The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
major
themes AD
N
additional
budget
details
fy 1 9 8 5
GENERAL NOTES
1. All years referred to are fiscal years, unless otherwise noted.
2. Details in the tables, text, and charts of this volume may not add to the totals because
of rounding.
3. In the tables, leaders indicate dollar amounts that are $500 thousand dollars or less,
or percentages that are .05 percent or less.
4. Estimated future pay raises have been allocated to individual programs in this document.
II
Table of Contents
Page
INTRODUCTION
3
CHAPTER 1—COMMUNITY DEVELOPMENT AND ECONOMIC SUBSIDIES
Community Development and Economic Subsidies Overview
7
Community Development and Fiscal Aid
Urban Parks and Historic Preservation
Appalachian Programs
Community Development Block Grants and Urban Development Action Grants
Rental Rehabilitation and Rental Development Grants
Rehabilitation Loan Fund
Disaster Relief Grants
Economic Development Administration
Indian Development
Tennessee Valley Authority Development Fund
General Revenue Sharing
Community Development Block Grant Loan Guarantees
Small Urban Programs and Close Outs
13
15
16
18
20
21
22
23
25
27
28
30
31
Other Business and Commercial Subsidies
The Overseas Private Investment Corporation
Export Credits and Guarantees
Payment to the Postal Service Fund
Small Business Administration Business Assistance
Minority Business Development Agency
Small Business Administration Disaster Loan Assistance
Flood Insurance
Health Professions Training Subsidies
Trade Adjustment Assistance for Workers
Postal Service
33
35
36
38
39
41
42
44
46
48
50
Transportation and Maritime Subsidies
National Oceanic and Atmospheric Administration Special Fisheries Funds
Amtrak
Northeast Corridor
Railroad Subsidies
National Aeronautics and Space Administration Aeronautical Research and Development
Air Carrier Subsidy
Maritime Subsidies
Maritime Research and Training
Rail Rehabilitation and Reorganization Loan Guarantees
Transportation Industry Assistance
51
53
55
57
58
III
60
62
63
65
66
68
Page
Energy Programs
Nuclear Fission Research and Development
Nuclear Fusion Research and Development
.
Nuclear Waste
Alternative and Synthetic Fuels
Fossil Energy Research and Development
Solar and Renewable Energy Research and Development
Supporting Energy Research
Energy Conservation Research and Development and Related Programs
Uranium Enrichment
Federal Power Programs
71
73
75
77
79
81
84
86
89
91
93
Housing Finance
Government National Mortgage Association Subsidized Mortgage Financing
Federal Housing Credit
Housing for the Elderly or Handicapped
Other Housing Programs
95
97
98
100
102
Financial Institution Funds
Financial Depository Institutions
105
107
CHAPTER 2—SOCIAL INSURANCE AND RETIREMENT
Social Insurance and Retirement Overview
Ill
Medicare
Medicare
119
121
Social Security
Old Age, Survivors, and Disability Insurance
125
127
Federal Retirement Programs
Federal Employee Retirement and Disability
Military Retirement Fund
129
131
134
Unemployment Insurance
Unemployment Compensation
137
139
Other Social Insurance
Railroad Retirement
Black Lung Program
Pension Benefit Guaranty Corporation
141
143
144
146
CHAPTER 3—LOW-INCOME BENEFIT PROGRAMS
Low-Income Benefit Programs Overview
151
Medical and Housing Programs
Medicaid Benefits
Subsidized Housing
161
163
165
Nutrition Programs
Food Stamp Benefits and Nutrition Assistance to Puerto Rico
169
171
IV
Page
Supplemental Food Programs
Other Nutrition Programs
Child Nutrition Programs
173
175
177
Cash Assistance Programs
Supplemental Security Income Benefits
Aid to Families with Dependent Children
Earned Income Tax Credit
Refugee Assistance
Low Income Home Energy Assistance
179
181
183
186
187
189
CHAPTER 4—HUMAN DEVELOPMENT AND SERVICES
Human Development and Services Overview
193
Elementary and Secondary Education
Compensatory Education for the Disadvantaged
State Education Block Grant
Small Elementary and Secondary Education Programs
Bilingual Education
Indian Education
Impact Aid
Education for the Handicapped
Vocational and Adult Education
197
199
201
203
205
207
209
211
213
Higher Education
Postsecondary Student Financial Assistance
Guaranteed Student Loans
Aid to Developing Institutions
Other Higher Education Programs
Special Postsecondary Institutions
215
217
219
221
223
225
Employment, Training and Public Service Employment
Job Corps
Training and Employment
Older Americans Employment
Work Incentive Program
Employment Service
227
229
231
233
234
236
Social Services
Social Services Block Grant
Head Start
Older Americans Act
Child Welfare Services and Training
Foster Care and Adoption Assistance
Federal Categorical Social Services
Rehabilitation Services
Housing Counseling, Rehabilitation Services Program Management, and Other Activities
237
239
240
241
243
244
246
248
V
249
Page
Health Services
Indian Health Services
Primary Care Block Grant
Alcohol, Drug Abuse, and Mental Health Block Grant
Preventive Health Block Grant
Maternal and Child Health Block Grant
Federal Categorical Health Services
Federal Subsidy for Saint Elizabeths Hospital
251
253
254
255
256
257
258
260
Other Services
Energy Conservation Grants
Community Services Program
ACTION
Legal Services Corporation
Criminal Justice Assistance
263
265
268
269
271
273
CHAPTER 5—AGRICULTURE AND RURAL PROGRAMS
Agriculture and Rural Programs Overview
277
Price Supports and Conservation Subsidies
Conservation of Agricultural Lands
Commodity Price Supports and Related Subsidies
Federal Crop Insurance
281
283
285
287
Agricultural Credit Activities
Agricultural Credit
289
291
Rural Housing and Development
Rural Housing
Rural Development
293
295
297
Rural Electric and Telephone Subsidies
Rural Electric and Telephone
299
301
Department of Agriculture Services
Agricultural Research
Extension Service
Animal and Plant Inspection Service
Agriculture Statistics, Marketing, Inspection, and Foreign Accounts
305
307
309
311
313
CHAPTER 6—PUBLIC INFRASTRUCTURE
Public Infrastructure Overview
317
Highways
Highway Trust Fund
Highway Safety Grants and Demonstrations
325
327
329
Airports/Airways
Airport Improvement Program
Federal Aviation Administration Operations
Federal Aviation Administration Capital Modernization Program
331
333
335
337
VI
Page
Mass Transit
Public Transit
339
341
Water Projects and Navigation
Soil Conservation Service Water Projects
Corps of Engineers, Civil
Bureau of Reclamation
343
345
347
349
Sewage Treatment
351
Sewage Treatment Construction Grants
353
CHAPTER 7—VETERANS PROGRAMS
Veterans Programs Overview
357
Veterans Income and Adjustment Programs
Veterans Compensation, Pensions, Burial and Other Benefits
Veterans Life Insurance
Readjustment Benefits
Veterans Medical Services and Housing
Medical Care and Hospital Service Operations
Hospital Construction
Veterans Medical Research, Administration and Related Activities
Veterans Housing
361
363
365
366
369
371
372
374
376
CHAPTER 8—GENERAL GOVERNMENT
General Government Overview
381
Regulatory Agencies
Nuclear Regulatory Commission
Office of Surface Mining and Reclamation
Environmental Protection Agency Operations
Superfund
Highway Safety Operations
Food Inspection Services
Food and Drug Administration
Occupational Safety and Health
Miscellaneous Regulatory Agencies
389
391
392
393
395
397
398
399
400
402
Law Enforcement
Law Enforcement
Bureau of Alcohol, Tobacco, and Firearms
Immigration and Naturalization Service
Customs Service
Department of Justice Legal Divisions
Federal Judicial Activities
Correctional Activities
Secret Service
Miscellaneous Civil Rights and Equal Opportunity Activities
403
405
407
408
409
410
411
412
413
414
VII
Page
Management of the Public Domain
Naval Petroleum Reserves
Forest Service
Bureau of Land Management and Minerals Management Service
Public Lands Acquisition
Fish and Wildlife Service
National Park Service
Geological Survey
Bureau of Mines
Payments to States and Counties From Land Management and Forest Service
Receipts
Rent and Royalties on the Outer Continental Shelf
Miscellaneous Interior Offsetting Receipts and Operating Programs
417
419
421
423
424
426
427
429
430
Science, Medical Research and Cultural Programs
National Science Foundation
Department of Energy General Science and Other Funds
Arts and Humanities
Biomedical Research and Research Training
Behavioral Research and Research Training
Research Libraries, Smithsonian and Public Broadcasting
439
441
443
445
446
447
448
Central Services and Functions
National Oceanic and Atmospheric Administration
Census, Economic Statistics, and Productivity Improvement
Patent, Trademark, and Copyright
National Bureau of Standards and Telecommunications
International Trade Administration
Internal Revenue Service
General Services Administration Property Supplies and Records
District of Columbia Payments and Net Loans
Central Services and Functions
451
453
455
457
458
460
462
464
466
467
Departmental Administration and Other Overhead
Domestic Agency Administrative Expenses
Federal Employee Health Benefits
Social Insurance Administrative Expenses
Federal Employee Group Life Insurance
Federal Employees Workers' Compensation
Low-Income Benefit Administrative Expenses
Legislative Functions
469
471
473
475
477
479
481
483
432
434
436
CHAPTER 9—SECURITY ASSISTANCE, DEVELOPMENT AID, SPACE, AND DEFENSE-RELATED PROGRAMS
Security Assistance, Development Aid, Space, and Defense-Related Programs Overview..
487
Strategic Stockpiles
National Defense Stockpile
491
493
VIII
Page
Strategic Petroleum Reserve
494
Defense-Related Activities
Atomic Energy Defense
Emergency Preparedness
497
499
501
Development Aid
Multilateral Development Banks
Bilateral Development Assistance
Contributions to International Organizations
P.L. 480 Food Aid
Peace Corps
International Refugee Assistance
Compact of Free Association (Micronesia)
503
505
507
509
511
512
513
514
Foreign Affairs-Related Agency Expenses
Foreign Affairs Administrative Expenses
Foreign Information and Exchange
515
517
518
Space Program
National Aeronautics and Space Administration Space Programs
521
523
Coast Guard
Coast Guard
527
529
Financial Accounts
Various International Financial Programs
531
533
Foreign Military Sales
Foreign Military Sales Financing
Foreign Military Sales and Special Defense Acquisition Funds
535
537
539
Other Security Assistance
Economic Support Fund
Military Grant Assistance and Training
Assistance to Central America
541
543
545
547
CHAPTER 10—DEPARTMENT OF DEFENSE MILITARY FUNCTIONS
Department of Defense Military Functions
551
CHAPTER 11—MANAGEMENT INITIATIVES
Management Initiatives Overview
559
Fraud, Waste, and Abuse-Related Deficit Reductions
President's Council on Integrity and Efficiency
Debt Collection
Cash Management
563
565
567
569
Savings Related to Improved Agency Management
Consolidation of Administrative Support Systems
Reductions in Personnel Levels and Costs
Reductions in Non-personnel Resources
571
573
574
575
IX
Page
Savings From Cross Agency Processes and Systems
Financial Operations and Planning
Personnel and Payroll Systems
X
577
579
580
Introduction
i
Introduction
A salient characteristic of all the industrial democracies in the past quarter century has been a
veritable explosion in Government spending for social welfare programs and for other domestic
areas such as agriculture and public infrastructure. In the 10 countries of the European Economic
Community, for example, total Government spending has risen from 32% of GNP in 1960 to 50% at
present, and their defense spending burden is less than that of the United States. While Government spending in the U.S. remains a smaller share of the economy than in Europe (about 34% of
GNP in 1983, of which 25% was Federal), the growth of domestic spending has been nearly as rapid
here as elsewhere. In real terms—i.e., after adjusting for inflation—Federal domestic spending
doubled from 1954 to 1961, doubled again from 1961 to 1971, and nearly doubled again from 1971 to
1981. Because this spending grew much faster than the economy, Federal domestic spending as a
share of GNP rose from 7.3% in 1961 to 10.5% in 1971 and to 15.0% in 1981.
The Dramatic Halt in Domestic Spending Growth
Such upward spending momentum was not sustainable, if only because American taxpayers would
not support it. One of the major accomplishments of the Reagan Administration, with the support of
Congress, has been to bring this fast-moving train to a halt. Domestic spending (defined as all
spending except defense, "national interest" programs such as space and foreign assistance, and net
interest) in constant 1985 dollars rose from $57.5 billion in 1954 to $126.5 billion in 1961, to $269.9
billion in 1971 and to $526.6 billion in 1981, the last pre-Reagan year. It is estimated to be slightly
lower in 1984, at $522.8 billion, and continue essentially unchanged at $523.1 billion in 1985 under
the proposals in the 1985 budget.
After three budget rounds, the explosive domestic budget growth has clearly been contained. With
Congressional action on the 1984 budget virtually complete, real domestic spending now stands
below 1981. And if the policies proposed in the President's 1985 budget are adhered to, there will be
essentially no growth in real terms for the rest of this decade, despite the fact that an aging
population will require continued growth in real outlays for social security, medicare, and medicaid.
Thus, after an era in which the real cost of Government doubled three times in less than three
decades, the shift in national policy inaugurated by the Reagan Administration will result in a
decade-long domestic real spending freeze.
With the economy now growing again, domestic spending in relation to GNP has already begun to
tilt downward, dropping to 14% in 1984 and falling further to about 12% in 1989 under current
services projections.
Moreover, the abrupt halt to the runaway growth momentum of domestic Government is now built
into the structure of the budget—even if the modest additional savings proposed for 1985 and outyears are not fully implemented by Congress. The current services budget for domestic programs
will rise only 6% in constant dollars between 1981 and 1989.
Programmatic highlights of this domestic spending freeze are as follows:
• Non-entitlement domestic outlays have been cut 24% in real terms from their 1978 peak and
under the President's 1985 budget would be 40% lower by 1989.
• The massive growth of welfare costs has been halted. Constant dollar costs of low-income
benefit programs will be nearly stable for the remainder of the 1980's, compared to the 11-fold
increase in constant dollar terms between 1954 and 1981.
• The growth of social insurance has been slowed due to bipartisan reform. The annual constant
dollar growth rate for the remainder of the 1980's is expected to be only 2.3% compared with
an annual real growth rate of 8.8% between 1954 and 1983.
Another way to measure the accomplishment is to calculate the inherited "baseline" of domestic
spending and compare it against the actual spending level of fiscal years 1982 and 1983, the
estimated level for 1984 and current services estimates for 1985 and 1986, all in current dollars. For
3
entitlements and other mandatory spending, the baseline represents existing law as of January
1981, adjusted for actual economic conditions (inflation, unemployment, etc.) through 1983 and
forecast economic conditions through 1986. For discretionary spending, the baseline equals recommended amounts for 1982-86 in the outgoing Carter Administration 1982 budget, published in
January 1981. The figures include off-budget outlays. The table shows that $318 billion has been
saved, or an average of more than 11% per year of domestic spending.
Domestic Program Savings Enacted Thus Far, 1982-1986
(Outlays in billions)
Savings enacted
Percent reduction
Savings as
percent of GNP
$489
547
565
602
641
-$36
-60
-66
-70
-86
7.4%
11.0%
11.7%
11.6%
13.4%
1.2%
1.9%
1.9%
1.8%
2.0%
2,844
-318
11.2%
1.7%
Pre-1981
baseline
Year
1982
1983
1984
1985
1986
Total
Structure of the Document
These achievements were the consequence of countless individual program proposals, decisions, and
legislative enactments over the calendar years 1981-83. Given the hundreds of Government programs affected, scholars—let alone ordinary citizens—might have difficulty keeping track of what
has happened and making sense of the cumulative impact in any given policy area. To contribute to
an understanding of the spending reductions achieved to date and those proposed in the 1985
budget, this budget volume divides domestic spending into eight analytical categories that group
like-programs together:
• Community Development and Economic Subsidies
• Social Insurance and Retirement
• Low-Income Benefit Programs
• Human Development and Social Services
• Agriculture and Rural Programs
• Public Infrastructure
• Veterans Programs
• General Government
A chapter of this budget volume has been devoted to each of the eight categories. An overview essay
for each chapter describes the category, provides an historical perspective on the growth of Government spending in the major program areas, and summarizes the accomplishments to date in
curtailing excessive growth. The essay is followed by a series of "factsheets" on individual programs
or groups of closely related programs, detailing the current status and the budget policy for 1985
with its implications for later years.
In addition, the volume contains separate chapters on defense and "national interest" program
development, and a chapter detailing the Administration's extensive efforts to achieve savings
through better management of the Government.
4
CHAPTER 1
Community Development and
Economic Subsidies
5
Community Development and
Economic Subsidies Overview
This component of the budget includes local fiscal subsidies—General Revenue Sharing (GRS);
community development aid—the Economic Development Administration (EDA) and Community
Development Block Grants (CDBG); industrial sector support—maritime, energy, trade adjustment
assistance, export aid; and Federal commercial and financing activities—uranium enrichment and
the Federal Deposit Insurance Corporation. Agricultural and rural subsidies are addressed in Chapter 5 of this volume.
The proposed savings represent a continuation of this Administration's long-standing efforts to
eliminate or sharply curtail unwarranted and largely ineffective economic subsidies. The proposed
savings amount to only 7% of the current services baseline over 1985-1989 (13% excluding off-budget
outlays), reflecting two factors:
• The first three budget rounds have been enormously successful in eliminating entire programs
(regional commissions and most of trade adjustment assistance, for example) or in substantially
reducing constant dollar funding levels (EDA, Export-Import Bank, CDBG, Urban Development
Action Grants (UDAG)). As a consequence, the constant dollar cost of this component of the
enacted 1984 budget will have declined 50% from its 1980 peak. If the additional savings
proposed in the 1985 budget are adopted, constant dollar spending levels by 1989 will be 80%
below the 1980 peak.
• The Administration is committed to maintaining general revenue sharing and modest aid
levels, in the form of CDBG and UDAG, to urban areas and smaller communities. It also has
proposed to maintain energy funding but to shift priorities away from expensive commercialization projects to research and development. Likewise, it has proposed to maintain minimum
subsidy levels for the Small Business Administration (SBA), the Postal Service, health professions training, Amtrak, the Export-Import Bank, and the maritime industry.
This chapter contains 47 factsheets, which are arranged into six groups.1 The remainder of this
essay addresses the savings achieved to date, further savings proposed for 1985-1989, and the impact
of this spending category on the budget totals.
Two Decades of Dramatic Spending Growth Reversed
The following chart depicts the dramatic growth of the community development and economic
subsidies component of the budget from 1962 to 1980, and the extraordinary degree of spending
restraint achieved over the last 3 years.
1
Separate factsheets have not been written for fisheries and marine mammal commissions, travel and tourism, miscellaneous small commerce programs, medical
facilities and Health Maintenance Organization loans, Overseas Private Investment Corporation (Federal Financing Bank (FFB)), miscellaneous FFB accounts, and
territorial loan guarantee obligations. Thus, the sum of the amounts in the factsheets is not equal to the summary totals used in this essay.
7
COMMUNITY DEVELOPMENT AND ECONOMIC SUBSIDIES:
HISTORICAL PERSPECTIVE
$ BILLIONS
(CONSTANT 1985 DOLLARS)
50-1
Federal outlays for this component of the budget increased 398% in real terms between 1962 and
1980. The composition of this increase is displayed in the following table.
Two Decades of Dramatic Spending Growth
(Outlays in billions of 1985 dollars)
1962
Community Development and Fiscal Aid
Business and Commercial Subsidies
Transportation and Maritime Subsidies
Energy Programs
Housing Finance
Financial Institution Funds
Total, Community Development and Economic Subsidies
1980
1.4
4.8
1.6
1.3
1.9
-1.3
19.5
11.9
5.0
8.4
3.3
-0.4
9.6
47.6
8
Peak year
Peak year
outlays
1,283%
147%
223%
569%
75%
71%
1973
1975
1981
1980
1968
1975
22.8
11.9
6.3
8.4
9.6
1.0
398%
1980
47.6
Percent change
• Community development and fiscal aid increased by an astronomical 1,283%. These subsidies
grew most rapidly during the 1970's with the establishment of general revenue sharing and
community development block grants and the 1977-1978 local public works program.
• Other major growth areas included energy technology development and demonstration programs, Tennesse Valley Authority (TVA) nuclear power development, railroads, Export-Import
Bank, trade adjustment assistance, flood insurance, SBA disaster loans, and Student Loan
Marketing Association guarantees.
Savings achieved since the 1980 peak have reduced budget costs for this category to a more
sustainable level. This is illustrated in the following table, which compares in constant dollars
actual 1980 outlays to estimated 1984 outlays under current law:
Real Outlays in 1984 Are Half of 1980 Peak
(In billions of 1985 dollars)
Share of total
reduction
1980 actual
19.5
11.9
5.0
8.4
3.3
-0.4
Total, Community Development and Economic Subsidies
1
11.7
5.7
3.2
4.1
1.6
-2.4
7.8
6.2
1.8
4.4
1.7
2.0
33%
26%
8%
18%
7%
8%
47.6
Community Development and Fiscal Aid
Business and Commercial Subsidies
Transportation and Maritime Subsidies
Energy Programs
Housing Finance
Financial Institution Funds
1984 current
services1
23.8
23.8
100%
Reduction
Spending levels based on current law.
Outlay savings of 50%
from the 1980 level have already been achieved in 1984.
Enacted savings.~The chart below shows that while 1982-1986 outlays under the pre-1981 baseline
would have declined somewhat from the 1980 peak, this Administration has proposed, and Congress
has enacted, substantial additional spending restraint totaling $52.6 billion over 1982-1986.
9
C0MMUN1TY DEVELOPMENT AND ECONOMIC SUBSIDIES:
SAVINGS ACHIEVED
$ BILLIONS
50SAVINGS FROM PRE-1981 BASELINE:
1982
40-
PRE—1981 BASELINE..
CURRENT SERVICES...
DIFFERENCE
PERCENT CHANGE...
1983
1984
1985
AVG. ANNUAL
1986 GROWTH RATE
33.6 29.7 29.6 31.2 33.1
23.7 21.3 22.7 20.9 15.9
-0.4%
-9.4%
-9.9 -8.4 -6.9 -10.2 -17.2
-30% -28% -23% -33% -52%
1981
BASELINE
In addition, it is important to note that the pre-1981 baseline may be underestimated—i.e., the
policies embodied in that estimate would likely have resulted in higher out-year estimates. Consequently, the enacted savings would actually be higher than estimated above.
Savings have been achieved in virtually every category of subsidy. The largest savings from the pre1981 baseline are attributable to energy programs and business and commercial subsidies:
• Energy program savings come from a more limited Federal role in technology development and
demonstration (e.g., large synthetic fuel demonstration plants), and from reductions in construction of TVA nuclear power plants as a result of lower load forecasts.
• Business and commercial subsidy reductions include outlays from Student Loan Marketing
Association guarantees, Export-Import Bank, trade adjustment assistance, SBA, and loan programs which use the Federal Financing Bank. These savings are partly offset by an increase in
net outlays (above receipts) by the Postal Service.
Proposals for Further Savings
The following table compares the President's 5-year budget plan to the outlays that would occur
under current law. Net outlay savings of $6.0 billion are sought for the 5-year period. These savings
represent 7.1% of the current services baseline (13.5% if off-budget outlays are excluded).
10
Further Savings Proposed
(Outlays in billions)
1985-1989
Major program areas
Proposed
savings
Current services
$54.1
20.8
11.8
14.2
-17.0
Total, Community Development and Economic Subsidies
$51.0
15.8
10.0
12.8
5.3
-17.0
-$3.1
-4.9
-1.7
-1.4
5.3
83.9
Community Development and Fiscal Aid
Business and Commercial Subsidies
Transportation and Maritime Subsidies
Energy Programs
Mousing Finance1
financial Institution Funds2
1985 request
77.9
-6.0
1 Current services for this program area include $9.4 billion in outlays for GNMA subsidized mortgage activity, elderly and handicapped housing, and low-rent
housing. These amounts are offset by $9.4 billion in receipts from FHA ana GNMA credit transactions. Hie 1985 request is largely current services except for a $5.8
billion increase for the Public Housing ban and Liquidation fund.
2 This program area includes net receipts for the Federal Deposit Insurance Corporation, the Federal Savings and Loan Insurance Corporation, and the National
Credit Union Administration.
• The Administration's priority is to reduce direct aid to the private sector. The largest percentage reductions are sought for business, commercial, maritime and transportation subsidies.
• Additional savings would be achieved through the termination of community development
programs which have outlived their mandate, namely the Economic Development Administration and the Appalachian Regional Commission. Under this Administration, community development programs have been altered to increase state and local discretion and private sector
involvement. The Administration's enterprise zone program would continue these trends.
• Savings would be offset in part by a 5-year, off-budget outlay increase of $5.8 billion for the
Public Housing Loan and Liquidating Fund. This increase would allow continued long term
financing of public housing projects through the Federal Financing Bank. The outlay cost of
this proposal would be offset by enhanced tax revenues, as tax-exempt financing is reduced.
Impact on the Budget Totals
Community development and economic subsidies make up a small part of total outlays, 2.2% in
1985, but are a more significant part of domestic discretionary outlays—the most "controllable" part
of the budget. Outlays for community development and economic subsidies were 23% of total
domestic discretionary outlays in 1980 and are estimated to be 15% in 1984.
The table below shows that this category of the budget accounts for almost half of the 24% real
reduction in domestic discretionary outlays between 1980 and 1984.
Community Development and Economic Subsidies Share of Total Domestic Discretionary Outlays
(Outlays in billions of 1985 dollars)
1980
Community Development and Economic Subsidies
Total Domestic Discretionary..™
CDES Share of Domestic Discretionary Total
1
1984 Current
Services
47.6
207.4
23.0%
23.8
158.4
15.1%
Based on 1985 request
11
Administration 1budget1
1985
1989
21.0
153.8
13.7%
9.4
122.8
7.7%
1980-1984
reduction
23.8
49.0
48.5%
The President's 5-year budget plan would further reduce this category's share of domestic discretionary spending—to 7.7% by 1989. The bulk of the savings would be achieved by further reducing
subsidies to the private sector.
In 1980, the community development and fiscal aid share of this spending category was 41%, while
the combined share of the other five subcategories—which can be roughly categorized as "private
sector subsidies"—was 59%. By 1984, the relative shares were nearly equal—49% to 51%, respectively. The Administration proposes to continue this trend. By 1989, the private sector subsidies share
would be reduced to 11%.
12
Community Development and Fiscal Aid
13
Urban Parks and Historic Preservation
Agency: Department of the Interior
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
35
95
36
62
37
43
39
35
41
38
35
95
52
23
"l
2
-36
-11
-37
-21
-39
-33
-41
-36
42
40
....
-42
-39
Total
1985-89
195
219
79
-195
-140
Program Description
These two grant programs provide matching funds to State and local governments and the private
non-profit National Trust for Historic Preservation. Funds support State and local historic preservation efforts and the rehabilitation and improvement of local urban park facilities.
Current Status
This Administration has requested no appropriations for these programs since taking office. In 1984,
Congress appropriated $8.7 million for the urban park grant program and $26.5 million to continue
Federal support of State historic preservation offices.
1985 Budget Proposal
Consistent with this Administration's past position, the 1985 budget proposal would eliminate all
new funding for these programs.
Rationale
Substantial economic and tax incentives have been set in place to encourage the private sector to
play the major role in preserving historic properties. The Economic Recovery Tax Act of 1981
provides a 25% income tax credit for historic preservation. Tax credits of $320 million were claimed
in 1983. About $385 million in such tax credits are expected to be claimed in 1984 and about $470
million in 1985.
Given this already high level of Federal support for historic preservation, the Administration
believes that the State and local governments should be responsible for funding their historic
preservation agencies and that the National Trust should rely on non-Federal means of support.
The Administration believes that further discretionary Federal grants to support local recreation
activities can be postponed until the deficit situation improves without causing any personal or
economic hardship.
At the beginning of 1984 these grant programs had about $140 million in appropriated but unspent
Federal funds awaiting matching State and local money.
15
Appalachian Programs
Agency: DOT/ARC
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
162
211
170
196
179
196
187
186
195
191
203
187
934
956
162
211
80
191
40
161
112
73
32
120
569
-90
-5
-139
-35
-187
-74
-195
-118
-203
-155
-814
-387
Program Description
The Appalachian programs provide funds for construction of highways and roads in Appalachia
along with grants for economic and community development. Also provided is half the operating
costs of the joint Federal/State Appalachian Regional Commission (ARC), which is charged with
overseeing the Appalachian programs.
Current Status
The Appalachian programs were initiated in 1965 as a temporary response to the perceived need to
improve road access to and within Appalachia and to improve economic and social conditions. By
the end of 1984, about $5 billion of Federal aid had been provided by the Appalachian programs:
$3.1 billion for roads and $1.8 billion for other purposes.
Other regional commissions have been eliminated and increased emphasis has been placed on State
and local self reliance to stimulate local economic development. In light of these developments, the
Congress has recognized that the Federal Government could not continue to provide previous levels
of support to the region through a separate, categorical program.
Constant Dollar Trend
Between 1966 and 1974, constant dollar outlays rose from $32 million to a peak of $624 million. By
1980, however, real funding levels had fallen 25% to $467 million. While Congress has not adopted
the rapid phase out timetable originally proposed by the Administration, current services outlays in
1985 will nevertheless total only $196 million—a 58% cutback since 1980 and a 69% reduction in
real terms from the 1974 funding peak.
Constant Dollar Trend
(1985 dollars in millions)
Year
Amount
32
514
624
467
196
1966
1970
1974
1980
1 9 8 5 c u r r e n t services
16
1985 Budget Proposals
The budget proposes savings of about $810 million in budget authority for 1985 through 1989. These
savings would result from the proposed:
• elimination of all non-highway Appalachian programs and administrative expenses of the
Appalachian Regional Commission; and
• phaseout of the separate Appalachian highway program by 1987.
As an interim step in the phaseout of the highway program, the budget would transfer responsibility for the program to the Department of Transportation.
Rationale
While some counties in Appalachia continue to have "inadequate" public facilities, the $1.8 billion
already provided by the Appalachian non-highway program has basically accomplished the objective
of improving conditions in Appalachia. This is indicated by the recent economic trends in Appalachia:
• Job losses of prior decades have been halted. Between 1965-1980, 2.4 million new jobs were
created.
• Per capita personal income relative to the U.S. has increased so that it was 82% of the
national average in 1980 compared to 78% in 1965.
• Poverty levels have been cut in half from 33% in 1965 to 14% in 1980 (compared to 12.4% in
the Nation).
The Federal Government can no longer continue to direct scarce Federal resources to programs,
such as ARC, that are narrowly focused on a particular State or group of States and that respond to
what are strictly State and local development desires. In addition, funds have been spent on projects
of questionable merit from a Federal perspective, such as swimming pools and ice skating rinks.
The intent of the law creating ARC in 1965 was that the program would be temporary. Nineteen
years later, it is argued that the program must still continue to provide "basic facilities" to
distressed areas and to create jobs. During this period, $4.9 billion has been appropriated to this
program.
The Appalachian highway program funds construction or reconstruction of roads that are already
part of the Federal-aid highway system and hence are eligible for funding through the Federal
Highway Administration. The approximately 50% increase in monies provided for Federal-aid roads
should enable the Appalachian states to address any remaining, critical road access problems. The
two-year phaseout of the Appalachian highway program provides a cushion to the Appalachian
states as they adjust their highway funding plans.
Termination of the non-highway Appalachian program recognizes that the funding required to
overcome remaining inadequate public facilities and improve health care, estimated at about $55
million, is clearly within the capabilities of the individual States and localities.
17
Community Development Block Grants and Urban
Development Action Grants
Agency: Department of Housing and
Urban Development
[In millions of dollars]
1984
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
3,908
4,380
3,908
4,390
3,908
4,037
4,092
4,011
4,272
4,048
4,442
4,142
20,622
20,628
3,908
4,380
3,908
4,390
3,908
4,037
3,908
4,007
3,908
3,973
3,908
3,908
19,540
20,315
-184
-4
-364
-75
-534
-234
-1,082
-313
Program Description
The community development block grant (CDBG) and the urban development action grant (UDAG)
programs provide funds to State and local governments for community and economic development
activities. CDBG allocates funds on a formula basis to States, cities, and urban counties, and
provides discretionary grants to insular areas and Indian governments for a wide range of eligible
activities. UDAG provides competitive discretionary grants to distressed localities, territories, and
Indian tribes to help make development projects economically viable.
Constant Dollar Funding Trend
The predecessor urban development programs grew steadily from 1962 to 1970. But with the
enactment of CDBG in 1973 and UDAG in 1977, constant dollar outlays surged to a peak of $5.8
billion in 1980. The subsequent period of restraint during the Reagan Administration has reversed
this rise—with 1986 current services outlays of $3.9 billion, a 33% decline from 1980 levels.
Constant Dollar Trend
(1985 dollars in millions)
Year
Amount
1962
1970
1974
1980
1985 current services
1986 current services
758
3,422
3,940
5,819
4,390
3,860
1985 Budget Proposal
The Administration supports funding for continuing these two programs at the 1984 appropriation
level of $3.9 billion. These funding levels are equivalent to those authorized by the Congress in the
recently-enacted Housing and Urban-Rural Recovery Act of 1983.
18
Rationale
The 1985 budget proposal would continue to supplement State and local governments' development
efforts. The Administration will also support vigorous efforts by local officials to increase the
productivity of these funds through public-private partnerships and increasing local flexibility in the
use of these resources. Maintaining the current level of funding through 1989 would save $1.1 billion
in budget authority and $313 million in outlays from the current services baseline. The baseline
includes unnecessary increases for inflation after the current 3-year authorization expires in 1986.
19
Rental Rehabilitation and Rental Development
Grants
Agency: Department of Housing and
Urban Development
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
615
615
1985
1986
1987
1988
1989
Total
1985-89
95
158
301
165
333
172
211
179
172
674
1,112
95
150
299
150
325
150
196
150
150
600
1,065
-15
-8
-22
-15
-29
-22
-74
-46
-8
-2
Program Description
The recently-enacted Housing and Urban-Rural Recovery Act of 1983 created two new programs
aimed at increasing the supply of standard, low-income rental housing in those communities where
shortages of such housing have persisted. The rental rehabilitation grant program will allocate $150
million through a formula to State and local governments for use in areas with a sufficient supply of
substandard housing suitable for moderate rehabilitation. Where the stock of housing that could be
brought up to standard condition with moderate levels of work is limited, the rental development
grant program would provide discretionary grants to assist private sector new construction efforts.
Both programs are designed to leverage private investment at least equal to the public funds
provided. The two programs differ in one critical respect—the extent to which they are intended to
serve low-income households currently eligible for HUD subsidized housing assistance. The rental
rehabilitation grant program is more heavily oriented toward the low-income renters. It will complement the centerpiece of the Administration's housing policy—the voucher program—by improving
the opportunities low-income voucher holders have for finding a suitable dwelling in tight housing
markets.
Current Status
The Administration proposes funding these programs in advance for both 1984 and 1985 by transferring $615 million in budget authority from the assisted housing accounts in 1984. The Department of
Housing and Urban Development (HUD) is making a concerted effort to implement these two
programs and obligate all the available funds during 1984.
1985 Budget Proposal
The funding levels proposed in the budget will provide moderate rehabilitation of 30,000 low-income
rental units annually in 1984 and 1985, and substantial rehabilitation or new construction of 10,000
units with the 1984 funding and 6,000 units with the 1985 funding.
Rationale
Critics of the voucher program have argued that the program cannot work in areas where the
supply of standard, low-income housing is insufficient to allow voucher holders to shop for decent
housing. The rental rehabilitation grant program will serve to alleviate this problem in communities
where such supply problems may exist.
20
Rehabilitation Loan Fund
Agency: Department of Housing and
Urban Development
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
Loan Reservations
1985 Budget Level:
Budget Authority
Outlays
Loan Reservations
Change:
Budget Authority
Outlays
Loan Reservations
1984
1985
1986
1987
1988
1989
Total
1985-89
17
132
49
69
-2
66
-2
66
—2
64
-2
62
41
327
17
132
21
-66
-66
-64
-62
-236
-28
-69
-64
-66
-64
-66
-62
-64
-60
-62
-277
-327
Program Description
The section 312 rehabilitation loan program provides subsidized below market interest rate loans to
private individuals for rehabilitation of single-family, multifamily, and non-residential properties.
Current Status
In the 1984 HUD-Independent Agencies Appropriations, Congress continued the rehabilitation loan
program using repayments and recaptures of prior year loans. $132 million is available in 1984 to
make loans under this program.
1985 Budget Proposal
The Administration proposes no new lending authority for the rehabilitation loan program in 1985.
The budget also proposes the transfer of funds from this account to HUD's salaries and expenses
account to cover the full administrative costs of running this program during 1984.
Rationale
The rehabilitation loan fund duplicates the rehabilitation activities that occur under the CDBG
program and that will occur under the newly authorized rental rehabilitation grant program. The
program is neither targeted toward those most in need nor toward the most distressed American
communities. It also provides for too deep a subsidy relative to the alternative now available
through the rental rehabilitation grant program. Outlay savings of $277 million would be possible
over the next five years if the lending authority were allowed to lapse.
21
Disaster Relief Grants
Agency: Federal Emergency
Management Agency
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
21
249
125
233
208
226
208
208
208
208
209
208
957
1,084
21
249
117
217
200
219
200
200
200
200
200
200
917
1,036
-8
-7
-8
-8
-8
-8
-9
-8
-40
-47
-7
-16
Program Description
Disaster relief grants cover a number of specially targeted programs. Federal assistance under the
Disaster Relief Act of 1974 provides supplementary assistance to individuals and State and local
governments in the event of a Presidentially declared emergency or major disaster. Smaller programs exist for riot and crime insurance and for farm and rangeland damage resulting from natural
disasters.
Current Status
The Administration has supported continuation of disaster relief grants without any major changes.
1985 Budget Proposal
The budget proposes funding for all programs at a current services level except for the emergency
conservation program. Emergency conservation would be integrated into the consolidated agricultural conservation program.
Rationale
Current services provide sufficient resources to cover anticipated payments for disaster relief.
Consolidation of essentially all Department of Agriculture conservation cost sharing programs into
one program provides greater flexibility in responding to priority conservation problems. Restoration of farmland severely damaged by natural disasters is also an eligible use of funds under the
consolidated conservation cost sharing program.
22
Economic Development Administration
Agency: Department of Commerce
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1987
1986
1988
1989
Total
1985-89
268
336
281
359
294
293
307
327
320
351
332
334
1,533
1,664
268
336
23
316
14
163
12
114
11
91
11
33
70
717
-258
-43
-280
-129
-295
-213
-308
-259
-321
-302
-1,463
-947
Program Description
The Economic Development Administration (EDA) provides economic development assistance grants
to State and local governments and loan guarantees to firms. Most grant funds are used for
industrial and commercial site development. Most loans finance manufacturing plants and machinery.
Constant Dollar Trend
EDA constant dollar outlays grew steadily throughout the 1960's and 1970's—reaching a peak of
$843 million in 1980. While Congress has resisted immediate termination of new grant and loan
activity as proposed by the Administration, it has permitted a major retrenchment in the availability of new budget authority. Consequently, current services outlays of $280 million by 1986 would
represent a 67% cutback from 1980.
Constant Dollar Trend
(1985 dollars in millions)
Year
Amount
1963
1970
1980
1985 current services
1986 current services
128
633
843
359
280
1985 Budget Proposal
The Administration would terminate funding for all EDA programs in 1985. EDA staff would be
maintained to manage EDA's $1.2 billion outstanding loan portfolio, and to ensure compliance with
the terms of outstanding grants.
Rationale
EDA's reason for being has been overtaken by the development of new programs:
• Any project that is funded by EDA can be supported through other Federal programs.
23
• Federal economic development assistance is now available from several other sources: general
revenue sharing ($4.6 billion); community development block grants ($3.9 billion); and urban
development action grants ($480 million). (Amounts are 1984 outlays.)
• Total outlays for the above programs (including EDA) are estimated to be to $9.3 billion in
1984, of which EDA represents only 3.6%. At the time of EDA's creation, none of the other
programs existed.
• Funding decisions for public works projects should be made by State and local elected officials
who bear the primary responsibility for meeting local needs.
EDA's mandate to assist poor areas has been undermined by its broad eligibility criteria:
• Areas eligible for EDA assistance contain 80% of the U.S. population.
• The Administration's enterprise zone proposal would target Federal benefits to areas with the
greatest need.
EDA appropriations are a very expensive experiment in job creation, and the results are not
encouraging.
• There is no evidence that EDA projects create net employment gains for the Nation, as opposed
to moving jobs around.
• The job creation impact of public works programs tends to be smaller and slower than
advertized, because of high capital costs and construction delays.
• The delinquency rate for EDA loan programs has been near 40% in the last 2 years. By the
end of 1983, the taxpayers had lost $297 million in written-off EDA loans.
• Training programs under the Job Training and Partnership Act are a much more efficient way
to assist the unemployed than public works grants. Capital costs are eliminated, and the
previously unemployed are more likely to be reached.
The Congress has recognized the merit of these arguments by steadily reducing EDA appropriations.
The Administration's proposal would finish the job.
24
Indian Development
Agency: Department of the Interior
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
773
832
830
810
860
829
892
855
924
884
4,298
4,203
790
847
...
...
792
824
766
807
804
782
826
791
843
811
877
837
4,117
4,028
+17
+15
-25
-17
-26
-29
-35
-38
-49
-44
-47
-47
-181
-175
Program Description
This program grouping includes numerous services for the approximately 755,000 members of the
504 Federally recognized Alaska native groups and Indian tribes who live on or near reservations.
They include municipal-type goverment services for Indian communities, economic development and
employment programs designed to stimulate reservation economies, programs to protect Indian
rights and property, and construction projects on Indian reservations. It also includes receipts
derived primarily from management of resources held in trust for Indian tribes, such as minerals
and timber.
Current Status
The major emphasis for the past three years has been to provide stable funding to strengthen tribal
governments and to support the growth of non-governmental sectors of reservation economies with
major emphasis on stimulating the investment of private capital. $18 million of the $25 million
reduction from current services in 1985 results from an accounting change that does not reduce
services but transfers the funds to other program categories.
1985 Budget Proposal
Modifications to Indian development programs funded by the Bureau of Indian Affairs would
include:
• An increase of $5 million for economic development grants to initiate business development of
tribal resources and to encourage non-Federal investment.
• A transfer of indirect cost funds for existing contracts with Indian groups from Indian development programs to education and natural resource programs ($18 million in 1985). This technical change accounts for most of the difference between a current services level and the
Administration request.
• Continued financing of all BIA road construction efforts, including program management in
1985, through contract authority allocation from the Federal highway trust fund, Department
of Transportation ($100 million in 1985). This began in 1983 with passage of the Surface
Transportation Assistance Act.
• Supplemental funds for 1984 to make payments for settlement of Indian water rights claims in
Arizona and to provide additional funds for welfare grants.
25
Rationale
The 1985 budget proposal would continue to provide funding in support of the Administration's
American Indian Policy Statement issued in January 1983. That policy reaffirms the government-togovernment relationship with Indian tribes; reinforces the concept of Indian tribal self-government
and self-determination; and supports economic development by attracting private capital.
26
Tennessee Valley Authority Development Fund
Agency: Tennessee Valley Authority
[In millions of dollars]
Level
Current Services:
Budget Authority 1
Outlays
1985 Budget Level:
Budget Authority 1
Outlays
Change:
Budget Authority
Outlays
1
1984
1985
1986
1987
1988
1989
Total
1985-89
86
200
115
120
126
126
134
136
143
140
152
149
671
671
86
200
116
118
117
118
124
125
133
133
141
141
632
634
+ 1
-2
-9
-9
-9
-11
-10
-7
-11
-8
-39
-36
Figures for 1984 exclude $47 million of prior year appropriations that would be used in 1984, resulting in a total program level of $133 million.
Program Description
The Tennessee Valley Authority (TVA) is a Government-owned corporation created to assist in
developing the Tennessee River Basin. It conducts two programs: the power program involving
production and sale of electricity throughout the region, largely self-financed; and the non-power
program, financed through appropriations. The non-power program supports activities to enhance
the area's natural resources, encourage economic and agricultural development and foster fertilizer
development on a national scale. This factsheet addresses the non-power program.
Current Status
The non-power program of the TVA has been decreasing in recent years due to completion of
several energy technology and water resources projects including the Tellico Dam and Bear Creek
flood control projects.
The remaining programs in natural resources, economic development and fertilizer development
have remained nearly stable.
1985 Budget Proposal
In total, the 1985 budget proposal is about the same level as current services—both below the 1984
program level due largely to completion of the Pickwick Lock project. The budget would provide for
relatively small reductions from current services in future years for the following reasons:
• Increases in fees from the sale of experimental fertilizer products.
• Reductions in expenses for R&D on the conversion of hardwood fuels to alcohols upon completion of the pilot plant now under construction.
• Small reductions in the economic and agricultural programs on the assumption that other
Federal agencies have primary responsibility for activities such as water conservation, air and
water pollution and community development.
Rationale
The proposal would continue necessary natural resources, economic and agricultural development
and fertilizer programs in the Tennessee Valley.
27
General Revenue Sharing
Agency: Department of the Treasury
[In millions of dollars]
1984
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
4,574
4,574
4,575
4,575
4,575
4,575
4,576
4,576
4,576
4,576
4,577
4,577
22,879
22,878
4,574
4,574
4,575
4,575
4,575
4,575
4,576
4,576
4,576
4,576
4,577
4,577
22,878
22,878
Program Description
General revenue sharing provides general fiscal assistance to approximately 39,000 local jurisdictions. The funds, which have few restrictions on their use, are distributed by a formula which takes
into account population, income, and tax effort.
Constant Dollar Trend
In real terms general revenue sharing achieved its peak outlay level of $15.1 billion in its initial
year—1973. Subsequent reauthorization did not keep pace with inflation and in 1980 the State grant
portion was permitted to expire. Consequently, the projected current law outlay level of $4.4 billion
in 1986 represents a 71% reduction in the purchasing power of this fiscal transfer compared to its
original level. Given the relative improvement of the State and local fiscal position over this period
and the drastic deterioration of the Federal position, this steady cutback in real general revenue
sharing funding is fully appropriate.
Constant Dollar Trend
(1985 dollars in millions)
Amount
Year
1973
1978
1980
1985 current services
1986 current services
15,137
10,825
9,164
4,575
4,375
Current Status
The recent 3-year reauthorization (1984-1986) of general revenue sharing holds the program at the
current level while continuing to provide local governments with discretion in the use of the funds.
28
1985 Budget Proposal
The 1985 proposal reflects the continuation of general revenue sharing at the authorized $4.6 billion
level. The funds would be allocated using the present distribution formulas which weight assistance
to governments with the greater need.
Rationale
General revenue sharing has become an important source of Federal assistance to local governments. Continuation of the program would permit the use of these funds by counties, municipalities,
townships and Alaskan villages. These local governments would continue to be able to use the funds
as they thought best with minimal intervention from the Federal Government.
29
Community Development Block Grant Loan
Guarantees
Agency: Department of Housing and
Urban Development
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
New Loan Guarantee
Authority
1985 Budget Level:
Budget Authority
Outlays
New Loan Guarantee
Authority
Change:
Budget Authority
Outlays
New Loan Guarantee
Authority
1984
1985
1986
1987
1988
1989
Total
1985-89
216
134
205
132
215
109
225
84
225
61
225
41
1,095
428
225
225
225
225
225
225
1,125
216
134
120
47
-106
-131
-125
-3
120
-317
-85
-85
-215
-215
-225
-215
-225
-186
-225
-44
-975
-745
-225
-225
-225
-225
-225
-1,125
225
Program Description
Section 108 of the Housing and Community Development Act of 1974, as amended, allows large
cities eligible for community development block grants (CDBG) to borrow from the Federal Financing Bank up to three times the amount of their annual CDBG grant to acquire or rehabilitate real
property.
Current Status
The Administration has proposed termination of the section 108 program since 1982. Congress has
instead continued to provide new guarantee authority of $225 million per year.
1985 Budget Proposal
The 1985 budget requests no new guarantee authority for the section 108 program.
Rationale
The 1985 budget proposals are consistent with this Administration's long-standing commitment to
reduce the Federal Government's allocation of credit. By reducing the risks faced by lenders and the
costs to certain borrowers, Federal credit guarantees distort the efficient allocation of capital in
private credit markets that might otherwise occur. More specifically, cities often utilize section 108
loan guarantees to bypass locally imposed limits on municipal debt. The Administration does not
feel that using Federal programs to skirt local voter prerogatives is an appropriate Federal role.
Only $61 million of the total $225 million available for new guarantee commitments was utilized in
1983.
30
Small Urban Programs and Close Outs
Agency: Department of Housing and
Urban Development
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1986
1985
1987
1988
1989
Total
1985-89
39
89
34
58
39
63
33
36
34
18
35
14
175
190
39
89
38
62
42
65
35
37
35
17
34
12
183
192
+4
+4
+3
+ 2
+2
+ 1
-1
+ 8
+3
-2
-1
Program Description
This segment of the budget aggregates several predominately urban-oriented programs including
planning assistance, the New Communities Development Corporation, and urban renewal in Department of Housing and Urban Development; the coastal energy impact programs in the National
Oceanic and Atmospheric Administration; the local public works and regional commissions programs in the Department of Commerce; the Neighborhood Reinvestment Corporation, and the
Pennsylvania Avenue Development Corporation.
Current Status
Most of these programs are being closed out pursuant to enacted legislation. In contrast to the other
programs in this grouping, the Neighborhood Reinvestment Corporation and the Pennsylvania
Avenue Development Corporation continue to receive Federal funding and Administration support.
Constant Dollar Trend
The close out of most of these programs, particularly the mid-1970's local public works grant
program, has dramatically reduced budget resource requirements. Compared to constant dollar peak
funding costs of $5.2 billion in 1978, 1985 current services outlays for remaining activities will
represent only 1% of prior peak budget levels.
Constant Dollar Trend
(1985 dollars in millions)
Year
Amount
1970
1978
1980
1985 current services
214
5,249
841
58
1985 Budget Proposal
The 1985 budget continues the policies established earlier for these programs.
31
Rationale
On the whole, the Administration continues to support the final closing out of most of the programs
in this category because these programs duplicated activities eligible under the more flexible
community development block grant program or provided funding for activities more appropriately
carried out by local jurisdictions using local resources.
32
Other Business and Commercial Subsidies
33
The Overseas Private Investment Corporation
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
Agency: Overseas Private Investment
Corporation
1987
1988
1989
Total
1985-89
-83
-71
-92
-92
-88
-90
-433
-83
-91
-86
-91
-91
-102
-461
-3
-12
-28
-20
+ 6
+ 1
Program Description
The Overseas Private Investment Corporation (OPIC) encourages U.S. private sector involvement in
the development of less-developed friendly countries by offering political risk insurance and providing investment financing through loans and guarantees.
Current Status
OPIC plans to issue $3.5 billion in new insurance in 1984, $10 million in loans and $100 million in
guarantees. Congress did not authorize the increased levels of credit activity requested in the 1984
budget ($15 million for loans, $150 million for guarantees).
1985 Budget Proposal
OPIC anticipates $3.85 billion in new insurance issuances $15 million in loans and $150 million in
guarantees. Negative outlay projections are higher than current services by $19.9 million because of
lower disbursements for the credit programs and a restructuring of the reinsurance programs.
Rationale
An important element of the Administration's foreign assistance policy is to promote private sector
solutions to the economic and social problems of developing countries. OPIC is the main governmental instrument for implementing this policy with respect to U.S. firms. It promotes investment, and
the benefits such investments bring, in instances where that investment might not otherwise take
place due to unfamiliarity with the recipient country or misperception of risk. Benefits from OPIC
activities accrue to both indigenous and U.S. businesses.
OPIC has had a good loss record. Over the past 3 years, claims on its $9.5 billion portfolio have
ranged between $0.9-2.3 million. Defaults for the $211 million credit program were $2.3 million in
1983. OPIC reserves ($784 million) are more than adequate to meet anticipated claims.
While OPIC fosters development throughout the Third World it is expected that the proposed
program increases will particularly focus on important regions such as the Caribbean Basin and
Central America.
35
Export Credits and Guarantees
Agency: Export-Import Bank
[In millions of dollars]
Level
Current Services:
Direct loans
Guaranteed loans
Budget Authority
Outlays
1985 Budget Level:
Direct loans
Guaranteed loans.
Budget Authority
Outlays
Change-.
Direct loans
Guaranteed loans
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
3,865
10,000
2,250
1,724
4,050
10,490
4,129
1,698
4,240
10,970
3,716
898
4,420
11,440
3,400
605
4,600
11,900
3,232
285
4,770
12,340
1,976
-21
22,080
57,140
16,453
3,465
3,865
10,000
2,250
1,724
3,830
10,000
3,913
1,635
3,830
10,000
3,398
790
3,830
10,000
2,980
460
3,830
10,000
2,712
96
3,830
10,000
1,364
-268
19,150
50,000
14,366
2,713
-220
-490
-216
-63
-410
-970
-318
-108
-590
-1,440
-420
-145
-770
-1,900
-520
-189
-940
-2,340
-612
-247
-2,930
-7,140
-2,087
-752
Program Description
The Export-Import Bank provides credit support for the sale of American goods and services
overseas through long-term direct loans and loan guarantees and through insurance against defaults
by foreign purchasers. The program enables U.S. exporters to obtain financing on terms competitive
with those offered foreign exporters by their governments or in areas where commercial lenders are
either unable or unwilling to extend credit without an Eximbank guarantee.
Current Status
The Bank's programs are now competitive with most foreign official export credit programs.
• In the past two years, the Administration has successfully negotiated three major changes in
international arrangements that control the terms of official export credits.
• These new agreements have reduced or eliminated subsidies in most areas. The principal
arrangement provides that the financial terms of government programs will adjust automatically to changes in market conditions so that subsidies will not recur.
• The Bank's interest rates are at the minimum rates permitted under these international
agreements.
• Our principal competitors—Germany and Japan—now operate their official export credit programs on commercial terms.
Because of the world wide recession, demand for the Bank's credit in 1983 continued the sharp
decrease from its 1981 peak. Demand has recovered only moderately in the first half of 1984.
1985 Budget Proposal
The Administration proposes the following credit limitations for 1985:
• A level of $3.83 billion for direct loans, which will permit obligations to increase significantly
from an estimated demand of $2.58 billion in 1984.
• A level of $10 billion for guaranteed loans, the same level as estimated for 1984.
36
These proposals would maintain the limits on the Bank's programs at approximately 1984 enacted
levels. If extraordinary circumstances require it, the need for an increased authorization would be
reviewed.
Rationale
The proposal would make available very substantial support for exports in 1985 to meet the credit
offers of other governments. While less than some exporter groups would wish, Eximbank funding
would be consistent with the world economic situation.
• The demand for Eximbank's credit is expected to recover only gradually in 1984 and 1985.
• Direct loans in 1983 were only $845 million, $3 billion below the limitation proposed for 1985.
• Loan guarantees in 1983, excluding special credit lines for Brazil and Mexico, were only $6.5
billion, $3.5 billion below the limitation proposed for 1985.
• The improvements in international export credit arrangements, along with the decline in
market interest rates from the high levels of 1980-82, will enable the Bank to operate more
efficiently and with less resort to direct loans.
The Bank's programs supported export financing that covered 3.8% of U.S. merchandise exports in
1983 and are forecast to support 4.9% of exports in 1985 if proposed authority is fully utilized.
Nevertheless, the Administration does not support an open-ended funding commitment to meet all
potential demand. Such a commitment, equivalent to operating the Bank on an entitlement basis,
would be inconsistent with the need to restrain Government expenditures and future deficits.
37
Payment to the Postal Service Fund
Agency: U.S. Postal Service
[in millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
879
879
970
970
807
807
776
776
745
745
776
776
4,074
4,074
879
879
692
692
443
443
444
444
445
445
447
447
2,470
2,470
-279
-279
-364
-364
-332
-332
-300
-300
-329
-329
-1,604
-1,604
Program Description
The U.S. Postal Service provides mail service at rates below true cost for certain "preferred-rate"
classes of mail including rural newspapers, classroom publications, and mail from non-profit organizations. Through the revenue foregone subsidy, the Federal Government reimburses the Postal
Service for revenue it loses as a result of these lower rates. It also pays certain liabilities of the
former Federal Post Office Department for such things as worker's compensation and unused
annual leave.
Current Status
Last year, the Administration introduced legislation to reduce the revenue foregone subsidy to $400
million, covering only the preferred rate for non-profit organizations. This reflects the belief that
postage costs should be paid by those who incur them and not the general taxpayer.
1985 Budget Proposal
The 1985 budget continues support for legislation proposed last year to reduce the revenue foregone
subsidy. It includes a $52 million reconciliation payment to cover the unbudgeted cost of 1982
preferred-rate mail. But the Administration proposes that in the future the Postal Service operate
within the amount appropriated by Congress each year, not receiving additional amounts, such as
reconciliation payments, to supplement the initial appropriation. The budget would also provide
$240 million for liabilities of the former Post Office for the years 1982 through 1985. (The 1981
Reconciliation Act deferred the 1982-1984 payments until 1985).
Rationale
The Administration believes that clearly assignable costs such as mailing costs should be borne by
those who incur them, not the general taxpayer. It recognizes, however, the substantial role played
by non-profit organizations in contributing to volunteer work in this country and therefore seeks to
maintain the revenue foregone subsidy, at a reduced level.
38
Small Business Administration Business Assistance
Agency: Small Business
Administration
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
New Direct Loans
Approved
Guar. Loan Commit
1985 Budget Level:
Budget Authority
Outlays
New Direct Loans
Approved
Guar. Loan Commit
Change:
Budget Authority
Outlays
New Direct Loans
Approved
Guar. Loan Commit
Total
1985-89
1984
1985
1986
1987
1988
1989
1,328
1,400
1,291
1,220
1,387
1,253
1,449
1,314
1,522
1,385
1,599
1,461
7,248
6,633
242
3,798
140
3,986
146
4,171
153
4,352
159
4,527
165
4,693
763
21,729
1,328
1,400
1,096
977
1,141
1,012
1,089
967
985
867
985
868
5,296
4,691
242
3,798
41
3,805
41
2,465
41
1,445
41
1,105
41
1,105
205
9,925
-195
-242
-247
-241
-359
-346
-536
-518
-614
-594
-1,951
-1,942
-99
-181
-105
-1,706
-112
-2,907
-118
-3,422
-124
-3,588
-558
-11,804
Program Description
The Small Business Administration (SBA) provides credit (direct loans, guaranteed loans, and
insurance) and management, technical, and procurement assistance to the Nation's small and
minority businesses and special groups.
Current Status
SBA continues to provide direct loans below the normal cost of borrowing from banks to a tiny
portion of all small businesses—approximately 0.02%. SBA loan guarantees have risen steadily from
around $0.5 billion annually in the late 1960's to about $4.0 billion in the early 1980's, for a 700%
increase.
Constant Dollar Trends
Despite the determined efforts of the Reagan Administration to reduce lending program levels and
future fiscal liabilities, constant dollar SBA outlays (excluding disaster aid) will reach an historic
peak of nearly $1.5 billion in 1984. In part, this reflects the failure of Congress to accept reduced
guaranteed loan levels and termination of most direct loans. It also reflects the delayed outlay
effects of guaranteed defaults on credit assistance extended during prior years. If the 1985 budget
recommendations are adhered to through 1989, SBA outlays in constant dollars will fall steadily
beneath the current services baseline to 50% of their 1984 peak.
39
Constant Dollar Trend
(1985 dollars in millions)
Year
Amount
1970
1980
1984
1985 current services,
1989 current services,
1989 budget
393
1,443
1,468
1,220
1,243
738
1985 Budget Proposal
The Administration proposes to eliminate SBA direct loans beginning in 1985 (except for $41.0
million for Minority Enterprise Small Business Investment Companies). Guaranteed credit assistance would be maintained in 1985 at the 1984 levels of about $3.8 billion, and would phase down to
about $1 billion by 1988. Under this proposal, handicapped and minority borrowers would have first
priority for credit assistance. The Government would assume risk primarily for these borrowers
whose risk the market is likely to overestimate.
Rationale
Subsidized direct loans to a few are unfair to other small businesses. They artificially prop up
businesses that could not compete without interest rates far below those entered into by virtually all
other small businesses—including the vast majority of SBA-assisted small businesses.
Assistance that has been provided often has not been effective in increasing the viability of small
business projects: over the past year, SBA had to cover defaults on its guaranteed loans at a cost
over a half billion dollars.
Since the vast majority of small businesses are obtaining financing without Federal assistance (less
than 1% of small businesses receive any SBA financial assistance), aid should be limited to those
businesses for which a valid case can be made that the market overestimates risk.
As interest rates decrease, burdensome regulations are removed, inflation remains low, and economic recovery continues, it should become easier for small businesses to obtain credit assistance
without Federal involvement.
40
Minority Business Development Agency
Agency: Department of Commerce
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
53
57
50
53
50
52
53
52
55
53
58
55
266
265
53
57
50
53
50
52
53
52
55
52
58
55
265
264
- 1
- 1
Program Description
The Minority Business Development Agency (MBDA) within the Department of Commerce provides
minority-owned firms with management, technical, and procurement assistance through contracts
with public and private organizations on a cost-sharing basis. (The Small Business Administration
(SBA) also provides its minority clients with management, technical, and credit assistance; establishes minority procurement goals for Federal agencies; and awards non-competitive 8(a) contracts
and business development expenses (BDE) grants to minority firms. SBA's annual funding of about
$42 million specifically for technical assistance and BDE grants to minority firms are included in
the factsheet on Small Business Administration—Business Assistance.)
Current Status
The President is committed to help minority Americans achieve fuller participation in the market
economy.
1985 Budget Proposal
This proposal would maintain and expand the 100 MBDA-funded Business Development Centers
(BDC's) across the country. By increasing private sector cost-sharing to 25% by 1987, the BDC's will
be able to provide assistance to a greater number of minority firms.
Rationale
In addition to the overall economic recovery program, this priority emphasis would help minority
businessmen marshal their talents and skills to achieve better lives for themselves and, in so doing,
contribute to a stronger economic base for America.
41
Small Business Administration Disaster Loan
Assistance
Agency: Small Business
Administration
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
New Direct Loans
Approved
1985 Budget Level:
Budget Authority
Outlays
New Direct Loans
Approved
Change:
Budget Authority
Outlays
New Direct Loans
Approved
1984
1985
1986
1987
1988
1989
Total
1985-89
-321
-213
-222
-201
-185
-170
—991
440
440
440
440
440
440
2,200
-321
-213
-222
— 201
-185
-170
— 991
440
440
440
440
440
440
2,200
Program Description
The Small Business Administration (SBA) provides loans to individuals and businesses that are
victims of physical disaster. The negative outlays shown above represent repayments in excess of
projected program expenditures (i.e., the repayment of outstanding loans exceeds the projected cost
of new loans).
Current Status
Over the past two years, the annual cost of the damages caused by natural catastrophes and covered
by SBA has been about $200 million. During this same time period, SBA disaster assistance has not
been available to farmers (who are eligible for Farmers Home Administration (FmHA) disaster
assistance) or to small businesses that suffer economic injury as a consequence of government
regulatory or legislative action (commonly referred to as non-physical disasters).
Constant Dollar Trend
Both the absence of major disasters and the significant policy reforms adopted in 1981 (exclusion of
farm disaster aid and termination of non-physical disaster loans) have resulted in a dramatic
turnaround in real budget outlays. Between 1975 and 1981, constant dollar SBA disaster loan
outlays averaged $1.2 billion per year. Since 1981, substantially reduced new loan disbursements
plus rising repayment from the outstanding loan portfolio have resulted in average negative outlays
of $341 million—representing a $1.5 billion per year shift from the 1975-81 period.
42
Constant Dollar Trend
(1985 dollars in millions)
Annual average
amount
Period
+$1,176
-341
1975-1981
1982-1985 current services
-1,517
Change
1985 Budget Proposal
The Administration has budgeted funds to meet the normally expected cost of physical disasters,
assuming no major disaster such as Hurricane Agnes in 1972. The Administration has proposed that
the policy of excluding farmers and non-physical disaster loans be continued.
Rationale
• The amount budgeted for 1985 is the same amount that the Congress has budgeted for 1984.
• Many of the non-physical disaster loans are necessitated by poor business judgment. To the
extent that financial assistance is justified, it can be provided through SBA's regular business
loan program.
• FmHA already has a disaster assistance program in place for farmers, and there is no need to
duplicate it in SBA. This also avoids abuses.
43
Flood Insurance
Agency: Federal Emergency
Management Agency
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
227
231
214
205
204
195
172
154
165
113
172
118
927
784
227
231
208
192
199
185
166
144
159
102
165
107
896
730
-6
-13
-6
-10
-6
-10
-6
-10
-7
-11
-30
-54
Program Description
The Federal Government offers to property owners flood insurance which is otherwise unavailable
in the commercial market. In return for the availability of insurance, communities agree to adopt
and enforce local flood plain management measures to protect lives and new construction from
future flooding.
The claims under flood insurance have exceeded premiums in most years since the program began
in 1968. Cumulative subsidies (losses) totaled nearly $1.2 billion by the end of 1983.
The subsidy stems from two problems: (1) inadequate premiums, and (2) lack of adequate elevation
data for some communities.
Elevation data usually is derived from flood assessment studies. The Administration has taken steps
to increase premiums and to review options to complete flood assessments more quickly and at lower
costs.
This program grouping also includes several other programs of the Federal Emergency Management
Agency, including training and fire programs and staff to manage disaster relief.
Current Status
The Admininstration proposal continues the policy of seeking a self-supporting flood insurance fund
by 1988 through increases in flood insurance rates, better rating mechanisms, coverage changes and
improved marketing. A study on demographic and flood plain development patterns is being conducted to better assess how to complete the flood studies more quickly in the remaining communities.
1985 Budget Proposal
No increases in premium rates are anticipated in 1985. Marketing of the insurance will be expanded
by encouraging the private insurance industry to write and service flood insurance policies.
The budget curtails the number of new flood studies and restudies until the report on demographic
and flood development patterns is completed during 1984.
44
Rationale
Over 7,000 communities, roughly half the original total, remain without any flood hazard assessment after 15 years of mapping.
Flood studies are time-consuming and costly, and periodic restudies are necessary as conditions
change. These costly studies should be curtailed to permit time for development of less costly
alternatives. The study on demographic and flood development patterns expected this year should
result in less costly and more expeditious flood hazard assessments.
45
Health Professions Training Subsidies
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
208
200
219
213
230
230
241
241
251
251
262
261
1,202
1,196
208
200
121
170
125
119
128
123
132
126
135
129
640
666
-98
-43
-105
-111
-112
-118
-120
-125
-127
-132
-562
-530
Program Description
Since the 1950's, the Federal Government has subsidized institutions and students through a
number of project and formula grant and loan training programs aimed at increasing the supply
and improving the distribution of health professionals.
Constant Dollar Trends
After passage of major health professions legislation in the mid-1960's, constant dollar Federal
outlays grew rapidly, reaching a peak funding level of $1.4 billion in 1973. Since 1978, however,
constant dollar funding has steadily fallen and in 1985 will be down 85% from its peak level. If the
1985 budget recommendations are adhered to, constant dollar outlays will decline to $110 million in
1989—a level only 8% of the mid-1970's peak.
Constant Dollar Trends
(1985 dollars in millions)
Year
Amount
1965
1973
1977
1980
1985 current services
1989 budget
97
1,432
1,231
542
213
110
Current Status
Numerous studies indicate that the overall supply of health professionals through the 1990,s will be
more than adequate. In 1985, the Nation as a whole will have met or exceeded the estimated
required level of health professions for almost every major specialty. However, access of minorities
to health professions education could be improved since the percentage of minorities entering
medical schools is only about one-third of the percentage of minorities in the United States population.
46
1985 Budget Proposal
The 1985 proposal would provide $121 million in budget authority to continue health professions
training, $87 million less than in 1984. The 1985 budget would focus Federal funds on increasing
health professions training opportunities for minorities and economically disadvantaged students.
Federal support for general subsidies would be reduced. In addition, schools would continue to have
access to $67 million in federally provided revolving loan funds. These funds can be used to make
loans to nursing and other health professions students.
Rationale
The projected oversupply of health professionals justifies a reduction in Federal support. Remaining
Federal dollars should be focussed on improving minority access.
47
Trade Adjustment Assistance for Workers
Agency: Department of Labor
[In millions of dollars]
Level
1984
Current Services: 1
Budget Authority
Outlays
1985 Budget Level: 1
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
54
64
51
51
5
5
56
56
54
64
51
51
5
5
56
56
1 This factsheet shows amounts for TAA cash benefits. Amounts for training and other employment assistance for TAA beneficiaries are included in the Training
and Employment factsheet.
Program Description
The Trade Adjustment Assistance (TAA) program provides additional weeks of cash unemployment
benefits to those whose loss of work has been determined to be caused, at least in part, by increased
imports. Unemployed workers certified eligible for TAA may collect up to a total of 52 weeks of
unemployment insurance and TAA benefits.
Current Status
TAA expenditures in 1985 are sharply lower than they would have been in the absence of the
bipartisan reform of TAA enacted as part of the 1981 Reconciliation Act. That legislation converted
the TAA program from one that emphasized cash benefits to one that emphasized adjustment to
changed economic conditions through training and other reemployment efforts. The 1981 Act provided that workers receive a weekly TAA payment only after they had used up all their weeks of
unemployment insurance (rather than adding a TAA payment on top of unemployment insurance)
and that the TAA benefit amount be the same as the unemployment insurance weekly benefit
(rather than a higher amount specified in Federal law).
Constant Dollar Trend
In the latter half of the 1970,s the constant dollar cost of TAA cash benefits exploded—rising from
$26 million to $2.1 billion in five years. Due to the 1981 reforms described above, TAA cash benefit
costs have now receded to their mid-1970's levels.
Constant Dollar Trend
(1985 dollars in millions)
Year
Amount
26
413
2,058
51
1975
1978
1980
1 9 8 5 c u r r e n t services
48
1985 Budget Proposal
The request reflects continued funding for this program at a current services level for 1985. The
authorization for TAA expires on September 30, 1985. No reauthorization of the program would be
sought.
Rationale
No reauthorization of TAA is being sought for equity reasons. Economic hardship resulting from
involuntary unemployment is not dependent upon the cause of job loss. Therefore, for purposes of
income support, workers affected by imports should not receive special cash benefits different from
their neighbors who may have lost their jobs for other reasons.
49
Postal Service
Agency: U.S. Postal Service
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
2,163
1,209
4,180
2,801
2,163
1,209
4,180
2,801
Total
1985-89
1987
1988
1989
608
102
1,032
1,028
1,393
1,994
46
-605
7,259
5,319
608
102
1,032
1,028
1,393
1,994
46
-605
7,259
5,319
1986
Program Description
The Postal Reorganization Act of 1970 converted the Post Office Department into the U.S. Postal
Service, an independent establishment within the executive branch. It is charged with providing
reliable mail service at reasonable rates.
Current Status
The activities of the U.S. Postal Service are financed primarily from mail and services revenue. It
also obtains financing from the following sources: (1) reimbursements from Federal and non-Federal
entities, (2) proceeds from borrowing, (3) interest from U.S. securities and other investments, and (4)
appropriations by the Congress. Budget authority represents the excess of commitments over revenue for a given year. The Postal Service is authorized to borrow by issuing obligations which may
not exceed $10 billion outstanding at any one time. Since 1974, it has borrowed exclusively from the
Federal Financing Bank.
1985 Budget Proposal
The 1985 budget for the Postal Service does not reflect the impact of the postal rate increase request
submitted to the Postal Rate Commission in November, 1983, because by convention no rate increase
is shown during the budget year. The rate increase is assumed to take effect in 1986. Under this
assumption, proposed 1985 outlays are $2.8 billion. The increase over the 1984 outlay amount is
primarily due to increased operating expenses and capital investments, as well as to the convention
of excluding the proposed rate increase.
Rationale
The 1985 budget reflects the Postal Service's best estimate of its future financial and operating
position.
50
Transportation and Maritime Subsidies
51
National Oceanic and Atmospheric Administration
Special Fisheries Funds
Agency: Department of Commerce
[In millions of dollars]
Level
Current Services:1
Budget Authority
Outlays
1985 Budget Level: 1
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1
1984
1985
1986
2
1
3
12
3
12
1987
1988
Total
1985-89
1989
3
3
4
4
5
5
14
12
-23
-15
-22
-22
-22
-22
-22
-22
-22
-22
-110
-101
-24
-15
-23
-23
-24
-24
-26
-25
-27
-26
-124
-114
Includes offsetting receipts.
Program Description
The National Oceanic and Atmospheric Administration (NOAA), through a number of special
fisheries funds, supports fisheries activities by: 1) insuring against claims resulting from gear
damage or other losses from foreign fishing in U.S. waters, energy development on the Outer
Continental Shelf, and seizure of U.S. vessels in foreign waters; 2) providing loans and loan guarantees for the purchase or upgrade of fishing vessels; 3) using fish import duties to fund grants and
contracts to the fisheries industry for its development; and 4) posting observers on foreign vessels
fishing within the U.S. Fisheries Conservation Zone (FCZ).
Current Status
The special insurance funds have been created in recent years and are financed through industry
contributions. Demand (number of claims) has remained stable. Other special funds are used to
make fisheries development grants and loans. Over the past several years, fishery management costs
borne by the taxpayer have increased, while $90 million in foreign fishing receipts have accumulated in the fisheries loan fund and are not being used.
1985 Budget Proposal
The Administration budget would maintain the insurance funds at current levels, and emphasize
fishery management activities. The foreign fish observer program would be reduced because foreign
fishermen will be able to contract for observers certified by the Secretary of Commerce. All import
duties and fees would be used to finance essential fisheries management operations. Industry
assistance grants, direct loans, and loan guarantees would be terminated. (The Administration
proposal would use foreign fishing receipts to offset costs incurred by NOAA (factsheet on the
National Oceanic and Atmospheric Administration) and Coast Guard (factsheet on the Coast Guard)
to enforce the FCZ.)
53
Rationale
Fish import duties should be used to offset taxpayer support for essential fisheries management
rather than for development programs. The appropriate Federal role in marine fisheries is ensuring
that resources are well managed and available to future generations, not developing new markets.
Foreign fishing receipts should be applied to offset the high costs of enforcing the FCZ, not intruding
in investment decisions best made by the private market.
Subsidized loans and loan guarantees are unnecessary. Many recipients of these subsidies are
defaulting on obligations, and taxpayers are required to pay off lending institutions. The Federal
Government has already paid off $10 million in defaulted loans in 1984.
54
Amtrak
Agency: Department of Transportation
[In millions of dollars]
Level
1984
Current Services: 1
Budget Authority
Outlays
1985 Budget Level: 1
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
1,945
1,990
755
780
793
820
830
860
867
880
901
900
4,146
4,240
1,945
1,990
680
738
680
690
680
680
690
690
690
690
3,420
3,488
-75
-42
-113
-130
-150
-180
-177
-190
-211
-210
-726
-752
1 Figures for 1984 include a one-time-only $1.2 billion payment made by the Department of Transportation on behalf of Amtrak to repay loans outstanding from
the Federal Financing Bank.
Program Description
Amtrak is the National Railroad Passenger Corporation, formed in 1970 when the Government took
over passenger operations from several freight railroads. It is subsidized by the Federal Government
through annual appropriations to pay almost all of Amtrak's capital costs and to cover operating
losses. Amtrak operates 104 trains per day in the Northeast Corridor, 18 other short distance routes
and 18 long distance routes throughout the Nation, most with daily service. Amtrak does not
operate freight trains.
Current Status
Since 1981, Federal operating and capital subsidies of Amtrak have decreased 19%, from $881
million to $716 million in 1984. Major legislative reforms were enacted in the Amtrak Improvement
Act of 1981, which resulted in reduced Amtrak operating costs and lower subsidy requirements.
During 1983, Amtrak controlled its operating expenses and increased revenues, allowing it to meet
the congressionally mandated goal of a 50% revenue-to-operating cost ratio. The budget request
reflects continued improvement in this ratio, which in 1985 is projected by Amtrak to be 58%.
Constant Dollar Trend
After its creation in 1970, Amtrak's constant dollar outlays grew rapidly—from $61 million in 1971
to a peak of $1.2 billion in 1977. The reforms adopted in 1981 have subsequently reduced the 1985
current services real funding level by 29% from 1980 and 37% from the 1977 peak.
Constant Dollar Trend
(1985 dollars in millions)
Year
Amount
1971
1977
1980
1985 current services
61
1,236
1,104
780
55
1985 Budget Proposal
In 1985 Amtrak is expected to operate essentially the same nationwide route system it is now
serving. Amtrak will continue to require Federal financial assistance to cover its operating deficit
and to provide for capital improvements. Productivity improvements, cost reductions, changes in
operations and surplus funds from prior years are expected to contribute to Amtrak's ability to
operate within the proposed 1985 funding level.
Legislation will be submitted that would:
• phase in full State and local funding of intrastate and commuter trains over a multi-year
period beginning in 1986;
• tighten Amtrak's maximum avoidable loss per passenger mile criterion through elimination of
certain enforcement loopholes based on excessive adjustments for inflation and repeated optimistic projections of improved performance on weak routes; and
• replace Amtrak's existing costly program of labor protection with a more realistic and affordable program.
Rationale
States and localities benefiting from Amtrak service pay only 1% of Amtrak's total expenses. The
costs of intrastate and commuter trains should be borne by the benefiting regions. Phasing in the
increased State and local share over a multi-year period would allow an orderly planning and
budgeting transition.
As allowed by the Rail Passenger Service Act of 1979, Amtrak annually adjusts its congressionally
mandated route performance criteria to account for inflation. However, one criterion, the ratio of
allowable loss to passenger miles, has increased in real terms over time. Under the Administration's
proposal, the standard would be tightened in future years through more selective inflation adjustments.
Trains that are not projected by Amtrak as being able to meet the statutory performance criteria
are required by law to be dropped from the Amtrak system. In some cases, optimistic projections by
Amtrak have resulted in continuation of inefficient routes over several years. The Administration
proposal would seek to correct this problem by requiring comparison of actual route performance to
Amtrak's projected performance over several years. This would be part of the process used to
determine whether routes meet the statutory criteria.
Although labor protection provisions included in the Rail Passenger Service Act of 1970 were
relevant to conditions existing during the transfer of service from the private railroads to Amtrak,
they are no longer appropriate. Under the Administration's proposal, employees deprived of employment because of route discontinuance would no longer receive full salaries for up to six years.
Instead, a new program comparable to that provided to Conrail employees would be agreed upon by
the Secretary of Transportation and employee representatives. Funds would be used for unemployment benefits, retraining and moving expenses, health insurance premiums and other appropriate
purposes.
During the past few years, lower than anticipated inflation rates and Amtrak productivity improvements have resulted in substantial portions of Amtrak's Federal subsidy remaining unspent. Under
the Administration's proposal, these surplus funds from prior years would be used to reduce the
level of new capital funding required by Amtrak in 1985.
56
Northeast Corridor
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
Agency: Department of Transportation
1987
100
310
110
321
100
128
100
120
100
310
266
78
20
-110
-55
-100
-50
-100
-100
1988
105
1989
Total
1985-89
310
674
364
-105
-310
-310
Program Description
The Northeast Corridor Improvement Project (NECIP) is intended to improve rail passenger service
between Washington, D.C., and Boston, Massachusetts. The goal of the project is to provide safe,
dependable, improved service on that corridor. The project, begun in 1976, has included track
improvement, bridge repair, elimination of grade crossings, station improvement, and electrification,
as well as installation of signalling and communication systems and railway maintenance facilities.
Current Status
The 1984 budget brought the total amount appropriated to the full $2.19 billion level sought by the
Administration for this project. Activity in 1985 will remain high as construction continues on
projects obligated in earlier years and completed projects are audited and closed out.
1985 Budget Proposal
No funds are requested for 1985. The $2.19 billion investment made to date in this project completes
improvements that the Administration expects will provide a safe, reliable and serviceable rail
system in the corridor. Any additional capital investment and maintenance work on the corridor
would be the responsibility of the National Railroad Passenger Corporation (Amtrak) after 1985,
when Amtrak assumes responsibility by statute. Outlays will continue to be made from prior year
appropriations.
Rationale
The goals of the project will have been achieved at the $2.19 billion funding level. Trains on the
corridor now reach speeds of 120 mph on certain track segments and travel time between New York
and Washington, D.C., has been reduced from three hours and 30 minutes in 1979 to two hours and
49 minutes in 1983. Service is safe and dependable. On-time performance has improved from 30% in
1977 to 90% in 1983. Reduced speeds, in effect for 185 miles of track in 1979, are now in effect for
only 1.2 miles of track. Although an additional $310 million is authorized for this project, expenditure of these funds will not appreciably increase service reliability or safety on the corridor.
After 1985, Amtrak will be responsible for further improvement and maintenance of the corridor.
This is appropriate because Amtrak owns most of the track and right-of-way on the corridor and
operates all the noncommuter passenger service. Through NECIP, the Federal Government has
helped Amtrak provide improved passenger service.
57
Railroad Subsidies
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
Agency: Department of Transportation
1987
1988
1989
Total
1985-89
83
215
89
133
97
139
105
107
114
113
122
122
527
614
83
215
63
120
67
116
69
69
71
71
73
73
342
448
-26
-12
-31
-23
-36
-38
-43
-43
-49
-49
-185
-166
Program Description
Railroad subsidies have several components: Federal purchase of preferred stock to finance specific
rail improvement projects; grant assistance (mostly formula) to States for rail planning and for
rehabilitation of track and facilities on low traffic branchlines; operation and ownership of the 500mile long Alaska Railroad; rail-safety related research and development (R&D); regulation of rail
safety and enforcement of safety rules; and overall management of the Federal Railroad Administration.
Constant Dollar Trend
Constant dollar outlays for these programs grew rapidly in the early 1970's—reaching a peak
funding level of $811 million in 1976. Reagan Administration efforts since 1981 to reduce unnecessary subsidies have been highly successful with 1985 current service outlays of $133 million representing an 84% reduction from the 1976 peak.
Constant Dollar Trend
(1985 dollars in millions)
Year
Amount
1970
1974
1976
1980
1985 current services
43
198
811
582
133
Current Status
Funding for these programs has decreased primarily because of the reduced need for Federal
financial assistance and the transfer of operation of the Transportation Test Center R&D facility
outside Pueblo, Colorado, to the private sector. In 1985, this trend will continue as the Federal
Railroad Administration proceeds with its efforts to focus on safety in the railroad industry.
58
1985 Budget Proposal
The Administration proposes to:
• Transfer the Alaska Railroad to the State of Alaska before December 1984.
• Terminate funding for local rail service assistance, a subsidy program for low traffic, local
branchlines.
• Terminate funding for the preference share program and allow all unobligated funds from
prior years to expire at the end of 1985.
• Terminate Federal grants to States to subsidize State safety inspection programs while maintaining the Federal safety program at its current funding level.
• Maintain the strong emphasis on conducting safety research and development in support of
Federal safety rulemaking and enforcement responsibilities.
Rationale
The Alaska Transfer Act of 1982 authorizes transfer of the Alaska Railroad to the State of Alaska.
The Administration is proceeding with this activity as provided in law. The transfer is expected to
occur prior to December 1984.
Local rail service assistance was originally intended to be a temporary program to help solve
Northeast rail problems resulting from the formation of Conrail. It was subsequently reauthorized
and expanded into a nationwide grant program in which over 25% of funds are allocated to States
by formula, irrespective of any branchline problems. Since the program was originally established,
conditions in the rail industry have changed drastically. In most regions, the severe rail problems
have been eliminated. Most States have recognized that the program was intended to be a transitional program and are not as dependent on this funding as they were initially. Many States have
established their own successful local assistance programs to deal with those regional problems that
may occur. There will be very little effect if Federal subsidies in this area are terminated, as
subsidized lines carry less than 0.5% of nationwide rail traffic.
Termination of the preference share program is part of a general effort to reduce the public tax
burden and allow market principles to apply. Compared with other forms of Federal railroad
assistance, this program entails an extremely high subsidy rate. It carries an effective interest rate
of approximately 3.4% (yield to maturity). Even at this level, obligation rates have lagged funding
availability. For example, in 1983 Department of Transportation obligated only 34% of the funds
available to it ($31 million obligated out of $101 million available). This strongly indicates a lessened
need for such subsidization of a strengthened railroad industry. Railroads formerly requiring this
assistance currently have a greatly enhanced ability to raise capital funds without Federal aid.
Federal grants to States to subsidize State safety inspection programs are used to pay salaries and
expenses for State inspectors and associated costs such as planning on a 50% cost-sharing basis.
Many States would continue with their programs, even bearing the full cost of their inspectors.
Although no Federal funds are requested for continued subsidies in 1985, no change in the program's functional authorization is requested. This will allow those States that wish to continue
programs with their own funds to do so.
The primary purpose of the Federal railroad research and development program is to support the
Government's efforts to regulate and enforce railroad safety. Other types of research should be the
responsibility of the railroad industry, which has indicated a willingness and ability to support such
market-oriented activities. The Administration proposal would continue support for the Federal
program.
59
National Aeronautics and Space Administration
Aeronautical Research and Development
Agency: National Aeronautics and
Space Administration
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
627
641
.
691
679
748
721
778
763
783
774
819
808
3,819
3,745
627
641
690
696
755
728
784
771
821
811
858
846
3,908
3,852
- 2
+7
+7
+7
+8
+38
+37
+39
+38
+89
+ 107
+ 17
Program Description
The National Aeronautics and Space Administration (NASA) aeronautical research and development (R&D) programs help to advance generic aeronautical technologies that underlie the development of future generations of superior military and civil aircraft. These programs support the staff,
major experimental facilities, and other research needs of three major aeronautical R&D centers.
Current Status
The Administration continues to support a vigorous program of aeronautical R&D to help sustain
continued U.S. leadership in aeronautics.
1985 Budget Proposal
Budget authority for NASA aeronautical R&D would total $690 million in 1985, an increase of $63
million over 1984. The proposed funding would:
• Advance generic aeronautical technologies such as materials and structures, propulsion and
aircraft control.
• Expand major high-priority projects, including:
• The joint NASA/Department of Defense (DOD) X-wing rotorcraft project to explore the
technology necessary to develop future high-speed rotorcraft;
• The advanced composite structures project to explore the use of new types of structural
materials which could improve significantly the operating efficiency of future military and
civil aircraft; and
• The Numerical Aerodynamic Simulator project to apply supercomputers which could
improve generically the productivity of aeronautical research and design processes. If
successful, this promising technology could help reduce the time and cost of achieving high
confidence in new designs for aircraft and propulsion systems by complementing traditional
experimental methods (e.g., wind tunnels) with the greater use of advanced computational
techniques.
60
Rationale
Advanced aeronautical technologies are necessary to assure a superior military aeronautical capability; to assure a safe, efficient, and environmentally compatible air transportation system; and to
maintain the competitiveness of the U.S. civil aviation industry.
The proposed increases for NASA aeronautical R&D programs in the 1985 budget are necessary to
help ensure the timely provision of the knowledge base underlying the continued superiority of U.S.
aviation technology. Individual firms are often unable to realize the full benefit of investments to
advance fundamental knowledge in aeronautical disciplines or generic aeronautical technologies
because of their diffuse applicability. NASA support is intended to complement, but not displace,
R&D efforts supported by DOD and by industry.
61
Air Carrier Subsidy
Agency: DOT/CAB
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
51
56
51
57
53
52
55
55
58
57
60
60
277
281
51
56
52
56
52
52
52
52
52
52
5
10
213
222
+ 1
-1
-55
-50
-64
-58
-3
-3
-6
-5
Program Description
Under the Airline Deregulation Act of 1978, the Civil Aeronautics Board (CAB) administers a
program of subsidies to air carriers to guarantee service to communities that were served by an air
carrier prior to airline deregulation. Beginning on January 1, 1985, the Department of Transportation is scheduled, as part of the CAB sunset process, to take over the administration of this program.
This change in agency responsibility will not change the level of subsidies.
Current Status
Since deregulation, service at all eligible communities has been maintained. Scheduled departures at
eligible communities have increased by 5% since 1978. At the same time, through careful attention
to subsidy payments, the cost of the program has decreased by 30%, from $74 million in 1978 to $52
million in 1985.
1985 Budget Proposal
The 1985 budget provides funding for an estimated 140 eligible cities: 120 cities in the lower 48
States and 20 cities in Alaska. These estimates are based on the likely number of eligible cities that
will require subsidy and the amounts of subsidy needed at each city to guarantee service.
Rationale
The 1985 funding is proposed at a level estimated to fully meet the needs of each community that
qualifies for this program. When the program expires in October 1988, it is expected that participating communities will have used the subsidies to adjust to deregulation, and they would then be
prepared to assume responsibility for air carrier service.
62
Maritime Subsidies
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1986
1985
Agency: Department of Transportation
1987
1988
1989
Total
1985-89
352
391
402
408
425
425
425
425
431
431
450
450
2,133
2,139
352
391
378
388
392
392
381
381
381
381
391
391
1,923
1,933
-24
-20
-33
-33
-44
-44
-50
-50
-59
-59
-210
-206
Program Description
The Department of Transportation's Maritime Administration (MarAd) provides: (1) direct ship
construction differential subsidies (CDS) of up to 50% of the price of building new privately owned
merchant ships in U.S. shipyards; and (2) direct operating differential subsidies (ODS) to offset the
higher costs (primarily wages) of operating U.S.-flag vessels in oceanborne foreign commerce.
Current Status
In 1982, the Administration formulated its maritime policy to revitalize the American merchant
marine. Both the shipping and shipbuilding industries have been in a state of decline. The Administration's maritime policy reflects the belief that these industries must become as competitive as
possible without further subsidy.
Constant Dollar Trend
In the two decades prior to 1980, constant dollar funding levels for maritime operating and construction subsidies slowly eroded—declining about 23% between the early 1960's and later 1970,s. By
terminating new construction subsidies and reforming the operating subsidy program, the Reagan
Administration has accelerated this trend. Current services outlays in 1985 will be down 50% from
1980 and 61% from the early 1960's funding level.
Constant Dollar Trend
(1985 dollars in millions)
Year
Amount
1962-1964 average
1972-1974 average
1977-1979 average
1980
1985 current services
1,048
939
804
813
408
63
1985 Budget Proposal
The 1985 budget reflects the following maritime policy initiatives, which were also included in the
1984 budget:
• Eliminate CDS and allow U.S.-flag operators to construct or acquire their ships in foreign
countries.
• Meet the Government's obligation on existing ODS contracts, make administrative changes to
hold down escalating costs, and allow no additional ODS contracts.
• Implement maritime regulatory reform legislation, recently enacted into law.
Rationale
These initiatives would lessen direct Government support and create a stronger, more competitive
U.S. merchant marine.
The CDS program has been unsuccessful in fostering a modern fleet of U.S.-flag vessels. Allowing
U.S.-flag operators to build ships in foreign yards would make it possible for operators to acquire
modern, efficient ships in a cost-effective and timely manner. It now costs more than twice as much
to build ships in U.S. shipyards as overseas.
Termination of the ship construction subsidy program would have little effect on the shipbuilding/
ship repair mobilization base because of overall upward trends in the value of ship construction,
particularly Navy work.
The approximate value of unfinished shipbuilding work in private yards has increased from $11.1
billion in 1980 to $20.7 billion in 1983, all of the increase attributable to the Navy program.
Through better administration and a more incentive-oriented program, operating subsidies would be
reduced for those operators now receiving them. This would result in greater flexibility for the
operators and would provide them with an opportunity to increase revenues and reduce costs,
offsetting the subsidy reduction. The average subsidy per sea-going billet is over $60,000 a year.
Implementation of maritime regulatory reform legislation should further improve the economic
condition of the industry.
64
Maritime Research and Training
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority 1
Outlays 1
Change:
Budget Authority 1
Outlays 1
1
1984
1985
1986
Agency: Department of Transportation
1987
1988
1989
Total
1985-89
85
103
89
90
94
93
99
98
104
103
109
108
494
492
85
103
76
86
89
89
90
90
95
94
100
99
450
458
-13
-3
-4
-4
-9
-8
-9
-9
-9
-9
-44
-34
In 1985 an additional $7 million is being transferred from unobligated balances of another program, making the decline in level of budget authority $6 million.
Program Description
The Department of Transportation's Maritime Administration (MarAd): (1) supports the training of
merchant marine officers by operating the Merchant Marine Academy (MMA) and by providing
Federal assistance to State maritime academies; and (2) supports research and development activities to enhance the maritime industry.
Current Status
There have been very few changes in funding levels over the recent past that are the result of policy
changes. In 1984, enrollment was reduced by 10% for new students attending the MMA. The
research budget was also reduced to eliminate those projects that should more appropriately be
funded by the industry.
1985 Budget Proposal
The 1985 budget would essentially sustain the programs as they are currently operating with small
reductions as outlined below.
The Administration proposal would reduce MMA enrollment of new students by 10% and would
reduce by 10% the number of direct payments provided to new students attending the State
maritime academies.
The Administration proposal would also reduce lower priority applied research and development
projects. Remaining funds would support basic research projects where the benefits to society may
be substantial but they do not accrue to individual firms.
Rationale
The proposed level of funding for maritime training would begin to equalize the supply/demand
ratio for merchant marine officers. The trend in the maritime industry is toward fewer, larger ships
with smaller crews. Currently, there is a 32% oversupply of merchant marine officers.
The Government would continue to fund research projects where the benefits to society may be
substantial but they do not accrue to individual firms. Reducing funding for applied research
projects would place the responsibility for those activities where it most appropriately belongs—with
the company or industry segment that receives a direct and immediate benefit.
65
Rail Rehabilitation and Reorganization Loan
Guarantees
Agency: DOT/USRA
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
12
-63
20
10
12
-63
10
1986
-10
-10
1987
1988
1989
Total
1985-89
20
8
20
7
20
4
20
3
100
32
-14
-15
-18
-19
10
-67
-20
-22
-20
-22
-20
-22
-20
-22
-90
-98
Program Description
Rail rehabilitation loan guarantees finance specific improvement projects (especially track rehabilitation) to assist financially needy railroads that would have difficulty borrowing money in the
private sector. The money is borrowed from the Federal Financing Bank (Treasury) and guaranteed
by the Department of Transportation. Rail reorganization loans were made by the U.S. Railway
Association to finance certain expenses incurred by the estates of the bankrupt railroads formed
into Conrail. The last of these loans will be repaid during 1984.
Current Status
In 1983, Congress placed an annual $100 million limitation on new rail rehabilitation loan guarantee commitments. However, only $15 million in new commitments were actually made that year.
The 1984 limitation is $20 million. Only the highest priority projects included in applications being
reviewed will be financed. The decrease in this program is a reflection of the increased financial
health of the railroad industry.
Constant Dollar Trend
Between 1975 and 1980 constant dollar Federal outlays for these programs totaled $1.1 billion.
Between 1981 and 1985 the payback of the railroad reorganization loans and the sharp reduction in
new disbursements for rail rehabilitation loans will result in cumulative negative outlays of $529
million. Although rail rehabilitation loans will continue to be repaid through the year 2006, under
both the current service baseline and 1985 budget policies, these programs will cease to have a
significant impact on the Federal budget after 1985.
1985 Budget Proposal
No new commitments for the rail rehabilitation loan guarantee program are being proposed for
1985.
66
Rationale
The financial prospects for U.S. railroads have improved significantly in the past several years, and
therefore, the need for what was intended to be temporary special Federal aid has ended. Because of
railroad deregulation and increased traffic levels, continued positive change for the railroad industry is expected.
Few applications for loan guarantee funding have been received, and therefore no adverse effects
are anticipated from terminating the program.
67
Transportation Industry Assistance
Agency: DOT/NASA
[in millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level: 1
Budget Authority
Outlays
Change: 1
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
1,172
-601
21
-33
23
-119
25
-132
26
-146
115
-441
1,182
-586
...
...
20
-11
15
-11
11
-54
6
-146
2
-164
3
-180
37
-555
+10
+15
-5
-11
-21
-17
-27
-22
-32
-23
-34
-78
-114
1 In 1984, the difference between current services and the budget level reflects a supplemental request for Conrail labor protection payments. Also included are a
one-time-only repayment to the Federal Financing Bank for outstanding Amtrak loans ($880 million) and the transfer through congressional action of $1 billion in NASA
loan guarantees from the research and development account into the space flight, control, and data communications account.
Program Description
Transportation industry assistance has several components: Federal subsidies of Conrail, the Government-owned freight railroad, including labor protection benefits and compensation paid to the
bankrupt railroads for properties taken from them to form Conrail; salaries and expenses for the
U.S. Railway Association; Federal ship financing and related funds; National Aeronautics and Space
Administration (NASA) loan guarantees to finance construction of a communications satellite and
R&D; and loan guarantees that financed Amtrak capital investment between 1970 and 1976 (which
were defaulted and subsequently repaid to the Federal Financing Bank in 1984).
Current Status
Conrail has made a financial recovery and has not required direct operating subsidies since 1982.
Settlements have been reached with all the bankrupt railroads involved in the formation of Conrail
with the exception of Central Jersey Industries. Congress has continued to provide funding for the
U.S. Railway Association; however, funding for this agency has decreased by 93% since 1981,
commensurate with its decreased responsibilities. The Federal Government continues to provide
labor protection benefits to former Conrail employees as provided for in current law. The Government is continuing its efforts to return Conrail to the private sector.
Because of depressed conditions in the maritime industry, a number of companies that have
constructed vessels with Federal loan guarantees have been unable to meet their debt service
payments on the guaranteed mortgages. This has led to defaults the Government has had to cover.
New loan guarantee commitments in 1984 and 1985 are projected to be $600 million, with an
additional $300 million available if needed in the interest of national security. Actual new loan
guarantee commitments in 1983 were $322 million.
Constant Dollar Trend
Between 1976 and 1983, cumulative constant dollar outlays for these programs totaled $11.3 billion.
As a consequence of Conrairs financial recovery, settlement of most of the railroad litigation, and
the repayment status of one-time NASA and Amtrak off-budget loans, these accounts shifted to
negative real outlays in 1984 and should have a negligible budget impact in the out-years.
68
Constant Dollar Trend
(1985 dollars in millions)
DnrinH
^
Cumulative
amount
1976-79
1980-83
1984-86 current services
4,905
6,385
- 672
1985 Budget Proposal
The Administration proposes to:
• Terminate funding for the U.S. Railway Association (USRA). USRA did not request any
funding for 1985.
• Continue to provide labor protection benefits to Conrail employees, as provided for in current
law.
• Better protect the Government's interest when it guarantees ship construction loans. Specifically, the Administration proposes to increase the amount of fees the Government receives
from loan guarantee recipients to cover the increasing number of defaults.
Rationale
USRA was created as a temporary agency in 1973 to oversee the formation of Conrail, monitor its
performance, and act as a conduit for Federal assistance. These activities are completed, and Conrail
is financially healthy. USRA has accomplished its purpose and should be phased out. The Department of Transportation is continuing its efforts to sell Conrail. Independent capability to monitor
DOT's activities exists in the Interstant Commerce Commission, the General Accounting Office, and
Conrail itself. Therefore, there is no need in 1985 for a separate agency to exist solely for the
purpose of monitoring the Conrail sale.
The beneficiaries of the ship construction loan guarantee program should bear more of the risk and
financial responsibility for loan defaults. The amount of defaults on guaranteed loans has become
substantial, representing an increased risk and cost to the Government. In 1982 there were no
defaults on Government guaranteed ship construction loans. Almost $100 million in defaults had to
be paid off by the Government in 1983. Defaults in 1984 could exceed the 1983 level. Over $7 billion
in Government guaranteed ship construction loans are currently outstanding.
69
Energy Programs
71
Nuclear Fission Research and Development
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority „
Outlays
1985
1986
Agency: Department of Energy
1987
1988
1989
Total
1985-89
679
703
554
639
537
657
554
648
525
545
536
484
2,707
2,973
677
698
618
656
549
586
499
533
455
487
442
442
2,563
2,704
-2
-5
+64
+ 17
+ 12
-71
-55
-115
-70
-59
-95
-41
-144
-269
Program Description
Under this program, the Department of Energy (DOE) supports research on advanced nuclear
technologies such as the Liquid Metal Fast Breeder Reactor (LMFBR), the High Temperature Gas
Reactor (HTGR), and reactors for potential power applications in space. In addition, the Department
conducts nuclear waste-related activities such as solidifying liquid waste at West Valley, New York
and remedial actions at uranium mill tailings sites and contaminated facilities (e.g., decommissioning the Government-owned demonstration power reactor at Shippingport, Pennsylvania).
Current Status
The major element of this program has been the research and development (R&D) effort of the
Department to develop and demonstrate the LMFBR as a commercial source of electric power. Until
1984, the centerpiece of the program was the Clinch River Breeder Reactor (CRBR) Demonstration
plant. Following Congressional action in October 1983 to terminate the CRBR, work is now underway to close out this project. This termination effort is expected to cost $172 million.
With the termination of the CRBR, DOE is reorienting its breeder base program. A greater
emphasis will be placed on international cooperation in resolving technical uncertainties and on
evaluation of alternative breeder design concepts.
Work is continuing in support of the HTGR (as an alternative to light water reactors currently used
by U.S. utilities), on safety related R&D at Three Mile Island, and on an international safety R&D
effort at the Loss of Fluid Test Facility (LOFT) in Idaho. Finally, within the fission program, the
Department is proceeding with cleanup activities, including remedial actions at 24 uranium mill
tailings sites.
Constant Dollar Trend
Constant dollar funding for the nuclear fission programs more than doubled between 1969 and 1977.
With the termination of the Clinch River project and scaleback of other activities, 1985 current
services funding will fall to pre-1970,s levels.
73
Constant Dollar Trend
(1985 dollars in milions)
Year
Amount
1969
1972
1977
1980
1985 current services
653
926
1,574
1,161
639
1985 Budget Proposal
Major components of the program are shown in the following table.
Nuclear Fission Research and Development: Budget Authority
(Dollars in milions)
1984
Breeder
Waste Activities
HTGR
Other (TMI, LOFT, Space Reactors)
1985
386
121
30
140
677
Total
296
193
34
129
652
Changes from 1984 are found in three major areas:
• The breeder base program would be reduced by $50 million. This reduction is due to the
elimination of CRBR- related R&D and greater international cooperation.
• Funding to close out the Clinch River Breeder Reactor (CRBR) is necessary in 1984, but not in
1985.
• Waste activities would increase by $70 million as cleanup work proceeds at West Valley and at
uranium mill tailings sites.
Rationale
Funds for the breeder base and HTGR will be used to develop and test advanced technologies to
maintain a range of options for further development of nuclear power. At the point where major
demonstrations are necessary it is assumed that such facilities will be funded by the private sector.
74
Nuclear Fission Research and Development
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
Agency: Department of Energy
1987
1988
1989
Total
1985-89
471
488
483
487
491
515
504
504
524
524
543
543
2,546
2,574
471
488
483
482
478
478
478
478
480
480
480
480
2,400
2,398
-13
-37
-26
-26
-44
-44
-63
-63
-146
-175
-5
Program Description
This program is aimed at producing electric power from hydrogen, the same source of energy that
powers the sun. At the extremely high temperatures involved, the fuel is isolated and confined
before ignition by using strong magnets, hence the name magnetic fusion. The magnetic fusion
energy program supports a broad research effort in three major areas: mainline concepts, (circular
devices called "tokamaks" and linear devices called "mirrors"), alternate concepts, and a technology
base program.
• Mainline concepts account for nearly 75% of the budget. This is spent on two large testing
devices, the Tokamak Fusion Test Reactor at Princeton, New Jersey, and the Mirror Fusion
Test Facility at Livermore, California. Construction of the Tokamak Reactor is completed and
the device is running with projected annual operating costs of $100 million. The Mirror
Facility is still under construction with planned completion in 1986.
• Alternate concepts, about 8% of the budget, play a supporting role to the mainline concepts.
Funds are used to explore novel approaches to common problems such as heating and controlling the fuel.
• The base program, about 17% of the budget, supports research in materials science, superconducting magnets, alternate heating concepts, and systems for handling tritium. This research is
common to all fusion concepts.
Current Status
Magnetic fusion has been supported by the Federal Government since the early 1950,s with the goal
of eventually demonstrating scientific and engineering feasibility of fusion energy technology. Over
the years a succession of challenging experiments have been performed to explore ways to control
the hydrogen gas in order to achieve conditions required for fusion. These experiments have
required sophisticated scientific equipment and have led to the construction of large test facilities.
Except for major funding increases associated with the construction of the Princeton Tokamak and
the Mirror Facility, the fusion program has been funded at a nearly constant level of effort for the
past several years. The program is now changing from an emphasis on major construction projects
to experimentation and technology development using the two large machines in this country and
profiting from complementary work being done abroad.
75
Constant Dollar Trend
Constant dollar funding for the fusion programs grew rapidly in the 1970's—increasing nearly
sixfold between 1970 and 1977. Although funding has fluctuated since 1980, the program has
generally remained around the $500 million level.
Constant Dollar Trend
(1985 dollars in millions)
Year
Amount
90
535
542
487
1970
1977
1981
1985 current sen/ices
1985 Budget Proposal
The 1985 budget proposal would continue the Administration's support for the development of
magnetic fusion energy technology at about the 1984 program level.
Major efforts in 1985 would include:
• Preparation for experiments at the large tokamak at Princeton (These experiments are
planned to produce the same amount of energy from the fuel as it takes to heat the fuel, the so
called breakeven level.);
• Continued construction of the Mirror Facility at Livermore, planned for completion in 1986;
and
• Continued efforts in the base program to develop supporting technology for components,
materials, and reactor systems engineering.
Rationale
Fusion holds the promise of providing economical electricity produced from an entirely new resource
base. While the potential of fusion as a power source is widely accepted, the payoff for this
technology is so far in the future that private companies are unable to invest the necessary
resources. Thus, as a long-term, high risk technology with potentially high payoff, fusion is an
example of technology that is appropriate for sustained Federal funding.
The U.S. and foreign fusion programs are now at a state of development where they can profit
greatly from increased international cooperation. Thus, with reduced emphasis on construction and
increased emphasis on international cooperation, the U.S. program should be able to maintain its
pace and effectiveness without increased budgets for the next several years.
76
Nuclear Waste
Agency: Department of Energy
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
Receipts
1984
1985
1986
1987
1988
1989
Total
1985-89
319
287
331
355
531
465
534
534
545
549
595
591
2,535
2,494
319
284
328
350
525
458
529
528
539
543
589
586
2,509
2,465
-3
-311
-3
-5
-378
-6
-7
-435
-6
-6
-504
-6
-6
-578
-6
-6
-653
-26
-29
-2,548
Program Description
This program supports Department of Energy (DOE) activities related to the development, construction, and operation of a permanent repository for the disposal of high-level radioactive waste from
commercial nuclear power plants. These activities are paid for by the nuclear waste fund which was
established by the Nuclear Waste Policy Act of 1982 and is financed by fees paid by nuclear utilities.
Current Status
Expenditures for this program have been increasing as the Government evaluates and characterizes
candidate sites in order to choose a suitable location for a repository and start on-site development
work. All expenditures are offset by the revenues from fees.
Recent program accomplishments by the DOE include:
• The signing of seventy contracts for the payment of fees in exchange for disposal services with
companies that own and generate spent nuclear fuel or high-level waste.
• Identification of nine potentially acceptable repository sites in six states.
• The submission to the Nuclear Regulatory Commission of siting guidelines after consultation
with State governments.
• The establishment of a separate waste office in the Department of Energy.
1985 Budget Proposal
By January 1985, the Department of Energy is expected to recommend to the President three sites
for continued assessment. Funds are therefore proposed in the 1985 budget to initiate construction of
an exploratory shaft at each of the three sites.
An increase in the fee (currently one mill per kilowatt hour) is assumed in order to offset inflation
and declining revenue projections resulting from lower than expected growth in nuclear power.
Under the Nuclear Waste Policy Act of 1982, fees may be adjusted by DOE as necessary to generate
revenues to cover costs.
Rationale
The lack of a means for disposing of nuclear waste has been a major issue affecting the acceptability
of continued reliance on nuclear power. Increased funding for this program is required for the
77
Federal Government to be able to provide disposal capability by 1998 as mandated by the Nuclear
Waste Policy Act. Until then, interim storage of spent fuel will continue to be the responsibility of
the utilities and can be provided through on-site measures, such as expansion of current pool
storage. The Federal Government is particpating with utilities in cooperative demonstrations of
advanced storage technologies to assure that adequate, safe interim storage capacity will be available.
78
Alternative and Synthetic Fuels
Agency: DOE/SFC
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
549
510
435
439
245
246
314
315
519
415
714
610
2,227
2,025
549
510
433
437
243
244
312
313
517
413
712
608
2,217
2,016
-2
-2
-2
-2
-2
-2
-2
-2
-2
-2
-10
-10
Program Description
These programs provide financial incentives to encourage private investment in alternative and
synthetic fuels. Incentives include support for feasibility studies and cooperative agreements, direct
loans, loan guarantees, price guarantees and purchase agreements. The programs are intended to
subsidize the development of alternative and synthetic energy resources until oil and gas prices rise
to the point where Government incentives are no longer necessary. The programs include activities
of the United States Synthetic Fuels Corporation (SFC) and the following programs of the Department of Energy (DOE): Geothermal Resources Development Fund, Alternative Fuels Production, and
Biomass Energy Development.
Current Status
The SFC has issued price guarantees to two projects—Union Oil Shale and Cool Water Coal
Gasification—and has letters of intent outstanding to two others.
DOE awarded a $2.02 billion loan guarantee to the Great Plains Coal Gasification Project in 1982
under its Alternative Fuels Production program, a precursor to the SFC. The loan for the project
was subsequently arranged through the Federal Financing Bank (FFB). Currently, the project is
over 70% complete, with initial gas production planned for the summer of 1984. Because of lower oil
price forecasts, the project sponsors have applied to the SFC for price supports in addition to loan
guarantees.
DOE has issued loan guarantee commitments to five geothermal projects and conditional commitments to three others. Several other applications are under review or anticipated. Most of these
projects will be privately financed, although it is possible that one or more of the guarantees may be
financed through the FFB.
DOE has issued a final loan guarantee to one alcohol fuel project and has conditional commitments
outstanding to five others.
In prior years, DOE awarded 102 feasibility studies and nine cooperative agreements under its
Alternative Fuels program. Most of these have been completed, and the program is expected to end
in 1984.
1985 Budget Proposal
The budget levels consist primarily of the Synthetic Fuels Corporation (SFC) activities and loan
disbursements for the Great Plains project, with only small amounts for the other activities, as
shown in the following table.
79
1985 Budget Proposal for Alternative and Synthetic Fuels
(Budget authority in millions)
1984
Synthetic Fuels Corporation
Great Plains (FFB Loan)
All Other
Total
1985
1986
1987
1988
1989
$67
470
12
$162
196
75
$228
$312
$517
$712
549
433
243
312
517
712
15
The budget reflects SFC plans to make project commitments totaling $14.8 billion by the end of
1985.
Loan disbursements to Great Plains will end in 1985.
No new activity is proposed for the other programs in 1985. Spending levels for these programs
reflect the budgetary impact of commitments made in 1984 and prior years.
Rationale
These programs were originated when oil and gas price rises seemed inexorable and prevailing
opinion, buttressed by Government price controls on domestic oil and gas production, was that
market forces were incapable of moderating the trend. Recent improvements in energy conservation
and efficiency, aided by the removal of oil price controls, have resulted in actual oil price decreases
and could result in further decreases. These recent events have demonstrated that, once currently
available funding is utilized, further subsidies for alternative and synthetic fuels production are
unwise, since they may lead to the creation of a large synfuels industry permanently dependent
upon massive Government support. Thus, the budget projections through 1989 include only the
future spend-out from commitments made in 1985 and prior years and assume no new funding
commitments after 1985.
80
NuclearFissionResearch and Development
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1
Agency: Department of Energy
1984
1985
1986
1987
1988
260
340
313
342
373
369
374
380
389
392
404
403
1,852
1,885
260
334
203
281
263
259
259
258
270
269
272
278
1,267
1,345
-110
-61
-110
-109
-115
-122
-119
-123
-131
-125
-585
-540
-6
1989
Figure for 1985 excludes $70 million of prior year appropriations that would be used in 1985, resulting in a total program level of $273 million.
Program Description
This program funds research in support of the development of new technologies for the improved
utilization of coal and for the production of oil and natural gas from unconventional sources. The
program finances research at universities and at Department of Energy (DOE) National Laboratories and Energy Technology Centers. It also funds research undertaken by private industry on a
cost-shared basis.
Current Status
Since 1981, funding levels for fossil energy research and development (R&D) have been substantially
reduced, with outlays declining from $890 million to $334 million in 1984. The program has
undergone a major transition—large demonstration projects have been terminated, while basic and
other longer-term research has been emphasized. Some engineering development work and a few
smaller scale test facilities have continued to be supported. Much of this work has been winding
down as key experiments and test runs are completed.
While these changes have been occurring in the Federal support of fossil R&D, industry investments
have been maintained at a high level and have been growing.
Trends in Fossil Energy R&D Outlays
(Dollars in millions)
1981
Government Outlays:
Basic and Applied Research
Development, Demonstration and Other
Total, Government Outlays
Private Investment
1982
1983
1984
1985
158
.732
132
520
230
173
197
137
169
112
890
1,257
652
1,368
403
NA
334
NA
281
NA
81
1985 Budget Proposal
The 1985 budget would continue the Administration's policy of supporting longer-term, high-risk
R&D that broadly supports the technology development activities of the U.S. energy industry.
Significant budget reductions from current services levels would be possible as a result of:
• Completion of several major engineering test facilities in the coal liquefaction and gasification
program. The data from these facilities will allow the private sector to make appropriate
decisions regarding any further demonstration and commercialization activities.
• Completion of the 4.8 megawatt phosphoric acid fuel cell electric utility demonstration and
reductions in R&D support for phosphoric acid fuel cells as this technology nears the stage of
commercial introduction.
• Reduced funding for engineering development of magnetohydrodynamics (MHD). The program
is proposed for transition to a more productive scientific research program leading eventually
to a proof-of-concept test to be cost-shared with industry.
These reductions would be partially offset by increases for acid rain related R&D. The DOE acid
rain R&D is part of the Administration's initiative to accelerate Government efforts to analyze the
problems of acid deposition. The DOE fossil energy program plays a lead role in supporting the
development of economical new systems to reduce the emissions from fossil fuel use, should a
program of emissions reductions be necessary. Research on the causes and effects of acid deposition
are coordinated by the Interagency Task Force on Acid Precipitation, on which the Environmental
Protection Agency (EPA) plays a leading role.
The table below shows the major components of the 1985 budget proposals as compared with 1984.
Fossil Energy R&D Budget Authority
(Dollars in millions)
1984
1985
37
197
30
16
50
Total, New Budget Authority
273
-70
260
Total Program
Less Carryover Balances
57
121
32
8
55
330
-70
Coal: Acid Rain related
Coal: All Other
Petroleum
Unconventional Natural Gas
Program Management
203
Rationale
The 1985 budget would provide a strong technology base for industry development of new fossil
energy technologies.
Some reductions from current services would be possible simply as a result of completion of several
pilot plant and test unit projects. Further DOE support to demonstrate these technologies at larger
scale is both inappropriate and unwise because:
• Complex economic and business decisions regarding the most promising technological alternatives for engineering development are best left to the private sector. Industry has shown that it
82
is capable of financing large scale engineering development without Government assistance
where appropriate.
• In view of current oil price forecasts, these technologies, at least in their current form, will not
be competitive until the next century. In the interim, the private sector could seek financial
subsidies from the Synthetic Fuels Corporation for commercial plants.
• It is a better investment for the Government to focus its efforts on more basic research, such as
coal chemistry, that could result in technical breakthroughs leading to a new generation of
more economical technologies.
In the case of MHD, the proposed reduction would avoid a premature engineering scale-up of the
technology and would refocus the program on unresolved scientific issues that are crucial to its
ultimate success.
In the area of acid rain, the increased funding in 1985 would result in expanded research leading to
early tests to verify the technical feasibility ("proof-of-concept") of advanced economical technologies
for reducing fossil energy emissions that might be the precursors of acid rain.
83
Solar and Renewable Energy Research and
Development
Agency: Department of Energy
[In millions of dollars]
1984
Level
Current Services:
Budget Authority ,
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1987
1986
1988
1989
Total
1985-89
253
304
261
278
283
272
295
284
307
297
318
307
1,463
1,439
252
301
217
250
209
203
214
197
237
196
237
200
1,114
1,045
-44
-28
-74
-69
-81
-88
-70
-101
-81
-108
-350
-393
-1
-3
Program Description
This program supports research and development on solar, hydropower and geothermal energy;
electric energy systems; and energy storage technologies. The program includes research funded at
universities, the Department of Energy National Laboratories and the Solar Energy Research
Institute (SERI), as well as projects undertaken by private industry on a cost-shared basis.
Current Status
Since 1981, funding levels for solar and renewables research and development (R&D) have been
substantially reduced, with outlays declining from $855 million to $301 million in 1984. The program
has undergone a major transition—large demonstration projects and subsidies for commercialization
activities have been terminated, while funding for research has been increased. As a result, the
Government program provides a stronger scientific underpinning for new and improved products
and processes to be developed and marketed by U.S. industry. The budgetary effect of these changes
is shown in the table below.
Trends in Government Solar/Renewables R&D Outlays
(Dollars in millions)
1981
Basic and Applied Research
Development, Demonstration and Other
Total
1982
1983
1984
1985
192
663
72
547
128
287
184
117
152
98
855
619
415
301
250
While Government R&D support has been refocused on longer-term research, the private sector has
aggressively pursued development and commercial deployment of new solar energy technologies. For
example:
• In 1983, U.S. industry produced 13.1 peak megawatts of photovoltaic generators, almost triple
the 1982 level of 5.7 peak megawatts.
84
• In 1983, private investment in photovoltaics research was projected at over $80 million, which
would exceed the level of Government research outlays for the first time.
• Generation of electricity from wind has increased over one hundred-fold, from 3 megawatts in
1980 to 350 megawatts in 1983. Further substantial increases are expected in 1984.
1985 Budget Proposal
The 1985 budget would continue the energy R&D policy of the Administration to focus Federal
support on longer-term research. Savings in 1985 are appropriate with the completion of the large
wind machine demonstration and through reductions in other nearer-term development activities.
These reductions are partially offset by increases in support for more basic research in areas such as
wind aerodynamics and materials.
Rationale
The 1985 budget provides for a strong, balanced program to support solar and renewable technologies as competitive energy supply options, while continuing the Administration policy of limiting
R&D support to areas that are beyond the investment criteria of the private sector.
The maintenance of a vigorous, longer-term research program covering such areas as advanced
materials for photovoltaics applications, the dynamics of wind interactions with wind machines, and
the genetic engineering of new biomass species will provide a stronger science and technology base
for the U.S. solar industry over the longer term.
85
Supporting Energy Research
Agency: DOE/EPA
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
624
702
698
715
715
728
730
742
758
763
775
776
3,677
3,724
632
685
765
757
824
820
855
852
903
894
928
921
4,275
4,242
4-8
+ 66
+41
+ 109
+92
+ 125
+ 110
+ 146
+ 131
+ 152
+ 145
+598
+ 518
-16
Program Description
Most of the programs in this category support energy-related basic and applied research in the
physical, biological, environmental and engineering sciences sponsored by the Department of Energy
(DOE) at major universities and DOE's National Laboratories. The goal of this research is primarily
to expand fundamental scientific knowledge and broaden the engineering data base that will help in
the future development of energy technologies and in the assessment of environmental problems
related to energy technology development. In addition, these programs provide funds for maintaining and improving the physical plant at DOE laboratories, for energy conservation projects at
various DOE facilities, and for technical information needed in the management of DOE programs.
This category also includes the energy-related environmental research program of the Environmental Protection Agency (EPA), which focuses mainly on issues of acid deposition. Other EPA activities
funded by this program include the development and demonstration, in cooperation with industry,
of a new low cost sulfur reduction technology designed for existing coal-fired power plants.
Current Status
The Administration is committed to the support of basic and other long-term research as an
appropriate Federal responsibility, recognizing that industry lacks incentives to make adequate
investments in the broad national interest. Recent budgets have provided for continued growth in
Federal support for such research across major agencies.
1985 Budget Proposal
The 1985 budget would provide for major increases in a number of areas supported by these
programs, as summarized in the following table.
86
Supporting Energy Research: Budget Authority
[Dollars in millions]
1984
Department of Energy:
Basic Energy Sciences
Biological and Environmental Research
Facilities Support and Other Services...
Environmental Protection Agency:
Acid Deposition 1
Other Energy-Related Research
337
184
79
21
11
Total
1
632
1985
420
189
112
33
11
765
1984 includes a $5.5 million supplemental appropriation request for 1984.
In the area of acid deposition research, the budget would provide:
• For EPA—A $5.5 million 1984 supplemental appropriation request to conduct a major survey of
the acidification status of over 3,000 lakes in the United States. In 1985, the budget level would
rise to $33.4 million, representing a 125% increase over the President's 1984 budget. Major
activities include development of estimates of the extent of damages associated with acid rain
and research which will lead to a better understanding of how acid rain is formed and
transported in the atmosphere.
• For DOE—Initiation of a new research program ($5 million in 1985) to study the relationship
between sulfur dioxide emissions and acid depositions monitored at a variety of locations in the
United States.
These programs in EPA and DOE are an integral part of the government-wide research effort on
acid rain coordinated by the Interagency Task Force on Acid Deposition, created by Title VII of the
Energy Security Act. The 1985 budget would provide a total of $55.5 million for the research effort
government-wide, a 100% increase over the 1984 Administration request.
In the basic research programs of the Department of Energy, the budget includes:
• Continued emphasis on long-term research related to the impact of radiation and energyrelated pollutants on biological and environmental systems;
• Enhanced funding for research to determine the relationship between the carbon dioxide
content of the atmosphere and the earth's climate changes;
• Enhanced funding for the operation of the seven major physical science research facilities
maintained by the Basic Energy Sciences program for users from industry, universities, and
National Laboratories;
• Continuation of construction projects initiated in 1984 including the Center for Advanced
Materials at the Lawrence Berkeley Laboratory, expansion of the National Synchrotron Light
Source at the Brookhaven National Laboratory, and an upgrade of the Stanford Synchrotron
Radiation Laboratory facilities;
• Initiation of construction of an Ion Collision Physics Facility at Kansas State University; and
• A supercomputer initiative which addresses access of DOE-supported researchers to state-ofthe-art computers and proposes a program of computational research required for developing
the "next generation" supercomputers.
87
Rationale
The 1985 budget continues to reflect the high priority this Administration gives to support of basic
and other long-term research which assists in assuring the Nation's economic growth and quality of
life. The programs in this category contribute toward achieving these broad goals.
By the very nature of investigations into fundamental science, the results of the research supported
by the programs in this category will not, initially, be applicable to any specific industry or energy
technology. The DOE basic research programs, in particular, provide a broad foundation to support
the development of new concepts, materials, processes and technologies important for energy production, conservation and utilization and for national security.
There is a specific need to accelerate resolution of key scientific questions related to acid deposition
over which considerable debate remains. For example, even the fundamental issue of whether
reductions in sulfur dioxide emissions would result in commensurate reductions in acid deposition is
still unresolved. Supporting the proposed research programs of EPA and DOE at the level requested
in the 1985 budget would help to ensure that such scientific issues can be resolved in a timely
fashion with a high degree of confidence.
88
Energy Conservation Research and Development
and Related Programs
Agency: DOE/HUD
[in millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority . ,
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
176
173
176
182
193
188
202
191
210
199
218
206
999
966
176
173
131
204
146
154
155
140
143
138
144
129
719
765
-45
+22
-47
-35
-47
-51
-67
-61
-74
-77
-280
-201
Program Description
The principal component of these programs is Department of Energy (DOE) support for research and
development (R&D) leading to more energy efficient technologies for buildings, transportation and
industry. Also included is the Solar Energy and Energy Conservation Bank (i.e., Solar Bank) in the
Department of Housing and Urban Development (HUD) that provides, through participating States,
loan subsidies and grants for selected residential units and non-profit commercial and agricultural
buildings. Nearly 90% of the Bank's activity is in energy conservation.
Current Status
The Administration recognizes conservation as an important national energy goal that is being most
effectively achieved through the economic incentives of the marketplace. In response to higher
energy prices in the 1970's, industry is continuing to develop and market more energy-efficient and
energy-saving products and processes, and customers are buying them. The Administration has
therefore sought to reduce counterproductive energy regulation that interferes with the market and
also sought to reduce unnecessary and unproductive Government subsidies for energy conservation.
The response of the marketplace to policy changes has been dramatic.
• The American economy is actually using less energy today than it used ten years ago—even
though it is producing 20% more goods and services, the population is up by 22 million people,
and there are 35 million more cars, trucks, and buses on the road.
• American homeowners have insulated and weatherized their homes because doing so makes
good economic sense. An estimated 20 million households—a third of all single family housing
units—installed energy conservation measures in 1981 alone.
• The average fuel economy of all cars on the road has improved by over 20% since 1973. Total
demand for gasoline has declined 11% from its peak in 1978 and is expected to decline further.
1985 Budget Proposal
The 1985 budget would:
• continue the Administration's energy conservation R&D policy and strategy that stresses
longer-term research in support of industry efforts to develop new technologies; and
89
• terminate funding for the Solar Bank program, which was $25 million in 1984. This would
account for most of the reduction from current services in 1985-1989.
Rationale
Although the marketplace is the primary mechanism for the development of new conservation
technologies, a limited Federal role is warranted in the support of R&D in instances where the
benefits of the research do not directly accrue to the private investor, or where the research is
beyond the normal investment time horizon of industry.
In the case of the Solar Bank, no funding is requested for several reasons. First, more effective
private sector lending institutions are available, and private economic incentives already exist for
these types of investments. Second, a majority of States already have State energy programs capable
of providing continued support of State energy conservation needs after this program's termination.
Third, Federal funding for energy conservation and solar energy projects would be continued
through such other programs as the HUD Community Development Block Grant program and the
DOE and Department of Health and Human Services programs for low-income home weatherization
and energy assistance payments, and for energy conservation investments in schools and hospitals.
90
Uranium Enrichment
Agency: Department of Energy
[In millions of dollars]
Total
1985-89
1984
1985
1986
1987
1988
1989
2,195
2,147
-2,105
2,074
2,105
-2,074
2,134
2,134
-2,134
2,057
2,056
-2,056
1,919
1,919
-1,918
1,888
1,888
-1,887
10,072
10,103
-10,069
2,195
2,147
-2,105
2,074
2,105
-2,074
2,134
2,134
-2,134
2,056
2,056
-2,056
1,919
1,919
-1,918
1,888
1,888
-1,887
10,071
10,103
-10,069
Level
Current Services:
Budget Authority
Outlays
Receipts
1985 Budget Level:
Budget Authority
Outlays
Receipts
Change:
Budget Authority
Outlays
Receipts
Program Description
The Department of Energy (DOE) is responsible for a $2 billion business that supplies enriched
uranium to domestic and foreign nuclear power plants. To provide this service, the Department
operates three large enrichment plants. In addition to production activities, the Department is also
constructing the first phase of a fourth plant—a more efficient Gas Centrifuge Enrichment Plant
(GCEP), and funding research on advanced techniques for enriching uranium at lower cost.
Current Status
The Department of Energy is establishing a new, business-like approach to its uranium enrichment
enterprise. Recently DOE has offered a new contract to its customers. This contract is expected to
secure the market share held by DOE and reverse a trend toward more business going to foreign
suppliers each year. Through 1984, DOE will continue to fund construction of GCEP and research
and development (R&D) on machines for GCEP. It will also support R&D on potentially more
efficient advanced enrichment techniques based on use of lasers.
Constant Dollar Trends
Due to the Administration policy of constraining research and construction expenditures to a level
consistent with receipts from enrichment program sales, the net deficit impact of enrichment
activities over 1985-1989 is almost zero. This contrasts markedly with the five year period between
1977-1981 when constant dollar net outlays totalled $2.2 billion.
Constant Dollar Trend
(1985 dollars in millions)
Cumulative constant
dollar net outlays
PorinH
m m
1977-1981
1985-1989 budget
2,205
33
91
1985 Budget Proposal
With lower demand for enrichment services worldwide and with lower world prices for enrichment
services, receipts will soon be inadequate to support a continued, large construction program and a
multi-technology R&D effort. Thus in 1985, construction and research will both be reduced. These
actions will eliminate the potential for major taxpayer subsidies to the uranium enrichment program.
Specifically the 1985 budget assumes that:
• The new Gas Centrifuge Enrichment Plant (GCEP) now under construction will be limited to
completion of two modules instead of eight as originally planned in 1978. Production from these
modules will begin in 1989.
• One of the two currently competing advanced technologies will be selected for further development, thus saving $40 million in 1985 and much larger amounts in the out-years.
Rationale
By reducing the scope of the program and providing more flexible sales conditions, DOE would
continue to offer a competitively- priced service which is fully funded by revenues from commercial
sales. The Goverment's investment to date has justified completing the first two modules of GCEP.
Through 1984, $2.4 billion was spent and an additional $350 million would be invested in 1985 to
complete this phase of the GCEP. However, due to a decline in demand for enrichment services,
further construction would be uneconomic at this time.
92
Federal Power Programs
Agency: DOE/USDA/TVA
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority.
Outlays
1985
1986
1987
1988
1989
Total
1985-89
824
628
536
196
385
-41
-47
-375
-158
-484
-152
-633
564
-1,337
824
618
497
149
345
-95
-88
-448
-201
-559
-195
-709
358
-1,662
-10
-40
-48
-40
-54
-41
-73
-43
-75
-43
-75
-207
-325
Program Description
This category includes several major Government-run business enterprises:
• Sale and transmission of electricity from Federal hydroelectric projects by the five Federal
power marketing administrations (PMAs) of the Department of Energy (DOE): Bonneville,
Western Area, Alaska, Southeastern and Southwestern;
• Production and sale of electricity from a combination of hydropower, coal and nuclear plants
owned and operated by the Tennessee Valley Authority (TVA);
• Financing of TVA's nuclear fuel inventory through off-budget loans from the Federal Financing Bank (FFB) to the TVA Seven States Corporation; and
• Administrative costs for the Rural Electrification Administration (REA) in the Department of
Agriculture.
Current Status
The TVA is constructing new nuclear power plants to meet anticipated load growth but on a smaller
scale and at a slower pace than originally planned. In addition, TVA is engaged in various research
and development (R&D) and energy conservation activities funded through revenues from power
sales.
In conjunction with their wholesale power marketing responsibilities, the PMAs are engaged in
transmission system maintenance and construction and power purchases needed to fulfill sales
contracts. Bonneville is implementing a major energy conservation program in the Pacific Northwest.
1985 Budget Proposal
For TVA and the PMAs, operating expenses are offset through revenues from power sales. Federal
expenditures are for capital investment, such as new power plants, transmission lines and energy
conservation measures, and are recovered over time through repayments to the Treasury. The
budgets for these programs are displayed net of revenues in the table below, by major program
components.
93
1985 Net Budget Authority For Federal Power Programs
(Dollars in millions)
1983
Power Marketing Administration (PMA)...
Tennessee Valley Authority (TVA)
Rural Electrification Administration (REA)
212
707
30
949
Total
9184
1985
165
629
30
51
445
824
497
The 1985 budget includes a major initiative in REA administrative funding, with a continuation of
current activities in TVA and the PMAs.
• In the REA, the budget proposal would institute the use of user fees to cover the administrative costs of the REA credit subsidy program.
• In TVA and the PMAs, no changes would be proposed from current services, which assume
significant reductions in net outlays over time as TVA power plant and PMA transmission
projects near completion.
Rationale
In the REA program, the proposed change would eliminate an unnecessary taxpayer subsidy to the
recipients of REA financing assistance. Further discussion of this and other proposed changes for
REA can be found in the Rural Electric and Telephone factsheet.
In the case of TVA and the PMAs, the budget would continue the current policies of providing
adequate electricity supplies to consumers at the lowest cost consistent with sound business principles.
94
Housing Finance
95
Government National Mortgage Association
Subsidized Mortgage Financing
Agency: Department of Housing and
Urban Development
[In millions of dollars]
Level
Current Services:
Budget Authority . .
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority . .
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
120
1,382
178
338
209
442
1,412
1,463
1,405
1,286
1,448
1,406
4,650
4,936
120
1,382
178
338
209
442
1,412
1,463
1,405
1,286
1,448
1,406
4,650
4,936
Program Description
The Government National Mortgage Association (GNMA) has in the past provided subsidized mortgage financing for low- and moderate-income apartment projects. GNMA purchased below market
interest rate mortgages from private lenders at face value and then sold the mortgages to investors
at market-determined prices. The difference between the face value and the market price represented the amount of the subsidy.
Current Status
The Housing and Urban-Rural Recovery Act of 1983 repealed statutes that authorized the GNMA
subsidized mortgage programs.
1985 Budget Proposal
In 1985, the Administration proposes that Treasury forgive the debt owed to it by GNMA. However,
to retain comparability with prior years, the data in the table exclude the effects of the debt
forgiveness proposal. GNMA will continue to honor commitments made in previous years to purchase mortgages. By the end of 1986, it is anticipated that GNMA will have honored all commitments to purchase mortgages, and sold to investors all the mortgages that have been purchased.
Beginning in 1987, the estimates of budget authority and outlays reflect the funding required to pay
interest on previously accumulated GNMA debt—debt that will be forgiven if the Administration's
proposal is enacted.
Rationale
The proposal to forgive GNMA debt to Treasury will permit the Federal Government to "clean-up
its books" for a bankrupt, terminated subsidy program. It will have no effect on net Government
outlays or Federal debt.
97
Federal Housing Credit
Agency: Department of Housing and
Urban Development
[In millions of dollars]
Level
FEDERAL HOUSING
ADMINISTRATION
Current Services:
Budget Authority
Outlays
Guaranteed Loan
Commitment Limit ,
1985 Budget Level:
Budget Authority
Outlays
Guaranteed Loan
Commitment Limit
Change:
Budget Authority
Outlays
Guaranteed Loan
Commitment Limit
GNMA MORTGAGE-BACKED
SECURITIES
Current Services:
Outlays
Guaranteed Loan
Commitment Limit
1985 Budget Level:
Outlays
Guaranteed Loan
Commitment Limit
Change:
Outlays
Guaranteed Loan
Commitment Limit
1984
1985
1987
1986
1988
1989
Total
1985-89
•
179
— 753
219
-1,155
159
-1,425
167
-1,589
197
-1,772
247
-1,804
989
-7,744
50,900
50,900
50,900
50,900
50,900
50,900
254,500
179
-753
219
-1,157
159
-1,436
167
-1,608
197
-1,798
247
-1,836
989
-7,834
50,900
50,900
50,900
50,900
50,900
50,900
254,500
-2
-ii
-19
-26
-32
-90
-205
-243
-303
-347
-166
-408
-1,467
68,250
68,250
68,250
68,250
68,250
68,250
341,250
-205
-243
-303
-347
-166
-408
-1,467
68,250
68,250
68,250
68,250
68,250
68,250
341,250
....
....
....
.
....
Program Description
Under the Federal Housing Administration (FHA) mortgage insurance programs, Federal Government backing is provided for a number of types of housing loans, particularly single-family home
loans. Loans made by private lenders, either insured by FHA or guaranteed by the Veterans
Administration, and direct home loans from the Farmers Home Administration are eligible for
pooling by mortgage lenders into larger packages of loans, called mortgage-backed securities
(MBS's). These MBS's are guaranteed by the Government National Mortgage Association (GNMA)
and sold by lenders to large investors. Only the FHA and GNMA MBS programs, which are
operated by the U.S. Department of Housing and Urban Development (HUD), are discussed here.
98
Current Status
Legislation proposed by this Administration and enacted by Congress in 1982 allows HUD to collect
FHA mortgage insurance fees on a one-time upfront basis at the time of home sale. This is expected
to raise offsetting receipts (and thereby reduce outlays) over the period shown in the table above*
Constant Dollar Trend
Due to the enactment of upfront FHA insurance premiums, increased GNMA MBS commitment!
fees, and tighter management of FHA portfolio operations, Reagan Administration policies have
achieved a dramatic turn-around in the budget impact of these programs. Over the five years ending
in 1981, constant dollar net outlays totalled $1.7 billion compared to current services baseline
negative net outlays of $8.4 billion projected for 1985-89. This represents a $10.2 billion reduction in
the deficit between the two periods.
Constant Dollar Trend
(1985 dollars in millions)
Cumulative constant
dollar net outlays
Period
+ 1,745
-8,415
1977-1981
1985-1989 current services.
Change
-10,160
1985 Budget Proposal
For 1985 and beyond, guaranteed loan limitations for both the FHA and GNMA mortgage-backed
securities programs are assumed to be held to their 1984 levels—$50.9 billion for FHA and $68.25
billion for GNMA.
Rationale
These levels are projected to be high enough to accommodate the demand for Government-backed
mortgage financing because:
1983 was a peak year, with $44.6 billion in FHA mortgage insurance commitments, reflecting
the recovery in home sales and the high volume of mortgage refinancings by homeowners who
had purchased their homes during the 1981-1982 high interest rate period.
Actual commitments for FHA mortgage insurance are projected at $40.9 billion in 1985, $10
billion below the $50.9 billion ceiling—indeed this ceiling level is expected to be adequate to
provide for total FHA insurance activity for each year through 1989.
1983 was also a peak year for GNMA MBS activity, with $64.2 billion in commitments, largely
reflecting the refinancings of FHA and VA-insured mortgages. Because fewer homeowners are
expected to refinance in 1985, the $68.25 billion commitment limit should be adequate to
provide for expected demand for GNMA MBS guarantees.
99
Housing for the Elderly or Handicapped
Agency: Department of Housing and
Urban Development
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
631
803
698
803
740
712
787
699
834
741
880
781
3,940
3,735
631
803
498
803
530
712
566
648
597
583
625
559
2,817
3,304
-200
-210
-222
-51
-237
-158
-255
-222
-1,123
-431
Program Description
This program provides direct loans to non-profit organizations sponsoring the construction or rehabilitation of rental housing for the elderly or handicapped. These projects also receive section 8 new
construction subsidies to enable low-income households to afford the rents in these projects (see
factsheet on Subsidized Housing for description).
Current Status
Since this program was created in 1959, 120,000 housing units for the elderly have been built with
direct loans under this program.
About 55,000 additional newly constructed housing units currently in planning or under construction will be available for occupancy over the next 3 years.
1985 Budget Proposal
The 1985 budget proposes to continue shifting funds away from costly subsidies for newly-constructed units towards more flexible housing vouchers which rely on the existing stock of private rental
housing.
Consistent with this policy, the 1985 budget requests a $133 million reduction in budget authority,
reflecting the proposed decline in new unit commitments from 14,000 in 1984 to 10,000 in 1985.
The Administration has maintained the current level of new subsidized housing assistance by
increasing funding for housing vouchers out of the subsidized housing program.
Rationale
In recent years, the cost of building or rehabilitating housing for the elderly has grown to the point
where it is no longer possible to maintain the current level of new commitments. Construction costs
in 1985 will approach $50,000 per unit with corresponding section 8 new construction rent subsidies
of $160,000 per unit over the 20-year subsidy term. This results in an average annual subsidy per
household of about $5,000 during the first year of occupancy as compared to $2,500 in the housing
voucher program.
Many low-income elderly do not wish to move to new accommodations in order to receive Federal
subsidized housing assistance. The housing voucher program will permit the elderly to stay in their
own units while at the same time reducing the portion of their income paid for housing.
100
The housing voucher program, combined with the "shared housing" initiative (a housing arrangement whereby a group of residents share a common living area with the assistance of a live-in
homemaker), will provide additional alternatives for preventing the institutionalization of the elderly and handicapped.
101
Other Housing Programs
Agency: Department of Housing and
Urban Development
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
202
310
134
111
106
106
97
553
202
310
1,200
1,334
1,200
1,276
1,200
1,258
1,200
1,239
1,200
1,220
6,000
6,327
+ 1,200
+ 1,200
+ 1,200
+ 1,166
+ 1,200
+ 1,152
+ 1,200
+ 1,134
+ 1,200
+ 1,122
+6,000
+ 5,774
Program Description
The Department of Housing and Urban Development operates several programs that provide various forms of assistance for subsidized housing. The largest of these, the low rent public housing loan
fund, provides direct loans and loan guarantees for the development and modernization of public
housing. It also makes periodic payments to the Federal Financing Bank (FFB) in amounts representing the difference between the tax-exempt interest rate carried by public housing authority
(PHA) obligations and the Treasury borrowing rate for obligations purchased by the FFB from 19801983. Financing public housing obligations through the FFB converts 100%, federally guaranteed
short-term, tax-exempt notes issued by PHA's into long-term loans from the Treasury financed by
taxable Treasury securities. In this off-budget FFB account, the new loans are recorded as budget
authority and new loans minus repayments as outlays. Housing programs in this group also provide
interest-free loans to non-profit organizations to plan Section 8/202 projects, funds for a demonstration program for congregate services for the elderly and handicapped, and assistance for FHAinsured troubled multifamily projects in need of repair to remain viable.
Current Status
Because these programs have carry-over balances and receipts from loan repayments, no appropriations were requested in the 1984 budget for these activities. Most of the budget authority and
outlays for "Other Housing Programs" is due to off-budget FFB direct loan transactions. The $14
billion in PHA notes currently outstanding make-up a sizable portion of the tax-exempt short-term
market. The purchase of PHA notes by the FFB, which is proposed to continue at a higher level in
1985, reduces the supply of short-term tax-exempt instruments and should enable other tax-exempt
borrowers to obtain more favorable prices for their short-term securities. Long-term financing of the
30-40 public housing obligations through the FFB reduces Federal exposure to interest rate changes
by enhancing the Treasury's debt management capabilities. In addition, this form of long-term
financing of public housing obligations eliminates the tax expenditure resulting from the use of taxexempt financing.
1985 Budget Proposal
As in 1984, the 1985 budget requests no appropriations for these programs. The resources currently
available are believed to be sufficient to meet program objectives. However, "off-budget" budget
authority and outlays will increase if the Administration's proposal to provide $1.2 billion of longterm financing per year in public housing obligations through the FFB is adopted.
102
Rationale
With sufficient resources available to meet the objectives of these programs, no additional appropriations are required. The increases in budget authority and outlays from off-budget direct loans
result from the conversion of short-term fully guaranteed private loans to direct long-term loans
from the Treasury. Because the FFB transaction also changes tax-exempt to taxable financing, it
will more accurately reflect the full cost of the public housing program to the Federal Government.
In addition, Treasury's ability to manage Federal borrowing will improve and 'crowding" in the
short-term tax-exempt market will ease.
103
Financial Institution Funds
105
Financial Depository Institutions
Agency: FDIC/FHLBB/NCUA
[in millions of dollars]
Total
1985-89
1984
1985
1986
1987
1988
1989
61
-2,249
18
-2,752
28
-2,953
39
-3,177
51
-3,725
62
-4,380
198
-16,987
61
-2,249
12
-2,757
26
-2,955
37
-3,179
48
-3,728
60
-4,383
183
-17,002
-2
-2
-2
-2
-3
-3
-15
-15
Level
Current Services:1
Budget Authority
Outlays
1985 Budget Level:2
Budget Authority .
- Outtays
Change:3
Budget Authority
Outlays
-6
-5
-2
-2
Budget authority and outlays for 1985 through 1989 include amounts for pay increases at the beginning of each fiscal year.
Budget authority and outlays for 1985 through 1989 include amounts for pay increases as of January 1985 and at the beginning of each following fiscal year.
3 Differences are due solely to different assumptions for current services pay increases and current policy pay increases. If different pay increase assumptions for
1985 through 1989 were not considered, there would be no differences for any year between current services and current policy (the 1985 budget level).
1
2
•
Program Description
Financial depository institutions include the Federal Deposit Insurance Corporation, the Federal
Home Loan Bank Board (and its Federal Savings and Loan Insurance Corporation), and the National Credit Union Administration (and its National Credit Union Share Insurance Fund). These
agencies insure the deposits of member banks, thrifts, and credit unions and, along with the Federal
Reserve and the Comptroller of the Currency, supervise and regulate these financial institutions.
The budgetary amounts shown in the header table above could change secondary to congressional
action on the Vice President's Financial Deregulation Task Force proposals to restructure the
Federal financial regulatory agencies.
Constant Dollar Trend
In each of the last two five-year budget periods, the deposit insurance funds and related programs
have generated about $8-$9 billion in constant dollar net receipts (negative outlays). Constant dollar
net receipts are projected to nearly double to $15.5 billion in the next five years due to projected
strong housing and financial markets for 1985-1989; the improved ability of financial institutions to
compete in the marketplace as a result of de-regulation and expanded asset and liability powers;
merger initiatives to handle troubled institutions; and tight management of the insurance programs.
This increase will contribute significantly to lower unified budget deficits.
Constant Dollar Trend
(1985 dollars in millions)
Five-vear oeriod
i-ive-year period
Cumulative constant
dollar outlays
1975-79
1980-84
1985-89 current services
-8,873
-8,110
-15,498
107
1985 Budget Proposal
For 1985, the Administration currently proposes no changes in the activities of the Federal Deposit
Insurance Corporation, the Federal Home Loan Bank Board, and the National Credit Union Administration. Receipts (negative outlays) are estimated to increase by over $500 million from 1984 to
1985 as generally improving economic conditions and lower, more stable interest rates decrease the
amount of Federal assistance required to help troubled financial institutions and safeguard depositors' accounts. These increased receipts will strengthen further the insurance reserves of these
agencies.
Rationale
The Administration's proposals and budget estimates for 1985 would continue to support the activities of these three agencies in promoting the safety and soundness of the banking system and
insuring the savings of individual depositors up to $100,000.
108
CHAPTER 2
Social Insurance and Retirement
109
Social Insurance and Retirement
Overview
Social insurance and retirement programs are the largest single group of domestic programs. They
include social security, medicare, Federal retirement, unemployment insurance, railroad retirement,
black lung, and the Pension Benefit Guaranty Corporation. In general they are financed by dedicated revenues, chiefly payroll taxes, which gives them their "insurance" character. Until recently
they were also the fastest growing group in the Federal budget. Twenty years ago social insurance
and retirement programs were 39% of all domestic programmatic outlays; they are now 57% of the
domestic budget. The growth in these programs has gone through two distinct phases:
• An era of bipartisan legislative expansion between 1962 and 1977; and
• An era of bipartisan legislative restraint between 1977 and the present.
The era of expansion resulted in real growth rates over 1962-1981 of 8.7%. In real terms, 1981 outlays
were almost five times higher than the comparable level for social insurance and retirement
programs in 1962.
The dramatic increase in social insurance and retirment programs has abated since 1980. As a result
of social security reforms adopted in 1977, 1980 and 1983, and medicare, unemployment compensation, and railroad retirement reforms adopted in the same time period, the real current services
growth rate for social insurance programs will decrease to 3.4% over the 1981 to 1986 period. By 1989,
the solvency gap in the social insurance budget as a whole will be nearly closed. This period of rapid
expansion, followed by an era of restraint, is graphically illustrated in the following chart.
Era of Legislative Expansion
The growth in outlays for social insurance and pension programs between 1962 and 1981 was faster
than any other category of the Federal budget. It translated into an increase in the share of GNP
for social insurance and retirement programs from 2.9% in 1962 to 7.6% in 1981, accounting for more
than the entire increase in the ratio of Federal spending to GNP during these 19 years. The peak
share was reached in 1983 at 8.6%.
Social Insurance and Retirement Growth
(In billions of constant 1985 dollars)
Actual
1962
Medicare
Social security
Federal retirement1
Unemployment insurance
Other
Total, social insurance and retirement...
Annual average growth rate (from prior
period)
As a share of domestic budget
As a share of GNP
1965
Current services
1970
1975
23.6
126.0
12.1
24.7
5.8
46.3
168.5
24.8
20.6
6.6
69.1
188.3
24.3
18.3
5.9
92.4
209.4
28.0
12.7
5.7
1981
1985
1989
46^8
—7.4
11.7
2.2
-5.2
8.1
2.1
15.3
77.6
-0.8
8.1
2.7
53.4
59.2
102.8
192.3
266.8
305.8
348.1
N/A
39.2
2.9
3.5
38.6
2.8
11.7
43.0
4.1
13.3
46.7
6.7
5.4
50.7
7.6
3.5
57.5
7.9
3.3
62.3
7.7
5*2
1 Federal retirement includes the employer contribution for military retirement. The contribution is on an accrual basis, i.e., the annual cost of the future
retirement for the present employees. The contributions are treated as negative outlays and more than offset the Federal retirement benefit outlays in the early years.
Ill
SOCIAL INSURANCE AND RETIREMENT:
HISTORICAL PERSPECTIVE
$ BILLIONS
(CONSTANT 1985 DOLLARS)
350
300
250-
The real growth in these program can be attributed to both increases in the number of beneficiaries
and increases in the level of real benefits distributed.
• Increases in beneficiaries.—From 1962 to 1981 the number of beneficiaries of existing programs
doubled because of the legislation expanding the definition of eligibility and caseload growth
relating to the general aging of the population. Approximately three-fourths of the beneficiaries of these programs are aged, a group who increased 55% in numbers between 1962 and
1981. In addition, medicare was introduced in 1966 and by 1981 its beneficiaries had grown to
7.2 million for hospital insurance and 28.6 million for supplementary medical insurance.
• Increases in real benefits.—These increases result from excessive cost-of-living adjustments
(COLAs), increases in wage histories on which initial retirement benefits are based, and
legislative expansions of both benefits and services such as adding physical therapy and home
health services to medicare.
The causes of real growth differ among the programs. For social security and medicare, the growth
in average real benefits was even more important than the substantial growth in beneficiaries.
However, for Federal retirement programs and unemployment insurance, the growth in beneficiaries was much more important than increases in real benefits.
Overindexation of retirement benefits.—Average real benefits in all the retirement programs grew
substantially in the 1970's, partly because of legislative increases, but also because they were
overindexed. The cost-of-living index that was used to adjust Federal social insurance benefits, the
Consumer Price Index, overcompensated for the rising costs of home mortgages and therefore
overstated the rise in the actual cost-of-living the average Federal beneficiary faced. Since a more
accurate measure of consumer prices was not available when the first automatic cost-of-living
adjustments were made in social security in 1975, the CPI was used and the average benefit was
about 6% larger than it should have been by 1981.
112
Between 1970 and 1975, Federal retirees also received a 1% COLA kicker every time their benefits
were adjusted. Before this provision was changed, it provided Federal retirees an additional windfall
in their benefits from 1970 to 1975 of more than 5%. In addition, between 1976 and the 1981
reforms, benefits were indexed twice a year. The combined effect of these COLA provisions was to
give retirees increases in their benefits that exceeded the increases in average wages for the
working population. This trend was particularly troublesome for Federal employees, where retirees'
compensation rose faster than that of the active employees. Thus the employee who retired in 1970
receives an annuity today that is 27-34% more than the annuity of an employee who retires this
year at the same grade and step.
Underindexation of medicare copayments.—At the same time that retirement benefits were overindexed, medicare deductibles and premiums were underindexed. For example, between 1970 and
1981, the supplementary medical insurance (SMI) deductible rose from $50 to $75, a yearly growth
rate of 3.7%. If the medical component of the CPI had been used to index the deductible each year,
the deductible in 1981 would have been about $120, 60% greater than it actually was. Likewise, in
1970, the SMI premium paid by beneficiaries was set at 50% of program costs. By 1981, the
beneficiaries' contribution has decreased to 25% of program costs.
Dedicated trust fund financing principle.—The overindexation of retirement benefits and the underindexation of medicare copayments exacerbated the fiscal deterioration of the social insurance and
retirement trust funds. Between 1979 and 1983, the balance between current cash outlays and
dedicated trust fund receipts steadily worsened under the combined pressure of overindexed benefits, high unemployment, stagnant real wages and the underindexing of medicare copayments. The
steady improvement after 1983 in the solvency of the trust funds projected under both current law
and the 1985 budget reflects the cumulative and growing effects of solvency reform and benefit
restraint legislation adopted beginning in 1977. This deteriorating trend and its reversal is illustrated in the accompanying table.
Social Insurance and Pension Trust Fund Solvency 1
(Dollars in billions, actual through 1983 and current services thereafter)
Outlays
1
Deficit
154.7
183.5
216.1
246.8
276.2
283.5
305.5
328.4
354.0
380.2
408.2
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
Receipts
138.9
157.8
182.7
201.5
209.0
239.5
269.0
294.6
320.3
357.7
389.5
-15.8
-25.7
-33.4
-45.3
-67.3
-44.1
-36.5
-33.8
-33.7
-22.5
-18.6
Receipts as a
percent of
outlays
90%
86%
85%
82%
76%
84%
88%
90%
90%
94%
95%
Includes medicare, social security, unemployment insurance, Federal civil service retirement and railroad retirement.
Era of Bipartisan Restraint
Since 1977, a bipartisan recognition has emerged that social insurance programs were rapidly
becoming unaffordable and insolvent. A consensus about how to control the growth of social
insurance and pension programs developed based on the following principles:
113
• A commitment to maintaining the basic structure of universal protections against the risks of
unemployment, retirement, old age, sickness, and disability that emerged over the four decades
prior to 1980;
• Recognition that benefit liberalizations, coverage expansions and ad hoc payment increases
granted during the 1960's and 1970,s had produced unsustainable growth momentum that had
to be checked firmly;
• Rejection of massive annual general fund subsidies as a means of halting the deteriorating
financial condition of various social insurance trust funds in favor of "solvency plans" that
reinforce the essential social insurance character of these programs; and
• Solvency reform formulas based on a *'shared responsibility" principle that has included
fiscally responsible increases in trust fund contributions and a slowdown in the growth of
benefits, thus steadily reversing the massive funding shortfalls that emerged in the late 1970's
and early 1980's.
The legislative improvements began with the 1977 Social Security Act, which raised scheduled
payroll taxes throughout the 1980's. It also prospectively lowered the benefit replacement rate by
40% when fully effective in 1989 compared with prior law, correcting a largely unintended increase
in the replacement rate enacted in 1972. The disability amendments of 1980 have likewise had a
substantial effect on the growth rate of outlays in this part of the system. Since 1980 there have
been four other major reforms that have significantly improved the fiscal condition of the social
insurance programs:
• The 1981 Reconciliation Act amendments resulted in modest medicare and social security
benefit cost savings, such as phasing out the adult student benefit, as well as initial steps to
improve the solvency of the unemployment insurance program;
• The 1982 Tax Equity and Fiscal Responsibility Act (TEFRA) amendments had a major cost
restraining impact on medicare by limiting hospital reimbursements. The TEFRA amendments
also extended medicare coverage and corresponding payroll taxes to Federal employees;
• The 1983 bipartisan social security amendments increased contributions from workers and
employers, restrained benefits through a 6-month COLA delay and imposed taxes on a portion
of the benefits of higher-income beneficiaries. The amendments extended the effects of the 1981
Act on the unemployment insurance program; they also used the hospital restraints in TEFRA
as the basis for the medicare prospective reimbursement reform, replacing "pay-what-it-costs"
hospital reimbursement of past years with set fees for patients with specific diagnoses; and
finally
• The 1983 bipartisan bill on railroad retirement increased employer pension contributions and
conformed benefit payments more closely to social security in order to restore the system's
solvency.
The accompanying chart shows the budget savings from these four reforms. Current services outlays
will be $23 billion less in 1985 and $26 billion less in 1986 than they would have been under the pre1981 law. Cumulatively from 1982 to 1986, $84 billion or 5.5% will have been saved from the pre1981 baseline. This is a remarkable achievement for programs that have traditionally been considered uncontrollable and almost untouchable.
114
SOCIAL INSURANCE AND RETIREMENT:
SAVINGS ACHIEVED
$ BILLIONS
375
SAVINGS FROM PRE--1981 BASELINE:
350325-
1982
1983
1984
1985
1986
PRE—1981 BASELINE..
CURRENT S E R V I C E S . . .
254.6 287.0 303.2 328.9 354.8
248.9 276.8 283.8 305.8 329.1
DIFFERENCE
PERCENT CHANGE...
AVG. ANNUAL
GROWTH RATE
PRE - 1981
BASELINE
+8.6%
+7.2%
- 5 . 7 -10.1 -19.4 -23.1 -25.7
-6%
-7% -7%
-4%
-2%
300275250
225
200
Additional Savings Proposed
Because the recently enacted reforms of social security and railroad retirement represented carefully balanced bipartisan compromises, it would be inappropriate to re-open these issues. Therefore, the
present budget proposals concentrate instead on the Federal retirement programs and medicare.
The 1985 budget proposes modest further reforms consisting mainly of COLA delays for Federal
civilian retirement and previously proposed medicare savings. These would save a total of $25 billion
over 1985-1989 or 1.4% of the current services baseline. The remaining growth in this category could
be reduced even further with additional needed reforms in medicare and Federal retirement.
The main proposals in the 1985 budget for social insurance and retirement programs are listed
below. The first three are proposed to redress the past overindexation of Federal retirement benefits
and the underindexation of medicare copayments:
• Limit COLAs in Federal retirement programs.—The payment date for COLAs would be shifted
from June, 1984 to January, 1985 and January thereafter to match the COLA delay that has
already been enacted for social security. COLAs would be limited to the lower of the CPI
increase or the General Schedule pay increase, and limited to 55% of the full COLA on the
amount of an annuity that exceeds $10,000 beginning in 1985.
115
• Increase SMI premium.—The SMI premium was originally set at 50% of program cost, but has
deteriorated significantly over the years so that it pays only 25% today. Under the proposal
SMI premiums would gradually be increased to 35% of program costs by 1990.
• Increase SMI deductible— The SMI deductible would be updated annually based on changes in
an index of medicare's costs.
• Increase employee and agency contribution to civil service retirement.—Federal employees and
matching agency contributions would increase from 7% in 1984 to 8% in 1985 and 9% in 1986.
• Limit physicans reimbursement.—Medicare reimbursements to physicians would temporarily
remain at 1984 reimbursement rates. Medicare reforms in the last 3 years have affected
primarly hospitals and beneficiaries while physicans fees have been little affected.
• Cover railroad workers under regular State/Federal unemployment insurance.—This would
assure availability of unemployment benefits for railroad workers whose separate unemployment insurance system is insolvent.
• Correct the deteriorating financial condition of the Pension Benefit Guaranty Corporation
(PBGC)—This proposal would increase PBGC premium charges to assure that it can remain
self-financing.
These proposals and others are discussed in more detail in the factsheets that follow. Together they
would save $1.6 billion in 1985, growing to $24.8 billion by 1989.
Further Savings Proposed
(Outlays in billions)
1985-89
Major program area
Current services
Medicare
Social security
Federal retirement 1
Unemployment insurance
Other
$438.6
1,083.9
139.9
83.3
31.1
$419.8
1,083.9
134.5
83.3
29.9
1,780.3
Total, social insurance and retirement
1
1985 request
1,745.7
savings
$18.8
4.8
1.2
24.8
Excludes the military retirement fund and Federal employee contributions to the civil service and military retirement funds.
The More Restrained Growth in the Future
As a result of the already enacted and proposed reforms summarized above, the outlook for the
1980's reflects significant progress in bringing social insurance and retirement cost growth within
sustainable limits. Given the President's proposals, the average annual percent real growth is
estimated to be reduced from a rate of 13.3% in the early 1970,s to 3.3% from 1985 to 1989 under
current services, or 2.7% assuming enactment of the President's proposals. Most revealing, however,
is that these programs are no longer growing as a share of GNP and are projected to decline, as
illustrated in the previous table.
A significant measure of success achieved thus far in both slowing the growth and restoring the
solvency of the major social insurance programs is due to the acceptance of the dedicated financing
principle. Thus, when outlays recently were substantially outrunning trust fund receipts, reforms
adjusted both benefits and receipts to reestablish a balance. To be sure, the dedicated financing
principle is not universally applied to all of the social insurance programs. Medicare, some unemployment compensation benefits, and Federal retirement annuities use general revenues. Neverthe-
116
less, dedicated financing has been the historical structure of these programs and the cornerstone on
which the recent bipartisan reforms have been built. The principle of dedicated financing should
continue to be a major factor in further reforms to the social insurance and retirement programs.
Future reforms of the Federal employee retirement programs and medicare trust funds, which
require general revenues to meet their obligations, will need to focus on this imbalance by increasing receipts and limiting the growth in benefits in order to further decrease the reliance of these
programs on general fund financing.
In contrast to the substantial decline in growth rates for most social insurance and retirement
programs during the 1980's, the decline in medicare has been considerably less dramatic. Real
medicare annual growth rates have been reduced significantly since the 1970's when they averaged
10.2% annually, to an estimated 6.1% from 1985 to 1989 under present proposals. However, these
estimated rates are still nearly four times greater than the growth of the rest of the programs in
this category and more than 20 times the proposed annual rate of growth of the domestic budget
from 1985 to 1989. The medicare trust fund is expected to be insolvent by the early 1990*8 unless
further reforms are made. While the timing of the insolvency varies depending on who does the
estimates, the insolvency itself is not in doubt under current law. Even if medicare weren't insolvent, the budget cannot sustain these real growth rates in excess of comparable rates for the
domestic budget as a whole. Therefore, longterm structural reforms in medicare will eventually be
required, as suggested by the first factsheet in this chapter.
The following factsheets cover the four major areas in social insurance and retirement: medicare,
social security, Federal retirement and unemployment insurance. The fifth area, other social insurance, is described by three factsheets on railroad retirement, black lung and the Pension Benefit
Guaranty Corporation.
117
Medicare
119
Medicare
Agency: Department of Health and
Human Services
[In millions of dollars]
1984
1985
1986
1987
1988
1989
Total
1985-89
62,773
59,653
70,793
69,105
82,874
76,936
98,294
86,606
102,317
97,214
110,044
108,709
464,322
438,571
(-4,960)
(-5,908)
(-6,439)
(-6,870)
(-7,317)
(-7,768)
(-34,302)
62,778
59,503
70,203
68,073
81,996
74,871
96,789
83,177
96,125
92,092
103,997
101,587
(-4,960)
(-6,015)
(-7,354)
(-8,928)
(-10,760)
(-12,878)
(-45,935)
-590
-1,032
-878
-2,065
-1,505
-3,429
-6,192
-5,122
-6,047
-7,122
-15,212
-18,770
(-107)
(-915)
(-2,058)
(-3,443)
(-5,110)
(-11,633)
Level
Current Services: 1
Budget Authority
Outlays
(Premiums and
collections)
1985 Budget Level: 1
Budget Authority
Outlays
(Premiums and
collections)
Change:
Budget Authority
Outlays
(Premiums and
collections)
+ 5
-150
449,110
419,802
1 Budget authority and outlays include all HI and SMI offsetting receipts and collections, 99 percent of which are from SMI premiums. Only SMI premiums are
affected by proposed legislation.
Program Description
Medicare is a Federally managed and subsidized health insurance program for persons 65 and older
and those who are disabled or suffer from end stage renal disease (ESRD). Medicare covers approximately 28 million aged persons, 98% of all the elderly, and 3 million disabled persons. It consists of
two parts:
• Hospital Insurance (HI or Part A), financed by Social Security payroll taxes, which helps pay
for care delivered by hospitals, skilled nursing facilities, home health agencies, and hospices;
and
• Supplementary Medical Insurance (SMI or Part B), the voluntary part of the program, which is
financed by premiums paid by beneficiaries (currently 25% of program costs) and by general
revenues. Part B helps pay for doctors, hospital outpatient and laboratory services, durable
medical equipment, treatment for ESRD, and other medical services and supplies.
Current Status
The current projected rate of increase in medicare spending could, if left unchecked, jeopardize
continued broad-based public support and acceptance of the medicare system. In constant dollars,
the annual rate of growth in medicare expenditures since 1966 has been more than double that for
total domestic spending.
Although originally designed to be a largely self-sustaining insurance program financed by a
balance between payroll taxes and premium contributions, medicare increasingly has become a
major draw on Federal tax dollars. In particular, the rate of increase in SMI premium financing has
not kept pace with expenditure growth. By 1982, premiums financed only half as much in program
expenditures as they had during the early years of the program.
The Administration and Congress have taken important bipartisan steps to address the explosive
escalation of medicare expenditures. Under the Social Security Amendments of 1983, a new system
was put in place which radically restructured the way medicare pays for hospital services. The new
121
prospective payment system (PPS) holds great promise for controlling increases in hospital expenditures by fundamentally altering provider incentives. Formerly, medicare rewarded inappropriate, or
inappropriately long, hospital stays and other unneccessary uses of resources. The new PPS should
have far-reaching effects, but more time is needed to determine its full impact.
The SMI program, on the other hand, continues to experience tremendous cost increases, but in the
past has escaped close scrutiny and significant reform. The rate of increase in SMI benefits
payments—80% of which are driven by payments to physicians—has averaged 20% annually since
1978, more than twice as fast as inflation in the general economy and about ten times faster than
enrollment increases would suggest. At the same time, the proportion of the program subsidized by
general revenues has grown substantially; the share borne by beneficiaries' premiums has eroded
dramatically from 50%, when the program first began, to 25% currently. Consequently, the 1985
budget focuses on this priority area.
Constant Dollar Trends
Between 1967 and 1982 the constant dollar cost of medicare rose from $7.6 billion to $51.7 billion—a
sevenfold increase. Real growth averaged 13.4% per year during this period. Between 1982 and 1984
the real growth rate fell to 10.0% per year. Under current services, the real growth rate is expected
to fall further to 8.1% per year between 1984 and 1989, and to 6.7% per year if the policies
recommended in the President's budget are adopted. Despite this welcome slowing in cost growth,
1989 constant dollar costs under current services are projected to exceed the 1984 level by 48% and
the 1979 level by 149%.
Constant Dollar Trend
(1985 dollars in millions)
Amount
Year
1967
1970
1979
1982
1984
1989 current services
1989 budget
7,572
15,295
37,166
51,670
62,568
92,441
86,384
1985 Budget Proposals
The budget proposals, with almost $19 billion in savings from 1985-89, represent a major step toward
placing the medicare program on firmer financial footing. The major proposals would:
• Slow the increase in the current rate of expenditures by constraining the indexing of physician
payments, on a one time basis. Temporarily freezing physician payments would save $600
million while reducing the average medicare payment by about 4%. This follows the precedent
of delaying cost of living increases established in the 1983 Social Security Amendments.
• Restore the economic value of the SMI deductible by tying it to the medicare economic index
(MEI), making it more consistent with private industry levels. In 1985 the deductible would
increase from $75 to $80, a level well below what would be required to make it comparable to
deductibles established in private industry.
• On a phased basis, end medicare's mounting dependence on Federal tax revenues by restoring
the balance in financing between SMI premiums and general revenues. Over six years, premiums would increase from 25% to 35% of program costs, a level significantly below that
122
experienced in the early years of the program, when premiums covered 50% of the program's
cost.
The SMI premium would cover an additional 1.67% of program costs each year through 1990. In 1985,
the premium would increase under this proposal a modest 40 cents per month or $4.80 per year per
beneficiary.
• Begin medicare eligibility coverage for individuals at the start of the first full month in which
they are 65 years old. Under current law, eligibility can begin before an individual's 65th
birthday occurs. This would make initial medicare eligibility consistent with initial eligibility
in Social Security. Insurance gaps would not be created since most group plans extend coverage
until medicare coverage begins.
• Contribute to systemwide health care reform by enhancing competitive behavior among medicare beneficiaries through a voluntary voucher program. Competition would also be encouraged by allowing competitive bidding for laboratory and other medical services.
The 1985 budget also includes $171 million to be paid from the HI Trust Fund in 1985 for the new
Peer Review Organization (PRO) program, which was created in 1982. PROs will play a critical role
in ensuring that effective and appropriate care is being provided to beneficiaries under the new
prospective payment system.
Finally, in addition to the proposals which directly affect the financial status of the medicare trust
funds, the Administration is proposing to limit tax subsidies for employer contributions to their
employees' health insurance premiums. Employer contributions above $175 monthly for a family or
$70 for an individual would be treated as taxable income to employees. In addition to alleviating the
distorted tax treatment accorded health insurance premiums, the proposal would moderate excessive
increases in health care costs. This proposal would generate $40 billion in tax revenues, which
includes over $2 billion in income to the medicare HI trust fund, over the next five years.
Currently, individuals have an incentive to purchase expensive health care policies with pre-tax
dollars. These "first-dollar," low cost-sharing policies encourage excessive use of services with little
cost-consciousness on the part of either providers or consumers. Further, the tax subsidy favors
workers with higher incomes. This proposal would alleviate this inequity, allowing individuals and
families to continue purchasing adequate health insurance policies. Approximately 22% of workers
would have employer contributions above the cap, and would be subject to taxes in 1985.
Rationale
The medicare program represents a major and long standing commitment to the medical security of
America's elderly and disabled citizens. Although there is general agreement about the nature and
magnitude of the problem medicare faces, no clear consensus exists on a long range solution. The
1985 budget proposals recognize the major accomplishments that the Congress enacted in the Tax
Equity and Fiscal Responsibility Act (TEFRA) of 1982 and the Social Security Amendments of 1983.
Accordingly, the 1985 proposals focus on generally agreed upon reform priorities such as physician
reimbursement, while allowing time to observe the effects of the significant reforms in hospital
payments associated with prospective payment. In 1985, the proposals would temporarily limit SMI
expenditures to achieve a more fiscally supportable growth rate of 14%, rather than the currently
projected rate of 17% in 1985.
123
Social Security
125
Old Age, Survivors, and Disability Insurance
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority..,,
Outlays
Total
1985-89
1984
1985
1986
1987
1988
1989
175,900
176,774
197,619
188,260
212,365
201,764
226,354
216,417
267,145
231,306
298,942
246,196
1,202,425
1,083,943
175,900
176,774
198,467
188,259
213,237
201,764
227,044
216,417
271,830
231,306
302,235
246,196
1,212,813
1,083,942
+ 849
-2
+ 872
+ 689
+4,685
+ 1
+3,293
+ 10,387
- 1
Program Description
The Social Security program provides income to retired and disabled workers, their dependents, and
survivors. The program is financed primarily by payroll taxes paid by employees, employers, and
self-employed individuals.
Current Status
On April 20, 1983, the President signed into law the Social Security Amendments of 1983. This
bipartisan legislation—recommended by the National Commission on Social Security Reform and
endorsed by the President, the Speaker of the House, and the Majority Leader of the Senateaverted a financial crisis in the Old Age and Survivors Insurance (OASI) trust fund. Without this
legislation, the OASI fund would have been unable to pay full benefits on a timely basis.
This legislation:
• extended Social Security coverage to Government workers and others not previously covered
by Social Security;
• taxed a portion of social security payments going to higher income workers;
• shifted automatic benefit increases to a calendar year basis;
• rescheduled social security payroll tax rates;
• made self-employed tax rates equal to the combined employee-employer tax rates;
• provided a means to reimburse the trust funds for costs that should be borne by other
appropriations;
• gradually increased the age of eligibility for benefits, beginning in the year 2000; and
• created safeguards that stabilize and restore the solvency of the OASI trust fund.
Constant Dollar Trend
During the last four years of the 1980's, social security constant dollar outlays will be four times
greater than during the 1962-65 period. However, the unsustainable growth momentum of the late
1960's and 1970's has dramatically abated. Constant dollar costs in 1986-89 will represent only a
$183 billion or 29% real increase over 1978-81. By contrast, the latter represented a $417 billion or
200% increase over 1962-65.
127
Constant Dollar Trend in Four-Year Intervals
(1985 dollars in billions)
Por'mH
m
4-year constant
dollar cost
m
1962-1965
1966-1969
1970-1973
1974-1977
1978-1981
1982-1985
1986-1989
$204.4
267.8
368.8
515.9
621.4
733.6
804.6
Change over prior
period
+31.0%
+37.7%
+39.9%
+20.5%
+18.0%
+9.7%
Constant Dollar Trend on an Annual Basis
(1985 dollars in millions)
Year
Amount
1962
1972
1982
1985 current services
1989 current services
..
46.8
93.8
175.6
188.3
209.4
1985 Budget Proposal
Consistent with last year's bipartisan agreement on social security reform, no changes in current
law spending are proposed for social security.
The additional budget authority shown in the table above results from the proposal to include a
portion of health insurance premiums paid by employers in employees' income. This change is
discussed in greater detail in the section on Medicare.
128
Federal Retirement Programs
129
Federal Employee Retirement and Disability
Agency: Office of Personnel
Management
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
37,220
22,593
39,702
23,990
42,585
25,999
45,567
27,878
48,376
29,781
51,092
31,702
227,322
139,349
37,200
22,342
40,419
23,573
44,917
25,167
48,318
26,865
51,575
28,592
54,738
30,315
239,967
134,512
-19
-251
+ 717
-416
+ 2,332
-832
+ 2,750
-1,013
+3,200
-1,189
+3,647
-1,387
+ 12,645
-4,837
Program Description
Civilian retirement and disability programs pay benefits to former employees and their survivors
who meet eligibility requirements based on age and length of service. Unreduced benefits are
available as early as age 55 with 30 years of service. Benefits are based on the employee's three
highest salary years and are indexed to the Consumer Price Index (CPI). Current workers and their
employing agencies each contribute 7% of wages toward retirement costs which provides only 38%
of the actuarial cost of benefits.
Members of the Coast Guard (CG) and of the Commissioned Corps of the Public Health Service
(PHS) receive military retirement benefits and are covered by social security. Although for most
civilian employees the civil service retirement system is separate from the social security system,
new employees hired after December 31, 1983 are covered under a combination of social security and
a temporary version of the civil service retirement system.
Under existing law, an estimated 2.0 million civilian, CG and PHS retirees and survivors will
receive payments totaling an estimated $24.0 billion in outlays in 1985.
Current Status
Recent surveys show that the benefits offered under the civil service retirement system are far
superior to those offered by the average private-sector employer. Because of substantial growth in
the number of beneficiaries and liberal benefit features, especially automatic cost-of-living adjustments and early retirement ages, program outlays grew rapidly over the last two decades. The
program now has an unfunded liability, under present economic conditions, of $515 billion.
Constant Dollar Trend
The constant dollar costs of Federal retirement programs (excluding military retirement) exploded
between 1962-1981—rising more than six-fold during this 20 year period. The annual real growth
rate averaged 9.8%. Due to reforms implemented by the Reagan Administration and the slowing of
growth in new annuitants, the average annual constant dollar growth rate fell to 2.4% between 1981 and
1984. Under current services, annual real growth is projected to average 2.6% between 1984 and 1989.
131
Constant Dollar Trend
(1985 dollars in millions)
Year
Amount
1962
1971
1981
1984
1989 current services
3,657
8,309
22,089
23,697
26,958
1985 Budget Proposals1
In 1985, the Administration will focus its legislative effort on three major civil service retirement
reform proposals: cost-of-living adjustment (COLA) reform, a high 5-year salary average for the
benefit formula, and increased employee and agency retirement contributions.
Automatic cost-of-living adjustments account for more than a third of the actuarial cost of the civil
service retirement system. The Administration's COLA reform proposals would: 1) shift the payment
date for the next COLA increase from June 1984 to January 1985; 2) establish January as the
annual adjustment date and adjust the CPI measurement period accordingly; 3) repeal the 1982
Reconciliation Act provision for a minimum 3.3% COLA in 1985 for retirees under age 62; 4) change
the COLA formula to the lower of CPI or General Schedule (GS) salary growth beginning in 1986;
and, 5) apply full indexation only to those annuities not exceeding $10,000—approximating the
maximum primary social security benefit—with a 55% COLA adjustment for that portion of an
annuity exceeding this amount. These reforms would bring COLAs for Federal civilian retirees into
closer alignment with COLA practices in the non-Federal sector.
The Administration also proposes to revise the benefit computation base from the retiree's highest
three years of earnings to the highest five in anticipation of continued low inflation. Employees now
eligible for retirement or within three years of retirement eligibility would not be affected.
Although retirement costs have skyrocketed, the portion withheld from Federal employees' salaries
has remained constant at 7% since 1969. The Administration proposes to increase the employee and
agency retirement contribution from the current 7% to 8% in 1985 and 9% in 1986.
The budget also proposes smaller changes in Federal civilian retirement that are consistent with
enacted reforms in social security. These include lowering the maximum eligibility age for adult
students and deleting guaranteed minimum benefits. In addition, new D.C. Government employees
hired after September 30, 1984 would not be eligible for coverage under civil service retirement.
Rationale
The overall objective of the Administration's 1984 and 1985 civilian retirement reforms is to achieve
greater comparability of benefits with those typically found in the private sector. More significant
reforms, such as those forwarded with the 1984 budget, would be necessary to fully meet this goal.
The 1985 retirement proposals present an excellent first step toward implementation of the 1984
reforms because:
• Current COLA indexation benefits are not comparable to private sector practices and are
extremely costly.
• Retirement payments made by agencies and employees cover less than half of the system's
costs. A shift of more of the cost burden to employing agencies and employees has long been
1
See factsheet on Military Retirement for a description of the reforms that would apply to Coast Guard and PHS Commissioned Corps retirees.
132
warranted. Such a shift would provide incentives for more appropriate program and personnel
management decisions.
• In the 1960's and 1970's the private sector moved to shorter salary averaging periods for
benefit computations to offset benefit erosion due to inflation. With lower rates of inflation
anticipated and adequate COLAs for Federal annuities, it is sensible to move to a 5-year
average, which is now typical in the private sector.
133
Military Retirement Fund
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
Agency: Department of Defense—Civil
1985
1986
1987
1988
1989
Total
1985-89
27,105
17,644
29,509
18,920
32,038
20,144
34,614
21,372
37,052
22,641
160,317
100,720
27,324
17,346
30,786
18,440
34,001
19,628
37,261
20,830
40,296
22,085
169,668
98,329
+ 219
-298
+ 1,278
-481
+ 1,963
-515
+ 2,647
-541
+3,244
-556
+9,351
-2,391
Program Description
The 1984 Defense Authorization Act provides for the establishment of accrual accounting for military retirement at the beginning of 1985. The Military Retirement Fund will be established to which
accrual payments will be paid and from which military retirees and survivors will receive benefits.
Under accrual accounting, the full cost of current military manpower is more accurately reflected in
the national defense category of the budget. Benefits for those already retired are more appropriately reflected in the Income Security category.
Spending for military retirement before 1985 was from the Department of Defense-Military category,
and is therefore not included in the table.
Retirement benefits are available after completion of 20 years of service. For personnel entering the
armed forces before September 1980 retired pay is based on a servicemember's highest basic pay. For
those entering after September 1980, retired pay will be based on the average of the highest three
years basic pay. Under accrual accounting, the armed forces will pay 51% of basic pay to the
Military Retirement Fund to provide retirement benefits for all active and reserve service performed after October 1, 1984. For service performed before that date, Treasury will make payments
to the Fund. Service members do not contribute toward military retirement benefits.
Under existing law, an estimated 1.5 million military retirees and their survivors will receive
payments totaling an estimated $17.6 billion in 1985.
Current Status
Under current law military retirees will receive cost-of-living adjustments (COLA's) in May of 1984,
June of 1985, and March of each subsequent year. Non-disability retirees under age 62 are entitled to
3.6% and 3.3% COLA's in 1984 and 1985, respectively.
1985 Budget Proposals
The 1985 budget proposes to delay the May 1984 COLA to January 1985 and to grant subsequent
COLA's in January. This change would provide the outlay savings shown above. The increase in
budget authority over the current services level would result from larger force sizes assumed for the
budget compared to the current services base.
134
Rationale
The January implementation date and the proposed delay would be consistent with the COLA
changes proposed for civil service retirees. Military and civil service retirees would continue to
receive COLAs in the same month.
135
Unemployment Insurance
137
Unemployment Compensation
Agency: Department of Labor
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
26,291
18,931
21,714
18,271
22,268
17,686
24,271
16,957
24,618
15,527
24,681
14,886
117,551
83,326
26,291
18,931
21,837
18,271
22,435
17,686
24,503
16,957
24,910
15,527
24,990
14,886
118,675
83,326
+ 123
+ 167
+ 232
+292
+310
+ 1,124
Program Description
Unemployment benefits are paid to individuals who are temporarily out of work and are searching
for jobs. About 97% of wage and salaried employment in the United States is covered by unemployment compensation.
Regular benefits (usually up to 26 weeks) are payable in all States. Up to 13 weeks of extended
benefits are payable in States with high rates of unemployment among individuals covered by
unemployment insurance. A temporary program of Federal Supplemental Compensation pays additional weeks of benefits to those who use up all the weeks of unemployment benefits to which they
are otherwise entitled. This temporary program will pay benefits through March 1985.
Current Status
The unemployment compensation program reflects reforms enacted in 1981 which target the additional weeks of unemployment benefits paid under the extended benefit program to claimants in
States experiencing high levels of unemployment.
As a result of these changes, outlays for benefits from 1984-1986 are estimated at $1.2 billion less in
1985 constant dollars than they would have been in the absence of the reforms. This comparison
includes the effects of the temporary program of Federal Supplemental Compensation.
Constant Dollar Trend
Outlays for unemployment insurance are heavily impacted by business cycle conditions. Nevertheless, the constant dollar statistics through 1980 indicate a clear trend toward higher recessioninduced peak outlays and increased residual costs at their low-point during the business expansion.
As a result of the reforms enacted by the Reagan Administration and the general restraint on
temporary extra benefits during the 1981-1982 recession, both recession peak and expansion lowpoint outlays in the 1980's will be less than during the 1970,s.
139
Constant Dollar Trend
(1985 dollars in millions)
Year
Amount
Recession Peak:
1962
197 2
1976
1983
Expansion Low-Point:
1968
197 3
11,714
15,817
33,349
32,407
6,244
11,137
1989 current services
12^658
1985 Budget Proposal
No changes in current law spending for unemployment compensation are proposed in the 1985
Budget. The budget proposes extending coverage under the regular State/Federal unemployment
insurance system to railroad workers who are currently covered under their own separate system.
Under the proposal, railroads would begin paying into State and Federal unemployment funds on
January 1, 1985. Benefits to railroad workers under the State/Federal unemployment insurance
system would begin July 1, 1986, after balances to finance them had been built up. Until July 1,
1986, all unemployment benefits to newly unemployed railroad workers would be paid by States but
would continue to be financed through the separate system that presently exists. Under the State
system, railroad workers generally would be eligible for higher maximum weekly benefit amounts
and the extended benefits available to all other workers during times of high unemployment.
Rationale
Covering railroad workers under the State/Federal unemployment insurance system would assure
them of continued unemployment benefits, under the same terms and conditions as all other
employees regardless of the future course of railroad employment.
• According to the Congressional Research Service, the separate railroad unemployment insurance system is insolvent and has been so for 18 of the last 23 years.
• The system has had to borrow from the rail pension fund in order to finance its benefit
payments; even under the most optimistic assumptions, its debt to the rail pension fund will
reach almost $1 billion by the end of 1985.
• Under existing contribution schedules the separate railroad unemployment insurance system
cannot finance its benefit payments and will have to borrow to meet its debt service obligations.
• Under the 1985 budget proposal the railroad unemployment insurance funding crisis would be
resolved and all debts to the rail pension fund would be repaid by about 1994.
140
Other Social Insurance
141
Railroad Retirement
Agency: Railroad Retirement Board
[In millions of dollars]
Level
Current Services:1
Budget Authority
Outlays
1985 Budget Level:1
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1
1985
1986
1987
1988
6,275
3,860
5,328
4,061
5,451
4,206
4,849
4,287
4,773
4,465
4,874
4,722
25,274
21,741
6,275
3,860
5,326
4,057
5,451
4,202
4,848
4,282
4,772
4,458
4,874
4,714
25,271
21,714
....
- 7
- 3
-27
....
- 1
- 4
....
- 4
....
- 5
....
- 6
1989
Total
1985-89
1984
Includes the Federal Windfall Subsidy, Railroad Social Security Equivalent Benefits, and the Rail Industry Pension Fund.
Program Description
The Railroad Retirement Board (RRB) administers social security equivalent benefits and rail
industry pension payments for former railroad employees and their dependents. The rail industry
pension is the only private pension administered by the Federal Government. About 351,000 former
railroad employees also receive a windfall payment.
• Social security benefits are funded from the social security trust funds.
• Rail industry pension payments are financed primarily by rail pension contributions, which
were collectively bargained by rail labor and management and enacted by the Congress, and
direct subsidies by the American taxpayer.
• Windfall payments are wholly subsized by the American taxpayer. The American taxpayer
subsidy represents nearly $1,100 per active railroad employee in 1985.
Current Status
On August 12, 1983, the President signed into law the Railroad Retirement Solvency Act of 1983.
This Act averted a major financial crisis facing the rail industry pension system, and enabled
continued payment of full rail pensions. The solvency crisis was brought about by inadequate rail
sector funding of their pension plan. The major provisions of the legislation:
• shifted automatic benefit increases to a calendar year basis;
• conformed early retirement and other benefit payments more closely to social security;
• increased rail sector pension contributions;
• taxed rail industry pension payments and windfall payments under the same rules that apply
to all other private pensions;
• added safeguards to protect social security benefits; and
• provided temporary Federal subsidies to the rail industry pension.
1985 Budget Proposal
The 1985 budget proposes no change to the current law financing and payment of rail pensions.
143
Black Lung Program
Agency: DOL/HHS
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
Total
1985-89
1984
1985
1986
1987
1988
1989
1,716
1,708
1,310
1,737
1,753
1,757
1,753
1,757
1,768
1,772
1,778
1,783
8,362
8,806
1,706
1,708
1,289
1,706
1,731
1,735
1,733
1,736
1,745
1,750
1,754
1,759
8,252
8,686
-10
-21
-30
-22
-22
-20
-21
-23
-22
-24
-24
-110
-120
Program Description
Coal miners who are disabled from chronic dust disease of the lungs as a result of their work in the
mines are eligible for black lung benefits. Recipients get a monthly cash subsidy equivalent to 50%
of the salary paid a GS-2 Federal worker as well as a full subsidy for disease-related medical
expenses. The Department of Health and Human Services (HHS) pays benefits from general revenues for claims filed from 1970 to 1973. The Department of Labor (DOL) processes claims filed after
1973 and reviews all claims previously denied by HHS for possible approval under revised eligibility
criteria. Claims approved by the DOL are to be paid by the mine operator found responsible for the
disability. Benefits for eligible miners and survivors where no mine operator can be assigned
responsibility, or where mine employment terminated before 1970, are paid from the Black Lung
Disability Trust Fund (BLDTF). This fund is financed by mine operators through an excise tax on
mined coal.
Current Status
The current cost of the black lung programs includes savings resulting from enactment of reform
legislation in 1981. That legislation required stricter evidence of disability due to black lung for
claims filed on or after January 1, 1982. Previously, claimants could get assistance without showing
medical evidence that they were disabled by black lung disease. In addition, the excise tax on mined
coal was doubled, beginning January 1, 1982, to improve the solvency of the trust fund. This
legislative change has increased expected coal tonnage tax revenues by $2.2 billion over the period
1982-1989.
Constant Dollar Trend
The constant dollar costs of the black lung program increased rapidly during its initial phase—
rising from $26 million in 1970 to $2.2 billion by 1973. After declining in real terms to $1.6 billion by
1978, a renewed surge of constant dollar growth occurred in the late 1970's—culminating in a peak
constant dollar outlay level of $2.4 billion in 1980. Due to restraint on cost of living increases and
caseload decreases, constant dollar costs fell by 25% by 1984. Under current services, constant dollar
costs are projected to decline through the remainder of the 1980's—with 1989 current services
outlays representing a 37% drop from the 1980 peak level.
144
Constant Dollar Trend
(1985 dollars in millions)
Year
Amount
1970
1973
1978
1980
1984
1989 current services
26
2,167
1,601
2,397
1,792
1,516
1985 Budget Proposal
In general, the budget request continues funding of Black Lung at the current services level. The
proposal to limit Federal pay increases in 1985 to 3.5% effective January 1, 1985 will reduce outlays
for black lung benefits by $120 million over the 1985-1989 period.
145
Pension Benefit Guaranty Corporation
Agency: Department of Labor
[In millions of dollars]
Level
Current Services:
Budget Authority1
Outlays
1985 Budget Level:
Budget Authority 1
Outlays
Change:
Budget Authority1
Outlays
1984
-17
1985
1986
1
1987
1988
1989
Total
1985-89
2
13
3
25
4
41
5
58
13
138
-118
-154
1
-156
2
-175
3
-192
5
-208
12
-884
-101
-154
-168
-200
-233
-266
-1,022
- 1
1 PBGC will need no budget authority in the 1985-1989 period. However, the method for allocating the allowances for civilian agency pay raises among the
categories used in this volume results in showing budget authority in this table.
Program Description
The Pension Benefit Guaranty Corporation (PBGC) insures the payment of pensions to workers
participating in privately established defined benefit pension plans. These plans are established by
employers, usually under collective bargaining agreements, and promise employees a specific monthly retirement income based upon the employees' earnings and years of service. Employers contribute
annually to trusts set up to fund the promised pensions. As a result of various factors, including
increases in promised benefits, the level of employer contributions, and changes in work and
retirement patterns, many such trust funds do not have current resources to cover the costs of the
promised pensions. If such a plan terminates, the PBGC assumes responsibility for the trust fund
assets and the pension payments, making up any deficiency from its resources. The PBGC finances
its responsibilities through an annual premium assessed on each plan (currently $2.60 per participant in single employer plans), through collection of liabilities placed by law on the net worth of
employers terminating plans, and through earnings on investments.
Current Status
Legislation enacted in 1980 changed the insurance program for pension plans established to serve
workers employed by several firms (multi-employer plans) in order to reduce the claims on PBGC.
Employers withdrawing from such plans must pay to the plans their fair share of unfunded pension
promises; multi-employer plans facing severe solvency problems must reorganize and, if necessary,
reduce promised benefits; and the PBGC will make repayable advances to insolvent plans to assure
that benefits currently due are paid.
The single employer program, however, is in difficulty. Premiums and other income are not enough
to cover the unfunded value of promised benefits in plans that have terminated. Moreover, some
employers are attempting to terminate plans not because they have failed or are threatened with
failure, but merely because they wish to avoid the future costs of financing the benefits they have
promised their employees. Unwilling to bear the cost of their own actions, they hope to shift the
unfunded portion of their pension plans on the PBGC, and ultimately on the responsible employers
who are successfully maintaining their plans and will have to pay the PBGC insurance premiums in
the future.
At the end of 1980 the PBGC had a total deficit—the excess of the current value of unfunded
benefits over current assets—of $159 million. By the end of 1983, the deficit had grown to $415
million. If no changes are made, by the end of 1985 the deficit is expected to exceed $620 million. By
1986, PBGC will be spending more than it takes in. It will continue to be unable to accumulate the
146
resources needed to pay benefits to participants from plans already terminated who will retire in
the future. It will continue to be unable to obtain the resources needed to assure future benefits to
participants of newly terminating plans. But in addition it will have to dip into the inadequate
resources it now has in order to make current payments to workers who have already retired.
1985 Budget Proposal
The budget proposes legislation to increase the premium for single-employer plans to a level that will
permit the current deficit to be amortized over a reasonable period of time. The Congress is asked to
enact a $7.00 per participant premium this year, and to apply the premium increase to all plan years
beginning after December 31, 1983. In addition, legislation is proposed to prevent solvent employers
from unjustifiably shifting the cost of their pension promises to the pension insurance system.
Rationale
The cost of private pension promises should be borne first by those who make them. A reasonable insurance program to spread the cost of unexpected and unavoidable plan terminations among all pension
plans is sustainable only if the premiums required are not inflated by unwarranted plan terminations.
The reasonable increase of the annual single-employer plan, premiums from $2.60 to $7.00 per participant, effective this year, would permit the current deficit to be amortized in 15 years. This is the same
period that the law allows private pension plans to amortize their experience losses.
The premium increase, when coupled with the additional investment income it would generate, would
limit the cumulative deficit to about $375 million at the end of 1985 and increase PBGC receipts from
premiums and interest by $1 billion over the 1985-1989 period.
147
CHAPTER 3
Low-Income Benefit Programs
149
Low-Income Benefit Programs
Overview
The category low-income benefit programs includes programs that provide cash and in-kind assistance to the Nation's low-income population. It encompasses all of the major means-tested entitlement programs, including Aid to Families with Dependent Children (AFDC), Supplemental Security
Income (SSI), Food Stamps, Medicaid, and child nutrition. It also includes certain discretionary
programs for the poor and near-poor, such as housing assistance, Women, Infants and Children
nutrition assistance (WIC), Low Income Energy Assistance, and refugee aid, which have some
characteristics of entitlements but are limited by annual appropriations acts. Taken together these
programs constitute the basic social safety net of direct cash and in-kind assistance for the Nation's
poor.
During the decades of the 1960's and 1970's, low-income benefit programs expanded in virtually
every dimension. In the relatively short time-span of 20 years, a total of seventeen separate lowincome programs were enacted into law, the number of beneficiaries increased by almost 300%, and
inflation-adjusted Federal expenditures rose by over 650%. By the end of the 1970's, runaway
growth in low-income benefit spending had become one of the most intractable budget and social
policy problems confronting the Nation. The rate of growth in benefit outlays could not be sustained, but reductions might have an adverse impact on millions of the Nation's poor. Thus, the
essential policy dilemma was to reduce the growth in outlays while, at the same time, preserving
benefits for those in genuine need.
Over the last three years, the dual problem of controlling costs and maintaining benefits to the
needy has largely been resolved. As is illustrated in the chart below, the growth in constant dollar
outlays for low-income benefits has been virtually halted. Projected low-income benefit costs will
remain almost constant in real terms throughout the five-year budget horizon. Moreover, this
stabilization of real program costs has been accomplished primarily by policies which improved the
targeting of benefits to those in genuine need.
In order to fully comprehend the extent of the cost control problem faced by the Administration in
1981, the excesses and inefficiencies of the vast network of programs that had been built up over two
decades of expansions, and the magnitude of the accomplishments achieved to date, it is instructive
to review the historical record of low-income benefit programs from the early 1960's to the present.
This review will also place the Administration's 1985 budget proposals in perspective.
The Historical Record
The historical perspectives chart below summarizes the dramatic 20-year expansion in low-income
benefit outlays and the impact of legislative reforms during the last three years. Over the 20-year
expansion period, 1962 through 1981, constant dollar outlays grew at an annual compound rate of
over 11%. Two generic factors operating throughout this period combined to produce this profound
growth:
• The creation of a multitude of uncoordinated in-kind benefit programs that resulted in a
layering of one benefit upon another rather than in an integrated system of benefits in which
the magnitude of one benefit would take into account receipt of another.
• The transformation and expansion of discretionary programs into open-ended, inflation-indexed
entitlement programs.
151
MEANS-TESTED CASH AND NEAR-CASH WELFARE:
$ BILLIONS
HISTORICAL PERSPECTIVE
(CONSTANT 1985 DOLLARS)
As the chart suggests, however, the 20-year growth period has two distinctly different phases. The
first phase of steadily accelerating costs roughly corresponds to the New Frontier-Great Society
years, 1962-1969. During this phase, a multitude of new programs which constituted the basic
network of low-income benefit programs was put in place. In the second phase, 1970-1981, the basic
network was fundamentally transformed as program after program was placed on an inflationindexed entitlement basis. This transformation, coupled with recession-induced benefit and eligibility liberalizations, radically accelerated the growth rate, driving expenditures to successively higher
and higher plateaus.
Creating the basic network: 1962-1969.—At the outset of the 1960's, relatively few low-income benefit
programs existed. Eligibility criteria varied, and the Federal Government generally shared costs
rather than providing 100% funding of benefits. Among the major programs, two categories of
entitlements—SSI-predecessor programs and AFDC—provided cash assistance to low-income aged,
blind, disabled and families headed by women. States could, with Federal support, provide medical
assistance to any or all of these groups. Housing aid primarily took the form of payments for the
capital costs of public housing, and nutrition aid largely was provided through grants for school
lunch programs.
152
During the 1960's, a dozen separate low-income benefit programs were enacted into law. All but one,
Medicaid, were discretionary programs and all but one, Refugee Assistance, provided assistance
entirely in the form of a specific in-kind benefit rather than cash. Six of the eleven newly created
discretionary programs provided nutritional aid. These included the Food Stamp program, three
child nutrition programs, and nutritional programs for the elderly and pregnant women. Four of the
additional programs provided housing assistance.
However, as the table below indicates, the primary source of the growth in low-income benefit costs
was not these discretionary programs. Their enactment simply established the base for the explosion
in outlays which occurred during the succeeding decade. The principal causes of the growth were
the expansion of AFDC and the enactment of Medicaid.
Growth in Low-Income Benefit Outlays, 1962-1969
(1985 constant dollar amounts in millions)
Share of total
increase
1962
2,533
322
4,714
Entitlement Programs:
AFDC
Medicaid
Aid to the Aged, Blind and Disabled
Subtotal, Entitlement Programs
Discretionary Programs:
Nutrition
Housing
Refugee Aid
Subtotal, Discretionary Programs
Total, All Programs
1969
4,702
6,056
4,569
15,327
24.1%
63.6%
-1.6%
1,594
941
188
2,723
18,050
7.5%
4.3%
2.1%
13.9%
100.0%
7,569
916
557
1,473
9,041
86.1%
Together, AFDC and Medicaid account for almost 90% of the 1962-1969 growth in constant dollar
outlays, a reflection of the importance of entitlement programs as a driving force behind the two
decades of runaway spending.
The low-income benefit programs enacted during the 1960's also represented a significant shift in
the nature of low-income assistance. Prior to the 1960's, assistance was provided primarily in the
form of cash. All of the low-income benefit programs enacted during the 1960's, on the other hand,
provided assistance in the form of in-kind benefits. As a result, in-kind aid as a proportion of total
low-income assistance rose from 20% in 1962 to over 50% by 1970.
Transforming the basic network: 1970-1981.—During the second phase, expenditures on low-income
benefit programs accelerated. In just two years, 1969-1971, the increase in inflation-adjusted expenditures exceeded the increase which occurred during the preceding seven years of the Great Society
programs, 1962-1969. Over the entire 11-year period, 1970-1981, the 19% annual compound growth
rate in outlays far outstripped the rate of inflation, causing constant dollar expenditures to more
than triple. Throughout the 1970,s, low-income benefit programs were the fastest rising segment of
the Federal budget.
The growth momentum was primarily the result of a flurry of legislative expansions during the
years 1970-1975. This six-year period contained two severe economic recessions and an intervening
period of rapid inflation. The legislative expansions enacted during this brief recession-inflationrecession cycle unleashed a spending momentum that would continue through late 1970,s and early
1980,s. In each recession, program eligibility was liberalized and benefits were increased. This was
153
done in large measure by transforming discretionary programs into open-ended entitlement programs with nationally uniform eligibility standards and benefit levels in excess of those provided
under State discretion. During the intervening years of inflation, all but a few programs were
indexed to prevent the real value of benefits from being eroded by rising prices.
The accompanying table presents data on the growth in expenditures by major program category.
As the data indicate, massive real growth in benefit spending occurred in all categories of aid.
Nutrition programs, whose growth was fueled by reports of widespread hunger in America, expanded the fastest, registering a constant dollar increase of over 1,000%. These programs accounted for
the largest share of the total increase in low-income benefit costs 33%. Between 1970 and 1975, six
of the nine nutrition programs, including Food Stamps and the school lunch program, were converted to entitlements and indexed.
Growth in Outlays by Program, 1970-1981
(1985 constant dollar amounts in millions)
Share of total
increase
1970
1981
2,475
6,832
5,495
4,489
17,867
19,443
8,820
7,902
1,610
55,642
33%
27%
7%
7%
3%
77%
219
8,156
1,136
2,175
887
15%
2%
5%
1%
Subtotal, Discretionary Programs
1,459
12,354
23%
Total, All Programs
20,751
67,996
100%
Entitlements Programs:
Nutrition
Medicaid
AFDC
SSI
EITC
Subtotal, Entitlement Programs
Discretionary Programs:
Housing
WIC
Low-Income Energy
Refugee Aid
19,291
1,240
In Medicaid, the entitlement was expanded to include services provided by intermediate care
facilities. This 1972 expansion, which profoundly changed the nature of Medicaid, was thought to
have minor consequences at the time. But, it alone accounts for almost 40% of the tripling of
Medicaid costs from 1972 to 1981.
The 1974 and subsequent SSI legislation transformed State-run programs for the aged, blind, and
disabled into a federally financed, nationally uniform, fully-indexed entitlement program. The
nationally uniform standards raised benefits and eligibility in many States. With these changes,
enrollment increased by one-third in the first year of SSI operation and constant dollar outlays
doubled within two years. Overall, entitlement programs accounted for 77% of the total growth in
low-income benefit costs during the period 1970-1981.
The expansion of the 1970's, however, was not limited to entitlement programs. Housing outlays
increased by almost 550% during the decade. In addition, during the latter half of the decade two
more discretionary programs, WIC and Low Income Energy Assistance, were added to the list of lowincome benefit programs. Both programs began with initial funding of less than $200 million. By the
early 1980's, both were among the fastest growing programs in the Federal budget. In 1981, WIC
expenditures had almost reached the $1 billion mark and Low Income Home Energy Assistance had
grown to $1.8 billion.
154
The shift in the form of low-income benefits from cash to in-kind assistance continued throughout
the 1970's. Primarily as a result of the explosion in nutrition and housing benefits and the continued
sharp growth in Medicaid outlays, in-kind benefits as a share of total low-income assistance rose by
one third from 1970 to 1981.
The Results of Two Decades of Growth
By 1981, 14 separate programs provided 7 out of every 10 dollars of Federal low-income benefits in
the form of in-kind assistance. As a result, multiple recipiency of benefits, uncommon in the 1960*8,
became the norm. In 1980, a recipient of low-income benefits received, on average, benefits from
three different programs. And some received benefits from as many as 6 different programs.
Low-Income Benefit Recipient Data
(Persons in millions)
1965
8.6
9.4
1.1
Number of People Getting One or More Benefits1
Total Benefit Program Enrollment1
Average Number of Benefits Per Recipient1
X SSI,
1980
33.1
111.9
3.4
AFDC, Food Stamps, Housing, Medicaid, School Lunch, Refugee Assistance, EITC, LIHEA.
The proliferation of benefits and lack of coordination among them resulted in inefficiency and poor
targeting, illustrated in data on the "poverty gap." The poverty gap represents the amount of lowincome benefits necessary to lift all poor persons out of poverty. The table below, which compares
the poverty gap to low-income benefit expenditures, shows that low-income benefits grew markedly
relative to social need. In 1981, expenditures were 62% more than necessary to eradicate poverty. At
the same time, however, fewer than half of those expenditures actually reduced the extent of
poverty. The other half went to people who were not poor to begin with or raised real incomes of
some families, who were initially poor, far above the poverty line.
Inefficiency of Low-Income Benefit Programs
(1985 constant dollar amounts in billions)
Pre-low-income
benefit poverty gap
Low-income benefit
expenditures
41.4
57.7
35.0
93.2
1970
1981
Post-benefit
poverty gap
29.5
Reforms Made to Date
Because means-tested programs had grown largely unchecked for 20 years, there was room for
reform when the Administration took office. The reforms undertaken were designed to do the
following:
• Restructure programs to improve their efficiency and effectiveness and stem unnecessary cost
growth.
• Reduce excessive benefits and better target aid to the needy.
• Implement effective work incentive measures.
• Reduce error and waste.
155
Legislation directed toward these goals and enacted during the last three years has resulted in a
cumulative reduction of $38 billion in nominal outlays over the period 1982-1986, as indicated in the
savings achieved chart.
MEANS-TESTED CASH AND NEAR-CASH WELFARE:
SAVINGS ACHIEVED
$BILLIONS
100
SAYINGS FROM PREr•1981 BASELINE:
1982
90
1983
1984 1985
AVG. ANNUAL
1986 GROWTH RATE
PRE—1981 BASELINE..
CURRENT SERVICES...
62.7 70.2 71.4 76.1 81.4
56.6 63.2 63.7 68.3 72.0
DIFFERENCE
PERCENT CHANGE...
-6.1 -7.0 -7.7 -7.8 -9.4
-10% -10% -11% -10% -12%
+6.7%
+6.2%
PRE - 1981
BASELINE
80
70
60
50
81
82
83
84
85
86
With these savings, real low-income benefit costs have been stabilized, as shown in the following
table.
Stabilization of Low-Income Benefit Outlays
(1985 constant dollar amount in billions)
Amount
1970
1981
1985 Current services
20.8
68.0
68.3
156
Percent change
from 1970
+
228%
+ 229%
This stabilization has been achieved while protection for the truly needy has been preserved. Data
from the Census survey that is used to compile official poverty rates illustrate this point. These data
are for 1981 and 1982, which are, respectively, the year prior to the time most reforms took effect
and the most recent year for which data are available. They include the market value of in-kind
benefits.
Improved Target Efficiency of Low-Income Benefits
(1985 constant dollar amounts in billions)
Total benefit
reported
1981:
1982:
28.3
49%
13.8
16.7
73%
45%
56.0
Total
69%
39%
18.8
37.2
Cash
In-kind
13.3
15.0
57.3
Total
Target
efficiency
19.4
37.9
Cash
In-kind
Amount of benefits
reducing poverty
30.5
54%
1 Includes AFDC, SSI, food stamps, free and reduced price school lunches, medicaid and housing benefits, but only the amounts which individuals reported
receiving.
As can be seen from the table above, the "target efficiency" of low-income benefits—the extent to
which low-income benefits raise those with incomes below the poverty level up to the poverty level—
has been greatly improved.
• The percentage of means-tested benefits going to reduce the extent of poverty rose from 49 to
54 between 1981 and 1982.
• In real terms, benefits going to reduce the degree of poverty increased by 8% after reforms
were enacted, although fewer dollars were spent in total.
Census survey data for 1981 and 1982 also indicate that the portion of households with cash incomes
below the poverty line who received any of the means-tested benefits covered by the survey was the
same in 1982 as in 1981: approximately 73%. Thus, the data refute recent assertions that the Federal
Government's policies have removed poor persons from the benefit rolls.
Another perspective on recent reforms is provided by a comparison of low-income benefit funding
reflected in budgets enacted for 1982-1983 with funding for budgets in roughly comparable prior
periods. As shown in the table below, relative to similar economic conditions in 1975-1976 and less
severe recession conditions in 1971-1972, constant dollar availability of cash and in-kind support for
the Nation's poor in 1982-1983 was 35% and 110% greater, respectively, despite the reform measures
enacted since 1981.
Major Low-Income Benefit Programs
(Average annual outlays in 1985 constant dollar amounts in billions)
Average Annual Outlays
1971-72
13.8
9.3
6.5
20.1
9.6
19.3
17.9
49.4
66.8
2.2
Total
18.5
4.2
13.7
13.1
31.8
Cash Assistance
Housing Aid
Medical
Nutrition
1975-76
157
1982-83
An examination of the major low-income benefit programs in turn confirms the success of the
reforms suggested by the general indicators:
AFDC and food stamps.—Reforms in these two programs have been designed primarily to improve
targeting by ensuring fuller recognition of the income and resources available to applicants and
recipients, to enhance their attachment to the labor force and discourage welfare dependency, and
to reduce errors in benefit payments.
The comparison of benefit payments in 1981 and 1982 shown in the table below suggests that
targeting has been improved. In both programs, the expenditures going to poor persons grew both in
constant dollar terms and as a percent of total program expenditures.
Expenditures for the Poor in AFDC and Food Stamps
(1985 constant dollar amounts in billions)
1981
Dollars
AFDC
Food stamps
8.2
5.8
1982
Percent of total
program
73%
78%
Dollars
9.2
6.9
Percent of total
program
80%
84%
Moreover, the steps taken to improve labor force attachment in AFDC and Food Stamps seem to be
working. Because a variety of evidence indicated that earned income deductions and disregards had
little, if any, effect on work incentives, reforms enacted in 1981 increased the amount of earned
income counted in determining benefits. Some people were concerned that these changes would lead
wage-earning recipients to quit their jobs to stay on welfare. Their concerns have proved unwarranted. A study of AFDC found that the number of recipients who quit work or lost jobs and returned to
welfare was the same both before and after the 1981 legislative changes—18%. Indeed, the change
produced the necessary incentive for the vast majority of working recipients to make the transition
from welfare to self-support. Cases with earned income moved off the AFDC rolls twice as fast after
the changes were made as they did before.
Assisted housing.—Although tenant rents were increased in this program to reduce disparities in
rents paid by those receiving HUD subsidies and unsubsidized citizens with comparable incomes, the
major thrust of reforms has been to shift housing subsidies toward less costly existing units. Under
these reforms, the number of households receiving HUD subsidies increased from 3,297,000 in 1981
to 3,663,000 in 1983, an 11% increase. In 1984, an additional 166,000 households will receive assistance.
Medicaid.—To promote system changes in this program, Federal matching rates were reduced and
States' flexibility to alter payment policies and modes of service delivery were increased. These
changes have been successful in precipitating a rethinking of programs along lines which are
benefiting the needy. The Intergovernmental Health Policy Project, which has been systematically
surveying State Medicaid programs, outlines the strong contrast between 1981 and 1982 in an April,
1983 report. They note that out-of-control growth prior to the reforms enacted under the Reagan
Administration was forcing States to retrench, often to the disadvantage of recipients. In contrast,
new flexibilities provided under the reforms have allowed many States to increase services and add
beneficiaries.
158
School lunch.—Under reforms in this program, free lunches have remained available at no cost for
children whose families have incomes below 130% of the poverty line, but subsidies have been
reduced for higher income families. Census data show that between 1981 and 1982 expenditures on
the poor in the school lunch program increased from $1.6 billion to $1.8 billion in constant 1985
dollars and from 42% to 49% of total program expenditures.
As with any change in subsidies, the reductions for higher income families probably affected
behavior, causing some of these families to decide the lunches were not worth their cost. In
combination with enrollment declines, these behavioral changes resulted in a drop in the number of
school lunches served between 1981 and 1982. As a result, schools reportedly are taking steps to
make their lunches more attractive to students. These changes should benefit children of all income
classes, and they seem to be having an effect. The number of school meals served increased between
1982 and 1983 and is projected to increase further in 1984.
Proposed Reforms
The reforms proposed in the 1985 budget build on the reforms implemented through the last three
budgets and are designed to meet the same goals. These proposals would maintain the new equilibrium attained through the reforms enacted in the last three budgets. In aggregate terms, the social
safety net of low-income programs would neither expand nor contract. The focus would be on
ensuring that runaway growth is not set in motion again through a proliferation of new programs,
conversion of discretionary programs to entitlements, and poorly targeted expansions of low-income
benefits. Priority would be placed on sustaining economic growth to reduce the level of need,
containing medical cost to ensure adequate assistance to the poor and elderly at minimum cost, and
marginal program reforms elsewhere to improve targeting and eliminate remaining abuses.
The modest reforms contained in the 1985 budget are consistent with these priorities. They include
continuation of the three percent matching reduction in Medicaid and mandatory copayments to
restrain excessive utilization; further steps to improve work incentives and targeting in AFDC;
minor cost savings in food stamps, largely through reductions in erroneous payments; small savings
in child nutrition programs; and funding slightly below current services levels for WIC, low-income
home energy and subsidized housing. Taken together, these reforms would result in funding for lowincome benefits increasing at an average annual rate of 0.5% between 1984 and 1989, a small
reduction in the 1.6% annual rate of increase under current services.
The proposed 1985 reforms are discussed in the factsheets that follow. This chapter contains 11
factsheets in three groups.
159
Medical and Housing Programs
161
Medicaid Benefits
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
19,659
19,222
21,082
21,998
23,799
23,799
26,088
26,088
28,498
28,498
31,042
31,042
130,508
131,424
19,659
19,222
20,015
20,931
22,682
22,682
24,934
24,934
27,309
27,309
29,825
29,825
124,764
125,680
-1,067
-1,067
-1,117
-1,117
-1,154
-1,154
-1,189
-1,189
-1,217
-1,217
-5,744
-5,744
Program Description
The medicaid program makes grants to States to help finance needed medical care for low-income
families and individuals. The Federal Government finances 50 to 78% of the cost of medical services
under State medicaid programs. Currently, medicaid pays the health care costs of 22.9 million lowincome people.
Current Status
The Administration has implemented significant medicaid reforms to improve program effectiveness, slow runaway health care costs, and promote greater flexibility for States in administering
their programs.
The Omnibus Budget Reconciliation Act of 1981 (OBRA) set reasonable growth rate targets for
health care costs and a schedule of reductions of Federal funds for States with excessive health care
costs. The 1982 Tax Equity and Fiscal Responsibility Act (TEFRA) gave States the option of
requiring medicaid recipients to share very nominally in the cost of their health care. Medicaid
reforms enacted by Congress have slowed the average annual growth of medicaid outlays from 14%
(1975-80), to a projected 8% for the period 1981-1985.
Other recent improvements include:
• the home and community based health care waiver program, which helps States finance health
services for individuals at home and in the community as an alternative to institutionalization;
• regulations to strengthen medical and dental screening, and treatment for about 2 million
children in the Early and Periodic Screening, Diagnosis and Treatment program; and
• more State discretion in eligibility determination and in controlling high hospital costs.
Constant Dollar Trends
Constant dollar outlays for the pre-medicaid state grant program totalled $804 million in 1965. By
1969 when medicaid was fully operational, constant dollar Federal costs reached $6.1 billion—nearly
an eight-fold rise over the pre-medicaid level. Due to benefit and coverage liberalizations enacted in
the early 1970's, as well as rapid increases in the real costs of health care, constant dollar outlays
more than tripled between 1969 and 1981.
Since 1981, the medicaid real growth rate has slowed sharply—averaging 1.2% annually between
1981-1984 compared to 10% per year between 1969 and 1981. Under current services projections, real
163
growth will average 5.5% per year from 1984 through 1989 and 4.7% per year over the same period
if the 1985 budget proposals are implemented.
Constant Dollar Trends
(1985 dollars in millions)
Year
Amount
1965 (pre-medicaid)
1969
1975
1981
1984
1989 current services
1989 budget
804
6,056
12,602
19,443
20,161
26,396
25,361
1985 Budget Proposals
The 1985 budget reproposes major 1984 budget proposals to: (1) continue OBRA growth rate targets
for health care costs, (2) reduce Federal medicaid funding to States with excessive health costs by
3%, and (3) require modest cost sharing by medicaid recipients (which was optional under TEFRA).
• Continue medicaid cost growth rate targets and reductions enacted by OBRA.—The 1984 medicaid cost growth rate targets and reductions would be continued in 1985 and beyond. The
reductions would, however, be set at 3% rather than the 4.5% applicable to 1984. Also
continued would be special incentives to states to promote hospital cost reviews, and reduce
fraud and abuse. States with exceptionally high unemployment rates (150% or more of the
national average) would continue to receive a 1% offset to the expenditure reductions for
exceeding the growth rate targets.
• Require nominal co-payments by medicaid recipients.—This proposal would require medicaid
recipients to make nominal copayments per visit for physician, clinic, outpatient and inpatient
services. These minimal copayments, ranging from $1.00 to $1.50 for physician visits, and $1.00
to $2.00 for each day in the hospital, would make consumers more aware of the cost and would
discourage them from unnecessary or excessive use of medical services. This proposal would
save the medicaid program $1.4 billion over five years.
• Other changes.—Other medicaid changes include improving third party collections to emphasize enforcement of medical coverage rights in child support enforcement cases; and requiring
assignment of certain rights to third-party payments as a condition of medicaid eligibility. In
addition, the medicaid budget reflects savings resulting from proposed changes in the AFDC
and medicare programs.
Rationale
The Administration's 1985 medicaid proposals seek the continued cooperation of States and consumers in moderating increasingly high health care costs and maintaining adequate medical care for the
poor.
164
Subsidized Housing
Agency: Department of Housing and
Urban Development
[In millions of dollars]
Level
1985
1986
1987
1988
1989
Total
1985-89
8,199
9,787
9,964
10,729
13,195
11,354
13,260
12,058
13,726
12,706
14,187
13,342
64,332
60,189
7,867
9,764
5,390
10,489
7,594
10,932
9,978
11,559
7,392
12,102
7,578
12,581
37,933
57,663
-331
-23
-4,573
-240
-5,601
-422
-3,281
-499
-6,335
-604
-6,609
-761
-26,399
-2,526
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
Program Description
The Department of Housing and Urban Development (HUD) administers subsidy programs that
assist 3.7 million low-income individuals in meeting the cost of purchasing or renting adequate
housing. Under most of these programs, tenants are required to pay up to 30% of their cash income
towards their housing costs. The Federal Government guarantees payment of the remaining portion
of the monthly rent, or mortgage, to private landlords, lenders, or local housing authorities through
long term (15 to 40 year) contracts. For the public housing program (which includes 1.3 million of the
3.7 million units cited above), operating cost shortfalls are funded each year as the need arises through
a separate public housing operating subsidy program.
Constant Dollar Trends
In the 8 years ending in 1970, subsidized housing costs more than doubled—rising from $557 million
to $1.2 billion per year. However, the policy shift in the early 1970's toward direct public housing
operating subsidies and the Section 8 program—which provided for annual contract payments of
both capital and operating subsidies—caused constant dollar outlays to skyrocket over the next 11
years. By 1981, constant dollar subsidized housing outlays totaled $8.2 billion—representing a 18.2%
annual real growth rate from the 1970 level. Due to the entitlement reforms, cost constraints, and
incremental unit growth reductions implemented by the Reagan Administration, the constant dollar
growth rate slowed to 8% per year between 1981 and 1984, and over the next five years is projected to
decline to 2% per year under current services and 0.8% per year under policies recommended in the
1985 budget.
Constant Dollar Trends
(1985 dollars in millions)
Year
Amount
1962
1970
1975
1981
1984
1989 current services
1989 budget
557
1,240
4,032
8,156
10,265
11,346
10,698
165
Current Status
In 1984, the Congress provided funding to subsidize 100,000 additional households. The 1985 budget
would fund the same number of additional households as in 1984 for about $2.2 billion less in budget
authority. This budget authority savings reflects the Administration's proposal to expand the use of
less costly and more flexible housing vouchers.
In addition, 1985 public housing operating subsidy requirements are expected to decline by $239
million from 1984 as a result of savings achieved through investments in energy conservation
measures, higher rental income, and regulatory changes.
1985 Budget Proposal
The 1985 budget continues to rely on the existing private rental housing stock to serve low-income
families rather than the construction of new subsidized housing. In 1985, HUD would provide 87,500
housing vouchers to help low-income tenants afford standard quality rental housing. These vouchers—equal to the difference between the area's private market rent levels and the tenant's expected
rent contribution—would replace the current Section 8 existing housing program.
Two regulatory changes for public housing operating subsidies are proposed that would:
• Require a year-end reconciliation between the income the public housing authority (PHA)
actually received and the amount projected at the beginning of the year; and
• Limit the payment of full subsidies to occupied units, decreasing the subsidies paid for vacant,
uninhabitable units.
Rationale
Under the current Section 8 existing housing program, which is designed to help low-income tenants
afford market rents, the Federal Government pays the difference between the actual rent and the
required tenant rent contribution. With the amounts tenants pay set by their income, there has
been no incentive for them to negotiate their own rents. As a result, landlords generally raised rents
to the maximum level, which resulted in subsidized units renting for about 26% more than
comparable, unassisted units.
The housing voucher subsidy—when used with otherwise unassisted units—would not be related to
the actual rent for the unit chosen by the tenant, and subsidy recipients would be encouraged to
"shop around" for the lowest cost available. Any rent savings would not reduce the value of the
tenant's housing voucher and would therefore accrue to the tenant.
Eliminating the maximum fair market rent will enable families to seek housing in any neighborhood they choose—thus resulting in fewer neighborhoods with concentrations of low-income residents— thereby promoting the goal of economically mixed housing.
The voucher program reduces the Federal Government subsidy commitment from 15 years (currently provided in the Section 8 existing program) to 5 years. Reducing the commitment term substantially reduces the budget authority needed for an equivalent number of units. The Section 8 existing
program needs a much larger amount of budget authority set aside to fund the additional 10-year
subsidy term. This shortened subsidy commitment will also allow greater flexibility to adjust or
reconsider subsidized housing policies in the future.
Because of the cost effectiveness of housing vouchers, the budget proposes to begin converting the
700,000 tenants in the Section 8 existing housing programs to the voucher program as current lease
and subsidy commitments expire.
166
Public housing operating subsidies are allocated based upon a formula which estimates what it costs
a well-managed authority to provide housing. Subsidy allocations will continue to be based on this
system. The proposed regulatory changes will save $70 million in 1985. They meet the objectives of:
• Compensating for the gap between allowable costs and income raised, eliminating over-payments of subsidy caused by under-projections of income; and
• Only providing subsidies to PHA's for housing low-income families, drastically reducing instances where PHA's can "profit" from payments of subsidy for vacant units.
167
Nutrition Programs
169
Food Stamp Benefits and Nutrition Assistance to
Puerto Rico
Agency: Department of Agriculture
[In millions of dollars]
1984
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
11,289
11,292
11,079
11,079
11,675
11,674
12,098
12,098
12,254
12,254
12,642
12,642
59,748
59,747
11,289
11,292
10,705
10,706
11,310
11,309
11,738
11,738
11,912
11,912
12,311
12,311
57,976
57,975
-374
-374
-365
-365
-360
-360
-342
-342
-331
-331
-1,772
-1,772
Program Description
The Food Stamp program subsidizes food purchases of low-income households. Monthly coupon
allotments are redeemable for food through commercial outlets. Given its special needs, the Commonwealth of Puerto Rico has authority to design its own food assistance program.
Constant Dollar Trend
The constant dollar cost of Federal commodity and food distribution programs increased steadily
during the 1960's—rising from $45 million in 1962 to $1.5 billion by 1970. However, the conversion of
these programs to food stamps on a nationwide basis with uniform eligibility criteria in the early
1970's, caused constant dollar outlays to reach $8.3 billion in 1975—nearly a sixfold increase in a
half-decade. After several years of stability, further liberalizations during the Carter Administration
caused constant dollar outlays to peak at $13.1 billion in 1981.
Due to the reforms implemented by the Reagan Administration, this uncontrolled growth of food
stamp program costs has been brought to an abrupt halt. Constant dollar outlays of $11.8 billion in
1984 represent a 9% reduction from 1981 peak levels. Moreover, under current services, constant
dollar costs are projected to fall to $10.7 billion by 1989—an 18% reduction from the 1981 level.
Constant Dollar Trend
(1985 dollars in millions)
Year
Amount
1962
1970
1975
1978
1981
1984
1989 current services
45
1,473
8,311
8,150
13,058
11,844
10,750
171
Current Status
The Administration remains committed to restraining the cost of entitlement programs without
jeopardizing assistance to those with genuine needs. To achieve this goal, the Administration has
sought to reduce overpayments in the Food Stamp program which cost the American taxpayer $1
billion annually.
Significant progress has been made in reducing Food Stamp errors—overissuances have been cut by
25% during the last two years. In fact, preliminary 1983 data reveal that the national average error
rate has fallen to approximately 8%—as opposed to the current statutory target rate of 9% for 1983.
Nonetheless, the error rate remains unacceptably high and States lack the incentive to improve
their administration of the program since benefits are 100% Federally financed. In 1985, States will
continue to misspend over $820 million by issuing erroneous Food Stamp payments.
1985 Budget Proposals
Almost 85% of the proposed 1985-89 savings of $1.8 billion would be achieved by holding States
liable for Food Stamp payments exceeding 103% of proper expenditures.
The President's proposals would also:
• Simplify Food Stamp application procedures by making AFDC recipients categorically eligible
for Food Stamps.
• Require States to adopt a community work experience program in which able-bodied Food
Stamp recipients must participate in work-related activites as a condition of their eligibility.
Rationale
The proposal to hold States liable for Food Stamp payments exceeding 103% of proper expenditures
would give States the incentive to further reduce overpayments.
This proposal also has the advantages of:
• Setting the Food Stamp error targets at the same level as those currently applicable for AFDC
and Medicaid.
• Not affecting benefits of eligible recipients.
The second proposal, categorical eligibility for AFDC recipients, would also help States meet their
target error rates by simplifying program administration.
The third budget proposal, the Community Work Experience Program, would continue past Administration efforts to target assistance on the neediest individuals and assure that able-bodied Food
Stamp recipients are encouraged to find work in the private sector, or to perform useful public
services when no private job is available.
172
Supplemental Food Programs
Agency: Department of Agriculture
[In millions of dollars]
Level
Total
1985-89
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
1,341
1,318
1,435
1,463
1,513
1,505
1,578
1,570
1,640
1,632
1,700
1,693
7,867
7,863
1,267
1,253
1,277
1,286
1,299
1,298
1,353
1,346
1,405
1,399
1,456
1,449
6,791
6,778
-74
-65
-158
-177
-214
-207
-225
-223
-235
-233
-245
-244
-1,076
-1,085
Program Description
The Special Supplemental Food Program for Women, Infants and Children (WIC) and the Commodity Supplemental Food Program (CSFP) provide nutritious foods to low-income pregnant, postpartum and breastfeeding women, infants and children who are at nutritional risk. WIC assistance
is provided mainly in the form of vouchers redeemable at grocery stores, while CSFP distributes
commodities purchased by the Department of Agriculture.
Current Status
WIC participation has grown explosively since the program's inception. Average 1984 participation
will be almost 50% higher than in 1980. One out of five babies born in 1984 will receive WIC
services. 146,000 women, infants and children will be served by CSFP this year.
Constant Dollar Trends
During 1976 constant dollar WIC outlays totalled $257 million. By 1981, constant dollar costs had
risen more than fourfold to $1.1 billion. Since 1981 the rate of real growth has slowed compared to
the start-up period, but 1984 current services outlays of $1.38 billion in constant dollars still
represent a 22% increase over the 1981 level. Under current services, constant dollar outlays will
rise slightly through 1989, while under the 1985 budget proposals they will fall slightly from 1984
levels.
Constant Dollar Trends
(1985 dollars in millions)
Year
Amount
1976
1981
1984
1989 current services
1989 budget
257
1,136
1,382
1,439
1,232
173
1985 Budget Proposals
The President's budget would fund WIC at a budget authority level of $1.25 billion in 1985, sufficient
to maintain a 2.7 million average monthly caseload.
Legislation will be introduced to reduce the WIC set-aside for State and local administration from 20
to 18% of the appropriation. States would no longer be required to spend one-sixth of their
administrative funds on nutrition education activities, although a nutrition education requirement
would be maintained.
CSFP would be funded at the current services program level except that no new funds are requested
for the elderly feeding pilot projects. Sufficient funding is expected to be available from current
appropriations to support the pilot projects in 1985.
Rationale
The proposed funding would stabilize WIC caseload growth and permit State and local administrators to concentrate on improving program management. Participation levels would remain the
highest in the program's history, prior to the infusion of one-time, emergency Jobs Bill funding.
WIC funding would support a 2.7 million monthly caseload, based on national average per person
costs. However, States could serve more recipients by taking steps to control their food costs, such as
encouraging better tailoring of packages to recipients' needs.
Lowering the set-aside for administrative expenses would create an incentive for State and local
health agencies to restrain overhead costs, currently lacking since WIC is 100% Federally-funded in
most States.
The present requirement to use one-sixth of administrative monies for nutrition education necessitates elaborate bookkeeping for States and prevents them from providing this service in the manner
they consider most appropriate. Under the proposal, specific funding earmarks would be removed to
assist States in their efforts to reduce administrative costs.
174
Other Nutrition Programs
Agency: USDA/FEMA/HHS
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
593
682
647
540
545
542
556
553
566
563
576
573
2,891
2,771
593
682
641
534
539
536
549
546
560
557
570
567
2,858
2,739
-6
-6
-6
-6
-6
-6
-7
-7
-7
-7
-32
-32
Program Description
Besides the major programs such as Food Stamps and Child Nutrition, the Federal Government
provides nutrition assistance through a variety of other mechanisms, including:
• Section 32 funds, which provide commodities to the child nutrition programs through market
purchases and surplus removal activities.
• The Special Milk program, which subsidizes milk served in schools and institutions that do not
participate in other Federal meal programs.
• The Food Donations program, which delivers commodities to Indian reservations and the Trust
Territories, as well as mostly cash assistance to elderly nutrition projects. These elderly sites
receive the vast majority of their assistance from the Department of Health and Human
Services (HHS), as described in the Older Americans Act factsheet.
• Temporary funding for emergency food distribution and shelter, administered by the Federal
Emergency Management Agency (FEMA).
• Commodity Credit Corporation food donations totalling over $1 billion for needy families,
charitable institutions and schools. Funds for this activity are included in the CCC factsheet.
Current Status
From 1980 to 1984, constant dollar budget authority for each of these nutrition programs has
increased, with the exception of Special Milk.
Savings have been achieved in the Special Milk program by eliminating wasteful duplication of
Special Milk and School Lunch benefits. In 1981, the Administration was successful in prohibiting
schools from receiving milk subsidies for the same student under both programs. The Special Milk
program continues to fund milk served in institutions that do not participate in the School Lunch
program.
1985 Budget Proposals
The President's budget would fund these programs at essentially the current services level. The
Section 32 appropriation request does not include funds for marketing agreements and orders, which
would be financed through user fees.
Since Congress designed FEMA's food and shelter program as an emergency relief measure in
response to the 1981-82 recession, it would not be extended past 1984.
175
Although continuing to fund the Elderly Feeding program at the current services level, the Administration proposes to fund this Department of Agriculture (USDA) program within HHS' Administration on Aging. Since HHS already administers the major elderly nutrition program, this proposal
would consolidate the administration of similar programs serving the same grantees.
Rationale
The Administration has requested funding for these programs at essentially the current services
level to help assure that low-income households with genuine needs continue to receive assistance.
• The budget proposes a shift of $5.9 million from Section 32 appropriated funds for marketing
orders to user fees because the Administration believes that the direct recipients of program
benefits can be readily identified and should support the program through a fee system.
• Funding USDA's Elderly Feeding program within HHS would simplify administration and free
State and local Governments from dealing with two separate Federal agencies in order to serve
meals to the elderly. USDA originally was given authority to administer the elderly program
since assistance was provided in the form of commodities. Since over 90% of assistance is now
provided as cash, there is little reason to retain the program in USDA.
176
Child Nutrition Programs
Agency: Department of Agriculture
[In millions of dollars]
1984
Level
Current Services: 1
Budget Authority
Outlays
1985 Budget Level: 1
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
3,559
3,543
3,805
3,786
4,083
4,064
4,379
4,360
4,702
4,681
5,027
5,005
21,996
21,896
3,559
3,543
3,756
3,741
3,979
3,964
4,206
4,191
4,455
4,438
4,707
4,690
21,103
21,025
-49
-46
-104
-100
-173
-169
-247
-242
-320
-314
-893
-871
1 Both current services and 1985 budget include funds for meals served at Head Start centers. The 1985 budget proposes transferring funding responsibility for
these meals to the Department of Health ana Human Services.
Program Description
The Child Nutrition programs finance school lunches and breakfasts, meals served at child care
facilities and summer feeding sites, and State administrative expenses. Meal subsidies consist of
both cash and commodity assistance.
In addition to these programs, children receive nutrition assistance through Special Milk, the
Special Supplemental Food Program for Women, Infants, and Children, the Commodity Supplemental Food Program, and Section 32 funding.
Constant Dollar Trends
Between 1962 and 1970, constant dollar outlays for Child Nutrition programs grew at a modest 4.2%
per year rate. During the next eight years, however, constant dollar costs surged to $4.46 billion by
1977—representing a 27.1% annual rate of increase. Real costs finally peaked in 1980 at $4.53
billion.
The major reforms implemented by the Reagan Administration will result in 1984 constant dollar
outlays of $3.7 billion—an 18% decline from the 1980 peak level. Under both current services and
the 1985 budget proposals, constant dollar outlays are projected to grow only modestly over the next
five years.
Constant Dollar Trends
(1985 dollars in millions)
Year
Amount
1962
1970
1977
1980
1984
1989 current services
1989 budget
564
782
4,460
4,527
3,716
4,256
3,988
177
Current Status
Child Nutrition reforms have targeted assistance to needy youngsters and reduced duplication in
subsidies. The programs will continue to subsidize meals for over 24 million children in 1984.
1985 Budget Proposals
The 1985 budget proposes to continue making the reforms necessary to focus assistance on needy
children and simplify program administration.
Minor changes would be proposed for the school feeding programs:
• Reimbursement rates for meals in all price categories would be increased by the same cost-ofliving adjustment.
• Procedures for verifying eligibility for free and reduced price meals would be strengthened.
• Federal mini-grants for developing nutrition education curricula would be discontinued.
The Child Care and Summer Feeding programs would be consolidated into a Non-School Program
Grant to States.
• The grant would be funded at the 1985 current services level for the two programs it would
replace. Meal assistance for Head Start centers, at present funded under the Child Care
Feeding program, would be available through a corresponding increase in Head Start funding.
1985 savings would be $46 million, while total 1985-89 savings would be $871 million.
Rationale
The Non-School Program Grant would permit States greater flexibility to design assistance programs for meals served to children outside a school setting. States could continue programs similar
to those the grant would replace or establish new programs more appropriate to the needs of their
population. States would no longer have to apply a complex set of reimbursement rates or comply
with cumbersome Federal regulatory requirements—75 pages of Federal regulations would be eliminated.
Through regulatory and legislative changes, procedures for schools to verify income eligibility for
free and reduced price meals would be strengthened. The new procedures would lessen the requirements placed on schools and increase cost-effectiveness. More vigorous efforts to verify eligibility
would better target meal benefits to those in need.
At present, cost-of-living adjustments to reduced-price meal reimbursements substantially overcompensate for inflation. The proposal would adjust all meal rates, including those for reduced-price
meals, by the same inflation factor.
178
Cash Assistance Programs
179
Supplemental Security Income Benefits
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
1989
Total
1985-89
10,185
10,185
9,785
9,785
46,086
46,089
9,015
9,015
10,171
10,171
9,770
9,770
46,015
46,018
-10
-10
-14
-14
-15
-15
-71
-71
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change-.
Budget Authority
Outlays
1985
1986
1987
7,459
7,607
8,426
8,428
8,665
8,665
9,025
9,025
7,459
7,591
8,410
8,412
8,649
8,649
-17
-16
-16
-16
-16
1988
Program Description
Supplemental Security Income (SSI) began in 1974 as a uniform national program to replace
previous public assistance programs for the aged, blind and disabled. SSI makes cash payments to
eligible persons, aged, blind, and disabled persons. Some states also finance supplemental payments.
The Department of Health and Human Services administers the basic Federal grant and, at State
option, the supplemental payments. Many SSI recipients also receive monthly Social Security
payments.
Constant Dollar Trend
Between 1962 and 1973, pre-SSI constant dollar outlays for public assistance to the elderly, blind
and disabled averaged a steady $4.8 billion per year. With the implemenation of SSI, however,
constant dollar costs nearly doubled to $8.3 billion by 1975 and remained at about this level through
1981. Since 1981 constant dollar costs have remained stable at the $8 billion level and are projected
to rise only slightly under current services through 1989.
Constant Dollar Trend
(1985 dollars in millions)
Year
Amount
1962-1973 average
1975
1981
1984
1989 current services
4,780
8,344
7,902
7,979
8,321
Current Status
Several SSI reforms have been enacted during the last three years. These changes were designed to
target benefits to the neediest and reduce erroneous payments. SSI benefits are fully indexed to
changes in the Consumer Price Index, and are projected to increase by 28% over the 1984-89 period.
Total SSI costs remain roughly constant, however, because future caseloads are projected to decline.
181
The major source of the caseload decline is aged persons who qualify for Social Security benefits
(which are higher than maximum SSI payment levels) and, therefore, no longer qualify for SSI.
1985 Budget Proposals
The budget includes several legislative and regulatory changes to improve program administration:
• Recovery of SSI and Social Security overpayments would be strengthened. This proposal would
permit past overpayments in one program to be recovered from current benefits payable to the
same person in the other program. (1985 savings: $11 million)
• Coordination of payments between SSI and Social Security would be improved to eliminate
duplicate and unintended windfall payments. (1985 savings: $5 million)
• Federal Fiscal Liability (FFL) payments to States would be terminated by regulation. Currently, the Federal Government assumes full liability for erroneous payments (above a 4% limit) in
SSI State supplements which HHS administers. This proposal would eliminate FFL and return
financial responsibility to the States which establish and fund these supplements. Savings
would begin in 1986.
Rationale
These proposals would improve program administration, eliminate unintended windfalls which
occur because of complicated SSI and Social Security rules, and return financial responsibility to
States. The basic SSI program would not be affected by these proposals. All needy individuals would
continue to receive the full benefits to which they are entitled.
HHS has been unable to collect more than 40% of SSI overpayments because many previously
overpaid persons are no longer receiving SSI. Half of former beneficiaries receive Social Security
payments. The 1985 budget proposal would allow SSI overpayments to be recovered from current
Social Security benefits for persons who are no longer needy.
HHS administers State supplemental payments without charge to States. The complexity of State
supplement systems, with numerous variations by living arrangement, geographic location, and
minimum payment levels, is a major cause of high error rates. The 1985 budget proposal would
return financial responsibility for excess errors in federally administered State supplements to the
States which designed these programs. States could still continue to have HHS administer their
supplements, with significant savings in State overhead costs. States could simplify their programs
to reduce errors, or they could operate the supplements themselves if they are not satisfied with the
free Federal service of administering State supplements. The President's Private Sector Survey on
Cost Control also recommends eliminating FFL payments.
Without these changes, Federal efforts to improve program administration could not succeed,
resulting in overpayments and windfall benefits to persons no longer in need, and Federal costs for
errors in SSI State supplements.
182
Aid to Families with Dependent Children
Agency: Department of Health and
Human Services
[In millions of dollars]
1984
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
6,810
6,629
6,628
6,828
6,963
6,963
7,071
7,071
7,123
7,123
7,272
7,272
35,057
35,257
6,810
6,604
5,835
6,035
5,922
5,922
6,007
6,007
6,046
6,046
6,153
6,153
29,963
30,163
-25
-793
-793
-1,041
-1,041
-1,064
-1,064
-1,077
-1,077
-1,119
-1,119
-5,094
-5,094
Program Description
Aid to Families with Dependent Children (AFDC) finances cash assistance for needy children
deprived of parental support due to death, disability, or continued absence of a parent from the
home. About half the States also cover low-income families where both parents are present in the
home, but where the principal earner is unemployed. AFDC is administered by State and local
governments in conformity with Federal guidelines. Benefits levels are determined by each State,
with the Federal Government paying 50% to 77% of benefit costs. The Federal Government also
pays 50% of State and local administrative costs, which are discussed in a separate factsheet.
Constant Dollar Trends
Between 1962 and 1967, constant dollar AFDC outlays were stable at slightly under $3 billion per
year. However, over the next five years, constant dollar costs grew dramatically, reaching $9.6
billion in 1972—a threefold increase from the 1967 level. During the remainder of the 1970,s,
constant dollar AFDC outlays remained in the $8 to 9 billion dollar range, reflecting the offsetting
pressures of moderately rising caseloads on the one hand, and failure of state-set benefit levels to
keep up with inflation, on the other.
The reforms enacted by the Reagan Administration have reduced constant dollar AFDC benefit
outlays by 21% between 1981 and 1984. Under the current services baseline, constant dollar costs
will fall to $6.2 billion by 1989—a decline of 30% from 1981 levels. If the further reforms recommended in the 1985 budget are enacted, 1989 constant dollar AFDC benefit outlays will be down
41% from 1981 levels and 46% from the 1972 peak.
Constant Dollar Trends
(1985 dollars in millions)
Year
Amount
1962
1967
1972
1981
1984
1989 current services
1989 budget..
2,533
2,975
9,615
8,820
6,953
6,184
5,232
183
Current Status
AFDC reforms have refocused the program on its original purpose—assistance to families who,
through no fault of their own, are temporarily unable to provide for themselves. These reforms,
coupled with improved economic conditions, have dramatically slowed the average annual growth in
AFDC benefit costs, from 12% annually for 1970-1981, to almost no growth for 1981-1989. During the
past two years, 37 states have increased AFDC benefit levels for eligible recipients.
1985 Budget Proposals
A variety of legislative changes to AFDC eligibility rules and benefit calculations is proposed,
building on recently enacted reforms.
The major budget proposals are as follows:
• Require all employable AFDC applicants and recipients to participate in work programs as a
condition of eligibility.—States now have the option to establish Community Work Experience
programs (CWEP) and mandatory job search requirements, but only half the States have done
so, even on a limited basis. This proposal would assure that AFDC recipients are encouraged to
find work in the private sector and perform useful public services when no private job is
available. States would also have the option to require parents of young children to participate
in work-related activities if child care is available. These requirements would be closely
coordinated with similar requirements in Food Stamps. (1985 benefit savings: $329 million.
Offsetting administrative costs of $158 million are included in another factsheet.)
• Include all parents and minor siblings living in the household as part of the AFDC assistance
unit for purposes of computing benefits.—Parents and minor children currently can be excluded
from the AFDC unit at the option of the welfare family. When some family member has
significant separate resources or income, this practice can affect the family's AFDC eligibility
or benefit level. Including all family members in the AFDC assistance unit would ensure
equitable treatment of families with similar needs. Individuals with separate SSI benefits
would continue to be excluded from the assistance unit. (1985 savings: $143 million)
• Prorate the shelter and utilities portion of the AFDC payment for AFDC families living in
extended households.—The AFDC payment includes funds for shelter and utility costs, based
on the number of persons in the AFDC family. When recipients share living expenses with
non-recipients in the same household, the AFDC benefit is not currently adjusted to reflect
reduced levels of need. By taking the economies of shared living arrangements into account,
AFDC benefits would be better targeted on those in need. This proposal would also improve
equity among families with the same circumstances. (1985 savings: $263 million)
• Provide assistance to minor mothers only if they live with their parents.—Unmarried minor
mothers can now leave home and establish a separate household in order to become eligible for
AFDC. In this situation, the parent's income is not taken into account in calculating AFDC
benefit levels. The 1985 budget proposal would eliminate this incentive for family break-up.
States could continue to pay AFDC to minor mothers in separate households where there are
exceptional circumstances. (1985 savings: $19 million)
• End the employable parent's share of AFDC benefits when the youngest child reaches age 16.—
Since the parent's presence in the home is no longer essential in these cases, employable adults
should be expected to seek private jobs rather than continuing to rely on public assistance. The
child's share of the AFDC benefit would not be affected. (1985 savings: $17 million)
184
A separate factsheet details the 1985 budget proposal to eliminate funding for the Work Incentives
(WIN) program, which now registers AFDC applicants and recipients for jobs and job training. The
mandatory work requirements outlined above make separate WIN funding unnecessary. The budget
effects of several 1985 budget proposals to improve child support enforcement are included in the
header above table. These proposals are also discussed in a separate factsheet.
Rationale
Proposed changes would:
• Strengthen AFDC employment and training by requiring all employable applicants and recipients to participate in some work-related activity as a condition of AFDC eligibility.
• Focus benefits on the needy by adjusting payments to reflect actual family circumstances and
living arrangements.
• Simplify AFDC rules to streamline administration and reduce erroneous payments.
185
Earned Income Tax Credit
Agency: Department of the Treasury
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
Tax Expenditures
1985 Budget Level:
Budget Authority
Outlays
Tax Expenditures
Change:
Budget Authority .
Outlays
Tax Expenditures
Total
1985-89
1984
1985
1986
1987
1988
1989
1,123
1,123
-330
1,044
1,044
-280
982
982
-225
923
923
-180
868
868
-145
868
868
-120
4,685
4,685
-950
1,123
1,123
-330
1,044
1,044
-280
982
982
-225
923
923
-180
868
868
-145
868
868
-120
4,685
4,685
-950
Program Description
The earned income tax credit (EITC) is a major way that income transfers are provided to lowincome wage earners with children. The EITC is 10% of earned income up to $5,000 and is phased
out in the $6,000 to $10,000 range.
Credits can be received as additions to paychecks or as a lump sum at the end of the year. When the
credit exceeds the wage earner's tax liability, a refund is made. Credits against taxes for this
purpose are tax expenditures and refund payments are outlays.
Current Status
The intent of the provision is to moderate the burden of the social security payroll tax on lowincome workers and thus to remove work disincentives for welfare families. Because the social
security payroll tax is payable on the first dollar of labor earnings, without deduction or exemptions,
it has a heavy impact on the working poor.
1985 Budget Proposal
In the 1985 budget, outlays for refunds are estimated at $1.0 billion and tax expenditures for the
credits that do not exceed tax liability are estimated at $280 million. The decline in outlays and tax
expenditures (receipts loss) in the outyears is due to a projected increase in income levels.
Rationale
The current law provisions of the EITC have been maintained during this Administration to offset
work disincentives inherent in the relationship between welfare and social insurance programs.
186
Refugee Assistance
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1989
1988
Total
1985-89
514
599
360
419
332
352
317
325
302
308
303
304
1,614
1,707
514
599
360
419
332
352
317
325
302
308
303
304
1,614
1,707
Program Description
The Federal Government finances initial welfare, health, employment and English language, education, and other services for refugees who come to the United States. Assistance is designed to
encourage refugees to become self-sufficient as soon as possible, and to relieve State and local
governments of the cost of refugee resettlement. Full reimbursement of State and local welfare costs
is available during the initial resettlement period, which varies from 18 to 36 months depending on
refugee eligibility. Private voluntary resettlement organizations arrange sponsors for individual
refugees and aid in many aspects of the resettlement process. Cuban and Haitian entrants are also
covered by these programs. Grants to voluntary agencies for initial reception and placement of
refugees are funded by the State Department and are discussed in a separate factsheet.
Constant Dollar Trends
Between 1963 and 1975 constant dollar costs for domestic refugee assistance averaged $192 million
per year with only moderate fluctuations in year-to-year outlays. However, the huge influx of
Southeast Asia refugees first in 1976 and then again in the late 1970's, and their heavy reliance on
welfare benefits, raised constant dollar costs to a peak level of $1.2 billion in 1982. The decline of
new entrant numbers to more manageable levels in recent years has permitted constant dollar
outlays to fall to $628 million in 1984. Further declines are projected under current services over the
next five years such that 1989 constant dollar outlays of $258 million would represent a 78%
reduction from the 1982 peak level.
Constant Dollar Trends
(1985 dollars in millions)
Year
Amount
1963-1975 average
1976
198 1
198 2
1984
1989 current services
1989 budget
192
620
887
1,154
628
258
258
187
Current Status
Domestic refugee costs depend substantially on the level of admissions to the United States. Arrivals
have decreased from a peak of 210,000 in 1980 to about 61,000 in 1983. This reduces the number of
refugees who receive special assistance. Continued projected reductions in future years, reflect lower
levels of refugees in overseas camps and increased resettlement efforts by other countries.
Refugee costs also depend significantly on the welfare dependency rates for recent arrivals. Over
80% of refugees who have been in the U.S. for 7 to 12 months currently receive welfare. Nearly 99%
of refugees receiving welfare payments first applied within 60 days of arriving in the United States.
1985 Budget Proposals
The budget proposes to authorize admission of 72,000 refugees to the U.S. during 1985, the same
level as 1984. The highest refugee budget priority is to reduce welfare dependency and accelerate
assimilation of new refugees into American society. To help attain this objective, voluntary resettlement agencies would become financially and legally responsible for the basic needs of refugees
during their first 90 days in the United States. Fifteen million dollars would be allocated to the
State Department to enable voluntary agencies to concentrate their efforts during the critical first
90 days.
Rationale
Successful refugee resettlement depends largely on efforts of voluntary agencies which place individual refugees in U.S. communities and find sponsors such as local church congregations and community organizations. Currently, the roles and responsibilities of the voluntary agencies, particularly in
providing employment services to encourage refugee self- sufficiency, are not well-defined. Nearly all
refugees are immediately directed to welfare offices for assistance.
The budget proposal would clarify and strengthen the voluntary agency role by making them
responsible for refugee needs during the first 90 days. This policy and the accompanying $15 million
allocation would help voluntary resettlement organizations and sponsors concentrate their efforts to
aid refugees to become self-sufficient and would deter refugees from automatically going on welfare.
188
Low Income Home Energy Assistance
Agency: Department of Health and
Human Services
[In millions of dollars]
1984
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority . . .
Outlays
1985
1986
1987
1988
1989
Total
1985-89
1,875
1,887
1,966
1,957
2,056
2,048
2,144
2,136
2,231
2,223
2,314
2,306
10,711
10,670
1,875
1,887
1,875
1,875
1,875
1,875
1,875
1,875
1,875
1,875
1,875
1,875
9,375
9,375
-91
-82
-181
-173
-269
-261
-356
-348
-439
-431
-1,336
-1,295
Program Description
The Low Income Home Energy Assistance Program (LIHEAP) helps needy families meet heating,
cooling, and other energy needs. States receive block grant payments which they use to tailor
programs to meet local needs, such as direct cash assistance, payments to fuel vendors, payments to
public housing building operators, and weatherization activities.
Current Status
Federal energy assistance has increased dramatically over the past 7 years, from $110 million in
1977 to $1.9 billion for 1984. Early programs focused on crisis assistance for households facing utility
shutoffs. Later programs distributed revenues from the windfall profits tax enacted in 1980. The
current program is primarily a subsidy of utility costs for low-income households, financed by the
American taxpayer. Attempts to reduce total budget levels by targeting funds to States which have
the most severe heating needs have not been successful, and funding has continued to grow.
Constant Dollar Trends
During the first year of funding in 1977, constant dollar outlays totalled $186 million. By 1981
constant dollar outlays reached $2.2 billion—nearly a 1,100% real increase in just four years. Since
1981 constant dollar outlays have averaged about $2 billion, and under current services are projected to remain at that level through 1989. If the funding levels proposed in the 1985 budget are
adhered to, constant dollar funding would decline to $1.6 billion by 1989—a 27% drop from the 1981
level.
Constant Dollar Trends
(1985 dollars in millions)
Year
Amount
1977
1981
1984
1989 current services
1989 budget
186
2,175
1,979
1,961
1,594
189
1985 Budget Proposals
The budget proposes to continue the current level of LIHEAP funding for 1985. A $200 million
supplemental in added 1984 funds is also requested to meet extraordinary heating needs due to very
cold winter weather this year. No changes to the State allocation formula for LIHEAP block grant
funds are proposed.
Beginning in 1985, the Administration proposes legislation to use recoveries from petroleum price
overcharges to help finance the block grant. Department of Energy (DOE) programs for low-income
home weatherization and energy conservation for schools and hospitals would also be funded
through these recoveries.
Rationale
The budget proposes a rational and orderly procedure for distributing funds collected by the
Department of Energy through settlements of petroleum price overcharges. To date, distribution
mechanisms have been chaotic and varied. Some recoveries have been disbursed by DOE through
various mechanisms such as claims funds, price rollbacks, crude oil purchases for the strategic
petroleum reserve fund, cash grants to States, and payments to the U.S. Treasury. Other recoveries
have recently been disbursed to several specific Federal programs through special Federal legislation. Still other funds are being held in escrow pending final distribution decisions. Distribution
policy for overcharge recoveries should be clearly established in law.
The budget proposes to use overcharge funds to finance LIHEAP and DOE energy conservation
efforts as the best statutory distribution mechanism. A combination of cash assistance to the poor
for high current energy costs, and weatherization programs to reduce future energy costs represents
the best use of these funds. By channeling cash assistance through the LIHEAP block grant, States
will have flexibility to design programs which best meet local needs and ensure maximum coordination with other public—and private—energy assistance programs.
Based on current State uses of LIHEAP funds, the proposed 1985 budget level of $1,875 million
would be adequate to continue current assistance levels. In 1983, 30 States transferred a total of
$117 million from LIHEAP to other block grants, and 46 States had a total of $131 million in
unobligated funds carried over into 1984. In 35 States, private energy assistance programs are in
place, through utility companies which solicit contributions from customers and stockholders, or use
other mechanisms. Federal assistance for energy costs is also available through AFDC, public
housing, and other low income programs.
Enactment of the budget proposal would focus aid on those who experience the greatest economic
burden for energy costs and would return authority, responsibility, and revenues to meet these
requirements to the States.
Failure to enact the budget proposal would continue current uncoordinated, piecemeal practices for
distributing petroleum price overcharge funds and would permit continued duplication between
these funds and LIHEAP block grant resources.
190
CHAPTER 4
Human Development and Services
191
Human Development and Services
Overview
Included in the category of human development and services programs is the entire collection of
domestic service programs which burgeoned in the 1960's and 1970's. Among these programs are
assistance for elementary and secondary education, higher education aid, employment and training
activities, social services for various population groups, health services (as opposed to financing)
programs, and many of the general service activities originated under the old Office of Economic
Opportunity. These programs grew, in constant dollars, from $5 billion in 1962 to $46 billion by their
peak year, 1979. Since then, they have been reduced to $32 billion in 1984. Outlays in the 1985
budget would be reduced by another 9%; about 40% of that reduction reflects the effect of changes
already enacted.
As indicated in the accompanying chart, "Historical Perspectives," most of the expansion in these
programs occurred in the 1960,s. From 1964 to 1967 alone the category more than tripled in real
terms. For the entire 1962-1969 period, growth averaged 24.1% per year. However, significant
increase continued in the 1970,s. From 1970 to 1974, the programs grew (in real terms) by 5.3% per
year, rising to a 9.3% annual growth from 1975 to 1979.
HUMAN DEVELOPMENT AND SERVICES:
$ BILLIONS
HISTORICAL
(CONSTANT 1985 DOLLARS)
50-
1986 EQUALS 34% REAL
REDUCTION FROM 1979
PEAK
834X REAL GROWTH FROM
1962 TO 1979 PEAK
PRE - 1981 BASELINE
80 81 82
193
83
84
85
86
The chart "Savings Achieved" shows that enactment and successful implementation of most of the
reforms proposed by the Administration in 1981 has completely reversed the trend of the 1970's. The
decline since the 1979 peak has averaged 7.2% annually through 1984. Of the total $14 billion
reduction in those years, in constant dollars, $9 billion was achieved between 1981 and 1982. Six
block grants have replaced a myriad of programs in the education, training, health, and social
services areas. Programs which were widely recognized as unproductive, such as CETA public
service jobs, have been cut out completely. Genuine needs are still being met, local service delivery
has hardly been affected, but the economies and efficiencies achieved have brought the mushrooming expansion of these programs to a halt. Even without additional restraint, the decline would
continue by about 1% per year through 1989 (primarily because declining interest rates will be
reflected in a decline in outlays for guaranteed student loans).
HUMAN DEVELOPMENT AND SERVICES:
SAVINQ? ACHIEVEP
$ BILLIONS
55
SAVINGS FROM PRE-1981 BASELINE:
1982
1983
1984
1985
AVG. ANNUAL
1986 GROWTH RATE
PRE—1981 BASELINE..
CURRENT SERVICES...
37.2 39.2 41.6 42.9 44.4
28.5 28.3 30.4 30.8 32.0
DIFFERENCE
PERCENT CHANGE...
+4.5%
+2.9%
-8.7 -10.9 -11.2 -12.1 -12.4
-23% -28% -27% -28% -28%
T"
PRE - 1981
BASELINE
The reductions from peak levels have occurred primarily in those areas where programs were
ineffective, national needs were relatively less, or the Federal responsibility was more limited
compared to that of State and local governments. The largest cuts (almost 70% below peak) have
been taken in public service employment and other Comprehensive Employment and Training Act
(CETA) programs, which spent almost $54 billion over 10 years with little to show as a result. The
Job Training Partnership Act, which has replaced those programs, will result in a joint publicprivate program of training for private sector jobs. Similarly, the Great Society community action
type programs, which created more action than community or human improvement, have been
reduced 60%, while the money and flexibility provided States in the health and social services block
194
grants will enable them to concentrate on the real needs of the people they serve. Elimination of the
now duplicative Community Services Block Grant (CSBG), the Legal Services Corporation (LSC), and
the vestigial Volunteers In Services to America (VISTA) would essentially complete the termination
of these unneeded programs.
Real reductions from peak levels (19%) have been made in Federal financing for elementary and
secondary education, reflecting the need for the function but recognizing that the primary responsibility and funding must remain at the State and local level. Since for the remainder of the 80's
States and localities are expected to be in a better fiscal situation than the Federal Government,
which must devote more resources to national needs that can be met by no one else, further modest
reductions must be made in this area. Similarly, health, mental health, and social services programs
have been cut between 20% and 40% in constant dollar terms from their peaks, in view of the
States' primary responsibility in those fields. Moreover, a large part of the money for these
programs is used to pay service providers; the State agencies which deal with them should be in a
better position to control costs.
Only higher education aid has so far resisted contraction, being only about 3% below its 1981 peak.
Change From Peak Funding: Education, Training, Health, and Social Services
(1985 constant dollar amounts in billions)
Year
Amount
Total:
1979 peak
1984 enacted
1985 proposed
1989 proposed
Public employment and job training services:
1978 peak
1984 enacted
1985 proposed
1989 proposed
Original Great Society: community action, LSC, juvenile justice, ACTION:
1973 peak
1984 enacted
1985 proposed
1989 proposed
Elementary and secondary education:
1980 peak
1984 enacted
1985 proposed
1989 proposed..
Social services block grant, foster care, head start, rehabilitation, elderly programs, and other social
services:
1979 peak
1984 enacted
1985 proposed
1989 proposed
Health and mental services*.
1976 peak
1984 enacted
1985 proposed
1989 proposed
Higher education and student aid:
1981 peak
1984 enacted
1985 proposed
1989 proposed
195
46.4
31.9
29.0
24.8
-31%
-38%
-47%
17.0
5.3
4.8
4.2
-69%
-72%
-75%
3.4
1.4
0.7
0.5
-60%
80%
86%
9.0
7.3
7.1
6.4
-19%
-21%
-29%
8.6
6.8
6.4
5.6
-20%
-25%
-35%
4.8
3.0
2.8
2.6
-37%
-41%
-47%
8.3
8.1
7.1
5.6
-3%
-14%
-33%
Thus, with the primary exception of higher education aid, only relatively small further reductions
are proposed for this category in the 1985 budget. About half of the 1985 to 1989 savings from
current services in this category results from two factors. First, nominal growth has been restrained
slightly below the current services level. Second, reductions are continuing to be made in small
programs providing Federal financing for individual projects in areas where States have primary
responsibility and are receiving substantial aid from formula and block grants (such as in programs
for disadvantaged and handicapped education, training for employment, and rehabilitation services).
This continued restraint below inflated current services estimates results in a widening gap below
the latter and an average 8% saving over the 1985 to 1989 period.
The other half of the savings for the 5-year budget period results from four program reductions.
Three involve elimination of the unneeded or duplicative CSBG, LSC, and Work Incentive Program
(WIN). The fourth is the reduction of higher education aid until it is 1/3 below its peak level by 1989
in real terms. It is difficult to justify continued liberal aid to middle-income students when the fiscal
constraints on the Federal budget are so severe.
Human Development and Services Further Savings Proposed
(Outlays in billions)
1985-89
Major program area
Current services
1985 request
savings
Total, Human Development and Services
39.4
39.1
36.8
34.0
-2.5
— 5.0
1.5
26.4
34.6
16.6
0.1
24.2
32.2
14.4
-1.5
-2.2
-2.4
3.6
3.7
0.2
2.8
-3.5
-1.0
164.9
Elementary and Secondary Education
Higher Education
Employment, Training, and PSE:
Work Incentive Program
All Other
Social Services
Health Services
Other Services:
Community Services Program and Legal Services Corporation
Allother
144.7
-20.2
-2.1
The details of the 1985 budget proposals for this category are contained in the following 38
factsheets.1 The first eight factsheets cover Federal assistance to elementary and secondary education; following are five factsheets concerning aid for higher education. The third section includes the
five papers on employment and training activities. The social services program proposals are
described in the eight factsheets of the fourth section. Then come seven factsheets on programs for
provision of health services (which do not include the medicare and medicaid programs covered in
Chapters 2 and 3, respectively). The final five factsheets cover miscellaneous service programs,
primarily ones originated by the old Office of Economic Opportunity.
1
No factsheets are included for the Youth Conservation Corps or Public Service Jobs, which were terminated in 1981, or for College Housing Loans, for which the
1985 budget includes no new loan commitments after 1983.
196
Elementary and Secondary Education
197
Compensatory Education for the Disadvantaged
Agency: Department of Education
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
3,488
3,376
3,662
3,435
3,834
3,633
4,003
3,805
4,163
3,974
4,317
4,135
19,978
18,982
3,488
3,376
3,480
3,424
3,490
3,479
3,530
3,490
3,570
3,523
3,610
3,563
17,679
17,479
-182
-12
-344
-154
-473
-315
-593
-450
-707
-572
-2,299
-1,503
Program Description
Chapter 1 of the Education Consolidation and Improvement Act (ECIA) supports a variety of
activities for disadvantaged children. Payments are made to local school districts to support compensatory education activities for educationally disadvantaged children. Chapter 1 also provides formula
grants to State educational agencies to provide compensatory education services to migrant children,
handicapped children in State operated programs, and neglected or delinquent children in State
institutions. States receive funds to pay the costs of administering the Chapter 1 programs and
discretionary grants are awarded for program evaluation.
Current Status
Since 1966, the Federal Government has provided more than $42 billion for the support of programs
to help disadvantaged children acquire basic academic skills. In 1981, Chapter 1 of ECIA amended
and replaced Title I of the Elementary and Secondary Act. While maintaining Title I's basic purpose
of serving educationally disadvantaged children through financial assistance to State and local
educational agencies and retaining the same funding formula, Chapter 1:
• simplified the administrative and program requirements of the Title I statute;
• removed unnecessary Federal supervision and control; and
• reduced burdensome paperwork requirements.
The first appropriation under Chapter 1 reached State and local educational agencies for use in the
1982-83 school year. The 1985 appropriation will be available for use in the 1985-86 school year.
1985 Budget Proposal
The 1985 request of $3.5 billion would enable the Federal Government to continue providing
substantial assistance to State and local educational agencies for compensatory educational services
to the disadvantaged. The amount of the 1985 request for Chapter 1 is the same as the 1984
appropriation. The Administration proposes to redistribute resources among Chapter 1 activities as
follows:
• provide a $31 million increase in funding for the major Chapter 1 activity, grants to local
educational agencies;
• maintain current funding levels for two State educational agency activities: grants for handicapped children in State operated programs and grants for neglected or delinquent children in
State institutions;
199
• increase funding for evaluation and studies in order to help carry out the Congressionally
mandated study of Chapter 1;
• reduce to 2 years the period for which a migrant child remains eligible for migrant education
funding after he or she no longer migrates from school district to school district;
• reduce funding for the support of State administrative activities; and
• eliminate funding for two small, excessively high cost discretionary grant programs that
support activities for older migrants.
Despite the fact that the 1985 budget provides for modest increases each year in the basic grant
program, the 1985 Budget proposal would, if adopted, result in savings of $1.5 billion in the 1985-89
period over what would be required to maintain all activities at their current program levels.
Rationale
The 1985 proposal would continue to provide grants to 14,000 school districts enabling them to
maintain services to almost 5 million educationally disadvantaged school children.
The basic grant program has been shown to focus available resources on children most in need of
services and to have modest, but consistent success in improving the basic skills of participants.
The migrant program does not target its available funds as effectively as the basic grant program.
Data have shown that over one-quarter of the children counted for allocation purposes and eligible
for services as migrants have not moved for more than 2 years.
The Chapter 1 programs for handicapped and neglected or delinquent children serve severely
educationally disadvantaged populations not served by other Federal education programs.
The discretionary migrant education programs have served only a small number of persons at
extremely high cost. Other similar Federal education programs are available to eligible migrants
and provide the same services at much lower per capita operating costs.
200
State Education Block Grant
Agency: Department of Education
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority . , ,
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
451
431
495
466
517
493
538
515
558
536
2,582
2,452
451
431
...
473
443
686
466
686
634
686
681
686
686
686
686
3,428
3,152
+213
+23
+ 191
+ 168
+ 169
+ 188
+ 148
+ 171
+ 128
+ 150
+847
+700
Program Description
The State education block grant (Chapter 2 of the Education Consolidation and Improvement Act of
1981) provides grants to States and local school districts for the improvement of elementary and
secondary education.
Current Status
The consolidation in 1981 of 29 funded categorical programs under Chapter 2 resulted, for the first
time, in provision of flexible Federal aid for educational improvement to all school districts, and also
allowed for significant budget savings over the 1982-1984 period.
Chapter 2 is being administered with minimal paperwork and few Federal restrictions on local
discretion. Resources are being used by States and localities for small-scale improvement programs
such as purchase of books and computer software and equipment, remedial and counseling programs, and staff training.
1985 Budget Proposals
For 1985 the President proposes a $235 million budget authority increase above the 1984 appropriation. The increase would support enhanced State and local educational reform initiatives, including
implementation of recommendations made by the National Commission on Excellence in Education.
Over the 1985-1989 period the budget provides a $700 million or 29% increase above current
services.
The 1985 budget would increase the average State allocation by about 50%, from $8.6 million to $13
million.
Rationale
To most effectively address local needs, educational reforms must be planned and directed at the
State and local level. Chapter 2 is the most appropriate vehicle for Federal financing of local
reforms of the general education system.
• The additional discretionary funds would enable States and local school systems to purchase or
upgrade computer software and equipment, or to experiment with or implement reforms such
as increased graduation requirements, changes in the length of the school day or year, teacher
training programs, and teacher career ladders.
201
• States and localities could also use funds to operate programs currently administered at the
Federal level for which new funding is not proposed for 1985 (e.g., Civil Rights Training,
Women's Educational Equity).
202
Small Elementary and Secondary Education
Programs
Agency: Department of Education
[In millions of dollars]
Level
Current Services:
Budget Authority . . .
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
100
144
105
112
110
107
115
110
119
115
123
120
572
564
150
150
106
140
106
114
106
107
106
106
106
106
532
573
+50
+6
+ 1
+28
-4
+7
-9
-3
-13
-9
-17
-14
-40
+ 10
Program Description
This category includes:
• Small elementary and secondary categorical programs which have not yet been consolidated
under the block grant enacted in Chapter 2 of the Education Consolidation and Improvement
Act (ECIA): Civil Rights Training, Women's Educational Equity, Follow Through, Ellender
Fellowships, and the two territorial assistance programs.
• The Secretary of Education's discretionary fund, first funded in 1982 under the authority of
Chapter 2 of the ECIA.
• Payments to special elementary and secondary institutions to support R&D and operations: the
American Printing House for the Blind (APHB), the Model Secondary School for the Deaf
(MSSD), and the Kendall Demonstration Elementary School (KDES) for the deaf.
The table above also includes funding for the President's proposed initiative to help States train
additional science and mathematics teachers.
Current Status
The shift of national priorities away from narrow-purpose education programs toward more flexible
State aid has unnecessarily left six small categorical programs, with total enacted funding in 1984 of
$48 million, outside the block grant structure.
The Secretary's discretionary funds have remained at or near $28 million since the Chapter 2
program began in 1982. About $11 million of the discretionary funds are statutorily earmarked for
arts education, alcohol and drug abuse education, and inexpensive book distribution, leaving approximately $17 million for Secretarial initiatives.
Funding for the elementary and secondary special institutions has been essentially unchanged in
nominal terms since 1981.
1985 Budget Proposals
The 1985 budget proposes a new $50 million per year block grant to States, to begin in 1984, to
provide scholarship funds for the training of new secondary school science and mathematics teachers. The remaining six small categorical programs not yet consolidated under the Chapter 2 block
grant would be eliminated. The Secretary's discretionary funds would be increased $14 million or
203
50% increase to expand initiatives aimed at improving the quality of elementary and secondary
education. For special institutions:
• The APHB appropriation would be maintained at $5 million, the level since 1982. Legislation is
proposed to terminate a century-old trust fund, now cost-ineffective, that provides $10,000
annually in interest income to APHB.
• MSSD and KDES appropriations are proposed only for R&D costs. Legislation is proposed that
would allow Gallaudet College, which operates the schools, to charge local school districts for
the direct educational expenses incurred by students from those districts attending MSSD or
KDES.
Rationale
There is a nationwide shortage of qualified science and mathematics teachers. The proposed science
and mathematics block grant is intended to address the immediate problem of teacher shortages
while stimulating further action by States, local school districts and private industry to improve the
overall quality of mathematics and science education.
Prescriptive categorical programs are less effective in addressing local educational needs than more
flexible funding mechanisms. The proposed $235 million funding increase for the Chapter 2 block
grant (see separate factsheet on State Education Block Grant) would enable States and local school
districts to operate such programs on their own if they saw the need.
Additional research and development is needed on strategies for improving educational quality. The
increased discretionary funds would enable Federal support and study of State and local experiments with educational reforms, especially those related to the recommendations of the National
Commission on Excellence in Education (for example, career ladder and merit pay systems for
teachers).
For special institutions:
• The current level is sufficient for APHB. Eliminating the obsolete trust fund would have little
impact because its $10,000 in annual interest represents less than one-tenth of 1% of the total
APHB budget from all sources.
• There is no justification for the current discrimination among local school districts with regard
to educating deaf children, a situation in which some districts escape costs because students
attend MSSD or KDES while others incur those costs. The proposed legislation would end this
inequitable treatment, resulting in all school districts paying educational expenses regardless
of where their students attend school. The Federal demonstration would continue with R&D
funding at current levels.
204
Bilingual Education
Agency: Department of Education
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
139
143
147
138
154
145
161
152
168
159
174
166
803
761
139
143
139
138
139
139
139
139
139
139
139
139
696
695
-14
-6
-21
-13
-28
-20
-35
-27
-106
-66
-7
Program Description
Bilingual education programs are intended to improve educational opportunities for individuals with
limited English proficiency by helping them to read, write, and speak English. Grantees are
required to use a students native language as well as English in their bilingual education programs.
Current Status
Federal bilingual education projects will serve about 195,000 children in 1984. Forty percent of the
school districts now participating in the program have received aid for six or more years. Outlays
for bilingual education, in constant 1985 dollars, have decreased from $211 million in 1981 to $150
million in 1984.
1985 Budget Proposals
Funding for bilingual education would be held level with the 1984 appropriation at $139 million.
Legislative changes are proposed to authorize a broader range of educational approaches, including
those that do not use a student's native language, and to end long-term aid to school districts.
Proposed legislation would also target aid on children most in need and would enhance State
responsibility for coordination and monitoring of Federally funded local projects.
Rationale
The 1985 budget request reflects modest savings while making significant improvements in program
structure and effectiveness.
• Research has been unable to show that the currently mandated teaching approach requiring
instruction in the native language is more effective than alternative approaches. Data from the
field indicate that preferred teaching techniques vary considerably across communities. Asian
and mixed populations, for example, tend to use intensive English instruction with limited or
no use of the native language. The proposed legislation would enable local school systems to
use instructional techniques that will best serve the needs of their limited English proficient
students.
• Long term support for school districts is inappropriate. Federal funds should provide the initial
catalyst for development of local programs; funds should not finance routine, on-going local
responsibilities.
205
• Children whose usual language is other than English should be given priority, freeing up
resources that currently serve children who speak English regularly and whose other education problems should be dealt with by different programs.
206
Indian Education
Agency: DOI/ED
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
327
326
346
340
368
360
390
382
413
405
435
427
1,952
1,914
327
326
344
334
363
356
379
372
395
388
414
407
1,895
1,858
- 2
-5
-4
-12
-10
-18
-16
-21
-19
-57
-56
-6
Program Description
The Department of the Interior, Bureau of Indian Affairs' (BIA's) education programs support the
direct operation of schools on Indian lands as well as tribally operated schools, and provide financial
assistance to public schools that serve Indian children from Federally recognized tribes. BIA also
assists Indian adults through financial aid to Indian postsecondary students, by support of tribally
operated postsecondary institutions, and by offering continuing education programs in many communities.
The Department of Education Indian programs provide financial assistance to public schools and
some tribally controlled schools for special services to Indian children from both Federally recognized and non-recognized tribes. The Education Department also operates small discretionary programs that support demonstration projects, teacher training, higher education fellowships, and adult
education.
Current Status
The Bureau of Indian Affairs programs have maintained a stable level of services since 1981 with
resources that have remained generally level in constant dollars. Most of the funds support a
Federally operated school system now comprised of 191 schools and 15 dormitories for Indian
students. Sixty-two of these schools are controlled and managed by Indian groups under contractual
arrangements with BIA.
BIA programs presently serve over 43,000 children enrolled in Federal and tribal schools, about
175,000 Indian children in public schools, and over 30,000 Indians in postsecondary or adult education programs.
Spending levels for Education Department programs peaked in 1980 at $125 million (in constant
1985 dollars) and have not exceeded $90 million since, decreasing in 1985 to $69 million, slightly
more than half the 1980 level. Most of these funds are distributed to public school systems and some
Indian-controlled schools that enroll more than 300,000 Indian students.
1985 Budget Proposals
The proposed budget for Indian education programs of the Bureau of Indian Affairs and the
Education Department would essentially maintain the 1984 funding level. The President has requested $273 million for BIA programs and $69 million for Education programs.
For the most part, current policy would be continued in both agencies' programs. The remaining 10
Alaska day schools operated by BIA would be transferred to the State of Alaska as part of the
207
continuing effort to establish in Alaska a single system of education consistent with the State's
constitution.
Rationale
The proposed BIA budget level would continue meeting the basic educational needs of Indian
students attending BIA and tribally operated schools.
BIA and Education Department funding for Indians enrolled in public schools would maintain
services for these Indian students at roughly current levels.
208
Impact Aid
Agency: Department of Education
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
585
513
617
642
647
654
678
670
708
699
736
727
3,386
3,392
585
613
507
572
515
543
525
526
534
532
550
546
2,631
2,719
-110
-70
-132
-112
-153
-144
-173
-167
-186
-182
-755
-673
Program Description
The Federal Government makes direct payments to school districts when enrollments and the
availability of revenues from local sources have been adversely affected by Federal activities. Most
of the direct payments are made on behalf of two kinds of federally connected children: "a" children
who live and whose parents work on Federal property; and "b" children, who either live on Federal
property or whose parents work on Federal property. There are 335,000 "a" children and more than
2 million "b" children. Under the Impact Aid program, assistance is also provided to school districts
that have suffered major disasters and for the construction of school facilities.
Current Status
Funding for Impact Aid activities peaked in 1980. Since that time, amendments to the basic Impact
Aid statutes (most contained in the Omnibus Budget Reconciliation Act of 1981) have made a
number of changes in the authorizing legislation:
• eliminated, beginning in 1985, payments on behalf of "b" children;
• established, for the first time, specific ceilings on the appropriations for the various activities;
and
• transferred funding responsibility for certain activities to the Department of Defense.
Since 1981, appropriations for "b" children have been reduced, while appropriations for "a" children
have been steadily increasing.
1985 Budget Proposal
The 1985 budget proposes to implement and extend existing policy to target Impact Aid funds.
Specifically, it would:
• Implement Congressional policy to reimburse school districts only for their "a" children. Under
the 1985 proposal, payments would be made to approximately 1,300 school districts which
educate "a" children, almost 2/3 of whom live on military installations and 1/3 live on Indian
lands.
• Make payments for all "a" children, but at a higher rate to districts in which "a" children
comprise at least 20% of the enrollment.
• Continue to make payments for disaster assistance at the current level.
• Provide no new support for school construction.
209
• Provide for modest program increases in 1986 through 1989.
Rationale
The Administration's budget proposal for 1985 continues the policy of focusing limited available
resources on the school districts that are most directly and most heavily affected by Federal
activities. The budget proposal, if adopted, would result in savings of $673 million in the 1985-89
period over what would be required to maintain all activities at their current levels.
Funding for "b" children would be eliminated in keeping with the Congressional decision to do so
and in recognition of the fact that "b" children represent little or no burden to local school districts.
School districts have in the past received most of their "b" payments on behalf of children whose
families live in the community and contribute to the support of local school systems.
The elimination of funding for school construction recognizes that $100 million has been appropriated for construction in the past two years enabling the Department of Education to meet the most
urgently needed construction requests.
Out-year increases provide some limited protection against inflation and maintain high payment
levels for "a" children.
210
Education for the Handicapped
Agency: Department of Education
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
Total
1985-89
1984
1985
1986
1987
1988
1989
1,239
1,108
1,301
1,183
1,361
1,299
1,421
1,353
1,477
1,407
1,531
1,464
7,091
6,706
1,239
1,108
1,214
1,176
1,214
1,223
1,239
1,219
1,264
1,234
1,289
1,258
6,222
6,109
-86
-7
-147
-76
-181
-134
-213
-173
-242
-206
-869
-597
Program Description
Under the Education of the Handicapped Act, formula grants help States and localities educate
handicapped children; smaller discretionary programs support demonstrations, research, and training. State grants are the major mechanism of Federal assistance, comprising more than 85% of total
outlays.
Current Status
From 1975 to 1981, outlays for education for the handicapped grew more than 4 times in real terms,
a rate of increase that was clearly unsustainable. The Reagan budget proposals to date have helped
moderate program growth, but further effort is needed to place the long-term funding pattern on an
acceptable path.
1985 Budget Proposals
The budget proposals for 1985:
• would maintain the State grant programs in 1985 at their 1984 level and include $25 million
annually in out-year growth;
• would make reductions in four of the eleven discretionary project grants, including personnel
training; and
• would continue at the 1984 level of $6 million the new program to improve secondary level
special education and the transition of handicapped youth from school to work or further
education.
The net effect is an outlay savings from current services of $597 million (9%) over 1985-1989.
Rationale
The 1985 budget would provide both substantial support for the education of handicapped children
and an outlay pattern which reflects necessary spending restraint.
• In the major State grant program which provides assistance to States and localities in educating more than four million handicapped children, the budget would maintain the 1984 average
Federal share per child at about 8% of the additional, special educational costs for a handicapped child.
211
• By trimming certain discretionary programs, the budget would provide outlays that remain
about level in constant dollars from 1984 through 1986, thereby reversing the unacceptable
runaway growth of the late 1970,s.
• Personnel training, the largest of the discretionary programs, would be reduced to place an
emphasis on the appropriate Federal role of preservice training for special education personnel
in fields with identified shortages.
212
Vocational and Adult Education
Agency: Department of Education
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
838
790
880
879
921
862
961
908
999
948
1,036
986
4,797
4,583
838
790
838
878
838
830
838
839
838
838
838
838
4,192
4,224
-42
-82
-32
-123
-69
-161
-109
-197
-148
-605
-359
- 1
Program Description
This activity provides several formula grants to States for a wide variety of vocational training and
adult basic education activities. About 2% of the funds are used for discretionary national R&D
projects in vocational education.
Current Status
In constant 1985 dollars, annual Federal spending for these activities exceeded $1 billion throughout
the 1970's, reaching $1.4 billion in 1976. Spending has been somewhat moderated at under $1 billion
since 1981 and can be stabilized at the current level without undermining program goals.
1985 Budget Proposals
The 1985 budget would continue 1984 funding levels for both vocational and adult education
programs. Legislation is proposed for each program to consolidate several small categorical grants
and reduce Federal reporting and recordkeeping requirements.
Rationale
Federal matching grants are achieving their purpose of stimulating State and local spending. The
State grant matching requirement in vocational education is 50%, yet currently States pay 90% of
every dollar. In adult education, the required match is 10%, yet States now pay about 50% of
program costs. Indeed, States and localities so substantially "over-match" Federal grants—i.e., spend
more than needed to be eligible for available Federal funds—that additional Federal funds would
have little or no "leverage" or program effect, possibly resulting only in offsetting State spending
reductions.
The current program has been widely criticized for administrative complexity and for attempting
(and failing) to achieve too many different program objectives. The Administration's proposals would
streamline the current adult education program and consolidate six current categorical vocational
education grants into a single grant with two clear purposes: economic development and improvement of vocational education programs.
The proposal includes vocational education set-asides for the handicapped and the disadvantaged,
ensuring no reduction in service to either group, while providing increased flexibility to States and
localities to design and operate programs that best meet their needs.
213
Higher Education
215
Postsecondary Student Financial Assistance
Agency: Department of Education
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
3,987
4,098
4,175
4,001
4,354
4,198
4,532
4,381
4,701
4,555
4,861
4,722
22,623
21,858
3,987
4,098
3,654
3,864
3,710
3,682
3,766
3,718
3,824
3,775
3,883
3,833
18,836
18,871
-521
-137
-645
-516
-766
-663
-877
-781
-978
-889
-3,787
-2,986
Program Description
Programs in this category provide financial aid to postsecondary students with varying degrees of
demonstrated need:
• The Pell Grant program is the largest with $2.8 billion appropriated in 1984. Funds are
provided to students based upon a uniform national need test. The maximum grant and the
expected family contribution are set annually.
• College Work Study (CWS) and Supplemental Educational Opportunity Grant (SEOG) program
funds are distributed to schools under State-based formulas and granted to students using a
variety of Federally approved need tests.
• Federal capital contributions are made through the National Direct Student Loan (NDSL)
program to institutions to help finance revolving loan funds as a source of low cost loans to
needy students. Over $5 billion is in revolving status.
• Support is provided to States through the State Student Incentive Grant (SSIG) program to
encourage them to set up additional programs of need-based grants. Currently, all States have
such a program and provide over $1 billion annually to needy students.
Current Status
The 1984 appropriation for these programs of $3.99 billion will generate for the 1984-1985 school
year over $4.6 billion in aid. This includes 2.6 million Pell grants, 655,000 SEOG grants, 870,000
work study awards, 304,000 SSIG grants and 881,000 direct loans. Many students will receive
more than one award. Significant savings were achieved in these programs in 1982 and 1983 but the
1984 appropriation reversed this trend, providing a 10% nominal increase over 1983.
1985 Budget Proposals
Pell Self-help Grants would be funded at $2.8 billion. After taking into account an increased family
contribution, the student would be required to provide $500 or 40% of educational costs, whichever
is greater, before becoming eligible for a Pell Self-help Grant. This requirement could be met by
work study awards or loans. The maximum Pell grant available to a needy student would be
increased from $1,900 in 1984 to a maximum of $3,000 in 1985. This would provide about 2.3 million
awards, eliminating grants to about 300,000 better off students.
College Work Study funding would be increased by over 50% to $850 million. This would furnish 1.2
million students with awards. To allow schools some flexibility to address the different needs of
217
their students, up to 50% of CWS funds may be awarded as grants. A cap of $4,500 would be set for
the combination of Pell and Work Study funded grants.
Over $585 million will be available on-campus for relending in the NDSL program as a result of
repayments to institutions' loan funds.
No funds are requested for new capital contributions for the National Direct Student Loan program,
Supplemental Educational Opportunity Grants or State Student Incentive Grants.
Modest growth is built into the outyears for Pell funding.
Rationale
The 1985 budget would help restore the primary role of the family and the student in meeting the
responsibility for postsecondary educational costs. The Administration also continues to support the
increased targeting of funds on students with greatest need. These policies allow movement towards
achieving Federal objectives while providing savings of $3 billion over 5 years.
• Between 1972 and 1982, Federal support for student assistance programs including the Guaranteed Student Loan program (see factsheet on Guaranteed Student Loans) increased by $5.5
billion. This expansion in funding was accompanied by a shift in the traditional responsibility
for financing college costs, from students and families to the Federal Government.
• Recent analyses indicate that as the proportion of Federal funds assisting students in meeting
educational costs has increased, parental contributions have declined—despite concurrent increases in parental disposable income. (Between 1970 and 1980, for example, average student
charges at public universities, as a percent of median family income, declined by over 2%.)
• Excessive reliance on federally supported student financial assistance abuses the spirit of
student aid as a supplement to, not a replacement for, other sources of college financing.
• The proposed restructuring of Federal student aid would allow funds to be targeted better to
students most in need of assistance within a reasonable funding level. Such students will be
able to qualify for maximum grants from all Federal programs equaling $4,500, compared to
the current combined $3,900 maximum. Pell Self-help grants will meet a larger portion of
educational costs (60 versus 50%) for needy students and be more sensitive to college costs.
• Elimination of separate funding for three programs reduces redundancy, simplifies administration and permits more consistent targeting of funds on needy students.
• Outyear growth provides a partial offset to rising costs within the limitations of overall
necessary budgetary constraints.
218
Guaranteed Student Loans
Agency: Department of Education
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change.Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
2,256
2,975
3,079
2,913
3,089
3,086
2,917
2,960
2,775
2,810
2,642
2,675
14,502
14,445
2,256
2,962
2,841
2,747
2,936
2,912
2,720
2,774
2,527
2,575
2,329
2,379
13,353
13,387
-13
-239
-166
-153
-174
-197
-186
-248
-235
-313
-297
-1,150
-1,058
Program Description
This program promotes the availability of loans from banks and other lenders to students and their
parents to help meet the costs of attending postsecondary institutions after taking into consideration
family financial resources and other student financial aid. This is accomplished through the provision of Federal insurance and reinsurance against borrower default, as well as through substantial
Federal interest subsidy payments. In general, the program is administered by State and private
nonprofit guarantee agencies which serve as intermediate loan insurers, defaulted loan collectors,
and providers of various services to lenders. Since 1982, students from families with annual incomes
over $30,000 have had to satisfy a need test to become eligible for a guaranteed loan.
Current Status
Between 1979 and 1985 the Guaranteed Student Loan program will have grown from an annual
volume of $2.9 billion to an expected volume of $7.5 billion. Latest data indicates that over 70% of
this volume is still not need tested.
During this same time period the volume of loans in default will have nearly tripled, growing from
$1 billion to $3 billion. The financial responsibility of the State and nonprofit agencies has declined
as 100% Federal reinsurance has become the rule.
The Government has continued to provide the State and nonprofit guarantee agencies advances
(interest-free loans) and administrative allowances without regard to the agencies' profitability;
some of these agencies have therefore been able to amass considerable reserves.
Continued efforts are necessary to eliminate the middle-income subsidy aspect of this program and
to help stabilize program costs.
1985 Budget Proposals
The Guaranteed Student Loan program will guarantee 3.2 million loans worth $7.5 billion in 1985.
Also $2.7 billion will be spent to pay interest subsidies, default claims and other costs. Between 1985
and 1989, the 1985 proposals will provide for outlay savings of $1.1 billion.
Proposed legislation would provide that loan applications from students at all income levels be
subject to a need analysis.
Other legislative changes would eliminate administrative cost allowances, reduce the Federal reinsurance coverage on new loans from 100 to 80%, recall advances (interest-free loans) and modify
billing procedures used by lenders to reflect actual subsidies earned.
219
Regulatory changes to be made in 1984 will also require banks, States and other guarantee agencies
to be more diligent in default prevention and collection.
Rationale
The proposed changes would improve the integrity of the program and reduce costs without reducing benefits to the needy student.
Requiring a need test for all applicants will help assure that Federal interest subsidy benefits only
go to those who need them most. The primary role of the family and the student in meeting the
responsibility of postsecondary educational costs would be reinforced by this change.
The GSL reinsurance program is now well established and financially stable. States or their
designated guarantee agencies can now readily assume more of the costs of the GSL program
without endangering their insurance and related activities. Federal advances and administrative
allowances are therefore not needed and represent unnecessary Federal costs.
Defaults are a large and growing problem. Changes in reinsurance rates and the regulatory improvements would provide greater incentives and requirements for the guarantee agencies and
lenders to act to forestall defaults and collect defaults in a more timely and equitable manner.
220
Aid to Developing Institutions
Agency: Department of Education
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority 1
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
134
182
141
132
147
139
154
146
160
153
166
159
768
729
136
182
134
129
134
137
134
136
134
135
134
134
672
671
+ 2
-7
-3
-13
-2
-19
-11
-26
-18
-31
-25
-96
-59
- 1
1 1984 budget authority increase over 1984 appropriation is the result of an estimate of the reappropriation necessary to ensure the continued availability of
funds for endowment grants.
Program Description
This program provides grants to developing institutions with limited financial resources serving
disadvantaged students—especially the 100 plus historically black colleges (HBC's) serving predominantly minority students—to improve academic quality, enhance program and financial administration, and establish or increase endowments. Grants are intended to help these schools become selfsufficient, viable institutions.
Current Status
The program has been financed at $134.4 million since 1982. In 1983 a new authority for matching
grants was enacted, as proposed by the Administration, to provide increased aid for endowments.
1985 Budget Proposal
The 1985 budget would continue the current funding level, including a set-aside of $45.7 million for
HBC's.
Legislation is proposed to consolidate two similar categorical grants and eliminate a third; improve
targeting; and simplify administrative requirements. The new program would establish annually
increasing non-Federal match requirements and limit eligibility to one multi-year grant award.
Rationale
The current level of funding has been considered adequate for several years by both the Administration and Congress to continue to help developing institutions of higher education to move toward
self-sufficiency.
The importance of HBC's in the education of minorities at the postsecondary level justifies continuation of the substantial HBC set-aside sought by the Administration last year and enacted by the
Congress.
The proposed legislation would continue the Administration's emphasis on long-term self-sufficiency
as the major objective of this program by eliminating all renewable grants and confining awards to
one multi-year grant with an annually increasing non-Federal match requirement. Institutions
would thus have to "graduate" from the program eventually. Failure to provide incentives for this
type of progress has dissipated the effect of funds in prior years.
221
The new endowment grant program, enacted last year in response to an Administration initiative,
would be continued in essentially its current form. The Administration intends to convert all Title
III grants to endowment grants over the longer term, believing that these grants represent the best
strategy for making institutions self-sufficient and, with the 50/50 match requirement, offer the best
opportunity for mobilizing private sector resources in support of developing institutions.
222
Other Higher Education Programs
Agency: Department of Education
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
274
271
276
284
292
288
303
290
314
301
324
312
1,510
1,474
274
271
118
271
122
164
122
125
121
121
121
121
604
802
-158
-13
-170
-124
-181
-165
-193
-180
-203
-191
-906
-672
Program Description
This category includes a variety of small categorical grant programs aimed at different groups,
different academic areas, different levels of postsecondary education, and different types of expenditure.
Current Status
Several of these programs provide financial assistance to students; most were started prior to the
recent substantial increases in the major student financial assistance programs. Other grants are
meant to demonstrate new educational approaches, stimulate renewed academic interest and support for high national priority areas of study, or help groups with special one-time education needs
(e.g., Vietnam war veterans). Most of these programs have accomplished their objectives or are
otherwise unnecessary. Continued funding of them at current services is, therefore, of questionable
merit.
1985 Budget Proposals
The 1985 request would fund at current levels postsecondary research (Fund for the Improvement of
Postsecondary Education (FIPSE)) and science improvement grants to predominantly minority
schools (Minority Institutions Science Improvement Program (MISIP)).
Cooperative education would be authorized as an allowable activity under college work study,
accompanied by a substantial funding increase for the work study program. (See factsheet on
Postsecondary Student Financial Assistance.)
Non-Federal matching requirements would be instituted for grants under special programs for the
disadvantaged (TRIO) and direct funding would be reduced by 50%.
The budget proposal would also eliminate grants for:
• Vietnam veterans counseling and support services;
• fellowships for graduate students in law, public service programs, and other areas;
• demonstration law school clinical experience program; and
• international education.
223
Rationale
Programs proposed for reduced or no funding have outlived their original purposes, have been
superseded by other funded activity, or are of low priority and should not use up scarce resources
needed elsewhere.
• The Law School Clinical Experience Program was started explicitly as a demonstration program to show the value of clinical experience as part of legal education and has been well
received. Thus it is time to conclude the demonstration.
• The Veterans Cost-of-Instruction Program, begun in 1972, provides funds for outreach, recruiting, counseling, and special education services for Vietnam veterans—even though the number
of these veterans has dropped by about 80% since its 1976 high and will continue to decline
steadily in the future. Normal services at postsecondary institutions are able to accommodate
these remaining veterans.
• Special graduate-level fellowships duplicate the much larger (and, often, more equitably designed) student financial aid programs.
• Most schools receiving international education funds have received such assistance for many
years; the funding has had the desired result of increasing academic activity and non-Federal
spending in this area. For example, Federal funds now account for only about 10% of support
for national resource centers—the largest of the international education programs. Reduction
of Federal support would have little significant impact on the centers. A recent Rand study
found that most participants in international education programs work in academia, the
private sector, or unrelated employment. This suggests that Federal needs for experts in these
areas are better and more efficiently met through targeted programs in affected agencies, such
as State, Defense, and USIA.
• The matching requirement that would be established in TRIO programs (Special Services,
Upward Bound) recognizes the value of the programs and the benefits accruing to the host
institution. The match allows significant Federal funding reductions without commensurate
reductions in program levels.
224
Special Postsecondary Institutions
Agency: Department of Education
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
209
227
225
228
236
237
246
246
254
254
262
262
1,224
1,226
209
227
228
231
228
229
228
229
227
227
226
226
1,139
1,142
+3
+3
-8
-8
-18
-17
-27
-27
-36
-36
-85
-85
Program Description
This category includes direct Federal assistance to three postsecondary institutions: Gallaudet
College, the National Technical Institute for the Deaf (NTID), and Howard University. The first two
are the Nation's two major colleges for deaf individuals; the latter is the Nation's largest historically
black university.
Current Status
Earlier appropriations for Gallaudet and NTID were substantially lower in constant dollars. Funding for these schools has increased steadily with increased enrollment, enhanced curriculum offerings, and, in the case of Gallaudet, ancillary research and public service activities. Their funding has
recently risen sharply as the first victims of the 1964-65 rubella (measles) epidemic have reached
college. This "rubella bulge" will cause increased enrollments, and costs, at both schools through the
late 1980's.
Howard has been consistently financed, in constant 1985 dollars, at between $150 and $175 million
since the early 1970's.
1985 Budget Proposals
Gallaudet and NTID.—The current dollar level for the basic educational program would be essentially continued at both schools. One-time construction costs would be funded at NTID for necessary
dormitory repair work. Increased funding would be provided for "rubella bulge" students. Research
and public service programs at Gallaudet not related directly to the college's postsecondary educational mission would be reduced, in part to offset the substantial increase in "rubella bulge" costs.
Howard.—Basic support would be maintained at the 1984 level, adjusted for inflation. Two initiatives
are proposed: $2 million for a 50/50 matching endowment grant and $5 million for increased
research in the sciences. Support for Howard's teaching hospital is continued at the current level.
Rationale
Each of these schools has a unique statutory relationship to the Federal Government. The 1985
budget recognizes this and, with the exception of the two Howard initiatives, would basically
continue the current level of funding with adjustments for inflation at Howard and special enrollment demands at the schools for the deaf.
225
The Howard endowment initiative is patterned on similar legislation enacted last year for the Title
III program (for which Howard is ineligible because of its direct Federal appropriation; see the
factsheet on Aid to Developing Institutions). The intent, as with Title III, is to increase institutional
self-sufficiency and reduce the need over the long-term for ongoing annual Federal appropriations.
The research initiative is intended to increase Howard's capacity in the area of scientific research
and would finance fellowships, facilities renovation, new equipment, seminars and symposia, and
research travel. The long-term goal of this seed money is to increase Howard's competitiveness with
other major universities so it may more successfully compete for available Federal research funds.
226
Employment, Training and Public Service Employment
227
Job Corps
Agency: Department of Labor
[In millions of dollars]
Level
Current Services:
Budget Authority 1
Outlays
1985 Budget Level:
Budget Authority 1
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
992
610
615
599
644
625
672
648
700
677
727
704
3,358
3,253
992
610
600
590
616
609
630
619
645
634
661
649
3,153
3,100
-14
-9
-28
-16
-42
-29
-55
-43
-66
-55
-205
-152
1 1984 includes $415 million for the 9-month period October 1, 1983, to June 30, 1984, to change to a program year financing basis; and $578 million for the
July 1, 1984, to June 30, 1985, program year.
Program Description
Job Corps is an intensive training program designed to increase the future employability of economically disadvantaged, unemployed, and out of school youth between the ages of 16 and 21. The Job
Corps program is operated through 107 residential centers located throughout the country which
can train 40,000 youth at a time. They provide a highly structured program of basic education,
vocational skills, and supportive services to about 80,000 youth a year. Intensive placement assistance is provided when youth complete their instructional program.
Current Status
Funding for the Job Corps has increased by almost $40 million since 1981, and the enrollment
capacity of the program has been maintained.
1985 Budget Proposal
The requested level of $600 million is an increase of $22.5 million over 1984. The proposal incorporates a number of cost-saving measures in order to maintain the current enrollment capacity and
keep the annual cost of a Job Corps slot below $14,500.
Rationale
Job Corps serves some of the most disadvantaged youth who lack job skills. This program will
continue to address the problem of structural unemployment among school dropouts and minority
youth.
Constraining budget growth for the Job Corps is consistent with the overall budget philosophy of
freezing* real domestic spending:
• The Job Corps is the most expensive Federal training program and one in which cost pressures
are continually building.
• This necessitates a vigilant program of cost control to assure that the public is not paying more
than necessary to support this high cost residential job training program.
229
Among the areas planned to realize cost savings sufficient to maintain current enrollment levels
are:
• more vigorous private sector bidding for Job Corps center operation contracts as well as for
other procurement activities;
• targeting capital expenditures on safety and health; and
• reassessing staff needs and other management support activities.
230
Training and Employment
[In millions of dollars]
Level
Current Services: 1
Budget Authority 2
Outlays
1985 Budget Level: 1
Budget Authority
Outlays
Change:
Budget Authority
Outlays
Agency: Department of Labor
1984
1985
1986
1987
1988
1989
Total
1985-89
5,433
2,974
3,145
3,056
3,260
3,146
3,372
3,262
3,481
3,374
3,586
3,478
16,844
16,315
5,259
2,895
2,924
2,938
2,924
2,929
2,924
2,928
2,924
2,928
2,941
2,927
14,635
14,651
-174
-78
-221
-118
-336
-216
-449
-333
-557
-446
-646
-552
-2,209
-1,665
Includes all amounts requested for the Job Training Partnership Act (JTPA) programs except the Job Corps which is discussed elsewhere.
1984 includes $2,379 million for the 9-month period October 1, 1984, to June 30, 1985, to change to the program year financing basis; and $3,028 million
for the July 1, 1984, to June 30, 1985 program year.
1
2
Program Description
The Federal Government's principal training and employment programs are authorized by the Job
Training Partnership Act (JTPA) of 1982. JTPA grants are allocated to States which then distribute
them among service delivery areas they have designated to run local programs. Grants to States are
used to provide various types of training, counseling, and other supportive services to unemployed
and economically disadvantaged persons and dislocated workers, and for subsidized work experience
for disadvantaged youth during the summer. JTPA also authorizes training assistance through
grants and nationally administered contracts for special segments of the population that have
particular disadvantages in the labor market such as Indians, migrant and seasonal farmworkers,
and veterans. Programs of technical assistance, research, and evaluation are also authorized. The
Job Corps program is discussed elsewhere.
Current Status
1984 was the first year of full implementation of the JTPA which replaced the Comprehensive
Employment and Training Act (CETA) programs. Reforms included in JTPA that assure participants will be trained for jobs include:
• Reducing the number of categorical grant programs which often lead to small inefficient
projects.
• Vesting the principal responsibility for job training programs with the States which already
have the responsibility for related programs such as vocational education and the Employment
Service.
• Assuring business has a major role in the development of job training programs through local
private industry councils which will provide policy guidance and oversee local programs.
• Requiring that 70% of resources be spent on training (only 18% of CETA grant resources were
spent on training) and limiting to 30% the amount that could be spent for administration and
support services.
The 1984 appropriation provided resources for a 9-month transition period from October 1, 1983, to
June 30, 1984, to place JTPA on a program year basis, and financing for the first program year from
July 1, 1984, to June 30, 1985. Subsequent appropriations will be for program year periods.
231
In addition to grants provided for JTPA programs assisting dislocated workers, the 1984 appropriation provided another $26 million specifically for training assistance to workers determined to have
been displaced by increased imports.
1985 Budget Proposal
The 1985 request continues all major grant programs and most nationally administered programs at
the 1984 level. Beginning with 1985, the Secretary of Labor will assure that adequate amounts are
made available within the discretionary portion of the resources available for dislocated workers for
training and relocating workers displaced by increased imports.
In order to open more jobs to unskilled youth, the Administration urges the Congress to enact
legislation to establish a differential minimum wage for youth under the age of 22 for summer jobs
held between May 1 and to September 30. This youth employment opportunity wage would be $2.50
an hour, 25% below the regular minimum wage of $3.35. Previously hired youth and workers would
be protected. Savings would be realized in the cost of the 1984 and 1985 Summer Youth Employment
Programs if this legislation were passed.
Rationale
Constraining budget growth for the training and employment programs is consistent with the
overall budget philosophy of freezing domestic spending.
Services will remain relatively constant:
• About 1.4 million disadvantaged youth, adults, and dislocated workers would be trained in 1984
and 1985.
• The Summer Youth Employment Program would be maintained at historic levels providing
about 718,000 disadvantaged youth with summer work opportunities. This service level would
be maintained if the youth opportunity wage is enacted, although the cost would be $87 million
less.
The current minimum wage keeps many youth from finding jobs:
• Many inexperienced youth do not have the skills to produce enough of value to make it
worthwhile for employers to pay them the current minimum wage. This is particularly true for
summer jobs when employers cannot expect to benefit from productivity improvement realized
in long-term jobs.
• The proposal for a summer youth employment differential would help at least 200,000 additional youth find private sector summer jobs that would give them valuable work experience and
help them subsequently find full-time jobs.
Inefficiencies and duplication of services would be eliminated by serving dislocated workers and
those displaced by increased imports under one program and through one delivery system. Amounts
already enacted for dislocated worker training in the program year ending June 30, 1985, exceed the
total available in fiscal year 1984 for both that program and the special program for those displaced
by increased imports. The higher amount is also requested for 1985.
232
Older Americans Employment
Agency: Department of Labor
[In millions of dollars]
Level
Current Services.Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
317
319
317
317
317
317
317
317
317
317
317
317
1,586
1,586
317
319
317
317
317
317
317
317
317
317
317
317
1,586
1,586
Program Description
The Community Service Employment for Older Americans program is authorized under Title V of
the Older Americans Act. This program subsidizes part-time jobs in community service activities for
unemployed low-income persons aged 55 and over through contracts with public and private nonprofit national-level organizations and grants to units of State government. Subsidized jobs, which
usually involve 20-25 hours of work a week, are provided in a wide variety of activities including
work in day care centers, schools, libraries, hospitals, senior citizens' centers, nutrition programs,
and in beautification, conservation, and restoration projects.
Current Status
Funding for this program has increased by about $40 million since 1981, adding about 8,000
subsidized jobs.
1985 Budget Proposal
The requested level of $317 million would finance 62,000 subsidized jobs in 1985, about the same as
in the previous two years. In 1985 the approximately $70 million in grants that is provided to States
would be transferred to the Department of Health and Human Services (HHS), which administers
grants for other services for Older Americans under Title III of the Act. The resources will be
allotted by HHS to the States for subsidized jobs.
Rationale
Maintaining current budget levels in this program is consistent with the overall budget philosophy
of freezing domestic spending.
Transferring the grant resources to HHS would promote efficiencies in the Title V program:
• State offices would no longer have to apply to both DOL and HHS for grant resources for the
aging;
• this would make it easier for States to plan their programs; and
• better planning could lead to the creation of more subsidized jobs serving the elderly at
locations such as nutrition sites and senior service centers.
233
Work Incentive Program
Agency: HHS/DOL
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
271
273
285
285
271
273
1986
1987
312
310
326
323
1989
57
-285
-228
299
296
1988
339
336
Total
1985-89
1,561
1,550
57
-299
-296
-312
-310
-326
-323
-339
-336
-1,561
-1,493
Program Description
The Work Incentive Program (WIN) was developed in the 1960's to implement the work test
requirement for individuals receiving Aid to Families with Dependent Children (AFDC). Applicants
for and recipients of AFDC who are able to work are required to register for job search, training,
and supportive services designed to enable them to find and accept employment leading to self
sufficiency. Job referral and training is provided under the Department of Labor; supportive services
under the Department of Health and Human Services.
Current Status
Constant dollar funding for the WIN program peaked in the mid-1970's and began a downward
decline in the late 1970's, a trend accelerated by the Reagan Administration. By 1984, constant
dollar costs of the program had been reduced by $194 million or 42% from its 1981 level.
Nevertheless, the WIN program still costs more than it saves:
• Although there are individual cases where WIN has marginally increased a welfare recipient's
income, these increases usually have not been sufficient to enable recipients to leave the
welfare rolls and become economically independent.
• A 1982 GAO survey estimated that the benefits of WIN in terms of reducing welfare grants
and other costs were much less than the costs of the program; only $91 million in savings was
attributed to WIN for 1980 yet the program spent $395 million in that year.
1985 Budget Proposal
No resources are requested for WIN in 1985. Existing programs would be phased out with unexpended carryover funds.
Rationale
This separate categorical program is no longer necessary:
• The Job Training Partnership Act (JTPA) requires equitable service to AFDC recipients
through programs better designed to provide skills needed for private sector jobs.
• Over 75% of the Service Delivery Areas under JTPA intend to make welfare recipients a
priority target group for job training services.
234
• The Omnibus Budget Reconciliation Act of 1981 reformed the AFDC program creating new
opportunities for work and work experience.
• Legislation is being proposed that would establish comprehensive programs of work-related
activity for AFDC applicants and recipients in all States; those who are eligible to work would
be required to do so as a condition of AFDC eligibility.
Financing the WIN program would continue the existing inefficiencies and duplication created when
separate Federal programs provide identical services to the same population.
235
Employment Service
Agency: Department of Labor
[In millions of dollars]
Level
1984
Current Services:
Budget Authority 1
Outlays
1985 Budget Level:
Budget Authority 1
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
1,465
902
983
956
1,030
1,002
1,075
1,048
1,119
1,093
1,162
1,136
5,369
5,235
1,465
902
938
939
960
949
982
971
1,005
994
1,028
1,016
4,914
4,869
-45
-17
-70
-53
-93
-77
-114
-99
-134
-120
-455
-366
1 1984 includes $531 million for the 9-month period October 1, 1983 to June 30, 1984, to change the basic employment service grants to a program year
financing basis; and $740 million for the July 1, 1984, to June 30, 1985, program year.
Program Description
This program of grants to States supports 100% of the operating costs of State agencies with local
offices throughout the Nation which provide job search and placement services to job seekers and
recruitment and special technical services for employers. Grants covering basic employment services
(79% of 1985 outlays) are distributed under a formula based on each State's share of the civilian
labor force and unemployed individuals. Additional grants (18% of 1985 outlays) cover costs of
special services to veterans, collection of labor statistics, and other services of national interest.
Remaining outlays (3%) finance Federal administrative costs.
Current Status
The 1982 amendments to the Wagner-Peyser Act give States considerably more latitude in how they
may use the Federal basic employment service grant to deliver employment services. Because of the
statutory formula under which the basic grant is distributed, the amount of resources each State
receives varies from year to year. By 1984, a reduction of 15% (measured in constant dollars) from
pre-1982 employment service funding levels had already been achieved.
1985 Budget Proposal
The $740 million requested for basic employment service grants in 1985 finances the 1985-86
program year (from July 1, 1985, to June 30, 1986); it is equal to the amount appropriated in 1984 to
finance the 1984-85 program year. For later years the estimates include an allowance for increased
costs sufficient to restrain growth below the current services level.
Rationale
Restraining appropriation increases below the estimates for inflation continues to be appropriate:
• It provides some cushion for cost increases while providing a powerful incentive to achieve
efficiencies and to develop more cost-effective operations.
• The rate of increases in wages, the primary cost of the Employment Service, is not uniform
among States. With a fixed formula allocation of grant monies to the States, increases for
inflation can not be allocated in proportion to the impact of inflation across States.
236
Social Services
237
Social Services Block Grant
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
1984
1985
1986
1987
1988
1989
Total
1985-89
2,675
2,772
2,700
2,757
2,700
2,702
2,700
2,700
2,700
2,700
2,700
2,700
13,500
13,558
2,675
2,772
2,700
2,796
2,700
2,703
2,700
2,700
2,700
2,700
2,700
2,700
13,500
13,599
+39
+ 1
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
+40
Program Description
The Social Services Block Grant (SSBG) gives States maximum flexibility to offer services that
reduce dependence on welfare and increase self-sufficiency, minimize the need for institutional care,
and protect persons who require placement in institutions. States determine eligibility criteria, and
the mix of services to be offered.
Current Status
The SSBG consolidated Title XX Social Services, State and Local Training, and Day Care programs.
The consolidation streamlined these programs, eliminated burdensome and unnecessary reporting
requirements, and gave States an opportunity to choose the mix of services that best meet the needs
of their unique populations.
1985 Budget Proposal
The 1985 budget request for the SSBG is at the authorization level of $2,700 million, an increase of
$25 million over 1984. No further funding is requested for the Community Services Block Grant
(CSBG), which duplicates services offered by the SSBG. States may continue to fund those community services which are most effective in meeting the needs of their residents using other funding
sources, including the SSBG.
Rationale
Consolidation and subsequent simplification of many social services programs has given the States
ample opportunity to improve the social services offered their populations. In many cases, States
have flexibility to choose for themselves the most effective programs; programs that best meet their
needs as they define them. However, one block grant, the Community Services Block Grant (CSBG),
remains unduly restrictive and duplicative. The Administration's proposal would offer States a
simple, unrestricted funding source for social services and would eliminate the duplication that
results from funding both the SSBG and the CSBG.
239
Head Start
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
Current Services.-1
Budget Authority
Outlays
1985 Budget Level: 1
Budget Authority
Outlays
Change.Budget Authority
Outlays
1
1984
1989
Total
1985-89
1985
1986
1987
1988
996
958
1,050
979
1,105
1,069
1,155
1,124
1,206
1,174
1,255
1,224
5,770
5,570
996
958
995
955
1,020
1,002
1,040
1,026
1,062
1,047
1,082
1,068
5,198
5,098
- 5 5
- 2 5
- 8 5
- 6 7
-114
- 9 7
-144
-127
-173
-156
-572
-472
Table does not include USDA funds for the Child Care feeding program ($80 million) proposed for inclusion in the Head Start appropriation beginning in 1985.
Program Description
In 1984, Head Start financed comprehensive education, health, nutrition, and social services for
430,000 low-income children and their families. At least 10% of children served were handicapped.
Grants were made directly to 1,200 grantees in 2,000 communities nationwide.
Like other child care programs, Head Start projects are eligible for reimbursement from the
Department of Agriculture's Child Care Feeding program.
Current Status
Since 1980, annual Head Start enrollment has increased 17 % (64,000 additional children). Expansion
of the Head Start program in 1984 increased enrollment in all the States, and in Indian and
Migrant Head Start programs as well. Increased enrollment has occurred because of program
management improvements and funding supplements.
1985 Budget Proposal
The 1985 budget for Head Start would maintain the current level of enrollment and direct services.
Approximately $4 million would be diverted from low priority evaluation, research, training, and
demonstration in order to support funding for direct services for low-income, and/or handicapped
children and their families.
The 1985 budget proposes that Head Start grantees receive all of their nutrition funds directly from
HHS as part of their program grant.
Rationale
The Administration's 1985 Head Start budget would maintain enrollment and services to children
while limiting program cost growth. Communities served by the Head Start program would see no
drop in resources, yet cost growth would be curtailed.
Additional savings for the Head Start program would be achieved by including nutrition funds in
Head Start program grants. Grantee administration would be simplified because each grantee would
no longer be required to monitor meals and funds for two separate agencies with different tracking
requirements.
240
Older Americans Act
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
Current Services: 1
Budget Authority
Outlays
1985 Budget Level: 1
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1
1984
1985
1986
1987
1988
1989
Total
1985-89
674
685
711
700
747
736
783
772
819
807
852
841
3,913
3,856
674
685
658
677
674
673
689
684
704
699
717
713
3,441
3,446
-54
-23
-74
-63
-94
-88
-115
-108
-135
-128
-471
-411
Table does not include USDA funds for the Elderly Feeding program ($116 million) proposed for inclusion in the AoA appropriation beginning in 1985.
Program Description
The Administration on Aging (AoA), which administers all but Title V of the Older Americans Act,
makes grants to 57 State Agencies on Aging who in turn fund 670 Area Agencies on Aging. Title III
of the Older Americans Act authorizes these agencies to either purchase or offer directly a variety
of services including congreate and home delivered meals, transportation, legal advice, homemaker/
home health services, and information. All persons over age 60, regardless of income, are eligible for
AoA meals and services.
In addition, under the Department of Agriculture's (USDA's) Elderly Feeding Program, AoA nutrition projects are entitled to reimbursement in cash or commodities for each meal they serve, subject
to an overall annual funding level.
Current Status
Since 1980, the States, through use of Administration on Aging funds, have provided supportive
services to approximately 36 million older persons, and served 800 million meals to 12 million older
persons. AoA has also funded more than 80 tribal organizations which serve approxiamtely 20,000
older Indians annually.
1985 Budget Proposal
Under the Administration's 1985 budget proposal, States would be free to allocate aging resources in
ways which maximize local benefits from the programs. The 1985 Budget would consolidate the four
separate Title III grants for services, group meals, home-delivered meals, and State administration
into one less restricted grant. The proposal would give States maximum flexibility but would not
turn the Older Americans Act programs into a block grant; States receiving AoA funds would still
be required to offer the various services described in the Older Americans Act.
The Administration also proposes that USDA's Elderly Feeding program be funded in the Department of Health and Human Services and administered by AoA as part of the consolidated Title III
grant.
Rationale
At present, each State receives its share of AoA funds based upon the size of its elderly population.
States receive a fixed percentage of each separate program's funds and must spend their share on
that specific program. As a result, States must spend their funds for home-delivered meals, services,
241
and group meals in roughly the same way—even if their elderly populations have vastly different
needs. Congress made some effort to correct this problem with the 1981 amendments to the Act in
which they allowed States to transfer up to 20% of any Title III grant to any of the other Title III
grants. In 1983 States made considerable use of this provision, transferring $38 million from the
group meals grant to the other Title III programs. States are now ready to take full responsibility
for allocating Title III funds.
Transfer of USDA's Elderly Feeding program to HHS is desirable because:
• the program began as a commodity outlet, but was redesigned in 1977 to allow the delivery of
cash in lieu of commodities;
• more than 90% of the program is on a cash basis;
• USDA has complained that it has virtually no control over the operations of the program and
that it is extremely difficult to resolve reporting discrepancies and administrative problems;
and
• transfer of the Elderly Feeding program simplifies administration of the program and frees
State and Area Agencies on Aging from dealing with two separate Federal agencies in order to
serve meals to the elderly.
242
Child Welfare Services and Training
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
181
178
178
177
187
184
196
193
204
202
215
210
980
966
181
178
169
169
173
172
176
175
180
179
183
182
881
877
-14
-13
-19
-18
-24
-23
-32
-28
-99
-89
-9
-8
Program Description
Child Welfare Services grants are made to States to help finance child protective services such as
counseling for parents, removal of children from dangerous homes, placement of children in foster
care or group homes, and training for staff.
Funds are distributed to the States by a formula based on number of children, per capita income,
and a base allocation of $70,000 per State.
Child Welfare Training grants are made to schools of social work rather than directly to the States
which employ trained child welfare workers.
Current Status
At present, Child Welfare grants are awarded from two separate categorical funds, one for services
and one for training. Training grants are made to universities and colleges rather than directly to
States and as a result are not focused on meeting State training needs. Schools of social work tend
to concentrate on training students to become social workers, but States place a higher priority on
training existing staff.
1985 Budget Proposal
The Administration's budget would combine the Child Welfare grants as one grant to States, and
would leave up to State discretion the percentage of total funds to be devoted to services and to
training.
Rationale
Carrying out child protective services is a State responsibility. The Federal role is to provide
financial assistance for services when necessary. Children, who receive protection from States, would
be better served if States could use Federal training money to improve their staffs. The 1985 budget
would give States, rather than third parties (schools of social work), control over training funds. In
this way, the Federal Government could help States improve their staffs as they see fit.
243
Foster Care and Adoption Assistance
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
Current Services:
Budget Authority
» Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority .
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
488
486
545
533
603
589
667
651
738
721
3,046
2,987
488
486
,
493
493
473
485
488
484
503
498
519
513
535
529
2,517
2,509
-20
-9
-57
-50
-100
-91
-148
-138
-203
-192
-529
-479
Program Description
The Foster Care program reimburses States for their expenditures on behalf of AFDC eligible
children placed in foster care. Reimbursements are made at the Medicaid matching rate (on
average, 54%).
The Adoption Assistance program makes payments to parents who adopt AFDC eligible children
with special needs. Special needs children are older, handicapped, members of sibling groups or
racial minorities. Adoption subsidies may be equal to foster care payments but may not exceed
them.
Both programs are open-ended entitlements.
Current Status
Recent data show that even with the foster care system reforms enacted in 1980, 45% of the
children in foster care have been there for more than two years. In several States, more than 60%
have been held in foster care for over two years. Foster care is being used as permanent placement
for many children who should either be returned to their families or placed in adoptive homes.
The adoption assistance program is projected to serve 6,000 children per month during 1984. It is
likely that these children would have remained in foster care were it not for adoption assistance.
1985 Budget Proposal
Due to a new incentive system to be proposed by the Administration for 1985, cost of the foster care
program would grow more slowly in 1985 than in previous years. The new system would discourage
lengthy and inappropriate foster care placement, and as a result, constrain program cost growth.
Rationale
The 1985 budget reflects a policy that foster care should become a short term solution to children's
problems. Existing incentives do not appear effective in encouraging States to return long duration
foster care children to their families or to place them in other permanent homes.
244
Available data indicate that too many children are spending their childhoods in foster care instead
of permanent natural, or adoptive homes. The Administration's legislative proposal would build
effective incentives for States to make more compassionate use of the program.
The 1985 budget proposes no changes to the adoption assistance program. Adoption assistance
complements Administration efforts to reduce duration of foster care by providing permanent homes
for hard to place children who cannot return to their natural parents.
245
Federal Categorical Social Services
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
196
200
216
211
225
220
235
230
244
239
253
249
1,173
1,149
196
200
178
191
183
183
188
187
193
191
197
196
939
948
-37
-20
-42
-37
-47
-43
-52
-48
-56
-53
-233
-202
Program Description
This grouping includes the Administration for Developmental Disabilities (ADD), the Administration
for Native Americans (ANA), Child Abuse and Neglect, Runaway and Homeless Youth, and related
Federal administration costs.
All of these programs serve special groups by funding grants to States, Tribal/Indian groups, public
and private shelters, and/or public and private researchers.
ADD helps States to meet the needs of their developmentally disabled populations by funding
planning councils, protection and advocacy offices, University Affiliated Facilities, and discretionary
demonstration projects.
ANA makes grants to federally and non-federally recognized tribes and Indian groups for social and
economic development.
The child abuse and neglect program helps States improve prevention and treatment of child abuse.
Grants are made by a fprmula based on the number of children under 18 in each State.
The runaway and homeless youth program makes grants to youth shelters across the country. On
average, each center receives about 25% of its total funds from the runaway and homeless youth
budget.
Federal administration supports salaries and expenses for over 1,000 Federal employees working in
the Office of Human Development Services.
Current Status
Federal categorical social services programs continue to offer economic development, planning,
protection, and shelter services to specific, vulnerable populations. Funding for these programs has
been generally level since 1980.
1985 Budget Proposal
The 1985 budget proposes that ADD receive a $2 million increase in funding over its 1984 enacted
level; child abuse and prevention funding remain level; ANA funds be trimmed by 3.4%; and that
the runaway and homeless youth program be returned to its historic funding level.
246
Rationale
Federal funding for these human development services is meant to augment State, local, and
Federal resources already devoted to the special problems experienced by the disabled, by Native
Americans, and by children. The 1985 budget would increase or maintain funding where necessary
(ADD and child abuse and neglect), make reductions where possible (ANA), and redirect programs to
a more appropriate Federal role (runaway and homeless youth).
247
Rehabilitation Services
Agency: Department of Education
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
Total
1985-89
1984
1985
1986
1987
1988
1989
1,121
1,207
1,181
1,160
1,240
1,222
1,298
1,280
1,354
1,337
1,408
1,392
6,481
6,391
1,121
1,207
1,092
1,091
1,112
1,109
1,132
1,126
1,152
1,146
1,172
1,166
5,658
5,637
-90
-69
-128
-113
-166
-155
-203
-192
-236
-226
-823
-754
Program Description
Formula grants are made to States for vocational rehabilitation (VR) services to help mentally and
physically handicapped individuals become gainfully employed. Smaller discretionary programs
support research, model programs, centers to teach severely handicapped individuals how to live
more independently, and personnel training. The VR State grant comprises about 90% of total
outlays.
Current Status
Outlays for these programs increased by more than five times in constant dollars from 1965 to 1975,
a clearly unsupportable rate of growth. Initial Administration progress in reducing constant dollar
outlays has been halted, however, by significant appropriation increases in 1983 and 1984.
1985 Budget Proposals
The 1985 request:
• would maintain in 1985 the 1984 level in the VR State grant and provide $20 million annually
in out-year growth;
• would make reductions in several of the smaller discretionary grant programs, particularly
personnel training; and
• includes a $5 million new initiative to assist selected States plan and implement supported
work programs for severely disabled individuals.
The net effect is an outlay savings from current services of $754 million (12%) over 1985-1989.
Rationale
The 1985 budget would maintain significant support of vocational rehabilitation services, while
implementing requisite budget control.
• Continuing the 1984 level in the VR State grant would provide for the rehabilitation of about
the same number of persons and serve nearly a million individuals in total.
• Cutting back some of the smaller discretionary programs would help deflate the renewed
budget pressure caused by the last two appropriation cycles.
• Training for rehabilitation personnel, in particular, would be refocused to address the appropriate Federal role of preservice training in fields of identified shortages.
248
Housing Counseling, Rehabilitation Services
Program Management, and Other Activities
Agency: HUD/ED/HHS
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority .. ..
Outlays
1985
1986
1987
1988
1989
Total
1985-89
24
30
25
27
26
27
28
27
29
29
30
30
138
141
24
30
21
26
21
24
22
22
23
23
24
24
110
119
-5
- 1
-6
-4
-6
-6
-6
-6
-6
-6
-28
-22
Program Description
This category includes several small programs in three cabinet departments: Education (ED), Health
and Human Services (HHS), and Housing and Urban Development (HUD). The largest of these
items, representing almost 90% of the 1985 budget authority requested for this category, is the
Federal administrative cost in the Education Department of managing rehabilitation services and
handicapped education grant programs. Other programs include:
• Housing counseling assistance (HUD) (grants to local social service agencies to provide default,
prepurchase, and renter counseling).
• Excess foreign currency supporting rehabilitation services research in foreign countries (ED).
• Consumer affairs office (HHS) (provides consumer education, fosters recognition of consumer
interests in Federal policies, and promotes voluntary consideration of consumer needs by
private sector organizations).
Current Status
The Federal staff activities in ED and HHS are relatively constant from year to year, the former
depending on numbers (not size) of grants, which has been steady in recent years, and the latter
representing a relatively constant ongoing level of consumer affairs activity. The housing counseling
assistance program has been continued since 1982 at a $3.5 million appropriation level. The special
foreign currency appropriation is tied to the amounts of excess foreign currencies available and
their countries of origin, where funded activity takes place; these currencies are now generally
expected to be depleted within the next few fiscal years.
1985 Budget Proposal
The Federal staff operations in ED and HHS would be continued at roughly current levels. No funds
are requested for either the housing counseling assistance program or the special foreign currency
program.
Rationale
Federal staffing proposed for ED and HHS in this category is adequate to carry out all required
tasks. Funding for the HHS consumer affairs office is necessary to provide a focal point to ensure
249
that the needs of individuals are adequately and consistently represented in Federal policies and
regulations.
The housing counseling assistance program would be zeroed out because evaluations of this program's effectiveness have produced inconclusive results and because States and localities can use
Community Development Block Grant funds to provide housing counseling services.
The special foreign currency program would be zeroed out in recognition of the imminent depletion
of excess foreign currencies. It is easier and more sensible programmatically to begin phasing out
the smaller of these accounts now so that fewer accounts will remain to be phased out when the
excess foreign funds disappear in the near future.
250
Health Services
251
Indian Health Services
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
824
839
868
866
917
917
969
968
1,021
1,021
1,075
1,074
4,850
4,845
824
839
745
808
776
800
803
813
830
833
857
859
4,011
4,113
-123
-58
-141
-116
-165
-155
-191
-187
-218
-216
-839
-732
Program Description
The Indian Health Service (IHS) provides free health care services to over 931,000 Indians and
Alaska natives. Health care is provided without charge to all Indians who request service and are
members of federally recognized tribes, regardless of ability to pay or the availability of employer or
other (workman's compensation, automobile indemnity, etc.) health insurance coverage.
Current Status
Federal funding for the IHS has exceeded $5 billion over the last decade. In addition to annual
appropriations, the IHS receives reimbursement when it provides care to an individual also eligible
for Medicare or Medicaid. The total of such reimbursements has risen steadily, from $2.1 million in
1978 to $25 million in 1983. These funds supplement annual appropriations and enable the IHS to
offer a broad array of health services.
1985 Budget Proposal
The major differences between current services and the proposed 1985 level reflect over $50 million
appropriated in 1984 for construction that is not required annually for 1985-89, as well as increased
obligations from third-party reimbursements, thus reducing the need for a major annual increase in
budget authority. The 1985 budget proposals recognize that continued automation of IHS accounting
procedures would permit increased third-party collections both in 1985 and through 1989. Medicare/
Medicaid reimbursements are expected to total $40 million in 1984 and $55.4 million in 1985. IHS
would continue its policy of billing third-party payors for services rendered to policy-holders. No
funds would be required for IHS construction, since over $120 million was appropriated in 1983-84.
Rationale
The 1985 request would enhance the resources available to maintain the traditional Federal role in
delivering health care to the Indians. In addition to the annual appropriations request, this proposal
would increase IHS flexibility to maintain existing health services levels despite the increasing costs
of medical care. It would be appropriate to use third-party coverage as an untapped source of
additional revenue to the extent that Indians have their own health insurance coverage.
253
Primary Care Block Grant
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
523
500
552
552
579
579
606
606
632
632
658
658
3,026
3,026
523
500
534
656
550
550
566
566
580
580
593
593
2,823
2,945
-18
+ 104
-28
-28
-40
-40
-52
-52
-65
-65
-203
-81
Program Description
The Omnibus Budget Reconciliation Act of 1981 authorized Primary Care Block Grants to support
community health centers (CHC's) providing health care services to medically underserved populations. States have the option of having the Federal Government administer this primary health care
program as a categorical grant.
Current Status
Because of State matching requirements and other numerous restrictions contained in the 1981
Reconciliation Act, and the de-centralized management of this and other health block grants, the
full savings and program improvements possible with creation of the Primary Care Block Grant
have not been realized. Due to these restrictions, few States have chosen to operate the old CHC
program as a block grant.
1985 Budget Proposal
The 1985 budget proposal would remove the matching requirement and other unnecessary restrictions, and would consolidate the migrant health, black lung clinics, and family planning categorical
programs into the Primary Care Block Grant. Funding of $534 million, $11 million above 1984,
would ensure a continued level-of-effort for State primary care activities. Finally, the President's
budget would consolidate block grants' management in the Office of the Assistant Secretary for
Health.
Rationale
Efforts were begun in 1982 to allow States more opportunity and flexibility in coordinating and
improving the effectiveness of primary care health services. Further program consolidation; management of the health block grants by a single Public Health Service agency (rather than three); and
relaxation of various requirements still imposed on the States would enhance these efforts. Fragmented delivery of primary health care services programs would also be reduced.
254
Alcohol, Drug Abuse, and Mental Health Block
Grant
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
462
472
489
604
512
512
536
536
560
560
582
582
2,678
2,793
462
472
473
379
487
487
501
501
514
514
525
525
2,500
2,406
-16
-225
-24
-24
-35
-35
-46
-46
-57
-57
-178
-387
Program Description
The Omnibus Budget Reconciliation Act of 1981 consolidated six narrow categorical programs
directed at alcoholism, drug abuse, and mental health into one block grant. States now have the
flexibility needed to focus mental health and substance abuse services on local priorities.
Current Status
The present level of Federal support reflects most of the savings associated with conversion of
categorical programs to a block grant. As such, the 1985 request represents basic level-of-effort
support, reflecting the fact that the reform goals proposed in 1981 have been substantially achieved.
1985 Budget Proposal
The 1985 budget proposal would consolidate management of this and other health block grants in
the Office of the Assistant Secretary for Health, and increase funding by $11 million over 1984.
Rationale
Administrative management of the block grants by a single Public Health Service agency (rather
than three) and relaxation of requirements imposed on the States would enhance efforts, begun in
1982, to allow States more opportunity and flexibility in coordinating and improving the effectiveness of alcohol, drug abuse and mental health services.
255
Preventive Health Block Grant
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
88
81
95
95
100
100
106
106
111
111
116
116
528
528
88
81
90
85
94
94
97
97
100
100
103
103
484
480
-11
-11
-13
-13
-44
-48
-5
-9
-6
-7
-9
-9
Program Description
The Omnibus Reconciliation Act of 1981 consolidated eight narrow categorical programs directed at
preventive health into one Preventive Health Block Grant. Consolidated programs included grants
for hypertension, health education, home health, health incentives, fluoridation, rodent control,
emergency medical services, and rape crisis counseling. States now have the flexibility to tailor
preventive health services to their own particular needs.
Current Status
The projected level of Federal support reflects most of the savings associated with the 1981 conversion of categorical programs to a block grant. As such, the 1985 request represents basic level-ofeffort support that insures responsiveness to State priorities without unnecessary Federal oversight.
1985 Budget Proposal
The 1985 budget proposes to consolidate management of this and other health block grants in the
Office of the Assistant Secretary for Health.
Rationale
Administrative management of the block grants by a single Public Health Service agency (rather
than three), and relaxation of requirements imposed on the States would enhance efforts, begun in
1982, to allow States more opportunity and flexibility in coordinating and improving the effectiveness of preventive health services for their citizens.
256
Maternal and Child Health Block Grant
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority .
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
400
425
422
422
442
442
463
463
483
483
503
503
2,313
2,313
400
425
408
418
420
420
432
432
443
443
453
453
2,156
2,167
-14
-4
-22
-22
-31
-31
-40
-40
-50
-50
-157
-147
Program Description
The Omnibus Budget Reconciliation Act of 1981 consolidated eight narrow categorical programs
directed at improving maternal and child health into one Maternal and Child Health (MCH) Block
Grant. Consolidated programs included MCH grants to States, MCH research and training, Special
Supplemental Income (SSI) disabled children, genetic diseases, hemophilia, sudden infant death
syndrome, lead-based paint, and adolescent health. States now have the flexibility needed to develop
MCH programs unencumbered by restrictive Federal requirements.
Current Status
The present level of Federal support reflects most of the savings associated with conversion of
categorical programs to a block grant. As such, the 1985 request maintains the MCH Block Grants
at a level of $8 million above 1984 to ensure continued support of State MCH priorities.
1985 Budget Proposal
The 1985 budget would consolidate management of this and other health block grants in the Office
of the Assistant Secretary for Health. Legislation would be proposed to remove the restrictive 15%
discretionary set-aside that diverts funds from State needs.
Rationale
Administrative management of the health block grants by a single Public Health Service agency
(rather than three), and relaxation of requirements imposed on the States would enhance efforts,
begun in 1982, to allow States more opportunity and flexibility in coordinating and improving the
effectiveness of MCH services for their citizens.
257
Federal Categorical Health Services
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
470
484
524
523
552
552
581
580
610
609
2,763
2,760
470
484
...
496
496
352
428
374
374
394
393
413
413
433
432
1,966
2,041
-145
-68
-149
-149
-158
-158
-168
-167
-177
-177
-797
-720
Program Description
In addition to the four State health block grants, the Department of Health and Human Services
administers categorical health services grants for areas such as immunizations and venereal disease
control. Other major categorical health programs remaining outside the block grants include epidemic services and infectious diseases administered by the Centers for Disease Control, health
planning and the National Health Service Corps (NHSC).
Current Status
With the continuing Federal expansion of narrow categorical health services programs throughout
the 1960's and early 1970's, constant dollar Federal outlays nearly doubled between 1962 and 1968.
This rapid growth continued into the 1970's with the creation of dozens of uncoordinated categorical
programs and reached a peak of $4.1 billion in 1976. Between 1977 and 1980, constant dollar outlays
declined to $3.3 billion, or 20% below the peak level. With the implementation of the health block
grants in 1982 and other major program improvements, categorical health services outlays dropped
dramatically and in 1985 will be down to $428 million—nearly 90% from the peak level. Implementation of the 1985 budget recommendations will reduce constant dollar outlays to $368 million in
1989.
1985 Budget Proposals
The 1985 budget would maintain current levels of activity for a variety of categorical health services
programs administered by the Centers for Disease Control (CDC), such as venereal diseases, chronic
and environmental diseases and infectious diseases. In support of childhood immunizations, the
budget would increase funding by 10% and initiate a campaign to eliminate rubella in pregnant
women, a primary cause of deafness in newborn children. The budget would also implement GAOrecommended user fees for certain CDC diagnostic laboratory services.
With regard to other categorical health services, the 1985 budget would support an increase of 600
in NHSC field staff to a total of over 3,500, while permitting a decrease of $24 million in Federal
funding through increased reliance an the private practice option (PPO). The health planning
program would not be funded in 1985. Other reductions would occur through Federal staffing
reallocations associated with 1985 priorities.
258
Rationale
By maintaining CDC categorical health services at current or increased levels, the 1985 budget
would strengthen disease prevention and health promotion activities in such areas as immunizations, laboratory investigations, and Acquired Immune Deficiency Syndrome research. Increased
funding for the State health block grants would continue to complement the more narrow focus of
the federally staffed preventive health services programs. Federal staffing reductions associated
with the remaining categorical programs reflect no funding for health planning, redirection of the
health professions programs, and further block grant consolidations.
Consistent with Administration policy to maximize management efficiencies, the 1985 budget would
consolidate administration of the block grants in the Office of the Assistant Secretary for Health
(ASH). With the reduction in Federal regulations and other requirements over the last few years,
staffing for programs now included in the four health block grants has decreased from over 1,300 to
a level of 40 which would be needed in 1985 to carry out this budget proposal. Placing all block
grants in ASH would allow greater consistency in administration and provide States with a single
focal point for quickly resolving any problems that arise in block grant management.
259
Federal Subsidy for Saint Elizabeths Hospital
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
1984
Current Services: 1
(Budget Authority)
(Outlays)
Budget Authority
Outlays
1985 Budget Level: 1
(Budget Authority)
(Outlays)
Budget Authority
Outlays
Change: 1
(Budget Authority)
(Outlays)
Budget Authority
Outlays
1
1985
1986
1987
1988
1989
Total
1985-89
(68)
(81)
68
81
(49)
(60)
54
65
(42)
(48)
54
59
(36)
(40)
55
58
(30)
(32)
56
58
(24)
(24)
57
58
(181)
(204)
275
298
(68)
(81)
68
81
(49)
(60)
50
61
(42)
(48)
52
58
(36)
(40)
53
56
(30)
(32)
54
56
(24)
(24)
55
55
(181)
(204)
265
287
(....)
(....)
(..••)
(....)
(.•••)
- 1
- 1
-2
-2
(••..)
(..-)
(..-)
(....)
-4
-3
- 1
- 1
(-.)
-2
-3
-9
-11
Numbers in parentheses reflect program costs exclusive of an imputed amount for pay costs through 1989.
Program Description
Saint Elizabeths Hospital (SEH) offers a full range of mental health services to approximately 1,400
inpatients (about 90% are District residents) and 1,800 outpatients. Programs are financed largely
by Federal appropriations and by modest reimbursements for services rendered to patient groups—
primarily residents of the District of Columbia.
Current Status
In 1983, the Government began a ten-year phasedown of the direct Federal subsidy for SEH. This
will allow the District of Columbia to assume an increasing share of the cost for SEH patients, the
majority of whom are District residents.
The District is also operating under a court order to move specified patients to less restrictive
environments. In 1984, the District will also place into the community 200 nursing home patients
and 89 drug and alcohol patients from the hospital.
1985 Budget Proposal
In 1985, the Federal subsidy to SEH would be $49 million, reflecting the third year of the planned 10
year phasedown. The budget assumes increased payments of $18 million from the District of
Columbia, although the District may have more appropriate and less expensive means of treatment
for its residents than at SEH.
In addition, the Administration has submitted legislation to transform SEH into a corporation in
1985.
Rationale
Although approximately 90% of the inpatients at SEH are District residents, contributions made by
the District amounted to only 18% of the hospital's operating costs in 1982 and 1983. Under the
260
budget request, the District payment would cover 43% of the hospital's total operating budget by
1985.
The phasedown of the direct Federal subsidy for SEH would make Federal policy with regard to the
District of Columbia consistent with the Federal relationship to other States and jurisdictions.
261
Other Services
263
Energy Conservation Grants
Agency: Department of Energy
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
280
317
293
333
307
348
321
363
333
377
346
391
1,600
1,812
280
317
251
206
253
344
253
262
254
254
254
254
1,265
1,320
-42
-126
-55
-4
-67
-101
-80
-124
-92
-137
-335
-492
Program Description
The Energy Conservation grants programs of the Department of Energy (DOE) consist of:
• The Weatherization Assistance Program which provides grants to States for energy conservation measures in the homes of low-income persons.
• The Schools and Hospitals grant program which provides funds for conservation measures at
public and nonprofit schools and hospitals.
• The State Energy Conservation Programs (SECP) which provide grants to the States for energy
conservation planning and administration.
• The Energy Extension Service (EES) which provides grants to the States for programs that
disseminate information about energy conservation measures.
Current Status
The President's 1983 and 1984 budgets proposed terminating these programs because:
• Decontrol of oil markets and growing awareness of the economic benefits of energy conservation made a continued Federal role unnecessary.
• Both public utilities and private energy companies have become more involved in educating
and assisting the public in providing conservation information, energy conservation audits, and
low-cost financing.
• Federal cash assistance for low-income families who experience high energy costs would
continue through the Low-Income Home Energy Assistance Program (LIHEAP) in the Department of Health and Human Services (HHS). Also, States may use these HHS funds for
weatherization activities.
However, in both years, Congress continued to fund the DOE programs. For 1983 and 1984, a total of
$664 million was appropriated as shown in the following table:
265
Prior Year Funding Levels for Energy Conservation Grants
(Budget authority in millions)
1983
245
98
24
7
10
8
384
Total
190
48
24
10
Weatherization
Schools & Hospitals
SECP Grants
Energy Extension Service
Program Direction
1984
280
In addition to the annual appropriations, monies have been made available for these programs from
funds collected by DOE from petroleum pricing and allocation violation settlements. An estimated
$1.2 billion of overcharge monies have been recovered through settlement agreements. Of this total,
approximately $575 million has been disbursed to the States through Court awards and DOE
settlements, and $101 million has gone to the Treasury. In 1983, an additional $200 million was
distributed to the States under the Warner Amendment (P.L. 97-377). Currently, $420 million is
being held in U.S. Treasury escrow accounts pending determination of proper distribution.
As of January 1, 1984, an estimated 1.15 million homes have been weatherized through the DOE
program, at a cost of $951 million. Approximately 175,000 additional homes will be weatherized in
1984 at an average cost of $1000 per home.
Since the inception of the Schools and Hospitals grant program, 13,576 technical assistance grants
and energy audits have been awarded, and energy conservation grants have improved 36,931
buildings at a total cost of $505 million.
1985 Budget Proposal
The total 1985 budget request of $251 million includes $238 million that is contingent upon passage
of new legislation and $13 million for program direction.
The proposed legislation would create a fund in HHS to hold monies recovered by the U.S.
Government from petroleum pricing and allocation violations under the Emergency Petroleum
Allocation Act of 1973, in instances where the overcharged customers cannot be identified and
repaid. Oil overcharge money in this fund would be used to support the HHS Low-Income Home
Energy Assistance Program as well as the DOE Weatherization Assistance Program and grants to
Schools and Hospitals.
The 1985 budget proposal would terminate the SECP and EES programs. This accounts for the
overall reduction from current services.
Rationale
Given continued congressional support of weatherization, the Administration would continue weatherization assistance to the States and grants to schools and hospitals to ease the impact of higher
energy prices on those individuals and institutions least able to absorb them. In contrast to
alternative remedies for the handling of the petroleum overcharge monies, the Administration's
proposed legislation would provide aid to those who experience the greatest economic burden from
higher energy prices. It would also return authority, responsibility and revenues to the States to
provide this aid.
266
The proposal would continue the indirect restitution approach used successfully in several earlier
consent orders and under the Warner amendment. It would also provide congressional oversight and
involvement without putting heavier burdens on the taxpayer and the Treasury.
The Administration considers the continuing transfer of Federal energy research and development
(R&D) results to consumers and the private sector a high priority. Accordingly, DOE will make
information from Federal energy R&D efforts available to States and local governments, allowing
them to fund and operate their own energy conservation and information dissemination programs.
This would eliminate the need for Federal programs such as SECP and EES.
Continued public awareness of the economic benefits of conservation measures can build upon the
solid groundwork already laid by Federal involvement in energy conservation. The States now have
the incentive and responsibility to continue these programs.
267
Community Services Program
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority . ,
Outlays
1984
1985
353
380
371
371
353
380
1986
1987
3
123
-368
-247
390
389
409
408
1988
427
426
1989
445
444
-409
-408
-427
-426
2,042
2,038
3
123
....
-390
-389
Total
1985-89
-445
-444
-2,039
-1,915
Program Description
The Community Services Block Grant (CSBG) is administered by the Office of Community Services
which replaced programs formerly administered by the Community Services Administration. The
purpose of the block grant is to give States flexibility to design programs that prevent or reduce
poverty, and encourage self-sufficiency. Since its creation, Congress has required that States "passthrough" 90% of their allocation to grantees previously funded by the Community Services Administration.
Current Status
The CSBG was enacted in the 1981 Omnibus Reconciliation Act. As enacted it is not a pure block
grant in that it requires States to spend their allotments in a manner set by Congress, rather than
by those who deliver the bulk of social services (the States), or by those who receive them.
1985 Budget Proposal
No further funding is requested for the Community Services Block Grant, which duplicates services
offered by the Social Services Block Grant (SSBG). The 1985 request for the SSBG is at the
authorization level of $2.7 billion, an increase of $25 million over 1984. States may continue to fund
those community services which are most effective in meeting the unique needs of their residents
using other funding sources, including the SSBG.
Rationale
Consolidation and subsequent simplification of many social services programs has given the States
ample opportunity to improve the social services offered their populations. In many cases, States
have flexibility to choose for themselves the most effective programs; programs that best meet their
needs as they define them. However, one block grant, the Community Services Block Grant, remains
unduly restrictive and duplicative. The Administration's proposal offers States a simple, unrestricted funding source for social services and eliminates the duplication that results from funding both
the SSBG and the CSBG.
268
Agency: ACTION
[In millions of dollars]
Level
Current Services.Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
129
130
135
133
140
139
146
144
151
150
156
155
729
721
129
130
121
124
120
121
125
124
130
129
135
134
631
632
-14
-9
-20
-17
-21
-20
-21
-21
-22
-21
-98
-89
Program Description
ACTIONS programs fall into 2 major categories: Volunteers in Service to America (VISTA) and
Older American Volunteer programs. VISTA was first authorized by the Economic Opportunity Act
in the 1960's. It pays full living costs for full time volunteers who work, usually for 1 year, with
local community groups on a great variety of projects intended to help the poor. It also provides the
volunteers with a "readjustment" allowance at the end of their tour of duty. The Older Americans
Volunteer programs consist of the Foster Grandparents Program (FGP), which pays stipends to low
income elderly people who work part time with children having special needs, either in institutional
or home settings; the Senior Companion Program (SCP), which pays stipends to low income elderly
people who work part time to help other elderly people continue to live independently; and the
Retired Senior Volunteer Program (RSVP), which reimburses elderly volunteers for their out-ofpocket expenses incurred while volunteering for a great variety of local service programs. In
addition, ACTION provides small amounts of seed money to encourage schools to use volunteerism
as an educational experience and to stimulate new volunteer activities.
Current Status
Since activities that VISTA volunteers may undertake are not specified in law, it is essentially an
authority looking for a purpose. As a result, the type of work undertaken by the volunteers, and the
priorities imposed on them, have varied from Administration to Administration and program head
to program head, from projects aimed at directly helping the poor to political activity. In the last
Administration, political activity became dominant. For example, the material ACTION submitted
to the Congress to justify its 1981 budget request blatantly stated: "VISTA can have the most impact
on the conditions of poverty by assisting poor people to come together to influence decisions that
affect their lives." In its amendments to the 1981 and 1982 budgets, this Administration proposed
phasing down VISTA. The Congress accepted that concept in the Omnibus Reconciliation Act of
1981, which reduced the minimum amount to be spent on VISTA in 1982 to $16 million, compared to
the $43 million included in the Carter budget. The Act further reduced the minimum for 1983 to $8
million, which would have been enough to complete the phase-out of the program.
Unfortunately, the intent of Reconciliation Act has been reversed by the appropriation process. The
Congress appropriated $11.8 million for VISTA in 1983 and again in 1984, enough to support 1,644
volunteer years in 1984, compared to almost 4,000 in 1980. Rather than continue the phase out, the
House has passed a new authorizing bill that would increase the minimum for VISTA to $28 million
for 1985 and the Senate a bill that authorizes $17 million.
269
This Administration has redirected the efforts of VISTA volunteers back to directly helping the
poor. Literacy, drug abuse prevention, runaways, food banks, job training, and the homeless are
emphasis areas to be included in the approximately 500 VISTA projects supported with 1984 funds.
Older American Volunteer programs have been kept close to their 1980 levels. In 1980, there were
16,900 FGP and 3,800 SCP volunteer years; the comparable numbers for 1984 are 16,400 and 3,900.
In 1980, some 269,000 people participated in RSVP; the comparable number for 1984 is 355,000.
1985 Budget Proposal
The 1985 budget proposes to complete the VISTA phaseout started by the 1981 Reconciliation Act by
requesting $5.8 million for completing the tours of the 931 volunteers expected to be on board at the
end of 1984. The Older American Volunteer programs would be kept essentially at their 1984 levels.
Rationale
This Administration is assuring that volunteers are directly helping the poor. However, as long as
the program finances a resource looking for a task to perform, the federally funded volunteers could
again be turned to political or other undesirable activities.
It costs $7,000 a year to keep a VISTA volunteer in the field, the most costly of ACTION'S programs.
As indicated in the Senate Report on the 1981 Reconciliation Act, "there are privately sponsored
and supported programs, including those administered by national volunteer systems, which have
similar activities and aims, which can take up some of the responsibility/'
270
Legal Services Corporation
Agency: Legal Services Corporation
[In millions of dollars]
Level
Current Service:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
275
284
290
290
275
284
1986
304
304
1987
318
318
1988
332
332
1989
345
345
20
-290
-270
Total
1985-89
1,589
1,589
20
-304
-304
-318
-318
-332
-332
-345
-345
-1,589
-1,569
Program Description
The Legal Services Corporation (LSC) funds local offices that give free civil legal assistance to the
poor. LSC is a private non-profit corporation acting independently of related Federal social and
community services programs. Local offices are involved both in advice and lawsuits for individual
clients and in broader "law reform" and "class action" activities.
Current Status
The Administration has consistently proposed eliminating separate Federal funding for the Legal
Services Corporation. From 1975 through 1981, LSC funding grew by 350%. The LSC authorization
expired more than three years ago, but funding has continued at a lower level while Congress
reviewed LSC operations and debated the appropriate Federal role in civil legal aid for the poor.
LSC continues to represent an unnecessary and duplicative expenditure of $275 million in 1984.
1985 Budget Proposal
The 1985 Budget proposes that LSC not be reauthorized and that no further separate Federal
funding be provided. LSC funds already appropriated by Congress would be used for completing
responsibilities in existing cases, separation costs for LSC and local grantee staff, and related
closeout functions.
Rationale
The budget proposal is based on three major considerations:
• Private attorneys represent a large and virtually untapped resource for civil legal assistance.
Private attorneys have an ethical responsibility to provide pro bono publico services to the
poor.
• Adequate authority to fund legal aid programs already exists through the $2.7 billion Social
Services Block Grant. States have flexibility to determine what legal aid is necessary and
appropriate, and how it should be structured to be responsive directly to citizen needs.
• A wide variety of inappropriate activities by local legal aid programs—class action lawsuits
unrelated to direct needs of specific clients, grassroots lobbying of Congress and State and local
legislatures, etc.—has been documented over the years. While Congress has repeatedly attempted to eliminate these problems through new Federal legislation, abuses continue. The
budget avoids further futile reform efforts.
271
The American Bar Association (ABA) Code of Professional Responsibility states:
The basic responsibility for providing legal services for those unable to pay ultimately rests
upon the individual lawyer, and personal involvement in the problems of the disadvantaged
can be one of the most rewarding experiences in the life of a lawyer. Every lawyer,
regardless of professional prominence or professional workload, should find time to participate in serving the disadvantaged.
There are currently over 600,000 attorneys nationwide, nearly double the number since LSC was
established. During the next 5 years, a further 25% increase is projected. These private bar
members can be a significant resource for civil legal assistance for the poor. Due to reductions in
LSC funding, and the Administration's call for greater involvement in pro bono activities, private
efforts have increased modestly. However, only about 8% of attorneys now take part in pro bono
activities.
Much more can and should be done: 40 hours/year per attorney in donated services would provide
more than twice as much legal aid nationwide as the entire quarter-billion Federal Legal Services
Corporation.
Other new sources of private legal aid funding are becoming available, which can take the place of
Federal LSC appropriations—at no cost to the American taxpayer. Interest on Lawyer Trust Account (IOLTA) programs have begun in several States. These programs pool small escrow accounts
which would otherwise earn no interest and place them in interest-bearing accounts. The revenues
are used to finance legal aid for the poor. Revenue from increased court filing fees is also being
earmarked for legal aid in several States. In some States, these programs could fund the full level of
services now provided by LSC.
Expanded use of law students and new law school graduates is also a promising way to meet legal
aid needs. There are 35,000 new law school graduates each year—7 times the number of LSC-funded
attorneys. Law students often receive limited exposure to "real" cases while in school, and can be
admitted to practice solely on the basis of classroom work. By contrast, medical students must
complete lengthy internships or residencies, as a standard part of their training, involving substantial direct involvement with specific patients and their problems. Broader use of law students and
new graduates would both increase the availability cf legal aid and improve the quality and
experience of graduates when they later move into private practice.
To supplement or coordinate private bar efforts, States can use Social Services Block Grant funds.
There is no restriction against using social services funds, but few States currently do so, in part
because separate Federal LSC funding has been available. The budget proposes $2.7 billion in 1985
for the Social Services Block Grant—10 times the current level for LSC. Use of social services funds
would enhance States' ability to tailor legal services to specific client needs, decrease overhead costs,
and improve coordination with other related services at the local level.
Without these changes, available private sector resources would remain underutilized and unnecessary Federal subsidies of private attorney responsibilities would continue.
272
Criminal Justice Assistance
Agency: Department of Justice
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
211
193
.
217
222
227
245
236
233
246
242
255
251
1,181
1,192
211
193
146
204
148
166
152
147
155
148
158
149
760
813
-71
-18
-79
-79
-84
-86
-91
-94
-97
-102
-421
-379
Program Description
This activity provides various forms of criminal justice assistance including Federal research and
statistical programs, a State and local grant program, correctional training, a public safety officers'
benefits program, and a juvenile justice grant program.
Current Status
The new Criminal Justice Assistance program, expected to be enacted in 1984, will provide $67
million for training and for technical and financial assistance to State and local governments in that
year.
1985 Budget Proposal
The 1985 budget continues to fund the Criminal Justice Assistance program at the 1984 level,
assisting State and local governments in implementing specific programs that offer a high probability of improving the criminal justice system. These programs target violent crime, serious repeat
offenders, victim assistance, and crime prevention.
The 1985 budget again proposes elimination of the juvenile justice program. For the last three years
the Administration has stressed that this program is no longer necessary because the major
objectives of the program have been substantially accomplished. These objectives include separating
juvenile offenders from adult offenders in correctional institutions, and the deinstitutionalization of
status offenders. (A status offense is an act which is unlawful if committed by a juvenile, but not
unlawful if committed by an adult, such as running away from home.)
Modest increases for the Federal research and statistical programs and an increase in positions for
the National Institute of Corrections are proposed. Funding for the Public Safety Officers Benefits
program would be slightly reduced, commensurate with a reduced number of casualties in recent
years.
Rationale
The proportion of juveniles who are still detained by law enforcement authorities for status offenses
has dropped to only 15% nationwide. In addition, about three-fourths of all States have either
totally removed, or have made progress in removing juvenile offenders from adult institutions.
Based on these results, the Administration believes that the Federal role of encouraging States to
adopt the deinstitutionalization and separation objectives discussed above has largely been accomplished, and that no further gains would be realized if Federal funding were continued.
273
CHAPTER 5
Agriculture and Rural Programs
275
Agriculture and Rural Programs
Overview
These programs consist of four main types designed to assist the agricultural economy and rural
communities:
• the price support and subsidy payment operations of the Commodity Credit Corporation (CCC);
• subsidized rural housing, development and farm credit programs operated by the Farmers
Home Administration (FmHA);
• subsidized credit for rural electric and telephone utilities under programs operated by the
Rural Electrification Administration (REA); and
• various agricultural sector subsidy and service programs such as soil conservation activities
and the extension service.
No progress has been made in reducing the budget cost of these programs since 1981. The Administration is therefore proposing substantial savings and reforms in the 1985 budget, and will propose
further reforms in future years.
This chapter contains eleven factsheets, arranged in five categories. The remainder of this essay
provides an overview of the chapter's programs' budget history, savings achieved to date and
proposals for further savings.
History of Dramatic Spending Growth
The "Historical Perspective" chart on the following page illustrates the extraordinary growth in
real (1985 constant dollars) direct spending for agriculture and rural programs experienced over the
last two decades. The major jump in spending occurred in 1977. Since then, spending for these
programs has continued at unprecedented high levels, with a record reached in 1983.
This part of the non-defense budget is the singular case in which a substantial increase in constant
dollar budget costs has occurred over the past 3 years. To a large degree, this outcome was driven by
the depressed state of the farm economy and the costly farm bill enacted in 1981. While CCC costs
have been historically volatile in response to cyclical swings in farm prices, production and incomes,
the table below makes clear that actual and current services constant dollar costs over 1982-86 will
exceed all 5-year periods since the early 1960's by large magnitudes. These amounts do not include
other Federal expenditures that also support agriculture, such as $1.5 billion of agricultural exports
subsidized each year by the P.L. 480 food aid program, and $1.2 billion or more a year in special tax
benefits for farmers.
277
AGRICULTURE AND RURAL PROGRAMS:
HISTORICAL, PERSPECTIVE
(CONSTANT 1985 DOLLARS)
$ BILLIONS
50
62
65
Dramatic Spending Growth Since 1962 in Agriculture and Rural Programs
(1985 on and off budget constant dollars in billions)
Average Annual Outlays
5-year period
1962-66
1967-71
1972-76
1977-81 1
1982-86
1
CCC and related
subsidies
10.6
10.7
5.2
6.1
12.3
Current services level for 1984-86.
278
FmHA subsidies
0.6
0.2
3.7
13.2
8.0
REA subsidies
0.6
0.8
1.3
4.0
4.4
All other
2.3
2.4
2.3
2.6
2.8
Total
14.1
14.1
12.5
25.9
27.5
Savings Achieved to Date
The "Savings Achieved" chart below indicates that this Administration's efforts over the last three
years have produced some reduction in costs from what the budget levels would have otherwise
been. Without recent actions to slow the growth in heavily-subsidized Government entitlement and
credit programs for farmers and rural communities, last year's budget peak for this group of
programs would have reached over $42.1 billion, rather than the $31.2 billion actually experienced.
These reductions are only a first step toward bringing the costs of these programs back to more
reasonable levels.
AGRICULTURE AND RURAL PROGRAMS:
SAVINGS ACHIEVED
$ BILUONS
55
SAVINGS FROM PRE--1981 BASELINE:
1982
50PRE—1981 BASELINE..
CURRENT SERVICES...
45-
DIFFERENCE
PERCENT CHANGE...
1983
1984
1985
1986
30.3
26.7
42.1
31.2
32.6
22.5
31.2
24.7
31.5
25.8
AVG. ANNUAL
GROWTH RATE
+1%
-1%
-3.6 -10.8 -10.0 -6.6 -5.7
-12% -26% -31% -23% -18%
PRE - 1981
BASELINE
Proposals for Further Savings
The President's 1985 budget seeks a steady unwinding of these historically high budget levels during
the remainder of the 1980's.
The following table compares the President's 5-year budget plan to the outlays that would otherwise
occur under current law.
279
Further Savings Proposed
(Outlays in billions)
1985-89
Major program area
Current services
1985 request
Proposed
savings
55.2
8.2
29.5
22.1
9.4
Total, Agriculture and Rural Programs
48.6
7.0
22.3
15.4
8.0
6.6
1.2
7.2
6.7
1.4
124.5
Price supports and conservation subsidies
Agricultural credit
Rural housing and development
Rural electric and telephone
USDA services
101.4
23.1
These savings would be produced by the implementation of the following:
• CCC Price Supports and Conservation Subsidies.—Proposed target price freeze, removal of the
mandate to support honey prices, plus other cost-saving proposals for conservation assistance
and crop insurance, partly offset by an increase in export credit assistance outlays.
• FmHA Agricultural Credit.—Proposed continuation of subsidized loans to farmers, except for
economic emergency loans.
• FmHA Rural Housing and Development.—Proposed focus on poorer households and communities.
• Rural Electric and Telephone.—Proposed reductions in loan levels and interest rate subsidies.
• Other Services.—Proposed continuation of current policy to focus resources on basic long-term
research and relying upon the private sector to finance and carry out applied research,
development and services through user fees and other means.
The proposed reforms in the 1985 budget, especially for CCC, still maintain agriculture and rural
program outlays at excessively high levels, even in constant dollars. It is, therefore, imperative that
when the current farm program expires in 1985, additional substantial retrenchment of pricesupport, target price and subsidy levels be enacted in order to bring the farm programs within
acceptable budget levels.
As noted above, the 1985 budget also proposes to steadily reduce budget costs for conservation, rural
housing and development, and Agriculture Department services relative to the peak constant dollar
costs generated during earlier years. In combination with a lower-cost, market-oriented 1985 farm
bill, these steps should make it possible to reduce total agriculture and rural program constant
dollar costs to $12 billion per year or less by the late 1980's. In real terms, this is a level consistent
with pre-1977 costs and only about half the bloated levels already experienced during 1977-1983.
280
Price Supports and Conservation Subsidies
281
Conservation of Agricultural Lands
Agency: Department of Agriculture
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
614
634
645
654
678
688
713
704
747
736
782
770
3,565
3,552
614
634
451
572
474
518
490
510
508
522
528
539
2,452
2,661
-194
-82
-204
-170
-223
-194
-239
-214
-253
-231
-1,112
-891
Program Description
These programs provide soil surveys, collect national information on soil and water related conservation problems, and provide both soil and water conservation technical assistance and financial
assistance to farmers, ranchers, and landowners to share the cost of installing soil and water
conservation measures on private lands.
Current Status
Current dollar appropriations for these conservation cost sharing and technical assistance programs
have increased by $35 million from $579 million in 1981 to $614 million in 1984. Funding for
technical assistance has grown by about $43 million, while Federal cost sharing has declined by
about $8 million during this period.
1985 Budget Proposal
The proposed budget would provide a single consolidated soil and water financial assistance program
($80 million) which combines the objectives of several different specific conservation cost sharing
programs (Agriculture Conservation Program, emergency conservation, forestry incentives, and
water bank programs). This represents a $140 million reduction from the current services level for
1985 for these programs. The change would give State and county committees greater flexibility in
directing available funds to the most critical practices. Funding for the resource conservation and
development (RC&D) program would be discontinued. The targeting of technical assistance funds to
critical problem areas would be expanded to 109 additional counties in 1985 for a total of $40.6
million in 917 counties in 49 States.
Rationale
Total funding for soil and water conservation activities in 1985 is consistent with Agriculture
Department priorities established in the Secretary's program for soil and water conservation under
the Soil and Water Resources Conservation Act of 1977 (RCA):
• Targeting increasing amounts of technical assistance to geographical areas where there is a
concentration of critical problems affecting soil productivity.
• Assigning highest priority to reducing soil erosion, upstream flooding and water conservation,
the most critical conservation problems identified in the RCA study.
283
• Placing a greater reliance on State and local governments and private landowners for solutions
to problems arising on private lands. Accordingly, substantial Federal cost sharing savings
result from this policy emphasis.
Analyses to date of the resource conservation and development program have failed to demonstrate
that this program has made any statistically significant difference in economic development between RC&D counties and non-RC&D counties. The program's conservation accomplishments can be
readily achieved under other Department of Agriculture programs. Accordingly, the RC&D program
is not funded in the 1985 budget.
The 1985 budget proposes a reformed, smaller conservation cost sharing program because:
• The Administration is seeking the most effective use of Federal funds in preserving the long
term productive capacity of privately-owned lands.
• As the affected lands are private, and the problems are usually local and occasionally regional
in nature, a larger share of costs should be borne by landowners and State and local groups.
• Set-asides of croplands have become a recurrent feature of the price support programs and
many of these highly erodible lands can be expected to be taken out of production and
protected.
284
Commodity Price Supports and Related Subsidies
Agency: Department of Agriculture
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1988
1989
Total
1985-89
9,550
10,100
9,200
9,400
8,700
8,950
46,860
49,630
8,340
8,680
8,000
8,575
8,100
8,100
7,500
7,700
40,794
43,897
-1,245
-1,770
-1,550
-1,525
-1,100
-1,300
-1,200
-1,250
-6,065
-5,733
1985
1986
1987
210
6,765
9,825
10,730
9,585
10,450
210
6,765
8,854
10,842
-970
+ 112
1984
Program Description
The Commodity Credit Corporation (CCC) finances a variety of subsidy programs to help maintain
farm income and to limit economic harm to farmers from price fluctuations. Subsidies are provided
through price support loans, purchases of surplus stocks, direct payments to farmers, and credit and
other compensation to farmers, exporters and foreign buyers.
Current Status
Since these programs react automatically to cushion the adverse effects of low prices and excess
supplies, CCC budget outlays have reached record levels these past few years, in both nominal and
constant dollars. Outlays of $18.9 billion in 1983 were far above any previous year. Much of the
increase is due to costly farm legislation enacted in 1981 which actually promotes excess supplies,
depresses farm prices and results in high Federal budget outlays.
1985 Budget Proposal
The President's 1985 budget would reduce these excessively high budget levels for the remainder of
the 1980's by $5.7 billion. Specific proposals, which require legislative action, would:
• Eliminate the automatic increase in target prices for the 1985 crops of wheat, feed grains,
cotton and rice, for a saving of $6 billion over 1985-89. Target prices guarantee a price per
bushel or per pound to farmers who participate in these programs. In recent years, legislated
target prices have been significantly higher than market prices. The Government is required to
make "deficiency" payments to farmers for the difference between the target price and the
market price for these crops.
• Eliminate the mandated honey price support program and provide honey producers income
and price security under discretionary authority, for a saving of $300 million over the 1985-89
period.
These savings are offset in part by an increase in export assistance, costing an estimated $600
million over 1985-89. Thus, net savings proposed under the 1985 budget amount to $5.7 billion.
Rationale
This proposed program should be less costly to the U.S. taxpayer and less of a restriction on farmers
than any other course available to us.
285
Target prices can be frozen at current levels and still more than cover current and projected
increases in farm production costs.
• The 1981 Farm Bill built in 22-33% cumulative increases in target prices over the 1981-85 crop
year period.
• Actual costs of production are expected to increase only a total of 13-15% over the same period.
Thus, current target prices already cover current and expected increased costs.
Eliminating the mandated honey subsidy program would help increase U.S. exports of honey.
• Current law forces domestic honey prices well above world prices, resulting in massive imports
of foreign honey, and in surplus U.S. stocks, bought by the Federal Government.
• Without any changes to current law, U.S. honey prices, which are already 1.5 times world
prices, would increase another 20% over the next 5 years. Since world prices are expected to
remain stable over the same period, the U.S. honey price would then be almost double the
world price, forcing us out of the world market.
• With elimination of these mandatory increases, honey prices would be allowed to move to
world levels. The U.S. would then become competitive in world trade, and we could then rely
more on our own industry and less on foreign imports.
Further reductions and cost efficiencies will still be necessary. The foregoing measures would reduce
annual CCC outlays to the $8 billion level, under assumed crop and price conditions, still well above
the $2-6 billion nominal dollar levels of the 60's and 70's. Therefore, when the current farm program
expires in 1985, additional program adjustments will be proposed. Such proposals would likely
include continuation of the Administration's efforts to correct supply/demand imbalances with
greater movement toward a free market orientation for the agriculture sector.
286
Federal Crop Insurance
Agency: Department of Agriculture
[In millions of dollars]
1984
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
310
635
370
329
415
370
465
415
514
460
544
487
2,308
2,061
410
635
369
328
414
369
465
415
513
459
544
486
2,304
2,058
- 1
- 1
- 1
- 1
- 1
- 1
- 1
- 1
- 1
- 1
-3
-3
+ 100
Program Description
The Federal crop insurance program makes available all risk crop insurance to farmers so that they
can minimize their losses due to natural hazards and adverse weather conditions.
Current Status
The Administration has pursued a consistent policy of expanding the crop insurance program as
rapidly as possible so as to meet the needs of farmers for minimizing weather-induced crop losses
while achieving sharp reductions in outlays under other Federal disaster assistance programs. From
1981 through 1984 there has been a seven-fold increase in program funding.
1985 Budget Proposal
The 1985 budget proposal includes an additional $100 million in funding designed to assist the
agency in making indemnity payments to producers adversely impacted by the drought of 1983 and
the citrus freeze of 1984. Additionally, the 1985 budget proposal would permit continued expansion
in the crop insurance program as measured by total insured acreage and participation by commercial insurers.
Rationale
The outlay reduction from 1984 to 1985 is solely due to an estimating assumption that the high 198384 costs of the severe drought in 1983 will not recur in 1985.
The 1985 budget proposal acknowledges the fact that Federal all-risk crop insurance is increasingly
regarded by farmers as a prudent and practical financial management tool. Specifically, the current
proposal would:
• Enable insured acreage to increase from 36,700,000 acres in 1984 to 98,700,000 acres by 1989.
• Establish crop insurance in 3,000 counties nationwide.
• Stimulate private insurers to handle approximately 55% of total premiums, 70% by 1989.
The current budget proposal promotes further progress in participation acreage and private insurer
involvement in the delivery mix to enable the agency to meet future indemnity obligations to
producers.
287
Agriculture Credit Activities
289
Agricultural Credit
Agency: Department of Agriculture
[In millions of dollars]
Level
Current Services: 1
Budget Authority
Outlays
Direct loans
Guaranteed loans
1985 Budget Level: 1
Budget Authority
Outlays
Direct loans
Guaranteed loans
Change:
Budget Authority
Outlays
Direct loans
Guaranteed loans
1984
1985
1986
1987
1988
1989
Total
1985-89
8,702
3,001
4,552
706
5,524
1,619
3,495
163
2,684
1,473
3,615
170
1,829
1,541
3,732
177
1,988
1,686
3,848
184
1,766
1,865
3,958
190
13,791
8,184
18,648
884
8,702
3,001
4,552
706
5,485
1,604
3,414
206
2,534
1,323
3,414
206
1,584
1,296
3,414
206
1,657
1,346
3,414
206
1,348
1,447
3,414
206
12,608
7,016
17,070
1,030
-40
-15
-81
+43
-150
-150
-201
+36
-245
-245
-318
+ 29
-331
-340
-434
+ 22
-418
-418
-544
+ 16
-1,183
-1,168
-1,578
+ 146
1 The budget authority and outlay data contained in this table does not accurately reflect program levels because of large revolving fund financing transactions
that mask the impact of changes in loan levels over time (i.e., borrowing requirements to retire outstanding debt to the FFB decline after 1985). The data on direct
and guaranteed loans display major program levels over the 1984-89 period.
Program Description
The USDA agricultural credit programs administered by the Farmers Home Administration consist
of direct and guaranteed loans to individuals for farm ownership, soil and water conservation, farm
operations, and emergencies. Associations are eligible for Indian land acquisition loans.
Current Status
The agricultural credit policies of the Administration have been designed to buffer the impact of the
recent decline in the agricultural economy. Additionally, the agricultural credit budget has reflected
the enhanced liquidity position of private lenders. Exclusive of disaster loans, new lending under
these programs has increased from $1.8 billion in 1981 to $2.7 billion in 1984.
Total current services estimates decline from 1984 to 1985 because of the estimated decline in
demand for disaster and emergency loans. Base lending programs current services are estimated
according to standard practice.
1985 Budget Proposal
The 1985 budget proposal reflects the Administration's concern with the economic recovery of the
agricultural sector by proposing a $650 million level for farm ownership loans and $2,070 million for
farm operating loans. Additionally, a limited portion of the farm operating and farm ownership loan
programs would be reserved to provide subsidized loans to limited-resource farmers who require
special assistance.
The 1985 budget assumes a decline in the emergency disaster loan program, ($870 million in 1985
versus $2 billion in 1984) reflecting, in part, the expansion of the crop insurance program and, in
part, an assumed nonrecurrence of widespread drought and freezes that have driven up the 1983-84
demand for emergency loans.
291
Rationale
The 1985 budget proposal:
• Recognizes that private lenders presently hold about 90% of total outstanding agricultural
credit, and encourages continued reliance on private lending to provide capital for farming
operations.
• Offers subsidized farm operating loans to those producers in temporary economic hardship who
don't have the necessary repayment ability to obtain loans from private lenders, but who can
achieve economic viability with temporary low- interest Government credit.
• Anticipates a non-recurrance of the 1984 disaster outlays generated both by the unusually
severe and widespread drought and the citrus freeze.
• Would encourage continued expansion in the Federal crop insurance program which is anticipated to insure 25% of total insurable acreage nationwide by 1985—a 7% increase over 1984—
thus reducing need for Federal disaster loans when bad growing conditions occur.
292
Rural Housing and Development
293
Rural Housing
Agency: Department of Agriculture
[In millions of dollars]
Level
Current Services: 1
Budget Authority
Outlays
Loans
Grants
1985 Budget Level: 1
Budget Authority
Outlays
Loans
Grants
Change: 1
Budget Authority
Outlays
Loans
Grants
1984
1985
1986
1987
1988
1989
Total
1985-89
8,191
4,312
3,285
134
6,362
4,209
3,450
213
4,634
4,635
3,610
226
4,845
4,836
3,765
218
4,964
5,003
3,915
215
5,003
5,019
4,066
220
25,808
23,702
18,806
1,092
8,191
4,312
3,285
134
5,923
3,874
2,320
116
3,334
3,378
2,320
116
3,335
3,147
2,320
116
3,317
3,266
2,320
116
3,131
3,041
2,320
116
19,041
16,707
11,600
580
-439
-335
-1,130
-97
-1,300
-1,257
-1,290
-110
-1,510
-1,689
-1,445
-102
-1,647
-1,737
-1,595
-99
-1,871
-1,979
-1,746
-104
-6,767
-6,995
-7,206
-512
1 The budget authority and outlay data contained in this table does not accurately reflect program levels because of large revolving fund financing transactions
that mask the impact of changes in loan levels over time (i.e., borrowing requirements to retire outstanding debt to the FFB decline after 1985). The data on loans
and grants display major program levels over the 1984-89 period.
Program Description
The rural housing programs administered by the Farmers Home Administration (FmHA) of the
Department of Agriculture are composed of loans for single family homes, rental and cooperative
housing, farm labor housing and rural housing sites. These programs are directed towards assisting
low-income individuals and families without other alternatives to find safe and adequate housing.
Current Status
The Administration has pursued a consistent policy of improved targeting of rural housing resources
toward low-income households. Specifically, the 1981 budget contained $802 million for housing
loans to middle- and upper-middle-income households compared to $230 million in 1984.
While "needs" targeting was enhanced, the historical mix between rental and single family housing
has been retained.
1985 Budget Proposal
Total rural housing lending is budgeted at $2.3 billion for 1985 compared to $4.0 billion in 1981. This
is the only remaining Federal program which provides deeply subsidized homeownership loans
(one% interest rate to the borrower).
The 1985 budget would fund the low-income single family homeownership loan program at $1.6
billion. The moderate-income homeownership component would be eliminated; $116 million is budgeted to renew expiring contracts for rental assistance payments.
The small housing grant programs are proposed for termination with reliance placed instead upon
low-interest loans and rental assistance grants to assist the primary target group.
295
Rationale
The Administration's objective is to focus Federal resources on assistance to low-income families
living in substandard housing while reducing the amount of commercial type lending by the Federal
Government.
FHA mortgage insurance will be offered through Farmers Home Administration offices to encourage private lenders to meet the needs of moderate-income home buyers.
The reduction in market interest rates achieved over the past 3 years will make mortgages much
more affordable.
Since the inception of the FmHA housing program, substandard rural housing has been reduced
from 61% to 6% of all rural housing, making it now appropriate to concentrate Federal resources on
assisting the very needy rather than on a general program to upgrade the quality of the Nation's
stock of rural housing.
296
Rural Development
[In millions of dollars]
Level
Current Services:1
Budget Authority
Outlays
Loans 2
Grants
1985 Budget Level: 1
Budget Authority
Outlays
Loans 3
Grants
Change: 1
Budget Authority
Outlays
Loans
Grants
Agency: Department of Agriculture
Total
1985-89
1984
1985
1986
1987
1988
1989
2,198
1,455
400
93
1,727
1,325
420
99
978
1,090
440
105
927
1,002
460
110
1,241
1,262
480
116
1,181
1,161
500
121
6,053
5,839
2,300
551
2,198
1,455
400
93
1,777
1,383
350
90
949
1,069
350
90
864
949
350
90
1,143
1,174
350
90
1,046
1,036
350
90
5,778
5,610
1,750
450
+ 50
+ 58
-70
-9
-29
-21
-90
-15
-63
-53
-110
-20
-99
-88
-130
-26
-135
-125
-150
-31
-275
-229
-550
-101
^ h e budget authority and outlay data contained in this table does not accurately reflect program levels because of large revolving fund financing transactions
that mask the impact of changes in loan levels over time (i.e., borrowing requirements to retire portions of outstanding debt to the FFB decline after 1985). The data
on loans and grants display major program levels over the 1984—89 period.
2 Excludes $300 million annual funding level for business and industry (B&l) guaranteed loan program.
3 1985 budget provides no funding for business and industry (B&l) guaranteed loan program
Program Description
The Department of Agriculture rural development programs administered by the Farmers Home
Administration are composed of direct loans and grants for water and waste disposal facilities, and
direct loans for community facilities.
Current Status
The Administration has pursued a consistent policy of limiting the Government's intrusion into
capital markets while insuring that available rural development assistance is directed to those
communities most in need. In 1981, rural development lending was $1.7 billion. The 1983 Jobs Bill
added $600 million in nonrecurring loan and grant funds that spend out over a several year period.
The 1984 budget provides $700 million in total rural development lending (including $300 million in
guaranteed business and industry loans).
1985 Budget Proposal
The 1985 budget proposal would fund the water and waste loan program at $250 million ($20 million
below the 1984 enacted level). The community facility loan program is proposed to be funded at $100
million ($30 million below the 1984 enacted level), while the funding level for the water and waste
grant program continues at the 1984 enacted level of $90 million.
The 1985 budget proposes no loan guarantees for non-farm rural business and industry.
Rationale
The 1985 budget proposals for rural development are consistent with the Administration's dual
objective of improving the targeting of resources towards low-income rural communities, and fostering private sector investment initiatives in lieu of direct Federal lending.
297
The water and waste grant program, proposed at the 1984 enacted level, continues the commitment
to help communities most in need and without access to private capital.
The Administration considers existing tax and market incentives for private sector investment in
rural areas plus the reduction in inflation and in market interest rates achieved over the last 3
years sufficient to stimulate development of rural business and industry. Thus the need for Government guarantees for loans to viable rural businesses is sharply reduced.
298
Rural Electric and Telephone Subsidies
299
Rural Electric and Telephone
Agency: Department of Agriculture
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
4,317
4,122
4,307
4,104
5,511
5,298
4,720
4,497
4,405
4,172
4,287
4,044
23,230
22,116
4,317
4,122
3,999
3,796
4,631
4,418
3,292
3,070
2,526
2,293
2,084
1,842
16,533
15,419
-308
-308
-880
-880
-1,427
-1,427
-1,879
-1,879
-2,203
-2,203
-6,697
-6,697
Program Description
The Rural Electrification Administration (REA) provides subsidized loans to electric and telephone
utilities for maintenance and expansion of operations and construction of new electric generation
facilities. Loans are usually provided directly from either the Rural Electrification and Telephone
Revolving Fund, the Rural Telephone Bank or the Federal Financing Bank (FFB).
Current Status
This set of programs and lending facilities was first established to provide rural areas access to nonsubsidized market-rate credit when commercial credit was not available. As commercial interest
rates climbed, basic REA direct loan rates remained stable, first at 2%, then at 5%. The massive
subsidy produced by this situation resulted in greater dependence of rural utilities on Federal
assistance and overextension of these utilities in the construction of electric power plants. As
electric demand growth declined drastically from the high increases experienced in the 70's to the
low growth of the 80's, demand for these programs also declined. However, unused electric power
capacity still exists and could pose serious problems in the future unless corrective action is taken
now.
1985 Budget Proposal
To reduce costly excess power capacity and promote an economically healthier and financially stable
rural electric and telephone industry which would be competitive in the commercial credit market,
the budget proposes the following:
• Restoration of the original REA interest rate determination method, by basing rates on
Treasury's cost of borrowing.
• Reduction of REA direct electric and telephone loans from $1 billion to $575 million.
• Reduction of electric generation loans, which are financed by the FFB, from $3.2 billion to $1.2
billion.
• Rescissions of 1984 appropriations to the Revolving Fund ($198 million) and Telephone Bank
($30 million).
• Establishment of loan application and approval fees to cover the administrative costs associated with this program.
301
Rationale
Interest Rates.—Restoring the intent of the original statute and increasing the interest rate from 5%
to Treasury's cost of borrowing would reduce but not eliminate the subsidy provided to rural
utilities, and would provide relief to the U.S. taxpayer.
• Private investor-owned utilities must finance from the commercial market at prevailing rates.
• Treasury's cost of borrowing is much less than prevailing commercial interest rates.
• While rural utilities would still enjoy low-cost Government credit, the American taxpayer
would save up to $100 million each year in interest subsidy losses currently incurred.
Direct Loans.—The proposed reduction would result in more equitable treatment of electric and
telephone utilities, regardless of location and political access.
• These utilities have been shifting their financing from the Federal Government over the last
several years. Use of commercial credit by REA borrowers has increased from $97 million in
1973 to $1.1 billion in 1983.
• This reduction would support the current move to a greater reliance on the commercial
market—a change necessary to build financial capacity.
Electric Generation Loans.—The proposed funding level would avoid the construction of costly and
unnecessary electric power plants, which in time would have to be paid for by the American
taxpayer.
• The proposal would provide enough financing for existing projects experiencing cost overruns
and for new projects in areas where additional power generation capacity is truly needed.
• On average, REA electric power supply borrowers have financed more generation capacity
than needed over the next decade. Electric demand has been substantially less than anticipated, creating further excess generation capacity, This places an unnecessary and unwarranted
cost burden on rural families served by rural electric systems. This proposal would place a halt
on unnecessary growth and provide for new capacity only where it is needed.
• Existing projects have been experiencing costly delays and other problems, creating a need for
additional Federal assistance, which this proposed level would provide.
Rescissions.—These rescissions would save $228 million without hurting rural electric or telephone
systems or reducing total resources available to borrowers.
• A rescission of $198 million appropriated to the Revolving Fund for interest subsidies and
losses is proposed because the appropriation was made to the wrong account. The rural electric
and telephone direct loan program has cost the Federal Government $1.3 billion since 1973.
However, these costs have been sustained by the Treasury, not the Revolving Fund. In fact, the
Fund has never incurred a loss since its inception in 1973, because it is already exempted by
statute from paying $307 million in annual interest costs to the Treasury on advances totaling
$7.9 billion.
• A rescission of $30 million of capital appropriated to the Rural Telephone Bank is proposed
because the Federal Government has already provided $360 million in capital to the Bank—$60
million over the amount called for in the original statute establishing the Bank. This rescission
would also save the Treasury about $12 million in interest over five years. The Bank can
borrow from private credit markets, or from Treasury at 50-year repayment terms. This
appropriation provides capital to the Bank with a 2% rate of return, the difference between
2% and Treasury's rates being borne by the U.S. taxpayer.
User Fees.—This proposal would bring REA in line with other Government and commercial credit
facilities, which have charged loan fees for many years, and save taxpayers $30 million a year.
302
Commercial lenders, plus many Government lenders, such as the FFB, the Commodity Credit
Corporation, and the Export-Import Bank, charge loan application and approval fees to cover
administrative costs associated with lending.
This user fee would fund the total $30 million annual REA salaries and expenses account.
303
Department of Agriculture Services
305
Agricultural Research
Agency: Department of Agriculture
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change-.
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
763
748
805
791
845
837
885
881
915
924
955
955
4,405
4,387
763
748
767
759
787 .
773
801
800
807
815
824
828
3,986
3,976
-84
-81
-108
-109
-130
-127
-419
-411
-38
-32
-58
-63
Program Description
Programs in this category support U.S. agriculture by funding the conduct, storage and dissemination of agriculture-related research.
Current Status
Since 1981, total funding for these programs has increased by 20% to $767 million. This is due to the
Administration's realization that significant long-term gains in the agriculture sector are dependent
upon the continued development of basic knowledge in the plant and animal sciences.
1985 Budget Proposal
The 1985 budget includes both increases and decreases in relation to the 1984 funding level.
It provides the following major increases:
• Competitive grants to States for biotechnology and animal research ($33 million).
• Hatch Act formula grant funding for biotechnology research ($3 million).
• Pay cost and small program increases ($17 million).
The major program reductions include:
• No funding for construction of laboratory facilities ($28 million).
• Reductions in special research grants and animal health and disease research grants to States
($17 million).
• Elimination of higher education grants ($8 million).
Rationale
Increased levels of support provided in the budget for agricultural research are focused on expanding basic knowledge. For example, in the area of plant sciences, biotechnology research has the
potential for doubling the amount of products produced from our soil while drastically decreasing or
eliminating the need for fertilizers and pesticides. In the area of animal sciences, genetic research
has already expanded our capacity to produce animals which consume less food, grow faster and
produce superior quality food. As such, these animals expand our supply of quality food while
utilizing less resources for themselves.
307
Application of the latest agricultural technology enables us to avoid depleting vital natural resources, thereby enabling us to maintain our leadership position in agriculture in the world.
Increased levels of funding for the National Agricultural Library would allow the library to maintain its position as the free world's largest agricultural library.
Separate funding for higher education fellowship grants is unnecessary since approximately 25% of
the proposed $50 million competitive grants program is likely to be used to hire graduate and postgraduate students to assist in agricultural research.
New funding for construction of additional research facilities is both unnecessary and unwarranted
in view of the fact that a number of existing laboratories are under-utilized, and some are excess to
the requirements of these agricultural research programs.
Decreased funding is proposed for special research grants because the basic Federal objective of
highlighting and providing several years of research funding for specific problem areas has been
accomplished. States are in the best position to determine whether research should be continued for
specific problem areas. States have the option of utilizing Federal formula grant funds for this
purpose.
Formula grants for animal health and disease research are proposed for elimination because other
funding mechanisms being proposed in the 1985 budget (e.g., competitive grants) are more effectively
targeted to areas of animal health and disease which are of major national concern.
308
Extension Service
Agency: Department of Agriculture
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
334
333
352
349
370
367
387
384
404
401
421
418
1,934
1,919
334
333
299
306
300
300
300
300
300
300
301
301
1,501
1,507
-53
-44
-70
-67
-87
-84
-104
-101
-120
-117
-433
-413
Program Description
The Federal Government finances 40% of the Federal/State Extension Service programs. These
programs, through technical assistance, help people identify and solve their farm, home and community problems through the use of research findings developed by the Department of Agriculture and
the State land-grant colleges.
Current Status
Total Federal funding for Extension Service programs has decreased by about $5 million since 1981
to a 1985 level of $299 million.
The Federal Extension Service supports programs through general formula funding and earmarked
funding. The main purpose of earmarked funding is to focus attention for a limited period of time on
specific problems that have national implications.
1985 Budget Proposal
The 1985 Extension Service budget reflects two policy decisions. First, Federal funding for programs
that have fulfilled their purpose would be terminated. Second, Federal program requirements would
be eased for the expanded food and nutrition education program to allow individual States to better
match service delivery to local needs. These proposals will save taxpayers about $41 million in 1985.
Rationale
Several Extension Service programs were initiated in recent years to respond to perceived national
problems: pest management, farm safety, pesticide impact assessment, urban gardening, integrated
reproduction management, soil and water management and conservation, national program innovation, and programs authorized by the Renewable Resources Extension Act. The Extension Service
considered these programs so important that they earmarked funds for them. The 1985 budget
proposes termination of Federal funding for these programs because they have achieved their
objectives. States would have the option of continuing these programs with State funds or eliminating them and using their funds to add support to other programs.
This policy will allow States to evaluate the need and usefulness of various programs in relation to
their local situation.
The 1985 budget level also reflects a proposal to ease Federal eligibility requirement for the
expanded food and nutrition program. This would allow States offering services that were previously
309
highly regulated by the Federal Government to better reflect and respond to local situations. As a
result, not only will more people be entitled to receive services, but services can be directed to those
who need them most. Current practices of detailed program regulation in many cases actually
prevent State and local governments from properly serving needy people.
310
Animal and Plant Inspection Service
Agency: Department of Agriculture
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
273
275
286
286
303
302
318
318
334
333
349
349
1,590
1,588
273
275
229
229
234
234
233
233
240
240
250
249
1,186
1,185
-57
-57
-69
-69
-85
-85
-93
-93
-99
-99
-404
-404
Program Description
The major objective of the Animal and Plant Inspection Service (APHIS) is to protect animal and
plant resources of the Nation from economically dangerous diseases and pests. To accomplish this,
the agency carries out various survey and diagnostic activities, conducts control and eradication
programs, and administers an inspection program at ports of entry.
Current Status
Total funding for these programs in current dollars has remained relatively constant from 1981
through 1984.
1985 Budget Proposal
The 1985 budget reflects a continuing effort to involve the States more extensively in program
financing and to transfer operating responsibility when possible. In addition, where possible, user
fees for user-specific services are proposed. Specifically, the Administration proposes to:
• Implement Brucellosis program checkoff payments by the livestock and dairy industries to
achieve greater cost sharing by the program beneficiaries, reducing Federal costs by $26
million in 1985.
• Reduce and terminate Federal funding in selected control programs where the control technology has been developed and demonstrated, and where the benefits are limited geographically,
with 1985 budget reductions of $16 million.
• Reduce screwworm funding consistent with phasedown plan based on successful establishment
of a quarantine barrier in southern Mexico by the end of 1984.
• Implement user fees for import/export inspections.
Total savings of $52 million are expected as a result of these proposed actions.
Rationale
Changes in the brucellosis program come after almost 45 years of Federal support which has
reduced the level of infection from 11.5% to less than one-half of one percent of cattle nationally.
Eradication efforts to date have cost taxpayers over $1.1 billion. Sharing funding responsibilities
with States and the livestock and dairy industries is desirable because the direct beneficiaries of the
program, beef and dairy cattle owners, will assume a fairer share of its cost. The costs of protection
311
against brucellosis should be borne by dairymen and cattlemen on the same basis that livestock
owners generally pay the cost of protection against other diseases.
Federal funding reductions and terminations in selected Federal control programs are proposed
because:
• The control technologies have been developed and adequately demonstrated.
• The beneficiaries have the capacity to assume responsibility for the programs.
• The affected areas in each case are limited to only a few States.
Significant programs affected include the golden nematode, grasshopper, gypsy moth, flreant, noxious weeds, witchweed and pink bollworm.
A screwworm quarantine barrier will be established in southern Mexico by the end of 1984. As a
result of the successful achievement of this goal, future funding requirements should be greatly
reduced.
Finally, savings are proposed in the area of plant and animal diseases. Effective control over the
possible introduction of diseases will continue to be maintained by the use of quarantine inspection
and import-export inspection of cargo. Savings of $18 million over 5 years can be achieved by
establishing inspection activity user fees paid by the importer or exporter. This program change is
consistent with government-wide attempts to apply user fees when possible to recover direct costs
associated with user specific services.
312
Agriculture Statistics, Marketing, Inspection and
Foreign Accounts
Agency: Department of Agriculture
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
246
242
259
259
279
279
300
299
321
320
343
342
1,501
1,498
246
242
244
244
261
262
275
275
290
289
306
305
1,375
1,374
-15
-15
-17
-17
-25
-24
-31
-31
-37
-37
-125
-124
Program Description
These programs collect statistical information on the worldwide production of agricultural commodities, and support the development of overseas markets. They also provide for grading, inspection,
and marketing of commodities for both export and domestic markets, so that purchasers and
consumers are assured of healthy, edible foodstuffs.
Current Status
Current dollar funding of $244 million for 1985 is about the same as the 1981 level. Increased
funding for export promotion has been offset by efficiencies in other areas.
1985 Budget Proposal
The budget proposes a $4 million increase to improve accuracy and reliability of crop and livestock
estimation. Increased funds are requested for macroeconomic agricultural surveys ($3 million) and
for enhanced development of foreign agricultural markets for U.S. farm products ($6 million).
These increases are more than offset by proposed savings through: charging fees for newsletters and
certain grading and marketing services which are not currently paid for by the user ($7 million);
curtailing payments to States for marketing programs ($1 million); reducing wholesale market
development assistance to urban areas ($2 million); reducing egg inspections ($1 million); and
discontinuing purchase of Landsat data by the Foreign Agricultural Service (FAS) ($7 million).
Rationale
These proposals promote fairness by having all users of the newsletters and grading services pay.
Currently, all do pay except for recipients of cotton and tobacco market newsletters and cotton
grading. The proposals to reduce domestic market assistance programs are based on the belief that
Federal Government involvement is no longer necessary. Egg inspection frequency is reduced at no
risk to consumers due to technological changes in processing. Discontinuing the purchase of Landsat
data is possible because FAS is acquiring this information from non-Landsat sources at lower cost.
313
CHAPTER 6
Public Infrastructure
315
Public Infrastructure Overview
This category includes the Federal programs that support public infrastructure—highways, airports
and airways, mass transit, water resources and navigation, and sewage treatment. These systems,
funded by all levels of government, provide part of the physical framework that enables the Nation's
economy to grow.
The President's five-year 1985 budget plan would continue the sorting of roles and responsibilities
among levels of government that the past three budget rounds have sought and largely achieved.
With this clear realignment of the complex funding patterns that evolved during previous decades,
the Administration has placed the future of the Nation's infrastructure on firm ground. The
President's infrastructure policy is based on three main principles—sustaining national systems,
encouraging local autonomy for local programs, and establishing user fees.
• The decisive sorting out of accumulated Federal infrastructure roles has strengthened the
Federal commitment to that portion of the Nation's infrastructure that is truly national in
scope and integrated in function—major highways, airports, and airways. The 1985 budget will
provide increases for construction and rehabilitation of these systems, and for portions of
operating expenditures. Constant dollar funding levels for highways, airports and airway
systems will be higher than ever before.
• At the same time, the Administration has successfully reduced Federal involvement in infrastructure systems with primarily local benefits. The past three budget rounds have reduced
constant dollar Federal funding levels for mass transit (especially operating subsidies), water
and navigation, and sewer programs and increased reliance on State and local governments to
finance these local and regional infrastructure needs where appropriate. By 1989, the constant
dollar funding for these locally oriented programs will return to the levels of the early- to mid1970's.
• To ensure that those who benefit from infrastructure investment bear the cost, the Administration and Congress have increased the proportion of infrastructure spending that is supported
by user fees. The 1982 Surface Transportation Assistance Act and the 1982 Airport and Airway
Improvement Act increased user fees to establish a sound financing mechanism to fund
national needs. The 1985 budget proposals extend these policies to programs that address local
needs; user fees will make up an increasing share of both Federal and local contributions for
these programs.
This chapter contains 10 factsheets, which have been arranged into two groups of national programs
and three groups of local programs.1 The remainder of this essay describes the savings achieved to
date, the Administration's proposals for their continuation, and the reforms in infrastructure
spending priorities and financing that are the cornerstone of Federal infrastructure policy.
Excesses in Infrastructure Spending Curtailed
As depicted on the following chart, Federal expenditures for public infrastructure grew dramatically
during much of the period after 1962 and rapidly gained momentum as they climbed to their 1980
peak.
1
Separate factsheets have not been written for several water resources programs and receipts, miscellaneous highway construction, National Airport, and other
miscellaneous Federal Avaition Administration (FAA) programs.
317
PUBLIC INFRASTRUCTURE:
$ BILLIONS
HISTORICAL PERSPECTIVE
(CONSTANT 1985 DOLLARS)
35
BY 1986, 13% REAL
fflX FROM 1980 PEAK
102% REAL GROWTH FROM
1962 TO 1980 PEAK
PRE - 1981
BASELINE
30-
25
20-
/ / CURRENT SERVICES
^
OUTCOME
80 81 82
83
84
85
86
• In real terms, Federal spending grew by 102% during this period. The bulk of this growth was
in the late 1970's, as expenditures mounted to a 1980 high 68% above the 1970 level.
• Spending grew in all infrastructure areas, but escalated most rapidly in locally oriented
programs. Mass transit spending exploded during the 1970's—rising in real terms from a mere
$0.3 billion in 1970 to $4.8 billion by 1981. Sewage treatment showed a similar pattern, rising
from negligible outlays as the 1970's began to a peak of $4.7 billion in 1981.
• At the same time that the Federal Government was increasing infrastructure expenditures,
local governments were reducing their contributions to infrastructure. In 1960, capital spending by all levels of government for these same infrastructure activities accounted for 2.2% of
GNP, while by 1980, despite increased Federal outlays, total spending declined to 1.3% of GNP.
The past three budget rounds have reduced real Federal infrastructure outlays from their 1980
peak.
• Significant savings have been achieved in programs which address local needs.
• These savings have offset the desired increases in national priority infrastructure spending.
• By 1986, the share of GNP allocated for Federal public infrastructure spending will be reduced
from its 1980 level of almost one percent of GNP by about one-fourth.
318
Enacted Savings
The accompanying chart reveals the outlay savings that have been achieved from the pre-1981
baseline.
PUBUC INFRASTRUCTURE:
SAVINGS ACHIEVED
$ BILLIONS
40SAVINGS FROM PRE--1981 BASELINE:
1982
35-
1983
1984
1985
AVG. ANNUAL
1986 GROWTH RATE
PRE—1981 BASELINE..
CURRENT SERVICES...
24.8 28.7 31.1 32.3 34.1
22.6 23.1 26.2 28.8 29.8
DIFFERENCE
PERCENT CHANGE...
+8.3%
+7.1%
PRE - 1981
BASEUNE
-2.2 -5.7 -4.9 -3.6 -4.3
-9% -20% -16% -11% -13%
• The pre-1981 policies would have escalated current dollar spending in each infrastructure
category, for a combined growth over the period of 37%.
• Under current law, nearly $21 billion has been saved over the 1982-86 period.
• The savings can be attributed to substantial reductions in the locally oriented programs,
accounting for nearly $20 billion, which more than offset the increases in highway programs.
• These savings have allowed for a growth rate in national priority program levels over this
period that is 55% greater than was planned in the pre-1981 baseline.
Haphazard Spending Patterns Reversed
Over the 1960's and 1970's, the Federal Government gradually accumulated additional responsibilities for public infrastructure which "crowded out" the national programs. As shown in the table
319
below, by 1981 local infrastructure programs had captured a sizeable share of Federal infrastructure
resources.
Return of Public Infrastructure Budget Priorities to Mainly National Public Infrastructure Needs
(1985 constant dollars in billions)
Proposed
1962 actual
Infrastructure Outlays
Distribution of funding:
National highways/airways
Primarily regional/local programs
1970 actual
1976 actual
1981 actual
J?fjL
1989 budget
16.2
19.5
27.7
29.8
27.5
26.6
73%
27%
76%
24%
57%
43%
51%
49%
59%
41%
66%
34%
The Administration has sought a reversal of this pattern, narrowing the Federal role to strengthen
national programs and encouraging greater local flexibility in infrastructure investment.
• Funding for largely local and regional investments will decline from 49% of Federal infrastructure funding in 1980 to 34% by 1989.
• This will free fully two-thirds of the funding for highways, airports and airways.
These same trends are evident in this year's budget proposals. The President's 1985 budget provides
for gradual annual increases in the 1985-89 period in Federal expenditures for public infrastructure.
As shown in the following table, expenditures for national programs will increase over current
services levels, while savings will be achieved in local programs. Because these outlays will be
increasingly financed by user fees, the President's plan will support the nation's necessary infrastructure—but without adding to the deficit.
Continued Strengthening of National Programs Proposed
(Outlays in billions)
1985-89
Major program areas
Current services
National Infrastructure Programs:
Highways 1
Airports/airways 2
3
4
320
+ 1.1
20.2
21.0
11.3
-2.5
-0.6
-0.6
52.5
-3.7
153.0
Includes small programs such as highway safety demonstrations funded from general revenues.
Includes facilities and equipment fund and research and engineering.
Army Corps of Engineers, Bureau of Reclamation, USDA small watershed projects.
Based on 1985 request
97.9
56.2
Total, Public Infrastructure
-0.9
+ 2.0
22.7
21.6
11.9
Subtotal
70.9
27.0
96.8
Local Infrastructure Programs:
Local mass transit
Water projects and navigation3
Sewage treatment
1
Proposed
change
71.8
25.0
Subtotal
2
Administration
budget 4
150.5
-2.5
As further illustrated in the table below, the Administration is committed to fulfilling the Federal
role in infrastructure financing. Average constant dollar funding for national programs will exceed
all previous levels.
National Funding Exceeds Previous Levels
(1985 constant dollars in billions)
Average over period
Highways
1962-1966
1967-1971
1972-1976
1977-1981
1985-1989 proposed
11.3
12.3
10.8
11.1
13.0
Airports/airways
2.4
3.0
3.9
4.1
4.9
Total
13.8
14.9
14.7
15.1
18.0
• Increases are requested for completing and preserving the interstate highway system and
rehabilitating primary highways and bridges, continuing policies set forth in the 1982 Surface
Transportation Assistance Act. Higher program levels and new initiatives are sought, as well,
for highway safety.
• Real spending growth is budgeted for airports and airways, reflecting the growing importance
of this segment of the Nation's transportation system. With funding at more than twice the
1960's levels in real terms, the safe and efficient movement of air traffic nationwide will be
fostered by capital modernization, airport improvements, and operations and maintenance.
• At the same time, sound user fee financing was enacted in 1982 for both programs. Consequently, real funding levels will exceed that for all 5-year intervals since 1960—but without
adding to the deficit.
By contrast, constant dollar funding levels for primarily local infrastructure activities have been
substantially trimmed after three budget rounds. Real outlays for local programs reached a $15.9
billion peak in 1980, and the pre-1981 baseline would have continued the upward trend. By 1984,
these outlays were reduced by 30%. The President's 1985 budget further reduces the 1984 level by
19% by 1989. As shown in the table below, all categories of local and regional public infrastructure
investment will have been reduced substantially in the enacted 1984 budget from their historic peak
levels.
321
Local and Regional Public Infrastructure Investments Are Reduced From Peak Funding Levels
(1985 constant dollars in billions)
Amount
Total local programs:
1980 peak
1984 estimated
1985 budget
1989 budget
Local water projects and regional navigation:
1980 peak
1984 estimated
1985 budget
1989 budget
Local mass transit:
1981 peak
1984 estimated
1985 budget
1989 budget
Local sewage treatment grants:
1977 peak
1984 estimated
1985 budget
1989 budget
Percent change
from peak
15.9
11.2
10.3
9.1
-30%
-35%
-43%
5.7
4.4
3.8
4.0
-22%
-32%
-28%
4.8
4.1
4.0
3.2
-14%
-17%
-32%
6.0
2.6
2.5
1.8
-56%
-58%
-70%
• Under the pre-1981 baseline planned outlays for local mass transit outlays would have continued to rise from their 1980 peak. By contrast, 1984 enacted mass transit funding will total $4.1
billion in real terms—a 21% reduction from the previously projected levels. Due to the phase
out of transit operating subsidies, the 1985 budget would further reduce aid in real terms to
78% of the 1984 levels in 1989.
• Funding levels under the pre-1981 baseline for local sewage treatment plants would have
remained above $4.6 billion per year by 1984. Due to the lower authorization levels that are
part of the reforms instituted in 1981, 1984 outlays will be $2.6 billion—or 44% lower in real
terms. The 1985 budget continues this effort, reducing this program's real funding to 68% of its
1984 level by 1989.
• Federal funding of water and navigation programs has been reduced in constant dollars from
its 1980 peak by 22% in 1984. The decline is due to two factors—reduced construction requirements as projects are completed, and improved planning efficiencies. The pre-1981 baseline
would have provided 39% more than the enacted 1984 level. The 1985 budget accelerates the
decline in inefficient project investments, proposes new user fees for navigation and greater
non-Federal cost sharing for new water projects.
The User Fee Principle
To make infrastructure financing more efficient and less of a burden on the deficit, the past three
budget rounds have instituted an increased reliance on user fees to support Federal infrastructure
programs. These fees not only charge users for government investments made in their behalf, but
will serve to put a meaningful price tag on infrastructure resources. Reflecting mainly legislation
322
enacted in 1982, the share of infrastructure program spending that is funded by user fees has
increased, and it would increase further under the 1985 budget proposals.
• For national infrastructure programs, the share funded by user fees will rise from 81% in 1980
to over 90% throughout the 1985-89 period.
• In total, the share of Federal infrastructure expenditures for both national and mainly local
programs financed by those who benefit from them will have increased from 42% in 1980 to
63% in 1989.
The reliance on user fees allows for savings in general revenues devoted to infrastructure. During
the past three budget rounds, general revenue funding for infrastructure has declined from $14.2
billion in 1980 to $13.2 billion in 1984. The 1985 budget proposals will continue this decline to $11.7
billion in 1989. These changes create a sound fiscal basis for future infrastructure funding to meet
national needs while relieving pressure on the deficit.
323
Highways
325
Highway Trust Fund
[In millions of dollars]
1984
1985
1986
1987
1988
1989
Total
1985-89
13,931
11,242
13,398
14,675
13,194
14,271
15,459
13,807
15,171
15,468
14,374
15,172
15,477
14,655
15,173
15,487
14,847
15,174
76,568
70,877
74,961
13,931
11,242
13,398
14,646
13,128
13,983
15,431
13,704
14,909
15,439
14,236
14,910
15,447
14,404
14,910
15,455
14,587
14,911
76,418
70,058
73,623
-29
-67
-288
-28
-103
-262
-29
-139
-262
-31
-251
-263
-32
-260
-263
-149
-819
-1,338
Level
Current Services:
Budget Authority
Outlays
Obligations
1985 Budget Level:
Budget Authority
Outlays
Obligations
Change:
Budget Authority
Outlays
Obligations
Agency: Department of Transportation
Program Description
The highway trust fund, financed by highway user fees, is the major source of Federal support for
the Nation's highways and bridges. Trust fund revenues from the Federal 9 cent motor fuels tax and
vehicle excise taxes provide grants under the Federal-aid highways program and other programs to
States for the interstate, primary, secondary, and urban highways, and bridges.
Current Status
The Surface Transportation Assistance Act (STAA) of 1982 set the authorized funding levels for the
Federal highway program for 1983 through 1986. The Act increased the motor fuels tax from 4 to 9
cents—the first increase since 1959—and restructured other road taxes to greatly expand efforts to
repair and reconstruct the Nation's highway infrastructure. The tax also improved the balance
between the tax assigned to different classes of highway users and the costs those users impose on
the highway system.
1985 Budget Proposal
The President's budget, combined with enacted 1983 economic recovery legislation for highway
construction, follows the obligation levels established in the STAA. The 1985 budget adheres to the
Act by proposing obligations, financed from the highway trust fund, of $14.0 billion for highways
and bridges, an increase of $0.6 billion over 1984 and $5.5 billion over 1982, the year prior to the
Act. The increased spending would allow:
• completion of all segments of the interstate highway system by the early 1990's;
• an obligation level increase for interstate rehabilitation of 263% over 1982 levels; and
• primary highway and bridge rehabilitation obligation level increases of 28% and 79%, respectively, over 1982.
Rationale
The Administration strongly supported passage of the STAA in 1982. The substantial increases
stipulated in the Act are funding badly needed repair and reconstruction of our highways and
bridges.
327
The President's 1985 budget is based on the Federal-aid highways obligation limitation in the STAA,
reduced by $275 million to partially offset highway construction appropriations advanced subsequent
to the STAA in 1983 economic recovery (Jobs Bill) legislation. The President's 1985 budget offsets
the Jobs Bill advances over three years, 1985-87, to keep total highway obligations in line with
revenues. The Administration is greatly concerned that additional highway spending would deplete
the balance of the highway trust fund more precipitously than is already occurring, thus endangering the highway program in future years. Recent testimony by the Congressional Budget Office
warns of an impending revenue shortfall even at the STAA obligation levels.
328
Highway Safety Grants and Demonstrations
[In millions of dollars]
1984
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority..Outlays
Change-.
Budget Authority
Outlays
1985
1986
Agency: Department of Transportation
1987
1988
1989
Total
1985-89
171
156
123
160
129
168
134
163
140
157
698
803
171
156
.
172
156
168
164
119
170
120
146
120
133
121
128
648
742
-4
+9
-4
+ 10
-9
-21
-14
-29
-19
-29
-49
-61
Program Description
The National Highway Traffic Safety Administration (NHTSA) provides grants to States under
programs that provide matching highway safety funds and alcohol safety incentive grants. The
Federal Highway Administration (FHWA) also provides funds to States for safety reconstruction of
unsafe highway segments.
Current Status
In 1984, the NHTSA grant programs were fully funded at the levels authorized by Congress. The full
funding is consistent with this Administration's strong commitment to highway safety. 1984 FHWA
appropriations also reflect this greater emphasis on safety.
1985 Budget Proposal
The 1985 budget continues NHTSA safety formula grants at their authorized levels.
$44 million is proposed to be obligated for alcohol safety incentive grants as a "best estimate" of
State response to the program. This money will be obligated from an available pool of $125 million,
of which $50 million is added in 1985. In accordance with the authorizations for this one-time
program, no additional money is added to the available pool in the out-years. However, the budget
does plan for obligations to continue through 1988, when the entire $125 million would then be
spent.
Small decreases in various FHWA programs account for most of the decline in budget authority
from 1984. This is due, primarily, to the elimination of the separate, categorical rail-highway grade
crossing program.
Rationale
The budget continues successful safety programs while eliminating a duplicative program. Since
1981, these successful programs have contributed to an 11% decrease in highway fatalities.
The grants are used as an efficient vehicle to leverage Federal funds to promote State highway
safety activities.
The 1985 budget for Federal alcohol safety incentive grants is based on the estimate that 32 States
will qualify for the grants through 1984. This represents a $6 million increase in funding in 1985
and will allow the Federal Government to support directly State efforts to combat drunk driving.
The FHWA rail-highway crossing program is being-dropped because it duplicates activities that are
eligible for funding in the expanded Federal-aid highways program.
329
Airports/Airways
331
Airport Improvement Program
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
Obligation Limitation
1985 Budget Level:
Budget Authority
Outlays
Obligation Limitation
Change:
Budget Authority
Outlays
Obligation Limitation
1984
1985
Agency: Department of Transportation
1986
1987
1988
1989
Total
1985-89
994
800
800
987
782
843
1,017
823
885
1,017
877
927
1,062
908
968
1,104
945
1,006
5,188
4,334
4,629
994
800
800
987
810
987
1,017
906
1,017
1,017
982
1,017
1,017
997
1,017
1,017
1,006
1,017
5,056
4,701
5,056
+83
+ 132
+ 106
+ 90
-45
+89
+ 49
-87
+62
+ 11
-132
+ 367
+427
....
+28
+ 144
Program Description
The airport improvement program (AIP) provides grants for airport planning and development,
including noise compatibility planning and programs. Formulation of master plans for future airport
development, construction and reconstruction of runways, land acquisition to provide noise buffers
around airports, and purchase of safety-related equipment such as firefighting apparatus are all
examples of AlP-eligible projects.
Current Status
The Airport and Airway Improvement Act of 1982 authorized the AIP through 1987.
Obligation limitations enacted through the appropriations process control how much of the annual
authorization is actually available for obligation. In 1984, the obligation limitation is $800 million,
roughly equal to the amount available for obligation in 1983, but $193.5 million less than the
amount newly authorized for 1984.
1985 Budget Proposal
The 1985 budget request would allow obligations totaling $987 million, the amount newly authorized
for that year in the Airport and Airway Improvement Act of 1982. The proposal, therefore, would
provide a 23% funding increase over 1984 and a 17% increase over what would be available if
obligations were held to a current services level.
Rationale
Current services funding would meet critical safety, rehabilitation and expansion needs.
The 1985 budget increase ($144 million over current services) would make available more funding to
relieve airport congestion. Funds would be largely targeted to increase the airport capacity available
in metropolitan areas where many factors, including airline deregulation, have increased congestion
in recent years. Capacity projects both at major commercial airports and reliever airports would be
given priority.
The 1985 budget proposal closely mirrors the amount of grant requests that FAA typically receives
over the course of a year.
333
The AIP is funded entirely through aviation user fees, principally the ticket tax on commercial
flights and fuel taxes on general aviation. Fully funding the amount newly authorized for the AIP
in 1985 maximizes the user fee financing available for FAA operations. The Administration remains
committed to recouping the fully allocated costs of the aviation system, including operations and
maintenance, from the system users.
334
Federal Aviation Administration Operations
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
Trust Fund Share 1
(percent)
1985 Budget Level:
Budget Authority
Outlays
Trust Fund Share 1
(percent)
Change:
Budget Authority
Outlays
1
Agency: Department of Transportation
1984
1985
1986
1987
1988
1989
Total
1985-89
2,599
2,609
2,812
2,918
2,954
2,961
3,107
3,101
3,261
3,253
3,418
3,410
15,552
15,643
1
20
23
25
14
2,745
2,688
2,939
3,073
3,041
3,063
3,141
3,136
3,246
3,242
15,112
15,202
64
53
64
48
42
54
-67
-230
-15
+ 112
-66
-37
-120
-117
-172
-168
-440
-441
2,599
2,609
Measured in terms of budget authority.
Program Description
The Federal Aviation Administration (FAA) operations appropriation finances all the expenses,
including overhead, associated with FAA's operation and maintenance of the national airspace
system and regulation of the safety of the aircraft, air carriers and airmen using the system.
Current Status
The appropriations process annually provides funds for FAA to carry out its operating responsibilities. During 1982-84, emphasis has been placed on rebuilding the air traffic controller workforce in
the wake of the August 1981 strike.
The Airport and Airway Improvement Act of 1982 authorized the use of aviation user fees to finance
a portion of FAA operations. The amount available is tied to the portion of the airport improvement
program (AIP) and facilities and equipment (F&E) authorizations made available through the
appropriations process. For instance, due to one statutory penalty provision, each one dollar reduction in F&E results in a two dollar reduction in the amount of FAA operations that can be financed
from user fees.
In 1984, none of FAA operations is financed by user fees because of AIP and F&E funding
reductions in the 1984 Transportation Appropriations Act and the resulting application of penalty
provisions.
1985 Budget Proposal
The 1985 budget proposes total operations funding of $2.7 billion, the amount necessary for the first
full "normal" year since the air traffic controllers strike.
Additionally, it proposes that $1.8 billion of operations funding be financed by user fees. The $1.8
billion includes $500 million of user fee financing foregone in 1984 due to reductions in the F&E
program.
335
Rationale
The 1985 budget closely approximates the 1985 current services level, minus savings associated with
such management reforms as increased use of contracting out for services previously performed by
Federal employees.
Reductions from current services levels are possible in the out-years because, as the system is
modernized, efficiencies are realized and staffing increases are mitigated. The savings are most
sizable in the later years (1988-89).
Regarding the level of user financing for FAA operations, the 1985 budget proposes that the newly
authorized amounts for both the AIP and F&E be made available. Thus, no statutory penalty
provisions would apply and $1.3 billion of user fees would be authorized to finance FAA operations
expenses.
The remaining $500 million of proposed operations user fee financing is tied to the 1985 budget
request for F&E, which proposes that $250 million of unappropriated 1984 F&E authorizations be
made available in 1985. The additional $500 million of user fee financing of operations is the amount
foregone in 1984 when the $250 million F&E reduction was taken. Many members of the aviation
community have concurred that this $500 million recoupment is appropriate.
336
Federal Aviation Administration Capital
Modernization Program
tin millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
Agency: Department of Transportation
Total
1985-89
1984
1985
1986
1987
1988
1989
1,013
601
1,057
758
1,042
897
1,058
985
1,104
1,022
1,147
1,070
5,408
4,732
1,013
601
1,927
907
1,730
1,240
1,653
1,489
1,505
1,575
1,410
1,566
8,225
6,778
+870
+ 150
+689
+343
+ 595
+ 504
+401
+553
+263
+496
+2,817
+2,045
Program Description
The FAA capital modernization program is a multi-year development and acquisition program to
upgrade the air traffic control, air navigation and various support systems that comprise the
national airspace system. The program was first presented in January 1982 when the FAA published the National Airspace System (NAS) Plan.
Current Status
The Airport and Airway Improvement Act of 1982 provided the research, engineering and development (R,E&D) and facilities and equipment (F&E) authorizations necessary to fund the programs in
the NAS Plan through 1987.
Through 1984, the R,E&D appropriations have closely tracked the annual authorization levels.
Funding for R,E&D has been critical since it finances the development work that must be completed
before new systems can be acquired with F&E funds.
On the other hand, the F&E appropriations have been significantly below the authorized levels,
largely reflecting more current schedules for award of major contracts. To date, actual implementation of the NAS Plan has been minimally affected by the reduced appropriations.
1985 Budget Proposal
The 1985 budget requests the full authorization for R,E&D. For F&E, the budget proposal not only
would fund the newly authorized 1985 level, but also $250 million of unappropriated 1984 authorizations.
In total, the 1985 budget request reflects a 90% increase over the 1984 enacted levels and an 82%
increase over the current services level. Over the 1985-89 period, the budget proposes funding that is
52% higher than the current services level.
Rationale
Full funding for the FAA capital modernization program is among the highest transportation
priorities. The program not only would vastly increase the capacity and cost-effectiveness of the
national airspace system, but would improve the system's safety as well.
337
1985 is a key year for the capital modernization program. The large funding increase is critical to
ensure that the second and third year commitments for on-going, multi-year contracts are met and
that additional major system acquisitions are awarded on schedule.
Included in 1985 is funding to procure new computers and develop new software to replace the
1960's technology currently used at FAA's enroute air traffic control centers. Additional funding
increments are requested for new airport landing systems, terminal radars, discrete address beacons,
and a systems engineering and integration contractor responsible for keeping the modernization
program on track.
The capital modernization program is entirely financed by aviation user fees. Full funding at
authorized levels also maximizes the amount of user fee financing available for FAA operations. The
Administration remains committed to recouping the fully allocated costs of the aviation system,
including operations and maintenance, from the system users.
338
Mass Transit
339
Public Transit
Agency: DOT/WMATA
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority.
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
4,320
3,936
4,327
4,196
4,491
4,597
4,638
4,732
4,547
4,559
4,490
4,610
22,494
22,693
4,320
3,936
4,112
3,990
4,119
4,263
3,990
4,240
3,790
3,913
3,622
3,807
19,633
20,212
-215
-206
-373
-334
-648
-492
-757
-646
-868
-804
-2,861
-2,481
Program Description
Public transit operations receive Federal assistance to repair, replace or build transit facilities and
equipment, and to pay some of the costs of transit operations. Federal grants are distributed by
formula for both capital and operating expenses. Discretionary grants are also available for specific
major capital projects.
Current Status
1984 is the first year of a new capital and operating expenses formula grant program authorized by
the Surface Transportation Assistance Act of 1982 (STAA). 1984 also initiates discretionary capital
grant funding from the revenues derived from 1 cent per gallon of the motor fuels tax.
Operating expenses funded by the formula grant program are limited by law to a fixed percentage of
the 1982 levels. The amounts that can be so used vary by city size, with the largest areas being able
to use 80% of the 1982 levels and the smallest areas 95%. This limitation was designed to reflect the
relative reliance on Federal operating subsidies by cities of differing size, and the relative difficulty
of adjusting to the elimination of Federal support.
1985 Budget Proposals
The budget proposes to hold the line on total Federal support for transit while focusing a greater
proportion of the available funding on bus and rail capital needs.
• Operating Subsidies.—The budget proposes to continue the phasedown in Federal operating
subsidies initiated in the STAA, leading to eventual elimination by 1989. Building on the logic
incorporated in the STAA, the phasedown would focus the initial additional reductions on the
largest cities while giving the smallest cities added time to adjust their transit financing and
operations. Specifically, in 1985, areas above 1 million population would be allowed to spend
50% of the operating subsidy levels provided in current law. Areas between 200,000 and 1
million population would be allowed 75%, and those below 200,000 population would be allowed
100%. The reduced operating subsidies associated with these changes would continue to be
available to the individual localities for capital expenses.
• Capital Grant.—The formula capital program will increase by 23% between 1984 and 1985,
offsetting the reduction in operating subsidies. These additional funds would be used to repair
or replace bus and rail transit facilities and equipment in large- and medium-size cities. These
cities generally have the largest and oldest transit systems. Discretionary capital grants will be
at the level authorized in the Surface Transportation Assistance Act of 1982. These grants will
341
be used, together with formula capital grants, to maintain priority for funding bus and rail
modernization, while providing sufficient funds for new systems. Grants for the Washington
Metro subway system are maintained at the 1984 level while interstate transfer grants for
transit projects provide for final completion of the interstate transfer program by the time
construction of the interstate highway system is completed (about 1990).
Rationale
Rehabilitation of existing public transit systems should be the highest Federal transit program
priority. Reflective of this, the budget focuses Federal assistance on capital grants for existing bus
and rail systems.
Recognizing, however, that some localities require new or major extensions of their transit systems,
the budget proposes to maintain the 1984 level for new bus and rail projects that are cost effective.
Transit operations should be the responsibility of State and local governments rather than the
Federal Government. The primary factors affecting operating costs (i.e., routes, labor contracts,
maintenance and repair, etc.) and the level of cost recovery from transit fares, are set by State or
local governments and not the Federal Government. In addition, two recent studies have highlighted
the fact that less than 30% of Federal operating subsidies go to benefit existing transit users, while
the remainder is eaten up by increased costs and expanded service. For these reasons, the budget
proposes continued phasedown of Federal operating subsidies. The policy has been structured to
mitigate hardship that might be encountered by local governments as they adjust to the Federal
phasedown. The phasedown of subsidies will be gradual and less demanding for those smaller and
medium size cities which may be more dependent on Federal assistance.
342
Water Projects and Navigation
343
Soil Conservation Service Water Projects
Agency: Department of Agriculture
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
200
293
221
317
233
266
245
242
257
254
269
266
1,226
1,345
200
293
109
277
115
144
121
121
142
135
147
144
634
821
-112
-40
-118
-123
-124
-121
-115
-119
-122
-122
-592
-524
Program Description
This program category provides two types of Federal assistance:
• It finances a portion of the cost of surveys and investigations of river basins for the purpose of
developing comprehensive plans for water resource development in these river basins. It also
finances surveys and plans for small watershed projects in cooperation with local sponsors.
• It finances a major share of the cost of construction of dams and other structural measures in
small watershed projects sponsored by local organizations.
Current Status
Over the 1981-84 period new funding averaged $25 million to $26 million annually for planning, and
about $192 million annually for construction (exclusive of the $100 million addition provided by the
1983 Jobs Bill for accelerated construction of small watershed and flood prevention projects). During
this period new starts for planning have averaged 35 annually; new starts for construction have
averaged 18.
1985 Budget Proposal
The budget proposal would provide new appropriations of $22 million for planning and $86 million
for construction. It would reduce the number of new river basin surveys, and would preclude any
new planning or construction starts of small watershed and flood prevention projects.
Rationale
The proposed budget continues to fund ongoing construction in recognition that many local sponsors
have made resource commitments based on expected performance by the Federal Government.
About 490 flood prevention and small watershed projects continue under construction during 1985.
Almost 1,650 staff years of Soil Conservation Service technical assistance will be provided on these
projects as well as on some projects in the pre-construction stage.
The budget does not fund any new construction starts. Watershed construction was accelerated
substantially by the $100 million increase over the normal funding level provided recently by the
Jobs Bill, Congress has directed 25 new construction starts in each of the last two years. Thus, the
backlog of projects waiting to be built has been virtually eliminated. Priority should now be given to
financing those projects already begun.
345
Though the appropriation request is sharply reduced below 1984, total outlays, representing work
completed during the year, would decline only $16 million. This is because the sharp increase in
appropriations in 1983, followed by additional funding for 1984, resulted in the carryover of large
unexpended obligations. These obligations will be expended in 1985.
346
Corps of Engineers, Civil
[In millions of dollars]
Level
Current Services—Net:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Proposed Receipts:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
Agency: Department of Defense—Civil
1984
1985
1986
1987
1988
1989
Total
1985-89
2,632
3,033
2,820
2,885
2,857
2,855
2,990
2,988
3,188
3,186
3,341
3,339
15,196
15,252
2,632
3,033
2,708
2,837
2,894
2,891
3,117
3,115
3,369
3,367
3,545
3,542
15,633
15,752
-200
-200
-200
-200
-201
-201
-201
-201
-201
-201
-1,003
-1,003
-312
-248
-163
-163
-73
-73
-20
-20
+ 2
-566
-503
+ 2
Program Description
The Corps of Engineers plans, constructs, operates and maintains water resource projects. These
projects provide inland and coastal navigation channels, flood control, hydropower, water supply and
other services.
Current Status
The Corps construction program has been decreasing over the last several years. This is because the
annual cost of new starts has been less than the prior-year cost of completing more expensive
projects started in the past. The Corps operation and maintenance (O&M) program has basically
stayed at the current service level for existing projects, increasing only to maintain new projects
becoming operational.
1985 Budget Proposal
The budget proposal would provide $1.1 billion for navigation O&M and construction, of which $200
million would be recovered through new user fees on channels and waterways.
The budget for 1985 and beyond would keep all construction projects on schedule, and includes a
modest allowance for new construction starts. Two new projects already authorized are proposed to
start in 1985. Despite this, total construction funding would decrease from the 1984 level.
O&M would be at the current services level, adjusted for new projects.
A $20 million or 15% reduction in project planning would restrict funding to studies that are likely
to result in actual construction.
Rationale
The Administration continues to believe that shipping companies and their customers who capture
the benefits of Federal navigation projects should pay their fair share of construction and O&M
costs. In 1984 it will cost the general taxpayer about $650 million to maintain shipping channels and
inland waterways while $39 million will be recovered through a user tax on barge lines. This is in
sharp contrast to Federal contributions to airways and highways that are recovered to a much
greater degree through user fees and taxes.
347
The reduction in the estimate for proposed navigation receipts compared to previous budget requests
signals the Administration's continued interest in a final resolution of this issue, yet recognizes that
none of the bills active in Congress would recover 100% of the Federal costs through user fees.
Both of the new projects proposed in this budget are economically and environmentally justified and
have a substantial portion of their total costs borne by non-Federal sponsors.
The overall reduction in the construction program is not the result of an Administration initiative.
It comes about because the Corps is completing much of its ongoing work, without replacement by
new starts of equivalent annual cost.
The O&M request would ensure that the taxpayers' previous investments in new and existing
projects are protected.
The planning reduction follows from the principle that a Federal investment of time and money
should only be made in those cases where there is a reasonable likelihood of success.
348
Bureau of Reclamation
Agency: Department of the Interior
[In millions of dollars]
Levei
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
891
879
943
940
952
952
990
990
1,043
1,042
1,110
1,109
5,038
5,032
891
879
1,004
932
1,165
1,004
1,194
1,094
1,295
1,179
1,290
1,289
5,948
5,498
+ 62
-7
+ 212
+ 52
+ 204
+ 104
+ 252
+ 137
+ 180
+ 180
+ 910
+466
Program Description
The Bureau of Reclamation develops and manages water resources in the 17 contiguous western
States, primarily for hydropower, municipal water supply, and irrigation. In 1985, 80 projects will be
under construction, including two new starts, and 32 projects will be operated and maintained.
Estimates shown are net of project-generated receipts except those hydropower receipts in excess of
operation and maintenance costs, which offset power marketing agencies' budgets and are shown in
Chapter 1.
Current Status
Gross funding for this program has increased annually. These increases have been necessary to
continue significant progress on key water projects already under construction.
1985 Budget Proposal
The 1985 budget for the Bureau of Reclamation would keep construction of existing projects on
schedule, start two high-priority hydropowrer projects, and ensure adequate maintenance of existing
projects. The new construction starts will upgrade the hydropower capability of Hoover Dam on the
Nevada/Arizona border, and the Palisades Project in Idaho. Both of these projects represent the new
partnership in enhanced financing arrangements with local sponsors that is one of the key features
of the Administration's water policy.
Rationale
The new projects underwent a rigorous review process guaranteeing that national benefits exceed
costs and that Federal and non-Federal contributions to the projects are balanced and fair. To
ensure that the benefits available from completed water resource projects are realized as quickly as
is prudent and at the same time achieve efficiency during construction, we propose funding at a
level which would result in no construction delays. Adequate maintenance is necessary to protect
the taxpayers' past investment.
349
Sewage Treatment
351
Sewage Treatment Construction Grants
Agency: Environmental Protection
Agency
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
2,430
2,500
2,560
2,510
2,690
2,380
2,810
2,320
2,930
2,330
3,050
2,350
14,040
11,890
2,430
2,500
2,400
2,500
2,400
2,340
2,400
2,210
2,400
2,140
2,400
2,100
12,000
11,290
-160
-10
-290
-40
-410
-110
-530
-190
-650
-250
-2,040
-600
Program Description
This program provides financial assistance to State and local governments for the construction of
publicly owned sewage treatment systems. Since 1973, over $40 billion in grant funds have been
provided and over 11,000 projects have been completed.
Current Status
Significant long term savings proposals were adopted in 1981 with the enactment of reform legislation that limits the types of eligible projects and targets funds to projects with the greatest water
quality benefits. The law authorized funding not to exceed $2.4 billion per year, and this maximum
authorized level has been requested annually since 1981. A separate funding mechanism, not to
exceed $200 million per year, can also be used to control the effects of heavy rain storms on certain
sewer systems. Appropriations for these projects, commonly referred to as combined sewer overflow
(CSO) correction projects, were $30 million for 1983 and 1984. The Administration requested no
funding.
1985 Budget Proposal
Though it is somewhat below the conventional calculation of current services, the full level of $2.4
billion authorized by law is again requested. This level will fund 650 new projects and allow for the
completion of 1,060 existing projects.
Rationale
The proposal continues the Administration commitment to request an annual appropriation of $2.4
billion, based on the reform legislation. The reforms limit funding to projects that serve existing
populations and which directly improve water quality. Project elements which serve estimated
future growth in population or which do not improve the quality of rivers and streams may be
financed by State and local governments without Federal contribution.
The proposed budget continues to provide the funding stability sought by States and municipalities.
Funding is not requested for CSO projects for several reasons. These projects are extremely expensive, have limited and temporary effect on water quality and provide primarily highly localized,
recreation benefits.
353
CHAPTER 7
Veterans Programs
355
Veterans Programs Overview
The President's 1985 budget for veterans programs, ranging from disability compensation and
pensions to the health care system, housing guarantee program, life insurance plans, and GI
education benefits, is largely a current services budget. This reflects the Administration's continuing
commitment to fulfill the obligations and promises made to America's veterans over many decades.
This chapter contains 7 factsheets which describe these programs and the President's budget
requirements.1
Modest increases to the current services level are proposed in two programs. A 15% increase is
proposed in education readjustment benefit levels because no increase has been granted since 1980,
despite a 20% increase in the cost-of-living, and even greater rises in tuition costs at most qualifying
institutions. This program provides a monthly subsistence allowance to eligible veterans and certain
survivors while attending college or receiving vocational or on-the-job training. The other increase is
for hospital construction which reflects the out-year construction costs of 4 major design projects
proposed for 1985—the largest number of new starts in recent times—and numerous nursing home,
clinical and ambulatory care additions and renovations. Despite the scarcity of budget resources in
the current fiscal environment, the growing number of veterans eligible for health care services and
the serious obsolescence and disrepair of many facilities makes these planned increases unavoidable,
given existing policy commitments to the veterans population.
In 1985, veterans programs will cost $26 billion and will account for nearly 18% of domestic current
services outlays outside of low-income benefits and social insurance. The proposed current services
funding level for 1985-89, as noted above, limits the potential for overall budget savings from
veterans programs. Nevertheless, it has been possible to achieve some savings since 1981. As the
following chart shows, current services for 1982-1986 are about $5 billion or 4% below the pre-1981
baseline.
^
1
A separate factsheet has not been written for miscellaneous veterans programs which include the general operating expense account. These programs are included
in Chapter 8 under Departmental Administration and Other Overhead.
357
VETERANS PROGRAMS:
SAVINGS ACHIEVED
$ BILLIONS
40SAVINGS FROM PRE--1981 BASELINE:
35-
1982
1983
1984
1985
AVG. ANNUAL
1986 GROWTH RATE
PRE—1981 BASELINE..
CURRENT SERVICES...
23.4 24.9 26.1 28.0 28.7
23.3 24.2 25.0 26.1 27.0
DIFFERENCE
PERCENT CHANGE...
-0.1 -0.7 -1.0 -2.0 -1.6
-0% -3% -^4% -7% -6%
30-
+5.2%
+3.8%
PRE - 1981
BASELINE
Despite these relatively modest savings, it is also important to note that the real cost of meeting the
nation's veterans commitments has declined significantly since the mid-1970's, and will continue to
remain stable in constant dollar terms through the 1980's—even with the small increases in GI
education benefits and the hospital construction rise proposed in the 1985 budget.
The reason for this declining real cost trend is that the major veterans benefit programs—primarily
education readjustment benefits, pensions, and disability compensation—reached a peak constant
1985 dollar cost of $25.1 billion in 1976 and have subsequently declined to $16.8 billion in the
enacted 1984 budget. This drop is mainly accounted for by the steady decline in the number of
Vietnam-era veterans eligible for education benefits. From a peak constant dollar cost of $10 billion
in 1976 for 2,951,000 trainees, education costs for veterans have declined to $1.7 billion in 1984 for
an estimated 724,000 trainees. Smaller declines are attributable to pension program reforms and
declining caseloads since the 1970's. Disability compensation costs reached a constant dollar cost of
$10 billion per year in 1981, and are projected to remain stable at this level through the remainder
of the decade.
By contrast, the constant dollar cost of health care operations and hospital construction has
increased from $7.0 billion in 1976 to $9.1 billion in 1984—an increase of nearly 30%. Under the
Administration's 1985 budget, constant dollar costs for these activities will rise 22% further to a
level of $11.1 billion by 1989.
358
Nevertheless, the actual and projected decline in veterans entitlement costs is more than sufficient
to offset the rising cost of the medical care system. As a consequence, 1986 total veterans program
costs will be down 20% in real terms from the 1976 peak, and will remain essentially frozen at that
level through 1989, The following chart depicts the historical funding pattern of veterans programs
in constant dollars.
VETERANS PROGRAMS:
HISTORICAL, PERSPECTIVE
$ BILLIONS
(CONSTANT 1985 DOLLARS)
35-
by 1986 , 20% r e a l r e d u c t i o n
from 1976 peak due t o
e x p i r a t i o n o f vietnam gi
b e n e f i t s and d e c l i n e o f
77% REAL GROWTH FROM
1962 TO 1976 PEAK DUE
TO VIETNAM Gi BENEFITS
pomp/Pension caseload
PRE - 1981 BASELINE
62
80 81 82
65
83
84
85
86
It is clear that, if overall veterans budget costs are to be reduced in future years, a thorough
reappraisal of veterans health care system policy, hospital capacity, and operational methods will be
necessary. These issues will be subject to intensive scrutiny by the Administration in preparation for
the 1986 budget.
359
Veterans Income and Adjustment Programs
361
Veterans Compensation, Pensions, Burial and Other
Benefits
Agency: Veterans Administration
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
14,146
14,131
14,521
14,490
15,025
14,981
15,592
15,545
16,171
16,122
16,688
16,643
77,997
77,781
14,146
14,131
14,521
14,490
15,025
14,981
15,592
15,545
16,171
16,122
16,688
16,643
77,997
77,781
Program Description
Compensation benefits are paid to veterans and their survivors as indemnification for loss of income
due to service-connected disability or death, with the rate based on severity of disability. Pension
benefits provide income to needy wartime service veterans who have become disabled subsequent to
their military service or have reached age 65. Financially needy survivors may also qualify for
benefits. Certain veterans and survivors may also receive benefits to defray the cost of burial and
funeral expenses.
Current Status
Generally, real growth in these large entitlement programs has slowed in recent years and is
expected to slightly decline in the 1980's since there are more veterans leaving the rolls (due to
mortality and ineligibility) than there are veterans from more recent war periods gaining access to
the programs. The decline is mainly taking place in the pension program, where cost in constant
1985 dollars peaked at $6 billion in 1972 and has been declining to the 1984 enacted level of $4.1
billion. Most of this cost reduction is the result of a pension reform law which made the program
more purely means-tested by limiting new benefit awards to qualified veterans and survivors below
the poverty level. This caseload decline more than offsets the expected doubling of the over-65
veterans population during the 1980's.
The compensation program grew significantly in real costs during the 1970's, a decade of legislative
liberalization which increased benefit levels and broadened eligibility, reaching $10 billion in 1981.
The 1980,s are expected to be marked by declining caseloads and relatively stable benefit levels.
Considerable savings have also been achieved by enactment of proposals in the President's 1984
budget to delay cost-of-living adjustments (COLAs) for each of these programs six months, consistent
with Administration and congressional COLA policy for other non-low-income entitlement programs.
1985 Budget Proposals
An estimated 2.6 million veterans and survivors are expected to receive compensation benefits in
each of the years 1984 through 1989. The number of pension recipients is expected to decline from
1.6 million in 1984 to 1.5 million in 1985, decreasing further approximately 5% each year through
the 1980's.
363
The 1985 budget would maintain these benefit programs at current services levels, proposing a 4.3%
COLA increase for the compensation program, effective in April, 1985 and assumes a 4.3% COLA for
the pension program (which is indexed to the Social Security COLA) effective in January, 1985. The
increased cost for these programs is nominal since the COLA increase is partially offset by declining
caseloads.
Rationale
The 1985 budget assumes that cost-of-living increases for compensation and pension will be provided
each year through 1989. This will allow benefit level increases for disabled or needy veterans and
survivors of deceased veterans to offset the increase in the Consumer Price Index each year.
364
Veterans Life Insurance
Agency: Veterans Administration
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
824
480
865
566
891
644
909
643
917
684
922
707
4,504
3,244
824
480
865
566
891
644
909
643
917
684
922
707
4,504
3,244
Program Description
Life insurance protection for the Nation's veterans is provided under six separate programs administered by the Veterans Administration (VA). By far the largest VA insurance program is the
National Service Life Insurance (NSLI) fund, which provides coverage for World War II veterans.
Only one program, Service-Disabled Veterans Insurance (SDVI), is issuing new policies. This program provides insurance coverage for service-disabled veterans at standard rates. Three additional
programs are supervised by VA through contractual relationships with private companies and do
not require Federal appropriations.
Current Status
The VA life insurance programs will provide an estimated $28.4 billion of coverage on nearly 4
million policies in 1985. The programs are financed primarily by premiums collected from policyholders and interest earnings on investments in U.S. Treasury securities. Several programs pay
dividends to policyholders. Three VA-administered insurance programs, including NSLI and SDVI,
are assisted financially by payments from the Veterans Insurance and Indemnities appropriation
account.
Veterans are permitted to borrow against the cash value of their policies at favorable interest rates.
Over $130 million in insurance policy loans were made by the VA in 1984.
Receipts and outlays for these programs are driven primarily by the level of interest rates and
mortality experience of policyholders. Constant dollar outlays for VA life insurance are expected to
increase slightly from $566 million in 1985 to $601 million by 1989.
1985 Budget Proposal
No changes are proposed in 1985 for VA life insurance programs.
365
Readjustment Benefits
Agency: Veterans Administration
[In millions of dollars]
Level
Total
1985-89
1984
1985
1,573
1,410
1,283
1,335
996
955
860
813
740
697
621
578
4,499
4,379
1,573
1,410
1,270
1,325
1,163
1,120
1,000
953
856
813
717
675
5,006
4,885
-12
-10
+ 167
+ 164
+ 140
+ 140
+ 116
+ 116
+ 97
+97
+ 507
+ 507
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1986
1987
1988
1989
Program Description
The "GI Bill" provides education and training benefits to post-Korean conflict and Vietnam era
veterans and servicepersons (and to their dependents and widows). The Vocational Rehabilitation
Program subsidizes the full cost of education and training in addition to a statutory subsistence
allowance for up to 48 months. Service-disabled veterans who are in need of assistance to overcome
a vocational handicap resulting from a service-connected disability are eligible for assistance. The
Post-Vietnam Era Veterans Education program provides educational assistance payments to veterans who entered the service after December 31, 1976; voluntary contributions by servicepersons are
matched by funds provided by the Department of Defense and paid to participants pursuing
training. In 1984, $130 million was appropriated for an emergency program of job training for
unemployed veterans of the Vietnam or Korean eras.
Current Status
Eligibility for the GI Bill was terminated in 1976, the peak year for government spending (Veterans
will be able to use the benefit until 1989). With fewer veterans eligible each year as the program
nears its termination, the caseload and program costs continue to dwindle. Changes in the education
benefits in recent years have focused on special bonus programs in the contributory program for
post-Vietnam enlistees.
1985 Budget Proposal
The 1985 budget proposes a 15% rise in education and vocational rehabilitation rates effective in
January, 1985 and no additional funds for emergency job training.
Rationale
The requested 15% GI Bill rate increase is appropriate since no increase has been granted since
1980—despite a 20% increase in the cost-of-living and even greater rises in tuition costs.
Even with the rate increase, the real cost of providing the education benefits will—through this
decade—continue the significant decline begun in the mid-1970's.
In 1985, nearly 544,000 GI Bill trainees are expected to participate in the program, compared to
642,000 in 1984. This total includes 8,400 new veterans expected to take advantage of the benefit
because of the rate increase.
366
While the Emergency Veterans' Job Training Act of 1983 was authorized as a 2-year program,
funding will not be needed in 1985 since the economic conditions the Act proposed to relieve will
have been alleviated. The unemployment rate is expected to decline about 2% between 1983 and
1985, and has, in fact, been declining steadily since the last quarter of 1982. The most recent
Department of Labor unemployment data (i.e., January, 1984) shows that the unemployment rate
for Vietnam era veterans is not higher than the unemployment rate for non-veterans.
367
Veterans Medical Services and Housing
369
Medical Care and Hospital Service Operations
Agency: Veterans Administration
[In millions of dollars]
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority1
Outlays1
1987
1988
1989
Total
1985-89
9,572
9,437
10,249
10,113
11,020
10,885
11,692
11,556
51,472
50,797
8,828
8,698
9,585
9,447
10,264
10,129
11,037
10,902
11,723
11,587
51,436
50,761
-111
-108
+ 13
+9
+ 15
+ 15
+ 17
+ 17
+31
+ 31
-36
-36
1984
1985
1986
8,189
8,127
8,939
8,806
8,204
8,142
+15
+15
Level
..
..
1 Reduction in 1985 is primarily the result of the Administration's government-wide policy regarding future pay comparability adjustments which would provide a
pay adjustment in January, 1985 at a slightly lower level than a current services adjustment. In addition, a portion of this pay raise would be absorbed
administratively.
Program Description
The VA provides hospital and medical care to veterans in its nationwide medical system and in nonVA facilities on a reimbursement basis. The VA operates this program in 172 hospitals, 227
outpatient clinics, 103 nursing homes and 16 domiciliary facilities with an average daily patient
census of 104,000.
Current Status
The veteran demand for quality health care continues to grow as veterans reaching age 65 become
eligible for a wide variety of medical benefits without regard to financial status. Meeting this
demand requires improvements and adjustments in health care services to provide the most appropriate type of care necessary in the most cost effective manner. In constant dollars, this program
has grown 14% since 1981.
1985 Budget Proposal
The 1985 budget request would provide for the medical needs of veterans by allowing treatment of
1.4 million inpatients and over 18 million outpatient visits in VA and community medical facilities.
This proposal would provide increases of $624 million and 2,747 staff over the 1984 level. These
resources would be used for activation of 10 new nursing home care units, 2 new outpatient clinics
in Florida and additional clinical services at 4 medical centers. This proposal would also provide for
new or expanded initiatives in ADP, establishment of an additional geriatric research, education
and clinical center (a program established within a hospital to provide a focus on the medical
treatment of older veterans, including research and training of medical personnel) and 6 new
Hospital Based Home Care programs (a mobile medical service program designed to meet the
medical, nursing, social and rehabilitation needs within the patient's home.)
Rationale
Increases in demand for health care can best be met by the increases and program adjustments
proposed in the 1985 budget. The new nursing home care beds, outpatient clinics, clinical improvements, and home care programs will ensure that needy veterans receive quality care in the most
appropriate medical setting available. The 1985 budget proposal would provide for the treatment of
an additional 5,000 inpatients and 79,000 outpatient visits and the activation of numerous completed
construction prejects.
371
Hospital Construction
Agency: Veterans Administration
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
549
581
767
634
764
655
801
692
837
709
872
734
4,040
3,425
549
581
857
677
1,176
940
1,242
1,114
1,309
1,313
1,381
1,405
5,965
5,449
+ 90
+42
+ 412
+ 286
+442
+ 422
+ 472
+ 604
+ 509
+ 671
+ 1,925
+ 2,024
Program Description
The Veterans Administration (VA) operates the largest Federal medical care delivery system. Two
appropriation accounts, one for major projects ($2 million or more) and one for minor projects,
provide for constructing, altering, extending, and improving these and other facilities under the
jurisdiction or for the use of the VA. Construction activities include planning, architectural and
engineering services, and site acquisition. An additional program provides grants for the construction of state extended care facilities.
Current Status
Changes in medical technology, growth in the outpatient program, and the normal aging process
have resulted in deficiencies in VA facilities that impede the delivery of modern health care.
Hospital construction activities include major replacement and modernization projects; clinical
improvements and additions; electrical, fire, and safety improvements; nursing home construction;
and general projects. Ongoing programs include removing harmful asbestos when it is encountered
during renovation, correcting seismic deficiencies, and improving the energy efficiency of VA facilities.
1985 Budget Proposal
Budget authority of $857 million is requested for VA hospital construction in 1985, $308 million
more than the enacted amount for 1984. These large increases recognize the critical need for
renovation and modification of many of the aging facilities in which medical services are provided.
In constant dollars, the 1985 Administration request for hospital construction is 90% above the 1976
level. The 1989 projection is 236% above the 1976 level.
Design funds are being requested in the 1985 budget for the modernization of VA hospitals in
Mountain Home, Tennessee and New York, New York. In addition, design funds are requested for
replacement hospitals in Augusta, Georgia and Houston, Texas. These 4 projects represent the
largest number of new major starts in any of the last ten years. Site preparation and, if necessary,
site acquisition funds are being sought for the future replacement of the Detroit, Michigan hospital.
The outyear construction costs for these five projects are estimated at $706 million. Funding is also
included for seven new nursing homes and numerous projects to remedy physical plant and safety
deficiencies.
Budget authority of $34 million for 1985, $16 million more than enacted for 1984, is requested for
grants to States for the construction or repair of State homes for the care of veterans.
372
Rationale
The 1985 budget request recognizes:
• The critical need for renovation and modification of many of the aging facilities in which VA
medical services are provided.
• The need for more nursing homes to serve the increasing number of aged veterans who, under
prevailing policy, are eligible for free health care services regardless of financial status.
373
Veterans Medical Research, Administration and
Related Activities
Agency: Veterans Administration
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
285
250
260
274
269
288
285
294
297
297
314
313
1,425
1,467
285
250
268
283
272
291
290
300
305
304
323
323
1,458
1,500
+ 8
+ 9
+ 3
+ 2
+ 5
+ 5
+ 7
+ 7
+ 10
+ 10
+33
+33
Program Description
The main activities included in this category are VA's medical and prosthetic research program and
the administrative overhead of the medical administration and miscellaneous operating expenses
(MAMOE) account. The research program is conducted in conjunction with the medical care program and focuses on biomedical, rehabilitation and health services problems facing veterans.
MAMOE provides for the administration and supervision of all VA medical programs, the conduct of
postgraduate and inservice training activities, and scholarship grants to eligible health care professionals, presently limited to nurses. The other programs included here are a grant program to the
Philippines to ensure care of veterans in that country and a program which provides assistance to
health training institutions.
Current Status
These programs provide support services for the VA's medical care program and have resulted in
improvements in the quality of medical and rehabilitative care. Since 1981, there has been an
increase of nearly 25% in constant dollars in both the research program and the administrative
expenses program, which has been offset by successful reductions in expenditures for assistance to
medical schools (funding culminated in 1979 with resulting expenditures continuing through 1985).
The 1984 budget level includes $54 million for a congressionally-mandated epidemiological study of
the health effects resulting from exposure to Agent Orange with subsequent funding for continuation of this study at significantly reduced rates.
1985 Budget Proposal
The Administration's proposal would provide for a 12% increase in funding and a 3% increase in
staffing for the research and MAMOE programs, excluding funding for the major Agent Orange
study. These increases would provide for continued and expanded research in such high priority
areas as alcoholism, cancer, aging, health problems of former prisoners of war and female veterans,
spinal cord injury and prosthetic/sensory aids, Agent Orange and delayed stress disorders. The
MAMOE request would provide for a staff increase of 16 for the administration and supervision of
VA's complex and rapidly changing health care system, a 19% increase in postgraduate and
inservice training to a level of $13.3 million, and a health professional scholarship program of $4.6
million to support 187 full-time and 200 part-time scholarship awards to nursing students in
baccalaurate and masters degree programs.
374
Rationale
These 1985 budget proposals would allow a continued and increased focus on clinical answers to
medical problems, improvements in the effectiveness and efficiency of delivering high quality
medical care, and better administration of the medical program. Increases in these areas are
proposed for evaluation of alternatives and implementation of improvements to minimize the high
cost of medical care and to assure the availability of qualified health professionals.
375
Veterans Housing
Agency: Veterans Administration
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1986
1987
1988
1989
Total
1985-89
1984
1985
-67
19
-75
-72
-76
10
211
183
213
338
199
199
473
658
-67
19
-75
-72
-76
10
211
183
213
338
199
199
473
658
Program Description
The purpose of the Veterans Administration (VA) home loan guaranty program is to facilitate the
extension of mortgage credit on favorable terms by private lenders to eligible veterans. The loans
are used for the purchase, construction, repair, or refinancing of homes to be occupied by veterans
and their families. In the event of default, the Federal guaranty protects lenders against losses up to
a maximum of the lesser of 60% of the mortgage amount or $27,500. A much smaller program
provides direct loans to severely disabled veterans who require specially adapted housing assistance.
VA mortgage loan guarantee and direct loan programs are expected to assist 240,000 veterans in
obtaining mortgages in 1985.
Current Status
When a VA guaranteed loan goes into foreclosure, VA has the option of paying the lender's claim or
buying the property. In the past, VA has fulfilled its responsibilities as guarantor, in about 95% of
cases, by acquiring and reselling properties in foreclosure. As a result of the dramatic increase in
foreclosures in recent years, VA currently has nearly 22,000 properties in its inventory. The Federal
Government incurs substantial costs in purchasing, managing, improving, and selling these properties. Direct program costs are borne by VA's loan guaranty revolving fund, while administrative
costs are charged to VA's operating expenses and the cost of borrowing funds to buy the properties
are borne by Treasury.
Most of these properties are sold with VA financing to veterans and nonveterans alike. Since no
downpayment is required, no "points" are charged, and the interest rate is often below the market
rate, these "vendee loans" provide substantial subsidies to nonveterans. These loans are then sold,
usually at a discount, to private investors with repurchase agreements that require VA to repurchase any loans that go into default.
1985 Budget Proposals
The President's 1985 Budget announced three major changes for this program that would require
VA to:
• stop bidding on properties at foreclosure of VA guaranteed loans and instead pay the amount
of the lender's claim;
• stop making vendee loans and instead sell all properties in its inventory for cash or with
private financing; and
• sell all loan assets without a repurchase agreement.
376
The original target date for implementation of these changes, which do not require legislation, was
March 1, 1984. The Administration has now delayed them until October 1, 1984. Representatives of
the VA, Federal Housing Administration (FHA), and Farmer's Home Administration (FmHA) are
working to develop uniform regulations and administrative procedures for implementing the new
policies.
Rationale
These policy changes will have no effect on a veteran's entitlement to a VA guaranteed loan.
Reducing property acquisitions will reduce VA's real estate operations. These operations disguise
the true costs of the loan guaranty program and provide substantial subsidies to nonveterans. VA's
inventory of properties represents an investment of over $700 million and is expensive to maintain.
The Federal guarantee protecting lenders against losses and the Government National Mortgage
Association's mortgage-backed securities program, which provides an unusual degree of liquidity for
VA and FHA mortgages, should continue to make VA mortgages attractive to private lenders.
377
CHAPTER 8
General Government
379
General Government Overview
This category includes all remaining components of the non-Department of Defense budget except
for net interest and defense-related, space and international affairs programs classified as "national
interest programs." While General Government is necessarily a catchall classification, there are
nevertheless a half dozen clusters of programs and activities that accord with well established
Federal responsibilities or the inherent overhead costs of operating a large central government.
These clusters include: 1) regulation of commerce and health and safety; 2) Federal law enforcement,
including border control activities; 3) Federally-supported scientific and medical research and cultural assistance; 4) management of the public domain and offsetting receipts from the sale of minerals
and other natural resources; 5) central functions such as tax collection, the weather service,
statistical agencies, and the patent office; and 6) the administrative costs of Federal entitlement
programs and departmental salary and expenses and other overhead costs not allocated to specific,
direct Federal activities.
The 1985 budget proposes funding levels consistent with well-established Administration priorities.
Funding for law enforcement and scientific research is increased above the current services level. In
almost all other cases, continued firm fiscal restraint is proposed, with aggregate savings amounting
to over $10 billion during the 5-year budget period.
Historic Spending Increase Curtailed
As the first chart illustrates, the historical expenditure pattern for General Government fluctuates
around a rising trend. The historical graph's fluctuations chiefly reflect large, volatile offsetting
receipt accounts for Outer Continental Shelf (OCS) sales, on-shore mineral and resource proceeds
and certain intragovernmental transactions. For example, OCS receipts range from a low of $39
million in 1962 to a high of $14.3 billion in 1974.
381
GENERAL GOVERNMENT:
HISTORICAL PERSPECTIVE
$ BILLIONS
(CONSTANT 1985 DOLLARS)
4540-
BY 1986, 33% REAL REDUCTION
FROM LATE 1970'S PEAK LEVELS
PRE - 1981
BASELINE
35302520-
80 81 82
83
84
85
86
I
A more meaningful picture of this category is obtained by charting gross outlays, leaving out the
volatile offsetting receipts from OCS sales.
382
GENERAL GOVERNMENT WITHOUT PCS* RECEIPTS:
HISTORICAL PERSPECTIVE
$ billions
( c o n s t a n t 1985 d o l l a r s )
• outer continental shelf
With OCS receipts omitted, the remaining functions show a steady, continuous growth rate of 7%
per year from 1962 to 1978 in real terms. General Government outlays (without OCS receipts) have
been reduced by 25% from their 1978 peak to 1984 in constant 1985 dollars. Under current services,
outlays in 1986 would be 33% below their peak.
Trends by Activity
Among the major programmatic or activity clusters, a number of clear trends are apparent which
highlight the changes introduced since 1981 and define opportunities for future budget savings. A
description of specific policy measures for each subfunction follows.
Regulatory Agencies
First, the explosive 1970's growth of regulatory agency budgets has been sharply curtailed. After
having doubled in real terms between 1962 and 1969, and tripled between 1969 and 1980, constant
dollar regulatory agency costs in the enacted 1984 budget will recede to their 1979 level ($4.4
billion). The President's 1985 budget would stabilize real costs at about this level through 1989.
Thus, the rapid growth of regulatory costs has been brought to a halt—with likely future real costs
stabilizing in the $4.5 billion annual range. Since this plateau reflects the diminution or termination
of some long-standing economic regulatory activities (e.g., ICC and CAB), most of the remaining costs
are attributable to more recently expanded health, safety and environmental protection agencies
(i.e., OSHA, NRC, EPA and FDA, which will account for 52% of 1984 regulatory agency budget
383
costs). Prospects for additional future budget savings depend in considerable degree, then, on
whether further progress in reducing the scope and burden of health and safety regulation is made
in the years ahead.
Law Enforcement
Second, the steady constant dollar expansion of the, Federal law enforcement budget, under way
since the early 1960s, has been reinforced by the high priority placed on it by the Reagan Administration. Special care has been taken to increase resources to meet the pervasive problems of drug
trafficking, organized crime, terrorism and foreign intelligence threats, and the growing problem of
tax protestors. Constant dollar law enforcement spending has risen from $1.4 billion in 1962 to $4.8
billion in 1981 and will reach $5.7 billion in the 1984 enacted budget. The proposed 1985 budget will
increase constant dollar funding levels to $6.0 billion by 1989—a 33% increase over 1981 and a level
4 times greater than in 1962.
Science, Medical Research and Culture
Third, constant dollar budget levels for scientific research, the National Institutes of Health (NIH)
and cultural support programs will have been reduced by about 5% in real terms between the 1980
peak and the 1984 enacted budget. The proposed 1985 budget essentially stabilizes total funding at
this level—with constant dollar outlays projected to average about $7.9 billion over the 1984-89
period.
However, within this stable total a modest reordering of priorities would continue to occur. Outlays
in 1984 for scientific research (National Science Foundation and the Department of Energy energy
science programs) will be 6% above the 1980 constant dollar level—with proposed future increases
resulting in a 19% increase by 1989. Additionally, certain small but significant increases have been
proposed for 1985, including a 13% nominal dollar increase for the National Institute of Education.
By contrast, cultural support programs have been reduced by 29% in real terms, and proposed
further reductions in constant dollar funding—mainly in the National Endowments and Corporation
for Public Broadcasting—would result in a 46% reduction by 1989. Real funding levels for NIH
would remain slightly below the 1980 level for the remainder of the decade.
These trends make clear that this component of the budget has been stabilized and new priorities
have been established. Reductions beyond those assumed in the 1985 budget would inevitably raise
serious policy questions about the appropriate level of Federal support for medical and scientific
research.
Management; of Public Domain
Fourth, because of the initiation of wide scale leasing and production from the outer continental
shelf, the net budget flow to the Treasury from the public domain now substantially exceeds the
operational costs of all major agencies responsible for its management.
This shift toward a strong positive cash flow and, therefore, reduction in unified budget outlays is
attributable to two factors. First, significant cost savings and economies in public domain management agency operations have been achieved by the Administration since 1980. Secondly, OCS and
other receipts have been rising persistently because of the Administration's more flexible mineral
leasing policies. Between 1980 and 1984, operating costs have been reduced 22% in real terms, while
constant dollar receipts have risen by 36%.
The proposed 1985 budget would continue these trends with further cost reductions and a continued
rise in planned receipts. Given both the minimum operating cost requirements of the major agencies—Forest Service, Bureau of Land Management, National Park Service and Fish and Wildlife
Service—as well as environmental and economic constraints on leasing activities, it will be an
increasingly difficult challenge to improve further the net budget position of public domain activities beyond the levels proposed in the President's 1985 budget.
384
Central Services and Functions
Fifth, the constant dollar cost of major central government functions—Internal Revenue Service
(IRS), debt management, Bureau of Labor Statistics (BLS)-Census, National Oceanic and Atmospheric Administration (NOAA), patent office, General Services Administration (GSA) property supply
and record management, international trade, and National Bureau of Standards (NBS)—has drifted
steadily upward in real terms over many years, rising from $3 billion in 1962 to $6.3 billion in 1981.
This trend has continued over the past 3 years, with the 1984 enacted budget for these functions up
by 12% over 1981 to $7 billion. Under the proposed 1985 budget, constant dollar expenditures would
average about $7 billion per year over 1985-89.
The growth in the cost of central government functions is primarily attributable to the rising real
cost of the IRS. The IRS constant dollar budget has risen by 16% since 1981 and will be 24% higher
by 1989. All other central function costs have risen by 8%, with a modest further rise proposed by
1989.
The increase in IRS is due to a combination of factors: the need to fund mandates imposed by three
major pieces of tax legislation; the high priority placed by this Administration on improvement of
tax compliance, and the replacement of the basic data processing equipment of the tax administration system. During this Administration, the level of support for tax enforcement activities will
increase 40% between 1981 and 1985, and the incremental direct revenue from enforcement activities will increase 100% in nominal dollars.
Given the continuing commitment to enhance compliance and effective collection of tax delinquencies, the major dynamic component of this function, the IRS, will not be reduced appreciably in
future years. However, increased receipt collections resulting from these funding augmentations—
around $30 billion annually in direct revenue—will contribute to overall deficit reduction.
Departmental Administration
Sixth, as a result of the rapid expansion of Federal programs during the 1970's, the constant dollar
cost of domestic departmental overhead not specifically allocable to direct Federal services grew
rapidly—from $6.9 billion in 1970 to $13.8 billion by 1981. More than 80% of this growth was
attributable to the administrative cost of major entitlement programs ranging from social security,
medicare, and unemployment benefits to aid to families with dependent Children, supplemental
security income, medicaid and the Federal nutrition programs, though administrative costs are
small relative to the entitlement benefits themselves.
Since 1981, central overhead costs have been held constant in real terms; this stabilization is almost
entirely the result of departmental and major agency salary and expense account reductions. The
cost of entitlement benefit administration itself has continued to rise and is projected to stabilize at
about $10.6 billion per year over 1985-89. Under the proposed 1985 budget, all other Federal
overhead costs would decline by about 16% in real terms by 1989.
Thus, because nearly two-thirds of unallocated overhead costs are now attributable to entitlement
benefit administration, it is clear that significant future savings depend upon the development of
more efficient administrative systems to serve the millions of Federal entitlement beneficiaries.
Achieving this objective while simultaneously reducing entitlement program errors and abuse poses
one of the most formidable management challenges faced by the Administration.
Savings Achieved and Proposed
The accompanying chart shows that very significant savings have been achieved between the pre1981 baseline and the present current services track. The pre-1981 baseline reveals a planned
growth of almost 50% from 1982 to 1986 while the current services level grows only 7% over that
same period. In nominal dollar terms, savings from the baseline increase to $10 billion by 1986.
385
GENERAL GOVERNMENT:
SAVINGS ACHIEVED
$ BILLIONS
40SAVINGS FROM PRK-1981 BASEL I NEj:
1982
1983
1984
1985
AVG. ANNUAL
1986 GROWTH RATE
PRE - 1981
BASELINE
PRE-1981 BASELINE
CURRENT SERVICES,
30-
20-
The table below summarizes the further cost saving measures proposed in the 1985 budget. Over the
five year period 1985-1989, the projected savings come to almost $10 billion below the current
services level. The largest components of this reduction are in the Departmental Administration
area and in Management of the Public Domain, the latter partly reflecting proposals to increase
offsetting receipts other than OCS receipts.
Further Savings Proposed
(Outlays in billions)
1985-89
Major program area
Current services
Proposed
savings
$24
31
-43
45
40
31
Total, General Government
386
$24
32
-46
43
38
27
+ $1
-3
-2
-2
-4
128
Regulatory Agencies
Law Enforcement
Management of Public Domain
Science, Medical Research and Culture
Central Services and Functions
Departmental Administration and Other Overhead
1985 request
118
-10
The factsheets1 in the General Government chapter provide additional details in each program
area. Some items include: the Nuclear Regulatory Commission and Food and Drug Administration
under Regulatory Agencies; the Federal Bureau of Investigation and U.S. Customs under Law
Enforcement; the National Park Service and OCS receipts under the Public Domain; the National
Science Foundation and the Endowments for the Arts under Science, Medical Research and Culture;
NOAA and IRS under Central Services and Functions; Federal Employee Health Benefits and
Legislative functions in the Departmental Administration and Other Overhead.
1
Factsheets have not been written for Federal Financing Bank surplus income, Treasury claims and judgments, other overhead, civilian agency pay raises, increased
agency payments for employee retirement, and other employee share—employee retirement. Thus, factsheet totals will not add to the category total.
387
Regulatory Agencies
389
Nuclear Regulatory Commission
Agency: Nuclear Regulatory
Commission
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
468
450
485
485
505
505
526
526
547
547
568
568
2,631
2,630
468
450
470
466
472
467
481
477
491
486
501
497
2,415
2,393
-15
-19
-34
-38
-45
-49
-56
-60
-67
-71
-217
-237
Program Description
To assure public health and safety, the Nuclear Regulatory Commission (NRC) regulates the activities of the utilities that produce nuclear power and of the many industrial firms and medical
facilities that handle nuclear materials. The NRC now employs a staff of 3,416 in activities that
range from licensing the construction and operation of new nuclear power plants to the ongoing
inspection of those plants. It also funds R&D at the national laboratories of the Department of
Energy in support of its regulatory responsibilities.
Current Status
The NRC has maintained a near constant funding level over the past three years. With no new
orders for nuclear power plants since 1978, the emphasis at the NRC has shifted from licensing to
inspections. Also, NRC has reduced emphasis on the funding of large scale research facilities.
1985 Budget Proposal
For 1985, the programs at NRC would continue trends started in 1983 to strengthen inspection
efforts and reduce spending on large R&D facilities.
• Funding for inspections would increase by 35% from $68 million in 1983 to $92 million in 1985.
This would allow NRC to hire 120 more inspectors over a two year period for an enhanced role
in ensuring the safety of nuclear power plants.
• Research would decline by 18% from $207 million in 1983 to $191 million in 1984 to $168
million in 1985. This would result from the phase out of large expensive test facilities such as
the Power Burst Facility (PBF) in Idaho.
Rationale
The Nuclear Regulatory Commission plans to phase out research in areas where work is nearly
complete or no longer necessary. In particular, by 1985, NRC will have completed its test program at
the Power Burst Facility, designed to study the properties of nuclear fuel during accident conditions.
Shutting down this one facility would save $21 million per year. Conversely, as utilities confront
more and more safety problems in the construction and operation of plants, NRC needs to devote
more attention to on-site inspections to assure the protection of the public's health and safety.
391
Office of Surface Mining and Reclamation
Agency: Department of the Interior
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
337
208
353
250
370
299
387
345
403
380
419
394
1,933
1,667
342
210
362
254
379
303
383
350
388
377
392
396
1,905
1,679
+ 5
+ 2
+9
+4
+9
+4
-3
+ 5
-15
-3
-27
+ 2
-28
+ 12
Program Description
The Office of Surface Mining (OSM) monitors State regulation of coal surface mining and gives
grants to States to reclaim lands damaged by past mining practices.
Current Status
OSM administers the Abandoned Mine Reclamation Fund, which was established in 1977 to reclaim
lands which were mined for coal and inadequately reclaimed prior to that year. The fund is financed
through fees paid on all coal mined in the U.S. and is used to stabilize land slides, extinguish fires in
coal waste piles, and clean out streams which are clogged with mining refuse. The coal-mining
States became eligible to receive grants from the fund once they assumed full responsibility for
regulating coal mining within their borders. Most States didn't take over full responsibility until
1981-82. A portion of the fees which accumulated in the fund from 1977-82 was appropriated for
State grants in 1984. The current unappropriated balance is $433 million, most of which should be
spent by the end of the decade.
1985 Budget Proposals
The 1985 budget would increase reclamation grants to States by $15 million over current service
levels to $263 million. Excluding a one-time, special purpose grant of $42 million to Pennsylvania in
1984, the increase is $57 million. This increase would fund 100 additional reclamation projects.
Rationale
The increase is proposed because the coal-mining States are expected to have finished building staff
levels necessary to fully utilize available reclamation funds, including a larger portion of the
unappropriated balance of the fund than was utilized in 1984. The proposed funding level is
projected to remain essentially constant through 1993.
Funding for the Federal rural abandoned mine reclamation program would decrease because States
will perform the same work, financed by the expanded grant program.
392
Environmental Protection Agency Operations
Agency: Environmental Protection
Agency
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
Total
1985-89
1984
1985
1986
1987
1988
1989
1,088
1,090
1,143
1,146
1,198
1,172
1,255
1,231
1,311
1,289
1,366
1,344
6,273
6,182
1,088
1,090
1,169
1,165
1,187
1,178
1,206
1,205
1,226
1,226
1,247
1,247
6,034
6,021
+ 26
+ 18
-12
+ 6
-49
-26
-85
-62
-119
-97
-239
-161
Program Description
Environmental Protection Agency (EPA) operations include funding for developing regulations,
enforcement activities, most research and overhead. Funds pay for salaries, administrative expenses,
contracts, and grants to States and universities to implement mandated responsibilities under eight
environmental statutes. EPA's acid rain and other energy related research funding is included in
"Supporting Energy Research/'
Current Status
In 1984 the President requested major increases for EPA operations. The President's 1985 proposal
continues to build on 1984 priorities to enhance Agency research and regulation of toxic pollutants
and to expand the Agency's enforcement capabilities to ensure compliance with established regulations.
1985 Budget Proposal
An 8% ($82 million) increase in budget authority and a 4% (400 workyear) increase in staff above
1984 levels is requested. The largest increase would be devoted to ensuring improved compliance by
both the private sector and municipal governments.
Rationale
• Regulatory programs are being accelerated.—Increased resources are devoted to safeguarding
the public from unacceptable risks of exposure to toxic pollutants and chemicals. Concern over
the emission of hazardous pollutants into land, water, and air would be addressed through a
rapid acceleration in regulatory, permit issuance, and enforcement activities. In addition,
evaluations of commercial uses of genetically engineered products would be initiated.
• Enforcement personnel increase.—Increased emphasis at both the Federal and State level will
be directed toward compliance with PCB and asbestos-in-school regulations; eliminating the
backlog of industrial permits; and a new initiative to bring municipal governments into
compliance with Clean Water Acts requirements.
• A new program to clean up the Chesapeake Bay.—With the completion of a seven-year, federally funded study of the Chesapeake Bay, a 135% increase in funds to $10 million is requested to
provide technical and financial assistance to Bay area States to further the cleanup effort.
393
• Research provides the basis for cost-effective regulations.—Increased research funding would
begin epidemiology studies that are necessary to establish appropriate risk levels from longterm exposure to pollutants. In addition, research into new, lower cost technologies will help
industries achieve reduced pollutant emissions at reasonable costs.
394
Superfund
Agency: Environmental Protection
Agency
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
Offsetting Receipts
(Recoveries)
1985 Budget Level:
Budget Authority
Outlays
Offsetting Receipts
(Recoveries)
Change:
Budget Authority
Outlays
Offsetting Receipts
(Recoveries)
1984
1985
1986
1987
1988
1989
Total
1985-89
429
426
449
428
469
455
488
472
506
494
2,341
2,275
-45
-50
-70
-110
-145
-420
640
535
478
543
480
500
482
487
484
484
2,564
2,549
-5
-45
-50
-80
-165
-155
-495
+ 50
+ 15
+ 211
+ 109
+ 29
+ 115
+ 11
+ 45
-6
+ 15
-22
-10
+ 223
+ 274
-10
-55
-10
-75
410
325
-5
460
340
Program Description
This trust fund enables the Federal Government to respond to hazardous chemical spills, clean up
abandoned hazardous waste sites, and take enforcement action against those responsible for hazardous waste problems. It is financed primarily by a tax on the oil and chemical industries.
Current Status
Superfund is a relatively new program that has grown rapidly from $75 million in 1981 to the $410
million requested and enacted in 1984. Because the law will expire at the end of 1985, the President
pledged in his State of the Union Address to request an extension of Superfund in order to provide
the necessary time and funding for an adequate cleanup effort.
1985 Budget Proposal
The 1985 budget would increase budget authority to $640 million in 1985 and also provide an
additional $50 million in 1984.
Rationale
The President's 1985 budget proposal would make available for use by the end of 1985 almost all of
the $1.6 billion in revenues expected under current law.
Continued increases in Environmental Protection Agency (EPA) personnel would also be provided in
1985 to manage the enlarged program.
The President's 1985 proposal would:
• Initiate planning efforts for site cleanup at 115 additional sites, bringing the number of sites
where work has begun to 396 by the end of 1985;
• Initiate cleanup actions at 46 sites, almost a threefold increase over 1984; and
395
• Increase the enforcement program by 65% over the current level. These funds would enable
EPA to:
• expand its effort to recover from responsible parties money spent to clean up hazardous
waste sites; and
• increase its efforts to force responsible parties to clean up the sites without using the trust
fund. To date, EPA has negotiated 72 privately financed cleanups costing $221 million.
The budget authority levels for 1986-89 reflect the amount of money that would be available if the
tax were extended at the current rate. Those levels do not reflect the Administration's determination of appropriate funding levels for that period. A policy on the appropriate future tax rate is
being developed in conjunction with proposals for extending the law.
396
Highway Safety Operations
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
Agency: Department of Transportation
1987
1988
1989
Total
1985-89
99
100
104
106
109
107
116
114
120
120
125
127
574
573
99
100
121
112
131
126
136
133
141
139
146
144
675
655
+ 17
+ 6
+ 21
+ 19
+ 20
+ 19
+ 21
+ 19
+ 21
+ 18
+ 101
+ 82
Program Description
Both the Bureau of Motor Carrier Safety (BMCS) and the National Highway Traffic Safety Administration (NHTSA) operate research, regulatory, and enforcement programs to increase the safety of
highway travel for trucks and autos.
Current Status
This Administration places safety among its highest priorities for transportion programs.
1985 Budget Proposal
Funding for the BMCS and NHTSA, in both operations and grant programs, would be increased to
bolster efforts to make highway travel safer.
The 1985 budget proposes a 100% increase in motor carrier safety grants. This should provide States
with adequate resources to conduct federally required truck inspection programs.
The 1985 budget proposes a 15% increase in NHTSA safety operations, enforcement, and regulatory
programs. This increase would be used to expand efforts to:
• disseminate safety information and technology to States and communities;
• work with other public and private organizations for a more comprehensive approach to auto
safety; and
• increase resources devoted to understanding and analyzing how accidents can be prevented.
Rationale
Since 1981, traffic fatalities have decreased by 11%. Even more encouraging, in 1983 the fatality
rate per 100 million miles traveled dropped to an all-time low of 2.6. The increases in this budget
would support those programs that have effectively contributed to this trend.
At this time, States, with the support of Federal safety grant programs and community organizations, are reexamining their highway safety laws. Both the BMCS and NHTSA programs support
this trend by working with States and local organizations to encourage increased and more effective
traffic safety efforts.
In particular, Federal highway safety operations target the drunk driver problem. NHTSA drunk
driving programs include demonstration projects, technical guidance, and information dissemination
to States and localities.
397
Food Inspection Services
Agency: Department of Agriculture
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1988
Total
1985-89
338
338
360
360
380
380
403
402
425
425
449
448
2,017
2,014
338
338
360
359
377
376
389
388
403
402
418
418
1,947
1,944
-4
-4
-14
-14
-22
-22
-30
-30
-70
-70
Program Description
This Department of Agriculture program inspects meat and poultry products in domestic and
foreign commerce. Inspections are conducted at slaughterhouses and in processing plants to assure
that only unadulterated, uncontaminated meat that is labeled and packaged according to Federal
law enters U.S. commerce.
Current Status
Current dollar appropriations for these activities have increased by $27 million or 9% since 1981 to
a total of $338 million for 1984.
1985 Budget Proposal
The 1985 budget proposal includes a further increase of $22 million to provide enhanced inspection
services. Specifically, it would provide:
• more inspection of imported meats at ports of entry;
• increased laboratory tests to detect chemical contamination;
• more inspectors at slaughterhouses; and
• more funds to the States for their inspection programs.
Domestic inspection efforts would also be enhanced by targeting inspections on those 5% of plants
that have continuing difficulty in complying with standards and regulations.
Rationale
Although the United States' inspection program is generally effective, improvements will help to
prevent any mislabeled, contaminated, or unwholesome meat from entering the U.S. food supply.
The targeting approach for domestic inspections should result in increased protection for the
consumer while minimizing cost increases.
398
Food and Drug Administration
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
394
396
408
422
430
439
452
459
475
475
499
498
2,264
2,292
394
396
397
407
420
429
438
445
457
457
477
476
2,189
2,213
-11
-15
-10
-10
-14
-14
-18
-18
-22
-22
-76
-80
Program Description
The Food and Drug Administration (FDA) conducts regulatory activitites to ensure the safety of
foods, pharmaceutical products, and medical devices sold in the U.S. marketplace. The agency also
reviews the efficacy of drugs and medical devices before they can be sold to the public.
Current Status
In the decade prior to 1972, constant dollar outlays for the FDA doubled. In the next decade,
constant dollar outlays increased another 44%. Since the 1979 peak funding year of $437 million,
real funding levels have stabilized, dropping less than 10% to $396 million in 1984.
Since 1981, the FDA has established four priorities: shorter regulatory review time for new drug
applications, as an incentive to innovation in the industry; support of orphan drugs, where unsubsidized development by industry is not profitable; greater use of voluntary compliance; and improvement in FDA's science base, to keep it abreast of current therapeutic, diagnostic, and production
technologies.
1985 Budget Proposal
The 1985 request would maintain the FDA at the current services level. The budget also proposes to
offset a small portion of FDA's operating costs—$5 million—through user charges on certain
industry-related activites. Fees would be imposed primarily on new drug applications and would
cover only a part of the cost of reviewing those applications.
Rationale
Modest increases in FDA funding over the 1985-89 period will allow FDA to continue its current
level of effort.
399
Occupational Safety and Health
Agency: DOL/OSHRC
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
219
223
228
228
239
238
251
250
262
261
274
272
1,254
1,249
217
221
225
224
233
232
243
242
254
253
265
264
1,219
1,215
-2
-4
-4
-7
-6
-7
-7
-8
-8
-9
-9
-35
-34
- 1
Program Description
The Occupational Safety and Health Administration (OSHA), in the Department of Labor, issues
and enforces regulations governing workplace safety and health, underwrites half the costs of
approved State-run safety and health programs, and encourages the voluntary cooperation of employers and employees on health and safety matters. The Occupational Safety and Health Review
Commission (OSHRC), an independent agency, adjudicates OSHA enforcement actions that are
contested by employers.
Current Status
The rapid growth of OSHA and OSHRC budgets, which peaked in real terms in 1980, has been
contained. In constant dollar terms, the 1984 enacted budget for these agencies will return them
roughly to the 1977 level. Agency resources are better targeted on significant problems and priorities; cooperation among employers, employees, States, and the Federal Government has been
encouraged; regulations have been reviewed to ensure that they are no more burdensome than
necessary to protect workers; and the number of enforcement actions employers contest before
OSHRC has been significantly reduced.
1985 Budget Proposals
The President's 1985 budget would stabilize real costs at roughly the 1984 level through 1989. Some
additional savings would be achieved through proposed management and administrative efficiencies,
which would enable both agencies to maintain at legist the same level of program activities using
fewer resources. The budget also contains an increase that would allow OSHA to implement a new
computerized management information system to track and improve the deployment of OSHA's
resources as well as to monitor States with approved programs.
Rationale
Enactment of the 1985 budget proposals would enable OSHA and OSHRC to provide necessary
workplace safety and health protection while minimizing costs borne by the taxpayers and by
private industry. The number of inspections would reach the highest level since 1976, with vast
improvements in targeting on worksites most likely to have serious safety and health hazards.
400
Major regulations would be reviewed and issued, to ensure that workers receive protection in a costeffective manner. The rate that enforcement actions are appealed to OSHRC is expected to remain
at its reduced level, decreasing the time inspectors must spend on litigation activities. The number
of follow-up inspections, usually unproductive, has been greatly reduced. These efficiencies enable
the inspection force to perform additional worker protection activities that otherwise would require
98 more inspectors.
401
Miscellaneous Regulatory Agencies
Agency: Various
[In millions of dollars]
Level
Current Services-.
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
Total
1985-89
1984
1985
1986
1987
1988
1989
1,039
1,039
1,114
1,120
1,162
1,168
1,224
1,225
1,286
1,288
1,351
1,348
6,137
6,149
1,042
1,042
1,056
1,074
1,108
1,120
1,160
1,164
1,215
1,219
1,270
1,263
5,809
5,841
+3
+ 4
-58
-46
-54
-48
-64
-61
-70
-69
-81
-84
-328
-308
Program Description
Agencies included in this category regulate energy activities, exchanges of securities and commodity
futures, communications, trade, transportation, labor relations, product and mine safety, as well as
control offshore and port oil pollution and coastal zone management.
Current Status
Funding for these activities remained high throughout the latter half of the 1970's, peaking, in
constant dollar terms, in 1980 at $1.5 billion.
Current constant dollar funding levels reflect achievement of a significant reduction from the
constant dollar peak.
1985 Budget Proposal
The 1985 budget level for this category is not significantly different from previous levels proposed by
the Administration. The 1985 budget proposal of $1.1 billion in outlays would continue to constrain
the constant dollar growth of regulatory costs for these activities.
The modest 1985 outlay savings are attributable to the Administration's proposal to reduce the
scope of transportation and other regulatory activities and terminate grants to States for coastal
zone management. Throughout most of these activities, savings would be achieved by personnel
reductions and implementation of space management initiatives, both resulting from reduced regulation and/or increased efficiencies.
Slight increases are proposed for the Securities and Exchange Commission (SEC), the Federal
Communications Commission (FCC) and the Commodity Futures Trading Commission (CFTC). The
SEC would implement a pilot paperless filing system; the FCC would continue its program to
deregulate the telecommunications industry; and the CFTC would enhance its enforcement efforts
aimed at curbing violations of commodities laws.
Rationale
Implementation of the President's budget proposal would continue the progress made in eliminating
unnecessary economic regulatory activity; reducing or redirecting regulation that places greater
burden on the public than necessary to accomplish essential objectives; decreasing paperwork; and
introducing efficiencies where regulation is necessary.
402
Law Enforcement
403
Law Enforcement
Agency: Department of Justice
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
Total
1985-89
1984
1985
1986
1987
1988
1989
1,445
1,432
1,433
1,462
1,503
1,467
1,575
1,539
1,650
1,613
1,726
1,688
7,887
7,769
1,445
1,432
1,504
1,544
1,602
1,571
1,680
1,651
1,761
1,723
1,826
1,794
8,373
8,283
+ 71
+ 82
+ 99
+ 104
+ 105
+ 112
+ 111
+ 110
+ 100
+ 106
+486
+ 514
Program Description
The primary law enforcement agencies in the Justice Department are the Federal Bureau of
Investigation (FBI) and the Drug Enforcement Administration (DEA). Besides enforcing Federal
criminal statutes, the FBI and DEA also perform other activities such as regulating the manufacture of controlled substances and maintaining a national repository for fingerprint identification.
Current Status
The Administration considers improvements to Federal law enforcement to be one of its top
domestic priorities. In the past year, additional staff and equipment were provided for organized
crime drug enforcement task forces and for foreign counterintelligence and anti-terrorism. Major
investments have also been made in the FBI to improve management, investigative, and fingerprint
processing capabilities. The 1985 budget continues resource growth for DEA and FBI: to underscore
the Administration's commitment to eliminate organized crime from drug trafficking; to intensify
the Nation's foreign counterintelligence efforts; and to modernize Federal law enforcement practices.
1985 Budget Proposal
The FBI and DEA represent 40% of the Department of Justice's budget request. If their budget
requests are adapted, the FBI and DEA agent complement will have grown by the end of 1985 to
11,147, up 1,500 from the 1981 level of 9,647.
An additional Organized Crime Drug Enforcement Task Force would be established to cover investigations in parts of Florida, the Virgin Islands, and Puerto Rico.
The FBI's organized crime program would be increased by 315 positions and $12 million for
investigations of traditional and non-traditional organized crime enterprises and for drug trafficking
investigations separate from the organized crime drug enforcement task forces.
The request would also provide a second successive infusion of staff and funds for the FBI's foreign
counterintelligence program.
Rationale
The recent increases in law enforcement resources have begun to produce results. For example,
since the FBI was given concurrent jurisdiction with DEA over drug investigations in 1982, the
405
number of cases being pursued jointly has increased from 12 to 737. By 1985, the number of drugrelated arrests is predicted to increase by 41%, from 7,420 to 10,450.
The problems with drug trafficking, other organized crime, terrorism, and foreign intelligence
activities within the United States are pervasive and continuing. More resources are vital to the
Administration's efforts to reduce these criminal activities.
406
Bureau of Alcohol, Tobacco and Firearms
Agency: Department of the Treasury
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
160
156
167
164
175
172
184
181
193
189
202
198
922
904
160
156
163
160
173
169
181
178
190
187
200
196
907
889
-4
-4
-3
-3
-3
-3
-3
-3
-2
- 2
-15
-14
Program Description
The Bureau of Alcohol, Tobacco and Firearms (BATF) protects the public safety by reducing the
criminal misuse of firearms and explosives and the unsafe storage of firearms; regulates the sale of
alcoholic beverages, firearms and explosives; and ensures collection of excise taxes on alcohol and
tobacco products.
1985 Budget Proposal
Reductions of $4.1 million and 108 workyears are proposed in the regulatory programs. BATF
projects that because of greater use of selective processing and inspection, revenue collections and
application processing would be maintained at the proposed funding level. By targetting inspections
and investigations on the largest excise taxpayers and those suspected of serious violation, BATF
will maintain revenue collections as well as its law enforcement presence.
The budget proposes law enforcement enhancements of $3 million to purchase voice secure radios
and to increase the agency's ability to relocate staff through permanent change of station moves.
These enhancements would protect law enforcement personnel in the course of duty.
Rationale
The 1985 budget would maintain the BATF at roughly current law enforcement levels while seeking
efficiency in regulatory programs through better targetting of inspection and investigation resources.
407
Immigration and Naturalization Service
Agency: Department of Justice
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
511
524
540
532
565
556
591
583
619
610
646
638
2,960
2,919
511
524
578
570
603
594
630
621
658
649
686
677
3,156
3,112
+ 39
+38
+39
+38
+39
+38
+ 39
+39
+40
+ 40
+ 196
+ 193
Program Description
The Immigration and Naturalization Service (INS) is responsible for the admission, exclusion,
apprehension, deportation and naturalization of aliens.
Current Status
During the past four years the Administration has sought to improve the management and information systems of the INS and to target resources to ensure the most effective enforcement of the
immigration laws.
1985 Budget Proposal
The budget proposes to add 1,000 positions to strengthen the border patrol presence against illegal
immigration, especially on the Southern border, since more than half of all apprehensions occur
over a limited portion of this border. The proposal includes 850 positions for the border patrol and
150 positions for detention and deportation, anti-smuggling and legal proceedings. This proposal
would increase enforcement workyears by 16% over 1983 actual levels and 14% over 1984 projected
levels.
Offsetting management savings of $4.8 million and 150 workyears are expected from implementing a
Grace Commission recommendation. These savings would be achieved by reducing central and
regional office staff based on a realignment of the roles and responsibilities of central and regional
offices vis-a-vis the district offices. This proposal would affect all program areas but is not expected
to reduce service or program operations.
In 1985, 65% of the INS budget would be devoted to enforcement programs—up from 61% in 1984
and 58% in 1983.
Rationale
The budget responds to growing pressure to strengthen border enforcement presence against illegal
immigration. Administration supported legislation to deter illegal immigration through a combination of legalization and employer sanctions is also intended to assist in the control of the Nation's
borders.
With these additional resources, apprehensions of illegal aliens are expected to increase by 36% over
1983 actual levels and 19% over 1984 projected levels.
408
Customs Service
Agency: Department of the Treasury
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
626
618
640
629
703
688
743
728
784
768
825
809
3,695
3,622
626
618
608
599
651
641
690
682
731
722
772
763
3,452
3,407
-32
-30
-52
-47
-53
-46
-53
-46
-53
-46
-242
-214
Program Description
The Customs Service administers and enforces the Tariff Act of 1930 and other laws which govern
international traffic and trade. Customs seeks to facilitate legitimate cargo and passenger traffic
and to detect illegal practices and seize contraband goods. In addition Customs collects nearly $10
billion in taxes and fees related to international trade.
Current Status
During the past four years, the Administration has sought to strengthen Customs' enforcement
programs while at the same time seeking labor savings and operating efficiencies by automating
commercial processing and streamlining field structure and procedures. In fact, funding for Customs' enforcement programs increased by 62% since 1980.
1985 Budget Proposal
The budget proposes a reduction of 954 direct workyears and 46 reimbursable workyears from 1984
levels. Savings are targetted to Customs' commercial operations in the belief that long-needed
modernizations such as automation of the cargo entry process and staff consolidation will achieve
labor savings in 1985.
The specific reductions would be accomplished by closing central and regional offices (231 workyears), consolidating appraisement specialists, laboratory staff and marine officers (277 workyears)
and increasing selectivity of inspection (415 workyears). In addition, limited duration staff associated
with the Olympics would no longer be necessary.
In addition to reductions discussed above, the budget would fund expansion of automated systems
that are critical to accomplishing efficiencies.
Rationale
The 1985 budget continues the Administration's efforts to modernize the Customs Service through
automation of commercial processing and streamlining field structure and functions.
The budget proposal for greater use of selective processing and inspection techniques based on risk
assessment of cargo and passenger traffic would allow Customs to achieve efficiencies.
409
Department of Justice Legal Divisions
Agency: Department of Justice
[In millions of dollars]
1984
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
706
704
835
814
877
855
919
897
961
933
4,387
4,275
717
715
...
795
775
813
796
859
837
900
878
941
919
983
961
4,497
4,390
+11
+ 11
+ 18
+ 20
+ 24
+23
+ 23
+ 23
+ 22
+ 22
+ 22
+ 27
+ 110
+ 115
Program Description
The legal divisions at the Department of Justice litigate all of the Federal Government's criminal
cases and most of its civil cases.
Current Status
The Administration has made a commitment to improving the Federal justice system. In the past
year, litigative resources, attorneys and support staff, and funds for improved automated techniques
to gather data and manage cases have been added to keep pace with expanded law enforcement
activities. These increases are making inroads in case backlogs and provide for affirmative litigation
in those areas of greatest priority.
1985 Budget Proposal
The 1985 budget would provide additional resources for the U.S. Attorneys to support the expansion
of the Organized Crime Drug Enforcement Task Forces into Florida, Puerto Rico and the Virgin
Islands. Increases for the Criminal and Tax Divisions would provide needed support to all the task
forces.
A major increase for tax prosecution and litigation would add 150 positions and $8.3 million to
permit the Tax Division and the U.S. Attorneys, in conjunction with the Internal Revenue Service,
to enforce recent changes in the tax laws. Additional resources for each U.S. Attorney's office
would provide a coordinator for Law Enforcement Coordinating Committees and the victim/witness
assistance programs.
Expanded environmental enforcement and increased resources for commercial and torts litigation
are proposed for the Lands and Civil Divisions. Full-year funding totaling $7 million and 33 positions
would be earmarked for a major litigation team, under the control of the Department's Civil
Division, to defend the hundreds of cases against the United States expected to result from the
recent bond default by the Washington Public Power Supply System.
Rationale
In an increasingly litigious society, the Government's attorneys must be equipped to handle the
workload that is thrust upon them as well as to seek out affirmative litigation to meet enforcement
objectives effectively. They must have the staff and the technology to be able to challenge the
increasingly sophisticated white collar criminal as well as the drug trafficker.
410
Federal Judicial Activities
Agency: The Judiciary
[In millions of dollars]
Level
Current Service:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
Total
1985-89
1985
1986
1987
1988
1989
928
922
1,070
1,059
1,151
1,133
1,239
1,220
1,330
1,310
1,425
1,404
6,215
6,126
928
922
1,053
1,042
1,144
1,126
1,232
1,213
1,323
1,303
1,417
1,396
6,168
6,080
-18
-17
-7
-7
-7
-7
-7
-7
-8
-8
-47
-47
1984
Program Description
This category covers all parts of the Federal judicial system, including the courts, the Administrative Office, and the Federal Judicial Center.
Current Status
Consistent with the emphasis given law enforcement in the United States since the late 1960's,
outlays for Federal Judicial Activities grew by an average annual rate of 7.8% in constant dollars
from 1970 to 1980 and will increase by 7% from 1981 to 1985.
1985 Budget Proposals
The request for 1985 would increase budget authority by 13% in nominal dollars and 8.1% in real
terms.
Outlays for Federal Judicial Activities for 1985 and beyond would be only slightly below the current
services level and would grow by 3.3% per year in real terms between 1985 and 1989.
The largest percentage increases in the 1985 budget for judiciary activities are for the United States
Tax Court (40% in nominal dollars) and the United States Court of Appeals for the Federal Circuit
(32%). The request for the other units in the judicial activities budget is about 12.5% above the
enacted 1984 amount and is primarily for the salaries of judges and supporting staff and associated
administrative costs.
The increase for the United States Tax Court would provide for 37 new positions to support an
estimated 29% workload increase in disposed cases; the establishment (on a trial basis) of an office
for special trial judges; a new satellite library for special trial judges; associated word processing
equipment; increased travel for judges due to the creation of a "summer session" lasting 35 weeks
and additional cases concerning tax protesters and tax shelters; and higher unavoidable costs.
The increase for the United States Court of Appeals for the Federal Circuit is predominantly for
standard level user charges.
Rationale
In accordance with law, the Federal Judicial Activities budget is presented in the President's Budget
without review and in the amounts submitted by the agencies.
411
Correctional Activities
Agency: Department of Justice
[In millions of dollars]
Level
Current Service:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
480
491
469
517
494
533
522
524
549
536
577
559
2,611
2,669
489
500
571
578
565
570
589
569
584
603
613
618
2,923
2,938
+ 9
+9
+ 102
+ 61
+ 71
+37
+ 68
+45
+ 36
+ 67
+36
+ 59
+ 313
+ 269
Program Description
The Federal Government is responsible for the care and custody of prisoners charged with or
convicted of violating Federal laws.
Current Status
The Administration has made a firm commitment to Federal prison construction. It has provided
180% more funding for prison building than the previous Administration and 53% of the total
resources spent for this purpose over the past 12 years. This has enabled the Federal prison system
to keep up with the unprecedented growth in the Federal prisoner population.
1985 Budget Proposal
In response to the growth of the Federal prisoner population, site and planning funds would be
provided for a new prison in the southeastern U.S., and construction funds would be provided for a
prison in the northeast. Additional funds would be made available to renovate and expand existing
facilities and to provide for additional correctional officers.
Rationale
One of the fundamental responsibilities of Government is to provide for the safety of the people. As
a result of the increased investigative and prosecutorial efforts of this Administration, significant
new funding for Federal prison expansion and modernization has been necessary. This will ensure
that intensified efforts to investigate and prosecute crimes will not be frustrated at the other end of
the criminal justice system by insufficient space to incarcerate those convicted.
412
Secret Service
Agency: Department of the Treasury
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
309
300
294
286
301
292
319
311
355
345
339
330
1,609
1,564
309
300
289
281
298
292
317
311
363
357
349
343
1,617
1,584
-6
-4
-3
-2
+ 1
+ 8
+ 11
+ 10
+ 12
+8
+20
Program Description
The Secret Service is responsible for protection of the President and other officials, investigation of
currency counterfeiting and check forgeries, and protection of the White House and some other
Federal buildings in Washington, D.C.
Current Status
The 1984 congressional action provided for a higher level of employment for the Service. At the
same time, Congress requested that the payments to State and local governments for the cost of
protection of diplomatic missions to the United Nations be shifted to the Department of State.
1985 Budget Proposal
The 1985 budget includes $12 million for equipment. This emphasis on equipment enhancements
would provide the Service with the ability to use sophisticated electronic and computer technologies
in carrying out its protective and other functions. The budget proposal carries out the Congressional
request to shift to the Department of State the cost of protection of diplomatic missions to the
United Nations.
Rationale
The Secret Service, in order to carry out its protective missions, as well as its criminal investigations
in the areas of forgery, counterfeiting and electronic funds fraud relating to Treasury securities,
needs sophisticated equipment to deal with a world in rapid technological change. The 1985 budget
would allow the Service to carry out its protective mission effectively and efficiently, as well as to
close 211,000 cases.
413
Miscellaneous Civil Rights and Equal Opportunity
Activities
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
Agency: EEOC/CRC/ED/HHS/HUD/
ATBCB
1987
1988
1989
Total
1985-89
266
269
275
274
290
289
304
303
319
318
333
333
1,521
1,517
266
269
271
273
286
284
299
297
312
309
325
323
1,493
1,486
-4
-4
-5
-5
-7
-7
-9
-8
-10
-27
-31
- 1
Program Description
This category includes the Equal Employment Opportunity Commission (responsible for enforcing
Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, and the Equal
Pay Act); the U.S. Commission on Civil Rights; and the Offices for Civil Rights in the Departments
of Education and Health and Human Services (responsible for assuring nondiscrimination in programs and activities receiving funds from their respective agencies). The Fair Housing Act activities
of the Department of Housing and Urban Development and the Architectural and Transportation
Barriers Compliance Board (which assures compliance with the Architectural Barriers Act of 1968)
are also included in this category.
Current Status
This Administration has maintained and expanded protections for the civil rights of individuals
while realizing personnel and other economies available through management and program reforms,
increased efficiency, and enhanced involvement of State and local governments in assuring nondiscrimination. As with Federal civil rights programs generally, the accomplishments of these activities
in 1983 continued to demonstrate the success of this approach. For example, the Department of
Education's Office for Civil Rights reduced its inventory of pending complaints by 27% and the
Department of Health and Human Service's Office for Civil Rights increased its number of completed compliance reviews by over 200%. As a result of the Department of Housing and Urban
Development's efforts to increase the capability of State and local agencies to resolve fair housing
complaints, 2,736 complaints were referred to these agencies for processing in 1983, over 500% more
than during the last year of the prior administration. Also during 1983, the Equal Employment
Opportunity Commission secured $182.9 million in back pay and other financial settlements for
victims of discrimination—136% more than during the last year of the prior administration.
1985 Budget Proposal
Budget authority for these combined programs would continue to rise and savings from the current
services level during 1985-1989 would total less than 2%.
414
Rationale
Protecting the civil rights of all Americans is a basic Federal responsibility and a central commitment of this Administration. Therefore, despite the clear need to achieve significant reductions in
Federal expenditures, the Administration believes that it is essential to continue to fund these and
other Federal civil rights activities at substantial levels that will maintain and enhance their scope
and effectiveness.
415
Management of the Public Domain
417
Naval Petroleum Reserves
Agency: Department of Energy
[In millions of dollars]
1984
1985
1986
1987
1988
1989
Total
1985-89
-1,030
-1,047
-1,059
-1,046
-992
-1,000
-959
-956
-911
-909
-829
-840
-4,750
-4,751
-1,017
-1,017
-1,057
-1,047
-992
-1,000
-959
-956
-911
-909
-830
-840
-4,749
-4,752
+ 13
+ 30
+ 2
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
+ 1
- 1
Program Description
The Federal Government owns three oil fields: at Elk Hills and Buena Vista near Bakersfield,
California, and at Teapot Dome near Casper, Wyoming.
• These fields were originally set aside before 1925 to supply oil to the Navy in an emergency.
• In 1976, Congress decided that defense and other emergency energy needs could be met more
effectively by building the Strategic Petroleum Reserve and that the oil in the Navel Petroleum Reserves (NPRs) should be produced and sold.
Current Status
Oil and gas is produced and sold at these fields in a manner consistent with standard commercial oil
field practice. Production is currently 115,000 barrels of crude oil per day—about 1.3% of U.S.
domestic production. In 1984, sales receipts to the U.S. Government—and thus to the taxpayer—are
expected to be $1.5 billion. Of this amount, $0.2 billion is paid to the Treasury as taxes under the
Windfall Profit Tax Act. The remaining $1.3 billion is credited to this account. Partially offsetting
these receipts is $0.3 billion needed to operate, develop, and maintain these producing properties.
1985 Budget Proposal
The budget proposes that production and sale of oil and gas at the NPRs continue under current
arrangements through 1989 and beyond. Net receipts from the fields are expected to decline
gradually as the fields are depleted, the production rate decreases, and the cost of operating them
increases.
Rationale
It makes sense to continue producing and selling oil and gas at the NPRs.
• The Administration supports the productive and efficient use of resources. Production of oil
and gas at the NPRs is clearly efficient, since it results in roughly a billion dollars of income to
the Federal Government each year over and above operating costs.
• Our emergency needs for petroleum for defense and other national purposes can be met more
effectively by building up the Strategic Petroleum Reserve (SPR) than by shutting in the
419
NPRs. If an emergency occurs, what will be needed is a lot of oil immediately. The emergency
pump out rate for the NPRs is 200,000 barrels of oil per day or less. The emergency pump out
rate for the SPR is currently 1.7 million barrels per day—over eight times as fast—and that
rate is slated to rise to 3.5 million barrels per day—17 times as fast—by 1987.
420
Forest Service
Agency: Department of Agriculture
[In millions of dollars]
1984
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
431
574
237
226
180
169
158
147
141
130
1,036
987
465
608
...
...
320
314
281
293
213
253
150
146
128
125
116
113
888
930
+34
+34
-39
-21
-24
+ 26
-30
-23
-30
-22
-25
-17
-148
-57
Program Description
This includes all Forest Service programs except payments to States and land acquisition. Major
activities include administration of the national forest system, forestry research, and State and
private forestry. It also includes offsetting receipts earned by Forest Service activities, chiefly timber
sales.
Current Status
Substantial reductions, totaling about $700 million in 1985 dollars have already been made since
1981 in these Forest Service programs. Reductions have been achieved primarily by improving
efficiency and by reducing a number of programs. For example, road costs have been reduced by
implementing efficiency measures. A timber sale level of 11.2 billion board feet is planned in 1985
versus 11.9 billion board feet in 1981 due to changed demand estimates and continuing increases in
the amount of timber under contract.
Current service outlays in 1984 were high relative to budget authority due to use of carryover
balances in 1984.
1985 Budget Proposal
Gross program funding of almost $1.8 billion requested for 1985 would be slightly higher than 1984
and about $85 million lower than the current services level.
The budget would sharply reduce grants to State forestry organizations and would modestly reduce
research and national forest system activities. In 1984, States are expected to receive direct financial
assistance of $23 million, which defrays only a small part of their costs. The 1985 budget would
eliminate all grants with the exception of a special grant to Minnesota required by site specific law.
The change in current services from 1984 to 1985 primarily reflects a large increase in offsetting
receipts due to past program activities and projected market conditions.
Rationale
The 1985 proposal would achieve some important reforms, improve efficiency and fund appropriate
program levels. Proposed program reforms would limit the Federal role to technical assistance on
State forestry problems of national importance and to collection and analysis of national statistics.
While research would continue at about the same level as in 1984, inefficient and completed work
units would be closed or consolidated.
421
Management of the national forest system would be funded at about the same level as 1-884.
Continued increases in program and management efficiency are anticipated. In view of limited
opportunities for profitable sales at present prices and lagging harvests from the 40 billion board
feet (BBF) of timber already under contract, new timber sales are planned to decline from 11.7BBF
in 1984 to 11.2BBF. However, receipts primarily from prior year sales contracts would increase,
accounting for the anticipated rise in offsetting receipts noted above.
422
Bureau of Land Management and Minerals
Management Service
Agency: Department of the Interior
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
620
648
643
636
663
657
698
691
733
726
768
761
3,506
3,471
620
648
613
611
637
630
664
658
695
688
729
723
3,338
3,310
-30
-25
-27
-26
-34
-33
-38
-37
-39
-38
-168
-161
Program Description
The Bureau of Land Management (BLM) is responsible for the management and development of 310
million acres of public lands. This includes responsibility for leasing and supervision of minerals
operations on public lands and on 370 million acres of land owned by others where the Federal
Government owns the minerals.
The Minerals Management Service (MMS) leases oil and gas resources on the Outer Continental
Shelf (OCS) and collects royalties and other income produced from minerals leases both onshore and
offshore.
Current Status
Increased efficiency has been achieved in a number of these programs by streamlining operations,
such as BLM land use planning and OCS leasing. There have been funding increases for collection of
mineral leasing receipts, an area which had been poorly managed until recently. To improve
management the program was moved to a new agency, Minerals Management Service, and additional funding was requested in 1982-1984.
1985 Budget Proposal
The budget would fund these programs close to the current level. Minor reductions below current
services are proposed in various programs where workload increases have been moderated through
reform. Small increases are proposed for onshore energy leasing and royalty collections, offset by
various smaller decreases.
Rationale
Increased competitive oil and gas leasing is expected onshore. Annual growth in the number of
leases in production is expected to be 5-10%. The budget would fund workload increases in both
leasing and post-lease enforcement and inspection.
New computer equipment is needed to cope with higher than expected workload in the royalty
collection program. The budget proposes an 11% increase for the program.
423
Public Lands Acquisition
Agencies: USDA/DOI
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
317
385
297
298
310
289
322
305
334
312
345
292
1,608
1,495
287
385
167
284
168
242
168
231
169
209
169
173
842
1,141
-30
-130
-14
-142
-47
-154
-74
-165
-103
-176
-118
-767
-355
Program Description
Using Land and Water Conservation Fund receipts (primarily revenues from Outer Continental
Shelf oil leases), Interior's National Park Service and Fish and Wildlife Service, and Agriculture's
Forest Service acquire land to create or expand nationally significant Federal recreation areas.
Areas acquired become designated as national parks, wildlife refuges, and forests or become part of
existing lands already designated as such. The National Park Service also administers matching
grants to States for outdoor recreation lands and facilities.
Current Status
When the Administration came into office, national park and refuge maintenance was badly
neglected, a huge backlog of recreational land condemnation cases had developed, and agency plans
for future land purchases were in disarray. As a result, the past three budget proposals limited the
request for land acquisition funding to property subject to awards under condemnation proceedings
begun in prior Administrations and to emergency purchases.
The Administration's goals have been to reduce the backlog of acquisitions, to focus available
resources on fixing up existing national parks, and to hold off on new Federal grants for State and
local parks until their backlog was cleared and the Federal fiscal situation permitted such assistance.
The Congress appropriated funds greatly in excess of the Administration's request for land acquisition in each of the three years, while not fully covering the costs of ongoing court awards.
1985 Budget Proposals
The Administration's 1985 budget would:
• substantially increase, to $140 million, the Administration's request for acquisition of national
park, refuge, and forest lands—including high priority conservation areas with approved land
protection plans, parcels subject to condemnation awards, and emergency purchases;
• propose legislation and $27.5 million in funding for both Federal and State wetlands acquisition;
• terminate $30 million in never-used and unnecessary contract authority for land purchases;
and
• provide no funding for State outdoor recreation grants for State and local park acquisition.
424
Rationale
After three years the goal of correcting for park and refuge neglect is being achieved, the condemnation backlog has been reduced to a manageable level and new land protection plans for charting
future acquisitions are in place. These developments enable the Administration to propose a major
increase relative to its previous requests for acquisitions of lands in nationally significant historic,
preservation, or recreation areas specifically designated by Congress. The amount requested, while
less than the level appropriated by Congress in 1984, meets the needs of an orderly acquisition
program.
The funds proposed for wetlands acquisition would meet a critical need to conserve habitat vital to
migratory birds, endangered species and other wildlife of Federal interest.
While the Administration is proposing to proceed with Federal land acquisitions in areas of national
significance specifically designated in Federal law, we still consider it appropriate to postpone grants
to States for purchase of lands and facilities for purely local recreation until the Federal deficit
situation improves. This proposal poses no personal or economic hardship, nor does it compromise
any Federal objective. About $400 million from prior years' appropriations remain available to
complete projects underway.
425
Fish and Wildlife Service
Agency: Department of the Interior
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change-.
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
455
470
483
480
513
500
547
534
581
567
621
607
2,745
2,688
456
471
462
472
493
494
522
513
557
546
595
584
2,629
2,608
+ 1
+ 1
-21
-8
-19
-7
-25
-21
-25
-21
-26
-23
-116
-80
Program Description
The Fish and Wildlife Service operates 419 national wildlife refuges and 75 fish hatcheries. The
Service is involved in fish and wildlife research, migratory bird management, endangered species
protection, animal damage control, and consultation on water resource development projects.
Current Status
The operations funding level has been relatively stable for several years, representing the continuation of programs for conservation, protection, and enhancement of fish and wildlife.
Certain Federal fish hatcheries serving local areas have been transferred to the States and internal
operations have been more efficiently organized by the closure of an unnecessary layer of area
offices. These cost savings have been applied to improved maintenance and operations at the same
budget level.
1985 Budget Proposals
The Administration's budget for Fish and Wildlife Service operational programs would increase
funding by about 1 percent in 1985 to maintain current program levels. Savings would be achieved
through additional hatchery transfers or closures.
The 1985 budget proposal emphasizes efforts to conserve valuable wetlands (-b$28 million) involving
Federal/State cooperation, and a lake liming and evaluation program ( + $6 million) to improve the
sport fishery and other values in acidified lakes and streams. The construction program would be
funded at a lower level (-$20 million) than in 1984.
Rationale
The Administration's proposal would provide for:
• continuation of program operations;
• mitigation of acidified surface waters and evaluation to improve sport fisheries for selected
demonstration projects;
• acquisition of Federal refuge wetlands to protect their intrinsic values and initiation of a state
wetland grant program;
• additional support for refuge maintenance improvements; and
• limitation of construction projects primarily to remaining health and safety problems in 1985.
426
National Park Service
Agency: Department of the Interior
[In millions of dollars]
1984
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority 1
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
680
720
796
790
823
811
860
844
900
892
942
936
4,320
4,274
682
722
746
771
771
782
796
795
825
824
862
861
3,999
4,033
+3
+3
-50
-20
-52
-28
-64
-49
-76
-69
-79
-75
-321
-241
1 The base for calculating 1985 current services is the appropriation amount shown for 1984 plus $64 million appropriated in 1983 but deferred by law until
1984, leaving a current services base program level in 1984 of $744 million, and a 1984 budget program level of $746 million.
Program Description
The National Park Service operates 334 park and historic areas comprising about 75 million acres.
There are approximately 250 million recreational visits to these parks and historic areas per year.
Current Status
The reduction in budget authority from current services stems from a one-time bulge of $64 million
in 1984 for capital improvement projects. This higher 1984 base results in artificially high current
service estimates in 1985 through 1989.
Administration budgets have called for a steady increase in dollars spent on maintaining our
national parks. The outlay trend tells the story:
Increased Funding for Park Operations
(Outlays in millions)
IpvpI
Year
Year
Level
1981
1982
198 3
1984 budget
1985 budget
Average annual change 1981-1985
607
616
676
722
771
41
Percent change
from prior year
1.5%
9.7%
6.8%
6.8%
1985 Budget Proposal
In 1985 the Administration proposes to continue its policy of allocating resources to enhance the
operation of the exisiting 334 units of the national park system, including rehabilitation of aging
facilities and utility systems through the multi-year park restoration and improvement program.
In addition to the funding shown here, $100 million would be provided for this initiative through the
Department of Transportation's Federal lands highway program for improving roads in the parks.
427
Rationale
By maintaining an enhanced level of operational funding and continuing the rehabilitation initiative, the Administration is investing in the nationally significant resources held in trust for all
Americans by the National Park Service.
Before 1981 Park Service operations were relatively shortchanged as funding focused on expanding
the number and types of units in the park system. This Administration has preferred to improve
visitor services and protection and eliminate the immediate critical problems of road deterioration,
hazardous visitor accomodations, and inadequate water and sewer systems within heavily utilized
parks. In the 1985 budget the Administration is proposing increased funds for land acquisition as
well as enhanced funding for park operations.
428
Geological Survey
Agency: Department of the Interior
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
382
408
430
428
458
456
488
486
518
516
548
546
2,442
2,432
382
408
396
395
426
425
450
448
476
475
504
504
2,252
2,246
-34
-34
-32
-32
-38
-38
-41
-40
-44
-42
-189
-185
Program Description
The Geological Survey (USGS) produces basic scientific data and maps of water, land and mineral
resources. Information is provided on the extent and character of these resources and on the
geologic processes which affect their development. Users of the products include Government agencies and various individuals and businesses in the private sector.
Current Status
Most of the information generated by USGS is important to the national economy but of such a
general nature that it would not normally be produced by any user. A standard set of topographic
maps covering the entire country and historic and current data on the quantity and quality of
surface and ground water resources are examples of such information. However, some of the users of
information generated by the USGS could produce similar data and maps themselves. The information sometimes addresses problems which are local or regional rather than national and is useful to
only a limited number of people.
1985 Budget Proposals
This budget proposal would continue the essential national work of the Geological Survey. Reductions below current services are proposed in mapping (-$3 million), geologic and mineral resource
surveys (-$13 million) and water surveys (-$18 million). Some of these reductions would be offset, and
the services provided, through increased user fees rather than through appropriations. A $3 million
increase is proposed to provide map data for the 1990 Census.
Rationale
The proposed 1985 level would reduce funding for programs where the State and local governments,
private companies, or other users could perform the work themselves or increase the fee they pay
the USGS program for providing the services.
• Coal producers would provide data to State regulatory authorities on the hydrologic consequences of proposed coal mines.
• State and local government and industry would replace Federal support for Water Resources
Research Institutes.
• Users would pay increased charges for cartographic and geographic information.
• Energy resource surveys would be reduced in favor of private sector research.
429
Bureau of Mines
Agency: Department of the Interior
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
138
149
145
144
153
152
161
160
169
168
177
176
804
799
138
149
119
127
126
126
132
131
138
137
145
144
660
665
-26
-17
-26
-25
-29
-29
-31
-31
-32
-32
-145
-134
Program Description
The Bureau of Mines carries out research to expand general knowledge of mining and to assist the
mining industry by developing new mining equipment which reduces hazards to miners' safety and
increases productivity. The Bureau also develops new minerals processing techniques which conserve scarce resources or make use of low grade domestic minerals. The Bureau's Mineral Institute
program provides grants to universities to carry out similar research. The Bureau also collects data
on worldwide mining production, which is used by Government policy makers, industry and academics.
Current Status
The Administration has previously proposed budget savings in the Bureau's research programs
because it feels that industry is capable of financing more of the developmental research which the
Bureau carries out for the benefit of the mining industry, and sometimes for the benefit of specific
companies. Changes to the tax code and improvement in the economy have provided incentives to
the industry to increase funding for internal research programs as well as university research.
1985 Budget Proposal
The budget would continue current levels of funding for information collection and for fundamental
research which enhances the base of scientific knowledge in the U.S. The budget would reduce funds
for the development and testing of prototype equipment and would eliminate funding for Mineral
Institutes.
Rationale
Savings in the health and safety research program are proposed because the Bureau has successfully
completed development of equipment to meet Federal mining health and safety standards. Savings
in other programs are proposed because the costs of development and testing of specific pieces of
mining equipment and research on problems of specific mining districts should not be financed by
the taxpayer for the direct benefit of an industry. The economic recovery should enable the mining
industry to take over these lines of research if they are considered worthwhile.
430
No funding is proposed for the Mineral Institute program because the program was only intended to
provide seed money to strengthen mining programs at participating universities. It has proved
successful in helping schools attract non-Federal support for research. The Mineral Institutes
currently receive 89% of their research money from non-Federal sources. Therefore, the Federal
subsidy to these institutes can be discontinued without seriously weakening their research programs.
431
Payments to States and Counties From Land
Management and Forest Service Receipts
Agency: USDA/DOI
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
Total
1985-89
1984
1985
1986
1987
1988
1989
1,098
1,098
1,135
1,135
1,292
1,291
1,445
1,444
1,587
1,586
1,696
1,695
7,156
7,151
1,098
1,098
1,073
1,073
1,158
1,158
1,273
1,272
1,378
1,378
1,459
1,458
6,340
6,339
-62
-62
-134
-134
-173
-172
-209
-208
-238
-236
-815
-811
Program Description
The three major programs which provide fiscal assistance to counties and States where Federal
lands or resources are located are:
• Payments to States from Forest Service receipts.—One-quarter of all national forest receipts plus
certain credits and deposit amounts must be paid to States. The States must spend the money
to benefit schools and roads in the counties where the national forests are located.
• Payments to States from Federal mineral leasing receipts.—Half of receipts derived from onshore leases are distributed to the States, except in Alaska where 90% of receipts are returned
to the State.
• Payments in lieu of taxes (PILT).—Payments are made to counties where Federal lands are
located, including lands managed by the Bureau of Land Management, the Forest Service, the
National Park Service, and other agencies. Payments are 75 cents per acre reduced by amounts
received the previous year from selected Federal programs, or 10 cents per acre, whichever is
higher.
Current Status
Payments to States from the Forest Service were sharply reduced in 1983 due to the very low
volume of timber harvested in 1982. Such payments are projected to increase in 1984 and the future
as the large volume of uncut timber under contract is harvested. Payments to States from mineral
leasing receipts will be high in 1984 because a statutory change requires the payment schedule to be
converted from semi-annual to monthly. This moves 17 months of payments into 1984, with 12
months' share being distributed in 1985. Future receipts are projected to increase steadily due to the
active Federal mineral leasing program.
1985 Budget Proposals
The budget proposal would place payments to States from Forest Service receipts on a basis more
comparable to the property tax on lands in private ownership. Estimated payments would be $285
million in 1985, compared to $144 million in 1983 and $204 million in 1984.
The proposal for the mineral leasing program would deduct one-half of the collection costs from the
States' share before receipts are distributed. Estimated payments would be $599 million.
432
The PILT program would remain at the 1984 level of $105 million, which represents full funding
under current statutes.
Rationale
Forest Service.—The budget proposal would provide more assurance to the counties on the amount
of revenue that would be available. It would guarantee that huge reductions such as experienced in
1983 would not recur. It would treat the Federal Government like other landowners for purposes of
property taxation. It would also be more equitable to the Government. Under the proposal there
would no longer be a "tax" on gross revenue with no recognition of the cost of generating that
revenue.
Mineral leasing.—States now receive about 50% of Federal mineral leasing receipts, but the Federal
Government bears the total cost of their collection. The budget proposal would deduct approximately
one-half of the cost of the Interior Department's royalty management program, $15 million, from
the States' share of receipts. As a result, all recipients of the revenues would equitably share in the
cost of collecting them.
433
Rent and Royalties on the Outer Continental Shelf
Agency: Department of the Interior
[In millions of dollars]
Current Services:
Budget Authority and
Outlays
1985 Budget Level:
Budget Authority and
Outlays
Change:
Budget Authority and
Outlays
Total
1985-89
1984
1985
-8,700
-7,400
-11,300
-11,600
-11,000
12,200
-53,500
-8,700
-7,400
-11,300
-11,600
-11,000
-12,200
-53,500
Level
1986
1987
1988
1989
Program Description
This program includes receipts to the Government from the competitive sale of Outer Continental
Shelf (OCS) oil and gas leases. Such a lease gives the lessee rights to explore the lease area and to
produce any oil and gas discovered subject to the provisions of applicable law and regulation. The
program also includes receipts from annual rentals on leases, royalties on production and other
forms of receipts to the Government which may be required by lease provisions. The funds collected
are treated as undistributed offsetting receipts applied against budget outlays as a whole rather
than any specific account or accounts.
Current Status
Receipt levels from this program depend upon a large number of factors including:
• The size, timing, and location of leasing activity as determined by the approved 5-year leasing
program. This leasing program is prepared and maintained through a lengthy and detailed
administrative process established by the OCS Lands Act. The process is designed to achieve a
proper consideration and balancing of economic, social, and environmental values and to
ensure that State and local governments, interested Federal agencies, firms in the industry,
other private entities and the Congress are adequately informed and have appropriate opportunity to comment and to make recommendations on the proposed program.
• The current and expected market prices for oil and gas.
• The capital available to industry for investment in lease acquisitions, exploration and development, and the alternative opportunities available for investing that capital.
Program changes instituted by this Administration have already achieved major increases in OCS
receipts by a policy of area-wide sale offerings, particularly in the Gulf of Mexico planning areas.
The Administration's 5-year leasing program also is designed to initiate exploration in "frontier"
OCS areas in order to improve our knowledge of what petroleum resources we may have in our
offshore lands.
1985 Budget Proposal
The budget estimates for the 1985 part of the approved 5-year program assume a reduction of OCS
receipts compared with previous years. Royalties are expected to be moderately below 1984 because
of lower expected gas prices. Bonuses from lease sales are expected to decline significantly compared
to 1983 and 1984 because several area-wide sales in the Gulf of Mexico planning areas have already
434
leased the most promising tracts and because of the relative geological promise and the timing of
the specific sale offerings in those years.
Rationale
The 1985 budget proposal assumes an orderly implementation of the approved program. It also
assumes that the long-standing standard processes for ensuring environmental protection, for coordination with State and local governments, for safety in exploration and development, and for
achieving fair market value will continue to be fully implemented.
435
Miscellaneous Interior Offsetting Receipts and
Operating Programs
Agency: Department of the Interior
[In millions of dollars]
1984
1985
1986
1987
1988
1989
Total
1985-89
-1,210
-1,175
-1,325
-1,322
-1,463
-1,470
-1,671
-1,681
-1,846
-1,854
-1,975
-1,983
-8,280
-8,310
-1,210
-1,175
-1,403
-1,374
-1,634
-1,576
-1,850
-1,812
-2,033
-2,016
-2,168
-2,160
-9,088
-8,938
-79
-52
-171
-106
-179
-131
-187
-162
-193
-178
-808
-628
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
Program Description
The funding levels reflected above include both receipt and spending programs. The major share of
the receipts are derived from Interior's minerals leasing, timber, recreation fee and Indian claims
programs. The major operating programs reflected above include funding for Indian land management and conservation and fiscal assistance for the U.S. territories and Trust Territory.
Current Status
Mineral leasing receipts are shared with the states in which the receipts are generated—50% in all
states except Alaska which receives 90%. From the remainder, 10% is deposited to the General
Fund to offset the cost of other programs in the Interior Department and 40% is deposited in the
Federal Reclamation Fund to finance water projects. Receipt totals are influenced by the market
price of minerals, general economic conditions and the pace of leasing on Federal lands. Generally
current services and budget levels are identical.
Current law imposes major restrictions on the collection of recreation user fees, many of which have
not been increased since the 1960's.
1985 Budget Proposals
The major changes in the Administration's 1985 budget would:
• Increase entrance and user fees collected at recreation sites operated by the National Park
Service and the Corps of Engineers by $31 million. (A similar proposal for Forest Service is
accounted for elsewhere.)
• Reduce funding of construction grants to the territories and Trust Territory by $38 million as
past projects are completed.
• Maintain other programs at the current service level of funding.
Onshore mineral leasing receipts are projected to total $1.3 billion in 1985 but no major policy
changes or initiatives are proposed.
436
Rationale
The Administration believes that those who benefit directly from Federal services should pay a
larger share of the costs of the services and the general taxpayer less. Under this policy a large
number of user charge proposals have been made by this Administration.
Funding for most previously initiated construction projects in the territories was completed in 1984.
437
Science, Medical Research and Cultural Programs
439
National Science Foundation
[in millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
Agency: National Science Foundation
Total
1985-89
1984
1985
1986
1987
1988
1989
1,326
1,242
1,390
1,348
1,452
1,409
1,514
1,467
1,573
1,526
1,632
1,583
7,561
7,334
1,326
1,242
1,507
1,457
1,575
1,530
1,644
1,596
1,711
1,661
1,773
1,720
8,210
7,964
+ 118
+ 109
+ 122
+ 120
+ 130
+ 128
+ 137
+ 134
+ 141
+ 137
+ 649
+630
Program Description
The National Science Foundation (NSF) chiefly supports basic research in all disciplines of science
and engineering, principally through project grants to researchers at academic institutions. NSF
also supports programs to help States and localities improve pre-college science education in the
Nation's schools.
Current Status
The Administration is committed to excellence and leadership in the pursuit of basic scientific and
engineering research vital to the Nation's long-term economic growth. The 1985 budget builds on the
Administration's already strong record of support for basic research through programs of the NSF
as well as those of other agencies such as the Departments of Defense, Energy, Agriculture and
Health and Human Services. For NSF, from 1981 to 1984, the budget has increased by nearly 30%,
from $1.0 to $1.3 billion.
1985 Budget Proposal
The 1985 budget for NSF would provide budget authority of $1.5 billion, an overall increase of 14%
over 1984. The increased funding would continue support for important ongoing research, initiate
several major new research programs, and make the capital investments necessary to enable
advances in promising scientific disciplines. Specifically, the proposed budget would:
• Enhance support of research and related professional training in science and engineering: The
budget would provide a 13% increase (from $1.17 billion in 1984 to $1.33 billion in 1985) for
support of basic research. Included in this enhanced support are:
• Investments to increase the productivity of the Nation's scientific and engineering enterprise.—These include: a 20% increase for improvement of research instrumentation,
principally at universities, to provide researchers with state-of-the-art scientific equipment;
and increased funding to enhance the access of academic scientists and engineers to
supercomputers.
• New mechanisms for improving the quality and relevance of research and related training.—
In addition to the support of research and related training through project grants, the
budget includes a new program of centers at universities to stimulate cross-disciplinary
engineering research and to provide additional valuable opportunities for advanced training of students. In addition, these centers would conduct research in areas important to
long-term U.S. economic competitiveness and would promote stronger linkages between
universities and industry.
441
• Selected investments to advance the frontiers of science in promising disciplines.—These
include the acquisition of an advanced supercomputer for the National Center for Atmospheric Research and initiation of construction of the Very Long Baseline Array radiotelescope: These investments would enable significant advances in radioastronomy, in the
earth, atmospheric, and ocean sciences, and in other fields.
• Strengthen science and engineering education: Proposed increases (from $87 million in 1984 to
$100 million in 1985) would provide important research training opportunities for graduate
students; would help universities retain our brightest young faculty; and, at the pre-college
level, would gain maximum leverage of Federal dollars through a few well-designed efforts.
Specific programs would include:
• increased support for the Nation's most promising graduate students through the NSF
nationally-competed graduate fellowship program;
• further support for the Nation's most talented young engineering and science faculty. This
support would be provided through the Presidential Young Investigators Research awards,
matched by funds from the private sector; and,
• continued support to enable scientists and educators to develop new or improved instructional materials for pre-college science and mathematics; to support local and regional
professional development activities for pre-college teachers; and, to provide annual recognition of the Nation's outstanding pre-college science and mathematics teachers.
Rationale
Support for basic research—and for related training and education activities—is an essential Federal investment for the Nation's long-term economic and technological growth and security. The
private sector lacks sufficient incentives to support adequately fundamental scientific research
because of its long-term nature and because the benefits of such research cannot be captured fully
by individual private firms.
NSF programs, in particular, are central to the continued health of scientific and engineering
research at universities. NSF support complements the basic research programs of other agencies.
The proposed budget recognizes that progress in improving pre-college education, including science
and mathematics education, will ultimately be achieved by the cooperation of a wide range of
institutions encompassing all levels of the public and private sectors. The programs of the NSF,
along with support for pre-college science and mathematics education proposed for the Department
of Education, serve as catalysts for State, local and private sector efforts.
442
Department of Energy General Science and Other
Funds
Agency: DOE/Smithsonian
[In millions of dollars]
Level
Current Services.Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
638
624
685
680
660
675
672
678
698
698
723
723
3,438
3,454
638
622
746
684
755
761
801
795
842
836
880
872
4,024
3,948
-2
+ 61
+4
+ 95
+86
+ 129
+ 117
+ 144
+ 138
+ 157
+ 149
+ 586
+494
Program Description
This category covers two interrelated Department of Energy (DOE) scientific programs—high energy
physics and nuclear physics. The purpose of these programs is to perform research on the structure
and properties of matter, to understand the basic forces of nature and their relationships, and to
study transformations of matter and energy at the most elemental level.
This category also includes a small amount ($115,000 in 1984, 1985, and the out-years) for the
Smithsonian Institution Canal Zone Biological Area Fund. Income from donations, subscriptions,
and fees are appropriated to this fund to defray part of the expenses of maintaining and operating
the Canal Zone biological area. The text below covers only the DOE general science programs.
Operationally, the DOE programs are concerned with "particle" physics and with maintaining
advanced accelerators where the experiments take place. A major part of all funding for high
energy and nuclear physics is required to meet the direct needs of the accelerator laboratories, and
to develop, maintain, and operate the major accelerator and detector facilities. Thus, the programs
continually face the problem of bringing large accelerators and expensive state-of-the-art detector
systems on-line without disrupting the operating programs. The operating budget also supports
university professors and graduate assistants in high energy and nuclear physics and provides solid
training for a wide variety of high technology positions in industry.
Current Status
The High-Energy-Physics (HEP) program now supports the three major U.S. facilities used to
accelerate elementary particles: Stanford Linear Accelerator Center (SLAC), the Fermi National
Laboratory, and the Alternating Gradient Synchrotron at Brookhaven (AGS). HEP also supports
university research groups including accelerator user-groups both in the U.S. and abroad, nonaccelerator experiments, detector development, and individual investigators.
The Nuclear-Physics program supports the operation of seven national facilities, four major university accelerators, and the operating expenses of 75 experimental groups located at universities around
the country. Individual investigators as well as theoretical nuclear physics groups are also supported
by this program.
Funding for the operating budgets of the high energy and nuclear physics programs has been stable
for the past several years, providing a relatively constant program level of effort. The steady
increases, past and planned, in these programs reflect primarily advanced accelerator research and
development and facilities construction.
443
1985 Budget Proposal
The 1985 budget would continue to fund these programs at a stable program level of effort. The
major features of the budget include:
• increased utilization of existing accelerator facilities, including operation of the newly completed (1983) Energy Saver Superconducting Synchrotron at Fermilab in the energy range from 500
billion to one trillion electron volts;
• completion of the construction at Fermilab of the Tevatron II (proton accelerator) and continuation of the Tevatron I (proton-antiproton colliding beam) project;
• completion of accelerator upgrades at the University of Washington and Yale University;
• continued construction of the Stanford Linear (electron-positron) Collider and the upgrade of
existing accelerators at Brookhaven National Laboratory;
• completion of nuclear physics accelerator upgrades at Argonne National Laboratory and the
Bates facility at the Massachusetts Institute of Technology; and
• initiation of an advanced nuclear physics electron accelerator facility at Newport News, Virginia, sponsored by the Southeastern Universities Research Association.
The budget also includes funds for continuation of preliminary research, and development activities
for the design of a possible next-generation high-energy particle physics accelerator.
Rationale
With a relatively stable level of operating funds and large capital budgets for facilities, the United
States has stayed at the forefront of science in both high energy and nuclear physics. The U.S. has
accelerator facilities that are unique in the world, and laboratories in the U.S. host research teams
from around the world. The budgets for the general science programs in 1984 and 1985 continue this
policy of stable funding and provide for the construction of facilities with research capabilities not
presently available anywhere in the world.
The Federal Government maintains the commitment to support basic research in high energy and
nuclear physics not only because it yields an ever deeper understanding of the constituents of
matter and energy and their role in the physical universe, but also because it provides a national
base of knowledge, techniques, instrumentation, and skilled manpower for many critical industries.
Nuclear knowledge, techniques, instruments, and applications pervade modern American society.
These serve as the basis for our national defense strategy, for therapeutic and diagnostic medical
applications, for the generation of electricity, and for a large and diverse array of applications in
industry and other areas of science.
444
Arts and Humanities
Agency: NEA/NEH/IMS
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
323
310
340
326
357
348
374
366
390
379
406
394
1,867
1,812
323
310
282
314
283
293
284
290
285
286
286
286
1,420
1,469
-58
-12
-74
-54
-90
-76
-105
-93
-120
-108
-447
-342
Program Description
The programs of the National Endowment for the Arts, the National Endowment for the Humanities, and the Institute of Museum Services provide discretionary grants to State and local governments and non-profit organizations in support of the humanities and the arts.
Current Status
In 1985 constant dollars, outlays for the arts and humanities peaked in 1980, after more than an
eleven-fold increase in the previous decade. In contrast, constant dollar outlays over the 1980 to 1989
period are expected to stabilize and recede slightly from the peak.
Recent restrained funding levels have been adequate to fund a broad array of small competitive
programs. These range from fellowships for individual artists and scholars to operating support for
museums and cultural institutions.
1985 Budget Proposal
The 1985 budget proposes a moderate 13% reduction from the 1984 enacted level. All grant programs, with the exception of two small museum programs, would be funded at slightly reduced
levels.
Rationale
The 1970's growth rate for these cultural activities was unsustainable. Federal encouragement of
cultural activites can be achieved at below peak funding levels, particularly if priority is given to
increasing private sector funding. Toward this end, these cultural agencies, and the President's
Committee on the Arts and Humanities, have launched activities to enhance private investment in
cultural activities nationwide. These efforts include expansion of matching grant programs; initiation of grant and technical assistance programs to help local arts agencies and emerging arts
organizations expand their financial base; and efforts to link businesses with educational and arts
institutions seeking financial support for major new endeavors.
445
Biomedical Research and Research Training
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
4,476
4,193
4,698
4,710
4,940
4,939
5,182
5,181
5,421
5,420
5,650
5,649
25,892
25,900
4,476
4,193
4,572
4,509
4,694
4,693
4,813
4,812
4,928
4,926
5,038
5,037
24,045
23,976
-127
-201
-246
-247
-369
-370
-493
-494
-612
-612
-1,847
-1,924
Program Description
This grouping includes biomedical research and training programs funded by the National Institutes
of Health (NIH). These programs support biomedical and behavioral research at universities here
and abroad; finance research in Federal laboratories; and subsidize the training of researchers.
Current Status
In constant 1985 dollars, funding for NIH biomedical research and training nearly tripled in the two
decades between 1962 and 1982. Since 1982, the annual average real growth rate has been reduced
from 5.2% over the 1962-1982 period to 4.4% over 1982-1989.
1985 Budget Proposal
The 1985 request includes an increase of $95 million, 2% over the 1984 enacted level and 14% over
the 1983 enacted level. New and competing research awards would be given the highest priority.
NIH would support 5,000 such grants in 1985; the average project grant award would increase 5%
over the 1984 level. Basic research would be emphasized.
In constant 1985 dollars, the proposed outlay level of $4.5 billion for 1985 would exceed the 1981 peak
for NIH biomedical research and training activities by almost $100 million.
Rationale
Holding 1985 budget growth below the inflation rate would help keep the long term growth trend of
these NIH activities at a more sustainable level for the remainder of the 1980's.
Research project grants should continue to receive the highest funding priority because they are the
primary means by which fundamental discoveries emerge.
446
Behavioral Research and Research Training
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
384
334
381
381
419
419
437
437
455
455
473
473
2,165
2,164
384
334
373
372
385
385
396
396
406
406
416
416
1,977
1,976
-34
-34
-41
-41
-49
-49
-56
-56
-187
-188
-7
-8
Program Description
The Alcohol, Drug Abuse, and Mental Health Administration (ADAMHA) focuses on alcohol, drug
abuse and mental health problems by funding research in prevention, lifestyles and other areas to
reduce the prevalence of related disorders. ADAMHA supports behavioral research at universities,
finances research in Federal laboratories, and subsidizes the training of researchers.
Current Status
The 1985 budget represents continued support for a strong and dynamic program of research and
research training on the major behavioral and substance abuse disorders.
1985 Budget Proposal
In 1985, $356 million is proposed for ADAMHA research, a $10 million or 2.9% increase over 1984.
In addition, $17 million, the 1984 level, would support 982 research trainees. New and competing
research project grants would remain a high priority and ADAMHA would support 500 such grants
in 1985, an increase of 21 over the 1984 anticipated level.
Rationale
In 1985, increases would be targetted on research project grants. This mechanism has been the
primary means for enhancing increased understanding of problems associated with mental health
and substance abuse.
447
Research, Libraries, Smithsonian and Public
Broadcasting
Agency: DOC/ED/HHS
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
740
780
779
818
827
839
878
863
927
912
979
984
4,390
4,416
740
780
668
788
685
739
704
704
726
719
749
745
3,532
3,695
-111
-30
-142
-100
-174
-159
-201
-193
-230
-239
-858
-721
Program Description
This program grouping includes Federal support for the National Institute of Education (NIE), the
National Institute for Occupational Safety and Health (NIOSH), the National Center for Education
Statistics (NCES), library programs, the Library of Congress, the Smithsonian Institution, the
Corporation for Public Broadcasting (CPB), and the public telecommunications facilities, planning,
and construction program (PTFP).
Current Status
In 1985 constant dollars, Federal funding for these disparate activities peaked in 1974. Since 1980,
expenditures for all activities except the Smithsonian have declined in constant dollars.
1985 Budget Proposals
The 1985 budget proposes to reduce total Federal spending on these activities by $30 million over
what would be required to maintain the current program level. Over the 1985-89 period, the
Administration proposals, if adopted, would result in savings of $721 million and would:
• provide increased support for NIE in 1985 and then maintenance of that level through 1989;
• maintain support for NCES at its 1984 funding level over the five year period;
• provide increasing support for the Smithsonian Institution programs, and more limited growth
for the Library of Congress;
• steadily reduce Federal support for CPB beginning in 1986;
• eliminate support for NIOSH occupational health training demonstration projects, but maintain support for other NIOSH applied research;
• eliminate entirely Federal support for libraries and for the PTFP Program.
Rationale
Increased support for NIE would fund efforts to improve the quality of American education, while
continued support of NCES would ensure a steady stream of data on the condition of American
education.
448
Increased support for Smithsonian programs continues the Federal Government's commitment to
provide for the protection of the Nation's vast collection of artifacts, for programs of research and
exhibitions aimed at public education, and for the upkeep and safety of Smithsonian museum
buildings.
The Corporation for Public Broadcasting provides funds to the 260 public radio and 176 public
television stations which comprise the public broadcasting network. The proposal to phase down
Federal support for public broadcasting recognizes the predominance of alternative funding sources
and that Federal support is no longer as necessary as it may have been during the industry's
infancy.
Federal support for surveillance and research into the causes of and methods to prevent occupational hazards should be continued. However, after 7 years, it is time to turn over support for the
NIOSH demonstration occupational health training program to private industry, which is the
primary beneficiary of such training, and individuals, who may fund their own training through
existing Federal student assistance programs.
The PTFP program was intended to help expand the availability of noncommercial, educational,
informational, and cultural television and radio programs. Since over 95% of the United States
currently receives public broadcasting programming, there is no reason to continue Federal funding
for this activity.
The Federal Government has provided more than $2 billion over the past 25 years to assist public
libraries to expand and improve services. As a result, access to public libraries is now virtually
universal, and Federal support is no longer essential.
449
Central Services and Functions
451
National Oceanic and Atmospheric Administration
Agency: Department of Commerce
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
Total
1985-89
1984
1985
1986
1987
1988
1989
1,001
1,023
1,118
1,090
1,194
1,184
1,227
1,219
1,281
1,274
1,338
1,330
6,159
6,097
1,001
1,023
884
924
917
925
934
936
1,020
1,003
1,080
1,062
4,835
4,851
-234
-166
-277
-259
-293
-283
-262
-270
-258
-268
-1,324
-1,246
Program Description
The National Oceanic and Atmospheric Administration (NOAA) provides: 1) national weather forecasts and severe weather warnings; 2) management and protection of marine fisheries and mammals; 3) development and production of aeronautical and nautical maps and charts; and 4) oceanic
and atmospheric research.
Current Status
Over the past 15 years since NOAA was established in 1970, the agency's annual expenditures have
increased by almost 75% in constant dollars. This cost increase is a result of expanded responsibilities in fisheries management and environmental research and development (R&D), and the introduction of new advanced weather and satellite technologies. The Administration has proposed that
escalating costs be offset by eliminating non-essential services and subsidies to special interest
groups.
1985 Budget Proposal
The 1985 budget proposal would decrease Federal support for NOAA programs by 20% below
current services. The Administration proposal emphasizes priority NOAA life safety programs, such
as detection of tornados and hurricanes and high-priority R&D, and targets resources to NOAA
programs that provide greatest benefit for the general public and that protect the public interest.
Thus, Federal marine fisheries activities would be focused on management and protection of stocks;
industry assistance and market development programs would be terminated. Equipment modernization would be provided for the National Weather Service, while forecasting services for specific user
groups would be terminated. Lower priority research programs would be curtailed, while essential
longterm research, e.g., acid rain, would be emphasized. Increases would provide an upgraded threeweather-satellite system, while a costly, duplicative fourth satellite would be terminated. Savings
would be achieved by increasing the cost of aeronautical and nautical maps sold to the public.
Finally, operational costs would be reduced by contracting-out functions to the private sector
whenever practicable.
Rationale
The appropriate Federal role in marine fisheries is ensuring that resources are well managed and
available to future generations, not developing new markets and products for the industry.
453
When products are produced by the Government for specific user groups, e.g., aeronautical and
nautical charts for general aviation and recreational boating, the beneficiaries should pay higher
fees and not force the general taxpayer to subsidize these services.
An upgraded three-weather-satellite system would maintain the 24-hour coverage of the United
States essential for nationwide severe weather warnings and gather global meteorological data for
general weather forecasts. Funding for an unnecessary fourth satellite, that would add over $300
million to the budget from 1985-1989, would be eliminated.
454
Census, Economic Statistics, and Productivity
Improvement
Agency: Department of Commerce
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
186
198
209
206
245
236
326
300
459
413
624
567
1,863
1,722
186
198
214
206
254
246
334
309
466
422
631
574
1,898
1,756
+ 5
+9
+ 10
+ 8
+ 8
+ 7
+ 8
+ 7
+ 7
+ 36
+ 34
- 1
Program Description
The Department of Commerce's Census Bureau and the Bureau of Economic Analysis (BEA) are the
principal sources of data on the population and economy of the United States. The Census Bureau
conducts surveys and censuses on population and on various sectors of the economy. The Bureau of
Economic Analysis maintains the national income and product accounts, the balance of payments
accounts, and other measures of overall economic activity. In addition, the Department of Commerce's Office of the Under Secretary for Economic Affairs provides economic analysis on a wide
range of policy issues and advises the Federal Government and various industries on ways to
increase private sector productivity and innovation.
Many Census Bureau surveys are conducted every 5 or 10 years and, therefore, have periodic
increases and decreases in their funding requirements. These include the 1987 economic, agriculture, and government censuses, funding for which increases from 1985 to 1988, and the 1990
decennial census.
Current Status
Overall, the statistical programs have been funded at current services levels and focused towards
the needs of Government policy makers. Those surveys that served narrow interest groups and were
not essential to Federal policy makers have been eliminated or conducted less frequently. Efforts
have also been made to reduce respondent burden.
Essential base programs have been maintained and important new efforts have been undertaken.
For example, data collection began in the fall of 1983 for a major new household Survey of Income
and Program Participation. This survey will provide new and better data on income, wealth, and
eligibility for and participation in various government programs, such as aid to families with
dependent children, unemployment insurance, workers compensation, and veterans benefits.
1985 Budget Proposal
The 1985 budget continues to restrain programs of lower priority while funding important new
initiatives. Funding is provided at roughly current services levels to continue current economic and
demographic data collection and analysis. New data on international services and investment
transactions and a monthly survey of the domestic services industries would be funded in 1985. Outyear funding is provided for the 1987 and 1990 periodic censuses.
455
Rationale
In the past several years, there has been increasing concern over the large statistical discrepancies
in the balance of payments accounts, which are presumed to be largely in the capital account. The
new data on international services and investment are expected to correct some of this discrepancy
by providing detailed information on such items as interest earned, or paid, on foreign investments
and other international financial services transactions.
The domestic services industries, particularly financial services, are an important, and growing,
sector of the economy. The new monthly services survey would provide more detailed data on this
sector. In addition, increased out-year funding would ensure adequate planning and pretesting of
methodology for the 1990 decennial census.
456
Patent, Trademark, and Copyright
Agency: DOC/LC
[In millions of dollars]
1984
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
143
194
150
154
157
157
162
163
154
158
781
786
143
194
•
157
154
166
160
182
180
201
198
211
210
210
213
970
961
+ 9
+ 7
+ 32
+ 26
+ 44
+ 41
+ 49
+ 47
+ 56
+ 54
+ 190
+ 175
Program Description
The activities of the Patent and Trademark Office (PTO) of the Department of Commerce and the
Copyright Office of the Library of Congress stimulate innovation and creativity by protecting the
intellectual property rights of inventors, designers, and authors.
Current Status
These activities are for the most part self-sustaining with users paying the direct costs of services.
New patent and trademark user fee legislation (P.L.97-247), which was enacted in 1982, established
full cost user fee recovery of costs associated with granting patents and registering trademarks. The
bill provided that a lower fee would be charged to small inventors.
At the time the legislation was enacted, the Administration made the following commitments to
PTO users: (1) to reduce patent pendancy rates to 18 months by 1987 (from peak levels of 25-26
months); (2) to reduce the time to first action on a trademark registration request to 3 months and
the time to disposal of a trademark registration request to 13 months (from peak times of 11 and 24
months); and (3) to automate PTO by the 1990's.
1985 Budget Proposal
The 1985 budget includes an increase of 6% above current services for an increase in the number of
patent examiners to reduce pendancy rates and for continued automation of PTO operations.
Rationale
The activities of the Patent and Trademark Office and the Copyright Office are important central
functions appropriately carried out by Government. Increases in the patent examiner core and
automation of PTO operations would enable PTO to issue valid patents more promptly and provide
for wide and timely dissemination of new technology.
457
National Bureau of Standards and
Telecommunications
Agency: Department of Commerce
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
130
136
141
148
151
150
162
160
172
171
183
182
809
811
130
136
142
147
142
147
152
151
163
162
175
173
773
780
-9
-9
-8
-8
-37
-30
-9
-3
-10
-9
Program Description
Since the early 1900's, the Federal Government has been responsible for developing, maintaining
and providing the Nation's scientific and technical standards and measurements that promote ease
of commerce between vendors and consumers. The National Bureau of Standards (NBS) and the
National Telecommunications and Information Agency (NTIA), both within the Department of
Commerce, have the lead in the development of civilian standards. NTIA is also responsible for the
Federal Government's telecommunications policy.
Current Status
NBS funding over the 1981-1984 period has gradually shifted from supporting applied research that
directly benefits private industry to facility upgrades and the development of the NBS scientific and
technical personnel resources. These personnel resources are required for standards development
generic to American industry and Government. During this same period, NTIA has reduced its
outlays, in real terms, by 43% and its staff by 40%.
1985 Budget Proposal
The Administration's proposal would maintain the capabilities of the Federal Government at their
current level. Minor programmatic increases would permit greater involvement in analyzing the
implications of, and developing standards for, a worldwide digital communications network and new
materials processing and production. In addition, facilities improvements, including purchase of a
supercomputer for faster, more complicated research, and modification of a reactor that would
permit measurement of the properties of high technology materials, would also be undertaken.
These increases would be partially offset by eliminating direct Federal funding of research on fire
safety and building performance and by reducing the Federal Government's role in computer
standards development.
Rationale
The development of a worldwide digital communications network should not occur without American political, technical, and industrial contributions. High technology products represent the newest
area of domestic and international competition for America's industries. For example, a potential
$200 billion global market for biotechnology-based products is projected by the year 2000. This
market can be tapped more quickly if standards describing bioprocesses are available.
458
Fire safety and building standards are viewed as primarily the responsibility of State and local
governments. Additionally, the industries involved in voluntary computer standards development
are strong enough to be able to assume more of the role that the Federal Government currently
plays.
459
International Trade Administration
Agency: Department of Commerce
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
178
193
187
181
196
194
205
203
214
213
224
222
1,025
1,014
178
193
174
176
184
183
190
191
201
200
210
209
958
958
-13
-5
-12
-11
-15
-12
-13
-13
-14
-14
-66
-56
Program Description
The International Trade Administration (ITA) promotes U.S. exports, administers U.S. export and
import control programs, and provides trade policy advice to the Secretary of Commerce.
In addition, ITA administers trade adjustment assistance (TAA), a program authorized by the 1974
Trade Act. TAA provides technical assistance and loans to firms injured by import competition.
Current Status
ITA outlays increased by 76% between 1980 and 1984 in constant dollar terms. (Most of this increase
is due to transfers of programs to ITA.)
The Administration is committed to helping U.S. businesses develop and expand exports.
1985 Budget Proposals
The Administration would maintain total ITA funding at roughly the 1984 level. As proposed in
1984, TAA would be terminated. Increases would be provided for the administration and enforcement of export controls, and for analyses of the global competitiveness of U.S. industries.
Rationale
Termination of trade adjustment assistance is justified because:
• U.S. trade laws provide remedies against unfair import competition. The fact that a firm has
been harmed by import competition should not in itself constitute justification for special
Federal assistance; indeed, it is unfair to firms that have been harmed by other causes; and
• high default rates—delinquencies, liquidations, and writeoffs totaling 61% suggest that the
loan program has failed to produce the intended adjustment.
A funding increase for export controls would:
• improve the effectiveness of export controls for national security and foreign policy purposes;
• improve administration of export controls by tightening monitoring of distribution licenses,
establishing a foreign availability data base, increasing technical support for international
coordination of export controls, and adding computer capacity; and
460
• improve enforcement of export controls by increasing field office staff and headquarters intelligence staff.
The bargaining power of U.S. trade negotiators would be strengthened by increasing the quantity
and quality of economic analysis of trade in specific product-country combinations.
461
Internal Revenue Service
Agency: Department of the Treasury
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
3,326
3,283
3,523
3,422
3,731
3,656
3,950
3,873
4,201
4,122
4,383
4,302
19,788
19,375
3,326
3,283
3,560
3,488
3,756
3,676
3,968
3,886
4,191
4,105
4,428
4,339
19,903
19,494
+37
+ 66
+ 25
+ 20
+ 18
+ 13
-11
-17
+ 45
+37
+ 115
+ 119
Program Description
The Internal Revenue Service (IRS) is charged with administering the tax law. It carries out this
mission through a broad spectrum of program activities including: routine processing of tax returns
and other documents; identifying unreported tax liabilities; investigating tax fraud; and collecting
assessed, but unpaid, taxes.
Current Status
During this Administration, IRS has given priority to modernizing and streamlining service operations and improving tax enforcement.
A key enforcement initiative in the 1983 and 1984 budgets was the dedication of over 5,400 positions
and $300 million to improvement of identification and collection of unpaid taxes, with a related
receipts increase of $4.6 billion over the two year period. In the Tax Equity and Fiscal Responsiblity
Act (TEFRA) of 1983, Congress provided IRS with significant new compliance tools including greatly
expanded information reporting, penalties for submitting or preparing false returns, and amendment of the statutory interest rate on underpayments and overpayments to better conform to
current economic conditions.
To modernize its operations, in 1982 IRS began replacing the basic machinery of the tax administration system with state of the art equipment. This initiative was extended in 1983 and 1984 to
peripheral tax processing activities and selected operational functions.
1985 Budget Proposal
The 1985 budget reflects an increase of $37 million over current services. Within this relatively level
funding, significant productivity and management savings would be redirected to improve compliance, to implement legislative mandates, and to continue efforts at modernizing operations through
the application of automated data processing and related technologies.
Rationale
One principal challenge currently facing tax administration is how best to contain the $90 billion
annual tax gap, that is, taxes owed but unpaid. In 1985, IRS seeks to strengthen its compliance
efforts and close known gaps in unreported revenue, overstatement of deductions, and outstanding
accounts receivable. Through these enforcement activities, IRS would generate over $30 billion in
additional direct revenue in 1985.
462
A second major objective for IRS in 1985 is to continue to enhance the efficiency and effectiveness of
the tax administration system through technology. Over two-thirds of the requested increases in this
area are related to projects begun in prior years, including: replacement of service center processing
equipment; utilization of optical scanning for certain documents; and implementation of an automated collection system. New projects focus on the creation of management information systems, the
improvement of communications capability, and the automation of selected operational functions.
This modernization program is critical to the viability of the tax administration system in the
coming decade. It would enable IRS to streamline its operations by utilizing updated data input,
processing, and operational technologies. Although the major benefits in personnel and interest
savings would not accrue for several years because of system design and acquisition costs, the 1985
budget reflects substantial savings from capital investments in technology made in earlier years,
which have been reallocated to finance the budget initiatives.
463
General Services Administration Property Supplies
and Records
Agency: General Services
Administration
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1983
Total
1985-89
460
604
498
618
550
510
606
549
664
607
723
641
3,040
2,926
460
604
485
485
545
419
602
505
659
517
718
587
3,008
2,513
-13
-133
-4
-90
-5
-45
-5
-90
-5
-55
-31
-413
Program Description
The General Services Administration (GSA) provides centralized administrative services to Federal
agencies in the following areas:
• procurement and nationwide distribution of supplies and equipment services;
• Government-wide maintenance and preservation of valuable records and archives;
• regulatory oversight for procurement and management of automated data processing (ADP)
and telecommunications equipment and services; and
• management of Federal real property assets, including construction, repair and alterations and
dispersal, and maintenance of federally occupied buildings.
Current Status
Overall there is no significant change planned in resource levels from prior years. The Administration has, however, focused GSA efforts on implementation of a number of government-wide management improvements. These initiatives include a reduction of workspace, review of the Federal field
structure, and increased surplus property sales. (See chapter on Management Initiatives).
1985 Budget Proposals
Highlights of the President's 1985 budget proposal include the following:
• $90 million for construction and acquisition of Federal buildings;
• $40 million for maintenance of 14.8 million cubic feet of Federal records by Federal Records
Centers; and
• $16 million for development and conversion of management information systems to support all
public building service programs.
Rationale
Funding for construction and acquisition of Federal buildings is necessary to meet the goal of
increased occupancy in federally owned, as opposed to leased, space.
464
Maintenance of records in Records Centers rather than agency space represents significant cost
savings to the Government. The average cost of maintaining records in agency space is $12.90/cubic
foot compared to storage in Records Centers at $0.89/cubic foot.
Development of an automated information system for real property management would improve
GSA's building operations and resource allocation in response to customer agencies' requirements.
465
District of Columbia Payments and Net Loans
Agency: District of Columbia
Government
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
567
567
555
555
575
575
594
594
612
612
611
611
2,947
2,947
567
567
469
469
473
473
477
477
480
480
483
483
2,382
2,382
-86
-86
-103
-103
-117
-117
-132
-132
-128
-128
-564
-564
Program Description
The Federal Government provides the District of Columbia Government with a Federal payment to
offset the costs of the Federal presence in the District of Columbia. Additionally, the Federal
Government makes payments to the city for annual contributions to the District's pension fund as
well as reimbursements to the District for water and sewer services provided to Federal buildings.
Also, the city borrows capital from the U.S. Treasury for the financing of capital projects.
Current Status
The District currently finances its capital projects at the prevailing Treasury rate. It is more costly
for the city than financing its projects in the tax exempt bond market. Additionally, it unnecessarily
entangles the Federal Government in the finances of a local government.
The District Government fully appreciates this dilemma and recently embarked on its first step
toward financial independence by issuing revenue anticipation notes to meet its operating cash
needs.
1985 Budget Proposal
The 1985 budget provides for a record increase in the Federal payment (from $386 million to $425
million) and assumes the successful entry of the District into the tax exempt bond market to finance
capital projects.
Rationale
The Administration supports the efforts of the District of Columbia Government to enter the private
market. This would be consistent with the policies of the Administration to eliminate the Federal
Government as a unnecessary financial intermediary. Furthermore, the District would save millions
of dollars each year if it were in the tax exempt bond market
466
Central Services and Functions
Agency: Various
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
562
538
591
577
789
740
918
866
1,051
996
1,192
1,133
4,541
4,312
536
513
574
560
788
738
905
849
1,038
984
1,180
1,123
4,484
4,254
-25
-25
-17
-17
-13
-17
-13
-12
-12
-10
-56
-58
- 1
- 1
Program Description
Included in this category are a number of disparate activities involving central services functions of
the general government. Among these are energy information programs, selected labor activities,
Treasury fiscal service operations, General Services Administration property receipts and other
miscellaneous offsetting receipts and payments.
Current Status
Overall, there is no significant planned change in the level of effort from earlier years for operating
accounts. There are, however, some major changes in assumptions underlying receipt estimates.
1985 Budget Proposals
Highlights include:
• Bureau of Labor Statistics.—Funding will be increased to continue the revision of the Consumer Price Index.
• Treasury fiscal operations.—Mint inventories will be drawn down to reduce funding requirements for coin production.
• GSA real property receipts.—Substantial lowering of previous estimates will bring projected
receipts into line with current expectations based on two years' experience with the program.
• Panama Canal.—Increased operating requirements and receipts reflect an improved economic
climate for the maritime industry.
Rationale
For operating programs, the budget presents a current services approach with continued emphasis
on management improvements. In receipt and miscellaneous payments activities, the budget estimates reflect the most realistic projections possible based upon currently available information.
467
Departmental Administration and Other Overhead
469
Domestic Agency Administrative Expenses
Agency: Various
[In millions of dollars]
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1986
1987
1988
1989
Total
1985-89
3,217
3,296
3,454
3,441
3,694
3,687
3,926
3,925
4,168
4,149
18,458
18,498
3,042
3,151
...
1985
3,037
3,132
Level
3,083
3,165
3,301
3,280
3,476
3,475
3,672
3,669
3,875
3,851
17,407
17,439
+ 5
+19
-134
-132
-153
-161
-217
-212
-253
-257
-293
-297
-1,052
-1,059
Program Description
This category covers the departmental administrative overhead costs of domestic agencies. It consists primarily of departmental or major bureau salaries and expense accounts in the Departments
of Agriculture, Health and Human Services, Labor, Education, Energy, Housing and Urban Development, Transportation, Interior, Justice, Commerce, and Veterans Administration. These accounts
finance activities associated with overall direction of the agencies and their components.
The cost of the direct management of Federal programs, including entitlement programs, is discussed in other factsheets, as are the costs of Federal employee health benefits and life insurance
and Federal employee workers' compensation.
Current Status
Along with the rapid expansion of Federal programs during the 1970's, departmental administrative
overhead increased. Outlays for 1970 were $2.2 billion in 1985 constant dollars. By 1980, they were
$3.8 billion, or 70%, higher.
Since 1981, the first three budget rounds of belt-tightening for domestic programs and a vigorous,
multi-faceted program to improve management in the Federal Government have successfully reduced costs in this category. As a consequence, constant dollar outlays for overhead in the enacted
1984 budget are $3.3 billion, a decline of more than $500 million, or 14%, from 1980 in real terms.
1985 Budget Proposal
In 1985, the total outlays for departmental administrative overhead would be $3.2 billion, a decline
of about $650 million, or 17%, from 1980 in real terms.
The President's 1985 budget proposes savings from current services in each year of the 5-year
forecast period through improved efficiencies and increased productivity. As the above table in
nominal dollars shows, the total outlay savings from current services for 1985 through 1989 would
be $1.1 billion. The average annual savings would be 6%, beginning with 4% in 1985 and steadily
increasing to 7% in 1989.
Despite these savings, there would be some overhead increases from 1980 in real terms. Generally,
the increases are to support higher domestic program levels. In Interior, the overhead increase is for
Inspector General activities. The increases are:
471
Overhead Increases
(1985 constant dollar outlays in millions)
1980
Agriculture:
Farmers Home Administration
Other
Interior
Law enforcement
316
170
75
84
1985
budget
1989
budget
331
256
87
113
330
244
87
115
Rationale
One of the central themes of this Administration has been to improve the efficiency of Government.
The President's 1985 budget proposals for this category reflect savings from continuing efforts to
reduce domestic program levels; minimize wasteful spending; and improve agency operations.
With real savings of 14% from 1980 to 1984 and with average annual savings from current services
of 6% through 1989, it would be optimistic to expect significant additional savings without further
large reductions in the domestic program levels that require administrative overhead support.
472
Federal Employee Health Benefits
Agency: Office of Personnel
Management
[In millions of dollars]
Level
1984
1985
1986
1987
1988
1989
Total
1985-89
1,506
1,309
1,342
1,339
1,848
1,554
2,087
1,756
2,344
1,965
2,631
2,185
10,252
8,800
1,506
1,309
1,342
1,339
1,415
1,314
1,522
1,429
1,621
1,534
1,722
1,637
7,622
7,252
-432
-240
-566
-328
-723
-431
-909
-548
-2,630
-1,547
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
Program Description
The Federal employees' health benefits (FEHB) program provides health care and insurance for
Federal workers and annuitants. There are about 3.7 million participants in the program, nearly
40% of whom are annuitants. Unlike most employee health programs, the cost of FEHB is shared by
the Federal Government and employees, with employees paying about 40% and the Government
paying about 60% of the total cost.
Current Status
About 180 private carriers contract with the Federal Government to provide employee health
benefits. Of these, nearly 80% are health maintenance organizations. The Office of Personnel
Management, which manages the FEHB program, expects to make payments to health carriers of
$7.8 billion in 1985. The Federal Government, including the Postal Service, contributes about $4.7
billion of that amount; the balance is derived from contributions by employees, annuitants and other
sources.
Federal employees are free to choose from among a wide range of health care options. Along with
the large number of carriers participating in the program, this freedom has tended to encourage
competition that has restrained cost increases. When average premiums increased by over 20% in
1982, employee selection of low-cost plans held overall cost increases in the FEHB program to 4%.
1985 Budget Proposal
The Administration has introduced legislation that would build on the competitive features of the
FEHB program and result in large outlay savings. The key features of the Administration proposal
are:
• basing the Government share of FEHB costs on a general price index rather than the limited
index that is used currently;
• dropping the current 75% limit on the Federal contribution to any plan and replacing it with a
system that would provide employees with rebates if they choose low-cost plans;
• encouraging a wider range of plans to participate, thereby giving employees a wider range of
choices; and
• requiring the U.S. Postal Service and other off-budget entities to pay their fair share of the
health benefits costs of their annuitants.
473
These measures would reduce outlays 20% from the current services levels currently projected for
the period 1986-89.
Rationale
In a time of rapidly rising health care costs, the FEHB program is a vivid example of how
competition can be used to restrain health care cost increases. Free choice by consumers from
among a variety of health plans is more effective than centrally-imposed Government mandates and
regulations.
The Administration's proposal for FEHB would give consumers an even wider range of choices. With
more alternatives and incentives to choose low-cost plans, the Administration's proposal is estimated
to reduce FEHB outlays by 20% (or $1.5 billion) in the period 1986-89.
Some proposals for FEHB would mandate certain forms of coverage and reduce the competitive
forces in the FEHB program. Rather than giving Federal employees a wider range of choices, these
proposals would reduce the flexibility that Federal employees now have to choose the health plan
that best meets their needs. Mandated coverage for certain forms of health care is estimated to
increase costs for both employees and the Government by as much as 50% over current levels.
474
Social Insurance Administrative Expenses
Agency: Department of Health and
Human Services
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
5,622
72
5,863
165
6,106
268
6,369
373
6,568
482
6,794
1,361
31,700
5,626
20
5,767
145
5,971
247
6,167
351
6,307
459
6,472
1,223
30,684
+4
-52
-97
-20
-135
-21
-202
-22
-261
-23
-322
-138
-1,017
Program Description
Social insurance administrative expenses includes the administration costs of four major programs:
Social Security, Civil Service Retirement, Medicare, and Unemployment Compensation.
• The costs of administering the old-age, survivors, and disability insurance programs are funded
from the Social Security trust funds.
• Federal grants pay 100% of the costs of State administration of unemployment compensation
programs under State and Federal laws.
• The costs of administering Civil Service Retirement and Disability Insurance are funded from
the Civil Service Retirement and Disability trust funds.
• Funds are transferred from the hospital insurance and supplementary medical insurance trust
funds to support research, survey and certification of facilities, Medicare contractors, and other
activities.
Current Status
Funding for social insurance administrative expenses more than doubled, in constant 1985 dollars,
between 1965 and 1982. Funding increased an average of about $209 million a year in real terms.
1985 Budget Proposals
The 1985 budget proposes spending of $5.8 billion on social insurance administration. Spending will
increase $100 million in real terms a year from 1982 to 1985, a reduction in the average amount of
growth from the 1965-82 period by more than one-half. Within this restrained growth level, the
administration of social insurance programs has been redirected to focus on quality control, productivity improvement, and other priorities.
The 1985 budget proposes $1.6 billion for medicare administration, an increase of $51 million over
the 1984 level. Funds would also be included for the Prospective Payment Assessment Commission,
which was created by the Social Security Amendments of 1983. The budget proposal includes a 1984
supplemental request to fund studies of the medicare prospective payment system, mandated by the
Tax Equity and Fiscal Responsibility Act and the Social Security Amendments of 1983. The budget
also proposes legislation to improve the administration of medicare, including:
475
• increasing the flexibility of the Secretary of Health and Human Services in contracting for
medicare claims processing by allowing for reimbursement to contractors on other than a cost
basis and eliminating the right of providers to select individual contractors;
• devolving the functions of end-state renal disease networks to other entities with the capacity
for data collection and monitoring;
• streamlining claims processing functions; and
• improving service to beneficiaries.
For 1985, Federal grants will finance an estimated 49,000 staff years at State and local offices which
process unemployment compensation payments. The Department of Labor and the States will
implement a quality control system to measure uniformly the accuracy of unemployment insurance
payments in a representative sample of claims.
The budget proposes to continue two major initiatives in the Social Security Administration:
• Improvement of SSA's automated processing capability under the systems modernization plan,
with an investment of $210 million in new spending authority. The effects of system enhancements have already resulted in improved service, more accurate payments, and increased
productivity.
• Reform of the disability insurance appeals process to ensure that reviews of continuing disability eligibility are fair and humane, while ensuring that only those who are legally entitled to
benefits are being paid.
Rationale
The 1985 budget proposals would strengthen administration of social insurance programs and
improve service; invest in efforts that will reduce the future growth in spending levels; improve
productivity of the Federal workforce; and conserve trust fund dollars by ensuring that benefits are
paid accurately to those who are legally eligible.
476
Federal Employee Group Life Insurance
Agency: Office of Personnel
Management
[In millions of dollars]
1984
1985
1986
1987
1988
1989
Total
1985-89
-640
-692
-749
-837
-936
-1,046
-4,260
-640
-692
-749
-837
-936
-1,046
-4,260
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change-.
Budget Authority
Outlays
Program Description
The Federal Employees Group Life Insurance fund finances insurance premiums paid to private
insurance companies for Federal employees group life insurance and expenses of the Office of
Personnel Management in administering the program for non-Postal Service employees. Premium
costs for the regular program are met by withholding 24 cents biweekly from the salaries of
employees for each $1,000 of life insurance and a 50% matching by employer-agencies. The optional
program is financed by withholding from employees' salaries or retirees' annuities.
Life Insurance Program Statistics
1985 estimates
Active employee participants
Annuitant participants
Insurance in force, active employees
Insurance in force, annuitants
2,494 million
1,345 million
$171 billion
$21 billion
Current Status
The Federal Employees Group Life Insurance Act of 1980 increased basic coverage for participants
under the age of 45 and offered additional optional coverages. The carrier-held contingency reserve
for the basic program was reduced to $50 million as of June 30, 1976 and is expected to remain at
this level. Excess income from the program over benefit payments and other expenses is deposited in
the U.S. Treasury to the credit of the Employees Life Insurance Fund.
1985 Budget Proposal
Total Federal Group Life Insurance Fund reserves will increase from an estimated $5.9 billion in
1984 to $6.6 billion in 1985. The difference between receipt and benefit payments under the policy
will continue to be held in reserve for paying future life insurance claims.
477
Rationale
The Federal Group Life Insurance Program is a fully-funded program and therefore places no drain
on the Federal Treasury. Surpluses are projected to increase; therefore, no 1985 reform has been
proposed.
478
Federal Employees Workers' Compensation
Agency: Department of Labor
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
216
216
207
207
215
215
225
225
231
231
250
250
1,128
1,128
216
216
191
191
178
178
184
184
189
189
206
206
948
948
-16
-16
-37
-37
-41
-41
-42
-42
-44
-44
-180
-180
Program Description
The Department of Labor provides workers' compensation benefits to Federal employees or their
survivors for job related injuries, illnesses, or death. Benefits include payment of medical expenses
and tax-free cash income which can be 75% of the pre-tax salary for an employee with dependents.
The Federal agencies reimburse the Department of Labor for costs of benefits paid for their
employees, help determine eligibility for benefits, and continue paying a disabled worker's full
salary during the first 45 days of a disability.
Current Status
The costs of FECA in this Administration have been restrained by a cooperative effort of the
Department of Labor and other Federal agencies to improve the quality of determinations made in
the program. Examination of initial claims have been improved to assure that benefits are paid only
for those who are disabled and whose injury or illness arose out of and in the course of Federal
employment. Controls have been established to prevent excessive medical payments. The rolls of
those receiving monthly disability checks are regularly examined to assure that the employee is still
disabled, that widows have not remarried, and that children are still dependents. The results of this
effort are impressive:
• Federal workers recognize that benefits will be paid only to those eligible. Whereas from 1977
to 1980 the number of FECA claims averaged 30,622 a year, from 1981 to 1983 they averaged
22,676.
• The number of people receiving monthly disability checks has stabilized. Whereas from 1977 to
1980 the number had increased by 5%, from 1981 to 1983 the number decreased by 6%.
1985 Budget Proposal
Legislation will be proposed to make the timing of cost of living adjustments to monthly FECA
benefits the same as that proposed for civil service retirees. This would result in delaying the cost-ofliving adjustment now scheduled to be paid with the April 1985 checks to January 1986, with
subsequent adjustments paid in January of each year. Budget savings in FECA from this proposal
would total $180 million in the 1985-1989 period. In addition, the Administration continues to urge
the Congress to enact proposed FECA reforms which would facilitate the rehabilitation and reemployment of disabled Federal workers, including assigning a rehabilitation specialist to a disabled
employee and increasing the duty of the employing agency to attempt to design a job that a
partially disabled worker could perform. The reforms would also recognize FECA as a wage replacement, not retirement, program and tie benefit increases to increases in Federal pay.
479
Rationale
Until Congress enacts the reform legislation, cost-of-living adjustments should be the same as for
civil service retirement, since those eligible for FECA income payments have the option of choosing
civil service disability retirement or survivor annuities.
The primary goal of disability programs should be, to the extent possible, the restoration of the
disabled to their full potential.
480
Low-Income Benefit Administrative Expenses
Agency: HHS/USDA
[In millions of dollars]
1984
1985
1986
1987
1988
1989
Total
1985-89
4,424
4,358
4,785
4,774
5,049
5,035
5,308
5,291
5,560
5,545
5,809
5,795
26,510
26,440
4,424
4,375
4,873
4,858
5,182
5,167
5,470
5,453
5,740
5,725
5,998
5,984
27,263
27,187
+17
+ 88
+84
+ 133
+ 132
+ 162
+ 162
+ 180
+ 180
+ 190
+ 189
+ 753
+747
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
...
Program Description
The Federal Government helps finance the cost of State and local administration of means-tested
welfare programs.
Current Status
The Food Stamp, Medicaid and Aid to Families with Dependent Children (AFDC) programs are
administered through State welfare offices. The Federal Government currently matches State administrative expenses at a 50% rate for these programs on an open-ended basis. Some expenses,
such as those for anti-fraud activities and management information systems, receive a higher
Federal match.
The Child Support Enforcement (CSE) program finances most State and local administrative expenses for establishing paternity and collecting support from legally liable absent parents. In AFDC
cases, these collections offset State and Federal welfare payments.
The Supplemental Security Income (SSI) program is administered through Social Security offices
with the Federal Government financing 100% of the costs. In addition, the Federal Government also
funds the administrative costs of supplemental benefit programs for 26 States.
This factsheet also covers the Federal administrative costs of the Departments of Agriculture
(USDA) and Health and Human Services (HHS) to operate these programs.
1985 Budget Proposal
The President's budget would increase administrative spending for these programs by $753 million
over current services during 1985-89, primarily due to effects of legislative proposals in AFDC and
Medicaid which are described in separate factsheets. In addition, the budget proposes to reform
financing rules for Child Support Enforcement.
Rationale
The proposed change in administrative funding for these programs is the result of several factors:
• The President's budget would mandate comprehensive programs of work-related activity for
AFDC applicants and recipients in all States. Although the proposal results in benefit savings
which are reflected in the AFDC factsheet, the savings are partially offset by increased
administrative costs.
481
• The 1985 budget includes several incentives for States to improve Medicaid administration.
These incentives include bonuses for reducing payment errors and increasing debt collection.
• To improve program administration at the Federal level, the Health Care Financing Administration of HHS would assume responsibility from the Office of Inspector General for administering grants to States for State Medicaid Fraud Control Units.
• The above increases in administrative costs would be partially offset through productivity
gains expected in the Federal management of these programs. As a result, the President's
budget request does not include a full inflationary increase for Federal administrative costs.
• The budget proposes a package of reforms to the Child Support Enforcement program. These
proposals are designed to give States powerful new financial incentives to increase collections
from absent parents in both AFDC and non-AFDC cases, and to reduce administrative costs
through new laws and procedures. The budget proposals would set up new performanceoriented bonus systems, modestly reduce the matching rate for CSE administrative costs,
require States to implement laws such as automatic mandatory wage withholding when support payments are not made on time, and establish new Federal payments to encourage
collections in interstate cases. Overall, these proposals increase federal CSE costs beginning in
1986, but yield offsetting savings through reduced AFDC costs, which are reflected in a
separate factsheet.
482
Legislative Functions
Agency: Legislative Branch
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
Total
1985-89
1984
1985
1986
1987
1988
1989
1,463
1,345
1,426
1,460
1,504
1,526
1,500
1,520
1,568
1,575
1,580
1,576
7,577
7,657
1,463
1,345
1,416
1,451
1,500
1,522
1,496
1,516
1,564
1,571
1,575
1,572
7,552
7,632
-10
-9
-4
-4
-4
-4
-4
-4
-4
-4
-25
-25
Program Description
This category includes funding for the Senate, the House of Representatives, and the several
legislative branch agencies, specifically the Congressional Budget Office, the Architect of the Capital, the Library of Congress, the Government Printing Office, the General Accounting Office, and
other smaller agencies.
Current Status
Outlays for legislative functions grew at an average annual rate of 5.6% in constant dollars from
1970 to 1980 and will increase by 3.4% per year from 1981 to 1985. This pattern is similar to, but
somewhat higher than, that of total budget outlays, excluding interest.
Over short periods of time, the legislative functions budget is affected significantly by construction
activity. This is the case in 1985 and 1986, when substantial renovation and restoration of Library of
Congress buildings will be done. Otherwise, the legislative functions budget grows at a relatively
stable rate. An exception in 1985 is the General Accounting Office, for which an increase of about
20% is requested.
1985 Budget Proposals
The budget for legislative functions for 1985 and beyond is essentially at the current services level
and is projected to grow very little in nominal terms through 1989. In constant dollars, the budget
for this activity shows a decline of 2.0% per year from 1985 to 1989.
The 1985 increase for the General Accounting Office is for increased staff, program enhancements,
and higher uncontrollable costs. An increase of 500 (or 10%) is requested for permanent staff
positions, of which 480 would be filled by new auditors. Two thirds of the new auditors would be
devoted to automatic data processing and telecommunications activities. The requested increase
would also finance the replacement of the current AT&T CENTREX system with a PBX voice/data
integrated system and the purchase of microcomputers, and cover anticipated higher administrative
costs, e.g., travel, average pay per workyear, standard level user charges, etc.
The 1985 increase requested in the legislative functions budget for travel is 18%. A substantial part
of this is for GAO. Comparable percentages for the judicial and executive branches are 7% and
4.5%, respectively.
483
Rationale
In accordance with law, the legislative functions budget is presented in the President's budget
without review and in the amounts submitted by the agencies.
484
CHAPTER 9
Security Assistance, Development Aid,
Space, and Defense-Related Programs
485
Security Assistance, Development Aid,
Space, and Defense-Related Programs
Overview
National Interest Programs
This grouping consists of programs that for the most part have attained priority status as the
Administration's foreign policy, international security, and national leadership objectives have been
defined and developed. The grouping includes Defense-related Programs (primarily nuclear weapons
programs in the Department of Energy), Foreign Assistance Programs, Administration of Foreign
Affairs, Space Programs, Coast Guard and Strategic Stockpiles. Except for the growth in Coast
Guard expenditures, between 1965 and 1974 real spending for this set of programs fell sharply, from
a level of $39.6 billion in 1965 to a low of $18.1 billion in 1974 (outlays in constant 1985 dollars).
SECURITY ASSISTANCE. DEVELOPMENT AID. SPACE AND DEFENSE
HISTORICAL PERSPECTIVE
$ BILLIONS
( c o n s t a n t 1985 d o l l a r s )
45-1
During the late 1970's, there was a gradual increase in funding, but the dollar levels still did not
match the needs. Consequently, increases to the current services funding level are proposed for most
programs within this component of the non-Department of Defense (DOD) budget, following increases in 1981-84. Overall, the President's 1985 budget calls for a $4.3 billion increase to $41.0
487
billion over the 1985 current services level of $36.7 billion for National Interest Programs (budget
authority in constant 1985 dollars).
When viewed in historical perspective, it is clear that the rising budget levels for National Interest
Programs proposed in the 1985 budget are not unprecedented. As shown in the table below, constant
dollar outlay levels for this function recorded in the early 1960's exceeded the levels proposed for
1985-1989. Moreover, the real GNP forecast for the late 1980's will be about twice as large as that
which supported the higher 1960's level.
Trends in National Interest Programs
(Outlays in billions of 1985 dollars)
Average annual outlays
Proposed 1982
to 1986
Proposed 1985
to 1989
1.4
3.9
5.4
1.8
5.8
1.8
-0.3
2.4
3.0
2.6
6.8
5.3
2.3
6.6
2.3
-0.3
3.9
3.6
0.4
1.8
8.4
5.2
2.8
6.9
2.3
-0.3
4.1
3.7
0.7
25.3
70%
33.5
92%
35.7
98%
1962 to 1966
Strategic Stockpiles1
Defense-Related
Development Aid
Administration of Foreign Affairs
Civil Space Program
Coast Guard
Financial Accounts1
Foreign Military Sales 1
Other Security Assistance
Central American Aid
Total National Interest Programsi
Percent of 1962-66 level
1
1967 to 1971
1972 to 1976
1977 to 1981
-0.7
6.5
10.8
1.3
12.0
1.0
-0.1
-0.5
6.0
-0.4
4.2
7.8
1.4
11.6
1.4
-0.1
0.3
3.3
-1.1
3.4
5.7
1.5
6.5
1.6
-0.2
-0.2
3.4
36.3
29.3
81%
20.4
56%
Minus sign denotes offsetting receipts.
Indeed, the 1985 and out-year spending levels proposed for these priority purposes appear to be high
relative only to the severely depressed levels that occurred during the mid-1970's. The low levels of
that period are attributable to a confluence of factors including large, unsustainable one-time sales
from the strategic stockpile, and lower levels of real spending for NASA (following completion of the
Apollo space program), security assistance, and foreign economic aid. By 1981, however, constant
dollar National Interest spending had already risen by 67% to about $30 billion from the mid-1970's
low of about $18 billion, as these temporary factors reversed and additional requirements for
security assistance and foreign policy support emerged.
From 1981 to 1985, constant dollar spending for National Interest Programs has risen by a further
22% in response to a wide variety of new requirements identified by the Administration—including
a substantial upgrade in the capabilities and effectiveness of the U.S. Information Agency, provision
of more adequate security assistance, and augmentation of the emergency preparedness program.
While these requirements were not fully anticipated in earlier Administration budget plans, the
1985 request represents a significant restoration of spending levels that have been traditionally
required to maintain an effective foreign policy, national leadership in space, and a variety of
defense-related programs. The President's 1985 budget for National Interest Programs, as well as
the projection for the rest of the decade, also includes a substantial realignment of priorities among
programs within the overall function.
488
Changing the Trend in National Interest Programs
(Outlays in billions of 1985 dollars)
1981 actual
Strategic Stockpiles
Percent change from 1981
Defense-Related
Percent change from 1981
Development Aid
Percent change from 1981
Administration of Foreign Affairs
Percent change from 1981
Civil Space Program
Percent change from 1981
Coast Guard
Percent change from 1981
Financial Accounts1
Percent change from 1981
Foreign Military Sales
Percent change from 1981
Other Security Assistance
Percent change from 1981
Central American Aid
4.0
4.5
5.8
1.8
6.0
1.9
-0.6
3.4
3.4
Total National Interest Programs
Percent change from 1981
1
30.1
^L^pp^
2.6
-35%
6.6
48%
5.5
-4%
2.3
33%
6.7
13%
2.4
22%
-0.3
53%
4.6
35%
3.7
11%
34.3
14%
1985
Pr°P°sed
2.0
-49%
7.6
71%
5.8
1%
2.5
45%
6.7
12%
2.4
24%
-0.3
51%
5.2
50%
3.9
16%
0.8
36.7
22%
1989 proposed
1.7
589%
8.7
96%
4.7
-18%
2.9
65%
7.2
20%
2.2
14%
-0.2
63%
3.5
3%
3.6
7%
0.6
35.0
16%
Minus sign denotes offsetting receipts.
The decline in spending for Strategic Stockpiles from 1981 to 1985 primarily results from the
substantial progress which the Administration has made in implementing the Strategic Petroleum
Reserve, which has permitted a tapering off in outlays for this program.
The increased spending since 1981 for Defense-related programs, is largely driven by the Strategic
Weapons Modernization Program and the need to upgrade the Department of Energy's nuclear
weapons research, production, and testing facilities. Likewise, the emergency prepareness increases
are integrally related to the Administration's overall national security objectives.
The 65% real increase projected over the decade of the 1980's for Administration of Foreign Affairs,
including the Department of State and the international communications agencies, provides an
illustration of previously unanticipated budget requirements. These activities are personnel and
overhead intensive; it has been discovered that significant loss of mission capability occurred during
the 1970's and that substantial additions to personnel, facilities, security, and specialized functions
will be needed in order to support adequately U.S. foreign policy objectives.
After declining throughout the 1970's, spending for the Space Program has now been stabilized and
will rise substantially above current services levels in the out-years, as the manned space station
development activities gain momentum.
Similarly, spending for the Coast Guard has increased because of continuous modernization needs
during the last decade.
For Foreign Military Sales, Other Security Assistance, and Central American Aid, the proposed 1985
spending of $9.8 billion is a 45% increase from the 1981 level of $6.8 billion (outlays in constant 1985
dollars). About $800 million or 26% of the increase of $3.1 billion is for Central American Aid which
is intended to provide for a comprehensive plan of support for democratic elements, reform pro-
489
grams, and human freedom in Central America. Other proposed increases are intended to help key
friends and allies build adequate defense forces, to provide further support for the peace process in
the Middle East, and to secure base rights and facilities.
Proposed Funding of National Interest Programs
(Outlays in billions of 1985 dollars)
1985
1986
1987
1988
1989
Total
Strategic Stockpiles
Defense-Related
Development Aid
Administration of Foreign Affairs
Civil Space Program
Coast Guard
Financial Accounts1
Foreign Military Sales
Other Security Assistance
Central American Aid
2.0
7.6
5.8
2.5
6.7
2.4
-0.3
5.2
3.9
0.8
1.9
8.4
5.2
2.6
6.8
2.3
-0.3
4.3
3.7
0.6
1.7
8.6
5.3
2.9
6.9
2.3
-0.3
3.8
3.7
0.7
1.7
8.7
5.2
2.9
7.1
2.2
-0.2
3.7
3.7
0.7
1.7
8.7
4.8
2.9
7.2
2.2
-0.2
3.5
3.6
0.6
9.1
42.0
26.2
13.9
34.6
11.5
-1.3
20.5
18.5
3.4
Total National
Programs
36.7
35.6
35.7
35.5
35.0
178.5
1
Interest
Minus sign denotes offsetting receipts.
Overall, the funding levels proposed in the 1985 budget closes what had previously been in many
cases a growing gap between recognized needs and projected budget paths. The added fiscal burden
is modest and the national interests served are of paramount importance.
The factsheets on particular aspects of national interest programs are grouped as follows:
Strategic Stockpiles includes factsheets on the National Defense Stockpile and the Strategic Petroleum Reserve. Defense related contains factsheets on Atomic Energy Defense (Department of
Energy) and Federal Emergency Prepardness (Federal Emergency Management Agency). Development aid includes six factsheets on the various aspects of this subfunction. The NASA space
program and the Coast Guard each has one factsheet. Financial Accounts includes the US quota in
the International Monetary Fund, Exchange Stabilization Fund, and repayment of loans to the
United Kingdom. The Foreign Military Sales Financing factsheet includes the foreign military sales
credit program and the Guarantee Reserve Fund. Other Security Assistance includes the Economic
Support Fund and military grant assistance and training. Finally, there is one factsheet covering
assistance to Central America.
As in other chapters, separate factsheets on some items in this category are not included so
factsheet totals will not add to the category total. Factsheets have not been written for peacekeeping
operations and Israeli facilities and off-setting receipts (mostly AID).
490
Strategic Stockpiles
491
National Defense Stockpile
Agency: General Services
Administration
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
23
144
27
19
29
28
30
30
31
31
33
32
149
139
23
144
28
19
30
29
31
31
32
32
34
34
155
145
+ 1
+ 1
+ 1
+ 1
+ 1
+ 1
+ 1
+ 1
+ 1
+ 1
+ 6
+ 6
Program Description
The General Services Administration maintains the National Defense Stockpile of strategic and
critical materials for use in a national emergency. This responsibility includes the acquisition and
disposal of commodities for the stockpile, as well as the operating activities associated with the
maintenance and storage of goods.
Current Status
Administration efforts to restructure the stockpile have been limited by a congressional prohibition
on the sale of excess silver. Silver represents the most valuable excess commodity in the stockpile—
roughly 137 million ounces are available for sale. In order to restructure stockpile holdings, new
sales are needed to generate income into the fund for additional purchases.
1985 Budget Proposal
For the period 1984 to 1989, projected obligations for acquisitions are $120 million each year,
disposals of excess, commodities range from $78-120 million, and operating expenses run from $23-34
million.
The Administration request proposes a current services purchase level of $120 million to support
priority acquistions for the stockpile. These purchases are predicated on an income stream dependent on the reauthorization of silver sales occurring during the latter part of 1985. The proposed level
of silver sales for 1985 is very modest—slightly above 5 million ounces.
Without the reauthorization of silver, there would not be sufficient income to support the projected
level of new purchases.
Rationale
The President has repeatedly committed the Administration to a restructuring of the National
Defense Stockpile. The budget implements that objective in the least disruptive manner consistent
with national defense priorities and conditions in the commodities markets.
By law stockpile sales must not disrupt the market for any commodity. The reauthorization of silver
sales at the level proposed in the President's budget should not materially affect its market price.
493
Strategic Petroleum Reserve
Agency: Department of Energy
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
809
2,366
2,843
2,457
2,414
2,430
2,397
2,346
2,445
2,417
687
2,036
10,785
11,687
809
2,360
2,337
2,025
1,940
1,962
1,903
1,864
1,934
1,911
2,001
1,964
10,115
9,727
-6
-506
-431
-474
-468
-494
-482
-511
-506
+ 1,314 - 6 7 1
-72
-1,960
Program Description
The Strategic Petroleum Reserve (SPR) is the emergency stockpile of crude oil which the Federal
Government is accumulating in underground storage facilities along the coast of Texas and Louisiana. The SPR is designed to help ensure the Nation against any severe disruptions which might
occur in world oil supplies.
Current Status
The Administration has made substantial progress in implementing the program since 1981. The
growth of the reserve continues at a steady and ambitious pace.
• More than 385 million barrels (MB) of oil were stored in SPR as of mid-February 1984. The
program is more than half-way toward its long-term goal of 750 MB.
• The amount of oil stored in SPR has more than tripled in the past 3 years. SPR is currently
being filled at a rate of 186,000 barrels per day (B/D).
• Development of SPR has been a high priority objective of the Administration. Nearly $12
billion has been spent on this program during a period of tight budget restraint—$3.8 billion in
1981, $3.9 billion in 1982, $1.9 billion in 1983 and $2.4 billion in 1984.
1985 Budget Proposal
The budget proposes that the SPR be filled at the rate of 145,000 B/D—an ambitious fill rate, but a
reduction from the current rate.
• The current services estimate assumes that the SPR fill rate continues at 186,000 B/D.
• The proposed budget assumes that the rate continues at 145,000 B/D starting in 1985.
• The proposed change from current services would reduce Federal spending by almost $2.0
billion in outlays through 1989.
Rationale
What is proposed is a marginal change in an important program, providing for its continued
expansion and enhancement of national security, but at a somewhat reduced rate, consistent with
sound management and the need to bring Federal spending under control.
The level of oil now in SPR already provides a significant level of protection.
494
• 385 MB is the equivalent of approximately 90 days of U.S. 1983 net oil imports. The original
1975 legislation establishing the SPR called for a stockpile approximately equal to 90 days of
oil imports at that time. Given the reduction that has occurred in oil imports since that time,
the SPR today already provides a level of protection in line with that intended in its original
legal mandate.
• The 385 MB of oil already stored is also the equivalent of 750 days—over two years—of U.S. oil
imports from the Persian Gulf.
Maintaining the higher fill rate would provide marginal additional benefits, but it would provide
them at a high cost. For example:
• The higher fill rate would increase the stockpile by only 15 MB or 3% by the end of 1985, but
it would increase program outlays by over $400 million in that one year alone.
• What is true for 1985 is also true for the other years: in no year is SPR 10% larger under the
higher fill rate than under the lower fill rate.
• While the higher fill rate has a negligible effect on SPR size, the nearly $2 billion increase in
outlays that result from the higher rate is a significant budgetary drain at a time of large
deficits.
Considerations of sound program management support the lower SPR fill rate proposed in the
budget.
• The proposed fill rate would essentially fill all permanent storage capacity as it becomes
available. Not more than 5% of storage capacity would be left unfilled at any time. This
approach leaves a margin for error and provides program flexibility. The higher fill rate would
press capacity limits and provide no such flexibility.
• Attempting to maintain the higher fill rate could complicate program implementation. Such an
approach could be reminiscent of the early stages of the program, when management considerations were subordinated to excessively rapid pumping of oil into the ground—and waste and
mismanagement resulted.
The SPR is only one part of an overall strategy for dealing with turbulence in world oil markets.
Many of the other factors which affect the American people's ability to cope with a crisis are
favorable. The impact of any disruption on the American people, consequently, would be changed
only marginally, if at all, by a higher SPR fill rate.
• There is substantial unused capacity in worldwide oil (approximately 10 MB/D) and North
American gas (2 to 5 TCF) that could become available should a supply interruption take place.
• The Federal program responsible for the gasoline lines and energy shortages in past disruptions—Federal oil allocation and Government administered price ceilings—has been dismantled. With that program in place, gas lines were inevitable—regardless of the size of SPR. With
that program dismantled, market forces will work to eliminate shortages. A slightly larger
SPR would have no effect on this key issue.
• There are an estimated 4.7 billion barrels of oil stocks held by governments and private
industry worldwide that would be in place for use during a supply disruption.
495
Defense-Related Activities
497
Atomic Energy Defense
Agency: Department of Energy
[In millions of dollars]
1984
1985
1986
1987
1988
1989
Total
1985-89
6,555
5,900
6,981
6,475
6,903
6,809
6,722
6,575
6,716
6,541
6,866
6,644
34,189
33,044
6,712
6,002
7,807
7,134
8,731
8,187
9,187
8,760
9,377
9,165
9,580
9,470
44,682
42,716
+ 158
-102
+826
+ 660
+ 1,828
+ 1,378
+ 2,465
+ 2,185
+ 2,660
+ 2,624
+ 2,714
+2,826
+ 10,494
+9,671
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority , .,.
Outlays
Program Description
The Atomic Energy Defense program of the Department of Energy (DOE) is responsible for the
design, testing and production of all nuclear weapons (missile warheads, bombs and artillery shells)
used in the strategic and tactical nuclear forces of the United States. This program also provides for
the production of nuclear materials for incorporation in the weapons, and for the safe management
of the nuclear wastes resulting from the production of nuclear materials.
Current Status
Funding for this program has been increasing in recent years primarily to support the modernization of nuclear weapons, in parallel with the ongoing modernization of strategic and tactical nuclear
forces within the Department of Defense (DOD). During most of the 1970's, the total number of
nuclear weapons in the nuclear stockpile steadily declined, as the rate of retirements of old weapons
exceeded the rate of production of new weapons. During this same period, the average age of the
nuclear weapons increased significantly. This period was also accompanied by a steady aging and
deterioration of the facilities used in weapons and materials production. The current multiyear
program is replacing older nuclear weapons with new weapons having improved command and
control and safety features. The DOE weapons complex is also being refurbished to enable it to meet
the higher weapons production workload needed to support DOD weapons systems such as the Bl-B
bomber, the Trident submarines, and the Peacekeeper missile.
1985 Budget Proposal
The 1985 budget would continue funding to support the modernization of nuclear weapons. It would
provide the minimum funding needed by DOE to support the schedules for delivery of nuclear
weapons to the DoD as authorized by the President. It also would provide increased support for
research and development on several weapons concepts that may be used in future ballistic missile
defense systems. In addition, the 1985 budget proposes necessary increases for the support of
environmental, safety and safeguards programs at the various DOE weapons R&D and production
facilities.
• The environmental and safety programs would significantly upgrade existing pollution control
and radiation protection systems at DOE facilities. Also included would be the accelerated
cleanup of chemical wastes that resulted from program activities in previous decades.
• The safeguard systems at DOE facilities would be substantially reinforced to offer a greater
assurance that any clandestine or overt actions against these facilities would be rapidly
detected and overcome.
499
The budget would continue activities to dispose of waste from DOE defense programs, the construction of an R&D facility in New Mexico to demonstrate the disposal of such wastes, and also the
construction of a facility in South Carolina to solidify nuclear wastes currently being stored temporarily in tanks in liquid form.
Rationale
The principal reason for the growth in the DOE Atomic Energy Defense program is the need to
modernize nuclear weapons. More modern weapons will incorporate improvements in command and
control and safety features. The improvements in command and control features would help increase the assurance that surviving weapons could be effectively used following a Soviet first strike,
thus increasing the credibility of our nuclear forces as a deterrent. The safety improvements would
provide additional assurance that nuclear weapons cannot be accidently detonated.
Modernization of nuclear weapons would be required even if the Soviet threat had remained
unchanged. However, the threat has grown significantly, and consequently new, modernized DoD
weapons systems are required. This determines the specific production schedules of new nuclear
weapons compatible with these systems.
500
Emergency Preparedness
Agency: Federal Emergency
Management Agency
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
429
402
464
428
491
453
519
474
546
499
573
525
2,594
2,379
429
402
542
489
600
549
681
630
776
717
804
815
3,403
3,200
+ 78
+ 60
+ 108
+ 96
+ 162
+ 156
+ 230
+ 218
+ 230
+ 291
+809
+ 820
Program Description
The Federal Emergency Management Agency (FEMA) is the major agency responsible for civil
defense and emergency preparedness planning. Civil defense is the largest component of these
activities.
Current Status
The Administration sees a continuing need to increase emergency preparedness programs, including
civil defense, that were neglected in the past.
1985 Budget Proposal
The Administration proposes a 50% increase—$82 million—in the civil defense program to better
prepare communities to respond to all types of natural and other emergencies. Further increases are
proposed in subsequent years. This increase is partly offset by minor changes in other preparedness
programs.
Rationale
This program has received minimal funding for many years. The result has been deterioration in
the capability of communities to respond to emergencies. This multi-year proposal will provide the
needed equipment, facilities and plans to assist Federal, State, and local officials to respond quickly
to emergencies of all kinds.
501
Development Aid
503
Multilateral Development Banks
[In millions of dollars]
Total
1985-89
1984
1986
1987
1988
1989
1,389
1,564
1,453
1,390
1,516
1,643
1,576
1,762
1,635
1,448
7,569
7,808
1,644
1,513
..
1985
1,324
1,505
Level
Current Services.Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
Agency: Department of the Treasury
1,236
1,452
1,287
1,273
1,287
1,502
1,287
1,590
1,287
1,229
6,383
7,046
+320
+8
-154
-112
-166
-117
-229
-142
-289
-172
-348
-219
-1,186
-762
Program Description
The multilateral development banks provide investment capital and technical assistance to developing nations. They have become the largest source of development lending to the Third World,
lending $20 billion in 1983. Each institution makes loans on both hard (market-related) and soft
(very low interest) terms. Loans are repaid over periods ranging from 15 to 50 years. The hard loans
are supported mainly by bank borrowings on world capital markets backed by donor guarantees.
Soft loans are more costly in budgetary terms since they are supported almost entirely by contributions from industrial country bank members. Contributions for soft lending account for the bulk of
U.S. contributions to the banks.
Because of the relatively low repayment stream from the banks' long-term loans and because of the
continuing need for development finance, the banks' resources are periodically replenished to meet
demand for new lending. The total amount of new contributions and industrialized country shares
are determined in international negotiations, with contributions paid in installments over several
years. The amounts requested for the multilateral banks in the budget represent annual contributions to the four institutions of which the United States is a member: the World Bank and its
affiliates, and the regional banks for Latin America, Asia and Africa.
Current Status
Over the last three years, the United States has made significant progress toward fulfilling funding
commitments made by previous Administrations to the banks. This includes not only completing
payments to the most recent round of replenishments, but clearing up all but $14 million of $250
million in payments to earlier replenishments dating from the mid-1970's. With passage of pending
1984 proposals, the United States would be essentially current on its pledges to all institutions.
• The World Bank group.—A capital increase for the World Bank, negotiated by the Carter
Administration, was ratified in 1982 and installment payments are now being made. The U.S.
pledge to the sixth replenishment of the International Development Association, completion of
which was delayed one year by the Congress, would be completed with passage of a pending
1984 supplemental.
• Regional Banks.—The U.S. pledges to past replenishments of the Inter-American Development
Bank, Asian Development Bank, and African Development Fund would be nearly completed in
1984. New replenishments of these institutions have been negotiated along with U.S. membership in the African Development Bank. Equal annual payments are now being made to all
these institutions.
505
1985 Budget Proposal
In addition to payments to ongoing replenishments of the World Bank and the three regional banks,
the 1985 request would fund two new initiatives.
• The United States would participate in a seventh replenishment of the International Development Association (IDA) with a $2.25 billion (25%) U.S. share. This is a significant reduction
from the $3.24 billion commitment to the last IDA replenishment, but should be sufficient to
meet the needs of the poorest borrowers. The first of three $750 million annual payments is
requested in 1985.
• The United States would join a new institution intended to support the private sector in Latin
America, the Inter-American Investment Corporation. The United States would assume a 26%
share of contributions to be made between 1985 and 1988. The first $20 million payment is
requested in 1985.
Rationale
The 1985 proposals would fully implement the findings of the Administration's assessment of the
multilateral banks conducted in 1982. That study found that the banks serve U.S. objectives by
encourging the participation of developing countries in a market-oriented world economic system,
and promoting longterm growth and stability. Among the goals set for future U.S. participation in
the banks were:
• encouragement of a stronger market-orientation in bank lending, and a greater emphasis on
policy reform; and
• a gradual shift away from soft lending toward hard (market-rate) lending by banks in future
bank replenishments, thereby providing major budgetary savings.
The 1985 budget proposals, especially the request for the seventh replenishment of IDA, would
realize these goals.
• Concessional pledges would be 40% or $400 million per year, below the last round of replenishments.
• Bank lending programs would continue to grow, reaching $26.5 billion by 1986, but with
lending on more market-related terms overall.
506
Bilateral Development Assistance
Agency: Agency for International
Development
[In millions of dollars]
Level
Current Services:1
Budget Authority
Outlays
1985 Budget Level:1
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1
1984
1985
1986
1987
1988
1989
Total
1985-89
1,980
1,820
2,060
1,923
2,157
2,022
2,254
2,110
2,347
2,202
2,440
2,306
11,258
10,563
1,988
1,823
2,147
1,959
2,208
2,085
2,244
2,163
2,299
2,219
2,351
2,277
11,250
10,703
+8
+ 3
+ 87
+36
+ 52
+ 63
-10
+ 53
-47
+ 17
-89
-29
-8
+ 140
These are gross totals that have not been offset by AID and other receipts.
Program Description
This bilateral development assistance category includes two groups of programs:
• Development loans and grants administered by the Agency for International Development
(AID). Assistance is provided in the areas of agriculture and rural development, population
planning, health, education and human resources development, energy, and science and technology in more than 60 countries in Latin America, Africa, and Asia.
• Development assistance provided through:
• the Inter-American Foundation, which assists indigenous private organizations to enhance
local participation in economic development in Latin America and the Caribbean;
• the African Development Foundation, which promotes nongovernmental small-scale indigenous development projects in Africa as a complement to other U.S. development assistance
efforts;
• the Trade and Development Program, which finances feasibility studies and other project
planning services for major development projects and thus enhances the use of U.S.
technology, goods and services in economic development activities; and
• the narcotics control program of the Department of State, which provides assistance to
foreign governments and international organizations to help them control the production,
processing, and illegal trafficking in narcotics and psychotropic drugs.
Current Status
The bilateral assistance program has not grown in real terms over the past several years. During
this period the program has been reoriented to emphasize:
• support of sound economic policies in recipient countries;
• utilization of American and recipient country private sectors as vehicles for economic growth;
• enhancement of the capacity of indigenous institutions in developing countries; and
• increased use of science and technology in development.
507
1985 Budget Proposal
The 1985 budget request for bilateral development assistance represents an 8% increase over 1984
levels, or 3% in real terms. Of the proposed increase, $75 million would provide initial funding for
the new economic policy initiative for Africa, a five-year, $500 million effort designed to provide
special support to those sub-Saharan African countries committed to resolving their deep-seated
economic and financial problems through appropriate policy reforms.
Rationale
The reoriented bilateral development assistance program will be an important component of the
overall assistance effort in many countries. The growth proposed is consistent with the recommendations of the Commission on Security and Economic Assistance (the Carlucci Commission), which had
broadly based congressional and private sector membership. As the Commission recommended, the
program puts special emphasis on assistance to Central America and the Caribbean and on Africa.
Not only the Africa initiative but other elements of the program as well are designed to elicit
indigenous policy reforms in order to achieve self-sustaining growth and reduce dependence on
external aid.
508
Contributions to International Organizations
Agency: DOS/AID
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
901
920
926
915
957
960
956
1,002
994
1,027
1,031
1,061
4,864
4,966
889
904
820
835
787
792
794
843
814
850
835
867
4,050
4,187
-12
-16
-107
-80
-170
-168
-162
-159
-180
-178
-196
-194
-814
-779
Program Description
Contributions to the United Nations and other international organizations include (1) assessments
for United Nations peacekeeping operations, (2) the organizations' operating expenses based on
binding membership agreements, and (3) voluntary contributions for developmental, humanitarian
and scientific programs of the United Nations and other international organizations.
Current Status
The Administration recognizes the important functions that most international organizations perform. Nevertheless, many of the organizations' budgets grew very rapidly throughout the 1970's and
the early 1980's. Efforts to reduce increases in assessed contributions by pressing for lower budget
growth have been successful. Enacted appropriations for voluntary contributions continue to exceed
amounts proposed.
1985 Budget Proposal
Assessed contributions for operating expenses would include savings due to exchange rate gains and
reduced growth of organizations' budgets.
Assessed contributions for UN peacekeeping activities would be at the level of current spending, the
amount requested by the organizations.
Contributions to the UN Educational Scientific and Cultural Organization (UNESCO) are terminated in 1986 and beyond.
Voluntary contributions would be maintained at the same levels proposed in recent years.
Rationale
There has been substantial agreement among international organization member governments that
after the rapid growth of the 1970's and early 1980's, a period of consolidation and rationalization
was advisable. Holding real program growth near zero for a period while sorting out priorities
among activities not only benefits contributors but should also strengthen the organizations' primary operations.
UN peacekeeping forces make a significant contribution to stability in countries and regions, such
as the Middle East, of high importance to the United States.
509
Reductions of over $50 million a year beginning in 1986 result from the United States' planned
withdrawal from UNESCO. Announced in December, 1983, the withdrawal was based on the adverse
trends in the management, policy, and budget of UNESCO which have consistently detracted from
the organization's effectiveness in pursuing the principles of its constitution, which the United
States strongly supports.
At a time when U.S. foreign aid must be increased to meet serious security and economic threats to
third world countries in Central America and elsewhere, untargeted voluntary contributions to
international organizations must receive a lower funding priority. Moreover, the assistance provided
by these organizations tends to be less well suited toward inducing needed economic policy reforms
than other bilateral and multilateral aid.
510
P.L. 480 Food Aid
Agency: Department of Agriculture
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change-.
Budget Authority
Outlays
Total
1985-89
1984
1985
1986
1987
1988
1989
1,052
1,052
1,281
1,281
1,297
1,297
1,322
1,322
1,348
1,348
1,363
1,363
6,611
6,611
1,052
1,052
1,319
1,319
1,300
1,300
1,288
1,288
1,278
1,278
1,258
1,258
6,443
6,443
+ 38
+38
+3
+3
-34
-34
-70
-70
-105
-105
-168
-168
Program Description
The P.L. 480 program provides surplus agricultural commodities to food deficit countries and meets
humanitarian needs abroad. Under Title I of P.L. 480, low interest rate loans finance commercial
commodity sales to ease recipient country financial strains. Loan repayments are available to
finance a portion of this program, reducing the need for new budget authority. Under Title II, food
is made available on a grant basis, normally directly to target population groups too poor to
purchase food and/or affected by natural disasters or other emergencies.
Current Status
The 1984 enacted level of $1,052 million represents an increase of 2% in value terms over the 1983
actual levels and will provide approximately the same volume. The Administration has proposed a
$90 million supplemental appropriation to provide additional Title II commodities for emergency aid
to the drought-stricken nations of Africa.
1985 Budget Proposal
The proposal would increase P.L. 480 budget authority by 25%, or $267 million, above the 1984
enacted level. For 1985 this increase would provide $113 million for additional commodities and
ocean freight differential payments and $154 million to offset a projected shortfall in Title I loan
repayments.
Rationale
P.L. 480 food aid exports support U.S. foreign policy, economic development and humanitarian goals
abroad. The provision of food assistance promotes political stability in developing countries by
reducing the threat of food shortages and helping to meet continuing emergency needs. The food aid
program also helps relieve debt pressures in the third world by reducing the need for scarce foreign
exchange. On the other hand, the rapid growth in the food aid program sought by some could create
disincentives to food production in recipient countries. Conditions attached to Title I programs
encourage recipients to adopt appropriate policies for agricultural development.
511
Peace Corps
Agency: Peace Corps
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
115
114
123
122
131
130
139
138
147
146
155
154
694
689
115
114
116
116
123
123
129
129
135
134
141
140
644
642
-6
-6
-7
-7
-10
-9
-12
-12
-14
-14
-50
-47
Program Description
The Peace Corps recruits, trains, and maintains U.S. volunteers overseas to fill the trained manpower needs of developing nations and to promote mutual understanding.
Current Status
In the last three years, the Peace Corps has provided an average of 4,700 workyears of service
annually in nearly 60 developing countries, in energy, health, education, agriculture, employment
generation and a range of other fields.
1985 Budget Proposal
The 1985 budget request would fund the Peace Corps at the 1984 level. Because of inflation abroad,
this funding level would lead to a modest 2% drop in volunteer-year levels.
Rationale
In the last year, the Peace Corps has been recognized in various studies of U.S. foreign aid and
foreign policy as a valuable element of the U.S. presence abroad. Its contribution would be maintained under this proposal, consistent with budget stringencies.
512
International Refugee Assistance
Agency: Department of State
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
323
348
339
354
355
352
370
367
385
382
400
397
1,849
1,852
338
356
341
363
333
338
323
330
329
331
336
336
1,662
1,697
+ 15
+ 7
+ 2
+ 9
-22
-14
-48
-37
-56
-52
-64
-61
-188
-155
Program Description
Refugee assistance provides for the selection, transportation and initial resettlement of refugees
admitted to the United States.
Funds are also provided to international organizations and American voluntary agencies to care for
large numbers of refugees in several regions around the world. The U.S. share of these efforts is
usually about 30%.
Displaced persons within nations (Lebanon and El Salvador) are helped through a separate program
of the Agency for International Development.
Current Status
During the past few years, there have been no large outflows of refugees comparable to the previous
Cuban (Mariel) exodus or the Afghanistan and Indochinese outpourings. Regrettably, refugee departures from the Soviet Union have slowed to a trickle. As a result of these developments, admissions
to the United States have steadily declined from a high of 217,000 in 1980 to 61,000 last year. Large
numbers of refugees in camps in Southeast Asia, Pakistan, the Middle East, Africa and Central
America still require substantial care and maintenance support.
1985 Budget Proposal
A 1985 budget request of $341 million, about the same as 1984, would admit 72,000 refugees in 1985,
the same as authorized for 1984. Would continue recent levels of world-wide care and maintenance
aid.
Rationale
The refugee program is a reflection of longstanding U.S. concern about refugees unable to return to
their countries. The proposed refugee admissions level, mainly Southeast Asians, would further
reduce politically destabilizing camp populations in Thailand and elsewhere. Reduced admissions are
estimated in out-years as outflows from Indochina decline and camp populations are reduced. No
major crises are anticipated abroad in 1985 or out-years; an emergency fund is available to meet
unforeseen needs.
513
Compact of Free Association (Micronesia)
Agency: Department of State
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
295
295
143
143
145
145
146
146
148
148
877
877
+ 295
+ 295
+ 143
+ 143
+ 145
+ 145
+ 146
+ 146
+ 148
+ 148
+877
+ 877
Program Description
This Compact, negotiated with and approved by the Federated States of Micronesia and the Marshall Islands, will change the status of the two entities from a United Nations trusteeship, managed
by the United States, to States freely associated with this country.
While the States will govern their internal affairs and conduct their foreign relations with other
nations, the U.S. Government will retain full authority in security and defense matters and the
right to establish and maintain military bases there.
The Compact binds the United States to make annual payments to the two States over the next 15
years totalling $2.2 billion to aid in their development.
Current Status
It is anticipated that the Congress will shortly begin consideration of compact legislation.
1985 Budget Proposal
The Administration will seek a $295 million appropriation upon enactment of the Compact by the
Congress. At that time, a $96 million Interior Department request for its ongoing programs for
managing the Trust Territory of the Pacific Islands will be reduced.
Rationale
The Compact recognizes the legitimate rights of the two States for self-determination and sovereignty, consistent with U.S. democratic principles. United States security interests in the area are fully
protected. The legitimate economic development needs of the Micronesian peoples will be fully met.
Funds will be used by the two States both for their governmental operations and for their economic
development.
514
Foreign Affairs-Related Agency Expenses
515
Foreign Affairs Administrative Expenses
Agency: Department of State
[In millions of dollars]
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
Total
1985-89
1984
1985
1986
1987
1988
1989
1,408
1,457
1,486
1,416
1,568
1,494
1,662
1,585
1,756
1,677
1,849
1,767
8,322
7,938
1,443
1,471
1,691
1,635
1,855
1,650
1,932
1,914
2,036
2,017
2,110
2,130
9,624
9,347
+ 35
+14
+ 204
+ 219
+ 288
+ 156
+ 271
+ 330
+ 279
+ 340
+ 261
+364
Level
...
+ 1,303
+ 1,408
Program Description
This category finances the operating costs of the Department of State in carrying out United States
foreign policy.
Current Status
The Administration is committed to strengthening our ability to promote American interests
abroad. In 1982, a major effort was begun to enhance our capacity to understand foreign developments and to respond accordingly. A principal feature of that continuing effort is better staffed and
supported embassies. A steady upgrading of the protective security and communications capability
of American embassies and consulates has been necessary for the effectiveness and safety of our
diplomatic and consular personnel. A growing passport and consular workload has also added to the
requirement for additional staff and support.
1985 Budget Proposal
This proposal would:
• Strengthen the reporting and analysis produced by the embassies and the Department.
• Permit the opening of several new diplomatic and consular posts.
• Increase the number of security personnel and improve protective measures.
• Provide additional personnel to meet growing passport and consular workloads.
• Permit the development and construction of needed office space and staff housing abroad.
Rationale
The pace at which world events unfold and the need to protect and promote American interests
demand a strengthened American diplomatic presence abroad. We must improve our information
flow and be better staffed to deal with foreign leaders in seeking solutions to world problems.
Making such improvements requires additional people abroad and the support they need to do their
jobs. It is especially important that we adequately support these people because of the growing
violence against American personnel and facilities abroad. This budget would continue what has
been a major Administration effort over the past three years.
517
Foreign Information and Exchange
Agency: U.S. Information Agency
[In millions of dollars]
Level
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
787
770
848
879
923
906
1,114
1,119
1,124
1,134
1,113
1,130
5,122
5,168
787
770
955
913
1,090
1,108
1,262
1,283
1,254
1,267
1,269
1,280
5,830
5,851
+ 107
+35
+ 167
+ 202
+ 148
+ 164
+ 130
+ 133
+ 156
+ 150
+ 708
+ 683
Program Description
The U.S. Information Agency (USIA) increases the understanding by foreign peoples of the American people, official U.S. policies, and the advantages of democratic governments and open societies.
It operates through academic, leader and youth exchanges, Voice of America broadcasts in 42
languages, Radio Marti broadcasts to Cuba, media materials, seminars, and libraries and cultural
centers in 127 countries. In addition, the Board for International Broadcasting provides grants to
Radio Free Europe/Radio Liberty which broadcasts in 21 languages to Eastern Europe and the
Soviet Union.
Current Status
For a number of years prior to 1980 USIA programs declined in real terms. Recognizing the need to
improve foreign understanding of American society and policies, the Administration began three
years ago a major effort to expand and improve foreign information and exchange activities. This
effort had as its centerpiece the expansion and modernization of the Voice of America. It also
incorporated improvements in existing USIA programs such as the popular exchange of persons
programs, and the initiation of new programs, such as the Worldnet television link, Radio Marti,
and the National Endowment for Democracy.
1985 Budget Proposal
The budget proposes a $107 million increase (13%) in USIA programs. Primary elements include:
• initial work on new radio transmitter facilities, replacement equipment on existing facilities
and expanded programming for the Voice of America, which is the United States' principal
vehicle for communicating directly with the people of the world;
• full operation of Radio Marti, which broadcasts to the people of Cuba;
• increases for the President's international youth exchange program, academic and other exchange programs;
• additional grants to the National Endowment for Democracy; and
• new efforts to use television to increase the accessibility of American leaders to foreign
television journalists and audiences.
518
Rationale
An up-to-date understanding of the United States and its policies by foreign peoples and governments is important to world peace and American security. Expanded and improved efforts are
urgently needed to increase the ability of the United States to state and explain its objectives to
foreign peoples. The United States must draw on its expertise in communications to counter the
large and growing Soviet propaganda and disinformation campaign. The success and attractiveness
of our free political and economic systems provide an ideal context from which increased informational efforts can be effectively mounted.
519
Space Program
521
National Aeronautics and Space Administration
Space Programs
Agency: National Aeronautics and
Space Administration
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
6,590
6,427
6,556
6,415
6,180
6,132
5,598
5,594
5,347
5,341
5,321
5,333
29,002
28,815
6,590
6,427
6,813
6,684
7,237
7,122
7,686
7,508
8,125
8,005
8,562
8,416
38 f 423
37,735
+ 257
+ 269
+ 1,057
+991
+ 2,088
+ 2,778
+ 1,914 + 2,664
+3,240
+ 3,083
+9,420
+ 8,921
Program Description
National Aeronautics and Space Administration (NASA) space programs currently include the
Shuttle-based system to bring about routine access to space; space-based scientific studies to increase
our knowledge of the Earth and its space environment, the solar system, the galaxy, and the
universe; research and development to encourage the application of space technologies to needs on
Earth; and initial studies of a manned space station to introduce a new era in man's use of space.
These programs cover all of the activities of NASA except aeronautical research and development
(R&D) and other aeronautics-related support.
Current Status
Increased funding is essential to the goal of this Administration to maintain U.S. leadership in space
for the benefit of the U.S. and all mankind. The achievement of this goal requires the continuation
of a balanced program in space science, applications and technology, including the initiation of new
missions launched from the Earth or the Space Shuttle and, in the longer term, a permanent U.S.
presence in space through the Space Station.
1985 Budget Proposal
The 1985 budget for NASA space programs would provide an overall increase of more than $200
million in budget authority over the 1984 budget, including $150 million to initiate planning for the
manned Space Station. Highlights include:
• Space Station.—The budget would provide the funding essential to define the scope of this
auspicious project. The Space Station would provide permanent space facilities having outstanding versatility; they would function simultaneously as a laboratory, observatory, and
center for commercial manufacturing and for spacecraft assembly, storage, service, and repair.
The budget envisions that this challenging and forward-looking project will be in place within
a decade at a cost of some $8 billion. International and private sector participation is a key
objective of this undertaking.
• Space Transportation.—The budget would provide for assuring the routine operation of our
highly successful Space Shuttle transportation system. It would provide for completing production of the four Space Shuttle orbiter vehicles; for continued development of the Centaur
rocket to expand greatly the capability to launch high-performance payloads from the Shuttle
523
to higher Earth orbits or beyond; for improvements in the performance and reliability of the
Shuttle system; and for support of the aggressive Shuttle flight program.
• Space Science and Applications.—Proposed 1985 funding would continue a balanced and vigorous program. In addition to a high level of ongoing efforts, several major new projects are
proposed, including the Mars Geoscience/Climatology Orbiter to continue the Nation's highly
successful program of planetary exploration; the Upper Atmospheric Research Satellite to
study the composition and dynamics of the Earth's upper atmosphere; and the Scatterometer
instrument to study wind patterns on the oceans' surfaces. Important ongoing activities include
ground-based research and spacecraft developments. Scheduled for launch in the 1985-1988
period are the Space Telescope, the Gamma Ray Observatory, the Galileo Mission to explore
Jupiter, the Venus Radar Mapper, and additional experiments using the Space Shuttle-based
Spacelab. Flight demonstration of the Advanced Communications Technology Satellite program
would be dropped in favor of a more appropriate program of ground-based research on satellite
communications technology.
• Other Agency-Wide Supporting Activities.—Funding is proposed that would maintain the national technical capability inherent in the agency's current civil service workforce; expand
efforts to address generic space technology needs; maintain and improve satellite tracking and
data acquisition systems; provide new facilities construction for major R&D programs; and
improve the rehabilitation and maintenance of technical equipment and the agency's physical
plant.
The following table summarizes the proposed 1985 budget for NASA:
National Aeronautics and Space Administration Space Activities
(Dollars in millions)
Budget authority
1983
3,533
1,069
1,692
1,143
1,914
3,166
150
1,381
2,115
6,328
Total NASA Space Activities
1985
3,567
Space Transportation
Space Station
Space Science and Applications
Agency-Wide Support Activities
1984
6,590
6,812
Rationale
Space Station.—This project presents a new technological challenge and an important step in
assuring continued U.S. leadership in space in the 1990's and beyond. The Space Station would allow
working in space on a full time basis to utilize fully the capabilities of the Space Shuttle and to
maximize the unique advantages provided by the environment of space. It would offer a degree of
flexibility and versatility that cannot be achieved with the Shuttle alone or with unmanned space
facilities. The Space Station will also allow the U.S. to continue its leadership in international
cooperation in space and to utilize more fully the unique strength of the Nation's industry in
exploring commercial opportunities in space. The new technologies developed by this project promise
even further benefits as they "spinoff' into the U.S. economy.
Space Transportation.—The budget would continue the rapid progress being made towards achieving
a fully operational and cost-effective vehicle, the Space Shuttle, to provide routine access to space,
including capabilities for retrieval, service, and repair of spacecraft in orbit. The overall decrease in
524
funding proposed for space transportation reflects primarily the planned completion of Shuttle
orbiter procurement. Options for resuming orbiter production are maintained.
Space Science and Applications.—The proposed program would ensure continued U.S. preeminence in
planetary exploration and space-based astronomy and would take advantage of major opportunities to
better understand the Earth, its dynamics, its resources, and its environment. The proposed Upper
Atmospheric Research Satellite and the Scatterometer instrument would allow important global
environmental measurements that can only be achieved through advanced space technology.
The Advanced Communications Technology Satellite flight demonstration would be dropped to avoid
government competition with recently announced plans by the private sector. The private sector has
stated a commitment to proceed independently with an alternative new communications satellite
project using advanced technology. As with the goals of the previously planned Federal efforts, the
anticipated private efforts would also help open new markets and allow more efficient use of
available radio frequencies and critical orbital locations for communications satellites.
Agency-Wide Support Activities.—The increased funding proposed for these activities would accommodate the proposed expansion of space operations and planned R&D programs, and would address
agency-wide needs and problems associated with the promising new era of permanent space facilities
that the Administration's program would make possible in the 1990's.
525
Coast Guard
527
Coast Guard
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
Agency: Department of Transportation
1984
1985
1986
1987
1988
1989
Total
1985-89
2,478
2,254
2,296
2,420
2,422
2,527
2,545
2,661
2,667
2,649
2,787
2,701
12,716
12,959
2,485
2,260
2,284
2,421
2,393
2,449
2,484
2,496
2,579
2,534
2,679
2,604
12,419
12,505
+ 6
+ 6
-12
+ 1
-29
-78
-61
-165
-88
-115
-108
-97
-298
-454
Program Description
The Coast Guard is responsible for a broad range of activities including search and rescue, maritime
law enforcement, aids to navigation, commercial vessel safety, military preparedness, icebreaking
and others. It employs about 45,000 personnel and a large fleet of vessels and aircraft to accomplish
this work.
Current Status
The Coast Guard's workload is constantly changing and is difficult to forecast. The Government's
posture for many years has been to maintain a stable Coast Guard while providing it with modern
capabilities which can be redeployed from time to time as requirements dictate. For example, law
enforcement has overtaken search and rescue as the largest activity in the Coast Guard.
New modern ships and aircraft have contributed to reductions in maritime smuggling since the
February 1982 intensification of interdiction patrols. Seizures in fiscal 1983 were 37% below
1982 due to the deterrent value of Coast Guard patrols, declining use of marijuana, and shifts in
cultivation and smuggling practices.
1985 Budget Proposals
The 1985 budget proposes a stable program with a modest increase above inflation to $1.8 billion in
budget authority for operating expenses, $0.4 billion for capital investment, $59 million for reserve
training and $115 million for other activities. The fleet would continue to be modernized with new
patrol boats, cutters and aircraft. A less than one percent reduction in non-operational Government
personnel is proposed based on the expectation that contractors could provide certain support
functions less expensively than Government personnel.
Rationale
Heavy capital investment in the Coast Guard between 1976 and 1984 is finally resulting in the
delivery of many new vesels and air- craft. Some moderation in the pace of capital investment can
be undertaken prudently as the capital spending emphasis shifts from the purchase of expensive
new vessels and aircraft toward the less costly mid-life renovation of vessels acquired in the 1960's.
Although interdiction of marijuana smuggling will continue to have very high priority, the point has
been reached where only moderate further intensification of the high levels of drug patrols should
be planned for 1985:
529
• Surveys show marijuana use declining steadily among those under 25 (monthly and daily use
were down 27% and 49%, respectively, in high schools between 1979 and 1983).
• While maritime interdiction properly punishes criminals and disrupts the smuggling that
peaked in 1980, there appears to be a trend of increased domestic cultivation supplanting
imported marijuana supplies.
• Information published by the National Institute on Drug Abuse confirms that greater awareness about the harmful effects of marijuana (this perception increased 80% between 1979
and 1983) and changing user preferences are the major factors which are determining its
declining use despite its continuing availability.
In other programs, stable funding is proposed because the Coast Guard has successfully achieved
many of the objectives set in the 1970's. Workload has declined or stabilized in many mission areas:
• oil spills peaked in 1977 and have declined as oil imports are reduced and tanker safety
improves;
• search and rescue calls have declined an average of 3% a year since 1978 due to better vessel
construction, better weather forecasting and better boater education; and
• fisheries enforcement—which was intensified in 1977—has become more manageable due to a
reduction in the number of foreign fishing vessels in the U.S. Fisheries Conservation Zone and
greater familiarity on the part of fishermen with U.S. fishing regulations.
The 1985 budget reflects these shifting workloads which have allowed the Coast Guard to redeploy
resources to drug interdiction and to increase the amount of joint training it is able to do with Navy
units.
To improve efficiency and reduce costs, in 1985 the Coast Guard plans to enter into contracts to
provide a variety of support functions now provided by military and civilian personnel. These are
jobs of a largely commercial nature that can be provided more economically by the private sector
such as: janitorial services, grounds maintenance, welding shops, food service and similar jobs. Some
work involving the maintenance of aids to navigation will also be contracted. These contractual
efforts should produce significant savings in the future.
The Administration continues to support the collection of user charges from those who benefit
directly from Coast Guard services.
530
Financial Accounts
531
#
Various International Financial Programs
Agency: Department of the Treasury
[In millions of dollars]
1984
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
8,380
-285
-85
-303
-87
-303
-89
-289
-90
-280
-92
-274
-444
-1,449
8,380
-285
Level
-88
-306
-87
-303
-89
-289
-90
-280
-92
-274
-447
-1,452
..
-3
-3
-3
-3
t
>
Program Description
This category has four elements:
• The U.S. quota in the International Monetary Fund (IMF).—The IMF is an international
organization established in 1944 to promote a stable and efficient international monetary
system. The 146 member countries have "quotas" in the Fund which are determined by
international negotiation. These quotas represent the amounts of deposits which members
must make in the Fund and determine the amounts which members may withdraw and borrow
from it. The IMF lends to countries in order to overcome temporary balance of payments
problems if these countries are prepared to undertake reforms intended to correct the problems. The overall size of the Fund is increased periodically to reflect the needs of the international monetary system.
• Loans to the International Monetary Fund (IMF).—The U.S. has contributed to two IMF loan
programs; the General Arrangements to Borrow (GAB) and the Supplementary Financing
Facility. The GAB were established in 1962 by 13 IMF member countries and Switzerland,
including the U.S., as a means of supplementing the IMF's resources when needed to forestall
or cope with an impairment of the international monetary system. The Supplementary Finance Facility is a temporary program set up in 1979 to augment the ability of the IMF to
assist member countries with serious balance-of-payments problems.
• The Exchange Stabilization Fund.—This fund is used by the Secretary of the Treasury to make
transactions in gold and foreign exchange, as necessary, to promote orderly exchange arrangements.
• Repayment of loans to the United Kingdom.—This is the repayment stream from World War II
loans.
Current Status
Congress approved an increase in the U.S. contribution to the IMF in 1984 of $8.5 billion, including
$5.8 billion for the U.S. quota increase and $2.7 billion for an increase to the IMF General
Arrangements to Borrow.
533
1985 Budget Proposal
There are no new proposals for these programs in 1985. Negative outlays reflect receipts in the
Exchange Stabilization Fund and continued repayment of the U.K. loan.
Rationale
There are no new proposals because the actions taken in 1984 to increase U.S. resource commitments to the IMF should be adequate to support increased IMF activity for several years.
534
Foreign Military Sales
535
Foreign Military Sales Financing
Agency: Funds Appropriated to the
President
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
5,502
5,300
5,879
6,196
6,141
7,083
6,394
6,504
6,639
6,734
6,899
6,991
31,952
33,509
5,502
5,300
8,042
5,058
6,094
4,257
5,694
4,165
5,481
4,061
5,409
4,059
30,719
21,599
+ 2,163
-1,139
-47
-2,827
-700
-2,339
-1,158
-2,673
-1,490
-2,932
-1,233
-11,910
Program Description
The Foreign Military Sales Credit (FMSCR) program helps finance the purchase of defense articles,
construction services, and training by friendly governments of eligible countries. The program
provides loans on terms that range from highly concessional interest rates to Treasury borrowing
rates. Maturities range from 7 to 30 years. Repayment of certain loans is forgiven, making them
grants.
Also included in this category are FMSCR receipts, which are the repayments from loans of earlier
years, and the Guarantee Reserve Fund, which is available to reimburse the Federal Financing
Bank (FFB) for loss of receipts due to delinquent and rescheduled loan repayments.
Current Status
Foreign military sales financing provides the necessary funding to support the foreign policy
interests of the United States by promoting and assisting friendly countries in defending mutual
security interests in various regions of the world. The recent, rapid growth of this program has
corrected serious underfunding of needs in key countries.
Through 1984, FMSCR has taken the form of guarantees of loans made by the Treasury Department's FFB. These loans have been made at Treasury's borrowing rates for comparable maturities.
The FMSCR loans have been off-budget except for the forgiven loans.
1985 Budget Proposal
A major financing change proposed in 1985 places the entire FMSCR program on-budget and
provides some loans on concessional terms. Because, for some countries, the terms of the financing
are more important than the size of the loans, the greater concessionality in the new program will
permit the total level of new loans to decrease without harming U.S. security interests. In 1985 the
decrease would be from the 1984 level of $5.7 billion to $5.1 billion.
Within the lower total program, concessional and forgiven loans would increase by $1.8 billion,
approximately doubling the grant value (i.e., subsidy) provided to recipients.
Major lending would be provided to Israel ($1.4 billion), all forgiven credits; Egypt ($1,175 billion),
also all forgiven; Turkey ($525 million); Greece ($500 million); Spain ($400 million).
A $274 million replenishment requested for the Guarantee Reserve Fund is needed to ensure an
adequate reserve for payments to the FFB for delinquent and rescheduled FMSCR loans.
537
Rationale
The FMSCR program supports a number of key national security and foreign policy objectives:
• furthering the peace process in the Middle East through large scale aid to Israel and Egypt,
which have been strongly supportive of U.S. objectives;
• securing base rights and facilities in countries such as Turkey, Greece and Spain;
• helping reduce the economic burden of security-related expenditures by providing grant and
concessional financing, which is particularly important to poorer countries; and
• supporting key friends and allies, notably in Central America who are endangered by violent
subversion.
The proposed financing shift toward increased concessionality achieves two objectives. First, it takes
into account that a number of countries face serious economic problems, due to world recession and
security threats, that make repayment of high-interest loans very difficult if not impossible. This
step will, however, result in higher budget outlays in the future because of diminished offsetting
receipts. Second, the shift on-budget makes explicit to Congress and the public the full scope of U.S.
military aid.
538
Foreign Military Sales and Special Defense
Acquisition Funds
Agency: Funds Appropriated to the
President
[In millions of dollars]
1984
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
-700
-878
100
104
400
205
500
25
700
94
900
101
2,600
529
-700
-878
100
104
400
205
500
25
700
94
900
101
2,600
529
Program Description
The Foreign Military Sales (FMS) trust fund facilitates government-to-government sales of defense
articles and services. Foreign governments make payments for such articles and services to this
fund, and the U.S. government in turn used these payments to pay suppliers. Because this account
is used to transfer foreign monies, it does not involve foreign aid. The Special Defense Acquisition
Fund finances the procurement of military equipment in anticipation of its transfer to governments
overseas.
Current Status
Program activity is primarily a product of the level of orders by foreign governments for defense
articles and the procurement process for those orders.
1985 Budget Proposal
Normal levels of activity are assumed for 1985, including $15 billion of new FMS orders.
Rationale
The trust fund is a necessary and legislatively required account to facilitate military sales. The
acquisition fund reduces the adverse impact on U.S forces of diversions from production or U.S.
military stocks.
539
*
Other Security Assistance
541
Economic Support Fund
Agency: Funds Appropriated to the
President
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
2,958
2,900
3,035
2,955
3,175
3,025
3,311
3,159
3,444
3,369
3,571
3,489
16,535
15,996
2,958
2,900
3,068
3,050
3,138
3,000
3,205
3,100
3,270
3,160
3,330
3,200
16,010
15,510
+32
+95
-37
-25
-106
-59
-174
-209
-241
-289
-525
-486
Program Description
The Economic Support Fund (ESF) provides grants and low-interest loans to countries of particular
security and political importance to the United States. This fund provides the resources to carry out
U.S. economic development policies, to provide balance of payments and budgetary support, and to
promote essential economic policy reforms in recipient countries.
Current Status
ESF continues to provide vital economic assistance necessary to support and advance U.S. foreign
policy objectives worldwide. The growth in the program, nearly 60% between 1980 and 1984, was
needed to alleviate the adverse impact of world recession on many key developing countries and to
counter the serious economic difficulties of countries facing threats to their security.
1985 Budget Proposal
The 1985 ESF request is for $3.1 billion, nearly $200 million more than the 1984 program, but less
than 2% higher when adjusted for inflation.
Countries to receive the largest amounts are: Israel ($850 million), Egypt ($750 million), Pakistan
($200 million), Turkey ($175 million), and Sudan ($120 million).
Funds were included for Central America for 1985 at 1984 budget request levels pending analysis of
the Bipartisan Commission report on aid to the region (see separate factsheet).
Rationale
The Economic Support Fund supports a number of key national security and foreign policy objectives.
• Over half of total funding would be provided to Israel and Egypt in recognition of their strong
support of U.S. policies and of the heavy burdens that instability in the Middle East has placed
on their economies.
• The proposed aid to Pakistan will strengthen a friendly country facing the threat of a hostile
neighbor and Soviet troops on its border. ESF is critical to the support of other governments
threatened by the Soviet Union and its radical allies. Sudan is continually threatened by
Soviet-backed Libyan and Ethiopian governments.
543
• Aid would be provided to Turkey and a number of other countries to help alleviate economic
dislocations.
• Finally, aid is provided in conjunction with U.S. access to military facilities in strategic
locations.
Because of the flexibility permitted under ESF authority in setting terms and conditions of assistance, this program has been especially valuable in meeting a range of short- and long-term U.S.
objectives. The modest increase requested for 1985 for countries outside Central America reflects the
important progress made during this Administration in providing adequate amounts of assistance to
the most important countries.
544
Military Grant Assistance and Training
Agency: Funds Appropriated to the
President
[In millions of dollars]
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1984
1985
1986
1987
1988
1989
Total
1985-89
564
591
592
621
621
650
648
679
675
707
701
735
3,238
3,392
564
591
866
782
888
838
908
895
926
934
944
956
4,532
4,404
+ 274
+ 161
+ 267
+ 187
+ 260
+ 216
+ 250
+ 226
+ 242
+ 221
+ 1,293
+ 1,012
Program Description
The Military Assistance Program (MAP) and International Military Education and Training (IMET)
provide grant funding for the procurement of U.S. defense articles, related services, and training by
friendly governments and international organizations.
Current Status
MAP and IMET programs provide the necessary funding to support the foreign policy interests of
the United States and promote and assist sympathetic countries in defending mutual security
interests in various regions of the world. Both programs have grown significantly during this
Administration. Grant military assistance has grown from $110 million in 1982 to more than $500
million in 1984, in order to help countries facing both serious international payments problems and
serious security threats. The military training program has doubled since 1980 in dollar funding and
grown even more in the numbers of persons trained.
1985 Budget Proposal
The 1985 MAP request is for $800 million to meet continuing, critical security and balance of
payments problems in the poorer countries of the world.
Provision has been made to augment grant aid for Central America carried in the totals above at
1984 request amounts as outlined in the following factsheet. Outside Central America grant military
aid would be provided in relatively modest amounts, in part because only limited assistance is
desirable for small and very poor countries. Among the larger programs, Turkey would receive $230
million and Portugal $70 million in conjunction with agreements for U.S. base access. Sudan would
be allocated $69 million, reflecting Libyan and Ethiopian threats to its security and very grave
balance of payments difficulties. The IMET request of $60.9 million is nearly 20% higher than the
1984 program.
Rationale
Grant military aid meets the same important international security objectives as discussed for the
foreign military sales credit program (see factsheet on Foreign Military Sales and Defense Acquisition Funds) but is focussed generally on the poorest countries. The requested funding increase is
important to correct previous shortfalls in funding that have limited the ability of the United States
to meet pressing needs in key countries. Because it does not produce future budget offsets, as does
545
the credit program through repayments, grant aid will remain considerably smaller than military
credits. It is, nonetheless, critical. The military training program is widely regarded as a highly costeffective means of supporting the military forces of other countries. Trainees not only learn needed
skills but have the opportunity to observe how our professional military establishment functions
within the framework of democracy.
546
Assistance to Central America
Agency: Funds Appropriated to the
President
[In millions of dollars]
1984
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1985
1986
1987
1988
1989
Total
1985-89
500
300
750
800
750
675
750
750
750
750
750
750
3,750
3,725
+ 500
+300
+ 750
+ 800
+ 750
+ 675
+ 750
+ 750
+ 750
+ 750
+ 750
+ 750
+ 3,750
+ 3,725
Program Description
The amounts for assistance to Central America shown above were intended to provide for various
kinds of military and economic assistance to Belize, Costa Rica, El Salvador, Guatemala, Honduras,
Panama, and regional organizations. The budget was prepared before the executive branch had an
opportunity to review the recommendations of the National Bipartisan Commission on Central
America (NBCCA), chaired by former Secretary of State Kissinger. Under the circumstances, 1985
amounts were set aside for Central America in the regular program accounts at the levels requested
for 1984.
It was, however, clear to the Administration during budget preparation that significant increases in
assistance would be required. Lump sum amounts approximating the expected additional requirements were included in the budget so that the budget totals would not be understated. Absent an
analysis of the Commission Report, it was judged to be undesirable to break down the annual
increments by specific programs.
Current Status
In mid-February the Administration submitted the Central America Democracy, Peace, and Development Initiative as well as the specific appropriations increases for the various assistance programs
for 1984 and 1985 that support the NBCCA report.
1985 Budget Proposal
The Assistance to Central America request for 1984 and 1985 has been replaced by requests in
specific regular accounts. The major amounts of required additional budget authority are:
547
U.S. Bilateral Assistance to Central America
(Dollars in millions)
Major accounts
1984
1985
Military Assistance
Economic Support Fund
Functional Development Assistance
Operating Expenses (AID)
Operating Expenses (Peace Corps)
Public Law 480
U.S. Information Agency
Other
Foreign Military Sales Credit
259
290
73
2
2
25
8
....
124
371
157
6
9
36
36
11
- 1 5
Total, Bilateral Assistance
659
735
Rationale
The Administration believes that it is vital strategically, politically, and morally to provide a
comprehensive plan of support for the democratic elements, the reform programs and human
freedom in Central America. The U.S. must assist in bringing peace to this troubled region so close
to home.
548
CHAPTER 10
Department of Defense Military
Functions
549
Department of Defense Military
Functions
A $46.8 billion increase in budget authority is being proposed for the Department of Defense in 1985.
After adjustments for anticipated inflation, budget authority would increase by 13% over 1984 and
outlays would increase by 9.3% over 1984. This proposed level of funding reaffirms this Administration's commitment to the American people to provide the military strength needed to ensure the
future security of this Nation's values and institutions. The 1985 budget requests the minimum level
of resources necessary to achieve our national defense objectives in the face of serious, sustained
challenges. A vigorous effort is being made to ensure that the resources requested are used in an
efficient and effective manner.
Department of Defense Military Functions
1
(Dollars in billions)
Level
Current Services:
Budget Authority
Outlays
1985 Budget Level:
Budget Authority
Outlays
Change:
Budget Authority
Outlays
1
1984
1985
1986
1987
1988
1989
258.0
231.0
321.3
277.3
356.2
314.7
388.3
345.6
424.5
377.2
464.0
412.4
258.2
231.0
305.0
264.4
349.6
301.8
379.2
339.2
411.5
369.8
446.1
398.8
+0.2
-16.3
-12.9
-6.6
-12.9
-9.1
-6.4
-13.0
-7.4
-17.9
-13.6
Military Functions include most of the activities of the Department of Defense (excluding only the Corps of Engineers civil functions).
Putting The Defense Budget Into Perspective
The proposed budget would not be an excessive burden on the economy.—Critics of the Administration's
defense build-up frequently compare the proposed budget levels to those which prevailed in the late
1970's and allege that Administration policies have resulted in inordinate budget growth. That
represents a misleading view of defense funding requirements, as well as failure to consider the longer
trend of post-war budgetary history. The needed Defense budget growth launched on a bipartisan basis
by Congress in 1980 and accelerated during the Reagan Administration does not come close to imposing
the burden on the U.S. economy experienced during earlier periods. Relative to GNP, projected 1985
defense spending is actually 30% lower than what the national economy proved capable of sustaining
in 1968. Between 1968 and the low point in 1976, constant dollar defense expenditures plummeted by
36% and the GNP share fell from 9.9% to 5.5%, or by over two-fifths. This massive drop resulted from
short-run national policy trends, the operational cost reductions attributable to the withdrawal from
Vietnam, and the large mid-70's decline in end-strength. Investment in both strategic and conventional
weapons programs was allowed to decline substantially. That low expenditure burden was unsustainable, however, for the long run because it resulted in funding levels that were inconsistent with stated
bipartisan national security objectives—objectives that have remained generally consistent throughout the post-war period. As substantial as the proposed increases appear to be, they would result in a
lower claim on GNP than that which prevailed during the entire 1954-1970 period which ranged
between 7% and 11.0%, and averaged 8.6%. Devotion of 7% of GNP to the Nation's military security in
a difficult and threatening world can hardly be considered excessive. Indeed, it represents no more
than a mid-point between the normal burden prior to the 1970,s and the temporarily depressed levels
of the mid and late 1970's.
551
Defense spending has already been reduced.—The prospect of continued high Federal deficits has led
some to suggest reductions in the Defense program. Thus far it has not been well understood just how
much the Defense budget has been reduced below the President's original plan. In March 1981, the
President's Five Year Defense Program called for an increase of $186 billion in budget authority over
the Carter proposal for 1982-86, corresponding to an increase in defense outlays of $116 billion. Actions
to date by the Executive branch and by the Congress have reduced the planned increase in budget
authority over Carter by $93 billion, for a net five-year increase of only $93 billion. The resulting
increase in actual defense spending over Carter for 1982-86 is only $12 billion—10% of the originally
planned increase in spending.
Projected growth would not be excessive.—Some critics have charged that 13% real growth in budget
authority would be excessive. Last year's plan for 1985 called for $321.6 billion for Defense, an increase
of 11.1% in real terms over the 1984 budget request of $273.4 billion. The revised 1985 request of $305
billion represents a real growth of only 6.8% over the 1984 requested funding level for Defense. With
respect to the 1984 Congressional Budget resolution level of $261.6 billion for Defense, the 1985 request
represents a real growth of 11.6% a growth rate comparable to that projected a year ago. Congress
ultimately appropriated over $15 billion less than the President's request for 1984, and over $3 billion
less than the Congressional budget resolution.
Defense spending, despite its importance, has been a declining function of Federal spending.—The
Defense share of Federal outlays dropped from an average of 48% in the 1950's to about 30% today.
Even with the continuing build-up, Defense spending will account for only 33% of the Federal budget
in 1989. Non-Defense spending, which comprised about 50% of total Federal outlays in the 1950's, now
represents more than 70% of the budget.
The Defense build-up is achievable.—In-depth analyses of defense industrial capacity by the Department of Commerce, with the cooperation of the Department of Defense, have concluded that, in most
cases, existing domestic capacity is adequate to supply projected Defense and non-Defense needs. In
fact, the latest reports show that even as capacity utilization rates for our manufacturing industries
are approaching the 80% level, the economy more than adequately accommodates our Defense
program.
In considering the Defense budget it is important to understand the economic effect of that budget
because that effect is an element of the nation's cost. Nevertheless, the threat to the national
security determines the Defense requirement and that alone is the basis for the budget.
The Threat to Our Security is Real and Growing
The Soviet Union is the principal threat.—During the 1970's, the Soviets greatly improved their
military power and became more adventuresome in their use of that power, both directly and through
the indirect support of client states. The resulting changes in the balance of military power constitute
a threat to all of the free world that cannot go unanswered.
Soviets Spent Heavily to Achieve Military Capabilities.—From 1980 to 1984, Soviets annually spent an
average of 32% more on defense program than the U.S. spent.
Soviets Invest more in Defense than the United States.—In 1983, the dollar estimate of Soviet defense
investment (procurement, research and development, military construction) was about 33% greater
than U.S. defense investment. During the past decade (1974-1983), the dollar value of Soviet defense
investment exceeded U.S. investment by almost one-half trillion dollars (in 1985 dollars). This included
$250 billion more in strategic nuclear forces.
Warsaw PACT invests more than U.S. and its allies.—Investments over the last decade of the Soviet
Union, plus those of its Warsaw Pact allies was over $105 billion more than the combined efforts of the
U.S., our North Atlantic Treaty Organization allies and Japan. Moreover, about 95% of Warsaw Pact
552
spending is Soviet spending, and therefore under direct Soviet control. To contrast, only about 62% of
the Alliance spending is U.S. spending.
Warsaw PACT Produces More Weapons than NATO in most categories.—As a result of the Soviet's
massive defense investments their production of major weapon systems, since 1974, has greatly
exceeded that of the U.S. In addition, Warsaw Pact production has exceeded overall NATO production,
except for general purpose naval forces.
Production of Selected Weapons, 1974-1983
United States
ICBM's
Tanks
Tactical Combat and Interceptor
Aircraft
Major Surface Warships
U.S.S.R.
U.S.S.R. to
United States
Ratio
NATO
Warsaw Pact
Warsaw Pact to
NATO Ratio
350
6,250
2,300
23,700
6.6:1
3.8:1
350
10,450
2,300
27,850
6.6:1
2.7:1
3,500
83
8,400
91
2.4:1
1.1:1
7,300
172
10,000
107
1.4:1
.6:1
In many important areas, the Warsaw PACT has more forces than NATO.—The 1970's witnessed a
major buildup in strategic forces by the Soviet Union which eliminated the strategic superiority the
U.S. had maintained since the beginning of the nuclear age.
• Soviets now have a significant advantage over the U.S. in numbers of deployed strategic
weapons systems.
Strategic Forces
(As of January 1 , 1 9 8 4 )
United States
Delivery Vehicles
Missiles
ICBMs
SLBMs
Bombers
1,957
1,632
(1,040)
(592)
325
U.S.S.R.
2,754
2,379
(1,398)
(981)
375
• Soviets also enjoy a near-monopoly in deployed, longer range intermediate range nuclear
forces (LRINF).
Longer Range Intermediate Range Nuclear Forces (LRINF)
United States
LRINF Warheads
25
• Warsaw Pact has a great advantage in conventional forces in Europe.
553
U.S.S.R.
1,371
Selected Conventional Forces
(Deployed)
2.5 to 1 Warsaw Pact Advantage
4.6 to 1 Warsaw Pact Advantage
2.1 to 1 Warsaw Pact Advantage
Tanks
Interceptor Aircraft,
Submarines
Other Threats Also Require Attention.—The growing economic and political interdependence of the
Western nations and the Third World increases the importance of those areas to our economy and
security. We depend on some of these countries for strategic minerals and resources, as do our friends
and allies. Thirty percent of U.S. exports now go to the Third World, up from 25% in 1976. Vital sea
lines of communication pass through strife-torn regions such as the Persian Gulf, the Caribbean, and
Southern Africa. We must be prepared to counter Soviet backed moves in those areas.
Our Strategy for Responding to the Threat
U.S. military strategy is defensive in nature. Our objective is to deter war, but failing that to
successfully defend ourselves. For deterrence to succeed, enemies must perceive that our forces could
survive a first strike; our threatened response to an attack must be credible; and the distinction
between peace and aggression must be clear. Should deterrence fail, our policy is to limit the scope
of the conflict to the theater of the attack, and to limit the duration and intensity of the conflict.
We carry out these objectives by several means. First, we participate in and contribute to a
collective defense posture that incorporates the combined strengths of the U.S. and our allies. Second,
to provide the first line of conventional defense in Western Europe and Northeast Asia, we and our
allies maintain forward deployments of military forces in those areas. These forces will be augmented in times of conflict. In addition, we and our allies have rapid deployment forces that are available
for deployments in other threat areas. Third, we seek a flexible force structure that builds upon our
alliances and deployments and offers us a range of responses. Fourth, our defensive orientation
requires that our forces maintain a high state of readiness.
Accomplishments and Plans for Carrying Out the Strategy
Strategic Force Modernization.—President Reagan has vigorously pursued a plan for maintaining
deterrence by replacing our aging nuclear forces with modern forces while negotiating arms reductions with the Soviet Union. These modernization efforts are linked firmly to U.S. arms control
objectives. The prospect of more capable U.S. forces provides the Soviets with incentives to negotiate
genuine reductions. Also, the deep cuts we seek in the destructive power of ballistic missile warheads should improve the survivability of our future intercontinental ballistic missile (ICBM) force.
Modernization and reductions are directly linked through the nuclear weapons "build down" proposed by the President in the START negotiations.
The 1985 budget sustains the modernization plan begun in 1981, adds a vigorous development
program for a small land-based intercontinental missile, and begins a long-term research and
development program to counter ballistic missiles with defensive measures. Key elements of the
strategic offensive modernization program are described below.
• The Peacekeeper ICBM is being developed and procured to redress the unfavorable balance in
land-based missile capabilities and to encourage the Soviet Union to negotiate arms reductions.
The planned force of 100 missiles will be deployed by 1990.
• The first B-1B bombers will be deployed in 1985; in addition, 34 more of the total planned buy
of 100 bombers will be procured in that year. These bombers will have a much greater
554
capability to penetrate improved Soviet air defenses than current B-52 bombers, which are now
being provided with stand-off air-launched cruise missiles.
• Development of an advanced technology (stealth) bomber is also underway.
• The sea-based strategic missile modernization program calls for replacing the aging fleet of
Poseidon submarines with more capable and survivable Trident submarines and missiles and
for achieving a capability to destroy hard targets by developing the Trident II missile. These
sea-based missiles are considered more survivable than bombers or land-based missiles. Trident
submarines are deployed and more are being procured at the rate of one per year, and the new
Trident II missile is scheduled for initial deployment in 1989.
Little modernization of strategic defensive forces took place in the 1970's. As a result, our strategic
air defense interceptors have become obsolete. The Soviet Union has operational ballistic missile
defense and antisatellite systems, while we have none. We are strengthening our space surveillance
capabilities and pursuing an operational antisatelite system. We are also improving our network of
air defense radars and modernizing our interceptor forces. More importantly, in response to the
President's initiative of last March, we have prepared a long-term research program to explore the
technologies required for a highly effective defense against ballistic missiles. As opposed to earlier
programs that would only intercept reentry vehicles in the final phase of their flight, the new
initiative will examine possibilities of engaging ballistic missiles and warheads through the launchto-impact sequence.
Rebuilding Our Conventional Forces.—When this Administration took office, our military forces
were inadequate to achieve national security objectives. Force readiness and sustainability were low,
our mobility forces were inadequate for force deployments, our naval forces were spread too thin,
and weapons systems were not being modernized fast enough to keep pace with the threat. Since
then, considerable progress has been made in improving our military capabilities, and in restoring
credibility. A decade of neglect, however, cannot be turned around in 3 years. More remains to be
done.
The readiness and sustainability of our forces have increased substantially since 1981. The condition
of the equipment and readiness have improved, the forces are more fully manned, and our Guard
and Reserve forces are better equipped and better integrated with the active forces into a total force.
Selected National Guard units are receiving our most modern armor, the M-l tank and Bradley
Fighting Vehicle; Air National Guard and Air Force Reserve units are flying the F-16, and Naval
Air Reserve units will receive the F/A-18. The Naval Reserve is now operating the Perry-Class
guided-missile frigate. Trained strength in reserve units has increased from 76% of the wartime
requirement in 1979 to 88% in 1984. When the munitions and secondary items included in the 1985
budget are delivered to the field, stockage levels and other measures of sustainability will have
increased almost 50% over the levels in 1980.
Administration supported pay increases totaling more than 30% and benefit increases in housing
and other allowances have substantially improved recruiting and retention programs. All military
services have met or exceeded their recruitment objectives for the last 3 years. In 1983, 91% of the
recruits were high school graduates compared to 68% in 1980. In 1983 reenlistments in the Navy
and Air Force soared to rates of 68% and 79%, respectively.
To correct the force structure and equipment deficiencies, our modernization efforts have been
accelerated. Funding has been increased for programs that were budgeted at low and inefficient
rates, such as the M-2 Bradley Fighting Vehicle and UH-60 Blackhawk helicopter, the Navy's AIM-9
Sidewinder missiles and F-14 aircraft, and the Air Force's F-15 and F-16 fighter aircraft. The Marine
Corps AV-8B aircraft and Navy aircraft carriers are now being built. A commitment has been made
to a 600 ship Navy and to land and air forces equipped to respond to the threat we face.
To augment our forward deployed forces during conflict, we must be able to deploy additional forces
in a timely manner. Our current goal is, through the combination of US and allied mobility forces
and prepositioning, to be able to deploy forces to Southwest Asia while also reinforcing NATO and
555
critical areas of Northeast Asia. To achieve this we are procuring new C-5s and KC-lOs, expanding
our Ready Reserve Force of ships, developing the C-17 aircraft and procuring equipment for offloading ships in austere ports.
Special Operations Forces (SOF) are being revitalized. Working with the armed forces of 15 countries from different parts of the world, this element of our forces is crucial to helping these countries
deal effectively with the global campaign of destabilization that threatens their countries. In crisis
situations, these forces offer a flexible alternative to conventional forces, and in a major conflict
would be an important component of our conventional operations.
The 1985 budget also supports the establishment of a new light Army infantry division (17th). This
division will have about 10,000 soldiers when fully activated. Smaller and more strategically deployable than current divisions, this new force will provide a new versatility and flexibility across
the entire spectrum of threats which the United States may face in the future.
Getting The Most For The Taxpayers Money
A vigorous management improvement program is being pursued by the Department of Defense.
• To reduce the costs of weapons systems, the acquisition process has been overhauled to reduce
acquisition time, provide for more stability in long-term procurements, increase competition,
and strengthen the defense industrial base.
• Twelve new multi-year procurement programs are contained in the 1985 budget for a
savings of $0.9 billion.
• To reduce the costs of spare parts and other support items the following actions have been
taken:
• The military services have been directed to seek refunds for past overcharges.
• Competition is being expanded and alternative sources of procurement are being developed.
• The largest ever DOD-wide audit to examine spare parts purchases has been initiated by the
Inspector General.
• Employee incentives are being used for finding cost savings and new procedures have been
adopted to identify large price increases.
• The audit staff has been reorganized and expanded.
• A joint Department of Defense and Department of Justice Procurement Fraud Unit has
been created to coordinate investigative, audit and prosecutive activities. The unit has
already obtained 14 indictments and 9 convictions on procurement related allegations.
• To improve planning, programming and budgeting the Defense Department's management
systems have been streamlined to emphasize planning, clarify the roles of the military services
and the Secretary of Defense's staff, and to permit the Defense Resources Board to focus on
major issues.
In summary, the Administration's National Security Program is necessary and achievable:
• Strong program is required by Soviet actions.
• Program is not detrimental to the economy.
• Defense resources are being managed carefully.
556
CHAPTER 11
Management Initiatives
557
Management Initiatives Overview
In 1981, it was apparent that Government had grown too large, and that it was important to reduce
its size and make its operation more efficient. It was also widely felt that improved management of
Government could help ensure that a greater share of Federal expenditures would benefit the
intended recipients. Thus, early in this Administration, a major goal was established: to provide
needed services in the most economical and efficient way possible.
GAO reports indicate that previous efforts at management improvement failed because of a lack of
support from the Executive Office of the President and the absence of a linkage of management
initiatives with the annual process of developing the President's budget. With this in mind, the
Reagan Administration developed a management improvement program with significant Presidential involvement and support. And, for the first time, organized reviews of management improvement activities have been included in the budget review process.
As a result, major management improvement initiatives are now underway that will fundamentally
change the way the Federal Government operates. These initiatives reflect the efforts this Administration is making to bring permanent improvements to the management of the Federal Government.
It is one of the most ambitious programs to improve management and reduce costs ever undertaken.
This Administration's management initiatives seek to overcome specific problems that have been
prevalent in Government. The Federal Government has not managed its cash well; it has not put
enough emphasis on debt collection; it has allowed incompatible and redundant administrative
systems to proliferate; and it has not always had good financial data.
1985 Budget Initiatives
As part of the overall management improvement initiative of this Administration, the 1985 budget
process included organized reviews of management improvement issues. These issues were selected
after a careful review of management and administrative operations and problems, and were
screened to identify targets of opportunity that would lead to accomplishment. Government-wide
policies for management and administrative operations were developed and used to assign specific
management goals to agencies for the period 1984 to 1988. A Government-wide system was established to track agency progress in reaching these goals. This will ensure the continuity, support, and
emphasis on implementation that previous management reform efforts have lacked.
As a result of the 1985 management reviews, agencies were directed to achieve $2.8 billion in
management-related deficit reductions in 1985 and $7.4 billion over the 1984 to 1988 period. These
deficit reduction measures relate to outlay savings or increased receipts; they do not include cost
avoidances or savings captured outside the 1985 budget review.
559
1985 Management Related Deficit Reductions
(Dollars in millions)
1984
Outlay savings for 20 largest agencies:
Reduce fraud, waste and abuse 1
Improve agency management
Adopt cross-agency management systems
Other
1985
1986-88
Total 1984-88
647
19
1
34
1,404
2,157
71
357
2,709
2,479
95
466
702
Subtotal, outlays
Revenue increases:
Collection of delinquent taxes
658
303
22
75
1,058
3,989
5,749
1,700
Total
702
2,758
1,700
3,989
7,449
1 The accomplishments of the Inspectors General usually result in the more efficient use of resources and have not been included as budget savings in this
category.
Major Management Objectives
The 1985 management-related deficit reduction targets shown in the table reflect the four major
objectives of the Administration's management reform program. Specifically, they are as follows:
Reduction of fraud, waste, and abuse.—This objective seeks improved control over the expenditure of
Federal funds through more vigorous collection of debt owed the Federal Government; adoption of
more sophisticated cash management and internal control procedures; and the pursuit of questionable Federal expenditures through the activities of the Inspectors General.
Significant accomplishments in this area include:
• initiation of a major program aimed at collecting delinquent debt owed to the Federal Government;
• improved use of over $30 billion in funds through the effort of the President's Council on
Integrity and Efficiency, established in March 1981 to coordinate the work of the Inspectors
General; and
• internal control system improvements resulting from agency-wide evaluations and actions
taken pursuant to the Federal Managers' Financial Integrity Act.
Plans for 1985 include:
• increasing agency emphasis on debt collection, including application of the latest computer and
telecommunications technology to collection functions;
• supplementing the traditional audit approach of the Inspectors General with increased emphasis on prevention;
• continuing to institutionalize the internal control evaluation, improvement, and reporting
process in Federal agencies; and
• improving the use and management of cash balances and the payment process.
Agency deficit reduction goals for 1984 to 1988 are illustrated in the following table:
560
Fraud, Waste and Abuse-Related Deficit Reductions
(Dollars in millions)
1984
20 largest agencies:
PCIE 1
Debt Collection 2
Cash Management
1985
1986
1987
1988
417
230
418
36
475
475
647
Total
2,147
211
2,358
454
475
475
^ h e accomplishments of the Inspectors General usually result in the more efficient use of resources and have not been included as budget savings
Includes $1.7 billion in receipts for 1985 related to increased collection of delinquent taxes.
2
Improvements in agency management—This objective is to improve the efficiency and effectiveness
of agency administrative operations. This can be accomplished through such means as the consolidation of common administrative support servicing operations; implementation of staffing standards;
and reductions in non-personnel resources such as office space, travel, printing, and publications
costs.
Accomplishments already made in this area include:
• establishment of a Government-wide program to consolidate and eliminate unnecessary periodicals and publications, and
• adoption of procurement reforms aimed at enhancing competition, improving agency management of the procurement process, and resulting in significant savings and cost avoidances.
Plans for 1985 include:
• consolidating, where cost effective, administrative support operations, both in headquarters
and in field locations;
• improving service and reducing personnel costs by adopting productivity standards and correcting overclassification in the mid and upper level positions;
• closing and downgrading printing plants and duplicating facilities where the private sector
offers cost-effective alternatives; and
• closing 17 agency travel offices by taking advantage of commercial travel services.
Administration goals for improving agency management between 1984 and 1988 are shown in the
following table:
Savings Related to Improved Agency Management
(Dollars in millions)
1984
20 largest agencies:
Consolidations of Administrative Support
Systems
A - 7 6 (efficiency reviews)
GS 11-15 Overgrading
Printing and Publications
Space Management
Travel Management
Total
1985
1986
1987
1988
18
1
82
33
106
11
69
1
107
89
228
10
73
1
145
148
362
10
74
1
155
180
488
10
74
1
19
303
508
740
909
561
Development of management processes that cut across agencies.—This objective focuses on improving
and standardizing management systems common to all Government agencies, including financial
and accounting systems, payroll and personnel systems, and real and personal property systems.
These improved systems will greatly strengthen central policy direction of administrative support
services, resulting in Government-wide management efficiencies. One accomplishment in this area is
the development of an electronic communications network, now connecting senior officials in the
twenty largest agencies with the White House.
Specific plans include:
• introducing Government-wide accounting system standards;
• developing centrally coordinated administrative systems plans, feasibility studies, and/or
design specifications;
• expanding the electronic data system to more agency officials;
• requiring agencies to develop comprehensive department-wide plans for all administrative
processes and systems; and
• consolidating payroll/personnel systems.
Savings from Cross Agency Processes and Systems
(Dollars in millions)
1984
20 largest agencies:
Financial Operations and Planning Systems
Payroll/Personnel Systems
Other
Total
1985
1
1
1986
1987
1988
20
2
3
24
4
3
16
4
3
9
4
22
31
23
16
Improving delivery of services.—This objective looks at the way the delivery of Federal services is
handled across the country. The goal is to achieve improved service at lower cost through improved
technology and management techniques such as prescreening, computer matching, adjusted payment schedules, contractor and grantee performance incentives, and a streamlined field structure.
Management Factsheets
More detailed descriptions of this Administration's management initiatives, including the issues
addressed in the 1985 budget review process, are provided in the following eight factsheets.
562
Fraud, Waste, and Abuse-Related
Deficit Reductions
563
President's Council on Integrity and Efficiency
Program Description
The President's Council on Integrity and Efficiency (PCIE), made up of 18 agency Inspectors
General, representatives of the Justice Department and the Office of Personnel Management, and
the Special Counsel of the Merit Systems Protection Board, has provided a focal point for the
President's efforts to reduce fraud, waste, and abuse in Federal programs. This interagency working
group has been responsible for providing leadership in the use of computer applications for the
matching and prepayment screening of beneficiaries, and in Government-wide initiatives to make
program and administrative systems less vulnerable to fraud, waste, and abuse.
Current Status
Over the past 2-1/2 years, the PCIE has reported semi-annually to the President on its accomplishments as a Council and on individual efforts by Inspectors General. Since the Council's creation in
March 1981, the Inspectors General (IGs) have secured commitments for more efficient use of or
attempted collection of over $30 billion in Government funds. Results from March 1981 through
September 1983 include:
• over $26 billion in commitments by agency managers to more efficiently use resources;
• approximately $4 billion in commitments by agency managers to recover funds, call loans, and
cancel guarantees;
• approximately $154 million in revenues and penalties assessed through both civil and criminal
actions;
• 6,563 successful prosecutions; and
• 7,419 administrative actions against Federal employees and contractors.
These figures alone do not adequately reflect the impact of the IG program. The work of the
Inspectors General has created an awareness that the Federal Government is concerned about
fraud, waste, and abuse, and has had an important deterrent effect. For example:
• Based on the finding of its Inspector General, the Department of Education has referred
delinquent loans to the Department of Justice for collection. In several cases, the U.S. Attorney
has repossessed automobiles from individuals with delinquent student loans, resulting in
television and newspaper coverage in a number of communities and a greater awareness of the
consequences of non-payment.
• The Federal Employees Receiving Government Assistance Project has uncovered 1,881 employees and retirees who improperly received $14 million under Federal benefit programs. An
additional 159,580 employees and retirees with delinquent indebtedness totaling over $189
million have also been pinpointed.
This Federal Employees project has resulted in program and system improvements such as benefit
pre-screening, revamped payment systems, and a greater awareness by agency managers of operational weaknesses.
The PCIE's long-term Computer Match Project has been instrumental in developing a network of
resources and expertise to further the Government's use of advanced technology to stem fraud,
waste, and abuse in Federal programs. This PCIE project has developed a compendium of "best
computer match practices," and inventories of state computer matching activities, and has provided
a conduit for sharing techniques, information, and expertise among state and Federal agencies.
565
In the past year, the emphasis of the Council has shifted from the traditional audit approach of postaction reviews to a more active front-end emphasis on preventing fraud, waste, and abuse. The
prevention thrust is reflected in a number of Government-wide projects geared to improving program and administrative systems, implementing front-end checks prior to the awarding of contracts,
grants or benefits, and a combined effort to improve the Government's procurement systems.
1985 Budget
The accomplishments of the Inspectors General are generally not construed as budget savings. The
major contribution of the PCIE and the Inspectors General is to make recommendations for more
efficient ways to use resources. Increased efficiencies usually result in reallocation of savings for
program purposes.
566
Debt Collection
Program Description
An estimated $288 billion was owed to the Government on September 30, 1983. Most of this debt is
not yet due; however, almost $44 billion of the total, as of September 1983, was delinquent or in
default. Of this amount, $26 billion is related to overdue taxes that are being pursued by the
Internal Revenue Service, and $18 billion relates to delinquent loans or delinquent accounts receivable. Some of these delinquent debts will have to be written off because the cost of recovery exceeds
the amount likely to be recovered.
A significant cause of this problem is the past failure of agencies to pursue collection aggressively
and a general attitude among debtors that they do not have to repay their debts to the Government.
The President has committed the Administration to increasing collection of delinquent debts, including delinquent taxes owed the Internal Revenue Service.
Current Status
Several efforts have been launched to attack existing delinquency problems and improve debt
collection practices across the Government.
• Debt information is being automated to improve the reliability and timeliness of accounts
receivable reports.
• Uniform delinquency rules are being applied to ensure proper management of debt portfolios.
• Uniform standards for writing off uncollectable debts are being established and enforced.
• Agencies are preparing detailed plans that outline specific steps to be taken to implement the
Debt Collection Act of 1982.
• Debt servicing and collection functions are being automated, using the latest computer and
telecommunications technology.
• Risk analysis and credit scoring procedures are being used to ensure the integrity of the
process for extending credit.
Under a Government-wide reporting system implemented in 1982, selected agencies are submitting
quarterly financial reports that include information on:
• total debt owed;
• the age and amount of delinquent debt;
• the amount of interest assessed and collected on delinquent debts; and
• the number and value of debt cases referred to GAO and the Justice Department for collection.
Examples of successful debt collection operations include:
• The Department of Health and Human Services, especially the Social Security Administration,
has upgraded its systems and procedures for debt collection, emphasizing the recovery of
delinquent debts.
• The Education Department has identified over 46,000 Federal employees who are delinquent in
repaying $68 million in student loans. The Department is working with other Federal agencies
to recover these funds and to date, over $4 million has been collected. Under the Debt
567
Collection Act Federal employees who do not cooperate in repaying their debts can have their
salaries offset to recover funds owed the Government.
1985 Budget Impact
As a result of this year's review of agency debt collection estimates, an additional $2.1 billion is
expected to be collected.
568
Cash Management
Program Description
The Cash Management Project was initiated to address the serious need for better oversight of the
Nation's cash balances and the flow of Government funds.
In 1985, the Federal Government will collect and spend nearly a trillion dollars. The Government is
the largest single spender in the United States but one of the most antiquated in the management of
money. By using simple cash management techniques such as electronic transfers, delayed drawdowns, and lock boxes, the Government will be able to better manage its cash on hand and save
millions in interest costs.
Current Status
The Cash Management Project was initiated in early 1983 and is a joint project under the leadership
of the Department of the Treasury and the Office of Management and Budget. The project has
developed cash management action plans for 20 agencies and is currently monitoring 316 initiatives.
Agency examples of cash management savings include:
• The Department of Housing and Urban Development estimates it will be able to save several
million dollars over the next few years by avoiding duplicate interest payments on public
housing note sales.
• The Department of Labor's Employment and Training Administration has been able to save
$750,000 by effectively monitoring and controlling grantees' cash balances.
• The Internal Revenue Service will develop and implement improved cash management procedures which will add over $200 million in receipts to the Treasury in 1984.
1985 Budget
Government-wide cash management goals totalling $210.8 million have been established for 1985.
Examples of agency accomplishments which will be achieved in 1985 are:
• Conversion of Department of Health and Human Services grantee recipient payments to the
Treasury Financial Communications System will save $60 million in 1985.
• Implementing a concentration banking system and using electronic funds transfer for collecting and disbursing loans will reduce 1985 outlays by $113 million for the Department of
Agriculture's Farmers Home Administration and its Commodity Credit Corporation.
569
Savings Related to Improved Agency Management
571
Consolidation of Administrative Support Systems
Program Description
Multiple Federal administrative support facilities and widely scattered small administrative support
centers have resulted in duplication of effort, low productivity, and high costs. The cost of processing
administrative payments, for example, varies widely across agencies. Using successful consolidations
as models, such as the Department of Commerce's Regional Administrative Support Centers, agencies are reviewing their administrative support systems with an eye toward consolidation and crossservicing with other agencies. Such arrangements achieve economies-of-scale that reduce overhead
costs.
Current Status
Several agencies have already consolidated administrative support operations.
• The Department of Commerce has consolidated regional administrative support operations in
Seattle, Washington; Boulder, Colorado; Kansas City, Missouri; and Norfolk, Virginia.
• The Department of the Interior is preparing a plan to analyze the possible consolidation of
more than 20 administrative payments processing centers. The plan will cover the consolidation of administrative payments operations, with implementation during calendar year 1985.
• The Department of Transportation will present a plan for a single administrative payments
center to begin operation in calendar year 1985.
1985 Budget
The 1985 budget contains savings totaling $81.6 million as the result of consolidations of administrative functions. Examples of actions being taken are:
• The Department of the Treasury will begin to consolidate administrative payments processing.
• The Department of Health and Human Services will reduce administrative payments processing from fifty-five centers to 29 centers and will develop a plan for further consolidation.
• The Departments of Interior, Agriculture, and Labor will each consolidate their headquarters
administrative support operations.
573
Reductions in Personnel Levels and Costs
Program Description
Reduction in personnel levels and costs have been made possible by the use of productivity standards, efficiency reviews., and adjustments in grade structure. Specifically, productivity standards
have been applied to several administrative functions to determine appropriate staffing levels.
Agencies are performing efficiency reviews as required by OMB Circular No. A-76 and savings
targets have been established. Administrative personnel levels have been adjusted to reflect reduced
program activities, and agency grade structures will be modified to correct the overgrading of
positions at the higher grade levels.
Current Status
Federal agencies are currently applying productivity standards to determine appropriate staffing
levels in the administrative processing operations. Most of these savings will be realized in 1985.
Federal agencies are required by OMB Circular A-76
ties to determine if they can be performed more
industry. All agencies have developed inventories of
several have completed many of their evaluations and
to evaluate commercial-industrial type activicost effectively by contracting with private
commercial-related activities to be reviewed;
reduced personnel costs:
• The General Services Administration has conducted reviews of 58 activities in 1983 and saved
approximately $7.2 million by eliminating the equivalent of 713 full-time positions (FTEs).
• Department of Defense estimates that the A-76 cost studies conducted over the last four years
are achieving savings of over $300 million annually. Over 900 cost comparisons have been
conducted that have reduced personnel by 15,500. These reductions have been offset by increases due to higher priority national defense missions. The Department of Defense is reviewing activities involving 10,000 FTEs in 1984.
• The Department of the Interior is reviewing activities involving 3,080 FTEs in 1984.
From 1982 to the end of 1984, programmatic and other reductions are expected to reduce total nondefense employment by 75,000 FTEs.
1985 Budget Proposals
Savings of $33.4 million and 3,700 FTEs from A-76 efficiency reviews are reflected in the 1985
budget.
To correct the overgrading of General Schedule grades 11 through 15 or equivalent positions,
funding for these positions is being reduced by $1.2 billion over the four year period 1985-88.
Agencies will individually manage the correction of the grade imbalance.
574
Reduction in Non-Personnel Resources
Program Description
Non-personnel resources represent a significant portion of overhead costs. A number of initiatives
have been undertaken to reduce these costs. In-house printing operations and travel offices have
been reduced by greater reliance on the private sector, yielding improved service at less cost.
Tighter authorization policies and increased use of discounts have further reduced travel costs.
Strengthened reviews and evaluations have reduced space, publications, and audio-visual costs.
Current Status
One hundred eleven of the more than 1,000 printing and duplicating facilities in the Federal
Government have been targeted for closure or downgrading. Much also has been accomplished to
date in the consolidation and elimination of publications. Since April 1981, one out of every four
publications in the Federal Government has been eliminated or consolidated.
Improvements in space and property management have resulted in the sale of 407 "items" by the
General Services Administration and the Department of the Interior, for a return of $195 million.
The Department of the Interior has also sold 10,376 acres of public land for a return of $8.1 million.
The widespread use of Federal and other travel discounts ($377 million in 1983 savings alone),
tighter travel authorization procedures, and the increased use of commercial travel offices to make
low cost travel arrangements have resulted in more efficient use of travel funds.
1985 Budget Proposals
By closing or downgrading printing plants and duplicating facilities, and by increasing commercial
contracts, printing services will be improved. Savings in 1985 for the twenty largest agencies will be
$11.5 million. Total savings for the 4-year period of 1985 to 1988 will be $41.6 million for these 20
agencies, and $50 million for all agencies.
Reductions in space needs due to decreased program requirements and the application of tighter
space standards are expected to save $69 million in 1985.
Closing 17 agency travel offices, relying on private travel agents, and other initiatives will save $1.2
million annually and upgrade the quality of travel services available to Federal employees.
575
Savings From Cross Agency Processes and Systems
577
Financial Operations and Planning
Program Description
Burgeoning Government grants, contracts, and loans have generated a proliferation of stand alone,
imcompatible financial management and accounting systems. The introduction of standard accounting procedures and common data elements and a comprehensive information flow will make it
possible for senior policy officials to analyze trends and performance. This will enhance the quality
of resource allocation decisions and bring to Government expenditure controls similar to those found
in large private sector organizations.
Current Status
The introduction of Government-wide accounting system standards and common data requirements
has just begun. Nonetheless, several improvements have already been achieved and many more are
in the planning stage.
• Commerce has created a department-level financial information system that extracts data from
eight incompatible bureau systems. This system will serve as a prototype for financial information systems throughout the Executive Branch.
• Funding requests for ten financial systems involving nine agencies were deferred pending the
development of acceptable automated data processing plans, feasibility studies and/or design
specifications.
• An automated grant payment system has been implemented by the Department of Health and
Human Services. This system will result in interest savings and adoption by other grant
making agencies could achieve additional savings.
1985 Budget Proposal
Agency budgets have been reduced $400,000 by discouraging development of uncoordinated financial
systems. Improved systems will give top managers better tools for controlling expenditures and
making budget decisions.
The 1985 budget provides for investment of $67 million for improvements in agency financial
management systems. The Department of Defense has a major initiative underway to streamline,
integrate, and modernize its systems.
• Seven domestic agencies (Department of Transportation, Department of Education, Department of Housing and Urban Development, Department of the Interior, Department of Labor,
Department of Commerce, and Department of Energy) are working together to develop a
common accounting system that could ultimately serve the needs of all domestic agencies.
• The four major international agencies (State, Agency for International Development, United
States Information Agency, and the Peace Corps) are working together to develop a system to
serve overseas needs.
579
Personnel and Payroll Systems
Program Description
There is no reason to continue the approximately 150 personnel/payroll processing systems which
perform virtually identical functions for Federal agencies. To reduce the number, the most modern
and least costly systems are being identified and put to use by more agencies. Information compatibility and cost-effectiveness are being enhanced by requiring small agencies and agencies with older
or less efficient systems to obtain processing services from agencies with more-up-to-date systems. In
addition, automation of labor intensive functions is being encouraged. Consolidating parallel systems
within agencies and designing system upgrades will be patterned on approved criteria. In the near
future, these approaches will eliminate more than half the systems being used today and will avoid
substantial costs for upgrading outdated systems. In general, there is an accelerated trend toward
the development of generic systems.
Current Status
Early results of this program evolved from targets of opportunity identified during an inter-agency
review of existing practices.
• The Department of Education is now being serviced by the Department of the Interior's payroll
and personnel processing systems; the Departments of Commerce and Housing and Urban
Development will obtain personnel/payroll processing from another agency in 1985.
• During 1984, the General Services Administration, Department of the Treasury, Small Business Administration, and Department of Labor will be adopting the Air Force personnel
system.
• Veterans Administration, National Aeronautics and Space Administration, Department of
Justice, and Environmental Protection Agency will review and assess options for personnel and
payroll systems during 1984 to determine the most cost-effective approach.
• The Department of State, Agency for International Development, United States Information
Agency, and the Peace Corps plan to adopt a personnel/payroll system which will service all
four agencies, and will lead to future savings and the avoidance of development and maintenance costs.
1985 Budget Proposal
The 1985 budget contains savings of $20.5 million due to consolidations and increased automation of
payroll and personnel systems. Agencies with unusually high costs for their personnel/payroll
systems will be reviewing their operations. Costs will be reduced by obtaining services from another
agency or through internal improvements. All agencies employing fewer than 6,000 people have
been directed to seek personnel/payroll processing services from one of a few agencies with advanced systems. Savings and management improvements expected include:
• $33 million will be saved (and 20% of the personnel staff reduced) when Health and Human
Services automates and otherwise improves its existing payroll/personnel system, beginning in
1985 and continuing through 1988.
• $8.4 million a year will be saved by Treasury by consolidation of its personnel/payroll systems.
• $800,000 will be saved by the Department of Labor by converting to the Air Force personnel
system.
580
Appropriations of $1.5 million have been requested for Office of Personnel Management to upgrade
its Central Personnel Data File so that this Government-wide data file can provide better and more
reliable data to the Congress, General Accounting Office, Office of Management and Budget, and
Federal agency managers.
581
Index of Factsheets By Agency
OFFICE OF THE PRESIDENT
Funds Appropriated to the President
Assistance to Central America
Economic Support Fund
Foreign Military Sales and Special Defense Acquisition Funds
Foreign Military Sales Financing
Military Grant Assistance and Training
Page
547
543
539
537
545
EXECUTIVE DEPARTMENTS
Department of Agriculture
Agricultural Credit
Agricultural Research
Agriculture Statistics, Marketing, Inspection, and Foreign Accounts
Animal and Plant Inspection Service
Child Nutrition Programs
Commodity Price Supports and Related Subsidies
Conservation of Agricultural Lands
Extension Service
Federal Crop Insurance
Federal Power Programs
Food Inspection Services
Food Stamp Benefits and Nutrition Assistance to Puerto Rico
Forest Service
Low-Income Benefit Administrative Expenses
Other Nutrition Programs
.
Payments to States and Counties From Land Management and Forest Service Receipts..
P.L. 480 Food Aid
Public Lands Acquisition
Rural Development
Rural Electric and Telephone
Rural Housing
Soil Conservation Service Water Projects
Supplemental Food Programs
291
307
313
311
177
285
283
309
287
93
398
171
421
481
175
432
511
424
297
301
295
345
173
Department of Commerce
Census, Economic Statistics, and Productivity Improvement
Economic Development Administration
International Trade Administration
Minority Business Development Agency
National Bureau of Standards and Telecommunications
National Oceanic and Atmospheric Administration
583
455
23
460
41
458
453
Page
National Oceanic and Atmospheric Administration Special Fisheries Funds
Patent, Trademark, and Copyright
Research, Libraries, Smithsonian and Public Broadcasting
Department of Defense—Civil Functions
Corps of Engineers, Civil
Military Retirement Fund
347
134
Department of Education
Aid to Developing Institutions
Bilingual Education.
Compensatory Education for the Disadvantaged
Education for the Handicapped
Guaranteed Student Loans
Housing Counseling, Rehabilitation Services Program Management, and Other Activities
Impact Aid
Indian Education
Miscellaneous Civil Rights and Equal Opportunity Activities
Other Higher Education Programs
Postsecondary Student Financial Assistance
Rehabilitation Services
Research, Libraries, Smithsonian and Public Broadcasting
Small Elementary and Secondary Education Programs
Special Postsecondary Institutions
State Education Block Grant
Vocational and Adult Education
Department of Energy
Alternative and Synthetic Fuels
Atomic Energy Defense
Department of Energy General Science and Other Funds
Energy Conservation Grants
Energy Conservation Research and Development and Related Programs
Federal Power Programs
Fossil Energy Research and Development
Naval Petroleum Reserves
Nuclear Fission Research and Development
Nuclear Fusion Research and Development
Nuclear Waste
Solar and Renewable Energy Research and Development
Strategic Petroleum Reserve
Supporting Energy Research
Uranium Enrichment
53
457
448
584
221
205
199
211
219
249
209
207
414
223
217
248
448
203
225
201
213
79
499
443
265
89
93
81
419
73
75
77
84
494
86
91
Department of Health and Human Services
Page
Aid to Families with Dependent Children
Alcohol, Drug Abuse, and Mental Health Block Grant
Behavorial Research and Research Training
Biomedical Research and Research Training
Black Lung Program
Child Welfare Services and Training
Community Services Program
Energy Conservation Grants
Federal Categorical Health Services
Federal Categorical Social Services
Federal Subsidy for Saint Elizabeths Hospital
Food and Drug Administration
Foster Care and Adoption Assistance
Head Start
Health Professions Training Subsidies
Housing Counseling, Rehabilitation Services Program Management, and Other Activities
Indian Health Services
Low-Income Benefit Administrative Expenses
Low Income Home Energy Assistance
Maternal and Child Health Block Grant
Medicaid Benefits
Medicare
Miscellaneous Civil Rights and Equal Opportunity Activities
Occupational Safety and Health
Old Age, Survivors, and Disability Insurance
Older Americans Act...
Other Nutrition Programs
Preventive Health Block Grant
Primary Care Block Grant
Refugee Assistance
Research, Libraries, Smithsonian and Public Broadcasting
Social Insurance Administrative Expenses
Social Services Block Grant
Supplemental Security Income Benefits
Work Incentive Program
183
255
447
446
144
243
268
265
258
246
260
399
244
240
46
249
253
481
189
257
163
121
414
400
127
241
175
256
254
187
448
475
239
181
234
Department of Housing and Urban Development
Community Development Block Grant Loan Guarantees
Community Development Block Grants and Urban Development Action Grants
Energy Conservation Research and Development and Related Programs
Federal Housing Credit
Government National Mortgage Association Subsidized Mortgage Financing
585
30
18
89
98
97
Page
Housing for the Elderly or Handicapped
Miscellaneous Civil Rights and Equal Opportunity Activities
Other Housing Programs
Rehabilitation Loan Fund
Rental Rehabilitation and Rental Development Grants
Small Urban Programs and Close Outs
Subsidized Housing
100
414
102
21
20
31
165
Department of Interior
Bureau of Land Management and Minerals Management Service
Bureau of Mines
Bureau of Reclamation
Economic Development Administration
Fish and Wildlife Service
Geological Survey
Indian Development
Indian Education
Miscellaneous Interior Offsetting Receipts and Operating Programs
National Park Service
Office of Surface Mining and Reclamation
Payments to States and Counties Land Management and From Forest Service Receipts..
Public Lands Acquisition
Rent and Royalties on the Outer Continental Shelf
Urban Parks and Historic Preservation
423
430
349
23
426
429
25
207
436
427
392
432
424
434
15
Department of Justice
Bilingual Education
Correctional Activities
Criminal Justice Assistance
Department of Justice Legal Divisions
Immigration and Naturalization Service
Law Enforcement
205
412
273
410
408
405
Department of Labor
Black Lung Program
Employment Service
Federal Employee Workers' Compensation
Job Corps
Older Americans Employment
Pension Benefit Guaranty Corporation
Trade Adjustment Assistance for Workers
Training and Employment
Unemployment Compensation
Work Incentive Program
144
236
479
229
233
146
48
231
139
234
586
Department of State
Page
Compact of Free Association (Micronesia)
Contributions to International Organizations
Foreign Affairs Administration Expenses
International Refugee Assistance
514
509
517
513
Department of Transportation
Air Carrier Subsidy
Airport Improvement Program
Amtrak
Appalachian Programs
Coast Guard
Federal Aviation Administration Capital Modernization Program
Federal Aviation Administration Operations
Highway Safety Grants and Demonstrations
Highway Safety Operations
Highway Trust Fund
Maritime Research and Training
Maritime Subsidies
Northeast Corridor
Public Transit
Rail Rehabilitation and Reorganization Loan Guarantees
Railroad Subsidies
Transportation Industry Assistance
62
333
55
16
529
337
335
329
397
327
65
63
57
341
66
58
68
Department of the Treasury
Bureau of Alcohol, Tobacco, and Firearms
Customs Service
Earned Income Tax Credit
General Revenue Sharing
Internal Revenue Service
Multilateral Development Banks
Secret Service
Various International Financial Programs
407
409
186
28
462
505
413
533
INDEPENDENT AGENCIES
ACTION
ACTION
269
Agency for International Development
Bilateral Development Assistance
507
Contributions to International Organization
509
Appalachian Regional Commission
Appalachian Programs
16
587
Civil Rights Commission
Page
Miscellaneous Civil Rights and Equal Opportunity Activities
414
Export-Import Bank
Export Credits and Guarantees
36
Federal Deposit Insurance Corporation
Financial Depository Institutions
107
Federal Emergency Management Agency
Disaster Relief Grants
Emergency Preparedness
Flood Insurance
Other Nutrition Programs
22
501
44
175
Federal Home Loan Bank Board
Financial Depository Institutions
107
General Services Administration
General Services Administration Property Supplies and Records
464
National Defense Stockpile
493
Institute of Museum Services
Arts and Humanities
445
National Aeronautics and Space Administration
Medicare
National Aeronautics and Space Administration Space Programs
National Aeronautics and Space Administration Aeronautical Research and Development
Transportation Industry Assistance
121
523
60
68
National Credit Union Administration
Financial Depository Institutions
107
National Endowment for the Arts
Arts and Humanities
445
National Endowment for the Humanities
Arts and Humanities
445
National Science Foundation
National Science Foundation
441
Occupational Safety and Health Review
Occupational Safety and Health
400
588
Office of Personnel Management
Page
Federal Employee Group Life Insurance
Federal Employee Health Benefits
Federal Employee Retirement and Disability
477
473
131
Overseas Private Investment Corporation
The Overseas Private Investment Corporation
35
Peace Corps
Peace Corps
512
Railroad Retirement Board
Railroad Retirement
143
Small Business Administration
Small Business Administration Business Assistance
39
Small Business Administration Disaster Loan Assistance
42
Tennessee Valley Authority
Federal Power Programs
93
Tennessee Valley Authority Development Fund
27
U.S. Information Agency
Foreign Information and Exchange
518
U.S. Postal Service
Payment to the Postal Service Fund
38
Postal Service
50
Veterans Administration
Hospital Construction
Medical Care and Hospital Service Operations
Readjustment Benefits
Veterans Compensation, Pensions, Burial and Other Benefits
Veterans Housing
Veterans Life Insurance
Veterans Medical Research, Administration and Related Activities
372
371
366
363
376
365
374
REGULATORY AGENCIES
Architectural and Transportation Barriers Compliance Board
Miscellaneous Civil Rights and Equal Opportunity Activities
414
Civil Aeronautics Board
Air Carrier Subsidy
62
589
Equal Employment Opportunity Commission
Page
Miscellaneous Civil Rights and Equal Opportunity Activities
414
Environmental Protection Agency
Environmental Protection Agency Operations
Sewage Treatment Construction Grants
393
353
Superfund
395
Nuclear Regulatory Commission
Nuclear Regulatory Commission
391
Miscellaneous Regulatory Agencies
Miscellaneous Regulatory Agencies
402
THE CONGRESS
Legislative Branch
Legislative Functions
483
Library of Congress
Patent, Trademark, and Copyright
457
JUDICIARY
The Judiciary
Federal Judicial Activities
411
SELECTED QUASI-GOVERNMENT AGENCIES
Legal Services Corporation
Legal Services Corporation
271
Smithsonian
Department of Energy General Science and Other Funds
443
U.S. Railway Association
Rail Rehabilitation and Reorganization Loan Guarantees
66
U.S. Synthetic Fuels Corporation
Alternative and Synthetic Fuels
79
CROSS-CUTTING MISCELLANEOUS FUNCTIONS
District of Columbia Government
District of Columbia Payments and Net Loans
590
466
Cross-Cutting Functions
Page
Cash Management
Central Services and Functions
Consolidation of Administrative Support Systems
Debt Collection
Domestic Agency Administrative Expenses
Financial Operations and Planning
Personnel and Payroll Systems
President's Council on Integrity and Efficiency
Reductions in Non-Personnel Resources
Reductions in Personnel Levels and Costs
569
467
573
567
471
579
580
565
575
574
Washington Metropolitan Area Transit Authority
Public Transit
341
591
@FedFRASER