Analytical Perspectives

Analytical Perspectives Budget of the U.S. Government Fiscal Year 2011 Office of Management and Budget www.budget.gov THE BUDGET DOCUMENTS Budget of the United States Government, Fiscal Year 2011 contains the Budget Message of the President, information on the President’s priorities, budget overviews organized by agency, and summary tables. Analytical Perspectives, Budget of the United States Government, Fiscal Year 2011 contains analyses that are designed to highlight specified subject areas or provide other significant presentations of budget data that place the budget in perspective. This volume includes economic and accounting analyses; information on Federal receipts and collections; analyses of Federal spending; information on Federal borrowing and debt; baseline or current services estimates; and other technical presentations. The Analytical Perspectives volume also contains supplemental material with several detailed tables, including tables showing the budget by agency and account and by function, subfunction, and program, that is available on the Internet and as a CD-ROM in the printed document. Historical Tables, Budget of the United States Government, Fiscal Year 2011 provides data on budget receipts, outlays, surpluses or deficits, Federal debt, and Federal employment over an extended time period, generally from 1940 or earlier to 2011 or 2015. To the extent feasible, the data have been adjusted to provide consistency with the 2011 Budget and to provide comparability over time. Appendix, Budget of the United States Government, Fiscal Year 2011 contains detailed information on the various appropriations and funds that constitute the budget and is designed primarily for the use of the Appropriations Committees. The Appendix contains more detailed financial information on individual programs and appropriation accounts than any of the other budget documents. It includes for each agency: the proposed text of appropriations language; budget schedules for each account; legislative proposals; explanations of the work to be performed and the funds needed; and proposed general provisions applicable to the appropriations of entire agencies or group of agencies. Information is also provided on certain activities whose transactions are not part of the budget totals. AUTOMATED SOURCES OF BUDGET INFORMATION The information contained in these documents is available in electronic format from the following sources: Internet. All budget documents, including documents that are released at a future date, spreadsheets of many of the budget tables, and a public use budget database are available for downloading in several formats from the Internet at www.budget.gov/budget. Links to documents and materials from budgets of prior years are also provided. Budget CD-ROM. The CD-ROM contains all of the budget documents in fully indexed PDF format along with the software required for viewing the documents. The CD-ROM has many of the budget tables in spreadsheet format and also contains the materials that are included on the separate Analytical Perspectives CD-ROM. For more information on access to electronic versions of the budget documents (except CD-ROMs), call (202) 512-1530 in the D.C. area or toll-free (888) 293-6498. To purchase the budget CD-ROM or printed documents call (202) 512-1800. GENERAL NOTES 1. All years referenced for budget data are fiscal years unless otherwise noted. All years referenced for economic data are calendar years unless otherwise noted. 2. Detail in this document may not add to the totals due to rounding. U.S. GOVERNMENT PRINTING OFFICE WASHINGTON 2010 For sale by the Superintendent of Documents, U.S. Government Printing Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC 20402-0001 I S B N 978-0-16-084798-1 TABLE OF CONTENTS Page List of Charts and Tables ..................................................................................................................... iii Introduction 1. Introduction .................................................................................................................................3 Economic and Budget Analyses 2. Economic Assumptions................................................................................................................9 3. Interactions Between the Economy and the Budget ...............................................................19 4. Financial Stabilization Efforts and Their Budgetary Effects .................................................27 5. Long Term Budget Outlook .......................................................................................................45 6. Federal Borrowing and Debt.....................................................................................................55 Performance and Management 7. Delivering High-Performance Government .............................................................................73 8. Program Evaluation ..................................................................................................................91 9. Benefit–Cost Analysis ...............................................................................................................93 10. Improving the Federal Workforce .............................................................................................99 Budget Concepts and Budget Process 11. Budget Concepts ......................................................................................................................115 12. Coverage of the Budget ...........................................................................................................137 13. Budget Process ........................................................................................................................143 Federal Receipts 14. Governmental Receipts ...........................................................................................................159 15. Offsetting Collections and Offsetting Receipts ......................................................................193 16. Tax Expenditures ....................................................................................................................207 Special Topics 17. Aid to State and Local Governments......................................................................................247 18. Strengthening Federal Statistics............................................................................................315 19. Information Technology...........................................................................................................321 20. Federal Investment .................................................................................................................329 21. Research and Development.....................................................................................................339 22. Credit and Insurance ..............................................................................................................345 23. Homeland Security Funding Analysis....................................................................................379 24. Federal Drug Control Funding ...............................................................................................387 i Page 25. California-Federal Bay-Delta Program Budget Crosscut (CALFED) ...................................389 Technical Budget Analyses 26. Current Services Estimates ....................................................................................................393 27. Trust Funds and Federal Funds .............................................................................................417 28. National Income and Product Accounts .................................................................................433 29. Comparison of Actual to Estimated Totals.............................................................................439 30. Budget and Financial Reporting ............................................................................................447 31. Social Indicators ......................................................................................................................455 ii LIST OF CHARTS AND TABLES iii LIST OF CHARTS AND TABLES LIST OF CHARTS Page 2–1. Relative House Prices Stopped Falling in 2009 .........................................................................9 2–2. The One-Month LIBOR Spread over the One-Month Treasury Yield has Returned to Pre-Crisis Levels ..................................................................................................10 2–3. The Personal Saving Rate has Risen Sharply since 2008 .......................................................11 2–4. The Lag between the Turnaround in Real GDP and the Turning Point for Payroll Employment and the Unemployment Rate ................................................................12 2–5. Real GDP Growth Following a Recession: Five-Year Averages...............................................14 3–1. Forecast Alternatives: Real GDP ..............................................................................................22 3–2. Range of Uncertainty for the Budget Deficit ...........................................................................24 4–1. Proposed Federal Financial Reforms........................................................................................43 5–1. Sources of Projected Growth in Medicare, Medicaid, and Social Security .............................46 5–2. Health Care Cost Alternatives .................................................................................................48 5–3. Alternative Discretionary Projections ......................................................................................49 5–4. Alternative Revenue Projections ..............................................................................................49 5–5. Alternative Productivity Assumptions .....................................................................................50 5–6. Alternative Fertility Assumptions ............................................................................................50 5–7. Alternative Immigration Assumptions.....................................................................................51 5–8. Alternative Mortality Assumptions ..........................................................................................52 10–1. Federal Civilian Workforce as Share of U.S. Population .........................................................99 10–2. Pay Raises for Federal vs. Private Workforce ........................................................................100 10–3. Education Level Distribution in Federal vs. Private Workforce ...........................................100 10–4. Federal Age Distribution in 1970 and 2009 ...........................................................................101 10–5. Federal vs. Private Age Distribution in 2009 .........................................................................102 10–6. Actual and Projected Federal Employee Retirements ...........................................................102 10–7. Federal General Schedule Distribution in 1953 and 2009 ....................................................103 10–8. Federal vs. Private Turnover Before and During Recession .................................................103 11–1. Relationship of Budget Authority to Outlays for 2011 ..........................................................126 19–1. Totals for Federal IT Spending, Infrastructure Share of Spending and Data Center Growth ...............................................................................................................322 19–2. Components of Federal IT Spending—Mission Support and Infrastructure .......................323 22–1. Face Value of Federal Credit Outstanding .............................................................................363 30–1. Net Federal Liabilities ............................................................................................................451 v LIST OF TABLES Page Economic and Budget Analyses Economic Assumptions 2–1. Economic Assumptions .................................................................................................... 13 2–2. Comparison of Economic Assumptions............................................................................ 16 2–3. Comparison of Economic Assumptions in the 2010 and 2011 Budgets ......................... 17 Interactions Between the Economy and the Budget 3–1. Sensitivity of the Budget to Economic Assumptions ...................................................... 3–2. GDP Forecast Errors, January 1982–Present................................................................. 3–3. Budget Effects of Alternative Scenarios .......................................................................... 3–4. The Structural Balance .................................................................................................... Financial Stabilization Efforts and Their Budgetary Effects 4–1. Costs of Troubled Asset Relief Program Actions (Excluding Debt Service) ................. 4–2. Troubled Asset Relief Program Current Value as Reflected in the Budget .................. 4–3. Troubled Asset Relief Program Face Value of TARP Outstanding ................................ 4–4. Troubled Asset Relief Program Effects on the Deficit and Debt as Reflected in the Budget ............................................................................................. 4–5. Troubled Asset Relief Program Effects on the Deficit and Debt Calculated on a Cash Basis ............................................................................................ 4–6. Troubled Asset Relief Program Reestimates................................................................... 4–7. Detailed TARP Program Levels and Costs .................................................................... 4–8. Comparison of OMB and CBO TARP Costs .................................................................... 21 22 23 25 35 35 36 37 38 39 40 41 Long Term Budget Outlook 5–1. Long-Run Budget Projections ......................................................................................... 47 5–2. Fiscal Gap under Alternative Budget Scenarios............................................................. 52 5–3. Intermediate Actuarial Projections for OASDI and HI .................................................. 53 Federal Borrowing and Debt 6–1. Trends in Federal Debt Held by the Public ..................................................................... 6–2. Federal Government Financing and Debt ....................................................................... 6–3. Debt Held by the Public Net of Financial Assets and Liabilities................................... 6–4. Agency Debt ...................................................................................................................... 6–5. Debt Held by Government Accounts ............................................................................... 6–6. Federal Funds Financing and Change in Debt Subject to Statutory Limit .................. 6–7. Foreign Holdings of Federal Debt .................................................................................... 55 58 61 63 64 68 69 Performance and Management Program Evaluation 8–1. Funded Program Evaluation Initiative Proposals ........................................................ 91 Benefit-Cost Analysis 9–1. Estimates of the Total Annual Benefits and Costs of Major Rules Reviewed by OMB in Fiscal Year 2008 .......................................................................... 94 9–2. Estimates of the Net Costs per Life Saved of Selected Health and Safety Rules Reviewed by OMB in Fiscal Year 2008 .................................................... 95 vii Page Improving the Federal Workforce 10–1. Federal Civilian Employment in the Executive Branch............................................... 10–2. Total Federal Employment ............................................................................................. 10–3. Personnel Compensation and Benefits .......................................................................... 10–4. Agency Rankings From Federal Workforce Surveys .................................................... 10–5. Overseas Staffing Under Chief of Mission Authority ................................................... 107 108 109 110 111 Budget Concepts and Budget Process Budget Concepts 11–1. Totals for the Budget and the Federal Government ..................................................... 119 Coverage of the Budget 12–1. Comparison of Total, On-budget, and Off-budget Transactions .................................. 138 Budget Process 13–1. Mandatory and Receipt Savings from Discretionary Program Integrity Base Funding and Allocation Adjustments .................................................. 13–2. Discretionary Program Integrity Base Funding and Allocation Adjustments ............ 13–3. Mandatory and Receipt Savings from Other Program Integrity Initiatives ............... 13–4. Pell Grant Adjustments.................................................................................................. 13–5. Highway Trust Fund Estimates ................................................................................... 144 145 147 153 154 Federal Receipts Governmental Receipts 14–1. Governmental Receipts by Source—Summary ............................................................. 14–2. Adjustments to the Budget Enforcement Act (BEA) Baseline Estimates of Governmental Receipts to Reflect Current Policy ................................. 14–3. Effect of Proposals .......................................................................................................... 14–4. Receipts by Source .......................................................................................................... Offsetting Collections and Offsetting Receipts 15–1. Offsetting Collections and Offsetting Receipts From the Public ................................. 15–2. Offsetting Receipts By Type........................................................................................... 15–3. Gross Outlays, User Charges, Other Offsetting Collections and Offsetting Receipts From the Public, and Net Outlays ............................................... 15–4. User Charge Proposals in the FY 2011 Budget ........................................................... Tax Expenditures 16–1. Estimates of Total Income Tax Expenditures for Fiscal Years 2009-2015 .................. 16–2. Estimates of Tax Expenditures for the Corporate and Individual Income Taxes for Fiscal Years 2009-2015 ..................................................................... 16–3. Income Tax Expenditures Ranked by Total Fiscal Year 2011-2015 Projected Revenue Effect .............................................................................................. 16–4. Present Value of Selected Tax Expenditures for Activity in Calendar Year 2009 ....... 159 171 185 190 194 195 200 202 209 214 220 223 Special Topics Aid to State and Local Governments 17–1. Trends in Federal Grants to State and Local Governments ........................................ 254 viii Page 17–2. 17–3. 17–4. 17–5. 17–6. 17–7. 17–8. 17–9. 17–10. 17–11. 17–12. 17–13. 17–14. 17–15. 17–16. 17–17. 17–18. 17–19. 17–20. 17–21. 17–22. 17–23. 17–24. 17–25. 17–26. 17–27. 17–28. 17–29. 17–30. 17–31. 17–32. 17–33. 17–34. 17–35. 17–36. 17–37. 17–38. 17–39. Federal Grants to State and Local Governments—Budget Authority and Outlays ... Summary of Programs by Agency, Bureau, and Program ............................................ Summary of Programs by State..................................................................................... Summary of Recovery Act Grants by Agency, Bureau, and Program .......................... Summary of Recovery Act Grants by State ................................................................... School Breakfast Program (10.553) ............................................................................... National School Lunch Program (10.555) ..................................................................... Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) (10.557) ......................................................................................... Child and Adult Care Food Program (10.558)............................................................... State Administrative Matching Grants for the Supplemental Nutrition Assistance Program (Food Stamps) (10.561) ............................................... Title I College-and-Career-Ready Students (Formerly Title I Grants to Local Educational Agencies) (84.010) ....................................................................... Improving Teacher Quality State Grants (84.367) ....................................................... Education State Grants, State Fiscal Stabilization Fund (84.394) ............................. Government Services, State Fiscal Stabilization Fund (84.397) ................................. Effective Teachers and Leaders State Grants .............................................................. Vocational Rehabilitation State Grants (84.126) .......................................................... IDEA Part B: Grants to States & Grants to States Recovery Act (84.027) ................. State Energy Program (81.041) ..................................................................................... Weatherization Assistance For Low-Income Persons (81.042) ..................................... Energy Efficiency And Conservation Block Grant (81.043) ......................................... Children’s Health Insurance Program (93.767) ............................................................ Grants To States For Medicaid (93.778) ........................................................................ Temporary Assistance for Needy Families (TANF)— Family Assistance Grants (93.558) ............................................................................... Child Support Enforcement - Federal Share of State and Local Administrative Costs and Incentives (93.563) ............................................................. Low Income Home Energy Assistance Program (93.568)............................................. Child Care and Development Block Grant (93.575) ..................................................... Child Care and Development Fund - Mandatory (93.596A) ........................................ Child Care and Development Fund - Matching (93.596B) ........................................... Head Start (93.600) ........................................................................................................ Foster Care - Title IV-E (93.658) .................................................................................... Adoption Assistance (93.659) ......................................................................................... Social Services Block Grant (93.667) ............................................................................. Ryan White HIV/AIDS Treatment Modernization Act - Part B HIV Care Grants (93.917) ............................................................................................. Public Housing Operating Fund (14.850) ..................................................................... Section 8 Housing Choice Vouchers (14.871) ................................................................ Public Housing Capital Fund (14.872) .......................................................................... Community Development Block Grants and Neighborhood Stabilization Program (14.218) ..................................................................................... Homelessness Prevention and Rapid Re-Housing Program (14.257) .......................... 255 266 268 269 270 271 272 273 274 275 276 277 278 279 280 281 282 283 284 285 286 287 288 289 290 291 292 293 294 295 296 297 298 299 300 301 302 303 ix Page 17–40. HOME Investment Partnership Program and Tax Credit Assistance Program (14.258) ........................................................................................ 17–41. Edward Byrne Memorial Justice Assistance Grant Program (16.738)........................ 17–42. Unemployment Insurance (17.225) ............................................................................... 17–43. WIA Youth Activities (17.259) ........................................................................................ 17–44. WIA Dislocated Workers (17.260) .................................................................................. 17–45. Airport Improvement Program (20.106)........................................................................ 17–46. Highway Planning and Construction (20.205) .............................................................. 17–47. Federal Transit Formula Grants Programs (20.507) .................................................... 17–48. Capitalization Grants for Clean Water State Revolving Fund (66.458) ...................... 17–49. Capitalization Grants for Drinking Water State Revolving Fund (66.468) ................ 17–50. Universal Service Fund E-Rate .................................................................................... 304 305 306 307 308 309 310 311 312 313 314 Strengthening Federal Statistics 18–1. 2009-2011 Budget Authority for Principal Statistical Agencies .................................. 319 Information Technology 19–1. Federal IT Spending, Budgets of 2009–2011 Including Major Federal IT Investment................................................................................................... 321 Federal Investment 20–1. Composition of Federal Investment Outlays ................................................................ 20–2. Federal Investment Budget Authority and Outlays: Grant and Direct Federal Programs ............................................................................................... 20–3. Net Stock of Federally Financed Physical Capital ....................................................... 20–4. Net Stock of Federally Financed Research and Development .................................... 20–5. Net Stock of Federally Financed Education Capital .................................................... 330 332 335 336 337 Research and Development 21–1. Federal Research and Development Spending ........................................................... 342 21–2. Agency Detail of Selected Interagency R&D Efforts ................................................... 344 Credit and Insurance 22–1. Top 10 Firms Presenting Claims (1975–2009) ............................................................. 360 22–2. Estimated Future Cost of Outstanding Federal Credit Programs .............................. 364 22–3. Reestimates of Credit Subsidies on Loans Disbursed Between 1992–2009 ............... 365 22–4. Direct Loan Subsidy Rates, Budget Authority, and Loan Levels, 2009–2011 .............. 368 22–5. Loan Guarantee Subsidy Rates, Budget Authority, and Loan Levels, 2009–2011...... 370 22–6. Summary of Federal Direct Loans and Loan Guarantees............................................ 371 22–7. Direct Loan Write-Offs and Guaranteed Loan Terminations for Defaults ................. 372 22–8. Appropriations Acts Limitations on Credit Loan Levels ............................................. 374 22–9. Face Value of Government-Sponsored Lending ........................................................... 375 22–10. Lending and Borrowing by Government-Sponsored Enterprises (GSEs) ................. 376 22–11. Direct Loan Transactions of the Federal Government ....................................... CD-ROM 22–12. Guaranteed Loan Transactions of the Federal Government............................... CD-ROM Homeland Security Funding Analysis 23–1. Homeland Security Funding by Agency ........................................................................ 379 23–2. Prevent and Disrupt Terrorist Attacks ......................................................................... 380 x Page 23–3. Protect the American People, Our Critical Infrastructure, and Key Resources ............................................................................... 381 23–4. Respond To and Recover From Incidents ...................................................................... 382 23–5. Discretionary Fee-Funded Homeland Security Activities by Agency .......................... 384 23–6. Mandatory Homeland Security Funding by Agency..................................................... 384 23–7. Baseline Estimates—Total Homeland Security Funding by Agency .......................... 385 23–8. Homeland Security Funding by Budget Function ........................................................ 386 23–9. Baseline Estimates—Homeland Security Funding by Budget Function .................... 386 Appendix—Homeland Security Mission Funding by Agency and Budget Account ............................................................................................. CD-ROM Federal Drug Control Funding 24–1. Federal Drug Control Funding, 2009–2011 ................................................................. 387 California-Federal Bay-Delta Program Budget Crosscut (CALFED) 25–1. CALFED-Related Federal Funding Budget Crosscut .................................................. 389 CALFED FY 1998-2011 Budget Crosscut Methodology ..................................... CD-ROM CALFED Federal Agency Funding—Summary by Category and Agency Breakout ......................................................................................... CD-ROM CALFED Project Descriptions ............................................................................. CD-ROM CALFED Fiscal Year 2009 Federal Funding ...................................................... CD-ROM CALFED Fiscal Years 2010–2011 Funding Under New and Old Authority ..... CD-ROM CALFED Federal Funding for Related Activities ............................................... CD-ROM CALFED Year by Year Funding ........................................................................... CD-ROM CALFED Agency Overview .................................................................................. CD-ROM Technical Budget Analyses Current Services Estimates 26–1. Category Totals for the Baseline Projection of Current Policy..................................... 393 26–2. Impact of Budget Policy ................................................................................................. 395 26–3. Alternative Baseline Assumptions ................................................................................ 396 26–4. Summary of Economic Assumptions ............................................................................. 397 26–5. Baseline Beneficiary Projections for Major Benefit Programs ..................................... 400 26–6. Impact of Regulations, Expiring Authorizations, and Other Assumptions in the Baseline ........................................................................................ 401 26–7. Receipts by Source in the Baseline Projection of Current Policy ................................. 410 26–8. Effects on Receipts of Changes in the Social Security Taxable Earnings Base .......... 411 26–9. Change in Outlay Estimates by Category in the Baseline Projection of Current Policy ............................................................................................................ 411 26–10. Outlays by Function in the Baseline Projection of Current Policy .............................. 412 26–11. Outlays by Agency in the Baseline Projection of Current Policy ................................. 413 26–12. Budget Authority by Function in the Baseline Projection of Current Policy .............. 414 26–13. Budget Authority by Agency in the Baseline Projection of Current Policy ................. 415 26–14. Category, and Program ......................................................................................... CD-ROM Trust Funds and Federal Funds 27–1. Receipts, Outlays and Surplus or Deficit by Fund Group ............................................ 418 xi Page 27–2. Income, Outgo, and Balances of Trust Funds Group .................................................... 27–3. Comparison of Total Federal Fund and Trust Fund Receipts to Unified Budget Receipts, Fiscal Year 2009 ................................................................................ 27–4. Income, Outgo, and Balances of Major Trust Funds .................................................... 27–5. Income, Outgo, and Balances of Selected Federal Funds ............................................. 419 420 422 429 National Income and Product Accounts 28–1. Federal Transactions in the National Income and Product Accounts, 2000-2011 ...... 436 28–2. Relationship of the Budget to the Federal Sector, NIPAs ........................................... 437 Comparison Actual to Estimated Totals 29–1. Comparison of Actual 2009 Receipts with the Initial Current Services Estimates .... 29–2. Comparison of Actual 2009 Outlays with the Initial Current Services Estimates ..... 29–3. Comparison of the Actual 2009 Deficit with the Initial Current Services Estimate . 29–4. Comparison of Actual and Estimated Outlays for Mandatory and Related Programs Under Current Law ........................................................................ 29–5. Reconciliation of Final Amounts for 2009 .................................................................... 29–6. Comparison of Estimated and Actual Surpluses or Deficits Since 1982 ..................... 29–7. Differences Between Estimated and Actual Surpluses or Deficits for Five-year Budget Estimates Since 1982 ..................................................................... 440 441 441 442 443 445 446 Budget and Financial Reporting 30–1. Key Budget and Financial Measures for 2008 .............................................................. 449 30–2. Government Assets and Liabilities ............................................................................... 452 Social Indicators 31–1. Economic and Social Indicators ..................................................................................... 458 31–2. Economic and Social Indicators ..................................................................................... 459 31–3. Sources for Economic and Social Indicators ................................................................. 460 Detailed Functional Table 32–1. Budget Authority and Outlays by Function, Category, and Program ................ CD-ROM Federal Programs by Agency and Account 33–1. Federal Programs by Agency and Account .......................................................... CD-ROM xii INTRODUCTION 1 1. INTRODUCTION PURPOSE OF THIS VOLUME The Analytical Perspectives volume presents analyses that highlight specific subject areas or provide other significant data that place the Budget in context. This volume presents crosscutting analyses of Government programs and activities from several perspectives. Presidential budgets have included separate analytical presentations of this kind for many years. The 1947 Budget and subsequent budgets included a separate section entitled “Special Analyses and Tables” that covered four and sometimes more topics. For the 1952 Budget, the section was expanded to 10 analyses, including many subjects still covered today, such as receipts, investment, credit programs, and aid to State and local governments. With the 1967 Budget this material became a separate volume entitled “Special Analyses,” and included 13 chapters. The material has remained a separate volume since then, with the exception of the Budgets for 1991– 1994, when all of the budget material was included in one large volume. Beginning with the 1995 Budget, the volume has been named Analytical Perspectives. Again this year, several large tables are included at http://www.whitehouse.gov/omb/budget/fy2011/spec. html and on the Analytical Perspectives CD-ROM enclosed with the printed version of this volume. A list of these items is in the Table of Contents. Overview of the Chapters Introduction Introduction. This chapter briefly discusses each of the subsequent chapters presented in this year’s Analytical Perspectives volume. Economic and Budget Analyses Economic Assumptions. This chapter reviews recent economic developments; presents the Administration’s assessment of the economic situation and outlook, including the effects of macroeconomic policies; and compares the economic assumptions on which the Budget is based with the assumptions for last year’s Budget and those of other forecasters. Interactions Between the Economy and the Budget. This chapter illustrates how different economic paths would automatically produce different budget results, and provides sensitivity estimates for the effects on the budget of changes in specified economic assumptions. It also provides estimates of the cyclical and structural components of the budget deficit. Past errors in economic projections are reviewed. Financial Stabilization Efforts and Their Budgetary Effects. This chapter focuses on Federal efforts to stabilize the economy and promote financial recovery, including the Troubled Asset Relief Program (TARP), reform of financial regulation, and other measures. The chapter also includes special analyses of the TARP as described in Section 203(a) of the Emergency Economic Stabilization Act of 2008. Long-Term Budget Outlook. This chapter assesses the long-term budget outlook and the sustainability of current budget policy by focusing on 75-year projections of the Federal budget and showing how alternative long-term budget assumptions would produce different results. The chapter presents information on the size of the fiscal gap, and the budgetary effects of growing health costs. The chapter also explains why long-term primary surpluses (surpluses when interest costs are not counted) would be needed to achieve sustainability. Federal Borrowing and Debt. This chapter analyzes Federal borrowing and debt and explains the budget estimates. It includes sections on special topics such as the trends in debt, agency debt, investment by Government accounts, and the statutory debt limit. Performance and Management Delivering High-Performance Government. This chapter describes this Administration’s approach to performance management, the Federal Government’s use of performance goals and measurement to drive significant performance gains. Leaders of the largest Federal agencies have identified between three and eight ambitious, high-priority, outcome-focused performance goals to achieve within the next 24 months. These are listed in this chapter. In addition, the chapter explains how the Administration expects agencies to use outcome-focused performance information to lead, learn, and improve outcomes; candidly communicate the priorities, problems, and progress of Government programs; and tap into practitioner communities to improve outcomes. Program Evaluation. The Program Evaluation chapter is new, which underscores this Administration’s commitment to measuring what works and what does not. The chapter reports on the OMB Director’s October 7th memo which called for an “Increased Emphasis on Program Evaluations.” As part of this memo, the Administration has committed to making ongoing program evaluation research available on-line, to creating an interagency task force that will identify and help to shape evaluations of programs, and to funding a new program evaluation initiative designed to strengthen rigorous, objective assessments of existing Federal activities to improve results and better inform funding decisions. This initiative funds 3 4 32 proposals for new program evaluations and/or efforts to build agency evaluation capacity. Finally, this chapter offers guidelines for strong evaluations and for effectively building agency evaluation capacity. Benefit-Cost Analysis. This chapter discusses the use of benefit-cost analysis to design programs and policies to ensure that they achieve the maximal benefit to society and do not impose unjustified or excessive costs. Improving the Federal Workforce. Strengthening the Federal workforce is essential to building a high-performing Government. This chapter presents summary data on Federal employment, compensation, and benefits; examines the challenges posed by aging employees and technological change; and discusses plans for improving the Federal workforce. Budget Concepts and Budget Process Budget Concepts. This chapter includes a basic description of the budget process, concepts, laws, and terminology, and includes a glossary of budget terms. Coverage of the Budget. This chapter distinguishes between activities that are included in budget receipts and outlays (“budgetary”), and those that are not included in the budget (“non-budgetary”). It also defines the terms “on-budget” and “off-budget.” Budget Process. This chapter includes a brief description of the Administration’s proposals to make the budget process more responsible and to make budgets more transparent, accurate, and comprehensive. Federal Receipts Governmental Receipts. This chapter presents information on receipts estimates, enacted tax legislation, and the receipts proposals in the Budget. Offsetting Collections and Offsetting Receipts. This chapter presents information on collections that offset outlays, including both transactions with the public and intragovernmental transactions. In addition, this chapter presents information on “user fees,” charges associated with market-oriented activities, and regulatory fees. Tax Expenditures. This chapter describes and presents estimates of tax expenditures, which are defined as revenue losses from special exemptions, credits, or other preferences in the tax code. Special Topics Aid to State and Local Governments. This chapter presents crosscutting information on Federal grants to State and local governments, including highlights of Administration proposals. An Appendix to this chapter includes State-by-State spending estimates of major grant programs, including estimates for grant spending from the American Recovery and Reinvestment Act of 2009 (ARRA). ANALYTICAL PERSPECTIVES Strengthening Federal Statistics. This chapter discusses 2011 Budget proposals for the Government’s principal statistical programs. Information Technology. This chapter gives an overview of Federal spending on information technology, and the major initiatives through which the Administration is seeking to improve Federal information technology to deliver better value to taxpayers, through improved program performance, greater efficiency and cost savings, and extending the transparency of government and participation of citizens. The chapter also discusses the Administration’s plans to extend its accomplishments in Federal information technology from its first year while continuing to provide strong information security and protection of privacy information. Federal Investment. This chapter discusses federally financed spending that yields long-term benefits. It presents information on annual spending on physical capital, research and development, and education and training, and on the cumulative capital stocks resulting from that spending. Research and Development. This chapter presents a crosscutting review of research and development funding in the Budget, including discussions about priorities, performance, and coordination across agencies. Credit and Insurance. This chapter provides crosscutting analyses of the roles, risks, and performance of Federal credit and insurance programs and Governmentsponsored enterprises (GSEs). The general portion of the chapter covers the categories of Federal credit (housing, education, business including farm operations, and international) and insurance programs (deposit insurance, pension guarantees, disaster insurance, and insurance against terrorism-related risks). Additionally, two detailed tables, “Table 22–11, Direct Loan Transactions of the Federal Government” and “Table 22–12. Guaranteed Loan Transactions of the Federal Government,” are available at the Internet address cited above for the electronic version of this volume and on the Analytical Perspectives CD-ROM enclosed with the printed version of this volume. Homeland Security Funding Analysis. This chapter discusses homeland security funding and provides information on homeland security program requirements, performance, and priorities. Additional detailed information is available at the Internet address cited above for the electronic version of this volume and on the Analytical Perspectives CD-ROM enclosed with the printed version of this volume. Federal Drug Control Funding. This chapter displays enacted and proposed drug control funding for Federal departments and agencies. California-Federal Bay-Delta Budget Crosscut (CALFED). This chapter presents information on Federal and State funding for the CALFED program, in fulfillment of the reporting requirements for this program. Additional detailed tables on CALFED funding and project descriptions are available at the Internet address cited above for the electronic version of this volume and 5 1. INTRODUCTION on the Analytical Perspectives CD-ROM enclosed with the printed version of this volume. Technical Budget Analyses Current Services Estimates. This chapter presents the Budget’s estimates of what receipts, outlays, and the deficit would be if current policies remained in force (termed the “baseline projection of current policy”). It discusses the conceptual framework for these estimates and describes differences with the baseline as specified under the rules of the Budget Enforcement Act (BEA). A detailed table, “Table 26–14, Current Services Budget Authority and Outlays by Function, Category, and Program” is available at the Internet address cited above for the electronic version of this volume and on the Analytical Perspectives CDROM enclosed with the printed version of this volume. Trust Funds and Federal Funds. This chapter provides summary information on the two fund groups – Federal funds and trust funds. In addition, for the major trust funds and several Federal fund programs, the chapter provides detailed information about income, outgo, and balances. National Income and Product Accounts. This chapter discusses how Federal receipts and outlays fit into the framework of the National Income and Product Accounts (NIPAs) prepared by the Department of Commerce. The NIPA measures are the basis for reporting Federal transactions in the gross domestic product (GDP) and for analyzing the effect of the budget on aggregate economic activity. Comparison of Actual to Estimated Totals. This chapter compares the actual receipts, outlays, and deficit for 2009 with the estimates for that year published two years ago in the 2009 Budget. It also includes a historical comparison of the differences between receipts, outlays, and the deficit as originally proposed with final outcomes. Budget and Financial Reporting. This chapter summarizes information about the Government’s financial performance that is provided by three complementary sources – the budget, the financial statements, and the national income and flow-of-funds accounts. Social Indicators. This chapter presents a selection of statistics that offer a numerical picture of the United States. Included are economic statistics such as real GDP per capita, household income, and measures of income equality. There are also environmental and energy indicators. A second table shows health, education, and other social indicators. The general picture presented by the statistics is one of improvement over the 50 years since 1960, but there have been setbacks such as the 2008–2009 recession, which have had a negative effect on some of the indicators. The following materials are available at the Internet address cited above for the electronic version of this volume and on the Analytical Perspectives CD-ROM enclosed with the printed version of this volume. Detailed Functional Table Detailed Functional Table. Table 32–1. “Budget Authority and Outlays by Function, Category, and Program.” Federal Programs by Agency and Account Federal Programs by Agency and Account. Table 33–1. “Federal Programs by Agency and Account.” ECONOMIC AND BUDGET ANALYSES 7 2. ECONOMIC ASSUMPTIONS When the President took office in January 2009, the economy was in the midst of an economic crisis. The recession, which began in December 2007, became more severe toward the end of 2008, and, in the three quarters ending in the first quarter of 2009, real GDP fell at an annual rate of 4.8 percent, the steepest three-quarter decline since 1947. Meanwhile, the unemployment rate surged 1.2 percentage points in the first quarter of 2009, the largest increase since 1975.1 The first order of business for the new Administration was to arrest the rapid decline in economic activity. The President and Congress took unprecedented actions to restore demand, stabilize financial markets, and put people back to work. These steps included passage of the American Recovery and Reinvestment Act (ARRA), signed by the President just 28 days after taking office. They also included the Financial Stability Plan, announced in February, which encompassed wide-ranging measures to strengthen the banking system, increase consumer and business lending, and stem foreclosures and support the housing market. These and a host of other actions walked the economy back from the brink. While current data suggest that production bottomed out during the summer of 2009, American businesses were still shedding jobs in the third and four quarters. The unemployment rate was 10.0 percent in December 2009 (the most recent month of data), and the number of long-term 1 In the Budget, economic performance is discussed in terms of calendar years. Budget figures are discussed in terms of fiscal years. unemployed was 6.1 million. The recovery is projected to gain momentum slowly in 2010 and to strengthen in 2011-2013. Unfortunately, even with healthy economic growth there is likely to be an extended period of higherthan-normal unemployment lasting for several years. Recent Economic Performance The accumulated stresses from a contracting housing market and strains on financial markets brought the previous expansion to an end in December 2007. In its early stages, the 2008-2009 recession was relatively mild, but financial conditions worsened sharply in the fall of 2008, and from that point forward the recession became much more severe. Production began rising in the second half of 2009, but the labor market has not yet begun to recover, although it is expected to begin to recover in 2010. The strength of the recovery is one of the key issues for the forecast. Housing Markets.—The downturn had its origin in the housing market. In hindsight, it is clear that by the early years of this decade, housing prices had become caught up in a speculative bubble that finally burst. Housing prices fell sharply from 2006 until 2009, but in recent months the market has shown signs of stabilizing (see Chart 2–1). As prices fell, investment in housing plummeted, reducing the rate of real GDP growth by an average of 1 percentage point per quarter. With the stabilization of house prices in the second half of 2009, housing Chart 2-1. Relative House Prices Stopped Falling in 2009 Case-Shiller National Home Price Index Divided by the CPI-U Research Series 200 180 160 140 120 100 80 60 40 20 0 1987 1989 1992 1995 1998 2000 2003 2006 2009 9 10 ANALYTICAL PERSPECTIVES investment also began to recover, adding 0.4 percentage points to real GDP growth in the third quarter. At the low point for residential building in April 2009, monthly housing starts fell to an annual rate of just 479,000 units. This was the lowest level ever recorded for this series, which dates from 1959. In normal times, at least 1.5 million starts a year are needed to accommodate the needs of an expanding population and to replace older units as they wear out. Since April, housing starts have been trending up, although they experienced a sharp drop in October as builders paused to see whether the homebuyers’ tax credit would be extended. A bill extending the credit was signed by President Obama on November 6, 2009, and starts rebounded in November. A large overhang of vacant homes exists currently, however, which must be reduced before a robust housing recovery can become established. The foreclosure rate in the third quarter of 2009 was 1.4 percent, which is the highest since records have been kept going back to 1972. With foreclosures adding to the stock of vacant homes, housing prices are likely to remain subdued. Although residential building is likely to remain modest for some time, the forecast assumes a gradual recovery in housing activity, which contributes to GDP growth in 2010-2012. The Financial Crisis.—In August 2007, the United States subprime mortgage market became the focal point for a worldwide reduction in risk tolerance. Subprime mortgages are mortgages provided to borrowers who do not meet the standard criteria for borrowing at the lowest prevailing interest rate, either because of low income, a poor credit history, lack of a down payment, or other reasons. In the spring of 2007, there was over $1 trillion outstanding in such mortgages, and with house prices falling, many of these mortgages were on the brink of default. As banks and other investors lost confidence in the value of these high-risk mortgages and the securities based on them, banks became much less willing to lend to each other. Money market participants outside the banks became unwilling to lend to one another as well. Financial market participants of all kinds were uncertain of the degree to which other participants’ balance sheets had been contaminated. The heightened uncertainty was reflected in unprecedented spreads between interest rates on Treasury securities and those on various types of financial market debt. One especially telling differential is the spread between the yield on short-term U.S. Treasury securities, and the London interbank lending rate (LIBOR) which banks trading in the London money market charge one another for short-term lending in dollars. Historically, this differential has amounted to only 30 or 40 basis points. In August 2007, it shot up to over 200 basis points, and it spiked again, most dramatically, in September 2008 following the bankruptcy of Lehman Brothers (see Chart 2-2). Gradually, over the course of this year the LIBOR spread and other measures of credit risk have declined. In recent months these spreads have regained their precrisis levels. This is the clearest evidence that the financial crisis has eased. Although financial institutions have easier access to funds, they remain reluctant to lend. The policy response following the Lehman Brothers bankruptcy was crucial in restoring confidence and limiting the financial panic. Over the course of the following three months, the Federal Reserve lowered its shortterm interest rate target to near zero, while creating new programs to provide credit to markets where banks were no longer lending. The Troubled Asset Relief Program (TARP) provided the Treasury with the financial resources to bolster banks’ capital position and to remove troubled assets from banks’ balance sheets. In the spring of 2009, the Treasury and bank regulators conducted the Supervisory Capital Assessment Program, a stress test to determine the health of the nineteen largest U.S. banks. The test provided more transparency than had existed Chart 2-2. The One-Month LIBOR Spread over the One-Month Treasury Yield has Returned to Pre-Crisis Levels Percentage Points 7 6 5 4 3 2 1 0 Jan 6 2006 Oct 13 2006 Jul 20 2007 Apr 25 2008 Jan 30 2009 Nov 6 2009 11 2. ECONOMIC ASSUMPTIONS before concerning the banks financial position, and this reassured investors. Consequently, the banks have been able to raise private capital, providing further evidence that the credit crisis has eased. Negative Wealth Effects and Consumption.— Between the third quarter of 2007 and the first quarter of 2009, the net worth of American households declined by $17.5 trillion, or 26.5 percent – the equivalent of more than one year’s GDP. A precipitous decline in the stock market and falling house prices over this period were the main reasons for the drop in household wealth. Since then wealth has partially recovered as the stock market has rallied, and house prices have stopped falling, but even so, household wealth remains well below its peak levels prior to the recession. Americans have reacted to this massive loss of wealth by saving more. The household saving rate had been declining since the 1980s, and it reached a low point of 0.8 percent in April 2008. Since then it has increased sharply, rising to a temporary high point of 6.4 percent last May following a distribution of special $250 payments to Social Security and Supplemental Security Income recipients and the implementation of other Recovery Act provisions. In November, the saving rate was still 4.7 percent (see Chart 2–3). In the long-run, increased saving is essential for raising future living standards. However, a sudden increase in the desire to save implies a corresponding reduction in consumer demand, and that fall-off in consumption had a negative effect on the economy in the second half of 2008. During that period, real consumer spending fell at an annual rate of 3.3 percent, the steepest two-quarter decline since 1980. In 2009, consumption has started to rise again, but it has not yet regained its peak reached in 2007. The Labor Market.—The unemployment rate continued to rise in the second half of 2009 despite the turnaround in economic production. The increase in unemploy- ment has had devastating effects on American families, and the recovery will not be real for most Americans until the job market also turns around. The good news is that historically, when the economy grows so does employment, although there is usually a lag of one to two quarters before unemployment declines after the resumption of real GDP growth. The normal sequence of events around a business cycle trough is for aggregate demand to revive, which pulls up sales. Initially, firms respond to the pickup in demand by increasing work hours of the existing work force and hiring temporary workers, but eventually as the higher level of demand is recognized, firms begin to hire permanent employees again, and employment revives. At that point, labor force participation is also likely to increase as discouraged workers return to the market place. Finally, the unemployment rate declines as the recovery takes hold (see Chart 2–4). Following the recessions in 1991 and 2001, however, the lag between increased output and the decline in unemployment was much longer than one or two quarters, mainly because the recovery in production was slower and more hesitant. Unfortunately, because of the lingering effects of the credit crisis and the accompanying loss of household wealth, the recovery from the current recession is also expected to begin more slowly than in some recoveries in the past. The expected growth rate should be rapid enough to reduce the unemployment rate in 2010, but the improvement could be slow at first. Policy Background Over the last 12 months, the Administration and the Federal Reserve have taken a series of actions to end the recession and bolster the economy. On the fiscal side, the passage of ARRA was a crucial step. Meanwhile, the Federal Reserve has kept its target interest rate near zero Chart 2-3. The Personal Saving Rate has Risen Sharply Since 2008 Percent of Disposable Personal Income 14 12 10 8 6 4 2 0 -2 1980 1983 1986 1989 1993 1996 1999 2002 2006 2009 12 ANALYTICAL PERSPECTIVES in order to stimulate growth, and it has also taken several novel measures to unfreeze the Nation’s credit markets. Fiscal Policy.—The Federal budget affects the economy through many channels. For an economy coming out of a deep recession, the most important of these is the budget’s effect on total demand. In a slumping economy, the level of demand is the main determinant of how much is produced and how many workers will be employed. Government spending on goods and services can substitute for missing private spending while changes in taxes and transfers can contribute to demand by enabling people to spend more than they otherwise would. ARRA bolstered aggregate demand in several ways which have helped spark the recovery. It increased spending on goods and services at the Federal level; it provided assistance to State governments; it included large tax reductions for middle-class families; and it extended unemployment insurance and other benefits which have allowed people to maintain spending at levels higher than would otherwise have occurred. The fiscal stimulus in ARRA was intended to provide a significant boost to demand in both 2009 and 2010. So far the stimulus has proceeded as intended. Although the economy has continued to lose jobs, the loss would have been much larger without the benefits of ARRA. In the first quarter of 2009, payroll employment was falling at an average rate of 691 thousand jobs per month. By the fourth quarter, the rate of job loss had declined to 69 thousand per month. It is not possible to judge the effectiveness of a macroeconomic policy without some idea of the alternative. Critics of ARRA have tended to argue that continued job losses are evidence of ineffectiveness. However, the only way to know that is through a macroeconomic model that can be used to project the employment outcome under an alternative policy. In fact, results from a range of models imply that employment was increased through the fourth quarter of 2009 by between 1.0 million and 2.1 million jobs thanks to ARRA. The economic recovery efforts have, intentionally, increased the deficit. The increase in the deficit has been extraordinary, but it was the necessary response to the crisis the Administration inherited. It is also temporary. The Budget provides a path to lower medium-term deficits. Over the long term, deficits tend to have some combination of two macroeconomic effects. First, they can raise interest rates and decrease investment, as the Federal Government goes into the credit markets and competes with private investors for limited capital. Second, deficits can increase the amount that the United States borrows from abroad, as foreigners step in to finance our consumption. Either way, deficits reduce future standards of living. If interest rates rise and investment falls, that makes American workers less productive and reduces our incomes. If we borrow more from abroad as a result of our deficits, that means that more of our future incomes will be mortgaged to pay back foreign creditors. Persistent large deficits would also limit the Government’s maneuvering room to handle future crises. Monetary Policy.—The Federal Reserve is responsible for monetary policy. Traditionally, it has relied on a relatively narrow range of instruments to achieve its policy goals, but in the recent crisis the Federal Reserve is using a broader set of approaches. The reason for departing from past practice is that the traditional tool of monetary policy—adjusting short-term interest rates—has proved insufficient. In addressing the economic crisis, the Federal Reserve has created facilities to provide credit to the commercial paper market directly and to provide backup liquidity for money market mutual funds. The Federal Reserve together with Treasury has expanded a facility to lend against AAA-rated asset-backed securities collateralized by student loans, auto loans, credit card loans, and business loans guaranteed by the Small Business Administration (SBA). The Federal Reserve has also bought longer-term securities for its portfolio. Chart 2-4. The Lag between the Turnaround in Real GDP and the Turning Point for Payroll Employment and the Unemployment Rate Number of Quarters 8 Unemployment Rate Lag 7 Payroll Employment Lag 7 7 6 5 5 4 3 3 2 2 2 1 1 0 0 1 1 1 1954.1 1958.1 1960.4 1970.4 1 1 0 0 1949.4 2 2 0 1975.1 1 0 1980.3 Dates of Trough in Real GDP 1982.3 1991.1 2001.3 13 2. ECONOMIC ASSUMPTIONS Table 2–1. ECONOMIC ASSUMPTIONS 1 (Calendar years; dollar amounts in billions) Projections 2008 Actual 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 14,441 13,312 14,252 12,973 14,768 13,317 15,514 13,823 16,444 14,416 17,433 15,027 18,446 15,633 19,433 16,194 20,408 16,714 21,373 17,190 22,329 17,643 23,312 18,091 24,323 18,543 Gross Domestic Product (GDP): Levels, dollar amounts in billions: Current dollars ............................................... Real, chained (2005) dollars ......................... Chained price index (2005 = 100), annual average ..................................................... 108.5 109.8 110.8 112.2 114.0 116.0 117.9 120.0 122.0 124.3 126.5 128.8 131.1 Percent change, fourth quarter over fourth quarter: Current dollars ............................................... Real, chained (2005) dollars ......................... Chained price index (2005 = 100) ................. 0.1 –1.9 1.9 0.4 –0.5 0.9 4.0 3.0 1.0 5.7 4.3 1.4 6.1 4.3 1.7 6.0 4.2 1.7 5.7 3.9 1.7 5.2 3.4 1.7 5.0 3.1 1.8 4.5 2.7 1.8 4.5 2.6 1.8 4.4 2.5 1.8 4.3 2.5 1.8 Percent change, year over year: Current dollars ............................................... Real, chained (2005) dollars ......................... Chained price index (2005 = 100) ................. 2.6 0.4 2.1 –1.3 –2.5 1.2 3.6 2.7 0.9 5.1 3.8 1.2 6.0 4.3 1.6 6.0 4.2 1.7 5.8 4.0 1.7 5.3 3.6 1.7 5.0 3.2 1.8 4.7 2.8 1.8 4.5 2.6 1.8 4.4 2.5 1.8 4.3 2.5 1.8 Incomes, billions of current dollars: Corporate profits before tax ................................... Employee Compensation ....................................... Wages and salaries ............................................... Other taxable income 2 ........................................................... 1,463 8,037 6,546 3,311 1,418 7,762 6,259 3,081 1,816 8,040 6,468 3,204 1,933 8,499 6,825 3,327 1,918 9,041 7,293 3,591 1,915 9,626 7,776 3,830 1,924 10,247 8,288 4,049 1,998 10,855 8,783 4,218 2,031 11,447 9,263 4,434 2,058 12,024 9,733 4,662 2,076 12,612 10,198 4,857 2,087 13,197 10,667 5,073 2,150 13,792 11,134 5,305 Consumer Price Index (all urban): 3 Level (1982–84 = 100), annual average ................ Percent change, fourth quarter over fourth quarter .... Percent change, year over year ............................. 215.2 1.5 3.8 214.5 1.4 –0.3 218.7 1.3 1.9 222.0 1.7 1.5 226.3 2.0 2.0 230.8 2.0 2.0 235.5 2.0 2.0 240.2 2.0 2.0 245.1 2.1 2.0 250.3 2.1 2.1 255.5 2.1 2.1 260.9 2.1 2.1 266.4 2.1 2.1 Unemployment rate, civilian, percent: Fourth quarter level ............................................... Annual average ...................................................... 6.9 5.8 10.3 9.3 9.8 10.0 8.9 9.2 7.9 8.2 7.0 7.3 6.2 6.5 5.7 5.9 5.4 5.5 5.3 5.3 5.2 5.2 5.2 5.2 5.2 5.2 Federal pay raises, January, percent: Military 4 ........................................................................................... Civilian 5 ........................................................................................... 3.5 3.5 3.9 3.9 3.4 2.0 1.4 1.4 NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA 4.1 5.3 4.1 5.3 4.1 5.3 4.1 5.3 Interest rates, percent: 91-day Treasury bills 6 ............................................................. 1.4 0.2 0.4 1.6 3.0 4.0 4.1 4.1 4.1 10-year Treasury notes .......................................... 3.7 3.3 3.9 4.5 5.0 5.2 5.3 5.3 5.3 NA = Not Available 1 Based on information available as of mid-November 2009. 2 Rent, interest, dividend, and proprietors’ income components of personal income. 3 Seasonally adjusted CPI for all urban consumers. 4 Percentages apply to basic pay only; percentages to be proposed for years after 2011 have not yet been determined. 5 Overall average increase, including locality pay adjustments. Percentages to be proposed for years after 2011 have not yet been determined. 6 Average rate, secondary market (bank discount basis). The Federal Reserve’s actions helped ease the credit crisis as evidenced by a decline in the interest rate spread between U.S. Treasuries and other securities. The expanded credit facilities have also caused a large increase in the Federal Reserve’s balance sheet. Federal Reserve assets have increased from under $1 trillion to over $2 trillion. Because much of the increase in Federal Reserve liabilities has gone into idle reserves of banks, and because of the considerable slack in the economy, current inflation risks are low. The Federal Reserve is prepared to reduce the assets on its balance sheet promptly as the economy recovers from the current recession and the crisis in the financial sector eases. Indeed, continued improvements in financial market conditions have been accompanied by further declines in credit extended through many of the Federal Reserve’s liquidity programs. Financial Stabilization Policies.—Over the course of the last 12 months, the U.S. financial system has been pulled 14 ANALYTICAL PERSPECTIVES back from the brink of a catastrophic collapse. The very real danger that the system would disintegrate in a cascade of failing institutions and collapsing asset prices has been averted. The Administration’s Financial Stability Plan played a key role in cleaning up and strengthening the nation’s banking system. This plan began with a forward-looking capital assessment exercise for the 19 U.S. banking institutions with assets in excess of $100 billion. This was the so-called “stress test” aimed at determining whether these institutions had sufficient capital to withstand stressful deterioration in economic conditions. The resulting transparency and resolution of uncertainty regarding banks’ potential losses boosted confidence and allowed banks to raise substantial funds in private markets and repay tens of billions of dollars in taxpayer investments. The second component of the Financial Stability Plan was aimed at establishing a market for the troubled realestate assets that were at the center of the crisis. The plan included provisions for the Federal Government to join private investors in buying mortgage-backed securities. Removing these assets from the banks’ balance sheets is a key step to restoring the financial system to normal functioning. The Financial Stability Plan also aimed to unfreeze secondary markets for loans to consumers and businesses. The Administration has undertaken the Making Home Affordable plan to help distressed homeowners, encourage access to home financing credit and avoid foreclosures and stabilize neighborhoods. The Home Affordable Modification Program has over 850 thousand mortgage modifications underway. In 2009 millions of American took advantage of low interest rates to refinance their mortgages at lower interest rates. The Administration has launched several initiatives through the SBA to increase loans from small and community banks to small businesses, and it is continuing a joint Treasury-Federal Reserve program that expands credit to small businesses and consumers by lending against securities backed by business and consumer loans. Economic Projections The economic projections underlying the 2011 Budget estimates are summarized in Table 2–1. The assumptions are based on information available as of mid-November 2009. This section discusses the Administration’s projections and the next section compares the projections with those of the Blue Chip Consensus of outside forecasters. Real GDP.—The Administration projects the economic recovery that began in the second half of 2009 will continue in 2010 with real GDP growing at an annual rate of 3.0 percent (fourth quarter over fourth quarter). In 20112013, growth is projected to increase to around 4-1/4 percent annually as underutilized economic capacity returns to productive uses. As shown in Chart 2–5, the Administration’s projections for real GDP growth over the next five years imply a recovery that is a bit below the historical average. It is true that recent recoveries have been somewhat weaker, but the last two expansions were preceded by relatively mild recessions, which left less pent-up demand when conditions improved. Because of the depth of the recent recession, there is much more room for a rebound in spending and production than was true either in 1991 or 2001. On the other hand, continued weakness in the financial sector may limit the pace of the recovery. Thus, on net, the Administration is forecasting a recovery over the next five years that is slightly below historical averages. Longer-Term Growth.—The Administration forecast does not attempt to project cyclical developments beyond the next few years. The long-run projection for real economic growth and unemployment assumes that they will maintain trend values in the years following the return to full employment. In the nonfarm business sector, produc- Chart 2-5. Real GDP Growth Following a Recession: Five-Year Averages Percent 8 7 6.7 6 5.8 5 4.8 4.5 4.5 4.2 4 3.8 3.7 3.4 3.3 3 2.7 2.7 2 1 0 1933 1949 1954 1958 1961 1970 1975 Trough Year 1982 1991 2001 Average 2011 Budget Forecast 15 2. ECONOMIC ASSUMPTIONS tivity growth is assumed to grow at 2.3 percent per year, while nonfarm labor supply grows at a rate of around 0.7 percent per year, so nonfarm business output grows approximately 3.0 percent per year. Real GDP growth, reflecting the slower measured growth in activity outside the nonfarm business sector, proceeds at a rate of 2.5 percent. That is markedly slower than the average growth rate of real GDP since 1947—3.3 percent per year. In the 21st Century, real GDP growth in the United States is likely to be permanently slower than it was in earlier eras because of the slowdown in labor force growth that is expected beginning with the retirement of the post-World War II “baby boom” generation. Unemployment.—Although production began to increase last summer, the unemployment rate remains highly elevated. In October, the overall unemployment rate rose above 10.0 percent for the first time since 1983, and it was at 10.0 percent in both November and December. The broadest measure of underutilized labor published by the Bureau of Labor Statistics—the U-6 measure which includes discouraged workers and those working part-time for economic reasons—reached 17.4 percent in October, and was at 17.3 percent in December. The overall unemployment rate is projected to begin to decline slightly over the course of 2010, although it may increase slightly before finally turning around. Because growth in 2010 is projected to be relatively slow for the early stages of a recovery, unemployment is projected to remain high for a prolonged period. The unemployment rate is projected to decline to 7.0 percent by the end of 2013. Inflation.—Inflation declined in 2009. Over the four quarters ending in 2009:3, the price index for GDP rose only 0.6 percent compared with an increase of 2.5 percent over the previous four quarters. The Consumer Price Index for all urban consumers (CPI-U) has been more volatile. For the 12 months ending in July the overall CPI-U fell by 1.9 percent. Over the previous 12 months it had increased by 5.4 percent. Since July the CPI has risen at an annual rate of 3.9 percent. Most of these swings have been due to sharp movements in food and energy prices over the last two years. The so-called “core” CPI, excluding both food and energy, was up 1.6 percent through the 12 months ending in July compared with 2.5 percent during the previous 12 months. While the rate of inflation in the overall CPI has increased since July, the core inflation rate has averaged only 1.4 percent. The weak demand resulting from the recession has held down prices increases for a wide range of goods and services. Continued high unemployment is expected to preserve a low inflation rate for the next several years. Eventually, as the economy recovers and the unemployment rate declines, the rate of inflation should rise again, returning to rates around 2 percent per year—similar to the rates that existed pre-recession. With the recovery path assumed in the Administration forecast, the risk of outright deflation appears minimal. In the long-run, the Administration assumes that the rate of change in the CPI will average 2.1 percent and that the GDP price index will increase at a 1.8 percent annual rate. Interest Rates.—Interest rates on Treasury securities fell sharply in late 2008, as both short-term and longterm rates declined to their lowest levels in decades. In 2009, short-term Treasury rates remained near zero, and the monthly average 10-year yield fluctuated within a range of 2-1/2 percent to 3-3/4 percent. Investors have sought the security of Treasury debt during the heightened financial uncertainty of the last few years, which has reduced yields. In the Administration projections, interest rates are expected to rise as financial concerns are alleviated and the economy recovers from recession. The 91-day Treasury bill rate is projected to reach 4.1 percent and the 10-year rate 5.3 percent by 2013. These forecast rates are historically low, reflecting lower inflation in the forecast than for most of the post-World War II period. After adjusting for inflation, the projected real interest rates are close to their historical averages. Income Shares.—The share of labor compensation in GDP was extremely low by historical standards in 2009. It is expected to rise over the forecast period to more normal levels. As a share of GDP, employee compensation was 54.5 percent in 2009 and it is expected to rise over the course of the 10-year forecast. In the expansion that ended in 2007, labor compensation tended to lag behind the growth in productivity, and that has also been true for the recent surge in productivity growth. While the overall share of labor compensation is expected to increase, the share of taxable wages is expected to remain roughly flat. Rising health insurance costs are projected to put upward pressure on the share of fringe benefits. The Administration economic projections do not account for the effects of health reform on compensation shares. The share of corporate profits before taxes was 13.9 percent of GDP in the third quarter of 2006 prior to the recession, which was near an all-time high. Since then profits before tax have dropped sharply. They are expected to be only 9.9 percent of GDP in 2009. As the economy recovers, the profit share is projected to rebound. In the forecast, the ratio of pretax profits to GDP reaches 12.5 percent in 2011 and then falls to around 9 percent by the end of the 10-year projection period as the share of employee compensation slowly recovers to approach its longrun historical average. Comparison with Private-Sector Forecasts Table 2–2 compares the economic assumptions for the 2011 Budget with projections by the Blue Chip Consensus, an average of about 50 private-sector economic forecasts. These other economic projections differ in some respects from the Administration’s projections, but the forecast differences are relatively small over the next two years, especially when compared with the margin of error in all economic forecasts. Like the Administration, the private forecasters believe that real GDP growth resumed in mid2009 and that the economy will continue to recover showing positive growth in 2010 and 2011. They also agree that inflation will be at a low rate in 2010-2011, while outright deflation is avoided, and that after peaking at 16 ANALYTICAL PERSPECTIVES a relatively high level, the unemployment rate gradually declines and interest rates rise. There are some conceptual differences between the Administration forecast and the private economic forecasts. The Administration forecast assumes that the President’s Budget proposals will be enacted. The 50 or so private forecasters in the Blue Chip Consensus make differing policy assumptions, but none would necessarily assume that the Budget is adopted in full. In addition, the forecasts were not made at the same time. The Administration forecast was completed in mid-November. The almost three-month lag between the forecast date and Budget release occurs because the budget process requires agencies to receive the forecast’s assumptions in time to use them in making the budget estimates for agency programs that are incorporated in the Budget. Forecasts made at different dates will differ if there is economic news between the two dates that alters the economic outlook. The Blue Chip consensus displayed in this table was the latest available at the time the Budget went to print—and was completed in early January, about six weeks after the Administration forecast was finalized. Real GDP Growth.—The Administration’s real GDP projections are very similar to those of the Blue Chip consensus in 2010 while exceeding the consensus view in 2011. In its August 2009 projections (the most recent available) the Congressional Budget Office (CBO) projected long-run growth of 2.2 percent per year. Most of the difference between the Administration and CBO’s longrun growth comes from a difference in the expected rate of growth of the labor force. Both forecasts assume that the labor force will grow more slowly than in the past because of population aging, but the Administration bases its population projections on the Census Bureau’s projections, which tend to run higher than the CBO projections. The Administration also believes that labor force participation could be somewhat stronger in the future. The net difference in the two forecasts is only a few tenths of a percentage point. All economic forecasts are subject to error, and the forecast errors are usually much larger than the forecast differences discussed above. As discussed in chapter 3, past forecast errors among the Administration, CBO, and the Blue Chip have been similar. Unemployment, Inflation, and Interest Rates.— The Administration forecast has an unemployment rate of 10.0 percent in 2010 and 9.2 percent in 2011. The January Blue Chip consensus is identical to the Administration forecast in both years. Both the Administration and the Blue Chip consensus anticipate a moderate rate of inflation over the next two years. The forecasts are also similar in their projections for the path of interest rates. Table 2–2. COMPARISON OF ECONOMIC ASSUMPTIONS (Calendar years) 2009 2010 2011 Nominal GDP (in billions of dollars): 2011 Budget .............................................................................. Blue Chip .................................................................................. 14,252 14,254 14,768 14,827 15,514 15,530 Real GDP (year-over-year): 2011 Budget ............................................................................. Blue Chip .................................................................................. –2.5 –2.5 2.7 2.8 3.8 3.1 Real GDP (fourth-quarter-over-fourth-quarter): 2011 Budget ............................................................................. Blue Chip .................................................................................. –0.5 –0.3 3.0 2.9 4.3 3.2 GDP Price Index:1 2011 Budget ............................................................................. Blue Chip .................................................................................. 1.2 1.2 0.9 1.2 1.2 1.6 Consumer Price Index (CPI-U):1 2011 Budget ............................................................................. Blue Chip .................................................................................. –0.3 –0.3 1.9 2.1 1.5 2.0 Unemployment Rate:2 2011 Budget ............................................................................. Blue Chip .................................................................................. 9.3 9.2 10.0 10.0 9.2 9.2 0.2 0.2 0.4 0.4 1.6 1.8 Interest Rates:2 91-Day Treasury Bills (discount basis): 2011 Budget ...................................................................... Blue Chip ........................................................................... 10-Year Treasury Notes: 2011 Budget ...................................................................... 3.3 3.9 4.5 Blue Chip ........................................................................... 3.3 3.9 4.6 Sources: Administration, January 2010 Blue Chip Economic Indicators, Aspen Publishers, Inc. 1 Year-over-year percent change. 2 Annual averages, percent. 17 2. ECONOMIC ASSUMPTIONS Short-term rates are expected to be near zero in 2009, but then to increase in 2010 and 2011. The interest rate on 10-year Treasury notes is projected to rise from 3.3 percent to about 4-1/2 percent in 2011 in both forecasts. the 2008-2009 recession, especially in the labor market. Consequently, the unemployment rate projected for 20092010 turned out to be too low. So far the forecast of 2009 real GDP growth appears to have been closer to the mark. The economic recovery projected for 2010 has been reduced slightly in view of the relatively modest start to the recovery so far in 2009. Finally, the long-run growth trend was pegged at 2.6 percent per year in the previous Budget and that has been reduced slightly to 2.5 percent per year in the current Budget in view of continuing revisions to the historical data that suggest a slower rate of trend productivity growth. Changes in Economic Assumptions Although some of the economic assumptions underlying this Budget have changed compared with those used for the 2010 Budget, most of the forecast values are similar, especially in the long run (see Table 2–3). The previous Budget did not fully anticipate the severity of Table 2–3. COMPARISON OF ECONOMIC ASSUMPTIONS IN THE 2010 AND 2011 BUDGETS (Calendar years; dollar amounts in billions) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Nominal GDP: 2010 Budget Assumptions1 ................................................ 2011 Budget Assumptions ................................................. 14,374 14,252 14,989 14,768 15,820 15,514 16,828 16,444 17,842 17,433 18,695 18,446 19,528 19,433 20,397 20,408 21,304 21,373 22,252 22,329 23,242 23,312 Real GDP (2005 dollars): 2010 Budget Assumptions1 ................................................ 2011 Budget Assumptions ................................................. 13,060 12,973 13,474 13,317 14,017 13,823 14,658 14,416 15,266 15,027 15,714 15,633 16,123 16,194 16,543 16,714 16,974 17,190 17,415 17,643 17,868 18,091 Real GDP (percent change):2 2010 Budget Assumptions1 ............................................... 2011 Budget Assumptions ................................................. –1.9 –2.5 3.2 2.7 4.0 3.8 4.6 4.3 4.2 4.2 2.9 4.0 2.6 3.6 2.6 3.2 2.6 2.8 2.6 2.6 2.6 2.5 GDP Price Index (percent change):2 2010 Budget Assumptions1 ............................................... 2011 Budget Assumptions ................................................. 1.3 1.2 1.1 0.9 1.5 1.2 1.7 1.6 1.8 1.7 1.8 1.7 1.8 1.7 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 Consumer Price Index (all-urban; percent change):2 2010 Budget Assumptions1 ............................................... 2011 Budget Assumptions ................................................. –0.6 –0.3 1.6 1.9 1.8 1.5 2.0 2.0 2.1 2.0 2.1 2.0 2.1 2.0 2.1 2.0 2.1 2.1 2.1 2.1 2.1 2.1 Civilian Unemployment Rate (percent):3 2010 Budget Assumptions1 ............................................... 2011 Budget Assumptions ................................................. 8.1 9.3 7.9 10.0 7.1 9.2 6.0 8.2 5.2 7.3 5.0 6.5 5.0 5.9 5.0 5.5 5.0 5.3 5.0 5.2 5.0 5.2 91-day Treasury bill rate (percent):3 2010 Budget Assumptions1 ............................................... 2011 Budget Assumptions ................................................. 0.2 0.2 1.6 0.4 3.4 1.6 3.9 3.0 4.0 4.0 4.0 4.1 4.0 4.1 4.0 4.1 4.0 4.1 4.0 4.1 4.0 4.1 2.8 3.3 4.0 3.9 4.8 4.5 5.1 5.0 5.2 5.2 5.2 5.3 5.2 5.3 5.2 5.3 5.2 5.3 5.2 5.3 5.2 5.3 10-year Treasury note rate (percent):3 2010 Budget Assumptions1 ............................................... 2011 Budget Assumptions ................................................. 1 Adjusted for July 2009 comprehensive NIPA revisions. 2 Year-over-year. 3 Calendar year average. 3. INTERACTIONS BETWEEN THE ECONOMY AND THE BUDGET The economy and the budget are interrelated. Both budget outlays and the tax structure have substantial effects on national output, employment, and inflation, and economic conditions significantly affect the budget. Because of the complex interrelationships between the budget and the economy, budget estimates depend to a very significant extent upon assumptions about the economy. This chapter attempts to quantify the relationship between macroeconomic outcomes and budget outcomes and to illustrate the challenges that uncertainty about the future path of the economy poses for making budget projections. While this chapter highlights uncertainty with respect to budget projections in the aggregate, estimates for many programs capture uncertainty using stochastic modeling. Stochastic models measure program costs as the probability-weighted average of costs under different scenarios, with economic, financial, and other variables differing across scenarios. Stochastic modeling is essential to properly measure the cost of programs that respond asymmetrically to deviations of actual economic and other variables from forecast values. In such programs, the Federal Government is subject to “one-sided bets” where costs go up when variables move in one direction but do not go down when they move in the opposite direction. The cost estimates for the Pension Benefit Guarantee Corporation, student loan programs, the Troubled Asset Relief Program (TARP), agriculture programs with price triggers, and heating oil programs all benefit from stochastic modeling. The first section of the chapter provides rules of thumb that describe how changes in economic variables result in changes in receipts, outlays, and the deficit. The second section presents information on GDP forecast errors in past budgets and how these forecast errors compare to those in forecasts made by the Congressional Budget Office (CBO) and the Blue Chip consensus. The third section provides specific alternatives to the current Administration forecast—both more optimistic and less optimistic—and describes the resulting effects on the deficit. The fourth section shows a probabilistic range of budget outcomes based on past errors in projecting the deficit. The last section discusses the relationship between structural and cyclical deficits, showing how much of the actual deficit is related to the economic cycle (e.g., the recent recession) and how much would persist even if the economy were at approaches full employment. Sensitivity of the Budget to Economic Assumptions Both receipts and outlays are affected by changes in economic conditions. Budget receipts vary with individual and corporate incomes, which respond both to real eco- nomic growth and inflation. At the same time, outlays for many Federal programs are directly linked to developments in the economy. For example, most retirement and other social insurance benefit payments are tied by law to cost-of-living indices. Medicare and Medicaid outlays are affected directly by the price of medical services. Interest on the debt is linked to market interest rates and the size of the budget surplus or deficit, both of which in turn are influenced by economic conditions. Outlays for certain benefits such as unemployment compensation and food stamps vary with the unemployment rate and are thereby linked to the state of the economy. This sensitivity complicates budget planning because errors in economic assumptions lead to errors in the budget projections. It is therefore useful to examine the implications of possible changes in economic assumptions. Many of the budgetary effects of such changes are fairly predictable, and a set of rules of thumb embodying these relationships can aid in estimating how changes in the economic assumptions would alter outlays, receipts, and the surplus or deficit. These rules of thumb should be understood as suggesting orders of magnitude; they ignore a long list of secondary effects that are not captured in the estimates. The rules of thumb show how the changes in economic variables affect Administration estimates for receipts and outlays, holding other factors constant. They are not, for two reasons, a prediction of how receipts or outlays would actually turn out if the economic changes actually came to pass. First, the rules of thumb are based on a fixed budget policy that is not always a good predictor of what might actually happen to the budget should the economic outlook change substantially. For example, unexpected downturns in real economic growth, and attendant job losses, usually give rise to legislative actions to expand unemployment benefits, stimulate the economy with additional Federal investment spending, and the like. Second, economic rules of thumb do not capture certain “technical” changes that may in fact relate to economic changes, but do not have a clear relationship to specific economic variables. For example, the rules of thumb for receipts changes reflect how Treasury’s receipts estimates would shift with certain economic changes, but they do not capture the effect of large changes in taxes on capital gains realizations that often occur when the economic outlook changes. On the spending side of the budget, the rules of thumb do not capture changes in deposit insurance outlays, even though bank failures are generally associated with turmoil in the economy. Economic variables that affect the budget do not usually change independently of one another. Output and employment tend to move together in the short run: a high rate of real GDP growth is generally associated with a 19 20 declining rate of unemployment, while slow or negative growth is usually accompanied by rising unemployment. This relationship is known as Okun’s Law. In the long run, however, changes in the average rate of growth of real GDP are mainly due to changes in the rates of growth of productivity and the labor force, and are not necessarily associated with changes in the average rate of unemployment. Inflation and interest rates are also closely interrelated: a higher expected rate of inflation increases nominal interest rates, while lower expected inflation reduces nominal interest rates. Changes in real GDP growth or inflation have a much greater cumulative effect on the budget if they are sustained for several years than if they last for only one year. However, even one-time changes can have permanent effects if they permanently raise the level of the tax base or the level of Government spending. Moreover, temporary economic changes can change the level of the debt, affecting future interest payments on the debt. Highlights of the budgetary effects of these rules of thumb are shown in Table 3–1. For real growth and employment: • The first block shows the effect of a temporary reduction in real GDP growth by one percentage point sustained for one year, followed by a recovery of GDP to the base-case level (the Budget assumptions) over the ensuing two years. In this case, the unemployment rate is assumed to rise by one-half percentage point relative to the Budget assumptions by the end of the first year, then return to the base case rate over the ensuing two years. After real GDP and the unemployment rate have returned to their base case levels, most budget effects vanish except for persistent out-year interest costs associated with larger near-term deficits. • The second block shows the effect of a reduction in real GDP growth by one percentage point sustained for one year, with no subsequent “catch up,” accompanying a permanent increase in the natural rate of unemployment (and of the actual unemployment rate) of one-half percentage point relative to the Budget assumptions. In this scenario, the level of GDP and taxable incomes are permanently lowered by the reduced growth rate in the first year. For that reason and because unemployment is permanently higher, the budget effects (including growing interest costs associated with larger deficits) continue to grow in each successive year. • The budgetary effects are much larger if the growth rate of real GDP is permanently reduced by one percentage point even leaving the unemployment rate unchanged, as might result from a shock to productivity growth. These effects are shown in the third block. In this example, the cumulative increase in the budget deficit is many times larger than the effects in the first and second blocks. ANALYTICAL PERSPECTIVES For inflation and interest rates: • The fourth block shows the effect of a one percentage point higher rate of inflation and one percentage point higher nominal interest rates maintained for the first year only. In subsequent years, the price level and nominal GDP would both be one percentage point higher than in the base case, but interest rates and future inflation rates are assumed to return to their base case levels. Receipts increase by about twice as much as outlays. • In the fifth block, the rate of inflation and the level of nominal interest rates are higher by one percentage point in all years. As a result, the price level and nominal GDP rise by a cumulatively growing percentage above their base levels. In this case, again the effect on receipts is about double the effect on outlays. Because Congress and the President are not likely to allow inflation to erode the real value of spending permanently, these estimates assume that annual appropriations rise one percent a year faster beginning in 2012. • The effects of a one percentage point increase in interest rates alone are shown in the sixth block. The outlay effect mainly reflects higher interest costs for Federal debt. The receipts portion of this ruleof-thumb is due to the Federal Reserve’s deposit of earnings on its securities portfolio and the effect of interest rate changes on both individuals’ income (and taxes) and financial corporations’ profits (and taxes). • The seventh block shows that a sustained one percentage point increase in GDP price index inflation decreases cumulative deficits substantially. The separate effects of higher inflation and higher interest rates shown in the sixth and seventh blocks do not sum to the effects for simultaneous changes in both shown in the fifth block. This is because the gains in budget receipts due to higher inflation result in higher debt service savings when interest rates are also assumed to be higher in the fifth block than when interest rates are assumed to be unchanged in the seventh block. • The last entry in the table shows rules of thumb for the added interest cost associated with changes in the budget deficit, holding interest rates and other economic assumptions constant. As noted, the rules of thumb discussed above are calculated assuming that in the long run funding levels for discretionary programs respond to changes in projected inflation. Specifically, in this Budget, discretionary funding levels for the outyears are based both on policy considerations and on the Administration’s inflation forecast. Thus, while the Budget shows discretionary funding in nominal terms, it conceives of discretionary growth rates in inflation-adjusted terms. Although the Administration 21 3. INTERACTIONS BETWEEN THE ECONOMY AND THE BUDGET Table 3–1. SENSITIVITY OF THE BUDGET TO ECONOMIC ASSUMPTIONS (Fiscal years; in billions of dollars) Budget Effect 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Total of Effects, 2010–2020 Real Growth and Employment Budgetary effects of 1 percent lower real GDP growth: (1) For calendar year 2010 only, with real GDP recovery in 2011–12:1 Receipts ........................................................................................... Outlays ............................................................................................. –14.4 2.8 –21.8 6.1 –10.5 4.8 –1.2 3.0 0.2 2.7 0.2 2.8 0.2 2.8 0.2 2.9 0.2 3.0 0.2 3.1 0.2 3.2 –46.6 37.0 Increase in deficit (+) ................................................................. 17.2 27.9 15.3 4.2 2.5 2.6 2.6 2.7 2.8 2.9 3.0 83.7 (2) For calendar year 2010 only, with no subsequent Receipts ........................................................................................... Outlays ............................................................................................. –14.4 2.8 –29.2 7.2 –34.4 9.9 –36.7 13.3 –38.8 16.5 –41.1 19.5 –43.2 22.5 –45.1 25.5 –47.2 28.5 –49.3 31.7 –51.7 35.1 –431.1 212.4 Increase in deficit (+) ................................................................. 17.2 36.4 44.3 50.0 55.3 60.5 65.7 70.6 75.6 81.0 86.9 643.5 (3) Sustained during 2010 - 2020, with no change in unemployment: Receipts ........................................................................................... Outlays ............................................................................................. –14.5 –0.7 –44.6 –0.8 –84.1 –128.1 –176.8 –230.7 –288.8 –349.3 –414.3 –483.3 –557.8 1.1 6.0 12.2 20.1 30.2 42.4 57.1 74.6 95.2 –2,772.4 337.4 Increase in deficit (+) ................................................................. 13.8 43.8 85.3 134.1 189.0 250.8 319.0 391.7 471.3 557.9 653.1 3,109.8 (4) Inflation and interest rates during calendar year 2010 only: Receipts ........................................................................................... Outlays ............................................................................................. 21.3 21.7 41.4 37.4 39.4 31.2 36.5 29.6 38.9 27.5 41.5 26.5 43.9 24.4 46.1 23.4 48.4 21.2 50.7 21.8 53.0 21.1 461.2 285.6 Decrease in deficit (–) ...................................................................... 0.4 –4.0 –8.2 –6.9 –11.5 –15.0 –19.6 –22.8 –27.2 –28.9 –32.0 –175.5 (5) Inflation and interest rates, sustained during 2010–2020: Receipts ........................................................................................... Outlays ............................................................................................. 21.3 21.1 64.6 61.3 111.1 104.3 157.8 147.7 208.9 190.0 264.1 234.2 325.1 280.8 390.0 330.6 459.2 381.1 533.7 438.9 614.7 498.6 3,150.5 2,688.5 Decrease in deficit (–) ................................................................ –0.2 –3.3 –6.8 –10.1 –18.9 –29.9 –44.4 –59.3 –78.1 –94.8 –116.1 –461.9 (6) Interest rates only, sustained during 2010–2020: Receipts ........................................................................................... Outlays ............................................................................................. 6.8 15.5 20.1 47.3 28.4 69.1 32.6 86.8 36.1 101.2 37.7 116.1 40.2 129.3 43.2 144.4 45.2 158.1 47.1 173.3 48.7 190.0 385.9 1,231.2 Increase in deficit (+) ................................................................. 8.7 27.3 40.7 54.2 65.2 78.4 89.1 101.3 112.9 126.2 141.3 845.3 (7) Inflation only, sustained during 2010–2020: Receipts ........................................................................................... Outlays ............................................................................................. 14.5 5.7 44.4 14.2 82.6 36.0 124.8 62.3 172.4 91.1 225.8 121.6 284.3 156.4 345.9 193.0 412.9 231.9 485.3 277.1 564.5 323.2 2,757.5 1,512.6 Decrease in deficit (–) ................................................................ –8.9 –30.2 –46.5 –62.5 –81.3 –104.2 –127.8 –152.9 –181.0 –208.2 –241.4 –1,244.9 recovery:1 Inflation and Interest Rates Budgetary effects of 1 percentage point higher rate of: Interest Cost of Higher Federal Borrowing (8) Outlay effect of $100 billion increase in borrowing in 2010 ................ 0.2 1.2 2.7 4.2 4.8 * $50 million or less. 1 The unemployment rate is assumed to be 0.5 percentage point higher per 1.0 percent shortfall in the level of real GDP. is confident that its current inflation assumptions are reasonable, if inflation projections change significantly, future budgets would be expected to adjust funding growth up or down accordingly. 1 1 This statement does not apply to funding growth between 2010 and the 2011 budget year, since the appropriations process for 2011 must 5.0 5.3 5.5 5.7 6.0 6.2 46.7 The effects of changes in economic assumptions in the opposite direction are approximately symmetric to those shown in the table. The impact of a one percentage point begin immediately and before inflation assumptions will be reassessed. It also does not apply to the outyear Budget Authority for overseas contingency operations, which is a placeholder and does not represent a policy determination. 22 ANALYTICAL PERSPECTIVES Table 3–2. GDP FORECAST ERRORS, JANUARY 1982–PRESENT (Percentage points) 2–Year Real GDP Admin. Mean Error. ................................................................................................................................................ Mean Absolute Error. ................................................................................................................................. Root Mean Square Error. ........................................................................................................................... CBO Blue Chip –0.2 1.0 1.3 –0.3 1.0 1.3 –0.5 1.0 1.2 –0.1 0.7 0.8 –0.4 0.6 0.8 –0.5 0.7 0.8 6-Year Real GDP Mean Error. ................................................................................................................................................ Mean Absolute Error. ................................................................................................................................. Root Mean Square Error. ........................................................................................................................... lower rate of inflation or higher real growth would have about the same magnitude as the effects shown in the table, but with the opposite sign. GDP Forecast Errors As can be seen in Table 3-1, one of the most important variables that affects the accuracy of the budget projections is the forecast of the growth rate of real GDP throughout the projection period. Table 3-2 shows errors in short- and long-term projections for past Administrations, and compares these errors to those of CBO and the Blue Chip Consensus of private forecasters.2 Over both a two-year and six-year horizon, the average annual GDP growth rate was very slightly underestimated by all three forecasters in the annual 2 Two-year errors are the average error in percentage points for year over year growth rates for the current year and budget year. Administration forecasts are from the budgets released starting in February 1982 (1983 Budget) and through February 2007 (2008 Budget). The six-year forecasts are constructed similarly, but the last forecast used is from February 2004 (2005 Budget). CBO forecasts are from ‘The Budget and Economic Outlook’ publications in January each year, and the Blue Chip forecasts are from their January projections. forecasts made since 1982. The differences between the three forecasters were minor. The average absolute error in the growth rate was 1.0 percent per year for all forecasters for two-year projections, and was about onethird smaller for all three for the six-year projections. The greater accuracy in the six-year projections could reflect a tendency of real GDP to revert at least partly to trend, though the overall evidence on whether GDP is mean reverting is mixed. Another way to interpret the result is that it is hard to predict GDP around turning points in the business cycle, but somewhat easier to project the long-term growth rate based on assumptions about the labor force, productivity, and other factors that affect GDP. Alternative Scenarios The economic outlook is always uncertain, but it is especially uncertain at present. The rules-of-thumb described above can be used in combination to show the approximate effect on the budget of alternative economic scenarios. Modeling explicit alternative scenarios can also be useful in gauging some of the risks to the cur- Chart 3-1. Forecast Alternatives: Real GDP Trillions of 2005 dollars 18 Alternative 1 Alternative 2 Alternative 3 17 Administration Trend Actual 16 15 14 13 2007 2008 2009 2010 2011 2012 2013 2014 23 3. INTERACTIONS BETWEEN THE ECONOMY AND THE BUDGET Table 3–3. BUDGET EFFECTS OF ALTERNATIVE SCENARIOS (Fiscal years; in billions of dollars) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Alternative Budget Deficit Projections: Administration Economic Assumptions .......................................... percent of GDP .......................................................................... 1556 10.6% 1267 8.3% 828 5.1% 727 4.2% 706 3.9% 752 3.9% 778 3.9% 778 3.7% 785 3.6% 908 3.9% 1003 4.2% Alternative Scenario 1 .................................................................... percent of GDP .......................................................................... 1491 10.0% 1159 7.4% 727 4.4% 650 3.7% 652 3.6% 708 3.7% 732 3.6% 734 3.5% 739 3.3% 860 3.7% 951 3.9% Alternative Scenario 2 .................................................................... percent of GDP .......................................................................... 1474 9.8% 1129 7.1% 673 4.0% 565 3.2% 534 2.8% 566 2.9% 576 2.8% 561 2.6% 552 2.4% 659 2.8% 736 3.0% Alternative Scenario 3 .................................................................... percent of GDP .......................................................................... 1559 10.7% 1288 8.5% 887 5.6% 840 5.0% 884 5.0% 975 5.3% 1024 5.3% 1040 5.1% 1068 5.1% 1213 5.5% 1330 5.8% rent budget projections. For example, the severity of the recent recession makes the strength of the recovery over the next few years highly uncertain. That possibility is explored in the three alternative scenarios presented in this section. In the first alternative, growth rebounds sooner than the Administration projects, in line with the average strength of most of the expansions following recoveries in previous recessions since World War II. Real growth beginning in the third quarter of 2009 is 5.9 percent over the next four quarters, followed by growth rates of 3.8 percent, 3.7 percent, 3.1 percent, and 3.8 percent, respectively. In this case, the level of GDP is substantially higher in the near term than in the Administration’s projections, but the level of GDP approaches the Administration’s projection in the out years. The Administration is projecting an average postwar recovery, but one that takes longer to gain traction because of the financial uncertainties in the current business climate. Given the depth of the 2008-2009 recession, a faster than normal recovery might be expected. There is evidence that the strength of a recovery is linked to the depth of the preceding recession. In the second alternative, growth rebounds at the average rate of 4.5 percent over the next five years which corresponds to the average of the five strongest of the ten expansions since World War II. This is similar to the first alternative except some of the weaker expansions—which generally followed mild recessions—are excluded from the calculation. In this case, real GDP rebounds to nearly reach by 2015 the trend path of 3.0 percent that it had followed in the decade before the latest recession, recovering all lost ground. The third alternative scenario assumes that real GDP growth in 2010 and 2011 is equal to the projection in the latest Blue Chip forecast (January), and that growth continues at a relatively subdued pace averaging 3.0 percent in 2012-14. In this case, the level of GDP remains lower than the Administration’s forecast throughout the projection. Table 3-3 shows the budget effects of these three alternative scenarios compared to the Administration’s economic forecast. Under the first alternative, budget deficits are modestly lower in each year compared to the Administration’s forecast, with the differences narrowing in the outyears of the forecast. In the second alternative, the deficit is much lower by 2014. In the third alternative, the deficit becomes progressively larger than the Administration’s projection. Many other scenarios are possible, of course, but the point is that the most important influences on the budget projections beyond the next year or two are the rate at which output and employment recover from the recession and the extent to which potential GDP returns to its prerecession trend. Uncertainty and the Deficit Projections The accuracy of budget projections depends not only on the accuracy of economic projections, but also on technical factors and the differences between proposed policy and enacted legislation. Chapter 29 provides detailed information on these factors for the budget year projections (Table 29-6), and also shows how the deficit projections compared to actual outcomes, on average, over a five-year window using historic data from 1982 to 2009 (Table 297). The error measures can be used to show a probabilistic range of uncertainty of what the range of deficit outcomes may be over the next five years relative to the Administration’s deficit projection. Chart 3-2 shows this cone of uncertainty, which is constructed under the assumption that future forecast errors would be governed by the normal distribution with a mean of zero and standard error equal to the root mean squared error, as a percent of GDP, of past forecasts. The deficit is projected to be 3.9 percent of GDP in 2015, but has a 90 percent chance of being within a range of a surplus of 2.6 percent of GDP and a deficit of 10.4 percent of GDP. Structural and Cyclical Deficits The budget deficit is highly sensitive to the business cycle. When the economy is operating below its potential and the unemployment rate exceeds the level consistent with price stability, receipts are lower, outlays for pro- 24 ANALYTICAL PERSPECTIVES Chart 3-2. Range of Uncertainty for the Budget Deficit Percent of GDP 5 Percentiles: 95th 90th 0 75th Forecast -5 25th 10th -10 5th -15 2010 2011 2012 grams such as unemployment compensation are higher, and the deficit is larger than it would be otherwise. These features serve as “automatic stabilizers” for the economy by restraining output when the economy threatens to overheat and cushioning economic downturns. They also make it hard to judge the overall stance of fiscal policy from looking at the unadjusted budget deficit. An alternative measure of the budget deficit is called the structural deficit. This measure provides a more useful perspective on the stance of fiscal policy than does the unadjusted unified budget deficit. The portion of the deficit traceable to the automatic effects of the business cycle is called the cyclical component. The remaining portion of the deficit is called the structural deficit. The structural deficit is a better gauge of the underlying stance of fiscal policy than the unadjusted unified deficit because it removes most of the effects of the business cycle. Estimates of the structural deficit, shown in Table 3-4, are based on the historical relationship between changes in the unemployment rate and real GDP growth, known as Okun’s Law, as well as relationships of unemployment and real GDP growth with receipts and outlays. These estimated relationships take account of the major cyclical changes in the economy and their effects on the budget, but they do not reflect all the possible cyclical effects on the budget, because economists have not been able to identify the cyclical factor in some of these other effects. For example, the recent decline in the stock market will pull down capital gains-related receipts and increase the deficit. Some of this decline is cyclical in nature, but economists have not pinned down the cyclical component of the stock market with any exactitude, and for that reason, all of the stock market’s contribution to receipts is counted in the structural deficit. Another factor that can affect the deficit and is related to the business cycle is labor force participation. Since the official unemployment rate does not include workers who have left the labor force, the conventional measures 2013 2014 2015 of potential GDP, incomes, and Government receipts understate the extent to which potential work hours are under-utilized because of a decline in labor force participation. The key unresolved question here is to what extent changes in labor force participation are cyclical and to what extent they are structural. By convention, in estimating the structural budget deficit, all changes in labor force participation are treated as structural. There are also lags in the collection of tax revenue that can delay the impact of cyclical effects beyond the year in which they occur. The result is that even after the unemployment rate has fallen, receipts may remain cyclically depressed for some time until these lagged effects have dissipated. The current recession has added substantially to the estimated cyclical component of the deficit, but for all the reasons stated above, the cyclical component is probably an understatement. As the economy recovers, the cyclical deficit is projected to decline and after unemployment reaches 5.2 percent, the level assumed to be consistent with stable inflation, the estimated cyclical component vanishes, leaving only the structural deficit, although some lagged cyclical effects would arguably still be present. Despite these limitations, the distinction between cyclical and structural deficits is helpful in understanding the path of fiscal policy. The large increase in the deficit in 2009 and 2010 is due to a combination of all three components of the deficit. There is a large increase in the cyclical component because of the rise in unemployment. That is what would be expected considering the severity of the current recession. Finally, there is a large increase in the structural deficit because of the policy measures taken to combat the recession. This reflects the Government’s decision to make an active use of fiscal policy to lessen the severity of the recession and to hasten economic recovery. In 2011–2017, the cyclical component declines sharply as the economy recovers. The structural deficit shrinks during 2011–2013 as the temporary spending and tax measures in the Recovery Act end. 25 3. INTERACTIONS BETWEEN THE ECONOMY AND THE BUDGET Table 3–4. THE STRUCTURAL BALANCE (Fiscal years; in billions of dollars) 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Unadjusted surplus (–) or deficit .. ...................................... Cyclical component ....................................................... 160.7 –54.5 458.6 6.5 1412.7 337.8 1555.6 467.7 1266.7 452.6 828.5 380.3 727.3 287.0 705.8 187.8 751.9 102.0 777.7 44.6 778.0 10.0 785.1 0.0 Structural surplus (–) or deficit .. ......................................... 216.7 433.3 815.6 1116.7 767.2 478.2 462.5 538.4 678.4 760.9 797.6 817.2 Unadjusted surplus (–) or deficit .. ...................................... Cyclical component ....................................................... 1.2% –0.4% 3.2% 0.0% (Fiscal years; percent of GDP) 9.9% 2.4% 10.5% 3.2% 8.1% 3.0% 5.3% 2.3% 4.3% 1.7% 3.9% 1.0% 3.9% 0.5% 3.9% 0.2% 3.7% 0.0% 3.6% 0.0% Structural surplus (–) or deficit .. ......................................... 1.5% 3.1% 7.6% Note: The NAIRU is assumed to be 5.0% through calendar year 2007, 5.2% after 2008. 7.3% 5.1% 3.0% 2.6% 2.9% 3.4% 3.6% 3.6% 3.6% 4. FINANCIAL STABILIZATION EFFORTS AND THEIR BUDGETARY EFFECTS The U.S. Government has taken unprecedented action to stem the negative effects of the current financial crisis. 1 The Department of the Treasury, the Federal Reserve, the Federal Deposit Insurance Corporation, the National Credit Union Administration, the Securities and Exchange Commission, and the Commodity Futures Trading Commission have acted independently and in concert to scale up existing programs and make them more effective, and to launch new programs that are designed to: • expand access to credit; • strengthen financial institutions; • restore confidence in the financial market; and • stabilize the housing sector. This chapter provides a summary of key government programs, followed by a report analyzing the cost and budgetary effects of the Treasury’s Troubled Asset Relief Program (TARP), consistent with Sections 202 and 203 of the Emergency Economic Stabilization Act (EESA) of 2008 (P.L. 110–343) as amended. This report analyzes transactions as of December 31, 2009, and expected transactions as reflected in the Budget. The TARP costs discussed in the report and included in the Budget are the estimated present value of the TARP investments, netting and discounting the expected dividends, interest, and principal redemptions the Government receives against its investments; this credit reform treatment of TARP transactions is provided for in Section 123 of EESA. The estimated impact of TARP on the deficit has been cut by more than 60 percent (or over $220 billion) from the Mid-Session Review (MSR) of the 2010 Budget, due to lower overall TARP investments and higher investment returns. The MSR estimated a $341 billion programmatic cost of purchases and guarantees of $777 billion in troubled assets. OMB’s new report estimates TARP’s deficit cost to be $117 billion—a reduction in cost of $224 billion from MSR (see Tables 4–1 and 4–7). The Treasury has received higher-than-expected repayments and redemptions from TARP recipients, and now predicts that banks alone will return $185 billion in TARP investments over 2009 and 2010. As of December 31, 2009, the Treasury had received actual repayments of $165 billion, mostly from large banks that received capital infusions in the first weeks of the TARP program. Those redemptions are a sign of the greater stability in the financial sector, which led the Administration to reduce estimates of future TARP purchases by 30 percent 1 Chapter 2 of this volume, Economic Assumptions, contains a discussion of the economic crisis and recent economic performance, among other topics. compared to MSR, to $546 billion, and to remove the $750 billion placeholder for a Financial Stabilization Reserve as no longer warranted. Federal Reserve Programs The Federal Reserve responded to the crisis by extending its existing credit programs, creating new credit programs, directly purchasing assets for its System Open Market Account (SOMA) portfolio, and providing direct financial support to a large number of financial institutions. Beginning in early August 2007, the Federal Reserve began pumping liquidity into the system to offset the precipitous decline in interbank lending. However, interbank liquidity concerns continued to persist, which led to the creation of the Term Auction Facility (TAF) in December 2007. This facility allowed banks to access Federal Reserve funds through an auction process, wherein depository institutions bid for TAF funds at an interest rate that is determined by the auction. As of November 30, 2009, cumulative TAF borrowing exceeded $3.7 trillion. However, since October 2008 every TAF auction has been undersubscribed, meaning that propositions for the TAF loans have been below auction limits. In late September 2009, the Federal Reserve announced that the TAF would be scaled back in 2010 as a result of improved financial market conditions. Throughout the economic crisis, the Federal Reserve created programs designed to improve credit market conditions. The Term Securities Lending Facility (TSLF), introduced in March 2008, has allowed institutions to pledge an array of collateral (all investment grade debt and securities) in return for risk-free Treasury securities. The Federal Reserve also created the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Primary Dealer Credit Facility, and the Commercial Paper Funding Facility. Each of these programs has increased liquidity for different participants in the money markets, which has had the effect of stabilizing broader financial markets. Similar to TAF, utilization of these programs has waned as market conditions have improved. In mid-December the Federal Reserve confirmed that these four programs will expire on February 1, 2010, consistent with the Federal Reserve’s June 2009 announcement. Addressing the frozen consumer and business credit markets, the Federal Reserve announced on November 25, 2008 that in conjunction with the Treasury Department it would lend up to $200 billion to holders of newly issued AAA-rated asset-backed securities through the Term Asset-Backed Securities Loan Facility (TALF). The program was expanded as part of the Administration’s Financial Stability Plan and launched in March 2009. Qualifying assets include student loans, auto loans, credit 27 28 cards, and Small Business Administration guaranteed loans. As of June 1, 2009, the Federal Reserve extended the list of qualifying assets to include commercial real estate mortgages. November 2009 marked the first deal involving new issuance of commercial mortgage-backed securities since June 2008, equal to $323 million of AAArated debt, of which TALF financing supported $72 million. As part of the program, the Treasury provides protection to the Federal Reserve by covering the first $20 billion in losses on all TALF loans. To support mortgage lending and housing markets, the Federal Reserve began purchasing up to $175 billion of Government-Sponsored Enterprise (GSE) debt and up to $1.25 trillion of GSE mortgage-backed securities (MBS) beginning in December 2008. As of the end of December, 2009 the Federal Reserve has purchased or committed to purchase $160 billion in GSE debt and $1.1 trillion in GSE MBS. Purchasing GSE debt and MBS is intended to provide liquidity to the mortgage industry and facilitate the issuance of new mortgage loans to homebuyers at affordable interest rates. The Federal Reserve also purchased $300 billion in longer-term Treasury securities in 2009 to improve interest rate conditions in mortgage and other private credit markets. Earnings resulting from the expansion of the Federal Reserve’s balance sheet through the purchase of GSE debt, GSE mortgage-backed securities, and long-term Treasury securities are expected to increase the Federal Reserve’s deposit of excess earnings with the Treasury. It is estimated that the Treasury will receive $77.0 billion from the Federal Reserve in 2010, and $79.3 billion in 2011, which represents an average 125 percent increase over 2009 deposits of $34.3 billion. Federal Reserve deposits of earnings with the Treasury will peak in 2011 and start to fall in the out-years as the Federal Reserve plans to wind down its portfolio. Federal Deposit Insurance Corporation (FDIC) Programs On October 14, 2008, using its existing authority, the FDIC created the Temporary Liquidity Guarantee Program (TLGP), aimed at restoring confidence in banks and preventing large scale deposit flight. The program has been designed to promote liquidity by allowing banks to rollover existing debt. For the first time ever, the FDIC guaranteed bank and bank holding company debt. Under the debt guarantee program (DGP), if there is default on the debt, the FDIC will make required principal and interest payments to unsecured senior debt holders. The FDIC charges additional premiums for any banks that voluntarily opt into this program. The guarantee was originally limited to unsecured debt issued on or before June 30, 2009, expiring June 30, 2012. On March 17, 2009, the FDIC extended the eligible period through October 31, 2009, to issue debt, and levied a surcharge on debt issued between April 1, 2009 and October 31, 2009, which will be transferred to Deposit Insurance Fund. On October 20, 2009, the FDIC adopted a final rule that reaffirmed the expiration of the debt guarantee program (DGP) on ANALYTICAL PERSPECTIVES October 31, 2009. However, the rule also established a limited, six-month guarantee facility upon expiration. This emergency guarantee facility is available on a case-by-case basis to entities participating in the DGP, upon application to the FDIC and with the approval of the Chairman after consultation with the Board. The Budget shows the book value of the DGP investment portfolio was $7 billion as of September 30, 2009. Another component of the TLGP, the Transaction Account Guarantee (TAG), allows the FDIC to cover without limit any losses that uninsured depositors incur within non-interest bearing deposits. The FDIC charges additional premiums for any banks that voluntarily opt into this program. This guarantee is designed to protect small business payrolls held at small and medium sized banks. On August 26, 2009, the FDIC extended this guarantee for six months, through June 30, 2010, and insured depository institutions that are participating in the TAG program may continue through the extension period. Those institutions will be assessed between 15 to 25 basis points depending upon the risk category assigned to the institution under the FDIC’s risk-based premium system. The FDIC had collected $450 million in fees related to the TAG as of September 30, 2009. In September 2009, the FDIC also piloted the Legacy Loan Program (LLP), which is part of the Public-Private Investment Program (PPIP) announced in March by the Secretary of the Treasury, the Federal Reserve, and the FDIC. The FDIC will provide oversight for the formation, funding, and operation of new public-private investment funds (PPIFs), which will purchase loans and other assets from depository institutions. The LLP will attract private capital through an FDIC debt guarantee. This program will ultimately help banks remove troubled loans and other assets from their balance sheets so that banks can raise new capital and be better positioned to emerge from the financial crisis. The FDIC has further collaborated with the Treasury Department and the Federal Reserve to provide exceptional assistance to institutions such as Citigroup. Alongside the Treasury and the Federal Reserve, the FDIC guaranteed up to $10 billion of a $301 billion portfolio of residential and commercial mortgage-backed securities at Citigroup. The guarantee was later terminated, as part of a larger Citigroup initiative to repay Federal support. In addition to the liquidity programs, the Emergency Economic Stabilization Act of 2008 temporarily increased the deposit and share insurance level from $100,000 per account to $250,000 through December 31, 2009. This increase applies to insured accounts of both the FDIC and the National Credit Union Administration (NCUA). On May 20, 2009, the President signed the Helping Families Save Their Homes Act, which extended the temporary increase of $250,000 through December 31, 2013. For a more detailed analysis of these programs, see the section titled, “Deposit Insurance” in Chapter 22, “Credit and Insurance”, in this volume. 4. FINANCIAL STABILIZATION EFFORTS AND THEIR BUDGETARY EFFECTS National Credit Union Administration (NCUA) Programs NCUA took aggressive actions in response to dislocations in financial markets in order to maintain confidence, limit losses, and promote recovery in the credit union system. These actions included raising the deposit insurance coverage to $250,000 (details provided above), providing liquidity loans totaling $23 billion, and stabilizing two of the largest corporate credit unions through conservatorship. NCUA also initiated multiple programs amidst the economic crises to stabilize liquidity and ultimately ensure the continued safety and soundness of the credit union system, including the Temporary Corporate Credit Union Stabilization Fund, the Credit Union Homeowners Affordability Relief Program, and the System Investment Program. On October 16, 2008, the NCUA announced the Temporary Corporate Credit Union Liquidity Guarantee Program. Under this program, the NCUA guaranteed certain unsecured debt of participating corporate credit unions issued from October 16, 2008 through June 30, 2010. The program ensured parity with depositories covered by a similar FDIC guarantee program, and maintained market-place confidence in corporate credit union unsecured debt offerings. NCUA utilized the powers of its Central Liquidity Facility (CLF) to provide liquidity to the credit union system. The CLF granted liquidity advances of $14.4 billion, with $10 billion originating in March 2009 to the National Credit Union Share Insurance Fund in order to provide funding stabilization to the conservatorships of two corporate credit unions. The CLF also established the Credit Union Homeowners Affordability Relief Program (HARP) and the System Investment Program (SIP) to add liquidity to the credit union system; a total of $8.4 billion has been advanced with these two programs. As of September 30, 2009, $18.4 billion of advances remain outstanding. Under the HARP, the CLF made one-year secured advances of credit to qualifying credit unions that in turn were required to invest in a special corporate credit union note used by the corporate credit union to pay down external secured borrowings. The qualifying credit union can earn an extra coupon payment on the HARP note for demonstrated mortgage relief to eligible members. To date, advances of approximately $164 million have been made, with complete repayment estimated by January 2011. Under the SIP, the CLF made one-year secured credit advances to credit unions, who will in turn invest those funds in guaranteed corporate credit union notes, providing a stable and affordable source of liquidity for corporate credit unions. To date, advances of $8.2 billion have been made, and complete repayment is expected at the end of March 2010. NCUA’s systemic support via guarantees of unsecured debt and share deposits and liquidity advances has stabilized the corporate credit union system, which is vital for the day-to-day operations and function of the nearly 7,640 credit unions nationwide. In addition to stabilizing liquidity and confidence in the system, NCUA is promulgating a 29 stronger regulatory and supervisory framework to govern credit unions, address identified weaknesses, and ensure such distress is not repeated in the future. NCUA is currently in the process of comprehensively revising Part 704 of its Rules and Regulations to address capital standards, investment authorities and limitations, and corporate governance. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) Programs As part of the Government’s continuing response to the financial crisis, the SEC and CFTC worked throughout 2009 to issue regulations targeted at many of the root causes of the crisis, to adapt their organizations to more effectively monitor regulated industries and activities, and to implement enforcement strategies designed to both punish noncompliant actors and deter noncompliance system-wide. Following a review of its enforcement protocol, the SEC has committed to significant organizational reforms within the Division of Enforcement. The SEC will now better manage tips, referrals, and complaints by centralizing and organizing leads for use throughout the agency. Specialized units dedicated to high-risk and emerging fields like structured products and asset management businesses will enable SEC staff to develop the expertise necessary to keep pace with the innovation occurring in the marketplace, and to take swift and skilled action when necessary. Finally, the SEC has committed to streamlining its management structure to ensure that the agency is able to act on the improved enforcement recommendations provided by its staff. Beyond enforcement, the SEC has taken action to prevent future abuses of short-selling, particularly “naked” short selling (selling shares that are not owned or borrowed), by introducing rules covering short sale price tests, circuit breakers, and failures to deliver securities. Other major regulatory efforts in 2009 focused on limits on flash trading (trading on information received milliseconds before the public), dark pool disclosures (disclosure of anonymous trading in alternative markets), money market fund regulation, and credit rating agency reform. In 2009, the SEC also focused significant attention on improving investor protection. This work has occurred on two fronts: increasing accountability of boards of directors of publicly-traded companies and introducing standards for investment advisors. The SEC established an Investor Advisory Committee to guide the agency’s agenda on investor education, investor protection, shareholder voting, and corporate governance. The CFTC has focused significant resources on monitoring the futures markets for potential manipulation throughout the financial crisis. In many cases, that monitoring has led to enforcement actions. In 2009, the CFTC filed 50 enforcement actions and opened 251 investigations, collecting more than $183 million in restitution and disgorgement penalties (i.e., the collection of ill-gotten gains), and $97 million in civil money penalties. The CFTC has also undertaken additional efforts to monitor 30 futures commission merchants (FCMs) to ensure that the funds investors entrust to FCMs are appropriately safeguarded by the FCMs. In 2009, the CFTC’s investor protection efforts included reviewing monthly financial reports from FCMs with an eye toward indicators of potential undercapitalization and systemic risk. As a result of the CFTC’s market oversight and risk surveillance activities, in 2009 there were no losses of regulated consumer funds as a result of FCM instability or failure. To better align their rulemakings and oversight, the SEC and CFTC have committed to harmonization efforts targeted at eliminating regulatory disparities between similar activities regulated by each agency. After holding joint meetings to discuss possible approaches to harmonization and to solicit public views on the strengths and weaknesses of the current system, in October 2009 the SEC and CFTC jointly issued a report recommending specific areas where aligning the agencies’ regulatory approaches would yield benefits. The President’s Budget provides significant increases for the SEC and CFTC in 2011 above 2010. For SEC, $1,258 million is provided, an increase of $147 million or 13 percent over 2010, of which $24 million is contingent upon enactment of financial reform legislation. For CFTC, $261 million is provided, an increase of $93 million or 55 percent over 2010, of which $45 million is contingent upon enactment of financial reform legislation. Housing Market Programs To preserve the safety and soundness of the housing market, the Federal Housing Finance Authority (FHFA) placed the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) into conservatorship on September 6, 2008. On the following day, the U.S. Treasury launched three new programs to provide temporary financial support to the GSEs and to stabilize the housing market under the broad authority provided in the Housing and Economic Recovery Act (HERA) of 2008 (P.L. 110–289). First, the Treasury announced Senior Preferred Stock Purchase Agreements to ensure that the GSEs maintain a positive net position (i.e., assets are greater than or equal to liabilities). On December 24, 2009, the Treasury announced that the funding commitments in the purchase agreements would be modified to allow for additional funding in the event that cumulative losses at either enterprise exceed the existing caps of $200 billion before December 31, 2012. Second, the Treasury established a line of credit for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks to ensure they have adequate funding on a short-term, as-needed basis. This line of credit was never used. Last, the Treasury initiated purchases of GSE guaranteed mortgage-backed securities (MBS) in the open market (separate from the Federal Reserve’s MBS purchase program above), with the goal of increasing liquidity in the mortgage market. In December 2009, the Treasury initiated two additional purchase programs under HERA authority to support new and existing State and local Housing Financing Agencies ANALYTICAL PERSPECTIVES (HFAs) revenue bonds. The GSE credit, MBS purchase, and HFA support programs all expired on December 31, 2009. A more detailed analysis of these programs is provided in Chapter 22, “Credit and Insurance.” In addition, significant assistance has been provided to the mortgage market through the Federal Housing Administration (see discussion in Chapter 22), and through the Department of the Treasury, as described below. Treasury Programs Temporary Guarantee Program for Money Market Mutual Funds. On September 18, 2009, the Treasury ended its Money Market Fund Guarantee Program, which guaranteed at its peak over $3 trillion of assets. The President approved Treasury’s request in September 2008 to use the Exchange Stabilization Fund to guarantee money market mutual funds. The program guaranteed that individual investors receive a stable share price for each share held in a participating money market fund (typically $1 per share) in the event that the fund “breaks the buck,” i.e., liquidates investor holdings at less than $1 per share. Participating funds had no covered losses while the program was in effect, so the program provided insurance to the markets at no ultimate cost to the public. The Treasury earned $1.2 billion in fees from participating funds. Troubled Asset Relief Program (TARP). EESA authorized the Treasury to purchase or guarantee troubled assets and other financial instruments, provided that the total purchase price paid for assets held by the Secretary not exceed $700 billion at any one time.2 The Treasury implemented the TARP under this authority to provide capital to and restore confidence in the strength of U.S. financial institutions, restart markets critical to financing American households and businesses, and address housing market problems and the foreclosure crisis. On December 9, 2009, and as authorized by EESA, the Secretary of the Treasury certified to Congress that an extension of TARP purchase authority until October 3, 2010, was necessary “to assist American families and stabilize financial markets because it will, among other things, enable us to continue to implement programs that address housing markets and the needs of small businesses, and to maintain the capacity to respond to unforeseen threats.” Under the terms of TARP, the Treasury can enter into new commitments to purchase troubled assets through October 3, though funding to liquidate them may occur thereafter. The Secretary outlined the Government’s four elements of its strategy to wind-down the TARP and related programs: first, the Treasury will wind down those programs that are no longer necessary, such as the Capital Purchase Program; funding for the CPP ended on December 31st. Second, (CPP)new planned programs in 2010 under the 2 TARP authority is defined as the purchase price paid for assets held by the Secretary of the Treasury and amounts guaranteed outstanding at any one time. The Helping Family Save Their Homes Act of 2009 (P.L. 111–22) reduced the total purchase authority by $1.3 billion. 4. FINANCIAL STABILIZATION EFFORTS AND THEIR BUDGETARY EFFECTS extension of the purchase authority will be limited to three areas: (1) continued foreclosure mitigation for responsible American homeowners and stabilization of the housing market; (2) initiatives to provide capital to small and community banks; and (3) potentially increased commitment to the Term Asset-Backed Securities Loan Facility (TALF) to improve securitization markets that facilitate consumer and small business loans, as well as commercial mortgage loans. Third, the Government will maintain the capacity to respond to unforeseen threats. The Government will not use remaining TARP funds unless necessary to respond to an immediate and substantial threat to the economy stemming from financial instability. Fourth, the Government will manage equity investments acquired through TARP while protecting taxpayer interests. It will continue to manage those investments in a commercial manner and seek to dispose of them as soon as practicable. As a result of improved overall financial conditions and careful stewardship of the program, the 2011 Budget reflects an impact of TARP on the deficit that is approximately $224 billion less than previously estimated in the August Mid-Session Review of the 2010 Budget. Furthermore, the Budget estimates total purchases under TARP authority to be approximately $550 billion, significantly less than the full $700 billion in authority granted under EESA. A more detailed analysis of specific TARP programs is provided below. Description of Assets Purchased Through the Troubled Asset Relief Program (TARP), by Program Capital Purchase Program (CPP). Pursuant to EESA, the Treasury created the CPP in October 2008 to restore confidence throughout the financial system so that the Nation’s banking institutions have a sufficient capital cushion against larger-than-expected future losses, should such losses occur due to a more severe economic environment, and to support lending to creditworthy borrowers. Under the CPP, the Treasury purchases senior preferred stock from qualifying U.S.-controlled banks, savings associations, and holding companies that meet established criteria and are recommended for this program by their regulator. For Subchapter S corporations and certain mutual institutions, the CPP program purchases subordinated debentures. Passage of the American Recovery and Reinvestment Act of 2009 amended the original terms of CPP preferred stock agreements, removing previous restrictions on participating institutions from redeeming preferred stock within the first three years. Further, in spring 2009, the CPP program included a conversion of $25 billion of Citigroup preferred stock to common stock. The 2011 Budget reflects $204.6 billion in purchases in 2009 and estimates of $3.4 billion in purchases completed in 2010, for a total of $208 billion.3 3 As of December 31, 2009, the funding deadline for CPP ended. Actual CPP disbursements were $205 billion. This will be reflected in the Mid-Session Review of the 2011 Budget. 31 All CPP recipients have completed funding by December 31, 2009. The Budget reflects that financial institutions redeemed $70.7 billion in principal repayments and $9.7 billion in dividends, interest, warrants and fees as of September 30, 2009. Furthermore, the Budget reflects that financial institutions will redeem an additional $59.7 billion in principal repayments and the Treasury expects to receive over $20.1 billion in dividends, interest, warrants and fees in 2010. American International Group (AIG) Investments. As of September 30, 2009, the Treasury purchased $40 billion in preferred shares from AIG. It also created an equity capital facility, in which AIG may draw up to $29.8 billion as needed in exchange for additional preferred stock. As of September 30, 2009, AIG had drawn $3.2 billion from the facility. The Budget assumes a total of $69.8 billion in preferred stock will be purchased or exchanged from AIG in 2009 and 2010. Targeted Investment Program (TIP). Investments made through the TIP seek to avoid significant market disruptions resulting from the deterioration of one financial institution that could threaten other financial institutions and impair broader financial markets, and thereby pose a threat to the overall economy. Under the TIP, the Treasury purchased $20 billion in preferred stock from Citigroup and $20 billion in preferred stock from Bank of America. The Treasury also received warrants from each company. Both preferred stock agreements pay a dividend of 8 percent per annum. The Budget reflects that both Citigroup and Bank of America fully redeemed the Government’s TIP investments in 2010. Furthermore, the Budget reflects that Citigroup and Bank of America paid $1.8 billion in dividends in 2009 and an estimated $791 million in additional dividend payments in 2010. Asset Guarantee Program (AGP). Also pursuant to EESA, the Treasury created AGP, to provide government assurances for assets held by financial institutions that are critical to the functioning of the nation’s financial system, which faced a risk of losing the critical confidence that was needed for them to continue to lend to other banks. The set of insured assets was selected by the Treasury and its agents in consultation with the financial institutions receiving the guarantee. In exchange for each guarantee, the Treasury received a combination of preferred stock and warrants as compensation. In January 2009, the Treasury, the Federal Reserve and the FDIC negotiated a potential loss sharing arrangement under the AGP on a $118 billion pool of financial instruments owned by Bank of America. The negotiations were never completed, and the parties did not enter into a final agreement. In May 2009, Bank of America announced its intention to terminate negotiations with respect to the loss-sharing arrangement, and in September 2009, the Treasury, the Federal Reserve, the FDIC, and Bank of America entered into a termination agreement pursuant to which 1) the parties terminated the related term sheet; and 2) Bank of America agreed to pay a termination fee of 32 $425 million to the government parties. Of this amount, $276 million was paid to the Treasury in 2009. The Treasury, the Federal Reserve and the FDIC entered into a final agreement for a similar loss-sharing arrangement with Citigroup on January 15, 2009. Under the agreement, the Treasury guaranteed up to $5 billion of potential losses incurred on a $301 billion portfolio of loans, mortgage-backed securities, and other financial assets held by Citigroup. The Budget reflects termination of that agreement, effective December 23, 2009. The U.S. Government parties did not pay any losses under the agreement and will keep $5.2 billion of the $7 billion in trust preferred securities as well as warrants for common shares that were issued by Citigroup as consideration for the guarantee. With this termination, the AGP will result in net positive returns to the taxpayer. Automotive Industry Financing Program (AIFP). In December 2008, the Treasury established the AIFP to prevent a disruption of the domestic automotive industry which posed a systemic risk to the nation’s economy. As of September 30, 2009, the Treasury extended structured and direct loans and equity investments to participating domestic automotive manufacturers, finance companies, and suppliers. The total includes debtor-in-possession financing to General Motors Company (GM) and Chrysler Holdings, as well as exit financing to Chrysler Holdings, that the Treasury supplied while these companies worked through their respective restructuring plans in bankruptcy proceedings. On December 30, 2009, GMAC received additional funding from the Treasury of $3.8 billion to complete GMAC’s stress-test capital needs. This transaction increased the Treasury’s ownership of GMAC from a 35 percent to a 56 percent equity stake in the company. The $3.8 billion in funding is $1.8 billion lower than originally estimated, due to better than expected outcomes in the GM and Chrysler bankruptcies and improved market conditions. The transaction also included contractual changes to earlier GMAC transactions. The Budget reflects a total of $85 billion in assistance through the AIFP. Upon successful emergence from bankruptcy, the Treasury received a $7.1 billion debt security and held 9.9 percent of the equity in the newly formed Chrysler. The original loans to Chrysler remain outstanding, but have been reduced by $500 million of debt that was assumed by New Chrysler. When the sale to New GM was completed on July 10, the Treasury converted most of its loans to 60.8 percent of the common equity in the New GM and $2.1 billion in preferred stock. The Treasury continues to hold loans in the amount of $6.7 billion. In November, GM agreed, subject to certain conditions, to begin $1 billion quarterly repayments on its loan, beginning with a repayment in December 2009. GM has stated publicly that it expects to repay the entire loan by June 2010, assuming no downturn in the economy or business. Home Affordable Modification Program (HAMP). The HAMP is a $75 billion program, which includes up to $50 billion of TARP funds, intended to offer relief to up ANALYTICAL PERSPECTIVES to three to four million at-risk homeowners struggling to make their mortgage payments, while preventing neighborhoods and communities from suffering the negative spillover effects of foreclosures. Under this program, the Treasury signs contracts with servicers to make incentive payments to the borrowers, servicers, investors, and lenders of first and second lien mortgages for successful modifications of the existing mortgages. In early October 2009, HAMP achieved its previously announced target of extending 850,000 trial modification offers and initiating 500,000 trial modifications – a month ahead of schedule. As of December 31, 2009, 102 mortgage servicers had signed up to participate in the HAMP, over one million trial modification offers had been extended to borrowers, and over 850,000 trial modifications were underway. Roughly 112,000 permanent modifications had been approved, including 66,000 that borrowers had accepted and 46,000 awaiting only the borrower’s signature. The Treasury also provides payments to protect against declining home prices, encouraging mortgage modifications in communities that have experienced continued price depreciation. When a mortgage modification is not possible, the Treasury offers incentive payments to encourage short sales (sales for less than the value of the mortgage) or deeds in lieu of foreclosures in order to provide a means for borrowers to avoid foreclosure. As of November 30, 2009, more than $27 billion has been committed to implement the HAMP. The 2011 Budget reflects a total of $48.8 billion in TARP program activity expected through the HAMP.4 Consumer and Business Lending Initiative (CBLI). The CBLI is an effort to jumpstart the credit markets that support lending to families and small businesses, through the Term Asset-Backed Securities Loan Facility (TALF) and dedicated small-business programs. The CBLI broadens and expands the resources of the TALF, a joint initiative with the Federal Reserve that provides financing to private investors to help unfreeze markets for various types of credit, such as commercial real estate, auto, student, small business, and credit card loans. As of June 1, 2009, the Federal Reserve extended the TALF program to investors of commercial real estate mortgages in order to boost the commercial mortgagebacked securities market. As part of the program, the Treasury provides protection to the Federal Reserve by covering the first $20 billion in losses on all TALF loans. The Treasury has provided $0.1 billion of this amount to the TALF Special Purpose Vehicle (SPV) used to implement the coverage, which represents a notional amount to establish the SPV. The Treasury’s total TALF purchases will depend on actual TALF loan defaults; $97 billion in total TALF loans are currently expected. 4 Section 123 of the EESA provides the Administration the authority to record TARP equity transactions pursuant to the Federal Credit Reform Act (FCRA), with adjustments to the discount rate for market risks. The Home Affordable Modification Program involves the purchase of financial instruments which have no provision for repayment or other return on investment, and therefore these purchases are recorded on a cash basis. 33 4. FINANCIAL STABILIZATION EFFORTS AND THEIR BUDGETARY EFFECTS The securitization market for asset-backed securities (ABS), which is an important source of credit for consumers and businesses, nearly came to a standstill at the height of the financial crisis. However, the market has rebounded since the first TALF subscription took place on March 19, 2009. There have been nine monthly ABS subscriptions as of November 30, 2009, and a total of $96 billion of TALF-eligible new ABS issuance has been brought to market. Of that amount, approximately 50 percent of total new issuance, or $48 billion, was financed using TALF loans; the rest required no TALF assistance. In an effort to reduce unemployment and stimulate growth, additional TARP funding has been notionally allocated to initiatives to facilitate small business lending in 2010. The President announced that the Administration is designing initiatives to provide capital to small and community banks, which are important sources of credit for small businesses. On November 19, 2009, the Administration hosted a two-day Small Business Financing Forum with small business owners, lenders, and trade associations to discuss new ideas to increase lending to small businesses. Ideas generated from the forum will be incorporated into the Treasury’s TARP small business lending initiatives. Public Private Investment Program (PPIP). The Treasury, in conjunction with the Federal Deposit Insurance Corporation (FDIC) and the Federal Reserve, introduced the PPIP on March 23, 2009, to address the volatile market cycle affecting troubled legacy assets clogging the balance sheets of private-sector financial institutions. The PPIP is designed to improve the financial position of financial institutions by facilitating the removal of legacy assets from their balance sheets. Legacy assets include both real estate loans held on banks’ balance sheets (legacy loans) as well as securities backed by residential and commercial real estate loans (legacy securities). The Treasury initially announced that it would provide up to $100 billion for the PPIP. Because of improvements in the market, this amount was reduced to $30 billion, which has been committed to the legacy securities program. The Budget reflects $6.7 billion in investments obligated in 2009, and $23.3 billion estimated in 2010. Capital Assistance Program and Other Programs (CAP). The Treasury launched the CAP in March 2009 as the next phase of its effort to ensure that institutions have enough capital to lend, even under a more severe recession than is currently projected. The CAP was announced in conjunction with the commencement of a supervisory capital assessment process, commonly referred to as the “stress tests”. The CAP was available to institutions that participated in the “stress tests” as well as others. Of the ten bank holding companies that were identified as needing to raise more capital, nine have met or exceeded the capital raising requirements through private efforts. The Treasury provided an additional $3.8 billion in capital to GMAC under the Auto Industry Financing Program (described above) to assist its fundraising efforts to meet the requirements of the stress test results. Due to the success of the stress tests, efforts to raise private capital, and CPP, as well as other Government efforts, the Treasury did not receive any applications for the CAP, which terminated on November 9, 2009. Method for Estimating the Cost of TARP Transactions Exercising its authority under EESA, the Treasury has purchased financial instruments with varying terms and conditions. Consistent with the provisions of Section 123 of EESA, the costs of equity purchases, loans, and guarantees, under the TARP are reflected on a net present value basis, as determined under the Federal Credit Reform Act of 1990 (2 USC 661 et seq.), with an adjustment to the discount rate for market risks. The budgetary cost of these transactions is reflected as the net present value of estimated cash flows to and from the Government, excluding administrative costs. Costs for the incentive payments under HAMP involve financial instruments without any provision for income or other returns, and are recorded on a cash basis.5 The costs of each transaction reflect the underlying structure of the instruments, consistent with the Federal Credit Reform Act (FCRA), and may include direct loans, structured loans, equity, loan guarantees, or direct incentive payments. For each of these instruments, analytical cash flow models generate expected cash flows to and from the Government over the life of a program or facility. Further, each cash flow model reflects the specific terms and conditions of the program, technical assumptions regarding the underlying assets, risk of default or other losses, and other factors as appropriate. Models are used to generate cash flows for original subsidy rate estimates for new TARP facilities. Cost estimate cash flows are also generated to calculate changes in cost due to changes in contract terms or other Government actions (modification cost estimates), as well as annual reestimates of subsidy cost that account for changes in economic or performance assumptions as well as actual cash flows to date. The risk adjustments to the discount rates for TARP equity, loan, and guarantee transactions were made using available data and methods to capture additional potential costs related to uncertainty around the expected cash flows to and from the public. The basic methods for each of these models are outlined below. Direct Loans. Direct loan subsidy cost estimates are derived using analytical models that estimate the cash flows to and from the Government over the life of the loan. These cash flows include the scheduled principal, interest, and other payments to the Government, including estimated income from warrants or additional notes. These 5 Section 123 of the EESA provides the Administration the authority to record TARP equity purchases pursuant to the FCRA, with required adjustments to the discount rate for market risks. The Home Affordable Modification Program involves the purchase of financial instruments which have no provision for repayment or other return on investment, and therefore these purchases are recorded on a cash basis. Administrative expenses are recorded for all of TARP under the Office of Financial Stability and the Special Inspector General for TARP on a cash basis, consistent with other Federal administrative costs. 34 models also include estimates of delinquencies, default and recoveries, based on loan-specific factors including the value of any collateral provided by the contract. The probability and timing of default and recoveries are estimated by using applicable historical data and econometric projections when available, or publicly available proxy data including aggregated credit rating agency historical performance data. Structured Loans. Structured loans such as the TALF and loans to GM suppliers are modeled according to the program structure, where an intermediary special purpose vehicle (SPV) is established to purchase or commit to purchase assets from beneficiaries. In general, structured loans are a hybrid of guarantees and direct loans. The Treasury makes a direct loan to a SPV; the SPV in turn enters into a contract with a beneficiary that resembles a guaranteed loan. Estimated cash flow assumptions reflect the anticipated behavior of the beneficiaries and the cash flows to and from the SPV and the Treasury. In the case of the TALF, the New York Federal Reserve created an SPV to purchase and manage assets received in connection with any TALF loans. The Federal Reserve acquires assets either when a TALF participant defaults on the Federal Reserve financing or chooses to turn over the securing assets in lieu of the scheduled repayment at the end of the term. The SPV has committed, for a fee, to purchase all assets securing a TALF loan that are received by the New York Federal Reserve at a price equal to the TALF loan amount at the time of acquisition, plus accrued but unpaid interest. The Treasury made an initial allotment to the SPV of $0.1 billion to fund the SPV, and the Treasury will purchase subordinated debt issued by the SPV to finance up to $20 billion of asset purchases. The Treasury receives fees and interest income on the entire outstanding TALF facility, and amounts collected in the SPV. The Treasury projects cash flows to and from the Government based on estimated SPV performance, the estimated mix of assets funded through the TALF, the terms of the contracts, and other factors. Guarantees. Cost estimates for guarantees reflect the net present value of estimated claim payments by the Government, net of income from fees, recoveries on defaults, or other sources. Under EESA, guarantees provided through TARP must have at most a zero-cost basis (i.e., fees and other income will completely offset estimated claim payments) at the time of commitment. In TARP guarantee transactions to date, guarantee fees were paid in the form of preferred stock and termination fees. The value of preferred stock is modeled using the same methodology discussed for other equity purchase programs below. Claim payments were modeled consistent with the terms of the guarantee contract. For the Citigroup guarantee, Citigroup would have covered the first loss, and the Treasury would have borne the second loss. Projected claim payments on the guaranteed portfolio of assets reflected historical performance data on similar assets and estimates of future economic conditions such as ANALYTICAL PERSPECTIVES unemployment rates, gross domestic product, and home price appreciation. However, the guarantee was terminated with no claim payments made by the Treasury. The Budget reflects actual collections, and estimated savings from preferred stock proceeds. Equity Purchases. Preferred stock cash flow projections reflect the risk of losses associated with adverse events, like failure of the institution or increases in market interest rates. The model estimates how cash flows vary depending on: 1) current interest rates, which affect the institution’s decision whether to repay the preferred stock; and 2) the strength of a financial institution’s assets. The model also estimates the values and projects the cash flows of warrants using an option-pricing approach based on the current stock price and its volatility. Common equity is valued at market prices. For the purposes of this calculation, common equity is assumed to be sold to the public as soon as is practicable and advisable. Incentive Payments. Foreclosure mitigation incentive payments (e.g., HAMP) occur when the Government makes payments to servicers, borrowers, investors, or lenders. Incentive payments are made for successful modifications of first and second liens, on-schedule borrower payments on those modified loans, protection against further declines in home prices, completing a short sale, or receiving a deed in lieu of foreclosure. The method for estimating these cash flows includes forecasting the total eligible loans, the timing of the loans becoming eligible and entering into the program, loan characteristics, the overall participation rate in the program, the re-default rate, and home price appreciation. TARP Program Costs and Current Value of Assets This section provides the special analysis described under Sections 202 and 203 of EESA, including estimates of the cost to taxpayers and the current value and budgetary effects of TARP transactions as reflected in the Budget.6 The analysis includes explanations of the effects from subsidy cost reestimates and prior-year activity. It also includes what the budgetary effects would have been had all transactions been reflected on a cash basis. The information below reflects the estimates of actual and anticipated use of TARP authority as of December 31, 2009. Through TARP, the Secretary of the Treasury has purchased equity under a number of programs, including the Capital Purchase Program, the AIG Investments Program, the Targeted Investment Program, the Public-Private Legacy Securities Investment Program (PPIP), and the Automotive Industry Financing Program (AIFP). The Secretary has also made direct loans through the AIFP, the TALF, and the PPIP. Below is a table (4–1) summarizing the current and anticipated activity under TARP, and the estimated lifetime budgetary costs, comparing these 6 The analysis does not assume the effects of a recoupment proposal under Section 134 of the EESA. 35 4. FINANCIAL STABILIZATION EFFORTS AND THEIR BUDGETARY EFFECTS Table 4–1. COSTS OF TROUBLED ASSET RELIEF PROGRAM ACTIONS (EXCLUDING DEBT SERVICE) 1 (In billions of dollars) 2010 MSR TARP Actions TARP Obligations Change from 2010 MSR to 2011 Budget 2011 Budget Subsidy Cost TARP Obligations Subsidy Cost TARP Obligations Subsidy Cost Equity purchases ................................................................................................................. Structured & direct loans and asset-backed security purchases ......................................... Guarantees of troubled asset purchases 2 .......................................................................... Home Affordable Modification Program (HAMP) ................................................................. 383.7 330.5 12.5 50.0 158.1 133.6 –0.8 50.0 344.1 148.6 5.0 48.8 55.9 25.0 –3.0 48.8 –39.6 –181.9 –7.5 –1.2 –102.2 –108.6 –2.2 –1.2 Total .............................................................................................................................. 776.7 340.9 546.4 126.7 –230.3 –214.2 Memorandum: 340.9 Deficit impact before administrative costs and interest effects 3 ...................... reflects estimated lifetime TARP obligations and costs through 2020. 2 The 2010 MSR reflected total face value of guarantees of $419 billion. The 2011 Budget reflects the actual face value of $301 billion. 3 The 2011 Budget total deficit impact includes downward interest on reestimates of $9.9 billion. 116.8 –224.1 1 Total amounts to estimates published in the MSR.7 The impact of TARP on the deficit is now projected to be $116.8 billion, down from $340.9 billion projected in the MidSession Review. The subsidy cost, which represents the lifetime net present value cost of TARP obligations from the date TARP obligations originate, is now estimated to be $126.7 billion. Estimated gross obligations as of the MSR totaled $776.7 billion, which assumed some additional obligations enabled by repayments, while adhering to the statutory cap of $700 billion in outstanding obligations at any one time. Current Value of Assets. The value of future cash flows related to TARP transactions can be measured by the balances in the program’s non-budgetary credit financing accounts, because equity purchases, direct loans, and loan guarantee transactions follow the FCRA budgetary accounting structure. A direct loan financing account, for example, receives the subsidy cost from the program account (reflecting the net present value cost of the loan), and borrows the difference between the face value of the loan and the subsidy cost from the Treasury to disburse a loan to a borrower. Future collections from the public – such as proceeds from stock sales, or payments of 7 Anticipated future activity under TARP is assumed to be direct loan transactions, though future activity could take the form of equity purchases, direct loans, asset guarantees, or other financial instrument purchases. principal and interest – are financial assets. As inflows from the public are received, the value is realized. These amounts are used to repay borrowing, and reduce the debt balance in the financing account. Therefore, the net debt balance in the financing account as of the end of each fiscal year represents the present value of future anticipated cash flows to and from the public related to outstanding loans or guarantees. The larger the subsidy cost for a given loan disbursed or equity purchased, the lower the estimated value of the cash flows from the public and asset value to the Government.8 Table 4–2 shows the projected balances of TARP financing accounts as of the end of 2009, and for the end of each year through 2020.9 Actual net balances in financing accounts at the end of 2009 totaled $129.9 billion. Estimates in 2010 and beyond reflect reestimated activity for TARP outstanding as of September 30, 2009, and all other anticipated transactions. TARP financing accounts are estimated to have balances of $189.7 billion as of the end of 2010, 8 As an extreme example, a loan program with 100 percent subsidy cost would require budget authority for the full amount of the loan. The financing account would receive the entire amount of a loan disbursement from the budgetary program account, and would not have to borrow from the Treasury. In this case, the loan would be estimated to have a zero asset value. 9 Reestimates for TARP are calculated using actual data through September 30, 2009, and updated projections of future activity. Thus, the full impacts of TARP reestimates are reflected in the 2010 financing account balances. Table 4–2. TROUBLED ASSET RELIEF PROGRAM CURRENT VALUE AS REFLECTED IN THE BUDGET 1 (In billions of dollars) Actual Financing Account Balances: Troubled Asset Relief Program Equity Purchase Financing Account .................... Troubled Asset Relief Program Direct Loan Financing Account ............................ Troubled Assets Insurance Financing Fund Guaranteed Loan Financing Account ...... Estimate 2009 2010 105.4 23.9 0.6 106.0 81.4 2.3 2011 90.8 90.8 2.1 2013 88.9 88.5 1.8 2014 84.1 83.1 1.7 2015 79.6 72.5 1.6 2016 2017 2018 2019 2020 74.8 38.1 1.5 65.5 25.6 1.4 54.9 10.3 1.4 29.0 8.4 1.3 13.1 0.2 1.3 Total Financing Account Balances ............................................................. 129.9 189.7 180.5 183.7 179.2 168.9 153.6 114.4 does not include financial instrument purchases under the HAMP. These instruments have no future value, and are reflected on a cash basis. 92.6 66.5 38.7 14.6 1 Table 90.8 87.6 2.1 2012 36 ANALYTICAL PERSPECTIVES Table 4–3. TROUBLED ASSET RELIEF PROGRAM FACE VALUE OF TARP OUTSTANDING 1 (In billions of dollars) Actual 2009 Estimate 2010 2011 Troubled Asset Relief Program Equity Purchases ......................................................... Troubled Asset Relief Program Direct Loans ................................................................. Troubled Assets Insurance Financing Fund Guaranteed Assets ................................... 229.6 60.5 251.4 171.0 101.0 ......... 161.1 73.1 ......... Total Face Value of TARP Outstanding ................................................................ 541.5 272.0 234.2 1 Table reflects face value of TARP outstanding direct loans, equity purchases, and assets supported by TARP guarantees as of September 30, 2009. Financial instrument purchases under the HAMP are not included. These instruments have no future value, and are reflected on a cash basis. indicating that—as of the end of 2010 – the Government is expected to hold TARP-related assets with an expected present value of $189.7 billion in future cash flows, based on risk-adjusted discount rates. The increase in value is due in large part to the TARP downward reestimate. It reflects the fact that actual performance exceeded expectations, market conditions improved, and the market risk adjustment to the discount rate was removed for actual transactions through the end of 2009. The overall balance of the financing accounts is estimated to fall in 2011, and increase in 2012 with anticipated future disbursements of TARP assistance obligated before October 3, 2010. The aggregate financing account balance is then estimated to fall in the subsequent years, as the assets and loans acquired under the TARP program are repaid or sold. TARP equity purchases are expected to reach a total value of $106.0 billion in 2010, declining thereafter as participants repurchase stock and assets are sold. The value of direct loans is expected to increase to $90.8 billion in 2012 as disbursements increase, predominantly due to the PPIP and TALF programs, then decline to $0.2 billion by 2020 as facilities are repaid and warrants and other assets are sold. The $2.3 billion value under the Asset Guarantee Program in 2010 reflects the preferred stock and warrants held by the Treasury as of the end of 2010 following termination of the guarantee on Citigroup assets. The value is expected to decline gradually, as preferred stock and warrants are sold. Table 4–3 shows the estimated face value of outstanding TARP investments at the end of each year through 2011. The decrease from 2009 through 2011 is primarily due two factors: (1) actual and expected repayments, and (2) the termination of the Citibank guarantee. The termination of the Citibank guarantee reduced the face value of overall outstanding TARP investments and guarantees by $251.4 billion. Estimate of the Deficit, Debt Held by the Public, and Gross Federal Debt, Based on the FCRA/EESA Methodology The estimates of the deficit and debt in the Budget reflect the impact of TARP as estimated under FCRA and Section 123 of EESA. The deficit estimates include the budgetary costs for each program under TARP, administrative expenses, certain indirect interest effects of credit programs, and debt service costs on Treasury borrowing to finance the program. The TARP is expected to reduce the 2010 deficit by $95.5 billion, capturing direct program costs, downward reestimates of $114.5 billion (including interest on reestimates), administrative costs, Special Inspector General for TARP activities, and other effects. The estimates of debt due to TARP include borrowing to finance both the deficit impact of TARP activity, and the requirements of non-budgetary financing accounts. These estimates are shown in Table 4–4. Debt due to TARP is $243.1 billion as of the end of 2010, and declines in later years as TARP loans are repaid and TARP equity purchases are sold or redeemed. Debt held by the public net of financial assets reflects the cumulative amount of money the Federal Government has borrowed from the public and not repaid, minus the current value of financial assets such as loan assets, private-sector securities, or equities held by the Government. While debt held by the public is a key measure for examining the impact of TARP, it provides incomplete information on the program’s effect on the Government’s financial condition. The U.S. Government holds financial assets as a result of TARP assistance, which must be offset against debt held by the public and other financial liabilities to achieve a more complete understanding of the Government’s financial condition. The specific effects of TARP on these estimates are displayed in Table 4–4. Accounting for the financial assets acquired through TARP, the impact of the program on debt net of financial assets is $53.4 billion as of the end of 2010. Under the Federal Credit Reform Act (FCRA), the financing account earns and pays interest at the same rate used to discount cash flows for the credit subsidy cost. Section 123 of EESA requires an adjustment to the discount rate for market risks. This results in subsidy costs for TARP equity purchases, direct loans, and guarantees that are higher than the net present value cost using Treasury discount rates under FCRA. Actual cash flows as of September 30, 2009 already reflect the effect of any market risks to that point, and therefore actual credit transactions with financing accounts reflect Treasury interest rates under FCRA, with no adjustment.10 Future 10 As TARP transactions wind down, the final lifetime cost estimates under the requirements of Section 123 of EESA will reflect no adjustment to the discount rate for market risks, as these risks have already been realized in the actual cash flows. Therefore, the final subsidy cost 37 4. FINANCIAL STABILIZATION EFFORTS AND THEIR BUDGETARY EFFECTS Table 4–4. TROUBLED ASSET RELIEF PROGRAM EFFECTS ON THE DEFICIT AND DEBT AS REFLECTED IN THE BUDGET 1 (In billions of dollars) Actual 2009 Estimate 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Deficit Effect: Programmatic and administrative expenses: Programmatic expenses: Equity purchases .......................................................................... Direct loans and purchases of asset-backed securities ................ Guarantees of troubled asset purchases ...................................... Home Affordable Modification Program ........................................ Reestimates of credit subsidy costs ............................................. Subtotal, programmatic expenses .......................................... Administrative expenses ...................................................................... Special Inspector General for TARP .................................................... Subtotal, programmatic & administrative expenses ...................... 115.3 31.1 36.9 0.6 –1.0 –1.4 * 11.1 ......... –114.5 151.2 –73.1 0.1 0.4 * 0.1 151.3 –72.6 0.1 0.4 ......... 10.3 ......... 10.7 0.3 0.1 11.1 ......... 0.5 ......... 9.3 ......... 9.8 0.3 0.1 10.2 ......... –* ......... 7.4 ......... 7.3 0.2 0.1 7.6 ......... 0.1 ......... 6.0 ......... 6.1 0.2 0.1 6.4 ......... * ......... 2.9 ......... 2.9 0.2 0.1 3.2 ......... * ......... 1.4 ......... 1.4 0.2 0.1 1.6 ......... ......... ......... 0.4 ......... 0.4 0.1 0.1 0.6 ......... ......... ......... * ......... * 0.1 0.1 0.1 ......... ......... ......... ......... ......... ......... * 0.1 0.1 ......... ......... ......... ......... ......... ......... * 0.1 0.1 Interest effects: Interest transactions with credit financing accounts 2 ......................... Debt service 3 ...................................................................................... Subtotal, interest effects ............................................................... –2.8 0.5 –2.3 –23.8 0.9 –22.9 –20.6 3.6 –17.0 –20.7 6.6 –14.1 –20.7 9.2 –11.6 –20.1 9.2 –10.9 –18.9 8.3 –10.5 –16.4 6.8 –9.6 –13.3 5.2 –8.1 –9.8 3.9 –5.9 –6.0 2.5 –3.5 –2.4 1.3 –1.2 Total deficit impact ............................................................................ 149.0 –95.5 –5.9 –3.9 –3.9 –4.6 –7.3 –8.0 –7.5 –5.8 –3.4 –1.1 Other TARP transactions affecting borrowing from the public — net disbursements of credit financing accounts: Troubled Asset Relief Program Equity Purchase Financing Account ......... Troubled Asset Relief Program Direct Loan Financing Account ................. Troubled Assets Insurance Financing Fund Guaranteed Loan Financing Account .................................................................................................. 105.4 23.9 0.6 57.5 –15.2 6.2 –* 3.2 –1.9 –2.3 –4.9 –5.4 –4.5 –10.7 –4.8 –34.4 –9.2 –12.5 –10.7 –15.3 –25.9 –1.9 –15.8 –8.2 0.6 1.7 –0.1 –* –0.3 –0.1 –0.1 –0.1 –0.1 –0.1 –0.1 –* Total, other transactions affecting borrowing from the public ...... 129.9 59.8 –9.2 3.2 –4.4 –10.3 –15.3 –39.3 –21.8 –26.0 –27.8 –24.1 Change in debt held by the public ................................................................ 278.9 –35.7 –15.1 –0.7 –8.4 –14.9 –22.6 –47.2 –29.3 –31.9 –31.2 –25.2 Debt held by the public .................................................................................. As a percent of GDP ................................................................................... 278.9 2.0% 243.1 1.7% 228.1 1.5% 227.4 1.4% 219.0 1.3% 204.1 1.1% 181.5 0.9% 134.2 104.93 0.7% 0.5% 73.1 0.3% 41.8 0.2% 16.6 0.1% 278.9 243.1 228.1 227.4 219.0 204.1 181.5 134.2 104.9 73.1 41.8 16.6 105.4 23.9 106.0 81.4 90.8 87.6 90.8 90.8 88.9 88.5 84.1 83.1 79.6 72.5 74.8 38.1 65.5 25.6 54.9 10.3 29.0 8.4 13.1 0.2 0.6 129.9 2.3 189.7 2.1 180.5 2.1 183.7 1.8 179.2 1.7 168.9 1.6 153.6 1.5 114.4 1.4 92.6 1.4 66.5 1.3 38.7 1.3 14.6 Debt held by the public net of financial assets: Debt held by the public ............................................................................... Less financial assets net of liabilities: Troubled Assets Relief Program Equity Purchase Financing Account Troubled Asset Relief Program Direct Loan Financing Account .......... Troubled Assets Insurance Financing Fund Guaranteed Loan Financing Account .......................................................................... Total, financial assets net of liabilities ........................................... 53.4 47.6 43.7 39.8 35.2 27.9 19.9 12.4 6.5 3.2 2.1 Debt held by the public net of financial assets ...................................... 149.0 As a percent of GDP ........................................................................... 1.0% 0.4% 0.3% 0.3% 0.2% 0.2% 0.1% 0.1% 0.1% * * * * $50 million or less (or 0.05 percent of GDP or less). 1 Table reflects the deficit effect of budgetary costs, including interest effects. 2 Projected Treasury interest transactions with credit financing accounts are based on the market-risk adjusted rates. Actual credit financing account interest transactions reflect the appropriate Treasury rates, per FCRA. 3 Includes debt service effects of all TARP transactions affecting borrowing from the public. cash flows reflect a risk-adjusted discount rate, consistent with the FCRA requirement that financing account interest be earned or paid at the same rate used to discount the cash flows. This aligns the financing account balances with the current subsidy cost reflected in the Budget. Over time, if actual transactions with the public are consistent with projections, the TARP subsidy costs for TARP transactions will equal the cost per FCRA, where the net present value reflects discounting with Treasury rates. will reflect downward reestimates to return the premium charged under the market risk-adjusted discount rate, while actual Treasury interest transactions with credit financing accounts would be lower than projections at the risk-adjusted rates. Estimate of the Current Value on a Cash Basis The value of the assets acquired through TARP does not depend on whether the costs of acquiring or purchas- 38 ANALYTICAL PERSPECTIVES Table 4–5. TROUBLED ASSET RELIEF PROGRAM EFFECTS ON THE DEFICIT AND DEBT CALCULATED ON A CASH BASIS 1 (In billions of dollars) Actual 2009 Estimate 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Deficit Effect: Programmatic and administrative expenses: Programmatic expenses: Equity purchases ................................................................. Direct loans and purchases of asset-backed securities ........... Guarantees of troubled asset purchases ............................. Home Affordable Modification Program ............................... Subtotal, programmatic expenses ................................. Administrative expenses ............................................................. Special Inspector General for TARP .......................................... Subtotal, programmatic & administrative expenses ............. Debt service 2 ............................................................................. 217.6 61.1 –0.5 * 278.3 0.1 * 278.4 0.5 –81.8 34.1 –0.5 11.1 –37.1 0.4 0.1 –36.6 0.9 –26.9 –2.0 –0.4 10.3 –19.0 0.3 0.1 –18.7 3.6 –11.3 –5.4 –0.2 9.3 –7.6 0.3 0.1 –7.3 6.6 –13.2 –11.5 –0.5 7.4 –17.8 0.2 0.1 –17.5 9.2 –16.0 –14.1 –0.3 6.0 –24.3 0.2 0.1 –24.1 9.2 –15.2 –18.7 –0.3 2.9 –31.3 0.2 0.1 –31.0 8.3 –14.8 –40.6 –0.2 1.4 –54.3 0.2 0.1 –54.1 6.8 –18.3 –16.5 –0.2 0.4 –34.6 0.1 0.1 –34.5 5.2 –18.3 –17.4 –0.2 * –35.8 0.1 0.1 –35.7 3.9 –31.0 –2.6 –0.2 ......... –33.8 * 0.1 –33.7 2.5 –17.9 –8.5 –0.2 ......... –26.5 * 0.1 –26.4 1.3 Total deficit impact ................................................................... 278.9 –35.7 –15.1 –0.7 –8.4 –14.9 –22.6 –47.2 –29.3 –31.9 –31.2 –25.2 Change in debt held by the public ....................................................... 278.9 –35.7 –15.1 –0.7 –8.4 –14.9 –22.6 –47.2 –29.3 –31.9 –31.2 –25.2 Debt held by the public ......................................................................... As a percent of GDP .......................................................................... 278.9 2.0% 243.1 1.7% 228.1 1.5% 227.4 1.4% 219.0 1.3% 204.1 1.1% 181.5 0.9% 134.2 0.7% 104.9 0.5% 73.0 0.3% 41.8 0.2% 16.6 0.1% Debt Held by the Public Net of Financial Assets: Debt held by the public ...................................................................... 278.9 243.1 228.1 227.4 219.0 204.1 181.5 134.2 104.9 73.0 41.8 16.6 105.4 23.9 106.0 81.4 90.8 87.6 90.8 90.8 88.9 88.5 84.1 83.1 79.6 72.5 74.8 38.1 65.5 25.6 54.9 10.3 29.0 8.4 13.1 0.2 0.6 129.9 2.3 189.7 2.1 180.5 2.1 183.7 1.8 179.2 1.7 168.9 1.6 153.6 1.5 114.4 1.4 92.6 1.4 66.5 1.3 38.7 1.3 14.6 6.5 * 3.2 * 2.1 * Less financial assets net of liabilities — credit financing account balances: Troubled Asset Relief Program Equity Purchase Financing Account ................................................................................. Troubled Asset Relief Program Direct Loan Financing Account . Troubled Assets Insurance Financing Fund Guaranteed Loan Financing Account ................................................................. Total, financial assets net of liabilities .................................. 149.0 53.4 47.6 43.7 39.8 35.2 27.9 19.9 12.4 Debt held by the public net of financial assets ............................. As a percent of GDP .................................................................. 1.0% 0.4% 0.3% 0.3% 0.2% 0.2% 0.1% 0.1% 0.1% * $50 million or less (or 0.05 percent of GDP or less). 1 Table reflects deficit effect of budgetary costs, substituting estimates calculated on a cash basis for estimates calculated under FCRA and Sec. 123 of EESA. 2 Includes debt service effects of all TARP transactions affecting borrowing from the public. ing the assets are recorded in the Budget on a cash basis, or a credit basis; their value would be the same either way. As noted above, the Budget records the cost of equity purchases, direct loans, and guarantees as the net present value cost to the Government, discounted at the rate required under the FCRA, and adjusted for market risks as required under Section 123 of EESA. Therefore, the net present value cost of the assets is reflected on the budgetary side, and the value of the assets is reflected in the financing accounts for equity purchases, direct loans and loan guarantees.11 If these purchases were instead presented in the budget on a cash basis, the value of assets purchased would not be reflected in the budget. Rather, the budget would reflect outlays for each disbursement (whether a purchase, a loan disbursement, or a default claim payment), and offsetting collections as cash is received from the public, with no obvious indication of 11 For the Home Affordable Modification Program, while Treasury does purchase financial instruments, these financial instruments do not result in the acquisition of an asset with potential for future returns. whether the outflows and inflows leave the Government in a better or worse financial position. Revised Estimate of the Deficit, Debt Held by the Public, and Gross Federal Debt Based on the Cash-basis Valuation Estimates of the deficit and debt with TARP transactions calculated on a cash basis are reflected in Table 4–5, for comparison to those estimates in Table 4–4 reported above, in which TARP transactions are calculated consistent with FCRA and Section 123 of EESA. If TARP transactions were reported on a cash basis, the deficit would include the full amount of government disbursements for activities such as equity purchases and direct loans, offset by cash inflows from dividend payments, redemptions, and loan repayments occurring in each year. For loan guarantees, the deficit would show fees, claim payouts, or other cash transactions associated with the guarantee as they occurred. Differences between actual 39 4. FINANCIAL STABILIZATION EFFORTS AND THEIR BUDGETARY EFFECTS and estimated performance, and updated estimates of future performance, would impact the deficit in the year that they occur, and there would be no credit reestimates. Table 4–5 shows that if TARP transactions were reported on a cash basis, TARP would reduce the deficit in 2010 by an estimated $35.7 billion, so the 2010 deficit would be $59.8 billion higher than estimated in the Budget if TARP were reflected on a cash basis. The deficit would be higher because outlays would be reported for TARP disbursements that are now included in non-budgetary financing accounts for TARP, and the portion of TARP downward reestimates attributable to better-than-expected future inflows from the public would not be recognized up front, rather, as offsetting receipts when they occur. Under this alternative approach, the impact of TARP on the debt, and on debt held net of financial assets, is the same as under FCRA with adjustments to the discount rate for market risks. Portion of the Deficit Attributable to Any Action Taken by the Secretary, and the Extent to Which the Deficit Impact is Due to a Reestimate Table 4–4 above shows the portion of the deficit attributable to actions taken by the Treasury Secretary under the authorities of TARP. The largest effects are for reestimates of TARP activity outstanding as of September 30, 2009, and reductions in the total anticipated size of TARP from $776.7 billion in TARP obligations at MSR to $546.4 billion in the 2011 Budget. The specific effects are as follows: • TARP reestimates and interest on reestimates will reduce the deficit by $114.5 billion in 2010, including $104.7 billion in reduced subsidy costs for TARP disbursements as of September 30, 2009, and $9.9 billion in interest on reestimates. Reestimate effects and changes to anticipated activity together are estimated to reduce total TARP program costs (excluding administrative expenses) by $214.2 billion from MSR. • Program costs for purchases of troubled assets including costs associated with AIG disbursements, HAMP incentive payments, and modifications of existing TARP activity (excluding reestimates) are estimated to increase the deficit by $41.4 billion in 2010. • TARP equity purchases in 2010 are expected to increase outlays by $31.1 billion due to AIG’s expected use of the capital facility, and AIFP and PPIP purchases. • New disbursements of direct loans under TARP, including the Term Asset-Backed Securities Loan Facility and future actions, are estimated to result in $1.7 billion in net outlays in 2010 through 2016, based on estimated loan disbursements. • Loan guarantees under TARP are estimated to reduce outlays on net by $1.4 billion in 2010, reflecting the termination of the guarantee and retained preferred stock. No further loan guarantee commitments are anticipated under the Asset Guarantee Program. • Outlays for the Home Affordable Modification Program are estimated at $11.1 billion in 2010. Outlays for this program are estimated to decline gradually through 2018. • Administrative expenses for the TARP program are estimated at $0.4 billion in 2010, and expected to fall as the TARP program winds down through 2020. Table 4–6. TROUBLED ASSET RELIEF PROGRAM REESTIMATES (In billions of dollars) Original Subsidy Rate Current Current Reestimated reestimate Rate amount Net lifetime reestimate TARP amount, Disbursements excluding as of interest 9/30/2009 Equity Programs: Capital Purchase Program ........................................................................................ AIG Investments ........................................................................................................ Targeted Investment Program ................................................................................... Automotive Industry Financing Program (Equity) ..................................................... Subtotal equity program reestimates .................................................................. 26.99% 82.78% 48.85% 54.52% –0.62% 62.04% –9.74% 27.58% –61.3 –9.8 –23.6 –3.6 –98.2 –56.2 –8.0 –23.3 –3.1 –90.6 204.6 43.2 40.0 12.5 300.3 Structured and Direct Loan Programs: Automotive Industry Financing Program (AIFP) ........................................................ Term-Asset Backed Securities Loan Facility 2 ........................................................... Subtotal program reestimates ............................................................................ 58.75% –104.23% 35.82% –295.89% –15.5 –0.2 –15.8 –13.4 –0.2 –13.6 63.4 0.1 63.5 –0.25% –0.85% –0.6 –0.5 301.0 Guarantee Programs: Asset Guarantee Program 1 ....................................................................................... –114.5 –104.7 664.8 Total TARP Reestimates ................................................................................... 1 Disbursement amount reflects the face value of guarantees of assets supported by the guarantee. The TARP obligation for this program was $5 billion, the maximum contingent liability while the guarantee was in force. 2 The Term-Asset Backed Securities Loan Facility 2009 subsidy rate reflects the anticipated collections for Treasury’s $20 billion commitment, as a percent of estimated lifetime disbursements of roughly $0.3 billion. 40 ANALYTICAL PERSPECTIVES • Costs for the Special Inspector General for TARP are estimated at $0.1 billion in 2010, and to remain relatively stable through 2020. billion in 2013 and 2014, and then falls to $1.3 billion in 2020. • Interest transactions with credit financing accounts include interest paid to Treasury on borrowing by the financing accounts, offset by interest paid by Treasury on the financing accounts’ uninvested balances. Although the financing accounts are nonbudgetary, Treasury payment and receipt of interest are budgetary transactions and therefore affect net outlays and the deficit. For TARP financing accounts, projected interest transactions are based on the market-risk adjusted rates used to discount the cash flows. The projected net financing account interest paid to Treasury at market risk adjusted rates is $23.8 billion in 2010 and declines over time as the financing accounts repay borrowing from Treasury through proceeds and repayments on TARP equity purchases and direct loans.12 Detailed Analysis of TARP Reestimates. The costs of outstanding TARP assistance are reestimated annually by updating cash flows for actual experience and new assumptions, and adjusting for any changes by either recording additional subsidy costs (an upward reestimate) or by reducing subsidy costs (a downward reestimate). The reestimated dollar amounts reflect TARP disbursements through September 30, 2009, while subsidy rates reflect anticipated future disbursements. As noted above, the total decrease in the deficit attributable to TARP reestimates in 2010 is $114.5 billion, reflecting $104.7 billion downward reestimate of the subsidy cost, plus $9.9 billion in interest on the reestimates. Detailed information on downward reestimates is reflected in Table 4–6. The subsidy cost for outstanding TARP equity is estimated to be $98.2 billion lower than originally estimated. The majority of reduced subsidy costs reflects significant repayments of CPP and TIP by financial institutions in 2009 and early 2010, resulting in a positive return and a lower subsidy rate, where the original subsidy rate assumed there would be slower payments and higher risks. Reduced subsidy costs for AIG investments and AIFP Equity are due to improved market conditions and future The full impact of TARP on the deficit includes the cost of Treasury borrowing from the public—debt service—for the higher outlays listed above. Debt service reaches $9.2 12 Actual TARP financing account interest for 2010 will reflect Treasury rates with no risk adjustment, as the effects of market risks would already be realized on actual cash flows. Table 4–7. DETAILED TARP PROGRAM LEVELS AND COSTS (In billions of dollars) MSR Program 2011 President’s Budget Estimated TARP Estimated TARP Cumulative Cumulative Obligations Subsidy Costs Obligations Subsidy Costs Equity Purchases Capital Purchase Program .......................................................................... AIG Investments .......................................................................................... Targeted Investment Program ..................................................................... Automotive Industry Financing Program (AIFP) .......................................... Other Equity Programs ................................................................................ Public-Private Investment Program - Equity ................................................ Sub-Total Equity Purchases ............................................................... 218.0 69.8 40.0 5.0 50.9 N/A 383.7 60.6 57.8 19.5 3.2 17.0 N/A 158.1 208.0 69.8 40.0 16.3 N/A 10.0 344.1 1.4 49.9 –3.7 6.3 N/A 2.0 55.9 Structured & direct loans and asset-backed security purchases Automotive Industry Financing Program (AIFP) .......................................... Term Asset-Backed Securities Loan Facility (TALF) 1 ................................. Other Loans ................................................................................................. Public-Private Investment Program - Debt .................................................. Other Section 101 ....................................................................................... Sub-Total Structured & Direct Loans and ABS purchases .................. 70.1 20.0 240.4 N/A N/A 330.5 54.5 –1.4 80.5 N/A N/A 133.6 68.6 20.0 N/A 20.0 40.0 148.6 24.5 –0.5 N/A –1.7 2.7 25.0 Guarantees of troubled asset purchases Asset Guarantee Program .......................................................................... Non-Add Asset Guarantee Program Face Value ......................................... Sub-Total Asset Guarantee Program ................................................... 12.5 419.0 12.5 –0.8 5.0 301.0 5.0 –3.0 –0.8 –3.0 Non-Credit Programs Home Affordable Modification Program (HAMP) ......................................... 50.0 50.0 48.8 48.8 Totals ...................................................................................................... 776.7 340.9 546.4 126.7 Memorandum: 340.9 Deficit impact before administrative costs and interest effects 2 ............. 1 Formerly called the Consumer Business Lending Initiative (CBLI), which included the Small Business 7(a) program for the 2010 MSR. 2 The 2011 Budget total deficit impact includes downward interest on reestimates of $9.9 billion. 116.8 41 4. FINANCIAL STABILIZATION EFFORTS AND THEIR BUDGETARY EFFECTS performance expectations. The initial $20 billion TALF facility is estimated to generate a return of $0.5 billion to the Treasury, due to both lower anticipated loans from the Treasury to the SPV to purchase troubled assets, and improved performance and fees on the facility as a whole. Fees are collected on the total TALF program and not just Treasury purchases. The subsidy rate for TALF is based on disbursements, and the Treasury only expects to purchase a small amount of the total $20 billion commitment but collects fees on the full TALF facility. The reestimated rate declined dramatically, as TALF anticipates fewer default purchases, and income is anticipated to remain strong. The Asset Guarantee program downward reestimate reflects the termination of the guarantee of up to $5 billion in losses on Citigroup assets, which had an initial face value of $301 billion in total guaranteed assets. No losses were paid through the program, and the transactions resulted in fees in the form of preferred stock. Differences Between Current and Previous OMB Estimates Table 4–7 above shows a total TARP deficit impact of $116.8 billion as reflected in the Budget, a reduction of $224.1 billion from the MSR projection of $340.9 billion. The deficit impact differs from the subsidy cost of $126.7 billion because the deficit impact reflects a $9.9 billion downward interest adjustment, accounting for the time between when the subsidy cost was originally estimated and the time when the reestimate is booked. The subsidy cost of $126.7 billion reflects the estimated present value cost of the program from the date TARP obligations originate. The significant reduction in total TARP cost is primarily being driven by two factors: 1) a reduction in TARP obligations resulting from fewer anticipated TARP purchases, and 2) lower subsidy costs on TARP obligations due to better than expected actual performance in some programs, and improved market conditions. As part of the December 9, 2009, announcement to extend TARP to October 3, 2010, the Treasury Secretary indicated that in light of the financial market recovery he does not expect to deploy more than $560 billion in total TARP related activity. The Budget reflects $546.4 billion in total TARP obligations, a reduction of $230.3 billion from MSR ($776.7 billion). $181.9 billion of the reduction is reflected in the structured and direct loans and assetbacked security purchases portfolio, primarily from the “Other Loans” placeholder amounts assumed for MSR. Estimated obligations in the equity purchases portfolio also decreased by $39.6 billion from MSR projections. The financial and credit markets have rebounded since the height of the economic crises, and as a result the Government’s outlook of TARP cost has improved. The Budget includes reestimated subsidy rates for each program based on actual market data since TARP’s inception. Higher than expected bank prepayments were incorporated into the subsidy reestimates. As of December 31, 2009, banks have repaid $162 billion in TARP funds provided to them, and the Treasury expects total bank repayments to exceed $185 billion by the end of 2010. As noted above, the cost of outstanding TARP programs disbursed as of September 30, 2009 is $104.7 billion lower than estimated in the MSR. Separately, the subsidy rate for several programs changed from a placeholder rate of 100 percent in the MSR to an actual rate used for program execution. Differences Between OMB and CBO Estimates Table 4–8 shows a comparison of the subsidy rates reflected in the Budget for TARP and the rates estimated by CBO in June 2009. 13 13 United States. Cong. Budget Office. The Troubled Asset Relief Program: Report on Transactions through June 17, 2009. Washington: CBO, 2009. http://www.cbo.gov/doc.cfm?index=10056 Table 4–8. COMPARISON OF OMB AND CBO TARP COSTS Risk-Adjusted Subsidy Rates CBO Rate 1 Capital Purchase Program ..................................................................................... Targeted Investment Program ................................................................................ AIG Assistance ....................................................................................................... Automotive Industry Financing Program ................................................................. Term Asset-Backed Securities Loan Facility 3 ........................................................ Asset Guarantee Program ...................................................................................... Other Programs (unidentified programs, PPIP, Small Business) 4 .......................... Home Affordable Modification Program 5 ............................................................... 18% 10% 50% 73% 10% 64% N/A 100% OMB Rate 2 2010 MSR 28% 49% 83% 77% –7% –0% 33% 100% 2011 Budget –1% –10% 62% 31% –1% –1% 3% 100% 36% 44% 21% Weighted average rate .................................................................................... from the Congressional Budget Office as published in “The Troubled Asset Relief Program: Report on Transactions Through June 17, 2009”, available here: http://www.cbo.gov/ftpdocs/100xx/doc10056/06–29-TARP.pdf 2 OMB subsidy rates reflect weighted average subsidy rates for several categories. OMB subsidy rates for the 2011 Budget in this table reflect the impact of reestimates. 3 The subsidy rate for the Term Asset-Backed Securities Loan Facility is expressed above as the percent of total expected obligations, for comparability. Please see Table 4–6 above for the subsidy rate. 4 The rate for “Other Programs” reflects a weighted average subsidy rate for unidentified programs, PPIP (Debt and Equity Purchases) and Small Business programs. CBO did not estimate a subsidy rate for these programs in its June report. 5 The HAMP transactions do not involve assets with value, and therefore are reflected on a cash basis. Cost is reflected above as a 100 percent subsidy rate. 1 Rates 42 ANALYTICAL PERSPECTIVES The main differences between OMB and CBO estimates are due to the different times at which the estimates were made. The rates estimated by CBO were released on June 17, 2009; the rates estimated for the MSR were developed at various times through June 30, 2009; and the rates estimated for the Budget were developed at various times through December 31, 2009. As discussed above in the section on differences between current and previous OMB estimates, subsidy costs have been reduced as market conditions have continued to improve. For the CPP, for example, the lower subsidy rate estimated in the Budget reflects both lower-than-expected losses on these investments and faster repayments than initially predicted. Several TARP investments have now yielded or are estimated to yield a positive return. CBO released an update to its Budget and Economic Outlook in August 200914 showing a total projected cost of $241 billion, based on an estimated lifetime TARP activity level of roughly $600 billion. OMB MSR estimates reflected total TARP activity level of $777 billion, and programmatic costs of $341 billion. The Budget reflects current estimates of roughly $550 billion in program level, and $127 billion in programmatic costs, including reestimates. TARP Oversight and Accountability Ensuring effective internal controls and monitoring of TARP programs and funds to protect taxpayer investments remains a top priority of TARP program staff and those offices charged with TARP oversight and accountability. The Treasury has implemented a comprehensive set of assessments geared toward identifying risks, evaluating their potential impact, and prioritizing resource assignments to manage risks based on a combined top-down and bottom-up assessment of risk. The Internal Control Department within the Office of Financial Stability (OFS) utilizes the assessments to ensure appropriate coverage of high-impact areas. A Senior Assessment Team and the Internal Control Program Office guide OFS efforts to meet all applicable requirements for a sound system of internal controls, and to review and respond to all recommendations made by the three TARP oversight bodies—the Special Inspector General for TARP (SIGTARP), the Government Accountability Office (GAO), and the Congressional Oversight Panel. The soundness of Treasury’s TARP compliance monitoring, internal control, and risk management policies and processes are reflected in the clean opinion issued by GAO after its audit of TARP financial statements for 2009. The Treasury has issued regulations governing executive compensation and conflicts of interest related to TARP program administration and participation. Compliance with these rules is monitored on an ongoing basis, and reviews of participant conduct and program administration are conducted as appropriate. In executing its responsibility for monitoring compliance with executive com14 United States. Cong. Budget Office. The Budget and Economic Outlook: An Update. Washington: CBO, 2009. http://cbo.gov/ftpdocs/105xx/ doc10521/08-25-BudgetUpdate.pdf pensation requirements, the Treasury has also created an Office of the Special Master for TARP to review TARP participant compliance with applicable legal and regulatory authority, and to recommend action to the Secretary when compensation is found to be awarded in a manner or amount deemed contrary to the public interest. Special Inspector General for TARP (SIGTARP). In 2009, SIGTARP issued four comprehensive reports explaining and evaluating each TARP program implemented and announced, and recommending changes to increase transparency and to decrease the potential for fraud, waste, and abuse. SIGTARP has worked extensively with the Treasury, OFS, and the Federal Reserve concerning TARP program design and has made 41 recommendations to improve internal controls and fraud prevention in TARP programs before they launch; 75 percent of those recommendations have been implemented. Evaluating programs in progress, SIGTARP has initiated 18 audits, and has issued reports on seven topics, including CPP participant selection and use of funds and executive compensation. In an effort to root out misuse of TARP funds and noncompliance with program terms, SIGTARP has received and analyzed over 9,500 hotline contacts, has organized a task force to identify vulnerabilities in the TALF and PPIP programs, and has opened over 75 civil and criminal investigations. SIGTARP will continue to work with the Administration, the Congressional Oversight Panel and GAO to oversee TARP program administration and participation until the last outstanding TARP investments have been completely resolved. Financial Reform In June 2009, the Administration submitted a comprehensive financial reform proposal to Congress designed to help prevent future financial crises by filling gaps in the U.S. regulatory regime and redistributing responsibilities among regulators in order to better focus on key issues that contributed to the present crisis. The Administration’s proposal employs lessons learned from the present crisis to reform and repair financial regulation on a number of fronts: First, the proposal prevents future bailout scenarios for “Too Big to Fail” firms by creating a new Financial Services Oversight Council to monitor for threats to financial stability and by authorizing the Federal Reserve to regulate large, interconnected firms if their failure during a downturn would severely impact the functioning of financial markets. In addition, the Government would have the ability to unwind such firms in an orderly manner when they fail to protect the financial system. Second, the proposal closes the gaps in and strengthens regulation of consumer financial products in the bank and non-bank sectors by consolidating existing consumer protection authorities to better protect consumers from unscrupulous practices—authorities that are currently spread out over seven regulators. The proposal creates a single, new regulator, the Consumer Financial Protection Agency, whose sole mission is to look out for consum- 43 4. FINANCIAL STABILIZATION EFFORTS AND THEIR BUDGETARY EFFECTS Chart 4-1. Proposed Federal Financial Reforms Non-Bank Resolution Authority No existing regulator No existing regulator Proposed System Current System Financial Stability Monitoring W NE Financial Services Oversight Council Consumer Financial Protection Functions Bank Supervision W W NE NE Consumer Financial Protection Agency ers in the increasingly complex financial marketplace. Consolidation of authorities in an agency with mission focus on consumer protection will create clear accountability for providing and consistently enforcing clear rules of the road for firms offering consumer financial services. Third, the proposal shines a light on dark pools of capital and derivatives markets, by expanding the authority of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), respectively, to register and regulate hedge funds and to require central clearing for over-the-counter derivatives. Fourth, the proposal creates a new Office of National Insurance within the Treasury Department to gather information, develop expertise, negotiate international agreements, and coordinate policy in the insurance sector. Better monitoring will help prevent the kind of intervention that AIG’s failure required to preserve financial stability. Securities and Derivitives Regulation National Bank Supervisor Fifth, to prevent depository institutions from selecting a corporate structure based on their preference for a particular regulator, the proposal consolidates the Office of the Comptroller of the Currency and the Office of Thrift Supervision into a single, unified National Bank Supervisor, applying the same standards of supervision to lending institutions that perform the same functions, regardless of how they choose to organize themselves. Finally, in an effort to further strengthen and provide consistent regulation while promoting growth and innovation in the marketplace, the Administration’s proposal includes numerous other reform measures. These measures include, but are not limited to, strengthening important payment, clearing, and settlement systems, enhancing credit rating agency regulation, and increasing investor protections. The House of Representatives passed a comprehensive financial reform package in December 2009, and 44 the Senate is expected to consider legislation in 2010. Because Congress has not yet completed its work on these historic and urgent reforms, this Budget reflects the Administration’s proposal. Specifically, some of the functions performed by staff for the Financial Services Oversight Council and the Office of National Insurance are authorized under current authorities, and the costs are reflected directly in the Budget. In other areas where specific new resources are not needed, such as in the case of the Federal Reserve’s actions on executive compensation, mortgage lending, and credit card regulation, administrative reform is underway but not specifically reflected in the Budget. The remaining reforms, which are subject to enactment of a financial reform bill, are currently included as a single amount in the Appendix, reflecting the net impact of proposed efficiency savings, transfers, and new spending. The amounts include a budgetary placeholder for new spending and receipts from the non-bank resolution authority. Specific programmatic impacts on SEC and CFTC are discussed in each regulator’s Appendix narrative. Chart 4-1 illustrates the Administration’s proposed changes to the U.S. financial regulatory structure. In the areas of financial stability oversight and the resolution of non-banks, the Administration has proposed new authorities that do not exist under the current regulatory structure. In consumer financial ANALYTICAL PERSPECTIVES protection and bank supervision, portions of the current authorities of multiple regulators is consolidated into fewer or a single regulator, in order to better focus Federal oversight in those areas. For securities and derivatives regulation, existing authorities have been enhanced. The overall result is a comprehensive system that addresses identified gaps in the system of U.S. financial regulation. International Financial Reform. The current financial crisis from which the Nation is emerging was an international event not limited to U.S. markets, corporations, and consumers. In addition to its demonstrated commitment to achieving meaningful financial reform at home, the Treasury Department continues to ensure coordination of financial reform principles across the globe. At the G–20 summit in October 2009, Secretary Geithner worked with other world leaders to establish a framework of core reform principles applicable to all member nations. The G–20 also produced a timeline for implementing the global reform agenda, which will be reviewed when the group reconvenes in spring 2010. The Treasury Department’s coordination with its international counterparts will help ensure that standards are raised across the globe and not just in the United States, so that dangerous and irresponsible practices by foreign firms do not threaten domestic financial markets. 5. LONG TERM BUDGET OUTLOOK The horizon for most numbers in this budget is 10 years. In particular, the account-level estimates in the 2011 Budget extend to 2020. This 10-year horizon reflects a balance between the importance of considering both the current and future implications of budget decisions made today and a practical limit on the construction of detailed budget projections for years in the future. Nonetheless, many decisions made today will have important repercussions beyond the 10-year horizon, and it is important to anticipate what future budgetary requirements beyond the 10-year horizon might flow from current laws and policies despite the uncertainty surrounding the assumptions needed for such estimates. Long-run budget projections can be useful in drawing attention to potential problems. Imbalances that may be manageable in the 10-year time frame can become unmanageable if allowed to grow. To this end, the budget projections in this chapter extend the policies proposed in the 2011 Budget for 75 years. Because of the uncertainties involved in making long-run projections, results are presented for a base case and for several alternative scenarios. Although the Budget offers major initiatives in many areas, the Administration recognizes that not all of the policy initiatives needed to stabilize the country’s longrun fiscal situation have been formulated. The projections in this chapter reflect the fact that until these reforms are enacted, simply extending current laws and policies leaves the budget in an unsustainable position. Reforms are needed to make sure that programs like Medicare Part A and Social Security, which are expected to be financed from dedicated revenue sources, remain self-sustaining, and that overall budgetary resources are large enough to support future spending. One of the reasons why the Administration made health care reform a first-year priority is that there is no way to achieve longrun fiscal sustainability without slowing the growth rate of health expenditures. The Administration intends to work with Congress to develop additional policies that will prevent the outcomes shown in many of the charts below from occurring. The key drivers of the long-range deficit are the Government’s major health and retirement programs: Medicare, Medicaid and Social Security. • Medicare finances health insurance for most of the Nation’s seniors and many individuals with disabilities. Medicare’s growth has exceeded that of other Federal spending for decades tracking the rapid growth in overall health care costs. • Medicaid provides medical assistance, including acute and long-term care, to low-income persons including families with dependent children as well as aged, blind or disabled individuals. It has grown more rapidly than the economy for several decades. • Social Security provides retirement benefits, disability benefits, and survivors’ insurance for the Nation’s workers. Outlays for Social Security benefits will begin to exceed its dedicated revenue stream over the next quarter century putting pressure on the overall budget. Long-range projections for Social Security and Medicare have been prepared for decades, and the actuaries at the Centers for Medicare and Medicaid Services plan to produce such projections for Medicaid in the near future. Budget projections for individual programs, however, even important ones such as Medicare and Social Security, cannot reveal the Government’s overall budgetary position, which is why the projections in this chapter offer a useful complement to the long-run projections for the individual programs. Future budget outcomes depend on a host of unknowns—changing economic conditions, unforeseen international developments, unexpected demographic shifts, the unpredictable forces of technological advance, and evolving political preferences to name a few. These uncertainties make even short-run budget forecasting quite difficult, and the uncertainties increase the further into the future projections are extended. While uncertainty makes forecast accuracy difficult to achieve, it does not detract from the importance of long-run budget projections, because future problems are often best addressed in the present. A full treatment of all the relevant risks is beyond the scope of this chapter, but the chapter does show how long-run budget projections respond to changes in some of key economic and demographic assumptions. An Unsustainable Path The deficit is projected to fall from its recent peak levels as the economy recovers from the recession and the worldwide financial crisis eases. By the end of the 10-year budget window, the deficit has returned to a lower level, and the debt held by the public is no longer rising rapidly relative to GDP. However, the fiscal position is not sustainable in the long run without further policy changes. Beyond the 10-year budget window, increasing health costs and population aging will place the budget on an unsustainable course unless policy changes are made to address these challenges. Medicare and Medicaid have grown faster than the economy for decades, and if they continue to do so their growth will exert tremendous pressures on the budget. Additionally, the first members of the huge generation born after World War II, the so-called baby boomers, reached age 62 in 2008 and became eligible 45 46 ANALYTICAL PERSPECTIVES for Social Security retirement benefits. In 2011, they will turn 65 and become eligible for Medicare. In the years that follow, the elderly population will steadily increase, putting serious strains on the budget. Sources of Increased Spending for Medicare, Medicaid, and Social Security.—The most important single factor driving the long-run budget outlook is the growth of health care expenditures. For decades, health care spending has outpaced the growth in total output (detailed national health expenditure data extend back to 1960). This excess cost growth must eventually be addressed if the budget is to reach a sustainable long-run position. The Administration’s approach to health care reform has focused on bringing these costs under control. In the long-run projections in this chapter, different assumptions about the growth rate of health care costs are made. In the base case, a continuation of the historical trend would see the per beneficiary cost of health care spending for Medicare, Medicaid, and private health care rising 2 percent per year faster than GDP per capita. The alternatives assume that the historical trend of rising costs is reduced. The health care legislation being considered in Congress is designed to be deficit neutral (or better) over the next 10 years based on hard, scoreable savings and to slow the growth rate of health care spending over the longer term. There are three broad reforms in the legislation under consideration in Congress that experts believe will produce significant savings relative to the historical trend: an excise tax on the highest-cost insurance plans will encourage substitution of more efficient plans with lower costs, while raising take-home pay; an independent payment advisory board will be empowered to suggest changes in Medicare and the health care system to improve the quality and value of its services; and an array of other delivery system reforms will gradu- ally reduce costs. With 10-year deficit neutrality and the other three components in place, it is reasonable to expect a break in the trend of future health care costs, but the baseline does not include these savings because the final form of the legislation was not resolved in time for the Administration to produce detailed estimates of its longrun effects. Of the many possible alternative projections, two are chosen here for examination. The first alternative is consistent with the projections made by the Medicare actuaries in the 2009 Trustees’ Report, which assumes that health care costs will gradually stabilize as a share of GDP over the next 75 years. The actuaries base this conclusion on a stylized model that makes assumptions about (i) continuing improvements in medical technology, (ii) the extent to which new technology raises or lowers health care costs, and (iii) society’s preferences for health care compared with other goods and services. It is more likely this stabilization will occur with the passage of health reform. In the actuaries’ projections, health care costs grow rapidly over the next 25 years, as excess cost growth is assumed to be 1.4 percent per year in 2033. By 2083, it has slowed to less than 0.2 percent per year. The average excess cost growth over the entire 75-year projection period is 1 percent per year. The second alternative assumes more savings will be generated by health reform. More effective cost discipline over the long run could lower excess cost growth on average to 0.5 percent per year, a reduction of 1-1/2 percentage points compared with the historical trend. This still allows for some increase in medical costs relative to GDP, which seems likely given the value people place on good health and increased lifespans, but with such a large reduction in the trend, the problems connected with rising costs would become much more manageable. Chart 5-1. Sources of Projected Growth in Medicare, Medicaid, and Social Security Spending on Medicare, Medicaid, and Social Security as a Percent of GDP 40 35 30 25 20 Effect of Excess Health Cost Growth 15 Effect of Aging Population 10 5 1980 1993 2006 2019 2032 2045 2058 2071 2084 47 5. LONG TERM BUDGET OUTLOOK Population aging also poses a serious long-run budgetary challenge. Because of lower expected fertility and improved longevity, the Social Security actuaries project that the ratio of workers to Social Security beneficiaries will fall from around 3.3 currently to a little over 2 by the time most of the baby boomers have retired. From that point forward, the ratio of workers to beneficiaries is expected to continue to decline slowly. With fewer workers to pay the taxes needed to support the retired population, budgetary pressures will steadily mount without reforms. Chart 5-1 decomposes the projected growth in Medicare, Medicaid, and Social Security into the portion due to health costs per beneficiary growing faster than GDP per capita and the portion due to population aging. The projections are based on the Budget for the first 10 years and then the historical rate of excess health cost growth for years after 2020. For the next 20 years both increasing numbers of beneficiaries and rapid health cost growth contribute to the increase in the share of GDP devoted to these programs, but after 2030 health cost growth is the primary driver of spending growth. Long-Run Budget Projections.—In 2009, the three major entitlement programs—Medicare, Medicaid, and Social Security—accounted for 41 percent of non-interest Federal spending, up from 30 percent in 1980. By 2030, when the surviving baby boomers will all be 65 or older, these three programs could account for 60 percent of noninterest Federal spending unless there is a break in the trend of health care costs or other major reforms to the programs. At the end of the projection period, in 2085, the figure could rise to nearly 80 percent of non-interest spending, again assuming current trends were to continue. In other words without reforms, most of the budget, aside from interest, would go to these three programs alone. That would severely reduce the flexibility of the budget, and the Government’s ability to respond to new challenges. The overall budget cannot sustain the projected increase in these major programs indefinitely. The bud- get projections shown in Table 5–1 illustrate that point. Without further adjustments to spending and revenue in the current decade and changes in entitlement programs in the longer term, the deficit will rise steadily relative to the overall economy during coming decades. These rising deficits would drive publicly held Federal debt as a ratio to GDP to levels well above its previous peak level reached at the end of World War II. Timely reforms, especially those that would lower the trend of health care costs, are needed to avoid such a development. The policies included in current health care legislation are important steps in this direction, though achieving fiscal sustainability will require both effective implementation of these policies and additional policy changes in the future. The Administration aims to work with Congress so that the ratio of debt-to-GDP stabilizes at an acceptable level once the economy has recovered. Revenues.—Projected revenues in these long-run budget projections start with the estimated receipts under the Administration’s proposals in the 2011 Budget. In the absence of further policy changes, the ratio of taxes to GDP is projected to remain roughly constant over most of the period from 2020 to 2085. The tax code is indexed for inflation, but not for increases in real income, so there is a tendency for individual income taxes to increase relative to incomes when real incomes are rising. With rising real incomes, a larger percentage of taxpayers will be in higher tax brackets and this will raise the ratio of taxes to GDP. Offsetting this trend is the decline in taxable wages as a share of overall compensation. Fringe benefits, especially private health insurance, have grown faster than overall compensation for decades, and, unless there are major cost saving reforms to private health insurance, that trend is projected to continue. The result is that the higher average marginal tax rates that result from rising real incomes apply to a declining share of total income. The projections assume that the Alternative Minimum Tax (AMT) will be effectively indexed, so the AMT does not raise the ratio of receipts to GDP. Some Federal tax- Table 5–1. LONG-RUN BUDGET PROJECTIONS (Receipts, Outlays, Surplus or Deficit, and Debt as a Percent of GDP) 1980 Receipts ............................................................................................. 19.0 1990 18.0 2000 20.6 2010 14.8 2020 19.6 2030 19.8 2050 20.0 2060 19.9 2085 18.7 Outlays: Discretionary ............................................................................. 10.1 8.7 6.3 9.6 6.2 6.1 6.1 6.1 6.1 Mandatory: Social Security .................................................................... 4.3 4.3 4.1 4.9 5.0 5.6 5.4 5.3 5.1 Medicare ............................................................................. 1.1 1.7 2.0 3.1 4.0 5.3 9.6 11.9 22.0 Medicaid ............................................................................. 0.5 0.7 1.2 1.9 2.0 2.4 3.5 4.1 6.6 Other ................................................................................... 3.7 3.2 2.4 4.7 3.1 2.8 2.6 2.6 3.1 Subtotal, mandatory ..................................................... 9.6 9.9 9.7 14.5 14.1 16.1 21.1 24.0 36.9 Net Interest ................................................................................ 1.9 3.2 2.3 1.3 3.5 4.5 10.0 14.8 38.0 Total outlays ........................................................................ 21.7 21.9 18.2 25.4 23.7 26.8 37.2 44.9 81.0 Surplus or Deficit (–) .......................................................................... –2.7 –3.9 2.4 –10.6 –4.2 –6.9 –17.1 –25.0 –62.3 Primary Surplus or Deficit (–) ............................................................ –0.8 –0.6 4.7 –9.4 –0.7 –2.4 –7.2 –10.2 –24.3 Federal Debt Held by the Public ........................................................ 26.1 42.1 34.7 63.6 77.2 98.8 218.1 323.7 829.7 Note: The figures shown in this table for 2030 and beyond are the product of a long-range forecasting model maintained by the Office of Management and Budget. This model is separate from the models and capabilities that produce detailed programmatic estimates in the Budget. It was designed to produce long-range forecasts based on additional assumptions regarding growth of the economy, the long-range evolution of specific programs, and the demographic and economic forces affecting those programs. The model, its assumptions, and sensitivity testing of those assumptions are presented in this chapter. 48 ANALYTICAL PERSPECTIVES Chart 5-2. Health Care Cost Alternatives Surplus(-)/Deficit(+) as a percent of GDP 70 2011 Budget Policy Extended 50 Actuaries' Health Cost Assumptions 30 10 -10 2000 Lower Average Growth 2012 2024 2036 es tend to decline in real terms in the absence of policy changes. For example, many excise taxes are set in nominal terms, so collections decline as a share of GDP when there is inflation. But such taxes are a relatively small fraction of total revenue. Income taxes and payroll taxes account for most of Federal revenue. Discretionary Outlays.— Because discretionary spending is determined annually through the legislative process, there is no simple natural assumption for projecting its future path. The budget provides a specific path for discretionary spending over the next 10 years. Beyond that time frame, there are several different plausible assumptions for the path of future discretionary spending. One possibility would be to assume that discretionary spending will be held constant in inflation adjusted terms. That would allow discretionary programs to increase with wage costs and other prices, but would not allow the programs to expand with population or real growth in the economy. Extending this assumption over many decades is not realistic. When the population and economy grow, as assumed in these projections, the demand for public services is likely to expand as well. The current base projection, therefore, assumes that discretionary spending keeps pace with the growth in GDP in the long run, so that spending increases in inflation-adjusted terms whenever there is real economic growth. This chapter also shows outcomes under alternative assumptions. Table 5-1 shows how the budget would evolve without further changes in policy under the base assumptions described above. The key assumption is the continued excess health care cost growth of around 2 percent per year, which dramatically increases the share of the budget devoted to Medicare and Medicaid. Other parts of the budget show much less growth. Social Security benefits 2048 2060 2072 2084 rise relative to the economy over the next 25 years, but beyond that point decline slightly as slower wage growth, the result of rapid health care cost growth, reduces future benefit payments. Other mandatory programs do not increase relative to the size of the economy, and discretionary programs are held to a constant share of GDP by assumption. On the revenue side, once tax revenues recover from the economic downturn, there is little change in revenues relative to GDP through 2060, as the forces pushing up taxes are roughly balanced by those limiting their growth. After 2060, the continuing rise in health costs lowers taxable incomes sufficiently to reduce total revenues relative to GDP. With total outlays increasing much more rapidly than taxes, the deficit rises, and publicly held debt greatly exceeds historical levels. Alternative Policy, Economic, and Technical Assumptions The quantitative results discussed above are sensitive to changes in underlying policy, economic, and technical assumptions. Some of the most important of these assumptions and their effects on the budget outlook are discussed below. Increasing deficits result for most plausible projections of the long run trends. Health Spending.—The base projections for Medicare and Medicaid over the next 75 years assume an extension of historical trends in health care spending. On average, Medicare and Medicaid costs per beneficiary have risen about 2 percent faster than GDP per capita since the programs were established in the 1960s. Continuing this trend would push costs steadily higher and is one of the main reasons the long-run projections show an unsustainable fiscal path. 49 5. LONG TERM BUDGET OUTLOOK Chart 5-3. Alternative Discretionary Projections Surplus(-)/Deficit(+) as a percent of GDP 70 60 2011 Budget Policy Extended 50 Growth with Population and Inflation 40 30 20 Nondefense Discretionary with Population and Inflation, Defense with Inflation Only 10 0 -10 2000 2012 2024 2036 Chart 5-2 shows budget outcomes under the base assumptions and under two other scenarios. In the first, per capita health care costs grow at the rates assumed in the 2009 Medicare Trustees’ Report. Specifically, this alternative assumes that the excess growth of health care costs above growth in GDP per capita growth averages about 1 percent per year for the next 75 years, falling from the historical value of over 2.0 percent to 1.4 percent in 2033 and to about 0.2 percent per year in 2083. In the second 2048 2060 2072 2084 scenario, excess cost growth is reduced to 0.5 percent per year on average over the next 75 years. Discretionary Spending.— The current base projection for discretionary spending assumes that after 2020, discretionary spending keeps pace with the growth in GDP (see Chart 5-3). An alternative assumption would be to allow discretionary spending to increase for inflation and population growth only. In this case, discretionary spending would remain constant in inflation adjusted per Chart 5-4. Alternative Revenue Projections Surplus(-)/Deficit(+) as a percent of GDP 80 70 Two Percent of GDP Lower Taxes 60 50 2011 Budget Policy Extended 40 30 20 10 Two Percent of GDP Higher Taxes 0 -10 2000 2012 2024 2036 2048 2060 2072 2084 50 ANALYTICAL PERSPECTIVES Chart 5-5. Alternative Productivity Assumptions Surplus(-)/Deficit(+) as a percent of GDP 90 80 Lower Productivity Growth 70 60 50 2011 Budget Policy Extended 40 30 20 Higher Productivity Growth 10 0 -10 2000 2012 2024 2036 capita terms. Yet another possible assumption is to allow nondefense discretionary spending to grow with inflation plus population, but to increase defense spending only for inflation. Alternative Revenue Projections.— In the base projection, tax receipts are roughly stable relative to GDP from 2020 through 2060, before declining thereafter. Chart 5-4 shows alternative receipts assumptions. Allowing receipts to rise over time by 2 percentage points 2048 2060 2072 2084 of GDP more than in the base case would lower the longrun budget deficit, but not by enough to establish a sustainable path for future policy. Reducing taxes by 2 percentage points of GDP would bring the projected rise in the deficit and the publicly held debt forward in time. Productivity.—The rate of future productivity growth has a major effect on the long-run budget outlook (see Chart 5-5). It is also highly uncertain. Over the next few decades, an increase in productivity growth Chart 5-6. Alternative Fertility Assumptions Surplus(-)/Deficit(+) as a percent of GDP 80 70 Lower Fertility 60 50 2011 Budget Policy Extended 40 30 Higher Fertility 20 10 0 -10 2000 2012 2024 2036 2048 2060 2072 2084 51 5. LONG TERM BUDGET OUTLOOK would reduce projected budget deficits. Higher productivity growth adds directly to the growth of the major tax bases, while it has a smaller immediate effect on outlay growth even assuming that discretionary spending rises with GDP. For much of the last century, output per hour in nonfarm business grew at an average rate of around 2-1/4 percent per year. Growth was not always steady. In the 25 years following 1948, productivity grew at an average rate of 2.7 percent per year, but this was followed by a period of much slower growth. From 1973 to 1995, output per hour in nonfarm business grew at an average annual rate of just 1.4 percent per year. In the latter half of the 1990s, however, the rate of productivity growth increased again and it has remained higher albeit with some fluctuations since then. Indeed, the average growth rate of productivity in nonfarm business has averaged 2.7 percent per year since the fourth quarter of 1995, the same as the average growth rate in the earlier postwar period. The base projections assume that output per hour in nonfarm business will increase at an average annual rate of around 2.3 percent per year, close to its long-run average and slightly below its average growth since 1995. This implies that real GDP per hour worked will grow at an average annual rate of 2.0 percent per year. The difference is accounted for by the fact that the sectors of the economy that are counted in GDP outside of the nonfarm business sector tend to have lower productivity growth than nonfarm business does. The alternatives highlight the effect of raising and lowering the projected productivity growth rate by 1/2 percentage point. Population.—The key assumptions for projecting long-run demographic developments are fertility, immigration, and mortality. • The demographic projections assume that fertility will average about 2.0 total lifetime births per woman in the future, just slightly below the replacement rate needed to maintain a constant population in the absence of immigration—2.1 births per woman (see Chart 5-6). The alternatives are those in the latest Social Security trustees’ report (1.7 and 2.3 births per woman). • The rate of immigration is assumed to average around 1 million immigrants per year in these projections (see Chart 5-7). Higher immigration relieves some of the downward pressure on population growth from low fertility and allows total population to expand throughout the projection period, although at a much slower rate than has prevailed historically. The alternatives are taken from the Social Security Trustees’ Report (1.3 million total immigrants per year in the high alternative and 0.8 million in the low alternative). • Mortality is projected to decline as people live longer in the future (see Chart 5-8). These assumptions parallel those in the latest Social Security Trustees’ Report. The average period life expectancy for women is projected to rise from 80.0 years in 2008 to 86.3 years in 2085, and the average period life expectancy for men is expected to increase from 75.4 years in 2007 to 83.1 years in 2085. A technical panel advising the Social Security trustees has reported that the improvement in longevity might be even greater than assumed here. The variations show the high and low alternatives from the latest Trustees’ report (average female and male life expectancy reaching 82.7 and 79.1 in the low cost alternative and 89.9 and 87.2 in the high cost alternative). Chart 5-7. Alternative Immigration Assumptions Surplus(-)/Deficit(+) as a percent of GDP 70 Lower Net Immigration 60 2011 Budget Policy Extended 50 40 30 20 Higher Net Immigration 10 0 -10 2000 2012 2024 2036 2048 2060 2072 2084 52 ANALYTICAL PERSPECTIVES Chart 5-8. Alternative Mortality Assumptions Surplus(-)/Deficit(+) as a percent of GDP 80 70 Longer Life Expectancy 60 50 2011 Budget Policy Extended 40 30 20 Shorter Life Expectancy 10 0 -10 2000 2012 2024 2036 The long-run budget outlook is highly uncertain. With pessimistic assumptions, the fiscal picture deteriorates even sooner than in the base projection. More optimistic assumptions imply a longer period before the pressures of rising spending overwhelm the budget. But despite the uncertainty, these projections show under a wide range of forecasting assumptions that overall budgetary resources will not be sufficient to support all future projected commitments. These projections highlight the commitments for future policy action to address the main drivers of future budgetary costs, especially health costs. The Fiscal Gap The fiscal gap is one measure of the size of the adjustment needed to preserve fiscal sustainability in the long run.1 It is defined as the increase in taxes or reduction in non-interest expenditures required to keep the long-run ratio of government debt to GDP at its current level if implemented immediately. The gap is usually measured as a percentage of GDP. The fiscal gap is calculated over a finite time period, and therefore it may understate the adjustment needed to achieve longer-run sustainability. Table 5-2 shows fiscal gap calculations for the base case calculated over a 75-year horizon and for the various alternative scenarios described above. The fiscal gap in the base case is 8.0 percent of GDP, and it ranges in the alternative scenarios from 2.8 percent of GDP to 9.6 percent of GDP. In all cases, significant fiscal adjustments would be needed to achieve long-run sustainability. 1 Alan J. Auerbach, “The U.S. Fiscal Problem: Where We Are, How We Got Here, and Where We’re Going,” NBER: Macroeconomics Annual 1994, pp 141 – 175. 2048 2060 2072 2084 Table 5–2. FISCAL GAP UNDER ALTERNATIVE BUDGET SCENARIOS (Percent of GDP) Baseline ..................................................................................................................... 8.0 Health: Excess cost growth averages 1 percent ............................................................... Excess cost growth averages 1/2 percent ............................................................ 4.5 2.8 Discretionary Outlays: Grow with inflation plus population ....................................................................... Defense grows with inflation; nondefense grows with inflation plus population .... 6.2 5.9 Revenues: Revenues exceed baseline by 2 percent of GDP ................................................. Revenues fall short of baseline by 2 percent of GDP ........................................... 6.4 9.6 Productivity: Productivity grows by 0.5 percent per year faster than the baseline ............. Productivity grows by 0.5 percent per year slower than the baseline ............ 6.6 9.6 Population: Fertility: 2.3 births per woman ..................................................................................... 1.7 births per woman ..................................................................................... Immigration: 1.3 million immigrants per year ...................................................................... 0.7 million immigrants per year ...................................................................... Mortality: Female life expectancy 82.7 years; male life expectancy 79.1 years in 2085 Female life expectancy 89.9 years; male life expectancy 87.2 years in 2085 7.1 8.8 7.5 8.4 7.2 8.8 53 5. LONG TERM BUDGET OUTLOOK Table 5–3. INTERMEDIATE ACTUARIAL PROJECTIONS FOR OASDI AND HI 2010 2020 2030 2050 2085 (Percent of Payroll) Medicare Hospital Insurance (HI) Income Rate ................................................................................................................ Cost Rate ..................................................................................................................... Annual Balance ........................................................................................................... 3.2 3.6 –0.4 3.3 4.4 –1.1 3.4 6.0 –2.6 25 years Projection Interval: Actuarial Deficiency 2008 - 2083 .............................................................................. 3.4 8.7 –5.3 50 years –1.4 3.5 12.2 –8.7 75 years –2.8 –3.9 13.3 16.6 –3.4 13.4 17.8 –4.4 (Percent of Payroll) Old Age Survivors and Disability Insurance (OASDI) Income Rate ................................................................................................................ Cost Rate ..................................................................................................................... Annual Balance ........................................................................................................... Projection Interval: Actuarial Balance ........................................................................................................ Actuarial Projections for Social Security and Medicare The Trustees for the Hospital Insurance and Social Security trust funds issue annual reports that include projections of income and outgo for these funds over a 75-year period. These projections are based on different methods and assumptions than the long-run budget projections presented above. Even with these differences, the message is similar: the growth in per capita health care costs and the retirement of the baby-boom generation will exhaust the trust funds unless further remedial action is taken. The Trustees’ reports feature the actuarial balance of the trust funds as a summary measure of their financial status. For each trust fund, the balance is calculated as the change in receipts or program benefits (expressed as a percentage of taxable payroll) that would be needed to preserve a small positive balance in the trust fund at the end of a specified time period. The estimates cover periods ranging in length from 10 to 75 years. These balance calculations show what it would take to achieve a positive trust fund balance at the end of a specified period of time, not what it would take to maintain a positive balance indefinitely. To maintain a positive balance forever requires a larger adjustment than is needed to maintain a positive balance over 75 years when the annual balance in the program is negative at the end of the 75-year projection period as it is expected to be for Social Security and Medicare without future programmatic reforms. Table 5–3 shows the projected income rate, cost rate, and annual balance for the Medicare Part A and OASDI Trust Funds at selected dates under the Trustees’ intermediate assumptions. For the Medicare HI trust fund, costs as a percentage of Medicare covered payroll are projected to rise from 3.6 percent today to 6.0 percent of projected payroll in 2030 12.9 12.5 0.4 13.0 14.5 –1.5 13.2 16.8 –3.6 25 years –0.2 50 years –1.5 75 years –2.0 and 12.2 percent of payroll in 2085. Income excluding interest rises only slightly from 3.2 percent of payroll today to 3.5 percent of payroll in 2085. Thus the annual balance moves from a relatively small 0.4 percent of payroll deficit today to 2.6 percent deficit in 2030 and 8.7 percent in 2085. On a 75-year basis, the HI actuarial deficit is 3.9 percent of payroll, roughly twice that of Social Security. As a result of reforms legislated in 1983, Social Security is currently running a small surplus with income exceeding costs. Over time, as the ratio of workers to retirees falls, costs are projected to rise from 12.5 percent of Social Security covered payroll today to 14.5 percent of payroll in 2020, 16.8 percent of payroll in 2030 and 17.8 percent of payroll in 2085. Revenues excluding interest are projected to rise only slightly from 12.9 percent of payroll today to 13.4 percent in 2085. Thus the annual balance is projected to switch from surplus to deficit, with the deficit rising to 1.5 percent of payroll in 2020, 3.6 percent of payroll in 2030, and 4.4 percent of payroll in 2085. On a 75-year basis, the actuarial deficit is projected to be 2.0 percent of payroll. TECHNICAL NOTE: SOURCES OF DATA AND METHODS OF ESTIMATING The long-range budget projections are based on demographic and economic assumptions. A simplified model of the Federal budget, developed at OMB, is used to compute the budgetary implications of these assumptions. Demographic and Economic Assumptions.—For the years 2010–2020, the assumptions are drawn from the Administration’s economic projections used for the 2011 Budget. These budget assumptions reflect the President’s policy proposals. The economic assumptions are extended beyond this interval by holding inflation, interest rates, and the unemployment rate constant at the levels assumed in the final year of the budget forecast. 54 Population growth and labor force growth are extended using the intermediate assumptions from the 2009 Social Security Trustees’ report. The projected rate of growth for real GDP is built up from the labor force assumptions and an assumed rate of productivity growth. Productivity growth, measured as real GDP per hour, is assumed to equal its average rate of growth over the next 10 years in the Budget’s economic assumptions. CPI inflation holds stable at 2.1 percent per year; the unemployment rate is constant at 5.2 percent; and the yield on 10-year Treasury notes is steady at 5.3 percent. Real GDP per hour, grows at the same average rate as in the Administration’s 10-year projections—2.0 percent per year. Consistent with the demographic assumptions in the Trustees’ reports, U.S. population growth slows from around 1 percent per year to about two-thirds that rate by 2030, and slower rates of growth beyond that point. By the end of the projection period it is as low as 0.4 percent per year. Real GDP growth is less than its historical average of around 3.2 percent per year because the slowdown in population growth and the increase in the population over age 65 reduce labor supply growth. In these projections, average real GDP growth declines to around 2.5 percent per year. The economic and demographic projections described above are set by assumption and do not automatically ANALYTICAL PERSPECTIVES change in response to changes in the budget outlook. This is unrealistic, but it simplifies comparisons of alternative policies. Budget Projections: For the period through 2020, receipts follow the 2011 Budget’s policy projections. After 2020, income tax receipts are assumed to rise relative to wages and salaries as real income growth pushes more people into higher tax brackets. However, this tendency is largely offset by the projected rise in nontaxed fringe benefits, mainly because health insurance costs are rising faster than wages. Other taxes generally hold close to the averages reached by 2020 in the Budget projections. Discretionary spending follows the policies in the Budget over the next 10 years and grows at the rate of growth in nominal GDP afterwards. Other spending also aligns with the Budget through the budget horizon. Long-run Social Security spending is projected by the Social Security actuaries using this chapter’s long-range assumptions. Medicare benefits are projected based on a projection of excess health care cost growth of 2 percent per year, the assumptions for the growth in the beneficiary population from the 2009 Medicare Trustees’ report, and the general inflation assumptions described above. Medicaid outlays are based on the economic and demographic projections in the model. Other entitlement programs are projected based on rules of thumb linking program spending to elements of the economic and demographic projections such as the poverty rate. 6. FEDERAL BORROWING AND DEBT Debt is the largest legally binding obligation of the Federal Government. At the end of 2009, the Government owed $7,545 billion of principal to the individuals and institutions who had loaned it the money to fund past deficits. During that year, the Government paid the public approximately $202 billion of interest on this debt. In addition to the Government’s debt obligation, at the end of 2009, the Government held financial assets, net of other liabilities, of $898 billion. Therefore, the Government’s debt net of financial assets was $6,647 billion, or 46.7 percent of GDP. The deficit was $1,413 billion in 2009. This $1,413 billion deficit and other financing transactions totaling $329 billion required the Government to increase its borrowing from the public by $1,742 billion last year. Meanwhile, as- Table 6–1. TRENDS IN FEDERAL DEBT HELD BY THE PUBLIC (Dollar amounts in billions) Fiscal Year Interest on the debt by the public held Debt held by the public: Debtasheld by the public as a a percent of: percent of:3 Current FY 2009 dollars dollars1 GDP Credit market debt2 Total outlays GDP 1946 ........................................................................................................... 1950 ........................................................................................................... 1955 ........................................................................................................... 1960 ........................................................................................................... 241.9 219.0 226.6 236.8 2,261.5 1,666.3 1,514.9 1,405.6 108.7 80.2 57.2 45.6 N/A 53.3 43.2 33.7 7.4 11.4 7.6 8.5 1.8 1.8 1.3 1.5 1965 ........................................................................................................... 1970 ........................................................................................................... 1975 ........................................................................................................... 1980 ........................................................................................................... 260.8 283.2 394.7 711.9 1,447.3 1,306.9 1,340.3 1,671.9 37.9 28.0 25.3 26.1 26.9 20.8 18.4 18.5 8.1 7.9 7.5 10.6 1.4 1.5 1.6 2.3 1985 ........................................................................................................... 1990 ........................................................................................................... 1995 ........................................................................................................... 1,507.3 2,411.6 3,604.4 2,698.3 3,697.3 4,868.5 36.4 42.1 49.1 22.3 22.6 26.7 16.2 16.2 15.8 3.7 3.5 3.3 2000 ........................................................................................................... 2001 ........................................................................................................... 2002 ........................................................................................................... 2003 ........................................................................................................... 2004 ........................................................................................................... 3,409.8 3,319.6 3,540.4 3,913.4 4,295.5 4,240.1 4,032.7 4,231.3 4,581.6 4,903.1 34.7 32.5 33.6 35.6 36.8 19.1 17.5 17.5 17.8 18.0 13.0 11.6 8.9 7.5 7.3 2.4 2.1 1.7 1.5 1.4 2005 ........................................................................................................... 2006 ........................................................................................................... 2007 ........................................................................................................... 2008 ........................................................................................................... 2009 ........................................................................................................... 4,592.2 4,829.0 5,035.1 5,803.1 7,544.7 5,076.1 5,161.2 5,229.5 5,890.4 7,544.7 36.9 36.5 36.2 40.2 53.0 17.6 16.9 16.2 17.6 21.9 7.7 8.9 9.2 8.7 5.7 1.5 1.8 1.8 1.8 1.4 9,297.7 10,498.3 11,472.1 12,325.7 13,139.3 9,215.1 10,291.4 11,073.1 11,697.4 12,260.2 63.6 68.6 70.8 71.7 72.2 N/A N/A N/A N/A N/A 6.3 8.0 10.9 13.0 14.2 1.6 2.0 2.5 3.0 3.2 2010 estimate 2011 estimate 2012 estimate 2013 estimate 2014 estimate ............................................................................................ ............................................................................................ ............................................................................................ ............................................................................................ ............................................................................................ 2015 estimate ............................................................................................ 13,988.4 12,833.6 72.9 N/A 14.9 3.4 N/A = Not available. 1 Debt in current dollars deflated by the GDP chain-type price index with fiscal year 2009 equal to 100. 2 Total credit market debt owed by domestic nonfinancial sectors, modified in some years to be consistent with budget concepts for the measurement of Federal debt. Financial sectors are omitted to avoid double counting, since financial intermediaries borrow in the credit market primarily in order to finance lending in the credit market. Source: Federal Reserve Board flow of funds accounts. Projections are not available. 3 Interest on debt held by the public is estimated as the interest on Treasury debt securities less the “interest received by trust funds” (subfunction 901 less subfunctions 902 and 903). The estimate of interest on debt held by the public does not include the comparatively small amount of interest paid on agency debt or the offsets for interest on Treasury debt received by other Government accounts (revolving funds and special funds). 55 56 ANALYTICAL PERSPECTIVES sets net of liabilities rose by $382 billion in 2009. Debt held by the public net of financial assets increased from 36.6 percent of Gross Domestic Product (GDP) at the end of 2008 to 46.7 percent of GDP at the end of 2009. The deficit is estimated to increase to $1,556 billion in 2010, largely as a result of the Government’s continued actions to restore economic growth, and then begin to fall. Declining deficits are estimated to significantly reduce growth in debt as a percentage of GDP; debt net of financial assets is projected to reach 61.6 percent of GDP at the end of 2011 and then to grow much more gradually in subsequent years. Trends in Debt Since World War II Table 6–1 depicts trends in Federal debt held by the public from World War II to the present and estimates from the present through 2015. (It is supplemented for earlier years by Tables 7.1–7.3 in Historical Tables, which is published as a separate volume of the Budget.) Federal debt peaked at 108.7 percent of GDP in 1946, just after the end of the war. From then until the 1970s, Federal debt as a percentage of GDP decreased almost every year because of relatively small deficits, an expanding economy, and inflation. With households borrowing large amounts to buy homes and consumer durables, and with businesses borrowing large amounts to buy plant and equipment, Federal debt also decreased almost every year as a percentage of total credit market debt outstanding. The cumulative effect was impressive. From 1950 to 1975, debt held by the public declined from 80.2 percent of GDP to 25.3 percent, and from 53.3 percent of credit market debt to 18.4 percent. Despite rising interest rates, interest outlays became a smaller share of the budget and were roughly stable as a percentage of GDP. Federal debt relative to GDP is a function of the Nation’s fiscal policy as well as overall economic conditions. During the 1970s, large budget deficits emerged as spending grew and as the economy was disrupted by oil shocks and rising inflation. The nominal amount of Federal debt more than doubled, and Federal debt relative to GDP and credit market debt stopped declining after the middle of the decade. The growth of Federal debt accelerated at the beginning of the 1980s, due in large part to a deep recession, and the ratio of Federal debt to GDP grew sharply. It continued to grow throughout the 1980s as large tax cuts, enacted in 1981, and substantial increases in defense spending were only partially offset by reductions in domestic spending. The resulting deficits increased the debt to almost 50 percent of GDP by 1993. The ratio of Federal debt to credit market debt also rose, though to a lesser extent. Interest outlays on debt held by the public, calculated as a percentage of either total Federal outlays or GDP, increased as well. The growth of Federal debt held by the public was slowing by the mid-1990s, however, as a growing economy and two major budget agreements enacting spending cuts and revenue increases reduced deficits significantly. The debt declined markedly relative to both GDP and total credit market debt, from 1997 to 2001, as surpluses emerged. Debt fell from 49.3 percent of the GDP in 1993 to 32.5 percent in 2001. Interest as a share of outlays peaked at 16.5 percent in 1989 and then fell to 8.9 percent by 2002; interest as a percentage of GDP fell by a similar proportion. The impressive progress in reducing the debt burden stopped and then reversed course beginning in 2002. A decline in the stock market, a recession, and the initially slow recovery from that recession all reduced tax receipts. The tax cuts of 2001 and 2003 had a similarly large and longer-lasting effect, as did the growing costs of the wars in Iraq and Afghanistan. Deficits ensued and debt began to rise, both in nominal terms and as a percentage of GDP. There was a small temporary improvement in 2006 and 2007 as economic growth led to a revival of receipt growth. As a result of the most recent recession, which began in December 2007, and the massive financial and economic challenges it imposed on the Nation, the deficit began increasing rapidly in 2008. The deficit increased more substantially in 2009 as the Government continued to take aggressive steps to restore the health of the Nation’s economy and financial markets. This Budget begins the difficult work of restoring fiscal discipline and returning the country to a more sustainable fiscal path. Deficits are projected to continue at an unusually high level in 2010 but then recede thereafter as the improving economy begins to translate into lower outlays and higher receipts. Debt net of financial assets as a percent of GDP is estimated to grow to 55.8 percent at the end of 2010 and 61.6 percent at the end of 2011 and then to grow much more slowly in subsequent years. Debt Held by the Public and Gross Federal Debt The Federal Government issues debt securities for two principal purposes. First, it borrows from the public to finance the Federal deficit.1 Second, it issues debt to Federal Government accounts, primarily trust funds, which accumulate surpluses. By law, trust fund surpluses must generally be invested in Federal securities. The gross Federal debt is defined to consist of both the debt held by the public and the debt held by Government accounts. Nearly all the Federal debt has been issued by the Treasury and is sometimes called “public debt,’’ but a small portion has been issued by other Government agencies and is called “agency debt.’’ 2 Borrowing from the public, whether by the Treasury or by some other Federal agency, is important because it represents the Federal demand on credit markets. Regardless of whether the proceeds are used for tangible or intangible investments or to finance current consumption, the Federal demand on credit markets has to be financed out of the 1 For the purposes of the Budget, “debt held by the public” is defined as debt held by investors outside of the Federal Government, both domestic and foreign, including U.S. State and local governments and foreign governments. It also includes debt held by the Federal Reserve. 2 The term “agency debt’’ is defined more narrowly in the budget than customarily in the securities market, where it includes not only the debt of the Federal agencies listed in Table 6–4, but also the debt of the Government-Sponsored Enterprises listed in Table 22–9 at the end of Chapter 22 of this volume and certain Government-guaranteed securities. 57 6. FEDERAL BORROWING AND DEBT saving of households and businesses, the State and local sector, or the rest of the world. Federal borrowing thereby competes with the borrowing of other sectors of the economy for financial resources in the credit market. Borrowing from the public thus affects the size and composition of assets held by the private sector and the amount of saving imported from abroad. It also increases the amount of future resources required to pay interest to the public on Federal debt. Borrowing from the public is therefore an important concern of Federal fiscal policy. 3 Borrowing from the public, however, is an incomplete measure of the Federal impact on credit markets. Different types of Federal activities can affect the credit markets in different ways. For example, with the Federal Government’s recent extraordinary efforts to stabilize credit markets, the Government has used the borrowed funds to acquire financial assets that would otherwise have required financing in the credit markets directly. (For more information on other ways in which Federal activities impact the credit market, see the discussion at the end of this chapter.) Issuing debt securities to Government accounts performs an essential function in accounting for the operation of these funds. The balances of debt represent the cumulative surpluses of these funds due to the excess of their tax receipts, interest receipts, and other collections over their spending. The interest on the debt that is credited to these funds accounts for the fact that some earmarked taxes and user charges will be spent at a later time than when the funds receive the monies. The debt securities are assets of those funds but are a liability of the general fund to the fund that holds the securities, and are a mechanism for crediting interest to that fund on its recorded balances. These balances generally provide the fund with authority to draw upon the U.S. Treasury in later years to make future payments on its behalf to the public. Public policy may result in the Government’s running surpluses and accumulating debt in trust funds and other Government accounts in anticipation of future spending. However, issuing debt to Government accounts does not have any of the credit market effects of borrowing from the public. It is an internal transaction of the Government, made between two accounts that are both within the Government itself. Issuing debt to a Government account is not a current transaction of the Government with the public; it is not financed by private saving and does not compete with the private sector for available funds in the credit market. While such issuance provides the account with assets—a binding claim against the Treasury—those assets are fully offset by the increased liability of the Treasury to pay the claims, which will ultimately be covered by taxation or borrowing. Similarly, the current interest earned by the Government account on its Treasury securities does not need to be financed by other resources. Furthermore, the debt held by Government accounts 3 The Federal subsector of the national income and product accounts provides a measure of “net government saving’’ (based on current expenditures and current receipts) that can be used to analyze the effect of Federal fiscal policy on national saving within the framework of an integrated set of measures of aggregate U.S. economic activity. The Federal subsector and its differences from the budget are discussed in Chapter 28 of this volume, “National Income and Product Accounts.’’ does not represent the estimated amount of the account’s obligations or responsibilities to make future payments to the public. For example, if the account records the transactions of a social insurance program, the debt that it holds does not necessarily represent the actuarial present value of estimated future benefits (or future benefits less taxes) for the current participants in the program; nor does it necessarily represent the actuarial present value of estimated future benefits (or future benefits less taxes) for the current participants plus the estimated future participants over some stated time period. The future transactions of Federal social insurance and employee retirement programs, which own 93 percent of the debt held by Government accounts, are important in their own right and need to be analyzed separately. This can be done through information published in the actuarial and financial reports for these programs.4 This Budget uses a variety of information sources to analyze the condition of Social Security and Medicare, the Government’s two largest social insurance programs. Chapter 5 of this volume, “Long-Term Budget Outlook,’’ projects Social Security and Medicare outlays to the year 2085 relative to GDP. The excess of future Social Security and Medicare benefits relative to their dedicated income is very different in concept and much larger in size than the amount of Treasury securities that these programs hold. For all these reasons, debt held by the public and debt net of financial assets are both better gauges of the effect of the budget on the credit markets than gross Federal debt. Government Deficits or Surpluses and the Change in Debt Table 6–2 summarizes Federal borrowing and debt from 2009 through 2020. In 2009 the Government borrowed $1,742 billion, increasing the debt held by the public from $5,803 billion at the end of 2008 to $7,545 billion at the end of 2009. The debt held by Government accounts increased $148 billion, and gross Federal debt increased by $1,890 billion to $11,876 billion. Debt held by the public.—The Federal Government primarily finances deficits by borrowing from the public, and it primarily uses surpluses to repay debt held by the public. 5 Table 6–2 shows the relationship between the 4 Extensive actuarial analyses of the Social Security and Medicare programs are published in the annual reports of the boards of trustees of these funds. The actuarial estimates for Social Security, Medicare, and the major Federal employee retirement programs are summarized in the Financial Report of the United States Government, prepared annually by the Treasury Department in coordination with the Office of Management and Budget. 5 Treasury debt held by the public is measured as the sales price plus the amortized discount (or less the amortized premium). At the time of sale, the book value equals the sales price. Subsequently, it equals the sales price plus the amount of the discount that has been amortized up to that time. In equivalent terms, the book value of the debt equals the principal amount due at maturity (par or face value) less the unamortized discount. (For a security sold at a premium, the definition is symmetrical.) For inflation-indexed notes and bonds, the book value includes a periodic adjustment for inflation. Agency debt is generally recorded at par. 58 ANALYTICAL PERSPECTIVES Table 6–2. FEDERAL GOVERNMENT FINANCING AND DEBT (In billions of dollars) Actual 2009 Estimate 2010 2011 Financing: Unified budget deficit ................................................................ 1,412.7 1,555.6 1,266.7 Other transactions affecting borrowing from the public: Changes in financial assets and liabilities: 1 Change in Treasury operating cash balance 2 ............. –96.3 –5.3 –200.0 Net disbursements of credit financing accounts: Direct loan accounts ............................................. 293.5 210.4 142.6 Guaranteed loan accounts ................................... 7.5 –6.8 8.1 Troubled Asset Relief Program equity purchase accounts .............................. 105.4 0.6 –15.2 Subtotal, net disbursements ........................ 406.4 204.1 135.5 Net purchases of non-Federal securities by the National Railroad Retirement Investment Trust ...... –2.9 –1.3 –1.0 Net change in other financial assets and liabilities 3 .... 22.2 ......... ......... Subtotal, changes in financial assets and liabilities ........................................................... 329.4 197.6 –65.5 Seigniorage on coins ......................................................... –0.4 –0.2 –0.5 Total, other transactions affecting borrowing from the public ......................................................... 329.0 197.4 –66.0 Total, requirement to borrow from the public (equals change in debt held by the public) .... 1,741.7 1,752.9 1,200.7 2012 2013 2014 2015 2016 2017 2018 2019 2020 828.5 727.3 705.8 751.9 777.7 778.0 785.1 908.4 1,002.9 ......... ......... ......... ......... ......... ......... ......... ......... ......... 135.1 11.8 117.9 11.8 108.5 6.0 99.2 4.2 70.4 3.2 84.9 1.2 78.8 –2.2 90.8 –4.0 91.3 –5.6 –* 147.0 –1.9 127.9 –4.9 109.6 –4.5 98.9 –4.8 68.9 –9.2 76.8 –10.7 65.9 –25.9 60.9 –15.8 69.8 –0.9 ......... –1.0 ......... –1.0 ......... –1.0 ......... –1.4 ......... –1.1 ......... –1.3 ......... –1.3 ......... –1.2 ......... 146.1 –0.8 126.9 –0.7 108.6 –0.7 97.9 –0.7 67.4 –0.7 75.7 –0.7 64.6 –0.7 59.6 –0.7 68.7 –0.7 145.3 126.2 107.9 97.2 66.7 75.0 63.9 59.0 68.0 973.8 853.5 813.7 849.0 844.5 853.0 849.0 967.4 1,070.9 Changes in Debt Subject to Statutory Limitation: Change in debt held by the public ............................................ 1,741.7 1,752.9 1,200.7 973.8 853.5 813.7 849.0 844.5 853.0 849.0 967.4 1,070.9 Change in debt held by Government accounts ......................... 148.1 157.8 156.7 217.8 264.3 265.1 302.0 309.2 321.3 337.2 285.3 256.4 Less: change in debt not subject to limit and other adjustments ....... 3.5 –1.7 –0.5 1.3 1.3 0.6 0.9 1.2 1.2 1.0 0.7 –0.5 Total, change in debt subject to statutory limitation ........... 1,893.3 1,909.1 1,356.9 1,192.9 1,119.1 1,079.4 1,151.8 1,154.9 1,175.6 1,187.2 1,253.4 1,326.8 Debt Subject to Statutory Limitation, End of Year: Debt issued by Treasury ........................................................... 11,850.3 13,760.1 15,116.8 16,308.4 17,426.3 18,504.5 19,655.6 20,809.4 21,984.4 23,171.3 24,424.2 25,751.2 Less: Treasury debt not subject to limitation (–) 4 ...................... –12.9 –13.6 –13.4 –12.1 –10.9 –9.7 –8.9 –7.9 –7.3 –7.0 –6.5 –6.8 Agency debt subject to limitation .............................................. * * * * * * * * * * * * Adjustment for discount and premium 5 .................................... 15.7 15.7 15.7 15.7 15.7 15.7 15.7 15.7 15.7 15.7 15.7 15.7 Total, debt subject to statutory limitation 6 .......................... 11,853.1 13,762.2 15,119.1 16,312.0 17,431.1 18,510.5 19,662.4 20,817.2 21,992.8 23,180.0 24,433.4 25,760.1 Debt Outstanding, End of Year: Gross Federal debt:7 Debt issued by Treasury .................................................... 11,850.3 13,760.1 15,116.8 16,308.4 17,426.3 18,504.5 19,655.6 20,809.4 21,984.4 23,171.3 24,424.2 25,751.2 Debt issued by other agencies .......................................... 25.5 26.5 27.3 27.2 27.2 27.8 27.7 27.6 26.9 26.2 26.0 26.2 Total, gross Federal debt ............................................ 11,875.9 13,786.6 15,144.0 16,335.7 17,453.5 18,532.3 19,683.3 20,836.9 22,011.3 23,197.5 24,450.1 25,777.4 Held by: Debt held by Government accounts .................................. 4,331.1 4,489.0 4,645.7 4,863.6 5,127.8 5,393.0 5,694.9 6,004.1 6,325.5 6,662.7 6,948.0 7,204.3 Debt held by the public 8 .................................................... 7,544.7 9,297.7 10,498.3 11,472.1 12,325.7 13,139.3 13,988.4 14,832.8 15,685.8 16,534.8 17,502.2 18,573.1 *$50 million or less. 1A decrease in the Treasury operating cash balance (which is an asset) is a means of financing a deficit and therefore has a negative sign. An increase in checks outstanding (which is a liability) is also a means of financing a deficit and therefore also has a negative sign. 2Includes assumed Supplementary Financing Program balance of $200 billion on September 30, 2010, and zero on September 30, 2011, and beyond. 3Besides checks outstanding, includes accrued interest payable on Treasury debt, uninvested deposit fund balances, allocations of special drawing rights, and other liability accounts; and, as an offset, cash and monetary assets (other than the Treasury operating cash balance), other asset accounts, and profit on sale of gold. 4Consists primarily of debt issued by or held by the Federal Financing Bank. 5Consists mainly of unamortized discount (less premium) on public issues of Treasury notes and bonds (other than zero-coupon bonds) and unrealized discount on Government account series securities. 6The statutory debt limit is $12,394 billion, as enacted on December 28, 2009. 7Treasury securities held by the public and zero-coupon bonds held by Government accounts are almost all measured at sales price plus amortized discount or less amortized premium. Agency debt securities are almost all measured at face value. Treasury securities in the Government account series are otherwise measured at face value less unrealized discount (if any). 8At the end of 2009, the Federal Reserve Banks held $769.2 billion of Federal securities and the rest of the public held $6,775.5 billion. Debt held by the Federal Reserve Banks is not estimated for future years. 6. FEDERAL BORROWING AND DEBT Federal deficit or surplus and the change in debt held by the public. The borrowing or debt repayment depends on the Federal Government’s expenditure programs and tax laws, on the economic conditions that influence tax receipts and outlays, and on debt management policy. The sensitivity of the budget to economic conditions is analyzed in Chapter 3 of this volume, “Interactions Between the Economy and the Budget.’’ The total or unified budget surplus consists of two parts: the on-budget surplus or deficit; and the surplus of the off-budget Federal entities, which have been excluded from the budget by law. Under present law, the off-budget Federal entities are the Social Security trust funds (OldAge and Survivors Insurance and Disability Insurance) and the Postal Service fund. 6 The on-budget and off-budget surpluses or deficits are added together to determine the Government’s financing needs. Over the long run, it is a good approximation to say that “the deficit is financed by borrowing from the public’’ or “the surplus is used to repay debt held by the public.’’ However, the Government’s need to borrow in any given year has always depended on several other factors besides the unified budget surplus or deficit, such as the change in the Treasury operating cash balance. These other factors—“other transactions affecting borrowing from the public’’—can either increase or decrease the Government’s need to borrow and can vary considerably in size from year to year. As a result of the Government’s recent extraordinary efforts to stabilize the Nation’s credit markets, these other factors have significantly increased borrowing from the public. The other transactions affecting borrowing from the public are presented in Table 6–2 (an increase in the need to borrow is represented by a positive sign, like the deficit). In 2009 the deficit was $1,413 billion while these other factors—primarily the net disbursements of credit financing accounts—increased the need to borrow by $329 billion. As a result, the Government borrowed $1,742 billion from the public. The other factors are estimated to increase borrowing by $197 billion in 2010 and reduce borrowing by $66 billion in 2011. In 2012–2020, these other factors are expected to increase borrowing by annual amounts ranging from $59 billion to $145 billion. Prior to 2008, the effect of these other transactions had been much smaller. In the 20 years between 1988 and 2007, the cumulative deficit was $2,956 billion, the increase in debt held by the public was $3,145 billion, and other factors added a total of $190 billion of borrowing, 6 percent of total borrowing over this period. By contrast, the other factors resulted in more than 40 percent of the total increase in borrowing from the public for 2008 and nearly 20 percent of the increase for 2009. Three specific factors presented in Table 6–2 are especially important. Change in Treasury operating cash balance.—The cash balance increased by a record $296 billion in 2008, primarily as a result of Treasury’s creation of the Supplementary Financing Program (SFP). Under this temporary program, Treasury issues short-term debt and deposits the 6 For further explanation of the off-budget Federal entities, see Chapter 12 of this volume, “Coverage of the Budget.’’ 59 cash proceeds with the Federal Reserve for use by the Federal Reserve in its actions to stabilize the financial markets. In 2009, the cash balance decreased by $96 billion, due to a $135 billion reduction in the SFP balance offset by a $38 billion increase in the non-SFP cash balance. In the preceding 10 years, changes in the cash balance had been much smaller, ranging from a decrease of $26 billion in 2003 to an increase of $23 billion in 2007. The operating cash balance is projected to decrease by $5 billion in 2010, to $270 billion, including an assumed SFP balance of $200 billion and a non-SFP balance of $70 billion. In 2011, the operating cash balance is projected to decrease by $200 billion due to an assumed end-of-year SFP balance of zero. Changes in the operating cash balance, while occasionally large, are inherently limited over time. Decreases in cash—a means of financing the Government—are limited by the amount of past accumulations, which themselves required financing when they were built up. Increases are limited because it is generally more efficient to repay debt. Net financing disbursements of the direct loan and guaranteed loan financing accounts.—Under the Federal Credit Reform Act of 1990 (FCRA), budget outlays for direct loans and loan guarantees consist of the estimated subsidy cost of the loans or guarantees at the time when the direct loans are disbursed or the guaranteed loans are made. The cash flows to and from the public resulting from these loans and guarantees—the disbursement and repayment of loans, the default payments on loan guarantees, the collections of interest and fees, and so forth—are not costs (or offsets to costs) to the Government except for their subsidy costs (the present value of the estimated net losses), which are already included in budget outlays. Therefore, they are non-budgetary in nature and are recorded as transactions of the non-budgetary financing account for each credit program. 7 The financing accounts also include several types of intragovernmental transactions. In particular, they receive payment from the credit program accounts for the costs of new direct loans and loan guarantees; they also receive payment for any upward reestimate of the costs of direct loans and loan guarantees outstanding. These collections are offset against the gross disbursements of the financing accounts in determining the accounts’ total net cash flows. The gross disbursements include outflows to the public—such as of loan funds or default payments—as well as the payment of any downward reestimate of costs to budgetary receipt accounts. The total net cash flows of the financing accounts, consisting of transactions with both the public and the budgetary accounts, are called “net financing disbursements.’’ They occur in the same way as the “outlays’’ of a budgetary account, even though they do not represent budgetary costs, and therefore af- 7 The Federal Credit Reform Act of 1990 (sec. 505(b)) requires that the financing accounts be non-budgetary. As explained in Chapter 12 of this volume, “Coverage of the Budget,’’ they are non-budgetary in concept because they do not measure cost. For additional discussion of credit programs, see Chapter 22 of this volume, “Credit and Insurance,” and Chapter 11, “Budget Concepts.’’ 60 fect the requirement for borrowing from the public in the same way as the deficit. The intragovernmental transactions of the financing accounts do not affect Federal borrowing from the public. Although the deficit changes because of the budget’s outlay to, or receipt from, a financing account, the net financing disbursement changes in an equal amount with the opposite sign, so the effects are cancelled out. On the other hand, financing account disbursements to the public increase the requirement for borrowing from the public in the same way as an increase in budget outlays that are disbursed to the public in cash. Likewise, financing account receipts from the public can be used to finance the payment of the Government’s obligations, and therefore they reduce the requirement for Federal borrowing from the public in the same way as an increase in budget receipts. In some years, large net upward or downward reestimates in the cost of outstanding direct and guaranteed loans may cause large swings in the net financing disbursements. In 2009, the downward reestimates in some accounts largely cancelled out the upward reestimates in other accounts, for a net upward reestimate of $0.4 billion. In 2010, due primarily to the Troubled Asset Relief Program (TARP), downward reestimates are significantly larger than upward reestimates, resulting in a net downward reestimate of $115 billion. The impact of the net financing disbursements on borrowing grew significantly in 2009, largely as a result of Government actions to address the Nation’s financial and economic challenges including through TARP, purchases of mortgage-backed securities issued or guaranteed by the Government-Sponsored Enterprises (GSEs), and the Temporary Student Loan Purchase Program. Net financing disbursements increased from $33 billion in 2008 to a record $406 billion in 2009. Borrowing due to financing accounts is estimated to fall by nearly half, to $204 billion in 2010, primarily due to large repayments of TARP assistance. After 2010, the credit financing accounts are expected to increase borrowing by amounts ranging from $61 billion to $147 billion over the next 10 years. Net purchases of non-Federal securities by the National Railroad Retirement Investment Trust (NRRIT).—This trust fund was established by the Railroad Retirement and Survivors’ Improvement Act of 2001. In 2003, most of the assets in the Railroad Retirement Board trust funds were transferred to the NRRIT trust fund, which invests its assets primarily in private stocks and bonds. The Act required special treatment of the purchase or sale of nonFederal assets by this trust fund, treating such purchases as a means of financing rather than an outlay. Therefore, the increased need to borrow from the public to finance the purchase of non-Federal assets is part of the “other transactions affecting borrowing from the public’’ rather than included as an increase in the deficit. While net purchases and redemptions affect borrowing from the public, unrealized gains and losses on NRRIT’s portfolio are included in both the other factors and, with the opposite sign, in NRRIT’s net outlays in the deficit, for no net impact on borrowing from the public. The increased borrowing associated with the initial transfer expanded publicly held debt by ANALYTICAL PERSPECTIVES $20 billion in 2003. Net transactions in subsequent years have been much smaller. In 2009, net reductions, including losses, were $3 billion. Net reductions are expected to be roughly $1 billion annually for 2010 through 2020. 8 Debt held by Government accounts.—The amount of Federal debt issued to Government accounts depends largely on the surpluses of the trust funds, both on-budget and off-budget, which owned 93 percent of the total Federal debt held by Government accounts at the end of 2009. In 2009, the total trust fund surplus was $127 billion, and trust funds invested $131 billion in Federal securities. Investment may differ somewhat from the surplus due to changes in the amount of cash assets not currently invested. The remainder of debt issued to Government accounts is owned by a number of special funds and revolving funds. The debt held in major accounts and the annual investments are shown in Table 6–5. Debt Held by the Public Net of Financial Assets and Liabilities While debt held by the public is a key measure for examining the role and impact of the Federal Government in the U.S. and international credit markets and for other purposes, it provides incomplete information on the Government’s financial condition. The U.S. Government holds significant financial assets, which must be offset against debt held by the public and other financial liabilities to achieve a more complete understanding of the Government’s financial condition. The acquisition of those financial assets represents a transaction with the credit markets, broadening those markets in a way that is analogous to the demand on credit markets that borrowing entails. For this reason, debt held by the public is also an incomplete measure of the impact of the Federal Government in the U.S. and international credit markets. One transaction that can increase both borrowing and assets is an increase to the Treasury operating cash balance. For example, in 2008, under the Supplementary Financing Program (discussed above), the Government borrowed nearly $300 billion to increase the Treasury operating cash balance held with the Federal Reserve; the cash balance created by the program represents an asset that is available to the Federal Government. Looking at both sides of this transaction—the borrowing to obtain the cash and the asset of the cash holdings—provides much more complete information about the Government’s financial condition than looking at only the borrowing from the public. Another example of a transaction that simultaneously increases borrowing from the public and Federal assets is Government borrowing to issue direct loans to the public. When the direct loan is made, the Government is also acquiring an asset in the form of future payments of principal and interest, net of the Government’s expected losses on the loans. Similarly, when the National Railroad Retirement Investment Trust increases its holdings of non-Federal securities, the borrowing to purchase those securities is offset by the value of the asset holdings. 8 The budget treatment of this fund is further discussed in Chapter 11 of this volume, “Budget Concepts.’’ 61 6. FEDERAL BORROWING AND DEBT The acquisition or disposition of Federal financial assets very largely explains the difference between the deficit for a particular year and that year’s increase in debt held by the public. Debt net of financial assets is a measure that is conceptually closer to the measurement of Federal deficits or surpluses; cumulative deficits and surpluses over time more closely equal the debt net of financial assets than they do the debt held by the public. The magnitude and the significance of the Government’s financial assets has increased greatly since the later part of 2008, as a result of Government actions, such as implementation of TARP, to address the challenges facing the Nation’s financial markets and economy. 9 Table 6–3 presents debt held by the public net of the Government’s financial assets and liabilities, or “net debt.” Treasury debt is presented in the Budget at book value, with no adjustments for the change in economic value that results from fluctuations in interest rates. The balances of credit financing accounts are based on projections of future cash flows. For direct loan financing accounts, the balance generally represents the net present value of anticipated future inflows such as principal and interest payments from borrowers. For guaranteed loan financing accounts, the balance generally represents the net present value of anticipated future outflows, such as default claim payments net of recoveries. NRRIT’s holdings of non-Federal securities are marked to market on a monthly basis. GSE preferred stock is measured at market value. At the end of 2009, debt held by the public was $7,545 billion, or 53.0 percent of GDP. The Government held $898 billion in net financial assets, including a cash balance of $275 billion, net credit financing account balances of $560 9 For more information on the specific actions that the Government is taking, see Chapter 4 of this volume, “Financial Stabilization Efforts and Their Budgetary Effects.” billion, 10 and other assets and liabilities that aggregated to a net asset of $63 billion. Therefore, debt net of financial assets was $6,647 billion, or 46.7 percent of GDP. As shown in Table 6–3, the value of the Government’s net financial assets is projected to increase to $1,133 billion in 2010, due largely to increases in the net balances of credit financing accounts. While debt held by the public is expected to increase from 53.0 percent to 63.6 percent during 2010, net debt is expected to increase from 46.7 percent to 55.8 percent. Debt securities and other financial assets and liabilities do not encompass all the assets and liabilities of the Federal Government. For example, accounts payable occur in the normal course of buying goods and services; Social Security benefits are due and payable as of the end of the month but, according to statute, are paid during the next month; and Federal employee salaries are paid after they have been earned. Like debt securities sold in the credit market, these liabilities have their own distinctive effects on the economy. The Federal Government also has significant holdings of non-financial assets, such as land, mineral deposits, buildings, and equipment. A unique and important asset is the Government’s sovereign power to tax. Federal assets and liabilities are analyzed within the broader conceptual framework of Federal resources and responsibilities in the “Budget and Financial Reporting’’ chapter of this volume. The different types of assets and 10 Consistent with the presentation in the Monthly Treasury Statement of Receipts and Outlays of the United States Government (Monthly Treasury Statement), Table 6-3 presents the net financial assets associated with direct and guaranteed loans in the financing accounts created under the Federal Credit Reform Act of 1990. Therefore, the figures differ by relatively small amounts from the figures in the “Budget and Financial Reporting” chapter of this volume, which reflect all loans made or guaranteed by the Federal Government, including loans originated prior to implementation of the FCRA. Table 6–3. DEBT HELD BY THE PUBLIC NET OF FINANCIAL ASSETS AND LIABILITIES (Dollar amounts in billions) Estimate Actual 2009 2010 Debt Held by the Public: Debt held by the public ................................................ As a percent of GDP ........................................... 7,544.7 53.0% 9,297.7 10,498.3 11,472.1 12,325.7 13,139.3 13,988.4 14,832.8 15,685.8 16,534.8 17,502.2 18,573.1 63.6% 68.6% 70.8% 71.7% 72.2% 72.9% 73.6% 74.2% 74.9% 75.9% 77.2% Financial Assets Net of Liabilities: Treasury operating cash balance ................................. 275.3 270.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 70.0 Credit financing account balances: Direct loan accounts ............................................ Guaranteed loan accounts .................................. TARP equity purchase accounts ......................... Subtotal, credit financing account balances . Government-sponsored enterprise preferred stock ..... Non-Federal securities held by NRRIT ........................ Other assets net of liabilities ........................................ Total, financial assets net of liabilities .................. 489.3 –34.9 105.4 559.8 64.7 22.0 –23.6 898.1 699.6 –41.8 106.0 763.9 102.4 20.7 –23.6 1,133.4 842.2 –33.7 90.8 899.3 115.0 19.7 –23.6 1,080.4 977.4 –21.9 90.8 1,046.3 115.0 18.8 –23.6 1,226.5 1,095.3 –10.1 88.9 1,174.2 115.0 17.9 –23.6 1,353.5 1,203.8 –4.1 84.1 1,283.8 115.0 16.9 –23.6 1,462.1 1,303.0 0.1 79.6 1,382.7 115.0 15.8 –23.6 1,559.9 1,373.4 3.4 74.8 1,451.5 115.0 14.4 –23.6 1,627.4 1,458.3 4.5 65.5 1,528.4 115.0 13.3 –23.6 1,703.1 1,537.1 2.3 54.9 1,594.3 115.0 12.0 –23.6 1,767.6 1,628.0 –1.7 29.0 1,655.2 115.0 10.7 –23.6 1,827.3 1,719.2 –7.3 13.1 1,725.0 115.0 9.5 –23.6 1,895.9 Debt Held by the Public Net of Financial Assets and Liabilities: Debt held by the public net of financial assets ............. As a percent of GDP ........................................... 6,646.6 46.7% 8,164.2 55.8% 9,417.9 10,245.6 10,972.2 11,677.3 12,428.4 13,205.4 13,982.7 14,767.2 15,674.9 16,677.1 61.6% 63.2% 63.9% 64.2% 64.8% 65.5% 66.2% 66.9% 68.0% 69.3% 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 62 ANALYTICAL PERSPECTIVES liabilities are reported annually in the financial statements of Federal agencies and in the Financial Report of the United States Government, prepared by the Treasury Department in coordination with the Office of Management and Budget (OMB). Treasury Debt Nearly all Federal debt is issued by the Department of the Treasury. Treasury meets most of the Federal Government’s financing needs by issuing marketable securities to the public. These financing needs include both the change in debt held by the public and the refinancing—or rollover—of any outstanding debt that matures during the year. Treasury marketable debt is sold at public auctions on a regular schedule and can be bought and sold on the secondary market. Treasury also sells to the public a relatively small amount of nonmarketable securities, such as savings bonds and State and Local Government Series securities (SLUGs).11 Treasury nonmarketable debt cannot be bought or sold on the secondary market. Treasury issues marketable securities in a wide range of maturities, and issues both nominal (non-inflation-indexed) and inflation-indexed securities. Treasury’s marketable securities include: Treasury Bills—Treasury bills have maturities of one year or less from their issue date. In addition to the regular auction calendar of bill issuance, Treasury issues cash management bills on an as-needed basis for various reasons such as to offset the seasonal patterns of the Government’s receipts and outlays. In addition, under the temporary Supplementary Financing Program, discussed above, Treasury issues cash management bills and deposits the proceeds with the Federal Reserve, for the Federal Reserve to use in its efforts to address the financial and economic challenges facing the Nation. Treasury Notes—Treasury notes have maturities of more than one year and up to 10 years. Treasury Bonds—Treasury bonds have maturities of more than 10 years. The longest-maturity securities issued by Treasury are 30-year bonds. Treasury Inflation-Protected Securities (TIPS)— Treasury inflation-protected – or inflation-indexed – securities are coupon issues for which the par value of the security rises with inflation. The principal value is adjusted every six months to reflect inflation as measured by changes in the CPI-U (with a two-month lag). Although the principal value may be adjusted downward if inflation is negative, the principal value will not be reduced below the original par value. Historically, the average maturity of outstanding debt issued by Treasury has been around 60 months, or about five years. As a result of the large volume of bills issued during 2009 to finance the Government’s activities to stabilize the financial markets, the average maturity fell to 53 months at the end of 2009. Treasury intends to gradually 11 Under the State and Local Government Series program, the Treasury offers special low-yield securities to State and local governments and other entities for temporary investment of proceeds of tax-exempt bonds. increase the average maturity of its debt, returning the portfolio closer to its historical average of about five years. In addition to quarterly announcements about the overall auction calendar, Treasury publicly announces in advance the auction of each security. Individuals can participate directly in Treasury auctions or can purchase securities through brokers, dealers, and other financial institutions. Treasury accepts two types of auction bids—competitive and noncompetitive. In a competitive bid, the bidder specifies the yield. A significant portion of competitive bids are submitted by primary dealers, which are banks and securities brokerages that have been designated to trade in Treasury securities with the Federal Reserve System. In a noncompetitive bid, the bidder agrees to accept the yield determined by the auction. At the close of the auction, Treasury accepts all eligible noncompetitive bids and then accepts competitive bids in ascending order beginning with the lowest yield bid until the offering amount is reached. All winning bidders receive the highest accepted yield bid. Treasury marketable securities are highly liquid and actively traded on the secondary market. The liquidity of Treasury securities is reflected in the ratio of bids received to bids accepted in Treasury auctions; the demand for the securities is substantially greater than the level of issuance. Because they are backed by the full faith and credit of the United States Government, Treasury marketable securities are considered to be “risk-free.” Therefore, the Treasury yield curve is commonly used as a benchmark for a wide variety of purposes in the financial markets. Whereas Treasury issuance of marketable debt is based on the Government’s financing needs, Treasury’s issuance of nonmarketable debt is based on the public’s demand for the specific types of investments. Traditionally, outstanding balances of nonmarketable debt have increased from year to year, somewhat reducing the need for marketable borrowing. In 2008 and 2009, there was net disinvestment in nonmarketables, necessitating additional marketable borrowing to finance the redemption of nonmarketable debt. Agency Debt Some Federal agencies, shown in Table 6–4, sell or have sold debt securities to the public and, at times, to other Government accounts. At one time, several other agencies issued debt securities, but this activity has declined significantly over time. Currently, new debt is issued only by the Tennessee Valley Authority (TVA) and the Federal Housing Administration (FHA); the remaining agencies are repaying existing borrowing. At the end of 2009, total agency debt remained nearly unchanged at the end-of–2008 level of $25.5 billion. Agency debt is less than one-half of one percent of Federal debt held by the public. As a result of new borrowing by TVA, agency debt is estimated to increase by $1.0 billion in 2010 and by $0.8 billion in 2011. The predominant agency borrower is the TVA, which had borrowed $25.2 billion from the public as of the end 63 6. FEDERAL BORROWING AND DEBT Table 6–4. AGENCY DEBT (In millions of dollars) Borrowing or repayment (–) of debt 2009 actual 2010 estimate Debt end of 2011 estimate 2011 estimate Borrowing from the public: Housing and Urban Development: Federal Housing Administration ...................................................................................... Architect of the Capitol ........................................................................................................... National Archives .................................................................................................................... –37 –7 –12 * –5 –13 ......... –6 –14 33 133 166 Tennessee Valley Authority: Bonds and notes .............................................................................................................. Lease/leaseback obligations ............................................................................................ Prepayment obligations .................................................................................................... 158 49 –106 1,143 –48 –105 938 –55 –105 24,914 1,302 717 Total, borrowing from the public .......................................................................... 46 973 759 27,265 Borrowing from other funds: Tennessee Valley Authority ...................................................................................................... –4 ......... ......... 2 Total, borrowing from other funds ....................................................................... –4 ......... ......... 2 Total, agency borrowing ........................................................................................ 42 973 759 27,266 * $500,000 or less. of 2009, or 99 percent of the total debt of all agencies. TVA sells debt primarily to finance capital expenditures. The TVA has traditionally financed its capital construction by selling bonds and notes to the public. Since 2000, it has also employed two types of alternative financing methods, lease/leaseback obligations and prepayment obligations. Under the lease/leaseback obligations method, TVA signs contracts to lease some facilities and equipment to private investors and simultaneously leases them back. It receives a lump sum for leasing out its assets, and then leases them back at fixed annual payments for a set number of years. TVA retains substantially all of the economic benefits and risks related to ownership of the assets. 12 Under the prepayment obligations method, TVA’s power distributors may prepay a portion of the price of the power they plan to purchase in the future. In return, they obtain a discount on a specific quantity of the future power they buy from TVA. The quantity varies, depending on TVA’s estimated cost of borrowing. The Office of Management and Budget determined that each of these alternative financing methods is a means of financing the acquisition of assets owned and used by the Government, or of refinancing debt previously incurred to finance such assets. They are equivalent in concept to other forms of borrowing from the public, although under different terms and conditions. The budget therefore records the upfront cash proceeds from these methods as borrowing from the public, not offsetting collections. 13 The budget presenta12 This arrangement is at least as governmental as a “lease-purchase without substantial private risk.’’ For further detail on the current budgetary treatment of lease-purchase without substantial private risk, see OMB Circular No. A–11, Appendix B. 13 This budgetary treatment differs from the treatment in the Monthly Treasury Statement Table 6 Schedule C, and the Combined Statement of Receipts, Outlays, and Balances of the United States Government tion is consistent with the reporting of these obligations as liabilities on TVA’s balance sheet under generally accepted accounting principles. Table 6–4 presents these alternative financing methods separately from TVA bonds and notes to distinguish between the types of borrowing. At the end of 2009, obligations were $1.4 billion for lease/leasebacks and $0.9 billion for prepayments. Obligations for these two types of alternative financing are estimated to continue to decline as TVA fulfills the terms of the contracts. Although the FHA generally makes direct disbursements to the public for default claims on FHA-insured mortgages, it may also pay claims by issuing debentures. Issuing debentures to pay the Government’s bills is equivalent to selling securities to the public and then paying the bills by disbursing the cash borrowed, so the transaction is recorded as being simultaneously an outlay and borrowing. The debentures are therefore classified as agency debt. A number of years ago, the Federal Government guaranteed the debt used to finance the construction of buildings for the National Archives and the Architect of the Capitol, and subsequently exercised full control over the design, construction, and operation of the buildings. These arrangements are equivalent to direct Federal construction financed by Federal borrowing. The construction expenditures and interest were therefore classified as Federal outlays, and the borrowing was classified as Federal agency borrowing from the public. Schedule 3, both published by the Department of the Treasury. These two schedules, which present debt issued by agencies other than Treasury, exclude the TVA alternative financing arrangements. This difference in treatment is one factor causing minor differences between debt figures reported in the Budget and debt figures reported by Treasury. The other factor is adjustments for the timing of the reporting of Federal debt held by the National Railroad Retirement Investment Trust. 64 ANALYTICAL PERSPECTIVES The amount of agency securities sold to the public has been reduced over time by borrowing from the Federal Financing Bank (FFB). The FFB is an entity within the Treasury Department, one of whose purposes is to substitute Treasury borrowing for agency borrowing from the public. It has the authority to purchase agency debt and finance these purchases by borrowing from the Treasury. Agency borrowing from the FFB is not included in gross Federal debt. It would be double counting to add together (a) the agency borrowing from the FFB and (b) the Treasury borrowing from the public that is needed to provide the FFB with the funds to lend to the agencies. Debt Held by Government Accounts Trust funds, and some special funds and public enterprise revolving funds, accumulate cash in excess of current needs in order to meet future obligations. These cash surpluses are generally invested in Treasury debt. New investment by trust funds and other Government accounts fell from $267 billion in 2008 to $148 billion in 2009, its lowest level since the mid-1990s. The decline was due in large part to the effects of current economic and financial conditions on the collections and expenditures of Government accounts that invest in Treasury securities. Investment by Government accounts is estimated to be $158 billion in 2010 and $157 billion in 2011, as shown in Table 6–5. The holdings of Federal securities by Government accounts are estimated to grow to $4,646 billion by the end of 2011, or 31 percent of the gross Federal debt. The percentage is estimated to decline by very small amounts over the next 10 years. The large investment by Government accounts is concentrated among a few funds: the Social Security Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) trust funds; the Medicare Hospital Insurance and Supplementary Medical Insurance trust funds; and four Federal employee retirement funds. These Federal employee retirement funds include the military retirement trust fund, the special fund for uniformed services Medicare-eligible retiree health care, the Civil Service Retirement and Disability Fund (CSRDF), and a separate special fund for Postal Service retiree health benefits. At the end of 2011, these Social Security, Medicare, and Federal employee retirement funds are estimated to own 94 percent of the total debt held by Government accounts. During 2009–2011, the Social Security OASI fund has a large surplus and is estimated to invest a total of $374 billion, 81 percent of total net investment by Government accounts. Over this period, the military retirement trust fund is projected to invest $145 billion, another 31 percent of the total. As a result of economic and programmatic factors, some Government accounts reduce their investments in Federal securities during 2009–2011. During Table 6–5. DEBT HELD BY GOVERNMENT ACCOUNTS 1 (In millions of dollars) Investment or Disinvestment (–) Description 2009 actual 2010 estimate Holdings end of 2011 estimate 2011 estimate Investment in Treasury debt: Legislative Branch: Payments to copyright owners .............................................................................................................. –11 –266 –8 906 Energy: Nuclear waste disposal fund 1 ....................................................................................................................................... Uranium enrichment decontamination fund .................................................................................................................. 1,662 51 –410 109 2,341 308 24,200 5,178 –9,039 2,674 216 2,114 –29,044 –1,050 48 –128 –32,121 –5,273 58 –118 248,537 55,441 2,990 1,868 36 271 67 355 20 319 2,070 2,070 Housing and Urban Development: Federal Housing Administration mutual mortgage fund ............................................................................................... Guarantees of mortgage-backed securities ................................................................................................................. –8,420 –13 –7,828 –108 5,856 –48 8,692 9,101 Interior: Abandoned mine reclamation fund ............................................................................................................................... Bureau of Land Management permanent operating funds ........................................................................................... Environmental improvement and restoration fund ........................................................................................................ Justice: Assets forfeiture fund .............................................................................................................................................. 102 –281 47 406 98 –156 3 –14 194 –171 15 ......... 2,824 1,334 1,185 2,000 Labor: Unemployment trust fund ............................................................................................................................................. Pension Benefit Guaranty Corporation 1 ....................................................................................................................... State: Foreign service retirement and disability trust fund .................................................................................................. –52,804 –132 478 –9,628 1,455 464 –500 –75 421 9,500 14,398 16,219 Health and Human Services: Federal hospital insurance trust fund ........................................................................................................................... Federal supplementary medical insurance trust fund ................................................................................................... Vaccine injury compensation fund ................................................................................................................................ Child enrollment contingency fund ............................................................................................................................... Homeland Security: Aquatic resources trust fund ......................................................................................................................................... Oil spill liability trust fund .............................................................................................................................................. 65 6. FEDERAL BORROWING AND DEBT Table 6–5. DEBT HELD BY GOVERNMENT ACCOUNTS 1—Continued (In millions of dollars) Investment or Disinvestment (–) Description 2009 actual 2010 estimate 2011 estimate Holdings end of 2011 estimate Transportation: Airport and airway trust fund ........................................................................................................................................ Highway trust fund ........................................................................................................................................................ Aviation insurance revolving fund ................................................................................................................................. 156 –1,327 193 1,420 –11,484 226 8 ......... 140 9,257 ......... 1,637 Treasury: Exchange stabilization fund .......................................................................................................................................... Federal Financing Bank ................................................................................................................................................ Comptroller of the Currency assessment fund ............................................................................................................. 2,969 463 68 1,109 2,367 60 1,775 1,570 67 22,700 4,429 1,092 Veterans Affairs: National service life insurance trust fund ...................................................................................................................... Veterans special life insurance fund ............................................................................................................................. Corps of Engineers: Harbor maintenance trust fund ........................................................................................................... –538 2 470 –629 –25 373 –658 –35 373 7,448 1,941 5,713 24,859 14,096 184 71,964 13,118 150 47,734 15,304 19 360,505 155,243 2,067 165 428 181 400 211 213 3,722 3,925 Other Defense-Civil: Military retirement trust fund ......................................................................................................................................... Medicare-eligible retiree health care fund .................................................................................................................... Education benefits fund ................................................................................................................................................ Environmental Protection Agency: Leaking underground storage tank trust fund ............................................................................................................... Hazardous substance trust fund ................................................................................................................................... International Assistance Programs: Overseas Private Investment Corporation .................................................................................................................... 124 208 216 5,239 Office of Personnel Management: Civil service retirement and disability trust fund ........................................................................................................... Postal Service retiree health benefits fund ................................................................................................................... Employees life insurance fund ...................................................................................................................................... Employees health benefits fund ................................................................................................................................... 25,393 2,822 1,748 –196 31,741 7,040 1,684 –635 29,077 7,232 1,881 690 815,062 49,387 39,711 15,424 Social Security Administration: Federal old-age and survivors insurance trust fund 2 .................................................................................................... Federal disability insurance trust fund2 ......................................................................................................................... District of Columbia: Federal pension fund .......................................................................................................................... 145,665 –8,555 –7 105,443 –21,327 146 122,513 –22,728 113 2,524,272 163,877 3,891 Farm Credit System Insurance Corporation: Farm Credit System Insurance fund ............................................................................................................................. 269 410 198 3,490 Federal Communications Commission: Universal service fund .................................................................................................................................................. 266 –2 ......... 6,006 Federal Deposit Insurance Corporation: Federal deposit insurance fund .................................................................................................................................... Senior unsecured debt guarantee fund ........................................................................................................................ FSLIC resolution fund ................................................................................................................................................... –13,860 7,010 –6 1,886 590 18 –13,262 –7,440 8 4,700 160 3,339 National Credit Union Administration: Share insurance fund ................................................................................................................................................... Central liquidity facility .................................................................................................................................................. Postal Service funds2 ........................................................................................................................................................... Railroad Retirement Board trust funds ................................................................................................................................ Securities Investor Protection Corporation 3 ........................................................................................................................ United States Enrichment Corporation fund ........................................................................................................................ Other Federal funds ............................................................................................................................................................. Other trust funds .................................................................................................................................................................. Unrealized discount 1 ........................................................................................................................................................... 409 1,834 2,643 707 1,092 27 337 350 502 728 92 –3,549 45 –33 62 –86 158 ......... 169 96 –700 –55 266 70 205 254 ......... 8,551 2,022 ......... 2,526 1,325 1,701 4,326 3,829 –1,328 Total, investment in Treasury debt1 ................................................................................................................... 148,116 157,818 156,742 4,645,702 Railroad Retirement Board: National Railroad Retirement Investment Trust ............................................................................................................ –4 ......... ......... 2 Total, investment in agency debt 1 ..................................................................................................................... –4 ......... ......... 2 Investment in agency debt: 66 ANALYTICAL PERSPECTIVES Table 6–5. DEBT HELD BY GOVERNMENT ACCOUNTS 1—Continued (In millions of dollars) Investment or Disinvestment (–) Description 2009 actual Total, investment in Federal debt 1 ..................................................................................................................... 148,112 2010 estimate 157,818 2011 estimate 156,742 Holdings end of 2011 estimate 4,645,704 MEMORANDUM Investment by Federal funds (on-budget) ................................................................................................................................. 13,560 20,634 14,954 349,832 Investment by Federal funds (off-budget) ................................................................................................................................ 2,643 –3,549 –700 ......... Investment by trust funds (on-budget) ...................................................................................................................................... –5,704 56,616 42,703 1,609,051 Investment by trust funds (off-budget) ...................................................................................................................................... 137,110 84,116 99,785 2,688,149 Unrealized discount1 ................................................................................................................................................................. 502 ......... ......... –1,328 1 Debt held by Government accounts is measured at face value except for the Treasury zero-coupon bonds held by the Nuclear Waste Disposal Fund and the Pension Benefit Guaranty Corporation (PBGC), which are recorded at market or redemption price; and the unrealized discount on Government account series, which is not distributed by account. Changes are not estimated in the unrealized discount. If recorded at face value, at the end of 2009 the debt figures would be $22.4 billion higher for the Nuclear Waste Disposal Fund and $1.8 billion higher for PBGC than recorded in this table. 2 Off-budget Federal entity. 3 The Securities Investor Protection Corporation (SIPC) was not previously included in the Federal budget. The investment represents the reclassification of SIPC’s entire end-of–2009 holdings from debt held by the public to debt held by Government accounts. In 2009, SIPC disinvested $511 million of its holdings of Federal securities. these years, the Medicare Hospital Insurance trust fund disinvests $70 billion, or 15 percent of the total net investment, and the Unemployment Trust Fund disinvests $63 billion, or 14 percent of the total. Technical note on measurement.—The Treasury securities held by Government accounts consist almost entirely of the Government account series. Most were issued at par value (face value), and the securities issued at a discount or premium were traditionally recorded at par in the OMB and Treasury reports on Federal debt. However, there are two kinds of exceptions. First, Treasury issues zero-coupon bonds to a very few Government accounts. Because the purchase price is a small fraction of par value and the amounts are large, the holdings are recorded in Table 6–5 at par value less unamortized discount. The only two Government accounts that held zero-coupon bonds during the period of this table are the Nuclear Waste Disposal Fund in the Department of Energy and the Pension Benefit Guaranty Corporation (PBGC). The total unamortized discount on zero-coupon bonds was $24.1 billion at the end of 2009. Second, Treasury subtracts the unrealized discount on other Government account series securities in calculating “net Federal securities held as investments of Government accounts.’’ Unlike the discount recorded for zero-coupon bonds and debt held by the public, the unrealized discount is the discount at the time of issue and is not amortized over the term of the security. In Table 6–5 it is shown as a separate item at the end of the table and not distributed by account. The amount was $1.3 billion at the end of 2009. Limitations on Federal Debt Definition of debt subject to limit.—Statutory limitations have usually been placed on Federal debt. Until World War I, the Congress ordinarily authorized a specific amount of debt for each separate issue. Beginning with the Second Liberty Bond Act of 1917, however, the nature of the limitation was modified in several steps until it developed into a ceiling on the total amount of most Federal debt outstanding. This last type of limitation has been in effect since 1941. The limit currently applies to most debt issued by the Treasury since September 1917, whether held by the public or by Government accounts; and other debt issued by Federal agencies that, according to explicit statute, is guaranteed as to principal and interest by the United States Government. The third part of Table 6–2 compares total Treasury debt with the amount of Federal debt that is subject to the limit. Nearly all Treasury debt is subject to the debt limit. A large portion of the Treasury debt not subject to the general statutory limit was issued by the Federal Financing Bank. The FFB is authorized to have outstanding up to $15 billion of publicly issued debt. It issued $14 billion of securities to the Civil Service Retirement and Disability Fund on November 15, 2004, in exchange for an equal amount of regular Treasury securities. The FFB securities have the same interest rates and maturities as the regular Treasury securities for which they were exchanged. The securities mature on dates from June 30, 2009, through June 30, 2019. At the end of 2009, $12 billion of these securities remained outstanding. The Housing and Economic Recovery Act of 2008 created a new type of debt not subject to limit. This debt, termed “Hope Bonds,” is issued by Treasury to the Federal Financing Bank for the HOPE for homeowners program. Treasury issued $30 million in Hope Bonds in 2008 and $463 million in 2009. Outstanding Hope Bonds are projected to be $2.9 billion at the end of 2010 and $4.4 billion at the end of 2011, and then to increase by smaller amounts in subsequent years. The other Treasury debt not subject to the general limit consists almost entirely of silver certificates and other currencies no longer being issued. It was $489 million at the end of 2009 and is projected to gradually decline over time. 6. FEDERAL BORROWING AND DEBT The sole agency debt currently subject to the general limit, $14 million at the end of 2009, is certain debentures issued by the Federal Housing Administration. 14 Some of the other agency debt, however, is subject to its own statutory limit. For example, the Tennessee Valley Authority is limited to $30 billion of bonds and notes outstanding. The comparison between Treasury debt and debt subject to limit also includes an adjustment for measurement differences in the treatment of discounts and premiums. As explained earlier in this chapter, debt securities may be sold at a discount or premium, and the measurement of debt may take this into account rather than recording the face value of the securities. However, the measurement differs between gross Federal debt (and its components) and the statutory definition of debt subject to limit. An adjustment is needed to derive debt subject to limit (as defined by law) from Treasury debt. The amount is relatively small: $15.7 billion at the end of 2009 compared with the total unamortized discount (less premium) of $59.5 billion on all Treasury securities. Changes in the debt limit.—The statutory debt limit has been changed many times. Since 1960, Congress has passed 77 separate acts to raise the limit, extend the duration of a temporary increase, or revise the definition. 15 The most recent debt limit increase, which raised the debt limit by $290 billion to $12,394 billion, was enacted on December 28, 2009. The legislation was enacted shortly before the anticipated reaching of the previous limit of $12,104 billion. Between July 2008 and February 2009, the debt limit was increased three times, in each case before the Government approached the limit. In these three instances, the increase was included in a larger piece of legislation aimed at stabilizing the financial markets and restoring economic growth. The increases provided room under the statutory debt ceiling for the activities authorized by each piece of legislation. On July 30, 2008, the debt limit was increased by $800 billion, to $10,615 billion, as part of the Housing and Economic Recovery Act of 2008. On October 3, 2008, the Emergency Economic Stabilization Act of 2008 increased the debt limit by $700 billion, to $11,315 billion. On February 17, 2009, the American Recovery and Reinvestment Act of 2009 increased the statutory limit by $789 billion, to $12,104 billion. At the dates of enactment, the debt subject to limit was at least a few hundred billion dollars below the previous ceiling. The debt reached or neared the ceiling prior to each of the five increases enacted between 2002 and 2007. The debt limit was increased to $6,400 billion on June 28, 2002, to $7,384 billion on May 27, 2003, to $8,184 billion on November 19, 2004, to $8,965 billion on March 20, 2006, and to $9,815 billion on September 29, 2007. At many times in the past several decades, including 2002, 2003, 2004, and 2006, the Government has reached 14 At the end of 2009, there were also $18 million of FHA debentures not subject to limit. 15 The Acts and the statutory limits since 1940 are listed in Historical Tables, Budget of the United States Government, Fiscal Year 2011, Table 7.3. 67 the statutory debt limit before an increase has been enacted. When this has occurred, it has been necessary for the Treasury Department to take administrative actions to meet the Government’s obligation to pay its bills and invest its trust funds while remaining below the statutory limit. One such measure is the partial or full disinvestment of the Government Securities Investment Fund (G-fund). This fund is one component of the Thrift Savings Plan (TSP), a defined contribution pension plan for Federal employees. The Secretary has statutory authority to suspend investment of the G-fund in Treasury securities as needed to prevent the debt from exceeding the debt limit. Treasury determines each day the amount of investments that would allow the fund to be invested as fully as possible without exceeding the debt limit. The Treasury Secretary is also authorized to declare a debt issuance suspension period, which allows him or her to redeem a limited amount of securities held by the Civil Service Retirement and Disability Fund and stop investing its receipts. The law requires that when any such actions are taken with the TSP G-fund or the CSRDF, the Secretary is required to make the fund whole after the debt limit has been raised by restoring the forgone interest and investing the fund fully. Another measure for staying below the debt limit is disinvestment of the Exchange Stabilization Fund. As the debt nears the limit, Treasury has also suspended acceptance of subscriptions to the State and Local Government Series to reduce unanticipated fluctuations in the level of the debt. In addition to these steps, Treasury has previously replaced regular Treasury securities with borrowing by the FFB, which, as explained above, is not subject to the debt limit. This measure was most recently taken in November 2004, and the outstanding FFB securities began to mature in June 2009. In contrast to recent debt limit increases, which have been in amounts sufficient to last for less than two years, the debt limit was increased three times during the 1990s by amounts large enough to last for two years or more. All three of these increases were enacted as part of a deficit reduction package or a plan to balance the budget and were intended to last a relatively long time: the Omnibus Budget Reconciliation Act of 1990; the Omnibus Budget Reconciliation Act of 1993; and the Balanced Budget Act of 1997. The 1997 increase lasted until 2002. Methods of changing the debt limit.—The statutory limit is usually changed by normal legislative procedures. Under the rules adopted by the House of Representatives, it can also be changed as a consequence of the annual Congressional budget resolution, which is not itself a law. The budget resolution includes a provision specifying the appropriate level of the debt subject to limit at the end of each fiscal year. The rule provides that, when the budget resolution is adopted by both Houses of the Congress, the vote in the House of Representatives is deemed to have been a vote in favor of a Joint Resolution setting the statutory limit at the level specified in the budget resolution. The Joint Resolution is transmitted to the Senate for further action, where it may be amended to change the debt limit provision or in any other way. If it passes both 68 ANALYTICAL PERSPECTIVES Houses of the Congress, it is sent to the President for signature. The House of Representatives first adopted this rule for 1980, although it was not included in the rules for several years before 2003. The rule was last used for the 2007 debt limit increase. Federal funds financing and the change in debt subject to limit.—The change in debt held by the public, as shown in Table 6–2, and the change in debt net of financial assets are determined primarily by the total Government deficit or surplus. The debt subject to limit, however, includes not only debt held by the public but also debt held by Government accounts. The change in debt subject to limit is therefore determined both by the factors that determine the total Government deficit or surplus and by the factors that determine the change in debt held by Government accounts. The effect of debt held by Government accounts on the total debt subject to limit can be seen in the second part of Table 6–2. The change in debt held by Government accounts results in 21 percent of the estimated total increase in debt subject to limit from 2010 through 2020. The budget is composed of two groups of funds, Federal funds and trust funds. The Federal funds, in the main, are derived from tax receipts and borrowing and are used for the general purposes of the Government. The trust funds, on the other hand, are financed by taxes or other receipts dedicated by law for specified purposes, such as for paying Social Security benefits or making grants to State governments for highway construction. 16 A Federal funds deficit must generally be financed by borrowing, which can be done either by selling securities to the public or by issuing securities to Government accounts that are not within the Federal funds group. Federal funds borrowing consists almost entirely of Treasury securities that are subject to the statutory debt limit. Very little debt subject to statutory limit has been issued for reasons except to finance the Federal funds deficit. The change in debt subject to limit is therefore determined primarily by the Federal funds deficit, which is equal to the difference between the total Government deficit or surplus and the trust fund surplus. Trust fund surpluses are almost entirely invested in securities subject to the debt limit, and trust funds hold most of the debt held by Government accounts. The trust fund surplus reduces the total budget deficit or increases the total budget surplus, decreasing the need to borrow from the public or increasing the ability to repay borrowing from the public. When the trust fund surplus is invested in Federal securities, the debt held by Government accounts increases, offsetting the decrease in debt held by the public by an equal amount. Thus, there is no net effect on gross Federal debt. Table 6–6 derives the change in debt subject to limit. In 2009 the Federal funds deficit was $1,540 billion, and 16 For further discussion of the trust funds and Federal funds groups, see Chapter 27 of this volume, “Trust Funds and Federal Funds.’’ Table 6–6. FEDERAL FUNDS FINANCING AND CHANGE IN DEBT SUBJECT TO STATUTORY LIMIT (In billions of dollars) Description Actual 2009 Estimate 2010 2011 2012 Change in Gross Federal Debt: Federal funds deficit (+) .......................................................... 1,540.0 1,613.9 1,372.4 1,010.9 Other transactions affecting borrowing from the public— Federal funds1 .................................................................... 331.8 198.6 –65.0 146.2 Increase (+) or decrease (–) in Federal debt held by Federal funds .................................................................................. 16.2 17.1 14.3 35.4 Adjustments for trust fund surplus/deficit not invested/ disinvested in Federal securities2 ....................................... 1.2 81.2 35.8 –0.9 Change in unrealized discount on Federal debt held by Government accounts ........................................................ 0.5 ......... ......... ......... Total financing requirements ...................................... 2013 2014 2015 2016 2017 2018 2019 2020 942.2 915.4 993.7 1,023.5 1,032.9 1,051.9 1,139.5 1,202.2 127.2 108.9 98.2 68.1 76.1 65.3 60.3 69.2 49.4 55.5 60.1 63.5 66.4 70.4 54.2 57.1 –1.0 –1.0 –1.0 –1.4 –1.1 –1.3 –1.3 –1.2 ......... ......... ......... ......... ......... ......... ......... ......... 1,889.8 1,910.8 1,357.4 1,191.6 1,117.8 1,078.8 1,151.0 1,153.7 1,174.3 1,186.2 1,252.7 1,327.3 Change in Debt Subject to Limit: Change in gross Federal debt ................................................ 1,889.8 1,910.8 1,357.4 1,191.6 1,117.8 1,078.8 1,151.0 1,153.7 1,174.3 1,186.2 1,252.7 1,327.3 Less: increase (+) or decrease (–) in Federal debt not subject to limit ................................................................................ –1.5 1.7 0.5 –1.3 –1.3 –0.6 –0.9 –1.2 –1.2 –1.0 –0.7 0.5 Less: change in adjustment for discount and premium 3 ........ –2.0 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... Total, change in debt subject to limit ......................... 1,893.3 1,909.1 1,356.9 1,192.9 1,119.1 1,079.4 1,151.8 1,154.9 1,175.6 1,187.2 1,253.4 1,326.8 ADDENDUM Debt subject to statutory limit 4 .................................................... 11,853.1 13,762.2 15,119.1 16,312.0 17,431.1 18,510.5 19,662.4 20,817.2 21,992.8 23,180.0 24,433.4 25,760.1 1 Includes Federal fund transactions that correspond to those presented in Table 6–2, but that are for Federal funds alone with respect to the public and trust funds. 2Includes trust fund holdings in other cash assets and changes in the investments of the National Railroad Retirement Investment Trust in non-Federal securities. 3 Consists of unamortized discount (less premium) on public issues of Treasury notes and bonds (other than zero-coupon bonds). 4 The statutory debt limit is $12,394 billion. 69 6. FEDERAL BORROWING AND DEBT other factors increased financing requirements by $332 billion. The net financing disbursements of credit financing accounts increased financing requirements by $406 billion, partly offset by a decrease in the Treasury operating cash balance, which reduced financing requirements by $96 billion. Other factors increased financing requirements by $22 billion. In addition, special funds and revolving funds, which are part of the Federal funds group, invested a net of $16 billion in Treasury securities. An adjustment is also made for the difference between the trust fund surplus or deficit and the trust funds’ investment or disinvestment in Federal securities (including the changes in the National Railroad Retirement Investment Trust’s investments in non-Federal securities). As a net result of all these factors, $1,890 billion in financing was required, increasing gross Federal debt by that amount. Since Federal debt not subject to limit decreased by $1.5 billion and the adjustment for discount and premium changed by $2.0 billion, the debt subject to limit increased by $1,893 billion, while debt held by the public increased by $1,742 billion. The debt subject to limit is estimated to increase to $13,762 billion by the end of 2010, above the current limit of $12,394 billion. The estimated increases in the debt subject to limit are caused by the continued Federal funds deficit, supplemented by the other factors shown in Table 6–6. While debt held by the public increases by $6,444 billion from the end of 2009 through 2015, debt subject to limit increases by $7,809 billion. Debt Held by Foreign Residents During most of American history, the Federal debt was held almost entirely by individuals and institutions within the United States. In the late 1960s, foreign holdings were just over $10 billion, less than 5 percent of the total Federal debt held by the public. Foreign holdings began to grow significantly starting in 1970. This increase has been almost entirely due to decisions by foreign central banks, corporations, and individuals, rather than the direct marketing of these securities to foreign residents. Foreign holdings of Federal debt are presented in Table 6–7. At the end of 2009, foreign holdings of Treasury debt were $3,497 billion, which was 46 percent of the total debt held by the public.17 Foreign central banks owned 76 percent of the Federal debt held by foreign residents; private 17 The debt calculated by the Bureau of Economic Analysis, Department of Commerce, is different, though similar in size, because of a different method of valuing securities. Table 6–7. FOREIGN HOLDINGS OF FEDERAL DEBT (Dollar amounts in billions) Debt held by the public Fiscal Year Percentage foreign Foreign 1 Total Change in debt held by the public Total 2 Foreign 1 1965 .................................................... 260.8 12.3 4.7 3.9 0.3 1970 .................................................... 1975 .................................................... 283.2 394.7 14.0 66.0 5.0 16.7 5.1 51.0 3.8 9.2 1980 .................................................... 1985 .................................................... 711.9 1,507.3 121.7 222.9 17.1 14.8 71.6 200.3 1.4 47.3 1990 .................................................... 1995 .................................................... 2,411.6 3,604.4 463.8 820.4 19.2 22.8 220.8 171.3 72.0 138.4 2000 .................................................... 2001 .................................................... 2002 .................................................... 2003 .................................................... 2004 .................................................... 3,409.8 3,319.6 3,540.4 3,913.4 4,295.5 1,057.9 1,005.5 1,200.8 1,454.2 1,798.7 31.0 30.3 33.9 37.2 41.9 –222.6 –90.2 220.8 373.0 382.1 –223.5 –52.3 195.3 253.4 344.5 2005 .................................................... 4,592.2 1,930.6 42.0 296.7 131.9 2006 .................................................... 4,829.0 2,027.3 42.0 236.8 96.7 2007 .................................................... 5,035.1 2,237.2 44.4 206.2 209.9 2008 .................................................... 5,803.1 2,799.5 48.2 767.9 562.3 2009 .................................................... 7,544.7 3,497.0 46.4 1,741.7 697.5 1 Estimated by Treasury Department. These estimates exclude agency debt, the holdings of which are believed to be small. The data on foreign holdings are recorded by methods that are not fully comparable with the data on debt held by the public. Projections of foreign holdings are not available. The estimates include the effects of benchmark revisions in 1984, 1989, 1994, and 2000, and annual June benchmark revisions for 2002–2009. 2 Change in debt held by the public is defined as equal to the change in debt held by the public from the beginning of the year to the end of the year. 70 investors owned nearly all the rest. This 76 percent represents a significant increase from the 67 percent held by foreign central banks at the end of 2008. All the Federal debt held by foreign residents is denominated in dollars. Although the amount of Federal debt held by foreign residents has grown greatly over this period, the proportion that foreign residents own, after increasing abruptly in the very early 1970s, remained about 15–20 percent until the mid-1990s. During 1995–97, however, growth in foreign holdings accelerated, reaching 33 percent by the end of 1997. Federal debt held by foreign residents resumed growth in the current decade, increasing from 34 percent at the end of 2002 to 42 percent at the end of 2004 and to 48 percent at the end of 2008. In 2009, foreign holdings fell to 46 percent. The increase in foreign holdings was about 40 percent of total Federal borrowing from the public in 2009 and 52 percent over the last five years. At the end of 2009, the nations holding the largest shares of U.S. Federal debt were China, which held 23 percent of all foreign holdings, Japan, which held 21 percent, and the United Kingdom, which held 7 percent. Foreign holdings of Federal debt are around 20 percent of the foreign-owned assets in the United States, depending on the method of measuring total assets. The foreign purchases of Federal debt securities do not measure the full impact of the capital inflow from abroad on the market for Federal debt securities. The capital inflow supplies additional funds to the credit market generally, and thus affects the market for Federal debt. For example, the capital inflow includes deposits in U.S. financial intermediaries that themselves buy Federal debt. ANALYTICAL PERSPECTIVES Federal, Federally Guaranteed, and Other Federally Assisted Borrowing The Government’s effects on the credit markets arise not only from its own borrowing but also from the direct loans that it makes to the public and the provision of assistance to certain borrowing by the public. The Government guarantees various types of borrowing by individuals, businesses, and other non-Federal entities, thereby providing assistance to private credit markets. The Government is also assisting borrowing by States through the Build America Bonds program, which subsidizes the interest that States pay on such borrowing. In addition, the Government has established private corporations—Government-Sponsored Enterprises—to provide financial intermediation for specified public purposes; it exempts the interest on most State and local government debt from income tax; it permits mortgage interest to be deducted in calculating taxable income; and it insures the deposits of banks and thrift institutions, which themselves make loans. Federal credit programs and other forms of assistance, including the substantial Government efforts to support the credit markets during the recent financial turmoil, are discussed in Chapter 22 of this volume, “Credit and Insurance.’’ Detailed data are presented in tables at the end of that chapter. PERFORMANCE AND MANAGEMENT 71 7. DELIVERING HIGH-PERFORMANCE GOVERNMENT For too long, Washington has not responsibly managed the tax dollars entrusted it by the American people. Decision-makers opened their doors and ears to those able to afford lobbyists while it became harder and harder for everyone else to learn what Government was doing, what it was accomplishing, and for whom. Programs and practices were allowed to persist out of inertia and not because they were delivering the results expected of them, while others that seemed to work were rarely assessed to confirm their impact and find ways to enhance their value. Over the last two decades, as the private sector was utilizing new management techniques and information technologies to boost productivity, cut costs, and deliver previously unheard of levels of customer service, the public sector lagged conspicuously behind. The American people deserve better. They deserve a Federal Government that respects their tax dollars, and uses them effectively and efficiently. They deserve a Federal Government that is transparent, fair, and responsive. And they deserve a Government that is constantly looking to streamline what works and to eliminate what does not. The Administration is committed to revolutionizing how the Federal Government runs on behalf of the American people. The President appointed the Nation’s first Chief Performance Officer, and the Administration has taken steps to bring more transparency to, for instance, how Federal information technology (IT) dollars are spent to improve customer service for those using citizenship services. At the same time, the Administration has combed the Budget to find programs that are duplicative, outdated, or just not working. To improve the performance of the Federal Government in the coming fiscal year and in years to come, the Administration will pursue three mutually reinforcing performance management strategies: 1. Use Performance Information to Lead, Learn, and Improve Outcomes. Agency leaders set a few high-priority goals and use constructive data-based reviews to keep their organizations on track to deliver on these objectives. 2. Communicate Performance Coherently and Concisely for Better Results and Transparency. The Federal Government will candidly communicate to the public the priorities, problems, and progress of Government programs, explaining the reasons behind past trends, the impact of past actions, and future plans. In addition, agencies will strengthen their capacity to learn from experience and experiments. 3. Strengthen Problem-Solving Networks. The Federal Government will tap into and encourage practitioner communities, inside and outside Government, to work together to improve outcomes and performance management practices. Use Performance Information to Lead, Learn, and Improve Outcomes Government operates more effectively when it focuses on outcomes, when leaders set clear and measurable goals, and when agencies use measurement to reinforce priorities, motivate action, and illuminate a path to improvement. This outcome-focused performance management approach has proved a powerful way to achieve large performance gains in other countries, several States, an increasing number of local governments, and a growing number of Federal programs. For instance, the State of Washington pushed down the re-victimization rate of children harmed in their homes from 13.3 percent to 6.5 percent over the last seven years by monitoring how changes in agency action affected children previously harmed and by adjusting policies accordingly to make improvements for the children. New York City and, subsequently, the City of Los Angeles saw crime rates plummet after each adopted CompStat meetings. These are frequently scheduled, goal-focused, data-driven meetings at which precinct captains are expected to discuss statistics about outcomes (e.g., crime), cost drivers (e.g., overtime), unwanted side effects (e.g., police abuse complaints), patterns of problems in the precinct, probable causes, apparent effects of prior actions, and future actions planned. Similarly, the U.S. Coast Guard’s Marine and Marine Environmental Protection programs work to reduce maritime deaths and injuries, large oil spills, and chemical discharge incidents by regularly analyzing their data to identify contributory causes and by testing different prevention options to identify and then implement those that work best. Outcome-focused performance management can transform the way government works, but its success is by no means assured. The ultimate test of an effective performance management system is whether it is used, not the number of goals and measures produced. Federal performance management efforts have not fared well on this test. The Government Performance and Results Act of 1993 (GPRA) and the Performance Assessment Rating Tool (PART) reviews increased the production of measurements in many agencies, resulting in the availability of better measures than previously existed; however, these initial successes have not lead to increased use. With a few exceptions, Congress does not use the performance goals and measures agencies produce to conduct 73 74 oversight, agencies do not use them to evaluate effectiveness or drive improvements, and they have not provided meaningful information for the public. Studies of past Federal performance management efforts have identified several problematic practices. For example, senior leaders at Federal agencies have historically focused far more attention on new policy development than on managing to improve outcomes. Mechanisms used to motivate change created serious unwanted side effects or linked to the wrong objectives. Central office reviews mandated measurements inappropriate to the situation, and performance reports seldom answered the questions of key audiences. Moreover, the annual reporting requirement of GPRA and the five-year program PART review cycle did not provide agencies the fast feedback needed to assess if delivery efforts were on track or to diagnose why they were or were not. Neither GPRA nor PART precluded more frequent measurement to inform agency action, but only a few agencies opted to supplement their annual measurement cycle with the kinds of data and analysis that fueled the private sector performance revolution. The Administration is initiating several new performance management actions and is tasking a new generation of performance leaders to implement successful performance management practices. To encourage senior leaders to deliver results against the most important priorities, the Administration launched the High-Priority Performance Goal initiative in June 2009, asking agency heads to identify and commit to a limited number of priority goals, generally three to eight, with high value to the public. The goals must have ambitious, but realistic, targets to achieve within 18 to 24 months without need for new resources or legislation, and well-defined, outcomes-based measures of progress. These goals are included in this Budget. Some notable examples are: • Assist 3 million homeowners who are at risk of losing their homes due to foreclosure (Secretaries Donovan and Geithner); • Reduce the population of homeless veterans to 59,000 in June, 2012 (Secretaries Donovan and Shinseki); and • Double renewable energy generating capacity (excluding conventional hydropower) by 2012 (Secretary Chu). In the coming year, the Administration will ask agency leaders to carry out a similar priority-setting exercise with top managers of their bureaus to set bureau-level goals and align those goals, as appropriate, with agencywide priority goals. These efforts are not distinct from the goal-setting and measurement expectations set forth in the GPRA, but rather reflect an intention to translate GPRA from a reporting exercise to a performanceimproving practice across the Federal Government. By making agencies’ top leaders responsible for specific goals that they themselves have named as most important, the ANALYTICAL PERSPECTIVES Administration is dramatically improving accountability and the chances that Government will deliver results on what matters most. Agency leaders will put in place rigorous, constructive quarterly feedback and review sessions to help agencies reach their targets, building on lessons from successful public sector performance management models in other governments and in some Federal agencies. In addition, the Office of Management and Budget (OMB) will initiate quarterly performance updates to help senior Federal Government leaders stay focused on driving to results. OMB will support the agencies with tools and assistance to help them succeed. In addition, OMB will help coordinate inter-agency efforts in select situations where collaboration is critical to success. Communicate Performance Coherently and Concisely for Better Results and Transparency Transparent, coherent performance information contributes to more effective, efficient, fair, and responsive government. Transparency not only promotes public understanding about the actions that government is working to accomplish, but also supports learning across government agencies, stimulates idea flow, enlists assistance, and motivates performance gain. In addition, transparency can strengthen public confidence in government, especially when government does more than simply herald its successes but also provides candid assessments of problems encountered, their likely causes, and actions being taken to address problems. The Administration is initiating several new performance communication actions. First, the Administration will identify and eliminate performance measurements and documents that are not useful. Second, what remains will be used. Goals contained in plans and budgets will communicate concisely and coherently what government is trying to accomplish. Agency, cross-agency, and program measures, including those developed under GPRA and PART that proved useful to agencies, the public, and OMB, will candidly convey how well the Government is accomplishing the goals. Combined performance plans and reports will explain why goals were chosen, the size and characteristics of problems Government is tackling, factors affecting outcomes that Government hopes to influence, lessons learned from experience, and future actions planned. Going forward, agencies will take greater ownership in communicating performance plans and results to key audiences to inform their decisions. Making performance data useful to all audiences—congressional, public, and agency leaders—improves both program performance and reporting accuracy. To that end, the Administration will redesign public access to Federal performance information. The Administration will create a Federal performance portal that provides a clear, concise picture of Federal goals and measures by theme, by agency, by program, and by program type. It will be designed to increase transparency and coherence for the public, motivate improve- 75 7. PERFORMANCE PLANNING ment, support collaboration, and enhance the ability of the Federal Government and its service delivery partners to learn from others’ experiences and from research experiments. The performance portal will also provide easy links to mission-support management dashboards, such as the IT dashboard (http://it.usaspending.gov/) launched in the summer of 2009, and similar dashboards planned for other common Government functions including procurement, improper payments, and hiring. While performance information is critical to improving Government effectiveness and efficiency, it can answer only so many questions. More sophisticated evaluation methods are required to answer fundamental questions about the social, economic, or environmental impact of programs and practices, isolating the effect of Government action from other possible influencing factors. OMB recently launched an Evaluation Initiative to promote rigorous impact evaluations, build agency evaluation capacity, and improve transparency of evaluation findings. These evaluations are a powerful complement to agency performance improvement efforts and often benefit from the availability of performance data. OMB will make information about all Federal evaluations focused on the impacts of programs and program practices available online through the performance portal. The Evaluation Initiative is explained in more detail in Chapter 8, “Program Evaluation,” in this volume. Strengthen Problem-Solving Networks The third strategy the Administration will pursue to improve performance management involves the extensive use of existing and new practitioner networks. Federal agencies do not work in isolation to improve outcomes. Every Federal agency and employee depends on and is supported by others—other Federal offices, other levels of government, for-profit and not-for-profit organizations, and individuals with expertise or a passion about specific problems. New information technologies are transforming our ability to tap vast reservoirs of capacity beyond the office. At the same time, low-technology networks such as professional associations and communities of practice are also able to solve problems, spur innovation, and diffuse knowledge. The Administration will create cross-agency teams to tackle shared problems and reach out to existing networks, both inside and outside Government, to find and develop smarter performance management methods and to assist others in their application. It will tap their intelligence, ingenuity, and commitment, as well as their dissemination and delivery capacity. The Performance Improvement Council (PIC), made up of Performance Improvement Officers from every Federal agency, will function as the hub of the performance management network. OMB will work with the PIC to create and advance a new set of Federal performance management principles, refine a Government-wide performance management implementation plan, and identify and tackle specific problems as they arise. The PIC will also serve as a home for Federal communities of practice, some new and some old. Some communities of practice will be organized by problems, some by program type such as regulatory programs, and some by methods such as quality management. These communities will develop tools and provide expert advice and assistance to their Federal colleagues. In addition, the PIC will address the governance challenge of advancing progress on high-priority problems that require action by multiple agencies. The Administration will also turn to existing external networks—including State and local government associations, schools of public policy and management, think tanks, and professional associations—to enlist their assistance on specific problems and in spreading effective performance management practices. AGENCY HIGH PRIORITY PERFORMANCE GOALS The following pages include challenging, near-term performance improvements agencies will strive to deliver for the American people using existing legislative authority and budgetary resources. The high priority performance goals listed here are therefore a subset of the fuller suite of goals reflected in agencies’ performance plans, which also include long-term strategic goals, a fuller set of agency-wide and program goals, and goals dependent on new legislation and additional funding. In addition, agencies identified performance measures under the American Recovery and Reinvestment Act, including estimates of jobs created and retained. These are shown on the Recovery Act website (http://www.recovery.gov). Also, given the nature of their work, national security agencies were given greater discretion in choosing which outcome-focused goals to include among the high priority performance goals publicly listed. Department of Agriculture Mission: The Department of Agriculture (USDA) provides leadership on food, agriculture, natural resources, rural development and related issues based on sound public policy, the best available science, and efficient management. High Priority Performance Goals As part of developing the 2011 Budget and performance plan, the Department has identified the following limited number of high priority performance goals that will be a particular focus over the next two years. These goals are a subset of those used to regularly monitor and report performance. To view a full set of performance information please visit www.usda.gov. • USDA will assist rural communities to increase prosperity so they are self sustaining, re-populating and economically thriving. – By 2011, increase the prosperity of rural communities by concentrating and strategically investing in 8-10 regions, resulting in the creation of strong local and regional economies, with a partic- 76 ANALYTICAL PERSPECTIVES ular emphasis on food systems, renewable energy, broadband-based economies, and rural recreation. High Priority Performance Goals – By the end of 2011, accelerate the protection of clean, abundant water resources by implementing high impact targeted (HIT) practices on three million acres of national forest and private working lands in priority landscapes. The Commerce Department develops a 5-year strategic plan, as well as an annual performance plan and annual report on our progress. As part of developing the 2011 Budget and performance plan, the Department has also identified a limited number of high priority performance goals that will be a particular focus over the next two years. These goals are a subset of those used to regularly monitor and report performance. To view the full set of performance information please visit: http://www.osec. doc.gov/bmi/budget/budgetsub_perf_strategicplans.htm. • USDA will help America promote agricultural production and biotechnology exports as America works to increase food security. • 2010 Decennial Census: Effectively execute the 2010 Census, and provide the States with accurate and timely redistricting data. – By the end of 2011, increase the number of provinces in Afghanistan in which women and children are food secure from 10 to 14, ensuring food security for 41 percent of the country in support of the President’s Afghanistan and Pakistan strategy. – Maintain at zero the number of incidents in which regulated genetically engineered products are comingled with non-regulated products in commercial channels, thereby protecting global markets for organic and biotech products. – By the end of 2011, reduce non-tariff trade barriers for five major markets and increase agriculture exports by $2 billion. – Timely completion of milestones to conduct the Census and provide redistricting data as mandated by law. – Achieve an accuracy level of an overall net coverage error at the national level of less than onehalf of one percent. • USDA will ensure our national forests and private working lands enhance our water resources and are conserved, restored, and made more resilient to climate change. • USDA will ensure that all of America’s children have access to safe, nutritious and balanced meals. – By the end of 2011, reduce the number of households with children who experience very low food security by 100,000. – By 2011, propose national standards that will result in improved quality of food sold in schools throughout the school day. – By the end of 2011, increase the availability of healthy foods by strategically investing in six food deserts by providing incentives for food entrepreneurs to establish or expand markets and grocery stores, including farmers markets, that make healthy foods available to low-income Americans. – By 2011, USDA will reduce the number of Salmonella illnesses by 50,000 and reduce illness costs by about $900 million as a result of FSIS regulated establishments reducing the presence of Salmonella. Department of Commerce Mission: The Department of Commerce creates the conditions for economic growth and opportunity by promoting innovation, entrepreneurship, competitiveness, and stewardship. • Intellectual Property Protection: Reduce patent pendency for first action and for final actions from the end of 2009 levels of 25.8 and 34.6 months respectively by the end of 2011, as well as the patent backlog. • Coastal and Ocean Resource Management: Ensure environmentally and economically resilient oceans, coasts, and Great Lakes communities, with healthy and productive ecosystems. – Ensure that all 46 Federal fishery management plans have required catch limits to end overfishing in place by the end of 2011. – Reduce the number of stocks subject to overfishing to zero by the end of 2011. – Improve the Fish Stock Sustainability Index (FSSI) to 586 by the end of 2011. The FSSI is a measure of stock assessments and overfishing. The target represents a four-percent increase above the FSSI score at the end of 2009. (Because the FSSI does not score a stock as “not subject to overfishing” until such status has been confirmed through subsequent survey and analysis, the improvements sought in overfishing will not be fully reflected in the 2011 FSSI level.) • Broadband Access: Efficiently and effectively implement the Broadband Technology Opportunities Program, to expand service to communities in a cost-effective manner that maximizes impacts on economic growth, education, health care, and public safety. • Export Opportunities: Increase the annual number of Small and Medium-size Enterprises (SMEs) the Commercial Service successfully assists in exporting to a 2nd or additional country by 40 percent from 2009 to 2011. 77 7. PERFORMANCE PLANNING • Sustainable Manufacturing and Building Practices: Raise the number of firms adopting sustainable manufacturing processes through the Manufacturing Extension Partnership by 250 by the end of 2011. Raise the percentage of construction projects involving buildings or structures funded by Economic Development Assistance Programs that are certified by the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) or a comparable third-party certification program to 12 percent. Department of Defense Mission: The mission of the Department of Defense (DOD) is to provide the military forces needed to deter war and to protect the security of the United States. Since the creation of America’s first army in 1775, the Department and its predecessor organizations have evolved into a global presence of three million individuals, stationed in more than 140 countries and dedicated to defending the United States by deterring and defeating aggression and coercion in critical regions. The Department embraces the core values of leadership, professionalism, and technical knowledge. Its employees are dedicated to duty, integrity, ethics, honor, courage, and loyalty. High Priority Performance Goals As part of developing the 2011 Budget and performance plan, the Department has identified a limited number of high priority goals that will be a particular focus over the next two years. These goals are a subset of those used to regularly monitor and report performance. To view the full set of performance information please visit: http:// www.defenselink.mil/comptroller/. • Increase Energy Efficiencies. – By 2011, DOD will reduce average building energy consumption by 18 percent from the 2003 baseline of 116,134 BTUs per gross square foot. – By 2011, DOD will produce or procure renewable energy equal to 14.3 percent of its annual electric energy usage. • Reform the DOD Personnel Security Clearance Process. – Beginning in 2010, DOD will adjudicate the fastest 90 percent of initial top secret and secret personnel security clearance cases within 20 days. – By 2011, 90 percent of all DOD national security investigations will be received via electronic delivery. • Create the Next Generation of Electronic Record System—Virtual Lifetime Electronic Record (VLER) by 2012. This interagency initiative will create a more effective means for electronically sharing health and benefits data of servicemembers and veterans. – By 2011, DOD will implement Virtual Lifetime Electronic Record (VLER) production capability in at least three sites. • Streamline the hiring process. – By 2011, DOD will improve its external civilian hiring end-to-end timeline to 112 days. • Implement DOD-wide in-sourcing initiative. – By 2011, DOD will decrease reliance on contract services by increasing the in-house civilian or military workforce by 19,844 authorizations for personnel. • Spend American Reinvestment and Recovery Act (ARRA) funds quickly and effectively. – By 2010, DOD will have obligated at least 95 percent of DOD Facilities, Sustainment, Restoration, and Modernization budget authority, funded by ARRA. – By 2010, DOD will have obligated at least 95 percent of DOD Research, Development, Test, and Evaluation budget authority, funded by ARRA. – By 2011, DOD will have obligated at least 95 percent of DOD Military Construction budget authority, funded by ARRA. – By 2011, DOD will have obligated at least 69 percent of DOD Homeowners Assistance Fund budget authority, funded by ARRA. • Provide effective business operations and ensure logistics support to Overseas Contingency Operations. – Beginning in 2010, DOD will maintain a 98 percent fill rate for the Joint Contracting Command (JCC) supporting contingency operations. – By 2011, DOD will maintain an assignment rate of 85 percent of required Contracting Officer Representatives (CORs) supporting Iraqi contingency operations. – By 2011, DOD will maintain an assignment rate of 85 percent of required Contracting Officer Representatives (CORs) supporting Afghan contingency operations. – By 2011, DOD will reduce the percent of in-theater Army central disbursements, using cash, to two percent. – By 2011, DOD will increase the percent of contract actions, tied to entitlements and disbursements in the systems of record, to 95 percent. • Increase the audit readiness of individual DOD components. – By 2011, 80 percent of DOD Statement of Budgetary Resources Appropriations Received (line 3A) will be reviewed, verified for accuracy, and “validated” or approved as audit-ready. – By 2011, 14 percent of DOD Statement of Budgetary Resources will be validated as audit-ready. – By 2011, 30 percent of DOD Funds Balance with the Treasury will be validated as audit-ready. 78 ANALYTICAL PERSPECTIVES – By 2011, 45 percent of DOD mission-critical assets (Real Property, Military Equipment, General Equipment, Operating Materials and Supplies, and Inventory balances) will be validated as audit-ready for existence and completeness. • Reform the DOD Acquisition Process. – By 2011, DOD will reduce average cycle time for Major Defense Acquisition Programs (MDAPs) starting in 2002 and later to 72 months. – Beginning in 2010, DOD will ensure the number of breaches—significant cost overruns—for Major Defense Acquisition Programs (MDAPs) is equal to or less than the previous fiscal year. – Beginning in 2010, DOD will increase, by one percent annually, the amount of contract obligations that are competitively awarded. – By 2011, DOD will decrease reliance on contract services in acquisition functions by increasing the in-house civilian and/or military workforce by 4,765 authorizations for personnel. – By 2011, DOD will increase the total number of DOD civilian and military personnel performing acquisition functions by 10,025 total personnel (end-strength). – For 2010 and 2011, DOD will increase the percent of positions filled with personnel meeting Level II certification requirements from the previous fiscal year. – For 2010 and 2011, DOD will increase the percent of positions filled with personnel meeting Level III certification requirements from the previous fiscal year. • Enhance the security cooperation workforce. – By 2011, DOD will increase the percent of incumbents that have been trained in security assistance in positions that require security assistance training to 95 percent or greater. Department of Education Mission: The U.S. Department of Education seeks to promote student achievement and preparation for global competitiveness by fostering educational excellence and ensuring equal access. President Obama’s vision is that by 2020, America will again have the best-educated, most competitive workforce in the world with the highest proportion of college graduates of any country. To do this, the United States must also close the achievement gap, so that all youth—regardless of their backgrounds—graduate from high school ready to succeed in college and careers. High Priority Performance Goals As part of developing the 2011 Budget and performance plan, the Department of Education has identified a limited number of high-priority performance goals that will be a particular focus over the next two years. These goals, which will help measure the success of the Department’s cradle-to-career education strategy, reflect the importance of teaching and learning at all levels of the education system. These goals are consistent with the Department’s 5-year strategic plan that is under development and will be used to regularly monitor and report progress. To view the full set of performance information, please visit www.ed.gov. Educational Outcomes • Early Learning: All States collecting school readiness data and improving their overall and disaggregated school readiness outcomes. • K-12: All States improving overall and disaggregated high-school graduation rates. • College: Nation improving overall and disaggregated college completion rate. Key Initiatives • Evidence Based Policy: Implementation of a comprehensive approach to using evidence to inform the Department’s policies and major initiatives, including: – Increase by 2/3 the number of Department discretionary programs that use evaluation, performance measures and other program data for continuous improvement. – Implement rigorous evaluations for all of the Department’s highest priority programs and initiatives. – Ensure all newly authorized Department discretionary programs include a rigorous evaluation component. • Struggling Schools Reform: Identify as nationwide models 500 of the persistently lowest achieving schools initiating high-quality intensive reform efforts (e.g., turnarounds, restarts, transformations, or closures). • Effective Teaching: Improve the quality of teaching and learning by: – increasing by 200,000 the number of teachers for low income and minority students who are being recruited or retained to teach in hard-to-staff subjects and schools in systems with rigorous processes for determining teacher effectiveness; – ensuring that all States have in place comprehensive teacher evaluation systems, based on multiple measures of effectiveness including student achievement, that are used for professional development, retention, tenure, and compensation decisions. • Data Driven Decisions: All States implementing comprehensive statewide longitudinal data systems that link student achievement and teacher data and 79 7. PERFORMANCE PLANNING link K-12 with higher education data and, to the extent possible, with pre-K and workforce data. nuclear security requirements as assigned by the President through the Nuclear Posture Review. • College and Career Ready Standards: All States collaborating to develop and adopt internationally benchmarked college- and career-ready standards. – Annual percentage of warheads in the Stockpile that is safe, secure, reliable, and available to the President for deployment (long term assurance). – Cumulative percentage of progress in completing Nuclear Weapons Council (NWC)-approved Life Extension Program (LEP) activities. – Cumulative percent reduction in projected W76 warhead production costs per warhead from established validated baseline, as computed and reported annually by the W76 LEP Cost Control Board. • Simplified Student Aid: All participating higher education institutions and loan servicers operationally ready to originate and service Federal Direct Student Loans through an efficient and effective student aid delivery system with simplified applications and minimal disruption to students. Department of Energy Mission: Discovering the Solutions to Power and Secure America’s Future. High Priority Performance Goals As part of developing the 2011 Budget and performance plan, DOE has identified seven high priority performance goals that will be a particular focus over the next two years. These goals are a subset of those used to regularly monitor and report performance. To view performance information please visit: www.energy.gov/about/budget. htm. • Double renewable energy generating capacity (excluding conventional hydropower) by 2012. • Assist in the development and deployment of advanced battery manufacturing capacity to support 500,000 plug-in hybrid electric vehicles a year by 2015. • DOE and HUD will work together to enable the cost-effective energy retrofits of a total of 1.1 million housing units through 2011. Of this number, DOE programs will contribute to retrofits of an estimated one million housing units. • Commit (conditionally) to loan guarantees for two nuclear power facilities to add new low-carbon emission capacity of at least 3,800 megawatts during 2010. • Make significant progress towards securing the most vulnerable nuclear materials worldwide within four years. – By the end of 2011, remove or dispose of a cumulative total of 3,297 kilograms of vulnerable nuclear material (highly enriched uranium and plutonium). – By the end of 2011, complete material protection, control and accounting upgrades on a cumulative total of 218 buildings. • Maintain the U.S. nuclear weapons stockpile and dismantle excess nuclear weapons to meet national • Reduce Cold War legacy environmental footprint by 40 percent, from 900 square miles to 540 square miles, by 2011. Department of Health and Human Services Mission: The Department of Health and Human Services’ (HHS’s) mission is to enhance the health and well-being of Americans by providing for effective health and human services and by fostering sound, sustained advances in the sciences underlying medicine, public health, and social services. High Priority Performance Goals As part of developing the 2011 Budget and performance plan, the Department has identified a limited number of high priority performance goals that will be a particular focus over the next two years. These goals are a subset of those used to regularly monitor and report performance. To view the full set of performance information please visit www.hhs.gov/asrt/ob/docbudget/index.html. • Access to Early Care and Education Programs for Low-Income Children: By the end of 2010, increase the number of low-income children receiving Federal support for access to high quality early care and education settings including an additional 64,000 children in Head Start and Early Head Start and an average of 10,000 additional children per month through the Child Care and Development Fund (CCDF) over the number of children who were enrolled in 2008. • Quality in Early Care and Education Programs for Low-Income Children: Take actions in 2010 and 2011 to strengthen the quality of early childhood programs by advancing recompetition, implementing improved performance standards and improving training and technical assistance systems in Head Start; promoting community efforts to integrate early childhood services; and by expanding the number of States with Quality Ratings Improvement Systems that meet high quality benchmarks for Child Care and other early childhood programs developed by HHS in coordination with the Department of Education. 80 ANALYTICAL PERSPECTIVES • Medicaid and Children’s Health Insurance Program: Broaden availability and accessibility of health insurance coverage through implementation of the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) legislation, by increasing CHIP enrollment by over 7 percent above the 2008 baseline by the end of 2011 (from 7,368,479 children to 7,884,273 children). • Food Safety: By the end of 2011, decrease by 10 percent from the 2005-2007 average baseline, all of the following: the rate of sporadic Salmonella Enteritidis (SE) illnesses in the population; the number of SE outbreaks; and, the number of SE cases associated with outbreaks.1 • Tobacco - Supportive Policy and Environments: By the end of 2011, increase to 75 percent2 the percentage of communities funded under the Communities Putting Prevention to Work (CPPW) program that have enacted new smoke-free policies and improved the comprehensiveness of existing policies. • Primary Care: By the end of 2011, increase access to primary health care by increasing the Field Strength of the National Health Service Corps (NHSC) to 8,5613 primary care providers. This is in contrast to the 2008 field strength of 3,601. • Emergency Preparedness - Incident Command Structure: By 2011, increase the percentage of State public health agencies that can convene within 60 minutes of notification a team of trained staff that can make decisions about appropriate response and interaction with partners to 96 percent. (CDC, 2007 Baseline: 84 percent). • Health Information Technology (HIT): By the end of 2011, establish the infrastructure necessary to encourage the adoption and meaningful use of Health Information Technology by: – Establishing a network of 70 Regional Extension Centers by the end of 2010. – Registering 30,000 providers to receive services from Regional Extension Centers by end of 2010. – Registering 100,000 providers to receive services from Regional Extension Centers by end of 2011. – Achieving 20 percent adoption of EHRs among providers working with Regional Extension Centers by end of 2011. • Biomedical Research: By 2011, reduce the fully-loaded cost of sequencing a human genome to $25,000. 1 Targets will be reevaluated after actual data is provided for 2009. 2 This target may be adjusted once the actual CCPPW-funded communities have been selected in February 2010. 3 The target of 8,561 assumes the 2010 Appropriation figure of $100.797 million for the National Health Service Corps Recruitment line and the 2011 President’s Budget Request of $122.588 million. If the Congress were to provide less funding in 2011, the target would need to be adjusted accordingly. Department of Homeland Security Mission: The Department of Homeland Security (DHS) has identified six goals that are based on operational missions defined by the Secretary’s Priorities. In addition, the Department has provided two additional goals focused on the Secretary’s Priority of Maturing and Strengthening the Homeland Security Enterprise. When DHS speaks of the “Homeland Security Enterprise”, we define it as the collective efforts of Federal, State, local, tribal, territorial non-governmental and private-sector partners—as well as individuals, families and communities—to maintain critical homeland security capabilities. The five operational missions defined by the Secretary are: 1. 2. 3. 4. 5. Countering terrorism and enhance security Securing and managing our borders Administering and enforcing our immigration laws Safeguarding and security cyberspace Ensuring resilience from disasters DHS currently has a 5-year strategic plan, a 5-year programming plan (Future Year Homeland Security Plan), as well as an annual performance plan and an annual performance report on Department progress. The Department will develop a new strategic plan based on these new priorities established by the Secretary. High Priority Performance Goals As part of developing the 2011 Budget and performance plan, DHS identified this set of high priority performance goals that will be a particular focus over the next two years. These goals have been organized around the priority areas identified above. These goals are a subset of those used to regularly monitor and report performance. To view the full set of performance information please visit: http://www.dhs.gov/xabout/budget/gc_1214235565991. shtm\. Countering terrorism and enhancing security • Improve security screening of transportation passengers, baggage, and employees while expediting the movement of the traveling public (aviation security). – Passenger and Baggage Security Screening Results (classified measures). – Wait times for aviation passengers (Target: Less than 20 minutes by 2012). • Improve security screening of transportation passengers, baggage, and employees while expediting the movement of the traveling public (surface transportation security). – Percent of mass transit and passenger rail agencies that have effectively implemented industry agreed upon Security and Emergency Manage- 81 7. PERFORMANCE PLANNING ment Action items to improve security (Target: 75 percent by 2012). Securing and managing our borders • Prevent terrorist movement at land ports of entry through enhanced screening while expediting the flow of legitimate travel. – Achieve 97 percent compliance with Western Hemisphere Travel Initiative. – Complete deployment of WHTI facilitative technology to low volume land ports of entry. – Improve the land border Law Enforcement Query Rate to 95 percent. – Increase the RFID document utilization rate to 25 percent. • Improve Acquisition Execution Across the DHS Acquisition Portfolio, by ensuring Key Acquisition Expertise resides in Major Program Office and Acquisition Oversight Staffs throughout the Department. – Increase from 45 percent to 60 percent the major acquisition projects that do not exceed 10 percent of cost / schedule / performance objectives. Department of Housing and Urban Development Mission: The mission of the Department of Housing and Urban Development (HUD) is to invest in quality, affordable homes and build strong, safe, healthy communities for all. High Priority Performance Goals Administering and enforcing our immigration laws • Improve the efficiency of the process to detain and remove illegal immigrants from the United States. – Increase the number of dangerous criminal aliens removed by four percent per year. – Decrease the number of days spent in custody by criminal aliens before they are removed from the United States from 43 to 41 days in 2010. • Improve the delivery of immigration services – Percent of USCIS workload adjudicated electronically. (Target: 40 percent by Q4 2011). – Percent of Solution Architect deliverables delivered on time. (Target: 100 percent). – Project milestones completed within 10 percent of cost, schedule, and performance goals. Ensuring resilience from disasters • Strengthen disaster preparedness and response by improving FEMA’s operational capabilities and strengthening State, local and private citizen preparedness. – Increase the capacity to provide temporary housing to disaster survivors by 200 percent. – Improve to 90 percent the percentage of shipments arriving with the requested materials at the requested location by the validated/agreed upon delivery date. – Improve to 95 percent the percentage of respondents reporting they are better prepared to deal with disasters and emergencies as a result of training. HUD develops a 5-year strategic plan, as well as an annual performance plan and annual report on our progress. As part of developing the 2011 Budget and performance plan, HUD has also identified a limited number of high priority performance goals that will be a particular focus over the next two years. These goals are a subset of those used to regularly monitor and report performance. To view the full set of performance information please visit: http://www.hud.gov/offices/cfo/reports/cforept.cfm. • Foreclosure Prevention – Assist three million homeowners who are at risk of losing their homes due to foreclosure.  200,000 homeowners will be assisted through FHA programs.  400,000 homeowners will be assisted through third-party lender loss mitigation initiatives mandated by FHA but not receiving FHA subsidy.  2.4 million homeowners will be assisted through joint HUD-Treasury programs. – For all FHA borrowers that become 30 days late, achieve a Consolidated Claim Workout (CCW) Ratio4 of 75 percent, representing a 10 percentage point improvement over current levels, and for those receiving a CCW achieve a six month re-default rate5 of 20 percent or less, representing a five percentage point reduction from current levels. • Rental Assistance: By the end of 2011, HUD programs will meet more of the growing need for affordable rental homes by serving 5.46 million families, 207,000 more than in 2009. Maturing and Strengthening the Homeland Security Enterprise • Mature and unify the Homeland Security Enterprise through effective information sharing. – Increase the percentage of information sharing agreements that allow for the sharing of information across all components of DHS by 85 percent. 4 CCWs combine FHA partial claims, loan modifications and new HAMP modifications that represent affordable solutions, but exclude less affordable forbearance programs. 5 Since most re-defaults tend to occur in the first six months after the workout, the six month period was selected to allow measurement of goal performance within a given year. 82 ANALYTICAL PERSPECTIVES • Veteran’s Homelessness: HUD and the Department of Veterans Affairs (VA) will jointly reduce homelessness among veterans. – Together, the two agencies will reduce the number of homeless veterans to 59,000 in June, 2012. Without intervention, there would be an estimated 194,000 homeless veterans by June, 2012. – Toward this joint goal, HUD is committed to assisting 16,000 homeless veterans each fiscal year to move out of homelessness into permanent housing (6,000 through Continuum of Care programs, and 10,000 in partnership with VA through the HUD-VASH program). • DOE and HUD will work together to enable the cost-effective energy retrofits of a total of 1.1 million housing units through 2011. – Of this number, HUD will complete cost-effective energy retrofits of an estimated 126,000 HUDassisted and public housing units. – Apart from our joint energy retrofit goal with DOE, HUD will complete green and healthy retrofits of 33,000 housing units. Department of the Interior Mission: The U.S. Department of the Interior protects and manages the Nation’s natural resources and cultural heritage; provides scientific and other information about those resources; and honors its trust responsibilities or special commitments to American Indians, Alaska Natives, and affiliated Island Communities. High Priority Performance Goals As part of developing the 2011 Budget and performance plan, the Department has identified a limited number of high priority performance goals that will be a particular focus over the next two years. These goals are a subset of those used to regularly monitor and report performance. To view the full set of performance information please visit www.doi.gov/ppp/perfreport.html. • Renewable Energy Development: Increase approved capacity for production of renewable (solar, wind, and geothermal) energy resources on Department of the Interior managed lands, while ensuring full environmental review, by at least 9,000 megawatts through 2011. • Water Conservation: Enable capability to increase available water supply for agricultural, municipal, industrial, and environmental uses in the western United States up to 375,000 acre-feet (estimated amount) by the end of 2011 through the bureau’s conservation-related programs, such as water reuse and recycling (Title XVI) and Challenge Grants. • Safe Indian Communities: Achieve significant reduction in criminal offenses of at least five percent within 24 months on targeted tribal reservations by implementing a comprehensive strategy involving community policing, tactical deployment, and critical interagency and intergovernmental partnerships. • Climate Change: By 2012, the Department will identify the areas and species’ ranges in the U.S. that are most vulnerable to climate change, and begin implementing comprehensive climate change adaptation strategies in these areas. • Youth Stewardship: By the end of 2011, increase by 50 percent (from 2009 levels) the employment of youth between the ages of 15-25 in the conservation mission of the Department. Department of Justice Mission: To enforce the law and defend the interests of the United States according to the law, to ensure public safety against threats foreign and domestic, to provide federal leadership in preventing and controlling crime, to seek just punishment for those guilty of unlawful behavior, and to ensure fair and impartial administration of justice for all Americans. High Priority Performance Goals The Department of Justice develops a 5-year strategic plan, as well as an annual performance and accountability report on our progress. As part of developing the 2011 Budget and performance plan, the Department of Justice has identified a limited number of high priority performance goals that will be a particular focus over the next two years. These goals are a subset of those used to regularly monitor and report performance. To view the full set of performance information please visit: http://www. justice.gov/02organizations/bpp.htm. • National Security: Increase the percentage of total counterterrorism investigations targeting Top Priority threats by five percent by the end of 2011. • White Collar Crime: Increase white collar caseload by five percent concerning mortgage fraud, health care fraud, and official corruption by 2012, with 90 percent of cases favorably resolved. • Violent Crime: Increase agents and prosecutors by three percent, in order to reduce incidents of violent crime in high crime areas by 2012. • Immigration: Increase Immigration Judges by 19 percent by the end of 2011 in order to expeditiously remove/release detained aliens by completing 85 percent of immigration court detained cases within 60 days. • Public Safety: Support 8,900 additional police officers by 2012 via COPS Hiring Programs to promote 83 7. PERFORMANCE PLANNING community policing strategies that are evidence based. • Civil Rights: Increase the number of persons favorably impacted by resolution of civil rights enforcement cases and matters. – By the end of 2011 increase the criminal civil rights caseload by 34 percent with 80 percent of cases favorably resolved. – By the end of 2011 increase the non-criminal civil rights caseload by 28 percent, with 80 percent of cases favorably resolved. – By the end of 2011 increase the number of complaints finalized by mediation by 10 percent, with 75 percent of mediation complaints successfully resolved. Department of Labor Mission: The Department of Labor fosters and promotes the welfare of the job seekers, wage earners, and retirees of the United States by improving their working conditions, advancing their opportunities for profitable employment, protecting their retirement and health care benefits, helping employers find workers, strengthening free collective bargaining, and tracking changes in employment, prices, and other national economic measurements. High Priority Performance Goals As part of developing the 2011 Budget and performance plan, the Department of Labor has identified a limited number of high priority performance goals that will be a particular focus over the next two years. These goals are a subset of those used to regularly monitor and report performance. To view the full set of performance information please visit www.dol.gov/dol/aboutdol/main.htm. • Workplace Fatalities: Reduce fatalities resulting from common causes by two percent in Occupational Safety and Health Administration-covered workplaces and by five percent in mining sites per year. • Wage Law Enforcement: Increase the percent of prior violators who remain in compliance with the minimum wage and overtime provisions of the Fair Labor Standards Act (FLSA) to 75 percent in 2011 from 66 percent in 2009. • International Labor Laws: By the end of 2011, improve worker rights and livelihoods for vulnerable populations in at least eight developing country trading partners. • Workers’ Compensation: Create a model return-towork program to reduce lost production day rates by one percent per year and reduce injury and illness rates by at least four percent per year in 2010 and 2011. • Worker Job Training: – By June 2012, increase by 10 percent (to 220,000) the number of WIA low-skilled adults, dislocated workers, disadvantaged youth; and National Emergency Grant (NEG), Trade Adjustment Assistance (TAA), and Community-Based Job Training (CBJT) program completers who receive training and attain a degree or certificate. – Train over 120,000 Americans for green jobs by June 2012. Department of State and USAID Mission: The shared mission of the U.S. Department of State and the U.S. Agency for International Development (USAID) is to advance freedom for the benefit of the American people and the international community by helping to build and sustain a more democratic, secure, and prosperous world composed of well-governed states that respond to the needs of their people, reduce widespread poverty, and act responsibly within the international system. High Priority Performance Goals As part of our 2011 Performance Budget and Annual Performance Plan, the Department and USAID identified a limited number of joint high priority performance goals that reflect both agencies’ priorities and will be a particular focus for the two agencies from now through 2011. These goals are a subset of those used to regularly monitor and report performance against our joint strategic plan. To view the full set of performance information please visit www.state.gov and www.usaid.gov. • Afghanistan and Pakistan: Strengthen the host country capacity to effectively provide services to citizens and enhance the long-term sustainability of development efforts by increasing the number of local implementers (government and private) that can achieve a clean audit to clear them to manage civilian assistance funds. • Iraq: Helping the Iraqi people continue to build a sovereign, stable, and self-reliant country as the United States transitions from military to civilian responsibility in Iraq, measured by improvements in security, political, and economic metrics. • Global Health: By 2011, countries receiving health assistance will better address priority health needs of women and children, with progress measured by USG and UNICEF-collected data and indicators. Longer term, by 2015, the Global Health Initiative aims to reduce mortality of mothers and children under five, saving millions of lives, avert millions of unintended pregnancies, prevent millions of new HIV infections, and eliminate some neglected tropical diseases. 84 • Climate Change: By the end of 2011, U.S. assistance will have supported the establishment of at least 20 work programs to develop Low-Carbon Development Strategies (LCDS) that contain measurable, reportable, and verifiable actions. This effort will lay the groundwork for at least 30 completed LCDS by the end of 2013 and meaningful reductions in national emissions trajectories through 2020. • Food Security: By 2011, up to five countries will demonstrate the necessary political commitment and implementation capacities to effectively launch implementation of comprehensive food security plans that will track progress towards the country’s Millennium Development Goal (MDG1) to halve poverty and hunger by 2015. • Democracy and Good Governance: Facilitate transparent, participatory, and accountable governance in 23 priority emerging and consolidating democracies by providing training assistance to 120,000 rule of law professionals, civil society leaders, democratically elected officials, journalists, and election observers over the 24-month period of October 1, 2009 through September 30, 2011. • Global Security–Nuclear Nonproliferation: Improve global controls to prevent the spread of nuclear weapons and enable the secure, peaceful use of nuclear energy. • Management–Building Civilian Capacity: Strengthen the civilian capacity of the State Department and USAID to conduct diplomacy and development activities in support of the Nation’s foreign policy goals by strategic management of personnel, effective skills training, and targeted hiring. Department of Transportation Mission: The national objectives of general welfare, economic growth and stability, and the security of the United States require the development of transportation policies and programs that contribute to providing fast, safe, efficient, and convenient transportation at the lowest cost consistent with those and other national objectives, including the efficient use and conservation of the resources of the United States. High Priority Performance Goals ANALYTICAL PERSPECTIVES To view the full set of performance information please visit: http://www.dot.gov/about_dot.html#perfbudgplan. • Reduce the Highway Fatality Rate: Reduce the rate of highway fatalities to 1.13 – 1.16 per 100 million vehicle miles traveled by the end of 2011, through a variety of initiatives aimed at drivers, improved road design, and the use of technology to improve safety. DOT will revisit this target once it has had the opportunity to research the effects of the recession on vehicle miles traveled and more completely understand the effect of new technology, safety standards, and demographic trends on passenger survival in an accident. • Limit the Rate of Aviation Risks on Runways: Reduce the risk of accidents during aircraft departures and landings by reducing the number of runway incursions five percent from the 2008 baseline by the end of 2011. • Improve Rail Transit Industry Focus on Safety Vulnerabilities: – Improve State Safety Oversight programs’ compliance with existing requirements by the end of the third quarter of 2010. – Form a compliance advisory committee, in accordance with the Federal Advisory Committee Act, to provide input on potential future regulation by the end of 2010. – Complete at least three workshops and training on transit asset management, including a focus on safety critical assets by the end of 2010. • Establish High Speed Rail Capability: Increase the Nation’s ability to develop high speed intercity passenger rail. – Obligate or issue a Letter of Intent to obligate 100 percent of funds to selected grantees by the end of 2011. Department of the Treasury Mission: Maintain a strong economy and create economic and job opportunities by promoting the conditions that enable economic growth and stability at home and abroad, strengthen national security by combating threats and protecting the integrity of the financial system, and manage the U.S. Government’s finances and resources effectively. High Priority Performance Goals The Department of Transportation (DOT) develops a 5-year strategic plan, as well as annual performance plans in its budget submission to Congress and an annual performance report on our progress. As part of developing the 2011 Budget and performance plan, the Department of Transportation has also identified a limited number of high priority performance goals that will be a particular focus over the next two years. These goals are a subset of those used to regularly monitor and report performance. As part of developing the 2011 Budget and performance plan the Department of the Treasury has identified a limited number of high priority performance goals that will be a particular focus over the next two years. These goals are a subset of those used to regularly monitor and report performance. To view the full set of performance information please visit www.treas.gov/offices/management/ budget/planningdocs/. 7. PERFORMANCE PLANNING • Repair and reform the financial system – Complete up to four million trial mortgage loan modifications by December 31, 2012. – Implement strong, comprehensive regulatory reform to restore stability and accountability to the financial system. – Establish a new Financial Services Oversight Council of financial regulators to identify emerging systemic risks and improve interagency cooperation. – Indicator: Mortgage interest rates. – Indicator: Cost of credit to businesses. – Indicator: Consumer Asset-Backed Securities (ABS) issuance. – Indicator: Chicago Federal Reserve Bank’s National Activity Index, 3-Month Moving Average (CFNAI-MA3). • Increase voluntary tax compliance – Make progress against the Tax Gap through improved service and enhanced enforcement of the tax laws:   Achieve over four million document matching closures in a year in 2011 (where IRS information does not match taxpayer reported information). Implement the new Customer Account Data Engine database and processing platform by December 2011, doubling the number of taxpayers receiving refunds on a five-day cycle. – Assist Americans in voluntarily meeting their tax obligations:   Increase individual income tax filers’ American Customer Satisfaction Index to 69 percent. Improve telephone level of service to at least 75 percent by the end of 2011. • Significantly increase the number of paperless transactions with the public – Increase electronic payment, collections, and savings bonds transactions by 33 percent by the end of 2011. – Increase individual E-file rate to 81 percent. Department of Veterans Affairs Mission: The Department of Veterans Affairs (VA) is responsible for a timeless mission: “To care for him who shall have borne the battle, and for his widow, and his orphan”—by serving and honoring the men and women who are America’s Veterans. High Priority Performance Goals VA identified five high priority performance goals that will be a particular focus over the next two years. These goals are a subset of those used to regularly monitor and 85 report performance as part of developing the 2011 Budget and performance plan. To view our most recent annual performance report, please visit http://www4.va.gov/ budget/report/. • In conjunction with HUD, reduce the homeless veteran population to 59,000 by June 2012 on the way to eliminating veteran homelessness. • Build and deploy an automated GI Bill benefits system to speed tuition and housing payments for all eligible veterans by December 2010. – By the end of 2011, reduce the average number of days to complete original Post-9/11 GI Bill education benefit claims to 18 days. • Implement a 21st Century paperless claims processing system by 2012 to ultimately reduce the average disability claims processing time to 125 days. • Create the next generation of electronic record system—Virtual Lifetime Electronic Record (VLER) by 2012. This interagency initiative will create a more effective means for electronically sharing health and benefits data of service members and veterans. – By the end of 2011, at least three sites will be capable of bi-directional information exchange between VA, the Department of Defense, and the private sector. – The prototyping and pilot phases will be completed by 2012. • Improve the quality, access, and value of mental health care provided to veterans by December 2011. – By the end of 2011, 96 percent of mental health patients will receive a mental health evaluation within 15 days following their first mental health encounter. – By the end of 2011, 97 percent of eligible patients will be screened at required intervals for Post Traumatic Stress Disorder. – By the end of 2010, 97 percent of all eligible patients will be screened at required intervals for alcohol misuse, and 96 percent will be screened for depression. • Deploy a Veterans Relationship Management (VRM) Program to improve access for all Veterans to the full range of VA services and benefits by June 2011. – By the end of 2010, implement call recording, national queue, transfer of calls and directed voice and self help. – By the end of 2010, enhance transfers of calls among all Veterans Benefits Administration lines of business with capability to simultaneously transfer callers’ data. – By the end of 2010, pilot the Unified Desktop within Veterans Benefits Administration lines of businesses to improve call center efficiency. 86 ANALYTICAL PERSPECTIVES Army Corps of Engineers—Civil Works Mission: The civil works program develops, manages, and restores water resources, with a focus on its three main mission areas, which are: 1) commercial navigation; 2) flood and storm damage reduction; and 3) aquatic ecosystem restoration. The Corps, working with other Federal agencies, also helps communities respond to and recover from floods and other natural disasters. well as documenting the causes of such variances. This will enable the Corps to better develop future project cost estimates and implementation schedules with the goal of keeping cost and schedule variance to no more than 10 percent. • Commercial Navigation—Help facilitate commercial navigation by providing safe, reliable, highly cost-effective, and environmentally sustainable waterborne transportation systems. High Priority Performance Goals As part of developing the 2011 Budget and performance plan, the Corps has identified four high priority performance goals to focus on over the next two years. These goals are a subset of those that it uses internally to monitor and report project and program performance. To view our performance-related information, please visit http://www.usace.army.mil/CECW/Pages/fpi.aspx. • Aquatic Ecosystem Restoration and Regulatory Program: Provide sustainable development, restoration, and protection of the Nation’s water resources by restoring degraded habitat on 10,300 acres in the Aquatic Ecosystem Restoration program by the end of 2011, which would result in an increase of 17 percent over the total acreage estimated to have been restored during 2005-2010, and achieving no net loss of wetland function through avoidance and mitigation in the Regulatory Program. • Flood Risk Management: Reduce the Nation’s risk of flooding that damages property and places individuals at risk of injury or loss of life. Metrics include: – Reduced risk of damage to property (Cumulative damages prevented)  2006-2009: $122 million; 2010: $150 million; 2011: $174 million. – Reduced risk to life and safety (Cumulative increase in the number of people offered protection)  2006-2009: 908 thousand people; 2010: 945 thousand people; 2011: 2.77 million people. This goal reflects the estimated cumulative flood damage reduction benefits (starting from 2006) resulting from completing construction of projects in 2010 or 2011. These first metric’s targets are based on projected milestones of an additional $28 million of property with a reduced risk of damage in 2010 and another $24 million in 2011. The second metric’s targets reflect project milestones of an additional 37 thousand people and another 1.823 million people offered protection in 2010 and 2011 respectively. In addition, for those completed projects, the Corps also will track overall project implementation performance by identifying variances in schedule and cost between the actual results and the initial estimates as adjusted for inflation, as Primary metric, inland navigation program: The number of instances where mechanically driven failure or shoaling results in the closure of a high or moderate commercial use segment anywhere in the Nation for a defined period of time. The Corps will measure overall program performance based on its ability over time to reduce both the number of preventable closures that last longer than 24 hours, as well as the number of preventable closures that last longer than one week. Using these measures, the Corps will aim to achieve a level of performance each year that is as good as the median level of annual performance over the past three years (from 2007— 2009). The Corps will only count preventable closures (i.e., not closures due to low water levels from droughts, high water levels from floods, or accidents) caused by: (1) a failure on the main chamber of a lock, rather than an auxiliary chamber; or (2) shoaling due to inadequate dredging. • Hydropower Program—Increase the Hydropower program’s performance metric of average peak unit availability for 353 generating units from the 2009 level of 88 percent to 90 percent by 2011. This will move the Corps closer to the industry standard level, which is 98 percent. Environmental Protection Agency Mission: The mission of the Environmental Protection Agency (EPA) is to protect human health and to safeguard the natural environment—air, water and land— upon which life depends. High Priority Performance Goals As part of developing the 2011 Budget and performance plan, EPA has identified a limited number of high priority performance goals that will be a particular focus over the next two years. These goals are a subset of those used to regularly monitor and report performance. To view the full set of performance information please visit www.epa. gov/ocfo/par/2009par/. • EPA will improve the country’s ability to measure and control Green House Gas (GHG) emissions. Building a foundation for action is essential. – By June 15, 2011, EPA will make publically available 100 percent of facility-level GHG emissions 7. PERFORMANCE PLANNING data submitted to EPA in compliance with the GHG Reporting Rule. – In 2011, EPA working with DOT will begin implementation of regulations designed to reduce the GHG emissions from light duty vehicles sold in the U.S. starting with model year 2012. • Clean water is essential for our quality of life and the health of our communities. EPA will take actions over the next two years to improve water quality. – All Chesapeake Bay watershed States (including the District of Columbia) will develop and submit approvable Phase I watershed implementation plans by the end of CY 2010 and Phase II plans by the end of CY 2011 in support of EPA’s final Chesapeake Bay Total Maximum Daily Load (TMDL). – By the end of 2011, increase the percent of federal CWA discharge permit enforcement actions that reduce pollutant discharges into impaired waterways from 20 percent (2009 baseline) to 25 percent, and promote transparency and right-toknow by posting results and analysis on the web. – EPA will initiate over the next two years, at least four drinking water standard reviews to strengthen public health protection. • EPA will ensure that environmental health and protection is delivered to our communities. – By 2012, EPA will have initiated 20 enhanced Brownfields community level projects that will include a new area-wide planning effort to benefit under-served and economically disadvantaged communities. This will allow those communities to assess and address multiple Brownfields sites within their boundaries, thereby advancing areawide planning and cleanups and enabling redevelopment of Brownfields properties on a broader scale than on individual sites. EPA will provide technical assistance, coordinate its enforcement, water and air quality programs, and work with other Federal agencies, States, tribes and local governments to implement associated targeted environmental improvements identified in each community’s area-wide plan. National Aeronautics and Space Administration Mission: The National Aeronautics and Space Administration (NASA) drives advances in science, technology, and exploration to enhance knowledge, education, innovation, economic vitality, and stewardship of the Earth. High Priority Performance Goals As part of developing the 2011 Budget and performance plan, NASA has identified a limited number of high priority performance goals that will be a particular focus over the next two years. The Agency will be establishing one or more additional goals in the months ahead for its hu- 87 man space programs. These goals are a subset of those used to regularly monitor and report performance. To view the full set of performance information please visit: www.nasa.gov/news/budget/index.html. • Aeronautics Research: Increase efficiency and throughput of aircraft operations during arrival phase of flight. – By September 2012, NASA will deliver a Technology Transition Document to the FAA. The goal is to conduct demonstration field tests of a NASAdeveloped technology that can reduce airliner flight time, fuel consumption, noise and emissions. Delivering complete documentation of the demonstration supports a process for potential deployment of this technology by the FAA. • Earth Science: NASA will make significant progress towards completion of the integration, test, launch, validation and initiation of early orbit operations of the Aquarius, Glory and NPOESS Preparatory Project (NPP) missions prior to the end of Fiscal Year 2011. – Aquarius: By February 2011, conduct “In-Orbit Checkout” (60 days post launch). – Glory: By January 2011, complete the Glory Transition Review. – NPP: By April 2011, complete the NPP Operational Handover Review. These milestones indicate when each mission is expected to become operational. The delays thus far for these missions represent an unplanned cost burden to NASA as well as lost opportunity in collecting essential data that supports major scientific assessments for climate change. • Education and Future Workforce Preparation: Increase annually the percentage of NASA higher education program student participants employed by NASA, aerospace contractors, universities, and other educational institutions. – In 2010 the target is to achieve a 60 percent conversion to the workforce of students who receive a degree and meet the threshold for funding/contact hour investments by NASA. The current actions and measures within this goal are intended to improve the means through which higher education program managers can increase the percentage of students hired into the NASA, aerospace, and Science, Technology, Engineering, and Mathematics (STEM) education workforce. • Energy Management: Ensure a sustainable infrastructure by reducing Agency energy intensity use. – For facility energy use, the target is 30 percent reduction in energy intensity Btu/gsf by the end of 2015 (from a 2003 baseline, reduce energy three percent per year for 2006-2015). 88 ANALYTICAL PERSPECTIVES – For fleet vehicle energy use, the target is 30 percent reduction in fleet total consumption of petroleum products by the end of 2020 (two percent per year from a 2005 baseline). – For potable water use, the target is 26 percent reduction in water intensity gal/gsf by the end of 2020 (two percent per year from a 2007 baseline). National Science Foundation Mission: The National Science Foundation (NSF) promotes the progress of science, engineering, and education for the common good. The National Science Foundation carries out its mission by investing in the best ideas generated by scientists, engineers and educators working at the frontiers of knowledge, and across all fields of research and education. High Priority Performance Goals As part of developing the 2011 budget and performance plan, NSF has identified a high priority performance goal focused on evidence-based approaches to our Science, Technology, Engineering, and Mathematics (STEM) workforce development programs that will be a particular focus over the next two years. In addition to this high priority performance goal, there are a number of other goals used to regularly monitor and report performance. To view the full set of performance information please visit www.nsf. gov/about/performance/. • Improve the education and training of an innovative Science, Technology, Engineering, and Mathematics (STEM) workforce through evidence-based approaches that includes collection and analysis of performance data, program evaluation and other research. – By the end of 2011, at least six major NSF STEM workforce development programs at the graduate/postdoctoral level have evaluation and assessment systems providing findings leading to program re-design or consolidation for more strategic impact in developing STEM workforce problem solvers, entrepreneurs, or innovators. Small Business Administration Mission: The Small Business Administration (SBA) was established in 1953 to “aid, counsel, assist and protect, insofar as is possible, the interests of small business concerns.” The charter also stipulated that SBA would ensure small businesses a “fair proportion” of Government contracts and sales of surplus property. SBA’s mission is to maintain and strengthen the Nation’s economy by enabling the establishment and vitality of small businesses and by assisting in the economic recovery of communities after disasters. High Priority Performance Goals As part of developing the 2011 Budget and performance plan, SBA has identified a limited number of high priority performance goals that will be a particular focus over the next two years. These goals are a subset of those used to regularly monitor and report performance. To view the full set of performance information please visit www.sba. gov/aboutsba/budgetsplans/index.html. • Lending: Expand access to capital by increasing the number of active SBA lending partners for the 7(a) loan program to 3,000 by September 30, 2011, a 15 percent increase over the 2008 and 2009 average. The SBA will increase its outreach to lending partners so that small business owners will have increased access to capital. The foundation for the initiative is the Office of Capital Access which oversees the SBA lending programs. Additionally, the primary contacts for these lenders are the staff in the Office of Field Operations’ 68 district offices around the country. Other SBA resources will play a role in promoting and achieving this goal. • Contracting: Increase small business participation in Federal Government contracting to meet the statutory goals and reduce participation by ineligible firms. Congress has mandated that small businesses should receive 23 percent of Federal Government prime contracts and has set separate goals for other subsets of the small business community. The SBA’s Office of Government Contracting and Business Development will play a lead coordinating role in helping each Federal agency reach the specific goals, and other SBA resources will play a role in promoting contracting opportunities to small business owners. • Disaster Assistance: Process 85 percent of home loan applications within 14 days and 85 percent of business and EIDL loan applications within 18 days. The SBA’s Office of Disaster Assistance will lead the Agency in overseeing the success of this goal. In addition, the Office of Field Operations, including its 68 offices around the country, will assist with “on the ground” efforts. • Small Business Innovation Research Program: Improve the SBIR program by 1) deploying an improved data collection and reporting system, including implementing performance metrics, 2) implementing more systematic monitoring for fraud waste and abuse, and 3) improving commercialization from existing program awards. Social Security Administration Mission: The Social Security Administration’s (SSA’s) mission is to “deliver Social Security services that meet the changing needs of the public.” 89 7. PERFORMANCE PLANNING High Priority Performance Goals As part of developing the 2011 Budget and performance plan, the Social Security Administration identified a limited number of high priority performance goals that will be a particular focus over the next two years. These goals are a subset of those used to regularly monitor and report performance. To view the full set of performance information please visit www.socialsecurity.gov/asp. • Increase the Number of Online Applications: By 2012, achieve an online filing rate of 50 percent for retirement applications. In 2011, SSA’s goal is to: – Achieve 44 percentage of total retirement claims filed online. – Additionally, achieve 27 percentage of total initial disability claims filed online. • Issue More Decisions for People Who File for Disability: SSA will work towards achieving the Agency’s long-term outcomes of lowering the disability backlogs and accurately processing claims. SSA will also ensure that clearly disabled individuals will receive an initial claims decision within 20 days. Finally, the Agency will reduce the time it takes an individual to receive a hearing decision to an average of 270 days by 2013. In order to efficiently issue decisions in 2011, SSA’s goal is to: – Process 3.317 million out of a universe of 4.316 million initial disability claims. – Achieve 6.5 percent of initial disability cases identified as a Quick Disability Determination or a Compassionate Allowance. – Process 799,000 out of a universe of 1.456 million hearing requests. • Improve SSA’s Customers’ Service Experience on the telephone, in field offices, and online: To alleviate field office workloads and to provide the variety of services the public expects, SSA will improve telephone service on the national 800-number and in the field offices. By 2011, SSA’s goal is to: – Achieve an average speed of answer of 264 seconds by the national 800-number. – Lower the busy rate for national 800-number calls from eight percent to seven percent. – Raise the percent of individuals who do business with SSA rating the overall services as “excellent,” “very good,” or “good” from 81 percent in 2009 to 83.5 percent. • Ensure Effective Stewardship of Social Security Programs by Increasing Program Integrity Efforts: SSA will improve program integrity efforts by minimizing improper payments and strengthening the Agency’s efforts to protect program dollars from waste, fraud, and abuse. In 2011, SSA’s goal is to: – Process 359,800 out of a total of approximately 2 million medical continuing disability reviews, an increase of 9.4 percent over 2010. – Process 2.422 million supplemental security income non-disability redeterminations in 2011. General Services Administration Mission: The General Services Administration (GSA) leverages the buying power of the Federal Government to assure value for taxpayers and our customers. High Priority Performance Goals As part of developing the 2011 Budget and performance plan, GSA has identified a limited number of high priority performance goals that will be a particular focus over the next two years. These goals are a subset of those used to regularly monitor and report performance. To view the full set of performance information please visit www.gsa. gov/annualreport. • Further green the GSA Fleet inventory and that of its largest customer, the U.S. Army, by collaborating to provide 1,000 Low Speed Electric Vehicles (LSEV) by September 30, 2011. • Provide agile technologies and expertise for citizento-Government interaction that will achieve unprecedented transparency and build innovative solutions for a more effective, citizen-driven Government. – Create three readiness assessments and criteriabased tool selection guidance by April 15, 2010. – Provide assistance to other Federal agencies in conducting six dialogs by September 30, 2010. – Realize 136 million touchpoints (citizen engagements) through Internet, phone, print and social media channels by September 30, 2010. – Successfully complete three agency dialogs with the public to better advance successful use of public engagements by September 30, 2010. – Train 100 Government employees on citizen engagement in forums, classes and/or webinars that are rated highly successful by participants and linked to agency capability building and successful engagement outcomes by September 30, 2010. • Identify at least three demonstration projects during 2010 to begin designing toward zero net energy footprint using the principles of Living Building Challenge. Office of Personnel Management Mission: The mission of the Office of Personnel Management (OPM) is to recruit, retain, and honor a world-class workforce to serve the American people. High Priority Performance Goals As part of developing the 2011 Budget and performance plan, OPM has identified a limited number of high priority performance goals that will be a particular focus over the next two years. These goals are a subset of those used 90 ANALYTICAL PERSPECTIVES to regularly monitor and report performance. To view the full set of performance information please visit www.opm. gov/about_opm/. • Hiring Reform: 80 percent of Departments and major agencies meet agreed upon targeted improvements to: – Improve hiring manager satisfaction with applicant quality. – Improve applicant satisfaction. – Reduce the time it takes to hire. • Telework: Increase by 50 percent the number of eligible Federal employees who telework. – By 2011, increase by 50 percent the number of eligible Federal employees who telework over the 2009 baseline of 102,900. • Security Clearance Reform: Maintain or exceed OPM-related goals of the Intelligence Reform and Terrorism Prevention Act of 2004 and provide OPM deliverables necessary to ensure that security clearance reforms are substantially operational across the Federal Government by the end of CY 2010. • Retirement Claims Processing: Reduce the number of retirement records OPM receives that are incomplete and require development to less than 38 percent by the end of 2010, 35 percent by the end of 2011, and 30 percent by the end of 2012. • Wellness: By the end of 2011, every agency has established and begun to implement a plan for a comprehensive health and wellness program which will achieve a 75 percent participation rate. Cross-Cutting Goals in Support of Executive Order 13514, Federal Leadership in Environmental Energy and Economic Performance Mission: Because of the size and scale of Federal operations, agency actions to lead by example in shifting to a clean energy economy align with our Nation’s energy security priorities. Executive Order 13514 promotes the Administration’s policy to increase energy efficiency; measure, report and reduce Federal agencies’ greenhouse gas emissions from both direct and indirect activities; conserve and protect water resources; eliminate waste; leverage Federal acquisition to foster markets for sustainable technologies, products and services; design, construct, maintain and operate high performance sustainable buildings in sustainable locations and strengthen the vitality and livability of the communities in which Federal facilities are located. High Priority Performance Goals The following high priority performance goals are identified as essential to meeting the Executive Order objectives. Achievement of all of these goals will help enable the Federal Government to meet its Greenhouse Gas Emission reduction target of 28 percent by 2020. Individual agencies will be held accountable for achieving these goals annually through an OMB Scorecard on Energy and Sustainability. • Energy Intensity Reduction (Btu/GSF): All Federal agencies will reduce their energy intensity (in goalsubject facilities) by 30 percent in 2015 as compared to 2003 or three percent annually. At the start of the Administration, the Federal Government had reduced its energy intensity by at least 9.3 percent since 2003 and plans to exceed 18 percent by the end of 2011. • Renewable Energy Increase: All Federal agencies will increase their use of electricity from renewable sources from three percent in 2008 to 7.5 percent by 2013 and at least half of that will come from (new) sources placed in service after 1999. • Water Intensity Reduction: All Federal agencies will reduce their use of potable water by at least 10 percent in 2012 or two percent annually from their 2007 use. • Petroleum Reduction: Federal agencies will reduce their petroleum use in covered fleet vehicles by at least 20 percent by 2015 or two percent annually from 2005 use. Emergency vehicles are excluded from this requirement. • Green Buildings: By 2015, all Federal agencies will have converted at least 15 percent of their buildings inventories to be green as defined by the Guiding Principles for Federal Leadership in High Performance and Sustainable Buildings. These buildings will employ integrated design principles, optimize energy efficiency, use renewable energy, protect and conserve water, have improved indoor environmental quality, and reduce the environmental impacts of materials. • GHG Emission Reduction: Agencies will submit their first complete GHG inventory and demonstrate that they are on track to achieve their individual 2020 GHG emission reduction targets. 8. PROGRAM EVALUATION Empirical evidence is an essential ingredient for assessing whether Government programs are achieving their intended outcomes. Agencies use performance measurement to track progress toward intended program outcomes and to suggest which programs and practices hold the most promise for improving performance and which do not. Performance measurement is a critical tool managers use to improve performance, but often cannot conclusively answer questions about how outcomes would differ in the absence of a program or if a program had been administered in a different way. That is where program evaluations play a critical role. Good program evaluations help answer questions such as whether workers are safer in facilities that are inspected more frequently, whether one option for turn- ing around a low-performing school is more effective than another, and whether outcomes for families are substantially improved in neighborhoods that receive intensive services. A central pillar of good government is a culture where answering such questions is a fundamental part of program design and where agencies have the capacity to use evidence to invest more in what works and less in what does not. The Administration has committed to building such an evaluation infrastructure, complementing and integrated with its efforts to strengthen performance measurement and management. On October 7, 2009, the OMB Director issued Memo M-10-01 “Increased Emphasis on Program Evaluations”, which called for three steps to improve the evaluation capacity of the Federal Government: Table 8–1. FUNDED PROGRAM EVALUATION INITIATIVE PROPOSALS Agency Description Department of Defense .............................................................................. Department of Education ............................................................................ Department of Education ............................................................................ Department of Education/National Science Foundation ............................. Department of Energy ................................................................................ Department of Health and Human Services ............................................... Department of Health and Human Services ............................................... Department of Housing and Urban Development ....................................... Department of Housing and Urban Development ....................................... Department of Housing and Urban Development ....................................... Department of Interior ................................................................................ Department of Justice ................................................................................ Department of Justice ................................................................................ Department of Labor .................................................................................. Department of Labor .................................................................................. Department of Labor .................................................................................. Department of Labor .................................................................................. Department of Labor .................................................................................. Department of Labor .................................................................................. Millennium Challenge Corporation ............................................................. Department of Transportation ..................................................................... Department of the Treasury ........................................................................ Department of the Treasury ........................................................................ Department of the Treasury ........................................................................ Department of the Treasury ........................................................................ Department of the Treasury ........................................................................ Environmental Protection Agency .............................................................. National Aeronautics and Space Administration ........................................ National Science Foundation ...................................................................... National Science Foundation ...................................................................... National Science Foundation/Department of Education ............................. Office of Personnel Management ............................................................... Small Business Administration ................................................................... Social Security Administration .................................................................... Corporation for National and Community Service ...................................... Effects of locus of control on ChalleNGe program outcomes Effects of school improvement grants Effects of Investing in Innovation Fund (i3) Effects of mathematical professional development for teachers Capacity building Effects of early childhood programs Effects of teen pregnancy programs Effects of rent reform options Effects of Family Self-Sufficiency (FSS) options Effects of Choice Neighborhoods Capacity building Effects of inmate re-entry programs Capacity building Effects of new WIA performance measures Effects of employment services Evaluation of workforce programs using administrative data Effects of training/wage incentives on dislocated workers Recidivism and deterrent effects of OSHA inspections Capacity building Various efforts to improve evaluation efforts Capacity building Testing alternative mortgage modification strategies Evaluating financial innovations by CDFIs Evaluating different approaches to no-fee debit cards Evaluating VITA prepaid cards Linking mortgage/administrative data to assess mortgage risk Capacity building Effects of Applied Sciences data sharing Capacity building Effects of Federal investments in science Effects of various STEM education initiatives Effects of Federal employee health and wellness initiative Effects of SBA programs Disability Insurance evaluations Effects of AmeriCorps on training, service, and communities 91 92 Providing on-line information about existing evaluations—OMB is working with agencies to make information readily available on-line about all Federal evaluations focused on program impacts that are planned or already underway. This effort, analogous to that of the HHS clinical trial registry and results data bank (ClinicalTrials.gov), will promote increased transparency and allow experts inside and outside the Government to engage early in the development of program evaluations. Establishing an inter-agency working group— Working with the Domestic Policy Council, National Economic Council, the Council of Economic Advisers, and OMB, this inter-agency working group will promote stronger evaluation across the Federal Government by (a) helping build agency evaluation capacity and creating effective evaluation networks that draw on the best expertise inside and outside the Federal Government, (b) sharing best practices from agencies with strong, independent evaluation offices and making research expertise available to agencies that need assistance in selecting appropriate research designs in different contexts, (c) devising new and creative strategies for using data and evaluation to drive continuous improvement in program policy and practice, and (d) developing Government-wide guidance on program evaluation practices with sufficient flexibility for agencies to adopt practices suited to their specific needs. Launch a new evaluation initiative—The Budget allocates approximately $100 million to 17 agencies that submitted proposals requesting funding either to conduct new evaluations with strong study designs that address important, actionable questions or to strengthen agency capacity to support such strong evaluations. Agencies that submitted proposals also needed to demonstrate that their 2011 funding priorities are based upon credible empirical evidence—or a plan to collect that evidence—and to identify impediments to rigorous program evaluation in their statutes or regulations so that these might be addressed going forward. The evaluation initiative included an extensive review process, with proposals reviewed by program examiners at OMB and evaluation experts at OMB and the Council of Economic Advisers. Agencies then had a series of meetings with OMB and the Council of Economic Advisers to sharpen their proposals. Going forward, OMB and the Council of Economic Advisers plan to continue to work with these agencies on implementing strong research designs that answer important questions. The accompanying table presents the evaluation activities proposed for funding as part of the 2011 evaluation initiative. Evaluations are also being undertaken separate from this initiative and part of the purpose of making information on all evaluations available on-line is to develop a comprehensive accounting of all such activity being conducted by the Federal Government. The President has made it very clear that policy decisions should be driven by evidence—evidence about what works and what does not and evidence that identifies the greatest needs and challenges. As an example of this, the Administration has made investments in equality of opportunity an important part of its agenda. Yet there are ANALYTICAL PERSPECTIVES many ways to make such investments, such as improving K-12 education, increasing aid for college, increasing training opportunities, and providing greater income support for low-income families. The Administration has chosen to invest in many of those areas, but has made a concerted effort to increase investments in early childhood education and home-visiting programs that are backed by strong evidence—because rigorous evidence suggests that investments in those areas have especially high returns. One of the challenges to doing evidence-based policy making is that sometimes it is hard to say whether a program is working well or not. Historically, evaluations have been an afterthought when programs are designed— and once programs have been in place for a while it can be hard to build a constituency for a rigorous evaluation. For that reason, for new initiatives, the Administration is using a three-tiered approach. First, more money is proposed for promoting the adoption of programs and practices that generate results backed up by strong evidence. Second, for an additional group of programs with some supportive evidence but not as much, additional resources are allocated on the condition that the programs will be rigorously evaluated going forward. Over time, the Administration anticipates that some of these programs will move to the top tier, but if not their funds will be directed to other, more promising efforts. Third, the approach encourages agencies to innovate and to test ideas with strong potential—ideas supported by preliminary research findings or reasonable hypotheses. This three-tiered structure will provide objective criteria to inform decisions about programs and practices in which to invest. It will also create the right incentives for the future. Organizations will know that to be considered for significant funding, they must provide credible evaluation results that show promise, and, before that evidence is available, to be ready to subject their models to analysis. As more models move into the top tier, it will create pressure on all the top-tier models to improve their effectiveness to continue to receive support. A good example of this approach—in which new or expanded programs have evaluation “baked into their DNA”—is the Department of Education’s Invest in Innovation Fund (i3). The i3 fund invests in high-impact, potentially transformative education interventions— ranging from new ideas with huge potential to those that have proven their effectiveness and are ready to be scaled up. Whether applicants to i3 are eligible for funding to develop, validate, or scale up their program, and therefore how much funding they are eligible to receive, will depend on the strength of the existing research evidence of the program’s effectiveness, the magnitude of the impact this evidence demonstrates the program is likely to have, and the program’s readiness for scaling up. By instilling a culture of learning into Federal programs, the Administration can build knowledge so that spending decisions are based not only on good intentions, but also on strong evidence, so that carefully targeted investments will produce results. 9. BENEFIT–COST ANALYSIS I. INTRODUCTION Federal Government policies and programs make use of our Nation’s limited resources to achieve important social goals, including education, security, environmental protection, and public health. Many Federal programs require governmental expenditures, such as those funding early childhood education or job training. Moreover, many policies entail social expenditures that are not reflected in budget numbers. For example, environmental and workplace safety regulations impose compliance costs on the private sector. In all cases, the American people expect the Federal Government to design programs and policies to manage and allocate scarce fiscal resources prudently, and to ensure that programs achieve the maximum benefit to society and do not impose unjustified or excessive costs. A crucial tool used by the Federal Government to achieve these objectives is benefit-cost analysis, which provides a systematic accounting of the social benefits and costs of Government policies. As the President recently said in Executive Order 13514, “It is . . . the policy of the United States that . . . agencies shall prioritize actions based on a full accounting of both economic and social benefits and costs and shall drive continuous improvement by annually evaluating performance, extending or expanding projects that have net benefits, and reassessing or discontinuing under-performing projects.” The benefits and costs of a government policy are meant to offer a concrete description of the anticipated consequences of the policy. Such an accounting enables policymakers to design programs to be efficient and effective and to avoid unnecessary or unjustified burdens. That accounting also allows the American people to see the expected consequences of programs and to hold policymakers accountable for their actions. II. BENEFIT-COST ANALYSIS OF FEDERAL REGULATIONS Overview of Benefit-Cost Analysis of Federal Regulation For over three decades, benefit-cost analysis has played a critical role in the evaluation and design of significant Federal regulatory actions. While there are precursors in earlier administrations, the Reagan Administration was the first to establish a broad commitment to benefit-cost analysis in regulatory decision making through its Executive Order 12291. The Clinton Administration updated the principles and processes governing regulatory review in Executive Order 12866, which continues in effect today. Executive Order 12866 requires executive agencies to catalogue and assess the benefits and costs of planned significant regulatory actions. It also requires agencies to undertake regulatory action only on the basis of a “reasoned determination” that the benefits justify the costs, and to choose the regulatory approach that maximizes net social benefits, that is, benefits minus costs (unless the law governing the agency’s action requires another approach). A notable change instituted by Executive Order 12866 was a more expansive conception of benefits and costs to include consideration of qualitative benefits and costs that are difficult to monetize but essential to consider, such as the value of protecting endangered species. Executive Order 12866 also calls for explicit consideration of “distributive impacts,” that is, of which social groups bear costs and enjoy benefits. Operating under the broad framework established by Executive Order 12866, OMB requires careful analysis of the costs and benefits of significant rules; identification of the approach that maximizes net benefits; detailed exploration of reasonable alternatives, alongside assessments of their costs and benefits; cost-effectiveness; and attention to unquantifiable benefits and costs as well as to distributive impacts. Reviewing agencies’ benefit-cost analyses and working with agencies to improve them, OMB provides a centralized repository of analytical expertise in its Office of Information and Regulatory Affairs (OIRA). OMB’s guidance to agencies on how to do benefit-cost analysis for proposed regulations is contained in its Circular A-4. A-4 directs agencies to specify the goal of a planned regulatory intervention, to consider a range of regulatory approaches for achieving that goal, and to estimate the benefits and costs of each alternative considered. To the extent feasible, agencies are required to monetize benefits and costs, so that they are expressed in comparable units of value. This process enables the agency to identify the approach that maximizes the total net benefits to society generated by the rule. For example, consider a regulation that sets standards for how quickly a truck’s brakes must be able to bring it to a stop.1 A shorter stopping distance generates great1 The National Highway Traffic Safety Administration recently issued a new safety standard for air brake systems to improve the stopping distance performance of trucks. See 49 CFR § 571. 93 94 ANALYTICAL PERSPECTIVES er safety benefits, but will also impose larger compliance costs if more effective brakes are more expensive. The agency should attempt to quantify both the safety benefits of reduced stopping distance and the costs of regulatory requirements. It should consider a range of stopping distances to determine the optimal one that maximizes net benefits. At such an optimal standard, making the stopping distance even shorter would impose greater additional compliance costs than it would generate in additional safety benefits. At the same time, making the stopping distance longer than optimal results in a loss in safety benefits that is greater than the cost savings. Careful benefitcost analysis enables the agency to determine the optimal standard. It helps to show that some approaches would be insufficient and that others would be excessive. To be sure, quantification of the relevant variables, and monetization of those variables, can present serious challenges. OIRA and relevant agencies have developed a range of strategies for meeting those strategies; many of them are sketched in Circular A-4. Efforts continue to be made to improve current analyses and to disclose and test Table 9–1 their underlying assumptions. In some cases, identification of costs and benefits will leave significant uncertainties. But in other cases, an understanding of costs and benefits will rule out some possible courses of action, and will show where, and why, reasonable people might differ. The Benefits and Costs of Federal Regulation in FY 2008 Each year, OMB reports to Congress agencies’ estimates of the benefits and costs of major regulations reviewed in the prior fiscal year. Table 9–1 presents the benefit and cost estimates for the 21 non-budgetary rules reviewed by OMB in FY 2008.2 Agencies monetized both the benefits and costs for 13 of the 21 rules. 2 FY 2008 is the most recent period for which such a summary is available. These estimates were reported in OMB, 2009 Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities. A detailed description of the assumptions and calculations underlying these estimates is provided in that Report. ESTIMATES OF THE TOTAL ANNUAL BENEFITS AND COSTS OF MAJOR RULES REVIEWED BY OMB IN FISCAL YEAR 2008 (In millions of 2001 dollars) Rule Right Whale Ship Strike Reduction ................................................................................ Energy Efficiency Standards for Residential Furnaces and Boilers .............................. Fire Safety Requirements for Long-Term Care Facilities: Sprinkler Systems (CMS3191-F) ..................................................................................................................... Group Health Plans and Health Insurance Issuers Under the Newborns’ and Mothers’ Health Protection Act ................................................................................................ Substances Prohibited from Use in Animal Food or Feed to Prevent the Transmission of Bovine Spongiform Encephalopathy ..................................................................... Changes to the Visa Waiver Program to Implement the Electronic System for Travel Authorization (ESTA) Program .................................................................................. Documents Required for Travelers Entering the United States at Sea and Land Portsof-Entry from within the Western Hemisphere .......................................................... Minimum Standards for Driver’s Licenses and Identification Cards Acceptable to Federal Agencies for Official Purposes .................................................................... Migratory Bird Hunting; 2008 to 2009 Migratory Game Bird Hunting Regulations ........ Section 404 Regulation-Default Investment Alternatives under Participant Directed Individual Account Plans .......................................................................................... Employer Payment for Personal Protective Equipment ................................................. Transport Airplane Fuel Tank Flammability Reduction .................................................. Hours of Service of Drivers ............................................................................................ Regulatory Relief for Electronically Controlled Pneumatic Brake System Implementation ......................................................................................................... Agency Benefits Costs DOC / NOAA DOE / EE Not estimated 120-182 105 33-38 HHS / CMS HHS/ CMS, DOL/ EBSA and IRS 53-56 45-56 Not estimated 119-238 HHS / FDA Not estimated 58-72 DHS / OS 20-29 13-99 DHS / USCBP Not estimated 268-284 DHS / OS DOI / FWS Not estimated 711-1002 477-1,331 Not estimated DOL / EBSA DOL / OSHA DOT / FAA DOT/ FMCSA Not estimated 40-336 21-66 0-1760 Not estimated 40-229 60-67 0-105 DOT / FRA TREAS/OCC and TREAS/ OTS 828-884 130-145 Implementation of a Revised Basel Capital Accord ....................................................... Not estimated 101-797 Control of Emissions from New Locomotives and New Marine Diesel Engines Less Than 30 Liters per Cylinder1 .................................................................................... EPA / AR 4,145-14,550 295-392 Control of Emissions from Nonroad Spark-Ignition Engines and Equipment 1 ............. EPA / AR 899-4,762 196-200 Review of the National Ambient Air Quality Standards for Ozone 2 .............................. EPA / AR 1,581-14,934 6,676-7,730 Petroleum Refineries--New Source Performance Standards (NSPS) 3 ........................ EPA / AR 176-1,669 27 Lead-Based Paint; Amendments for Renovation, Repair and Painting ......................... EPA/ OPPTS 657-1,611 383-417 Definition of Solid Wastes Revisions ............................................................................. EPA / SWER 16-285 14 1 EPA reported estimated impacts in the years of 2020 and 2030. OMB linearly interpolated the impact for the transition period and annualized at 7 percent and 3 percent from 2007 to 2020, and 2020 to 2030. 2 EPA reported estimate impacts in the year 2020. 3 EPA reported estimate impacts in the year 2012. 95 9. BENEFIT-COST ANALYSIS Most of the benefits and costs reported in Table 9–1 are expressed as ranges, and sometimes as wide ranges, because of uncertainty about the likely consequences of rules. Quantification and monetization raise difficult conceptual and empirical questions. Prospective benefitcost analysis requires predictions about the future—both about what will happen if the regulatory action is taken and what will happen if it is not—and what the future holds is typically not known for certain. A standard goal of the agency’s analysis is to produce both a central “best estimate,” which reflects the expected value of the benefits and costs of the rule, as well as a description of the ranges of plausible values for benefits, costs, and net benefits. These estimates inform the decision makers and the public of the degree of uncertainty associated with the regulatory decision. The process of public scrutiny can sometimes reduce that uncertainty. To illustrate some of the underlying issues, consider the EPA’s recent National Ambient Air Quality Standard (NAAQS) for Ozone. The benefits of the rule are estimated to be somewhere between $1,581–$14,934 million—an expansive range. Almost all of these estimated benefits are due to reduced mortality resulting from the reduction in particulate matter emissions caused by the rule. However, there is substantial uncertainty with respect to (a) the relationship between exposure to particulate matter and premature death and (b) the proper monetary valuation of avoiding a premature death. Hence, the agency reported a wide range of plausible values for the benefits of the NAAQS for Ozone. Similar uncertainties in both the science used to predict the consequences of rules and the monetary values of those consequences, contribute to the uncertainty represented in the ranges of benefits and costs for other rules in Table 9–1. Despite these uncertainties, benefit-cost analysis often reduces the range of reasonable approaches – and simultaneously helps to inform the decision about which approach is most reasonable. As noted, Executive Order 12866 requires agencies, to the extent permitted by law, to “propose or adopt a regulation only upon a reasoned determination that the benefits of the intended regulation justify its costs.” OIRA works actively with agencies to promote compliance with this requirement. It is noteworthy that for all but one entry in Table 9–1—Transport Airline Fuel Tank flammability reduction—the benefits exceeded the costs for much of the estimated range. The exception was an unusual rule designed to protect against low-probability disasters in the context of air travel. Acknowledging the uncertainties, the Federal Aviation Administration said that “When modeling discrete rare events such as fuel tank explosions, it is important to understand and evaluate the distribution around the mean value rather than to rely only on a single point estimated value. This variability analysis indicates there is a substantial (23 percent) probability that the quantified benefits will be greater than the costs.” The FAA concluded “that the correct public policy choice is to eliminate the substantial probability of a high consequence fuel tank explosion accident by proceeding with the final rule.”3 Cost-per-life-saved of Health and Safety Regulation in FY 2008 For regulations intended to reduce mortality risks, another analytic tool that can be used to assess regulations is cost-effectiveness analysis. Some agencies develop estimates of the “net cost per life saved” for regulations intended to improve public health and safety. To calculate this figure, 3 73 Fed. Reg. 42489 (July 21, 2008). Table 9–2. ESTIMATES OF THE NET COSTS PER LIFE SAVED OF SELECTED HEALTH AND SAFETY RULES REVIEWED BY OMB IN FISCAL YEAR 2008 (in millions of 2001 dollars) Rule Agency Benefits Costs Net Cost per Life Saved Fire Safety Requirements for Long-Term Care Facilities: Sprinkler Systems (CMS3191-F) ..................................................... HHS / CMS 53-56 45-56 0.23 Transport Airplane Fuel Tank Flammability Reduction ................................................. DOT / FAA 21-66 60-67 8.51 Control of Emissions from New Locomotives and New Marine Diesel Engines Less Than 30 Liters per Cylinder ...................... EPA / AR 4,145-14,550 295-392 Negative2 Control of Emissions from Nonroad SparkIgnition Engines and Equipment ............... EPA / AR 899-4,762 196-200 0.05 - 0.523 Review of the National Ambient Air Quality Standards for Ozone ................................. EPA / AR 1,581-14,934 6,676-7,730 2.7 - 284 Notes: 1. FAA estimates that the net cost per life saved for retrofitting cargo planes (one provision in the rule) is $31 billion, but for this provision the majority of the benefits are not related to mortality risk. 2. EPA reports “the net costs (private compliance costs minus avoided cost of illness minus other benefits) are negative, indicating that the final standards result in cost savings. As such, traditional cost-effectiveness ratios are not informative.” 3. p. 8-110 of EPA’s RIA at http://www.epa.gov/otaq/regs/nonroad/marinesi-equipld/420r08014-chp08.pdf 4. These estimates exclude the costs and benefits of meeting the standard in the south coast of California and the San Joaquin Valley and assume “aggressive technological change” (RIA, p. ES-5). OMB derived it using the ratio of EPA’s highest net cost estimate over EPA’s lowest estimate of the reduction in mortality risk and EPA’s lowest net cost estimate over EPA’s highest estimate of the reduction in mortality risk. 96 ANALYTICAL PERSPECTIVES the costs of the rule minus any monetized benefits other than mortality reduction are placed in the numerator, and the expected reduction in mortality in terms of total number of lives saved is placed in the denominator. This measure avoids any assignment of monetary values to reductions in mortality risk. It still reflects, however, a concern for economic efficiency, insofar as choosing a regulatory option that reduces a given amount of mortality risk at a lower net cost to society would conserve scarce resources compared to choosing another regulatory option that would reduce the same amount of risk at greater net costs. Table 9–2 presents the net cost per life saved for the five health and safety rules from Table 1 for which calculation is possible.4 The net cost per life saved is calculated using a 3% discount rate and using agencies’ best estimates for costs and expected mortality reduction where those were provided by the agency. There is substantial varia- tion in the net cost per life saved by these rules, ranging from negative (that is, the non-mortality-related benefits outweigh the costs), to potentially as high as $28 million. This table is designed to be illustrative rather than definitive, and continuing work must be done to ensure that estimates of this kind are complete and not misleading. For example, some mortality-reducing rules have a range of other benefits, including reductions in morbidity, and it is important to include these benefits in cost-effectiveness analysis. Other rules have benefits that are exceedingly difficult to quantify but nonetheless essential to consider; consider rules that improve water quality or have aesthetic benefits. Nonetheless, it is clear that some rules are far more cost-effective than others, and it is valuable to take steps to catalogue variations and to increase the likelihood that scarce resources will be used as effectively as possible. III. BENEFIT-COST ANALYSIS OF BUDGETARY PROGRAMS Historically, benefit-cost analysis of Federal budgetary programs has been more limited than that of regulatory policy. Increasingly, though, the Federal Government explicitly employs benefit-cost analysis to ensure that projects and spending programs have benefits in excess of costs, maximize net benefits, and allocate federal dollars across potential projects. In the 1936 Flood Control Act, for example, the Congress stated as a matter of policy that the Federal government should undertake or participate in flood control projects if the benefits exceeded the costs, where the lives and social security of people are at stake. By the late 1970s, the Army Corps of Engineers had begun to use benefit-cost analysis to improve the return on investment at a given project site. The Corps did this by designing projects based on increments of work whose benefits exceeded their costs. More recently, the Budget has used benefits and costs, along with other criteria, to develop an overall program for the Corps that yields the greatest bang for the buck. Benefit-cost analysis can also be used to evaluate programs retrospectively to determine whether they should be either expanded or discontinued and how they can be improved. Chapter 8, “Program Evaluation”, in this volume discusses current efforts to improve program evaluation including through the use of benefit-cost analysis. Evidence that an activity can yield substantial net benefits has motivated the creation and expansion of a substantial number of programs. For example, longitudinal studies have shown that each dollar spent on high quality pre-school programs serving disadvantaged children yields substantially more than a dollar (in present value) in higher wages, less crime, and less use of public services, motivating an expansion of funding for quality pre-K programs. Similar evidence has motivated the decision to expand funding for nurse family partnerships, finding that each dollar spent in the program leads to more than a dollar of benefits mostly in reduced government expenditures on health care, educational and social services, and criminal justice, and that the highest returns were present in serving the most disadvantaged families. GAO has concluded that the Women, Infants, and Children (WIC) program produces monetary benefits that exceed its costs by reducing the incidence of low birth weight and iron deficiency, which are linked to children’s behavior and development. IV. IMPROVING THE USE OF BENEFIT-COST ANALYSIS BY THE FEDERAL GOVERNMENT OMB continually works with executive agencies to improve their benefit-cost analyses. In its 2009 annual report to Congress on the benefits and costs of Federal 4 Of the 21 regulations listed in Table 1, 15 are primarily intended to protect health and safety. These 15 include all of EPA’s regulations, which affect health and safety primarily through improvements in environmental quality, as well as all FDA and OSHA regulations. Rules issued by the Department of Homeland Security are excluded because homeland security is a much broader goal than public health and safety per se. Of the 15 health and safety regulations, five are not suitable for meaningful calculations of the net costs per life saved because their primary goal is to reduce injuries as opposed to mortality risks. For five other rules the agencies did not calculate a net cost per life saved in the regulatory impact analysis and did not present sufficient information to permit OMB to derive an accurate estimate. regulations,5 OMB made the following recommendations for improvement in agencies’ use of benefit-cost analysis in regulatory decision making. Regulation should be data-driven and evidence-based, and benefit-cost analysis can help to ensure a careful focus on evidence and a thorough consideration of alternative approaches. Properly understood, such analysis should be seen as a pragmatic tool for helping agencies to assess the consequences of regulations and thus to identify approaches that best promote human welfare.6 In accordance with Executive 5 OMB, 2009 Report to Congress on the Benefits and Costs of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities. 6 See Adler and Posner (2004). 97 9. BENEFIT-COST ANALYSIS Order 12866, regulatory analysis should, where relevant, incorporate the interests of future generations, attend to distributional considerations, and consider issues of fairness. Furthermore, OMB recommends that benefit-cost analysis should be seen and used as a central part of open government. By providing the public with information about proposed and final regulations, by revealing assumptions and subjecting them to public assessment, and by drawing attention to the consequences of alternative approaches, such analysis can promote public understanding, scrutiny, and improvement of rules. OMB continues to explore ways to ensure that benefit-cost analysis helps promote the commitment to open government.7 Improving Benefit-Cost Analysis With recognition of the limits of quantification, efforts to promote a full accounting of both benefits and costs can greatly inform judgments about appropriate courses of action – and can help to increase benefits, decrease burdens, and inspire new approaches and creative solutions. In this section, OMB recommends several steps designed to promote these goals. Benefit-cost analysis continues to present a range of analytical, empirical, and normative challenges, involving (for example) the appropriate valuation of mortality and morbidity risks, the proper discount rate for future benefits and harms, the treatment of variables that are hard to quantify or monetize, the appropriate treatment of uncertainty, and the role, if any, of “stated preference” studies. OMB Circular A-4 offers guidance on these and other issues. Because OMB’s goals are to ensure that regulation is evidence-based and data-driven, to increase the likelihood that regulation will be effective in achieving its goals, and to reduce excessive or unjustified burdens on the private and public sectors, OMB continues to explore the underlying questions and the best way to approach them. Several points are clear. To promote evidence-based regulation, those who produce the relevant numbers must respect scientific integrity. It is also vital to have a process of public scrutiny and review, allowing assumptions to be revealed and errors to be exposed and corrected. Imposition of serious burdens and costs must be justified, and any effort at justification should attempt to measure and quantify benefits; the process of analysis might reveal that a particular approach cannot be justified and that a less stringent or more stringent approach is better. Appropriate analysis should attempt to quantify relevant variables, to promote cost-effective choices, and to explore and evaluate different alternatives. Some variables are essential to identify and consider but difficult to monetize; examples include improvements in the water quality of rivers, protection of endangered species, and measures designed to decrease the risks of terrorist attacks. A sensible approach to benefit-cost analysis recognizes 7 See Transparency and Open Government, Memorandum for the Heads of Executive Departments and Agencies, President Obama, Jan. 21, 2009. For discussion of this point and its relationship to retrospective analysis of the effects of regulations, see Greenstone (2009). the limits of quantification and insists on presentation of qualitative as well as quantitative information. If, for example, a regulation would prevent a specified range of deaths and injuries from occupational accidents, a proper analysis would present that range as well as the monetary equivalents. In some cases, the effort to monetize certain benefits (such as protection of streams and wildlife) may run into serious obstacles; quantification may be possible but not monetization. In other cases, regulators will know the direction of an effect, and perhaps be able to specify a range, but precise quantification will not be possible. For these reasons, OMB recommends that consistent with Executive Order 12866, the best practice is to accompany all significant regulations with (1) a tabular presentation, placed prominently and offering a clear statement of qualitative and quantitative benefits and costs of the proposed or planned action, together with (2) a presentation of uncertainties and (3) similar information for reasonable alternatives to the proposed or planned actions. As Table 1 above demonstrates, some rules are not accompanied by relevant information on either costs or benefits; OMB recommends that agencies should be more consistent and systematic in providing that information. While essential, pre-promulgation analyses of costs and benefits of rules may turn out to be inaccurate. Prospective accounts may overestimate or underestimate either costs or benefits. In some cases, regulations may impose significant burdens that are not justified. In other cases, regulations may be working well, and more stringency might be desirable. For this reason, OMB recommends that serious consideration be given to finding ways to employ retrospective analysis more regularly, in order to ensure that rules are appropriate, and to expand, reduce, or repeal them in accordance with what has been learned.8 President Obama’s January 30, 2009, memorandum on regulatory review specifically directed OMB to “offer suggestions on the role of cost benefit analysis” and to “address the role of distributional considerations, fairness, and concern for the interests of future generations.” It is clear that a full accounting of the costs and benefits of rules must include, rather than neglect, the interests of future generations. Nor does sensible regulation ignore distributional considerations. If regulation would impose serious costs on the least well-off, or deliver significant benefits to them, regulators should take that point into account in deciding how to proceed. To meet these challenges, OMB recommends a candid effort to go as far as existing knowledge allows, while also fairly presenting the limits of such knowledge and recognizing that an analysis of quantitative costs and benefits may not be determinative. In some cases, the most that can be done is to present a “break-even analysis,” that is, an analysis that specifies the economic value of the benefits that would make the regulation justified on benefit-cost grounds. OMB continues to explore methods for handling the most difficult challenges posed by efforts to specify the likely effects of regulation. 8 See Greenstone (2009). 98 ANALYTICAL PERSPECTIVES Regulatory Analysis and Open Government Rigorous benefit-cost analysis continues to be a central feature of regulatory review. Properly understood, a public accounting of the consequences of alternative regulatory approaches can increase transparency and openness, discourage ill-considered initiatives, and promote valuable innovations. President Obama has placed a great deal of emphasis on open government. He has quoted the words of Supreme Court Justice Louis Brandeis: “Sunlight is said to be the best of disinfectants.”9 He has explained that “accountability is in the interest of the Government and the citizenry alike.” He has emphasized that “[k]nowledge is widely dispersed in society, and public officials benefit from having access to that dispersed knowledge.”10 Transparency can increase the availability of data to all, and with available data we can greatly improve our practices. OMB’s Open Government Directive, issued in late 2009, is designed to promote the President’s goals by requiring a series of steps to promote transparency, participation, and collaboration. Indeed, careful regulatory analysis, if transparent in its assumptions and subject to public scrutiny, should be seen as part and parcel of open government. It helps to ensure that policies are not based on speculation and guesswork, but instead on a sense of the likely consequences of alternative courses of action. It helps to reduce the risk of insufficiently justified regulation, imposing serious burdens and costs for inadequate reason. It also helps to reduce the risk of insufficiently protective regulation, failing to go as far as proper analysis suggests. OMB believes that regulatory analysis should be developed and designed in a way that fits with the commitment to open government. Modern technologies should be enlisted to promote that goal. Existing websites—regulations.gov and reginfo.gov—have been improved to increase transparency, participation, and collaboration. OMB recommends continued assessment of those websites to promote these goals. OMB also recommends that agencies should publish, on those websites, existing data sets that can help promote regulatory goals. The Occupational Safety and Health Administration has posted fatality data on www.osha.gov. If sunlight can operate as “the best of dis9 Speech by President Obama, Jan. 28, 2009. infectants,” steps of this kind might help to increase safety and thus promote the agency’s core mission. Indeed, OMB’s Open Government Directive specifically calls for open government plans that include “high-value information,” defined to include information “that can be used to increase agency accountability and responsiveness; improve public knowledge of the agency and its operations; further the core mission of the agency; create economic opportunity; or respond to need and demand as identified through public consultation.”11 For present purposes, OMB emphasizes that information can “further the core mission of the agency” and “create economic opportunity.” In some cases, disclosure will further that mission, and promote such opportunity, for reasons previously sketched in this chapter. With full appreciation of its limitations, benefit-cost analysis itself can promote transparency and accountability. By drawing attention to the consequences of proposed courses of action, benefit-cost analysis can help the public to evaluate regulatory initiatives. At the same time, it creates the possibility of self-correction. Benefit-cost analysis should itself be subject to public scrutiny and review and qualified or corrected if it is wrong. As noted, OMB continues to explore ways to promote retrospective analysis of rules, thus (in the words of Executive Order 13514) “extending or expanding projects that have net benefits, and reassessing or discontinuing under-performing projects.” If members of the public have fresh evidence or ideas about improvement of existing regulations – including expansion, redirection, modification, or repeal – it is important to learn about that evidence and those ideas. A general goal is to connect the interest in sound analysis with the focus on open government, in part by promoting public engagement and understanding of regulatory alternatives. REFERENCES Adler, Matthew and Posner, Eric A., New Foundations for Cost-Benefit Analysis, Cambridge: Harvard University Press, 2004. Greenstone, Michael. “Toward A Culture of Persistent Regulatory Experimentation and Evaluation,” in David Moss & John Cisternino, eds., New Perspectives on Regulation. Cambridge: The Tobin Project, 2009, pp. 111126. 10 Transparency and Open Government, Memorandum for the Heads of Executive Departments and Agencies, President Obama, Jan. 21, 2009. 11 Open Government, Memorandum for the Heads of Executive Departments and Agencies, OMB Director Peter Orszag, Dec. 8, 2009. 10. IMPROVING THE FEDERAL WORKFORCE The United States has overcome great challenges throughout its history because Americans of every generation have stepped forward to aid their Nation through service, both in civilian Government and in the Armed Forces. Today’s Civil Service carries forward that proud American tradition. Whether it is defending our homeland, restoring confidence in our financial system and administering a historic economic recovery effort, providing health care to our veterans, or searching for cures to the most vexing diseases—we are fortunate to be able to rely upon a skilled workforce committed to public service. A high-performing Government depends on committed, engaged, and well-prepared employees. This chapter presents trends in Federal employment, compensation, and benefits; discusses challenges facing the Federal service; and presents the Administration’s plans for achieving the most talented Federal workforce possible to serve the American people. the Census, the ratio has steadily decreased over time. In 1988 there was one Federal employee for every 110 residents and by 2008 there was one Federal employee for every 155 residents. Table 10-1 shows Federal civilian employment in the executive branch by agency from 2007 to 2011. The levels for 2007 through 2009 are actual levels. The levels for 2010 and 2011 are estimates. The full-time equivalents (FTEs) shown in the table are calculated by dividing total hours worked during the fiscal year by 2080 (for 40 hours a week times 52 weeks per year). Total executive branch civilian employment is expected to grow by 274,100 FTEs over this time period. A little more than half of the fouryear increase happened between 2007 and 2009, while the remainder occurs between 2009 and 2011. Most of the increase (79 percent) is at five agencies – the Department of Defense, the Department of Veterans Affairs, the Department of Homeland Security, the Department of Justice, and the Department of State – that are centrally involved in fighting the wars in Iraq and Afghanistan, providing care for our returning veterans, protecting our country from the threat of terrorism, and advancing our Nation’s interests abroad. Trends in Federal Employment Chart 10-1 shows total Federal civilian employment (excluding the U.S. Postal Service) as a share of the U.S. resident population from 1940 to 2008. Since the end of the Korean War in 1953, there has been a steady downward trend in the relative size of the Federal civilian workforce. In 1953, there was one Federal worker for every 78 residents. Notwithstanding occasional upticks, due to, for example, military conflicts and the enumeration of Federal Workforce Pay Federal and private sector pay raises have followed each other closely for the past two decades. As a default, Federal pay raises are pegged to changes in the Chart 10-1. Federal Civilian Workforce as Share of U.S. Population 3.0% Total Federal Civilian Employment 2.5% DOD Civilian Employment 2.0% Civilian Agencies 1.5% 1.0% 0.5% 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 1978 1976 1974 1972 1970 1968 1966 1964 1962 1960 1958 1956 1954 1952 1950 1948 1946 1944 1942 1940 0% Sources: Workforce from OPM historical Federal civilian workforce tables. U.S. Population from Census Bureau. Notes: Workforce excludes U.S. Postal Service. U.S. Population is resident population series. 99 100 ANALYTICAL PERSPECTIVES Chart 10-2. Pay Raises for Federal vs. Private Workforce Year-over-year percent change 6.0 5.0 4.0 3.0 2.0 Federal Pay 1.0 Employment Cost Index (15-month lag) 0.0 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 Sources: Public Laws, Executive Orders, and the Bureau of Labor Statistics. Notes: Federal pay is for civilians and includes base and locality pay. Employement Cost Index is the wages and salaries, private industry workers series. 15-month-lagged Employment Cost Index series of wage and salaries for private industry workers.1 The index 1 The Federal Employees Pay Comparability Act of 1990 (FEPCA) dictated that Federal civilian employee pay increases be composed of two parts: across-the board or base pay adjustments and locality adjustments. The annual statutory increase for base pay is the 15-month lagged ECI (wages and salaries, private industry workers) minus 0.5 percent. The annual statutory increase for locality pay is different by geographic area and is based upon Bureau of Labor Statistics-measured pay comparability differences between private and Federal pay rates for jobs by locality. Federal civilian pay increases generally have not followed statutory guidelines; instead, Presidents have proposed differing amounts based upon their authority to do so under FEPCA’s alternative pay adjustment provisions, and Congress has enacted differing amounts in annual appropriations bills. measures private sector pay holding constant industry and occupation composition. Chart 10-2 shows Federal civilian pay raises and the private sector index since 1989. As the lines show, actual pay raises closely track the private sector index. In fact, since 1989 Federal and private sector pay raises have never diverged by more than one percentage point in a given year. And furthermore, since the adjustments have been in both directions, the adjustments have offset each other so that the average difference has been only one tenth of one percentage point over the time period. The Federal Government hires lawyers to tackle corruption, security professionals to monitor our borders, doc- Chart 10-3. Education Level Distribution in Federal vs. Private Workforce Federal Doctorate Private Masters/ Professional Degree College Degree Some College/ Associates High School Less than High School 0% 5% 10% 15% 20% 25% 30% 35% Source: Current Population Survey, 2009 Notes: Full-time, year-round employees. Federal is civilian workforce excluding U.S. Postal Service. State and Local workers excluded from both groups. 101 10. IMPROVING THE FEDERAL WORKFORCE tors to care for our injured veterans, and world-class scientists to combat deadly diseases such as cancer. Because of these vital needs, the Federal Government hires a relatively highly educated workforce, resulting in higher average pay. In 2009, full-time, year-round Federal civilian employees earned on average 21 percent more than workers in the private sector, according to Current Population Survey data collected by the Census Bureau. However, a raw comparison of these numbers masks important differences in the education levels of Federal and private sector employees. 2 Chart 10-3 examines this difference in more detail, showing the distribution of workers by education level in the Federal civilian and private workforce. About 20 percent of Federal workers have a master’s degree, professional degree, or doctorate versus only 13 percent in the private sector. A full 51 percent of Federal employees have at least a college degree compared to 35 percent in the private sector. Challenges An older workforce combined with technological change could be a major personnel challenge for the Federal Government. If the Government loses top talent, experience, and institutional memory through retirements but does not recruit, retain, and train talent, government performance will suffer. If the Government does not adapt to technological change by updating the ways it hires, develops, deploys, and engages its personnel, the Government will have difficulty meeting 21st Century challenges. But at the same time, these two developments create an opportunity for Government to bring in new workers excited about Government service with strong technology and problem-solving skills along with fresh perspectives on the problems that Government is expected to address. Aging workforce The Federal workforce of 2009 is older than Federal workforces of past decades and older than the private sector workforce of the present. Chart 10-4 shows the age distribution of Federal civilian employees in 1970 and 2009. The age distribution of the 2009 Federal workforce is shifted to the right of the 1970 distribution indicating an older workforce. In 1970, only 31 percent of Federal employees were 50 or older, whereas in 2009 a full 46 percent were at least 50 years old. At the same time, health has improved at older ages, allowing a greater proportion of workers to remain productive longer. One factor driving this shift is the aging of the Baby Boomers, but the age structure of the Federal workforce is not solely a product of this demographic trend. Chart 10-5 compares the age distribution of Federal and private employees in 2009. The Federal workforce is substantially older than the private sector workforce. About 31 percent of the private workforce is at least 50, while 46 percent of the Federal workforce is 50 or older. Chart 10-6 shows actual and projected retirements for the Federal civilian workforce from 1999 through 2016. Retirement levels increased from 2001 to 2007, and are projected to maintain their peak through 2011. While the recession that began in 2007 seems to have dampened retirement levels, it is unlikely to have a permanent effect. The gap between actual and predicted retirements in 2008 suggests that Federal workers, like workers in the private sector, are delaying retirement for economic reasons. As the economy recovers, retirements will rebound, likely pushing the retirement peak a few years into the future. 2 John Donahue, The Warping of Government Work (Harvard University Press, 2008) 20% Chart 10-4. Federal Age Distribution in 1970 and 2009 1970 2009 16% 12% 8% 4% 0% 18-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 >64 Source: Current Population Survey, 1970 and 2009. Notes: Full-time, year-round employees. Federal is civilian workforce excluding U.S. Postal Service. State and Local workers excluded from both groups. 102 ANALYTICAL PERSPECTIVES Chart 10-5. Federal vs. Private Age Distribution in 2009 20% Private Federal 16% 12% 8% 4% 0% 18-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 >64 Source: Current Population Survey. Notes: Full-time, year-round employees. Federal is civilian workforce excluding U.S. Postal Service. State and Local workers excluded from both groups. Chart 10-6. Actual and Projected Federal Employee Retirements 70,000 Actuals Projections 60,000 50,000 40,000 30,000 20,000 10,000 0 1999 2001 2003 2005 2007 2009 2011 2013 2015 Source: Office of Personnel Management. Notes: Retirements of non-seasonal, full-time, and permanent Federal civilian employees. A Knowledge-Based Economy Half a century ago, most white collar Federal employees performed clerical tasks, such as posting Census figures in ledgers and retrieving taxpayer records from file rooms. Today their jobs are vastly different. Federal workers need the advanced skills required for a knowledge-based economy. Professionals such as doctors, engineers, scientists, statisticians, and lawyers now make up a large portion of the Federal workforce. Additionally, a large number of Federal employees must manage highly sensitive situations that require great skill, experience, and judgment to balance the interests of multiple stakeholders to advance progress on complex, and often novel, problems, a point emphasized by Donald Kettl. 3 Federal employees increasingly need sophisticated management and negotiation skills to coordinate change not just 3 The Next Government of the United States: Why our Institutions Fail and How to Fix Them (W. W. Norton & Compnay, Inc, 2009) 103 10. IMPROVING THE FEDERAL WORKFORCE Chart 10-7. Federal General Schedule Distribution in 1953 and 2009 25% 1953 2009 20% 15% 10% 5% 0% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 General Schedule Level Source: Office of Personnel Management. across Federal Government organizations, but also with other levels of government, not-for-profit providers, and for-profit contractors. Others need skills to manage large, highly complex information systems that exceed the scope of most private sector systems. This shift is perhaps illustrated most starkly by Chart 10-7, which shows the General Schedule levels of Federal employees in 1953 and 2009. The General Schedule (GS) is a payment structure set in place in 1949 that classifies occupations according to the difficulty and responsibility of the work. In 1953, about 75 percent of Federal employees had a GS level of 7 or below. By 2009, in contrast, more than 70 percent of the workforce was GS 8 or higher. Chart 10-8 shows employee turnover in the Federal civilian and private workforce, measured by the percent of employees that left work for voluntary or involuntary reasons within the last year. Hire and separation rates in the Federal Government are consistently about half those in the private sector. At a private firm, on average, about 50 percent of employees have been hired or will leave within the year. In the Federal Government, only about 25 percent of employees are hired or separate within a given year. Federal turnover fell dramatically in CY 2008, presumably due to the recession. Among other implications, the low turnover rate of Federal employees Chart 10-8. Federal vs. Private Turnover Before and During Recession 60% CY 2002-2007 50% CY 2008 40% 30% 20% 10% 0% Private Source: Job Openings and Labor Turnover Survey (JOLTS), Bureau of Labor Statistics. Notes: Turnover defined as separations as a share of workforce. Federal 104 ANALYTICAL PERSPECTIVES suggests Government can gain significantly from training its workers. Personnel Performance Agenda To serve the American people, the Federal Government needs to improve management of the Federal workforce. The Office of Personnel Management (OPM) has recently released its new Strategic Plan with goals aligned with the lifecycle of a Federal employee. The “Hire the Best” strategic goal concentrates on improving the Federal hiring process. The “Respect the Workforce” strategic goal focuses on employee retention through training and worklife initiatives. The “Expect the Best” strategic goal aims to provide the necessary tools and resources for employees to engage and perform at the highest levels while holding them accountable. Finally, the “Honor Service” strategic goal acknowledges the exemplary service of Federal employees through well-designed compensation and retirement benefits. Combined, these strategic goals will facilitate engagement and satisfaction as the individual moves from applicant to Federal employee to retiree. Having the best possible Federal workforce is critical to improving organizational performance across the Government. Specifically, the Government needs to improve “people” management in order to improve “program” management and ultimately the services on which the American people depend. Improving the Federal Hiring Process The Administration believes that fixing the Federal hiring process is urgent to enable the Federal Government to attract the talent it needs, especially in light of retirement projections. The Office of Personnel Management is spearheading a Government-wide hiring initiative and has devised a five-prong approach to 1) elevate public service; 2) create pathways for college recruiting; 3) improve the applicant’s experience; 4) improve the quality of hires; and 5) simplify the hiring process. Additionally, the Administration aims to increase its outreach to veterans and persons with disabilities, and improve the diversity of the Federal workforce. Finally, the Administration is working to improve the timeliness and quality of critical personnel background investigations and employment suitability services. Improving Federal Manager and Employee Training The Administration is committed to the strategic management of Federal personnel, and believes that assessing and reducing the skills gap is a critical component of this strategy. As Linda Bilmes and Scott Gould observe, agencies too rarely invest strategically in training.4 Yet improving Federal manager and employee training is essential. Given the expected increase in the number of new hires and projected retirements, agencies must harness the institutional knowledge of experienced workers, cross-train new staff to provide seamless delivery of ser4 The People Factor: Strengthening America by Investing in Public Service (Brookings Institution Press, 2009) vices to the public, and groom their future leaders. The Federal workforce needs an optimal skills mix to meet demands in changing technology and process improvements in Government services. In some areas of the Federal Government, such as the military branches, training has been studied and revised extensively to implement best talent management practices. One promising example of training in the intelligence community is joint duty, which allows personnel to rotate assignments in order to better understand the roles and responsibilities of their counterparts. As another example, the VA San Diego Health System offers its employees disaster preparedness training and nurse triage training via virtual world simulations of real world scenarios. Improved Personnel Analytics Over the next year, the Administration plans to strengthen Federal agencies’ ability to use survey feedback from employees to help them improve personnel management. Federal agencies should strive to be model employers, and the engagement and satisfaction of our workforce directly affects Federal Government performance. The Administration will strengthen the capacity of agencies to use results from surveys of Federal workers and from job applicants to identify areas of personnel management strength and promote them in other parts of the Federal Government and to identify areas of weakness needing attention. Since 2002, the Office of Personnel Management has administered a biannual survey of Federal employees. The Federal Employee Viewpoint survey (formerly the Federal Human Capital Survey) measures the views of full-time, permanent employees across Government. Table 10-4 shows rankings, along four dimensions, constructed with the survey data. (The table shows results only from large agencies, so the rankings skip some numbers.) The first four columns present indices constructed from the 2008 survey: the Leadership and Knowledge Management Index brings together data on the motivational and communication skills of leadership; the Results-Oriented Performance Culture Index combines responses to questions on the promotion of creative and innovating thinking and performance appraisal; the Talent Management Index summarizes data on the recruiting and training of workforce talent; and the Job Satisfaction Index brings together responses to questions on job satisfaction. The rankings across indices are highly correlated, suggesting that the elements of workforce management, engagement, and satisfaction are inherently intertwined and that agencies may be able to take a broad-based approach to improvement. The rankings should be taken in context, as different agency missions place different challenges on employees. Moreover, they do not show variations by type of work or by subunits within a larger organization, which may vary dramatically, and do not reflect changes in performance over the last year. Still, the survey results begin to shed light on the issues different agencies face in personnel man- 10. IMPROVING THE FEDERAL WORKFORCE agement, and highlight areas where there is room for improvement. Table 10-4 also shows the Employee Engagement Rankings constructed by the Merit System Protections Board (MSPB) and the Best Places to Work ranking constructed by the Partnership for Public Service (PPS). The Employee Engagement Rankings draws from the 2005 Merit Principles Survey and the Best Places to Work ranking uses responses from the same Federal Employee Viewpoint Survey described above. The similar rankings across these different surveys and methodologies may lend support to the validity of the findings. These survey results can be viewed as a baseline to measure improvements in the workforce. To provide leadership with more current information, the Federal Employee Viewpoint Survey will be administered on an annual basis starting in 2010. Results will be reported so that they can be used by agency leadership to inform management decisions. Going forward, the survey will be administered to more employees so the findings can be sorted by and linked to more organizational units to make them more “actionable” by managers and supervisors. In addition, OMB and OPM will examine the survey to identify promising practices to promote more broadly for Government-wide improvement. A few other major initiatives being launched in the coming year will improve analysis and management of workforce issues. The Federal Employee Health Benefits (FEHB) program provides health insurance for 8 million Federal employees, retirees, their spouses and dependents, and data from insurance carriers involved in FEHB is currently used to detect fraud. It is not, however, analyzed to improve the effectiveness or efficiency of the program or the health of FEHB members. The Budget proposes funding for new analytical capacity to focus on the FEHB program with the goal of analyzing the data for program improvement, not just for fraud detection. The President’s Budget also includes funding for worksite wellness demonstration projects which are aimed at applying best practices from the private sector to the Federal workforce. These demonstration projects will be evaluated to determine their impact on lowering the growth in employee health care costs and improving employee health, productivity, and morale. In addition, the Administration will construct a Human Resources Dashboard, with a specific focus on employee and manager satisfaction with the hiring process and other key metrics of personnel management. This dashboard will be used to inform management decisions and identify problem areas at an early stage. Similar to the IT Dashboard, the HR Dashboard will provide senior leaders and managers a mechanism to have better information on the current status of hiring and other key “people issues” in their agencies so they can focus on areas that need improvement. The dashboards will also help agencies benchmark with each other and learn from each other’s best practices. 105 Restoring Balance Between Work Done by Federal Employees and Work Done by Contractors Federal agencies use both Federal employees and private sector contractors to deliver important services to citizens. Agency management practices must recognize the proper role of each sector’s labor force and draw on their respective skills to help Government operate at its best. Contractors provide vital expertise to the Government, and agencies must continue to strengthen their acquisition practices so that they can take advantage of the marketplace to meet taxpayer needs. At the same time, agencies must be alert to situations in which excessive reliance on contractors undermines the ability of the Federal Government to control its own operations and accomplish its missions for the American people. In particular, overreliance on contractors can lead to the erosion of in-house capacity that is essential to effective Government performance, a fact emphasized by Paul Light.5 Such overreliance was encouraged by the one-sided management priorities of the previous administration. Those priorities rewarded agencies for identifying functions that could be outsourced, while ignoring the costs associated with the loss of institutional knowledge and internal capability. Too often agencies have neglected the investments in human capital planning, recruitment, hiring, and training that are necessary for building strong internal capacity. In July 2009, OMB issued guidance providing agencies with a framework of guiding principles for assessing their use of contractors in this context. That guidance directed agencies to take steps to make sure that they have sufficient internal capacity to maintain control of their missions and operations. Each agency was also directed to conduct a pilot human capital analysis of at least one program, project, or activity, where the agency had concerns about the extent of reliance on contractors, and to take appropriate steps to address any identified internal weaknesses. In some instances, the result of the pilots may be that agencies replace contractors with Federal employees, a step that often saves money at the same time that it improves control over mission and operations. Some of the FTE increases described earlier in the chapter result from agencies replacing contractors with Federal workers. When contractors are used, it is essential that the Federal Government has the ability to protect taxpayer interests. Acquiring the best contractor support requires solid acquisition planning, appropriate competitive procedures, and appropriate management and oversight of firms during performance of contracts. Too often, whether due to inadequate planning or simply poor business decisions, the government has entered into high-risk arrangements, such as sole-source contracts, that cause costs to the taxpayers to rise without commensurate benefits, and, too frequently, contract management has been haphazard and inadequate. 5 A Government Ill Executed: The Decline of the Federal Service and How to Reverse It (Harvard University Press, 2008) 106 The Federal Government currently spends more than $500 billion a year on contracts, more than double the amount that was spent in 2001. Over that period, the size of the acquisition workforce planning, awarding, and managing these contracts has barely grown. The President’s 2011 Budget provides $158 million for an initiative to improve the capacity and capabilities of the civilian agency acquisition workforce, building on a similar initiative at the Department of Defense. The initiative included in the 2011 Budget provides resources sufficient for most civilian agencies to increase their acquisition workforce by five percent and to invest in training and technology that will make the acquisition workforce more effective. The initiative also provides funds for Government-wide investments in the acquisition workforce, such as curriculum development, competency and certification management, and collection of data on acquisition workforce capacity and needs. This additional capacity will allow agencies to acquire the goods and services they need to accomplish their missions at reduced costs and with better performance. ANALYTICAL PERSPECTIVES Appendix: The U.S. Overseas Staffing Presence There are approximately 70,300 American and locally hired staff overseas under the authority of Chiefs of Mission (e.g., Ambassadors or Charge d’ Affairs at U.S. embassies worldwide). The average estimated cost to support an American position overseas in 2011 is projected to be $580,000, as reported by agencies with personnel overseas (see Table 10-5.). This total includes direct costs, such as salary, benefits, and overseas allowances, and also support costs, such as housing, travel, administrative support, Capital Security Cost Sharing charges, and other benefits. The Administration continues to work to improve the safety, efficiency, and accountability in U.S. Government staffing overseas. To this end, the Administration is committed to developing transparent data on overseas staffing, including the cost of maintaining positions overseas, and incorporating this data in the budget process to better inform decision makers on overseas staffing levels. 107 10. IMPROVING THE FEDERAL WORKFORCE Table 10–1. FEDERAL CIVILIAN EMPLOYMENT IN THE EXECUTIVE BRANCH (Civilian employment as measured by Full-Time Equivalents in thousands, excluding the Postal Service) Agency Cabinet agencies: Agriculture .......................................................... Commerce .......................................................... Defense .............................................................. Education ............................................................ Energy ................................................................ Health and Human Services ............................... Homeland Security ............................................ Housing and Urban Development ....................... Interior ................................................................ Justice ................................................................ Labor .................................................................. State ................................................................... Transportation ..................................................... Treasury .............................................................. Veterans Affairs .................................................. Actual 2007 2008 Estimate 2009 2010 Change: 2007 to 2011 2011 FTE Percent 94.8 36.3 658.8 4.1 14.6 58.8 148.1 9.5 67.4 105.0 15.9 30.1 53.4 107.7 230.4 93.9 37.5 671.2 4.1 14.7 59.8 158.2 9.4 67.4 106.0 16.0 30.4 54.7 106.7 249.5 94.2 56.0 702.7 4.0 15.5 63.0 169.6 9.5 68.6 109.1 16.0 30.4 56.4 108.7 272.0 101.0 141.5 720.2 4.3 16.6 65.1 177.0 9.7 70.6 119.3 17.9 35.0 57.9 113.5 284.3 97.1 43.6 757.5 4.6 16.9 68.0 183.5 9.7 69.6 125.0 17.9 35.7 58.6 113.7 287.7 2.3 7.3 98.7 0.5 2.3 9.2 35.4 0.2 2.2 20.0 2.0 5.6 5.2 6.0 57.3 2.4% 20.1% 15.0% 12.2% 15.8% 15.6% 23.9% 2.1% 3.3% 19.0% 12.6% 18.6% 9.7% 5.6% 24.9% Agency for International Development ................ Broadcasting Board of Governors ...................... Corps of Engineers—Civil Works ....................... Environmental Protection Agency ....................... Equal Employment Opportunity Comm .............. Federal Deposit Insurance Corporation .............. General Services Administration ........................ National Aeronautics and Space Admin ............. National Archives and Records Administration ... National Labor Relations Board .......................... National Science Foundation .............................. Nuclear Regulatory Commission ........................ Office of Personnel Management ....................... Peace Corps ....................................................... Railroad Retirement Board ................................. Securities and Exchange Commission ............... Small Business Administration ........................... Smithsonian Institution ....................................... Social Security Administration ............................ Tennessee Valley Authority ................................. All other small agencies ...................................... 2.4 2.0 21.2 17.0 2.2 4.5 11.9 18.2 2.8 1.7 1.3 3.5 4.6 1.1 1.0 3.5 4.4 5.0 61.7 11.3 15.6 2.4 2.0 21.1 16.8 2.2 4.6 11.8 18.4 2.8 1.6 1.3 3.7 4.7 1.0 1.0 3.5 3.6 5.1 61.3 11.6 15.2 2.6 1.9 22.2 17.0 2.2 5.5 12.0 18.3 3.0 1.6 1.4 4.0 4.7 1.0 0.9 3.6 3.9 5.1 64.1 11.5 15.6 2.8 2.1 22.6 17.4 2.5 7.6 13.0 18.6 3.2 1.7 1.4 4.0 4.9 1.3 1.0 3.8 3.5 5.4 67.6 13.0 17.3 3.3 2.1 22.6 17.6 2.6 6.6 13.3 18.6 3.3 1.7 1.5 4.0 5.0 1.4 0.9 4.2 3.5 5.4 68.4 13.0 17.7 0.9 0.1 1.4 0.6 0.4 2.1 1.4 0.4 0.5 0.0 0.2 0.5 0.4 0.3 –0.1 0.7 –0.9 0.4 6.7 1.7 2.1 37.5% 5.0% 6.6% 3.5% 18.2% 46.7% 11.8% 2.2% 17.9% 0.0% 15.4% 14.3% 8.7% 27.3% –10.0% 20.0% –20.5% 8.0% 10.9% 15.0% 13.5% Total, Executive Branch civilian employment * ... 1,831.6 658.8 1,172.8 1,875.3 671.2 1,204.1 1,977.8 702.7 1,275.1 2,148.3 720.2 1,428.1 2,105.7 757.5 1,348.2 274.1 98.7 175.4 15.0% 15.0% 15.0% Other agencies—excluding Postal Service: Subtotal, Defense .................................................... Subtotal, Non-Defense ............................................ * Totals may not add due to rounding. 108 ANALYTICAL PERSPECTIVES Table 10–2. TOTAL FEDERAL EMPLOYMENT (As measured by Full-Time Equivalents) Description Estimate 2009 Actual Change: 2009 to 2011 2010 2011 FTE Percent Executive branch civilian personnel: All agencies except Postal Service and Defense ......................... Defense-Military functions (civilians) ........................................... Subtotal, excluding Postal Service ....................................... Postal Service 1 ............................................................................ Subtotal, Executive Branch civilian personnel ...................... 1,275,110 702,664 1,977,774 674,844 2,652,618 1,428,103 720,201 2,148,304 675,256 2,823,560 1,348,241 757,461 2,105,702 663,503 2,769,205 73,131 54,797 127,928 –11,341 116,587 5.7% 7.8% 6.5% –1.7% 4.4% Executive branch uniformed personnel: Department of Defense 2 ............................................................. Department of Homeland Security (USCG) ................................ Commissioned Corps (DOC, EPA, HHS) .................................... Subtotal, uniformed military personnel ................................. Subtotal, Executive Branch .................................................. Legislative Branch: Total FTE 3 ......................................................... Judicial branch: Total FTE ................................................................. 1,541,235 42,939 6,580 1,590,754 4,243,372 32,104 34,288 1,547,501 44,276 6,873 1,598,650 4,422,210 33,495 35,162 1,541,182 43,810 6,926 1,591,918 4,361,123 33,533 36,303 –53 871 346 1,164 117,751 1,429 2,015 –0.0% 2.0% 5.3% 0.1% 2.8% 4.5% 5.9% 4,309,764 4,490,867 4,430,959 121,195 Postal Rate Commission. 2 Does not include Full-Time Support (Active Guard & Reserve (AGRs)) paid from Reserve Component Appropriations. 3 FTE data not available for the Senate (positions filled were used). 2.8% Grand total ................................................................................ 1 Includes 109 10. IMPROVING THE FEDERAL WORKFORCE Table 10–3. PERSONNEL COMPENSATION AND BENEFITS (In millions of dollars) Description 2009 Actual 2010 Estimate Change: 2009 to 2011 2011 Request Dollars Percent Civilian personnel costs: Executive Branch (excluding Postal Service): Direct compensation: DOD—military functions .................................................... All other executive branch .................................................. Subtotal, direct compensation ..................................... Personnel benefits: DOD—military functions .................................................... All other executive branch .................................................. Subtotal, personnel benefits ........................................ Subtotal, Executive Branch ................................... 49,194 104,921 154,115 52,949 116,353 169,302 56,914 117,177 174,091 7,720 12,256 19,976 15.7% 11.7% 13.0% 13,965 42,604 56,569 210,684 15,565 44,661 60,226 229,528 16,642 45,546 62,188 236,279 2,677 2,942 5,619 25,595 19.2% 6.9% 9.9% 12.1% 36,387 16,642 53,029 37,914 18,096 56,010 37,818 18,615 56,433 1,431 1,973 3,404 3.9% 11.9% 6.4% 2,072 604 2,676 2,221 665 2,886 2,303 691 2,994 231 87 318 11.1% 14.4% 11.9% 3,023 942 3,965 270,354 3,247 1,015 4,262 292,686 3,425 1,076 4,501 300,207 402 134 536 29,853 13.3% 14.2% 13.5% 11.0% DOD—Military Functions: Direct compensation ................................................................. Personnel benefits .................................................................... Subtotal .............................................................................. 95,613 47,106 142,719 99,788 50,815 150,603 100,925 52,307 153,232 5,312 5,201 10,513 5.6% 11.0% 7.4% All other executive branch, uniformed personnel: Direct compensation ........................................................................ Personnel benefits ........................................................................... Subtotal .................................................................................... Total, military personnel costs 2 ....................................................... 2,914 792 3,706 146,425 3,140 833 3,973 154,576 3,187 841 4,028 157,260 273 49 322 10,835 9.4% 6.2% 8.7% 7.4% Grand total, personnel costs ............................................................. 416,779 447,262 457,467 40,688 9.8% 69,307 9,114 44 71,683 9,526 47 73,961 10,118 48 4,654 1,004 4 6.7% 11.0% 9.1% Postal Service: Direct compensation ................................................................. Personnel benefits .................................................................... Subtotal .............................................................................. Legislative Branch: 1 Direct compensation ................................................................. Personnel benefits .................................................................... Subtotal .............................................................................. Judicial Branch: Direct compensation ................................................................. Personnel benefits .................................................................... Subtotal .............................................................................. Total, civilian personnel costs ............................................ Military personnel costs: ADDENDUM Former Civilian Personnel: Retired pay for former personnel ..................................................... Government payment for Annuitants: Employee health benefits ................................................... Employee life insurance ..................................................... Former Military personnel: Retired pay for former personnel ..................................................... 50,304 50,998 51,933 1,629 3.2% Military annuitants health benefits ................................................... 8,291 8,634 9,356 1,065 12.8% 1 Excludes members and officers of the Senate. 2 Amounts in this table for military compensation reflect direct pay and benefits for all service members, including active duty, guard, and reserve members. 110 ANALYTICAL PERSPECTIVES Table 10–4. AGENCY RANKINGS FROM FEDERAL WORKFORCE SURVEYS 1 Human Capital Index Score (OPM) Agency Nuclear Regulatory Commission ................................................................. National Aeronautics and Space Administration ......................................... State ............................................................................................................ General Services Administration ................................................................. Social Security Administration ..................................................................... Commerce ................................................................................................... Office of Personnel Management ................................................................ Defense ....................................................................................................... Energy ......................................................................................................... Securities and Exchange Commission ........................................................ Justice ......................................................................................................... Environmental Protection Agency ............................................................... Treasury ....................................................................................................... Labor ........................................................................................................... Small Business Administration .................................................................... Veterans Affairs ........................................................................................... Health and Human Services ........................................................................ Education ..................................................................................................... Agriculture ................................................................................................... Housing and Urban Development ................................................................ Interior ......................................................................................................... Homeland Security ...................................................................................... Transportation .............................................................................................. 1 Only large agencies shown. Rankings may skip numbers. * Not surveyed Leadership Resultsand Oriented Knowledge Performance Talent Job Management Culter Management Satisfaction 1 5 7 8 10 11 14 15 16 17 18 19 20 21 22 23 24 27 28 31 34 35 36 2 4 11 14 24 8 15 20 19 27 23 13 18 16 26 32 17 29 31 33 30 35 36 1 3 10 9 24 12 26 16 15 22 17 13 18 30 31 14 20 25 23 36 27 34 33 1 4 5 12 7 16 19 18 22 29 10 11 28 21 27 14 20 31 24 30 26 33 35 Employee Satisfaction Ranking Employee (PPS Best Engagement Places to Rankings Work) (MSPB) 1 3 5 8 9 10 20 15 19 11 7 6 17 18 26 12 21 27 23 24 22 28 30 * 1 2 9 14 6 18 13 20 * 7 5 15 12 * 8 11 21 19 17 16 24 22 111 10. IMPROVING THE FEDERAL WORKFORCE Table 10–5. OVERSEAS STAFFING UNDER CHIEF OF MISSION AUTHORITY* Total Personnel Under COM Authority (including American and locally engaged staff) projected for FY 2011 Total American Personnel Under COM Authority projected for FY 2011 70,300 17,640 * As reported by agencies in their 2011 Overseas Staffing and Cost submissions Average Cost of an American Position Overseas Estimated for FY 2011 $580,000 BUDGET CONCEPTS AND BUDGET PROCESS 113 114 11. BUDGET CONCEPTS The budget system of the United States Government provides the means for the President and Congress to decide how much money to spend, what to spend it on, and how to raise the money they have decided to spend. Through the budget system, they determine the allocation of resources among the agencies of the Federal Government and between the Federal Government and the private sector. The budget system focuses primarily on dollars, but it also allocates other resources, such as Federal employment. The decisions made in the budget process affect the Nation as a whole, state and local governments, and individual Americans. Many budget decisions have worldwide significance. The Congress and the President enact budget decisions into law. The budget system ensures that these laws are carried out. This chapter provides an overview of the budget system and explains some of the more important budget concepts. It includes summary dollar amounts to illustrate major concepts. Other chapters of the budget documents discuss these amounts and more detailed amounts in greater depth. The following section discusses the budget process, covering formulation of the President’s Budget, action by Congress, and execution of enacted budget laws. The next section provides information on budget coverage, including a discussion of on-budget and off-budget amounts, functional classification, presentation of budget data, types of funds, and full-cost budgeting. Subsequent sections discuss the concepts of receipts and collections, budget authority, and outlays. These sections are followed by discussions of Federal credit; surpluses, deficits, and means of financing; Federal employment; and the basis for the budget figures. A glossary of budget terms appears at the end of the chapter. Various laws, enacted to carry out requirements of the Constitution, govern the budget system. The chapter refers to the principal ones by title throughout the text and gives complete citations in the section just preceding the glossary. THE BUDGET PROCESS The budget process has three main phases, each of which is related to the others: 1. Formulation of the President’s Budget; 2. Action by Congress; and 3. Execution of enacted budget laws. Formulation of the President’s Budget The Budget of the United States Government consists of several volumes that set forth the President’s fiscal policy goals and priorities for the allocation of resources by the Government. The primary focus of the Budget is on the budget year—the next fiscal year for which Congress needs to make appropriations, in this case 2011. (Fiscal year 2011 will begin on October 1, 2010, and end on September 30, 2011.) The Budget also covers the nine years following the budget year in order to reflect the effect of budget decisions over the longer term. It includes the funding levels provided for the current year, in this case 2010, so that the reader can compare the President’s Budget proposals with the most recently enacted levels, and it includes data on the most recently completed fiscal year, in this case 2009, so that the reader can compare budget estimates to actual accounting data. In a normal year, the President begins the process of formulating the budget by establishing general budget and fiscal policy guidelines, usually by the Spring of each year, at least nine months before the President transmits the budget to Congress and at least 18 months before the fiscal year begins. (See the “Budget Calendar” later in this chapter.) Based on these guidelines, the Office of Management and Budget (OMB) works with the Federal agencies to establish specific policy directions and planning levels, both for the budget year and for at least the following four years, and in this case, the following nine years, to guide the preparation of their budget requests. During the formulation of the budget, the President, the Director of OMB, and other officials in the Executive Office of the President continually exchange information, proposals, and evaluations bearing on policy decisions with the Secretaries of the departments and the heads of the other Government agencies. Decisions reflected in previously enacted budgets, including the one for the fiscal year in progress, reactions to the last proposed budget (which Congress is considering at the same time the process of preparing the forthcoming budget begins), and evaluations of program performance all influence decisions concerning the forthcoming budget. So do projections of the economic outlook, prepared jointly by the Council of Economic Advisers, OMB, and the Treasury Department. In early Fall, agencies submit their budget requests to OMB, where analysts review them and identify issues that OMB officials need to discuss with the agencies. OMB and the agencies resolve many issues themselves. Others require the involvement of White House policy officials and the President. This decision-making process is usually completed by late December. At that time, the final stage of developing detailed budget data and the preparation of the budget documents begins. 115 116 ANALYTICAL PERSPECTIVES The decision-makers must consider the effects of economic and technical assumptions on the budget estimates. Interest rates, economic growth, the rate of inflation, the unemployment rate, and the number of people eligible for various benefit programs, among other factors, affect Government spending and receipts. Small changes in these assumptions can alter budget estimates by many billions of dollars. (Chapter 2, “Economic Assumptions,’’ provides more information on this subject.) Thus, the budget formulation process involves the simultaneous consideration of the resource needs of individual programs, the allocation of resources among the agencies and functions of the Federal Government, and the total outlays and receipts that are appropriate in light of current and prospective economic conditions. The law governing the President’s budget requires its transmittal to Congress on or after the first Monday in January but not later than the first Monday in February of each year for the following fiscal year, which begins on October 1. The budget is routinely sent to Congress on the first Monday in February, giving Congress eight months to act on the budget before the fiscal year begins. Congressional Action 1 Congress considers the President’s budget proposals and approves, modifies, or disapproves them. It can change funding levels, eliminate programs, or add programs not requested by the President. It can add or eliminate taxes and other sources of receipts or make other changes that affect the amount of receipts collected. Congress does not enact a budget as such. Through the process of adopting a planning document called a budget 1 For a fuller discussion of the congressional budget process, see Robert Keith, Introduction to the Federal Budget Process (Congressional Research Service Report 98–721 GOV), and Robert Keith and Allen Schick, Manual on the Federal Budget Process (Congressional Research Service Report 98–720 GOV, archived). resolution (described below), Congress agrees on targets for total spending and receipts, the size of the deficit or surplus, and the debt limit. The budget resolution provides the framework within which individual congressional committees prepare appropriations bills and other spending and receipts legislation. Congress provides spending authority—funding—for specified purposes in appropriations acts each year. It also enacts changes each year in other laws that affect spending and receipts. Both appropriations acts and these other laws are discussed in the following paragraphs. In making appropriations, Congress does not vote on the level of outlays (spending) directly, but rather on budget authority, or funding, which is the authority provided by law to incur financial obligations that will result in outlays. In a separate process, prior to making appropriations, Congress usually enacts legislation that authorizes an agency to carry out particular programs and, in some cases, limits the amount that can be appropriated for the programs. Some authorizing legislation expires after one year, some expires after a specified number of years, and some is permanent. Congress may enact appropriations for a program even though there is no specific authorization for it or its authorization has expired. Congress begins its work on its budget resolution shortly after it receives the President’s budget. Under the procedures established by the Congressional Budget Act of 1974, Congress decides on budget targets before commencing action on individual appropriations. The Act requires each standing committee of the House and Senate to recommend budget levels and report legislative plans concerning matters within the committee’s jurisdiction to the Budget Committee in each body. The House and Senate Budget Committees then each design and report, and each body then considers, a concurrent resolution on the budget—a congressional budget plan, or budget resolution. The budget resolution sets targets for total receipts BUDGET CALENDAR The following timetable highlights the scheduled dates for significant budget events during a normal budget year: Between the 1st Monday in January and the 1st Monday in February ........................ President transmits the budget Congressional committees report budget estimates to Six weeks later ............................................ Budget Committees April 15 ......................................................... Action to be completed on congressional budget resolution House consideration of annual appropriations bills may May 15 .......................................................... begin even if the budget resolution has not been agreed to. House Appropriations Committee to report the last of its June 10 ......................................................... annual appropriations bills. June 15 ......................................................... Action to be completed on “reconciliation bill” by Congress. June 30 ......................................................... Action on appropriations to be completed by House July 15 .......................................................... President transmits Mid-Session Review of the Budget October 1 ....................................................... Fiscal year begins 11. BUDGET CONCEPTS and for budget authority and outlays, both in total and by functional category (see “Functional Classification’’ later in this chapter). It also sets targets for the budget deficit or surplus and for Federal debt subject to statutory limit. The congressional timetable calls for the House and Senate to resolve differences between their respective versions of the congressional budget resolution and adopt a single budget resolution by April 15 of each year. In the report on the budget resolution, the Budget Committees allocate the total on-budget budget authority and outlays set forth in the resolution to the Appropriations Committees and the other committees that have jurisdiction over spending. (See “Coverage of the Budget,” later in this chapter, for more information on onbudget and off-budget amounts.) Once Congress resolves differences between the House and Senate and agrees on a budget resolution, the Appropriations Committees are required to divide their allocations of budget authority and outlays among their subcommittees. Congress is not allowed to consider appropriations bills (so-called “discretionary” spending) that would breach or further breach an Appropriations subcommittee’s target. The other committees with jurisdiction over spending (so-called “mandatory” spending) may make allocations among their subcommittees but are not required to. Congress is not allowed to consider legislation that would cause the overall spending target for any such committee to be breached or further breached. The Budget Committees’ reports may discuss assumptions about the level of funding for major programs. While these assumptions do not bind the other committees and subcommittees, they may influence their decisions. The budget resolution may also contain “reconciliation directives’’ (discussed below) to the committees responsible for tax laws and for mandatory spending— programs not controlled by annual appropriation acts— in order to conform the level of receipts and this type of spending to the targets in the budget resolution. Since the concurrent resolution on the budget is not a law, it does not require the President’s approval. However, Congress considers the President’s views in preparing budget resolutions, because legislation developed to meet congressional budget allocations does require the President’s approval. In some years, the President and the joint leadership of Congress have formally agreed on plans to reduce the deficit or balance the budget. These agreements were then reflected in the budget resolution and legislation passed for those years. Once Congress approves the budget resolution, it turns its attention to enacting appropriations bills and authorizing legislation. Appropriations bills are initiated in the House. They provide the budgetary resources for the majority of Federal programs, but only a minority of Federal spending. The Appropriations Committee in each body has jurisdiction over annual appropriations. These committees are divided into subcommittees that hold hearings and review detailed budget justification materials prepared by the Executive Branch agencies within the subcommittee’s jurisdiction. After a bill has been drafted by a subcommittee, the full committee and the whole House, in turn, must approve the bill, sometimes 117 with amendments to the original version. The House then forwards the bill to the Senate, where a similar review follows. If the Senate disagrees with the House on particular matters in the bill, which is often the case, the two bodies form a conference committee (consisting of some Members of each body) to resolve the differences. The conference committee revises the bill and returns it to both bodies for approval. When the revised bill is agreed to, first in the House and then in the Senate, Congress sends it to the President for approval or veto. Since 1977, when the start of the fiscal year was established as October 1, there have been only three fiscal years (1989, 1995, and 1997) for which Congress agreed to every appropriations bill by that date. When one or more appropriations bills has not been agreed on by this date, Congress usually enacts a joint resolution called a “continuing resolution,’’ (CR) which is an interim or stop-gap appropriations bill that provides authority for the affected agencies to continue operations at some specified level up to a specific date or until the regular appropriations are enacted. Occasionally, a CR has funded a portion or all of the Government for the entire year. Most CRs instruct the Administration to take the most limited funding action permitted by the CR, so as not to impinge on the final funding prerogatives of the Congress. Congress must present these resolutions to the President for approval or veto. In some cases, Presidents have rejected CRs because they contained unacceptable provisions. Left without funds, Government agencies were required by law to shut down operations—with exceptions for some activities—until Congress passed a CR the President would approve. Shutdowns have lasted for periods of a day to several weeks. Congress also provides budget authority in laws other than appropriations acts. In fact, while annual appropriations acts fund the majority of Federal programs, they account for only about a third of the total spending in a typical year. Authorizing legislation controls the rest of the spending, which is commonly called “mandatory spending.” A distinctive feature of these authorizing laws is that they provide agencies with the authority or requirement to spend money without first requiring the Appropriations Committees to enact funding. This category of spending includes interest the Government pays on the public debt and the spending of several major programs, such as Social Security, Medicare, Medicaid, unemployment insurance, and Federal employee retirement. This chapter discusses the control of budget authority and outlays in greater detail under “Budget Authority and Other Budgetary Resources, Obligations, and Outlays.” Almost all taxes and most other receipts also result from authorizing laws. Article I, Section 7, of the Constitution provides that all bills for raising revenue shall originate in the House of Representatives. In the House, the Ways and Means Committee initiates tax bills; in the Senate, the Finance Committee has jurisdiction over tax laws. The budget resolution often includes reconciliation directives, which require authorizing committees to change laws that affect receipts or mandatory spending. It directs each designated committee to report amendments 118 ANALYTICAL PERSPECTIVES to the laws under the committee’s jurisdiction that would achieve changes in the levels of receipts or reductions in mandatory spending controlled by those laws. These directives specify the dollar amount of changes that each designated committee is expected to achieve, but do not specify which laws are to be changed or the changes to be made. However, the Budget Committees’ reports on the budget resolution frequently discuss assumptions about how the laws would be changed. Like other assumptions in the report, they do not bind the committees of jurisdiction but may influence their decisions. A reconciliation instruction may also specify the total amount by which the statutory limit on the public debt is to be changed. The committees subject to reconciliation directives draft the implementing legislation. Such legislation may, for example, change the tax code, revise benefit formulas or eligibility requirements for benefit programs, or authorize Government agencies to charge fees to cover some of their costs. Reconciliation bills are typically omnibus legislation, combining the legislation submitted by each reconciled committee in a single act. Such a large and complicated bill would be difficult to enact under normal legislative procedures because it usually involves changes to tax rates or to popular social programs in order to achieve budgetary savings. The Senate considers such omnibus reconciliation acts under expedited procedures that limit total debate on the bill. To offset the procedural advantage gained by expedited procedures, the Senate places significant restrictions on the substantive content of the reconciliation measure itself, as well as on amendments to the measure. Any material in the bill that is extraneous or that contains changes to the Federal Old-Age and Survivors Insurance and the Federal Disability Insurance programs is not in order under the Senate’s expedited reconciliation procedures. Non-germane amendments are also prohibited. In addition, the reconciliation bill as a whole is not permitted to increase projected deficits or reduce projected surpluses. Reconciliation acts, together with appropriations acts for the year, are usually used to implement broad agreements between the President and the Congress on those occasions where the two branches have negotiated a comprehensive budget plan. Reconciliation acts have sometimes included other matters, such as laws providing the means for enforcing these agreements, as described under “Budget Enforcement.” Budget Enforcement The Budget Enforcement Act (BEA), first enacted in 1990 and extended in 1993 and 1997, was an example of a law designed to enforce an overall budget agreement negotiated between the President and Congress; the purpose of the law was to reassure both the President and Congress that neither would work to unravel the budget agreement they had reached. Most aspects of the BEA expired in 2002, and its principal enforcement provisions were ignored by the President and Congress in its last few years. However, one of those provisions—a pay-as-yougo rule for tax and mandatory spending legislation—is part of House and Senate rules in a modified form and continues to govern congressional consideration of such legislation. In addition, the possibility of reinstating caps on discretionary spending and a statutory pay-as-you-go rule continues to prompt much discussion and so these provisions are discussed in this section. The BEA divided spending into two types—discretionary spending and direct or mandatory spending. As noted above, discretionary spending is controlled through annual appropriations acts and mandatory spending is controlled by authorizing laws. The BEA defined categories of discretionary spending (such as “defense” and “non-defense” spending) and set forth dollar limits known as caps on the amount of spending in each category. If the amount of budget authority provided in appropriations acts for a given year exceeded the budget authority cap for that category, or if the estimated outlays exceeded the outlay cap for that category, the BEA triggered an automatic procedure, called sequestration, for reducing the spending in the category down to the level of the cap. The BEA did not cap mandatory spending, in large part because much mandatory spending, such as unemployment compensation, is intended to fluctuate automatically with economic conditions. Instead, it required that all proposed legislation that affected mandatory spending or receipts be enacted on a pay-as-you-go (PAYGO) basis. If such a law increased the projected deficit or reduced a projected surplus in the budget year or any of the four following years, another law had to be enacted with an offsetting reduction in mandatory spending or increase in receipts for each such year. In short, the PAYGO rule prohibited the enactment of new legislation that, on net, would cost money in any of the years covered by a budget agreement between the President and Congress. (In 1990, 1993, and 1997, the agreements each covered five years.) If the net of all tax and mandatory spending legislation enacted since the start of the most recent five-year agreement was a cost for the budget year, a sequestration would be triggered to offset that net cost. On July 22, 2009, the House of Representatives passed a permanent version of statutory PAYGO (H.R. 2920), similar in basic ways to the statutory PAYGO provisions of the BEA. The Senate has not yet acted on the House-passed bill. The Administration transmitted a statutory PAYGO bill to Congress in 2009 and supports the House-passed legislation. This proposal is discussed in more detail in Chapter 13 of this volume, “Budget Process.” Chapter 24, “Budget System and Concepts and Glossary,” pages 460-461 in the Analytical Perspectives volume of the 2004 Budget, discusses the Budget Enforcement Act in more detail. Budget Execution Government agencies may not spend or obligate more than Congress has appropriated, and they may use funds only for purposes specified in law. The Antideficiency Act prohibits them from spending or obligating the Government to spend in advance of an appropriation, un- 119 11. BUDGET CONCEPTS less specific authority to do so has been provided in law. Additionally, the Act requires the President to apportion the budgetary resources available for most executive branch agencies. The President has delegated this authority to OMB. Some apportionments are by time periods (usually by quarter of the fiscal year), some are by projects or activities, and others are by a combination of both. Agencies may request OMB to reapportion funds during the year to accommodate changing circumstances. This system helps to ensure that funds do not run out before the end of the fiscal year. During the budget execution phase, the Government sometimes finds that it needs more funding than Congress has appropriated for the fiscal year because of unanticipated circumstances. For example, more might be needed to respond to a severe natural disaster. Under such circumstances, Congress may enact a supplemental appropriation. On the other hand, the President may propose to reduce a previously enacted appropriation. The President may propose to either “cancel” or “rescind” the amount. If the President initiates the withholding of funds while Congress considers his request, the amounts are apportioned as “deferred” or “withheld pending rescission” on the OMB-approved apportionment form. Agencies are instructed not to withhold funds without the prior approval of OMB. When OMB approves a withholding, the Impoundment Control Act requires that the President transmit a “special message” to the Congress. The historical reason for the special message is to inform Congress that the President has unilaterally withheld funds that were enacted in regular appropriations acts. The notification allows the Congress to consider the proposed rescission in a timely way. The last time the President initiated the withholding of funds was in fiscal year 2000. COVERAGE OF THE BUDGET Federal Government and Budget Totals The budget documents provide information on all Federal agencies and programs. However, because the laws governing Social Security (the Federal Old-Age and Survivors Insurance and the Federal Disability Insurance trust funds) and the Postal Service Fund require that the receipts and outlays for those activities be excluded from the budget totals and from the calculation of the deficit or surplus, the budget presents on-budget and off-budget totals. The off-budget totals include the Federal transactions excluded by law from the budget totals. The on-budget and off-budget amounts are added together to derive the totals for the Federal Government. These are someTable 11–1. TOTALS FOR THE BUDGET AND THE FEDERAL GOVERNMENT (In billions of dollars) 2009 Actual Estimate 2010 2011 Budget Authority: Unified .......................................................................... On-budget ..................................................................... Off-budget ..................................................................... 4,077 3,548 529 3,601 3,041 559 3,691 3,110 580 Receipts: Unified .......................................................................... On-budget ..................................................................... Off-budget ..................................................................... 2,105 1,451 654 2,165 1,530 635 2,567 1,893 674 Outlays: Unified .......................................................................... On-budget ..................................................................... Off-budget ..................................................................... 3,518 3,001 517 3,721 3,164 557 3,834 3,256 578 Deficit (–)/Surplus (+): Unified .......................................................................... On-budget ..................................................................... Off-budget ..................................................................... –1,413 –1,550 137 –1,556 –1,634 78 –1,267 –1,363 96 times referred to as the unified or consolidated budget totals. It is not always obvious whether a transaction or activity should be included in the budget; the dividing line between the Government and the private sector is sometimes murky. Where there is a question, OMB normally follows the recommendation of the 1967 President’s Commission on Budget Concepts to be comprehensive of the full range of Federal agencies, programs, and activities. In recent years, for example, the budget has included the transactions of the Universal Service Fund, the Public Company Accounting Oversight Board, Guaranty Agencies Reserves, the National Railroad Retirement Investment Trust, the United Mine Workers Combined Benefits Fund, the Telecommunications Development Fund, the Federal Financial Institutions Examination Council, and the transactions of Electric Reliability Organizations (EROs) established pursuant to the Energy Policy Act of 2005. This year, the budget includes the transactions of the Securities Investor Protection Corporation, which was created pursuant to Securities Investor Protection Act of 1970. The budget also classifies as governmental the collections and spending by the Affordable Housing Program (AHP) funds created by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) and includes them in the budget totals. FIRREA requires each of the 12 Federal Home Loan Banks (FHLBs) to contribute at least 10 percent of its previous year’s net earnings to an AHP fund to be used to subsidize owner-occupied and rental housing for low-income families and individuals and to provide assistance to certain first-time homebuyers. Since 1990, the FHLBs have contributed $3.5 billion to the AHP funds, of which $2.7 billion has been spent. The unspent funds represent 2009 contributions that will be committed in 2010 and the undisbursed portion of funds already committed to specific projects. Although 120 ANALYTICAL PERSPECTIVES the funds remain in the possession of the FHLBs, the deposit of specific amounts into the AHP funds is compulsory, and the expenditures are to meet specific governmental purposes. In contrast, the budget excludes tribal trust funds that are owned by Indian tribes and held and managed by the Government in a fiduciary capacity on the tribes’ behalf. These funds are not owned by the Government, the Government is not the source of their capital, and the Government’s control is limited to the exercise of fiduciary duties. Similarly, the transactions of Governmentsponsored enterprises, such as the FHLBs, are not included in the on-budget or off-budget totals. Federal laws established these enterprises for public policy purposes, but they are privately owned and operated corporations. Nevertheless, because of their public charters, the budget discusses them and reports summary financial data in the budget Appendix and in some detailed tables. The Appendix includes a presentation for the Board of Governors of the Federal Reserve System for information only. The amounts are not included in either the on-budget or off-budget totals because of the independent status of the System within the Government. However, the Federal Reserve System transfers its net earnings to the Treasury, and the budget records them as receipts. Chapter 12 of this volume, “Coverage of the Budget,” provides more information on this subject. Functional Classification The functional classification is used to array budget authority, outlays, and other budget data according to the major purpose served—such as agriculture, transportation, income security, and national defense. There are 19 major functions, most of which are divided into subfunctions. For example, the Agriculture function comprises the subfunctions Farm Income Stabilization and Agricultural Research and Services. The functional array meets the Congressional Budget Act requirement for a presentation in the budget by national needs and agency missions and programs. The following criteria are used in establishing functional categories and assigning activities to them: • A function encompasses activities with similar purposes, emphasizing what the Federal Government seeks to accomplish rather than the means of accomplishment, the objects purchased, the clientele or geographic area served (except in the cases of functions 570 for Medicare, 650 for Social Security, and 700 for Veterans Benefits and Services), or the Federal agency conducting the activity (except in the case of subfunction 051 in the National Defense function, which is used only for defense activities under the Department of Defense—Military). • A function must be of continuing national importance, and the amounts attributable to it must be significant. • Each basic unit being classified (generally the appropriation or fund account) usually is classified ac- cording to its primary purpose and assigned to only one subfunction. However, some large accounts that serve more than one major purpose are subdivided into two or more functions or subfunctions. Detailed functional tables, which provide information on Government activities by function and subfunction, are available on the Internet and as a CD-ROM in the printed document. Agencies, Accounts, Programs, Projects, and Activities Various summary tables in the Analytical Perspectives volume of the Budget provide information on budget authority, outlays, and offsetting collections and receipts arrayed by Federal agency. A table that lists budget authority and outlays by budget account within each agency and the totals for each agency of budget authority, outlays, and receipts that offset the agency spending totals is available on the Internet and as a CD-ROM in the printed document. The Appendix provides budgetary, financial, and descriptive information about programs, projects, and activities by account within each agency. Types of Funds Agency activities are financed through Federal funds and trust funds. Federal funds comprise several types of funds. Receipt accounts of the general fund, which is the greater part of the budget, record receipts not earmarked by law for a specific purpose, such as income tax receipts. The general fund also includes the proceeds of general borrowing. General fund appropriations accounts record general fund expenditures. General fund appropriations draw from general fund receipts and borrowing collectively and, therefore, are not specifically linked to receipt accounts. Special funds consist of receipt accounts for Federal fund receipts that laws have designated for specific purposes and the associated appropriation accounts for the expenditure of those receipts. Public enterprise funds are revolving funds used for programs authorized by law to conduct a cycle of business-type operations, primarily with the public, in which outlays generate collections. Intragovernmental funds are revolving funds that conduct business-type operations primarily within and between Government agencies. The collections and the outlays of revolving funds are recorded in the same budget account. Trust funds account for the receipt and expenditure of monies by the Government for carrying out specific purposes and programs in accordance with the terms of a statute that designates the fund as a trust fund (such as the Highway Trust Fund) or for carrying out the stipulations of a trust where the Government itself is the beneficiary (such as any of several trust funds for gifts and donations for specific purposes). Trust revolving funds are 121 11. BUDGET CONCEPTS trust funds credited with collections earmarked by law to carry out a cycle of business-type operations. The Federal budget meaning of the term “trust,” as applied to trust fund accounts, differs significantly from its private-sector usage. In the private sector, the beneficiary of a trust usually owns the trust’s assets, which are managed by a trustee who must follow the stipulations of the trust. In contrast, the Federal Government owns the assets of most Federal trust funds, and it can raise or lower future trust fund collections and payments, or change the purposes for which the collections are used, by changing existing laws. There is no substantive difference between a trust fund and a special fund or between a trust revolving fund and a public enterprise revolving fund. However, in some instances, the Government does act as a true trustee of assets that are owned or held for the benefit of others. For example, it maintains accounts on behalf of individual Federal employees in the Thrift Savings Fund, investing them as directed by the individual employee. The Government accounts for such funds in deposit funds, which are not included in the budget. (Chapter 27 of this volume, “Trust Funds and Federal Funds,” provides more information on this subject.) Budgeting for Full Costs A budget is a financial plan for allocating resources— deciding how much the Federal Government should spend in total, program by program, and for the parts of each program and deciding how to finance the spending. The budgetary system provides a process for proposing policies, making decisions, implementing them, and reporting the results. The budget needs to measure costs accurately so that decision makers can compare the cost of a program with its benefits, the cost of one program with another, and the cost of one method of reaching a specified goal with another. These costs need to be fully included in the budget up front, when the spending decision is made, so that executive and congressional decision makers have the information and the incentive to take the total costs into account when setting priorities. The budget includes all types of spending, including both current operating expenditures and capital investment, and to the extent possible, both are measured on the basis of full cost. Questions are often raised about the measure of capital investment. The present budget provides policymakers the necessary information regarding investment spending. It records investment on a cash basis, and it requires Congress to provide budget authority before an agency can obligate the Government to make a cash outlay. By these means, it causes the total cost of capital investment to be compared up front in a rough and ready way with the total expected future net benefits. Since the budget measures only cost, the benefits with which these costs are compared, based on policy makers’ judgment, must be presented in supplementary materials. Such a comparison of total costs with benefits is consistent with the formal method of cost-benefit analysis of capital projects in government, in which the full cost of a capital asset as the cash is paid out is compared with the full stream of future benefits (all in terms of present values). (Chapter 20 of this volume, “Federal Investment,’’ provides more information on capital investment.) RECEIPTS, OFFSETTING COLLECTIONS, AND OFFSETTING RECEIPTS In General The budget records amounts collected by Government agencies two different ways. Depending on the nature of the activity generating the collection and the law that established the collection, they are recorded as either: • Governmental receipts, which are compared in total to outlays (net of offsetting collections and offsetting receipts) in calculating the surplus or deficit; or • Offsetting collections or offsetting receipts, which are deducted from gross outlays to calculate net outlay figures. Governmental Receipts Governmental receipts are collections that result from the Government’s exercise of its sovereign power to tax or otherwise compel payment. Sometimes they are called receipts, Federal receipts, or Federal revenues. They consist mostly of individual and corporation income taxes and social insurance taxes, but also include excise taxes, compulsory user charges, regulatory fees, customs duties, court fines, certain license fees, and deposits of earnings by the Federal Reserve System. Total receipts for the Federal Government include both on-budget and off-budget receipts (see Table 11–1, “Totals for the Budget and the Federal Government,” which appears earlier in this chapter.) Chapter 14 of this volume, “Governmental Receipts,’’ provides more information on receipts. Offsetting Collections and Offsetting Receipts Offsetting collections and offsetting receipts are recorded as offsets to (deductions from) spending, not as additions on the receipt side of the budget. As explained below, they are recorded as offsets to outlays so that the budget totals represent governmental rather than market activity and reflect the Government’s net transactions with the public. They are recorded in one of two ways, based on interpretation of laws and longstanding budget concepts and practice. They are offsetting collections when the collections are authorized by law to be credited to expenditure accounts and are generally available for expenditure without further legislation. Otherwise, they are deposited in receipt accounts and called offsetting receipts. 122 ANALYTICAL PERSPECTIVES Offsetting collections and offsetting receipts result from any of the following types of transactions: • Business-like transactions or market-oriented activities with the public—collections from the public in exchange for goods or services, such as the proceeds from the sale of postage stamps, the fees charged for admittance to recreation areas, and the proceeds from the sale of Government-owned land. The budget records these amounts as offsetting collections from non-Federal sources (for offsetting collections) or as proprietary receipts (for offsetting receipts). The amounts are deducted from gross budget authority and outlays, rather than added to governmental receipts. This treatment produces budget totals for budget authority, outlays, and governmental receipts that represent governmental rather than market activity. • Intragovernmental transactions—collections from other Federal Government accounts. The budget records collections by one Government account from another as offsetting collections from Federal sources (for offsetting collections) or as intragovernmental receipts (for offsetting receipts). For example, the General Services Administration rents office space to other Government agencies and records their rental payments as offsetting collections from Federal sources in the Federal Buildings Fund. These transactions are exactly offsetting and do not affect the surplus or deficit. However, they are an important accounting mechanism for allocating costs to the programs and activities that cause the Government to incur the costs. Intragovernmental offsetting collections and receipts are deducted from gross budget authority and outlays so that the budget totals measure the transactions of the Government with the public. • Voluntary gifts and donations—gifts and donations, which are treated as offsets to budget authority and outlays. Previously, existing gifts and donations were reported as Governmental receipts, but they have been reclassified for the 2011 Budget. • Offsetting governmental transactions—collections from the public that are governmental in nature (e.g., tax receipts, regulatory fees, compulsory user charges, custom duties, license fees) but required by law to be misclassified as offsetting. The budget records amounts from non-Federal sources that are governmental in nature as offsetting governmental collections (for offsetting collections) or as offsetting governmental receipts (for offsetting receipts). Offsetting Collections Some laws authorize agencies to credit collections directly to the account from which they will be spent and, usually, to spend the collections for the purpose of the account without further action by Congress. Most revolv- ing funds operate with such authority. For example, a permanent law authorizes the Postal Service to use collections from the sale of stamps to finance its operations without a requirement for annual appropriations. The budget records these collections in the Postal Service Fund (a revolving fund) and records budget authority in an amount equal to the collections. In addition to revolving funds, some agencies are authorized to charge fees to defray a portion of costs for a program that are otherwise financed by appropriations from the general fund and usually to spend the collections without further action by Congress. In such cases, the budget records the offsetting collections and resulting budget authority in the program’s general fund expenditure account. Similarly, intragovernmental collections authorized by some laws may be recorded as offsetting collections and budget authority in revolving funds or in general fund expenditure accounts. Sometimes appropriations acts or provisions in other laws limit the obligations that can be financed by offsetting collections. In those cases, the budget records budget authority in the amount available to incur obligations, not in the amount of the collections. Offsetting collections credited to expenditure accounts automatically offset the outlays at the expenditure account level. Where accounts have offsetting collections, the budget shows the budget authority and outlays of the account both gross (before deducting offsetting collections) and net (after deducting offsetting collections). Totals for the agency, subfunction, and overall budget are net of offsetting collections. Offsetting Receipts Collections that are offset against gross outlays but are not authorized to be credited to expenditure accounts are credited to receipt accounts and are called offsetting receipts. Offsetting receipts are deducted from budget authority and outlays in arriving at total budget authority and outlays. However, unlike offsetting collections credited to expenditure accounts, offsetting receipts do not offset budget authority and outlays at the account level. In most cases, they offset budget authority and outlays at the agency and subfunction levels. Proprietary receipts from a few sources, however, are not offset against any specific agency or function and are classified as undistributed offsetting receipts. They are deducted from the Government-wide totals for budget authority and outlays. For example, the collections of rents and royalties from outer continental shelf lands are undistributed because the amounts are large and for the most part are not related to the spending of the agency that administers the transactions and the subfunction that records the administrative expenses. Similarly, two kinds of intragovernmental transactions—agencies’ payments as employers into Federal employee retirement trust funds and interest received by trust funds—are classified as undistributed offsetting receipts. They appear instead as special deductions in computing total budget authority and outlays for the 123 11. BUDGET CONCEPTS Government rather than as offsets at the agency level. This special treatment is necessary because the amounts are so large they would distort measures of the agency’s activities if they were attributed to the agency. User Charges User charges are fees assessed on individuals or organizations for the provision of Government services and for the sale or use of Government goods or resources. The payers of the user charge must be limited in the authorizing legislation to those receiving special benefits from, or subject to regulation by, the program or activity beyond the benefits received by the general public or broad segments of the public (such as those who pay income taxes or customs duties). Policy regarding user charges is es- tablished in OMB Circular A–25, “User Charges” (July 8, 1993). The term encompasses proceeds from the sale or use of Government goods and services, including the sale of natural resources (such as timber, oil, and minerals) and proceeds from asset sales (such as property, plant, and equipment). User charges are not necessarily dedicated to the activity they finance and may be credited to the general fund of the Treasury. The term “user charge” does not refer to a separate budget category for collections. User charges are classified in the budget as receipts, offsetting receipts, or offsetting collections according to the principles explained previously. See Chapter 15, “Offsetting Collections and Offsetting Receipts,” for more information on the classification of user charges. BUDGET AUTHORITY, OBLIGATIONS, AND OUTLAYS Budget authority, obligations, and outlays are the primary benchmarks and measures of the budget control system. Congress enacts laws that provide agencies with spending authority in the form of budget authority. Before agencies can use these resources—obligate this budget authority—OMB must approve their spending plans. After the plans are approved, agencies can enter into binding agreements to purchase items or services or to make grants or other payments. These agreements are recorded as obligations of the United States and deducted from the amount of budgetary resources available to the agency. When payments are made, the obligations are liquidated and outlays recorded. These concepts are discussed more fully below. Budget Authority and Other Budgetary Resources Budget authority is the authority provided in law to enter into legal obligations that will result in immediate or future outlays of the Government. In other words, it is the amount of money that agencies are allowed to commit to be spent in current or future years. Government officials may obligate the Government to make outlays only to the extent they have been granted budget authority. The budget records new budget authority as a dollar amount in the year when it first becomes available for obligation. When permitted by law, unobligated balances of budget authority may be carried over and used in the next year. The budget does not record these balances as budget authority again. They do, however, constitute a budgetary resource that is available for obligation. In some cases, a provision of law (such as a limitation on obligations or a benefit formula) precludes the obligation of funds that would otherwise be available for obligation. In such cases, the budget records budget authority equal to the amount of obligations that can be incurred. A major exception to this rule is for the highway and mass transit programs financed by the Highway Trust Fund, where budget authority is measured as the amount of contract authority (described later in this chapter) provided in authorizing statutes, even though the obligation limitations enacted in annual appropriations acts restrict the amount of contract authority that can be obligated. In deciding the amount of budget authority to request for a program, project, or activity, agency officials estimate the total amount of obligations they will need to incur to achieve desired goals and subtract the unobligated balances available for these purposes. The amount of budget authority requested is influenced by the nature of the programs, projects, or activities being financed. For current operating expenditures, the amount requested usually covers the needs for the fiscal year. For major procurement programs and construction projects, agencies generally must request sufficient budget authority in the first year to fully fund an economically useful segment of a procurement or project, even though it may be obligated over several years. This full funding policy is intended to ensure that the decision-makers take into account all costs and benefits fully at the time decisions are made to provide resources. It also avoids sinking money into a procurement or project without being certain if or when future funding will be available to complete the procurement or project. Budget authority takes several forms: • Appropriations, provided in annual appropriations acts or authorizing laws, permit agencies to incur obligations and make payment; • Borrowing authority, usually provided in permanent laws, permits agencies to incur obligations but requires them to borrow funds, usually from the general fund of the Treasury, to make payment; • Contract authority, usually provided in permanent law, permits agencies to incur obligations in advance of a separate appropriation of the cash for payment or in anticipation of the collection of receipts that can be used for payment; and 124 • Spending authority from offsetting collections, usually provided in permanent law, permits agencies to credit offsetting collections to an expenditure account, incur obligations, and make payment using the offsetting collections. Because offsetting collections and offsetting receipts are deducted from gross budget authority, they are referred to as negative budget authority for some purposes, such as Congressional Budget Act provisions that pertain to budget authority. Authorizing statutes usually determine the form of budget authority for a program. The authorizing statute may authorize a particular type of budget authority to be provided in annual appropriations acts, or it may provide one of the forms of budget authority directly, without the need for further appropriations. An appropriation may make funds available from the general fund, special funds, or trust funds, or authorize the spending of offsetting collections credited to expenditure accounts, including revolving funds. Borrowing authority is usually authorized for business-like activities where the activity being financed is expected to produce income over time with which to repay the borrowing with interest. The use of contract authority is traditionally limited to transportation programs. New budget authority for most Federal programs is normally provided in annual appropriations acts. However, new budget authority for more than half of all outlays is made available through permanent appropriations under existing laws and does not require current action by Congress. Much of the permanent budget authority is for trust funds, interest on the public debt, and the authority to spend offsetting collections credited to appropriation or fund accounts. For most trust funds, the budget authority is appropriated automatically under existing law from the available balance of the fund and equals the estimated annual obligations of the funds. For interest on the public debt, budget authority is provided automatically under a permanent appropriation enacted in 1847 and equals interest outlays. Annual appropriations acts generally make budget authority available for obligation only during the fiscal year to which the act applies. However, they frequently allow budget authority for a particular purpose to remain available for obligation for a longer period or indefinitely (that is, until expended or until the program objectives have been attained). Typically, budget authority for current operations is made available for only one year, and budget authority for construction and some research projects is available for a specified number of years or indefinitely. Most budget authority provided in authorizing statutes, such as for most trust funds, is available indefinitely. If budget authority is initially provided for a limited period of availability, an extension of availability would require enactment of another law (see “Reappropriation” later in this chapter). Budget authority that is available for more than one year and not obligated in the year it becomes available is carried forward for obligation in a following year. In some ANALYTICAL PERSPECTIVES cases, an account may carry forward unobligated budget authority from more than one prior year. The sum of such amounts constitutes the account’s unobligated balance. Most of these balances had been provided for specific uses such as the multi-year construction of a major project and so are not available for new programs. A small part may never be obligated or spent, primarily amounts provided for contingencies that do not occur or reserves that never have to be used. Amounts of budget authority that have been obligated but not yet paid constitute the account’s unpaid obligations. For example, in the case of salaries and wages, one to three weeks elapse between the time of obligation and the time of payment. In the case of major procurement and construction, payments may occur over a period of several years after the obligation is made. Unpaid obligations net of the accounts receivable and unfilled customers’ orders are defined by law as the obligated balances. Obligated balances of budget authority at the end of the year are carried forward until the obligations are paid or the balances are canceled. (A general law provides that the obligated balances of budget authority that was made available for a definite period is automatically cancelled five years after the end of the period.) Due to such flows, a change in the amount of budget authority available in any one year may change the level of obligations and outlays for several years to come. Conversely, a change in the amount of obligations incurred from one year to the next does not necessarily result from an equal change in the amount of budget authority available for that year and will not necessarily result in an equal change in the level of outlays in that year. Congress usually makes budget authority available on the first day of the fiscal year for which the appropriations act is passed. Occasionally, the appropriations language specifies a different timing. The language may provide an advance appropriation—budget authority that does not become available until one year or more beyond the fiscal year for which the appropriations act is passed. Forward funding is budget authority that is made available for obligation beginning in the last quarter of the fiscal year (beginning on July 1) for the financing of ongoing grant programs during the next fiscal year. This kind of funding is used mostly for education programs, so that obligations for education grants can be made prior to the beginning of the next school year. For certain benefit programs funded by annual appropriations, the appropriation provides for advance funding—budget authority that is to be charged to the appropriation in the succeeding year, but which authorizes obligations to be incurred in the last quarter of the current fiscal year if necessary to meet benefit payments in excess of the specific amount appropriated for the year. When such authority is used, an adjustment is made to increase the budget authority for the fiscal year in which it is used and to reduce the budget authority of the succeeding fiscal year. Provisions of law that extend into a new fiscal year the availability of unobligated amounts that have expired or would otherwise expire are called reappropriations. Reappropriations of expired balances that are 125 11. BUDGET CONCEPTS newly available for obligation in the current or budget year count as new budget authority in the fiscal year in which the balances become newly available. For example, if a 2010 appropriations act extends the availability of unobligated budget authority that expired at the end of 2009, new budget authority would be recorded for 2010. This scorekeeping is used because a reappropriation has exactly the same effect as allowing the earlier appropriation to expire at the end of 2009 and enacting a new appropriation for 2010. For purposes of the Congressional Budget Act (discussed earlier under “Budget Enforcement’’), the budget classifies budget authority as discretionary or mandatory. This classification indicates whether an appropriations act or authorizing legislation controls the amount of budget authority that is available. Generally, budget authority is discretionary if provided in an annual appropriations act and mandatory if provided in authorizing legislation. However, the budget authority provided in annual appropriations acts for certain specifically identified programs is also classified as mandatory. This is because the authorizing legislation for these programs entitles beneficiaries—persons, households, or other levels of government—to receive payment, or otherwise legally obligates the Government to make payment and thereby effectively determines the amount of budget authority required, even though the payments are funded by a subsequent appropriation. Sometimes, budget authority is characterized as current or permanent. Current authority requires Congress to act on the request for new budget authority for the year involved. Permanent authority becomes available pursuant to standing provisions of law without appropriations action by Congress for the year involved. Generally, budget authority is current if an annual appropriations act provides it and permanent if authorizing legislation provides it. By and large, the current/permanent distinction has been replaced by the discretionary/mandatory distinction, which is similar but not identical. Outlays are also classified as discretionary or mandatory according to the classification of the budget authority from which they flow (see “Outlays’’ later in this chapter). The amount of budget authority recorded in the budget depends on whether the law provides a specific amount or employs a variable factor that determines the amount. It is considered definite if the law specifies a dollar amount (which may be stated as an upper limit, for example, “shall not exceed …”). It is considered indefinite if, instead of specifying an amount, the law permits the amount to be determined by subsequent circumstances. For example, indefinite budget authority is provided for interest on the public debt, payment of claims and judgments awarded by the courts against the United States, and many entitlement programs. Many of the laws that authorize collections to be credited to revolving, special, and trust funds make all of the collections available for expenditure for the authorized purposes of the fund, and such authority is considered to be indefinite budget authority because the amount of collections is not known in advance of their collection. Obligations Following the enactment of budget authority and the completion of required apportionment action, Government agencies incur obligations to make payments (see earlier discussion under “Budget Execution”). Agencies must record obligations when they enter into binding agreements that will result in immediate or future outlays. Such obligations include the current liabilities for salaries, wages, and interest; and contracts for the purchase of supplies and equipment, construction, and the acquisition of office space, buildings, and land. For Federal credit programs, obligations are recorded in an amount equal to the estimated subsidy cost of direct loans and loan guarantees (see “Federal Credit” later in this chapter). Outlays Outlays are the measure of Government spending. They are payments that liquidate obligations (other than most exchanges of financial instruments, of which the repayment of debt is the prime example). The budget records outlays when obligations are paid, in the amount that is paid. Agency, function and subfunction, and Governmentwide outlay totals are stated net of offsetting collections and offsetting receipts for most budget presentations. (Offsetting receipts from a few sources do not offset any specific function, subfunction, or agency, as explained previously, but only offset Government-wide totals.) Outlay totals for accounts with offsetting collections are stated both gross and net of the offsetting collections credited to the account. However, the outlay totals for special and trust funds with offsetting receipts are not stated net of the offsetting receipts; like other offsetting receipts, these offset the agency, function, and subfunction totals but do not offset account-level outlays. The Government usually makes outlays in the form of cash (currency, checks, or electronic fund transfers). However, in some cases agencies pay obligations without disbursing cash, and the budget nevertheless records outlays for the equivalent method. For example, the budget records outlays for the full amount of Federal employees’ salaries, even though the cash disbursed to employees is net of Federal and state income taxes withheld, retirement contributions, life and health insurance premiums, and other deductions. (The budget also records receipts for the amounts withheld from Federal employee paychecks for Federal income taxes and other payments to the Government.) When debt instruments (bonds, debentures, notes, or monetary credits) are used in place of cash to pay obligations, the budget records outlays financed by an increase in agency debt. For example, the budget records the acquisition of physical assets through certain types of lease-purchase arrangements as though a cash disbursement were made for an outright purchase. The transaction creates a Government debt, and the cash lease payments are treated as repayments of principal and interest. 126 ANALYTICAL PERSPECTIVES Chart 11-1. Relationship of Budget Authority to Outlays for 2011 (Billions of dollars) New Authority Recommended for 2011 3,691 To be spent in 2011 2,933 To b e in fu spent ture yea rs t en sp 1 e 1 b 0 To in 2 Unspent Authority Enacted in Prior Years 2,284 Outlays in 2011 4 3,834 901 75 7 Authority written off, expired, and adjusted (net) To be spent in Future Years 1,380 The budget records outlays for the interest on the public issues of Treasury debt securities as the interest accrues, not when the cash is paid. A small portion of Treasury debt consists of inflation-indexed securities, which feature monthly adjustments to principal for inflation and semiannual payments of interest on the inflation-adjusted principal. As with fixed-rate securities, the budget records interest outlays as the interest accrues. The monthly adjustment to principal is recorded, simultaneously, as an increase in debt outstanding and an outlay of interest. Most Treasury debt securities held by trust funds and other Government accounts are in the Government account series (that is, they are “special issues” of debt). The budget normally states the interest on these securities on a cash basis. When a Government account is invested in Federal debt securities, the purchase price is usually close or identical to the par (face) value of the security. The budget generally records the investment at par value and adjusts the interest paid by Treasury and collected by the account by the difference between purchase price and par, if any. For Federal credit programs, outlays are equal to the subsidy cost of direct loans and loan guarantees and are recorded as the underlying loans are disbursed (see “Federal Credit” later in this chapter). The budget records refunds of receipts that result from overpayments by the public (such as income taxes withheld in excess of tax liabilities) as reductions of receipts, rather than as outlays. However, the budget records payments to taxpayers for refundable tax credits (such as earned income tax credits) that exceed the taxpayer’s tax liability as outlays. Similarly, when the Government makes overpayments that are later returned to the Government, those refunds to the Government are recorded as offsetting collections or offsetting receipts, not as governmental receipts. Not all of the new budget authority for 2011 will be obligated or spent in 2011. Outlays during a fiscal year Unspent Authority for Outlays in Future Years 2,137 may liquidate obligations incurred in the same year or in prior years. Obligations, in turn, may be incurred against budget authority provided in the same year or against unobligated balances of budget authority provided in prior years. Outlays, therefore, flow in part from budget authority provided for the year in which the money is spent and in part from budget authority provided for prior years. The ratio of a given year’s outlays resulting from budget authority enacted in that or a prior year to the original amount of that budget authority is referred to as the spendout rate for that year. As shown in the accompanying chart, $2,933 billion of outlays in 2011 (77 percent of the outlay total) will be made from that year’s $3,691 billion total of proposed new budget authority (a first-year spendout rate of 79 percent). Thus, the remaining $901 billion of outlays in 2011 (23 percent of the outlay total) will be made from budget authority enacted in previous years. At the same time, $757 billion of the new budget authority proposed for 2011 (21 percent of the total amount proposed) will not lead to outlays until future years. As described earlier, the budget classifies budget authority and outlays as discretionary or mandatory for the purposes of the Congressional Budget Act. This classification of outlays measures the extent to which actual spending is controlled through the annual appropriations process. Almost 35 percent of total outlays in 2009 ($1,219 billion) are discretionary and the remaining 65 percent ($2,299 billion in 2009) are mandatory spending and net interest. Such a large portion of total spending is mandatory because authorizing rather than appropriations legislation determines net interest ($187 billion in 2009) and the spending for a few programs with large amounts of spending each year, such as Social Security ($678 billion in 2009) and Medicare ($425 billion in 2009). The bulk of mandatory outlays flow from budget authority recorded in the same fiscal year. This is not nec- 127 11. BUDGET CONCEPTS essarily the case for discretionary budget authority and outlays. For most major construction and procurement projects and long-term contracts, for example, the budget authority covers the entire cost estimated when the projects are initiated even though the work will take place and outlays will be made over a period extending beyond the year for which the budget authority is enacted. Similarly, discretionary budget authority for most education and job training activities is appropriated for school or program years that begin in the fourth quarter of the fiscal year. Most of these funds result in outlays in the year after the appropriation. FEDERAL CREDIT Some Government programs make direct loans or loan guarantees. A direct loan is a disbursement of funds by the Government to a non-Federal borrower under a contract that requires repayment of such funds with or without interest. The term includes equivalent transactions such as selling a property on credit terms in lieu of receiving cash up front. A loan guarantee is any guarantee, insurance, or other pledge with respect to the payment of all or a part of the principal or interest on any debt obligation of a non-Federal borrower to a non-Federal lender. The Federal Credit Reform Act (FCRA) prescribes the budget treatment for Federal credit programs. Under this treatment, the budget records the net cost to the Government (subsidy cost) when the loans are disbursed, rather than the cash flows year by year over the term of the loan, so direct loans and loan guarantees can be compared to each other and to other methods of delivering benefits, such as grants, on an equivalent basis. The cost of direct loans and loan guarantees, sometimes called the “subsidy cost,’’ is estimated as the present value of expected disbursements over the term of the loan less the present value of expected collections, using appropriate Treasury interest rates to discount the cash flows.2 Similar to most other kinds of programs, agencies can make loans or guarantee loans only if Congress has appropriated funds sufficient to cover the subsidy costs or provided a limitation on the amount of direct loans or loan guarantees that can be made in annual appropriations acts. The budget records the estimated long-term cost to the Government arising from direct loans and loan guarantees—the budget authority and outlays—in credit program accounts. When a Federal agency disburses a direct loan or when a non-Federal lender disburses a loan guaranteed by a Federal agency, the program account disburses or outlays an amount equal to the estimated present- value cost, or subsidy, to a non-budgetary credit financing account. The financing accounts record the actual transactions with the public. For a few programs, the estimated cost is negative, because the present value of expected Government collections exceeds the present value of expected payments to the public over the term of the loan. In such cases, the financing account makes a payment to the program’s negative subsidy receipt account, where it is recorded as an offsetting receipt. In a few cases, the offsetting receipts of credit accounts are 2 Present value is a standard financial concept that allows for the time-value of money. That is, it accounts for the fact that a given sum of money is worth more today than the same sum would be worth in the future because interest can be earned on money held today. dedicated to a special fund established for the program and are available for appropriation for the program. The agencies responsible for credit programs must reestimate the cost of the outstanding portfolio of direct loans and loan guarantees each year. If the estimated cost increases, the program account makes an additional payment to the financing account. If the estimated cost decreases, the financing account makes a payment to the program’s downward reestimate receipt account, where it is recorded as an offsetting receipt. The FCRA provides permanent indefinite appropriations to pay for upward reestimates. If the Government modifies the terms of an outstanding direct loan or loan guarantee in a way that increases the cost as the result of a law or the exercise of administrative discretion under existing law, the program account records obligations for an additional amount equal to the increased cost and outlays the amount to the financing account. As with the original cost, agencies may incur modification costs only if Congress has appropriated funds to cover them. A modification may also reduce costs, in which case the amounts are generally returned to the general fund when the financing account makes a payment to the program’s receipt account. Credit financing accounts record all cash flows arising from direct loan obligations and loan guarantee commitments. These cash flows consist mainly of direct loan disbursements and repayments, loan guarantee default payments, fees and interest from the public, the receipt of subsidy cost payments from program accounts, and interest paid to or received from the Treasury. Separate financing accounts record the cash flows of direct loans and of loan guarantees for programs that provide both types of credit. The budget totals exclude the transactions of the financing accounts because they are not a cost to the Government. However, since financing accounts record all credit , they affect the means of financing a budget surplus or deficit (see “Credit Financing Accounts” in the next section). The budget documents display the transactions of the financing accounts, together with the related program accounts, for information and analytical purposes. The FCRA, which was enacted in 1990, grandfathered the budgetary treatment of direct loan obligations and loan guarantee commitments made prior to 1992. The budget records these on a cash basis in credit liquidating accounts, the same as they were recorded before FCRA was enacted. However, this exception ceases to apply if the direct loans or loan guarantees are modified as described above. In that case, the budget records the subsidy cost or savings of the modification, as appropriate, 128 ANALYTICAL PERSPECTIVES and begins to account for the associated transactions as the FCRA prescribes for direct loan obligations and loan guarantee commitments made in 1992 or later. The Emergency Economic Stabilization Act of 2008 (EESA) created the Troubled Asset Relief Program (TARP) under the Department of the Treasury, and authorized Treasury to purchase or guarantee up to $700 billion in troubled assets until October 3, 2010. Under the TARP, Treasury has purchased preferred stock (equity interests) in financial institutions. Section 123 of the EESA provides the Administration the authority to treat these equity investments pursuant to the FCRA, recording outlays on a subsidy cost basis as is done for direct loans and loan guarantees. The budget reflects the cost to the Government of TARP direct loans, loan guarantees, and equity investments consistent with the FCRA and Section 123 of EESA, which requires adjustments to the discount rate otherwise prescribed by FCRA to account for market risk for transactions recorded on a present-value basis. BUDGET DEFICIT OR SURPLUS AND MEANS OF FINANCING When outlays exceed receipts, the difference is a deficit, which the Government finances primarily by borrowing. When receipts exceed outlays, the difference is a surplus, and the Government automatically uses the surplus primarily to reduce debt. The Government’s debt (debt held by the public) is approximately the cumulative amount of borrowing to finance deficits, less repayments from surpluses, over the Nation’s history. Borrowing is not exactly equal to the deficit, and debt repayment is not exactly equal to the surplus, because of the other means of financing such as those discussed in this section. The factors included in the other means of financing can either increase or decrease the Government’s borrowing needs (or decrease or increase its ability to repay debt). For example, the change in the Treasury operating cash balance is a factor included in other means of financing. Holding receipts and outlays constant, increases in the cash balance increase the Government’s need to borrow or reduce the Government’s ability to repay debt, and decreases in the cash balance decrease the need to borrow or increase the ability to repay debt. In some years, the net effect of the other means of financing is minor relative to the borrowing or debt repayment; in other years, such as 2009, the net effect may be significant, as explained later in this chapter. In addition to selling debt to the public, the Treasury Department issues debt to Government accounts, primarily trust funds that are required by law to invest in Treasury securities. Issuing and redeeming this debt does not affect the means of financing, because these transactions occur between one Government account and another and thus do not raise or use any cash for the Government as a whole. (See Chapter 6 of this volume, “Federal Borrowing and Debt,” for a fuller discussion of this topic.) Exercise of Monetary Power Seigniorage is the profit from coining money. It is the difference between the value of coins as money and their cost of production. Seigniorage reduces the Government’s need to borrow. Unlike the payment of taxes or other receipts, it does not involve a transfer of financial assets from the public. Instead, it arises from the exercise of the Government’s power to create money and the public’s desire to hold financial assets in the form of coins. Therefore, the budget excludes seigniorage from receipts and treats it as a means of financing other than borrowing from the public. The budget also treats proceeds from the sale of gold as a means of financing, since the value of gold is determined by its value as a monetary asset rather than as a commodity. Borrowing and Debt Repayment The budget treats borrowing and debt repayment as a means of financing, not as receipts and outlays. If borrowing were defined as receipts and debt repayment as outlays, the budget would always be virtually balanced by definition. This rule applies both to borrowing in the form of Treasury securities and to specialized borrowing in the form of agency securities. The rule reflects the commonsense understanding that lending or borrowing is just an exchange of financial assets of equal value—cash for Treasury securities—and so is fundamentally different from, say, paying taxes. In 2009, the Government borrowed $1,743 billion from the public, bringing debt held by the public to $7,546 billion. This borrowing financed the $1,412 billion deficit in that year as well as the net effect of the other means of financing, such as changes in cash balances and other accounts discussed below. Credit Financing Accounts The budget records the net cash flows of credit programs in credit financing accounts. These accounts include the transactions for direct loan and loan guarantee programs, as well as the equity purchase programs under TARP that are recorded on a credit basis consistent with Section 123 of EESA, and the 2009 increase in contributions to the International Monetary Fund that are recorded on a credit basis consistent with the Supplemental Appropriations Act, 2009 (Public Law 111-32, title XIV, International Monetary Programs). These accounts are excluded from the budget because they are not allocations of resources by the Government (see “Federal Credit” earlier in this chapter). However, even though they do not affect the surplus or deficit, they can either increase or decrease the Government’s need 129 11. BUDGET CONCEPTS to borrow. Therefore, they are recorded as a means of financing. Financing account disbursements to the public increase the requirement for Treasury borrowing in the same way as an increase in budget outlays. Financing account receipts from the public can be used to finance the payment of the Government’s obligations and therefore reduce the requirement for Treasury borrowing from the public in the same way as an increase in budget receipts. Deposit Fund Account Balances The Treasury uses non-budgetary accounts, called deposit funds, to record cash held temporarily until ownership is determined (for example, earnest money paid by bidders for mineral leases) or cash held by the Government as agent for others (for example, State and local income taxes withheld from Federal employees’ salaries and not yet paid to the State or local government or the Thrift Savings Fund, a defined contribution pension fund held and managed in a fiduciary capacity by the Government). Deposit fund balances may be held in the form of either invested or uninvested balances. To the extent that they are not invested, changes in the balances are available to finance expenditures and are recorded as a means of financing other than borrowing from the public. To the extent that they are invested in Federal debt, changes in the balances are reflected as borrowing from the public (in lieu of borrowing from other parts of the public) and are not reflected as a separate means of financing. United States Quota Subscriptions to the International Monetary Fund (IMF) The United States participates in the IMF through a quota subscription. Financial transactions with the IMF are exchanges of monetary assets. When the IMF draws dollars from the U.S. quota, the United States simultaneously receives an equal, offsetting, Special Drawing Right (SDR)-denominated claim in the form of an increase in the U.S. reserve position in the IMF. The U.S. reserve position in the IMF increases when the United States transfers dollars to the IMF and decreases when the United States is repaid and the cash flows return to the Treasury. The budgetary treatment of appropriations for IMF quotas has changed over time. The 2011 Budget reflects obligations and outlays for the quota increase provided by the Supplemental Appropriations Act of 2009 (Public Law 111-2, Title XIV, International Monetary Programs) on a credit reform basis, with an adjustment to the discount rate for market risk. The cash transactions between the U.S. Treasury and the IMF are treated as a means of financing (see “Credit Financing Accounts” earlier in this chapter), which do not affect the deficit. In contrast, for increases to the U.S. quota subscriptions made prior to the 2009 Supplemental Appropriations Act, the 2011 Budget records interest received from the IMF on U.S. deposits as an offsetting receipt in the general fund of the Treasury. Treasury records outlays in the prior year for financial transactions with the IMF to the extent there is an unrealized loss in dollar terms and offsetting receipts to the extent there is an unrealized gain in dollar terms on the value of the interest-bearing portion of the U.S. quota actually held at the IMF in SDRs. Changes in the value of the portion of the U.S. quota held at Treasury rather than in the U.S. reserve position held at the IMF are recorded as a change in obligations. Chapter 13 of this volume, “Budget Process,” provides more information on transactions with the IMF. Investments of the National Railroad Retirement Investment Trust Under longstanding rules, the budget has generally treated investments in non-Federal equities and debt securities as a purchase of an asset, recording an obligation and an outlay in an amount equal to the purchase price in the year of the purchase. Since investments in non-Federal equities or debt securities consume cash, fund balances (of funds available for obligation) are normally reduced by the amounts paid for these purchases. However, as previously noted, the purchase of equity securities through TARP is recorded on a credit basis, with an outlay recorded in the amount of the estimated subsidy cost. In addition, the Railroad Retirement and Survivors’ Improvement Act of 2001 (Public Law 107– 90) requires purchases or sales of non-Federal assets by the National Railroad Retirement Investment Trust to be treated as a means of financing in the budget, rather than as an outlay. Earnings on investments by the National Railroad Retirement Investment Trust (NRRIT) in private assets pose special challenges for budget projections. Over long periods, equities and private bonds are expected to earn a higher return on average than the Treasury rate, but that return is subject to greater uncertainty. Sound budgeting principles require that estimates of future trust fund balances reflect both the average return on investments, and the cost of risk associated with the uncertainty of that return. (The latter is particularly true in cases where individual beneficiaries have not made a voluntary choice to assume additional risk.) Estimating both of these separately is quite difficult. While the gains and losses that these assets have experienced in the past are known, it is quite possible that such premiums will differ in the future. Furthermore, there is no existing procedure for the budget to record separately the cost of risk from such an investment, even if it could be estimated accurately. Economic theory suggests, however, that the difference between the expected return of a risky liquid asset and the Treasury rate is equal to the cost of the asset’s additional risk as priced by the market net of administrative and transaction costs. Following through on this insight, the best way to project the rate of return on the Fund’s balances is probably to use a Treasury rate. As a result, the Budget treats equivalently NRRIT 130 ANALYTICAL PERSPECTIVES investments with equal economic value as measured by market prices, avoiding the appearance that the budget would be expected to benefit if the Government bought private sector assets. The actual and estimated returns to private (debt and equity) securities are recorded in subfunction 909, other investment income. The actual-year returns include interest, dividends, and capital gains and losses on private equities and other securities. The Fund’s portfolio of these assets is revalued at market prices at the end of each month to determine capital gains or losses. As a result, the Fund’s balance at any given point reflects the current market value of resources available to the Government to finance benefits. Earnings for the remainder of the current year and for future years are estimated using the 10year Treasury rate and the value of the Fund’s portfolio at the end of the actual year. No estimates are made of gains and losses for the remainder of the current year or for subsequent years. FEDERAL EMPLOYMENT The budget includes information on civilian and military employment. It also includes information on related personnel compensation and benefits and on staffing requirements at overseas missions. Chapter 10 of this volume, “Improving the Federal Workforce,’’ provides em- ployment levels measured in full-time equivalents (FTE). Agency FTEs are the measure of total hours worked by an agency’s Federal employees divided by the total number of one person’s compensable work hours in a fiscal year. BASIS FOR BUDGET FIGURES Data for the Past Year The past year column (2009) generally presents the actual transactions and balances as recorded in agency accounts and as summarized in the central financial reports prepared by the Treasury Department for the most recently completed fiscal year. Occasionally, the budget reports corrections to data reported erroneously to Treasury but not discovered in time to be reflected in Treasury’s published data. In addition, in certain cases the Budget has a broader scope and includes financial transactions that are not reported to Treasury (see Chapter 29 of this volume, “Comparison of Actual to Estimated Totals,” for a summary of these differences). Data for the Current Year The current year column (2010) includes estimates of transactions and balances based on the amounts of budgetary resources that were available when the budget was transmitted, including amounts appropriated for the year. If the budget proposes policy changes effective in the current year, the data will also reflect the budgetary effect of those proposed policy changes. Data for the Budget Year The budget year column (2011) includes estimates of transactions and balances based on the amounts of budgetary resources that are estimated to be available, including new budget authority requested under current authorizing legislation, and amounts estimated to result from changes in authorizing legislation and tax laws. The budget Appendix generally includes the appropriations language for the amounts proposed to be appropriated under current authorizing legislation. In a few cases, this language is transmitted later because the exact requirements are unknown when the budget is transmitted. The Appendix generally does not include appropriations language for the amounts that will be requested under proposed legislation; that language is usually transmitted later, after the legislation is enacted. Some tables in the budget identify the items for later transmittal and the related outlays separately. Estimates of the total requirements for the budget year include both the amounts requested with the transmittal of the budget and the amounts planned for later transmittal. Data for the Outyears The budget presents estimates for each of the nine years beyond the budget year (2012 through 2020) in order to reflect the effect of budget decisions on objectives and plans over a longer period. Allowances The budget may include lump-sum allowances to cover certain transactions that are expected to increase or decrease budget authority, outlays, or receipts but are not, for various reasons, reflected in the program details. For example, the budget might include an allowance to show the effect on the budget totals of a proposal that would actually affect many accounts by relatively small amounts, in order to avoid unnecessary detail in the presentations for the individual accounts. This year’s Budget, like last year’s, includes an allowance for the costs of possible future natural disasters. Baseline The budget baseline is an estimate of the receipts, outlays, and deficits or surpluses that would occur if no changes were made to current laws and policies during the period covered by the budget. The baseline assumes that receipts and mandatory spending, which generally 131 11. BUDGET CONCEPTS are authorized on a permanent basis, will continue in the future as required by current law and policy. The baseline assumes that the future funding for most discretionary programs, which generally are funded annually, will equal the most recently enacted appropriation, adjusted for inflation. The baseline represents the amount of resources that would be used by the Government over the period covered by the budget on the basis of laws currently enacted. The baseline serves several useful purposes: • It may warn of future problems, either for Government fiscal policy as a whole or for individual tax and spending programs. • It may provide a starting point for formulating the President’s Budget. • It may provide a “policy-neutral’’ benchmark against which the President’s Budget and alternative proposals can be compared to assess the magnitude of proposed changes. As it happens, a number of significant changes in policies are embedded in current law. For example, the tax cuts enacted in 2001 and 2003 are scheduled to expire at the end of 2010; relief from the Alternative Minimum Tax, enacted on a one-year basis in virtually every year of the last decade, is scheduled to expire as of tax year 2010; and relief from very deep cuts to Medicare physician reimbursement rates is scheduled to expire at the end of Feburary 2010. Because the expiration of these laws would create significant differences between the baseline as specified in the Budget Enforcement Act (BEA) of 1990 and policies in effect this year or last, the Administration also issues a baseline projection of current policy that, unlike the BEA baseline, assumes such scheduled changes in current law will not occur. (Chapter 26 of this volume, “Current Services Estimates,” provides more information on the baseline, including the differences between the baseline as calculated under the rules of the BEA and the baseline projection of current policy used in this Budget.) PRINCIPAL BUDGET LAWS The following basic laws govern the Federal budget process: Article 1, section 8, clause 1 of the Constitution, which empowers the Congress to collect taxes. Article 1, section 9, clause 7 of the Constitution, which requires appropriations in law before money may be spent from the Treasury and the publication of a regular statement of the receipts and expenditures of all public money. Antideficiency Act (codified in Chapters 13 and 15 of Title 31, United States Code), which prescribes rules and procedures for budget execution. Chapter 11 of Title 31, United States Code, which prescribes procedures for submission of the President’s budget and information to be contained in it. Congressional Budget and Impoundment Control Act of 1974 (Public Law 93–344), as amended. This Act comprises the: Congressional Budget Act of 1974, as amended, which prescribes the congressional budget process; and Impoundment Control Act of 1974, which controls certain aspects of budget execution. Federal Credit Reform Act of 1990, as amended (2 USC 661–661f), which the Budget Enforcement Act of 1990 included as an amendment to the Congressional Budget Act to prescribe the budget treatment for Federal credit programs. Government Performance and Results Act of 1993 (Public Law 103–62, as amended) which emphasizes managing for results. It requires agencies to prepare strategic plans, annual performance plans, and annual performance reports. GLOSSARY OF BUDGET TERMS Account refers to a separate financial reporting unit used by the Federal government to record budget authority, outlays and income for budgeting or management information purposes as well as for accounting purposes. All budget (and off-budget) accounts are classified as being either expenditure or receipt accounts and by fund group. Budget (and off-budget) transactions fall within either of two fund group: (1) Federal funds and (2) trust funds. (Cf. Federal funds group and trust funds group.) Accrual method of measuring cost means an accounting method that records cost when the liability is incurred. As applied to Federal employee retirement benefits, accrual costs are recorded when the benefits are earned rather than when they are paid at some time in the future. The accrual method is used in part to provide data that assists in agency policymaking, but not used in presenting the overall budget of the United States Government. 132 Advance appropriation means appropriations of new budget authority that become available one or more fiscal years beyond the fiscal year for which the appropriation act was passed. Advance funding means appropriations of budget authority provided in an appropriations act to be used, if necessary, to cover obligations incurred late in the fiscal year for benefit payments in excess of the amount specifically appropriated in the act for that year, where the budget authority is charged to the appropriation for the program for the fiscal year following the fiscal year for which the appropriations act is passed. Agency means a department or other establishment of the Government. Allowance means a lump-sum included in the budget to represent certain transactions that are expected to increase or decrease budget authority, outlays, or receipts but that are not, for various reasons, reflected in the program details. Balances of budget authority means the amounts of budget authority provided in previous years that have not been outlayed.Baseline means a projection of the estimated receipts, outlays, and deficit or surplus that would result from continuing current law or current policies through the period covered by the budget. Budget means the Budget of the United States Government, which sets forth the President’s comprehensive financial plan for allocating resources and indicates the President’s priorities for the Federal Government. Budget authority (BA) means the authority provided by law to incur financial obligations that will result in outlays. (For a description of the several forms of budget authority, see “Budget Authority and Other Budgetary Resources’’ earlier in this chapter.) Budget Enforcement Act of 1990 (now expired) refers to legislation that altered the budget process, primarily by replacing the earlier fixed targets for annual deficits with a Pay-As-You-Go requirement for new tax or mandatory spending legislation, and with caps on annual discretionary funding. Budget resolution—see concurrent resolution on the budget. Budget totals mean the totals included in the budget for budget authority, outlays, receipts, and the surplus or deficit. Some presentations in the budget distinguish onbudget totals from off-budget totals. On-budget totals reflect the transactions of all Federal Government entities except those excluded from the budget totals by law. The off-budget totals reflect the transactions of Government entities that are excluded from the on-budget totals by law. Under current law, the off-budget totals include ANALYTICAL PERSPECTIVES the Social Security trust funds (Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds) and the Postal Service Fund. The budget combines the on- and off-budget totals to derive unified or consolidated totals for Federal activity. Budgetary resources mean amounts available to incur obligations in a given year. The term comprises new budget authority and unobligated balances of budget authority provided in previous years. Cap means the legal limits for each fiscal year under the Budget Enforcement Act on the budget authority and outlays provided by discretionary appropriations. Cash equivalent transaction means a transaction in which the Government makes outlays or receives collections in a form other than cash or the cash does not accurately measure the cost of the transaction. (For examples, see the section on “Outlays’’ earlier in this chapter.) Collections mean money collected by the Government that the budget records as a governmental receipt, an offsetting collection, or an offsetting receipt. Concurrent resolution on the budget refers to the concurrent resolution adopted by Congress to set budgetary targets for appropriations, mandatory spending legislation, and tax legislation. These concurrent resolutions are required by the Congressional Budget Act of 1974, and are generally adopted annually. Continuing resolution means an appropriations act that provides for the ongoing operation of the Government in the absence of enacted appropriations. Cost refers to legislation or administrative actions that increase outlays or decrease receipts. (Cf savings.) Credit program account means a budget account that receives and obligates appropriations to cover the subsidy cost of a direct loan or loan guarantee and disburses the subsidy cost to a financing account. Current services estimate—see Baseline. Debt held by the public means the cumulative amount of money the Federal Government has borrowed from the public and not repaid. Debt held by the public net of financial assets means the cumulative amount of money the Federal Government has borrowed from the public and not repaid, minus the current value of financial assets such as loan assets, bank deposits, or private-sector securities or equities held by the Government and plus the current value of financial liabilities other than debt. Debt held by Government accounts means the debt the Treasury Department owes to accounts within the 133 11. BUDGET CONCEPTS Federal Government. Most of it results from the surpluses of the Social Security and other trust funds, which are required by law to be invested in Federal securities. Debt limit means the maximum amount of Federal debt that may legally be outstanding at any time. It includes both the debt held by the public and the debt held by Government accounts, but without accounting for offsetting financial assets. When the debt limit is reached, the Government cannot borrow more money until the Congress has enacted a law to increase the limit. Deficit means the amount by which outlays exceed receipts in a fiscal year. It may refer to the on-budget, offbudget, or unified budget deficit. Direct loan means a disbursement of funds by the Government to a non-Federal borrower under a contract that requires the repayment of such funds with or without interest. The term includes the purchase of, or participation in, a loan made by another lender. The term also includes the sale of a Government asset on credit terms of more than 90 days duration as well as financing arrangements for other transactions that defer payment for more than 90 days. It also includes loans financed by the Federal Financing Bank (FFB) pursuant to agency loan guarantee authority. The term does not include the acquisition of a federally guaranteed loan in satisfaction of default or other guarantee claims or the price support “loans” of the Commodity Credit Corporation. (Cf. loan guarantee.) Direct spending—see mandatory spending. Discretionary spending means budgetary resources (except those provided to fund mandatory spending programs) provided in appropriations acts. (Cf. mandatory spending.) Entitlement refers to a program in which the Federal Government is legally obligated to make payments or provide aid to any person who, or State or local government that, meets the legal criteria for eligibility. Examples include Social Security, Medicare, Medicaid, and Food Stamps. Emergency appropriation means an appropriation that the Congress has designated as an emergency requirement. Under terms of most recent budget resolutions and other applicable House and Senate rules, such spending is not subject to the limits on discretionary spending, if it is discretionary spending, or the pay-asyou-go rules, if it is mandatory. Federal funds group refers to the moneys collected and spent by the Government through accounts other than those designated as trust funds. Federal funds include general, special, public enterprise, and intragovernmental funds. (Cf. trust funds group.) Financing account means a non-budgetary account (an account whose transactions are excluded from the budget totals) that records all of the cash flows resulting from post-1991 direct loan obligations or loan guarantee commitments. At least one financing account is associated with each credit program account. For programs that make both direct loans and loan guarantees, there are separate financing accounts for the direct loans and the loan guarantees. (Cf. liquidating account.) Fiscal year means the Government’s accounting period. It begins on October 1st and ends on September 30th, and is designated by the calendar year in which it ends. Forward funding means appropriations of budget authority that are made for obligation starting in the last quarter of the fiscal year for the financing of ongoing grant programs during the next fiscal year. General fund means the accounts in which are recorded governmental receipts not earmarked by law for a specific purpose, the proceeds of general borrowing, and the expenditure of these moneys. Government sponsored enterprises mean private enterprises that were established and sponsored by the Federal Government for public policy purposes. They are not included in the budget totals because they are private companies, and their securities are not backed by the full faith and credit of the Federal Government. However, the budget presents statements of financial condition for certain Government sponsored enterprises such as the Federal National Mortgage Association. (Cf. off-budget.) Intragovernmental fund —see Revolving fund. Liquidating account means a budget account that records all cash flows to and from the Government resulting from pre-1992 direct loan obligations or loan guarantee commitments. (Cf. financing account.) Loan guarantee means any guarantee, insurance, or other pledge with respect to the payment of all or a part of the principal or interest on any debt obligation of a non-Federal borrower to a non-Federal lender. The term does not include the insurance of deposits, shares, or other withdrawable accounts in financial institutions. (Cf. direct loan.) Mandatory spending means spending controlled by laws other than appropriations acts (including spending for entitlement programs) and spending for the food stamp program. Although the Budget Enforcement Act used the term direct spending to mean this, mandatory spending is commonly used instead. (Cf. discretionary spending.) Means of financing refers to borrowing, the change in cash balances, and certain other transactions involved in financing a deficit. The term is also used to refer to the 134 ANALYTICAL PERSPECTIVES debt repayment, the change in cash balances, and certain other transactions involved in using a surplus. By definition, the means of financing are not treated as receipts or outlays and so are non-budgetary. as the issuance of debentures to pay insurance claims, and in a few cases are recorded on an accrual basis such as interest on public issues of the public debt. Outlays are the measure of Government spending. Obligated balance means the cumulative amount of budget authority that has been obligated but not yet outlayed. (Cf. unobligated balance.) Outyear estimates mean estimates presented in the budget for the years beyond the budget year of budget authority, outlays, receipts, and other items (such as debt). Obligation means a binding agreement that will result in outlays, immediately or in the future. Budgetary resources must be available before obligations can be incurred legally. Pay-as-you-go (PAYGO) refers to requirements of the Budget Enforcement Act that would have resulted in a sequestration if the estimated combined result of legislation affecting mandatory spending or receipts is a net cost for a fiscal year. Similarly, it refers to current House and Senate rules requiring that legislation affecting mandatory spending or receipts not have net costs over either a 6-year or an 11-year period starting with the current fiscal year. Off-budget refers to transactions of the Federal Government that would be treated as budgetary had Congress not designated them by statute as “off-budget.” Currently, transactions of the Social Security trust fund and the Postal Service fund are the only sets of transactions that are so designated. The term is sometimes used more broadly to refer to the transactions of private enterprises that were established and sponsored by the Government, most especially “Government sponsored enterprises” such as the Federal Home Loan Banks. (Cf. budget totals.) Offsetting collections mean collections that, by law, are credited directly to expenditure accounts and deducted from gross budget authority and outlays of the expenditure account, rather than added to receipts. Usually, they are authorized to be spent for the purposes of the account without further action by Congress. They result from business-like transactions or market-oriented activities with the public and other Government accounts. The authority to spend offsetting collections is a form of budget authority. (Cf. receipts and offsetting receipts.) Offsetting receipts mean collections that are credited to offsetting receipt accounts and deducted from gross budget authority and outlays, rather than added to receipts. They are not authorized to be credited to expenditure accounts. The legislation that authorizes the offsetting receipts may earmark them for a specific purpose and either appropriate them for expenditure for that purpose or require them to be appropriated in annual appropriation acts before they can be spent. Like offsetting collections, they result from business-like transactions or market-oriented activities with the public and other Government accounts. (Cf. receipts, undistributed offsetting receipts, and offsetting collections.) On-budget refers to all budgetary transactions other than those designated by statute as off-budget (Cf. budget totals.) Outlay means a payment to liquidate an obligation (other than the repayment of debt principal or other disbursements that are “means of financing” transactions). Outlays generally are equal to cash disbursements, but also are recorded for cash-equivalent transactions, such Public enterprise fund —see Revolving fund. Reappropriation means a provision of law that extends into a new fiscal year the availability of unobligated amounts that have expired or would otherwise expire. Receipts mean collections that result from the Government’s exercise of its sovereign power to tax or otherwise compel payment . They are compared to outlays in calculating a surplus or deficit. (Cf. offsetting collections and offsetting receipts.) Revolving fund means a fund that conducts continuing cycles of business-like activity, in which the fund charges for the sale of products or services and uses the proceeds to finance its spending, usually without requirement for annual appropriations. There are two types of revolving funds: Public enterprise funds, which conduct business-like operations mainly with the public, and intragovernmental revolving funds, which conduct businesslike operations mainly within and between Government agencies. (Cf special fund and revolving fund.) Savings refers to legislation or administrative actions that decrease outlays or increase receipts. (Cf. cost.) Scorekeeping means measuring the budget effects of legislation, generally in terms of budget authority, receipts, and outlays, for purposes of measuring adherence to the Budget or to budget targets established by Congress, as through agreement to a Budget Resolution. Sequestration means the cancellation of budgetary resources provided by discretionary appropriations or mandatory spending legislation, following various procedures prescribed by the Budget Enforcement Act. Under that Act, a sequestration could have occurred in response to a discretionary appropriation that causes discretionary spending to exceed the discretionary spending caps set by the Act or in response to net costs resulting from the combined result of legislation affecting mandatory spend- 11. BUDGET CONCEPTS ing or receipts (referred to as a “pay-as-you-go’’ sequestration). Special fund means a Federal fund account for receipts or offsetting receipts earmarked for specific purposes and the expenditure of these receipts. (Cf. revolving fund and trust fund.) Subsidy means the estimated long-term cost to the Government of a direct loan or loan guarantee, calculated on a net present value basis, excluding administrative costs and any incidental effects on governmental receipts or outlays. Surplus means the amount by which receipts exceed outlays in a fiscal year. It may refer to the on-budget, offbudget, or unified budget surplus. Supplemental appropriation means an appropriation enacted subsequent to a regular annual appropriations act, when the need for additional funds is too urgent to be postponed until the next regular annual appropriations act. Trust fund refers to a type of account, designated by law as a trust fund, for receipts or offsetting receipts dedicated to specific purposes and the expenditure of these receipts. Some revolving funds are designated as trust funds, and these are called trust revolving funds. (Cf. special fund and revolving fund.) 135 Trust funds group refers to the moneys collected and spent by the Government through trust fund accounts. (Cf. Federal funds group.) Undistributed offsetting receipts mean offsetting receipts that are deducted from the Government-wide totals for budget authority and outlays instead of being offset against a specific agency and function. (Cf. offsetting receipts.) Unified budget includes receipts from all sources and outlays for all programs of the Federal Government, including both on- and off-budget programs. It is the most comprehensive measure of the Government’s annual finances. Unobligated balance means the cumulative amount of budget authority within a budget account that is not obligated and that remains available for obligation under law. User charges are charges assessed for the provision of Government services and for the sale or use of Government goods or resources. The payers of the user charge must be limited in the authorizing legislation to those receiving special benefits from, or subject to regulation by, the program or activity beyond the benefits received by the general public or broad segments of the public (such as those who pay income taxes or custom duties). 12. COVERAGE OF THE BUDGET The Federal Government’s activities have far-reaching impacts, affecting the economy and society of the Nation and the world. One of the primary activities of the Government is to allocate resources in order to provide public goods and achieve public policy objectives. The budget is the Government’s financial plan for proposing, deciding, and controlling the allocation of resources. Those financial activities that constitute the direct allocation of resources are included in the budget’s measures of receipts and expenditures, and are therefore characterized as “budgetary.” Federal Government activities that do not involve the direct allocation of resources in a measurable way are characterized as “non-budgetary” and classified outside of the budget. For example, the budget does not include funds that are privately owned but held and managed by the Government in a fiduciary capacity, such as the deposit funds owned by Native American Indians. In addition, the budget does not include costs that are borne by the private sector even when those costs result from Federal regulatory activity. Also, although the budget includes the “subsidy costs” 1 of Federal credit programs, it does not include the other cash flows of these programs that do not involve a direct allocation of resources by the Government and that are a means of financing these programs. Nonbudgetary activities can be important instruments of Federal policy and are discussed briefly in this chapter and in more detail in other parts of the budget documents. The term “off-budget” may appear to be synonymous with non-budgetary. However, it has a meaning distinct from non-budgetary and, as discussed below, refers to Federal Government activities that are required by law to be excluded from the budget totals. The term is also used colloquially to refer to emergency funding or supplemental appropriations for war costs because these items have often been passed by the Congress without regard to the normal budget enforcement procedures. Despite the colloquial usage of the term off-budget, emergency aid and war costs are budgetary and specifically “on-budget,” as that term is defined below; budgetary outlays and receipts reflect the costs of these provisions. In contrast, off-budget amounts are required by law to be recorded separately in the budget and non-budgetary transactions are not in the budget under any circumstances because they do not impose direct costs on the Treasury. Off-Budget Federal Entities The Federal Government has used the unified budget concept as the foundation for its budgetary analysis and presentation since the 1969 Budget, implementing 1 Subsidy costs are explained in the section below on “Federal credit programs.” a recommendation made by the President’s Commission on Budget Concepts in 1967. It called for the budget to include the financial transactions of all of the Federal Government’s programs and agencies. Every year since 1971, however, at least one Federal entity that would otherwise be included in the budget has been declared to be off-budget by law. Such off-budget Federal entities are federally owned and controlled, but their transactions are excluded, by law, from the rest of the budget totals, which are also known as “on-budget” totals. When a Federal entity is off-budget by law, its receipts, budget authority, outlays, and surplus or deficit are separated from all other (on-budget) receipts, budget authority, outlays, and surplus or deficit. The budget reflects the legal distinction between on-budget entities and offbudget entities by showing outlays and receipts for both types of entities separately. Although there is a legal distinction between on-budget and off-budget entities, there is no conceptual difference between the two. The off-budget Federal entities engage in the same kinds of governmental activities as the onbudget entities, and the programs of off-budget entities result in the same kind of outlays and receipts as on-budget entities. The “unified budget” reflects the conceptual similarity between on-budget and off-budget entities by showing combined totals of outlays and receipts for both types of entities. The off-budget Federal entities currently consist of the Postal Service Fund and the two Social Security Trust Funds: Old-Age and Survivors Insurance and Disability Insurance. Social Security has been classified as off-budget since 1986 and the Postal Service Fund has been classified as off-budget since 1990. 2 A number of other entities that had been declared off-budget by law at different times before 1986 have been classified as on-budget by law since at least 1985. Table 12–1 divides total Federal Government receipts, outlays, and the surplus or deficit between on-budget and off-budget amounts. Within this table, the Social Security and Postal Service transactions are classified as off-budget for all years in order to provide a consistent comparison over time. Entities that were off-budget at one time but are now on-budget are classified as on-budget for all years. Because Social Security is the largest single program in the unified budget and is classified by law as off-budget, the off-budget accounts comprise a significant part of total Federal spending and receipts. In 2011, off-budget receipts are an estimated 26.3 percent of total receipts, and off-budget outlays are a smaller, but still significant, percentage of total outlays at 15.1 percent. The estimated unified budget deficit in 2011 is $1,267 billion—a $1,363 2 See 42 U.S.C. § 911 and 39 U.S.C. § 2009a. 137 138 ANALYTICAL PERSPECTIVES Table 12–1. COMPARISON OF TOTAL, ON-BUDGET, AND OFF-BUDGET TRANSACTIONS 1 (In billions of dollars) Fiscal Year Receipts Total On-budget Outlays Off-budget Total On-budget Surplus or deficit (–) Off-budget Total On-budget Off-budget 1980 ................................................................................ 1981 ................................................................................ 1982 ................................................................................ 1983 ................................................................................ 1984 ................................................................................ 517.1 599.3 617.8 600.6 666.4 403.9 469.1 474.3 453.2 500.4 113.2 130.2 143.5 147.3 166.1 590.9 678.2 745.7 808.4 851.8 477.0 543.0 594.9 660.9 685.6 113.9 135.3 150.9 147.4 166.2 –73.8 –79.0 –128.0 –207.8 –185.4 –73.1 –73.9 –120.6 –207.7 –185.3 –0.7 –5.1 –7.4 –0.1 –0.1 1985 ................................................................................ 1986 ................................................................................ 1987 ................................................................................ 1988 ................................................................................ 1989 ................................................................................ 734.0 769.2 854.3 909.2 991.1 547.9 568.9 640.9 667.7 727.4 186.2 200.2 213.4 241.5 263.7 946.3 990.4 1,004.0 1,064.4 1,143.7 769.4 806.8 809.2 860.0 932.8 176.9 183.5 194.8 204.4 210.9 –212.3 –221.2 –149.7 –155.2 –152.6 –221.5 –237.9 –168.4 –192.3 –205.4 9.2 16.7 18.6 37.1 52.8 1990 ................................................................................ 1991 ................................................................................ 1992 ................................................................................ 1993 ................................................................................ 1994 ................................................................................ 1,032.0 1,055.0 1,091.2 1,154.3 1,258.6 750.3 761.1 788.8 842.4 923.6 281.7 293.9 302.4 311.9 335.0 1,253.0 1,324.2 1,381.5 1,409.4 1,461.8 1,027.9 1,082.5 1,129.2 1,142.8 1,182.4 225.1 241.7 252.3 266.6 279.4 –221.0 –269.2 –290.3 –255.1 –203.2 –277.6 –321.4 –340.4 –300.4 –258.8 56.6 52.2 50.1 45.3 55.7 1995 ................................................................................ 1996 ................................................................................ 1997 ................................................................................ 1998 ................................................................................ 1999 ................................................................................ 1,351.8 1,453.1 1,579.2 1,721.7 1,827.5 1,000.7 1,085.6 1,187.2 1,305.9 1,383.0 351.1 367.5 392.0 415.8 444.5 1,515.8 1,560.5 1,601.1 1,652.5 1,701.8 1,227.1 1,259.6 1,290.5 1,335.9 1,381.1 288.7 300.9 310.6 316.6 320.8 –164.0 –107.4 –21.9 69.3 125.6 –226.4 –174.0 –103.2 –29.9 1.9 62.4 66.6 81.4 99.2 123.7 2000 ................................................................................ 2001 ................................................................................ 2002 ................................................................................ 2003 ................................................................................ 2004 ................................................................................ 2,025.2 1,991.1 1,853.1 1,782.3 1,880.1 1,544.6 1,483.6 1,337.8 1,258.5 1,345.4 480.6 507.5 515.3 523.8 534.7 1,789.0 1,862.9 2,010.9 2,159.9 2,292.9 1,458.2 1,516.1 1,655.2 1,796.9 1,913.3 330.8 346.8 355.7 363.0 379.5 236.2 128.2 –157.8 –377.6 –412.7 86.4 –32.4 –317.4 –538.4 –568.0 149.8 160.7 159.7 160.8 155.2 2005 ................................................................................ 2006 ................................................................................ 2007 ................................................................................ 2008 ................................................................................ 2009 ................................................................................ 2,153.6 2,406.9 2,568.0 2,524.0 2,105.0 1,576.1 1,798.5 1,932.9 1,866.0 1,451.0 577.5 608.4 635.1 658.0 654.0 2,472.0 2,655.1 2,728.7 2,982.6 3,517.7 2,069.8 2,233.0 2,275.1 2,507.8 3,000.7 402.2 422.1 453.6 474.8 517.0 –318.3 –248.2 –160.7 –458.6 –1,412.7 –493.6 –434.5 –342.2 –641.8 –1,549.7 175.3 186.3 181.5 183.3 137.0 2010 estimate ................................................................. 2,165.1 1,529.9 635.2 2011 estimate ................................................................. 2,567.2 1.893.1 674.1 2012 estimate ................................................................. 2,926.4 2,205.9 720.5 2013 estimate ................................................................. 3,188.1 2,422.4 765.7 2014 estimate ................................................................. 3,455.5 2,646.4 809.0 2015 estimate ................................................................. 3,633.7 2,777.7 855.9 1 Off-budget transactions consist of the Social Security trust funds and the Postal Service fund. 3,720.7 3,833.9 3,754.9 3,915.4 4,161.2 4,385.5 3,163.7 3,255.7 3,154.6 3,285.5 3,498.7 3,687.7 557.0 578.2 600.2 629.9 662.6 697.9 –1,555.6 –1,266.7 –828.5 –727.3 –705.8 –751.9 –1,633.8 -1,362.6 -948.7 -863.1 –852.3 –909.9 78.2 95.9 120.2 135.8 146.5 158.1 12. COVERAGE OF THE BUDGET billion on-budget deficit partly offset by a $96 billion offbudget surplus. The off-budget surplus consists entirely of the Social Security surplus.3 Social Security had small deficits or surpluses from its inception through the early 1980s, but since the middle 1980s it has had a large and growing surplus. However, under present law, the surplus is eventually estimated to decline, turn into a deficit, and never reach balance again. Non-Budgetary Activities Some important Government activities are characterized as non-budgetary because they do not involve the direct allocation of resources by the Government. Some of the Government’s major non-budgetary activities are discussed below. As noted below, some of these activities affect budget outlays or receipts even though they have components that are non-budgetary.4 Federal credit programs: budgetary and nonbudgetary transactions.—Federal credit programs make direct loans or guarantee private loans. The Federal Credit Reform Act of 1990 changed how the costs of credit programs are recorded in the budget by defining as budgetary the “subsidy cost” of the credit programs (defined in the next paragraph) and classifying the other credit program cash flows as non-budgetary. One way to view the budgetary and non-budgetary components of a credit program is to consider a portfolio of new direct loans made to a cohort of college students. The loan terms may include deferrals of interest while the students are in school, and some of the students will default on their loans; over time, the interest received on the loans may not be sufficient to recover the Government’s expected losses. Under credit reform, the subsidy cost reflects the estimated lifetime cash flows to and from the Government (excluding administrative costs) discounted to the point of the loan disbursement. The present value of the net cash flows, or the subsidy cost, is recorded as an outlay when the loan is disbursed. In other words, the difference between the amount disbursed by the Government and the value of the loan assets the Government ultimately receives in return, the cash value of the students’ promissory notes, is the subsidy cost. Because the loan assets have value, the remainder of the transaction (beyond the amount recorded as a subsidy) is simply an exchange of financial assets of equal value, and does not result in a cost to the Government or the taxpayer. That remaining portion of the loan transaction, the cash flows apart from the subsidies, is classified as non-budgetary. 3 The 2009 off-budget surplus reflects a $137.3 billion surplus for Social Security and a $0.3 billion deficit for the Postal Service. The estimated 2010 off-budget surplus reflects a $84.6 billion surplus for Social Security and a $6.4 billion deficit for the Postal Service, and the projected 2011 off-budget surplus reflects a $100.1 billion surplus for Social Security and a $4.2 billion deficit for the Postal Service. 4 Until the 2011 Budget, the Securities Investor Protection Corporation (SIPC) was classified as non-budgetary. In the fall of 2009, the Congressional Budget Office, the Office of Management and Budget, and the Budget Committees of the Congress reviewed the non-budgetary status of SIPC and decided to reclassify it as budgetary. Chapter 11 of this volume, “Budget Concepts,” provides a discussion of this decision. 139 Since the adoption of credit reform, the budget outlays of credit programs reflect only the subsidy costs of Government credit and show this cost when the credit assistance is provided, reflecting more accurately the cost of credit decisions.5 This enables the budget to fulfill its purpose of being a financial plan for allocating resources among alternative uses by comparing the expected cost of credit programs with their benefits, comparing the cost of credit programs with the cost of other spending programs, and comparing the cost of one type of credit assistance with the cost of another type.6 Credit programs are discussed in more detail in Chapter 22 of this volume, “Credit and Insurance Programs.” Deposit funds.—Deposit funds are non-budgetary accounts that record amounts held by the Government temporarily until ownership is determined (such as earnest money paid by bidders for mineral leases) or held by the Government as an agent for others (such as State income taxes withheld from Federal employees’ salaries and not yet paid to the States, and the Tribal trust funds). The largest deposit fund is the Government Securities Investment Fund, which is also known as the G Fund. It is one of several investment funds managed by the Federal Retirement Thrift Investment Board, as an agent, for Federal employees who participate in the Government’s defined contribution retirement plan, the Thrift Savings Plan (which is similar to private-sector 401(k) plans). Because the G Fund assets, which are held by the Department of the Treasury, are the property of Federal employees and are held by the Government only in a fiduciary capacity, the transactions of the Fund are not transactions of the Government itself and are therefore non-budgetary. 7 For similar reasons, the budget excludes funds that are owned by Native American Indians, but held and managed by the Government in a fiduciary capacity. Government-sponsored enterprises.—The Federal Government has chartered Government-sponsored en5 Both credit reform accounting and the earlier cash accounting of Federal credit programs would ultimately show the same costs for credit transactions. For example, cash accounting for direct loans would show the full disbursement of the loan as an outlay when it was made, and then later show the repayments of principal and interest as an offset to outlays. Over the life of the loan, only the net cost of the loan would ultimately be reflected in the budget. Credit accounting shows that same net cost, or subsidy, but shows that cost at the time the loan is made (adjusting the cash flows for the time-value of money); credit accounting therefore does not “omit” any costs from the budget. 6 For more explanation of the budget concepts for direct loans and loan guarantees, see the sections on Federal credit and credit financing accounts in Chapter 11 of this volume, “Budget Concepts.” The structure of credit reform is further explained in Chapter VIII.A of the Budget of the United States Government, Fiscal Year 1992, Part Two, pp. 223–226. The implementation of credit reform through 1995 is reviewed in Chapter 8, “Underwriting Federal Credit and Insurance,” Analytical Perspectives, Budget of the United States Government, Fiscal Year 1997, pp. 142– 144. Refinements and simplifications enacted by the Balanced Budget Act of 1997 or provided by later OMB guidance are explained in Chapter 8, “Underwriting Federal Credit and Insurance,” Analytical Perspectives, Budget of the United States Government, Fiscal Year 1999, p. 170. 7 The administrative functions of the Federal Retirement Thrift Investment Board are carried out by Government employees, and are, therefore, included in the budget. 140 terprises (GSEs) such as the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corporation (Freddie Mac), the Federal Home Loan Banks, the Farm Credit System, and the Federal Agricultural Mortgage Corporation to provide financial intermediation for specified public purposes. Although Federally chartered to serve public-policy purposes, the GSEs are classified as non-budgetary and excluded from the Budget. This is because, except as discussed below with respect to Fannie Mac and Freddie Mac, they are privately owned and controlled. Estimates of the GSEs’ activities are reported in a separate chapter of the Budget Appendix, and their activities are discussed in Chapter 22 of this volume, “Credit and Insurance Programs.” In September 2008, the director of the Federal Housing Finance Agency (FHFA) 8 placed Fannie Mae and Freddie Mac into conservatorship for the purpose of preserving the assets and restoring the solvency of these two GSEs. As conservator, FHFA has broad authority to direct the operations of these GSEs. However, these GSEs remain private companies with Boards of Directors and management rsponsible for their day-to-day operations. This Budget continues to treat these two GSEs as nonbudgetary private entities in conservatorship rather than as Government agencies. By contrast, the Congressional Budget Office (CBO) treats these GSEs as budgetary. The two different treatments of these GSEs each include both budgetary and non-budgetary amounts. Under the approach in the Budget, all of the GSEs’ transactions with the public are non-budgetary because the GSEs are not considered to be Government agencies. However, the payments from the U.S. Treasury to the GSEs are recorded as budgetary outlays and add to the budget deficit. Under CBO’s approach, which treats these GSEs as Federal agencies, the subsidy costs, or expected losses over time, of the GSEs’ past credit activities have already been recorded in CBO’s budget estimates and the subsidy costs of future credit activities will be recorded when the activities occur. Lending and borrowing activities between the GSEs and the public apart from the subsidy costs are treated as non-budgetary, and Treasury cash payments to the GSEs are intragovernmental (transfers from Treasury to the GSEs) that net to zero in CBO’s budget estimates. Overall, both the Budget’s accounting and CBO’s accounting present the GSEs’ losses as Government outlays, which therefore increase Government deficits. The two approaches, however, reflect the losses as budget costs at different times. 9 A further review of which approach better fits both legal considerations and goals of budgetary accounting is ongoing. Chapter 22 of this volume, “Credit 8 The Housing and Economic Recovery Act of 2008, enacted on July 30, 2008, created the FHFA as the new regulator for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. FHFA reflects the merger of the Office of Federal Housing Enterprise Oversight, the Federal Housing Finance Board, and the Department of Housing and Urban Development’s Government-sponsored enterprise mission team. 9 The two approaches would be the same over the long run only under the assumption that the Government maintains its current relationship with the two GSEs indefinitely and only if a consistent approach is used to measure the cost of risk. ANALYTICAL PERSPECTIVES and Insurance Programs,” and the Summary Tables in the main Budget volume provide more information about the GSEs. Regulation.—Federal Government regulation often requires the private sector or other levels of government to make expenditures for specified purposes, such as safety and pollution control. Although the budget reflects the Government’s cost of conducting regulatory activities, the costs imposed on, and the benefits accruing to, the private sector as a result of regulation are treated as non-budgetary and not included in the budget. The Government’s regulatory priorities and plans are described in the annual Regulatory Plan and the semi-annual Unified Agenda of Federal Regulatory and Deregulatory Actions. 10 The estimated costs and benefits of Federal regulation have been published annually by the Office of Management and Budget (OMB) since 1997. The latest report was released in September 2009. 11 In this draft report, OMB indicates that the estimated annual benefits of Federal regulations it reviewed from October 1, 1998, to September 30, 2008, range from $126 billion to $663 billion, while the estimated annual costs range from $51 to $60 billion. In its report, OMB discusses the impact of Federal regulation on State, local, and tribal governments, and agency compliance with the Unfunded Mandates Reform Act of 1995. The costs and benefits of Federal regulation are also discussed in Chapter 9 of this volume, “Benefit-Cost Analysis.” Monetary policy.—As noted above, the budget is a financial plan for allocating resources by raising revenues and spending those revenues. As a fiscal policy tool, the budget is used by elected Government officials to promote economic growth and achieve other public policy objectives. Monetary policy is another tool that governments use to promote economic growth. In the United States, monetary policy is conducted by the Federal Reserve System, which is composed of a Board of Governors and 12 regional Federal Reserve Banks. The Federal Reserve Act provides that the goal of monetary policy is to “maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.”12 The dual goals of full employment and price stability were reaffirmed by the Full Employment and Balanced Growth Act of 1978, also known as the Humphrey-Hawkins Act.13 10 The most recent Regulatory Plan and introduction to the Unified Agenda were issued by the General Services Administration’s Regulatory Information Service Center and were printed in the Federal Register of May 11, 2009. Both the Regulatory Plan and Unified Agenda are available on-line at www.reginfo.gov and at www.gpoaccess.gov. 11 Office of Information and Regulatory Affairs, Office of Management and Budget, 2009 Draft Report to Congress on the Costs and Benefits of Federal Regulations and Unfunded Mandates on State, Local, and Tribal Entities (September 21, 2009). The Report is available at www. whitehouse.gov/omb/inforeg_regpol_reports_congress/. 12 See 12 U.S.C. §225a. 13 See 15 U.S.C. 3101 et seq. 141 12. COVERAGE OF THE BUDGET By law, the Federal Reserve System is a self-financing entity that is independent of the Executive Branch and subject to only broad oversight by the Congress. Consistent with the recommendations of the 1967 President’s Commission on Budget Concepts, the effects of monetary policy and the actions of the Federal Reserve System are, with one exception, non-budgetary. In other words, the actions the Federal Reserve takes to affect the economy, including the buying and selling of Treasury securities and other public and private-sector financial instruments, are not reflected as outlays or receipts. Although the relatively recent increase in the Federal Reserve’s balance sheet in response to the financial crisis has had important macroeconomic consequences, it does not directly affect the Federal deficit. The exception to the treatment of Federal Reserve transactions as non-budgetary involves excess earnings of the Federal Reserve System. The Federal Reserve System earns income from a variety of sources including interest on U.S. Government securities, foreign currency investments and loans to depository institutions, and fees for services (e.g., check clearing services) provided to depository institutions. After paying its expenses, the Federal Reserve System remits to the U.S. Treasury any excess income. This income, which is classified in the budget as a governmental receipt, was equal to $34 billion in 2009. The recent expansion of the Federal Reserve’s balance sheet has increased its sources of income (and potential loss), which in turn has affected the Federal Reserve’s excess income payment to the Treasury. The Board of Governors is a Federal Government agency, but because of its independent status, its budget is not subject to Executive Branch review. Its budget is included in the Budget Appendix for informational purposes. The Federal Reserve Banks are subject to Board oversight and managed by boards of directors chosen by the Board of Governors and member banks, which include all national banks and state banks that choose to become members. The budgets of the regional Banks, although subject to approval by the Board of Governors, are not included in the Budget Appendix. Indirect macroeconomic effects of Federal activity.—Government activity has many effects on the Nation’s economy that extend beyond the amounts recorded in the budget. Government expenditures, taxation, tax expenditures, regulation, and trade policy can all affect the allocation of resources among private uses and income distribution among individuals. These effects, resulting indirectly from Federal activity, are generally not part of the budget, but the most important of them are discussed in this volume. For example, the effects of the American Recovery and Reinvestment Act of 2009 (ARRA), among other things, are discussed in Chapter 2 of this volume, “Economic Assumptions.” Credit market stabilization activity.—Since late 2007, the Federal Reserve System, Executive Branch agencies, and the GSEs Fannie Mae and Freddie Mac have engaged in a variety of activities designed to stabi- lize the financial markets and restore economic growth. The actions taken by the Federal Reserve System 14 are non-budgetary for reasons discussed above in the section on “Monetary policy.” However, as also noted above, Federal Reserve actions may affect the System’s earnings, which ultimately affect governmental receipts. The placement of Fannie Mae and Freddie Mac into conservatorship, discussed above in the section on “Governmentsponsored enterprises,” is not treated as affecting their non-budgetary status, so the GSEs’ transactions with the public are not included in the 2011 Budget. However, as with other transactions between non-budgetary entities and the Government, the transactions of the GSEs with the Government, including all cash payments from the Treasury to the GSEs, are included in the budget. Executive Branch activities in support of financial market stabilization include actions taken by the Department of the Treasury, the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), and the Federal Housing Finance Agency (FHFA). The Treasury activities include some programs that have already been or are in the process of being wound down, such as the Capital Assistance Program, the Guarantee Program for Money Market Funds, and the Supplementary Financing Program. In addition, the Treasury activities include a number of programs that continue to be necessary, such as the Capital Purchase Program, the Public-Private Investment Partnership program, and the Auto Industry Financing Program. 15 Actions by the FDIC include the Temporary Liquidity Guarantee Program and actions by the NCUA include the Temporary Corporate Credit Union Liquidity Guarantee Program, the Credit Union Homeowners Affordability Relief Program, and the Credit Union System Investment Program. Actions by the FHFA include the placement of the GSEs into conservatorship in 2008 and the subsequent and ongoing management of the GSEs. Chapter 4 of this volume, “Financial Stabilization Efforts and Their Budgetary Effects,” discusses all Government efforts to stabilize the financial markets and restore economic growth. As distinct from the activities of the Federal Reserve and the GSEs, the activities of the Department of the Treasury, the FDIC, and the NCUA are budgetary. Most of these activities, including all financial asset acquisitions, loans, and loan guarantees under the Troubled Asset Relief Program (TARP), are reported in the budget on a credit basis. 16 As discussed above in the section on 14 Examples of Federal Reserve actions include the creation of the following liquidity facilities: the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Money Market Investor Funding Facility, the Primary Dealer Credit Facility, the Term Asset-Backed Securities Loan Facility, the Term Auction Facility, and the Term Securities Lending Facility. 15 These Treasury activities were authorized by TARP. Other Treasury activities, some of which were also authorized by TARP, include the Asset Guarantee Program, the Auto Supplier Support Program, the GSE Credit Facility, the Homeowner Affordability and Stability Plan, the Systemically Failing Institutions Program, the Targeted Investment Program, and the acquisition of GSE mortgage-backed securities. 16 The Emergency Economic Stabilization Act (EESA) (§123(a)) pro- 142 ANALYTICAL PERSPECTIVES “Federal credit programs,” this means that outlays equal to the net present value of all future cash flows with the public are recorded when the transaction occurs. The rationale for recording financial asset purchases under TARP on a credit basis rather than on a cash basis is the same as the rationale, discussed above, for loans and loan guarantees generally: the Government’s cost of purchasing a financial asset that is intended to be sold at some point in the future is not equal to the cash used to acquire the asset at the time of acquisition. Rather, the cost is equal to the present value of the cash outflows for acquir- ing the asset less the present value of cash inflows from holding and ultimately selling the asset. The total budget impact of all of the credit market stabilization efforts undertaken by the Treasury, other Executive Branch agencies, the GSEs, and the Federal Reserve may not be known with certainty for several years. Nevertheless, actual and estimated outlays and receipts are included in the 2011 Budget. In addition, the actual and estimated impacts of credit market stabilization efforts on the debt held by the public are included in the 2011 Budget. 17 vides the authority to record the costs of all troubled assets purchased (or guaranteed) under TARP in accordance with the Federal Credit Reform Act (FCRA). EESA further requires (in §123(b)) that the discount rate used for recording these costs reflect market risk, which is in contrast to the risk-free discount rate required under FCRA for calculating the costs of loans and loan guarantees not authorized by EESA. 17 For an analysis of the Government’s response to the financial crisis, see Chapter 4 of this volume, “Financial Stabilization Efforts and Their Budgetary Effects.” 13. BUDGET PROCESS We are emerging from an era of fiscal irresponsibility, in which the process by which budget decisions were made and the ways in which they were presented helped expand deficits by hundreds of billions of dollars per year. The President’s first budget represented a break from these process and presentational choices, and this Budget continues on the new path. For instance, where the prior Administration turned its back on certain budget enforcement principles that had fostered surpluses during the 1990s, this Administration will reinstate and improve upon those rules. And where the prior Administration presented budgets and budget baselines that failed to reflect the year-to-year costs of, for example, overseas military operations, this Administration employs a baseline and presents a Budget that more accurately reflects the costs of current and proposed policy going into the future. The President’s budget reform proposals can be grouped into three categories: First, we will adopt certain changes in the budget process, such as a statutory Pay-As-You-Go rule and a proposal for an optional, fasttrack procedure for Congress to consider certain rescission requests, that will together help to impose greater discipline on revenue and spending policies. Second, we have made several changes in the display of the budget, such as emphasizing the metric of “debt net of financial assets” and reflecting the up-front cost to the Government in its Troubled Asset Relief Program (TARP) transactions through net present value accounting, that offer a clearer window into the liabilities and costs that the Government has and will incur. In addition, we have adopted the approach of fully funding overseas military operations, to the extent their costs are knowable, in the regular appropriations bills rather than relying exclusively or primarily on supplemental appropriations. Moreover, we have shown the expected future levels of individual appropriations accounts rather than omitting this material entirely from the budget, as was done during the last five years of the prior Administration. Finally, we have presented a revised baseline, which includes a projection of the costs of major tax and spending policies currently in effect, such as relief from the growing scope of the Alternative Minimum Tax, even if those costs are scheduled to expire within the budget window. In addition, we include an allowance for the costs of possible future natural disasters. The improved baseline better captures the likely costs of operating the Federal Government under current policy going forward. Taken together, these reforms generate a Budget that is more transparent, comprehensive, accurate, and realistic, and is thus a better guidepost for citizens and their representatives in making decisions about the key fiscal policy issues we confront as a Nation. CHANGES IN THE BUDGET PROCESS The Administration supports eight proposals that would supplement the budget process laid out in the Congressional Budget Act of 1974: a renewed statutory Pay-As-You-Go rule, a Fiscal Commission to identify policies to stabilize the debt-to-GDP ratio in the future, a Pay-As-You-Go review of potential administrative actions by Executive Branch agencies affecting entitlement programs, allocation adjustments that support the costefficient administration of mandatory programs and tax collection, incentives to encourage agencies to improve real property oversight, protection of appropriated funding for major disasters and emergencies, a limit on the use of advance appropriations for discretionary programs, and an option for the expedited consideration of certain rescission proposals. Statutory Pay-As-You-Go The Administration supports a statutory approach to the Pay-As-You-Go or PAYGO rule, to complement and reinforce the point-of-order constraints agreed to by the House and the Senate in 2007. On June 9, 2009, the President transmitted PAYGO legislation to Congress, and the House of Representatives adopted similar legislation, H.R. 2920, on July 22. The PAYGO principle requires that legislation increasing mandatory spending must be fully offset, or “paid for,” by legislation reducing mandatory spending or increasing revenues. Likewise, legislation reducing revenues must be fully offset by legislation raising revenues or reducing mandatory spending. In short, the net of all tax and mandatory spending legislation must be budget neutral. Drawing closely on the PAYGO law enacted in 1990, the Administration’s bill would enforce the requirement of budget neutrality by an automatic reduction or “sequestration” of selected mandatory programs if legislation is enacted that violates the PAYGO rule. If triggered, such a penalty would restore budget neutrality. But the real purpose of such a penalty is to discourage the enactment, or even the consideration, of legislation that would violate the PAYGO rule. During the 1990s, the rule was adhered to without a sequestration having to be employed. The fact that PAYGO sequestration did not have to be employed is a testament to the success of the PAYGO rule during that decade. The Administration’s PAYGO proposal differs in a few ways from the House and Senate PAYGO rules. First, the Administration believes that compliance with PAYGO is better measured relative to a baseline that makes budget projections based on current policies—policies in effect in 2009 or 2010—rather than on policies scheduled (but unlikely) to be in effect in later years (see the discussion of baselines in this section). Second, the Administration 143 144 ANALYTICAL PERSPECTIVES would enforce the statute by a year-end reckoning of the net costs of all tax or mandatory spending legislation, rather than enforcing the requirement bill by bill. This allows costs in one bill to be offset by savings in another. Third, the Administration would require the total cost of PAYGO legislation to be budget neutral in each year of the five years that the legislation would be in effect, rather than over a period of years. In contrast, the House and Senate rules each require budget neutrality only over a six-year and an 11-year period. Fiscal Commission The Administration supports the creation of a Fiscal Commission. The Fiscal Commission is charged with identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run. Specifically, the Commission is charged with balancing the budget excluding interest payments on the debt by 2015. The result is projected to stabilize the debtto-GDP ratio at an acceptable level once the economy recovers. The magnitude and timing of the policy measures necessary to achieve this goal are subject to considerable uncertainty and will depend on the evolution of the economy. In addition, the Commission will examine policies to meaningfully improve the long-run fiscal outlook, including changes to address the growth of entitlement spending and the gap between the projected revenues and expenditures of the Federal Government. Administrative PAYGO The Administration will continue to review potential administrative actions by Executive Branch agencies affecting entitlement programs, as stated in a memorandum issued on May 23, 2005, by the Director of the Office of Management and Budget. This effectively establishes a PAYGO requirement for administrative actions involving mandatory spending programs. Exceptions to this requirement are only provided in extraordinary or compelling circumstances. Program Integrity Funding With billions of dollars being spent in programs such as Social Security, Medicare, and Medicaid, upon which so many Americans rely, it is important that they are run efficiently and effectively. The Administration will make significant investments in activities to ensure that taxpayer dollars will be spent correctly, expanding oversight activities in the largest benefit programs and increasing investments in tax compliance and enforcement activities. Table 13–1. MANDATORY AND RECEIPT SAVINGS FROM DISCRETIONARY PROGRAM INTEGRITY BASE FUNDING AND ALLOCATION ADJUSTMENTS (Budget authority in millions of dollars) 2011-2015 Allocation Adjustments SSA Program Integrity: 1 Enforcement Base ...................................................... Allocation Adjustment ................................................. IRS Tax Enforcement: 2 Enforcement Base 3 .................................................... Allocation Adjustment 4 ............................................... Health Care Fraud and Abuse Control Program: Allocation Adjustment 5 ............................................... Payments: 6 1,528 3,953 Savings Achieved from Allocation Adjustments and Inflation Thereafter 2011 374 –651 2012 2013 2014 2015 2016 2017 2018 2019 2020 –606 –2,347 –1,247 –3,538 –1,578 –4,315 –1,885 –5,251 –2,225 –6,536 –2,452 –7,388 –2,654 –8,165 –2,986 –3,268 –9,370 –10,277 10-Year Total –18,527 –57,838 37,566 –50,000 –50,000 –50,000 –50,000 –50,000 –50,000 –50,000 –50,000 –50,000 –50,000 –500,000 8,869 –385 –1,164 –2,355 –3,955 –6,015 –7,987 –9,238 –9,931 –10,378 –10,809 –62,217 3,100 –740 –860 –910 –960 –1,000 –1,030 –1,050 –1,080 –1,110 –1,130 –9,870 Unemployment Insurance Improper Enforcement Base ...................................................... 54 –35 –35 –36 –37 –40 –41 –41 –43 –45 –48 –401 Allocation Adjustment ................................................. 325 –88 –184 –202 –222 –241 –254 –263 –272 –280 –290 –2,296 1 This is based on SSA’s Office of the Actuary estimates of savings. In the first year, the enforcement base shows a positive outlay. This is due to the fact that redeterminations of eligibility can uncover underpayment errors as well as overpayment errors. SSI recipients are more likely to initiate a redetermination if they believe there is an underpayment, and SSA completes these beneficiary-initiated redeterminations in the enforcement base. In addition, corrections for underpayments are realized more quickly than corrections for overpayment. The allocation adjustment does not show an outlay in the first year because SSA would target their allocation adjustment redetermination dollars to cases where an overpayment is suspected. 2 Savings for IRS are revenue increases rather than spending reductions. They are shown as negatives for consistency in presentation. 3 No official estimate for FY 2011 enforcement revenue has been produced at the time of publishing, so this figure is an approximation and included only for illustrative purposes. 4 The Internal Revenue Service (IRS) allocation adjustment funds cost increases for existing enforcement initiatives and activities and new initiatives. The IRS enforcement program helps maintain the more than $2 trillion in taxes voluntarily paid each year. The cost increases will help maintain the base revenue while generating additional revenue through targeted program investments. The activities and new initiatives funded out of the allocation adjustment are estimated to yield more than $60 billion over 10 years. Aside from direct enforcement revenue, the deterrence impact of these activities suggests the potential for even greater savings. 5 These data are based on estimates from the HHS Office of the Actuary for return on investment (ROI) from program integrity activities. The ROI is based on the discretionary allocations amount less the administrative costs for implementing the legislative and administrative program integrity proposals. 6 The maximum UI benefit period is typically 26 weeks. As a result, preventing an ineligible individual from collecting UI benefits would save at most a half year of benefits. 145 13. BUDGET PROCESS The Administration supports initiatives related to ensuring that Federal agencies are responsible stewards of taxpayer resources and will work with Congress to that end. Specifically, the Administration is focused on the reduction of improper payments made to beneficiaries while ensuring access to important benefit programs. The Administration supports efforts to provide Federal agencies with the necessary resources and incentives to prevent, reduce, or recover improper payments (including fraudulent payments), as well as the authority to spend recovered improper payments for discretionary programs, and will work with Congress to accomplish these goals. Discretionary Program Integrity Initiatives.—The Administration proposes significant increases in discretionary administrative program integrity activities at the Social Security Administration (SSA), the Department of Health and Human Services (HHS), the Department of Labor (DOL), and the Internal Revenue Service (IRS). The Administration proposes a multi-year strategy, which will permit the agencies to pay closer attention to the risk of improper payments, commensurate with the large and growing costs of the programs administered by these agencies, including Social Security, Medicare, Medicaid, and Unemployment Insurance (UI). There is solid and rigorous evidence that these investments in administrative resources can significantly decrease the rate of improper payments and recoup many times their initial investment. For every $1 spent by SSA on a disability review, $10 is saved in erroneous payments. Similarly, for every $1 spent by HHS to fight health care fraud, approximately $1.55 is saved or averted, and the IRS enforcement activities recoup roughly $7 for every $1 spent. As shown in Table 13-1, the initial five-year investment of $16.2 billion for 2011 through 2015, if sustained by baseline inflation between 2016 and 2020, is estimated to result in more than $132 billion in lower spending and additional tax revenue over the next 10 years, with additional savings accruing after the 10-year period. The Administration proposes to protect the dollars requested for these activities in the appropriations pro- Table 13–2. DISCRETIONARY PROGRAM INTEGRITY BASE FUNDING AND ALLOCATION ADJUSTMENTS (Budget authority in millions of dollars) 2009 Actual 2010 Enacted 2011 Proposed 2012 Proposed 2013 Proposed 2014 Proposed 2015 Proposed SSA Program Integrity: Enforcement Base 1 ......................................................................................................... 264 273 283 294 305 317 329 Allocation Adjustments: BA ............................................................................................................................. Outlays ..................................................................................................................... 240 240 485 485 513 513 642 642 751 751 924 924 1,123 1,123 Enforcement Base: Enforcement Account ............................................................................................... Operations Support Account .................................................................................... 6,997 N/A N/A 7,100 4,904 2,196 7,120 5,007 1,991 7,387 5,104 2,283 7,535 5,206 2,329 7,685 5,310 2,375 7,839 5,416 2,423 Allocation Adjustments: BA ............................................................................................................................. Outlays ..................................................................................................................... 490 441 890 850 1,115 1,093 1,357 1,469 1,724 1,687 2,105 2,067 2,568 2,522 Health Care Fraud and Abuse Control Program: Enforcement Base (Mandatory) ....................................................................................... 1,161 1,173 1,173 1,173 1,173 1,173 1,173 Allocation Adjustments: BA ............................................................................................................................. Outlays ..................................................................................................................... 198 198 311 311 561 561 589 589 619 619 649 649 682 682 Unemployment Insurance Improper Payments: Enforcement Base ........................................................................................................... 10 10 10 11 11 11 11 Allocation Adjustments: BA ............................................................................................................................. Outlays ..................................................................................................................... 40 34 50 49 55 54 60 59 65 64 70 69 75 74 TOTAL: Enforcement Base ........................................................................................................... 8,432 8,556 8,586 8,865 9,024 9,186 9,352 IRS Tax Enforcement: Allocation Adjustments: BA ............................................................................................................................. 968 1,736 2,244 2,648 3,159 3,748 4,448 Outlays ..................................................................................................................... 913 1,695 2,221 2,760 3,121 3,710 4,401 1 For 2009 through 2015, numbers reflect spending on Continuing Disability Reviews and SSI redeterminations. Limited funding in the 2010 allocation adjustment may also be available for asset verification processes, provided the activity is as cost-effective as SSI redeterminations. 146 cess through allocation adjustments, a mechanism that has been used by past administrations and Congresses. Allocation adjustments are increases in the ceiling or allocation for annual appropriations, but these increases are granted only if appropriations bills increase funding for the specified program integrity purposes above specified base levels. This budget mechanism will ensure that this funding will not supplant other Federal spending on these activities or be diverted to other purposes. The base level of funding assumed in each appropriations request and the allocation adjustment for each agency is listed in Table 13-2. The Administration’s proposal assumes baseline inflation increases for the base level of funding for all ten years of the budget window and assumes funding for five years of allocation adjustments with baseline inflation increases allowed for that funding after the fifth year. For the Social Security Administration, the $513 million allocation adjustment would allow SSA to conduct at least 360,000 Continuing Disability Reviews (CDRs) and at least 2.4 million Supplemental Security Income (SSI) redeterminations of eligibility in 2011. The funding provided for the Social Security Administration will enable the agency to work down a backlog of Continuing Disability Reviews, which determine whether an individual continues to qualify for Disability Insurance or Supplemental Security Income. The number of these reviews has fallen in recent years even as the Disability Insurance program has grown. In addition, up to $10 million of the allocation adjustment may be spent to continue implementing the Access to Financial Institutions initiative, which helps SSA identify individuals who have financial accounts exceeding the Supplemental Security Income resource limits. As a result of the allocation adjustment funding, SSA would recoup over $57.8 billion in savings in the Disability Insurance and Supplemental Security Income programs, with additional savings after the ten-year period, as estimated by SSA’s Office of the Actuary. SSA is required by law to conduct CDRs for all beneficiaries who are receiving Disability Insurance benefits, as well as all children under age 18 who are receiving Supplemental Security Income. SSI redeterminations are also required by law, but the frequency is not specified in statute. The baseline assumes the likely scenario for program integrity activities, given the baseline funding levels. The President’s Budget shows the savings that would result from the increase in CDRs and redeterminations made possible by the program integrity allocation adjustment proposal. As stated above, the return on investment (ROI) for CDRs is approximately 10 to 1 in lifetime program savings. The ROI for redeterminations is approximately 8 to 1. The savings from one year of program integrity activities are realized over multiple years because some CDRs identify that the beneficiary has medically improved and is capable of working, which may mean that they are no longer eligible to receive Disability Insurance (DI) or Supplemental Security Income (SSI) benefits. Redeterminations focus on an individual’s eligibility for the means-tested SSI program and generally result in ANALYTICAL PERSPECTIVES a revision to the individual’s benefit level. However, the schedule of savings resulting from redeterminations will be different for the base funding and the allocation adjustment. This is because redeterminations of eligibility can uncover underpayment errors as well as overpayment errors. SSI recipients are more likely to initiate a redetermination of eligibility if they believe there is an underpayment error, and these recipient-initiated redeterminations are included in the base. For the IRS, the $1,115 million allocation adjustment covers some cost increases for the base IRS enforcement program plus new and continuing investments in expanding and improving the effectiveness and efficiency of the IRS’ overall tax enforcement program. As a result of these additional efforts, as well as the work done by base programs, the IRS will collect an estimated $50 to $60 billion in 2011 in direct enforcement revenue. The IRS estimates that work completed by the proposed new staff in 2011 will eventually yield another $720 million. Further, once these new staff are trained and become fully operational in 2013, the extra revenue they bring in each year will rise to $1,946 million, or roughly $9 in additional revenue for every $1 in administrative expense. However, this ROI estimate is likely understated because a portion of the new investment is directed towards efforts to improve the performance of existing staff and resources (such as new computers and better research) that are not reflected in the IRS’ ROI calculation. More importantly, the ROI is understated because it does not reflect the effect enhanced enforcement has on deterring non-compliance, which helps to ensure the continued payment of well over $2 trillion in taxes voluntarily paid each year. Though this figure is not directly measured, research suggests it is at least three times as large as the direct effect on revenue, and possibly much greater. The discretionary allocation adjustment of $561 million for Health Care Fraud and Abuse Control (HCFAC) activities is designed to expand the Health Care Fraud Prevention & Enforcement Action Team (HEAT) initiative, to provide resources to implement a robust set of administrative and legislative program integrity proposals, and to provide additional resources to identify and reduce improper payments in the Medicare, Medicaid, and CHIP programs. The funding would be allocated among CMS, the Health and Human Services Office of Inspector General, the Federal Bureau of Investigation, and Department of Justice to safeguard Medicare, Medicaid, and CHIP against fraud and abuse. This $561 million would generate approximately $740 million in savings in 2011, which would reflect recouping improper payments made to providers. The 2011 Budget proposes a discretionary allocation adjustment of $55 million for the Department of Labor’s (DOL) Unemployment Insurance (UI) State administrative grants program to reduce UI improper payments, a top management challenge identified by GAO and DOL’s Inspector General. The proposal would expand a $10 million Reemployment and Eligibility Assessment initiative begun in 2005 to finance in-person interviews at One-Stop Career Centers to assess UI beneficiaries’ need for job- 147 13. BUDGET PROCESS finding services and their continued eligibility for benefits. The current $10 million effort results in a savings in UI benefit payments of $35 million. The request for additional funding for in-person reemployment and eligibility assessments of claimants of unemployment compensation builds upon the success of a number of States in reducing improper payments and speeding reemployment using these assessments. Because most unemployment claims are now filed by telephone or Internet, in-person assessments conducted in the One-Stop Career Centers can help determine the continued eligibility for benefits and the adequacy of work search, verify the identity of beneficiaries where there is suspicion of possible identity theft, and provide a referral to reemployment assistance to those who need additional help. The maximum UI benefit period is typically 26 weeks. As a result, preventing an ineligible individual from collecting UI benefits would save, at most, a half year of benefits. The two years of savings from the additional $55 million, totaling $88 million in 2011 and $122 million in 2012, reflect the fact that reemployment and eligibility assessments conducted late in the year affect individuals whose benefits would have continued into the subsequent fiscal year. Mandatory Program Integrity Initiatives.—Table 13-3 lays out the mandatory and receipt savings from other program integrity initiatives that are included in the 2011 Budget, beyond the expansion in staff resulting from the increases in discretionary funding discussed above. These savings total more than $20.3 billion over ten years and more than 80 percent of these savings would be scored as PAYGO offsets, because legislation granting agencies new methods to crack down on overpayments and combat fraud counts as PAYGO savings. Expand CMS Program Integrity Authority.—The 2011 Budget includes new Medicare and Medicaid program integrity proposals to help prevent fraud and abuse before they occur; detect fraud and abuse as early as possible; and more comprehensively enforce penalties and other sanctions when fraud and abuse occur. These efforts will save approximately $13.1 billion over 10 years. Unemployment Insurance Integrity Legislation.—Since 2006, the President’s Budget has included a multi-part proposal to give States additional tools and resources to recover and prevent UI improper payments. The current proposal would: • Strengthen States’ incentives to recover UI benefit overpayments and employer contributions by permitting States to use a portion of recovered funds for the reduction of fraud and errors and detection of nonpayment of required contributions; • Impose a penalty for UI fraud; • Charge employers when their actions lead to overpayments; Table 13–3. MANDATORY AND RECEIPT SAVINGS FROM OTHER PROGRAM INTEGRITY INITIATIVES (Receipts and outlays in millions of dollars) 2011 Department of Health and Human Services: Expand CMS Program Integrity Authority ............................................ 2012 10-year Total 2013 2014 2015 2016 2017 2018 2019 2020 –2,047 –13,079 –109 –213 –1,121 –1,250 –1,418 –1,564 –1,660 –1,784 –1,912 Outlay impact: PAYGO ........................................................................................ Non-PAYGO ................................................................................. ......... ......... –151 –71 –178 –146 –135 –149 –132 –153 –130 –158 –130 –164 –133 –169 –137 –174 –141 –181 –1,267 –1,365 Receipt impact: PAYGO1 ....................................................................................... Non-PAYGO ................................................................................. ......... ......... –39 –3 –40 –2 –27 11 –32 36 –49 124 –72 247 19 –208 –62 200 –73 252 –375 657 Department of Labor: Implement Unemployment Insurance Integrity Legislation: Department of the Treasury: Authorize post-levy due process (receipt effect) ....................................... Increase levy authority to 100 percent for vendor payments (receipt effect) ................................................................................................... –77 –115 –119 –124 –109 –113 –118 –122 –127 –132 –1,156 –61 –87 –86 –90 –78 –82 –85 –88 –92 –96 –845 Social Security Administration: Windfall Elimination Provision/Government Pension Offset Enforcement Provision (non-PAYGO) ....................................................................... ......... ......... ......... –172 –375 –492 –523 –478 –452 –417 –2,909 –247 –247 ......... –679 –605 –74 –1,692 –1,544 –148 –1,936 –1,626 –310 –2,261 –1,769 –492 –2,464 –1,938 –526 –2,505 –2,065 –440 –2,963 –2,108 –855 –2,756 –2,330 –426 Total, Mandatory and Receipt Savings ................................................. PAYGO Savings ................................................................................... Non-PAYGO Savings ........................................................................... 1 Net of income offsets. –2,835 –20,339 –2,489 –16,722 –346 –3,617 148 • Collect delinquent UI overpayments, uncollected employer contributions, and associated penalties and interest through offset of Federal tax refunds; and • Include the date individuals start work in the information reported to the National Directory of New Hires to facilitate identification of fraudulent UI claims. The 2011 Budget re-proposes the 2010 Budget’s UI Financial Integrity legislation, but limits the use of the tax refund offset to improper payments for which the claimant is at fault. This change in approach from using the Treasury Offset Program (TOP) to recover all overpayments would avoid recoveries from families where the overpayment was not the worker’s fault. States would be required to conduct additional screening prior to submitting a TOP request to Treasury. The combined revenue loss and the outlay savings associated with this proposal would reduce the deficit by nearly $2.4 billion over 10 years. Of the $2.6 billion outlay impact, approximately half would be PAYGO savings; the net revenue loss of almost $300 million represents more than $650 million in non-PAYGO costs and $375 million in PAYGO savings. Improve Treasury Debt Collection and Increase Levy Authority.—The 2011 Budget includes two proposals to increase receipts from debt collection activities: • Authorize post-levy due process.—Before the Treasury can issue a levy, it must provide the debtor with an opportunity for a hearing. Exemptions to this requirement exist in cases where the Treasury is offsetting a payment to collect delinquent employment taxes (P.L. 110-28), and when States offset refund payments to collect Federal tax debt. This proposal expands the existing exemptions to include cases where Treasury offsets a payment to collect delinquent income taxes from Federal vendors. As with the current exemption, the debtor will still be provided with an opportunity for a hearing after the levy has been applied. This proposal would result in PAYGO savings of nearly $1.2 billion over 10 years. • Technical correction to the 100 percent levy legislation.—The Internal Revenue Code was amended by the American Jobs Creation Act of 2004 (P.L. 108357), which sought to authorize a 100 percent levy of Federal vendor payments. But an imperfection had the unintended effect of limiting the levy to 15 percent. This proposal would correct the imperfection and, like the first proposal, allow Treasury to collect some of the sizable debt owed by Federal contractors. In 2007, the Government Accountability Office estimated that approximately 60,000 Federal contractors were delinquent on more than $7 billion in Federal taxes. This proposal would result in PAYGO savings of $845 million over 10 years. Social Security Windfall Elimination Provision/ Government Pension Offset Enforcement Provision.—The Budget re-proposes legislation that would improve report- ANALYTICAL PERSPECTIVES ing for non-covered pensions so that the Social Security Administration could enforce the offsets for non-covered employment, Windfall Elimination Provision (WEP), and Government Pension Offset (GPO). The proposal would require State and local governments to provide information on their non-covered pension payments to SSA so that the agency can apply the WEP and GPO adjustments. Under current law, the WEP and GPO adjustments are dependent on self-reported pension data and cannot be independently verified. This proposal would result in savings in the Old-Age, Survivors, and Disability Insurance program of almost $2.9 billion over 10 years, which would be scored as a non-PAYGO deficit impact because the program is off-budget. Executive Order (EO) on Reducing Improper Payments.—Executive Order 13520 on Reducing Improper Payments and Eliminating Waste in Federal Programs intensifies agency efforts to eliminate errors (including waste, fraud, and abuse) in the major programs (i.e., those programs with the highest dollar value or majority of improper payments) administered by the Federal Government. There are three overarching Executive Order requirements: 1. Increase transparency and public participation; 2. Intensify agency accountability and coordination; and 3. Use incentives to improve contractor and state and local efforts in eliminating payment errors. Among other things, the provisions of the Executive Order align with the President’s program integrity initiatives by (1) ensuring that performance measures exist to assess (either annually or more frequently) whether these actions are reducing errors; (2) requiring agencies to submit a remediation plan when reduction targets for those programs with the high dollar value of improper payments are missed two consecutive years; and (3) initiating studies to recommend incentives for reducing error. Expanding Data Matching Authority to Reduce Improper Payments.—Based on Federal agencies’ 2009 improper payment reporting, approximately 35 percent (or $35 billion) of all payment errors were due to the inability to verify applicant information such as earnings, income, assets, or work status. This type of information is frequently available in data sources maintained by Federal agencies and third parties, but access to these sources are often limited due to legal, regulatory, or cost impediments. Under Executive Order 13520, Reducing Improper Payments and Eliminating Waste in Federal Programs, a working group will make recommendations on improving information sharing among agencies and programs to reduce payment errors, while enhancing beneficiaries’ ability to access these Federal programs. The Administration will pursue opportunities to improve information sharing by developing or enhancing policy and guidance and developing legislative proposals to leverage available information in determining benefit eligibility. 13. BUDGET PROCESS Partnership Fund for Program Integrity Innovation.—The 2010 Budget included a new initiative to improve service delivery, payment accuracy, and administrative efficiency, while reducing access barriers and protecting beneficiaries of federal assistance programs administered by States or localities. The Partnership Fund will allow Federal, State, or local agencies to pilot new ideas in service delivery in a controlled environment with a comprehensive evaluation. Once a pilot is selected, funding will be transferred to the applicable Federal agency to administer the pilot. Successful initiatives could be expanded and used to inform further administrative or legislative action. The 2010 Consolidated Appropriations Act (P.L. 111-117) included $37.5 million for the Partnership Fund. Incentivizing Real Property Oversight The Administration is focused on improving the management of real property assets. It therefore supports initiatives to provide Federal agencies with incentives to dispose of unneeded Federal real property. One such incentive would allow all Federal agencies to retain the net proceeds from the sale of excess property. The legislative language to allow this is included in the government-wide general provisions in the Appendix. Under this proposal, Federal agencies could expend those funds for activities related to Federal real property capital improvements and disposal activities. Disaster Relief Fund The Administration requests discretionary budget authority of $1,950 million for FEMA in 2011 to provide Federal assistance in response to Presidentially-declared major disasters and emergencies. The Budget uses the five-year historical obligations for non-catastrophic events (those less than $500 million in estimated obligations) less the average of the five-year estimated recoveries to calculate this level. The rationale for this methodology is that large or catastrophic events are rare and would likely involve a supplemental or emergency appropriation. As a result of this assumption, obligations in response to large or catastrophic events are not included in the level of disaster relief. The Administration seeks to protect the Disaster Relief Fund (DRF) and prevent redirection of these funds for non-disaster purposes by proposing that the full DRF request be allocated to the Appropriations Committees in a separate category, available only for the specified purposes. Specifically, the Administration requests that the Budget Committees include in the 2011 budget resolution a provision that allows for an adjustment to their 302(a) allocations for the full DRF request. The terms of this adjustment would stipulate that the 302(a) allocations would not be increased unless the Appropriations bill provided for full funding for the DRF and the language included a provision preventing transfers. Limit On Discretionary Advance Appropriations An advance appropriation first becomes available for obligation one or more fiscal years beyond the year for 149 which the appropriations act is passed. Budget authority is recorded in the year the funds become available for obligation, not in the year the appropriation is enacted. There are legitimate policy reasons to use advance appropriations to fund programs. For example, funding for the Corporation for Public Broadcasting is customarily appropriated two years in advance. This gives the beneficiaries of this funding time to plan their broadcasting budgets before the broadcast season starts. However, advance appropriations can also be used in situations that lack a programmatic justification, as a gimmick to make room for expanded funding within the funding allocations set under a congressional budget resolution. For example, some education grants are forward funded (available beginning July 1 of the fiscal year) to provide certainty of funding for an entire school year, since school years straddle Federal fiscal years. This funding is recorded in the budget year because the funding is first legally available in that fiscal year. However, more than $21.9 billion of this funding is advance appropriated (available beginning three months later, on October 1) rather than forward funded. Prior Congresses increased advance appropriations and decreased the amounts of forward funding as a gimmick to free up room in the budget year without affecting the total amount available for a coming school year. This gimmick works because the advance appropriation is not recorded in the budget year but rather the following fiscal year. But it works only in the year in which funds are switched from forward funding to advance appropriations; that is, it works only in years in which the amounts of advance appropriations for such “straddle” programs are increased. To curtail this gimmick, which allows over-budget funding in the budget year and exerts pressure for increased funding in future years, congressional budget resolutions since the 2001 Resolution have set limits on the amount of advance appropriations. When the congressional limit equals the amount that had been advance appropriated in the most recent appropriations bill, there is no additional room to switch forward funding to advance appropriations, and so no room for this particular gimmick to operate in that year’s budget. The 2011 Budget includes $28,843 million in advance appropriations for 2012 and freezes them at this level in subsequent years. In this way, the Budget does not employ this potential gimmick. Moreover, the Administration supports limiting advance appropriations to the proposed level through the congressional budget resolution for 2011, similar to the limits included as section 402 and 424 of S. Con. Res. 13, the concurrent resolution on the budget for fiscal year 2010. Those limits applied only to the accounts explicitly specified in the joint explanatory statement of managers accompanying the budget resolution. In order to account for the Administration’s Elementary and Secondary Education Act reauthorization proposal, the 2011 Budget eliminates the $1,681 million advance appropriation that was previously in the School Improvement account (renamed the Education Improvement account) and replaces it with corresponding increases to advance appropriations in the accounts 150 for Education for the Disadvantaged ($840 million, renamed Accelerating Achievement and Ensuring Equity) and Special Education ($841 million). Total advance appropriations in the Department of Education remain unchanged at $21,905 million. In addition, the Administration would allow advance appropriations for the Corporation for Public Broadcasting, which is typically enacted two years in advance, and for Veterans Medical Care, as is now required by the Veterans Health Care Budget Reform and Transparency Act (P.L. 111-81). The advance appropriations funding level for the veterans medical care accounts (comprising Medical Services, Medical Support and Compliance, and Medical Facilities) is largely determined by the Health Care and Enrollment Projection model of the Department of Veterans Affairs. This model covers approximately 80 percent of the total medical care funding requirement. The remaining funding requirement is estimated based on other models and assumptions for services such as long-term care. To aid the General Accountability Office in meeting a requirement contained in P.L. 111-81 to develop a report on the adequacy of the Administration’s advance appropriations request within 120 days of the release of the President’s Budget, the Department of Veterans Affairs has included more detailed information in its Congressional Budget Justifications regarding the methodology used to determine the overall fiscal year 2012 VA medical care funding requirement. For a detailed table of accounts that have received discretionary and mandatory advance appropriations since 2009 or for which the Budget requests advance appropriations for 2012 and beyond, please refer to the Advance Appropriation chapter that can be found at the end of the Budget Appendix. Expedited Process For Considering Rescission Requests The President and Congress can and do use the normal legislative process to consider requests for the rescission or cancellation of funds that were previously appropriated but have, for example, proven to be in excess of amounts actually needed or of lower-than-expected value. However, there would be a benefit to establishing the option of an additional procedure in those cases where the President finds a need for a rapid, up-or-down vote on a package of rescission proposals. Under such a proposal, the President can choose to send a limited number of packages of rescission requests to Congress for fast-track procedure. If he chooses to send a package under this special procedure, then the rescission proposals can only reduce or eliminate funding for budget accounts, programs, projects, or activities; the President could not redirect funds or change their allowable uses. The House would be required to vote on that package as transmitted, without amendment, within a specified number of days. If the package passes the House, the Senate would consider the same package, again without amendment, within a limited time frame. ANALYTICAL PERSPECTIVES CHANGES IN BUDGET DISPLAY The Budget and supporting material include a more insightful display of publicly held debt, the International Monetary Fund, Pell Grants, and surface transportation programs funded by the highway trust fund. It also continues the present-value display of transactions under the Troubled Assets Relief program (TARP). Debt Held by the Public Net of Financial Assets.— In the Summary Tables included in the main Budget volume, Summary Tables S-1 and S-14 display both debt held by the public and debt held by the public net of financial assets. Borrowing from the public is normally a good approximation of the Federal demand on credit markets. However, it provides an incomplete picture of the financial condition of the Government and may misrepresent the net effect of federal activity on credit markets. Some transactions that increase the Federal debt also increase the financial assets held by the Government. For example, when the Government lends money to a private firm or individual, the Government acquires a financial asset that provides a stream of future payments of principal and interest. At the time the loan is made, debt held by the public reflects only Treasury’s borrowing to finance the loan, failing to reflect the value of the loan asset acquired by the Government. In contrast, debt held by the public net of financial assets provides a more accurate measure of the Government’s net financial position by including the value of loans and other financial assets held by the Government. This measure is especially useful during times, like the present, when the Government has borrowed large sums of money to address difficulties faced by the economy and financial markets. As shown in Summary Table S-14, a large share of the Government’s current and recent borrowing has financed the purchase of financial assets, so that the increase in debt held by the public net of financial assets is noticeably smaller than the overall increase in debt held by the public. Likewise, while Federal borrowing reduces the amount of private saving that is available through financial markets for private-sector investment, Federal acquisition of financial assets has the opposite effect—it injects cash into financial markets. Thus, the change in debt net of financial assets can better indicate the effect of the Federal Government on the financial markets. TARP transactions.—The President’s Budget reflects costs for the Troubled Assets Relief Program (TARP) on a net present value basis, with adjustments to the discount rate for market risk, pursuant to the authority in the 2008 Emergency Economic Stabilization Act (EESA). Net present value budgeting for TARP equity purchases captures the lifetime expected net cost of the program up front, rather than reflecting the cash impact in each year. Programmatic and interest costs of a transaction sum to the same total over time whether they are shown on a present value basis or a cash basis; under neither approach do any costs to the Government disappear from the budget. The advantage of net present value scorekeeping in TARP and similar cases where financial assets are acquired is that the net costs to the Government appear at the time the transaction actually occurs. The 151 13. BUDGET PROCESS requirement that the present-value estimate of TARP transactions also adjust for “market risk” means that the program cost will be shown as higher, and net interest expenditures will be shown as correspondingly lower, than if the Government’s cost of borrowing were used to discount future cash flows to the present. Full cash flows to and from the Government are still reported as a means of financing in the Budget and the Monthly Treasury Statement. The Budget would reflect much higher upfront costs and large offsetting receipts in subsequent years—producing a steeper trajectory of falling deficits—if TARP equity purchases had been shown on a cash basis. Such a cash portrayal would therefore have made it appear that the Administration was even more successful at bringing down deficits from year to year. But cash scoring for equity purchases, though perhaps advantageous for cosmetic reasons in this case, would not do as good a job as present value scoring in reflecting the expected costs of these transactions. Chapter 4, “Financial Stabilization Efforts and Their Budgetary Effects,” contains the analysis outlined under EESA, including the cost of TARP activities with cash-based estimates for TARP transactions substituted for those same transactions reflected on a credit basis in the budget. IMF quota subscription and increase in the New Arrangements to Borrow.—The United States participates in the IMF through a quota subscription. Financial transactions with the IMF are exchanges of monetary assets. When the IMF draws dollars from the U.S. quota, the United States simultaneously receives an equal, offsetting, Special Drawing Right (SDR)-denominated claim in the form of an increase in the U.S. reserve position in the IMF. The U.S. reserve position in the IMF increases when the United States transfers dollars to the IMF and decreases when the United States is repaid and the cash flows return to the Treasury. The U.S. reserve position is a liquid and interest-bearing claim on the IMF, which may be exchanged on demand for foreign exchange. These transactions are like bank deposits and withdrawals, where the government exchanges one type of financial asset (cash) for another (bank deposit) of equal face value. The budgetary treatment of appropriations for IMF quotas has changed over time. Prior to 1981, the transactions were not included in the budget because they were viewed as exchanges of cash for a monetary asset (SDRs) of the same value. This was consistent with the scoring of other exchanges of monetary assets, such as deposits of cash in Treasury accounts at commercial banks. As a re- ACQUISITION OF FINANCIAL ASSETS There are a number of circumstances in which the Treasury disburses cash and receives financial assets in return. In some cases, these transactions are recognized as an exchange of financial assets and so are not considered budgetary transactions at all; rather, they are considered non-budgetary financing transactions. Purchasing gold, depositing Treasury operating cash in “tax and loan” accounts, or depositing cash with the Federal Reserve are examples of such transactions. In each case, borrowing from the public is higher than it would be if the transaction did not occur, but the extra borrowing does not represent extra spending or a higher deficit because the financial asset acquired by the Treasury fully offsets the liability of extra debt incurred by the Treasury. Direct loans are a similar example; in those cases, the Treasury disburses cash (makes a direct loan) to a borrower (e.g., a student, farmer, small business, etc.) and receives in return a loan asset or IOU from the borrower. In most cases the risk of default (and perhaps an interest-rate differential) makes the loan asset worth less than the cash disbursed by the Treasury. The difference in value represents the loss, or cost, the Government is expected to incur on such transactions. Put differently, the difference in value represents a subsidy to the borrower. The Government measures the cost or subsidy by discounting to the present the estimated present and future cash flows related to the loan contract, and records the amount of subsidy as an outlay. Present-value scorekeeping is used precisely because it is a method of comparing the value of future cash flows with an equivalent amount of up-front cash. Chapter 11, “Budget Concepts” discusses this subject in more detail and Chapter 22, “Credit and Insurance,” provides more information on credit programs. Two other, similar examples are the Troubled Assets Relief Program (TARP) and the National Railroad Retirement Investment Trust. In each of these cases, the programs can acquire private-sector equities or equivalent financial instruments, and in each case, Congress legislated scorekeeping methods that do not show the purchase prices as an outlay. Budget scorekeeping rules have not, however, fully incorporated the broad principle that the value of an acquired financial asset should be recorded as an offset against the cost of its acquisition. As a result, the cash paid to acquire stock in Fannie Mae and Freddie Mac has been recorded as a pure outlay (and increase in the deficit) with no recognition at the point of purchase that the stock has some positive, offsetting value. Rather, dividends projected to be paid by the two entities will appear as cash inflows and reduce the deficit in later years. Likewise, if and when that stock is later sold to the public, the cash received in return will look like a reduction in the deficit. Over time—and accounting for interest on the cash flows—present value or subsidy scorekeeping produces the same total effect on the deficit as cash scorekeeping. The former may be preferable, however, because it means that the Government records the full expected cost of a transaction up front, when it occurs. The same reasoning suggests that the use of the budget to allocate public resources would benefit from up-front or present-value scorekeeping. For this reason, the Administration plans a comprehensive review of these types of transactions, with the goal of making the scorekeeping more consistent across the Government. Doing so may necessitate imposing controls or limits that may not now exist, so that the purchase of assets will occur only for the policy reasons and in the magnitude that the Government believes is appropriate. 152 sult of an agreement reached with the Congress in 1980, the budget began to record budget authority for the quotas, but did not record outlays because of the continuing view that the transactions were exchanges of monetary assets of equal value. This scoring convention continued to be applied through 2008. The 2010 Budget proposed to change the scoring back to the pre-1981 practice of showing zero budget authority and outlays for proposed increases in the U.S. quota subscriptions to the IMF, and therefore excluded increases in the Government’s quota subscription to the IMF from budget authority totals. Negotiations between the Administration and the Congress resulted in a decision to score the transactions for the proposed 2009 increase as credit transactions under the Federal Credit Reform Act of 1990. The Supplemental Appropriations Act of 2009 (Public Law 111-32, Title XIV, International Monetary Programs) increased the IMF quota and specified that this increase was to be scored on a credit reform basis, but with an adjustment to the discount rate for market risk. Such a decision implicitly treats Treasury transactions with the IMF as involving an exchange of financial assets whose value is not necessarily equal. The 2011 Budget reflects obligations and outlays for the quota increase provided by the 2009 Supplemental Appropriations Act, which has a total face value of approximately $8 billion, consistent with this scoring specification. The Budget shows $142 million for the total estimated subsidy cost associated with this increase, of which $51 million is estimated to be expended through 2020. It also reflects the total estimated subsidy cost of the $100 billion increase in the U.S. participation in the IMF New Arrangements to Borrow—an estimate of $0.3 billion, of which $45 million is estimated to be expended through 2020. The cash transactions between the U.S. Treasury and the IMF are treated as a means of financing, which do not affect the deficit (see the discussion of “Federal Credit” in Chapter 11, “Budget Concepts”). In contrast, for increases to the U.S. quota subscriptions made prior to the 2009 Supplemental Appropriations Act, the 2011 Budget continues to record interest received from the IMF on U.S. deposits as an offsetting receipt in the general fund of the Treasury. Treasury records outlays in the prior year for financial transactions with the IMF to the extent there is an unrealized loss in dollar terms and offsetting receipts to the extent there is an unrealized gain in dollar terms on the value of the interestbearing portion of the U.S. quota actually held at the IMF in SDRs. Changes in the value of the portion of the U.S. quota held at Treasury rather than in the U.S. reserve position held at the IMF are recorded as a change in obligations. Because IMF transactions have characteristics that do not fit well in credit reform constructs, the Administration is working with Congressional staff to explore options for scoring future increases to the U.S. quota subscriptions to the IMF by using an alternative to credit reform treatment, reflecting the estimated present-value cost to the ANALYTICAL PERSPECTIVES Government of Treasury transactions with the IMF using probabilistic estimates. Pell Grants.—The Administration requests that Pell Grants be converted to a mandatory program beginning in 2010 and that the current maximum award of $5,550 be increased by the CPI plus one percentage point in subsequent years. While the Pell Grant program functions much like an entitlement, the program is primarily funded through the annual appropriations process, where significant increases or decreases in demand need to be accounted for. The Budget’s proposed changes will help ensure that the value of Pell Grants grows more in line with the growth in college costs, and will make Pell a true entitlement that students and families can count on to pay for these costs. Table 13-4 helps illustrate the adjustments made to Pell Grant funding across the existing Student Financial Assistance account and the proposed Federal Pell Grants budget account to reflect the Administration’s policy. The Student Financial Assistance account includes the discretionary and mandatory baseline for Pell Grants. The discretionary baseline for the prior year and the current year includes all discretionary appropriations provided in those years, including a $15.6 billion appropriation included in the American Recovery and Reinvestment Act (ARRA) to help pay for Pell Grant program costs in both the 2009-2010 and 2010-2011 award years. The 2011 baseline, in accordance with the baseline rules in the Administration’s PAYGO bill, supports the full cost of maintaining the $4,860 discretionary maximum award plus prior-year shortfalls. Specifically, the 2011 baseline of $35.1 billion reflects a $5.7 billion increase to account for higher than estimated program costs in the 2010-2011 award year and prior award years, and an $11.9 billion increase to pay for estimated program costs in the 20112012 award year. In addition to this change, the baseline reflects the reclassification of the Pell Grant Program from discretionary to mandatory. This reclassification is presented in budget tables, but is not broken out in Table 13–4. Since Pell Grants are forward funded and its BA is available across two fiscal years, the Department of Education is able to carry funding shortfalls and surpluses forward into the next fiscal year. This means any additional 2010 appropriations would reduce the BA necessary in 2011 by a corresponding amount. Specifically, the total BA necessary to pay for Pell Grant program costs in 2010 and 2011 and cover all prior-year shortfalls is $52.6 billion, including $17.5 billion in 2010 and $35.1 billion in 2011. (This level excludes any ARRA funding used in 2010-2011.) If 2010 appropriations were increased by, for instance, $9 billion to $26.4 billion, the 2011 BA necessary to maintain a $4,860 award would decrease by the same amount, to $26.1 billion. The Department of Education would use these appropriations to first cover the $5.7 billion prior-year shortfall and would use the remainder to pay for 2011-2012 program costs. To reflect the Administration’s policy to convert Pell Grant to a mandatory program, the Student Financial Assistance account first zeros out the discretionary base- 153 13. BUDGET PROCESS line amounts in 2010 and 2011. The Federal Pell Grants account then provides the indefinite appropriation necessary in 2010 and 2011 to fully pay for a $4,860 award in both years. Under this policy, the $5.7 billion necessary to pay for prior year funding shortfalls would be made available in 2010 rather than 2011, increasing 2010 BA needed to fund the current discretionary award to $23.2 billion. The 2011 BA necessary would then be reduced by the same amount, to $29.3 billion. These amounts are then increased by the existing mandatory BA provided by the College Cost Reduction and Access Act, and additional mandatory BA necessary to modify Pell eligibility and index Pell awards to CPI plus one percentage point. Summary Tables S-3 through S-7 in the Budget also treat existing Pell Grant funding and expenditures for 2009 as mandatory. Classifying Pell spending consistently in all years in the baseline and the policy estimates makes it easier to understand the budget effect of the policy proposal, and also to interpret the total levels of year-by-year funding for discretionary and for mandatory programs. Highway Trust Fund (HTF).—The authorization for Federal surface transportation programs, which was scheduled to expire on December 31, 2009, has been extended through February 29, 2010. Recognizing that surface transportation programs and the system for paying for them must be fundamentally reformed, the Administration has called for an additional extension until spring 2011, to give Congress and the Administration sufficient time to craft more comprehensive, long-term legislation. To reflect the growing imbalance between projected HTF revenues and baseline spending in the most transparent manner, starting in FY 2012 the Budget shows funding from the HTF at only the level that can be supported by HTF revenues while maintaining positive annual cash balances in the trust fund. The additional funding for HTF programs needed to maintain the program at baseline levels is shown as discretionary budget authority from the General Fund. Specifically, as shown in Table 13-5, for 2012 the Budget includes $6 billion in obligation limitation and $37 billion in discretionary budget authority for the Federal-Aid Highways program. This approach is used for both highway and transit programs over the 10-year budget horizon. Again, this presentation does not represent the ultimate funding levels or budgeting approach that the Administration and Congress necessarily should or will adopt for the long-term reauthorization. Rather, its purpose is to accurately depict the condition of the HTF and recognize that, under current law, main- Table 13–4. PELL GRANT ADJUSTMENTS (Budget authority in millions of dollars) 2009 2010 2011 Pell Grant BA in Student Financial Assistance Account, 91-0200-X-1-502: Discretionary appropriation .................................................................................... Recovery Act, discretionary appropriation .............................................................. Shortfall for prior award years ......................................................................... 2011/2012 increase in program cost ............................................................... Current discretionary award, $4,860 ......................................................... 17,288 15,640 32,928 17,495 17,495 17,495 5,740 11,869 35,104 (Non-add) BA to fund $4,860, 2010 and 2011 combined ....................................... 52,599 Recovery Act, mandatory appropriation ................................................................. Existing mandatory appropriation, CCRAA ............................................................ Current Pell Grant baseline ............................................................................. 643 2,090 35,661 831 3,030 21,356 3,090 38,194 Convert current Pell program to entitlement in Federal Pell Grants......................... Total, Pell Grants, Student Financial Assistance ............................................. --35,661 -21,356 --- -38,194 --- --- 17,495 5,740 23,235 35,104 -5,740 29,364 Pell Grant BA in Federal Pell Grants Account, 91-0208-4-1-502: Current discretionary award, $4,860 ...................................................................... Provide permanent, indefinite appropriation for Pell Grants ................................... Subtotal, Current Discretionary Award, $4,860 ............................................... (Non-add) BA to fund $4,860, 2010 and 2011 combined ....................................... Existing mandatory appropriation, CCRAA and Recovery Act ............................... Increase and index maximum awards .................................................................... Total, Pell Grants, Federal Pell Grants ............................................................. 52,599 --- 3,861 723 27,819 3,090 2,424 34,878 Grand Total, Pell Grants, 2011 Budget ............................................................ 35,661 27,819 34,878 Memorandum—Program Cost in Program Year: Program Cost of $4,860 (non-add) ......................................................................... Total Program Cost (non-add) ................................................................................ 25,437 28,252 28,060 32,321 29,364 34,878 154 ANALYTICAL PERSPECTIVES Table 13–5. HIGHWAY TRUST FUND ESTIMATES 1 (In billions of dollars) 2009 Highways : Obligation Limitation ..................................................................................................... General Fund Budget Authority .................................................................................... Total resources , Highways .................................................................................... 42 ......... 42 2010 42 ......... 42 2011 43 ......... 43 2012 2013 6 37 43 2014 41 3 44 2015 36 9 45 Transit: Obligation Limitation ..................................................................................................... 8 8 9 1 3 5 General Fund Budget Authority .................................................................................... ......... ......... ......... 8 6 4 Total resources , Transit ......................................................................................... 8 8 9 9 9 9 1 Assumes the Highway Trust Fund will be provided additional appropriations from the General Fund during 2010 and 2011. Starting in 2012, both highway and transit obligation limitations are set at levels that ensure trust fund outlays are supported by current law revenues to the trust fund. taining baseline spending will require support from the General Fund. IMPROVED DEFINITION OF BASELINE The Administration also suggests improving a few of the concepts used in formulating baseline projections to make the resulting product more useful to the public and to policymakers. Because the baseline sometimes plays a part in budget enforcement (as when PAYGO legislation is measured relative to a baseline), these suggestions would both improve the display of budget material and improve the budget process. For years the baseline used by Congress has followed the definition contained in section 257 of the Balanced Budget and Emergency Deficit Control Act of 1985 as amended, often referred to as the Budget Enforcement Act (BEA) baseline. However, the BEA baseline does not accurately reflect a continuation of current policy. Both last year and this year, the Administration has built its budget proposals starting from a baseline that adjusts the BEA baseline to better represent current policy, and recommends that Congress, the Congressional Budget Office, and the public use such a baseline in their own analyses as well. The deficit impacts of the adjustments to the BEA baseline are summarized in Summary Table S-7 of the Budget. The adjustments are described below. Further detail about the adjusted baseline is provided in Chapter 26, “Current Services Estimates,” of this document. Fully fund Pell Grant maximum award and shift from discretionary to mandatory.—The baseline used by the Administration makes two adjustments for the Pell Grant program. First, the baseline reflects the amounts necessary to fully fund the maximum award. Second, the baseline reflects the reclassification of projected Pell Grants from discretionary to mandatory. In 2010, the baseline includes mandatory budget authority for Pell Grants equal to the amounts that are necessary to fully fund a maximum Pell Grant award of $5,550. Currently, the costs for the first $4,860 of the Pell Grant award would be classified as discretionary because the FY 2010 appropriation Act for the Department of Education sets and funds the maximum award at this level, while the College Cost Reduction and Access Act (CCRAA) in- 36 9 46 5 4 9 creases the 2010 award to $5,550. The resulting outlays are also classified as mandatory. In 2011 and future years, the baseline includes mandatory budget authority equal to the amount needed to fund the Pell Grant at $4,860, plus an add-on funded by the CCRAA. This is consistent with the treatment of the Federal Pell Grant program in the Administration’s PAYGO legislation. The policy estimates reflect the baseline costs described above plus the expansion in benefits that is proposed by the Administration; the Administration proposes that the maximum award grows in each year after FY 2010 by the CPI plus one percentage point. The amounts for FY 2012 are also shown as mandatory, for comparability. The reclassification simply makes it easier to understand the budgetary impact of the policy of increasing the maximum award and the costs associated with that increase. Adjustments to reflect current policies.—In recent years, Congress has repeatedly extended provisions of law that have a large deficit impact or signaled its intention that a provision be extended when it enacted it for a limited number of years. The Administration’s baseline assumes extension of these policies to represent the policies previously in place: continuing the 2001 and 2003 tax cuts, extending and indexing for inflation the 2009 parameters of the Alternative Minimum Tax, and accounting for additional expected Medicare physician payments. Disaster and Other “Emergency” Costs.—Because the BEA baseline extends all appropriations already enacted for the year in progress, it can be subject to huge swings as a result of funding enacted as an emergency or supplemental requirement. At times, the BEA baseline extends large one-time emergency appropriations out for the next 10 years; at other times it extends very little. The current policy baseline includes adjustments to account for these swings. Specifically, the Administration’s baseline projection of current policies includes an allowance for “disaster costs.” This entry reflects the fact that major natural or man-made disasters are likely to occur at some point during the remainder of 2010 and in subsequent years—major earthquakes, hurricanes, catastrophic floods, infrastructure collapses, and so on. Obviously, both the timing and amounts are unknowable in advance. In addition to the inclusion of this entry in the baseline, 13. BUDGET PROCESS the Administration includes the same allowance in its Budget. The baseline and budget figures are not a “reserve fund,” nor are they a request for discretionary budget authority or congressional legislation of any kind. 1 Instead, they are placeholders that represent at least a down payment on potential future emergency needs. Consequently, the placeholder for major disaster costs is not included in the request for $1,320 billion in discretionary budgetary resources for FY 2011. In addition, the 2011 request includes amounts that can be reasonably budgeted to cover the ongoing and inevitable costs of programs that fund natural disasters. Including a down payment for the costs of potential major disasters makes the budget totals more honest and realistic. Baselines likewise would be more meaningful if they did not project forward whatever disaster costs happen to have occurred in the current year. Rather, 1 If a major disaster occurs, Federal assistance is likely to be granted in the form of discretionary appropriations, automatic and legislated increases in mandatory programs, and in some cases tax relief. The summary tables show the allowance for disaster costs within the outlay totals for convenience. 155 baselines should replace the projection of actual currentyear costs—which might be unusually low or unusually high—with plausible estimates of future costs. That is, baselines should remove any projection of non-recurring or one-time emergency disaster costs, consistent with the inclusion of an allowance for such costs. In the 2010 appropriations bills, Congress did not need to enact any non-recurring, emergency disaster funding, but that is no reason to believe the nation would be as fortunate in future years. Pay raises.—The baseline projection of current policy modifies the BEA baseline growth rates to remove an erroneous overstatement of the cost of the annual pay raise for Federal employees. The BEA baseline rules presume that Federal pay raises take effect on October 1, at the start of each fiscal year, when in fact, the effective date for pay raises is now permanently set by law as the first pay period in January. This causes the BEA baseline to overstate the cost of providing a constant level of services. FEDERAL RECEIPTS 157 158 14. GOVERNMENTAL RECEIPTS After years of tax policies that have disproportionately benefited high-income Americans and corporations, the country has been left with a tax code that is unbalanced and insufficient to meet national needs. The Administration’s agenda represents a change in course, providing tax relief to working American families while asking corporations and high-income families making more than $250,000 to pay more after the economy recovers from the effects of the recent recession. Within a month of taking office, the Administration took action to jumpstart the economy and provide immediate tax relief to 95 percent of working American families. The Department of the Treasury estimates that as of the end of December 2009, tax reductions (including refundable tax credits) provided in the American Recovery and Reinvestment Act (ARRA) total $99 billion. 1 The Budget proposes to continue tax relief to middle class families by, for instance, expanding the tax credit for those with dependent care expenses and increasing educational opportunity. It does this while rebalancing the tax code by allowing the top ordinary income tax rates to return to what they were during most of the 1990s for families making more than $250,000 and eliminating subsidies and loopholes that benefit only narrow and often well-funded interest groups, such as oil companies. Further, the Budget will impose a fee on the largest financial institutions to offset the costs of the Troubled Asset Relief Program (TARP) and ensure that support provided to the financial sector through TARP does not add to the national debt. The Budget will also reform the international tax laws by reducing incentives for U.S.-based multinational corporations to invest abroad rather than in the United States and propose enforcement measures that will cut into the gap between what is owed under the tax law and what is paid. ESTIMATES OF GOVERNMENTAL RECEIPTS Governmental receipts (on-budget and off-budget) are taxes and other collections from the public that result from the exercise of the Federal Government’s sovereign 1 The tax reduction estimates are based on the Department of the Treasury Office of Tax Analysis (OTA) tax simulation model for the effect of the ARRA tax provisions. The OTA will not have comprehensive data on the 2009 tax filings until later in 2010. or governmental powers. The difference between governmental receipts and outlays is the surplus or deficit. The Federal Government also collects income from the public from market-oriented activities. Collections from these activities, which are subtracted from gross outlays, rather than added to taxes and other governmental re- Table 14–1. GOVERNMENTAL RECEIPTS BY SOURCE—SUMMARY (In billions of dollars) 2009 Actual Estimate 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Individual income taxes ..................................... 915.3 935.8 1,121.3 1,326.0 1,468.4 1,603.9 1,733.5 1,856.3 1,980.1 2,101.8 2,222.7 2,338.3 Corporation income taxes .................................. 138.2 156.7 296.9 366.4 393.5 444.8 411.1 449.3 462.6 472.9 485.5 502.1 Social insurance and retirement receipts .......... 890.9 875.8 935.1 1,004.9 1,070.2 1,132.2 1,194.6 1,266.9 1,321.3 1,378.8 1,435.8 1,488.8 (391.7) (404.7) (On-budget) .................................................. (236.9) (240.6) (261.0) (284.4) (304.5) (323.2) (338.7) (355.5) (366.9) (379.3) (Off-budget) .................................................. (654.0) (635.2) (674.1) (720.5) (765.7) (809.0) (855.9) (911.4) (954.4) (999.6) (1,044.1) (1,084.1) Excise taxes ...................................................... 62.5 73.2 74.3 81.1 85.0 86.5 87.8 89.1 90.0 90.5 91.0 91.8 Estate and gift taxes .......................................... 23.5 17.0 25.0 22.5 23.6 25.6 27.6 29.8 32.1 34.6 37.2 39.9 Customs duties .................................................. 22.5 23.8 27.4 31.8 34.8 36.9 39.3 41.8 44.1 46.5 49.3 52.0 Miscellaneous receipts ...................................... 52.1 94.8 96.1 84.2 76.7 70.1 65.7 68.0 70.7 73.2 75.6 77.8 Health insurance reform .................................... ......... ......... 16.0 17.5 39.0 57.5 74.0 86.0 93.0 101.0 109.5 119.0 Jobs initiatives ................................................... ......... -12.0 -25.0 -8.0 -3.0 -2.0 ......... ......... ......... ......... ......... ......... 2,105.0 2,165.1 2,567.2 2,926.4 3,188.1 3,455.5 3,633.7 3,887.2 4,094.0 4,299.3 4,506.5 4,709.8 Total receipts .............................................. (On-budget) .......................................... (1,451.0) (1,529.9) (1,893.1) (2,205.9) (2,422.4) (2,646.4) (2,777.7) (2,975.8) (3,139.6) (3,299.7) (3,462.4) (3,625.7) (Off-budget) .......................................... (654.0) (635.2) (674.1) (720.5) (765.7) (809.0) (855.9) (911.4) (954.4) Total receipts as a percentage of GDP ......... 14.8 14.8 16.8 18.1 18.6 19.0 18.9 19.3 19.4 (999.6) (1,044.1) (1,084.1) 19.5 19.5 19.6 159 160 ANALYTICAL PERSPECTIVES ceipts, are discussed in Chapter 15, “Offsetting Collections and Offsetting Receipts,” in this volume. Total governmental receipts (hereafter referred to as “receipts”) are estimated to be $2,165.1 billion in 2010, an increase of $60.1 billion or 2.9 percent from 2009. The estimated increase in 2010 is partly attributable to the growth in personal income and corporate profits as the economy begins to recover from the recession. These sources of income affect payroll taxes and individual and corporation income taxes, the three largest sources of receipts. Increases in deposits of earnings by the Federal Reserve System, which are classified as miscellaneous receipts, also contribute to the growth in 2010 receipts relative to 2009. Overall, receipts in 2010 are estimated to be 14.8 percent of Gross Domestic Product (GDP), the same as in 2009 (the lowest share since 1950, when receipts were 14.4 percent of GDP). As the economy continues to recover from the recession, receipts are estimated to rise to $2,567.2 billion in 2011, an increase of $402.1 billion or 18.6 percent relative to 2010. Receipts are projected to grow at an average annual rate of 9.1 percent between 2011 and 2015, rising to $3,633.7 billion. Receipts are projected to rise to $4,709.8 billion in 2020, growing at an average annual rate of 5.3 percent between 2015 and 2020. This growth is largely due to assumed increases in incomes resulting from both real economic growth and inflation. The Administration’s proposals to restore balance to the tax code, to close loopholes, and to eliminate subsidies to special interests contribute to the growth in receipts, beginning in 2011. As a share of GDP, receipts are projected to increase from 14.8 percent in 2010 to 16.8 percent in 2011, and to rise to 19.6 percent in 2020. However, as a share of GDP, receipts would still be lower than in 2000, when the receipts share of GDP reached 20.6 percent. LEGISLATION ENACTED IN 2009 THAT AFFECTS GOVERNMENTAL RECEIPTS In one of his first official acts, President Obama signed into law the reauthorization of the Children’s Health Insurance Program (CHIP) on February 4, 2009. This Act provided the support, options and incentives for States to provide coverage for an additional four million children on average in CHIP and Medicaid who were previously uninsured. Shortly thereafter, on February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009, an ambitious effort to stimulate the economy. The provisions of this Act have provided a direct fiscal boost to help lift the Nation from the most significant economic crisis since the Great Depression and have laid the foundation for further economic growth. The Worker, Homeownership, and Business Assistance Act of 2009, which was signed into law by President Obama on November 6, 2009, built on the successes of ARRA by helping to spur job creation and providing much needed support for workers who are struggling to find jobs. Other legislation signed by President Obama since taking office in January 2009 extended the authority to collect taxes that fund the Airport and Airway Trust Fund, extended the ban on imports from Burma, and extended several tax provisions that were scheduled to expire on December 31, 2009. The major provisions of these Acts that affect receipts are described below. 2 CHILDREN’S HEALTH INSURANCE PROGRAM REAUTHORIZATION ACT OF 2009 Increase excise tax rates on tobacco products and make administrative improvements.—Tobacco products (cigars, cigarettes, cigarette papers and tubes, snuff, chewing tobacco, pipe tobacco and roll-your-own tobacco) 2 In the discussions of enacted legislation, years referred to are calendar years, unless otherwise noted. manufactured in the United States or imported into the United States are subject to Federal excise taxes. This Act increased the Federal excise tax on cigarettes, which was 39 cents per pack under prior law, to $1.01 per pack; excise taxes on other tobacco products were increased in a generally proportionate manner. The definition of “rollyour-own tobacco” was expanded to include any tobacco used for making cigars, or for use as wrappers for making cigars. In addition, a tax was imposed on floor stocks of tobacco products (other than certain cigars and cigarette papers and tubes), reduced by a $500 tax credit. These changes in tobacco excise taxes were effective for articles removed from the factory or released from customs custody after March 31, 2009. Strengthen regulatory and enforcement authority.—This Act also strengthened regulatory and enforcement authority over the production and importation of tobacco by: (1) subjecting manufacturers and importers of “processed tobacco” to current law permit, inventory, reporting, and recordkeeping requirements; (2) broadening the authority of the Department of the Treasury to deny, suspend, and revoke tobacco permits for holders that fail to comply with the tax code and related regulations; (3) clarifying that the three-year statute of limitations for assessment of taxes applies to taxes on imported alcohol, tobacco products, and cigarette papers and tubes; (4) imposing a tax on the unlawful manufacture of tobacco products and cigarette papers and tubes; and (5) making certain tax return information related to civil actions against tobacco companies available to the Department of Justice. These changes generally were effective on February 4, 2009. Modify the timing of estimated tax payments by corporations.—Corporations generally are required to pay their income tax liability in quarterly estimated payments. For corporations that keep their accounts on a 14. FEDERAL RECEIPTS calendar year basis, these payments are due on or before April 15, June 15, September 15 and December 15. If these dates fall on a holiday or weekend, payment is due on the next business day. This Act increased the estimated tax payments due in July through September of 2013 by corporations with assets of at least $1 billion from 120 percent of the amount otherwise due to 120.5 percent of the amount otherwise due. For corporations affected by this provision, the next required estimated tax payment is reduced accordingly. AMERICAN RECOVERY AND REINVESTMENT ACT OF 2009 Tax Relief for Individuals and Families Increase and extend the alternative minimum tax (AMT) exemption amounts.—A temporary provision of prior law increased the AMT exemption amounts to $46,200 for single taxpayers, $69,950 for married taxpayers filing a joint return and surviving spouses, and $34,975 for married taxpayers filing a separate return and for estates and trusts. These temporary increases were effective for taxable years beginning after December 31, 2007, and before January 1, 2009. This Act increased the AMT exemption amounts, effective for taxable years beginning after December 31, 2008, and before January 1, 2010, to $46,700 for single taxpayers, $70,950 for married taxpayers filing a joint return and surviving spouses, and $35,475 for married taxpayers filing a separate return and for estates and trusts. Extend AMT relief for nonrefundable personal credits.—Under a temporary provision of prior law, taxpayers were permitted to offset both the regular tax and the AMT with nonrefundable personal tax credits, effective for taxable years beginning before January 1, 2009. This Act extended minimum tax relief for nonrefundable personal tax credits for one year, to apply to taxable years beginning before January 1, 2010. The extension does not apply to the child credit, the saver’s credit, the earned income tax credit (EITC), or the adoption credit, which were provided AMT relief through December 31, 2010, under the 2001 tax cut. The refundable portion of the child credit and the earned income tax credit are also allowed against the AMT through December 31, 2010. In addition, the extension does not apply to the residential energy efficient property credit or the new qualified plugin electric drive motor vehicle credit, both of which are allowed against the AMT under prior law. Provide making work pay tax credit.—A refundable tax credit equal to 6.2 percent of earned income, up to a maximum of $400 for working single taxpayers and $800 for working married taxpayers filing a joint return, was provided under this Act for taxable years 2009 and 2010. The credit is phased out at a rate of 2 percent for taxpayers with modified adjusted gross income (AGI) in excess of $75,000 ($150,000 for married taxpayers filing 161 a joint return). Payments are made to each possession of the United States with a mirror tax system (U.S. Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands) in an amount equal to the loss in receipts to that possession attributable to the credit provided in this Act. Payments are made to each possession that does not have a mirror tax system (Puerto Rico and American Samoa) in an amount estimated by the Department of the Treasury as being equal to the aggregate credits that would have been allowed to residents of that possession if a mirror tax system had been in effect. Increase the EITC.—The EITC generally equals a specified percentage of earned income, up to a maximum dollar amount, that is reduced by the product of a specified phase-out rate and the amount of earned income or AGI, if greater, in excess of a specified income threshold. Three separate credit schedules apply, depending on whether the eligible taxpayer has no, one, or more than one qualifying child. Under prior law, for taxable year 2009, taxpayers with more than one qualifying child were provided a credit of 40 percent on up to $12,570 in earnings, for a maximum credit of $5,028. The credit was reduced at the rate of 21.06 percent of earnings in excess of $16,420 for single taxpayers ($19,540 for married taxpayers filing a joint return). Effective for taxable years 2009 and 2010, this Act increased the credit percentage for families with three or more qualifying children to 45 percent, thereby creating a fourth credit schedule with a maximum credit of $5,657. This Act also provided marriage penalty relief to married couples filing a joint return (regardless of the number of qualifying children) by increasing the income thresholds for the phaseout of the EITC to $5,000 above the income thresholds for the phaseout for other taxpayers for 2009, and indexed this amount for 2010. Increase refundable portion of the child tax credit.—Taxpayers are allowed a nonrefundable tax credit of up to $1,000 for each qualifying child under the age of 17. The credit is reduced by $50 for each $1,000 (or fraction thereof) of modified AGI over $75,000 for single taxpayers ($110,000 for married taxpayers filing a joint return). If the credit exceeds the taxpayer’s individual income tax liability, the taxpayer is eligible for a refundable credit (the additional child credit) equal to the lesser of: (1) 15 percent of earned income in excess of a threshold dollar amount ($12,550 for 2009), indexed annually for inflation; or (2) any child credit unclaimed due to insufficient tax liability. Taxpayers with three or more qualifying children may determine the additional child credit using an alternative formula if this results in a larger credit. Under this Act, effective for taxable years 2009 and 2010, the refundable tax credit was increased by reducing the threshold dollar amount to $3,000. Provide American opportunity tax credit.— Taxpayers are allowed a nonrefundable tax credit of up to $1,800 (for 2009) per eligible student per year for qualified tuition and related expenses paid for the first two years of the student’s post-secondary education in a degree or 162 certificate program. Students must attend at least half time to be eligible for the credit. This credit, called the Hope Scholarship Credit, is equal to 100 percent of the first $1,200 in qualified tuition and related expenses and 50 percent of the next $1,200 of qualified tuition and related expenses for 2009; these amounts are indexed annually for inflation and rounded down to the next lowest multiple of $100. The credit is phased out ratably for single taxpayers with modified AGI between $50,000 and $60,000 ($100,000 and $120,000 for married taxpayers filing a joint return) for 2009. The income thresholds for these phase-out ranges are indexed annually for inflation, with the amount rounded down to the next lowest multiple of $1,000. ARRA created the American opportunity tax credit to replace the Hope Scholarship Credit for taxable years 2009 and 2010. The new tax credit is partially refundable, has a higher maximum credit amount, is available for the first four years of postsecondary education, and has higher phase-out limits. The American opportunity tax credit provides taxpayers a credit of up to $2,500 per eligible student per year for qualified tuition and related expenses (expanded to include course materials) paid for each of the first four years of the student’s post-secondary education in a degree or certificate program. The credit is equal to 100 percent of the first $2,000 in qualified tuition and related expenses, and 25 percent of the next $2,000 of qualified tuition and related expenses. In addition, generally 40 percent of the otherwise allowable credit is refundable. The credit is phased out ratably for single taxpayers with modified AGI between $80,000 and $90,000 ($160,000 and $180,000 for married taxpayers filing a joint return). Extend and modify the refundable tax credit for first-time homebuyers.—A temporary provision of prior law provided a refundable tax credit to first-time homebuyers who purchased a home after April 8, 2008, and before July 1, 2009, without regard to whether or not there was a binding contract to purchase prior to April 9, 2008. A first-time homebuyer is an individual who had no ownership interest in a principal residence in the United States during the three-year period prior to the purchase of the home to which the credit applies. The credit, which is equal to 10 percent of the purchase price of the home, up to a maximum credit of $7,500, is phased out for taxpayers with modified AGI between $75,000 and $95,000 ($150,000 and $170,000 for married taxpayers filing a joint return). Taxpayers receiving the credit must repay the amount received in equal installments over a 15-year period beginning two years after the purchase of the home. This Act extended the credit to apply to qualifying home purchases before December 1, 2009, waived the recapture of the credit for qualifying home purchases after December 31, 2008, and before December 1, 2009, and increased the maximum credit to $8,000.3 3 The Worker, Homeownership and Business Assistance Act of 2009 extended the deadline to May 1, 2010, for a binding contract and made some other modifications. ANALYTICAL PERSPECTIVES Exclude a portion of unemployment compensation from taxation.—Unemployment compensation received under the laws of the United States or a State is subject to individual income tax under current law. Under this Act, for taxable year 2009, a taxpayer may exclude up to $2,400 of such compensation from gross income for Federal individual income tax purposes. Provide an additional deduction for taxes on the purchase of certain motor vehicles.—Taxpayers who itemize deductions are allowed to elect to deduct State and local general sales taxes in lieu of State and local income taxes. If a taxpayer itemizes deductions and elects to deduct State and local general sales taxes, the taxpayer may substantiate the sales taxes paid with receipts or may deduct an amount determined from Internal Revenue Service (IRS) tables plus the amount of general State and local sales taxes paid on the purchase of a motor vehicle, boat or certain other items. Taxpayers who claim the standard deduction or who itemize deductions and deduct State and local income taxes are not allowed to deduct State and local taxes paid on the purchase of a motor vehicle. Under this Act, taxpayers who claim the standard deduction or itemize deductions, but elect to deduct State and local income taxes, instead of general sales taxes, are also allowed to deduct State and local sales or excise taxes paid or accrued on the purchase of a qualified motor vehicle after February 16, 2009, and before January 1, 2010. A qualified motor vehicle is a passenger automobile, light truck or motorcycle that has a gross vehicle weight rating of not more than 8,500 pounds, or a motor home acquired for use by the taxpayer, the original use of which commences with the taxpayer. The deduction is limited to the tax on up to $49,500 of the purchase price and is phased out for single taxpayers with modified AGI over $125,000 ($250,000 for married taxpayers filing a joint return). Provide assistance for COBRA continuation coverage.—Certain group health plans are required to offer qualified beneficiaries the opportunity to continue to participate in the group health plan for a specified period of time after the occurrence of certain events that otherwise would have terminated such participation. Qualified beneficiaries may be required to pay a premium for continuation coverage. The continuation coverage rules, which were enacted in the Consolidated Omnibus Budget Reconciliation Act of 1985, are often referred to as “COBRA.” Under ARRA, qualified beneficiaries electing COBRA continuation coverage as a result of an involuntary termination occurring on or after September 1, 2008, and before January 1, 2010, are provided a premium subsidy for up to nine months of COBRA continuation coverage. 4 The subsidy is 65 percent of the premium for a period of coverage; the qualified beneficiary electing COBRA continuation coverage is responsible for the remaining 35 percent. Single taxpayers with modified AGI in excess 4 The Department of Defense Appropriations Act, FY 2010, extended premium assistance coverage to qualified individuals who are involuntarily terminated between January 1, 2010, and February 28, 2010, and extended the duration of the subsidy from nine months to fifteen months. 14. FEDERAL RECEIPTS of $145,000 ($290,000 for married taxpayers filing a joint return) do not qualify for the subsidy. A special sixtyday election period is provided to individuals who did not have a COBRA election in effect as of February 17, 2009, but would otherwise be eligible for the premium subsidy. The entity to which premiums are payable is reimbursed by the amount of the premium for COBRA continuation coverage that is not paid on account of the premium subsidy. These entities treat the reimbursement as a credit against the employee income tax withholding and the employee and employer social security tax liability otherwise deposited in the Treasury. To the extent that the amount of the reimbursement exceeds the amount of the entity’s liability for these taxes, the entity is reimbursed directly by the Treasury. Transfers of social security tax liability to the social security trust funds are not affected by the credits. Tax Incentives for Business Extend temporary bonus depreciation for certain property.—Taxpayers are allowed to recover the cost of certain property used in a trade or business or for the production of income through annual depreciation deductions. The amount of the allowable depreciation deduction for a taxable year is generally determined under the modified accelerated cost recovery system (MACRS), which assigns applicable recovery periods and depreciation methods to different types of property. Under temporary provisions of prior laws, an additional first-year depreciation deduction equal to 50 percent of the adjusted basis of the property was provided for qualifying property acquired and placed in service after December 31, 2007, and before January 1, 2009. Qualifying property included tangible property that had a recovery period not exceeding 20 years, purchased computer software, water utility property and qualified leasehold improvement property. A one-year extension of the placed-in-service date, through calendar year 2009, was provided for certain longer-lived property and certain transportation property. Corporations otherwise eligible for additional first-year depreciation were allowed to elect to claim additional research or AMT tax credits in lieu of the additional first-year depreciation deduction for qualified property placed in service after March 31, 2008, and before January 1, 2009. This Act extended the additional first-year depreciation deduction for one year, to apply to qualifying property acquired after calendar year 2007 and before calendar year 2010, and placed in service in calendar year 2009 (through 2010 for certain longer-lived and transportation property). The election to claim additional research or AMT tax credits in lieu of the additional firstyear depreciation was also extended for one year. Extend temporary increase in expensing for small business.—Under a temporary provision expiring in 2011, business taxpayers were allowed to expense up to $125,000 in annual investment expenditures for qualifying property (including off-the-shelf computer software) placed in service in taxable years beginning in 2007. The maximum amount that could be expensed was reduced 163 by the amount by which the taxpayer’s cost of qualifying property exceeded $500,000. Both the deduction and annual investment limits were indexed annually for inflation, effective for taxable years beginning after 2007 and before 2011. Another temporary provision of prior law increased the expensing and annual investment limits to $250,000 and $800,000, respectively, effective for taxable years beginning in 2008. This Act extended the $250,000 deduction and $800,000 annual investment limits for one year, through taxable years beginning in 2009. Allow five-year carryback of net operating losses (NOLs).—In general, an NOL may be carried back two years and carried forward twenty years to offset taxable income in such years. However, different rules apply with respect to NOLs arising in certain circumstances. This Act provided eligible small businesses (businesses meeting a $15 million gross receipts test) the election to increase the carryback period for applicable NOLs from two years to any whole number of years elected by the taxpayer that is more than two and less than six. An applicable NOL is the taxpayer’s NOL for any taxable year ending in 2008, or, if elected by the taxpayer, the NOL for any taxable year beginning in 2008. However, any election may be made only with respect to one taxable year. Clarify and modify regulations related to limitations on certain built-in losses following an ownership change.—The extent to which a “loss corporation” may offset taxable income in taxable years after an “ownership change” by net operating losses, certain built-in losses, and deductions attributable to taxable years prior to the ownership change is limited under current law. This Act repealed prospectively a notice issued by the Department of the Treasury in 2008 that liberalized these rules with respect to an ownership change by a bank. This Act also provided an exception from the application of the limitation in the case of an ownership change that occurs after February 17, 2009, pursuant to a restructuring plan required under a loan agreement or commitment for a line of credit entered into with the Department of the Treasury under the Emergency Economic Stabilization Act of 2008. Allow deferral of certain income from the discharge of indebtedness.—Gross income generally includes income realized by a debtor from the discharge of indebtedness, subject to certain exceptions. In cases involving discharges of indebtedness that are excluded from gross income under the exceptions to the general rule, taxpayers generally are required to reduce certain tax attributes by the amount of the discharge of indebtedness. The amount of discharge of indebtedness generally equals the excess of the adjusted issue price of the indebtedness being satisfied over the amount paid (or deemed paid) to satisfy such indebtedness. This rule generally applies to: (1) the acquisition by the debtor of its debt instrument in exchange for cash; (2) the issuance of a debt instrument by the debtor in satisfaction of its indebtedness, including a modification of indebtedness that is treated as an 164 exchange (a debt-for-debt exchange); (3) the transfer by a debtor corporation of stock, or a debtor partnership of a capital or profits interest in such partnership, in satisfaction of its indebtedness (an equity-for-debt exchange); and (4) the acquisition by a debtor corporation of its indebtedness from a shareholder as a contribution to capital. This Act allowed a taxpayer to elect to defer the recognition of income from the cancellation of indebtedness associated with the “reacquisition” of “an applicable debt instrument” after December 31, 2008, and before January 1, 2011. Income deferred pursuant to the election must be included in the gross income of the taxpayer ratably in the five taxable years beginning with: (1) the fifth taxable year following the taxable year in which the repurchase occurs, for repurchases in 2009; and (2) the fourth taxable year following the taxable year in which the repurchase occurs, for repurchases in 2010. Additionally, the debtor’s original issue discount deductions are delayed to prevent a mismatch in timing between income recognition and deductions. Suspend applicable high-yield debt obligation rules.—The applicable high-yield debt obligation (AHYDO) rules defer or deny interest deductions on certain debt instruments. This Act generally suspended the application of the AHYDO rules for any debt instrument issued during the period beginning on September 1, 2008, and ending on December 31, 2009, in exchange (including an exchange resulting from a modification of the debt instrument) for an obligation that is not an AHYDO. This Act also provided the Department of the Treasury with the authority to extend the suspension or provide other types of relief from the AHYDO rules. Reduce capital gains taxation on small businesses.—Current law provides a 50-percent exclusion (60-percent exclusion for certain empowerment zones) from tax for capital gains realized on the sale of certain small business stock held for more than five years. The amount of gain eligible for the exclusion is limited to the greater of $10 million or ten times the taxpayer’s basis in the stock. The exclusion is limited to investments of individuals and not the investments of a corporation. This Act increased the exclusion to 75 percent, effective for stock issued after February 17, 2009, and before January 1, 2011. Modify other provisions regarding the taxation of businesses.—Other provisions in this Act affecting businesses: (1) modified the amount of estimated tax payments by small businesses for any taxable year beginning in 2009; (2) temporarily expanded the targeted groups eligible for the work opportunity tax credit to include unemployed veterans and disconnected youth who begin work in taxable years 2009 and 2010; (3) provided a temporary exemption from tax on built-in gains of S corporations recognized during taxable years 2009 and 2010 if the seventh taxable year of the recognition period preceded such taxable year; and (4) temporarily liberalized the eligibility requirements for tax-exempt small issue ANALYTICAL PERSPECTIVES bonds for manufacturing facilities issued after February 17, 2009, and before January 1, 2011, to include certain high-technology facilities and certain functionally related and subordinate facilities. Relief for State and Local Governments Modify tax-exempt interest expense allocation rules for financial institutions.—Under current law, a deduction generally is not allowed for interest expenses incurred by a financial institution to purchase obligations the interest on which is exempt from tax. The amount of interest disallowed is an amount that bears the same ratio to such interest expense as the taxpayer’s average adjusted bases of tax-exempt obligations acquired after August 7, 1986, bears to the average adjusted bases for all assets of the taxpayer. This rule does not apply to “qualified taxexempt obligations;” instead, as is described below, only 20 percent of the interest expense allocable to “qualified tax-exempt obligations” is disallowed. A “qualified taxexempt obligation” is a tax-exempt obligation that: (1) is issued after August 7, 1986, by a qualified small issuer (one that reasonably anticipates that the amount of taxexempt obligations that it will issue during the year will be $10 million or less); (2) is not a private activity bond; and (3) is designated by the issuer as qualifying for the exception from the general rule. The amount allowable as a deduction with respect to any financial institution preference item is reduced by 20 percent. Financial institution preference items include interest on debt to carry tax-exempt obligations acquired after December 31, 1982, and before August 8, 1986; because qualified tax-exempt obligations are treated as if they were acquired on August 7, 1986, under current law, the amount allowable as a deduction by a financial institution with respect to interest incurred to carry a qualified tax-exempt obligation is reduced by 20 percent. Effective for tax-exempt obligations issued after December 31, 2008, and before January 1, 2011, and held by a financial institution, this Act provided that: (1) such obligations held in an amount not to exceed 2 percent of the adjusted basis of the financial institution’s assets would not be taken into account for purposes of determining the portion of the financial institution’s interest expenses subject to the pro rata interest disallowance rule; (2) such obligations would be treated as preference items, thereby reducing the amount allowable as a deduction with respect to interest incurred to carry such obligations by 20 percent; and (3) the annual limit for qualified small issuers would be increased from $10 million to $30 million. Authorize the issuance of qualified school construction bonds.—This Act created a new category of taxable tax credit bonds, called qualified school construction bonds, which provide a Federal subsidy through tax credits to investors in an amount equal to 100 percent of the interest on eligible bonds. All of the proceeds from the issuance of such bonds must be used for the construction, rehabilitation, or repair of a public school facility or 165 14. FEDERAL RECEIPTS for the acquisition of land on which such a bond-financed facility is to be constructed. Up to $11 billion in qualified school construction bonds may be issued in each year, 2009 and 2010. Extend and expand the issuance of qualified zone academy bonds.—Under prior law, State and local governments were allowed to issue taxable tax credit bonds, called qualified zone academy bonds, which provided a Federal subsidy through tax credits to investors in an amount equal to 100 percent of the interest on the bonds. This authorization was for $400 million in each calendar year, 1998 through 2009. At least 95 percent of the proceeds of such bonds were required to be used for teacher and other personnel training, purchases of equipment, curriculum development, or renovations and repairs at a qualified zone academy. This Act provided that an additional $1.4 billion in qualified zone academy bonds could be issued in each of calendar year 2009 and 2010. Authorize the issuance of build America bonds.— This Act allowed State and local governments to issue two types of taxable tax credit bonds in 2009 and 2010, called build America bonds, with Federal subsidies for a portion of the borrowing costs. One type of build America bond provides a Federal tax credit to investors equal to 35 percent of the interest payable by the issuer of the bond (net of the tax credit), which represents a Federal subsidy of approximately 25 percent of the total borrowing cost. This type of build America bond may be issued for any purpose for which governmental tax-exempt bonds (excluding private activity bonds) can be issued under current law. The credit, which is included in gross income, is allowed against the regular tax and the AMT. Unused credits may be carried forward to succeeding taxable years. A second type of build America bond provides a refundable credit or direct payment from the Department of the Treasury to eligible State or local government issuers equal to 35 percent of the total interest payable to investors on eligible taxable bonds. This second type of build America bond may be used to finance only capital expenditures. Authorize the issuance of recovery zone economic development bonds and recovery zone facility bonds.—This Act allowed State and local governments to issue recovery zone economic development bonds and recovery zone facility bonds, which are two new types of taxpreferred bonds. Recovery zone economic development bonds are a modified type of taxable build America bond that are eligible for a deeper Federal subsidy in the form of a refundable credit or direct payment to State and local government issuers in an amount equal to 45 percent of the interest payable on the bond. Recovery zone facility bonds are a modified type of tax-exempt private activity bond. Nationwide, up to $10 billion of recovery zone economic development bonds and up to $15 billion of recovery zone facility bonds may be issued in 2009 and 2010. This total authorization is allocated among States and localities based on relative declines in employment. The proceeds of recovery zone economic development bonds must be used for purposes of promoting development or other economic activity in a recovery zone, including capital expenditures paid or incurred with respect to property located in such zones and expenditures for public infrastructure and construction of public facilities located in such zones. At least 95 percent of the proceeds of recovery zone facility bonds must be used for specific types of recovery zone property. Areas designated by the issuer as recovery zones must have significant poverty, unemployment, general distress, or home foreclosures; be any area for which a designation as an empowerment zone or renewal community is in effect; or be economically distressed by reason of the closure or realignment of a military installation pursuant to the Defense Base Closure and Realignment Act of 1990. Modify the new markets tax credit.—The new markets tax credit is provided for qualified equity investments made to acquire stock in a corporation or a capital interest in a partnership that is a qualified community development entity. A credit of 5 percent is provided to the investor for the first three years of investment. The credit increases to 6 percent for the next four years. Under prior law, the maximum amount of annual qualifying equity investment is capped at $2.0 billion for calendar years 2004 and 2005, and $3.5 billion for calendar years 2006 through 2009. This Act increased the cap on annual qualifying investment to $5 billion for 2008 and 2009. Provide other relief for State and local governments.—This Act also: (1) provided that tax-exempt interest on certain private activity bonds issued in 2009 and 2010 is not an item of tax preference for purposes of the AMT; (2) modified the speed requirement for high-speed intercity rail facility bonds; (3) allowed Indian tribal governments to issue $2 billion in tribal economic development bonds; (4) provided procedures for the pass-through of credits on tax credit bonds held by regulated investment companies; and (5) delayed for one year the withholding of tax on certain payments to government contractors. Energy Incentives Extend the tax credit for energy produced from certain renewable sources.—Taxpayers are allowed a tax credit for electricity produced from wind, closed-loop biomass, open-loop biomass, geothermal energy, solar energy, small irrigation power, municipal solid waste, qualified hydropower, and marine and hydrokinetic renewable energy at qualified facilities (the renewable electricity production credit). The credit rate is 1.5 cents per kilowatt hour for electricity produced from wind, closed-loop biomass, geothermal, and solar power, and 0.75 cents per kilowatt hour for electricity produced from open-loop biomass, small irrigation power, municipal solid waste, qualified hydropower, and marine and hydrokinetic renewable energy (both rates are adjusted for inflation since 1992). To qualify for the credit, electricity generally must be produced at qualified facilities placed in service by a specific date and must be sold by the taxpayer to an unrelated per- 166 son. This Act extended the placed-in-service date for: (1) qualified facilities producing electricity from closed-loop biomass, open-loop biomass, geothermal energy, municipal solid waste, and qualified hydropower for three years through December 31, 2013; (2) qualified wind facilities for three years through December 31, 2012; and (3) qualified marine and hydrokinetic renewable energy facilities for two years through December 31, 2013. Modify business energy credit.—A nonrefundable tax credit is allowed for certain qualifying energy property placed in service by a taxpayer (the energy credit). Qualifying energy property includes solar energy property, fuel cell power plants, microturbines, geothermal power production property, geothermal heat pump property, small wind energy property and combined heat and power system property. Depending on the type of property placed in service, the credit rate may be 10 or 30 percent of the property’s basis, and the credit may be limited by an annual cap. This Act repealed a prior law rule that reduced the basis of property for purposes of the credit computation when the property was financed by subsidized energy financing or with proceeds from private activity bonds. This Act also eliminated the prior law rule limiting the credit with respect to small wind energy property to $4,000 per year. This Act also allowed taxpayers to elect to treat certain qualified facilities as qualifying energy property eligible for a credit equal to 30 percent of the property’s basis. The facilities eligible for this treatment are facilities that would otherwise qualify for the tax credit for electricity produced from wind, closed-loop biomass, open-loop biomass, geothermal energy, small irrigation power, municipal solid waste, qualified hydropower, and marine and hydrokinetic renewable energy. A taxpayer making the election with respect to a facility may not claim the renewable electricity production credit for electricity produced at the facility. This Act also allowed taxpayers to elect to receive a grant from the Department of the Treasury in lieu of the energy credit or the renewable electricity production credit for these facilities and for other qualifying energy property. The election and grants are available for renewable power facilities placed in service in 2009 and 2010 and are also available if construction began during 2009 and 2010 for wind facilities placed in service before 2013 and other renewable power facilities placed in service before 2014. Grants are available for qualifying energy property other than renewable power facilities if the property is placed in service during 2009 or 2010, or if construction began during 2009 or 2010 and the property is placed in service before 2017. Extend and modify the credit for nonbusiness energy property.—Under prior law, a nonrefundable 10-percent credit was provided for the purchase of qualified energy efficiency improvements (insulation, exterior windows and doors, roofs) to existing homes located in the United States and owned and used by the taxpayer as the taxpayer’s principal residence. Specified credits also were provided: (1) $50 for each qualified advanced ANALYTICAL PERSPECTIVES main air circulating fan; (2) $150 for each qualified natural gas, propane, or oil furnace or hot water boiler; and (3) $300 for each item of qualified energy efficient property (any of the following meeting specified standards: an electric heat pump; an electric heat pump water heater; a central air conditioner; a natural gas, propane, or oil water heater; and biomass fuel property). These credits, which applied to expenditures after December 31, 2008, for property placed in service after December 31, 2008, and before January 1, 2010, were subject to an aggregate lifetime cap of $500 for each taxpayer with respect to a specific dwelling; no more than $200 of the credits could be attributable to expenditures on windows. This Act: (1) increased the credit rate to 30 percent and expanded it to apply to the energy property otherwise eligible for the $50, $150 and $300 credits of prior law; (2) extended the credits for one year, to apply to property purchased and placed in service prior to January 1, 2011; (3) replaced the $500 lifetime cap ($200 for windows) with an aggregate cap of $1,500 for property placed in service during the period 2009 through 2010; (4) modified the efficiency standards for qualifying property; and (5) eliminated the rule that reduced the credit for property purchased with subsidized energy financing. Modify credits for alternative fuel and plug-in electric drive motor vehicles.—A tax credit (the alternative motor vehicle credit) is provided for each new qualified fuel cell, hybrid, advanced lean burn technology and alternative fuel vehicle placed in service by the taxpayer. The credit varies depending on the weight class of the vehicle, the type of technology used, the amount by which the vehicle exceeds fuel economy standards, and, in some cases, the estimated lifetime fuel savings of the vehicle. The credit is available for vehicles purchased after 2005 and, under prior law, was scheduled to expire after 2009, 2010 or 2014, depending on the type of vehicle. In addition, the credit for hybrid and advanced lean burn technology vehicles phases out with respect to a manufacturer’s vehicles after the manufacturer has sold at least 60,000 of those vehicles. A credit also is available for each qualified plug-in electric drive motor vehicle (a vehicle that has at least four wheels, is manufactured for use on public roads, meets certain emissions standards, draws propulsion using a traction battery with at least four kilowatt-hours of capacity, and is capable of being recharged from an external source of electricity) placed in service. Under prior law, the base amount of the credit for plug-in electric drive motor vehicles was $2,500, plus $417 for each kilowatt-hour of battery capacity in excess of four kilowatt-hours. The maximum credit varied by weight of the vehicle, ranging from $7,500 for a vehicle weighing less than 10,000 pounds to $15,000 for a vehicle weighing more than 26,000 pounds. Under prior law, the credit was scheduled to phase out over the four calendar quarters beginning in the second quarter following the quarter in which a total of 250,000 credit-eligible vehicles were sold for use in the United States; in addition, the credit was not available for purchases after December 31, 2014. 167 14. FEDERAL RECEIPTS This Act modified the alternative motor vehicle credit by making it a personal credit allowed against the AMT, effective for taxable years beginning after December 31, 2008. This Act also made the following modifications to the plug-in electric drive motor vehicle credit, effective for vehicles acquired after December 31, 2009: (1) the credit was capped at $7,500 per vehicle, regardless of the weight of the vehicle; (2) the credit was eliminated for low-speed vehicles and vehicles weighing 14,000 pounds or more; and (3) the prior law phaseout after the sale of 250,000 crediteligible vehicles was replaced with separate phaseouts for each manufacturer, with the phaseout for each manufacturer’s vehicles beginning after the sale of 200,000 of the manufacturer’s credit-eligible vehicles. In addition, this Act provided: (1) a new 10-percent credit capped at $2,500 per vehicle for low-speed vehicles, motorcycles, and threewheeled vehicles purchased after February 17, 2009, and before January 1, 2012; and (2) a new 10-percent credit capped at $4,000 per vehicle for the cost of converting any motor vehicle into a qualified plug-in electric drive motor vehicle that is placed in service after February 17, 2009, and before January 1, 2012. property and eliminated the reduction in credits for property using subsidized energy financing; (2) temporarily increased the rate for the credit for alternative fuel vehicle refueling property to 50 percent (except for hydrogen refueling property) and increased the maximum credit per taxable year per location to $50,000 for qualified business property ($200,000 for qualified hydrogen refueling property) and to $2,000 for nonbusiness property; and (3) equalized tax-free transit and parking benefits through 2010, setting both at $230 in 2009. This Act also authorized the issuance of: (1) an additional $1.6 billion of taxable tax credit bonds, called new clean renewable energy bonds, which are used to finance qualified renewable energy facilities; and (2) an additional $2.4 billion of taxable tax credit bonds, called qualified energy conservation bonds, which are used to finance qualified energy conservation purposes and, as clarified by this Act, may be used to make loans and grants for capital expenditures to implement green community programs. Both types of bonds provide a Federal subsidy through tax credits to investors equal to 70 percent of the interest on the bond. Provide a credit for investment in qualified property used in a qualified advanced energy manufacturing project.—This Act provided a 30-percent credit for investment in eligible property used in a qualified advanced energy manufacturing project. A qualified advanced energy manufacturing project re-equips, expands, or establishes a manufacturing facility for the production of: (1) property designed to be used to produce energy from the sun, wind, geothermal deposits, or other renewable resources; (2) fuel cells, microturbines, or an energy storage system for use with electric or hybrid-electric motor vehicles; (3) electric grids to support the transmission of intermittent sources of renewable energy, including the storage of such energy; (4) property designed to capture and sequester carbon dioxide; (5) property designed to refine or blend renewable fuels (excluding fossil fuels) or to produce energy conservation technologies; (6) new qualified plug-in electric drive motor vehicles or components that are designed specifically for use with such vehicles; or (7) other advanced energy property designed to reduce greenhouse gas emissions as may be determined by the Department of the Treasury. Eligible property must be depreciable (or amortizable) property used in a qualified advanced energy project and does not include property designed to manufacture equipment for use in the refining or blending of any transportation fuel other than renewable fuels. The credit is available only for projects certified by the Department of the Treasury (in consultation with the Department of Energy). The total amount of credits certified by the Department of the Treasury may not exceed $2.3 billion. The Department of the Treasury is required to establish a certification program no later than 180 days after February 17, 2009. FEDERAL AVIATION ADMINISTRATION EXTENSION ACT OF 2009 Provide other incentives for energy.—This Act also: (1) removed the prior law caps on the credit for the purchase of residential solar hot water, geothermal, and wind This Act, which was signed into law by President Obama on March 30, 2009, extended the authority to collect taxes that fund the Airport and Airway Trust Fund through September 30, 2009. These taxes had been scheduled to expire after March 31, 2009, under prior law. A JOINT RESOLUTION APPROVING THE RENEWAL OF IMPORT RESTRICTIONS CONTAINED IN THE BURMESE FREEDOM AND DEMOCRACY ACT OF 2003, AND FOR OTHER PURPOSES This Act, which was signed into law by President Obama on July 28, 2009, extended for one year, through July 28, 2010, the ban on all imports from Burma, including a ban on imports of certain gemstones originating from Burma and on jewelry containing such gemstones. Corporations generally are required to pay their income tax liability in quarterly estimated payments. For corporations that keep their accounts on a calendar year basis, these payments are due on or before April 15, June 15, September 15 and December 15. If these dates fall on a holiday or weekend, payment is due on the next business day. This Act repealed all previously enacted adjustments of estimated tax payments due in July through September by corporations with assets of at least $1 billion, applicable to 2010, 2011 and 2013. In addition, estimated tax payments due in July through September by corporations with assets of at least $1 billion were increased to 100.25 percent of the amount otherwise due in 2014. For corporations affected by this provision, the next required estimated tax payment is reduced accordingly. 168 ANALYTICAL PERSPECTIVES FISCAL YEAR 2010 FEDERAL AVIATION ADMINISTRATION EXTENSION ACT This Act, which was signed into law by President Obama on October 1, 2009, extended the authority to collect taxes that fund the Airport and Airway Trust Fund through December 31, 2009. These taxes had been scheduled to expire after September 30, 2009, under prior law. WORKER, HOMEOWNERSHIP, AND BUSINESS ASSISTANCE ACT OF 2009 Extend and modify the refundable tax credit for first-time homebuyers.—Temporary provisions of ARRA and, before that, the Housing and Economic Recovery Act of 2008, provided a refundable tax credit to first-time homebuyers who purchased a home after April 8, 2008, and before December 1, 2009. A first-time homebuyer is an individual who had no ownership interest in a principal residence in the United States during the three-year period prior to the purchase of the home to which the credit applies. The credit, which is equal to 10 percent of the purchase price of the home, up to a maximum credit of $8,000, is phased out for taxpayers with modified AGI between $75,000 and $95,000 ($150,000 and $170,000 for married taxpayers filing a joint return). This Act extended the credit to apply to qualifying home purchases after November 30, 2009, and before May 1, 2010 (July 1, 2010, provided a binding written contract is entered into before May 1, 2010, to close on the purchase before July 1, 2010). This Act also created a new tax credit, equal to 10 percent of the purchase price of the home, up to a maximum credit of $6,500, for existing homeowners who purchase a subsequent primary residence after October 1, 2009, and before May 1, 2010. An existing homeowner is an individual who has maintained the same principal residence in the United States for any five-consecutiveyear period during the eight-year period ending on the date of the purchase of the subsequent principal residence to which the credit applies. Effective for qualifying purchases after October 1, 2009, this Act also: (1) limited the credits to residences with a purchase price less than or equal to $800,000; (2) increased the income threshold for the phaseout of the credits to modified AGI of $125,000 for single taxpayers and $225,000 for married taxpayers filing a joint return; (3) required that in order to qualify for the first-time homebuyer credit the taxpayer and/or the taxpayer’s spouse must be at least 18 years of age; (4) required that a properly executed copy of the settlement statement used to complete the purchase be attached to the taxpayer’s tax return; and (5) clarified that certain transactions within a family do not qualify for the credit. This Act also provided the IRS with mathematical error authority to reject fraudulent or inappropriately claimed credits prior to refund, effective for tax returns filed for taxable years ending on or after April 9, 2008. Expand temporary five-year carryback of net operating losses (NOLs).—In general, an NOL may be carried back two years and carried forward twenty years to offset taxable income in such years. However, different rules apply with respect to NOLs arising in certain circumstances. A temporary provision of ARRA provided eligible small businesses (businesses meeting a $15 million gross receipts test) the election to increase the carryback period to any whole number of years elected by the taxpayer that is more than two and less than six, for NOLs for any taxable year beginning or ending in 2008. However, any election may be made only with respect to one year. This Act expanded the temporary provision of ARRA provided to eligible small businesses to apply to any business with an NOL for any taxable year beginning or ending in 2008 or 2009. Any election may be made only with respect to one taxable year; however, any small business that made a timely election under the temporary provision of prior law to carry back its applicable 2008 NOL is also allowed to carry back a 2009 NOL in accordance with the provisions of this Act. This Act also limited the amount of an NOL that may be carried back to the fifth taxable year preceding the loss year to 50 percent of taxable income for such taxable year (except in the case of an applicable 2008 NOL of an eligible small business). The amount of the NOL otherwise carried back to taxable years subsequent to such fifth taxable year is adjusted to take into account the 50-percent limitation. The provision generally does not apply to: (1) the Federal National Mortgage Association; (2) the Federal Home Loan Mortgage Corporation; (3) any taxpayer in which the Federal Government acquired before November 6, 2009, pursuant to the Emergency Economic Stabilization Act of 2008, an equity interest or any warrant (or other right) to acquire an equity interest; or (4) any taxpayer that receives after November 6, 2009, funds from the Federal Government in exchange for an equity interest or any warrant (or other right) to acquire an equity interest pursuant to the Emergency Economic Stabilization Act of 2008, unless the funds are received by a financial institution pursuant to a program to increase the availability of credit to small businesses. Expand the exclusion from gross income of payments received under the Department of Defense Homeowners Assistance Program (HAP).—Certain employees and members of the Armed forces receive payments from HAP to offset the adverse effects on housing values that result from a military base realignment or closure. Under prior law, payments received under HAP, as in effect on November 11, 2003, generally are excluded from gross income for individual income tax and social security and Medicare payroll tax purposes. The excludable amount is limited to the reduction in the fair market value of the property. The HAP program was expanded under ARRA. This Act expanded the exclusion from gross income to apply to HAP payments made after February 17, 2009, the date of enactment of ARRA. Delay implementation of the world-wide interest allocation rules.—Subject to various limitations, U.S. taxpayers may credit foreign taxes paid or accrued against U.S. tax on foreign-source income. The American Jobs Creation Act of 2004 made several changes to the foreign 169 14. FEDERAL RECEIPTS tax credit rules, including a modification to the interest expense allocation rules. One provision of that Act permitted taxpayers a one-time election to use an alternative method for allocating their interest expenses between U.S.source and foreign-source income (“worldwide affiliated group election”), effective for taxable years beginning after December 31, 2008. The Housing and Economic Recovery Act of 2008 delayed the effective date of the election for two years, so that it would apply to taxable years beginning after December 31, 2010, and provided a special phase-in rule for the first year the election is in effect. This Act delayed the effective date of the election for an additional seven years, so that it would apply to taxable years beginning after December 31, 2017, and repealed the special phase-in rule for the first year the election is in effect. Extend unemployment insurance surtax.—Under prior law, the net Federal unemployment tax on employers was scheduled to drop from 0.8 percent to 0.6 percent with respect to wages paid after December 31, 2009. This Act extended the 0.8 percent rate through June 30, 2011. Modify the timing of estimated tax payments by corporations.—Corporations generally are required to pay their income tax liability in quarterly estimated payments. For corporations that keep their accounts on a calendar year basis, these payments are due on or before April 15, June 15, September 15 and December 15. If these dates fall on a holiday or weekend, payment is due on the next business day. This Act increased the estimated tax payments due in July through September of 2014 by corporations with assets of at least $1 billion to 133.25 percent of the amount otherwise due. For corporations affected by this provision, the next required estimated tax payment is reduced accordingly. Increase the penalty for failure to file partnership or S corporation returns.—Under prior law, the penalty for failure to file either a partnership or S corporation return was $89 per partner or shareholder, for each month or fraction of a month that the failure continued, up to a maximum of 12 months. The penalty applied to returns required to be filed for taxable years beginning after December 31, 2008. This Act increased the penalty for failure to file either a partnership or S corporation return to $195 per partner or shareholder, effective for returns required to be filed for taxable years beginning after December 31, 2009. Expand electronic filing by return preparers.— Effective for tax returns filed after December 31, 2010, “specified tax return preparers” are required to file electronically income tax returns of individuals, estates and trusts. Specified tax return preparers are all return preparers except those who neither prepare nor reasonably expect to prepare ten or more returns in a calendar year. FISCAL YEAR 2010 FEDERAL AVIATION ADMINISTRATION EXTENSION ACT, PART II This Act, which was signed into law by President Obama on December 16, 2009, extended the authority to collect taxes that fund the Airport and Airway Trust Fund through March 31, 2010. These taxes had been scheduled to expire after December 31, 2009, under prior law. DEPARTMENT OF DEFENSE APPROPRIATIONS ACT, FY 2010 This Act, which was signed into law by President Obama on December 19, 2009, provided funding for the Department of Defense military programs and extended various expiring programs. The major provisions of this Act that affected receipts extended and increased the COBRA health insurance premium assistance program, which was enacted in ARRA and scheduled to expire with respect to qualified individuals involuntarily terminated after December 31, 2009. These provisions extended premium assistance coverage to qualified individuals who are involuntarily terminated between January 1, 2010, and February 28, 2010, and extended the duration of the subsidy from nine months to fifteen months. TO EXTEND THE GENERALIZED SYSTEM OF PREFERENCES AND THE ANDEAN TRADE PREFERENCE ACT, AND FOR OTHER PURPOSES This Act, which was signed into law by President Obama on December 28, 2009, extended both the Andean Trade Preference Act for Colombia, Ecuador and Peru and the Generalized System of Preferences through December 31, 2010. This Act also increased the estimated tax payments due in July through September of 2014 by corporations with assets of at least $1 billion to 134.75 percent of the amount otherwise due. For corporations affected by this provision, the next required estimated tax payment is reduced accordingly. ADJUSTMENTS TO THE BUDGET ENFORCEMENT ACT (BEA) BASELINE TO REFLECT CURRENT POLICY An important step in addressing the Nation’s fiscal problems is to be upfront about them – and to establish an honest baseline that measures where we are before new policies are enacted. This Budget does so by adjusting the BEA baseline to reflect the true cost of the current policy path. The BEA baseline, which is commonly used in budgeting and is defined in a now expired statute, reflects, with some exceptions, the projected receipts level under current law. But under current law, relief from the AMT expired at the end of 2009, causing millions of Americans to begin paying this additional tax. Congress has repeatedly taken action to extend AMT relief, sometimes after it has expired, as would be the case now. Furthermore, the 2001 and 2003 tax cuts would expire entirely at the end 170 ANALYTICAL PERSPECTIVES of 2010. These expirations were not written into law for policy reasons; instead, they reflect decisions made to artificially reduce the cost estimates of AMT relief and the 2001 and 2003 tax cuts to fit these policies within certain budget process rules. Because of this, the BEA’s “current law” baseline is not an accurate reflection of what it would mean to continue forward with current policies. This Budget uses an adjusted baseline that continues AMT relief and the 2001 and 2003 tax cuts, so as to project future receipts under current policy and to better measure the effects of the Administration’s proposed policy changes. Index to inflation the 2009 parameters of the AMT as enacted in the American Recovery and Reinvestment Act of 2009.—The Administration’s baseline projection of current policy reflects annual indexation of the AMT exemption amounts in effect for taxable year 2009 ($46,700 for single taxpayers, $70,950 for married taxpayers filing a joint return and surviving spouses, and $35,475 for married taxpayers filing a separate return and for estates and trusts); the income thresholds for the 28-percent AMT rate ($87,500 for married taxpayers filing a separate return and $175,000 for all other taxpayers); and the income thresholds for the phaseout of the exemption amounts ($150,000 for married taxpayers filing a joint return and surviving spouses, $112,500 for single taxpayers, and $75,000 for married taxpayers filing a separate return). The baseline projection of current policy also extends AMT relief for nonrefundable personal credits. Continue the 2001 and 2003 tax cuts.—Most of the tax reductions enacted in 2001 and 2003 expire on December 31, 2010. This includes reductions in marginal tax rates, marriage penalty relief, expansions in the child tax credit, increases in small business expensing, preferential rates for capital gains and dividends, and reduction and repeal of estate and gift taxes. The Administration’s baseline projection of current policy continues all of these expiring provisions (as amended by subsequent legislation),5 except for repeal of estate and generation-skipping transfer taxes. Estate and gift taxes are assumed to be extended at parameters in effect for calendar year 2009 (a top rate of 45 percent and an exemption amount of $3.5 million). PROPOSALS The Administration proposes to restore balance to the tax code by providing tax cuts to working families, returning to the pre-2001 ordinary income tax rates for families making more than a quarter of a million dollars a year, closing loopholes, and eliminating subsidies to special interests. Extensions of certain provisions, including those directed toward boosting investment and economic recovery, are also proposed. These proposals are described below. Temporary Recovery Measures Extend making work pay tax credit.—A refundable tax credit equal to 6.2 percent of earned income, up to a maximum of $400 for working single taxpayers and $800 for working married taxpayers filing a joint return, was provided for taxable years 2009 and 2010 under ARRA. The credit is phased out at a rate of 2 percent of modified AGI in excess of $75,000 ($150,000 for married taxpayers filing a joint return). Payments were made to each possession of the United States with a mirror tax system (U.S. Virgin Islands, Guam, and the Commonwealth of the Northern Mariana Islands) in an amount equal to the loss in receipts to that possession attributable to the credit provided in this Act. Payments were made to each possession that does not have a mirror tax system (Puerto Rico and American Samoa) in an amount estimated by the Department of the Treasury as being equal to the aggregate credits that would have been allowed to residents of that possession if a mirror tax system had been in effect. The Administration proposes to extend the credit for one year, through taxable year 2011. Receipt effect of providing $250 Economic Recovery Payments.—The Administration proposes to provide a $250 Economic Recovery Payment in 2010 to each adult eligible ($500 to a married couple where both spouses are eligible) for social security, railroad retirement, veteran’s compensation or pension, or Supplemental Security Income (SSI) benefits (excluding individuals who receive SSI while in a Medicaid institution). The Administration also proposes to provide a $250 refundable tax credit to Federal, State and local government retirees who are not eligible for social security benefits. Retirees who are employed and eligible for the making work pay tax credit will have their making work pay tax credit reduced (but not below zero) by the amount of the recovery payment and refundable tax credit. Extend COBRA health insurance premium assistance.—Under current law, COBRA health insurance premium assistance is scheduled to expire with respect to qualified individuals involuntarily terminated after February 28, 2010. Individuals are eligible for assistance for up to 15 months. The Administration proposes to extend the provision in order to allow qualified individuals involuntarily terminated before January 1, 2011 to be eligible for assistance. The duration of the assistance period for qualified individuals who are involuntarily terminated after February 28, 2010 would be twelve months. 5 Consistent with treatment of the tax cuts in the Administration’s statutory pay-as-you-go (PAYGO) proposal, the Budget, in the current policy baseline, assumes continuation of the 2001 and 2003 tax cuts as amended through June 2009, when the PAYGO legislation was introduced. Among other changes, this continues two amendments made to these tax cuts in ARRA and subsequent to the Administration taking office. These two amendments expand child tax credit refundability and the earned income tax credit for married couples. 171 14. FEDERAL RECEIPTS Table 14–2. ADJUSTMENTS TO THE BUDGET ENFORCEMENT ACT (BEA) BASELINE ESTIMATES OF GOVERNMENTAL RECEIPTS TO REFLECT CURRENT POLICY (In billions of dollars) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 BEA baseline receipts ...................................... 2,230.7 2,781.8 3,069.0 3,308.1 3,581.1 3,760.1 4,018.1 4,234.8 4,452.1 4,670.6 4,885.4 16,500.2 38,761.1 Adjustments to reflect current policy: Index to inflation the 2009 parameters of the AMT as enacted in the American Recovery and Reinvestment Act .............. –13.0 –64.1 –32.4 –37.9 –45.1 –53.2 –62.5 –72.5 –84.0 –96.8 –110.3 –232.7 –658.8 –2.3 –0.9 ......... –22.9 –7.7 –3.2 –4.1 –1.5 –5.6 –12.4 –4.9 –4.4 –21.5 –9.4 –3.5 –26.6 –12.3 –2.8 –27.6 –13.3 –2.3 –28.6 –14.2 –2.0 –29.4 –15.1 –1.9 –29.9 –16.0 –1.8 –30.2 –16.8 –1.8 –87.5 –35.9 –19.5 –233.3 –111.2 –29.2 ......... ......... ......... * * –87.2 –3.2 –15.6 –0.7 –0.4 –137.6 –13.0 –25.3 –1.4 –0.9 –149.9 –13.1 –26.9 –1.4 –0.9 –162.1 –13.2 –28.8 –1.5 –0.9 –173.8 –13.5 –30.7 –1.6 –0.9 –185.5 –13.7 –32.3 –1.7 –1.0 –197.2 –13.9 –33.9 –1.7 –1.0 –208.7 –14.0 –35.6 –1.8 –1.0 –220.2 –14.0 –37.0 –1.9 –1.0 –231.9 –14.0 –38.4 –2.0 –1.0 –2.0 6.2 –18.9 –23.7 –26.0 –28.1 –30.2 –32.2 –34.3 –36.5 –38.8 –5.1 –134.8 –208.1 –237.6 –266.9 –290.3 –307.6 –324.7 –341.7 –358.3 –374.9 –1,137.7 –2,844.9 –18.1 –198.8 –240.5 –275.5 –312.0 –343.6 –370.1 –397.2 –425.7 –455.1 –485.1 –1,370.4 –3,503.7 Baseline projection of current policy receipts ..... 2,212.6 2,583.0 2,828.5 3,032.7 3,269.1 3,416.6 3,648.0 3,837.6 * $50 million or less. 1 This provision affects both receipts and outlays. Only the receipt effect is shown here. The outlay effects are listed below: 4,026.4 4,215.5 4,400.2 Continue the 2001 and 2003 tax cuts: Dividends tax rate structure ................... Capital gains tax rate structure .............. Expensing for small businesses ............ Marginal individual income tax rate reductions ......................................... Child tax credit 1 .................................... Marriage penalty relief 1 ........................ Education incentives ............................. Other incentives for families and children ... Estate, generation-skipping transfer taxes, and gift taxes at 2009 parameters ....................................... Subtotal, continue the 2001 and 2003 tax cuts ............................. Total, adjustments to reflect current policy ....................... 2010 Child tax credit ............................................... Marriage penalty relief ................................... Total, outlay effects of adjustments to reflect current policy ......................... 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011-15 2011-20 –710.5 –1,753.9 –56.0 –125.7 –38.4 –304.5 –6.6 –15.7 –4.1 –9.1 –90.4 15,129.8 –262.4 35,257.5 2011–15 2011–20 ......... ......... 0.8 –0.6 24.8 4.1 24.5 3.9 24.5 3.8 24.2 3.7 24.1 3.7 23.9 3.6 24.0 3.6 24.0 3.6 24.1 3.7 98.7 14.9 218.8 33.1 ......... 0.2 28.8 28.5 28.3 27.9 27.7 27.5 27.6 27.7 27.8 113.6 251.9 Provide additional tax credits for investment in qualified property used in a qualified advanced energy manufacturing project.—ARRA provided a 30-percent credit for investment in eligible property used in a qualified advanced energy manufacturing project. A qualified advanced energy manufacturing project reequips, expands, or establishes a manufacturing facility for the production of: (1) property designed to be used to produce energy from the sun, wind, geothermal deposits, or other renewable resources; (2) fuel cells, microturbines, or an energy storage system for use with electric or hybrid-electric motor vehicles; (3) electric grids to support the transmission of intermittent sources of renewable energy, including the storage of such energy; (4) property designed to capture and sequester carbon dioxide; (5) property designed to refine or blend renewable fuels (excluding fossil fuels) or to produce energy conservation technologies; (6) new qualified plug-in electric drive motor vehicles or components that are designed specifically for use with such vehicles; or (7) other advanced energy property designed to reduce greenhouse gas emissions as may be determined by the Department of the Treasury. Eligible property must be depreciable (or amortizable) property used in a qualified advanced energy project and does not include property designed to manufacture equipment for use in the refining or blending of any transportation fuel other than renewable fuels. The credit is available only for projects certified by the Department of the Treasury (in consultation with the Department of Energy); the total amount of credits certified may not exceed $2.3 billion. The Administration proposes to provide an additional $5 billion in credits, thereby increasing the total amount of credits certified by the Department of the Treasury to $7.3 billion. Extend temporary increase in expensing for small businesses.—Under a temporary provision expiring in 2011, business taxpayers were allowed to expense up to $125,000 in annual investment expenditures for qualifying property (including off-the-shelf computer software) placed in service in taxable years beginning in 2007. The maximum amount that could be expensed was reduced by the amount by which the taxpayer’s cost of qualifying property exceeded $500,000. Both the deduction and annual investment limits were indexed annually for inflation, effective for taxable years beginning after 2007 and before 2011. Another temporary provision of prior law increased the expensing and annual investment limits to $250,000 and $800,000, respectively, effective for taxable years beginning in 2008 and 2009. The Administration 172 ANALYTICAL PERSPECTIVES proposes to extend the $250,000 expensing and $800,000 annual investment limits for one year, through taxable years beginning in 2010. Extend temporary bonus depreciation for certain property.—Under a temporary provision of ARRA described above, an additional first-year depreciation deduction equal to 50 percent of the adjusted basis of the property was provided for qualifying property acquired after calendar year 2007 and before calendar year 2010, and placed in service in calendar year 2009 (through 2010 for certain longer-lived and transportation property). Corporations otherwise eligible for additional first-year depreciation were allowed to elect to claim additional research or AMT tax credits in lieu of the additional firstyear depreciation deduction for qualified property. The Administration proposes to extend, for an additional year, the bonus depreciation provision and the election to claim additional research or AMT tax credits in lieu of the additional first-year depreciation. The proposal would apply to qualifying property acquired after calendar year 2007 and before calendar year 2011, and placed in service in calendar year 2010 (through 2011 for certain longer-lived and transportation property). Extend option for cash assistance to States in lieu of housing tax credits.—The Administration proposes to allow States to elect cash assistance in lieu of low-income housing tax credits (LIHTC) for 2010 to finance certain low-income residential rental properties. The cash assistance for each State could not exceed an election amount equal to 85 percent of the product of ten and the sum of the State’s: (1) unused housing credit ceiling for 2009; (2) returns to the State during 2010 of credit allocations (other than credit allocations derived, directly or indirectly, under section 1400N(c) of the Code) made by the State in a prior year; (3) 40 percent of the State’s 2010 per capita authority: and (4) 40 percent of the State’s share of the 2010 national pool allocation, if any. States would be required to use the cash assistance by December 31, 2012, to finance the construction or rehabilitation (including acquisition) of qualified low-income housing projects generally subject to the same rental requirements and recapture rules as properties financed with LIHTC. The Department of the Treasury would be provided additional authority to ensure that the cash assistance is used in compliance with LIHTC rules. Tax Cuts for Families and Individuals Expand EITC.—The EITC generally equals a specified percentage of earned income, up to a maximum dollar amount, that is reduced by the product of a specified phase-out rate and the amount of earned income or AGI, if greater, in excess of a specified income threshold. Three separate credit schedules apply, depending on whether the eligible taxpayer has no, one, or more than one qualifying child. Under prior law, for taxable year 2009, taxpayers with more than one qualifying child were provided a credit of 40 percent on up to $12,570 in earnings, for a maximum credit of $5,028. The credit was reduced at the rate of 21.06 percent of earnings in excess of $16,420 for single taxpayers ($19,540 for married taxpayers filing a joint return). Effective for taxable years 2009 and 2010, ARRA increased the credit percentage for families with three or more qualifying children to 45 percent, thereby creating a fourth credit schedule with a maximum credit of $5,657. ARRA also increased the income thresholds for the phaseout of the EITC for married taxpayers filing a joint return to $5,000 above the threshold for single taxpayers. Effective for taxable years beginning after December 31, 2010, the Administration proposes to permanently extend the 45-percent credit percentage for families with three or more qualifying children.6 Expand child and dependent care tax credit.— Taxpayers with child or dependent care expenses who are working or looking for work are eligible for a nonrefundable tax credit that partially offsets these expenses. Married couples are only eligible if they file a joint return and either both spouses are working or looking for work, or if one spouse is working or looking for work and the other is attending school full-time. To qualify for this benefit, the child and dependent care expenses must be for either a child under age 13 when the care was provided or a disabled dependent of any age with the same place of abode as the taxpayer. Any allowable credit is reduced by the aggregate amount excluded from income under a dependent care assistance program. Eligible taxpayers may claim the credit for up to 35 percent of up to $3,000 in eligible expenses for one child or dependent and up to $6,000 in eligible expenses for more than one child or dependent. The percentage of expenses for which a credit may be taken decreases at a rate of one percent for every $2,000 of AGI over $15,000 until the percentage of expenses reaches 20 percent (at incomes above $43,000). There are no further income limits. The income phasedown and the credit are not indexed for inflation. The proposal would increase the beginning of the phasedown to $85,000 (and thus, the end of the phasedown range to $113,000) but is otherwise unchanged. The proposal would be effective for tax years beginning after December 31, 2010. Provide for automatic enrollment in IRAs and double the tax credit for small employer plan startup costs.—The Administration proposes to encourage saving and increase participation in retirement savings arrangements by requiring employers that do not currently offer a retirement plan to offer their employees automatic enrollment in an IRA, effective for taxable years beginning after December 31, 2011. Small employers (those with ten or fewer employees) and employers in existence for less than two years would be exempt. An employee not providing a written participation election would be enrolled at a default rate of three percent of the employee’s compensation in a Roth IRA. Employees 6 As described in footnote 5, the current policy baseline assumes extension of the 2001 and 2003 tax cuts as amended through June 2009. ARRA’s EITC expansion for married couples is such an amendment and so its continuation is already included in the Administration’s current policy baseline. 173 14. FEDERAL RECEIPTS would always have the option of opting out, opting for a lower or higher contribution within the IRA limits, or opting for a traditional IRA. Employers that offer an automatic IRA (including those that are not required to do so) would be entitled to a temporary business tax credit of $25 per participating employee up to a total of $250 per year for two years. Contributions by employees to automatic payroll-deposit IRAs would qualify for the saver’s credit (to the extent the contributor and the contributions otherwise qualified). Under current law, small employers (those with no more than 100 employees) that adopt a new qualified retirement or SIMPLE plan are entitled to a temporary business tax credit equal to 50 percent of the employer’s expenses of establishing or administering the plan including expenses of retirement-related employee education with respect to the plan. The credit is limited to a maximum of $500 per year for three years. In conjunction with the automatic IRA proposal, to encourage employers not currently sponsoring a qualified retirement plan or SIMPLE to do so, the Administration proposes to double this tax credit to a maximum of $1,000 per year for three years, effective for taxable years beginning after December 31, 2011. Expand saver’s credit.—Under current law, taxpayers age 18 or older who are not dependents or full-time students may receive a nonrefundable credit (the saver’s credit) on up to $2,000 of their compensation contributed to employer-sponsored qualified retirement plans and IRAs. The credit ranges between 10 and 50 percent of the amount contributed, depending on the taxpayer’s filing status and AGI (adjusted for inflation). In determining the credit, qualified contributions are reduced by distributions from qualified plans and IRAs during the current tax year, the two preceding tax years, and the following year, up to the due date of the return, including extensions. Effective for taxable years beginning after December 31, 2010, the Administration proposes to modify the existing credit by: (1) making it refundable; and (2) converting it to a 50-percent match on up to $500 in qualified retirement savings per individual ($1,000 per married couple filing a joint return) per year (indexed annually for inflation beginning with taxable year 2012). The match could be deposited in the account to which the individual contributed. The proposal would increase the eligibility income threshold so that the amount of savings that could be matched would phase out at a rate of five percent for AGI in excess of $32,500 for single taxpayers and $65,000 for married taxpayers filing a joint return (so that the credit would be fully phased out for married taxpayers filing jointly with AGI of $85,000); the increased AGI thresholds would be indexed annually for inflation beginning with taxable year 2012. Extend American opportunity tax credit.—ARRA created the American opportunity tax credit to replace the Hope Scholarship Credit for taxable years 2009 and 2010. The American opportunity tax credit provides taxpayers a credit of up to $2,500 per eligible student per year for qualified tuition and related expenses (expanded to include course materials) paid for each of the first four years of the student’s post-secondary education in a degree or certification program. The student must be enrolled at least half-time to receive the credit. The credit is equal to 100 percent of the first $2,000 in qualified tuition and related expenses, and 25 percent of the next $2,000 of qualified tuition and related expenses. In addition, generally 40 percent of the otherwise allowable credit is refundable. The credit is phased out ratably for single taxpayers with modified AGI between $80,000 and $90,000 ($160,000 and $180,000 for married taxpayers filing a joint return). Unlike the Hope Scholarship Credit, the new tax credit is partially refundable, has a higher maximum credit amount, is available for the first four years of postsecondary education, and has higher phaseout limits. The Administration proposes to permanently extend the American opportunity tax credit and index the expense amounts and phase-out limits, effective for taxable years beginning after December 31, 2010. Tax Cuts for Businesses Eliminate capital gains taxation on small businesses.—Current law provides a 50-percent exclusion from tax for capital gains realized on the sale of certain small business stock held for more than five years. The amount of gain eligible for the exclusion is limited to the greater of $10 million or ten times the taxpayer’s basis in the stock. The exclusion is limited to the investments of individuals and not the investments of a corporation. Effective for stock issued after February 17, 2009, and before January 1, 2011, ARRA increased the exclusion to 75 percent. The Administration proposes to increase the exclusion to 100 percent, effective for qualified small business stock issued after February 17, 2009. Reporting requirements would be tightened to improve compliance. Make research and experimentation (R&E) tax credit permanent.—A tax credit of 20 percent is provided for qualified research and experimentation expenditures generally above a base amount. An alternative simplified credit of 14 percent above a base amount is also provided. These tax credits, which expired with respect to expenditures paid or incurred in taxable years beginning after December 31, 2009, are proposed to be permanently extended. Remove cell phones from listed property.— Taxpayers generally are allowed a deduction for ordinary and necessary expenses paid or incurred in carrying on a trade or business. However, with respect to “listed property,” the deduction may be limited or disallowed. Included in listed property are any cellular telephone and other similar telecommunications equipment. Under current law, deductions are disallowed for listed property unless the taxpayer substantiates: (1) the amount of such expense or other item; (2) the use of the listed property; (3) the business purpose of the expense or other item; and 174 ANALYTICAL PERSPECTIVES (4) the business relationship to the taxpayer of persons using the listed property. If the listed property is not used predominantly for business purposes (or if not properly substantiated), annual depreciation deductions (and any small business expensing deduction) are limited. In addition, to the extent that an employee uses a business cell phone (or other listed property) for personal purposes, the fair market value of such usage is includable as a fringe benefit in the employee’s gross income and wages (with the included amount generally deductible by the employer). The Administration recognizes that the substantiation requirements of current law with respect to cell phones, which have become a ubiquitous device for doing business, are excessively burdensome for employers, employees, and the IRS. Accordingly, the Administration proposes that cell phones (or other similar telecommunications equipment) no longer be classified as listed property, effectively removing the requirement of strict substantiation of use and the limitation on depreciation deductions. In addition, the fair market value of personal use of a cell phone (or other similar telecommunications equipment) provided primarily for business purposes would be excluded from gross income. Continue Certain Expiring Provisions Through Calendar Year 2011 A number of temporary tax provisions that have been routinely extended are scheduled to expire before December 31, 2011. The Administration proposes to extend a number of these provisions through December 31, 2011. These provisions include the optional deduction for State and local general sales taxes, Subpart F “active financing” and “look-through” exceptions, the exclusion from unrelated business income of certain payments to controlling exempt organizations, the modified recovery period for qualified leasehold improvements and qualified restaurant property, incentives for empowerment and community renewal zones, and several trade agreements, including the Generalized System of Preferences and the Caribbean Basin Initiative. In accordance with the President’s agreement at the G-20 Summit in Pittsburgh to phase out subsidies for fossil fuels, temporary incentives provided for the production of fossil fuels would be allowed to expire as scheduled under current law. Other Revenue Changes and Loophole Closers Reform treatment of financial institutions and products.—The Administration proposes to impose a fee on large financial institutions and close tax loopholes in the taxation of financial institutions and products through a series of legislative reforms in tax laws as described below: Impose a financial crisis responsibility fee.— The Administration proposes to impose a fee on firms with assets in excess of $50 billion for banks, thrifts, bank holding companies, insurance and other companies that own depository institutions on the date of announcement, and broker-dealers. The fee would be approximately 15 basis points applied to the firm’s covered liabilities (generally, liabilities less assessable deposits in the case of a bank). Require accrual of income on forward sale of corporate stock.—A corporation generally does not recognize gain or loss on the issuance or repurchase of its own stock. Thus, a corporation does not recognize gain or loss when it issues its stock in the future pursuant to a contract that entitles the corporation to receive a specified amount of consideration when the contract settles (typically referred to as a forward contract). A corporation does, however, recognize interest income upon the current sale of any stock (including its own) for a payment to be received in the future. The only difference between a corporate issuer’s current sale of its stock for deferred payment and an issuer’s forward sale of the same stock is the timing of the stock issuance. In a current sale, the stock is issued at the inception of the transaction, whereas in a forward sale the stock is issued at the time the deferred payment is received. In both cases, a portion of the deferred payment economically compensates the corporation for the time value of deferring the payment. It is inappropriate to treat these two transactions differently. The Administration proposes to require a corporation that enters into a forward contract to sell its own stock to treat a portion of the payment received when the stock is issued as a payment of interest. Require ordinary treatment of income from day-to-day dealer activities for certain dealers of equity options and commodities.—Under current law, certain dealers in securities, equity options, commodities, and commodities derivatives treat the income from section 1256 contracts entered into in their capacity as a dealer as generating 60 percent long-term capital gain (or loss) and 40 percent short-term capital gain (or loss). Dealers in other types of property uniformly treat the income generated by their dealer activities as ordinary income. There is no reason to treat dealers in different types of property differently. The Administration’s proposal would therefore require dealers in securities, equity options, commodities, and commodities derivatives to treat the income (or loss) from their dealer activities as ordinary in character. Modify the definition of “control” for purposes of section 249.—In general, if a corporation repurchases a debt instrument that is convertible into its stock, or into stock of a corporation in control of, or controlled by, the corporation, section 249 may disallow or limit the issuer’s deduction for any premium paid to repurchase the debt instrument. For this purpose, “control” is determined by reference to section 368(c), which encompasses only direct relationships (e.g., a parent corporation and its wholly-owned, first tier subsidiary). The definition of “control” in section 249 is narrow and has allowed the limitation in section 249 to be too easily avoided. Indirect control relationships (e.g., a parent corporation and a second-tier subsidiary) present the same economic identity of interests as direct control relationships and should be treated 14. FEDERAL RECEIPTS in a similar manner. The Administration proposes to amend the definition of “control” in section 249(b)(2) by referencing the definition of a controlled group in section 1563(a)(1), which includes indirect control relationships. Reinstate Superfund taxes.—The Administration proposes to reinstate the taxes that were deposited in the Hazardous Substance Superfund prior to their expiration on December 31, 1995. These taxes, which contributed to financing the cleanup of the nation’s highest risk hazardous waste sites, are proposed to be reinstated beginning in 2011, with an expiration in 2020. The proposed taxes include the following: (1) an excise tax of 9.7 cents per barrel on crude oil and imported petroleum products; (2) an excise tax on hazardous chemicals listed in section 4661 of the Code at rates that vary from 22 cents to $4.87 per ton; (3) an excise tax on imported substances that use listed hazardous chemicals as a feedstock (in an amount equivalent to the tax that would have been imposed on domestic production); and (4) a corporate environmental income tax imposed at a rate of 0.12 percent on the amount by which the modified AMT income of a corporation exceeds $2 million. Make unemployment insurance surtax permanent.—The net Federal unemployment tax on employers is scheduled to drop from 0.8 percent to 0.6 percent with respect to wages paid after June 30, 2011. The 0.8 percent rate is proposed to be extended permanently. Repeal last-in, first-out (LIFO) method of accounting for inventories.—Under the LIFO method of accounting for inventories, it is assumed that the cost of the items of inventory that are sold is equal to the cost of the items of inventory that were most recently purchased or produced. The Administration proposes to repeal the use of the LIFO accounting method for Federal tax purposes, effective for taxable years beginning after December 31, 2011. Assuming inventory costs rise over time, taxpayers required to change from the LIFO method under the proposal generally would experience a permanent reduction in their deductions for cost of goods sold and a corresponding increase in their annual taxable income as older, cheaper inventory is taken into account in computing taxable income. Taxpayers required to change from the LIFO method also would be required to report their beginning-of-year inventory at its first-in, first-out (FIFO) value in the year of change, causing a one-time increase in taxable income that would be recognized ratably over ten years. Repeal gain limitation for dividends received in reorganization exchanges.—A limitation on recognition of gain for certain qualified corporate reorganizations (section 356(a)(1)) can result in distributions of property with minimal U.S. tax consequences. The proposal would repeal this limitation in reorganization transactions in which the acquiring corporation is either domestic or foreign and the shareholder’s exchange has the effect of the 175 distribution of a dividend (within the meaning of section 356(a)(2)). Reform U.S international tax system.—The Administration proposes to reduce incentives for U.S.based multinational corporations to invest abroad rather than in the United States and also to target tax avoidance and evasion through a series of legislative reforms and enforcement measures, as described below: Defer deduction of interest expense related to deferred income.—Under current law, a taxpayer that incurs interest expense properly allocable and apportioned to foreign-source income may be able to deduct that expense even if some or all of the foreignsource income is not subject to current U.S. taxation. To provide greater matching of the timing of interest expense deductions and recognition of associated income, the proposal would defer the deduction of interest expense properly allocable and apportioned to foreign-source income to the extent the U.S. taxation of such income is deferred. Reform foreign tax credit.—Under the proposal, a taxpayer would be required to determine foreign tax credits from the receipt of a dividend from a foreign subsidiary on a consolidated basis for all its foreign subsidiaries. Foreign tax credits from the receipt of a dividend from a foreign subsidiary would be based on the consolidated earnings and profits and foreign taxes of all the taxpayer’s foreign subsidiaries. In addition, the proposal would adopt a matching rule to prevent the separation of foreign taxes and associated foreign income. Tax currently excess returns associated with transfers of intangibles offshore.—The IRS has broad authority to allocate income among commonly controlled businesses under section 482. Notwithstanding the transfer pricing rules, there is evidence of income shifting offshore, including through transfers of intangible rights to subsidiaries that bear little or no foreign income tax. Under the proposal, if a U.S. person transfers an intangible to a related controlled foreign corporation (CFC) in circumstances that demonstrate excessive income shifting from the U.S., then an amount equal to the excessive return would be treated as subpart F income. Limit shifting of income through intangible property transfers.—The definition of intangible property for purposes of the special rules relating to transfers of intangibles by a U.S. person to a foreign corporation (section 367(d)) and the allocation of income and deductions among taxpayers (section 482) would be clarified to prevent inappropriate shifting of income outside the United States. The proposal would also clarify the appropriate method for valuing intangibles transferred to foreign corporations. Disallow the deduction for excess non-taxed reinsurance premiums paid to affiliates.—Under the proposal, a U.S. non-life insurance company would be denied a deduction for certain excessive non-taxed reinsurance premiums paid to affiliates. 176 Limit earnings stripping by expatriated entities.—Under the proposal, the rules that limit the deductibility of interest paid to related persons subject to low or no U.S. tax on that interest would be amended to prevent inverted companies from using foreign-related-party and certain guaranteed debt to reduce inappropriately their U.S. tax liability. Repeal 80/20 company rules.—Under current law, if a U.S. corporation derives at least 80 percent of its gross income from an active foreign business (commonly referred to as an “80/20 company”) during a threeyear testing period, then all or a portion of the interest and dividends paid by the 80/20 company are not subject to U.S. withholding tax. Because the rules that apply to 80/20 companies are subject to manipulation, they are proposed to be repealed. Prevent avoidance of dividend withholding taxes.—Income earned by foreign persons with respect to equity swaps that reference U.S. equities would be treated as arising from U.S. sources to the extent that the income is determined to be attributable to dividends paid by a domestic corporation. This proposal would also ensure that economically equivalent transactions are subject to similar tax treatment and prevent avoidance of dividend withholding taxes by reforming the existing rules applicable to substitute dividends in a securities loan or a sale-repurchase transaction. Modify tax rules for dual capacity taxpayers.— The foreign tax credit rules that apply to taxpayers that are subject to a foreign levy and that also receive (directly or indirectly) a specific economic benefit from the levying country (so-called “dual capacity” taxpayers) would be tightened. Combat under-reporting of income through use of accounts and entities in offshore jurisdictions.—For too long, some American have evaded their taxpaying responsibilities by hiding unreported income in a foreign bank account, trust, or corporation. To reduce such evasion, the Administration proposes a series of measures to strengthen the information reporting and withholding systems that support U.S. taxation of income earned or held through offshore accounts or entities. Reform treatment of insurance companies and products.—The Administration proposes to reform the taxation of insurance companies and products through a series of legislative changes in domestic tax laws as described below: Modify rules that apply to sales of life insurance contracts.—The seller of a life insurance contract generally must report as taxable income the difference between the amount received from the buyer and the adjusted basis for the contract. When death benefits are received under the contract, the buyer is taxed on the excess of those benefits over the amounts paid for the contract, unless an exception to a “transfer-for-value rule” applies. Information reporting may not always be required in circumstances involving the ANALYTICAL PERSPECTIVES purchase of a life insurance contract. In response to the growth in the number and size of life settlement transactions, the proposal would expand information reporting on the sale of life insurance contracts and the payment of death benefits on contracts that were sold, and would modify the “transfer-for-value” exceptions to prevent purchasers of policies from avoiding tax on death benefits that are received. Modify dividends-received deduction for life insurance company separate accounts.—Under current law, a life insurance company is required to “prorate” its net investment income between a company’s share and a policyholder’s share. The result of this proration is used to limit the funding of tax-deductible reserve increases with tax-preferred income, such as certain corporate dividends and tax-exempt interest. The complexity of this regime has generated significant controversy between life insurance companies and the IRS, particularly with regard to the dividends-received deduction for such companies’ separate accounts. In some cases, the existing regime produces a company’s share that exceeds the company’s actual economic interest in the underlying income. The proposal would modify this regime to ensure that the benefits enjoyed by the company are more consistent with the company’s actual economic interest in the underlying income. Expand pro rata interest expense disallowance for corporate-owned life insurance (COLI).—The interest deductions of a business other than an insurance company are reduced to the extent the interest is allocable to unborrowed policy cash values on life insurance and annuity contracts. The purpose of this pro rata disallowance is to prevent the deduction of interest expense that is allocable to inside buildup that is either tax-deferred or not taxed at all. A similar disallowance applies with regard to reserve deductions of an insurance company. A current-law exception to this rule applies to contracts covering the lives of officers, directors and employees. Under the proposal, the exception for officers, directors and employees would be repealed unless those individuals are also 20-percent owners of the business that is the owner or beneficiary of the contracts. Thus, purchases of life insurance by small businesses and other taxpayers that depend heavily on the services of a 20-percent owner would be unaffected, but the funding of deductible interest expenses with tax-exempt or tax-deferred inside buildup would be curtailed. Permit partial annuitization of a nonqualified annuity contract.—A taxpayer who receives amounts under an annuity contract “as an annuity” is generally allowed to recover the investment in the contract ratably as payments are received. In contrast, a taxpayer who receives amounts under an annuity contract but not as an annuity (for example, as a lumpsum) is taxed on an income-first basis. Applying the income-first rule to the annuitization of only a portion of an annuity contract front-loads the reporting of income on a stream of payments and thus may discourage taxpayers from accessing funds that are needed 14. FEDERAL RECEIPTS such as for retirement. Under the proposal, the partial annuitization of a nonqualified annuity contract would be entitled to the same treatment as a complete annuitization of the contract. Eliminate fossil fuel tax preferences.—Current law provides a number of credits and deductions that are targeted towards certain oil, gas and coal activities. In accordance with the President’s agreement at the G-20 Summit in Pittsburgh to phase out subsidies for fossil fuels so that we can transition to a 21st century energy economy, the Administration proposes to repeal a number of tax preferences available for fossil fuels. The following tax preferences available for oil and gas activities are proposed to be repealed beginning in 2011: (1) the enhanced oil recovery credit for eligible costs attributable to a qualified enhanced oil recovery project; (2) the credit for oil and gas produced from marginal wells; (3) the expensing of intangible drilling costs; (4) the deduction for costs paid or incurred for any tertiary injectant used as part of a tertiary recovery method; (5) the exception to passive loss limitations provided to working interests in oil and natural gas properties; (6) the use of percentage depletion with respect to oil and gas wells; (7) the ability to claim the domestic manufacturing deduction against income derived from the production of oil and gas; and (8) two-year amortization of independent producer’s geological and geophysical expenditures, instead allowing amortization over the same seven-year period as for integrated oil and gas producers. The following tax preferences available for coal activities are proposed to be repealed beginning in 2011: (1) expensing of exploration and development costs; (2) percentage depletion for hard mineral fossil fuels; (3) capital gains treatment for royalties; and (4) the ability to claim the domestic manufacturing deduction against income derived from the production of coal and other hard mineral fossil fuels. Tax carried (profits) interests as ordinary income.— A partnership does not pay income tax; instead, the income or loss and associated character flows through to the partners who must include such items on their individual income tax return. Certain partners receive a partnership interest, typically an interest in future profits, in exchange for services (commonly referred to as a “carried interest”). Current law taxes the recipient of a carried interest on the value at the time granted, which may be based on the value the partner would receive if the partnership were liquidated immediately (for example, the value of an interest only in future profits would be zero). Because the partners, including partners who provide services, reflect their share of partnership items on their tax return in accordance with the character of the income at the partnership level, long-term capital gains and qualifying dividends attributable to carried interest may be taxed at a maximum 15-percent rate (the maximum tax rate on capital gains) rather than at ordinary income tax rates. The Administration proposes to designate any carried interest as a “services partnership interest” (SPI) and to tax a partner’s share of an SPI that is 177 not attributable to invested capital as ordinary income, regardless of the character of the income at the partnership level. In addition, the partner would be required to pay self-employment taxes on such income, and the gain recognized on the sale of an SPI that is not attributable to invested capital would generally be taxed as ordinary income, not as capital gain. However, any allocation of income or gain attributable to invested capital on the part of the partner would be taxed as ordinary income or capital gain based on its character to the partnership and any gain realized on a sale of the interest attributable to such partner’s invested capital would be treated as capital gain or ordinary income as provided under current law. Modify cellulosic biofuel producer credit.— Current law provides an income tax credit for cellulosic biofuel that is produced by the taxpayer. The credit is available (with certain exceptions for nonbusiness use) for all cellulosic biofuel sold or used by the producer. Cellulosic biofuel is defined as any liquid fuel that (i) is produced from any lignocellulosic or hemicellulosic matter that is available on a renewable or recurring basis and (ii) meets the registration requirements for fuels and fuel additives established by the Environmental Protection Agency under section 211 of the Clean Air Act (EPA registration requirements). Liquid byproducts derived from the processing of paper or pulp (known as black liquor when derived from the kraft process) are produced from lignocellulosic or hemicellulosic matter available on a renewable or recurring basis. Thus, any such liquid byproducts that meet the EPA registration requirements would qualify as cellulosic biofuel and, to the extent so qualifying, could result in substantial revenue losses and a windfall to the paper industry. The Administration proposes to exclude from the definition of cellulosic biofuel any fuels that (i) are more than 4 percent (by weight) water or sediment in any combination, or (ii) have an ash content of more than 1 percent (by weight). This change would exclude black liquor from eligibility for the credit. The change would be effective on the date of enactment. Eliminate advanced EITC.—Under current law, taxpayers eligible for the refundable EITC who have one or more qualifying children may elect to receive advanced payment of the credit through their employer. Since advance payments have been unpopular among eligible taxpayers and since recent research shows evidence of extensive non-compliance by employers and workers, the Administration proposes that effective for taxable years beginning after December 31, 2010, taxpayers would no longer be able to receive an advance against their expected EITC through their employer. Taxpayers with positive tax liability could, however, continue to receive any nonrefundable portion of the EITC during the year by adjusting their withholding. Deny deduction for punitive damages.—The Administration proposes to deny tax deductions for punitive damages paid or incurred by a taxpayer, whether upon a judgment or in settlement of a claim. Where the 178 liability for punitive damages is covered by insurance, such damages paid or incurred by the insurer would be included in the gross income of the insured person. This proposal would apply to damages paid or incurred after December 31, 2011. Repeal lower-of-cost-or-market inventory accounting method.—The Administration proposes to prohibit the use of the lower-of-cost-or-market and subnormal goods methods of inventory accounting, which currently allow certain taxpayers to take cost-of-goods-sold deductions on certain merchandise before the merchandise is sold. The proposed prohibition would be effective for taxable years beginning after twelve months from the date of enactment, and any resulting income inclusion would be recognized over a four-year period. Reduce the tax gap and make reforms.—The tax gap generally is the difference between the amount owed under the tax law and the amount actually paid on time. The Administration proposes to help reduce the tax gap through a number of legislative proposals that would expand information reporting, improve compliance by businesses, strengthen tax administration, and expand penalties. The Administration also proposes to make certain reforms in domestic tax laws to close loopholes in estate and gift taxation. The proposals to reduce the tax gap and make reforms are described below: Expand information reporting.—The Administration proposes to expand information reporting, as described below: Require information reporting on payments to corporations.—Generally, a taxpayer making payments to a recipient aggregating to $600 or more for services or determinable gains in the course of a trade or business in a calendar year is required to send an information return to the IRS setting forth the amount, as well as name and address of the recipient of the payment (generally on Form 1099). Under a longstanding regulatory regime, payments to corporations are generally excepted from this information reporting requirement. This exception has created compliance issues. Because this exception has been in place for many years and because Congress, during that time period, has made numerous changes to the information reporting rules, elimination of the exception should be made by legislative change. Accordingly, the Administration proposes that a business would be required to file an information return for payments for services or for determinable gains aggregating to $600 or more in a calendar year to a corporation (except a taxexempt corporation). Require information reporting for rental property expense payments.—The Administration proposes to subject recipients of rental income from real estate to the same information reporting requirements applicable to taxpayers engaged in a trade or business. Under the proposal, recipients ANALYTICAL PERSPECTIVES of rental income making payments of $600 or more to a service provider such as a plumber, painter or accountant in the course of earning rental income would be required to send an information return to the IRS and to the service provider. Exceptions to the reporting requirement would be made for particularly burdensome situations, such as for taxpayers (including members of the military) who rent their principal residence on a temporary basis, or for those who receive only small amounts of rental income per year. Require information reporting for private separate accounts of life insurance companies.—Earnings from direct investments in assets generally result in taxable income to the holder, whereas investment in comparable assets through a separate account of a life insurance company generally gives rise to tax-free or tax-deferred income. This favorable tax treatment is unavailable if the policyholder has so much control over the investments in the account that the policyholder, rather than the company, should be treated as the owner of those investments. The proposal would require information reporting with regard to each life insurance or annuity contract whose investment in a separate account represents at least 10 percent of the value of the account. Require a certified Taxpayer Identification Number (TIN) from contractors and allow certain withholding.—Currently, withholding is not required or permitted for payments to contractors. Since contractors are not subject to withholding, they may be required to make quarterly payment of estimated income taxes and self-employment (SECA) taxes near the end of each calendar quarter. An optional withholding method for contractors would reduce the burdens of having to make quarterly payments, would help contractors automatically set aside funds for tax payments, and would help increase compliance. Under the Administration’s proposal, a contractor receiving payments of $600 or more in a calendar year from a particular business would be required to furnish to the business the contractor’s certified Taxpayer Identification Number (TIN). A business would be required to verify the contractor’s TIN with the IRS, which would be authorized to disclose, solely for this purpose, whether the certified TIN-name combination matches IRS records. Contractors receiving payments of $600 or more in a calendar year from a particular business could require the business to withhold a flat rate percentage of their gross payments. Require increased information reporting for certain government payments for property and services.—Generally, a taxpayer making payments aggregating to $600 or more for services or determinable gains in the course of a trade or business in a calendar year is required to send an information return to the IRS (except if the recipient is a corporation) setting forth the amount, as well as the 14. FEDERAL RECEIPTS name and address of the recipient of the payment (generally on Form 1099). The Administration proposes additional legislation authorizing the IRS and Department of the Treasury to promulgate regulations requiring information reporting on all non-wage payments by Federal, State and local governments to procure property and services. Increase information return penalties.— Generally, compliance increases significantly with respect to amounts reported on information returns. To help ensure compliance with information return filing obligations, the Administration proposes to increase the penalties imposed under current law for failing to file information returns. The proposal would also provide that every five years the penalty amounts would be adjusted to account for inflation. Improve compliance by businesses.—The Administration proposes to improve compliance by businesses, as described below: Require greater electronic filing of returns.—Generally, compliance increases when taxpayers are required to provide better information to the IRS in usable form. The Administration proposes that regulatory authority be granted to the Department of the Treasury to require that information returns be filed electronically. Also, corporations and partnerships with assets of $10 million or more that are required to file Schedule M-3 would be required to file their tax returns electronically. In the case of certain other large taxpayers not required to file Schedule M-3 (such as exempt organizations), the regulatory authority to require electronic filing would allow reduction of the current threshold of filing 250 or more returns during a calendar year. Implement standards clarifying when employee leasing companies can be held liable for their clients’ Federal employment taxes.—Under present law, there is often uncertainty whether an employee leasing company or its client is liable for unpaid Federal employment taxes arising with respect to wages paid to the client’s workers. Providing standards for when an employee leasing company and its clients will be held liable for Federal employment taxes will facilitate the assessment, payment, and collection of those taxes and will preclude taxpayers who have control over withholding and payment of those taxes from denying liability when the taxes are not paid. Under the proposal, standards would be set forth for holding employee leasing companies jointly and severally liable with their clients for Federal employment taxes. The proposal would also provide standards for holding employee leasing companies solely liable for such taxes if they meet specified requirements. Increase certainty with respect to worker classification.—Under current law, worker classification as an employee or as a self-employed person (independent contractor) is generally based on 179 a common-law test for determining whether an employment relationship exists. Under a special provision (section 530 of the Revenue Act of 1978), a service recipient may treat a worker who may actually be an employee as an independent contractor for Federal employment tax purposes if, among other things, the service recipient has a reasonable basis for treating the worker as an independent contractor. If a service recipient meets the requirements of this special provision with respect to a class of workers, the IRS is prohibited from reclassifying the workers as employees, even prospectively. The special provision also prohibits the IRS from issuing generally applicable guidance about the proper classification of workers. The Administration proposes to permit the IRS to issue generally applicable guidance about the proper classification of workers and to permit the IRS to require prospective reclassification of workers who are currently misclassified and whose reclassification is prohibited under the special provision. Penalties would be waived for service recipients with only a small number of employees and a small number of misclassified workers, if the service recipient had consistently filed all required information returns reporting all payments to all misclassified workers and the service recipient agreed to prospective reclassification of misclassified workers. It is anticipated that after enactment new enforcement activity would focus mainly on obtaining the proper worker classification prospectively, since in many cases the proper classification of workers may not be clear. The proposal would be effective upon enactment, but the prospective reclassification for those covered by the special provision would not be effective until the first calendar year beginning at least one year after the date of enactment. Strengthen tax administration.—The Administration proposes to strengthen tax administration, as described below: Codify “economic substance” doctrine.—The economic substance doctrine is a judicial rather than statutory tax doctrine that has been used by the IRS and applied by the courts for many years to disallow tax benefits from transactions that do not meaningfully change a taxpayer’s economic position, even if the transactions technically comply with the Tax Code. The Administration proposes to create a new provision in the Tax Code clarifying that a transaction must have both objective economic substance and a business purpose to satisfy the judicial economic substance doctrine. The new provision would address what constitutes objective economic effects and a substantial nontax business purpose. A 30-percent penalty would be imposed on any understatement of tax resulting from a transaction lacking economic substance, even when the taxpayer has reasonable cause for the understatement. The penalty would be reduced to 20 percent 180 ANALYTICAL PERSPECTIVES for transactions that are adequately disclosed on the tax return or in a statement attached to the return. These proposed changes would be effective for transactions entered into after the date of enactment. Allow assessment of criminal restitution as tax.—Court-ordered restitution in criminal tax cases cannot be assessed as a tax, which prevents the IRS from using its existing assessment systems to collect and enforce the restitution obligation. This leads to unnecessary duplication of efforts, delays, and confusion in the administration of court-ordered restitution. The budget proposal would allow the IRS and Department of the Treasury to immediately assess, without issuing a statutory notice of deficiency, and collect as a tax debt court-ordered restitution. Revise offer-in-compromise application rules.— Current law provides that the IRS may compromise any civil or criminal case arising under the internal revenue laws prior to a referral to the Department of Justice for prosecution or defense. In 2006, a provision was enacted to require taxpayers to make certain nonrefundable payments with any initial offer-in-compromise of a tax case. Requiring nonrefundable payments with an offer-in-compromise may substantially reduce access to the offer-incompromise program. Reducing access to the offer-in-compromise program makes it more difficult and costly for the IRS to obtain the collectable portion of existing tax liabilities. Accordingly, the Administration proposes eliminating the requirements that an initial offer-in-compromise include a nonrefundable payment of any portion of the taxpayer’s offer. Expand IRS access to information in the National Directory of New Hires for tax administration purposes.—Employment data are useful to the IRS in administering a wide range of tax provisions, including verifying taxpayer claims and identifying levy sources. Currently, the IRS may obtain employment and unemployment data on a State-by-State basis, which is a costly and time-consuming process. Under the Administration’s proposals, the Social Security Act would be amended to expand IRS access to the National Directory of New Hires (NDNH) data for general tax administration purposes, including data matching, verification of taxpayer claims during return processing, preparation of substitute returns for non-compliant taxpayers, and identification of levy sources. Data obtained by the IRS from the NDNH would be protected by existing taxpayer privacy law, including civil and criminal sanctions. Make repeated willful failure to file a tax return a felony.—Current law provides that willful failure to file a tax return is a misdemeanor punishable by a term of imprisonment for not more than one year, a fine of not more than $25,000 ($100,000 in the case of a corporation), or both. The Administration would modify this rule such that any person who willfully fails to file tax returns in any three years within any five consecutive year period, if the aggregated tax liability for such period is at least $50,000, would be subject to a new aggravated failure to file criminal penalty. The proposal would classify such failure as a felony and, upon conviction, impose a fine of not more than $250,000 ($500,000 in the case of a corporation) or imprisonment for not more than five years, or both. Facilitate tax compliance with local jurisdictions.—Although Federal tax returns and return information (FTI) generally are confidential, the IRS and Treasury Department may share FTI with States as well as certain local government entities that are treated as States for this purpose. IRS and Treasury compliance activity, especially with respect to alcohol, tobacco and fuel excise taxes, may necessitate information sharing with Indian Tribal Governments (ITGs). The Administration’s proposal would specify that ITGs that impose alcohol, tobacco, or fuel excise taxes, or income or wage taxes, would be treated as States for purposes of information sharing to the extent necessary for ITG tax administration. The ITG that receives FTI would be required to safeguard it according to prescribed protocols. Extend statute of limitations where State adjustment affects Federal tax liability.—In general, additional Federal tax liabilities in the form of tax, interest, penalties and additions to tax must be assessed by the IRS within three years after the date a return is filed. Pursuant to agreement, the IRS and State and local revenue agencies exchange reports of adjustments made through examination so that corresponding adjustments can be made by each taxing authority. The general statute of limitations for assessment of Federal tax liabilities serves as a barrier to the effective use by the IRS of State and local tax adjustment reports when the reports are provided by the State or local revenue agency to the IRS with little time remaining for assessments to be made at the federal level. The Administration therefore proposes an additional exception to the general three-year statute of limitations for assessment of Federal tax liability resulting from adjustments to State or local tax liability. The statute of limitations would be extended only with respect to the increase in Federal tax attributable to the State or local tax adjustment. The statute of limitations would not be further extended if the taxpayer files additional amended returns for the same tax periods as the initial amended return or the IRS receives additional information from the State or local revenue agency under an information sharing agreement. Improve investigative disclosure statute.— Generally, tax return information is confidential, unless a specific exception in the Tax Code applies. In the case of tax administration, the Tax Code 14. FEDERAL RECEIPTS permits Treasury and IRS officers and employees to disclose return information to the extent necessary to obtain information not otherwise reasonably available, in the course of an audit or investigation, as prescribed by regulation. Treasury regulations effective since 2003 state that the term “necessary” in this context does not mean essential or indispensable, but rather appropriate and helpful in obtaining the information sought. Determining if an investigative disclosure is “necessary” is inherently factual, leading to inconsistent opinions by the courts. Eliminating this uncertainty from the statute would facilitate investigations by IRS officers and employees, while setting forth clear guidance for taxpayers, thus enhancing compliance with the Tax Code. Under the Administration’s proposal, the taxpayer privacy law would be clarified by stating that it does not prohibit Treasury and IRS officers and employees from identifying themselves, their organizational affiliation, and the nature and subject of an investigation, when contacting third parties in connection with a civil or criminal tax investigation. Expand penalties.—The Administration proposes to expand penalties, as described below: Clarify the bad check penalty applies to electronic checks and other payment forms.—The Tax Code imposes a penalty on any taxpayer who attempts to satisfy a tax liability with a check or money order that is not duly paid. Taxpayers use a variety of commercially acceptable instruments to pay tax liabilities, but only two types of instruments are covered by the Code’s bad check penalty: checks and money orders. The proposal would expand the bad check penalty to cover all commercially acceptable instruments of payment that are not duly paid. Impose a penalty on failure to comply with electronic filing requirements.—Certain corporations and tax-exempt organizations (including certain charitable trusts and private foundations) are required to file their returns electronically. Although there are additions to tax for the failure to file returns, there is no specific penalty in the Tax Code for a failure to comply with a requirement to file electronically. Electronic filing increases efficiency of tax administration because the provision of tax return information in an electronic form enables the IRS to focus audit activities where they can have the greatest impact. This also assists taxpayers where the need for audit is reduced. The Administration is proposing an assessable penalty for a failure to comply with a requirement of electronic (or other machine-readable) format for a return that is filed. The amount of the penalty would be $25,000 for a corporation or $5,000 for a tax-exempt organization. Modify estate and gift tax valuation discounts and make other reforms.—The Administration pro- 181 poses to close loopholes in estate and gift taxation, as described below: Require consistency in value for transfer and income tax purposes.—Current law provides generally that the basis of property inherited from a decedent is the property’s fair market value at the decedent’s death, and of property received by gift is the donor’s adjusted basis in the property, increased by the gift tax paid on the transfer. A special limitation applies if the property subsequently is sold by the donee at a loss. Although these are generally the same standards used to determine the value subject to estate or gift tax, there is no explicit consistency rule that would require the recipient of the property to use the value used for estate or gift tax purposes as the recipient’s basis in that property. The Administration proposes to require that, for decedents dying and gifts made after December 31 of the year of enactment, the recipient’s basis generally must equal (but in no event may exceed) the value of the property for estate or gift tax purposes, and a reporting requirement would be imposed on the decedent’s executor or the donee to provide the necessary information to both the recipient and the IRS. The proposal also would grant regulatory authority for the development of rules to govern situations in which this general rule would not be appropriate. Modify rules on valuation discounts.— Current law provides that the fair market value for estate and gift tax purposes of certain interests transferred intrafamily is to be determined without taking into consideration certain “applicable restrictions” that would otherwise justify discounts for lack of marketability and control in the determination of that value. Judicial decisions and the enactment of new statutes in most states, in effect, have made these rules inapplicable in many situations that were intended to be subject to those rules. In addition, additional arrangements have been identified which purport to reduce the value of the taxable transfer for transfer tax purposes, without reducing the economic value to the recipient of the transferred interest. The Administration proposes to create an additional category of “disregarded restrictions” that also would be ignored in valuing certain transferred interests. Those interests would be valued instead by assuming the applicability of certain assumptions to be specified in regulations. Disregarded restrictions would include limitations on a holder’s right to liquidate that holder’s interest that are more restrictive than a standard to be identified in regulations, and any limitation on a transferee’s ability to be admitted as a full partner or holder of an equity interest in the entity. The proposal would include additional rules to support the implementation of the proposal, and would include a grant of appropriate regulatory authority. Require a minimum term for grantor retained annuity trusts (GRATs).—Current law 182 ANALYTICAL PERSPECTIVES provides that the value of the remainder interest in a GRAT for gift tax purposes is determined by deducting the present value of the annuity to be paid during the GRAT term from the fair market value of the property contributed to the GRAT. If the grantor of the GRAT dies during that term, the portion of the trust assets needed to produce the annuity is included in the grantor’s gross estate for estate tax purposes. In practice, grantors commonly use brief GRAT terms (often of less than two years) and significant annuities to minimize both the risk of estate tax inclusion and the value of the remainder for gift tax purposes. The Administration proposes to require that, for all trusts created after the date of enactment, the GRAT must have a minimum term of ten years, the value of the remainder at the creation of the trust must be greater than zero, and the annuity must not decrease during the GRAT term. Upper-Income Tax Provisions Upper-income tax provisions dedicated to deficit reduction.—The Administration proposes to allow many of the 2001 and 2003 tax cuts for those making more than $250,000 per year to expire, as scheduled, at the end of 2010. The additional revenues would be devoted to deficit reduction:7 Expand the 28-percent rate and reinstate the 36-percent and 39.6-percent rates for those taxpayers with income over $250,000 (married filing a joint return) and $200,000 (single).—The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) split the 15-percent statutory individual income tax rate bracket of prior law into two tax rate brackets of 10 and 15 percent, and replaced the four remaining statutory individual income tax rate brackets of 28, 31, 36 and 39.6 percent with statutory tax rate brackets of 25, 28, 33 and 35 percent. When the tax rate brackets provided under EGTRRA expire on December 31, 2010, the Administration proposes to extend the tax rate brackets of 10, 15, 25 and 28 percent; to eliminate the tax rate brackets of 33 and 35 percent; and to reinstate the prior law tax rate brackets of 36 and 39.6 percent. These rate increases would apply to married taxpayers filing a joint return with income over $250,000 (at 2009 levels) and to single taxpayers with income over $200,000. The 28-percent tax rate bracket would be expanded so that taxpayers earning less than these amounts would not see their taxes rise as a result of the increased tax rate brackets. Reinstate the personal exemption phaseout and limitation on itemized deductions for those taxpayers with income over $250,000 (married filing a joint return) and $200,000 (single).—Prior to the enactment of EGTRRA, the deduction for personal 7 Under the Administration’s statutory PAYGO proposal, savings from allowing many of the 2001 and 2003 tax cuts for those making more than $250,000 to expire after 2010 are not counted as PAYGO savings. The additional revenues, therefore, cannot be used to pay for other polices under the PAYGO rules but, instead, must be devoted to deficit reduction. exemptions for the taxpayer and his or her dependents was phased out for taxpayers with AGI in excess of certain thresholds. In addition, the amount of otherwise allowable itemized deductions (other than medical expenses, investment interest, theft and casualty losses, and wagering losses) was reduced by three percent of AGI in excess of certain thresholds, but not by more than 80 percent. EGTRRA phased in the repeal of the phaseout of personal exemptions and the limitation on itemized deductions over a five-year period, 2006 through 2010. The Administration proposes to reinstate the limitations on personal exemptions and itemized deductions for married taxpayers filing joint returns with income over $250,000 (at 2009 levels) and for single taxpayers with income over $200,000, effective for taxable years beginning after December 31, 2010. Impose a 20-percent tax rate on capital gains and dividends for those taxpayers with income over $250,000 (married filing a joint return) and $200,000 (single).—Under the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA), the maximum tax rate on long-term capital gains was reduced from 20 percent to 15 percent for taxpayers in individual income tax rate brackets exceeding 15 percent, and from 10 percent to 5 percent (zero beginning in 2008) for lower-income taxpayers. JGTRRA also reduced the maximum tax rate on qualified dividends received by an individual shareholder to 15 percent for taxpayers in individual income tax rate brackets above 15 percent and to 5 percent (zero beginning in 2008) for lower-income taxpayers. Dividends had been taxed as ordinary income under prior law. The Administration proposes to increase the tax rate on qualified dividends and long-term capital gains to 20 percent for married taxpayers filing a joint return with income over $250,000 (at 2009 levels) and for single taxpayers with income over $200,000. The proposal would be effective for taxable years beginning after December 31, 2010. All other taxpayers would be taxed at the rates in effect in 2009. Limit the tax rate at which itemized deductions reduce tax liability to 28 percent.—The Administration proposes to limit the tax rate at which high-income taxpayers can take itemized deductions to a maximum of 28 percent, affecting only married taxpayers filing a joint return with income over $250,000 (at 2009 levels) and single taxpayers with income over $200,000. The proposed limitation would be effective for taxable years beginning after December 31, 2010. User Fees Support capital investment in the inland waterways.—In 1986, the Congress provided that commercial traffic on the inland waterways would be responsible for 50 percent of the capital costs of the locks and dams and of the other features that make barge transportation possible on the inland waterways. The current ex- 14. FEDERAL RECEIPTS cise tax of 20 cents per gallon on diesel fuel used in inland waterways commerce does not produce the revenue needed to cover the required 50 percent of these costs. The Budget proposes to replace the fuel tax with a new funding mechanism that raises the needed revenue in a way that is more efficient and more equitable than the fuel tax. It will preserve the landmark cost-sharing reform established by the Congress in 1986, while supporting inland waterways construction, replacement, expansion, and rehabilitation work. Increase fees for Migratory Bird Hunting and Conservation Stamps.—Federal Migratory Bird Hunting and Conservation Stamps, commonly known as “Duck Stamps,” were originally created in 1934 as the Federal licenses required for hunting migratory waterfowl. Today, ninety-eight percent of the receipts generated from the sale of these stamps ($15 per stamp per year) are used to acquire important migratory bird breeding areas, migration resting places, and wintering areas. The land and water interest located and acquired with the Duck Stamp funds establish or add to existing migratory bird refuges and waterfowl production areas. The price of the Duck Stamp has not increased since 1991; however, the cost of land and water has increased significantly over the past 18 years. The Administration proposes to increase these fees to $25 per stamp per year, effective beginning in 2011. Change retention policy for consular fees.—The Administration proposes to change retention policy for user fees related to passports, visas, and consular services. Additional details are provided in Chapter 15, “Offsetting Collections and Offsetting Receipts,” in this volume. Trade Initiatives Promote trade.—The Obama Administration is committed to opening markets for American producers. As a part of this effort, the Administration is working with Members of Congress and stakeholders to address outstanding issues and move forward on pending trade agreements with Panama, Colombia, and South Korea. The Administration also looks forward to working with Congress in an effort to reform U.S. preference programs. Additionally, in 2009 the President announced his intention to establish Reconstruction Opportunity Zones (ROZs) in Afghanistan and the border regions of Pakistan as part of the Administration’s broader counterterrorism strategy. The Administration will work closely with Congress and private sector stakeholders to implement these important trade initiatives. Other Initiatives Extend and modify the New Markets tax credit.— The new markets tax credit (NMTC) is a 39 percent credit for qualified equity investments made in qualified community development entities that are held for a period of seven years. The NMTC provisions expired at the end of 183 2009. The Administration proposes to extend the NMTC through 2011, with an allocation amount of $5 billion for each of 2010 and 2011. The proposal would also permit the NMTC to offset AMT liability. Reform and extend build America bonds.—ARRA created the build America bond program as an optional borrowing alternative for State and local governments on taxable bonds issued in 2009 and 2010 to finance new investments in governmental capital projects. Under the current program, the Department of the Treasury makes direct subsidy payments (called “refundable tax credits”) to State and local governmental issuers in a subsidy amount equal to 35 percent of the coupon interest on the bonds. The Administration proposes to make the successful build America bond program permanent in a way designed to be approximately revenue neutral in comparison to the Federal tax cost from traditional tax-exempt bonds. The Administration also proposes to expand the build America bond program beyond new investments in governmental capital projects to include certain additional uses for which State and local governments may use tax-exempt bonds under existing law. The proposed modifications to the build America bond program would be effective for bonds issued beginning in 2011. Restructure assistance to New York City, provide tax incentives for transportation infrastructure— Some of the tax benefits that were provided to New York following the attacks of September 11, 2001, likely will not be usable in the form in which they were originally provided. State and local officials in New York have concluded that improvements to transportation infrastructure and connectivity in the Liberty Zone would have a greater impact on recovery and continued development than would some of the existing tax incentives. The Administration proposes to provide tax credits to New York State and New York City for expenditures relating to the construction or improvement of transportation infrastructure in or connecting to the New York Liberty Zone. New York State and New York City each would be eligible for a tax credit for expenditures relating to the construction or improvement of transportation infrastructure in or connecting to the New York Liberty Zone. The tax credit would be allowed in each year from 2011 to 2020, inclusive, subject to an annual limit of $200 million (for a total of $2 billion in tax credits), and would be divided evenly between the State and the City. Any unused credits below the annual limit would be added to the $200 million annual limit for the following year, including years after 2020. Similarly, any expenditures that exceeded the limit would be carried forward and subtracted from the annual limit in the following year. The credit would be allowed against any payments (other than payments of excise taxes and social security and Medicare payroll taxes) made by the City and State under any provision of the Tax Code, including income tax withholding. Implement unemployment insurance integrity legislation.—The Administration has a multi-part proposal 184 to strengthen the financial integrity of the unemployment insurance (UI) system and to encourage the early reemployment of UI beneficiaries. The Administration’s proposal will boost States’ ability to recover benefit overpayments and deter tax evasion schemes by permitting them to use a portion of recovered funds to expand enforcement efforts in these areas, including identification of misclassified employees. In addition, the proposal would require States to impose a monetary penalty on UI benefit fraud, which would be used to reduce overpayments; require States to charge employers found to be at fault when their actions lead to overpayments; expand collection of delinquent UI overpayments and employer taxes through garnishment of Federal tax refunds; and improve the accuracy of hiring data in the National Directory of New Hires, which would reduce benefit overpayments. These efforts to strengthen the financial integrity of the UI system and encourage early reemployment of UI beneficiaries will keep State UI taxes down and improve the solvency of the State trust funds. Levy payments to Federal contractors with delinquent tax debt.—The Budget proposes two changes to the Department of the Treasury’s debt collection procedures that will increase the amount of delinquent taxes collected from Federal contractors. While the IRS can initiate enforcement proceedings against delinquent tax filers in order to collect taxes owed, Treasury can also reduce a Government payment owed to a contractor to collect unpaid taxes. However, Treasury generally must wait until all debt collection administrative procedures are complete before reducing a Government payment. Typically, by the time this lengthy process is finished, Treasury has already paid the Federal contractor, thus resulting in a lost opportunity to collect taxes owed. Under the first proposal, Treasury will be allowed to reduce payments before all debt collection administrative procedures are complete, and will therefore collect more unpaid taxes. Further, pursuant to the American Jobs Creation Act of 2004, Treasury is authorized to levy 100 percent of Federal contractor payments in order to collect delinquent debt. However, the language contains an imperfection that has the unintended effect of limiting the levy to 15 percent of certain payments. The second proposal will allow Treasury to levy up to 100 percent of a Federal contractor payment. Implement program integrity allocation adjustments—IRS.—The Administration proposes a program integrity allocation adjustment of $1,115 million for the IRS. Allocation adjustments have been used by past administrations and Congresses to help protect increases above a base level for certain activities that generate benefits that exceed programmatic costs. The adjustment permits specified program increases above the ceiling, or allocation limit, provided in the annual congressional appropriations process, but these increases are granted only if appropriations bills increase funding for the specified integrity purposes. In previous years, the allocation adjustment applied to the total enforcement activity level, which included the ANALYTICAL PERSPECTIVES entirety of the Enforcement account and over half of the Operations Support account. As in 2010, for 2011 the Administration proposes to apply the allocation adjustment separately to the Enforcement account base ($790 million of the allocation adjustment) and the proportion of the Operations Support appropriation that directly supports Enforcement account activities ($325 million of the allocation adjustment). The Administration proposes this adjusted structure because it mitigates budget execution problems that may arise independently of the Administration’s request. Further, the structure applies the allocation adjustment to the enforcement resources most directly involved in generating return-on-investment in the form of additional receipts. Within the enforcement activity funding, IRS will continue initiatives implemented with 2010 appropriations and establish new initiatives that will bring in an estimated $1.9 billion in additional receipts for each year of work, once new hires reach full productivity in 2013. Not only will these resources help the IRS continue to increase the roughly $50-$60 billion in enforcement revenues generated each year, but they will also help close the tax gap, defined as the difference between taxes owed and those paid on time. The 2011 allocation adjustment will, among other areas, target international tax compliance of highnet worth individuals and corporations, thereby helping the IRS reduce that specific portion of the tax gap. Allow offset of Federal income tax refunds to collect delinquent State income taxes for out-of-stateresidents.—Under current law, federal tax refunds may be offset to collect delinquent State income tax obligations but only if the delinquent taxpayer resides in the State collecting the tax. The proposal would allow federal tax refunds to be offset to collect delinquent State tax obligations regardless of where the debtor resides. Revise terrorism risk insurance program.—The terrorism risk insurance program (TRIP), which was established under the Terrorism Risk Insurance Act of 2002, was expanded and extended through December 31, 2014, under the Terrorism Risk Insurance Program Reauthorization Act of 2007. The reauthorization expanded coverage to include acts of domestic terrorism and set up a mechanism for the Federal government to recoup 133 percent of Federal payments under the program, up to a maximum of $27.5 billion, through a surcharge imposed on insurance premiums. The Administration proposes to lessen Federal intervention in this insurance market and reduce the subsidy to private insurers (that is, increase the private sector share of losses). Beginning in 2011, after the economy is expected to stabilize, and then again in 2013, the proposal would increase private insurer’s deductibles and co-payments. The minimum qualifying size of a terrorist attack (known as the “event trigger”) would be increased once in 2011. The proposal removes coverage for acts of domestic terrorism and requires insurers to pay back only 100 percent rather than 133 percent of the Federal payments made under the program. Under the proposal TRIP expires December 31, 2014, consistent with current law. 185 14. FEDERAL RECEIPTS Allowances Health insurance reform.—The Budget includes the average receipt and outlay effects of the House and Senate health insurance reform bills as passed by those houses and scored by the Congressional Budget Office (CBO) in December 2009. The CBO receipt estimates are adjusted to remove overlap between the bills and proposals in the Budget. Jobs initiatives.—The Administration will work with Congress to enact a job creation package along the lines the President announced in December 2009. A number of specific jobs initiatives are included in the Budget, and, as a placeholder for additional initiatives, the Budget includes $100 billion, with this cost split equally between receipts and outlays. Table 14–3. EFFECT OF PROPOSALS (In millions of dollars) 2010 Temporary Recovery Measures: Extend making work pay tax credit 1 .................................. Receipt effect of providing $250 Economic Recovery Payments: Provide $250 refundable credit for Federal , State and local government retirees not eligible for social security benefits 1 ................................................... Interaction of the $250 Economic Recovery Payments with the making work pay tax credit 1 ..................... Subtotal, receipt effect of providing $250 Economic Recovery Payments ........................ Extend COBRA health insurance premium assistance 1 .... Provide additional tax credits for investment in qualified property used in a qualified advanced energy manufacturing project .................................................... Extend temporary increase in expensing for small businesses ..................................................................... Extend temporary bonus depreciation for certain property Extend option for cash assistance to States in lieu of housing tax credits 1 ...................................................... Total, temporary recovery measures ........................... Tax Cuts for Families and Individuals: Expand earned income tax credit 1 ..................................... Expand child and dependent care tax credit 1 .................... Provide for automatic enrollment in IRAs and double the tax credit for small employer plan startup costs 1 .......... Expand saver’s credit 1 ....................................................... Extend American opportunity tax credit 1 ........................... Total, tax cuts for families and individuals ................... 2011 2012 ......... –30,132 –31,075 2013 2014 2015 2016 2017 2018 2019 2020 2011-15 2011-20 ......... ......... ......... ......... ......... ......... ......... ......... –61,207 –61,207 –38 –212 ......... ......... ......... ......... ......... ......... ......... ......... ......... –212 –212 ......... 2,436 ......... ......... ......... ......... ......... ......... ......... ......... ......... 2,436 2,436 –38 2,224 –3,188 –5,237 ......... –228 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 2,224 –5,465 2,224 –5,465 –731 –1,145 –1,114 –539 –122 72 114 62 26 –3,813 –3,661 12 744 583 13,235 753 20,099 ......... –284 –706 –440 434 –22,445 –15,216 11,912 268 7,478 186 5,149 135 3,912 76 2,580 43 1,685 24 1,063 15 792 –2,435 –1,798 91 –28,812 –50,883 –19,597 269 6,870 429 4,650 511 4,019 538 3,072 538 2,338 538 1,739 538 1,407 ......... ......... 538 –498 2,192 1,320 –54,941 –45,065 –85 –1,674 –1,645 –1,636 –1,628 –1,639 –1,663 –1,692 –1,730 –1,766 –377 –1,345 –1,359 –1,368 –1,373 –1,377 –1,374 –1,365 –1,354 –1,349 ......... ......... –506 –825 –876 –982 –1,113 –1,261 ......... –323 –2,683 –2,996 –3,029 –3,109 –3,195 –3,323 ......... –951 –6,875 –7,444 –7,815 –8,400 –8,841 –8,632 ......... –1,736 –13,083 –14,269 –14,724 –15,492 –16,165 –16,253 –1,423 –3,490 –8,738 –16,708 –1,604 –3,716 –8,870 –17,274 –6,668 –15,158 –5,822 –12,641 –1,801 –3,189 –10,391 –3,910 –12,140 –29,774 –8,907 –31,485 –75,473 –17,733 –59,304 –143,437 Tax Cuts for Businesses: Eliminate capital gains taxation on small businesses ......... ......... ......... ......... ......... –55 –280 –731 –1,217 –1,591 –1,933 –2,248 –335 –8,055 Make research and experimentation tax credit permanent –3,044 –5,346 –5,969 –6,622 –7,286 –7,945 –8,597 –9,244 –9,887 –10,530 –11,182 –33,168 –82,608 Remove cell phones from listed property ........................... –69 –277 –226 –238 –248 –266 –281 –296 –314 –332 –348 –1,255 –2,826 Total, tax cuts for businesses ...................................... –3,113 –5,623 –6,195 –6,860 –7,589 –8,491 –9,609 –10,757 –11,792 –12,795 –13,778 –34,758 –93,489 Continue Certain Expiring Provisions Through Calendar Year 2011 1, 2 ....................................................................... –8,867 –21,539 –11,926 –2,205 –1,581 –1,422 –1,309 –1,013 –1,138 –1,435 –3,109 –38,673 –46,677 Other Revenue Changes and Loophole Closers: Reform treatment of financial institutions and products: Impose a financial crisis responsibility fee .................. Require accrual of income on forward sale of corporate stock ....................................................... Require ordinary treatment of income from day-today dealer activities for certain dealers of equity options and commodities ........................................ Modify the definition of “control” for purposes of section 249 ............................................................. Subtotal, reform treatment of financial institutions and products .................................................... Reinstate Superfund taxes 2 ............................................... Make unemployment insurance surtax permanent 2 .......... ......... 8,000 8,000 9,000 9,000 9,000 9,000 9,000 9,000 10,000 10,000 43,000 90,000 1 5 12 19 26 33 36 38 40 42 44 95 295 49 169 214 226 240 254 270 286 303 321 341 1,103 2,624 2 15 30 32 34 36 38 41 43 46 48 147 363 52 ......... ......... 8,189 1,203 ......... 8,256 1,608 1,458 9,277 1,729 1,501 9,300 1,837 1,539 9,323 1,921 1,571 9,344 1,995 1,596 9,365 2,068 1,616 9,386 10,409 10,433 2,129 2,196 2,239 1,631 1,642 1,642 44,345 8,298 6,069 93,282 18,925 14,196 186 ANALYTICAL PERSPECTIVES Table 14–3. EFFECT OF PROPOSALS—Continued (In millions of dollars) 2010 Repeal LIFO method of accounting for inventories ............ Repeal gain limitation for dividends received in reorganization exchanges .............................................. Reform U.S. international tax system: Defer deduction of interest expense related to deferred income ...................................................... Reform foreign tax credit: Determine the foreign tax credit on a pooling basis ......................................... Reform foreign tax credit: Prevent splitting of foreign income and foreign taxes ....................................... Tax currently excess returns associated with transfers of intangibles offshore ............................................ Limit shifting of income through intangible property transfers .................................................................. Disallow the deduction for excess non-taxed reinsurance premiums paid to affiliates .................. Limit earnings stripping by expatriated entities ........... Repeal 80/20 company rules ....................................... Prevent avoidance of dividend withholding taxes ........ Modify tax rules for dual capacity taxpayers ................ Combat under-reporting of income through use of accounts and entities in offshore jurisdictions 2 ...... Subtotal, reform U.S. international tax system ...... Reform treatment of insurance companies and products: Modify rules that apply to sales of life insurance contracts ................................................................. Modify dividends-received deduction for life insurance company separate accounts ................................... Expand pro-rata interest expense disallowance for corporate-owned life insurance (COLI) ................... Permit partial annuitization of a nonqualified annuity contract ................................................................... Subtotal, reform treatment of insurance companies and products .................................. Eliminate fossil fuel tax preferences: Eliminate oil and gas preferences: Repeal enhanced oil recovery credit 3 .................. Repeal credit for oil and gas produced from marginal wells 3 ................................................ Repeal expensing of intangible drilling costs ........ Repeal deduction for tertiary injectants ................ Repeal exception to passive loss limitations for working interests in oil and natural gas properties ......................................................... Repeal percentage depletion for oil and natural gas wells .......................................................... Repeal domestic manufacturing deduction for oil and natural gas companies .............................. Increase geological and geophysical amortization period for independent producers to seven years ................................................................ Subtotal, eliminate oil and gas preferences ... Eliminate coal preferences: Repeal expensing of exploration and development costs ................................................................ Repeal percentage depletion for hard mineral fossil fuels ........................................................ Repeal capital gains treatment for royalties .......... Repeal domestic manufacturing deduction for coal and other hard mineral fossil fuels ................... Subtotal, eliminate coal preferences .............. Subtotal, eliminate fossil fuel tax preferences ......................................... Tax carried (profits) interests as ordinary income ............... Modify cellulosic biofuel producer credit ............................. 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011-15 2011-20 ......... ......... 2,667 6,007 7,070 7,120 7,162 7,224 7,207 7,278 7,350 22,864 59,085 ......... 46 77 78 78 81 83 85 86 86 88 360 788 ......... 2,024 3,357 3,343 3,350 3,434 3,520 3,572 1,803 613 626 15,508 25,642 ......... 1,928 3,198 3,184 3,191 3,271 3,353 3,403 3,439 3,462 3,532 14,772 31,961 ......... 1,226 2,223 2,494 2,707 2,875 3,006 3,106 3,186 3,253 3,327 11,525 27,403 ......... 635 1,580 1,573 1,577 1,616 1,657 1,681 1,699 1,711 1,745 6,981 15,474 ......... 12 32 54 78 104 131 159 189 220 254 280 1,233 ......... ......... ......... 219 ......... 22 211 83 275 381 53 352 111 135 676 54 353 111 91 734 54 356 112 94 788 50 368 116 96 846 50 379 120 97 907 54 385 122 102 972 58 390 123 109 1,044 60 393 124 115 1,121 64 402 127 123 1,080 233 1,640 533 691 3,425 519 3,589 1,149 1,237 8,549 27 246 72 161 716 919 447 381 549 686 740 762 6,869 11,878 12,707 13,226 13,223 13,601 14,105 12,726 11,812 12,042 2,315 5,433 57,903 122,189 ......... 22 71 84 101 117 136 156 179 204 233 395 1,303 ......... 149 379 407 432 441 468 492 511 512 515 1,808 4,306 ......... 20 87 183 276 437 659 910 1,293 1,731 2,188 1,003 7,784 ......... 5 21 39 59 81 105 132 160 192 226 205 1,020 ......... 196 558 713 868 1,076 1,368 1,690 2,143 2,639 3,162 3,411 14,413 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 1,202 5 ......... 1,582 9 ......... 1,089 9 ......... 914 8 ......... 848 7 ......... 694 6 ......... 482 6 ......... 374 5 ......... 344 6 ......... 310 6 ......... 5,635 38 ......... 7,839 67 ......... 20 24 19 18 17 17 17 16 16 16 98 180 ......... 522 895 933 969 1,009 1,052 1,095 1,141 1,184 1,226 4,328 10,026 ......... 851 1,470 1,559 1,650 1,742 1,831 1,920 2,007 2,096 2,188 7,272 17,314 ......... ......... 44 2,644 160 4,140 246 3,855 231 3,790 177 3,800 122 3,722 67 3,587 28 3,571 17 3,663 18 3,764 858 18,229 1,110 36,536 ......... 32 55 49 45 45 44 40 37 34 32 226 413 ......... 10 57 18 98 25 102 48 106 67 109 78 111 87 115 95 119 103 122 111 123 119 472 236 1,062 751 ......... 10 3 110 5 183 5 204 5 223 6 238 6 248 6 256 7 266 7 274 7 281 24 958 57 2,283 10 ......... 784 2,754 1,452 6,569 4,323 3,289 8,058 4,059 3,914 4,901 4,013 3,741 2,659 4,038 3,176 1,491 3,970 2,534 309 3,843 1,975 ......... 3,837 1,530 ......... 3,937 1,355 ......... 4,045 1,011 ......... 19,187 15,572 23,678 38,819 23,977 23,987 187 14. FEDERAL RECEIPTS Table 14–3. EFFECT OF PROPOSALS—Continued (In millions of dollars) 2010 Eliminate advanced earned income tax credit 1 ................. Deny deduction for punitive damages ................................ Repeal lower-of-cost-or-market inventory accounting method ........................................................................... Reduce the tax gap and make reforms: Expand information reporting: Require information reporting on payments to corporations ..................................................... Require information reporting for rental property expense payments ........................................... Require information reporting for private separate accounts of life insurance companies .............. Require a certified Taxpayer Identification Number from contractors and allow certain withholding Require increased information reporting for certain government payments for property and services ............................................................ Increase information return penalties ................... Improve compliance by businesses: Require greater electronic filing of returns ............ Implement standards clarifying when employee leasing companies can be held liable for their clients’ Federal employment taxes ................... Increase certainty with respect to worker classification .................................................... Strengthen tax administration: Codify “economic substance” doctrine .................. Allow assessment of criminal restitution as tax .... Revise offer-in-compromise application rules ....... Expand IRS access to information in the National Directory of New Hires for tax administration purposes .......................................................... Make repeated willful failure to file a tax return a felony ............................................................... Facilitate tax compliance with local jurisdictions ... Extend statute of limitations where State adjustment affects Federal tax liability ............. Improve investigative disclosure statute ............... Expand penalties: Clarify the bad check penalty applies to electronic checks and other payment forms ..................... Impose a penalty on failure to comply with electronic filing requirements ........................... Modify estate and gift valuation discounts and make other reforms: Require consistency in value for transfer and income tax purposes ........................................ Modify rules on valuation discounts ...................... Require a minimum term for grantor retained annuity trusts (GRATs) ..................................... Subtotal, reduce the tax gap and make reforms ...................................................... Total, other revenue changes and loophole closers .................................. 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011-15 2011-20 ......... ......... 120 ......... 72 22 70 32 69 33 68 34 69 35 69 36 72 38 74 38 77 39 399 121 760 307 ......... ......... 286 1,423 2,045 1,402 1,127 283 296 309 323 5,156 7,494 ......... 84 612 777 924 983 1,040 1,095 1,152 1,212 1,275 3,380 9,154 ......... 179 267 281 296 312 327 342 357 372 387 1,335 3,120 ......... 1 2 3 4 4 6 7 8 10 13 14 58 ......... 17 44 63 72 76 79 83 86 90 94 272 704 ......... ......... 25 20 70 34 58 35 28 35 30 36 32 42 34 43 35 43 37 44 39 44 211 160 388 376 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 4 6 6 7 7 7 8 8 9 9 30 71 ......... 11 214 543 688 766 848 933 1,020 1,112 1,208 2,222 7,343 ......... ......... 1 23 ......... 3 77 3 3 157 4 3 272 4 3 366 4 3 476 4 3 593 4 3 682 4 3 758 4 3 838 4 4 895 15 15 4,242 35 31 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 1 ......... 1 1 1 1 1 1 2 1 2 1 2 1 2 1 10 6 ......... ......... 3 ......... 4 ......... 4 ......... 4 1 4 1 5 1 5 1 5 2 5 2 6 2 19 2 45 10 ......... 1 2 2 2 3 3 3 3 4 4 10 27 ......... ......... ......... ......... ......... 1 1 1 2 2 2 1 9 40 ......... 135 666 171 1,413 182 1,531 192 1,671 204 1,818 216 1,972 229 2,135 243 2,305 258 2,484 273 2,672 884 7,099 2,103 18,667 ......... 15 46 93 160 231 308 389 477 570 670 545 2,959 41 1,187 2,968 3,742 4,364 4,851 5,372 5,910 6,438 6,979 7,547 17,112 49,358 1,133 28,585 45,520 50,153 50,842 49,375 48,565 48,269 47,519 48,754 49,998 224,475 467,580 Upper-Income Tax Provisions: Upper-income tax provisions dedicated to deficit reduction: Expand the 28-percent rate and reinstate the 36-percent and 39.6-percent rates for those taxpayers with income over $250,000 (married) and $200,000 (single) ............................................. Reinstate the personal exemption phaseout and limitation on itemized deductions for those taxpayers with income over $250,000 (married) and $200,000 (single) ............................................. 14,509 26,217 29,295 32,556 35,676 38,809 41,960 45,135 48,399 51,883 138,253 364,439 ......... 6,840 14,925 17,119 18,991 20,808 22,571 24,324 26,054 27,687 29,170 78,683 208,489 188 ANALYTICAL PERSPECTIVES Table 14–3. EFFECT OF PROPOSALS—Continued (In millions of dollars) 2010 Impose 20-percent tax rate on capital gains and dividends for those taxpayers with income over $250,000 (married) and $200,000 (single) ............. Subtotal, upper-income tax provisions dedicated to deficit reduction ............................................ Limit the tax rate at which itemized deductions reduce tax liability to 28 percent ..................................................... Total, upper-income tax provisions ....................... User Fees: Support capital investment in the inland waterways 2 ......... Increase fees for Migratory Bird Hunting and Conservation Stamps .......................................................................... Change retention policy for consular fees .......................... Total, user fees ............................................................ Trade Initiatives: Promote trade 2 .................................................................. Other Initiatives: Extend and modify the New Markets tax credit .................. Reform and extend build America bonds 1 ......................... Restructure assistance to New York City: Provide tax incentives for transporation infrastructure ...................... Implement unemployment insurance integrity legislation 2 4 ... Levy payments to Federal contractors with delinquent tax debt: Authorize post-levy due process ................................. Increase levy authority to 100 percent for vendor payments ................................................................ Subtotal, levy payments to Federal contractors with delinquent tax debt 4 ................................. Implement program integrity allocation adjustments—IRS 4 .... Allow offset of Federal income tax refunds to collect delinquent State income taxes for out-of-state residents ..... Revise terrorism risk insurance program 4 .......................... Total, other initiatives ................................................... 2011 1,344 12,165 2012 –263 2013 3,315 2014 2015 2016 2017 2018 2019 2020 8,230 11,372 12,370 13,288 14,162 14,973 15,752 2011-15 2011-20 34,819 105,364 1,344 33,514 40,879 49,729 59,777 67,856 73,750 79,572 85,351 91,059 96,805 251,755 678,292 ......... 7,896 21,582 24,500 27,019 29,351 31,570 33,938 36,268 38,426 40,625 110,348 291,175 1,344 41,410 62,461 74,229 86,796 97,207 105,320 113,510 121,619 129,485 137,430 362,103 969,467 ......... ......... 196 163 187 129 100 72 70 68 68 675 1,053 ......... ......... ......... 14 –782 –768 14 –810 –600 14 –825 –648 14 –840 –639 14 –857 –714 14 –873 –759 14 –891 –805 14 –909 –825 14 –927 –845 14 –946 –864 70 –4,114 –3,369 140 –8,660 –7,467 ......... –145 –430 –552 –606 –647 –680 –705 –729 –753 –777 –2,380 –6,024 ......... ......... –113 8 –229 –3 –345 –3 –430 –3 –480 –4 –511 –4 –510 –4 –441 –4 –279 –4 –103 –3 –1,597 –5 –3,441 –24 ......... ......... –200 ......... –200 42 –200 42 –200 16 –200 –4 –200 –75 –200 –175 –200 189 –200 –138 –200 –179 –1,000 96 –2,000 –282 ......... 77 115 119 124 109 113 118 122 127 132 544 1,156 ......... 61 87 86 90 78 82 85 88 92 96 402 845 ......... ......... 138 385 202 1,164 205 2,355 214 3,955 187 6,015 195 7,987 203 9,238 210 219 228 9,931 10,378 10,809 946 13,874 2,001 62,217 ......... ......... ......... ......... ......... 218 ......... –21 955 ......... –18 2,036 ......... –45 3,507 ......... –99 5,415 ......... –173 7,219 ......... –205 8,347 ......... –6 9,679 ......... –183 12,131 ......... –603 57,868 ......... ......... –21 –15 9,955 10,537 Allowances: Health insurance reform ..................................................... ......... 16,000 17,500 40,500 57,000 75,500 89,500 98,000 106,500 116,000 126,500 206,500 743,000 Jobs initiatives .................................................................... –12,000 –25,000 –8,000 –3,000 –2,000 ......... ......... ......... ......... ......... ......... –38,000 –38,000 Total, allowances ......................................................... –12,000 9,000 –9,500 37,500 55,000 75,500 89,500 98,000 106,500 116,000 126,500 168,500 705,000 Total, effect of proposals ................................................. –50,315 –19,481 66,605 146,254 175,656 204,750 225,154 240,931 255,864 272,499 289,524 573,784 1,857,756 This proposal affects both receipts and outlays. Both effects are shown here. The outlays effects included in these estimates are listed below: 1 2010 Extend making work pay tax credit ................. Provide $250 refundable credit for Federal , State and local government retirees not eligible for social security benefits ............. Interaction of the $250 Economic Recovery Payments with the making work pay tax credit ............................................................ Extend COBRA health insurance premium assistance ................................................. Extend option for cash assistance to States in lieu of housing tax credits ...................... Expand earned income tax credit ................... Expand child and dependent care tax credit .. Provide for automatic enrollment in IRAs and double the tax credit for small employer plan startup costs ..................................... Expand saver’s credit ..................................... Extend American opportunity tax credit ......... Continue certain expiring provisions through calendar year 2011 .................................... 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011–15 2011–20 ......... 703 21,265 ......... ......... ......... ......... ......... ......... ......... ......... 21,968 21,968 ......... 100 ......... ......... ......... ......... ......... ......... ......... ......... ......... 100 100 ......... –365 ......... ......... ......... ......... ......... ......... ......... ......... ......... –365 –365 319 524 23 ......... ......... ......... ......... ......... ......... ......... ......... 547 547 2,435 ......... ......... 1,815 83 ......... ......... 1,667 399 ......... 1,635 406 ......... 1,628 403 ......... 1,622 398 ......... 1,634 403 ......... 1,659 406 ......... 1,689 408 ......... 1,726 407 ......... 1,762 409 1,815 6,635 1,606 1,815 15,105 3,639 ......... ......... ......... ......... 570 ......... 83 3,715 2,941 146 1,402 3,058 149 1,369 3,146 158 1,366 3,268 177 1,349 3,441 200 1,337 3,363 223 1,339 3,330 250 1,340 3,310 281 1,353 3,302 536 8,422 12,413 1,667 15,140 29,159 66 91 23 ......... ......... ......... ......... ......... ......... ......... ......... 114 114 189 14. FEDERAL RECEIPTS Table 14–3. EFFECT OF PROPOSALS—Continued (In millions of dollars) 2010 2 3 4 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Eliminate advanced earned income tax ........ ......... –120 –72 –70 –69 –68 –69 –69 –72 –74 –77 Reform and extend build America bonds ....... ......... 266 1,216 2,630 4,108 5,608 7,105 8,595 10,078 11,554 13,023 Total, outlay effects of receipt proposals .. 2,820 3,667 31,260 9,207 10,734 12,352 14,040 15,491 16,995 18,513 20,053 Net of income offsets. This provision is estimated to have zero receipt effect under the Adminstration’s current projections for energy prices. The receipt effect of a spending initiative. 2011-15 2011-20 –399 –760 13,828 64,183 67,220 152,312 IMPROVING TAX FAIRNESS AND FEDERAL FINANCES THROUGH BETTER TAX COMPLIANCE The IRS collects over 95 percent of gross (pre-refund) governmental receipts. The IRS collected roughly $2.35 trillion in 2009. However, not every dollar of tax legally owed is actually paid. The great majority of taxpayers comply with the law by filing returns and paying their taxes on time, but some do not comply, either because they do not understand their obligations due to the complexity of the tax law or because they seek to avoid those obligations. Tax Compliance In 2006, the IRS released updated results of its first large study in two decades of the difference between taxes owed and taxes actually paid—the “tax gap.” The IRS estimated that taxpayers initially underpaid by $345 billion for tax year 2001. This equates to a voluntary compliance rate of roughly 84 percent. Late payments and IRS enforcement action reduced this to a net tax gap of $290 billion, raising the net compliance rate to 86 percent. The Department of the Treasury does not have estimates of the tax gap for the years after 2001, though current efforts are underway to provide a new estimate and subsequently update it annually. Due to changes in methodologies, comparisons between the 2001 estimates and those from earlier studies should be made cautiously. However, it appears that the voluntary compliance rate has not changed much since the 1980s. The IRS previously reported voluntary compliance rates of 87 percent in 1988, 86 percent in 1985, and 84 percent in 1983. While the overall compliance rate seems to have moved relatively little over time, each 1 percentage point change significantly affects revenue. A 1 percentage point improvement would increase revenue by over $20 billion per year. The IRS compliance estimates, primarily based on random audits of individuals and businesses, are not precise, but give a general sense of the size of the tax gap and patterns in compliance. This type of information is critical for effectively targeting IRS enforcement programs to yield revenue while minimizing the cost and burden on taxpayers. The IRS’ estimates are most accurate for underpayments of known taxes as record- ed in IRS financial systems, and for individual income tax reporting compliance through the recent National Research Program (NRP) random study. Non-filing estimates come from studies of Census data and are somewhat less precise. The weakest portions of the IRS’ estimates are in areas where no recent studies have been completed and the IRS is relying on older data (e.g., for corporations). Of the total tax gap, 83 percent comes from underreporting of tax liability. A significant portion of the gap also comes from underpayment of known tax debts and people who fail to file returns. Individual income taxes, the largest source of Federal receipts, account for 71 percent of the tax gap. The highest compliance rates are found in areas where the IRS has good information about income because it is reported by third parties (e.g., Form W-2, which reports wage income from employers, and Form 1099, which reports various third-party payments, including interest from banks). The IRS estimates that 95 percent of income with substantial third-party reporting but no tax withholding (e.g., interest income and dividends) is declared on taxpayer returns. Where there is tax withholding, as in the case of most wages, nearly 99 percent of the amounts reported by payers are declared on taxpayer returns. The 2011 Budget contains a collection of proposals that will increase third-party reporting and drive additional compliance. Conversely, the rate of underpaid taxes is high for income with little or no third-party reporting. For example, an estimated 43 percent of business income that should have been reported on individual returns (e.g., farm income and non-farm proprietor income) is misreported. Improving Tax Compliance While the tax gap can likely never be entirely eliminated, reducing the gap by improving compliance is important because non-compliant taxpayers impose unacceptable burdens on other taxpayers and on Federal finances, as well as undermine the integrity and fairness of the tax system. 190 ANALYTICAL PERSPECTIVES The Administration proposes to reduce tax evasion and avoidance through a series of legislative reforms and enforcement activities. In addition to the legislative reforms described earlier, the 2011 Budget provides an additional increment of roughly $250 million for a robust set of IRS initiatives to implement more vigorously the IRS’ evolving compliance strategy, particularly in the international tax area. These targeted investments will help IRS enforce the law to ensure everyone meets the obligation to pay taxes, as well as reduce the tax gap. The 2011 Budget continues to emphasize international compliance issues while also addressing a wide array of underreporting and non-filing compliance challenges. As the number of entities and transactions - both domestic and international - continues to expand and also increase in complexity, the role of the IRS becomes additionally critical. These investments will help the IRS keep pace with evolving trends and challenges in the tax community, making for a more nimble and effective organization. Collectively these efforts will reduce the tax gap and improve the fiscal situation of the Government. Equally important, better compliance will improve the fairness of the tax system by ensuring all taxpayers pay their fair share. Implementation depends on effective IRS leadership to improve factors such as technology investments and reengineering processes, as well as on the active support of the Congress to implement tax law changes and provide needed funding for these improvements. Table 14–4. RECEIPTS BY SOURCE (In millions of dollars) Source Individual income taxes: Federal funds ................................................... Legislative proposal, not subject to PAYGO ................................................. Legislative proposal, subject to PAYGO .... Total, Individual income taxes ............................. Corporation income taxes: Federal funds: Federal funds ............................................ Legislative proposal, not subject to PAYGO .......................................... Legislative proposal, subject to PAYGO .......................................... Total, Federal funds ......................................... Trust funds: Legislative proposal, subject to PAYGO .......................................... Total, Corporation income taxes ......................... Social insurance and retirement receipts (trust funds): Employment and general retirement: Old-age survivors insurance (off-budget) .. Legislative proposal, subject to PAYGO .......................................... Disability insurance (off-budget) ............... Legislative proposal, subject to PAYGO .......................................... Hospital Insurance ................................... Legislative proposal, subject to PAYGO .......................................... Railroad retirement: Social security equivalent account ............ Rail pension & supplemental annuity ........ Total, Employment and general retirement ..... On-budget ................................................ Off-budget ................................................. Unemployment insurance: .............................. Deposits by States 1 ................................. Legislative proposal, not subject to PAYGO .......................................... Legislative proposal, subject to PAYGO .......................................... Federal unemployment receipts 1 ............. 2009 Actual Estimate 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 915,308 951,424 1,126,211 1,271,452 1,386,746 1,507,028 1,625,199 1,738,636 1,852,955 1,965,881 2,078,372 2,186,118 ......... 1,380 34,662 ......... –17,033 –39,577 43,176 11,417 53,352 28,312 65,137 31,696 75,406 32,871 83,410 34,272 90,623 36,546 97,235 103,525 109,840 38,640 40,765 42,381 915,308 935,771 1,121,296 1,326,045 1,468,410 1,603,861 1,733,476 1,856,318 1,980,124 2,101,756 2,222,662 2,338,339 138,229 175,817 292,548 333,216 361,326 414,882 382,576 422,336 436,634 448,610 461,009 477,829 ......... –36 –65 –58 –57 –56 –56 –56 –56 –54 –53 –51 ......... –19,040 3,656 32,206 31,126 28,831 27,338 25,796 24,786 23,021 23,190 22,950 138,229 156,741 296,139 365,364 392,395 443,657 409,858 448,076 461,364 471,577 484,146 500,728 ......... ......... 763 997 1,079 1,148 1,197 1,239 1,281 1,321 1,363 1,382 138,229 156,741 296,902 366,361 393,474 444,805 411,055 449,315 462,645 472,898 485,509 502,110 559,067 542,949 575,863 615,911 653,379 692,085 730,448 776,137 811,600 849,825 886,951 920,255 ......... 94,942 44 92,182 359 –21 1,193 –483 1,241 2,968 4,272 4,661 5,571 6,442 97,785 104,589 110,951 117,523 124,038 131,797 137,818 144,310 150,615 156,269 ......... 8 61 –4 202 –82 210 503 724 791 945 1,092 190,663 180,464 192,330 208,063 221,823 236,098 249,957 266,012 278,405 291,816 304,911 316,610 ......... 10 116 415 1,012 1,243 1,333 1,422 1,511 1,583 1,683 1,771 1,912 1,897 1,918 1,978 2,040 2,105 2,163 2,223 2,282 2,345 2,406 2,462 2,301 2,266 2,262 2,465 2,573 2,782 2,893 2,971 3,051 3,130 3,350 3,614 848,885 819,820 870,694 933,396 993,173 1,051,271 1,112,283 1,184,033 1,239,663 1,298,461 1,356,432 1,408,515 194,876 184,637 196,626 212,921 227,448 242,228 256,346 272,628 285,249 298,874 312,350 324,457 654,009 635,183 674,068 720,475 765,725 809,043 855,937 911,405 954,414 999,587 1,044,082 1,084,058 31,138 44,493 52,653 57,510 60,584 61,949 62,132 61,587 60,376 58,389 58,006 59,281 ......... ......... ......... 3 2 –11 –36 –124 –89 20 –200 –160 ......... 6,658 ......... 6,902 1 7,296 70 7,758 102 10,413 96 13,120 99 14,477 102 15,620 105 15,732 107 15,947 111 15,688 115 15,413 191 14. FEDERAL RECEIPTS Table 14–4. RECEIPTS BY SOURCE—Continued (In millions of dollars) Source Legislative proposal, not subject to PAYGO .......................................... Legislative proposal, subject to PAYGO .......................................... Railroad unemployment receipts 1 ............ Total, Unemployment insurance ...................... Other retirement: Federal employees retirement- employee share .................................................... Non-Federal employees retirement 2 ........ Total, Other retirement ..................................... Total, Social insurance and retirement receipts (trust funds) ...................................................... On-budget ....................................................... Off-budget ....................................................... Excise taxes: Federal funds: Alcohol taxes ............................................. Legislative proposal, subject to PAYGO .......................................... Tobacco taxes ........................................... Transportation fuels tax ............................. Legislative proposal, subject to PAYGO .......................................... Telephone and teleype services ............... Other Federal fund excise taxes ............... Legislative proposal, subject to PAYGO .......................................... Total, Federal funds ......................................... Trust funds: Highway .................................................... Airport and airway ..................................... Sport fish restoration and boating safety .. Tobacco assessments .............................. Black lung disability insurance .................. Inland waterways ...................................... Legislative proposal, subject to PAYGO .......................................... Hazardous substance superfund (Legislative proposal, subject to PAYGO) ......................................... Oil spill liability .......................................... Vaccine injury compensation .................... Leaking under ground storage tank .......... Total, Trust funds ............................................. 2009 Actual Estimate 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 ......... ......... ......... ......... ......... ......... ......... ......... –158 188 ......... –92 ......... 93 37,889 ......... 101 51,496 ......... 196 60,146 1,823 268 67,432 1,876 171 73,148 1,923 65 77,142 1,963 47 78,682 1,995 64 79,244 2,021 112 78,099 2,039 147 76,837 2,051 133 75,789 2,053 104 76,714 4,105 38 4,143 4,413 27 4,440 4,250 26 4,276 4,056 23 4,079 3,895 20 3,915 3,773 19 3,792 3,654 19 3,673 3,584 19 3,603 3,536 19 3,555 3,520 19 3,539 3,523 19 3,542 3,556 19 3,575 890,917 875,756 935,116 1,004,907 1,070,236 1,132,205 1,194,638 1,266,880 1,321,317 1,378,837 1,435,763 1,488,804 236,908 240,573 261,048 284,432 304,511 323,162 338,701 355,475 366,903 379,250 391,681 404,746 654,009 635,183 674,068 720,475 765,725 809,043 855,937 911,405 954,414 999,587 1,044,082 1,084,058 9,903 9,983 9,902 9,790 9,617 9,690 9,862 10,040 10,230 10,427 10,629 10,836 ......... 12,841 –10,324 –66 17,391 –7,541 –91 16,895 –1,760 –23 16,695 176 ......... 16,671 171 ......... 16,648 167 ......... 16,520 163 ......... 16,436 159 ......... 16,280 153 ......... 16,091 148 ......... 15,954 143 ......... 15,782 137 ......... 1,115 319 –831 879 2,107 –6,259 629 1,547 –2,502 377 1,539 ......... 220 1,540 ......... 142 1,586 ......... 116 1,657 ......... 104 1,734 ......... 100 1,812 ......... 100 1,892 ......... 100 1,971 ......... 100 2,055 ......... 13,854 66 21,988 91 20,954 23 26,075 4 28,223 10 28,243 18 28,336 24 28,497 28 28,603 30 28,688 32 28,829 34 28,944 34,961 10,569 576 951 645 76 36,237 11,798 573 960 638 84 37,080 12,493 587 960 647 85 37,799 13,179 602 960 657 86 38,722 13,970 617 960 665 89 39,282 14,812 632 960 671 89 39,644 15,649 648 960 679 90 39,822 16,460 664 960 687 91 39,738 17,270 679 960 693 91 39,396 17,992 695 960 699 93 39,238 18,718 713 960 446 96 39,273 19,468 728 960 338 96 ......... ......... ......... ......... –45 –45 –90 –91 –91 –93 –96 –96 ......... 447 235 169 48,629 ......... 449 295 182 51,216 586 472 241 183 53,334 816 488 238 185 55,010 866 497 241 189 56,771 919 504 245 191 58,260 964 511 247 191 59,493 1,008 520 248 191 60,560 1,048 520 251 193 61,352 1,078 508 253 189 61,770 1,111 505 256 189 62,136 1,144 508 259 188 62,866 Total, Excise taxes ................................................ 62,483 73,204 74,288 81,085 84,994 86,503 87,829 89,057 89,955 90,458 90,965 91,810 Estate and gift taxes: Federal funds ............................................ Legislative proposal, subject to PAYGO .......................................... 23,482 16,971 24,220 20,885 21,771 23,543 25,381 27,327 29,368 31,547 33,853 36,282 ......... 40 815 1,629 1,806 2,023 2,253 2,496 2,753 3,025 3,312 3,615 Total, Estate and gift taxes .................................. 23,482 17,011 25,035 22,514 23,577 25,566 27,634 29,823 32,121 34,572 37,165 39,897 21,264 22,569 27,163 31,133 33,741 35,845 38,133 40,455 42,669 44,980 47,595 50,114 ......... 21,264 –37 22,532 –1,164 25,999 –981 30,152 –736 33,005 –808 35,037 –863 37,270 –906 39,549 –940 41,729 –972 44,008 –1,004 46,591 –1,036 49,078 1,189 1,255 1,446 1,619 1,764 1,908 2,063 2,209 2,362 2,536 2,734 2,948 Customs duties: Federal funds: Federal funds ............................................ Legislative proposal, subject to PAYGO .......................................... Total, Federal funds ......................................... Trust funds: Trust funds ................................................ 192 ANALYTICAL PERSPECTIVES Table 14–4. RECEIPTS BY SOURCE—Continued (In millions of dollars) Source Total, Customs duties .......................................... 2009 Actual Estimate 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 22,453 23,787 27,445 31,771 34,769 36,945 39,333 41,758 44,091 46,544 49,325 52,026 352 361 364 365 368 371 375 380 384 389 392 397 34,318 77,083 79,341 66,990 59,222 52,344 47,504 49,678 52,243 54,610 56,854 58,868 11,066 11,986 12,616 12,903 13,086 13,368 13,940 14,173 14,400 14,294 14,498 14,679 ......... 5,324 –71 50,989 ......... 4,463 –75 93,818 –768 3,709 –106 95,156 –817 3,709 –80 83,070 –829 3,709 –51 75,505 –871 3,709 –33 68,888 –942 3,709 –32 64,554 –1,032 3,709 –32 66,876 –1,082 3,709 –32 69,622 –901 3,709 –32 72,069 –934 3,709 –32 74,487 –947 3,709 –32 76,674 69 389 47 394 28 400 26 400 23 400 21 400 19 400 17 400 15 400 13 400 12 400 11 400 ......... 670 6 1,134 ......... 584 6 1,031 ......... 509 6 943 196 519 6 1,147 196 525 6 1,150 220 531 6 1,178 196 539 6 1,160 168 546 6 1,137 140 554 6 1,115 140 562 6 1,121 140 570 6 1,128 140 577 6 1,134 Total, Miscellaneous receipts .............................. 52,123 94,849 96,099 84,217 76,655 70,066 65,714 68,013 70,737 73,190 75,615 77,808 Health insurance reform (Legislative proposal, subject to PAYGO) ........................................... ......... ......... 16,000 17,500 39,000 57,500 74,000 86,000 93,000 101,000 109,500 119,000 Jobs initiatives (Legislative proposal, subject to PAYGO) ......................................................... ......... –12,000 –25,000 –8,000 –3,000 –2,000 ......... ......... Miscellaneous receipts: Federal funds: Miscellaneous taxes .................................. Deposit of earnings, Federal Reserve System ................................................. Fees for permits and regulatory and judicial services .................................... Legislative proposal, subject to PAYGO .......................................... Fines, penalities, and forfeitures ............... Refunds and recoveries ............................ Total, Federal funds ......................................... Trust funds: United Mine Workers of America, combined benefit fund ......................... Defense cooperation ................................. Inland waterways (Legislative proposal, subject to PAYGO) ............................... Fines, penalities, and forfeitures ............... Refunds and recoveries ............................ Total, Trust funds ............................................. ......... ......... ......... ......... Total, budget receipts ............................................. 2,104,995 2,165,119 2,567,181 2,926,400 3,188,115 3,455,451 3,633,679 3,887,164 4,093,990 4,299,255 4,506,504 4,709,794 On-budget .................................................. 1,450,986 1,529,936 1,893,113 2,205,925 2,422,390 2,646,408 2,777,742 2,975,759 3,139,576 3,299,668 3,462,422 3,625,736 Off-budget .................................................. 654,009 635,183 674,068 720,475 765,725 809,043 855,937 911,405 954,414 999,587 1,044,082 1,084,058 1 Deposits by States cover the benefit part of the program. Federal unemployment receipts cover administrative costs at both the Federal and State levels. Railroad unemployment receipts cover both the benefits and administrative costs of the program for the railroads. 2 Represents employer and employee contributions to the civil sevice retirement and disability fund for covered employees of Government-sponsored, privately owned enterprises and the District of Columbia municipal government. 15. OFFSETTING COLLECTIONS AND OFFSETTING RECEIPTS I. INTRODUCTION AND BACKGROUND The Government records money collected in one of two ways: either as governmental receipts, included in the amounts reported on the receipts side of the budget, or as offsetting collections or offsetting receipts, which reduce (or “offset”) the amounts reported on the outlay side of the budget. Governmental receipts are discussed in the previous chapter, “Governmental Receipts.” The first section of this chapter broadly discusses offsetting collections and offsetting receipts. The second section discusses user charges, which consist of a subset of offsetting collections and offsetting receipts, and a small share of governmental receipts. Finally, the third section of this chapter describes the Administration’s new user charge proposals. As discussed below, offsetting collections and offsetting receipts are cash inflows to a budget account that are used to finance Government activities, and the spending associated with these activities is included in total or “gross outlays.” Offsetting collections and offsetting receipts are then subtracted from gross outlays to yield “net outlays,” which is the most common measure of outlays cited and generally referred to as simply “outlays.” Governmentwide net outlays reflect the Government’s net transactions with the public and are subtracted from governmental receipts to derive the Government’s surplus or deficit. Some offsetting collections and offsetting receipts are classified as such based on a conceptual difference with governmental receipts. In particular, these offsetting collections and offsetting receipts come from business-like transactions with the public and, unlike governmental receipts, are not collected based on the Government’s exercise of its sovereign power. For this reason, it is appropriate to classify these offsetting collections and offsetting receipts as offsets to outlays rather than on the receipts side of the budget.1 Treating offsetting collections and offsetting receipts in this way produces budget totals for receipts, (net) outlays, and budget authority that reflect the amount of resources allocated by the Government through collective political choice, rather than through the marketplace. Examples of offsetting collections and offsetting receipts resulting from business-like activities include charges for the sale of postage stamps and electricity sold by the Tennessee Valley Authority, proceeds from 1 Showing collections from business-type transactions as offsets on the spending side of the budget follows the concept recommended by the Report of the President’s Commission on Budget Concepts in 1967 and is discussed in Chapter 11 of this volume: “Budget Concepts.’’ Offsetting governmental receipts, which are a subset of offsetting receipts and estimated to be $23.3 billion in 2009, result from the Government’s exercise of its sovereign power to tax, but by law are required to be subtracted from outlays rather than added to governmental receipts. the sale of goods by defense commissaries, Supplementary Medical Insurance premiums, life insurance premiums for veterans, recreation fees for parks, and proceeds from the sale of assets (e.g., property, plant, and equipment) and natural resources (e.g., timber, oil, and minerals). Other offsetting collections and offsetting receipts are classified as such either because this classification has been specified in law or because they have traditionally been classified as offsets to outlays. This is despite the fact that they derive from the Government’s sovereign powers and would, otherwise, appear on the receipts side of the budget.2 Most of the offsetting collections and offsetting receipts in this category derive from fees from Government regulatory services or Government licenses, and include, for example, charges for regulating the nuclear energy industry, bankruptcy filing fees, immigration fees, food inspection fees, passport fees, and patent and trademark fees. The final sources of offsetting collections and offsetting receipts are gifts and intragovernmental transfers. Examples of intragovernmental transfers include interest payments to funds that hold Government securities (such as the Social Security trust funds), general fund transfers to civilian and military retirement and health benefits funds, and agency payments to funds for employee benefits. Although both offsetting collections and offsetting receipts are subtracted from gross outlays to derive net outlays, they are treated differently when it comes to accounting for specific programs and agencies. Offsetting collections are credited to expenditure accounts and therefore reduce or offset spending at the account level. By contrast, offsetting receipts are credited to receipt accounts (even though they are not recorded as governmental receipts). In some cases, offsetting receipts are reported in a particular agency and reduce or offset the outlays reported for that agency. In other cases, the offsetting receipts reduce total Government outlays, but not the outlays of any particular agency. Offsetting collections and offsetting receipts are generally differentiated from each other based on the form of Congressional authorization. Offsetting collections are usually authorized to be spent for the purposes of the expenditure account and are generally available for use 2 Where the regulatory or licensing fee is closely linked to the provision of a service by a regulating or licensing agency, the fee could be viewed as payment for a particular service or for the right to engage in a particular type of business. Nevertheless, many budget experts believe such fees are more appropriately classified as governmental receipts. Any reclassification of such fees would either require a change in law or have a direct impact on the Congressional appropriations process. 193 194 ANALYTICAL PERSPECTIVES when collected, without further action by the Congress. Offsetting receipts may or may not be designated for a specific purpose, depending on the legislation that authorizes their collection. If designated for a particular purpose, the offsetting receipts may, in some cases, be spent without further action by the Congress. When not designated for a particular purpose, offsetting receipts are credited to the general fund, which contains all funds not otherwise allocated and which cannot be spent without further action by the Congress. Table 15–1 summarizes offsetting collections and offsetting receipts from the public. Note that this table focuses only on payments from the public and does not include intragovernmental transactions. The table shows the amount of the Government’s financial transactions with the public that are not evident from the commonly cited budget measure of (net) outlays. For 2011, the table shows that total offsetting collections and offsetting receipts from the public are estimated to be $469.0 billion or 3.1 percent of gross domestic product. Of these, an estimated $225.6 billion are offsetting collections and an estimated $243.4 billion are offsetting receipts. Table 15–1 also identifies those offsetting collections and offsetting receipts that are considered user charges, as defined and discussed below. As shown in the table, major offsetting collections from the public include proceeds from Postal Service sales, electrical power sales, loan repayments to the Table 15–1. OFFSETTING COLLECTIONS AND OFFSETTING RECEIPTS FROM THE PUBLIC (In billions of dollars) Estimate Actual 2009 2010 2011 Offsetting collections (credited to expenditure accounts): User charges: Postal Service stamps and other USPS fees (off-budget) ............................................................................. Defense Commissary Agency ....................................................................................................................... Active and retired employee contributions for health benefits ...................................................................... Sale of energy: Tennessee Valley Authority ..................................................................................................................... Bonneville Power Administration ............................................................................................................. Federal Deposit Insurance Corporation: Insurance fees and recoveries ...................................................... All other user charges ................................................................................................................................... Subtotal, user charges ........................................................................................................................... 69.0 6.1 10.5 64.8 6.2 11.5 67.4 6.3 12.5 11.1 2.9 20.5 45.1 165.2 10.8 3.8 88.0 51.7 236.8 12.1 4.1 36.1 65.3 203.8 Other collections credited to expenditure accounts: Commodity Credit Corporation fund .............................................................................................................. Supplemental Security Income (collections from the States) ........................................................................ Other collections ............................................................................................................................................ Subtotal, other collections ....................................................................................................................... Subtotal, offsetting collections ............................................................................................................................... 8.0 4.1 23.2 35.3 200.5 9.9 3.8 18.8 32.5 269.3 8.5 4.1 9.2 21.8 225.6 User charges: Medicare premiums, Supplementary Medical Insurance .............................................................................. Outer Continental Shelf rents, bonuses, and royalties .................................................................................. Digital Television Transition and Public Safety Fund ...................................................................................... All other user charges ................................................................................................................................... Subtotal, user charges deposited in receipt accounts ........................................................................... 57.0 5.3 16.7 22.3 101.3 61.6 3.5 0.0 22.8 88.0 68.8 7.2 0.0 28.7 104.7 Other collections deposited in receipt accounts: Military assistance program sales ................................................................................................................. Interest received from credit financing accounts ........................................................................................... Other interest income .................................................................................................................................... All other collections deposited in receipt accounts ........................................................................................ Subtotal, other collections deposited in receipt accounts ....................................................................... Subtotal, offsetting receipts ................................................................................................................................... 24.9 26.0 4.4 66.6 122.0 223.3 24.9 58.2 13.2 181.4 277.7 365.7 25.5 59.4 20.9 32.8 138.7 243.4 Total, offsetting collections and offsetting receipts from the public ................................................................... 423.7 634.9 469.0 Total, offsetting collections and offsetting receipts excluding off-budget ......................................................... 354.7 570.0 401.5 ADDENDUM: User charges that are offsetting collections or offsetting receipts 1 ....................................................................... Other offsetting collections and offsetting receipts from the public ........................................................................ 266.5 157.3 324.7 310.2 308.5 160.5 Total, offsetting collections and offsetting receipts from the public ...................................................... 423.7 634.9 469.0 Offsetting receipts (deposited in receipt accounts): 1 Excludes user charges that are classified as governmental receipts. For total user charges, see Table 15–3. 195 15. OFFSETTING COLLECTIONS AND OFFSETTING RECEIPTS Table 15–2. OFFSETTING RECEIPTS BY TYPE (in Millions of Dollars) Source Estimate 2009 Actual 2010 2011 2012 2013 2014 2015 51,125 ......... 194,268 ......... 14,366 121 31,755 18,093 ......... 922 200 310,850 58,619 ......... 208,557 ......... 15,700 164 32,387 45,645 31,000 842 313 393,227 60,818 469 228,649 –103 18,614 178 33,480 1,322 18,000 763 322 362,512 63,099 487 245,430 –40 20,225 195 34,383 950 ......... 756 332 365,817 65,466 505 275,200 –75 22,664 217 35,285 904 ......... 736 343 401,245 67,920 524 301,283 –187 25,194 234 36,187 874 ......... 729 354 433,112 70,467 604 325,679 –163 27,504 249 36,994 856 ......... 717 364 463,271 16,330 ......... 16,330 327,180 1,784 80 1,864 395,091 1,770 ......... 1,770 364,282 1,711 ......... 1,711 367,528 1,671 ......... 1,671 402,916 1,704 ......... 1,704 434,816 1,739 ......... 1,739 465,010 17,368 3,120 21,288 ......... 240 815 2,955 45,786 16,848 3,295 24,714 ......... 239 745 3,937 49,778 17,555 3,397 25,623 408 245 739 4,208 52,175 18,068 3,416 24,883 395 255 765 4,442 52,224 18,686 3,542 25,493 406 265 799 4,700 53,891 19,443 3,661 26,159 416 274 837 4,987 55,777 20,193 3,811 26,740 426 283 877 5,275 57,605 63,600 ......... ......... 63,600 109,386 436,566 72,992 ......... ......... 72,992 122,770 517,861 73,738 –7 ......... 73,731 125,906 490,188 76,715 85 1 76,801 129,025 496,553 80,783 94 6 80,883 134,774 537,690 84,851 160 27 85,038 140,815 575,631 88,513 227 43 88,783 146,388 611,398 1,339 2,496 3,835 3,835 3,835 440,401 1,174 ......... 1,174 1,174 1,174 519,035 1,244 ......... 1,244 1,244 1,244 491,432 1,322 ......... 1,322 1,322 1,322 497,875 1,398 ......... 1,398 1,398 1,398 539,088 1,476 ......... 1,476 1,476 1,476 577,107 1,547 ......... 1,547 1,547 1,547 612,945 I. INTRAGOVERNMENTAL RECEIPTS A. On Budget 1. Interfund Receipts a. Federal Fund Payments to Trust Funds i. Distributed by Agency Contributions to insurance programs Military retirement fund ........................................................................................ Proposed Legislation (Non-PAYGO) .................................................................... Supplementary medical insurance ....................................................................... Proposed Legislation (Non-PAYGO) .................................................................... Hospital insurance ............................................................................................... Railroad social security equivalent benefit fund ................................................... Civilian supplementary retirement contributions .................................................. Unemployment insurance. .................................................................................... Proposed Legislation (Non-PAYGO) .................................................................... Other contributions ............................................................................................... Rail industry pension fund. ................................................................................... Subtotal, Contributions to insurance programs. ................................................... Other miscellaneous transactions Miscellaneous payments ...................................................................................... Other .................................................................................................................... Subtotal, Other miscellaneous transactions ......................................................... Subtotal, Distributed by Agency ........................................................................... ii. Undistributed by Agency Employer share, employee retirement (on-budget) Civil service retirement and disablity insurance ................................................... Hospital insurance (contribution as employer) ..................................................... Military retirement fund ........................................................................................ Proposed Legislation (Non-PAYGO) .................................................................... Other federal employees retirements. .................................................................. Postal Service contributions to FHI ...................................................................... CSRDI from Postal Service .................................................................................. Subtotal, Employer share, employee retirement (on-budget). .............................. Other miscellaneous transactions Interest received by on-budget trust funds. .......................................................... Proposed Legislation (Non-PAYGO). ................................................................... Proposed Legislation (PAYGO) ............................................................................ Subtotal, Other miscellaneous transactions ......................................................... Subtotal, Undistributed by Agency ....................................................................... Subtotal, Federal Fund Payments to Trust Funds. ............................................... b. Trust Fund Payments to Federal Funds i. Distributed by Agency Other miscellaneous transactions Other .................................................................................................................... Repayment of loans or advances to trust funds ................................................... Subtotal, Other miscellaneous transactions ......................................................... Subtotal, Distributed by Agency ........................................................................... Subtotal, Trust fund Payments to Federal Funds ................................................. Subtotal, Interfund Receipts ............................................................................. 196 ANALYTICAL PERSPECTIVES Table 15–2. OFFSETTING RECEIPTS BY TYPE—Continued (in Millions of Dollars) Source 2009 Actual Estimate 2010 2011 2012 2013 2014 2015 2. Federal Intrafund Receipts a. Distributed by Agency General fund payments to retirement and health benefits funds DOD retiree health care fund ................................................................................. Employees health benefits fund ............................................................................. Miscellaneous Federal retirement funds ................................................................ Subtotal, General fund payments to retirement and health benefits funds ............ 11,752 1,400 400 13,552 15,306 5,500 525 21,331 16,039 5,500 486 22,025 17,525 5,600 487 23,612 18,885 5,600 470 24,955 20,363 5,700 469 26,532 21,770 5,700 477 27,947 991 582 124 1,697 568 1,139 156 1,863 766 2,153 173 3,092 1,161 3,762 190 5,113 1,546 5,357 203 7,106 1,615 6,063 216 7,894 1,642 6,497 234 8,373 3,668 ......... 3,668 18,917 4,334 2,000 6,334 29,528 4,856 ......... 4,856 29,973 5,494 ......... 5,494 34,219 6,184 ......... 6,184 38,245 6,703 ......... 6,703 41,129 7,481 ......... 7,481 43,801 10,645 ......... ......... 10,645 10,645 29,562 11,097 ......... ......... 11,097 11,097 40,625 11,177 143 ......... 11,320 11,320 41,293 11,909 ......... ......... 11,909 11,909 46,128 12,640 ......... ......... 12,640 12,640 50,885 13,419 ......... ......... 13,419 13,419 54,548 14,250 ......... ......... 14,250 14,250 58,051 5,691 5,691 6,455 6,455 6,439 6,439 6,381 6,381 6,524 6,524 6,620 6,620 6,745 6,745 1 1 5,692 5,692 475,655 1 1 6,456 6,456 566,116 1 1 6,440 6,440 539,165 1 1 6,382 6,382 550,385 1 1 6,525 6,525 596,498 1 1 6,621 6,621 638,276 1 1 6,746 6,746 677,742 20,824 20,824 20,824 24,395 24,395 24,395 26,886 26,886 26,886 29,530 29,530 29,530 33,040 33,040 33,040 36,359 36,359 36,359 39,512 39,512 39,512 14,226 14,226 14,930 14,930 15,573 15,573 15,894 15,894 16,749 16,749 17,518 17,518 18,442 18,442 Interest Interest on Government capital in enterprises ..................................................... Interest from the Federal Financing Bank ............................................................ Interest received by retirement and health benefits funds ................................... Subtotal, Interest .................................................................................................. Other miscellaneous transactions Other ...................................................................................................................... Proposed Legislation (Non-PAYGO) ...................................................................... Subtotal, Other miscellaneous transactions .......................................................... Subtotal, Distributed by Agency ............................................................................. b. Undistributed by Agency Employing agency contributions DOD retiree health care fund ................................................................................. Proposed Legislation (Non-PAYGO). ..................................................................... Employees health benefits ..................................................................................... Subtotal, Employing agency contributions. ............................................................ Subtotal, Undistributed by Agency ......................................................................... Subtotal, Federal Intrafund Receipts. .................................................................... 3. Trust Intrafund Receipts a. Distributed by Agency Personnel benefits Payment to railroad retirement (from off-budget) ................................................... Subtotal, Personnel benefits. ................................................................................. Other miscellaneous transactions Other ...................................................................................................................... Subtotal, Other miscellaneous transactions .......................................................... Subtotal, Distributed by Agency ............................................................................. Subtotal, Trust Intrafund Receipts Subtotal, On Budget B. Off Budget 1. Interfund Receipts a. Federal Fund Payments to Trust Funds i. Distributed by Agency Personnel benefits Old-age, survivors and disablitity, insurance. ....................................................... Subtotal, Personnel benefits. ............................................................................... Subtotal, Distributed by Agency ........................................................................... ii. Undistributed by Agency Personnel benefits Employer share, employee retirement (off-budget) .............................................. Subtotal, Personnel benefits. ............................................................................... 197 15. OFFSETTING COLLECTIONS AND OFFSETTING RECEIPTS Table 15–2. OFFSETTING RECEIPTS BY TYPE—Continued (in Millions of Dollars) Source Estimate 2009 Actual 2010 2011 2012 2013 2014 2015 117,954 117,954 132,180 153,004 153,004 153,004 118,404 118,404 133,334 157,729 157,729 157,729 119,080 119,080 134,653 161,539 161,539 161,539 122,281 122,281 138,175 167,705 167,705 167,705 128,261 128,261 145,010 178,050 178,050 178,050 135,730 135,730 153,248 189,607 189,607 189,607 144,286 144,286 162,728 202,240 202,240 202,240 628,659 723,845 700,704 718,090 774,548 827,883 879,982 770 4,394 ......... ......... 5,164 773 4,713 ......... ......... 5,486 779 5,278 ......... 81 6,138 781 5,548 46 95 6,470 784 5,790 46 98 6,718 785 6,008 46 102 6,941 787 6,216 46 108 7,157 40 40 26,359 4,336 30,775 40 15 58,532 12,254 70,841 40 279 59,690 17,565 77,574 40 581 63,763 6,730 71,114 40 779 67,641 6,730 75,190 40 793 70,815 6,730 78,378 40 793 73,515 6,730 81,078 45,792 ......... ......... 63 45,855 158,191 ......... 1,742 62 159,995 5,293 7 5,516 62 10,878 3,575 7 3,468 63 7,113 2,296 6 1,883 64 4,249 1,791 7 566 65 2,429 1,615 7 279 66 1,967 124 ......... 78 202 195 ......... 72 267 161 5 118 284 210 10 98 318 182 19 49 250 191 29 21 241 214 29 8 251 205 51 671 156 ......... 1,083 203 12 495 102 ......... 812 187 12 729 117 30 1,075 190 13 593 122 30 948 147 10 715 101 30 1,003 151 11 645 120 30 957 152 11 727 125 30 1,045 4,047 ......... 5,313 ......... 7 2,151 ......... 3,595 ......... 5,424 ......... 3 2,005 ......... 4,243 –50 5,150 2 3 2,007 19 4,748 –50 5,279 3 3 2,020 19 4,801 –50 5,446 3 3 2,036 19 4,911 –50 5,622 3 3 2,051 19 5,332 ......... 5,774 3 3 2,067 19 Other miscellaneous transactions Interest received by off-budget trust funds. .......................................................... Subtotal, Other miscellaneous transactions ......................................................... Subtotal, Undistributed by Agency ....................................................................... Subtotal, Federal Fund Payments to Trust Funds. ............................................... Subtotal, Interfund Receipts. ............................................................................ Subtotal, Off Budget .......................................................................................... SUBTOTAL, INTRAGOVERNMENTAL RECEIPTS II. NON-FEDERAL RECEIPTS A. On Budget 1. Proprietary Receipts a. Federal Fund Reciepts i. Distributed by Agency Fees and other charges for services and special benefits Nuclear waste displosal revenues ........................................................................ Other .................................................................................................................... Proposed Legislation (Non-PAYGO) .................................................................... Proposed Legislation (PAYGO) ............................................................................ Subtotal, Fees and other charges for services and special benefits. ................... Interest Interest on foreign loans and deferred foreign collections .................................... Interest on deposits and loan accounts ............................................................... Other interest ....................................................................................................... Dividends and other earnings .............................................................................. Subtotal, Interest. ................................................................................................. Realization upon loans and investments Negative and downward reestimates ................................................................... Proposed Legislation (Non-PAYGO) .................................................................... Proposed Legislation (PAYGO) ............................................................................ Other .................................................................................................................... Subtotal, Realization upon loans and investments .............................................. Sale of Government property Sale of land and other real property. .................................................................... Proposed Legislation (PAYGO) ............................................................................ Other sales of government property .................................................................... Subtotal, Sale of Government property ................................................................ Sale of products Sale of timber and other natural land products. ................................................... Sale of minerals and mineral products ................................................................. Sale of power and other utilities ........................................................................... Other .................................................................................................................... Proposed Legislation (PAYGO) ............................................................................ Subtotal, Sale of products. ................................................................................... Other miscellaneous transactions Royalties and rents. .............................................................................................. Proposed Legislation (PAYGO) ............................................................................ Recoveries and refunds. ...................................................................................... Proposed Legislation (PAYGO) ............................................................................ Gifts and contributions ......................................................................................... Miscellaneous receipt accounts ........................................................................... Proposed Legislation (PAYGO) ............................................................................ 198 ANALYTICAL PERSPECTIVES Table 15–2. OFFSETTING RECEIPTS BY TYPE—Continued (in Millions of Dollars) Source Subtotal, Other miscellaneous transactions ......................................................... Subtotal, Distributed by Agency ........................................................................... 2009 Actual Estimate 2010 2011 2014 2015 11,518 94,597 11,027 248,428 11,374 107,323 2012 12,022 97,985 2013 12,258 99,668 12,559 101,505 13,198 104,696 1,521 ......... 3,771 ......... 5,292 790 ......... 2,745 ......... 3,535 538 8 6,638 50 7,234 522 22 7,572 50 8,166 409 38 8,357 50 8,854 423 53 8,675 50 9,201 413 67 9,054 ......... 9,534 ......... ......... 5,292 99,889 ......... ......... 3,535 251,963 ......... ......... 7,234 114,557 323 323 8,489 106,474 ......... ......... 8,854 108,522 ......... ......... 9,201 110,706 ......... ......... 9,534 114,230 57,036 ......... 136 8,295 65,467 61,618 ......... 122 9,011 70,751 68,761 –11 108 9,542 78,400 76,148 –27 95 10,111 86,327 83,802 –29 82 10,702 94,557 92,192 –30 71 11,272 103,505 99,780 –42 60 11,874 111,672 404 –728 –324 77 498 575 2,008 768 2,776 2,933 815 3,748 3,372 831 4,203 3,796 802 4,598 3,986 755 4,741 164 1 165 ......... 1 1 ......... 1 1 ......... 1 1 ......... 1 1 ......... 1 1 ......... 1 1 24,913 24,913 24,854 24,854 25,475 25,475 25,221 25,221 24,716 24,716 24,222 24,222 23,011 23,011 9,417 ......... ......... 269 92 9,778 99,999 99,999 199,888 9,504 ......... ......... 238 95 9,837 106,018 106,018 357,981 9,804 ......... ......... 238 99 10,141 116,793 116,793 231,350 10,104 71 151 252 104 10,682 125,979 125,979 232,453 10,304 146 178 252 110 10,990 134,467 134,467 242,989 10,604 149 135 239 116 11,243 143,569 143,569 254,275 10,704 153 132 239 122 11,350 150,775 150,775 265,005 6,464 ......... 136 6,600 7,056 ......... 133 7,189 7,522 111 134 7,767 7,563 111 135 7,809 7,669 111 137 7,917 7,839 95 138 8,072 8,018 95 139 8,252 ii. Undistributed by Agency Outer Continental Shelf Outer Continental Shelf rents and bonuses ......................................................... Proposed Legislation (PAYGO) ............................................................................ Outer Continental Shelf royalties. ......................................................................... Proposed Legislation (PAYGO) ............................................................................ Subtotal, Outer Continental Shelf. ........................................................................ Other miscellaneous transactions Sale of major assets ............................................................................................ Subtotal, Other miscellaneous transactions ......................................................... Subtotal, Undistributed by Agency ....................................................................... Subtotal, Federal Fund Reciepts ...................................................................... b. Trust Fund Reciepts i. Distributed by Agency Fees and other charges for services and special benefits Medicare premiums and other charges ............................................................... Proposed Legislation (PAYGO) ............................................................................ Veterans life insurance (trust funds) ..................................................................... Other .................................................................................................................... Subtotal, Fees and other charges for services and special benefits. ................... Interest Other interest ....................................................................................................... Dividends and other earnings .............................................................................. Subtotal, Interest. ................................................................................................. Realization upon loans and investments Negative and downward reestimates ................................................................... Other .................................................................................................................... Subtotal, Realization upon loans and investments .............................................. Sale of Government property Military assistance program sales (trust funds). ................................................... Subtotal, Sale of Government property ................................................................ Other miscellaneous transactions Recoveries and refunds. ...................................................................................... Proposed Legislation (Non-PAYGO) .................................................................... Proposed Legislation (PAYGO) ............................................................................ Gifts and contributions ......................................................................................... Miscellaneous receipt accounts ........................................................................... Subtotal, Other miscellaneous transactions ......................................................... Subtotal, Distributed by Agency ........................................................................... Subtotal, Trust Fund Receipts .............................................................................. Subtotal, Proprietary Receipts ............................................................................. 2. Offsetting Governmental Receipts a. Federal Fund Reciepts i. Distributed by Agency Other miscellaneous transactions Regulatory Fees ................................................................................................... Proposed Legislation (PAYGO) ............................................................................ Other .................................................................................................................... Subtotal, Other miscellaneous transactions ......................................................... 199 15. OFFSETTING COLLECTIONS AND OFFSETTING RECEIPTS Table 15–2. OFFSETTING RECEIPTS BY TYPE—Continued (in Millions of Dollars) Source Subtotal, Distributed by Agency ........................................................................... Estimate 2009 Actual 2010 2011 2012 2013 2014 2015 6,600 7,189 7,767 7,809 7,917 8,072 8,252 16,690 ......... 16,690 16,690 23,290 341 50 391 391 7,580 3,874 300 4,174 4,174 11,941 850 375 1,225 1,225 9,034 2,000 650 2,650 2,650 10,567 …… 750 750 750 8,822 …… 750 750 750 9,002 3 3 3 3 23,293 223,181 7 7 7 7 7,587 365,568 7 7 7 7 11,948 243,298 7 7 7 7 9,041 241,494 6 6 6 6 10,573 253,562 7 7 7 7 8,829 263,104 7 7 7 7 9,009 274,014 27 27 29 29 29 29 29 29 29 29 29 29 29 29 Recoveries and refunds. ...................................................................................... Subtotal, Other miscellaneous transactions ......................................................... Subtotal, Distributed by Agency ........................................................................... Subtotal, Trust Fund Receipts ........................................................................... Subtotal, Proprietary Receipts. ......................................................................... Subtotal, Off Budget .......................................................................................... 60 60 87 87 87 87 59 59 88 88 88 88 59 59 88 88 88 88 59 59 88 88 88 88 59 59 88 88 88 88 59 59 88 88 88 88 59 59 88 88 88 88 SUBTOTAL, NON-FEDERAL RECEIPTS ............................................................................................ 223,268 365,656 243,386 241,582 253,650 263,192 274,102 GRAND TOTAL OFFSETTING RECEIPTS .......................................................................................... 851,927 1,089,501 944,090 959,672 1,028,198 1,091,075 1,154,084 ii. Undistributed by Agency Other miscellaneous transactions Spectrum auction proceeds ................................................................................. Proposed Legislation (PAYGO) ............................................................................ Subtotal, Other miscellaneous transactions ......................................................... Subtotal, Undistributed by Agency ....................................................................... Subtotal, Federal Fund Receipts. ..................................................................... b. Trust Fund Reciepts i. Distributed by Agency Other miscellaneous transactions Regulatory Fees ................................................................................................... Subtotal, Other miscellaneous transactions ......................................................... Subtotal, Distributed by Agency ........................................................................... Subtotal, Trust Fund Reciepts. ............................................................................. Subtotal, Offsetting Governmental Receipts ........................................................ Subtotal, On Budget. ............................................................................................ B. Off Budget 1. Proprietary Receipts a. Trust Fund Reciepts i. Distributed by Agency Fees and other charges for services and special benefits Other .................................................................................................................... Subtotal, Fees and other charges for services and special benefits. ................... Other miscellaneous transactions 200 ANALYTICAL PERSPECTIVES Commodity Credit Corporation for loans made prior to enactment of the Federal Credit Reform Act, and Federal employee payments for health benefits. As also shown in the table, major offsetting receipts from the public include Supplementary Medical Insurance premiums, proceeds from military assistance program sales, rents and royalties from Outer Continental Shelf oil extraction, and interest income. Table 15–2 provides further detail about offsetting receipts, including both offsetting receipts from the public (as summarized in Table 15–1) and intragovernmental transactions.3 In total, offsetting receipts are estimated to be $944.1 billion in 2011: $700.7 billion are intragov- ernmental transactions and $243.4 billion are from the public. The offsetting receipts from the public consist of proprietary receipts ($231.4 billion) and those classified as offsetting receipts by law or tradition ($11.9 billion) (shown as offsetting governmental receipts in the table). Proprietary receipts from the public result from business-like transactions with the public such as the sale of goods or services, or the rental or use of Government land. Offsetting governmental receipts are composed of fees from Government regulatory services or Government licenses and, absent a specification in law or a long-standing practice, would otherwise have been classified on the receipts side of the budget. II. USER CHARGES User charges or user fees4 refer generally to those monies that the Government receives from the public for market-oriented activities and regulatory activities. Laws that authorize user charges, in combination with budget concepts, determine whether a user charge is classified as an offsetting collection, an offsetting receipt or a governmental receipt. Almost all user charges, as defined below, are classified as offsetting collections or offsetting receipts; less than 1.5 percent of user charges are classified as governmental receipts. As summarized in Table 15–3, total user charges for 2011 are estimated to be $312.2 billion with $308.5 billion being offsetting collections or 3 A comparable table showing total offsetting collections from the public and from intragovernmental transactions is not presented here because the data are not currently reported in a way that would permit such a presentation. 4 In this chapter, the term “user charge” is generally used and has the same meaning as the term “user fee.” The term “user charge” is the one used in OMB Circular No. A–11, “Preparation, Submission, and Execution of the Budget;” OMB Circular No. A–25, “User Charges;” and Chapter 11 of the volume, “Budget Concepts.” In common usage, the terms “user charge” and “user fee” are often used interchangeably; and in A Glossary of Terms Used in the Federal Budget Process, GAO provides the same definition for both terms. offsetting receipts, accounting for about two thirds of all offsetting collections and offsetting receipts from the public. Definition. In this chapter, user charges refer to fees, charges, and assessments levied on individuals or organizations directly benefiting from or subject to regulation by a Government program or activity, where the payers do not represent a broad segment of the public such as those who pay income taxes or customs duties. Examples of business-type or market-oriented user charges, and regulatory and licensing user charges include those charges listed above for offsetting collections and offsetting receipts. User charges exclude certain offsetting collections and offsetting receipts from the public, such as repayments received from credit programs, interest and dividends, and also exclude payments from one part of the Federal Government to another. In addition, user charges do not include dedicated taxes (such as taxes paid to social insurance programs or excise taxes on gasoline), or customs duties, fines, penalties, or forfeitures. Alternative definitions. The definition used in this chapter follows the definition used in OMB Circular No. A–25, “User Charges,’’ which provides policy guidance Table 15–3. GROSS OUTLAYS, USER CHARGES, OTHER OFFSETTING COLLECTIONS AND OFFSETTING RECEIPTS FROM THE PUBLIC, AND NET OUTLAYS (In billions of dollars) Estimate Actual 2009 2010 2011 Gross outlays ................................................................................................................................. 3,941.4 4,355.6 4,302.9 Offsetting collections and offsetting receipts from the public: User charges 1 .......................................................................................................................... Other ......................................................................................................................................... Subtotal, offsetting collections and offsetting receipts from the public .......................................... 266.5 157.3 423.7 324.7 310.2 634.9 308.5 160.5 469.0 Net outlays ..................................................................................................................................... 3,517.7 3,720.7 3,833.9 1 Total user charges for 2009 were $269.6 billion, with $3.2 billion classified as governmental receipts, and the remainder classified as offsetting collections and offsetting receipts. Total user charges for 2010 and 2011 are estimated to be $328.0 billion and $312.2 billion, respectively, with $3.2 billion and $3.6 billion classified as governmental receipts, again respectively. 15. OFFSETTING COLLECTIONS AND OFFSETTING RECEIPTS to Executive Branch agencies on setting prices for user charges. Alternative definitions may be used for other purposes. Much of the discussion of user charges below— their purpose, when they should be levied, and how the amount should be set—applies to these alternative definitions as well. The definition of user charges could be narrower than the one used in this chapter by being limited to proceeds from the sale of goods and services, excluding the proceeds from the sale of assets, and by being limited to proceeds that are dedicated to financing the goods and services being provided. This definition is similar to one the House of Representatives uses as a guide for purposes of committee jurisdiction. (See the Congressional Record, January 3, 1991, p. H31, item 8.) The definition of user charges could be even narrower by excluding regulatory fees and focusing solely on business-type transactions. Alternatively, the user charge definition could be broader than the one used in this chapter by including beneficiary- or liability-based excise taxes.5 What is the purpose of user charges? User charges are intended to improve the efficiency and equity of financing certain Government activities. Charging users for activities that benefit a relatively limited number of people and for regulatory activities reduces the burden on the general taxpayer. User charges that are set to cover the costs of production of goods and services can result in more efficient resource allocation within the economy. When buyers are charged more of the cost of providing goods and services, they make better cost-benefit calculations regarding the size of their purchase, which in turn signals to the Government how much of the goods or services it should provide. Prices in private, competitive markets serve the same purposes. User charges for goods and services that do not have special social or distributional benefits may also improve equity or fairness by requiring those who benefit from an activity to pay for it and by not requiring those who do not benefit from an activity to pay for it. When should the Government impose a charge? Discussions of whether to finance spending with a tax or a fee often focus on whether the benefits of the activity accrue to the public in general or to a limited group of people. In general, if the benefits of spending accrue broadly to the public or have special social or distributional benefits, then the program should be financed by taxes paid by the public. In contrast, if the benefits accrue to a limited number of private individuals or organizations and do not have special social or distributional benefits, then the program should be financed by charges paid by the private beneficiaries. For Federal programs where the 5 Beneficiary- and liability-based taxes are terms taken from the Congressional Budget Office, The Growth of Federal User Charges, August 1993, and updated in October 1995. Gasoline taxes are an example of beneficiary-based taxes. An example of a liability-based tax is the excise tax that formerly helped fund the hazardous substance superfund in the Environmental Protection Agency. This tax was paid by industry groups to finance environmental cleanup activities related to the industry activity but not necessarily caused by the payer of the fee. 201 benefits are entirely public or entirely private, applying this principle can be relatively easy. For example, according to this principle, the benefits from national defense accrue to the public in general, and should be and are financed by taxes. In contrast, the benefits of electricity sold by the Tennessee Valley Authority accrue exclusively to those using the electricity, and should be and are financed by user charges. In many cases, however, an activity has benefits that accrue to both public and private groups, and it may be difficult to identify how much of the benefits accrue to each. Because of this, it can be difficult to know how much of the program should be financed by taxes and how much by fees. For example, the benefits from recreation areas are mixed. Fees for visitors to these areas are appropriate because the visitors benefit directly from their visit, but the public in general also benefits because these areas protect the Nation’s natural and historic heritage now and for posterity. For this reason, visitor recreation fees do not generally cover the full cost to the Government of maintaining the recreation property. Where a fee may be appropriate to finance all or part of an activity, the extent to which a fee can be easily administered must be considered. For example, fees for entering or using Government owned land require clear points of entry onto the land and attendants patrolling and monitoring the land’s use. What amount should be charged? When the Government is acting in its capacity as sovereign and where user charges are appropriate, current policies support setting fees equal to the full cost to the Government, including both direct and indirect costs. When the Government is not acting in its capacity as sovereign and engages in a purely business-type transaction (such as leasing or selling goods, services, or resources), market price is generally the basis for establishing the fee.6 If the Government is engaged in a purely business-type transaction and economic resources are allocated efficiently, then this market price should be equal to or greater than the Government’s full cost of production. Classification of user charges in the budget. As shown in the note to Table 15–3, most user charges are classified as offsets to outlays on the spending side of the budget, but a few are classified on the receipts side of the budget. An estimated $3.6 billion in 2011 of user charges are classified on the receipts side and are included in the governmental receipts totals described in the previous chapter, “Federal Receipts.’’ They are classified as receipts because they are regulatory charges collected by the Federal Government by the exercise of its sovereign powers. Therefore, conceptually they should be classified as governmental receipts, and, unlike in a number of other cases, there is not a long-standing practice or specification in law to classify them as offsetting receipts. Examples include filing fees in the United States courts and agricultural quarantine inspection fees. 6 Policies for setting user charges are promulgated in OMB Circular No. A–25: “User Charges’’ (July 8, 1993). 202 ANALYTICAL PERSPECTIVES The remaining user charges, an estimated $308.5 billion in 2011, are classified as offsetting collections and offsetting receipts on the spending side of the budget. As discussed above in the context of all offsetting collections and offsetting receipts, some of these user charges are collected by the Federal Government by the exercise of its sovereign powers and conceptually should appear on the receipts side of the budget, but they are required by law or a long-standing practice to be classified on the spending side. As shown in Table 15–1 above, an estimated $203.8 billion of user charges for 2011 will be credited directly to expenditure accounts and will generally be available for expenditure when they are collected, without further action by the Congress. An estimated $104.7 billion of user charges for 2011 will be deposited in offsetting receipt accounts and will be available to be spent only according to the legislation that established the charges. III. USER CHARGE PROPOSALS As shown in Table 15–4, the Administration is proposing new or increased user charges that would, in the aggregate, increase collections by an estimated $1.8 billion in 2011 and an average of $4.5 billion per year from 2012–20. These amounts are offsetting collections, offsetting receipts and governmental receipts only; they do not include related spending. Each proposal is classified as either discretionary or mandatory, as those terms are defined in the Budget Enforcement Act of 1990 as amended. “Discretionary’’ refers to user charges controlled through annual appropriations acts and generally under the jurisdiction of the appropriations committees in the Congress. “Mandatory’’ refers to user charges controlled by permanent laws and under the jurisdiction of the authorizing Table 15–4. USER CHARGE PROPOSALS IN THE FY 2011 BUDGET 1 (Estimated collections in millions of dollars) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011– 2015 2011– 2020 OFFSETTING COLLECTIONS AND OFFSETTING RECEIPTS DISCRETIONARY: 1. Offsetting collections Department of Commerce: Patent Trademark Office Interim fee increase ..................................................................................... ......... 224 232 228 236 239 248 258 269 279 290 1,159 2,503 38 32 220 40 34 231 42 35 243 44 37 255 46 39 267 48 41 281 51 43 295 53 45 310 56 47 325 59 50 341 210 177 1,216 478 402 2,767 782 1,595 2,441 2,490 2,540 2,590 2,642 2,695 2,749 7,309 20,525 Department of Health and Human Services: Food and Drug Administration Generic drug review activities fees .............................................................. ......... Reinspection and export certification fees ................................................... ......... Food inspection and food facility registration fees ....................................... ......... Department of Homeland Security: Transportation Security Administration Aviation passenger security fee ................................................................... ......... ......... Department of the Interior Minerals Management Service: Outer Continental Shelf oil and gas lease inspection fee .......................................................................................... 10 Bureau of Land Management: Public lands oil and gas lease inspection fee ........................................................................................................... ......... 20 20 20 20 20 20 20 20 20 20 100 200 10 10 10 10 10 10 10 10 10 10 50 100 782 810 825 840 857 873 891 909 927 946 298 ......... ......... ......... ......... ......... ......... ......... ......... ......... 4,114 298 8,660 298 Department of State Retention of consular fees ........................................................................... ......... Western Hemisphere Travel Initiative surcharge extension ......................... ......... Department of Transportation: Federal Railroad Administration Railroad safety user fee ............................................................................... ......... 50 80 81 82 84 86 88 90 92 94 377 827 106 107 108 109 110 111 112 113 114 115 540 1,105 200 204 208 212 216 221 225 230 235 240 1,040 2,191 Department of the Treasury: Alcohol and Tobacco Tax and Trade Bureau Licensing fees ............................................................................................. ......... 2. Offsetting receipts Department of Energy Environmental cleanup fee .......................................................................... ......... 203 15. OFFSETTING COLLECTIONS AND OFFSETTING RECEIPTS Table 15–4. USER CHARGE PROPOSALS IN THE FY 2011 BUDGET 1—Continued (Estimated collections in millions of dollars) 2010 Subtotal, discretionary user charge proposals ............................... 10 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2011– 2015 1,980 2,550 3,395 4,286 4,378 4,479 4,583 4,691 4,801 4,914 16,589 2011– 2020 40,057 MANDATORY: Offsetting receipts Department of Agriculture Food Safety and Inspection Service: Performance and licensing user charges ................................................................................................... Grain, Inspection, Packers, and Stockyards Administration: User charges . Animal and Plant Health Inspection Service: Inspection and licensing user charges ................................................................................................... Natural Resource Conservation Service: User charges .............................. ......... ......... 11 29 13 30 13 31 13 31 14 31 14 32 14 32 14 32 15 33 15 34 64 152 136 315 ......... ......... 20 19 27 19 27 19 28 19 29 19 30 19 31 19 32 19 33 19 34 19 131 95 291 190 8 22 38 53 67 80 97 114 132 149 188 760 ......... 22 22 21 20 ......... ......... ......... ......... ......... 85 85 111 111 111 95 95 95 95 95 95 95 523 998 46 4 46 8 72 8 75 8 81 8 81 8 84 8 84 8 87 8 87 8 320 36 743 76 425 550 550 550 550 550 550 550 200 200 200 200 200 200 200 200 25 ......... ......... ......... ......... ......... ......... ......... 2,025 600 200 4,775 1,600 200 991 1,093 1,114 1,109 1,130 1,148 1,172 1,191 4,419 10,169 60 2,528 3,223 4,386 5,379 5,493 5,588 5,713 5,893 5,973 6,105 21,008 50,226 Department of the Interior Minerals Management Service and Bureau of Land Management: Fee on nonproducing Federal oil and gas leases ............................................... ......... Bureau of Land Management: Repeal of Energy Policy Act fee prohibition and mandatory permit funds ................................................................... ......... Department of Labor: Employment Standards Administration Foreign labor certification fee ...................................................................... ......... Environmental Protection Agency Pesticide user charges ................................................................................ ......... Pre-manufacture notice user charges .......................................................... ......... Federal Communications Commission Spectrum license fee authority .................................................................... 50 Extension of spectrum auction authority ...................................................... ......... Domestic satellite spectrum auctions .......................................................... ......... Subtotal, mandatory user charge proposals ......................................... Subtotal, user charge proposals that are offsetting collections and offsetting receipts ............................................................................ 50 200 300 ......... ......... 100 75 548 673 GOVERNMENTAL RECEIPTS Department of the Interior Fees for migratory bird hunting and conservation stamps ........................... ......... 14 14 14 14 14 14 14 14 14 14 70 140 -782 -810 -825 -840 -857 -873 -891 -909 -927 -946 -4,114 -8,660 ......... -768 196 -600 163 -648 187 -639 129 -714 100 -759 72 -805 70 -825 68 -845 68 -864 675 -3,369 1,053 -7,467 1,760 2,623 3,738 4,740 4,779 4,829 4,908 5,014 5,128 5,241 17,639 42,759 Department of State Retention of consular fees ............................................................................ ......... Corps of Engineers - Civil Works Preservation of cost-sharing of inland waterways capital costs ................... ......... Subtotal, governmental receipts user charge proposals ...................... ......... Total, user charge proposals ......................................................................... 60 * $500 thousand or less 1 A negative sign indicates a decrease in collections. committees. These and other terms are discussed further in this volume in Chapter 11, “Budget Concepts.’’ A. Discretionary User Charge Proposals 1. Offsetting collections Department of Commerce: U.S. Patent and Trademark Office (PTO) Interim fee increase. The Budget includes a proposal to increase statutory patent fees by 15 percent, which is expected to yield over $200 million in additional collections in 2011. The increase is intended to be an interim measure to provide additional resources to process patent applications while PTO develops a new fee schedule that better aligns fee rates to the cost of providing services. Department of Health and Human Services: Food and Drug Administration (FDA) Generic drug review activities fees. Generic drugs play an important role in reducing the cost of and increasing access to pharmaceuticals. The Budget includes a propos- 204 al for a new user charge to generate additional resources in support of FDA’s generic drug review activities. Similar to the purpose served by FDA’s current prescription drug user charges, the proposed generic drug user charge would be used to improve review times and reduce the current backlog of applications. Re-inspection and export certification fees. FDA conducts post-market inspections of manufacturers of food, human drugs, biologics, animal drugs, animal feed, and medical drugs to assess their compliance with Good Manufacturing Practice requirements. The Budget includes a proposal to enable FDA to assess fees for followup re-inspections that are required when violations of Good Manufacturing Practices are found during initial inspections. In addition, FDA collects user charges for the issuance of export certifications for human drugs, animal drugs, and medical devices. The Budget includes a proposal to expand FDA’s authority to collect fees for issuing export certifications for food and animal feed. Food inspection and food facility registration fees. The Budget includes two new user charges designed to improve and support additional inspections and enforcement activities, and to establish and maintain a food facility registration system. Department of Homeland Security: Transportation Security Administration (TSA) Aviation passenger security fee. Since its establishment in 2001, under the Aviation and Transportation Security Act, the aviation passenger security fee has been limited to $2.50 per passenger enplanement with a maximum fee of $5.00 per one-way trip. However, the cost of providing security has increased substantially since 2001. The Administration proposes to increase by $1.00 per year the aviation passenger security fee beginning in fiscal year 2012 to a maximum of $5.50 per enplanement and $11.00 per one-way trip in 2014 and thereafter. This adjustment will fulfill the original intent of the Aviation and Transportation Security Act by better aligning the cost of aviation security services with the fee paid by those individuals who directly benefit from the service. With the proposed adjustments to the aviation passenger security fee, total aviation security fees (which include an air carrier fee) would generate revenue sufficient to fund 76 percent of the discretionary costs of the TSA’s Aviation Security Program in fiscal year 2014, compared to approximately 40 percent currently. Department of the Interior Minerals Management Service (MMS): Outer Continental Shelf (OCS) oil and gas lease inspection fee. The Budget includes appropriations language to increase OCS inspection fees on oil and gas facilities that are subject to inspection by MMS. The fees would be based on the number of oil and gas wells per facility, providing for costs to be shared equitably across the industry. According to agency data, MMS currently spends more than $44 million on compliance inspections. Inspection costs include, among other things, the cost of approximately 60 inspectors and nearly $20 million in helicopter costs. Inspection ANALYTICAL PERSPECTIVES costs rise as energy development companies extend exploration and production efforts into deeper waters; additional miles must be flown, aircraft requirements increase, and the time for travel and inspection increases as facilities become increasingly complex. The proposed fee will generate approximately $20 million in 2011, up from $10 million in 2010, thereby requiring OCS energy developers to fund roughly 50 percent of compliance inspection costs. Bureau of Land Management (BLM): Public lands oil and gas lease inspection fee. The Budget includes appropriations language to begin charging inspection fees to oil and gas facilities that are subject to inspection by BLM. The fees would be based on the number of oil and gas wells per facility, providing for costs to be shared equitably across the industry. According to agency data, BLM currently spends about $40 million on compliance inspections. Inspection costs include, among other things, the salaries and travel expenses of inspectors. The proposed fee will generate approximately $10 million in 2011, thereby requiring energy developers on Federal lands to fund roughly 25 percent of compliance costs. Department of State Western Hemisphere Travel Initiative surcharge extension. The Administration proposes to extend the authority for the Department of State to collect the Western Hemisphere Travel Initiative surcharge for one year, through September 30, 2011. The Passport Services Enhancement Act of 2005 (P.L. 109–167) authorized the Department to charge a fee, but only through September 30, 2010, to cover the Department’s costs of meeting increased demand for passports as a result of the implementation of the Western Hemisphere Travel Initiative. Retention of consular fees. The Administration proposes to standardize the budgetary treatment of fees related to the provision of consular services by the Department of State. The proposal would allow the Department to retain all user fees collected from the provision of passport, visa, and other consular services for 2011 and all future years. The portion of collections from consular fees currently deposited as governmental receipts would instead be deposited as offsetting collections for use by the Department to cover the full cost of immigration, passport, and other consular services. The proposed reclassification is included in the Budget as appropriations language. The Congressional Budget Committees would treat the reclassification as a pay-as-you-go (PAYGO) cost pursuant to section 10 of Rule XXI of the Rules of the House of Representatives, 111th Congress, and Section 201 of S. Con. Res. 21, the concurrent resolution on the Budget for 2008. For this reason, the Budget reflects this reclassification as a PAYGO cost, to be offset from within overall Administration spending and revenue proposals. Department of Transportation: Federal Railroad Administration (FRA) Railroad safety inspection fee. The FRA establishes and enforces safety standards for U.S. railroads. FRA’s rail safety inspectors work in the field and oversee railroads’ 15. OFFSETTING COLLECTIONS AND OFFSETTING RECEIPTS operating and management practices. The Administration is proposing that, starting in 2011, the railroads cover the cost of FRA’s field inspections because railroads benefit directly from Government efforts to maintain high safety standards. The proposed fee would be similar to existing user charges collected from other industries regulated by Federal safety programs. Department of the Treasury: Alcohol and Tobacco Tax and Trade Bureau (TTB) TTB annual licensing fee. The TTB ensures that alcohol and tobacco products are labeled, advertised, and marketed in accordance with Federal law. TTB has the authority to inspect places of business associated with alcohol and tobacco production and distribution, and to assess fines for unlawful activity. The Administration proposes to begin collecting annual licensing fees from the regulated community to cover the costs of TTB’s regulatory activities and align TTB with the self-financing structure of other Federal regulators. 2. Offsetting receipts Department of Energy Environmental cleanup fee. The Budget includes a proposal to reauthorize the special assessment on domestic utilities for deposit into the Uranium Enrichment Decontamination and Decommissioning Fund. Established in 1992, the Fund pays, subject to appropriations, the decontamination and decommissioning costs of the Department of Energy’s gaseous diffusion plants in Tennessee, Ohio, and Kentucky. Additional resources, from the proposed cleanup fee, are required due to higherthan-expected cleanup costs. B. Mandatory User Charge Proposals Offsetting receipts Department of Agriculture Food Safety and Inspection Service (FSIS): Performance and licensing user charges. Through a variety of activities, including slaughter and processing plant inspections, FSIS ensures that meat, poultry and egg products are safe, wholesome, and correctly labeled and packaged. This Budget includes a proposal for two new user charges, a performance fee and a licensing fee. The performance fee would be charged to those facilities that have product recalls, are linked to an outbreak of food-borne illness, or require re-sampling and retesting because of positive samples. This fee would be charged each time one of these incidents occurs. The licensing fee is a flat fee for facility applications and renewal activities. This fee is graduated based on the size of the facility. Grain Inspection, Packers, and Stockyards Administration (GIPSA): User charges. The Administration proposes to establish a fee to cover the cost associated with GIPSA’s standardization activities and a licensing fee to cover the cost associated with administering meat packers and stockyards activities. 205 Animal and Plant Health Inspection Service (APHIS): Inspection and licensing user charges. The Administration proposes to establish user charges for: (1) animal welfare inspections for animal research facilities, carriers, and intransit handlers of animals, (2) licenses for individuals or companies who seek to market a veterinary biologic, and (3) reviews and inspections that may allow APHIS to issue permits that acknowledge that regulated entities are providing sufficient safeguards in the testing of biotechnologically derived products. Natural Resource Conservation Service (NRCS): User charges. NRCS assists farmers and ranchers in developing and implementing plans to protect, conserve, and enhance natural resources (soil, water, air, plants, and wildlife habitat). The Budget includes a proposal to begin charging for general conservation planning services. Department of the Interior Minerals Management Service and Bureau of Land Management: Fee on non-producing Federal oil and gas leases. The Budget includes a proposal that is part of a broader Administration initiative to encourage energy development on lands already leased for development. A new $4 per acre fee on non-producing Federal leases on Federal lands and waters would provide a financial incentive for oil and gas companies to either get their leases into production or relinquish them so that the tracts can be re-leased to and developed by new parties. The proposed $4 per acre fee would apply to all new leases and would be indexed annually. In October 2008, the Government Accountability Office (GAO) issued a report critical of past efforts by the Department of the Interior to ensure that companies diligently develop their Federal leases. Although the GAO report focused on administrative actions that the Department could undertake, this proposal requires legislative action. This proposal is similar to other non-producing fee proposals considered by the Congress in the last several years. Bureau of Land Management (BLM): Repeal of Energy Policy Act fee prohibition and mandatory permit funds. Beginning in 2012, the Administration proposes to repeal a provision of the Energy Policy Act that prohibits BLM from charging fees for its services. The Budget proposal would permit BLM to charge a fee for oil and gas permit processing, consistent with recent appropriations provisions, generating offsetting collections that will permit a corresponding reduction in BLM’s discretionary funding. In 2011, the Administration proposes to continue the oil and gas permit processing fees imposed by appropriations language, which overrides the Energy Policy Act fee prohibition. Department of Labor (DOL): Employment and Training Administration Foreign labor certification fee. Under the Immigration and Nationality Act, employers seeking to hire foreign workers must certify that qualified U.S. workers are not available for the job being offered to a foreign worker and that such hiring would not affect adversely the wages or working conditions of similarly employed U.S. workers. 206 DOL must approve the certification. The Administration proposes to establish a cost-based user fee to be paid by employers requesting permanent labor certifications and H–2B temporary visas for non-agricultural temporary workers. In addition, the Administration proposes to have the fees currently collected for H–2A temporary agricultural visas credited to a DOL account rather than to the general fund. Environmental Protection Agency (EPA) Pesticide user charges. All pesticides marketed in the United States must be registered with EPA. Presently, EPA collects fees from entities seeking to register their pesticides and from entities seeking to maintain their registrations. The Administration proposes to better cover the costs of EPA’s pesticide registration services by increasing the amount charged for currently authorized pesticide user charges. Amendments to the Federal Insecticide, Fungicide, and Rodenticide Act require EPA to review all registered pesticides on a 15-year cycle to ensure that registrations reflect current science. The Administration’s proposed increases to registration and maintenance fees are intended to cover the increased costs posed by these reviews and a greater portion of overall program costs. In addition, although the Federal Food, Drug, and Cosmetic Act requires EPA to collect fees for the establishment and reassessment of pesticide tolerances, the collection of these fees has been blocked through 2012 by statute. The Administration proposes to eliminate this prohibition and collect the tolerance fee beginning in 2011. Premanufacture notice user charges. EPA presently collects fees from chemical manufacturers seeking to market new chemicals. These fees are authorized by the Toxic Substances Control Act and are subject to a statutory cap. The Administration proposes to lift the cap so that EPA can recover a greater portion of the program cost. Federal Communications Commission (FCC) Spectrum license fee authority. To promote efficient use of the electromagnetic spectrum, the Administration proposes to provide the FCC with new authority to use other economic mechanisms, such as fees, as a spectrum management tool. The Commission would be authorized to set user charges on unauctioned spectrum licenses based on spectrum-management principles. Fees would be phased in over time as part of an ongoing rulemaking process to determine the appropriate application and level for fees. Extension of spectrum auction authority. The Administration proposes to extend indefinitely the authority of the FCC to auction spectrum licenses, which expires on September 30, 2012. Domestic satellite spectrum auctions. The Administration proposes to ensure that spectrum licenses for ANALYTICAL PERSPECTIVES predominantly domestic satellite services are assigned efficiently and effectively through competitive bidding. Services such as Direct Broadcast Satellite and Satellite Digital Audio Radio Services were assigned by auction prior to a 2005 court decision. The Administration proposes to authorize through legislation auctions of licenses for these and similar domestic satellite services. C. User Charge Proposals that are Governmental Receipts Department of the Interior Migratory bird hunting and conservation stamp fees. Federal Migratory Bird Hunting and Conservation Stamps, known as “duck stamps,” are required for hunting migratory waterfowl. Proceeds from the sale of the stamps are available without further appropriation to acquire important migratory bird breeding areas, migration resting places, and wintering areas.7 The land and water interests acquired with the duck stamp proceeds establish or supplement existing National Wildlife Refuges. If the price of the duck stamp had been indexed to inflation since 1991, when it was last increased, it would cost $23 today. The Budget includes a proposal to increase the duck stamp price to $25 in 2011. Department of State Retention of consular fees. As discussed above, the Budget includes a proposal to reclassify consular fees. Consular fees currently recorded as governmental receipts would be recorded as discretionary offsetting collections. Corps of Engineers—Civil Works Preserving cost-sharing of inland waterways capital costs. In 1986, the Congress provided that commercial traffic on the inland waterways would be responsible for 50 percent of the capital costs of the locks and dams and of the other features that make barge transportation possible on the inland waterways. The current excise tax of 20 cents per gallon on diesel fuel used in inland waterways commerce does not produce the revenue needed to cover the required 50 percent of these costs. The Budget proposes to replace the fuel tax with a new funding mechanism that raises the needed revenue in a way that is more efficient and more equitable than the fuel tax. It will preserve the landmark cost-sharing reform established by the Congress in 1986, while supporting inland waterways construction, replacement, expansion, and rehabilitation work. 7 By law, duck stamp proceeds are available for use without further action by Congress, and, in this way, are similar to offsetting collections. 16. TAX EXPENDITURES The Congressional Budget Act of 1974 (Public Law 93344) requires that a list of “tax expenditures’’ be included in the budget. Tax expenditures are defined in the law as “revenue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of liability.’’ These exceptions may be viewed as alternatives to other policy instruments, such as spending or regulatory programs. Identification and measurement of tax expenditures depends importantly on the baseline tax system against which the actual tax system is compared. The tax expenditure estimates presented in this chapter are patterned on a comprehensive income tax, which defines income as the sum of consumption and the change in net wealth in a given period of time. An important assumption underlying each tax expenditure estimate reported below is that other parts of the Tax Code remain unchanged. The estimates would be different if tax expenditures were changed simultaneously because of potential interactions among provisions. For that reason, this chapter does not present a grand total for the estimated tax expenditures. Tax expenditures relating to the individual and corporate income taxes are estimated for fiscal years 2009– 2015 using two methods of accounting: current revenue effects and present value effects. The present value approach provides estimates of the revenue effects for tax expenditures that generally involve deferrals of tax payments into the future. A discussion of performance measures and economic effects related to the assessment of the effect of tax expenditures on the achievement of program performance goals is presented in Appendix A. This section is a complement to the Government-wide performance plan required by the Government Performance and Results Act of 1993. TAX EXPENDITURES IN THE INCOME TAX Tax Expenditure Estimates All tax expenditure estimates presented here are based upon current tax law enacted as of December 31, 2009. Expired or repealed provisions are not listed if their revenue effects result only from taxpayer activity occurring before fiscal year 2009. The estimates reflect 2010 Budget Midsession Review economic assumptions. Legislation enacted in 2010 is not reflected in these estimates. The total revenue effects for tax expenditures for fiscal years 2009–2015 are displayed according to the Budget’s functional categories in Table 16–1. Descriptions of the specific tax expenditure provisions follow the tables of estimates and the discussion of general features of the tax expenditure concept. Two baseline concepts—the normal tax baseline and the reference tax law baseline—are used to identify and estimate tax expenditures.1 For the most part, the two concepts coincide. However, items treated as tax expenditures under the normal tax baseline, but not the reference tax law baseline, are indicated by the designation “normal tax method’’ in the tables. The revenue effects for these items are zero using the reference tax rules. The alternative baseline concepts are discussed in detail following the tables. 1 These baseline concepts are thoroughly discussed in Special Analysis G of the 1985 Budget, where the former is referred to as the pre-1983 method and the latter the post-1982 method. Table 16–2 reports the respective portions of the total revenue effects that arise under the individual and corporate income taxes separately. The location of the estimates under the individual and corporate headings does not imply that these categories of filers benefit from the special tax provisions in proportion to the respective tax expenditure amounts shown. Rather, these breakdowns show the specific tax accounts through which the various provisions are cleared. The ultimate beneficiaries of corporate tax expenditures could be shareholders, employees, customers, or other providers of capital, depending on economic forces. Table 16–3 ranks the major tax expenditures by the size of their 2011–2015 revenue effect. The first column provides the number of the provision in order to cross reference this table to Tables 16–1 and 16–2, as well as to the descriptions below. In the 2005 Analytical Perspectives, the treatment of capital gains was changed to exclude the portion of capital gains derived from corporate equity from the estimate of the tax expenditure for preferential tax rates on capital gains. In addition, the preferential rates on qualified dividend income that were enacted in the Jobs and Growth Tax Relief Reconciliation Act of 2003 were not identified as a tax expenditure. In this volume, the estimates reflect the pre-2005 methodology where no interaction effects among the various taxes are taken into account. For example, preferences under the personal income tax are evaluated in isolation of additional taxes that may apply under the corporate tax, the payroll tax, 207 208 ANALYTICAL PERSPECTIVES the estate tax, and excise taxes. The preferential rate on qualified dividends is identified as a tax expenditure. Interpreting Tax Expenditure Estimates The estimates shown for individual tax expenditures in Tables 16–1, 16–2, and 16–3 do not necessarily equal the increase in Federal revenues (or the change in the budget balance) that would result from repealing these special provisions, for the following reasons. First, eliminating a tax expenditure may have incentive effects that alter economic behavior. These incentives can affect the resulting magnitudes of the activity or of other tax provisions or Government programs. For example, if capital gains were taxed at ordinary rates, capital gain realizations would be expected to decline, resulting in lower tax receipts. Such behavioral effects are not reflected in the estimates. Second, tax expenditures are interdependent even without incentive effects. Repeal of a tax expenditure provision can increase or decrease the tax revenues associated with other provisions. For example, even if behavior does not change, repeal of an itemized deduction could increase the revenue costs from other deductions because some taxpayers would be moved into higher tax brackets. Alternatively, repeal of an itemized deduction could lower the revenue cost from other deductions if taxpayers are led to claim the standard deduction instead of itemizing. Similarly, if two provisions were repealed simultaneously, the increase in tax liability could be greater or less than the sum of the two separate tax expenditures, because each is estimated assuming that the other remains in force. In addition, the estimates reported in Table 16–1 are the totals of individual and corporate income tax revenue effects reported in Table 16–2 and do not reflect any possible interactions between individual and corporate income tax receipts. For this reason, the estimates in Table 16–1 should be regarded as approximations. Present-Value Estimates The annual value of tax expenditures for tax deferrals is reported on a cash basis in all tables except Table 16–4. Cash-based estimates reflect the difference between taxes deferred in the current year and incoming revenues that are received due to deferrals of taxes from prior years. Although such estimates are useful as a measure of cash flows into the Government, they do not accurately reflect the true economic cost of these provisions. For example, for a provision where activity levels have changed, so that incoming tax receipts from past deferrals are greater than deferred receipts from new activity, the cash-basis tax expenditure estimate can be negative, despite the fact that in present-value terms current deferrals have a real cost to the Government. Alternatively, in the case of a newly enacted deferral provision, a cash-based estimate can overstate the real effect on receipts to the Government because the newly deferred taxes will ultimately be received. Discounted present-value estimates of revenue effects are presented in Table 16–4 for certain provisions that involve tax deferrals or other long-term revenue effects. These estimates complement the cash-based tax expenditure estimates presented in the other tables. The present-value estimates represent the revenue effects, net of future tax payments that follow from activities undertaken during calendar year 2009 which cause the deferrals or other long-term revenue effects. For instance, a pension contribution in 2009 would cause a deferral of tax payments on wages in 2009 and on pension fund earnings on this contribution (e.g., interest) in later years. In some future year, however, the 2009 pension contribution and accrued earnings will be paid out and taxes will be due; these receipts are included in the present-value estimate. In general, this conceptual approach is similar to the one used for reporting the budgetary effects of credit programs, where direct loans and guarantees in a given year affect future cash flows. Tax Expenditure Baselines A tax expenditure is an exception to baseline provisions of the tax structure that usually results in a reduction in the amount of tax owed. The 1974 Congressional Budget Act, which mandated the tax expenditure budget, did not specify the baseline provisions of the tax law. As noted previously, deciding whether provisions are exceptions, therefore, is a matter of judgment. As in prior years, most of this year’s tax expenditure estimates are presented using two baselines: the normal tax baseline and the reference tax law baseline. Tax expenditures may take the form of credits, deductions, special exceptions and allowances, and reduce tax liability below the level implied by the baseline tax system. The normal tax baseline is patterned on a practical variant of a comprehensive income tax, which defines income as the sum of consumption and the change in net wealth in a given period of time. The normal tax baseline allows personal exemptions, a standard deduction, and deduction of expenses incurred in earning income. It is not limited to a particular structure of tax rates, or by a specific definition of the taxpaying unit. The reference tax law baseline is also patterned on a comprehensive income tax, but it is closer to existing law. Reference law tax expenditures are limited to special exceptions from a generally provided tax rule that serve programmatic functions in a way that is analogous to spending programs. Provisions under the reference law baseline are generally tax expenditures under the normal tax baseline, but the reverse is not always true. Both the normal and reference tax baselines allow several major departures from a pure comprehensive income tax. For example, under the normal and reference tax baselines: • Income is taxable only when it is realized in exchange. Thus, the deferral of tax on unrealized capital gains is not regarded as a tax expenditure. Accrued income would be taxed under a comprehensive income tax. 209 16. TAX EXPENDITURES Table 16–1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2009-2015 (In millions of dollars) Total from corporations and individuals 2009 2010 2011 2012 2013 2014 2015 2011–15 National Defense 1 Exclusion of benefits and allowances to armed forces personnel ....................................... 11,930 12,570 11,530 11,570 11,920 12,370 12,860 60,250 International affairs: 2 Exclusion of income earned abroad by U.S. citizens ........................................................... 3 Exclusion of certain allowances for Federal employees abroad ........................................... 4 Inventory property sales source rules exception .................................................................. 5 Deferral of income from controlled foreign corporations (normal tax method) .................... 6 Deferred taxes for financial firms on certain income earned overseas ................................. 5,320 920 2,420 31,580 5,570 5,590 970 2,620 30,960 5,460 5,870 1,020 2,830 32,720 5,770 6,160 1,070 3,070 33,870 5,980 6,470 1,120 3,320 34,490 6,090 6,790 1,180 3,590 33,930 5,990 7,130 1,240 3,890 34,130 6,020 32,420 5,630 16,700 35,840 6,320 General science, space, and technology: 7 Expensing of research and experimentation expenditures (normal tax method) ................ 8 Credit for increasing research activities ............................................................................... 3,820 8,010 3,500 5,890 4,560 3,850 5,720 3,080 6,690 2,460 6,930 1,964 7,710 1,568 31,610 12,922 1,640 340 60 20 70 10 430 270 50 30 130 140 70 2,040 610 50 20 60 10 880 530 1,200 10 240 140 80 1,180 670 20 20 60 30 1,160 600 8,870 10 260 130 100 920 940 10 20 60 30 1,430 680 10,940 0 130 120 120 900 1,130 0 20 70 30 1,530 420 6,690 0 170 120 140 680 1,160 0 20 80 30 1,530 370 3,610 0 230 120 140 340 1,190 0 20 100 30 1,500 450 2,030 0 390 120 140 4,020 5,090 30 100 370 150 7,150 2,520 32,140 10 1,180 610 640 –10 180 770 80 40 60 30 570 130 110 0 –150 290 1,140 110 150 80 20 1,950 130 180 10 –400 480 930 120 240 90 20 1,460 50 180 40 –460 550 760 110 240 90 20 0 0 180 80 –490 440 630 90 190 130 0 0 0 190 110 –500 360 –300 80 140 80 0 0 0 190 120 –470 250 –790 80 90 10 0 0 0 190 120 –2,320 2,080 1,230 480 900 400 40 1,460 50 930 470 Natural resources and environment: 33 Expensing of exploration and development costs, nonfuel minerals ................................... 34 Excess of percentage over cost depletion, nonfuel minerals ............................................... 35 Exclusion of interest on bonds for water, sewage, and hazardous waste facilities ............... 36 Capital gains treatment of certain timber income ................................................................ 37 Expensing of multiperiod timber growing costs ................................................................... 38 Tax incentives for preservation of historic structures ........................................................... 39 Expensing of capital costs with respect to complying with EPA sulfur regulations ............... 40 Exclusion of gain or loss on sale or exchange of certain brownfield sites ............................ 41 Industrial CO2 capture and sequestration tax credit ............................................................ 42 Deduction for endangered species recovery expenditures ................................................... 50 700 340 70 210 430 10 40 0 0 90 710 310 60 260 440 0 70 0 20 90 740 420 60 290 470 0 60 0 30 100 750 520 60 290 490 0 40 0 30 100 770 550 70 320 520 0 30 0 30 100 810 580 80 310 540 0 10 60 50 100 830 610 100 310 570 0 0 130 50 490 3,900 2,680 370 1,520 2,590 0 140 190 190 Agriculture: 43 Expensing of certain capital outlays .................................................................................... 44 Expensing of certain multiperiod production costs .............................................................. 45 Treatment of loans forgiven for solvent farmers .................................................................... 46 Capital gains treatment of certain income ........................................................................... 47 Income averaging for farmers ............................................................................................... 48 Deferral of gain on sale of farm refiners ............................................................................... 70 120 20 700 90 20 70 110 20 610 90 20 70 110 20 590 90 20 80 110 20 550 90 20 90 120 20 680 90 20 90 120 20 830 90 20 90 120 20 970 100 20 420 580 100 3,620 460 100 Energy: 9 Expensing of exploration and development costs, fuels ...................................................... 10 Excess of percentage over cost depletion, fuels ................................................................. 11 Alternative fuel production credit ......................................................................................... 12 Exception from passive loss limitation for working interests in oil and gas properties ........ 13 Capital gains treatment of royalties on coal ......................................................................... 14 Exclusion of interest on energy facility bonds ...................................................................... 15 New technology credit ......................................................................................................... 16 Energy investment credit ...................................................................................................... 17 Alcohol fuel credits 1 ........................................................................................................... 18 Bio-Diesel and small agri-biodiesel producer tax credits 2 ................................................... 19 Tax credit and deduction for clean-fuel burning vehicles ...................................................... 20 Exclusion of utility conservation subsidies ............................................................................ 21 Credit for holding clean renewable energy bonds ................................................................ 22 Deferral of gain from dispositions of transmission property to implement FERC restructuring policy .......................................................................................................... 23 Credit for investment in clean coal facilities .......................................................................... 24 Temporary 50% expensing for equipment used in the refining of liquid fuels ....................... 25 Natural gas distribution pipelines treated as 15-year property ............................................. 26 Amortize all geological and geophysical expenditures over 2 years ..................................... 27 Allowance of deduction for certain energy efficient commercial building property ............... 28 Credit for construction of new energy efficient homes .......................................................... 29 Credit for energy efficiency improvements to existing homes ............................................... 30 Credit for energy efficient appliances ................................................................................... 31 Credit for residential purchases/installations of solar and fuel cells ..................................... 32 Qualified energy conservation bonds ................................................................................... 210 ANALYTICAL PERSPECTIVES Table 16–1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2009-2015—Continued (In millions of dollars) Total from corporations and individuals 2009 2010 2011 2012 2013 2014 2015 2011–15 Commerce and housing: 49 50 51 52 53 54 Financial institutions and insurance: Exemption of credit union income ................................................................................... Exclusion of interest on life insurance savings ............................................................... Special alternative tax on small property and casualty insurance companies ................ Tax exemption of certain insurance companies owned by tax-exempt organizations ...... Small life insurance company deduction ........................................................................ Exclusion of interest spread of financial institutions ........................................................ 650 20,280 40 190 50 –120 650 21,140 40 200 50 520 710 23,070 40 200 50 960 790 24,700 50 210 50 1,070 880 26,420 50 210 50 1,160 960 28,220 50 220 50 1,250 1,030 29,860 60 220 50 1,330 4,370 132,270 250 1,060 250 6,170 55 56 57 58 59 60 61 62 63 64 65 66 Housing: Exclusion of interest on owner-occupied mortgage subsidy bonds ................................ Exclusion of interest on rental housing bonds ................................................................. Deductibility of mortgage interest on owner-occupied homes ........................................ Deductibility of State and local property tax on owner-occupied homes ........................ Deferral of income from installment sales ....................................................................... Capital gains exclusion on home sales ............................................................................ Exclusion of net imputed rental income ........................................................................... Exception from passive loss rules for $25,000 of rental loss .......................................... Credit for low-income housing investments .................................................................... Accelerated depreciation on rental housing (normal tax method) .................................. Discharge of mortgage indebtedness .............................................................................. Credit for homebuyer ....................................................................................................... 960 810 79,400 29,010 720 23,500 27,040 6,020 3,800 3,860 360 9,730 870 730 92,180 18,860 720 23,860 32,530 5,910 5,680 4,640 260 16,540 1,190 1,010 104,540 23,710 810 31,300 37,630 7,330 6,170 5,870 200 1,530 1,470 1,240 116,620 29,730 880 39,510 40,810 8,510 6,660 7,100 180 –1,980 1,540 1,300 127,840 31,340 1,020 43,640 41,020 9,670 7,540 8,380 120 –1,210 1,610 1,370 139,000 32,700 1,150 48,200 48,330 11,120 7,910 9,360 0 –800 1,710 1,450 149,560 33,690 1,260 53,230 56,100 13,010 8,030 9,970 0 –490 7,520 6,370 637,560 151,170 5,120 215,880 223,890 49,640 36,310 40,680 500 –2,950 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 Commerce: Cancellation of indebtedness ......................................................................................... Exceptions from imputed interest rules .......................................................................... Treatment of qualified dividends ...................................................................................... Capital gains (except agriculture, timber, iron ore, and coal) 3 ........................................ Capital gains exclusion of small corporation stock .......................................................... Step-up basis of capital gains at death ........................................................................... Carryover basis of capital gains on gifts ......................................................................... Ordinary income treatment of loss from small business corporation stock sale ............. Accelerated depreciation of buildings other than rental housing (normal tax method) ... Accelerated depreciation of machinery and equipment (normal tax method) ................ Expensing of certain small investments (normal tax method) ........................................ Graduated corporation income tax rate (normal tax method) ......................................... Exclusion of interest on small issue bonds ..................................................................... Deduction for US production activities ............................................................................. Special rules for certain film and TV production .............................................................. 300 50 22,425 52,590 50 41,370 1,630 50 –9,350 57,400 –130 2,720 250 9,020 60 130 50 38,012 45,360 50 36,740 1,430 60 –11,080 10,470 410 2,860 230 11,530 50 –10 50 26,869 44,290 170 44,520 4,790 60 –12,860 1,170 –3,200 3,120 320 13,640 –60 –50 50 0 41,090 290 53,270 2,050 60 –13,960 14,120 –2,820 3,070 400 14,420 –110 –30 50 0 51,120 300 57,260 2,740 60 –15,530 30,710 –710 3,150 420 15,290 –90 0 50 0 62,230 470 61,560 2,940 60 –16,360 44,310 210 3,420 430 16,210 –60 40 50 0 72,180 690 66,180 3,160 60 –17,540 56,400 760 3,600 460 17,120 –50 –50 250 26,869 270,910 1,920 282,790 15,680 300 –76,250 146,710 –5,760 16,360 2,030 76,680 –370 20 2,960 540 80 20 3,020 560 110 20 3,100 530 70 20 3,190 560 30 20 3,320 600 10 20 3,460 640 10 20 3,590 670 0 100 16,660 3,000 120 90 100 100 90 60 60 60 370 30 680 110 1,130 580 290 30 0 0 30 610 110 750 720 20 80 0 140 30 850 110 430 800 –140 80 30 390 30 1,040 110 580 810 –140 70 40 470 30 1,090 120 680 780 –140 50 40 490 30 1,140 120 740 740 –130 50 40 520 30 1,210 120 730 660 –120 50 40 550 150 5,330 580 3,160 3,790 –670 300 190 2,420 Transportation: 82 Deferral of tax on shipping companies ................................................................................ 83 Exclusion of reimbursed employee parking expenses ......................................................... 84 Exclusion for employer-provided transit passes .................................................................. 85 Tax credit for certain expenditures for maintaining railroad tracks ........................................ 86 Exclusion of interest on bonds for Financing of Highway Projects and rail-truck transfer facilities ............................................................................................................................ Community and regional development: 87 Investment credit for rehabilitation of structures (other than historic) .................................. 88 Exclusion of interest for airport, dock, and similar bonds ..................................................... 89 Exemption of certain mutuals’ and cooperatives’ income .................................................... 90 Empowerment zones and renewal communities .................................................................. 91 New markets tax credit ......................................................................................................... 92 Expensing of environmental remediation costs .................................................................... 93 Credit to holders of Gulf Tax Credit Bonds. ........................................................................... 94 Recovery Zone Bonds 4 ........................................................................................................ 95 Tribal Economic Development Bonds ................................................................................... 211 16. TAX EXPENDITURES Table 16–1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2009-2015—Continued (In millions of dollars) Total from corporations and individuals 2009 2010 2011 2012 2013 2014 2015 2011–15 Education, training, employment, and social services: 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 Education: Exclusion of scholarship and fellowship income (normal tax method) ............................ HOPE tax credit ............................................................................................................... Lifetime Learning tax credit ............................................................................................. American Opportunity Tax Credit ..................................................................................... Education Individual Retirement Accounts ...................................................................... Deductibility of student-loan interest ................................................................................ Deduction for higher education expenses ....................................................................... State prepaid tuition plans ............................................................................................... Exclusion of interest on student-loan bonds ................................................................... Exclusion of interest on bonds for private nonprofit educational facilities ....................... Credit for holders of zone academy bonds ...................................................................... Exclusion of interest on savings bonds redeemed to finance educational expenses ...... Parental personal exemption for students age 19 or over .............................................. Deductibility of charitable contributions (education) ........................................................ Exclusion of employer-provided educational assistance ................................................ Special deduction for teacher expenses .......................................................................... Discharge of student loan indebtedness ......................................................................... Qualified school construction bonds ................................................................................ 2,080 2,920 3,860 2,460 40 1,250 1,790 1,200 440 1,780 190 20 4,440 4,170 660 180 20 20 2,160 0 2,910 13,590 60 1,260 520 1,390 400 1,610 220 20 2,710 4,290 690 160 20 110 2,250 840 3,360 11,380 70 1,130 0 1,580 550 2,220 260 20 2,780 4,940 30 0 20 310 2,340 4,250 4,780 0 80 590 0 1,750 670 2,720 290 20 3,140 5,370 0 0 20 630 2,440 4,460 5,010 0 80 610 0 1,860 710 2,850 280 20 2,950 5,800 0 0 20 940 2,540 4,680 5,250 0 90 640 0 1,950 740 3,000 250 20 2,750 6,190 0 0 20 1,060 2,650 4,900 5,510 0 100 660 0 2,050 780 3,170 230 20 2,550 6,610 0 0 20 1,060 12,220 19,130 23,910 11,380 420 3,630 0 9,190 3,450 13,960 1,310 100 14,170 28,910 30 0 100 4,000 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 Training, employment, and social services: Work opportunity tax credit .............................................................................................. Welfare-to-work tax credit ................................................................................................ Employer provided child care exclusion ........................................................................... Employer-provided child care credit ................................................................................ Assistance for adopted foster children ............................................................................. Adoption credit and exclusion .......................................................................................... Exclusion of employee meals and lodging (other than military) ...................................... Child credit 5 .................................................................................................................... Credit for child and dependent care expenses ............................................................... Credit for disabled access expenditures ......................................................................... Deductibility of charitable contributions, other than education and health ....................... Exclusion of certain foster care payments ...................................................................... Exclusion of parsonage allowances ................................................................................ Employee retention credit for employers in certain federal disaster areas ...................... Exclusion for benefits provided to volunteer EMS and firefighters .................................. Temporary income exclusion for employer provided lodging in Midwestern disaster area ......... Making work pay tax credit 6 ............................................................................................ 870 50 770 10 450 530 1,010 25,640 4,330 20 36,710 440 580 140 80 20 9,340 910 30 1,210 20 460 580 1,060 23,450 3,750 20 37,720 420 620 40 80 0 23,450 830 10 1,370 10 490 460 1,110 18,550 2,200 20 43,850 400 660 0 60 0 14,160 540 10 1,410 0 520 90 1,170 10,870 1,890 30 47,730 390 700 0 0 0 0 260 0 1,480 0 550 90 1,230 10,610 1,830 30 51,570 390 740 0 0 0 0 130 0 1,550 0 580 90 1,300 10,320 1,730 30 55,140 390 790 0 0 0 0 60 0 1,630 0 610 90 1,370 9,990 1,650 30 58,850 370 840 0 0 0 0 1,820 20 7,440 10 2,750 820 6,180 60,340 9,300 140 257,140 1,940 3,730 0 60 0 14,160 Health: 131 Exclusion of employer contributions for medical insurance premiums and medical care 7 . 132 Self-employed medical insurance premiums ........................................................................ 133 Medical Savings Accounts / Health Savings Accounts ......................................................... 134 Deductibility of medical expenses ....................................................................................... 135 Exclusion of interest on hospital construction bonds ............................................................ 136 Deductibility of charitable contributions (health) ................................................................... 137 Tax credit for orphan drug research ..................................................................................... 138 Special Blue Cross/Blue Shield deduction .......................................................................... 139 Tax credit for health insurance purchased by certain displaced and retired individuals 8 .... 140 Distributions from retirement plans for premiums for health and long-term care insurance . 144,412 4,870 1,930 8,760 2,690 4,150 270 760 10 260 159,868 5,250 2,030 9,090 2,440 4,260 290 890 10 300 176,964 5,740 2,130 10,030 3,350 4,950 320 690 10 330 191,540 6,150 2,240 10,980 4,110 5,380 350 660 10 360 208,650 6,580 2,350 11,970 4,310 5,810 380 590 10 400 228,040 7,120 2,470 13,260 4,540 6,230 410 530 10 440 Income security: 141 Exclusion of railroad retirement system benefits ................................................................. 142 Exclusion of workers’ compensation benefits ....................................................................... 143 Exclusion of public assistance benefits (normal tax method) .............................................. 144 Exclusion of special benefits for disabled coal miners ......................................................... 145 Exclusion of military disability pensions .............................................................................. 330 5,810 600 40 110 320 5,870 640 40 110 300 5,940 670 40 110 280 6,070 710 40 110 260 6,170 740 40 110 250 6,270 760 40 110 248,600 1,053,794 7,780 33,370 2,590 11,780 14,910 61,150 4,790 21,100 6,640 29,010 450 1,910 690 3,160 10 50 490 2,020 250 6,370 790 40 120 1,340 30,820 3,670 200 560 212 ANALYTICAL PERSPECTIVES Table 16–1. ESTIMATES OF TOTAL INCOME TAX EXPENDITURES FOR FISCAL YEARS 2009-2015—Continued (In millions of dollars) Total from corporations and individuals 2009 2010 2011 2012 2013 2014 2015 2011–15 146 147 148 149 150 Net exclusion of pension contributions and earnings: Employer plans ............................................................................................................... 401(k) plans ..................................................................................................................... Individual Retirement Accounts ...................................................................................... Low and moderate income savers credit ......................................................................... Keogh plans .................................................................................................................... 40,670 44,126 12,090 1,050 12,770 41,360 53,549 12,780 1,180 13,890 44,630 67,061 14,080 1,170 15,120 47,870 70,168 15,770 1,130 17,190 49,050 72,716 16,190 1,060 19,740 51,950 74,712 16,400 1,000 21,100 53,980 76,183 16,500 960 22,610 247,480 360,840 78,940 5,320 95,760 151 152 153 154 155 156 157 158 159 160 161 Exclusion of other employee benefits: Premiums on group term life insurance .......................................................................... Premiums on accident and disability insurance .............................................................. Income of trusts to finance supplementary unemployment benefits .................................... Special ESOP rules .............................................................................................................. Additional deduction for the blind ......................................................................................... Additional deduction for the elderly ..................................................................................... Tax credit for the elderly and disabled ................................................................................. Deductibility of casualty losses ............................................................................................ Earned income tax credit 9 ................................................................................................. Additional exemption for housing Hurricane Katrina displaced individuals ........................... Exclusion of unemployment insurance benefits .................................................................... 2,160 320 30 1,700 40 2,230 10 510 4,420 10 1,310 2,110 330 40 1,700 30 2,030 10 560 6,190 0 5,220 2,160 340 50 1,800 40 2,600 10 640 6,200 0 0 2,280 350 50 1,900 50 3,100 10 680 8,380 0 0 2,320 360 50 2,000 50 3,300 10 720 8,540 0 0 2,350 360 50 2,100 50 3,550 10 750 8,790 0 0 2,390 360 60 2,200 50 3,690 10 780 9,090 0 0 11,500 1,770 260 10,000 240 16,240 50 3,570 41,000 0 0 Exclusion of social security benefits: 162 Social Security benefits for retired workers .................................................................... 163 Social Security benefits for disabled workers .................................................................. 164 Social Security benefits for spouses, dependents and survivors ..................................... 165 Tax Credit for Certain Government Retirees 10 ..................................................................... 20,970 6,460 3,650 40 21,410 6,950 3,850 110 20,240 7,160 3,140 0 21,380 7,450 3,150 0 22,560 7,750 3,170 0 24,160 8,080 3,200 0 26,810 8,580 3,330 0 115,150 39,020 15,990 0 Veterans benefits and services: 166 Exclusion of veterans death benefits and disability compensation ...................................... 167 Exclusion of veterans pensions ........................................................................................... 168 Exclusion of GI bill benefits ................................................................................................. 169 Exclusion of interest on veterans housing bonds ................................................................. 3,900 190 300 20 4,130 200 470 30 4,370 220 770 30 4,630 250 1,010 40 4,910 260 1,270 50 5,200 270 1,570 60 5,510 270 1,910 60 24,620 1,270 6,530 240 General purpose fiscal assistance: 170 Exclusion of interest on public purpose State and local bonds ........................................... 171 Build America Bonds 11 ........................................................................................................ 172 Deductibility of nonbusiness state and local taxes other than on owner-occupied homes .. 22,990 –200 45,310 20,810 –1,300 33,920 28,660 –2,120 46,500 35,130 –2,110 58,100 36,900 –2,030 61,890 38,780 –1,960 65,320 40,910 –1,880 68,250 180,380 –10,100 300,060 Interest: 173 Deferral of interest on U.S. savings bonds ........................................................................... 1,270 1,180 1,220 1,300 1,320 1,330 1,340 6,510 Deductibility of: Property taxes on owner-occupied homes ..................................................................... Nonbusiness State and local taxes other than on owner-occupied homes .................... 29,010 45,310 18,860 33,920 23,710 46,500 29,730 58,100 31,340 61,890 32,700 65,320 33,690 68,250 151,170 300,060 Exclusion of interest on State and local bonds for: Public purposes ............................................................................................................... Energy facilities ................................................................................................................ Water, sewage, and hazardous waste disposal facilities ................................................ Small-issues .................................................................................................................... Owner-occupied mortgage subsidies .............................................................................. Rental housing ................................................................................................................ Airports, docks, and similar facilities ............................................................................... Student loans .................................................................................................................. Private nonprofit educational facilities ............................................................................ Hospital construction ....................................................................................................... Veterans’ housing ........................................................................................................... GO Zone and GO Zone mortgage ................................................................................... Credit for holders of zone academy bonds ........................................................................... 22,990 10 340 250 960 810 680 440 1,780 2,690 10 80 190 20,810 10 310 230 870 730 610 400 1,610 2,440 10 70 220 28,660 30 420 320 1,190 1,010 850 550 2,220 3,350 20 90 260 35,130 30 520 400 1,470 1,240 1,040 670 2,720 4,110 20 110 290 36,900 30 550 420 1,540 1,300 1,090 710 2,850 4,310 20 120 280 38,780 30 580 430 1,610 1,370 1,140 740 3,000 4,540 20 120 250 40,910 30 610 460 1,710 1,450 1,210 780 3,170 4,790 20 130 230 180,380 150 2,680 2,030 7,520 6,370 5,330 3,450 13,960 21,100 100 610 1,310 Social Security: Addendum: Aid to State and local governments: 16. TAX EXPENDITURES 213 1 Firms can tax an energy grant in lieu of the energy production credit or the energy investment credit for facilities placed in service in 2009 and 2010 or whose construction commenced in 2009 and 2010. The effect of the grant on outlays (in millions of dollars) is as follows: 2009 $1,050; 2010 $3,090; 2011 $4,460; 2012 $4,240; 2013 $2,360; 2014 $230; 2015 $30. 2 In addition, the alcohol fuel credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2009 $5,160; 2010 $6,100; 2011 $1,940; 2012 $0; 2013 $0; 2014 $0; 2015 $0. 3 In addition, the biodiesel producer tax credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2009 $810; 2010 $200; 2011 $0; 2012 $0; 2013 $0; 2014 $0; 2015 $0. 4 In addition, recovery zone bonds have outlay effects (in millions of dollars) as follows: 2009 $0; 2010 $80; 2011 $150; 2012 $170; 2013 $170; 2014 $170; and 2015 $170. 5 The figures in the table indicate the effect of the child tax credit on receipts. The effect of the credit on outlays (in millions of dollars) is as follows: 2009 $19,150; 2010 $30,290; 2011 $29,790; 2012 $1,490; 2013 $1,460; 2014 $1,420; and 2015 $1,380. 6 The figures in the table indicate the effect of the making work pay tax credit on receipts. The effect of the credit on outlays (in millions of dollars) is as follows: 2009 $645; 2010 $32,528; and 2011 $31,490. 7 The figures in the table indicate the effect on income taxes of the employer contributions for health. In addition, the effect on payroll tax receipts (in millions of dollars) is as follows: 2009 $97,130; 2010 $101,710; 2011 $106,730; 2012 $113,570; 2013 $121,770; 2014 $130,860; and 2015 $140,400. 8 The figures in the table indicate the effect of the health insurance tax credit on receipts. The effect of the credit on outlays (in millions of dollars) is as follows: 2009 $100; 2010 $110; 2011 $110; 2012 $120; 2013 $130; 2014 $140; and 2015 $150. 9 The figures in the table indicate the effect of the earned income tax credit on receipts. The effect of the credit on outlays (in millions of dollars) is as follows: 2009 $44,370; 2010 $51,500; 2011 $51,450; 2012 $43,980; 2013 $43,860; 2014 $44,130; and 2015 $44,380. 10 The figures in the table indicate the effect of the tax credit for certain government retirees on receipts. The effect of the credit on outlays (in millions of dollars) is as follows: 2010 $99. 11 In addition, Build America Bonds have outlay effects of (in millions of dollars): 2009 $20; 2010 $2,900; 2011 $3,050; 2012 $2,960; 2013 $2,850; 2014 $2,740; and 2015 $2,640. 214 ANALYTICAL PERSPECTIVES Table 16–2. ESTIMATES OF TAX EXPENDITURES FOR THE CORPORATE AND INDIVIDUAL INCOME TAXES FOR FISCAL YEARS 2009-2015 (In millions of dollars) Corporations 2009 2010 2011 2012 2013 Individuals 2014 2015 2011–15 2009 National Defense: 1 Exclusion of benefits and allowances to armed forces personnel ........................ 2011 2012 2013 2014 2015 2011–15 11,930 12,570 11,530 11,570 11,920 12,370 12,860 International affairs: 2 Exclusion of income earned abroad by U.S. citizens .................................................. 3 Exclusion of certain allowances for Federal employees abroad ................................. 4 Inventory property sales source rules exception ............................................... 2,420 2,620 2,830 3,070 3,320 3,590 3,890 5 Deferral of income from controlled foreign corporations (normal tax method) ........ 31,580 30,960 32,720 33,870 34,490 33,930 34,130 6 Deferred taxes for financial firms on certain income earned overseas ....................... 5,570 5,460 5,770 5,980 6,090 5,990 6,020 General science, space, and technology: 7 Expensing of research and experimentation expenditures (normal tax method) ........ 3,560 3,220 4,250 5,390 6,330 6,550 7,310 8 Credit for increasing research activities ..... 7,620 5,770 3,850 3,080 2,460 1,964 1,568 Energy: 9 Expensing of exploration and development costs, fuels ............................................ 10 Excess of percentage over cost depletion, fuels ...................................................... 11 Alternative fuel production credit ............... 12 Exception from passive loss limitation for working interests in oil and gas properties ............................................. 13 Capital gains treatment of royalties on coal 14 Exclusion of interest on energy facility bonds .................................................... 15 Energy production credit 1 .......................... 16 Energy investment credit 1 .......................... 17 Alcohol fuel credits 2 ................................. 18 Bio-Diesel and small agri-biodiesel producer tax credits 3 ........................... 19 Tax credit and deduction for clean-fuel burning vehicles ..................................... 20 Exclusion of utility conservation subsidies .. 21 Credit for holding clean renewable energy bonds ..................................................... 22 Deferral of gain from dispositions of transmission property to implement FERC restructuring policy ...................... 23 Credit for investment in clean coal facilities 24 Temporary 50% expensing for equipment used in the refining of liquid fuels .......... 25 Natural gas distribution pipelines treated as 15-year property .................................... 26 Amortize all geological and geophysical expenditures over 2 years ...................... 27 Allowance of deduction for certain energy efficient commercial building property ... 28 Credit for construction of new energy efficient homes ...................................... 29 Credit for energy efficiency improvements to existing homes ................................... 30 Credit for energy efficient appliances ......... 31 Credit for residential energy efficient property ................................................ 32 Qualified energy conservation bonds ......... 2010 1,370 1,710 310 60 560 50 760 570 5,320 5,590 60,250 5,870 6,160 6,470 6,790 7,130 32,420 920 970 1020 1070 1120 1180 1240 5,630 29,830 12,922 260 390 280 120 310 0 330 0 360 0 380 0 400 0 1,780 0 16,700 35,840 6,320 990 770 290 3,380 270 330 190 150 140 110 50 640 610 20 860 1,030 1,060 1,090 10 0 0 0 4,650 30 30 0 50 0 60 0 80 0 100 0 100 0 100 0 440 0 20 70 20 60 20 60 20 60 20 70 20 80 20 100 100 370 50 6,090 2,100 32,000 10 50 40 10 10 110 100 10 20 150 120 20 20 200 140 40 20 230 70 50 20 240 40 20 20 240 50 10 100 1,060 420 140 0 0 10 10 10 10 10 380 770 1,010 1,230 1,300 1,290 1,260 230 430 480 540 350 330 400 40 1,190 8,850 10,900 6,640 3,590 2,020 20 10 10 0 0 0 0 10 10 0 0 0 0 0 0 0 80 10 180 10 220 0 120 0 160 0 210 0 340 0 1,050 0 50 130 60 130 40 130 10 120 10 120 20 120 50 120 130 610 20 20 30 30 40 40 40 180 50 60 70 90 100 100 100 460 –10 180 –150 290 –400 480 –460 550 –490 440 –500 360 –470 250 –2,320 2,080 0 0 0 0 0 0 0 0 770 1140 930 760 630 –300 –790 1,230 0 0 0 0 0 0 0 0 80 110 120 110 90 80 80 480 0 0 0 0 0 0 0 0 30 120 190 190 150 110 70 710 10 30 50 50 40 30 20 190 50 60 70 70 100 60 10 310 10 20 20 20 30 20 0 90 10 10 10 10 0 0 0 20 20 10 10 10 0 0 0 20 0 130 0 130 0 50 0 0 0 0 0 0 0 0 0 50 570 1,950 0 0 1,460 0 0 0 0 0 0 0 0 0 1,460 0 0 0 0 0 0 10 0 20 0 30 0 30 0 30 0 120 180 30 180 60 190 80 190 90 190 90 930 350 110 0 180 10 215 16. TAX EXPENDITURES Table 16–2. ESTIMATES OF TAX EXPENDITURES FOR THE CORPORATE AND INDIVIDUAL INCOME TAXES FOR FISCAL YEARS 2009-2015—Continued (In millions of dollars) Corporations 2009 Natural resources and environment: 33 Expensing of exploration and development costs, nonfuel minerals ......................... 34 Excess of percentage over cost depletion, nonfuel minerals ................................... 35 Exclusion of interest on bonds for water, sewage, and hazardous waste facilities . 36 Capital gains treatment of certain timber income .................................................. 37 Expensing of multiperiod timber growing costs ..................................................... 38 Tax incentives for preservation of historic structures .............................................. 39 Expensing of capital costs with respect to complying with EPA sulfur regulations ... 40 Exclusion of gain or loss on sale or exchange of certain brownfield sites ..... 41 Industrial CO2 capture and sequestration tax credit ................................................ 42 Deduction for endangered species recovery expenditures .......................................... Agriculture: 43 Expensing of certain capital outlays .......... 44 Expensing of certain multiperiod production costs ..................................................... 45 Treatment of loans forgiven for solvent farmers .................................................. 46 Capital gains treatment of certain income . 47 Income averaging for farmers ..................... 48 Deferral of gain on sale of farm refiners ..... 2010 2011 2012 2013 Individuals 2014 2015 2011–15 2009 2010 2011 2012 2013 2014 2015 2011–15 50 90 90 100 100 100 100 490 0 680 690 720 730 750 780 800 3,780 20 20 20 20 20 30 30 120 70 80 140 180 180 190 200 890 270 230 280 340 370 390 410 1,790 70 60 60 60 70 80 100 370 130 170 180 180 210 200 200 970 80 90 110 110 110 110 110 550 330 340 360 380 400 420 440 2,000 100 100 110 110 120 120 130 590 10 0 0 0 0 0 0 0 30 50 40 30 20 10 0 100 10 20 20 10 10 0 0 40 0 0 0 0 0 60 130 190 0 10 20 20 20 30 30 120 0 10 10 10 10 20 20 70 10 10 10 10 10 10 10 50 60 60 60 70 80 80 80 370 10 10 10 10 10 10 10 50 110 100 100 100 110 110 110 530 20 700 90 20 610 90 20 590 90 20 550 90 20 680 90 20 830 90 20 970 100 100 3,620 460 9,350 18750 19550 21390 22930 24560 26250 27790 122,920 20 20 20 20 20 20 20 100 650 650 710 790 880 960 1,030 4,370 1,530 1590 1680 1770 1860 1970 2070 40 40 40 50 50 50 60 250 190 200 200 210 210 220 220 1,060 50 50 50 50 50 50 50 250 Commerce and housing: 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 Financial institutions and insurance: Exemption of credit union income ......... Exclusion of interest on life insurance savings ............................................. Special alternative tax on small property and casualty insurance companies .. Tax exemption of certain insurance companies owned by tax-exempt organizations .................................... Small life insurance company deduction ........................................................... Exclusion of interest spread of financial institutions ......................................... Housing: Exclusion of interest on owner-occupied mortgage subsidy bonds ................. 200 220 400 510 510 520 550 Exclusion of interest on rental housing bonds ................................................ 170 180 340 430 430 440 470 Deductibility of mortgage interest on owner-occupied homes .................... Deductibility of State and local property tax on owner-occupied homes ......... Deferral of income from installment sales ........................................................... Capital gains exclusion on home sales .. Exclusion of net imputed rental income . Exception from passive loss rules for $25,000 of rental loss ...................... Credit for low-income housing investments ...................................... 3,610 5,400 5,860 6,330 7,160 7,510 7,630 –120 520 960 1,070 1,160 1,250 1,330 6,170 2,490 760 650 790 960 1,030 1,090 1,160 5,030 2,110 640 550 670 810 870 930 980 4,260 79,400 92,180 104,540 116,620 127,840 139,000 149,560 637,560 29,010 18,860 23,710 29,730 31,340 32,700 33,690 151,170 720 720 810 880 1,020 1,150 1,260 23,500 23,860 31,300 39,510 43,640 48,200 53,230 27,040 32,530 37,630 40,810 41,020 48,330 56,100 5,120 215,880 223,890 6,020 5,910 34,490 190 280 7,330 8,510 310 330 9,670 11,120 13,010 380 400 400 49,640 1,820 216 ANALYTICAL PERSPECTIVES Table 16–2. ESTIMATES OF TAX EXPENDITURES FOR THE CORPORATE AND INDIVIDUAL INCOME TAXES FOR FISCAL YEARS 2009-2015—Continued (In millions of dollars) Corporations 2009 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 Accelerated depreciation on rental housing (normal tax method) ........... Discharge of mortgage indebtedness .... Credit for homebuyer ............................. Commerce: Cancellation of indebtedness ............... Exceptions from imputed interest rules Treatment of qualified dividends ............ Capital gains (except agriculture, timber, iron ore, and coal) ............................. Capital gains exclusion of small corporation stock .............................. Step-up basis of capital gains at death . Carryover basis of capital gains on gifts Ordinary income treatment of loss from small business corporation stock sale ........................................................... Accelerated depreciation of buildings other than rental housing (normal tax method) ........................................... Accelerated depreciation of machinery and equipment (normal tax method) Expensing of certain small investments (normal tax method) ........................ Graduated corporation income tax rate (normal tax method) ........................ Exclusion of interest on small issue bonds ............................................... Deduction for US production activities ... Special rules for certain film and TV production ......................................... Transportation: 82 Deferral of tax on shipping companies ...... 83 Exclusion of reimbursed employee parking expenses .............................................. 84 Exclusion for employer-provided transit passes .................................................. 85 Tax credit for certain expenditures for maintaining railroad tracks ..................... 86 Exclusion of interest on bonds for Financing of Highway Projects and rail-truck transfer facilities ..................................... Community and regional development: 87 Investment credit for rehabilitation of structures (other than historic) .............. 88 Exclusion of interest for airport, dock, and similar bonds ......................................... 89 Exemption of certain mutuals’ and cooperatives’ income ............................ 90 Empowerment zones and renewal communities .......................................... 91 New markets tax credit ............................... 92 Expensing of environmental remediation costs ...................................................... 93 Credit to holders of Gulf Tax Credit Bonds. . 94 Recovery Zone Bonds 4 .............................. 95 Tribal Economic Development Bonds ......... Education, training, employment, and social services: Education: 500 2010 750 2011 2012 2013 Individuals 2014 2015 2011–15 2009 890 1,020 1,350 1,410 1,480 2010 2011 6,150 3,360 3,890 360 260 9,730 16,540 2012 2013 2014 4,980 6,080 7,030 200 180 120 1,530 –1,980 –1,210 2015 2011–15 7,950 0 –800 8,490 0 –490 34,530 500 –2,950 0 50 0 40 50 0 –50 250 26,869 52,590 45,360 44,290 41,090 51,120 62,230 72,180 270,910 50 50 170 290 300 470 690 41,370 36,740 44,520 53,270 57,260 61,560 66,180 1,630 1,430 4,790 2,050 2,740 2,940 3,160 1,920 282,790 15,680 300 130 –10 50 50 50 22,425 38,012 26,869 50 300 –2,380 –3,420 –3,760 –3,880 –4,740 –4,730 –5,020 –22,130 –6,970 –7,660 –9,100 –10,080 –10,790 –11,630 –12,520 –54,120 –170 320 –5,160 1,750 11,810 18,490 24,770 190 –350 –360 –50 70 51,660 34,360 10,150 60 60 –30 50 0 60 23,040 60 –50 50 0 60 60 6,330 12,370 18,900 25,820 31,630 150 –540 40 220 –2,850 –2,460 2,720 2,860 3,120 3,070 3,150 3,420 3,600 16,360 0 0 0 50 60 110 140 140 140 150 6,930 8,770 10,320 10,910 11,570 12,260 12,950 680 200 170 58,010 2,090 2,760 95,050 –660 140 610 –5,220 0 0 0 0 0 210 3,320 260 3,510 280 3,720 290 3,950 310 4,170 1,350 18,670 50 40 –50 –90 –70 –50 –40 –300 10 10 –10 –20 –20 –10 –10 –70 20 20 20 20 20 20 20 100 0 0 0 0 0 0 0 0 2,960 3,020 3,100 3,190 3,320 3,460 3,590 16,660 540 560 530 560 600 640 670 3,000 70 100 60 30 10 10 0 110 10 10 10 0 0 0 0 10 20 30 30 20 10 10 10 80 70 70 70 70 50 50 50 290 10 10 10 10 10 10 10 50 20 20 20 20 20 20 20 100 140 150 290 360 360 370 390 1,770 540 460 560 680 730 770 820 3,560 110 110 110 110 120 120 120 580 270 520 140 650 80 720 110 730 130 700 150 660 140 590 610 3,400 860 60 610 70 350 80 470 80 550 80 590 80 590 70 2,550 390 240 0 0 0 20 20 0 50 –120 20 10 130 –120 20 10 160 –120 10 10 160 –110 10 10 170 –100 10 10 180 –570 70 50 800 50 30 0 0 0 60 0 90 –20 60 20 260 –20 50 30 310 –20 40 30 330 –20 40 30 350 –20 40 30 370 –100 230 140 1,620 217 16. TAX EXPENDITURES Table 16–2. ESTIMATES OF TAX EXPENDITURES FOR THE CORPORATE AND INDIVIDUAL INCOME TAXES FOR FISCAL YEARS 2009-2015—Continued (In millions of dollars) Corporations 2009 96 97 98 99 100 101 102 103 104 105 106 107 108 109 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 129 130 Exclusion of scholarship and fellowship income (normal tax method) ............ HOPE tax credit ..................................... Lifetime Learning tax credit ................... American Opportunity Tax Credit ........... Education Individual Retirement Accounts ........................................... Deductibility of student-loan interest ...... Deduction for higher education expenses .......................................... State prepaid tuition plans ..................... Exclusion of interest on student-loan bonds ............................................... Exclusion of interest on bonds for private nonprofit educational facilities .......... Credit for holders of zone academy bonds ................................................ Exclusion of interest on savings bonds redeemed to finance educational expenses .......................................... Parental personal exemption for students age 19 or over ................... Deductibility of charitable contributions (education) ........................................ Exclusion of employer-provided educational assistance .................... Special deduction for teacher expenses Discharge of student loan indebtedness Qualified school construction bonds ...... Training, employment, and social services: Work opportunity tax credit .................... Welfare-to-work tax credit ...................... Employer provided child care exclusion . Employer-provided child care credit ...... Assistance for adopted foster children ... Adoption credit and exclusion ................ Exclusion of employee meals and lodging (other than military) ............. Child credit 5 .......................................... Credit for child and dependent care expenses ......................................... Credit for disabled access expenditures Deductibility of charitable contributions, other than education and health ....... Exclusion of certain foster care payments ......................................... Exclusion of parsonage allowances ...... Employee retention credit for employers in certain federal disaster areas ....... Exclusion for benefits provided to volunteer EMS and firefighters ......... Temporary income exclusion for employer provided lodging in Midwestern disaster area ................. Making work pay tax credit 6 .................. Health: 131 Exclusion of employer contributions for medical insurance premiums and medical care 7 ....................................... 132 Self-employed medical insurance premiums ... 2010 2011 2012 2013 Individuals 2014 2015 2011–15 2009 2010 2011 2012 2,080 2,160 2,250 2,920 0 840 3,860 2,910 3,360 2,460 13,590 11,380 2013 2014 2015 2011–15 2,340 4,250 4,780 0 2,440 4,460 5,010 0 2,540 4,680 5,250 0 2,650 4,900 5,510 0 12,220 19,130 23,910 11,380 40 60 1,250 1,260 70 1,130 80 590 80 610 90 640 100 660 420 3,630 1,790 520 1,200 1,390 0 1,580 0 1,750 0 1,860 0 1,950 0 2,050 0 9,190 90 100 190 230 230 240 250 1,140 350 300 360 440 480 500 530 2,310 380 400 750 940 940 970 1,020 4,620 1400 1210 1470 1780 1910 2030 2150 9,340 190 220 260 290 280 250 1,310 20 20 20 20 20 20 20 100 4,440 2,710 2,780 3,140 2,950 2,750 2,550 14,170 3,680 3,580 3,680 4,300 4,680 5,060 5,410 5,780 25,230 590 610 640 690 740 780 230 830 660 180 20 10 690 160 20 70 30 0 20 220 0 0 20 460 0 0 20 700 0 0 20 800 0 0 20 800 30 0 100 2,980 190 10 770 210 10 1210 210 0 1370 100 0 1410 30 0 1480 20 0 1550 10 0 1630 450 530 460 580 490 460 520 90 550 90 580 90 610 90 370 0 7,440 0 2,750 820 1,010 1,060 1,110 1,170 1,230 1,300 25,640 23,450 18,550 10,870 10,610 10,320 1,370 9,990 6,180 60,340 1,650 20 9,300 90 8,020 35,360 36,350 42,420 46,220 49,970 53,450 57,060 249,120 10 40 90 170 240 260 260 1,020 680 40 700 20 620 10 440 10 230 0 110 0 50 0 1,450 20 10 20 10 0 0 0 0 10 10 10 10 1,350 1,370 1,430 1,510 1,600 1,690 1790 70 10 20 10 0 10 0 10 0 0 0 50 0 4,330 3,750 10 10 2,200 10 1,890 20 1,830 20 1,730 20 440 580 420 620 400 660 390 700 390 740 390 790 370 840 1,940 3,730 70 20 0 0 0 0 0 0 80 80 60 0 0 0 20 0 0 9,340 23,450 14,160 0 0 0 0 0 0 60 0 0 0 14,160 144,412 159,868 176,964 191,540 208,650 228,040 248,600 1,053,794 4,870 5,250 5,740 6,150 6,580 7,120 7,780 33,370 218 ANALYTICAL PERSPECTIVES Table 16–2. ESTIMATES OF TAX EXPENDITURES FOR THE CORPORATE AND INDIVIDUAL INCOME TAXES FOR FISCAL YEARS 2009-2015—Continued (In millions of dollars) Corporations 2009 133 Medical Savings Accounts / Health Savings Accounts ................................................ 134 Deductibility of medical expenses ............. 135 Exclusion of interest on hospital construction bonds ................................ 136 Deductibility of charitable contributions (health) .................................................. 137 Tax credit for orphan drug research ........... 138 Special Blue Cross/Blue Shield deduction 139 Tax credit for health insurance purchased by certain displaced and retired individuals 8 .......................................... 140 Distributions from retirement plans for premiums for health and long-term care insurance ............................................... Income security: 141 Exclusion of railroad retirement system benefits ................................................. 142 Exclusion of workers’ compensation benefits .................................................. 143 Exclusion of public assistance benefits (normal tax method) ............................. 144 Exclusion of special benefits for disabled coal miners ........................................... 145 Exclusion of military disability pensions .... Net exclusion of pension contributions and earnings: ............................................... 146 Employer plans ..................................... 147 401(k) plans ........................................... 148 Individual Retirement Accounts ............ 149 Low and moderate income savers credit 150 Keogh plans .......................................... Exclusion of other employee benefits: ....... 151 Premiums on group term life insurance 152 Premiums on accident and disability insurance ......................................... 153 Income of trusts to finance supplementary unemployment benefits ......................... 154 Special ESOP rules .................................... 155 Additional deduction for the blind ............... 156 Additional deduction for the elderly ........... 157 Tax credit for the elderly and disabled ....... 158 Deductibility of casualty losses .................. 159 Earned income tax credit 9 ....................... 160 Additional exemption for housing disaster related displaced individuals .................. 161 Exclusion of unemployment insurance benefits .................................................. Social Security: Exclusion of social security benefits: ......... 162 Social Security benefits for retired workers ............................................ 163 Social Security benefits for disabled workers ............................................. 164 Social Security benefits for spouses, dependents and survivors ................ 165 Tax Credit for Certain Government Retirees 10 .. Veterans benefits and services: 166 Exclusion of veterans death benefits and disability compensation ........................ 167 Exclusion of veterans pensions ................. 2010 2011 2012 2013 Individuals 2014 2015 2011–15 2009 2010 2011 2012 2013 2014 2015 2011–15 1,930 2,030 2,130 2,240 2,350 2,470 2,590 8,760 9,090 10,030 10,980 11,970 13,260 14,910 11,780 61,150 570 610 1,130 1,420 1,420 1,470 1,550 6,990 2,120 1,830 2,220 2,690 2,890 3,070 3,240 14,110 180 270 760 180 290 890 1,070 3,970 4,080 1,910 3,160 4,760 5,180 5,600 6,000 6,400 27,940 190 320 690 200 350 660 210 380 590 230 410 530 240 450 690 10 10 10 10 10 10 10 50 260 300 330 360 400 440 490 2,020 330 320 300 280 260 250 250 1,340 5,810 5,870 5,940 6,070 6,170 6,270 6,370 30,820 600 640 670 710 740 760 790 3,670 40 110 40 110 40 110 40 110 40 110 40 110 40 120 200 560 40,670 44,126 12,090 1,050 12,770 41,360 53,549 12,780 1,180 13,890 44,630 67,061 14,080 1,170 15,120 47,870 70,168 15,770 1,130 17,190 49,050 72,716 16,190 1,060 19,740 51,950 74,712 16,400 1,000 21,100 53,980 76,183 16,500 960 22,610 247,480 360,840 78,940 5,320 95,760 2,160 2,110 2,160 2,280 2,320 2,350 2,390 11,500 330 340 350 360 360 360 1,770 30 40 420 450 40 30 2,230 2,030 10 10 510 560 4,420 6,190 50 470 40 2,600 10 640 6,200 50 490 50 3,100 10 680 8,380 50 520 50 3,300 10 720 8,540 50 550 50 3,550 10 750 8,790 60 580 50 3,690 10 780 9,090 260 2,610 240 16,240 50 3,570 41,000 0 0 0 0 0 0 0 1,310 5,220 0 0 0 0 0 0 20,970 21,410 20,240 21,380 22,560 24,160 26,810 115,150 320 1,280 1,250 1,330 1,410 1,480 1,550 1,620 7,390 10 6,460 6,950 7,160 7,450 7,750 8,080 8,580 39,020 3,650 3,850 40 110 3,140 0 3,150 0 3,170 0 3,200 0 3,330 0 15,990 3,900 4,130 190 200 4,370 220 4,630 250 4,910 260 5,200 270 5,510 270 24,620 1,270 219 16. TAX EXPENDITURES Table 16–2. ESTIMATES OF TAX EXPENDITURES FOR THE CORPORATE AND INDIVIDUAL INCOME TAXES FOR FISCAL YEARS 2009-2015—Continued (In millions of dollars) Corporations 2009 168 Exclusion of GI bill benefits ....................... 169 Exclusion of interest on veterans housing bonds ..................................................... 10 2010 10 2011 10 2012 10 2013 20 Individuals 2014 20 2015 2011–15 2009 20 General purpose fiscal assistance: 170 Exclusion of interest on public purpose State and local bonds ........................... 4,850 5,180 9,690 12,140 12,170 12,570 13,200 171 Build America Bonds 11 .............................. –40 –390 –540 –570 –550 –530 –510 172 Deductibility of nonbusiness State and local taxes other than on owner-occupied homes ................................................... Interest: 173 Deferral of interest on U.S. savings bonds . 2010 2011 2012 2013 2014 2015 2011–15 300 470 770 1,010 1,270 1,570 1,910 6,530 10 20 20 30 30 40 40 160 59,770 18,140 15,630 18,970 22,990 24,730 26,210 27,710 –2,700 –160 –910 –1,580 –1,540 –1,480 –1,430 –1,370 120,610 –7,400 45,310 33,920 46,500 58,100 61,890 65,320 68,250 300,060 80 1,270 1,180 1,220 1,300 1,320 1,330 1,340 6,510 29,010 18,860 23,710 29,730 31,340 32,700 33,690 151,170 45,310 33,920 46,500 58,100 61,890 65,320 68,250 300,060 Addendum: Aid to State and local governments: Deductibility of: Property taxes on owner-occupied homes .............................................. Nonbusiness State and local taxes other than on owner-occupied homes ....... Exclusion of interest on State and local bonds for: Public purposes ..................................... 4,850 5,180 9,690 12,140 12,170 12,570 13,200 59,770 18,140 15,630 18,970 22,990 24,730 26,210 27,710 120,610 Energy facilities ...................................... 0 0 10 10 10 10 10 50 10 10 20 20 20 20 20 100 Water, sewage, and hazardous waste disposal facilities .............................. 70 80 140 180 180 190 200 890 270 230 280 340 370 390 410 1,790 Small-issues .......................................... 50 60 110 140 140 140 150 680 200 170 210 260 280 290 310 1,350 Owner-occupied mortgage subsidies .... 200 220 400 510 510 520 550 2,490 760 650 790 960 1,030 1,090 1,160 5,030 Rental housing ...................................... 170 180 340 430 430 440 470 2,110 640 550 670 810 870 930 980 4,260 Airports, docks, and similar facilities ..... 140 150 290 360 360 370 390 1,770 540 460 560 680 730 770 820 3,560 Student loans ........................................ 90 100 190 230 230 240 250 1,140 350 300 360 440 480 500 530 2,310 Private nonprofit educational facilities .. 380 400 750 940 940 970 1,020 4,620 1,400 1,210 1,470 1,780 1,910 2,030 2,150 9,340 Hospital construction ............................. 570 610 1,130 1,420 1,420 1,470 1,550 6,990 2,120 1,830 2,220 2,690 2,890 3,070 3,240 14,110 Veterans’ housing ................................. 0 0 10 10 10 10 10 50 10 10 10 10 10 10 10 50 GO Zone and GO Zone mortgage ......... 20 20 30 40 40 40 40 230 60 50 60 70 80 80 90 380 Credit for holders of zone academy bonds . 190 220 260 290 280 250 230 1,310 1 Firms can tax an energy grant in lieu of the energy production credit or the energy investment credit for facilities placed in service in 2009 and 2010 or whose construction commenced in 2009 and 2010. The effect of the grant on outlays (in millions of dollars) is as follows: 2009 $1,050; 2010 $3,090; 2011 $4,460; 2012 $4,240; 2013 $2,360; 2014 $230; 2015 $30. 2 In addition, the alcohol fuel credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2009 $5,160; 2010 $6,100; 2011 $1,940; 2012 $0; 2013 $0; 2014 $0; 2015 $0. 3 In addition, the biodiesel producer tax credit results in a reduction in excise tax receipts (in millions of dollars) as follows: 2009 $810; 2010 $200; 2011 $0; 2012 $0; 2013 $0; 2014 $0; 2015 $0. 4 In addition, recovery zone bonds have outlay effects (in millions of dollars) as follows: 2009 $0; 2010 $80; 2011 $150; 2012 $170; 2013 $170; 2014 $170; and 2015 $170. 5 The figures in the table indicate the effect of the child tax credit on receipts. The effect of the credit on outlays (in millions of dollars) is as follows: 2009 $19,150; 2010 $30,290; 2011 $29,790; 2012 $1,490; 2013 $1,460; 2014 $1,420; and 2015 $,1380. 6 The figures in the table indicate the effect of the making work pay tax credit on receipts. The effect of the credit on outlays (in millions of dollars) is as follows: 2009 $645; 2010 $32,528; and 2011 $31,490. 7 The figures in the table indicate the effect on income taxes of the employer contributions for health. In addition, the effect on payroll tax receipts (in millions of dollars) is as follows: 2009 $97,130; 2010 $101,710; 2011 $106,730; 2012 $113,570; 2013 $121,770; 2014 $130,860; and 2015 $140,400. 8 The figures in the table indicate the effect of the health insurance tax credit on receipts. The effect of the credit on outlays (in millions of dollars) is as follows: 2009 $100; 2010 $110; 2011 $110; 2012 $120; 2013 $130; 2014 $140; and 2015 $150. 9 The figures in the table indicate the effect of the earned income tax credit on receipts. The effect of the credit on outlays (in millions of dollars) is as follows:2009 $44,370; 2010 $51,500; 2011 $51,450; 2012 $43,980; 2013 $43,860; 2014 $44,130; and 2015 $44,380. 10 The figures in the table indicate the effect of the tax credit for certain government retirees on receipts. The effect of the credit on outlays (in millions of dollars) is as follows: 2010 $99. 11 In addition, Build America Bonds have outlay effects of (in millions of dollars): 2009 $20; 2010 $2,900; 2011 $3,050; 2012 $2,960; 2013 $2,850; 2014 $2,740; and 2015 $2,640. Note: Provisions with estimates denoted normal tax method have no revenue loss under the reference tax law method. All estimates have been rounded to the nearest $10 million. Provisions with estimates that rounded to zero in each year are not included in the table. 220 ANALYTICAL PERSPECTIVES Table 16–3. INCOME TAX EXPENDITURES RANKED BY TOTAL FISCAL YEAR 2011-2015 PROJECTED REVENUE EFFECT (In millions of dollars) Provision 131 57 147 172 72 70 124 146 61 60 170 58 76 50 162 150 148 80 134 121 1 62 159 64 163 63 5 132 2 17 7 142 136 109 69 166 98 135 97 4 83 78 156 164 73 108 130 105 8 96 133 151 99 154 122 103 55 116 15 168 Exclusion of employer contributions for medical insurance premiums and medical care ................................................................................................... Deductibility of mortgage interest on owner-occupied homes ............................................................................................................................................ 401(k) plans ......................................................................................................................................................................................................................... Deductibility of nonbusiness State and local taxes other than on owner-occupied homes ................................................................................................ Step-up basis of capital gains at death ............................................................................................................................................................................... Capital gains (except agriculture, timber, iron ore, and coal) ............................................................................................................................................... Deductibility of charitable contributions, other than education and health ........................................................................................................................... Employer plans ................................................................................................................................................................................................................... Exclusion of net imputed rental income ............................................................................................................................................................................... Capital gains exclusion on home sales ............................................................................................................................................................................... Exclusion of interest on public purpose State and local bonds .......................................................................................................................................... Deductibility of State and local property tax on owner-occupied homes ............................................................................................................................ Accelerated depreciation of machinery and equipment (normal tax method) .................................................................................................................... Exclusion of interest on life insurance savings ................................................................................................................................................................... Social Security benefits for retired workers ........................................................................................................................................................................ Keogh plans ........................................................................................................................................................................................................................ Individual Retirement Accounts .......................................................................................................................................................................................... Deduction for US production activities ................................................................................................................................................................................. Deductibility of medical expenses ...................................................................................................................................................................................... Child credit ........................................................................................................................................................................................................................... Exclusion of benefits and allowances to armed forces personnel ...................................................................................................................................... Exception from passive loss rules for $25,000 of rental loss .............................................................................................................................................. Earned income tax credit ..................................................................................................................................................................................................... Accelerated depreciation on rental housing (normal tax method) ...................................................................................................................................... Social Security benefits for disabled workers ...................................................................................................................................................................... Credit for low-income housing investments ........................................................................................................................................................................ Deferral of income from controlled foreign corporations (normal tax method) ................................................................................................................... Self-employed medical insurance premiums ....................................................................................................................................................................... Exclusion of income earned abroad by U.S. citizens .......................................................................................................................................................... Alcohol fuel credits .............................................................................................................................................................................................................. Expensing of research and experimentation expenditures (normal tax method) ............................................................................................................... Exclusion of workers’ compensation benefits ...................................................................................................................................................................... Deductibility of charitable contributions (health) .................................................................................................................................................................. Deductibility of charitable contributions (education) ............................................................................................................................................................ Treatment of qualified dividends .......................................................................................................................................................................................... Exclusion of veterans death benefits and disability compensation ..................................................................................................................................... Lifetime Learning tax credit ................................................................................................................................................................................................. Exclusion of interest on hospital construction bonds ........................................................................................................................................................... HOPE tax credit ................................................................................................................................................................................................................... Inventory property sales source rules exception ................................................................................................................................................................. Exclusion of reimbursed employee parking expenses ........................................................................................................................................................ Graduated corporation income tax rate (normal tax method) ............................................................................................................................................. Additional deduction for the elderly .................................................................................................................................................................................... Social Security benefits for spouses, dependents and survivors ........................................................................................................................................ Carryover basis of capital gains on gifts ............................................................................................................................................................................. Parental personal exemption for students age 19 or over .................................................................................................................................................. Making work pay tax credit .................................................................................................................................................................................................. Exclusion of interest on bonds for private nonprofit educational facilities ........................................................................................................................... Credit for increasing research activities .............................................................................................................................................................................. Exclusion of scholarship and fellowship income (normal tax method) ............................................................................................................................... Medical Savings Accounts / Health Savings Accounts ........................................................................................................................................................ Premiums on group term life insurance .............................................................................................................................................................................. Lifetime Learning tax credit ................................................................................................................................................................................................. Special ESOP rules ............................................................................................................................................................................................................. Credit for child and dependent care expenses ................................................................................................................................................................... State prepaid tuition plans ................................................................................................................................................................................................... Exclusion of interest on owner-occupied mortgage subsidy bonds .................................................................................................................................... Employer provided child care exclusion ............................................................................................................................................................................... New technology credit ........................................................................................................................................................................................................ Exclusion of GI bill benefits ................................................................................................................................................................................................ 2011 176,964 104,540 67,061 46,500 44,520 44,290 43,850 44,630 37,630 31,300 28,660 23,710 1,170 23,070 20,240 15,120 14,080 13,640 10,030 18,550 11,530 7,330 6,200 5,870 7,160 6,170 32,720 5,740 5,870 8,870 4,560 5,940 4,950 4,940 26,869 4,370 3,360 3,350 840 2,830 3,100 3,120 2,600 3,140 4,790 2,780 14,160 2,220 3,850 2,250 2,130 2,160 11,380 1,800 2,200 1,580 1,190 1,370 1,160 770 2011–15 1,053,794 637,560 360,840 300,060 282,790 270,910 257,140 247,480 223,890 215,880 180,380 151,170 146,710 132,270 115,150 95,760 78,940 76,680 61,150 60,340 60,250 49,640 41,000 40,680 39,020 36,310 35,840 33,370 32,420 32,140 31,610 30,820 29,010 28,910 26,869 24,620 23,910 21,100 19,130 16,700 16,660 16,360 16,240 15,990 15,680 14,170 14,160 13,960 12,922 12,220 11,780 11,500 11,380 10,000 9,300 9,190 7,520 7,440 7,150 6,530 221 16. TAX EXPENDITURES Table 16–3. INCOME TAX EXPENDITURES RANKED BY TOTAL FISCAL YEAR 2011-2015 PROJECTED REVENUE EFFECT—Continued (In millions of dollars) Provision 173 56 6 120 54 3 88 149 59 10 49 9 113 34 91 126 143 101 46 158 104 90 138 84 118 35 38 16 95 23 79 140 125 71 137 114 152 37 29 141 106 167 24 19 52 31 26 119 21 20 44 89 145 65 33 25 32 47 43 100 Deferral of interest on U.S. savings bonds .......................................................................................................................................................................... Exclusion of interest on rental housing bonds ..................................................................................................................................................................... Deferred taxes for financial firms on certain income earned overseas ................................................................................................................................ Exclusion of employee meals and lodging (other than military) ......................................................................................................................................... Exclusion of interest spread of financial institutions ............................................................................................................................................................ Exclusion of certain allowances for Federal employees abroad .......................................................................................................................................... Exclusion of interest for airport, dock, and similar bonds .................................................................................................................................................... Low and moderate income savers credit ............................................................................................................................................................................. Deferral of income from installment sales ........................................................................................................................................................................... Excess of percentage over cost depletion, fuels ................................................................................................................................................................ Exemption of credit union income ...................................................................................................................................................................................... Expensing of exploration and development costs, fuels ..................................................................................................................................................... Qualified school construction bonds .................................................................................................................................................................................... Excess of percentage over cost depletion, nonfuel minerals .............................................................................................................................................. New markets tax credit ........................................................................................................................................................................................................ Exclusion of parsonage allowances ................................................................................................................................................................................... Exclusion of public assistance benefits (normal tax method) ............................................................................................................................................. Deductibility of student-loan interest .................................................................................................................................................................................... Capital gains treatment of certain income .......................................................................................................................................................................... Deductibility of casualty losses ........................................................................................................................................................................................... Exclusion of interest on student-loan bonds ....................................................................................................................................................................... Empowerment zones, Enterprise communities, and Renewal communities ....................................................................................................................... Special Blue Cross/Blue Shield deduction ......................................................................................................................................................................... Exclusion for employer-provided transit passes ................................................................................................................................................................. Assistance for adopted foster children ................................................................................................................................................................................. Exclusion of interest on bonds for water, sewage, and hazardous waste facilities .............................................................................................................. Tax incentives for preservation of historic structures .......................................................................................................................................................... Energy investment credit ..................................................................................................................................................................................................... Tribal Economic Development Bonds .................................................................................................................................................................................. Credit for investment in clean coal facilities ......................................................................................................................................................................... Exclusion of interest on small issue bonds ......................................................................................................................................................................... Distributions from retirement plans for premiums for health and long-term care insurance ................................................................................................ Exclusion of certain foster care payments .......................................................................................................................................................................... Capital gains exclusion of small corporation stock .............................................................................................................................................................. Tax credit for orphan drug research .................................................................................................................................................................................... Work opportunity tax credit .................................................................................................................................................................................................. Premiums on accident and disability insurance .................................................................................................................................................................. Expensing of multiperiod timber growing costs .................................................................................................................................................................. Credit for energy efficiency improvements to existing homes .............................................................................................................................................. Exclusion of railroad retirement system benefits ................................................................................................................................................................ Credit for holders of zone academy bonds .......................................................................................................................................................................... Exclusion of veterans pensions .......................................................................................................................................................................................... Temporary 50% expensing for equipment used in the refining of liquid fuels ...................................................................................................................... Tax credit and deduction for clean-fuel burning vehicles ..................................................................................................................................................... Tax exemption of certain insurance companies owned by tax-exempt organizations ......................................................................................................... 30% credit for residential purchases/installations of solar and fuel cells ............................................................................................................................. Amortize all geological and geophysical expenditures over 2 years .................................................................................................................................... Adoption credit and exclusion .............................................................................................................................................................................................. Credit for holding clean renewable energy bonds ............................................................................................................................................................... Exclusion of utility conservation subsidies ........................................................................................................................................................................... Expensing of certain multiperiod production costs ............................................................................................................................................................. Exemption of certain mutuals’ and cooperatives’ income ................................................................................................................................................... Exclusion of military disability pensions ............................................................................................................................................................................. Discharge of mortgage indebtedness .................................................................................................................................................................................. Expensing of exploration and development costs, nonfuel minerals .................................................................................................................................. Natural gas distribution pipelines treated as 15-year property ............................................................................................................................................ Qualified energy conservation bonds .................................................................................................................................................................................. Income averaging for farmers .............................................................................................................................................................................................. Expensing of certain capital outlays ................................................................................................................................................................................... Education Individual Retirement Accounts .......................................................................................................................................................................... 2011 1,220 1,010 5,770 1,110 960 1,020 850 1,170 810 670 710 1,180 310 740 800 660 670 1,130 590 640 550 430 690 530 490 420 470 600 390 480 320 330 400 170 320 830 340 290 1,460 300 260 220 930 260 200 180 240 460 100 130 110 110 110 200 90 120 40 90 70 70 2011–15 6,510 6,370 6,320 6,180 6,170 5,630 5,330 5,320 5,120 5,090 4,370 4,020 4,000 3,900 3,790 3,730 3,670 3,630 3,620 3,570 3,450 3,160 3,160 3,000 2,750 2,680 2,590 2,520 2,420 2,080 2,030 2,020 1,940 1,920 1,910 1,820 1,770 1,520 1,460 1,340 1,310 1,270 1,230 1,180 1,060 930 900 820 640 610 580 580 560 500 490 480 470 460 420 420 222 ANALYTICAL PERSPECTIVES Table 16–3. INCOME TAX EXPENDITURES RANKED BY TOTAL FISCAL YEAR 2011-2015 PROJECTED REVENUE EFFECT—Continued (In millions of dollars) Provision 27 13 36 86 74 93 153 51 53 68 155 169 144 41 42 94 14 87 40 123 85 12 45 48 82 107 112 128 30 139 157 28 11 110 115 18 117 39 102 111 127 129 160 161 165 67 81 92 22 67 77 171 75 Allowance of deduction for certain energy efficient commercial building property .............................................................................................................. Capital gains treatment of royalties on coal ........................................................................................................................................................................ Capital gains treatment of certain timber income ............................................................................................................................................................... Exclusion of interest on bonds for Financing of Highway Projects and rail-truck transfer facilities ...................................................................................... Ordinary income treatment of loss from small business corporation stock sale ................................................................................................................. Credit to holders of Gulf Tax Credit Bonds. .......................................................................................................................................................................... Income of trusts to finance supplementary unemployment benefits ................................................................................................................................... Special alternative tax on small property and casualty insurance companies ................................................................................................................... Small life insurance company deduction ............................................................................................................................................................................ Exceptions from imputed interest rules .............................................................................................................................................................................. Additional deduction for the blind ........................................................................................................................................................................................ Exclusion of interest on veterans housing bonds ................................................................................................................................................................ Exclusion of special benefits for disabled coal miners ........................................................................................................................................................ Industrial CO2 capture and sequestration tax credit ........................................................................................................................................................... Deduction for endangered species recovery expenditures .................................................................................................................................................. Recovery Zone Bonds ......................................................................................................................................................................................................... Exclusion of interest on energy facility bonds ..................................................................................................................................................................... Investment credit for rehabilitation of structures (other than historic) ................................................................................................................................. Exclusion of gain or loss on sale or exchange of certain brownfield sites ........................................................................................................................... Credit for disabled access expenditures ............................................................................................................................................................................. Tax credit for certain expenditures for maintaining railroad tracks ....................................................................................................................................... Exception from passive loss limitation for working interests in oil and gas properties ....................................................................................................... Treatment of loans forgiven for solvent farmers ................................................................................................................................................................... Deferral of gain on sale of farm refiners .............................................................................................................................................................................. Deferral of tax on shipping companies ............................................................................................................................................................................... Exclusion of interest on savings bonds redeemed to finance educational expenses .......................................................................................................... Discharge of student loan indebtedness ............................................................................................................................................................................. Exclusion for benefits provided to volunteer EMS and firefighters ...................................................................................................................................... Credit for energy efficient appliances .................................................................................................................................................................................. Tax credit for health insurance purchased by certain displaced and retired individuals ...................................................................................................... Tax credit for the elderly and disabled ................................................................................................................................................................................ Credit for construction of new energy efficient homes ......................................................................................................................................................... Alternative fuel production credit ........................................................................................................................................................................................ Exclusion of employer-provided educational assistance .................................................................................................................................................... Welfare-to-work tax credit .................................................................................................................................................................................................... Bio-Diesel and small agri-biodiesel producer tax credits ..................................................................................................................................................... Employer-provided child care credit .................................................................................................................................................................................... Expensing of capital costs with respect to complying with EPA sulfur regulations .............................................................................................................. Deduction for higher education expenses ........................................................................................................................................................................... Special deduction for teacher expenses .............................................................................................................................................................................. Employee retention credit for employers affected by Hurricane Katrina, Rita, and Wilma ................................................................................................... Temporary income exclusion for employer provided lodging in Midwestern disaster area .................................................................................................. Additional exemption for housing Hurricane Katrina displaced individuals .......................................................................................................................... Exclusion of unemployment insurance benefits ................................................................................................................................................................... Tax Credit for Certain Government Retirees ....................................................................................................................................................................... Cancellation of indebtedness ............................................................................................................................................................................................. Special rules for certain film and TV production .................................................................................................................................................................. Expensing of environmental remediation costs ................................................................................................................................................................... Deferral of gain from dispositions of transmission property to implement FERC restructuring policy ................................................................................. Credit for homebuyer ........................................................................................................................................................................................................... Expensing of certain small investments (normal tax method) ............................................................................................................................................ Build America Bonds ........................................................................................................................................................................................................... Accelerated depreciation of buildings other than rental housing (normal tax method) ....................................................................................................... 2011 90 60 60 100 60 80 50 40 50 50 40 30 40 0 30 30 30 30 60 20 70 20 20 20 20 20 20 60 50 10 10 20 20 30 10 10 10 0 0 0 0 0 0 0 0 –10 –60 –140 –400 1,530 –3,200 –2,120 –12,860 2011–15 400 370 370 370 300 300 260 250 250 250 240 240 200 190 190 190 150 150 140 140 120 100 100 100 100 100 100 60 50 50 50 40 30 30 20 10 10 0 0 0 0 0 0 0 0 –50 –370 –670 –2,320 –2,950 –5,760 –10,100 –76,250 223 16. TAX EXPENDITURES Table 16–4. PRESENT VALUE OF SELECTED TAX EXPENDITURES FOR ACTIVITY IN CALENDAR YEAR 2009 (In millions of dollars) Provision 2009 Present Value of Revenue Loss 5 Deferral of income from controlled foreign corporations (normal tax method) ....................................................................... 20,060 6 Deferred taxes for financial firms on income earned overseas ............................................................................................... 3,540 7 Expensing of research and experimentation expenditures (normal tax method) ................................................................... 2,750 21 Credit for holding clean renewable energy bonds .................................................................................................................. 350 9 Expensing of exploration and development costs—fuels ....................................................................................................... 275 33 Expensing of exploration and development costs—nonfuels ................................................................................................. 130 37 Expensing of multiperiod timber growing costs ...................................................................................................................... 90 44 Expensing of certain multiperiod production costs—agriculture ............................................................................................. 180 43 Expensing of certain capital outlays—agriculture ................................................................................................................... 120 50 Deferral of income on life insurance and annuity contracts .................................................................................................... 19,400 64 Accelerated depreciation on rental housing ........................................................................................................................... 6,980 75 Accelerated depreciation of buildings other than rental ........................................................................................................ –15,850 76 Accelerated depreciation of machinery and equipment .......................................................................................................... 3,150 77 Expensing of certain small investments (normal tax method) ................................................................................................ –40 82 Deferral of tax on shipping companies ................................................................................................................................... 20 106 Credit for holders of zone academy bonds ............................................................................................................................. 610 63 Credit for low-income housing investments ............................................................................................................................ 5,420 103 Deferral for state prepaid tuition plans .................................................................................................................................... 7,100 146 Exclusion of pension contributions—employer plans ............................................................................................................. 74,280 147 Exclusion of 401(k) contributions ............................................................................................................................................ 113,000 148 Exclusion of IRA contributions and earnings .......................................................................................................................... 4,000 148 Exclusion of Roth earnings and distributions ......................................................................................................................... 11,200 148 Exclusion of non-deductible IRA earnings .............................................................................................................................. 510 150 Exclusion of contributions and earnings for Keogh plans ....................................................................................................... 6,270 170 Exclusion of interest on public-purpose bonds ....................................................................................................................... Exclusion of interest on non-public purpose bonds ................................................................................................................ 26,470 11,460 173 Deferral of interest on U.S. savings bonds .............................................................................................................................. 270 224 • There is a separate corporate income tax. Under a comprehensive income tax, corporate income would be taxed only once – at the shareholder level, whether or not distributed in the form of dividends. • Noncorporate tax rates vary by level of income. • Individual tax rates, including brackets, standard deduction, and personal exemptions, are allowed to vary with marital status. • Values of assets and debt are not generally adjusted for inflation. A comprehensive income tax would adjust the cost basis of capital assets and debt for changes in the general price level. Thus, under a comprehensive income tax baseline, the failure to take account of inflation in measuring depreciation, capital gains, and interest income would be regarded as a negative tax expenditure (i.e., a tax penalty), and failure to take account of inflation in measuring interest costs would be regarded as a positive tax expenditure (i.e., a tax subsidy). Although the reference law and normal tax baselines are generally similar, areas of difference include: Tax rates. The separate schedules applying to the various taxpaying units are included in the reference law baseline. Thus, corporate tax rates below the maximum statutory rate do not give rise to a tax expenditure. The normal tax baseline is similar, except that, by convention, it specifies the current maximum rate as the baseline for the corporate income tax. The lower tax rates applied to the first $10 million of corporate income are thus regarded as a tax expenditure under the normal tax. By convention, the Alternative Minimum Tax is treated as part of the baseline rate structure under both the reference and normal tax methods. Income subject to the tax. Income subject to tax is defined as gross income less the costs of earning that income. Under the reference tax rules, gross income does not include gifts defined as receipts of money or property that are not consideration in an exchange nor does gross income include most transfer payments from the Government.2 The normal tax baseline also excludes gifts between individuals from gross income. Under the normal tax baseline, however, all cash transfer payments from the Government to private individuals are counted in gross income, and exemptions of such transfers from tax are identified as tax expenditures. The costs of earning income are generally deductible in determining taxable income under both the reference and normal tax baselines.3 2 Gross income does, however, include transfer payments associated with past employment, such as Social Security benefits. 3 In the case of individuals who hold “passive’’ equity interests in businesses, the pro-rata shares of sales and expense deductions reportable in a year are limited. A passive business activity is defined generally to be one in which the holder of the interest, usually a partnership interest, does not actively perform managerial or other participatory functions. The taxpayer may generally report no larger deductions for a year than will reduce taxable income from such activities to zero. Deductions in excess of the limitation may be taken in subsequent years, or when the interest is liquidated. In addition, costs of earning income may be limited under the Alternative Minimum Tax. ANALYTICAL PERSPECTIVES Capital recovery. Under the reference tax law baseline no tax expenditures arise from accelerated depreciation. Under the normal tax baseline, the depreciation allowance for property is computed using estimates of economic depreciation. Treatment of foreign income. Both the normal and reference tax baselines allow a tax credit for foreign income taxes paid (up to the amount of U.S. income taxes that would otherwise be due), which prevents double taxation of income earned abroad. Under the normal tax method, however, controlled foreign corporations (CFCs) are not regarded as entities separate from their controlling U.S. shareholders. Thus, the deferral of tax on income received by CFCs is regarded as a tax expenditure under this method. In contrast, except for tax haven activities, the reference law baseline follows current law in treating CFCs as separate taxable entities whose income is not subject to U.S. tax until distributed to U.S. taxpayers. Under this baseline, deferral of tax on CFC income is not a tax expenditure because U.S. taxpayers generally are not taxed on accrued, but unrealized, income. Descriptions of Income Tax Provisions Descriptions of the individual and corporate income tax expenditures reported on in this chapter follow. These descriptions relate to current law as of December 31, 2009, and do not reflect proposals made elsewhere in the Budget. Legislation enacted in 2009, such as the American Recovery and Reinvestment Act of 2009, and the Worker, Homeownership and Business Assistance Act of 2009, introduced many changes which for the most part expanded the scope of existing provisions in the Tax Code. New provisions include recovery zone bonds, tribal economic development bonds, American opportunity tax credit, qualified school construction bonds, making work pay tax credits, credits for certain government retirees, and Build America Bonds. Provisions significantly expanded include the child and earned income tax credits, energy and investment related incentives, housing related subsidies, and health insurance premiums for the unemployed. In addition, a number of provisions which were set to expire were expected to be extended for another year, but the extensions had not yet occurred and are not included in these estimates. National Defense 1. Benefits and allowances to Armed Forces personnel.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income because they represent accretions to wealth that do not materially differ from cash wages. As an example, a rental voucher of $100 is (approximately) equal in value to $100 of cash income. In contrast to this treatment, certain housing and meals, in addition to other benefits provided military personnel, either in cash or in kind, as well as certain amounts of pay related to combat service, are excluded from income subject to tax International Affairs. 225 16. TAX EXPENDITURES 2. Income earned abroad.—Under the baseline tax system, all compensation received by U.S. citizens is properly included in their taxable income. It makes no difference whether the compensation is a result of working abroad or whether it is labeled as a housing allowance. In contrast to this treatment, U.S. tax law allows U.S. citizens who live abroad, work in the private sector, and satisfy a foreign residency requirement to exclude up to $80,000 in foreign earned income from U.S. taxes. In addition, if these taxpayers receive a specific allowance for foreign housing from their employers, then they may also exclude the value of that allowance. If they do not receive a specific allowance for housing expenses, they may deduct against their U.S. taxes that portion of such expenses that exceeds one-sixth the salary of a civil servant at grade GS–14, step 1 ($83,445 in 2009, which excludes regional pay adjustments). 3. Exclusion of certain allowances for Federal employees abroad.—In general, all compensation received by U.S. citizens is properly included in their taxable income. It makes no difference whether the compensation is a result of working abroad or whether it is labeled as an allowance for the high cost of living abroad. In contrast to this treatment, U.S. Federal civilian employees and Peace Corps members who work outside the continental United States are allowed to exclude from U.S. taxable income certain special allowances they receive to compensate them for the relatively high costs associated with living overseas. The allowances supplement wage income and cover expenses such as rent, education, and the cost of travel to and from the United States. 4. Sales source rule exceptions.—The United States generally taxes the worldwide income of U.S. persons, with taxpayers receiving a credit for foreign taxes paid, limited to the pre-credit U.S. tax on the foreign source income. In contrast, the sales source rules for inventory property allow U.S. exporters to use more foreign tax credits by allowing the exporters to attribute a larger portion of their earnings abroad than would be the case if the allocation of earnings was based on actual economic activity. 5. Income of U.S.-controlled foreign corporations.—The United States generally taxes the worldwide income of U.S. persons and business entities. In contrast, certain active income of foreign corporations controlled by U.S. shareholders is not subject to U.S. taxation when it is earned. The income becomes taxable only when the controlling U.S. shareholders receive dividends or other distributions from their foreign stockholding. The reference law tax baseline reflects this tax treatment where only realized income is taxed. Under the normal tax method, however, the currently attributable foreign source pre-tax income from such a controlling interest is considered to be subject to U.S. taxation, whether or not distributed. Thus, the normal tax method considers the amount of controlled foreign corporation income not yet distributed to a U.S. shareholder as tax-deferred income. 6. Exceptions under subpart F for active financing income.—The United States generally taxes the worldwide income of U.S. persons and business entities. It would not allow the deferral of tax or other relief targeted at particular industries or activities. In contrast, under current law, financial firms may defer taxes on income earned overseas in an active business. General Science, Space, and Technology 7. Expensing R&E expenditures.—Research and experimentation (R&E) projects can be viewed as investments because, if successful, their benefits accrue for several years. It is often difficult, however, to identify whether a specific R&E project is successful and, if successful, what its expected life will be. Because of this ambiguity, the reference law baseline tax system would allow of expensing of R&E expenditures. In contrast, under the normal tax method, the expensing of R&E expenditures is viewed as a tax expenditure. The baseline assumed for the normal tax method is that all R&E expenditures are successful and have an expected life of five years. 8. R&E credit.—The baseline tax system would uniformly tax all returns to investments and not allow credits for particular activities, investments, or industries. In contrast, the Tax Code allows an R&E credit of 20 percent of qualified research expenditures in excess of a base amount. The base amount is generally determined by multiplying a “fixed-base percentage” by the average amount of the company’s gross receipts for the prior four years. The taxpayer’s fixed base percentage generally is the ratio of its research expenses to gross receipts for 1984 through 1988. Taxpayers can elect the alternative simplified credit regime, which is equal to 14 percent (12 percent prior to 2009) of qualified research expenses that exceed 50 percent of the average qualified research expenses for the three preceding taxable years. Prior to January 1, 2009, taxpayers could also elect an alternative incremental credit regime. Under the alternative incremental credit regime the taxpayer was assigned a three-tiered fixed base percentage that is lower than the fixed-base percentage that would otherwise apply, and the credit rate was reduced. The rates for the alternative incremental credit ranged from 3 percent to 5 percent. The research credit expired on December 31, 2009. Energy 9. Exploration and development costs.—Under the baseline tax system, the costs of exploring and developing oil and gas wells would be capitalized and then amortized (or depreciated) over an estimate of the economic life of the well. This insures that the net income from the well is measured appropriately each year. In contrast to this treatment, current law allows intangible drilling costs for successful investments in domestic oil and gas wells (such as wages, the cost of using machinery for grading and drilling, and the cost of unsalvageable materials used in constructing wells) to be deducted immediately, i.e., expensed. Because it allows recovery of costs sooner, expensing is more generous for the taxpayer than would be amortization. Integrated oil 226 companies may deduct only 70 percent of such costs and must amortize the remaining 30 percent over five years. The same rule applies to the exploration and development costs of surface stripping and the construction of shafts and tunnels for other fuel minerals. 10. Percentage depletion.—The baseline tax system would allow recovery of the costs of developing certain oil and mineral properties using cost depletion. Cost depletion is similar in concept to depreciation, in that the costs of developing or acquiring the asset are capitalized and then gradually reduced over an estimate of the asset’s productive life, as is appropriate for measuring net income. In contrast, the Tax Code generally allows independent fuel and mineral producers and royalty owners to take percentage depletion deductions rather than cost depletion on limited quantities of output. Under percentage depletion, taxpayers deduct a percentage of gross income from mineral production. In certain cases the deduction is limited to a fraction of the asset’s net income. Over the life of an investment, percentage depletion deductions can exceed the cost of the investment. Consequently, percentage depletion offers more generous tax treatment than would cost depletion, which would limit deductions to an investment’s cost. 11. Alternative fuel production credit.—The baseline tax system would not allow credits for particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investmentlike activities. In contrast, the Tax Code provides a credit of $3 per oil-equivalent barrel of production (in 2004 dollars) for coke or coke gas during a four-year period for qualified facilities placed in service before January 1, 2010. 12. Oil and gas exception to passive loss limitation.—The baseline tax system accepts current law’s general rule limiting taxpayers’ ability to deduct losses from passive activities against nonpassive income (e.g., wages, interest, and dividends). Passive activities generally are defined as those in which the taxpayer does not materially participate and there are numerous additional considerations brought to bear on the determination of which activities are passive for a given taxpayer. Losses are limited in an attempt to limit tax sheltering activities. Passive losses that are unused may be carried forward and applied against future passive income. In contrast to the general restrictions on passive losses, the Tax Code exempts owners of working interests in oil and gas properties from “passive income’’ limitations, such that the working interest-holder who manages the development of wells and incurs all operating costs on behalf of himself and all other owners may aggregate negative taxable income (i.e., losses) from such interests with his other income. Thus, these taxpayers are able to fully deduct passive losses against nonpassive income, in contradiction to the general prohibition against such deductions. 13. Capital gains treatment of royalties on coal.— For individuals in 2009, tax rates on regular income vary from 10 percent to 35 percent, depending on the taxpay- ANALYTICAL PERSPECTIVES er’s income. The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low tax rates to apply to certain types or sources of income. In contrast, current law allows capital gains to be taxed at a preferentially low rate that is no higher than 15 percent. Certain sales of coal under royalty contracts qualify for taxation as capital gains rather than ordinary income, and so benefit from the preferentially low 15 percent maximum tax rate on capital gains. 14. Energy facility bonds.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, the Tax Code allows interest earned on State and local bonds used to finance construction of certain energy facilities to be exempt from tax. These bonds are generally subject to the State private-activity-bond annual volume cap. 15. Energy production credit.—The baseline tax system would not allow credits for particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code provides a credit for certain electricity produced from wind energy, biomass, geothermal energy, solar energy, small irrigation power, municipal solid waste, or qualified hydropower and sold to an unrelated party. In addition to the electricity production credit, an income tax credit is allowed for the production of refined coal and Indian coal at qualified facilities. 16. Energy investment credit.—The baseline tax system would not allow credits for particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. However, the Tax Code provides credits for investments in solar and geothermal energy property, qualified fuel cell power plants, stationary microturbine power plants, geothermal heat pumps, small wind property and combined heat and power property. Owners of renewable power facilities that qualify for the energy production credit may instead elect to take an energy investment credit. 17. Alcohol fuel credits.—The baseline tax system would not allow credits for particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code provides an income tax credit for ethanol derived from renewable sources and used as fuel. In lieu of the alcohol mixture credit, the taxpayer may claim a refundable excise tax credit. In addition, small ethanol producers are eligible for a separate income tax credit for ethanol production and a separate income tax credit is available for qualified cellulosic biofuel production. 18. Bio-Diesel tax credit.—The baseline tax system would not allow credits for particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. However, the Tax Code allows an income tax credit for biodiesel used or sold and for bio-diesel derived from virgin 16. TAX EXPENDITURES sources. In lieu of the bio-diesel credit, the taxpayer may claim a refundable excise tax credit. In addition, small agri-biodiesel producers are eligible for a separate income tax credit for ethanol production and a separate credit is available for qualified renewable diesel fuel mixtures. 19. Credit for alternative motor vehicles and refueling property.—The baseline tax system would not allow credits or deductions for particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code allows a number of credits for certain types of vehicles and property. These are available for alternative motor vehicles (including fuel cell, advanced lean burn technology, hybrid, and alternative fuel motor vehicles), alternative fuel vehicle refueling property, and plug-ins (including plug-in electric vehicles, plug-in electric drive motor vehicles, and plug-in conversion kits). 20. Exclusion of utility conservation subsidies.— The baseline tax system generally takes a comprehensive view of taxable income that includes a wide variety of (measurable) accretions to wealth. In certain circumstances, public utilities offer rate subsidies to non-business customers who invest in energy conservation measures. These rate subsidies are equivalent to payments from the utility to its customer, and so represent accretions to wealth, income, that would be taxable to the customer under the baseline tax system. In contrast, the Tax Code exempts these subsidies from the non-business customer’s gross income. 21. Credit to holders of clean renewable energy bonds.—The baseline tax system would uniformly tax all returns to investments and not allow credits for particular activities, investments, or industries. In contrast, the Tax Code provides for the issuance of Clean Renewable Energy Bonds which entitles the bond holder to a Federal income tax credit in lieu of interest. The limit on the volume issued in 2009 is $2.4 billion. 22. Deferral of gain from dispositions of transmission property to implement FERC restructuring policy.—The baseline tax system generally would tax gains from sale when realized. However, the Tax Code allows utilities to defer gains from the sale of their transmission assets to a FERC-approved independent transmission company. 23. Credit for investment in clean coal facilities.— The baseline tax system would uniformly tax all returns to investments and not allow credits for particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code provides investment tax credits for clean coal facilities producing electricity and for industrial gasification combined cycle projects. 24. Temporary 50 percent expensing for equipment used in the refining of liquid fuels.—The baseline tax system allows the taxpayer to deduct the decline in the economic value of an investment over time. However, the Tax Code provides for an accelerated recovery of the cost of certain investments in refineries by allowing partial expensing of the cost, thereby giving such investments a tax advantage. 227 25. Natural gas distribution pipelines treated as 15-year property.—The baseline tax system allows taxpayers to deduct the decline in the economic value of an investment over time. However, the Tax Code allows depreciation of natural gas distribution pipelines (placed in service between 2005 and 2011) over a 15 year period. These deductions are accelerated relative to deductions based on economic depreciation. 26. Amortize all geological and geophysical expenditures over two years.—The baseline tax system allows taxpayers to deduct the decline in the economic value of an investment over time. However, the Tax Code allows geological and geophysical expenditures incurred in connection with oil and gas exploration in the United States to be amortized over two years for non-integrated oil companies. 27. Allowance of deduction for certain energy efficient commercial building property.—The baseline tax system would not allow deductions in addition to normal depreciation allowances for particular investments in particular industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code allows a deduction, per square foot, for certain energy efficient commercial buildings. 28. Credit for construction of new energy efficient homes.—The baseline tax system would not allow credits for particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. However, the Tax Code allows contractors a tax credit of $2,000 for the construction of a qualified new energy-efficient home that has an annual level of heating and cooling energy consumption at least 50 percent below the annual consumption of a comparable dwelling unit. The credit equals $1,000 in the case of a new manufactured home that meets a 30 percent standard. 29. Credit for energy efficiency improvements to existing homes.—The baseline tax system would not allow credits for particular activities, investments, or industries. However, the Tax Code provides an investment tax credit for expenditures made on insulation, exterior windows, and doors that improve the energy efficiency of homes and meet certain standards. The Tax Code also provides a credit for purchases of advanced main air circulating fans, natural gas, propane, or oil furnaces or hot water boilers, and other qualified energy efficient property. 30. Credit for energy efficient appliances.—The baseline tax system would not allow credits for particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code provides tax credits for the manufacture of efficient dishwashers, clothes washers, and refrigerators. The size of the credit depends on the efficiency of the appliance. 31. Credit for residential energy efficient property.—The baseline tax system would uniformly tax all returns to investments and not allow credits for particular activities, investments, or industries. However, the Tax Code provides a credit for the purchase of a qualified pho- 228 ANALYTICAL PERSPECTIVES tovoltaic property and solar water heating property, as well as for fuel cell power plants, geothermal heat pumps and small wind property. 32. Credit for qualified energy conservation bonds.—The baseline tax system would uniformly tax all returns to investments and not allow credits for particular activities, investments, or industries. However, the Tax Code provides for the issuance of energy conservation bonds which entitle the bond holder to a Federal income tax credit in lieu of interest. The limit on the volume issued in 2009 is $3.2 billion. Natural Resources and Environment 33. Exploration and development costs.—The baseline tax system allows the taxpayer to deduct the depreciation of an asset according to the decline in its economic value over time. However, certain capital outlays associated with exploration and development of nonfuel minerals may be expensed rather than depreciated over the life of the asset. 34. Percentage depletion.—The baseline tax system allows the taxpayer to deduct the decline in the economic value of an investment over time. Under current law, however, most nonfuel mineral extractors may use percentage depletion (whereby the deduction is fixed as a percentage of revenue and can exceed total costs) rather than cost depletion, with percentage depletion rates ranging from 22 percent for sulfur to 5 percent for sand and gravel. Over the life of an investment, percentage depletion deductions can exceed the cost of the investment. Consequently, percentage depletion offers more generous tax treatment than would cost depletion, which would limit deductions to an investment’s cost. 35. Sewage, water, solid and hazardous waste facility bonds.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, the Tax Code allows interest earned on State and local bonds used to finance construction of sewage, water, or hazardous waste facilities to be exempt from tax. These bonds are generally subject to the State private-activitybond annual volume cap. 36. Capital gains treatment of certain timber.— The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low tax rates to apply to certain types or sources of income. However, under current law certain timber sales can be treated as a capital gain rather than ordinary income and therefore subject to the lower capital-gains tax rate. For individuals in 2009, tax rates on regular income vary from 10 percent to 35 percent, depending on the taxpayer’s income. In contrast, current law allows capital gains to be taxed at a preferentially low rate that is no higher than 15 percent. 37. Expensing multi-period timber growing costs.—The baseline tax system requires the taxpayer to capitalize costs associated with investment property. However, most of the production costs of growing timber may be expensed under current law rather than capitalized and deducted when the timber is sold, thereby accelerating cost recovery. 38. Historic preservation.—The baseline tax system would not allow credits for particular activities, investments, or industries. However, expenditures to preserve and restore certified historic structures qualify for an investment tax credit of 20 percent under current law for certified rehabilitation activities. 39. Expensing of capital costs with respect to complying with EPA sulfur regulations.—The baseline tax system allows the taxpayer to deduct the decline in the economic value of an investment over time. However, the Tax Code allows small refiners to deduct 75 percent of qualified capital costs incurred during the taxable year, thereby accelerating cost recovery relative to economic depreciation. 40. Exclusion of gain or loss on sale or exchange of certain brownfield sites.—In general, a tax-exempt organization must pay taxes on income from activities unrelated to its nonprofit status. The Tax Code, however, provides a special exclusion from unrelated business taxable income of the gain or loss from the sale or exchange of certain qualifying brownfield properties. 41. Industrial CO2 capture and sequestration tax credit.—The baseline tax system would uniformly tax all returns to investments and not allow credits for particular activities, investments, or industries. In contrast, the Tax Code allows a credit of $20 per metric ton for qualified carbon dioxide captured at a qualified facility and disposed of in secure geological storage. In addition, the provision allows a credit of $10 per metric ton of qualified carbon dioxide that is captured at a qualified facility and as a tertiary injectant in a qualified enhanced oil or natural gas recovery project. 42. Deduction for endangered species recovery expenditures.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low tax rates to apply to certain types or sources of income. In contrast, under current law farmers can deduct up to 25 percent of their gross income for expenses incurred as a result of site and habitat improvement activities that will benefit endangered species on their farm land, in accordance with site specific management actions included in species recovery plans approved pursuant to the Endangered Species Act of 1973. Agriculture 43. Expensing certain capital outlays.—The baseline tax system requires the taxpayer to capitalize costs associated with investment property. However, farmers may expense certain expenditures for feed and fertilizer as well as for soil and water conservation measures as well as other capital improvements under current law. 44. Expensing multi-period livestock and crop production costs.—The baseline tax system requires the taxpayer to capitalize costs associated with an investment over time. However, the production of livestock and 16. TAX EXPENDITURES crops with a production period greater than two years (e.g., establishing orchards or constructing barns) is exempt from the uniform cost capitalization rules, thereby accelerating cost recovery. 45. Loans forgiven solvent farmers.—The baseline tax system requires debtors to include the amount of loan forgiveness as income or else reduce their recoverable basis in the property related to the loan. If the amount of forgiveness exceeds the basis, the excess forgiveness is taxable. However, for bankrupt debtors, the amount of loan forgiveness reduces carryover losses, unused credits, and then basis, with the remainder of the forgiven debt excluded from taxation. 46. Capital gains treatment of certain income.— For individuals in 2009, tax rates on regular income vary from 10 percent to 35 percent, depending on the taxpayer’s income. The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low tax rates to apply to certain types or sources of income. In contrast, current law allows capital gains to be taxed at a preferentially low rate that is no higher than 15 percent. Certain agricultural income, such as unharvested crops, qualify for taxation as capital gains rather than ordinary income, and so benefit from the preferentially low 15 percent maximum tax rate on capital gains. 47. Income averaging for farmers.—The baseline tax system generally taxes all earned income each year at the rate determined by the income tax. However, taxpayers may average their taxable income from farming and fishing over the previous three years. 48. Deferral of gain on sales of farm refiners.— The baseline tax system generally subjects capital gains to taxes the year that they are realized. However, the Tax Code allows a taxpayer who sells stock in a farm refiner to a farmers’ cooperative to defer recognition of the gain if the proceeds are re-invested in a qualified replacement property. Commerce and Housing This category includes a number of tax expenditure provisions that also affect economic activity in other functional categories. For example, provisions related to investment, such as accelerated depreciation, could be classified under the energy, natural resources and environment, agriculture, or transportation categories. 49. Credit union income exemption.—Under the baseline tax system, corporations pay taxes on their profits under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. However, in the Tax Code the earnings of credit unions not distributed to members as interest or dividends are exempt from the income tax. 50. Deferral of income on life insurance and annuity contracts.—Under the baseline tax system, individuals and corporations pay taxes on their income when it is (actually or constructively) received or accrued, depending on their method of accounting. Nevertheless, the Tax Code provides favorable tax treatment for invest- 229 ment income earned within qualified life insurance and annuity contracts. In general, investment income earned on qualified life insurance contracts held until death is permanently exempt from income tax. Investment income distributed prior to the death of the insured is generally tax-deferred. Investment income earned on annuities benefits from tax deferral. 51. Small property and casualty insurance companies.—Under the baseline tax system, corporations pay taxes on their profits under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. Under current law, however, stock non-life insurance companies are generally exempt from tax if their gross receipts for the taxable year do not exceed $600,000 and more than 50 percent of such gross receipts consists of premiums. Mutual non-life insurance companies are generally tax-exempt if their annual gross receipts do not exceed $150,000 and more than 35 percent of gross receipts consist of premiums. Also, non-life insurance companies with no more than $1.2 million of annual net premiums may elect to pay tax only on their taxable investment income. 52. Insurance companies owned by exempt organizations.—Under the baseline tax system, corporations pay taxes on their profits under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. Generally the income generated by life and property and casualty insurance companies is subject to tax, albeit by special rules. Insurance operations conducted by such exempt organizations as fraternal societies, voluntary employee benefit associations, and others, however, are exempt from tax. 53. Small life insurance company deduction.— Under the baseline tax system, corporations pay taxes on their profits under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. However, under current law small life insurance companies (with gross assets of less than $500 million) can deduct 60 percent of the first $3 million of otherwise taxable income. The deduction phases out for otherwise taxable income between $3 million and $15 million. 54. Exclusion of interest spread of financial institutions.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. Consumers and nonprofit organizations pay for some deposit-linked services, such as check cashing, by accepting a below-market interest rate on their demand deposits. If they received a market rate of interest on those deposits and paid explicit fees for the associated services, they would pay taxes on the full market rate and (unlike businesses) could not deduct the fees. The Government thus foregoes tax on the difference between the risk-free market interest rate and below-market interest rates on demand deposits, which under competitive conditions should equal the value added of deposit services. 230 55. Mortgage housing bonds.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, the Tax Code allows interest earned on State and local bonds used to finance homes purchased by first-time, low-to-moderate-income buyers to be exempt. These bonds are generally subject to the State privateactivity-bond annual volume cap. 56. Rental housing bonds.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, the Tax Code allows interest earned on State and local government bonds used to finance multifamily rental housing projects to be tax-exempt. 57. Interest on owner-occupied homes.—The baseline tax system would allow the write-off of expenses incurred in earning income. It would not allow the deductibility of expenses when income or the return on investments are not taxed. In contrast, the Tax Code provides that owner-occupants of homes may deduct mortgage interest on their primary and secondary residences as itemized nonbusiness deductions even though the value of owneroccupied housing services is not included in a taxpayer’s taxable income. In general, the mortgage interest deduction is limited to interest on debt no greater than the owner’s basis in the residence, and is also limited to interest on debt of no more than $1 million. Interest on up to $100,000 of other debt secured by a lien on a principal or second residence is also deductible, irrespective of the purpose of borrowing, provided the debt does not exceed the fair market value of the residence. 58. Taxes on owner-occupied homes.—The Tax Code allows owner-occupants of homes to deduct property taxes on their primary and secondary residences even though they are not required to report the value of owner-occupied housing services as gross income. 59. Installment sales.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates, or deferral of tax, to apply to certain types or sources of income. Dealers in real and personal property (i.e., sellers who regularly hold property for sale or resale) cannot defer taxable income from installment sales until the receipt of the loan repayment. Nondealers (i.e., sellers of real property used in their business) are required to pay interest on deferred taxes attributable to their total installment obligations in excess of $5 million. Only properties with sales prices exceeding $150,000 are includable in the total. The payment of a market rate of interest eliminates the benefit of the tax deferral. The tax exemption for nondealers with total installment obligations of less than $5 million is, therefore, a tax expenditure. 60. Capital gains exclusion on home sales.—The baseline tax system would not allow deductions and exemptions to certain types of income. In contrast, under current law, a homeowner can exclude from tax up to $500,000 ($250,000 for singles) of the capital gains from ANALYTICAL PERSPECTIVES the sale of a principal residence. The exclusion may not be used more than once every two years. 61. Imputed net rental income on owner-occupied housing.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. Under current law, the implicit rental value of home ownership, net of expenses such as mortgage interest and depreciation, is excluded from income. 62. Passive loss real estate exemption.—The baseline tax system accepts current law’s general rule limiting taxpayers’ ability to deduct losses from passive activities against nonpassive income (e.g., wages, interest, and dividends). Passive activities generally are defined as those in which the taxpayer does not materially participate and there are numerous additional considerations brought to bear on the determination of which activities are passive for a given taxpayer. Losses are limited in an attempt to limit tax sheltering activities. Passive losses that are unused may be carried forward and applied against future passive income. In contrast to the general restrictions on passive losses, the Tax Code exempts owners of rental real estate activities from “passive income’’ limitations. The exemption is limited to $25,000 in losses and phases out for taxpayers with income between $100,000 and $150,000. 63. Low-income housing credit.—The baseline tax system would uniformly tax all returns to investments and not allow credits for particular activities, investments, or industries. However, under current law taxpayers who invest in certain low-income housing are eligible for a tax credit. The credit rate is set so that the present value of the credit is equal to 70 percent for new construction and 30 percent for (1) housing receiving other Federal benefits (such as tax-exempt bond financing), or (2) substantially rehabilitated existing housing. The credit can exceed these levels in certain statutorily defined and State designated areas where project development costs are higher. The credit is allowed in equal amounts over 10 years and is generally subject to a volume cap. 64. Accelerated depreciation of residential rental property.—Under an economic income tax, the costs of acquiring a building are capitalized and depreciated over time in accordance with the decline in the property’s economic value due to wear and tear or obsolescence. This insures that the net income from the rental property is measured appropriately each year. However, the depreciation provisions of the Tax Code are part of the reference law rules, and thus do not give rise to tax expenditures under reference law. Under normal law, however, depreciation allowances reflect estimates of economic depreciation. 65. Discharge of mortgage indebtedness.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, the Tax Code allows an exclusion from the income of a taxpayer any discharge of 16. TAX EXPENDITURES indebtedness of a qualified principal residence. The provision sunsets on December 31, 2012. 66. Credit for homebuyer.—The baseline tax system would not allow credits for particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code allows a tax credit for home buyers on purchases before May 1, 2010. 67. Cancellation of indebtedness.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, under current law individuals are not required to report the cancellation of certain indebtedness as current income. If the canceled debt is not reported as current income, however, the basis of the underlying property must be reduced by the amount canceled. 68. Imputed interest rules.—Holders (issuers) of debt instruments are generally required to report interest earned (paid) in the period it accrues, not when paid. In addition, the amount of interest accrued is determined by the actual price paid, not by the stated principal and interest stipulated in the instrument. In general, any debt associated with the sale of property worth less than $250,000 is excepted from the general interest accounting rules. This general $250,000 exception is not a tax expenditure under reference law but is under normal law. Exceptions above $250,000 are a tax expenditure under reference law; these exceptions include the following: (1) sales of personal residences worth more than $250,000, and (2) sales of farms and small businesses worth between $250,000 and $1 million. 69. Treatment of qualified dividends.—For individuals in 2009, tax rates on regular income vary from 10 percent to 35 percent, depending on the taxpayer’s income. The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low tax rates to apply to certain types or sources of income. In contrast, current law allows qualified dividends to be taxed at a preferentially low rate that is no higher than 15 percent. 70. Capital gains (other than agriculture, timber, and coal).—For individuals in 2009, tax rates on regular income vary from 10 percent to 35 percent, depending on the taxpayer’s income. The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low tax rates to apply to certain types or sources of income. In contrast, current law allows capital gains on assets held for more than one year to be taxed at a preferentially low rate that is no higher than 15 percent. 71. Capital gains exclusion for small business stock.—The baseline tax system would not allow deductions and exemptions to certain types of income. In contrast, the Tax Code provides an exclusion of 50 percent (from a 28 percent tax rate) for capital gains from qualified small business stock held by individuals for more than 5 years; 75 percent for stock issued in 2009 and 2010. A qualified small business is a corporation whose 231 gross assets do not exceed $50 million as of the date of issuance of the stock. 72. Step-up in basis of capital gains at death.— The baseline tax system would not allow deductions and exemptions to certain types of income. In contrast, capital gains on assets held at the owner’s death are not subject to capital gains tax under current law. The cost basis of the appreciated assets is adjusted to the market value at the owner’s date of death. 73. Carryover basis of capital gains on gifts.—The baseline tax system would not allow deductions and exemptions to certain types of income. In contrast, when a gift of appreciated asset is made under current law, the donor’s basis in the transferred property (the cost that was incurred when the transferred property was first acquired) carries over to the donee. The carryover of the donor’s basis allows a continued deferral of unrealized capital gains. 74. Ordinary income treatment of losses from sale of small business corporate stock shares.—The baseline tax system limits to $3,000 the write-off of losses from capital assets, with carryover of the excess to future years. In contrast, the Tax Code allows up to $100,000 in losses from the sale of small business corporate stock (capitalization less than $1 million) to be treated as ordinary losses and fully deducted. 75. Depreciation of non-rental-housing buildings.—Under an economic income tax, the costs of acquiring a building are capitalized and depreciated over time in accordance with the decline in the property’s economic value due to wear and tear or obsolescence. This insures that the net income from the property is measured appropriately each year. However, the depreciation provisions of the Tax Code are part of the reference law rules, and thus do not give rise to tax expenditures under reference law. Under normal law, however, depreciation allowances reflect estimates of economic depreciation. 76. Accelerated depreciation of machinery and equipment.—Under an economic income tax, the costs of acquiring machinery and equipment are capitalized and depreciated over time in accordance with the decline in the property’s economic value due to wear and tear or obsolescence. This insures that the net income from the property is measured appropriately each year. However, the depreciation provisions of the Tax Code are part of the reference law rules, and thus do not give rise to tax expenditures under reference law. Under normal law, however, depreciation allowances reflect estimates of economic depreciation. 77. Expensing of certain small investments.— Under the reference law baseline, the costs of acquiring tangible property and computer software would be depreciated using the Tax Code’s depreciation provisions. Under the normal tax baseline, depreciation allowances are estimates of economic depreciation. However, the Tax Code allows qualifying investments by small businesses in tangible property and certain computer software to be expensed rather than depreciated over time. 78. Graduated corporation income tax rate schedule.—Because the corporate rate schedule is part of refer- 232 ANALYTICAL PERSPECTIVES ence tax law, it is not considered a tax expenditure under the reference method. A flat corporation income tax rate is taken as the baseline under the normal tax method; therefore the lower rate is considered a tax expenditure under this concept. 79. Small issue industrial development bonds.— The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, the Tax Code allows interest earned on small issue industrial development bonds (IDBs) issued by State and local governments to finance manufacturing facilities to be tax exempt. Depreciable property financed with small issue IDBs must be depreciated, however, using the straight-line method. The annual volume of small issue IDBs is subject to the unified volume cap discussed in the mortgage housing bond section above. 80. Deduction for U.S. production activities.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, the Tax Code allows for a deduction equal to a portion of taxable income attributable to domestic production. 81. Special rules for certain film and TV production.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, under current law taxpayers may deduct up to $15 million per production ($20 million in certain distressed areas) in non-capital expenditures incurred during the year. Transportation 82. Deferral of tax on U.S. shipping companies.— The baseline tax system generally would tax all profits and income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, the Tax Code allows certain companies that operate U.S. flag vessels to defer income taxes on that portion of their income used for shipping purposes, primarily construction, modernization and major repairs to ships, and repayment of loans to finance these investments. 83. Exclusion of employee parking expenses.— Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income because they represent accretions to wealth that do not materially differ from cash wages. In contrast, under current law employee parking expenses that are paid for by the employer or that are received in lieu of wages are excludable from the income of the employee. In 2009, the maximum amount of the parking exclusion is $230 (indexed) per month. The tax expenditure estimate does not include parking at facilities owned by the employer. 84. Exclusion of employee transit pass expenses.— Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income because they represent accretions to wealth that do not materially differ from cash wages. In contrast, under current law transit passes, tokens, fare cards, and vanpool expenses paid for by an employer or provided in lieu of wages to defray an employee’s commuting costs are excludable from the employee’s income. The recent stimulus legislation included a provision that equalized the transit subsidy maximum to that for employee parking expenses through the end of 2010. In 2009, the maximum amount of the exclusion is $230 (indexed) per month. 85. Tax credit for certain expenditures for maintaining railroad tracks.—The baseline tax system would not allow credits for particular activities, investments, or industries. However, under current law eligible taxpayers may claim a credit equal to the lesser of 50 percent of maintenance expenditures and the product of $3,500 and the number of miles of track owned or leased. 86. Exclusion of interest on bonds for financing of highway projects and rail-truck transfer facilities.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, the Tax Code provides for $15 billion of tax-exempt bond authority to finance qualified highway or surface freight transfer facilities. The authority to issue these bonds expires on December 31, 2015. Community and Regional Development 87. Rehabilitation of structures.—The baseline tax system would uniformly tax all returns to investments and not allow credits for particular activities, investments, or industries. However, the Tax Code allows a 10-percent investment tax credit for the rehabilitation of buildings that are used for business or productive activities and that were erected before 1936 for other than residential purposes. The taxpayer’s recoverable basis must be reduced by the amount of the credit. 88. Airport, dock, and similar facility bonds.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, the Tax Code allows interest earned on State and local bonds issued to finance high-speed rail facilities and Government-owned airports, docks, wharves, and sport and convention facilities to be tax-exempt. These bonds are not subject to a volume cap. 89. Exemption of income of mutuals and cooperatives.—Under the baseline tax system, corporations pay taxes on their profits under the regular tax rate schedule. In contrast, the Tax Code provides for the incomes of mutual and cooperative telephone and electric companies to be exempt from tax if at least 85 percent of their revenues are derived from patron service charges. 233 16. TAX EXPENDITURES 90. Empowerment zones and renewal communities.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income, tax credits, and writeoffs faster than economic depreciation. In contrast, under current law qualifying businesses in designated economically depressed areas can receive tax benefits such as an employer wage credit, increased expensing of investment in equipment, special tax-exempt financing, accelerated depreciation, and certain capital gains incentives. 91. New markets tax credit.—The baseline tax system would not allow credits for particular activities, investments, or industries. However, under current law taxpayers who make qualified equity investments in a community development entity (CDE), which then makes qualified investments in low-income communities, are eligible for a tax credit received over 7 years. The total equity investment available for the credit across all CDEs is $5 billion in 2009. 92. Expensing of environmental remediation costs.—Under the baseline tax system, the costs would be amortized (or depreciated) over an estimate of the economic life of the building. This insures that the net income from the buildings is measured appropriately each year. However, the Tax Code allows taxpayers who clean up certain hazardous substances at a qualified site to expense the clean-up costs, even though the expenses will generally increase the value of the property significantly or appreciably prolong the life of the property. 93. Credit to holders of Gulf and Midwest Tax Credit Bonds.—The baseline tax system would not allow credits for particular activities, investments, or industries. Instead, under current law taxpayers that own Gulf and Midwest Tax Credit bonds receive a non-refundable tax credit rather than interest. The credit is included in gross income. 94. Recovery Zone Bonds.—The baseline tax system would not allow credits for particular activities, investments, or industries. In addition, it would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, the Tax Code allows local governments to issue up $10 billion in taxable Recovery Zone Economic Development Bonds in 2009 and 2010 and receive a direct payment from Treasury equal to 45 percent of interest expenses. In addition, they would be allowed to allocate up to $15 billion in tax exempt Recovery Zone Facility Bonds. These bonds finance certain kinds of business development in areas of economic distress. 95. Tribal Economic Development Bonds.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, the Tax Code was modified in 2009 to allow Indian tribal governments to issue tax exempt “tribal economic development bonds.” There is a national bond limitation of $2 billion. Education, Training, Employment, and Social Services 96. Scholarship and fellowship income.— Scholarships and fellowships are excluded from taxable income to the extent they pay for tuition and course-related expenses of the grantee. Similarly, tuition reductions for employees of educational institutions and their families are not included in taxable income. From an economic point of view, scholarships and fellowships are either gifts not conditioned on the performance of services, or they are rebates of educational costs. Thus, under the baseline tax system of the reference law method, this exclusion is not a tax expenditure because this method does not include either gifts or price reductions in a taxpayer’s gross income. The exclusion, however, is considered a tax expenditure under the normal tax method, which includes gift-like transfers of Government funds in gross income (many scholarships are derived directly or indirectly from Government funding). 97. HOPE tax credit.—The baseline tax system would not allow credits for particular activities, investments, or industries. Under current law, however, the non-refundable HOPE tax credit allows a credit for 100 percent of an eligible student’s first $1,200 of tuition and fees and 50 percent of the next $1,200 of tuition and fees. The credit only covers tuition and fees paid during the first two years of a student’s post-secondary education. In 2009, the credit is phased out ratably for taxpayers with modified AGI between $100,000 and $120,000 ($50,000 and $60,000 for singles), indexed. 98. Lifetime Learning tax credit.—The baseline tax system would not allow credits for particular activities, investments, or industries. Under current law, however, the non-refundable Lifetime Learning tax credit allows a credit for 20 percent of an eligible student’s tuition and fees, up to a maximum credit per return of $2,000. The credit is phased out ratably for taxpayers with modified AGI between $100,000 and $120,000 ($50,000 and $60,000 for singles), indexed. The credit applies to both undergraduate and graduate students. 99. American Opportunity Tax Credit.—The baseline tax system would not allow credits for particular activities, investments, or industries. In contrast, the Tax Code was modified in 2009 to provide a tax credit in 2009 and 2010 of up to $2,500 per eligible student for qualified tuition and related expenses paid for each of the first four years of the student’s post-secondary education. The credit is phased out for taxpayers with modified adjusted gross income between $80,000 and $90,000 ($160,000 and $180,000 for married taxpayers filing a joint return). 100. Education Individual Retirement Accounts (IRA).—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. Contributions to an education IRA are not tax-deductible. However, investment income earned by education IRAs is not taxed when earned, and investment income from an education IRA is tax-exempt when withdrawn to pay for a student’s tuition 234 and fees. The maximum contribution to an education IRA in 2008 is $2,000 per beneficiary. The maximum contribution is phased down ratably for taxpayers with modified AGI between $190,000 and $220,000 ($95,000 and $110,000 for singles). 101. Student-loan interest.—The baseline tax system accepts current law’s general rule limiting taxpayers’ ability to deduct non-business interest expenses. In contrast, taxpayers may claim an above-the-line deduction of up to $2,500 on interest paid on an education loan. Interest may only be deducted for the first five years in which interest payments are required. In 2009, the maximum deduction is phased down ratably for taxpayers with modified AGI between $110,000 and $140,000 ($55,000 and $70,000 for singles), indexed. 102. Deduction for higher education expenses.— The baseline tax system would not allow a deduction for personal expenditures. In contrast, the Tax Code provides a maximum annual deduction of $4,000 in 2009 for qualified higher education expenses for taxpayers with adjusted gross income up to $130,000 on a joint return ($65,000 for singles). Taxpayers with adjusted gross income up to $160,000 on a joint return ($80,000 for singles) may deduct up to $2,000. 103. State prepaid tuition plans.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. Some States have adopted prepaid tuition plans and prepaid room and board plans, which allow persons to pay in advance for college expenses for designated beneficiaries. Under current law, investment income is not taxed when earned, and is tax-exempt when withdrawn to pay for qualified expenses. 104. Student-loan bonds.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, interest earned on State and local bonds issued to finance student loans is tax-exempt under current law. The volume of all such private activity bonds that each State may issue annually is limited. 105. Bonds for private nonprofit educational institutions.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, under current law interest earned on State and local Government bonds issued to finance the construction of facilities used by private nonprofit educational institutions is not taxed. 106. Credit for holders of zone academy bonds.— The baseline tax system would not allow credits for particular activities, investments, or industries. Under current law, however, financial institutions that own zone academy bonds receive a non-refundable tax credit rather than interest. The credit is included in gross income. Proceeds from zone academy bonds may only be used to renovate, but not construct, qualifying schools and for certain other school purposes. The total amount of zone academy bonds ANALYTICAL PERSPECTIVES that may be issued is limited to $1.4 billion in 2009 and 2010. 107. U.S. savings bonds for education.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. Under current law, however, interest earned on U.S. savings bonds issued after December 31, 1989 is tax-exempt if the bonds are transferred to an educational institution to pay for educational expenses. The tax exemption is phased out for taxpayers with AGI between $100,650 and $130,650 ($67,100 and $81,100 for singles) in 2009. 108. Dependent students age 19 or older.—The tax rate schedule, including personal exemptions and the standard deduction, are part of the baseline tax system. Additional exemptions to targeted groups are not allowed. In contrast, the Tax Code provides taxpayers personal exemptions for dependent children who are over the age of 18 or under the age of 24 and who (1) reside with the taxpayer for over half the year (with exceptions for temporary absences from home, such as for school attendance), (2) are full-time students, and (3) do not claim a personal exemption on their own tax returns. However, under current law, the dependent/student is not eligible to claim a personal exemption on his or her own tax return. 109. Charitable contributions to educational institutions.—The baseline tax system would not allow a deduction for personal expenditures. In contrast, the Tax Code provides taxpayers a deduction for contributions to nonprofit educational institutions. Moreover, taxpayers who donate capital assets to educational institutions can deduct the asset’s current value without being taxed on any appreciation in value. An individual’s total charitable contribution generally may not exceed 50 percent of adjusted gross income; a corporation’s total charitable contributions generally may not exceed 10 percent of pre-tax income. 110. Employer-provided educational assistance.— Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income because they represent accretions to wealth that do not materially differ from cash wages. Under current law, however, employer-provided educational assistance is excluded from an employee’s gross income even though the employer’s costs for this assistance are a deductible business expense. 111. Special deduction for teacher expenses.—The baseline tax system would not allow a deduction for personal expenditures. In contrast, under current law educators in both public and private elementary and secondary schools, who work at least 900 hours during a school year as a teacher, instructor, counselor, principal or aide, may subtract up to $250 of qualified expenses when figuring their adjusted gross income (AGI). This provision expired at end of December 31, 2008. 112. Discharge of student loan indebtedness.— Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. In contrast, the Tax Code al- 16. TAX EXPENDITURES lows certain professionals who perform in underserved areas, and as a consequence get their student loans discharged, not to recognize such discharge as income. 113. Qualified school construction bonds.—The baseline tax system would not allow credits for particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investmentlike activities. In contrast, the Tax Code was modified in 2009 to provide a tax credit in lieu of interest to holders of qualified school construction bonds. The national volume limit is $22 billion over 2009 and 2010. 114. Work opportunity tax credit (WOTC).—The baseline tax system would not allow credits for particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, the Tax Code provides employers with a tax credit for qualified wages paid to individuals. The credit applies to employees who begin work on or before August 31, 2011 and who are certified as members of various targeted groups. The amount of the credit that can be claimed is 25 percent of qualified wages for employment less than 400 hours and 40 percent for employment of 400 hours or more. Generally, the maximum credit per employee is $2,400 and can only be claimed on the first year of wages an individual earns from an employer. However, the credit for long-term welfare recipients can be claimed on second year wages as well and has a $9,000 maximum. Employees must work at least 120 hours to be eligible for the credit. Employers must reduce their deduction for wages paid by the amount of the credit claimed. 115. Welfare-to-work tax credit.—The baseline tax system would not allow credits for particular activities, investments, or industries. Instead, it generally would seek to tax uniformly all returns from investment-like activities. In contrast, under current law an employer is eligible for a tax credit on the first $20,000 of eligible wages paid to qualified long-term family assistance recipients during the first two years of employment. The welfareto-work credit expired on December 31, 2006. After this date, long-term welfare recipients became a WOTC target group. 116. Employer-provided child care exclusion.— Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. In contrast, under current law up to $5,000 of employer-provided child care is excluded from an employee’s gross income even though the employer’s costs for the child care are a deductible business expense. 117. Employer-provided child care credit.—The baseline tax system would not allow credits for particular activities, investments, or industries. Instead, current law provides a credit equal to 25 percent of qualified expenses for employee child care and 10 percent of qualified expenses for child care resource and referral services. Employer deductions for such expenses are reduced by the amount of the credit. The maximum total credit is limited to $150,000 per taxable year. 235 118. Assistance for adopted foster children.— Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. Taxpayers who adopt eligible children from the public foster care system can receive monthly payments for the children’s significant and varied needs and a reimbursement of up to $2,000 for nonrecurring adoption expenses. These payments are excluded from gross income under current law. 119. Adoption credit and exclusion.—The baseline tax system would not allow credits for particular activities. Instead, taxpayers can receive a nonrefundable tax credit for qualified adoption expenses under current law. The maximum credit is $12,150 per child for 2009, and is phased-out ratably for taxpayers with modified AGI between $182,180 and $220,180. The credit amounts and the phase-out thresholds are indexed for inflation. Taxpayers may also exclude qualified adoption expenses from income, subject to the same maximum amounts and phase-out as the credit. The same expenses cannot qualify for tax benefits under both programs; however, a taxpayer may use the benefits of the exclusion and the tax credit for different expenses. 120. Employer-provided meals and lodging.— Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. In contrast, under current law employer-provided meals and lodging are excluded from an employee’s gross income even though the employer’s costs for these items are a deductible business expense. 121. Child credit.—The baseline tax system would not allow credits for particular activities or targeted at specific groups. Under current law, however, taxpayers with children under age 17 can qualify for a $1,000 partially refundable per child credit. The maximum credit declines to $500 in 2011 and later years. The credit is phased out for taxpayers at the rate of $50 per $1,000 of modified AGI above $110,000 ($75,000 for singles). 122. Child and dependent care expenses.—The baseline tax system would not allow credits for particular activities or targeted at specific groups. In contrast, the Tax Code provides married couples with child and dependent care expenses a tax credit when one spouse works full time and the other works at least part time or goes to school. The credit may also be claimed by single parents and by divorced or separated parents who have custody of children. In 2009, expenditures up to a maximum $3,000 for one dependent and $6,000 for two or more dependents are eligible for the credit. The credit is equal to 35 percent of qualified expenditures for taxpayers with incomes of $15,000. The credit is reduced to a minimum of 20 percent by one percentage point for each $2,000 of income in excess of $15,000. 123. Disabled access expenditure credit.—The baseline tax system would not allow credits for particular activities, investments, or industries. In contrast, the Tax Code provides small businesses (less than $1 million in gross receipts or fewer than 31 full-time employees) a 50-percent credit for expenditures in excess of $250 to 236 remove access barriers for disabled persons. The credit is limited to $5,000. 124. Charitable contributions, other than education and health.—The baseline tax system would not allow a deduction for personal expenditures. In contrast, the Tax Code provides taxpayers a deduction for contributions to charitable, religious, and certain other nonprofit organizations. Taxpayers who donate capital assets to charitable organizations can deduct the assets’ current value without being taxed on any appreciation in value. An individual’s total charitable contribution generally may not exceed 50 percent of adjusted gross income; a corporation’s total charitable contributions generally may not exceed 10 percent of pre-tax income. 125. Foster care payments.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. Foster parents provide a home and care for children who are wards of the State, under contract with the State. However, compensation received for this service is excluded from the gross incomes of foster parents; the expenses they incur are nondeductible. 126. Parsonage allowances.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. In contrast, the value of a clergyman’s housing allowance and the rental value of parsonages are not included in a minister’s taxable income under current law. 127. Provide an employee retention credit to employers affected by hurricanes Katrina, Rita, Wilma, and Ike.—The baseline tax system would not allow credits for particular activities, investments, or industries. In contrast, the Tax Code provides tax credits against the wages paid to eligible employees in areas affected by natural disasters such as hurricanes Katrina, Rita, Wilma, and Ike. 128. Exclusion for benefits provided to volunteer EMS and firefighters.—Under the baseline tax system, all compensation, including dedicated payments and inkind benefits, should be included in taxable income. In contrast, the Tax Code provides that certain benefits received by volunteer EMS and firefighters excluded from income. 129. Temporary income exclusion for employer provided lodging in Midwestern disaster area.— Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. In contrast, under current law employer-provided meals and lodging in disaster areas are excluded from an employee’s gross income even though the employer’s costs for these items are a deductible business expense. 130. Making work pay tax credit.—The baseline tax system would not allow credits for particular activities. In contrast, the Tax Code was modified in 2009 to provide for a tax credit in 2009 and 2010 of the lesser of 6.2 percent of an individual’s earned income or $400 ($800 for joint filers). It is phased out at a rate of 2 percent of modified AGI above $75,000 ($150,000 for joint filers). ANALYTICAL PERSPECTIVES Health 131. Employer-paid medical insurance and expenses.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. In contrast, under current law, employer-paid health insurance premiums and other medical expenses (including long-term care) are deducted as a business expense by employers, but they are not included in employee gross income. The selfemployed also may deduct part of their family health insurance premiums. 132. Self-employed medical insurance premiums.—Under the baseline tax system, all compensation and remuneration, including dedicated payments and in-kind benefits, should be included in taxable income. In contrast, under current law self-employed taxpayers may deduct a percentage of their family health insurance premiums. Taxpayers without self-employment income are not eligible for the special percentage deduction. The deductible percentage is 60 percent in 2001, 70 percent in 2002, and 100 percent in 2003 and thereafter. 133. Medical and health savings accounts.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. Also, the baseline tax system would not allow a deduction for personal expenditures. In contrast, individual contributions to Archer Medical Savings Accounts (Archer MSAs) and Health Savings Accounts (HSAs) are allowed as a deduction in determining adjusted gross income whether or not the individual itemizes deductions. Employer contributions to Archer MSAs and HSAs are excluded from income and employment taxes. Archer MSAs and HSAs require that the individual have coverage by a qualifying high deductible health plan. Earnings from the accounts are excluded from taxable income. Distributions from the accounts used for medical expenses are not taxable. The rules for HSAs are generally more flexible than for Archer MSAs and the deductible contribution amounts are greater (in 2009, $3000 for taxpayers with individual coverage and $5,950 for taxpayers with family coverage). Thus, HSAs have largely replaced MSAs. 134. Medical care expenses.—The baseline tax system would not allow a deduction for personal expenditures. In contrast, under current law personal expenditures for medical care (including the costs of prescription drugs) exceeding 7.5 percent of the taxpayer’s adjusted gross income are deductible. 135. Hospital construction bonds.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, under current law interest earned on State and local government debt issued to finance hospital construction is excluded from income subject to tax. 136. Charitable contributions to health institutions.—The baseline tax system would not allow a deduction for personal expenditures. In contrast, the Tax Code provides individuals and corporations a deduction for con- 16. TAX EXPENDITURES tributions to nonprofit health institutions. Tax expenditures resulting from the deductibility of contributions to other charitable institutions are listed under the education, training, employment, and social services function. 137. Orphan drugs.—The baseline tax system would not allow credits for particular activities, investments, or industries. In contrast, under current law drug firms can claim a tax credit of 50 percent of the costs for clinical testing required by the Food and Drug Administration for drugs that treat rare physical conditions or rare diseases. 138. Blue Cross and Blue Shield.—The baseline tax system generally would tax all profits under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, Blue Cross and Blue Shield health insurance providers in existence on August 16, 1986 and certain other nonprofit health insurers are provided exceptions from otherwise applicable insurance company income tax accounting rules that substantially reduce (or even eliminate) their tax liabilities. 139. Tax credit for health insurance purchased by certain displaced and retired individuals.—The baseline tax system would not allow credits for particular activities, investments, or industries. In contrast, the Trade Act of 2002 provides a refundable tax credit of 65 percent for the purchase of health insurance coverage by individuals eligible for Trade Adjustment Assistance and certain Pension Benefit Guarantee Corporation pension recipients. 140. Distributions for premiums for health and long-term care insurance.—Under the baseline tax system, all compensation, including dedicated and deferred payments, should be included in taxable income. In contrast, the Tax Code provides for tax-free distributions of up to $3,000 from governmental retirement plans for premiums for health and long term care premiums of public safety officers. Income Security 141. Railroad retirement benefits.—Under the baseline tax system, all compensation, including dedicated and deferred payments, should be included in taxable income. In contrast, railroad retirement benefits are not generally subject to the income tax unless the recipient’s gross income reaches a certain threshold under current law. The threshold is discussed more fully under the Social Security function. 142. Workers’ compensation benefits.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. However, workers compensation provides payments to disabled workers. These benefits, although income to the recipients, are not subject to the income tax under current law. 143. Public assistance benefits.—Under the reference law baseline tax system, gifts and transfers are not treated as income to the recipients. In contrast, the normal tax method considers cash transfers from the Government as part of the recipients’ income, and thus, 237 treats the exclusion for public assistance benefits under current law as tax expenditure. 144. Special benefits for disabled coal miners.— Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. However, disability payments to former coal miners out of the Black Lung Trust Fund, although income to the recipient, are not subject to the income tax. 145. Military disability pensions.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. In contrast, most of the military pension income received by current disabled retired veterans is excluded from their income subject to tax. 146. Employer-provided pension contributions and earnings.—Under the baseline tax system, all compensation, including deferred and dedicated payments, should be included in taxable income. In contrast, under current law certain employer contributions to pension plans are excluded from an employee’s gross income even though the employer can deduct the contributions. In addition, the tax on the investment income earned by the pension plans is deferred until the money is withdrawn. 147. 401(k) plans.—Under the baseline tax system, all compensation, including deferred and dedicated payments, should be included in taxable income. In contrast, under current law individual taxpayers can make tax-preferred contributions to certain types of employer-provided 401(k) plans (and 401(k)-type plans like 403(b) plans and the Federal Government’s Thrift Savings Plan). In 2009, an employee could exclude up to $16,500 (indexed) of wages from AGI under a qualified arrangement with an employer’s 401(k) plan. Employees age 50 or over could exclude up to $22,000 in contributions (indexed). The tax on the investment income earned by 401(k)-type plans is deferred until withdrawn. 148. Individual Retirement Accounts (IRAs).— Under the baseline tax system, all compensation, including deferred and dedicated payments, should be included in taxable income. In contrast, under current law individual taxpayers can take advantage of several different IRAs to defer or otherwise reduce the tax on the return to their retirement savings. These arrangements include deductible IRAs, nondeductible IRAs and Roth IRAs. The IRA contribution limit is $5,000 in 2009 (indexed thereafter) and allows taxpayers over age 50 to make additional “catch-up’’ contributions of $1,000. Taxpayers can make a deductible IRA contribution only up to certain levels of AGI depending on whether they are active participants in employer plans. Above those AGI limits, the amount that may be deducted is reduced and eventually phased out. There is no income limit for nondeductible IRA contributions, which still benefit from deferral of tax on earnings. Roth IRA contributions are not deductible, but earnings and withdrawals are exempt from taxation under certain conditions. AGI limits also apply to Roth IRA contributions. 149. Low and moderate-income savers’ credit.— The baseline tax system would not allow credits for par- 238 ticular activities or targeted at specific group. In contrast, the Tax Code provides an additional incentive for lowerincome taxpayers to save through a nonrefundable credit of up to 50 percent on IRA and other retirement contributions of up to $2,000. This credit is in addition to any deduction or exclusion. The credit is completely phased out by $55,500 for joint filers and $27,750 for single filers. 150. Keogh plans.—Under the baseline tax system, all compensation, including deferred and dedicated payments, should be included in taxable income. In contrast, under current law self-employed individuals can make deductible contributions to their own retirement (Keogh) plans equal to 25 percent of their income, up to a maximum of $49,000 in 2009. Total plan contributions are limited to 25 percent of a firm’s total wages. The tax on the investment income earned by Keogh plans is deferred until withdrawn. 151. Employer-provided life insurance benefits.— Under the baseline tax system, all compensation, including deferred and dedicated payments, should be included in taxable income. In contrast, under current law employer-provided life insurance benefits are excluded from an employee’s gross income even though the employer’s costs for the insurance are a deductible business expense, but only to the extent that the employer’s share of the total costs does not exceed the cost of $50,000 of such insurance. 152. Employer-provided accident and disability benefits.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. In contrast, employer-provided accident and disability benefits are excluded from an employee’s gross income even though the employer’s costs for the benefits are a deductible business expense. 153. Employer-provided supplementary unemployment benefits.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. Employers may establish trusts to pay supplemental unemployment benefits to employees separated from employment. Interest payments to such trusts are exempt from taxation. 154. Employer Stock Ownership Plan (ESOP) provisions.—ESOPs are a special type of tax-exempt employee benefit plan. Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income. In contrast, employer-paid contributions (the value of stock issued to the ESOP) are deductible by the employer as part of employee compensation costs. They are not included in the employees’ gross income for tax purposes, however, until they are paid out as benefits. The following special income tax provisions for ESOPs are intended to increase ownership of corporations by their employees: (1) annual employer contributions are subject to less restrictive limitations; (2) ESOPs may borrow to purchase employer stock, guaranteed by their agreement with the employer that the debt will be serviced by his payment (deductible by him) of a portion of wages (excludable by the employ- ANALYTICAL PERSPECTIVES ees) to service the loan; (3) employees who sell appreciated company stock to the ESOP may defer any taxes due until they withdraw benefits; and (4) dividends paid to ESOP-held stock are deductible by the employer. 155. Additional deduction for the blind.—The tax rate schedule, including personal exemptions and the standard deduction, are part of the baseline tax system. Additional exemptions to targeted groups are not allowed. In contrast, the Tax Code provides taxpayers who are blind an additional $1,400 standard deduction if single, or $1,100 if married in 2009. 156. Additional deduction for the elderly.—The tax rate schedule, including personal exemptions and the standard deduction, are part of the baseline tax system. Additional exemptions to targeted groups are not allowed. In contrast, the Tax Code provides taxpayers who are 65 years or older an additional $1,400 standard deduction if single, or $1,100 if married in 2009. 157. Tax credit for the elderly and disabled.—The baseline tax system would not allow credits for particular activities or targeted at specific group. Under current law, however, individuals who are 65 years of age or older, or who are permanently disabled, can take a tax credit equal to 15 percent of the sum of their earned and retirement income. Income is limited to no more than $5,000 for single individuals or married couples filing a joint return where only one spouse is 65 years of age or older, and up to $7,500 for joint returns where both spouses are 65 years of age or older. These limits are reduced by one-half of the taxpayer’s adjusted gross income over $7,500 for single individuals and $10,000 for married couples filing a joint return. 158. Casualty losses.—Under the baseline tax system, neither the purchase of property nor insurance premiums to protect its value are deductible as costs of earning income. Therefore, reimbursement for insured loss of such property is not reportable as a part of gross income and uninsured losses not deductible. In contrast, the Tax Code provides a deduction for uninsured casualty and theft losses of more than $100 each, but only to the extent that total losses during the year exceed 10 percent of AGI. 159. Earned income tax credit (EITC).—The baseline tax system would not allow credits for particular activities or targeted at specific group. In contrast, the Tax Code provides an EITC to low-income workers at a maximum rate of 40 percent of income. For a family with one qualifying child, the credit is 34 percent of the first $8,950 of earned income in 2009. The credit is 40 percent of the first $12,570 of income for a family with two or more qualifying children. The credit is 45 percent of the first $12,570 of income for a family with three or more qualifying children. Low-income workers with no qualifying children are eligible for a 7.65 percent credit on the first $5,970 of earned income. The credit is phased out at income levels and rates which depend upon how many qualifying children are eligible and marital status. Earned income tax credits in excess of tax liabilities owed through the individual income tax system are refundable to individuals. 239 16. TAX EXPENDITURES 160. Additional exemption for housing natural disaster displaced individuals.—The tax rate schedule, including personal exemptions and the standard deduction, are part of the baseline tax system. Additional exemptions to targeted groups are not allowed. In contrast, the Tax Code provides additional exemption to persons displaced by natural disasters such as hurricane Katrina. 161. Exclusion of unemployment benefits.—The baseline tax system would not allow deductions and exemptions to certain types of income. In contrast the Tax Code was modified in 2009 to allow an exclusion of up to $2,400 of unemployment insurance benefits from gross income for taxable year 2009. Social Security 162. Social Security benefits for retired workers.— Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income because they represent accretions to wealth that do not materially differ from cash wages. In contrast, the Tax Code may not tax all of the Social Security benefits that exceed the beneficiary’s contributions out of taxed income. These additional retirement benefits are paid for partly by employers’ contributions that were not included in employees’ taxable compensation and partly by earnings on employee and employer contributions. Portions of benefits (reaching as much as 85 percent) of recipients’ Social Security and tier 1 railroad retirement benefits are included in (phasedin) the income tax base, however, if the recipient’s provisional income exceeds certain base amounts. Provisional income is equal to adjusted gross income plus foreign or U.S. possession income and tax-exempt interest, and one half of Social Security and tier 1 railroad retirement benefits. The tax expenditure is limited to the portion of the benefits received by taxpayers who are below the income amounts at which 85 percent of the benefits are taxable. 163. Social Security benefits for the disabled.— Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income because they represent accretions to wealth that do not materially differ from cash wages. Under current law, however, benefit payments from the Social Security Trust Fund for disability are fully or partially excluded from a beneficiary’s gross incomes. (See provision number 156, Social Security benefits for retired workers.) 164. Social Security benefits for dependents and survivors.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income because they represent accretions to wealth that do not materially differ from cash wages. Under current law, however, benefit payments from the Social Security Trust Fund for dependents and survivors are fully or partially excluded from a beneficiary’s gross income. 165. Tax Credit for Certain Government Retirees.— The baseline tax system would not allow credits for particular activities or targeted at specific group. In contrast, the Tax Code was modified in 2009 to provide a tax credit of $250 for certain government retirees who do not receive social security benefits. This credit is provided so as to equalize the treatment with social security beneficiaries who received $250 in stimulus payments in 2009. Veterans Benefits and Services 166. Veterans death benefits and disability compensation.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income because they represent accretions to wealth that do not materially differ from cash wages. In contrast, all compensation due to death or disability paid by the Veterans Administration is excluded from taxable income under current law. 167. Veterans pension payments.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income because they represent accretions to wealth that do not materially differ from cash wages. Under current law, however, pension payments made by the Veterans Administration are excluded from gross income. 168. G.I. Bill benefits.—Under the baseline tax system, all compensation, including dedicated payments and in-kind benefits, should be included in taxable income because they represent accretions to wealth that do not materially differ from cash wages. Under current law, however, G.I. Bill benefits paid by the Veterans Administration are excluded from gross income. 169. Tax-exempt mortgage bonds for veterans.— The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, under current law, interest earned on general obligation bonds issued by State and local governments to finance housing for veterans is excluded from taxable income. General Government 170. Public purpose State and local bonds.—The baseline tax system generally would tax all income under the regular tax rate schedule. It would not allow preferentially low (or zero) tax rates to apply to certain types or sources of income. In contrast, under current law interest earned on State and local government bonds issued to finance public-purpose construction (e.g., schools, roads, sewers), equipment acquisition, and other public purposes is tax-exempt. Interest on bonds issued by Indian tribal governments for essential governmental purposes is also tax-exempt. 171. Build America Bonds.—The baseline tax system would not allow credits for particular activities or targeted at specific group. In contrast, the Tax Code in 2009 allowed State and local governments to issue taxable bonds and receive a direct payment from Treasury equal to 35 percent of interest expenses. Alternatively, State and local governments may issue taxable bonds and the private 240 ANALYTICAL PERSPECTIVES lenders receive the 35 percent credit which is included in taxable income. 4 172. Deductibility of certain nonbusiness State and local taxes.—The baseline tax system would not allow a deduction for personal expenditures. In contrast, the Tax Code provides taxpayers who itemize a deduction for State and local income taxes and property taxes (or at the taxpayer’s election state and local sales taxes) even though these taxes primarily pay for services that, if purchased directly by taxpayers, would not be deductible. Interest 173. U.S. savings bonds.—The baseline tax system would uniformly tax all returns to investments and not allow an exemption or deferral for particular activities, investments, or industries. In contrast, taxpayers may defer paying tax on interest earned on U.S. savings bonds until the bonds are redeemed. APPENDIX A PERFORMANCE MEASURES AND THE ECONOMIC EFFECTS OF TAX EXPENDITURES The Government Performance and Results Act of 1993 (GPRA) directs Federal agencies to develop annual and strategic plans for their programs and activities. These plans set out performance objectives to be achieved over a specific time period. Most of these objectives are achieved through direct expenditure programs. Tax expenditures, however, may also contribute to achieving these goals. This Appendix responds to the report of the Senate Governmental Affairs Committee on GPRA5 calling on the Executive Branch to undertake a series of analyses to assess the effect of specific tax expenditures on the achievement of agencies’ performance objectives. Comparison of tax expenditure, spending, and regulatory policies. Tax expenditures by definition work through the tax system and, particularly, the income tax. Thus, they may be relatively advantageous policy approaches when the benefit or incentive is related to income and is intended to be widely available.6 Because there is an existing public administrative and private compliance structure for the tax system, the incremental administrative and compliance costs for a tax expenditure may be low in many cases. In addition, some tax expenditures actually simplify the operation of the tax system, (for example, the exclusion for up to $500,000 of capital gains on home sales). Tax expenditures also implicitly subsidize certain activities. Spending, regulatory or taxdisincentive policies can also modify behavior, but may have different economic effects. Finally, a variety of tax expenditure tools can be used, e.g., deductions; credits; 4 This payment is treated as an outlay and has no direct revenue effects. To the extent that these bonds displace traditional tax exempt bonds, the outlays are in part offset by revenue gains from such displacement. Following tax expenditure estimating conventions on behavioral effects, the reported revenue gain estimates in the Tables should be set to zero. Nevertheless, such estimates are provided to highlight the dynamics of these new bonds in substituting for traditional bonds as well as reflecting on the keen public interest in this provision. 5 Committee on Government Affairs, United States Senate, “Government Performance and Results Act of 1993’’ (Report 103–58, 1993). 6 Although this chapter focuses upon tax expenditures under the income tax, tax expenditures also arise under the unified transfer, payroll, and excise tax systems. Such provisions can be useful when they relate to the base of those taxes, such as an excise tax exemption for certain types of consumption deemed meritorious. exemptions; deferrals, floors, ceilings; phase-ins; phaseouts; and these can be dependent on income, expenses, or demographic characteristics (age, number of family members, etc.). This wide range of policy instruments means that tax expenditures can be flexible and can have very different economic effects. Tax expenditures also have limitations. In many cases they add to the complexity of the tax system, which raises both administrative and compliance costs. For example, personal exemptions, deductions, credits, and phase-outs can complicate filing and decision-making. The income tax system may have little or no contact with persons who have no or very low incomes, and does not require information on certain characteristics of individuals used in some spending programs, such as wealth. These features may reduce the effectiveness of tax expenditures for addressing socioeconomic disparity. Tax expenditures also generally do not enable the same degree of agency discretion as an outlay program. For example, grant or direct Federal service delivery programs can prioritize activities to be addressed with specific resources in a way that is difficult to emulate with tax expenditures. Outlay programs have advantages where direct Government service provision is particularly warranted such as equipping and providing the armed forces or administering the system of justice. Outlay programs may also be specifically designed to meet the needs of low-income families who would not otherwise be subject to income taxes or need to file a tax return. Outlay programs may also receive more year-to-year oversight and fine tuning through the legislative and executive budget process. In addition, many different types of spending programs including direct Government provision; credit programs; and payments to State and local governments, the private sector, or individuals in the form of grants or contracts provide flexibility for policy design. On the other hand, certain outlay programs, such as direct Government service provision may rely less directly on economic incentives and private-market provision than tax incentives, which may reduce the relative efficiency of spending programs for some goals. Finally, spending programs, particularly on the discretionary side, may respond less readily 241 16. TAX EXPENDITURES to changing activity levels and economic conditions than tax expenditures. Regulations have more direct and immediate effects than outlay and tax-expenditure programs because regulations apply directly and immediately to the regulated party (i.e., the intended actor) generally in the private sector. Regulations can also be fine-tuned more quickly than tax expenditures because they can often be changed as needed by the Executive Branch without legislation. Like tax expenditures, regulations often rely largely on voluntary compliance, rather than detailed inspections and policing. As such, the public administrative costs tend to be modest relative to the private resource costs associated with modifying activities. Historically, regulations have tended to rely on proscriptive measures, as opposed to economic incentives. This reliance can diminish their economic efficiency, although this feature can also promote full compliance where (as in certain safety-related cases) policymakers believe that trade-offs with economic considerations are not of paramount importance. Also, regulations generally do not directly affect Federal outlays or receipts. Thus, like tax expenditures, they may escape the degree of scrutiny that outlay programs receive. However, major regulations are subjected to a formal regulatory analysis that goes well beyond the analysis required for outlays and tax-expenditures. To some extent, the GPRA requirement for performance evaluation will address this lack of formal analysis. Some policy objectives are achieved using multiple approaches. For example, minimum wage legislation, the earned income tax credit, and the food stamp program are regulatory, tax expenditure, and direct outlay programs, respectively, all having the objective of improving the economic welfare of low-wage workers. Tax expenditures, like spending and regulatory programs, have a variety of objectives and effects. When measured against a comprehensive income tax, for example, these include: encouraging certain types of activities (e.g., saving for retirement or investing in certain sectors); increasing certain types of after-tax income (e.g., favorable tax treatment of Social Security income); reducing private compliance costs and Government administrative costs (e.g., the exclusion for up to $500,000 of capital gains on home sales); and promoting tax neutrality (e.g., accelerated depreciation in the presence of inflation). Some of these objectives are well suited to quantitative measurement, while others are less well suited. Also, many tax expenditures, including those cited above, may have more than one objective. For example, accelerated depreciation may encourage investment. In addition, the economic effects of particular provisions can extend beyond their intended objectives (e.g., a provision intended to promote an activity or raise certain incomes may have positive or negative effects on tax neutrality). Performance measurement is generally concerned with inputs, outputs, and outcomes. In the case of tax expenditures, the principal input is usually the revenue effect. Outputs are quantitative or qualitative measures of goods and services, or changes in income and investment, directly produced by these inputs. Outcomes, in turn, repre- sent the changes in the economy, society, or environment that are the ultimate goals of programs. Thus, for a provision that reduces taxes on certain investment activity, an increase in the amount of investment would likely be a key output. The resulting production from that investment, and, in turn, the associated improvements in national income, welfare, or security, could be the outcomes of interest. For other provisions, such as those designed to address a potential inequity or unintended consequence in the Tax Code, an important performance measure might be how they change effective tax rates (the discounted present value of taxes owed on new investments or incremental earnings) or excess burden (an economic measure of the distortions caused by taxes). Effects on the incomes of members of particular groups may be an important measure for certain provisions. An Overview of Evaluation Issues by Budget Function The discussion below considers the types of measures that might be useful for some major programmatic groups of tax expenditures. The discussion is intended to be illustrative and not all encompassing. However, it is premised on the assumption that the data needed to perform the analysis are available or can be developed. In practice, data availability is likely to be a major challenge, and data constraints may limit the assessment of the effectiveness of many provisions. In addition, such assessments can raise significant challenges in economic modeling. National defense. Some tax expenditures are intended to assist governmental activities. For example, tax preferences for military benefits reflect, among other things, the view that benefits such as housing, subsistence, and moving expenses are intrinsic aspects of military service, and are provided, in part, for the benefit of the employer, the U.S. Government. Tax benefits for combat service are intended to reduce tax burdens on military personnel undertaking hazardous service for the Nation. A portion of the tax expenditure associated with foreign earnings is targeted to benefit U.S. Government civilian personnel working abroad by offsetting the living costs that can be higher than those in the United States. These tax expenditures should be considered together with direct agency budget costs in making programmatic decisions. International affairs. Tax expenditures are also aimed at goals such as tax neutrality. These include the exclusion for income earned abroad by nongovernmental employees and exclusions for income of U.S.-controlled foreign corporations. Measuring the effectiveness of these provisions raises challenging issues. General science, space and technology, energy, natural resources and the environment, agriculture, and commerce and housing. A series of tax expenditures reduces the cost of investment, both in specific activities such as research and experimentation, extractive industries, and certain financial activities and more generally, through accelerated depreciation for plant and equipment. These provisions can be evaluated along a number of dimen- 242 sions. For example, it could be useful to consider the strength of the incentives by measuring their effects on the cost of capital (the interest rate which investments must yield to cover their costs) and effective tax rates. The impact of these provisions on the amounts of corresponding forms of investment (e.g., research spending, exploration activity, equipment) might also be estimated. In some cases, such as research, there is evidence that the investment can provide significant positive externalities—that is, economic benefits that are not reflected in the market transactions between private parties. It could be useful to quantify these externalities and compare them with the size of tax expenditures. Measures could also indicate the effects on production from these investments such as numbers or values of patents, energy production and reserves, and industrial production. Issues to be considered include the extent to which the preferences increase production (as opposed to benefiting existing output) and their cost-effectiveness relative to other policies. Analysis could also consider objectives that are more difficult to measure but still are ultimate goals, such as promoting the Nation’s technological base, energy security, environmental quality, or economic growth. Such an assessment is likely to involve tax analysis as well as consideration of non-tax matters such as market structure, scientific, and other information (such as the effects of increased domestic fuel production on imports from various regions, or the effects of various energy sources on the environment). Housing investment also benefits from tax expenditures. The imputed net rental income from owner-occupied housing is excluded from the tax base. The mortgage interest deduction and property tax deduction on personal residences also are reported as tax expenditures because the value of owner-occupied housing services is not included in a taxpayer’s taxable income. Taxpayers also may exclude up to $500,000 of the capital gains from the sale of personal residences. Measures of the effectiveness of these provisions could include their effects on increasing the extent of home ownership and the quality of housing. Similarly, analysis of the extent of accumulated inflationary gains is likely to be relevant to evaluation of the capital gains for home sales. Deductibility of State and local property taxes assists with making housing more affordable as well as easing the cost of providing community services through these taxes. Provisions intended to promote investment in rental housing could be evaluated for their effects on making such housing more available and affordable. These provisions should then be compared with alternative programs that address housing supply and demand. Transportation. Employer-provided parking is a fringe benefit that, for the most part, is excluded from taxation. The tax expenditure estimates reflect the cost of parking that is leased by employers for employees; an estimate is not currently available for the value of parking owned by employers and provided to their employees. The exclusion for employer-provided transit passes is intended to promote use of this mode of transportation, which has environmental and congestion benefits. The tax treatments of ANALYTICAL PERSPECTIVES these different benefits could be compared with alternative transportation policies. Community and regional development. A series of tax expenditures is intended to promote community and regional development by reducing the costs of financing specialized infrastructure, such as airports, docks, and stadiums. Empowerment zone and enterprise community provisions are designed to promote activity in disadvantaged areas. These provisions can be compared with grants and other policies designed to spur economic development. Education, training, employment, and social services. Major provisions in this function are intended to promote post-secondary education, to offset costs of raising children, and to promote a variety of charitable activities. The education incentives can be compared with loans, grants, and other programs designed to promote higher education and training. The child credits are intended to adjust the tax system for the costs of raising children; as such, they could be compared to other Federal tax and spending policies, including related features of the tax system, such as personal exemptions (which are not defined as a tax expenditure). Evaluation of charitable activities requires consideration of the beneficiaries of these activities, who are generally not the parties receiving the tax reduction. Health. Individuals also benefit from favorable treatment of employer-provided health insurance. Measures of these benefits could include increased coverage and pooling of risks. The effects of insurance coverage on final outcome measures of actual health (e.g., infant mortality, days of work lost due to illness, or life expectancy) or intermediate outcomes (e.g., use of preventive health care or health care costs) could also be investigated. Income security, Social Security, and veterans benefits and services. Major tax expenditures in the income security function benefit retirement savings, through employer-provided pensions, individual retirement accounts, and Keogh plans. These provisions might be evaluated in terms of their effects on boosting retirement incomes, private savings, and national savings (which would include the effect on private savings as well as public savings or deficits). Interactions with other programs, including Social Security, also may merit analysis. As in the case of employer-provided health insurance, analysis of employer-provided pension programs requires imputing the value of benefits funded at the firm level to individuals. Other provisions principally affect the incomes of members of certain groups, rather than affecting incentives. For example, tax-favored treatment of Social Security benefits, certain veterans’ benefits, and deductions for the blind and elderly provide increased incomes to eligible parties. The earned-income tax credit, in contrast, should be evaluated for its effects on labor force participation as well as the income it provides lower-income workers. General purpose fiscal assistance and interest. The taxexemption for public purpose State and local bonds reduces the costs of borrowing for a variety of purposes (borrowing for non-public purposes is reflected under other budget functions). The deductibility of certain State and local taxes reflected under this function primarily relates 16. TAX EXPENDITURES to personal income taxes (property tax deductibility is reflected under the commerce and housing function). Tax preferences for Puerto Rico and other U.S. possessions are also included here. These provisions can be compared with other tax and spending policies as means of benefiting fiscal and economic conditions in the States, localities, and possessions. Finally, the tax deferral for interest on U.S. savings bonds benefits savers who invest in these instruments. The extent of these benefits and any effects on Federal borrowing costs could be evaluated. The above illustrative discussion, although broad, is nevertheless incomplete, omitting important details both 243 for the provisions mentioned and the many that are not explicitly cited. Developing a framework that is sufficiently comprehensive, accurate, and flexible to reflect the objectives and effects of the wide range of tax expenditures will be a significant challenge. OMB, Treasury, and other agencies will work together, as appropriate, to address this challenge. As indicated above, over the next few years the Executive Branch’s focus will be on the availability of the data needed to assess the effects of the tax expenditures designed to increase savings. SPECIAL TOPICS 245 246 17. AID TO STATE AND LOCAL GOVERNMENTS State and local governments play a vital role in providing government services. In the most recent decade for which data are available (1999-2008), programs provided by State and local governments represented about 44 percent of all government spending. More than a third of State budgets are devoted to education, 20 percent to health care programs, and 14 percent to programs related to public safety.1 Yet the recent recession has caused the steepest decline in State tax receipts on record. As a result, State and local governments have turned to the Federal Government for assistance. Through the American Recovery and Reinvestment Act of 2009 (Recovery Act) and other key actions, including expanded Federal support for many safety net programs administered by States, the Federal Government has responded to the urgent State and local needs. Through the Recovery Act, the Federal Government is providing over $280 billion in funds to State and local governments. As discussed further below, these funds have been used to relieve State budget shortfalls and, also, to supplement State spending in such areas as transportation and job training. The Recovery Act also indirectly helps States by providing grants supporting State and local priorities directly to organizations, small businesses, or individuals. While these investments are essential, States continue to struggle to close budget gaps. The Federal Government will continue to examine new ways to assist State and local governments as they work to tackle these fiscal challenges. Already, Federal grants in aid to State and local governments are a key source of financing for State and local programs. In the most recent decade, Federal grants in aid financed about one-fifth of State budgets. Although data are not yet available, that share will likely increase in the period from 2009-2011 due to the Federal Government’s actions to stabilize State budgets, discussed further below. In 2011, outlays for Federal grants in aid will equal $645.7 billion. As shown in Table 17-1, 49 percent of this aid will be for health programs, with most of the funding going to Medicaid. Medicaid—which offers health insurance to low-income Americans—was established by the Federal Government but is administered by the States. The Federal Government normally matches State medical assistance expenditures at more than half of the cost of covered services, on average, though this share would be increased to 67 percent in 2011 under enacted and proposed State fiscal relief, discussed further below. In 2011, another 19 percent of the aid will go to income security programs; 13 percent to education, training, and social 1 Bureau of Economic Analysis, National Income and Product Accounts services; 11 percent to transportation; and the remainder to a variety of other areas. Though grant outlays will increase from 2009 to 2010, the amounts spent in 2011 will be somewhat below those in 2010. In 2009, Federal outlays for grants in aid to States were $538.0 billion, and these outlays are estimated to be $653.7 billion in 2010. The drop-off in 2011 will be primarily due to the gradual phase-down of the Federal Government’s State and local fiscal relief efforts detailed below. The Federal Government also indirectly provides aid to States through the Federal tax code. In particular, State and local governments can issue bonds that pay interest which is exempt from Federal income taxation, allowing the States and localities to pay a lower interest rate on their debt than they would otherwise.2 Also, State and local personal property and income taxes (or, at the taxpayer’s elections, sales taxes) are deductible from income for taxpayers who itemize deductions. This may help States and localities indirectly by allowing them to tax at higher rates than they otherwise would. Altogether, these two policies will cost the Federal Government $109.2 billion in 2011. Such costs are known as “tax expenditures,” and Chapter 16 of this volume, “Tax Expenditures,” provides a detailed discussion of the definition and measurement of them. Tax expenditures that especially aid State and local governments are displayed separately at the end of Tables 16-1 and 16-2.3 Table 17-2 at the end of this chapter includes funding for every Federal aid program. An Appendix to this chapter includes State-by-State estimates of major grant programs. STATE AND LOCAL FISCAL RELIEF The recent recession has had a sharply negative effect on State and local finances. When the economy enters recession, State and local governments, absent policy changes, take in less revenue than they otherwise would and also see spending increase on programs that benefit the unemployed or low-income populations. This also happens to the Federal Government—an effect on the 2 The Budget also proposes to continue, with modifications, the Build America Bonds (BABs) program, which was created in the American Recovery and Reinvestment Act of 2009 and is scheduled to expire after 2010. Under the BABs program, State and local governments issue bonds that pay taxable interest and, in place of the tax exemption, the Federal government directly pays a subsidy to State and local governments that is equal to a share of the interest paid by the State and local governments on the bonds. The modified BABs program has been designed to provide more support to State and local governments than do tax-exempt bonds, but at the same cost to the Federal Government. 3 As described in that chapter, the estimates of individual tax expenditures are derived independently and the figure in the preceding sentence does not account for interactive effects. 247 248 ANALYTICAL PERSPECTIVES Federal budget that is detailed in Chapter 3, “Interactions Between the Economy and the Budget.” Unlike the Federal Government, though, State governments are constrained in the amount that they can borrow to cover budget shortfalls. All states except Vermont have either constitutional or statutory requirements that they balance their budgets and Vermont consistently produces a balanced budget without a requirement. While the definition of “balance” varies across the States, this constraint forces States to either cut programs or increase taxes to offset the effects of the recession on their budgets. This policy response works as a drag on the economy relative to their running deficits instead, as State and local employees and contractors lose their jobs as governments cut back on programs and taxpayers are left with less disposable income due to tax increases. The Federal Government does not collect information on projected amounts by which State and local governments must either cut programs or raise taxes to meet their balanced budget constraints, but outside research groups have attempted to quantify the size of the Statelevel shortfalls due to the recent recession. According to the National Council of State Legislatures in their “State Budget Update: November 2009,” combined State budget shortfalls for State fiscal years 2009 and 2010 were in the range of $291 billion and some States are already predicting additional budget shortfalls totaling $55 billion in 2011 and $69 billion in 2012. During times of economic expansion, most States accumulate excess funds in budget stabilization or “rainy day” accounts. These accounts, along with fiscal yearend balances, peaked at about $69 billion (more than 11 percent of total expenditures) as of the end of 2006, according to the “Fiscal Survey of States” published jointly by the National Association of State Budget Officers and the National Governors Association in December 2009. While these were the largest reserves relative to the size of State budgets in more than 25 years, they have been insufficient to cover the large shortfalls States have faced due to the recent recession. In light of the extraordinary economic and fiscal circumstances facing State and local governments and the negative ramifications for jobs and the economy, the Administration worked with Congress last year to enact temporary relief for State and local governments as part of the Recovery Act. The Recovery Act will provide over $280 billion in funds to State and local governments. These funds supplement State spending in such areas as transportation and job training. They also go toward relieving State budget shortfalls. This relief is being primarily delivered in two ways: State Fiscal Stabilization Fund. $53.5 billion in relief is being delivered through the State Fiscal Stabilization Fund, most of which goes to State and local education programs. $48.6 billion of this funding is split among the States based on a combination of a State’s total population and its population aged 5-24. Of this, $39.8 billion, or more than 80 percent, must go toward the ongoing operations (such as to pay for teachers’ salaries and school maintenance) of public schools, both K to 12 schools and institutions of higher education, while the remainder is a flexible block grant to the States. In exchange for accepting these funds, States must at least maintain the same support for their public education systems as in 2006. Most of the remainder of the stabilization fund is used to fund innovative educational initiatives such as reforming teacher pay to, for instance, attract more highly qualified teachers into hard-to-staff schools and subjects. Medicaid Federal matching funds. An estimated $84.5 billion in relief to States is being provided through the first quarter of 2011 through a temporary change in the Federal Government’s share of Medicaid costs. As noted, the Medicaid program is administered by the States, and the Federal Government shares in the cost of the program. Absent the Recovery Act, the Federal Government would match about 57 percent of State medical assistance expenditures, on average. For all States, the Recovery Act temporarily increases the Federal Government’s share of the State’s Medicaid costs by 6.2 percentage points. Additional relief is provided to States that have suffered high increases in unemployment. Evidence suggests that the Recovery Act’s State and local fiscal relief has helped these governments avoid taking steps that would have otherwise harmed economic growth and cost jobs. According to an analysis by the Council of Economic Advisers (CEA), States that received more Medicaid payment relief through the beginning of July had experienced better labor market outcomes, controlling for other factors.4 Furthermore, the CEA found a positive relationship between total Recovery Act payments to the States through the beginning of July and change in employment in such areas as public safety, education, health care, and other sectors where State governments provide a large amount of financial support. In light of the projected shortfalls in State and local budgets and the need to continue bolstering job creation and the economy, the Budget proposes a six-month extension of the Recovery Act’s Federal Medical Assistance Percentage (FMAP) relief — through the end of June 2011. This will help State and local governments to avoid potential program cuts or tax increases to balance their FY 2011 budgets. (FY 2011 starts in July 2010 for many of these governments.) HIGHLIGHTS OF FEDERAL AID TO STATES AND LOCALITIES Several proposals in the 2011 Budget affect Federal aid to State and local governments and the important rela- tionships between the levels of government. Highlights of these proposals are presented below. 4 “The Economic Impact of the American Reinvestment and Recovery Act of 2009”, September 10, 2009. 249 17. AID TO STATE AND LOCAL GOVERNMENTS Natural Resources and Environment Grant outlays for natural resources and environment programs are estimated to be $8.5 billion in 2011. The 2011 Budget requests $3.3 billion for the Clean Water and Drinking Water State Revolving Funds (SRFs). The Federal SRF funding provides grants to States for low-interest loans to communities through a combination of Federal capitalization, State matches, State leveraging, interest, and loan repayments. Since loan interest and principal payments are returned to the program, the SRFs continue to generate funding for new loans even without continued Federal funding. The Federal contribution to water and waste water infrastructure has been substantially incorporated into SRFs. These Funds, combined, now produce approximately $5 billion in repayments each year. As the Funds have grown, the need for Federal capitalization will decline over the next decade. Some ongoing contribution will be maintained to ensure that the neediest communities are adequately served. For 2011, the Environmental Protection Agency proposes a new approach to helping small drinking water systems, as well as reforms to improve the long-term financial, managerial, and environmental sustainability of the SRFs. As part of that strategy, the Administration is working to ensure that Federal dollars provided through the SRFs act as a catalyst for efficient system-wide planning; improvements in technical, financial and managerial capacity; and the design, construction and on-going management of sustainable water infrastructure. The Budget requests $1.3 billion, a 14 percent increase from 2010 enacted and the highest level ever, for grants that support eligible States and Tribes that implement environmental programs. Included in this increase is $25 million to aid States in permitting activities for greenhouse gas (GHG) emissions under the New Source Review and Title V operating permits programs. Additionally, the Budget recognizes State fiscal constraints and provides substantial increases for select State and tribal programs, including a $45 million increase for State water pollution control grants and a $58 million increase for air quality management grants. The Budget includes $30 million for a new tribal multimedia grant program targeted at Tribes and tribal consortia that can implement environmental program requirements on tribal lands. Transportation Federal grants support State and local highway, transit, and airport construction programs. For 2011, grant outlays for transportation are estimated to be $68.2 billion. Fulfilling the President’s campaign promise, the Budget includes $4 billion to create a National Infrastructure Innovation and Finance Fund to invest in projects of regional or national significance. This marks an important departure from the Federal Government’s traditional way of spending on infrastructure through grants to specific States and localities. Established as a new operational unit within the Department of Transportation, the Fund will directly provide resources for projects through grants or loans or a blend of both, and will effectively leverage non-Federal resources, including private capital. The Fund will allocate resources based on demonstrable merit and analytical measures of performance. The Fund will provide planning, feasibility, and analytical capacity to help sponsors identify projects from around the country and then carefully select the most worthwhile. The Administration recommends extending the current surface transportation authorization through March 2011, during which time it will work with Congress to reform surface transportation programs and put the system on a sustainable financing path. Careful consideration is needed to design a Federal surface transportation program that leads to higher performing investments, increases people’s transportation options, promotes a sustainable environment, and makes the Nation’s economy more productive. Further, the Federal program must generate the best investments to reduce congestion and improve safety. To do so, the Administration seeks to integrate economic analysis and performance measurement in transportation planning to ensure that taxpayer dollars are better targeted and spent. As part of the President’s Partnership for Sustainable Communities initiative, the Budget includes $530 million to help State and local governments invest smarter in transportation infrastructure and leverage that investment to advance sustainable development. This is part of the Federal Government’s effort to stimulate comprehensive regional and community planning efforts that integrate transportation, housing, and other critical investments. Building on the historic $8 billion down payment provided through the Recovery Act, the Budget includes $1 billion for high speed rail which supports the President’s five-year, $5 billion pledge in the 2010 Budget. The Administration is dedicated to working with States and project sponsors to identify high speed rail projects that will provide the greatest transportation, social, and environmental benefits, while maximizing the return on taxpayer dollars. Community and Regional Development Grant outlays for community and regional development programs are estimated to be $22.5 billion in 2011. The Budget funds $4 billion in State and local programs, including Firefighter Assistance Grants, for equipping, training, exercising, and hiring first responders. Of this amount, funding of $1.1 billion for the Urban Area Security Initiative will direct resources to the metropolitan vicinities with the highest threat based on a risk management methodology. Funding of $600 million provides essential support to the transportation sector through the Transit and Port Security Grant Programs. The Budget also supports disaster response and resilience efforts by funding the Disaster Relief Fund (DRF) at $1.95 billion. The DRF is used in the instance of a Presidentiallydeclared disaster or emergency by the Federal Emergency Management Agency to assist State and local govern- 250 ments in the response, recovery, and mitigation against emergency and disaster events. The Administration supports tribal self-determination and will assist tribal governments in enhancing their management capacity. The Budget provides increased funding to better compensate Tribes for the work they perform in managing Federal programs under self-determination contracts and self-governance compacts. In addition, the Budget includes proposals to foster better coordination between the Departments of the Interior and Justice on Indian law enforcement issues. Education, Training, Employment, and Social Services Grant outlays for education, training, employment, and social service programs are estimated to be $84.1 billion in 2011. The Budget supports the Administration’s new vision for the Elementary and Secondary Education Act (ESEA). The reauthorized law would encourage States to adopt higher, clearer standards that set the expectation that every student will graduate from high school ready for college and a career. The new law would support dramatic improvements in the quality of assessments to measure complex skills and help teachers identify and respond to students’ strengths and needs. The reauthorization would also recognize and reward schools for helping students make important gains, even if they are not yet at gradelevel, and offer new flexibility for successful States and districts to pursue new solutions to helping all students meet high standards. At the same time, the law would require vigorous efforts to turn around persistently lowperforming schools, applying comprehensive strategies that put children first. In support of these efforts, the Budget provides a $3 billion increase in funding for K to 12 education programs authorized in the ESEA and the Administration will request up to $1 billion in additional funding if Congress successfully completes ESEA reauthorization. Together, these measures would represent the largest funding increase for K to 12 ESEA programs ever requested. The Budget also provides $900 million for School Turnaround Grants. The $4 billion “Race to the Top,” created by the Recovery Act, began a competition among States to spur systemic and innovative reform across four areas: supporting high academic standards; improving teacher effectiveness and distributing effective teachers more equitably; using data to improve achievement; and turning around low-performing schools. Not all States will receive Race to the Top grants, but the competition itself has galvanized key stakeholders across the Nation to reform State laws and to develop new plans for lifting student achievement. The Budget provides $1.4 billion to continue the President’s Race to the Top challenge and to expand the competition from States to school districts that are ready for comprehensive reform. Increasing the number of great teachers, especially in disadvantaged schools, will require major new efforts to help all teachers improve their skills; recognize and reward excellence in the classroom; and help struggling ANALYTICAL PERSPECTIVES teachers improve or, if need be, exit the classroom. Today, taxpayers invest nearly $3 billion a year in a teacher quality block grant that heavily supports investments with little evidentiary support or impact on increasing learning. As part of the overhaul of ESEA, the Administration will require States taking formula funds to develop the preconditions for an effective human capital system, beginning with strong evaluation systems. At the same time, the Administration will invest $950 million in a new competitive fund for States and districts that support bold approaches to recruiting, developing, retaining, and rewarding more effective teachers, particularly in the lowest-performing schools. The Administration is also investing $405 million in supporting successful and innovative pathways into teaching and school leadership. As part of a $1.8 billion investment in the Supporting Student Success initiative, the Budget funds comprehensive supports so that students are mentally and physically healthy and ready to learn. The initiative also reforms the 21st Century Community Learning Centers program to focus funding on models that redesign and extend the school day, week or year to provide additional time for students to engage in academic activities, additional time for enrichment activities, and time for educators to collaborate and improve instruction. Also as part of this initiative, the Budget includes dedicated support for Promise Neighborhoods, modeled after the Harlem Children’s Zone, which aims to improve college going rates by combining a rigorous K-12 education with a full network of supportive services in an entire neighborhood. This initiative would support comprehensive programs that address the needs of children and youth in a targeted area from before the time they are born to their attendance in college. The core principle behind this initiative is that combining both effective academic programs and strong health and social service systems can combat the effects of poverty and improve the education and life outcomes of children. The Department of Education funds dozens of programs that narrowly limit what States, districts, and schools can do with funds. Some of these programs have little evidence of success, while others are demonstrably failing to improve student achievement. The President’s Budget eliminates six programs and consolidates 38 others into 11 new programs that emphasize using competition to allocate funds, giving communities more choices around activities, and using rigorous evidence to fund what works. Building on the Recovery Act, the Administration also proposes $500 million to expand the Investing in Innovation Fund, which will expand proven models—and fund and evaluate promising ones—for achieving student success. Finally, the Budget dedicates funds for the rigorous evaluation of education programs to permit scaling up what works and eliminating what does not. The Administration supports pending legislation that will establish a new Early Learning Challenge Fund administered by the Department of Education and the Department of Health and Human Services to help States improve the quality of early childhood programs to help children enter school ready to succeed. 251 17. AID TO STATE AND LOCAL GOVERNMENTS The Budget reflects the Administration’s investment in improving science, technology, engineering, and mathematics (STEM) outcomes and creating the next generation of scientists and engineers who can help drive economic growth in the coming decades. The Budget provides $300 million in new grants to States to develop and implement curricula and improve teaching and learning in science and math aligned to new high standards. The Budget also dedicates $150 million within the Investing in Innovation Fund to competitive grants for school districts, nonprofits, and other organizations to test, validate, and scale promising strategies to improve teaching and accelerate student learning in STEM subjects. The Department of Education will work with the National Science Foundation and other Federal agencies to identify the most effective interventions that can help States, schools, and teachers improve STEM outcomes. The Budget reflects the Administration’s commitment to rigorous evaluations that distinguish between what works and what doesn’t to avoid wasting taxpayer dollars. Compared to two years ago, the current request represents an increase of over 20 percent in the investment in the development, evaluation, and dissemination of education interventions that increase student learning and achievement through the Institute of Education Sciences. Additional funds will be used to evaluate Federal education programs rigorously, particularly investments launched under the Recovery Act. The increase in education research and evaluation will provide practitioners and policy makers with effective tools for preparing students for success in college and the workforce. Health Grant outlays for health related programs are estimated to be $317.6 billion in 2011. In addition to the six-month extension of the Recovery Act’s FMAP relief described in the previous section, this Budget puts forward a robust set of proposals to strengthen Medicaid and the Children’s Health Insurance Program (CHIP) program integrity actions, including proposals aimed at preventing fraud and abuse before they occur, detecting it as early as possible when it does occur, and vigorously enforcing all penalties and recourses available when fraud is identified. It proposes $250 million in additional resources that, among other things, will help to expand the Health Care Fraud Prevention & Enforcement Action Team (HEAT) initiative, a joint effort by the Departments of Health and Human Services and Justice. As a result, the Administration will be better able to minimize inappropriate payments, close loopholes, and provide greater value for program expenditures to beneficiaries and taxpayers. The Budget increases resources for the Ryan White program to support the care and treatment needs for an estimated 10,000 additional persons living with HIV/ AIDS who are unable to afford health care and related support services. Income Security Grant outlays for income security programs are estimated to be $121.7 billion in 2011. The Budget provides $7.6 billion for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) to fully serve all eligible individuals. This funding supports more than 10 million participants in the WIC program, which is critical to the health of pregnant women, new mothers, and their infants. The Budget also supports a strong Child Nutrition and WIC reauthorization package that will ensure that schoolchildren have access to healthy meals and to help fulfill the President’s pledge to end childhood hunger. The Budget provides $10 billion over 10 years for program reforms aimed at improving program access, establishing high standards for the nutritional quality of food available in school, exploring new strategies for reducing hunger and improving children’s food choices, and improving program management. The President continues to support the nutrition provisions incorporated in the Recovery Act. Participants in the Supplemental Nutrition Assistance Program (SNAP) will continue to receive enhanced benefits at an average value of about $20 per person per month. The Budget also proposes to extend the Recovery Act provision in SNAP that temporarily eliminates the time limits for certain working-age, low-income adults without dependents for an additional fiscal year. This extension helps remove access barriers to SNAP and increase food purchasing power among some of hardest-to-reach populations. The Budget provides critical support for young children and their families by building on historic increases provided in the Recovery Act. The Budget provides an additional $989 million for Head Start and Early Head Start to continue to serve 64,000 additional children and families funded in the Recovery Act. The Budget also provides an additional $1.6 billion for the Child Care and Development Block Grant (CCDBG), in preparation for reauthorization to expand child care opportunities and improve health, safety, and outcomes for children. This request will allow States to provide child care subsidies to 1.6 million children, approximately 235,000 more than could have been served without the additional funds. The Budget includes $3.3 billion for the Low Income Home Energy Assistance Program (LIHEAP) to help lowincome families with their home heating and cooling expenses. In addition, the Administration proposes a trigger mechanism to provide automatic increases in energy assistance whenever there is a spike in energy costs or large numbers of families in poverty. The trigger allows the program to be more responsive to volatile energy markets and to increased demand for energy assistance during times of economic hardship. Using probabilistic scoring, the Administration expects the trigger to provide roughly $2 billion in additional assistance in FY 2011 and $6.5 billion over ten years. The Administration proposes to allow States to elect cash assistance in lieu of low-income housing tax credits (LIHTC) for 2010 to finance certain low-income resi- 252 dential rental properties, extending a provision in the Recover Act. States would be required to use the cash assistance by December 31, 2012, to finance the construction or rehabilitation (including acquisition) of qualified low-income housing projects generally subject to the same rental requirements and recapture rules as properties financed with LIHTC. The Department of the Treasury would be provided additional authority to ensure that the cash assistance is used in compliance with LIHTC rules. The President’s Budget requests $19.6 billion for the Housing Choice Voucher program to help more than two million extremely low- to low-income families with rental assistance to live in decent housing in neighborhoods of their choice. The Budget continues funding for all existing mainstream vouchers and provides flexibility to support new vouchers that were leased and $85 million in special purpose vouchers for homeless and at-risk of homelessness families with children and persons with disabilities. The Administration remains committed to working with the Congress to focus the goals and objectives of the program. In addition, the Administration would like to address the program’s costly inefficiencies, alleviate the administrative burdens on the Public Housing Authorities, and establish a funding mechanism that is transparent and predictable in order to serve more needy families. The Budget provides $9.4 billion for the Project-Based Rental Assistance program to preserve approximately 1.3 million affordable rental units through increased funding for contracts with private owners of multifamily properties. This critical investment will help extremely low- to low-income households to obtain or retain decent, safe, and sanitary housing. The Budget requests $350 million to fund the first phase of a multi-year initiative to regionalize the Housing Choice Voucher program and convert Public Housing to property-based rental assistance. The primary goals of the Transforming Rental Assistance initiative are to improve the physical condition and management of the public housing stock, increase the mobility of assisted families, and streamline the Department of Housing and Urban Development’s (HUD’s) oversight of its rental assistance programs. By providing $250 million in 2011, the Budget continues HUD’s effort to make a range of transformative investments in high-poverty neighborhoods where public and assisted housing is concentrated. A central element of the Administration’s place-based agenda, this Choice Neighborhoods initiative will invest in public, private, and nonprofit partners that have transformative neighborhood interventions and provide the greatest returns on Federal investment. As part of the President’s Partnership for Sustainable Communities Initiative, the Budget includes $150 million to help stimulate comprehensive regional and community planning efforts that integrate transportation and housing investments that result in more regional and local sustainable development patterns, reduce greenhouse gases, and increase more transit accessible housing choices for residents. HUD’s Sustainable Communities Initiative also expands and better coordinates Federal efforts to incentivize State and local governments to plan for and implement ANALYTICAL PERSPECTIVES pre-disaster mitigation strategies. Coordinating hazard mitigation efforts with related sustainability goals and activities will reduce risks while protecting life, property, and the environment. Combined with the Department of Transportation’s funding for strengthening the capacity of States and local governments to make smarter infrastructure investments and the Environmental Protection Agency’s technical assistance, this interagency partnership aims to lower the cost of living while improving the quality of life in local communities. It will do so by providing more coordinated housing and transportation options, improving environmental quality, and better leveraging Federal investments. The Administration will boost funding for Unemployment Insurance (UI) integrity efforts and propose legislative changes that would reduce improper payments by over $4 billion and employer tax evasion by almost $300 million over 10 years. Administration of Justice Grant outlays for administration of justice programs are estimated to be $5.4 billion in 2011. The Budget includes $600 billion, an additional $302 million, to support the hiring or retention of police officers in communities across the country. Supporting the hiring of police officers will help States and communities prevent the growth of crime as the Nation’s economy recovers. The Budget includes $538 million, an increase of $120 million, to support women victims of violence, including domestic abuse and sexual assault victims. The Budget also provides $330 million for the State Criminal Alien Assistance Program to assist States and localities in identifying, determining the status of, and conducting removal proceedings for incarcerated illegal aliens. The Budget also provides $144 million for prisoner reentry programs, including an additional $100 million for the Office of Justice Programs to administer grant programs authorized by the Second Chance Act and $30 million for residential substance abuse treatment programs in State and local prisons and jails. These programs reduce recidivism by providing counseling, job training, drug treatment, and other transitional assistance to former prisoners as they reintegrate into the job market and community life. The Budget includes $19 million to support 45 additional FBI agents for Indian country and $256 million in grants and technical assistance to increase public safety efforts in tribal areas. The funding for additional FBI agents will be provided on a reimbursable basis through the Department of the Interior. The Departments of Justice and the Interior will coordinate the deployment of Federal public safety resources to best address the public safety needs in Indian Country. General Government Grant outlays for general government programs are estimated to be $7.5 billion in 2011. 253 17. AID TO STATE AND LOCAL GOVERNMENTS The Recovery Act created the Build America Bond program as an optional new lower cost borrowing incentive for State and local governments on taxable bonds issued in 2009 and 2010 to finance new investments in governmental capital projects. Under the current program, the Department of the Treasury makes direct subsidy payments to State and local governmental issuers in a subsidy amount equal to 35 percent of the coupon interest on the bonds. The Administration proposes to make the successful Build America Bond program permanent at a reduced subsidy level designed to be approximately revenue neutral in comparison to the Federal tax losses from traditional taxexempt bonds. The Administration also proposes to expand the Build America Bond program beyond new investments in governmental capital projects to include certain additional program uses for which State and local governments may use tax-exempt bonds under existing law. The proposed modifications to the Build America Bond program would be effective for bonds issued beginning in 2011. HISTORICAL PERSPECTIVES In recent decades, Federal aid to State and local governments has become a major factor in the financing of certain government functions. The rudiments of the present system date back to the Civil War. The Morrill Act, passed in 1862, established the land grant colleges and instituted certain federally required standards for States that received the grants, as is characteristic of the present grant programs. Federal aid was later initiated for agriculture, highways, vocational education and rehabilitation, forestry, and public health. In the depression years, Federal aid was extended to meet income security and other social welfare needs. However, Federal grants did not become a significant factor in Federal Government expenditures until after World War II. Table 17–1 displays trends in Federal grants to State and local governments since 1960. Section A shows Federal grants by function. Functions with a substantial amount of grants are shown separately. Grants for the national defense, energy, social security, and veterans benefits and services functions are combined in the “other functions’’ line in the table. Federal grants for transportation increased to $3.0 billion, or 43 percent of all Federal grants, in 1960 after initiation of aid to States to build the Interstate Highway System in the late 1950s. By 1970 there had been significant increases in the relative amounts for education, training, employment, social services, and health (largely Medicaid). In the early and mid-1970s, major new grants were created for natural resources and environment (construction of sewage treatment plants), community and regional development (community development block grants), and general government (general revenue sharing). Since the late 1970s changes in the relative amounts among functions reflect steady growth of grants for health (Medicaid) and income security. The functions with the largest amount of grants are health; income security; education, training, employment, and social services; and transportation, with combined estimated grant outlays of $500.9 billion, or more than 93 percent of total grant outlays in 2009. The increase in total outlays for grants overall since 1990 has been driven by increases in grants for health, which have increased more than six-fold, from $43.9 billion in 1990 to $268.3 billion in 2009. The income security; education, training, employment, and social services; and transportation functions also increased substantially, but at a slower rate than for health. Section B of the table distributes grants between mandatory and discretionary spending. Funding for grant programs classified as mandatory is determined in authorizing legislation. Funding levels for mandatory programs can only be changed by changing eligibility criteria or benefit formulas established in law and are usually not limited by the annual appropriations process. Outlays for mandatory grant programs were $328.2 billion in 2009. The three largest mandatory grant programs are Medicaid, with outlays of $250.9 billion in 2009; Temporary Assistance for Needy Families, $17.9 billion; and child nutrition programs, $15.1 billion. The funding level for discretionary grant programs is determined annually through appropriations acts. Outlays for discretionary grant programs were $209.7 billion in 2009. The largest four discretionary programs in 2009 were Federal-aid Highways, $36.0 billion; Tenant Based Rental Assistance, $16.0 billion; Accelerating Achievement and Ensuring Equity (Education for the Disadvantaged), $15.8 billion; and Special Education, $12.5 billion. Table 17–2 at the end of this chapter identifies discretionary and mandatory grant programs separately. For more information on these categories, see Chapter 11, “Budget Concepts’’ in this volume. Section C of Table 17–1 divides grants among three major categories: payments for individuals, grants for physical capital, and other grants. Grant outlays for payments for individuals, which are mainly entitlement programs in which the Federal Government and the States share the costs, have grown significantly as a percent of total grants. They increased from about a third of the total in 1960 to slightly less than two-thirds in the mid-1990s, and have remained about that proportion since then. These grants are distributed through State or local governments to provide cash or in-kind benefits that constitute income transfers to individuals or families. The major grant in this category is Medicaid. Temporary Assistance for Needy Families, child nutrition programs, and housing assistance are also large grants in this category. Grants for physical capital assist States and localities with construction and other physical capital activities. The major capital grants are for highways, but there are also grants for airports, mass transit, sewage treatment plant construction, community development, and other facilities. Grants for physical capital were almost half of 254 ANALYTICAL PERSPECTIVES Table 17–1. TRENDS IN FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS (Outlays in billions of dollars) Actual 1960 1965 1970 1975 1980 Estimate 1985 1990 1995 2000 2005 2009 2010 2011 A. Distribution of grants by function: Natural resources and environment ................................................ Agriculture ...................................................................................... Transportation ................................................................................. Community and regional development ........................................... Education, training, employment, and social services .................... Health ............................................................................................. Income security .............................................................................. Administration of justice .................................................................. General government ....................................................................... Other ............................................................................................... Total ........................................................................................ 0.1 0.2 3.0 0.1 0.5 0.2 2.6 ......... 0.2 * 7.0 0.2 0.5 4.1 0.6 1.1 0.6 3.5 ......... 0.2 0.1 10.9 0.4 0.6 4.6 1.8 6.4 3.8 5.8 * 0.5 0.1 24.1 2.4 0.4 5.9 2.8 12.1 8.8 9.4 0.7 7.1 0.2 49.8 5.4 0.6 13.0 6.5 21.9 15.8 18.5 0.5 8.6 0.7 91.4 4.1 2.4 17.0 5.2 17.1 24.5 27.9 0.1 6.8 0.8 105.9 3.7 1.3 19.2 5.0 21.8 43.9 36.8 0.6 2.3 0.8 135.3 4.0 0.8 25.8 7.2 30.9 93.6 58.4 1.2 2.3 0.8 225.0 4.6 0.7 32.2 8.7 36.7 124.8 68.7 5.3 2.1 2.1 285.9 5.9 0.9 43.4 20.2 57.2 197.8 90.9 4.8 4.4 2.6 428.0 6.3 0.9 55.4 17.4 74.0 268.3 103.2 4.8 4.2 3.5 538.0 8.8 1.2 72.2 21.2 111.7 294.6 121.8 5.8 7.1 9.1 653.7 8.5 1.1 68.2 22.5 84.1 317.6 121.7 5.4 7.5 9.1 645.7 B. Distribution of grants by BEA category: Discretionary ................................................................................... Mandatory ....................................................................................... Total ........................................................................................ N/A N/A 7.0 2.9 8.0 10.9 10.2 13.9 24.1 21.0 28.8 49.8 53.3 38.1 91.4 55.5 50.4 105.9 63.3 72.0 135.3 94.0 131.0 225.0 116.7 169.2 285.9 181.7 246.3 428.0 209.7 328.2 538.0 281.4 372.3 653.7 250.9 394.8 645.7 2.5 3.3 1.2 7.0 3.7 5.0 2.2 10.9 8.7 7.1 8.3 24.1 16.8 10.9 22.2 49.8 32.6 22.6 36.2 91.4 50.1 24.9 30.9 105.9 77.3 27.2 30.9 135.3 144.4 39.6 41.0 225.0 182.6 48.7 54.6 285.9 273.9 60.8 93.3 428.0 356.7 75.2 106.1 538.0 394.5 111.3 147.8 653.7 419.2 107.5 119.1 645.7 Percentage of total grants: Payments for individuals 1 ..................................................... 35.3% Physical capital 1 .................................................................... 47.3% Other grants ........................................................................... 17.4% Total ................................................................................. 100.0% 34.1% 45.7% 20.2% 100.0% 36.2% 29.3% 34.5% 100.0% 33.6% 21.9% 44.5% 100.0% 35.7% 24.7% 39.6% 100.0% 47.3% 23.5% 29.2% 100.0% 57.1% 20.1% 22.8% 100.0% 64.2% 17.6% 18.2% 100.0% 63.9% 17.0% 19.1% 100.0% 18.8 27.9 19.2 65.9 37.3 31.4 55.0 123.7 53.5 30.0 103.4 186.9 71.1 44.9 111.1 227.1 83.5 39.5 66.6 189.6 107.6 37.6 53.0 198.1 175.7 50.0 57.9 283.6 203.2 56.5 67.0 326.8 C. Composition: Current dollars: Payments for individuals 1 ..................................................... Physical capital 1 .................................................................... Other grants ........................................................................... Total ................................................................................. Constant (FY 2005) dollars: Payments for individuals 1 ..................................................... Physical capital 1 .................................................................... Other grants ........................................................................... Total ................................................................................. 13.3 19.6 12.3 45.3 64.0% 66.3% 60.4% 64.9% 14.2% 14.0% 17.0% 16.6% 21.8% 19.7% 22.6% 18.4% 100.0% 100.0% 100.0% 100.0% 273.9 60.8 93.3 428.0 328.2 63.5 91.1 482.9 354.9 92.5 124.9 572.3 371.9 87.0 98.1 557.0 7.6% 9.2% 12.3% 15.0% 15.5% 11.2% 10.8% 14.8% 16.0% 17.3% 18.0% 18.3% 23.2% 21.7% 22.2% 18.2% 17.1% 21.6% 22.0% 23.5% 14.8% 15.5% 20.1% 24.0% 27.4% 22.0% 18.9% 22.8% 22.2% 24.5% 1.4% 1.6% 2.4% 3.2% 3.4% 2.6% 2.4% 3.1% 2.9% 3.4% 15.3% 19.7% 25.9% 3.8% 17.6% 23.0% N/A 4.5% 16.8% 22.5% N/A 4.2% N/A N/A N/A N/A N/A N/A D. Total grants as a percent of: Federal outlays: Total ........................................................................................ Domestic programs 2 .............................................................. State and local expenditures .......................................................... Gross domestic product .................................................................. E. As a share of total State and local gross investments: Federal capital grants ..................................................................... 24.6% 25.5% 25.4% 26.0% 35.4% 30.2% 21.9% 26.0% 22.0% 22.0% 21.2% State and local own-source financing ............................................. 75.4% 74.5% 74.6% 74.0% 64.6% 69.8% 78.1% 74.0% 78.0% 78.0% 78.8% Total ................................................................................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% N/A: Not available. * 50 million or less. 1 Grants that are both payments for individuals and capital investment are shown under capital investment. 2 Excludes national defense, international affairs, net interest, and undistributed offsetting receipts. total grants in 1960, shortly after grants began for construction of the Interstate Highway System. The relative share of these outlays has declined, as payments for individuals have grown. In 2009, grants for physical capital were $75.2 billion, 14 percent of total grants. The other grants are primarily for education, training, employment, and social services. These grants were 20 percent of total grants in 2009. Section D of this table shows grants as a percentage of Federal outlays, State and local expenditures, and gross domestic product. Grants have increased as a percentage of total Federal outlays from 11 percent in 1990 to 15 255 17. AID TO STATE AND LOCAL GOVERNMENTS percent in 2009. Grants as a percentage of domestic programs were 20 percent in 2009. As a percentage of total State and local expenditures, grants have increased from 19 percent in 1990 to 26 percent in 2009. Section E shows the relative contribution of physical capital grants in assisting States and localities with gross investment. Federal capital grants are estimated to be 21 percent of State and local gross investment in 2009. Table 17–2. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—BUDGET AUTHORITY AND OUTLAYS (In millions of dollars) Budget Authority Function, Category, Agency and Program 2009 Actual 2010 Estimate Outlays 2011 Estimate 2009 Actual 2010 Estimate 2011 Estimate National Defense Discretionary: Department of Homeland Security: Federal Emergency Management Agency: State and Local Programs ........................................................................................................ 190 48 .......... 26 82 49 Department of Energy: Energy Programs: Energy Efficiency and Renewable Energy ................................................................................ 12,342 297 385 455 5,425 5,161 Mandatory: Tennessee Valley Authority Fund .............................................................................................. Total, Energy ......................................................................................................................................... 544 502 588 544 502 588 12,886 799 973 999 5,927 5,749 5 5 .......... 5 5 .......... 3 164 5 20 2 .......... 1 155 5 276 2 103 262 5 316 3 307 3 266 5 387 3 311 3 647 80 7 164 80 .......... 164 65 .......... 536 87 6 105 74 .......... 105 75 .......... 66 28 71 3 60 .......... 57 76 62 48 69 20 6 6 6 5 6 6 75 75 .......... 90 85 .......... 90 85 .......... 68 95 16 78 98 20 81 99 16 –1 60 24 84 .......... 68 40 80 .......... 51 50 55 –1 61 52 83 .......... 66 28 85 .......... 55 28 76 9,294 4,938 4,772 3,446 5,630 5,526 Energy Discretionary: Natural Resources and Environment Discretionary: Department of Agriculture: Farm Service Agency: Grassroots Source Water Protection Program .......................................................................... Natural Resources Conservation Service: Watershed Rehabilitation Program ........................................................................................... Watershed and Flood Prevention Operations ........................................................................... Forest Service: State and Private Forestry ........................................................................................................ Management of National Forest Lands for Subsistence Uses .................................................. Department of Commerce: National Oceanic and Atmospheric Administration: Operations, Research, and Facilities ........................................................................................ Pacific Coastal Salmon Recovery ............................................................................................. Procurement, Acquisition and Construction .............................................................................. Department of the Interior: Office of Surface Mining Reclamation and Enforcement: Regulation and Technology ....................................................................................................... Abandoned Mine Reclamation Fund ........................................................................................ United States Geological Survey: Surveys, Investigations, and Research ..................................................................................... United States Fish and Wildlife Service: State and Tribal Wildlife Grants ................................................................................................. Cooperative Endangered Species Conservation Fund ............................................................. Landowner Incentive Program .................................................................................................. National Park Service: Urban Park and Recreation Fund ............................................................................................. National Recreation and Preservation ...................................................................................... Land Acquisition and State Assistance ..................................................................................... Historic Preservation Fund ....................................................................................................... Environmental Protection Agency: State and Tribal Assistance Grants ........................................................................................... 256 ANALYTICAL PERSPECTIVES Table 17–2. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—BUDGET AUTHORITY AND OUTLAYS—Continued (In millions of dollars) Budget Authority Function, Category, Agency and Program Hazardous Substance Superfund ............................................................................................. Leaking Underground Storage Tank Trust Fund ....................................................................... Total, discretionary ............................................................................................................................... 2009 Actual 2010 Estimate Outlays 2011 Estimate 2009 Actual 2010 Estimate 2011 Estimate 40 295 40 97 43 97 53 81 333 156 291 135 11,219 6,111 5,850 5,153 7,465 7,001 110 101 91 108 102 96 9 39 25 250 5 2 2 250 5 2 2 .......... 9 39 25 25 5 2 2 172 5 2 2 187 85 90 85 147 95 163 46 65 48 89 68 110 6 5 .......... 6 5 .......... 367 54 497 508 59 477 628 65 455 304 54 446 376 59 500 490 65 503 Mandatory: Department of the Interior: Bureau of Land Management: Miscellaneous Permanent Payment Accounts .......................................................................... Minerals Management Service: National Forests Fund, Payment to States ............................................................................... Leases of Lands Acquired for Flood Control, Navigation, and Allied Purposes ........................ States Share from Certain Gulf of Mexico Leases .................................................................... Coastal Impact Assistance ....................................................................................................... Office of Surface Mining Reclamation and Enforcement: Payments to States in Lieu of Coal Fee Receipts ..................................................................... Abandoned Mine Reclamation Fund ........................................................................................ Bureau of Reclamation: Bureau of Reclamation Loan Program Account ....................................................................... United States Fish and Wildlife Service: Federal Aid in Wildlife Restoration ............................................................................................ Cooperative Endangered Species Conservation Fund ............................................................. Sport Fish Restoration .............................................................................................................. National Park Service: Land Acquisition and State Assistance ..................................................................................... 8 1 1 .......... 1 3 Department of the Treasury: Financial Management Service: Payment to Terrestrial Wildlife Habitat Restoration Trust Fund ................................................. 5 5 .......... 5 5 .......... Corps of Engineers-Civil Works: South Dakota Terrestrial Wildlife Habitat Restoration Trust Fund ............................................. Total, mandatory ................................................................................................................................... 21 5 4 .......... 5 4 1,566 1,652 1,511 1,132 1,371 1,535 Total, Natural Resources and Environment ........................................................................................ 12,785 7,763 7,361 6,285 8,836 8,536 15 .......... .......... 7 .......... .......... 498 296 63 520 318 65 504 380 30 467 277 30 607 325 50 585 414 40 2 2 3 14 2 2 Agriculture Discretionary: Department of Agriculture: Departmental Management: Departmental Administration .................................................................................................... National Institute of Food and Agriculture: Extension Activities ................................................................................................................... Research and Education Activities ........................................................................................... Integrated Activities .................................................................................................................. Agricultural Marketing Service: Payments to States and Possessions ....................................................................................... Farm Service Agency: State Mediation Grants ............................................................................................................. Total, discretionary ............................................................................................................................... 4 4 4 4 5 5 878 909 921 799 989 1,046 49 55 55 .......... 19 38 50 88 .......... 223 .......... 43 50 88 .......... 223 .......... 43 Mandatory: Department of Agriculture: Agricultural Marketing Service: Payments to States and Possessions ....................................................................................... Farm Service Agency: Aquaculture Assistance ............................................................................................................ Commodity Credit Corporation Fund ........................................................................................ Total, mandatory ................................................................................................................................... 187 278 98 138 242 81 Total, Agriculture .................................................................................................................................. 1,065 1,187 1,019 937 1,231 1,127 257 17. AID TO STATE AND LOCAL GOVERNMENTS Table 17–2. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—BUDGET AUTHORITY AND OUTLAYS—Continued (In millions of dollars) Budget Authority Function, Category, Agency and Program 2009 Actual 2010 Estimate Outlays 2011 Estimate 2009 Actual 2010 Estimate 2011 Estimate Commerce and Housing Credit Mandatory: Department of Commerce: National Oceanic and Atmospheric Administration: Promote and Develop Fishery Products and Research Pertaining to American Fisheries ....... 31 8 8 6 29 14 Federal Communications Commission: Universal Service Fund ............................................................................................................. Total, mandatory ................................................................................................................................... 1,602 2,096 2,157 1,602 2,096 2,157 1,633 2,104 2,165 1,608 2,125 2,171 Total, Commerce and Housing Credit ................................................................................................. 1,633 2,104 2,165 1,608 2,125 2,171 1,100 3,515 .......... 3,515 .......... 3,515 3,938 .......... 3,856 .......... 3,459 .......... .......... 27,212 .......... 10 .......... 39,715 167 .......... .......... .......... 650 .......... .......... 41,107 293 –7 .......... .......... .......... .......... .......... 41,363 .......... .......... 766 2,417 .......... 75 36,049 .......... 44 72 886 11,185 59 36 38,910 .......... 147 61 567 7,078 267 18 40,118 .......... 181 58 .......... 307 .......... 310 .......... 310 256 .......... 449 .......... 397 .......... .......... 620 .......... 620 .......... 621 502 .......... 713 .......... 694 .......... .......... 90 25 8,000 .......... .......... .......... 35 2,500 .......... .......... .......... .......... 1,000 .......... .......... .......... .......... 2 .......... 20 6 40 388 1 .......... 18 40 1,225 .......... 7,188 750 .......... 1 .......... 1 .......... 2,557 .......... .......... .......... .......... .......... .......... .......... .......... 9,247 .......... .......... .......... 1 150 .......... 75 1,998 .......... .......... .......... .......... .......... .......... .......... .......... 8,343 .......... .......... .......... .......... 150 .......... .......... 1,820 29 16 .......... .......... 53 .......... 307 .......... 8,272 570 76 33 .......... .......... 740 .......... 2,483 .......... .......... 16 .......... .......... .......... .......... 7,264 .......... 2,459 252 17 1 33 635 .......... 2,617 .......... .......... 17 .......... .......... .......... .......... 9,252 .......... 1,884 192 11 1 78 373 11 2,425 4 8 17 5 .......... 46 .......... 8,844 .......... 35 39 45 35 40 44 Transportation Discretionary: Department of Transportation: Federal Aviation Administration: Grants-in-aid for Airports .......................................................................................................... Grants-in-aid for Airports (non-add obligation limitations) 1 ..................................................... Federal Highway Administration: Emergency Relief Program ....................................................................................................... Highway Infrastructure Investment ............................................................................................ Highway Infrastructure Programs ............................................................................................. Appalachian Development Highway System ............................................................................ Federal-aid Highways ............................................................................................................... Federal-aid Highways (non-add obligation limitations) 1 .......................................................... Miscellaneous Appropriations ................................................................................................... Miscellaneous Highway Trust Funds ......................................................................................... Federal Motor Carrier Safety Administration: Motor Carrier Safety Grants ...................................................................................................... Motor Carrier Safety Grants (non-add obligation limitations) 1 ................................................ National Highway Traffic Safety Administration: Highway Traffic Safety Grants ................................................................................................... Highway Traffic Safety Grants (non-add obligation limitations) 1 .............................................. Federal Railroad Administration: Emergency Railroad Rehabilitation and Repair ........................................................................ Intercity Passenger Rail Grant Program ................................................................................... Rail Line Relocation and Improvement Program ...................................................................... Capital Assistance for High Speed Rail Corridors and Intercity Passenger Rail Service ......... Alaska Railroad Rehabilitation .................................................................................................. Federal Transit Administration: Transit Capital Assistance ......................................................................................................... Fixed Guideway Infrastructure Investment ................................................................................ Job Access and Reverse Commute Grants .............................................................................. Interstate Transfer Grants-transit .............................................................................................. Washington Metropolitan Area Transit Authority ....................................................................... Formula Grants ......................................................................................................................... Grants for Energy Efficiency and Greenhouse Gas Reductions ............................................... Capital Investment Grants ........................................................................................................ Technical Assistance and Workforce Development .................................................................. Rail Transit Safety Oversight Program ...................................................................................... Discretionary Grants (Highway Trust Fund, Mass Transit Account) .......................................... Greenhouse Gas and Energy Reduction .................................................................................. Greenhouse Gas and Energy Reduction (non-add obligation limitations) 1 ............................ Livable Communities ................................................................................................................. Livable Communities (non-add obligation limitations) 1 ........................................................... Formula and Bus Grants ........................................................................................................... Formula and Bus Grants (non-add obligation limitations) 1 ...................................................... Pipeline and Hazardous Materials Safety Administration: Pipeline Safety .......................................................................................................................... 258 ANALYTICAL PERSPECTIVES Table 17–2. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—BUDGET AUTHORITY AND OUTLAYS—Continued (In millions of dollars) Budget Authority Function, Category, Agency and Program Total, discretionary ............................................................................................................................... Total, obligation limitations (non-add) 1 ................................................................................................... 2009 Actual 2010 Estimate Outlays 2011 Estimate 2009 Actual 2010 Estimate 2011 Estimate 47,136 53,404 5,734 53,895 3,060 54,441 55,338 .......... 72,080 .......... 68,063 .......... 119 115 106 110 114 105 3,686 3,476 3,373 .......... .......... .......... 29,761 –12 1 42,586 .......... 55 42,217 .......... .......... .......... –12 2 .......... .......... 55 .......... .......... .......... 300 305 307 .......... .......... .......... 543 587 600 .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... .......... Mandatory: Department of Homeland Security: United States Coast Guard: Boat Safety ............................................................................................................................... Department of Transportation: Federal Aviation Administration: Grants-in-aid for Airports (Airport and Airway Trust Fund) 1 ..................................................... Federal Highway Administration: Federal-aid Highways 1 ............................................................................................................. Right-of-way Revolving Fund Liquidating Account .................................................................... Miscellaneous Appropriations ................................................................................................... Federal Motor Carrier Safety Administration: Motor Carrier Safety Grants 1 ................................................................................................... National Highway Traffic Safety Administration: Highway Traffic Safety Grants 1 ................................................................................................. Federal Transit Administration: Greenhouse Gas and Energy Reduction 1 ............................................................................... Livable Communities 1 .............................................................................................................. Formula and Bus Grants 1 ........................................................................................................ Total, mandatory ................................................................................................................................... .......... .......... 9,247 .......... .......... 8,361 38 307 8,001 43,645 55,485 54,949 100 169 105 Total, Transportation ............................................................................................................................. 90,781 61,219 58,009 55,438 72,249 68,168 .......... .......... 35 .......... .......... 23 331 1,919 88 551 50 534 122 585 54 966 83 1,086 298 77 37 207 144 114 239 139 58 116 189 133 Department of Commerce: Economic Development Administration: Economic Development Assistance Programs ......................................................................... 408 255 246 243 422 481 Department of Homeland Security: Federal Emergency Management Agency: State and Local Programs ........................................................................................................ United States Fire Administration and Training ......................................................................... Mitigation Grants ....................................................................................................................... Disaster Relief .......................................................................................................................... 4,694 4 .......... 703 3,991 4 .......... 3,301 4,001 4 .......... 1,268 2,529 3 11 6,525 2,870 5 .......... 7,478 6,251 5 .......... 4,636 6,867 6 10 .......... 4,405 6 18 .......... 4,336 .......... .......... .......... 6,408 5 22 16 7,230 8 32 17 8,022 .......... 29 17 240 139 139 168 196 183 155 21 159 26 159 8 149 9 158 35 158 9 Community and Regional Development Discretionary: Department of Agriculture: Office of the Secretary: Healthy Foods, Healthy Neighborhoods Initiative ..................................................................... Rural Utilities Service: Distance Learning, Telemedicine, and Broadband Program ..................................................... Rural Water and Waste Disposal Program Account .................................................................. Rural Housing Service: Rural Community Facilities Program Account ........................................................................... Rural Business_Cooperative Service: Rural Business Program Account ............................................................................................. Department of Housing and Urban Development: Community Planning and Development: Community Development Fund ................................................................................................ Community Development Loan Guarantees Program Account ................................................ Brownfields Redevelopment ..................................................................................................... Empowerment Zones/enterprise Communities/renewal Communities ..................................... Office of Lead Hazard Control and Healthy Homes: Lead Hazard Reduction ............................................................................................................ Department of the Interior: Bureau of Indian Affairs and Bureau of Indian Education: Operation of Indian Programs ................................................................................................... Indian Guaranteed Loan Program Account .............................................................................. 259 17. AID TO STATE AND LOCAL GOVERNMENTS Table 17–2. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—BUDGET AUTHORITY AND OUTLAYS—Continued (In millions of dollars) Budget Authority Function, Category, Agency and Program 2009 Actual 2010 Estimate Outlays 2011 Estimate 2009 Actual 2010 Estimate 2011 Estimate 67 13 12 67 13 13 67 13 12 62 9 60 65 13 79 67 13 57 15,987 13,252 10,967 17,249 19,961 21,367 Department of Housing and Urban Development: Community Planning and Development: Community Development Loan Guarantees Program Account ................................................ Neighborhood Stabilization Program ........................................................................................ Community Development Loan Guarantees Liquidating Account ............................................. Total, mandatory ................................................................................................................................... 3 .......... .......... 3 .......... .......... .......... .......... .......... 3 116 .......... 3 1,260 –3 .......... 1,107 .......... 3 3 .......... 119 1,260 1,107 Total, Community and Regional Development ................................................................................... 15,990 13,255 10,967 17,368 21,221 22,474 18 .......... 18 .......... .......... .......... 20 2 24 1 23 1 118 1,361 25,807 5,703 53,542 123 1,272 15,864 5,098 .......... 123 1,272 15,044 3,501 .......... 114 1,297 15,797 5,247 12,430 108 1,457 22,157 5,442 32,117 121 1,281 20,928 5,244 8,995 822 958 5,805 653 885 1,128 610 289 1,786 651 597 511 686 744 794 667 714 724 22,831 739 23 12,367 148 25 11,776 288 25 12,536 165 21 16,553 525 30 17,705 502 25 1,923 1,997 1,924 2,005 2,074 1,953 353 364 353 387 520 387 64 310 .......... 64 48 .......... .......... 55 .......... 61 34 60 67 120 120 51 128 .......... 63 13,507 62 8,944 62 9,941 63 8,793 62 12,118 62 10,467 Appalachian Regional Commission ......................................................................................................... Delta Regional Authority .......................................................................................................................... Denali Commission .................................................................................................................................. Total, discretionary ............................................................................................................................... Mandatory: Education, Training, Employment, and Social Services Discretionary: Department of Commerce: National Telecommunications and Information Administration: Public Telecommunications Facilities, Planning and Construction ............................................ Information Infrastructure Grants .............................................................................................. Department of Education: Office of Elementary and Secondary Education: Indian Student Education .......................................................................................................... Impact Aid ................................................................................................................................. Accelerating Achievement and Ensuring Equity ....................................................................... Education Improvement Programs ........................................................................................... State Fiscal Stabilization Fund ................................................................................................. Office of Innovation and Improvement: Innovation and Instructional Teams ........................................................................................... Office of Safe and Drug-Free Schools: Supporting Student Success .................................................................................................... Office of English Language Acquisition: English Learner Education ........................................................................................................ Office of Special Education and Rehabilitative Services: Special Education ..................................................................................................................... Rehabilitation Services and Disability Research ...................................................................... American Printing House for the Blind ...................................................................................... Office of Vocational and Adult Education: Career, Technical and Adult Education ..................................................................................... Office of Postsecondary Education: Higher Education ...................................................................................................................... Office of Federal Student Aid: Student Financial Assistance .................................................................................................... Institute of Education Sciences ....................................................................................................... Hurricane Education Recovery ........................................................................................................ Department of Health and Human Services: Administration for Children and Families: Promoting Safe and Stable Families ......................................................................................... Children and Families Services Programs ................................................................................ Administration on Aging: Aging Services Programs ......................................................................................................... 1,569 1,493 1,602 1,435 1,577 1,560 Department of the Interior: Bureau of Indian Affairs and Bureau of Indian Education: Operation of Indian Programs ................................................................................................... 103 159 111 98 138 108 Department of Labor: Employment and Training Administration: Training and Employment Services .......................................................................................... Community Service Employment for Older Americans ............................................................. 5,886 419 3,208 549 3,378 325 3,768 168 5,357 315 3,201 388 260 ANALYTICAL PERSPECTIVES Table 17–2. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—BUDGET AUTHORITY AND OUTLAYS—Continued (In millions of dollars) Budget Authority Function, Category, Agency and Program 2009 Actual 2010 Estimate Outlays 2011 Estimate 2009 Actual 2010 Estimate 2011 Estimate State Unemployment Insurance and Employment Service Operations .................................... States Paid Leave Fund ............................................................................................................ Unemployment Trust Fund ........................................................................................................ 92 .......... 1,364 87 .......... 970 87 49 964 35 .......... 953 95 .......... 1,230 84 11 1,022 Corporation for National and Community Service: Domestic Volunteer Service Programs, Operating Expenses ................................................... National and Community Service Programs, Operating Expenses .......................................... Operating Expenses ................................................................................................................. Corporation for Public Broadcasting ........................................................................................................ .......... .......... 464 461 .......... .......... 695 506 .......... .......... 803 466 11 47 315 461 .......... .......... 430 506 .......... .......... 648 466 District of Columbia: District of Columbia General and Special Payments: Federal Payment for Resident Tuition Support .......................................................................... Federal Payment to Jump Start Public School Reform ............................................................. Federal Payment for School Improvement ................................................................................ 35 20 54 35 .......... 74 35 20 52 35 20 54 35 .......... 74 35 20 52 National Endowment for the Arts: National Endowment for the Arts: Grants and Administration ................................................... 71 56 53 51 65 53 Institute of Museum and Library Services: Office of Museum and Library Services: Grants and Administration ........................................ Total, discretionary ............................................................................................................................... 258 265 248 248 260 262 139,276 56,482 60,942 68,702 105,773 78,146 Department of Education: Office of Special Education and Rehabilitative Services: Rehabilitation Services and Disability Research ...................................................................... 2,975 3,085 3,085 2,766 2,986 3,080 Department of Health and Human Services: Administration for Children and Families: Promoting Safe and Stable Families ......................................................................................... Social Services Block Grant ..................................................................................................... 371 1,700 372 1,700 372 1,700 388 1,854 331 2,118 365 1,832 686 686 686 276 507 720 Mandatory: Department of Labor: Employment and Training Administration: Federal Unemployment Benefits and Allowances ..................................................................... Total, mandatory ................................................................................................................................... 5,732 5,843 5,843 5,284 5,942 5,997 Total, Education, Training, Employment, and Social Services .......................................................... 145,008 62,325 66,785 73,986 111,715 84,143 51 50 50 49 50 50 2,847 2,847 2,847 3,060 2,987 2,987 2,358 2,669 2,434 2,746 2,358 2,755 2,331 2,888 2,397 2,870 2,335 2,963 394 700 139 426 .......... 147 426 .......... 147 671 .......... 239 277 158 286 277 314 284 104 104 117 104 104 117 Health Discretionary: Department of Agriculture: Food Safety and Inspection Service: Salaries and Expenses ............................................................................................................. Department of Health and Human Services: Health Resources and Services Administration: Health Resources and Services ............................................................................................... Centers for Disease Control and Prevention: Disease Control, Research, and Training ................................................................................. Substance Abuse and Mental Health Services Administration ....................................................... Departmental Management: Public Health and Social Services Emergency Fund ................................................................ Prevention and Wellness Fund ................................................................................................. General Departmental Management ........................................................................................ Department of Labor: Occupational Safety and Health Administration: Salaries and Expenses ............................................................................................................. Mine Safety and Health Administration: Salaries and Expenses ............................................................................................................. Total, discretionary ............................................................................................................................... 9 9 9 9 9 9 9,271 8,763 8,709 9,351 9,138 9,336 261 17. AID TO STATE AND LOCAL GOVERNMENTS Table 17–2. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—BUDGET AUTHORITY AND OUTLAYS—Continued (In millions of dollars) Budget Authority Function, Category, Agency and Program 2009 Actual 2010 Estimate Outlays 2011 Estimate 2009 Actual 2010 Estimate 2011 Estimate Mandatory: Department of Health and Human Services: Centers for Medicare and Medicaid Services: Grants to States for Medicaid ................................................................................................... Children’s Health Insurance Fund ............................................................................................. State Grants and Demonstrations ............................................................................................ Child Enrollment Contingency Fund ......................................................................................... Departmental Management: General Departmental Management ........................................................................................ Total, mandatory ................................................................................................................................... 254,890 13,834 609 2,113 292,678 13,529 583 73 285,213 13,504 629 82 250,924 7,547 498 .......... 275,383 8,903 980 200 296,726 10,285 1,036 200 10 10 .......... .......... 9 11 271,456 306,873 299,428 258,969 285,475 308,258 280,727 315,636 308,137 268,320 294,613 317,594 Department of Agriculture: Food and Nutrition Service: Commodity Assistance Program ............................................................................................... Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) .................. 384 7,360 251 7,257 250 7,603 361 6,480 289 7,704 275 7,467 Department of Health and Human Services: Administration for Children and Families: Low Income Home Energy Assistance ..................................................................................... Refugee and Entrant Assistance .............................................................................................. Payments to States for the Child Care and Development Block Grant ..................................... 5,100 532 4,120 5,100 531 2,120 3,300 678 2,918 4,533 544 2,346 4,993 571 3,387 3,648 675 3,195 Department of Homeland Security: Federal Emergency Management Agency: Emergency Food and Shelter ................................................................................................... 300 200 100 284 216 100 4,455 120 10 16,217 292 6,414 .......... 1,152 .......... .......... 4,760 198 13 18,084 232 2,475 .......... 700 .......... .......... 4,781 –65 10 19,355 322 2,024 .......... 574 313 350 4,449 317 4 15,981 279 3,207 1 644 .......... .......... 4,574 289 7 17,739 277 4,044 .......... 878 .......... .......... 4,775 262 9 19,076 322 4,394 .......... 721 8 53 3,167 4,071 308 26 .......... 1,852 1,807 332 .......... .......... 2,034 1,633 337 .......... .......... 1,484 1,915 317 15 3 1,872 2,242 333 26 10 2,173 4,034 304 18 15 .......... 248 763 .......... 297 817 .......... 89 271 4 337 979 .......... 291 921 .......... 295 949 Total, Health .......................................................................................................................................... Income Security Discretionary: Department of Housing and Urban Development: Public and Indian Housing Programs: Public Housing Operating Fund ................................................................................................ Revitalization of Severely Distressed Public Housing (HOPE VI) ............................................. Native Hawaiian Housing Block Grant ...................................................................................... Tenant Based Rental Assistance .............................................................................................. Project-based Rental Assistance .............................................................................................. Public Housing Capital Fund .................................................................................................... Prevention of Resident Displacement ....................................................................................... Native American Housing Block Grant ...................................................................................... Choice Neighborhoods ............................................................................................................. Transforming Rental Assistance ............................................................................................... Community Planning and Development: Homeless Assistance Grants .................................................................................................... Home Investment Partnership Program .................................................................................... Housing Opportunities for Persons with AIDS .......................................................................... Rural Housing and Economic Development ............................................................................. Permanent Supportive Housing ................................................................................................ Housing Programs: Homeownership and Opportunity for People Everywhere Grants (HOPE Grants) ................... Housing for Persons with Disabilities ........................................................................................ Housing for the Elderly ............................................................................................................. Department of Labor: Employment and Training Administration: Unemployment Trust Fund ........................................................................................................ Total, discretionary ............................................................................................................................... 3,504 3,267 3,421 3,110 3,619 2,309 58,543 50,293 50,298 47,594 54,282 55,077 993 1,056 982 929 1,056 982 Mandatory: Department of Agriculture: Agricultural Marketing Service: Funds for Strengthening Markets, Income, and Supply (section 32) ........................................ 262 ANALYTICAL PERSPECTIVES Table 17–2. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—BUDGET AUTHORITY AND OUTLAYS—Continued (In millions of dollars) Budget Authority Function, Category, Agency and Program 2009 Actual 2010 Estimate Outlays 2011 Estimate 2009 Actual 2010 Estimate 2011 Estimate Food and Nutrition Service: Supplemental Nutrition Assistance Program ............................................................................ Commodity Assistance Program ............................................................................................... Child Nutrition Programs ........................................................................................................... 5,872 21 15,003 6,355 21 16,863 6,149 21 19,221 5,624 8 15,083 6,627 9 17,136 6,237 9 19,040 Department of Health and Human Services: Administration for Children and Families: Payments to States for Child Support Enforcement and Family Support Programs ................. Low Income Home Energy Assistance ..................................................................................... Contingency Fund ..................................................................................................................... Payments to States for Foster Care and Adoption Assistance ................................................. Child Care Entitlement to States ............................................................................................... Temporary Assistance for Needy Families ................................................................................ 4,282 .......... 5,000 7,218 2,917 17,059 4,788 .......... .......... 7,381 2,917 17,059 4,255 2,000 4,355 7,456 3,717 17,408 4,352 .......... 1,072 6,858 2,952 17,861 4,710 .......... 4,329 7,403 2,925 17,754 4,324 1,460 3,406 7,442 3,417 17,595 Department of Labor: Employment and Training Administration: Unemployment Trust Fund ........................................................................................................ 807 612 31 807 612 31 Department of the Treasury: Departmental Offices: Grants to States for Low-Income Housing Projects in Lieu of Low-Income Housing Credit Allocations ........................................................................................................................... Total, mandatory ................................................................................................................................... 2,930 3,615 2,265 29 4,975 2,685 62,102 60,667 67,860 55,575 67,536 66,628 Total, Income Security .......................................................................................................................... 120,645 110,960 118,158 103,169 121,818 121,705 24 28 21 45 26 25 650 755 855 650 755 855 Social Security Mandatory: Social Security Administration: Federal Disability Insurance Trust Fund .................................................................................... Veterans Benefits and Services Discretionary: Department of Veterans Affairs: Veterans Health Administration: Medical Services ....................................................................................................................... Departmental Administration: Grants for Construction of State Extended Care Facilities ........................................................ Grants for Construction of State Veterans Cemeteries ............................................................. Total, discretionary ............................................................................................................................... 325 42 100 46 85 46 129 30 148 32 207 32 1,017 901 986 809 935 1,094 Total, Veterans Benefits and Services ................................................................................................ 1,017 901 986 809 935 1,094 Department of Homeland Security: Departmental Management and Operations: National Security Special Events, State and Local Reimbursement ......................................... .......... .......... 20 .......... .......... 18 Department of Housing and Urban Development: Fair Housing and Equal Opportunity: Fair Housing Activities .............................................................................................................. 54 71 60 46 53 63 Administration of Justice Discretionary: Department of Justice: Legal Activities and U.S. Marshals: Assets Forfeiture Fund .............................................................................................................. Office of Justice Programs: Justice Assistance .................................................................................................................... State and Local Law Enforcement Assistance .......................................................................... Juvenile Justice Programs ........................................................................................................ Community Oriented Policing Services .................................................................................... Violence against Women Prevention and Prosecution Programs ............................................. 21 21 21 14 21 21 139 4,294 338 1,181 584 180 1,687 394 537 394 170 1,434 263 720 441 246 2,335 345 227 318 185 2,664 333 606 541 204 1,937 348 737 451 Equal Employment Opportunity Commission: Salaries and Expenses ............................................................................................................. 26 30 30 26 30 30 263 17. AID TO STATE AND LOCAL GOVERNMENTS Table 17–2. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—BUDGET AUTHORITY AND OUTLAYS—Continued (In millions of dollars) Budget Authority Function, Category, Agency and Program Federal Drug Control Programs: High-intensity Drug Trafficking Areas Program ......................................................................... State Justice Institute: State Justice Institute: Salaries and Expenses ......................................................................... Total, discretionary ............................................................................................................................... 2009 Actual 2010 Estimate Outlays 2011 Estimate 2009 Actual 2010 Estimate 2011 Estimate 213 239 210 217 195 211 4 5 5 4 5 5 6,854 3,558 3,374 3,778 4,633 4,025 537 516 447 413 403 500 591 660 750 519 567 697 Mandatory: Department of Justice: Legal Activities and U.S. Marshals: Assets Forfeiture Fund .............................................................................................................. Office of Justice Programs: Crime Victims Fund ................................................................................................................... Department of the Treasury: Departmental Offices: Treasury Forfeiture Fund ........................................................................................................... Total, mandatory ................................................................................................................................... 184 150 150 100 180 150 1,312 1,326 1,347 1,032 1,150 1,347 Total, Administration of Justice .......................................................................................................... 8,166 4,884 4,721 4,810 5,783 5,372 .......... .......... .......... 1 .......... .......... 14 14 14 14 14 14 51 .......... 57 .......... 56 .......... 50 .......... 55 1 54 1 District of Columbia: District of Columbia Courts: Federal Payment to the District of Columbia Courts ................................................................. Defender Services in District of Columbia Courts .................................................................... District of Columbia General and Special Payments: Federal Support for Economic Development and Management Reforms in the District ........... 248 52 261 55 247 55 241 45 309 65 306 63 54 60 46 54 60 46 Election Assistance Commission: Election Reform Programs ........................................................................................................ Election Data Collection Grants ................................................................................................ Total, discretionary ............................................................................................................................... 106 .......... 75 .......... .......... .......... 78 6 105 4 75 .......... 525 522 418 489 613 559 Department of Agriculture: Forest Service: Forest Service Permanent Appropriations ................................................................................ 578 493 453 522 584 453 Department of Energy: Energy Programs: Payments to States under Federal Power Act .......................................................................... 3 3 3 3 3 3 Department of Homeland Security: Customs and Border Protection: Refunds, Transfers, and Expenses of Operation, Puerto Rico .................................................. 84 92 90 92 92 90 1,839 16 13 1,648 5 .......... 1,960 12 .......... 1,839 16 13 1,648 5 .......... 1,960 12 .......... 123 142 .......... 28 254 78 General Government Discretionary: Department of Health and Human Services: Administration for Children and Families: Disabled Voter Services ............................................................................................................ Department of the Interior: United States Fish and Wildlife Service: National Wildlife Refuge Fund .................................................................................................. Insular Affairs: Assistance to Territories ............................................................................................................ Trust Territory of the Pacific Islands .......................................................................................... Mandatory: Department of the Interior: Minerals Management Service: Mineral Leasing and Associated Payments .............................................................................. National Petroleum Reserve, Alaska ........................................................................................ Geothermal Lease Revenues, Payment to Counties ................................................................ Office of Surface Mining Reclamation and Enforcement: Payments to States in Lieu of Coal Fee Receipts ..................................................................... 264 ANALYTICAL PERSPECTIVES Table 17–2. FEDERAL GRANTS TO STATE AND LOCAL GOVERNMENTS—BUDGET AUTHORITY AND OUTLAYS—Continued (In millions of dollars) Budget Authority Function, Category, Agency and Program 2009 Actual United States Fish and Wildlife Service: National Wildlife Refuge Fund .................................................................................................. Insular Affairs: Assistance to Territories ............................................................................................................ Payments to the United States Territories, Fiscal Assistance ................................................... Department-Wide Programs: Payments in Lieu of Taxes ........................................................................................................ Department of the Treasury: Alcohol and Tobacco Tax and Trade Bureau: Internal Revenue Collections for Puerto Rico ........................................................................... Internal Revenue Service: Build America Bond Payments ................................................................................................. 2010 Estimate Outlays 2011 Estimate 2009 Actual 2010 Estimate 2011 Estimate 7 10 10 9 10 10 28 149 28 177 28 146 33 149 27 177 29 146 382 395 409 521 395 409 473 422 439 473 422 439 .......... 2,870 3,315 .......... 2,870 3,315 Corps of Engineers-Civil Works: Permanent Appropriations ........................................................................................................ Total, mandatory ................................................................................................................................... 4 4 4 4 4 4 3,699 6,289 6,869 3,702 6,491 6,948 Total, General Government .................................................................................................................. 4,224 6,811 7,287 4,191 7,104 7,507 Total, Grants .......................................................................................................................................... 695,141 587,920 586,589 537,991 653,665 645,714 Discretionary ........................................................................................................................... Transportation obligation limitations (non-add) 1 ...................................................................... Mandatory ................................................................................................................................ 303,238 53,404 146,870 53,895 145,910 54,441 209,743 .......... 281,376 .......... 250,924 .......... 391,903 441,050 440,679 328,248 372,289 394,790 contract authority provides budget authority for these programs, but program levels are set by discretionary obligation limitations in appropriations bills and outlays are recorded as discretionary. This table shows the obligation limitations as non-additive items to avoid double counting. 1 Mandatory Table 17–2, “Federal Grants to State and Local Governments-Budget Authority and Outlays,’’ provides detailed budget authority and outlay data for grants by budget account, including proposed legislation. This table displays discretionary and mandatory grant programs separately. OTHER INFORMATION ON FEDERAL AID TO STATE AND LOCAL GOVERNMENTS Additional information regarding aid to State and local governments can be found elsewhere in this Budget and in other documents. Major public physical capital investment programs providing Federal grants to State and local governments are identified in Chapter 20, “Federal Investment.’’ Data for summary and detailed grants to State and local governments can be found in many sections of a separate volume of the Budget entitled Historical Tables. Section 12 of that document is devoted exclusively to grants to State and local governments. Additional information on grants can be found in Section 6 (Composition of Federal Government Outlays); Section 9 (Federal Government Outlays for Investment: Major Physical Capital, Research and Development, and Education and Training); Section 11 (Federal Government Payments for Individuals); and Section 15 (Total (Federal and State and Local) Government Finances). In addition to these sources, a number of other sources of information are available that use slightly different concepts of grants, provide State-by-State information, provide information on how to apply for Federal aid, or display information about audits. Current and updated grant receipt information by State and local governments can be found on USAspending.gov. This public website also contains contract and loan information and is updated twice per month. Additional current and updated information about grants provided specifically by the Recovery Act can be found on Recovery.gov. The Bureau of the Census in the Department of Commerce provides data on public finances, including Federal aid to State and local governments. The Bureau’s major reports and databases on grant-making include: • Federal Aid to States, a report on Federal grant spending by State for the most recently completed fiscal year. • The Consolidated Federal Funds Report is an annual document that shows the distribution of Federal spending by State and county areas and by local governmental jurisdictions. • The Federal Assistance Awards Data System (FAADS) provides computerized information about current grant funding. Data on all direct assistance awards are provided quarterly to the States and to the Congress. • The Federal Audit Clearinghouse maintains an online database (harvester.census.gov/sac) that pro- 17. AID TO STATE AND LOCAL GOVERNMENTS vides access to summary information about audits conducted under OMB Circular A–133, “Audits to States, Local Governments, and Non-Profit Organizations.’’ Information is available for each audited entity, including the amount of Federal money expended by program and whether there were audit findings. The Bureau of Economic Analysis, also in the Department of Commerce, publishes the monthly Survey of Current Business, which provides data on the national income and product accounts (NIPA), a broad statistical concept encompassing the entire economy. These accounts include data on Federal grants to State and local governments. Data using the NIPA concepts appear in this volume in Chapter 28, “National Income and Product Accounts.’’ The Catalog of Federal Domestic Assistance is a primary reference source for communities wishing to apply for grants and other domestic assistance. The Catalog is prepared by the General Services Administration and contains a detailed listing of grant and other assistance programs; discussions of eligibility criteria, application procedures, and estimated obligations; and related information. The Catalog is available on the Internet at www. cfda.gov. APPENDIX: SELECTED GRANT DATA BY STATE This Appendix displays State-by-State spending for the selected grant programs to State and local governments shown in the following table, “Summary of Grant Programs by Agency, Bureau, and Program.’’ The programs selected here cover more than 80 percent of total grant spending. The first summary table shows the obligations for each program. The second summary table, “Summary of Grant Programs by State,’’ shows the obligations for each State for these programs. Both of these tables combine fund- 265 ing provided in the Recovery Act with funding provided through other authority. The third summary table, “Summary of Recovery Act Grants by Agency, Bureau, and Program” shows obligations made from funding provided by the Recovery Act for the grant programs from the first summary table. For those grant programs created by the Recovery Act, such as the State Fiscal Stabilization Fund, the amounts in this table are the same as in the first table. The fourth summary table, “Summary of Recovery Act Grants by State” shows the amounts for each State from funding provided by the Recovery Act. The individual program tables display obligations for each program on a State-by-State basis, consistent with the estimates in this Budget. These tables combine funding provided by the Recovery Act with funding provided through other authority. Each table reports the following information: • The Federal agency that administers the program. • The program title and number as contained in the Catalog of Federal Domestic Assistance. • The budget account number from which the program is funded. • Actual 2009 obligations by State, Federal territory, and Indian tribes in thousands of dollars. Undistributed obligations shown at the bottom of each page are generally project funds that are not distributed by formula, or programs for which State-by-State data are not available. • Estimates of 2010 obligations by State from previous budget authority and from new budget authority. • Estimates of 2011 obligations by State, which are based on the 2011 Budget request, unless otherwise noted. • The percentage share of 2011 estimated program funds distributed to each State. 266 ANALYTICAL PERSPECTIVES Table 17–3. SUMMARY OF PROGRAMS BY AGENCY, BUREAU, AND PROGRAM (Obligations in millions of dollars) Estimated FY 2010 obligations from: Agency, Bureau, and Program Department of Agriculture, Food and Nutrition Service School Breakfast Program (10.553) ..................................................................................................................... National School Lunch Program (10.555) ............................................................................................................. Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) (10.557) ................................ Child and Adult Care Food Program (10.558) ...................................................................................................... State Administrative Matching Grants for the Supplemental Nutrition Assistance Program (Food Stamps) (10.561) ........................................................................................................................................................... Department of Education, Office of Elementary and Secondary Education Title I College-and-Career-Ready Students (formerly Title I Grants to Local Educational Agencies) (84.010) .... Improving Teacher Quality State Grants (84.367) ................................................................................................. Education State Grants, State Fiscal Stabilization Fund (84.394) ........................................................................ Government Services, State Fiscal Stabilization Fund (84.397) .......................................................................... Effective Teachers and Leaders State Grants ...................................................................................................... Department of Education, Office of Special Education and Rehabilitative Services Vocational Rehabilitation State Grants (84.126) ................................................................................................... IDEA Part B: Grants to States & Grants to States Recovery Act (84.027) ........................................................... Department of Energy, Energy Programs State Energy Program (81.041) ............................................................................................................................ Weatherization Assistance For Low-Income Persons (81.042) ............................................................................ Energy Efficiency And Conservation Block Grant (81.043) .................................................................................. Department of Health and Human Services, Centers for Medicare and Medicaid Services Children’s Health Insurance Program (93.767) ..................................................................................................... Grants To States For Medicaid (93.778) ............................................................................................................... Department of Health and Human Services, Administration for Children and Families Temporary Assistance for Needy Families (TANF) - Family Assistance Grants (93.558) ..................................... Child Support Enforcement - Federal Share of State and Local Administrative Costs and Incentives (93.563) .. Low Income Home Energy Assistance Program (93.568) .................................................................................... Child Care and Development Block Grant (93.575) .............................................................................................. Child Care and Development Fund - Mandatory (93.596a) .................................................................................. Child Care and Development Fund - Matching (93.596b) .................................................................................... Head Start (93.600) .............................................................................................................................................. Foster Care - Title IV-E (93.658) ........................................................................................................................... Adoption Assistance (93.659) ............................................................................................................................... Social Services Block Grant (93.667) ................................................................................................................... Department of Health and Human Services, HIV/AIDS Bureau .......................................................................... Ryan White HIV/AIDS Treatment Modernization Act - Part B HIV Care Grants (93.917) ..................................... Department of Housing and Urban Development, Public and Indian Housing Programs Public Housing Operating Fund (14.850) ............................................................................................................. Section 8 Housing Choice Vouchers (14.871) ...................................................................................................... Public Housing Capital Fund (14.872) .................................................................................................................. Department of Housing and Urban Development, Community Planning and Development Community Development Block Grants and Neighborhood Stabilization Program (14.218) ................................ Homelessness Prevention and Rapid Re-Housing Program (14.257) .................................................................. HOME Investment Partnership Program and Tax Credit Assistance Program (14.258) ....................................... Department of Justice, Office of Justice Programs Edward Byrne Memorial Justice Assistance Grant Program (16.738) .................................................................. Department of Labor, Employment and Training Administration Unemployment Insurance (17.225) ...................................................................................................................... WIA Youth Activities (17.259) ................................................................................................................................ WIA Dislocated Workers (17.260) ......................................................................................................................... Department of Transportation, Federal Aviation Administration Airport Improvement Program (20.106) ................................................................................................................ Department of Transportation, Federal Highway Administration Highway Planning and Construction (20.205) ...................................................................................................... Department of Transportation, Federal Transit Administration Federal Transit Formula Grants Programs (20.507) ............................................................................................. Environmental Protection Agency, Office of Water Capitalization Grants for Clean Water State Revolving Fund (66.458) ................................................................. Capitalization Grants for Drinking Water State Revolving Fund (66.468) ............................................................. FY 2009 (actual) Previous authority New authority FY 2011 (estimated) Total 2,607 8,984 7,005 2,452 ......... 304 555 ......... 2,898 9,915 7,073 2,616 2,898 10,218 7,628 2,616 3,118 10,713 7,861 2,729 3,059 ......... 3,841 3,841 3,384 24,492 2,948 39,743 8,843 ......... ......... ......... ......... ......... ......... 14,492 2,948 ......... ......... ......... 14,492 2,948 ......... ......... ......... 14,492 ......... ......... ......... 2,500 3,514 22,805 1 ......... 3,085 11,505 3,086 11,505 3,142 11,755 3,137 5,198 1,506 ......... ......... 1,189 50 210 ......... 50 210 1,189 75 300 ......... 9,464 265,058 ......... ......... 12,520 278,830 12,520 278,830 13,459 274,495 18,145 4,245 4,510 2,127 1,627 2,090 7,110 4,545 2,130 1,700 150 ......... ......... ......... ......... ......... ......... ......... ......... ......... 17,106 3,566 4,510 2,387 1,240 2,205 7,235 4,406 2,272 1,700 17,256 3,566 4,510 2,387 1,240 2,205 7,235 4,406 2,272 1,700 20,265 4,618 2,510 2,927 1,240 2,461 8,224 4,592 2,522 1,700 1,162 ......... 1,185 1,185 1,185 4,449 16,289 6,367 ......... 291 125 4,760 18,084 2,419 4,760 18,375 2,544 4,781 19,355 2,000 8,092 1,485 4,059 7,341 7 ......... 4,450 ......... 1,825 11,791 7 1,825 4,336 ......... 1,633 1,995 ......... 483 483 466 3,711 2,108 2,429 129 ......... ......... 3,370 924 1,187 3,499 924 1,187 3,503 871 1,187 3,471 ......... 3,378 3,378 3,367 59,758 7,600 41,846 49,446 42,102 6,009 2,276 5,875 8,151 10,077 4,677 2,967 193 188 2,100 1,387 2,293 1,575 2,000 1,287 267 17. AID TO STATE AND LOCAL GOVERNMENTS Table 17–3. SUMMARY OF PROGRAMS BY AGENCY, BUREAU, AND PROGRAM—Continued (Obligations in millions of dollars) Estimated FY 2010 obligations from: Agency, Bureau, and Program Federal Communications Commission Universal Service Fund E-Rate ............................................................................................................................ Total.......................................................................................................................................................................... FY 2009 (actual) Previous authority New authority Total FY 2011 (estimated) 1,520 ......... 2,057 2,057 2,118 589,590 20,350 491,938 512,288 499,350 268 ANALYTICAL PERSPECTIVES Table 17–4. SUMMARY OF PROGRAMS BY STATE (Obligations in millions of dollars) Programs distributed in all years State or Territory All programs FY 2009 (actual) Estimated FY 2010 obligations from: Previous authority New authority Total FY 2011 (estimated) FY 2011 Percentage of distributed total Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Total, programs distributed by State in all years ............................................ 8,871 2,288 12,247 6,033 68,853 6,353 7,124 1,763 2,718 26,982 15,380 2,552 2,616 22,080 11,624 5,394 4,371 9,013 12,077 3,427 9,540 14,733 18,055 9,798 7,224 11,525 2,051 3,007 3,162 2,033 15,541 5,240 53,757 17,096 1,524 22,536 7,255 6,570 24,599 2,691 8,199 1,655 12,534 40,833 3,768 1,751 9,950 11,194 4,282 10,109 1,277 175 355 139 4,959 36 320 1,626 157 84 347 229 1,147 132 279 92 171 708 455 77 67 489 490 578 157 149 1,774 29 186 368 320 200 95 418 88 105 159 27 260 105 748 333 28 614 92 127 319 46 176 103 220 3,075 36 50 410 254 92 296 13 3 13 11 90 59 8 125 6,618 1,979 11,138 5,101 58,250 4,787 5,883 1,462 2,634 20,636 12,492 1,903 2,035 17,388 8,903 4,100 3,307 7,542 8,846 2,929 7,991 13,013 14,509 8,361 6,208 9,565 1,629 2,397 2,373 1,617 12,367 4,850 50,568 12,481 1,133 18,636 5,967 5,645 20,178 2,209 6,836 1,265 9,245 32,935 2,855 1,507 8,489 8,479 3,753 7,739 914 93 188 57 3,203 137 175 1,361 6,775 2,063 11,486 5,330 59,396 4,920 6,163 1,554 2,805 21,344 12,947 1,980 2,102 17,877 9,393 4,678 3,464 7,691 10,620 2,958 8,178 13,381 14,829 8,561 6,303 9,983 1,717 2,502 2,532 1,644 12,626 4,956 51,316 12,814 1,162 19,250 6,058 5,771 20,496 2,256 7,012 1,367 9,465 36,011 2,891 1,556 8,899 8,734 3,845 8,035 927 96 200 68 3,293 196 183 1,486 6,639 2,041 11,112 5,136 55,797 4,842 5,305 1,336 2,610 20,017 11,846 1,678 2,042 16,190 8,918 4,074 3,132 7,316 7,985 2,503 7,950 11,835 14,380 7,867 6,208 9,321 1,619 2,319 2,418 1,549 12,371 4,787 48,074 11,612 1,109 18,290 6,327 5,771 19,874 2,069 6,510 1,252 9,057 32,900 2,893 1,352 8,069 8,198 3,482 7,274 871 88 181 51 3,225 45 164 1,435 1.43 0.44 2.40 1.11 12.04 1.05 1.15 0.29 0.56 4.32 2.56 0.36 0.44 3.49 1.92 0.88 0.68 1.58 1.72 0.54 1.72 2.55 3.10 1.70 1.34 2.01 0.35 0.50 0.52 0.33 2.67 1.03 10.38 2.51 0.24 3.95 1.37 1.25 4.29 0.45 1.40 0.27 1.95 7.10 0.62 0.29 1.74 1.77 0.75 1.57 0.19 0.02 0.04 0.01 0.70 0.01 0.04 0.31 582,865 17,280 478,863 496,143 463,315 100.00 MEMORANDUM: Not distributed by State in all years 1 .................................................................... Total, including undistributed ................................................................................ 6,725 589,590 3,070 20,350 13,075 491,938 16,145 512,288 36,035 499,350 N/A N/A 1 The sum of programs not distributed by State in all years. 269 17. AID TO STATE AND LOCAL GOVERNMENTS Table 17–5. SUMMARY OF RECOVERY ACT GRANTS BY AGENCY, BUREAU, AND PROGRAM (Obligations in millions of dollars) Estimated FY 2010 obligations from: Agency, Bureau, and Program Department of Agriculture, Food and Nutrition Service Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) (10.557) ............................ State Administrative Matching Grants for Supplemental Nutrition Assistance Program (Food Stamps) (10.561) ........................................................................................................................................................... Department of Education, Office of Elementary and Secondary Education Title I College-and-Career-Ready Students (formerly Title I Grants to Local Educational Agencies), Recovery Act (84.389) ..................................................................................................................................... Education State Grants, State Fiscal Stabilization Fund (84.394) .................................................................... Government Services, State Fiscal Stabilization Fund (84.397) ...................................................................... Department of Education, Office of Special Education and Rehabilitative Services Vocational Rehabilitation State Grants, Recovery Act (84.390) ........................................................................ IDEA Part B: Grants to States Recovery Act (84.391) ...................................................................................... Department of Energy, Energy Programs State Energy Program (81.041) ........................................................................................................................ Weatherization Assistance For Low-Income Persons (81.042) ........................................................................ Energy Efficiency And Conservation Block Grant (81.043) .............................................................................. Department of Health and Human Services, Centers for Medicare and Medicaid Services Grants To States For Medicaid (93.778) ........................................................................................................... Department of Health and Human Services, Administration for Children and Families Temporary Assistance for Needy Families (TANF) - Family Assistance Grants (93.714) ................................. Child Support Enforcement - Federal Share of State and Local Administrative Costs and Incentives (93.563) ........................................................................................................................................................... Child Care and Development Block Grant (93.713) .......................................................................................... Head Start (93.708) .......................................................................................................................................... Foster Care - Title IV-E (93.658) ....................................................................................................................... Adoption Assistance (93.659) ........................................................................................................................... Department of Housing and Urban Development, Public and Indian Housing Programs Public Housing Capital Fund (14.885) .............................................................................................................. Department of Housing and Urban Development, Community Planning and Development Community Development Block Grants and Neighborhood Stabilization Program (14.253) ............................ Homelessness Prevention and Rapid Re-Housing Program (14.257) .............................................................. Tax Credit Assistance Program (14.258) .......................................................................................................... Department of Justice, Office of Justice Programs ............................................................................................ Edward Byrne Memorial Justice Assistance Grant Program (16.738) .............................................................. Department of Labor, Employment and Training Administration ....................................................................... Unemployment Insurance (17.225) .................................................................................................................. WIA Youth Activities (17.259) ............................................................................................................................ WIA Dislocated Workers (17.260) ..................................................................................................................... Department of Transportation, Federal Aviation Administration ....................................................................... Airport Improvement Program (20.106) ............................................................................................................ Department of Transportation, Federal Highway Administration ....................................................................... Highway Planning and Construction (20.205) .................................................................................................. Department of Transportation, Federal Transit Administration .......................................................................... Federal Transit Formula Grants Programs (20.507) ......................................................................................... Environmental Protection Agency, Office of Water ............................................................................................. Capitalization Grants for Clean Water State Revolving Fund (66.458) ............................................................. Capitalization Grants for Drinking Water State Revolving Fund (66.468) ......................................................... Total ......................................................................................................................................................................... FY 2009 (actual) Previous authority New authority FY 2011 (estimated) Total 34 65 ......... 65 ......... 144 ......... 146 146 ......... 10,000 39,743 8,843 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 539 11,300 1 ......... ......... ......... 1 ......... ......... ......... 3,087 4,747 1,506 ......... ......... 1,085 ......... ......... ......... ......... ......... 1,085 ......... ......... ......... 34,762 ......... 39,946 39,946 17,763 617 3,383 1,000 4,383 ......... 429 1,997 578 162 194 ......... ......... ......... ......... ......... 1,321 3 1,522 201 220 1,321 3 1,522 201 220 ......... ......... ......... 53 63 3,979 21 ......... 21 ......... 972 1,485 2,250 1,998 7 ......... ......... ......... ......... 1,998 7 ......... ......... ......... ......... 1,989 ......... ......... ......... ......... 34 1,188 1,241 111 ......... ......... 131 ......... ......... 242 ......... ......... ......... ......... ......... 1,095 2 ......... 2 ......... 19,659 7,600 ......... 7,600 ......... 6,731 745 ......... 745 ......... 3,972 2,028 47 (40) ......... ......... 47 (40) ......... ......... 165,306 15,027 44,491 59,518 17,879 270 ANALYTICAL PERSPECTIVES Table 17–6. SUMMARY OF RECOVERY ACT GRANTS BY STATE (Obligations in millions of dollars) Programs distributed in all years State or Territory Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Total, programs distributed by State in all years ............................................ MEMORANDUM: Not distributed by State in all years 1 .................................................................. Total, including undistributed ................................................................................ * $500 or less or 0.005 percent or less. 1 The sum of programs not distributed by State in all years. All programs FY 2009 (actual) Estimated FY 2010 obligations from: Previous authority New authority FY 2011 (estimated) Total FY 2011 Percentage of distributed total 2,438 623 3,094 1,491 19,032 2,224 2,075 556 774 8,423 4,518 737 771 7,095 3,349 1,560 1,350 2,221 2,461 840 2,908 3,977 5,391 3,020 1,729 3,129 595 911 1,130 675 4,482 1,150 13,934 4,475 492 5,917 2,030 1,773 7,026 771 2,219 491 3,362 11,703 1,257 508 3,170 3,344 1,056 2,841 456 95 189 89 1,991 1 153 341 114 68 263 131 793 116 96 72 35 405 392 46 59 223 207 39 140 127 123 22 139 261 288 139 65 261 76 93 127 10 267 81 367 207 30 537 68 102 234 30 149 99 97 1,138 30 28 401 170 32 206 1 0 10 10 69 ......... 5 47 421 103 1,019 304 5,742 430 608 148 173 2,176 689 192 145 1,623 744 330 247 550 821 265 889 1,393 1,175 977 417 763 106 153 229 147 1,162 342 5,938 955 51 135 568 475 1,982 210 341 67 733 3,263 174 144 824 910 237 630 63 3 4 2 128 ......... 7 62 535 171 1,282 435 6,535 546 704 221 208 2,581 1,080 238 204 1,846 951 369 388 677 944 287 1,028 1,654 1,463 1,116 482 1,024 182 246 357 157 1,428 424 6,305 1,161 81 672 637 577 2,216 240 489 167 831 4,401 204 172 1,225 1,079 269 837 65 3 14 11 197 ......... 12 109 96 29 230 88 1,248 115 145 27 45 545 148 57 38 358 154 81 63 123 248 64 239 351 214 199 109 206 21 48 59 37 282 99 1,478 215 17 6 496 117 470 46 107 54 171 626 45 40 205 238 62 116 18 1 1 0 24 ......... 1 ......... 0.93 0.28 2.23 0.86 12.09 1.11 1.40 0.26 0.44 5.28 1.44 0.55 0.37 3.47 1.49 0.79 0.61 1.20 2.40 0.62 2.31 3.40 2.08 1.93 1.06 1.99 0.20 0.46 0.57 0.36 2.73 0.96 14.31 2.08 0.17 0.06 4.80 1.13 4.55 0.44 1.04 0.53 1.65 6.06 0.43 0.39 1.99 2.31 0.60 1.13 0.17 0.01 0.01 * 0.23 ......... 0.01 ......... 164,414 9,347 42,388 51,735 10,323 100.00 892 165,306 5,680 15,027 2,103 44,491 7,782 59,518 7,556 17,879 N/A N/A 271 17. AID TO STATE AND LOCAL GOVERNMENTS Department of Agriculture, Food and Nutrition Service 12-3539-0-1-605 Table 17–7. SCHOOL BREAKFAST PROGRAM (10.553) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. DOD/AF/USMC/Nave ................................................................................................ Total .......................................................................................................................... * $500 or less or 0.005 percent or less. 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) 50,789 6,101 55,043 35,209 320,551 23,563 17,092 6,696 4,660 140,833 131,310 8,553 14,235 74,070 48,127 16,748 20,210 52,597 55,087 7,988 31,382 32,684 63,262 26,177 50,783 51,489 5,485 11,045 14,214 3,927 41,647 29,448 135,553 86,749 3,385 79,043 46,001 28,311 63,822 5,816 58,315 5,564 63,288 352,187 14,148 4,060 48,159 38,544 18,499 28,768 2,683 ......... 1,932 ......... 32,154 ......... 993 ......... 38,359 18 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 57,289 6,882 62,088 39,715 361,578 26,579 19,280 7,553 5,256 158,858 148,116 9,648 16,057 83,550 54,287 18,892 22,797 59,329 62,138 9,010 35,399 36,867 71,359 29,527 57,283 58,079 6,187 12,459 16,033 4,430 46,977 33,217 152,902 97,852 3,818 89,160 51,889 31,935 71,991 6,560 65,779 6,276 71,388 397,263 15,959 4,580 54,323 43,477 20,867 32,450 3,026 ......... 2,179 ......... 36,269 ......... 1,120 ......... ......... 20 57,289 6,882 62,088 39,715 361,578 26,579 19,280 7,553 5,256 158,858 148,116 9,648 16,057 83,550 54,287 18,892 22,797 59,329 62,138 9,010 35,399 36,867 71,359 29,527 57,283 58,079 6,187 12,459 16,033 4,430 46,977 33,217 152,902 97,852 3,818 89,160 51,889 31,935 71,991 6,560 65,779 6,276 71,388 397,263 15,959 4,580 54,323 43,477 20,867 32,450 3,026 ......... 2,179 ......... 36,269 ......... 1,120 ......... ......... 20 61,640 7,404 66,803 42,731 389,037 28,597 20,744 8,127 5,656 170,922 159,364 10,380 17,276 89,895 58,409 20,326 24,528 63,834 66,856 9,695 38,087 39,667 76,778 31,770 61,633 62,490 6,657 13,405 17,251 4,766 50,545 35,740 164,514 105,283 4,108 95,931 55,829 34,360 77,458 7,059 70,774 6,753 76,809 427,432 17,171 4,927 58,448 46,779 22,451 34,914 3,256 ......... 2,345 ......... 39,024 ......... 1,205 ......... ......... 20 2,607,356 ......... 2,897,802 2,897,802 3,117,863 FY 2011 Percentage of distributed total 1.98 0.24 2.14 1.37 12.48 0.92 0.67 0.26 0.18 5.48 5.11 0.33 0.55 2.88 1.87 0.65 0.79 2.05 2.14 0.31 1.22 1.27 2.46 1.02 1.98 2.00 0.21 0.43 0.55 0.15 1.62 1.15 5.28 3.38 0.13 3.08 1.79 1.10 2.48 0.23 2.27 0.22 2.46 13.71 0.55 0.16 1.87 1.50 0.72 1.12 0.10 ......... 0.08 ......... 1.25 ......... 0.04 ......... ......... * 1 100.00 272 ANALYTICAL PERSPECTIVES Department of Agriculture, Food and Nutrition Service 12-3539-0-1-605 Table 17–8. NATIONAL SCHOOL LUNCH PROGRAM (10.555) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. DOD/AF/USMC/Navy ................................................................................................ Total .......................................................................................................................... 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) 167,073 25,924 204,905 104,628 1,205,780 98,879 69,619 21,115 16,434 501,060 377,712 31,741 41,207 333,580 186,936 75,441 78,400 147,465 169,179 26,942 108,679 123,770 231,021 116,128 138,277 159,265 20,393 48,570 59,629 19,529 173,540 75,456 512,513 283,260 13,742 273,508 124,472 84,203 259,774 23,287 155,693 21,911 193,426 1,019,661 70,598 11,504 167,081 142,487 51,991 122,786 10,888 .... 5,610 .... 122,206 .... 4,766 .... 141,342 8,725 5,737 890 7,037 3,593 41,407 3,396 2,391 725 564 17,207 12,971 1,090 1,415 11,455 6,420 2,591 2,692 5,064 5,810 925 3,732 4,250 7,933 3,988 4,749 5,469 700 1,668 2,048 671 5,960 2,591 17,600 9,727 472 9,392 4,274 2,892 8,921 800 5,347 752 6,642 35,016 2,424 395 5,738 4,893 1,785 4,217 374 .... 193 .... 4,197 .... 164 .... .... 300 187,331 29,068 229,750 117,314 1,351,982 110,868 78,060 23,675 18,427 561,814 423,510 35,590 46,203 374,027 209,602 84,588 87,906 165,345 189,692 30,209 121,857 138,778 259,033 130,209 155,043 178,576 22,866 54,459 66,859 21,897 194,581 84,605 574,656 317,606 15,408 306,672 139,565 94,412 291,272 26,110 174,571 24,568 216,879 1,143,296 79,158 12,899 187,339 159,764 58,295 137,673 12,208 .... 6,290 .... 137,023 .... 5,344 .... .... 9,782 193,068 29,958 236,787 120,907 1,393,389 114,264 80,451 24,400 18,991 579,021 436,481 36,680 47,618 385,482 216,022 87,179 90,598 170,409 195,502 31,134 125,589 143,028 266,966 134,197 159,792 184,045 23,566 56,127 68,907 22,568 200,541 87,196 592,256 327,333 15,880 316,064 143,839 97,304 300,193 26,910 179,918 25,320 223,521 1,178,312 81,582 13,294 193,077 164,657 60,080 141,890 12,582 .... 6,483 .... 141,220 .... 5,508 .... .... 10,082 202,419 31,408 248,254 126,763 1,460,873 119,798 84,347 25,582 19,911 607,063 457,620 38,456 49,925 404,152 226,484 91,401 94,986 178,662 204,970 32,642 131,671 149,955 279,895 140,696 167,531 192,959 24,707 58,845 72,244 23,661 210,254 91,419 620,939 343,186 16,649 331,371 150,805 102,017 314,731 28,214 188,631 26,546 234,347 1,235,379 85,534 13,938 202,428 172,631 62,990 148,762 13,191 .... 6,797 .... 148,060 .... 5,774 .... .... 10,574 8,983,711 303,654 9,914,514 10,218,168 10,713,047 FY 2011 Percentage of distributed total 1.89 0.29 2.32 1.18 13.64 1.12 0.79 0.24 0.19 5.67 4.27 0.36 0.47 3.77 2.11 0.85 0.89 1.67 1.91 0.30 1.23 1.40 2.61 1.31 1.56 1.80 0.23 0.55 0.67 0.22 1.96 0.85 5.80 3.20 0.16 3.09 1.41 0.95 2.94 0.26 1.76 0.25 2.19 11.53 0.80 0.13 1.89 1.61 0.59 1.39 0.12 ......... 0.06 ......... 1.38 ......... 0.05 ......... ......... 0.10 1 100.00 273 17. AID TO STATE AND LOCAL GOVERNMENTS Department of Agriculture, Food and Nutrition Service 12-3510-0-1-605 Table 17–9. SPECIAL SUPPLEMENTAL NUTRITION PROGRAM FOR WOMEN, INFANTS, AND CHILDREN (WIC) (10.557) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) 119,439 25,450 139,807 72,897 1,097,494 74,677 50,471 17,123 17,457 378,535 271,013 35,704 32,546 233,769 123,548 54,742 50,037 115,237 125,173 20,850 102,419 94,153 189,146 108,236 98,457 101,717 16,507 32,816 44,077 13,988 127,936 49,235 429,748 234,726 11,301 209,747 73,652 80,474 206,418 20,627 104,221 15,367 135,101 625,102 46,722 14,446 115,015 144,716 41,989 90,466 9,432 8,199 10,109 4,831 253,613 ......... 8,264 71,178 4,531 8,565 4,265 12,722 5,094 80,396 5,662 3,918 6,446 1,802 30,325 18,937 2,745 4,831 22,463 8,633 3,825 7,280 8,052 9,323 1,457 7,157 7,488 13,217 10,498 6,880 7,408 1,448 2,476 3,080 977 10,289 5,301 38,253 16,402 859 14,656 5,147 6,015 15,642 1,588 7,283 2,982 9,922 53,508 3,471 1,419 8,037 10,112 2,934 6,723 659 573 706 338 18,143 ......... 577 4,974 1,072 120,685 25,716 141,266 73,658 1,108,943 75,456 50,997 17,302 17,639 382,483 273,840 36,076 32,886 236,208 124,837 55,313 50,559 116,440 126,479 21,068 103,487 95,135 191,119 109,365 99,484 102,778 16,680 33,158 44,537 14,134 129,270 49,749 434,231 237,175 11,419 211,936 74,420 81,314 208,571 20,843 105,308 15,527 136,511 631,622 47,209 14,597 116,215 146,226 42,427 91,411 9,531 8,284 10,215 4,881 256,258 ......... 8,351 71,921 ......... 129,250 29,981 153,988 78,752 1,189,339 81,118 54,915 23,748 19,441 412,808 292,777 38,821 37,717 258,671 133,470 59,138 57,839 124,492 135,802 22,525 110,644 102,623 204,336 119,863 106,364 110,186 18,128 35,634 47,617 15,111 139,559 55,050 472,484 253,577 12,278 226,592 79,567 87,329 224,213 22,431 112,591 18,509 146,433 685,130 50,680 16,016 124,252 156,338 45,361 98,134 10,190 8,857 10,921 5,219 274,401 ......... 8,928 76,895 1,072 134,122 28,579 156,993 81,859 1,232,410 83,857 56,675 19,228 19,603 425,068 304,329 40,093 36,547 262,506 138,736 61,471 56,188 129,403 140,561 23,413 115,009 105,727 212,398 121,541 110,560 114,221 18,536 36,850 49,495 15,708 143,663 55,287 482,578 263,581 12,690 235,531 82,706 90,367 231,793 23,163 117,033 17,256 151,709 701,947 52,466 16,222 129,154 162,506 47,151 101,587 10,592 9,207 11,352 5,425 284,790 ......... 9,280 79,928 ......... 7,004,651 554,955 7,073,150 7,628,105 7,860,650 FY 2011 Percentage of distributed total 1.71 0.36 2.00 1.04 15.68 1.07 0.72 0.24 0.25 5.41 3.87 0.51 0.46 3.34 1.76 0.78 0.71 1.65 1.79 0.30 1.46 1.35 2.70 1.55 1.41 1.45 0.24 0.47 0.63 0.20 1.83 0.70 6.14 3.35 0.16 3.00 1.05 1.15 2.95 0.29 1.49 0.22 1.93 8.93 0.67 0.21 1.64 2.07 0.60 1.29 0.13 0.12 0.14 0.07 3.62 ......... 0.12 1.02 ......... 1 100.00 274 ANALYTICAL PERSPECTIVES Department of Agriculture, Food and Nutrition Service 12-3539-0-1-605 Table 17–10. CHILD AND ADULT CARE FOOD PROGRAM (10.558) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) 36,406 7,886 47,108 36,147 260,578 21,503 12,917 12,083 4,394 141,560 98,140 5,352 6,211 112,772 39,889 25,385 32,394 27,063 61,322 9,777 37,270 51,613 60,241 59,980 32,379 42,175 9,954 27,585 4,260 3,607 59,937 34,803 178,602 78,871 10,149 80,672 52,232 28,052 75,796 6,501 25,640 7,960 46,270 242,778 20,986 4,428 33,595 42,552 14,179 39,299 4,859 ......... 327 ......... 25,398 ......... 799 ......... 9,046 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 38,989 8,445 50,450 38,711 279,065 23,029 13,833 12,940 4,706 151,603 105,103 5,732 6,652 120,773 42,719 27,186 34,692 28,983 65,672 10,471 39,914 55,275 64,515 64,235 34,676 45,167 10,660 29,542 4,562 3,863 64,189 37,272 191,273 84,467 10,869 86,395 55,938 30,042 81,173 6,962 27,459 8,525 49,553 260,002 22,475 4,742 35,978 45,571 15,185 42,087 5,204 ......... 350 ......... 27,200 ......... 856 ......... ......... 38,989 8,445 50,450 38,711 279,065 23,029 13,833 12,940 4,706 151,603 105,103 5,732 6,652 120,773 42,719 27,186 34,692 28,983 65,672 10,471 39,914 55,275 64,515 64,235 34,676 45,167 10,660 29,542 4,562 3,863 64,189 37,272 191,273 84,467 10,869 86,395 55,938 30,042 81,173 6,962 27,459 8,525 49,553 260,002 22,475 4,742 35,978 45,571 15,185 42,087 5,204 ......... 350 ......... 27,200 ......... 856 ......... ......... 40,670 8,810 52,626 40,381 291,101 24,022 14,430 13,498 4,909 158,142 109,636 5,979 6,939 125,982 44,561 28,358 36,188 30,233 68,505 10,922 41,636 57,659 67,297 67,006 36,172 47,115 11,120 30,816 4,759 4,030 66,958 38,880 199,523 88,110 11,338 90,122 58,350 31,338 84,674 7,262 28,643 8,892 51,690 271,216 23,444 4,947 37,530 47,536 15,840 43,902 5,428 ......... 365 ......... 28,373 ......... 893 ......... ......... 2,451,682 ......... 2,615,930 2,615,930 2,728,756 FY 2011 Percentage of distributed total 1.49 0.32 1.93 1.48 10.67 0.88 0.53 0.49 0.18 5.80 4.02 0.22 0.25 4.62 1.63 1.04 1.33 1.11 2.51 0.40 1.53 2.11 2.47 2.46 1.33 1.73 0.41 1.13 0.17 0.15 2.45 1.42 7.31 3.23 0.42 3.30 2.14 1.15 3.10 0.27 1.05 0.33 1.89 9.94 0.86 0.18 1.38 1.74 0.58 1.61 0.20 ......... 0.01 ......... 1.04 ......... 0.03 ......... ......... 1 100.00 275 17. AID TO STATE AND LOCAL GOVERNMENTS Department of Agriculture, Food and Nutrition Service 12-3505-0-1-605 Table 17–11. STATE ADMINISTRATIVE MATCHING GRANTS FOR THE SUPPLEMENTAL NUTRITION ASSISTANCE PROGRAM (FOOD STAMPS) (10.561) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) 38,126 11,171 51,573 29,171 514,451 35,587 32,748 15,778 14,476 85,120 64,819 15,278 11,042 121,486 48,229 23,698 15,630 51,835 61,004 14,362 47,578 45,650 138,610 56,593 30,095 51,138 9,507 14,829 15,643 6,829 103,644 29,992 347,207 78,374 7,209 103,979 44,467 57,664 175,395 7,545 19,265 9,239 57,649 210,115 25,426 8,606 94,437 58,844 17,465 40,279 5,730 ......... 1,777 ......... ......... ......... 5,291 ......... (123,108) ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 46,027 13,486 62,261 35,216 621,062 42,962 39,534 19,048 17,476 102,760 78,251 18,444 13,330 146,662 58,223 28,609 18,869 62,577 73,646 17,338 57,438 55,110 167,335 68,322 36,332 61,735 11,477 17,903 18,885 8,244 125,123 36,207 419,160 94,616 8,703 125,527 53,682 69,615 211,742 9,108 23,258 11,153 69,596 253,658 30,695 10,390 114,007 71,038 21,084 48,626 6,917 ......... 2,145 ......... ......... ......... 6,388 ......... ......... 46,027 13,486 62,261 35,216 621,062 42,962 39,534 19,048 17,476 102,760 78,251 18,444 13,330 146,662 58,223 28,609 18,869 62,577 73,646 17,338 57,438 55,110 167,335 68,322 36,332 61,735 11,477 17,903 18,885 8,244 125,123 36,207 419,160 94,616 8,703 125,527 53,682 69,615 211,742 9,108 23,258 11,153 69,596 253,658 30,695 10,390 114,007 71,038 21,084 48,626 6,917 ......... 2,145 ......... ......... ......... 6,388 ......... ......... 40,551 11,882 54,853 31,026 547,170 37,850 34,830 16,782 15,397 90,533 68,941 16,250 11,744 129,212 51,296 25,205 16,624 55,131 64,883 15,275 50,604 48,553 147,426 60,193 32,009 54,390 10,112 15,772 16,638 7,263 110,236 31,899 369,289 83,358 7,668 110,592 47,295 61,332 186,549 8,024 20,491 9,826 61,315 223,479 27,043 9,153 100,443 62,586 18,575 42,840 6,094 ......... 1,890 ......... ......... ......... 5,628 ......... ......... 3,058,547 ......... 3,841,000 3,841,000 3,384,000 FY 2011 Percentage of distributed total 1.20 0.35 1.62 0.92 16.17 1.12 1.03 0.50 0.45 2.68 2.04 0.48 0.35 3.82 1.52 0.74 0.49 1.63 1.92 0.45 1.50 1.43 4.36 1.78 0.95 1.61 0.30 0.47 0.49 0.21 3.26 0.94 10.91 2.46 0.23 3.27 1.40 1.81 5.51 0.24 0.61 0.29 1.81 6.60 0.80 0.27 2.97 1.85 0.55 1.27 0.18 ......... 0.06 ......... ......... ......... 0.17 ......... ......... 1 100.00 276 ANALYTICAL PERSPECTIVES Department of Education, Office of Elementary and Secondary Education 91-0900-0-1-501 Table 17–12. TITLE I COLLEGE-AND-CAREER-READY STUDENTS (FORMERLY TITLE I GRANTS TO LOCAL EDUCATIONAL AGENCIES) (84.010) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... New authority 220,808 37,158 304,253 156,784 1,729,889 155,870 115,109 41,360 47,945 719,059 513,644 42,668 49,357 612,892 251,393 77,486 102,441 224,626 315,331 52,496 183,501 224,259 535,183 130,768 202,194 237,495 45,275 61,628 89,819 39,571 297,503 114,161 1,243,277 377,945 35,569 532,511 161,657 145,124 578,695 50,525 215,800 43,747 272,025 1,337,221 68,415 33,586 249,339 191,482 91,546 196,592 32,665 10,086 11,910 3,664 553,870 ......... 13,553 100,671 9,000 Total FY 2011 (estimated) 220,808 37,158 304,253 156,784 1,729,889 155,870 115,109 41,360 47,945 719,059 513,644 42,668 49,357 612,892 251,393 77,486 102,441 224,626 315,331 52,496 183,501 224,259 535,183 130,768 202,194 237,495 45,275 61,628 89,819 39,571 297,503 114,161 1,243,277 377,945 35,569 532,511 161,657 145,124 578,695 50,525 215,800 43,747 272,025 1,337,221 68,415 33,586 249,339 191,482 91,546 196,592 32,665 10,086 11,910 3,664 553,870 ......... 13,553 100,671 9,000 219,120 37,158 304,645 155,511 1,746,453 155,102 115,109 41,360 48,531 726,842 516,951 42,565 49,353 601,330 249,116 77,975 103,028 225,004 311,984 52,778 182,206 217,917 529,852 129,591 202,045 238,392 45,287 61,305 90,833 39,571 298,491 113,724 1,241,272 380,718 35,569 527,536 162,824 146,376 579,240 49,973 217,501 43,747 272,604 1,337,454 68,952 33,586 251,275 191,592 91,263 189,672 32,665 10,086 11,910 3,664 560,569 ......... 13,553 100,671 9,000 24,492,401 ......... 14,492,401 14,492,401 Note: FY 2011 State estimates are preliminary pending reauthorization of the Elementary and Secondary Education Act and other factors. 1 Excludes undistributed obligations. 14,492,401 Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... 401,185 67,665 485,628 274,766 2,776,474 271,126 183,498 73,465 86,491 1,165,369 847,487 76,402 85,058 1,055,367 429,983 129,574 174,803 381,348 487,130 90,058 327,769 407,826 944,863 234,945 331,434 382,352 80,351 115,817 162,679 70,796 468,720 198,880 2,152,358 628,563 63,079 920,842 270,827 232,375 977,542 88,073 353,426 78,397 469,805 2,315,446 118,674 59,259 413,278 334,540 154,679 362,443 59,958 16,864 20,795 6,125 920,644 ......... 22,660 173,440 9,000 Previous authority FY 2011 Percentage of distributed total 1.51 0.26 2.10 1.07 12.06 1.07 0.79 0.29 0.34 5.02 3.57 0.29 0.34 4.15 1.72 0.54 0.71 1.55 2.15 0.36 1.26 1.50 3.66 0.89 1.40 1.65 0.31 0.42 0.63 0.27 2.06 0.79 8.57 2.63 0.25 3.64 1.12 1.01 4.00 0.35 1.50 0.30 1.88 9.23 0.48 0.23 1.73 1.32 0.63 1.31 0.23 0.07 0.08 0.03 3.87 ......... 0.09 0.70 ......... 1 100.00 277 17. AID TO STATE AND LOCAL GOVERNMENTS Department of Education, Office of Elementary and Secondary Education 91-1000-0-1-501 Table 17–13. IMPROVING TEACHER QUALITY STATE GRANTS (84.367) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... Previous authority New authority Total FY 2011 (estimated) FY 2011 Percentage of distributed total 47,444 13,986 49,362 29,165 327,107 33,921 26,558 13,986 13,986 132,561 80,809 13,986 13,986 118,574 50,643 22,459 22,861 45,509 64,041 13,986 41,151 51,825 112,425 38,884 42,810 50,700 13,986 14,263 15,836 13,986 64,928 22,958 227,449 67,951 13,986 108,260 34,252 28,646 114,956 13,986 37,806 13,986 52,244 248,187 19,513 13,986 52,705 48,044 23,377 46,847 13,986 3,498 5,155 1,646 92,331 .... 4,365 14,665 27,239 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 46,531 14,024 50,189 28,986 331,147 33,529 26,746 14,024 14,024 134,533 81,286 14,024 14,024 118,521 51,268 22,564 22,813 45,478 63,438 14,024 40,874 51,111 112,441 38,577 43,030 51,012 14,024 14,301 15,772 14,024 65,420 22,841 227,670 68,478 14,024 107,946 34,344 28,890 115,388 14,024 38,087 14,024 52,054 248,010 19,511 14,024 52,927 47,725 23,379 46,334 14,024 3,498 5,155 1,646 93,226 ......... 4,365 14,665 19,739 46,531 14,024 50,189 28,986 331,147 33,529 26,746 14,024 14,024 134,533 81,286 14,024 14,024 118,521 51,268 22,564 22,813 45,478 63,438 14,024 40,874 51,111 112,441 38,577 43,030 51,012 14,024 14,301 15,772 14,024 65,420 22,841 227,670 68,478 14,024 107,946 34,344 28,890 115,388 14,024 38,087 14,024 52,054 248,010 19,511 14,024 52,927 47,725 23,379 46,334 14,024 3,498 5,155 1,646 93,226 ......... 4,365 14,665 19,739 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 2,947,749 ......... 2,947,749 2,947,749 ......... ........... 278 ANALYTICAL PERSPECTIVES Department of Education, Office of Elementary and Secondary Education 91-1909-0-1-501 Table 17–14. EDUCATION STATE GRANTS, STATE FISCAL STABILIZATION FUND (84.394) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... FY 2009 Actual Previous authority New authority FY 2011 (estimated) Total FY 2011 Percentage of distributed total 596,356 93,043 831,869 363,053 4,875,499 621,878 443,252 110,320 73,110 2,208,839 1,260,799 157,202 201,700 1,681,131 823,661 386,374 367,423 532,798 579,592 158,250 719,677 813,303 1,302,369 667,888 392,068 753,172 121,628 233,956 324,405 164,244 1,088,336 260,436 2,468,558 1,161,932 85,644 1,463,710 472,821 466,462 1,558,798 134,912 567,741 104,293 775,135 3,250,272 392,582 77,150 983,866 819,947 217,971 717,337 67,620 36,498 88,330 36,347 529,742 .......... 58,049 .......... .......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 39,743,348 ......... ......... ......... ......... ........... 279 17. AID TO STATE AND LOCAL GOVERNMENTS Department of Education, Office of Elementary and Secondary Education 91-1909-0-1-501 Table 17–15. GOVERNMENT SERVICES, STATE FISCAL STABILIZATION FUND (84.397) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... Previous authority New authority FY 2011 (estimated) Total FY 2011 Percentage of distributed total 132,686 20,702 185,086 80,777 1,084,768 138,364 98,621 24,546 16,267 491,453 280,520 34,976 44,877 374,041 183,260 85,966 81,749 118,544 128,956 35,210 160,124 180,955 289,769 148,601 87,233 167,576 27,062 52,054 72,178 36,543 242,148 57,945 549,239 258,523 19,055 325,666 105,200 103,785 346,823 30,017 126,319 23,204 172,463 723,166 87,347 17,165 218,904 182,433 48,497 159,603 15,045 8,121 19,653 8,087 117,864 .......... 12,916 .......... .......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 8,842,652 ......... ......... ......... ......... ........... 280 ANALYTICAL PERSPECTIVES Department of Education, Office of Elementary and Secondary Education 91-0204-0-1-501 Table 17–16. EFFECTIVE TEACHERS AND LEADERS STATE GRANTS 1 (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... Previous authority ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... New authority ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... Note: FY 2011 State estimates are preliminary pending reauthorization of the Elementary and Secondary Education Act and other factors. 1 A CFDA number will be assigned once funding is appropriated for this program. 2 Excludes undistributed obligations. FY 2011 (estimated) Total ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 31,201 9,404 33,654 19,437 222,051 22,483 17,934 9,404 9,404 90,211 54,506 9,404 9,404 79,474 34,378 15,130 15,297 30,495 42,538 9,404 27,408 34,273 75,397 25,868 28,854 34,206 9,404 9,589 10,576 9,404 43,867 15,316 152,664 45,918 9,404 72,383 23,029 19,372 77,374 9,404 25,539 9,404 34,904 166,303 13,083 9,404 35,490 32,002 15,677 31,069 9,404 2,981 4,394 1,403 62,513 ......... 3,721 12,500 531,290 ......... 2,500,000 FY 2011 Percentage of distributed total 1.58 0.48 1.71 0.99 11.28 1.14 0.91 0.48 0.48 4.58 2.77 0.48 0.48 4.04 1.75 0.77 0.78 1.55 2.16 0.48 1.39 1.74 3.83 1.31 1.47 1.74 0.48 0.49 0.54 0.48 2.23 0.78 7.75 2.33 0.48 3.68 1.17 0.98 3.93 0.48 1.30 0.48 1.77 8.45 0.66 0.48 1.80 1.63 0.80 1.58 0.48 0.15 0.22 0.07 3.18 ......... 0.19 0.63 ......... 2 100.00 281 17. AID TO STATE AND LOCAL GOVERNMENTS Department of Education, Office of Special Education and Rehabilitative Services 91-0301-0-1-506 Table 17–17. VOCATIONAL REHABILITATION STATE GRANTS (84.126) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... 70,841 11,995 74,419 46,122 341,271 45,070 26,673 12,883 14,868 191,023 95,176 15,131 19,337 133,528 81,120 37,790 32,904 62,787 42,981 18,390 52,491 60,251 118,078 52,482 50,684 76,159 13,809 22,201 14,454 14,082 68,523 28,421 181,734 115,179 11,595 143,034 49,682 51,047 145,176 12,439 63,640 11,820 80,521 272,299 37,796 12,145 78,865 63,615 30,225 67,090 10,632 739 2,993 1,497 85,723 ......... 1,982 36,113 ......... Previous authority ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 205 554 ......... ......... ......... 351 ......... ......... New authority 59,746 10,157 64,466 38,238 290,144 39,952 20,997 10,157 13,346 160,654 103,511 11,440 17,309 112,944 74,044 33,873 29,188 56,101 57,200 16,130 40,352 48,075 109,195 47,219 43,514 67,939 11,446 19,068 19,239 11,650 57,891 24,465 149,195 102,916 10,157 131,466 42,130 39,072 128,886 10,508 55,608 10,157 72,509 232,505 31,673 10,157 66,147 54,434 26,579 60,807 10,157 1,082 3,118 878 75,355 ......... 2,101 37,449 ......... Total 59,746 10,157 64,466 38,238 290,144 39,952 20,997 10,157 13,346 160,654 103,511 11,440 17,309 112,944 74,044 33,873 29,188 56,101 57,200 16,130 40,352 48,075 109,195 47,219 43,514 67,939 11,446 19,068 19,239 11,650 57,891 24,465 149,195 102,916 10,157 131,466 42,130 39,072 128,886 10,508 55,608 10,157 72,509 232,505 31,673 10,157 66,147 54,434 26,579 60,807 10,157 1,287 3,672 878 75,355 ......... 2,452 37,449 ......... FY 2011 (estimated) 60,544 10,700 65,781 38,937 294,746 40,949 21,497 10,700 13,917 163,736 105,503 11,940 17,941 114,121 74,884 34,269 29,670 56,854 58,250 16,598 41,300 49,366 109,663 48,034 43,998 69,019 11,966 19,613 19,898 12,162 58,930 25,090 151,430 105,047 10,700 132,808 42,803 39,666 131,163 10,990 56,798 10,700 73,707 238,060 32,452 10,700 67,644 55,794 27,042 61,454 10,700 1,150 3,172 947 75,864 ......... 2,163 38,000 ......... FY 2011 Percentage of distributed total 1.93 0.34 2.09 1.24 9.38 1.30 0.68 0.34 0.44 5.21 3.36 0.38 0.57 3.63 2.38 1.09 0.94 1.81 1.85 0.53 1.31 1.57 3.49 1.53 1.40 2.20 0.38 0.62 0.63 0.39 1.88 0.80 4.82 3.34 0.34 4.23 1.36 1.26 4.18 0.35 1.81 0.34 2.35 7.58 1.03 0.34 2.15 1.78 0.86 1.96 0.34 0.04 0.10 0.03 2.41 ......... 0.07 1.21 ......... 1 100.00 3,513,525 1,110 3,084,696 3,085,806 3,141,530 Note: FY 2011 State estimates are preliminary pending reauthorization of the Workforce Investment Act and other factors. Under its reauthorization proposal to consolidate a number of smaller programs into the VR State Grants program, the Administration intends for every State to receive at least the amount the State received in FY 2010 under the formula grant programs being consolidated. 1 Excludes undistributed obligations. 282 ANALYTICAL PERSPECTIVES Department of Education, Office of Special Education and Rehabilitative Services 91-0300-0-1-501 Table 17–18. IDEA PART B: GRANTS TO STATES & GRANTS TO STATES RECOVERY ACT (84.027) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) 362,616 69,185 362,787 223,669 2,446,375 302,323 265,129 66,470 33,421 1,255,606 637,774 79,606 108,236 1,009,858 509,937 243,443 213,089 314,747 376,910 107,553 399,257 562,708 798,763 378,516 237,301 452,959 73,687 148,897 136,433 94,632 719,970 181,737 1,513,738 639,099 53,973 872,792 294,944 257,169 851,741 87,201 349,270 64,296 465,036 1,922,188 214,532 52,040 561,639 441,359 151,439 415,125 53,523 6,527 14,473 4,960 221,764 9,199 6,579 92,011 15,000 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 180,595 36,195 184,139 111,392 1,218,328 153,451 132,047 33,738 16,964 627,798 323,713 39,645 54,938 502,946 256,185 121,246 106,125 157,043 187,989 54,344 198,845 281,921 397,799 188,515 119,357 225,596 36,946 74,158 69,249 47,131 358,979 90,513 753,907 324,394 27,395 434,670 146,891 128,078 424,187 43,430 175,880 32,634 235,217 975,656 108,892 26,414 279,981 219,805 75,424 206,748 27,711 6,297 13,962 4,785 112,560 8,874 6,579 92,012 24,998 180,595 36,195 184,139 111,392 1,218,328 153,451 132,047 33,738 16,964 627,798 323,713 39,645 54,938 502,946 256,185 121,246 106,125 157,043 187,989 54,344 198,845 281,921 397,799 188,515 119,357 225,596 36,946 74,158 69,249 47,131 358,979 90,513 753,907 324,394 27,395 434,670 146,891 128,078 424,187 43,430 175,880 32,634 235,217 975,656 108,892 26,414 279,981 219,805 75,424 206,748 27,711 6,297 13,962 4,785 112,560 8,874 6,579 92,012 24,998 184,127 37,062 190,902 113,571 1,242,154 159,087 134,629 34,977 17,587 640,075 335,603 40,420 56,163 512,782 261,195 123,617 108,201 160,114 191,666 55,406 202,734 287,434 405,578 192,202 121,692 230,007 37,813 75,608 71,792 48,053 365,999 92,283 768,650 333,839 28,401 443,170 149,764 130,583 432,483 44,280 179,319 33,833 239,817 998,071 112,891 27,384 285,456 224,103 76,899 210,791 28,729 6,398 14,185 4,862 116,694 9,016 6,579 93,481 25,000 22,805,211 ......... 11,505,211 11,505,211 11,755,211 FY 2011 Percentage of distributed total 1.57 0.32 1.63 0.97 10.59 1.36 1.15 0.30 0.15 5.46 2.86 0.34 0.48 4.37 2.23 1.05 0.92 1.36 1.63 0.47 1.73 2.45 3.46 1.64 1.04 1.96 0.32 0.64 0.61 0.41 3.12 0.79 6.55 2.85 0.24 3.78 1.28 1.11 3.69 0.38 1.53 0.29 2.04 8.51 0.96 0.23 2.43 1.91 0.66 1.80 0.24 0.05 0.12 0.04 0.99 0.08 0.06 0.80 ......... 1 100.00 283 17. AID TO STATE AND LOCAL GOVERNMENTS Department of Energy, Energy Programs 89-0321-0-1-272 Table 17–19. STATE ENERGY PROGRAM (81.041) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Washington HQ ......................................................................................................... NREL TA .................................................................................................................... ORNL TA .................................................................................................................... LBNL TA ..................................................................................................................... Total .......................................................................................................................... 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) 55,943 28,408 55,784 39,717 227,662 49,613 38,931 24,392 22,177 126,904 83,018 26,097 28,758 102,448 69,240 40,912 38,605 52,936 72,131 27,531 52,248 55,516 82,989 54,745 40,692 57,901 26,033 31,151 34,906 26,039 74,411 32,036 124,711 76,542 24,754 97,135 47,049 42,501 100,753 24,155 50,883 23,874 62,949 220,078 35,599 22,168 70,561 61,373 33,026 56,080 25,093 18,663 19,216 18,763 37,402 ......... 20,798 10,024 ......... 22,350 2,000 8,000 400 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 372 175 335 301 1,564 391 391 160 154 811 521 166 185 1,133 620 366 321 402 435 227 477 608 959 575 272 509 178 241 190 212 771 214 1,613 552 168 1,057 344 318 1,074 195 332 164 466 1,287 236 168 560 428 281 595 151 112 117 111 316 ......... 119 ......... ......... 22,574 1,500 426 500 372 175 335 301 1,564 391 391 160 154 811 521 166 185 1,133 620 366 321 402 435 227 477 608 959 575 272 509 178 241 190 212 771 214 1,613 552 168 1,057 344 318 1,074 195 332 164 466 1,287 236 168 560 428 281 595 151 112 117 111 316 ......... 119 ......... ......... 22,574 1,500 426 500 597 292 558 460 2,480 591 549 259 245 1,321 856 271 301 1,552 900 532 476 616 717 339 692 834 1,299 796 435 742 283 366 330 318 1,075 343 2,122 863 268 1,455 532 489 1,483 293 537 261 721 2,166 379 258 846 676 412 822 252 188 195 187 467 ......... 203 ......... ......... 33,875 1,925 975 725 3,136,774 ......... 50,000 50,000 75,000 FY 2011 Percentage of distributed total 0.80 0.39 0.74 0.61 3.31 0.79 0.73 0.35 0.33 1.76 1.14 0.36 0.40 2.07 1.20 0.71 0.63 0.82 0.96 0.45 0.92 1.11 1.73 1.06 0.58 0.99 0.38 0.49 0.44 0.42 1.43 0.46 2.83 1.15 0.36 1.94 0.71 0.65 1.98 0.39 0.72 0.35 0.96 2.89 0.51 0.34 1.13 0.90 0.55 1.10 0.34 0.25 0.26 0.25 0.62 ......... 0.27 ......... ......... 45.17 2.57 1.30 0.97 1 100.00 284 ANALYTICAL PERSPECTIVES Department of Energy, Energy Programs 89-0321-0-1-272 Table 17–20. WEATHERIZATION ASSISTANCE FOR LOW-INCOME PERSONS (81.042) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. HQ Other Grants #3DC ............................................................................................. Washington HQ T and TA .......................................................................................... NREL T and TA .......................................................................................................... ORNL T and TA .......................................................................................................... Total .......................................................................................................................... 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) 77,260 20,697 61,102 52,146 199,972 88,653 69,626 14,917 9,088 185,869 133,051 4,435 33,708 266,597 144,189 89,413 61,444 78,555 54,280 46,860 66,722 133,872 269,349 147,910 53,165 139,714 30,304 46,016 39,830 25,753 128,946 30,080 431,341 141,722 28,945 291,955 66,053 43,075 278,194 22,097 63,135 27,507 107,683 346,770 41,715 18,864 102,160 66,789 42,402 156,468 11,935 917 1,318 992 49,772 ......... 1,615 10,024 ......... 9,000 14,578 3,231 14,102 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 1,882 1,330 1,058 1,622 4,918 4,308 1,972 460 519 1,484 2,282 169 1,558 10,845 5,138 3,919 1,988 3,548 1,341 2,416 2,083 5,138 11,911 7,740 1,291 4,704 1,987 1,964 663 1,193 3,999 1,506 15,787 3,250 1,969 10,762 2,029 2,223 11,520 916 1,389 1,513 3,278 4,294 1,639 1,012 3,148 3,571 2,526 6,727 932 155 159 156 647 ......... 162 ......... ......... 30,000 2,700 ......... 600 1,882 1,330 1,058 1,622 4,918 4,308 1,972 460 519 1,484 2,282 169 1,558 10,845 5,138 3,919 1,988 3,548 1,341 2,416 2,083 5,138 11,911 7,740 1,291 4,704 1,987 1,964 663 1,193 3,999 1,506 15,787 3,250 1,969 10,762 2,029 2,223 11,520 916 1,389 1,513 3,278 4,294 1,639 1,012 3,148 3,571 2,526 6,727 932 155 159 156 647 ......... 162 ......... ......... 30,000 2,700 ......... 600 2,968 1,943 1,866 2,309 7,609 6,349 3,070 698 727 3,397 3,719 265 2,304 15,544 7,563 5,626 2,899 5,254 1,840 3,517 3,159 7,482 17,180 11,205 1,992 6,788 2,865 2,846 1,219 1,731 6,091 2,190 23,214 4,996 2,794 15,551 2,985 3,283 16,799 1,313 2,100 2,139 5,117 7,788 2,472 1,448 4,663 5,275 3,516 9,909 1,322 201 205 202 784 ......... 209 ......... ......... 30,000 6,500 500 500 5,197,882 ......... 210,000 210,000 300,000 FY 2011 Percentage of distributed total 0.99 0.65 0.62 0.77 2.54 2.12 1.02 0.23 0.24 1.13 1.24 0.09 0.77 5.18 2.52 1.88 0.97 1.75 0.61 1.17 1.05 2.49 5.73 3.74 0.66 2.26 0.96 0.95 0.41 0.58 2.03 0.73 7.74 1.67 0.93 5.18 1.00 1.09 5.60 0.44 0.70 0.71 1.71 2.60 0.82 0.48 1.55 1.76 1.17 3.30 0.44 0.07 0.07 0.07 0.26 ......... 0.07 ......... ......... 10.00 2.17 0.17 0.17 1 100.00 285 17. AID TO STATE AND LOCAL GOVERNMENTS Department of Energy, Energy Programs 89-0321-0-1-272 Table 17–21. ENERGY EFFICIENCY AND CONSERVATION BLOCK GRANT (81.043) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... Previous authority New authority Total FY 2011 (estimated) FY 2011 Percentage of distributed total 26,900 5,860 40,007 13,610 160,209 31,649 19,247 10,832 ......... 68,980 52,056 10,599 12,936 72,395 31,697 11,403 7,213 20,108 22,549 975 18,946 27,773 38,261 29,385 12,473 24,757 10,927 11,353 13,310 10,178 31,783 4,044 128,914 34,620 11,080 40,472 16,553 16,456 54,093 11,315 22,498 11,241 31,437 126,164 5,122 10,323 27,561 27,875 3,605 16,926 10,694 ......... 492 ......... 15,153 ......... 9,594 21,092 ......... 4,678 8,110 23,811 6,508 191,450 ......... 5,276 5,087 9,594 99,664 15,132 4,469 4,021 39,781 10,683 9,700 16,433 5,275 11,074 10,306 33,349 14,458 38,340 7,975 4,502 19,023 3,044 7,457 18,673 2,345 43,596 16,564 46,209 23,431 1,731 43,711 10,620 17,046 48,416 3,206 8,951 1,927 10,807 82,596 22,655 ......... 33,159 28,225 10,399 20,231 1,326 ......... 9,102 9,594 18,824 ......... ......... 46,732 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 4,678 8,110 23,811 6,508 191,450 ......... 5,276 5,087 9,594 99,664 15,132 4,469 4,021 39,781 10,683 9,700 16,433 5,275 11,074 10,306 33,349 14,458 38,340 7,975 4,502 19,023 3,044 7,457 18,673 2,345 43,596 16,564 46,209 23,431 1,731 43,711 10,620 17,046 48,416 3,206 8,951 1,927 10,807 82,596 22,655 ......... 33,159 28,225 10,399 20,231 1,326 ......... 9,102 9,594 18,824 ......... ......... 46,732 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 1,505,695 1,189,276 ......... 1,189,276 ......... ........... 286 ANALYTICAL PERSPECTIVES Department of Health and Human Services, Centers for Medicare and Medicaid Services 75-2010-0515 Table 17–22. CHILDREN’S HEALTH INSURANCE PROGRAM (93.767) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... 140,301 24,565 171,133 133,753 1,522,910 100,696 45,645 15,096 14,180 356,095 302,055 20,889 44,515 344,562 137,585 65,255 57,164 126,014 207,403 39,272 194,774 310,476 221,124 83,960 192,939 158,829 32,989 41,955 61,397 14,845 484,402 277,128 433,473 241,660 15,822 285,275 151,400 100,198 310,309 66,993 106,863 20,656 156,629 867,350 65,264 9,490 175,860 94,285 43,263 204,276 11,327 1,332 5,177 1,221 148,643 ......... 3,329 ......... ......... Previous authority ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... New authority 147,158 25,717 182,592 140,776 1,629,092 107,060 47,785 15,889 14,845 372,791 320,022 21,928 47,219 360,717 144,186 68,492 60,287 132,153 229,089 42,268 216,082 403,133 231,492 87,897 214,132 166,276 34,691 44,180 65,135 15,540 634,745 345,313 453,796 257,369 16,596 298,560 159,709 105,695 324,858 75,436 112,887 21,764 164,728 925,033 69,926 9,935 184,455 99,438 45,292 213,853 12,063 892 3,963 818 117,254 ......... 2,396 ......... 2,274,516 Total 147,158 25,717 182,592 140,776 1,629,092 107,060 47,785 15,889 14,845 372,791 320,022 21,928 47,219 360,717 144,186 68,492 60,287 132,153 229,089 42,268 216,082 403,133 231,492 87,897 214,132 166,276 34,691 44,180 65,135 15,540 634,745 345,313 453,796 257,369 16,596 298,560 159,709 105,695 324,858 75,436 112,887 21,764 164,728 925,033 69,926 9,935 184,455 99,438 45,292 213,853 12,063 892 3,963 818 117,254 ......... 2,396 ......... 2,274,516 FY 2011 (estimated) 147,158 25,717 182,592 140,776 1,629,092 107,060 47,785 15,889 14,845 372,791 320,022 21,928 47,219 360,717 144,186 68,492 60,287 132,153 229,089 42,268 216,082 403,133 231,492 87,897 214,132 166,276 34,691 44,180 65,135 15,540 634,745 345,313 453,796 257,369 16,596 298,560 159,709 105,695 324,858 75,436 112,887 21,764 164,728 925,033 69,926 9,935 184,455 99,438 45,292 213,853 12,063 892 3,963 818 117,254 ......... 2,396 ......... 3,213,516 FY 2011 Percentage of distributed total 1.44 0.25 1.78 1.37 15.90 1.04 0.47 0.16 0.14 3.64 3.12 0.21 0.46 3.52 1.41 0.67 0.59 1.29 2.24 0.41 2.11 3.93 2.26 0.86 2.09 1.62 0.34 0.43 0.64 0.15 6.20 3.37 4.43 2.51 0.16 2.91 1.56 1.03 3.17 0.74 1.10 0.21 1.61 9.03 0.68 0.10 1.80 0.97 0.44 2.09 0.12 0.01 0.04 0.01 1.14 ......... 0.02 ......... ......... 1 100.00 9,464,001 ......... 12,519,914 12,519,914 13,458,914 Note: FY 2011 estimates will be determined by increasing the FY 2010 Federal payments made to states by growth factors in the Children’s Health Insurance Program Reauthorization Act of 2009 (P.L. 111–3) 1 Excludes undistributed obligations. 287 17. AID TO STATE AND LOCAL GOVERNMENTS Department of Health and Human Services, Centers for Medicare and Medicaid Services 75-0512-0-1-551 Table 17–23. GRANTS TO STATES FOR MEDICAID (93.778) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory Alabama ............................................................................................ Alaska ................................................................................................ Arizona .............................................................................................. Arkansas ............................................................................................ California ........................................................................................... Colorado ............................................................................................ Connecticut ........................................................................................ Delaware ........................................................................................... District of Columbia ........................................................................... Florida ................................................................................................ Georgia .............................................................................................. Hawaii ................................................................................................ Idaho .................................................................................................. Illinois ................................................................................................. Indiana ............................................................................................... Iowa ................................................................................................... Kansas ............................................................................................... Kentucky ............................................................................................ Louisiana ........................................................................................... Maine ................................................................................................. Maryland ............................................................................................ Massachusetts ................................................................................... Michigan ............................................................................................ Minnesota .......................................................................................... Mississippi ......................................................................................... Missouri ............................................................................................. Montana ............................................................................................. Nebraska ........................................................................................... Nevada .............................................................................................. New Hampshire ................................................................................. New Jersey ........................................................................................ New Mexico ....................................................................................... New York ............................................................................................ North Carolina ................................................................................... North Dakota ..................................................................................... Ohio ................................................................................................... Oklahoma .......................................................................................... Oregon ............................................................................................... Pennsylvania ..................................................................................... Rhode Island ..................................................................................... South Carolina ................................................................................... South Dakota ..................................................................................... Tennessee ......................................................................................... Texas ................................................................................................. Utah ................................................................................................... Vermont ............................................................................................. Virginia ............................................................................................... Washington ........................................................................................ West Virginia ...................................................................................... Wisconsin .......................................................................................... Wyoming ............................................................................................ American Samoa ............................................................................... Guam ................................................................................................. Northern Mariana Islands .................................................................. Puerto Rico ........................................................................................ Freely Associated States ................................................................... Virgin Islands ..................................................................................... Indian Tribes ...................................................................................... Undistributed ..................................................................................... Survey and Certification .................................................................... Vaccines For Children ........................................................................ Fraud Control Units ............................................................................ Medicare Part B Transfer ................................................................... VFC Offsetting Collections ................................................................ Incurred But Not Reported ................................................................ Total ................................................................................................. FY 2009 Actual Previous authority 3,889,001 ......... 780,279 ......... 6,897,889 ......... 2,990,996 ......... 29,581,974 ......... 2,240,392 ......... 3,431,016 ......... 775,558 ......... 1,445,138 ......... 11,113,001 ......... 6,019,317 ......... 1,048,817 ......... 1,132,993 ......... 8,570,759 ......... 5,274,065 ......... 2,137,716 ......... 1,735,812 ......... 4,391,309 ......... 5,222,313 ......... 1,960,901 ......... 4,135,897 ......... 7,817,268 ......... 7,727,955 ......... 4,791,471 ......... 3,597,041 ......... 5,723,176 ......... 681,445 ......... 1,184,475 ......... 973,065 ......... 805,488 ......... 6,267,539 ......... 2,689,309 ......... 29,691,242 ......... 8,813,332 ......... 448,509 ......... 10,688,223 ......... 3,179,899 ......... 2,870,964 ......... 11,917,541 ......... 1,259,859 ......... 3,912,443 ......... 551,403 ......... 6,439,612 ......... 16,222,418 ......... 1,384,409 ......... 817,352 ......... 3,671,916 ......... 5,080,304 ......... 2,050,254 ......... 4,570,461 ......... 328,057 ......... 11,793 ......... 17,563 ......... 6,393 ......... 366,199 ......... ......... ......... 17,982 ......... ......... ......... (1,036,524) ......... 207,175 ......... 3,382,875 ......... 195,300 ......... 449,420 ......... 47 ......... 508,273 ......... 265,058,069 ......... New authority 3,649,485 877,155 7,768,000 3,161,639 31,658,614 2,358,577 3,269,629 801,985 1,529,042 11,836,469 6,014,925 926,831 1,173,327 9,147,874 5,360,517 2,367,605 1,746,001 4,698,726 5,339,345 2,019,776 4,697,622 7,708,389 8,245,439 5,305,476 3,888,937 6,023,645 787,561 1,262,599 1,109,074 901,901 6,645,298 3,084,080 33,257,281 7,405,222 513,866 11,187,257 3,599,993 3,338,515 12,216,118 1,236,055 4,303,971 596,888 5,610,907 18,767,376 1,515,632 878,591 4,282,407 4,758,882 2,161,746 4,585,730 364,029 12,342 19,036 6,786 418,745 ......... 19,479 ......... (5,142,219) 230,646 3,652,189 205,065 562,500 ......... 2,899,000 Total 3,649,485 877,155 7,768,000 3,161,639 31,658,614 2,358,577 3,269,629 801,985 1,529,042 11,836,469 6,014,925 926,831 1,173,327 9,147,874 5,360,517 2,367,605 1,746,001 4,698,726 5,339,345 2,019,776 4,697,622 7,708,389 8,245,439 5,305,476 3,888,937 6,023,645 787,561 1,262,599 1,109,074 901,901 6,645,298 3,084,080 33,257,281 7,405,222 513,866 11,187,257 3,599,993 3,338,515 12,216,118 1,236,055 4,303,971 596,888 5,610,907 18,767,376 1,515,612 878,591 4,282,407 4,758,882 2,161,746 4,585,730 364,029 12,342 19,036 6,786 418,745 ......... 19,479 ......... (5,142,219) 230,646 3,652,189 205,065 562,500 ......... 2,899,000 278,829,578 278,829,578 FY 2011 FY 2011 Percentage of (estimated) distributed total 3,618,184 1.38 850,791 0.32 7,646,295 2.91 3,145,104 1.20 27,755,624 10.56 2,356,903 0.90 2,794,915 1.06 738,040 0.28 1,479,942 0.56 10,564,207 4.02 5,636,219 2.14 764,028 0.29 1,157,834 0.44 7,510,926 2.86 5,191,714 1.98 2,294,851 0.87 1,583,795 0.60 4,391,265 1.67 4,457,063 1.70 1,601,783 0.61 4,515,712 1.72 6,845,016 2.60 8,131,760 3.09 4,836,755 1.84 3,859,159 1.47 5,681,707 2.16 756,036 0.29 1,205,380 0.46 1,064,412 0.41 854,494 0.33 6,135,283 2.33 2,995,324 1.14 30,285,860 11.52 6,386,562 2.43 488,023 0.19 10,733,429 4.08 3,827,722 1.46 3,409,476 1.30 11,748,758 4.47 1,127,429 0.43 3,925,097 1.49 573,148 0.22 5,375,840 2.05 17,763,043 6.76 1,501,232 0.57 774,172 0.29 4,079,191 1.55 4,343,113 1.65 2,063,915 0.79 4,076,350 1.55 342,081 0.13 10,204 * 15,784 0.01 5,612 * 346,270 0.13 ......... ......... 16,108 0.01 ......... ......... 11,705,389 ......... 234,600 0.09 3,651,354 1.39 215,319 0.08 150,000 0.06 ......... ......... 2,899,000 1.10 274,494,602 * $500 or less or 0.005 percent or less. Note: FY 2011 obligations do not reflect the estimated $25.5 billion impact of a proposed six-month extension of the ARRA temporary increase of the Federal Medicaid match. 1 Excludes undistributed obligations. 1 100.00 288 ANALYTICAL PERSPECTIVES Department of Health and Human Services, Administration for Children and Families 75-1552-0-1-609 Table 17–24. TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) - FAMILY ASSISTANCE GRANTS (93.558) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Previous authority New authority Total FY 2011 (estimated) 104,408 53,044 224,158 62,907 3,659,483 149,626 266,788 30,824 92,576 622,746 368,025 98,905 33,911 585,057 206,799 131,030 101,931 181,288 180,999 78,121 229,098 459,371 775,353 263,434 95,803 217,052 39,172 57,514 47,641 38,521 404,035 117,131 2,442,931 338,350 26,400 727,968 145,281 166,799 717,366 95,022 99,968 21,280 212,268 538,965 84,314 47,353 158,285 380,750 110,176 314,499 18,501 ......... 2,968 ......... 71,563 ......... 2,847 180,352 ......... 149,870 1,106,924 7,558 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 150,000 ......... ......... ......... ......... 104,408 53,309 224,158 62,951 3,657,887 149,626 266,788 32,291 92,610 622,746 368,025 98,905 33,911 585,057 206,799 131,030 101,931 181,288 180,999 78,121 229,098 459,371 775,353 263,434 95,803 217,052 39,172 57,514 47,641 38,521 404,035 117,131 2,442,931 338,350 26,400 727,968 145,281 166,799 719,499 95,022 99,968 21,280 213,089 538,965 84,314 47,353 158,285 380,740 110,176 314,499 18,501 ......... 3,465 ......... 71,563 ......... 2,847 181,734 ......... ......... 212,397 7,633 ......... ......... 104,408 53,309 224,158 62,951 3,657,887 149,626 266,788 32,291 92,610 622,746 368,025 98,905 33,911 585,057 206,799 131,030 101,931 181,288 180,999 78,121 229,098 459,371 775,353 263,434 95,803 217,052 39,172 57,514 47,641 38,521 404,035 117,131 2,442,931 338,350 26,400 727,968 145,281 166,799 719,499 95,022 99,968 21,280 213,089 538,965 84,314 47,353 158,285 380,740 110,176 314,499 18,501 ......... 3,465 ......... 71,563 ......... 2,847 181,734 ......... 150,000 212,397 7,633 ......... ......... 104,408 53,309 224,158 62,951 3,657,887 149,626 266,788 32,291 92,610 622,746 368,025 98,905 33,911 585,057 206,799 131,030 101,931 181,288 180,999 78,121 229,098 459,371 775,353 263,434 95,803 217,052 39,172 57,514 47,641 38,521 404,035 117,131 2,442,931 338,350 26,400 727,968 145,281 166,799 719,499 95,022 99,968 21,280 213,089 538,965 84,314 47,353 158,285 380,740 110,176 314,499 18,501 ......... 3,465 ......... 71,563 ......... 2,847 181,734 ......... ......... 371,000 7,633 500,000 2,500,000 18,145,309 Note: Six-month extension of the Arra temporary increase in the Federal Medicaid match. 1 Excludes undistributed obligations. 150,000 17,106,024 17,256,024 20,264,627 Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Healthy Marriage Promotion and Responsible Fatherhood ....................................... Contingency Fund ..................................................................................................... Tribal New Program ................................................................................................... Fatherhood and Families Innovation Fund ................................................................ Enhanced Emergency Fund ...................................................................................... Total .......................................................................................................................... FY 2011 Percentage of distributed total 0.52 0.26 1.11 0.31 18.05 0.74 1.32 0.16 0.46 3.07 1.82 0.49 0.17 2.89 1.02 0.65 0.50 0.89 0.89 0.39 1.13 2.27 3.83 1.30 0.47 1.07 0.19 0.28 0.24 0.19 1.99 0.58 12.06 1.67 0.13 3.59 0.72 0.82 3.55 0.47 0.49 0.11 1.05 2.66 0.42 0.23 0.78 1.88 0.54 1.55 0.09 ......... 0.02 ......... 0.35 .. 0.01 0.90 ......... ......... 1.83 0.04 2.47 12.34 1 100.00 289 17. AID TO STATE AND LOCAL GOVERNMENTS Department of Health and Human Services, Administration for Children and Families 75-1501-0-1-609 Table 17–25. CHILD SUPPORT ENFORCEMENT - FEDERAL SHARE OF STATE AND LOCAL ADMINISTRATIVE COSTS AND INCENTIVES (93.563) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... Note: ARRA totals represent only approximation of ARRA obligations in FY 2010. 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) 47,930 16,109 49,043 38,480 714,198 50,492 53,777 22,623 21,466 235,865 81,065 16,815 23,732 129,656 68,024 42,705 35,079 52,524 67,310 16,747 84,323 70,408 166,591 130,465 28,324 66,551 10,487 32,187 37,445 16,084 196,675 39,201 235,267 107,218 7,710 253,041 37,252 49,470 182,014 5,465 43,729 4,220 63,523 202,810 34,833 9,213 60,014 112,747 31,072 56,470 9,378 ......... 3,083 ......... 38,896 ......... 4,162 30,856 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 46,380 12,585 34,882 39,148 566,536 47,758 45,428 22,621 22,704 210,300 85,737 16,938 22,330 123,306 47,508 24,197 28,275 50,551 71,190 8,752 80,131 65,499 137,954 124,624 29,957 50,986 7,646 33,073 38,081 16,051 155,190 39,885 221,347 95,757 7,096 233,195 5,058 40,741 162,713 2,891 45,637 (1,348) 42,749 41,245 36,841 7,585 39,771 105,879 28,982 42,557 9,918 ......... 3,261 ......... 41,138 ......... 4,402 42,000 ......... 46,380 12,585 34,882 39,148 566,536 47,758 45,428 22,621 22,704 210,300 85,737 16,938 22,330 123,306 47,508 24,197 28,275 50,551 71,190 8,752 80,131 65,499 137,954 124,624 29,957 50,986 7,646 33,073 38,081 16,051 155,190 39,885 221,347 95,757 7,096 233,195 5,058 40,741 162,713 2,891 45,637 (1,348) 42,749 41,245 36,841 7,585 39,771 105,879 28,982 42,557 9,918 ......... 3,261 ......... 41,138 ......... 4,402 42,000 ......... 49,179 17,887 56,011 38,617 789,179 52,307 58,170 22,883 21,152 250,130 79,878 16,951 24,638 134,012 78,084 51,568 38,558 54,018 66,325 20,555 87,184 74,899 181,454 134,601 27,910 74,355 11,892 32,155 37,586 16,283 217,695 39,340 244,257 113,630 8,076 264,917 52,245 53,986 192,829 6,693 43,366 6,787 73,649 278,229 34,323 10,055 69,859 117,145 32,374 63,412 9,241 ......... 3,038 ......... 38,327 ......... 4,101 42,000 ......... 4,244,824 ......... 3,565,618 3,565,618 4,617,995 FY 2011 Percentage of distributed total 1.06 0.39 1.21 0.84 17.09 1.13 1.26 0.50 0.46 5.42 1.73 0.37 0.53 2.90 1.69 1.12 0.83 1.17 1.44 0.45 1.89 1.62 3.93 2.91 0.60 1.61 0.26 0.70 0.81 0.35 4.71 0.85 5.29 2.46 0.17 5.74 1.13 1.17 4.18 0.14 0.94 0.15 1.59 6.02 0.74 0.22 1.51 2.54 0.70 1.37 0.20 ......... 0.07 ......... 0.83 ......... 0.09 0.91 ......... 1 100.00 290 ANALYTICAL PERSPECTIVES Department of Health and Human Services, Administration for Children and Families 75-1502-0-1-609 Table 17–26. LOW INCOME HOME ENERGY ASSISTANCE PROGRAM (93.568) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Discretionary Funds .................................................................................................. Technical Assistance ................................................................................................. Total .......................................................................................................................... Previous authority New authority Total FY 2011 (estimated) 59,716 16,333 26,844 36,497 223,978 63,474 95,783 17,384 14,653 95,013 75,141 4,652 25,632 237,236 103,602 67,803 45,270 68,353 57,196 47,649 101,296 162,916 221,244 144,528 38,937 103,541 26,075 39,533 13,643 34,112 166,690 22,919 475,382 121,051 27,299 220,588 44,572 44,640 274,925 30,123 47,702 22,921 73,723 158,110 31,596 25,568 118,084 71,568 40,584 130,096 12,640 100 220 76 5,465 ......... 208 47,487 ......... 27,000 300 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 58,394 16,283 31,171 35,773 201,029 64,257 96,942 15,189 13,992 110,326 87,252 6,023 25,632 232,865 104,144 67,803 41,678 57,742 51,870 52,324 82,002 175,454 232,323 144,528 39,586 95,257 26,075 39,533 15,841 34,112 177,196 20,575 479,270 107,395 27,299 223,108 43,514 44,640 282,279 29,582 47,311 22,921 72,092 183,593 31,596 25,568 100,856 71,568 38,884 130,096 12,527 100 220 76 5,465 ......... 208 49,031 ......... 27,000 300 58,394 16,283 31,171 35,773 201,029 64,257 96,942 15,189 13,992 110,326 87,252 6,023 25,632 232,865 104,144 67,803 41,678 57,742 51,870 52,324 82,002 175,454 232,323 144,528 39,586 95,257 26,075 39,533 15,841 34,112 177,196 20,575 479,270 107,395 27,299 223,108 43,514 44,640 282,279 29,582 47,311 22,921 72,092 183,593 31,596 25,568 100,856 71,568 38,884 130,096 12,527 100 220 76 5,465 ......... 208 49,031 ......... 27,000 300 38,959 9,174 18,626 21,913 110,116 33,047 54,679 9,305 7,554 65,927 52,138 3,721 13,838 120,072 53,226 36,762 24,178 30,827 32,836 26,911 48,724 93,117 124,093 78,363 24,105 49,938 14,077 21,324 9,466 18,416 99,047 11,108 250,841 67,365 14,738 121,308 27,802 24,022 148,579 15,970 31,697 12,375 43,223 109,708 16,961 13,804 60,206 38,800 20,993 70,538 6,614 56 122 42 3,027 ......... 115 28,208 ......... 27,000 300 4,509,671 ......... 4,509,670 4,509,670 2,510,001 FY 2011 Percentage of distributed total 1.55 0.37 0.74 0.87 4.39 1.32 2.18 0.37 0.30 2.63 2.08 0.15 0.55 4.78 2.12 1.46 0.96 1.23 1.31 1.07 1.94 3.71 4.94 3.12 0.96 1.99 0.56 0.85 0.38 0.73 3.95 0.44 9.99 2.68 0.59 4.83 1.11 0.96 5.92 0.64 1.26 0.49 1.72 4.37 0.68 0.55 2.40 1.55 0.84 2.81 0.26 * * * 0.12 ......... * 1.12 ......... 1.08 0.01 1 100.00 * $500 or less or 0.005 percent or less. 1Excludes contingency funds and proposed mandatory triggered funds to be allocated at the discretion of the Administration with consideration to how States are impacted by specific energy-related emergencies and events. 2Excludes undistributed obligations. 291 17. AID TO STATE AND LOCAL GOVERNMENTS Department of Health and Human Services, Administration for Children and Families 75-1515-0-1-609 Table 17–27. CHILD CARE AND DEVELOPMENT BLOCK GRANT (93.575) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Technical Assistance ................................................................................................. Research Set-Aside ................................................................................................... Child Care Aware ....................................................................................................... Total .......................................................................................................................... 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) 40,700 4,270 53,824 26,590 233,035 25,721 14,478 4,809 2,841 111,433 87,646 6,822 12,639 78,046 45,242 19,171 19,482 36,920 42,332 7,149 25,433 25,355 62,081 27,609 32,778 40,923 6,080 12,483 15,145 5,011 36,082 18,849 102,393 71,456 3,855 72,088 31,906 23,814 63,631 5,527 38,420 5,776 44,362 227,298 23,661 2,987 40,087 35,283 13,803 32,260 2,736 2,832 3,979 1,939 35,353 ......... 1,886 42,542 ......... 5,314 9,906 1,000 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 40,364 4,174 54,618 26,505 235,666 25,887 14,240 4,859 2,752 11,263 87,021 6,733 12,700 77,126 45,923 19,237 19,713 36,752 42,631 7,108 25,087 25,300 61,058 27,556 32,106 40,646 6,177 12,472 15,331 4,976 35,877 18,730 100,828 71,176 3,886 72,182 31,513 23,996 63,334 5,497 38,144 5,762 48,345 227,410 24,235 2,951 399,580 35,260 13,634 32,252 2,804 2,832 3,979 1,939 33,931 ......... 1,886 42,542 ......... 5,318 9,910 1,000 40,364 4,174 54,618 26,505 235,666 25,887 14,240 4,859 2,752 11,263 87,021 6,733 12,700 77,126 45,923 19,237 19,713 36,752 42,631 7,108 25,087 25,300 61,058 27,556 32,106 40,646 6,177 12,472 15,331 4,976 35,877 18,730 100,828 71,176 3,886 72,182 31,513 23,996 63,334 5,497 38,144 5,762 48,345 227,410 24,235 2,951 399,580 35,260 13,634 32,252 2,804 2,832 3,979 1,939 33,931 ......... 1,886 42,542 ......... 5,318 9,910 1,000 55,626 5,752 75,268 36,526 324,770 35,674 19,624 6,697 3,793 153,331 119,923 9,278 17,501 106,288 63,286 26,511 27,166 50,648 58,749 9,795 34,572 34,866 84,144 37,975 44,246 56,014 8,512 17,187 21,128 6,857 49,442 25,812 138,951 98,088 5,355 99,473 43,428 33,069 87,280 7,576 52,566 7,941 66,625 313,393 33,398 4,066 55,055 48,591 18,789 44,447 3,864 3,897 5,475 2,668 46,760 ......... 2,595 58,542 ......... 7,318 9,910 1,000 2,127,073 ......... 2,386,714 2,386,714 2,927,081 FY 2011 Percentage of distributed total 1.90 0.20 2.57 1.25 11.10 1.22 0.67 0.23 0.13 5.24 4.10 0.32 0.60 3.63 2.16 0.91 0.93 1.73 2.01 0.33 1.18 1.19 2.87 1.30 1.51 1.91 0.29 0.59 0.72 0.23 1.69 0.88 4.75 3.35 0.18 3.40 1.48 1.13 2.98 0.26 1.80 0.27 2.28 10.71 1.14 0.14 1.88 1.66 0.64 1.52 0.13 0.13 0.19 0.09 1.60 ......... 0.09 2.00 ......... 0.25 0.34 0.03 1 100.00 292 ANALYTICAL PERSPECTIVES Department of Health and Human Services, Administration for Children and Families 75-1550-0-1-609 Table 17–28. CHILD CARE AND DEVELOPMENT FUND - MANDATORY (93.596A) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Technical Assistance ................................................................................................. Total .......................................................................................................................... 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) 16,442 3,545 19,827 5,300 85,593 10,174 18,738 5,179 4,567 430,274 36,548 4,972 2,868 56,874 26,182 8,508 9,812 16,702 13,865 3,019 23,301 44,973 32,082 23,368 6,293 24,669 3,191 10,595 2,580 4,582 26,374 8,308 101,984 69,639 2,506 70,125 24,910 19,409 55,337 6,634 9,867 1,711 37,702 59,844 12,592 3,945 21,329 41,883 8,727 24,511 2,815 ......... ......... ......... ......... ......... ......... 57,984 ......... 3,792 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 16,442 3,545 19,827 5,300 85,593 10,174 18,738 5,179 4,567 43,027 36,548 4,972 2,868 56,874 26,182 8,508 9,812 16,702 13,865 3,019 23,301 44,973 32,082 23,368 6,293 24,669 3,191 10,595 2,580 4,582 26,374 8,308 101,984 69,639 2,506 70,125 24,910 19,409 55,337 6,634 9,867 1,711 37,702 59,844 12,592 3,945 21,329 41,883 8,727 24,511 2,815 ......... ......... ......... ......... ......... ......... 58,340 ......... 3,792 16,442 3,545 19,827 5,300 85,593 10,174 18,738 5,179 4,567 43,027 36,548 4,972 2,868 56,874 26,182 8,508 9,812 16,702 13,865 3,019 23,301 44,973 32,082 23,368 6,293 24,669 3,191 10,595 2,580 4,582 26,374 8,308 101,984 69,639 2,506 70,125 24,910 19,409 55,337 6,634 9,867 1,711 37,702 59,844 12,592 3,945 21,329 41,883 8,727 24,511 2,815 ......... ......... ......... ......... ......... ......... 58,340 ......... 3,792 16,442 3,545 19,827 5,300 85,593 10,174 18,738 5,179 4,567 43,027 36,548 4,972 2,868 56,874 26,182 8,508 9,812 16,702 13,865 3,019 23,301 44,973 32,082 23,368 6,293 24,669 3,191 10,595 2,580 4,582 26,374 8,308 101,984 69,639 2,506 70,125 24,910 19,409 55,337 6,634 9,867 1,711 37,702 59,844 12,592 3,945 21,329 41,883 8,727 24,511 2,815 ......... ......... ......... ......... ......... ......... 58,340 ......... 3,792 1,626,551 ......... 1,239,660 1,239,660 1,239,660 FY 2011 Percentage of distributed total 1.33 0.29 1.60 0.43 6.90 0.82 1.51 0.42 0.37 3.47 2.95 0.40 0.23 4.59 2.11 0.69 0.79 1.35 1.12 0.24 1.88 3.63 2.59 1.89 0.51 1.99 0.26 0.85 0.21 0.37 2.13 0.67 8.23 5.62 0.20 5.66 2.01 1.57 4.46 0.54 0.80 0.14 3.04 4.83 1.02 0.32 1.72 3.38 0.70 1.98 0.23 ......... ......... ......... ......... ......... ......... 4.71 ......... 0.31 1 100.00 293 17. AID TO STATE AND LOCAL GOVERNMENTS Department of Health and Human Services, Administration for Children and Families 75-1550-0-1-609 Table 17–29. CHILD CARE AND DEVELOPMENT FUND - MATCHING (93.596B) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Technical Assistance ................................................................................................. Total .......................................................................................................................... 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) 25,408 4,064 38,844 16,013 211,812 27,530 18,178 4,655 2,596 91,404 58,396 6,473 9,407 72,661 36,039 15,992 15,880 22,798 24,415 6,067 30,454 31,846 54,089 28,428 17,476 32,066 4,852 10,187 15,306 6,514 463,825 11,375 98,196 50,969 3,180 61,627 20,599 19,459 61,380 5,137 23,948 4,447 33,464 154,441 15,184 2,816 41,549 34,566 8,683 29,495 2,826 ......... ......... ......... ......... ......... ......... ......... ......... 3,466 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 25,310 4,046 39,671 16,049 211,296 27,886 17,961 4,669 2,568 90,435 586,701 6,517 9,524 71,937 35,919 16,048 16,022 22,839 25,068 5,983 29,983 31,730 52,658 28,339 17,404 31,989 4,897 10,220 15,465 6,387 45,926 11,475 97,954 51,571 3,206 61,037 20,804 19,598 60,822 5,028 24,126 4,504 33,532 156,694 20,225 2,762 41,422 34,731 8,647 29,363 2,924 ......... ......... ......... ......... ......... ......... ......... ......... 3,501 25,310 4,046 39,671 16,049 211,296 27,886 17,961 4,669 2,568 90,435 586,701 6,517 9,524 71,937 35,919 16,048 16,022 22,839 25,068 5,983 29,983 31,730 52,658 28,339 17,404 31,989 4,897 10,220 15,465 6,387 45,926 11,475 97,954 51,571 3,206 61,037 20,804 19,598 60,822 5,028 24,126 4,504 33,532 156,694 20,225 2,762 41,422 34,731 8,647 29,363 2,924 ......... ......... ......... ......... ......... ......... ......... ......... 3,501 37,135 5,936 58,205 23,547 310,011 40,914 26,352 6,850 3,767 132,686 86,080 9,562 13,974 105,545 52,699 23,545 23,507 33,510 36,780 8,778 43,991 46,554 77,259 41,579 25,535 46,934 7,185 14,995 22,690 9,371 67,383 16,836 143,717 75,665 4,703 89,553 30,523 28,754 89,237 7,377 35,397 6,608 49,198 229,899 29,673 4,053 60,773 50,958 12,687 43,081 4,291 ......... ......... ......... ......... ......... ......... ......... ......... 5,501 2,090,482 ......... 2,205,373 2,205,373 2,461,343 FY 2011 Percentage of distributed total 1.51 0.24 2.36 0.96 12.60 1.66 1.07 0.28 0.15 5.39 3.50 0.39 0.57 4.29 2.14 0.96 0.96 1.36 1.49 0.36 1.79 1.89 3.14 1.69 1.04 1.91 0.29 0.61 0.92 0.38 2.74 0.68 5.84 3.07 0.19 3.64 1.24 1.17 3.63 0.30 1.44 0.27 2.00 9.34 1.21 0.16 2.47 2.07 0.52 1.75 0.17 ......... ......... ......... ......... ......... ......... ......... ......... 0.22 1 100.00 294 ANALYTICAL PERSPECTIVES Department of Health and Human Services, Administration for Children and Families 75-1536-0-1-506 Table 17–30. HEAD START (93.600) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Training and Technical Assistance ............................................................................. Research and Evaluation .......................................................................................... Program Support ....................................................................................................... Total .......................................................................................................................... 110,249 12,896 107,015 66,717 859,904 70,659 53,660 13,685 25,960 272,067 174,228 23,663 23,588 279,954 99,465 53,299 52,655 111,506 150,855 28,548 80,683 112,028 242,511 74,447 167,178 123,031 21,660 37,282 25,104 13,840 133,392 54,075 447,896 146,070 17,758 255,277 83,801 61,488 235,917 22,762 85,302 19,464 123,391 494,959 39,046 14,020 102,462 103,769 52,362 93,963 12,791 2,223 2,237 1,721 257,780 1,379 8,268 510,029 ......... 176,352 19,989 42,000 7,110,280 Note: The incorporated ARRA totals represent only approximations of ARRA obligations in FY 2010. 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 112,246 13,130 108,953 67,926 875,482 71,939 54,632 13,933 26,430 276,996 177,384 24,092 24,016 285,026 101,267 54,265 53,609 113,526 153,588 29,065 82,145 114,057 246,905 75,796 170,207 125,259 22,053 37,958 25,559 14,091 135,809 55,054 456,010 148,716 18,079 259,901 85,319 62,602 240,191 23,175 86,848 19,817 125,626 503,926 39,753 14,274 104,318 105,649 53,311 95,665 13,023 2,263 2,278 1,752 262,449 1,404 8,418 519,268 ......... 176,352 20,000 42,000 112,246 13,130 108,953 67,926 875,482 71,939 54,632 13,933 26,430 276,996 177,384 24,092 24,016 285,026 101,267 54,265 53,609 113,526 153,588 29,065 82,145 114,057 246,905 75,796 170,207 125,259 22,053 37,958 25,559 14,091 135,809 55,054 456,010 148,716 18,079 259,901 85,319 62,602 240,191 23,175 86,848 19,817 125,626 503,926 39,753 14,274 104,318 105,649 53,311 95,665 13,023 2,263 2,278 1,752 262,449 1,404 8,418 519,268 ......... 176,352 20,000 42,000 130,008 14,865 125,903 78,687 989,213 83,555 60,768 15,877 28,823 324,028 205,208 26,472 28,182 325,998 119,149 61,295 61,842 129,772 173,725 32,640 93,781 126,929 277,821 86,650 186,887 143,711 24,806 43,660 30,979 16,106 155,526 64,020 510,890 177,582 19,776 296,464 100,715 72,703 269,606 25,905 102,561 22,345 141,234 578,681 46,651 15,663 119,228 121,469 60,198 108,779 13,900 2,343 2,358 1,814 287,586 1,453 9,746 589,136 207 196,078 20,000 42,000 ......... 7,234,785 7,234,785 8,223,957 FY 2011 Percentage of distributed total 1.58 0.18 1.53 0.96 12.03 1.02 0.74 0.19 0.35 3.94 2.50 0.32 0.34 3.96 1.45 0.75 0.75 1.58 2.11 0.40 1.14 1.54 3.38 1.05 2.27 1.75 0.30 0.53 0.38 0.20 1.89 0.78 6.21 2.16 0.24 3.60 1.22 0.88 3.28 0.32 1.25 0.27 1.72 7.04 0.57 0.19 1.45 1.48 0.73 1.32 0.17 0.03 0.03 0.02 3.50 0.02 0.12 7.16 ......... 2.38 0.24 0.51 1 100.00 295 17. AID TO STATE AND LOCAL GOVERNMENTS Department of Health and Human Services, Administration for Children and Families 75-1545-0-1-609 Table 17–31. FOSTER CARE - TITLE IV-E (93.658) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual New authority Total FY 2011 (estimated) ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 36,395 13,515 84,722 37,871 1,236,296 61,165 60,327 3,572 21,226 162,543 83,617 19,392 9,884 212,838 98,072 24,863 22,477 47,829 47,606 13,579 85,172 52,724 88,242 51,353 10,468 58,756 10,489 19,587 29,061 15,146 81,670 23,633 402,679 77,950 10,359 200,359 37,670 96,586 134,745 14,639 35,591 5,348 40,772 223,753 18,241 10,712 65,679 94,371 34,670 50,901 400 ......... ......... ......... ......... ......... ......... 3,000 ......... 20,487 3,000 36,395 13,515 84,722 37,871 1,236,296 61,165 60,327 3,572 21,226 162,543 83,617 19,392 9,884 212,838 98,072 24,863 22,477 47,829 47,606 13,579 85,172 52,724 88,242 51,353 10,468 58,756 10,489 19,587 29,061 15,146 81,670 23,633 402,679 77,950 10,359 200,359 37,670 96,586 134,745 14,639 35,591 5,348 40,772 223,753 18,241 10,712 65,679 94,371 34,670 50,901 400 ......... ......... ......... ......... ......... ......... 3,000 ......... 20,487 3,000 37,225 13,975 89,316 39,154 1,268,537 63,861 63,834 3,744 22,524 163,696 87,650 19,867 10,331 222,034 102,049 26,021 23,843 50,695 50,045 14,228 91,646 55,808 92,366 53,425 11,035 60,522 10,858 20,474 30,690 15,633 84,667 24,200 425,355 80,627 11,001 211,524 39,424 98,825 141,785 15,459 36,807 5,637 42,745 237,874 18,915 11,508 70,493 97,794 35,025 52,951 2,295 ......... ......... ......... ......... ......... ......... 7,000 ......... 22,000 3,000 4,545,429 ......... Note: The incorporated ARRA totals represent only approximations of ARRA obligations in FY 2010 and FY 2011. 1 Excludes undistributed obligations. 4,406,002 4,406,002 4,591,997 Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Techincal Assistance ................................................................................................. Pre-appropriated Tribal Technical Assistance ............................................................ Total .......................................................................................................................... 37,386 13,927 87,802 39,024 1,271,118 63,208 62,589 3,696 22,040 166,223 86,511 19,929 10,217 219,894 101,248 25,711 23,337 49,648 49,295 14,047 88,809 54,706 91,258 53,013 10,849 60,479 10,812 20,248 30,133 15,599 84,223 24,284 417,565 80,333 10,759 207,731 38,956 99,225 139,567 15,179 36,677 5,542 42,185 232,467 18,812 11,164 68,432 97,309 35,487 52,545 960 ......... ......... ......... ......... ......... ......... ......... ......... 20,277 2,994 Previous authority FY 2011 Percentage of distributed total 0.81 0.30 1.95 0.85 27.62 1.39 1.39 0.08 0.49 3.56 1.91 0.43 0.22 4.84 2.22 0.57 0.52 1.10 1.09 0.31 2.00 1.22 2.01 1.16 0.24 1.32 0.24 0.45 0.67 0.34 1.84 0.53 9.26 1.76 0.24 4.61 0.86 2.15 3.09 0.34 0.80 0.12 0.93 5.18 0.41 0.25 1.54 2.13 0.76 1.15 0.05 ......... ......... ......... ......... ......... ......... 0.15 ......... 0.48 0.07 1 100.00 296 ANALYTICAL PERSPECTIVES Department of Health and Human Services, Administration for Children and Families 75-1545-0-1-609 Table 17–32. ADOPTION ASSISTANCE (93.659) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... 10,778 8,727 63,818 13,046 392,890 20,906 31,588 1,829 17,665 80,470 37,737 14,372 4,979 79,475 60,197 34,987 14,396 38,228 16,435 14,129 22,123 32,737 114,306 24,593 5,305 36,160 7,863 10,277 11,290 5,050 54,172 15,348 213,021 42,736 4,229 179,607 27,761 37,326 42,879 7,786 14,856 3,317 38,432 74,935 7,663 7,838 21,397 46,195 15,414 48,011 908 ......... ......... ......... ......... ......... ......... ......... ......... Previous authority New authority ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 2,130,187 ......... Note: The incorporated ARRA obligations represent only approximations of ARRA obligations in FY 2010 and FY 2011. 1 Excludes undistributed obligations. Total FY 2011 (estimated) 11,559 322 68,322 13,982 420,476 22,381 33,840 1,957 18,931 86,172 40,426 15,357 5,339 84,991 64,481 37,463 15,415 40,947 17,607 15,142 23,650 35,053 122,366 26,362 5,685 38,732 8,421 11,004 12,057 5,406 58,075 16,445 227,736 45,767 4,529 192,832 29,754 39,990 46,066 8,335 15,930 3,553 41,177 80,147 8,207 8,389 22,903 49,436 16,515 51,396 971 ......... ......... ......... ......... ......... ......... ......... ......... 11,559 322 68,322 13,982 420,476 22,381 33,840 1,957 18,931 86,172 40,426 15,357 5,339 84,991 64,481 37,463 15,415 40,947 17,607 15,142 23,650 35,053 122,366 26,362 5,685 38,732 8,421 11,004 12,057 5,406 58,075 16,445 227,736 45,767 4,529 192,832 29,754 39,990 46,066 8,335 15,930 3,553 41,177 80,147 8,207 8,389 22,903 49,436 16,515 51,396 971 ......... ......... ......... ......... ......... ......... ......... ......... 12,513 10,637 75,749 15,275 468,258 24,817 37,182 2,179 20,701 95,199 44,454 17,454 5,800 95,588 70,976 41,424 17,041 45,086 19,346 16,547 26,718 38,773 135,762 28,744 6,230 42,657 9,295 12,178 13,812 6,005 63,216 18,037 257,147 50,522 5,006 205,776 32,492 43,901 48,722 9,262 17,288 3,924 45,175 89,987 9,047 9,336 25,446 55,078 18,111 57,035 1,092 ......... ......... ......... ......... ......... ......... ......... ......... 2,271,999 2,271,999 2,522,000 FY 2011 Percentage of distributed total 0.50 0.42 3.00 0.61 18.57 0.98 1.47 0.09 0.82 3.77 1.76 0.69 0.23 3.79 2.81 1.64 0.68 1.79 0.77 0.66 1.06 1.54 5.38 1.14 0.25 1.69 0.37 0.48 0.55 0.24 2.51 0.72 10.20 2.00 0.20 8.16 1.29 1.74 1.93 0.37 0.69 0.16 1.79 3.57 0.36 0.37 1.01 2.18 0.72 2.26 0.04 ......... ......... ......... ......... ......... ......... ......... ......... 1 100.00 297 17. AID TO STATE AND LOCAL GOVERNMENTS Department of Health and Human Services, Administration for Children and Families 75-1534-0-1-506 Table 17–33. SOCIAL SERVICES BLOCK GRANT (93.667) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... * $500 or less or 0.005 percent or less. 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) 25,938 3,831 35,527 15,888 204,872 27,248 19,630 4,847 3,297 102,294 53,496 7,193 8,404 72,035 35,564 16,747 15,559 23,772 24,062 7,383 31,489 36,149 56,450 29,131 16,359 32,947 5,369 9,946 14,378 7,375 48,682 11,041 108,159 50,785 3,585 64,269 20,274 21,004 69,683 5,929 24,704 4,463 34,507 133,978 14,826 3,482 43,224 36,254 10,156 31,396 2,930 49 293 59 8,793 ......... 293 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 25,938 3,831 35,527 15,888 204,872 27,248 19,630 4,847 3,297 102,294 53,496 7,193 8,404 72,035 35,564 16,747 15,559 23,772 24,062 7,383 31,489 36,149 56,450 29,131 16,359 32,947 5,369 9,946 14,378 7,375 48,682 11,041 108,159 50,785 3,585 64,269 20,274 21,004 69,683 5,929 24,704 4,463 34,507 133,978 14,826 3,482 43,224 36,254 10,156 31,396 2,930 49 293 59 8,793 ......... 293 ......... ......... 25,938 3,831 35,527 15,888 204,872 27,248 19,630 4,847 3,297 102,294 53,496 7,193 8,404 72,035 35,564 16,747 15,559 23,772 24,062 7,383 31,489 36,149 56,450 29,131 16,359 32,947 5,369 9,946 14,378 7,375 48,682 11,041 108,159 50,785 3,585 64,269 20,274 21,004 69,683 5,929 24,704 4,463 34,507 133,978 14,826 3,482 43,224 36,254 10,156 31,396 2,930 49 293 59 8,793 ......... 293 ......... ......... 25,938 3,831 35,527 15,888 204,872 27,248 19,630 4,847 3,297 102,294 53,496 7,193 8,404 72,035 35,564 16,747 15,559 23,772 24,062 7,383 31,489 36,149 56,450 29,131 16,359 32,947 5,369 9,946 14,378 7,375 48,682 11,041 108,159 50,785 3,585 64,269 20,274 21,004 69,683 5,929 24,704 4,463 34,507 133,978 14,826 3,482 43,224 36,254 10,156 31,396 2,930 49 293 59 8,793 ......... 293 ......... ......... 1,699,998 ......... 1,699,998 1,699,998 1,699,998 FY 2011 Percentage of distributed total 1.53 0.23 2.09 0.93 12.05 1.60 1.15 0.29 0.19 6.02 3.15 0.42 0.49 4.24 2.09 0.99 0.92 1.40 1.42 0.43 1.85 2.13 3.32 1.71 0.96 1.94 0.32 0.59 0.85 0.43 2.86 0.65 6.36 2.99 0.21 3.78 1.19 1.24 4.10 0.35 1.45 0.26 2.03 7.88 0.87 0.20 2.54 2.13 0.60 1.85 0.17 * 0.02 * 0.52 ......... 0.02 ......... ......... 1 100.00 298 ANALYTICAL PERSPECTIVES Department of Health and Human Services, HIV/AIDS Bureau 75-0350-0-1-551 Table 17–34. RYAN WHITE HIV/AIDS TREATMENT MODERNIZATION ACT - PART B HIV CARE GRANTS (93.917) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Marshall Islands ......................................................................................................... Republic of Palau ....................................................................................................... Total .......................................................................................................................... * $500 or less or 0.005 percent or less. Note: FY 2009 data does not include Part B Supplemental 1 FY 2010 data for each state is not available 2 FY 2011 data will be available in March 2011 Previous authority New authority Total FY 2011 (estimated) FY 2011 Percentage of distributed total 19,475 1,187 15,306 7,419 129,240 12,384 15,057 5,277 19,066 117,385 43,211 3,667 1,233 38,216 12,799 2,958 3,647 8,307 24,409 1,624 36,821 19,889 17,499 7,393 14,305 14,104 861 2,510 8,483 1,503 45,995 4,066 169,503 35,004 350 21,089 9,119 6,883 28,561 3,480 28,284 830 18,731 89,898 4,200 913 28,867 13,253 2,457 9,343 693 34 238 45 34,195 39 709 ......... ......... 25 44 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 1 1,185,326 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 1,185,326 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 2 1,185,326 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 1,162,083 ......... 1,185,326 1,185,326 1,185,326 ........... 299 17. AID TO STATE AND LOCAL GOVERNMENTS Department of Housing and Urban Development, Public and Indian Housing Programs 86-0163-0-1-604 Table 17–35. PUBLIC HOUSING OPERATING FUND (14.850) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Technical Assistance ................................................................................................. Total .......................................................................................................................... 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) 136,975 9,647 37,612 22,023 139,926 27,971 68,087 11,834 49,824 130,845 146,893 21,998 1,527 259,904 48,582 7,574 20,421 61,461 70,002 15,564 100,391 157,480 62,609 54,278 39,880 42,895 5,647 15,251 16,435 12,669 181,782 11,548 1,000,441 130,206 3,885 192,119 36,081 18,486 288,046 37,816 48,371 3,220 111,906 182,756 5,071 5,286 77,407 41,895 20,037 25,034 1,773 ......... 3,979 ......... 205,108 ......... 20,332 ......... ......... 3 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 146,557 10,322 40,243 23,564 149,714 29,928 72,850 12,662 53,309 139,998 157,169 23,537 1,634 278,085 51,980 8,104 21,850 65,760 74,899 16,653 107,414 168,496 66,989 58,075 42,670 45,896 6,042 16,318 17,585 13,555 194,498 12,356 1,070,426 139,314 4,157 205,558 38,605 19,779 308,196 40,461 51,755 3,445 119,734 195,540 5,426 5,656 82,822 44,826 21,439 26,785 1,897 ......... 4,257 ......... 219,456 ......... 21,754 ......... ......... ......... 146,557 10,322 40,243 23,564 149,714 29,928 72,850 12,662 53,309 139,998 157,169 23,537 1,634 278,085 51,980 8,104 21,850 65,760 74,899 16,653 107,414 168,496 66,989 58,075 42,670 45,896 6,042 16,318 17,585 13,555 194,498 12,356 1,070,426 139,314 4,157 205,558 38,605 19,779 308,196 40,461 51,755 3,445 119,734 195,540 5,426 5,656 82,822 44,826 21,439 26,785 1,897 ......... 4,257 ......... 219,456 ......... 21,754 ......... ......... ......... 144,155 10,153 23,177 39,584 147,261 29,437 78,905 12,454 52,436 137,704 154,593 23,151 1,607 273,528 51,129 7,971 21,491 64,683 73,672 16,380 106,054 187,470 65,891 57,123 41,971 45,144 5,943 16,051 17,297 13,333 191,311 12,153 1,122,285 137,032 4,089 202,190 37,972 19,455 303,146 39,798 51,018 3,389 117,772 192,336 5,337 5,563 81,465 44,196 21,087 26,346 1,866 ......... 4,188 ......... 215,860 ......... 21,398 ......... ......... ......... 4,448,793 ......... 4,760,000 4,760,000 4,781,000 FY 2011 Percentage of distributed total 3.02 0.21 0.48 0.83 3.08 0.62 1.65 0.26 1.10 2.88 3.23 0.48 0.03 5.72 1.07 0.17 0.45 1.35 1.54 0.34 2.22 3.92 1.38 1.19 0.88 0.94 0.12 0.34 0.36 0.28 4.00 0.25 23.47 2.87 0.09 4.23 0.79 0.41 6.34 0.83 1.07 0.07 2.46 4.02 0.11 0.12 1.70 0.92 0.44 0.55 0.04 ......... 0.09 ......... 4.51 ......... 0.45 ......... ......... ......... 1 100.00 300 ANALYTICAL PERSPECTIVES Department of Housing and Urban Development, Public and Indian Housing Programs 86-0302-08-1-604 Table 17–36. SECTION 8 HOUSING CHOICE VOUCHERS (14.871) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... * $500 or less or 0.005 percent or less. 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) 153,025 30,293 153,610 94,111 2,977,959 208,332 317,962 34,169 156,416 756,549 437,920 98,232 34,303 795,504 187,749 89,094 56,489 167,339 306,897 76,414 403,768 769,139 305,658 198,451 100,500 213,969 26,906 57,527 111,643 75,865 608,797 71,894 1,927,721 314,890 29,315 513,618 119,527 193,975 524,827 70,464 130,636 26,235 183,057 958,169 62,895 39,536 329,694 366,017 61,884 139,105 11,255 ......... 32,004 2,872 163,007 ......... 11,365 ......... ......... 2,737 542 2,747 1,683 53,253 3,726 5,686 611 2,797 13,529 7,831 1,757 613 14,226 3,358 1,593 1,010 2,993 5,488 1,367 7,221 13,755 5,466 3,549 1,797 3,826 481 1,029 1,997 1,357 10,887 1,286 34,474 5,631 524 9,185 2,138 3,469 9,386 1,260 2,336 469 3,274 17,135 1,125 707 5,896 6,546 1,107 2,488 201 ......... 572 51 2,915 ......... 203 ......... ......... 169,894 33,632 170,544 104,486 3,306,250 231,298 353,014 37,936 173,659 839,951 486,196 109,061 38,084 883,200 208,446 98,916 62,716 185,786 340,729 84,838 448,280 853,928 339,354 220,329 111,579 237,557 29,872 63,869 123,951 84,228 675,911 79,820 2,140,233 349,603 32,546 570,240 132,704 215,359 582,684 78,232 145,037 29,127 203,237 1,063,798 69,828 43,895 366,040 406,366 68,706 154,440 12,496 ......... 35,532 3,188 180,977 ......... 12,618 ......... ......... 172,631 34,174 173,291 106,169 3,359,503 235,024 358,700 38,547 176,456 853,480 494,027 110,818 38,697 897,426 211,804 100,509 63,726 188,779 346,217 86,205 455,501 867,683 344,820 223,878 113,376 241,383 30,353 64,898 125,948 85,585 686,798 81,106 2,174,707 355,234 33,070 579,425 134,842 218,828 592,070 79,492 147,373 29,596 206,511 1,080,933 70,953 44,602 371,936 412,912 69,813 156,928 12,697 ......... 36,104 3,239 183,892 ......... 12,821 ......... ......... 181,043 35,840 181,736 111,343 3,523,229 246,477 375,191 40,426 185,056 895,074 518,104 116,218 40,584 941,161 222,126 105,407 66,832 197,978 363,090 90,406 477,699 909,968 361,624 234,788 118,902 253,147 31,832 68,061 132,085 89,755 720,269 85,058 2,280,690 372,546 34,682 607,663 141,413 229,492 620,924 83,366 154,556 31,038 216,574 1,133,611 74,411 46,776 390,062 433,035 73,214 164,576 13,316 ......... 37,864 3,398 192,854 ......... 13,446 ......... 85,000 16,288,552 291,290 18,084,200 18,375,490 19,355,016 FY 2011 Percentage of distributed total 0.94 0.19 0.94 0.58 18.28 1.28 1.95 0.21 0.96 4.64 2.69 0.60 0.21 4.88 1.15 0.55 0.35 1.03 1.88 0.47 2.48 4.72 1.88 1.22 0.62 1.31 0.17 0.35 0.69 0.47 3.74 0.44 11.84 1.93 0.18 3.15 0.73 1.19 3.22 0.43 0.80 0.16 1.12 5.88 0.39 0.24 2.02 2.25 0.38 0.85 0.07 ......... 0.20 0.02 1.00 ......... 0.07 ......... ......... 1 100.00 301 17. AID TO STATE AND LOCAL GOVERNMENTS Department of Housing and Urban Development, Public and Indian Housing Programs 86-0304-0-1-604 Table 17–37. PUBLIC HOUSING CAPITAL FUND (14.872) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Set-Asides (Technical Assistance, Administrative Expenses) ................................... Total .......................................................................................................................... 181,945 6,371 25,667 56,480 287,449 62,181 96,577 26,512 84,122 203,275 214,328 28,993 2,318 481,913 101,302 13,924 40,565 100,452 145,582 15,488 148,927 228,106 93,517 137,449 67,514 103,184 8,323 23,837 28,720 13,756 216,093 22,244 920,157 176,486 7,388 284,012 56,922 30,259 438,729 36,288 78,043 6,476 172,300 231,623 9,801 9,257 95,941 134,236 23,248 55,000 2,418 ......... 3,513 ......... 310,873 ......... 16,897 ......... ......... 22 Previous authority 3,908 161 534 1,171 5,039 860 1,530 286 1,190 3,423 4,596 668 52 9,266 1,586 321 688 2,211 3,370 359 2,527 3,854 1,769 1,923 1,394 2,032 204 556 450 308 4,448 398 20,802 3,231 158 5,348 1,062 644 8,989 819 1,493 196 3,349 4,739 162 143 2,159 1,689 527 1,061 56 ......... 80 ......... 7,147 ......... 392 ......... ......... 34 6,367,003 125,362 * $500 or less or 0.005 percent or less. Note: This table reflects multiple CFDA Numbers: 14.884 and 14.885 in addition to the main CFDA number of 14.872 1 Excludes undistributed obligations. New authority Total FY 2011 (estimated) 71,112 2,924 9,725 21,314 91,698 15,653 27,842 5,202 21,657 62,284 83,640 12,165 939 168,613 28,866 5,849 12,529 40,234 61,334 6,533 45,985 70,125 32,194 34,998 25,376 36,969 3,716 10,127 8,192 5,597 80,934 7,245 378,538 58,805 2,874 97,313 19,324 11,720 163,570 14,898 27,170 3,561 60,941 86,245 2,949 2,608 39,285 30,737 9,583 19,308 1,014 ......... 1,459 ......... 130,060 ......... 7,139 ......... 138,000 24 75,020 3,085 10,259 22,485 96,737 16,513 29,372 5,488 22,847 65,707 88,236 12,833 991 177,879 30,452 6,170 13,217 42,445 64,704 6,892 48,512 73,979 33,963 36,921 26,770 39,001 3,920 10,683 8,642 5,905 85,382 7,643 399,340 62,036 3,032 102,661 20,386 12,364 172,559 15,717 28,663 3,757 64,290 90,984 3,111 2,751 41,444 32,426 10,110 20,369 1,070 ......... 1,539 ......... 137,207 ......... 7,531 ......... 138,000 58 61,737 2,538 8,443 18,504 79,609 13,589 24,172 4,516 18,802 54,073 72,613 10,561 816 146,385 25,061 5,078 10,877 34,930 53,248 5,672 39,922 60,880 27,949 30,384 22,030 32,095 3,226 8,792 7,112 4,859 70,264 6,290 328,635 51,052 2,495 84,484 16,777 10,175 142,007 12,934 23,588 3,091 52,906 74,875 2,560 2,264 34,106 26,684 8,319 16,763 881 ......... 1,267 ......... 112,913 ......... 6,197 ......... 20,000 24 2,418,696 2,544,058 2,000,024 FY 2011 Percentage of distributed total 3.12 0.13 0.43 0.93 4.02 0.69 1.22 0.23 0.95 2.73 3.67 0.53 0.04 7.39 1.27 0.26 0.55 1.76 2.69 0.29 2.02 3.07 1.41 1.53 1.11 1.62 0.16 0.44 0.36 0.25 3.55 0.32 16.60 2.58 0.13 4.27 0.85 0.51 7.17 0.65 1.19 0.16 2.67 3.78 0.13 0.11 1.72 1.35 0.42 0.85 0.04 ......... 0.06 ......... 5.70 ......... 0.31 ......... ......... * 1 100.00 302 ANALYTICAL PERSPECTIVES Department of Housing and Urban Development, Community Planning and Development 86-0162-0-1-451 Table 17–38. COMMUNITY DEVELOPMENT BLOCK GRANTS AND NEIGHBORHOOD STABILIZATION PROGRAM (14.218) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Set-aside (e.g., Indian CDBG, Congressional Earmarks, Administration Initiatives) . Total .......................................................................................................................... Previous authority New authority Total FY 2011 (estimated) 86,781 5,944 74,807 35,068 615,244 47,000 56,866 9,052 22,929 200,175 110,103 19,109 15,100 221,800 251,512 248,324 35,118 60,750 1,481,407 20,674 69,222 137,758 158,544 73,193 53,106 94,733 12,244 31,660 25,618 16,680 121,934 26,608 439,520 97,199 8,000 202,974 38,927 45,633 285,635 21,474 48,927 11,581 63,023 1,633,870 25,173 10,524 83,112 77,551 34,696 131,442 5,330 2,002 5,701 2,750 157,257 ......... 3,622 72,900 ......... 144,000 ......... 67 ......... 70,181 2,760 444 ......... ......... ......... 82,097 ......... ......... ......... 186,756 253,340 516,714 ......... ......... 1,626,195 4,293 ......... 542 806 ......... 6,505 92,605 ......... ......... ......... ......... 735 ......... ......... ......... ......... ......... 1,794 ......... ......... 243 ......... 509 92,518 1,743,001 ......... ......... ......... ......... ......... 75,432 ......... ......... ......... ......... ......... ......... ......... 67,581 1,930,000 585,880 52,931 5,178 65,719 30,200 538,529 39,985 49,843 7,775 19,632 172,566 90,963 16,403 12,902 191,298 77,195 43,986 30,157 49,430 34,337 19,069 59,410 118,858 135,730 61,920 38,262 71,721 9,949 22,817 22,017 14,333 104,428 22,858 377,865 85,129 6,873 174,253 33,628 39,071 246,928 18,678 42,032 8,684 54,171 273,339 21,421 9,040 72,855 66,673 27,112 70,735 4,581 1,027 2,821 1,360 119,599 ......... 1,792 65,000 ......... 394,932 52,931 5,245 65,719 100,381 541,289 40,429 49,843 7,775 19,632 254,663 90,963 16,403 12,902 378,054 330,535 560,700 30,157 49,430 1,660,532 23,362 59,410 119,400 136,536 61,920 44,767 164,326 9,949 22,817 22,017 14,333 105,163 22,858 377,865 85,129 6,873 174,253 35,422 39,071 246,928 18,921 42,032 9,193 146,689 2,016,340 21,421 9,040 72,855 66,673 27,112 146,167 4,581 1,027 2,821 1,360 119,599 ......... 1,792 132,581 1,930,000 980,812 52,441 5,130 65,111 29,920 533,545 39,615 49,382 7,703 19,451 170,969 90,122 16,251 12,783 189,528 76,480 43,579 29,878 48,972 34,020 18,893 58,860 117,758 134,474 61,347 37,908 71,058 9,857 22,606 21,813 14,200 103,461 22,646 374,367 84,341 6,809 172,641 33,316 38,709 244,643 18,505 41,643 8,603 53,670 270,809 21,223 8,956 72,181 66,056 26,861 70,081 4,539 ......... ......... ......... 118,492 ......... ......... 65,000 ......... 325,000 8,091,886 7,340,998 4,450,000 11,790,998 4,336,206 Note: NSP2 competitive awards have not yet been announced Note: Additional related CFDA numbers (regular CDBG): 14.225, 14.227, 14.228; (Recovery Act): 14.254, 14.255, 14.256) 1 Excludes undistributed obligations. FY 2011 Percentage of distributed total 1.21 0.12 1.50 0.69 12.30 0.91 1.14 0.18 0.45 3.94 2.08 0.37 0.29 4.37 1.76 1.01 0.69 1.13 0.78 0.44 1.36 2.72 3.10 1.41 0.87 1.64 0.23 0.52 0.50 0.33 2.39 0.52 8.63 1.95 0.16 3.98 0.77 0.89 5.64 0.43 0.96 0.20 1.24 6.25 0.49 0.21 1.66 1.52 0.62 1.62 0.10 ......... ......... ......... 2.73 ......... ......... 1.50 ......... 7.50 1 100.00 303 17. AID TO STATE AND LOCAL GOVERNMENTS Department of Housing and Urban Development, Community Planning and Development 86-0192-0-1-604 Table 17–39. HOMELESSNESS PREVENTION AND RAPID RE-HOUSING PROGRAM (14.257) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... Previous authority New authority Total FY 2011 (estimated) FY 2011 Percentage of distributed total 20,074 1,920 22,084 11,213 187,632 15,491 16,960 2,921 7,489 65,298 33,625 6,183 4,972 68,287 28,383 16,732 11,350 18,557 24,841 8,057 22,408 44,559 53,140 23,546 14,380 27,263 3,731 7,872 8,250 5,379 40,920 8,586 139,997 29,078 2,583 65,654 12,298 14,907 89,984 6,978 15,789 3,254 20,295 103,968 8,408 24,809 3,399 24,949 10,199 26,936 1,718 413 1,222 589 45,002 ......... 776 ......... ......... ......... ......... ......... ......... 1,455 ......... ......... ......... ......... ......... ......... ......... ......... 2,578 ......... ......... ......... ......... 1,735 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 1,424 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 1,455 ......... ......... ......... ......... ......... ......... ......... ......... 2,578 ......... ......... ......... ......... 1,735 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 1,424 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 1,485,308 7,192 ......... 7,192 ......... ........... 304 ANALYTICAL PERSPECTIVES Department of Housing and Urban Development, Community Planning and Development 86-0205-0-1-604 Table 17–40. HOME INVESTMENT PARTNERSHIP PROGRAM AND TAX CREDIT ASSISTANCE PROGRAM (14.258) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) 57,670 9,563 58,247 36,858 588,494 49,238 47,306 11,599 20,956 183,030 98,231 17,498 15,782 170,850 68,587 34,196 30,868 56,961 71,056 19,143 57,143 107,462 115,099 51,208 39,876 69,803 14,097 20,665 27,073 14,937 110,286 25,017 455,501 93,879 8,473 150,608 46,337 49,282 171,297 21,525 45,811 9,766 70,299 267,050 20,957 9,786 79,675 77,518 29,814 64,220 8,347 341 1,406 647 76,206 ......... 1,256 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 25,949 4,109 26,172 16,542 264,976 22,084 21,325 5,035 9,396 82,631 44,142 7,705 7,091 76,858 30,813 15,354 13,870 25,572 31,957 8,528 25,669 48,285 51,583 22,978 18,155 31,395 6,335 9,367 11,995 6,727 49,482 11,240 204,663 42,100 3,644 67,725 20,798 22,135 76,932 9,678 20,609 4,400 31,547 119,761 9,402 4,408 35,745 34,818 13,391 28,882 3,531 341 1,406 647 33,861 ......... 1,256 ......... ......... 25,949 4,109 26,172 16,542 264,976 22,084 21,325 5,035 9,396 82,631 44,142 7,705 7,091 76,858 30,813 15,354 13,870 25,572 31,957 8,528 25,669 48,285 51,583 22,978 18,155 31,395 6,335 9,367 11,995 6,727 49,482 11,240 204,663 42,100 3,644 67,725 20,798 22,135 76,932 9,678 20,609 4,400 31,547 119,761 9,402 4,408 35,745 34,818 13,391 28,882 3,531 341 1,406 647 33,861 ......... 1,256 ......... ......... 23,226 3,678 23,425 14,806 237,172 19,766 19,087 4,506 8,410 73,960 39,510 6,896 6,347 68,793 27,579 13,743 12,415 22,889 28,604 7,633 22,976 43,218 46,171 20,567 16,250 28,101 5,671 8,384 10,737 6,021 44,290 10,060 183,188 37,682 3,262 60,619 18,616 19,812 68,859 8,663 18,447 3,938 28,237 107,194 8,415 3,945 31,994 31,164 11,986 25,851 3,160 305 1,258 579 30,308 ......... 1,125 ......... ......... 4,058,800 ......... 1,825,000 1,825,000 1,633,498 FY 2011 Percentage of distributed total 1.42 0.23 1.43 0.91 14.52 1.21 1.17 0.28 0.51 4.53 2.42 0.42 0.39 4.21 1.69 0.84 0.76 1.40 1.75 0.47 1.41 2.65 2.83 1.26 0.99 1.72 0.35 0.51 0.66 0.37 2.71 0.62 11.21 2.31 0.20 3.71 1.14 1.21 4.22 0.53 1.13 0.24 1.73 6.56 0.52 0.24 1.96 1.91 0.73 1.58 0.19 0.02 0.08 0.04 1.86 ......... 0.07 ......... ......... 1 100.00 305 17. AID TO STATE AND LOCAL GOVERNMENTS Department of Justice, Office of Justice Programs 15-0404-0-1-754 Table 17–41. EDWARD BYRNE MEMORIAL JUSTICE ASSISTANCE GRANT PROGRAM (16.738) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... 30,109 9,552 41,954 22,129 225,297 29,823 20,593 10,906 11,742 134,461 58,938 10,707 11,353 83,663 35,356 18,702 19,884 24,018 34,988 9,608 43,874 40,738 66,994 29,087 17,965 40,257 4,959 13,103 22,912 9,775 47,749 18,248 110,497 56,014 4,973 61,590 26,049 22,026 72,361 9,465 37,937 4,929 50,170 147,131 16,221 4,972 39,645 36,622 12,834 30,057 14,848 3,332 4,973 1,641 22,687 ......... 4,973 ......... ......... Previous authority ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... New authority 7,338 2,310 10,138 5,314 54,844 7,270 5,014 2,655 2,858 32,874 14,315 2,607 2,763 20,371 8,543 4,554 4,824 5,845 8,864 2,339 10,657 9,933 16,315 7,086 4,352 9,749 1,211 3,158 5,586 2,380 11,626 4,421 26,917 13,703 1,099 15,010 6,324 5,344 17,621 2,305 9,248 1,190 12,245 35,696 3,946 1,211 9,653 8,937 3,170 7,318 1,086 811 1,211 399 5,281 ......... 1,211 ......... ......... Total 7,338 2,310 10,138 5,314 54,844 7,270 5,014 2,655 2,858 32,874 14,315 2,607 2,763 20,371 8,543 4,554 4,824 5,845 8,864 2,339 10,657 9,933 16,315 7,086 4,352 9,749 1,211 3,158 5,586 2,380 11,626 4,421 26,917 13,703 1,099 15,010 6,324 5,344 17,621 2,305 9,248 1,190 12,245 35,696 3,946 1,211 9,653 8,937 3,170 7,318 1,086 811 1,211 399 5,281 ......... 1,211 ......... ......... FY 2011 (estimated) 7,078 2,242 9,846 5,187 52,951 7,011 4,840 2,563 2,760 31,629 13,846 2,517 2,668 19,664 8,298 4,396 4,670 5,645 8,289 2,258 10,307 9,578 15,747 6,837 4,218 9,452 1,166 3,074 5,387 2,298 11,223 4,285 25,973 13,178 1,148 14,479 6,119 5,173 17,008 2,225 8,919 1,157 11,797 34,557 3,812 1,169 9,318 8,611 3,025 7,065 1,122 783 1,169 386 5,097 ......... 1,169 ......... ......... FY 2011 Percentage of distributed total 1.52 0.48 2.11 1.11 11.35 1.50 1.04 0.55 0.59 6.78 2.97 0.54 0.57 4.22 1.78 0.94 1.00 1.21 1.78 0.48 2.21 2.05 3.38 1.47 0.90 2.03 0.25 0.66 1.15 0.49 2.41 0.92 5.57 2.83 0.25 3.10 1.31 1.11 3.65 0.48 1.91 0.25 2.53 7.41 0.82 0.25 2.00 1.85 0.65 1.51 0.24 0.17 0.25 0.08 1.09 ......... 0.25 ......... ......... 1 100.00 1,995,391 ......... 483,050 483,050 466,386 Note: Fiscal Year 2010 obligations are estimates, please note that the formula may change. Note: Amounts for 2011 are estimates; actual formula may change; amount is total funding available net of Office of Justice Program set asides for tribal criminal justice assistance; and research, evaluation and statistics. 1 Excludes undistributed obligations. 306 ANALYTICAL PERSPECTIVES Department of Labor, Employment and Training Administration 16-0179-0-1-504 Table 17–42. UNEMPLOYMENT INSURANCE (17.225) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Previous authority New authority Total FY 2011 (estimated) FY 2011 Percentage of distributed total 46,125 27,591 47,707 28,120 529,890 50,816 73,837 12,021 14,106 151,674 93,494 20,594 35,029 174,700 57,251 42,141 26,610 40,193 32,117 19,375 83,063 83,157 187,609 60,253 30,190 60,219 12,303 17,038 44,951 16,445 140,629 20,128 217,590 98,609 12,398 149,420 32,836 79,489 179,620 21,177 50,589 8,302 57,502 168,535 36,164 9,234 60,741 108,015 16,776 85,224 11,531 ......... ......... ......... 25,658 ......... 2,240 ......... ......... 1,455 294 1,572 979 20,666 1,754 2,516 312 354 6,773 2,311 663 756 5,080 2,697 1,284 688 1,594 558 571 2,348 3,908 6,030 1,680 1,014 2,562 327 411 1,931 598 6,587 981 5,409 3,878 68 6,101 1,530 3,258 5,851 663 1,480 115 1,889 5,512 1,024 142 2,113 2,952 436 2,432 176 ......... ......... ......... 2,804 ......... 58 ......... ......... 40,144 27,005 37,436 26,866 497,660 46,198 66,884 12,911 13,469 113,627 77,393 18,663 21,594 175,324 52,321 32,480 23,298 35,814 35,555 16,981 68,413 84,624 177,541 53,118 28,476 51,519 11,886 18,206 34,773 15,286 136,867 17,582 227,216 78,195 8,094 122,646 26,869 66,352 171,786 18,429 39,565 6,656 42,775 159,612 28,021 9,462 53,155 107,488 16,869 79,039 8,769 ......... ......... ......... 26,380 ......... 2,261 ......... ......... 41,599 27,299 39,008 27,845 518,326 47,952 69,400 13,223 13,823 120,400 79,704 19,326 22,350 180,404 55,018 33,764 23,986 37,408 36,113 17,552 70,761 88,532 183,571 54,798 29,490 54,081 12,213 18,617 36,704 15,884 143,454 18,563 232,625 82,073 8,162 128,747 28,399 69,610 177,637 19,092 41,045 6,771 44,664 165,124 29,045 9,604 55,268 110,440 17,305 81,471 8,945 ......... ......... ......... 29,184 ......... 2,319 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 3,503,145 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 3,711,026 Note: Program Funding Allocation Data includes UI State Admin, Non-ARRA EUC and ARRA EUC 129,145 3,369,553 3,498,698 3,503,145 ......... Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... 17. AID TO STATE AND LOCAL GOVERNMENTS 307 Department of Labor, Employment and Training Administration 16-0174-0-1-504 Table 17–43. WIA YOUTH ACTIVITIES (17.259) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... 1 Excludes undistributed otbligations. Previous authority New authority Total FY 2011 (estimated) 20,707 6,998 33,942 21,451 331,560 21,112 19,618 5,188 7,058 76,222 55,756 5,188 5,188 110,519 42,095 9,195 12,661 31,485 35,579 7,575 20,597 44,158 131,433 31,626 33,222 45,157 5,188 5,235 13,459 5,188 37,040 10,424 127,162 44,470 5,188 99,841 15,481 26,789 72,265 9,976 43,934 5,188 44,622 145,784 9,017 5,188 23,081 41,682 9,500 24,550 5,188 302 2,457 854 75,454 162 1,450 27,017 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 11,844 3,062 15,163 9,385 129,852 10,561 8,414 2,270 3,088 33,348 26,291 2,552 2,978 37,121 18,686 4,506 5,626 13,569 15,566 3,298 10,731 19,320 52,139 27,812 13,983 17,689 2,270 2,389 5,888 2,270 19,864 4,850 49,189 24,780 2,270 43,682 6,773 13,004 30,236 8,664 19,222 2,270 17,688 63,783 3,941 2,270 12,301 18,237 4,156 13,752 2,270 132 1,073 397 33,025 75 633 13,861 ......... 11,844 3,062 15,163 9,385 129,852 10,561 8,414 2,270 3,088 33,348 26,291 2,552 2,978 37,121 18,686 4,506 5,626 13,569 15,566 3,298 10,731 19,320 52,139 27,812 13,983 17,689 2,270 2,389 5,888 2,270 19,864 4,850 49,189 24,780 2,270 43,682 6,773 13,004 30,236 8,664 19,222 2,270 17,688 63,783 3,941 2,270 12,301 18,237 4,156 13,752 2,270 132 1,073 397 33,025 75 633 13,861 ......... 11,167 2,887 14,296 8,849 122,429 9,957 7,933 2,140 2,911 31,442 24,788 2,406 2,807 34,999 17,618 4,249 5,305 12,793 14,677 3,110 10,118 18,216 49,159 26,223 13,184 16,678 2,140 2,253 5,552 2,140 18,728 4,573 46,378 23,364 2,140 41,185 6,386 12,261 28,507 8,168 18,123 2,140 16,677 60,137 3,716 2,140 11,598 17,194 3,919 12,966 2,140 124 1,012 374 31,137 71 597 13,069 ......... 2,108,426 ......... 924,069 924,069 871,250 FY 2011 Percentage of distributed total 1.28 0.33 1.64 1.02 14.05 1.14 0.91 0.25 0.33 3.61 2.85 0.28 0.32 4.02 2.02 0.49 0.61 1.47 1.68 0.36 1.16 2.09 5.64 3.01 1.51 1.91 0.25 0.26 0.64 0.25 2.15 0.52 5.32 2.68 0.25 4.73 0.73 1.41 3.27 0.94 2.08 0.25 1.91 6.90 0.43 0.25 1.33 1.97 0.45 1.49 0.25 0.01 0.12 0.04 3.57 0.01 0.07 1.50 ......... 1 100.00 308 ANALYTICAL PERSPECTIVES Department of Labor, Employment and Training Administration 16-0174-0-1-504 Table 17–44. WIA DISLOCATED WORKERS (17.260) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... * $500 or less or 0.005 percent or less. 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) 25,815 6,939 34,051 14,711 434,192 28,303 29,123 3,990 7,421 157,611 85,704 4,229 5,543 134,096 51,290 10,225 10,182 36,615 18,116 8,946 22,022 41,527 153,502 41,018 27,804 50,542 3,436 5,070 28,003 4,895 63,995 5,793 129,859 86,912 1,793 114,485 11,786 33,581 83,122 15,547 48,339 1,866 55,514 105,205 6,920 3,422 27,619 43,324 7,004 31,423 1,142 426 3,308 1,224 57,768 345 1,953 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 12,930 3,476 17,170 7,368 217,457 14,176 14,587 1,999 3,717 78,943 42,927 2,118 2,776 67,164 25,690 5,121 5,100 18,339 9,074 4,481 11,030 20,799 76,885 20,541 13,926 25,315 1,721 2,539 14,026 2,452 32,053 2,832 65,042 43,532 898 57,342 5,903 16,820 41,630 7,787 24,211 935 27,805 52,694 3,458 1,714 13,833 21,685 3,508 15,739 572 23 171 62 3,155 21 101 ......... ......... 12,930 3,476 17,170 7,368 217,457 14,176 14,587 1,999 3,717 78,943 42,927 2,118 2,776 67,164 25,690 5,121 5,100 18,339 9,074 4,481 11,030 20,799 76,885 20,541 13,926 25,315 1,721 2,539 14,026 2,452 32,053 2,832 65,042 43,532 898 57,342 5,903 16,820 41,630 7,787 24,211 935 27,805 52,694 3,458 1,714 13,833 21,685 3,508 15,739 572 23 171 62 3,155 21 101 ......... ......... 12,930 3,476 17,170 7,368 217,457 14,176 14,587 1,999 3,717 78,943 42,927 2,118 2,776 67,164 25,690 5,121 5,100 18,339 9,074 4,481 11,030 20,799 76,885 20,541 13,926 25,315 1,721 2,539 14,026 2,452 32,053 2,832 65,042 43,532 898 57,342 5,903 16,820 41,630 7,787 24,211 935 27,805 52,694 3,458 1,714 13,833 21,685 3,508 15,739 572 23 171 62 3,155 21 101 ......... ......... 2,428,596 ......... 1,187,373 1,187,373 1,187,373 FY 2011 Percentage of distributed total 1.09 0.29 1.45 0.62 18.31 1.19 1.23 0.17 0.31 6.65 3.62 0.18 0.23 5.66 2.16 0.43 0.43 1.54 0.76 0.38 0.93 1.75 6.48 1.73 1.17 2.13 0.14 0.21 1.18 0.21 2.70 0.24 5.48 3.67 0.08 4.83 0.50 1.42 3.51 0.66 2.04 0.08 2.34 4.44 0.29 0.14 1.17 1.83 0.30 1.33 0.05 * 0.01 0.01 0.27 * 0.01 ......... ......... 1 100.00 17. AID TO STATE AND LOCAL GOVERNMENTS 309 Department of Transportation, Federal Aviation Administration 69-8106-0-7-402 Table 17–45. AIRPORT IMPROVEMENT PROGRAM (20.106) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... * $500 or less or 0.005 percent or less. 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) 55,244 207,225 70,664 41,309 280,592 103,706 19,192 6,250 384 174,896 90,105 34,789 17,229 116,902 68,872 39,952 39,159 46,039 67,946 31,125 31,471 52,955 95,092 65,126 43,935 66,738 47,099 32,635 56,677 9,504 30,959 20,843 111,432 90,055 23,623 77,993 38,511 63,677 93,465 11,905 54,045 30,199 90,493 282,845 33,834 12,061 75,555 110,015 20,339 72,669 27,002 9,077 16,744 9,600 10,710 25,080 15,242 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 58,506 210,509 68,298 35,329 278,980 89,093 19,230 8,386 169 158,286 89,834 31,566 23,948 131,776 57,290 37,139 34,057 65,997 63,397 23,094 31,065 49,690 103,347 61,009 56,575 75,720 35,165 26,389 53,661 24,815 39,894 23,199 123,006 79,996 21,691 84,294 40,041 43,562 104,592 15,995 38,738 27,367 68,447 253,698 37,558 6,990 76,509 97,415 27,576 58,247 22,636 6,196 16,286 7,314 13,576 34,939 6,024 ......... ......... 58,506 210,509 68,298 35,329 278,980 89,093 19,230 8,386 169 158,286 89,834 31,566 23,948 131,776 57,290 37,139 34,057 65,997 63,397 23,094 31,065 49,690 103,347 61,009 56,575 75,720 35,165 26,389 53,661 24,815 39,894 23,199 123,006 79,996 21,691 84,294 40,041 43,562 104,592 15,995 38,738 27,367 68,447 253,698 37,558 6,990 76,509 97,415 27,576 58,247 22,636 6,196 16,286 7,314 13,576 34,939 6,024 ......... ......... 58,306 209,791 68,065 35,209 278,028 88,789 19,165 8,357 168 157,746 89,527 31,459 23,867 131,325 57,095 37,013 33,941 65,771 63,180 23,016 30,959 49,520 102,993 60,801 56,382 75,462 35,044 26,300 53,479 24,730 39,758 23,121 122,586 79,723 21,617 84,006 39,904 43,414 104,235 15,941 38,605 27,273 68,213 252,832 37,430 6,966 76,247 97,082 27,481 58,048 22,558 6,175 16,230 7,289 13,530 34,820 6,003 ......... ......... 3,470,785 ......... 3,378,106 3,378,106 3,366,575 FY 2011 Percentage of distributed total 1.73 6.23 2.02 1.05 8.26 2.64 0.57 0.25 * 4.69 2.66 0.93 0.71 3.90 1.70 1.10 1.01 1.95 1.88 0.68 0.92 1.47 3.06 1.81 1.67 2.24 1.04 0.78 1.59 0.73 1.18 0.69 3.64 2.37 0.64 2.50 1.19 1.29 3.10 0.47 1.15 0.81 2.03 7.51 1.11 0.21 2.26 2.88 0.82 1.72 0.67 0.18 0.48 0.22 0.40 1.03 0.18 ......... ......... 1 100.00 310 ANALYTICAL PERSPECTIVES Department of Transportation, Federal Highway Administration 69-8083-0-7-401 Table 17–46. HIGHWAY PLANNING AND CONSTRUCTION (20.205) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... Note: This table also includes Budget account number 69-0504-0-1-401. 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) 1,188,900 491,728 1,029,907 700,958 5,629,877 825,764 767,785 233,642 263,732 3,354,172 1,792,809 279,976 418,483 2,188,124 1,448,810 847,735 639,776 1,066,857 1,220,463 308,366 973,646 883,520 1,712,983 1,019,099 831,272 1,288,751 523,662 422,181 487,454 282,261 1,334,018 562,158 2,324,738 1,563,306 416,521 1,954,873 1,172,512 747,110 2,320,113 326,496 995,812 394,360 1,368,520 4,322,933 554,133 253,448 1,175,896 1,204,228 644,518 1,229,099 423,932 30,943 44,722 9,874 204,534 ......... 30,984 24,028 1,001,568 99,623 57,319 217,305 123,655 488,591 95,719 85,192 61,725 14,022 362,366 341,453 40,717 50,567 158,637 180,557 26,870 114,965 119,778 96,114 6,800 94,294 169,852 209,243 124,227 54,618 230,600 72,791 78,902 104,899 6,070 162,947 61,909 125,068 168,384 23,114 462,516 52,335 76,137 117,335 11,968 127,349 94,044 76,739 1,028,289 5,136 27,521 351,748 135,626 17,167 173,922 ......... ......... ......... ......... 26,301 ......... 4,770 ......... 382,131 647,760 383,182 629,575 484,117 3,213,092 482,508 436,496 208,325 180,194 1,531,829 1,135,635 219,078 245,776 1,336,645 793,596 457,034 402,046 599,562 718,966 187,206 558,895 956,779 987,902 624,136 435,332 865,206 352,932 294,054 284,186 164,423 944,176 346,059 1,598,373 875,372 237,737 1,221,923 582,556 453,313 1,553,374 217,338 572,277 268,072 828,028 2,761,588 318,898 219,989 984,630 579,206 412,290 673,799 236,269 16,772 16,949 3,409 127,016 ......... 12,870 ......... 5,967,250 747,383 440,501 846,880 607,772 3,701,683 578,227 521,688 270,050 194,216 1,894,195 1,477,088 259,795 296,343 1,495,282 974,153 483,904 517,011 719,340 815,080 194,006 653,189 1,126,631 1,197,145 748,363 489,950 1,095,806 425,723 372,956 389,085 170,493 1,107,123 407,968 1,723,441 1,043,756 260,851 1,684,439 634,891 529,450 1,670,709 229,306 699,626 362,116 904,767 3,789,877 324,034 247,510 1,336,378 714,832 429,457 847,721 236,269 16,772 16,949 3,409 153,317 ......... 17,640 ......... 6,349,381 708,076 443,743 707,332 499,417 3,565,173 529,339 486,289 164,834 160,988 1,817,536 1,239,881 169,713 277,518 1,394,358 916,869 475,621 379,888 637,610 674,794 187,001 591,366 609,662 1,037,249 622,234 468,776 905,257 375,064 288,252 356,370 163,647 973,404 352,772 1,666,502 1,001,585 247,523 1,282,532 626,787 489,642 1,590,032 218,523 607,761 272,667 801,074 3,045,069 317,293 202,084 965,275 664,881 406,571 716,519 242,382 16,772 16,949 3,409 127,016 ......... 12,870 ......... 4,380,025 59,758,070 7,599,927 41,846,000 49,445,927 42,101,776 FY 2011 Percentage of distributed total 1.88 1.18 1.88 1.32 9.45 1.40 1.29 0.44 0.43 4.82 3.29 0.45 0.74 3.70 2.43 1.26 1.01 1.69 1.79 0.50 1.57 1.62 2.75 1.65 1.24 2.40 0.99 0.76 0.94 0.43 2.58 0.94 4.42 2.66 0.66 3.40 1.66 1.30 4.22 0.58 1.61 0.72 2.12 8.07 0.84 0.54 2.56 1.76 1.08 1.90 0.64 0.04 0.04 0.01 0.34 ......... 0.03 ......... ......... 1 100.00 311 17. AID TO STATE AND LOCAL GOVERNMENTS Department of Transportation, Federal Transit Administration 69-8350-0-7-1 Table 17–47. FEDERAL TRANSIT FORMULA GRANTS PROGRAMS (20.507) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... 21,968 58,403 51,946 16,509 993,663 91,712 13,848 18,143 3,683 206,620 125,671 27,169 10,425 456,042 85,485 37,446 18,724 43,825 59,144 14,848 148,019 85,660 100,841 77,291 11,943 81,423 14,866 8,859 42,002 9,913 516,442 30,311 718,325 70,504 10,076 129,293 35,022 94,015 377,252 25,217 24,627 9,601 70,497 374,249 46,728 15,631 186,279 148,579 9,630 69,622 7,165 370 941 2,158 37,211 ......... 2,459 ......... 1 60,402 Previous authority 29,939 4,155 81,410 5,846 261,300 20,871 164,732 13,940 121,465 92,759 51,450 11,283 4,890 38,108 22,268 4,653 12,968 3,619 6,827 2,646 32,752 150,219 33,583 46,018 13,436 19,314 2,584 12,048 14,094 6,476 14,163 4,980 458,719 62,938 1,323 62,286 7,362 5,245 49,703 13,190 20,937 1,632 14,688 70,230 ......... 7,803 1,488 64,225 49,063 9,630 10,146 513 410 2 ......... 59,244 ......... ......... ......... New authority 63,339 33,955 151,068 13,025 670,432 101,108 298,652 24,536 203,059 252,515 102,693 57,395 17,229 165,951 56,582 14,266 29,426 17,526 20,862 9,728 101,120 347,682 73,666 87,204 38,592 48,319 6,229 26,589 28,487 14,281 126,355 16,525 1,241,508 127,378 7,025 117,144 17,064 54,787 181,661 45,465 41,652 4,292 43,677 177,139 5,434 25,813 18,814 162,510 181,795 24,245 25,236 2,054 719 667 7,797 91,566 140 ......... 2 51,321 Total 93,278 38,110 232,478 18,871 931,732 121,979 463,384 38,476 324,524 345,274 154,143 68,678 22,119 204,059 78,850 18,919 42,394 21,145 27,689 12,374 133,872 497,901 107,249 133,222 52,028 67,633 8,813 38,637 42,581 20,757 140,518 21,505 1,700,227 190,316 8,348 179,430 24,426 60,032 231,364 58,655 62,589 5,924 58,365 247,369 5,434 33,616 20,302 226,735 230,858 33,875 35,382 2,567 1,129 669 7,797 150,810 140 ......... 51,321 FY 2011 (estimated) FY 2011 Percentage of distributed total 53,823 73,195 115,149 32,716 1,464,136 124,697 190,652 19,040 255,859 394,318 209,814 49,581 20,258 672,276 107,962 41,560 34,112 56,489 78,464 15,964 234,380 433,884 152,310 119,952 29,671 107,331 16,562 25,319 52,553 15,254 671,852 30,629 1,777,601 114,968 12,352 219,493 44,290 98,319 489,473 32,349 48,271 12,277 82,655 447,542 66,988 7,246 165,444 255,413 24,998 92,687 9,858 582 1,378 1,447 88,678 ......... 1,810 ......... 3 81,243 6,008,697 2,275,573 5,875,299 8,150,872 10,077,124 2009 undistributed is the Oversight takedown and does not include the $64 administrative oversight takedown in the 2009 American Recovery and Reinvestment Act. 2 FY 2010 undistributed is the Oversight takedown 3 FY 2011 undistributed in the Oversight takedown 4 Excludes undistributed obligations. 1 FY 0.54 0.73 1.15 0.33 14.65 1.25 1.91 0.19 2.56 3.94 2.10 0.50 0.20 6.73 1.08 0.42 0.34 0.57 0.78 0.16 2.34 4.34 1.52 1.20 0.30 1.07 0.17 0.25 0.53 0.15 6.72 0.31 17.78 1.15 0.12 2.20 0.44 0.98 4.90 0.32 0.48 0.12 0.83 4.48 0.67 0.07 1.66 2.56 0.25 0.93 0.10 0.01 0.01 0.01 0.89 ......... 0.02 ......... ......... 4 100.00 312 ANALYTICAL PERSPECTIVES Environmental Protection Agency, Office of Water 68-0103-0-1-304 Table 17–48. CAPITALIZATION GRANTS FOR CLEAN WATER STATE REVOLVING FUND (66.458) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) 51,950 27,806 32,895 25,995 333,570 37,163 56,916 19,533 14,682 159,805 78,552 30,774 22,808 209,809 112,149 72,081 41,936 59,130 55,469 35,964 112,366 157,741 199,766 95,925 41,858 129,094 27,808 23,769 19,533 53,198 189,853 23,620 518,988 71,568 23,482 299,469 32,644 52,443 157,078 26,680 47,595 22,894 67,490 212,366 24,480 22,808 95,149 80,812 72,424 125,601 22,808 3,754 3,018 1,852 70,071 ......... 1,963 66,341 62 ......... ......... 1 ......... 325 ......... ......... 3,280 10,405 ......... 18,203 5,224 ......... 331 369 ......... 522 ......... 7,456 1 ......... ......... 3,376 81 ......... 18,855 ......... 1 3,447 ......... ......... 3,274 ......... 12,281 (2,600) 416 5,453 40 48,630 4,515 8 ......... ......... 31,102 ......... 3,274 ......... ......... 14 ......... ......... 1,605 246 474 1,115 ......... 458 2,598 8,597 23,013 12,317 13,901 13,463 147,193 16,463 25,213 10,103 10,103 69,471 34,797 15,940 10,103 93,080 49,600 27,854 18,577 26,194 22,624 15,932 49,777 69,876 88,493 37,827 18,542 57,054 10,103 10,527 10,103 20,567 84,102 10,103 227,170 37,144 10,103 115,861 16,627 23,249 81,524 13,819 21,084 10,103 29,897 94,067 10,844 10,103 42,119 35,791 32,083 55,639 10,103 11,129 8,052 5,172 26,843 ......... 6,459 42,000 ......... 23,013 12,317 13,902 13,463 147,518 16,463 25,213 13,383 20,508 69,471 53,000 21,164 10,103 93,411 49,969 27,854 19,099 26,194 30,080 15,933 49,777 69,876 91,869 37,908 18,542 75,909 10,103 10,528 13,550 20,567 84,102 13,377 227,170 49,425 7,503 116,277 22,080 23,289 130,154 18,334 21,092 10,103 29,897 125,169 10,844 13,377 42,119 35,791 32,097 55,639 10,103 12,734 8,299 5,646 27,958 ......... 6,917 44,598 8,597 21,917 11,731 13,238 12,822 140,180 15,678 24,012 9,622 9,622 66,161 33,139 15,180 9,622 88,645 47,236 26,527 17,692 24,946 21,546 15,172 47,405 66,546 84,277 36,025 17,659 54,335 9,622 10,025 9,622 19,587 80,095 9,622 216,345 35,374 9,622 110,341 15,835 22,141 77,639 13,161 20,079 9,622 28,473 89,585 10,328 9,622 40,112 34,085 30,554 52,988 9,622 10,619 7,683 4,935 25,564 ......... 6,163 40,000 ......... 4,677,357 193,377 2,100,000 2,293,375 2,000,000 FY 2011 Percentage of distributed total 1.10 0.59 0.66 0.64 7.01 0.78 1.20 0.48 0.48 3.31 1.66 0.76 0.48 4.43 2.36 1.33 0.88 1.25 1.08 0.76 2.37 3.33 4.21 1.80 0.88 2.72 0.48 0.50 0.48 0.98 4.00 0.48 10.82 1.77 0.48 5.52 0.79 1.11 3.88 0.66 1.00 0.48 1.42 4.48 0.52 0.48 2.01 1.70 1.53 2.65 0.48 0.53 0.38 0.25 1.28 ......... 0.31 2.00 ......... 1 100.00 313 17. AID TO STATE AND LOCAL GOVERNMENTS Environmental Protection Agency, Office of Water 68-0103-0-1-304 Table 17–49. CAPITALIZATION GRANTS FOR DRINKING WATER STATE REVOLVING FUND (66.468) (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) 56,292 19,500 57,034 34,714 161,569 42,498 19,500 26,990 27,780 88,530 62,921 152,348 23,901 94,205 42,982 32,541 27,646 47,864 40,777 27,646 44,185 60,362 150,335 24,697 27,954 48,010 27,646 35,316 19,500 27,646 61,181 31,040 123,076 72,771 33,850 69,827 39,627 45,979 79,948 27,646 27,646 27,646 43,120 227,768 27,646 41,313 52,666 53,718 29,886 70,976 20,012 2,223 3,137 9,975 19,500 ......... 1,999 137,879 32,033 ......... 8,172 ......... 10,229 ......... ......... 8,146 ......... 8,668 ......... (18,100) 8,146 ......... ......... ......... 10,148 ......... ......... ......... ......... 3,026 ......... 52 ......... ......... 15,816 6,672 ......... 8,146 8,146 ......... 8,146 ......... 27,414 2,600 100 ......... 11,912 5,762 8,146 806 ......... ......... 4,359 ......... 8,146 ......... ......... 8,146 ......... ......... 202 887 504 8,146 ......... 835 2,644 11,983 16,823 13,573 27,259 20,539 126,958 24,074 13,573 13,573 13,573 44,316 32,071 13,573 13,573 51,230 22,638 23,169 16,605 19,592 25,649 13,573 21,059 25,303 41,226 22,776 14,125 26,234 13,573 13,573 13,573 13,573 28,995 13,573 89,427 35,593 13,573 43,610 16,863 13,573 39,766 13,573 13,573 13,573 15,084 86,254 13,573 13,573 23,008 34,650 13,573 23,399 13,573 2,057 5,138 6,148 13,573 ......... 7,016 27,740 2,000 16,823 21,745 27,259 30,768 126,958 24,074 21,719 13,573 22,241 44,316 13,971 21,719 13,573 51,230 22,638 33,317 16,605 19,592 25,649 13,573 24,085 25,303 41,278 22,776 14,125 42,050 20,245 13,573 21,719 21,719 28,995 21,719 89,427 63,007 16,173 43,710 16,863 25,485 45,528 21,719 14,379 13,573 15,084 90,613 13,573 21,719 23,008 34,650 21,719 23,399 13,573 2,259 6,025 6,652 21,719 ......... 7,851 30,384 13,983 15,608 12,593 25,290 19,056 117,792 22,335 12,593 12,593 12,593 41,116 29,755 12,593 12,593 47,531 21,003 21,496 15,406 18,178 23,797 12,593 19,538 23,476 38,250 21,132 13,105 24,340 12,593 12,593 12,593 12,593 26,901 12,593 82,970 33,023 12,593 40,461 15,646 12,593 36,894 12,593 12,593 12,593 13,995 80,026 12,593 12,593 21,347 32,148 12,593 21,710 12,593 ......... ......... ......... 12,593 ......... ......... 27,740 18,889 2,966,978 188,005 1,387,000 1,575,006 1,287,000 FY 2011 Percentage of distributed total 1.23 0.99 1.99 1.50 9.29 1.76 0.99 0.99 0.99 3.24 2.35 0.99 0.99 3.75 1.66 1.70 1.21 1.43 1.88 0.99 1.54 1.85 3.02 1.67 1.03 1.92 0.99 0.99 0.99 0.99 2.12 0.99 6.54 2.60 0.99 3.19 1.23 0.99 2.91 0.99 0.99 0.99 1.10 6.31 0.99 0.99 1.68 2.54 0.99 1.71 0.99 ......... ......... ......... 0.99 ......... ......... 2.19 ......... 1 100.00 314 ANALYTICAL PERSPECTIVES Federal Communications Commission 27-5183-0-2-376 Table 17–50. UNIVERSAL SERVICE FUND E-RATE (Obligations in thousands of dollars) Estimated FY 2010 obligations from: State or Territory FY 2009 Actual Alabama .................................................................................................................... Alaska ........................................................................................................................ Arizona ...................................................................................................................... Arkansas .................................................................................................................... California ................................................................................................................... Colorado .................................................................................................................... Connecticut ................................................................................................................ Delaware ................................................................................................................... District of Columbia ................................................................................................... Florida ........................................................................................................................ Georgia ...................................................................................................................... Hawaii ........................................................................................................................ Idaho .......................................................................................................................... Illinois ......................................................................................................................... Indiana ....................................................................................................................... Iowa ........................................................................................................................... Kansas ....................................................................................................................... Kentucky .................................................................................................................... Louisiana ................................................................................................................... Maine ......................................................................................................................... Maryland .................................................................................................................... Massachusetts ........................................................................................................... Michigan .................................................................................................................... Minnesota .................................................................................................................. Mississippi ................................................................................................................. Missouri ..................................................................................................................... Montana ..................................................................................................................... Nebraska ................................................................................................................... Nevada ...................................................................................................................... New Hampshire ......................................................................................................... New Jersey ................................................................................................................ New Mexico ............................................................................................................... New York .................................................................................................................... North Carolina ........................................................................................................... North Dakota ............................................................................................................. Ohio ........................................................................................................................... Oklahoma .................................................................................................................. Oregon ....................................................................................................................... Pennsylvania ............................................................................................................. Rhode Island ............................................................................................................. South Carolina ........................................................................................................... South Dakota ............................................................................................................. Tennessee ................................................................................................................. Texas ......................................................................................................................... Utah ........................................................................................................................... Vermont ..................................................................................................................... Virginia ....................................................................................................................... Washington ................................................................................................................ West Virginia .............................................................................................................. Wisconsin .................................................................................................................. Wyoming .................................................................................................................... American Samoa ....................................................................................................... Guam ......................................................................................................................... Northern Mariana Islands .......................................................................................... Puerto Rico ................................................................................................................ Freely Associated States ........................................................................................... Virgin Islands ............................................................................................................. Indian Tribes .............................................................................................................. Undistributed ............................................................................................................. Total .......................................................................................................................... 1 Excludes undistributed obligations. Previous authority New authority Total FY 2011 (estimated) 26,201 17,494 39,406 17,506 207,060 12,149 18,756 615 12,411 70,855 58,293 1,865 4,120 59,563 15,991 8,536 13,286 22,266 31,131 5,106 8,840 18,248 46,004 13,260 21,405 18,495 3,047 7,256 2,496 1,865 32,333 22,971 173,459 45,492 2,838 52,257 26,581 11,933 56,927 4,745 30,247 4,558 33,610 136,742 12,986 1,247 24,869 23,957 7,210 11,499 3,609 3,426 271 693 7,610 ......... 3,909 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 35,462 23,679 53,336 23,695 280,525 16,444 25,386 833 16,798 95,901 78,899 2,525 5,577 80,618 21,644 11,553 17,983 30,137 42,136 6,910 11,965 24,698 62,266 17,948 28,972 25,032 4,123 9,821 3,379 2,525 43,763 31,090 234,774 61,573 3,841 70,730 35,977 16,151 77,050 6,422 40,939 6,169 45,490 185,079 17,577 1,688 33,659 32,425 9,759 15,564 4,884 4,636 366 938 10,300 ......... 5,290 ......... ......... 35,462 23,679 53,336 23,695 280,525 16,444 25,386 833 16,798 95,901 78,899 2,525 5,577 80,618 21,644 11,553 17,983 30,137 42,136 6,910 11,965 24,698 62,266 17,948 28,972 25,032 4,123 9,821 3,379 2,525 43,763 31,090 234,774 61,573 3,841 70,730 35,977 16,151 77,050 6,422 40,939 6,169 45,490 185,079 17,577 1,688 33,659 32,425 9,759 15,564 4,884 4,636 366 938 10,300 ......... 5,290 ......... ......... 36,491 24,366 54,884 24,383 288,388 16,921 26,123 857 17,286 98,685 81,189 2,598 5,739 82,956 22,272 11,889 18,505 31,012 43,359 8,842 12,312 25,415 64,073 18,469 29,813 25,759 4,243 10,106 3,477 2,598 45,033 31,993 241,589 63,361 3,953 72,783 37,021 16,620 79,287 6,608 42,127 6,348 46,811 190,452 18,087 1,737 34,636 33,366 10,042 16,016 5,026 4,771 377 965 10,599 ......... 5,444 ......... ......... 1,519,505 ......... 2,056,904 2,056,904 2,118,062 FY 2011 Percentage of distributed total 1.72 1.15 2.59 1.15 13.62 0.80 1.23 0.04 0.82 4.66 3.83 0.12 0.27 3.92 1.05 0.56 0.87 1.46 2.05 0.42 0.58 1.20 3.03 0.87 1.41 1.22 0.20 0.48 0.16 0.12 2.13 1.51 11.41 2.99 0.19 3.44 1.75 0.78 3.74 0.31 1.99 0.30 2.21 8.99 0.85 0.08 1.64 1.58 0.47 0.76 0.24 0.23 0.02 0.05 0.50 ......... 0.26 ......... ......... 1 100.00 18. STRENGTHENING FEDERAL STATISTICS Federal statistical programs produce key information to illuminate public and private decisions on a range of topics, including the economy, the population, agriculture, crime, education, energy, the environment, health, science, and transportation. The share of budget resources spent on supporting Federal statistics is relatively modest—about 0.02 percent of GDP in non-decennial census years and roughly double that in decennial census years— but that funding is leveraged to inform crucial decisions in a wide variety of spheres. The ability of governments, businesses, and the general public to make appropriate decisions about budgets, employment, investments, taxes, and a host of other important matters depends critically on the ready availability of relevant, accurate, and timely Federal statistics. The Federal statistical community remains eager for opportunities to improve these measures of our Nation’s performance. For example, during 2009, Federal statistical agencies: (i) incorporated the Troubled Assets Relief Program, Federal assistance to Fannie Mae and Freddie Mac, the American Recovery and Reinvestment Act, and the “cash for clunkers” program into the national economic accounts (Bureau of Economic Analysis); (ii) conducted the Address Canvassing operation for the 2010 Decennial Census, in which more than 150,000 temporary field workers fanned out across the country and verified the addresses and locations of over 140 million housing units in less than four months (Census Bureau); (iii) added three industries to productivity measures, which are used to analyze trends in production costs, to compare trends in efficiency across industries, and to examine the effects of technological improvements (Bureau of Labor Statistics); (iv) developed the full scale Business R&D and Innovation Survey, which will provide government and business policymakers, researchers, and the media with information needed to measure and evaluate the Nation’s R&D enterprise and to assess how effective our R&D efforts are in keeping the United States competitive globally (Division of Science Resources Statistics/NSF and the Census Bureau); (v) expanded the Research and Development (R&D) satellite account and developed a framework for capitalizing R&D expenditures in the 2007 benchmark Input-Output accounts (Bureau of Economic Analysis); (vi) collected new data on employer costs associated with pension funds and health coverage and other new data sets targeting specific needs of the Bureau of Economic Analysis, including data on franchising, computer systems integration, patient care, and research and development acquisitions (Census Bureau); (vii) completed the first national assessment of the scope and extent of “food deserts”—areas with limited access to affordable and nutritious food—whose findings will allow targeting of efforts to increase access to healthy, affordable food (Economic Research Service); (viii) published data for the time period 1959-2007 to gain a more complete understanding of the long-term trends in the number and percentage of persons under age 65 with different types of health insurance coverage and with no coverage (National Center for Health Statistics); (ix) prepared to conduct the firstever national On-Farm Renewable Energy Production Survey (National Agricultural Statistics Service); (x) used the cost savings from electronic tax return information filing to expand and integrate samples and to increase published data (Statistics of Income Division, IRS); (xi) expanded the program to collect and publish U.S. and regional renewable fuel (mainly ethanol) information (Energy Information Administration); (xii) released the 2007 Commodity Flow Survey data providing characteristics of the 12.5 billion tons of raw materials and goods transported by the Nation’s freight transportation system (Bureau of Transportation Statistics); and (xiii) launched a major multi-year project to redesign the National Crime Victimization Survey, which provides the only national data on the extent of crime both reported and not reported to law enforcement as well as the characteristics and consequences of such victimization to the American public (Bureau of Justice Statistics). For Federal statistical programs to be used by their wide range of users, the underlying data systems must be credible. To foster this credibility, Federal statistical programs seek to adhere to high-quality standards and to maintain integrity and efficiency in the production of data. As the collectors and providers of these basic statistics, the responsible agencies act as data stewards—balancing public information demands and decision-makers’ needs for information with legal and ethical obligations to minimize reporting burden, respect respondents’ privacy, and protect the confidentiality of the data provided to the Government. This chapter presents highlights of principal statistical agencies’ 2011 budget proposals. Highlights of 2011 Program Budget Proposals The programs that provide essential statistical information for use by governments, businesses, researchers, and the public are carried out by more than 80 agencies spread across every department and several independent agencies. Excluding cyclical funding for the decennial census, nearly 40 percent of the total budget for these programs provides resources for 13 agencies or units that have statistical activities as their principal mission (see Table 18–1). The remaining funding supports work in more than 70 agencies or units that carry out statistical activities in conjunction with other missions such as providing services, conducting research, or implementing regulations. More comprehensive budget and program 315 316 information about the Federal statistical system will be available in OMB’s annual report, Statistical Programs of the United States Government, Fiscal Year 2011, when it is published later this year. The following highlights elaborate on the Administration’s proposals for the programs of the principal Federal statistical agencies. Bureau of Economic Analysis (BEA): Funding is requested to continue BEA’s core programs, and to: (1) improve Foreign Direct Investment statistics by reexamining the coverage and detail of the data collected on multinational corporations, redesigning surveys to maximize their efficiency, and improving the quantity and usefulness of the resulting data; (2) develop a New Economic Dashboard to expand the statistical coverage of the business and government sectors and to develop new data series that will better serve the statistical and regulatory communities including new measures of GDPby-Industry on a quarterly basis (currently only available on an annual basis) as well as new detail and breakouts of the business sector, with an emphasis on small businesses; (3) produce a new suite of measures of household income distribution, expenses, debt, and savings in “Everyday Economics: The American Household,” which will detail household spending power, debt, and the composition of savings to provide critical tools necessary to identify signs of weakness in the future; and (4) create common BEAEIA statistics on energy supply, consumption, and price data to provide consistent metrics for discussing energy trends and developing forecast models of energy supply and consumption dynamics. Bureau of Justice Statistics (BJS): Funding is requested to: (1) improve BJS’ criminal victimization statistics derived from the National Crime Victimization Survey (NCVS) as well as their usefulness by addressing recommendations of the 2008 National Research Council report, Surveying Victims: Options for Conducting the National Crime Victimization Survey; (2) respond to recommendations of the 2009 National Research Council report, Ensuring the Quality, Credibility, and Relevance of U.S. Justice Statistics; and (3) maintain BJS’ core statistical programs that provide law enforcement data from more than 3,000 local agencies on the organization and administration of police and sheriffs’ departments; nationally representative prosecution data on resources, policies, and practices of local prosecutors; court and sentencing statistics, including Federal and State case processing data; data on correctional populations and facilities from Federal, State, and local governments; and information about prisoner re-entry and recidivism. Bureau of Labor Statistics (BLS): Funding is requested to provide support for ongoing BLS programs, and to: (1) continue development of the new “green-collar” jobs data series, which will measure employment and wages for businesses whose primary activities can be defined as “green,” and produce information on the occupations involved, in whole or in part, in green economic activities; (2) expand the Occupational Employment ANALYTICAL PERSPECTIVES Statistics (OES) sample to include annual data from a subset of establishments, allowing year-to-year comparisons of occupational trends in employment and wages; (3) modernize the Consumer Expenditure (CE) survey, improving the quality of data generated by the survey and the accuracy of its inputs into the Consumer Price Index (CPI); (4) reduce the variance of the CPI by increasing by 50 percent the number of CPI commodity and services price quotes collected; (5) research how to improve or replace the current survey for identifying the sample of retail outlets that is used to initiate and reprice items in the CPI; (6) modify the CE survey to support the Census Bureau in its development of a supplemental statistical poverty measure; (7) expand BLS’s ability to produce estimates for local pay areas for the President’s Pay Agent via a new model-based approach that utilizes OES and Employment Cost Index data, while allowing for the elimination of the Locality Pay Surveys (LPS); and (8) restructure the way in which the Current Employment Statistics (CES) program produces State and metropolitan area data estimates and improve the program’s response rates for both preliminary and final estimates, thereby reducing the statistical error on the estimates. Savings from the LPS and CES items above, and the elimination of the International Labor Comparisons program, will partially fund these improvements. Bureau of Transportation Statistics (BTS): Funding is requested to support the development and improvement of transportation system performance measures and for the maintenance of the BTS core statistical programs, including: (1) planning and implementation of the initial phase of the 2012 Commodity Flow Survey; (2) production of transportation statistics related to safety, economic competitiveness, and livable communities; (3) release of monthly statistics on the modes of transportation used in international trade with the U.S. major economic partners; (4) production of a core set of transportation performance indicators including the Transportation Services Index; and (5) collection, analysis, and dissemination of airline performance data. Census Bureau: Funding is requested for the Census Bureau’s ongoing economic and demographic programs and for the 2010 Census. For the 2010 Census program, funding is requested to: (1) compile and deliver State-level population totals from the 2010 Census to the President for the apportionment of seats in the U.S. House of Representatives by December 31, 2010, as well as to deliver data to the States for use in redistricting by March 31, 2011; (2) provide data used for the distribution of Federal funds and for other purposes; (3) complete fieldwork for the Coverage Measurement Program which gathers additional information to identify reasons for differences between pre-census listing operations and postcensus records; and (4) conduct evaluations of the 2010 Census. For the Census Bureau’s other economic and demographic programs, funding is requested for: (1) the Geographic Support program for improved address coverage, continual update of road and other special data, and 18. STRENGTHENING FEDERAL STATISTICS enhanced quality measures of the geographic programs; (2) the American Community Survey program to expand the sample size to increase the reliability of small area estimates, to enhance field and telephone center data collection, to conduct a 100 percent non-response follow-up operation in Remote Alaska and small American Indian, Alaska Native, and Native Hawaiian Homeland areas, and for additional review of three-year and five-year data; (3) expansion of research and production capacities in order to complement the official poverty measures with annual supplementary measures of poverty from the Current Population Survey; (4) using administrative records to simulate the 2010 Census in order to thoroughly examine and document the coverage and quality of major governmental and commercial administrative record sets; (5) enhancing existing data integration infrastructure in order to facilitate more efficient and higher quality record linkage among health surveys and Centers for Medicare & Medicaid Services administrative data; and (6) additional resources devoted to IT security. Economic Research Service (ERS): Funding is requested to continue ERS’ core programs, and to enable ERS to provide the best possible analysis of how USDA policies and programs can better support healthy food choices, healthy consumers, and sustainable and healthy communities by developing data and conducting economic research on the access by low-income communities to affordable and nutritious food and on the local food environment--the type of food retail outlets, food prices, and the availability of fresh, local food sources. Data would be obtained through linking spatial characteristics available in Federal and proprietary data sets including community factors such as race/ethnicity, unemployment rates, public transportation systems, crime rates, school characteristics, USDA food assistance program delivery and participation, local food prices, food store and fast food access and availability, local costs of healthy diets, and other environmental factors. Funds are also requested to maintain data confidentiality and research efficiency during physical relocation of secure data labs. These initiatives would be funded within available resources by reductions in lower priority programs. Additional funding is requested to: (1) use administrative records to better understand how nutrition assistance and other government assistance programs work together to provide a social safety net, to better assess how nutrition assistance and health care policy work together to improve dietary and health outcomes; and (2) serve as the Program Management Office for an interagency Statistical Community of Practice, designed to increase the sharing across agencies of statistical protocols and tools for the collection, storage, analysis, and dissemination of statistical data to improve the statistical system’s data quality, ease of use, information security, and system-wide operating efficiency. Energy Information Administration (EIA): Funding is requested to maintain core energy data, analyses, and forecasting programs critical to energy markets 317 and policymakers, and to: (1) perform research on energy market behavior and the interrelationship of energy and financial markets; (2) expand surveys of energy consumption in homes, commercial buildings, and manufacturing to provide baseline information critical to understanding energy utilization and for use as the basis for benchmarking and performance measurement of energy efficiency programs; (3) continue to upgrade the aging National Energy Model, which will improve EIA’s ability to assess and forecast supply, demand, and technology trends affecting U.S. and world energy markets; and (4) continue to implement improvements in energy data coverage, quality, and integration. National Agricultural Statistics Service (NASS): The requested funding would reallocate resources by eliminating lower priority programs in order to free resources to: (1) improve county estimates of crop production used to administer risk management procedures as key triggers for crop insurance and disaster recovery programs; (2) expand the number of States that have a cropland data layer and provide NASS the ability to collect additional data on crop conditions, soil moisture, and/or drought monitoring to fill a significant informational gap in current remote sensing to measure climate change; and (3) establish an on-going organic agriculture data series to allow USDA and others to monitor the continued growth, evolution, and understanding of this sector in support of a nutritious domestic and international food supply. National Center for Education Statistics (NCES): Funding is requested to continue NCES’ core programs, and to: (1) conduct the National Assessment of Educational Progress (NAEP), including administration of 2011 national and State reading and math assessments at grades 4 and 8, a national writing assessment at grades 4, 8, and 12, a State grade 4 writing assessment, and assessments for a small number of urban districts that participate in the Trial Urban District Assessments; (2) participate in the 2011 Trends in International Mathematics and Science Study (TIMSS), a study of 4th and 8th grade mathematics and science achievement in the United States and other countries; (3) conduct an equating study between NAEP and TIMSS that would allow States to compare their students’ 8th grade mathematics achievement to that of students in other countries; (4) conduct the 2011 Programme for the International Assessment of Adult Competencies, an international assessment that will allow the United States to benchmark its adult literacy with that of other countries; and (5) provide support for the development of statewide longitudinal data systems to allow States to improve their data systems, including ensuring that information is available at the pre-school, postsecondary, and workforce levels in addition to kindergarten through grade 12. National Center for Health Statistics (NCHS): Funding is requested to continue data collection, analysis, and dissemination activities for NCHS surveys and 318 maintain sample sizes at the expanded levels of FY 2010, including the National Vital Statistics System, National Health Interview Survey, National Health and Nutrition Examination Survey (NHANES) and National Health Care Surveys; and to: (1) continue providing timely, accurate estimates of high priority health measures; (2) enhance the quality and usability of data access tools through improved tutorials; (3) fully support electronic birth records in all 50 States in FY 2011, and gradually phase in electronic death records over three years; (4) expand the sample size of the National Ambulatory Medical Care Survey to monitor the characteristics of ambulatory care providers and their patients at the national level and in selected States; (5) continue providing NHANES data on diet and nutrition, blood pressure, chronic diseases, and other health indicators; and (6) enhance the National Health Interview Survey to produce annual estimates for selected States on a broad range of health and health care measures. Office of Research, Evaluation, and Statistics (ORES), SSA: Funding is requested to continue ORES’ core programs, and to: (1) modernize ORES’ processes for developing and disseminating data from the Social Security Administration’s major administrative data files for statistical purposes; (2) support outside surveys and linkage of SSA administrative data to surveys; (3) create new public use files of administrative data, such as earnings histories for a sample of Social Security Numbers, and information on samples of Social Security and Supplemental Security Income beneficiaries; (4) strengthen microsimulation models that estimate the distributional effects of proposed changes in Social Security programs; and (5) develop a topical module for the redesign of the Survey of Income and Program Participation to address Social Security’s data needs for microsimulation models, program evaluation, and analysis. ANALYTICAL PERSPECTIVES Science Resources Statistics Division (SRS), NSF: Funding is requested to implement ongoing programs on the science and engineering enterprise, and to: (1) continue to implement redesign and improvement activities for a broad range of surveys, particularly the sample frame redesign of the National Survey of College Graduates and the suite of research and development surveys; (2) support the Science of Science and Innovation Policy program’s efforts to develop the data, tools, and knowledge needed for a new science of science policy by enhancing the comparability, scope, and availability of international data; (3) field a data collection on postdoctoral students based on pilot activities in FY2010; and (4) expand activities to develop improved data on innovation activities by developing an innovation module for the Business R&D and Innovation Survey and continuing the development of a Microbusiness R&D and Innovation Survey, with data collection expected to begin late in 2011. Statistics of Income Division (SOI), IRS: Funding is requested to continue SOI’s core programs, and to: (1) continue to modernize tax data collection systems, particularly to efficiently assimilate into SOI systems data captured from the electronic filing of tax and information returns; (2) examine means to better mask individual data records to minimize the risk of reidentification in the Individual Public-Use cross-section file; (3) expand and improve dissemination of tax data by implementing a table wizard application on www.irs.gov/taxstats, making data files available through www.data.gov, and supporting focused research projects that have the potential to improve the administration of the tax system; (4) develop statistical techniques to identify outliers and edit data in IRS administrative population files; and (5) provide relevant statistics needed to evaluate and monitor the tax-related provisions of the American Recovery and Reinvestment Act of 2009. 319 18. STRENGTHENING FEDERAL STATISTICS Table 18–1. 2009-2011 BUDGET AUTHORITY FOR PRINCIPAL STATISTICAL AGENCIES1 (in millions of dollars) Estimate 2009 Actual 2010 2011 Bureau of Economic Analysis ...................................................................... 87 94 Bureau of Justice Statistics2 ........................................................................ 51 67 109 70 Bureau of Labor Statistics ........................................................................... 597 611 646 Bureau of Transportation Statistics .............................................................. 27 28 30 Census Bureau3 ........................................................................................... 4169 7355 1297 Salaries and Expenses3 .......................................................................... Periodic Censuses and Programs .......................................................... 264 3905 289 7066 310 987 Economic Research Service ....................................................................... 80 82 87 Energy Information Administration .............................................................. 111 111 129 National Agricultural Statistics Service4 ....................................................... 152 162 165 National Center for Education Statistics5 ..................................................... 255 266 279 Statistics5 ................................................................................................ Assessment ............................................................................................ National Assessment Governing Board .................................................. 116 130 9 127 130 9 135 135 9 National Center for Health Statistics6 ........................................................... 125 139 162 Office of Research, Evaluation, and Statistics, SSA .................................... 27 29 32 Science Resources Statistics Division, NSF ............................................... 39 35 37 Statistics of Income Division, IRS ................................................................ 42 43 44 1 Reflects any recissions. 2 Includes funds for management and administrative costs of $6, $7, and $7 million in 2009, 2010, 2011, respectively that were previously displayed separately. 3 Salaries and Expenses funds include discretionary and mandatory funds. For the Periodic Censuses and Programs account, FY 2009 includes $1 billion in American Recovery and Reinvestment Act funding. 4 Includes funds for the periodic Census of Agriculture of $37, $38, and $33 million in 2009, 2010, and 2011, respectively. FY 2009 funding was used to summarize and publish the 2007 Census of Agriculture. FY 2010 and FY 2011 funding will be used to continue planned follow-on studies and preparations for the 2012 Census of Agriculture. 5 Includes funds for salaries and expenses of $17, $18, and $18 million in 2009, 2010, and 2011, respectively, that are reflected in the Institute of Education Sciences (IES) budget. In addition, NCES manages the IES grant program for the State Longitudinal Data System which is funded at $65 million, $58 million, and $65 million in 2009, 2010, and 2011, respectively. 6 All funds from the Public Health Service Evaluation Fund. Administrative costs for NCHS that previously were displayed as part of the NCHS budget line are now reflected in two consolidated CDC-wide budget lines for management and administrative costs. 19. INFORMATION TECHNOLOGY Twenty years ago, people working for the Federal Government had access to the world’s best technology. Today, many Government employees have better technology at home than at work. The Federal Government spends tens of billions of dollars annually on information technology (IT). However, fragmentation, poor project execution, and the drag of legacy technology have prevented the Government from realizing the productivity and performance gains that are found when IT is deployed effectively in the private sector. Under the leadership of the Federal Chief Information Officer, the Administration will continue its efforts to close the gap in effective technology use between the private and public sectors. The Administration will continue to streamline operations, transform customer service, and maximize the return on investment from information technology. In its first year in office, the Obama Administration leveraged the power of information technology to transform the Federal Government. Starting on his first full day in office, the President led this effort by issuing a directive to make the Government more open and transparent. The Administration engaged the American people in new ways such as virtual town hall meetings and improved the quality of the services delivered to the public. Key initiatives demonstrate the commitment to changing the way Government works: • In May 2009, Data.gov was launched to enhance access to Federal data. Since then, the site has grown to contain over 167,000 data sets and tools for using the data. After the Environmental Protection Agency toxic release data was featured on Data.gov, the frequency of downloads of that data increased over tenfold. • In June 2009, the IT Dashboard was implemented to provide unprecedented transparency into $78 billion in annual Federal spending on IT investments. Agency Chief Information Officers now review the IT Dashboard monthly to provide updated status information on major IT investments more frequently than ever before. • In September 2009, Apps.gov was launched to provide Federal agencies easy access to new cloud computing and social media technologies. This enabled agencies to transform their computing services quickly and avoid months of delay and redundant effort. • In October 2009, a new platform, Cyberscope, was launched to streamline the annual security reporting workload and improved the ability to analyze and report on IT security across the Federal Government. • In December 2009, OMB issued the Open Government Directive instructing all agencies to implement the principles of transparency, participation and collaboration set forth by the President. • In January 2010, the Federal CIO held the first “TechStat” session with the Environmental Protection Agency, using the IT Dashboard to identify and correct IT investment problems. TechStat sessions will be a regular practice going forward to detect IT investment problems early, reduce waste, and increase the rate of successful project completion. These efforts demonstrate that the Federal Government can implement new technology to solve old problems quickly and cost-effectively. In 2011, the Administration will build on these efforts to leverage the power of technology to transform the Government and meet its responsibilities to manage IT resources with a bold new strategy to guide the Federal enterprise. Table 19–1. FEDERAL IT SPENDING, BUDGETS OF 2009–2011 INCLUDING MAJOR FEDERAL IT INVESTMENT (Investment counts, spending in millions of dollars) 2009 2010 2011 Number of Major IT Investments ................................................................................................ 807 781 809 All IT Investments ....................................................................................................................... 6,575 7,409 7,463 Major IT Investment Spending ($ M). .......................................................................................... 37,250 40,328 40,409 All IT Investment Spending ($ M) ............................................................................................... 71,227 Notes: The table compares the Budgets of three years, not final actuals or enacted levels for 2009 or 2010. Values for 2011 are based on the best available agency estimates 78,440 79,375 321 322 ANALYTICAL PERSPECTIVES MANAGING THE FEDERAL IT PORTFOLIO Federal Spending on Information Technology— The total planned spending on information technology in 2011 is $79.4 billion, a 1.2% increase from the 2010 Budget level of $78.4 billion. Table 19.1 above displays the spending estimates presented in the last three budgets. Data displayed in Charts 19.1 and 19.2 reflect actual levels through 2009 and the enacted 2010 level, highlighting the 1.6% decrease from the 2010 enacted level of $80.6 billion. Identifying ways to achieve greater efficiencies in the areas of most rapid cost growth in the past, like development of new mission-oriented systems and infrastructure, is an important part of the Administration’s IT strategy. The strategy to control IT spending will also focus on reversing the growth in the number of agency data centers which increased over 150 percent from 432 in 1998 to 1,100 in 2009. Federal IT spending of nearly $80 billion a year demands continuous improvements in oversight. Responding to the need, the Administration launched a publicly accessible IT Dashboard, located at http://it.usaspending.gov, to increase the visibility of agencies’ IT spending, promote accountability, and help managers identify and eliminate redundancies. Here American taxpayers can see whether major IT investments are well managed by viewing costs, schedule, performance, and CIO ratings of IT investments. The Dashboard’s capabilities will continue to improve oversight of the main drivers behind increased IT spending, including mission-related spending (up approximately 90 percent since 2001), shown in Chart 19–2, and investments for internal management. Federal Enterprise Architecture—Early engagement in strategic planning processes and development of robust system architectures is central to the Administration’s approach to effective IT. Stronger interventions early in project planning are needed to give the Federal enterprise a modern, interconnected, responsive information technology environment, which will support improved business processes and program performance. The history of many past failures in Federal IT investments is rife with examples where proper planning, consultation with business owners, and the development of a sound architecture could have saved many millions of dollars from being wasted, rather than waiting until burgeoning costs and repeated non-deliveries on required capabilities forced managers to abandon the project. For example, use of the National Information Exchange Model, a Federal, State, local and tribal interagency initiative that enables seamless information exchange, has improved information sharing and reduced redundant investments. Starting in 2009 with initiatives such as Data.gov and the expanded USASpending.gov, the Federal CIO began to transform the face of Federal IT investment management. This new approach will redesign IT in key business areas from the ground up, based on the concept of central Federal platforms designed to streamline processes and modernize information technology services. This will provide an interoperable, secure, and cost-effective Federal IT enterprise. Chart 19-1. Totals for Federal IT Spending, Infrastructure Share of Spending and Data Center Growth 2011 (Billions of dollars) 90 29% IT Infrastructure Other IT Spending 71% 75 1,200 60 1,100 1,000 45 Total for Major Agencies 30 Number of reported data centers in Federal Government 800 600 432 400 15 200 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 0 1998 2010 323 19. INFORMATION TECHNOLOGY MODERNIZING FEDERAL AND NATIONAL IT INFRASTRUCTURE TO BE EFFICIENT AND EFFECTIVE Centralized Provision of Information Technology Services for Non-Military Agencies—As technology and IT management practices continue to evolve at a rapid pace, we need to identify and adopt creative and innovative means to achieve greater efficiency and effectiveness. Following examples set by the Department of Defense, several State governments, and best practices in private industry, the Administration will establish one or more efficient, centralized service providers for non-military agencies for key strategic IT services. Centralizing key Federal IT services through this approach will reduce duplicative and wasteful spending, reduce facility space usage and energy consumption, increase security, and improve service delivery. Centralized provision of key IT services could prevent billions of dollars in increased costs across the Federal Government. Several IT services have been identified as potential candidates for delivery through new platforms hosted by central service providers. Central service providers will leverage planning and analysis conducted in 2010 to deliver shared IT services more efficiently and effectively. Governance, funding, performance metrics and service models will be created, communicated and implemented. In 2011, previous pilot efforts will migrate into production. The Office of Management and Budget (OMB) will provide guidance addressing the provision of services by central providers and their role in supporting the efficient and effective use of IT in the Federal Government in delivering benefits to the public. Cloud Computing—Adoption of a cloud computing model is a major part of the strategy to achieve efficient and effective IT. After evaluation in 2010, agencies will deploy cloud computing solutions across the Government to improve the delivery of IT services. There will be an online storefront to enable subscribers to access lightweight collaboration tools, software, and platform and infrastructure service offerings in a cloud environment. Cloud computing will be implemented in a secure manner. Data Center Consolidation—Data center consolidation is another key element of the new Federal IT strategy. It is clear that agencies are not implementing technological solutions as effectively and efficiently as possible. A 1998 survey of Federal agencies identified 432 agency data centers. In September 2009, agencies reported that the number of Federal data centers grew to 1,100. This growth trend conflicts with the proven best practice of consolidating and reducing the number of data centers to reduce costs, energy consumption, and environmental impacts, and improve service and performance. Consolidating Federal data centers will play an important role in meeting the goals of Executive Order 13423 “Strengthening Federal Environmental, Energy and Transportation Management,” Executive Order 13514 “Federal Leadership in Environmental, Energy, and Economic Performance,” and the Energy Security and Independence Act of 2007. OMB will work with agencies to develop a Government-wide strategy and agency plans to reduce the number and cost of Federal data centers. This will reduce energy consumption, space usage and environmental impacts, while increasing the utilization and efficiency of IT assets, in concert with the transition to cloud computing. OMB will monitor agency implementa- Chart 19-2. Components of Federal IT Spending – Mission Support and Infrastructure Spending shown in billions of dollars 35 30 25 20 15 Part 1. Mission Area Support Part 2. IT Infrastructure 10 5 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 324 tions of data center consolidation plans, identifying and addressing any problems that arise. Leveraging the Federal Government’s Buying Power and the Federal eMall—The Federal Government often buys information technology through numerous, fragmented suboptimal purchases. Existing programs such as Smart Buy, run by the General Services Administration, enable the government to pool its purchasing, but they are limited in scope and much more can be done. In 2009, Apps.gov was established to provide a modern online storefront to streamline agencies’ acquisition of software at low cost or no cost. OMB will work with the acquisition community to identify additional opportunities to consolidate purchases, reduce administrative costs, and leverage Federal buying power to get the greatest value for the taxpayers’ dollars. Federal agencies are spending upwards of $20 billion annually using purchase cards. In many instances, staff within the same agency purchase identical goods through separate orders. Some of these orders are placed through existing on-line ordering portals (e.g., GSA Advantage, Navy eMall); others are placed over the phone or by fax; and many are made by staff walking into stores. Currently, there is no effective way for agencies to collect the data on all of their purchase card activity so that they can identify savings opportunities, such as taking advantage of bulk discounts or soliciting more strategic sourcing opportunities. Moving the majority of routine Federal purchase card transactions to one or more of the existing online Federal eMalls has the potential for significant annual savings. Specifically, an on-line Federal eMall will provide visibility into Government-wide purchase card transactions, including the ability to view and analyze purchase data across the Government to more effectively develop strategic sourcing policies. At the same time, internal controls related to Federal purchase cards will be improved through the use of electronic approval of purchases, records of purchases, and documentation of purchases maintained electronically. OMB will work with agencies to expand the use of on-line eMalls for Federal purchases in 2010 and monitor these efforts for further expansion in 2011 and beyond based on lessons learned. Building a Strong Federal IT Workforce—Rapid advances in IT are driving strong demand for highly skilled employees to manage IT projects and systems needed to improve program performance. Qualified personnel with the necessary competencies are required to help ensure agency IT systems are well planned, managed, operated and maintained. The need for skilled IT professionals, including experienced managers for major IT investment projects, has steadily increased. According to the Office of Personnel Management, there were about 70,000 IT professionals (GS-2210 Federal job series) in the Federal workforce as of March 2009. Increasing demands will conflict with anticipated retirements of current IT professionals projected by the Center for Workforce Information at OPM to continue at a rate of over 2,500 annually (or about 4% of the workforce) for the next seven years. In 2010, the Federal CIO Council will conduct a government-wide IT workforce survey to enable agency ANALYTICAL PERSPECTIVES managers to identify future workforce needs. Streamlined hiring processes will help agencies to attract and retain the best talent in the future. An Efficient Federal Workforce—With rapid advances in IT, agencies must adopt the best in 21st century technology to attract and retain the best and brightest future employees and enable all Federal employees to work at their peak performance. Much of the work within the Government could be improved with a technology platform that enables effective collaboration across agencies, across distances, and across governmental boundaries. The rise in social media and web 2.0 technologies has proven that no single organization has a monopoly on good ideas. Today, in the Federal Government, it is difficult just to locate a person in another agency, much less find people with common interests and problems and leverage IT to work collaboratively. A collaboration platform would integrate social media technology with the ability to collaborate across Government boundaries. This platform would enable employees to locate other Government employees with common challenges, needed skills, and ideas to solve common problems, communicate and share information, and generate better solutions to problems more efficiently. In 2010, we will evaluate alternatives, determine the best solutions, develop an implementation plan, and initiate implementation. In 2011, these capabilities will be deployed across the Federal Government. Health Information Technology (HIT)—As the Federal Government implements the requirements of the HITECH Act of 2009, the Administration will continue to leverage Federal information technology to support goals for population health, encourage care coordination through the development of interoperability standards, and assist the development and integration of privacy and security protections into the HIT framework. Smart Grid—Our electricity transmission grid must be expanded and modernized to improve reliability, efficiency, and security, while enabling increased generation from clean energy sources. In 2011, the Administration will continue to advance the development of advanced grid technologies such as smart metering and communications, cybersecurity systems, and large-scale energy storage. These technologies will promote energy savings for consumers, increase energy efficiency, and foster the growth of renewable energy sources like wind and solar power. Focus on Customer Service – In 2010 and 2011, the Federal CIO will continue to collaborate with agencies to harness the power of IT to make Government work better for the American people. Examples of successful initiatives already undertaken include: • Simplifying the student loan application process to reduce time and complexity in the Department of Education and the Internal Revenue Service. • Streamlining veterans benefits processing and reducing the backlog in the Department of Veterans Affairs. • Enabling immigration applicants to get updates on the status of their applications in the U.S. Citizenship and Immigration Services. 325 19. INFORMATION TECHNOLOGY TRANSPARENCY AND PARTICIPATION USASpending—The public deserves to see how the Government spends their taxpayer dollars. Because of the scope and complexity of that spending, considerable effort is required to identify, collect and make sense of all that data. Upon launch in 2007, the focus was solely on meeting congressionally mandated deadlines. Consequently, the site was not designed for scalability or real-time data reporting, and does not provide a capability for sub-award reporting. In early 2010, the USASpending.gov platform is being re-engineered to create a scalable platform flexible enough to accommodate future growth and speedy assimilation of new and diverse datasets; however, without additional resources included in the 2011 budget, the site will still not be fully compliant with the Federal Funding Accountability and Transparency Act (FFATA). In 2010 and 2011, USASpending.gov will leverage the efforts of FederalReporting.gov to provide for recipient/sub-recipient reporting, making the site FFATA compliant. Data.gov—Data.gov allows the public to easily find, download, and use datasets and data tools that are generated and managed by the Federal Government. As a priority Administration initiative, the vision for Data.gov was encapsulated in the President’s January 21, 2009 Open Government and Transparency memorandum where he states that information should be disclosed “rapidly in forms that the public can readily find and use.” Following the example of Data.gov, States and cities in the United States and other countries are creating their own sites to make their data more publicly accessible. As a result of making more data available on Data.gov, new software applications providing useful services to the citizens have been rapidly developed for the public by the private sector. Geospatial Platform — In 2010 and 2011, Federal data managers for geospatial data will move to a portfolio management approach, creating a Geospatial Platform to support GeoOneStop, place-based initiatives, and other potential future programs. This transformation will be facilitated by improving the governance framework to address the requirements of State, local and tribal agencies, Administration policy, and agency mission objectives. Investments will be prioritized based on business needs. The Geospatial Platform will explore opportunities for increased collaboration with Data.gov, with an emphasis on reuse of architectural standards and technology, ultimately increasing access to geospatial data. Citizen Services Dashboard — In 2010 and 2011, the Administration will develop and implement a Citizens’ Services Dashboard to provide transparency into the quality of service the Government delivers to the public by highlighting the top service delivery touch points for each major Federal department and agency. Challenge Platform — In 2010 and 2011, the Administration will develop and implement web-based platforms to facilitate innovation through challenges and prizes. A challenge is exactly what the name suggests: it is a challenge by one party (a “seeker”) to a third party or parties (a “solver”) to identify a solution to a particular problem. Challenge platforms are tools that provide a forum for the seeker to post the problem and invite a community of solvers to suggest, collaborate on, and judge solutions. Challenge platforms can also be used to run incentive prizes which reward contestants for accomplishing a particular future goal. Challenges are an important tool for achieving the President’s goals for Government to be more transparent, participatory and collaborative. Transparency of Research and Development Information—In order to fulfill requirements in the E-Government Act regarding the maintenance of a repository of information on research and development (R&D), in a manner harmonized with the Administration’s efforts to improve the transparency and usability of Federal data, the Administration is committed to exploring with stakeholders a fundamental change in how data on R&D should be made available to the public. As in other areas included in the push for greater transparency, the emphasis will be on testing models for making R&D related data from contributing agencies available in ways that are secure, interoperable, and usable by a wide array of potential users. Efforts in this area will be coordinated with plans in closely related areas such as USASpending and Data.gov. Broadband Access for Americans—Greater citizen engagement and participation in Federal, State and local civic processes is aided by reliable, cost effective access to broadband internet services. In the near term, the Departments of Agriculture and Commerce are awarding more than $7 billion in grants and loans under the Recovery Act, designed to expand broadband infrastructure capacity and improve subscribership. Broadband is a foundation for economic innovation and technological advances, and the Administration will continue to work toward universal, affordable access. Increased access to broadband capabilities will be enhanced over the long term by a national plan which will be submitted to Congress in 2010, aiming to advance the objective of ready access to broadband services for all Americans. SECURITY AND PRIVACY Securing Government Systems — Our Nation’s security and economic prosperity depend on the stability and integrity of our Federal communications and information infrastructure. As stated in the Cyberspace Policy Review, the 60-day clean-slate evaluation of cyber activities ordered by the President, threats to cyberspace pose some of the most serious economic and national security challenges of the 21st century for the United States. The group of state and non-state actors who target U.S. citizens, businesses, and Federal agencies is growing. USCERT, the computer response center for civilian agencies, sees millions of attempts daily to access open ports and vulnerable applications on Federal networks. Historically, the Federal Government has not been as effective as necessary in its cyber defense. An inadequate cybersecurity workforce, a focus on compliance rather than outcomes, and a cumbersome and time-consuming pro- 326 cess for collecting information regarding agency security postures have hindered our cyber security management capabilities. OMB will work with agencies, Inspectors General, Chief Information Officers, senior agency officials for Privacy, as well as GAO and the Congress, to strengthen the Federal Government’s IT security and privacy programs. As part of those activities, OMB will: • Utilize a Modern Platform for Federal Information Security Management Act (FISMA) Reporting. On October 19, 2009, OMB launched an interactive data collection tool—CyberScope—enabling agencies to fulfill their FISMA reporting requirements through a modern digital platform. The broad range of meaningful information collected, the use of secure twofactor authentication, and the online access to data provides for a more efficient and effective reporting process. In the spring of 2010, OMB will unveil a cybersecurity dashboard, unlocking the value of agency FISMA reporting by presenting the information gathered to agencies’ IT professionals and management in a timely, comprehensive, and secure manner. • Collect More Specific Cost/Budget Information. Beginning with the 2009 FISMA report, OMB is collecting cost estimates and actual amounts spent on IT security. Collection of this information, especially when combined with performance-based metrics, will allow both OMB and agency management to make informed, risk-based decisions on where to allocate scarce resources. • Implement New Security Metrics. In September 2009, OMB established a task force which has developed new, outcome-focused metrics for information security performance for Federal agencies rather than merely demonstrating compliance. These metrics will be used in agencies 2010 FISMA reports to OMB and the Congress. Additionally, OMB and the task force will release a roadmap for future reporting under FISMA, which will incorporate real-time metrics and enhance Government-wide situational awareness in 2010. • Move towards Situational Awareness across the Government. More frequent reporting, near or at real-time, is imperative for developing situational awareness across the Federal enterprise. The use of Security Information Management or Security Information Event Management tools will assist in progressing towards real time security awareness and management in the Government. • Cybersecurity Workforce. On October 1, 2009, as a result of OMB collaboration with the Office of Personnel Management, DHS Secretary Janet Napolitano announced that DHS has the authority to hire up to 1,000 new cyber security professionals over the next three years to fill staffing gaps at various DHS agencies. This new hiring authority will enable DHS to recruit skilled cyber analysts, developers and engineers to serve their country by helping to secure the Nation against cyber threat. ANALYTICAL PERSPECTIVES Identity Management—The Cyberspace Policy Review outlined a number of cybersecurity recommendations. To support this effort, the Federal Chief Information Officers’ Council developed the “Identity, Credential and Access Management (ICAM) Roadmap and Implementation Guidance” document to provide implementation guidance for program managers, leadership, and stakeholders as they plan and upgrade their architectures. One of the major outcomes of this effort is to enable agencies to create and maintain information systems that deliver more convenience, appropriate security, and privacy protection, with less effort and at a lower cost. The ICAM roadmap, issued in November 2009, outlines a number of transition activities for agencies to complete. It also serves as an important tool for providing awareness to external mission partners and driving the development and implementation of interoperable solutions. ICAM solutions will leverage the existing investments in the Federal Government while promoting efficient use of tax dollars when designing, deploying, and operating ICAM systems. As part of this effort, OMB will continue to oversee the implementation of the strong Federal identity management scheme outlined in Homeland Security Presidential Directive 12 (HSPD-12). This directive, “Policy for a Common Identification Standard for Federal Employees and Contractors,” addressed the September 11th Commission recommendation to improve the security of Federal facilities and information systems. Agencies are required to follow specific, technical standards and business processes for the issuance of Federal credentials including a standardized background investigation to verify employees’ and contractors’ identities. HSPD-12 credentials facilitate physical access control and provide for digital signature, encryption, archiving of documents, multi-factor authentication, and single sign-on to improve security and facilitate information sharing. They also provide for a very high level of trust in identity credentials during disaster response, disaster recovery, and reconstitution of Government scenarios. As of September 1, 2009, more than 4.1 million credentials (71 percent of those needed) were issued to the Federal workforce and 3.3 million background investigations (57 percent of those needed) were completed. Additionally, 20 credential issuance infrastructures are in operation nationwide and 55 system integrators and 449 products are on the Approved Products and Services list maintained by GSA. Agencies are currently focusing on completing the issuance of credentials to their remaining employees and contractors and leveraging the electronic capabilities of the credentials. Protecting Privacy — Federal agencies will continue to implement breach notification plans, eliminate unnecessary collection and use of Social Security numbers in agency programs, reduce unnecessary holdings of personally identifiable information, and develop policies outlining rules of behavior and identifying consequences and corrective actions to address non-compliance. Agencies are expected to demonstrate progress in all aspects of privacy protection. The Federal Government will continue to improve information security for Federal systems and the 19. INFORMATION TECHNOLOGY information sector overall. This focus, along with a commitment to ensuring privacy as investments are made in the widespread implementation of electronic health records, will maintain the privacy of personal information for all Americans as a top priority. CONCLUSION The Obama Administration is committed to making the Government work better for the American people and be more responsive to their needs. The Government will get rid of waste and inefficiency that bloats our deficits and squanders the taxpayers’ hard earned dollars. The Administration will accomplish this by revamping outdated information technology that undermines our efficiency, threatens our security, and fails to serve the public’s interests. The Administration’s announcement in June 2009, of a shorter, simpler, and more user friendly Free Application for Federal Student Aid (FAFSA) is one example of serving Americans better through information technology. FAFSA will make it easier for all Americans to apply for college financial aid. Streamlining the application process will increase postsecondary enrollment, particularly among low- and middle-income students, as part of the Administration’s initiative to meet the President’s challenge to the Nation to once again have the highest percentage of college graduates in the world. Making the path to a college education easier will send a clear message to young people as well as adults that college is within their reach. Streamlining the higher education aid process is just one example where innovations in Federal information technology have created value for American taxpayers. The Obama Administration moved in 2009 to open the Government and make it more transparent; engage the American public in collaborative ways through new media technologies; and drive innovation, efficiency, and effectiveness through transformative approaches like 327 cloud computing. The new IT Dashboard was used by the Department of Veterans Affairs to identify 45 IT projects at risk that were put on hold until they could be reevaluated and corrected. The General Services Administration demonstrated the potential for cost savings from cloud computing by moving USA.gov onto a cloud computing platform and saving $1.7 million annually. Data.gov proved the value of making more data available when programmers outside the Federal Government built “Fly on Time,” a useful tool for travelers to predict travel times, leveraging ease of access to Federal data sources to provide all Americans with a valuable innovation. Catalyzed by greater data availability, such innovations can benefit the public with greater speed and at less cost than direct investment of tax dollars. This innovative use of technology will continue in 2010. The Administration will enhance Data.gov and USASpending.gov to improve transparency and openness of the Government, acquire and deploy new social media technologies to improve citizen engagement, explore using innovative tools to improve the collaboration and effectiveness of the Federal workforce, and initiate pilot projects in cloud computing to transform how the Government provides computing services while taking steps to improve the security of Federal information and systems. In 2011, the Administration will build upon this foundation and further increase transparency by providing more data of greater detail and quality, institutionalizing the use of social media and other tools for citizen engagement and Federal workforce collaboration, migrating successful cloud computing pilots to mainstream production services, consolidating data centers to reduce costs and environmental impacts, and increasing the security profile of all Federal information and systems. Through these efforts, we will realize the potential of information technology to transform the Government and improve its services to all Americans. 20. FEDERAL INVESTMENT Federal investment is the portion of Federal spending intended to yield long-term benefits. It promotes improved efficiency within Federal agencies, as well as growth in the national economy by increasing the overall stock of capital. Investment spending can take the form of direct Federal spending or of grants to State and local governments. It can be designated for physical capital, which creates a tangible asset that yields a stream of services over a period of years. It also can be for research and development, education, or training, all of which are intangible but still increase income in the future or provide other long-term benefits. Most presentations in this volume combine investment spending with spending for current use. This chapter focuses solely on Federal and federally financed investment. It provides a comprehensive picture of Federal investment spending, but because it disregards spending for non-investment activities, it provides only a partial picture of Federal support for specific national needs, such as defense, transportation, or environmental protection. In this chapter, investment is discussed in the following sections: • a description of the size and composition of Federal investment spending; and • a presentation of trends in the stock of federally financed physical capital, research and development, and education. PART I: DESCRIPTION OF FEDERAL INVESTMENT The distinction and classification of spending between investment and current outlays is a matter of judgment. The budget has historically employed a relatively broad classification, encompassing physical investment, research, development, education, and training. The budget further classifies investments into those that are grants to State and local governments, such as grants for highways, and all other investments, or “direct Federal programs.” This “direct Federal’’ category consists primarily of spending for assets owned by the Federal Government, such as weapons systems and buildings, but also includes grants to private organizations and individuals for investment, such as capital grants to Amtrak or higher education loans directly to individuals. The definition of investment in a particular presentation can vary depending on specific considerations: • Taking the approach of a traditional balance sheet would limit investment to only those physical assets owned by the Federal Government, excluding capital financed through grants and intangible assets such as research and education. • Focusing on the role of investment in improving national productivity and enhancing economic growth would exclude items such as national defense assets, the direct benefits of which enhance national security rather than economic growth. • Examining the efficiency of Federal operations would confine the coverage to investments that reduce costs or improve the effectiveness of internal Federal agency operations, such as computer systems. • Considering a “social investment’’ perspective would broaden the coverage of investment beyond what is included in this chapter to include programs such as childhood immunization, maternal health, certain nutrition programs, and substance abuse treatment, which are designed in part to prevent more costly health problems in future years. This analysis takes the relatively broad approach of including all investment in physical assets, research and development, and education, regardless of ultimate ownership of the resulting asset or the purpose it serves. It does not include “social investment” items like health care or social services where it is difficult to separate out the degree to which the spending provides current versus future benefits. The definition of investment used in this section provides consistency over time (historical figures on investment outlays back to 1940 can be found in the separate Historical Tables volume). Table 20–2 at the end of this section allows disaggregation of the data to focus on those investment outlays that best suit a particular purpose. In addition to this basic issue of definition, there are two technical problems in the classification of investment data: the treatment of grants to State and local governments and the classification of spending that could be shown in multiple categories. First, for some grants to State and local governments it is the recipient jurisdiction not the Federal Government that ultimately determines whether the money is used to finance investment or current purposes. This analysis classifies all of the outlays into the category in which the recipient jurisdictions are expected to spend a majority of the money. Hence, the Community Development Block Grants are classified as physical investment, although 329 330 ANALYTICAL PERSPECTIVES some may be spent for current purposes. General purpose fiscal assistance is classified as current spending, although some may be spent by recipient jurisdictions on investment. Second, some spending could be classified in more than one category of investment. For example, outlays for construction of research facilities finance the acquisition of physical assets, but they also contribute to research and development. To avoid double counting, the outlays are classified hierarchically in the category that is most commonly recognized as investment: physical assets, followed by research and development, followed by education and training. Consequently, outlays for the conduct of research and development do not include outlays for the construction of research facilities, because these outlays are included in the category for investment in physical assets. When direct loans and loan guarantees are used to fund investment, the subsidy value is included as investment. The subsidies are classified according to their program purpose, such as construction or education and training. For more information about the treatment of Federal credit programs, refer to Chapter 22, “Credit and Insurance,’’ in this volume. This section presents spending for gross investment, without adjusting for depreciation. Composition of Federal Investment Outlays Major Federal Investment The composition of major Federal investment outlays is summarized in Table 20–1. They include major public physical investment, the conduct of research and development, and the conduct of education and training. Combined defense and non-defense investment outlays were $482.2 billion in 2009. They are estimated to increase to $619.4 billion in 2010 before falling to $602.7 billion in 2011. The large increase in Federal investment from 2009 to 2010 can be attributed to further spending of funds from P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (Recovery Act). Likewise, the Table 20–1. COMPOSITION OF FEDERAL INVESTMENT OUTLAYS (In billions of dollars) Federal Investment Estimate Actual 2009 2010 2011 Major public physical capital investment: Direct Federal: National defense ......................................................................................................................................................................... Nondefense ................................................................................................................................................................................ Subtotal, direct major public physical capital investment ..................................................................................................... 139.7 46.9 186.6 163.8 52.5 216.3 156.3 55.8 212.1 Grants to State and local governments .............................................................................................................................................. Subtotal, major public physical capital investment ..................................................................................................................... 75.2 261.8 111.3 327.7 107.5 319.5 Conduct of research and development: National defense ................................................................................................................................................................................. Nondefense ........................................................................................................................................................................................ Subtotal, conduct of research and development ........................................................................................................................ 82.9 56.9 139.8 83.3 60.9 144.3 82.5 66.6 149.0 Conduct of education and training: Grants to State and local governments .............................................................................................................................................. Direct Federal ..................................................................................................................................................................................... Subtotal, conduct of education and training ............................................................................................................................... 69.7 10.9 80.6 106.9 40.5 147.4 79.6 54.5 134.1 Total, major Federal investment outlays ................................................................................................................... 482.2 619.4 602.7 Major Federal investment outlays: National defense ................................................................................................................................................................................. Nondefense ........................................................................................................................................................................................ Total, major Federal investment outlays ..................................................................................................................................... 222.7 259.6 482.2 247.2 372.2 619.4 238.8 363.9 602.7 Miscellaneous physical investment: Commodity inventories ....................................................................................................................................................................... Other physical investment (direct) ...................................................................................................................................................... Total, miscellaneous physical investment ................................................................................................................................... 0.2 12.3 12.5 –0.2 18.5 18.3 –0.1 4.3 4.2 Total, Federal investment outlays, including miscellaneous physical investment .................................................................................... 494.8 637.7 606.9 MEMORANDUM 331 20. FEDERAL INVESTMENT decrease in the overall level of Federal investment from 2010 to 2011 can be attributed to the completion of several Recovery Act provisions, most notably a $23.1 billion decrease in outlays for the State Fiscal Stabilization grant program. Major Federal investment outlays will comprise an estimated 15.7 percent of total Federal outlays in 2011 and 3.9 percent of the Nation’s gross domestic product. Greater detail on Federal investment is available in Table 20–2 at the end of this section. That table includes both budget authority and outlays. Physical investment. Outlays for major public physical capital investment (hereafter referred to as “physical investment outlays”) are estimated to be $319.5 billion in 2011. Physical investment outlays are for construction and rehabilitation, the purchase of major equipment, and the purchase or sale of land and structures. Approximately two-thirds of these outlays are for direct physical investment by the Federal Government, with the remainder being grants to State and local governments for physical investment. Direct physical investment outlays by the Federal Government are primarily for national defense. Defense outlays for physical investment are estimated to be $156.3 billion in 2011. Almost all of these outlays, or an estimated $142.0 billion, are for the procurement of weapons and other defense equipment, and the remainder is primarily for construction on military bases, family housing for military personnel, and Department of Energy defense facilities. Outlays for direct physical investment for non-defense purposes are estimated to be $55.8 billion in 2011. These outlays include $35.9 billion for construction and rehabilitation. This amount includes funds for water, power, and natural resources projects of the Corps of Engineers, the Bureau of Reclamation within the Department of the Interior, and the Tennessee Valley Authority; construction and rehabilitation of veterans hospitals and Indian Health Service hospitals and clinics; facilities for space and science programs; Postal Service facilities; energy conservation projects in the Department of Energy; construction for the administration of justice programs (largely in Customs and Border Protection within the Department of Homeland Security); construction of office buildings by the General Services Administration; and construction for embassy security. Outlays for the acquisition of major equipment are estimated to be $19.1 billion in 2011. The largest amounts are for the air traffic control system; weather and climate monitoring in the National Oceanic and Atmospheric Administration; law enforcement activities, largely in the Department of Homeland Security and the Federal Bureau of Investigation; and information systems in the Department of Veterans Affairs. Grants to State and local governments for physical investment are estimated to be $107.5 billion in 2011. Over 60 percent of these outlays, or $66.9 billion, are to assist States and localities with transportation infrastructure, primarily highways. Other major grants for physical investment fund sewage treatment plants, community and regional development, and public housing. Conduct of research and development. Outlays for the conduct of research and development are estimated to be $149.0 billion in 2011. These outlays are devoted to increasing basic scientific knowledge and promoting research and development. They increase the Nation’s security, improve the productivity of capital and labor for both public and private purposes, and enhance the quality of life. More than half of these outlays, an estimated $82.5 billion, are for national defense. Physical investment for research and development facilities and equipment is included in the physical investment category. Non-defense outlays for the conduct of research and development are estimated to be $66.6 billion in 2011. These are largely for the National Aeronautics and Space Administration, the National Science Foundation, the National Institutes of Health, and the Department of Energy. A more complete and detailed discussion of research and development funding can be found in Chapter 21, “Research and Development,’’ in this volume. Conduct of education and training. Outlays for the conduct of education and training are estimated to be $134.1 billion in 2011. These outlays add to the stock of human capital by developing a more skilled and productive labor force. Grants to State and local governments for this category are estimated to be $79.6 billion in 2011, nearly 60 percent of the total. They include education programs for the disadvantaged and individuals with disabilities, training programs in the Department of Labor, Head Start, the State Fiscal Stabilization Fund, and other education programs. Direct Federal education and training outlays are estimated to be $54.5 billion in 2011. Programs in this category primarily consist of aid for higher education through student financial assistance, loan subsidies, veterans education, and health training programs. Significant downward re-estimates of student loan subsidies recorded in 2009 reduced net outlays for direct Federal education and training to $10.9 billion in that year, leading to a large increase in this category in 2010 and 2011. This category does not include outlays for education and training of Federal civilian and military employees. Outlays for education and training that are for physical investment and for research and development are in the categories for physical investment and the conduct of research and development. Miscellaneous Physical Investment In addition to the categories of major Federal investment, several miscellaneous categories of investment outlays are shown at the bottom of Table 20–1. These items, all for physical investment, are generally unrelated to improving Government operations or enhancing economic activity. Outlays for commodity inventories are for the purchase or sale of agricultural products pursuant to farm price support programs and other commodities. Sales are estimated to exceed purchases by $89 million in 2011. 332 ANALYTICAL PERSPECTIVES Outlays for other miscellaneous physical investment are estimated to be $4.3 billion in 2011. This category consists entirely of direct Federal outlays and includes primarily conservation programs. Detailed Table on Investment Spending The following table provides data on budget authority as well as outlays for major Federal investment divided according to grants to State and local governments and direct Federal spending. Miscellaneous investment is not included because it is generally unrelated to improving Government operations or enhancing economic activity. Table 20–2. FEDERAL INVESTMENT BUDGET AUTHORITY AND OUTLAYS: GRANT AND DIRECT FEDERAL PROGRAMS (In millions of dollars) Budget Authority Description 2009 Actual Outlays 2010 Estimate 2011 Estimate 2009 Actual 2010 Estimate 2011 Estimate GRANTS TO STATE AND LOCAL GOVERNMENTS Major public physical investment: Construction and rehabilitation: Transportation: Highways .................................................................................................... Mass transportation .................................................................................... Rail transportation ....................................................................................... Air and other transportation ........................................................................ Subtotal, transportation ........................................................................ Other construction and rehabilitation: Pollution control and abatement ................................................................. Community and regional development ....................................................... Housing assistance ..................................................................................... Other ........................................................................................................... Subtotal, other construction and rehabilitation ..................................... Subtotal, construction and rehabilitation ..................................................... Other physical assets ............................................................................................... Subtotal, major public physical investment ........................................................ 57,053 19,744 8,115 4,786 89,698 43,487 10,585 2,535 3,483 60,090 42,127 10,361 1,000 3,380 56,868 39,358 11,186 2 3,938 54,484 51,278 15,283 454 3,856 70,871 48,226 13,899 1,283 3,459 66,867 8,534 10,015 16,042 13,188 47,779 137,477 1,856 139,333 3,938 5,619 10,254 3,528 23,339 83,429 1,859 85,288 3,621 5,375 7,451 3,992 20,439 77,307 1,921 79,228 2,355 7,961 7,771 1,028 19,115 73,599 1,613 75,212 5,091 10,560 14,016 8,993 38,660 109,531 1,790 111,321 4,785 11,244 13,694 9,004 38,727 105,594 1,859 107,453 Conduct of research and development: Agriculture ................................................................................................................ Other ......................................................................................................................... Subtotal, conduct of research and development ............................................... 361 309 670 385 291 676 413 294 707 310 348 658 377 418 795 456 401 857 Conduct of education and training: Elementary, secondary, and vocational education .................................................... Higher education ...................................................................................................... Research and general education aids ...................................................................... Training and employment .......................................................................................... Social services .......................................................................................................... Agriculture ................................................................................................................ Other ......................................................................................................................... Subtotal, conduct of education and training ...................................................... 113,485 452 1,100 6,572 15,946 498 1,886 139,939 38,952 463 875 3,894 10,692 520 2,390 57,786 42,215 388 822 4,064 11,829 504 2,451 62,273 51,589 483 794 4,044 10,453 467 1,865 69,695 82,404 622 951 5,864 14,111 607 2,377 106,936 58,773 473 909 3,921 12,531 585 2,439 79,631 Subtotal, grants for investment ............................................................................. 279,942 143,750 142,208 145,565 219,052 187,941 18,875 244 19,119 15,453 173 15,626 15,456 50 15,506 9,896 222 10,118 15,860 188 16,048 14,288 49 14,337 1,620 2,778 9,947 1,695 19,553 895 2,566 3,413 837 7,222 920 2,850 2,793 770 9,895 574 3,149 3,634 1,027 4,029 344 2,312 5,544 1,325 10,949 449 2,012 4,916 1,228 15,613 DIRECT FEDERAL PROGRAMS Major public physical investment: Construction and rehabilitation: National defense: Military construction and family housing ..................................................... Atomic energy defense activities and other ................................................ Subtotal, national defense .................................................................... Nondefense: International affairs ..................................................................................... General science, space, and technology .................................................... Water resources projects ............................................................................ Other natural resources and environment .................................................. Energy ........................................................................................................ 333 20. FEDERAL INVESTMENT Table 20–2. FEDERAL INVESTMENT BUDGET AUTHORITY AND OUTLAYS: GRANT AND DIRECT FEDERAL PROGRAMS—Continued (In millions of dollars) Description Postal service ............................................................................................. Transportation ............................................................................................. Veterans hospitals and other health facilities .............................................. Administration of justice .............................................................................. GSA real property activities ........................................................................ Other construction ...................................................................................... Subtotal, nondefense ........................................................................... Subtotal, construction and rehabilitation ..................................................... Acquisition of major equipment: National defense: Department of Defense ............................................................................... Atomic energy defense activities ................................................................ Subtotal, national defense .................................................................... Nondefense: General science and basic research .......................................................... Space flight, research, and supporting activities ........................................ Postal service ............................................................................................. Air transportation ........................................................................................ Water transportation (Coast Guard) ........................................................... Other transportation (railroads) ................................................................... Hospital and medical care for veterans ....................................................... Federal law enforcement activities .............................................................. Department of the Treasury (fiscal operations) ........................................... National Oceanic and Atmospheric Administration ..................................... GSA general services funds ....................................................................... Other ........................................................................................................... Subtotal, nondefense ........................................................................... Subtotal, acquisition of major equipment .................................................... Purchase or sale of land and structures: National defense ................................................................................................ Natural resources and environment .................................................................. General government .......................................................................................... Other ................................................................................................................. Subtotal, purchase or sale of land and structures ...................................... Subtotal, major public physical investment ........................................................ Budget Authority 2009 Actual Outlays 2010 Estimate 2011 Estimate 2009 Actual 2010 Estimate 2011 Estimate 502 302 8,107 2,412 6,775 10,043 63,734 82,853 623 85 1,028 1,529 1,308 2,295 21,801 37,427 574 126 3,664 1,196 1,380 2,127 26,295 41,801 1,006 130 3,532 2,323 1,586 8,319 29,309 39,427 647 309 3,642 2,171 2,528 2,781 32,552 48,600 632 302 3,954 1,931 3,035 1,817 35,889 50,226 135,583 469 136,052 134,650 498 135,148 137,610 482 138,092 129,331 282 129,613 147,338 442 147,780 141,555 427 141,982 1,725 186 326 4,664 1,466 2,790 785 2,159 275 1,898 855 4,341 21,470 157,522 818 110 877 3,746 1,489 1,565 1,332 1,773 304 1,432 1,044 4,127 18,617 153,765 815 120 976 3,370 1,292 1,615 1,018 1,740 442 2,122 1,044 4,258 18,812 156,904 719 148 804 3,885 1,147 1,665 1,111 1,929 266 1,233 855 3,518 17,280 146,893 1,349 139 830 3,395 1,536 2,539 1,086 1,704 257 1,440 1,044 4,237 19,556 167,336 1,047 139 861 3,498 1,612 1,875 1,013 1,655 327 1,669 1,044 4,311 19,051 161,033 -29 207 150 171 499 240,874 -29 341 141 2,003 2,456 193,648 -27 445 136 -6 548 199,253 -18 208 149 -53 286 186,606 -18 224 141 61 408 216,344 -24 340 136 375 827 212,086 80,893 3,582 84,475 81,006 3,767 84,773 77,451 3,990 81,441 79,708 3,210 82,918 79,638 3,709 83,347 78,513 3,950 82,463 255 255 255 260 233 233 8,847 6,578 4,476 802 20,703 3,327 6,584 4,634 3,822 857 15,897 2,147 7,364 5,119 3,975 866 17,324 2,459 9,160 3,936 3,347 876 17,319 1,846 7,960 5,259 4,066 787 18,072 2,719 6,839 5,049 4,159 1,164 17,211 3,616 875 650 18 1,543 905 435 24 1,364 908 1,075 20 2,003 583 777 20 1,380 719 540 26 1,285 713 766 24 1,503 38,019 1,760 30,334 490 31,265 500 28,663 892 30,666 614 35,526 798 Conduct of research and development: National defense: Defense military ................................................................................................. Atomic energy and other ................................................................................... Subtotal, national defense .......................................................................... Nondefense: International affairs ............................................................................................ General science, space, and technology: NASA .......................................................................................................... National Science Foundation ...................................................................... Department of Energy ................................................................................ Other general science, space, and technology ........................................... Subtotal, general science, space, and technology ............................... Energy ............................................................................................................... Transportation: Department of Transportation ..................................................................... NASA .......................................................................................................... Other transportation .................................................................................... Subtotal, transportation ........................................................................ Health: National Institutes of Health ........................................................................ Other health ................................................................................................ 334 ANALYTICAL PERSPECTIVES Table 20–2. FEDERAL INVESTMENT BUDGET AUTHORITY AND OUTLAYS: GRANT AND DIRECT FEDERAL PROGRAMS—Continued (In millions of dollars) Description Budget Authority 2009 Actual Outlays 2010 Estimate 2011 Estimate 2009 Actual 2010 Estimate 2011 Estimate Subtotal, health .................................................................................... Agriculture ......................................................................................................... Natural resources and environment .................................................................. National Institute of Standards and Technology ................................................ Hospital and medical care for veterans ............................................................. All other research and development .................................................................. Subtotal, nondefense .................................................................................. Subtotal, conduct of research and development ............................................... 39,779 1,574 2,197 536 1,020 1,085 72,019 156,494 30,824 1,640 2,300 470 1,162 1,194 57,253 142,026 31,765 1,623 2,506 551 1,180 1,258 60,924 142,365 29,555 1,519 1,898 425 1,016 1,035 56,253 139,171 31,280 1,642 2,019 518 1,102 1,248 60,118 143,465 36,324 1,760 2,121 669 1,152 1,108 65,697 148,160 Conduct of education and training: Elementary, secondary, and vocational education .................................................... Higher education ...................................................................................................... Research and general education aids ...................................................................... Training and employment .......................................................................................... Health ....................................................................................................................... Veterans education, training, and rehabilitation ........................................................ General science and basic research ........................................................................ National defense ....................................................................................................... International affairs ................................................................................................... Other ......................................................................................................................... Subtotal, conduct of education and training ...................................................... 1,568 12,039 2,228 3,646 1,886 4,599 1,193 ......... 569 972 28,700 2,604 18,529 2,337 2,442 1,626 9,170 1,047 ......... 661 1,031 39,447 2,572 36,303 2,438 2,380 1,733 10,948 1,074 ......... 663 1,038 59,149 1,521 -3,171 2,147 2,245 1,645 4,328 963 19 542 665 10,904 1,582 20,306 2,197 2,357 1,591 9,679 1,102 ......... 608 1,069 40,491 2,203 31,913 2,215 2,617 1,702 11,034 1,097 ......... 654 1,042 54,477 Subtotal, direct Federal investment ...................................................................... 426,068 375,121 400,767 336,681 400,300 414,723 Total, Federal investment ............................................................................................ 706,010 518,871 542,975 482,246 619,352 602,664 PART II: FEDERALLY FINANCED CAPITAL STOCKS Federal investment spending creates a “stock’’ of capital that is available for future productive use. Each year, Federal investment outlays add to this stock of capital. At the same time, however, wear and tear and obsolescence reduce it. This section presents very rough measures over time of three different kinds of capital stocks financed by the Federal Government: public physical capital, research and development (R&D), and education. Federal spending for physical assets adds to the Nation’s capital stock of tangible assets, such as roads, buildings, and aircraft carriers. These assets deliver a flow of services over their lifetime. The capital depreciates as the asset ages, wears out, is accidentally damaged, or becomes obsolete. Federal spending for the conduct of R&D adds to an “intangible’’ asset, the Nation’s stock of knowledge. Spending for education adds to the stock of human capital by providing skills that help make people more productive. Although financed by the Federal Government, R&D or education can be carried out by Federal or State government laboratories, universities and other nonprofit organizations, local governments, or private industry. R&D covers a wide range of activities, from the investigation of subatomic particles to the exploration of outer space; it can be “basic’’ research without particular applications in mind, or it can have a highly specific practical use. Similarly, education includes a wide variety of programs, assisting people of all ages beginning with pre-school education and extending through graduate studies and adult education. Like physical assets, the capital stocks of R&D and education provide services over a number of years and depreciate as they become outdated. For this analysis, physical and R&D capital stocks are estimated using the perpetual inventory method. Each year’s Federal outlays are treated as gross investment, adding to the capital stock; depreciation reduces the capital stock. Gross investment less depreciation is net investment. The estimates of the capital stock are equal to the sum of net investment in the current and prior years. Conversely, the year-to-year change in the capital stock estimates is annual net investment. A limitation of the perpetual inventory method is that the original investment spending may not accurately measure the current value of the asset created, even after adjusting for inflation, because the value of existing capital changes over time due to changing market conditions. However, alternative methods for measuring asset value, such as direct surveys of current market worth or indirect estimation based on an expected rate of return, are especially difficult to apply to assets that do not have a private market, such as highways or weapons systems. In contrast to physical and R&D stocks, the estimate of the education stock is based on the replacement cost method. Data on the total years of education of the U.S. 335 20. FEDERAL INVESTMENT population are combined with data on the current cost of education and the Federal share of education spending to yield the cost of replacing the Federal share of the Nation’s stock of education. It should be stressed that these estimates are rough approximations, and provide a basis only for making broad generalizations. Errors may arise from uncertainty about the useful lives and depreciation rates of different types of assets, incomplete data for historical outlays, and imprecision in the deflators used to express costs in constant dollars. The methods used to estimate capital stocks are discussed further in Chapter 30, “Budget and Financial Reporting,” in this volume. Additional detail about these methods appeared in a methodological note in Chapter 7, “Federal Investment Spending and Capital Budgeting,’’ in the Analytical Perspectives volume of the 2004 Budget. The Stock of Physical Capital This section presents data on stocks of physical capital assets and estimates of the depreciation of these assets. Trends. Table 20–3 shows the value of the net federally financed physical capital stock since 1960, in constant fiscal year 2005 dollars. The total stock grew at a 2.3 percent average annual rate from 1960 to 2009, with periods of faster growth during the late 1960s and the 1980s. The stock amounted to $2,646 billion in 2009 and is estimated to increase to $2,793 billion by 2011. In 2009, the national defense capital stock accounted for $769 billion, or 29 percent of the total, and non-defense stocks for $1,876 billion, or 71 percent of the total. Real stocks of defense and nondefense capital show very different trends. Non-defense stocks have grown consistently since 1970, increasing from $524 billion in 1970 to $1,876 billion in 2009. With the investments proposed in the Budget, nondefense stocks are estimated to grow to $1,967 billion in 2011. During the 1970s, the non-defense capital stock grew at an average annual rate of 5.0 percent. In the 1980s, however, the growth rate slowed to 2.9 percent annually, with growth continuing at about that rate since then. Real national defense stocks began in 1970 at a relatively high level, and declined steadily throughout the decade as depreciation from investment during the Vietnam war exceeded new investment in military construction and weapons procurement. Starting in the early 1980s, a large defense buildup began to increase the stock of defense capital. By 1987, the defense stock exceeded its earlier Vietnam-era peak. In the early 1990s, however, depreciation on the increased stocks and a slower pace of defense physical capital investment began to reduce the stock from its previous levels. The increased defense investment in the last few years has reversed this decline, increasing the stock from a low of $647 billion in 2001 to $826 billion in 2011. Another trend in the Federal physical capital stocks is the shift from direct Federal assets to grant-financed assets. In 1960, 37 percent of federally financed non-defense capital was owned by the Federal Government, and 63 percent was owned by State and local governments but financed by Federal grants. Expansion in Federal grants for highways and other State and local capital, coupled Table 20–3. NET STOCK OF FEDERALLY FINANCED PHYSICAL CAPITAL (In billions of 2005 dollars) Direct Federal Capital Fiscal Year Total National Defense Total Nondefense Water and Power Total Capital Financed by Federal Grants Other Total Community and Natural Transportation Regional Resources Other Five year intervals: 1960 ............................................ 1965 ............................................ 1970 ............................................ 1975 ............................................ 1980 ............................................ 1985 ............................................ 1990 ............................................ 1995 ............................................ 888 989 1,169 1,220 1,362 1,585 1,881 2,041 622 603 645 558 506 586 740 731 267 386 524 662 856 999 1,142 1,310 98 126 150 171 200 228 263 305 61 76 91 105 126 139 150 160 37 50 59 66 74 88 112 144 169 260 374 491 656 771 879 1,006 102 182 265 325 395 458 534 616 31 37 54 88 139 168 182 194 24 26 30 48 91 115 130 142 12 14 24 29 31 30 33 53 Annual data: 2000 ............................................ 2001 ............................................ 2002 ............................................ 2003 ............................................ 2004 ............................................ 2005 ............................................ 2006 ............................................ 2007 ............................................ 2008 ............................................ 2009 ............................................ 2010 est. .................................... 2011 est. .................................... 2,159 2,208 2,270 2,336 2,403 2,466 2,531 2,543 2,623 2,646 2,783 2,793 650 647 651 661 678 696 717 725 759 769 826 826 1,509 1,561 1,619 1,675 1,725 1,770 1,814 1,818 1,864 1,876 1,957 1,967 346 359 374 388 399 409 419 420 433 444 462 475 164 167 169 170 172 172 173 174 175 177 187 193 182 193 206 218 228 236 245 247 258 267 275 282 1,163 1,202 1,244 1,286 1,326 1,361 1,395 1,398 1,430 1,432 1,495 1,492 714 740 770 799 826 852 878 876 903 906 943 942 212 215 219 223 226 229 231 236 235 234 240 239 151 153 154 156 158 159 160 160 161 161 164 164 87 94 101 109 116 121 127 126 131 132 147 147 336 ANALYTICAL PERSPECTIVES with slower growth in direct Federal investment for water resources, for example, shifted the composition of the stock substantially. In 2009, 24 percent of the nondefense stock was owned by the Federal Government and 76 percent by State and local governments. The growth in the stock of physical capital financed by grants has come in several areas. The growth in the stock for transportation is largely grants for highways, including the Interstate Highway System. The growth in community and regional development stocks occurred largely following the enactment of the Community Development Block Grant in the early 1970s. The value of this capital stock has grown only slowly in the past few years. The growth in the natural resources area occurred primarily because of construction grants for water infrastructure projects. The value of this federally financed stock has increased about 40 percent since the mid-1980s. The Stock of Research and Development Capital This section presents data on the stock of research and development (R&D) capital, taking into account adjustments for its depreciation. Trends. As shown in Table 20–4, the R&D capital stock financed by Federal outlays is estimated to be $1,393 billion in 2009 in constant 2005 dollars. Roughly half is the stock of basic research knowledge; the remainder is the stock of applied research and development. The nondefense stock accounted for about threefifths of the total federally financed R&D stock in 2009. Although investment in defense R&D has exceeded that of nondefense R&D in nearly every year since 1981, the nondefense R&D stock is actually the larger of the two, because of the different emphasis on basic research and applied research and development. Defense R&D spending is heavily concentrated in applied research and development, which depreciates much more quickly than basic research. The stock of applied research and development is assumed to depreciate at a ten percent geometric rate, while basic research is assumed not to depreciate at all. The defense R&D stock rose slowly during the 1970s, as gross outlays for R&D trended down in constant dollars and the stock created in the 1960s depreciated. Increased defense R&D spending from 1980 through 1990 led to a more rapid growth of the R&D stock. Subsequently, real defense R&D outlays tapered off, depreciation grew, and, as a result, the real net defense R&D stock stabilized at around $475 billion. Renewed spending for defense R&D in recent years has begun to increase the stock, and it is projected to increase to $547 billion in 2011. The growth of the nondefense R&D stock slowed from the 1970s to the 1980s, from an annual rate of 3.8 percent in the 1970s to a rate of 2.1 percent in the 1980s. Gross investment in real terms fell during of the early 1980s, and about three-fourths of new outlays went to replacing depreciated R&D. Since 1984, however, nondefense R&D outlays have been on an upward trend while depreciation has edged down. As a result, the net nondefense R&D capital stock has grown more rapidly. Table 20–4. NET STOCK OF FEDERALLY FINANCED RESEARCH AND DEVELOPMENT 1 (In billions of 2005 dollars) National Defense Fiscal Year Five year intervals: 1970 ............................................ 1975 ............................................ 1980 ............................................ 1985 ............................................ 1990 ............................................ 1995 ............................................ Applied Research and Development Basic Research Total 294 311 315 362 454 476 Nondefense 18 23 28 34 41 48 276 288 287 328 413 428 Basic Research Total Total Federal Applied Research and Development Basic Research Total Applied Research and Development 242 296 350 382 432 519 75 110 148 196 257 331 167 186 202 186 174 189 536 607 666 744 885 996 93 133 176 230 298 379 443 475 490 514 587 617 Annual data: 2000 ............................................ 476 55 422 611 2001 ............................................ 474 57 417 634 2002 ............................................ 472 58 414 661 2003 ............................................ 477 60 417 690 2004 ............................................ 483 61 421 720 2005 ............................................ 498 63 435 744 2006 ............................................ 509 64 445 770 2007 ............................................ 520 65 454 795 2008. .......................................... 529 67 462 820 2009 ............................................ 536 68 468 857 2010 est. .................................... 542 69 473 897 2011 est. .................................... 547 71 477 941 1 Excludes stock of physical capital for research and development, which is included in Table 20–3. 414 435 457 481 506 529 552 575 598 624 653 683 197 200 204 209 214 215 218 220 222 233 245 258 1,087 1,108 1,134 1,167 1,202 1,242 1,278 1,314 1,349 1,393 1,440 1,488 468 491 516 541 567 591 616 640 665 692 722 753 619 617 618 626 635 650 663 674 684 701 718 735 337 20. FEDERAL INVESTMENT Table 20–5. NET STOCK OF FEDERALLY FINANCED EDUCATION CAPITAL (In billions of 2005 dollars) Fiscal Year Total Education Stock Elementary and Secondary Education Higher Education Five year intervals: 1960 ............................................ 1965 ............................................ 1970 ............................................ 1975 ............................................ 1980 ............................................ 1985 ............................................ 1990 ............................................ 1995 ............................................ 80 115 264 394 544 651 826 989 58 83 207 318 427 489 615 722 22 31 57 75 117 162 211 267 Annual data: 2000 ............................................ 2001 ............................................ 2002 ............................................ 2003 ............................................ 2004 ............................................ 2005 ............................................ 2006 ............................................ 2007 ............................................ 2008 ............................................ 2009 ............................................ 2010 est. .................................... 2011 est. .................................... 1,211 1,270 1,325 1,371 1,426 1,462 1,551 1,627 1,731 1,755 1,888 2,007 882 922 963 998 1,031 1,067 1,116 1,169 1,243 1,277 1,384 1,467 329 348 361 373 395 395 435 458 488 478 505 540 The Stock of Education Capital This section presents estimates of the stock of education capital financed by the Federal Government. As shown in Table 20–5, the federally financed education stock is estimated at $1,755 billion in 2009 in constant 2005 dollars. The vast majority of the Nation’s education stock is financed by State and local governments, and by students and their families themselves. This federally financed portion of the stock represents about 3 percent of the Nation’s total education stock.1 Nearly three-quarters is for elementary and secondary education, while the remainder is for higher education. The federally financed education stock has grown steadily in the last few decades, with an average annual growth rate of 5.0 percent from 1970 to 2009. The expansion of the education stock is projected to continue under this budget, with the stock rising to $2,007 billion in 2011. 1 For estimates of the total education stock, see Chapter 31, “Social Indicators’’ 21. RESEARCH AND DEVELOPMENT Scientific discovery and technological innovation are major engines of increasing productivity and are indispensable for promoting economic growth and job creation, advancing toward a clean energy future, improving the health of the population, and safeguarding our national security in the technologically driven 21st Century. The President’s 2011 Budget proposes $147.7 billion for Federal research and development (R&D). This investment reinforces the Administration’s commitment to science, technology, and innovation that will help the country make progress toward these national goals. This investment is a cornerstone of the President’s Strategy for American Innovation: Driving Towards Sustainable Growth and Quality Jobs, announced in September 2009. This investment moves the Nation toward the President’s long-term goal that R&D investments in the United States should reach three percent of the Gross Domestic Product (GDP). The additional funding provided in the 2011 Budget will make progress toward this goal by increasing Federal funding for R&D as a percentage of GDP for non-defense activities. The 2011 Budget’s proposed permanent extension of the research and experimentation tax credit will spur private investment in R&D by providing certainty that the credit will be available for the duration of the R&D investment. In general, the Budget’s priorities align with the conclusions in the report from the National Science and Technology Summit held in August 2008. I. PRIORITIES FOR FEDERAL RESEARCH AND DEVELOPMENT The Budget provides support for multidisciplinary research and promising, but exploratory and high-risk, research proposals that could fundamentally improve our understanding of nature, revolutionize fields of science, and lead to radically new technologies. Investing in the Sciences for a Prosperous America The Administration recognizes the Government’s role in fostering scientific and technological breakthroughs, and has committed resources to ensure America leads the world in the innovations of the future. Federally supported research expands the frontiers of human knowledge and has been a reliable source of new knowledge to drive economic recovery, job creation, and economic growth. The Budget proposes $61.6 billion for basic and applied research, an increase of 5.6 percent above the 2010 enacted level. The President’s Plan for Science and Innovation, announced in April 2009, seeks to double Federal investment for basic research in key agencies: the National Science Foundation (NSF); the Department of Energy (DOE) Office of Science; and the laboratories of the Department of Commerce (DOC) National Institute of Standards and Technology (NIST). The American Recovery and Reinvestment Act and the 2010 appropriations provided critical down payments toward this doubling. The Budget proposes $13.3 billion in 2011 for these three agencies. This level is an increase of 6.6 percent above the 2010 enacted level of $12.4 billion. Priorities for 2011 include multidisciplinary research targeted at the jobs and industries of the future and at sustainability at NSF, basic energy sciences at DOE, and cybersecurity, biomanufacturing, and innovative energy technologies at NIST. The Budget also supports research investments in other Federal agencies. The Budget proposes $429 million, an increase of 63 percent, for the Agriculture and Food Research Initiative, a competitively awarded research program within the U.S. Department of Agriculture’s (USDA) new National Institute of Food and Agriculture (formerly the Cooperative State Research, Education and Extension Service). The Budget also proposes a 30-percent increase in funding for the National Center for Education Research, part of the Department of Education’s Institute of Education Sciences. These funds will support much needed R&D investments to generate solutions to critical problems in education. The Federal R&D effort needs complementary R&D investments from business to translate scientific discoveries into commercially successful, innovative products and services. In order to provide businesses with greater confidence to invest, innovate, and grow, the Budget proposes to make the Research and Experimentation tax credit permanent. A Clean Energy Future The Administration envisions the United States leading the world in research, development, demonstration, and deployment of clean-energy technology to reduce dependence on energy imports and to mitigate the impact of climate change while creating clean energy jobs and new businesses. The 2011 Budget builds upon substantial clean energy R&D investments in the Recovery Act and 2010 appropriations to forge a comprehensive approach to transforming energy supply and slowing global climate change through cutting-edge science and technology. R&D funding will support renewable energy and energy efficiency technolo339 340 ANALYTICAL PERSPECTIVES gies such as advanced batteries, solid-state lighting, solar, biomass, geothermal, and wind power. The 2011 Budget proposes $438 million for research and development of advanced coal-fueled power systems and carbon capture and storage technologies that reduce the carbon emission intensity of fossil fuel-based power systems. To further support achievement of clean energy and climate goals, the Budget supports strong, science-based nuclear energy R&D programs to advance nuclear technologies and improve their market competitiveness, including a broad new effort to encourage the development of creative, cutting-edge solutions. Longer-term nuclear R&D programs complement the near-term strategy to support the revitalization of the nuclear industry through loan guarantees. The Budget also proposes $170 million for bioenergy research in USDA to develop next-generation biofuels like cellulosic and algae-based biofuels that displace oil consumption and reduce greenhouse gas emissions. The 2011 Budget proposes $300 million for the Advanced Research Projects Agency-Energy within DOE to support transformational discoveries and accelerate the development of clean energy. Healthy Lives for All Americans The Administration is committed to funding Federal R&D investments in biomedical and health research and supporting policies to increase the impact of these investments on health outcomes. The 2011 Budget strongly supports research that builds and expands upon recent discoveries in genomics and other high-throughput technologies to increase scientific knowledge and translate discoveries into better, more cost-effective medical treatments. The 2011 Budget proposes $32 billion for the National Institutes of Health (NIH), an increase of $1 billion. The Budget will support bold and innovative efforts in research on diseases such as cancer and autism spectrum disorders. The Budget also proposes $286 million for patientcentered health research in the Agency for Healthcare Research and Quality and $590 million for medical research in the Department of Veterans Affairs. A Safe and Secure America Federal R&D investments in security assure that we have the technologies needed to protect our troops, citizens, and national interests, including those needed to verify arms control and nonproliferation agreements essential to our security. The 2011 Budget sustains the Department of Defense’s (DOD) critical role in supporting technological advances with $3.1 billion for the Defense Advanced Research Projects Agency for its support of longer-term breakthrough research. The Budget proposes $6.5 billion for DOD basic and applied research, 2.3 percent above the 2010 enacted level of $6.3 billion. The Budget maintains scientific and technological preeminence for our Armed Forces. The Budget invests in the technological capabilities necessary to monitor nuclear nonproliferation compliance and to prevent weapons of mass destruction from entering the country. The Budget proposes $352 million for DOE’s nonproliferation and verification R&D portfolio, an increase of 11 percent over the 2010 level. The Budget invests in the science and technology needed to combat natural and manmade threats to our Nation’s food supply, including $113.6 million in the U.S. Department of Agriculture for research associated with the safety of the U.S. food supply. In order to address these priorities effectively, the Administration recognizes the need to strengthen key cross-cutting areas. Science, technology, engineering, and mathematics (STEM) education: The Administration is committed to strengthening STEM education, from pre-college to postgraduate to lifelong learning. The Budget invests $3.7 billion in STEM education programs throughout the Federal government. The Budget proposes $74 million for a coordinated DOE-NSF RE-ENERGYSE education campaign to inspire tens of thousands of young Americans to pursue STEM careers in clean energy. These Federal programs complement an expanding array of Federal-private partnerships in STEM education announced by the President in November 2009 in the “Educate to Innovate” campaign. The Budget emphasizes suppport for researchers at the beginning of their careers to sustain and expand the Nations’s scientific and technical workforce, including sustained investments toward tripling the number of NSF’s Graduate Research Fellowships by 2013. The Budget also proposes significant investments in STEM education at the Department of Education. Through the reauthorization of the Elementary and Secondary Education Act, the Administration is seeking to create the Effective Teaching and Learning: STEM program, which would support State and local efforts to implement a comprehensive STEM strategy for the provision of highquality STEM instruction to students from preK–12. The Budget also dedicates $150 million within the Investing in Innovation program to competitive grants for school districts, nonprofits, and other organizations to test, validate, and scale promising strategies to improve student learning in STEM subjects. Productive research institutions: The Administration recognizes the need for strong, productive research institutions, including our research universities and major public and private laboratories and research centers. The Budget sustains critical investments in university research from the NIH, NSF, DOD, and USDA, among others. Space capabilities: The Administration is committed to enhancing our capabilities in space, which are essential for communications, geopositioning, intelligence gathering, Earth observation, and national defense. As part of this commitment, the National Aeronautics and Space Administration (NASA) will embark on vigorous new technology development and test programs aimed at increasing the capabilities and reducing the cost of NASA, other government, and U.S. commercial space activities. Infrastructure: The Administration places a high priority on improving and protecting our information, communication, and transportation infrastructure, which 341 21. RESEARCH AND DEVELOPMENT is essential to our commerce, science, and security alike. As an example, the Administration is investing heavily in broadband infrastructure by implementing $7.2 billion provided for this purpose in the Recovery Act to USDA and DOC. II. FEDERAL R&D DATA R&D is the collection of efforts directed towards gaining greater knowledge or understanding and applying knowledge toward the production of useful materials, devices, and methods. R&D investments can be characterized as basic research, applied research, development, R&D equipment, or R&D facilities. The Office of Management and Budget has used those or similar categories in its collection of R&D data since 1949. Federal R&D Funding Basic research is systematic study directed toward a fuller knowledge or understanding of the fundamental aspects of phenomena and of observable facts without specific applications towards processes or products in mind. Basic research, however, may include activities with broad applications in mind. Applied research is systematic study to gain knowledge or understanding necessary to determine the means by which a recognized and specific need may be met. Development is systematic application of knowledge or understanding, directed toward the production of useful materials, devices, and systems or methods, including design, development, and improvement of prototypes and new processes to meet specific requirements. Research and development equipment includes acquisition or design and production of movable equipment, such as spectrometers, research satellites, detectors, and other instruments. At a minimum, this category should include programs devoted to the purchase or construction of R&D equipment. Research and development facilities include the acquisition, design, and construction of, or major repairs or alterations to, all physical facilities for use in R&D activities. Facilities include land, buildings, and fixed capital equipment, regardless of whether the facilities are to be used by the Government or by a private organization, and regardless of where title to the property may rest. This category includes such fixed facilities as reactors, wind tunnels, and particle accelerators. There are more than 20 Federal agencies that fund R&D in the United States. The nature of the R&D that these agencies fund depends on the mission of each agency and on the role of R&D in accomplishing it. Table 21–1 shows agency-by-agency spending on basic and applied research, development, and R&D equipment and facilities. III. MULTI-AGENCY R&D ACTIVITIES A number of research investments are being addressed through multi-agency research activities coordinated through the National Science and Technology Council (NSTC) and other interagency forums. Many of the challenges simply cannot be addressed by a single agency. Moreover, innovation often arises from combining the tools, techniques, and insights from multiple agencies. Table 21–2 shows details of three such interagency efforts: networking and information technology R&D, nanotechnology R&D, and climate change R&D. Networking and Information Technology R&D: The Budget proposes $4.0 billion for the multi-agency Networking and Information Technology Research and Development (NITRD) Program, which plans and coordinates agency research efforts in cyber security, highend computing systems, advanced networking, software development, high-confidence systems, information management, and other information technologies. The 2011 Budget retains the important focus on investment in high-end computing research for both national security and large-scale scientific applications, particularly in advanced scalable simulations. The 2011 Budget also continues to emphasize foundations for assured comput- ing and secure hardware, software and network design and engineering to address the goal of making Internet communications more secure and reliable. Reports and general information about NITRD are available at www. nitrd.gov. Nanotechnology R&D: The Budget proposes $1.7 billion for the multi-agency National Nanotechnology Initiative (NNI). The NNI focuses on R&D that creates materials, devices, and systems that exploit the fundamentally distinct properties of matter as it is manipulated at the nanoscale (roughly 1 to 100 nanometers). The results of NNI-supported R&D are enabling breakthroughs in biomedical detection and treatment, advanced manufacturing at or near the nanoscale, environmental monitoring and protection, sustainable energy production as well as energy conversion and storage, and more powerful electronic devices, among many others. Guided by the NNI strategies developed by the Nanoscale Science, Engineering, and Technology Subcommittee of the NSTC, participating agencies will continue to support nanoscience and nanotechnology development through investigator-led research; multidisciplinary centers of excellence; education and training; and infrastructure and standards development, including user facilities and net- 342 ANALYTICAL PERSPECTIVES works that are broadly available to support research and innovation. In addition, consistent with the NNI Strategy for Nanotechnology-Related Environmental Health, and Safety Research, agencies continue to maintain a focus on the responsible development of nanotechnology, with attention to the human and environmental health impacts, as well as ethical, legal, and other societal issues. Reports and general information about NNI are available at www.nano.gov. Climate Change R&D: The Budget proposes $2.6 billion for the U.S. Global Change Research Program (USGCRP), which integrates Federal research and solutions for climate and global change. The 2011 Budget supports scientific research and applications to support the goals set forth in the program’s strategic plan. These activities can be grouped under the following areas: improve our knowledge of Earth’s past and present climate variability and change; improve our understanding of natural and human forces of climate change; improve our capability to model and predict future conditions and impacts; assess the Nation’s vulnerability to current and anticipated impacts of climate change; and improve the Nation’s ability to respond to climate change by providing climate information and decision support tools that are useful to policy makers and the general public. Reports and general information about the USGCRP are available on the program’s website, www.globalchange.gov. The Climate Change Technology Program (CCTP) provides planning and analysis on the portfolio of federally funded climate change technology R&D. Reports and general information about the CCTP are available on the program’s website, www.climatetechnology.gov. Table 21–1. FEDERAL RESEARCH AND DEVELOPMENT SPENDING (Budget authority, dollar amounts in millions) 2009 Actual 1 2010 Estimate 2011 Proposed Dollar Change: Percent Change: 2010 to 2011 2010 to 2011 2 By Agency Defense ............................................................................................................................................... Health and Human Services ................................................................................................................ Energy ................................................................................................................................................. NASA ................................................................................................................................................... National Science Foundation ............................................................................................................... Agriculture ........................................................................................................................................... Commerce ........................................................................................................................................... Veterans Affairs ................................................................................................................................... Homeland Security .............................................................................................................................. Transportation ...................................................................................................................................... Interior ................................................................................................................................................. Environmental Protection Agency ........................................................................................................ Education ............................................................................................................................................ Smithsonian Institution ........................................................................................................................ Other .................................................................................................................................................... 81,121 41,658 13,268 11,677 7,576 2,613 1,969 1,020 1,096 976 775 559 312 226 625 81,090 31,177 10,693 9,286 5,092 2,591 1,516 1,162 1,150 1,012 755 622 348 208 651 77,548 32,156 11,219 10,986 5,571 2,448 1,727 1,180 1,046 1,018 772 651 383 236 755 –3,542 979 526 1,700 479 –143 211 18 –104 6 17 29 35 28 104 –4% 3% 5% 18% 9% –6% 14% 2% –9% 1% 2% 5% 10% 13% 16% TOTAL ......................................................................................................................................... 165,471 147,353 147,696 343 0% Defense ............................................................................................................................................... Health and Human Services ................................................................................................................ Energy ................................................................................................................................................. NASA ................................................................................................................................................... National Science Foundation ............................................................................................................... Agriculture ........................................................................................................................................... Commerce ........................................................................................................................................... Veterans Affairs ................................................................................................................................... Homeland Security .............................................................................................................................. Transportation ...................................................................................................................................... Interior ................................................................................................................................................. Environmental Protection Agency ........................................................................................................ Education ............................................................................................................................................ Smithsonian Institution ........................................................................................................................ Other .................................................................................................................................................... 1,727 21,140 4,505 1,830 6,107 907 152 406 268 ......... 47 107 3 152 26 1,830 16,981 3,862 884 4,291 999 121 464 227 ......... 50 90 6 162 35 1,998 17,502 4,003 977 4,684 1,018 150 470 173 ......... 52 95 7 178 34 168 521 141 93 393 19 29 6 –54 ......... 2 5 1 16 -1 9% 3% 4% 11% 9% 2% 24% 1% –24% ......... 4% 6% 17% 10% –3% SUBTOTAL ................................................................................................................................. 37,377 30,002 31,341 1,339 4% Basic Research 343 21. RESEARCH AND DEVELOPMENT Table 21–1. FEDERAL RESEARCH AND DEVELOPMENT SPENDING—Continued (Budget authority, dollar amounts in millions) 2009 Actual 1 2010 Estimate 2011 Proposed Dollar Change: Percent Change: 2010 to 2011 2010 to 2011 2 Applied Research Defense ............................................................................................................................................... Health and Human Services ................................................................................................................ Energy ................................................................................................................................................. NASA ................................................................................................................................................... National Science Foundation ............................................................................................................... Agriculture ........................................................................................................................................... Commerce ........................................................................................................................................... Veterans Affairs ................................................................................................................................... Homeland Security .............................................................................................................................. Transportation ...................................................................................................................................... Interior ................................................................................................................................................. Environmental Protection Agency ........................................................................................................ Education ............................................................................................................................................. Smithsonian Institution ........................................................................................................................ Other .................................................................................................................................................... 5,066 18,836 3,686 990 471 1,214 834 548 413 726 652 367 189 ......... 447 4,500 14,051 3,131 683 343 1,232 833 618 475 748 624 437 205 ......... 447 4,479 14,479 3,728 1,336 435 1,216 900 636 425 781 637 458 225 ......... 541 –21 428 597 653 92 –16 67 18 –50 33 13 21 20 ......... 94 –0% 3% 19% 96% 27% –1% 8% 3% –11% 4% 2% 5% 10% ......... 21% SUBTOTAL ................................................................................................................................. 34,439 28,327 30,276 1,949 7% Defense ............................................................................................................................................... Health and Human Services ................................................................................................................ Energy ................................................................................................................................................. NASA ................................................................................................................................................... National Science Foundation ............................................................................................................... Agriculture ........................................................................................................................................... Commerce ........................................................................................................................................... Veterans Affairs ................................................................................................................................... Homeland Security .............................................................................................................................. Transportation ...................................................................................................................................... Interior ................................................................................................................................................. Environmental Protection Agency ........................................................................................................ Education ............................................................................................................................................. Smithsonian Institution ........................................................................................................................ Other .................................................................................................................................................... 74,100 20 3,050 6,677 ......... 165 208 66 415 230 66 85 120 ......... 146 74,676 20 2,612 5,452 ......... 175 197 80 448 242 74 95 137 ......... 165 70,974 25 2,560 6,126 ......... 180 346 74 448 212 81 98 151 ......... 180 –3,702 5 –52 674 ......... 5 149 –6 ......... –30 7 3 14 ......... 15 –5% 25% –2% 12% ......... 3% 76% –8% ......... –12% 9% 3% 10% ......... 9% SUBTOTAL ................................................................................................................................. 85,348 84,373 81,455 –2,918 –3% 228 1,662 2,027 2,180 998 327 775 ......... ......... 20 10 ......... ......... 74 6 84 125 1,088 2,267 458 185 365 ......... ......... 22 7 ......... ......... 46 4 97 150 928 2,547 452 34 331 ......... ......... 25 2 ......... ......... 58 ......... 13 25 –160 280 –6 –151 –34 ......... ......... 3 –5 ......... ......... 12 –4 15% 20% –15% 12% –1% –82% –9% ......... ......... 14% –71% ......... ......... 26% -100% 8,307 amounts for 2009 include funding from P.L. 111-5, the American Recovery and Reinvestment Act of 2009. 2 Percentages may be rounded. 4,651 4,624 –27 –1% Development Facilities and Equipment ....................................................................................................................... Defense ............................................................................................................................................... Health and Human Services ................................................................................................................ Energy ................................................................................................................................................. NASA ................................................................................................................................................... National Science Foundation ............................................................................................................... Agriculture ........................................................................................................................................... Commerce ........................................................................................................................................... Veterans Affairs ................................................................................................................................... Homeland Security .............................................................................................................................. Transportation ...................................................................................................................................... Interior ................................................................................................................................................. Environmental Protection Agency ........................................................................................................ Education ............................................................................................................................................. Smithsonian Institution ........................................................................................................................ Other .................................................................................................................................................... SUBTOTAL ................................................................................................................................. 1 The 344 ANALYTICAL PERSPECTIVES Table 21–2. AGENCY DETAIL OF SELECTED INTERAGENCY R&D EFFORTS (Budget authority, dollar amounts in millions) 2009 Actual 1 2010 Estimate 2011 Proposed Dollar Percent Change: Change: 2010 2010 to 2011 to 2011 2 Networking and Information Technology R&D National Science Foundation ........................................................ Defense ......................................................................................... Health and Human Services 3 ....................................................... Energy ........................................................................................... Commerce ..................................................................................... National Aeronautics and Space Administration ........................... Environmental Protection Agency ................................................. National Archives and Records Administration .............................. 1,359 1,368 1,238 572 258 100 6 5 1,091 1,278 986 495 104 82 6 5 1,171 1,107 1,019 524 119 82 6 5 80 –171 33 29 15 ......... ......... ......... 7% –13% 3% 6% 14% ......... ......... ......... TOTAL .............................................................................. 4,906 4,047 4,033 -14 -0% Energy .......................................................................................... National Science Foundation ........................................................ Health and Human Services 4 ....................................................... Defense ......................................................................................... Commerce (NIST) ......................................................................... Environmental Protection Agency ................................................ National Aeronautics and Space Administration .......................... Agriculture ..................................................................................... Homeland Security ........................................................................ Transportation ............................................................................... Consumer Product Safety Commission ......................................... Justice ........................................................................................... 589 510 410 459 137 13 17 15 9 1 ......... 1 343 418 345 436 114 18 17 15 12 3 ......... ......... 406 401 391 349 108 20 17 14 12 2 2 ......... 63 –17 46 -87 -6 2 ......... -1 ......... -1 2 ......... 18 –4% 13% –20% -5% 11% ......... –7% ......... –33% N/A ......... TOTAL .............................................................................. 2,161 1,721 1,722 1 0% 1,323 594 390 233 47 45 18 6 5 2 17 1,071 360 319 165 109 63 21 7 4 3 36 1,285 437 370 191 157 81 22 11 4 3 43 214 77 51 26 48 18 1 4 ......... ......... 7 20% 21% 16% 16% 44% 29% 5% 57% ......... ......... 19% National Nanotechnology Initiative U.S. Global Change Research Program National Aeronautics and Spce Administration ............................. Commerce (NOAA) ....................................................................... National Science Foundation ........................................................ Energy .......................................................................................... Agriculture .................................................................................... Interior (USGS) .............................................................................. Environmental Protection Agency ................................................. Smithsonian Institution ................................................................. Health and Human Services (NIH) ................................................ Transportation ............................................................................... U.S. Agency for International Development 5 ................................. TOTAL .............................................................................. 2,663 2,122 2,561 439 21% for 2009 include funding from P.L. 111-5, the American Recovery and Reinvestment Act of 2009. 2 Percentages may be rounded. 3 Includes funds from offsetting collections for the Agency for Healthcare Research and Quality. 4 Includes funds from the National Institutes of Health, National Institute of Occupational Safety and Health, and Food and Drug Administration. 5 USAID funding supports USGCRP and the Climate Change International Assistance (CCIA) effort. In the past, some USAID funding was counted under both crosscuts. These efforts will only be counted toward the CCIA total. 1 Amounts 22. CREDIT AND INSURANCE The Federal Government offers direct loans and loan guarantees to support a wide range of activities including housing, education, business and development, and exports. The Federal Government also permits certain privately owned companies, called Government-Sponsored Enterprises (GSEs), to operate under Federal charters for the purpose of enhancing credit availability for targeted sectors. Through its insurance programs, the Federal Government insures deposits at depository institutions, guarantees private defined-benefit pensions, and insures against some other risks such as flood and terrorism. Recently, in response to severe financing difficulties in private markets, GSEs have been playing more active roles in the secondary market, Federal credit programs have sought to facilitate access to credit and support a greater number of borrowers, and Government guarantees and insurance have been expanded to new areas of the economy. Some of these measures are temporary, taken only to address the economic crisis. This chapter discusses the roles of these diverse programs: • The first section emphasizes the roles of Federal credit and insurance programs in addressing market imperfections that may prevent the private market from efficiently providing credit and insurance. • The second section discusses individual credit programs and the GSEs intended to support four sectors: housing, education, business and development, and exports. • The third section reviews Federal deposit insurance, pension guarantees, disaster insurance, and insurance against terrorism and other security-related risks. I. THE FEDERAL ROLE Credit and insurance markets often suffer from market imperfections and can require regulation or other Government involvement to function well. Relevant market imperfections include information failures, limited ability to secure resources, insufficient competition, externalities, and economic disequilibrium. Federal credit and insurance programs may improve economic efficiency if they effectively fill the gaps created by market imperfections. But the presence of a market imperfection does not mean that Government intervention will always be effective. To be effective, a credit or insurance program should be carefully designed to reduce inefficiencies in the targeted area while minimizing inefficiencies elsewhere. Information Failures. Financial intermediaries may fail to allocate credit to creditworthy borrowers if there is an asymmetry in the information available to different agents in the market place. For example, some groups of borrowers, such as students and start-up businesses, have limited incomes and credit histories, which can make it difficult for financial institutions to distinguish between borrowers who represent good and bad risks. In this circumstance, “adverse selection” can cause the pool of borrowers to disproportionately contain bad risks, thereby causing creditworthy borrowers belonging to these groups to fail to obtain credit or to be forced to pay excessively high interest rates. Government credit programs can sometimes expand the pool of borrowers in such a way that pricing becomes attractive to a wider set of potential borrowers. Another example is caused by “moral hazard” problems, where the borrower or insured could behave so as to take advantage of the lender or insurer. This is the case for pension guarantees, where sponsors might underfund plans, and for deposit insurance, where banks might take more risk to earn a higher return. In these cases, the Government’s legal and regulatory powers can provide an advantage in comparison with a private insurer. Limited Ability to Secure Resources. The ability of private entities to absorb losses is more limited than that of the Federal Government, which has general taxing and borrowing authority and can therefore spread risk more widely. For some events potentially involving a very large loss concentrated in a short time period, therefore, Government insurance can be more reliable. Such events include large bank failures and some natural and man-made disasters that can threaten the solvency of private insurers. In addition, some lenders may have limited funding sources. Small local banks, for example, may have to rely largely on local deposits. Insufficient Competition. Competition can be insufficient in some markets because of barriers to entry or economies of scale. Insufficient competition may result in unduly high prices of credit and insurance in those markets. Externalities. Decisions at the individual level are not socially optimal when individuals do not capture the full benefit (positive externalities) or bear the full cost (negative externalities) of their activities. Education, for example, generates positive externalities because the general public benefits from the high productivity and good citizenship of a well-educated person. Homeownership and 345 346 ANALYTICAL PERSPECTIVES small business activity may also have significant social benefits. Pollution, in contrast, is a negative externality, from which other people suffer. Without Government intervention, people will engage less than the socially optimal level in activities that generate positive externalities and more in activities that generate negative externalities. Economic Disequilibrium. Another rationale for Federal intervention is economic disequilibrium. This is one rationale for deposit insurance. If many banks are hurt simultaneously by an economic shock, such as the one the Nation experienced recently, and depositors have a hard time knowing which ones may become insolvent, deposit insurance prevents a contagious rush to withdraw deposits. Such a rush could harm the entire economy. Reducing Inequality and Increasing Access. In addition to correcting market failures, Federal credit programs are often used to provide subsidies that reduce inequalities or extend opportunities to disadvantaged regions or segments of the population. II. CREDIT IN FOUR SECTORS Housing Credit Programs and GSEs Through housing credit programs, the Federal Government promotes homeownership and housing among various target groups, including low-income people, veterans, and rural residents. The primary function of housing GSEs is to increase liquidity in the mortgage market. Federal Housing Administration The Federal Housing Administration (FHA) guarantees mortgage loans to provide access to homeownership for people who may have difficulty obtaining a conventional mortgage. FHA has been a primary facilitator of mortgage credit for first-time and minority buyers, pioneered products such as the 30-year self-amortizing mortgage, and enhances the credit of many moderate and low-income households. It continues to have an important place in the mortgage market, but its role—and its risks—evolve. FHA and the Mortgage Market Shortly into the new millennium, FHA’s market presence diminished greatly as lower interest rates increased the affordability of mortgage finance and as more borrowers used emerging non-prime mortgage products, including subprime and Alt-A mortgages. Many of these products had exotic and risky features such as low “teaser rates” offered for periods as short as the first two years of the mortgage, high loan-to-value ratios (with some mortgages exceeding the value of the house), and interest-only loans requiring full payoff at a set future date. The Alt-A mortgage made credit easily available by not requiring documentation of income or assets. This competition eroded FHA’s market share, reducing it from 10 percent in 2000 to 2 percent in 2006. Starting at the end of 2007 and continuing through the present day, the availability of FHA and Government National Mortgage Association credit guarantees have been important counter-cyclical responses to the tightening of the private credit markets. With fewer conventional options, borrowers and lenders have flocked to FHA mortgages which have the advantages of being widely understood in the mortgage market, and offering ready access to the secondary markets through “full faith and credit” securitization by the Government National Mortgage Association. FHA’s loan volume soared to over $360 billion during 2009. FHA’s presence has supported the purchase market and enabled existing homeowners to re-finance at today’s lower rates. If not for such re-financing options, many homeowners would face higher risk of foreclosure due to the less favorable terms of their current mortgages. FHA’s reverse mortgage program—its Home Equity Conversion Mortgage program, or HECM—has grown steadily throughout the decade. This program allows elderly homeowners to tap their home equity to help meet their retirement needs. FHA has successfully pioneered an innovative product that has served many borrowers. From a small pilot started in 1990, the program grew to volume of $30 billion in FY 2009. This program growth is attributable to a combination of factors: the sharp growth in home equity attributable to strong housing price appreciation through most of the decade, the growing population of eligible elderly homeowners, and increased marketing efforts by lenders offering the product. While the provision of FHA insurance is serving a valuable role in addressing the needs of the present, the potential return of conventional finance to the mortgage market—with appropriate safeguards for consumers and investors including proper assessment and disclosure of risk—would broaden both the options available to borrowers and the sources of capital to fund those options. Nevertheless, FHA will continue to play an important role in the mortgage market going forward. Policy Response to Address Weakness in the Mortgage Market FHA continues to address potential foreclosures within its portfolio of insured mortgages. On May 20, 2009, the President signed the “Helping Families Save Their Homes Act of 2009.” This new law provides the Federal Housing Administration (FHA) with additional loss mitigation authority which the Administration has implemented through the FHA-Home Affordable Modification Program (FHA-HAMP) as part of the broader Making Home Affordable Program. The new statutory authority allows FHA to pay partial insurance claims of up to 30 percent of the unpaid principal balance of a defaulted mortgage. This authority allows FHA to modify loans to terms that are sustainable for borrowers who have realistic expectations of repayment. The same Act enacted 22. CREDIT AND INSURANCE improvements to the HOPE for Homeowners program. This program offers an FHA re-financing option to borrowers paying a very high share of their income on their mortgage and therefore at risk of default. The program has experienced little demand since its inception in October 2008. The statutory improvements, which became effective at the start of CY 2010 include the lowering of program premia and increased underwriting flexibility. These changes broaden the potential population eligible for the program while maintaining critical risk management features. FHA’s Budget Costs Throughout the recent period of stress in the mortgage market and into the Budget’s projections for 2011, FHA, like all other mortgage market participants, has faced significant financial risk and incurred large costs associated with defaults. FHA made several improvements to its forecasting abilities and used its analysis to identify particularly high-cost mortgages. The quality of estimates for FHA’s budgetary effects has improved and in doing so additional costs have been identified and reported. Since 1992, the net cost of FHA Mutual Mortgage single-family insurance has been reestimated and increased by a total of $37 billion excluding interest. As discussed in detail below, these reestimates have substantially reduced FHA’s capital reserves. Forecasting improvements continue. Starting with the 2010 reestimate, FHA now uses an econometric model for projecting loss severity rates. As a result, this model reflects economic conditions more closely than previous methods did. FHA improved its projections of default claims, correcting a structural under-estimation and producing fine-grained data on the relationship between underwriting variables and subsequent loan performance. These reviews also shed light on the high costs of SellerFinanced Downpayment Assistance Loans that, having both extremely high claim rates (over 30 percent in some cohorts) and poor recoveries on claims, contributed greatly to the reestimate costs. (These loans are qualitatively distinct from downpayment assistance provided by government agencies.) The upward cost reestimates occurred even as the housing market in general was prospering through the middle part of this decade and strong house-price growth increased the proceeds FHA took in from foreclosure sales. As more borrowers opted for nonprime private products, FHA’s market share—particularly of low-risk borrowers—dwindled and its proportion of borrowers with Seller-Financed Downpayment Assistance grew sharply. One of the major benefits of an FHA-insured mortgage is that it provides an option for borrowers who make only a modest downpayment, but show that they are creditworthy and have sufficient income to afford the house they want to buy. The disadvantage to these low downpayment mortgages (roughly 80 percent of FHA-insured purchase loans are financed with less than five percent down) is that they have little in the way of an equity cushion should house prices decline. When income changes from job loss or divorce occur, the limited equity cushion asso- 347 ciated with low downpayments make mortgage defaults more likely, as more homes cannot be sold at a sufficient price to pay off the debt. FHA has safeguards (such as requiring documented income) to protect it from the worst credit-risk exposure, such as that experienced in the subprime and Alt-A markets. All parties that have credit-risk, however, have been significantly hurt by house price depreciation and the prospect of continued weakness in the near-term. FHA’s exposure is more limited than many other mortgage market participants, however, due to a relatively lower number of mortgages in higher cost markets and historically low levels of originations until 2008. Moreover, even with growing proportions of Seller-Financed Downpayment Assistance Loans in its portfolio, FHA’s portfolio performance has experienced lower levels of defaults than the subprime sector and less-significant declines in performance than Alt-A loans. Accordingly, the Budget’s reestimates of FHA costs incorporate prudent projections of risk. The FHA reverse mortgage product, HECMs, has experienced significant cost increases. This product displays unique risks—its borrowers generally make no payments until their home is sold, and its costs are particularly sensitive to long-term house price appreciation. As the average term of a HECM is longer than a forward mortgage, trends in house prices may compound, creating a proportionally larger effect on costs than for the forward program. The decline in house prices has adversely affected the projected credit performance of HECMs and the program has a positive subsidy rate for 2011. The President’s Budget includes $250 million to fund the cost of guaranteeing HECMs as well as program changes described below. Combining all these factors, FHA recorded a reestimate excluding interest of $8 billion in 2010 in the expected costs of its outstanding portfolio of the Mutual Mortgage Insurance Fund (MMI). Under the provisions of the Federal Credit Reform Act, these costs are recorded as mandatory outlays in the year the reestimates are performed and will increase the 2010 deficit. According to its annual actuarial analysis and in the absence of policy changes, FHA dropped below the statutorily-mandated capital ratio of 2 percent in 2009. As the housing market recovers, the actuarial review projects that the ratio will again exceed 2 percent by 2013. However, it is important to note that a low capital ratio does not threaten FHA’s operations, either for its existing portfolio or for new books of business. Unlike private lenders, the guarantee on FHA and other federal loans is backed by the full faith and credit of the Federal Government, and is not dependent on capital reserves — FHA can never “run out” of money. Continued short-term weakness in house prices and a long-term expectation that price appreciation will rebound to a modest rate of growth also increases risks on new FHA loan guarantees endorsed in 2010. The cost effects identified in the reestimates of the existing FHA portfolio also inform the credit subsidy estimates for new activity in both forward mortgages and HECMs. 348 ANALYTICAL PERSPECTIVES Policy Responses to Enhance FHA’s Risk Management and Capital Reserve The Budget includes several policy changes to focus FHA’s credit enhancement on prudent risks and improve the financial health of the MMI Fund with premia increases. FHA is promulgating most of these through the appropriate administrative methods. A key exception is the annual premia levels. The Budget proposes a statutory revision to allow FHA more flexibility in setting these premia subject to a specific cap, as discussed further below. The policies are the product of considerable analysis focusing on three primary criteria: 1) effect on broader housing market stabilization and recovery; 2) effect on specific targeted populations; and 3) effect on the FHA MMI Fund capital reserves. The approach balances the goal of rebuilding FHA’s capital reserves quickly against the risks of compromising FHA’s mission and overcorrecting during this critical time in the fragile housing market recovery. 1. New loan-to-value (LTV) / credit score requirements. FHA’s current minimum credit score is 500 (as measured by the FICO score). This will be raised to 580 for borrowers making low downpayments (those with loan-to-value ratios above 90 percent). Other borrowers, having the security of possessing a high amount of equity relative to low downpayment borrowers, will still be eligible for the current lower minimum credit score. 2. Mortgage insurance premia (MIP) increases. FHA is immediately raising the upfront premium from 1.75 percent of the loan amount to 2.25 percent for most of its mortgages. The President’s Budget also includes a legislative proposal to increase the maximum annual premium the Secretary is authorized to charge. If granted this statutory flexibility, FHA will lower the upfront premium to 1 percent and increase the annual premia from 0.50 percent to 0.85 percent (0.90 percent for low downpayment mortgages). 3. Reduce allowable seller concessions from 6 percent to 3 percent to conform with industry standards and reduce potential house value inflation. 4. Increase enforcement and monitoring of FHA lenders. – Require approved mortgagees to assume liability for all of the loans that they originate or underwrite. – Eliminate independent FHA approval of mortgage brokers who originate but do not fund loans. – Pursue legislative authority to withdraw originating and underwriting approval for a lender nationwide on the basis of the actions of its regional branches. – More frequently monitor lender performance and compliance with FHA guidelines and standards. – Publicly report lender performance via a scorecard system to complement currently available Neighborhood Watch data. The President’s Budget also includes changes to the HECM program to minimize the risk and cost of the program. Starting in 2011, the program will have higher premia and borrowers will generally have access to slightly lower loan limits than currently in place. These changes in combination with credit subsidy appropriations described earlier will permit the program to meet demand for all qualifying loans. VA Housing Program The Department of Veterans Affairs (VA) assists veterans, members of the Selected Reserve, and active duty personnel in purchasing homes as recognition of their service to the Nation. The housing program substitutes the Federal guarantee for the borrower’s down payment, making the lending terms more favorable than loans without a VA guarantee. VA provided 132,556 zero down payment loans in 2009. The number of loans VA guaranteed increased significantly in 2009, as the tightened credit markets continued to make the VA housing program more attractive to eligible homebuyers. Additionally, the historically low interest rate environment of 2009 allowed 89,725 Veteran borrowers to lower the interest rate on their home mortgages. VA provided $68 billion in guarantees to assist 323,812 borrowers in 2009, compared with $38 billion and 186,638 borrowers in 2008. VA also assists borrowers through joint servicing efforts with VA-guaranteed loan servicers via home retention options and alternatives to foreclosure. These joint efforts helped resolve over 65 percent of defaulted VAguaranteed loans in 2009. Rural Housing Service The U.S. Department of Agriculture’s Rural Housing Service (RHS) offers direct and guaranteed loans to help very low- to moderate-income rural residents buy and maintain adequate, affordable housing. RHS housing loans and loan guarantees differ from other Federal housing loan programs in that they are means-tested, making them more accessible to low-income, rural residents. The single family direct loans can reduce the borrower’s interest rate down to as low as 1 percent. The program helps the “on the cusp” borrower obtain a mortgage, and requires graduation to private credit as the borrower’s income and equity in their home increase over time. The interest rate depends on the borrower’s income, and it is reviewed and reset annually. The direct program cost is balanced between interest subsidy and defaults. For 2011, RHS expects to provide $1.2 billion in loans. For the guaranteed loan program, the 2011 Budget proposes to make the fee structure of the single family housing guarantee similar to that of HUD’s FHA guaranteed loans. The up-front fee on new purchase loans will remain 2 percent, but an annual fee of .15 percent will be added to both new and refinanced loans. In addition, the up-front fee for refinanced loan guarantees will be increased to 1 percent. This change allows the subsidy for the loans to be completely offset without a significant additional burden to the borrowers, given that they can finance the up-front fee as part of the loan, and the annual fee will be a nominal 349 22. CREDIT AND INSURANCE amount added to the monthly payment. In addition to this change, the Budget includes language that will make the guaranteed loan program a direct endorsement program similar to VA and HUD’s guaranteed loan programs. This will make RHS more efficient and allow the single family housing staff to focus more on single family housing direct loans. For 2011, the Budget will provide $12 billion in single family loan guarantees. Within the multifamily housing portfolio, the 2011 Budget does not fund the revitalization demonstration programs. Instead, the Budget provides an increase in the multifamily housing direct loan level from $70 million to $95 million. In doing this, the Administration supports the poorest rural tenant population base. Meanwhile, the rental assistance grants, that are vital to the proper underwriting of the multifamily housing direct loan portfolio, are funded at $966 million, which is sufficient to renew the outstanding contracts. Multifamily Housing Guarantees and Farm Labor Housing are funded at historical levels. Government-Sponsored Enterprises in the Housing Market Homeownership has long been recognized as an important part of the American economy and part of the American dream. However, it has not always been within reach for the average American. During the Great Depression, housing markets were in turmoil. A typical mortgage required a down payment of around 50 percent and a balloon payment of principal within a few years. Limitations in financial and communication technology and restrictions on financial institutions made it difficult for surplus funds in one part of the country to be shifted to other parts of the country to finance residential housing. Starting in 1932, the Congress responded by creating a series of entities and programs that together promoted the development of longterm, amortizing mortgages and facilitated the movement of capital to support housing finance. A key element of this response was the creation of the FHA in 1934. Another element was the establishment of several entities designed to develop secondary mortgage markets and to facilitate the movement of capital into housing finance. These entities were chartered by the Congress with public missions and endowed with certain benefits that give them competitive advantages when compared with fully private companies. The Federal Home Loan Bank (FHLB) System, created in 1932, is comprised of twelve individual banks with shared liabilities. Together they lend money through advances to financial institutions—mainly banks and thrifts—that are involved in mortgage financing to varying degrees, and they also finance some mortgages on their own balance sheets. Recent financial market conditions have led to strong net interest income for the FHLBs, but several banks have experienced significant losses on their investments in private-label mortgagebacked securities. These securities constitute less than 5 percent of their total portfolio. The Federal National Mortgage Association, or Fannie Mae, created in 1938, and the Federal Home Loan Mortgage Corporation, or Freddie Mac, created in 1970, were established to support the stability and liquidity of a secondary market for residential mortgage loans. Fannie Mae’s and Freddie Mac’s public missions were later broadened to promote affordable housing. Together these three GSEs currently are involved, in one form or another, with more than one half of the $11-plus trillion residential mortgages outstanding in the U.S. today, not including indirect investments through advances of the FHLBs. Their share of outstanding residential mortgage debt peaked at 55 percent in 2003. Subsequently, originations of subprime and non-traditional mortgages led to a surge of privatelabel mortgage-backed securities (MBS), reducing the three GSEs’ market share to a low of 47 percent in 2006. Recent disruptions in the financial market, however, have led to a resurgence of their market share, which has increased to almost match the previous high of 55 percent as of September 30, 2009. The growing stress and losses in the mortgage markets over the last two years also reduced the GSEs’ capital, and responsive legislation enacted in July 2008 strengthened GSE regulation and provided the Treasury Department with authorities to bolster the GSEs’ financial condition. In September 2008, reacting to growing GSE losses and uncertainty that approached paralysis in the mortgage markets, the Federal Housing Finance Agency put Fannie Mae and Freddie Mac under Federal conservatorship, and Treasury began to exercise its GSE assistance authorities. The Budget continues to reflect the GSEs as nonbudgetary entities, though their status will continue to be reviewed. All of the current federal assistance being provided to Fannie Mae and Freddie Mac, including the Senior Preferred Stock Purchase Agreements (PSPA), is shown on-budget, and discussed below. Budget Summary Table S-12 displays estimated gross transactions between the Treasury Department and Fannie Mae and Freddie Mac under the PSPAs as well as the estimated market value of the GSE’s and their balance sheet information for prior years. Dividend payments after 2011 were calculated to be consistent with the net value for the companies derived from an option pricing model. Starting in 2012, the Budget forecasts that Fannie Mae and Freddie Mac will have sufficient earnings to pay part but not all of the scheduled dividend payments. The Budget assumes that the net dividend payments received by Treasury for each year after 2011 will be $6.73 billion. Mission The mission of the housing GSEs is to support certain aspects of the U.S. mortgage market. Fannie Mae and Freddie Mac’s mission is to promote affordable housing, and provide liquidity and stability to the secondary mortgage market. Currently, they engage in two major lines of business. 1. Credit Guarantee Business—Fannie Mae and Freddie Mac guarantee the timely payment of principal and interest on mortgage-backed securities (MBS). They create MBS by either buying and pooling whole mortgages or by entering into swap arrangements with mortgage originators. Over time 350 ANALYTICAL PERSPECTIVES these MBS held by the public have averaged about one-quarter of the U.S. mortgage market, and as of November 30, 2009 they totaled $3.9 trillion. 2. Mortgage Investment Business—Fannie Mae and Freddie Mac manage retained mortgage portfolios composed of their own MBS, MBS issued by others, and individual mortgages. The GSEs finance the purchase of assets held in their portfolios through debt issued in the credit markets. As of November 30, 2009 these retained mortgages, financed largely by GSE debt, totaled $1.5 trillion. taken in response to the GSEs’ declining capital adequacy and to support the safety and soundness of the GSEs and their role in the secondary mortgage market. HERA provides that as conservator FHFA may take any action that is necessary to return Fannie Mae and Freddie Mac to a sound and solvent condition and to preserve and conserve the assets of each firm. As conservator, FHFA has assumed the powers of the Board and shareholders at Fannie Mae and Freddie Mac. FHFA has appointed new Directors and CEOs that are responsible for the day-to-day operations of the two firms. The mission of the Federal Home Loan Bank System is broadly defined as promoting housing finance, and the System also has specific requirements to support affordable housing. Its principal business remains lending (secured by mortgages) to regulated depository institutions and insurance companies engaged in residential mortgage finance. Department of Treasury GSE Programs under HERA On September 7, 2008, the U.S. Treasury launched three new programs to provide temporary financial support to the GSEs under the temporary authority provided in HERA. These authorities sunset on December 31, 2009. Regulatory Reform 1. Senior Preferred Stock Purchase Agreements with Fannie Mae and Freddie Mac Treasury initially entered into agreements with Fannie Mae and Freddie Mac to make investments of up to $100 billion in senior preferred stock in each GSE in order to ensure that each company maintains a positive net worth. In exchange for the substantial funding commitment the Treasury received $1 billion in preferred stock for each GSE and warrants to purchase up to a 79.9 percent share of common stock at a nominal price. On February 18, 2009 Treasury announced that the funding commitments for these agreements would be increased to $200 billion each. On December 24, 2009, Treasury announced that the funding commitments in the purchase agreements would be modified to allow for additional funding in the event that cumulative losses at either enterprise exceed $200 billion before December 31, 2012. In total, as of December 31, 2009, $110.6 billion has been paid to the GSEs, and the redemption face value of Treasury’s preferred stock has increased accordingly. Fannie Mae and Freddie Mac must pay quarterly dividends to Treasury based on the redemption value of Treasury’s senior preferred stock; $6.8 billion in dividends have been paid as of December 31, 2009. The 2008 Housing and Economic Recovery Act (HERA) reformed and strengthened the GSEs’ safety and soundness regulator by creating the Federal Housing Finance Agency (FHFA), a new independent regulator for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. The FHFA authorities consolidate and expand upon the regulatory and supervisory roles of what were previously three distinct regulatory bodies: the Federal Housing Finance Board as the FHLB’s overseer; the Office of Federal Housing Enterprise Oversight as the safety and soundness regulator of the other GSEs; and HUD as their public mission overseer. FHFA has been given substantial authority and discretion to influence the size and composition of Fannie Mae and Freddie Mac investment portfolios through the establishment and compliance monitoring of housing goals and capital requirements. FHFA is required to issue housing goals for each of the regulated enterprises, including the FHLBs starting in 2011, with respect to single family and multi-family mortgages and has the authority to require a corrective “housing plan” if an enterprise does not meet its goals and statutory reporting requirements, and in some instances impose civil money penalties. In August of 2009, FHFA promulgated a final rule adjusting the overall 2009 housing goals downward based on a finding that current market conditions have reduced the share of loans that qualify under the goals. HERA mandated dramatic revisions to the housing goals, which beginning in 2010 will comprise four singlefamily goals and one multifamily special affordable goal. These changes will be promulgated by FHFA in the first half of 2010. The expanded authorities of FHFA also include the ability to place any of the regulated enterprises into conservatorship or receivership based on a finding of under-capitalization or a number of other factors. Conservatorship On September 6, 2008, FHFA placed Fannie Mae and Freddie Mac into conservatorship. This action was 2. GSE MBS Purchase Programs Treasury initiated a temporary program to purchase MBS issued by Fannie Mae and Freddie Mac, which carry the GSEs’ standard guarantee against default. The purpose of the program was to promote liquidity in the mortgage market and, thereby, affordable homeownership by stabilizing the interest rate spreads between mortgage rates and Treasuries. Treasury purchased $226 billion in MBS from September 2008 to December 31, 2009, when the statutory authority for this program expired. In addition, the Federal Reserve engaged in GSE MBS purchases over this period totaling $1 trillion through the end of 2009 (see discussion below). 22. CREDIT AND INSURANCE 351 3. GSE Lending Facility ligations of the GSEs. On March 18, 2009 the Federal Reserve Board announced that the purchase targets for these program would be increased to up to $1.25 trillion and $200 billion respectively. This MBS purchase program is widely credited with pushing down mortgage interest rates, which according to the Freddie Mac Primary Mortgage Market Survey (PMMS) reached an all time low of 4.71 for the average 30-year fixed-rate the week ending December 3, 2009. The Federal Reserve Board has announced that it intends to wind both of these programs down by March 31, 2010. Treasury promulgated the terms of a temporary secured lending credit facility available to Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. The facility was intended to serve as an ultimate liquidity backstop to the GSEs if necessary. No loans were needed or issued through December 31, 2009, when Treasury’s HERA purchase authority expired. In December 2009, Treasury initiated two additional purchase programs under HERA authority to support state and local Housing Financing Agencies (HFAs). Historically, HFAs have funded their activities by issuing tax-exempt mortgage revenue bonds (MRBs), keeping the associated mortgage collateral produced on HFA balance sheets. The bond performance of HFAs has generally been strong. However, due to the uncertainties and strain throughout the housing sector and the widening of spreads in the tax-exempt market, HFAs have experienced challenges in issuing new bonds to fund new mortgage lending. They have also faced difficulties in renewing required liquidity facilities on non-punitive terms. 4. Temporary Credit and Liquidity Program (TCLP) TCLP will provide HFAs with credit and liquidity facilities supporting up to $8.2 billion in existing HFA bonds, temporally replacing private market facilities that are expiring or imposing unusually high costs to the HFAs due to current market conditions. The fee for HFAs to use the TCLP will increase over time, encouraging the HFAs to transition from the TCLP to private market financing alternatives as quickly as possible. This assistance is designed to preserve the viability of the HFA infrastructure so that HFAs can continue their role in providing affordable mortgage credit to low and moderate income Americans. 5. New Issue Bond Purchase Program (NIBP) Under NIBP Treasury will purchase up to $15.3 billion in securities of Fannie Mae and Freddie Mac backed by new HFA housing bonds. NIBP provides temporary liquidity support for new HFA tax-exempt housing bond issuances, which would not otherwise occur in the current economic and bond market environment. The program will support up to several hundred thousand new mortgages to first time homebuyers in 2010, as well as refinancing opportunities to put at-risk, but responsible and performing, borrowers into more sustainable mortgages. The NIBP will also support development of tens of thousands of new affordable rental housing units for working families. Federal Reserve Agency MortgageBacked Securities and Direct GSE Obligation Purchase Programs On November 25, 2008, the Federal Reserve Board announced new programs to purchase up to $500 billion in agency MBS, including Fannie Mae, Freddie Mac, and Ginnie Mae issuances, and up to $100 billion in direct ob- Recent GSE Role in Administration Initiatives to Relieve the Foreclosure Crisis While under conservatorship, Fannie Mae and Freddie Mac have continued to play a leading role in government and market initiatives to prevent homeowners who can no longer afford to make their mortgage payments from losing their homes. In November, 2008 the mortgage industry’s HOPE NOW Alliance announced the Streamlined Modification Program (SMP). The SMP established industry standards for voluntary mortgage modifications to assist distressed borrowers by reducing their monthly mortgage payments to no more than 38 percent of a borrower’s gross monthly income. However, only a small number of modifications were initiated under the SMP program. The limited success of the SMP program was due in part to restrictions in securitization agreements on mortgage servicers regarding permissible modifications. These restrictions included requiring a finding of imminent default or a demonstration that the net present value to the investor would be maximized before a loan can be modified. In March 2009, the Administration announced its Making Home Affordable (MHA) program, which includes the Home Affordable Modification Program (HAMP), and the Home Affordable Refinance Program (HARP). HAMP is a $75 billion program, which includes up to $50 billion of TARP funds, intended to bring relief to roughly three to four million at-risk homeowners struggling to make their mortgage payments, while preventing neighborhoods and communities from suffering the negative spillover effects of foreclosures. Fannie Mae and Freddie Mac are participating in the HAMP both for their own mortgage books and as the Treasury Department’s agents. Under HAMP, lenders, servicers, and borrowers receive incentive and interest supplement payments from Treasury to reduce the monthly mortgage payment for troubled borrowers to 31 percent of their gross income, fixed for 5 years, establishing a new standard for mortgage modification affordability. Treasury is also working with the Federal Housing Administration (FHA) to incorporate HAMP incentive payments into FHA’s mortgage modification program. As of November 30, 2009, 78 mortgage servicers have signed up to participate in the HAMP, over one million trial modifications have been extended to borrowers, and over 725,000 trial modifications were underway. Fannie Mae and Freddie Mac are also integral to the HARP. Under the program, borrowers with a mortgage 352 ANALYTICAL PERSPECTIVES that is owned by Fannie Mae or Freddie Mac and with a current loan-to-value (LTV) ratio up to 125 percent may be eligible to refinance their mortgage to take advantage of the current low interest rate environment. Prior to HARP, the LTV limit of 80 percent for conforming purchase mortgages without a credit enhancement such as private mortgage insurance also applied to refinancing of mortgages owned by the GSEs. Under HARP, borrowers whose mortgages are already owned or guaranteed by Fannie Mae or Freddie Mac may be eligible to refinance their mortgage without obtaining new or additional mortgage insurance even if their current loan-to-value ratio is as high as 125 percent. (See Chapter 4 for more information). Risks that GSEs Face Like other financial institutions, the GSEs face a full range of risks, including market risk, credit risk, and operational risk. The housing market downturn in the last two years has significantly increased the credit risk for mortgage delinquencies and defaults faced by Fannie Mae and Freddie Mac. Systemic risk is the risk that liquidity or solvency problems at a financial institution or group of institutions could lead to problems more widely in the financial system or economy—the risk that a small problem could multiply to a point where it could jeopardize the country’s economic well-being. Before conservatorship, Fannie Mae and Freddie Mac posed a significant systemic risk because of their size, high leverage and the critical role of mortgage financing in the economy. However, this risk has been substantially reduced as a result of the additional risk capital provided to them through the Senior Preferred Stock Purchase Agreements with the U.S. Department of Treasury. The GSEs borrow significant funds from various types of investors, and the health of the housing market critically affects the overall economic activity. Thus, financial trouble at one or more of the GSEs could unsettle not only the mortgage finance markets but also other vital parts of the financial system and economy. As of November 30, 2009 their combined debt and guaranteed MBS totaled $5.5 trillion, about as large as the total publicly held debt of the United States. Historically, investors in GSE debt have included thousands of banks, institutional investors such as insurance companies, pension funds, foreign governments and millions of individuals through mutual funds and 401k investments. The investor-fueled growth of the GSEs was due in large part to the funding advantages arising from a public perception of a Federal guarantee of their obligations that yielded above-Treasury rate returns. Future of the GSEs The Administration continues to monitor the situation of the GSEs closely and will continue to provide updates on considerations for longer term reform of Fannie Mae and Freddie Mac as appropriate. Education Credit Programs The Department of Education (ED) helps finance student loans through two major programs: the Federal Family Education Loan (FFEL) program and the William D. Ford Federal Direct Student Loan (Direct Loan) program. Eligible institutions of higher education may participate in one or both programs. Loans are available to students regardless of income. However, borrowers with low family incomes are eligible for loans where the Federal Government subsidizes loan interest costs while borrowers are in school, during a six-month grace period after graduation, and during certain deferment periods. Historically, the FFEL program provides loans through an administrative structure involving over 3,600 lenders, 35 State and private guaranty agencies, and over 5,000 participating schools. In the FFEL program, banks and other eligible lenders loan private capital to students and parents, guaranty agencies insure the loans, and the Federal Government reinsures the loans against borrower default. Lenders bear some of the default risk on all new loans, and the Federal Government is responsible for the remainder. ED also makes administrative payments to guaranty agencies and, in specific circumstances, pays interest subsidies on behalf of borrowers to lenders. The William D. Ford Direct Student Loan program was authorized by the Student Loan Reform Act of 1993. Under the Direct Loan program, the Federal Government provides loan capital directly to nearly 1,100 schools, which then disburse loan funds to students. The program offers a variety of flexible repayment plans including income-contingent repayment, under which annual repayment amounts vary based on the income of the borrower and payments can be made over 25 years with any residual balances forgiven. Due to significant disruptions in the credit markets, in early 2008 FFEL lenders expressed concerns that there would be insufficient capital to make FFEL loans to all eligible students in the 2008-2009 academic year. In response, Congress enacted the Ensuring Continued Access to Student Loans Act (ECASLA) which provided ED with the authority to purchase student loans. This authority was subsequently extended through the 2009-2010 academic year. ED used this authority to establish several temporary programs intended to ensure the availability of student loans: • Loan Participation Interest Program: In this program ED purchases a 100 percent interest in any eligible FFEL loan originated during the academic year. Once the loan is fully disbursed, or before this program expires at the end of the academic year, the lender can either redeem ED’s interest in a loan plus a yield of Commercial Paper plus 50 basis points or pledge the entire loan to ED in return for compensation of incurred expenses (such as origination and servicing) less ED’s yield. Between this program and the Direct Loan program, over 88 percent of federal student loan volume in the 2008-2009 academic year and 85 percent in the 2009-2010 year will be financed by the Department. • Loan Purchase Commitment Program: ED commits to purchase any eligible loans originated by a FFEL lender during the applicable academic years for face value plus any incurred expenses. The De- 22. CREDIT AND INSURANCE partment also established a short-term version of this program to purchase up to $6 billion in loans originated in the 2007-2008 academic year. • Asset-Backed Commercial Paper Conduit: This conduit facilitates financial transactions similar to those involved in a typical securitization: Investors purchase commercial paper (backed by student loan assets) while the conduit uses these proceeds to pay interest to other investors once the commercial paper matures and to purchase additional student loans. Though the hope is that this Conduit will continue providing liquidity to FFEL lenders without federal intervention, the Department, using its ECASLA authority, will serve as a buyer-of-lastresort in cases where the Conduit is unable to refinance maturing commercial paper. In the 2011 President’s Budget, the Administration is proposing to end subsidies currently paid to FFEL lenders and to originate all loans through the Federal Direct Loan program beginning on July 1, 2010. Doing so will make certain that student loans will continue to be available to all eligible students without risk of disruption due to turmoil in the financial markets. If enacted, this proposal would save $2.3 billion in 2010, $25.1 billion over the five year budget window (2011-2015) and $43.3 billion over 10 years (2011-2020) under OMB scoring. Congress is currently working with the Administration on a broader student aid reconciliation bill that would enact such a proposal and use these savings to increase Federal Pell Grants, fund an American Graduation Initiative, and make significant investments in early learning programs. Business and Rural Development Credit Programs and GSEs Through various business lending programs, the Federal Government promotes entrepreneurship and energy efficiency. The Government also offers direct loans and loan guarantees to farmers who may have difficulty obtaining credit elsewhere and to rural communities that need to develop and maintain infrastructure. Two GSEs, the Farm Credit System and the Federal Agricultural Mortgage Corporation, increase liquidity in the agricultural lending market. Small Business Administration The Small Business Administration (SBA) helps entrepreneurs start, sustain, and grow small businesses. As a “gap lender” SBA works to supplement market lending and provide access to credit where private lenders are reluctant to do so without a Government guarantee. Additionally, SBA helps home- and business-owners, as well as renters, cover the uninsured costs of recovery from disasters through its direct loan program. The 2011 Budget requests $994 million, including administrative funds, for SBA to support more than $28 billion in financing for small businesses and disaster victims. The 7(a) General Business Loan program will support up to $17.5 billion in guaranteed loans that will 353 help small businesses operate and expand. This includes an estimated $16 billion in term loans and $1.5 billion in revolving lines of credit; the latter are expected to support $39 billion in total economic activity through draws and repayments over the life of the guarantee. The 504 Certified Development Company (CDC) program will support up to $7.5 billion in guaranteed loans for fixedasset financing. SBA will supplement the capital of Small Business Investment Companies (SBICs) with up to $3 billion in long-term, guaranteed loans to support SBIC financing assistance for venture capital investments in small businesses. At the end of 2009, SBA’s outstanding balance of direct and guaranteed loans totaled $90 billion. Consistent with the overall credit markets, SBA’s guaranteed lending declined in 2008 and early 2009 as the economy worsened, lending became constricted, and demand for loans dropped. However, with the overall improvement of economic conditions in mid-2009 and significant support through the American Recovery and Reinvestment Act, SBA’s guaranteed lending began to recover from the depths of the recession. To reduce lender risk and borrower costs, the Recovery Act included credit subsidy budget authority (BA) to temporarily raise the SBA guarantee on most 7(a) loans to 90 percent, and reduce fees for the 7(a) and 504 programs. The Recovery Act subsidy of $375 million supported $12 billion in 7(a) and 504 loan guarantee approvals. The Department of Defense Appropriations Act, 2010 (Public Law 111-117) provided an additional $125 million in subsidy BA to support an additional $3.4 billion in loan guarantee approvals under these more generous terms; this funding is expected to support lending through February, 2010. The Administration supports extension of these program terms through September 30, 2010. In addition, the Administration is also providing substantial assistance to SBA and other small business credit through several Department of Treasury programs using the resources of the Troubled Asset Relief Program (TARP). In 2009, this included providing a source of financing to 7(a) secondary market investors through the Term Asset-Backed Securities Loan Facility (TALF) program. The purchase of securities backed by the guaranteed portion of 7(a) loans is an important source of liquidity for SBA lenders. In addition, in March 2009 the Treasury Department announced its intention to directly purchase 7(a) secondary market securities and private first-lien loans under the 504 CDC program. While the program was ultimately not initiated on a large scale, the Federal government’s commitment to a strong secondary market for 7(a) and 504 loans helped restore investor confidence and the market for these securities. The Administration has begun programs to support broader small business lending. This includes offering low-cost capital through TARP to community banks and Community Development Financial Institutions (CDFIs) that commit to increase their small business loan originations. The Treasury Department has allocated at least $30 billion in TARP authority to continue and strengthen this effort in Fiscal Year 2010. For further information, see Chapter 4. 354 During the past year SBA experienced rising defaults in its outstanding portfolio, largely attributable to the economic downturn. For the 2011 Budget credit reestimates, SBA recorded a $4.5 billion net upward cost reestimate for its guaranteed loan programs, the Agency’s largest reestimate ever since the implementation of Credit Reform in 1992. This additional cost reflects actual and expected losses on loans issued prior to 2009. It is covered by mandatory appropriations, and increases the 2010 Budget deficit. To help mitigate future loan losses, the Budget requests additional funds to strengthen SBA’s loan and lender oversight system. In addition, the Administration will propose language in SBA’s legislative package to address the rising cost of 7(a) guarantees by giving SBA the flexibility to adjust fees to make the program self-sustaining over time. Due to higher actual and projected defaults, the subsidy cost of the 7(a) program—largely the difference between the program’s net default costs and the share of costs covered by fees—is projected to double in 2011 from 2010. The Budget provides $198 million in subsidy BA to provide a loan program, equivalent to the historical SBA authorized program level, but with an accounting adjustment for revolving lines of credit, to capture their loan drawdown and repayment activity. This treatment more accurately reflects the total credit activity supported by the Federal guarantee. The Budget also requests $3 million in subsidy BA and $10 million in technical assistance grant funds for the Microloan program. The Microloan program provides funds to non-profit intermediaries who in turn provide loans of up to $35,000 to new entrepreneurs. The Budget also includes three legislative proposals to help small businesses access credit. The Budget includes language to: 1) increase the maximum 7(a) loan size from $2 million to $5 million; 2) increase the maximum 504/ CDC loan from $2 million to $5 million for regular projects and from $4 million to $5.5 million for manufacturing projects, and 3) increase the maximum Microloan size from $35,000 to $50,000. Credit Programs to Promote Clean and Efficient Energy The Department of Energy (DOE) currently administers two credit programs that serve to enhance energy efficiency and reduce emissions: a loan guarantee program to support innovative energy technologies and a direct loan program to support advanced automotive technologies. The DOE’s loan guarantee program is authorized to issue loan guarantees for projects that employ innovative technologies to reduce air pollutants or man-made greenhouse gases. The program was first provided $4 billion in loan volume authority in 2007. The 2009 Consolidated Appropriations Act provided an additional $47 billion in loan volume authority, allocated as follows: $18.5 billion for nuclear power facilities, $2 billion for “front-end” nuclear enrichment activities, $6 billion for new or retrofitted coal-based power facilities equipped with carbon capture and sequestration (CCS) technologies, $2 billion for advanced coal gasification, and $18.5 billion for energy ANALYTICAL PERSPECTIVES efficiency, renewable energy, and transmission and distribution projects. The American Reinvestment and Recovery Act of 2009 amended the program’s authorizing statute to allow loan guarantees on a temporary basis for commercial or advanced renewable energy systems, electric power transmission systems, and leading edge biofuel projects. The Recovery Act also initially provided $6 billion in new budget authority for credit subsidy costs incurred for eligible loan guarantees. The program currently has $4 billion after funds were transferred to support the Department of Transportation’s “Cash for Clunkers” program. Early solicitations for the guarantee program attracted many projects requesting loan guarantees for 100 percent of DOE-supported project debt. Consistent with Federal credit policies, loans with 100 percent guarantees in this program are made through the Federal Financing Bank, and therefore do not involve private sector lenders. The program’s most recent solicitation, however, invites private sector lenders to participate under a new “Financial Institutions Partnership Program” whereby DOE provides guarantees for up to 80 percent of loan amounts financed by private sector financial institutions. This structure will utilize private sector expertise, expedite the lending/underwriting process, and leverage the program’s funds by sharing project risks with the private sector while increasing private sector experience with financing energy technologies. The 2011 Budget expands the program’s loan volume authority substantially to support the Administration’s objective of promoting clean energy including $500 million in budget authority (credit subsidy) to support approximately $3 to 5 billion in end use energy efficiency and renewable energy projects and $36 billion in loan guarantee authority for nuclear power facilities. The DOE’s direct loan program, the Advanced Technology Vehicle Manufacturing (ATVM) direct loan program, was created to support the development of advanced technology vehicles and associated components in the United States that would improve vehicle energy efficiency by at least 25% relative to a 2005 Corporate Average Fuel Economy standards baseline. The 2009 Continuing Resolution appropriated $7.5 billion in credit subsidy costs to support a maximum of $25 billion in loans under ATVM. The program provides loans to automobile and automobile part manufacturers for the cost of re-equipping, expanding, or establishing manufacturing facilities in the United States to produce vehicles or qualified components, and for associated engineering integration costs. Electric and Telecommunications Loans Rural Utilities Service (RUS) programs of the US Department of Agriculture (USDA) provide loans for rural electrification, telecommunications, distance learning, telemedicine, and broadband, and also provide grants for distance learning and telemedicine (DLT). The Recovery Act provided USDA $2.5 billion to support broadband loans and grants for fiscal years 2009 and 2010. This funding is expected to support over $6 billion in federal investments and will provide new and 22. CREDIT AND INSURANCE improved access to broadband services throughout rural America, based on the most appropriate technology for specific areas. The Budget includes $4.1 billion in direct electric loans for distribution, construction of renewable energy facilities, transmission, and carbon capture projects on facilities that use fossil fuel. No funds are provided to support generation using fossil fuels, except for carbon capture projects. The Budget also provides $690 million in direct telecommunications loans, $400 million in broadband loans, $18 million in broadband grants, and $30 million in DLT grants. USDA Rural Infrastructure and Business Development Programs USDA provides grants, loans, and loan guarantees to communities for constructing facilities such as healthcare clinics, police stations, and water systems. Direct loans are available at lower interest rates for the poorest communities. These programs have very low default rates. The cost associated with them is due primarily to subsidized interest rates that are below the prevailing Treasury rates. The program level for the Water and Wastewater (W&W) treatment facility loan and grant program in the 2011 President’s Budget is $1.6 billion. These funds are available to communities of 10,000 or fewer residents. The Community Facility Program is targeted to rural communities with fewer than 20,000 residents. It will have a program level of $531 million in 2011. USDA also provides grants, direct loans, and loan guarantees to assist rural businesses, cooperatives, nonprofits, and farmers in creating new community infrastructures (i.e. educational networks or healthcare coops) and to diversify the rural economy and employment opportunities. In 2011, USDA proposes to provide $978 million in loan guarantees and direct loans to entities that serve communities of 50,000 or less through the Business and Industry guaranteed loan program and Intermediary Relending program. These loans are structured to save/ create jobs and stabilize fluctuating rural economies. A recently implemented performance assessment tool will be used to calculate their impact on income growth in local, state, and national economies. The Rural Business Service is responsible for five rural renewable energy and small business programs. The Budget includes $240 million in discretionary and mandatory funds to support over $285 million in loans and grants for the following programs: the Rural Microentrepreneur Assistance Program, the Value-Added Agricultural Market Development Grant Program, the Biorefinery Assistance Program, the Rural Energy for America Program, and the Bioenergy Program for Advanced Biofuels. These programs are targeted to promote energy efficiencies, renewable energy, and small business development in rural communities. Loans to Farmers The Farm Service Agency (FSA) assists low-income family farmers in starting and maintaining viable farm- 355 ing operations. Emphasis is placed on aiding beginning and socially disadvantaged farmers. FSA offers operating loans and ownership loans, both of which may be either direct or guaranteed loans. Operating loans provide credit to farmers and ranchers for annual production expenses and purchases of livestock, machinery, and equipment, while farm ownership loans assist producers in acquiring and developing their farming or ranching operations. As a condition of eligibility for direct loans, borrowers must be unable to obtain private credit at reasonable rates and terms. As FSA is the “lender of last resort,” default rates on FSA direct loans are generally higher than those on private-sector loans. FSA-guaranteed farm loans are made to more creditworthy borrowers who have access to private credit markets. Because the private loan originators must retain 10 percent of the risk, they exercise care in examining the repayment ability of borrowers. The subsidy rates for the direct programs have been fluctuating over the past several years. These fluctuations are mainly due to the interest component of the subsidy rate. The number of loans provided by these programs has varied over the past several years. In 2009, FSA provided loans and loan guarantees to approximately 34,000 family farmers totaling $4.6 billion. Direct and guaranteed loan programs provided assistance totaling $1.5 billion to beginning farmers during 2009. Loans for socially disadvantaged farmers totaled $435 million, of which $186 million was in the farm ownership program and $249 million in the farm operating program. The average size of farm ownership loans continues to increase, with new customers receiving the bulk of these loans. In contrast, the majority of assistance provided in the operating loan program is to existing FSA farm borrowers. Overall, demand for FSA loans—both direct and guaranteed—continues to be high. More conservative credit standards and reduced profit margins are moving additional applicants from commercial credit to FSA direct programs. Also, the increase in market volatility and uncertainty is driving lenders to request guarantees in situations that they may not have in the past. In the 2011 Budget, FSA proposes to make $4.1 billion in direct and guaranteed loans through discretionary programs. Lending to beginning farmers was strong during 2009. FSA loaned or guaranteed loans to over 13,000 beginning farmer borrowers. Loans provided under the Beginning Farmer Down Payment Loan Program represented 25 percent of total direct ownership loans made during the year, a substantial increase from previous years. Direct operating loans also demonstrated a 34 percent increase in the number of beginning farmers assisted as compared to 2008. Overall, lending to beginning farmers was 24 percent above the 2008 levels. Lending to minority and women farmers was a significant portion of overall assistance provided, with $435 million in loans and loan guarantees provided to more than 5,000 farmers. This represents an increase of 20 percent in the number of minority borrowers and an increase of 15 percent in the overall dollar value. Outreach efforts by FSA field offices to promote and inform beginning and minority farmers 356 about available FSA funding have resulted in increased lending to these groups. In 2009, FSA received funding through the American Recovery and Reinvestment Act to provide a total of $173 million in direct farm operating loans. These loans are used to purchase items such as farm equipment, feed, seed, fuel and other operating expenses and will stimulate rural economies by providing American farmers funds to operate. FSA continues to evaluate the farm loan programs in order to improve their effectiveness. As part of this effort, FSA has undertaken an initiative to identify and develop outcome metrics for the direct and guaranteed loan programs. FSA is also developing a nationwide continuing education program for its loan officers to ensure they remain experts in agricultural lending. FSA will also be transitioning all information technology applications for direct loan servicing into a single, web-based application. In addition to moving direct loan servicing to a modern platform, the system will expand on existing capabilities to include all special servicing options, and its implementation will allow FSA to better service its delinquent and financially distressed borrowers. The Farm Credit System and Farmer Mac The Farm Credit System (FCS or System), including the Federal Agricultural Mortgage Corporation (Farmer Mac), is a Government-sponsored enterprise (GSE) that enhances credit availability for the agricultural sector. The banks and associations of the FCS provide production, equipment, and mortgage lending to farmers and ranchers, aquatic producers, agricultural cooperatives, related businesses, and rural homeowners, while Farmer Mac provides a secondary market for agricultural real estate, rural housing mortgages, certain rural utility loans, and farm and business loans guaranteed by the U.S. Department of Agriculture. Because Farmer Mac is governed by laws and regulations that are different from those governing the banks, associations, and service entities that compose the rest of the System, Farmer Mac is discussed separately below. The Farm Credit System (Banks and Associations) The financial condition of the System’s banks and associations remains fundamentally sound. Between September 30, 2008 and September 30, 2009, the ratio of capital to assets increased from 13.4 percent to 13.6 percent. Capital consisted of $3.2 billion in restricted capital in the Farm Credit Insurance Fund, which is held by the Farm Credit System Insurance Corporation (FCSIC), and $26 billion of unrestricted capital. For the first nine months of calendar year 2009, net income equaled $2.02 billion compared with $2.37 billion for the same period of the previous year. The decrease in net income primarily resulted from increases in provision for loan losses and net noninterest expenses offset in part by an increase in net interest income. Over the 12-month period ending September 30, 2009, nonperforming loans as a percentage of total loans outstanding increased from 0.65 percent to 2.65 percent, primarily due to deterioration in the ANALYTICAL PERSPECTIVES credit quality of loans to borrowers in certain agricultural sectors and also due to the downturn in the U.S. general economy. System assets grew a moderate 3.6 percent over the past twelve months as loan demand softened and commodity prices declined. The number of FCS institutions continues to decrease because of consolidation. As of September 30, 2009, the System consisted of five banks and 90 associations compared with seven banks and 104 associations in September 2002. Of the 95 FCS banks and associations, 80 had one of the top two examination ratings (1 or 2 on a 1-5 scale), 12 FCS institutions had a rating of 3, and 3 FCS institutions had a rating of 4. Over the 12-month period ending September 30, 2009, the System’s loans outstanding grew by $4.1 billion, or 2.6 percent, while over the past five years they grew by $67.3 billion, or 70.9 percent. As required by law, borrowers are also stockholder-owners of System banks and associations. As of September 30, 2009, the System had 483,797 stockholders. Loans to young, beginning, and small farmers and ranchers represented 11.4 percent, 19.3 percent, and 25.0 percent, respectively, of the total dollar volume of farm loans outstanding at the end of calendar year 2008. The percentage of loans made to young, beginning and small farmers in calendar year 2008 decreased slightly compared with calendar year 2007. Young, beginning, and small farmers are not mutually exclusive groups and, thus, cannot be added across categories. Maintaining special policies and programs for the extension of credit to young, beginning, and small farmers and ranchers is a legislative mandate for the System. The System, while continuing to record strong earnings and capital growth, remains exposed to a variety of risks associated with its portfolio concentration in agriculture and rural America. The agricultural sector has recently experienced some stress, especially in ethanol, poultry, dairy, hogs, nursery, and forestry, and has become riskier with the overall downturn in the U.S. and global economies. This downturn has led to reduced demand for agricultural products and lower farm prices. Squeezed profit margins have seriously undermined incomes and thus repayment capacity for major farm commodity groups, especially those dependent on the livestock industry. The agricultural sector is also subject to possible future risks such as farmland values, weather-related catastrophes, rising regulatory costs, and long-term environmental risks related to global warming. Also, as a result of the prolonged financial crisis, issuing longer-term debt remains a challenge for the System. FCSIC ensures the timely payment of principal and interest on FCS obligations on which System banks are jointly and severally liable. FCSIC holds the Insurance Fund, which supplements the System’s capital. On September 30, 2009, the assets in the Insurance Fund totaled $3.21 billion. Of that amount $40 million was allocated to the Allocated Insurance Reserve Accounts (AIRAs). As of September 30, 2009, the Insurance Fund as a percentage of adjusted insured debt was 2.04 percent in the unallocated Insurance Fund and 2.07 percent including the AIRAs. This was above the statutory secure base amount (SBA) of 2 percent. During 2009 System debt de- 357 22. CREDIT AND INSURANCE creased slightly, allowing the Insurance Fund to return to the SBA more rapidly than anticipated. Farmer Mac Farmer Mac was established in 1988 as a federally chartered institution within the FCS to facilitate a secondary market for farm real estate and rural housing loans. The Farm Credit System Reform Act of 1996 expanded Farmer Mac’s role from a guarantor of securities backed by loan pools to a direct purchaser of mortgages, enabling it to form pools to securitize. In May 2008, the Food, Conservation and Energy Act of 2008 (2008 Farm Bill) expanded Farmer Mac’s program authorities by allowing it to purchase and guarantee securities backed by rural utility loans made by cooperatives. Farmer Mac continues to meet core capital and regulatory risk-based capital requirements. As of September 30, 2009, Farmer Mac’s total program activity (loans purchased and guaranteed, AgVantage bond assets, and real estate owned) amounted to $10.8 billion, which represents an increase of 10 percent from the level a year ago. Of total program activity, on-balance-sheet loans and agricultural mortgage-backed securities accounted for $4.1 billion, and off-balance-sheet obligations accounted for $6.6 billion. Total assets were $5.7 billion, with nonprogram investments accounting for $1.3 billion of those assets. Farmer Mac’s net income for the first three quarters of calendar year 2009 was $76.8 million, a significant increase from the same period in 2008 during which Farmer Mac reported a net loss of $93 million. Earnings in 2009 were significantly aided by $56.7 million in pre-tax gains on trading assets and $15.5 million in pre-tax gains on financial derivatives. The prior year’s reported year-to-date loss was primarily caused by $102 million in other-than-temporary impairment charges on two securities held in Farmer Mac’s nonprogram investment portfolio. Farmer Mac liquidated these securities in 2009 and also replaced its Chief Executive Officer and Chief Financial Officer. International Credit Programs Seven Federal agencies -- the Department of Agriculture (USDA), the Department of Defense, the Department of State, the Department of the Treasury, the Agency for International Development (USAID), the Export-Import Bank, and the Overseas Private Investment Corporation (OPIC) -- provide direct loans, loan guarantees, and insurance to a variety of foreign private and sovereign borrowers. These programs are intended to level the playing field for U.S. exporters, deliver robust support for U.S. manufactured goods, stabilize international financial markets, and promote sustainable development. Leveling the Playing Field Federal export credit programs counter subsidies that foreign governments, largely in Europe and Japan, provide their exporters, usually through export credit agencies (ECAs). The U.S. Government has worked since the 1970’s to constrain official credit support through a mul- tilateral agreement in the Organization for Economic Cooperation and Development (OECD). This agreement has significantly constrained direct interest rate subsidies and tied-aid grants. Further negotiations resulted in a multilateral agreement that standardized the fees for sovereign lending across all ECAs beginning in April 1999. Fees for non-sovereign lending, however, continue to vary widely across ECAs and markets, thereby providing implicit subsidies. The Export-Import Bank attempts to “level the playing field” strategically and to fill gaps in the availability of private export credit. The Export-Import Bank provides export credits, in the form of direct loans or loan guarantees, to U.S. exporters who meet basic eligibility criteria and who request the Bank’s assistance. USDA’s Export Credit Guarantee Programs (also known as GSM programs) similarly help to level the playing field. Like programs of other agricultural exporting nations, GSM programs guarantee payment from countries and entities that want to import U.S. agricultural products but cannot easily obtain credit. Stabilizing International Financial Markets Consistent with U.S. obligations in the International Monetary Fund regarding global financial stability, the ESF may provide loans or credits to a foreign entity or government of a foreign country. A loan or credit may not be made for more than six months in any 12-month period unless the President gives the Congress a written statement that unique or emergency circumstances require the loan or credit be for more than six months. The 2009 Supplemental Appropriations Act provided increases in the U.S. participation in the IMF, including an increase in the U.S. quota subscription to the IMF of approximately $7.9 billion (at the December 2009 dollar/SDR exchange rate), and a $100 billion increase in the U.S. participation in the IMF New Arrangements to Borrow (NAB). While U.S. participation in the quota and NAB are not credit programs, the Act requires the 2009 appropriations to be scored on a credit basis, with an adjustment to the discount rate for market risks. (See Chapter 13 for more information). Using Credit to Promote Sustainable Development Credit is an important tool in U.S. bilateral assistance to promote sustainable development. USAID’s Development Credit Authority (DCA) allows USAID to use a variety of credit tools to support its development activities abroad. DCA provides non-sovereign loan guarantees in targeted cases where credit serves more effectively than traditional grant mechanisms to achieve sustainable development. DCA is intended to mobilize host country private capital to finance sustainable development in line with USAID’s strategic objectives. Through the use of partial loan guarantees and risk sharing with the private sector, DCA stimulates private-sector lending for financially viable development projects, thereby leveraging host-country capital and strengthening sub-national capital markets in the developing world. While there is clear demand for 358 ANALYTICAL PERSPECTIVES DCA’s facilities in some emerging economies, the utilization rate for these facilities is still very low. OPIC also supports a mix of development, employment, and export goals by promoting U.S. direct investment in developing countries. OPIC pursues these goals through political risk insurance, direct loans, and guarantee products, which provide finance, as well as associated skills and technology transfers. These programs are intended to create more efficient financial markets, eventually encouraging the private sector to supplant OPIC finance in developing countries. OPIC has also created a number of investment funds that provide equity to local companies with strong development potential. The Interagency Country Risk Assessment System (ICRAS) standardizes the way in which most agencies that lack sufficient historical experience budget for the cost associated with the risk of international lending. The cost of lending by these agencies is governed by proprietary U.S. Government ratings, which correspond to a set of default estimates over a given maturity. The methodology establishes assumptions about default risks in international lending using averages of international sovereign bond market data. The strength of this method is its link to the market and an annual update that adjusts the default estimates to reflect the most recent risks observed in the market. Ongoing Coordination Promoting Economic Growth and Poverty Reduction through Debt Sustainability International credit programs are coordinated through two groups to ensure consistency in policy design and credit implementation. The Trade Promotion Coordinating Committee (TPCC) works within the Administration to develop a National Export Strategy to make the delivery of trade promotion support more effective and convenient for U.S. exporters. The Enhanced Heavily Indebted Poorest Countries (HIPC) Initiative reduces the debt of some of the poor countries with unsustainable debt burdens that are committed to economic reform and poverty reduction. The 2011 Budget continues to support debt reduction for countries that qualify under the HIPC Initiative. III. INSURANCE PROGRAMS Deposit Insurance Federal deposit insurance promotes stability in the U.S. financial system. Prior to the establishment of Federal deposit insurance, depository institution failures often caused depositors to lose confidence in the banking system and rush to withdraw deposits. Such sudden withdrawals caused serious disruption to the economy. In 1933, in the midst of the Great Depression, a system of Federal deposit insurance was established to protect depositors and to prevent bank failures from causing widespread disruption in financial markets. Today, the Federal Deposit Insurance Corporation (FDIC) insures deposits in banks and savings associations (thrifts) using the resources available in its Deposit Insurance Fund (DIF). The National Credit Union Administration (NCUA) insures deposits (shares) in most credit unions (certain credit unions are privately insured) using the resources available in the National Credit Union Share Insurance Fund (NCUSIF). As of September 30, 2009, the FDIC insured $6 trillion of deposits at 8,099 commercial banks and thrifts, and the NCUA insured $715 billion of shares at 7,640 credit unions. The NCUA also administers the Central Liquidity Facility (CLF), which serves as a back-up lender for credit unions when market sources of liquidity are unavailable. By statute, the CLF is authorized to borrow up to 12 times its subscribed capital stock and surplus. As of 2009 this statue would allow the CLF to borrow up to approximately $44 billion. However, Congress traditionally sets the CLF borrowing limit on an annual basis through the appropriation process; historically, Congress has set the CLF borrowing limit at $1.5 billion. In order to give the CLF the flexibility to respond to the liquidity needs of credit unions at the height of the economic crises, the 2009 Omnibus Appropriations Act did not include the $1.5 billion appropriations limit on the CLF, effectively allowing the CLF to borrow up to its statutory limit. The CLF borrowed $19.5 billion in FY 2009. Since its creation, the deposit insurance system has undergone a series of reforms. The Deposit Insurance Reform Act of 2005 allows the FDIC to better manage the DIF. For example, the Act authorizes the FDIC to charge premiums for deposit insurance on a risk-adjusted basis, and ensures that all financial institutions pay premiums for Federal insurance on their insured deposits regardless of the level of the DIF. The Act authorizes the FDIC to set a reserve ratio (ratio of the deposit insurance fund to total insured deposits) within a range of 1.15 percent and 1.5 percent. Should the reserve ratio fall below 1.15 percent, the FDIC is allowed additional time to restore the DIF, and when it rises to 1.35 percent, the FDIC is required to rebate half of the premiums it collects (at that point it would likely reduce required premiums as well). The Emergency Economic Stabilization Act of 2008 temporarily increased the insured deposit level from $100,000 per account to $250,000 until December 31, 2009. On May 20, 2009, President Obama signed the Helping Families Save Their Homes Act, which further extended the temporary increase in the insured deposit level of $250,000 per account through December 31, 2013. Additionally, the Consolidated Appropriations Act of 2010 authorizes NCUA’s Central Liquidity Facility (CLF), to borrow up to 12 times its subscribed capital stock and surplus, effectively raising the CLF’s lending limit to $44 billion under the statutory formula for FY 2010. 359 22. CREDIT AND INSURANCE Emergency Programs Responding to the stress among financial institutions, the FDIC and the NCUA have committed resources to increase access to credit, strengthen financial institutions, and restore confidence in the housing sector. These programs include: FDIC: • 3-year guarantee of qualifying bank and bank holding company senior unsecured debt issued prior to October 31, 2009 • Removal of the insurance limit on participating banks’ non-interest bearing transaction account deposits thru December 31, 2013 NCUA: • Corporate credit union stabilization programs, including lending programs designed to increase liquidity at corporate credit unions • Credit Union Homeowners Affordability Relief Program, which is designed to lower monthly mortgage payments for struggling low-and moderate-income credit union members See Chapter 4 for additional programmatic detail. Money Market Guarantee Program: In September 2008, Treasury opened a temporary money market mutual fund guarantee program, which guaranteed the share price of any publicly offered eligible money market mutual fund—both retail and institutional—that paid a fee to participate in the program. The program expired on September 18, 2009. Treasury had no losses under the program and earned approximately $1.2 billion in participation fees. (See Chapter 4 for additional information on this program.) Recent Performance of the Federal Deposit Insurance Funds As of September 30, 2009, the number of insured institutions on the FDIC’s “problem list” (institutions with the highest risk ratings) rose to 552 institutions with $345.9 billion in aggregate assets. This is nearly double the number of “problem institutions” listed in December, 2008, and represents the highest level in both number of institutions and aggregate assets since the end of 1993. As of September 30, 2009, the DIF fund balance stood at -$8.2 billion, equivalent to a reserve ratio of -0.16 percent, or $69.3 billion below the level that would meet the target reserve ratio of 1.15 percent. The National Credit Union Share Insurance Fund (SIF), the Federal fund for credit unions that is analogous to the DIF for banks and thrifts, ended September 2009 with assets of $8.5 billion and an equity ratio of 1.30 percent, which equals the NCUA-set target ratio. Recent market volatility has seen an increase in observed losses in the credit union industry. The number of “problem institutions” reported by the NCUA has steadily risen since 2008, and as of September 2009 the SIF has set aside more than $520 million in reserves to cover potential insurance losses, significantly more than the $129 million set-aside as of September 2008. For the fiscal year ending on September 2009 and 2008, the SIF has incurred GAAP-based losses of $510 million and $298 million, respectively. Restoration Plans On September 30, 2008, the FDIC reported that the DIF reserve ratio had fallen below the minimum level of 1.15 percent. Pursuant to 12 U.S.C. 1817(b), the FDIC proposed a plan to restore the DIF to 1.15 percent within 5 years (i.e., prior to October 5, 2013) by increasing annual insurance premiums to an effective rate of 13.5 basis points. On February 27, 2009, citing the significant strains on banks, the FDIC extended the restoration plan horizon to seven years (i.e., prior to October 5, 2015). In May 2009, Congress amended the statute governing establishment and implementation of the Restoration Plan to allow the FDIC up to eight years (2017) to return the DIF reserve ratio back to 1.15 percent. At the same time, and in order to prevent the DIF balance from falling to a level close to or below zero, the FDIC adopted a final rule imposing a five basis point special assessment on each insured depository institution’s total assets minus Tier 1 capital as of June 30, 2009. The FDIC collected a total $5.6 billion in special assessments on September 30, 2009. In September, the FDIC announced that the DIF reserve ratio would become negative as of the end of the month. The FDIC has the authority to borrow up to $100 billion from the Treasury (and if necessary, up to $500 billion through 2010) to maintain sufficient DIF balances. However, to maintain balances, the FDIC Board of Directors adopted a Notice of Proposed Rulemaking to require insured institutions to prepay their estimated quarterly risk-based assessments for the fourth quarter of 2009 and for all of 2010, 2011 and 2012. The FDIC adopted the rule on November 12, and insured institutions prepaid three-years of assessments on December 30, 2009, for an estimated $45 billion in prepaid assessments. Unlike a special assessment, the prepaid assessments will not immediately affect bank earnings. Banks will book a prepayment asset on their balance sheets, and then a payment liability at the end of each quarter for that quarter’s estimated prepayment. The Budget projects the DIF reserve ratio will return to 1.15 percent in 2018. Both the current financial crisis and the savings and loan (S&L) crisis of the 1980s and early 1990s have shown that the current designated reserve ratio of 1.15 to 1.5 percent is inadequate to handle the unexpected risks and losses that come with a downturn in the economy. During the S&L crisis, the FDIC borrowed roughly $15 billion from the Treasury to meet its obligations. During the current crisis, the FDIC has assessed both a special assessment of $5.6 billion and a $45 billion three-year prepayment of assessments, totaling $50.6 billion to replenish the DIF. In the future, it may be appropriate to consider raising the target to a level above 1.5 percent in order to maintain positive fund balances during future downturns. In 2009, the NCUA Board approved the assessment of $1.7 billion to federally insured credit unions in order to 360 ANALYTICAL PERSPECTIVES maintain the target equity ratio of 1.3 percent, and the assessment was received in December 2009. The Budget reflects NCUA maintaining an equity ratio of 1.3 percent over time, pursuant to the set target. Pension Guarantees The Pension Benefit Guaranty Corporation (PBGC) insures the pension benefits of workers and retirees in covered defined-benefit pension plans. PBGC pays benefits, up to a guaranteed level, when a company’s plan closes without enough assets to pay future benefits. PBGC’s claims exposure is the amount by which qualified benefits exceed assets in insured plans. In the near term, the risk of loss stems from financially distressed firms with underfunded plans. In the longer term, loss exposure results from the possibility that healthy firms become distressed and well-funded plans become underfunded due to inadequate contributions, poor investment results, or increased liabilities. PBGC monitors companies with underfunded plans and acts to protect the interests of the pension insurance program’s stakeholders where possible. Under its Early Warning Program, PBGC works with companies to strengthen plan funding or otherwise protect the insurance program from avoidable losses. However, PBGC’s authority to prevent undue risks to the insurance program is limited. Most private insurers can diversify or reinsure their catastrophic risks or apply traditional insurance underwriting methods to these risks. Unlike private insurers, PBGC cannot deny insurance coverage or adjust premiums according to risk. PBGC’s premiums are set in statute. Claims against PBGC’s insurance programs are highly variable. A single large pension plan termination may result in a larger claim against the Corporation than the termination of many smaller plans. Future results will continue to depend largely on the infrequent and unpredictable termination of a limited number of very large plans. As a result of a flawed pension funding system and exposure to losses from financially troubled plan sponsors, PBGC’s single-employer program incurred substantial losses from underfunded plan terminations in 2001 through 2006. The table below shows the ten largest plan termination losses in PBGC’s history. Nine of the ten have come since 2001. As of September 30, 2009, the single-employer and multiemployer programs reported deficits of $21.1 billion and $869 million, respectively. Notwithstanding these deficits, the Corporation has $70 billion in assets and will be able to meet its obligations for a number of years. However, neither program at present has the resources to fully satisfy PBGC’s obligations in the long run. PBGC estimates its long term loss exposure to reasonably possible terminations (e.g., underfunded plans sponsored by companies with credit ratings below investment grade) at approximately $168 billion on September 30, 2009. For 2009, this exposure was concentrated in the following sectors: manufacturing (primarily automobile/ auto parts and primary and fabricated metals), transportation (primarily airlines), and wholesale and retail trade. Table 22–1. TOP 10 FIRMS PRESENTING CLAIMS (1975–2009) Single-Employer Program Firm 1 United Airlines ............................ Delphi ......................................... Bethlehem Steel ......................... US Airways ................................ LTV Steel* ................................... Delta Air Lines ............................ National Steel ............................. Pan American Air ........................ Trans World Airlines .................... Weirton Steel .............................. Top 10 Total ................................ All Other Total ............................. 2 3 4 5 6 7 8 9 10 Fiscal Year(s) of Plan Termination(s) 2005 2009 2003 2003, 2005 2002, 2003, 2004 2006 2003 1991, 1992 2001 2004 Claims (by firm) $7,441,450,992 6,108,491,551 3,654,380,116 2,751,534,173 2,134,985,884 1,641,083,525 1,275,628,286 841,082,434 668,377,106 640,480,970 27,157,495,038 15,760,580,981 Percent of Total Claims (1975–2009) 17.30% 14.20% 8.50% 6.40% 5.00% 3.80% 3.00% 2.00% 1.60% 1.50% 63.30% 36.70% Total ...................................... $42,918,076,019 100.00% Sources: PBGC Fiscal Year Closing File (9/30/09), PBGC Case Management System, and PBGC Participant System (PRISM). Due to rounding of individual items, numbers and percentages may not add up to totals. Data in this table have been calculated on a firm basis and, except as noted, include all trusteed plans of each firm. Values and distributions are subject to change as PBGC completes its reviews and establishes termination dates. * Does not include 1986 termination of a Republic Steel plan sponsored by LTV. 361 22. CREDIT AND INSURANCE Disaster Insurance Flood Insurance The Federal Government provides flood insurance through the National Flood Insurance Program (NFIP), which is administered by the Federal Emergency Management Agency of the Department of Homeland Security (DHS). Flood insurance is available to homeowners and businesses in communities that have adopted and enforce appropriate flood plain management measures. Coverage is limited to buildings and their contents. By the end of 2008, the program had over 5.6 million policies in more than 20,200 communities with over $1 trillion of insurance in force. Prior to the creation of the program in 1968, many factors made it cost prohibitive for private insurance companies alone to make affordable flood insurance available. In response, the NFIP was established to make affordable insurance coverage widely available. The NFIP requires building standards and other mitigation efforts to reduce losses, and operates a flood hazard mapping program to quantify the geographic risk of flooding. These efforts have made substantial progress. However, structures built prior to flood mapping and NFIP floodplain management requirements, which make up 26 percent of the total policies in force, pay less than fully actuarial rates. A major DHS goal is to have property owners be compensated for flood losses through flood insurance, rather than through taxpayer-funded disaster assistance. The marketing strategy aims to increase the number of Americans insured against flood losses and improve retention of policies among existing customers. The strategy includes: 1. Provide financial incentives to expand the flood-insurance business to the private insurers that sell and service flood policies for the Federal Government. 2. Conduct the national marketing and advertising campaign, FloodSmart, which uses TV, radio, print and online advertising, direct mailings, and public relations activities to help overcome denial and resistance and increase demand. 3. Foster lender compliance with flood insurance requirements through training, guidance materials, regular communication with lending regulators and the lending community. 4. Conduct NFIP training for insurance agents via instructor-led seminars, online training modules, and other vehicles. 5. Seek opportunities to simplify NFIP processes to make it easier for agents to sell and consumers to buy. While these strategies have resulted in steady policy growth over recent years, the growth slowed somewhat in 2009 due to the severe downturn in the economy. DHS also has a multi-pronged strategy for reducing future flood damage. The NFIP offers flood mitigation assistance grants to assist flood victims to rebuild to current building codes, including base flood elevations, thereby reducing future flood damage costs. In addition, two grant programs targeted toward repetitive and severe repetitive loss properties not only help owners of highrisk property, but also reduce the disproportionate drain on the National Flood Insurance Fund these properties cause through acquisition, relocation, or elevation. DHS is working to ensure that all of the flood mitigation grant programs are closely integrated, resulting in better coordination and communication with State and local governments. Further, through the Community Rating System, DHS adjusts premium rates to encourage community and State mitigation activities beyond those required by the NFIP. These efforts, in addition to the minimum NFIP requirements for floodplain management, save over $1 billion annually in avoided flood damages. The program’s reserve account, which is a cash fund, has sometimes had expenses greater than its revenue, forcing the NFIP to borrow funds from the Treasury in order to meet claims obligations. While funds borrowed during the 1970’s were repaid by appropriations in the early 1980’s, from 1986 until 2005, the program was able to repay all borrowed funds with interest from premium dollars. However, Hurricanes Katrina, Rita, and Wilma generated more flood insurance claims than the cumulative number of claims from 1968 to 2004. These three storms resulted in over 234,000 claims with total claims payments expected to be approximately $20 billion. As a result, the Administration and the Congress have increased the borrowing authority to $20.8 billion to date in order to make certain that all claims could be paid. The catastrophic nature of the 2005 hurricane season has also triggered an examination of the program, and the Administration is working with the Congress to improve the program, based on the following principles: protecting the NFIP’s integrity by covering existing commitments; phasing out subsidized premiums in order to charge fair and actuarially sound premiums; increasing program participation incentives and improving enforcement of mandatory participation in the program; increasing risk awareness by educating property owners; and reducing future risks by implementing and enhancing mitigation measures. The Administration looks forward to working with the Congress to enact program reforms that further mitigate the impact of flood damages and losses. Crop Insurance Subsidized Federal crop insurance administered by USDA’s Risk Management Agency (RMA) assists farmers in managing yield and revenue shortfalls due to bad weather or other natural disasters. The program is a cooperative effort between the Federal Government and the private insurance industry. Private insurance companies sell and service crop insurance policies. These companies rely on reinsurance provided by the Federal Government and also by the commercial reinsurance market to manage 362 their individual risk portfolio. The Federal Government reimburses private companies for a portion of the administrative expenses associated with providing crop insurance and reinsures the private companies for excess insurance losses on all policies. The Federal Government also subsidizes premiums for farmers. During 2010, USDA will be pursuing changes to the financial terms in the agreement it has with the companies, the Standard Reinsurance Agreement (SRA). The Administration wants to promote change in the crop insurance program through the SRA re-negotiation. There is currently excess subsidy in the program for the companies, and the government should be able to offer the same program at less cost through the changes to the SRA proposed by the Administration on December 4, 2009. The Budget assumes that the SRA proposal will save the government $8 billion over 10 years. There are various types of insurance programs. The most basic type of coverage is catastrophic coverage (CAT), which compensates the farmer for losses in excess of 50 percent of the individual’s average yield at 55 percent of the expected market price. The CAT premium is entirely subsidized, and farmers pay only an administrative fee. Higher levels of coverage, called buy-up coverage, are also available. A premium is charged for buy-up coverage. The premium is determined by the level of coverage selected and varies from crop to crop and county to county. For the ten principal crops, which accounted for about 82% of total liability in 2009, the most recent data show that over 83% of eligible acres participated in the crop insurance program. RMA offers both yield and revenue-based insurance products. Revenue insurance programs protect against loss of revenue stemming from low prices, poor yields, or a combination of both. These programs extend traditional multi-peril or yield crop insurance by adding price variability to production history. RMA is continuously trying to develop new products or expand existing products in order to cover more types of crops. Currently, RMA has 22 active pilot programs and 12 programs developed by private parties or persons submitted to Federal Crop Insurance Corporation under section 508(h) of the Federal Crop Insurance Act. The Cabbage pilot program was converted to permanent status and proposals to convert the Avocado, Forage Seed, and Processing Chili Pepper pilot programs are underway. Improvements were made to pasture, rangeland, and forage pilots that are based on vegetation greenness and rainfall indices. The products were updated to meet the needs of livestock producers who purchase insurance protection for forage produced for grazing or harvested for hay. In 2009, there were 15,369 vegetation and rainfall policies sold covering nearly 41 million acres of pasture, rangeland and forage. There was over $534 million in liability and almost $42 million in indemnities paid to livestock producers who purchased the coverage. For more information and additional crop insurance program details, please reference RMA’s web site: (www. rma.usda.gov). ANALYTICAL PERSPECTIVES Insurance against Security-Related Risks Terrorism Risk Insurance The Terrorism Risk Insurance Program (TRIP) was authorized under P.L. 107-297 to help stabilize the insurance industry following the terrorist attacks of September 11, 2001. Initially, TRIP was a three-year Federal program that provided a system of shared public and private compensation for insured commercial property and casualty losses arising from certified acts of foreign terrorism. In 2005, Congress passed a two-year extension (P.L.109144), which narrowed the Government’s role by increasing the private sector’s share of losses, reducing lines of insurance covered by the program, and adding a threshold event amount triggering Federal payments. In 2007, Congress extended TRIP for an additional seven years (P.L.110-318), which also broadened the program to include losses from domestic as well as foreign acts of terrorism. For all seven extension years, it maintains an insurer deductible of 20 percent of the prior year’s direct earned premiums, an insurer co-payment of 15 percent of insured losses above the deductible, and a $100 million event trigger amount for Federal payments. The 2007 extension also requires Treasury to recoup 133 percent of the Federal payments made under the program, and accelerates deadlines for recoupment of any Federal payments made before September 30, 2017. The Budget baseline includes the estimated Federal cost of providing terrorism risk insurance, reflecting the 2007 extension of the TRIP. Using market driven data, the Budget projects annual outlays and recoupments for TRIP. These estimates represent the weighted average of TRIP payments over a full range of scenarios, most of which include no notional terrorist attacks (and therefore no TRIP payments), and some of which include notional terrorist attacks of varying magnitudes. On this basis, the Budget projects net spending of $1,187 billion over the 2011-2015 period and $1,260 billion over the 2011-2020 period. The Administration proposes to decrease Government intervention in this insurance market by reducing the Federal subsidy to private insurers (i.e., increasing the share of losses retained by the private sector). Beginning in 2011, this proposal would increase the insurer deductible, co-payment, and the event trigger amount for Federal payments; the insurer deductible and co-payment would be increased again in 2013. The proposal would also remove coverage for domestic terrorism. Prior to the 2007 reauthorization, coverage of domestic terrorism was widely available even in the absence of Government support. The proposal would fully sunset TRIP in 2014, consistent with current law. By reducing this insurance market subsidy, the proposal would encourage the private sector to mitigate terrorism risk through other means, such as developing alternative reinsurance options prior to the 2014 program termination date and by building safer buildings. Additionally, this Budget proposal amends TRIP to allow insurers additional time to remit policyholder surcharges to Treasury and to require commercial prop- 363 22. CREDIT AND INSURANCE erty and casualty insurance policyholders to collectively pay back only 100 percent rather than 133 percent of the Federal payments made under the program. In so doing, the proposal would allow Treasury to assess a surcharge (recoup Federal payments) only after the economy begins to recover following a terrorist attack. The Budget projects savings from this proposal of $378 million over the 2011-2015 period and $249 million over the 2011-2020 period. Airline War Risk Insurance After the September 11, 2001 attacks, private insurers cancelled third-party liability war risk coverage for airlines and dramatically increased the cost of other war risk insurance. In addition to a number of short term responses, the Congress also passed the Homeland Security Act of 2002 (P.L. 107-296). Among other provisions, this Act required the Secretary of Transportation to provide additional war risk insurance coverage for hull losses and passenger liability to air carriers insured for third-party war risk liability as of June 19, 2002. The Fiscal Year 2010 Federal Aviation Administration Extension Act, Part II (P.L. 111-116) further extended the requirement to provide insurance coverage. Acting on behalf of the Secretary, the FAA has made available insurance coverage for (i) hull losses at agreed value; (ii) death, injury, or property loss liability to passengers or crew, the limit being the same as that of the air carrier’s commercial coverage before September 11, 2001; and (iii) third party liability, the limit generally being twice that of such coverage. The Secretary is also authorized to limit an air carrier’s third party liability to $100 million, when the Secretary certifies that the loss is from an act of terrorism. This program provides airlines with financial protection from war risk occurrences, and thus allows airlines to meet the basic requirement for adequate hull loss and liability coverage found in most aircraft mortgage covenants, leases, and government regulation. Without such coverage, many airlines might be grounded. Currently, aviation war risk insurance coverage is generally available from private insurers, but premiums are significantly higher in the private market. Also, private insurance coverage for occurrences involving weapons of mass destruction is more limited. Currently, 61 air carriers are insured by Department of Transportation. Coverage for individual carriers ranges from $ 100 million to $4 billion per carrier, with the median insurance coverage at approximately $1.8 billion per occurrence. Premiums collected by the Government for these policies are deposited into the Aviation Insurance Revolving Fund. In 2009, the Fund collected approximately $ 150 million in premiums for insurance provided by DOT. At the end of 2009, the balance in the Aviation Insurance Revolving Fund available for payment of future claims was $1.3 billion. Although no claims have been paid by the Fund since 2001, the balance in the Fund would be inadequate to meet either the coverage limits of the largest policies in force ($4 billion) or to meet a series of large claims in succession. The Federal Government would pay any claims by the airlines that exceed the balance in the Aviation Insurance Revolving Fund. Chart 22-1. Face Value of Federal Credit Outstanding Dollars in trillions 2.4 2.2 2.0 1.8 1.6 1.4 1.2 1.0 Loan Guarantees 0.8 0.6 Direct Loans 0.4 0.2 0.0 1970 1975 1980 1985 1990 1995 2000 2005 2010 364 ANALYTICAL PERSPECTIVES Table 22–2. ESTIMATED FUTURE COST OF OUTSTANDING FEDERAL CREDIT PROGRAMS (In billions of dollars) Program Estimated Future Costs Estimated Future Costs Outstanding 2008 of 2008 Outstanding 1 Outstanding 2009 of 2009 Outstanding 1 Direct Loans: 2 Federal Student Loans .......................................................................................................... Farm Service Agency (excl. CCC), Rural Development, Rural Housing ...................................... Rural Utilities Service and Rural Telephone Bank .................................................................. Disaster Assistance ................................................................................................................ Housing and Urban Development ........................................................................................... Public Law 480 ....................................................................................................................... Agency for International Development .................................................................................... Education Temporary Student Loan Purchase Authority ........................................................ Export-Import Bank ................................................................................................................ GSE Mortgage-Backed Securities Purchase Program ........................................................... Troubled Asset Relief Program 3 ............................................................................................. Other Direct Loan Programs ................................................................................................... Total Direct Loans ............................................................................................................ 143 45 42 10 9 7 6 5 5 3 ......... 11 286 22 9 2 3 3 3 2 0 2 * ......... 3 49 179 47 44 10 9 6 5 51 6 186 290 17 850 12 10 2 3 6 2 2 –5 2 –11 54 5 82 448 415 232 128 75 40 37 22 4 ......... ......... 6 1,407 17 43 4 2 2 1 1 2 ......... ......... * 2 74 691 457 194 128 75 42 50 21 7 251 ......... 8 1,924 28 21 4 6 4 1 2 2 ......... 2 * ......... 70 Guaranteed Loans: 2 FHA-Mutual Mortgage Insurance Fund .................................................................................. Federal Student Loans ........................................................................................................... VA Mortgage ........................................................................................................................... FHA-General and Special Risk Insurance Fund ..................................................................... Small Business 4 ..................................................................................................................... Export-Import Bank ................................................................................................................ Farm Service Agency (excl. CCC), Rural Development, Rural Housing ...................................... International Assistance ......................................................................................................... Commodity Credit Corporation (CCC) ................................................................................... Troubled Asset Relief Program 3 ............................................................................................. Government National Mortgage Association (GNMA) 4 ......................................................... Other Guaranteed Loan Programs ......................................................................................... Total Guaranteed Loans .................................................................................................. Total Federal Credit .............................................................................................................. 1,693 123 2,774 152 * Less than $500 million. 1 Direct loan future costs are the financing account allowance for subsidy cost and the liquidating account allowance for estimated uncollectible principal and interest. Loan guarantee future costs are estimated liabilities for loan guarantees. 2 Excludes loans and guarantees by deposit insurance agencies and programs not included under credit reform, such as Commodity Credit Corporation commodity price supports. Defaulted guaranteed loans which become loans receivable are accounted for as direct loans. 3 As authorized by the Emergency Economic Stabilization Act (EESA), table includes equity purchases under the Troubled Asset Relief Program. Future costs for TARP equity purchases, direct loan transactions, and asset guarantees are calculated using the discount rate required by the Federal Credit Reform Act adjusted for market risks, consistent with the EESA. 4 Certain SBA data are excluded from the totals because they are secondary guarantees on SBA’s own guaranteed loans. GNMA data are excluded from the totals because they are secondary guarantees on loans guaranteed by FHA, VA and RHS. 365 22. CREDIT AND INSURANCE Table 22–3. REESTIMATES OF CREDIT SUBSIDIES ON LOANS DISBURSED BETWEEN 1992–2009 1 (Budget authority and outlays, in millions of dollars) Agency and Program 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 DIRECT LOANS Agriculture: Agriculture Credit Insurance Fund ............................................. Farm Storage Facility Loans ...................................................... Apple Loans ............................................................................... Emergency Boll Weevil Loans ................................................... Distance Learning, Telemedicine and Broadband Loans .......... Rural Electrification and Telecommunications Loans ................ Rural Telephone Bank ............................................................... Rural Housing Insurance Fund .................................................. Rural Economic Development Loans ........................................ Rural Development Loan Program ............................................ Rural Community Facilities Program ......................................... Rural Business and Industry Program ...................................... Rural Water and Waste Disposal Program ................................ Rural Community Advancement Program 2 ............................... P.L. 480 ...................................................................................... P.L. 480 Title I Food for Progress Credits ................................... ......... ......... ......... ......... ......... –39 –9 71 –1 –6 ......... ......... ......... 5 ......... ......... 331 ......... ......... ......... ......... ......... ......... ......... * ......... ......... ......... ......... ......... ......... ......... –656 ......... ......... ......... ......... –17 –1 19 ......... ......... ......... ......... ......... 37 –23 ......... 921 –1 –2 ......... 1 –42 ......... –29 –1 –1 ......... ......... ......... 3 65 ......... 10 –7 1 1 –1 101 –3 –435 –1 –3 ......... ......... ......... –1 –348 –112 –701 –8 ......... * –1 265 –7 –64 ......... ......... ......... ......... ......... –84 33 –44 –147 7 * * 1 143 –6 –200 –2 –3 ......... ......... ......... –34 –43 ......... –2 –1 * 3 7 –197 –17 109 * –2 ......... ......... ......... –73 –239 ......... –14 ......... * ......... 1 –108 –48 ......... –3 –7 ......... ......... ......... –77 –26 ......... –251 50 * * 3 –149 –22 –13 3 * 4 –22 –13 ......... 44 ......... –478 –47 –1 * –3 293 36 –405 –1 –4 77 –5 72 ......... –163 ......... 326 –11 –1 –* 1 248 1 17 –3 –4 –19 –5 –125 ......... –171 ......... Commerce: Fisheries Finance ...................................................................... ......... ......... –19 –1 –3 ......... 1 –15 –12 11 –16 –* Defense: Military Housing Improvement Fund .......................................... ......... ......... ......... ......... ......... ......... * –4 –1 –8 –2 –12 22 ......... –383 –2,158 –6 560 ......... ......... 43 3,678 ......... 1,999 ......... 855 ......... 2,827 ......... 2,674 ......... 408 ......... –45 ......... –1,176 Education: Federal Direct Student Loan Program: 3 Volume reestimate .............................................................. Other technical reestimate ................................................. Temporary Student Loan Purchase Authority: 3 Volume reestimate .............................................................. Other technical reestimate ................................................. College Housing and Academic Facilities Loans ....................... Historically Black Colleges and Universities .............................. TEACH Grants ........................................................................... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... –1 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... * 11 ......... ......... ......... * –16 ......... 418 444 * –24 ......... ......... 1,076 * –75 12 Energy: Advanced Technology Vehicle Manufacturing Fund .................. Title 17 Innovative Technology Fund ......................................... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 12 –* Homeland Security: Disaster Assistance ................................................................... ......... 47 36 –7 –6 * 4 * * * ......... –18 Interior: Bureau of Reclamation Loans ................................................... Bureau of Indian Affairs Direct Loans ........................................ Assistance to American Samoa ................................................. ......... 1 ......... 3 5 ......... 3 –1 ......... –9 –1 ......... –14 2 ......... ......... * * 17 * * 1 * ......... 1 1 2 5 –1 ......... –3 ......... ......... –1 1 –4 Transportation: High Priority Corridor Loans ...................................................... Alameda Corridor Loan ............................................................. Transportation Infrastructure Finance and Innovation ............... Railroad Rehabilitation and Improvement Program ................... ......... ......... ......... ......... ......... –58 ......... ......... ......... ......... 18 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... –12 ......... –5 ......... ......... 3 –14 ......... ......... –11 –11 ......... ......... 7 –1 ......... ......... 11 15 ......... ......... –163 –8 ......... ......... 92 14 Treasury: GSE Mortgage-Backed Securities Purchase Program .............. Community Development Financial Institutions Fund ................ Troubled Asset Relief Program Direct Loan 4 ............................ Troubled Asset Relief Program Equity 4 ..................................... ......... ......... ......... ......... ......... 1 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... * ......... ......... ......... –1 ......... ......... ......... * ......... ......... ......... –1 ......... ......... ......... 1 ......... ......... ......... * ......... ......... ......... ......... ......... ......... –8,165 –2 –13,557 –90,601 Veterans Affairs: Veterans Housing Benefit Program Fund ................................. –111 –52 –107 –697 17 –178 987 –44 –76 –402 20 69 366 ANALYTICAL PERSPECTIVES Table 22–3. REESTIMATES OF CREDIT SUBSIDIES ON LOANS DISBURSED BETWEEN 1992–2009—Continued (Budget authority and outlays, in millions of dollars) Agency and Program 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Native American Veteran Housing ............................................. Vocational Rehabilitation Loans ................................................. ......... ......... ......... ......... ......... ......... ......... ......... –3 * * * * * * –1 1 1 1 –1 * 1 –* –* Environmental Protection Agency: Abatement, Control and Compliance ......................................... ......... ......... 3 –1 * –3 * * * * * –* International Assistance Programs: Foreign Military Financing ......................................................... 1 152 –166 119 –397 –64 –41 –7 –6 7 ......... ......... U.S. Agency for International Development: Micro and Small Enterprise Development .......................... ......... ......... ......... * ......... * ......... ......... ......... ......... ......... ......... Overseas Private Investment Corporation: OPIC Direct Loans ............................................................. Debt Reduction .......................................................................... ......... ......... ......... 36 ......... –4 ......... ......... –4 * –21 –47 3 –104 –7 54 72 –3 31 ......... –15 ......... –46 ......... Small Business Administration: Business Loans ......................................................................... Disaster Loans ........................................................................... ......... 246 ......... –398 1 –282 –2 –14 1 266 25 589 ......... 196 –16 61 –4 258 4 –109 7 134 3 157 Other Independent Agencies: Export-Import Bank Direct Loans .............................................. Federal Communications Commission ..................................... ......... –177 980 –1,501 157 –804 117 92 –640 346 –305 380 111 732 –257 –24 –227 11 –120 ......... 7 –100 54 –23 LOAN GUARANTEES Agriculture: Agriculture Credit Insurance Fund ............................................. Agriculture Resource Conservation Demonstration .................. Commodity Credit Corporation Export Guarantees ................... Rural Electrification and Telecommunications Loans ................ Rural Housing Insurance Fund .................................................. Rural Business and Industry Program ...................................... Rural Community Facilities Program ......................................... Rural Water and Waste Disposal Program ................................ Rural Community Advancement Program 2 ............................... Renewable Energy .................................................................... ......... ......... ......... ......... 109 ......... ......... ......... 41 ......... –31 205 ......... 2 ......... –1,410 ......... ......... ......... 152 ......... ......... ......... ......... ......... ......... ......... 63 ......... ......... 40 ......... ......... ......... –56 ......... ......... ......... 17 ......... –36 1 –13 ......... 32 ......... ......... ......... 91 ......... –33 –1 –230 ......... 50 ......... ......... ......... 15 ......... –22 * –205 ......... 66 ......... ......... ......... 29 ......... –162 * –366 ......... 44 ......... ......... ......... –64 ......... 20 ......... –232 * ......... ......... ......... ......... –16 ......... –36 ......... –225 * –19 –9 –1 ......... ......... * –48 ......... –39 * –24 –11 13 ......... ......... * –3 ......... 8 * 82 41 8 2 ......... 2 Commerce: Fisheries Finance ...................................................................... Emergency Steel Guaranteed Loans ........................................ Emergency Oil and Gas Guaranteed Loans .............................. ......... ......... ......... ......... ......... ......... –3 ......... * –1 ......... * 3 50 * * * * 1 3 * * –75 –1 1 –13 * * 1 * * –53 ......... * ......... ......... Defense: Military Housing Improvement Fund .......................................... Defense Export Loan Guarantee ............................................... Arms Initiative Guaranteed Loan Program ................................ ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... –3 ......... ......... –1 –5 ......... –3 ......... ......... –5 ......... ......... –1 ......... 20 –2 ......... ......... –3 ......... 2 Education: Federal Family Education Loan Program: 3 Volume reestimate .............................................................. Other technical reestimate ................................................. –13 –140 ......... 277 ......... ......... –2,483 –3,278 ......... 1,348 ......... ......... 6,837 –3,399 ......... –189 ......... –13,463 ......... –7,008 Health and Human Services: Heath Center Loan Guarantees ................................................ Health Education Assistance Loans .......................................... ......... ......... 3 ......... ......... ......... * ......... * –5 ......... –37 1 –33 * –20 –1 * –2 –15 * –5 Housing and Urban Development: Indian Housing Loan Guarantee ................................................ Title VI Indian Guarantees ......................................................... Community Development Loan Guarantees .............................. FHA-Mutual Mortgage Insurance .............................................. FHA-General and Special Risk .................................................. ......... ......... ......... 3,789 79 ......... ......... ......... ......... ......... –6 * ......... ......... ......... ......... 2,413 –1,308 –217 –403 –1 –1 ......... 1,100 77 * 1 19 5,947 352 –3 4 –10 1,979 507 –1 * * –4 –2 4 2,842 636 238 –1,254 –5 –3 1 3,923 –362 –7 –2 –1 9,262 6,086 –7 –2 –8 8,435 571 Interior: Bureau of Indian Affairs Guaranteed Loans .............................. ......... ......... –2 –2 * –30 –3 11 –60 –42 667 –3,484 –14 –1 * –18 15 5 367 22. CREDIT AND INSURANCE Table 22–3. REESTIMATES OF CREDIT SUBSIDIES ON LOANS DISBURSED BETWEEN 1992–2009—Continued (Budget authority and outlays, in millions of dollars) Agency and Program 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Transportation: Maritime Guaranteed Loans (Title XI) ....................................... Minority Business Resource Center .......................................... –71 ......... 30 ......... –15 ......... 187 1 27 ......... –16 * 4 * –76 ......... –11 * –51 * 23 ......... 8 –* Treasury: Air Transportation Stabilization Program ................................... Troubled Asset Relief Program 4 ................................................ ......... ......... ......... ......... ......... ......... ......... ......... 113 ......... –199 ......... 292 ......... –109 ......... –95 ......... ......... ......... ......... ......... ......... –517 Veterans Affairs: Veterans Housing Benefit Fund Program .................................. 492 229 –770 –163 –184 –1,515 –462 –842 –525 182 –70 494 ......... ......... ......... ......... ......... ......... ......... ......... ......... –1 ......... –4 ......... ......... –15 1 2 48 –3 –2 –2 –2 ......... –5 2 –3 –11 11 * –22 5 ......... 7 –8 ......... –1 ......... ......... ......... ......... ......... ......... ......... ......... ......... –34 ......... ......... ......... ......... ......... ......... –76 ......... ......... –111 ......... ......... 188 7 ......... 34 14 ......... –16 –12 ......... –46 12 ......... 283 –11 Overseas Private Investment Corporation: OPIC Guaranteed Loans .................................................... ......... ......... ......... 5 77 60 –212 –21 –149 –268 –26 –23 Small Business Administration: Business Loans ......................................................................... –545 –235 –528 –226 304 1,750 1,034 –390 –268 –140 931 3,745 Other Independent Agencies: Export-Import Bank Guarantees ................................................ ......... –191 –1,520 –655 –1,164 –579 –174 23 571 International Assistance Programs: U.S. Agency for International Development: Development Credit Authority ............................................. Micro and Small Enterprise Development .......................... Urban and Environmental Credit ........................................ Assistance to the New Independent States of the Former Soviet Union ...................................................... Loan Guarantees to Israel .................................................. Loan Guarantees to Egypt ................................................. Total .......................................................................................... –417 –2,042 –1,133 4,518 –3,357 –6,427 –1,854 –142 3,468 6,008 9,003 –3,441 2,044 2,576 –105,269 * Less than $500,000. 1 Excludes interest on reestimates. Additional information on credit reform subsidy reestimates is contained in the Federal Credit Supplement. 2 Includes Rural Water and Waste Disposal, Rural Community Facilities, and Rural Business and Industry programs for 1999–2007. 3 Volume reestimates in mandatory programs represent a change in volume of loans disbursed in the prior years. 4 As authorized by the Emergency Economic Stabilization Act (EESA), table includes reestimates associated with equity purchases under the Troubled Asset Relief Program (TARP). Subsidy costs for TARP equity purchasese, direct loans, and asset guarantees are estimated using the discount rate required under FCRA adjusted for market risks, as directed in legislation. 368 ANALYTICAL PERSPECTIVES Table 22–4. DIRECT LOAN SUBSIDY RATES, BUDGET AUTHORITY, AND LOAN LEVELS, 2009–2011 (In millions of dollars) 2009 Actual Agency and Program Subsidy Subsidy budget 1 rate authority 2010 Enacted Subsidy Subsidy budget 1 rate authority Loan levels 2011 Proposed Subsidy Subsidy budget 1 rate authority Loan levels Loan levels Agriculture: Agricultural Credit Insurance Fund Program Account ......................... Farm Storage Facility Loans Program Account ................................... Rural Electrification and Telecommunications Loans Program Account ........ Distance Learning, Telemedicine, and Broadband Program ............... Rural Water and Waste Disposal Program Account ............................ Rural Community Facilities Program Account ..................................... Farm Labor Program Account ............................................................. Multifamily Housing Revitalization Program Account ........................... Rural Housing Insurance Fund Program Account ............................... Rural Microenterprise Investment Program Account ........................... Rural Development Loan Fund Program Account ............................... Rural Economic Development Loans Program Account ...................... 9.59 6.25 –2.13 2.85 14.62 5.72 42.14 61.78 8.58 ......... 41.85 20.89 184 13 –155 1 229 29 15 16 134 ......... 14 8 1,916 200 7,288 22 1,564 501 35 26 1,554 ......... 34 37 3.97 –0.98 –1.25 7.24 7.54 1.31 36.14 41.67 4.25 21.13 25.24 13.05 76 –2 –89 515 394 73 10 28 148 6 9 5 1,905 153 7,790 7,114 5,221 5,588 27 67 3,495 29 34 38 5.98 –1.97 –4.38 5.58 8.58 1.33 38.38 ......... 8.40 29.12 38.58 17.91 95 –3 –210 22 89 4 10 ......... 114 9 14 6 1,578 153 4,790 400 1,036 295 27 ......... 1,350 30 36 33 Commerce: Fisheries Finance Program Account ................................................... –7.19 –5 67 –9.24 –7 75 –11.27 –8 71 Defense—Military: Defense Family Housing Improvement Fund ....................................... 30.93 36 117 30.04 42 139 20.30 114 560 16.31 10 61 –3.63 –3 89 ......... ......... ......... –8.93 –11,805 132,235 –14.96 –5,829 38,948 11.35 13.63 ......... –5.19 –7.75 20 11 ......... –1,610 –7,581 178 80 ......... 31,019 97,875 7.24 20 279 13.64 13 93 –3.40 –101 2,985 ......... ......... ......... –6.88 –10,404 151,331 Education: College Housing and Academic Facilities Loans Program Account .... TEACH Grant Program Account .......................................................... Federal Perkins Loan Program Account .............................................. Federal Family Education Loan Program Account 2 ............................ Federal Direct Student Loan Program Account ................................... Energy: Title 17 Innovative Technology Loan Guarantee Program ................... Advanced Technology Vehicles Manufacturing Loan Program Account .... 7.57 38.29 40 3,280 535 8,567 4.24 19.64 1,049 3,227 24,717 16,433 4.89 ......... 2,347 ......... 48,011 ......... Homeland Security: Disaster Assistance Direct Loan Program Account ............................. 93.95 57 61 –0.36 ......... 25 –1.22 ......... 25 Housing and Urban Development: FHA-Mutual Mortgage Insurance Program Account ............................ Green Retrofit Program for Multifamily Housing, Recovery Act ........... ......... ......... ......... ......... ......... ......... ......... 82.30 ......... 118 50 143 ......... ......... ......... ......... 50 ......... State: Repatriation Loans Program Account .................................................. 59.77 1 1 58.05 1 1 58.57 1 1 Transportation: National Infrastructure Innovation and Finance Fund Program Account ........................................................................................... Federal-Aid Highways .......................................................................... Railroad Rehabilitation and Improvement Program ............................. ......... 8.69 0.00 ......... 86 ......... ......... 990 104 ......... 12.03 0.00 ......... 100 ......... ......... 831 600 20.00 10.87 0.00 417 100 ......... 2,085 920 600 –2.36 –4,498 190,574 20.73 19,277 92,999 42.66 140,421 329,175 –3.35 2.36 20.92 –1,790 1,312 3,128 53,397 55,560 14,952 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 40.53 4 10 Veterans Affairs: Housing Program Account ................................................................... Native American Veteran Housing Loan Program Account ................. –2.33 –8.36 –2 –2 79 21 –4.94 –29.00 –47 –5 965 18 –2.23 –9.84 –24 –1 1,102 12 International Assistance Programs: Overseas Private Investment Corporation Program Account .............. United States Quota IMF Direct Loan Program Account 3 ................... Loans to the IMF Direct Loan Program Account 3 ............................... –2.37 ......... ......... –32 ......... ......... 1,352 ......... ......... 2.57 1.80 0.30 26 1,000 142 7,879 300 100,000 3.87 ......... ......... 25 ......... ......... 650 ......... ......... Small Business Administration: Disaster Loans Program Account ........................................................ Business Loans Program Account ...................................................... 14.92 11.66 103 4 688 37 10.77 0.65 118 4 13.22 0.36 145 3 1,100 691 Treasury: GSE Mortgage-Backed Securities Purchase Program Account .......... Troubled Asset Relief Program Account 3 ............................................ Troubled Asset Relief Program Equity Purchase Program 3 ................ Community Development Financial Institutions Fund Program Account ........................................................................................... 1,100 550 369 22. CREDIT AND INSURANCE Table 22–4. DIRECT LOAN SUBSIDY RATES, BUDGET AUTHORITY, AND LOAN LEVELS, 2009–2011—Continued (In millions of dollars) 2009 Actual Agency and Program Export-Import Bank of the United States: Export-Import Bank Loans Program Account ..................................... Total ............................................................................................. Subsidy Subsidy budget 1 authority rate –2.62 –79 2010 Enacted Loan levels 3,034 Subsidy Subsidy budget 1 rate authority 33.13 17 2011 Proposed Loan levels 50 Subsidy Subsidy budget 1 rate authority 33.35 8 Loan levels 25 N/A 141,548 812,911 N/A –252 439,098 N/A –7,191 220,329 Additional information on credit subsidy rates is contained in the Federal Credit Supplement. 2 Includes Temporary Student Loan Purchase programs authorized by the Ensuring Continued Access to Student Loans Act. Consolidated loans are not eligible for purchase. 3 As authorized by the Emergency Economic Stabilization Act (EESA), table includes equity purchases under the Troubled Asset Relief Program (TARP). Table also includes contributions to the International Monetary Fund (IMF) provided in the Supplemental Appropriations Act of 2009. Subsidy costs for TARP and these IMF transactions are calculated using the discount rates required by the Federal Credit Reform Act adjusted for market risks, as directed in these acts. N/A = Not applicable. 1 370 ANALYTICAL PERSPECTIVES Table 22–5. LOAN GUARANTEE SUBSIDY RATES, BUDGET AUTHORITY, AND LOAN LEVELS, 2009–2011 (In millions of dollars) 2009 Actual Agency and Program Subsidy Subsidy budget 1 rate authority 2010 Enacted Loan levels Subsidy Subsidy budget 1 rate authority 2011 Proposed Loan levels Subsidy Subsidy budget 1 rate authority Loan levels Agriculture: Agricultural Credit Insurance Fund Program Account .................................................... Commodity Credit Corporation Export Loans Program Account .................................... Rural Water and Waste Disposal Program Account ....................................................... Rural Community Facilities Program Account ................................................................ Rural Housing Insurance Fund Program Account .......................................................... Rural Business Program Account ................................................................................... Renewable Energy Program Account ............................................................................. Biorefinery Assistance Program Account ....................................................................... 2.09 0.60 –0.82 3.08 1.30 4.47 9.69 33.34 56 32 ......... 9 214 56 6 35 2,658 5,357 2 280 16,348 1,244 58 105 2.00 –0.99 –0.82 3.21 1.45 6.87 13.64 35.47 65 –54 –1 12 210 184 49 285 3,245 5,500 75 354 14,542 2,684 357 803 1.89 –0.51 –0.85 3.95 8.34 4.28 46.36 34.70 61 –28 –1 8 5 40 39 17 3,219 5,500 75 206 12,129 942 84 50 Education: Federal Family Education Loan Program Account ......................................................... –2.98 –2,404 80,593 –0.22 –92 42,060 ......... ......... ......... Energy: Title 17 Innovative Technology Loan Guarantee Program .............................................. ......... ......... ......... 3.62 225 6,217 6.16 525 8,522 Health and Human Services: Health Resources and Services ..................................................................................... ......... ......... ......... 4.53 1 17 4.35 1 17 Housing and Urban Development: Indian Housing Loan Guarantee Fund Program Account ............................................... Native Hawaiian Housing Loan Guarantee Fund Program Account ............................... Native American Housing Block Grant ........................................................................... Community Development Loan Guarantees Program Account ...................................... FHA-Mutual Mortgage Insurance Program Account ....................................................... FHA-General and Special Risk Program Account .......................................................... Home Ownership Preservation Equity Fund Program Account ...................................... 2.52 2.52 12.34 2.26 –0.16 –2.14 23.27 13 501 ......... 14 1 8 5 236 –565 360,648 –172 7,968 1 4 0.68 2.52 11.18 2.40 –0.61 –2.92 16.91 7 919 1 42 2 18 6 250 –2,014 330,754 –438 15,000 2,363 13,972 0.83 0.83 10.20 ......... –2.18 –1.96 10.90 Interior: Indian Guaranteed Loan Program Account .................................................................... 7.73 7 85 7.17 15 217 7.87 6 84 Transportation: Minority Business Resource Center Program ................................................................ Federal-Aid Highways ..................................................................................................... Railroad Rehabilitation and Improvement Program ........................................................ Maritime Guaranteed Loan (Title XI) Program Account ................................................. 1.86 ......... ......... 5.63 ......... ......... ......... 18 5 ......... ......... 310 1.86 10.00 0.00 7.39 ......... 20 ......... 78 18 200 100 1,055 1.79 10.00 0.00 ......... ......... 20 ......... ......... 18 200 100 ......... Treasury: Troubled Asset Relief Program Account 2 ....................................................................... –0.25 –752 301,000 ......... ......... ......... ......... ......... ......... Veterans Affairs: Housing Program Account .............................................................................................. –0.66 –448 67,849 –0.13 –76 59,232 –0.27 –147 54,524 International Assistance Programs: Loan Guarantees to Israel Program Account ................................................................. Development Credit Authority Program Account ............................................................ Overseas Private Investment Corporation Program Account ......................................... ......... 2.77 –5.35 ......... 9 –97 ......... 317 1,816 0.00 4.86 –0.04 ......... 25 –1 1,200 517 1,500 0.00 4.12 0.52 ......... 25 8 1,200 605 1,650 Small Business Administration: Disaster Loans Program Account ................................................................................... Business Loans Program Account ................................................................................. ......... 1.84 ......... 298 ......... 13,831 2.25 1.15 2 494 75 31,247 ......... 0.21 ......... 165 ......... 66,239 Export-Import Bank of the United States: Export-Import Bank Loans Program Account ................................................................. –0.97 –174 17,988 –1.27 –205 16,092 –1.16 –226 19,333 Total ....................................................................................................................... N/A –3,852 879,225 N/A 1,164 548,262 N/A –3,863 463,093 GNMA: Guarantees of Mortgage-backed Securities Loan Guarantee Program Account ........... –0.21 –888 418,938 –0.24 –914 380,942 –0.24 –679 283,042 SBA: Secondary Market Guarantee Program .......................................................................... 0.00 8 994 ......... 42 2 20 ......... 500 –5,523 252,868 –391 20,000 1,523 13,972 ADDENDUM: SECONDARY GUARANTEED LOAN COMMITMENT LIMITATIONS Total, secondary guaranteed loan commitments ..................................................... ......... 2,381 0.00 ......... 12,000 0.00 ......... 12,000 N/A –888 421,319 N/A –914 392,942 N/A –679 295,042 Additional information on credit subsidy rates is contained in the Federal Credit Supplement. 2 The subsidy costs for Troubled Asset Relief Program asset guarantees are calculated using the discount rate under the Federal Credit Reform Act adjusted for market risks, as directed in the Emergency Economic Stabilization Act. N/A = Not applicable. 1 371 22. CREDIT AND INSURANCE Table 22–6. SUMMARY OF FEDERAL DIRECT LOANS AND LOAN GUARANTEES (In billions of dollars) Actual 2002 2003 2004 2005 Estimate 2006 2007 2008 2009 1 2010 1 2011 Direct loans: Obligations ...................................................................... Disbursements ................................................................ New subsidy budget authority 2 ...................................... Reestimated subsidy budget authority 3 ......................... 43.7 39.6 * 0.5 45.4 39.7 0.7 2.9 42.0 38.7 0.4 2.6 56.3 50.6 2.1 3.8 57.8 46.6 4.7 3.1 42.5 41.7 1.4 3.4 75.6 41.1 3.7 –0.8 812.9 669.4 140.1 –0.1 439.1 270.9 2.9 –123.1 220.3 197.1 –7.2 ......... Total subsidy budget authority ........................... 0.5 3.5 3.0 6.0 7.8 4.8 –1.3 140.0 –120.2 –7.2 Loan guarantees: Commitments 4 ............................................................... Lender disbursements 4 .................................................. New subsidy budget authority 2 ...................................... Reestimated subsidy budget authority 3 ......................... 303.7 271.4 2.9 –2.4 345.9 331.3 3.8 –3.5 300.6 279.9 7.3 2.0 248.5 221.6 10.1 3.5 280.7 256.0 17.2 7.0 270.2 251.2 5.7 –6.8 367.7 354.6 –1.4 3.6 879.2 841.5 –7.8 0.5 548.3 520.3 1.7 7.6 463.1 396.0 –4.5 ......... Total subsidy budget authority ........................... 0.5 0.3 9.3 13.6 24.2 –1.1 2.2 –7.2 9.3 –4.5 * Less than $50 million. 1 Table includes Troubled Asset Relief Program equity purchases under the authority of the Emergency Economic Stabilization Act and certain International Monetary Fund contributions under the authority of the Supplemental Appropriations Act of 2009. 2 Credit subsidy costs for the Troubled Asset Relief Program and contributions to the International Monetary Fund provided in the Supplemental Appropriations Act of 2009 are calculated using discount rates as required under the Federal Credit Reform Act adjusted for market risks, consistent with legislative direction. 3 Includes interest on reestimate. 4 To avoid double-counting, totals exclude GNMA secondary guarantees of loans that are guaranteed by FHA, VA, and RHS, and SBA’s guarantee of 7(a) loans sold in the secondary market. 372 ANALYTICAL PERSPECTIVES Table 22–7. DIRECT LOAN WRITE-OFFS AND GUARANTEED LOAN TERMINATIONS FOR DEFAULTS As a percentage of outstanding loans 1 In millions of dollars Agency and Program 2009 actual 2010 estimate 2011 estimate 2009 actual 2010 estimate 2011 estimate DIRECT LOAN WRITE-OFFS Agriculture: Agricultural Credit Insurance Fund .................................................................................................. Rural Community Facility .................................................................................................................. Rural Business and Industry Program .............................................................................................. Rural Development Loan Fund ........................................................................................................ Rural Housing Insurance Fund ........................................................................................................ Debt Restructuring ........................................................................................................................... 47 2 4 2 37 70 68 ......... 3 1 76 128 66 ......... 2 1 81 0 0.59 0.06 11.43 0.14 0.14 19.55 0.76 ......... 10.34 0.07 0.27 45.39 0.70 ......... 8.70 0.08 0.28 0.00 Defense—Military: Family Housing Improvement Fund ................................................................................................. ......... 1 2 ......... 0.14 0.22 Education: Student Financial Assistance .......................................................................................................... 9 8 10 2.89 2.61 3.31 Housing and Urban Development: Revolving Fund (Liquidating Programs) ............................................................................................ Guarantees of Mortgage-Backed Securities .................................................................................... ......... ......... 1 10 1 17 ......... ......... 16.67 83.33 25.00 65.38 Treasury: Troubled Asset Relief Program Direct Loans .................................................................................... Troubled Assets Relief Program Equity Purchases .......................................................................... ......... ......... 1,887 ......... 30,163 75 ......... ......... 1.81 ......... 28.46 0.04 Veterans Affairs: Miscellaneous Veterans Housing Loans .......................................................................................... Veterans Housing Benefit Program ................................................................................................. ......... 25 4 61 1 59 ......... 3.18 5.80 3.63 1.43 3.39 International Assistance Programs: Economic Assistance Loans ............................................................................................................ Foreign Military Financing ............................................................................................................... Overseas Private Investment Corporation ....................................................................................... ......... 94 5 223 ......... 15 51 ......... 15 ......... 6.20 0.48 5.63 ......... 1.12 1.48 ......... 0.83 Small Business Administration: Disaster Loans ................................................................................................................................. Business Loans ............................................................................................................................... 299 4 157 4 157 7 3.18 2.34 1.71 0.74 1.75 0.84 Other Independent Agencies: Debt Reduction (Export-Import Bank) ............................................................................................. Export-Import Bank ......................................................................................................................... Spectrum Auction Program .............................................................................................................. Tennessee Valley Authority Fund ..................................................................................................... 6 9 ......... 4 582 10 149 ......... ......... 10 28 1 2.05 0.16 ......... 7.02 67.28 0.19 73.40 ......... ......... 0.22 51.85 1.56 Total, direct loan write-offs .......................................................................................................... 617 3,388 30,747 0.14 0.76 8.85 Agriculture: Agricultural Credit Insurance Fund .................................................................................................. Commodity Credit Corporation Export Loans .................................................................................. Rural Community Facility .................................................................................................................. Rural Business and Industry Program .............................................................................................. Rural Housing Insurance Fund ........................................................................................................ Rural Water and Waste Disposal Fund ............................................................................................ Renewable Energy Guaranteed Loans ............................................................................................ Biorefinery Assistance Guaranteed Loans ...................................................................................... 37 26 23 99 206 1 ......... ......... 39 55 24 76 219 ......... ......... ......... 42 128 24 124 276 ......... 1 1 0.29 0.29 2.75 2.05 0.58 1.37 ......... ......... 0.29 0.45 2.21 1.20 0.46 ......... ......... ......... 0.30 0.82 1.80 1.64 0.49 ......... 0.54 0.19 Defense—Military: Family Housing Improvement Fund ................................................................................................. ......... 7 7 ......... 1.53 1.57 Education: Federal Family Education Loans ...................................................................................................... Health Education Assistance Loans 2 ............................................................................................... 12,823 ......... 10,117 ......... 9,568 14 2.67 ......... 1.98 ......... 2.05 1.83 Energy: Title 17 Innovative Technology ......................................................................................................... ......... 5 21 ......... 0.16 0.17 Health and Human Services: Health Education Assistance Loans 2 ............................................................................................... Health Center Loan Guarantees ...................................................................................................... 14 1 14 1 ......... 1 1.43 1.45 1.64 1.22 ......... 1.14 GUARANTEED LOAN TERMINATIONS FOR DEFAULT 373 22. CREDIT AND INSURANCE Table 22–7. DIRECT LOAN WRITE-OFFS AND GUARANTEED LOAN TERMINATIONS FOR DEFAULTS—Continued Agency and Program As a percentage of outstanding loans 1 In millions of dollars 2009 actual 2010 estimate 2011 estimate 2009 actual 2010 estimate 2011 estimate Housing and Urban Development: Indian Housing Loan Guarantee ...................................................................................................... Native Hawaiian Housing Loan Guarantees .................................................................................... FHA-Mutual Mortgage Insurance .................................................................................................... FHA-General and Special Risk Insurance ........................................................................................ Home Ownership Preservation Equity Fund ................................................................................... 5 1 8,517 1,595 ......... 7 1 15,666 1,974 30 7 1 19,655 1,935 543 0.41 1.20 1.07 1.16 ......... 0.33 0.83 1.55 1.44 0.21 0.23 0.86 1.77 1.45 1.94 Interior: Indian Guaranteed Loans ................................................................................................................ 8 8 8 1.82 1.50 1.37 Transportation: Maritime Guaranteed Loan (Title XI) ............................................................................................... 50 150 73 1.86 5.37 2.55 Veterans Affairs: Veterans Housing Benefit Program ................................................................................................. 1,750 1,574 1,801 0.58 0.62 0.60 International Assistance Programs: Urban and Environmental Credit Program ....................................................................................... Development Credit Authority .......................................................................................................... Overseas Private Investment Corporation ....................................................................................... Housing and Other Credit Guaranty Program .................................................................................. 5 1 150 17 5 2 50 22 5 2 60 24 1.26 0.33 2.55 2.01 1.45 0.56 0.80 2.95 1.54 0.44 0.86 3.58 Small Business Administration: Business Loans ............................................................................................................................... 4,485 5,163 3,636 5.14 5.29 3.34 Other Independent Agencies: Export-Import Bank ......................................................................................................................... 193 202 202 0.35 0.36 0.34 Total, guaranteed loan terminations for default .......................................................................... 30,007 35,411 38,159 1.56 1.63 1.64 Total, direct loan write-offs and guaranteed loan terminations ................................................ 30,624 38,799 68,906 1.30 1.48 2.57 Agriculture: Agricultural Credit Insurance Fund .................................................................................................. 24 12 10 29.63 15.58 11.49 Education: Federal Family Education Loans ...................................................................................................... Health Education Assistance Loans 2 ............................................................................................... 1,814 ......... 1,843 ......... 1,828 1 5.01 ......... 4.83 ......... 4.81 0.17 Health and Human Services: Health Education Assistance Loans 2 ............................................................................................... 19 1 ......... 2.96 0.17 ......... Housing and Urban Development: FHA-Mutual Mortgage Insurance .................................................................................................... FHA-General and Special Risk Insurance ....................................................................................... 3 332 1 228 1 257 0.51 6.91 0.07 4.17 0.05 4.20 Veterans Affairs: Veterans Housing Benefit Program ................................................................................................. 11 7 5 22.00 20.59 20.83 International Assistance Programs: Overseas Private Investment Corporation ....................................................................................... Housing and Other Credit Guaranty Program .................................................................................. 81 ......... 55 22 50 ......... 36.65 ......... 39.29 7.83 41.67 ......... ADDENDUM: WRITE-OFFS OF DEFAULTED GUARANTEED LOANS THAT RESULT IN LOANS RECEIVABLE Small Business Administration: Business loans ................................................................................................................................ 1,484 277 277 18.28 3.63 3.57 Total, write-offs of loans receivable ............................................................................................ 3,768 2,446 2,429 7.39 4.55 4.37 1 Loans 2 The outstanding at start of year plus new disbursements. Budget reflects the proposal to transfer the HEAL Loan Guarantee program from the Department of Health and Human Services to the Department of Education. 374 ANALYTICAL PERSPECTIVES Table 22–8. APPROPRIATIONS ACTS LIMITATIONS ON CREDIT LOAN LEVELS 1 (In millions of dollars) Agency and Program 2009 Actual 2010 Actual 2011 Estimate DIRECT LOAN OBLIGATIONS Agriculture: Agricultural Credit Insurance Fund Direct Loan Financing Account .................................................. Rural Economic Development Direct Loan Financing Account ......................................................... 1,859 37 1,931 38 1,522 33 Commerce: Fisheries Finance Direct Loan Financing Account ............................................................................ 67 75 71 Education: Historically Black College and University Capital Financing Direct Loan Financing Account ............ 61 178 279 Energy: Title 17 Innovative Technology Direct Loan Financing Account ......................................................... Advanced Technology Vehicles Manufacturing Direct Loan Financing Account ................................. 47,000 25,000 ......... ......... 18,000 ......... Homeland Security: Disaster Assistance Direct Loan Financing Account ......................................................................... 25 25 25 Housing and Urban Development: FHA-General and Special Risk Direct Loan Financing Account ........................................................ FHA-Mutual Mortgage Insurance Direct Loan Financing Account .................................................... 50 50 20 50 20 50 Treasury: Community Development Financial Institutions Fund Direct Loan Financing Account ...................... 16 ......... 25 Veterans Affairs: Vocational Rehabilitation Direct Loan Financing Account ................................................................. 3 2 3 International Assistance Programs: United States IMF Quota, Direct Loan Financing Account ................................................................ Loans to IMF Direct Loan Financing Account .................................................................................... 7,879 100,000 ......... ......... ......... ......... Total, limitations on direct loan obligations ......................................................................... 182,047 2,319 20,028 LOAN GUARANTEE COMMITMENTS Agriculture: Agricultural Credit Insurance Fund Guaranteed Loan Financing Account ......................................... Rural Housing Insurance Fund Guaranteed Loan Financing Account .............................................. 2,552 ......... 3,245 ......... 3,219 12,000 Energy: Title 17 Innovative Technology Guaranteed Loan Financing Account ............................................... ......... ......... 18,000 Housing and Urban Development: Indian Housing Loan Guarantee Fund Financing Account ................................................................ Title VI Indian Federal Guarantees Financing Account ..................................................................... Native Hawaiian Housing Loan Guarantee Fund Financing Account ................................................ Community Development Loan Guarantees Financing Account ....................................................... FHA-General and Special Risk Guaranteed Loan Financing Account .............................................. FHA-Mutual Mortgage Insurance Guaranteed Loan Financing Account ........................................... 420 17 42 265 45,000 400,000 919 18 42 275 15,000 400,000 994 20 42 500 20,000 400,000 Interior: Indian Guaranteed Loan Financing Account ..................................................................................... 85 217 84 Transportation: Minority Business Resource Center Guaranteed Loan Financing Account ....................................... 18 18 18 International Assistance Programs: Development Credit Authority Guaranteed Loan Financing Account ................................................ 2,700 700 700 Small Business Administration: Business Guaranteed Loan Financing Account 2 ............................................................................... 17,500 31,247 66,239 Total, limitations on loan guarantee commitments .............................................................. 468,599 451,681 521,816 ADDENDUM: SECONDARY GUARANTEED LOAN COMMITMENT LIMITATIONS Housing and Urban Development: Guarantees of Mortgage-Backed Securities Financing Account ....................................................... 400,000 500,000 500,000 Small Business Administration: Secondary Market Guarantee ............................................................................................................ 12,000 12,000 12,000 Total, limitations on secondary guaranteed loan commitments ......................................... 412,000 512,000 512,000 represent loan level limitations enacted or proposed to be enacted in appropriations acts. For information on actual and estimated loan levels supportable by new subsidy budget authority requested, see Tables 22–4 and 22–5. 2 Amounts include the full face value of guarantees of revolving credit facilities starting in 2011. 1 Data 375 22. CREDIT AND INSURANCE Table 22–9. FACE VALUE OF GOVERNMENT-SPONSORED LENDING 1 (In billions of dollars) Outstanding 2008 2009 Government Sponsored Enterprises: Fannie Mae 2 .......................................................................................................... Freddie Mac 3 ......................................................................................................... Federal Home Loan Banks ..................................................................................... Farm Credit System ................................................................................................ Total ............................................................................................................... 2,955 2,135 1,012 156 3,083 2,172 929 161 6,258 6,345 originations including issuance of securities and investment portfolio purchases, net of purchases of federallyguaranteed loans. 2 Data for Fannie Mae is net of purchases of federally-guaranteed loans and Freddie Mac issuances, as reported by the Federal Housing Finance Agency (FHFA). 3 Data for Freddie Mac is net of purchases of federally-guaranteed loans and Fannie Mae issuances, as reported by the FHFA. 1 New 376 ANALYTICAL PERSPECTIVES Table 22–10. LENDING AND BORROWING BY GOVERNMENTSPONSORED ENTERPRISES (GSEs) 1 (In millions of dollars) Enterprise 2009 LENDING Federal National Mortgage Association: Portfolio programs: Net change ...................................................................................................................... Outstandings ................................................................................................................... 25,761 792,927 Mortgage-backed securities: Net change ...................................................................................................................... Outstandings ................................................................................................................... 138,221 2,416,391 Federal Home Loan Mortgage Corporation: Portfolio programs: Net change ...................................................................................................................... Outstandings ................................................................................................................... 47,295 784,171 Mortgage-backed securities: Net change ...................................................................................................................... Outstandings ................................................................................................................... (931) 1,458,531 Farm Credit System: Agricultural credit bank: Net change ...................................................................................................................... Outstandings ................................................................................................................... (695) 42,415 Farm credit banks: Net change ...................................................................................................................... Outstandings ................................................................................................................... 4,171 107,553 Federal Agricultural Mortgage Corporation: Net change ...................................................................................................................... Outstandings ................................................................................................................... 962 10,772 Federal Home Loan Banks: Net change ............................................................................................................................. Outstandings .......................................................................................................................... (347,554) 752,057 Less federally-guaranteed loans purchased by: Federal National Mortgage Association: Net change ...................................................................................................................... Outstandings ................................................................................................................... 10,073 66,878 Federal Home Loan Mortgage Corporation: Net change ...................................................................................................................... Outstandings ................................................................................................................... 855 7,207 Federal Home Loan Banks: Net change ...................................................................................................................... Outstandings ................................................................................................................... (708) 7,623 Other: Net change ...................................................................................................................... Outstandings ................................................................................................................... N/A N/A Less purchase of mortgage securities issued by other GSEs: 2 Net Change ..................................................................................................................... Outstandings ................................................................................................................... 40,790 225,886 BORROWING Federal National Mortgage Association: Portfolio programs: Net change ...................................................................................................................... Outstandings ................................................................................................................... (28,320) 802,990 Mortgage-backed securities: Net change ...................................................................................................................... Outstandings ................................................................................................................... 138,221 2,416,391 377 22. CREDIT AND INSURANCE Table 22–10. LENDING AND BORROWING BY GOVERNMENTSPONSORED ENTERPRISES (GSEs)—Continued (In millions of dollars) Enterprise 2009 Federal Home Loan Mortgage Corporation: Portfolio programs: Net change ...................................................................................................................... Outstandings ................................................................................................................... 19,831 803,781 Mortgage-backed securities: Net change ...................................................................................................................... Outstandings ................................................................................................................... (931) 1,458,531 Farm Credit System: Agricultural Credit Bank: Net change ...................................................................................................................... Outstandings ................................................................................................................... 1,303 54,715 Farm Credit Banks: Net change ...................................................................................................................... Outstandings ................................................................................................................... 3,957 126,610 Federal Agricultural Mortgage Corporation: Net change ...................................................................................................................... Outstandings ................................................................................................................... 811 5,118 Federal Home Loan Banks: 3 Net change ............................................................................................................................. Outstandings .......................................................................................................................... (343,154) 980,263 DEDUCTIONS 4 Less borrowing from other GSEs: Net change ............................................................................................................................. Outstandings .......................................................................................................................... N/A N/A Less purchase of Federal debt securities: Net change ............................................................................................................................. Outstandings .......................................................................................................................... N/A N/A Less borrowing to purchase federally-guaranteed loans and securities: Net change ............................................................................................................................. Outstandings .......................................................................................................................... 10,220 81,708 Less borrowing to purchase mortgage securities issued by other GSEs: 2 Net change ............................................................................................................................. 40,790 Outstandings .......................................................................................................................... 225,886 N/A = Not available. 1 Data have not been reviewed by the Administration. The data for all years include programs of mortgagebacked securities. In cases where a GSE owns securities issued by the same GSE, including mortgagebacked securities, the borrowing and lending data for that GSE are adjusted to remove double-counting. Data for Fannie Mae, Freddie Mac, and the Federal Home Loan Banks as reported by the Federal Housing Finance Agency (FHFA). 2 Includes Fannie Mae securities purchased by Freddie Mac and the Federal Home Loan Banks, and Freddie Mac securities purchased by Fannie Mae and the Federal Home Loan Banks. 3 The net change in borrowings is derived from the difference in borrowings between 2009 and the Federal Home Loan Banks’ audited financial statements of 2008. 4 Where totals and subtotals have not been calculated, a portion of the total is unavailable. 23. HOMELAND SECURITY FUNDING ANALYSIS Section 889 of the Homeland Security Act of 2002 requires that a homeland security funding analysis be incorporated in the President’s Budget. This analysis addresses that legislative requirement, and covers the homeland security funding and activities of all Federal agencies, not only those carried out by Department of Homeland Security (DHS), as well as State, local, and private sector expenditures. Since not all activities carried out by DHS constitute traditional homeland security funding (e.g. response to natural disasters and Coast Guard search and rescue activities), DHS estimates in this section do not encompass the entire DHS budget. The President’s highest priority is to keep the American people safe. Homeland security budgetary priorities will Table 23–1. HOMELAND SECURITY FUNDING BY AGENCY (budget authority in millions of dollars) Agency 2009 Enacted 2009 Supplemental/ Emergency 2010 Enacted 2010 Supplemental/ Emergency 2011 Request Department of Agriculture ............................................................................................. Department of Commerce ............................................................................................. Department of Defense ................................................................................................. Department of Education ............................................................................................... Department of Energy ................................................................................................... Department of Health and Human Services .................................................................. Department of Homeland Security ................................................................................ Department of Housing and Urban Development .......................................................... Department of the Interior ............................................................................................. Department of Justice ................................................................................................... Department of Labor ..................................................................................................... Department of State ...................................................................................................... Department of Transportation ........................................................................................ Department of the Treasury ........................................................................................... Department of Veterans Affairs ...................................................................................... Corps of Engineers ........................................................................................................ Environmental Protection Agency ................................................................................. Executive Office of the President ................................................................................... General Services Administration ................................................................................... National Aeronautics and Space Administration ........................................................... National Science Foundation ......................................................................................... Office of Personnel Management .................................................................................. Social Security Administration ....................................................................................... District of Columbia ....................................................................................................... Federal Communications Commission .......................................................................... Intelligence Community Management Account ............................................................. National Archives and Records Administration .............................................................. Nuclear Regulatory Commission ................................................................................... Securities and Exchange Commission .......................................................................... Smithsonian Institution .................................................................................................. United States Holocaust Memorial Museum ................................................................. 513.0 258.8 19,413.5 31.8 1,938.8 4,627.1 36,036.5 4.8 49.9 3,650.4 48.5 1,809.2 220.9 133.3 309.9 40.0 157.0 19.1 125.4 214.3 377.2 1.9 181.5 39.0 2.2 32.8 19.6 72.8 15.0 92.3 9.0 ......... 12.9 69.4 ......... ......... 50.0 2,951.0 ......... 4.4 64.7 ......... ......... ......... ......... ......... ......... ......... ......... 369.0 ......... 29.4 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 599.4 254.4 19,040.6 28.5 2,018.0 4,803.9 35,840.0 4.9 51.5 4,106.9 52.9 1,767.1 229.6 124.2 426.8 37.0 155.1 12.0 214.0 218.0 390.0 2.2 209.3 15.0 1.7 15.5 20.0 65.4 17.0 98.5 10.0 ......... ......... ......... ......... ......... ......... 241.5 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 595.9 285.7 19,103.0 31.0 2,023.2 4,528.0 37,066.2 5.1 55.8 4,285.2 53.1 2,258.8 259.6 126.9 428.2 37.0 120.4 8.4 149.0 213.8 405.4 1.9 224.7 15.0 1.5 15.9 20.9 64.3 17.0 101.7 10.0 Total, Homeland Security Budget Authority .............................................................. 70,445.3 –19,413.5 3,550.8 –69.4 70,829.2 –19,040.6 241.5 ......... 72,512.4 –19,103.0 51,031.8 –5,003.9 –2,507.3 3,481.4 ......... –7.9 51,788.6 –5,502.9 –2,589.6 241.5 ......... ......... 53,409.4 –5,765.5 –2,645.8 Minus Transfer from BioShield .................................................................................. 43,520.6 ......... 3,473.5 ......... 43,696.1 –609.0 241.5 ......... 44,998.1 ......... Net Non-Defense Discretionary Homeland Security BA, including BioShield Transfer ..................................................................................................................... 43,520.6 3,473.5 43,087.1 241.5 44,998.1 Less Department of Defense .................................................................................... Non-Defense Homeland Security BA, excluding BioShield Transfer ...................... Less Fee-Funded Homeland Security Programs ...................................................... Less Mandatory Homeland Security Programs ........................................................ Net Non-Defense Discretionary Homeland Security BA, excluding BioShield ....... 379 380 ANALYTICAL PERSPECTIVES continue to be informed by careful, Governmental-wide strategy development and review. or mission area estimates over time based on additional analysis or changes in the way specific activities are characterized, aggregated, or disaggregated. Data Collection Methodology and Adjustments The Federal spending estimates in this analysis utilize funding and programmatic information collected on the Executive Branch’s homeland security efforts. Throughout the budget formulation process, the Office of Management and Budget (OMB) collects three-year funding estimates and associated programmatic information from all Federal agencies with homeland security responsibilities. These estimates do not include the efforts of the Legislative or Judicial branches. Information in this chapter is augmented by a detailed appendix of account-level funding estimates, which is available on the Analytical Perspectives CD-ROM. To compile this data, agencies report information using standardized definitions for homeland security.1 The data provided by the agencies are developed at the “activity level,’’ which incorporates a set of like programs or projects, at a level of detail sufficient to consolidate the information to determine total Governmental spending on homeland security. To the extent possible, this analysis maintains programmatic and funding consistency with previous estimates. Some discrepancies from data reported in earlier years arise due to agencies’ improved ability to extract homeland security-related activities from host programs and refine their characterizations. As in the Budget, where appropriate, the data is also updated to reflect agency activities, congressional action, and technical re-estimates. In addition, the Administration may refine definitions 1 Federal homeland security activities are currently defined by OMB in Circular A–11 as, “activities that focus on combating and protecting against terrorism, and that occur within the United States and its territories (this includes Critical Infrastructure Protection (CIP) and Continuity of Operations (COOP) data), or outside of the United States and its territories if they support domestically-based systems or activities (e.g., visa processing or pre-screening high-risk cargo at overseas ports). Such activities include efforts to detect, deter, protect against, and, if needed, respond to terrorist attacks.’’] Federal Expenditures Total funding for homeland security has grown significantly since the attacks of September 11, 2001. For 2011, the President’s Budget includes $72.5 billion of gross budget authority for homeland security activities, a $1.7 billion (2 percent) increase above the 2010 enacted level. Excluding mandatory spending, fees, and the Department of Defense’s (DOD) homeland security budget, the 2011 Budget proposes a net, non-Defense, discretionary budget authority level of $45.0 billion, which is an increase of $ 1.3 billion (3 percent) above the 2010 level (see Table 23–1). A total of 31 agency budgets include Federal homeland security funding in 2010. Six agencies—the Departments of Homeland Security, Defense, Health and Human Services (HHS), Justice (DOJ), State (DOS) and Energy (DOE)—account for approximately $69.3 billion (96 percent) of total Government-wide gross discretionary homeland security funding in 2011. As required by the Homeland Security Act, this analysis presents homeland security risk and spending in three broad categories: Prevent and Disrupt Terrorist Attacks; Protect the American People, Our Critical Infrastructure, and Key Resources; and Respond To and Recover From Incidents. Prevent and Disrupt Terrorist Attacks Activities of both intelligence-and-warning and domestic counterterrorism aim to disrupt the ability of terrorists to operate within our borders and prevent the emergence of violent radicalization. Intelligence-and-warning funding covers activities designed to detect terrorist activity before it manifests itself in an attack so that proper preemptive, preventive, and protective action can be taken. Specifically, it is made up of efforts to identify, collect, Table 23–2. PREVENT AND DISRUPT TERRORIST ATTACKS (budget authority in millions of dollars) Agency 2009 Enacted 2009 Supplemental/ Emergency 2010 Enacted 2010 Supplemental/ Emergency 2011 Request Department of Agriculture ........................................................ Department of Commerce ........................................................ Department of Energy .............................................................. Department of Homeland Security ........................................... Department of the Interior ........................................................ Department of Justice .............................................................. Department of Labor ................................................................ Department of State ................................................................. Department of Transportation ................................................... Department of the Treasury ...................................................... General Services Administration .............................................. 188.0 3.8 51.2 25,242.3 0.7 2,965.2 0.4 1,780.6 40.3 75.8 75.0 ......... 1.9 ......... 2,015.4 ......... 61.8 ......... ......... ......... ......... 300.0 233.0 5.9 49.2 26,765.0 0.4 3,312.8 0.4 1,730.6 41.7 70.8 151.0 ......... ......... ......... 241.5 ......... ......... ......... ......... ......... ......... ......... 230.2 4.1 64.0 27,623.0 0.3 3,411.7 0.4 2,221.6 44.0 72.7 86.0 Total, Prevent and Disrupt Terrorist Attacks ......................... 30,423.0 2,379.1 32,360.9 241.5 33,758.0 381 23. HOMELAND SECURITY FUNDING ANALYSIS analyze, and distribute source intelligence information or the resultant warnings from intelligence analysis. It also includes information sharing activities among Federal, State, and local governments, relevant private sector entities, and the public at large; but it does not include most foreign intelligence collection—although the resulting intelligence may inform homeland security activities. In 2011, funding for intelligence-and-warning is distributed between DHS (50 percent), primarily in the Office of Intelligence and Analysis; and DOJ (47 percent), primarily in the Federal Bureau of Investigation (FBI). The 2011 funding for intelligence and warning activities is 3 percent above the 2010 level. Activities to deny terrorists and terrorist-related weapons and materials entry into our country and across all international borders include measures to protect border and transportation systems, such as screening airport passengers, detecting dangerous materials at ports overseas and at U.S. ports-of-entry, and patrolling our coasts and the land between ports-of-entry. Securing our borders and transportation systems is a complex task. Security enhancements in one area may make another avenue more attractive to terrorists. Therefore, our border and transportation security strategy aims to make the U.S. borders “smarter’’—targeting layered resources toward the highest risks and sharing information so that frontline personnel can stay ahead of potential adversaries—while facilitating the flow of legitimate visitors and commerce. The majority of funding for border and transportation security ($24.6 billion, or 91 percent, in 2011) is in DHS, largely for the U.S. Customs and Border Protection (CBP), the Transportation Security Administration (TSA), and the U.S Coast Guard. Other DHS bureaus and other Federal Departments, such as the Departments of State and Justice, also play a significant role. The President’s 2011 request would increase funding for border and transportation security activities by 4 percent over the 2010 level. Funding for domestic counterterrorism contains Federal and Federally-supported efforts to identify, thwart, and prosecute terrorists in the United States. It also includes pursuit not only of the individuals directly involved in terrorist activity, but also their sources of support: the people and organizations that knowingly fund the terrorists and those that provide them with logistical assistance. In today’s world, preventing and interdicting terrorist activity within the United States is a priority for law enforcement at all levels of government. The largest contributors to the domestic counterterrorism goal are law enforcement organizations, with DOJ (largely for the FBI) and DHS (largely for ICE) accounting for 53 and 45 percent of funding for 2011, respectively. Protect the American People, Our Critical Infrastructure, and Key Resources Critical infrastructure includes the assets, systems, and networks, whether physical or virtual, so vital to the United States that their incapacitation or destruction would have a debilitating effect on security, national economic security, public health or safety, or any combination thereof. Key resources are publicly or privately controlled resources essential to the minimal operations of the economy and government whose disruption or destruction could have significant consequences across multiple dimensions, including national monuments and icons. Efforts to protect the American people include defending against catastrophic threats through research, development, and deployment of technologies, systems, and medical measures to detect and counter the threat of chemical, biological, radiological, and nuclear (CBRN) weapons. Funding encompasses activities to protect against, detect, deter, or mitigate the possible terrorist use of CBRN weapons through detection systems and procedures, improving decontamination techniques, and the development of medical countermeasures, such as vaccines, drugs and diagnostics to protect the public from Table 23–3. PROTECT THE AMERICAN PEOPLE, OUR CRITICAL INFRASTRUCTURE, AND KEY RESOURCES (budget authority in millions of dollars) Agency 2009 Enacted 2009 Supplemental/ Emergency 2010 Enacted 2010 Supplemental/ Emergency 2011 Request Department of Agriculture ........................................................ Department of Commerce ........................................................ Department of Defense ............................................................ Department of Energy .............................................................. Department of Health and Human Services ............................. Department of Homeland Security ........................................... Department of Justice .............................................................. Department of Veterans Affairs ................................................. National Aeronautics and Space Administration ...................... National Science Foundation .................................................... Social Security Administration .................................................. Other Agencies ......................................................................... 269.7 203.0 19,148.2 1,721.5 2,510.5 7,379.8 675.6 228.2 214.3 377.2 181.0 687.6 ......... 11.0 69.4 ......... 50.0 595.6 2.9 ......... ......... 29.4 ......... 73.4 310.2 195.0 18,733.0 1,808.6 4,997.3 2,615.4 781.3 270.9 218.0 390.0 208.8 698.4 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 309.4 222.4 18,719.9 1,791.9 2,376.8 6,039.7 794.7 281.9 213.8 405.4 224.2 707.2 Total, Protect the American People, Our Critical Infrastructure, and Key Resources ................................... 33,596.6 831.7 31,226.8 ......... 32,087.2 382 ANALYTICAL PERSPECTIVES the threat of a CBRN attack or other public health emergency. The agencies with the most significant resources to help develop and field technologies to counter CBRN threats are: DOD ($2.3 billion, or 38 percent, of the 2011 total); HHS, largely for research at the National Institutes of Health (NIH) and for advanced development of medical countermeasures ($2.1 billion, or 34 percent, of the 2011 total); and DHS ($1.1 billion, or 19 percent, of the 2011 total). Protecting the Nation’s critical infrastructure and key resources (CI/KR) is a complex challenge for two reasons: (1) the diversity of infrastructure and (2) the high level of private ownership (85 percent) of the Nation’s critical infrastructure and key assets. Efforts to protect CI/ KR include unifying disparate efforts to protect critical infrastructure across the Federal Government, and with State, local, and private stakeholders; accurately assessing CI/KR and prioritizing protective action based on risk; and reducing threats and vulnerabilities in cyberspace. DOD continues to report the largest share of funding in this category for 2011 ($16.5 billion, or 63 percent), which includes programs focusing on physical security and improving the military’s ability to prevent or mitigate the consequences of attacks against departmental personnel and facilities. DHS has overall responsibility for prioritizing and executing infrastructure protection activities at the national level and accounts for $4.9 billion (19 percent) of 2011 funding. Another 25 agencies also report funding to protect their own assets and work with States, localities, and the private sector to reduce vulnerabilities in their areas of expertise. The President’s 2011 request increases funding for activities to protect the Nation’s people, critical infrastructure and key resources by $860.4 million. Respond To and Recover From Incidents The ability to respond to and recover from incidents requires efforts to bolster capabilities nationwide to prevent and protect against terrorist attacks, and also minimize the damage from attacks through effective response and recovery. This includes programs that help to plan, equip, train, and practice the response capabilities of many different response units (including first responders, such as police officers, firefighters, emergency medical providers, public works personnel, and emergency management officials) that are instrumental in the preparedness to mobilize without warning for an emergency. Building this capability encompasses a broad range of agency incident management activities, as well as grants and other assistance to States and localities for first responder preparedness capabilities. Response to natural disasters and other major incidents, including catastrophic natural events such as Hurricane Katrina and chemical or oil spills, do not directly fall within the definition of a homeland security activity Table 23–4. RESPOND TO AND RECOVER FROM INCIDENTS (budget authority in millions of dollars) Agency 2009 Enacted 2009 Supplemental/ Emergency 2010 Enacted 2010 Supplemental/ Emergency 2011 Request Department of Agriculture ........................................................ Department of Commerce ........................................................ Department of Defense ............................................................ Department of Education .......................................................... Department of Energy .............................................................. Department of Health and Human Services ............................. Department of Homeland Security ........................................... Department of Housing and Urban Development ..................... Department of the Interior ........................................................ Department of Justice .............................................................. Department of Labor ................................................................ Department of State ................................................................. Department of Transportation ................................................... Department of the Treasury ...................................................... Department of Veterans Affairs ................................................. Environmental Protection Agency ............................................ Executive Office of the President .............................................. General Services Administration .............................................. Office of Personnel Management ............................................. Social Security Administration .................................................. District of Columbia .................................................................. Federal Communications Commission ..................................... Intelligence Community Management Account ........................ National Archives and Records Administration ......................... Securities and Exchange Commission ..................................... 55.2 52.0 265.3 0.4 166.2 2,116.5 3,210.0 4.8 3.8 9.7 14.8 17.0 18.8 40.1 81.7 70.2 8.4 3.0 0.7 0.5 39.0 2.2 32.8 2.1 3.0 ......... ......... ......... ......... ......... ......... 340.0 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 56.3 53.5 307.6 1.3 160.2 2,230.6 3,195.2 4.9 4.1 8.8 17.6 24.3 19.0 36.1 155.8 70.6 6.0 3.0 0.8 0.5 15.0 1.7 15.5 1.7 4.0 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 56.4 59.2 383.2 1.1 167.3 2,151.1 3,187.2 5.1 4.4 6.0 17.9 19.3 30.4 36.2 146.3 57.6 4.2 3.0 0.7 0.5 15.0 1.5 15.9 1.9 4.0 Total, Respond To and Recover From Incidents ................... 6,218.2 340.0 6,394.1 ......... 6,375.2 23. HOMELAND SECURITY FUNDING ANALYSIS for funding purposes, as defined by section 889 of the Homeland Security Act of 2002. However, preparing for terrorism-related threats includes many activities that also support preparedness for catastrophic natural and man-made disasters. Additionally, lessons learned from the response to Hurricane Katrina have been used to revise and strengthen catastrophic response planning. The agencies with the most significant participation in this effort are: DHS ($3.2 billion, or 50 percent, of the 2011 total); and HHS ($2.2 billion, or 34 percent, of the 2011 total). Twenty-three other agencies include emergency preparedness and response funding. The President’s 2011 request would decrease funding by $ 18.9 million (0.3 percent) below the 2010 level, largely due to reductions in state and local grant programs that were not awarded based on a risk methodology and were subject to earmarking for non-risk based projects. Continue to Strengthen the Homeland Security Foundation Preventing and disrupting terrorist attacks; protecting the American people, critical infrastructure, and key resources; and responding to and recovering from incidents that do occur are enduring homeland security responsibilities. For the long-term fulfillment of these responsibilities it is necessary to continue to strengthen the principles, systems, structures, and institutions that cut across the homeland security enterprise and support our activities to secure the Nation. Long-term success across several cross-cutting areas is essential to protect the United States. While these areas are not quantifiable in terms of budget figures, they are important elements in the management and budgeting processes. As the Administration sets priorities and determines funding for new and existing homeland security programs, consideration must be given to areas such as the assessment and management of risk, which underlie the full spectrum of homeland security activities. This would include decisions about when, where, and how to invest resources in capabilities or assets that eliminate, control, or mitigate risks. Likewise, research and development initiatives promote the application of science and technology to homeland security activities, and can drive improvements in processes and efficiencies to reduce the vulnerability of the nation. Non-Federal Expenditures 2 State and local governments and private-sector firms also have devoted resources of their own to the task of defending against terrorist threats. Some of the additional spending has been of a one-time nature, such as investment in new security equipment and infrastructure; some additional spending has been ongoing, such as hiring more personnel, and increasing overtime for existing security personnel. In many cases, own-source spending 2 OMB does not collect detailed homeland security expenditure data from State, local, or private entities directly. 383 has supplemented the resources provided by the Federal Government. Many governments and businesses, though not all, place a high priority on, and provide additional resources, for security. A 2004 survey conducted by the National Association of Counties found, that as a result of the homeland security process of intergovernmental planning and funding, three out of four counties believed they were better prepared to respond to terrorist threats. Moreover, almost 40 percent of the surveyed counties had appropriated their own funds to assist with homeland security. Own-source resources supplemented funds provided by states and the Federal Government. However, the same survey revealed that 54 percent of counties had not used any of their own funds.3 The survey’s findings were based on the responses from 471 counties (15 percent) nationwide, out of 3,140 counties or equivalents.4 A recent study conducted by the Heritage Foundation, one of the few organizations to compile homeland security spending estimates from states and localities, provides data on State and local spending in support of homeland security activities.5 The report surveyed 43 jurisdictions that are eligible for DHS’ Urban Areas Security Initiative (UASI) grant funds due to the risk of a terrorist attack.6 These jurisdictions are home to approximately 145 million people or 47 percent of the total United States population. According to the report, the 2007 homeland security budgets for the jurisdictions examined (which include 26 states and the District of Columbia, 50 primary cities, and 35 primary counties) totaled $37 billion, while the same entities received slightly more than $2 billion in Federal homeland security grants.7 The report further states that from 2000–2007, these states and localities spent $220 billion on homeland security activities, which includes increases of three to six percent a year for law enforcement and fire services budgets, and received over $10 billion in Federal grants. California, the most populous State, is also the largest recipient of Federal homeland security funds, having received almost $1.5 billion from 3 Source: National Association of Counties, “Homeland Security Funding—2003 State Homeland Security Grants Programs I and II.’’ 4 The National Association of Counties conducted a survey through its various state associations (48), responses were received from 471 counties in 26 states. 5 Source: Matt A. Mayer, “An Analysis of Federal, State, and Local Homeland Security Budgets,” A Report of the Heritage Center for Data Analysis, CDA09-01, March 9, 2009, at http://www.heritage.org/Research/HomelandSecurity/upload/ CDA_09_01.pdf. Figures cited in this report have not been independently verified by the Office of Management and Budget. 6 The Heritage Foundation report’s methodology in selecting the states, cities, and counties to include in the report is as follows: the state had to possess a designated UASI jurisdiction and the city and county had to belong to a designated UASI jurisdiction that had received at least $15 million from 2003 to 2007 from the DHS. 7 The Heritage Foundation report’s budget data for homeland security included primary law enforcement agencies, fire departments, homeland security offices, and emergency management agencies. In some cases, state and local emergency management agency budget data was embedded in the fire department budget data and was not separately noted in its own category. 384 ANALYTICAL PERSPECTIVES 2000 - 2007, while spending over $45 billion in State and local funding. Over the same time period, the top ten most populous states (including California) spent $148 billion on state and local homeland security related activities. There is also a diversity of responses in the businesses community. A 2003 survey of 199 corporate security directors conducted by the Conference Board showed that just over half of the companies reported that they had permanently increased security spending post-September 11, 2001.8 About 15 percent of the companies surveyed had increased their security spending by 20 percent or more.9 Large increases in spending were especially evi- dent in critical industries, such as transportation, energy, financial services, media and telecommunications, information technology, and healthcare. However, about onethird of the surveyed companies reported that they had not increased their security spending after September 11th.10 Given the difficulty of obtaining survey results that are representative of the universe of States, localities, and businesses, it is likely that there will be a wide range of estimates of non-Federal security spending for critical infrastructure protection. 8 Source: Thomas E. Cavanagh and Meredith Whiting, “2003 Corporate Security Management: Organization and Spending Since 9/11,” The Conference Board. R-1333-03-RR. July 2003. This report references sample size of 199 corporate security directors, of which 96 were in “critical industries”, while the remaining 103 were in “non-critical industries.” In the report, the Conference Board states that it followed the DHS usage of critical industries, “defined as the following: transportation; energy and utilities; financial services; media and telecommunications; information technology; and healthcare.” The tables in the Federal expenditures section of this chapter present data based on the President’s policy for the 2011 Budget. The tables below present additional policy and baseline data, as directed by the Homeland Security Act of 2002. An appendix of account-level funding estimates is available on the Analytical Perspectives CD ROM. 9 The Conference Board survey cites the sample size for this statistic was 192 corporate security directors. 10 The Conference Board survey cites the sample size for this statistic was 199 corporate security directors. Table 23–5 Additional Tables DISCRETIONARY FEE-FUNDED HOMELAND SECURITY ACTIVITIES BY AGENCY (Budget authority in millions of dollars) Agency 2009 Supplemental/ Emergency 2009 Enacted 2010 Supplemental/ Emergency 2010 Enacted 2011 Request Department of Energy ................................................................................................................ Department of Homeland Security ............................................................................................. Department of State ................................................................................................................... General Services Administration ................................................................................................ Social Security Administration .................................................................................................... Federal Communications Commission ....................................................................................... Securities and Exchange Commission ....................................................................................... 15.7 3,002.0 1,670.0 117.0 182.0 2.2 15.0 ......... ......... ......... ......... ......... ......... ......... 15.9 3,400.0 1,653.0 206.0 209.3 1.7 17.0 ......... ......... ......... ......... ......... ......... ......... 15.2 3,315.0 2,051.0 141.0 224.7 1.5 17.0 Total, Discretionary Homeland Security Fee-Funded Activities ........................................... 5,003.9 ......... 5,502.9 ......... 5,765.5 Table 23–6. MANDATORY HOMELAND SECURITY FUNDING BY AGENCY (Budget authority in millions of dollars) Agency 2009 Enacted 2009 Supplemental/ Emergency 2010 Enacted 2010 Supplemental/ Emergency 2011 Request Department of Agriculture ........................................................... Department of Commerce ........................................................... Department of Energy ................................................................. Department of Health and Human Services ................................ Department of Homeland Security .............................................. Department of Labor ................................................................... 147.0 16.7 13.0 14.4 2,308.1 8.1 ......... 7.9 ......... ......... ......... ......... 185.8 18.2 13.0 24.4 2,340.2 8.1 ......... ......... ......... ......... ......... ......... 189.5 18.0 12.0 18.9 2,399.2 8.1 Total, Homeland Security Mandatory Programs ..................... 2,507.3 7.9 2,589.6 ......... 2,645.8 385 23. HOMELAND SECURITY FUNDING ANALYSIS Table 23–7. BASELINE ESTIMATES—TOTAL HOMELAND SECURITY FUNDING BY AGENCY (Budget authority in millions of dollars) Baseline Agency 2010 Enacted 2011 2012 2013 2014 2015 Department of Agriculture ................................................... Department of Commerce ................................................... Department of Defense ....................................................... Department of Education ..................................................... Department of Energy ......................................................... Department of Health and Human Services ........................ Department of Homeland Security ...................................... Department of Housing and Urban Development ................ Department of the Interior ................................................... Department of Justice ......................................................... Department of Labor ........................................................... Department of State ............................................................ Department of Transportation .............................................. Department of the Treasury ................................................. Department of Veterans Affairs ............................................ Corps of Engineers .............................................................. Environmental Protection Agency ....................................... Executive Office of the President ......................................... General Services Administration ......................................... National Aeronautics and Space Administration ................. National Science Foundation ............................................... Office of Personnel Management ........................................ Social Security Administration ............................................. District of Columbia ............................................................. Federal Communications Commission ................................ Intelligence Community Management Account ................... National Archives and Records Administration .................... Nuclear Regulatory Commission ......................................... Securities and Exchange Commission ................................ Smithsonian Institution ........................................................ United States Holocaust Memorial Museum ....................... 599 255 19,045 29 2,017 4,802 35,886 5 52 4,108 51 1,767 229 124 428 37 156 12 214 218 390 2 209 15 2 16 20 65 17 99 10 610 257 19,254 29 2,041 7,315 36,626 5 53 4,220 51 1,868 236 127 416 37 159 12 216 220 394 2 225 15 2 16 20 67 17 103 10 625 263 19,485 30 2,075 7,443 37,807 5 54 4,352 52 1,898 246 130 426 38 161 12 220 223 400 2 234 15 2 16 21 69 17 108 10 642 267 19,814 30 2,113 7,588 38,887 5 57 4,489 53 1,930 256 136 435 39 166 13 223 228 408 2 236 16 2 17 21 71 18 112 10 657 273 20,155 31 2,150 7,730 40,006 5 58 4,632 54 1,963 267 139 448 39 169 13 226 231 414 2 238 16 2 17 21 73 18 117 11 671 280 20,496 31 2,189 7,877 41,161 5 60 4,781 54 1,997 277 142 458 40 173 13 231 235 421 2 244 16 2 17 22 77 18 122 11 Total, Homeland Security Budget Authority ................... 70,879 –19,045 74,623 –19,254 76,439 –19,485 78,284 –19,814 80,175 –20,155 82,123 –20,496 51,834 –5,528 –2,590 55,369 –5,562 –2,646 56,954 –5,625 –2,931 58,470 –5,722 –3,024 60,020 –5,820 –3,124 61,627 –5,922 –3,223 Minus Transfer from BioShield ........................................ 43,716 –609 47,161 ......... 48,398 ......... 49,724 ......... 51,076 ......... 52,482 ......... Net Non-Defense, Discretionary Homeland Security BA, including BioShield Transfer ....................................... 43,107 47,161 48,398 49,724 51,076 52,482 105 106 107 109 111 114 Less Department of Defense .......................................... Non-Defense Homeland Security BA, excluding BioShield Transfer ........................................................ Less Fee-Funded Homeland Security Programs ............ Less Mandatory Homeland Security Programs .............. Net Non-Defense, Discretionary Homeland Security BA, excluding BioShield Transfer ....................................... Obligations Limitations ..................................................... Department of Transportation Obligations Limitation ...... 386 ANALYTICAL PERSPECTIVES Table 23–8. HOMELAND SECURITY FUNDING BY BUDGET FUNCTION (Budget authority in millions of dollars) 2009 Actual Budget Function 2010 Enacted 2011 Request National Defense ..................................................................................................................... International Affairs .................................................................................................................. General Science Space and Technology ................................................................................. Energy ..................................................................................................................................... Natural Resources and the Environment ................................................................................. Agriculture ............................................................................................................................... Commerce and Housing Credit ............................................................................................... Transportation .......................................................................................................................... Community and Regional Development .................................................................................. Education, Training, Employment and Social Services ............................................................ Health ...................................................................................................................................... Medicare .................................................................................................................................. Income Security ....................................................................................................................... Social Security ......................................................................................................................... Veterans Benefits and Services ............................................................................................... Administration of Justice .......................................................................................................... General Government ............................................................................................................... 24,460 1,870 1,500 137 333 517 179 10,315 4,201 171 6,395 25 14 182 310 19,320 1,370 23,890 1,767 1,547 122 306 567 196 11,200 3,948 174 4,204 27 14 209 428 20,119 1,552 23,970 2,259 1,572 124 274 574 226 11,670 4,028 179 4,497 63 14 225 428 20,722 1,483 Total, Homeland Security Budget Authority ....................................................................... 71,299 –19,484 70,270 –19,045 72,308 –19,103 Less Fee-Funded Homeland Security Programs ................................................................ Less Mandatory Homeland Security Programs .................................................................. 51,815 –4,981 –2,534 51,225 –5,468 –2,590 53,205 –5,733 –2,646 Net Non-Defense, Discretionary Homeland Security BA ................................................... 44,300 43,167 44,826 Less National Defense, DOD .............................................................................................. Non-Defense Homeland Security BA ................................................................................... Table 23–9. BASELINE ESTIMATES—HOMELAND SECURITY FUNDING BY BUDGET FUNCTION (Budget authority in millions of dollars) Budget Function 2010 Enacted Baseline 2011 2012 2013 2014 2015 National Defense ..................................................................................................................... International Affairs .................................................................................................................. General Science Space and Technology ................................................................................. Energy ..................................................................................................................................... Natural Resources and the Environment ................................................................................. Agriculture ............................................................................................................................... Commerce and Housing Credit ............................................................................................... Transportation .......................................................................................................................... Community and Regional Development .................................................................................. Education, Training, Employment and Social Services ............................................................ Health ...................................................................................................................................... Medicare .................................................................................................................................. Income Security ....................................................................................................................... Social Security ......................................................................................................................... Veterans Benefits and Services ............................................................................................... Administration of Justice .......................................................................................................... General Government ............................................................................................................... 23,890 1,767 1,547 122 306 567 196 11,200 3,948 174 4,204 27 14 209 428 20,119 1,552 24,190 1,868 1,564 123 310 578 198 11,342 3,993 178 7,325 28 14 225 416 20,718 1,553 24,533 1,898 1,589 126 316 591 201 11,601 4,058 184 7,454 29 15 234 426 21,602 1,582 24,979 1,930 1,620 129 326 608 205 11,931 4,129 189 7,597 31 15 236 435 22,315 1,609 25,443 1,963 1,644 132 330 622 210 12,272 4,201 197 7,739 32 15 238 448 23,057 1,632 25,911 1,997 1,674 136 339 636 214 12,621 4,272 202 7,884 34 15 244 458 23,827 1,659 Total, Homeland Security Budget Authority ....................................................................... 70,270 –19,045 74,623 –19,254 76,439 –19,485 78,284 –19,814 80,175 –20,155 82,123 –20,496 Less Fee-Funded Homeland Security Programs ................................................................ Less Mandatory Homeland Security Programs .................................................................. 51,225 –5,528 –2,590 55,369 –5,562 –2,646 56,954 –5,625 –2,931 58,470 –5,722 –3,024 60,020 –5,820 –3,124 61,627 –5,922 –3,223 Net Non-Defense, Discretionary Homeland Security BA ................................................... 43,107 47,161 48,398 49,724 51,076 52,482 105 106 107 109 111 114 Less National Defense, DOD .............................................................................................. Non-Defense, Discretionary Homeland Security BA .......................................................... Obligations Limitations ......................................................................................................... Department of Transportation Obligations Limitation .......................................................... 24. FEDERAL DRUG CONTROL FUNDING Table 24–1. FEDERAL DRUG CONTROL FUNDING, 2009–2011 1 (Budget authority, in millions of dollars) Department/Agency Enacted 2009 2010 2011 Request Department of Defense 2 .......................................................................................................................................... 1,405.1 1,598.8 1,588.5 Department of Education . ....................................................................................................................................... 429.8 175.8 283.1 Department of Health and Human Services: Centers for Medicare and Medicaid Services 3 .................................................................................................... Indian Health Service ............................................................................................................................................ National Institute on Drug Abuse 4 ........................................................................................................................ Substance Abuse and Mental Health Services Administration 5 ........................................................................... Total HHS ...................................................................................................................................................... 215.0 91.5 1,293.6 2,494.1 4,094.2 430.0 96.0 1,059.4 2,557.4 4,142.8 400.0 103.1 1,094.1 2,688.2 4,285.4 Department of Homeland Security: Counternarcotics Enforcement .............................................................................................................................. Customs and Border Protection ............................................................................................................................ Immigration and Customs Enforcement ................................................................................................................ U.S. Coast Guard ................................................................................................................................................... 3.7 2,101.0 437.1 1,096.9 3.6 2,108.6 477.7 1,162.3 3.9 2,086.1 499.8 1,208.1 Total DHS ..................................................................................................................................................... 3,638.7 3,752.2 3,797.9 Department of the Interior: Bureau of Indian Affairs ......................................................................................................................................... 6.3 10.0 10.0 Department of Justice: Bureau of Prisons .................................................................................................................................................. Drug Enforcement Administration .......................................................................................................................... Interagency Crime and Drug Enforcement ............................................................................................................ Office of Justice Programs ..................................................................................................................................... National Drug Intelligence Center .......................................................................................................................... 79.2 2,203.5 515.0 397.5 44.0 87.6 2,271.5 528.6 288.4 44.0 93.5 2,421.9 579.3 307.6 44.6 Total DOJ ...................................................................................................................................................... 3,239.2 3,220.1 3,446.9 Office of National Drug Control Policy: Operations ............................................................................................................................................................ Counterdrug Technology Assessment Center ....................................................................................................... High Intensity Drug Trafficking Area Program ........................................................................................................ Other Federal Drug Control Programs ................................................................................................................... 27.2 3.0 234.0 174.7 29.6 5.0 239.0 154.4 26.2 0.0 210.0 165.3 Total ONDCP ................................................................................................................................................ 438.9 428.0 401.5 Department of State/International Affairs: 6 Bureau of International Narcotics and Law Enforcement Affairs ........................................................................... Economic Support and Development Assistance .................................................................................................. 1,150.4 418.6 870.7 365.1 892.0 365.1 Total Department of State/International Affairs ....................................................................................... 1,569.0 1,235.8 1,257.1 Department of the Treasury: Internal Revenue Service ...................................................................................................................................... 60.6 59.2 60.3 Department of Veterans Affairs: Veterans Health Administration ............................................................................................................................. 392.8 405.0 418.0 Other Priorities 7 ....................................................................................................................................................... 3.7 3.7 3.7 Total Federal Drug Budget ....................................................................................................................................... 15,278.3 15,031.4 15,552.4 387 388 1 Detail ANALYTICAL PERSPECTIVES may not add due to rounding. amounts include supplemental funding. The 2009 enacted includes the 2009 supplemental war appropriations. The 2010 and 2011 amounts are the current request levels and include war funding. 3 Baseline outlays estimated by HHS actuaries based on projected State Medicaid program participation. The 2011 estimate of Medicaid spending decreases due to the end of the temporary increase in the Medicaid Federal Medical Assistance Percentage (FMAP) that was provided by the American Recovery and Reinvestment Act (ARRA) through December 31, 2010, and does not take into account the proposed extension of the ARRA increase of FMAP. 4 NIDA 2009 amount includes funding provided by the American Recovery and Reinvestment Act. 5 Includes budget authority and funding through evaluation set-aside authorized by Section 241 of the Public Health Service (PHS) Act. PHS Evaluation Fund levels are as follows: $110.5 million in 2009, $110.5 million in 2010, and $111.2 million in 2011. The 2011 amount includes $25 million for the Health Resources and Services Administration (HRSA); HRSA is not designated as a Federal Drug Control Program agency. 6 State/International Affairs amounts include supplemental funding. The 2010 enacted includes the pending 2010 war supplemental request. 7 Includes (1) the Small Business Administration’s Drug-Free Workplace grants, and (2) the Department of Transportation National Highway Traffic Safety Administration’s Drug Impaired Driving Program. 2 DOD 25. CALIFORNIA-FEDERAL BAY-DELTA PROGRAM BUDGET CROSSCUT (CALFED) The California-Federal Bay-Delta program (also known as CALFED) is a cooperative effort among the Federal Government, the State of California, local governments, and water users, to proactively address the water management and aquatic ecosystem needs of California’s Central Valley. This valley, one of the most productive agricultural regions of the world, is drained by the Sacramento River in the north and the San Joaquin River in the south. The two rivers meet southwest of Sacramento, forming the Sacramento-San Joaquin Delta, and drain west into San Francisco Bay. The extensive development of the area’s water resources has boosted agricultural production, but has also adversely affected the region’s ecosystems. CALFED participants recognized the need to provide a safe, clean, reliable source of water for multiple uses, while at the same time restoring or maintaining the ecosystems of the area and protecting against floods. This recognition resulted in the 1994 Bay-Delta Accord, which laid the foundation for the CALFED program. CALFED’s adaptive management approach to water resources development and management seeks to balance achievement among the program’s four objectives: Water Supply Reliability, Levee System Integrity, Water Quality, and Ecosystem Restoration. The program integrates science and monitoring into program management to track progress toward achieving those goals. The partners signed a Record of Decision in 2000, spelling out the different program components and goals. In 2004, the Calfed Bay-Delta Authorization Act (P.L. 108-361) was signed into law. This Act authorizes activities for the CALFED program through 2010, provides new programmatic authority for participating agencies, authorizes funding to be appropriated for the Federal share of CALFED activities, and specifies criteria for program cost-shares and achieving balanced implementation of CALFED program components. Federal agencies contributing to CALFED goals include: the Department of the Interior’s Bureau of Reclamation, U.S. Fish and Wildlife Service, and U.S. Geological Survey; the Department of Agriculture’s Natural Resources Conservation Service; the U.S. Army Corps of Engineers; the Department of Commerce’s National Oceanic and Atmospheric Administration (NOAA); and the Environmental Protection Agency. The Department of the Interior and the White House Council on Environmental Quality, are leading an interagency Federal working group that is developing strategies to establish a sustainable Bay Delta ecosystem that provides for a high quality, reliable, and sustainable longterm water supply for California, and restores the environmental integrity and sustainability of the system. The FY 2011 Budget includes a crosscut of estimated Federal funding by each of the CALFED agencies, fulfilling the reporting requirements of P.L. 108-361. Detailed tables can be found in the CD-ROM included with the Analytical Perspectives, as well as an explanation of budget crosscut methodology. Table 25–1. CALFED-RELATED FEDERAL FUNDING BUDGET CROSSCUT (In millions of dollars) Enacted Agency 1998 Bureau of Reclamation .............................................. Corps of Engineers .................................................... Natural Resources Conservation Service ................. NOAA Fisheries ......................................................... Geological Survey ..................................................... Fish and Wildlife Service ........................................... Environmental Protection Agency 2 ............................ 1999 2000 153.37 114.67 138.51 100.67 103.34 93.79 0.00 14.54 12.85 0.30 0.38 0.45 3.16 3.16 4.32 0.94 1.14 3.65 3.20 3.05 57.26 2001 2002 79.75 103.32 54.19 58.22 16.95 39.08 0.55 0.58 5.37 5.09 18.23 5.61 53.38 54.26 2003 74.21 57.83 38.4 0.78 4.91 11.19 20.69 2004 75.74 72.64 48.75 0.78 4.89 13.68 62.78 2005 81.10 52.31 36.39 0.78 5.42 8.91 97.65 2006 2007 99.83 101.34 91.29 87.44 34.64 26.86 0.78 0.50 5.18 4.08 10.74 7.53 36.56 36.13 2008 2009 1 66.05 156.80 51.20 140.74 40.90 44.40 0.53 0.53 3.73 3.73 22.03 24.19 68.34 161.47 2010 2011 Pres. Budget 94.66 72.52 39.70 0.53 3.50 6.52 7.64 140.21 58.07 50.00 1.60 3.50 6.52 5.60 Totals ......................................................................... 261.64 240.28 310.83 228.42 266.16 208.01 279.26 282.56 279.02 263.88 252.78 531.86 225.07 1 The FY 2009 total includes American Recovery and Reinvestment Act projects and activities. 2 Additional EPA funds would be provided through the State Revolving Funds (SRFs), which EPA is unable to forecast. 265.50 389 TECHNICAL BUDGET ANALYSES 391 392 26. CURRENT SERVICES ESTIMATES Current services, or “baseline,” estimates are designed to provide a benchmark against which policy proposals can be measured. A baseline is not a prediction of the final outcome of the annual budget process, nor is it a proposed budget. It can be a useful tool in budgeting, however. It can be used to warn of future problems, either for Government fiscal policy as a whole or for individual tax and spending programs, and it can also be used as a benchmark against which to measure the magnitude of the policy changes in the President’s Budget or other budget proposals. Since the early 1970s, when the first requirements for the calculation of a “current services” baseline were enacted, a variety of concepts and measures have been employed. Shortly after enactment of the Budget Enforcement Act of 1990 (BEA), which provided detailed rules for calculating a baseline, there was a consensus to define the current services estimates according to those rules. However, that baseline has flaws, which compromise its ability to serve as an appropriate benchmark. This section provides de- tailed estimates of a baseline that corrects these flaws. It also discusses alternative formulations for the baseline. Ideally, a current services baseline would provide a projection of estimated receipts, outlays, deficits or surpluses, and budget authority needed to reflect this year’s enacted policies and programs for each year in the future. Because such a concept would be nearly impossible to apply across all segments of the government, the baseline has instead become largely a mechanical construct whose levels may be considered a representation of current services when viewed in aggregate. The Administration believes adjustments to the BEA baseline are needed to better represent the deficit outlook under current policy. For example, an appropriate benchmark should include the future costs of extending temporary tax cuts and spending programs that have been extended routinely in the past. Omitting these costs would make the deficit outlook appear more favorable than is actually likely, masking future problems and providing an inappropriate benchmark for measuring budget proposals. Table 26–1. CATEGORY TOTALS FOR THE BASELINE PROJECTION OF CURRENT POLICY (in billions of dollars) 2009 Receipts .............................................................................................. 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2,105 2,213 2,583 2,829 3,033 3,269 3,417 3,648 3,838 4,026 4,215 4,400 Discretionary: Defense .................................................................................. Non-defense ........................................................................... Subtotal, discretionary ..................................................... 657 562 1,219 705 692 1,397 704 672 1,376 710 629 1,340 721 622 1,343 736 630 1,367 754 642 1,396 768 657 1,425 787 673 1,460 807 689 1,496 827 706 1,534 848 724 1,573 Mandatory: Social Security ........................................................................ Medicare ................................................................................. Medicaid and CHIP ................................................................ Other mandatory .................................................................... Subtotal, mandatory ......................................................... Disaster costs 1 ............................................................................. Net interest .................................................................................... Total, outlays ....................................................................................... 678 425 258 751 2,112 ......... 187 3,518 703 451 284 619 2,057 1 188 3,643 730 492 282 597 2,100 3 250 3,728 762 502 286 530 2,079 4 340 3,762 801 557 305 527 2,191 4 434 3,973 846 625 323 522 2,316 5 516 4,203 894 654 343 521 2,413 5 586 4,400 947 727 368 538 2,579 5 652 4,661 1,004 760 396 538 2,698 5 716 4,879 1,067 795 426 536 2,823 5 779 5,103 1,133 886 458 582 3,060 5 844 5,443 1,204 957 494 600 3,256 5 912 5,746 Unified deficit(+)/surplus(–) ........................................................... On-budget .............................................................................. Off-budget .............................................................................. 1,413 1,550 –137 1,430 1,508 –78 1,145 1,241 –96 934 1,054 –120 940 1,074 –135 934 1,080 –147 983 1,139 –156 1,013 1,183 –170 1,042 1,209 –168 1,077 1,243 –166 1,227 1,385 –157 1,346 1,486 –140 Outlays: Memorandum: BEA baseline deficit ....................................................................... 1,413 1,404 912 613 561 495 492 469 445 421 507 557 Adjustments to reflect current tax policies .............................. ......... 18 199 269 304 340 371 398 425 453 483 513 Adjustments to reflect current spending policies and potential disaster costs ............................................. ......... 8 32 40 45 47 49 52 54 56 62 67 Related debt service .............................................................. ......... * 2 11 31 51 71 94 118 146 175 209 Baseline projection of current policy deficit ................................... 1,413 1,430 1,145 934 940 934 983 1,013 1,042 1,077 1,227 1,346 * 500 million or less 1 These amounts represent a placeholder for major disasters requiring Federal assistance for relief and reconstruction. Such assistance might be provided in the form of discretionary or mandatory outlays or tax relief. These amounts are included as outlays for convenience. 393 394 ANALYTICAL PERSPECTIVES Table 26–1 shows estimates of receipts, outlays, and surpluses under the Administration’s baseline projection of current policy for 2009 through 2020. The estimates are based on the economic assumptions described later in this chapter. They are shown on a unified budget basis, i.e., the off-budget receipts and outlays of the Social Security trust funds and the Postal Service Fund are added to the on-budget receipts and outlays to calculate the unified budget totals. The table also shows the Administration’s estimates by major component. Estimates based on the BEA baseline rules are shown as a memorandum in the table. Table 26–2 shows the changes proposed in the President’s Budget relative to the baseline projection of current policy. Conceptual Basis for Estimates Receipts and outlays are divided into two categories that are important for calculating the baseline: those controlled by authorizing legislation (direct spending and receipts) and those controlled through the annual appropriations process (discretionary spending). Different estimating rules apply to each category. There are numerous alternative rules that could be used to develop current services estimates for both categories. The next section discusses some alternatives that might be considered. Direct spending and receipts.—Direct spending includes the major entitlement programs, such as Social Security, Medicare, Medicaid, Federal employee retirement, unemployment compensation, Food Stamps and other means-tested entitlements. It also includes such programs as deposit insurance and farm price and income supports, where the Government is legally obligated to make payments under certain conditions. Receipts and direct spending are alike in that they involve ongoing activities that generally operate under permanent or longstanding authority (they do not require annual authorization), and the underlying statutes generally specify the tax rates or benefit levels that must be collected or paid, and who must pay or who is eligible to receive benefits. The baseline projection of current policy generally—but not always—assumes that receipts and direct spending programs continue in the future as specified by current law. The budgetary effects of anticipated regulatory and administrative actions that are permissible under current law are also reflected in the estimates. Exceptions to this general rule are described below: • Consistent with the BEA, expiring provisions affecting excise taxes dedicated to a trust fund are assumed to be extended at current rates. During the projection period of 2010 through 2020, the only taxes affected by this exception are taxes deposited in the Airport and Airway Trust Fund, which expire on March 31, 2010; taxes deposited in the Highway Trust Fund, the Leaking Underground Storage Tank Trust Fund, and the Sport Fish Restoration and Boating Safety Trust Fund, which expire on September 30, 2011; tobacco assessments deposited in the Tobacco Trust Fund, which expire on September 30, 2014; and taxes deposited in the Oil Spill Liability Trust Fund, which expire on December 31, 2017. • The BEA required temporary direct spending programs that were enacted before the Balanced Budget Act of 1997 to be extended if their current year outlays exceed $50 million. However, the Administration believes the $50 million threshold would better apply to the level of outlays in the last full fiscal year before the program expires, not the current year. For example, the Supplemental Nutrition Assistance Program is scheduled to expire at the end of FY 2012. The baseline estimates provided here assume continuation of this program through the projection period. For existing programs enacted since the Balanced Budget Act of 1997, programs that are explicitly temporary in nature expire in the baseline even if their outlays in the last full fiscal year before expiration exceed the $50 million threshold. For example, the Department of Interior’s Coastal Impact Assistance Program is assumed to expire as scheduled in 2010 even though outlays are estimated to be $172 million in the year before expiration. For programs that may be created in future legislation, the Administration would extend all temporary programs with outlays exceeding $50 million in the last full fiscal year before expiration except those Congress designates as temporary by statute. • Most of the tax reductions enacted in 2001 and 2003 are scheduled to expire on December 31, 2010. The Administration’s baseline projection of current policy continues most of these tax cuts past their expiration date except that estate and generation-skipping transfer taxes are assumed to be extended at their 2009 parameters (maximum rate of 45 percent and exemption amount of $3.5 million). The baseline projections also reflect annual indexation of the alternative minimum tax (AMT) exemption amounts in effect for taxable year 2009, the income thresholds for the 28 percent AMT rate, and the income thresholds for the phaseout of the AMT exemption amounts. The baseline projection of current policy also extends AMT relief for nonrefundable personal credits. Unlike the extension of excise taxes dedicated to a trust fund mentioned above, the BEA baseline definitions, developed before the enactment of the 2001 and 2003 tax cuts, do not provide for extension of these provisions. • Medicare physician payments are constrained under current law by a “sustainable growth rate” formula, but Congress has frequently overridden the reductions required by the formula. The Administration believes that the current Medicare physician payment system, while having served to limit spending to a degree, needs to be reformed to give physicians incentives to improve quality and efficiency. The Administration would support comprehensive, but fiscally responsible, reforms to this payment formula. The baseline projection of current policy reflects the costs of expected Medicare physician payments, 395 26. CURRENT SERVICES ESTIMATE assuming a zero percent update for physician payments rather than the large cuts scheduled under current law. that shifted the effective date of federal employee pay raises from October to January. • The baseline projection of current policy reflects the costs of continuing the annually appropriated portion of the Pell grant program for all eligible students at the maximum award amount of $4,860 specified in existing appropriations. While the Pell program has traditionally been funded largely through discretionary appropriations, the program has effectively operated as an entitlement, in which funding is provided to meet the specified award level for all eligible students. In addition, the baseline projection of current policy reflects the Administration’s request that Pell Grants be converted from a discretionary program to a mandatory program starting in 2010 and the benefits be increased for inflation plus one percentage point per year starting in 2011. Accordingly, the baseline projection of current policy reclassifies the program from discretionary to mandatory starting in 2009, for comparability. Reclassifying Pell spending in the baseline provides an appropriate benchmark for assessing the budget impact of the Administration’s proposal to expand benefits, which constitute an increase relative to that baseline. Discretionary spending.—Discretionary programs differ in one important aspect from direct spending programs: Congress provides spending authority for almost all discretionary programs one year at a time. The spending authority is normally provided in the form of annual appropriations. Absent appropriations of additional funds in the future, discretionary programs would cease to operate after existing balances were spent. If the baseline were intended to reflect current law, then a baseline would reflect only the expenditure of remaining balances from appropriations laws already enacted. Instead, the BEA baseline provides a mechanical definition for discretionary programs that is admittedly somewhat arbitrary. Under the BEA, the baseline estimates for discretionary programs in the current year are equal to enacted appropriations. For the budget year and beyond, the spending authority enacted in the current year is adjusted for inflation, using specified inflation rates. The definition used in the Administration’s baseline projection of current policy attempts to keep discretionary spending level in real terms. The Administration’s baseline projection is based on the following assumptions, which differ from the BEA baseline: • The baseline projection of current policy removes the extension and inflation of items designated as “emergency” requirements that are clearly one-time in nature. There is no obvious reason that nonrecurring emergency costs should be continued in the baseline as required by the BEA. On the other hand, including no adjustment for future one-time expenditures could understate the baseline costs, and therefore the Administration’s baseline projection includes a disaster cost allowance as explained below. For the 2011 Budget, the baseline projection of current policy makes no adjustments to remove • The inflation rates used are the same as those required by the BEA except for an adjustment to remove the overcompensation for federal pay inherent in the BEA definition. Unlike the BEA requirements, the baseline projection of current policy reflects the fact that federal pay raises are effective in January, as required under current law. At the time the BEA was enacted, it failed to account for the nearly contemporaneous enactment of the Federal Employees Compensation Act of 1991 Table 26–2. IMPACT OF BUDGET POLICY (in billions of dollars) Totals 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20112015 20112020 Baseline projection of current policy deficit ....................... 1,430 1,145 934 940 934 983 1,013 1,042 1,077 1,227 1,346 4,936 10,640 Proposals: Revenue proposals 1 .................................................... 50 20 –67 –146 –176 –205 –225 –241 –256 –272 –290 –574 –1,857 Discretionary policy: Defense ................................................................. Non-defense .......................................................... Subtotal, discretionary .................................................. 9 2 11 40 –1 39 –34 –4 –38 –66 –10 –76 –72 –12 –84 –75 –12 –86 –77 –11 –88 –78 –11 –89 –79 –12 –91 –81 –11 –92 –83 –6 –88 –207 –38 –245 –604 –89 –693 Mandatory proposals .................................................... Net interest ................................................................... 64 –* 62 –1 –4 –2 8 * 38 2 75 3 103 4 101 4 101 5 104 5 108 6 178 2 695 26 Debt service ...................................................................... * 2 5 1 –8 –18 –28 –39 –51 –64 –79 –17 –278 Resulting deficits in 2011 Budget ...................................... * $500 million or less. 1 Includes outlay impact of revenue proposals. 1,556 1,267 828 727 706 752 778 778 785 908 1,003 4,295 8,784 396 ANALYTICAL PERSPECTIVES one-time emergency funding, because no such funding had been enacted at the time the Budget was prepared. Disaster funding.—An allowance for the possible future costs of major natural or man-made disasters during the remainder of 2010 and in subsequent years is assumed in the baseline projection of current policy in order to make budget totals more realistic. Baselines would be more meaningful if they did not project forward whatever disaster costs happen to have occurred in the current year. Rather, baselines should replace the projection of actual current-year costs—which might be unusually low or unusually high—with plausible estimates of future costs. This allowance is displayed as possible future outlays for convenience, but in practice the disaster relief could take the form of either increases in outlays or reductions in receipts. As discussed, baselines can be used as a benchmark against which policy proposals are measured. However, this purpose is achieved only if the policies and the baseline are each constructed under the same set of economic and technical assumptions. For this reason, the Administration uses the same assumptions – for example, the same inflation assumptions – in preparing its current service estimates and its Budget. Specifically, in this Budget, discretionary funding levels are based both on policy consideration and on the Administration’s inflation forecast. Thus, while the Budget shows discretionary funding in nominal terms, it conceives of discretionary growth rates in inflation-adjusted terms. Although the Administration is confident that its inflation assumptions are reasonable, if its policies were measured against a baseline that employed different inflation assumptions, the Administration’s outyear discretionary funding levels would have to be adjusted upwards or downwards accordingly, to maintain comparability. (This statement does not apply to funding growth between 2010 and the 2011 budget year, since the appropriations process for 2011 must begin immediately and before inflation assumptions will be revisited. It also does not apply to the outyear BA for overseas contingency operations, which is a placeholder and does not represent a policy determination.) Alternative Formulations of Baseline Throughout much of U.S. history, congressional budget proposals were often compared with either the President’s request or the previous year’s budget. In the early 1970s, policymakers developed the concept of a baseline to provide a more neutral benchmark for comparisons. While the Congressional Budget Act of 1974 included a requirement that OMB and the Congressional Budget Office (CBO) provide estimates of a current services baseline, the definition of the baseline was very general and specific guidance was not provided. Subsequent budget laws have specified in increasing detail the requirements for constructing baselines. Current services estimates for direct spending programs and receipts are generally estimated based on laws currently in place and most major programs are assumed to continue even past sunset dates set in law. In the case of receipts, the BEA requires only the extension of trust fund excise taxes, but otherwise bases the estimates on current law. For discretionary programs, these acts instituted a precise definition of the baseline with numerous rules for its construction. It is clear, however, that a number of baseline definitions could be developed that differ from those presented in this chapter: • Extend provisions affecting parts of mandatory programs. Currently, mandatory programs that have outlays of over $50 million in the last full fiscal year before expiration are generally assumed to continue, unless the programs are explicitly temporary. While the baseline projection of current policy continues expected Medicare physician payments, other provisions of law that affect parts of mandatory programs are assumed to expire as scheduled. • Do not extend any authorizing laws that expire. If all mandatory programs were assumed to expire as scheduled, deficits for 2011 through 2020 would be Table 26–3. ALTERNATIVE BASELINE ASSUMPTIONS (in billions of dollars) Totals 2009 Baseline project of current policy deficit ......................... 1,413 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 20102014 20102019 1,430 1,145 934 940 934 983 1,013 1,042 1,077 1,227 1,346 4,936 10,640 –22 6 –63 12 –105 44 –195 46 –199 47 –199 49 –202 50 –204 51 –207 52 –213 52 –220 53 –761 198 –1,806 456 –5 –13 –136 –65 –244 –35 –287 –43 –332 –53 –370 –64 –404 –76 –439 –90 –476 –105 –514 –123 –554 –1,369 –142 –260 –3,755 –796 Alternative assumptions (“+” represents deficit increase): Do not extend any authorizing laws: Mandatory spending ................................... Trust fund excise taxes ............................... Certain provisions of the 2001 and 2003 Tax Acts ......................................................... AMT relief ................................................... Straightline appropriations ..................................... ......... ......... –14 –40 –71 –105 –142 –182 –226 –272 –323 –376 –373 –1,752 Account for population growth ............................... ......... ......... 7 18 30 44 58 73 89 106 124 146 158 697 Do not extend any appropriations .......................... ......... ......... –744 –1,159 –1,361 –1,502 –1,620 –1,732 –1,846 –1,967 –2,094 –2,229 –6,386 –16,255 397 26. CURRENT SERVICES ESTIMATE $1,806 billion lower than in the baseline projection of current policy. (See the section below on major program assumptions for details on mandatory program extensions assumed in the estimates.) If excise taxes dedicated to trust funds were assumed to expire as scheduled under current law, the deficit would be $456 billion higher over the period 2011 through 2020. If certain provisions of the 2001 and 2003 Tax Acts were assumed to expire, the deficit would be $3,755 billion lower over the 10-year period. If the AMT relief were assumed to expire, the deficit would be $796 billion lower over the 10-year period. ternative would increase total outlays by $7 billion in 2011 and $697 billion over the period 2011-2020 relative to the BEA baseline. • Do not extend any appropriations. The current treatment of expiring provisions of mandatory programs is inconsistent with the treatment of discretionary spending. All discretionary spending continues whether there is authorization for the program or not and whether funds have already been provided or not. In nearly all cases, funds for discretionary programs have not been provided in advance for years beyond the current year. If rules consistent with the treatment of other expiring provisions were applied to discretionary spending, no new budgetary resources would be provided. Thus, under a strict “current law” approach, the only discretionary outlays that would be included in the baseline would be the lagged spending from the current year budgetary resource. If this rule were followed, outlays in 2011 would be reduced by $744 billion relative to the baseline projection of current policy. However, clearly this would provide an unrealistic estimate of future spending and the Government’s future fiscal position. • Straightline appropriations. If all discretionary budgetary resources in the current year that are inflated in the baseline projection of current policy were instead frozen throughout the projection period, total outlays would be $14 billion lower in 2011 and $1,752 billion lower over the period 2011 through 2020, which includes savings from debt service. This calculation does not include any extension of the Recovery Act and other emergency resources, which are not extended in the baseline projection of current policy. • Account for population growth. While the baseline projection of current policy assumes that discretionary budgetary resources will grow with inflation, an alternative would be to assume growth with both inflation and population, so that real resources per person (or the real cost per person of funding these programs) remains constant over time. Such an al- Table 26–3 provides estimates for a variety of changes in baseline definitions that could be considered. Economic Assumptions The estimates for the baseline projection of current policy are prepared using the same economic assump- Table 26–4. SUMMARY OF ECONOMIC ASSUMPTIONS (Fiscal years; dollar amounts in billions) 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Levels, dollar amounts in billions: Current dollars ................................................................................. Real, chained (2005) dollars ........................................................... 14,624 13,220 15,299 13,679 16,203 14,265 17,182 14,873 18,193 15,483 19,190 16,059 20,163 16,587 21,136 17,076 22,087 17,530 23,065 17,980 24,067 18,429 Percent change, year over year: Current dollars ................................................................................. Real, chained (2005) dollars ........................................................... 2.7 1.8 4.6 3.5 5.9 4.3 6.0 4.3 5.9 4.1 5.5 3.7 5.1 3.3 4.8 3.0 4.5 2.7 4.4 2.6 4.3 2.5 Inflation measures (percent change, year over year): GDP chained price index ......................................................................... Consumer price index (all urban) ............................................................ 0.9 2.0 1.1 1.4 1.6 1.9 1.7 2.0 1.7 2.0 1.7 2.0 1.7 2.0 1.8 2.1 1.8 2.1 1.8 2.1 1.8 2.1 Unemployment rate, civilian (percent) .......................................................... 10.1 9.5 8.5 7.5 6.7 6.0 5.6 5.3 5.2 5.2 5.2 Interest rates (percent): 91-day Treasury bills ................................................................................ 10-year Treasury notes ............................................................................ 0.2 3.7 1.3 4.3 2.6 4.9 3.9 5.2 4.1 5.3 4.1 5.3 4.1 5.3 4.1 5.3 4.1 5.3 4.1 5.3 4.1 5.3 0.0 0.0 0.0 4.7 0.0 0.0 0.0 4.3 1.1 1.1 0.0 4.0 2.0 2.0 0.0 3.6 2.0 2.0 0.0 3.2 2.0 2.0 0.0 2.8 2.0 2.0 0.0 2.6 2.1 2.1 0.0 2.4 2.1 2.1 0.0 2.4 2.1 2.1 1.4 2.3 2.1 2.1 2.1 2.3 Gross Domestic Product (GDP): MEMORANDUM: Related program assumptions: Automatic benefit increases (percent): Social security and veterans pensions ..................................... Federal employee retirement .................................................... Food stamps ............................................................................. Insured unemployment rate ............................................................. 398 ANALYTICAL PERSPECTIVES tions as the President’s Budget. These assumptions are based on enactment of the President’s Budget proposals. The economy and the budget interact. Changes in economic conditions significantly alter the estimates of tax receipts, unemployment benefits, entitlement payments that are automatically adjusted for changes in cost-of-living (COLAs), income support programs for lowincome individuals, and interest on the Federal debt. In turn, Government tax and spending policies influence prices, economic growth, consumption, savings, and investment. Because of these interactions, it would be reasonable, from an economic perspective, to assume different economic paths for the baseline projection and the President’s Budget. However, this would diminish the value of the baseline estimates as a benchmark for measuring proposed policy changes, because it would then be difficult to separate the effects of proposed policy changes from the effects of different economic assumptions. By using the same economic assumptions for the baseline and the President’s Budget, this potential source of confusion is eliminated. The economic assumptions underlying both the Budget and the baseline projection of current policy are summarized in Table 26–4. The economic outlook underlying these assumptions is discussed in greater detail in Chapter 2 of this volume. Major Programmatic Assumptions A number of programmatic assumptions must be made in order to calculate the baseline estimates. These include assumptions about annual cost-of-living adjustments in the indexed programs and the number of beneficiaries who will receive payments from the major benefit programs. Assumptions about various automatic cost-of-living-adjustments are shown in Table 26–4, and assumptions on baseline caseload projections for the major benefit programs are shown in Table 26–5. These assumptions affect baseline estimates of direct spending for each of these programs, and they also affect estimates of the discretionary baseline for a limited number of programs. For Pell Grants, Medicare, Railroad Retirement, and unemployment insurance, the discretionary baseline is increased (or decreased) for changes in the number of beneficiaries in addition to the adjustments for inflation described earlier. It is also necessary to make assumptions about the continuation of expiring programs and provisions. As explained above, in the estimates of the baseline projection of current policy provided here, expiring excise taxes dedicated to a trust fund are extended at current rates. Certain tax reductions enacted in 2001 and 2003 and AMT relief are assumed to be permanent for purposes of calculating revenue estimates. In general, mandatory programs with spending of at least $50 million in the last full fiscal year before expiration are also assumed to continue. The baseline projection of current policy also assumes additional expected costs for Medicare physician payments. However, other specific provisions of law that affect mandatory programs (but are not necessary for program operation) are allowed to expire as scheduled. For example, under the Energy Policy Act of 2005, the Coastal Assistance Program will expire at the end of 2010. The baseline does not assume further extension of this authorization beyond that point. Table 26–6 provides a listing of mandatory programs and taxes assumed to continue in the baseline after their expiration. All discretionary programs with enacted non-emergency appropriations in the current year and the 2010 costs for overseas contingency operations in Iraq and Afghanistan and other recurring international activities are assumed to continue. Many other important assumptions must be made in order to calculate the baseline estimates. These include assumptions about the timing and substance of regulations that will be issued over the projection period, the use of administrative discretion provided under current law, and other assumptions about the way programs operate. Table 26–6 lists many of these assumptions and their effects on the baseline estimates. It is not intended to be an exhaustive listing; the variety and complexity of Government programs are too great to provide a complete list. Instead, some of the more important assumptions are shown. Current Services Receipts, Outlays, and Budget Authority Receipts.—Table 26-7 shows the baseline projection of current policy receipts by major source. Total receipts are projected to increase by $370 billion from 2010 to 2011, by $834 billion from 2011 to 2015, and by $984 billion from 2015 to 2020. These increases are largely due to assumed increases in incomes resulting from both real economic growth and inflation. Individual income taxes are estimated to increase by $175 billion from 2010 to 2011, by $499 billion from 2011 to 2015, and by $561 billion from 2015 to 2020 under baseline assumptions. This average annual rate of growth of 7.6 percent between 2011 and 2020 is primarily the effect of increased collections resulting from rising aggregate personal incomes. Corporation income taxes are estimated to increase by $117 billion from 2010 to 2011, by $90 billion from 2011 to 2015, and by $95 billion from 2015 to 2020 under baseline assumptions. This average annual rate of growth of 5.6 percent between 2011 and 2020 is primarily attributable to growth in corporate profits. Social insurance and retirement receipts are estimated to increase by $59 billion from 2010 to 2011, by an additional $255 billion between 2011 and 2015, and by an additional $288 billion between 2015 and 2020. These baseline estimates reflect increases in total wages and salaries paid and scheduled increases in the Social Security taxable earnings base from $106,800 in 2010 to $126,600 in 2015 and to $156,900 in 2020, as shown in Table 26-8. Other baseline receipts (excise taxes, estate and gift taxes, customs duties and miscellaneous receipts) are projected to increase by $20 billion between 2010 and 2011, and to rise to $259 billion in 2020. Outlays.—Outlays in the baseline projection of current policy are estimated to increase from $3,643 billion in 2010 to $3,728 billion in 2011, a 2.3 percent increase. Between 2010 and 2015, the baseline outlays are project- 26. CURRENT SERVICES ESTIMATE ed to increase at an average annual rate of 3.8 percent and between 2010 and 2020, the baseline outlays are projected to increase at an average annual rate of 4.7 percent. Table 26–9 shows the growth from 2010 to 2011 and average annual growth over the five-year and ten-year periods for certain discretionary and major mandatory programs. Note that these baseline growth rates do not reflect the enactment of comprehensive health reform legislation. While most discretionary budget authority is assumed to grow with inflation, outlays for discretionary programs decrease by 1.5 percent from $1,397 billion in 2010 to $1,376 billion in 2011, largely due to the spendout of Recovery Act funds. Excluding the outlay impact of the Recovery Act, outlays increase each year after 2011, largely reflecting increases in resources to keep pace with inflation, reaching $1,573 billion in 2020. Entitlement and other mandatory programs are estimated to increase from $2,057 billion in 2010 to $2,100 billion in 2011, largely due to a $41 billion increase in Medicare outlays and a downward reestimate of TARP costs in 2010. Mandatory outlays generally increase after 2011, reaching $3,256 billion in 2020, due in large part to increased Social Security and Medicare outlays. Social Security outlays grow from $703 billion in 2010 to $1,204 billion in 2020, an average annual rate of 5.5 percent. In contrast, Social Security beneficiaries grow at a lower average annual rate of 2.6 percent. Medicare and Medicaid/ Children’s Health Insurance Program (CHIP) outlays are 399 projected to grow at annual average rates of 7.8 and 5.7 percent over the ten-year period, respectively, outpacing inflation; over the same period, the average annual rate of growth for Medicare and Medicaid/CHIP beneficiaries is 3.0 percent and 0.4 percent, respectively. Other areas of high growth include veterans programs (4.5 percent) and other health care programs (5.4 percent), while outlays for unemployment compensation decline by 8.5 percent. Net interest payments are projected to increase by 32.9 percent from $188 billion in 2010 to $250 billion in 2011 due to increased interest rates, and are projected to increase to $912 billion in 2020, an average annual rate of 17.1 percent, due to increases in the amount of debt outstanding and to the average interest rate on the debt. Tables 26–10 and 26–11 show the baseline projection of current policy outlays by function and by agency, respectively. A more detailed presentation of outlays (by function, category, subfunction, and program) is available as Table 26–14 on the Internet and on the CD-ROM enclosed with the printed version of this Analytical Perspectives volume. Budget authority.—Tables 26–12 and 26–13 show estimates of budget authority in the baseline projection of current policy by function and by agency, respectively. A more detailed presentation of budget authority with program level estimates is also part of Table 26–14 on the Internet and on the CD-ROM enclosed with the printed version of this Analytical Perspectives volume. 400 ANALYTICAL PERSPECTIVES Table 26–5. BASELINE BENEFICIARY PROJECTIONS FOR MAJOR BENEFIT PROGRAMS (Annual average, in thousands) Actual 2009 Estimate 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Farmers receiving Federal payments ................................ Federal family education loans .......................................... Federal direct student loans .............................................. Medicaid/State Childrens’ Health Insurance Program 1 ..... Medicare-eligible military retiree health benefits ............... 1,411 6,540 3,495 57,025 2,017 1,404 6,899 4,326 60,400 2,046 1,397 7,312 4,582 62,300 2,079 1,390 7,599 4,780 63,300 2,128 1,383 7,900 4,978 64,100 2,184 1,376 8,215 5,179 62,500 2,231 1,369 8,546 5,390 60,900 2,269 1,362 8,894 5,612 61,200 2,301 1,355 9,259 5,844 61,500 2,334 1,348 9,642 6,089 62,000 2,367 1,341 10,046 6,346 62,500 2,400 1,334 10,470 6,616 63,000 2,433 Medicare: Hospital insurance ........................................................ 45,752 46,671 47,803 49,294 50,919 52,456 53,949 55,472 57,064 58,722 60,442 62,217 Supplementary medical insurance: Part B .................................................................... Part D .................................................................... 42,567 33,085 43,461 34,214 44,386 35,559 45,621 37,160 47,064 38,484 48,380 39,618 49,661 40,718 50,966 41,841 52,338 43,016 53,774 44,240 55,272 45,510 56,827 46,821 26,518 6,568 10,748 552 2,510 2,195 14,530 27,700 6,515 11,337 547 2,533 2,213 16,321 29,022 6,537 11,385 543 2,557 2,225 15,474 30,557 6,603 11,821 539 2,581 2,235 14,638 31,803 6,682 12,226 535 2,604 2,262 13,484 32,874 6,743 12,611 532 2,625 2,266 12,350 33,924 6,795 12,985 529 2,646 2,270 11,317 34,996 6,845 13,342 526 2,666 2,273 10,557 36,117 6,898 13,708 522 2,684 2,277 10,134 37,285 6,955 14,093 517 2,701 2,280 9,891 38,496 7,014 14,496 511 2,717 2,284 9,802 39,747 7,074 14,915 505 2,733 2,288 9,787 33,722 31,196 466 40,538 32,091 585 43,260 32,573 605 42,939 32,980 605 41,482 33,310 605 39,932 33,610 605 38,180 33,878 605 36,815 34,149 605 35,405 34,423 605 33,627 34,698 605 31,595 34,976 605 30,122 35,255 605 Prescription Drug Plans and Medicare Advantage: Prescription Drug Plans ......................................... Retiree Drug Subsidy ................................................... Managed Care Enrollment 2 ......................................... Railroad retirement ............................................................ Federal civil service retirement .......................................... Military retirement .............................................................. Unemployment insurance .................................................. Supplemental Nutrition Assistance Program (formerly ...... Food Stamps) ............................................................... Child nutrition ..................................................................... Commodity Supplemental Food Program .......................... Foster care, Adoption Assistance ...................................... and Guardianship Assistance ....................................... 604 618 636 660 685 716 735 757 783 812 841 871 Supplemental security income (SSI): Aged ............................................................................ Blind/disabled ............................................................... Total, SSI ............................................................... Child care and development fund 3 .................................... 1,106 6,198 7,304 2,350 1,109 6,450 7,559 2,330 1,113 6,707 7,820 2,400 1,119 6,964 8,083 2,330 1,130 7,168 8,298 2,270 1,144 7,242 8,386 2,240 1,162 7,299 8,461 2,120 1,181 7,347 8,528 2,040 1,203 7,390 8,593 1,980 1,227 7,437 8,664 1,930 1,256 7,485 8,741 1,880 1,287 7,534 8,821 1,830 Social security (OASDI): Old age and survivor insurance .................................... Disability insurance ....................................................... Total, OASDI .......................................................... 42,001 9,364 51,365 43,162 9,832 52,994 44,236 10,369 54,605 45,293 10,811 56,104 46,457 11,100 57,557 47,767 11,232 58,999 49,169 11,316 60,485 50,663 11,377 62,040 52,224 11,432 63,656 53,828 11,483 65,311 55,469 11,534 67,003 57,138 11,586 68,724 Veterans compensation: Veterans ........................................................................ Survivors (non-veterans) .............................................. Total, Veterans compensation ................................ 3,044 340 3,384 3,292 371 3,663 3,435 381 3,815 3,573 387 3,960 3,708 393 4,101 3,838 401 4,239 3,965 409 4,374 4,087 418 4,505 4,206 427 4,633 4,321 437 4,758 4,433 447 4,880 4,542 460 5,001 Veterans pensions: Veterans ........................................................................ 316 312 309 306 303 300 297 294 291 288 285 Survivors (non-veterans) .............................................. 195 194 194 194 194 194 194 194 194 194 194 Total, Veterans pensions ........................................ 511 506 503 500 497 494 491 488 485 482 479 1 Enrollment figures in person years. 2 Enrollment figures include only beneficiaries who receive both Part A and Part B services through managed care. 3 Includes children served through the CCDF (including TANF transfers) and through funds spent directly on child care in the Social Services Block Grant and TANF programs. 282 194 476 401 26. CURRENT SERVICES ESTIMATE Table 26–6. IMPACT OF REGULATIONS, EXPIRING AUTHORIZATIONS, AND OTHER ASSUMPTIONS IN THE BASELINE (In millions of dollars) Estimate 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 REGULATIONS Finalized Old Age and Survivors Insurance (OASI), Disability Insurance (DI) and Supplemental Security Income (SSI): Reduction of Title II Benefits Under Family Maximum in Cases of Dual Entitlement (OASDI) ........................................................................... Trial Work Period (OASDI). ...................................................................... Title XVI Cross Program Recovery (SSI) ................................................. Student Earned Income Exclusion (SSI). ................................................ Continuing Disability Review Failure to Cooperate Process(OASDI) ...... 1 –20 5 –12 ......... –20 5 –13 ......... –20 5 –14 ......... –20 5 –15 ......... –20 5 –16 ......... –20 5 –17 ......... –20 5 –17 ......... –20 5 –17 ......... –20 5 –17 ......... –20 5 –17 ......... –20 5 –17 Exemption of Work Activity as a Basis for a Continuing Disability Review (OASDI and SSI): OASDI ................................................................................. SSI ...................................................................................... 54 2 70 2 87 2 105 3 124 3 142 3 142 3 142 3 142 3 142 3 142 3 Amendments to the Quick Disability Determination Process (OASDI and SSI): OASDI ................................................................................. SSI ...................................................................................... 1 ......... –4 –1 –5 –1 –8 –1 –9 –2 –12 –2 –16 –2 –1 ......... –1 ......... –1 ......... –1 ......... Revised Medical Criteria for Evaluating Digestive Disorders (OASDI and SSI): OASDI ................................................................................. SSI ...................................................................................... 60 Month Government Pension Offset Exemption (OASDI) .................... –27 –5 –5 –35 –8 –7 –42 –8 –8 –50 –11 –10 –58 –12 –10 –67 –14 –10 –75 –17 –10 –83 –17 –10 –83 –17 –10 –83 –17 –10 –83 –17 –10 Revised Medical Criteria for Evaluating Immune System Disorders (OASDI and SSI): OASDI ................................................................................. SSI ...................................................................................... 3 1 5 1 6 1 7 2 9 2 10 2 11 2 12 2 12 2 12 2 12 2 Ticket to Work (OASDI and SSI): OASDI ................................................................................. SSI ...................................................................................... 29 4 92 –11 134 –3 174 –8 189 –11 195 –8 173 –20 158 –13 134 –4 134 –4 134 –4 Revised Medical Criteria for Evaluating Malignant Neoplastic Diseases (OASDI and SSI): OASDI ................................................................................. SSI ...................................................................................... –2 ......... –2 ......... –3 –1 –4 –1 –5 –1 –6 –1 –7 –1 –8 –1 –9 –1 –9 –1 –9 –1 ......... 0 12 –40 10 –100 9 –130 5 –150 3 –170 2 –190 2 –200 1 –220 1 –230 0 –240 Animal and Plant Health Inspection Service (APHIS): Plant Pest and Disease Mangament and Disaster Prevention (2008 Farm Bill, Section 10201) ............................................................ Specialty Crop Research Initiative ................................................... ......... ......... ......... ......... ......... 18 2 50 20 50 38 50 50 50 50 50 50 50 50 50 50 DM/Assistant Secretary for Civil Rights: Outreach and Technical Assistance for Socially Disadvantaged ...... Farmers and Ranchers ..................................................................... ......... ......... ......... 20 20 20 20 20 20 20 20 Not Finalized Adoption and Foster Care Analysis and Reporting System (AFCARS) ....... Medicare Program Integrity .......................................................................... EXPIRING AUTHORIZATIONS Programs Extended in the Baseline Projection of Current Policy Spending: Agriculture: 402 ANALYTICAL PERSPECTIVES Table 26–6. IMPACT OF REGULATIONS, EXPIRING AUTHORIZATIONS, AND OTHER ASSUMPTIONS IN THE BASELINE—Continued (In millions of dollars) Estimate 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Forest Service (FS): Federal Land and Facility Enhancement Fund ................................. Administration of Rights-of-Way and Other Land Uses Fund ........... Federal Lands Recreation Enhancement Fund ................................ Sect. 420 Sale of botanical products pilot program .......................... ......... ......... ......... ......... 25 ......... ......... ......... 26 ......... ......... ......... 27 4 ......... ......... 28 4 75 ......... 29 4 77 3 30 4 80 3 31 5 83 3 32 5 86 3 33 5 89 3 34 5 92 3 Natural Resources Conservation Service (NRCS): Environmental Quality Incentives Program ...................................... Ag. Water Enhancement Program .................................................... Wildlife Habitat Incentives Program .................................................. Farm and Ranch Land Protection Program ...................................... Conservation Stewardship Program ................................................. Chesapeake Bay Watershed Initiative .............................................. ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 617 27 22 11 25 22 1,037 46 38 65 240 32 1,294 54 50 124 487 39 1,438 57 59 157 721 42 1,555 60 64 183 953 45 1,671 60 74 200 1,184 48 1,773 60 83 200 1,223 50 1,774 60 85 200 1,226 50 Farm Service Agency (FSA) Programs: Agricultural Commodity Marketing Loans ......................................... Sugar Program Loans ...................................................................... Dairy Product Price Support Program .............................................. Agricultural Commodity Counter-Cyclical Program .......................... Average Crop Revenue Election (ACRE) Program .......................... Direct Crop Payments ...................................................................... Conservation Reserve Program ....................................................... Milk Income Loss Contract Program ................................................ Market Access Program --FAS ......................................................... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 526 ......... 79 ......... ......... ......... 2,091 50 200 32 ......... 71 ......... ......... 5,024 2,213 50 200 46 ......... 63 418 115 5,021 2,293 50 200 42 ......... 55 363 104 5,018 2,431 50 200 52 ......... 47 327 102 5,015 2,475 50 200 47 ......... 47 293 109 5,013 2,485 50 200 47 ......... 47 261 115 5,011 2,435 50 200 43 ......... 47 235 151 5,008 2,435 50 200 Child Nutrition Programs: State Administrative Expenses ........................................................ Summer Food Service Program ....................................................... 187 374 203 394 225 413 242 434 252 456 259 478 263 503 266 529 270 556 278 585 288 615 Supplemental Nutrition Assistance Program (SNAP) (formerly Food Stamps) .............................................................................................. ......... ......... ......... 77,224 74,795 72,278 70,143 68,010 65,404 63,237 62,385 CMS: Children’s Health Insurance Program .............................................. Additional cost of 0% physicians update .......................................... 9,103 6,638 10,485 22,146 11,805 27,402 13,085 31,655 9,730 33,617 6,115 35,039 5,700 37,750 5,700 39,810 5,700 42,707 5,700 48,145 5,700 53,164 Administration for Children and Families: Child Care Entitlements to States .................................................... Promoting safe and stable families ................................................... TANF ................................................................................................ Contingency Fund ............................................................................ ......... ......... ......... ......... 2,373 ......... 13,090 1,577 2,855 104 16,488 278 2,917 276 16,719 ......... 2,917 321 16,591 ......... 2,917 338 16,461 ......... 2,917 342 16,431 ......... 2,917 345 16,434 ......... 2,917 345 16,401 ......... 2,917 345 16,569 ......... 2,917 345 16,724 ......... Homeland Security: National Flood Insurance Fund .............................................................. –160 –27 268 449 453 410 374 337 299 264 226 Interior: Sport Fish Restoration ............................................................................. ......... 313 503 501 497 496 494 509 525 542 560 Labor: Trade Adjustment Assistance for Workers .............................................. ......... ......... 169 854 1,091 1,066 1,045 1,052 1,071 1,101 1,139 Veterans Affairs: Veterans Compensation Cost of Living Adjustment ................................. ......... ......... 382 1,234 2,268 3,380 4,578 5,902 7,326 9,025 10,537 Revenues: Airport and Airway Trust Fund Taxes ....................................................... Highway Trust Fund Taxes ....................................................................... Leaking Underground Storage Tank (LUST) Trust Fund Taxes ................ Oil Spill Liability Trust Fund Taxes ............................................................ Sport Fish Restoration and Boating Safety Trust Fund Taxes ................. Tobacco Assessment ............................................................................... 5,729 ......... ......... ......... ......... ......... 12,090 ......... ......... ......... ......... ......... 12,745 30,543 185 ......... 494 ......... 13,496 31,392 189 ......... 506 ......... 14,292 31,902 191 ......... 518 ......... 15,085 32,255 191 ......... 531 960 15,836 32,464 191 ......... 545 960 16,558 32,469 193 390 557 960 17,242 32,264 189 508 571 960 17,929 32,218 189 505 586 960 18,636 32,354 188 508 600 960 Health and Human Services: 403 26. CURRENT SERVICES ESTIMATE Table 26–6. IMPACT OF REGULATIONS, EXPIRING AUTHORIZATIONS, AND OTHER ASSUMPTIONS IN THE BASELINE—Continued (In millions of dollars) Estimate 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Programs and Provisions Not Extended in the Baseline Projection of Current Policy Spending: Agriculture: Animal and Plant Health Inspection Service: National Clean Plant Network (2008 Farm Bill, Section 10202) ....... ......... ......... ......... 2 5 5 5 5 5 5 5 Child Nutrition: NSLP Commodity Support (Bonus - Section 6(e)(1)(B) of NSLA). ... ......... –100 –100 –100 –100 –100 –100 –100 –100 –100 –100 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 178 17 800 ......... 357 17 800 960 357 17 800 960 357 17 800 960 357 17 800 960 357 17 800 960 357 17 800 960 357 17 Cooperative State Research, Education, and Extension Service): Biomass research and development ................................................ Healthy Urban Food Enterprise Development Center ...................... Beginning Farmer and Rancher Program ......................................... Organic Research Initiative .............................................................. ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 5 1 2 1 21 1 10 8 31 1 19 15 37 1 19 20 40 1 19 20 40 1 19 20 40 1 19 20 40 1 19 20 Natural Resources Conservation Service (NRCS): Grasslands Reserve Program .......................................................... Wetlands Reserve Program ............................................................ Healthy Forests Reserve Program ................................................... Small Watershed Rehabilitation Program ......................................... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 40 58 47 5 70 59 90 8 95 60 119 9 100 60 132 9 100 60 145 9 100 60 158 10 100 60 171 10 100 60 178 10 100 ......... ......... ......... 10 10 10 10 10 10 10 10 ......... ......... ......... ......... ......... ......... ......... 55 ......... 55 ......... 55 140 55 140 55 140 55 140 55 140 55 ......... ......... 3 9 ......... ......... ......... 10 35 12 ......... ......... 13 35 135 2 26 14 35 245 2 26 105 15 35 245 3 42 105 15 35 245 4 54 105 15 35 245 4 67 105 15 35 245 4 70 105 15 35 245 4 70 105 15 35 245 4 70 105 15 35 245 4 Trade Assistance Programs: Foreign Market Development (Cooperator) Program ....................... Technical Assistance Specialty Crops .............................................. Emerging Markets ............................................................................ Trade Adjustment Assistance for Farmers ........................................ ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 18 35 9 10 23 35 9 10 23 35 9 10 23 35 9 10 23 35 9 10 23 35 9 10 23 35 9 10 23 35 9 10 23 Forest Service (FS): Forest County Safety Net Payments (Departments of Agriculture and the Interior) ........................................................................... 0 0 0 314 235 156 78 0 0 0 0 Health and Human Services: TANF Supplemental Grants ..................................................................... ......... 251 315 319 319 319 319 319 319 319 319 0 0 0 250 670 0 640 900 156 680 910 263 700 995 291 730 1,100 296 760 1,230 299 790 1,370 300 820 1,515 300 860 1,670 300 890 1,845 300 4 3 3 4 4 4 4 4 4 4 5 ......... 25 25 25 25 25 25 25 25 25 25 Farm Service Agency (FSA) Programs: Agricultural Disaster Relief Fund ...................................................... Tobacco buyout payments ................................................................ Biomass Crop Assistance Program (BCAP) .................................... Voluntary Public Access ................................................................... National Institute of Food and Agriculture (Formerly CSREES Agricultural Marketing Service: Farmers Market Promotion Program (2008 Farm Bill, Sec. 10106) . Wool Research, Development, and Promotion Trust Fund Program (P.L. 110–343, Sec. 325). ............................................................. Specialty Crop Block Grants Program (2008 Farm Bill, Sec. 10109) ..... Rural Business-Cooperative Service: Rural Energy for America Program .................................................. Bioenergy Program for Advanced Biofuels ....................................... Value Added Agricultural Market Development Program ................. Repowering Assistance Program ..................................................... Biorefinery Assistance Program ....................................................... Rural Microentrepreneur Assistance Program ................................. Medicaid: Transitional Medical Assistance ....................................................... Medicare Low-Income Premium Assistance .................................... Special Diabetes Programs for Indians and Type I Diabetes ................... CPI-U adjustments for HCFAC provided through the Tax Relief and Health Care Act of 2006 (P.L. 109–492,”TRHCA”) .............................. Medicaid Integrity Program created by the Deficit Reduction Act of 2005 (P.L. 109–171, “DRA”) ......................................................................... 404 ANALYTICAL PERSPECTIVES Table 26–6. IMPACT OF REGULATIONS, EXPIRING AUTHORIZATIONS, AND OTHER ASSUMPTIONS IN THE BASELINE—Continued (In millions of dollars) Estimate 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Never Event (Section 203 of The Tax Relief and Health Care Act of 2006) (P.L. 109–492,”TRHCA”) ........................................................... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... Interior: Coastal Impact Assistance ...................................................................... Oil and Gas Permit Processing Improvement Fund ................................ Payments in Lieu of Taxes ....................................................................... ......... ......... ......... 250 ......... ......... 250 ......... ......... 250 ......... 439 250 ......... 455 250 ......... 471 250 20 488 250 20 506 250 20 524 250 20 542 250 20 562 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... –78 ......... –79 ......... –80 ......... –81 ......... –82 ......... –83 ......... –84 ......... ......... ......... ......... –86 ......... –99 ......... –107 1 –116 1 –125 1 –134 1 –142 1 –150 1 –157 1 ......... ......... ......... ......... ......... 1 ......... 1 ......... 2 ......... 2 ......... 2 ......... 3 ......... 3 ......... 2 ......... 3 ......... ......... ......... ......... ......... –320 ......... –323 3 –420 ......... –432 3 –439 ......... –452 4 –458 ......... –471 ......... –478 Veterans Pension: Income Verification Match ................................................................ Sunset Medicaid Provision ............................................................... National Directory for New Hires (NDNH) Data Matches ................ ......... ......... ......... ......... ......... ......... 20 –559 2 –6 –571 1 –13 –584 ......... –20 –597 –1 –27 –611 –2 ......... ......... –3 ......... ......... –4 ......... ......... –5 ......... ......... –5 Environmental Protection Agency: Pesticide maintenance fee ............................................................... Pesticide registration service fee ...................................................... ......... ......... ......... ......... ......... ......... –22 –4 –22 –7 –22 –10 –22 –10 –22 –10 –22 –10 –22 –10 –22 –10 Social Security: SSI Extension for Elderly and Disabled Refugees Act (SSI) ................... Social Security Protection Act (Section 302) - SSI attorney fees ............ Social Security Protection Act (Section 303) - Non-attorney fees ........... ......... –2 ......... ......... –5 –1 18 –5 –1 18 –5 –1 18 –5 –1 18 –5 –1 18 –5 –1 18 –5 –1 18 –5 –1 18 –5 –1 18 –5 –1 Fees for Federal Administration of SSI State Supplemental Benefit Payments (SSI): Treasury Share .......................................................................... SSA Share ................................................................................. Performance of Non-Disability SSI Redeterminations (SSI) .................... –147 –165 324 –165 –185 –1,038 –144 –185 –247 –162 –185 101 –164 –185 118 –165 –185 130 –181 –185 113 –168 –185 138 –155 –185 169 –171 –185 160 –173 –185 182 –743 –798 –775 –788 –799 –805 –814 –814 –818 –825 Veterans Affairs: Veterans Compensation: VBA OBRA and IT OBRA ................................................................. Authority to Presume Service-Connection for Additional Diseases from Herbicide Agents ................................................................. COLA Rounddown ........................................................................... Veterans Housing: Enhanced Loan Asset Sales ............................................................ Co-op Loan Guaranties .................................................................... Specially Adapted Housing Assistance for Temporary Residency with Family Members ................................................................... Increase in Maximum Loan Guaranty Amount ................................. Adjustable Rate Mortgages (ARM)/ Hybrid Adjustable Rate Mortages ..................................................................................... Guaranteed Loan Funding Fees Extension ...................................... OTHER IMPORTANT PROGRAM ASSUMPTIONS Agriculture: Risk Management Agency, Federal Crop Insurance Fund ...................... Changes from the renegotiation of the Standard Reinsurance Agreement (SRA) ........................................................................ Health and Human Services: Children’s Health Insurance Program (Title XXI): State allotments ....................................................................................... Contingency fund ..................................................................................... Performance bonus ................................................................................. Child health quality activities ................................................................... 8,800 200 73 30 10,000 200 240 45 11,400 200 160 45 12,800 200 40 45 9,700 ......... ......... 30 6,100 ......... ......... 15 5,700 ......... ......... ......... 5,700 ......... ......... ......... 5,700 ......... ......... ......... 5,700 ......... ......... ......... 5,700 ......... ......... ......... Medicaid: Financial management recoveries ........................................................... Vaccines for Children, Total program costs .............................................. Institutional long-term care 1 .................................................................... Home and community based institutional alternatives 1 .......................... –387 3,652 42,668 35,815 –418 3,651 40,652 35,803 –448 3,777 39,942 36,860 –480 3,885 42,034 40,816 –516 3,999 44,337 45,306 –556 3,996 46,878 50,408 –600 4,128 49,661 56,167 –648 4,265 52,705 62,655 –700 4,406 56,032 69,961 –756 4,550 59,695 78,255 –817 4,704 63,696 87,580 405 26. CURRENT SERVICES ESTIMATE Table 26–6. IMPACT OF REGULATIONS, EXPIRING AUTHORIZATIONS, AND OTHER ASSUMPTIONS IN THE BASELINE—Continued (In millions of dollars) Estimate 2010 2011 2012 2013 2014 2015 2016 2017 Pharmaceuticals (FFS, net of rebates) 1 ................................................. Managed care (Including Medicaid MCOs, PHPs, and PCCM) 1 ............ 12,739 61,232 12,673 61,151 12,592 62,638 13,330 68,349 14,122 74,494 14,962 81,089 15,874 88,093 16,855 17,903 19,008 20,180 95,494 103,283 111,514 120,104 Medicare: Contracting Reform ................................................................................. Hospice budget neutrality adjustment ...................................................... DME Competitive Bidding 2 ..................................................................... –550 –50 –20 –580 –130 –80 –620 –230 –120 –660 –340 –270 –730 –460 –530 –780 –610 –680 –840 –760 –780 –910 –820 –990 –990 –880 –1,300 –1,080 –950 –1,660 –1,180 –1,020 –2,070 Old Age and Survivors Insurance (OASI), Disability Insurance (DI) and Supplemental Security Income (SSI): Performance of CRDS in 2010 and Subsequent Years (OASDI and SSI): OASDI ........................................................................................ SSI ............................................................................................. –23 –57 –97 –231 –138 –346 –157 –536 –176 –699 –195 –842 –214 –1,043 –233 –1,086 –252 –1,098 –271 –1,279 –290 –1,367 Collection of Overpayments (OASI, DI, and SSI): OASI .......................................................................................... DI ............................................................................................... SSI ............................................................................................. –1,255 –879 –1,115 –1,344 –926 –1,195 –1,419 –971 –1,280 –1,496 –1,015 –1,357 –1,581 –1,057 –1,430 –1,674 –1,098 –1,501 –1,674 –1,098 –1,501 –1,674 –1,098 –1,501 –1,674 –1,098 –1,501 –1,674 –1,098 –1,501 –1,674 –1,098 –1,501 222 549 424 238 578 454 251 607 487 265 634 516 280 660 544 296 686 571 296 686 571 296 686 571 296 686 571 296 686 571 296 686 571 84 51 89 53 96 56 105 60 113 64 122 68 129 72 135 76 141 80 147 82 154 85 26 34 25 52 11 43 ......... 43 ......... 43 ......... 43 ......... 43 ......... 43 ......... 43 ......... 43 ......... 43 –3,799 3,765 –4,142 4,175 –3,819 3,780 –4,256 4,245 –4,391 4,380 –4,548 4,510 –4,955 4,970 –4,768 4,785 –4,616 4,575 –5,179 5,065 –5,321 5,220 –147 –165 –165 –185 –144 –185 –162 –185 –164 –185 –165 –185 –181 –185 –168 –185 –155 –185 –171 –185 –173 –185 324 –1,038 –247 101 118 130 113 138 169 160 182 Ticket to Work Health Grant Programs: Infrastructure Grant Program .......................................................... Demonstration to maintain independence and employment ............ 80 56 100 ......... 31 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... High-Risk Pools: Initial Seed Grants ............................................................................ Operation of Pools ............................................................................ Emergency Health Services for Undocumented Aliens ........................... Pilot Program for National and State Background Checks ...................... Katrina Relief ........................................................................................... Site Development Grants—Rural PACE .................................................. Funding for PACE Outliers ....................................................................... Drug Surveys and Reports ...................................................................... Partnerships for Long-Term Care ............................................................ Alternate Non-Emergency Care .............................................................. Psychiatric Residential Treatment Demonstration ................................... Money Follows the Person (MFP) Demonstration ................................... MFP Evaluation and Support ................................................................... Medicaid Transformation Grants .............................................................. ......... ......... 111 0 36 ......... 2 ......... 3 23 30 425 2 51 ......... ......... 70 ......... ......... ......... 4 ......... 3 11 29 681 2 26 ......... ......... 50 ......... ......... ......... 4 ......... 3 ......... 89 308 1 ......... ......... ......... 55 ......... ......... ......... ......... ......... 3 ......... 39 105 0* ......... ......... ......... 30 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... Debts Written off as Uncollectible: OASI .......................................................................................... DI ............................................................................................... SSI (Federal) .............................................................................. Payments to States for Vocational Rehab (excludes ticket payments OASDI and SSI): OASDI ........................................................................................ SSI ............................................................................................. Research and Demonstration Projects (OASDI and SSI): OASDI ........................................................................................ SSI ............................................................................................. State Supplementation Benefit Payments (SSI): Payments from States ................................................................ Benefit Payments ....................................................................... Fees for Federal Administration of SSI State Supplemental Benefit Payments: Treasury Share .......................................................................... SSA Share ................................................................................. Performance of Non-Disability SSI Redeterminations (SSI) ............. 2018 2019 2020 State Grants and Demonstrations: 3 406 ANALYTICAL PERSPECTIVES Table 26–6. IMPACT OF REGULATIONS, EXPIRING AUTHORIZATIONS, AND OTHER ASSUMPTIONS IN THE BASELINE—Continued (In millions of dollars) Estimate 2010 Medicaid Integrity Program ...................................................................... State Pharmacy Assistance ..................................................................... Katrina/Rita Hurricane Support ............................................................... Grants to Improve Outreach and Enrollment ........................................... Application of Prospective Payment system ............................................ 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 133 ......... ......... 25 2 75 ......... ......... 32 3 75 ......... ......... 20 ......... 75 ......... ......... 20 ......... 75 ......... ......... 1 ......... 75 ......... ......... 75 ......... ......... 75 ......... ......... 75 ......... ......... 75 ......... ......... 75 ......... ......... ......... ......... ......... ......... ......... ......... 4 4 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 12 ......... 12 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 38 51 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 7 7 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 0 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 11 11 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 8 10 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 9 9 0 0 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 90 ......... 20 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 1 1 2 1 2 1 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 162 155 168 161 99 94 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 856 856 1,286 1,286 1,263 1,263 1,306 1,306 896 896 ......... 4 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 2,515 2,515 2,611 2,611 1,358 1,358 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 3 3 3 3 1 1 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 150 150 45 45 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 512 488 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... Approved and Implemented Demonstrations and Pilot Programs: 4 Medicare, HI: Rural Hospice: Baseline Estimate ...................................................................... Demonstration estimate ............................................................. Premier: Baseline estimate ...................................................................... Demonstration estimate ............................................................. Rural Community Hospital: 5 Baseline estimate ...................................................................... Demonstration estimate ............................................................. Utah Graduate Medical Education: Baseline estimate ...................................................................... Demonstration estimate ............................................................. Medicare, SMI: Medicare Health Support Program: Baseline estimate ...................................................................... Program Estimate ...................................................................... Coordinated Care Disease Management Demonstration: Baseline estimate ...................................................................... Demonstration estimate ............................................................. Low-Vision Rehabilitation: Baseline estimate ...................................................................... Demonstration estimate ............................................................. Cancer Prevention and Treatment for Ethnic and Racial Minorities: Baseline estimate ...................................................................... Demonstration estimate ............................................................. Demonstration to Revise the Part D Low-Income Benchmark: Baseline estimate ...................................................................... Demonstration estimate ............................................................. Frontier Extended Stay Clinic Demonstration: Baseline estimate ...................................................................... Demonstration estimate ............................................................. Medicare: HI and SMI: Acute Care Episode Bundling Demonstration: Baseline estimate ...................................................................... Demonstration estimate ............................................................. Electronic Health Records Demonstration: Baseline estimate ...................................................................... Demonstration estimate ............................................................. Physician Hospital Collaboration Demonstration: Baseline estimate ...................................................................... Demonstration estimate ............................................................. Senior Risk Reduction Demonstration: Baseline estimate ...................................................................... Demonstration estimate ............................................................. ESRD Disease Management Demonstration: Baseline estimate ...................................................................... Demonstration estimate ............................................................. Home Health Third-Party Liability Demonstration: Baseline estimate ...................................................................... Demonstration estimate ............................................................. 407 26. CURRENT SERVICES ESTIMATE Table 26–6. IMPACT OF REGULATIONS, EXPIRING AUTHORIZATIONS, AND OTHER ASSUMPTIONS IN THE BASELINE—Continued (In millions of dollars) Estimate 2010 Medicare+Choice Phase II Demonstration: Baseline estimate ...................................................................... Demonstration estimate ............................................................. S/HMO I Demonstration: Baseline estimate ...................................................................... Demonstration estimate ............................................................. S/HMO II Demonstration: Baseline estimate ...................................................................... Demonstration estimate ............................................................. Minnesota-Dual Eligibles: Baseline estimate ...................................................................... Demonstration estimate ............................................................. Wisconsin Health Partnership Dual Eligible Demonstration: Baseline estimate ...................................................................... Demonstration estimate ........................................................... Massachusetts SCO Dual Eligible Demonstration: Baseline estimate ...................................................................... Demonstration estimate ............................................................. Physician Group Practice Demonstration: Baseline estimate ...................................................................... Demonstration estimate ............................................................. Home Health Pay for Performance: Baseline estimate ...................................................................... Demonstration estimate ............................................................. PACE for Profit: ................................................................................ Baseline estimate ...................................................................... Demonstration estimate ............................................................. DRA 5007 Medicare Hospital Gainsharing Demonstration: ............. Baseline estimate ...................................................................... Demonstration estimate ............................................................. Medicare Care Management Performance: Baseline estimate ...................................................................... Demonstration estimate ............................................................. Care Management for High-Cost Beneficiaries: Baseline estimate ...................................................................... Demonstration estimate ............................................................. Medicare Health Care Quality Demonstration Programs: Baseline estimate ...................................................................... Demonstration estimate ............................................................. Nursing Home Value Based Purchasing Demonstration: Baseline estimate ...................................................................... Demonstration estimate ............................................................. Medicaid: 6 Alabama Family Planning: Baseline estimate ...................................................................... Arizona AHCCCS: Baseline estimate ...................................................................... Arkansas ARKids B: 7 Baseline estimate ...................................................................... Arkansas Family Planning: Baseline estimate ...................................................................... Arkansas TEFRA: Baseline estimate ...................................................................... California Family Planning: 8 Baseline estimate ...................................................................... California MediCal Hospital/Uninsured Care: Baseline estimate ...................................................................... 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 ......... 59 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 1,437 1,459 1,609 1,614 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 634 641 745 747 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 740 769 870 876 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 83 87 102 103 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 273 284 368 370 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 1,032 993 ......... 98 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 390 390 ......... 16 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 15 15 3 3 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 304 304 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 3,011 2,960 24 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 463 463 477 477 201 201 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 1,966 1,933 2,739 2,671 4,612 4,488 4,913 4,753 3,917 3,810 ......... 153 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 509 490 535 505 416 395 ......... 15 ......... 13 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 173 189 ......... ......... ......... ......... ......... ......... ......... ......... ......... 5,932 6,571 ......... ......... ......... ......... ......... ......... ......... ......... ......... 264 277 96 ......... ......... ......... ......... ......... ......... ......... ......... 34 9 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... TBD 702 408 ANALYTICAL PERSPECTIVES Table 26–6. IMPACT OF REGULATIONS, EXPIRING AUTHORIZATIONS, AND OTHER ASSUMPTIONS IN THE BASELINE—Continued (In millions of dollars) Estimate 2010 Delaware Diamond State Health Plan: 9 Baseline estimate ...................................................................... District of Columbia Childless Adults: Baseline estimate ...................................................................... District of Columbia HIV: Baseline estimate ...................................................................... Florida Family Planning: 7 Baseline estimate ...................................................................... Florida MEDS-AD Program: Baseline estimate ...................................................................... Florida Medicaid Reform: Baseline estimate ...................................................................... Hawaii Health QUEST: Baseline estimate ...................................................................... Healthy Indiana Plan: Baseline estimate ...................................................................... Idaho Adult Access Card: Baseline estimate ...................................................................... Illinois Family Planning: Baseline estimate ...................................................................... IowaCare: Baseline estimate ...................................................................... Iowa Family Planning: Baseline estimate ...................................................................... Kentucky Health Care Partnership Program: Baseline estimate ...................................................................... Louisiana Family Planning: Baseline estimate ...................................................................... Maine HIV: Baseline estimate ...................................................................... MaineCare Childless Adults: Baseline estimate ..................................................................... Maryland Health Choice: Baseline estimate ...................................................................... Massachusetts MassHealth: Baseline estimate ...................................................................... Michigan Adult Benefits: Baseline estimate ...................................................................... Michigan Family Planning: Baseline estimate ...................................................................... Minnesota Prepaid Med. Assist. Project Plus: Baseline estimate ...................................................................... Minnesota Family Planning: Baseline estimate ...................................................................... Mississippi Family Planning: Baseline estimate ...................................................................... Mississippi - Healthier Mississippi: 7 Baseline estimate ...................................................................... Montana Basic Medicaid for Able-Bodied Adults: 7 Baseline estimate ...................................................................... Missouri Family Planning: Baseline estimate ...................................................................... New Mexico Family Planning: 10 Baseline estimate ...................................................................... New Mexico State Coverage Insurance: Baseline estimate ...................................................................... New York Partnership Plan: 11 Baseline estimate ...................................................................... 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 76 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 6 6 ......... ......... ......... ......... ......... ......... ......... ......... ......... 6 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 1,298 461 ......... ......... ......... ......... ......... ......... ......... ......... ......... 7,683 4,137 ......... ......... ......... ......... ......... ......... ......... ......... ......... 788 870 961 777 ......... ......... ......... ......... ......... ......... ......... 1,299 1,404 1,541 ......... ......... ......... ......... ......... ......... ......... ......... 60 83 87 92 97 ......... ......... ......... ......... ......... ......... 608 662 345 ......... ......... ......... ......... ......... ......... ......... ......... 134 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 214 74 ......... ......... ......... ......... ......... ......... ......... ......... ......... 635 691 58 ......... ......... ......... ......... ......... ......... ......... ......... 569 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 39 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 57 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 2,149 1,694 ......... ......... ......... ......... ......... ......... ......... ......... ......... 3,596 2,855 ......... ......... ......... ......... ......... ......... ......... ......... ......... 103 143 150 158 167 ......... ......... ......... ......... ......... ......... 547 285 ......... ......... ......... ......... ......... ......... ......... ......... ......... 205 173 ......... ......... ......... ......... ......... ......... ......... ......... ......... 339 88 ......... ......... ......... ......... ......... ......... ......... ......... ......... 358 398 ......... ......... ......... ......... ......... ......... ......... ......... ......... 331 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 124 32 ......... ......... ......... ......... ......... ......... ......... ......... ......... 132 185 194 204 215 ......... ......... ......... ......... ......... ......... TBD TBD TBD TBD 409 26. CURRENT SERVICES ESTIMATE Table 26–6. IMPACT OF REGULATIONS, EXPIRING AUTHORIZATIONS, AND OTHER ASSUMPTIONS IN THE BASELINE—Continued (In millions of dollars) Estimate New York Federal-State Health Reform Partnership: Baseline estimate ...................................................................... North Carolina Family Planning: Baseline estimate ...................................................................... Oklahoma Family Planning: 12 Baseline estimate ...................................................................... Oregon Family Planning: 13 Baseline estimate ...................................................................... Oregon Health Plan 2: Baseline estimate ..................................................................... Pennsylvania Family Planning: Baseline estimate ...................................................................... Rhode Island Rite Care: Baseline estimate ...................................................................... South Carolina Family Planning: Baseline estimate ...................................................................... TennCare II: Baseline estimate ...................................................................... Texas Family Planning: Baseline estimate ...................................................................... Utah Primary Care Network: Baseline estimate ...................................................................... Vermont Long Term Care Plan: Baseline estimate ...................................................................... Vermont Global Commitment to Health: Baseline estimate ...................................................................... Virginia Family Planning: Baseline estimate ...................................................................... Washington Take Charge/Family Planning: 7 Baseline estimate ...................................................................... Wisconsin BadgerCare: Baseline estimate ...................................................................... Wisconsin BadgerCare Plus: Baseline estimate ...................................................................... Wisconsin Family Planning: Baseline estimate ...................................................................... Wyoming Family Planning: Baseline estimate ...................................................................... Wisconsin Pharmacy Plus Demonstration estimate ............................................................. Children’s Health Insurance Program (CHIP)/Medicaid Demonstrations: 14 Arizona: Demonstration estimate ............................................................ Arkansas: Demonstration estimate (CHIP funds) ....................................... Baseline estimate (Medicaid funds) ........................................... Colorado: 11 Demonstration estimate ............................................................. Idaho: 11 Demonstration estimate (CHIP funds) ....................................... Nevada: Demonstration estimate (CHIP funds) ....................................... New Jersey FamilyCare: 15 Demonstration Estimate ........................................................... New Mexico: Demonstration estimate (CHIP funds) ....................................... Oklahoma Sooner Care Demo: Baseline estimate ...................................................................... 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 12,357 13,153 ......... ......... ......... ......... ......... ......... ......... ......... ......... 515 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 16 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 1,960 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 333 360 301 ......... ......... ......... ......... ......... ......... ......... ......... 222 238 ......... ......... ......... ......... ......... ......... ......... ......... ......... 431 108 ......... ......... ......... ......... ......... ......... ......... ......... ......... 5,390 6,300 6,655 5,202 ......... ......... ......... ......... ......... ......... ......... 1,819 2,026 ......... ......... ......... ......... ......... ......... ......... ......... ......... 90 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 176 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 639 160 ......... ......... ......... ......... ......... ......... ......... ......... ......... 244 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 39 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 96 100 104 108 28 ......... ......... ......... ......... ......... ......... 450 113 ......... ......... ......... ......... ......... ......... ......... ......... ......... 35 37 39 ......... ......... ......... ......... ......... ......... ......... ......... 40 41 46 12 ......... ......... ......... ......... ......... ......... ......... 26 28 ......... ......... ......... ......... ......... ......... ......... ......... ......... 24 2,049 31 2,318 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 21 17 ......... ......... ......... ......... ......... ......... ......... ......... ......... 166 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 165 110 ......... ......... ......... ......... ......... ......... ......... ......... ......... 124 129 139 ......... ......... ......... ......... ......... ......... ......... ......... TBD TBD TBD TBD 410 ANALYTICAL PERSPECTIVES Table 26–6. IMPACT OF REGULATIONS, EXPIRING AUTHORIZATIONS, AND OTHER ASSUMPTIONS IN THE BASELINE—Continued (In millions of dollars) Estimate 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Oregon Health Plan 2: Demonstration estimate ............................................................ TBD Virginia: 11 Demonstration estimate (CHIP funds) ....................................... TBD 1 Reflects the temporary FMAP adjustments included in the American Recovery and Reinvestment Act, P.L. 111–5. 2 Projected without premium offset. 3 State Grants and Demonstrations estimates do not reflect temporary FMAP adjustments included in the American Recovery and Reinvestment Act, P.L. 111–5. 4 Baseline estimates reflect costs absent the demonstration; demonstration estimate reflects costs of the demonstration. The differences represent the net impact of the demonstration. Any demonstrations are implicitly assumed in the current services baseline. The demonstrations listed are only those that were approved and implemented by release of the FY 2011 President’s Budget. 5 Costs of this demonstration are offset annually by a reduction to inpatient hospital prospective payment rates. 6 Medicaid demonstration estimates do not reflect temporary FMAP adjustments included in the American Recovery and Reinvestment Act, P.L. 111–5. 7 Demonstration on temporary extension through January 31, 2010. 8 The Federal Government does not have current estimates for California; the State has been operating under a temporary extension for five years. 9 Demonstration on temporary extension through June 30, 2010. 10 Demonstration on temporary extension through March 31, 2010. 11 Demonstration renewal is currently under review. 12 An extension request is under review. Current demonstration expired March 31, 2010. 13 Demonstration on temporary extension through January 29, 2010. 14 The Children’s Health Insurance Program Reauthorization Act (CHIPRA) (P.L. 111–3) authorized coverage for childless adults through December 31, 2009 and parents through September 31, 2011. States may extend coverage for parents of low-income children through September 31, 2013 subject to terms and conditions outlined in Section 2111(b) of the Social Security Act. 15 New Jersey FY 2010 estimates are based on the FY 2009 estimate due to automatic extension under CHIPRA. Table 26–7. RECEIPTS BY SOURCE IN THE BASELINE PROJECTION OF CURRENT POLICY (In billions of dollars) 2009 Actual Individual income taxes ......................................................... Corporation income taxes ...................................................... Social insurance and retirement receipts .............................. (On-budget) ...................................................................... (Off-budget) ...................................................................... Excise taxes .......................................................................... Estate and gift taxes .............................................................. Customs duties ...................................................................... Miscellaneous receipts .......................................................... Total receipts .................................................................. 915.3 138.2 890.9 (236.9) (654.0) 62.5 23.5 22.5 52.1 Estimate 2010 2011 2012 2013 2014 2015 2016 2017 2018 951.4 175.8 875.7 (240.6) (635.1) 74.0 17.0 23.8 94.8 1,126.2 292.5 934.6 (260.9) (673.6) 80.0 24.2 28.6 96.9 1,271.5 333.2 1,002.6 (282.1) (720.5) 82.8 20.9 32.8 84.8 1,386.7 361.3 1,065.8 (301.5) (764.3) 84.2 21.8 35.5 77.3 1,507.0 414.9 1,129.5 (319.9) (809.6) 85.6 23.5 37.8 70.7 1,625.2 382.6 1,189.8 (335.3) (854.5) 86.9 25.4 40.2 66.5 1,738.6 422.3 1,260.0 (352.1) (907.9) 88.1 27.3 42.7 68.9 1,853.0 436.6 1,312.9 (363.5) (949.4) 89.0 29.4 45.0 71.7 1,965.9 2,078.4 2,186.1 448.6 461.0 477.8 1,369.4 1,425.6 1,477.6 (375.3) (388.0) (401.1) (994.1) (1,037.6) (1,076.5) 89.4 89.9 90.7 31.5 33.9 36.3 47.5 50.3 53.1 74.0 76.4 78.6 2019 2020 2,105.0 2,212.6 2,583.0 2,828.5 3,032.7 3,269.1 3,416.6 3,648.0 3,837.6 4,026.4 4,215.5 4,400.2 (On-budget) .............................................................. (1,451.0) (1,577.5) (1,909.3) (2,108.0) (2,268.3) (2,459.5) (2,562.1) (2,740.0) (2,888.2) (3,032.3) (3,177.9) (3,323.7) (Off-budget) .............................................................. (654.0) (635.1) (673.6) (720.5) (764.3) (809.6) (854.5) (907.9) (949.4) (994.1) (1,037.6) (1,076.5) 411 26. CURRENT SERVICES ESTIMATE Table 26–8. EFFECTS ON RECEIPTS OF CHANGES IN THE SOCIAL SECURITY TAXABLE EARNINGS BASE (In billions of dollars) 2012 Social security (OASDI) taxable earnings base increases: $106,800 to $111,300 on Jan. 1, 2012 1/ ................................................................ $111,300 to $115,200 on Jan. 1, 2013 .................................................................... $115,200 to $120,900 on Jan. 1, 2014 .................................................................... $120,900 to $126,600 on Jan. 1, 2015 .................................................................... $126,600 to $133,200 on Jan. 1, 2016 .................................................................... $133,200 to $139,200 on Jan. 1, 2017 .................................................................... $139,200 to $145,200 on Jan. 1, 2018 .................................................................... $145,200 to $150,900 on Jan. 1, 2019 .................................................................... $150,900 to $156,900 on Jan. 1, 2020 .................................................................... 1 The taxable earnings base remains at $106,800 for 2009, 2010 and 2011. 2013 2.2 ......... ......... ......... ......... ......... ......... ......... ......... 2014 5.8 2.0 ......... ......... ......... ......... ......... ......... ......... 2015 6.6 5.3 3.0 ......... ......... ......... ......... ......... ......... 2016 7.4 5.9 7.9 3.0 ......... ......... ......... ......... ......... 2017 8.2 6.6 8.9 8.0 3.5 ......... ......... ......... ......... 2018 9.2 7.3 9.7 8.8 9.1 3.1 ......... ......... ......... 10.1 8.0 10.6 9.7 10.0 8.2 3.1 ......... ......... 2019 11.0 8.8 11.8 10.5 11.1 9.0 8.2 3.0 ......... 2020 11.9 9.6 12.8 11.5 11.9 9.9 8.9 7.7 3.1 Table 26–9. CHANGE IN OUTLAY ESTIMATES BY CATEGORY IN THE BASELINE PROJECTION OF CURRENT POLICY (Dollar amounts in billions) Change 2010 to 2011 Change 2010 to 2015 Change 2010 to 2020 2010 2011 2015 2020 Amount Percent Amount Annual average rate Amount Annual average rate Outlays: Discretionary: Defense .................................................................. Non-defense ........................................................... Subtotal, discretionary ........................................................ 705 692 1,397 704 672 1,376 754 642 1,396 848 724 1,573 Mandatory: Farm programs ....................................................... 18 18 14 14 Medicaid ................................................................. 275 271 337 488 Other health care .................................................... 32 33 33 54 Medicare ................................................................. 451 492 654 957 Federal employee retirement .................................. and disability ................................................ 120 123 140 164 Unemployment compensation ................................ 158 85 65 65 Other income security programs ............................ 300 287 257 266 Social Security ........................................................ 703 730 894 1,204 Veterans programs ................................................. 72 69 85 112 Other mandatory programs .................................... 7 82 33 59 Undistributed offsetting receipts ............................. –80 –90 –99 –128 Subtotal, mandatory ........................................................... 2,057 2,100 2,413 3,256 Disaster costs 1 ................................................................... 1 3 5 5 Net interest ......................................................................... 188 250 586 912 Total, outlays ................................................................................ 3,643 3,728 4,400 5,746 * $500 million or less. 1 These amounts represent a placeholder for major disasters requiring Federal assistance for relief and reconstruction. or mandatory outlays or tax relief. These amounts are included as outlays for convenience. –1 –20 –21 –0.2% –2.9% –1.5% 48 –49 –1 1.3% –1.5% –0.0% 143 33 175 1.9% 0.5% 1.2% –* –4 1 41 –1.2% –1.4% 4.3% 9.0% –4 61 2 203 –5.0% 4.1% 1.1% 7.7% –4 213 22 506 –2.5% 5.9% 5.4% 7.8% 3 –73 –13 27 –3 75 –10 43 2 62 85 2.2% –46.4% –4.3% 3.8% –4.6% 1111.1% 12.4% 2.1% 200.0% 32.9% 2.3% 20 –93 –44 191 13 26 –20 356 4 398 757 3.1% –16.3% –3.1% 4.9% 3.3% 37.2% 4.5% 3.2% 35.1% 25.5% 3.8% 44 –94 –35 502 40 52 –48 1,199 4 725 2,103 3.2% –8.5% –1.2% 5.5% 4.5% 24.1% 4.8% 4.7% 17.5% 17.1% 4.7% Such assistance might be provided in the form of discretionary 412 ANALYTICAL PERSPECTIVES Table 26–10. OUTLAYS BY FUNCTION IN THE BASELINE PROJECTION OF CURRENT POLICY (In billions of dollars) Function National Defense: Department of Defense—Military ...................... Other .................................................................. Total, National Defense ...................................... International Affairs ................................................. General Science, Space, and Technology .............. Energy .................................................................... Natural Resources and Environment ...................... Agriculture .............................................................. Commerce and Housing Credit .............................. On-Budget .......................................................... Off-Budget .......................................................... Transportation ......................................................... Community and Regional Development ................. Education, Training, Employment, and Social Services ............................................................. Health ..................................................................... Medicare ................................................................. Income Security ...................................................... Social Security ........................................................ On-Budget .......................................................... Off-Budget .......................................................... Veterans Benefits and Services .............................. Administration of Justice ......................................... General Government .............................................. Net Interest ............................................................. On-Budget .......................................................... Off-Budget .......................................................... Allowances ............................................................. Undistributed Offsetting Receipts: Employer share, employee retirement (onbudget) .................................................. ................................................................ Employer share, employee retirement (offbudget) .................................................. ................................................................ Rents and royalties on the Outer Continental Shelf ............................................................. Sale of major assets .......................................... Other undistributed offsetting receipts ............... Total, Undistributed Offsetting Receipts ............ On-Budget ................................................... Off-Budget ................................................... Total ........................................................................ 2009 Actual 636.7 24.3 661.0 37.5 29.4 4.7 35.6 22.2 291.5 (291.2) (0.3) 84.3 27.6 Estimate 2010 683.4 27.1 710.5 50.0 33.0 19.0 47.0 25.9 –25.3 (–31.7) (6.4) 106.4 29.1 2011 681.6 27.7 709.3 47.8 32.0 25.1 43.0 25.9 30.2 (26.0) (4.2) 103.8 28.7 2012 687.8 27.5 715.2 51.0 31.8 14.2 41.4 18.0 7.9 (7.9) (0.0) 99.0 22.7 2013 700.0 25.9 725.8 50.7 32.3 7.2 40.6 24.2 –5.3 (–5.3) (0.0) 98.7 19.4 2014 715.3 26.3 741.6 50.9 32.8 5.4 41.2 23.2 –9.8 (–9.8) (0.0) 97.6 19.0 2015 2016 2017 2018 732.2 26.8 758.9 52.3 33.1 3.5 42.0 22.3 –12.3 (–12.3) (0.0) 100.2 18.6 745.8 27.3 773.1 54.9 33.8 3.3 43.7 22.5 –13.7 (–13.7) (0.0) 102.7 18.4 764.4 27.9 792.3 57.9 34.8 3.1 45.1 22.7 –12.1 (–12.1) (0.0) 104.9 18.6 783.8 28.5 812.3 59.3 35.5 3.4 46.7 23.0 –13.8 (–13.8) (0.0) 106.9 18.9 2019 803.9 29.1 833.0 60.8 36.3 3.5 47.8 23.2 5.1 (5.1) ......... 109.2 19.1 2020 824.6 29.7 854.3 62.6 37.0 3.8 49.3 23.5 5.0 (5.0) (–0.0) 111.7 19.4 79.7 142.9 131.2 114.4 114.7 114.8 119.7 121.8 123.9 126.3 128.9 131.3 334.3 372.0 374.8 372.5 392.5 413.8 436.5 465.2 500.8 535.3 573.3 615.6 430.1 457.2 497.8 507.9 564.1 631.7 661.9 734.4 768.6 803.6 894.8 966.9 533.2 651.8 569.2 535.2 535.8 536.3 534.4 543.2 544.2 546.7 561.6 574.3 683.0 709.0 735.5 767.7 807.9 852.5 901.0 953.6 1,011.7 1,074.1 1,141.1 1,212.5 (34.1) (25.1) (27.0) (29.5) (33.0) (36.4) (39.5) (42.9) (46.7) (50.2) (53.7) (57.5) (648.9) (683.9) (708.5) (738.2) (774.8) (816.1) (861.5) (910.7) (965.0) (1,023.9) (1,087.3) (1,155.0) 95.4 124.1 124.1 121.8 132.6 139.7 146.4 158.7 160.5 161.4 175.7 183.6 51.5 55.0 59.3 59.1 59.4 60.2 62.1 64.0 65.9 68.5 71.6 73.5 22.0 25.8 27.3 27.7 27.0 27.0 27.8 28.5 28.7 29.6 30.9 31.8 186.9 187.9 249.8 339.8 434.3 515.7 586.0 651.5 716.2 779.0 844.4 912.5 (304.9) (306.3) (368.8) (462.1) (562.5) (651.4) (730.3) (804.8) (879.2) (953.6) (1,029.2) (1,107.5) (–118.0) (–118.4) (–119.1) (–122.3) (–128.3) (–135.7) (–144.3) (–153.3) (–163.0) (–174.5) (–184.8) (–195.0) ......... 1.2 3.2 4.0 4.2 4.5 4.8 5.0 5.0 5.0 5.0 5.0 –56.4 –60.9 –62.9 –63.7 –66.1 –68.8 –71.4 –74.4 –83.2 –86.7 –90.4 –94.2 –14.2 –14.9 –15.6 –15.9 –16.7 –17.5 –18.4 –19.5 –20.4 –21.3 –22.4 –23.5 –5.3 ......... –16.7 –92.6 (–78.4) (–14.2) –3.5 ......... –0.3 –79.7 (–64.8) (–14.9) –7.2 ......... –3.9 –89.6 (–74.0) (–15.6) –8.1 –0.3 –0.8 –88.9 (–73.0) (–15.9) –8.8 ......... –2.0 –93.6 (–76.9) (–16.7) –9.1 ......... ......... –95.4 (–77.9) (–17.5) –9.5 ......... ......... –99.3 (–80.9) (–18.4) –9.8 ......... ......... –103.7 (–84.2) (–19.5) –10.0 ......... ......... –113.6 (–93.2) (–20.4) –10.3 –9.8 –9.6 ......... ......... –0.3 ......... ......... ......... –118.3 –122.6 –127.6 (–97.0) (–100.2) (–104.2) (–21.3) (–22.4) (–23.5) 3,517.7 3,642.9 3,728.4 3,762.3 3,972.5 4,202.7 4,399.8 4,660.7 4,879.2 5,103.2 5,442.6 5,746.0 On-Budget .......................................................... (3,000.7) (3,086.0) (3,150.3) (3,162.3) (3,342.7) (3,539.8) (3,701.1) (3,922.9) (4,097.6) (4,275.0) (4,562.5) (4,809.5) Off-Budget .......................................................... (517.0) (557.0) (578.1) (600.0) (629.8) (662.9) (698.8) (737.9) (781.6) (828.2) (880.1) (936.5) 413 26. CURRENT SERVICES ESTIMATE Table 26–11. OUTLAYS BY AGENCY IN THE BASELINE PROJECTION OF CURRENT POLICY (In billions of dollars) Agency Legislative Branch .................................................. Judicial Branch ....................................................... Agriculture .............................................................. Commerce .............................................................. Defense—Military ................................................... Education ................................................................ Energy .................................................................... Health and Human Services ................................... Homeland Security ................................................. Housing and Urban Development ........................... Interior .................................................................... Justice .................................................................... Labor ...................................................................... State ....................................................................... Transportation ......................................................... Treasury .................................................................. Veterans Affairs ...................................................... Corps of Engineers—Civil Works ........................... Other Defense Civil Programs ................................ Environmental Protection Agency .......................... Executive Office of the President ............................ General Services Administration ............................ International Assistance Programs ......................... National Aeronautics and Space Administration .... National Science Foundation .................................. Office of Personnel Management ........................... Small Business Administration ............................... Social Security Administration ................................ On-Budget .......................................................... Off-Budget .......................................................... Social Security Administration ................................ On-Budget .......................................................... Off-Budget .......................................................... Other Independent Agencies .................................. On-Budget .......................................................... Off-Budget .......................................................... Allowances ............................................................. Undistributed Offsetting Receipts ............................ On-Budget .......................................................... Off-Budget .......................................................... Total ........................................................................ 2009 Actual Estimate 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 4.7 5.4 5.4 5.4 5.6 5.8 6.0 6.2 6.4 6.6 6.8 7.0 6.6 7.2 7.3 7.6 7.8 8.0 8.3 8.5 8.8 9.1 9.4 9.7 114.4 142.0 146.1 138.9 143.2 140.5 138.1 137.4 137.1 136.5 136.0 137.2 10.7 16.7 16.1 16.4 16.2 15.8 16.2 16.7 17.2 17.7 18.2 18.7 636.8 683.4 681.6 687.8 700.0 715.3 732.2 745.8 764.4 783.8 803.9 824.6 53.4 107.3 99.7 85.8 86.0 85.6 90.1 91.6 93.2 95.0 97.0 98.8 23.7 38.3 43.9 33.5 26.7 26.6 25.7 25.7 26.2 26.6 27.2 27.7 796.3 868.2 905.5 909.1 983.9 1,071.1 1,122.5 1,223.6 1,286.4 1,353.0 1,479.5 1,589.9 51.7 51.6 52.3 46.3 46.1 47.9 49.2 50.5 52.0 53.9 56.4 57.7 61.0 62.5 56.0 51.5 49.1 50.0 50.2 50.9 51.7 52.6 53.6 54.5 11.8 13.9 13.9 13.3 13.0 13.2 13.1 13.4 13.7 14.1 14.3 14.5 27.7 30.3 34.0 33.2 33.0 33.3 34.2 35.3 36.4 37.6 38.7 40.0 138.2 178.3 99.0 91.1 86.4 82.3 79.0 77.3 77.4 78.3 80.4 82.7 21.4 25.4 26.3 28.2 29.0 29.3 29.4 30.0 30.6 31.3 31.9 32.6 73.0 90.9 86.3 82.5 82.3 80.8 82.8 84.8 86.5 87.8 89.6 91.4 701.8 496.9 588.6 651.2 752.3 843.7 924.2 1,003.2 1,082.8 1,165.2 1,249.1 1,334.7 95.5 124.0 123.8 121.5 132.2 139.3 146.0 158.3 160.1 160.9 175.3 183.2 6.8 10.5 7.2 6.6 5.5 5.5 5.7 5.8 6.0 6.2 6.4 6.5 57.3 54.3 55.5 56.1 57.7 59.2 60.7 62.2 63.9 65.6 67.5 69.5 8.1 11.3 11.3 10.5 10.1 10.1 10.4 10.8 11.2 11.6 12.1 12.5 0.7 0.7 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.6 0.6 0.6 0.3 1.8 2.2 1.9 1.3 0.9 0.9 0.8 0.4 0.4 0.5 0.5 14.8 23.1 20.5 21.6 20.7 20.6 21.8 23.7 26.0 26.7 27.4 28.6 19.2 19.1 18.1 18.9 19.6 20.0 20.4 20.8 21.3 21.7 22.2 22.7 6.0 7.8 7.5 7.2 7.1 7.1 7.0 7.1 7.6 7.7 7.9 8.0 72.3 71.6 73.5 76.0 78.9 82.7 85.8 89.2 99.8 104.1 109.3 115.7 2.2 6.0 1.2 1.1 1.0 1.0 1.1 1.1 1.1 1.1 1.2 1.2 78.7 72.6 80.5 78.8 88.4 93.5 98.5 108.3 110.0 110.7 120.7 126.6 (78.7) (72.6) (80.5) (78.8) (88.4) (93.5) (98.5) (108.3) (110.0) (110.7) (120.7) (126.6) ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... 648.9 683.9 708.5 738.2 774.8 816.1 861.5 910.7 965.0 1,023.9 1,087.3 1,155.0 ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... (648.9) (683.9) (708.5) (738.2) (774.8) (816.1) (861.5) (910.7) (965.0) (1,023.9) (1,087.3) (1,155.0) 47.9 7.6 35.1 25.6 12.5 8.9 6.2 5.4 4.6 3.5 22.3 22.5 (47.6) (1.2) (30.9) (25.6) (12.4) (8.9) (6.2) (5.4) (4.6) (3.5) (22.3) (22.5) (0.3) (6.4) (4.2) * * * * * * * ......... –* -* 1.2 3.2 4.0 4.2 4.5 4.8 5.0 5.0 5.0 5.0 5.0 –274.2 –271.1 –282.4 –288.0 –302.8 –316.2 –332.5 –349.9 –374.2 –395.7 –415.0 –433.8 (–142.0) (–137.7) (–147.7) (–149.8) (–157.8) (–163.0) (–169.8) (–177.0) (–190.8) (–200.0) (–207.8) (–215.3) (–132.2) (–133.3) (–134.7) (–138.2) (–145.0) (–153.2) (–162.7) (–172.8) (–183.4) (–195.8) (–207.2) (–218.5) 3,517.7 3,642.9 3,728.4 3,762.3 3,972.5 4,202.7 4,399.8 4,660.7 4,879.2 5,103.2 5,442.6 5,746.0 On-Budget .......................................................... (3,000.7) (3,086.0) (3,150.3) (3,162.3) (3,342.7) (3,539.8) (3,701.1) (3,922.9) (4,097.6) (4,275.0) (4,562.5) (4,809.5) Off-Budget .......................................................... (517.0) (557.0) (578.1) (600.0) (629.8) (662.9) (698.8) (737.9) (781.6) (828.2) (880.1) (936.5) * $50 million or less. 414 ANALYTICAL PERSPECTIVES Table 26–12. BUDGET AUTHORITY BY FUNCTION IN THE BASELINE PROJECTION OF CURRENT POLICY (In billions of dollars) Function National Defense: Department of Defense—Military ...................... Other .................................................................. Total, National Defense ...................................... International Affairs ................................................. General Science, Space, and Technology .............. Energy .................................................................... Natural Resources and Environment ...................... Agriculture .............................................................. Commerce and Housing Credit .............................. On-Budget .......................................................... Off-Budget .......................................................... Transportation ......................................................... Community and Regional Development ................. Education, Training, Employment, and Social Services ............................................................. Health ..................................................................... Medicare ................................................................. Income Security ...................................................... Social Security ........................................................ On-Budget .......................................................... Off-Budget .......................................................... Veterans Benefits and Services .............................. Administration of Justice ......................................... General Government .............................................. Net Interest ............................................................. On-Budget .......................................................... Off-Budget .......................................................... Allowances ............................................................. Undistributed Offsetting Receipts: Employer share, employee retirement (onbudget) .......................................................... Employer share, employee retirement (offbudget) .......................................................... Rents and royalties on the Outer Continental Shelf ............................................................. Sale of major assets .......................................... Other undistributed offsetting receipts ............... Total, Undistributed Offsetting Receipts ............ On-Budget ................................................... Off-Budget ................................................... 2009 Actual Estimate 2010 667.5 663.9 30.2 25.2 697.8 689.1 63.4 62.9 35.0 31.0 42.8 8.8 57.4 39.5 24.1 24.3 451.7 –111.8 (445.1) (–118.2) (6.6) (6.4) 125.0 93.7 23.8 16.3 2011 676.3 25.5 701.8 57.9 31.5 10.0 40.3 25.3 –8.1 (–12.3) (4.2) 94.8 16.3 2012 691.6 25.8 717.4 56.2 32.0 9.2 41.1 17.4 14.9 (14.9) (0.0) 95.8 16.6 2013 708.2 26.3 734.5 57.7 32.7 6.7 41.6 24.3 3.5 (3.5) (0.0) 96.9 16.8 2014 725.4 26.8 752.1 54.3 33.3 5.7 42.7 23.2 8.9 (8.9) (0.0) 98.1 17.2 2015 742.9 27.3 770.2 51.7 33.9 4.7 43.6 22.5 9.5 (9.5) (0.0) 99.3 17.5 2016 761.1 27.8 788.9 54.6 34.6 4.7 45.3 22.7 9.9 (9.9) (0.0) 100.5 17.9 2017 780.3 28.4 808.8 57.9 35.3 4.3 46.7 23.0 13.5 (13.5) (0.0) 101.8 18.3 2018 800.2 29.0 829.2 59.5 36.0 5.1 48.3 23.3 13.8 (13.8) (0.0) 103.2 18.7 2019 820.6 29.7 850.3 61.1 36.8 5.2 49.5 23.6 14.1 (14.1) ......... 104.6 19.1 2020 841.7 30.3 872.1 63.0 37.5 5.5 50.7 23.9 14.8 (14.8) (–0.0) 106.0 19.5 167.6 84.5 118.6 115.2 112.7 119.8 122.0 124.1 126.5 128.8 131.6 134.2 373.6 386.1 357.9 377.7 401.8 411.6 438.4 467.7 503.4 538.0 575.7 616.4 437.0 462.1 498.0 508.4 564.2 631.9 662.1 734.2 768.7 803.7 894.6 967.0 610.6 631.0 559.6 531.6 536.4 537.5 538.6 549.0 549.7 553.2 567.8 580.7 689.8 711.0 737.5 770.7 811.3 856.3 905.2 958.2 1,016.7 1,079.4 1,146.8 1,218.7 (35.0) (24.7) (26.9) (29.5) (33.0) (36.4) (39.5) (42.9) (46.7) (50.2) (53.7) (57.5) (654.8) (686.3) (710.6) (741.1) (778.3) (819.9) (865.6) (915.2) (970.0) (1,029.2) (1,093.1) (1,161.1) 96.9 124.5 121.6 127.7 134.1 141.2 148.0 154.8 162.2 169.7 177.6 185.5 56.6 53.5 60.3 57.1 58.9 60.7 62.5 64.4 66.5 69.0 72.1 74.1 30.2 25.5 26.7 27.5 27.4 28.1 28.8 29.4 30.2 31.0 32.0 32.7 186.9 187.9 249.8 339.8 434.3 515.7 586.0 651.5 716.2 779.0 844.4 912.5 (304.9) (306.3) (368.8) (462.1) (562.5) (651.4) (730.3) (804.8) (879.2) (953.6) (1,029.2) (1,107.5) (–118.0) (–118.4) (–119.1) (–122.3) (–128.3) (–135.7) (–144.3) (–153.3) (–163.0) (–174.5) (–184.8) (–195.0) ......... 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 –56.4 –60.9 –62.9 –63.7 –66.1 –68.8 –71.4 –74.4 –83.2 –86.7 –90.4 –94.2 –14.2 –14.9 –15.6 –15.9 –16.7 –17.5 –18.4 –19.5 –20.4 –21.3 –22.4 –23.5 –5.3 ......... –16.7 –92.6 (–78.4) (–14.2) –3.5 ......... –0.3 –79.7 (–64.8) (–14.9) –7.2 ......... –3.9 –89.6 (–74.0) (–15.6) –8.1 –0.3 –0.8 –88.9 (–73.0) (–15.9) –8.8 ......... –2.0 –93.6 (–76.9) (–16.7) –9.1 ......... ......... –95.4 (–77.9) (–17.5) –9.5 ......... ......... –99.3 (–80.9) (–18.4) –9.8 ......... ......... –103.7 (–84.2) (–19.5) –10.0 ......... ......... –113.6 (–93.2) (–20.4) –10.3 –9.8 –9.6 ......... ......... –0.3 ......... ......... ......... –118.3 –122.6 –127.6 (–97.0) (–100.2) (–104.2) (–21.3) (–22.4) (–23.5) Total ........................................................................ 4,077.5 3,445.2 3,615.2 3,772.6 4,007.1 4,247.9 4,450.1 4,713.9 4,940.9 5,175.8 5,489.3 5,792.1 On-Budget .......................................................... (3,548.3) (2,885.8) (3,035.0) (3,169.7) (3,373.8) (3,581.2) (3,747.2) (3,971.5) (4,154.4) (4,342.3) (4,603.5) (4,849.5) Off-Budget .......................................................... (529.2) (559.4) (580.2) (603.0) (633.3) (666.6) (702.9) (742.4) (786.5) (833.5) (885.8) (942.6) MEMORANDUM Discretionary budget authority: National defense ................................................ International ....................................................... Domestic ............................................................ 685.9 43.2 450.6 740.5 42.3 726.1 741.4 44.8 442.6 757.3 45.5 452.5 775.3 46.4 463.6 794.4 47.3 475.0 813.9 48.2 486.4 834.1 49.1 498.2 854.8 50.1 510.3 876.2 51.1 522.8 898.1 52.2 535.8 920.8 53.2 549.1 Total ........................................................................ 1,179.7 1,508.9 1,228.8 1,255.3 1,285.3 1,316.7 1,348.6 1,381.4 1,415.3 1,450.1 1,486.1 1,523.1 415 26. CURRENT SERVICES ESTIMATE Table 26–13. BUDGET AUTHORITY BY AGENCY IN THE BASELINE PROJECTION OF CURRENT POLICY (In billions of dollars) Agency Legislative Branch .................................................. Judicial Branch ....................................................... Agriculture .............................................................. Commerce .............................................................. Defense—Military ................................................... Education ................................................................ Energy .................................................................... Health and Human Services ................................... Homeland Security ................................................. Housing and Urban Development ........................... Interior .................................................................... Justice .................................................................... Labor ...................................................................... State ....................................................................... Transportation ......................................................... Treasury .................................................................. Veterans Affairs ...................................................... Corps of Engineers—Civil Works ........................... Other Defense Civil Programs ................................ Environmental Protection Agency .......................... Executive Office of the President ............................ General Services Administration ............................ International Assistance Programs ......................... National Aeronautics and Space Administration .... National Science Foundation .................................. Office of Personnel Management ........................... Small Business Administration ............................... Social Security Administration ................................ On-Budget .......................................................... Off-Budget .......................................................... Social Security Administration ................................ On-Budget .......................................................... Off-Budget .......................................................... Other Independent Agencies .................................. On-Budget .......................................................... Off-Budget .......................................................... Allowances ............................................................. Undistributed Offsetting Receipts ............................ On-Budget .......................................................... Off-Budget .......................................................... Total ........................................................................ 2009 Actual Estimate 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 5.0 5.2 5.3 5.5 5.7 6.0 6.1 6.3 6.5 6.8 7.0 7.3 6.8 7.2 7.4 7.7 7.9 8.2 8.4 8.7 9.0 9.3 9.6 9.9 127.8 135.5 149.8 143.3 148.2 146.3 144.1 143.4 143.1 143.0 142.7 143.4 25.7 13.9 14.6 15.0 15.5 15.9 16.4 16.9 17.4 17.9 18.5 19.0 667.6 663.9 676.3 691.6 708.2 725.4 742.9 761.1 780.3 800.2 820.6 841.7 131.9 54.6 88.6 86.8 83.8 90.4 92.1 93.7 95.4 97.2 99.4 101.3 68.6 24.6 25.6 26.0 25.9 26.3 26.4 26.9 27.4 27.9 28.4 29.0 851.7 881.4 886.0 913.7 992.5 1,068.7 1,124.0 1,225.8 1,287.8 1,355.2 1,481.2 1,591.7 46.0 40.0 44.1 45.5 46.8 48.1 49.5 50.9 52.4 54.4 57.0 58.4 61.8 49.3 47.2 47.7 48.8 49.7 50.6 51.6 52.7 53.8 55.0 56.3 14.8 12.8 12.6 12.8 12.6 12.8 12.8 13.3 13.6 14.1 14.5 14.8 32.7 29.7 35.7 31.6 32.5 33.5 34.5 35.6 36.7 37.9 39.1 40.3 152.8 175.6 99.4 91.7 86.5 81.6 77.7 75.5 75.3 75.8 77.5 79.8 27.2 27.3 27.5 28.1 28.6 29.2 29.8 30.5 31.1 31.8 32.5 33.2 112.3 78.4 79.2 79.8 80.4 81.1 81.7 82.4 83.2 83.9 84.7 85.5 897.0 394.4 556.0 642.8 746.4 839.4 923.2 1,003.3 1,084.2 1,166.9 1,250.5 1,335.9 96.9 124.3 121.4 127.4 133.8 140.8 147.6 154.4 161.8 169.3 177.1 185.1 16.6 5.4 5.5 5.6 5.6 5.7 5.9 6.0 6.2 6.4 6.6 6.7 57.5 54.5 55.7 56.4 57.9 59.4 60.9 62.5 64.1 65.8 67.7 69.7 14.8 10.2 10.4 10.6 10.9 11.1 11.4 11.7 12.0 12.3 12.6 12.9 0.4 0.4 0.4 0.5 0.5 0.5 0.5 0.5 0.5 0.6 0.6 0.6 6.3 0.6 0.6 0.6 0.6 0.6 0.6 0.6 0.7 0.7 0.7 0.7 34.7 33.6 28.9 26.6 27.4 23.4 20.2 22.4 25.0 25.9 26.8 27.9 18.8 18.7 19.0 19.4 19.8 20.2 20.6 21.0 21.5 22.0 22.4 22.9 9.6 7.0 7.0 7.2 7.3 7.4 7.5 7.7 7.8 8.0 8.1 8.3 74.4 72.9 75.5 78.6 82.3 86.0 89.7 93.4 104.0 108.6 113.4 118.2 2.6 5.6 1.0 1.0 1.0 1.0 1.1 1.1 1.1 1.2 1.2 1.2 78.4 71.9 80.4 78.9 88.5 93.5 98.6 108.3 110.0 110.8 120.8 126.7 (78.4) (71.9) (80.4) (78.9) (88.5) (93.5) (98.6) (108.3) (110.0) (110.8) (120.8) (126.7) ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... 654.8 686.3 710.6 741.1 778.3 819.9 865.6 915.2 970.0 1,029.2 1,093.1 1,161.1 ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... ...... (654.8) (686.3) (710.6) (741.1) (778.3) (819.9) (865.6) (915.2) (970.0) (1,029.2) (1,093.1) (1,161.1) 56.4 26.1 20.8 32.3 20.9 26.8 27.0 28.1 29.3 30.0 30.3 31.1 (49.8) (19.7) (16.6) (32.3) (20.9) (26.8) (27.0) (28.1) (29.3) (30.0) (30.3) (31.1) (6.6) (6.4) (4.2) (0.0) (0.0) (0.0) (0.0) (0.0) (0.0) (0.0) ...... (–0.0) -* 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 5.0 –274.2 –271.1 –282.4 –288.0 –302.8 –316.2 –332.5 –349.9 –374.2 –395.7 –415.0 –433.8 (–142.0) (–137.7) (–147.7) (–149.8) (–157.8) (–163.0) (–169.8) (–177.0) (–190.8) (–200.0) (–207.8) (–215.3) (–132.2) (–133.3) (–134.7) (–138.2) (–145.0) (–153.2) (–162.7) (–172.8) (–183.4) (–195.8) (–207.2) (–218.5) 4,077.5 3,445.2 3,615.2 3,772.6 4,007.1 4,247.9 4,450.1 4,713.9 4,940.9 5,175.8 5,489.3 5,792.1 On-Budget .......................................................... (3,548.3) (2,885.8) (3,035.0) (3,169.7) (3,373.8) (3,581.2) (3,747.2) (3,971.5) (4,154.4) (4,342.3) (4,603.5) (4,849.5) Off-Budget .......................................................... (529.2) (559.4) (580.2) (603.0) (633.3) (666.6) (702.9) (742.4) (786.5) (833.5) (885.8) (942.6) * $50 million or less. 27. TRUST FUNDS AND FEDERAL FUNDS When money is received by the Federal Government, it is credited to a budget account, and when money is spent by the Government, it reduces the balances of a budget account. Budget accounts are either appropriations accounts or receipt accounts and belong to either the Federal funds group or the trust funds group. This chapter presents summary information about the transactions of each of these two fund groups. It also presents information about the income and outgo of the major trust funds and of a number of Federal funds that are financed by dedicated collections in a manner similar to trust funds. proceeds. Because the proceeds of these sales are recorded as offsetting outlays rather than being recorded as governmental receipts, the proceeds are known as “offsetting collections.” There are two classes of revolving funds in the Federal funds group. Public enterprise funds, such as the Postal Service Fund, conduct business-like operations mainly with the public. Intragovernmental funds, such as the Federal Buildings Fund, conduct business-like operations mainly within and between Government agencies. The Federal Funds Group The trust funds group consists of funds that are designated by law as trust funds. Like special funds and revolving funds, trust funds receive dedicated collections for spending on specific purposes. Many of the larger trust funds are used to budget for social insurance programs, such as Social Security, Medicare, and unemployment compensation. Other major trust funds are used to budget for military and Federal civilian employees’ retirement benefits, highway and transit construction, and airport and airway development. There are a few trust revolving funds that are credited with collections earmarked by law to carry out a cycle of business-type operations. There are also a few small trust funds that have been established to carry out the terms of a conditional gift or bequest. There is no substantive difference between special funds in the Federal funds group and trust funds or, as noted below, between revolving funds in the Federal funds group and trust revolving funds. Whether a particular fund is designated in law as a trust fund is, in many cases, arbitrary. For example, the National Service Life Insurance Fund is a trust fund, but the Servicemen’s Group Life Insurance Fund is a Federal fund, even though both receive dedicated collections from veterans and both provide life insurance payments to veterans’ beneficiaries.1 The Federal Government uses the term “trust fund” very differently than does the private sector. The beneficiary of a private trust owns the trust’s income and may own the trust’s assets. A custodian or trustee manages the assets on behalf of the beneficiary according to the stipulations of the trust, which is set up by a trustor and which neither the trustee nor the beneficiary can change; only the trustor can change the terms of the trust agreement. The Federal funds group accounts for a larger share of the budget than the trust funds group, and includes all transactions that are not required by law to pass through trust funds. The Federal funds group includes the “general fund,” which is the largest fund in the Government and used for the general purposes of Government rather than being restricted by law to a specific program. The general fund receives all collections not dedicated for some other fund; it includes virtually all income taxes and many excise taxes. The general fund is used for all programs not supported by trust, special, or revolving funds. The Federal funds group also includes special funds and revolving funds, both of which receive dedicated collections for spending on specific purposes. Where the law requires that Federal fund collections be dedicated to a particular program, the collections and associated disbursements are recorded in special fund receipt and expenditure accounts. An example is the portion of the Outer Continental Shelf mineral leasing receipts deposited into the Land and Water Conservation Fund. Money in special fund receipt accounts must be appropriated before it can be obligated and spent. The majority of special fund collections are derived from the Government’s power to impose taxes or fines, or otherwise compel payment, as in the case of the Nuclear Waste Disposal Fund. In addition, a significant amount of collections credited to special funds is derived from business-like activity, such as the receipts from Outer Continental Shelf mineral leasing. Revolving funds are used to conduct continuing cycles of business-like activity. Revolving funds receive proceeds from the sale of products or services, and these proceeds finance ongoing activities that continue to provide products or services. Instead of being deposited in receipt accounts, the proceeds are recorded in revolving funds, which are expenditure accounts. The proceeds collected in this way are generally available for obligation and expenditure without further legislative action. Outlays for programs with revolving funds are reported net of these The Trust Funds Group 1 Another example is the Violent Crime Reduction Trust Fund, established pursuant to the Violent Crime Control and Law Enforcement Act of 1994. Because the Fund is not required by law to be classified as a trust fund, it is classified as a Federal fund, notwithstanding the presence of the words “Trust Fund” in its official name. In addition, the Fund is substantively a means of accounting for general fund appropriations and does not contain any dedicated receipts. 417 418 ANALYTICAL PERSPECTIVES In contrast, the Federal Government owns and manages the assets and the earnings of most Federal trust funds, and can unilaterally raise or lower future trust fund collections and payments or change the purpose for which the collections are used by changing existing law. Only a few small Federal trust funds are managed pursuant to a trust agreement whereby the Government acts as the trustee, and even then the Government generally owns the funds and has some ability to alter the amount deposited into or paid out of the funds. By contrast, deposit funds, which are funds held by the Government as a custodian on behalf of individuals or a non-Federal entity, are similar to private-sector trust funds. The Government makes no decisions about the amount of money placed in deposit funds or about how the proceeds are spent. For this reason, these funds are not classified as Federal trust funds, but are instead considered to be non-budgetary and excluded from the Federal budget.2 The income of a Federal Government trust fund must be used for the purposes specified in law. The income of some trust funds, such as the Federal Employees Health Benefits fund, is spent almost as quickly as it is collected. In other cases, such as the Social Security and the Federal civilian employees’ retirement trust funds, less income is currently spent each year than is collected. A surplus of income over outgo adds to the trust fund’s balance, which 2 Deposit funds are discussed briefly in Chapter 12 of this volume, “Coverage of the Budget.” is available to authorize future expenditures. The balances are generally required by law to be invested in Federal securities issued by the Department of the Treasury.3 The National Railroad Retirement Investment Trust is a rare example of a Government trust fund authorized to invest balances in equity markets. A trust fund normally consists of one or more receipt accounts (to record income) and an expenditure account (to record outgo). However, a few trust funds, such as the Veterans Special Life Insurance fund, are established by law as trust revolving funds. Such a fund is similar to a revolving fund in the Federal funds group in that it may consist of a single account to record both income and outgo. Trust revolving funds are used to conduct a cycle of business-type operations; offsetting collections are credited to the funds (which are also expenditure accounts) and the funds’ outlays are displayed net of the offsetting collections. Income and Outgo by Fund Group Table 27–1 shows income, outgo, and the surplus or deficit by fund group and in the aggregate (netted to avoid double-counting) from which the total unified budget receipts, outlays, and surplus or deficit are derived. 3 The relationships between Treasury securities held by trust funds (and by other Government accounts), debt held by the public, and gross Federal debt are discussed in Chapter 6 of this volume, “Federal Borrowing and Debt.” Table 27–1. RECEIPTS, OUTLAYS AND SURPLUS OR DEFICIT BY FUND GROUP (In billions of dollars) 2009 Actual Estimate 2010 2011 2012 2013 2014 2015 Receipts: Federal funds cash income: From the public .......................................................... From trust funds ........................................................ Total, Federal funds cash income ....................... Trust funds cash income: From the public .......................................................... From Federal funds: Interest ................................................................ Other ................................................................... Total, Trust funds cash income ............................ Offsetting receipts .............................................................. Total, unified budget receipts ..................................... Outlays: Federal funds cash outgo .................................................. Trust funds cash outgo ...................................................... Offsetting receipts .............................................................. Total, unified budget outlays ...................................... 1,286.3 3.8 1,290.1 1,495.4 1.2 1,496.6 1,702.1 1.2 1,703.3 1,978.2.2 1.3 1,979.6 2,176.2 1.4 2,177.6 2,380.3 1.5 2,381.8 2,498.4 1.5 2,499.9 1,042.0 1,035.4 1,108.5 1,189.8 1,265.6 1,338.4 1,409.4 181.6 408.0 1,631.5 –816.7 2,105.0 191.4 484.2 1,711.0 –1,042.4 2,165.1 192.8 458.9 1,760.2 –896.4 2,567.2 199.1 465.2 1,854.0 –907.2 2,926.4 209.1 506.6 1,981.3 –970.8 3,188.1 220.8 544.5 2,103.6 –1,029.9 3,455.5 233.1 580.6 2,223.1 –1,089.3 3,633.7 2,830.1 1,504.2 –816.7 3,517.7 3,110.4 1,652.7 –1,042.4 3,720.7 3,075.7 1,654.5 –896.4 3,833.9 2,990.4 1,671.6 –907.2 3,754.9 3,119.8 1,766.5 –970.8 3,915.4 3,297.2 1,894.0 –1,029.9 4,161.2 3,493.6 1,981.2 –1,089.3 4,385.5 Surplus or deficit(–): Federal funds ..................................................................... –1,540.0 –1,613.9 –1,372.4 –1,010.9 –942.2 –915.4 –993.7 Trust funds ......................................................................... 127.3 58.3 105.7 182.4 214.8 209.6 241.8 Total, unified surplus/deficit(–) ................................... –1,412.7 –1,555.6 –1,266.7 –828.5 –727.3 –705.8 –751.9 Note: Receipts include governemental, interfund, and proprietary, and exclude intrafund receipts (which are offset against intrafund payments so that cash income and cash outgo are not overstated). 419 27. TRUST FUNDS AND FEDERAL FUNDS Income consists mostly of governmental receipts (derived from governmental activity--primarily income, payroll, and excise taxes). Income also consists of offsetting receipts, which include proprietary receipts (derived from business-like transactions with the public), interfund collections (derived from payments from a fund in one fund group to a fund in the other fund group), and gifts. Outgo consists of payments made to the public or to a fund in the other fund group. Two types of transactions are treated specially in the table. First, income and outgo for each fund group net out all transactions that occur between funds within the same fund group. 4 These intrafund transactions constitute outgo and income for the individual funds that make and collect the payments, but they are offsetting within the fund group as a whole. The totals for each fund group measure only the group’s transactions with the public and the other fund group. Second, income and outgo are calculated net of the collections that are credited to expenditure accounts.5 These two types of offsetting collections are offset against outgo in Table 27–1 and are not shown separately. Some funds in the Federal funds group and some trust funds are authorized to borrow from the general fund of the Treasury.6 Borrowed funds are not recorded as receipts of the fund or included in the income of the fund. Rather, the borrowed funds finance outlays by the fund in excess of available receipts. Subsequently, any excess fund receipts are transferred from the fund to the general fund in repayment of the borrowing. The repayment is not 5 For example, postage stamp fees are deposited as offsetting collections in the Postal Service Fund. As a result, the Fund’s outgo reported in Table 27–1 is disbursements net of collections. 4 For example, the railroad retirement trust funds pay the equivalent of Social Security benefits to railroad retirees in addition to the regular railroad pension. These benefits are financed by a payment from the Federal Old-Age and Survivors Insurance trust fund to the railroad retirement trust funds. The payment and collection are not included in Table 27–1 so that the total trust fund income and outgo shown in the table reflect disbursements to the public and to Federal funds. 6 For example, the Bonneville Power Administration Fund, a revolving fund in the Department of Energy, is authorized to borrow from the general fund. The Black Lung Disability Trust Fund, a trust fund in the Department of Labor, is authorized to receive appropriations of repayable advances from the general fund; this constitutes a form of borrowing. Table 27–2. INCOME, OUTGO, AND BALANCES OF TRUST FUNDS GROUP (in billions of dollars) 2009 Actual Estimate 2010 2011 2012 2013 2014 2015 Total Trust Funds Balance, start of year ................................................................ 3,953.0 4,088.5 4,196.9 4,326.9 4,509.3 4,724.1 4,933.8 Income: Governmental receipts ........................................................ Proprietary receipts ............................................................. 941.9 115.3 929.3 122.4 991.6 134.3 1,063.7 144.5 1,131.0 154.1 1,194.7 164.6 1,258.6 173.1 Receipts from Federal funds: Interest ......................................................................... Other ............................................................................ Subtotal, income .................................................... 183.4 447.8 1,688.3 193.2 524.8 1,769.6 194.8 502.3 1,823.1 201.4 511.1 1,920.7 212.1 555.6 2,052.9 223.6 597.0 2,179.9 236.1 636.5 2,304.3 Outgo: To the public ......................................................................... Payments to Federal funds .................................................. Subtotal, outgo ............................................................. 1,557.2 3.8 1,561.0 1,710.2 1.2 1,711.3 1,716.1 1.2 1,717.3 1,737.0 1.3 1,738.3 1,836.7 1.4 1,838,0 1,968.8 1.5 1,970.2 2,060.9 1.5 2,062.5 Surplus or deficit(–): Excluding interest ......................................................... Interest ......................................................................... Subtotal, surplus or deficit(–) ................................. –56.1 183.4 127.3 -134.9 193.2 58.3 –89.1 194.8 105.7 -19.0 201.4 182.4 2.7 212.1 214.8 -13.9 223.6 209.6 5.8 236.1 241.8 Adjustments: Transfers/lapses (net) ................................................... Other adjustments ........................................................ Total, change in fund balance ................................ * 7.9 135.2 –* 49.8 108.1 * 25.1 130.3 ......... ......... 182.4 ......... ......... 214.8 ......... ......... 209.6 ......... ......... 241.8 4,088.5 4,196.6 4,326.9 4,509.3 4,724.1 4,933.8 5,175.6 Change in fund balance: Balance, end of year ................................................................. * $50 million or less 420 ANALYTICAL PERSPECTIVES recorded as an outlay of the fund or included in fund outgo. This treatment is consistent with the broad principle that borrowing and debt redemption are not budgetary transactions but rather a means of financing deficits or disposing of surpluses.7 Some income in both Federal funds and trust funds consists of offsetting receipts. 8 Offsetting receipts are not considered governmental receipts (such as taxes) but instead are subtracted from gross outlays. There are two reasons for this treatment: • Business-like or market-oriented activities with the public: The collections from such activities are deducted from gross outlays, rather than added to receipts, in order to produce budget totals for receipts and outlays that represent governmental rather than market activity. • Intragovernmental transactions: Collections by one Government account from another are deducted from gross outlays, rather than added to receipts, so that the budget totals measure the transactions of the Government with the public. Because the income for Federal funds and for trust funds recorded in Table 27–1 includes offsetting receipts, those offsetting receipts must be deducted from the two fund groups’ combined gross income in order to reconcile 7 Borrowing and debt repayment are discussed in Chapter 11 of this volume, “Budget Concepts.” 8 Interest on borrowed funds is an example of an offsetting receipt. to total (net) unified budget receipts. Similarly, because the outgo for Federal funds and for trust funds in Table 27–1 consists of outlays gross of offsetting receipts, the amount of the offsetting receipts must be deducted from the sum of the Federal funds’ and the trust funds’ gross outgo in order to reconcile to total (net) unified budget outlays. Table 27–3 reconciles, for fiscal year 2009, the gross total of all trust fund and Federal fund receipts with the net total of the cash income of the Federal fund group and the trust fund group (as shown in Table 27–1), and with the receipt total of the unified budget. Income, Outgo, and Balances of Trust Funds Table 27–2 shows, for the trust funds group as a whole, the funds’ balance at the start of each year, income and outgo during the year, and the end-of-year balance. Income and outgo are divided between transactions with the public and transactions with Federal funds. Receipts from Federal funds are divided between interest and other interfund receipts. The definitions of income and outgo in this table differ from those in Table 27–1 in one important way. Trust fund collections that are offset against outgo (as offsetting collections) within expenditure accounts instead of being deposited in separate receipt accounts are classified as income in this table, but not in Table 27–1. This classification is consistent with the definitions of income and outgo for trust funds used elsewhere in the budget. It has the effect of increasing both income and outgo by the Table 27–3. COMPARISON OF TOTAL FEDERAL FUND AND TRUST FUND RECEIPTS TO UNIFIED BUDGET RECEIPTS, FISCAL YEAR 2009 (In billions of dollars) Gross trust fund receipts ............................................................................................................................................. Gross Federal fund receipts ........................................................................................................................................ Total, gross receipts ...................................................................................................................................................... 1,637.2 1,319.7 2,956.9 Deduct intrafund receipts (from funds within the same fund group): Trust intrafund receipts ..................................................................................................................................... Federal intrafund receipts ................................................................................................................................. Subtotal, intrafund receipts ........................................................................................................................ –5.7 –29.6 –35.3 Total trust funds and Federal funds cash income ......................................................................................................... 2,921.7 Deduct offsetting receipts: Trust fund receipts from Federal funds: Interest in receipt accounts ....................................................................................................................... General fund payment to Medicare Parts B and D ................................................................................... Employing agencies’ payments for pensions, Social Security, and Medicare ........................................... General fund payments for unfunded liabilities of Federal employees retirement funds ........................... Transfer of taxation of Social Security and RRB benefits to OASDI, HI, and RRB ................................... Other receipts from Federal funds ............................................................................................................ Subtotal, trust fund receipts from Federal funds ................................................................................. Federal fund receipts from trust funds ............................................................................................................. Proprietary receipts ......................................................................................................................................... Subtotal, offsetting receipts ...................................................................................................................... –181.6 –194.3 –60.0 –82.9 –33.5 –37.3 –589.6 –3.8 –223.3 –816.7 Unified budget receipts ................................................................................................................................................ Note: Offsetting receipts are included in cash income for each fund group, but are deducted from outlays in the unified budget. 2,105.0 27. TRUST FUNDS AND FEDERAL FUNDS amount of the offsetting collections. The difference was approximately $57 billion in 2009. Table 27–2, therefore, provides a more transparent summary of trust fund income and outgo. The trust funds group is expected to have large and growing surpluses over the projection period. As a consequence, trust fund balances are estimated to grow substantially, continuing a trend that has persisted over the past two decades. The size of the anticipated balances is unprecedented and results mainly from changes in the way some trust funds (primarily Social Security and Federal retirement funds) are financed. Because of these changes and economic growth (both real and inflationary), trust fund balances increased from $205 billion in 1982 to $4.1 trillion in 2009. The current balances are estimated to increase by more than 25 percent by the year 2015, rising to $5.2 trillion. Almost all of these balances are invested in Treasury securities and earn interest. The balances represent the value, in current dollars, of taxes and user fees that have been received by the Government and dedicated to particular programs but have not yet been spent. Until the 1980s, most trust funds operated on a payas-you-go basis. Taxes and user fees were set at levels sufficient to finance current program expenditures and administrative expenses, and to maintain balances generally equal to one year’s worth of expenditures (to provide for unexpected events). As a result, trust fund balances tended to grow at about the same rate as the fund’s annual expenditures. For some of the larger trust funds, pay-as-you-go financing was replaced in the 1980s by full or partial advance funding. The Social Security Amendments of 1983 raised payroll taxes above the levels necessary to finance current expenditures. Similarly, in 1984, a new system was set up to finance military retirement benefits on a full accrual basis and, in 1986, full accrual funding of retirement benefits was mandated for Federal civilian employees hired after December 31, 1983. The two retirement programs now require Federal agencies and employees together to pay the trust funds that disburse Federal civilian and military retirement benefits an amount equal to those accruing retirement benefits. Since many years will pass between the time when benefits are earned (or accrued) and when they are paid, the trust funds will accumulate substantial balances over time. From the perspective of the trust fund, these balances are available for future benefit payments and other fund expenditures. From the perspective of the Government, 421 the trust fund balances do not represent net resources. The trust fund balances are assets of the trust fund program agencies and liabilities of the Treasury, netting to zero for the Government as a whole. From a cash perspective, when trust fund holdings are redeemed to authorize the payment of benefits, the Department of the Treasury finances the expenditure in the same way as any other Federal expenditure—by using current receipts if the unified budget is in surplus or by borrowing from the public if it is in deficit. The existence of large trust fund balances, therefore, does not, by itself, increase the Government’s ability to pay benefits. From an economic standpoint, the Government is able to pre-fund benefits only by increasing saving and investment in the economy as a whole. This can be fully accomplished only by simultaneously running trust fund surpluses equal to the actuarial present value of the accumulating benefits while maintaining an unchanged Federal fund surplus or deficit, so that the trust fund surplus reduces the unified budget deficit or increases the unified budget surplus. This would reduce Federal borrowing from the public by the amount of the trust funds surplus and increase the amount of national saving available to finance investment. As long as the increase in Government saving is not offset by a reduction in private saving, greater investment would increase future national income, which would yield greater tax revenue to support the benefits. Table 27–4 shows estimates of income, outgo, and balances for 2009 through 2015 for the major trust funds. With the exception of transactions between trust funds, the data for the individual trust funds are conceptually the same as the data in Table 27–2 for the trust funds group. As explained previously, transactions between trust funds are shown as outgo of the fund that makes the payment and as income of the fund that collects it in the data for an individual trust fund, but the collections are offset against outgo in the data for the trust fund group as a whole. Additional information for these and other trust funds can be found in the Status of Funds tables in the Budget Appendix. Table 27–5 shows income, outgo, and balances of five Federal funds--three revolving funds and two special funds. These five funds are similar to trust funds in that they are financed by dedicated receipts, the excess of income over outgo is invested in Treasury securities, the interest earnings add to fund balances, and the balances remain available to cover future expenditures. The table is illustrative of the Federal funds group, which includes many other revolving funds and special funds. 422 ANALYTICAL PERSPECTIVES Table 27–4. INCOME, OUTGO, AND BALANCES OF MAJOR TRUST FUNDS (In billions of dollars) Estimate 2009 Actual 2010 2011 2012 2013 2014 2015 Airport and Airway Trust Fund Balance, start of year ...................................................................................... 9.7 8.8 10.4 10.4 10.7 11.8 13.6 Income: Governmental receipts .............................................................................. Proprietary receipts ................................................................................... 10.6 0.1 11.8 0.1 12.5 0.1 13.2 0.1 14.0 0.1 14.8 0.1 15.6 0.1 Receipts from Federal funds: Interest ............................................................................................... Other .................................................................................................. Receipts from Trust funds .......................................................................... Subtotal, income ................................................................................. 0.3 * ......... 11.0 0.2 0.1 ......... 12.2 0.2 0.1 ......... 12.9 0.3 0.1 ......... 13.6 0.4 0.1 ......... 14.5 0.5 0.1 ......... 15.5 0.6 0.1 ......... 16.4 Outgo: To the public ............................................................................................... Payments to Federal funds ........................................................................ Subtotal, outgo ................................................................................... 11.9 ......... 11.9 10.6 ......... 10.6 12.9 ......... 12.9 13.3 ......... 13.3 13.4 ......... 13.4 13.6 ......... 13.6 13.9 ......... 13.9 Surplus or deficit(–): Excluding interest ............................................................................... Interest ............................................................................................... Subtotal, surplus or deficit(–) ....................................................... –1.2 0.3 –0.9 1.4 0.2 1.6 –0.2 0.2 * –* 0.3 0.3 0.7 0.4 1.1 1.4 0.5 1.9 1.9 0.6 2.5 Adjustments: Transfers/lapses (net) ................................................................................ Other adjustments ..................................................................................... Total, change in fund balance ............................................................. ......... ......... –0.9 ......... ......... 1.6 ......... ......... * ......... ......... 0.3 ......... ......... 1.1 ......... ......... 1.9 ......... ......... 2.5 Balance, end of year ...................................................................................... 8.8 10.4 10.4 10.7 11.8 13.6 16.1 Balance, start of year ...................................................................................... 728.9 754.3 783.4 812.5 841.8 871.1 900.9 Income: Governmental receipts .............................................................................. Proprietary receipts ................................................................................... 4.1 ......... 4.4 ......... 4.2 ......... 4.0 ......... 3.8 ......... 3.7 ......... 3.6 ......... Receipts from Federal funds: Interest ............................................................................................... Other .................................................................................................. Receipts from Trust funds .......................................................................... Subtotal, income ................................................................................. 37.2 51.8 ......... 93.1 42.1 52.9 ......... 99.3 42.3 55.0 ......... 101.5 43.6 56.6 ......... 104.3 45.2 58.4 ......... 107.4 47.1 60.3 ......... 111.1 48.9 62.2 ......... 114.6 Outgo: To the public ............................................................................................... Payments to Federal funds ........................................................................ Subtotal, outgo ................................................................................... 67.7 ......... 67.7 70.2 ......... 70.2 72.4 ......... 72.4 75.0 ......... 75.0 78.1 ......... 78.1 81.4 ......... 81.4 84.6 ......... 84.6 Surplus or deficit(–): Excluding interest ............................................................................... Interest ............................................................................................... Subtotal, surplus or deficit(–) ....................................................... –11.8 37.2 25.4 –12.9 42.1 29.2 –13.2 42.3 29.1 –14.4 43.6 29.3 –15.9 45.2 29.3 –17.3 47.1 29.8 –18.8 48.9 30.0 Adjustments: Transfers/lapses (net) ................................................................................ Other adjustments ..................................................................................... Total, change in fund balance ............................................................. ......... ......... 25.4 ......... ......... 29.2 ......... ......... 29.1 ......... ......... 29.3 ......... ......... 29.3 ......... ......... 29.8 ......... ......... 30.0 Balance, end of year ...................................................................................... 754.3 783.4 812.5 841.8 871.1 900.9 930.9 Change in fund balance: Civil Service Retirement and Disability Fund Change in fund balance: 423 27. TRUST FUNDS AND FEDERAL FUNDS Table 27–4. INCOME, OUTGO, AND BALANCES OF MAJOR TRUST FUNDS—Continued (In billions of dollars) 2009 Estimate Actual 2010 2011 2012 2013 2014 2015 Federal Employees Health Benefits Fund Balance, start of year ...................................................................................... 15.5 15.3 14.7 14.7 14.9 15.4 16.0 Income: Governmental receipts .............................................................................. Proprietary receipts ................................................................................... ......... 10.5 ......... 11.5 ......... 12.5 ......... 13.4 ......... 14.5 ......... 15.7 ......... 16.9 Receipts from Federal funds: Interest ............................................................................................... Other .................................................................................................. Receipts from Trust funds .......................................................................... Subtotal, income ................................................................................. 0.4 26.3 ......... 37.2 0.4 27.7 ......... 39.7 0.5 29.9 ......... 42.8 0.6 31.9 ......... 45.9 0.7 34.5 ......... 49.7 0.8 37.4 ......... 53.8 0.8 40.3 ......... 58.0 Outgo: To the public ............................................................................................... Payments to Federal funds ........................................................................ Subtotal, outgo ................................................................................... 37.4 ......... 37.4 40.2 ......... 40.2 42.9 ......... 42.9 45.7 ......... 45.7 49.2 ......... 49.2 53.2 ......... 53.2 57.1 ......... 57.1 Surplus or deficit(–): Excluding interest ............................................................................... Interest ............................................................................................... Subtotal, surplus or deficit(–) ....................................................... –0.6 0.4 –0.2 –1.0 0.4 –0.6 –0.5 0.5 –0.1 –0.3 0.6 0.2 –0.2 0.7 0.5 –0.1 0.8 0.6 0.1 0.8 0.9 Adjustments: Transfers/lapses (net) ................................................................................ Other adjustments ..................................................................................... Total, change in fund balance ............................................................. ......... ......... –0.2 ......... ......... –0.6 ......... ......... –0.1 ......... ......... 0.2 ......... ......... 0.5 ......... ......... 0.6 ......... ......... 0.9 Balance, end of year ...................................................................................... 15.3 14.7 14.7 14.9 15.4 16.0 16.9 Balance, start of year ...................................................................................... 14.2 17.2 17.3 18.3 18.7 19.8 21.2 Income: Governmental receipts .............................................................................. Proprietary receipts ................................................................................... ......... 24.9 ......... 24.9 ......... 25.5 ......... 25.2 ......... 24.7 ......... 24.2 ......... 23.0 Receipts from Federal funds: Interest ............................................................................................... Other .................................................................................................. Receipts from Trust funds .......................................................................... Subtotal, income ................................................................................. ......... ......... ......... 24.9 ......... ......... ......... 24.9 ......... ......... ......... 25.5 ......... ......... ......... 25.2 ......... ......... ......... 24.7 ......... ......... ......... 24.2 ......... ......... ......... 23.0 Outgo: To the public ............................................................................................... Payments to Federal funds ........................................................................ Subtotal, outgo ................................................................................... 21.9 ......... 21.9 24.7 ......... 24.7 24.5 ......... 24.5 24.8 ......... 24.8 23.6 ......... 23.6 22.9 ......... 22.9 22.4 ......... 22.4 Surplus or deficit(–): Excluding interest ............................................................................... Interest ............................................................................................... Subtotal, surplus or deficit(–) ....................................................... 3.0 ......... 3.0 0.1 ......... 0.1 1.0 ......... 1.0 0.4 ......... 0.4 1.1 ......... 1.1 1.3 ......... 1.3 0.6 ......... 0.6 Adjustments: Transfers/lapses (net) ................................................................................ Other adjustments ..................................................................................... Total, change in fund balance ............................................................. ......... ......... 3.0 ......... ......... 0.1 ......... ......... 1.0 ......... ......... 0.4 ......... ......... 1.1 ......... ......... 1.3 ......... ......... 0.6 Balance, end of year ...................................................................................... 17.2 17.3 18.3 18.7 19.8 21.2 21.8 Change in fund balance: Foreign Military Sales Trust Fund Change in fund balance: 424 ANALYTICAL PERSPECTIVES Table 27–4. INCOME, OUTGO, AND BALANCES OF MAJOR TRUST FUNDS—Continued (In billions of dollars) 2009 Estimate Actual 2010 2011 2012 2013 2014 2015 Highway Trust Fund Balance, start of year ...................................................................................... 16.8 14.1 0.1 –13.8 –15.0 –8.3 –7.3 Income: Governmental receipts .............................................................................. Proprietary receipts ................................................................................... 35.0 0.2 36.2 * 37.1 * 37.8 * 38.7 * 39.3 * 39.6 * Receipts from Federal funds: Interest ............................................................................................... Other .................................................................................................. Receipts from Trust funds .......................................................................... Subtotal, income ................................................................................. ......... 7.2 ......... 42.3 ......... 0.2 ......... 36.5 ......... 0.2 ......... 37.4 ......... 0.2 ......... 38.1 ......... 0.2 ......... 39.0 ......... 0.2 ......... 39.5 ......... 0.2 ......... 39.9 Outgo: To the public ............................................................................................... Payments to Federal funds ........................................................................ Subtotal, outgo ................................................................................... 45.0 ......... 45.0 50.5 ......... 50.5 51.2 ......... 51.2 39.2 ......... 39.2 32.3 ......... 32.3 38.5 ......... 38.5 40.5 ......... 40.5 Surplus or deficit(–): Excluding interest ............................................................................... Interest ............................................................................................... Subtotal, surplus or deficit(–) ....................................................... –2.7 ......... –2.7 –14.0 ......... –14.0 –13.9 ......... –13.9 –1.2 ......... –1.2 6.7 ......... 6.7 1.0 ......... 1.0 –0.6 ......... –0.6 Adjustments: Transfers/lapses (net) ................................................................................ Other adjustments ..................................................................................... Total, change in fund balance ............................................................. * –* –2.7 –* ......... –14.0 ......... ......... –13.9 ......... ......... –1.2 ......... ......... 6.7 ......... ......... 1.0 ......... ......... –0.6 Balance, end of year ........................................................................................ 14.1 0.1 –13.8 –15.0 –8.3 –7.3 –7.8 Balance, start of year ...................................................................................... 318.9 309.8 280.6 248.9 225.6 193.4 142.7 Income: Governmental receipts .............................................................................. Proprietary receipts ................................................................................... 191.1 8.3 180.9 8.8 192.8 9.0 208.8 9.3 223.2 9.6 237.7 10.1 251.6 10.4 Receipts from Federal funds: Interest ............................................................................................... Other .................................................................................................. Receipts from Trust funds .......................................................................... Subtotal, income ................................................................................. 15.9 18.9 ......... 234.3 14.7 19.9 ......... 224.2 13.2 23.0 ......... 238.0 11.8 24.6 ......... 254.6 10.1 27.2 ......... 270.2 8.0 29.9 ......... 285.7 5.7 32.4 ......... 300.1 Outgo: To the public ............................................................................................... Payments to Federal funds ........................................................................ Subtotal, outgo ................................................................................... 243.4 ......... 243.4 253.5 ......... 253.5 269.6 ......... 269.6 277.8 ......... 277.8 302.4 ......... 302.4 336.4 ......... 336.4 346.9 ......... 346.9 Surplus or deficit(–): Excluding interest ............................................................................... Interest ............................................................................................... Subtotal, surplus or deficit(–) ....................................................... –25.0 15.9 –9.1 –43.9 14.7 –29.3 –44.9 13.2 –31.7 –35.0 11.8 –23.2 –42.4 10.1 –32.3 –58.6 8.0 –50.7 –52.4 5.7 –46.7 Adjustments: Transfers/lapses (net) ................................................................................ Other adjustments ..................................................................................... Total, change in fund balance ............................................................. ......... ......... –9.1 ......... ......... –29.3 ......... ......... –31.7 ......... ......... –23.2 ......... ......... –32.3 ......... ......... –50.7 ......... ......... –46.7 Balance, end of year ........................................................................................ 309.8 280.6 248.9 225.6 193.4 142.7 96.0 Change in fund balance: Medicare: Hospital Insurance (HI) Trust Fund Change in fund balance: 425 27. TRUST FUNDS AND FEDERAL FUNDS Table 27–4. INCOME, OUTGO, AND BALANCES OF MAJOR TRUST FUNDS—Continued (In billions of dollars) 2009 Estimate Actual 2010 2011 2012 2013 2014 2015 Medicare: Supplementary Medical Insurance SMI Trust Fund Balance, start of year ...................................................................................... 59.1 61.4 60.6 55.3 64.9 73.7 75.2 Income: Governmental receipts .............................................................................. Proprietary receipts ................................................................................... ......... 65.6 ......... 70.5 ......... 78.3 ......... 86.2 ......... 94.3 ......... 103.1 ......... 111.1 Receipts from Federal funds: Interest ............................................................................................... Other .................................................................................................. Receipts from Trust funds .......................................................................... Subtotal, income ................................................................................. 3.0 196.5 ......... 265.1 3.0 208.6 ......... 282.1 2.9 228.5 ......... 309.7 2.7 245.4 ......... 334.3 2.9 275.1 ......... 372.4 3.3 301.1 ......... 407.5 3.6 325.5 ......... 440.2 Outgo: To the public ............................................................................................... Payments to Federal funds ........................................................................ Subtotal, outgo ................................................................................... 262.8 ......... 262.8 282.9 ......... 282.9 315.0 ......... 315.0 324.8 ......... 324.8 363.5 ......... 363.5 405.9 ......... 405.9 433.2 ......... 433.2 Surplus or deficit(–): Excluding interest ............................................................................... Interest ............................................................................................... Subtotal, surplus or deficit(–) ....................................................... –0.7 3.0 2.3 –3.8 3.0 –0.8 –8.2 2.9 –5.3 6.8 2.7 9.5 5.9 2.9 8.8 –1.7 3.3 1.5 3.4 3.6 6.9 Adjustments: Transfers/lapses (net) ................................................................................ Other adjustments ..................................................................................... Total, change in fund balance ............................................................. ......... ......... 2.3 ......... ......... –0.8 ......... ......... –5.3 ......... ......... 9.5 ......... ......... 8.8 ......... ......... 1.5 ......... ......... 6.9 Balance, end of year ...................................................................................... 61.4 60.6 55.3 64.9 73.7 75.2 82.2 Balance, start of year ...................................................................................... 250.9 276.1 319.1 367.5 419.6 476.9 539.4 Income: Governmental receipts .............................................................................. Proprietary receipts ................................................................................... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... Receipts from Federal funds: Interest ............................................................................................... Other .................................................................................................. Receipts from Trust funds .......................................................................... Subtotal, income ................................................................................. 2.7 72.4 ......... 75.1 10.5 83.3 ......... 93.8 12.8 87.3 ......... 100.1 16.0 88.9 ......... 104.9 19.8 91.9 ......... 111.7 23.6 95.0 ......... 118.7 27.2 98.2 ......... 125.4 Outgo: To the public ............................................................................................... Payments to Federal funds ........................................................................ Subtotal, outgo ................................................................................... 50.0 ......... 50.0 50.8 ......... 50.8 51.7 ......... 51.7 52.7 ......... 52.7 54.4 ......... 54.4 56.1 ......... 56.1 57.5 ......... 57.5 Surplus or deficit(–): Excluding interest ............................................................................... Interest ............................................................................................... Subtotal, surplus or deficit(–) ....................................................... 22.4 2.7 25.2 32.5 10.5 43.0 35.6 12.8 48.4 36.1 16.0 52.1 37.4 19.8 57.3 38.9 23.6 62.5 40.7 27.2 67.9 Adjustments: Transfers/lapses (net) ................................................................................ Other adjustments ..................................................................................... Total, change in fund balance ............................................................. ......... ......... 25.2 ......... ......... 43.0 ......... ......... 48.4 ......... ......... 52.1 ......... ......... 57.3 ......... ......... 62.5 ......... ......... 67.9 Balance, end of year ...................................................................................... 276.1 319.1 367.5 419.6 476.9 539.4 607.3 Change in fund balance: Military Retirement Fund Change in fund balance: 426 ANALYTICAL PERSPECTIVES Table 27–4. INCOME, OUTGO, AND BALANCES OF MAJOR TRUST FUNDS—Continued (In billions of dollars) 2009 Estimate Actual 2010 2011 2012 2013 2014 2015 Railroad Retirement Trust Funds Balance, start of year ...................................................................................... 23.6 21.2 19.7 18.8 17.9 16.8 15.7 Income: Governmental receipts .............................................................................. Proprietary receipts ................................................................................... 4.2 –0.4 4.2 0.6 4.2 0.9 4.4 0.9 4.6 0.9 4.9 0.9 5.1 0.8 Receipts from Federal funds: Interest ............................................................................................... Other .................................................................................................. Receipts from Trust funds .......................................................................... Subtotal, income ................................................................................. * 0.4 4.1 8.5 * 0.6 4.4 9.8 0.1 0.6 4.5 10.3 0.1 0.7 4.6 10.7 0.1 0.7 4.6 10.9 0.1 0.7 4.7 11.3 0.1 0.7 4.8 11.5 Outgo: To the public ............................................................................................... Payments to Federal funds ........................................................................ Subtotal, outgo ................................................................................... 10.7 0.2 10.9 11.0 0.1 11.2 11.2 0.2 11.4 11.4 0.2 11.6 11.8 0.2 12.0 12.1 0.2 12.4 12.5 0.3 12.7 Surplus or deficit(–): Excluding interest ............................................................................... Interest ............................................................................................... Subtotal, surplus or deficit(–) ....................................................... –2.4 * –2.4 –1.4 * –1.4 –1.2 0.1 –1.1 –1.0 0.1 –1.0 –1.2 0.1 –1.1 –1.2 0.1 –1.1 –1.2 0.1 –1.2 Adjustments: Transfers/lapses (net) ................................................................................ Other adjustments ..................................................................................... Total, change in fund balance ............................................................. ......... * –2.4 –0.1 * –1.5 * 0.2 –0.9 ......... ......... –1.0 ......... ......... –1.1 ......... ......... –1.1 ......... ......... –1.2 Balance, end of year ...................................................................................... 21.2 19.7 18.8 17.9 16.8 15.7 14.5 Change in fund balance: Social Security: Old-Age, Survivors and Disability Insurance (OASDI) Trust Funds Balance, start of year ...................................................................................... 2,366.4 2,503.8 2,588.4 2,688.4 2,808.6 2,944.5 3,091.0 Income: Governmental receipts .............................................................................. Proprietary receipts ................................................................................... 654.0 0.1 635.2 0.1 674.1 0.1 720.5 0.1 765.7 0.1 809.0 0.1 855.9 0.1 Receipts from Federal funds: Interest ............................................................................................... Other .................................................................................................. Receipts from Trust funds .......................................................................... Subtotal, income ................................................................................. 118.0 35.0 ......... 807.1 118.4 39.3 ......... 793.0 119.1 42.5 ......... 835.7 122.3 45.4 ......... 888.3 128.3 49.8 ......... 943.9 135.7 53.9 ......... 998.7 144.3 58.0 ......... 1,058.3 Outgo: To the public ............................................................................................... Payments to Federal funds ........................................................................ Subtotal, outgo ................................................................................... 664.5 5.3 669.8 702.9 5.4 708.4 730.1 5.6 735.7 762.3 5.7 768.0 802.3 5.7 808.0 846.4 5.9 852.3 894.2 6.0 900.2 Surplus or deficit(–): Excluding interest ............................................................................... Interest ............................................................................................... Subtotal, surplus or deficit(–) ....................................................... 19.4 118.0 137.3 –33.8 118.4 84.6 –19.1 119.1 100.0 –2.0 122.3 120.2 7.6 128.3 135.9 10.7 135.7 146.5 13.8 144.3 158.0 Adjustments: Transfers/lapses (net) ................................................................................ Other adjustments ..................................................................................... Total, change in fund balance ............................................................. ......... ......... 137.3 ......... ......... 84.6 ......... ......... 100.0 ......... ......... 120.2 ......... ......... 135.9 ......... ......... 146.5 ......... ......... 158.0 Balance, end of year ...................................................................................... 2,503.8 2,588.4 2,688.4 2,808.6 2,944.5 3,091.0 3,249.0 Change in fund balance: 427 27. TRUST FUNDS AND FEDERAL FUNDS Table 27–4. INCOME, OUTGO, AND BALANCES OF MAJOR TRUST FUNDS—Continued (In billions of dollars) 2009 Estimate Actual 2010 2011 2012 2013 2014 2015 Unemployment Trust Fund1 Balance, start of year ...................................................................................... 73.5 22.8 16.1 15.7 5.3 5.9 14.9 Income: Governmental receipts .............................................................................. Proprietary receipts ................................................................................... 37.9 * 51.5 * 60.1 1.9 67.4 3.1 73.1 3.6 77.1 4.0 78.7 4.2 Receipts from Federal funds: Interest ............................................................................................... Other .................................................................................................. Receipts from Trust funds .......................................................................... Subtotal, income ................................................................................. 2.7 18.1 ......... 58.7 0.5 76.6 ......... 128.7 0.2 19.3 ......... 81.6 0.2 1.0 ......... 71.6 0.2 0.9 ......... 77.9 0.3 0.9 ......... 82.3 0.4 0.9 ......... 84.1 Outgo: To the public ............................................................................................... Payments to Federal funds ........................................................................ Subtotal, outgo ................................................................................... 117.3 ......... 117.3 186.0 ......... 186.0 107.1 ......... 107.1 82.0 ......... 82.0 77.3 ......... 77.3 73.3 ......... 73.3 69.5 ......... 69.5 Surplus or deficit(–): Excluding interest ............................................................................... Interest ............................................................................................... Subtotal, surplus or deficit(–) ....................................................... –61.3 2.7 –58.6 –57.8 0.5 –57.3 –25.7 0.2 –25.5 –10.6 0.2 –10.4 0.3 0.2 0.5 8.7 0.3 9.0 14.2 0.4 14.6 Adjustments: Transfers/lapses (net) ................................................................................ Other adjustments ..................................................................................... Total, change in fund balance ............................................................. ......... 7.9 –50.7 0.1 50.5 –6.7 –* 25.1 –0.4 ......... ......... –10.4 ......... ......... 0.5 ......... ......... 9.0 ......... ......... 14.6 Balance, end of year ...................................................................................... 22.8 16.1 15.7 5.3 5.9 14.9 29.5 Balance, start of year ...................................................................................... 11.5 10.9 10.3 9.6 8.9 8.1 7.4 Income: Governmental receipts .............................................................................. Proprietary receipts ................................................................................... ......... 0.5 ......... 0.4 ......... 0.4 ......... 0.4 ......... 0.3 ......... 0.3 ......... 0.3 Receipts from Federal funds: Interest ............................................................................................... Other .................................................................................................. Receipts from Trust funds .......................................................................... Subtotal, income ................................................................................. 0.6 * ......... 1.1 0.6 * ......... 1.0 0.5 * ......... 0.9 0.5 * ......... 0.9 0.4 * ......... 0.8 0.4 * ......... 0.7 0.3 * ......... 0.6 Outgo: To the public ............................................................................................... Payments to Federal funds ........................................................................ Subtotal, outgo ................................................................................... 1.7 ......... 1.7 1.7 ......... 1.7 1.6 ......... 1.6 1.6 ......... 1.6 1.5 ......... 1.5 1.5 ......... 1.5 1.4 ......... 1.4 Surplus or deficit(–): Excluding interest ............................................................................... Interest ............................................................................................... Subtotal, surplus or deficit(–) ....................................................... –1.2 0.6 –0.5 –1.2 0.6 –0.7 –1.2 0.5 –0.7 –1.2 0.5 –0.7 –1.2 0.4 –0.7 –1.1 0.4 –0.8 –1.1 0.3 –0.8 Adjustments: Transfers/lapses (net) ................................................................................ Other adjustments ..................................................................................... Total, change in fund balance ............................................................. ......... ......... –0.5 ......... ......... –0.7 ......... ......... –0.7 ......... ......... –0.7 ......... ......... –0.7 ......... ......... –0.8 ......... ......... –0.8 Balance, end of year ...................................................................................... 10.9 10.3 9.6 8.9 8.1 7.4 6.6 Change in fund balance: Veterans Life Insurance Funds Change in fund balance: 428 ANALYTICAL PERSPECTIVES Table 27–4. INCOME, OUTGO, AND BALANCES OF MAJOR TRUST FUNDS—Continued (In billions of dollars) 2009 Estimate Actual 2010 2011 2012 2013 2014 2015 Other Trust Funds Balance, start of year ...................................................................................... 64.7 73.3 76.3 81.0 87.8 95.5 103.4 Income: Governmental receipts .............................................................................. Proprietary receipts ................................................................................... 5.0 5.5 5.1 5.5 6.6 5.7 7.5 5.8 7.8 5.9 8.1 6.1 8.3 6.2 Receipts from Federal funds: Interest ............................................................................................... Other .................................................................................................. Receipts from Trust funds .......................................................................... Subtotal, income ................................................................................. 2.5 21.1 * 34.1 2.7 15.5 * 28.8 3.0 15.9 * 31.2 3.4 16.4 * 33.1 4.0 16.8 * 34.5 3.9 17.5 * 35.6 4.2 18.0 * 36.8 Outgo: To the public ............................................................................................... Payments to Federal funds ........................................................................ Subtotal, outgo ................................................................................... 25.5 * 25.5 25.0 * 25.1 25.8 * 25.8 26.2 * 26.3 26.8 0.1 26.8 27.6 0.1 27.7 27.1 0.1 27.2 Surplus or deficit(–): Excluding interest ............................................................................... Interest ............................................................................................... Subtotal, surplus or deficit(–) ....................................................... 6.1 2.5 8.6 1.1 2.7 3.8 2.4 3.0 5.4 3.4 3.4 6.8 3.7 4.0 7.7 4.1 3.9 7.9 5.4 4.2 9.5 Adjustments: Transfers/lapses (net) ................................................................................ Other adjustments ..................................................................................... Total, change in fund balance ............................................................. * –* 8.6 * –0.7 3.1 * –0.8 4.6 ......... ......... 6.8 ......... ......... 7.7 ......... ......... 7.9 ......... ......... 9.5 Change in fund balance: Balance, end of year ....................................................................................... 73.3 76.3 81.0 87.8 95.5 103.4 112.9 * $50 million or less. Note: Balances shown include committed and uncommitted cash balances. 1 The large adjustments for the Unemployment Trust Fund shown in 2009, 2010, and 2011 reflect the Fund’s borrowing from the general fund for use by the States to pay benefits resulting from the economic recession. 429 27. TRUST FUNDS AND FEDERAL FUNDS Table 27–5. INCOME, OUTGO, AND BALANCES OF SELECTED FEDERAL FUNDS (In billions of dollars) 2009 Estimate Actual 2010 2011 2012 2013 2014 2015 Abandoned Mine Reclamation Fund Balance, start of year ....................................................................................... 2.4 2.5 2.6 2.8 2.9 2.9 2.9 Income: Governmental receipts ............................................................................... Proprietary receipts .................................................................................... 0.3 * 0.3 ......... 0.3 ......... 0.3 ......... 0.3 ......... 0.3 ......... 0.3 ......... Receipts from Federal funds: Interest ................................................................................................ Other ................................................................................................... Receipts from Trust funds ........................................................................... Subtotal, income .................................................................................. 0.1 ......... ......... 0.3 0.1 ......... ......... 0.3 0.1 ......... ......... 0.4 0.1 ......... ......... 0.4 0.1 ......... ......... 0.3 0.1 ......... ......... 0.3 0.1 ......... ......... 0.3 Outgo: To the public ................................................................................................ Payments to Federal funds ......................................................................... Subtotal, outgo .................................................................................... 0.2 ......... 0.2 0.2 ......... 0.2 0.2 ......... 0.2 0.3 ......... 0.3 0.3 ......... 0.3 0.3 ......... 0.3 0.3 ......... 0.3 Surplus or deficit(–): Excluding interest ................................................................................ Interest ................................................................................................ Subtotal, surplus or deficit(–) ........................................................ 0.1 0.1 0.1 * 0.1 0.1 * 0.1 0.1 * 0.1 0.1 -* 0.1 * –0.1 0.1 * –0.1 0.1 * Adjustments: Transfers/lapses (net) ................................................................................. Other adjustments ...................................................................................... Total, change in fund balance .............................................................. -* ......... 0.1 ......... ......... 0.1 ......... ......... 0.1 ......... ......... 0.1 ......... ......... * ......... ......... * ......... ......... * Balance, end of year ........................................................................................ 2.5 2.6 2.8 2.9 2.9 2.9 2.9 Balance, start of year ....................................................................................... 7.2 7.6 8.3 8.5 9.6 10.4 11.3 Income: Governmental receipts ............................................................................... Proprietary receipts .................................................................................... ......... 0.5 ......... 1.8 ......... 11.1 ......... 1.3 ......... 0.8 ......... 0.9 ......... 0.9 Receipts from Federal funds: Interest ................................................................................................ Other ................................................................................................... Receipts from Trust funds ........................................................................... Subtotal, income .................................................................................. 0.2 10.0 ......... 10.6 0.2 ......... ......... 2.0 0.2 ......... ......... 11.3 0.3 ......... ......... 1.5 0.3 ......... ......... 1.2 0.4 ......... ......... 1.2 0.4 ......... ......... 1.3 Outgo: To the public ................................................................................................ Payments to Federal funds ......................................................................... Subtotal, outgo .................................................................................... 10.2 ......... 10.2 1.3 ......... 1.3 11.1 ......... 11.1 0.5 ......... 0.5 0.4 ......... 0.4 0.3 ......... 0.3 0.6 ......... 0.6 Surplus or deficit(–): Excluding interest ................................................................................ Interest ................................................................................................ Subtotal, surplus or deficit(–) ........................................................ 0.2 0.2 0.4 0.6 0.2 0.7 -* 0.2 0.2 0.8 0.3 1.1 0.5 0.3 0.8 0.6 0.4 0.9 0.3 0.4 0.7 Adjustments: Transfers/lapses (net) ................................................................................. Other adjustments ...................................................................................... Total, change in fund balance .............................................................. ......... ......... 0.4 ......... ......... 0.7 ......... ......... 0.2 ......... ......... 1.1 ......... ......... 0.8 ......... ......... 0.9 ......... ......... 0.7 Balance, end of year ........................................................................................ 7.6 8.3 8.5 9.6 10.4 11.3 12.0 Change in fund balance: National Credit Union Share Insurance Fund Change in fund balance: 430 ANALYTICAL PERSPECTIVES Table 27–5. INCOME, OUTGO, AND BALANCES OF SELECTED FEDERAL FUNDS—Continued (In billions of dollars) 2009 Estimate Actual 2010 2011 2012 2013 2014 2015 Department of Defense Medicare-Eligible Retiree Health Care Fund Balance, start of year ....................................................................................... 132.8 146.8 164.6 182.6 201.9 222.4 244.2 Income: Governmental receipts ............................................................................... Proprietary receipts .................................................................................... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... ......... Receipts from Federal funds: Interest ................................................................................................ Other ................................................................................................... Receipts from Trust funds ........................................................................... Subtotal, income .................................................................................. 1.1 21.3 ......... 22.4 5.3 21.1 ......... 26.4 5.7 21.7 ......... 27.4 6.8 22.7 ......... 29.4 7.7 23.8 ......... 31.5 8.8 25.0 ......... 33.8 9.7 26.3 ......... 36.0 Outgo: To the public ................................................................................................ Payments to Federal funds ......................................................................... Subtotal, outgo .................................................................................... 8.4 ......... 8.4 8.6 ......... 8.6 9.4 ......... 9.4 10.2 ......... 10.2 11.0 ......... 11.0 12.0 ......... 12.0 12.9 ......... 12.9 Surplus or deficit(–): Excluding interest ................................................................................ Interest ................................................................................................ Subtotal, surplus or deficit(–) ........................................................ 12.9 1.1 14.0 12.5 5.3 17.8 12.3 5.7 18.0 12.5 6.8 19.3 12.8 7.7 20.5 13.1 8.8 21.8 13.3 9.7 23.1 Adjustments: Transfers/lapses (net) ................................................................................. Other adjustments ...................................................................................... Total, change in fund balance .............................................................. ......... ......... 14.0 ......... ......... 17.8 ......... ......... 18.0 ......... ......... 19.3 ......... ......... 20.5 ......... ......... 21.8 ......... ......... 23.1 Balance, end of year ........................................................................................ 146.8 164.6 182.6 201.9 222.4 244.2 267.3 Balance, start of year ....................................................................................... 4.6 4.8 4.9 5.0 5.2 5.4 5.6 Income: Governmental receipts ............................................................................... Proprietary receipts .................................................................................... ......... * ......... * ......... * ......... * ......... * ......... * ......... * Receipts from Federal funds: Interest ................................................................................................ Other ................................................................................................... Receipts from Trust funds ........................................................................... Subtotal, income .................................................................................. 0.2 * ......... 0.3 0.2 * ......... 0.2 0.2 * ......... 0.3 0.2 * ......... 0.2 0.2 * ......... 0.3 0.2 * ......... 0.3 0.3 * ......... 0.3 Outgo: To the public ................................................................................................ Payments to Federal funds ......................................................................... Subtotal, outgo .................................................................................... 0.1 ......... 0.1 0.1 ......... 0.1 0.1 ......... 0.1 0.1 ......... 0.1 0.1 ......... 0.1 0.1 ......... 0.1 0.1 ......... 0.1 Surplus or deficit(–): Excluding interest ................................................................................ Interest ................................................................................................ Subtotal, surplus or deficit(–) ........................................................ * 0.2 0.2 -* 0.2 0.2 -* 0.2 0.2 -* 0.2 0.2 -* 0.2 0.2 -* 0.2 0.2 -* 0.3 0.3 Adjustments: Transfers/lapses (net) ................................................................................. Other adjustments ...................................................................................... Total, change in fund balance .............................................................. –0.1 ......... 0.2 –0.1 ......... 0.1 –0.1 ......... 0.1 ......... ......... 0.2 ......... ......... 0.2 ......... ......... 0.2 ......... ......... 0.3 Balance, end of year ........................................................................................ 4.8 4.9 5.0 5.2 5.4 5.6 5.9 Change in fund balance: Overseas Private Investment Corporation Change in fund balance: 431 27. TRUST FUNDS AND FEDERAL FUNDS Table 27–5. INCOME, OUTGO, AND BALANCES OF SELECTED FEDERAL FUNDS—Continued (In billions of dollars) 2009 Estimate Actual 2010 2011 2012 2013 2014 2015 Pension Benefit Guaranty Corporation Fund Balance, start of year ....................................................................................... 13.2 13.1 13.1 14.2 15.1 15.1 14.3 Income: Governmental receipts ............................................................................... Proprietary receipts .................................................................................... ......... 4.3 ......... 5.6 ......... 7.5 ......... 8.3 ......... 8.4 ......... 8.7 ......... 9.0 Receipts from Federal funds: Interest ................................................................................................ Other ................................................................................................... Receipts from Trust funds ........................................................................... Subtotal, income .................................................................................. 0.2 ......... ......... 4.5 0.8 ......... ......... 6.4 0.9 ......... ......... 8.3 0.9 ......... ......... 9.2 0.9 ......... ......... 9.3 0.9 ......... ......... 9.6 0.8 ......... ......... 9.8 Outgo: To the public ................................................................................................ Payments to Federal funds ......................................................................... Subtotal, outgo .................................................................................... 4.7 ......... 4.7 6.3 ......... 6.3 7.2 ......... 7.2 8.3 ......... 8.3 9.4 ......... 9.4 10.4 ......... 10.4 11.4 ......... 11.4 Surplus or deficit(–): Excluding interest ................................................................................ Interest ................................................................................................ Subtotal, surplus or deficit(–) ........................................................ –0.4 0.2 –0.2 –0.7 0.8 0.1 0.2 0.9 1.1 * 0.9 0.9 –0.9 0.9 -* –1.7 0.9 –0.8 –2.4 0.8 –1.6 Adjustments: Transfers/lapses (net) ................................................................................. Other adjustments ...................................................................................... Total, change in fund balance .............................................................. ......... ......... –0.2 ......... ......... 0.1 ......... ......... 1.1 ......... ......... 0.9 ......... ......... -* ......... ......... –0.8 ......... ......... –1.6 13.1 13.1 14.2 15.1 15.1 14.3 12.7 Change in fund balance: Balance, end of year ........................................................................................ * $50 million or less. Note: Balances shown include committed and uncommitted cash balances. 28. NATIONAL INCOME AND PRODUCT ACCOUNTS Federal transactions in the NIPAs are measured according to NIPA accounting concepts and as a result they differ from the budget in netting and grossing, timing, and coverage. These differences cause current receipts and expenditures in the NIPAs to differ from total receipts and outlays in the budget, albeit by relatively small amounts.2 Differences in timing and coverage also cause the NIPA measure of net Federal Government saving to differ from the budget surplus or deficit. Unlike timing and coverage differences, netting and grossing differences have equal effects on receipts and expenditures and thus have no effect on net Government saving. The NIPAs also combine transactions into different categories from those used in the budget. July 2009 NIPA Revisions.--Comprehensive revisions to the NIPAs introduced in July 2009 changed the way Federal transactions are measured in the NIPAs, and the ways in which the NIPAs differ from the budget. The most important of these differences are a change in the treatment of Federal transactions with U.S. territories and a change in the treatment of insurance payouts (such as for the National Flood Insurance Program). Previously, Federal transactions with territories were omitted from the NIPAs because they were not treated as part of the United States, but neither were they treated as foreign countries (part of the “rest of the world”). The new treatment includes them in the NIPAs as transactions with the “rest of the world.” Federal insurance payouts associated with catastrophic events are now treated as capital transfers. Previously, large discrete insurance claim payouts associated with major disasters (such as Hurricane Katrina) were treated as negative current capital transfer receipts from business. Netting and grossing differences arise because the budget records certain transactions as offsets to outlays that are recorded as current receipts in the NIPAs (or vice versa). The budget treats all income that comes to the Government due to its sovereign powers—mainly, but not exclusively, taxes—as governmental receipts. The budget offsets against outlays any income that arises from voluntary business-type transactions with the public. The NIPAs generally follow this concept as well, and income to Government revolving accounts (such as the Government Printing Office) is offset against their expenditures. However, the NIPAs have a narrower definition of “business-type transactions’’ than does the budget. Rents and royalties, and some regulatory or inspection fees, which are classified as offsets to outlays in the budget, are recorded in the NIPAs as Government receipts (income receipts on assets and current transfer receipts, respectively). The NIPAs include Medicare premiums as Government receipts, while the budget classifies them as business-type transactions (offsetting receipts). In addition, the NIPAs treat the net surplus of Government en- 1 The NIPA government sector consists of the Federal subsector and a State and local subsector that is a single set of transactions for all U.S. State and local units of government, treated as a consolidated entity. 2 Over the period 1994–2008, NIPA current expenditures averaged 4.1 percent higher than budget outlays, while NIPA current receipts averaged 2.7 percent higher than budget receipts. The National Income and Product Accounts (NIPAs) are an integrated set of statistics prepared by the Department of Commerce that measure aggregate U.S. economic activity. Because the NIPAs include Federal transactions and are widely used in economic analysis, it is important to understand the differences between the NIPAs’ distinctive presentation of Federal transactions and that of the budget. The main purpose of the NIPAs is to measure the Nation’s total production of goods and services, known as gross domestic product (GDP), and the incomes generated in its production. GDP excludes intermediate production to avoid double counting. Government consumption expenditures along with government gross investment— State and local as well as Federal—are included in GDP as part of final output, together with personal consumption expenditures, gross private domestic investment, and net exports of goods and services (exports minus imports). Not all government expenditures are counted in GDP. Benefit payments to individuals, grants to State and local governments, subsidies, and interest payments are not purchases of final output and are therefore not included in GDP. However, these transactions are recorded in the NIPA government account that records current receipts and expenditures (including depreciation on government gross investment) because all of these affect the government’s claim on economic resources. Federal transactions are included in the NIPAs as part of the government sector. 1 The Federal subsector is designed to measure certain important economic effects of Federal transactions in a way that is consistent with the conceptual framework of the entire set of integrated accounts. The NIPA Federal subsector is not itself a budget, because it is not a financial plan for proposing, determining, and controlling the fiscal activities of the Government. For example, it omits from its current receipts and current expenditures certain “capital transfers’’ (such as estate and gift tax receipts) that are recorded in the budget. NIPA concepts also differ in many other ways from budget concepts, and therefore the NIPA presentation of Federal finances is significantly different from that of the budget. Differences between the NIPAs and the Budget 433 434 terprises, such as the Postal Service, as a component of current receipts. In the budget, any intragovernmental income paid from one account to another is offset against outlays rather than being recorded as a receipt so that total outlays and receipts measure only transactions with the public. For example, Government contributions for Federal employee social insurance (such as Social Security) are offset against outlays. In contrast, the NIPAs treat the Federal Government like any other employer and show contributions for Federal employee social insurance as expenditures by the employing agencies and as current receipts, rather than offsets against outlays. The NIPAs also display certain transactions that are not recorded explicitly in the budget. For example, unemployment benefits for Federal employees are financed by direct appropriations rather than social insurance contributions. The NIPAs impute the social insurance contributions to the expenditures of employing agencies—again, treating the Federal Government like any other employer. Timing differences for receipts occur because the NIPAs generally record business taxes when they accrue, while the budget generally records receipts when they are received. Thus the NIPAs attribute corporations’ final settlement payments back to the quarter(s) in which the profits that gave rise to the tax liability occurred. The delay between accrual of liability and Treasury receipt of payment can result in significant timing differences between NIPA and budget measures of receipts for any given accounting period. Timing differences also occur for expenditures. When the first day of a month falls on a weekend or holiday, monthly benefit checks normally deposited on the first day of the month may be deposited a day or two earlier; the budget then reflects two payments in one month and none the next. As a result, the budget totals occasionally reflect 13 monthly payments in one year and only 11 the next. NIPA expenditure figures always reflect 12 benefit payments per year, giving rise to a timing difference compared to the budget. Coverage differences arise on the expenditure side because of the NIPA treatment of Government investment. The budget includes outlays for Federal investments as they are paid, while the NIPA Federal current account excludes current investments but includes a depreciation charge on past investments (“consumption of general government fixed capital’’) as part of “current expenditures.’’ The inclusion of depreciation on fixed capital (structures, equipment and software) in current expenditures can be thought of as a proxy for the services that capital renders; i.e., for its contribution to Government output of public services. The depreciation charge is not a full reflection of capital services, however, since it does not include the net return to capital that in a private corporation would appear as interest income or profit. The NIPAs would need to include an imputed interest charge for government capital to assure a fully parallel treatment. Certain items in the budget are excluded from the NIPA Federal current account because they are related to the acquisition or sale of assets, and not linked to current ANALYTICAL PERSPECTIVES consumption or income. Examples include Federal grants to State and local governments for capital investment, investment subsidies to business, lump sum payments to amortize the unfunded liability of the Uniformed Services Retiree Health Care Fund and the Postal Service Retiree Health Benefits Fund, and forgiveness of debt owed by foreign governments. Likewise, estate and gift taxes, included in budget receipts, are excluded from NIPA current receipts as being capital transfers. The NIPAs also exclude the proceeds from the sales of nonproduced assets such as land. Bonuses paid on Outer Continental Shelf oil leases and proceeds from broadcast spectrum auctions are shown as offsetting receipts in the budget and are deducted from budget outlays. In the NIPAs these transactions are excluded from the Federal current account as an exchange of assets with no current production involved. The NIPAs are not strictly consistent in this interpretation, however, since they do include in total revenues the taxation of capital gains. The treatment of Government pension plan income and outgo creates a coverage difference. Whereas the budget treats employee payments to these pension plans as governmental receipts, and employer contributions by agencies as offsets to outlays because they are intragovernmental, the NIPAs treat employer contributions as personal income and employee payments as a transfer of income within the household sector, in the same way as it treats contributions to pension plans in the private (household) sector. Likewise, the budget records a Government check to a retired Government employee as an outlay, but under NIPA concepts, no Government expenditure occurs at that time; the payment is treated (like private pension payments) as a transfer of income within the household sector. Financial transactions such as loan disbursements, loan repayments, loan asset sales, and loan guarantees are excluded from the NIPA current accounts on the grounds that such transactions simply involve an exchange of assets rather than current production, income, or consumption. In contrast, under the Federal Credit Reform Act of 1990, the budget records the estimated subsidy cost of the direct loan or loan guarantee as an outlay at the time when the loan is disbursed. The cash flows with the public are recorded in nonbudgetary accounts as a means of financing the budget rather than as budgetary transactions. This treatment recognizes that a Federal direct loan is an exchange of assets with equal value after allowing for the subsidy to the borrower implied by the terms of the loan. It also recognizes the subsidy element in loan guarantees. In the NIPAs current accounts, these subsidies are not recognized. Exclusion from the NIPA current accounts of asset purchases, direct loans, and loan guarantees under the Troubled Asset Relief Program (TARP) and other financial stabilization measures gave rise to the largest difference between budget and NIPA expenditures totals in 2009. The NIPAs, like the budget, include all interest transactions with the public, including interest received by and paid to the loan financing accounts; and both the NIPAs and the budget include administrative costs of credit program operations. 435 28. NATIONAL INCOME AND PRODUCT ACCOUNTS TREATMENT OF FINANCIAL STABILIZATION PROGRAMS U.S. financial stabilization efforts include programs administered by Executive Branch agencies (principally Treasury, the Federal Deposit Insurance Corporation (FDIC), and the National Credit Union Administration (NCUA)) and by the Federal Reserve. The Troubled Assets Relief Program (TARP), administered by Treasury, has injected capital into banks and other financial institutions by purchasing preferred stock, guaranteed assets of financial institutions, and provided loans and other support to the auto industry. Treasury has also provided support for the major Government Sponsored Enterprises in the housing area, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac), which have been placed under conservatorship by the Federal Housing Finance Administration, including purchasing GSE preferred stock and purchasing mortgage-backed securities issued by GSEs. The FDIC and NCUA have taken steps to provide liquidity to the banking industry. The Executive Branch actions in support of financial stabilization give rise to a number of differences between the budget and the NIPAs. As mentioned in the main text, deposit insurance transactions of the FDIC and NCUA are recorded on a cash basis in the budget but only premiums are included in the NIPAs. Likewise, purchase of GSE preferred stock is recorded in the budget on a cash basis, but is excluded from the NIPA current accounts; GSE preferred stock purchases, however, are scored as capital transfers. Many of the Treasury’s financial stabilization programs, including TARP equity purchases, are recorded in the budget on a credit basis, in which the budget recognizes the estimated subsidy value of direct loans, loan guarantees, and equity purchases at the time the loan or purchase is made. Under the Emergency Economic Stabilization Act of 2008, this credit treatment was extended to equity purchases under the Troubled Asset Relief Program, as well as loans. As mentioned in the text, the NIPAs normally exclude the principal disbursements and repayments of credit transactions as exchanges of assets with no current production involved; the interest and dividend receipts, however, are included in NIPA current receipts as receipts on assets. For certain transactions, the NIPAs will recognize the subsidy conveyed by these transactions by recording capital transfers, calculated as the difference between the actual price paid for the financial asset and an estimate of its market value. This capital transfer treatment applies to preferred stock purchases and purchases of warrants for common stock. Both the Budget and the NIPAs treat the Federal Reserve System (the Fed) as if it were a nonfederal entity; thus, those financial stabilization efforts undertaken by the Federal Reserve (assistance to AIG and Bear Stearns, for example) are not scored in either the Budget or NIPA current expenditures. Both the budget and the NIPAs treat GSEs in a similar way to their treatment of the Fed, and they continue to treat the two GSEs in conservatorship in the same manner. Similarly to loan transactions, deposit insurance outlays for resolving failed banks and thrift institutions are excluded from the NIPAs on the grounds that there are no offsetting current income flows from these transactions. This exclusion creates a particularly large difference in 2009, because of large outlays to liquidate failed bank deposits. In a similar episode in 1991, this exclusion was the largest difference between the NIPAs and the budget and made NIPA net Government saving a significantly smaller negative number than the budget deficit that year. In subsequent years, as assets acquired from failed financial institutions were sold, these collections tended to make the budget deficit a smaller negative figure than NIPA net Federal Government saving. Federal Sector Current Receipts Table 28–1 shows the NIPA classification of Federal current receipts in five major categories and four of the subcategories used to measure taxes, which are similar to the budget categories but with some significant differences. Current tax receipts is the largest category of current receipts, and its personal current taxes subcategory— composed primarily of the individual income tax—is the largest single subcategory. The NIPAs’ taxes on corporate income subcategory differs in classification from the corresponding budget category primarily because the NIPAs include the deposit of earnings of the Federal Reserve System as corporate income taxes, while the budget treats these collections as miscellaneous receipts. (The timing difference between the NIPAs and the budget is especially large for corporate receipts.) The taxes on production and imports subcategory is composed of excise taxes and customs duties. Contributions for Government social insurance is the second largest category of current receipts. It differs from the corresponding budget category primarily because: (1) the NIPAs include Federal employer contributions for social insurance as a governmental receipt, while the budget offsets these contributions against outlays as undistributed offsetting receipts; (2) the NIPAs include premiums for Parts B and D of Medicare as governmental receipts, while the budget nets them against outlays; (3) the NIPAs treat Government employee contributions to their pension plans as a transfer of personal income within the household sector (as if the pension system were private), while the budget includes them in governmental receipts; and (4) the NIPAs impute employer contributions for Federal employees’ unemployment insurance and workers’ compensation. The income receipts on assets category consists mainly of interest payments received on Government direct loans (such as student loans), rents and royalties on Outer Continental Shelf oil leases, and, beginning in 2009, dividends received on preferred stock. The current transfer receipts category consists primarily of deposit insurance premiums, fees, fines and other receipts from both indi- 436 ANALYTICAL PERSPECTIVES viduals and businesses, less insurance settlements from the National Flood Insurance Program—virtually all of which are netted against outlays in the budget. The current surplus (or deficit) of Government enterprises category is the profit or loss of “Government enterprises,’’ such as the Postal Service, which are business-type operations of Government that usually appear in the budget as public enterprise revolving funds. Depreciation (consumption of enterprise fixed capital) is netted in calculating the current surplus of Government enterprises. Table 28–1. FEDERAL TRANSACTIONS IN THE NATIONAL INCOME AND PRODUCT ACCOUNTS, 2000-2011 (In billions of dollars) Description Estimate 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Current tax receipts .................................................................................... 1302.9 1263.9 1095.5 1056.5 1115.7 1346.2 1538.5 1641.2 1491.6 Personal current taxes ........................................................................... 985.1 991.4 849.4 781.5 782.3 913.2 1033.7 1142.3 1124.9 Taxes on production and imports ........................................................... 87.3 85.9 85.9 88.7 93.4 98.0 99.1 95.8 92.9 Taxes on corporate income ................................................................... 223.5 179.1 152.4 177.8 230.8 323.0 393.8 387.6 258.7 Taxes from the rest of the world ............................................................. 6.9 7.5 7.7 8.4 9.3 12.0 11.8 15.5 15.1 Contributions for government social insurance ........................................... 693.3 719.5 734.4 753.4 795.4 847.9 892.7 936.0 969.7 Income receipts on assets .......................................................................... 23.6 25.2 21.6 21.6 23.1 24.1 25.2 27.9 31.7 Current transfer receipts ............................................................................. 25.9 25.6 27.5 24.9 27.8 32.4 38.1 40.5 48.0 Current surplus of government enterprises ................................................ –* –4.9 –0.9 4.0 1.7 –3.7 –3.3 –2.3 –3.3 1195.1 881.1 90.5 210.5 13.1 958.2 34.6 70.0 –3.4 1312.5 928.5 100.6 272.0 11.4 987.5 40.4 63.6 –3.4 1624.7 1076.1 105.3 431.9 11.4 1054.4 45.3 64.2 –6.6 Total current receipts ............................................................ 2045.7 2029.3 1878.1 1860.3 1963.7 2246.9 2491.2 2643.4 2537.7 2254.5 2400.6 2782.1 Consumption expenditures ......................................................................... 493.9 516.9 574.1 646.3 704.7 756.5 797.6 831.3 909.5 Defense ................................................................................................. 321.5 335.5 367.6 422.9 469.7 507.3 531.3 562.8 616.7 Nondefense ........................................................................................... 172.3 181.3 206.6 223.4 235.0 249.3 266.3 268.4 292.8 Current transfer payments .......................................................................... 1032.6 1116.7 1226.0 1317.0 1392.2 1473.4 1566.0 1658.5 1803.5 Government social benefits ................................................................... 768.1 828.0 905.8 960.5 1014.9 1076.9 1166.6 1248.2 1372.0 Grants-in-aid to State and local governments ....................................... 244.0 268.2 296.7 328.4 347.8 359.6 360.9 372.5 386.1 Other transfers to the rest of the world .................................................. 20.4 20.5 23.5 28.1 29.5 37.0 38.5 37.8 45.5 Interest payments ....................................................................................... 283.2 267.9 234.5 215.7 215.8 242.8 284.4 302.2 313.6 Subsidies ................................................................................................... 45.3 51.3 41.0 48.1 44.6 57.6 54.6 47.8 49.3 Wage disbursements less accruals ............................................................ ......... ......... ......... ......... ......... ......... ......... ......... ......... 975.7 653.4 322.3 2076.9 1570.2 460.1 46.7 233.7 56.4 ......... 1073.0 704.8 368.2 2411.0 1799.7 558.3 53.0 289.0 80.0 ......... 1103.3 730.2 373.1 2380.9 1756.9 566.0 58.0 359.8 87.4 ......... Total current expenditures .................................................... 1855.0 1952.8 2075.6 2227.0 2357.4 2530.2 2702.7 2839.7 3075.9 3342.7 3853.0 3931.4 CURRENT RECEIPTS CURRENT EXPENDITURES Net Federal Government saving ........................................... 190.7 76.5 –197.5 –366.7 –393.8 –283.4 –211.5 –196.4 –538.2 –1088.2 –1452.4 –1149.4 ADDENDUM: TOTAL RECEIPTS AND EXPENDITURES Current receipts .......................................................................................... 2045.7 2029.3 1878.1 1860.3 1963.7 2246.9 2491.2 2643.4 2537.7 Capital transfer receipts .............................................................................. 28.8 28.2 26.4 21.7 24.7 24.6 27.7 25.8 28.6 2254.5 23.2 2400.6 16.8 2782.1 24.8 Total receipts .......................................................................... 2074.5 2057.5 1904.5 1882.1 1988.3 2271.4 2518.9 2669.2 2566.3 2277.8 2417.4 2806.9 Current expenditures .................................................................................. 1855.0 1952.8 2075.6 2227.0 2357.4 2530.2 2702.7 2839.7 3075.9 Net investment: Gross government investment: Defense .......................................................................................... 48.9 50.5 55.7 61.4 67.1 73.8 78.6 86.1 98.8 Nondefense .................................................................................... 32.5 30.1 32.9 33.7 33.5 34.8 40.0 40.2 42.2 Less: Consumption of fixed capital: ....................................................... Defense .......................................................................................... 60.6 60.5 60.3 61.4 63.7 67.8 72.0 76.2 81.7 Nondefense .................................................................................... 26.6 28.0 28.6 29.0 29.7 31.3 33.0 34.8 36.5 Capital transfer payments ........................................................................... 39.5 41.0 45.2 51.3 62.2 83.7 69.5 69.5 86.4 Net purchases of nonproduced assets ....................................................... –0.2 –0.8 0.3 –* 0.1 –0.7 –0.3 –13.9 –10.0 3342.7 3853.0 3931.4 112.0 46.9 128.0 52.2 132.7 58.0 85.4 40.1 266.0 –16.9 89.6 40.6 238.3 –0.2 93.3 41.1 144.6 –3.6 Total expenditures ................................................................. 1888.5 1985.0 2120.8 2283.0 2427.0 2622.7 2785.5 2910.6 3175.1 3625.3 4141.0 4128.6 Net lending or net borrowing (–) .......................................... * $50 million or less. 186.0 72.5 –216.3 –400.9 –438.7 –351.3 –266.6 –241.4 –608.8 –1347.5 –1723.7 –1321.7 437 28. NATIONAL INCOME AND PRODUCT ACCOUNTS Federal Sector Current Expenditures Table 28–1 shows the five major NIPA categories for current expenditures and five subcategories, which differ greatly from the corresponding budget categories. Government consumption expenditures consist of goods and services purchased by the Federal Government, including compensation of employees and depreciation on fixed capital. Gross investment (shown among the addendum items in Table 28–1) is thus excluded from current expenditures and does not figure in computing net Government saving on a NIPA basis, whereas depreciation—charges on federally-owned fixed capital (“consumption of general government fixed capital’’)—is included. The NIPAs treat State and local investment and capital consumption in the same way—regardless of the extent to which it is financed with Federal aid (capital transfer payments) or from State and local own-source receipts. Although gross investment is not included in Government current expenditures, Government gross investment is included in total GDP along with current consumption expenditures (including depreciation), which makes the treatment of the government sector in the NIPAs similar to that of the private sector. Investment includes structures, equipment, and computer software. The largest expenditure category consists mainly of current transfer payments for Government income security and health benefits, such as Social Security and Medicare. Payment of pension benefits to former Government employees is not included, as explained previously. Grantsin-aid to State and local governments help finance a range of programs, including income security, Medicaid, and education (but capital transfer payments for construction of highways, airports, waste-water treatment plants, and mass transit are excluded). “Current transfer payments to the rest of the world (net)’’ consists mainly of grants to foreign governments and U.S. territories. Interest payments consist of the interest paid by the Government on its debt (excluding debt held by trust funds, other than Federal employee pension plans; and other Government accounts). Where the budget nets interest received on loans against outlays, the NIPAs treat it as current receipts. Subsidies consist of subsidy payments for resident businesses (excluding subsidies for investment). NIPA subsidies do not include the imputed credit subsidies estimated as budget outlays under credit reform. Rather, as explained previously loans and guarantees are excluded from the NIPAs except for associated interest and fees. Wage disbursements less accruals is an adjustment that is necessary to the extent that the wages paid in a period differ from the amount earned in the period. Table 28–2. RELATIONSHIP OF THE BUDGET TO THE FEDERAL SECTOR, NIPAs Description Estimate 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 RECEIPTS Budget receipts ................................................................................................. Contributions to government employee retirement plans ............................ Capital transfers received ............................................................................ Other coverage differences .......................................................................... Netting and grossing .................................................................................... Timing differences ....................................................................................... 2025.2 1991.1 1853.1 1782.3 1880.1 2153.6 2406.9 2568.0 2524.0 2105.0 2165.1 2567.2 –4.8 –4.7 –4.6 –4.6 –4.6 –4.5 –4.4 –4.3 –4.2 –4.1 –4.4 –4.3 –28.8 –28.2 –26.4 –21.7 –24.7 –24.6 –27.7 –25.8 –28.6 –23.2 –16.8 –24.8 –4.9 –4.6 –5.6 –5.7 –6.6 –7.1 –7.4 –7.3 –8.4 –7.5 –7.9 –8.1 71.9 70.0 79.4 87.4 91.7 97.8 111.2 119.9 133.2 151.1 204.7 180.9 –12.9 5.7 –17.9 22.6 27.7 31.6 12.6 –7.2 –78.3 33.4 59.9 71.1 NIPA current receipts ......................................................................... 2045.7 2029.3 1878.1 1860.3 1963.7 2246.9 2491.2 2643.4 2537.7 2254.5 2400.6 2782.1 EXPENDITURES Budget outlays .................................................................................................. Government employee retirement plan transactions ................................... Deposit insurance and other financial transactions ..................................... Capital transfer payments ............................................................................ Net purchases of nonproduced assets ........................................................ Net investment ............................................................................................. Other coverage differences .......................................................................... Netting and grossing differences ................................................................. Timing differences ....................................................................................... 1789.0 1862.9 2010.9 2159.9 2292.9 2472.0 2655.1 2728.7 2982.6 3517.7 3720.7 3833.9 31.4 31.7 33.6 33.0 33.2 38.9 41.6 39.9 52.6 34.7 57.8 62.4 –11.9 –7.3 –9.2 –1.8 –0.9 –0.5 –9.8 –13.8 –61.8 –356.9 –142.2 –151.6 –35.3 –41.0 –45.1 –45.7 –46.8 –65.1 –51.8 –53.1 –58.3 –236.2 –202.5 –107.5 0.2 0.8 –0.3 -* –0.1 0.7 0.3 13.9 10.0 16.9 0.2 3.6 5.8 7.9 0.3 –4.7 –7.3 –9.5 –13.6 –15.2 –22.8 –33.4 –49.9 –56.2 13.8 18.3 10.6 –2.1 –8.4 –12.7 –23.7 9.1 19.6 241.1 262.7 178.8 71.9 70.0 79.4 87.4 91.7 97.8 111.2 119.9 133.2 151.1 204.7 180.9 –9.7 9.3 –4.7 1.1 3.1 8.6 –6.5 10.3 20.8 7.9 1.5 –13.0 NIPA current expenditures ................................................................ 1855.0 1952.8 2075.6 2227.0 2357.4 2530.2 2702.7 2839.7 3075.9 3342.7 3853.0 3931.4 ADDENDUM Budget surplus or deficit (–) ......................................................................... NIPA net Federal Government saving .......................................................... * $50 million or less. 236.2 190.7 128.2 –157.8 –377.6 –412.7 –318.3 –248.2 –160.7 –458.6 –1412.7 –1555.6 –1266.7 76.5 –197.5 –366.7 –393.8 –283.4 –211.5 –196.4 –538.2 –1088.2 –1452.4 –1149.4 438 ANALYTICAL PERSPECTIVES Differences in the Estimates Since the introduction of the unified budget in January 1968, NIPA current receipts have been greater than budget receipts in most years. This is due principally to grossing differences and the fact that estate and gift taxes, which the NIPAs exclude as capital transfers, have been roughly matched by Medicare premiums, which the NIPAs include as a governmental receipt, but the budget treats as an offsetting receipt that is netted against the outlay total. Since 1986, NIPA current expenditures have usually been higher than budget outlays (from which the Medicare premiums and employer retirement contributions are netted out as offsetting receipts), despite the omission from NIPA expenditures of capital transfer grants and pension benefit payments to former Government employees. Two components of budget outlays, however, are sometimes sufficiently large in combination to exceed the usual netting and grossing adjustments. These are financial transactions and net investment (the difference between gross investment and depreciation). Large outlays associated with resolving the failed savings and loan associations and banks in 1990 and 1991 caused those year’s budget outlays to exceed NIPA current expenditures. With the change in budgetary treatment of direct loans in 1992 under credit reform, the cost of direct loans to the public recorded in the budget has been reduced, bringing it closer to the NIPA treatment. Disbursement and repayment of loans made since that time are recorded outside the budget; only credit subsidies are recorded as budget outlays, unlike the NIPAs which do not include this element of government expenditure. Every year during the period 1976–1992, the budget deficit showed a larger fiscal imbalance than the amount of (negative) net Federal Government saving as measured in the NIPAs. The largest difference, $74.1 billion, occurred in 1991 as a result of resolving failed financial institutions as discussed above; the budget deficit was then $269.2 billion, while the NIPA net Government saving was $195.1 billion. Beginning in 1992, deposit insurance and other financial transactions caused the relationship to change, and in 1992–2002, the budget deficit or surplus showed a more positive fiscal picture than the NIPA measure, with NIPA (negative) net Federal Government saving exceeding in magnitude the budget deficit when the budget was in deficit and (positive) net Federal Government saving falling short of the budget surplus during the years the budget was in surplus. The budget measure was more positive again in 2007 and 2008 due to sales of nonproduced assets and unusual swings in timing differences and financial transactions those years. For 2003–2006, and for 2009, however, the budget deficit was once again larger than NIPA net Federal Government saving, largely due to timing differences and financial transactions. For 2009, the difference was historically high, $324 billion, due primarily to differing treatment of TARP and other financial stabilization measures (see text box); and it is expected to remain high in 2010 and 2011. Table 28–1 displays Federal transactions using NIPA concepts with actual data for 2000–2009 and estimates for 2010 and 2011 consistent with the Administration’s Budget proposals. Table 28–2 summarizes the reasons for differences between the NIPA and budget measures. Annual NIPA data for 1948–2011 are published in Section 14 of a separate budget volume, Historical Tables, Budget of the U.S. Government, Fiscal Year 2011. Detailed estimates of NIPA current receipts and expenditures consistent with the Budget and including quarterly estimates will be published in a forthcoming issue of the Department of Commerce publication, Survey of Current Business and on the Bureau of Economic Analysis website at www.bea.gov. 29. COMPARISON OF ACTUAL TO ESTIMATED TOTALS In successive budgets, the Administration publishes several estimates of the surplus or deficit for a particular fiscal year. Initially, the year appears as an outyear projection at the end of the budget horizon. In each subsequent budget, the year advances in the estimating horizon until it becomes the “budget year.’’ One year later, the year becomes the “current year’’ then in progress, and the following year, it becomes the just-completed “actual year.’’ The budget is legally required to compare budget year estimates of receipts and outlays with the subsequent actual receipts and outlays for that year. Part I of this chapter meets that requirement by comparing the actual re- sults for 2009 with the current services estimates shown in the 2009 Budget, published in February 2008. Part II of the chapter presents a broader comparison of estimates and actual outcomes. This part first discusses the historical record of budget year estimates versus actual results over the last two and a half decades. Second, it lengthens the focus to estimates made for each year of the budget horizon, extending four years beyond the budget year. This longer focus shows that the differences between estimates and the eventual actual results grow as the estimates extend further into the future. PART I: COMPARISON OF ACTUAL TO ESTIMATED TOTALS FOR 2009 This part of the chapter compares the actual receipts, outlays, and deficit for 2009 with the current services estimates shown in the 2009 Budget, published in February 2008.1 This part also presents a more detailed comparison for mandatory and related programs, and reconciles the actual receipts, outlays, and deficit totals shown here with the figures for 2009 previously published by the Department of the Treasury. Receipts Actual receipts for 2009 were $2,105 billion, $710 billion less than the $2,815 billion current services estimate in the 2009 Budget (February 2008). As shown in Table 29–1, this decrease was the net effect of legislative and administrative changes, economic conditions that differed from what had been expected, and technical factors that resulted in different tax liabilities and collection patterns than had been assumed. Policy differences. Several laws were enacted after February 2008 that reduced 2009 receipts by a net $222 billion. The largest net reductions in 2009 receipts were provided by the American Recovery and Reinvestment Act of 2009, the Economic Stimulus Act of 2008, and the Emergency Economic Stabilization Act of 2008, Energy Improvement and Extension Act of 2008, and Tax Extenders and Alternative Minimum Tax Relief Act of 2008. 1 The current services concept is discussed in Chapter 26, “Current Services Estimates.’’ For mandatory programs and receipts, the February 2008 current services estimate was based on laws then in place, adjusted to reflect extension of certain expiring provisions in the 2001 and 2003 tax acts. For discretionary programs the current services estimate was based on the current year estimates, excluding one-time emergency appropriations, adjusted for inflation. Economic differences. Differences between the economic assumptions upon which the current services estimates were based and actual economic performance reduced 2009 receipts by $267 billion below the February 2008 estimate. Lower-than-anticipated wages and salaries and other sources of taxable personal income were in large part responsible for the reduction in individual income taxes of $151 billion. Lower-than-anticipated gross domestic product (GDP) and other economic measures that affect the profitability of corporations reduced corporation income taxes $13 billion below the February 2008 estimate. Lower-than-anticipated wages and salaries and proprietors’ income—the tax base for Social Security and Medicare payroll taxes—were in large part responsible for the reduction in social insurance and retirement receipts of $78 billion. Lower-than-anticipated imports reduced collections of customs duties by $9 billion. Reductions in deposits of earnings by the Federal Reserve System, attributable in large part to lower-than-expected interest rates, were responsible for the $12 billion reduction in miscellaneous receipts. Differences between anticipated and actual economic performance reduced other sources of receipts by $5 billion. Technical factors. Technical factors, which had the greatest effect on collections of individual and corporation income taxes, reduced receipts by a net $221 billion below the February 2008 current services estimate. The models used to prepare the February 2008 estimates of individual and corporation income taxes were based on historical economic data and then-current tax and collections data that were all subsequently revised. These revisions indicated that sources of income that are not part of the economic forecast, but subject to tax, such as capital gains and pensions, were lower than expected at the time the February 2008 estimates were prepared. These revisions also indicated that for most sources of income subject to individual and corporation income 439 440 ANALYTICAL PERSPECTIVES taxes, both the percentage that was subject to tax and the effective tax rate on the portion subject to tax were lower than anticipated. The revisions also indicated that the timing of the payment of tax liability was different from what had been assumed. These revisions in economic, tax, and collections data and their effect on income tax liability and the timing of collections, relative to what was assumed when the February 2008 estimates were prepared, accounted for the reductions in individual and corporation income taxes of $99 billion and $143 billion, respectively. Technical factors affecting collections of other sources of receipts were much smaller and increased collections by a net $21 billion. Specifically, shortfalls in collections of excise taxes and estate and gift taxes totaling $12 billion were offset by higher-thanestimated collections of social insurance and retirement receipts, customs duties and miscellaneous receipts totaling $33 billion. Higher-than-expected deposits of earnings by the Federal Reserve System, attributable to higher-than-expected returns on its investment portfolio and its foreign currency holdings, accounted for $16 billion of the increase in miscellaneous receipts. A reclassification of gifts and donations from miscellaneous receipts to offsetting receipts also affected miscellaneous receipts, reducing collections by $0.3 billion. Outlays Outlays for 2009 were $3,518 billion, $525 billion more than the $2,993 billion current services estimate in the 2009 Budget (February 2008). Table 29–2 distributes the $525 billion net increase in outlays among discretionary and mandatory programs and net interest. 2 The table also makes rough estimates according to three reasons for the changes: policy; economic conditions; and technical estimating differences, a residual. 2 Discretionary programs are controlled by annual appropriations, while mandatory programs are generally controlled by authorizing legislation. Mandatory programs are mostly formula benefit or entitlement programs with permanent spending authority that depend on eligibility criteria, benefit levels, and other factors. Policy changes are the result of legislative actions that change spending levels, primarily through higher or lower appropriations or changes in authorizing legislation, which may themselves reflect responses to changed economic conditions. For 2009, policy changes increased outlays by an estimated $603 billion relative to the initial current services estimates. Policy changes increased discretionary outlays by $239 billion. The increase in defense discretionary outlays of $156 billion largely resulted from enactment of emergency supplemental appropriations for combat operations in Iraq and Afghanistan in 2008 and 2009. The February 2008 current services estimates reflected only the partyear funding for 2008 that had been enacted at that point, and included no allowance for funding for 2009. The increase in nondefense discretionary outlays of $82 billion largely resulted from enactment of the American Recovery and Reinvestment Act of 2009. Policy changes increased mandatory outlays by a net $362 billion above current law. This increase largely reflects $151 billion of net outlays for the Troubled Asset Relief Program enacted in the Emergency Economic Stabilization Act of 2008; $87 billion of net outlays for Fannie Mae and Freddie Mac transactions authorized by the Housing and Economic Recovery Act of 2008; a $44 billion increase in Medicare and Medicaid outlays enacted in the Medicare Improvements for Patients and Providers Act of 2008 and the American Recovery and Reinvestment Act of 2009; a $32 billion increase in unemployment compensation outlays enacted in the Supplemental Appropriations Act of 2008, the Unemployment Compensation Extension Act of 2008, and the American Recovery and Reinvestment Act of 2009; $14 billion of economic recovery payments to individuals enacted in the American Recovery and Reinvestment Act of 2009; and other increases in mandatory outlays, largely economic stimulus rebates and refundable tax credits to individuals. Debt service costs associated with the policy receipt and outlay changes were $2 billion. Economic conditions that differed from those forecast in February 2008 resulted in a net decrease in outlays of $33 billion. This change largely reflected an $18 bil- Table 29–1. COMPARISON OF ACTUAL 2009 RECEIPTS WITH THE INITIAL CURRENT SERVICES ESTIMATES Enacted legislation/ administrative actions February 2008 estimate Different economic conditions Technical factors Net change Actual Individual income taxes ........................................................ 1,337 –171 –151 –99 –422 915 Corporation income taxes ..................................................... 348 –55 –13 –143 –210 138 Social insurance and retirement receipts ............................ 955 –1 –78 14 –64 891 Excise taxes ......................................................................... 69 5 –2 –10 –7 62 Estate and gift taxes ............................................................. 26 1 –3 –1 –3 23 Customs duties ..................................................................... 31 –1 –9 1 –9 22 Miscellaneous receipts ........................................................ 48 –1 –12 18 4 52 Total receipts ................................................................... 2,815 –222 –267 –221 –710 2,105 441 29. COMPARISON OF ACTUAL TO ESTIMATED TOTALS Table 29–2. COMPARISON OF ACTUAL 2009 OUTLAYS WITH THE INITIAL CURRENT SERVICES ESTIMATES (In billions of dollars) Changes Current Services (Feb. 2008) Policy Economic Total changes Technical Actual Discretionary: Defense ............................................................................... Nondefense ......................................................................... Subtotal, discretionary ........................................... 560 531 1,092 156 82 239 ......... ......... ......... –60 –32 –92 96 50 146 657 581 1,238 Mandatory: Social Security ..................................................................... Medicare and Medicaid ....................................................... Other programs ................................................................... Subtotal, mandatory ............................................... Net interest ............................................................................... 645 638 370 1,653 249 13 44 305 362 2 12 3 36 51 –84 8 –9 28 28 20 33 38 369 440 –62 678 676 739 2,093 187 Total outlays .................................................................. 2,993 603 –33 –45 525 3,518 lion increase in unemployment compensation and a $13 billion increase in food and nutrition assistance due to higher-than-expected unemployment rates and a $12 billion increase in Social Security benefits due to higher cost-of-living adjustments, which were more than offset by an $84 billion decrease in net interest due to lowerthan-expected interest rates. Technical estimating factors resulted in a net decrease in outlays of $45 billion. Technical changes result from changes in such factors as the number of beneficiaries for entitlement programs, crop conditions, or other factors not associated with policy changes or economic conditions. Outlays for discretionary programs decreased by $92 billion, because appropriations for both defense and nondefense programs were spent more slowly than expected. Outlays for mandatory programs increased a net $28 billion, largely due to higher-than-anticipated outlays for unemployment compensation and deposit insurance, which were partially offset by lower-than-expected subsidy costs for the Federal Family Education Loan and Direct Student Loan Programs. The net change in mandatory outlays also includes a conceptual change with a relatively small budgetary impact, reclassifying $0.3 billion of gifts and donations from governmental receipts to offsetting receipts, which net against mandatory outlays. Net interest outlays increased by $20 billion due to technical factors compared to the February 2008 estimates. Deficit The preceding two sections discussed the differences between the initial current services estimates and the actual amounts of Federal Government receipts and outlays for 2009. This section combines these effects to show the net deficit impact of these differences. As shown in Table 29–3, the 2009 current services deficit was initially estimated to be $178 billion. The actual deficit was $1,413 billion, which was a $1,235 billion increase from the initial estimate. Receipts were $710 billion less than the initial estimate and outlays were $525 billion more. The table shows the distribution of the changes according to the categories in the preceding two sections. The net effect of policy changes for receipts and outlays increased the deficit by $825 billion. Economic conditions that differed from the initial assumptions in February 2008 accounted for an estimated $234 billion increase in the deficit. Technical factors increased the deficit by an estimated $176 billion. Comparison of the Actual and Estimated Outlays for Mandatory and Related Programs for 2009 This section compares the original 2009 outlay estimates for mandatory and related programs under current law in the 2009 Budget (February 2008) with the ac- Table 29–3. COMPARISON OF THE ACTUAL 2009 DEFICIT WITH THE INITIAL CURRENT SERVICES ESTIMATE (In billions of dollars) Current Services (Feb. 2008) Changes Policy Economic Technical Total changes Actual Receipts ...................................................................................................... 2,815 –222 –267 –221 –710 2,105 Outlays ....................................................................................................... 2,993 603 –33 –45 525 3,518 176 1,235 1,413 Deficit ..................................................................................................... 178 825 234 Note: Deficit changes are outlays minus receipts. For these changes, a positive number indicates an increase in the deficit. 442 ANALYTICAL PERSPECTIVES Table 29–4. COMPARISON OF ACTUAL AND ESTIMATED OUTLAYS FOR MANDATORY AND RELATED PROGRAMS UNDER CURRENT LAW (In billions of dollars) 2009 Feb. 2008 estimate Actual Change Mandatory outlays: Human resources programs: Education, training, employment, and social services ............................................ Health: Medicaid .......................................................................................................... Other ................................................................................................................ 10 –22 –32 218 26 251 27 33 * 244 420 278 425 34 5 121 37 56 129 126 119 72 153 5 82 16 24 Total, income security ................................................................................ Social security ........................................................................................................ Veterans benefits and services: Income security for veterans ............................................................................ Other ................................................................................................................ 343 645 470 678 126 33 45 3 46 3 1 –* Total, veterans benefits and services ........................................................ 48 49 1 Total, mandatory human resources programs ........................................... 1,710 1,877 167 Other functions: Agriculture .............................................................................................................. International ............................................................................................................ Mortgage credit ...................................................................................................... Deposit insurance ................................................................................................... Other advancement of commerce (includes the Troubled Asset Relief Program) .. Other functions ....................................................................................................... 14 –2 –3 –3 12 6 16 –6 101 23 162 13 2 –3 104 26 150 7 Total, other functions ................................................................................. 23 309 286 Undistributed offsetting receipts: Employer share, employee retirement ................................................................... Rents and royalties on the outer continental shelf .................................................. Other undistributed offsetting receipts .................................................................... –68 –10 –2 –71 –5 –17 –3 5 –15 Total, undistributed offsetting receipts ....................................................... –80 –93 –13 Total, mandatory .............................................................................................. 1,653 2,093 440 Net interest: Interest on Treasury debt securities (gross) ................................................................... Interest received by trust funds ...................................................................................... Other interest ................................................................................................................. 476 –209 –18 383 –182 –15 –93 27 4 Total, net interest ............................................................................................ 249 187 –62 Total, outlays for mandatory and net interest ................................................................. * $500 million or less. 1,902 2,280 378 Total, health ............................................................................................... Medicare ................................................................................................................. Income security: Retirement and disability ................................................................................. Unemployment compensation ......................................................................... Food and nutrition assistance .......................................................................... Other ................................................................................................................ 443 29. COMPARISON OF ACTUAL TO ESTIMATED TOTALS tual outlays. Major examples of these programs include Social Security and Medicare benefits, agricultural price support payments to farmers, and deposit insurance for banks and thrift institutions. This category also includes net interest outlays and undistributed offsetting receipts. A number of factors may cause differences between the amounts estimated in the budget and the actual mandatory outlays. For example, legislation may change benefit rates or coverage; the actual number of beneficiaries may differ from the number estimated; or economic conditions (such as inflation or interest rates) may differ from what was assumed in making the original estimates. Table 29–4 shows the differences between the actual outlays for these programs in 2009 and the amounts originally estimated in the 2009 Budget, based on laws in effect at that time. Actual outlays for mandatory spending and net interest in 2009 were $2,280 billion, which was $378 billion more than the initial estimate of $1,902 billion, based on existing law in February 2008. As Table 29–4 shows, actual outlays for mandatory human resources programs were $1,877 billion, $167 billion more than originally estimated. This increase was the net effect of legislative action, differences between actual and assumed economic conditions, differences between the anticipated and actual number of beneficiaries, and other technical differences. Most significantly, outlays for unemployment compensation increased by $82 billion, largely due to extensions of benefits enacted in 2008 and 2009 and higher-than-expected unemployment rates. Outlays for programs in other functions were $286 billion more than originally estimated, largely due to outlays for the Troubled Asset Relief Program, Fannie Mae and Freddie Mac preferred stock purchases, and higher-than-expected outlays for deposit insurance. Undistributed offsetting receipts were on net $13 billion higher than the original estimate. Outlays for net interest were $187 billion or $62 billion less than the original estimate. As shown on Table 29-4, interest payments on Treasury debt securities decreased by $93 billion due to lower-than-expected interest rates, which was partially offset by lower interest receipts by trust funds and other interest accounts. Reconciliation of Differences with Amounts Published by the Treasury for 2009 Table 29–5 provides a reconciliation of the receipts, outlays, and deficit totals published by the Department of the Treasury in the September 2009 Monthly Treasury Statement (MTS) and those published in this Budget. The Department of the Treasury made adjustments to the estimates for the Combined Statement of Receipts, Outlays, and Balances, which increased receipts by $1 million and decreased outlays by $35 million. Additional adjustments for this Budget increased receipts by $381 million and decreased outlays by $4,018 million. Several financial transactions that are not reported to the Department of the Treasury, including those for the Public Company Accounting Oversight Board, the Affordable Housing Program, the Securities Investor Protection Corporation, the Electric Reliability Organization, and the United Mine Workers of America benefit funds, are included in the Budget. Another conceptual difference in reporting is for the National Railroad Retirement Investment Trust (NRRIT). Reporting to the Department of the Treasury for the NRRIT is done with Table 29–5. RECONCILIATION OF FINAL AMOUNTS FOR 2009 (in millions of dollars) Receipts Outlays Deficit Totals published by Treasury (September 30 MTS) .................................................................. Miscellaneous Treasury adjustments ................................................................................... Totals published by Treasury in Combined Statement .............................................................. 2,104,613 1 2,104,614 3,521,734 –35 3,521,699 1,417,121 –36 1,417,085 National Railroad Retirement Investment Trust ................................................................... Exchange Stabilization Fund, Money Market Mutual Fund Guaranty Facility ...................... Interest on Treasury Debt Securities ................................................................................... Public Company Accounting Oversight Board ..................................................................... Affordable Housing Program ............................................................................................... Securities Investor Protection Corporation .......................................................................... Electric Reliability Organization ........................................................................................... United Mine Workers of America benefit funds ................................................................... Reclassification of Gifts and Donations from Governmental to Offsetting Receipts ............ Other .................................................................................................................................... ......... ......... ......... 157 152 130 100 69 –251 24 –3,535 –1,100 –293 149 152 641 100 55 –251 64 –3,535 –1,100 –293 –8 ......... 511 ......... –14 ......... 40 Total adjustments, net .......................................................................................................... 381 –4,018 –4,399 Totals in the budget .................................................................................................................. 2,104,995 3,517,681 1,412,686 MEMORANDUM: Total change since year-end statement ............................................................................... 382 –4,053 –4,435 444 ANALYTICAL PERSPECTIVES a one-month lag so that the fiscal year total provided in the Treasury Combined Statement covers September 2008 through August 2009. The Budget has been adjusted to reflect transactions that occurred during the actual fiscal year, which begins October 1. The Budget also reflects agency adjustments to outlays reported to Treasury after preparation of the Treasury Combined Statement. These backdated adjustments included transactions for the Exchange Stabilization Fund Money Market Mutual Fund Guaranty Facility and the Interest on Treasury Debt Securities, a reclassification of gifts and donations from governmental to offsetting receipts, and other smaller receipt and outlay adjustments. PART II: HISTORICAL COMPARISON OF ACTUAL TO ESTIMATED SURPLUSES OR DEFICITS This part of the chapter compares estimated surpluses or deficits to actual outcomes over the last two and a half decades. The first section compares the estimate for the budget year of each budget with the subsequent actual result. The second section extends the comparison to the estimated surpluses or deficits for each year of the budget window: that is, for the current year through the fourth year following the budget year. This part concludes with some observations on the historical record of estimates of the surplus or deficit versus the subsequent actual outcomes. Historical Comparison of Actual to Estimated Results for the Budget Year Table 29–6 compares the estimated and actual surpluses or deficits since the deficit estimated for 1982 in the 1982 Budget. The estimated surpluses or deficits for each budget include the Administration’s policy proposals. Therefore, the original deficit estimate for 2009 differs from that shown in Table 29–3, which is on a current services basis. Earlier comparisons of actual and estimated surpluses or deficits were on a policy basis, so for consistency the figures in Table 29–6 are on this basis. On average, the estimates for the budget year underestimated actual deficits (or overestimated actual surpluses) by $55 billion over the 28-year period. Policy outcomes that differed from the original proposals increased the deficit by an average of $61 billion. Differences between economic assumptions and actual economic performance increased the deficit an average of $22 billion. Differences due to these two factors were partly offset by technical revisions, which reduced the deficit an average of $28 billion. The relatively small average difference between actual and estimated deficits conceals a wide variation in the differences from budget to budget. The differences ranged from a $1,005 billion underestimate of the deficit to a $192 billion overestimate. The $1,005 billion underestimate in the 2009 Budget was due largely to enactment of several housing and economic stabilization and recovery legislation in response to weak economy, lower 2009 receipts due to weak economic performance, and emergency supplemental appropriations for combat operations in Iraq and Afghanistan in 2008 and 2009. The $192 billion overestimate of the deficit in the 2007 Budget stemmed largely from higher-than-anticipated collections of individual and corporation income taxes due to different collection patterns and effective tax rates than initially assumed, as well as lower-than-expected outlays due to technical factors. Because the average deficit difference obscures the degree of under- and overestimation in the historical data, a more appropriate statistic to measure the magnitude of the differences is the average absolute difference. This statistic measures the difference without regard to whether it was an under- or overestimate. Since 1982, the average absolute difference has been $139 billion. Other measures of variability include the standard deviation and the root mean squared error. These measures calculate the dispersion of the data around the average value. As shown in Table 29-6, the standard deviation of the deficit differences since 1982 is $233 billion and the root mean squared error is $239 billion. Like the average absolute difference, these measures illustrate the high degree of variation in the difference between estimates and actual deficits. The large variability in errors in estimates of the surplus or deficit for the budget year underscores the inherent uncertainties in estimating the future path of the Federal budget. Some estimating errors are unavoidable, because of differences between the President’s original budget proposals and the legislation that Congress subsequently enacts. Occasionally such differences are huge, such as additional spending in 2002 for disaster recovery, homeland security, and military operations in Afghanistan in response to the terrorist attacks of September 11, 2001, which were obviously not anticipated in the Budget submitted in February 2001. Even aside from differences in policy outcomes, errors in budget estimates can arise from new economic developments, unexpected changes in program costs, shifts in taxpayer behavior, and other factors. The budget impact of changes in economic assumptions is discussed further in Chapter 3 of this volume, “Interactions Between the Economy and the Budget.’’ 445 29. COMPARISON OF ACTUAL TO ESTIMATED TOTALS Table 29–6. COMPARISON OF ESTIMATED AND ACTUAL SURPLUSES OR DEFICITS SINCE 1982 (In billions of dollars) Budget 1982 ............................................. 1983 ............................................. 1984 ............................................. 1985 ............................................. 1986 ............................................. 1987 ............................................. 1988 ............................................. 1989 ............................................. 1990 ............................................. 1991 ............................................. 1992 ............................................. 1993 ............................................. 1994 ............................................. 1995 ............................................. 1996 ............................................. 1997 ............................................. 1998 ............................................. 1999 ............................................. 2000 ............................................. 2001 ............................................. 2002 ............................................. 2003 ............................................. 2004 ............................................. 2005 ............................................. 2006 ............................................. 2007 ............................................. 2008 ............................................. 2009 ............................................. Surplus (–) or deficit (+) estimated for budget year 1 62 107 203 195 180 144 111 130 91 63 281 350 264 165 197 140 121 –10 –117 –184 –231 80 307 364 390 354 239 407 Average ....................................... Absolute average 2 ....................... Standard deviation ....................... Root mean squared error ............ Differences due to Enacted legislation Economic factors Technical factors Total difference Actual surplus (–) or deficit (+} –15 12 21 12 8 –2 9 22 21 –21 36 8 8 18 –6 –1 9 22 42 129 104 86 122 67 141 85 165 595 70 67 –38 17 27 16 19 –10 31 85 21 13 –16 –1 –53 4 –48 –56 –88 –32 201 34 22 11 –6 –7 98 234 11 22 * –12 7 –8 16 11 79 143 –48 –115 –52 –18 –30 –121 –151 –82 –73 –41 84 177 –39 –123 –277 –270 –44 176 66 101 –17 17 41 6 44 23 131 206 9 –95 –61 –1 –89 –118 –190 –116 –119 56 389 297 105 –45 –142 –192 219 1,005 61 64 117 131 22 47 70 73 –28 80 108 111 55 139 233 239 128 208 185 212 221 150 155 153 221 269 290 255 203 164 107 22 –69 –126 –236 –128 158 378 413 318 248 162 459 1,413 * $500 million or less. 1 Surplus or deficit estimate includes the effect of the Budget’s policy proposals. 2 Absolute average is the average without regard to sign. Five-Year Comparison of Actual to Estimated Surpluses or Deficits The substantial difference between actual surpluses or deficits and the budget year estimates made less than two years earlier raises questions about the degree of variability for estimates of years beyond the budget year. Table 29–7 shows the summary statistics for the differences for the current year (CY), budget year (BY), and the four succeeding years (BY+1 through BY+4). These are the years that are required to be estimated in the budget by the Budget Enforcement Act of 1990. On average, the budget estimates since 1982 overstated the deficit in the CY by $25 billion, but underestimated the deficit in the BY by $55 billion. The budget estimates understated the deficit in the years following, by amounts growing from $105 billion for BY+1 to $195 billion for BY+4. While these results suggest a tendency to underestimate deficits toward the end of the budget horizon, the averages are not statistically different from 446 ANALYTICAL PERSPECTIVES zero in light of the high variation in the data. Chapter 3 of this volume, “Interactions Between the Economy and the Budget,’’ further discusses the variability in the dif- ference between estimated and actual deficits over the budget horizon and includes Chart 3-2, which is based on the variability measures shown in Table 29-7. Table 29–7. DIFFERENCES BETWEEN ESTIMATED AND ACTUAL SURPLUSES OR DEFICITS FOR FIVE-YEAR BUDGET ESTIMATES SINCE 1982 (In billions of dollars) Current year estimate Average difference 1 ........................... Average absolute difference 2 ............ Standard deviation ............................. Root mean squared error .................. 1 2 –25 58 70 75 Budget year estimate 55 139 233 239 Estimate for budget year plus One year (BY+1) 105 192 299 317 Two years (BY+2) 137 237 322 350 A positive figure represents an underestimate of the deficit or an overestimate of the surplus. Average absolute difference is the difference without regard to sign. Three years (BY+3) Four years (BY+4) 168 272 331 371 195 307 343 388 30. BUDGET AND FINANCIAL REPORTING The budget is a plan for proposing, allocating, and controlling financial resources of the Federal Government and the primary mechanism for reporting fiscal results. The annual President’s Budget proposes a fiscal plan for the current year and the coming budget year, includes projections for subsequent years, and reports budget results for prior fiscal years. Budget reporting also occurs throughout the year with the Monthly Treasury Statement, culminating in the first report of fiscal-year-end results in the September Monthly Treasury Statement. A second source of financial information for the Government is the annual Financial Report of the U.S. Government. The Financial Report provides information on the Government’s financial position and condition at the end of the prior fiscal year. Financial reporting and budget reporting use much of the same underlying data pertaining to agency financial transactions, but financial reports1 compile the data using different methods and present the data using different formats,2 as explained in this chapter. Although not discussed in this chapter, a third source of Government financial information is the Integrated Macroeconomic Accounts, which are a series of accounts that relate flows of production, income, saving, and investment to financial holdings and physical capital stocks for the major sectors of the U.S. economy.3 Federal Government financial transactions are included in the government sector of the Integrated Accounts. The Integrated Accounts combine the national income and product accounts with the flow of funds accounts,4 and the treatment of Federal transactions under national income and product accounting and under budgetary accounting is compared in Chapter 28 of this volume, “National Income and Product Accounts.” 1 As used in this chapter, “Financial Report” refers to the Financial Report of the United States Government, which is the consolidated financial report for the Executive Branch and some Legislative and Judicial Branch entities, and “financial reports” refer to both the Financial Report and the Agency Financial Reports or the Performance and Accountability Reports issued by Executive Branch agencies. The Financial Report is issued by the Department of the Treasury in coordination with the Office of Management and Budget. 2 Federal financial reporting is governed by statements issued by the Federal Accounting Standards Advisory Board (FASAB). 3 The Integrated Accounts follow the guidelines of the System of National Accounts 1993, and are prepared jointly by the Bureau of Economic Analysis and the staff of the Board of Governors of the Federal Reserve. 4 The National Income and Product Accounts show production, income, and expenditures for each sector of the economy and how these measures relate to wealth. Flow of funds accounts show financial flows (in the form of borrowing, lending, and investment) through the sectors of the economy. The Purpose of Budget and Financial Reporting In a democracy, the Government’s sovereign authority to tax and to allocate the proceeds of those taxes to public purposes requires that the Government be accountable to the public for its use of tax dollars and that it be transparent in its activities. Accountability requires reporting the amount of money raised by taxation and other means, the programs on which the money was spent, and whether the money was spent in accordance with the requirements of appropriations, authorizing, and other applicable laws. In addition, accountability requires the Government to report balances for, among other things, cash on hand and other financial assets and dedicated funds,5 and to report on its borrowing needs. In addition to providing information about how financial resources are obtained and used, accountability requires that the Government provide information about its operating performance. This includes information about the costs and results of Government programs and activities, and the degree to which their performance was efficient or effective. Chapters 7, 8, and 9 of this volume, “Delivering High-Performance Government,” “Program Evaluation,” and “Benefit-Cost Analysis,” provide more information about the Government’s operating performance and issues related to measuring performance. Unlike a private entity, Government performance cannot be summed up in a single measure such as profit or loss found on the income statement or net position found on the balance sheet. The budget and financial reports provide information that the citizenry can use to hold the Government accountable, reporting on how and how well the Government has obtained, used, and managed its financial and other resources. The budget and financial reports seek to provide information in a transparent manner. Transparency is an important element of accountability, which addresses past actions, and transparency is equally important when looking to the future. Future plans can only be evaluated based on how clearly and how completely they are explained. As a financial plan, the President’s Budget contains detailed information about the Government’s fiscal policies for the coming fiscal year and the 10-year budget window. In addition, the Budget provides long-term, 75-year information about projected spending and projected receipts. The financial report also contains information about the Government’s long-run fiscal condition, showing projections of long-run sustainability and detailed information about social insurance6 programs. The detailed historical 5 In this chapter, “dedicated” refers to those Government collections that are designated for a particular purpose; the collections may be voluntary or compulsory, and include collections in trust, special, and revolving funds. 6 As used in this chapter, “social insurance” refers to Social Security, Medicare, Unemployment Insurance, Railroad Retirement, and the Black Lung Programs. 447 448 and projected information contained in the Budget and the financial reports provide the public with transparent information about the Government’s financial activities. The Budget As noted above, the budget serves as both a forwardlooking planning tool and a backward-looking accountability report. To serve these dual purposes, the President’s Budget contains both budget projections and historical budget data. The budget projections and historical data contain measures that represent flows or amounts over a period of time (usually a year) and measures that represent stocks or amounts at a point in time. In addition, the budget includes measures that are recorded on cash and accrual bases of accounting, with cash-based transactions recorded when cash is either paid or received regardless of when the transaction occurs, and accrual-based transactions recorded when the transaction occurs regardless of when the cash is exchanged. Measures Budget measures that represent flows include budget authority, obligations, outlays, receipts, and the deficit or surplus. Budget measures that represent a stock include debt held by the public, debt net of financial assets, and gross Federal debt Budget authority is the amount of resources made available for use during a given period, usually a year. Obligations are the legal commitments incurred during a year. Both budget authority and obligations can be viewed as accrual measures, as the term “accrual” is described above, in that budget authority and obligations are recorded when a transaction occurs, rather than when cash is actually received or paid out by the Government. Outlays are the liquidation or payment of obligations during a year, and are measured primarily on a cash basis.7 Receipts are inflows of financial resources to the Government during a year, and are measured on 7 Outlays for interest on debt held by the public are measured on an accrual basis rather than on a cash basis. Budget authority and obligations for interest are measured on an accrual basis, consistent with budget authority and obligations measures for most other programs. Budget authority, obligations, and outlays for loans and loan guarantees, or credit programs, are measured on a net present value basis with the present value of the cash outflows and inflows recorded when the loan or guarantee is made. A present value represents the value today of a future amount or amounts, reflecting the time value of money, and it can be used as an accrual measure. Present values are used in budgetary accounting to record the costs of credit programs and to estimate the actuarial costs of employee (defined-benefit) pension plans. From an agency perspective, payments toward Federal employee (defined-benefit and defined-contribution) pension plans are recorded on an accrual basis (with the actuarially accruing defined-benefit costs estimated by using present values). Agency payments to a defined-contribution plan such as the Thrift Savings Plan constitute Government outlays and are reflected in the deficit at the time the payments are made. In contrast, agency payments to a Government defined-benefit pension plan—such as Military Retirement or Civil Service Retirement—are recorded as collections by the plan trust funds and net to zero within the unified budget. As a consequence of this netting, only the defined-benefit payments to current retirees constitute outlays and are reflected in the deficit. From a government-wide perspective, payments for Federal employee defined-benefit pension plans are recorded on a cash basis. ANALYTICAL PERSPECTIVES a cash basis. Because the deficit or surplus is the difference between outlays and receipts for a given year, it represents an annual flow and is measured primarily on a cash basis, as are outlays and receipts. In contrast to all of these measures that represent flows, the debt held by the public is a stock measure and it can be viewed as the accumulation of past deficits less past surpluses; it is measured on an amortized cost basis. Chapter 11 of this volume, “Budget Concepts,” and Chapter 6 of this volume, “Federal Borrowing and Debt,” contain more complete definitions of these concepts. The President’s Budget presents budget authority, obligations, and outlays and receipts at a summary level, for example, for the Government as a whole and by agency. In addition, the Budget presents all four of these measures at a very detailed level, by program, activity, and account. In addition to summary and detailed budget data, the Budget presents total obligations by object class and total budget authority and outlays by function and subfunction. The Budget presents the deficit (or surplus) and debt held by the public (and other measures) in nominal and inflation-adjusted dollar amounts, and as a percent of gross domestic product (GDP).8 Summary and detailed data for budget authority, obligations, outlays, and receipts; object class data; and functional classification data are reported for the prior fiscal year, the current fiscal year, and the budget year. In addition, many of these measures are presented for the entire ten-year budget horizon, and the summary measures are presented historically, in the Historical Tables volume, and projected for 75 years in Chapter 5 of this volume, “Long-Term Budget Outlook.” Structure The President’s Budget is a multi-volume document,9 consisting of the main Budget volume, the Budget Appendix, the Analytical Perspectives volume, the Historical Tables, the Federal Credit Supplement, other supplemental materials, and the Mid-Session Review. The main Budget volume is a textual summary of the budget, discussing the Administration’s fiscal plan, including its policy and program priorities, and significant proposed changes to current law. The Budget Appendix contains the proposed appropriations language for each program, activity, or account that receives an appropriation, whether the appropriation is annual, biennial, or permanent. The Analytical Perspectives volume provides historical and cross-cutting analyses of the budget, and the Historical Tables volume reports historical data for summary budget measures; many are expressed in nominal and inflation-adjusted dollars and as a percent of GDP. The Federal Credit Supplement provides detailed information about the Government’s loan and loan guar8 The deficit and debt, as well as other measures, are presented as a percent of gross domestic product because comparisons of these measures over time are best done by looking at these measures in relation to the size of the economy as a whole, as measured by GDP. 9 Budget data reflect all three Branches of Government, but the Budget documents reflect proposals for the Executive Branch only. 449 30. BUDGET AND FINANCIAL REPORTING antee programs that are governed by the Federal Credit Reform Act (FCRA). In addition to the documents that comprise the President’s Budget, the budget transmittal to the Congress involves the transmittal of Congressional Budget Justifications for each agency subject to the appropriations process and of authorizing legislation in support of the President’s Budget. The Financial Reports As noted above, financial reports are primarily an accountability tool. The financial reports are not plans per se, although they provide information that can be used in developing a fiscal plan. The Financial Report provides information about the Government’s financial position at the end of the prior fiscal year, and how the financial position changed during the course of the fiscal year. In addition, like the Budget, the financial reports contain measures10 that represent flows and stocks, and measures that are reported on modified-cash and accrual bases of accounting. The financial reports are used as, among other things, accountability documents by non-profit groups that monitor Government activities and as informational documents by agency staff. Measures The financial reporting measures that represent flows include revenues, expenses, and net operating cost, which is the difference between revenues and expenses. The measures that represent stocks include assets, liabilities, and net position, which is the difference between assets and liabilities. The most widely cited of these measures are the net operating cost and net position. Less than ten percent of the Government’s revenues are recognized on an accrual basis in the financial reports and the remainder, more than 90 percent of revenues, are recognized on a cash basis; overall, revenues are said to be recognized on a “modified-cash” basis of accounting. Assets (e.g., cash, other monetary assets, property, plant and equipment) are generally measured at historical cost, but some (e.g., debt and equity securities) are measured at fair market value. Expenses are measured on an accrual basis. Net operating cost and net position are derived from revenues and expenses, and from assets and liabilities, respectively. Even though they are derived from measures (revenues) that are not pure accrual measures, both net operating cost and net position are generally considered to be accounted for on an accrual basis. Structure The Financial Report consists of six basic financial statements organized as follows: Statements of Net Cost, Statements of Operations and Changes in Net Position, Reconciliations of Net Operating Cost and Unified Budget Deficit, Statements of Changes in Cash Balance from 10 The term “measures” is used in this chapter to refer to both budget and financial measures; however, the Federal Accounting Standards Advisory Board would refer to the financial measures as “elements.” Unified Budget and Other Activities, Balance Sheets, and the Statements of Social Insurance. Reported with the basic statements are required note disclosures. In addition, the Financial Report contains a Management’s Discussion and Analysis section that summarizes the highlights of the statements, supplementary disclosures, and the auditor’s report. The Financial Report is the governmentwide report for the Executive Branch, and contains some financial data from the Legislative and Judicial Branches. Individual agencies produce Agency Financial Reports or Performance and Accountability Reports, which include financial information that is used to develop the Financial Report and program performance information that is unique to each agency. The financial statements for agencies consist of five basic statements. Three of the five statements are the same as in the Financial Report: the Statement of Net Cost, Statement of Operations and Changes in Net Position, and the Balance Sheet. The two statements that are not included as statements in the Financial Report are the Statement of Budgetary Resources and the Statement of Custodial Activity. Comparison of the Budget and Financial Reports Revenues in the Financial Report and budgetary receipts are quite similar, with revenues recognized on a Table 30–1. KEY BUDGET AND FINANCIAL MEASURES FOR 2008 (In billions of dollars) Budget Measures Receipts ................................................................................ Outlays ................................................................................. Deficit ............................................................................... 2,524.3 2,982.9 (458.6) Debt Held by the Public ........................................................ 5,802.7 Financial Measures Revenues .............................................................................. Expenses .............................................................................. Net Operating Cost .......................................................... 2,661.4 3,640.7 (1,009.1) Assets ................................................................................... Liabilities ............................................................................... Net Position ..................................................................... 1,974.7 12,178.2 (10,203.5) modified cash basis and receipts recognized on a pure cash basis. The revenues recognized on an accrual basis are those resulting from Government business-like transactions with the public, for example the sale of stamps by the Postal Service and the recreation fees paid at National Parks; these revenues are referred to as “earned revenues.”11 As noted above, earned revenues comprise less than 10 percent of total revenues. In addition, because the cash and accrual bases of earned revenues are 11 Earned revenue may be received before goods or services are provided. Examples include Department of Energy collections from utility companies for the future cost of disposing of nuclear waste, Federal Communications Commission collections from its competitive bidding system for the recovered analog spectrum for licenses that have not been granted, and Postal Service collections for prepaid postage, outstanding money orders, and prepaid P.O. box rentals. 450 themselves quite similar, the difference between total revenues and total receipts tends to be less than 10 percent. Expenses in the financial reports are recognized on an accrual basis, and in this regard are similar to budgetary obligations. However, because expenses are subtracted from revenues to derive net operating cost, they are more frequently compared with budgetary outlays. In contrast to expenses, outlays are generally recognized on a cash basis (except for interest and credit programs as noted in footnote 7 above). As a result of the difference between cash and accrual accounting, the difference between total expenses (referred to as net cost in the Financial Report) and total budgetary outlays can be fairly significant, roughly 20 percent. Net operating cost and the budget deficit are the most widely compared measures. They are similar in that both represent the annual increase or decrease in Government resources resulting from financial transactions. The primary difference between net operating cost and the deficit results from the accrual of certain expenses that affect net operating cost, but not the deficit. These differences are primarily accruing expenses for civilian and military employee retirement and veterans programs, accruing expenses for environmental cleanup and disposal, and the accrual of depreciation expense. In addition, the full cost of asset acquisitions (or usable segments thereof) are included in the deficit upfront, when the asset is acquired, but these costs are included in net operating cost only over time, once the asset begins to be used up or depreciated. Because net operating cost is derived from revenues and expenses, and the deficit is derived from receipts and outlays, the difference between net operating cost and the deficit results from the differences, discussed above, between revenues and receipts, and to an even greater extent between expenses and outlays. Liabilities recorded in the financial statements are accounting liabilities, which include, but are not limited to, legal liabilities. This is in contrast to budgetary accounting, where budget authority reflects the legal authority to incur budgetary obligations, obligations are legal commitments, and outlays are the liquidation of those budgetary obligations. In addition, the primary budgetary stock measure that is cited, and which is a legal liability, is debt held by the public. Debt held by the public is shown as a liability on the Government’s balance sheet along with other liabilities, some of which are not legal liabilities. Total accounting liabilities, as of 2008, were more than twice the size of debt held by the public. Assets are generally recorded in the financial statements at historical cost or fair market value, but not treated as budget measures. For this reason, the net position, which is the difference between assets and liabilities, reported in the financial reports does not have a budgetary analog. The prior fiscal-year data included in the budget and the fiscal-year results reported in the financial reports are all taken from the same source, the Federal Agencies’ Centralized Trial-Balance System, known as FACTS I and II. These data are audited for certain Federal agen- ANALYTICAL PERSPECTIVES cies12 and for the government-wide financial statements; the related audit reports, which include audits of prior fiscal year data, are included in the financial reports. Alternative Estimates of Government Assets and Liabilities The traditional measures of financial position in budget and financial reporting, debt and net position respectively, reflect the Government’s financial position at a point in time, but not the Government’s future financial position. This is because measures of assets and liabilities at any particular point in time do not reflect the full scope of resources available to or responsibilities of the Government into the future. Even the measures used by OMB to produce a Government balance sheet (shown below), using somewhat different methods from those used in the Financial Report, do not capture the Government’s total future resources or responsibilities. Balance sheet measures reflect only past transactions or events, but the Government’s responsibilities will continue into in the indefinite future and its primary resource for fulfilling these responsibilities is future tax revenue, which is not reflected on a balance sheet. The best way to assess the Government’s long-term financial condition is to compare future spending to future receipts, as is done in Chapter 5 of this volume, “Long-Term Budget Outlook.” The Government has many assets reported on the balance sheet of the Financial Report, such as cash, loans (including mortgages), financial assets acquired recently in an attempt to alleviate the crisis in the financial markets, property, plant and equipment. The Government owns a substantial amount of land, timber and mineral resources, and heritage assets (works of art and historical artifacts) that, although disclosed in the financial reports, are not reported as assets. The Government’s most valuable and unique asset is one that cannot reasonably be reported on any balance sheet—its sovereign power to tax. The Government’s authority to levy taxes allows it to operate even if its liabilities exceed its measurable assets, as is evident in the low interest rate creditors charge the U.S. Treasury. The Government’s liabilities reported on the balance sheet of the Financial Report include debt held by the public, Federal employee and veterans health and pension benefits, insurance obligations, loan guarantees, environmental liabilities, and certain entitlement benefits that are due and payable (within the next month). These liabilities, however, are only a subset of the Government’s long-run responsibilities. Just as the power to tax or future tax revenue is not shown as an asset on the balance sheet, the Government’s long-term commitments to, among other things, Medicare, Medicaid, Social Security, unemployment insurance, supplemental nutrition assistance, education, and defense are not reported on the balance sheet. 12 Audits are conducted for more than 100 Executive Branch agencies, including the 24 agencies covered by the Chief Financial Officers Act of 1990 and an additional 11 significant Executive Branch entities. Audits are not conducted for some of the smaller entities that are included in the Financial Report. 451 30. BUDGET AND FINANCIAL REPORTING Chart 30-1. Net Federal Liabilities Percent of GDP 80 70 60 50 40 30 20 10 0 1960 1967 1974 1981 For many years, the Analytical Perspective volume has included a table of assets and liabilities, shown here as Table 30-2. This table is similar in concept to the balance sheet in the Financial Report, but it is designed to show a consistent historical series of assets and liabilities and uses economic valuation methods rather than accounting methods for certain entries.13 The table shows Government assets and liabilities from 1960 through 2009 measured in constant 2009 dollars; the balance of net liabilities is also shown as a ratio to gross domestic product (GDP). As shown in the table, Government liabilities exceeded its assets over the entire period. In addition, as shown in the table and Chart 30-1, there was a substantial increase in net liabilities in the 1980s and early 1990s, which was the result of the large budget deficits in those years. In the late 1990s, there was a marked decline in the ratio of net liabilities to GDP as the budget temporarily went into surplus, and debt held by the public fell. Beginning in 2001, the ratio began increasing again, and in 2009 it reached a new high because of the Government’s efforts to address the worldwide financial crisis. Relative to GDP, the net liability position was 35 percent in 1960 and, although fluctuating over the next two decades, in 1980, it was 37 percent. From 1980 to 1993, the ratio of net liabilities rose to 58 percent of GDP primarily because of the increase in the budget deficits, but by 2000, the ratio had fallen to 44 percent again mainly because of the decline in the budget deficit. As the deficit began to increase again, at the start of the millennium, 13 Land and mineral rights, shown in Table 30-2, are assets that are not reported on the balance sheets in the financial reports. Fixed reproducible capital is reported at historical cost on the balances sheets in the financial reports, but is estimated using a model that approximates current market value in Table 30-2. 1988 1995 2002 2009 the net liability position deteriorated once again, reaching a plateau of approximately 52 percent in 2004. The ratio has increased again in 2008 and 2009 because of the worldwide financial crisis and the recession. For 2009, the Government’s net liabilities were 73 percent of GDP. Financial Assets: The Government’s financial assets amounted to about $1 trillion at the end of 2009. Government holdings of loans and mortgages have been relatively stable since the mid-1990s. OMB estimates the discounted present value of future losses and interest subsidies on loans to be $82 billion as of the end of 2009, and this amount was subtracted from the face value of outstanding loans to estimate their value. Non-Financial Assets: Government-owned stocks of reproducible defense and nondefense capital have been relatively stable for most of the last 45 years at around $1.2 trillion. In 1960, 86 percent of the capital was defense; today it is 64 percent. During the 1970s and again during the 1990s (after the end of the Cold War), there were substantial declines in defense capital. Although there are no official estimates of the market value of the Government’s vast land and mineral holdings, it is assumed here that Federal land values rise and fall along with private land values. Since the mid-1990s, oil prices have been volatile, which has caused the estimated market value of federally-owned proved reserves of oil and natural gas to fluctuate as well. In 2009, as estimated here, the combined real value of Federal land and mineral rights was $0.8 trillion compared with $1.1 trillion in 2008. Total Assets: The total value of Government assets measured in constant dollars was about $3.3 trillion, equal to 23 percent of GDP, at the end of 2009. Debt Held by the Public: The Government’s largest liability is the debt owed to the public, which amounted to 452 ANALYTICAL PERSPECTIVES $7.5 trillion at the end of 2009. Publicly held debt declined for several years in the late 1990s because of the shift from unified budget deficits to surpluses, but began to increase again as deficits returned, and it increased very substantially in 2008 and 2009. Insurance and Guarantee Liabilities: The estimates in Table 30-2 reflect the current discounted value of prospective future losses on outstanding guarantees and insur- ance contracts, not accounting for market risk. Other insurance includes veterans’ life insurance, flood, crop, and terrorism insurance. Relative to total liabilities, insurance and guarantee liabilities are small, comprising less than 2 percent of total liabilities in 2008. Pension and Post-Employment Health Liabilities: While the Government’s employee pension obligations have risen slowly, there has been a sharp increase in the Table 30–2. GOVERNMENT ASSETS AND LIABILITIES* (As of the end of the fiscal year, in billions of 2009 dollars) 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2007 2008 2009 ASSETS Financial Assets: Cash and Checking Deposits ....................................................... Other Monetary Assets ................................................................. Mortgages .................................................................................... Other Loans .................................................................................. Less Expected Loan Losses ................................................. Other Treasury Financial Assets ................................................... Subtotal ........................................................................... 51 2 33 122 –1 74 281 74 1 32 168 –3 92 364 46 1 47 211 –5 81 380 37 2 50 212 –11 73 363 57 2 92 273 –21 103 506 37 2 94 354 –21 152 618 51 2 120 251 –24 241 641 52 1 82 202 –30 290 599 69 8 95 232 –46 309 666 38 2 84 218 –45 330 627 79 1 86 212 –45 316 650 375 3 91 215 –49 339 973 368 2 97 223 –82 339 947 Nonfinancial Assets: Fixed Reproducible Capital ........................................................... Defense ................................................................................. Nondefense ........................................................................... Inventories .................................................................................... Nonreproducible Capital ................................................................ Land ...................................................................................... Mineral Rights ....................................................................... Subtotal ........................................................................... 1229 1060 170 321 158 113 45 1709 1219 995 224 278 209 156 53 1707 1269 1007 263 259 251 197 53 1779 1231 919 312 232 408 312 96 1871 1079 776 303 287 595 399 196 1960 1254 910 344 328 692 414 278 2274 1303 938 365 290 587 426 162 2180 1361 966 395 223 438 313 125 2022 1192 793 398 229 752 532 220 2173 1148 723 425 297 1369 1003 366 2814 1186 751 435 286 1351 991 360 2823 1181 752 429 292 1088 636 453 2561 1,280 818 462 285 831 514 317 2,395 Total Assets ....................................................................................... 1989 2071 2159 2234 2466 2893 2821 2621 2838 3441 3472 3534 3,342 Debt held by the Public ...................................................................... 1402 1442 1284 1305 1622 2681 3649 4848 4214 5022 5196 5842 7,544 Insurance and Guarantee Liabilities: Deposit Insurance ........................................................................... Pension Benefit Guarantee ............................................................. Loan Guarantees ............................................................................ Other Insurance .............................................................................. Subtotal ........................................................................... ......... ......... ......... 38 38 ......... ......... 1 35 35 ......... ......... 3 27 30 ......... 53 8 24 85 2 39 15 33 89 11 53 13 20 98 88 53 19 24 184 24 25 36 22 107 1 50 46 20 117 1 90 52 44 188 2 85 71 17 176 34 75 75 25 209 72 92 70 15 249 Pension and Post-Employment Health Liabilities: Civilian and Military Pensions ......................................................... Retiree Health Insurance Benefits .................................................. Veterans Disability Compensation .................................................. Subtotal ............................................................................ 1059 217 233 1509 1331 272 293 1896 1592 326 350 2268 1804 369 388 2561 2218 454 398 3070 2200 450 328 2979 2148 440 296 2884 2082 435 359 2876 2178 483 683 3343 2372 1230 1228 4830 2492 1184 1164 4841 2627 1170 1477 5274 2,707 1,178 1,318 5,202 Environmental and Disposal Liabilities .............................................. 82 102 123 139 166 198 232 306 372 284 353 345 342 Other Liabilities: Trade Payables and Miscellaneous .............................................. Benefits Due and Payable ........................................................... Subtotal ........................................................................... 33 25 59 41 30 71 52 40 93 64 43 107 100 54 155 132 60 192 181 72 253 150 84 234 133 96 229 251 128 379 278 138 416 288 147 435 258 161 419 Total Liabilities ................................................................................... 3089 3546 3796 4197 5101 6148 7202 8370 8275 10702 10982 12104 13,756 Net Liabilities (Liabilities Minus Assets) ............................................. 1100 1475 1637 1963 2635 3256 4381 5749 5437 LIABILITIES 7261 Addenda: Ratio to GDP (in percent) .................................................................. 35.3 37.7 35.0 37.0 41.5 43.0 49.5 57.4 43.9 52.1 * This table shows assets and liabilities for the Government as a whole excluding the Federal Reserve System. Data for 2009 are extrapolated in some cases. 7509 8570 10,414 51.3 58.5 73.1 453 30. BUDGET AND FINANCIAL REPORTING liability for future health benefits and veterans compensation. The discounted present value of these benefits is estimated to have been around $5.2 trillion at the end of 2009, which is little changed from 2008. Environmental and Disposal Liabilities: During World War II and the Cold War, the Government constructed a vast industrial complex to produce and test nuclear weapons, which resulted in environmental contamination. Ongoing defense and other activities can result in contamination if waste disposal is not carried out properly. Cleanup and disposal liabilities are estimated to be around $340 billion in present value terms. The Government need not maintain a positive balance of net assets to assure its fiscal solvency. Indeed, the increase in the Government’s net liability position since 1960 has not significantly affected the Government’s creditworthiness, and interest rates on Federal debt have been very low recently, despite the surge in Government borrowing. Nevertheless, there are limits to how much debt any Government can assume without putting its finances in jeopardy. Conclusion Budget and financial reporting each provide the public with detailed information on how the Government raised and spent financial resources. The budget uses a cashbased transactions conceptual framework laid out in the 1967 Report of the President’s Commission on Budget Concepts. Financial reporting uses much the same underlying data to develop reports prepared in accordance with generally accepted accounting principles (GAAP) promulgated by the Federal Accounting Standard Advisory Board and adopted for Executive Branch agencies by the Office of Management and Budget. 31. SOCIAL INDICATORS The social indicators presented in this chapter illustrate in broad terms how the Nation is faring in selected areas where the Federal Government has significant responsibilities, including the economy, energy, the environment, health, and education, among others. The indicators shown in the tables in this chapter are only a subset drawn from the vast array of available data on conditions in the United States. In choosing indicators for this table, priority was given to measures that were consistently available over an extended period. Such indicators make it easier to draw comparisons and establish trends. The individual measures in these tables are influenced to varying degrees by many Government policies and programs, as well as by external factors beyond the Government’s control. They do not measure the outcomes of Government policies, because they do not show the direct results of Government activities, but they do provide a quantitative measure of the progress or lack of progress toward some of the ultimate ends that Government policy is intended to promote. The Program Evaluation and Benefit-Cost Analysis chapters of this volume discuss approaches to directly assessing the impacts of particular Government programs. The President has made it clear that policy decisions should be based upon evidence—evidence about what the Nation’s greatest needs and challenges are and evidence about what strategies are working. The social indicators in this chapter provide useful information both for prioritizing budgetary and policymaking resources and for evaluating how well existing approaches are working. Economic Conditions: The current economic downturn has produced the worst labor market in more than a generation. Unemployment is more than double its rate at the most recent business cycle peak. The employment to population ratio has fallen below 60 percent for the first time in 25 years. Over the full 1960 to 2009 period shown in the tables, the primary pattern has been one of rising living standards. Real disposable income per capita has more than tripled over the past five decades as technological progress and the accumulation of human and physical capital have increased the Nation’s productive capacity. Average household net worth has more than doubled. But the median family has not shared fully in this prosperity— median income is up only about 30 percent (since 1967) and was lower in 2008 than in 1998, because income gains have been concentrated among higher-income families and individuals. Household composition has also affected the median income as the numbers of two-earner households and single-parent households have increased. Similarly the median wealth of households in the decade before retirement has risen, but not nearly as rapidly as mean wealth. The rise in the share of national income received by those at the top of the income distribution can be seen in the two inequality measures in Table 31-1. The share of income accruing to the lower 60 percent of households has fallen from 32.3 percent in 1970 to 26.7 percent in the most recent year for which we have data. The income share of the top one percent of taxpayers has risen from around eight percent between 1960 and 1980 to over 18 percent in 2007. The poverty rate, which fell dramatically between 1960 and 1970, as the economy prospered and as Social Security and other safety-net programs expanded, is at about the same level as in 1970—despite the large increase in per capita income, and 15 percent of American households are food-insecure. Changes in family structure among low-income households and stagnating wages for low-skill workers are a large part of the story for why rising aggregate income has not had more impact on the most economically vulnerable Americans. Setting the Stage for Future Prosperity: The Nation’s future economic prosperity depends on the amount of technical know-how we have as well as on the quantity and quality of our physical and human capital. Table 31-1 shows that net national saving, which was already low by international standards when it averaged around 10 percent in the 1960s and 1970s, fell from 6.2 percent in 2000 to 2.0 percent in 2007 under the previous administration as Federal budget surpluses turned to deficits. National saving is a key determinant of future prosperity because it leads to the investment that produces capital accumulation. During the current recession, personal savings has rebounded to 4.5 percent, but net national saving, which includes the Government’s dissaving, has fallen to less than -2 percent of GDP. Despite the current low saving rate, past saving has resulted in a large accumulation of physical capital. The stock of physical capital including consumer durable goods like cars and appliances amounted to $48 trillion in 2008, more than four times the size of the capital stock in 1960. National R&D spending has hovered between 2.5 percent and 2.7 percent for most of the past 50 years. The President has set a target to increase this number to 3.0 percent. Patents encourage innovation by awarding an inventor the right to exclude others from the use of an invention unless compensated. The patent system also assures publication of patented ideas distributing knowledge that might otherwise be kept confidential. Patents by U.S. inventors have more than doubled since 1960. The Nation’s future well-being and prosperity depends also on stewardship of our natural resources and environment and on our ability to transform the economy into 455 456 one that can succeed with a lower-level of carbon emissions. The country has made major strides in improving air quality since the passage of the Clean Air Act in 1970. Concentrations of the main criteria pollutants tracked by the Environmental Protection Agency have declined significantly since 1970. The largest decline was for lead, which was removed from gasoline, but there have also been large declines in the emissions of carbon monoxide, nitrogen oxides, and sulfur dioxide. The air has become markedly cleaner in the United States as a result of this progress. Progress on improving water quality has also been noticeable as an increasing proportion of the population is served by improved water treatment facilities. Moving forward, the greatest environmental challenge is reducing greenhouse gas emissions. In 2007 emissions were 6088 teragrams. The President announced a target reduction of 17 percent in greenhouse gas emissions between 2005 and 2020, with an ultimate reduction of 83 percent between 2005 and 2050. While technological advances and a shift in production patterns mean that we now use about half as much energy per real dollar of GDP as we did 40 years ago, our rising income levels mean that per capita consumption has remained roughly constant. And today only seven percent of our energy production is from renewable sources. Health, Education, and Civic Engagement: Table 31-2 focuses on additional national priorities. The first three groups of indicators in this table show measures related to the Nation’s health. The United States devotes a large fraction of its income to health care, and that share has increased more than threefold since 1960. In the latest data, from 2008, the share of GDP accounted for by health expenditures was over 16 percent. This is the largest it has ever been and well above what other nations spend on health. Despite the large expenditures on health care, many Americans lack health insurance, although if Congress passes health care reform legislation this number is projected to decline significantly. In 2008, about 15 percent of the U.S. population was uninsured. The United States has seen progress over the last 50 years in some important indicators of health status. Infant mortality has fallen from 26 deaths per 1,000 live births in 1960 to less than 7 deaths in 2000, although there has been no further progress since 2000. Life expectancy at birth continues to increase in the United States, rising by more than eight years since 1960, although it lags behind that in many other developed countries. Americans’ behaviors contribute to some of our health problems. Cigarette smoking has declined dramatically since the 1970s, but 20 percent of the adult population still smokes with the attendant health risks that brings. Obesity is a growing problem for the United States as more and more Americans fall into this category. More than a third of the population is classified as obese according to criteria established by the Centers for Disease Control and Prevention, up from 15 percent thirty years ago. The Administration is committed to returning America to being number one in the world in high school and college ANALYTICAL PERSPECTIVES graduation rates and academic achievement. Between 1960 and 1980, the percentage of 18-24 year olds with a high school diploma increased from 60 percent to 81 percent, a gain of about ten percentage points per decade. Progress has slowed since then with only a four percentage point gain over the past 30 years. College enrollment rates have continued to rise. In 1980 only a quarter of 1824 year olds were enrolled in college. Today that number is almost 40 percent. The most thorough measurement of education achievement is the National Assessment of Educational Progress (NAEP). These measures have been taken since the 1980s. They show only very gradual improvement in mathematics and no discernible progress in reading for American 17-year olds. Americans are generally well housed, but some of the population faces housing problems. In 2007, about five percent of households with children lived in inadequate housing as defined by the Census Bureau. These problems usually consisted of poor plumbing, inadequate heating, or other physical maintenance problems. About six percent of these households were experiencing overcrowding. Both measures were down from levels reported in the 1980s. However, many families have experienced increased housing costs relative to income. In 2007, 37 percent of families with children were spending more than 30 percent of reported income on housing and utilities, up from 17 percent in 1980. Since 1980, there has been a remarkable decline in violent crime. The two crime measures shown in Table 31-2 are based on different types of record keeping. The murder rate is based on reported homicides compiled by the Federal Bureau of Investigation from local law enforcement agencies, while the violent crime statistic is based on surveys of victims. The violent crime rate has declined to less than half of its 1980 level. The murder rate has been cut almost in half. Measures of family instability increased significantly up until around 1995. Since 1995, births to unmarried adolescents age 15 to 17 have dropped from around 30 per 1,000 women to about 20 per 1,000. After rising for more than three decades, the percentage of children living only with their mother has stabilized at around 24 percent of all children. Americans increased their charitable contributions at an average real rate of slightly less than two percent per year between 1960 and 2008; real GDP per capita grew by slightly more than two percent per year over that interval. Charitable giving dropped in real terms in 2008, as the recession and capital losses cut into family resources. Another measure of American’s willingness to participate in civic activity, the voting rate for President, was at 64 percent in 1960, but averaged about 55 percent from 1972 through 2000 before rising to 60 percent in 2004 and 62 percent in 2008. Other Compilations of Economic and Social Indicators: There are many other sources of data on trends in American social and economic conditions, including the Statistical Abstract published annually by the Census Bureau. Some examples are described below. Cutting across a range of social and economic domains, the Interagency Forum on Child and Family Statistics 31. SOCIAL INDICATORS annually assembles American’s Children: Key National Indicators of Well-Being: http://www.childstats.gov. The Interagency Forum on Aging-Related Statistics publishes Older Americans: Key Indicators of Well-Being every other year http://www.agingstats.gov/agingstatsdotnet/ main_site/default.aspx. There are also topic-specific indicators, which highlight performance in specific areas. Science and Engineering Indicators, published by the National Science Board, provides a broad base of quantitative information on the U.S. and international science and engineering enterprise: http://www.nsf.gov/statistics/indicators. The Science Resources Statistics Division at the National Science Foundation is doing developmental work on measuring 457 innovation, an important component of the scientific enterprise not currently included in our measures. Healthy People 2010 within the Department of Health and Human Services offers a statement of national health objectives that identifies the most significant preventable threats to health and establishes national goals to reduce these threats. The National Center for Health Statistics annually publishes Health, United States (http://www. cdc.gov/nchs/hus.htm), a comprehensive compilation of health indicators. The National Center for Education Statistics within the Department of Education publishes the Condition of Education: http://nces.ed.gov/programs/coe. The website includes a set of indicators and also special analyses, and a user’s guide. 458 ANALYTICAL PERSPECTIVES Table 31–1. ECONOMIC AND SOCIAL INDICATORS Calendar Years 1960 1970 1980 1990 1995 2000 2005 2007 2008 2009 Living Standards: Real GDP per person (2005 dollars) t ................................................................ average annual percent change (5-year trend) .......................................... Real disposable income per capita average (2005 dollars) 1 ............................. average annual percent change (5-year trend) .......................................... Real median income: all households (2008 dollars) .......................................... average annual percent change (5-year trend) .......................................... Poverty rate (%) 2 ............................................................................................... Food-insecure households (percent of all households) 3 ................................... 15,661 0.7 10,865 1.2 N/A N/A 22.2 N/A 20,820 2.3 15,158 3.2 41,620 N/A 12.6 N/A 25,640 2.6 18,863 2.0 44,059 0.5 13.0 N/A 32,112 2.3 23,568 1.8 47,818 1.2 13.5 N/A 34,111 1.2 24,951 1.1 47,803 –0.0 13.8 N/A 39,750 3.1 28,899 3.0 52,500 1.9 11.3 10.5 42,692 1.4 31,338 1.6 51,093 –0.5 12.6 11.0 43,926 1.8 32,679 1.7 52,163 0.5 12.5 11.1 43,714 1.4 32,546 1.3 50,303 –0.2 13.2 14.6 42,190 0.2 32,599 0.9 N/A N/A N/A N/A Jobs and Unemployment: 1 Civilian unemployment rate (%) ......................................................................... Unemployment plus marginally attached and underemployed (%) .................... Employment-population ratio % 4 ....................................................................... Payroll employment change—December to December (millions) ..................... Payroll employment change—5-year annual average (millions) ........................ 5.5 N/A 56.1 –0.4 0.2 4.9 N/A 57.4 –0.5 1.7 7.1 N/A 59.2 0.3 2.6 5.5 N/A 62.8 0.3 2.1 5.6 10.0 62.9 2.2 1.8 4.0 7.0 64.4 2.0 2.9 5.1 8.9 62.7 2.5 0.5 4.6 8.3 63.0 1.2 1.6 5.8 10.6 62.2 –3.1 1.0 9.9 16.3 59.3 –4.2 –0.3 Economic Inequality: Income share of lower 60% of all households ................................................... Income share of top 1% of all taxpayers ............................................................ N/A 8.4 32.3 7.8 31.2 8.2 29.3 13.0 28.0 13.5 27.3 16.5 26.6 17.4 26.9 18.3 26.7 N/A N/A N/A Economic Conditions: Wealth Creation: Net national saving rate (% of GDP) 5 ................................................................ Personal Saving Rate (% of Disposable Personal Income) 5 ............................. Average household net worth (2009 dollars) 5 ................................................... Median wealth of households aged 55-64 (2007 dollars) 6 ................................ 10.4 8.1 7.1 3.9 4.7 6.2 2.9 2.0 –0.2 –2.3 7.2 9.4 9.8 6.5 5.2 2.9 1.4 1.7 2.7 4.5 222,912 267,600 293,177 350,828 394,535 500,019 577,813 575,210 438,420 455,906 N/A N/A N/A 160,000 156,100 198,800 269,233 254,100 N/A N/A Innovation: R&D spending (% of GDP) ................................................................................ Patents issued to U.S. residents (thousands) .................................................... Multifactor productivity (average 5 year percent change) .................................. Nonfarm output per hour (average 5 year percent change) ............................... 2.6 42.3 1.0 1.8 2.5 50.6 0.8 2.1 2.3 40.8 0.8 1.1 2.6 52.8 0.6 1.5 2.5 64.4 0.5 1.5 2.7 96.9 1.1 2.7 2.6 82.6 1.8 3.1 2.6 93.7 1.4 2.2 N/A 92.6 1.1 1.8 N/A N/A N/A 1.9 Capital and Infrastructure: Bridges that are structurally deficient or functionally obsolete (%) 7 .................. Real net stock of fixed assets and consumer durable goods ($08 bils) ............. N/A 11,204 N/A 16,350 N/A 22,526 N/A 29,796 31.8 33,150 28.6 38,926 26.3 44,791 25.4 47,236 25.2 48,139 N/A N/A Energy and Environment: Air Quality - Mean Pollution Concentration levels 8: Carbon Monoxide (ppm) based on 124 monitoring sites ............................ Ground Level Ozone (ppm) based on 258 monitoring sites ....................... Lead (ug/m3) based on 19 monitoring sites ............................................... Nitrogen Dioxide (ppm) based on 75 monitoring sites ............................... Particulate Matter (ug/m3): PM10 based on 325 monitoring sites .................................................. PM 2.5 based on 728 monitoring sites ................................................ Sulfur Dioxide (ppm) based on 141 monitoring sites .................................. N/A N/A N/A N/A N/A N/A N/A N/A 8.951 0.100 1.263 0.028 6.130 0.089 0.357 0.024 4.797 0.090 0.090 0.023 3.461 0.081 0.079 0.021 2.296 0.080 0.078 0.017 2.021 0.079 0.102 0.016 1.874 0.075 0.101 0.015 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A 0.012 80.769 N/A 0.009 67.718 N/A 0.006 62.601 13.470 0.005 57.194 12.831 0.004 58.360 11.887 0.004 55.929 10.899 0.003 N/A N/A N/A Water Quality: Population served by secondary treatment or better (millions) 6 ............... 57.2 85.7 117.9 146.5 161.1 189.1 207.7 213.1 215.9 218.6 Climate Change: Net greenhouse gas emissions (teragrams CO2 equivalent) 9 ................... Per capita greenhouse gas emissions (megagrams CO2 equivalent) ........ Per 2005$ of GDP greenhouse emissions (kilograms CO2 equivalent) ..... N/A N/A N/A N/A N/A N/A N/A N/A N/A 5,257 21.0 0.654 5,612 21.1 0.617 6,291 22.3 0.560 5,986 20.2 0.474 6,088 20.2 0.459 N/A N/A N/A N/A N/A N/A Energy: Energy consumption per capita (millions of BTUs) ................................... 250 331 344 339 342 351 340 337 327 N/A Energy consumption per real dollar of GDP (thousands of BTUs) ............. 18 18 15 12 11 10 9 9 9 N/A Energy production from renewable sources (% of total) ............................. N/A N/A N/A N/A N/A N/A 6.4 6.7 7.4 N/A 5 2009 through 2009Q3 only. N/A = Not Available 6 Data interpolated for some years. 1 Values for 2009 based on a consensus forecast for 2009Q4. 7 Bridges are structurally deficient if they have been restricted to light vehicles, require 2 The poverty rate does not reflect noncash government transfers. 3 These households were uncertain of having, or unable to acquire, enough food to meet immediate rehabilitation, or are closed. They are functionally obsolete if they have deck geometry, load carrying capacity, clearance or approach roadway alignment that no longer the needs of all their members because they had insufficient money or other resources for meet the criteria for the system of which the bridge is carrying a part. food at some time during the year. 8 ppm—parts per million; ug/m3—micrograms per cubic meter 4 Civilian employment as a percent of the civilian noninstitutional population age 16 and 9 This is a net measure reflecting both sources and sinks of greenhouse gases. above. 459 31. SOCIAL INDICATORS Table 31–2. ECONOMIC AND SOCIAL INDICATORS Calendar Years 1960 1970 1980 1990 1995 2000 2005 2007 2008 2009 Access to Health Care: Total national health expenditures (percent of GDP) .............................................. Percentage of population without health insurance ................................................ Percent of children age 19-35 months with recommended immunizations 1 .......... 5.2 N/A N/A 7.2 N/A N/A 9.1 N/A N/A 12.3 12.9 N/A 13.7 14.4 N/A 13.6 13.7 72.8 15.7 15.3 80.8 15.9 15.3 80.1 16.2 15.4 N/A N/A N/A N/A 26.0 7.7 69.7 20.0 7.9 70.8 12.6 6.8 73.7 9.2 7.0 75.4 7.6 7.3 75.8 6.9 7.6 76.8 6.9 8.2 77.4 6.8 8.2 77.9 N/A N/A N/A N/A N/A N/A N/A 13.3 N/A N/A 39.2 14.3 N/A N/A 33.0 15.2 N/A N/A 25.3 22.4 N/A N/A 24.6 26.6 32.6 N/A 23.2 31.4 30.7 27.2 20.9 34.6 25.5 29.0 19.8 N/A 26.0 29.3 20.6 N/A N/A N/A N/A N/A N/A N/A High school graduates (% of population 25 and older) ........................................... Percentage of 18-24 year olds with a high school diploma .................................... Percentage of 18-24 year olds enrolled in college .................................................. College graduates (% of population 25 and older) ................................................. 44.6 59.9 N/A 8.4 55.2 78.8 25.7 11.0 68.6 80.9 25.6 17.0 77.6 81.7 32.0 21.3 81.7 80.8 34.3 23.0 84.1 81.9 35.5 25.6 85.2 82.9 38.9 27.6 85.7 83.9 38.8 28.7 86.6 84.9 39.6 29.4 N/A N/A N/A N/A National Assessment of Educational Progress 6 Reading 17-year olds ............................................................................................. Mathematics 17-year olds ....................................................................................... N/A N/A N/A N/A 283 297 288 303 286 305 285 306 284 305 285 306 286 306 N/A N/A N/A N/A N/A N/A N/A N/A 9 9 17 9 7 25 7 7 28 7 7 28 5 6 34 5 6 37 N/A N/A N/A N/A N/A N/A N/A 5.1 N/A 7.8 4,940 10.2 4,410 9.4 4,610 8.2 2,740 5.5 2,100 5.6 2,040 5.6 1,930 5.4 N/A N/A N/A 9.2 N/A 11.6 20.6 18.6 29.6 21.6 30.1 24.0 23.9 22.3 19.7 23.4 N/A 24.1 N/A 23.9 N/A N/A 295 N/A 421 N/A 450 N/A 514 20.4 487 N/A 744 N/A 766 27.0 781 26.2 725 26.4 N/A N/A Health Status: Infant mortality (per 1000 live births) 2 .................................................................... Low birthweight [<2,500 gms] percentage of babies .............................................. Life expectancy at birth (years) 2 ............................................................................. Health Risks: Cigarette smokers (% population 18 and older) ..................................................... Obesity (% of population with BMI over 30) 3 .......................................................... Alcohol (% high school students engaged in heavy drinking) 4 .............................. Physical activity: % of adults over 45 engaged in regular activity 5 ......................... Education: Housing: Percentage of families with children with inadequate housing 7 .............................. Percentage of families with children with crowded housing .................................... Percentage of families with children with costly housing 8 ...................................... Crime: Violent crime rate (per 100,000 population 12 and older) 9 .................................... Murder rate (per 100,000 population) 10 ................................................................. Families: Births to unmarried adolescents age 15-17 (per 1,000) ......................................... Children living with mother only (% of all children) ................................................. Civic Engagement: Individual Charitable Giving per Capita (2008 dollars) .......................................... Percentage of Americans volunteering 11 ............................................................... (1960) (1972) (1980) (1988) (1992) (1996) (2000) (2004) (2008) Voting for President by election year (% eligible population) 12 .............................. 63.8 56.2 54.2 52.8 58.1 51.7 54.2 60.1 61.7 6 Data are interpolated. Actual survey years were 1973, 1978, 1982, 1986, 1990, 1992, N/A = Not Available 1 The 4:3:1:3:3 series consisting of 4 doses (or more) of diphtheria, tetanus toxoids, and 1994, 1996, 1999, 2004, and 2008. 7 Inadequate housing has moderate to severe physical problems, usually poor plumbing pertussis (DTP) vaccines, diphtheria and tetanus toxoids (DT), or diphtheria, tetanus toxoids, or heating or upkeep problems. Some data intepolated. and any acellular pertussis (DTaP) vaccines; 3 doses (or more) of poliovirus vaccines; 8 Expenditures for housing and utilities exceed 30 percent of reported income. Some 1 dose (or more) of any measles-containing vaccine; 3 doses (or more) of Haemophilus data intepolated. influenzae type b (Hib) vaccines; and 3 doses (or more) of hepatitis B vaccines. 9 Includes crimes both reported and not reported to law enforcement. Offenses include 2 Data for 2007 are preliminary. 3 BMI refers to body mass index. A BMI over 30 is the criterion for obesity used by the homicide, rape, robbery, aggravated assault and simple assault. 10 Based on reported crimes. Not all crimes are reported, and the fraction that go Centers for Disease Control and Prevention. 4 Data are interpolated. Percentage of high school students who had five or more drinks unreported may have varied over time, preliminary data for 2008. 11 Data from 1974, 1989, and since 2005 are drawn from the Current Population Survey. within a couple of hours at least once within the 30 days prior to the survey. 12 As computed by Professor Michael McDonald, George Mason University, after 5 Data for 2007 are preliminary. adjusting the population for those not eligible to vote in Presidential elections. 460 ANALYTICAL PERSPECTIVES Table 31–3. SOURCES FOR ECONOMIC AND SOCIAL INDICATORS Indicator: Source: Economic, Envronmental, and Energy Indicators (Table 31–1): Real GDP per person ........................................................................... U.S. Department of Commerce, Bureau of Economic Analysis, National Economic Accounts Data. Real disposable income per capita ....................................................... U.S. Department of Commerce, Bureau of Economic Analysis, National Economic Accounts Data. Real median income: all households .................................................... U.S. Census Bureau, Housing and Household Economic Statistics Division. Poverty rate .......................................................................................... U.S. Census Bureau, Housing and Household Economic Statistics Division. Food-insecure households ................................................................... U.S. Census Bureau, Current Population Survey Food Security Supplement; tabulated by U.S. Department of Agriculture, Economic Research Service. Civilian unemployment rate .................................................................. U.S. Department of Labor, Bureau of Labor Statistics, Current Population Survey. Unemployment plus marginally attached and underemployed ............. U.S. Department of Labor, Bureau of Labor Statistics, Current Population Survey. Employment-population ratio ................................................................ U.S. Department of Labor, Bureau of Labor Statistics, Current Population Survey. Payroll employment .............................................................................. U.S. Department of Labor, Bureau of Labor Statistics, Current Employment Statistics program. Income share of lower 60% of all households ...................................... U.S. Census Bureau, Housing and Household Economic Statistics Division. Income share of top 1% of all taxpayers ............................................... Thomas Piketty and Emanuel Saez, “Income Inequality in the United States, 1913-1998” Quarterly Journal of Economics, 118(1), 2003, 1-39 (tables and figures updated to 2007, 8-09). Net national saving rate ........................................................................ U.S. Department of Commerce, Bureau of Economic Analysis, National Economic Accounts Data. Personal Saving Rate ........................................................................... U.S. Department of Commerce, Bureau of Economic Analysis, National Economic Accounts Data. Average household net worth ............................................................... Board of Governors of the Federal Reserve System, Flow of Funds Accounts of the United States, and U.S. Census Bureau, Housing and Economic Statistics Division. Median wealth of households aged 55-64 ............................................ Board of Governors of the Federal Reserve System, 2007 Survey of Consumer Finances Chartbook. R&D spending ...................................................................................... National Science Foundation, Division of Science Resources Statistics, National Patterns of R&D Resources 2007, data update, NSF 08-318. Patents issued to U.S. residents ........................................................... U.S. Patent and Trademark Office, Electronic Information Products Division, Patent Technology Monitoring Team, submissions to the World Intellectual Property Organization. Multifactor productivity .......................................................................... U.S. Department of Labor, Bureau of Labor Statistics, Major Sector Productivity Program. Nonfarm output per hour ...................................................................... U.S. Department of Labor, Bureau of Labor Statistics, Major Sector Productivity Program. Bridges that are structurally deficient or functionally obsolete .............. U.S. Federal Highway Administration, Office of Bridge Technology, “National Bridge Inventory.” Real net stock of fixed assets and consumer durable goods ............... U.S. Department of Commerce, Bureau of Economic Analysis, National Economic Accounts Data. Carbon Monoxide ................................................................................. U.S. Environmental Protection Agency, Office of Air and Radiation, Air Trends. Ground Level Ozone ............................................................................. U.S. Environmental Protection Agency, Office of Air and Radiation, Air Trends. Lead ...................................................................................................... U.S. Environmental Protection Agency, Office of Air and Radiation, Air Trends. Nitrogen Dioxide ................................................................................... U.S. Environmental Protection Agency, Office of Air and Radiation, Air Trends. PM10 .................................................................................................... U.S. Environmental Protection Agency, Office of Air and Radiation, Air Trends. PM 2.5 .................................................................................................. U.S. Environmental Protection Agency, Office of Air and Radiation, Air Trends. Sulfur Dioxide ....................................................................................... U.S. Environmental Protection Agency, Office of Air and Radiation, Air Trends. Population served by secondary treatment or better ............................ U.S. Environmental Protection Agency, Clean Watersheds Needs Survey 2004 Report to Congress, January 2008 (includes a projection for 2020). Net greenhouse gas emissions ............................................................ U.S. Environmental Protection Agency, 2009 Inventory of Greenhouse Gases Emissions and Sinks: 1990-2007. Energy consumption per capita ............................................................ U.S. Energy Information Administration, Annual Energy Review 2008, June 26, 2009, energy overview Table 1.5. Energy production from renewable sources ......................................... U.S. Energy Information Administration, Monthly Energy Review 2009, April 2009. Health, Education, and Other Social Indicators (Table 31–2): Total national health expenditures ........................................................ Centers for Medicare and Medicaid Services, National Health Expenditure Data, January 2010. Percentage of population without health insurance .............................. U.S. Census Bureau, Housing and Household Economic Statistics Division. Percent of children age 19-35 months with recommended Centers for Disease Control and Prevention, National Center for Immunization and Respiratory Diseases and immunizations .................................................................................. National Center for Health Statistics, National Immunization Survey. Infant mortality ...................................................................................... Centers for Disease Control and Prevention, National Vital Statistics Report, vol. 58, no. 1, August 19, 2009, and National Center for Health Statistics, and Data Brief, Number 9, October 2008, Recent Trends in Infant Mortality in the United States, Marian MacDorman and T.J. Mathews. Low birthweight percentage of babies .................................................. Centers for Disease Control and Prevention, National Vital Statistics Report, vol. 57, no. 12, March 18, 2009. Life expectancy at birth ......................................................................... Centers for Disease Control and Prevention, National Vital Statistics Report, vol. 57, no. 14, April 17, 2009. Cigarette smokers (% population 18 and older) ................................... Centers for Disease Control and Prevention, Morbidity and Mortality Weekly Report, November 13, 2009. Obesity (% of population with BMI over 30) .......................................... Centers for Disease Control and Prevention, National Center for Health Statistics, Health and Stats, December 2008. Prevalence of Obesity and Extreme Obesity among Adults: United States Trends 1960-62 through 2005-2006. Percent high school students engaged in heavy drinking ..................... Centers for Disease Control and Prevention, Youth Risk Behavior Survey, Trends in the Prevalence of Alcohol Use, 1991-2007. Percent of adults over 45 engaged in regular activity ........................... Centers for Disease Control and Prevention, National Center for Health Statistics, National Health Interview Survey. 461 31. SOCIAL INDICATORS Table 31–3. SOURCES FOR ECONOMIC AND SOCIAL INDICATORS—Continued Indicator: High school graduates (% of population 25 and older) ......................... Percentage of 18-24 year olds with a high school diploma .................. Percentage of 18-24 year olds enrolled in college ................................ College graduates (% of population 25 and older) ............................... NAEP: Reading 17-year olds ................................................................ NAEP: Mathematics 17-year olds ......................................................... Percentage of families with children with inadequate housing ............. Percentage of families with children with crowded housing .................. Percentage of families with children with costly housing ....................... Source: U.S. Census Bureau, U.S. Census of Population, 1960, 1970, and 1980, Summary File 3; and Current Population reports. U.S. Census Bureau, School Enrollment, Historical Table A-5a, The Population 14 to 24 Years Old by HS Graduate Status and College Enrollment. U.S. Census Bureau, School Enrollment, Historical Table A-5a, The Population 14 to 24 Years Old by HS Graduate Status and College Enrollment. U.S. Census Bureau, Current Population Survey, 2008 Annual Social and Economic Supplement, Internet Release Data, April 2009. National Assessment of Educational Progress, National Center for Education Statistics, 2008 Long-Term Trend Top Stories. National Assessment of Educational Progress, National Center for Education Statistics, 2008 Long-Term Trend Top Stories. U.S. Census Bureau, American Housing Survey. Tabulated by U.S. Department of Housing and Urban Development. U.S. Census Bureau, American Housing Survey. Tabulated by U.S. Department of Housing and Urban Development. U.S. Census Bureau, American Housing Survey. Tabulated by U.S. Department of Housing and Urban Development. Violent crime rate (per 100,000 population 12 and older) ..................... U.S. Department of Justice, Bureau of Justice Statistics, Violent Crime Trends. Murder rate (per 100,000 population) ................................................... U.S. Department of Justice, Federal Bureau of Investigation, Criminal Justice Information Services Division, 2008 Crime in the United States, Table 1. Births to unmarried women aged 15-17 (per 1,000) ............................. National Center for Health Statistics, National Vital Statistics System. Hamilton, B.E., Martin, J.A., and Ventura, S.J. (2009). Births: Preliminary data for 2007. National Vital Statistics Reports, 57(12). Hyattsville, MD: National Center for Health Statistics. Martin, J.A., Hamilton, B.E., Sutton, P.D., Ventura, S.J., Menacker, F., Kirmeyer, S., and Mathews, T.J.. (2009). Births: Final data for 2006. National Vital Statistics Reports, 57(7). Hyattsville, MD: National Center for Health Statistics. Hamilton, B.E., Sutton, P.D., and Ventura, S.J. (2003). Revised birth and fertility rates for the 1990s: United States, and new rates for Hispanic populations, 2000 and 2001. National Vital Statistics Reports, 51(12). Hyattsville, MD: National Center for Health Statistics. Ventura, S.J. and Bachrach, C.A. (2000). Nonmarital childbearing in the United States, 1940–99. National Vital Statistics Reports, 48(16). Hyattsville, MD: National Center for Health Statistics. Children living with mother only ............................................................ Annual Social and Economic Supplement to the Current Population Survey, Detailed Poverty Tabulations various years. Individual Charitable Giving .................................................................. Statistical Abstract 2009, Center on Philanthropy at Indiana University, Giving USA. Percentage of Americans volunteering ................................................. Corporation for National and Community Service, “Volunteer Growth in America: A Review of Trends since 1974” based on the Current Population Survey. Voting for President by election year (% eligible population) ............... The United States Elections Project, Dr. Michael McDonald, George Mason University, Fairfax, Virginia. Budget of the U.S. Government, FY 2011 Stock number: 041-001-00671-1 ISBN number: 978-0-16-084795-0 Price: $37.00 Appendix-Budget of the U.S. Government, FY 2011 Stock number: 041-001-00672-9 ISBN number: 978-0-16-084796-7 Price: $73.00 Historical Tables-Budget of the U.S. Government, FY 2011 Stock number: 041-001-00673-7 ISBN number: 978-0-16-084797-4 Price: $49.00 Analytical Perspectives-Budget of the U.S. Government, FY 2011 Stock number: 041-001-00674-5 ISBN number: 978-0-16-084798-1 Price: $52.00 The Federal Budget on CD-ROM-Budget of the U.S. Government, FY 2011 Stock number: 041-001-00675-3 ISBN number: 978-0-16-084799-8 Price: $25.00 Order Processing Code: 3555 Qty Easy Secure Internet: bookstore.gpo.gov Toll Free: 866 512–1800 DC Area: 202 512–1800 Fax: 202 512–2104 Mail: US Government Printing Office P.O. 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