Basic Federal Budgeting Terminology
Basic Federal Budgeting Terminology
Bill Heniff Jr.
Analyst on the Congress and Legislative Process
Government and Finance Division
In its most elemental form, the federal budget is a comprehensive accounting of the
government’s spending, revenues, and borrowing. This report provides a brief overview
of the basic terminology and concepts used in the federal budget process. For more
information on the budget process, see the CRS Guides to Congressional Processes at
[ http://www.crs.gov/products/guides/guidehome.shtml] .
Fiscal Year. The fiscal year is the accounting period of the federal government.
It begins on October 1 and ends on September 30 of the next calendar year. Each fiscal
year is identified by the calendar year in which it ends and commonly is referred to as
“FY.” For example, FY2009 began October 1, 2008, and ends September 30, 2009.
Spending. The key terms of federal spending are budget authority, obligations,
outlays, and spendout rate. Congress and the President enact budget authority in law.
Budget authority allows federal agencies to incur obligations, such as entering into
contracts, employing personnel, and submitting purchase orders. Outlays represent the
actual payment of these obligations, usually in the form of electronic transfers or checks
issued by the Treasury Department. The rate at which budget authority becomes outlays
in a fiscal year is called the spendout rate, or the outlay rate. The spendout rate varies
among agencies’ accounts depending on the timing of activity in each account.
Budget authority may be made available for obligation for a one-year, multi-year, or
no-year period. One-year, or annual, budget authority is available for obligation only
during a specific fiscal year, and any unobligated authority expires at the end of that fiscal
year; multi-year budget authority is available for a period longer than one fiscal year; and
no-year budget authority is available for an indefinite period.
Typically, new budget authority is provided in the form of permanent appropriations
or annual appropriations. Permanent appropriations provide new budget authority each
year without any annual legislative action. Usually, this type of new budget authority is
provided in legislation authorizing the program, such as in the case of most entitlement
programs (e.g., Social Security benefits). Annual appropriations, on the other hand,
generally provide new budget authority for the particular fiscal year for which they were
enacted. In some cases, new budget authority in annual appropriations acts is made
available for more than one year, or for a future fiscal year. Annual appropriations are
provided in the regular appropriations bills enacted by Congress and the President each
year. Annual appropriations also may be provided in supplemental appropriations acts
and continuing appropriations acts (often referred to as continuing resolutions).
New budget authority also may be made available to agencies in the form of
borrowing authority, contract authority, and the authority to spend offsetting collections.
Borrowing authority and contract authority allow agencies to borrow funds and enter into
contracts prior to enactment of appropriations. Spending authority from offsetting
collections, such as fees for certain market-oriented activities, may be provided to allow
agencies to obligate and spend these funds. Offsetting collections are deducted from
gross budget authority and outlays at the account or higher level.
Revenues. Revenues, also known as receipts, are the funds collected from the
public primarily as a result of the federal government’s exercise of its sovereign powers.
Most of the federal government’s revenues consist of receipts from individual income
taxes, social insurance (payroll) taxes, and corporate income taxes. Preferential
provisions, such as tax exemptions, deductions, and credits, which reduce government
receipts, are called tax expenditures. Excise taxes, duties, gifts, and miscellaneous
receipts are other sources of federal revenues.
Offsetting collections are not classified as revenues, but instead are treated as
negative spending (i.e., as noted above, deducted from gross budget authority and
Budget Deficit or Surplus. The difference between government revenues and
outlays in a fiscal year equals the budget deficit or surplus. A budget deficit results when
outlays exceed revenues; a budget surplus results when revenues exceed outlays. What
is counted as government revenues and outlays, however, depends on the presentation of
the federal budget. The federal budget typically is presented in the form of the unified
budget, reflecting a unified budget deficit or surplus. The unified budget, or consolidated
budget, includes the revenues and outlays of all budget accounts, including federal funds
and trust funds, regardless of whether they are designated in law as on-budget or off-
budget. The unified budget represents a comprehensive picture of the federal
government’s financial activities.
The federal budget also is presented to distinguish between on-budget and off-budget
accounts. That is, the federal budget also presents an on-budget deficit or surplus and an
off-budget deficit or surplus. The on-budget deficit or surplus includes all accounts not
designated in law as off-budget. The off-budget deficit or surplus includes those accounts
designated in law as off-budget. Currently, there are three accounts designated in law as
off-budget: the Federal Old-Age and Survivors Insurance Trust Fund (Social Security
retirement), the Federal Disability Insurance Trust Fund (Social Security disability), and
the Postal Service Fund.
Debt. The gross federal debt, almost all of which is subject to statutory limitation,
consists of the debt held by the public plus the debt held by government accounts. The
debt held by the public is the total net amount borrowed from the public by the federal
government to cover its budget deficits over the years. Usually, analysts use the debt held
by the public as the measure of the impact of the federal government’s borrowing on the
economy. It is this portion of federal debt that not only reflects the amount of the nation’s
wealth invested in federal government securities rather than in private investment, but
also determines the level of real resources the government must acquire to make interest
and principal payments. The debt held by government accounts is the total net amount
of federal debt issued to specialized federal accounts, primarily trust funds. It represents
internal transactions of the federal government.