01 February 1999
(Fact sheet on U.S. budget concepts and terms) (1180) Washington -- With the new budget season at hand, lawmakers, journalists and the general public once again face the formidable task of trying to find their way through a maze of budget concepts and terms that may be clear to a handful of budget office experts but certainly are not to the rest of us. The following is an attempt to provide a helpful guide to some of the concepts most likely to cause confusion when officials and experts discuss the fiscal year 2000 budget proposals presented to the U.S. Congress by President Clinton February 1. OUTLAYS OR AUTHORITY? The overall figures that get the most attention are the estimates for actual expenditures for the fiscal year, or what the budget-makers call "outlays." When the legislative wheels get into high gear, however, it is the appropriations or "budget authority" figures that take the spotlight, and they can be quite different. -- Budget authority, or obligational authority, refers to the maximum amount of money Congress allows the various government agencies to commit, or "obligate," for various purposes in the given fiscal year. In the case of salaries, the amounts obligated are spent in roughly the same year. Not so with the money obligated for an aircraft carrier. The contract may be signed this year and the total amount appears under "budget authority" for the current fiscal year, but portions of the total will show up in the "outlays" column over a number of years in the future as successive phases of the work are completed. Conversely, outlays in the current fiscal year may include amounts left over from unspent budget authority enacted in prior years. Some types of budget authority are controlled by appropriations bills. Other types, such as Social Security payments, are not subject to annual appropriations. -- Outlays refers to the money actually paid out in a given year. The money may be paid out of funds made available in appropriations bills enacted for that fiscal year, or out of funds appropriated and obligated in an earlier fiscal year, or under some multi-year obligational authority. In seeking to stay within a certain spending ceiling for fiscal year 2000 (FY00), then, the president and the U.S. Congress have to take account of the amount of unspent previous budget authority that is likely to be available and used in FY00 and then estimate how much of the newly enacted budget authority (mostly appropriations) will result in outlays during that period. "CONTROLLABLE" ITEM OR "UNCONTROLLABLE" ITEM? While all budget items could be said to be "controllable" in the long run, that is not true within the time span involved in putting together and enacting one year's budget. -- Uncontrollable items, in the strict sense, are expenditures required by prior contractual obligations. Interest on the public debt is the prime example. -- Many relatively uncontrollable items, in the United States often referred to as "entitlement programs," involve payments the government is obligated to pay to individuals as a result of the rules laid down by Congress for some continuing program, such as Social Security, medical care programs, veterans benefits, and unemployment insurance. The costs of such programs can be changed over time by legislation changing the way benefits are calculated. In the short run, however, current recipients have in many cases come to depend on the current level of benefits, and any reduction for current recipients is regarded by many as amounting almost to a breach of contract, morally if not legally. For this reason it is difficult to make quick reductions in expenditures for "entitlements" programs. -- Controllable budget items (also sometimes referred to as "discretionary" spending programs) are those programs that live on year to year by the grace of annual congressional appropriations. CALENDAR YEAR OR FISCAL YEAR? The fiscal year is named for the calendar year in which it ends. -- Fiscal year 1999 (FY99) began October 1, 1998, and will end September 30, 1999. -- Fiscal year 2000 (FY00), the year for which President Clinton is submitting proposals to the Congress, will begin October 1, 1999, and end September 30, 2000. ESTIMATED FIGURES OR ACTUAL FIGURES? Most figures in the budget presentation are only estimates, and even with the best of intentions the actual figures reported later are much different. -- Estimates are given for the fiscal year for which the outlays are being proposed as well as for the current fiscal year, which is not yet half over when the budget proposals go to the Congress. -- Actual figures are given only for past fiscal years, after all the results are in. Some reasons why the estimates are usually wide of the mark include: -- The president can only propose a budget. It is the Congress that enacts the appropriations and the revenue measures. Congress typically deviates from the presidents' recommendations on many items. -- Government revenues and certain expenditures such as unemployment compensation are strongly affected by economic conditions. The budget estimates are based on a series of economic assumptions, but it is well known that economic forecasting is not infallible, even six months ahead. The fiscal year under consideration does not even begin until more than six months after the economic assumptions and budget projections are presented and ends almost two years after these forecasts are worked out. Economists do not take forecasts very seriously when they reach that far into the future. PROPOSED BUDGET OR CURRENT SERVICES BUDGET? The "current services budget" does not represent a proposal but helps provide an additional dimension to the proposals and counterproposals that are made. -- The proposed budget shows the revenue and expenditures that would result if all of the legislation proposed is enacted. -- The "current service budget" attempts to project what would happen if there are no changes in the tax laws, entitlements programs and other laws, and if all discretionary programs continue to provide the same level of services as in the previous fiscal year. The totals could still change from one year to the other as a result of economic conditions, price changes, demographic factors, etc. A comparison of the "current services budget" with the proposed budget figures helps to distinguish between changes resulting from deliberate policy decisions and changes resulting from other factors. YEAR OVER YEAR OR 4TH QUARTER TO 4TH QUARTER? These concepts usually are used in speaking of the economic assumptions underlying the budget. It is important to know if a given percentage change is calculated on one basis or the other since the resulting figures can be quite different. Both figures are valuable, for different uses. -- The fourth quarter to fourth quarter figure is often best for showing the latest trend. Unless "fiscal year" is specified, "fourth quarter" refers to the last three months of the calendar year: October through December. -- The year-over-year figure is usually best for historical purposes and for showing longer term trends since it is more complete and averages out the humps and valleys within the years.