porated, if the President deems it appropriate, into the main budget classifications.

In the national needs presentation, Federal programs are discussed in terms of national needs and the functional classification, and information is provided on the relationship of objectives, goals, accomplishments and allocation of budgetary resources to national needs.

In this context, a single program may be identified as serving several national needs. For example, medicare, primarily a health program, is identified as meeting the national need for improved health care. However, it also provides a form of income security by paying for medical bills and, hence, can also be identified as meeting the national need for income security. A discussion of Federal programs based solely on the functional classification system would have been limited to discussion of each program, classified by major purposes served, in only one category.

The national needs presentation can be found in Part 5 (“Meeting National Needs: the Federal Program by Function”). Since this is the first complete national needs presentation in the President's budget, some of the approaches are, of necessity, experimental. It is likely that some changes will evolve in future years.

Types of funds.-Agency activities are financed through Federal funds and through trust funds, both of which are included in the budget.

Federal funds are of four types. The general fund is credited with receipts not earmarked by law for a specific purpose, and is charged with payments from such receipts and from general borrowing. Special funds contain Federal receipts earmarked for specific purposes, other than for carrying out a cycle of operations. Public enterprise (revolving) funds finance a cycle of business-type operations in which outlays generate collections, primarily from the public. Intragovernmental revolving and management funds facilitate financing operations within and between Government agencies.

Trust funds are established to account for receipt and expenditure of moneys by the Government for use in carrying out specific purposes and programs in accordance with the terms of a trust agreement or statute. These moneys are not available for the general purposes of the Government. Within the category of trust funds there is a special subcategory of trust revolving funds that carry on a cycle of businesstype operations.

Current expense and capital investment.—The budget includes spending for both current operating expenses and capital investment, such as the purchase of lands, structures, and equipment. It also includes capital investment in the form of lending and the purchase of investments. These categorizations of outlays are discussed in Special Analysis D.

BUDGET AUTHORITY AND RELATED TRANSACTIONS

Budget authority.—Government agencies—whether or not they are included in the budget totals—are permitted to enter into obligations requiring either immediate or future payment of money only when they have been granted authority to do so by law. This authority is usually provided as budget authority. (Collections specifically authorized to be credited to appropriation and fund accounts are also available for obligation.) Budget authority permits obligations to be incurred. The amounts of budget authority requested are determined by the nature of the programs or projects being funded. For activities for which the cost depends upon the program level planned for a fiscal year, the amount of budget authority requested covers the obligations expected to be incurred during the year. Most of these Federal activities, such as operations and maintenance, entitlement programs and continuing research programs, are fully funded on an annual basis. For projects that are separate and distinct units, the amount of budget authority requested covers the entire cost to complete each project at the time it is initiated. Most direct Federal major procurement and construction projects are of this nature, and funds have traditionally been requested to cover the full cost of the projects, that is, “full funding” is requested. However, some of these projects (for example, water resources construction) have not been fully funded in the past. Beginning with fiscal year 1979, exceptions will generally be eliminated under a new administration policy. Full funding will apply to all new projects. However, ongoing projects that have been incrementally funded in the past will continue to be funded incrementally until completed. Budget authority usually takes the form of appropriations, which permit obligations to be incurred and payments to be made. Some budget authority is in the form of contract authority, which permits obligations in advance of appropriations and therefore requires a subsequent appropriation or receipts to “liquidate” (pay) these obligations. There is also authority to borrow; such budget authority permits the use of borrowed money to incur obligations and make payments. Since January 1976, it has not been in order for either House of the Congress to consider any bill, with certain exceptions, that provides new borrowing or contract authority unless that bill also provides that such new spending authority will be effective only to the extent or in such amounts as are provided in appropriations acts.

Most appropriations for current operations are made available for obligation only during a specified fiscal year (1-year appropriations). Some are for a specified longer period (multiple-year appropriations). Others, including most of those for construction, some for research, and many trust fund appropriations, are made available for obligation until the objectives have been attained (no-year appropriations).

When budget authority is made available by the Congress for a specific period of time, any part that is not used for obligations during that period lapses and cannot be used later. Reappropriations— congressional actions to continue availability of unused balances that have lapsed—are counted as budget authority in the year of the congressional action.

A rescission is a legislative action that cancels new budget authority or unobligated balances of budget authority prior to the time the authority would otherwise have lapsed. Rescissions are offset against new budget authority in arriving at the total of budget authority for each year. A deferral is an executive branch action or inaction— including the establishment of reserves under the Antideficiency Act—that effectively delays the obligation or expenditure of budget authority.

Most authority to obligate funds is granted year by year (current authority). Under certain laws, some budget authority in Federal funds and most budget authority in the trust funds become available from time to time without further action by the Congress (permanent authority).

The amount of budget authority is usually stated specifically in the legislation that makes it available (definite authority). In a few cases the amount is left indefinite, to be determined by subsequent circumstances (indefinite authority). Examples of the latter type are the appropriation for interest on the public debt, and the trust fund appropriation equal to receipts under the Federal Insurance Contributions Act (social security).

Obligations incurred.—Following the enactment of budget authority, obligations are incurred by Government agencies. Such obligations include the currently accruing liabilities for salaries and wages, certain contractual services, and interest; entering into contracts for the purchase of supplies and equipment, construction and the acquisition of land; entering into contracts to make loans; and other contractual arrangements requiring the payment of money.

Outlays.-Obligations generally are liquidated by the issuance of checks or the disbursement of cash; such payments are called outlays. In lieu of issuing checks, obligations may also be liquidated (and outlays occur) by the maturing of interest coupons in the case of some bonds, or by the issuance of bonds or notes (or increases in the redemption value of bonds outstanding). Outlays during a fiscal year may be for payment of obligations incurred in prior years or in the same year. Such outlays, therefore, flow in part from unexpended balances of prior year budget authority and in part from budget authority provided for the year in which the money is spent.*Total budget outlays are stated net of deductions for offsetting collections (see collections below), and exclude outlays of off-budget Federal entities.

Balances of authority.—Not all budget authority enacted for a fiscal year is obligated and paid out in the same year. The obligated balance is that portion of the budget authority that has been obligated but not yet paid. 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, up to several years may elapse. Obligated balances of budget authority are carried forward until the obligations are subsequently paid. In addition, in multiple-year or no-year accounts, budget authority that is still available for obligation (unobligated balances) may be carried forward for obligation in the following year.”

Therefore, a change in the amount of budget authority for a given year does not necessarily result in a similar change in either the obligations incurred or the budget outlays of that same year. A change in budget authority in any one year may have an effect on obligations for two or more years, and may affect budget outlays for an even longer period. In the case of standby budget authority, obligations and outlays may never materialize.

Allocations between agencies.—In some cases, an agency may share in the administration of a program for which appropriations are made to another agency or to the President. This is made possible by the establishment of allocations from the “parent” account, to which the appropriation was made. Obligations incurred through such allocations are included with the parent account in the Budget (without separate identification) and in the Budget Appendiz (where the total obligations of each participating agency are identified separately under the parent account).

COLLECTIONS

In general.-Amounts collected during the year are classified into two major categories: • Budget receipts, which are compared with total outlays in calculating the budget surplus or deficit.

• Offsetting collections, which are deducted from disbursements in calculating total outlays. Corresponding offsets are made in arriving at total budget authority and net obligations incurred.

Budget receipts.-These are collections from the public that result from the exercise of the Government's sovereign or governmental powers and from contributions paid by participants in certain voluntary Federal social insurance programs. These collections, also called governmental receipts, consist primarily of tax receipts and social insurance premiums, but also include receipts from court fines, certain licenses, and deposits of earnings by the Federal Reserve System. Gifts and contributions (as distinguished from payments for services or cost-sharing deposits by State and local governments) are also counted as budget receipts.

Offsetting collections.—These are collections from other Government accounts or from transactions with the public that are of a business-type or market-oriented nature. They are classified into two major categories: collections credited to appropriation or fund accounts and offsetting receipts (that is, amounts deposited in receipt accounts). In general, the distinction between these two major categories is that collections credited to appropriation or fund accounts can be used without appropriation action by the Congress, whereas funds in receipt accounts cannot be used without being appropriated. Collections credited to appropriation or fund accounts occur in two circumstances: • Reimbursements.--When authorized by law, amounts collected for materials or services furnished (for example, amounts received from the public to pay expenses of providing information under the Freedom of Information Act) are treated as reimbursements to appropriations. These collections are netted in determining outlays from such appropriations. • Revolving funds.-In the three types of revolving funds—public enterprise, intragovernmental, and trust revolving—collections are netted against spending and outlays are reported as the net amount. Offsetting receipts generally are deducted from budget authority and outlays by function and/or subfunction, and by agency. Offsetting receipts are subdivided into two categories, as follows: • Proprietary receipts from the public.—These are collections from the public—deposited in receipt accounts of the general fund, special funds, or trust funds—that arise out of the business-type or market-oriented activities of the Government (for example, loan repayments, interest, sale of property and products, charges for nonregulatory services, and rents and royalties). Such collec