1 Includes allowances for civilian and military pay raises for Department of Defense. 2 Includes allowances for energy tax equalization payments, civilian agency pay raises, and contingencies. From 1965 through 1974, there was a cumulative Federal funds deficit of $172 billion, of which $85 billion was attributable to transactions with trust funds and the remaining $87 billion was attributable to transactions with the public. As occurred in 1969, a significant Federal funds deficit can exist when there are surpluses in the unified budget and in the transactions of the Federal funds with the public. The relevant figures for 1974 through 1976 are shown in the following table: 3 For purposes of this comparison. payments from Federal funds to the general revenue sharing trust fund are treated as transactions with the public instead of transactions with a trust fund; and the corresponding payments from the general revenue sharing trust fund to the public are accordingly omitted. This is because the general revenue sharing trust fund has no independent source of funding but serves only as a channel through which Federal funds money is paid to the public. Federal funds: BUDGET SURPLUS OR DEFICIT (~) BY FUND GROUP 1 In billions of dollars] Description 1974 actual 1975 1976 estimate estimate 1 For purpose of presentation in this table, payments from Federal funds to the general revenue sharing trust fund are treated as transactions with the public instead of transactions with a trust fund; and the corresponding payments from the general revenue sharing trust fund to the public are accordingly omitted. This is because the general revenue sharing trust fund has no independent source of funding but serves only as a channel through which Federal funds money is paid to the public. RECONCILIATION OF ACTUAL AND ESTIMATED This section of the budget explains the differences between actual outlays for major relatively uncontrollable programs in 1974-the last completed fiscal year-with the original budget estimates for that year. The Congressional Budget Act of 1974 (Public Law 93-344) requires that this information be included in each budget, beginning with the one for 1978, at which time it must be provided for 1976. The information is being added to the budget 2 years earlier to facilitate the transition to the new congressional budget review process. Outlays are considered to be relatively uncontrollable in any one year when Government decisions in that year can neither increase nor decrease them without changing existing substantive law. The amounts estimated for relatively uncontrollable outlays, however, may not be actually realized for a number of reasons. For example, legislation may raise benefit rates, the number of beneficiaries under a program may differ from the number estimated, and external conditions such as the interest rates required to sell Federal debt may differ from what was assumed. The following table shows the differences between actual outlays for major relatively uncontrollable programs in 1974 and the estimated amounts shown in the 1974 budget, which was transmitted to the Congress in January 1973. The list of such programs in this table is the same as in table 14 (Controllability of Budget Outlays) in Part 9 of this year's budget. The January 1973 estimate of uncontrollable outlays did not include the outlay effect of legislation being proposed. This standard practice is consistent with the definition of uncontrollable outlays stated above. Where legislation was enacted that significantly affected relatively uncontrollable outlays in 1974, it is identified in the discussion below. As the table shows, actual outlays for uncontrollable programs, in total, were $2.1 billion higher than originally estimated. The discussion below explains the major differences listed in the table. 1 Based on the controllability classification used in the 1976 budget. 2 Excluding prior-year contracts and obligations for activities shown as "open-ended programs and fixed costs." 3 Adjusted to make the functional classification consistent with that used in the 1976 budget. Social security and railroad retirement outlays exceeded the original estimate by $1.0 billion, with social security outlays up by $0.4 billion and railroad retirement benefits up by $0.6 billion. The legislated 7% benefit increase that became effective in March 1974 increased social security outlays by almost $1.0 billion over the original estimate. This increase was partly offset by an overestimate of the average level of payments per beneficiary. The increase in railroad retirement benefits was due almost entirely to legislation that extended temporary benefit increases enacted in 1970, 1971, and 1972. Outlays for Federal retirement and insurance programs were $1.2 billion higher than originally estimated. Much of this increase was due to higher inflation, which produced larger and more frequent cost-of-living increases than anticipated in the 1974 budget. Benefits for these programs increase automatically whenever the consumer price index goes up by 3% over the base period and maintains that level for 3 months. The consumer price index for 1974 was about 6%% higher than estimated. In addition, the number of retirees was greater than originally estimated. Finally, unanticipated changes in the financing arrangements for the Federal employees life insurance program raised outlays by $150 million. The $0.6 billion increase in unemployment assistance is explained partly by an underestimate of unemployment. The benefit estimates in the 1974 budget were based on a 1974 unemployment rate of 4.6%, as compared to the actual rate of 5.0% for that year. In addition, legislation extending unemployment benefits (Public Laws 93-53 and 93-156) added $0.3 billion to the original estimate. The $0.9 billion increase in veterans benefits was due largely to unanticipated increases in the veterans readjustment benefits program stemming from the GI Bill amendments of 1972 (Public Law 92-540). In addition, legislation increased outlays for pension and burial benefits by $0.1 billion (Public Laws 93-177 and 93-43). Medicare outlays were $1.2 billion lower than originally estimated, while medicaid outlays were $0.6 billion higher. The medicare shortfall resulted largely from an overestimate of hospital insurance benefits for the disabled, who were first covered by medicare in 1974. This new program was utilized considerably less than anticipated. The original estimate of medicaid outlays assumed that States would respond to legislation enacted in 1972 that permitted them to reduce expenditures below existing levels (Public Law 92-603). The $0.6 billion increase in medicaid outlays was due primarily to the States. not making these changes. The $0.2 billion overestimate of housing payments resulted from a shortfall in the estimated number of subsidized units under payment at the end of the year. Fewer units were financed because of unanticipated delays in processing applications for multifamily housing due to environmental and other reviews, and because of delays in implementing the new leased housing program. Outlays for public assistance and related programs were $0.6 billion higher than originally estimated, with virtually all the increase for food stamp payments. This upward revision resulted in large part from the Agriculture and Consumer Protection Act of 1973 (Public Law 93-86), which mandated a 22% increase in the food stamp allotment and a major expansion of the eligible population. Cash outlays for public assistance, disabled coal miner benefits, and the supplemental security income program were all within $0.1 billion of the original estimate. The single largest revision in 1974 uncontrollable outlays was an increase of $2.8 billion for net interest. The original estimate assumed that the average rate on Treasury bills would remain at its December 1972 level of about 5%. Short-term rates increased sharply from this level, however, and a year later the average rate on Treasury bills was a full 3 percentage points higher. This sharp increase in interest rates more than offset the effect of lower amounts of debt outstanding than had originally been estimated. The $1.7 billion lower payment for farm price supports resulted from large increases in commodity prices due to a shortfall in world agricultural output and the devaluation of the dollar. The higher prices, especially for grain, reduced outlays for price support loans (-$1.1 billion), commodity purchases (-$0.3 billion), and extension of export credit (-$0.3 billion). Outlays from prior-year contracts and obligations were $2.0 billion lower than originally estimated, with most of the overestimate in civilian programs. The major overestimates were for the Environmental Protection Agency (-$0.8 billion) and the Department of Agriculture (-$0.4 billion). FISCAL ACTIVITIES OUTSIDE THE FEDERAL BUDGET The budget does not include several fiscal activities of the Federal Government that result in spending similar to budget outlays. Two major exclusions-the off-budget activities of Federal agencies and the activities of privately owned Government-sponsored enterprises are discussed in some detail below.5 4 Outlays of off-budget Federal agencies and Governmentsponsored enterprises. Off-budget Federal agencies are federally owned and controlled, but their transactions have been excluded from the budget totals under provisions of law. Therefore, their fiscal activities are not reflected in either budget outlays or the budget sur Detailed financial statements for these organizations are contained in "Annexed Budgets," Part IV of the Appendix, Budget of the United States Government. Fiscal Year 1976. 5 The Exchange Stabilization Fund and the Board of Governors of the Federal Reserve System (but not the Federal Reserve banks) are Federal entities. They are excluded from the budget and from this discussion, |