Budget Issues

This testimony discusses budget accounting and budget enforcement as they relate to trust funds and other special funds in the federal budget. GAO focuses on three areas: (1) the structure of the federal budget especially categorizations within the unified budget; (2) the budget outlook, discretionary caps, and enforcement situation as the United States enters a projected era of unified budget surpluses; and (3) the potential implications of changes in the treatment of the aviation programs.

GAO noted that: (1) the unified budget was adopted in 1969 as a way of capturing all federal receipts and expenditures; (2) the federal budget consists of several types of funds: (a) the general fund; (b) special funds; (c) public enterprise funds; (d) intragovernmental funds; and (e) trust funds; (3) all of these except trust funds are considered to be federal funds; (4) the term trust fund as used in the federal budget is neither the same as a private trust fund nor does it have unique characteristics within the federal budget; (5) if a trust/special fund collects more receipts than it spends in a year, its annual surplus adds to the unified budget surplus--or reduces the unified deficit if it spends more than it receives; (6) the Budget Enforcement Act (BEA) established a budgetary control regime that divided the budget into two major parts: (a) discretionary spending, defined as spending that stems from annual appropriations acts; and (b) direct spending, or spending that flows directly from authorizing legislation; (7) after nearly 30 years of unified budget deficits, current projections are for surpluses; (8) discretionary caps were first imposed by the BEA in 1990; (9) according to the Congressional Budget Office, discretionary spending in 1999 made up about one-third of total outlays; (10) under the caps, these outlays will remain almost unchanged in dollar terms between fiscal years 1999 and 2002; (11) Federal Aviation Administration (FAA) receives funding from both the Airport and Airway Trust Fund and from general fund appropriations; (12) the Airport and Airway Trust Fund is used almost entirely to support FAA activities; (13) the budgetary implications of creating a new separate spending category for aviation depends on the design of the category; (14) in the past, separate caps within the overall discretionary spending limit were designed to place firewalls between different areas of spending--regardless of whether funding was from the trust fund or the general fund; (15) however, if a separate category is designed as a guaranteed minimum funding level, there are additional issues; (16) if aviation spending were increased and this increase was carved out of the general discretionary cap, then the remaining activities within that general category would compete for fewer dollars; (17) providing guaranteed funding levels to any one activity in the budget protects that activity from competition with other areas for scarce resources; and (18) the design of any guarantee can have implications for other federal activities and for federal resources.