U.S. Budget Concepts: Grants, on\off budget, and non-budgetary

The public budget database I found yesterday was great. However, being a novice at this, there were a couple columns of information I didn’t understand. Those two columns were labeled Grant/non-grant split and On- or off-budget. What are those and what do their options mean? I went in search of an answer to this question and here is what I found.

The first place I looked was the so-called User’s Guide to the Public Budget Database. In it, I found a small blurb about Grants.

Grant/Non-grant–Grants to State and local governments are separated from non-grant outlays, based on the definitions in OMB Circular A-11 for schedule C data.

And another small blurb about the On-Off-budget distinction:

Social Security trust funds and the Postal Service are off-budget, all other accounts are on-budget

There was also some other good descriptions about the other fields. I won’t reprint them here, but if you’re interested you can check out the User’s Guide yourself(pages 6-8).

That’s a good start but I’d really like to know more about each of the 2 categories. Fortunately, the user guide suggested a couple documents on where to find more information.

Readers who are not already familiar with the Federal Budget should gain a familiarity with the concepts and organization of the budget before proceeding. The following documents may be helpful:

Analytical Perspectives, Budget of the United States Government, Fiscal Year 2011. This document contains analyses that are designed to highlight specified program areas or provide other significant presentations of Budget data that place the Budget in perspective. It includes a discussion of the concepts underlying the organization of the Budget and the presentation of Budget data, economic assumptions underlying the Budget estimates, Federal receipts and collections, including user fees and tax expenditures, Federal spending, the Budget Enforcement Act, and other topics. Two particularly useful chapters are “Budget Concepts,” which contains a discussion of budget concepts, and “Federal Programs by Agency and Account,” which contains a listing of all appropriation and fund accounts in the Budget.

OMB Circular A-11 provides instructions to agencies in preparing Budget submissions, including details for entry into the Budget database.

Fortunately, both of these documents were easy to find.

The link to the Analytical Perspectives(pdf) can be found on the budget page for each year. And, with a quick google search, I was able to find the OMB circular on the Office of Management and Budget website. Best thing about the OMB is that it’s available in both html and pdf formats.

Chapter 12 of the Analytical Perspectives had a good description of what “off-budget” means. Here’s the most informative blurb:

Off-Budget Federal Entities:

The Federal Government has used the unified budget concept as the foundation for its budgetary analysis and presentation since the 1969 Budget, implementing a recommendation made by the President’s Commission on Budget Concepts in 1967. It called for the budget to include the financial transactions of all of the Federal Government’s programs and agencies.

Every year since 1971, however, at least one Federal entity that would otherwise be included in the budget has been declared to be off-budget by law. Such off-budget Federal entities are federally owned and controlled, but their transactions are excluded, by law, from the rest of the budget totals, which are also known as “on-budget” totals. When a Federal entity is off-budget by law, its re-ceipts, budget authority, outlays, and surplus or deficit are separated from all other (on-budget) receipts, budget au-thority, outlays, and surplus or deficit. The budget reflects the legal distinction between on-budget entities and off-budget entities by showing outlays and receipts for both types of entities separately.

Although there is a legal distinction between on-budget and off-budget entities, there is no conceptual difference between the two. The off-budget Federal entities engage in the same kinds of governmental activities as the on-budget entities, and the programs of off-budget entities result in the same kind of outlays and receipts as on-bud-get entities. The “unified budget” reflects the conceptual similarity between on-budget and off-budget entities by showing combined totals of outlays and receipts for both types of entities.

The off-budget Federal entities currently consist of the Postal Service Fund and the two Social Security Trust Funds: Old-Age and Survivors Insurance and Disability Insurance. Social Security has been classified as off-bud-get since 1986 and the Postal Service Fund has been clas-sified as off-budget since 1990. 2 A number of other enti-ties that had been declared off-budget by law at differenttimes before 1986 have been classified as on-budget by law since at least 1985.

I also found a better description of “Grants” in section 84 of the OMB Circular.

Grants to State and local governments.

Report budget authority and outlays as grants to State and local governments if the Federal government’s

resources support State or local programs of government operations or provision of services to the public.

For reporting character classification data for grants, include the following:

• Direct cash grants to State or local governmental units, to other public bodies established under

State or local law, or to their designee.

• Payments for grants-in-kind, such as purchases of commodities distributed to State or local

governmental institutions (e.g., school lunch programs).

• Payments to nongovernmental entities when such payments result in cash or in-kind services or

products that are passed on to State or local governments, for example, payments to the

Corporation for Public Broadcasting, or to the American Printing House for the Blind.

• Payments to regional commissions and organizations that are redistributed at the State or local

level to provide public services.

• Payments to State and local governments for research and development that is an integral part of

the State and local governments’ provision of services to the general public (e.g., research on

crime control financed from law enforcement assistance grants, or on mental health associated

with the provision of mental rehabilitation services; see discussion below for exclusions related to

research and development and payments for services rendered).

• Direct loan or loan guarantee subsidies to State or local governments.

• Shared revenues. These payments to State or local governments are computed as a percentage of

the proceeds from the sale of certain Federal property, products, or services (e.g., payments from

receipts of Oregon and California grant lands). Also included are tax or other collections by the

Federal Government that are passed on to State or local governments (e.g., internal revenue

collections for Puerto Rico).

Exclude the following:

• Federal administrative expenses associated with grant programs.

• Grants directly to profit-making institutions, individuals, and non-profit institutions not covered

above, for example, payments to Job Corps centers and trainees.

• Payments for research and development not directly related to the provision of services to the

general public, for example, basic research awarded via competitive grants.

• Payments for services rendered, for example, utility services, training programs and expenses for

Federal employees, research and development for Federal purposes conducted under contracts,

grants, or agreements by such agencies as the National Institutes of Health (NIH), the National

Science Foundation (NSF), the Department of Energy (DOE), the National Aeronautics and Space

Administration (NASA), and the Department of Defense (DOD).

• Federal grants to cover administrative expenses for regional bodies and other funds not

redistributed to the States or their subordinate jurisdictions, for example, the administrative

expenses of the Appalachian Regional Commission.

While reading Chapter 12 of Analytical Perspectives(pdf) I also learned another concept that seems important. “non-budgetary”.

Federal Government activities that do not involve the

direct allocation of resources in a measurable way are

characterized as “non-budgetary” and classified outside

of the budget. For example, the budget does not include

funds that are privately owned but held and managed by

the Government in a fiduciary capacity, such as the depos-

it funds owned by Native American Indians. In addition,

the budget does not include costs that are borne by the

private sector even when those costs result from Federal

regulatory activity. Also, although the budget includes the

“subsidy costs” 1 of Federal credit programs, it does not

include the other cash flows of these programs that do not

involve a direct allocation of resources by the Government

and that are a means of financing these programs. Non-

budgetary activities can be important instruments of

Federal policy and are discussed briefly in this chapter

and in more detail in other parts of the budget documents.

The term “off-budget” may appear to be synonymous

with non-budgetary. However, it has a meaning distinct

from non-budgetary and, as discussed below, refers to

Federal Government activities that are required by law to

be excluded from the budget totals. The term is also used

colloquially to refer to emergency funding or supplemen-

tal appropriations for war costs because these items have

often been passed by the Congress without regard to the

normal budget enforcement procedures. Despite the collo-

quial usage of the term off-budget, emergency aid and war

costs are budgetary and specifically “on-budget,” as that

term is defined below; budgetary outlays and receipts re-

flect the costs of these provisions. In contrast, off-budget

amounts are required by law to be recorded separately

in the budget and non-budgetary transactions are not in

the budget under any circumstances because they do not

impose direct costs on the Treasury.

Later in the document it then lists each of the things that are considered “non-budgetary”

• Federal credit programs
• Deposit Funds
• Government-sponsored Enterprises
• Regulation
• Monetary policy
• Indirect macroeconomic effects of Federal activity
• Credit market stabilization activity

So, in summary. Here’s what I’ve learned

• Grants are money that’s given to local\state governments for a particular purpose, but not the money spent to administer the programs that give that money out.
• off-budget is just the post office, and the money given out as social security(but not the money spent to send that money out)
• non-budgetary are things that affect the budget, but aren’t direct spending of money.

Cool. I feel smarter already.

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