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USIS Washington 
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01 February 1999

A GUIDE TO THE BUDGET MAZE

(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.