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The Impact of Trust Fund Programs on Federal Budget Surpluses and Deficits [i] (November 2002)

handle is hein.congrec/cbo0728 and id is 1 raw text is: CBO LONG-RANGE FISCAL POLICY BRIEF A series of issue summaries from the Congressional Budget Office No. 5, November 4, 2002 The Impact of Trust Fund Programs on Federal Budget Surpluses and Deficits Summary Although currently the federal budget is in deficit, federal trust fund programs as a group appear to be running a surplus. Under the Congressional Budget Office's latest budget projections, the combined income of the trust funds is estimated to exceed their cumulative expenditures by $3.4 trillion over the next 10 years. However, much of trust funds' income comes not from sources outside the government but from credits from one government account to another, or intragovernmental transfers. Consequently, such transfers have no effect on whether the government is running an overall surplus or deficit. In assessing the cash flow that trust fund programs generate, if one considers only the portion of their income that represents receipts to the government, the trust funds are projected to run a cumulative deficit of $1.2 trillion over the next 10 years. Trust fund accounting, which credits intragovernmental transfers to trust fund programs, is designed to show legal measures of spending authority and outlays, not the government's receipts and expenditures for such programs. Currently, trust fund measures of income and expenditures are distorting the effects that the programs have on the federal budget. Their apparent surplus relies on both actual receipts and the government's promise to pay money to itself. In fact, more money is going out of the Treasury for trust fund programs than is coming in, and this imbalance only grows larger as one looks out into the future. Trust Funds in the Budget Trust fund programs differ in a number of ways from other government programs. Many trust fund programs, including Social Security and Medicare, have distinct revenue authorities to finance, or help finance, the benefits that they provide or functions that they serve. And that income, when received by the Treasury, is accounted for by crediting federal securities to the trust fund accounts. Notably, those securities represent the government's promise to pay money to itself. For some of the larger funds, the securities basically serve as spending authority: as long as the fund has a balance, the Department of the Treasury has the legal authority to make program expenditures. Further, trust fund balances may change continuously as the programs receive new distinct tax revenues and fees and as interest on their security holdings accrues.

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