United States General Accounting Office

GAO Report to the Chairman, Committee on

the Budget, House of Representatives

February 1998 BUDGET FUNCTION

CLASSIFICATIONS

Origins, Trends, and

Implications for

Current Uses

GAO/AIMD-98-67

GAO United States

General Accounting Office

Washington, D.C. 20548

Accounting and Information

Management Division

B-276287 

February 27, 1998

The Honorable John R. Kasich

Chairman, Committee on the Budget

House of Representatives

Dear Mr. Chairman:

This letter responds to your request for information on budget function

classifications. Budget functions have long been used as supplementary

presentations within budget and financial summaries of the federal

government. Specifically in this letter, we discuss the origins and evolution

of the current structure and recent spending trends by function. In

addition, as agreed with your office, we also describe in this letter possible

challenges in using these classifications as a framework for other

governmentwide applications, such as the Federal Government

Performance Plan, required by the Government Performance and Results

Act, and the Statement of Net Cost in the Consolidated Financial

Statements of the federal government.

The budgetary information presented in this letter was developed from an

automated system used by the Office of Management and Budget (OMB) to

collect and process information for the President’s annual budget

submission. Although these data were not verified at the individual budget

account level, we did summarize and reconcile fiscal year net outlays by

subfunction to published sources. All growth rates and trend analyses are

stated in constant dollars, using fiscal year 1996 as the base year.

Appendix I provides additional details on our objectives, scope, and

methodology.

Results in Brief While the desire to categorize federal spending according to the purpose

or mission of government can be traced back nearly 200 years, modern

budget function classifications have evolved from a structure first used in

1948. Over the last 50 years, budget functions have been generally stable,

with only a few changes overall and none in the last decade. However, this

period also saw significant change in the use of budget functions from a

purely retrospective summary of federal spending, to a supplemental but

subsidiary presentation summarizing the President’s budget submission, to

the basic prospective framework for the modern congressional budget

resolution.

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Over the last 20 years, federal spending has become increasingly

concentrated in just a few budget functions, with about one-third of the

functions accounting for about 90 percent of the growth. Functions with

the highest average annual real growth included Medicare, Net Interest,

and Health. An alternative trend analysis using a mission area structure

based directly on budget subfunction classifications shows that spending

related to human resources missions and interest payments increased

from 55 percent to nearly 70 percent of total federal spending since 1977

(See figure 4). In fact, nearly all of the growth in federal spending since

1977 can be traced to these two areas. Lastly, a more discrete analysis of

federal spending based on subfunctions affirms the prominence of interest

and health-related spending compared to other areas but also shows the

rapid growth in spending for federal law enforcement activities since 1977.

Significant average annual real declines over the last 20 years were

associated with general purpose fiscal assistance to state and local

governments, certain veterans-related activities, and the central fiscal and

personnel management activities of the federal government (See figure 5).

In recent years, the use of budget functions for other than simple historical

summaries of federal spending—in effect, the desire to address a variety of

governmentwide needs through a convenient and familiar structure—has

continued. But as budget functions become the framework for

assessments of the performance and cost of government operations,

questions about the structure’s appropriateness for these emerging uses

will likely increase. These questions will stem from two basic concerns:

(1) how agencies report specific spending and (2) how this information is

aggregated into various function and subfunction categories. Addressing

these concerns will be challenging, but necessary, if these evolving uses

are to succeed. Newly available mission and strategic goal information

arising from the Results Act and new perspectives on the full cost of

government operations arising from improvements in federal financial

reporting will present an excellent opportunity and an appropriate

environment to begin such an examination.

Background Budget function classifications are intended to provide a means of

arraying budget data according to the major purpose served. Currently, as

shown in figure 1 below, the federal budget is divided into 20 functions to

provide a coherent and comprehensive basis for analyzing and

understanding federal spending. Of the 20 budget functions, 17 are

concerned with broad areas of national need; the remaining three

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functions—Net Interest, Undistributed Offsetting Receipts,1 and

Allowances2

—do not address a specific national need but are included to

ensure full coverage of the federal budget. Subfunctions are the building

blocks of functions; at present, over 70 subfunctions (see figure 1) are

defined, with each intended to describe discrete but related groupings of

programs and activities. In essence, function classifications are merely

summaries of subfunction-based information. To allow for an even higher

level aggregation, the function summaries are sometimes combined into

six “superfunctions:” National Defense, Human Resources, Physical

Resources, Net Interest, Other Functions, and Undistributed Offsetting

Collections.

To facilitate preparation of the President’s Budget, each budget account is

associated with a three-digit subfunction code; this association is intended

to reflect the preponderance of spending on activities funded through that

account. All spending is totaled by subfunction and then the subfunction

totals are added to obtain function totals. In some cases, an account is

directly assigned to a function code if the activities funded by the account

are spread across multiple subfunctions within a single function. In still

other cases, if the activities within the account are associated with

multiple functions, the account is associated with a generic three-digit

code (“999”) to indicate that it is “multi-function.” New budget accounts

are assigned a subfunction code by OMB; requests for changes in the

classification of existing accounts may be made by each agency, subject to

approval by OMB.

Each federal activity is placed in a budget function and subfunction that

best describes its most important purpose, even though many federal

activities may serve more than one purpose. For example, Medicaid

spending could be considered a health program or a form of income

security benefits. To prevent double-counting and to reflect its primary

purpose of financing health care for specific beneficiaries, the Medicaid

program is classified as “health care services” within the Health function.

To the extent feasible, classifications are made without regard to agency

or organizational distinctions.

1

Most offsetting receipts are included as deductions from outlays in the applicable functions and

subfunctions. Some are not distributed, however, and are aggregated into this function.

2

This function is used to permit the budget to reflect total estimated budget authority and outlay

requirements for future years.

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Figure 1: Function and Subfunction Classifications

National Defense

Department of Defense-Military

Atomic energy defense activities

Defense-related activities

International Affairs

International development and humanitarian assistance

International security assistance

Conduct of foreign affairs

Foreign information and exchange activities

International financial programs

General Science, Space and Technology

 General science and basic research

 Space flight, research, and supporting activities

Energy

Energy supply

Energy conservation

Emergency energy preparedness

Energy information, policy, and regulation

Natural Resources and Environment

Water resources

Conservation and land management

Recreational resources

Pollution control and abatement

Other natural resources

Agriculture

Farm income stabilization

Agricultural research and services

Commerce and Housing Credit

Mortgage credit

Postal Service

Deposit insurance

Other advancement of commerce

Transportation

Ground transportation

Air transportation

Water transportation

Other transportation

Community and Regional Development

Community development

Area and regional development

Disaster relief and insurance

Education, Training, Employment, and Social Services

Elementary, secondary, and vocational education

Higher education

Research and general education aids

Training and employment

Other labor services

Social services

Health

Health care services

Health research and training

Consumer and occupational health and safety

Medicare

Medicare

Income Security

 General retirement and disability insurance (excluding 

social security)

 Federal employee retirement and disability

Unemployment compensation

Housing assistance

Food and nutrition assistance

Other income security

Social Security

Social security

Veterans Benefits and Services

Income security for veterans

Veterans education, training and rehabilitation

Hospital and medical care for veterans

Veterans housing

Other veterans benefits and services

Administration of Justice

Federal law enforcement activities

Federal litigative and judicial activities

Federal correctional activities

Criminal justice assistance

General Government

Legislative functions

Executive direction and management

Central fiscal operations

General property and records management

Central personnel management

General purpose fiscal assistance

Other general government

Deductions for offsetting receipts

Net Interest

Interest on the public debt

Interest received by on-budget trust funds

Interest received by off-budget trust funds

Other interest

Undistributed Offsetting Receipts

Employer share, employee retirement (on-budget)

Employer share, employee retirement (off-budget)

Rents and royalties on the Outer Continental Shelf

Sale of major assets

Other undistributed offsetting receipts

Allowances

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Origins and Evolution

of Budget Function

Classifications

The current budget function structure, while having antecedents that can

be traced back nearly 200 years, is basically a modification of

classifications developed for the 1948 Budget. The usefulness of

governmentwide summaries of federal spending has long been recognized.

Throughout the 19th century, prior to the development of federal

budgeting, function presentations were devised and included in financial

summaries prepared by the Secretary of the Treasury. Coincident with the

beginning of federal budgets covering the entire executive branch in the

early 1920s, function summaries became associated with the President’s

budget submissions. The most recent change involving budget function

classifications stems from their use as a framework for congressional

budget resolutions under the Congressional Budget Act of 1974. Although

some changes in budget function classifications have occurred since 1948,

they have been relatively minor; in large part, the structure has remained

remarkably stable over this period of time, with no changes in the last

decade.

In one sense, the use of function classifications can be traced to the

earliest fiscal activities of the federal government. The General

Appropriation Act of 1789 contained only four broad authorizations for the

expenses of the civil list, the Department of War, discharging warrants of

the Treasury, and paying pensions. It could be said that this act provided

lump sum appropriations by categories roughly paralleling four of today’s

functions: General Government, National Defense, Net Interest, and

Veterans Benefits and Services. This broad form of appropriations for the

executive branch didn’t last long. In fact, only 5 years later in 1794, the

Congress had differentiated its appropriations into three separate acts,

each of which contained numerous specific (line item) appropriations.3

The emergence of multiple line-item appropriations in the early 19th

century—often specific to the level of individual positions within each

office of the government—made it increasingly difficult to track overall

federal spending. To address this need, the Treasury Department

developed year-end recapitulation reports. For example, the 1876

recapitulation was based on the following categories: civil, miscellaneous,

and foreign intercourse; interior; military; navy; and public debt. The

recapitulations did not appear until after the end of the fiscal year and

served only to provide summary historical perspectives, not to provide

information on financial needs for the coming year. Because the major

purposes of federal spending were for the most part highly correlated with

3

For a discussion of the history of line item and lump sum budgets, see Louis Fisher, Presidential

Spending Power (Princeton, NJ: Princeton University Press, 1975), pp. 59-74, and Budget Object

Classification: Origins and Recent Trends (GAO/AIMD-94-147, Sept. 13, 1994).

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the separate agencies of government, the Treasury summaries tended to

reflect the departmental structure. The problems of concurrence and

diffusion of missions across federal departments and agencies were not

yet significant issues.

In 1912, President William Howard Taft’s Commission on Economy and

Efficiency proposed that the President annually submit a “national budget”

and recommended that this budget contain supplemental schedules which

classified expenditures by the “amount estimated, appropriated or

expended for each function or class of work.” These schedules were

intended to allow a comparison of spending across each of the broad

policy areas of the government, not just retrospectively as in the Treasury

summaries, but also prospectively by reflecting the President’s budget

proposals “for the next fiscal year.” The Taft Commission’s proposal also

differed from earlier Treasury summaries by introducing a multi-level

classification structure—a precursor to our modern superfunction,

function, subfunction structure. For example, the Commission proposed

three broad spending categories—General, Public Service, and Local

Government. The Commission’s Public Service category included a

Military function, as in the Treasury recapitulations, but further subdivided

this function into “national defense by land,” “national defense by sea,”

and “national defense—expenditures on account of past services.”

President Taft’s statement to the Congress argued that these analyses “will

be of great value in considering questions of policy bearing on the future

work program of the Government.”4

Many of the recommendations of the Taft Commission were incorporated

into law as the Budget and Accounting Act of 1921. Although this law is

the genesis for modern federal budgeting, it did not require that a function

structure be used, but only that the President provide “supplementary

information” with his annual budget submission. The 1924 Budget—the

first budget prepared after the 1921 Act—contained a supplementary table

summarizing requested and enacted appropriations by “governmental

functions.” This classification was very similar to the earlier Taft

Commission proposal but also included a “nonfunctional” category to

cover items that were “of a nonorganizational character.” (e.g., interest on

the debt.)

Given that the 1924 classification structure was oriented toward the

purposes of government spending, it is not surprising that it was

4

Message of the President of the United States Submitting for the Consideration of the Congress a

Budget, U.S. Senate, 62d Congress, 3d Session, Document No. 1113 (Washington, D.C., 1913), p. 24.

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substantially changed as the country struggled through the dominant

crises of the next two decades: economic depression and war. In fact, the

1936 Budget presented revised summaries which effectively replaced a

function orientation with one focusing on the organizations of government

(e.g., “civil departments and agencies”) and, most importantly, “recovery

and relief” activities. Subsequently, in the 1944 Budget, all spending was

recategorized as either “war activities” or “other activities,” with

subordinate detail summarized by federal department and agency. In both

cases, the changes clearly emphasized the near singularity of purpose of

federal activities during these periods.

The end of World War II presented an opportunity to revisit the major

purposes of the federal government, and thus the budget function

classifications. The 1948 Budget presented a revised classification scheme

that, in effect, has formed the basis for our modern structure. As stated in

the Budget,

“By grouping together items which are functionally related, regardless of the agency that is

responsible, this type of classification provides for the Congress and the public a useful

summary of what the Government is doing, or expects to do, and, in general, focuses upon

the ultimate purpose which the Government programs are designed to serve.”5

The revised classification included several changes intended to promote a

focus on the purposes of government. For example, the earlier public

works function, which could be traced to the 1924 Budget, was eliminated,

with spending for public works distributed among the functions which

such activities served; also, subfunctions once again reflected the missions

of government, rather than organizations. Another innovation of the 1948

Budget presentations was the use of three-digit codes for all functions and

subfunctions to allow “the reader to know how each individual

appropriation is classified.”

Finally, the last and arguably most significant change affecting budget

function classifications occurred in 1979, as a direct result of the

Congressional Budget Act of 1974. This act, among other things, created

the congressional budget resolution—in effect, an annual congressional

budget plan which relates the disparate parts of the budget to the whole

and provides a means to enforce budget targets and coordinate the

5

The Budget of the United States Government for the Fiscal Year Ending June 30, 1948, United States

Government Printing Office (Washington, D.C., 1947), p. 1353.

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budgetary actions of congressional committees.6 The act required that new

budget authority and outlays be shown “for each major functional

category,”7

 and that changes to budget function classifications be made

“only in consultation with the Committees on Appropriations and on the

Budget of both Houses of Congress.”8

 Thus, this act defined, for the first

time, a statutory foundation for budget function classifications; most

importantly, it established budget functions as not merely residual or

supplementary schedules to aggregate historical federal spending and

presidential budget proposals, but also as the basic prospective

framework for the Congress’ governmentwide budget planning.

In keeping with the requirement of the act to present budgetary

information “in terms of a detailed structure of national needs. . .[and]

missions and programs of agencies,”9 OMB proposed several changes to

function and subfunction classifications in the 1979 Budget. In addition, a

distinction was made between function and subfunction presentations:

national needs were intended to be described in the function

classifications, with subfunctions representing the resources devoted to

agency missions.

Although there have been periodic adjustments throughout the last two

centuries, the basic purpose of the classifications—to summarize federal

spending governmentwide—remained constant, with any adjustments

reflecting changing perspectives on the purposes of such spending. Since

1948, as shown in table 1 below, budget functions have been generally

stable. Over the last 50 years, periodic changes in the structure of budget

functions occurred, but often these changes simply reordered or renamed

existing functions. More recently, between 1979 and 1989, two major

federal activities (Social Security and Medicare) were split into separate

functions and one (General Purpose Fiscal Assistance) was redefined as a

subfunction. Since 1989 there have been no changes to the function

classifications.

6

Although not a public law, the budget resolution is in the form of a concurrent resolution, which is

agreed to by both Houses and thus binding on them.

7

2 U.S.C. 632(a)(4). The term “budget authority” means authority provided by law to enter into

financial obligations which will result in immediate or future outlays.

8

31 U.S.C. 1104(c).

9

Now codified at 31 U.S.C. 1105(a)(22).

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Table 1: Functions Used in Fiscal

Years 1948, 1979, and 1998 1948 1979 1998

National Defense National Defense National Defense

Veterans Benefits and

Services

Veterans Benefits and

Services

Veterans Benefits and

Services

International Affairs and

Finance

International Affairs International Affairs

Social Welfare, Health and

Security

Income Security Income Security

Social Security

Health Health

Medicare

Housing and Community

Facilities

Community and Regional

Development

Community and Regional

Development

Labor Education, Training,

Employment, and Social

Services

Education, Training,

Employment, and Social

Services

Education and General

Research

General Science, Space,

and Technology

General Science, Space,

and Technology

Agriculture and Agricultural

Resources

Agriculture Agriculture

Natural Resources not

primarily Agricultural

Natural Resources and

Environment

Natural Resources and

Environment

Energy Energy

Finance, Commerce and

Industry

Commerce and Housing

Credit

Commerce and Housing

Credit

Transportation and

Communication

Transportation Transportation

General Government General Government General Government

General Purpose Fiscal

Assistance

Administration of Justice Administration of Justice

Interest on the Public Debt Interest Net Interest

Refunds of Receipts

The relative stability indicated by table 1 tends to mask more frequent

changes that have occurred within subfunctions. Since 1979, OMB has tried

to use subfunctions to more discretely portray the missions of the federal

government, and thus these structures have been subject to greater

change. For example, prior to the energy crisis of the 1970s, all federal

spending for energy programs was included in a single subfunction with

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water resource programs because most federal spending was associated

with hydroelectric power projects. However, with the growth of other

federal energy programs, a separate energy subfunction was created.

Subsequently, this subfunction was recast as a function, with four discrete

subfunctions (see figure 1) created to distinguish among different types of

federal missions. While subfunction changes are driven by changes in

federal spending patterns, there is usually a lag from the point at which

spending priorities are altered to a resulting change in subfunctions. For

example, although spending for deposit insurance increased sharply in the

late 1980s, it was not until the President’s 1992 Budget that a new

subfunction was added.

Recent Spending

Trends by Function

and Subfunction

Included as appendixes to this letter are several trend analyses which

show federal spending by function and subfunction for the 20 year period

1977 through 1996. There are several ways in which federal spending could

be presented for these types of analyses; for example, OMB publishes

annual summaries showing budget authority and net outlays. For this

letter, we developed a measure we refer to as “adjusted net outlays.” This

measure is based on reported net outlays by budget account, with one

change: we added back to net outlays deductions for collections resulting

from the business-type transactions of the government.10 This approach

allows for a more complete analysis of changing federal spending

priorities by including all spending, whether arising from governmental or

business-type transactions with the public. A further discussion of this

approach is included in appendix I.

Between 1977 and 1996, average annual real growth among the functions

varied widely, ranging from –5.5 percent (General Government) to

7.4 percent (Medicare). During the same period, adjusted net outlays for

the federal government experienced real growth of 2.4 percent, with

growth rates for the mandatory and discretionary components of the

budget at 3.3 percent and 0.8 percent, respectively. Figure 2 displays the

average annual real growth for each budget function, and additional

information by function is contained in appendix II. As these analyses

indicate, federal spending has become increasingly concentrated in fewer

functions, with just five of the 18 functions—Medicare, Net Interest,

10Typically, federal spending associated with the government’s business-type activities with the public

is offset by revenues collected from those activities. Although this approach ensures that reported net

outlays reflect net governmental rather than market-based transactions, it does understate total federal

transactions. Reported net outlays also offsets spending arising from interagency transfers. To prevent

double-counting both the original and subsequent outlay, only the original outlay is included; our

adjusted net outlay totals reflect this treatment of interagency transactions.

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Health, Administration of Justice, and Social Security—accounting for

about 90 percent of reported real growth during this period.

Figure 2: Average Annual Real Growth

by Budget Function, Fiscal Years

1977-1996

-8 -6 -4 -2 0 2 4 6 8

Education/Training/Employmnt/Social Srvs

General Science/Space/Technology

National Defense

Transportation

Commerce and Housing Credit

General Government

International Affairs

Agriculture

Community and Regional Development

Veterans Benefits and Services

Natural Resources and Environment

Energy

Overall federal government

Social Security

Adminstration of Justice

Medicare

Income Security

Net Interest

Health

Average annual real change (percent)

Constructing trends across budget functions can be a useful way to

observe shifting patterns in spending priorities. However, the sheer

number of functions—17 “areas of national need” plus net interest—and

the substantial variation in absolute size across the functions—ranging

from about $350 billion to less than $15 billion in fiscal year 1996—can

present analytical difficulties.

To address these concerns, OMB developed six “superfunctions”: National

Defense, Human Resources, Physical Resources, Other Functions, Net

Interest, and Undistributed Offsetting Receipts. These superfunctions are,

in effect, summaries of summaries; they are composites of function totals,

which, as discussed above, are constructed by adding subfunction totals.

Although larger and fewer aggregations can shed light on the

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“macro-priorities” of the federal government, the superfunction

classifications do not really do that because they are based directly on

function definitions. As will be discussed in the concluding section of this

letter, current budget functions are marked by structural inconsistencies

and merely adding them together to obtain superfunction totals tends to

compound the inconsistencies.

To allow for a more discrete analysis of the “macro-priorities” of the

federal government, while still reducing the number of classifications

needing to be examined, GAO constructed seven federal “mission areas”

based directly on subfunction totals—National Security and International

Affairs, Human Resources, Natural Resources, Economic Affairs, General

Government, Interest, and Undistributed Offsetting Receipts. While any

aggregation is essentially subjective, combining subfunctions directly

eliminates the arbitrariness arising from function groupings. Each

subfunction, regardless of its function affiliation, was separately assigned

to one of the mission areas; figure 3 shows these assignments by mission

area for each of the subfunctions shown in figure 1. The principal

differences between the GAO mission area structure and the OMB

superfunction structure occurs in the Natural Resources, Economic

Affairs and General Government mission areas. For example within the

OMB superfunction structure, the entire budget function Commerce and

Housing Credit is placed in one superfunction, Physical Resources. In the

GAO mission area presentation, each of the four subfunctions within

Commerce and Housing Credit is assigned to a specific mission area:

“deposit insurance” and “other advancement of commerce” to Economic

Affairs; “postal service” to General Government; and “mortgage credit” to

Human Resources.

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Figure 3: Federal Mission Areas by Subfunction

Human Resources

Research and general education aids 

Elementary, secondary, and vocational education

Higher education 

Training and employment 

Veterans education, training and rehabilitation

Consumer and occupational health and safety 

Health care services 

Medicare 

Health research and training 

Hospital and medical care for veterans 

Housing assistance 

Mortgage credit 

Veterans housing 

Other income security 

Food and nutrition assistance 

Social services 

Unemployment compensation 

Other veterans benefits and services 

Federal employee retirement and disability 

General retirement and disability insurance 

Social security 

Income security for veterans 

Economic Affairs

Farm income stabilization 

Deposit insurance 

Disaster relief and insurance 

Area and regional development 

Community development 

General purpose fiscal assistance 

Other advancement of commerce 

Other labor services 

Agricultural research and services 

General science and basic research 

Space flight, research, and supporting activities

Air transportation 

Ground transportation 

Water transportation 

Other transportation 

Natural Resources

Emergency energy preparedness 

Energy conservation 

Energy supply 

Energy information, policy, and regulation

Conservation and land management 

Other natural resources 

Pollution control and abatement 

Recreational resources 

Water resources 

General Government

Federal correctional activities 

Criminal justice assistance 

Federal litigative and judicial activities 

Federal law enforcement activities 

Legislative functions 

Executive direction and management 

Postal Service 

Central fiscal operations 

Other general government 

Central personnel management 

General property and records management 

National Security and International Affairs

Conduct of foreign affairs 

International development and humanitarian assistance

Foreign information and exchange activities 

International financial programs 

International security assistance 

Department of Defense-Military 

Atomic energy defense activities 

Defense-related activities 

Interest

Interest on the public debt 

Other Interest 

Offsetting Receipts

Interest Paid to Trust Funds

Rents and Royalties on the Outer Continental Shelf

Other Undistributed Offsetting Receipts

Offsetting Receipts

Appendix III contains trend analyses based on the GAO-defined mission

areas. This analysis shows that average annual real growth for interest

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payments (6.7 percent) and Human Resources spending (3.1 percent)

dominated the period 1977 through 1996, accounting for over 95 percent of

the total real growth in federal spending over the last 20 years.

Alternatively, average annual real growth in the General Government

(1.7 percent) and National Security and International Affairs (0.5 percent)

mission areas has risen, but much slower than real growth in overall

federal spending (2.4 percent); two mission areas, Natural Resources

(–0.6 percent) and Economic Affairs (–1.1 percent), experienced real

declines during this period. Figure 4 presents an alternative representation

of these trends over the last 20 years. As shares of total federal spending,

interest payments more than doubled (from over 6 percent to almost

14 percent) and Human Resources spending increased from about

49 percent to about 56 percent. All other mission areas experienced

declines as shares of total federal spending during this period.

Figure 4: Spending Trends by Mission

Area, Fiscal Years 1977-1996

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995

0

20

40

60

80

100

Fiscal year

Percent of total adjusted net outlays

National defense

Human resources

Interest

Economic affairs

Natural resources

General government

Appendix III also includes specific trend information on each budget

subfunction by mission area. Figure 5 captures some of this information by

displaying the 10 subfunctions with the highest average annual real growth

and the 10 with the largest average annual real decline, since 1977.

Although health-related and interest spending are predictably among the

fastest growing areas of federal activity, this summary shows that federal

spending for corrections and in other law enforcement areas also

experienced substantial growth during this period. The largest real decline

over the last 20 years was in “general purpose fiscal assistance” and was

the result of terminating general revenue sharing for state and local

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governments; large real declines were also associated with certain

veterans-related spending and with the central fiscal and personnel

management activities of the federal government.

Figure 5: Highest Average Annual Real

Growth or Decline by Subfunction,

Fiscal Years 1977-1996

-15 -10 -5 0 5 10 15

Overall federal government

Federal correctional activities

Medicare

Housing assistance

Interest on the public debt

Health care services

Federal litigative/judicial activities

Atomic energy defense activities

Defense-related activities

Federal law enforcement activities

Other transportation

Energy information/policy/regulation

Community development

Area and regional development

Central fiscal operations

Training and employment

Central personnel management

Mortgage credit

Veterans housing

Veterans education/training/rehabilitation

General purpose fiscal assistance

Average annual real change (percent)

The preceding discussions describe the nature of spending trends by

subfunction over a 20-year period. But subfunctions can also be used to

estimate the extent of spending change that occurs on a year-to-year

basis.11 This type of analysis provides insight on the relative stability in

spending “according to the major purpose served.” Figure 6 displays the

magnitude and frequency of annual real change in adjusted net outlays for

all subfunctions since 1977. As this figure indicates, most subfunction

spending changes little from year to year. Over 40 percent of total annual

real changes in subfunction spending falls within plus or minus 5 percent;

11For a more extensive discussion of this type of analysis, see James L. True, “Why Budgets Change a

Little. . .Or a Lot: The Earthquake Budget Theory,” presented at the Annual Meeting of the Association

for Budgeting and Financial Management, Washington D.C., October 1996.

Page 15 GAO/AIMD-98-67 Budget Functions
B-276287 

over two-thirds of the observations fall within plus or minus 10 percent.

The median annual real change during this period—half the observations

of real annual change in subfunction spending falling above and half

below—was about 1.5 percent.

Figure 6: Distribution of Annual Real

Changes in Subfunction Spending,

Fiscal Years 1977-1996

-100 -90 -80 -70 -60 -50 -40 -30 -20 -10 0 10 20 30 40 50 60 70 80 90 100

0

1

2

3

4

5

6

7

Annual real change (percent)

Percent of total observations

New Uses Will Pose

Challenges for Budget

Function

Classifications

Recent federal initiatives concerned with the performance and cost of

government operations demonstrate the continued need for

governmentwide, mission-based classifications. Although using the

well-known and available budget function classifications will clearly

benefit these initiatives initially, it will also likely surface certain structural

and procedural inconsistencies within the current classifications. One

approach to moderate the challenges presented by the current budget

functions will be to use the results of these new initiatives to reassess and,

as needed, change the underlying function and subfunction structures.

This approach would ensure that the budget function classifications

reflect modern statements of federal missions and goals and,

correspondingly, that an agency’s reporting of spending by function and

subfunction reflects an accurate, complete, and consistent portrayal of its

missions and activities.

Two major and very recent developments within the federal

government—governmentwide performance plans and consolidated

Page 16 GAO/AIMD-98-67 Budget Functions
B-276287 

financial statements—use budget function classifications to provide a

needed cross-agency, mission-based perspective.

• Under the Government Performance and Results Act (the “Results Act”),

the President is required to prepare and submit a Federal Government

Performance Plan with the Budget submission. To meet the expectation

that this plan “provide a single cohesive picture of the annual performance

goals for the fiscal year,” the Director of OMB was given broad discretion

regarding “the best manner and useful form” for the plan. Budget functions

were selected as the principal organizing framework to summarize the

annual performance goals of federal departments and agencies. Recently,

in a letter to the Director of OMB, the majority leadership of the Congress

emphasized its expectation that “each budget function should have a clear

mission with clear strategic goals” within the Federal Government

Performance Plan.

• Beginning with the prototype Consolidated Financial Statement of the

United States Government for fiscal year 1996, a new presentation was

added—the Statement of Net Cost. This statement is intended to show the

annual net cost of government operations and is organized around budget

functions.12 According to the Treasury, this change was made to support

the implementation of the Results Act. Specifically, “classifying each

activity solely in the function defining its most important purpose. . .

permits adding the cost of each function to obtain the total cost.”13

These new uses will likely generate questions about the adequacy of the

current budget functions as an organizing framework. Budget function

classifications clearly remain a convenient and well-known mechanism for

governmentwide reporting needs. Nevertheless, current practices

regarding how information is coded within this framework, as well as

questions about both the function and subfunction categories themselves,

may focus attention on the capacity of these structures to meet the newly

evolving needs. Specifically, (1) some function and subfunction categories

do not portray a cohesive, mission-based grouping of federal activities and

(2) agency discretion regarding how spending is coded may not promote

an accurate, complete, or consistent portrayal of mission activities.

12“The functions in the Statement of Net Cost are the same functions as those in the budget with one

exception. The income security function in the budget includes federal employee retirement and

disability costs; these costs are allocated to the other major functions in the Statement of Net Cost.

13Consolidated Financial Statement, U.S. Government, Fiscal Year 1996, U.S. Government Printing

Office (Washington, D.C., 1997), p. 13.

Page 17 GAO/AIMD-98-67 Budget Functions
B-276287 

Structural Inconsistencies

in Budget Function

Classifications

A long-standing problem for any function presentation is that a single

federal activity might reasonably be associated with more than one

purpose. For example, waste water treatment grants are directly linked

with pollution control and abatement activities but could also be

associated with area and regional development goals. To prevent

double-counting, agencies are supposed to associate their spending with

its main or primary purpose—and budget function. But even this approach

poses difficulties given structural inconsistencies within current function

and subfunction categories.

For example, the 17 budget functions that are intended to indicate specific

“areas of national need” reflect a variety of organizing principles. While

some functions comprise a set of clearly mission-related activities (i.e.,

National Defense, Administration of Justice, Health), others reflect

beneficiary (e.g., Veterans Benefits and Services), or functional themes

(i.e., Transportation). In other cases, such as the Education, Training,

Employment, and Social Services function, an amalgamation of very

different federal missions and activities can be represented within a single

budget function. This function includes, for example, such diverse

activities as basic knowledge and skills development (i.e, elementary

through higher education programs), vocational training and employment

services, and various social programs for children, families, and the

elderly. But this last set of activities corresponds closely with other federal

cash and food assistance programs to needy individuals and families,

which are separately included in the Income Security function, and with

related assistance programs to specific beneficiaries such as the elderly or

veterans, which are coded to the Social Security and Veterans Benefits and

Services functions, respectively.

Conforming agency missions and strategic goals developed under the

Results Act to current budget function classifications may not fully

capture the significance and breadth of often complex federal entities. The

Department of Transportation offers one example. Virtually all

departmental spending is coded to one of the modal subfunctions (i.e.,

ground, air, or water transportation) within the Transportation function.

However, the Department’s recently issued strategic plan describes

strategic goals including, among others, promoting public health and

safety, enhancing economic growth and competitiveness, and advancing

the nation’s vital security interests. Each of these goals and related agency

spending could be associated with a different, more representative

mission-related budget function.

Page 18 GAO/AIMD-98-67 Budget Functions
B-276287 

Although subfunctions are more homogeneous than functions, there are

comparable definitional problems.14 For example, in the Commerce and

Housing Credit function, after excluding spending coded to the “mortgage

credit,” “deposit insurance,” and “postal service” subfunctions, all

remaining commerce-related spending is coded to that function’s other

generic subfunction: “other advancement of commerce.” However, this

subfunction includes such dissimilar federal activities as the Securities

and Exchange Commission, the Census Bureau, the Small Business

Administration, and the National Institute of Standards and Technology.

Perhaps more importantly, this subfunction does not include federal

efforts associated with commercial assistance and regulation of

transportation-related activities; instead, these activities are coded to the

modal transportation subfunctions.

An additional structural challenge arising from current budget functions is

a by-product of their most conspicuous feature—their remarkable stability

through the years. In effect, the persistence of the structure could become

an obstacle as agencies reassesses their missions and principal activities

under the Results Act and as new questions arise based on those

reassessments. One example of this type of question stems from the

complexities posed by fragmented federal missions and overlapping

programs.15 For example, to compare the performance or costs of housing

programs that are spread across several federal departments and agencies,

a user would have to consider spending that is now coded to several

subfunctions in at least four functions (i.e., Income Security, Veterans

Benefits and Services, Commerce and Housing Credit, and Community and

Regional Development). There is no direct way using budget function

classifications to relate activities which, from a mission perspective, are

essentially comparable.

Similar Activities May Not

Be Coded Similarly

Currently, agencies are expected to code each budget account according

to the preponderance of spending on activities funded through that

account. If activities within a given account are spread across multiple

subfunctions, the account is coded to the corresponding function; if

spread across multiple functions, then a generic multifunction code is

used. By its nature, this coding convention tends to produce less

14For a detailed analysis of federal spending in fiscal year 1996 by department/subdepartment and by

function/subfunction, see Budget Issues: Fiscal Year 1996 Agency Spending by Budget Function

(GAO/AIMD-97-95, May 13, 1997).

15For a discussion of this issue, see Managing for Results: Using the Results Act to Address Mission

Fragmentation and Program Overlap (GAO/AIMD-97-146, Aug. 29, 1997).

Page 19 GAO/AIMD-98-67 Budget Functions
B-276287 

informative results, as federal spending is generalized to function or

multifunction classifications. More importantly, this apparently

straightforward convention does not necessarily produce consistent

results across agencies, because of the wide range of activities that can be

associated with a given budget account and because of the discretion

afforded agencies in how they treat certain common activities.

Even if an agency is able to associate a budget account with a discrete

subfunction, the resulting subfunction totals may not provide a clear or

complete indication of primary mission or total cost. For example, based

on strategic goals16 developed during its implementation of the Results

Act, the National Oceanic and Atmospheric Administration would seem

likely to associate some of its spending with such subfunctions as “water

resources,” “general science and technology,” or “water transportation.”

However, in fiscal year 1996, all of its spending was coded to “other

natural resources” and “other advancement of commerce,” providing little

if any insight into its basic missions. Similarly, the mission of the National

Park Service, as defined in its strategic plan, is to “preserve unimpaired the

natural and cultural resources and values of the national park system for

the enjoyment, education, and inspiration of this and future generations.”

However, virtually all of the Service’s spending is coded to “recreational

resources;” none is coded to “conservation and land management.”

Achieving a better understanding of the total cost of federal operations

through budget function classifications will also be hindered because

agencies sometimes code similar activities differently. For example, many

agencies finance central support activities through common or

departmentwide budget accounts. There is no apparent convention for

how agencies will code this type of spending within function and

subfunction classifications. The Department of Housing and Urban

Development allocates its management and administration accounts

across four of the five subfunctions charged by the department.17

Conversely, the Department of Health and Human Services places its

departmental management accounts within a single subfunction (i.e.,

“health care services”) from among the eight subfunctions associated with

its broad mission responsibilities. In a related example, although all major

departments and agencies have an Office of Inspector General, these

16Advance short-term warning and forecast services; implement seasonal to interannual climate

forecasts; predict and assess decadal to centennial climate change; promote safe navigation; build

sustainable fisheries; recover protected species; and sustain healthy coasts.

17The one subfunction used by the department for which no allocation of central support charges was

made in fiscal year 1996 accounted for only about 0.04 percent of total department obligations.

Page 20 GAO/AIMD-98-67 Budget Functions
B-276287 

comparable entities are coded differently. In the departments of Justice

and Education, Inspector General spending is assigned to the “federal law

enforcement activities” subfunction; in all other cases, Inspector General

activities are coded to either one of the specific subfunctions associated

with the department’s or agency’s missions, or to a general (i.e., 

“other. . .”) subfunction.

Addressing the Challenges

of Budget Function

Classifications

The preceding discussion should not be interpreted to suggest that budget

function classifications have little or no value for the emerging focus on

governmentwide performance and cost. On the contrary, as a

long-standing method to categorize the purpose of government without

regard to organizational arrangements, budget functions are an obvious

and available approach to apply to these important concerns.

Nevertheless, the structural and procedural issues described above would

seem to suggest that initial expectations should be tempered. For example,

achieving the congressional expectation of a clear mission and strategic

goals for each budget function will likely be very difficult; in many cases,

the function structure will produce mission and goal definitions which are

(1) fragmentary, as in the case of federal housing missions, or (2) unclear,

as in the case of functions which reflect non-mission themes.

To gain the benefits of using a classification structure that is well-known

and currently available, while still addressing its shortcomings, some

attention could be given toward moderating the known challenges of the

current structure. For example, focusing on subfunction classifications,

which are inherently more discrete than function classifications, or

recasting certain budget functions to emphasize a more consistent mission

focus, will help avoid potential confusion and misinformation.

Another perhaps more promising approach would be to use the

department and agency missions and strategic goals recently defined

under the Results Act as a baseline for comparison against current

function and subfunction classifications. Just as the end of World War II

presented an opportunity to reassess the purposes of government

spending and led to broad changes in budget function classifications,

department and agency implementation of the Results Act, as well as

Page 21 GAO/AIMD-98-67 Budget Functions
B-276287 

various financial management improvements18 that are intended to provide

a better understanding of the full cost of federal activities, will present an

appropriate environment to begin a modern reexamination. Moreover, the

convergence of these initiatives focusing on performance and cost offers a

unique opportunity for such a reassessment by providing a complete,

consistent and fact-based foundation. This evaluation will likely reaffirm

many of the current subfunctions, identify instances where agency coding

decisions might be changed to be clearer and more mission-based, and

disclose any significant gaps or inconsistencies which might require new

subfunction or function classifications. Collectively, these actions should

result in function and subfunction classifications better structured to

continue their historic role as a governmentwide reporting mechanism.

We are sending copies of this report to the Ranking Minority Member of

the House Committee on the Budget; to the Chairmen and the Ranking

Minority Members of the House Committee on Government Reform and

Oversight and its Subcommittee on Government Management, Information

and Technology, the Senate Committee on the Budget, and the Senate

Committee on Governmental Affairs; to the Director of the Office of

Management and Budget; and to other interested parties. We will also

make copies available to others upon request.

If you have any questions, please call me at (202) 512-9573. Major

contributors to this report were Michael J. Curro, Assistant Director, and

John W. Mingus, Jr.

Sincerely yours,

Paul L. Posner

Director, Budget Issues

18These improvements stem from several statutes, notably the (1) Chief Financial Officers Act of 1990,

as amended by the Government Management Reform Act of 1994, which established chief financial

officer positions across the government and required the preparation and audit of annual financial

statements, and (2) the Federal Financial Management Improvement Act of 1996, which requires

federal financial management systems to support full disclosure of federal financial data, including the

full cost of programs and activities.

Page 22 GAO/AIMD-98-67 Budget Functions
Page 23 GAO/AIMD-98-67 Budget Functions
Contents

Letter 1

Appendix I 

Objectives, Scope,

and Methodology

26

Appendix II 

Trend Analyses by

Function

32

Appendix III 

Trend Analyses by

Mission Area

34

Human Resources 36

National Security and International Affairs 40

Economic Affairs 42

General Government 44

Natural Resources 46

Interest 48

Related GAO Products 52

Tables Table 1: Functions Used in Fiscal Years 1948, 1979, and 1998 9

Table I.1: Adjusted Net Outlays and Net Outlays: Fiscal Years

1977 and 1996

28

Table I.2: Adjusted Net Outlays by Subfunction, Fiscal Year 1996 29

Table II.1: Spending Trends and Growth Rates by Function 32

Table III.1: Shares of Federal Spending and Growth Rates by

Mission Area

34

Table III.2: Subfunction Shares and Growth Rates, Human

Resources Mission Area

37

Table III.3: Subfunction Shares and Growth Rates, National

Security and International Affairs Mission Area

40

Table III.4: Subfunction Shares and Growth Rates, Economic

Affairs Mission Area

42

Table III.5: Subfunction Shares and Growth Rates, General

Government Mission Area

44

Table III.6: Subfunction Shares and Growth Rates, Natural

Resources Mission Area

46

Page 24 GAO/AIMD-98-67 Budget Functions
Contents

Table III.7: Subfunction Shares and Growth Rates, Interest

Mission Area

48

Figures Figure 1: Function and Subfunction Classifications 4

Figure 2: Average Annual Real Growth by Budget Function,

Fiscal Years 1977-1996

11

Figure 3: Federal Mission Areas by Subfunction 13

Figure 4: Spending Trends by Mission Area, Fiscal Years

1977-1996

14

Figure 5: Highest Average Annual Real Growth or Decline By

Subfunction, Fiscal Years 1977-1996

15

Figure 6: Distribution of Annual Real Changes in Subfunction

Spending, Fiscal Years 1977-1996

16

Figure I.1: Net Outlays and Adjusted Net Outlays, Fiscal Years

1977-1996

29

Figure II.1: Shares of Federal Spending by Function, Fiscal Years

1977-1996

33

Figure III.1: Shares of Federal Spending by Mission Area, Fiscal

Years 1977-1996

35

Figure III.2: Human Resources Subfunctions as Shares of Total

Federal Spending, Fiscal Years 1977-1996

38

Figure III.3: Shares of Human Resources Spending by Major

Subfunction Groups, Fiscal Years 1977-1996

39

Figure III.4: National Security and International Affairs

Subfunctions as Shares of Total Federal Spending, Fiscal Years

1977-1996

41

Figure III.5: Economic Affairs Subfunctions as Shares of Total

Federal Spending, Fiscal Years 1977-1996

43

Figure III.6: General Government Subfunctions as Shares of Total

Federal Spending, Fiscal Years 1977-1996

45

Figure III.7: Natural Resources Subfunctions as Shares of Total

Federal Spending, Fiscal Years 1977-1996

47

Figure III.8: Interest Subfunctions as Shares of Total Federal

Spending, Fiscal Years 1977-1996

49

Abbreviations

BEA Budget Enforcement Act

OMB Office of Management and Budget

Page 25 GAO/AIMD-98-67 Budget Functions
Appendix I 

Objectives, Scope, and Methodology

Our objectives were to (1) discuss the origin and evolution of budget

function and subfunction classifications, (2) describe recent federal

spending trends in the context of this framework, and (3) comment on the

implications of using this framework for modern applications. Information

on the origins and historical development of budget function

classifications was developed primarily through a literature search.

Comments on recent uses for these classifications were based on

published material from OMB and the Department of the Treasury.

For appendixes II and III, we developed historical summaries based on

automated data collected by OMB. As part of their annual budget

submissions to OMB, federal departments and agencies are required to

provide a variety of budgetary data for each budget account, the basic

building block of their submissions. Each budget account is required to be

associated with, among other things, a specific three-digit function or

subfunction code. OMB collects and processes this information through the

MAX budget system (formerly referred to as the Budget Preparation

System), which is used to prepare the President’s annual budget

submission. We accumulated these annual data at the budget account level

in a GAO database. Although much of the information provided by agencies

is subject to verification processes and edit checks by OMB, it is not

audited, and we did not independently verify the data.1

For purposes of this analysis, we chose to focus on the 20-year period,

1977 through 1996. We selected this period because it was sufficiently

lengthy to show changes in federal spending patterns while minimizing the

amount of necessary data manipulation. Because the GAO database is a

compilation of annual files, it does not reflect changes in budget structure

or concept that occur after a specific fiscal year file has been appended.

Thus, to portray spending trends against a consistent structure, we needed

to modify the coding of budget accounts throughout this period to ensure

that all data were coded according to the function/subfunction structure

used in the President’s fiscal year 1998 budget submission. The process

used for standardizing coding involved identifying each account that had

an “old” function code in any fiscal year prior to a change in the

function/subfunction structure and to recategorize that account with the

new code. For example, “social security” was not a separate subfunction

prior to 1983, and its associated budget accounts were coded to the

“retirement programs” subfunction. For purposes of this analysis,

individual “social security” budget accounts were recoded to the current

1

Some recent GAO work has indicated significant problems in the accounting information underlying

certain revenue and expenditure presentations in the budget. See, for example, Financial Audit:

Examination of IRS’ Fiscal Year 1995 Financial Statements (GAO/AIMD-96-101, July 11, 1996).

Page 26 GAO/AIMD-98-67 Budget Functions
Appendix I 

Objectives, Scope, and Methodology

subfunction; other budget accounts coded to “retirement programs” in

earlier years were similarly assigned to an appropriate and current

classification.

There were two exceptions to the above approach. First, to ease analysis,

various offsetting receipt subfunctions (code 95x) were merged into a

single subfunction; certain interest subfunctions (codes 902-908) were

treated similarly. Second, during the period 1977 through 1982, certain

receipt accounts were coded to function rather than subfunction codes; to

maintain consistency with later years, these accounts were recoded to the

offsetting receipts subfunction.

After standardizing the function/subfunction structure, we needed to

select a unit of measure for the trend analyses. Typically, federal spending

is described in terms of (1) budget authority—the authority to enter into

financial commitments, (2) obligations—the amount of orders placed,

contracts awarded, services rendered, or similar financial commitments

that will require payment either immediately or in the future, or

(3) outlays—the issuance of checks or disbursement of cash to liquidate

an obligation during a given fiscal year. Sometimes, the measure that is

used is determined by the nature of the analysis; for example, trend

analyses according to budget object class require using obligation data,

because that is the only unit of measure associated with object class

presentations. For budget functions, although any of the above measures

could be used, we chose to concentrate on reported outlays to reflect

actual “spending” in each fiscal year, regardless of outstanding

commitments or the extent of budget authority available.

In budget presentations in the President’s Budget, departments and

agencies report outlays in both “gross” and “net” terms. Net outlays are

gross outlays minus collections received from either federal or nonfederal

sources. Deducting collections from federal sources prevents

double-counting on a governmentwide basis; deducting collections from

nonfederal sources ensures that reported net outlays reflect only

governmental transactions with the public. This latter deduction subtracts

(or “offsets”) from gross outlays any revenues collected by the government

as part of a business-type transaction with the public.

To achieve the purposes of this analysis—that is, to summarize federal

spending by “purpose” or mission—we chose to construct a unique

Page 27 GAO/AIMD-98-67 Budget Functions
Appendix I 

Objectives, Scope, and Methodology

measure, which we refer to as “adjusted net outlays.”2 We calculated this

measure for each budget account by excluding from reported gross

outlays only collections from federal sources while retaining collections

from nonfederal sources. Another way to describe this measure is to say

that it takes reported net outlays and adds back collections from

nonfederal sources. To make this calculation, we extracted the relevant

budgetary data from the GAO database and converted the data to constant

1996 dollars using the GDP implicit deflator reported in the Fiscal Year

1998 Historical Tables. These constant dollar totals were then used to

calculate the share figures displayed in appendixes II and III.

We believe that “adjusted net outlays” better ensures that the measure of

spending used in this letter fully reflects all outlays of federal agencies,

whether on not such spending arose from governmental or business-type

transactions. The implications of this calculation can be shown by

example. In fiscal year 1996, the Postal Service “spent,” in net outlay

terms, negative $504 million—that is, it ran a surplus of over $500 million.

In fact, gross outlays totaled over $56.3 billion, but were offset by about

$55.5 billion in collections from nonfederal sources and about $1.4 billion

in collections from federal sources. For this analysis, we report adjusted

net outlays for the Postal Service of about $55.0 billion ($56.3 billion minus

$1.4 billion; or –$0.5 billion plus $55.5 billion).

Adding back to reported net outlays the deductions for offsetting

collections from non-federal sources consistently increased reported net

outlays. Table I.1 and Figure I.1 show, over the period we examined, the

relationship between net and adjusted net outlays.

Table I.1: Adjusted Net Outlays and

Net Outlays: Fiscal Years 1977 and

1996

Billions of 1996 dollars

1977 1996

Adjusted net outlays $1,122.1 $1,756.7

Net outlays 958.4 1,560.3

Difference (offsetting collections from nonfederal sources) $ 163.7 $ 196.4

Note: This table includes undistributed offsetting receipts which are excluded from analyses in

appendixes II and III.

2

To create this measure, we extracted budget data from three OMB MAX data series: Line Type “A”

(Analysis of Outlays), Line Type “P” (Program and Financing Data), and Line Type “R” (Receipts data).

Page 28 GAO/AIMD-98-67 Budget Functions
Appendix I 

Objectives, Scope, and Methodology

Figure I.1: Net Outlays and Adjusted

Net Outlays, Fiscal Years 1977-1996

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995

0

500

1,000

1,500

2,000

Fiscal year

Billions of 1996 dollars

Adjusted

net outlays

 Net

 outlays

Although calculating adjusted net outlays affected virtually all

subfunctions, its impact was most pronounced in a rather small subset.

Table I.2 notes that most of the difference in fiscal year 1996 between

adjusted net outlays and net outlays can be traced to just 7 of the over 70

budget subfunctions.

Table I.2: Adjusted Net Outlays by Subfunction, Fiscal Year 1996

Dollars in billions

Subfunction

Adjusted net

outlays Net outlays Difference

Cumulative percent of

total difference

Postal Service $55.0 –$0.5 $55.5 28.2

Medicare 194.3 174.2 20.0 38.5

International financial programs 15.7 –2.2 17.8 47.5

Energy supply 17.5 1.6 15.8 55.6

Mortgage credit 8.4 –4.8 13.2 62.3

Deposit insurance 2.7 –8.4 11.1 67.9

Farm income stabilization 16.2 6.5 9.7 72.9

All other subfunctions 1,447.1 1,393.8 53.2 27.1

Total 1,756.7 1,560.3 196.4 100.0

To provide further insight into the nature of any changes observed during

this period, we also extracted for each budget account the code that is

Page 29 GAO/AIMD-98-67 Budget Functions
Appendix I 

Objectives, Scope, and Methodology

used to distinguish discretionary and mandatory spending under the

Budget Enforcement Act (BEA) of 1990. However, because this coding

structure did not exist prior to the enactment of the act, we determined

appropriate BEA codes for all pre-1990 budget accounts. If a specific

budget account existed both pre- and post-1990, the post-1990 BEA code

was simply added to all earlier data. Accounts that did not exist after 1990

were coded based on logical matches to similar types of accounts and

activities.

For appendixes II and III, we computed real average annual growth rates

using the constant dollar totals for each budget function and subfunction

for fiscal years 1977 and 1996. We used the “@RATE” formula from an

automated spreadsheet application to compute growth rates. This formula

determines the periodic interest rate needed for an investment to grow to

a future value—or conversely the growth rate displayed between two

known values—over the number of compounding periods.

Lastly, to ensure that the process of standardizing function codes and

adding BEA codes to individual budget accounts did not affect overall

accuracy, reported net outlay totals for subfunctions and for mandatory

and discretionary spending were compared to OMB’s published sources.

After controlling for the shift of some budget accounts between

subfunctions or BEA categories, only one subfunction had greater than a

1-percent difference between the calculated dataset for this analysis and

published data. That subfunction, deductions for offsetting receipts, did

not significantly affect the substance of our analysis.

We performed our work from August through December 1997 in

accordance with generally accepted government auditing standards. We

provided a draft of this report to OMB for technical review.

Page 30 GAO/AIMD-98-67 Budget Functions
Appendix I 

Objectives, Scope, and Methodology

Page 31 GAO/AIMD-98-67 Budget Functions
Appendix II 

Trend Analyses by Function

The 17 budget functions which reflect areas of national needs and

spending for net interest have experienced widely varying trends over the

last 20 years. As shown in figure II.1, just 6 functions accounted for almost

80 percent of total adjusted net outlays in 1996; those same functions

accounted for about two-thirds of spending in 1977. As table II.1 shows,

average annual growth rates varied substantially across the functions, with

most of the growth arising from mandatory spending (i.e., spending not

controlled through the appropriations process but rather by authorizing

laws which define eligibility or set benefit or payment rules).

Table II.1: Spending Trends and Growth Rates by Function

Billions of 1996 dollars Average annual growth rate (percent)

Budget function 1977 1996 Mandatory Discretionary Total

National defense $235.9 $275.4 –9.1 0.9 0.8

International affairs 43.4 34.1 –1.3 –1.2 –1.3

General science, space and technology 11.5 16.8 2.6 2.0 2.0

Energy 22.5 19.4 0.3 –2.3 –0.8

Natural resources and environment 27.5 25.0 8.7 –1.2 –0.5

Agriculture 28.5 19.1 –2.8 1.9 –2.1

Commerce and housing credit 63.5 70.9 1.0 –3.4 0.6

Transportation 35.8 40.5 0.7 0.6 0.7

Community and regional development 20.9 13.5 –5.4 –1.6 –2.3

Education, training, employment, 

and social services

50.0 53.8 3.0 –0.4 0.4

Health 43.3 124.0 7.2 1.9 5.7

Medicare 50.5 194.3 7.5 2.6 7.4

Income security 148.0 233.0 2.0 5.7 2.4

Social security 199.2 349.7 3.1 –1.1 3.0

Veterans benefits and services 46.6 39.8 –2.4 2.1 –0.8

Administration of justice 8.6 20.0 35.9 3.9 4.6

General government 44.2 15.0 –12.7 –0.4 –5.5

Net interest 71.4 246.0 6.7 n/a 6.7

Total 

(excluding undistributed offsetting receipts)

$1,151.4 $1,790.5 3.3 0.8 2.4

Page 32 GAO/AIMD-98-67 Budget Functions
Appendix II 

Trend Analyses by Function

Figure II.1: Shares of Federal Spending by Function, Fiscal Years 1977-1996

a. Largest functions

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995

0

20

40

60

80

100

Fiscal year

Percent of total adjusted net outlays

Health

National defense

Net interest

Medicare

Income security

Social security

All other (see figure b below)

Veterans benefits and services

b. Detail of "all other" in figure a.

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995

0

10

20

30

40

Fiscal year

Percent of total adjusted net outlays

Education, training, employment, 

 and social services

International affairs

Transportation

All other (See figure c below)

Commerce and housing credit

Natural resources and environment

c. Detail of "all other" in figure b.

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995

0

2

4

6

8

10

12

14

16

Fiscal year

Percent of total adjusted net outlays

Agriculture

Administration of justice

General science, space and technology

Community and regional development

Energy

General government

Page 33 GAO/AIMD-98-67 Budget Functions
Appendix III 

Trend Analyses by Mission Area

To better reflect the major spending priorities of the federal government,

GAO developed the six “mission areas” shown in table III.1, below. Each of

these mission areas was constructed by aggregating reported subfunction

totals; table 3 in the preceding letter, and the subsequent analyses in this

appendix, define which subfunctions are associated with which mission

areas.

As table III.1 and figure III.1 show, there have been some significant shifts

in federal spending by mission area over the last 20 years. Human

resources spending has increased from about 49 percent of total spending

to almost 56 percent; in constant dollar terms, spending has increased

nearly 80 percent in this mission area. Even more dramatically, interest

spending has increased almost 250 percent in constant dollar terms. These

two mission areas now constitute almost 70 percent of total federal

spending.

The remainder of this appendix provides an overview of the factors

underlying the changes in each mission area.

Table III.1: Shares of Federal Spending and Growth Rates by Mission Area

Billions of 1996 dollars Average annual growth rate (percent)

Mission areas 1977 1996 Mandatory Discretionary Total

Human resources

[e.g., health; retirement and disability; education

and training; income support]

$563.0 $1,002.0 3.3 1.9 3.1

National security and international affairs 279.3 309.5 –1.9 0.7 0.5

Interest 71.4 246.0 6.7 6.7

Economic affairs

[i.e., area/rural/community development; financial

institution oversight; transportation; science and

research]

123.5 100.3 –3.6 0.1 –1.1

General government

[i.e., legislative and executive functions; postal

service; administration of justice]

64.2 88.2 1.8 1.5 1.7

Natural resources 

[i.e., energy conservation and supply; natural

resources; environment]

50.1 44.4 1.3 –1.5 –0.6

Total 

(excluding undistributed offsetting receipts)

$1,151.4 $1,790.5 3.3 0.8 2.4

Page 34 GAO/AIMD-98-67 Budget Functions
Appendix III 

Trend Analyses by Mission Area

Figure III.1: Shares of Federal

Spending by Mission Area, Fiscal

Years 1977-1996

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995

0

20

40

60

80

100

Fiscal year

Percent of total adjusted net outlays

National defense

Human resources

Interest

Economic affairs

Natural resources

General government

Page 35 GAO/AIMD-98-67 Budget Functions
Appendix III 

Trend Analyses by Mission Area

Human Resources As noted above, the human resources mission area has been consistently

the largest mission area as a share of total federal spending during this

period and has also experienced the second highest average annual real

growth (3.1 percent). (See table III.1.) However, growth rates and shares

of total federal spending vary considerably across the large number of

subfunctions within this mission area and across the period of this

analysis. To help show some of these differences, table III.2 displays four

principal groups of subfunctions within this mission area: (1) education

and training, (2) health, (3) income support, and (4) retirement and

disability.

Although the “social security” subfunction continues to dominate the

mission area overall (figure III.3), health-related spending—notably

“medicare” and “health care services”—has shown the most rapid real

growth during this period, now collectively representing almost 19 percent

of federal spending. (See table III.2 and figure III.2.) Much of the increase

in health-related programs—and in general for this mission area—has

arisen from mandatory spending programs, rather than through

discretionary appropriations.

Perhaps more so than other mission areas, human resources spending

reflects significant demographic (e.g., veterans-related spending) and

economic (e.g., “unemployment compensation”) changes during the period

of this analysis. For example, the large (–5.8 percent) real decline in the

“mortgage credit” subfunction is largely driven by interest rates associated

with the selected start (unusually high rates) and end dates (unusually low

rates) for this analysis. Also, the decline in “training and employment”

spending (–4.3 percent) reflects the large temporary increases for public

sector jobs as part of an economic stimulus program in 1977 and 1978,

coupled with the termination of the Comprehensive Employment and

Training Act after 1982; since 1983, the “training and employment”

subfunction has been virtually flat.

Page 36 GAO/AIMD-98-67 Budget Functions
Appendix III 

Trend Analyses by Mission Area

Table III.2: Subfunction Shares and Growth Rates, Human Resources Mission Area

Percent of federal

spending Average annual growth rate (percent)a

Budget subfunctions 1977 1996 Mandatory Discretionary Total

[Education and training subfunctions] 3.98 2.20 -0.8 -0.8 -0.8

Elementary, secondary, and vocational education 0.94 0.83 n/a 1.7 1.7

Higher education 0.70 0.78 10.8 0.5 2.9

Training and employment 1.40 0.39 62.6 –5.1 –4.3

Research and general education aids 0.18 0.12 –2.4 0.3 0.3

Veterans education, training, rehabilitation 0.76 0.07 –9.6 –14.0 –9.6

[Health subfunctions] 9.11 18.74 7.4 2.1 6.3

Medicare 4.38 10.85 7.5 2.6 7.4

Health care services 2.89 6.20 7.2 2.6 6.5

Hospital and medical care for veterans 0.96 0.96 41.9 2.3 2.4

Health research and training 0.72 0.61 n/a 1.4 1.4

Consumer and occupational health and safety 0.16 0.12 –6.4 0.8 0.8

[Income support subfunctions] 12.01 10.14 0.6 5.2 1.4

Other income security 2.93 3.75 3.7 3.2 3.7

Food and nutrition assistance 1.73 2.12 3.0 10.0 3.4

Housing assistance 0.66 1.50 –6.0 7.3 6.9

Unemployment compensation 3.12 1.39 –2.1 0.0 –1.9

Social services 1.04 0.83 0.4 2.3 1.1

Mortgage credit 2.28 0.47 –6.7 17.3 –5.8

Other veterans benefits and services 0.13 0.07 –2.2 –1.0 –1.2

Veterans housing 0.12 0.02 –8.1 n/a –6.4

[Retirement and disability subfunctions] 23.80 24.88 2.6 -1.2 2.6

Social security 17.30 19.53 3.1 –1.1 3.0

Federal employee retirement and disability 3.68 3.87 2.6 2.7 2.6

Income security for veterans 2.08 1.10 –1.0 n/a –1.0

General retirement and disability insurance 0.73 0.39 –0.9 –3.1 –1.0

Total 

(excluding undistributed offsetting receipts)

48.90 55.98 3.3 1.9 3.1

a“n/a” in growth rate columns occurs when growth rate cannot be measured because of sign

changes in data or absence of data.

Page 37 GAO/AIMD-98-67 Budget Functions
Appendix III 

Trend Analyses by Mission Area

Figure III.2: Human Resources Subfunctions as Shares of Total Federal Spending, Fiscal Years 1977-1996

a. Largest subfunctions

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995

0

10

20

30

40

50

60

Fiscal year

Percent of total adjusted net outlays

Housing assistance

Medicare

Health care services

Other income security

Food and nutrition assistance

Federal employee retirement and disability

Social security

All other (See figure b below)

Mortgage credit

b. Detail of "all other" in figure a.

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995

0

5

10

15

20

Fiscal year

Percent of total adjusted net outlays

Income security for veterans

Health research and training

Higher education

Hospital and medical care for veterans

Elementary/secondary/vocational education

All other (See figure c below)

Unemployment compensation

c. Detail of "all other" in figure b.

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995

0

1

2

3

4

5

6

Fiscal year

Percent of total adjusted net outlays

General retirement and 

 disability insurance

Social services

Training and employment

Veterans education, training 

 and rehabilitation

Veterans housing

Research and general education aids

Other veterans benefits and services

Consumer/occupational health 

 and safety

Page 38 GAO/AIMD-98-67 Budget Functions
Appendix III 

Trend Analyses by Mission Area

Figure III.3: Shares of Human Resources Spending by Major Subfunction Groups, Fiscal Years 1977-1996

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995

0

10

20

30

40

50

60

Fiscal year

Percent of total adjusted net outlays

Retirement and disabilities subfunctions

Education and employment subfunctions

Income support subfunctions

Health subfunctions

Page 39 GAO/AIMD-98-67 Budget Functions
Appendix III 

Trend Analyses by Mission Area

National Security and

International Affairs

Like the human resources mission area, national security and international

affairs is dominated by a single subfunction: “Department of Defense -

Military.” (See table III.3.) Although this subfunction has declined sharply

as a share of total federal spending—from about 20 percent to about

15 percent over the last 20 years—it has consistently maintained about

80 percent of the spending in this mission area. “International security

assistance” and “international financial programs” were the largest

declining subfunctions, both as a share of overall federal spending and in

real terms. (See figure III.4.)

Table III.3: Subfunction Shares and Growth Rates, National Security and International Affairs Mission Area

Percent of federal

spending Average annual growth rate (percent)a

Budget subfunction 1977 1996 Mandatory Discretionary Total

Department of Defense-Military 20.06 14.68 –11.1 0.7 0.7

International financial programs 2.15 0.88 –1.2 –11.9 –2.4

Atomic energy defense activities 0.39 0.65 n/a 5.1 5.1

International development and humanitarian

assistance

0.67 0.44 –7.2 0.3 0.1

International security assistance 0.66 0.31 n/a –1.8 –1.7

Conduct of foreign affairs 0.20 0.22 –6.3 2.8 2.8

Foreign information and exchange activities 0.08 0.07 4.2 1.5 1.5

Defense-related activities 0.03 0.05 6.4 4.6 4.9

Total

(excluding undistributed offsetting receipts)

24.25 17.29 –1.9 0.7 0.5

a“n/a” in growth rate columns occurs when growth rate cannot be measured because of sign

changes in data or absence of data.

Page 40 GAO/AIMD-98-67 Budget Functions
Appendix III 

Trend Analyses by Mission Area

Figure III.4: National Security and International Affairs Subfunctions as Shares of Total Federal Spending, Fiscal Years

1977-1996

a. Largest subfunctions

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995

0

5

10

15

20

25

30

Fiscal year

Percent of total adjusted net outlays

Department of Defense-Military

All other (See figure b below)

b. Detail of "all other" in figure a.

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995

0

1

2

3

4

5

Fiscal year

Percent of total adjusted net outlays

International financial programs

International development and 

 humanitarian assistance

Conduct of foreign affairs

Defense-related activities

Atomic energy defense activities

Foreign information and exchange activities

International security assistance

Page 41 GAO/AIMD-98-67 Budget Functions
Appendix III 

Trend Analyses by Mission Area

Economic Affairs The overall real decline in spending for this mission area (table

III.4) reflects several significant shifts in federal priorities: the near ending

of “general purpose fiscal assistance”—most notably general revenue

sharing and several other federal payments to state and local

governments—and a decline in regional and community development

spending. However, overall growth rates mask several subfunctions which

experienced substantial volatility during this period. For example, as

shown in figure III.5, the “disaster relief and insurance” subfunction

experienced several periods of rapid increase in response to natural

disasters, and “deposit insurance” spending sharply surged in the late

1980s in response to the savings and loan crisis.

Table III.4: Subfunction Shares and Growth Rates, Economic Affairs Mission Area

Percent of federal

spending Average annual growth rate (percent)a

Budget subfunction 1977 1996 Mandatory Discretionary Total

Ground transportation 2.09 1.43 0.8 0.3 0.3

Farm income stabilization 2.24 0.90 –2.8 6.0 –2.4

Space flight, research, and supporting activities 0.78 0.71 –100.0 1.9 1.9

Air transportation 0.58 0.57 –100.0 2.4 2.3

Area and regional development 0.86 0.28 –2.8 –3.0 –3.6

Community development 0.78 0.28 –7.1 –1.7 –3.0

Other advancement of commerce 0.32 0.27 21.8 –0.9 1.4

Water transportation 0.43 0.24 2.9 –1.1 –0.7

General science and basic research 0.22 0.22 3.7 2.5 2.5

Disaster relief and insurance 0.18 0.20 3.7 2.7 2.9

Agricultural research and services 0.23 0.17 1.5 0.5 0.6

Deposit insurance –0.04 0.15 n/a n/a n/a

General purpose fiscal assistance 1.96 0.11 –13.3 –9.3 –12.0

Other labor services 0.08 0.05 –100.0 0.3 0.3

Other transportation 0.02 0.02 n/a 3.5 3.8

Total

(excluding undistributed offsetting receipts)

10.72 5.60 –3.6 0.1 –1.1

a“n/a” in growth rate columns occurs when growth rate cannot be measured because of sign

changes in data or absence of data.

Page 42 GAO/AIMD-98-67 Budget Functions
Appendix III 

Trend Analyses by Mission Area

Figure III.5: Economic Affairs Subfunctions as Shares of Total Federal Spending, Fiscal Years 1977-1996

a. Largest subfunctions and deposit insurance

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995

0

2

4

6

8

10

12

14

16

Fiscal year

Percent of total adjusted net outlays

Deposit insurance

Farm income stabilization

Ground transportation

Air transportation

Space flight, research, and supporting activities

Community development

All other (See figure b below)

c. Detail of "all other" in figure b.

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995

0

0.5

1

1.5

2

2.5

Fiscal year

Percent of total adjusted net outlays

Other labor services

General purpose fiscal assistance

Other transportation

Agricultural research and services

b. Detail of "all other" in figure a.

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995

0

1

2

3

4

5

Fiscal year

Percent of total adjusted net outlays

All other (See figure c below)

Area and regional development

Other advancement of commerce

Water transportation

General science and basic research

Disaster relief and insurance

Page 43 GAO/AIMD-98-67 Budget Functions
Appendix III 

Trend Analyses by Mission Area

General Government Throughout the first half of the 20-year trend period of this analysis, two

subfunctions—“postal service” and “central fiscal operations”—dominated

the general government mission area. (See figure III.6.) Postal service

spending continued throughout this period to be a significant share of this

mission area and of total federal spending, but spending for central fiscal

operations fell off sharply. However, this decline merely reflects a

technical change in the budgetary treatment of agency borrowing from the

Federal Financing Bank.

Notwithstanding the dominance of postal service spending, the highest

real growth in this mission area over the last 20 years occurred in three

other subfunctions: “federal correctional activities” (9.4 percent), “federal

litigative and judicial activities” (6.2 percent), and “federal law

enforcement activities” (4.4 percent). (See table III.5.) Collectively,

spending in these Administration of Justice subfunctions exhibited real

growth four times greater than the other subfunctions in this mission area

(4.6 percent versus 1.1 percent). The large real decline since 1977 in

“central personnel management” (–4.4 percent) reflects the recent

downsizing of the Office of Personnel Management.

Table III.5: Subfunction Shares and Growth Rates, General Government Mission Area

Percent of federal

spending Average annual growth rate (percent)a

Budget subfunction 1977 1996 Mandatory Discretionary Total

Postal service 2.95 3.07 3.5 –19.6 2.6

Federal law enforcement activities 0.35 0.52 25.3 3.6 4.4

Central fiscal operations 1.53 0.49 n/a 3.0 –3.6

Federal litigative and judicial activities 0.17 0.35 n/a 5.5 6.2

Federal correctional activities 0.05 0.18 5.8 9.3 9.2

Legislative functions 0.17 0.11 n/a –0.3 –0.1

Criminal justice assistance 0.17 0.08 n/a –2.3 –1.7

General property and records management 0.05 0.06 6.4 –8.0 3.6

Other general government 0.09 0.06 9.3 2.9 0.1

Executive direction and management 0.02 0.01 n/a 1.9 1.9

Central personnel management 0.02 0.01 n/a –4.4 –4.4

Total

(excluding undistributed offsetting receipts)

5.58 4.93 1.8 1.5 1.7

a“n/a” in growth rate columns occurs when growth rate cannot be measured because of sign

changes in data or absence of data.

Page 44 GAO/AIMD-98-67 Budget Functions
Appendix III 

Trend Analyses by Mission Area

Figure III.6: General Government Subfunctions as Shares of Total Federal Spending, Fiscal Years 1977-1996

a. Largest subfunctions

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995

0

1

2

3

4

5

6

7

Fiscal year

Percent of total adjusted net outlays

Postal Service

Central fiscal operations

All other (See figure b below)

b. Detail of "all other" in figure a.

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995

0

0.5

1

1.5

2

Fiscal year

Percent of total adjusted net outlays

Criminal justice assistance

Federal correctional activities

Federal litigative and judicial activities

Federal law enforcement activities

All other (See figure c below)

c. Detail of "all other" in figure b.

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995

0

0.1

0.2

0.3

0.4

0.5

Fiscal year

Percent of total adjusted net outlays

General property/records management

Other general government

Executive direction and management

Central personnel management

Legislative functions

Page 45 GAO/AIMD-98-67 Budget Functions
Appendix III 

Trend Analyses by Mission Area

Natural Resources Over the last 20 years, the natural resources mission area has consistently

been the smallest area of federal spending, with each of the six

subfunctions associated with this mission generally being less than

1 percent of total federal outlays over this period. (See table III.6 and

figure III.7.) Spending in this mission area was dramatically affected by the

federal response to the energy crisis in the late 1970s, which resulted in

periods of rapid growth and subsequent decline for energy-related

subfunctions. The surge in spending in the “emergency energy

preparedness” subfunction (figure III.7b) in 1981 was the result of oil

purchases for the Strategic Petroleum Reserve.

Table III.6: Subfunction Shares and Growth Rates, Natural Resources Mission Area

Percent of federal

spending Average annual growth rate (percent)a

Budget subfunctions 1977 1996 Mandatory Discretionary Total

Energy supply 1.74 0.97 0.3 –2.7 –0.7

Conservation and land management 0.41 0.41 12.7 0.3 2.3

Pollution control and abatement 0.87 0.36 3.0 –2.3 –2.3

Water resources 0.69 0.30 3.7 –2.3 –2.1

Other natural resources 0.21 0.16 4.0 0.6 1.0

Recreational resources 0.21 0.16 43.1 1.0 1.1

Energy information, policy, and regulation 0.16 0.06 n/a –2.6 –2.6

Energy conservation 0.04 0.04 n/a 2.3 2.3

Emergency energy preparedness 0.03 0.01 n/a –1.0 –1.0

Total 

(excluding undistributed offsetting receipts)

4.35 2.48 1.3 –1.5 –0.6

a“n/a” in growth rate columns occurs when growth rate cannot be measured because of sign

changes in data or absence of data.

Page 46 GAO/AIMD-98-67 Budget Functions
Appendix III 

Trend Analyses by Mission Area

Figure III.7: Natural Resources Subfunctions as Shares of Total Federal Spending, Fiscal Years 1977-1996

a. Largest subfunctions

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995

0

1

2

3

4

5

6

Fiscal year

Percent of total adjusted net outlays

Water resources

Conservation and land management

Pollution control and abatement

Energy supply

All other (See figure b below)

b. Detail of "all other" in figure a.

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995

0

0.2

0.4

0.6

0.8

1

1.2

Fiscal year

Percent of total adjusted net outlays

Emergency energy preparedness

Recreational resources

Energy information, policy, and regulation

Other natural resources

Energy conservation

Page 47 GAO/AIMD-98-67 Budget Functions
Appendix III 

Trend Analyses by Mission Area

Interest This mission area, which includes interest payments on the public debt as

well as interest received by trust funds and interest paid by the federal

government, experienced the highest rate of real average annual growth

during the last 20 years, almost 7 percent. (See table III.7.) “Interest on the

public debt” as a share of total spending has more than doubled in

constant dollar terms.

Table III.7: Subfunction Shares and

Growth Rates, Interest Mission Area Percent of federal

spending

Budget subfunctions 1977 1996

Average annual

growth rate

(percent)

Interest on the public debt 8.52 19.21 6.8

Other interest –2.32 –5.47 7.1

Total (excluding undistributed

offsetting receipts)

6.20 13.74 6.7

Note: All spending in this mission area is mandatory.

Page 48 GAO/AIMD-98-67 Budget Functions
Appendix III 

Trend Analyses by Mission Area

Figure III.8: Interest Subfunctions as Shares of Total Federal Spending, Fiscal Years 1977-1996

1977 1979 1981 1983 1985 1987 1989 1991 1993 1995

0

5

10

15

20

25

Fiscal year

Percent of total adjusted net outlays

Deduction for interest received

Interest on the public debt

Net interest

Page 49 GAO/AIMD-98-67 Budget Functions
Page 50 GAO/AIMD-98-67 Budget Functions
Page 51 GAO/AIMD-98-67 Budget Functions
Related GAO Products

Budget Issues: Fiscal Year 1996 Agency Spending by Budget Function

(GAO/AIMD-97-95, May 13, 1997)

Federal Fiscal Trends: Fiscal Years 1971-1995 (GAO/AIMD-97-3,

November 1996)

Budget Function Classification: Agency Spending by Subfunction and

Object Category, Fiscal Year 1994 (GAO/AIMD-95-116FS, May 10, 1995)

Budget Function Classification: Agency Spending and Personnel Levels for

Fiscal Years 1994 and 1995 (GAO/AIMD-95-115FS, April 11, 1995)

(935223) Page 52 GAO/AIMD-98-67 Budget Functions
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