a

GAO

United States Government Accountability Office

Report to Congress

January 2006 MANDATORY 

SPENDING

Using Budget Triggers 

to Constrain Growth

GAO-06-276
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

January 2006

MANDATORY SPENDING 

Using Budget Triggers to Constrain 

Highlights of GAO-06-276, a report to Growth 

Congress 

Prepared as part of GAO’s basic

statutory responsibility for 

monitoring the condition of the 

nation’s finances, the objectives of

this report were to (1) determine 

the feasibility of designing and 

using trigger mechanisms to 

constrain growth in mandatory 

spending programs and (2) provide 

an analysis of the factors that led to

differences between estimated and 

actual outlays in seven mandatory

budget accounts during fiscal years 

2000 through 2004. 

What GAO Recommends

To promote explicit scrutiny of 

significant growth in mandatory

accounts, as mandatory spending

programs are created, reexamined,

or reauthorized, Congress should 

consider incorporating budget 

triggers that would signal the need

for action. Further, it should 

determine whether in some cases it 

might be appropriate to consider 

automatically causing some action

to be taken when the trigger is 

exceeded. Once a trigger is

tripped, Congress could either

accept or reject all or a portion of a 

proposed response to the spending 

growth. The Office of Management

and Budget and agencies

responsible for the seven case 

study accounts either did not have 

comments or provided comments 

that were clarifying and/or

technical in nature, which were

incorporated as appropriate.

One idea to constrain growth in mandatory programs is to develop programspecific triggers that, when tripped, prompt a response. A trigger could 

result in a “hard” or automatic response, unless Congress and the President 

acted to override or alter it. Alternatively, reaching a trigger could require a 

“soft” response, such as a report on the causes of the overage, development 

of a plan to address it, or an explicit and formal decision to accept or reject a 

proposed action or increase. By identifying significant increases in the 

spending path of a mandatory program relatively early and acting to 

constrain it, Congress may avert larger financial challenges in the future. 

However, both in establishing triggers and in designing the subsequent 

responses, the integrity of program goals needs to be preserved. In addition, 

tax expenditures operate like mandatory programs but do not compete in 

the annual appropriations process. The analysis GAO applied to spending in

this report would also be useful in examining tax expenditures. 

 

The budget experts GAO consulted had mixed views of triggers. Proponents 

of triggers noted that mandatory spending is currently unconstrained and a 

mechanism that causes decision makers to at least periodically reevaluate 

spending is better than allowing spending to rise unchecked. Others, 

however, expressed considerable skepticism about the effectiveness of 

triggers; many felt they would either be circumvented or ignored. While 

GAO appreciates the views expressed by budget experts, in our opinion 

establishing budget triggers warrants consideration in efforts to constrain 

significant and largely unchecked growth in mandatory programs. However, 

recognizing the natural tension in balancing both long-term fiscal challenges 

and other public policy goals, each program needs to be considered 

individually to ensure that any responses triggered strike the appropriate 

balance between the long-term fiscal challenge and the program goals.

To better understand growth in mandatory spending and thus inform GAO’s 

thinking on triggers, for seven case study accounts GAO categorized the 

reasons provided by agencies for differences between estimated and actual 

outlays during a 5-year period as the result of legislative, economic, or 

technical changes. Out of 40 differences, subsequent legislation was the 

primary reason for 19, economic changes for 7, and technical changes for 13. 

In many cases, a combination of these factors caused the differences. 

Conceptual Differences between Hard and Soft Responses 

Source: GAO analysis.

Hard Response

• Automatic, program-specific spending cuts

• Automatic revenue increases

• Changed eligibility criteria or benefit 

 formulas

Soft Response

• Points of order

• Agency reports

• Proposals to change spending path

Trigger Response

www.gao.gov/cgi-bin/getrpt?GAO-06-276.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Susan J. Irving, 

202-512-9142, irvings@gao.gov.
Page i GAO-06-276 Budget Triggers

Contents

Letter 1

Results in Brief 3

Background 5

Objectives, Scope, and Methodology 10

Trigger Mechanisms Could Help Constrain Mandatory Spending but 

Must Be Carefully Designed 14

Reasons for Differences between Estimated and Actual Outlays in 

Selected Accounts Varied 25

Conclusions 33

Matter for Congressional Consideration 35

Agency Comments 35

Appendixes

Appendix I: Illustrative Examples of Triggers and Responses for Case 

Study Accounts 36

Appendix II: Analysis of Total Outlays, Receipts, and Fiscal Position 73

Aggregate Mandatory Spending Estimates Were Close to Actual 

Outlays but Large Differences Appear at the Account Level 73

Differences between Estimated and Actual Mandatory Outlays Had 

Limited Effect on the Unified Deficit/Surplus 74

Appendix III: Mandatory Budget Accounts 82

Appendix IV: GAO Contact and Acknowledgments 100

Tables Table 1: Reasons for Differences between Estimated and Actual 

Outlays 27

Table 2: Estimated and Actual Corn Outlays, by Fiscal Year 39

Table 3: Explanation of Differences between Estimated and Actual 

Corn Outlays 40

Table 4: Estimated and Actual Crop Disaster Assistance Outlays, by 

Fiscal Year 43

Table 5: Estimated and Actual Direct Student Loan Outlays, by 

Fiscal Year 45

Table 6: Explanation of Differences between Estimated and Actual 

Direct Student Loan Outlays 46

Table 7: Estimated and Actual Medicaid Outlays, by Fiscal Year 49

Table 8: Explanation of Differences between Estimated and Actual 

Medicaid Outlays 50

Table 9: Estimated and Actual HI Outlays, by Fiscal Year 53
Contents

Page ii GAO-06-276 Budget Triggers

Table 10: Explanation of Differences between Estimated and Actual 

HI Outlays 54

Table 11: Estimated and Actual SMI Outlays, by Fiscal Year 58

Table 12: Explanation of Differences between Estimated and Actual 

SMI Outlays 59

Table 13: Estimated and Actual Rail Industry Pension Fund Outlays, 

by Fiscal Year 64

Table 14: Explanation of Differences between Estimated and Actual 

Rail Industry Pension Fund Outlays 65

Table 15: Estimated and Actual Unemployment Trust Fund Outlays, 

by Fiscal Year 69

Table 16: Explanation of Differences between Estimated and Actual 

Unemployment Trust Fund Outlays 71

Table 17: Aggregate Estimated and Actual Outlays and Receipts for 

Fiscal Years 2000–2004 77

Table 18: Revenue Estimates and Actual Results by Source and 

Fiscal Year 80

Table 19: Budget Accounts with Greater than 50 percent Mandatory 

Outlays 82

Figures Figure 1: Federal Spending for Mandatory and Discretionary 

Programs 6

Figure 2: Composition of Spending as a Share of GDP under 

Baseline Extended 7

Figure 3: Composition of Spending as a Share of GDP Assuming 

Discretionary Spending Grows with GDP After 2005 and 

All Expiring Tax Provisions Are Extended 8

Figure 4: Five-Year Average Differences between Estimated and 

Actual Mandatory Outlays, Fiscal Years 2000 through 

2005 13

Figure 5: Conceptual Differences between Hard and Soft 

Responses 16

Figure 6: Balancing Public Policy Goals and Long-term Fiscal 

Challenges 20

Figure 7: Factors Affecting Budget Estimates 26

Figure 8: Percent Change in Unemployment Rate versus Percent 

Change in Actual UTF Outlays 70

Figure 9: Estimated and Actual Total Mandatory Outlays for FYs 

2000–2004, constant 2004 dollars 74

Figure 10: Estimated and Actual Surplus/Deficit, Fiscal Years 2000–

2004, constant 2004 dollars 75
Contents

Page iii GAO-06-276 Budget Triggers

Figure 11: Total Estimated and Actual Receipts, Fiscal Years 2000–

2004, constant 2004 dollars 79

Abbreviations

AMT Alternative Minimum Tax

BBRA Medicare, Medicaid, and SCHIP Balanced Budget

Refinement Act of 1999

BEA Budget Enforcement Act

CBO Congressional Budget Office

CCC Commodity Credit Corporation

CCP Countercyclical Payments

CMS Centers for Medicare & Medicaid Services

CRS Congressional Research Service

ESAA Employment Security Administration Account

EUCA Extended Unemployment Compensation Account

FDLP Federal Direct Student Loan Program

FFELP Federal Family Education Loan Program

FMAP Federal Medical Assistance Percentage

FSA Farm Service Agency

FUA Federal Unemployment Account

FY Fiscal Year

GDP Gross Domestic Product

GRH Gramm-Rudman-Hollings Act

HI Hospital Insurance

LDP Loan Deficiency Payments

MMA Medicare Prescription Drug, Improvement, and 

Modernization Act of 2003

MMI Mutual Mortgage Insurance Program Account

NRRIT National Railroad Retirement Investment Trust

OASDI Old Age, Survivors, and Disability Insurance

OMB Office of Management and Budget

PAYGO Pay-As-You-Go

PPS Prospective Payment System

QIO Quality Improvement Organizations

RRB Railroad Retirement Board 

RUG Resource Utilization Group

SGR Sustainable Growth Rate

SMI Supplementary Medical Insurance 

SNF Skilled Nursing Facility
Contents

Page iv GAO-06-276 Budget Triggers

TEUC Temporary Extended Unemployment Compensation

Act of 2002

USDA U.S. Department of Agriculture

UTF Unemployment Trust Fund

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Page 1 GAO-06-276 Budget Triggers

United States Government Accountability Office

Washington, D.C. 20548

A

January 31, 2006 Letr

The President of the Senate

The Speaker of the House of Representatives

Over the next few decades as the baby boom generation retires and health 

care costs continue to rise, federal spending on retirement and health 

programs—Social Security, Medicare, Medicaid, and other federal pension, 

health, and disability programs—will grow dramatically. Absent policy 

changes on the spending and/or revenue sides of the budget, a growing 

imbalance between expected federal spending and tax revenues will mean 

escalating and ultimately unsustainable federal deficits and debt that 

threaten our future economy and national security as well as the standard 

of living for the American people.1

Given rising deficits, the expiration of the Budget Enforcement Act (BEA) 

of 1990,2

 and the long-term fiscal outlook, new budget control mechanisms 

are needed. Accordingly, there have been calls for the reintroduction of 

discretionary spending caps and PAYGO rules. Although PAYGO was 

effective in preventing legislative actions that increased the deficit, it did 

not address increases that occurred absent legislative action. Constraining 

the growth of existing mandatory spending programs requires additional 

action. 

In our 1994 report on capping mandatory spending,3 we noted that an 

alternative method to prompt congressional review of mandatory spending 

trends would be to require Congress to vote periodically on whether or not 

to make program changes when mandatory spending exceeds certain 

targets. One way to do this and potentially achieve greater fiscal 

responsibility would be to create triggers for individual mandatory 

programs—predetermined spending or revenue thresholds—that signal the 

1

For more information, see GAO, 21st Century Challenges: Reexamining the Base of the 

Federal Government, GAO-05-325SP (Washington, D.C.: February 2005).

2

BEA established pay-as-you-go (PAYGO) rules to ensure that legislation affecting direct, or 

mandatory, spending and revenues was budget-neutral over each session of Congress. In 

addition, annual discretionary spending limits were established. The sequestration 

procedure enforced PAYGO rules and discretionary spending caps. See Pub. L. No. 101-508, 

title XIII, § 13204, 104 Stat. 1388, Nov. 5, 1990.

3

GAO, Budget Policy: Issues in Capping Mandatory Spending, GAO/AIMD-94-155

(Washington, D.C.: July 18, 1994).
Page 2 GAO-06-276 Budget Triggers

need for some type of action to be taken on the program. Once tripped, the 

trigger could drive either a review or an automatic action. It could, for 

example, trigger a requirement for Congress to either review or reaffirm 

acceptance of the unexpected increase in actual program spending or 

projections. Alternatively, it could trigger previously specified changes to 

the program that automatically take effect to reduce spending or increase 

program revenue. 

Insufficient transparency regarding both the expected and actual cost path 

for spending and revenue decisions hampers the ability of decision makers 

to make informed choices. In previous work, we have called for increased 

disclosure and recognition of long-term costs of proposed policies and 

programs.4

 The ability to monitor actual spending paths can also play an 

important role in decisions about both the overall fiscal position and the 

allocation of scarce resources. Moreover, as we reported in 1994, a cap on 

mandatory spending would have little if any effect on the longer-term 

growth trends until and unless issues of underlying program eligibility and 

benefits are addressed.5

 Thus, efforts to constrain growth in mandatory 

programs need to be focused on and tailored to individual programs. One 

way to assess mandatory spending is to analyze growth by examining the 

estimated and actual outlays for each program. Because budget estimates 

can be linked to achieving fiscal responsibility in the government, 

identifying and understanding recurring patterns between mandatory 

account budget estimates and actual results can facilitate future budget 

decisions. 

This report, prepared as part of our basic statutory responsibility for 

monitoring the condition of the nation’s finances, examines issues related 

to using such triggers on mandatory programs. The objectives were to 

(1) determine the feasibility of designing and using trigger mechanisms to 

constrain growth in mandatory spending and (2) provide an analysis of the 

factors that led to differences between estimated and actual outlays in 

seven mandatory budget accounts during fiscal years 2000 through 2004.

This report does not deal with the question of projected costs at the time 

decisions are made but instead with the need for responses when there is 

4

GAO, Fiscal Exposures: Improving the Budgetary Focus on Long-Term Costs and 

Uncertainties, GAO-03-213 (Washington, D.C.: Jan. 24, 2003).

5

GAO/AIMD-94-155.
Page 3 GAO-06-276 Budget Triggers

significant growth. Analogous analyses could be applied to the revenue 

side of the budget (e.g., tax expenditures).

Results in Brief One idea to constrain growth in mandatory programs is to develop triggers 

that, when tripped, prompt a response. A trigger could result in a “hard” or 

automatic response, unless Congress and the President acted to override or 

alter it. Alternatively, reaching a trigger could require a “soft” response, 

such as a report on the causes of the overage, development of a plan to 

address it, or an explicit and formal decision to accept or reject a proposed 

action or increase. By identifying significant increases in the spending path 

of a mandatory program relatively early and acting to constrain it, Congress 

may avert larger financial challenges in the future. However, both in 

establishing triggers and in designing the subsequent actions to be 

triggered, the integrity of program goals needs to be preserved. 

The budget experts we consulted had mixed views of triggers. Some 

expressed strong support for budget triggers. These proponents of triggers 

noted that mandatory spending is currently unconstrained and a 

mechanism that causes decision makers to at least periodically reevaluate 

spending is better than allowing spending to rise unchecked. Others, 

however, expressed considerable skepticism about the effectiveness of 

triggers; many felt they would be circumvented or ignored. For example, 

one expert pointed to “accounting tricks” that have resulted from triggers 

with hard responses, such as when Congress mandated certain costs not be 

counted against spending limits so as to avoid across-the-board cuts. 

Others worried that applying budget triggers to various mandatory 

programs diverts attention from what they see as the real source of the 

nation’s fiscal woes—health care spending. Further, they felt that 

establishing triggers on such programs could mislead the public into 

thinking that the long-term fiscal problem had been addressed, thus 

delaying efforts to appropriately address it. 

Any discussion to create triggered responses and their design must 

recognize that unlike controls on discretionary spending, there is some 

tension between the idea of triggers and the nature of entitlement and other 

mandatory spending programs. These programs—as with tax provisions 

such as tax expenditures—were designed to provide benefits based on 

eligibility formulas or actions as opposed to an annual decision regarding 

spending. This tension makes it more challenging to constrain costs and to 

design both triggers and triggered responses. At the same time, with only 

about one-third of the budget under the control of the annual 
Page 4 GAO-06-276 Budget Triggers

appropriations process, considering ways to increase transparency, 

oversight, and control of mandatory programs must be part of addressing 

the nation’s long-term fiscal challenges.

Ignoring significant growth in mandatory accounts is inconsistent with 

evaluation of programs and their costs. While we appreciate the concerns 

raised by budget experts, we believe that, if carefully designed, budget 

constraint mechanisms such as triggers should be considered as existing 

programs are reexamined or reauthorized and when new programs are 

created. Each program would need to be considered individually to ensure 

that any actions that are triggered preserve program goals. The seven 

mandatory accounts we examined helped inform our thinking about budget 

constraint mechanisms, and we present illustrative examples of how 

growth could be constrained in many of the accounts discussed in 

appendix I.

For seven case study accounts,6 we categorized the reasons provided by 

agencies for differences between estimated and actual outlays during fiscal 

years 2000 through 2004 as the result of (1) legislative changes enacted 

after original estimates were submitted, (2) economic changes such as 

interest and unemployment rates, or (3) technical changes, which is a 

residual category that represents revisions to budget estimates that cannot 

be attributed to legislative or economic factors. Our analysis of the reasons 

for differences between estimated and actual outlays showed that out of 40 

differences, legislative changes7

 were the primary reason for 19, economic 

changes for 7, and technical changes for 13. In one case, it was unclear 

which factors most significantly caused the difference between estimated 

and actual outlays. In many cases, a combination of factors caused the 

differences. 

OMB and agencies responsible for the seven case study accounts either did 

not have comments or provided comments that were clarifying and/or 

technical in nature. These comments were incorporated as appropriate.

6

These seven accounts listed in the Objectives, Scope and Methodology section were 

selected because of the relatively large 5-year average differences between their estimated 

and actual outlays. 

7

Both the Congressional Budget Office (CBO) and the Office of Management and Budget 

(OMB) estimate the cost of bills that affect mandatory spending.
Page 5 GAO-06-276 Budget Triggers

Background BEA8

 divided federal spending into two broad categories: discretionary 

and mandatory. Discretionary spending refers to outlays from budget 

authority that is provided in and controlled by appropriation acts; it can 

and has been controlled through annual, adjustable dollar limits (spending 

caps) that permanently lower the base for future appropriations. 

Mandatory spending9

 refers to outlays resulting from budget authority that 

is provided in laws other than appropriation acts, for example, entitlement 

programs such as Medicare, Food Stamps, and veterans’ pensions. 

Mandatory spending—like tax expenditures—is governed by eligibility 

rules and benefit formulas, which means that funds are spent as required to 

provide benefits to those who are eligible and wish to participate. 

Therefore, unforeseen events such as changes in the economy or additional 

demands for services can translate into unanticipated additional program 

outlays. Congress controls spending for these programs indirectly by 

defining eligibility and setting the benefit or payment rules rather than 

directly through appropriation acts. On an annual basis, however, 

mandatory spending is relatively uncontrollable since Congress and the 

President must change substantive law in order to further increase or 

decrease outlays. This makes it more challenging to constrain costs and to 

design both triggers and triggered responses.

Over the past 4 decades, we have seen mandatory spending grow as a share 

of the total federal budget. For example, figure 1 shows that spending on 

mandatory programs rose from approximately 42 percent of total federal 

spending in 1984 to about 49 percent in 1994, and to 54 percent in 2004. 

This growth is projected to continue with mandatory programs claiming 

about 58 percent of total federal spending in 2010. 

8

BEA amended the Balanced Budget and Emergency Deficit Control Act of 1985, sometimes 

referred to as the Gramm-Rudman-Hollings Act. In this report, the amended Balanced 

Budget and Emergency Deficit Control Act of 1985 is referred to as the Budget Enforcement 

Act, or BEA.

9

BEA defined mandatory spending (referred to as “direct spending” in BEA) as spending for 

entitlement authority, the Food Stamp program, and budget authority provided in laws other 

than appropriations acts. Mandatory programs include familiar benefits and services—

among them Social Security, Food Stamps, and Medicare—as well as other lesser-known 

activities, such as revolving funds and certain activities of the National Park Service, the 

Bureau of Customs and Border Protection, and the federal judiciary. 
Page 6 GAO-06-276 Budget Triggers

Figure 1: Federal Spending for Mandatory and Discretionary Programs

The nation’s long-term fiscal outlook is daunting under many different 

policy scenarios and assumptions. For instance, under a fiscally restrained 

scenario, if discretionary spending grew only with inflation over the next 10 

years and all existing tax cuts expire when scheduled under current law, 

spending for Social Security and health care programs would grow to 

consume over three-quarters of federal revenues by 2040 (see fig. 2). On 

the other hand, if discretionary spending grew at the same rate as the 

economy—measured by Gross Domestic Product (GDP)—in the near term 

and if all tax cuts were extended, federal revenues may just be adequate to 

pay interest on the growing federal debt by 2040 (see fig. 3). Numerous 

alternative scenarios can be developed incorporating different 

combinations of possible policy choices and economic assumptions, but 

these two scenarios can be viewed as “bookends” showing a range of 

possible outcomes.

Discretionary

7%

39% 54%

13%

45%

42%

Source: GAO analysis of President’s budget data.

1984

14%

37%

49%

1994 2004

Mandatory Net interest
Page 7 GAO-06-276 Budget Triggers

Figure 2: Composition of Spending as a Share of GDP under Baseline Extended

Note: In addition to the expiration of tax cuts, revenue as a share of GDP increases through 2015 due 

to (1) real bracket creep, (2) more taxpayers becoming subject to the alternative minimum tax (AMT), 

and (3) increased revenue from tax-deferred retirement accounts. After 2015, revenue as a share of 

GDP is held constant. 

Percent of GDP

Fiscal year

All other spending Medicare & Medicaid Social Security Net interest

Source: GAO’s August 2005 analysis.

0

10

20

30

40

50

2004 2015 2040 2030

● ● ●

●

Revenue
Page 8 GAO-06-276 Budget Triggers

Figure 3: Composition of Spending as a Share of GDP Assuming Discretionary Spending Grows with GDP After 2005 and All 

Expiring Tax Provisions Are Extended

Note: Although expiring tax provisions are extended, revenue as a share of GDP increases through 

2015 due to (1) real bracket creep, (2) more taxpayers becoming subject to the AMT, and (3) increased 

revenue from tax-deferred retirement accounts. After 2015, revenue as a share of GDP is held 

constant. 

As both these simulations illustrate, absent policy changes on the spending 

and/or revenue side of the budget, the growth in spending on federal 

retirement and health entitlements will encumber an escalating share of the 

government’s resources. Neither slowing the growth in discretionary 

spending nor allowing the tax provisions to expire—nor both together—

would eliminate the imbalance. Although revenues will be part of the 

debate about our fiscal future, making no changes to Social Security, 

Medicare, Medicaid, and other drivers of the long-term fiscal gap would 

require at least a doubling of taxes—and that seems implausible. 

Accordingly, substantive reform of Social Security and our major health 

programs remains critical to recapturing our future fiscal flexibility. 

These long-term spending projections can largely be attributed to the aging 

population and increased health care costs. This does not, however, mean 

that the rest of the budget should be exempt from review. It is important to 

Percent of GDP

Fiscal year

All other spending Medicare & Medicaid Social Security Net interest

Source: GAO’s August 2005 analysis.

0

10

20

30

40

50

2004 2015 2040 2030

Revenue

● ● ● ●
Page 9 GAO-06-276 Budget Triggers

periodically look at mandatory accounts in order to determine possible 

ways to constrain spending and ensure a more accurate and responsible 

federal budget process. 

Congressional interest in fiscal discipline and the adoption of budget tools 

to control mandatory spending are not new. The Balanced Budget and 

Emergency Deficit Control Act of 1985, commonly referred to as GrammRudman-Hollings (GRH), established declining deficit targets and a 

sequestration procedure to reduce spending if those targets were 

exceeded. GRH was amended several times, most significantly by BEA in 

1990. One important reason for BEA’s success in reducing the deficit during 

the 1990s was that the process enforced a previously reached agreement to 

reduce the deficit. However, recurring surpluses at the end of the decade 

caused a new debate to emerge and undermined the acceptance of BEA’s 

spending caps and PAYGO enforcement. BEA rules were not extended 

beyond their scheduled expiration date at the end of fiscal year 2002. 

In the past, mandatory spending caps were proposed as a way to control 

the growth of mandatory programs. This idea was discussed in a report we 

issued in 1994.10 Mandatory caps fail to address underlying eligibility and 

benefits formulas—which drive spending. In addition, if caps were imposed 

in the context of a control requiring across-the-board spending cuts, they 

would present agencies with difficulties in successfully reducing their 

program spending to stay within limits, and perhaps lead to a cycle of 

continual sequestrations. This difficulty is because in such a regime, any 

shortfalls in savings or growth in spending that occurred despite agency 

efforts would be added to the amount of cuts required in the next year. 

Moreover, the mandatory programs that would be most affected by a cap—

because of their high and/or volatile growth rates—are also the programs 

for which a cap would be hardest to implement. 

In the mid-1990s, there was a period when the idea of constraining greaterthan-expected growth through the use of triggers surfaced. However, it 

coincided with a period when actual growth generally was less than 

expected. Recently, with the reappearance of large deficits, there has been 

a resurgence of interest in restoring budget controls and containing the 

growth in both discretionary and mandatory spending. For example, in 

10GAO/AIMD-94-155.
Page 10 GAO-06-276 Budget Triggers

2005, numerous bills to reinstate fiscal discipline were proposed.11 

Moreover, in May 2005, OMB issued a memo to agencies that required them 

to propose offsets to any administrative action that would increase 

mandatory spending. 

Budget estimates and actual outlays are determined over a period that 

spans nearly 2 years: from the time the President’s budget is formulated, 

about a year before the start of the fiscal year in question, to the 

completion of that fiscal year. Within this 2-year lag period between 

original estimates and actual outlays, legislative, economic, and technical 

factors can affect program outlays. Budget estimates are revised part way 

through the fiscal year and included in the budget request for the following 

fiscal year. These revisions reflect updated technical and economic 

assumptions as well as any legislative changes. Also, midsession reviews 

conducted during the summer, usually in July, update budget estimates 

prior to the completion of the fiscal year. In addition, both CBO and OMB 

estimate the cost of bills that affect mandatory spending. 

Objectives, Scope, and 

Methodology

The objectives of this study were to (1) determine the feasibility of 

designing and using trigger mechanisms to constrain growth in mandatory 

spending and (2) provide an analysis of the factors (legislative, economic, 

and technical) that led to differences between estimated and actual outlays 

in seven mandatory budget accounts during fiscal years 2000 through 2004. 

This second objective contributed to our understanding of programs, 

helped us better appreciate the reasons behind growth in mandatory 

accounts that experienced relatively large dollar changes, and more fully 

informed our thinking about triggers.

To accomplish our first objective, we performed a literature search on 

mechanisms to constrain mandatory spending and had discussions with 

numerous budget experts from OMB, CBO, the Senate Budget Committee 

staff, and various policy research organizations. Based on our research, 

interviews at agencies, and discussions with experts, we then considered 

possible approaches for budgetary constraint within each account. 

To accomplish our second objective we extracted from OMB’s budget 

database mandatory outlays of accounts where 50 percent or more of the 

11Examples of these 2005 bills include S. 19, S. 568, H.R. 523, H.R. 903, and H.R. 2290.
Page 11 GAO-06-276 Budget Triggers

outlays were mandatory. We analyzed these data for fiscal years 2000 

through 2004. To determine the estimated and actual outlays for each year, 

we used the original budget estimate and the actual outlays reported 2 

years later, after the end of the fiscal year. For example, when determining 

the difference between estimated and actual outlays for fiscal year 2000, 

we compared the fiscal year 2000 budget estimates published in February 

1999 to the actual outlays published in February 2001.

From the 534 accounts with outlays at least half mandatory, we selected the 

top 10 accounts that experienced the greatest average dollar change 

between original estimate and actual outlays in absolute value terms for 5 

fiscal years (2000–2004). The complete list of these accounts is included as 

appendix III. These 10 accounts, which represent approximately 50 

percent of total average mandatory outlays, include (1) Interest on 

Treasury Debt Securities, (2) Unemployment Trust Fund, (3) Commodity 

Credit Corporation Fund,12 (4) Federal Supplementary Medical Insurance 

Trust Fund (Medicare Part B), (5) Federal Hospital Insurance Trust Fund 

(Medicare Part A), (6) Grants to States for Medicaid,13 (7) Rail Industry 

Pension Fund, (8) Federal Direct Student Loan Program (FDLP) Account, 

(9) Payments to Health Care Trust Funds, and (10) Mutual Mortgage 

Insurance Program Account (MMI). Because many of the programs we 

selected are relatively big, large dollar increases may represent small 

percentage increases relative to program size.

After initial analysis, we excluded three of these accounts from further 

analysis: Interest on Treasury Debt Securities, MMI,14 and Payments to 

Health Care Trust Funds. We eliminated the U.S. Treasury account because 

interest payments are a function of all other funding decisions and thus 

12Given the size and breadth of programs covered by the Commodity Credit Corporation, we 

selected two programs within the large account: corn and crop disaster assistance. 

13Although the source of Medicaid funding is through an annual appropriation act, Medicaid 

is not considered a discretionary spending program. Because Medicaid is an entitlement 

created by the operation of law, if Congress fails to appropriate money necessary to fund 

payments and benefits, eligible recipients may seek legal recourse. In such case, necessary 

payments may be made through the indefinite judgment fund pursuant to 31 U.S.C. § 1304.

14For more information on MMI, see GAO, Mortgage Financing: FHA’s $7 Billion 

Reestimate Reflects Higher Claims and Changing Loan Performance Estimates, GAO-05-

875 (Washington, D.C.: Sept. 2, 2005).
Page 12 GAO-06-276 Budget Triggers

provide little insight into trigger design.15 We excluded the MMI account 

because the program itself is discretionary—only the large mandatory 

reestimates of its credit subsidy required by the Federal Credit Reform Act 

of 1990 caused it to fall into our original sample. Because decisions about 

the size of this program are annually made in the appropriations process 

and can be informed by the reestimates of previous years’ loans, there is no 

need for separate triggers. Finally, we excluded the Payments to Health 

Care Trust Funds account because the payments are classified as 

intragovernmental transfers and therefore do not affect overall budget 

outlay data. Moreover, these transfers are captured within other accounts 

in our sample.

Figure 4 below shows the 5-year average difference between estimated and 

actual mandatory outlays in absolute value terms for the seven accounts 

we reviewed. These differences ranged from $9.4 billion in the 

Unemployment Trust Fund to $2.6 billion in FDLP. 

15In addition, these interest payments must be made in order to avoid a default on the 

federal government’s debt obligations.
Page 13 GAO-06-276 Budget Triggers

Figure 4: Five-Year Average Differences between Estimated and Actual Mandatory 

Outlays, Fiscal Years 2000 through 2005

To gain more perspective on what factors contributed to the differences 

between estimated and actual outlays in the remaining seven accounts, we 

met with officials from the cognizant agencies to determine if the reasons 

behind the differences were (1) legislative, (2) economic, (3) technical, or a 

combination of the three. We did not independently verify the explanations 

agencies provided for differences.

Our work was done between May 2005 and January 2006 in Washington, 

D.C., in accordance with generally accepted government auditing 

standards.

0

1

2

3

4

5

6

7

8

9

10

Billions of dollars, absolute value

Source: GAO analysis of President’s budget data.

Selected mandatory budget accounts

Federal Direct Student

Grants to States for

Rail Industry

Federal Supplementary

Federal Hospital Insurance

Commodity Credit 

Unemployement Trust Fund

Corporation

Trust Fund

Trust Fund

Medical Insurance

Medicaid

Pension Fund

Loan Program Fund

9.4

2.6

4.0 4.2

6.4

5.6

6.9
Page 14 GAO-06-276 Budget Triggers

Trigger Mechanisms 

Could Help Constrain 

Mandatory Spending 

but Must Be Carefully 

Designed

The purpose of a budget trigger is to either automatically cause some 

action to occur or to prompt decision makers to evaluate and consider 

responding to rising costs. For example, where differences between 

expected and actual growth in a program exceed a specified amount, 

Congress could decide explicitly—by voting—whether to accept the 

slippage or could take action to bring the spending path closer to the 

original goal by recouping some or all of the slippage through changes in 

the program. Our background research, work in case study agencies, and 

discussions with budget experts highlighted several issues to consider 

when designing triggers and their resulting actions, such as the extent of 

agreement among decision makers about underlying fiscal goals, measures 

selected to trip the trigger, and the triggered response.

While a budget process can surface important issues, it is not a substitute 

for substantive debate—no process can force agreement where one does 

not exist. Accordingly, the success of any effort to constrain growth 

depends on whether there is widespread agreement on the underlying 

goals; absent such agreement, any trigger would likely be circumvented. 

For example, underlying the successful budget enforcement mechanisms 

embodied in BEA was the broadly accepted goal of deficit reduction and an 

agreement on a specific set of legislative changes to reach that goal. Its 

triggers were centered around measures that Congress could control—

discretionary spending caps and changes to entitlement and tax laws. 

However, once the budget moved into surplus in the late 1990s and there 

was no longer agreement on fiscal goals, actions were taken to bypass BEA 

controls. For example, the consolidated appropriations acts for both fiscal 

years 2000 and 2001 mandated that OMB change the PAYGO scorecard 

balance to zero. Both OMB and CBO estimated that without instructions to 

change the scorecard, sequestrations would have been required in 2001. 

Other countries we have studied have sought to address national priorities 

by developing explicit goals to guide fiscal policy and justifying their goals 

with compelling rationales that often pointed out the potential fiscal and 

economic benefits of budgetary discipline. In a 2000 report,16 we noted that 

having fiscal goals anchored by a rationale that is compelling enough to 

make continued restraint acceptable is critical to sustain support for 

budgetary discipline. 

16GAO, Budget Surpluses: Experiences of Other Nations and Implications for the United 

States, GAO/AIMD-00-23 (Washington, D.C.: Nov. 2, 1999).
Page 15 GAO-06-276 Budget Triggers

Issues to Consider in 

Constructing a Trigger

One of the reasons for the success of BEA was its link to congressional 

action.17 Discretionary spending caps and PAYGO constrained 

congressional action—BEA held Congress accountable only for things it 

could control and not for the effect of economic or technical factors on 

spending or revenues. This was both the strength and the limitation of 

PAYGO. Triggers seek to go beyond the PAYGO regime by subjecting 

program growth to scrutiny even where that growth is the result of 

economic, population, or other factors outside congressional control. 

Triggers recognize that even the best estimates can turn out to be wrong 

and that decision makers who expected one path might wish to consider 

changes in a program where the path is significantly different from what 

was anticipated.

In general, there are two types of responses to budget triggers—soft and 

hard—depending on what type of action results when the trigger is tripped. 

A “soft” response prompts special consideration of a program or a proposal 

for action when a certain threshold or target is breached. Examples of soft 

responses that could be triggered include requiring the administering 

agency to prepare a special report explaining why the trigger’s threshold 

was breached, or requiring the President to submit a proposal for reform. 

An example of a soft response already exists in the Medicare program, 

which requires the President to submit a proposal to Congress for action if 

the Medicare Trustees determine in 2 consecutive years that the general 

revenue share of Medicare spending is projected to exceed 45 percent 

during a 7-year period.18 In addition, a few Social Security reform 

proposals have included language requiring presidential and congressional 

action if the Social Security Board of Trustees determines that the balance 

ratio of either of the Social Security trust funds will be zero for any 

calendar year during the succeeding 75 years.19 

17As discussed earlier, BEA established pay-as-you-go (PAYGO) rules to ensure that 

legislation affecting direct spending and revenues was budget-neutral in each session of 

Congress. In addition, annual discretionary spending limits were established.

18For the purpose of the Medicare trigger, general revenue is defined as the difference 

between Medicare program outlays and dedicated Medicare financing sources. Dedicated 

Medicare financing sources are HI payroll taxes, the HI share of income taxes on Social 

Security benefits, state transfers for Part D prescription drug benefits, premiums paid under 

Parts A, B, and D, and any gifts received by the trust funds.

19Recently, this provision was included in the Bipartisan Retirement Security Act of 2005, 

H.R. 440, 109th Cong. § 14 (2005). 
Page 16 GAO-06-276 Budget Triggers

Soft responses can help in alerting decision makers of potential problems 

but they do not ensure that action to decrease spending or increase 

revenue is taken. With soft responses, the fiscal path continues unless 

Congress and the President take action. In contrast, a trigger could lead to 

“hard” responses requiring a predetermined, program-specific action to 

take place, such as changes in eligibility criteria and benefit formulas, 

automatic revenue increases, or automatic spending cuts. With hard 

responses, spending is automatically constrained, revenue is automatically 

increased, or both, unless Congress takes action to override. Figure 5 

below illustrates the conceptual differences between hard and soft 

responses of a budget trigger.

Figure 5: Conceptual Differences between Hard and Soft Responses

In establishing triggers, both near- and long-term perspectives need be 

considered. For some programs it might be appropriate to tie triggers to 

historical data. For example, unexpected spending growth in student loans 

might be measured against past historical spending data. However, for 

other programs that expose the government to long-term commitments—

such as Medicare or Social Security—it might be more appropriate to tie 

the trigger to projections of future spending. Social Security, however, 

represents a large long-term commitment of future resources. Thus, 

growth for this program might be measured against changes in actuarial 

projections of Social Security’s 75-year outlook. Such an approach could 

be used for other programs with long-term commitments, such as pension 

insurance, if good long-term projections become available.

Source: GAO analysis.

Hard Response

• Automatic, program-specific 

spending cuts

• Automatic revenue increases

• Changed eligibility criteria or benefit 

 formulas

Soft Response

• Points of order

• Agency reports

• Proposals to change spending path

Trigger Response
Page 17 GAO-06-276 Budget Triggers

Since all estimates are subject to some uncertainty, the triggering 

mechanism should not be so tight that it is overly sensitive to normal 

variation in budget estimation. One way to address this concern is to 

establish a normal or expected range of budget uncertainty and set a trigger 

level that falls outside this range. For example, if a program’s actual 

outlays historically fall within plus or minus 5 percent of estimated outlays, 

a trigger set at a level greater than 5 percent would best signal unexpected 

growth. This approach resembles one CBO uses for certain programs to 

analyze the budgetary effects of legislative proposals.20 Using a 

probabilistic model, CBO estimates the weighted average of the effects 

associated with all possible sets of circumstances, taking into account their 

respective probabilities. Such an approach could be adapted to establish a 

range of uncertainty around a budget estimate.

Triggers also could be used to ensure that policy changes actually achieve 

intended reductions in spending growth. Such triggers could address 

concerns that some budget constraint mechanisms create the false 

impression that long-term problems have been addressed. 

Although any hard response can be overridden by congressional action, it 

could be important to incorporate a more automatic escape clause into 

budget enforcement mechanisms such as triggers. Effective budget 

enforcement mechanisms need to be able to accommodate changing 

budget policy and political environments in which future outcomes are 

difficult to predict. For example, periods of economic growth may be brief 

or sustained, but inevitably are followed by periods of economic downturn 

that may be shallow or deep. Escape mechanisms, such as expiration 

dates, allow budget policies and procedures to be renegotiated later. In 

addition to expiration dates, House or Senate rules can provide flexibility. 

For example, any Senator may raise a point of order against legislation 

violating PAYGO rules prohibiting consideration of revenue or direct 

spending legislation that is not deficit-neutral. However, the point of order 

20CBO uses probabilistic modeling when the possible cost of a legislative proposal is not 

distributed symmetrically around a single, most likely outcome. For example, under 

marketing loan programs, low crop prices yield large costs to the government with farmers 

paying back loans at the lower market price rather than the higher loan rate. However, high 

crop prices provide no offsetting gains because farmers may simply repay their loans at the 

original loan rate. For more information, see CBO, Estimating the Costs of One-Sided Bets: 

How CBO Analyzes Proposals with Asymmetric Uncertainties (Washington, D.C.: Oct. 

1999).
Page 18 GAO-06-276 Budget Triggers

may be waived if there is broad consensus on the need to do so—that is, if 

there is an affirmative vote of three-fifths of the membership. 

Although they provide important flexibility, escape clauses can be 

overused. For example, in fiscal year 2002, the Department of Defense and 

Emergency Supplemental Appropriations Act21 instructed that $130.3 

billion in costs be eliminated from the PAYGO scorecard. Both OMB and 

CBO estimated that without instructions to change the scorecard, a 

sequester—across-the-board spending cuts—would have been required in 

2002. In addition, many programs were exempt from PAYGO’s 

sequestration requirement. These exemptions meant that the full brunt of 

any sequester was concentrated in the remaining programs, resulting in 

cuts so draconian that Congress and the President changed the targets 

rather than impose the required cuts. 

Issues to Consider in 

Designing the Triggered 

Response

Whether a triggered response is soft, hard, or a combination of the two, 

efforts to constrain growth in mandatory programs need to be focused at 

the program level. The experience with GRH highlights the importance of 

individually designed triggers and responses. The deficit-neutrality targets 

under GRH triggered a hard response—across-the-board spending cuts—if 

they were not met. The deficit targets under GRH were not achieved due to 

the inability of Congress and the President to control all of the factors—

mainly economic factors—that affected whether the trigger would be 

breached and their unwillingness to accept the across-the-board cuts that 

would have been necessary to meet the deficit targets. 

In developing program-specific triggers and responses, proposed changes 

in underlying benefits structure and design of mandatory programs can be 

considered in the context of the factors that drove the growth and the goals 

and objectives of specific programs. For example, certain programs such 

as unemployment insurance and crop assistance are designed and intended 

to have a countercyclical effect on the economy. That is, they are aimed at 

reducing the size and duration of swings in economic activity in order to 

keep economic growth closer to a pace consistent with low inflation and 

high employment. Thus, a triggered response in these programs needs to 

be sensitive to whether growth is being driven by automatic budget 

21Department of Defense and Emergency Supplemental Appropriations for Recovery from 

and Response to Terrorist Attacks on the United States, 2002, Pub. L. No. 107-117, Div. C, § 

102, Jan. 10, 2002.
Page 19 GAO-06-276 Budget Triggers

stabilizers. For example, a rise in the unemployment rate would by design 

increase outlays in federal unemployment insurance not only to provide 

assistance to the unemployed but also to stabilize the economy. If a trigger 

were established that resulted in a contractionary response, it could 

undermine these important goals and exacerbate the effects of 

unemployment on the economy. In a January 2002 report,22 the 

Congressional Research Service (CRS) suggested one option to avoid 

procyclical triggers would be to delegate to some entity—for instance 

Congress or an executive department—the responsibility for evaluating 

each year whether deteriorating economic conditions would make a trigger 

detrimental. If conditions were found to be deteriorating, decisions would 

need to be made about whether and how to implement any reduction. CRS 

acknowledged, however, that this type of proposal could be criticized on 

the grounds that it is based on a subjective decision and thus could be prey 

to the sort of political pressures that critics fear would undermine a trigger. 

Indeed, one budget expert we met with expressed concern that in devising 

a budget trigger, it would be helpful to acknowledge political pressures by 

considering who would judge progress against the trigger and the neutrality 

of the judging entity.

The programs and agencies we reviewed have objectives and missions that 

contribute to the achievement of public policy goals such as income 

security, feeding the nation, fostering higher education, and providing 

health care. To these ends, these programs are designed to provide 

entitlements—benefits and assistance—to eligible recipients. While 

striving to meet these commitments, our nation is faced with a daunting 

long-term fiscal outlook based on the challenges of an aging population, 

unsustainable deficits, and mounting debt while also ensuring truth and 

transparency. Figure 6 depicts the inherent tension in balancing public 

policy goals and long-term fiscal challenges. 

22CRS, Fashioning a Tax Cut Trigger: Economic Issues, Order Code RL30948 (Washington, 

D.C.: Updated Jan. 29, 2002).
Page 20 GAO-06-276 Budget Triggers

Figure 6: Balancing Public Policy Goals and Long-term Fiscal Challenges 

Addressing this tension invariably entails difficult political choices among 

competing programs that promise benefits to many Americans but are 

collectively unaffordable and unsustainable at current revenue levels. In 

February 2005 we highlighted the size of fiscal imbalances looming in the 

future and the challenge of our policy process to act with more foresight to 

take early action on problems that may not constitute an urgent crisis but 

pose important longer-term threats to the nation’s fiscal, economic, 

security, and societal future.23 Budget triggers are mechanisms that can 

encourage and facilitate such action. 

23GAO-05-325SP.

Source: GAO analysis and PhotoDisc (images).

Public 

policy goals

Income security

Feeding the nation

Higher education

Health care

Aging population

Unsustainable deficits

Mounting debt

Long-term

fiscal

challenges
Page 21 GAO-06-276 Budget Triggers

To help us better consider the implications of establishing triggers, we 

looked at seven mandatory accounts with relatively large differences 

between estimated and actual outlays: Commodity Credit Corporation 

(CCC), Federal Direct Student Loan Program Account, Grants to States for 

Medicaid, Federal Hospital Insurance (HI) Trust Fund (Medicare Part A), 

Federal Supplementary Medical Insurance (SMI) Trust Fund (Medicare 

Part B), Rail Industry Pension Fund, and the Unemployment Trust Fund. 

We explored ways in which existing triggers and their corresponding 

actions could be revised, as well as an array of new trigger mechanisms 

that take into consideration the issues just discussed and could be adopted 

to promote better budgeting in light of the nation’s long-term fiscal outlook. 

It is important to consider the data upon which the trigger will hinge—

future projections based on historical data, growth as a percent of GDP, 

total growth, or another measure altogether. For example, Congress has 

established a trigger to constrain growth in Medicare spending for 

physicians’ services. The sustainable growth rate (SGR) is a statutorily set 

formula that estimates the allowed rate of increase in spending for 

physicians’ services; that rate is used to construct the spending target for 

the following calendar year. If actual spending exceeds the cumulative SGR 

targets, fee updates in future years must be lowered sufficiently both to 

offset the accumulated excess spending and to slow expected spending for 

the coming year.24 The Medicare Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA) established another trigger—the general 

revenue share of Medicare spending. If the Medicare Trustees determine in 

2 consecutive years that the general revenue share is projected to exceed 

45 percent during a 7-year projection period, the President must submit a 

proposal to Congress for action. To date, this threshold has not been 

breached and thus no response has been triggered. However, Medicare 

Trustees are expected to determine the first breach in their upcoming 2006 

report as the trigger is projected to be tripped in 2012, which falls within 

the 7-year projection period captured in that report. For unemployment 

insurance, a trigger was established around balances in the Unemployment 

Trust Fund. When funds accumulating in federal unemployment accounts 

reach statutorily set limits, a distribution of the “excess” funds from the 

24Although the SGR was designed to encourage fiscal discipline, administrative and 

legislative actions modified or overrode the SGR system, resulting in fee increases for 2003, 

2004, and 2005. For more information on this, see GAO, Medicare Physician Payments: 

Concerns about Spending Target System Prompt Interest in Considering Reform, GAO-05-

85 (Washington, D.C.: Oct. 8, 2004).
Page 22 GAO-06-276 Budget Triggers

trust fund to individual states’ accounts—called “Reed Distributions”25—

are automatically triggered based on each state’s share of covered wages. 

One way to constrain federal spending would be to increase the statutory 

cap on federal unemployment accounts, thus making it more difficult to 

trigger Reed Distributions to states. By making it more difficult to trip the 

trigger, funds could continue to build during economic prosperity and be 

available to states when truly needed to counter rising unemployment.

Our analysis allowed us to develop a list of illustrative examples, which 

analyze the related trade-offs involved in balancing restraint with 

optimization of program goals. These are shown in appendix I, along with a 

brief description of the program and account. Finally, where appropriate 

we present illustrative examples of hard responses that could be 

established to constrain spending. We do not specifically advocate any of 

these approaches—they are presented for illustrative purposes only to 

provide a sense of the types of trigger and resulting actions that could be 

established. Although the illustrative examples we developed apply 

specifically to the seven case study accounts that we reviewed, we believe 

the information can further the larger policy conversation about how to 

increase oversight of the path of mandatory spending and advance and 

encourage budgetary discipline. 

Expert Views on Trigger 

Mechanisms Are Mixed 

We interviewed budget experts from OMB, CBO, the Senate Budget 

Committee staff, and various policy research organizations to discuss 

views on using triggers to constrain mandatory spending. Overall, views 

were mixed. While some were more in favor of triggers than others, many 

expressed concern that they would be circumvented or ignored, thereby 

questioning their effectiveness. In addition, many were concerned that 

triggers could jeopardize the underlying intent of mandatory programs. 

Several experts also pointed to the need to ensure that any triggers 

developed be carefully designed to avoid procyclical effects. 

Some of the experts expressed strong support for budget triggers. These 

individuals believed that triggers with hard responses had the potential to 

constrain mandatory spending and that the accountability added by 

triggers would be preferable to the current unconstrained environment. 

25States may keep Reed Distributions in their trust funds or appropriate the money for 

administrative costs. Because state funds are held by the U.S. Treasury, they are not 

recorded as an outlay until the states distribute the funds.
Page 23 GAO-06-276 Budget Triggers

For example, one expressed concern about the debt burden being 

permitted to mount for future generations in order to avoid the reduction in 

benefits or increase in taxes needed to finance current benefits. Linking 

revenues and spending with GDP, she argued, would help avoid such 

generational inequities. Another added that under current policy, spending 

grows automatically, by default, faster than tax revenues as the population 

ages and health costs soar. He argued that only by changing the budget’s 

autopilot programming can we gain the flexibility needed to continually 

improve government policies and services.

Others, however, said that triggers reduced accountability because they 

enable decision makers to publicly extol budget constraint but quietly 

continue to increase spending. One pointed to “accounting tricks” that 

have resulted from triggers with hard responses, such as when Congress 

mandated certain costs not be counted against spending limits so as to 

avoid across-the-board cuts. However, as discussed previously, triggers 

also could be used to ensure that policy changes actually achieve intended 

reductions in spending growth. Such triggers could address concerns that 

some budget constraint mechanisms create the false impression that longterm problems have been addressed. 

Many expressed skepticism that budget constraint mechanisms such as 

triggers would be adhered to; one cited Medicare’s SGR as an example. The 

SGR system is designed to apply financial brakes whenever actual spending 

for physicians’ services exceeds predefined spending targets. It does this 

by reducing physician fees or limiting their annual increase. Because the 

actual versus target spending comparison is cumulative, future fee updates 

are reduced to lower future actual spending below future target spending 

until total cumulative actual spending is the same as total cumulative target 

spending. However, fee declines were averted for 2003, 2004, and 2005 by 

administrative and legislative actions that modified or overrode the SGR 

system.

Some experts worried that applying budget triggers to various mandatory 

spending programs would divert attention from the real source of the 

nation’s fiscal woes—health care—whose costs continue to rise faster than 

GDP. They pointed to CBO data as evidence that, outside of health care and 

to a lesser extent Social Security, virtually all other mandatory programs 

are decreasing or holding steady as a percent of GDP. Accordingly, they 

expressed concern that establishing triggers on such programs could 

mislead the public into thinking that the long-term fiscal problem had been 

addressed, thus delaying efforts to appropriately address it.
Page 24 GAO-06-276 Budget Triggers

Many of the budget experts raised concerns about triggers jeopardizing the 

important underlying missions and program goals financed by mandatory 

accounts. In particular, concerns were raised about undermining 

countercyclical effects of programs such as unemployment insurance, 

Food Stamps, and the Earned Income Tax Credit. Some noted that the 

desire to preserve program goals is the reason why triggers with hard 

responses have not worked in the past. With respect to the SGR, for 

example, one expert explained that the reason Congress overrides the 

trigger is to ensure doctors do not stop accepting Medicare patients. 

Finally, a couple of experts pointed out that triggers need not only apply to 

spending; the revenue side of the budget should also be addressed. One 

noted, for example, that an increase in taxes to cover spending growth 

would increase visibility to the public and thus permit the American people 

to be more aware of how much they are paying for services. Applying 

triggers to tax cuts was an issue considered in 2001 when the budget was in 

surplus and tax cuts were proposed. For example, Federal Reserve 

Chairman Greenspan at that time expressed his preference for a trigger 

that would make tax cuts contingent on the realized net debt level. 

Comptroller General Walker also raised the possibility of using a trigger to 

return a “surplus dividend” if actual surpluses occurred in excess of 

specific levels. Ultimately, however, triggers were not adopted. Instead, 

tax cuts were enacted through 2010 even though substantial deficits have 

reappeared. In addition, as we reported in a February 2005 testimony,26

there has been an extensive use of tax incentives, rather than direct 

spending authority, to fund social objectives. As we reported in September 

2005,27 the sum of revenue loss estimates associated with tax 

expenditures—such as tax exclusions, credits, and deductions—was nearly 

$730 billion in 2004.28 Many tax expenditures operate like mandatory 

spending programs and generally are not subject to reauthorization. Such 

tax expenditures are embedded in the tax system and are off the radar 

screen for the most part. This is a concern from a budgetary standpoint 

because federal dollars committed to fund these expenditures do not 

26GAO, Long-Term Fiscal Issues: Increasing Transparency and Reexamining the Base of 

the Federal Budget, GAO-05-317T (Washington, D.C.: Feb. 8, 2005).

27GAO, Government Performance and Accountability: Tax Expenditures Represent a 

Substantial Federal Commitment and Need to Be Reexamined, GAO-05-690 (Washington, 

D.C.: Sept. 23, 2005).

28Summing tax expenditure estimates does not take into account interactions between 

individual provisions.
Page 25 GAO-06-276 Budget Triggers

compete in the annual appropriations process and are effectively “fully 

funded” before any discretionary spending is considered. The analysis we 

applied to spending in this report would also be useful in examining tax 

expenditures. However, challenges in defining and measuring tax 

expenditures, to some extent, would affect any effort to curtail revenues 

foregone through tax expenditures. For example, after taxpayers have 

taken advantage of tax expenditures, the federal government still may not 

know, with much certainty, how much tax revenue was foregone, who 

benefited, and what results were achieved.29

Reasons for 

Differences between 

Estimated and Actual 

Outlays in Selected 

Accounts Varied

To better appreciate the reasons behind growth in mandatory accounts and 

thus inform our thinking on triggers, we examined the reasons for 

differences between originally estimated and actual outlays for seven 

mandatory accounts that experienced relatively large dollar changes.30

Based on agencies’ explanations of differences between estimated and 

actual outlays of the case study accounts we examined, we found that 

legislation enacted after original estimates were submitted was the primary 

driver in 19 out of 40 differences during fiscal years 2000 through 2004. 

Economic factors, such as changes in interest and unemployment rates, 

were primarily responsible for 7 differences. Finally, technical factors, 

which cover a broad spectrum, most significantly drove 13 out of 40 

differences. In one case, it was unclear which factors most significantly 

caused the difference between estimated and actual outlays. In many 

cases, a combination of factors resulted in differences. 

In categorizing agencies’ explanations for differences between estimated 

and actual outlays, we applied criteria similar to those that CBO uses in its 

annual budget and economic outlook reports to categorize changes as 

legislative, technical, and economic. However, in our report, legislative 

action was classified in a somewhat different manner from the method that 

CBO applies. Whereas we examined the actual budgetary effect that 

resulted from the legislation, CBO projects the anticipated future 

29For additional details, see GAO, Tax Policy: Tax Expenditures Deserve More Scrutiny, 

GAO/GGD/AIMD-94-122 (Washington, D.C.: June 3, 1994).

30Given this report’s focus on constraining growth in mandatory spending, our analysis 

focused more on underestimates than overestimates of actual outlays.
Page 26 GAO-06-276 Budget Triggers

budgetary effect of legislation.31 Figure 7 describes the criteria that we 

applied to categorize agencies’ explanations into three factors. While this 

framework is helpful in evaluating changes in the federal budget, it is not 

precise and should be viewed as indicative as opposed to determinative.

Figure 7: Factors Affecting Budget Estimates

Table 1 summarizes the factors—legislative, economic, and technical—that 

most significantly resulted in differences between estimated and actual 

outlays by fiscal year and account. The factors that were major drivers for 

differences between estimated and actual outlays are denoted with “3.” 

Other factors that affected the difference are denoted with “x.” In one case, 

it was unclear which factors most significantly caused the difference 

between estimated and actual outlays. In that case, both relevant factors 

are marked with an “x.” Detailed explanations supporting this summary 

are presented in appendix I. 

31If a new law has effects that differ from those reflected in CBO’s initial estimate, the 

differences will appear as technical “reestimates” in later revisions to the baseline.

• Legislative: Refers to any legislative action that (1) was enacted after the time that

 original budget estimates were submitted in a given fiscal year and (2) proved to

 have a direct effect on account outlays within the time period we reviewed.

• Economic: Includes changes that are driven by the economy (e.g., inflation, 

 interest rates, real GDP, market prices, and the unemployment rate).

• Technical: Includes changes related to legislation that was passed prior to the 

 formulation of original budget estimates, revisions to estimation models, some

 factors related to the performance of the economy (e.g., capital gains realizations), 

and any other changes that were not clearly driven by subsequent legislation or 

 changes in the economic forecast.

Source: GAO analysis.
Page 27 GAO-06-276 Budget Triggers

Table 1: Reasons for Differences between Estimated and Actual Outlays

Account Fiscal year

Reason for differences

Legislative Economic Technical

Commodity Credit Corporation—Corn 2000 3 x

2001 3 x x

2002 3

2003 3 x

2004 3 x

Commodity Credit Corporation—Crop Disaster 

Assistance

2000 3

2001 3

2002 3

2003 3

2004 3

Federal Direct Student Loan Program Account 2000 3

2001 3 x

2002 3 x

2003 3 x

2004 3

Grants to States for Medicaid 2000 3

2001 3

2002 3

2003 3 x

2004 3 x

Medicare Part A—Federal Hospital Insurance Trust 

Fund

2000 3

2001 3

2002 3

2003 x x

2004 3 x

Medicare Part B—Federal Supplementary Medical 

Insurance Trust Fund

2000 3

2001 3

2002 3

2003 3 x x

2004 3 x
Page 28 GAO-06-276 Budget Triggers

Source: GAO analysis of agencies’ explanations of differences between estimated and actual outlays.

Note: Factors that were major drivers for the difference between estimated and actual outlays are 

denoted with “3.” Other factors that affected the difference are denoted with “x.” In one case, it was 

unclear which factors most significantly affected the difference. In that case, both relevant factors are 

marked with an “x.” 

Legislation Enacted After 

Original Estimates 

Explained Many Differences 

between Estimated and 

Actual Outlays

As seen above in table 1, most of the accounts we reviewed were directly 

affected by legislation that was enacted after original estimates were 

developed and significantly contributed to differences between expected 

and actual outlays in 19 out of 40 instances.32 For example, the Temporary 

Extended Unemployment Compensation Act (TEUC) of 2002 led to the 

disbursement of greater-than-expected unemployment benefits. 

Supplemental appropriations for crop disaster assistance and Agricultural 

Market Transition Act payments largely contributed to additional outlays 

that were not assumed in original CCC budget projections. Similarly, the 

MMA and the Railroad Retirement and Survivors’ Improvement Act of 2001, 

respectively, increased Medicare outlays and Rail Industry Pension outlays.

TEUC was enacted to provide up to 13 weeks of federally funded 

unemployment insurance benefits to workers in all states who had 

exhausted their entitlement to regular state unemployment benefits. 

Furthermore, the Act provided up to 13 additional weeks of federally 

funded benefits to workers in states with especially high unemployment 

Rail Industry Pension Fund 2000 3

2001 3

2002 3 x

2003 3 x

2004 3 x

Unemployment Trust Fund 2000 3

2001 3

2002 3 x

2003 3 x

2004 3 x

Total major drivers of differences 19 7 13

(Continued From Previous Page)

Account Fiscal year

Reason for differences

Legislative Economic Technical

32In all cases, CBO had prepared scoring estimates of the legislation. 
Page 29 GAO-06-276 Budget Triggers

rates. Congress renewed this extension in April 2003, which allowed 

qualified individuals to file for federal extensions through December 2003 

and collect on those extensions through December 2004. As a result, 

program outlays exceeded estimates by $7.9 billion in 2002, $11 billion in 

2003, and $4.3 billion in 2004. 

Outlays in both CCC programs that we reviewed also were directly affected 

by subsequent legislative action that occurred after original budget 

estimates were formulated. For example, Crop Disaster Assistance 

programs are funded through supplemental appropriations every year 

throughout the 5-year period that we reviewed, which led to an additional 

total of $6 billion in program outlays. According to OMB officials, the 

Administration prefers not to include estimates in the budget for relatively 

unpredictable disaster-related programs such as crop disaster assistance. 

Instead, such funding is typically initiated by Congress through 

supplemental appropriations.33 Accordingly, for all 5 years we examined, 

no estimates were provided and all of the outlays were as a result of 

supplemental appropriations. 

Legislative action that increased market loss assistance payments to corn 

producers largely contributed to the greatest underestimates of outlays for 

that particular commodity—nearly $9 billion in 2000 and 2001 together. 

These payments were authorized on an ad hoc basis and, in fiscal year 

2000, were paid out for both 1999 and 2000. 

The Consolidated Appropriations Resolution of 2003 provided substantially 

higher Medicare34 payments to physicians than estimated in original budget 

projections and contributed to the largest discrepancy—over $13 billion—

between estimated and actual SMI outlays throughout the 5 years that we 

reviewed. Furthermore, both the HI and SMI trust funds incurred 

unanticipated additional outlays as a result of MMA. Several of the 

provisions under MMA were implemented in 2004 and directly affected that 

year’s outlays; however, officials from the Centers for Medicare & Medicaid 

33Although Crop Disaster Assistance programs are generally funded through supplemental 

appropriations acts, the Department of Agriculture considers and applies funding in a 

manner similar to mandatory programs. According to a Farm Service Agency official, 

funding is provided to all eligible applications for assistance by prorating available funding if 

necessary. OMB also considers Crop Disaster Assistance programs to be mandatory in that 

all eligible applicants may receive benefits. 

34The HI Trust Fund finances Medicare Part A while the SMI Trust Fund finances Medicare 

Part B. 
Page 30 GAO-06-276 Budget Triggers

Services (CMS) said that the largest factors that led to additional HI outlays 

of approximately $4.4 billion and additional SMI outlays of nearly $12.3 

billion were the substantially increased payments to private health plans 

and rural health providers, as well as the increased physician payment 

update—all of which were provided for under MMA.

Finally, the Railroad Retirement and Survivors’ Improvement Act of 2001 

changed a number of benefit and eligibility criteria, which led to a sharp 

rise in retirements. For example, the enactment of this law (1) eliminated 

benefit reductions to early retirees, (2) eliminated the maximum threshold 

on the amount of combined monthly employee and spouse benefit 

payments, (3) lowered the minimum eligibility requirement for railroad 

retirement annuities, and (4) increased benefit payments for widow(er)s. 

Under this legislation, funds in excess of those needed for current benefit 

payments and administrative expenses were transferred to the National 

Railroad Retirement Investment Trust. As a result, rail industry retirements 

increased, and pension fund outlays increased by almost $20 billion in 2002 

and 2003 collectively. 

Economic Factors Were 

Especially Important in 

Some Programs’ Differences

Case study agencies cited economic factors as primary reasons for 

differences between estimated and actual outlays for 7 out of 40 

differences. This was especially true for agricultural commodities, student 

loans, and unemployment insurance. For example, market prices for 

commodities affected federal subsidy payments to farmers, changes in 

interest rates affected revenues received from student loan borrowers, and 

unemployment affected outlays of federal unemployment insurance. 

Economic factors also affected the hospital market basket, which 

contributed to greater-than-expected Medicare outlays.

For CCC’s corn program,35 market prices were both underestimated and 

overestimated over the 5-year period. According to a Department of 

Agriculture (USDA) official, corn prices are extremely volatile and highly 

dependent on weather conditions and global food production. In addition, 

the countercyclical design of federal commodity subsidies results in 

35Federal commodity subsidies essentially consist of three types of payments available to 

supplement farmers’ income: direct payments to historical producers of the commodity, 

countercyclical payments, which provide a safety net in the event of low crop prices, and 

nonrecourse loans, which allow farmers to store production and use loan proceeds to meet 

cash flow needs without selling the crop. 
Page 31 GAO-06-276 Budget Triggers

outlays that are highly sensitive to changes in price. This official explained 

that a 1 cent change in estimated corn prices results in about an $85 million 

change in federal outlays. 

The historically low interest rates that prevailed in recent years were below 

levels previously forecasted, which affected estimated student loan subsidy 

costs. Subsidy cost estimates for FDLP are highly sensitive to changes 

between projected and actual interest rates because borrower interest 

rates are variable. The decline in interest rates resulted in lower-thanexpected interest payments to the government from FDLP borrowers, thus 

increasing reestimated subsidy costs for these loans.36 Concurrently, the 

volume of student consolidation loans, which allow borrowers to lock in 

fixed interest rates, increased as interest rates declined. In consolidating 

their loans, borrowers effectively paid off their underlying loans, thereby 

lowering anticipated interest payments to the government on the loans and, 

in turn, increasing the estimated subsidy costs of the underlying loans.

Discrepancies between estimated and actual unemployment insurance 

outlays are partially attributed to economic factors such as unanticipated 

changes in both the unemployment rate and benefit recipiency rates. For 

example, Department of Labor officials said that most of the outlay 

overestimate in 2000 resulted from a lower-than-expected unemployment 

rate—the ratio of the total number of unemployed individuals to the total 

workforce—which translated into lower-than-expected outlays. In 

subsequent years, the unemployment rate was underestimated and thus 

contributed to greater-than-expected outlays. Inaccurate assumptions 

about the benefit recipiency rates, that is, the ratio of the total number of 

unemployed individuals filing for or receiving benefits to the total number 

of unemployed, further contributed to the agency’s errors in accurately 

estimating program outlays. According to agency officials, these economic 

factors tend to be key drivers affecting budget estimates, albeit to a 

somewhat lesser degree during the timeframe we reviewed given the 

significance of the temporary extended unemployment compensation 

legislation that substantially increased outlays in 2002 through 2004.

36Direct loan subsidy cost is the estimated long-term cost to the government of a direct loan 

excluding administrative costs. It is the net present value of estimated loan disbursements, 

repayments of principal, payments of interest, and other payments by or to the government 

over the life of the loan.
Page 32 GAO-06-276 Budget Triggers

To a lesser extent, economic factors affected Medicare outlays. In 2003, a 

higher-than-expected market basket,37 which is basically a price index 

representing the cost of providing health care services to patients, was part 

of the explanation behind higher-than-originally-estimated Medicare 

outlays, according to CMS officials. This increase in the market basket led 

to greater-than-expected inpatient and outpatient hospital expenditures in 

the HI and SMI funds respectively. 

Technical Factors Explained 

a Broad Spectrum of 

Differences

Technical factors, which encompass a somewhat wide-ranging residual 

category, significantly explained outlay differences in 13 out of 40 

instances. Generally, technical factors account for differences between 

budget estimates and actual outlays that cannot be attributed to legislative 

or economic factors. For example, delayed implementation and difficulty 

in predicting the behavior of providers under new payment systems, an 

increased case mix, and the deferral of adjusting payments for skilled 

nursing facilities utilization led to differences between estimated and 

actual Medicare outlays. Increases in administrative costs and revised 

assumptions of the amount of loan defaults and collections caused some of 

the direct student loan outlays to differ from original estimates. Similar to 

the diversity of the programs we reviewed, there was great variability 

among the technical factors that affected account outlays. 

Actual outlays for both Medicare Parts A and B differed from estimates 

primarily due to a number of technical factors, which accounted for both 

some of the largest and some of the smallest discrepancies. For example, 

the largest discrepancy in the HI fund (Medicare Part A) occurred in fiscal 

year 2000 for which outlays were lower-than-originally estimated by nearly 

$16 billion. According to CMS, the majority of this inaccuracy is attributed 

to lower-than-expected benefit payments as a result of the agency’s 

difficulty in predicting the behavior of providers under newly implemented 

payment systems for skilled nursing facility (SNF) services and home 

health services. CMS officials said that these payment systems were very 

new at the time fiscal year 2000 budget estimates were done and the effect 

of these new systems was unknown. Similarly, SMI outlays were $4.6 billion 

less-than-originally estimated due largely to the delayed implementation of 

37The market basket refers to an input price index that reflects the cost of a particular type 

of health care provider (e.g., hospital, skilled nursing facility, home health agency) to 

provide services to patients. This index is used to update the payments to providers from 

one year to the next.
Page 33 GAO-06-276 Budget Triggers

and unfamiliarity with a new outpatient hospital prospective payment 

system. Other technical factors CMS cited to explain the differences 

between estimated and actual Medicare outlays included case mixes that 

were more complex than expected and deferred payment refinements for 

SNF utilization. Case mix refers to the average complexity of inpatient 

admissions for Medicare beneficiaries. A change in the mix of cases causes 

the amount of benefit payments to change. The deferral of payment 

adjustments for SNF utilization contributed to greater-than-expected 

outlays in both fiscal years 2003 and 2004. These adjustments would have 

reduced payment rates that had previously been increased on a temporary 

basis under the Medicare, Medicaid, and SCHIP Balanced Budget 

Refinement Act of 1999 (BBRA).38 CMS included the budgetary effects of 

these adjustments in their HI estimates for 2003 and 2004, but later decided 

not to implement them citing the need for additional time to review and 

analyze the implications of implementing hospital case mix refinements. 

Differences between estimated and actual outlays for federal direct student 

loans were most frequently explained by technical factors, including 

revised assumptions in the Department of Education’s loan subsidy model, 

increased administrative costs, and Congress’s decision not to adopt a 

budget proposal to shift administrative expenses to a discretionary 

account. Moreover, because of the way federal credit programs are 

budgeted, original estimates include a loan subsidy amount for one fiscal 

year but actual outlays include a loan subsidy reestimate for all prior fiscal 

years—in the case of FDLP, up to 8 years for fiscal year 2004. 

Conclusions Given that unsustainable federal deficits and debt threaten our future 

economy and national security as well as the standard of living for the 

American people, renewed emphasis on increasing fiscal discipline is 

crucial. Mandatory spending represents an increasing percentage of the 

federal budget (e.g., about 54 percent in 2004, up from about 42 percent in 

1984). Unexpected growth in individual programs—especially certain very 

large programs—can significantly change the nation’s fiscal position. By 

identifying significant increases in mandatory spending relatively early and 

38Section 101(a) of BBRA provided for a temporary, 20 percent increase in per diem adjusted 

payment rates for 15 specified resource utilization groups. Under section 101(c) of the Act, 

this increase was to be effective for SNF services furnished on or after April 1, 2000, and 

would continue until the later of: (1) October 1, 2000, or (2) implementation of a refined 

case-mix classification system that would better account for medically-complex patients.
Page 34 GAO-06-276 Budget Triggers

acting to constrain it, Congress may avert even larger fiscal challenges in 

the future.

The notion of establishing budget triggers to constrain growth is not new 

and has been used in the past with varying degrees of success. Given that 

spending for mandatory programs is driven by underlying benefit and 

eligibility formulas, serious efforts to constrain spending would require 

substantive changes to current law. Such changes should consider 

program goals and objectives and be enacted as programs are created, 

reexamined, or reauthorized. While budget triggers certainly are neither a 

panacea nor a substitute for deliberate consideration by stakeholders and 

decision makers, they can help to prompt action and enhance fiscal 

responsibility.

Ignoring significant growth in mandatory accounts is inconsistent with 

evaluation of programs and their costs. While we appreciate the concerns 

raised by budget experts, in our opinion, establishing budget triggers 

warrants serious consideration in order to constrain growth in mandatory 

spending programs. However, it is clear that how the triggers are designed 

must be carefully considered. For example, once widespread agreement 

on underlying public policy goals has been achieved, it needs to be decided 

whether a soft or hard response to a trigger—or a combination thereof—

would be most appropriate. Also, it is important to consider the data upon 

which the trigger will hinge—future projections of historical data, growth 

as a percent of GDP, total growth, or another measure altogether. 

Moreover, this trigger concept might also be useful in examining tax 

expenditure growth. Calculating a normal range of uncertainty for a 

program could help avoid triggering an action prematurely or 

unnecessarily. In addition, it is important to strike an appropriate balance 

between responses that constrain spending or increase revenues. We 

recognize that automatic responses pose much more difficult trade-offs. 

Ensuring countercyclical effects are not undermined is of particular 

importance. In any case, recognizing the natural tension in balancing both 

long-term fiscal challenges and other public policy goals, each program 

needs to be considered individually to ensure that any responses triggered 

strike the appropriate balance between the long-term fiscal challenge and 

the program goals. Considering ways to increase transparency, oversight, 

and control of mandatory spending programs must be part of addressing 

the nation’s long-term fiscal challenges.
Page 35 GAO-06-276 Budget Triggers

Matter for 

Congressional 

Consideration

To promote explicit scrutiny of significant growth in mandatory accounts, 

as mandatory spending programs are created, reexamined, or reauthorized, 

Congress should consider incorporating budget triggers that would signal 

the need for action. Further, it should determine whether in some cases it 

might be appropriate to consider automatically causing some action to be 

taken when the trigger is exceeded. Once a trigger is tripped, Congress 

could either accept or reject all or a portion of the response to the spending 

growth.

Agency Comments We requested comments on a draft of this report from OMB; the 

Departments of Agriculture, Education, Health and Human Services, Labor; 

and the Railroad Retirement Board. OMB and the Departments of 

Education and Labor had no comments. The Departments of Agriculture, 

Health and Human Services, and the Railroad Retirement Board provided 

clarifying and/or technical comments, which we incorporated as 

appropriate.

This report was prepared under the direction of Susan J. Irving, Director, 

Federal Budget Analysis, Strategic Issues, who can be reached at (202) 512-

9142 or irvings@gao.gov. Other key contributors are listed in appendix IV.

David M. Walker

Comptroller General

of the United States
Page 36 GAO-06-276 Budget Triggers

Appendix I

Illustrative Examples of Triggers and Apendxies

Responses for Case Study Accounts ApendxiI

Addressing growth in mandatory spending is an important but complicated 

matter that requires looking below the aggregate and into specific 

programs. Mandatory spending is governed by eligibility rules and benefit 

formulas, which means that funds are spent as required to meet the needs 

of all those who are eligible and wish to participate. Accordingly, spending 

in mandatory programs cannot be constrained through the application of 

simple caps/limits. Rather, it requires changes in the underlying benefit 

structure and design of programs. As a result, constraints of individual 

programs that look at the specific economic and other factors that drive 

spending are likely to be most effective. 

One idea to constrain growth in mandatory programs is to develop triggers 

that, when tripped, would cause some automatic cost-cutting or revenueincreasing response—such as changes in eligibility criteria, benefit 

formulas, or fees—automatically to go into effect unless Congress and the 

President act to make other changes. An alternative approach would 

replace such a “hard” response with a “soft” one such as requiring special 

consideration of a program or a proposal for action when the trigger’s 

threshhold is breached. Examples of soft responses include raising a point 

of order, requiring the administering agency to prepare a special report 

explaining why the trigger was breached, or submitting a proposal for 

reform. Soft responses may be helpful in alerting decision makers of 

potential problems but do not ensure that such action is taken. 

Especially in designing hard responses, careful consideration must be 

given to avoid counteracting the program’s goals and objectives. For 

example, a rise in the unemployment rate would by design increase outlays 

in federal unemployment insurance not only to provide assistance to the 

unemployed but also to stabilize the economy. If a trigger were established 

that resulted in a contractionary response, it could undermine these 

important goals and exacerbate the effects of unemployment on the 

economy.

We selected seven mandatory budget accounts to examine in order to 

inform our thinking about budget trigger responses and the design issues 

that need to be considered. These seven accounts were selected because 

of their relatively large 5-year average differences between estimated and 

actual outlays. These accounts are the
Appendix I

Illustrative Examples of Triggers and 

Responses for Case Study Accounts

Page 37 GAO-06-276 Budget Triggers

(1) Commodity Credit Corporation1

• Corn

• Crop Disaster Assistance,

(2) Federal Direct Student Loan Program Account,

(3) Grants to States for Medicaid,

(4) Medicare Part A: Federal Hospital Insurance Trust Fund,

(5) Medicare Part B: Federal Supplementary Medical Insurance Trust Fund,

(6) Rail Industry Pension Fund, and

(7) Unemployment Trust Fund.

In this appendix, for each case study account we present contextual 

information such as the administering agency, program description, and 

source of funding. Also we provide the agency’s explanation of key 

differences between estimated and actual outlays and, as appropriate, 

other relevant information. Finally, where appropriate we present 

illustrative examples of hard responses that could be established to 

constrain spending.2

 In some cases these illustrative examples involve 

revising currently existing triggers and their corresponding actions. In 

other cases new triggers and responses are presented. We do not 

specifically advocate any of these approaches as Congress would need to 

balance the program and national objectives sought with the long-term 

fiscal challenges facing our nation. The approaches we present are for 

illustrative purposes only to provide a sense of the types of trigger and 

resulting actions that could be established. 

1

The Commodity Credit Corporation budget account encompasses many programs that are 

influenced by different factors. Accordingly, to gain an appreciation for the factors that 

should be considered in designing budget triggers, we focused on two programs—corn and 

crop disaster assistance. These two programs experienced the greatest average 5-year 

differences between estimated and actual outlays.

2

Given the nature of soft triggers, that is, requiring special consideration or reporting, to 

avoid redundancy we do not present soft triggered actions for each of the case study 

accounts.
Appendix I

Illustrative Examples of Triggers and 

Responses for Case Study Accounts

Page 38 GAO-06-276 Budget Triggers

Account Name Commodity Credit Corporation Fund—Corn

Administering Organization Primarily the Farm Service Agency (FSA),

U.S. Department of Agriculture

Program Description The Commodity Credit Corporation (CCC) is a government-owned and 

government-operated entity that was created in 1933 to stabilize, support, 

and protect farm income and prices. CCC also helps maintain balanced 

and adequate supplies of agricultural commodities and aids in their orderly 

distribution.

For fiscal years 2000–2002 (under 1996 Farm Bill provisions), CCC 

provided corn-related subsidies primarily through two types of payments 

available to supplement farmers’ incomes: (1) production flexibility 

payments to historical producers of corn and (2) nonrecourse loans, which 

allow farmers to store production and use loan proceeds to meet cash flow 

needs without selling the crop. Ad hoc legislation provided additional 

payments in the form of market loss assistance payments to compensate 

producers for low prices. 

For fiscal years 2003–2004 (under 2002 Farm Bill provisions), CCC 

provided corn-related subsidies through three types of payments available 

to supplement farmers’ incomes: (1) direct payments to historical 

producers of corn; (2) countercyclical payments, which provide a safety 

net in the event of low crop prices; and (3) nonrecourse loans. 

Funding Source CCC has an authorized capital stock of $100 million held by the United 

States and the authority to have outstanding borrowings of up to $30 billion 

at any one time. Funds are borrowed from the U.S. Treasury.

Differences between Estimated 

and Actual Outlays

Based on a 5-year average, estimated outlays for corn differed from actual 

outlays by about $1.9 billion per year, or 63.4 percent, in absolute value 

terms. However, the actual annual differences varied between an 

overestimate of $388 million and an underestimate of $7 billion. Table 2 

presents the estimated and actual outlays associated with CCC’s corn 

program, by fiscal year.
Appendix I

Illustrative Examples of Triggers and 

Responses for Case Study Accounts

Page 39 GAO-06-276 Budget Triggers

Table 2: Estimated and Actual Corn Outlays, by Fiscal Year

Source: GAO analysis of FSA budget data.

Explanation of Key Differences According to the Farm Service Agency, legislative action and economic 

changes were the primary reasons behind differences between estimated 

and actual outlays for CCC’s corn program during fiscal years 2000 through 

2004. In general, weather and natural disasters are the key drivers of 

differences between estimated and actual outlays, which are highly 

sensitive to changes in the price of corn. Outlays increase when the corn 

price decreases. A 1 cent drop in the price of a bushel of corn can lead to 

about $85 million increase in countercyclical payments. Participation also 

affects costs. Farm program costs depend on market prices and farm 

production, which in turn are influenced by world weather, the condition of 

the general economy, the foreign and trade policies of the United States 

and other food-exporting nations, the rate of inflation, and the value of the 

dollar, among other variables. Detailed explanations are shown in table 3.

Nominal dollars in millions

Fiscal year Original outlay estimate Actual outlays Difference

2000 $3,087 $10,136 $-7,049

2001 4,444 6,297 -1,853

2002 3,013 2,959 54

2003 1,803 1,415 388

2004 2,695 2,504 191

5-year average dollar difference $-1,654

5-year average difference as a percent of average estimated outlays -55.5%

5-year average dollar difference (absolute value)

5-year percentage difference (absolute value) 

$1,907

63.4%
Appendix I

Illustrative Examples of Triggers and 

Responses for Case Study Accounts

Page 40 GAO-06-276 Budget Triggers

Table 3: Explanation of Differences between Estimated and Actual Corn Outlays 

Source: Farm Service Agency.

Notes: Primary drivers of outlay differences are marked in bold.

a

A negative difference means that actual outlays were higher than originally estimated. A positive 

difference means that actual outlays were less than originally estimated.

Nominal dollars in billions

Fiscal year and 

dollar differencea

FSA’s explanation of differences

Legislative Economic Technical

2000

$-7.0

Additional $5.1 billion fixed 

payments for producers of 

grains and cotton were 

authorized in Oct. 1999 (Pub. L. 

106-78 § 802).

Loan deficiency payments were 

underestimated by $1.6 billion due to a 

sharp drop in prices ($0.20 and $0.25 

per bushel for 1999 and 2000 

projections). Remaining difference due 

to lower loan repayments since more 

loans were repaid at lower rates due to 

weak market conditions, representing 

marketing loan gains for producers.

2001

$-1.9

$2.1 billion Market Loss 

Assistance payments were 

authorized in Aug. 2001 (Pub. L. 

107-25 § 1).

Underpayment was moderated by a 

small reduction in loan deficiency 

payments resulting from a slight rise in 

the average market price and a change 

in the seasonal pattern from projections.

A small drop in net loan 

expenditures, as less corn was 

placed under loan than projected.

2002

$0.05

Three cent per bushel drop in the 

2001 price of corn, which triggered 

higher loan deficiency payments 

(LDP). As more producers opted for 

LDPs, fewer placed corn under loan, 

thus reducing net outlays.

2003

$0.39

Mandated policy change saved 

$1.9 billion by eliminating 

production flexibility contract 

payments unless requested by 

producers who are parties to 

the contract (Pub. L. 107-171 § 

1107). This was partially offset 

by $1.4 billion for the new direct 

payment program.

Increase in net loan outlays, reflecting a 

change in the loan rates. The rate for 

2002 and 2003 corn was assumed at 

$1.67 per bushel under previous 

legislation but increased to $1.98 under 

2002 legislation. Thus, the face value of 

loans made went up.

2004

$0.19

An increase in prices pushed corn 

above the countercyclical payment 

(CCP) trigger level, thus reducing 

CCPs by $397 million. The CCP 

decline outweighed increases of 

$100 million for LDPs, which reflect a 

decline in the 2004 crop price, raising 

the LDP rate and quantity.

The CCP decline outweighed 

increases of $130 million for direct 

payments, which were due to 

higher base acres than were 

assumed before the actual sign-up.
Appendix I

Illustrative Examples of Triggers and 

Responses for Case Study Accounts

Page 41 GAO-06-276 Budget Triggers

Illustrative Triggers and 

Response

The 2002 Farm Bill3 guaranteed historical producers of corn and other 

commodities a minimum price per bushel, known as a target price, which 

they can expect to earn. To constrain spending, one possible trigger could 

be when the target price exceeds the market price by some historically 

average percentage, the legislated target price could be reduced. However, 

to avoid price shocks to the industry and possible procyclical effects, the 

price reduction could be deferred to the following year. 

The Farm Bill also established a formula for fixed, direct payments to 

historical producers of corn and other commodities. To limit spending on 

this income-support program, one idea for a trigger could be to link direct 

payments to farm sector production prices. For example, if production 

prices drop by more than 3 percent,4

 Congress could redefine the formula 

to be less generous. 

Alternatively, Congress could limit the guarantee of direct payments to 

current producers of corn rather than historical producers. 

3

Farm Security Act and Rural Investment Act of 2002, Pub. L. No. 107-171 (May 13, 2002). 

4

According to USDA’s Economic Research Service, the average change in annual U.S. farm 

sector production expenses between 2001 and 2005 was about 2.5 percent.
Appendix I

Illustrative Examples of Triggers and 

Responses for Case Study Accounts

Page 42 GAO-06-276 Budget Triggers

Account Name Commodity Credit Corporation Fund—Crop Disaster Assistance

Administering Organization Primarily the Farm Service Agency (FSA),

U.S. Department of Agriculture

Program Description CCC is a government-owned and government-operated entity that was 

created in 1933 to stabilize, support, and protect farm income and prices. 

CCC also helps maintain balanced and adequate supplies of agricultural 

commodities and aids in their orderly distribution. 

Crop Disaster Assistance programs reimburse producers for qualifying 

losses to agricultural commodities (other than sugar cane or cotton seed) 

due to damaging weather or related conditions. The damages must be in 

excess of 35 percent of the established price of crops for lost production or 

20 percent for lost quality. Crop disaster programs cover insured, 

uninsured, and noninsurable crops. The program has no set funding 

limitation, however, payments are limited to $80,000 per person, and 

producers with incomes greater than $2.5 million are ineligible. This crop 

disaster assistance program is not permanently authorized.

Funding Source CCC has an authorized capital stock of $100 million held by the United 

States and the authority to have outstanding borrowings of up to $30 billion 

at any one time. Funds are borrowed from the U.S. Treasury. Although 

Crop Disaster Assistance programs are provided through appropriations 

acts,5

 the Department of Agriculture considers and applies funding for the 

programs in a manner similar to mandatory programs. According to an 

FSA official, funding is provided to all eligible applications for assistance 

by prorating available funding if necessary. The Office of Management and 

Budget (OMB) also considers crop disaster assistance programs to be 

mandatory in that all eligible applicants may receive benefits. 

Differences between Estimated 

and Actual Outlays

Based on a 5-year average, estimated outlays for crop disaster assistance 

differed from actual outlays by about $1.2 billion per year in absolute value 

terms. However, the actual annual differences varied between $230 million 

and $1.9 billion. Table 4 presents the estimated and actual outlays 

associated with CCC’s crop disaster assistance programs, by fiscal year.

5

For example, see Military Construction Appropriation and Emergency Hurricane 

Supplemental Appropriations Act, 2005, Pub. L. No. 108-324, 118 Stat. 1220, 1232-37, Oct. 13, 

2005.
Appendix I

Illustrative Examples of Triggers and 

Responses for Case Study Accounts

Page 43 GAO-06-276 Budget Triggers

Table 4: Estimated and Actual Crop Disaster Assistance Outlays, by Fiscal Year

Source: GAO analysis of FSA budget data.

Explanation of Key Differences According to OMB staff, it is not OMB’s policy to include an estimate for 

disaster assistance in the President’s budget. Instead, these programs are 

typically funded through subsequent legislation. 

Ideas for Improving the 

Accuracy of Estimates

Although OMB typically does not include an estimate for crop disaster 

assistance in the President’s budget, we have reported in the past that 

shifting the budget timing to an up-front recognition of emergency costs 

through reserves may promote a more comprehensive and transparent 

debate over federal budgetary priorities during the regular budget process.6

 

For example, we suggested that federal governmentwide emergency 

reserves could set aside budget authority in advance for expected yet 

unpredictable events as part of the annual resource-allocation process. 

Another approach would be to establish agency-specific reserve funds for 

those agencies that regularly respond to federal emergencies. Funds would 

be appropriated to these agencies on a contingent basis, meaning that 

certain agency-specific criteria would have to be met before the funds 

could be used. While these approaches are not of the trigger/response 

variety that is the subject of this report, they would help accomplish a goal 

of constraining spending if the emergency budget authority provided in 

advance is assumed to be within a constrained total budget authority.

Nominal dollars in millions

Fiscal year Original outlay estimate Actual outlays Difference

2000 $0 $1,251 $-1,251

2001 0 1,848 -1,848

2002 0 230 -230

2003 0 1,867 -1,867

2004 0 804 -804

5-year average dollar difference $-1,200

5-year average difference as a percent of average estimated outlays N/A

5-year average dollar difference (absolute value)

5-year percentage difference (absolute value) 

$1,200

N/A

6

GAO, Budgeting for Emergencies: State Practices and Federal Implications, GAO/AIMD99-250 (Washington, D.C.: Sept. 30, 1999).
Appendix I

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Page 44 GAO-06-276 Budget Triggers

Account Name Federal Direct Student Loan Program Account

Administering Organization Office of Federal Student Aid,

U.S. Department of Education

Program Description The Department of Education (Education) provides financial aid in part to 

increase access to college. Education’s first direct loans were made in the 

fourth quarter of fiscal year 1994.7

 Through its William D. Ford Federal 

Direct Loan Program (FDLP), students and/or their parents borrow money 

directly from the federal government through the vocational, 

undergraduate, or graduate schools the students attend. As is the case 

under the Federal Family Education Loan Program (FFELP), or 

“guaranteed” student loan program, there are four types of direct loans.8

 

Stafford Loans—variable rate loans available to students. The federal 

government pays the interest on behalf of borrowers while the student is in 

school, during a 6-month grace period when the student first leaves school, 

and during statutory deferment periods related to borrower unemployment 

and economic hardship.

Unsubsidized Stafford Loans—variable rate loans to students with the 

same terms as Stafford Loans except that the government does not pay 

interest costs during in-school, grace, and deferment periods.

PLUS Loans—variable rate loans made to parents. The borrower pays all 

interest costs.

Consolidation Loans—borrowers may combine multiple federal student 

loans into a single, fixed rate loan. The interest rate is based on the 

weighted average of the interest rates in effect on the loans being 

consolidated or a fixed percentage.

Funding Source Education finances FDLP through a combination of appropriations and 

borrowing from Treasury. Education receives permanent, indefinite budget 

7

Under the Federal Family Education Loan Program (FFELP), private lenders fund the loans 

and the government guarantees them a minimum yield and repayment if borrowers default. 

FFELP is a larger program than is FDLP in terms of both annual and outstanding loan 

volume. 

8

Loans made in each fiscal year are called a cohort. 
Appendix I

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authority for estimated subsidy costs—the amount expected not to be 

repaid by borrowers—of its loans. These costs are generally updated, or 

reestimated, annually. The portion of direct loans that Education predicts 

will ultimately be repaid by borrowers is financed by borrowing from 

Treasury and is not considered a cost to the government because it is 

expected to be returned to the government in future years.

Differences between Estimated 

and Actual Outlays

Based on a 5-year average, estimated outlays for direct student loans 

differed from actual outlays by about $2.6 billion per year, or 702 percent, 

in absolute value terms. However, the actual annual differences varied 

between an overestimate of $2.8 billion and an underestimate of $5.3 

billion. A large component of these differences reflects the fact that initial 

estimates do not include reestimates of prior year costs, which are 

reflected in actual outlays. In addition, initial estimates reflect proposed 

policies, many of which were not enacted and so were not reflected in 

subsequent actual outlays. Table 5 presents the estimated and actual 

outlays associated with the federal direct student loan program, by fiscal 

year.

Table 5: Estimated and Actual Direct Student Loan Outlays, by Fiscal Year

Source: GAO analysis of President’s budget data.

Note: A negative outlay amount indicates a positive collection of revenue. Also, for credit programs, 

the term actual is misleading because reestimates will continue until all the loans in that cohort have 

been repaid.

Explanation of Key Differences Because FDLP is a relatively new program, it has a short history of 

repayment activity and little historical data are available. Accordingly, 

Education initially relied heavily on data from the guaranteed student loan 

Nominal dollars in millions

Fiscal year Original outlay estimate Actual outlays Difference

2000 $-42 $-2,862 $2,820

2001 115 257 -142

2002 -635 97 -732

2003 -283 5,055 -5,338

2004 -786 3,246 -4,032

5-year average dollar difference $-1,485

5-year average difference as a percent of average estimated outlays 455.2%

5-year average dollar difference (absolute value)

5-year percentage difference (absolute value) 

$2,613

702%
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Page 46 GAO-06-276 Budget Triggers

program to develop estimates for most key cash flow assumptions in its 

FDLP cash flow model, which is used to estimate the subsidy cost of the 

program. Over the past few years, Education has incorporated FDLP data 

into many cash flow assumptions; as more data become available, 

Education plans to completely phase out the use of guaranteed loan data 

for FDLP assumptions.9

Drops in interest rates have been a key driver behind differences in 

estimated versus actual outlays. Not only are loans being paid off at lower 

rates than anticipated but the drop in rates has also led to a dramatic 

increase in consolidations (which are prepayments). Detailed explanations 

are shown in table 6. 

Table 6: Explanation of Differences between Estimated and Actual Direct Student Loan Outlays

9

While using guaranteed loan data is appropriate for the interim, guaranteed loans may 

perform differently than FDLP loans. Accordingly, Education plans to phase out the use of 

guaranteed loan data as FDLP data become available. 

Nominal dollars in billions

Education’s explanation of differences

Fiscal year and dollar 

differencesa Legislative Economic Technical

2000

$2.8

Actual includes about $2.4 billion in prior 

year reestimates of loans made in fiscal 

years (FY) 1994 through 1999. Net 

downward reestimate of prior cohorts 

primarily due to revised assumptions 

about a drop in defaults and an increase 

in collections. FY 2000 cohort subsidy 

decreased $442 million. Administrative 

costs decreased $30 million.

2001

$-0.14

Changes in interest rates resulted 

in $481 million upward reestimate 

of prior year cohorts.

Actual includes about $481 million in prior 

year reestimates of loans made in FYs 1994 

through 2000. FY 2001 cohort subsidy 

decreased $432 million. Administrative costs 

increased $94 million

2002

$-0.73

Drop in interest rates caused FY 

2002 cohort subsidy to increase 

$694 million due to lower projected 

borrower repayments.

Administrative costs increased $42 million.
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Source: Department of Education.

Notes: Primary drivers of outlay differences are marked in bold.

a

A negative difference means that actual outlays were higher than originally estimated. A positive 

difference means that actual outlays were less than originally estimated.

Illustrative Trigger and Response Congress could decrease the subsidy cost to the government by, among 

other things, increasing the amount of fees borrowers must pay to obtain a 

loan or increasing borrowers’ interest rate. For example, continued 

differences between estimated and actual outlays could be used as a 

trigger, resulting in higher origination fees or interest rates for new FDLP 

loans. In implementing such a trigger and response, Congress would need 

to consider whether FFELP borrowers should similarly be affected. Under 

current law, loans made to borrowers, unless otherwise specified, are to 

have the same terms, conditions, and benefits and be made available in the 

same amounts under both FDLP and FFELP.10

2003

$-5.3

Revised assumptions on interest 

rates, prepayments through 

consolidations, and defaults 

resulted in upward reestimate of 

prior year cohorts of $4.6 billion. 

FY 2003 cohort subsidy increased 

$250 million.

Actual includes about $4.6 billion for 2-years 

worth of prior-year reestimates of loans made 

in FYs 1994 through 2002. (No reestimate 

was executed in FY 2002.) $15 million policy 

proposal to shift administrative expenses to a 

discretionary account not enacted by 

Congress.

2004

$-4.0

$710 million policy proposal to shift 

administrative expenses to a 

discretionary account not enacted by 

Congress. About $2.6 billion in upward 

reestimates of prior year cohorts (loans 

made during FYs 1994 through 2003) 

reflects technical changes to model 

assumptions, including higher level of 

prepayments, which lower future interest 

income, and higher defaults for borrowers 

choosing income-contingent loan 

repayment.

(Continued From Previous Page)

Nominal dollars in billions

Education’s explanation of differences

Fiscal year and dollar 

differencesa Legislative Economic Technical

10Higher Education Act of 1965 (Public Law 89-329), as amended, Section 455 (a)(1).
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Account Name Grants to States for Medicaid 

Administering Organization Centers for Medicare & Medicaid Services (CMS),

U.S. Department of Health and Human Services

Program Description Medicaid is a health-financing program for eligible low-income individuals 

and families. Federal statute defines over 50 population groups that are 

potentially eligible for states’ programs. In general, eligibility is limited to 

low-income children, pregnant women, parents of dependent children, 

people with disabilities, and the elderly. Although Medicaid is one federal 

program, it consists of 56 distinct state-level programs—one for each state, 

territory, Puerto Rico, and the District of Columbia.11 Each of the states has 

a designated Medicaid agency that administers the program. In accordance 

with the Medicaid statute and within broad federal guidelines, each state 

establishes its own eligibility standards; determines the type, amount, 

duration, and scope of covered services; sets payment rates; and develops 

its administrative structure.

Funding Source The federal government matches state Medicaid spending for medical 

assistance according to a formula that compares each state’s average per 

capita income—a proxy reflecting the health of the state’s economy and its 

response to economic changes—to the national per capita income. 

Therefore, states with a high per capita income receive less federal funds 

than states with a low per capita income. As economic conditions improve 

or decline in a particular state, so does the amount of federal matching 

funds granted to that state. The federal share, known as the Federal 

Medical Assistance Percentage (FMAP), can range from 50 to 83 percent. 

States are required to describe the nature and scope of their programs in 

comprehensive written plans submitted to CMS—with federal funding for 

state Medicaid services contingent upon CMS approval of the plans. This 

approval hinges on whether CMS determines that state plans meet all 

applicable federal laws and regulations.

Although the source of Medicaid funding is through an annual 

appropriation act, Medicaid is not considered a discretionary spending 

program. Because Medicaid is an entitlement created by the operation of 

law, if Congress fails to appropriate money necessary to fund payments and 

benefits, eligible recipients may seek legal recourse. In such case, 

11Hereafter, all will be referred to as states.
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necessary payments may be made through the indefinite judgment fund 

pursuant to 31 U.S.C. § 1304.

Differences between Estimated 

and Actual Outlays

Based on a 5-year average, estimated Medicaid outlays differed from actual 

outlays by about $4.2 billion per year, or 2.9 percent, in absolute value 

terms. Actual annual differences ranged from an underestimate of $5.1 

billion to an overestimate of $6.3 billion. Table 7 presents the estimated 

and actual Medicaid outlays for fiscal years 2000 through 2004.

Table 7: Estimated and Actual Medicaid Outlays, by Fiscal Year

Source: GAO analysis of President’s budget data.

Explanation of Key Differences Both legislative and technical factors led to differences in estimated and 

actual Medicaid outlays. For example, the Jobs and Growth Tax Relief 

Reconciliation Act of 2003,12 which temporarily changed federal matching 

rates for benefits and provided fiscal relief to states, affected estimated 

Medicaid outlays in both fiscal years 2003 and 2004. Technical factors 

included misestimates of medical assistance payments, administrative 

costs, vaccines for children, and collections. Also, there were a number of 

legislative proposals that were not adopted. It is not clear if economic 

factors also contributed to the differences, although it is likely so given the 

economic downturn that occurred during this time period. Changing 

economic conditions could have led to differences in the number of 

Nominal dollars in millions

Fiscal year Original outlay estimate Actual outlays Difference

2000 $114,660 $117,921 $-3,261

2001 124,838 129,374 -4,536

2002 142,423 147,512 -5,089

2003 158,790 160,693 -1,903

2004 182,543 176,231 6,312

5-year average dollar difference $-1,695

5-year average difference as a percent of average estimated outlays -1.2%

5-year average dollar difference (absolute value)

5-year percentage difference (absolute value) 

$4,220

2.9%

12Pub. L. No. 108-27, §401, 117 Stat. 752, 764 (May 28, 2003).
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individuals eligible for and receiving benefits, and therefore total program 

outlays.

According to CMS officials, Medicaid estimates are based primarily on 

state estimates and may be adjusted by CMS’ Office of the Actuary to 

reflect recent trends in how state estimates have changed over time or how 

they have compared with actual expenditures in recent years. Agency 

officials were unable to accurately identify and quantify the effects of any 

of these factors and explained that the difficulty lies with the variability of 

program structure across states. Each state is allowed the discretion to 

structure and modify its program, including the establishment of eligibility 

criteria and payment rates. Similarly, state legislative actions and 

economic conditions vary across the country and could have varying 

effects on program outlays. Consequently, aggregating state data into a 

single Medicaid figure would mask estimating inaccuracies and challenges 

since the negative effect in one might be offset by positive effect in another. 

In the event that the difference between estimated and actual spending is 

very large, CMS said it would then investigate and seek explanations from 

the states. Although CMS did not consider the differences evident 

throughout the 5-year period we reviewed to be large enough to prompt 

such an evaluation, they did provide some explanation behind 

misestimates as shown in table 8 below. 

Table 8: Explanation of Differences between Estimated and Actual Medicaid Outlays 

Nominal dollars in billions

CMS’ explanation of differences

Fiscal year and 

dollar differencea Legislative Economic Technical

2000

-$3.3

Underestimated medical assistance payments 

by over $3 billion, administrative costs by $71 

million, and vaccines for children by $2 million. 

The resulting outlay underestimate was further 

increased by a legislative proposal expected to 

save $161 million that had been included in the 

original estimate but was not accepted.
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Source: Centers for Medicare & Medicaid Services.

Notes: Primary drivers of outlay differences are marked in bold.

a

A negative difference means that actual outlays were higher than originally estimated. A positive 

difference means that actual outlays were less than originally estimated.

2001

-$4.6

Underestimated medical assistance payments 

by $7.1 billion and vaccines for children by 

$357 million. These underestimates were 

partially offset by a $977 million overestimate 

of administrative costs, an underestimate of 

almost $1.3 billion in collections, and a 

legislative proposal expected to cost $663

million that had been included in the original 

estimate but was not accepted.

2002

-$5.1

Underestimated medical assistance payments 

by $5.3 billion. This underestimate was partially 

offset by a $138 million underestimate of 

collections and overestimates of administrative 

costs and vaccines for children by $722 million 

and $4 million respectively. The resulting 

outlay underestimate was further increased by 

a legislative proposal expected to save $606 

million that had been included in the original 

estimate but was not accepted. 

2003

-$1.9

The Jobs and Growth Tax 

Relief Reconciliation Act of 

2003 was enacted in late May 

2003, after original FY 2003

estimates were made. CMS 

said this legislation accounted 

for approximately $4 billion in 

unanticipated outlays.

Underestimated medical assistance payments by 

nearly $3 billion and vaccines for children by $241 

million. These underestimates were partially offset 

by a $1.1 billion overestimate of administrative 

costs, a $112 million underestimate of collections, 

and a legislative proposal expected to cost $98 

million that had been included in the original 

estimate but was not accepted.

2004

$6.3

The Jobs and Growth Tax 

Relief Reconciliation Act of 

2003 was enacted in late May 

2003, after original FY 2004 

estimates were made. CMS 

said this legislation accounted 

for approximately $6 billion in 

unanticipated outlays.

Outlays were overestimated as a result of a 

legislative proposal expected to cost $5.8 billion, 

which had been included in the original estimate 

but was not adopted, a $1 billion overestimate of 

administrative costs, and a $168 million 

underestimate of collections. The resulting outlay 

overestimate was partially offset by 

underestimates of medical assistance payments 

and vaccines for children by $520 million and $133 

million respectively. 

(Continued From Previous Page)

Nominal dollars in billions

CMS’ explanation of differences

Fiscal year and 

dollar differencea Legislative Economic Technical
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Account Name Federal Hospital Insurance (HI) Trust Fund (Medicare Part A)

Administering Organization Centers for Medicare & Medicaid Services,

U.S. Department of Health and Human Services

Program Description The account funds the Medicare Part A program which partially covers the 

costs of, among other things, home health care, inpatient care in hospitals 

and skilled nursing facilities, and hospice care. Based on their work history, 

most U.S. citizens and permanent residents and their spouses are eligible 

for Medicare Part A if they are 65 years of age or older. Also, certain 

persons under 65 years old who are disabled or have end-stage renal 

disease are eligible for coverage. Enrollees or their spouses who have 

contributed to Medicare through payroll taxes for at least 10 years of 

employment are automatically enrolled at age 65 and need not pay 

premiums to receive coverage. Individuals who have not met this eligibility 

requirement may pay a monthly premium to purchase Part A coverage.13 

Funding Source The primary funding source for Medicare Part A comes from payroll taxes. 

Other relevant revenue sources include interest on investments in 

government securities held by the fund,14 income from taxation of Old Age, 

Survivors, and Disability Insurance (Social Security) benefits, and 

premiums collected from voluntary participants. 

Differences between Estimated 

and Actual Outlays

Based on a 5-year average, estimated Medicare Part A outlays differed from 

actual outlays by about $5.6 billion per year, or 3.8 percent, in absolute 

value terms. Actual annual differences ranged from an underestimate of 

$4.3 billion to an overestimate of $15.9 billion. Table 9 presents the 

estimated and actual HI outlays for fiscal years 2000 through 2004.

13The premium for Part A was $375 per month in 2005. Medicare premiums can change each 

year.

14The portion of the HI trust fund that is not needed to cover current expenditures for 

administration and benefits is invested on a daily basis in interest-bearing obligations of the 

federal government.
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Table 9: Estimated and Actual HI Outlays, by Fiscal Year

Source: GAO analysis of President’s budget data.

Explanation of Key Differences Both legislative and technical factors led to differences between estimated 

and actual HI outlays. For example, the Medicare Prescription Drug, 

Improvement, and Modernization Act of 2003 (MMA)15 led to greater-thanexpected outlays in fiscal year 2004. Technical factors included difficulty in 

predicting the behavior of providers under new payment systems, 

misestimates of home health transfers to and from the Supplementary 

Medical Insurance (SMI) Trust Fund, and misestimates of service usage. 

Economic factors, specifically the hospital market basket, also contributed 

to differences. The hospital market basket is an input price index that 

represents the cost of the mix of goods and services that comprise routine, 

ancillary, and special-care unit inpatient hospital services. Detailed 

explanations of the differences are shown in table 10.

Nominal dollars in millions

Fiscal year Original outlay estimate Actual outlays Difference

2000 $143,898 $127,973 $15,925

2001 143,427 140,573 2,854

2002 144,674 145,606 -932

2003 147,295 151,308 -4,013

2004 159,750 164,136 -4,386

5-year average dollar difference $1,890

5-year average difference as a percent of average estimated outlays 1.3%

5-year average dollar difference (absolute value)

5-year percentage difference (absolute value) 

$5,622

3.8%

15Public Law 108-173. In this report, the Medicare Prescription Drug, Improvement, and 

Modernization Act of 2003 is referred to as the Medicare Modernization Act (MMA).
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Table 10: Explanation of Differences between Estimated and Actual HI Outlays 

Nominal dollars in billions

CMS’ explanation of differences

Fiscal year and 

dollar differencea Legislative Economic Technical

2000

$15.9

Overestimated benefit payments by $10.1 

billion, which CMS attributed to its 

difficulty in predicting the behavior of 

providers under new payment systems for 

skilled nursing facility (SNF) services and 

home health services. Also, a $6.6 billion 

overestimate of home health transfers to 

the SMI fundb

 further widened the gap 

between estimated and actual outlays. CMS 

attributed this to discrepancies in 

implementing the payment system, 

particularly by home health agencies. 

Specifically, the cap on average perbeneficiary home health expenditures was 

treated as an absolute cap, thereby cutting 

services to patients requiring numerous 

visits per episode of care. This resulted in 

unexpected additional savings. The 

resulting outlay overestimate was partially 

offset by a legislative proposal expected to 

save $808 million that had been included in 

the original estimate but was not accepted.

2001

$2.9

Overestimated benefit payments by almost 

$3.9 billion, which CMS attributed to the 

discrepancy between what they assumed 

service usage to be and actual usage. 

Overestimates of $242 million in home 

health transfers to the SMI fund and $84 

million in quality improvement 

organizations (QIO)c

 further added to the 

difference. The resulting outlay 

overestimate was partially offset by a $1.2 

billion quinquennial adjustment as required 

by lawd

 and a legislative proposal expected 

to save $185 million that had been included 

in the original estimate but was not 

adopted.
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Source: Centers for Medicare & Medicaid Services.

2002

-$0.9

Underestimated benefit payments by $2.3

billion, which CMS attributed to the 

discrepancy between what they assumed 

service usage to be and actual usage. The 

resulting outlay underestimate was 

partially offset by overestimates of $1.3

billion and $77 million in home health 

transfers to the SMI fund and QIOs 

respectively. 

2003

-$4.0

Inpatient hospital expenditures 

were higher than expected due 

to a higher-than-expected 

“market basket” payment 

update. Market basket refers to 

the input price index based on 

the cost of a particular type of 

health provider (e.g., hospital, 

skilled nursing facility, home 

health agency) to provide 

services to patients. By law 

these indexes are used to 

update Medicare payments.

Inpatient hospital expenditures were higher 

than expected also because of a hospital case 

mix increase. Case mix refers to the average 

complexity of inpatient admissions for 

Medicare beneficiaries. Payments are based 

on the type of case, so if the mix of cases 

changes, payments also change. 

Expenditures were also higher because 

expected SNF resource utilization group 

(RUG) refinements were not made, which 

would have reduced payments. SNFs received 

higher payments due to the introduction of a 

new administrative policy to adjust payment 

updates for past differences between actual 

and estimated market basket increases. The 

$7.3 billion underestimate in benefit payments 

was further increased by an $18 million 

underestimate of administrative costs, but was 

partially offset by overestimates of $2.8 billion 

in home health transfers to the SMI fund, $43 

million in QIOs, and a legislative proposal 

expected to cost $410 million that was 

included in the original estimate but was not 

adopted. 

2004

-$4.4

Underestimated benefit 

payments by $4.3 billion. CMS 

attributed this to several MMA 

provisions that were enacted 

and implemented after original 

estimates were made, which 

led to higher actual 

expenditures. In particular, 

payments to private health 

plans contracting with 

Medicare were increased 

substantially as were 

payments to rural health 

providers.

Once again, expected SNF RUG refinements 

were not made, resulting in higher-thanestimated expenditures. Hospice expenditures 

were also higher than estimated. The $4.3 

billion underestimate in benefit payments was 

further increased by underestimates of $23 

million in QIOs and $17 million in 

administrative costs.

(Continued From Previous Page)

Nominal dollars in billions

CMS’ explanation of differences

Fiscal year and 

dollar differencea Legislative Economic Technical
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Notes: Primary drivers of outlay differences are marked in bold. In 2003 it was unclear which factor 

most significantly affected the difference. In that case, there is no primary driver marked in bold.

a

A negative difference means that actual outlays were higher than originally estimated. A positive 

difference means that actual outlays were less than originally estimated.

b

Home health agency transfers occur between the HI and SMI trust funds and total billions of dollars 

throughout the 5-year period. However, the positive variance in one fund is equally offset by the 

negative variance in the other. As a result, when the Medicare trust funds are taken together, this 

intertrust fund activity has no cumulative impact on the federal surplus/deficit.

c

Quality improvement organizations are groups of practicing doctors and other health care experts paid 

by the federal government to check and improve the care given to Medicare patients.

d

Section 217(g) of the Social Security Act provides for periodic transfers between the general fund of 

the Treasury and the HI trust fund, if needed to adjust prior payments for the costs arising from wage 

credits granted for military service before 1957.

Currently Existing Program 

Trigger and Response

MMA established a trigger with a soft response to constrain growth in 

Medicare; it requires the President to submit a proposal to Congress for 

action if the Medicare Trustees determine in 2 consecutive years that the 

general revenue share16 of Medicare is projected to exceed 45 percent 

during a 7-year projection period. To date, this threshold has not been 

breached and thus no response has been triggered. According to the 2005 

Medicare Trustees’ report, the trigger is expected to be breached in 2012, 

which falls within the 7-year projection period that will be covered in the 

2006 Medicare Trustees’ report. If the 45 percent threshold is projected to 

be breached again in the next consecutive 7-year projection period, the 

President will be required to propose legislation, within 15 days of 

submitting the fiscal year 2009 budget, to respond to the funding warning.

Illustrative Trigger and Response Using the trigger of general revenue exceeding 45 percent in 2 consecutive 

years during a 7-year period, hard responses could also be developed. 

Possible responses are to adjust taxes, benefit formulas, or eligibility 

criteria. For example, Medicare payroll taxes could automatically be 

increased unless Congress took action to prevent the increase. 

Alternatively, reaching the trigger could cause automatic changes to benefit 

formulas or eligibility criteria, or a combination of benefit changes and tax 

increases. Of course congressional action could change the automatic 

response if it was deemed inappropriate at that time.

16For the purpose of the Medicare trigger, general revenue is defined as the difference 

between Medicare program outlays and dedicated Medicare financing sources. Dedicated 

Medicare financing sources are HI payroll taxes, the HI share of income taxes on Social 

Security benefits, state transfers for Part D prescription drug benefits, premiums paid under 

Parts A, B, and D, and any gifts received by the trust funds.
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Account Name Federal Supplementary Medical Insurance (SMI) TrustFund 

(Medicare Part B)

Administering Organization Centers for Medicare & Medicaid Services,

U.S. Department of Health and Human Services

Program Description This account, also known as Medicare Part B, partially covers the cost of 

doctors’ services, clinical laboratory services, outpatient hospital services, 

some physical and occupational therapy services, and some home health 

care. Eligibility requirements for Medicare Part B are similar to those for 

Part A. However, unlike for Medicare Part A, enrollment is voluntary. 

Enrollees must pay a monthly premium to receive Part B coverage. In 2005, 

premiums were $78.20 per month and the deductible was $110. Premium 

and deductible rates may change every year. 

Most Part B services are paid based on a fee schedule. Physicians, the 

largest Part B service type, are paid under the sustainable growth rate 

(SGR) system,17 which determines the increase in payments per service for 

the physician fee schedule for each year based on a statutory formula. 

Under the SGR system, actual physician-related spending is compared with 

target physician-related spending levels. If actual spending exceeds target 

spending, then future physician fee schedule updates are reduced.

Funding Source SMI is financed from general revenues (approximately 75 percent) and 

beneficiary premiums (approximately 25 percent). 

Differences between Estimated 

and Actual Outlays

Based on a 5-year average, estimated Medicare Part B outlays differed from 

actual outlays by about $6.4 billion per year, or 6.1 percent, in absolute 

value terms. Actual annual differences ranged from an underestimate of 

$13.4 billion to an overestimate of $4.6 billion. Table 11 presents the 

estimated and actual SMI outlays by fiscal year. 

17Physician spending was about 40 percent of total Part B benefits in fiscal year 2004.
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Table 11: Estimated and Actual SMI Outlays, by Fiscal Year 

Source: GAO analysis of President’s budget data.

Congress has overridden the statutory updates for the 2003, 2004, and 2005 

physician fee schedules. Although the SGR system called for negative 

updates in these years, Congress instead granted increases in physician 

payments per service. For several years the law was changed to specify 

higher spending for physicians after the budget estimates were already 

done. Consequently, this contributed to actual outlays that were higher 

than estimated.

Explanation of Key Differences Both legislative and technical factors led to differences between estimated 

and actual SMI outlays. For example, the Consolidated Appropriations 

Resolution of 2003 and MMA led to greater-than-expected outlays for 

spending for physicians’ services. Technical factors included delayed 

implementation and difficulty in predicting the behavior of providers under 

a new outpatient hospital prospective payment system, misestimates of 

home health transfers to and from the HI fund, and misestimates of service 

usage. Similar to the HI fund, changes in the hospital market basket also 

contributed to differences. Detailed explanations of the differences are 

shown in table 12. 

Nominal dollars in billions

Fiscal year Original outlay estimate Actual outlays Difference

2000 $91,795 $87,216 $4,579

2001 96,372 97,531 -1,159

2002 107,830 107,113 717

2003 108,416 121,816 -13,400

2004 119,353 131,632 -12,279

5-year average dollar difference $-4,308

5-year average difference as a percent of average estimated outlays -4.1%

5-year average dollar difference (absolute value)

5-year percentage difference (absolute value) 

$6,427

6.1%
Appendix I

Illustrative Examples of Triggers and 

Responses for Case Study Accounts

Page 59 GAO-06-276 Budget Triggers

Table 12: Explanation of Differences between Estimated and Actual SMI Outlays 

Nominal dollars in billions

CMS’ explanation of differences

Fiscal year and 

dollar differencea Legislative Economic Technical

2000

$4.6

Benefit payments were $11.6 billion lower 

than expected, which CMS attributed to the 

delayed implementation and difficulty in 

predicting the behavior of providers under 

a new outpatient hospital prospective 

payment system. The system was being 

created from scratch and little research 

had been done on what type of system 

would work best. Original projections had 

an earlier start date, which caused higher 

expenditures to be estimated. This 

overestimate was further increased by 

overestimates of $90 million and $17 

million in transfers to Medicaid and QIOs 

respectively. The resulting overestimate 

was partially offset by a $6.6 billion 

overestimate of home health transfers 

received from the HI fund and a legislative 

proposal expected to save $570 million that 

had been included in the original estimate 

but was not adopted.

2001

-$1.2

Most of the difference is attributed to a 

legislative proposal expected to save $685 

million that was not adopted. Benefit 

payments were $241 million greater than 

expected, which CMS attributed to the 

discrepancy between what they assumed 

service usage to be and actual usage. In 

addition, home health transfers received 

from the HI fund were $242 million less 

than expected.

2002

$0.7

Most of the difference resulted from a $2.1 

billion overestimate of benefit payments, 

which CMS attributed to the discrepancy 

between what they assumed service usage 

to be and actual usage. This overestimate 

was partially offset by a $1.3 billion 

overestimate of home health transfers 

received from the HI fund and a $42 million 

underestimate of transfers to Medicaid. 
Appendix I

Illustrative Examples of Triggers and 

Responses for Case Study Accounts

Page 60 GAO-06-276 Budget Triggers

Source: Centers for Medicare & Medicaid Services.

Notes: Primary drivers of outlay differences are marked in bold.

a

A negative difference means that actual outlays were higher than originally estimated. A positive 

difference means that actual outlays were less than originally estimated.

Currently Existing Program 

Triggers and Responses

Congress has established two triggers with soft and hard responses to 

constrain growth in SMI. First, under the SGR system, if actual physicianrelated spending exceeds target physician-related spending then future 

physician fee schedule updates are reduced. Because the actual versus 

target spending comparison is cumulative, future fee updates are reduced 

to lower future actual spending below future target spending until total 

cumulative actual spending is the same as total cumulative target spending. 

Although the SGR system was designed to encourage fiscal discipline, 

Congress has chosen to modify or override this constraint a number of 

times. We have previously reported on concerns about the SGR system and 

2003

-$13.4

Consolidated Appropriations 

Resolution 2003 was passed 

after the original budget 

estimates, which caused a 

substantially higher physician 

fee update than estimated in 

the projections.

A higher hospital market 

basket (as mentioned in the 

Medicare Part A section) also 

caused higher-than-expected 

outpatient hospital 

expenditures.

The underestimate of benefit payments was 

further increased by a $112 million 

underestimate of transfers to Medicaid, but 

was partially offset by a legislative proposal 

expected to cost $70 million that was not 

adopted and a $16 million overestimate in 

QIOs.

2004

-$12.3

As noted in the Medicare Part A 

section, MMA was passed in 

2003 and some of its provisions 

were implemented in 2004, 

causing higher private plan and 

rural provider expenditures. 

Also, the physician fee update 

was much higher than had 

been originally estimated due 

to the MMA legislation that was 

enacted after the 2004 budget 

estimates were made. 

Consequently, benefit 

payments were $12.2 billion 

greater than expected. 

The underestimate of benefit payments was 

further increased by a $168 million 

underestimate of transfers to Medicaid, but 

was partially offset by a legislative proposal 

expected to cost $55 million that was included 

in the original estimate but not adopted.

(Continued From Previous Page)

Nominal dollars in billions

CMS’ explanation of differences

Fiscal year and 

dollar differencea Legislative Economic Technical
Appendix I

Illustrative Examples of Triggers and 

Responses for Case Study Accounts

Page 61 GAO-06-276 Budget Triggers

considerations for reform.18 Second, MMA established a trigger with a soft 

response; it requires the President to submit a proposal to Congress for 

action if the Medicare Trustees determine in 2 consecutive years that the 

general revenue share of Medicare is projected to exceed 45 percent during 

a 7-year projection period. To date, this threshold has not been breached 

and thus no response has been triggered. As mentioned in the Medicare 

Part A section of this appendix, the trigger is expected to be breached in 

2012, which falls within the specified 7-year projection period that will be 

covered in the 2006 Medicare Trustees’ report. If the 45 percent threshold is 

projected to be breached again in the next consecutive 7-year projection 

period, the President will be required to propose legislation, within 15 days 

of submitting the fiscal year 2009 budget, to respond to the funding 

warning.

Illustrative Trigger and Response Using the trigger of general revenue exceeding 45 percent in 2 consecutive 

years during a 7-year period, hard responses could also be developed. 

Possible responses are to adjust premiums,19 benefit formulas, or eligibility 

criteria. For example, Part B premiums could automatically be increased 

unless Congress took action to prevent the increase. Alternatively, reaching 

the trigger could cause automatic changes to benefit formulas or eligibility 

criteria, or a combination of benefit changes and premium increases. Of 

course congressional action could change the automatic response if it was 

deemed inappropriate at that time.

18GAO, Medicare Physician Payments: Considerations for Reforming the Sustainable 

Growth Rate System, GAO-05-326T (Washington, D.C.: Feb. 10, 2005) and Medicare 

Physician Payments: Concerns about Spending Target System Prompt Interest in 

Considering Reforms, GAO-05-85 (Washington, D.C.: Oct. 8, 2004).

19Part B premiums have seen double-digit increases in the past 3 years, and are expected to 

continue in the future if Congress again decides to override the SGR.
Appendix I

Illustrative Examples of Triggers and 

Responses for Case Study Accounts

Page 62 GAO-06-276 Budget Triggers

Account Name Rail Industry Pension Fund 

Administering Organization Railroad Retirement Board (RRB)

Program Description The RRB administers a Federal retirement-survivor benefit program for the 

nation’s railroad workers and their families, under the Railroad Retirement 

Act. In connection with this retirement program, the RRB has 

administrative responsibilities under the Social Security Act for certain 

benefit payments and railroad workers’ Medicare coverage.

Under the Railroad Retirement Act, retirement and disability annuities are 

paid to railroad workers with at least 10 years of service, or 5 years if 

performed after 1995. Annuities are also payable to spouses and divorced 

spouses of retired workers and to widow(er)s, surviving divorced spouses, 

remarried widow(er)s, children, and parents of deceased railroad workers. 

Qualified railroad retirement beneficiaries are covered by Medicare in the 

same way as Social Security beneficiaries.

Railroad retirement benefits are calculated under a two-tier formula. Tier I 

is based on combined railroad retirement and Social Security credits, using 

Social Security benefit formulas. Tier II is based on railroad service only 

and is similar to the defined benefit pensions paid over-and-above Social 

Security benefits in other industries. In addition, some annuitants may also 

be qualified for supplemental benefits and vested dual benefits. Cost-ofliving adjustments on the Tier I portion of annuities are paid similarly to 

those for Social Security. However, the adjustment for the Tier II portion is 

limited to 32.5 percent of the previous year’s increase in the Consumer 

Price Index. Supplemental annuities and vested dual benefits are not 

subject to cost-of-living adjustments.

Funding Source Payroll taxes paid by railroad employers and their employees are the 

primary source of funding for the railroad retirement benefit program. 

Corresponding to the two-tier benefit structure, railroad retirement taxes 

are levied on a two-tier basis. Railroad retirement Tier I payroll taxes are 

coordinated with Social Security taxes so that employees and employers 

pay Tier I taxes at the same rate as Social Security taxes. In addition, both 

employees and employers pay Tier II taxes, which are used to finance 

railroad retirement benefit payments over-and-above Social Security 

equivalent levels. These Tier II taxes are based on the ratio of certain asset 

balances to the sum of benefit payments and administrative expenses.
Appendix I

Illustrative Examples of Triggers and 

Responses for Case Study Accounts

Page 63 GAO-06-276 Budget Triggers

While the railroad retirement system has remained separate from the Social 

Security system, the two systems are closely coordinated with regard to 

earnings credits, benefit payments, and taxes. The financing of the two 

systems is linked through a financial interchange under which, in effect, the 

portion of railroad retirement annuities that is equivalent to Social Security 

benefits is coordinated with the Social Security system. The purpose of 

this financial coordination is to place the Social Security trust funds in the 

same position they would be in if railroad service were covered by the 

Social Security program instead of the railroad retirement program.

Starting in fiscal year 2002, revenues in excess of benefit payments are 

invested to provide additional trust fund income. The National Railroad 

Retirement Investment Trust (NRRIT), established by the Railroad 

Retirement and Survivors’ Improvement Act of 2001, manages and invests 

railroad retirement assets. The trust is a tax-exempt entity independent 

from the federal government. Railroad retirement funds are invested in 

nongovernmental assets, as well as in governmental securities. Prior to the 

Act, investment of Railroad Retirement Account assets was limited to U.S. 

government securities.

Additional trust fund income is derived from revenues from federal income 

taxes on railroad retirement benefits, and appropriations from general 

Treasury revenues provided after 1974 as part of a phase-out of certain 

vested dual benefits.

Differences between Estimated 

and Actual Outlays

Based on a 5-year average, estimated outlays from the Rail Industry 

Pension Fund differed from actual outlays by about $4.1 billion per year, or 

125.7 percent, in absolute value terms. The actual annual differences 

between estimated and actual outlays varied between an overestimate of 

$77 million and an underestimate of about $17.9 billion. The majority of the 

underestimate was a result of legislation that resulted in funds being 

transferred out of the account and into a nongovernmental investment trust 

fund. Table 13 presents the estimated and actual outlays associated with 

the Rail Industry Pension Fund, by fiscal year.
Appendix I

Illustrative Examples of Triggers and 

Responses for Case Study Accounts

Page 64 GAO-06-276 Budget Triggers

Table 13: Estimated and Actual Rail Industry Pension Fund Outlays, by Fiscal Year

Source: GAO analysis of President’s budget data.

Explanation of Key Differences The discrepancies between estimated and actual outlays in fiscal years 

2002 through 2004 can be attributed to the enactment of the Railroad 

Retirement and Survivors’ Improvement Act of 2001, which was signed into 

law on December 21, 2001. This legislation lowered eligibility requirements 

for annuitants and eliminated reductions that previously applied to 

annuities of 30-year employees retiring between ages 60 and 62. The law 

also lowered the minimum eligibility requirement to receive regular 

annuities from 10 to 5 years of service after 1995 and increased the Tier II 

amount paid to a widow(er) from 50 percent to 100 percent. Additionally, 

the maximum limit on monthly railroad retirement benefits was eliminated. 

The law reduced the Tier II tax rate on rail employers in 2002 and 2003, and 

in 2004 provided automatic Tier II tax rate adjustments for both employers 

and employees. Lastly, funds in excess of those needed for current 

payment of benefits and administrative expenses were transferred to the 

National Railroad Retirement Investment Trust.

Agency officials indicated that the level of employment in the rail industry 

is the most difficult factor to predict when estimating revenue because it 

directly affects payroll tax income. Employment only affects estimates in 

the long term, not short term. When reporting budget estimates to OMB, 

the agency uses middle-range estimates that assume employment will 

decrease gradually over time. Additionally, financial interchanges of the 

estimated allocation of benefits between the Railroad Retirement Account 

and Social Security Equivalent Benefit Account make it difficult to estimate 

Nominal dollars in millions

Fiscal year Original outlay estimate Actual outlays Difference

2000 $3,038 $2,961 $77

2001 3,044 2,967 77

2002 3,078 4,814 -1,736

2003 3,416 21,326 -17,910

2004 3,639 4,225 -586

5-year average dollar difference $-4,016

5-year average difference as a percent of average estimated outlays -123.8%

5-year average dollar difference (absolute value)

5-year percentage difference (absolute value) 

$4,077

125.7%
Appendix I

Illustrative Examples of Triggers and 

Responses for Case Study Accounts

Page 65 GAO-06-276 Budget Triggers

exact outlays as they are continually changing. A detailed explanation of 

the differences is shown in table 14.

Table 14: Explanation of Differences between Estimated and Actual Rail Industry Pension Fund Outlays 

Nominal dollars in billions

RRB’s explanation of differences

Fiscal year and 

dollar differencea Legislative Economic Technical

2000

$0.08

Difference results from changes in 

the estimated allocation of benefits 

between the Railroad Retirement 

Account and Social Security 

Equivalent Benefit Account. The 

actual allocation of benefits 

between these accounts for a given 

calendar year is not known until the 

financial interchange determination 

is completed some 16 months after 

the end of a calendar year (which 

implies about 19 months after the 

end of the fiscal year ending in the 

given calendar year).

2001

$0.08

Difference results from changes in 

the estimated allocation of benefits 

between the Railroad Retirement 

Account and Social Security 

Equivalent Benefit Account. 

2002

$-1.7

The number of retirements increased due to 

the enactment of the Railroad Retirement and 

Survivors’ Improvement Act of 2001, which 

lowered eligibility requirements for 

annuitants and eliminated reductions that 

previously applied to annuities of 30-year 

employees retiring at age 60. The Act also 

lowered the minimum eligibility requirement 

to receive regular annuities from 10 to 5 

years of service after 1995 and increased the 

Tier II amount paid to a widow(er) from 50 

percent to 100 percent. Additionally, the 

maximum limit on monthly railroad 

retirement benefits was eliminated. The Act 

reduced the Tier II tax rate on rail employers 

in 2002 and 2003, and in 2004 provided 

automatic Tier II tax rate adjustments for both 

employers and employees. Funds in excess 

of those required for current payment of 

benefits and administrative expenses, $1.432 

billion, were transferred to the NRRIT.

The original outlay estimates are for 

benefit payments only. 
Appendix I

Illustrative Examples of Triggers and 

Responses for Case Study Accounts

Page 66 GAO-06-276 Budget Triggers

Source: Railroad Retirement Board.

Notes: Primary drivers of outlay differences are marked in bold.

a

A negative difference means that actual outlays were higher than originally estimated. A positive 

difference means that actual outlays were less than originally estimated.

Illustrative Trigger and Response If actual outlays exceeded estimates by more than the historical average, 

Congress could reduce retirement benefits across the board. For example, 

if estimated outlays historically differed from actual outlays by a specified 

percent, increases in outlays above that specified percent could 

automatically result in an across-the-board increase in retirement 

contributions or a cut in retirement benefits. To determine an appropriate 

threshold, rail officials would need to look at long-term historical 

differences to minimize the effects of events such as the legislative change 

in fiscal years 2002 and 2003. 

2003

$-17.9

The number of retirements increased due to 

the enactment of the Railroad Retirement and 

Survivors’ Improvement Act of 2001. Funds 

in excess of those required for current 

payment of benefits and administrative 

expenses, $17.75 billion, were transferred to 

the NRRIT.

The original outlay estimates are for 

benefit payments only. 

2004

$-0.59

Funds in excess of those required for current 

payment of benefits and administrative 

expenses, $586 million, were transferred to 

the NRRIT.

The original outlay estimates are for 

benefit payments only. 

(Continued From Previous Page)

Nominal dollars in billions

RRB’s explanation of differences

Fiscal year and 

dollar differencea Legislative Economic Technical
Appendix I

Illustrative Examples of Triggers and 

Responses for Case Study Accounts

Page 67 GAO-06-276 Budget Triggers

Account Name Unemployment Trust Fund

Administering Organization Employment and Training Administration, 

U.S. Department of Labor

50 states, District of Columbia, Puerto Rico, and the 

Virgin Islands

Program Description Unemployment insurance is designed to serve as a “counter-cyclical” 

remedy to the effects of recessions by putting more dollars in the pockets 

of the labor force, thereby increasing the demand for goods and services 

and stabilizing the U.S. economy. 

The Unemployment Trust Fund (UTF) finances unemployment insurance—

a joint federal-state program that provides temporary cash benefits to 

eligible workers who become unemployed through no fault of their own 

and helps to stabilize the economy in times of economic recession. Guided 

by federal law, unemployed workers must meet certain criteria set by their 

state in order to receive these benefits. Unemployment insurance is 

administered by state employees under state law. 

Extended benefits are paid during periods of high state unemployment. 

Extended benefits are financed one-half by state payroll taxes and one-half 

by the federal unemployment payroll tax. The federal tax also pays for the 

cost of federal and state administration of unemployment insurance, labormarket information programs, veterans’ employment services, and 97 

percent of the costs of the employment service. States may receive 

repayable advances from the UTF when their balances in the fund are 

insufficient to pay benefits. 

Federal unemployment payroll taxes accumulate in three accounts: (1) the 

Employment Security Administration Account (ESAA), which covers both 

federal and state administrative costs; (2) the Extended Unemployment 

Compensation Account (EUCA), which covers the federal share of 

extended unemployment benefits and has been used to fund temporary 

extended unemployment compensation benefits; and (3) the Federal 

Unemployment Account (FUA), which funds loans to insolvent state 

accounts. There is a statutory ceiling on the size of each of these accounts, 

the amounts of which are calculated each September. The ceiling for the 

ESAA account is 40 percent of the appropriated amounts during the fiscal 

year for which the ceiling is being calculated. For the EUCA and FUA 
Appendix I

Illustrative Examples of Triggers and 

Responses for Case Study Accounts

Page 68 GAO-06-276 Budget Triggers

accounts, this ceiling is 0.5 percent of the total covered wages in the prior 

calendar year.

Funding Source The UTF is funded by employer contributions (payroll taxes) and benefit 

reimbursements from nonprofit entities and governmental units that are 

paid in lieu of payroll taxes. The UTF may receive repayable advances from 

the general fund of the Treasury when it has insufficient balances to make 

advances to states or to pay the federal share of extended benefits.

The UTF invests its receipts in U.S. government securities and then draws 

on them when the government needs to pay unemployment benefits and/or 

cover administrative costs. In addition, the Treasury maintains a trust fund 

account for each state that it can use to build up reserves in times of 

economic stability. Forty-nine states have triggers that automatically raise 

state employer taxes when UTF balances fall below a specific level.

States finance the costs of regular unemployment insurance benefits and 

their half of the permanent Extended Benefits Program with employer 

payroll taxes imposed on at least the first $7,000 paid annually to each 

employee. 

Differences between Estimated 

and Actual Outlays

Based on a 5-year average, estimated outlays from the UTF differed from 

actual outlays by about $9.4 billion per year, or 29.6 percent, in absolute 

value terms. However, the actual annual differences varied between an 

overestimate of about $5 billion and an underestimate of about $22 billion. 

Table 15 presents the estimated and actual outlays associated with the 

unemployment program by fiscal year.
Appendix I

Illustrative Examples of Triggers and 

Responses for Case Study Accounts

Page 69 GAO-06-276 Budget Triggers

Table 15: Estimated and Actual Unemployment Trust Fund Outlays, by Fiscal Year

Source: GAO analysis of President’s budget data.

Explanation of Key Differences Because the overall unemployment rate increased over the 5 fiscal years, 

actual UTF outlays also increased as would be expected. UTF outlays are 

highly sensitive to changes in the unemployment rate. For example, 

between 2000 and 2001 the 17.5 percent increase in the unemployment rate 

was associated with a 34.6 percent increase in actual UTF outlays. This 

relationship is best illustrated by referring to figure 8. 

Nominal dollars in millions

Fiscal year Original outlay estimate Actual outlays Difference

2000 $25,773 $20,790 $4,983 

2001 24,708 27,989 -3,281

2002 28,443 50,841 -22,398

2003 40,795 54,617 -13,822

2004 39,830 42,525 -2,695

5-year average dollar difference $-7,443

5-year average difference as a percent of average estimated outlays -23.3%

5-year average dollar difference (absolute value)

5-year percentage difference (absolute value) 

$9,436

29.6%
Appendix I

Illustrative Examples of Triggers and 

Responses for Case Study Accounts

Page 70 GAO-06-276 Budget Triggers

Figure 8: Percent Change in Unemployment Rate versus Percent Change in Actual 

UTF Outlays

Between 2001 and 2002, UTF outlays increased 81.6 percent in response to 

a 23.4 percent increase in the unemployment rate. In 2002, part of the 

outlay increase was due to legislation extending federally-funded 

unemployment insurance benefits through the Temporary Employment 

Compensation Act of 2002 (TEUC) which resulted in unanticipated UTF 

outlays. The unemployment rate continued to rise during this time as 

130,000 workers were displaced after the events on September 11, 2001, 

and the economic recession persisted. Between 2002 and 2003, TEUC 

benefits were extended and the unemployment rate continued to increase 

but did so at a decreasing rate. The 3.4 percent increase in the 

unemployment rate and the subsequent extension of TEUC led to the 7.4 

percent increase in UTF outlays. Between 2003 and 2004, the 

unemployment rate decreased by 8.3 percent and outlays decreased by 

about 22 percent. Table 16 presents the Department of Labor’s (Labor) 

explanation for differences between estimated and actual outlays.

-40

-20

0

20

40

60

80

100

2001 2002 2003 2004

Percent change

Source: GAO analysis of data from the U.S. Bureau of Labor Statistics and the President’s budgets.

Fiscal year

Percent change in actual outlays

Percent change in unemployment rate

Deficit

Surplus 23.4

17.5

34.6

81.6

3.4

7.4

-8.3

-22.1
Appendix I

Illustrative Examples of Triggers and 

Responses for Case Study Accounts

Page 71 GAO-06-276 Budget Triggers

Table 16: Explanation of Differences between Estimated and Actual Unemployment Trust Fund Outlays

Source: Department of Labor.

Notes: Primary drivers of outlay differences are marked in bold.

a

A negative difference means that actual outlays were higher than originally estimated. A positive 

difference means that actual outlays were less than originally estimated.

b

The recipiency rate refers to the number of benefit claims and, more specifically, is the ratio of the 

insured unemployed (claimants) to the total number of unemployed. The rate tends to vary between 

35 and 45 percent.

c

According to the CRS, the terrorist attacks of September 11, 2001 are directly attributed to displacing 

130,000 employees.

d

The Temporary Extended Unemployment Compensation Act (TEUC), as amended, temporarily 

extended unemployment benefits from March 2002 through December 2004.

e

Department of Labor officials did not include the $8 billion Reed Distribution in 2002 as part of the 

explanation of the difference between estimated and actual outlays in fiscal year 2002 because it was 

considered an intragovernmental transfer and was not recorded until the states used the money held in 

the U.S. Treasury. Reed Distributions to states’ accounts occur when funds accumulating in federal 

unemployment accounts reach statutorily set limits. 

Nominal dollars in billions

Labor’s explanation of differences

Fiscal year and 

dollar differencesa Legislative Economic Technical

2000

$5.0

An overestimate of the unemployment rate 

(5 percent estimated versus 4 percent 

actual) explained $4.7 billion of the 

difference.

2001

$-3.3

An underestimate of the recipiency rateb

(38 percent estimated versus 42 percent 

actual) explained $2.9 billion of the 

difference. The recipiency rate increased 

from 37 percent the prior year, which is 

typical for a recession, but was 

unanticipated.c

2002

$-22.4

TEUCd enactment resulted in 

$7.9 billion of unanticipated 

outlays. 

A 1.1 percent underestimate of the 

unemployment rate due to recession resulted 

in a $6.6 billion difference. Underestimates of 

the recipiency rate and the average weekly 

benefit accounted for about $4.8 billion and 

$2.4 billion in outlays, respectively.e

2003

$-13.9

TEUC extension resulted in $11 

billion of unanticipated outlays.

An underestimate of the unemployment rate 

accounted for an additional $2.9 billion.

2004

$-2.7

TEUC extension resulted in $4.3

billion of unanticipated outlays.

Overestimates of the recipiency rate and 

average weekly benefit partly offset the TEUC 

extension.
Appendix I

Illustrative Examples of Triggers and 

Responses for Case Study Accounts

Page 72 GAO-06-276 Budget Triggers

Illustrative Triggers and 

Responses

Currently, when funds accumulating in federal unemployment accounts 

reach statutorily set limits, a distribution of the “excess” funds from the 

UTF to individual states’ accounts in the U.S. Treasury is automatically 

triggered based on each state’s share of covered wages. These 

distributions are known as “Reed Distributions.”20 Congress can also 

legislatively trigger a special distribution21 as it did in March 2002, which 

provided $8 billion in distributions to all 50 states, the District of Columbia, 

Puerto Rico, and the Virgin Islands and extended UTF benefits up to an 

additional 13 weeks longer than the maximum 26 weeks previously allowed 

by most states. 

One potential option to constrain federal spending would be to increase the 

statutory cap on federal unemployment accounts, thus making it more 

difficult to trigger Reed Distributions to states. By making it more difficult 

to trip the trigger, funds could continue to build during economic 

prosperity and be available to states when truly needed to counter rising 

unemployment. 

A different alternative for constraining growth would be to establish a 

trigger using a measure of economic prosperity—such as GDP growth in a 

specified number of consecutive quarters. If this trigger was reached, 

federal unemployment taxes would automatically increase, allowing trust 

fund balances to rise. To avoid procyclical effects, these taxes could be 

automatically reduced again using periods of rising unemployment or 

recession as the trigger for that action.

20Reed Distributions occur when excess funds build up in federal accounts. States can keep 

the money in their trust funds or appropriate the money for administrative costs. Because 

these state funds are held by the U.S. Treasury, they are not recorded as an outlay until the 

states distribute the funds. 

21Special Reed Distributions occur when Congress mandates a distribution to state UTF 

accounts but do not follow all the Reed Act provisions.
Page 73 GAO-06-276 Budget Triggers

Appendix II

Analysis of Total Outlays, Receipts, and Fiscal 

Position ApendxiI

While the focus of this report is on budget triggers as they relate to selected 

case study accounts, we have included our analysis of aggregate receipts, 

outlays, and surplus/deficit measures to provide broader context. Findings 

related to our seven case study accounts and the reasons for differences 

between estimated and actual outlays are discussed in the body of this 

report. More detailed summaries of each account are included in appendix 

I.

Aggregate Mandatory 

Spending Estimates 

Were Close to Actual 

Outlays but Large 

Differences Appear at 

the Account Level

In the aggregate, original estimates of total mandatory spending were fairly 

close to actual results, however large discrepancies were evident at the 

account level. During fiscal years 2000 through 2004, estimated total 

mandatory outlays differed from actuals by no more than about 2 percent, 

or $24 billion. However at the account level, average estimated and actual 

outlays varied greatly. While the largest difference was in the Interest on 

the Public Debt account—a result of other changes—other accounts also 

showed significant changes between estimated and actual outlays. 

Alternatively, there are many mandatory accounts with virtually no 

differences between estimated and actual outlays. The variation among 

individual accounts was not apparent at the aggregate level because the 

combination of positive and negative differences offset each other. 

Figure 9 shows that total spending on mandatory programs was expected 

to rise throughout the 5-year period and that resulting outlays were just 

slightly higher than expected. 
Appendix II

Analysis of Total Outlays, Receipts, and 

Fiscal Position

Page 74 GAO-06-276 Budget Triggers

Figure 9: Estimated and Actual Total Mandatory Outlays for FYs 2000–2004, 

constant 2004 dollars 

Although aggregate estimates were close to actual estimates, the continued 

actual and forecasted growth in mandatory programs has raised concerns 

about the government’s long-term fiscal outlook. Addressing growth in 

mandatory spending is an important but complicated matter that requires 

looking below the aggregate and into specific programs. 

Differences between 

Estimated and Actual 

Mandatory Outlays 

Had Limited Effect on 

the Unified 

Deficit/Surplus

The unified budget deficit/surplus measures federal fiscal position, that is, 

the difference between total annual receipts and outlays. Not surprisingly, 

the relatively small differences between total estimated and actual 

mandatory outlays had a limited effect on the unified budget 

surplus/deficit. In most cases throughout fiscal years 2000 through 2004, 

the difference between estimated and actual mandatory outlays accounted 

for approximately 7 percent or less of the difference between the estimated 

and actual fiscal position. Despite the fact that mandatory outlays were 

close to expectations, surplus/deficit measures proved difficult to estimate 

950

1,000

1,050

1,100

1,150

1,200

1,250

1,300

1,350

2000 2001 2002 2003 2004

Dollars in billions

Source: GAO analysis of President’s budget data.

Fiscal year

Acutal outlays

Original estimates
Appendix II

Analysis of Total Outlays, Receipts, and 

Fiscal Position

Page 75 GAO-06-276 Budget Triggers

throughout the 5-year period, primarily because of misestimates of federal 

receipts.1

 

During fiscal years 2000 through 2004, deficit/surplus projections were 

generally more optimistic than reality. Figure 10 illustrates the estimated 

and actual fiscal position (surplus/deficit) throughout the 5-year period. 

Although increasing surpluses were projected for the first three years 

followed by growing deficits, actual results show that the nation’s fiscal 

position in fact declined throughout the 5-year timeframe. In addition, 

projections for fiscal years 2003 and 2004 show that the deficit was 

expected to grow but not to the magnitude that ultimately resulted. 

Figure 10: Estimated and Actual Surplus/Deficit, Fiscal Years 2000–2004, constant 

2004 dollars

1

Differences between estimated and actual discretionary outlays were much greater than for 

mandatory outlays. However, on the whole, differences in receipts outweighed differences 

in outlays.

-500

-400

-300

-200

-100

0

100

200

300

2000 2001 2002 2003 2004

Dollars in billions

Source: GAO analysis of President’s budget data.

Fiscal year

Actual surplus/deficit

Original estimates

Deficit

Surplus
Appendix II

Analysis of Total Outlays, Receipts, and 

Fiscal Position

Page 76 GAO-06-276 Budget Triggers

The fiscal position represents the difference between total federal revenues 

and outlays in a given year. Although mandatory spending constitutes 

more than half of total federal spending, misestimates of the amount of 

mandatory spending did not contribute significantly to the differences 

between the predicted and actual fiscal position. According to the detailed 

receipt and outlay data shown in table 17, the mandatory outlay difference 

in most cases accounted for less than 7 percent of the difference between 

the estimated and actual fiscal position with one exception. In fiscal year 

2001, the mandatory outlay estimating error had a larger than usual 

effect—approximately 29 percent—on the fiscal position estimating error. 

While this particular year stands out in the analysis, it is a reasonable result 

given that the total amount of error in surplus/deficit projections was much 

smaller—approximately 30 percent or $60 billion—compared with any 

other year during the 5-year period. For example, a $242 billion surplus 

was projected for 2002 when in fact the nation’s fiscal position changed 

from surplus to deficit, resulting in a $165 billion deficit for that year.2

 This 

discrepancy represented a misestimate of approximately 168 percent. In 

both fiscal years 2001 and 2002, mandatory outlay estimates differed from 

actual outlays by approximately 2 percent. This relatively small difference 

accounted for over one quarter of the resulting error in the surplus 

projection for 2001 because the difference between estimated and actual 

receipts also was relatively small. It accounted for less than one-tenth of 

the total error in the fiscal position projection for 2002 because the 

difference between estimated and actual receipts was much larger. Effects 

similar to the latter occurred more frequently throughout the 5-year period, 

indicating that estimation errors in mandatory outlays had a limited effect 

on fiscal position.

2

Budget figures discussed here are in constant 2004 dollars.
Appendix II

Analysis of Total Outlays, Receipts, and 

Fiscal Position

Page 77 GAO-06-276 Budget Triggers

Table 17: Aggregate Estimated and Actual Outlays and Receipts for Fiscal Years 2000–2004

Constant 2004 dollars in billions

Original estimate Actual Difference

Percent of 

original estimate

Percent of 

difference

Fiscal Year 2000

Receipts $2,055.7 $2,210.9 -$155.3 -7.6% 119.7%

Outlays 1,927.6 1,953.1 -25.5 -1.3 19.7

 Discretionary spending 645.7 671.2 -25.4 -3.9 19.6

 Mandatory spending 1,093.7 1,085.0 8.6 0.8 -6.6

 Offsetting receipts -46.8 -46.5 -0.3 0.7 0.3

 Net interest 234.9 243.3 -8.4 -3.6 6.5

Surplus/Deficit $128.1 $257.8 -$129.7 -101.3% 100.0%

Fiscal Year 2001

Receipts $2,154.1 $2,124.4 $29.7 1.4% 49.9%

Outlays 1,957.8 1,987.7 -29.9 -1.5 -50.1

 Discretionary spending 676.3 692.7 -16.4 -2.4 -27.6

 Mandatory spending 1,107.6 1,125.1 -17.5 -1.6 -29.4

 Offsetting receipts -48.4 -50.1 1.7 -3.5 2.9

 Net interest 222.2 220.0 2.2 1.0 3.8

Surplus/Deficit $196.3 $136.7 $59.6 30.3% 100.0%

Fiscal Year 2002

Receipts $2,296.5 $1,941.7 $354.7 15.4% 87.0%

Outlays 2,054.2 2,107.1 -52.8 -2.6 -13.0

 Discretionary spending 724.7 769.4 -44.6 -6.2 -11.0

 Mandatory spending 1,184.1 1,208.2 -24.1 -2.0 -5.9

 Offsetting receipts -51.8 -49.7 -2.1 4.0 -0.5

 Net interest 197.1 179.1 18.0 9.1 4.4

Surplus/Deficit $242.2 -$165.3 $407.6 168.3% 100.0%

Fiscal Year 2003

Receipts $2,093.5 $1,821.9 $271.6 13.0% 89.3%

Outlays 2,175.4 2,207.8 -32.4 -1.5 -10.7

 Discretionary spending 806.5 843.7 -37.2 -4.6 -12.2

 Mandatory spending 1,260.0 1,263.2 -3.2 -0.3 -1.0

 Offsetting receipts -75.7 -55.6 -20.1 26.6 -6.6

 Net interest 184.7 156.5 28.2 15.3 9.3

Surplus/Deficit -$81.9 -$386.0 $304.0 -371.0% 100.0%
Appendix II

Analysis of Total Outlays, Receipts, and 

Fiscal Position

Page 78 GAO-06-276 Budget Triggers

Source: GAO analysis of President’s budget data.

In contrast, revenue estimate inaccuracies proved to have a greater effect 

on projections of the nation’s fiscal position. Throughout the 5-year period, 

total estimated outlays differed from actual outlays by no more than 3 

percent while total estimated receipts differed from actual receipts by up to 

15 percent in absolute value terms. This suggests that revenue, rather than 

outlay estimates, led most significantly to the discrepancies in 

surplus/deficit projections. Figure 11 shows the total estimated and actual 

federal receipts in dollar terms for each year we reviewed.3

 

Fiscal Year 2004

Receipts $1,922.0 $1,880.1 $42.0 2.2% 40.1%

Outlays 2,229.4 2,292.2 -62.8 -2.8 -59.9

 Discretionary spending 818.8 895.4 -76.6 -9.4 -73.1

 Mandatory spending 1,287.9 1,295.1 -7.2 -0.6 -6.9

 Offsetting receipts -53.7 -58.5 4.8 -8.9 4.6

 Net interest 176.4 160.2 16.2 9.2 15.5

Surplus/Deficit -$307.4 -$412.1 $104.7 -34.1% 100.0%

(Continued From Previous Page)

Constant 2004 dollars in billions

Original estimate Actual Difference

Percent of 

original estimate

Percent of 

difference

3

A comparable figure showing total estimated and actual mandatory outlays for fiscal years 

2000 through 2004 is included as figure 9.
Appendix II

Analysis of Total Outlays, Receipts, and 

Fiscal Position

Page 79 GAO-06-276 Budget Triggers

Figure 11: Total Estimated and Actual Receipts, Fiscal Years 2000–2004, constant 

2004 dollars 

As mentioned earlier in this report, the greatest revenue estimating errors 

occurred in 2000, 2002, and 2003, which correlate with the years in which 

the fiscal position projections were the most inaccurate. For example, in 

fiscal year 2002, an approximate 2.6 percent underestimate in total outlays 

coupled with an approximate 15.4 percent overestimate of receipts 

translated into a large shift in fiscal position from surplus to deficit. Similar 

effects occurred in 2000 and 2003. As shown in table 18, the driving source 

of revenue misestimates in any given year varied, but individual and 

corporate income taxes often proved difficult to estimate. 

1,000

1,500

2,000

2,500

2000 2001 2002 2003 2004

Dollars in billions

Source: GAO analysis of President’s budget data.

Fiscal year

Actual receipts

Original estimates
Appendix II

Analysis of Total Outlays, Receipts, and 

Fiscal Position

Page 80 GAO-06-276 Budget Triggers

Table 18: Revenue Estimates and Actual Results by Source and Fiscal Year

Constant 2004 dollars in millions

Component of revenue Original estimate Actual

Actual minus 

original

Percent of 

original

Fiscal Year 2000

Individual income taxes $982,250 $1,096,574 -$114,324 -11.6%

Corporate income taxes 206,721 226,298 -19,578 -9.5

Social insurance taxes and contributions 694,901 712,721 -17,820 -2.6

Excise taxes 76,312 75,180 1,132 1.5

Estate and gift taxes 29,445 31,670 -2,225 -7.6

Customs duties 20,048 21,740 -1,692 -8.4

Miscellaneous receipts 45,991 46,753 -762 -1.7

Total $2,055,668 $2,210,937 -$155,269 -7.6%

Fiscal Year 2001

Individual income taxes $1,037,459 $1,060,855 -$23,396 -2.3%

Corporate income taxes 207,799 161,181 46,618 22.4

Social insurance taxes and contributions 727,707 740,389 -12,682 -1.7

Excise taxes 81,805 70,663 11,143 13.6

Estate and gift taxes 34,465 30,300 4,165 12.1

Customs duties 22,267 20,665 1,602 7.2

Miscellaneous receipts 42,590 40,341 2,249 5.3

Total $2,154,093 $2,124,393 $29,699 1.4%

Fiscal Year 2002

Individual income taxes $1,130,332 $899,356 $230,977 20.4%

Corporate income taxes 229,239 155,117 74,122 32.3

Social insurance taxes and contributions 760,476 734,241 26,234 3.4

Excise taxes 77,557 70,190 7,367 9.5

Estate and gift taxes 30,070 27,773 2,297 7.6

Customs duties 23,614 19,491 4,123 17.5

Miscellaneous receipts 45,165 35,547 9,618 21.3

Total $2,296,452 $1,941,715 $354,737 15.4%
Appendix II

Analysis of Total Outlays, Receipts, and 

Fiscal Position

Page 81 GAO-06-276 Budget Triggers

Source: GAO analysis of President’s budget data.

Fiscal Year 2003

Individual income taxes $1,028,676 $811,304 $217,372 21.1%

Corporate income taxes 210,047 134,701 75,346 35.9

Social insurance taxes and contributions 765,831 728,793 37,038 4.8

Excise taxes 70,552 69,022 1,530 2.2

Estate and gift taxes 23,509 22,446 1,063 4.5

Customs duties 20,244 20,303 -58 -0.3

Miscellaneous receipts -25,371 35,308 -60,679 239.2

Total $2,093,489 $1,821,877 $271,612 13.0%

Fiscal Year 2004

Individual income taxes $849,880 $808,959 $40,921 4.8%

Corporate income taxes 169,060 189,371 -20,311 -12.0

Social insurance taxes and contributions 764,548 733,407 31,141 4.1

Excise taxes 70,905 69,855 1,050 1.5

Estate and gift taxes 23,379 24,831 -1,452 -6.2

Customs duties 20,713 21,083 -370 -1.8

Miscellaneous receipts 38,540 32,565 5,975 15.5

Total $1,937,025 $1,880,071 $56,954 2.9%

(Continued From Previous Page)

Constant 2004 dollars in millions

Component of revenue Original estimate Actual

Actual minus 

original

Percent of 

original
Page 82 GAO-06-276 Budget Triggers

Appendix III

Mandatory Budget Accounts ApendxiI

Table 19: Budget Accounts with Greater than 50 percent Mandatory Outlays

Dollars in millions

Obs. # Agency Account

5-year avg. 

dollar change 

(absolute value)

1 Treasury Interest on Treasury debt securities (gross) $20,016

2 Veterans Affairs Disability compensation benefits* 9,977

3 Labor Unemployment trust fund 9,436

4 Veterans Affairs Compensation* 7,423

5 Agriculture Commodity Credit Corporation fund 6,944

6 Health and Human Services Federal supplementary medical insurance trust fund 6,427

7 Health and Human Services Federal hospital insurance trust fund 5,622

8 Office of Personnel Management Employees health benefits fund* 5,065

9 Health and Human Services Grants to States for Medicaid 4,220

10 Railroad Retirement Board Rail industry pension fund 4,077

11 Health and Human Services Payments to health care trust funds 3,800

12 Housing and Urban Development FHA—mutual mortgage insurance program account* 2,892

13 Veterans Affairs Pensions benefits* 2,528

14 Education Federal direct student loan program account 2,370

15 Health and Human Services Immediate helping hand prescription drug plan* 2,240

16 Postal Service Postal Service fund 2,129

17 Housing and Urban Development FHA—mutual mortgage and cooperative housing insurance 

funds liquidating account

2,067

18 Agriculture Food stamp program 2,058

19 Treasury Temporary State fiscal assistance fund* 2,000

20 Social Security Administration Federal old-age and survivors insurance trust fund 1,979

21 Office of Personnel Management Payment to civil service retirement and disability fund 1,862

22 Allowances Bipartisan economic security plan* 1,600

23 Treasury Payment where child credit exceeds liability for tax 1,582

24 Education Federal family education loan program account 1,573

25 Federal Communications Commission Universal service fund 1,539

26 Health and Human Services Temporary assistance for needy families 1,322

27 Health and Human Services Allowance for Medicare modernization* 1,200

28 Justice September 11th victim compensation (general fund)* 1,192

29 Social Security Administration Payments to social security trust funds 1,168

30 Labor Advances to the Unemployment trust fund and other* funds 1,154

31 Treasury Refunding internal revenue collections, interest 1,153
Appendix III

Mandatory Budget Accounts

Page 83 GAO-06-276 Budget Triggers

32 Office of Personnel Management Government payment for annuitants, employees health 

benefits

1,081

33 Treasury Payment where earned income credit exceeds liability for 

tax

1,004

34 Office of Personnel Management Civil service retirement and disability fund 988

35 Labor Black lung disability trust fund 987

36 Housing and Urban Development FHA—general and special risk insurance funds liquidating 

account

964

37 Health and Human Services State children's health insurance fund 922

38 Transportation Compensation for air carriers* 910

39 Social Security Administration Federal disability insurance trust fund 865

40 International Assistance Programs Foreign military sales trust fund 850

41 Federal Deposit Insurance Corporation Bank insurance fund* 844

42 Treasury Payment to the Resolution Funding Corporation 799

43 International Assistance Programs United States quota, International Monetary Fund* 793

44 Federal Communications Commission Spectrum auction program account* 785

45 Education Federal family education loan liquidating account 778

46 Office of Personnel Management Employees and retired employees health benefits funds* 775

47 Social Security Administration Supplemental security income program 759

48 Agriculture Rural electrification and telecommunications liquidating 

account

681

49 Justice Immigration support* 652

50 Small Business Administration Business loan program account* 625

51 Treasury Interest paid to credit financing accounts 625

52 Justice Crime victims fund 609

53 Veterans Affairs Housing program account 594

54 Labor Pension benefit guaranty corporation fund 581

55 Treasury Claims, judgments, and relief acts 569

56 Agriculture Commodity Credit Corporation export loans program 

account

553

57 Housing and Urban Development FHA—mutual mortgage insurance capital reserve account* 543

58 Housing and Urban Development FHA-general and special risk program account* 536

59 Export-Import Bank of the United States Export-Import Bank loans program account* 516

60 Health and Human Services Child care entitlement to States 499

61 Treasury Federal Financing Bank 488

62 Homeland Security Citizenship and Immigration Services* 471

(Continued From Previous Page)

Dollars in millions

Obs. # Agency Account

5-year avg. 

dollar change 

(absolute value)
Appendix III

Mandatory Budget Accounts

Page 84 GAO-06-276 Budget Triggers

63 Agriculture Agricultural credit insurance fund program account* 467

64 Treasury Exchange stabilization fund 440

65 Justice Immigration services* 418

66 Labor Reemployment accounts* 400

67 Health and Human Services Payments to States for foster care and adoption assistance 392

68 Other Defense Civil Programs Payment to Department of Defense Medicare-eligible retiree 

health care fund*

390

69 Other Defense Civil Programs Payment to military retirement fund 376

70 Railroad Retirement Board National railroad retirement investment trust* 367

71 Railroad Retirement Board Railroad social security equivalent benefit account 363

72 Other Defense Civil Programs Department of Defense Medicare-Eligible retiree health 

care fund*

361

73 Labor Welfare to work jobs 353

74 Homeland Security Retired Pay* 352

75 Department of Defense—Military Allied contributions and cooperation account 346

76 Veterans Affairs Education benefits 324

77 Tennessee Valley Authority Tennessee Valley Authority fund 323

78 Small Business Administration Disaster loans program account* 319

79 Energy Bonneville Power Administration fund 317

80 Department of Defense—Military Pentagon reservation maintenance revolving fund* 317

81 Other Defense Civil Programs Military retirement fund 312

82 Department of Defense—Military Iraq relief and reconstruction fund, Army* 310

83 Agriculture Federal crop insurance corporation fund 310

84 Labor Payments to the Unemployment trust fund* 305

85 Federal Deposit Insurance Corporation Savings association insurance fund* 295

86 Health and Human Services Payments to States for child support enforcement and 

family support programs

284

87 Interior Mineral leasing and associated payments 279

88 Treasury Air transportation stabilization program account* 273

89 Homeland Security National Flood Insurance Fund* 269

90 Interior Interior Franchise Fund* 260

91 Agriculture Farm security and rural investment programs* 254

92 Agriculture Funds for strengthening markets, income, and supply 

(section 32)

241

93 Health and Human Services Allowance for transitional Medicare low-income drug 

assistance*

240

(Continued From Previous Page)

Dollars in millions

Obs. # Agency Account

5-year avg. 

dollar change 

(absolute value)
Appendix III

Mandatory Budget Accounts

Page 85 GAO-06-276 Budget Triggers

94 Federal Emergency Management Agency National flood insurance fund* 227

95 Housing and Urban Development Guarantees of mortgage-backed securities liquidating 

account*

223

96 Veterans Affairs Vocational rehabilitation and employment benefits* 202

97 Department of Defense—Military National defense stockpile transaction fund* 197

98 National Credit Union Administration Credit union share insurance fund 195

99 Federal Deposit Insurance Corporation FSLIC resolution fund 189

100 Export-Import Bank of the United States Export-Import Bank of the United States liquidating account 188

101 Office of Personnel Management Employees life insurance fund 187

102 Education Federal student loan reserve fund* 182

103 Agriculture Rural electrification and telecommunications loans program 

account*

180

104 Transportation Coast Guard military retirement fund* 178

105 Agriculture Child nutrition programs 177

106 Health and Human Services Social services block grant 177

107 Treasury Payment where health care credit exceeds liability for tax* 177

108 Transportation Retired pay* 174

109 Agriculture Rural development insurance fund liquidating account 174

110 Labor Energy employees occupational illness compensation fund* 160

111 Labor Federal unemployment benefits and allowances 159

112 Veterans Affairs Supply fund* 159

113 Health and Human Services Ricky Ray hemophilia relief fund* 150

114 Transportation Payment to Coast Guard military retirement fund* 147

115 Social Security Administration Payment to social security trust funds post-1956 military 

service wage credits*

146

116 Agriculture Forest Service trust funds 139

117 Agriculture Rural housing insurance fund liquidating account 131

118 Treasury Restitution of forgone interest* 129

119 International Assistance Programs Economic assistance loans liquidating account 127

120 Agriculture Agricultural credit insurance fund liquidating account 125

121 Interior Tribal special fund 123

122 Interior Working capital fund* 118

123 Housing and Urban Development Housing for the elderly or handicapped fund liquidating 

account

118

124 District of Columbia Federal payment to the District of Columbia pension fund 117

125 Agriculture Forest Service permanent appropriations 116

(Continued From Previous Page)

Dollars in millions

Obs. # Agency Account

5-year avg. 

dollar change 

(absolute value)
Appendix III

Mandatory Budget Accounts

Page 86 GAO-06-276 Budget Triggers

126 Small Business Administration Disaster loan fund liquidating account 116

127 Health and Human Services Payment to the Ricky Ray hemophilia relief fund* 116

128 Farm Credit System Financial Assistance 

Corporation

Financial Assistance Corporation assistance fund 

liquidating account

116

129 Transportation Ocean freight differential 115

130 Legislative Branch Payments to copyright owners 113

131 Veterans Affairs Housing liquidating account 104

132 Treasury Contribution for annuity benefits* 103

133 Social Security Administration Special benefits for disabled coal miners* 95

134 Labor Special benefits for disabled coal miners* 94

135 International Assistance Programs Foreign military loan liquidating account 93

136 Treasury Treasury forfeiture fund* 88

137 Small Business Administration Business loan fund liquidating account 87

138 Labor Special benefits 86

139 International Assistance Programs Overseas Private Investment Corporation program account* 86

140 Interior Miscellaneous permanent payment accounts 82

141 Agriculture Commodity Credit Corporation guaranteed loans liquidating 

account

81

142 Treasury Payment of anti-terrorism judgments* 80

143 Judicial Branch Judiciary filing fees 80

144 Education Rehabilitation services and disability research 79

145 Treasury Payment where alternative to failing school credit exceeds 

liability for tax*

76

146 International Assistance Programs Foreign military financing loan program account* 70

147 Veterans Affairs National service life insurance fund 70

148 Treasury Internal revenue collections for Puerto Rico 68

149 Corps of Engineers—Civil Works Rivers and harbors contributed funds 67

150 Health and Human Services Retirement pay and medical benefits for commissioned 

officers

67

151 Transportation Miscellaneous trust funds 65

152 United Mine Workers of America Benefit 

Funds

United Mine Workers of America combined benefit fund 63

153 Agriculture Healthy investments in rural environments* 63

154 Railroad Retirement Board Federal payments to the railroad retirement accounts 61

155 Transportation Maritime guaranteed loan (Title XI) program account* 60

156 Agriculture Rural telephone bank liquidating account 60

(Continued From Previous Page)

Dollars in millions

Obs. # Agency Account

5-year avg. 

dollar change 

(absolute value)
Appendix III

Mandatory Budget Accounts

Page 87 GAO-06-276 Budget Triggers

157 General Services Administration General supply fund* 60

158 Veterans Affairs Burial benefits* 59

159 Treasury Continued dumping and subsidy offset* 56

160 Transportation Aviation insurance revolving fund* 56

161 Agriculture Fund for rural America 55

162 Agriculture Payments to states stabilization* 54

163 Health and Human Services Program management* 52

164 Veterans Affairs Burial benefits and miscellaneous assistance* 51

165 Treasury Refunds, transfers, and expenses of operation, Puerto 

Rico*

51

166 Federal Communications Commission Pioneer's preference settlement* 50

167 Treasury Restoration of lost interest, Medicare trust funds* 49

168 Corps of Engineers—Civil Works Revolving fund* 48

169 Agriculture Expenses, Public Law 480, foreign assistance programs, 

Agriculture liquidating account

48

170 Agriculture Expenses and refunds, inspection and grading of farm 

products*

48

171 Justice Working capital fund* 48

172 Department of Defense—Military Army conventional ammunition working capital fund* 48

173 United States Enrichment Corporation Fund United States Enrichment Corporation Fund* 47

174 Health and Human Services Public Health Service Commissioned Corps retirement 

fund*

47

175 Department of Defense—Military Surcharge collections, sales of commissary stores, 

Defense*

46

176 Interior Recreation fee permanent appropriations 45

177 Housing and Urban Development Working capital fund* 44

178 Health and Human Services Transitional drug assistance, Federal supplementary 

medical insurance trust fund*

43

179 Treasury Confiscated and vested Iraqi property and assets* 42

180 Labor Administrative expenses, Energy employees occupational 

illness compensation fund*

40

181 Interior Lower Colorado River Basin development fund 40

182 Treasury Federal Reserve Bank reimbursement fund 38

183 Legislative Branch Government Printing Office revolving fund 38

184 Justice Public safety officers' benefits* 37

185 Interior Permanent operating funds 37

186 Department of State Working capital fund* 36

(Continued From Previous Page)

Dollars in millions

Obs. # Agency Account

5-year avg. 

dollar change 

(absolute value)
Appendix III

Mandatory Budget Accounts

Page 88 GAO-06-276 Budget Triggers

187 Treasury Financial agent services* 36

188 Commerce Census working capital fund* 36

189 Justice Federal Prison Industries, Incorporated* 36

190 Federal Deposit Insurance Corporation Federal deposit insurance fund* 36

191 Interior Upper Colorado River Basin fund* 35

192 Farm Credit System Insurance Corporation Farm credit system insurance fund 35

193 Health and Human Services Payment to health care trust funds for post-1956 military 

service wage credits*

35

194 Justice Assets forfeiture fund 35

195 Health and Human Services Health care fraud and abuse control account 34

196 Health and Human Services Health education assistance loans program account* 33

197 International Assistance Programs Housing and other credit guaranty programs liquidating 

account

33

198 Agriculture Initiative for future agriculture and food systems* 33

199 Justice Radiation exposure compensation trust fund* 32

200 Homeland Security Boat Safety* 30

201 Agriculture Payments to States, northern spotted owl guarantee, Forest 

Service*

29

202 Treasury Working capital fund* 29

203 Corps of Engineers—Civil Works Coastal wetlands restoration trust fund 29

204 Transportation Boat safety* 28

205 Other Defense Civil Programs Contributions* 28

206 Homeland Security Oil Spill Recovery* 28

207 Transportation Oil spill recovery* 28

208 Interior Tribal trust fund 27

209 Interior Compact of free association 27

210 Commerce Promote and develop fishery products and research 

pertaining to American fisheries

26

211 Health and Human Services Payment to Public Health Service Commissioned Corps 

retirement system*

26

212 Central Intelligence Agency Payment to Central Intelligence Agency retirement and 

disability system fund

26

213 Housing and Urban Development Low-rent public housing—loans and other expenses 25

214 Environmental Protection Agency Re-registration and expedited processing revolving fund* 24

215 Health and Human Services HHS service and supply fund* 23

216 Interior Abandoned mine reclamation fund* 23

(Continued From Previous Page)

Dollars in millions

Obs. # Agency Account

5-year avg. 

dollar change 

(absolute value)
Appendix III

Mandatory Budget Accounts

Page 89 GAO-06-276 Budget Triggers

217 Federal Emergency Management Agency Disaster assistance direct loan program account* 23

218 Justice Fees and expenses of witnesses 23

219 Judicial Branch Judiciary information technology fund 22

220 Health and Human Services Vaccine injury compensation program trust fund 22

221 Interior Natural resource damage assessment fund 22

222 Agriculture Miscellaneous trust funds* 21

223 Health and Human Services Promoting safe and stable families 21

224 Interior Payments to the United States territories, fiscal assistance 21

225 Agriculture McGovern-Dole international food for education and child 

nutrition program*

20

226 Treasury Assessment funds 20

227 Transportation Essential air service and rural airport improvement fund* 20

228 Housing and Urban Development Revolving fund (liquidating programs)* 18

229 Agriculture Perishable Agricultural Commodities Act fund 18

230 International Assistance Programs Urban and environmental credit program account* 18

231 Justice Commissary funds, Federal prisons (trust revolving fund)* 18

232 Veterans Affairs Veterans special life insurance fund 18

233 Agriculture Working capital fund* 17

234 Federal Emergency Management Agency Flood map modernization fund* 17

235 Agriculture Trade adjustment assistance for farmers* 16

236 Interior Federal aid in wildlife restoration 16

237 Homeland Security Refunds, transfers, and expenses of operation, Puerto 

Rico*

16

238 Agriculture Milk market orders assessment fund* 16

239 Health and Human Services Health education assistance loans liquidating account 15

240 Transportation Right-of-way revolving fund liquidating account 15

241 Justice Payment to radiation exposure compensation trust fund* 15

242 Interior Working capital fund 15

243 Railroad Retirement Board Railroad unemployment insurance trust fund 15

244 Department of Defense—Military Other DOD trust funds 14

245 Veterans Affairs Franchise fund* 14

246 Treasury Office of Thrift Supervision* 14

247 Justice Diversion control fee account 14

248 General Services Administration Panama Canal revolving fund* 14

249 National Science Foundation Donations 13

(Continued From Previous Page)

Dollars in millions

Obs. # Agency Account

5-year avg. 

dollar change 

(absolute value)
Appendix III

Mandatory Budget Accounts

Page 90 GAO-06-276 Budget Triggers

250 Farm Credit System Financial Assistance 

Corporation

Financial assistance corporation trust fund* 13

251 District of Columbia District of Columbia Federal pension liability trust fund 12

252 Interior Colorado River dam fund, Boulder Canyon project 12

253 Interior Sport fish restoration 12

254 Treasury Presidential election campaign fund* 12

255 United Mine Workers of America Benefit 

Funds

United Mine Workers of America 1992 benefit plan 12

256 Department of State Payment to Foreign Service retirement and disability fund 12

257 Health and Human Services Miscellaneous trust funds 11

258 Commerce Emergency steel guaranteed loan program account* 11

259 Health and Human Services State grants and demonstrations* 11

260 Health and Human Services Children's research and technical assistance 10

261 Agriculture Rural strategic investment program grants* 10

262 Health and Human Services Contingency fund* 10

263 Federal Emergency Management Agency National flood mitigation fund* 10

264 Agriculture Rural economic development grants 10

265 Interior Everglades watershed protection* 10

266 Interior Other permanent appropriations 10

267 Health and Human Services Vaccine injury compensation* 9

268 Federal Emergency Management Agency Disaster assistance direct loan liquidating account* 9

269 Interior Interior Franchise Fund* 9

270 Federal Deposit Insurance Corporation Office of Inspector General 9

271 Veterans Affairs Post-Vietnam era veterans education account 9

272 Federal Retirement Thrift Investment Board Program expenses 9

273 Interior Assistance to territories* 9

274 Commerce Working capital fund* 8

275 Department of Defense—Military Buildings maintenance fund* 8

276 Department of State Miscellaneous trust funds 8

277 Interior Helium fund 8

278 Other Defense Civil Programs Education benefits fund 8

279 Justice Independent counsel 8

280 Corps of Engineers—Civil Works Washington aqueduct* 8

281 Interior Reclamation trust funds* 8

282 Agriculture Rural cooperative development grants* 8

(Continued From Previous Page)

Dollars in millions

Obs. # Agency Account

5-year avg. 

dollar change 

(absolute value)
Appendix III

Mandatory Budget Accounts

Page 91 GAO-06-276 Budget Triggers

283 Energy Emergency fund, Western Area Power Administration* 8

284 United Mine Workers of America Benefit 

Funds

Federal payment to United Mine Workers of America 

combined benefit fund*

8

285 Agriculture Rural business investment program account* 7

286 Education College housing and academic facilities loans liquidating 

account

7

287 Interior Miscellaneous trust funds* 7

288 Veterans Affairs Service-disabled veterans insurance fund 7

289 Legislative Branch Gift and trust fund accounts 7

290 Agriculture Local television loan guarantee program account* 7

291 Housing and Urban Development Community development loan guarantees liquidating 

account*

7

292 Transportation Working Capital Fund* 7

293 Department of State Foreign Service retirement and disability fund 7

294 Public Company Accounting Oversight 

Board

Public Company Accounting Oversight Board* 7

295 Agriculture Miscellaneous trust funds 7

296 Department of Defense—Military Foreign national employees separation pay 7

297 Transportation Federal ship financing fund liquidating account 7

298 Interior Cooperative fund (Papago)* 6

299 Commerce Coastal zone management fund 6

300 Energy Continuing fund, Southeastern Power Administration* 6

301 International Assistance Programs Overseas Private Investment Corporation liquidating 

account*

6

302 Housing and Urban Development Rental housing assistance fund* 6

303 Interior Miscellaneous trust funds 6

304 Treasury Federal interest liabilities to States 6

305 Department of Defense—Military Voluntary separation incentive fund 5

306 Labor Special workers' compensation expenses 5

307 Health and Human Services State grants and demonstrations* 5

308 Housing and Urban Development Community development loan guarantees program 

account*

5

309 Interior Miscellaneous permanent appropriations 5

310 Interior Contribution for annuity benefits* 5

311 Health and Human Services Job opportunities and basic skills training program* 5

312 Veterans Affairs Miscellaneous veterans housing loans program account* 5

(Continued From Previous Page)

Dollars in millions

Obs. # Agency Account

5-year avg. 

dollar change 

(absolute value)
Appendix III

Mandatory Budget Accounts

Page 92 GAO-06-276 Budget Triggers

313 Agriculture Miscellaneous contributed funds* 5

314 Commerce Economic development revolving fund liquidating account* 5

315 Commerce Environmental improvement and restoration fund* 5

316 Veterans Affairs Veterans reopened insurance fund 5

317 Agriculture Conservation reserve program* 4

318 Veterans Affairs Canteen service revolving fund* 4

319 Legislative Branch U.S. Capitol Preservation Commission* 4

320 Commerce Federal ship financing fund fishing vessels liquidating 

account*

4

321 Interior Payments for trust accounting deficiencies* 4

322 National Credit Union Administration Operating fund* 4

323 Railroad Retirement Board Supplemental annuity pension fund* 4

324 Agriculture National Sheep Industry Improvement Center* 4

325 Agriculture Road and trail fund* 4

326 Commerce Payments to NOAA commissioned officer corps retirement 

fund*

4

327 Treasury Administering the public debt* 4

328 International Assistance Programs Loan guarantees to Israel program account* 4

329 Agriculture Renewable energy program account* 4

330 District of Columbia Federal payment for water and sewer services* 4

331 Department of Defense—Military Host nation support fund for relocation 4

332 Standard Setting Body Payment to standard setting body* 4

333 Agriculture Miscellaneous contributed funds 3

334 Interior Bureau of Reclamation loan liquidating account 3

335 General Services Administration Disposal of surplus real and related personal property 3

336 Legislative Branch Gifts and donations 3

337 Commerce National Oceanic and Atmospheric Administration 

Commissioned Officer Corps retirement*

3

338 Treasury Informant payments* 3

339 Legislative Branch Judiciary office building development and operations fund* 3

340 Department of State Foreign Service national separation liability trust fund 3

341 Treasury Refunds, transfers and expenses, Unclaimed and 

abandoned goods*

3

342 Agriculture Wetlands reserve program 3

343 Agriculture Expenses and refunds, inspection and grading of farm 

products

3

(Continued From Previous Page)

Dollars in millions

Obs. # Agency Account

5-year avg. 

dollar change 

(absolute value)
Appendix III

Mandatory Budget Accounts

Page 93 GAO-06-276 Budget Triggers

344 Transportation Operations and maintenance (Harbor services fee 

collections)*

3

345 Veterans Affairs General post fund, national homes 3

346 Judicial Branch Judicial officers' retirement fund 3

347 National Archives and Records 

Administration

National archives gift fund* 3

348 Office of Personnel Management Government payment for annuitants, employee life 

insurance

3

349 Vietnam Education Foundation Vietnam debt repayment fund* 3

350 Agriculture Miscellaneous contributed funds 2

351 Commerce Damage assessment and restoration revolving fund 2

352 Housing and Urban Development Manufactured home inspection and monitoring* 2

353 Interior Migratory bird conservation account 2

354 Interior Indian direct loan program account* 2

355 Transportation Operations and maintenance* 2

356 General Services Administration Expenses of transportation audit contracts and contract 

administration

2

357 International Assistance Programs Miscellaneous trust funds, AID* 2

358 Commerce Fisheries finance program account* 2

359 Department of Defense—Military Other DOD trust revolving funds* 2

360 Health and Human Services Medical facilities guarantee and loan fund 2

361 Veterans Affairs Service members' group life insurance fund* 2

362 Farm Credit Administration Revolving fund for administrative expenses* 2

363 Federal Housing Finance Board Federal housing finance board* 2

364 Judicial Branch Registry Administration 2

365 Legislative Branch Compensation of members and related administrative 

expenses

2

366 Small Business Administration Pollution control equipment fund liquidating account* 2

367 Corps of Engineers—Civil Works Permanent appropriations 2

368 Corps of Engineers—Civil Works Payment to South Dakota terrestrial wildlife habitat 

restoration trust fund*

2

369 Commerce Limited access system administration fund* 2

370 Homeland Security US Customs Refunds, Transfers and Expenses, Unclaimed 

and Abandoned Goods*

2

371 Agriculture Wildlife habitat incentives program 2

372 Veterans Affairs Insurance benefits 2

(Continued From Previous Page)

Dollars in millions

Obs. # Agency Account

5-year avg. 

dollar change 

(absolute value)
Appendix III

Mandatory Budget Accounts

Page 94 GAO-06-276 Budget Triggers

373 District of Columbia Federal payment to the District of Columbia judicial 

retirement and survivors annuity fund*

2

374 Morris K. Udall Scholarship and Excellence 

in National Environmental Policy Foundation

Environmental dispute resolution fund* 2

375 Agriculture Farm storage facility loans program account* 2

376 Department of Defense—Military Miscellaneous special funds* 2

377 Housing and Urban Development Elderly vouchers* 2

378 Department of State International litigation fund 2

379 Interior National Indian Gaming Commission, Gaming activity fees 2

380 Treasury Interest on uninvested funds 2

381 Transportation Railroad rehabilitation and improvement liquidating account 2

382 Environmental Protection Agency Abatement, control, and compliance direct loan liquidating 

account*

2

383 Panama Canal Commission Panama Canal Commission dissolution fund* 2

384 Interior White Earth settlement fund 1

385 Interior Indian loan guaranty and insurance fund liquidating 

account*

1

386 Transportation Emergency preparedness grants 1

387 Legislative Branch Congressional use of foreign currency, House of 

Representatives

1

388 Agriculture Rural communication development fund liquidating account* 1

389 Commerce Franchise fund* 1

390 Justice United States trustee system fund* 1

391 Interior Revolving fund for loans liquidating account 1

392 Interior National forests fund, Payment to States 1

393 Interior Recreational fee program 1

394 Interior Miscellaneous trust funds 1

395 Treasury Federal tax lien revolving fund* 1

396 International Assistance Programs Microenterprise and small enterprise development program 

account*

1

397 Interior Contributed funds 1

398 Interior Miscellaneous permanent appropriations 1

399 Treasury Check forgery insurance fund 1

400 Treasury Payment to terrestrial wildlife habitat restoration trust fund* 1

401 District of Columbia District of Columbia judicial retirement and survivors annuity 

fund

1

402 Environmental Protection Agency Abatement, control, and compliance loan program account* 1

(Continued From Previous Page)

Dollars in millions

Obs. # Agency Account

5-year avg. 

dollar change 

(absolute value)
Appendix III

Mandatory Budget Accounts

Page 95 GAO-06-276 Budget Triggers

403 Harry S. Truman Scholarship Foundation Harry S. Truman memorial scholarship trust fund 1

404 James Madison Memorial Fellowship 

Foundation

James Madison Memorial Fellowship trust fund 1

405 Legislative Branch John C. Stennis Center for Public Service Training and 

Development trust fund

1

406 National Archives and Records 

Administration

National archives trust fund* 1

407 Agriculture Agricultural resource conservation demonstration program 

account*

1

408 Agriculture Rural economic development loans program account* 1

409 Housing and Urban Development Manufactured housing fees trust fund* 1

410 Labor Panama Canal Commission compensation fund 1

411 Department of State Miscellaneous trust funds, information and exchange 

programs*

1

412 Interior Operation and maintenance of quarters 1

413 Veterans Affairs Special therapeutic and rehabilitation activities fund* 1

414 Equal Employment Opportunity Commission EEOC education, technical assistance, and training 

revolving fund*

1

415 International Assistance Programs Peace Corps miscellaneous trust fund 1

416 Judicial Branch Judicial survivors' annuities fund 1

417 Legislative Branch Congressional use of foreign currency, Senate 1

418 Social Security Administration Special benefits for certain World War II veterans* 1

419 Appalachian Regional Commission Miscellaneous trust funds 1

420 Broadcasting Board of Governors Foreign Service national separation liability trust fund* 1

421 Christopher Columbus Fellowship 

Foundation

Christopher Columbus Fellowship Foundation* 1

422 Agriculture Limitation on inspection and weighing services expenses* 1

423 Agriculture Rural development loan fund liquidating account 1

424 Agriculture Biomass research and development* 1

425 Energy Payments to States under Federal Power Act 1

426 Health and Human Services Revolving fund for certification and other services* 1

427 Labor Working capital fund* 1

428 Interior Range improvements 1

429 Interior Cooperative endangered species conservation fund* 1

430 Interior Everglades restoration account 1

431 Interior Leases of lands acquired for flood control, navigation, and 

allied purposes

1

(Continued From Previous Page)

Dollars in millions

Obs. # Agency Account

5-year avg. 

dollar change 

(absolute value)
Appendix III

Mandatory Budget Accounts

Page 96 GAO-06-276 Budget Triggers

432 Interior Contributed funds* 1

433 Treasury Payment of Government losses in shipment* 1

434 Treasury Terrorism insurance program* 1

435 Transportation Amtrak corridor improvement loans liquidating account* 1

436 Federal Emergency Management Agency National insurance development fund* 1

437 International Assistance Programs Property management fund* 1

438 International Assistance Programs Foreign Service national separation liability trust fund 1

439 Judicial Branch Gifts and donations, Federal Judicial Center Foundation 1

440 Legislative Branch Senate revolving funds* 1

441 Morris K. Udall Scholarship and Excellence 

in National Environmental Policy Foundation

Morris K. Udall Scholarship and Excellence in National 

Environmental Policy Foundation*

1

442 Other Defense Civil Programs White House commission on the national moment of 

remembrance*

1

443 Telecommunications Development Fund Telecommunications development fund* 1

444 Agriculture Distance learning, telemedicine, and broadband program* 0

445 Agriculture Rural economic development loans liquidating account* 0

446 Agriculture Facilities acquisition and enhancement fund* 0

447 Housing and Urban Development Homeownership assistance fund* 0

448 Housing and Urban Development Consolidated fee fund* 0

449 Department of State International Center, Washington, D.C.* 0

450 Interior Donations and contributed funds* 0

451 Treasury Collection Contractor Support* 0

452 Veterans Affairs United States Government life insurance fund 0

453 Veterans Affairs Medical facilities revolving fund* 0

454 Veterans Affairs Veterans extended care revolving fund* 0

455 International Assistance Programs Kuwait civil reconstruction trust fund* 0

456 Judicial Branch United States Court of Federal Claims Judges' retirement 

fund

0

457 Legislative Branch Compensation of members, Senate 0

458 Legislative Branch Tax Court judges survivors annuity fund* 0

459 Agriculture Emergency boll weevil loan program account* 0

460 Agriculture Gifts and bequests 0

461 Agriculture Apple loans program account* 0

462 Agriculture Rural community fire protection grants* 0

463 Agriculture National sheep industry improvement center revolving fund* 0

464 Agriculture Land acquisition reinvestment fund* 0

(Continued From Previous Page)

Dollars in millions

Obs. # Agency Account

5-year avg. 

dollar change 

(absolute value)
Appendix III

Mandatory Budget Accounts

Page 97 GAO-06-276 Budget Triggers

465 Energy Continuing fund, Southwestern Power Administration* 0

466 Energy Advances for cooperative work* 0

467 Housing and Urban Development Interstate land sales* 0

468 Department of State Foreign service national defined contributions retirement 

fund*

0

469 Department of State USIA Foreign Service national separation liability trust fund* 0

470 Interior Dutch John community assistance* 0

471 Transportation Saint Lawrence Seaway Development Corporation* 0

472 Transportation Minority business resource center program* 0

473 Federal Financial Institutions Examination 

Council Appraisal Subcommittee

Registry fees 0

474 International Assistance Programs Private sector revolving fund liquidating account* 0

475 Japan-United States Friendship Commission Japan-United States Friendship trust fund 0

476 National Credit Union Administration Community development credit union revolving loan fund* 0

477 Other Defense Civil Programs Wildlife conservation 0

478 Other Defense Civil Programs Soldiers' and airmen's home revolving fund* 0

479 Other Defense Civil Programs White House commission on the national moment of 

remembrance*

0

480 Allowances Contingent offset for the refundable portion of the health 

care tax credit*

0

481 Barry Goldwater Scholarship and Excellence 

in Education Foundation

Barry Goldwater Scholarship and Excellence in Education 

Foundation

0

482 Agriculture P.L. 480 title I food for progress credits, program account* 0

483 Commerce Gifts and bequests 0

484 Department of Defense—Military Concurrent receipt accrual payments to the Military 

Retirement Fund*

0

485 Department of Defense—Military Restoration of the Rocky Mountain Arsenal* 0

486 Education Reading excellence* 0

487 Education School construction* 0

488 Education Class size reduction and teacher financing* 0

489 Education Perkins loan revolving fund* 0

490 Education Federal family education loan insurance fund* 0

491 Health and Human Services State legalization impact assistance grants* 0

492 Health and Human Services Health maintenance organization loan and loan guarantee 

fund*

0

493 Homeland Security Disaster assistance direct loan program account* 0

494 Housing and Urban Development Empowerment zones/enterprise communities* 0

(Continued From Previous Page)

Dollars in millions

Obs. # Agency Account

5-year avg. 

dollar change 

(absolute value)
Appendix III

Mandatory Budget Accounts

Page 98 GAO-06-276 Budget Triggers

495 Justice Civil liberties public education fund* 0

496 Labor Foreign labor certification processing* 0

497 Interior Bureau of Reclamation loan program account* 0

498 Interior Miscellaneous permanent appropriations* 0

499 Interior Payment to tribe, Lower Brule Sioux Trust Fund* 0

500 Interior Miscellaneous Indian trust payments* 0

501 Interior Operation and maintenance of quarters* 0

502 Interior Operation and maintenance of quarters* 0

503 Interior Fee collection support, national park system* 0

504 Interior National park renewal fund* 0

505 Interior Concessions improvement accounts* 0

506 Interior Park concessions franchise fees* 0

507 Interior African elephant conservation fund* 0

508 Interior Miscellaneous permanent appropriations* 0

509 Treasury Payment to Justice, FIRREA related claims* 0

510 Treasury Payments to the farm credit system financial assistance 

corporation liquidating account*

0

511 Treasury Miscellaneous activities to be authorized in tobacco 

legislation*

0

512 Treasury Miscellaneous permanent appropriations* 0

513 Transportation Railroad rehabilitation and improvement program* 0

514 Transportation Aviation user fees 0

515 Veterans Affairs Veterans housing benefit program fund* 0

516 Veterans Affairs Reinstated entitlement program for survivors under P.L. 97-

377*

0

517 Veterans Affairs Miscellaneous veterans housing loans guaranteed loan 

financing account*

0

518 Veterans Affairs Medical care cost recovery fund* 0

519 District of Columbia District of Columbia Federal pension fund* 0

520 District of Columbia Federal payment for water and sewer services* 0

521 Environmental Protection Agency Revolving fund for certification and other services* 0

522 General Services Administration Working capital fund* 0

523 General Services Administration Acquisition workforce training fund* 0

524 General Services Administration Pennsylvania Avenue activities* 0

525 General Services Administration Land acquisition and development fund* 0

(Continued From Previous Page)

Dollars in millions

Obs. # Agency Account

5-year avg. 

dollar change 

(absolute value)
Appendix III

Mandatory Budget Accounts

Page 99 GAO-06-276 Budget Triggers

Source: GAO analysis of President’s budget data.

Note: The shaded rows indicate the 7 case study accounts discussed in appendix I. Accounts with 

fewer than 5 years of data are denoted with an “*.”

526 International Assistance Programs Payment to the Foreign Service retirement and disability 

fund

0

527 Judicial Branch Payment to judiciary trust funds 0

528 Legislative Branch Gifts and donations* 0

529 Legislative Branch United States Capitol Police memorial fund* 0

530 National Aeronautics and Space 

Administration

National Space Grant Program* 0

531 National Aeronautics and Space 

Administration

Science, space, and technology education trust fund 0

532 Other Independent Agencies Foreign service national separation liability trust fund* 0

533 Other Independent Agencies Miscellaneous trust funds* 0

534 Tennessee Valley Authority Tennessee Valley Authority Office of the Inspector General* 0

Total $162,987

(Continued From Previous Page)

Dollars in millions

Obs. # Agency Account

5-year avg. 

dollar change 

(absolute value)
Page 100 GAO-06-276 Budget Triggers

Appendix IV

GAO Contact and Acknowledgments ApendxiIV

GAO Contact Susan J. Irving, (202) 512-9142, irvings@gao.gov

Acknowledgments In addition to the individual named above, Christine Bonham, Assistant 

Director, as well as Carol Henn, Richard Krashevski, Leah Nash, Sheila 

Rajabiun, Paul Posner, and Stephanie Wade made key contributions to this 

report. 

(450410)
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