United States General Accounting Office

GAO Fact Sheet for the Chairman, Committee

on the Budget, House of Representatives

August 1995 BUDGET ISSUES

Earmarking in the

Federal Government

GAO/AIMD-95-216FS

GAO United States

General Accounting Office

Washington, D.C. 20548

Accounting and Information

Management Division

B-262146 

August 1, 1995

The Honorable John R. Kasich

Chairman, Committee on the Budget

House of Representatives

Dear Mr. Chairman:

This fact sheet responds to your request that we identify the extent to

which federal receipts have been earmarked in fiscal year 1994. In our

analysis, we considered receipts to be earmarked when they were

designated for particular uses by authorizing legislation or permanent law.

To provide information on how extensive earmarking is in the budget, you

asked us to determine what percent of total receipts from the public are

earmarked and the level of earmarking by fund type. You also asked us to

obtain information on the extent of earmarking at the state government

level.

In summary, we found extensive earmarking in numerous accounts, such

as those financing the Land and Water Conservation Fund, the Medicare

trust funds, as well as the transportation trust funds. Our analysis showed

that in fiscal year 1994 roughly $690 billion, or 47 percent, of total receipts

from the public1

 were earmarked in the federal budget. This percentage is

about the same as what we found during our last review of earmarking for

fiscal year 1988 when about 48 percent of total receipts from the public

were earmarked.2

There are six types of budget accounts—nonrevolving trust, public

enterprise, special, intragovernmental, general, and revolving trust. Of

these types, only “general fund” accounts are used to account for

collections that are not earmarked by law for a specific purpose. However,

some general fund accounts also receive earmarked receipts in the form of

offsetting collections—either from the public or from federal

sources—which are credited directly to the account and are available for

use, often without further legislative action. The remaining five types of

accounts are designed for programs primarily financed by earmarked

receipts.

1

We define total receipts from the public to include total receipts, total proprietary receipts from the

public, total offsetting governmental receipts, and total collections from the public credited to

expenditure accounts. To determine the percentage of total receipts from the public that were

earmarked, we removed intrafund and interfund transactions and offsetting collections from federal

sources from our earmarked total.

2

Budget Issues: Earmarking in the Federal Government (GAO/AFMD-90-8FS, Jan. 19, 1990).

Page 1 GAO/AIMD-95-216FS Earmarking in the Federal Government
B-262146 

All budget accounts are classified as either expenditure or receipt

accounts. Receipt accounts record income while expenditure accounts

record outlays. Some offsetting collections are credited directly to

expenditure accounts. The fiscal year 1994 federal budget had 574 special

and trust fund receipt accounts that received some earmarked receipts. In

addition, 567 expenditure accounts received offsetting collections.

Nonrevolving trust funds accounted for about $520 billion, or roughly 75

percent, of all earmarked receipts from the public. Nonrevolving trust

funds finance large entitlement programs (such as Social Security and

Medicare) and transportation infrastructure construction and maintenance

through the transportation trust funds. Public enterprise revolving funds

accounted for about $126 billion, or roughly 18 percent, of all earmarked

receipts from the public. This fund type receives amounts generated in a

continuing cycle of business-type activity. Examples include the Postal

Service and the Export Import Bank. The other four fund types—special,

intragovernmental, general, and nonrevolving trust—accounted for

roughly $44 billion, or about 7 percent, of earmarked receipts from the

public. The tables in appendix I describe each fund type and summarize

earmarked receipts by fund type.

On average, states earmark less of their revenues than the federal

government. According to a recent report by the National Conference of

State Legislatures (NCSL), states earmark about 24 percent of their

collections. However, this average masks a great variation among states in

the extent of earmarking. For instance, Alabama earmarks roughly

87 percent of its collections, while Kentucky earmarks only about

4 percent. NCSL reports that while the earmarked share of state tax

collections has remained near 23 percent since 1979, state legislatures

appear to be turning more readily to earmarking taxes than they did in the

recent past. As it has in previous reports, NCSL points out that earmarking

is more likely to hamper than assist state budgetary design and

management. Appendix II details the NCSL report findings and lists the

proportion of tax revenue earmarked by state for fiscal year 1993.

Scope and

Methodology

To determine the extent of earmarking of federal revenues for fiscal year

1994, we used an Office of Management and Budget budget information

system—the MAX budget system—to sort earmarked receipt accounts by

fund type. We also used this database to identify accounts with offsetting

collections. We did not independently verify this information.

Page 2 GAO/AIMD-95-216FS Earmarking in the Federal Government
B-262146 

The information on earmarked receipts by fund type includes offsetting

collections from the public and from federal sources as well as intrafund

and interfund transactions in the earmarked receipts category.

To determine the percentage of total receipts from the public that were

earmarked, we removed from our earmarked total intrafund and interfund

transactions and offsetting collections from federal sources. We did this in

order to avoid double counting these collections. We divided this adjusted

total by the $1,463 billion of fiscal year 1994 receipts from the public to

determine the percentage of receipts from the public that were earmarked.

Finally, we summarized the findings of a recent NCSL report to provide

information on the extent of earmarking at the state level.

We performed our work in July 1995 in Washington, D.C. We discussed our

summary of the NCSL report with NCSL officials.

We will send copies of this report to the Chairman, Senate Budget

Committee, and the Ranking Members of both House and Senate Budget

Committees. We will make copies available to others on request.

Major contributors to this fact sheet were Christine Bonham, Assistant

Director; Timothy L. Minelli, Evaluator-in-Charge; and John W. Mingus,

Evaluator. Please contact me on (202) 512-9573 if you or your staff have

any questions.

Sincerely yours,

Paul L. Posner

Director, Budget Issues

Page 3 GAO/AIMD-95-216FS Earmarking in the Federal Government
Appendix I 

Earmarking by Fund Type

The following sections and tables describe the different kinds of accounts

and identify earmarked receipts by receipt type within each. Account

types are presented according to the dollar size of earmarked receipts.

Nonrevolving Trust

Fund Accounts

Nonrevolving trust fund accounts record revenues collected for a specific

purpose or programs designated in law as trust funds. Nonrevolving trust

fund accounts finance programs such as Social Security, Medicare, and

Superfund. Other nonrevolving trust funds include the Unemployment

Trust Fund, the Highway Trust Fund, the Airport and Airway Trust Fund,

the Inland Waterways Trust Fund, and the Harbor Maintenance Trust

Fund. Excluding receipts received from intrafund and interfund

transactions and offsetting collections from federal sources, nonrevolving

trust funds accounted for roughly $520 billion, or about 75 percent, of total

earmarked receipts from the public in fiscal year 1994. Including these

receipts adds another $212 billion to the nonrevolving trust fund total.

Interfund transactions, which include Department of the Treasury interest

payments to nonrevolving trust funds, accounted for over $206 billion of

this additional total.

Table I.1 shows nonrevolving trust fund receipts by receipt type. These

totals for types of receipts were drawn from the 330 nonrevolving trust

fund receipt accounts, as well as the 14 nonrevolving trust fund

expenditure accounts credited with offsetting collections, in the fiscal year

1994 budget.

Page 4 GAO/AIMD-95-216FS Earmarking in the Federal Government
Appendix I 

Earmarking by Fund Type

Table I.1: Nonrevolving Trust Fund

Earmarked Receipts Dollars in thousands

Receipt type

Fiscal year

1994 actual

Receipts from the public

Social insurance $461,475,337

Proprietary receiptsa 32,285,248

Excise taxes 23,998,744

Customs duties 677,106

Corporate income taxes 652,695

Miscellaneous receiptsb 578,074

Offsetting collections from the public 510,325

Subtotal $520,177,529

Interfund transactionsc 206,635,037

Intrafund transactionsd 3,526,608

Offsetting collections from federal sources 1,959,422

Total $732,298,596

aProprietary receipts are collections from the public that arise as a result of the government’s

business-type or market-oriented activities. Among these are interest received, proceeds from the

sale of property and products, and rents and royalties.

bMiscellaneous receipts include, among other things, proceeds from the sale of seized goods,

and gifts and donations.

cInterfund transactions are payments from one fund group, either federal or trust, to a receipt

account in the other fund group. Such transactions include Department of the Treasury interest

payments to trust funds.

dIntrafund transactions are those in which both the payment and receipt occur within the same

fund group.

Public Enterprise

Revolving Fund

Accounts

Public enterprise revolving fund accounts receive amounts generated in a

continuing cycle of business-type operations. Examples include the Postal

Service and the Export Import Bank, which are both government

organizations originally established to be substantially self-financed

through the sale of their goods or services. Excluding offsetting

collections from federal sources, public enterprise trust funds accounted

for about $126 billion, or 18 percent, of all earmarked receipts from the

public in fiscal year 1994.

Table I.2 identifies offsetting collections credited to public enterprise fund

accounts. These totals were drawn from the 115 public enterprise

Page 5 GAO/AIMD-95-216FS Earmarking in the Federal Government
Appendix I 

Earmarking by Fund Type

revolving fund accounts that received offsetting collections in the fiscal

year 1994 budget.

Table I.2: Offsetting Collections

Credited to Public Enterprise Fund

Earmarked Accounts

Dollars in thousands

Receipt type

Fiscal year

1994 actual

Offsetting collections from the public $125,822,415

Offsetting collections from federal sources 8,353,263

Total $134,175,678

Special Fund

Accounts

Special fund accounts are established to record receipts collected from a

specific source and earmarked by law for a specific purpose or program.

Special funds operate like trust funds, the only difference is that they are

not designated as trust funds in authorizing legislation. The Nuclear Waste

Fund is an example of a special fund account. This fund provides facilities

for the disposal of civilian and defense high-level nuclear waste and is

funded, in part, through a fee on the commercial generation of nuclear

power. Other examples include the Historic Preservation Fund,

administered by the National Park Service, and the Presidential Election

Campaign Fund. Excluding intrafund transactions and offsetting

collections from federal sources, special funds accounted for roughly

$16 billion, or about 2 percent, of total earmarked receipts from the public

in fiscal year 1994. Including these receipts adds another $762 million to

the special funds total.

Table I.3 shows special fund earmarked receipts by receipt type. These

totals for type of receipt were drawn from the 244 special fund receipt

accounts, as well as the 11 special fund expenditure accounts that were

credited with offsetting collections, in the fiscal year 1994 budget.

Page 6 GAO/AIMD-95-216FS Earmarking in the Federal Government
Appendix I 

Earmarking by Fund Type

Table I.3: Special Fund Earmarked

Receipts Dollars in thousands

Receipt type

Fiscal year

1994 actual

Receipts from the public

Customs duties $6,309,746

Proprietary receipts 5,484,578

Offsetting governmental receiptsa 2,047,920

Miscellaneous receipts 1,984,031

Excise taxes 425,322

Individual income taxes 69,755

Offsetting collections from public 60,518

Subtotal $16,381,870

Intrafund transactions 676,018

Offsetting collections from federal sources 85,523

Total $17,143,411

aOffsetting governmental receipts are based on the government’s sovereign powers but, unlike

other tax receipts, are required by law to be treated as offsets to outlays. They include some

receipts designated as user fees, such as customs user fees.

General Fund

Accounts

General fund accounts are composed of all federal moneys not allocated

to any other account and are generally credited with all collections not

earmarked by law for a specific purpose. However, some general fund

accounts also receive earmarked revenue in the form of offsetting

collections. For example, the Federal Family Education Loan Liquidating

Account administered by the Department of Education receives offsetting

collections from the public upon the recovery of defaulted student loans.

Excluding offsetting collections from federal sources, general funds

accounted for roughly $15 billion, or about 2 percent, of total earmarked

receipts from the public in fiscal year 1994.

Table I.4 identifies offsetting collections credited to general fund accounts.

These totals were drawn from the 368 general fund accounts that received

offsetting collections in the fiscal year 1994 budget.

Page 7 GAO/AIMD-95-216FS Earmarking in the Federal Government
Appendix I 

Earmarking by Fund Type

Table I.4: Offsetting Collections

Credited to General Fund Accounts Dollars in thousands

Receipt type

Fiscal year

1994 actual

Offsetting collections from the public $14,843,743

Offsetting collections from federal sources 49,356,992

Total $64,200,735

Intragovernmental

Fund Accounts

Intragovernmental fund accounts are specifically authorized by law to

facilitate financing transactions within and between federal agencies. An

example is the General Services Administration’s Federal Buildings Fund,

whose primary purpose is to build, operate, maintain, and protect federally

owned and leased buildings. This account receives rent from other

government agencies. Excluding offsetting collections from federal

sources, intragovernmental funds accounted for about $7 billion, or

roughly 1 percent, of total earmarked receipts from the public in fiscal

year 1994.

Table I.5 identifies offsetting collections credited to intragovernmental

fund accounts. These totals were drawn from the 45 intragovernmental

fund accounts that received offsetting collections in the fiscal year 1994

budget.

Table I.5: Offsetting Collections

Credited to Intragovernmental Fund

Accounts

Dollars in thousands

Receipt type

Fiscal year

1994 actual

Offsetting collections from the public $7,074,699

Offsetting collections from federal sources 101,574,675

Total $108,649,374

Revolving Trust Fund

Accounts

Revolving trust fund accounts receive revenues generated in business-type

operations and are designated as trust funds by statute. An example is the

Federal Deposit Insurance Corporation, which receives insurance

premiums paid by the financial institutions it insures. Excluding offsetting

collections from federal sources, revolving trust funds accounted for

about $6 billion, or roughly 1 percent, of total earmarked receipts from the

public in fiscal year 1994.

Page 8 GAO/AIMD-95-216FS Earmarking in the Federal Government
Appendix I 

Earmarking by Fund Type

Table I.6 identifies offsetting collections credited to revolving trust fund

accounts. These totals were drawn from the 14 revolving trust fund

accounts credited with offsetting collections in the fiscal year 1994 budget.

Table I.6: Offsetting Collections

Credited to Revolving Trust Fund

Accounts

Dollars in thousands

Receipt type

Fiscal year

1994 actual

Offsetting collections from the public $6,112,229

Offsetting collections from federal sources 13,722,190

Total $19,834,419

Page 9 GAO/AIMD-95-216FS Earmarking in the Federal Government
Appendix II 

Earmarking Among State Governments

According to an April 1995 report by the National Conference of State

Legislatures (NCSL),1

 although earmarking may offer strategic advantages

in assuring funding for specific projects or services and tying program

benefits to program payers, it is more likely, on balance, to hamper than

assist state budgetary design and management. NCSL notes that earmarking

removes revenues and expenditures from the review that occurs in the

appropriations process and reduces the flexibility of the revenue

structure, increasing the difficulty of adapting budgets to changing

economic conditions. As a result, earmarking makes comprehensive

budgeting more difficult.

NCSL reports that the average earmarked share of state tax collections has

remained near 23 percent since 1979. NCSL adds, however, that state

legislatures appear to be turning more readily to earmarking taxes than

they did in the recent past.

The report offers documentation for these observations. Because

earmarked taxes often do not grow as fast as total state tax collections,

earmarking as a percent of total revenue tends to decline in the absence of

any policy actions to increase earmarking. NCSL reports that in most states

where earmarking has decreased since its September 1990 review of state

earmarking, no policy changes were made with regard to earmarking. For

example, NCSL reports that in New Hampshire, the percent of earmarked

revenues fell from 24 percent in fiscal year 1988 to 14.2 percent in fiscal

year 1993. This happened because New Hampshire’s motor fuel tax, which

is the only tax New Hampshire earmarks, did not grow in proportion to

total state tax collections in the period. The NCSL report identified several

examples of states reporting greater earmarking of sales and income taxes

to support funding for education, health, and social service programs.

Also, 23 states now earmark some revenue sources for environmental

programs.

NCSL reports that all 50 states earmark motor fuel taxes, generally for state

highway and other transportation purposes, such as mass transit. NCSL also

reports that 33 states earmark a portion of their general sales tax, and

roughly half of the states earmark a portion of their tobacco, alcoholic

beverage, severance, and insurance taxes.

1

Earmarking State Taxes, National Conference of State Legislatures (April 1995).

Page 10 GAO/AIMD-95-216FS Earmarking in the Federal Government
Appendix II 

Earmarking Among State Governments

Table II.1: Proportion of Tax Revenue

Earmarked by State for Fiscal Year

1993

Region/State Percent Region/State Percent

New England

Connecticut

Maine

Massachusetts

New Hampshire

Rhode Island

Vermont

Mid-Atlantic

Delaware

Maryland

New Jersey

New York

Pennsylvania

Great Lakes

Illinois

Indiana

Michigan

Ohio

Wisconsin

Southeast

Alabama

Arkansas

Florida

Georgia

Kentucky

Louisiana

Mississippi

North Carolina

South Carolina

Tennessee

Virginia

West Virginia

10

12

39

14

5

13

6

17

39

8

11

32

26

39

17

9

87

13

28

6

4

15

26

19

17

60

25

19

Plains

Iowa

Kansas

Minnesota

Missouri 

Nebraska 

North Dakota

South Dakota

Southwest

Arizona

New Mexico 

Oklahoma

Texas

Rocky Mountain

Colorado

Idaho

Montana

Utah

Wyoming

Far West

Alaska

California

Hawaii

Nevada

Oregon

Washington

Average

22

25

16

27

21

22

47

30

40

21

21

20

21

64

55

17

8

19

5

57

21

30

24a

Source: National Conference of State Legislatures.

aThis figure is a weighted average. It is the average of the earmarked share of total state tax

collections, not the average of individual state percentages.

(935170) Page 11 GAO/AIMD-95-216FS Earmarking in the Federal Government
Ordering Information

The first copy of each GAO report and testimony is free.

Additional copies are $2 each. Orders should be sent to the

following address, accompanied by a check or money order

made out to the Superintendent of Documents, when

necessary. Orders for 100 or more copies to be mailed to a

single address are discounted 25 percent.

Orders by mail:

U.S. General Accounting Office

P.O. Box 6015

Gaithersburg, MD 20884-6015

or visit:

Room 1100

700 4th St. NW (corner of 4th and G Sts. NW)

U.S. General Accounting Office

Washington, DC

Orders may also be placed by calling (202) 512-6000 

or by using fax number (301) 258-4066, or TDD (301) 413-0006.

Each day, GAO issues a list of newly available reports and

testimony. To receive facsimile copies of the daily list or any

list from the past 30 days, please call (301) 258-4097 using a

touchtone phone. A recorded menu will provide information on

how to obtain these lists.

For information on how to access GAO reports on the INTERNET,

send an e-mail message with "info" in the body to:

info@www.gao.gov

PRINTED ON RECYCLED PAPER
United States

General Accounting Office

Washington, D.C. 20548-0001

Official Business

Penalty for Private Use $300

Address Correction Requested

Bulk Mail

Postage & Fees Paid

GAO

Permit No. G100