GAO

United States General Accounting Office

January 2001 FEDERAL TRUST 

AND OTHER 

EARMARKED FUNDS

Answers to Frequently 

Asked Questions

GAO-01-199SP

Page 1 GAO-01-199SP Trust Fund FAQs

5

7

1.1 What Are Federal Trust Funds? 7

1.2 How Are Federal Trust Funds Different From Private Trust Funds? 7

1.3 How Do Federal Trust Funds Fit Within the Unified Budget

 Concept 8

1.4 What Fund Types Within the Federal Budget Are Earmarked? 9

1.5 What Are the Differences Between Earmarked Fund Types? 10

1.6 How Many Earmarked Funds Are There? 12

1.7 Why Are Earmarked Funds Established? 14

1.8 When Were Earmarked Funds Established? 15

1.9 By Design, Earmarked Funds May Accumulate Balances. What

 Do Balances Really Mean? 16

1.10 What Receipt Sources Contribute to Fund Balances? 17

1.11 What Do Funds Do With Their Balances? 17

1.12 What Do the Treasury Securities Represent? 18

1.13 To What Extent Do Earmarked Funds Earn Interest? 19

20

2.1 What Are the Sources of Income for Earmarked Funds? 20

2.2 What Purposes and Activities Do Earmarked Funds Finance? 23

2.3 What Is the Relationship Between the Sources and Uses of

 Earmarked Funds? 23

2.4 What Earmarked Funds Serve Long-Term Commitments? What Is

 the Rationale for Earmarking Receipts for These Long-Term

 Commitments? 24

2.5 What Were the Revenues, Gross Outlays, and Balances of

 Earmarked Accounts in Fiscal Year 1999? What Portions of

 These Amounts Represent Long-Term Commitments? 25

2.6 How Do Accumulated Balances of Earmarked Funds Affect the 

 Government’s Ability to Meet Its Long-Term Commitments? 26

28

3.1 Are Earmarked Funds Treated Differently in the Budget Process? 28

3.2 Are Earmarked Funds Discretionary or Mandatory? 28

3.3 What Does “Off-Budget” Mean? Are “Off-Budget” Funds

 Governed by Different Rules? 29

3.4 What Kinds of Special Treatment Have Been Given to Some

 Earmarked Funds? What Arguments Have Been Used for

 Such Treatment? 30

Preface

Contents

Section 1: What Are

Federal Trust and Other

Earmarked Funds?

Section 2: What Is the

Composition of

Earmarked Funds?

Section 3: How Are

Earmarked Funds

Controlled in the

Federal Budget

Process?
Page 2 GAO-01-199SP Trust Fund FAQs

31

4.1 How Has the Composition of Earmarked Versus Unearmarked

 Federal Receipts Changed Over Time? 31

4.2 What Is the Effect of Earmarked Funds in Measuring Unified

 Budget Deficits or Surpluses? 32

4.3 What Are the Implications of Investing Balances in Treasury

 Securities? 33

4.4 What Issues Are Raised by Proposals to Permit Earmarked

 Revenues in the Private Sector? 34

4.5 What Does It Mean When People Say the Fund Balances Are Used

 for Other Than Intended Purposes? 36

38

Transparency Issues 38

Signaling Issues 40

Appendix I: Scope and Methodology 43

Appendix II: Description of Selected Earmarked Funds 45

Appendix III: List of Funds’ Revenues, Gross Outlays, and Balances

for Fiscal Year 1999 75

Appendix IV: Glossary 88

Appendix V: GAO Staff Acknowledgments 92

Table 2.1: Breakout of Fiscal Year 1999 Revenues, Gross Outlays, and

Balance, by Fund Type 26

Table III.1: Earmarked Funds Revenues, Gross Outlays, and Balances

for Fiscal Year 1999 75

Table III.2: Top 10 Funds in Each Earmarked Fund Type, by Total

Revenues 87

Figure 1.1: Fund Types in the Federal Budget 9

Figure 1.2: Comparison of the Number of Earmarked Funds to Funds’

Total Revenues 14

Figure 2.1: Concentration of Revenues Among Earmarked Funds 20

Figure 2.2: Sources and Uses of Nonrevolving Trust Fund Receipts 22

Figure 2.3: Sources and Uses of Special Fund Receipts 22

Figure 4.1: Trust Funds’ Share of Total Receipts and GDP Over Time 31

Figure 4.2: Effect of Trust Fund Surpluses/Deficits on Unified Budget

Totals Over Time 33

Section 4: How Do

Earmarked Funds

Affect Federal Fiscal

Position?

Section 5: Policy and

Design Issues Related

to Earmarked Funds

Appendixes

Tables

Figures
Page 3 GAO-01-199SP Trust Fund FAQs

Reclassification of Indian Tribal Funds From Federal Trust Funds

 to Nonbudgetary Deposit Funds 8

Application of Trust Fund Criteria 11

Recording Earmarked Funds 13

Setting Aside Annual Surpluses of Funds Earmarked for Long-Term

 Commitments to Reduce Debt 37

Abbreviations

AIR-21 Aviation Investment and Reform Act for the 21st Century

CCC Commodity Credit Corporation

CSRD Civil Service Retirement and Disability

CSRS Civil Service Retirement System

DCA Deficit Control Act

DI Disability Insurance

ESRD End Stage Renal Disease

FCC Federal Communications Commission

FEGLI Federal Employees Government Life Insurance

FEHB Federal Employees Health Benefits

FEHBP Federal Employees Health Benefits Program

FERS Federal Employees Retirement System

FICA Federal Insurance Contributions Act

FUTA Federal Unemployment Tax Act

GDP Gross Domestic Product

HI Hospital Insurance

LTC Long-Term Care

LWCF Land and Water Conservation Fund

OASI Old-Age and Survivors Insurance

OMB Office of Management and Budget

OPM Office of Personnel Management

PAYGO Pay-as-you-go

REHB Retired Employees Health Benefits

SMI Supplemental Medical Insurance

TEA-21 Transportation Equity Act for the 21st Century

TVA Tennessee Valley Authority

UC Unemployment Compensation

USDA United States Department of Agriculture

Text Boxes
Page 4 GAO-01-199SP Trust Fund FAQs
Page 5 GAO-01-199SP Trust Fund FAQs

In fiscal year 1999, trust fund receipts represented nearly half of all federal

budget receipts. Despite their importance in the budget, the relationship

between federal trust funds—such as the Social Security or Medicare trust

funds—and other earmarked funds—such as the Nuclear Waste Fund or

the Postal Service Fund—and the rest of the federal budget can be

confusing to both policymakers and the public. There is confusion about

the distinction between federal trust funds and private trust funds, about

how trust funds compare to other fund types, about how earmarked funds

are controlled in the federal budget, and about the relationship between

fund accounting and the government’s overall financial condition.

Prior to 1969, three concepts were variously used as federal budgets:

(1) administrative, (2) consolidated cash, and (3) federal sector in the

national income accounts. The most commonly used of these, the

administrative budget, excluded the operations of all trust funds, which

were shown in the consolidated cash and national income accounts

budgets. Trust fund transactions did not receive much attention in

appropriations debates and action. The administrative budget was viewed

as an increasingly incomplete and unreliable measure of government

activities.

Acting on a recommendation from the 1967 Report of the President’s

Commission on Budget Concepts, the federal government adopted a

unified budget for fiscal year 1969—including the transactions of both

federal and trust funds in calculating a single budget surplus or deficit.

Separate accounts were maintained for the individual trust funds, and

tabulations were made of the trust fund and federal fund groups in total.

Although the decision to include trust fund transactions in the 1969 budget

produced a single statement of the United States government’s use of

funds, it did not definitively resolve concerns about the budget treatment

of trust funds. Rather, it opened a new debate on trust fund budget

treatment and status. For example, some observers raised concerns that

inadequate attention was being paid to whether trust fund surpluses were

being used to finance and mask increasing federal funds deficits.

We developed this report to provide answers to some basic questions that

often arise about trust funds and other earmarked funds. In addition,

appendix II contains a more specific discussion about some of the larger

earmarked funds, and appendix IV contains a glossary of relevant budget

terms.

Preface
Preface

Page 6 GAO-01-199SP Trust Fund FAQs

This document was prepared under the direction of Paul L. Posner and

Susan J. Irving, who may be reached at (202) 512-9573 if there are any

questions.

Paul L. Posner

Managing Director

Federal Budget Issues

Strategic Issues

Susan J. Irving

Director

Federal Budget Issues

Strategic Issues
Page 7 GAO-01-199SP Trust Fund FAQs

A1.1 Federal trust funds represent one accounting mechanism used to

link earmarked receipts1

 with the expenditures of those receipts. The

Office of Management and Budget (OMB) and the Department of the

Treasury determine budgetary designation as a trust fund when a law both

earmarks receipts to a program and identifies the account as a “trust fund”

account.

A1.2 In the federal budget the meaning of the term “trust” differs

significantly from its private sector usage. In the private sector, a person

creates a private trust fund using his or her own assets to benefit a stated

individual(s). The creator of the trust names a trustee who has a fiduciary

responsibility to manage the designated assets in accordance with the

stipulations of the trust. In the federal sector, the Congress creates a

federal trust fund in law and designates a funding source to benefit stated

groups or individuals.2

 However, in contrast to a private trust fund, the

federal government does not have a fiduciary responsibility to the trust

beneficiaries, and it can raise or lower future trust fund collections and

payments or change the purposes for which the collections are used by

changing existing laws. Moreover, the federal government has custody and

control of the funds as well as the earnings of most federal trust funds.

There are cases—such as the federal employees’ Thrift Savings Fund3

—in

which the federal government holds nonfederal monies in trust as a

custodian on behalf of some entity outside the government. Since the

government makes no decisions about the amount of these deposits or

how they are spent, they are not considered to be federal trust funds.

Rather, they are considered to be nonbudgetary and are excluded from the

federal budget. Accordingly, these funds are not included within the scope

of this report. The following text box discusses the example of Indian

Tribal Funds, which the government recently reclassified from trust to

nonbudgetary deposit funds.

 1

In this report, the term “earmarked receipts” refers to collections that, by law, have been

dedicated to a specific fund for a specific purpose or program.

2

In some cases, such as gift funds, the federal government is the beneficiary of the trust.

3

The Thrift Savings Fund is composed of individual accounts maintained by the Federal

Retirement Thrift Investment Board on behalf of individual federal employee participants

in the fund. These participants may select how their contributions are distributed among

three investment funds.

Section 1

What Are Federal Trust and Other

Earmarked Funds?

Q1.1 What Are Federal

Trust Funds

Q1.2 How Are Federal

Trust Funds Different

From Private Trust

Funds?
Section 1

What Are Federal Trust and Other

Earmarked Funds?

Page 8 GAO-01-199SP Trust Fund FAQs

Reclassification of Indian Tribal Funds From

Federal Trust Funds to Nonbudgetary Deposit Funds

Beginning in fiscal year 2000, the federal budget no longer includes funds that are

owned by Indian tribes but are held and managed in a fiduciary capacity by the

government on behalf of the tribes. These Indian tribal funds were included in the

budget totals beginning with the adoption of the unified budget in 1969 through

fiscal year 1999 under the generic title ìtribal trust funds.î However, they are trusts

in the private sector meaning of the term. For example, the funds include

(1) Indian-owned assets derived from tribal-owned natural resources,

(2) judgments against the United States, and (3) monies derived from legislative

acts and for government obligations. Appropriate application of current federal

budget concepts dictates that most of the Indian tribal funds should not have been

included in the budget or been subject to budgetary constraints, and accordingly

they have been reclassified as nonbudgetary deposit funds. This reclassification

affects only budget coverage, not the operation of the funds or ownership of the

fundsí assets. The funds will continue to be managed by the federal government

according to present law, with the same rights and responsibilities that existed prior

to the reclassification.

A1.3 The unified budget, as conceived by the 1967 Report of the

President’s Commission on Budget Concepts, includes the full range of

federal activities, regardless of their fund type or whether they are on- or

off-budget.4

 The unified budget can be divided into two fund groups:

(1) federal funds and (2) trust funds. Section 4.2 of this report discusses

the effect of both groups of funds on the unified budget totals.

As shown in figure 1.1, within these two fund groups there are six fund

types: (1) the general fund, (2) special funds, (3) public enterprise funds,

(4) intragovernmental funds, (5) nonrevolving trust funds, and

(6) revolving trust funds. All of these, except the two types of trust funds,

are considered to be “federal funds.”

 4

On-budget refers to transactions included in the budget. Off-budget refers to transactions

required by law to be excluded from the budget even though they are part of total

government transactions. The budget combines the on- and off-budget totals to derive

unified or consolidated totals for federal activity. Nonbudgetary refers to transactions of

the government that do not belong in the budget because they do not represent a cost to

the government.

Q1.3 How Do Federal

Trust Funds Fit Within

the Unified Budget

Concept?
Section 1

What Are Federal Trust and Other

Earmarked Funds?

Page 9 GAO-01-199SP Trust Fund FAQs

Figure 1.1: Fund Types in the Federal Budget

A1.4 Trust funds are created to account for monies that are earmarked;

that is, dedicated for a specific purpose. While earmarked monies are

heavily concentrated in trust funds, trust funds are not the only way

earmarked monies can be accounted for in the federal budget. For

example, special and public enterprise funds also are used for programs

primarily financed by earmarked collections. Trust, special, and public

enterprise funds are used to account for the receipt and expenditure of

monies earmarked by the government for carrying out specific purposes

and programs in accordance with legislation.5

 Revolving trust funds are

similar to public enterprise funds: they carry out a cycle of business-type

operations and their earmarked receipts are basically revenues generated

by their business activities. Nonrevolving trust funds, such as Social

Security, are similar to special funds, such as Funds for Strengthening

 5

Some general fund accounts also receive earmarked receipts in the form of offsetting

collections—either from the public or from federal sources—that are credited directly to

the account and are available for use, often without further legislative action. These have

been discussed in Budget Issues: Earmarking in the Federal Government (GAO/AIMD-95-

216FS, Aug. 1, 1995) and Federal User Fees: Budgetary Treatment, Status, and Emerging

Management Issues (GAO/AIMD-98-11, Dec. 19, 1997).

Q1.4 What Fund Types

Within The Federal

Budget Are

Earmarked?

Federal Budget

Trust Funds

Federal Funds

•General Funds

•Special Funds

•Public Enterprise Funds

•Intragovernmental Funds

•Nonrevolving Trust Funds

•Revolving Trust Funds

= Analogous fund types
Section 1

What Are Federal Trust and Other

Earmarked Funds?

Page 10 GAO-01-199SP Trust Fund FAQs

Markets, Income, and Supply: they are used to account for earmarked

receipts and spending that primarily are not the result of business-type

activities.

Among authorizing statutes for similar kinds of programs there is no

consistency in whether they are funded by earmarked receipts or general

fund appropriations. For example, both the Coast Guard Military

Retirement System and the general Military Retirement System are

noncontributory pension plans. However, the Coast Guard’s system is

financed through the general fund while the Military Retirement System is

financed through a trust fund. Another example of the inconsistency is the

Multinational Species Conservation Fund and the Cooperative Endangered

Species Conservation Fund. Both funds support efforts to protect

endangered species and their habitats, yet the former is financed through a

general fund while the latter is a special fund.

A1.5 The major difference between the four types of earmarked funds is

whether the activities they finance are business- or non-business-type

activities—not whether the funds are labeled “trust funds.” Both revolving

trust funds and public enterprise funds primarily are used for businesstype activities, whereas both nonrevolving trust funds and special funds

primarily are used for non-business-type activities.

There are no substantive differences between a revolving trust fund and a

public enterprise fund. Both are credited with offsetting collections to

finance the costs of their business-type activities. For example, the

Veterans Special Life Insurance revolving trust fund and the Veterans

Reopened Insurance public enterprise fund both finance payments on

Veterans’ life insurance claims.

Similarly, there is no substantive distinction between a nonrevolving trust

fund and a special fund. Both are used to track receipts and spending for

programs that have specific taxes or other revenues earmarked for their

use. By definition, the only difference between them is whether the word

“trust” is included in the legislation establishing the account. For example,

the Environmental Protection Agency’s Hazardous Substance Superfund—

a fund with receipts earmarked for environmental cleanup—was

designated by law as a trust fund, while the Department of Energy’s

Nuclear Waste Fund—also having earmarked receipts and similar

purposes—was established in legislation as a separate fund and is shown

by Treasury and OMB as a special fund. Notwithstanding the definition

and examples like this, our analysis found that in practice there is a

Q1.5 What Are the

Differences Between

Earmarked Fund

Types?
Section 1

What Are Federal Trust and Other

Earmarked Funds?

Page 11 GAO-01-199SP Trust Fund FAQs

notable difference between the use of nonrevolving trust and special

funds:

ï Trust fund monies predominantly fund long-term commitments, whereas

no special fund monies currently fund long-term commitments. (See

section 2.4 for a discussion of what funds serve long-term commitments.)

ï Trust fund accounts are more likely to fund large dollar programs than

special fund accounts.

The text box below discusses how OMB determines whether an account is

a trust fund.

Application of Trust Fund Criteria

OMBís policy is to identify receipts as belonging to a trust fund if the receipts

have the following two attributes: (1) they are dedicated by law to a particular

program or set of programs and (2) they are dedicated to accounts designated in

law as ìtrust accounts.î It is possible, however, for an account to be labeled a

trust fund in legislation but, because it does not have funding that meets the

above criteria for dedication to a trust fund, OMB and Treasury would not

consider it to be a trust fund. For example, the Violent Crime Reduction Trust

Fund was established pursuant to the Violent Crime Control and Law

Enforcement Act of 1994. Notwithstanding its name, because the fund is

substantively a means of accounting for general fund appropriations and does not

consist of dedicated receipts, it is classified by OMB and Treasury as a federal

fund rather than a trust fund.
Section 1

What Are Federal Trust and Other

Earmarked Funds?

Page 12 GAO-01-199SP Trust Fund FAQs

A1.6 In fiscal year 1999, Treasury identified 224 federal trust funds and

247 special funds. However, in doing our analysis, which was based on

OMB budget data, we identified 130 federal trust funds.6

 This included 120

nonrevolving trust funds and 10 revolving trust funds. Using OMB budget

data, we also identified 149 special funds and 113 public enterprise funds.

A complete list of these funds, including their fiscal year 1999 incomes,

gross expenditures, and end-of-year balances is shown in appendix III.7

The text box below discusses how earmarked funds are recorded in the

federal budget and in federal financial statements.

 6

OMB and Treasury report funds differently. While Treasury records earmarked funds in

separate accounts, OMB does not always report them separately in annual budget

documents. Because the federal budget rounds amounts to millions of dollars, it does not

show funds with amounts less than $500,000. Accordingly, OMB instructs agencies to

consolidate small trust fund accounts with larger general fund accounts. In addition, OMB

will sometimes report trust fund groups rather than individual trust funds. Groups may

include two or more trust funds with similar purposes. For example, it groups the five trust

funds related to “foreign service national separation liability” associated with five different

agencies under one group trust fund name. However, Treasury tracks monies for each

discrete trust fund account down to the penny in order to fulfill its governmentwide

accounting and cash management responsibilities. Thus, Treasury’s count of funds

represents the actual number of separate entities designated as earmarked funds.

Because this report was written primarily from a budgetary perspective, we used OMB

budget data to analyze earmarked funds. Accordingly, our analysis does not separately

identify funds with amounts less than $500,000. Although, to the extent possible, we

individually counted trust funds that OMB grouped together, we could not always

separately identify expenditures that had been merged or consolidated with other

accounts. As a result, the number of earmarked funds we identify is more than the number

of funds tracked by OMB but fewer than the actual number tracked by Treasury. According

to OMB, there were 112 trust funds and trust fund groupings in fiscal year 1999.

Alternatively, Treasury tracked 224 trust funds in fiscal year 1999.

7

In some cases, we could not separately identify expenditures and fund balances because

these budget data had been merged or consolidated with other accounts. In these cases, we

listed fund groups in our appendix.

Q1.6 How Many

Earmarked Funds Are

There?
Section 1

What Are Federal Trust and Other

Earmarked Funds?

Page 13 GAO-01-199SP Trust Fund FAQs

Recording Earmarked Funds

As part of its governmentwide accounting responsibility, the Treasury establishes numbered accounts for each agency of the

government. Receipts are recorded in ìreceipt accountsî and expenditures in ìexpenditure accounts.î Nonrevolving trust and

special funds are recorded differently from revolving trust and public enterprise funds.

Nonrevolving trust and special funds are comprised of both receipt accounts and expenditure accounts. Receipt accounts are

grouped by unique 4-digit receipt account numbers. Each of these numbers correlates to one nonrevolving trust or special fund,

which may have one or more receipt accounts. Typically, these funds will have a single expenditure account. However, some

funds have multiple expenditure accounts, each with a separate expenditure account number. For example, the Oil Spill Liability

Trust Fundís receipt account symbol is 8185. It obtains receipts from five different sources such as excise taxes, earnings on

investments, and fines and penalties, with each in a separate receipt accountó8185.10, 8185.20, 8185.30, 8185.40, and 8185.50.

Coincidentally, the fund also includes six expenditure accounts for purposes such as oil spill response, oil spill research, and

pipeline safety.

In some cases, matching receipt accounts with their related expenditure accounts is difficult because the expenditures for accounts

with relatively small dollar amounts and similar purposes have been consolidated into a different account altogetherósometimes

not even a special or trust fund account. For example, the receipts for ìFees, Operation and Maintenance of Recreation Facilities,

Forest Serviceî are credited to a special fund receipt account (12-5072.00). However, the corresponding expenditures from these

receipts are reported in the general fund account, ìNational Forest Systemî (12-1106).

Revolving trust funds and public enterprise funds are relatively easier to identify because each has a unique expenditure account

number. In addition, these funds do not use receipt accounts; they primarily collect monies from their business-type or marketoriented activities that are credited to expenditure accounts. These collections are then used to offset expenses.

Federal accounting standards classify revenue to the government as part of either an exchange or a nonexchange transaction.8

Exchange revenue is revenue resulting from the governmentís business-type activities; hence it includes most user charges. The

standards require that financial statements recognize exchange revenue at the time that a government entity provides goods or

services, measured at the price likely to be received. Thus, financial statements for public enterprise and revolving trust fundsó

the budget accounts used for business-type activitiesówould recognize revenue when it is earned rather than when it is paid. In

the Financial Report of the United States Government, intragovernmental exchange revenue would be deducted from the totals.

Nonexchange revenue includes inflows of resources arising from the governmentís sovereign power to tax, as well as voluntary

donations. These revenues are recognized when the collection is probable (i.e., a reporting entity has established a specifically

identifiable, legally enforceable claim to cash or assets) and the amount can reasonably be estimated. Nonrevolving trust and

special funds generally would have nonexchange revenue.

 8

According to the Statement of Federal Financial Accounting Standards (SFFAS) No. 7,

Accounting for Revenue and Other Financing Sources and Concepts for Reconciling

Budgetary and Financial Accounting, exchange revenues, also known as earned revenues,

arise when a government entity provides goods and services to the public or to another

government entity for a price. Nonexchange revenues arise primarily from exercise of the

government’s power to demand payments from the public (e.g., taxes, duties, fines, and

penalties) but also include donations. The term “revenue” does not encompass all financing

sources of government reporting entities; for example, most of the appropriations they

receive are not included.
Section 1

What Are Federal Trust and Other

Earmarked Funds?

Page 14 GAO-01-199SP Trust Fund FAQs

Almost 100 percent of trust fund revenues are concentrated in 20 funds,

nearly 90 percent of special fund revenues are concentrated in 20 funds,

and about 90 percent of public enterprise fund revenues are concentrated

in 16 funds. Figure 1.2 below compares the number of funds in each fund

type to the total revenues of each fund type.

Figure 1.2: Comparison of the Number of Earmarked Funds to Funds’ Total Revenues

A1.7 Earmarked funds are established as a way to link receipts to a

specific purpose or activity. This concept of dedicated receipts can be very

appealing to a public interested in supporting that purpose or activity.

Although for trust, special, and public enterprise funds, the earmarking of

receipts by law indicates the government’s intent to restrict the use of

those funds to the specified purpose, the government can always change

this restriction by changing the law. As discussed in section 5, designation

as a trust fund does not in and of itself impose a greater commitment on

the government to carry out that activity than it has to carry out other

government activities. However, the confusion of the federal use of the

term “trust fund” with the private sector use of the term may lead the

public to expect a similar commitment and hence may provide some

degree of political protection. This “protection” may affect the allocation

Q1.7 Why Are

Earmarked Funds

Established?

Total Revenues of Earmarked Funds

Trust

Special

Public Enterprise

Number of Earmarked Funds

Trust

Special

Public Enterprise
Section 1

What Are Federal Trust and Other

Earmarked Funds?

Page 15 GAO-01-199SP Trust Fund FAQs

of resources within the budget. Constituencies may create pressure to

spend earmarked revenues because the revenues are there, regardless of

the need for the spending at the moment or the priority that would

otherwise be given such spending. Ironically, earmarked funds may also

constrain program spending when the spending threatens to outstrip

accumulated balances. This is because the fund balance determines

whether Treasury has the legal authority to issue checks for a program.9

In practice, as discussed in section 2.3, the strength of the link between the

source and use of earmarked receipts can vary considerably. While the

link is clear in many cases, such as with the payroll tax portion of social

insurance programs, in some cases the source and use of monies appear

unrelated. For example, the Elk Hills School Lands (special) fund was

established to dispense a percentage of the sale proceeds from the Elk

Hills Naval Petroleum Reserve for payment to the State of California for its

Teachers’ Retirement Fund. Although the sources are very different from

those for social insurance funds, the sources and uses of funds are linked

for gifts and bequests and for business-type funds. For business-type

funds—public enterprise and revolving trusts—the earmarking of receipts

received as payment for goods or services permits an ongoing cycle of

business activity.

A1.8 One of the earliest of the largest trust funds established was the

Civil Service Retirement and Disability fund, set up in 1920. Since then,

trust funds have often been created in response to the public policy

concerns of the time. For example, during the bleak economic times of the

1930s, the Unemployment and the Federal Old-Age & Survivors Insurance

trust funds were created. During the more prosperous 1950s, Federal

Disability Insurance was added and, in the 1960s, two medical trust funds:

Federal Hospital Insurance and Federal Supplementary Medical Insurance.

In the 1980s, the Leaking Underground Storage Tank Trust Fund was

created. This trust fund provides funds for responding to releases from

leaking underground petroleum tanks.

The oldest of the largest special funds is the Reclamation Fund,

established in 1902. The largest special fund (in terms of receipts) is Funds

for Strengthening Markets, Income, and Supply (Section 32) which was

established in 1935. Later, the Land and Water Conservation Fund was

 9

The Antideficiency Act prohibits incurring obligations or making expenditures in excess of

amounts available in appropriation or fund accounts, unless specifically authorized by law.

Q1.8 When Were

Earmarked Funds

Established?
Section 1

What Are Federal Trust and Other

Earmarked Funds?

Page 16 GAO-01-199SP Trust Fund FAQs

established by the Land and Water Conservation Act of 1964. The Nuclear

Waste Fund was established in 1983 by the Nuclear Waste Policy Act to

finance the disposal of spent fuel from nuclear powered electrical

generators. Special funds are established from time to time to meet

specific needs for funds to finance specified activities. For example, the

Elk Hills School Lands (special) Fund was established as a result of the

Fiscal Year 1996 National Defense Authorization Act to finance payment to

the State of California for its Teachers’ Retirement Fund.

The largest public enterprise fund by far is the Postal Service Fund. It was

established by the 1970 Postal Reorganization Act. Other large public

enterprise funds include the Commodity Credit Corporation Fund, a

predecessor of which was established in 1933, and the Tennessee Valley

Authority Fund (TVA).10 TVA was established during the depression and

created by the Act of May 18, 1933. More recently established public

enterprise funds are the Bank Insurance Fund, the Federal Savings and

Loan Insurance Corporation Resolution Fund, and the Savings Association

Insurance Fund. These funds were established by the Financial

Institutions Reform Recovery and Enforcement Act of 1989.11

A1.9 The vast majority of earmarked funds take in more than their

current needs. 12 On an annual basis, this is often described as having a

“surplus.” The accumulated surpluses result in these funds having a

“balance.” The balances of earmarked funds are assets of the funds in that

they provide a claim on the general fund of the Treasury for future

spending. However, the balances are not cash. As with all other money

collected by the government, the general fund of the Treasury receives the

actual earmarked taxes and fees paid by the public. Treasury then credits

these collections as assets (often in the form of Treasury securities) to the

appropriate fund accounts. From the general fund’s perspective, these

fund assets are a liability. From the standpoint of the government as a

whole, the earmarked funds’ assets and the general fund’s liabilities offset

each other so that neither an asset nor a liability is shown for the federal

 10The Postal Service Fund accounts for over half of all public enterprise fund outlays, while

the Commodity Credit Corporation Fund and the Tennessee Valley Authority Fund account

for about 8 percent and 6 percent of all public enterprise fund outlays, respectively.

11The Bank Insurance Fund and the Savings Association Insurance Fund are both

successors of previous funds.

12In fiscal year 1999, only 53 of 392 earmarked funds had balances of less than $500,000.

Q1.9 By Design,

Earmarked Funds May

Accumulate Balances.

What Do Balances

Really Mean?
Section 1

What Are Federal Trust and Other

Earmarked Funds?

Page 17 GAO-01-199SP Trust Fund FAQs

government as a whole in the consolidated Financial Report of the United

States Government.

The relationship between earmarked fund balances and the claim on

future resources depends on whether the program financed by the fund

was structured so that earmarked receipts would cover the future program

claims. Not all funds are structured to be actuarially sound. Depending on

the financing structure, the balance may or may not equal the future claim.

For example, the current and expected earmarked receipts from Social

Security are not structured to cover the expectations for future payments

stemming from the program’s defined benefit structure. Conversely, the

Highway Trust Fund has no defined benefit structure other than that based

on receipts to the fund. Although payments from both funds are limited to

the fund balance, the difference in benefit structure leads to a different

expectation for future payments beyond its balance. The relationship

between fund balances and the government’s ability to meet future

commitments is discussed further in section 2.6.

A1.10 Fund balances stem from a combination of earmarked receipts

(e.g., taxes and collections from market-oriented activities) and

appropriated contributions from the general fund. These contributions

include such things as interest payments, the employer share of federal

employee pension costs, and in some cases, such as Medicare’s

Supplemental Medical Insurance (SMI) trust fund, what might be viewed

as a subsidy from the general fund. Excluding interest payments and the

federal employer’s share of compensation-related payments (pensions,

etc.), 39 out of 269 nonrevolving trust and special funds received general

fund contributions totaling about $72 billion during fiscal year 1999. Of

this amount, about $70 billion was related to Medicare.

A1.11 Whether and how funds invest their balances is based on specific

legal authorizations by the Congress. Trust funds generally are required by

31 U.S.C. 9702 to be invested in government obligations at an annual

interest rate of at least 5 percent. Most of the balances of earmarked funds

are invested in special, nonmarketable U.S. Treasury securities; Treasury

credits the appropriate fund with the securities. If the fund reaches a point

where outgoing payments exceed current receipts, the fund may redeem

these securities to make the required payments. A few funds do not invest

in Treasury securities and simply hold credit balances. Finally, some

earmarked funds are specifically authorized by the Congress to invest

outside Treasury securities. For example, the Civil Service Retirement and

Disability trust fund also carries but does not routinely invest in federal

Q1.10 What Receipt

Sources Contribute to

Fund Balances?

Q1.11 What Do Funds

Do With Their

Balances?
Section 1

What Are Federal Trust and Other

Earmarked Funds?

Page 18 GAO-01-199SP Trust Fund FAQs

agency securities while TVA invests in a portfolio of securities designed to

earn interest in line with overall equity market performance.

A1.12 When an earmarked fund invests in U.S. Treasury securities, it has

“lent” money to the general fund of the Treasury. The value of the

securities held is recorded as “debt held by government accounts” and

represents debt owed by one part of the government to another. 13 In many

ways, the special U.S. Treasury securities held by government accounts

are indistinguishable from the marketable government debt sold to the

public. A maturity date is set, interest is accrued at established market

rates, and the securities count as part of the overall federal debt. These

securities, however, are not traded in the financial markets. They can only

be redeemed by the Treasury Department. The interest they earn is simply

credited to the fund accounts in the form of additional Treasury securities.

Debt held by government accounts represents over a third of gross federal

debt and like publicly held debt is guaranteed for principal and interest by

the full faith and credit of the United States government. At the end of

fiscal year 2000, debt held by government accounts was about $2.2 trillion.

This debt does not appear on the government’s consolidated financial

statements because it represents internal debt—amounts that one part of

the government owes to another part of the government. However, it does

constitute a liability for the Treasury since the Treasury must pay back the

debt held by government accounts when these accounts need to redeem

their securities to be able to make their expenditures. When this happens,

Treasury would have to obtain cash to finance the government’s spending

either through increased taxes, spending cuts, increased borrowing from

the public, retiring less debt (if the unified budget is in surplus), or some

combination thereof.

 13Debt held by government accounts plus debt held by the public are the two components

of gross federal debt, which totaled about $5.7 trillion at the end of fiscal year 2000. A key

difference between the two components of debt is their effect on credit markets. Changes

in debt held by the public approximates the federal government’s competition for credit

with the private sector in the credit markets and affects current interest rates and private

capital accumulation. In contrast, changes in debt held by government accounts does not

compete with the private sector for available funds in the credit market. However, when

the government accounts redeem their securities to obtain cash to make expenditures,

Treasury competes with the private sector for cash by borrowing more from the public (or

redeeming less debt held by the public if in a unified surplus position). For additional

information on federal debt, see Federal Debt: Answers to Frequently Asked Questions— An Update (GAO/OCG-99-27, May 28, 1999).

Q1.12 What Do the

Treasury Securities

Represent?
Section 1

What Are Federal Trust and Other

Earmarked Funds?

Page 19 GAO-01-199SP Trust Fund FAQs

A1.13 Generally, earmarked funds earn interest on balances. The extent

to which funds may earn interest and the rate at which interest is earned is

determined by specific legal authorization from the Congress. As

discussed in section 1.11, most of the balances of earmarked funds are

invested in special, nonmarketable U.S. Treasury securities. In some cases,

laws may permit that the interest earned by one fund’s investment be used

for a different purpose. For example, the interest earned by the

Abandoned Mine Reclamation Fund (a special fund) is transferred to the

United Mine Workers’ Combined Benefits Fund.

Some funds with relatively small balances, such as the Radiation Exposure

Compensation Trust Fund, do not invest their balances but receive interest

as if they had invested. Because of provisions contained in the

Transportation Equity Act for the 21st Century, as amended, the Highway

Trust Fund is unusual in that securities held after September 30, 1998, are

noninterest bearing.

Q1.13 To What Extent

Do Earmarked Funds

Earn Interest?
Page 20 GAO-01-199SP Trust Fund FAQs

A2.1 Nonrevolving trust and special funds obtain revenues primarily

through earmarked receipts, such as Social Security payroll taxes, and, to

a far lesser extent, offsetting collections.1

 In contrast, revolving trust and

public enterprise funds operate primarily through offsetting collections

resulting from their business-type activities. Although there were 392 trust,

special, and public enterprise funds in the budget during fiscal year 1999, a

few large funds received most of the revenues. In fact, about 78 percent of

all earmarked revenues were associated with just six funds in fiscal year

1999, with the remaining 22 percent earmarked to all other 386 funds.

These six large funds included the two Social Security trust funds, the two

Medicare trust funds, the Civil Service Retirement and Disability trust

fund, and the Postal Service public enterprise fund. Figure 2.1 illustrates

this concentration of revenues.

Figure 2.1: Concentration of Revenues Among Earmarked Funds

 1

Offsetting collections are monies credited directly to expenditure accounts rather than

receipt accounts.

Section 2

What Is the Composition of Earmarked

Funds?

Q2.1 What Are the

Sources of Income for

Earmarked Funds?

Social Security

Medicare

Civil Service Retirement

Postal

All Other
Section 2

What Is the Composition of Earmarked

Funds?

Page 21 GAO-01-199SP Trust Fund FAQs

The concentration of earmarked revenues in a few funds can also be seen

in the sources and uses of fund receipts. Specific sources and uses of

funds in fiscal year 1999 are described below.

ï Nonrevolving trust funds received almost two-thirds of their receipts from

taxes and contributions related to social insurance (largely Social Security

and Medicare). About 12 percent of receipts stemmed from interest

earnings on balances and another 16 percent from other federal fund

transfers, such as the federal government’s contribution to its employees’

pension funds.

ï Special funds received over half of their receipts from customs duties,

permits, and regulatory fees. Nearly a third was derived from business or

market-oriented activities with the public such as income from housing

loans, rents and royalties, and fees for other services such as nuclear

waste disposal and recreational programs.

ï About 95 percent of revolving trust fund collections came from federal

employee health benefit contributions (81.4 percent) and federal

employees’ life insurance premiums (13.3 percent).

ï Over half of public enterprise fund collections came from postal revenues

with the remainder collected from multiple sources such as the

Commodity Credit Corporation and the Tennessee Valley Authority.

Figure 2.2 shows the types of sources and uses, by budget function, of

receipts for nonrevolving trust funds and figure 2.3 shows the sources and

uses of receipts for special funds.
Section 2

What Is the Composition of Earmarked

Funds?

Page 22 GAO-01-199SP Trust Fund FAQs

Figure 2.2: Sources and Uses of Nonrevolving Trust Fund Receipts

Notes:

a

Includes receipts such as federal contributions to Medicare and Social Security, and employing agency

contributions to retirement programs.

b

Includes receipts such as excise taxes, fees, and sale of government property.

c

Includes outlays such as those for federal pension programs, for example the Civil Service Retirement and

Disability Trust Fund.

d

Includes budget functions such as Transportation, Natural Resources and Environment, and Veterans Benefits.

Figure 2.3: Sources and Uses of Special Fund Receipts

Notes:

a

Includes receipts for such things as royalties and rents, fees, sale of products, and interest on investments.

b

Includes other budget functions such as Energy, Income Security, and General Government.

Sources of Nonrevolving Trust 

Funds

Other Federal 

Fund Payments

Interest 

Earnings

All Other

Social Insurance

Uses of Nonrevolving Trust Funds

Medicare

Income Security

Social Security

All Other 

Functionsd

a

b

c

Sources of Special Funds

Permits and 

Regulatory 

Services

Customs Duties

All Other

Income from 

Loans and 

Investments

Uses of Special Funds

Administration of 

Justice

All Other 

Functions

Commerce and 

Housing Credit

Natural 

Resources and 

Environment

a b
Section 2

What Is the Composition of Earmarked

Funds?

Page 23 GAO-01-199SP Trust Fund FAQs

A2.2 Every budget function included some activities financed by

earmarked funds in fiscal year 1999. However, as was the case for

revenues, the distribution was not even. Gross outlays financed by

earmarked revenues were also concentrated in a few specific areas.

ï Over 75 percent of nonrevolving trust fund dollars supported social

insurance programs, including Social Security (50.9 percent) and Medicare

(27.5 percent). Income security, which primarily includes pension

programs, ran third, consuming about 11 percent of total gross outlays.

ï Although special funds served a broader variety of functions than trust

funds, they were heaviest in commerce and housing credit (35.8 percent),

administration of justice (21 percent), and natural resources and

environment (13.7 percent).

ï Revolving trust fund spending was highly concentrated in the health

budget function (86.8 percent), which is completely driven by federal

employees’ health benefits.

ï Public enterprise fund monies were dominated by the Postal Service fund

and thus were concentrated in the commerce and housing credit function

(58.7 percent). A large portion (28.4 percent) of public enterprise fund

monies served multiple functions.

A2.3 Because revolving trust and public enterprise funds carry out a

cycle of business-type operations, the sources and uses of monies for

these funds are directly related.2

 In addition, for the majority of

nonrevolving trust and special fund revenues, the relationship between the

sources and uses of the revenues is relatively direct. For example, Old-Age

Survivors and Disability Insurance Trust Funds receive most of their

monies from Federal Insurance Contributions Act (FICA) taxes paid by

employees and their employers, and they use the monies to finance Social

Security payments to individuals and to invest in Treasury securities. The

sources and uses of monies for Medicare taxes and premiums3

 and pension

 2

Because revolving trust and public enterprise funds receive monies through offsetting

collections deposited in expenditure accounts and do not have receipt accounts, detailed

data on the explicit sources of monies were not always readily available. However, the

collections would be payments from the public or another federal entity for goods or

services provided by the fund’s business activity.

3

Nearly three-fourths of the SMI portion of Medicare is financed from general fund

contributions.

Q2.2 What Purposes

and Activities Do

Earmarked Funds

Finance?

Q2.3 What Is the

Relationship Between

the Sources and Uses

of Earmarked Funds?
Section 2

What Is the Composition of Earmarked

Funds?

Page 24 GAO-01-199SP Trust Fund FAQs

programs are also directly related. However, in some cases the

relationship is less direct. For example, the largest special fund, Funds for

Strengthening Markets, Income, and Supply (Section 32) is financed by 30

percent of customs duties collected and automatically appropriated for

expanding outlets for nonbasic agricultural commodities. Most of these

earmarked customs duties are used primarily to support child nutrition

programs.4

A2.4 Funds that provide social insurance,5 federal insurance, federal

pensions, and certain education benefits represent what we classify as

long-term commitments of the federal government.6

 About 93 percent of

all nonrevolving trust fund outlays were associated with funds

representing long-term commitments. Some examples of earmarked funds

that do not represent long-term commitments include gift funds, such as

the Library of Congress gift fund; funds that transfer collected revenues to

state or local governments for local use, such as the special fund for

Mineral Leasing on Public Lands; and transportation funds, such as the

Highway Trust Fund. Although only 38 of the 392 earmarked funds were

dedicated to long-term commitments in fiscal year 1999, these funds

represented the vast proportion of dollars collected. Most long-term

commitments were associated with nonrevolving trust funds rather than

revolving trust or public enterprise funds; none were associated with

special funds. The payments for long-term commitments that were made

by these funds tended to be cash payments to or on behalf of individuals

rather than services to the general public. Overall, projected fund balances

may not equal the future claims the federal government could be

responsible for under current law. For example, Social Security’s trust

funds are projected to have balances sufficient to fund benefits through

2037, leaving an unfunded claim at that date of about 28 percent of

benefits owed.7

 4

See appendix II for more detailed discussion of this fund.

5

For social insurance funds, we included the funds listed in the Federal Accounting

Standards Advisory Board’s Statement of Federal Financial Accounting Standards (SFFAS)

No. 17, Accounting for Social Insurance, August 1999.

6

Long-term commitments are not an established budget concept; individuals may differ on

what they perceive should be included in this category.

7

Status of the Social Security and Medicare Programs. A Summary of the 2000 Annual

Reports (Revised April 2000), Social Security and Medicare Boards of Trustees.

Q2.4 What Earmarked

Funds Serve Long-Term

Commitments? What Is

the Rationale for

Earmarking Receipts

for These Long-Term

Commitments?
Section 2

What Is the Composition of Earmarked

Funds?

Page 25 GAO-01-199SP Trust Fund FAQs

One rationale for earmarking revenues to finance long-term commitments

is that the benefits are financed by the contributions made by the

beneficiaries. However, the current projections for the earmarked

revenues for the largest long-term commitment programs would be

insufficient to fully finance expected benefits: that is, the earmarked

financing of the program is not structured to fully cover future benefits.

For example, only about a quarter of the revenues paid into Medicare’s

Supplemental Medical Insurance trust fund stem from enrollees’ monthly

premiums; the bulk of the program’s financing comes from federal general

revenues. In theory, monitoring the funding status of long-term

commitments may trigger policy action if a fund becomes too far out of

balance. For example, in the past, the threat of trust fund depletion led to

changes in the Social Security program and its financing. Recently,

concerns over the long-term viability of the Social Security trust funds

have led to myriad proposals for reform. Other measures that indicate

fund solvency are discussed in more detail in section 5.

Although long-term commitments are in many cases financed by

earmarked revenues, this is not always the case. For example, long-term

commitments related to some pensions and some environmental cleanup

are financed through general fund revenues instead of earmarked funds.

The lifecycle costs of capital8

 also typically are financed by general funds.

A2.5 Nonrevolving trust funds receive and use the bulk of earmarked

revenues, even though there are more special funds and almost as many

public enterprise funds. Moreover, nonrevolving trust funds are

overwhelmingly used for financing programs that make long-term

commitments. Table 2.1 below shows the earmarked revenues, outlays,

and balances by fund type for fiscal year 1999, separately identifying

amounts earmarked for long-term commitments.

 8

Life-cycle costs of capital include initial costs plus costs of operation and maintenance,

and any costs of decommissioning or disposal. Capital assets are tangible assets (such as

buildings, equipment, and information technology) that are owned by the federal

government and primarily used to deliver federal services.

Q2.5 What Were The

Revenues, Gross

Outlays, and Balances

of Earmarked Accounts

in Fiscal Year 1999?

What Portions of These

Amounts Represent

Long-Term

Commitments?
Section 2

What Is the Composition of Earmarked

Funds?

Page 26 GAO-01-199SP Trust Fund FAQs

Table 2.1: Breakout of Fiscal Year 1999 Revenues, Gross Outlays, and Balance, by Fund Type

Dollars in billions

Revenues Gross outlays Fund balances

Fund type

Number of

funds Total

Long-term

commitments Total

Long-term

commitments Total

Long-term

commitments

Nonrevolving trust 120 $ 983 $ 916 $ 771 $ 718 $ 1,847 $ 1,786

Special 149 27 0 14a 0 40 a 0

Revolving trust 10 22 3 21 2 29 22

Public enterprise 113 120 9 127 8 163 55

Totals 392 $ 1,152 $ 928 $ 933 a $ 728 $ 2,079 a $ 1,863 a

This amount is understated because some special fund appropriations have been

consolidated into general fund accounts. Thus, an unknown portion of special fund outlays

are included in general fund outlays and some special fund balances is included in

general fund balances.

A2.6 Annual surpluses can accumulate into large trust fund balances.

However, because these balances are really bookkeeping credits to the

fund with the actual cash commingled with other collections, the

accumulation of large balances does not by itself affect the government’s

ability to meet long-term commitments or make a program more

sustainable in the future. In other words, accumulated balances do not

increase the government’s ability to acquire future resources to meet longterm commitments. Nor do they necessarily represent the full future cost

of existing commitments. From a macro perspective, the critical question

is not how much a trust fund has in assets but whether the government as

a whole has the economic capacity to finance the claims on the trust funds

for benefits now and in the future and at the cost of other competing

claims for scarce resources. The President’s Budget includes a useful

discussion on the relationship of balances to the economy.

“Increases in trust fund balances do strengthen the ability to pay

future benefits if the surplus in the trust fund is matched by an

improvement in the Government’s net financial position. It is in

this sense that future benefits can be prefunded. If a trust fund

surplus is matched by a corresponding reduction in publicly held

debt, then the Government’s financial position will be improved.

This makes it easier to finance future benefits in two respects.

The first, direct effect, is that this debt reduction reduces future

interest payments and frees up general receipts to finance the

future benefits. The second is that debt reduction increases the

Q2.6 How Do

Accumulated Balances

of Earmarked Funds

Affect the

Government’s Ability to

Meet Its Long-Term

Commitments?
Section 2

What Is the Composition of Earmarked

Funds?

Page 27 GAO-01-199SP Trust Fund FAQs

resources available for investment in the economy as a whole.

Greater investment now increases future incomes and wealth,

which will provide more real economic resources to support the

benefits, and may prolong the solvency of the trust funds.”

9

From a micro perspective, projected trust fund balances can provide a

vital signaling function for policymakers about underlying fiscal

imbalances in covered programs. However, balances do not provide

meaningful information about program sustainability,10 notwithstanding

that financial condition is often gauged by the solvency of the fund.

Extending a trust fund’s solvency without reforms to make the underlying

program more sustainable over the long-term can obscure the warning

signals that trust fund balances provide, thereby creating a false sense of

security and delaying needed reform.

 9

Analytical Perspectives, Budget of the United States Government, Fiscal Year 2001, p. 346.

10By program sustainability, we are referring to the Nation’s ability to finance promised

benefits over the long run.
Page 28 GAO-01-199SP Trust Fund FAQs

A3.1 Fund type does not determine how fund spending is controlled.

The budget distinguishes between federal funds and trust funds; however,

this designation does not control federal spending. Although some have

advocated the creation of earmarked funds with an eye toward giving

these monies special treatment, these are not the labels that matter for

budgetary control. The Deficit Control Act (DCA)1

 divides the budget into

“discretionary” and “mandatory” categories—and it is these categories that

determine how a fund is controlled. What matters for budget control is

whether an earmarked fund is classified as discretionary or mandatory

and whether it has any special rules accompanying it.

All spending classified as discretionary (whether from earmarked or

general funds) is subject to annual adjustable dollar limits (spending caps)

and is controlled through the regular appropriations process. Mandatory

spending is subject to pay-as-you-go (PAYGO) rules, regardless of whether

its financing source is earmarked or general fund. These rules require that

the aggregate effect of new legislation that either increases mandatory

spending or decreases receipts be deficit neutral (that is not increase the

deficit or decrease the surplus). The two Social Security trust funds are

exempt from these general budget enforcement procedures but are subject

to special rules of each chamber of the Congress barring legislation that

would erode trust fund balances. The legal authority to issue checks for

programs financed by earmarked funds is limited to their fund balances,

except where there is authority to borrow.

A3.2 DCA classification is relatively consistent across fund types. The

majority of each earmarked fund type is mandatory. A large number (59)

of nonrevolving trust funds and special funds have both mandatory and

discretionary authority. The public enterprise group has more individual

funds (24) with strictly discretionary spending than do the other

earmarked fund types.

Of the 392 funds we analyzed for fiscal year 1999, we were able to

determine DCA classification for 367.2

 The revenues and outlays for 268 of

 1

The actual title of this act is the Balanced Budget and Emergency Deficit Control Act of

1985, as amended. However, for simplicity, we refer to it as DCA. It is often referred to as

the Budget Enforcement Act (BEA) because that act added the current sequestration

process and designated accounts as either mandatory or discretionary.

2

DCA classification data were not readily available for 25 of the 392 funds because they had

no receipts or expenditures during fiscal year 1999.

Section 3

How Are Earmarked Funds Controlled in the

Federal Budget Process?

Q3.1 Are Earmarked

Funds Treated

Differently in the

Budget Process?

Q3.2 Are Earmarked

Funds Discretionary or

Mandatory?
Section 3

How Are Earmarked Funds Controlled in the

Federal Budget Process?

Page 29 GAO-01-199SP Trust Fund FAQs

these 367 funds were completely mandatory. Spending from these funds

was governed by the legislation that established the program, that is,

eligibility criteria and benefit formulas. Another 31 funds were completely

discretionary. Spending from these funds was controlled by the

appropriations process and was subject to the spending caps, thus limiting

the amounts that could be spent from the funds. Finally, 68 funds had a

mixture of mandatory and discretionary revenues and outlays. The

Hazardous Substance Superfund (trust fund) is an example of such a case.

The outlays of this fund are all discretionary while revenues have both

mandatory and discretionary components. The mandatory revenues stem

from taxes, fines, recoveries and interest while the discretionary revenues

stem from additional appropriations from the general fund.

A3.3 Every year since 1971 at least one federal entity has been “offbudget.” Off-budget federal entities are federally owned and controlled,

but their transactions are excluded from the budget totals by law. The offbudget federal entities currently consist of the two Social Security trust

funds and the Postal Service public enterprise fund. "Off-budget" is a

display distinction not a control distinction.

As discussed in section 1.3, the federal government uses the unified budget

concept as the foundation for its budgetary analysis and presentation. It is

a comprehensive display of the full range of federal activities, regardless of

fund type or on- and off-budget status. Thus, whether a fund is “on-budget”

or “off-budget” affects the way totals are displayed in various summary

budget tables. However, it has no effect on the collection or expenditure

of funds or on the way the funds are controlled. As discussed in section

3.1, it is the DCA mandatory and discretionary categories and Social

Security’s special rules that determine how a fund is controlled. Taking a

fund off-budget does not by itself exempt it from DCA controls. Whether a

fund is exempt from DCA depends on the existence of a law specifying

exclusion, such as the specific exclusion of Social Security contained in

DCA.

Q3.3 What Does “OffBudget” Mean? Are

“Off-Budget” Funds

Governed by Different

Rules?
Section 3

How Are Earmarked Funds Controlled in the

Federal Budget Process?

Page 30 GAO-01-199SP Trust Fund FAQs

A3.4 Since 1974, the Postal Service—a public enterprise fund—has been

moved on- and off-budget. Currently, it is off-budget, financed by business

transactions with the public, and excluded from DCA controls. Social

Security was taken off-budget in response to concern about its financial

condition, fear that use of its surpluses to offset other spending would hurt

the program, and criticism that surplus Social Security taxes were hiding

the size of budget deficits. It is excluded from DCA controls and subject to

its own set of congressional rules designed to prohibit legislation that

would erode its surpluses.

During the 106th Congress, proposals were made to move a number of

additional funds off-budget: the Airport and Airway Trust Fund, the Civil

Service Retirement and Disability (trust) Fund, the Nuclear Waste

(special) Fund, the Inland Waterways and Harbor Maintenance Trust

Funds, and the Land and Water Conservation (special) Fund. All these

proposals would also have excluded these funds from DCA controls.

Proponents argue that the combination of off-budget and DCA exclusion is

a stronger way to set aside earmarked monies and assure that they are

used in the near term for their dedicated purpose rather than for general

government activities. Opponents of off-budget designations argue that

changing its label or category does not make an activity less federal, does

not change total federal revenues or spending, and contributes to a more

confusing picture of the federal government’s total taxes and spending.

Opponents of DCA exemptions argue that removing a fund’s transactions

from the existing budgetary Congressional controls reduces the ability of

the President and the Congress to make trade-offs across government

priorities.

Special budgetary treatment has been provided to the transportation trust

funds without moving them off-budget or excluding them from DCA. The

Transportation Equity Act for the 21st Century (TEA-21), enacted in 1998,

guaranteed specific levels of funding for many highway and mass transit

programs based on the user tax receipts credited to the Highway Account

of the Highway Trust Fund. More recently, a similar treatment of the

Airport and Airway trust fund was provided in the Aviation Investment and

Reform Act for the 21st Century (AIR-21), enacted April 5, 2000. Since these

funds are technically under the discretionary caps, their guaranteed

funding levels in effect reduced the ability of policymakers to make tradeoffs among discretionary spending programs.

Q3.4 What Kinds of

Special Treatment Have

Been Given to Some

Earmarked Funds?

What Arguments Have

Been Used for Such

Treatment?
Page 31 GAO-01-199SP Trust Fund FAQs

A4.1 Historical budget data on earmarked receipts are only readily

available for those earmarked to trust funds. It is the trust fund historical

trends that are most important, however, because they hold about 90

percent of all earmarked balances. Over the last 50 years, trust fund

receipts have grown both as a share of total federal receipts and as a share

of Gross Domestic Product (GDP). Today, annual trust fund receipts make

up about half of all federal receipts and about 10 percent of GDP. In fiscal

year 1950, trust fund receipts made up only about one-seventh of total

receipts and about 2 percent of GDP. Even in 1970, after the enactment of

Medicare, trust fund receipts made up less than a third of all federal

receipts. The big jump in the mid 1980s in large part reflects the effect of

the Social Security Amendments of 1983 when payroll taxes were set

higher than needed to cover current expenditures, causing the trust fund

balances to grow. Figure 4.1 illustrates this growth.

Figure 4.1: Trust Funds’ Share of Total Receipts and GDP Over Time

Source: Historical Tables, Budget of the United States Government, Fiscal Year 2001, tables 1.2 and 1.4

Section 4

How Do Earmarked Funds Affect Federal

Fiscal Position?

Q4.1 How Has the

Composition of

Earmarked Versus

Unearmarked Federal

Receipts Changed Over

Time?

0

10

20

30

40

50

60

70

80

90

100

1950195219541956195819601962196419661968197019721974197619781980198219841986198819901992199419961998

2000 est.

Fiscal year

Percent of total 

dollars

Share of total receipts

Share of GDP
Section 4

How Do Earmarked Funds Affect Federal

Fiscal Position?

Page 32 GAO-01-199SP Trust Fund FAQs

A4.2 Again, historical budget data do not readily separate special and

public enterprise funds from other federal funds. There are rich historical

data, however, on federal versus trust fund surpluses and deficits. The sum

of trust fund and federal fund surpluses/deficits comprise the annual

unified budget total. Accordingly, any trust fund surpluses add to the

unified budget totals (increasing a surplus or reducing a deficit), and any

trust fund deficits subtract from them. Since 1963, in the aggregate, trust

funds have been running surpluses, thus reducing the federal

government’s need to borrow from the public. As discussed earlier, these

surpluses generally are invested in special U.S. Treasury securities. For

fiscal year 2000, the unified budget had a surplus of $237.0 billion—the

cumulative result of a trust funds surplus of $228.7 billion (including

interest received from federal funds) and a federal funds surplus of

$8.3 billion (including interest paid to trust funds). As discussed in section

1.10, trust funds receive contributions from the general fund for such

things as interest payments, the employer share of federal employee

pension costs, and, in some cases, such as Medicare, what might be

viewed as a subsidy from the general fund. Interest payments make up a

significant portion of these contributions. For example, if the $128.9 billion

in interest paid to trust funds were excluded from surplus calculations, the

fiscal year 2000 federal funds surplus of $8.3 billion would increase to a

surplus of $137.2 billion. Similarly, the trust funds surplus of $228.7 billion

would be reduced to a surplus of only $99.8 billion.

Figure 4.2 illustrates the extent to which trust fund surpluses/deficits have

affected the unified budget deficit or surplus over time.1

 1

For additional information on deficits/surpluses and their relationship to federal debt, see

Federal Debt: Answers to Frequently Asked Questions—An Update (GAO/OCG-99-27,

May 28, 1999).

Q4.2 What Is the Effect

of Earmarked Funds in

Measuring Unified

Budget Deficits or

Surpluses?
Section 4

How Do Earmarked Funds Affect Federal

Fiscal Position?

Page 33 GAO-01-199SP Trust Fund FAQs

Figure 4.2: Effect of Trust Fund Surpluses/Deficits on Unified Budget Totals

Over Time

Note: Data exclude the extra quarter in fiscal year 1976, which resulted from the shift in

fiscal years from July 1st to October 1st.

Source: Historical Tables, Budget of the United States Government, Fiscal Year 2001,

table 1.4, pages 25 and 26, and the Final Monthly Treasury Statement of Receipts and

Outlays of the United States Government, For Fiscal Year 2000 through September 30,

2000, and Other Periods.

A4.3 When earmarked funds hold balances as Treasury securities, the

securities represent a future claim on the Treasury. While the security is

an asset to the earmarked fund, it is a liability to the general fund of the

Treasury.2

 If earmarked surpluses are used to finance other governmental

activities, the government’s need for additional cash to finance these

activities is less than what it otherwise would have been. Using earmarked

surpluses to redeem debt held by the public does not reduce gross federal

 2

The same would be true whether the balances are invested in Treasury securities or simply

maintained as uninvested balances.

Q4.3 What Are the

Implications of

Investing Balances in

Treasury Securities?

-500,000

-400,000

-300,000

-200,000

-100,000

0

100,000

200,000

300,000

1950

1952

1954

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

19761978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

Fiscal years

Millions of dollars

Trust funds Federal funds Unified results
Section 4

How Do Earmarked Funds Affect Federal

Fiscal Position?

Page 34 GAO-01-199SP Trust Fund FAQs

debt because debt held by government accounts increases by the same

amount that debt held by the public decreases. However, as discussed in

section 2.6, using these surpluses to reduce publicly-held debt not only

improves the government’s net financial position but, because it frees up

private funds for other investments, also promotes future economic

growth. As a result, the government’s ability to pay the future claims for

which the surpluses were earmarked would be enhanced. Therefore, if the

trust fund surpluses were used to strengthen the government’s fiscal

position by causing unified surpluses to be higher or deficits lower than

they otherwise would have been, then the government’s ability to pay

future benefits could be improved. Currently, there is bipartisan consensus

to use the surpluses of the largest long-term commitment—Social

Security—to redeem publicly-held debt.

When an earmarked fund’s annual outlays for benefits and expenses

exceed annual earmarked receipts, it redeems some of its Treasury

securities. The Treasury would need to obtain cash to redeem these

securities. Cash could be obtained either through increased taxes,

spending cuts, increased borrowing from the public, retiring less debt (if

the unified budget is in surplus), or some combination thereof.

A4.4 Allowing earmarked revenues to be invested in the stock market,

as has recently been proposed for some trust funds, would have

consequences for the programs financed by those revenues, the U.S.

economy, and federal budget policy.3

 Historically, the rates of return on

stocks have exceeded interest rates on Treasury securities, although stock

returns are more variable. While the prospect of higher stock market

returns might allow the funds to pay benefits longer without other

program changes, the government would also face greater risk and other

implementation issues. For example, if stock investing were implemented

in isolation of other program reforms, the trust funds would inevitably

need to liquidate their stock portfolios to pay promised benefits and would

be vulnerable to losses in the event of a general downturn in the market.

Proposals for government stock investing typically suggest investing

passively in a broad-based stock index to reduce both the costs and the

fear that the government, through its stock ownership, would influence

 3

For additional information on this topic, see Social Security Financing: Implications of

Government Stock Investing for the Trust Fund, the Federal Budget, and the Economy

(GAO/AIMD/HEHS-98-74, April 22, 1998).

Q4.4 What Issues Are

Raised by Proposals to

Permit the Investment

of Earmarked

Revenues in the Private

Sector?
Section 4

How Do Earmarked Funds Affect Federal

Fiscal Position?

Page 35 GAO-01-199SP Trust Fund FAQs

individual companies. Although index investing would help achieve these

goals, it would not completely eliminate the possibility of political

influence over stock selections. Nor would it answer the question of what

to do about voting rights. Even choosing not to vote would affect

corporate decision-making by enhancing the voting power of other

shareholders or investment managers.

In contrast to the current situation in which earmarked funds hold their

balances in Treasury securities, stock investing would have the immediate

effect of decreasing the unified surplus (or increasing any unified deficit)

because, under current budget scoring rules, stock purchases would be

treated as outlays. This is because monies would actually be expended

outside the government and any money used to purchase stocks would no

longer be invested in Treasury securities, thus reducing Treasury’s

available cash. To the extent that this resulted in unified budget deficits,

the Treasury would need to borrow from the public to replace cash used

to buy stocks, unless offsetting spending or revenue actions were taken.

This would have no effect on gross federal debt. However, if stock

purchases were scored under different rules than other types of federal

spending, they could be excluded from government outlays.

Without compensating changes in fiscal policy, stock investing would not

significantly alter the effect of federal finances on national saving and the

economy. To cover a deficit, the government would increase borrowing

from the public, but it would offset this action by purchasing stocks from

other investors. This asset shuffle could lead to higher stock prices and

higher interest rates, undercutting somewhat the potential gain from stock

investing and increasing the government’s cost of borrowing. Even with

such price effects, higher returns might result in the government still

coming out ahead by investing in stocks. However, any higher returns

earned by the government would otherwise have accrued to other

investors. In short, by itself, government stock investing should have no

appreciable effect on future national income.

Although the immediate budgetary effect of investing in stocks would lead

to decreased unified budget surpluses or possible deficits, stock investing

might also indirectly lead to changes in federal fiscal policy that could

increase national saving. By making earmarked fund surpluses unavailable

to the Treasury, stock investing could focus more attention on any

budgetary imbalances that may exist when such surpluses are excluded.

Increased attention could prompt policymakers to address an imbalance

either by cutting spending or raising revenue. Such fiscal actions could

boost national saving and long-term economic growth.
Section 4

How Do Earmarked Funds Affect Federal

Fiscal Position?

Page 36 GAO-01-199SP Trust Fund FAQs

A4.5 Concerns have been raised that, because the actual earmarked

cash borrowed from the funds is commingled in the Treasury with other

receipts and used to pay whatever bills the government currently has on

hand, the federal government has inappropriately diverted funds for

purposes other than what was intended. Treasury accounts for earmarked

monies by crediting these collections to the appropriate funds. Any

surpluses resulting from these collections are then lent to the general fund

of the Treasury and the funds in most cases are given special,

nonmarketable Treasury securities in return.4

 These special securities are

claims on the Treasury (i.e., IOUs) that can be redeemed in the future to

obtain the cash needed to pay the intended benefits. However, if sufficient

surpluses are not available to redeem the securities, the government

would either need to increase borrowing from the public, raise future

taxes, reduce future spending, retire less debt (if the unified budget is in

surplus), or some combination thereof. This future need for cash to

redeem Treasury securities emphasizes the importance of using

earmarked surpluses to reduce debt held by the public, thereby increasing

economic growth and making it easier for the government to pay these

future commitments.

Although the special Treasury securities are nonmarketable, like other

Treasury securities they are backed by the full faith and credit of the

United States government. History provides no evidence to suggest that

the U.S. would not honor these obligations as it does its other obligations.

In fact, some trust funds support programs with long-term commitments in

which current expenditures on benefits and administration have already

exceeded dedicated annual tax revenues (that is, the funds have run a cash

deficit). These trust funds have redeemed some of their Treasury

securities to make current benefit payments. For example, from 1992

through 1998, the Medicare Hospital Insurance (Part A) Trust Fund had a

cash deficit and, as needed, redeemed a portion of its accumulated

securities each year to pay current claims. The combined Social Security

trust funds also redeemed some of their Treasury securities to cover their

cash deficits starting in the mid-1970s through the early 1980s, when

payroll taxes were increased. The combined Social Security trust funds are

projected to reach the point at which current expenditures exceed annual

cash receipts by 2015.

 4

Even if the surpluses were not invested in Treasury securities, they would be used for

other purposes.

Q4.5 What Does It

Mean When People Say

the Fund Balances Are

Used for Other Than

Intended Purposes?
Section 4

How Do Earmarked Funds Affect Federal

Fiscal Position?

Page 37 GAO-01-199SP Trust Fund FAQs

The following text box discusses the implications of using earmarked fund

surpluses of long-term commitments for debt reduction.

Setting Aside Annual Surpluses of Funds Earmarked for Long-Term

Commitments to Reduce Debt

In fiscal year 1999, about $125 billion of the $201 billion in annual surplus earmarked

funds collected for long-term commitments was related to Social Security, leaving about

$76 billion related to other long-term commitments, such as pensions, insurance, and other

social insurance programs. There was bipartisan consensus to use the surpluses associated

with Social Security to reduce debt held by the publicóa concept sometimes referred to as

a ìlockbox.î Because the government spent the remaining surpluses related to other longterm commitments, if these surpluses had instead been used to reduce debt held by the

public, spending would have had to be cut and/or taxes raised.
Page 38 GAO-01-199SP Trust Fund FAQs

The federal budget is an instrument of national policymaking. It seeks to

facilitate the Nation’s economic stabilization and growth as well as the

allocation of resources among competing claims. Accordingly, it is

essential that the budget be transparent, that is, understandable, to as

much of the public and as many of their elected representatives as

possible. Transparency permits the public to participate intelligently in the

important decisions that the budget brings to bear. In addition, the budget

should provide decisionmakers with sufficient information to signal when

and what forms of corrective actions are needed.

Federal budget concepts are based on the recommendations set forth by

the 1967 budget commission almost 35 years ago. Although they apply

broadly in the budget process, not all recommendations were

implemented and they do not address certain issues that are plaguing

lawmakers and budget scorekeepers. For example, issues such as longterm commitments, Social Security reforms, biennial budgeting, and

accrual of long-term costs raise concern among budget scorekeepers.

Accordingly, there have been proposals for a new budget concepts

commission. Should such a commission convene, it could consider a

number of the issues raised in the following sections.

Certain aspects of earmarked funds can reduce budget transparency. First,

the term “trust fund” in the federal budget does not mean what it does in

the private sector. Unlike a private trust fund, the federal government can

unilaterally change the terms of a trust fund financed program; it can raise

or lower future trust fund collections and payments and change the

purposes for which the collections can be used. Also, some believe that

the government has a greater commitment to carry out an activity financed

by a trust fund than its commitment to other government activities. This is

not true. For example, the U.S. Constitution provides that the government

is responsible for the common defense of the nation—an activity that is

not financed through a trust fund. The lack of a trust fund financing

arrangement is certainly not an indication that the government has some

lesser commitment to a strong national defense than it does to trust fund

activities. Contrary to what many citizens may believe, the absence or

presence of a trust fund does not necessarily represent the strength of the

government’s commitment to a particular activity.

While earmarking does not confer any permanent, unchangeable benefit to

a program, it may influence debates about program creation or changes if

the program is financed in whole or in part by its beneficiaries. Given

these political benefits, earmarking as a means of specifying the financing

for a program is unlikely to disappear. However, transparency could be

Section 5

Policy and Design Issues Related to

Earmarked Funds

Transparency Issues
Section 5

Policy and Design Issues Related to

Earmarked Funds

Page 39 GAO-01-199SP Trust Fund FAQs

increased by recognizing the similarity between nonrevolving trust funds

and special funds and between revolving trust funds and public enterprise

funds. Do we need four fund types when two might suffice?

Consideration should be given to whether budget transparency could be

improved by eliminating the use of the term “trust fund” in the federal

budget. Use of a term that is not identical to a private sector term with a

different meaning could clear up some of the public’s confusion. For

example, using the term “special fund” instead of trust fund could

eliminate the confusion. Also, it might increase consistency within the

budget given the lack of distinction between fund types. Alternatively, an

entirely new term could be developed to encompass current trust, special,

and public enterprise fund labels.

Finally, it may be confusing that gross federal debt can increase during a

time when budget surpluses are being used to pay down the debt. This

occurs because gross federal debt includes both debt held by government

accounts (that is, the balances in earmarked funds) and debt held by the

public. Trust funds are generally required by law to be invested in

government obligations. When such earmarked funds have annual

surpluses—as in the current case of Social Security trust funds—debt held

by government accounts increases. Using the earmarked surpluses to

reduce debt held by the public merely exchanges publicly held debt for

debt held by government accounts; gross federal debt remains unchanged.

If the surpluses in earmarked funds are not all used to reduce debt held by

the public, total debt would increase even when the budget is in surplus.

Moreover, reforms to Social Security and Medicare can increase balances

and hence could increase gross federal debt if they increase any near-term

surpluses in these funds.

Some reconsideration of how debt is defined might help clarify the

situation. For example, the term “debt held by government accounts”—

essentially a bookkeeping entry of what has been earmarked to particular

purposes in excess of spending—could be reconsidered. This debt might

be excluded from gross federal debt so that gross federal debt reflects only

borrowing from the public which is a better concept for analyzing the

effect of the budget on the economy.1

 Debt held by government accounts

 1

Debt held by the public is a useful measure because it represents the cumulative burden of

past federal borrowing on today’s economy and the federal budget. Because debt held by

government accounts is neither equal to future benefit payments nor a measure of the

commitments of the current system, it cannot be seen as a measure of this future burden.
Section 5

Policy and Design Issues Related to

Earmarked Funds

Page 40 GAO-01-199SP Trust Fund FAQs

could also be excluded from the amount that is subject to the federal debt

limit. The balances of debt held by government accounts could be tracked

and interest paid, but it would not be called “debt.” This single clarification

could make public discourse on debt more transparent.

The federal budget is intended to facilitate the allocation of resources

among competing claims as well as the Nation’s economic stabilization

and growth. As a general principle, decision-making is enhanced if the

government recognizes the costs of its commitments at the time it makes

them. For most programs, cash-based budgeting accomplishes this.

However, for some programs, such as credit, pension, and insurance, cashbased measurement is incomplete and potentially misleading. For such

programs and others established to account for long-term commitments

like Social Security, the budget in some cases attempts to accumulate

earmarked balances in anticipation of future claims.

Because an earmarked fund’s accumulated balance does not necessarily

reflect the full future cost of existing government commitments, it is not

an adequate measure of a fund’s solvency or sustainability. As discussed in

section 2.3, the relationship between projected future fund balances and

the claim on future resources depends on whether the program financed

by the fund was structured such that earmarked receipts would cover the

future program claims stemming from its benefit structure. However,

when programs are not designed to be fully self-financed, their projected

accumulated balances can provide a vital signaling function about

underlying fiscal imbalances. For example, under current law, the longterm projected balances in the Social Security trust funds will not cover

the cost of Social Security benefits projected for the same long-term

period. In that case and others, the information on accumulated fund

balances provides an indication of the solvency of the fund but does not

fully inform policymakers about either the size of the benefit promised or

the sustainability of the programs financed by earmarked funds. Tracking

the estimated future balances in earmarked funds does make it possible,

however, to estimate how much more funding is needed to pay for the

commitments that have been promised. A shortfall between the long-term

projected fund balance and projected costs can signal that the fund, either

by design or because of changes in circumstances, is collecting insufficient

monies to finance future payments. This signaling device can eventually

prompt policymakers to action.

The difficulty of developing meaningful measures of fund sustainability is

exacerbated by the length of time covered by long-term commitments. The

longer the span of time between the collection and the expenditure of

Signaling Issues
Section 5

Policy and Design Issues Related to

Earmarked Funds

Page 41 GAO-01-199SP Trust Fund FAQs

funds, the greater the uncertainty involved in forecasting future needs.

Social insurance, pensions, and other programs that create long-term

commitments will frequently grapple with these timing issues. Having

several measures may in fact be the most informative. For example, Social

Security uses three alternative sets of economic and demographic

assumptions to estimate a range of possible future experiences.2

In that balances do not fully inform policymakers and the public about the

long-term sustainability of the programs financed by earmarked funds,

consideration is warranted of other ways to make long-term commitments

more apparent when making budget decisions. For example, similar to

credit programs, one might look at the net present value of estimated costs

and receipts for specific programs. Alternatively, constructing meaningful

measures that would trigger some action, such as expected program

growth beyond a specified share of GDP, might offer another means to

focus policymaker attention on certain long-term commitments. For

example, we have suggested that Medicare reforms could include a trigger

that would require the President to propose how to deal with the growth

and the Congress to vote on the proposal, either accepting it or developing

an alternative.3

 Whether ways to make long-term commitments more

apparent should represent changes in how the budget is measured or

simply changes in budget display would need to be considered based on

what is appropriate for each type of program. As we have said before, the

future sustainability of programs is the key issue policymakers should

address—i.e., the capacity of the economy and budget to afford the

 2

The three sets of estimates include low-, high-, and intermediate-cost assumptions that are

used to prepare 10-year and 75-year estimates. The low-cost alternative is more optimistic

for trust fund financing, the high-cost alternative is more pessimistic, and the intermediatecost alternative reflects the “best estimate” of future experience.

3

Medicare Reform: Issues Associated With General Revenue Financing (GAO/T-AIMD-00-

126, Mar. 27, 2000).
Section 5

Policy and Design Issues Related to

Earmarked Funds

Page 42 GAO-01-199SP Trust Fund FAQs

commitment. Fund solvency can help, but only if promoting solvency

improves the future sustainability of the program.
Page 43 GAO-01-199SP Trust Fund FAQs

OMB and Treasury report funds differently. For example, because

amounts in the federal budget are rounded to millions of dollars, OMB

instructs agencies to consolidate small accounts with larger general fund

accounts.1 However, Treasury tracks monies for each discrete trust fund

account down to the penny in order to fulfill its governmentwide

accounting and cash management responsibilities. Thus, Treasury’s count

of funds represents the actual number of separate entities designated as

earmarked funds.

Because this report was written primarily from a budgetary perspective,

we used OMB budget data to analyze earmarked funds. Accordingly, our

analysis does not separately identify funds with amounts less than

$500,000. Although, to the extent possible, we individually counted trust

funds that OMB grouped together, we could not always separately identify

expenditures that had been merged or consolidated with other accounts.

As a result, the number of earmarked funds we identify is more than the

number of funds tracked by OMB but fewer than the actual number

tracked by Treasury.

The budget data we used were extracted from automated information

collected and maintained by OMB. We obtained this data for the fiscal year

2001 budget, which included data for fiscal year 1999. We extracted

account data on receipts (including source information), offsetting

collections, gross outlays, and balances (including unappropriated,

unobligated, and obligated balance data). We also extracted data on

budget function and Deficit Control Act classification as mandatory or

discretionary. We excluded (1) financing accounts, since they are

nonbudgetary; (2) funds established after 1999; and (3) legislative

proposals included in the 2001 budget. Although we did not independently

verify the extracted data for every earmarked fund, we reconciled account

data for a judgmentally selected set of funds to the published Budget of

the United States Government, Fiscal Year 2001—Appendix and, in many

cases to the Department of Treasury’s receipt data published in the United

States Government Annual Report—Appendix.

We defined earmarked funds that carry some degree of long-term

commitment as those that finance federal insurance programs, social

 1

OMB also will sometimes report trust fund groups rather than individual trust funds.

Groups may include two or more trust funds with similar purposes. For example, it groups

the five trust funds related to “foreign service national separation liability” associated with

five different agencies under one group trust fund name

Appendix I

Scope and Methodology
Appendix I

Scope and Methodology

Page 44 GAO-01-199SP Trust Fund FAQs

insurance programs, and federal pensions. We recognize that there is no

universal agreement on which programs constitute federal insurance2

 and

social insurance. We determined our list based on the programs previously

identified by OMB and the Federal Accounting Standards Advisory Board.

We also included earmarked pension funds that had filed under P.L 95-595

as well as others we identified. In addition, we included two railroad funds

related to Social Security and Unemployment Insurance and two

Department of Defense education funds that represent exchange

transactions.

To develop historical perspective on earmarked funds, we reviewed

relevant literature. In addition, we met with budget specialists from OMB,

CRS, and CBO and held telephone conversations with specialists from the

Department of Treasury. We obtained comments on this report and

incorporated them as appropriate.

Our work was performed in Washington, D.C., and was done in

accordance with generally accepted auditing standards.

 2

See Budget Issues: Budgeting for Federal Insurance Programs (GAO/AIMD-97-16, Sept. 30,

1997).
Page 45 GAO-01-199SP Trust Fund FAQs

Earmarked funds serve a multitude of purposes and can vary considerably

in their makeup. To provide a sense of this variety, this appendix briefly

describes the background and purpose of some of the bigger funds and

each fund’s Deficit Control Act category, fiscal year 1999 fund data,

investment information, and current issues. We include funds from each of

the four types of earmarked funds and have ordered them alphabetically.

ï Airport and Airway Trust Fund (Nonrevolving Trust Fund)

ï Civil Service Retirement and Disability Fund (Nonrevolving Trust Fund)

ï Commodity Credit Corporation Fund (Public Enterprise Fund)

ï Federal Employees and Retired Employees Health Benefits Funds

(Revolving Trust Fund)

ï Employees Life Insurance Fund (Revolving Trust Fund)

ï Highway Trust Fund (Nonrevolving Trust Fund)

ï Land and Water Conservation (Special Fund)

ï Medicare (Hospital Insurance and Supplemental Medical Insurance)

(Nonrevolving Trust Funds)

ï Military Retirement Fund (Nonrevolving Trust Fund)

ï Nuclear Waste Fund (Special Fund)

ï Postal Service Fund (Public Enterprise Fund)

ï Strengthening Markets, Income, and Supply (Section 32) (Special Fund)

ï Social Security (Old-Age and Survivors Insurance Fund and Disability

Insurance Fund) (Nonrevolving Trust Funds)

ï Tennessee Valley Authority Fund (Public Enterprise Fund)

ï Unemployment Insurance Fund (Nonrevolving Trust Fund)

ï Universal Service Fund (Special Fund)

Appendix II

Description of Selected Earmarked Funds
Appendix II

Description of Selected Earmarked Funds

Page 46 GAO-01-199SP Trust Fund FAQs

Fund type, authorization, background, and purpose:

The Airport and Airway Trust Fund is a nonrevolving trust fund

established by Title II of the Airport and Airway Revenue Act of 1970

(section 208 of P.L. 91-258). The “Aviation Trust Fund,” as it is also known,

was established to provide funding for capital improvements and

operations for the nation’s airport and airway system. The most recent

reauthorization of aviation programs occurred with passage of the Wendell

H. Ford Aviation Investment and Reform Act for the 21st Century (P.L.

106-181).

The aviation trust fund receives the vast majority of its funding from a

percentage tax on domestic airline tickets and a flight segment tax.

Additional funding is obtained from taxes on aviation fuels, cargo waybills,

and international departures and arrivals.

Deficit Control Act category: Mandatory receipts and discretionary

outlays

Budget subfunction: Air transportation (402)

Fiscal year 1999 fund data:

(Dollars in millions)

Income $11,121

Source of funds:

Taxes (governmental receipts) $10,391

Offsetting collections 32

Proprietary receipts 0

General fund transfers: 698

Interest $698

Appropriations 0

Other 0

Outlays $ 8,089

Balance at end of year $12,446

Investments: The fund is invested in nonmarketable federal securities.

Current issues: In April 2000, the Wendell H. Ford Aviation Investment

and Reform Act for the 21st Century (AIR-21) was enacted. This law

Airport and Airway

Trust Fund

(20-8103-0-7-402)
Appendix II

Description of Selected Earmarked Funds

Page 47 GAO-01-199SP Trust Fund FAQs

changes the budgetary treatment of the Airport and Airway Trust Fund so

that it is similar to that of the Highway Trust Fund (i.e., establishes annual

guaranteed minimum funding levels that are tied to receipts.) Providing

guaranteed funding levels to any one activity in the budget protects that

activity from competition with other areas for finite resources. GAO has

previously testified on guaranteed funding levels and trust fund control in

the budget.1

Fund type, authorization, background, and purpose:

Civil Service Retirement and Disability (CSRD) is a nonrevolving trust

fund covering the defined benefit components of the two major federal

civilian retirement systems: the Civil Service Retirement System (CSRS)

and the Federal Employees’ Retirement System (FERS). According to the

Office of Personnel Management’s annual report, the CSRS and FERS

retirement plans cover about 90 percent of the federal civilian workforce.

From 1920 to 1984, CSRS was the retirement plan covering most civilian

federal employees. In 1935, the Congress enacted the Social Security

system for private sector workers. The Congress extended Social Security

coverage to state and local government workers in the early 1950s and, in

1983, the Congress enacted P.L. 98-21, which mandated that workers hired

into permanent federal positions on or after January 1, 1984, be covered by

Social Security.

In June 1986, the Congress passed the Federal Employees’ Retirement

System Act of 1986 (P.L. 99-335) creating FERS. Unlike CSRS, which is a

defined benefit plan,2

 FERS has three components: (1) Social Security

defined benefit, (2) a FERS defined benefit pension, and (3) the Federal

Thrift Savings Plan defined contribution plan. CSRS was closed to new

entrants after December 31, 1983.

Deficit Control Act category: Primarily mandatory; some discretionary

outlays

 1

Budget Issues: Trust Funds in the Budget (GAO/T-AIMD/RCED-99-110, March 8, 1999) and

Budget Issues: Cap Structure and Guaranteed Funding (GAO/T-99-210, July 21, 1999).

2

Federal workers covered by CSRS also may participate in the thrift savings plan, but their

total contribution is limited to 5 percent of pay and they receive no matching contributions

from their employing agency.

Civil Service

Retirement and

Disability Fund

(24-8135-0-7-602)
Appendix II

Description of Selected Earmarked Funds

Page 48 GAO-01-199SP Trust Fund FAQs

Budget subfunction: Federal employee retirement and disability (602)

Fiscal year 1999 fund data:

(Dollars in millions)

Income $ 74,522

Source of funds:

Governmental receipts: employee contributions $ 4,421

Proprietary receipts 0

Offsetting collections 0

General fund transfers: 70,101

Interest $33,579

Appropriations 21,427

Other (employer contributions) 15,095

Outlays $ 43,932

Balance at end of year $481,273

Investments: The fund is invested in interest-bearing securities of the

U.S. government. It also carries, but does not routinely invest in certain

federal agency securities.

Current issues: At present, there is no looming financial crisis facing

either CSRS or FERS. According to the actuaries of the Office of Personnel

Management, both programs will have sufficient resources to meet their

obligations for the indefinite future. Periodically, proposals have been

made to take the CSRD trust fund off-budget, as has been done with the

Social Security trust funds. For example, since 1993, at least three bills

have been introduced to move the CSRD trust fund off-budget. However,

none of these bills was enacted.

Congressional interest in the civil service retirement programs in the past

has tended to focus on the “under-funding” of retirement annuities in

CSRS. While FERS was set up to be fully funded, CSRS has always been
Appendix II

Description of Selected Earmarked Funds

Page 49 GAO-01-199SP Trust Fund FAQs

funded on a pay-as-you-go basis.3 In other words, payments into the CSRD

trust fund were used to pay benefits to already retired workers rather than

to prefund the pension benefits of current workers. Proposals to prefund

CSRS in the same manner as FERS have tended to founder on the issue of

whether they would be given additional budget authority or make higher

contributions from their existing budget authority. While recording

additional budget authority in agency budgets would properly reflect the

costs of CSRS employees, the accumulation of large surplus balances in

the trust fund does not by itself affect the government’s ability to meet

commitments or make a program more sustainable in the future.

Fund type, authorization, background, and purpose:

The Commodity Credit Corporation (CCC) fund is a public enterprise

fund.

CCC was established in 1933 as one of the first pieces of New Deal

legislation proposed by President Roosevelt. CCC was originally

incorporated under a Delaware charter and was reincorporated in 1948 as

a federal corporation within the U.S. Department of Agriculture (USDA)

by the Commodity Credit Corporation Charter Act (P.L. 80-806). CCC was

established to stabilize, support, and protect farm incomes and prices and

to assist in maintaining balanced and adequate supplies of agricultural

commodities and in facilitating their orderly distribution. CCC carries out

this mission by financing a variety of income and commodity support

programs through direct payments and loans. These programs assist in the

production and marketing of agricultural commodities such as feed grains,

wheat, rice, and cotton. CCC’s mission was expanded in recent years to

include the financing of a range of commodity export, resource

conservation, and disaster assistance programs. Among other things, these

programs are intended to enhance price competitiveness of U.S.

commodities in foreign markets, assist producers in implementing

conservation practices on their farms, and indemnify producers for the

extraordinary losses of crops or livestock resulting from weather-related

 3

Because the full costs of CSRS are not met by the combined total of employee

contributions, agency contributions, and the supplemental payments from Treasury, some

future CSRS benefits will of necessity be paid from contributions that were made to the

fund on behalf of employees who are covered by FERS. This would have created an

unfunded liability for FERS. However, funding for this liability is provided through a series

of 30-year amortization payments from the general fund of the Treasury to the CSRD trust

fund.

Commodity Credit

Corporation Fund

(12-4336-0-3-999)
Appendix II

Description of Selected Earmarked Funds

Page 50 GAO-01-199SP Trust Fund FAQs

disasters and pest infestations. CCC uses offsetting collections from the

sale of commodities, loan repayments, interest income, dairy assessments,

and various other program fees. CCC has no employees; its operations are

carried out principally through the personnel and facilities of USDA’s

Farm Service Agency, Foreign Agricultural Service, and Natural Resources

and Conservation Service.

Deficit Control Act category: Mandatory

Budget subfunction: Multiple functions (999)

Fiscal year 1999 fund data:

(Dollars in millions)

Income $ 9,882

Source of funds:

Taxes (governmental receipts): $ 0

Proprietary receipts 0

General fund transfers 0

Offsetting collections: 9,882

Interest $ 0

Federal sources 1,621

Nonfederal sources 8,261

Gross outlays $29,182

Balance at end of year $ 1,402

Fund type, authorization, background, and purpose:

This account is a revolving trust fund and combines the Federal

Employees Health Benefits fund (FEHB) and the Retired Employees

Health Benefits fund (REHB). Authorized by the Federal Employees

Health Benefits Act of 1959 (P.L. 86-382), the FEHB program began

operations on July 1, 1960. The basic structure of FEHB has undergone

Federal Employees and

Retired Employees

Health Benefits Funds

(24-9981-0-8-551)
Appendix II

Description of Selected Earmarked Funds

Page 51 GAO-01-199SP Trust Fund FAQs

relatively few changes since the program began operation.4 The REHB

program was created by the Retired Federal Employees Health Benefits

Act (P.L. 86-724). Together, these two funds comprise the FEHB trust

fund.

FEHBP is the nation’s largest voluntary employer-sponsored health

insurance program and is administered by the Office of Personnel

Management (OPM). Employees and retirees share the costs of health

coverage with the federal government, which pays 72 percent of premium

costs, on average.5

 FEHBP serves as an insurance purchaser contracting

with several hundred private health plans to offer health benefits to

federal employees, retirees, and their dependents. OPM negotiates

premiums and benefits with participating health plans but it does not

directly reimburse claims or directly provide health care services.

Participation in FEHBP is voluntary and enrollees may change from one

plan to another during annual “open seasons.” At the time of retirement,

eligible enrollees must make a one-time election to continue to participate

in FEHBP as retirees. Participating retirees pay the same premiums as

active employees.

Deficit Control Act category: Primarily mandatory

Budget subfunction: Health care services (551)

 4

Since 1991, OPM has required participant plans to implement cost containment procedures

and policies such as hospital precertification, case management, and development of

preferred provider networks.

5

The Balanced Budget Act of 1997 (P.L. 105-33) established a new formula that permanently

sets the government’s share of premiums at 72 percent of the average total premium cost of

all plans in the FEHBP, weighted by the number of participants in each plan. The

government share cannot exceed 75 percent of the premium of any particular plan.
Appendix II

Description of Selected Earmarked Funds

Page 52 GAO-01-199SP Trust Fund FAQs

Fiscal year 1999 fund data:

(Dollars in millions)

Income $18,039

Source of funds:

Taxes (governmental receipts): employee contributions $ 0

Proprietary receipts 0

General fund transfers 0

Offsetting collections: 18,039

Interest $ 360

Employer/government contributions 12,759

Employee/annuitant contributions 4,920

Outlays $18,463

Balance at end of year $ 5,813

Investments: The fund is invested in nonmarketable, market-based

government debt securities, which have a yield that equals the average of

all marketable government debt securities with 4 or more years to

maturity.

Current issues: As of October 1, 2000, OPM began allowing employees of

the executive branch agencies to pay their share of FEHB insurance costs

with pretax dollars, thus increasing employees after-tax income. Only

current employees will be able to pay their premiums in this manner. We

have estimated that the tax loss associated with this method of payment

will be over $700 million annually.

S. 2218 and H.R. 4040 have been introduced to establish a long-term care

(LTC) insurance program for federal employees and annuitants, current

and retired members of the uniformed services, and their qualified

relatives. Under these proposals, OPM would contract with private

insurance carriers or a consortium of insurers to provide LTC benefits.

Insured individuals would be responsible for 100 percent of premiums.

Fund type, authorization, background, and purpose:

This revolving trust fund finances payment to a private insurance company

for federal employees’ group life insurance (FEGLI) and expenses

incurred by OPM to administer the program. The life insurance program

Employees Life

Insurance Fund

(24-8424-0-8-602)
Appendix II

Description of Selected Earmarked Funds

Page 53 GAO-01-199SP Trust Fund FAQs

was created by the Federal Employees Group Life Insurance Act of 1954

(P.L. 83-598) and covers about 90 percent of eligible employees,

annuitants, and many of their family members.

The FEGLI program provides basic coverage and three types of optional

coverage, including standard, additional, and family optional coverage.

FEGLI is administered through a contract with Metropolitan Life

Insurance Company. Basic insurance is determined by the amount of an

employee’s annual rate of basic pay, rounded to the next highest thousand,

plus $2,000. All federal employees are automatically covered by basic

insurance unless they decline. Starting in 1995, living benefits were added

to the FEGLI program. Living benefits allow eligible terminally ill enrollees

to receive their basic insurance benefits during the last stage of their lives.

Deficit Control Act category: Primarily mandatory

Budget subfunction: Federal employee retirement and disability (602)

Fiscal year 1999 fund data:

(Dollars in millions)

Income $ 2,945

Source of funds:

Taxes (governmental receipts) $ 0

Proprietary receipts 0

General fund transfers 0

Offsetting collections: 2,945

Interest $1,311

Nonfederal sources 1,240

Other (Agency contributions) 394

Outlays $ 1,561

Balance at end of year $20,486

Investments: The fund is invested in nonmarketable, market-based

government debt securities, which have a yield that equals the average of

all marketable government debt securities with 4 or more years to

maturity.
Appendix II

Description of Selected Earmarked Funds

Page 54 GAO-01-199SP Trust Fund FAQs

Fund type, authorization, background, and purpose:

The Highway Trust Fund is a nonrevolving trust fund comprised of two

accounts: highways and mass transit. The Highway Trust Fund was

created by Title II of P.L. 84-627, the Highway Revenue Act of 1956. This

1956 act provided funding for construction of the interstate highway

system and for some other federal highway programs. The Highway Trust

Fund was established as a way to provide funding for capital construction

and this remains its principal focus.

The mass transit account, created by the Surface Transportation

Assistance Act of 1982 (P.L. 97-424), represented the culmination of a long

congressional debate about the position of transit in the national

transportation system. The transit account provided a consistent federal

funding source for capital spending on new and rehabilitated mass transit

infrastructure and for other purposes.

Deficit Control Act category: Mandatory receipts; predominantly

discretionary outlays

Budget subfunction: Ground transportation (401)

Fiscal year 1999 fund data:

(Dollars in millions)

Income $39,427

Source of funds:

Taxes (governmental receipts) $39,299

Offsetting collections 126

Proprietary receipts: interest 2

Outlays $29,036

Balance at end of year $28,979

Investments: The fund is invested in nonmarketable Treasury securities

which are noninterest bearing.

Current issues: Over the last 40 years, the Highway Trust Fund and the

federal program it supports have been changed numerous times. In almost

every instance, the Congress has chosen to expand the scope of the

federal highway program. At various times over the same period, the

Highway Trust Fund

(20-8102-0-7-401)
Appendix II

Description of Selected Earmarked Funds

Page 55 GAO-01-199SP Trust Fund FAQs

Congress has also chosen to increase the revenue stream into the trust

fund by raising federal excise taxes on motor fuels. Over the last several

years, a number of bills have proposed to both move the Highway Trust

Fund off-budget and exempt it from DCA controls in order to ensure that

highway spending is not held down in order to lower the federal deficit.

Instead of moving the fund off-budget, legislation in May 1998 established

minimum guaranteed spending levels. The Transportation Equity Act for

the 21st Century (P.L. 105-178), referred to as TEA-21,6

 established two

new categories within the discretionary spending caps set forth in the

DCA: the highway category and the mass transit category, each with its

own outlay caps through fiscal year 2003. TEA-21 also established

minimum obligation limitations or spending levels for the highway and

mass transit categories for fiscal years 1999 through 2003. For the highway

category, these minimum spending levels are tied to receipts (from the

previous year) of the highway category. TEA-21 provides a mechanism for

adjusting these spending levels upward or downward each year based on

actual receipts from 2 years prior to the fiscal year, as reported by

Treasury, plus revised Treasury receipt projections for the fiscal year in

question. For example, for fiscal year 2000, TEA-21 requires that this

adjustment be calculated by comparing (1) actual highway account

receipts for fiscal year 1998 with the TEA-21 projection of these receipts

and (2) revised projections of the highway account receipts for fiscal year

2000 with the TEA-21 projection of these receipts. The sum of these

differences becomes the adjusted funding level. GAO has previously

testified on guaranteed funding levels and trust fund control in the budget.7

Fund type, authorization, background and purpose:

The Land and Water Conservation Fund (LWCF) is a special fund

administered by the Department of the Interior. The fund was created by

the Land and Water Conservation Fund Act of 1965 (Pub.L. 88-578). The

fund was originally authorized through fiscal year 1989 but was

 6

A technical corrections bill provided additional clarification of funding formulas, highway

safety regulations related to drunk driving, and certain budget offsets. The technical

corrections for TEA-21 were ultimately incorporated into Title IX of the Internal Revenue

Service Restructuring and Reform Act of 1988 (P.L. 105-206), which was enacted on July 22,

1998.

7

Budget Issues: Trust Funds in the Budget (GAO/T-AIMD/RCED-99-110, March 9, 1999) and

Budget Issues: Cap Structure and Guaranteed Funding (GAO/T-99-210, July 21, 1999).

Land and Water

Conservation Fund

(14-5005-0-2-303)
Appendix II

Description of Selected Earmarked Funds

Page 56 GAO-01-199SP Trust Fund FAQs

reauthorized through fiscal year 2015 by the Omnibus Budget

Reconciliation Act of 1987.

Revenues to the fund are comprised of federal recreation fees, proceeds

from the sale of surplus federal real property, part of the motorboat fuel

tax, and part of the receipts from oil and gas leases on the Outer

Continental Shelf. The latter item constitutes the bulk of the revenues to

the fund.

LWCF funds are available to support federal land acquisition and state

recreation programs only upon appropriation by the Congress.

Appropriations are made for the Forest Service in the Department of

Agriculture and to three Department of the Interior agencies (National

Park Service, Fish and Wildlife Service, and Bureau of Land Management).

Deficit Control Act category: Mandatory receipts and discretionary

outlays

Budget subfunction: Recreational resources (303)

Fiscal year 1999 fund data:

(Dollars in millions)

Income $ 908

Source of funds:

Taxes (governmental receipts) [motorboat fuels tax] $ 1

General fund transfers (intragovernmental transfers)

Interest

Appropriations

Other

Proprietary receipts: 907

Outer Continental Shelf lands rent $899

Surplus property sales 8

Offsetting collections 385

Outlays $ 1,087

Balance at end of year $12,936

Investments: The Land and Water Conservation Fund is not authorized to

invest surplus funds in Treasury securities.
Appendix II

Description of Selected Earmarked Funds

Page 57 GAO-01-199SP Trust Fund FAQs

Current issues: Concerns have been raised that, over the years, spending

from the LWCF has been held down to help reduce the federal budget

deficit. A substantial balance of unappropriated funds has accumulated,

and even if funds were appropriated at the authorized level, the fund

would be unlikely to spend down the balance in the near future. Some

advocates see the current budget surpluses as an opportunity to spend

more money on these activities.

Bills to greatly expand federal financial support for land and resource

acquisition and for protection and recreation have been introduced during

the 106th Congress. Some proposals would replace annual appropriations

with a permanent appropriation. Other proposals would take the LWCF

off-budget and exempt it from any general budget limitation. The House

passed H.R 701 on May 11, 2000. This bill would increase funding for

LWCF by transferring up to $900 million annually from a newly established

Conservation and Reinvestment Act Fund. Funding for federal land

acquisition would remain subject to appropriations acts while a portion of

the funds would not be subject to appropriations.

Fund type, authorization, background, and purpose:

Medicare, financed through two nonrevolving trust funds, is a federal

health insurance program enacted in 1965. Initially, eligible Americans age

65 or older were covered. Coverage was later extended to certain disabled

persons by the Social Security Amendments of 1972. Medicare is the

nation’s largest health insurance program. It is administered by the Health

Care Financing Administration, which contracts with insurance companies

for claims processing services.

Medicare has two parts, A and B, and two trust funds, HI and SMI, each of

which is financed differently.

Part A: Federal Hospital Insurance (HI) Component: Medicare Part A is

financed through the HI trust fund, which covers inpatient hospital, skilled

nursing facility, home health, and hospice services. It is financed by a 1.45

percent payroll tax on employers and employees. It also receives a portion

of federal income taxes paid on Social Security benefits. All citizens 65

years of age or older with credit for at least 40 quarters of employment are

fully covered for life under Social Security. They are entitled to Part A at

no cost. Senior citizens without sufficient quarters of coverage can

purchase Part A for premiums based on the actuarial value of benefits.

Persons who have received Social Security disability benefits for 24

Medicare Trust Funds

(20-8004-0-7-571 and

20-8005-0-7-571)
Appendix II

Description of Selected Earmarked Funds

Page 58 GAO-01-199SP Trust Fund FAQs

months and most people with kidney disease—End Stage Renal Disease

(ESRD)—are also entitled to Part A without additional premiums.

Part B: Federal Supplementary Medical Insurance (SMI) Component:

Medicare Part B is financed through the SMI trust fund. It is a voluntary

program under which anyone age 65 or older, disabled persons, or ESRD

patients entitled to Part A can purchase coverage for a wide range of

outpatient services ranging from physicians’ services to clinical laboratory

tests. Enrollees pay a monthly premium that covers about 25 percent of

program costs; federal general revenues pay the remainder. Beneficiaries

are responsible for a $100 annual deductible payment. For most covered

services, beneficiaries are also responsible for 20 percent coinsurance. If a

Medicare beneficiary qualifies for Medicaid (an income-tested program),

the Medicaid program will pay his or her Medicare Part B premiums.

Deficit Control Act category: Benefit payments, comprising about 98

percent of gross outlays, are mandatory; administrative expenses,

comprising about 2 percent of outlays, are discretionary.

Budget subfunction: Medicare (571)

Fiscal year 1999 fund data:

Federal Hospital Insurance

(Dollars in millions)

Income $153,018

Source of funds:

Taxes (governmental receipts) $132,337

Offsetting collections 3

Proprietary receipts: 1,403

Interest $ 2

Premiums 1,401

General fund transfers: 19,275

Interest 9,286

Appropriations 7,413

Other (federal employer contributions) 2,576

Outlays $131,503

Balance at end of year $138,421
Appendix II

Description of Selected Earmarked Funds

Page 59 GAO-01-199SP Trust Fund FAQs

Federal Supplementary Medical Insurance

(Dollars in millions)

Income $85,457

Source of funds:

Taxes (governmental receipts) $ 0

Offsetting collections 179

Proprietary receipts 20,167

Interest $ 7

Premiums 20,160

General fund transfers: 65,111

Interest 2,926

Appropriations 62,185

Outlays $80,697

Balance at end of year $45,649

Investments: The Social Security Act requires that funds not necessary to

meet current expenditures be invested in interest-bearing obligations of

the United States or in obligations guaranteed as to both principal and

interest by the United States. These investments are carried at face value

as determined by Treasury.

Current issues: Absent changes, the long-term financial outlook for the

Medicare program is bleak. Under the Trustees’ 1999 intermediate

projections, HI and SMI expenditures taken together are expected to

increase dramatically, rising from about 12 percent of all federal revenues

in 1999 to about 25 percent by mid-century, even without any additions to

the benefit package. Over the same time frame, Medicare’s expenditures

are expected to double as a share of the economy, from 2.5 percent to 5.3

percent.

Medicare trust fund reports show that the HI component had a cash deficit

from 1992 through 1998 but is now running a surplus that is projected to

continue until 2025. Nevertheless, the Medicare program is fiscally

unsustainable in its present form as the disparity between program

expenditures and program revenues is expected to reopen and widen

dramatically after 2025. Moreover, the program has not adopted modern,

market-based management tools and its benefit package contains gaps in

desired coverage compared to private employer coverage. Compounding
Appendix II

Description of Selected Earmarked Funds

Page 60 GAO-01-199SP Trust Fund FAQs

the difficulties of responding to these competing concerns is the sheer size

of the Medicare program—even modest program changes send ripples

across the program’s 39-million beneficiary population and the

approximately 1 million health care providers that bill the program.

A number of legislative proposals dealing with Medicare benefits and

financing have been made. Options to reform Medicare must balance the

needs of all parties and require hard choices based on affordability, equity,

adequacy, feasibility, and acceptance.

Fund type, authorization, background, and purpose:

The Military Retirement Fund is a nonrevolving trust fund. It was

established by the Department of Defense Authorization Act of 1984.

The military retirement system provides benefits for retirement after a

military career, disability retirement, and survivor benefits for eligible

survivors of deceased retirees. Benefits are paid after 20 years of active

service, regardless of age, and are intended more to retain qualified

personnel through a full 20-year career than to provide adequate

retirement income. The system seeks to minimize turnover and the

government’s training costs for skilled personnel and to encourage the

retirement of service members who have become too old to meet the

physical and mental demands of military service. The military retirement

system is a noncontributory (i.e., no employee contributions) defined

benefit plan.

Deficit Control Act category: Mandatory

Budget subfunction: Federal employee retirement and disability (602)

Military Retirement

Fund

(97-8097-0-7-602)
Appendix II

Description of Selected Earmarked Funds

Page 61 GAO-01-199SP Trust Fund FAQs

Fiscal year 1999 fund data:

(Dollars in millions)

Income $ 38,227

Source of funds:

Taxes (governmental receipts): employee contributions $ 0

Proprietary receipts 0

Offsetting collections 0

General fund transfers: 38,227

Interest $12,560

Appropriations 15,250

Other (employer contributions) 10,417

Outlays $ 31,889

Balance at end of

year

$151,853

Investment: The fund is invested in nonmarketable, special-issue

Treasury securities.

Current issues: A variety of major changes in military retirement were

enacted in the fiscal year 2000 National Defense Authorization Act (P.L.

106-65). Some of the changes included (1) allowing military personnel the

option of retiring under the “Redux” system with a cash bonus of $30,000

or under a more generous pre-Redux formula without the bonus payment;8

(2) allowing military personnel to enroll in the federal civil service’s Thrift

Savings Plan; (3) repealing dual compensation laws that required military

retirees in the federal civil service to forfeit some or all of their retired pay;

and (4) authorizing a special payment to some people who receive both

military nondisability retired pay and Department of Veterans Affairs

disability compensation.

 8

Redux refers to cuts incorporated in military retirement pay for persons who would first

be retiring in mid-2006. Redux was established in the Military Retirement Reform Act of

1986 (P.L. 99-348) based on allegations that military retirement cost too much, had overly

generous benefits, and contributed to inefficient military personnel management.
Appendix II

Description of Selected Earmarked Funds

Page 62 GAO-01-199SP Trust Fund FAQs

Fund type, authorization, background, and purpose:

The Nuclear Waste Fund is a special fund under the jurisdiction of the

Department of Energy. It was established by the Nuclear Waste Policy Act

of 1982, Public Law 97-425, enacted January 7, 1983. It finances the

activities of the nuclear waste disposal program, which consists of the

development, acquisition, and operation of facilities for the disposal of

nuclear waste.

The act requires that reactor operators pay (1) fees for electricity

generated by a civilian nuclear power reactor and (2) a one-time fee for

spent nuclear fuel for power generated prior to the act. These fees are

credited to the fund. The act said that, in return for these fees, the

Secretary of Energy, beginning not later than January 31, 1998, would

provide for the disposal of the high-level radioactive waste or spent

nuclear fuel accumulated at nuclear power plants. The Secretary was

authorized to make expenditures from the fund for purposes of authorized

radioactive waste disposal activities, subject to appropriations that would

remain available until expended. Balances in the fund may be invested in

Treasury securities.

Deficit Control Act category: Discretionary

Budget subfunction: Energy Supply (271)

Fiscal year 1999 fund data:

(Dollars in millions)

Income $ 768

Source of funds:

Taxes (governmental receipts)

Proprietary receipts : $662

Fees for Services $662

General fund transfers (intragovernmental transfers) 106

Interest 106

Appropriations

Other

Offsetting collections

Outlays $ 188

Balance at end of year $7,927

Nuclear Waste Fund

(89-5227-0-2-271)
Appendix II

Description of Selected Earmarked Funds

Page 63 GAO-01-199SP Trust Fund FAQs

Investments: The fund is invested in U.S. Treasury securities, which are

classified as “available-for-sale” and are reported at market value.

Current issues: The goal of accepting radioactive waste into a repository

at Yucca Mountain, Nevada, in 1998 was not achieved. The goal now is to

open the facility in 2010 at the earliest. The lack of a disposal site has been

a contentious issue over the years. Nuclear utilities, which have paid for

the waste disposal program for years through the fee on nuclear power,

have become concerned over the delays and the need to store spent

nuclear fuel. Some delays have been blamed on poor program

management, while the Department of Energy contends that tight funding

has been a major barrier. Congressional approval is required to spend the

fees collected, and only about half of the fees collected have been

appropriated to the program. Some surplus in the fund may be needed to

pay future costs after nuclear plants have ceased operation.

In the 106th Congress, bills to modify the civilian waste program were

considered in both houses. The House Commerce Committee approved

H.R. 45, which would have moved the Nuclear Waste Fund off-budget and

exempted it from DCA controls. Although appropriations would still be

required for all expenditures from the fund, the appropriations would not

be subject to budget caps. This proposal raised considerable concern from

the House Budget Committee. The Senate bill (S. 1287) would leave the

current funding mechanism in place but would authorize waste shipments

to the repository site if it receives a Nuclear Regulatory Commission

construction permit. S. 1287 passed both houses of Congress but the

President vetoed the legislation on April 25, 2000. A Senate override

attempt on May 2, 2000, was unsuccessful.

Fund type, authorization, background, and purpose:

The U.S. Postal Service is financed through a public enterprise fund. The

Service’s roots date back to 1775 when the Continental Congress

appointed Benjamin Franklin as Postmaster General. Throughout the

years, the mode and price of mail delivery changed. In 1970, President

Nixon signed into law the Postal Reorganization Act (P.L. 91-375), the

most comprehensive postal legislation in nearly two centuries. The 1970

act removed the Post Office Department from the President’s cabinet,

retained the postal mail monopoly, ended the authority of the Congress to

set employee wages and postage rates, and granted the new independent

establishment substantial fiscal autonomy over its operations. Its primary

mission is to provide universal postal service at reasonable rates. It must

also remain self-supporting from postal revenues.

Postal Service Fund

(18-4020-0-3-372)
Appendix II

Description of Selected Earmarked Funds

Page 64 GAO-01-199SP Trust Fund FAQs

Currently, the Postal Service is one of two off-budget federal entities; the

other is Social Security. By law, the government must exclude the

transactions of off-budget programs from the totals of the President’s

budget and the Congress’ budget resolutions, even though they are part of

total government transactions.

Deficit Control Act category: Excluded

Budget subfunction: Postal Service (372)

Fiscal year 1999 fund data:

(Dollars in millions)

Income $62,943

Source of funds:

Taxes (governmental receipts) $ 0

Proprietary receipts 0

General fund transfers 0

Offsetting collections: 62,943

Interest $ 29

Federal sources 957

Nonfederal sources 61,957

Gross outlays $63,964

Balance at end of year $22,107

Investments: The Postal Service invests in nonmarketable U.S. Treasury

securities.

Current issues: Direct and indirect competition to the Postal Service is

growing. Advances in communications technology, privatized and

deregulated foreign postal services, and consumer demand fueled by

dramatic growth in Internet commerce make it imperative to raise the

quality and ease of use of products and services. In particular, the Postal

Service has been hampered by long-standing challenges in labormanagement relations that, if continued, may hinder efforts to achieve

desired improvements. Continued success will depend heavily on the

Postal Service’s ability to control operating costs, improve productivity,

strengthen internal controls, and ensure the integrity of its services.
Appendix II

Description of Selected Earmarked Funds

Page 65 GAO-01-199SP Trust Fund FAQs

Fund type, authorization, background, and purpose:

Funds for Strengthening Markets, Income, and Supply (Section 32) is a

special fund administered by the Agricultural Marketing Service of the

Department of Agriculture. Section 32 of the Act of August 24, 1935, Chap.

641 (7 USC 612c) authorized a permanent appropriation equal to 30

percent of the gross receipts from duties collected under the customs laws

to be maintained in a separate fund. The money was first made available

during the depression to assist farmers suffering from price-depressing

surpluses.

Funds must be used for (1) encouraging the export of farm products

through producer payments or other means, (2) encouraging the domestic

consumption of farm products by diverting them from normal channels

and expanding use by low-income groups, and (3) reestablishing farmers’

purchasing power. The Secretary of Agriculture has wide discretion in

deciding how to achieve these objectives since the legislation provided

that the sums shall be expended for one or more of the specified purposes

and at such times, in such manner, and in such amounts as the Secretary

determines. However, no more than 25 percent may be spent on any one

commodity or product.

Most of the money credited to this special fund is transferred to the Food

and Nutrition Service and is used to purchase commodities under section

6 of the National School Lunch Act and other authorities specified in the

child nutrition appropriation. In fiscal year 1999 just over $5 billion was

transferred to Child Nutrition Programs. An amount equal to 30 percent of

receipts collected on fishery products ($66 million in 1999) was

transferred to the Department of Commerce for fisheries research. The

remaining funds are available for administrative expenses for direct

commodity purchases and to serve as a contingency reserve.

Deficit Control Act category: Mandatory

Budget subfunction: Food and nutrition assistance (605)

Funds for

Strengthening Markets,

Income, and Supply

(Section 32)

(12-5209-0-2-605)
Appendix II

Description of Selected Earmarked Funds

Page 66 GAO-01-199SP Trust Fund FAQs

Fiscal year 1999 fund data:

(Dollars in millions)

Income $5,681

Source of funds:

Taxes (governmental receipts): customs duties $5,680

Proprietary receipts

General fund transfers

Offsetting collections: Nonfederal sources 1

Outlays 833

Transfers to other accounts $5,114

Balance at end of year $ 486

Investments: This fund has no investments in Treasury Securities.

Current issues: Among the issues identified by the Congressional

Research Service is the issue of whether 30 percent of customs receipts is

still an appropriate source and level of funding. The Congress designated

this level in 1935 on the premise that 30 percent of the population then

lived on farms. Thus, the amount theoretically represented the farmers’

“fair share” of customs revenues. Today only about 2 percent of the

population live on farms. Those who take exception to that argument

contend that the food and fiber system accounts for about 13 percent of

GDP and provides 23 million jobs. Only about 3 percent of the customs

receipts are spent on the direct purchase of agricultural products. The

bulk of the fund receipts are transferred to the Food and Nutrition Service

and are being used to reimburse schools and other institutions for meals

served to children. If this level were reduced, discretionary appropriations

would have to be increased to maintain the same level of child nutrition

programs.

Fund type, authorization, background, and purpose:

In 1935, the Social Security Act was enacted, establishing a program to

provide monthly retirement benefits to workers. Program benefits are

generally based on average lifetime taxable earnings. Over the years, the

benefit amount, taxable income base, and tax rates have substantially

increased. Participation in the program has become mandatory for most

workers. In addition to changes in benefits and taxation, the law has also

Social Security Trust

Funds

(20-8006-0-7-651 and

20-8007-0-7-651)
Appendix II

Description of Selected Earmarked Funds

Page 67 GAO-01-199SP Trust Fund FAQs

been amended to add survivor’s coverage and to provide benefits for the

disabled. As a result, Title II of the Social Security Act now provides for

two programs that are financed by two nonrevolving trust funds: the

Federal Old-Age and Survivors Insurance Trust Fund (OASI) and the

Federal Disability Insurance Trust Fund (DI).

Each of these programs is financed by Federal Insurance Contribution Act

and Self-Employment Contributions Act payroll tax contributions from

employees and employers that are placed in separate nonrevolving trust

funds from which benefits are paid. Both programs are federally

administered by the Social Security Administration.

Old Age and Survivors Insurance Component: Under the OASI program,

workers may retire at age 65 and receive full benefits.9

 Retirees man opt to

retire as early as age 62 and receive reduced benefits.

Disability Insurance Component: The DI program is administered by both

the federal government and state entities (Disability Determination

Services). The DI program pays benefits to individuals who are unable to

work for long periods because of medical conditions that prevent

substantial gainful activity.

Over time, there have been several proposals to remove Social Security

from the federal budget. Measures were enacted in 1983 and 1985

specifying that Social Security should not be included in the budget. In

1990, Social Security’s off-budget status was reaffirmed and was also

removed from calculations in the sequestration process . Although the

program is part of the unified budget, budget totals are shown both on a

unified basis (including Social Security) and excluding Social Security.

Deficit Control Act category: Benefit payments, comprising over 99

percent of gross outlays, are mandatory; administrative expenses,

comprising less than 1 percent of outlays, are discretionary. Both trust

funds are excluded from DCA controls but are subject to special

enforcement provisions.

Budget subfunction: Federal employee retirement and disability (602)

 9

The normal retirement age, when a person may first become entitled to unreduced

retirement benefits, is currently 65 years and 2 months. However, under current law, it is

scheduled to gradually increase to 67 for persons reaching that age in 2027 or later.
Appendix II

Description of Selected Earmarked Funds

Page 68 GAO-01-199SP Trust Fund FAQs

Fiscal year 1999 fund data:

Old-Age and Survivors Insurance

(Dollars in millions)

Income $449,489

Source of funds

Taxes (governmental receipts): employee/employer

 contributions

$383,559

General fund transfers (intragovernmental transfers) 63,409

Interest $46,847

Appropriations 10,188

Other (employer contributions) 6,374

Proprietary receipts 9

Offsetting collections 2,512

Outlays $340,427

Balance at end of year $762,374

Disability Insurance

(Dollars in millions)

Income $67,791

Source of funds

Taxes (governmental receipts): employee/employer

 contributions

$60,909

General fund transfers (intragovernmental transfers) 6,870

Interest $5,223

Appropriations 636

Other (employer contributions) 1,011

Proprietary receipts 12

Offsetting collections 0

Outlays $52,142

Balance at end of year $92,628
Appendix II

Description of Selected Earmarked Funds

Page 69 GAO-01-199SP Trust Fund FAQs

Investments: OASI and DI trust fund balances may be invested only in

interest-bearing obligations of the United States or in obligations

guaranteed as to both principal and interest by the United States. These

investments consist of U.S. Treasury special issues and bonds. Special

issues are special public debt obligations for purchase exclusively by the

trust funds. They are always purchased and redeemed at face value.

Current issues: The Social Security program is not in long-term actuarial

balance. This means Social Security revenues are not expected to be

sufficient to pay all benefit obligations through 2075. Without changing the

current program, excess cash revenues from payroll and income taxes are

expected to begin declining substantially in the near future. After 2014,

cash revenues will be insufficient to pay all program costs and Social

Security will have to start redeeming some of its assets to obtain the cash

needed to pay benefits. The trust funds are expected to be exhausted in

2037.10

Two important factors affecting Social Security’s pending financing

problems are increasing life expectancy and the rapidly approaching

retirement of the baby boom generation. The oldest of this generation will

reach early retirement age (62) in 2008, and the youngest will reach it in

2026. This large number of longer living retirees would substantially

increase program costs and strain the ability of the program to pay

benefits even if they were the only factors affecting future costs.

Exacerbating the problem of the retirement of the baby boom generation

is the relatively smaller generation that follows it. The post-baby boom

generation, which resulted from the rapid decline in birth rates from the

mid-1960s to the mid-1980s, will result in relatively fewer workers to

support a larger number of retirees.

Numerous proposals have been forwarded to address Social Security

financing issues. In our opinion, such proposals should be evaluated based

on three criteria: (1) sustainable solvency, (2) equity and adequacy, and

(3) feasibility and transparency.

 10Based on the intermediate assumptions of Social Security’s 2000 Annual Report.
Appendix II

Description of Selected Earmarked Funds

Page 70 GAO-01-199SP Trust Fund FAQs

Fund type, authorization, background, and purpose:

The Tennessee Valley Authority (TVA) fund is a public enterprise fund.

TVA is a wholly owned government corporation created by the Tennessee

Valley Authority Act of 1933 (16 U.S.C. 831-831dd). It was established to

develop the resources of the Tennessee Valley region in order to

strengthen the regional and national economy and the national defense.

TVA’s programs are divided into two categories: power and nonpower

programs. Substantially all TVA revenues and assets are attributable to the

power program. The power program has historically been separate from

the nonpower programs and is required to be self-supporting; it does not

receive any annual appropriations. Although most of the funding for TVA’s

nonpower programs has historically been provided by annual

appropriations, beginning in fiscal year 2000, they will be funded primarily

by power revenues.

Deficit Control Act category: Primarily mandatory

Budget subfunction: Multiple functions (999)

Fiscal year 1999 fund data:

(Dollars in millions)

Income $6,588

Source of funds:

Taxes (governmental receipts): $ 0

Proprietary receipts 0

General fund transfers: 50

Appropriations $ 50

Offsetting collections: 6,538

Interest 0

Federal sources 77

Nonfederal sources 6,827

Capital transfers and debt repayment -366

Gross outlays $6,906

Balance at end of year $ 644

Investments: TVA maintains an investment fund to provide funding for

the decommissioning of nuclear power plants. The funds are invested in

Tennessee Valley

Authority Fund

(64-4110-0-3-999)
Appendix II

Description of Selected Earmarked Funds

Page 71 GAO-01-199SP Trust Fund FAQs

securities designed to achieve a return in line with overall equity market

performance.

Current issues: TVA faces increasing competition in electricity markets,

deregulation, and the possibility of losing legislative protections.

Fund type, authorization, background, and purpose:

The financial transactions of the federal, state, and railroad unemployment

insurance systems are made through the nonrevolving Unemployment

Trust Fund. Such unemployment compensation (UC), established by the

Social Security Act of 1935, as amended, was intended to (1) provide

temporary relief through partial wage replacement for workers who lose

jobs for economic reasons and (2) help stabilize the economy during

recessions. The UC system operates in each state, the District of

Columbia, Puerto Rico, and the Virgin Islands. Federal law sets broad

rules that the 53 state programs must follow and levies a payroll tax on

employers under the Federal Unemployment Tax Act (FUTA). States set

most of the specific rules for eligibility, benefits, and financing. States also

process claims and pay the benefits. The U.S. Treasury receives federal

and state payroll taxes, maintains the trust fund, and makes loans to states

with insolvent accounts.

Deficit Control Act category: Primarily mandatory

Budget subfunction: Multiple functions (999)

Unemployment Trust

Fund

(20-8042-0-7-999)
Appendix II

Description of Selected Earmarked Funds

Page 72 GAO-01-199SP Trust Fund FAQs

Fiscal year 1999 fund data:

(Dollars in millions)

Income $31,681

Source of funds:

Taxes (governmental receipts) $26,480

Proprietary receipts 3

Offsetting collections 0

General fund transfers: 5,198

Interest $4,795

Appropriations 403

Other 0

Outlays $24,938

Balance at end of year $77,699

Investments: The fund is invested in nonmarketable Treasury Certificates

of Indebtedness and special-issue Treasury bonds.

Current issues: Changes in the federal-state UC system are being

considered during the 106th Congress. For example, S. 462 proposes to

shift some federal UC responsibilities to the states. Broader UC reform

legislation has been introduced in H.R. 1830, which would provide

incentives to states to expand eligibility, strengthen administrative

financing, and improve the solvency of state accounts. The Taxpayer

Refund and Relief Act of 1999, passed by the House and Senate on

August 5, 1999, included a provision to repeal the UC surtax extension

after December 31, 2004. However, the President vetoed the bill on

September 23, 1999. Other bills, including S. 103 and S. 625, as amended,

also contain provisions to repeal the FUTA surtax.

Fund type, authorization, background, and purpose:

The Universal Service Fund is a special fund under the jurisdiction of the

Federal Communications Commission (FCC). The fund was established as

a result of the Telecommunications Act of 1996 (Public Law 104-104

enacted on February 8, 1996). The act requires every carrier of interstate

telecommunications services to contribute funds to preserve and advance

universal service. The universal service concept was created to ensure the

Universal Service Fund

(27-5183-0-2-376)
Appendix II

Description of Selected Earmarked Funds

Page 73 GAO-01-199SP Trust Fund FAQs

availability of telecommunications services for all consumers, including

low-income consumers as well as those in rural and high cost areas.

The contributions by the providers are used to support carriers offering

services in high cost areas of the United States and those offering services

to low income consumers. Also, telecommunications carriers and certain

other eligible providers receive support payments for providing

discounted service to schools, libraries, and health care providers.

Deficit Control Act category: Mandatory

Budget subfunction: Other advancement of commerce (376)

Fiscal year 1999 fund data:

(Dollars in millions)

Income $3,752

Source of funds:

Governmental receipts : statutory assessments $3,752

Proprietary receipts

General fund transfers (intragovernmental transfers)

Interest

Appropriations

Offsetting collections

Outlays $3,293

Balance at end of year $1,479

Investments: This fund has no investments.

Current issues: According to the Congressional Research Service, most

policymakers support the universal service concept. However, the FCC’s

implementation of the schools and libraries provision of the 1996 act has

generated significant controversy. Oversight of the schools and libraries

program by the Congress was intense, with congressional comments

ranging from those who called for the abolishment of the program, to

those who supported the program but felt it needed major revisions, to

those who continued to support the program as funded and designed.

Concerns regarding the schools and libraries program focus on: the

administrative structure designed to implement the program; the scope

and funding level of the program; and the potential for fraud, waste, and
Appendix II

Description of Selected Earmarked Funds

Page 74 GAO-01-199SP Trust Fund FAQs

abuse. An additional related issue—industry billing practices—has also

had an impact on the schools and libraries program.
Page 75 GAO-01-199SP Trust Fund FAQs

This appendix lists each earmarked fund’s revenues, gross outlays, and

balance for fiscal year 1999. Table III.1 lists the funds in alphabetical

order, grouped by fund type. Table III.2 lists the largest 10 funds, in terms

of total revenue for each fund type.

Available budget data for certain funds, typically small nonrevolving trust

and special funds, were, in some instances, consolidated or merged for

budget presentation purposes. As a result, budget data did not always

permit us to de-aggregate the data belonging to specific funds. Also, when

amounts were transferred or appropriated from one account to another

account, outlays are reflected in the accounts that received the transferred

or appropriated amounts.

Table III.1: Earmarked Funds Revenues, Gross Outlays, and Balances for Fiscal Year 1999

(Dollars in millions)

Fund name Fund type Revenues Gross outlays Balance

Advances for Cooperative Work, Department of Energy Nonrevolving trust 0 2 5

Airport and Airway Trust Fund Nonrevolving trust 11,121 8,089 12,446

American Battle Monuments Commission Gift Fund Nonrevolving trust 27 14 41

Aquatic Resources Trust Fund Nonrevolving trust 462 348 1,276

Architect of the Capitol Gift Fund Nonrevolving trust 0 0 0

Armed Forces Retirement Home Trust Fund Nonrevolving trust 53 73 197

Barry Goldwater Scholarship and Excellence in

 Education Foundation Nonrevolving trust 3 3 61

Bequests and Gifts, Federal Emergency Management

 Agency Nonrevolving trust 0 0 2

Black Lung Disability Trust Fund Nonrevolving trust 599 1,000 -6,239 b

Cheyenne River Sioux Tribe Terrestrial Wildlife

 Restoration Trust Fund Nonrevolving trust 4 0 4

Christopher Columbus Scholarship Foundation Nonrevolving trust 1 0 7

Civil Service Retirement and Disability Fund Nonrevolving trust 74,522 43,932 481,273

Claims Court Judges Retirement Fund Nonrevolving trust 2 1 7

Coast Guard Gift Fund Nonrevolving trust 0 0 2

Cooperative Fund (Papago) Nonrevolving trust 2 0 31

Corporation for National Community Service Gift Fund Nonrevolving trust 96 56 399

Court of Veterans Appeals Retirement Fund Nonrevolving trust 0 0 3

Department of State Conditional Gift Fund Nonrevolving trust 1 0 17

Department of State Unconditional Gift Fund Nonrevolving trust 1 0 0

Appendix III

List of Funds’ Revenues, Gross Outlays, and

Balances for Fiscal Year 1999
Appendix III

List of Funds’ Revenues, Gross Outlays, and

Balances for Fiscal Year 1999

Page 76 GAO-01-199SP Trust Fund FAQs

Fund name Fund type Revenues Gross outlays Balance

Departmental Administration Gift Fund, Agriculture Nonrevolving trust 1 1 2

District of Columbia Federal Pension Liability

 Trust Fund Nonrevolving trust 3,357 140 3217

District of Columbia Judicial Retirement and

 Survivors Annuity Fund Nonrevolving trust 71 2 75

Education Benefits Fund, Department of Defense Nonrevolving trust 237 178 676

Federal Judicial Center Foundation Gift Fund Nonrevolving trust 0 1 1

Financial Assistance Corporation Trust Fund Nonrevolving trust 7 0 106

Fish and Wildlife Service Contributed Funds Nonrevolving trust 6 4 8

Foreign Military Sales Trust Fund Nonrevolving trust 11,624 12,159 5,509

Foreign National Employees Separation Pay Trust Fund Nonrevolving trust 15 27 304

Foreign Service National Separation Liability Trust

 Fund, Agency for International Development Nonrevolving trust 2 1 12

Foreign Service National Separation Liability Trust

 Fund, Broadcasting Board of Governors Nonrevolving trust 0 0 0

Foreign Service National Separation Liability Trust

 Fund, Department of State Nonrevolving trust 8 6 76

Foreign Service National Separation Liability Trust

 Fund, International Trade Administration Nonrevolving trust 0 11 0

Foreign Service National Separation Liability Trust

 Fund, U.S. Information Agency Nonrevolving trust 0 0 8

Foreign Service Retirement and Disability Fund Nonrevolving trust 1,120 538 10,132

Forest Service Trust Funds a Nonrevolving trust 193 133 408

General Post Fund, National Homes, Department of

 Veterans Affairs Nonrevolving trust 33 29 52

Geological Survey Contributed Funds Nonrevolving trust 0 2 2

Gifts and Bequests Trust Fund, Department of Commerce Nonrevolving trust 1 1 1

Harbor Maintenance Trust Fund Nonrevolving trust 607 295 1,736

Harry S. Truman Memorial Scholarship Fund Nonrevolving trust 4 5 57

Hazardous Substance Superfund Nonrevolving trust 1,017 1,717 4,443

Highway Trust Fund Nonrevolving trust 39,427 29,036 28,979

Host Nation Support Fund for Relocation Nonrevolving trust 0 0 0

Indian Tribal Funds a Nonrevolving trust 438 322 304

Inland Waterways Trust Fund Nonrevolving trust 118 88 361

Inspection and Grading of Farm Products,

 Agricultural Marketing Service Nonrevolving trust 116 105 15

Inspection and Grading of Farm Products, Food

 Safety Inspection Service Nonrevolving trust 4 4 0
Appendix III

List of Funds’ Revenues, Gross Outlays, and

Balances for Fiscal Year 1999

Page 77 GAO-01-199SP Trust Fund FAQs

Fund name Fund type Revenues Gross outlays Balance

Interest, Miscellaneous Trust Fund, Department of

 Treasury Nonrevolving trust 1 0 0

Israeli Arab and Eisenhower Exchange Fellowship

 Program Trust Fund Nonrevolving trust 0 1 21

James Madison Memorial Fellowship Trust Fund Nonrevolving trust 3 2 43

Japan-United States Friendship Trust Fund Nonrevolving trust 28 2 42

John C. Stennis Center for Public Service

 Development Trust Fund Nonrevolving trust 1 1 9

Judicial Officers Retirement Fund Nonrevolving trust 33 14 120

Judicial Survivors Annuities Fund Nonrevolving trust 37 11 318

Kuwait Civil Reconstruction Trust Fund Nonrevolving trust 0 0 2

Leaking Underground Storage Tank Trust Fund Nonrevolving trust 268 65 1,389

Library of Congress Gift and Trust Funds a Nonrevolving trust 31 26 52

Lower Bruel Sioux Tribe Terrestrial Wildlife

 Restoration Trust Fund Nonrevolving trust 1 0 0

Medicare, Part A (Federal Hospital Insurance Trust

 Fund) Nonrevolving trust 153,018 131,503 138,421

Medicare, Part B (Federal Supplementary Medical

 Insurance Trust Fund) Nonrevolving trust 85,457 80,697 45,649

Military Retirement Fund Nonrevolving trust 38,227 31,889 151,853

Miscellaneous Contributed Funds, Agricultural

 Research Service Nonrevolving trust 22 18 22

Miscellaneous Contributed Funds, Department of

 Agriculture Nonrevolving trust 5 0 0

Miscellaneous Trust Funds, a Administration of

 Foreign Affairs Nonrevolving trust 2 2 10

Miscellaneous Trust Funds, Agency for International

 Development Nonrevolving trust 0 0 2

Miscellaneous Trust Funds, Animal and Plant Health

 Inspection Service Nonrevolving trust 13 13 6

Miscellaneous Trust Funds, Appalachian Regional

 Commission Nonrevolving trust 6 5 2

Miscellaneous Trust Funds, Bureau of Land

 Management Nonrevolving trust 13 12 15

Miscellaneous Trust Funds, a Federal Highway

 Administration Nonrevolving trust 50 26 71

Miscellaneous Trust Funds, Health Services

 Administration Nonrevolving trust 52 60 115

Morris K. Udall Scholarship Fund Nonrevolving trust 1 1 23
Appendix III

List of Funds’ Revenues, Gross Outlays, and

Balances for Fiscal Year 1999

Page 78 GAO-01-199SP Trust Fund FAQs

Fund name Fund type Revenues Gross outlays Balance

National Archives Gift Fund Nonrevolving trust 1 1 7

National Botanic Garden Gift Fund Nonrevolving trust 0 0 0

National Endowment for the Arts Gift Fund Nonrevolving trust 1 0 0

National Endowment for the Humanities Gift Fund Nonrevolving trust 1 0 0

National Park Service Miscellaneous Trust Fund Nonrevolving trust 15 15 25

National Science Foundation Gift Fund Nonrevolving trust 37 42 27

National Security Education Trust Fund Nonrevolving trust 3 6 52

National Service Life Insurance Fund Nonrevolving trust 1,677 1,732 11,962

Natural Resources Conservation Service

 Miscellaneous Contributed Funds Nonrevolving trust 5 2 25

Office of International Cooperation and

 Development Miscellaneous Contributed Fund Nonrevolving trust 2 1 7

Oil Spill Liability Fund Nonrevolving trust 75 141 1,017

Other Commissions and Boards Nonrevolving trust 0 0 0

Other Department of Defense Trust Funds a Nonrevolving trust 37 39 26

Peace Corps Miscellaneous Trust Funds Nonrevolving trust 1 1 2

Post-Vietnam Era Veterans Education Account Nonrevolving trust 6 20 108

Proprietary Receipts, Miscellaneous Trust Funds,

 Department of Transportation Nonrevolving trust 0 0 0

Radiation Exposure Compensation Trust Fund Nonrevolving trust 0 13 9

Rail Industry Pension Fund Nonrevolving trust 3,193 3,000 15,255

Railroad Social Security Equivalent Benefit Account Nonrevolving trust 5,482 5,318 -1,058b

Reclamation Trust Funds Nonrevolving trust 23 13 42

Ricky Ray Hemophilia Relief Fund Nonrevolving trust 0 0 0

Rivers and Harbors Contributed Funds Nonrevolving trust 350 252 394

Sales of Unclaimed Abandoned and Seized Goods,

 Customs Service Nonrevolving trust 4 7 1

Science, Space, and Technology Education Trust Fund Nonrevolving trust 2 1 15

Social Security (Federal Disability Insurance Trust Fund) Nonrevolving trust 67,791 52,142 92,628

Social Security (Federal Old-Age Survivors Trust Fund) Nonrevolving trust 449,489 340,427 762,374

South Dakota Terrestrial Wildlife Habitat Restoration

 Trust Fund Nonrevolving trust 10 0 10

Special Workers’ Compensation Funds a Nonrevolving trust 145 143 57

Supplemental Annuity Pension Fund, Railroad

 Retirement Board Nonrevolving trust 94 75 56

Tax Court Judges Survivors Annuity Fund Nonrevolving trust 0 0 7

Tribal Trust Fund Nonrevolving trust 0 0 0

U.S. Capitol Preservation Commission Trust Fund Nonrevolving trust 1 0 28
Appendix III

List of Funds’ Revenues, Gross Outlays, and

Balances for Fiscal Year 1999

Page 79 GAO-01-199SP Trust Fund FAQs

Fund name Fund type Revenues Gross outlays Balance

U.S. Government Life Insurance Fund, Department of

 Veterans Affairs Nonrevolving trust 7 12 80

Unemployment Trust Fund Nonrevolving trust 31,681 24,938 77,699

United Mine Workers Combined Benefits Fund Nonrevolving trust 230 230 0

Vaccine Injury Compensation Trust Fund Nonrevolving trust 194 60 1,400

Voluntary Separation Incentive Fund Nonrevolving trust 172 156 893

Assessment Funds (Comptroller of the Currency) Revolving trust 394 402 304

Coast Guard Miscellaneous Trust Revolving

 Funds Revolving trust 7 7 0

Commissary Funds (Federal Prison System) Revolving trust 192 192 108

Employees and Retired Employees Health

 Benefits Fund Revolving trust 18,039 18,463 5,813

Employees Life Insurance Fund Revolving trust 2,945 1,561 20,486

Milk Market Assessment Fund Revolving trust 36 62 0

National Archives Trust Fund Revolving trust 15 15 15

Other Department of Defense Trust Revolving Funds Revolving trust 17 17 0

Surcharge Collections, Sales of Commissary Stores Revolving trust 284 350 216

Veterans Special Life Insurance Fund Revolving trust 239 201 1,668

Abandoned Mine Reclamation Fund Special 360 267 1,736

Allied Contributions and Cooperation Account,

 Department of Defense Special 208 126 17

Alternative Fuels Production Special 1 0 13

Assets Forfeiture Fund Special 613 502 728

Aviation User Fees Special 0 0 0

Central Valley Project Restoration Fund Special 49 38 47

Colorado River Dam Fund, Boulder Canyon Project Special 65 58 12

Construction, Rehabilitation, Operation and

 Maintenance, WAPA Special 63 268 168

Continuing Fund, Southeastern Power

 Administration Special 2 0 2

Continuing Fund, Southwestern Power

 Administration Special 2 2 0

Cooperative Endangered Species Conservation Fund Special 29 38 191

Crime Victims Fund Special 985 348 1,629

Customs Services at Small Airports Special 3 3 3

Department of the Treasury Forfeiture Fund Special 347 300 413

Disease Control, Research, and Training Special 2 0 0
Appendix III

List of Funds’ Revenues, Gross Outlays, and

Balances for Fiscal Year 1999

Page 80 GAO-01-199SP Trust Fund FAQs

Fund name Fund type Revenues Gross outlays Balance

Disposal of Surplus Real and Related Personal

 Property Special 9 4 87

Diversion Control Fee Account Special 54 63 77

Elk Hills School Lands Fund Special 0 36 262

Emergency Preparedness Grants Special 8 7 17

Environmental Dispute Resolution Fund Special 0 3 3

Environmental Services Special 10 0 63

Essential Air Service and Rural Airport Improvement

 Fund Special 48 42 13

Everglades Restoration Account Special 4 0 4

Expenses of Transportation Audit Contracts and

 Contract Administration Special 8 9 25

Exxon Valdez Settlement Fund Special 0 1 2

Falcon and Amistad Operating and Maintenance

 Fund Special 1 1 2

Federal Aid in Wildlife Restoration Special 226 213 436

FHA—Mutual Mortgage Insurance Program Account Special 3,559 0 0

Fishermen's Contingency Fund Special 0 0 3

Fishermen's Guaranty Fund Special 0 0 3

Fishermen's Protective Fund Special 0 0 1

Forest Products Program Special 0 0 3

Forest Service Permanent Appropriations a Special 228 366 580

Funds for Strengthening Markets, Income, and

 Supply (Section 32) Special 5,681 833 486

Gifts to the United States for Reduction of the Public Debt Special 1 0 0

Guarantees of Mortgate-Backed Securities Loan

 Guarantee Program Account Special 355 0 701

H-1B Nonimmigrant Petitioner Account Special 74 2 1

Historic Preservation Fund Special -150 37 2,154

Immigration Support a Special 1,142 1,182 152

Indian Health Facilities Special 5 0 0

Informant Payments Special 8 8 0

Internal Revenue Collections for Puerto Rico Special 235 235 0

Internal Revenue Service Miscellaneous Retained Fees Special 88 88 0

International Center, Washington, D.C. Special 3 3 3

International Litigation Fund Special 2 1 8

Interstate Land Sales Fund Special 0 0 0

Judiciary Filing Fees Special 107 115 286

Judiciary Information Technology Fund Special 228 233 176
Appendix III

List of Funds’ Revenues, Gross Outlays, and

Balances for Fiscal Year 1999

Page 81 GAO-01-199SP Trust Fund FAQs

Fund name Fund type Revenues Gross outlays Balance

Land Acquisition Accounts Special 1 93 173

Land and Water Conservation Fund Special 1,293 1,087 12,936

Leases of Lands Acquired for Flood Control,

 Navigation, and Allied Purposes Special 1 1 0

Management of Lands and Resources, Bureau of Land

Management Special 1 0 0

Manufactured Home Inspection and Monitoring Special 15 15 10

Medical Care, Department of Veterans Affairs Special 574 0 51

Migratory Bird Conservation Account Special 65 55 38

Mineral Leasing and Associated Payments Special 478 478 0

Miscellaneous Permanent Appropriations, Bureau of Indian

 Affairs a Special 72 72 83

Miscellaneous Permanent Appropriations, Office of

 Special Trustee for American Indians Special 23 9 47

Miscellaneous Permanent Payment Accounts, Bureau of

 Land Management a Special 34 118 90

Miscellaneous Permanent Appropriations, Fish and

 Wildlife Service Special 2 4 3

Miscellaneous Special Funds, Department of Defense a Special 76 68 253

National Forest System Special 4 0 78

National Forests Fund, Payment to States Special 3 3 0

National Indian Gaming Commission, Gaming

 Activity Fees Special 5 0 5

National Institutes of Health Miscellaneous Accounts Special 13 0 0

National Wildlife Refuge Fund Special 8 19 6

Natural Resource Damage Assessment Fund Special 61 17 72

North American Wetlands Conservation Fund Special 1 14 41

Nuclear Waste Fund Special 768 188 7,927

Office of Federal Housing Enterprise Oversight Special 16 16 4

Operation and Maintenance of Quarters, Bureau of Indian

 Affairs Special 5 4 4

Operation and Maintenance, General, Corps of Engineers Special 33 0 33

Operation of the National Park System Special 7 0 7

Other Permanent Appropriations, National Park Service a Special 50 30 71

Overseas Military Facility Investment Recovery Special 4 29 48

Panama Canal Commission Compensation Fund Special 7 6 79

Payments to Copyright Owners Special 243 174 772

Payments to States Under Federal Power Act Special 3 3 3

Perishable Agricultural Commodities Act Fund Special 8 9 10
Appendix III

List of Funds’ Revenues, Gross Outlays, and

Balances for Fiscal Year 1999

Page 82 GAO-01-199SP Trust Fund FAQs

Fund name Fund type Revenues Gross outlays Balance

Permanent Appropriations, Corps of Engineers a Special 14 19 14

Permanent Operating Funds, Bureau of Land

 Management a Special 17 24 47

Pipeline Safety Special 34 34 33

Presidential Election Campaign Fund Special 61 26 0

Program Expenses, Federal Retirement Thrift

 Investment Board Special 75 59 39

Promote and Develop Fishery Products and Research

 Pertaining to American Fisheries Special 0 5 7

Radiological Emergency Preparedness Fund Special 13 10 3

Range Betterment Fund Special 3 3 4

Range Improvements Special 8 10 6

Reclamation Fund Special 1,050 317 2,245

Recreation Fee Permanent Appropriations a Special 145 68 216

Recreational Fee Demonstration Program Special 3 2 4

Refunds, Transfers, and Expenses of Operation,

 Puerto Rico Special 104 100 18

Registry Administration Special 3 3 0

Registry Fees Special 2 1 4

Research and Education Activities, Native American

 Institutions Endowment Fund Special 5 0 19

Salaries and Expenses, Animal and Plant Health Inspection

 Service Special 172 0 117

Salaries and Expenses, Food and Drug Administration Special 1 0 0

Salaries and Expenses, Financial Management Service Special 13 0 0

Salaries and Expenses, Nuclear Regulatory Commission Special 442 0 0

Salaries and Expenses, Patent and Trademark Office Special 0 0 0

Salaries and Expenses, U.S. Customs Service Special 1,208 0 0

Service Charges, Deposits, and Forfeitures, Bureau of Land

 Management Special 12 11 11

Spectrum Auction Program Account Special 290 1,411 0

Supplemental Security Income Program Special 2 0 2

United States Capitol Police Memorial Fund Special 1 1 0

United States Trustee System Fund Special 116 138 123

Universal Service Fund Special 3,752 3,293 1,479

Uranium Enrichment Decontamination and

 Decommissioning Fund Special 608 228 1,651

Utah Reclamation Mitigation and Conservation Account Special 21 20 121

Wildlife Conservation Special -1 2 4
Appendix III

List of Funds’ Revenues, Gross Outlays, and

Balances for Fiscal Year 1999

Page 83 GAO-01-199SP Trust Fund FAQs

Fund name Fund type Revenues Gross outlays Balance

Wildlife Conservation and Appreciation Fund Special 0 1 3

Agricultural Credit Insurance Fund Liquidating Account Public Enterprise 1,060 30 61

Alternative Agricultural Research and

 Commercialization Corporation Revolving Fund Public Enterprise 5 5 3

Assistance for the Independent States of the Former

 Soviet Union: Ukraine Export Credit Insurance Public Enterprise 2 0 30

Aviation Insurance Revolving Fund Public Enterprise 4 0 76

Bank Insurance Fund Public Enterprise 3,022 1,987 28,111

Board of Governors of the Federal Reserve System Public Enterprise 189 189 0

Bonneville Power Administration Fund Public Enterprise 2,629 2,426 997

Business Loan Fund Liquidating Account Public Enterprise 313 0 779

Canteen Service Revolving Fund Public Enterprise 218 218 39

Central Liquidity Facility Public Enterprise 155 155 0

Check Forgery Insurance Fund Public Enterprise 0 3 4

Coastal Zone Management Fund Public Enterprise 4 7 3

Colorado River Basins Power Marketing Fund,

 Western Area Power Administration Public Enterprise 104 75 67

Commodity Credit Corporation Fund Public Enterprise 9,882 29,182 1,402

Commodity Credit Corporation Guaranteed Loans

 Liquidating Account Public Enterprise 234 0 59

Community Development Credit Union Revolving

 Loan Fund Public Enterprise 4 2 3

Community Development Loan Guarantees

 Liquidating Account Public Enterprise 24 4 134

Cooperative Acquisitions Program Revolving Fund Public Enterprise 2 2 3

Credit Union Share Insurance Fund Public Enterprise 527 268 4,121

Damage Assessment and Restoration Revolving Fund Public Enterprise 13 0 16

Disaster Assistance Direct Loan Liquidating Account Public Enterprise 4 0 0

Disaster Loan Fund Liquidating Account Public Enterprise 229 63 67

Economic Assistance Loans—Liquidating Account Public Enterprise 1,075 0 67

Economic Development Revolving Fund Liquidating

 Account Public Enterprise 11 5 9

Economics and Statistics Administration Revolving Fund Public Enterprise 5 6 2

Equal Employment Opportunity Commission Education,

 Technical Assistance and Training Revolving Fund Public Enterprise 2 1 3

Exchange Stabilization Fund Public Enterprise 1,385 0 39,916

Export-Import Bank of the United States Liquidating

 Account Public Enterprise 1,150 258 1,308
Appendix III

List of Funds’ Revenues, Gross Outlays, and

Balances for Fiscal Year 1999

Page 84 GAO-01-199SP Trust Fund FAQs

Fund name Fund type Revenues Gross outlays Balance

Farm Credit System Insurance Fund Public Enterprise 122 59 1,370

Federal Consumer Information Center Fund Public Enterprise 7 6 3

Federal Crop Insurance Corporation Fund Public Enterprise 622 2,299 2,262

Federal Housing Finance Board Public Enterprise 18 18 5

Federal Ship Financing Fund Liquidating Account Public Enterprise 11 6 0

Federal Ship Financing Fund, Fishing Vessels

 Liquidating Account Public Enterprise 8 2 17

Federal Tax Lien Revolving Fund Public Enterprise 6 6 6

FHA—General and Special Risk Insurance Funds

 Liquidating Account Public Enterprise 559 1,057 899

FHA—Mutual Mortgage and Cooperative Housing

 Insurance Funds Liquidating Account Public Enterprise 4,939 4,620 15,417

Financial Assistance Corporation Assistance Fund,

 Liquidating Account Public Enterprise 194 499 1,562

Flexible Subsidy Fund Public Enterprise 48 17 292

Foreign Military Loan Liquidating Account Public Enterprise 229 43 0

Federal Savings and Loan Insurance Corporation

 Resolution Fund Public Enterprise 3,922 339 2,870

Guarantees of Mortgage-Backed Securities

 Liquidating Account Public Enterprise 428 93 5,769

Health Education Assistance Loans Liquidating Account Public Enterprise 20 20 13

Health Maintenance Organization Loan and Loan

 Guarantee Fund Public Enterprise 2 0 11

Helium Fund Public Enterprise 16 6 31

Homeowners Assistance Fund, Department of Defense Public Enterprise 44 127 36

Homeownership Assistance Fund Public Enterprise 1 0 23

House Revolving Funds Public Enterprise 0 0 8

Housing and Other Credit Guaranty Programs

 Liquidating Account Public Enterprise 84 62 14

Housing for the Elderly or Handicapped Fund

 Liquidating Account Public Enterprise 772 382 1,114

Indian Loan Guaranty and Insurance Fund

 Liquidating Account Public Enterprise 2 2 0

Inspection and Weighing Services Public Enterprise 37 35 8

Interior Franchise Fund Public Enterprise 51 39 17

Investment in Securities Investor Protection Corporation Public Enterprise 0 0 1,000

Isotope Production and Distribution Program Fund Public Enterprise 31 31 11

Lower Colorado River Basin Development Fund Public Enterprise 163 201 53

Low-Rent Public Housing—Loans and Other Expenses Public Enterprise 83 116 886
Appendix III

List of Funds’ Revenues, Gross Outlays, and

Balances for Fiscal Year 1999

Page 85 GAO-01-199SP Trust Fund FAQs

Fund name Fund type Revenues Gross outlays Balance

Medical Center Research Organizations Public Enterprise 105 105 18

Medical Facilities Guarantee and Loan Fund Public Enterprise 6 3 63

Medical Facilities Revolving Fund Public Enterprise 3 3 6

National Defense Stockpile Transaction Fund Public Enterprise 449 240 960

National Flood Insurance Fund Public Enterprise 1,416 1,350 611

National Flood Mitigation Fund Public Enterprise 0 8 42

Nehemiah Housing Opportunity Fund Public Enterprise 0 2 24

Nonprofit Sponsor Assistance Liquidating Account Public Enterprise 0 0 6

National Technical Information Service Revolving Fund Public Enterprise 34 36 39

Office of Thrift Supervision Public Enterprise 143 142 156

Oklahoma City National Memorial Trust Public Enterprise 0 2 3

Operating Fund, National Credit Union Administration Public Enterprise 106 104 28

Overseas Private Investment Corporation

 Liquidating Account Public Enterprise 11 1 26

Overseas Private Investment Corporation

 Noncredit Account Public Enterprise 328 55 3,038

Panama Canal Commission Dissolution Fund Public Enterprise 1 0 7

Panama Canal Revolving Fund Public Enterprise 756 683 374

Parking Revolving Fund Public Enterprise 3 15 30

Pension Benefit Guaranty Corporation Fund Public Enterprise 1,866 1,201 9,369

Perkins Loan Revolving Fund Public Enterprise 0 1 0

Pershing Hall Revolving Fund Public Enterprise 0 0 1

Pollution Control Equipment Fund Liquidating Account Public Enterprise 0 3 0

Postal Service Fund Public Enterprise 62,943 63,964 22,107

Presidio Trust Public Enterprise 54 35 43

Property Management Fund, Agency for International

 Development Public Enterprise 0 0 3

Railroad Rehabilitation and Improvement Liquidating

 Account Public Enterprise 7 3 0

Rental Housing Assistance Fund Public Enterprise 34 34 8

Reregistration and Expedited Processing Revolving Fund Public Enterprise 18 22 11

Reserve Mobilization Income Insurance Fund Public Enterprise 1 5 17

Resolution Trust Corporation Revolving Fund Public Enterprise 0 0 4

Revolving Fund (Liquidating Programs) Public Enterprise 53 7 102

Revolving Fund for Administrative Expenses Public Enterprise 34 34 15

Revolving Fund for Certification and Other Services Public Enterprise 4 7 4

Revolving Fund for Loans Liquidating Account Public Enterprise 6 0 0

Rural Communication Development Fund Liquidating

 Account Public Enterprise 1 3 1
Appendix III

List of Funds’ Revenues, Gross Outlays, and

Balances for Fiscal Year 1999

Page 86 GAO-01-199SP Trust Fund FAQs

Fund name Fund type Revenues Gross outlays Balance

Rural Development Insurance Fund Liquidating Account Public Enterprise 541 627 229

Rural Development Loan Fund Liquidating Account Public Enterprise 4 1 2

Rural Electrification and Telecommunications

 Liquidating Account Public Enterprise 2,788 2,143 517

Rural Housing Insurance Fund Liquidating

 Account Public Enterprise 2,172 1,068 483

Rural Telephone Bank Liquidating Account Public Enterprise 318 32 657

Saint Lawrence Seaway Development Corporation Public Enterprise 13 13 16

Savings Association Insurance Fund Public Enterprise 693 257 10,224

Senate Revolving Funds Public Enterprise 0 0 8

Service-Disabled Veterans Insurance Fund Public Enterprise 71 61 41

Servicemembers' Group Life Insurance Fund Public Enterprise 402 402 5

Special Defense Acquisition Fund Public Enterprise 8 6 83

Special Therapeutic and Rehabilitation Activities Fund Public Enterprise 40 38 15

Surety Bond Guarantees Revolving Fund Public Enterprise 7 8 41

Tennessee Valley Authority Fund Public Enterprise 6,588 6,906 644

United States Enrichment Corporation Fund Public Enterprise 0 5 478

United States Mint Public Enterprise Fund Public Enterprise 1,399 1,419 183

Upper Colorado River Basin Fund Public Enterprise 180 81 140

Vessel Operations Revolving Fund Public Enterprise 533 477 55

Veterans Housing Benefit Program Fund Liquidating

 Account Public Enterprise 700 330 159

Veterans Reopened Insurance Fund Public Enterprise 62 68 510

War Risk Insurance Revolving Fund Public Enterprise 2 1 31

Working Capital Fund, Federal Emergency

 Management Agency Public Enterprise 23 20 14

Notes: a indicates that, for presentation purposes, funds were grouped. b indicates that the

negative balances shown are a result of outstanding debts to Treasury that exceed the

funds’ assets.
Appendix III

List of Funds’ Revenues, Gross Outlays, and

Balances for Fiscal Year 1999

Page 87 GAO-01-199SP Trust Fund FAQs

Table III.2: Top 10 Funds in Each Earmarked Fund Type, by Total Revenues

(Dollars in millions)

Trust Funds Special Funds Public Enterprise Funds

Top 10 Funds Total

Revenues

Top 10 Funds Total

Revenues

Top 10 Funds Total

Revenues

Federal Old-Age

Survivors Insurance

Trust Fund

$449,489 Funds for Strengthening

Markets, Income, and

Supply (Section 32)

$5,681 Postal Service Fund $62,943

Federal Hospital

Insurance Fund

153,018 Universal Service Fund 3,752 Commodity Credit

Corporation Fund

9,882

Federal Supplementary

Medical Insurance

Trust Fund

85,457 FHA—Mutual Mortgage

Insurance Program

Account

3,559 Tennessee Valley

Authority Fund

6,904

Civil Service Retirement

and Disability Fund

74,522 Salaries and Expenses,

U.S. Customs Service

1,208 FHA—Mutual Mortgage

and Cooperative

Housing Insurance

Funds Liquidating

Account

4,939

Federal Disability

Insurance Trust Fund

67,791 Immigration Support 1,142 FSLIC Resolution Fund 3,922

Highway Trust Fund 39,427 Reclamation Fund 1,050 Bank Insurance Fund 3,022

Military Retirement Fund 38,227 Land and Water

Conservation Fund

1,293 Rural Electrification and

Telecommunications

Liquidating Account

2,788

Unemployment Trust

Fund

31,681 Crime Victims Fund 985 Bonneville Power

Administration Fund

2,629

Employees and Retired

Employees Health

Benefits Fund

18,039 Nuclear Waste Fund 768 Rural Housing Insurance

Fund Liquidating

Account

2,172

Military Sales Program 11,624 Assets Forfeiture Fund 613 Pension Benefit Guaranty

Corporation Fund

1,866
Page 88 GAO-01-199SP Trust Fund FAQs

Budget caps Adjustable dollar limits under the Deficit Control Act

that specify maximum amounts of budget authority

and outlays for each fiscal year provided by the

regular appropriations process. If appropriations are

enacted that cause discretionary spending to exceed

the limits, a sequestration will occur to eliminate the

amount of the excess.

Budget function Groups of accounts that present budget authority,

outlays, receipts, and tax expenditures according to

the national needs being addressed. Each budget

account is generally placed in the single budget

function (e.g., transportation or health) that best

reflects its major purpose, an important national

need. There are 19 major functions, most of which

are divided into subfunctions.

Debt held by government accounts That part of gross federal debt held by earmarked

funds and invested in special, nonmarketable U.S.

Treasury securities or in agency debt. Essentially,

these securities represent debt owed by one part of

the federal government to another.

Debt held by the public That part of gross federal debt held outside of the

federal government. This includes any federal debt

held by individuals, corporations, state or local

governments, the Federal Reserve System, and

foreign governments and central banks.

Deficit Control Act (DCA) Legislation that established statutory limits on federal

government spending. The actual title of this act is

the Balanced Budget and Emergency Deficit Control

Act of 1985, as amended. However, for simplicity, we

refer to it as DCA. It also is often referred to as the

Budget Enforcement Act (BEA) because that act

added the current sequestration process and

designated accounts as either mandatory or

discretionary.

Discretionary A term that usually modifies either “spending,”

“appropriations,” or “amount.” Discretionary

spending refers to outlays controllable through the

regular congressional appropriations process.

Appendix IV

Glossary
Appendix IV

Glossary

Page 89 GAO-01-199SP Trust Fund FAQs

Earmarked receipts Collections dedicated by law for a specific purpose or

program. Earmarked receipts comprise the receipts

of trust, special, and public enterprise fund accounts,

as well as offsetting collections credited to

appropriations accounts.

Exchange revenue An accounting term, exchange revenue includes most

user charges (i.e., revenue resulting from the

government’s business-type activities). Also known as

earned revenue, it arises when a government entity

provides goods and services to the public or to

another government entity for a price.

Fund balance The cumulative net effect of a fund’s total receipts

and outlays.

Fund surplus/deficit The difference between a fund’s receipts and outlays

over a given period, usually a fiscal year. When

receipts are greater than outlays, a surplus results.

When receipts are less than outlays, a deficit results.

Gross Domestic Product An economic term referring to the value of all final

goods and services produced within the borders of

the United States in a given period of time, whether

produced by residents or nonresidents.

Mandatory A term that usually modifies either “spending,”

“appropriations,” or “amount.” Mandatory spending

refers to outlays for entitlement programs such as

food stamps, Medicare, veterans’ pensions, payment

of interest on the public debt, and nonentitlements

such as payments to states from Forest Service

receipts. By defining eligibility and setting the benefit

or payment rules, the Congress controls spending for

these programs indirectly rather than directly through

the appropriations process.

Nonexchange revenue An accounting term, nonexchange revenue includes

inflows of resources arising from the government’s

sovereign power to tax, as well as voluntary

donations.
Appendix IV

Glossary

Page 90 GAO-01-199SP Trust Fund FAQs

Nonrevolving trust funds Accounts designated as trust funds by law and used

to track receipts and spending for programs that have

specific taxes or other revenues dedicated by law for

their use.

Offsetting collections Collections that are deducted from gross budget

authority and outlays rather than added to receipts

and, by law, are credited directly to expenditure

accounts. Usually, they may be spent for the

purposes of the account without further action by the

Congress. They result from business-type or marketoriented activities with the public and other

government accounts.

Outlays The issuance of checks, disbursement of cash, or

electronic transfer of funds made to liquidate a

federal obligation. Outlays during a fiscal year may

be for payment of obligations incurred in prior years

or in the same year. They flow in part from

unexpended balances of prior-year budgetary

resources and in part from budgetary resources

provided for the year in which the money is spent.

Pay-as-you-go (PAYGO) A requirement, established by the Deficit Control Act,

as amended, that the aggregate effect of new

legislation that increases direct spending or

decreases receipts be neutral (that is, not increase

the deficit or decrease the surplus).

Program sustainability The nation’s ability to finance promised benefits over

the long-run.

Public enterprise fund An account authorized to be credited with offsetting

collections, primarily from the public, that are

generated by, and are earmarked to finance a

continuing cycle of business-type operations in

accordance with statute.

Revolving trust fund An account designated as a “trust fund” by law and

authorized to be credited with offsetting collections

that are used to carry out a cycle of business-type

operations in accordance with statute.
Appendix IV

Glossary

Page 91 GAO-01-199SP Trust Fund FAQs

Special fund One or more accounts used to track receipts and

spending for programs that have specific taxes or

other revenues dedicated by law for their use but

which are not designated in law as “trust funds.”

Unified budget Under budget concepts set forth in the 1967 Report of

the President’s Commission on Budget Concepts, a

comprehensive budget in which receipts and outlays

from federal and trust funds are consolidated. When

these fund groups are consolidated to display budget

totals, transactions that are outlays of one fund group

for payment to the other fund group (that is,

interfund transactions) are deducted to avoid double

counting. The unified budget should, as conceived by

the President’s Commission, be comprehensive of the

full range of federal activities. By law, budget

authority, outlays, and receipts of off-budget

programs (currently only the U.S. Postal Service and

Social Security) are excluded from the budget, but

data relating to off-budget programs are displayed in

the budget documents.
Page 92 GAO-01-199SP Trust Fund FAQs

Christine E. Bonham, Assistant Director

Robert M. Sexton, Senior Analyst

Carol M. Henn, Senior Analyst

Frank Maguire, Senior Attorney

(935313)

Appendix V

GAO Staff Acknowledgments

Strategic Issues

Office of the General

Counsel
Ordering Information The first copy of each GAO report is free. Additional copies of 

reports are $2 each. A check or money order should be made out to 

the Superintendent of Documents. VISA and MasterCard credit 

cards are accepted, also.

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 37050

Washington, DC 20013

Orders by visiting:

Room 1100

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

U.S. General Accounting Office

Washington, DC

Orders by phone:

(202) 512-6000

fax: (202) 512-6061

TDD (202) 512-2537

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 (202) 512-6000 using a touchtone 

phone. A recorded menu will provide information on how to obtain 

these lists.

Orders by Internet:

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

or visit GAO’s World Wide Web home page at: 

http://www.gao.gov

To Report Fraud, 

Waste, or Abuse in 

Federal Programs

Contact one:

• Web site: http://www.gao.gov/fraudnet/fraudnet.htm

• e-mail: fraudnet@gao.gov

• 1-800-424-5454 (automated answering system)