The Budget Treatment of Trust Funds

T-AFMD-90-3: Published: Oct 18, 1989. Publicly Released: Oct 18, 1989.

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GAO discussed the federal budget treatment of trust funds, focusing on whether the budget should include Social Security trust fund surpluses in the budget totals that are subject to deficit reduction actions. GAO noted that: (1) the federal budget includes widely different discretionary and entitlement programs as trust fund programs; (2) the government treated trust funds separately until fiscal year 1969, when it introduced a unified budget which included trust funds; (3) debate continues regarding the appropriate budgetary treatment of trust funds, and there has been a proliferation of proposals aimed at removing one or more trust funds from the budget; (4) 1985 budget deficit reduction legislation provided for the two Social Security trust funds to go off-budget, and allowed the Office of Management and Budget to offset a projected $65 billion Social Security surplus, and another $69 billion total budget deficit; (5) establishment of off-budget government-sponsored enterprises has increased since 1985; (6) general, trust and enterprise fund subdivisions to the unified budget could enhance comprehension of the unified budget and subsequent fiscal policy decisions; (7) the government lacks a clear, concise definition of trust funds; and (8) an increase in national savings and investment would enhance other budget deficit activities.

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