For Immediate Release

FOR IMMEDIATE RELEASE
October 11, 2007
Contact Treasury: Jennifer Zuccarelli, (202) 622-8657
OMB: Sean Kevelighan, (202) 395-7254
To view the release: http://www.treas.gov/press/releases/hp603.htm

Joint Statement of
Henry M. Paulson, Jr., Secretary of the Treasury,
And Jim Nussle, Director of the Office of Management and Budget,
on Budget Results for Fiscal Year 2007

SUMMARY

The Administration today released the September 2007 Monthly Treasury Statement of Receipts and Outlays of the United States Government. The statement shows the actual budget totals for the fiscal year that ended September 30, 2007, as follows:

A deficit of $163 billion;
total receipts of $2,568 billion; and
total outlays of $2,731 billion.

Table 1. TOTAL RECEIPTS, OUTLAYS AND SURPLUS/DEFICIT (-)
(in billions of dollars)

	Receipts	Outlays	Surplus/Deficit (-)
2006 Actual...................................	2,407	2,655	-248
FY 2007 Estimates: FY 2008 Budget...................	2,540	2,784	-244
FY 2008 Mid-Session Review...	2,574	2,779	-205
Actual..............................................	2,568	2,731	-163

The FY 2007 unified deficit was $163 billion, or an estimated 1.2 percent of the Gross Domestic Product (GDP). At this level, the deficit is half of the 40-year average of 2.4 percent of GDP. The deficit for FY 2007 was $42 billion lower than projected in July in the Mid-Session Review (MSR) because outlays were $48 billion lower than expected and receipts were $6 billion lower than expected. The deficit was also $81 billion lower than projected last February in the FY 2008 Budget, with receipts coming in $28 billion higher and outlays $54 billion lower than projected.

Overall, receipts in FY 2007 were 6.7 percent higher than in FY 2006, marking the third consecutive year in which receipt growth outpaced growth in GDP. Receipts rose from 18.5 percent of GDP in FY 2006 to 18.8 percent of GDP in FY 2007. This level of receipts is above the 40-year historical average of 18.3 percent.

Outlays for FY 2007 grew by $76 billion, or 2.8 percent, from last year, representing the smallest percentage growth in outlays in 10 years. The increase was driven by growth in the Departments of Defense and Health and Human Services and the Social Security Administration. Overall, outlays decreased as a percent of GDP, from 20.4 percent in FY 2006 to 20.0 percent in FY 2007. This spending level is below the 40-year historical average of 20.6 percent.

RECEIPTS

Total receipts for FY 2007 were $2,568 billion, $6 billion lower than the MSR estimate of $2,574 billion. Table 2 displays actual receipts and estimates from the Budget and MSR by source.

Individual income taxes were $1,163 billion, $5 billion lower than the MSR estimate. An accounting adjustment based on more recent data reallocated $3 billion less than had been expected in withheld tax payments from the Social Security and Medicare Trust Funds to individual income taxes, reducing withheld individual income taxes $3 billion below the MSR estimate. Lower-than-estimated non-withheld payments reduced individual income taxes an additional $3 billion below the MSR estimate. These shortfalls in payments of withheld and non-withheld taxes were partially offset by lower-than-expected refunds.
Corporation income taxes were $370 billion, $1 billion lower than the MSR estimate. Lower-than-estimated corporate tax payments of $2 billion, which were partially offset by lower-than-estimated refunds, were responsible for the difference in collections relative to the MSR.
Social insurance and retirement receipts were $870 billion, the same as the MSR estimate, despite the lower-than-expected reallocation of withheld tax payments from the Social Security and Medicare Trust Funds to individual income taxes, as described above.
Other sources of receipts (excise taxes, customs duties, estate and gift taxes, and miscellaneous receipts) were $164 billion, the same as the MSR estimate, due to small offsetting changes among these sources of receipts.

OUTLAYS

Total outlays were $2,731 billion, $48 billion below the MSR estimate. Outlays for nearly all agencies were lower than MSR estimates, with the largest differences in the Departments of Defense, Health and Human Services, and Homeland Security. Table 3 displays actual outlays by agency and major program as well as estimates from the Budget and the MSR. The largest changes in outlays from the MSR were in the following areas:

Department of Agriculture – Department of Agriculture outlays were $84 billion, $4.5 billion below the MSR estimate. The Farm Service Agency’s (FSA) FY 2007 outlays were $2.7 billion below the MSR estimate. FSA did not outlay $1.4 billion in planned disaster assistance in FY 2007; these payments will now be made in FY 2008. Also, commodity prices were slightly stronger than anticipated, which contributed to lower-than-anticipated commodity payments and also resulted in fewer producers taking FSA loans on the 2007 crop than anticipated in the MSR. Additionally, outlays for the Risk Management Agency were lower than the MSR estimate because the weather for areas where the bulk of crops is insured was better than expected, reducing crop insurance payments.
Department of Defense – Military outlays were $530 billion in FY 2007, $9 billion (1.7 percent) below the MSR estimate. Outlays for military personnel, operations and maintenance, and procurement were all lower than expected. The late passage of the FY 2007 emergency supplemental caused the military services to restrain spending and delay planned activities. At the time of the MSR, many of these programs projected rapid recovery from these disruptions. However, while outlays have picked up gradually since June, spending has not been as high as projected.
Department of Education – Outlays for the Department of Education were $66 billion in FY 2007, $1.5 billion below the MSR estimate. This stemmed from lower-than-estimated outlays for several programs in the Office of Elementary and Secondary Education, other offices with formula grant programs, and appropriations provided for hurricane relief.
Department of Energy – Outlays for the Department of Energy were $20 billion, $1 billion lower than the MSR estimate. Program outlays for the National Nuclear Security Administration were $0.7 billion lower than expected. In addition, net outlays for the Bonneville Power Administration were $0.5 billion less than estimated in the MSR due to higher-than-expected secondary market revenues. Secondary market revenues, which result from Bonneville selling surplus power in the wholesale market, are difficult to predict in advance because they are primarily driven by weather events, such as heavy rain or snow pack.
Department of Health and Human Services – Outlays for the Department of Health and Human Services were $672 billion, $7.1 billion lower than the MSR estimate. Outlays for Medicaid were $6.2 billion lower than projected in the MSR, due to lower-than-expected claims for Federal share reimbursement of State Medicaid spending. Additionally, Medicare gross outlays increased by $3.2 billion (0.7 percent) compared to MSR estimates. Key factors explaining the difference include higher-than-expected skilled nursing facility and home health spending, partially offset by lower-than-expected inpatient hospital spending.
Department of Homeland Security – Outlays for the Department of Homeland Security were $39 billion in FY 2007, $7.1 billion below the MSR estimate. Nearly $3 billion of this difference is attributable to delayed obligations by Customs and Border Protection and Immigration and Customs Enforcement from supplemental funding and capital investments in the Secure Border Initiative. In the Federal Emergency Management Agency, outlays were $2.6 billion less than estimated in the MSR, due primarily to reduced estimates for flood insurance claims related to hurricane Katrina. In addition, spending for the Bioshield program was $1.0 billion less than anticipated because private sector demand for next generation vaccine development dollars has not materialized as expected at the time of the MSR.
Department of State – Outlays for the Department of State were $13.7 billion in FY 2007, $2.9 billion below the MSR estimate. Outlays for Administration of Foreign Affairs were $2.1 billion below the MSR estimate due to slower-than-expected spending on capital construction projects, lower-than-expected outlays for Iraq operations and other supplemental funding received late in the fiscal year, and higher-than-expected proceeds for sale of real property overseas. In addition, outlays were $0.6 billion lower for International Organizations due to the timing of payments to the United Nations and $0.5 billion lower than the MSR estimate for International Narcotics Control and Law Enforcement programs.
Department of Transportation – Department of Transportation outlays were $61.7 billion in FY 2007, $2.4 billion below the MSR estimate. The decrease was due to slower-than-anticipated obligation and spending of funds for many Federal-Aid Highway grants, surface transportation safety bureaus, Federal Aviation Administration grants and capital investments.
Department of the Treasury – The Department of the Treasury had actual outlays of $491 billion, $2.0 billion higher than the MSR estimate. Interest on the public debt was $430 billion, $0.7 billion higher than the MSR estimate. The remainder of the difference is in offsetting receipt amounts, primarily due to lower-than-anticipated interest received from credit financing accounts.
Department of Veterans Affairs – Outlays for the Department of Veterans Affairs were $73 billion, $2.0 billion lower than estimated in the MSR. The difference was largely due to lower-than-anticipated spending in veterans’ medical care. Outlays for benefit programs were $0.7 billion lower than expected, primarily for the compensation and pension programs.
Army Corps of Engineers – FY 2007 outlays for the Corps of Engineers were $3.9 billion, $2.8 billion below MSR projections. The majority of the difference is attributable to higher-than-expected reimbursements from FEMA for Corps activities in response to the 2005 hurricanes. Other differences are due in large part to weather, legal and other natural-disaster delays or adjustments.
International Assistance Programs – Outlays for International Assistance Programs were $12.8 billion in FY 2007, $4.0 billion below the MSR estimate. Outlays for the Economic Support Fund were $1.2 billion lower than the MSR estimate, and outlays for the Agency for International Development were $0.8 billion lower due in part to slower-than-expected obligations of FY 2007 supplemental funds for Iraq and Afghanistan. Foreign Military Financing program outlays were $0.4 billion lower than estimated in the MSR due to slower-than-expected release of full-year funding for grant programs.

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