The Outlook for Major Federal Trust Funds: 2020 to 2030
CBO projects that the balances held by federal trust funds will fall by $43 billion in fiscal year 2020. Spending from the trust funds is projected to exceed income by $18 billion in 2021, a deficit that grows to $502 billion by 2030.
The federal government uses several accounting mechanisms to link earmarked receipts (that is, money designated for a specific purpose) with corresponding expenditures. One of those mechanisms is trust funds. When the receipts designated for trust funds exceed the amounts needed for expenditures, the funds are credited with nonmarketable debt instruments known as Government Account Series (GAS) securities, which are issued by the Treasury. At the end of fiscal year 2019, trust funds held $5.2 trillion in such securities.
The federal budget has numerous trust funds, although most of the money credited to them goes to fewer than a dozen. By far the largest trust funds are Social Security’s Old-Age and Survivors Insurance (OASI) Trust Fund and the funds dedicated to the government’s retirement programs for its military and civilian personnel (see Table 1).
According to the Congressional Budget Office’s current baseline budget projections, the balances held by federal trust funds will fall by $43 billion in fiscal year 2020. That amount is $100 billion lower than the $57 billion surplus that the agency estimated in January, when it last published its baseline budget projections for the major trust funds. The change in CBO’s estimate was largely driven by an increase in payments made by the Unemployment Trust Fund as the number of beneficiaries increased.
Spending from the trust funds is projected to exceed income by $18 billion in 2021, a deficit that grows to $502 billion by 2030 (see Table 2). Over the 2021–2030 period, CBO projects a cumulative trust fund deficit of $2.3 trillion, on net. That amount is $130 billion (or 6 percent) larger than the $2.2 trillion deficit that the agency estimated in January 2020. The projections for deficits were revised upward in part because of the economic disruption stemming from the 2020 coronavirus pandemic, which reduced CBO’s estimates of payroll tax revenues.
If the Congress did not take action to address the shortfalls, CBO projects, the balances in three trust funds would be exhausted within the next 10 years: the Highway Trust Fund (in fiscal year 2021), Medicare’s Hospital Insurance (HI) Trust Fund (in fiscal year 2024), and Social Security’s Disability Insurance (DI) Trust Fund (in fiscal year 2026). No provisions in law dictate the funds’ procedures once their balances are depleted. However, if that happened, excise and payroll taxes designated for the funds would continue to be collected, and the funds would continue to make payments, but they would not have the authority to make payments in excess of receipts. Thus they would no longer be able to pay amounts as projected under current law.