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May 2008
PrefaceThis Congressional Budget Office (CBO) paper, prepared at the request of the Chairman of the House Committee on the Budget, analyzes the advantages and disadvantages of adopting a capital budget at the federal level. It also examines implementation issues, including options for defining capital spending.
The paper was written by Jeffrey Holland and David Torregrosa, with contributions from Sheila Campbell, Kathleen Gramp, Amber Marcellino, Nathan Musick, and David Newman. Elizabeth Cove wrote the appendix. Robert Dennis, Peter Fontaine, Theresa Gullo, Kim Kowalewski, and Leo Lex directed the research. Linda Lewis Harris assisted with the preparation of some of the tables.
Perry Beider, Eric Miller, John Peterson, Brian Plummer, David Rafferty, Eric Schatten, and Tom Woodward of CBO provided useful suggestions or assistance. Helpful comments were also provided by Eileen Parlow and Wendy Payne of the Federal Accounting Standards Advisory Board; Ron Feldman of the Federal Reserve Bank of Minneapolis; Robert Anderson, Michael Falkenheim, Laurence Jacobson, Carol Johnson, Jessie LaVine, Patrick Locke, Arthur Stigile, and Gail Zimmerman of the Office of Management and Budget; Gary Ward of the Department of the Treasury; David Merriman of the University of Illinois at Chicago; and Marvin Phaup, formerly of CBO. (The assistance of external reviewers implies no responsibility for the final product, which rests solely with CBO.)
Christine Bogusz edited the paper, and Loretta Lettner proofread it. Maureen Costantino prepared the paper for publication. Lenny Skutnik produced the printed copies, Linda Schimmel handled the print distribution, and Simone Thomas produced the electronic version for CBO’s Web site.
ContentsReports by the Office of Management and Budget
National Income and Product Accounts
Financial Accounting Guidelines for Federal Agencies
Trends in Federal Capital Expenditures
Current Budgetary and Financial Accounting for Capital
Treatment of Capital Spending in the Federal Budget
Private-Sector Financial Reports
Establishing a Separate Capital Budget Using the Financial Accounting Model
Mixing Cash and Accrual Measures in the Budget
Other Options Related to Capital Budgeting
Create a Cap on Capital Spending as Part of New Budget Enforcement Provisions
Set Up Capital Acquisition Funds
Economic Effects of More Capital Spending
Appendix: State Capital Budgeting
1. Major Federal Investment Outlays
2. Cost of Federal Property, Plant, and Equipment as of September 30, 2007
3. Depreciation Versus Capitalized Fixed-Asset Costs for the Federal Government, Fiscal Years 2003 to 2007
A-1. An Example of a Capital Spending Budget at the State Level, by Function, 2008 to 2013
1. Public Spending on Investments for Transportation and Water Infrastructure
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