Federal Funds and Trust Funds

The federal budget consists of two major groups of funds:
trust funds and federal funds. "Trust funds" are designated as such by
law. All other funds that are not trust funds are "federal funds."

Trust funds earmark revenues for particular purposes. The larger trust
funds finance payments for Social Security, Medicare and unemployment
compensation. Other trust funds finance Federal employee retirement,
veterans' retirement, highway construction and airport development. The
designation of a trust fund is somewhat arbitrary and there are a
number of cases where one trust fund finances an activity, and a very
similar activity is financed through federal funds. There are over 200
trust funds. See Chart 1 for the breakdown of the major trust funds.

Chart 1: Federal Trust Funds, FY2003 (in billions of dollars)
Federal Budget Trust Funds Pie Chart

Federal funds constitute
all other government funds. The largest share of federal fund revenues
comes from individual income taxes, so the federal funds breakdown can
be used to examine how an individual income tax dollar is spent.
Corporate income, excise, estate and gift taxes, other special
collections, and borrowing also finance federal funds activities. See
Chart 2 for the breakdown of the federal funds part of the budget.

Chart 2: Federal
Funds, FY2002 Federal Funds Budget Pie Chart

Sources:Office of Management and Budget, Budget of the U.S. Government, Analytical
Perspectives, FY2004 [1].