Executive Summary to the FY 2021 Financial Report of U.S. Government

Costs and Revenues

The government’s “bottom line” net operating cost decreased $746.5 billion (19.4 percent) during FY 2021 to $3.1 trillion. It is calculated as follows:

• Starting with total gross costs of $7.3 trillion, the government subtracts earned program revenues (e.g., Medicare premiums, national park entry fees, and postal service fees) and adjusts the balance for gains or losses from changes in actuarial assumptions used to estimate future federal employee and veteran benefits payments to derive its net cost before taxes and other revenues of $7.4 trillion (see Chart 3), a slight decrease of $62.2 billion (0.8 percent) from FY 2020. This net decrease is the combined effect of many offsetting increases and decreases across the government, including the ongoing effects of the federal government’s response to the pandemic. For example:
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  • A $211.6 billion decrease in net costs at the SBA, driven primarily by a $230.0 billion decrease in loan subsidy costs, including reestimates, attributable to the PPP and Debt Relief programs under the CARES Act.
  • A $270.1 billion increase in Treasury net costs largely due to increased disbursement of refundable tax credits or EIPs ($569.5 billion in FY 2021 compared to $274.7 billion in FY 2020), to eligible recipients in every state and territory and at foreign addresses.
  • A $96.4 billion decrease at DOL, much of which is attributable to a $100.7 billion decrease in Income Maintenance programs costs, primarily due to decreases in unemployment benefits as less jobless claims are filed.
  • A $100.8 billion net cost increase at HHS primarily due to a $115.4 billion increase across the Medicare and Medicaid benefits programs, including an increase in Medicaid grants to states to continue COVID-19 relief efforts. These cost increases were offset by cost decreases due to the PHSSEF receiving less funding during FY 2021 for COVID-19.
  • Entities administering federal employee and veteran benefits programs, including the OPM, VA, and DOD employ a complex series of assumptions to make actuarial projections of their long-term benefits liabilities. These assumptions include but are not limited to interest rates, beneficiary eligibility, life expectancy, and medical cost levels. Changes in these assumptions can result in either losses (net cost increases) or gains (net cost decreases). Across the government, these net losses from changes in assumptions amounted to $518.4 billion in FY 2021, a loss decrease (and a corresponding net cost decrease) of $161.1 billion compared to FY 2020.
  • VA net costs decreased $291.8 billion due largely to changes in benefits program experience and assumptions as referenced above, including, but not limited to a lower than anticipated number of veterans.
  • DOD net costs increased $144.8 billion due to a $100.2 billion loss increase from changes in assumptions referenced above, as well as slight increases in net costs across DOD’s major programs, including military operations, readiness, support, procurement, personnel, and R&D.
  • SSA net costs increased $36.5 billion due largely to a cost of living increase in benefits expenses for the OASI program, partially offset by a decrease in the number of beneficiaries and, consequently, expenses for the DI program.
  • Interest costs related to federal debt securities held by the public increased by $20.9 billion due largely to an increase in inflation adjustments and an increase in outstanding debt held by the public.

• The government deducts tax and other revenues from net cost (with some adjustments) to derive its FY 2021 “bottom line” net operating cost of $3.1 trillion.
  • From Chart 4, total government tax and other revenues increased by $684.3 billion (19.2 percent) to about $4.3 trillion for FY 2021 due primarily to overall growth in income taxes collections, partially offset by increased refunds.
  • Together, individual income tax and tax withholdings, and corporate taxes accounted for about 87.7 percent of total tax and other revenues in FY 2021. Other revenues include Federal Reserve earnings, excise taxes, and customs duties.

Assets and Liabilities

Chart 5 summarizes the assets and liabilities that the government reports on its Balance Sheet. As of September 30, 2021:

• More than three-fourths of the federal government’s total assets ($4.9 trillion) consist of: 1) $475.0 billion in cash and monetary assets; 2) $401.0 billion in net accounts receivable; 3) $1.7 trillion in net loans receivable (primarily student loans); and 4) $1.2 trillion in net PP&E.
  • Cash and monetary assets ($475.0 billion) is comprised largely of the operating cash of the U.S. government. Operating cash held by Treasury decreased $1.6 trillion (88.8 percent) to $198.4 billion during FY 2021 due to Treasury maintaining an elevated cash balance in FY 2020 to maintain prudent liquidity in light of the size and relative uncertainty of COVID-19 related outflows, combined with needing to reduce the cash balance to well under Treasury’s prudent policy level at the end of FY 2021 due to debt ceiling constraints.
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  • Treasury comprises approximately 76.0 percent of the government’s reported accounts receivable, net, mostly in the form of reported taxes receivable, which consist of unpaid assessments due from taxpayers, unpaid taxes related to IRC section 965, and deferred payments for employer’s share of FICA taxes, resulting from the CARES Act. Other accounts receivable, gross increased significantly year to year, primarily as a result of DOL’s $18.6 billion increase in benefit overpayments from programs related to COVID-19 as well as a $7.0 billion increase in HHS receivables, primarily due to Medicare.
  • Loans receivable, net increased by $73.6 billion (4.7 percent) during FY 2021. This increase was primarily attributable to an increase in direct disaster COVID-19 EIDL-funded loans and direct student loans, offset by an increase in the estimated subsidy cost of direct student loans largely due to administrative action to temporarily suspend payments during FY 2021.
  • Federal government general PP&E includes many of the physical resources that are vital to the federal government’s ongoing operations, including buildings, structures, facilities, equipment, internal use software, and general purpose land. DOD comprises approximately 68.8 percent of the government’s reported general PP&E of $1.2 trillion as of September 30, 2021.
  • Other significant government resources not reported on the Balance Sheet include stewardship assets, natural resources, and the government’s power to tax and set monetary policy.
• Total liabilities ($34.8 trillion) consist mostly of: 1) $22.3 trillion in federal debt and interest payable; and 2) $10.2 trillion in federal employee and veteran benefits payable.
• Federal debt held by the public is debt held outside of the government by individuals, corporations, state and local governments, FRB, foreign governments, and other non-federal entities.
• The government borrows from the public (increases federal debt levels) to finance deficits. During FY 2021, federal debt held by the public increased $1.3 trillion (6.0 percent) to $22.3 trillion.
• The government also reports about $6.2 trillion of intra-governmental debt outstanding, which arises when one part of the government borrows from another. For example, government funds (e.g., Social Security and Medicare Trust Funds) typically must invest excess annual receipts, including interest earnings, in Treasury-issued federal debt securities. Although not reflected in Chart 5, these securities are included in the calculation of federal debt subject to the debt limit.
• Federal debt held by the public plus intra-governmental debt equals gross federal debt, which, with some adjustments, is subject to a statutory debt ceiling (“debt limit”). At the end of FY 2021, debt subject to the statutory limit was $28.4 trillion. Increasing or suspending the debt limit does not increase spending or authorize new spending; rather, it permits the government to continue to honor pre-existing commitments. On August 2, 2019, the BBA of 2019 (P.L. 116-37) was enacted suspending the statutory debt limit through July 31, 2021. A delay in raising the statutory debt limit occurred from August 1, 2021 through September 30, 2021. During the period of August 2, 2021 through September 30, 2021, Treasury departed from their normal debt management operations and undertook extraordinary measures to avoid exceeding the statutory debt limit. On October 14, 2021, P.L. 117-50 was enacted which raised the statutory debt limit by $480.0 billion, to $28.9 trillion. Congress and the President most recently increased the debt limit by $2.5 trillion in December 2021 with the enactment of P.L. 117-73 (see Note 31—Subsequent Events).
• Federal Employee and Veteran Benefits Payable ($10.2 trillion) represents the amounts of benefits payable by agencies which administer the government’s pension and other benefit plans for its military and civilian employees.

See Note 30—COVID-19 Activity, as well as the referenced agencies’ FY 2021 financial statements for additional information. See Note 31—Subsequent Events for information about events that occurred after the end of the fiscal year that may affect the government’s financial results.

Key Economic Trends

An analysis of U.S. economic performance provides useful background when evaluating the government’s financial statements. During the last two fiscal years, the economy’s performance has been deeply affected by the COVID-19 global pandemic as well as the U.S. government’s extensive measures to provide fiscal support. Over the course of FY 2021, the economy grew briskly, continuing the recovery begun during the previous fiscal year. These and other economic and financial developments are discussed in greater detail in the Financial Report.