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Revolving Fund Questions

A revolving fund is a special budget account that is authorized to sell goods or services and to use the proceeds to fund the next round of business. An example is the Postal Service Fund, which delivers the mail and uses the income from stamp sales to cover the costs. The income “revolves” in the sense that it stays in the Postal Service Fund and is available to fund Postal Service operations.

The intent of the proposal is to implement a permanent capital planning process within the annual appropriations process. The proposed Federal Capital Revolving Fund is essential for two reasons.

First, the revolving fund is a continuing source of financing for expensive capital projects that does not compete directly with operations for funding. The funding will allow projects to go forward as needed, but the limit on total funding means that decision-makers will have to prioritize projects.

Second, the requirement to use annual discretionary appropriations to repay the revolving fund avoids the current problem of spikes in discretionary funding needs.  Instead of having to deal with a spike, the costs are recognized as an operating expense over time and set aside to be used to fund future capital projects.

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