June 10 (Bloomberg) -- The U.S. budget deficit, already approaching $1 trillion so far this fiscal year, widened in May from a year earlier as the recession subtracted from revenue and the government spent more to rejuvenate the economy.

The excess of spending over revenue climbed to $189.7 billion, a record for the month and compared with a gap of $165.9 billion a year earlier, the Treasury said today in Washington. Spending rose 5.8 percent to $306.9 billion and revenue fell 5.7 percent to $117.2 billion. For the fiscal year to date, the shortfall totaled a record $991.9 billion.

While the worst recession in five decades has shown signs of easing, the jobless rate is the highest in almost 26 years and companies haven’t yet seen a sustained increase in demand, cutting individual and corporate tax receipts. The Obama administration raised its borrowing estimate by $196 billion for this quarter to help the Federal Reserve keep programs aimed at reviving the financial system.

“The deficit is going to keep on setting a new record each month this fiscal year as the Obama administration pulls out all the stops to get the economy moving,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York.

Economists surveyed by Bloomberg News forecast a May deficit of $181 billion, the median of 31 estimates. Projections ranged from deficits of $170 billion to $202 billion. The Congressional Budget Office projected a shortfall of $181 billion for the month.

Tax Receipts

For the fiscal year that ends Sept. 30, the CBO forecasts the deficit to reach a record $1.845 trillion, almost four times the previous fiscal year’s $454.8 billion shortfall.

Corporate tax receipts totaled $69.4 billion through May versus $178.2 billion, a decline of 61 percent, the Treasury’s budget statement said today. Individual income tax collections were down 23 percent so far this fiscal year to $592.6 billion compared with $769.2 billion in the year-earlier period.

The CBO said in a June 5 statement that even as corporate receipts usually aren’t “a significant source of revenue” in the month they “continued to show weakness in May 2009, with a decline of $8 billion from May 2008. Net corporate receipts were negative; refunds were larger than gross receipts.”

Other Categories

In other categories, spending by the Social Security Administration rose to $479.8 billion from $436.1 billion for the fiscal year to date; spending by the Department of Health and Human Services, which administers the Medicare and Medicaid health programs, rose to $520.2 billion from $475.3 billion and spending by the Defense Department rose to $419.1 billion from $393.7 billion, Treasury said today.

The Treasury also said that for the fiscal year to date it has spent $177.7 billion on the financial rescue plan called the Troubled Asset Relief Program, and $140.6 billion to purchase mortgage debt from government-sponsored enterprises including Fannie Mae and Freddie Mac, now in government conservatorship.

JPMorgan Chase & Co., Goldman Sachs Group Inc. and Morgan Stanley were among 10 lenders that won Treasury approval to buy back $68 billion of government shares, freeing them from added oversight that curbed lending practices, hiring and pay.

“These repayments are an encouraging sign of financial repair,” Treasury Secretary Timothy Geithner said in a statement yesterday. “But we still have work to do.”

‘Central Importance’

Geithner has committed to cutting the budget deficit as concern about deteriorating U.S. creditworthiness deepened.

“I have deep conviction in the central importance of fiscal responsibility for this country,” Geithner said in Senate testimony yesterday. “There was no path through this crisis that did not involve some temporary short-term increase in borrowing.”

Stressing the importance of bringing the deficit down over time, he said “recovery will be weaker, private investment will be weaker, interest rates will be higher, unless we’re able to convince people that we are going to have the will and the ability to do that.”

In a May 21 Bloomberg Television interview, he said the target is reducing the shortfall to about 3 percent of gross domestic product, from a projected 12.9 percent this year.

The government plans to sell $361 billion of marketable securities this quarter and borrow $515 billion in the three months through September, the Treasury said in a quarterly statement issued on April 27.

Stimulus Spending

President Barack Obama in February signed into law a $787 billion stimulus program that he pledged will preserve or create 3.5 million jobs. Since then, the administration has committed funds to help the automotive and banking industries, taking a major stake in bankrupt automaker General Motors Corp. and interests in a variety of financial firms including Bank of America Corp. and Citigroup Inc.

The government reported its first budget deficit for April in more than a quarter century, $20.9 billion. April is typically a surplus month because of increased individual tax payments before the Internal Revenue Service’s mid-month deadline.

The economy has lost 6 million jobs since the recession started in December 2007, and gross domestic product contracted at a 5.7 percent annual rate in the first quarter, marking the economy’s weakest six-month performance in five decades.

To contact the reporter on this story: Vincent Del Giudice in Washington at vdelgiudicebloomberg.net

Last Updated: June 10, 2009 15:46 EDT