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HONEST BUDGETING ACT OF 1983

MONDAY, SEPTEMBER 19, 1983

U.S. SENATE,

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS,

Washington, D.C. The committee met at 10 a.m., in room SD-538, of the Dirksen Senate Office Building, Senator Paul S. Trible, Jr., presiding. Present: Senators Trible, Gorton, Hecht, Proxmire, and Sasser.

OPENING STATEMENT OF SENATOR TRIBLE

Senator TRIBLE. Good morning, the full Committee on Banking, Housing, and Urban Affairs will come to order.

This morning we are here for hearings on Senate bill 1679, the Honest Budgeting Act of 1983.

A large part of the spending activities of the Federal Government does not show up in the Federal budget. It's off-budget and, therefore, largely obscure from congressional oversight. The outlays of the Federal Financing Bank comprise most of the off-budget outlays of the Federal Government. In less than 10 years, the Federal Financing Bank has financed $97 billion in off-budget spending.

That spending is Federal spending. It belongs in the budget. Creative accounting and off-budget spending on such a massive scale creates many serious problems. Every year, for example, actual Federal spending and Federal deficits are seriously underreported by the unified budget totals-by $21 billion in 1981, by $14 billion in 1982 and by about $14 billion this year. Congress and the public are seriously misled.

There are other problems as well.

Federal agencies can spend millions of dollars, and yet are not charged for the outlays. Programs with equal budget numbers are actually wildly unequal, hindering Congress severely in the national setting of budget priorities and the allocation of scarce Federal dollars. Programs authorized by Congress as loan guarantees are turned into direct Federal loans. Congressional constraints on individual programs are circumvented.

All these problems result from budget accounting procedures which Congress created. Only Congress can correct the situation. The Honest Budgeting Act of 1983, Senate bill 1679, would require the transactions of the Federal Financing Bank to be reflected in the unified budget. The Federal budget would, therefore, accurately reflect the fiscal operations of the Federal Government. Further budget authority and outlays for Federal spending programs financed by the FFB would be charged to responsible agen

(1)

cies' budget totals. Programs financed through the FFB would continue to be financed through the bank in the future.

Finally, other long loan programs, including new programs, could be financed with the FFB, providing that their budget authority and outlays would be attributed to the responsible agency and correctly reflected in the unified budget.

What then does all this mean? This legislation would accomplish a number of important objectives. It would make the unified Federal budget a more accurate reflection of the fiscal operations. It would greatly assist the formulation of tax and spending policy. It would eliminate the present understatement of Federal spending, lending and borrowing now associated with programs financed by the Federal Financing Bank. It would insure that loan programs which involve equal Federal outlays would appear as equal Federal budget documents and it would strengthen congressional control of Federal credit.

All this means our Government and limited national resources would be more effectively and efficiently managed, and that is our objective today.

At the outset, let me commend Senator Proxmire and Senator Gorton for their leadership in this matter. They have pointed the way for this legislation. This legislation, in effect, is a 1983 update of legislation they put forward in the last Congress. Senator Proxmire.

[Copy of bill being considered follows:]

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To amend the Federal Financing Bank Act of 1973 to require that programs financed through the Federal Financing Bank be included in the Federal budget, to require that certain types of obligations be offered for sale to the Bank, and for other purposes.

IN THE SENATE OF THE UNITED STATES

JULY 26 (legislative day, JULY 25), 1983

Mr. TRIBLE (for himself, Mr. GARN, Mr. PROXMIRE, Mr. GORTON, Mr. DOMENICI, Mr. ARMSTRONG, Mr. MATTINGLY, and Mr. HECHT) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs

A BILL

To amend the Federal Financing Bank Act of 1973 to require that programs financed through the Federal Financing Bank be included in the Federal budget, to require that certain types of obligations be offered for sale to the Bank, and for other purposes.

1

Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

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4

SHORT TITLE

SECTION 1. This Act may be cited as the "Honest

5 Budgeting Act of 1983".

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2

REPEAL OF BUDGET EXEMPTION

SEC. 2. Section 11(c) of the Federal Financing Bank

3 Act of 1973 (12 U.S.C. 2290(c)) is amended to read as fol

4 lows:

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"(c) All transactions of the Bank shall be reflected in the

6 unified budget of the United States Government. Amounts of 7 loans which are guaranteed by a Federal agency and which 8 are financed by the Bank shall be recorded as outlays of that 9 agency and shall not exceed amounts of budget authority pro10 vided to that agency for such purpose. Amounts which are 11 disbursed by the Bank for the purchase of loans guaranteed, 12 loan assets sold, and debt obligations issued, by a Federal 13 agency shall be treated as a means of financing that agency. 14 The Director of the Office of Management and Budget 15 shall issue regulations to carry out the provisions of this 16 subsection.".

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LIMITATIONS ON AGENCY FINANCING

SEC. 3. Section 7 of the Federal Financing Bank Act of 19 1973 (12 U.S.C. 2286) is amended by adding at the end 20 thereof the following:

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"(d) A Federal agency may not issue, sell, or guarantee 22 an obligation of a type which was, during the period begin23 ning October 1, 1981, and ending September 30, 1984, 24 issued, sold, or guaranteed, and financed through the Bank 25 unless that obligation is first offered for sale to the Bank. The

S 1679 IS

1 Secretary of the Treasury shall issue regulations to carry out

2 the provisions of this subsection.".

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EFFECTIVE DATE

SEC. 4. (a) The amendments made by this Act shall take

5 effect on October 1, 1984.

6 (b) The amendments made by this Act shall not be 7 deemed to be superseded, modified, or repealed except by a 8 provision of law which is enacted after the date of enactment 9 of this Act, and which amends the Federal Financing Bank 10 Act of 1973.

S 1679 IS

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