« iepriekšējāTurpināt »
Rudolph G. Penner
Congressional Budget Office
Mr. Chairman, I am pleased to appear before this Committee to discuss S. 1679, the Honest Budgeting Act of 1983. I strongly support the objectives of this bill.
The current budgetary treatment of the Federal Financing Bank (FFB) has created two problems not foreseen at the bank's inception: the transfer of on-budget outlays off budget as a result of the FFB's purchase of loan assets from on-budget agencies, and the conversion of loan guarantees into off-budget direct government loans. This potentially causes confusion about fiscal policy and may distort the allocation of resources among programs.
The Congressional Budget Office (CBO) believes that the budgetary treatment of the FFB should be revised to conform more closely to the original intent of the Congress. This could be accomplished by modifying the budgetary treatment either of programs financed by the FFB or of the FFB itself. The Honest Budgeting Act of 1983 introduced by Senator Trible takes the latter approach--it amends the budget treatment of the Federal Financing Bank itself.
My statement this morning will reiterate some of the background material presented to this Committee by Dr. Rivlin in the spring. I will also discuss how improving the budget treatment of the FFB relates to the
broader concerns of the control of federal credit activities.
FEDERAL FINANCING BANK OPERATIONS
Since 1974 the FFB has become an important source of financing for loans directly issued or guaranteed by federal agencies. The FFB portfolio has grown rapidly and steadily since its inception. Its outstanding holdings totaled $124.3 billion in fiscal year 1982 and, if current policy is continued, would exceed $210 billion by 1988.
The FFB engages in three types of activities: purchasing loan assets (certificates of beneficial ownership--CBOs) from agencies, making direct loans to borrowers holding agency guarantees, and purchasing agency debt. The largest activity is purchase of loan assets, which accounted for 46 percent of the FFB's total holdings at the end of fiscal year 1982. The FFB has become the primary buyer of loan assets sold by federal agencies. In 1975, its first full year of operation, the FFB purchased 63.8 percent of all loan assets offered for sale by federal agencies. By 1982 the FFB's share had increased to 86 percent, or $12.6 billion of the $14.8 billion of assets offered for sale. The Farmers Home Administration (FmHA) has been the principal seller of loan assets to the FFB. As shown in Table 1, FFB holdings of Farmers Home Administration certificates at the end of fiscal year 1982 totaled $53.7 billion, or 94 percent of the bank's loan asset holdings.
The second largest category of FFB activity is direct loans to guaranteed borrowers, which represent 32 percent of the bank's assets.
TABLE 1. FFB OUTSTANDING HOLDINGS BY TYPE OF ACTIVITY, FISCAL YEARS 1980-1982 (In billions of dollars)
Budget of the U.S. Government, Fiscal Years 1982, 1983, and 1984, Special Analyses.
Includes activities of the Rural Development Insurance Fund and Rural
Instead of raising funds in the securities market, a borrower with a guarantee from a federal agency may have the FFB purchase the entire security issue. Thus, in effect, the FFB makes a direct loan to that borrower. In terms of dollar volume, the two largest categories of borrowers have been rural electric cooperatives, under guarantees by the Rural Electrification Administration, and foreign purchasers of U.S.-made military equipment, under guarantees by the Department of Defense. These two categories accounted for $27.7 billion of the FFB direct loans outstanding at the end of 1982, or 70 percent of the total.
The remaining 22 percent of the FFB portfolio consists of holdings of agency debt. Since its inception in 1974, the FFB has been the sole financing agent for nearly all new issues of agency debt. At the close of fiscal year 1982, its holding of agency debt was $27.8 billion. The main debt issues held are those of the Export-Import bank and the Tennessee Valley Authority. In recent years, the U.S. Railway Association and the Postal Service have both redeemed some of their debt held by the FFB.
BUDGETARY TREATMENT OF FFB FINANCING
The Federal Financing Bank was intended to be a neutral financial intermediary, lowering the agencies' interest costs but not otherwise
affecting the federal budget. The FFB authorization provided that the bank's activities should not affect the budgetary status of agencies selling obligations to the bank, and further provided that the receipts and disbursements of the bank should not be included in the unified budget. The onbudget activity levels of agencies were not expected to be affected by the establishment of the FFB. In fact, however, the budget treatment of loan asset sales and direct loans to guaranteed borrowers financed by the FFB has affected the unified budget. Under current practices, FFB operations contribute to a situation in which the unified budget deficit understates federal borrowing requirements and otherwise identical loans appear to have different budgetary costs.
Shifting of On-Budget Outlays Off Budget Through Loan Asset Sales
Special provisions of law require that sales of certificates of beneficial ownership by the Farmers Home Administration and the Rural Electrification Administration (REA) be treated as sales of assets rather than as borrowing by these agencies. The significance of these provisions is that asset sales are treated as negative outlays in the originating agency's budget accounts. Thus, when the Farmers Home Administration makes $1 million in loans and uses them as collateral for selling $1 million in certificates of beneficial ownership to the FFB, the net outlays for the Farmers Home