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FEDERAL ASSISTANCE TO THOSE AREAS IS NOT TAKEN INTO ACCOUNT.

LENDING PROGRAMS FINANCED OFF-BUDGET THROUGH THE FFB HAVE AN

UNFAIR ADVANTAGE OVER PROGRAMS FINANCED DIRECTLY FROM THE GENERAL

FUND OF THE TREASURY. WITHOUT MORE COMPLETE DISCLOSURE OF THE

BUDGETARY COST OF FEDERAL PROGRAMS AND THE ASSISTANCE PROVIDED TO

DIFFERENT ELEMENTS OF SOCIETY, THE CONGRESS CANNOT MAKE INFORMED

BUDGETARY DECISIONS.

S. 1679, SENATOR TRIBLE'S HONEST BUDGETING ACT OF 1983, WOULD

AMEND THE FFB ACT TO IMPROVE THE BUDGETARY TREATMENT OF FFB FINANCING

OF FEDERAL DIRECT LOANS. UNDER THE BILL, FFB OUTLAYS RESULTING FROM

PURCHASES OF CBOS OR ORIGINATION OF GUARANTEED LOANS WOULD BE

CHARGED TO THE OTHER FEDERAL AGENCIES INITIATING THE TRANSACTIONS.

SUCH FFB OUTLAYS ALSO COULD NOT EXCEED BUDGET AUTHORITY PROVIDED TO

THOSE AGENCIES TO FINANCE THE LOANS.

THE EFFECT OF THIS CHANGE WOULD BE TO SHOW THE BUDGET IMPACT

OF FFB FINANCING OF DIRECT LOANS WHERE IT LOGICALLY BELONGS: IN

THE BUDGETS OF AGENCIES INITIATING THE LENDING. THE CHANGE WOULD

MAKE THE BUDGET A MUCH MORE ACCURATE MEASURE OF FEDERAL SPENDING

AND THE FEDERAL DEFICIT, AND WOULD ALLOW THE BUDGET TO PORTRAY

MORE COMPLETELY TOTAL FEDERAL ASSISTANCE TO INDIVIDUAL PROGRAM

AREAS. THIS GREATER BUDGETARY DISCLOSURE SHOULD IMPROVE IN TURN

THE CONGRESS' ABILITY TO MAKE INFORMED BUDGETARY DECISIONS.

FOR THESE REASONS

-

GREATER ACCURACY IN THE BUDGET AND MORE

-

RESPONSIBLE BUDGETING BY THE CONGRESS I STRONGLY SUPPORT S. 1679,

AS I DID EARLIER LEGISLATION INTRODUCED BY SENATORS PROXMIRE AND

GORTON, S. 711. AS CHAIRMAN OF THE SENATE BUDGET COMMITTEE, I

COMMEND ALL THREE SENATORS AND THIS COMMITTEE FOR YOUR EFFORTS TO

IMPROVE THE BUDGET AND THE BUDGET PROCESS.

ALTHOUGH THE BUDGET AND GOVERNMENTAL AFFAIRS COMMITTEES DO NOT

HAVE LEGISLATIVE JURISDICTION OVER THE FFB ACT, BOTH COMMITTEES HAVE

A STRONG INTEREST IN LEGISLATION SUCH AS S. 1679 WHICH WOULD EFFECT

THE CONTENTS OF CONGRESSIONAL BUDGET RESOLUTIONS. THEREFORE, THE

COMMITTEES HAVE REQUESTED REFERRAL OF S. 1679 TO HAVE AN OPPORTUNITY

TO SUGGEST MODIFICATIONS IN THE BILL AND TO MAKE A WRITTEN REPORT

TO THE SENATE.

ALSO, MR. CHAIRMAN, LET ME SUGGEST A SMALL CHANGE TO SECTION

2 OF S. 1679 THAT I BELIEVE IS APPROPRIATE. AS SECTION 2 NOW READS,

IT CAN BE INTERPRETED AS REQUIRING NOT ONLY THAT FFB FINANCING OF

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REQUESTED BY REA BE SHOWN IN REA'S BUDGET, BUT ALSO THAT REA ITSELF

BE BROUGHT ON-BUDGET. UNDER THIS BROAD INTERPRETATION, SECTION 2

OVERTURNS THE PROVISION OF THE RURAL ELECTRIFICATION ACT THAT NOW

EXCLUDES REA FROM THE BUDGET.

REA.

I AM CONCERNED ABOUT ALL OFF-BUDGET SPENDING, INCLUDING THAT OF

HOWEVER, IT SEEMS TO ME THAT THE MOST IMPORTANT GOAL OF

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TO REQUIRE THAT FFB OUTLAYS TO FINANCE DIRECT LOANS BE

SHOWN IN THE BUDGETS OF THE AGENCIES INITIATING THE LENDING

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COULD BE JEOPARDIZED BY ATTEMPTING TO BRING REA ON-BUDGET AS WELL.

I WOULD PREFER THAT THE CONGRESS ADDRESS THAT ESSENTIALLY SEPARATE

ISSUE THROUGH AN AMENDMENT TO THE RURAL ELECTRIFICATION ACT,

RATHER THAN THROUGH A CHANGE IN THE FFB ACT.

FINALLY, MR. CHAIRMAN, LET ME SAY THAT SENATOR CHILES, THE RANKING MINORITY MEMBER OF THE BUDGET COMMITTEE, ALSO SUPPORTS S. 1679. HOWEVER, HE HAS A CONFLICT AND CANNOT APPEAR BEFORE THE COMMITTEE THIS MORNING,

HE ASKED ME TO REQUEST THAT HIS PREPARED STATEMENT BE MADE PART OF THE

HEARING RECORD.

THANK YOU AGAIN FOR THIS OPPORTUNITY TO TESTIFY BEFORE YOUR

COMMITTEE, MR. CHAIRMAN. I WOULD BE PLEASED TO ANSWER ANY QUESTIONS

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ANYONE MAY HAVE.

Responses to Questions on S. 1679.

Q: Qualitatively, how important is the distortion of budget realitites, by aggregate and by function, if we continue to allow FFB-financed spending to be excluded from the budget?

A: The FFB finances only about 1 to 1 percent of federal spending, a small proportion. However, FFB-financed lending has grown faster in the last ten years than any other federal spending, and the potential for future growth is great. Also, the FFB finances nearly 25 percent of Function 150, International Affairs, and large portions of others.

Q: If S. 1679 is not passed, won't there be a tendency to want to escape hard budget choices by relying more on hidden spending?

A:

If we look at the explosive growth of FFB-financed lending over the past decade, I think the answer is "yes", there will be more pressure for offbudget spending.

Q: S. 1679 requires outlays of all loan programs financed through the FFB to be included in the unified budget, as well as the agencies' budgets. Is this appropriate?

A:

As I mentioned in my testimony, this would override the Rural Electrification Act, which excludes REA from the unified budget. I believe the off-budget status of the REA should be considered by the Agriculture Committee, which has jurisdiction over that law.

Q: The FFB makes loans guaranteed by other agencies. This bill would require that FFB outlays resulting from those loans be shown in the agencies' budgets. Is that appropriate?

A:

Q:

Yes. The loans are made at the request of and are backed and serviced by the agencies that guarantee them. From a budgetary perspective, the loans are equivalent to direct loans made by the agencies and financed through borrowing from the FFB. S. 1679 would require that the agencies' budgets reflect this budgetary reality.

Some arue that the limits put on credit programs in the appropriations process are an effective way of controlling off-budget FFB spending. Is this true?

A: No, it's not. Although the appropriation limits on credit programs financed by the FFB are part of the credit budget, the aggregate credit targets set by Congress are not binding. Thus the scrutiny of program needs and the competition for scarce resources that occurs on the spending side does not occur to the same degree on the credit side. Even if we amended the Budget Act to make the credit budget binding, however, the spending impact of FFB financing still would not be shown in the unified budget. The unified budget must reflect the spending impact of FFB financing for Congress to make informed decisions.

Q: This bill makes the budgetary accounting change effective in FY 1985. Is that enough time for the Budget Committee to plan?

A:

Since this is a change in budgetary accounting, not policy, that is plenty of time.

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Does not include FFB outlays resulting from transactions with the Rural Electrification Administration (Function 270) or the Rural Telephone Bank (Function 450), since these agenices' spending is excluded from the unified budget by separate statute.

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