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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
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
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.
I AM CONCERNED ABOUT ALL OFF-BUDGET SPENDING, INCLUDING THAT OF
HOWEVER, IT SEEMS TO ME THAT THE MOST IMPORTANT GOAL OF
TO REQUIRE THAT FFB OUTLAYS TO FINANCE DIRECT LOANS BE
SHOWN IN THE BUDGETS OF THE AGENCIES INITIATING THE LENDING
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
THANK YOU AGAIN FOR THIS OPPORTUNITY TO TESTIFY BEFORE YOUR
COMMITTEE, MR. CHAIRMAN. I WOULD BE PLEASED TO ANSWER ANY QUESTIONS
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?
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?
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?
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?
Since this is a change in budgetary accounting, not policy, that is plenty of time.