An asset sale is the disposal of the Federal Government of some item of value to which it has legal title and exchanges for some form of value. The assets may in goods, natural resources (such as precious metals or timber) financial instruments (such as stock in non-Federal entities), or real estate. Typically, these items sold are exchanged for some form of receipt that is typically classified (“scored”) as negative spending receipts.
The sale of a physical or financial asset owned in whole or in part by the federal government to the public. Asset sales are typically large-dollar transactions ($50 million or more) for which advance notification must be provided to the
Department of the Treasury. Revenue from the sale of assets is accounted for in the budget as offsetting receipts or collections.
In general, asset sales increase current cash payments received by the government at the expense of a stream of future income that the government would otherwise receive. (See also Direct Loan under Federal Credit.)
Asset Sale under Scorekeeping Rule 15
If the net financial cost to the Government of an asset sale is zero or negative (a savings), the amount scored shall be the estimated change in receipts and mandatory outlays in each fiscal year on a cost basis. If the cost to the Government is positive (a loss), the proceeds from the sale shall not be scored for purposes of the CBA or GRH.
The net financial cost to the Federal government of an asset sale shall be the net present value of the cash flows from:
(1) Estimated proceeds from the asset sale;
(2) The net effect on Federal revenues, if any, based on special tax treatments specified in the legislation;
(3) The loss of future offsetting receipts that would otherwise be collected under continued Government ownership (using baseline levels for the projection period and estimated levels thereafter); and
(4) Changes in future spending, both discretionary and mandatory, from levels that would otherwise occur under continued Government ownership (using baseline levels for the projection period and at levels estimated to be necessary to operate and maintain the asset thereafter).
The discount rate used to estimate the net present value shall be the average interest rate on marketable Treasury securities of similar maturity to the expected remaining useful life of the asset for which the estimate is being made, plus 2 percentage points to reflect the economic effects of continued ownership by the Government.
Section 102 of the Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987 (Pub. L. 100-119)
Asset Sale (BBEDCRA 1987)
In amending section 257 of the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA) , section 102 of that Act’s successor law, the Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987 (BBEDCRA), set out a definition of asset sales. Section 257 (BBEDCA) at that time was the section of law which included definitions of various terms before they were moved to section 250 (BBEDCA) by the Budget Enforcement Act of 1990. The BBEDCRA 1987 definition was as follows:
“(12) The sale of an asset means the sale to the public of any asset, whether physical or financial, owned in whole or in part by the United States. The term ‘prepayment of a loan’ means payments to the United States made in advance of the schedules set by law or contract when the financial asset is first acquired, such as the prepayment to the Federal Financing Bank of loans guaranteed by the Rural Electrification Administration. If a law or contract allows a flexible payment schedule, the term ‘in advance’ shall mean in advance of the slowest payment schedule allowed under such law or contract.”.
U.S. Congress, Joint Explanatory Statement of the Committee of Conference on the Balanced Budget and Emergency Deficit Control Reaffirmation Act of 1987, House Ways and Means Committee, H. Rept. 100-313, 99th Congress, 2nd sess, September 12, 1987.