§225. Section 13201 – Credit Reform

Budget Enforcement Act of 1990

Section 13201

Subtitle B—Permanent Amendments to the Congressional Budget and Impoundment Control Act 1974

SEC. 13201. CREDIT ACCOUNTING.

(a) Credit Accounting.—Title V of the Congressional Budget Act of 1974 is amended to read as follows:

“TITLE V—CREDIT REFORM

“SEC. 500. SHORT TITLE.

“This title may be cited as the “Federal Credit Reform Act of 1990”.

“SEC. 501. PURPOSES.

“The purposes of this title are to—

“(1) measure more accurately the costs of Federal credit programs;

“(2) place the cost of credit programs on a budgetary basis equivalent to other Federal spending;

“(3) encourage the delivery of benefits in the form most appropriate to the needs of beneficiaries; and

“(4) improve the allocation of resources among credit programs and between credit and other spending programs.

“SEC. 502. DEFINITIONS.

“For purposes of this title—

“(1) The term ‘direct loan’ means a disbursement of funds by the Government to a non-Federal borrower under a contract that requires the repayment of such funds with or without interest. The term includes the purchase of, or participation in, a loan made by another lender. The term does not include the acquisition of a federally guaranteed loan in satisfaction of default claims or the price support loans of the Commodity Credit Corporation.

“(2) The term ‘direct loan obligation’ means a binding agreement by a Federal agency to make a direct loan when specified conditions are fulfilled by the borrower.

“(3) The term ‘loan guarantee’ means any guarantee, insurance, or other pledge with respect to the payment of all or a part of the principal or interest on any debt obligation of a non-Federal borrower to a non-Federal lender, but does not include the insurance of deposits, shares, or other withdrawable accounts in financial institutions.

“(4) The term ‘loan guarantee commitment’ means a binding agreement by a Federal agency to make a loan guarantee when specified conditions are fulfilled by the borrower, the lender, or any other party to the guarantee agreement.

“(5)(A) The term ‘cost’ means the estimated long-term cost to the Government of a direct loan or loan guarantee, calculated on a net present basis, excluding administrative costs and any incidental effects on governmental receipts or outlays.

“(B) The cost of a direct loan shall be the net present value, at the time when the direct loan is disbursed, of the following cash flows:

“(i) loan disbursements;

“(ii) repayments of principal; and

“(iii) payments of interest and other payments by or to the Government over the life of the loan after adjusting for estimated defaults, prepayments, fees, penalties and other recoveries.

“(C) The cost of a loan guarantee shall be the net present value when a guaranteed loan is disbursed of the cash flow from—

“(i) estimated payments by the Government to cover defaults and delinquencies, interest subsidies, or other payments, and

“(ii) the estimated payments to the Government including origination and other fees, penalties and recoveries.

“(D) Any Government action that alters the estimated net present value of an outstanding direct loan or loan guarantee (except modifications within the terms of existing contracts or through other existing authorities) shall be counted as a change in the cost of that direct loan or loan guarantee. The calculation of such changes shall be based on the estimated present value of the direct loan or loan guarantee at the time of modification.

“(E) In estimating net present values, the discount rate shall be the average interest rate on marketable Treasury securities of similar maturity to the direct loan or loan guarantee for which the estimate is being made.

“(6) The term ‘credit program account’ means the budget account into which an appropriation to cover the cost of a direct loan or loan guarantee program is made and from which such cost is disbursed to the financing account.

“(7) The term ‘financing account’ means the non-budget account or accounts associated with each credit program account which holds balances, receives the cost payment from the credit program account, and also includes all other cash flows to and from the Government resulting from direct loan obligations or loan guarantee commitments made on or after October 1, 1991.

“(8) The term ‘liquidating account’ means the budget account that includes all cash flows to and from the Government resulting from direct loan obligations or loan guarantee commitments made prior to October 1, 1991. These accounts shall be shown in the budget on a cash basis.

“(9) The term ‘Director’ means the Director of the Office of Management and Budget.

“SEC. 503. OMB AND CBO ANALYSIS, COORDINATION, AND REVIEW.

“(a) In General.—For the executive branch, the Director shall be responsible for coordinating the estimates required by this title. The Director shall consult with the agencies that administer direct loan or loan guarantee programs.

“(b) Delegation.—The Director may delegate to agencies authority to make estimates of costs. The delegation of authority shall be based upon written guidelines, regulations, or criteria consistent with the definitions in this title.

“(c) Coordination with the Congressional Budget Office.—In developing estimation guidelines, regulations, or criteria to be used by Federal agencies, the Director shall consult with the Director of the Congressional Budget Office.

“(d) Improving Cost Estimates.—The Director and the Director of the Congressional Budget Office shall coordinate the development of more accurate data on historical performance of direct loan and loan guarantee programs. They shall annually review the performance of outstanding direct loans and loan guarantees to improve estimates of costs. The Office of Management and Budget and the Congressional Budget Office shall have access to all agency data that may facilitate the development and improvement of estimates of costs.

“(e) Historical Credit Program Costs.—The Director shall review, to the extent possible, historical data and develop the best possible estimates of adjustments that would convert aggregate historical budget data to credit reform accounting.

“(f) Administrative Costs.—The Director and the Director of the Congressional Budget Office shall each analyze and report to Congress on differences in long-term administrative costs for credit programs versus grant programs by January 31, 1992. Their reports shall recommend to Congress any changes, if necessary, in the treatment of administrative costs under credit reform accounting.

“SEC. 504. BUDGETARY TREATMENT.

“(a) President’s Budget.—Beginning with fiscal year 1992, the President’s budget shall reflect the costs of direct loan and loan guarantee programs. The budget shall also include the planned level of new direct loan obligations or loan guarantee commitments associated with each appropriations request.

“(b) Appropriations Required.—Notwithstanding any other provision of law, new direct loan obligations may be incurred and new loan guarantee commitments may be made for fiscal year 1992 and thereafter only to the extent that—

“(1) appropriations of budget authority to cover their costs are made in advance;

“(2) a limitation on the use of funds otherwise available for the cost of a direct loan or loan guarantee program is enacted; or

“(3) authority is otherwise provided in appropriation Acts.

“(c) Exemption for Mandatory Programs.—Subsection (b) shall not apply to a direct loan or loan guarantee program that—

“(1) constitutes an entitlement (such as the guaranteed student loan program or the veterans” home loan guaranty program); or

“(2) all existing credit programs of the Commodity Credit Corporation on the date of enactment of this title.

“(d) Budget Accounting.—

“(1) The authority to incur new direct loan obligations, make new loan guarantee commitments, or directly or indirectly alter the costs of outstanding direct loans and loan guarantees shall constitute new budget authority in an amount equal to the cost of the direct loan or loan guarantee in the fiscal year in which definite authority becomes available or indefinite authority is used. Such budget authority shall constitute an obligation of the credit program account to pay to the financing account.

“(2) The outlays resulting from new budget authority for the cost of direct loans or loan guarantees described in paragraph (1) shall be paid from the credit program account into the financing account and recorded in the fiscal year in which the direct loan or the guaranteed loan is disbursed or its costs altered.

“(3) All collections and payments of the financing accounts shall be a means of financing.

“(e) Modifications.—A direct loan obligation or loan guarantee commitment shall not be modified in a manner that increases its cost unless budget authority for the additional cost is appropriated, or is available out of existing appropriations or from other budgetary resources.

“(f) Reestimates.—When the estimated cost for a group of direct loans or loan guarantees for a given credit program made in a single fiscal year is reestimated in a subsequent year, the difference between the reestimated cost and the previous cost estimate shall be displayed as a distinct and separately identified subaccount in the credit program account as a change in program costs and a change in net interest. There is hereby provided permanent indefinite authority for these reestimates.

“(g) Administrative Expenses.—All funding for an agency”s administration of a direct loan or loan guarantee program shall be displayed as distinct and separately identified subaccounts within the same budget account as the program”s cost.

“SEC. 505. AUTHORIZATIONS.

“(a) Authorization of Appropriations for Costs.—There are authorized to be appropriated to each Federal agency authorized to make direct loan obligations or loan guarantee commitments, such sums as may be necessary to pay the cost associated with such direct loan obligations or loan guarantee commitments.

“(b) Authorization for Financing Accounts.—In order to implement the accounting required by this title, the President is authorized to establish such non-budgetary accounts as may be appropriate.

“(c) Treasury Transactions with the Financing Accounts.—The Secretary of the Treasury shall borrow from, receive from, lend to, or pay to the financing accounts such amounts as may be appropriate. The Secretary of the Treasury may prescribe forms and denominations, maturities, and terms and conditions for the transactions described above. The authorities described above shall not be construed to supercede or override the authority of the head of a Federal agency to administer and operate a direct loan or loan guarantee program. All of the transactions provided in this subsection shall be subject to the provisions of subchapter II of chapter 15 of title 31, United States Code. Cash balances of the financing accounts in excess of current requirements shall be maintained in a form of uninvested funds and the Secretary of the Treasury shall pay interest on these funds.

“(d) Authorization for Liquidating Accounts.—If funds in liquidating accounts are insufficient to satisfy the obligations and commitments of said accounts, there is hereby provided permanent, indefinite authority to make any payments required to be made on such obligations and commitments.

“(e) Authorization of Appropriations for Implementation Expenses.—There are authorized to be appropriated to existing accounts such sums as may be necessary for salaries and expenses to carry out the responsibilities under this title.

“(f) Reinsurance.—Nothing in this title shall be construed as authorizing or requiring the purchase of insurance or reinsurance on a direct loan or loan guarantee from private insurers. If any such reinsurance for a direct loan or loan guarantee is authorized, the cost of such insurance and any recoveries to the Government shall be included in the calculation of the cost.

“(g) Eligibility and Assistance.—Nothing in this title shall be construed to change the authority or the responsibility of a Federal agency to determine the terms and conditions of eligibility for, or the amount of assistance provided by a direct loan or a loan guarantee.

“SEC. 506. TREATMENT OF DEPOSIT INSURANCE AND AGENCIES AND OTHER INSURANCE PROGRAMS.

“(a) In General.—

“(1) This title shall not apply to the credit or insurance activities of the Federal Deposit Insurance Corporation, National Credit Union Administration, Resolution Trust Corporation, Pension Benefit Guaranty Corporation, National Flood Insurance, National Insurance Development Fund, Crop Insurance, or Tennessee Valley Authority.

“(2) The Director and the Director of the Congressional Budget Office shall each study whether the accounting for Federal deposit insurance programs should be on a cash basis on the same basis as loan guarantees, or on a different basis. Each Director shall report findings and recommendations to the President and the Congress on or before May 31, 1991.

“(3) For the purposes of paragraph (2), the Office of Management and Budget and the Congressional Budget Office shall have access to all agency data that may facilitate these studies.

“SEC. 507. EFFECT ON OTHER LAWS.

“(a) Effect on Other Laws.—This title shall supersede, modify, or repeal any provision of law enacted prior to the date of enactment of this title to the extent such provision is inconsistent with this title. Nothing in this title shall be construed to establish a credit limitation on any Federal loan or loan guarantee program.

“(b) Crediting of Collections.—Collections resulting from direct loans obligated or loan guarantees committed prior to October 1, 1991, shall be credited to the liquidating accounts of Federal agencies. Amounts so credited shall be available, to the same extent that they were available prior to the date of enactment of this title, to liquidate obligations arising from such direct loans obligated or loan guarantees committed prior to October 1, 1991, including repayment of any obligations held by the Secretary of the Treasury or the Federal Financing Bank. The unobligated balances of such accounts that are in excess of current needs shall be transferred to the general fund of the Treasury. Such transfers shall be made from time to time but, at least once each year.”.

(b) Conforming Amendments.—

(1) Definition.—Section 3(2) of the Congressional Budget Act of 1974 is amended by adding at the end the following: “The term includes the cost for direct loan and loan guarantee programs, as those terms are defined by title V”.

(2) Point of order for fiscal year 1991.—Effective January 1, 1991, for fiscal year 1991 only, section 302(f)(2) of the Congressional Budget Act of 1974 is amended by inserting after “new budget authority” the following: “or new credit authority”.

(3) Sunset point of order in fiscal year 1992.—Effective for fiscal years beginning after September 30, 1991, section 302 of the Congressional Budget Act is amended—

(A) in subsection (a)(1)—

(i) by striking “total entitlement authority, and total credit authority” and inserting “and total entitlement authority”;

(ii) by striking “such entitlement authority, or such credit authority” and inserting “or such entitlement authority”; and

(iii) by striking “entitlement authority, and credit authority” and inserting “and entitlement authority”;

(B) in subsection (a)(2), by striking “total budget outlays, total new budget authority and new credit authority” and inserting “total budget outlays and total new budget authority”;

(C) in subsection (b)(1)(A), by striking “budget outlays, new budget authority, and new credit authority” and inserting “budget outlays and new budget authority”;

(D) in subsection (c)—

(i) in paragraph (1), by inserting “or” at the end thereof; and

(ii) by striking “or (3) new credit authority for a fiscal year;”; and

(E) in subsection (f)(1)—

(i) by striking “year, new entitlement authority effective during such fiscal year, or new credit authority for such fiscal year,” and inserting “year or new entitlement authority effective during such fiscal year,”; and

(ii) by striking “authority, new entitlement authority, or new credit authority” and inserting “authority or new entitlement authority”.

Section 13201 (BEA 1990) was not classified to the U.S. Code since it amended existing law, and already so classified. This section amended title V of the Congressional Budget Act of 1974 in its entirety and is codified at 2 U.S.C. 661, et seq.

Explanatory Statement of Managers of Committee of Conference
(H. Conf. Rept. 105-217)

The Conference Committee on the Budget Enforcement Act of 1990, title XIII of the Omnibus Budget Reconciliation Act of 1990, included the following explanatory statement on the amendments made to budget law that established Federal Credit Reform. The text that follows describes the conference agreement provisions:

Conference Agreement

The conference agreement indicates that the purpose of credit accounting reform is to measure more accurately the costs of Federal direct loan and loan guarantee programs, to place the cost of those programs on a basis equivalent to other spending, to encourage more efficient delivery of Federal assistance, and to improve the allocation of resources between credit and other spending programs. The conference agreement also substantially accepts the definitions in the Senate bill.

The conference agreement requires that, starting with fiscal year 1992, the budget cost of credit programs be the net present value of the long-term costs to the Government, excluding administrative costs and incidental effects on governmental receipts and outlays. All of the other cash flows resulting from credit programs will be treated as means of financing and included in non-budgetary financing accounts. The cash flows resulting from direct loan obligations and loan guarantee commitments made prior to fiscal year 1992 will be reflected in the budget on a cash flow basis.

The conference agreement provides that the Director of the Office of Management and Budget will be responsible for coordinating credit cost estimates for the executive branch and may delegate that authority to other agencies based upon written guidelines. The Director of the Office of Management and Budget is to consult with the Director of the Congressional Budget Office in developing guidelines for credit cost estimates and in reviewing and improving those estimates.

The conference agreement requires the appropriation of new budget authority to cover the cost of direct loan and loan guarantee programs before new assistance can be provided. An exception to this requirement is provided for entitlement credit programs (such as the guaranteed student loan program and veteran’s home loan guaranty program) and for the credit programs of the Commodity Credit Corporation. The agreement also provides that budget authority must be available to cover the cost of modifying any outstanding direct loan or loan guarantee. Administrative expenses for credit programs will continue to be counted on a cash flow basis, but displayed in a separate subaccount within the account for the credit program.

In a few cases, the cost to government of a loan or guarantee may be zero or negative. In such case, it is still necessary for appropriations bills to provide specific authority before loans could be made. Providing such authority will generate an off-setting receipt (negative budget authority and outlays) which would be credited to the appropriations committees and count against discretionary spending limits.

The conference agreement provides that, if initial estimates of the costs of credit activity are determined to be incorrect, reestimates are recorded on the budget as soon as possible. These reestimates will take the form of payments from the treasury to the financing accounts or vice versa. The reestimate is discounted back to the time when the loan was disbursed; the discounted portion is charged to the program account (as a mandatory) and the rest is charged to net interest.

The conference agreement provides authority for the Secretary of the Treasury to conduct the transactions necessary to maintain the non-budgetary financing accounts.

As part of the transition provisions, new credit authority is made subject to a 302 point of order in the Senate in fiscal year 1991. However, the agreement sunsets this point of order in both houses in 1992.

If excesses were to develop in the financing accounts, the agreement presumes that these excesses would revert to the treasury. These excesses do not include balances necessary to maintain adequate reserves, achieve mandated capital levels, or preserve the mutuality of certain credit programs.

The financing accounts are made subject to the Antideficiency Act. However, Federal agencies will continue to administer and operate direct loan and loan guarantee programs as they do now. Permanent indefinite authority is provided to make any payments required to liquidate direct loan obligations and loan guarantee commitments made prior to fiscal year 1992. The agreement provides an authorization to cover the administrative expenses of implementing credit accounting reform. Finally, the activities of Federal insurance programs are excluded from credit accounting reform, but the Director of the Office of Management and Budget and the Director of the Congressional Budget are required to study whether the accounting for Federal deposit insurance programs should be a cash basis, on the same basis as loan guarantees, or on a different basis.

[Joint Explanatory Statement on the Committee of Conference on the Budget Enforcement Act of 1990; (Conference Report), Committee on the Budget, House of Representatives, 105th Congress, 1st Session, Washington D.C. 1997.]

LEGISLATIVE HISTORY NOTES

Pub. L. 101–508, title XIII, §13201, Nov. 5, 1990, 104 Stat. 1388, 1388-609; (Budget Enforcement Act of 1990).

Section 13111 (BEA 1990)

Section 13202 (BEA 1990)

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