June 6, 1977
Page 17572
HOUSING AND COMMUNITY DEVELOPMENT ACT— S. 1523
AMENDMENT NO. 361
(Ordered to be printed and to lie on the table.)
Mr. MUSKIE. Mr. President, S. 1523, the Housing and Community Development Act of 1977, now pending before the Senate, would authorize and extend a broad range of housing and community development programs. These programs, and the problems they address, have been of particular concern to me throughout my tenure in the Senate. Providing decent housing for all Americans and improving the quality of life in our cities are goals that must be high on our national agenda.
Mr. President, it is as a supporter of these goals that I must express my deep concern that one provision of this bill, section 208, removes tens of billions of dollars of federally assisted housing programs from congressional control by amending the Budget Act to hide the future year costs of these programs. For this year alone, some $34 billion in housing contract obligation would show as less than $60 million in the budget.
The distinguished ranking member of the Senate Banking Committee, Senator BELLMON, has joined me in expressing his concern with respect to section 208, and we intend to propose an amendment tomorrow to strike section 208 in order to preserve the congressional budget process.
Senator BELLMON and I are deeply concerned that this bill would hide the true budget impact of these long term Federal obligations through cosmetic shifts in accounting that would obscure the real costs of these programs. The administration also has voiced its strong opposition to this change in accounting which violates sound budgetary practice.
Under present practice, which is required by law and supported by the administration and Comptroller General, the full cost of these 15 to 40 year contract obligations is shown in the budget for the year in which the contracts are signed. Under S. 1523 only the first year costs of these long term obligations would appear in the budget in the year the obligation is incurred. The remainder of the contract costs would appear as uncontrollable costs in future years.
The distortion which flows from the proposed change can be vividly demonstrated. For fiscal years 1976 through 1978, over $75 billion in budget authority will have been approved for these programs by the Congress in appropriation acts. Under S. 1523, this $75 billion would have been disguised as barely $5 billion in budget authority. Under the current method, the full amount of all these commitments would have been subject to prior congressional review and vote in the budget resolutions and appropriation acts before the contracts were signed.
At the current rate, Federal obligations for assisted housing programs will amount to as much as $1 trillion by the year 2005. Under the accounting change S. 1523 would impose, almost none of these obligations would have appeared as controllable budget authority in the year in which the contracts were signed. But the obligation would already have occurred and would have to be paid.
In recommending that the actual costs of Federal housing obligations be obscured, the Banking Committee argues that housing programs suffer because large numbers in the budget scare away potential supporters. The evidence is to the contrary. Indeed, for fiscal 1978, amendments to the first budget resolution to increase housing programs by over $6 billion — to the full administration request of $32.8 billion — were approved by a 57 to39 margin in the Senate. The more than $75 billion these programs will have received by fiscal 1978 belie any claim that reflecting the full cost of these programs as required by sound accounting practices has driven away support.
Under the Budget Act, the Senate has consistently faced up to the hard choices presented by the true cost of new Federal obligations. Although we support the objectives of S. 1523, we are compelled to oppose the accounting change contained in section 208. It would mark the first retreat by the Senate from its clear commitment to honesty in budgeting.
Only through full disclosure of program costs can Congress expect to maintain control over Federal expenditures. Were each authorizing committee to devise a new method of accounting for its programs to hide the true impact on future years of decisions taken now, the result would signal the end of the budget process — and pure chaos. We should not abandon the truth-in-budgeting principles the Senate has pursued thus far. We should not create this new multibillion dollar loophole. We should instead be moving to eliminate whatever anomalies now exist. Accordingly, we intend to offer an amendment to strike section 208 from the Housing bill and urge your support.
Mr. President, the administration is also opposed to section 208 and I ask unanimous consent that letters from OMB Director Lance and Housing and Urban Development Secretary Harris be printed in the RECORD at this point.
There being no objection, the letters were ordered to be printed in the RECORD, as follows:
OFFICE OF MANAGEMENT AND BUDGET,
Washington, D.C.,
June 2, 1977.
Hon. EDMUND S. MUSKIE,
Chairman,
Senate Budget Committee,
Washington, D.C.
DEAR MR. CHAIRMAN. Last week, the Senate Banking, Housing, and Urban Affairs Committee completed action on S. 1523 — the "Housing and Community Development Act of 1977." Section 208 of that bill would change the way budget authority is defined under HUD's subsidized housing programs. In my judgment, this provision poses a serious threat to the congressional budget process as well as to the public's ability to understand and influence the setting of national priorities. I believe this matter warrants your personal attention.
Another result of the Committee's action also has disturbing implications for the budget process. I will comment on this as well.
BUDGET AUTHORITY UNDER ASSISTED HOUSING
At the present time, both the legislative and executive branches of the Federal Government recognize as budget authority under HUD's assisted housing programs the maximum Federal payments that could be required pursuant to contractual obligations approved by the Congress in appropriation acts. Such treatment is required by section 3(a) (2) of the "Congressional Budget Act of 1974" which defines "budget authority" to mean authority provided by law to enter into obligations which will result in immediate or future outlays involving Government funds.
Clearly, housing subsidy contracts are legal "obligations" of the Federal Government, and result in the outlay of Government funds.
Section 208 of the Committee's bill would establish a different concept of budget authority, for housing subsidy programs only, and require its use by both the legislative and executive branches. In effect, section 208 would define as budget authority only the payments required to liquidate housing assistance contracts in a given year. Thus, rather than providing a basis for contractual obligations, budget authority would be recognized after such obligations were made — sometimes as long as forty years afterwards. This was the approach taken to budget authority prior to the enactment of the Congressional Budget Act.
Special treatment for the housing subsidy programs in this manner would have the following unfortunate consequences:
1. It would destroy one of the important bases for budget scorekeeping, on which both the Congress and the executive branch depend. If we are to keep track of actions that affect budget outlays now and in the future, we must have a reliable measure of authority to enter into obligations. Establishing different measures for different programs would greatly impair our ability to plan and implement sound budget policies over time.
2. It would seriously mislead the public. The definition of budget authority implied by section 208 would allow the executive branch to propose and the Congress to provide major subsidies for housing without having to acknowledge the taxpayers' legal obligation to finance these subsidies over a 15-40 year period.
3. It would undermine the process of establishing priorities among competing national needs by understating the budget consequences of selected programs.
I can appreciate the concern of those who are bothered by the large sums that must be shown as budget authority for the subsidized units. However, arbitrarily changing the definition of budget authority to make the numbers smaller will not make the housing subsidy programs any less costly, or change in any way the nature of the Government's legal obligation to pay these subsidies.
In sum, while the Congress clearly has the right to change the definition of budget authority for any program, I believe it would be most regrettable if the Senate approved legislation containing a provision along the lines of section 208. The requirements set forth in this section are totally inconsistent with both the spirit and letter of the Congressional Budget Act, and would only serve to conceal from the public the financial burden to which it is being committed by its elected representatives.
FEDERAL GUARANTEES FOR TAX-EXEMPT BORROWING
A second feature of S. 1523 that warrants your attention is section 107 which would amend an existing provision of law authorizing HUD to guarantee loans for certain purposes in connection with community development grant programs. These amendments would pave the way for a major expansion in the volume of tax exempt borrowing backed by a Federal guarantee.
It would not be appropriate for me to comment on the objectives that section 107 is intended to achieve. I do wish to comment on the means for achieving them, and its implications for the budget process and debt management.
Increasing the volume of federally guaranteed tax exempt securities would:
1. Make it more difficult to manage the national debt by significantly increasing a class of securities superior even to Treasury's own debt issue.
2. Increase Treasury borrowing costs and Federal outlays — through the backdoor — by raising the yield that Treasury would have to offer in order to attract funds.
3. Increase the budget still further — again through the backdoor — as defaults occur.
4. Add to the upward pressure on the budget by allowing block grant recipients to, in effect, get future year grants now by borrowing against them.
In the name of helping central cities, section 107 would commit additional Federal resources to a form of subsidy that is widely recognized to be highly inefficient since it costs the Treasury more in revenue than the borrower saves in interest costs. The difference becomes a subsidy for high bracket taxpayers.
For these reasons, guarantees of tax exempt obligations have been opposed by each of the last four administrations. I urge that section 107 of the bill be modified to avoid the problems noted above, or deleted.
Your assistance in bringing these concerns to the attention of your colleagues in the Senate would be appreciated.
Sincerely,
BERT LANCE,
Director.
THE SECRETARY OF HOUSING AND URBAN DEVELOPMENT,
Washington, D.C.
Hon. EDMUND S. MUSKIE,
Chairman, Senate Budget Committee,
U.S. Senate,
Washington, D.C.
DEAR Mr.. CHAIRMAN: Thank you for your inquiry regarding the position of the Department of Housing and Urban Development on certain provisions contained in S. 1523 relating to the way in which budget authority is defined under specified HUD subsidized housing programs. This letter will address two such provisions of S. 1523: Section 208, relating to budget authorization under assisted housing, and the proposed treatment for Section 202 housing for the elderly and handicapped.
This Department opposes Section 208 of the Committee's bill, which would define as budget authority only those payments for assisted housing required to liquidate housing assistance contracts in a given year.
In part, the Committee's action may reflect a view which I have stated publicly that, in the case of subsidized housing programs, reliance on the concept of budget authority alone can be misleading. For internal HUD purposes, and as an additional presentation to the Appropriations Committees, the Department has continued to use the concept of appropriations as a useful way to measure the amount the Department is actually asking to be provided from the Treasury.
Because of the scorekeeping procedure required for budget authority under the Congressional Budget Act of 1974, however, and the basic definitions set forth in that Act, I do not support a change in the present method of computing budget authority. Since the payments obligate the Federal government to pay annual outlays over the life of the contract, the current definitions would appear to be necessary.
We are also opposed to the action taken by the Committee in not putting the Section 202 program back on budget as was requested by the Administration. There is no difference between this direct loan program and other direct loan programs in HUD and elsewhere. We continue to believe, therefore, that the revenues and outlays of this program should be included in the budget totals and not arbitrarily excluded.
The Office of Management and Budget has advised that there is no objection to the presentation of these views from the standpoint of the Administration's program.
Sincerely,
PATRICIA ROBERTS HARRIS.