Fairness In Asbestos Injury Resolution Act of 2003, B-301397, September 4, 2003
B-301397: Sep 4, 2003
Chairman: This is in response to your request that the General Accounting Office prepare a comparison of the program that would be created by S. 1125. Enclosed is a chart comparing the two statutory programs and S. 1125. FAIR Act Subsection 223(c) of the bill provides as follows: "(c) BORROWING AUTHORITY-The Administrator [of the Office of Asbestos Injury Claims Resolution] is authorized to borrow. Borrowing Authority Generally "Borrowing authority" is a type of budget authority that permits a federal agency to incur obligations and to liquidate those obligations out of borrowed moneys. Borrowing from the Treasury is the most common form of borrowing authority. Although commercial borrowing authority is less common than Treasury borrowing authority.
Fairness In Asbestos Injury Resolution Act of 2003, B-301397, September 4, 2003
The Honorable Don Nickles Chairman, Committee on the Budget United States Senate
Dear Mr. Chairman:
This is in response to your request that the General Accounting Office prepare a comparison of the program that would be created by S. 1125, the "Fairness In Asbestos Injury Resolution Act of 2003 (FAIR Act)," recently reported in the Senate, and the existing National Vaccine Injury Compensation Program and Black Lung Benefits Program. You also asked that we comment on the borrowing authority in S. 1125. Enclosed is a chart comparing the two statutory programs and S. 1125. In response to your second request, we offer the following observations regarding the borrowing authority in S. 1125.
Subsection 223(c) of the bill provides as follows:
"(c) BORROWING AUTHORITY-The Administrator [of the Office of Asbestos Injury Claims Resolution] is authorized to borrow, in any calendar year, an amount not to exceed anticipated contributions to the [Asbestos Injury Claims Resolution] Fund in the following calendar year for purposes of carrying out the obligations of the Fund under this Act."
The Senate report on the bill explains that the FAIR Act provides the Administrator with "authority to borrow from commercial lending institutions amounts to offset short term losses in an amount that does not exceed anticipated contributions for the following year." S. Rep. No. 108-118 at 29 (2003) (emphasis added). See also id. at 53.
Borrowing Authority Generally
"Borrowing authority" is a type of budget authority that permits a federal agency to incur obligations and to liquidate those obligations out of borrowed moneys. U.S. General Accounting Office, A GlossaryofTerms Used in the Federal Budget Process 22 (GAO/AFMD-2.1.1) (Exposure Draft) (Washington D.C. Jan. 1993). See generally U.S. General Accounting Office, Budget Issues: Inventory of Accounts With Spending Authority and Permanent Appropriations, 1996, GAO/AIMD-96-79, App. III, Figure III.2, "Authority to Borrow by Agency, Bureau, and Account" (Washington, D.C. May 1996). Borrowing from the Treasury is the most common form of borrowing authority. Borrowing authority also may include authority to borrow directly from the public, authority to borrow from the Federal Financing Bank (FFB), /1/ or some combination of authorities. For a general discussion, see U.S. General Accounting Office, Principles of Federal Appropriations Law at 2-6 (2nd ed. 1991).
Commercial and Federal Borrowing Authority Subsection 223(c) of S. 1125 would permit the Administrator of the Office of Asbestos Injury Claims Resolution to "borrow, in any calendar year, an amount not to exceed anticipated contributions to the Fund in the following calendar year." The statutory language in the bill does not specify the source of the borrowing. The authority in subsection 223(c) appears to permit borrowing from commercial lending sources as well as borrowing from federal sources. See S. Rep. No. 108-118 29 (2003). Although commercial borrowing authority is less common than Treasury borrowing authority, it has been authorized by Congress for specific federal entities, either alone or in combination with Treasury borrowing authority. See, e.g., 12 U.S.C. Sec. 1795f (National Credit Union Administration Central Liquidity Facility); 39 U.S.C. Secs. 2005-06 (Postal Service).
The Administrator also may borrow from FFB. The FFB's enabling legislation provides that any federal agency "which is authorized to issue, sell, or guarantee any obligation is authorized to issue or sell such obligations directly to the Bank." 12 U.S.C. Sec. 2285(a). See, e.g., B-248647, April 24, 1995 (no need for Congress specifically to authorize a federal financing arrangement in the Federal Triangle Development Act since the FFB has separate statutory authority to provide financing). To provide certainty with regard to the sources from which the Administrator may borrow, Congress may wish to make those sources explicit in the bill.
Extent of the Borrowing Authority in Subsection 223(c)
GAO in the past has recommended that Congress grant borrowing authority selectively. /2/ Here, the borrowing authority granted by S. 1125 is subject only to the limitation that it not exceed "anticipated contributions to the Fund in the following calendar year." There is no explicit provision in S. 1125 for retiring that debt. Conceptually at least, the Administrator could incur substantial cumulative debt, subject only to his or her fiduciary responsibilities (see Secs. 222(a), (b)) and ability to secure borrowing at reasonable terms. Under section 405 of S. 1125, however, such borrowing would apparently not be supported by the U.S. government. Paragraph 405(b)(1) provides that generally, nothing in the Act may be construed to "create any obligation of funding from the United States Government." /3/ See S. Rep. No. 108-118, above, at 57. To ensure that the government incurs no liability for repayment of borrowing under the act, Congress may wish to explicitly state that repayment of borrowing is limited solely to amounts available in the Fund.
In addition, Congress may wish to consider placing further restrictions on borrowing under subsection 223(c), such as a ceiling on the cumulative debt that may be incurred by the Administrator. For example, Congress has imposed a cumulative debt ceiling on borrowing by the Tennessee Valley Authority (TVA). 16 U.S.C. Sec. 831n-4 (TVA borrowing authority limited to "an amount not exceeding $30,000,000,000 outstanding at any one time"). Congress also may wish to consider requiring Treasury approval or oversight of borrowing by the Administrator. /4/ See, e.g., 15 U.S.C. Sec. 713a-4 (Commodity Credit Corporation borrowing "with the approval of the Secretary of the Treasury").
We trust this is responsive to your request. We are sending copies of this correspondence to the Ranking Minority Member of the Senate Budget Committee, to the Chair and Ranking Minority Member of the Senate Judiciary Committee, the House Budget Committee, and the House Judiciary Committee and to the sponsors of other asbestos-related bills now pending in the Congress. If we can be of further assistance in this matter, please contact Charles Roney at 202-512-8152 or Frank Maguire at 512-8226 of my staff.
Anthony H. Gamboa
1. Congress established the Federal Financing Bank to (1) finance federal and federally assisted borrowings in ways that least disrupt private markets, (2) coordinate such borrowing programs with the government's overall fiscal policy, and (3) reduce the costs of such borrowings from the public. See 12 U.S.C. Secs. 2281 et seq. FFB provides financial assistance to or on behalf of federal agencies by (1) making direct loans to federal agencies to help them fund their programs, (2) purchasing loan assets from federal agencies, and (3) making direct loans to nonfederal borrowers (including foreign governments) that are secured by federal agency guarantees. FFB obtains funds by borrowing from the Department of the Treasury or the public. Each loan made by Treasury matches the terms and conditions, except for the interest rate, of the corresponding loans made by FFB. FFB charges its borrowers the interest it incurs on Treasury borrowing, plus a fee to cover administrative costs. See U.S. General Accounting Office, Financial Audit: Federal Financing Bank's 1993 and 1992 Financial Statements, GAO/AIMD-95-4 (Washington D.C. 1994). See also "The Federal Financing Bank." http://www.treas.gov/ffb (last visited Sept. 3, 2003).
2. As a general proposition, direct appropriations provide enhanced congressional control relative to borrowing authority. See, e.g., B-141869, July 26, 1961. See also U.S. General Accounting Office, Budget Issues: Agency Authority to Borrow Should Be Granted More Selectively, GAO/AFMD-89-4 (Washington, D.C. Sept. 1989).
3. Section 405(b) of S.1125, as reported in the Senate, provides in full as follows: "Nothing in this Act may be construed to - (1) create any obligation of funding from the United States Government, other than the funding for personnel and support as provided under subtitle A of title I; or (2) obligate the United States Government to pay any award or part of an award, if amounts in the Fund are inadequate."
4. Under section 2286 of Title 12, U.S.C., "the prior approval of the Secretary of the Treasury" is required with respect to methods, source, timing and financing of "obligations issued or sold by any Federal agency." Whether this section would be applicable to borrowing by the Administrator is open to question due to an explicit exception in the statute for "obligations issued or sold pursuant to an Act of Congress which expressly prohibits any guarantee of such obligations by the United States." 12 U.S.C. Sec. 2286(a); see also, 12 U.S.C. Sec. 2288(3) (definition of "guarantee" as "any guarantee, insurance or other pledge with respect to the payment of all or part of the principal or interest of any obligation . . . ."). As indicated above, section 405 of the bill provides generally that, nothing in the Act may be construed to "create any obligation of funding from the United States Government."
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