FEDERAL AND FEDERALLY ASSISTED LOANS OUTSTANDING 1

[In billions of dollars; at end of fiscal period]

1 See table F-7 in Special Analysis F. Federal Credit Programs," Special Analyses, Budget of the United States Government, Fiscal Year 1979. 2 Excludes loans held by Government accounts and Government-sponsored enterprises.

3 Net of loans between Government-sponsored enterprises and between such enterprises and Federal agencies.

Outlays of off-budget Federal entities.-Off-budget Federal entities are federally owned and controlled, but their transactions have been excluded from the budget totals under provisions of law. Therefore, their fiscal activities are not reflected in either budget outlays or the budget surplus or deficit, appropriation requests for their activities are not included in the totals of budget authority, and their outlays are not subject to the ceilings set by the congressional budget resolutions. As shown in the table on page 257, the outlays of the off-budget Federal entities are added to the unified budget deficit to comprise the total Government deficit that has to be financed by borrowing from the public or by other means. When off-budget outlays are financed by Treasury borrowing, the additional debt is subject to the statutory debt limit; when financed by the entities' own borrowing, it is not. In either case the additional debt is part of the gross Federal debt.

The first Federal entity removed from the unified budget was the Export-Import Bank (excluded by statute as of August 17, 1971). This exclusion was the first departure from the concept of the unified budget, which had been adopted beginning with the 1969. budget and which combined the administrative budget with the substantial trust fund activity of the Federal Government. After 1972, further departures from a unified budget occurred. The Postal Service fund, the Rural Telephone Bank, the lending activities that became the Rural electrification and telephone revolving fund, and the Housing for the elderly or handicapped fund were removed from the budget. The Environmental Financing Authority, the Federal Financing

6 The Board of Governors of the Federal Reserve System (but not the Federal Reserve banks, which are privately owned) is a Federal organization. It is excluded from the budget and from this discussion.

o The Environmental Financing Authority expired on June 30, 1975, without having conducted any operations.

Bank, the U.S. Railway Association, and the Pension Benefit Guaranty Corporation were established off-budget. The Exchange stabilization fund has always been outside the unified budget, though until last year it was classified as a deposit fund instead of an off-budget Federal entity.?

Some of the outlays related to the activities of the off-budget Federal entities are nonetheless included in the budget totals. The budget totals include the subsidies paid to the Postal Service fund and the administrative expenses of the Rural electrification lending programs and the U.S. Railway Association. Moreover, while the budget authority and outlays of off-budget Federal entities are excluded from the budget totals, some of their activities are subject to Presidential and congressional review. For example, limits on the amount of new lending by the Rural electrification and telephone revolving fund are set annually by law, and the outstanding debt and annual borrowing of the Postal Service are limited by statute.

In the past 2 years, the creation of new off-budget Federal entities has been reversed. The Export-Import Bank was returned to the budget by statute on October 1, 1976, and the Housing for the elderly or handicapped fund was returned to the budget by statute on October 1, 1977. The budget outlays and deficits of previous years have been revised to include these two entities, and these revisions are reflected in the tables published in this budget. The budget treatment of the U.S. Railway Association has been altered by a different kind of legislative change. From the start of the assistance program to Con Rail in 1976, which now comprises almost all of the Association's activity, the purchases of Con Rail securities have been required by law to be included in the budget. Furthermore, the administration has proposed legislation to include the administrative expenses of the Exchange stabilization fund in the budget. When this legislation is enacted, the other outlays of the Exchange stabilization fund will also be included in the budget.8

Congress has expressed concern about the existence of off-budget Federal entities. The Congressional Budget Act of 1974 calls for the Committees on the Budget of the House of Representatives and the Senate to study on a continuing basis those provisions of law that exclude any outlays of Federal entities from the budget and to report to their respective Houses their recommendations for terminating or modifying such provisions. In September 1976 the House Budget

7 The Exchange stabilization fund conducts a cycle of operations similar to revolving funds. Consequently, its classification as a deposit fund was contrary to the normal definition of a deposit fund: an account that records amounts held by the Government as an agent for others or amounts held in suspense temporarily before being refunded

or paid into some other fund. 8 The outlays of the Exchange stabilization fund do not include foreign exchange transactions as such. Because it is not practicable to forecast transactions in gold, foreign currency, and foreign investments, only administrative expenses and interest on investments in U.S. securities will be estimated for the current and future years.

Committee adopted a report recommending that the budget include the administrative expenses of the Exchange stabilization fund and the outlays of all other off-budget Federal entities except the Federal Financing Bank. The committee deferred judgment on the budget status of the Federal Financing Bank.'

Except for the Postal Service, the Pension Benefit Guaranty Corporation, and the Exchange stabilization fund, the excluded outlays of the off-budget Federal entities are incurred for carrying out loan programs. These programs are similar to the direct loan programs in the unified budget. The outlays of the off-budget loan programs are approximately equal to the difference between new loans disbursed and repayments of principal. For example, during 1979 new loans disbursed by the excluded programs are estimated to be $16.8 billion and repayments $3.9 billion, for an increase in loans outstanding of $12.9 billion. This is about the same as the estimated outlays of these programs, which are $12.6 billion. The difference is due to such factors as administrative expenses and interest paid and received.

Like direct loans in the budget, the loans of the excluded programs are designed to allocate economic resources toward particular uses. The off-budget Federal entities support a variety of program functions both by their direct operations and, in the case of the Federal Financing Bank, by purchasing debt securities issued by several agencies and purchasing obligations guaranteed under a number of Government programs. The size of these activities is generally indicated by the outlays of each off-budget entity in the following table. Part 5 of the budget, "Meeting National Needs: the Federal Program by Function,” shows the outlays of the off-budget Federal entities by function and discusses some of their more significant activities.

House of Representatives, Committee on the Budget. 0f-Budget Actioities of the Federal Govern, lo ment, Report No. 94-1740 (1976): and First Concurrent Resolution on the Budget - Fiscal Year 1978, b Report No. 95–189 (1977). pp. 11-12.

De

As the table shows, the Federal Financing Bank (FFB) accounts for most of the off-budget outlays. The outlays of the FFB include only its purchase of Government-guaranteed obligations, not its purchase of Federal agency debt. This prevents counting the same amount twice, both in the FFB's own outlays and in the outlays of the agency that borrows from the FFB and spends the proceeds.

The FFB's large share of the total off-budget outlays has been increased by the legislation mentioned above that put the ExportImport Bank, the Housing for the elderly or handicapped fund, and the major lending program of the U.S. Railway Association into the budget totals. Among the remaining off-budget Federal entities only the Postal Service fund in some years has comparatively large outlays. The outlays of the Postal Service fund are calculated with an offset for the subsidy that it receives for public service costs and for revenue foregone from carrying certain mail at free or reduced rates. This subsidy, which is included in the budget, is estimated at $1.8 billion in 1979. The continued net lending of the Rural electrification and telephone revolving fund during 1978–79 is mostly counted in the outlays of the FFB rather than in its own outlays. The fund plans to sell certificates of beneficial ownership to the FFB, and the sale of these certificates is required by law to be treated as the sale of assets instead of borrowing. Therefore the sale of these certificates to the FFB is an offset to the outlays of the Rural electrification and telephone revolving fund and adds to the outlays of the FFB.

In the table on the next page, the excluded outlays of the off-budget Federal entities are compared with the unified budget outlays.10 The outlays of the off-budget entities (excluding the Export-Import Bank and Exchange stabilization fund) were negligible in 1973 but grew rapidly afterwards, as the Federal Financing Bank and other off-budget entities were created. The outlays of the off-budget Federal entities equaled 2.2% of budget outlays in 1977 and are estimated to equal 2.5% in both 1978 and 1979.

Outlays of Government-sponsored enterprises.-Several Government-sponsored enterprises have been established and chartered by the Federal Government to perform specialized credit functions. The earlier enterprises were all created with partial or full Government ownership and direct Government control, but, in time, they were converted to private ownership and some new enterprises were created as privately owned institutions. The rule governing the budget treatment of these enterprises was established in 1967 in accordance with a recommendation by the President's Commission on

10 The historical data for unified budget outlays include Federal entities that are now off-budget for any period when they were in the budget, include the Export-Import Bank and Housing for the elderly or handicapped fund for all years, and include Government-sponsored enterprises for periods when they had any Government ownership.

COMPARISON OF OUTLAYS FOR THE UNIFIED BUDGET, OFF-BUDGET FEDERAL ENTITIES, AND GOVERNMENT-SPONSORED ENTERPRISES

[In billions of dollars]

1970. 1971. 1972 1973. 1974.

196.6 211.4 232.0 247.1 269.6

196.6 211.4 232.0 247.1 271.1