CONSOLIDATED FARM SERVICE AGENCY The 1996 Budget Estimates include proposed changes in language as follows (new language underscored; deleted matter enclosed in brackets): Agricultural Credit Insurance Fund Program Account: 1 2 3 5 For gross obligations for the principal amount of direct and guaranteed loans For the cost of direct and guaranteed loans, including the cost of modifying In addition, for administrative expenses necessary to carry out the direct and guaranteed loan programs, [$243,766,000) $227,258,000, which shall be transferred to and merged with the following accounts in the following amounts: $214, 163,000 to Salaries and Expenses" $318,000 to Rural Utilities Service "Salaries and Expenses, and $171,000 to Rural Housing and Community Development Service. "Salaries and Expenses." The first change adds language which provides for a $4.3 million level for the direct and guaranteed soil and water loan program which will provide for an estimated 162 loans. The second change adds language which provides for a $45 million level for the acquired property credit sales program which will provide for an estimated 470 loans. The third change adds language providing a subsidy cost appropriation for the direct and guaranteed soil and water loan program. The fourth change adds language providing a subsidy cost appropriation for the acquired property credit sales program. The fifth change adds language providing for the transfer of salaries and expenses to other agencies associated with the servicing of loans transferred by the department's reorganization. AGRICULTURAL CREDIT INSURANCE FUND PROGRAM ACCOUNT (On basis of loan level, subsidy, and administrative expenses PROJECT STATEMENT (On basis of appropriated loan levels, subsidies, and administrative expenses) (In thousands of dollars) Item of change Farm ownership loans: Direct loans... Indian tribe land acquisition loans: Total: Total loans and suberies 28,525 227,258 Total Appropriation 3,003,200 437 208 3213,830 375,534 -10,083 39,525: 3,203,867: 415,059 Stall-years are reflected in the Salaries and Expense Project Statement. Of the $217,101,000 for administrative expenses in FY 1994, $11,919,000 will be retained for obligation of program-related nonrecoverable costs. Of the $214,258,000 In b/ $79,570,000 of the $145,738,000 program level and $20,394,000 of the $39,038,000 subsidy level is from the FY 1993 emergency supplemental appropriation for rellef from the c/ Due to General Provisions section 726(a) of the FY 1995 Appropriations Act, P.L. 103-330, dated September 30, 1994, an additional $7,670,000 in subsidy was made available for presidentially declared disasters. JUSTIFICATION OF INCREASES AND DECREASES The FY 1996 Budget proposes to meet the goals and objectives set forth for the farm credit programs by the Administration. The Administration's objectives include maintaining family farms, targeting the purchase and development of farms, and sustaining and revitalizing the farm economy of rural areas. Farm ownership loans help owner-operators restructure their debts, comply with local sanitation and pollution abatement requirements, keep up with advances in agricultural technology, and meet changing market requirements. Another function of the farm ownership loan program is to assist farmers, especially beginning and socially disadvantaged farmers, in the purchase and enlargement of farms. These loans are used to combine small tracks of land, make basic soil improvements, improve dwelling and essential farm buildings, and control pollution. Farm operating loans assist full-time and part-time farmers to continue in agriculture and improve their farm operations. Farm operating loans are used to purchase livestock, farm equipment and supplies, finance land and water development, use and conservation. Farm credit loans help to stabilize the economy in many rural areas, including areas outside the farm belt, in many ways. For example, these loans assist beginning farmers in replacing older farmers now ready to retire, and these loans assist socially disadvantaged farmers to build economically viable farming enterprises. The direct loan programs provide financing targeted to the most financially needy borrowers and beginning farmers. Through the Administration's initiatives involving outreach, supervised credit, and beginning farmers, the Agency has increased the number of low-income and socially disadvantaged families that can avail themselves of the opportunity, continuation, or the establishment of a productive farming operation. Through supervised credit and improved servicing, these borrowers will become successful and eventually move to commercial credit. Guaranteed lending will facilitate graduations of loans to private lenders and create valuable, lasting relationships between borrowers and their local lending institutions. In addition, the transfer of some loan making responsibilities to private lenders will enable the Agency to concentrate on providing supervised credit assistance to needy borrowers, insure an effective guarantee/graduation process and allow for improved servicing of the existing portfolio. The following adjustments result in a net decrease of $10,063,000 in loan programs and an increase of $13,000,000 in administrative expenses. Due to rising market interest rates and therefore increasing interest rate subsidies to borrowers, the loan subsidy costs of the programs are increased by $26,525,000. (1) A decrease of $8,081,000 for direct farm ownership loans ($78.081,000 Lending will be targeted to beginning farmers and financially needy applicants. The Agency has established annual target participation rates on a county-wide basis to ensure that members of socially disadvantaged groups will receive real estate loans and have the opportunity to accrue personal wealth through equity in real estate and the establishment of a productive farming operation. The program level requested will provide 860 direct loans in FY 1996. |