Mr. SCHULTZE. We would be glad to submit an analysis of backdoor financing. As a general proposition, it has been our general practice in the last 4 years not to request in legislation any new back-door spending authority, but where such authority now exists to continue along the same line-in other words, kind of a status quo agreement. Now, there have been a few cases which I wouldn't call back door at all, where contingency funds have been provided through this route. In other words, where you have financial assistance programs particularly with a contingency backup by the Treasury-where the Treasury stands ready in case of default on the loan to "bail out" the lending agency, but there is no current spending involved. There are a few cases like this where legislation has provided for that contingency Treasury authority. But apart from that, it has been our general rule in the last 4 years not to request of the Congress any new back-door spending authority, but simply to maintain the existing situation and the existing relationships as far as we were concerned, at least between the legislative and the appropriations committees. Really the responsibility in the matter of financing is a matter, we believe, for the legislative and appropriations committees to decide between them. Cochairman MONRONEY. What, in your estimate, would be the extent of the so-called back-door spending? By that I mean the spending that is beyond the reach of Congress for annual adjustment. Mr. SCHULTZE. I don't believe I have such information. Cochairman MONRONEY. You can put that in the paper. Mr. SCHULTZE. Yes, sir. I will put that in the paper. Cochairman MONRONEY. On some programs, like urban redevelopment, there could be a vast recovery if you made a firm appropriation to take care of the fund needed. On the other hand, the total demand by the local governing authorities would be uncertain. No one could tell what would be required or what would qualify. It is going to be more and more that way on education and many other programs we passed so far this year. Mr. SCHULTZE. Well, one result, for example, in some of these areas, of eliminating back-door spending authority would probably be the necessity of providing, let's say, 2 or 3 years' appropriations at once. I am not saying it couldn't be done; it clearly could be done, but it would not be a simple matter simply to substitute appropriations for back-door spending. You would have to make some sort of arrangements for getting sufficient funds for reservations of certain projects and the like. Cochairman MONRONEY. I can understand how you can have a 3year appropriation for a public works program of buildings or highways where the rate of construction is known and you have that flowing out. But it is quite difficult to know how to fund these programs when the total cost will depend on how many people apply for Federal matching funds and things of that kind. For instance, in the Federal airport program we appropriate the full amount of the authorization and generally the cities and towns match that and use it all up. Actually, you have a limit on it and you can't go beyond the limit. Mr. SCHULTZE. My recollection is that this year the House Appropriations Committee changed the financing in the urban renewal area from back door to front door, and if I recall correctly did provide 2 years' worth of appropriations recognizing the problem involved here. Mr. TILLER. It is still pending. Mr. SCHULTZE. It is still pending. Cochairman MONRONEY. This has been the usual way of going about it. It is called forward funding for 2-year appropriation. One further question Representative HALL. Mr. Chairman, one further point if you will yield, at the same time when we get that figure that the Director is going to supply, could we, simultaneously for comparison's sake, and indeed for emphasis of definition, have the total recurring previously committed annual expenses of the Federal Government at the same time, the percentage of the total budget that is annually long range, permanently recommitted over which the Congress has no control except that it must comply with an appropriation, the estimate of sum total of things like it has no relation to back-door spending. Mr. SCHULTZE. No; relatively firm commitments. Representative HALL. Firm commitments, such as veterans' pensions. I have seen the figure that that is-like you I don't want to be held to this-I have seen the figure that it is, 37 percent of the annual budget or something like that. My interest is (a) the back-door spending estimates and (b) the recurring committed funding vis-avis 50 or 49 percent for defense; what is left? I would like to see that set up in a table or however is easier for you to supply it, but I think it would be a vital thing in connection with this request of the chairman. Mr. SCHULTZE. Always realizing, Mr. Hall, that this is-you can always question our judgment as to what we put in each category; we will try to give you that information. Representative HALL. Yes. But that is the spirit of the question. If you are not the acme of guesstimators in this particular area then this country is bad off. So, we just want your advice on this, your thinking. Thank you, Mr. Chairman. Cochairman MONRONEY. Fine. (The information referred to is as follows:) BACK-DOOR FINANCING The term "back-door financing" refers to the granting of new obligational authority by the Congress outside of appropriation acts. All such authorizations must, however, be enacted by the Congress. None can be created by the executive branch. They do not, therefore, take away the powers of the purse from the Congress. To the extent that some of these authorizations provide for additional amounts to become available in future years without further congressional action, Congress can be said to be exercising the power on behalf of a later Congress. In the past, some permanent appropriations have been provided outside the appropriations process. New permanent appropriations are enacted only occasionally. At the present time, however, back-door action to provide new obligational authority usually takes one of two forms: Authorizations to expend from debt receipts.-Authority for the Treasury to use borrowed moneys, or authority for the activity concerned to borrow directly from the public, for the purpose of making certain expenditures. This type of authorization is most often used (1) to finance self-sustaining and incomeproducing programs which can repay the borrowing, with interest, from future revenues or (2) to provide backup money to meet contingencies resulting from possible defaults under programs where a Government agency is a guarantor. It has also been used to finance some programs which operate at a loss over a period of years, such as the Commodity Credit Corporation. Contract authorizations.—Authority to incur obligations in advance of appropriations; appropriations must be obtained subsequently to permit payment of the obligations. This type of authorization has been used for a few programs which require the incurring of substantial obligations more than a year in advance of expenditures, especially for some grant programs which require advance planning by State or local governments. It has been used sparingly in recent years, however. Each of these types of authorizations may also be granted in appropriation acts (such as authorizations to expend from public debt receipts of the Farmers' Home Administration and the Rural Electrification Administration) and these are not back-door financing. At the heart of the front-door versus back-door financing issue is the question of which committees in Congress will handle the bills to provide new obligational authority. This is primarily a matter for each House of Congress to decide. The current policy of the executive branch is not to propose any major changes in existing practice in this area. Therefore, executive branch proposals to provide new obligational authority outside of appropriation acts are usually limited to two types of situations: 1. Continuation of previous methods of financing. This relates to certain programs which have traditionally been financed through new obligational authority provided in substantive legislation. In the present session of Congress the Housing Act amendments (S. 1354 and H.R. 5840) recommended new obligational authority as follows: Authorizations to expend from public debt receipts: College housing loans ($110 million for 1965); special assistance functions, FNMA ($150 million for 1965). Contract authorization: Urban renewal grants ($675 million for 1965). The highway program, for which authorizing legislation is enacted every 2 years, also falls in this category, and is financed by contract authorizations. 2. To finance possible defaults of guaranteed loans.-These contingency authorizations are indefinite in amount, and would permit agencies to expend from public debt receipts in order to make prompt payment to holders of defaulted loans. Three bills recommended in the current session of Congress contained this type of authorization: Agriculture: Rural housing loan program (S. 1354 and H.R. 5840). Health, Education, and Welfare: Student financial assistance under Higher Education Act (S. 600 and H.R. 3221); Group Practice Insurance and Loans Act (H.R. 2987). Exceptions to this policy are made only in very extraordinary circumstances. 2 Includes $200,000,000 in each fiscal year for operation and maintenance of existing river and harbor, flood control, reclamation, and related projects. NOTE.--Detail may not add to totals because of rounding. |