Visitors. A total of 520 visitors, including 129 from foreign countries were given tours of or briefings at the NAL Building during the 5-month period from May through September 1980. This is almost double the 295 persons, including 139 from other countries, who visited the building to learn about Technical Information Systems during all of 1979. TIS missions and services were explained to scientists, librarians, and technical information specialists from the Peoples Republic of China, (31), Brazil, Israel, Bulgaria, Bangladesh, India, Yugoslavia, New Zealand, Australia, Guadelupe, Germany, England, France, and other countries.

Lending. There was a significant improvement FY 1979 in the efficiency of TIS document delivery service. Over 80 percent of requested items were processed and on their way in five or less working days from the time of initial receipt of request. A sampling indicated that from June 1 through August 31, 1980, an average of 83.5 percent of all requests received were completed in 5 or less working days compared with an average of 64.2 percent completed in the same 3-month period in 1979. TIS lends or photocopies (in lieu of loan) more than 100,000 items from its collections each year and considers the service efficient if 80 percent of the requested items are processed and sent out in five or less working days. Some 3,500 more requests were handled with less man power in FY 1979.

MONDAY, MARCH 23, 1981.

RURAL ELECTRIFICATION ADMINISTRATION

WITNESSES

JOSEPH S. ZOLLER, ACTING ADMINISTRATOR

JOSEPH VELLONE, ACTING ASSISTANT ADMINISTRATOR, ADMINISTRATION

JOHN H. ARNESEN, ASSISTANT ADMINISTRATOR, TELEPHONE

CHARLES A. JEWELL, DIRECTOR, OFFICE OF BUDGET

MICHAEL W. KELLY, ASSISTANT GENERAL COUNSEL, ELECTRIC AND TELEPHONE DIVISION, OFFICE OF THE GENERAL COUNSEL

STEPHEN B. DEWHURST, BUDGET OFFICER, DEPARTMENT OF AGRICULTURE

OPENING REMARKS

Mr. WHITTEN. The Committee will come to order. We have with us today the Rural Electrification Administration, represented by Mr. Zoller, the Acting Administrator. We are glad to have you. You may wish to introduce your colleagues to the Committee.

Mr. ZOLLER. Yes, Mr. Chairman. I would first like to introduce the designate for Under Secretary for Small Community and Rural Development, Frank W. Naylor, Jr. He is sitting in the audience. At the table with me, Mr. Chairman, on my left is John H. Arnesen, Assistant Administrator for Telephone. Next to John is Joseph Vellone, acting Assistant Administrator for Administration. On my right is Charles A. Jewell, Director, Office of Budget of REA. Next to Charles is Michael W. Kelly, Assistant General Counsel, Electric and Telephone Division, Office of General Counsel, USDA. At the end of the table is Stephen B. Dewhurst, Budget Officer for the Department of Agriculture.

Mr. Chairman, with your permission I would like to make some general comments about my statement and submit the full statement for the record.

Mr. WHITTEN. We will be glad to have you proceed in any way you see fit.

[CLERK'S NOTE.-The full text of Mr. Zoller's prepared statement appears on pages 595 through 599, followed by the explanatory notes on pages 600 through 651.]

Mr. ZOLLER. Thank you. Mr. Chairman and Members of the subcommittee, I appreciate this opportunity to present the 1982 REA budget. The proposed changes in the 1982 budget are important elements of the President's Program for Economic Recovery. The major mechanism for lowering inflation, reducing interest rates, increasing business investments, and enhancing economic growth is to reduce the overall level of federal activity and to encourage private economic activity.

THE ELECTRIC LOAN AND LOAN GUARANTEE PROGRAM

REA now makes some insured loans to generation and transmission borrowers as well as distribution borrowers. The loans to distribution borrowers are made for distribution facilities and in some cases for generation, and transmission facilities. Because the loan demands for generation and transmission facilities have exceeded $5 billion recently, it is obvious that insured loans for power supply facilities-generation and transmission-could only meet a very limited portion of these needs. Generally, the agency has exercised this responsibility by limiting such loans to construction of low voltage transmission lines that feed distribution systems, and more recently to development costs of potential supplemental renewable power supply sources such as biomass and low-head hydro generation. The February 1981 Economic Message of the President and the budget before you proposed to eliminate for the balance of fiscal year 1981 and thereafter insured loans for these purposes and to provide generation and transmission facility funding by REA guarantee of loans made by other lenders.

The Congress has received a fiscal year 1981 rescission proposal to reduce the 1981 Appropriation Act by $62 million to carry out this change in the last half of 1981. The insured loan level proposed in the fiscal year 1982 revised budget has been reduced by $150 million from $850 million to $700 million and the loan guarantee request increased from $5 billion to $5.1 billion to partially offset the insured loan reduction in fiscal year 1982. The loan program level ranges have also been eliminated to provide tighter controls.

The loans under REA guarantee will no longer be advanced from Treasury borrowings and, therefore, will be outside of the Federal debt limitation. The increase in cost to REA borrowers resulting from this change is small considering the overall increase in interest costs since the program began in 1974, some five percentage points in seven years.

Mr. WHITTEN. Will all these changes require a change in law? Mr. ZOLLER. Excuse me, sir?

Mr. WHITTEN. Your proposed change as to how REA loans will get financed, does that require a change in the law or can it be done by just changing regulations?

Mr. KELLY. Is that question directed to the guaranteed program, Mr. Chairman?

Mr. WHITTEN. Mr. Zoller said "the loans will be outside of the debt limitation" by which I presume he meant the guaranteed loans. Does that call for a change in the law?

Mr. KELLY. No, Mr. Chairman. That would not require a change in the law. The guarantee program could operate with outside lenders.

Mr. WHITTEN. That assumes that Mr. Stockman does not put a limitation on guaranteed loans. Have you been given any assurance that he will not? In order to follow your recommendations, we need to know where they lead.

Mr. ZOLLER. What is being proposed is a ceiling on the guaranteed loans of $5.1 billion for fiscal year 1982.

Mr. WHITTEN. Wouldn't this ceiling leave borrowers to handle the remainder of their problems in some other fashion?

Mr. ZOLLER. If there is need for other financing, it would be from other sources of funding, yes.

Mr. WHITTEN. This Committee just received the details of the President's proposal last week. Many of the proposals call for changes in the law. I have seen previous Administrations propose to make changes in the law but then they could not get anybody to introduce the bill. Be sure in the record you point out what your assumptions are with regard to legislative changes.

Mr. ZOLLER. We will supply that for the record. [The information follows:]

ACCOMPLISHING THE PROPOSED CHANGES FOR REA

The Administration has proposed that existing authority to make 2 percent interest loans pursuant to Section 305 of the Rural Electrification Act be eliminated through an amendment to the Act. In addition, the Administration will consider changes in the REA program which do not appear to require changes in existing legislation other than Appropriation Acts in some cases. The principal changes include limiting or eliminating insured loans for rural telephones and for electric generation and transmission facilities, and eliminating loans and guarantees for CATV purposes. In order to effect some of these changes during fiscal year 1981, it will be necessary to amend the provisions of the 1981 Appropriations Act, as proposed in the rescission package previously submitted.

Mr. WHITTEN. You may proceed.

Mr. ZOLLER. A legislative change is being proposed to eliminate two percent loans and substitute five percent loans. This will have no effect on the overall loan levels in the balance of the 1981 budget and fiscal year budgets thereafter.

Mr. WHITTEN. What does "no effect on the overall loan levels" mean? It could be that an applicant would qualify if he could get a two percent loan, but he could not qualify if he had to pay five percent.

Mr. ZOLLER. I mean that it would not affect the total dollars in the budget.

Mr. WHITTEN. But you did not say it would not affect the people in the area.

Mr. ZOLLER. That is correct. I did not say that.

REA REVOLVING FUND

It will, however, increase the interest income in the Revolving Fund in future years, and thereby reduce the need for future appropriations for interest differential costs in the Fund.

Mr. WHITTEN. What does that mean?

Mr. ZOLLER. The loans are now being made out of the revolving fund, but because of income to the revolving fund-

Mr. WHITTEN. The revolving fund has not been ample to meet your needs, has it?

Mr. ZOLLER. We have to borrow additional funds to take care of the cash flow. We go back to the Federal Financing Bank twice a year, selling the Certificate of Beneficial Ownership to Treasury. Mr. WHITTEN. What does that mean?

Mr. ZOLLER. The rate of subsidy for REA two percent loans where our current borrowings from the U.S. Treasury are running approximately 12 percent is creating an interest expense in that revolving fund.