RURAL ELECTRIFICATION ADMINISTRATION

The estimates include appropriation languages for this item as follows (new language underscored; deleted matter enclosed in brackets):

RURAL ELECTRIFICATION ADMINISTRATION

To carry into effect the provisions of the Rural Electrification Act of 1936, as amended (7 U.S.C. 901-905(b)). as follows:

RURAL ELECTRIFICATION AND TELEPHONE REVOLVING FUND LOAN AUTHORIZATIONS

1

2

Insured loans pursuant to the authority of section 305 of the Rural Electrification Act of 1936, as amended (7 U.S.C. 935), shall be made as follows: rural electrification loans, not less than $850,000,000, nor more than [$1,100,000,000 $1,000,000,000, and rural telephone loans, not less than $250,000,000, nor more than $325,000,000, to remain available until expended: Provided, That loans made pursuant to section 306 of that Act are in addition to these amounts, but during 1982, total commitments to guarantee loans pursuant to section 306, shall not be less than $5,145,000,000, nor more than $6,655,000,000 of contingent liability for loan principal.

The first change reduces the upper range of authorization on insured electric loans from the $1.1 billion in the 1981 Act to $1.0 billion. The $1.0 billion should be adequate to meet any change in economic conditions which might occur in Fiscal Year 1982.

The second change proposes a limitation on new loan guarantee commitments for electric and telephone programs consistent with the purposes of the Federal Credit Control program initiated in Fiscal Year 1981. The limitations should provide ample guarantee commitment authority to meet the demand for generation, transmissions, and telephone facilities needed by REA borrowers.

" for

A/ The Appropriation Act for fiscal year 1980 provided an indefinite authorization of not less than $850,000,000, nor more than $1,000,000,000 . insured electric loans and not less than $250,000,000 .

for in

sured telephone loans. The 1981 Act provides not less than $850,000,000 nor more than $1,100,000,000 for the electric program and not less than $250,000,000 nor more than $325,000,000 for the telephone program. 1982 limits Are the same as 1981 except the upper limitation is $1,000,000,000 for electric

loans.

b/ The 1980 and 1981 Appropriation Acts provide no limitations for loan guarantees; however, the 1982 budget proposes "not less than $5,145,000, 000 nor more than $6,655,000,000."

PROJECT STATEMENT

(On basis of actual or estimated obligations for loans and interest expense)

7,064,605: 11,926,000 :+7,029,000 (2) 18,955,000 250,098,000: 250,156,000 a/:- 156,000(3) 250,000,000

2.

Rural Telephone :

loans:

:

Interest expense:

Insured loans ..:

:

:

Loan guarantee

:

a/ Includes $156,000 of prior years authorizations carried forward into FY 1981.

77-802 0-81--39

EXPLANATION OF ELECTRIC AND TELEPHONE LOAN PROGRAM

The loan authorizations of the Rural Electrification Administration are used to carry out the provisions of the Rural Electrification Act of 1936, as amended. The objectives of the program are to assure that rural communities have access to reliable electric and telephone service. REA conducts two loan programs: (1) the rural electrification program, which provides central station electric service to farms and other rural establishments; and (2) the rural telephone program, which furnishes and improves telephone service in rural areas.

Insured loans are financed from the Rural Electrification and Telephone Revolving Fund (RETRF) and bear interest at either a standard rate of 5 percent or a special rate of 2 percent, in accordance with criteria specified in the Act, and must be repaid within a period not to exceed 35 years. REA also guarantees loans made by the Federal Financing Bank and other lenders including the Bank for Cooperatives which is part of the Farm Credit System. Interest rates on loans guaranteed by REA are negotiated between the lender and the borrower.

976

991

Cumulative funds advanced

Unadvanced funds, end of period

Cumulative principal repaid

Cumulative interest paid

Cumulative loan guarantee commitments

Cumulative route miles of line constructed

or improved-(thousands-estimated)

.......

Cumulative dial subscribers, new and improved service-calendar year (thousands-estimated)3/

Number of borrowers

1/ Includes interest received by REA as trustee for holders of certificates of beneficial ownership.

2/ Data represents accomplishments from all sources of funds.

3/ Data represents accomplishments from borrowers financed 20% or more by REA, RTB, and guaranteed loans.

Electric and telephone plant construction financed by monies provided through the REA programs have far-reaching effects on the economies of the rural areas served by REA borrowers. These effects are multi-faceted and reach into many areas of the work force. Some of the benefits accruing to the program include:

--In addition to improving the quality of life in rural America, electric power generated and/or distributed by REA electric borrowers makes significant contributions to agricultural and commercial production in REA service areas. Overall 5.4 percent of the total energy consumed in the production of agriculture products is provided by electricity, according to estimates provided by the Economics and Statistics Service. For example, 25 percent of the energy needed for irrigation is electrically generated. In the dairy industry, more than 30 percent of the energy consumed is electric, and in the livestock industry more than 15 percent of the energy consumed is electric.

-In 1978 there were an estimated 50,806 employees of REA electric borrowers and 27,936 employees of telephone borrowers. Assuming an average salary of $17,000, borrower payrolls alone would provide more than $1.3 billion of direct income to be spent in those areas.

--Information provided by the 1979 Community Development Survey shows that since 1961, REA borrowers have assisted in over 14,600 commercial, industrial and community facility projects involving 427,000 jobs and bringing about an estimated 277,000 jobs in related industries. During 1979 alone, REA-financed electric and telephone systems created more than 47,000 new jobs in rural America. The new jobs resulted from 1,536 commercial, industrial and community facilities projects which REA borrowers helped launch. The Job figure is based on reports from 1,194 REA-financed systems 849 electric and 345 telephone. Since 1961, when REA first began conducting the survey, more than 700,000 jobs have been created in rural areas through 14,600 local projects.

-

--Construction which is initiated utilyzing the nearly $7.4 billion in utility financing provided by the REA program in 1980 will result in more than 209,000 staff years of employment in the construction and utility supply industries. The benefits of the program to the nations' work force and industries affect many segments of the economy over many years.

Application of Federal Credit Controls

The 1982 budget contains language proposals to place limitations on Federal insured loan and loan guarantee programs. For this account the control proposal sets "not less than" and "nor more than" levels for new REA commitments to guarantee the electric and telephone loans of other qualified lenders.

The use of "not less than" and "nor more than" limits have been in effect in the insured electric loan program for some time, and was first used in the telephone program in fiscal year 1981. The "not less than" level is the level at which the budget is prepared and constitutes what the President considers to be an adequate program based on known conditions at the time the budget is submitted to the Congress. However, because of the unknowns involved with facility construction delays, i.e., weather, material shortages, etc., and to avoid a constant need for the Congress to act on supplemental requests, the new credit controls in this account are proposed to follow the established precedents for insured electric loans.