Clarifying the Proper Accounting of New Budget Authority Under Annual Contract Authorities for Certain Housing Programs

B-171630.16: Aug 14, 1975

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A House member requested our assistance in clarifying the proper accounting of new budget authority under annual contract authorities for certain housing programs in relation to the Congressional Budget Act of 1974. The housing programs in question are long-term subsidy programs under which the Department of Housing and Urban Development (HUD) is authorized to enter into contracts providing for annual assistance for terms of up to 40 years. The inquiry relates to the inclusion of a provision for $662,300,000 in new annual contract authority in the HUD-Independent Agencies Appropriation Bill for fiscal year 1976, and the treatment of this amount in the annual HUD budget. This letter analyzes several legal issues concerning treatment of the new contract authority.

OMB has advised that budget authority under the subsidized housing programs should be redefined to include the full amount of Federal payments authorized by an increase in budget authority, i.e., budget authority now equals the product of the increase in contract authority to make annual payments multiplied by the maximum number of years covered by the contracts. Under this concept, the annual appropriation to meet payments due in a given year is no longer treated as budget authority but is termed an appropriation to liquidate contract authority. An analysis of the proper accounting of the new HUD contract authority requires consideration of the following areas: (1) the relationship, in general terms, between budget authority and contract authority, and the impact, if any, of the Budget Act on this relationship; (2) the relationship between budget authority and appropriations to liquidate contract authority; and (3) the proper measure of budget authority to be reflected in the budget documents. The definition of budget contained in the Congressional Budget Act of 1974 clearly encompasses contract authority in the context the instant HUD subsidy programs. The proper treatment of appropriations to liquidate contract authority, while not addressed to our knowledge in any statute, follows logically from the foregoing. To the extent that contract authority is reflected as budget authority, the subsequent appropriation to liquidate that contract authority should not be shown as budget authority for purposes of the Budget Act in order to prevent the amount of the appropriation from being counted twice. We are inclined to concur with OMB's view that budget authority should reflect the maximum potential tration of contracts authorized by law. In view of the nature of the "Section 8" program as described above, however, we believe that a more desirable alternative--and an approach more consistent with the Budget Act--would be for the appropriation act to include both a limitation on the annual cost and a limitation on the total (run-out) cost of contracts which the Secretary is authorized to execute. In sum, we believe that under the proposed language for the "Section 8" program contained in the 1976 Budget Appendix, it is necessary to indicate potential budget authority of $26 billion, even though this figure may be of no practical relevance at best and may even be seriously misleading, However, it is also our view that this problem could be eliminated by specifying in the proposed language a realistic figure for total budget authority to be available for 1976.