B-114873, FEB 6, 1974, 53 COMP GEN 560

B-114873, FEB 6, 1974, 53 COMP GEN 560

LOANS - GOVERNMENT INSURED - LIMITATIONS - CONSTRUCTION OF STATUTORY LANGUAGE WHILE LANGUAGE CONTAINED IN THE AGRICULTURE-ENVIRONMENTAL AND CONSUMER PROTECTION APPROPRIATION ACT, 1974, THAT "LOANS MAY BE INSURED, OR MADE TO BE SOLD AND INSURED *** AS FOLLOWS: *** OPERATING LOANS, $350,000,000 ***" WOULD, STANDING ALONE, NORMALLY BE CONSTRUED AS BINDING UPON THE AGRICULTURE DEPARTMENT AND ESTABLISHING A LIMIT UPON THE AMOUNT OF LOANS, THE LEGISLATIVE HISTORY INDICATES THAT THE AMOUNT SPECIFIED WAS NOT INTENDED TO BE A LIMITATION.

IN THE MATTER OF FARM OPERATING LOANS, FEBRUARY 6, 1974:

THE GENERAL COUNSEL OF THE DEPARTMENT OF AGRICULTURE REQUESTED OUR OPINION WHETHER FARM OPERATING LOANS MAY BE MADE DURING FISCAL YEAR 1974 IN EXCESS OF $350 MILLION, PROVIDING THAT THE TOTAL AMOUNT OF SUCH LOANS DOES NOT EXCEED MONIES APPROPRIATED TO THE AGRICULTURAL CREDIT INSURANCE FUND (HEREAFTER "ACIF"). THE GENERAL COUNSEL STATES THAT THE DEPARTMENT DESIRES TO MAKE OPERATING LOANS IN EXCESS OF $350 MILLION, AND MAINTAINS THAT ITS LEGAL AUTHORITY TO DO SO IS SUPPORTED BY THE TERMS AND LEGISLATIVE HISTORY OF APPROPRIATION LEGISLATION DISCUSSED HEREINAFTER.

PRIOR TO ENACTMENT OF THE RURAL DEVELOPMENT ACT OF 1972, APPROVED AUGUST 30, 1972, PUBLIC LAW 92-419, 86 STAT. 657, 7 U.S.C. 1921 NOTE, FARM OPERATING LOANS WERE MADE AS DIRECT LOANS, FINANCED FROM A DIRECT LOAN ACCOUNT, IN AMOUNTS AUTHORIZED BY ANNUAL APPROPRIATION ACTS. SECTION 115(B) OF THE RURAL DEVELOPMENT ACT INTER ALIA ABOLISHED THE DIRECT LOAN ACCOUNT AND TRANSFERRED ITS ASSETS AND LIABILITIES TO THE ACIF. SEE 7 U.S.C. 1929(G)(1). ACCORDINGLY, OPERATING LOANS ARE NOW MADE ESSENTIALLY ON AN INSURED BASIS, AND ARE FINANCED FROM THE ACIF. SEE 7 U.S.C. 1928- 1929.

THE GENERAL COUNSEL'S QUESTION AS TO THE AMOUNT OF OPERATING LOANS WHICH MAY BE MADE DURING THE CURRENT FISCAL YEAR ARISES IN VIEW OF THE FOLLOWING PROVISION WITH RESPECT TO THE ACIF CONTAINED IN THE AGRICULTURE- ENVIRONMENTAL AND CONSUMER PROTECTION APPROPRIATION ACT, 1974, APPROVED OCTOBER 24, 1973, PUBLIC LAW 93-135, 87 STAT. 468, 480:

LOANS MAY BE INSURED, OR MADE TO BE SOLD AND INSURED, UNDER THIS FUND IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF 7 U.S.C. 1928-1929, AS FOLLOWS: REAL ESTATE LOANS, $370,000,000, INCLUDING NOT LESS THAN $350,000,000 FOR FARM-OWNERSHIP LOANS; OPERATING LOANS, $350,000,000; AND EMERGENCY LOANS IN AMOUNTS NECESSARY TO MEET THE NEEDS RESULTING FROM NATURAL DISASTERS ***.

THE GENERAL COUNSEL STATES THAT IN ESTABLISHING THE ACIF THE CONGRESS CLEARLY DID NOT REQUIRE FURTHER APPROPRIATIONS IN ORDER TO UTILIZE ITS ASSETS, AND THAT PRIOR TO FISCAL YEAR 1972, ANNUAL APPROPRIATION ACTS DID NOT SPECIFY ANY AMOUNTS FOR LENDING PURPOSES UNDER THIS FUND. THE APPROPRIATION ACT FOR FISCAL YEAR 1972 DID SPECIFY AMOUNTS FOR LENDING PURPOSES IN A FORM SIMILAR TO THE PROVISION OF THE 1974 ACT QUOTED ABOVE. HOWEVER, THE GENERAL COUNSEL NOTES THAT THE REPORT OF THE SENATE COMMITTEE ON APPROPRIATIONS ON THE 1972 BILL STATED WITH RESPECT TO THE AMOUNTS SPECIFIED FOR THE ACIF, AS WELL AS AMOUNTS SPECIFIED FOR THE RURAL HOUSING INSURANCE FUND:

THE FARMERS HOME ADMINISTRATION HAS BEEN MAKING INSURED LOANS AS AUTHORIZED IN BASIC LAW FOR A NUMBER OF YEARS. FOR THE FIRST TIME THE BILL AS PASSED BY THE HOUSE INDICATES SPECIFIC AMOUNTS FOR SUCH LOANS UNDER BOTH THE AGRICULTURAL CREDIT INSURANCE FUND AND THE RURAL HOUSING INSURANCE FUND. THE UNDERLYING STATUTES FOR THESE INSURANCE FUNDS BY THEIR OWN PROVISIONS AUTHORIZE LOANS TO BE MADE WITHOUT ACTION BY CONGRESS IN THE ANNUAL APPROPRIATION ACTS. THEREFORE, THE INDICATION OF SPECIFIC AMOUNTS IN THE BILL DOES NOT CONSTITUTE A LIMITATION ON THE AMOUNT OF LOANS WHICH MAY BE MADE AND INSURED BY THE ADMINISTRATION.

S. REPT. NO. 92-253, 29-30. THE SENATE APPROPRIATIONS COMMITTEE'S REPORT ON THE 1973 APPROPRIATION BILL MADE THE SAME POINT CONCERNING THE AMOUNTS SPECIFIED IN THAT BILL. S. REPT. NO. 92-983, 31.

IN ADDITION TO CITING THE FOREGOING STATEMENTS BY THE SENATE APPROPRIATIONS COMMITTEE, THE GENERAL COUNSEL SUGGESTS THAT FURTHER EVIDENCE THAT THE $350 MILLION AMOUNT SPECIFIED IN THE 1974 APPROPRIATION ACT DOES NOT CONSTITUTE A LIMITATION UPON OPERATING LOANS IS FOUND IN THE ACT'S USE OF THE WORD "MAY," WHICH CONNOTES ADMINISTRATIVE DISCRETION.

AS NOTED PREVIOUSLY, THE 1974 ACT STATES THAT "LOANS MAY BE INSURED, OR MADE TO BE SOLD AND INSURED *** AS FOLLOWS: *** OPERATING LOANS, $350,000,000 ***." IN OUR VIEW, THE NATURAL AND USUAL CONSTRUCTION OF SUCH LANGUAGE, STANDING ALONE, WOULD BE AT LEAST TO IMPOSE A SPECIFIC $350 MILLION LIMIT UPON OPERATING LOANS, NOTWITHSTANDING USE OF THE WORD "MAY."

THE STATEMENTS OF THE SENATE APPROPRIATIONS COMMITTEE REFERRED TO BY THE GENERAL COUNSEL DO, OF COURSE, DIRECTLY SUPPORT HIS CONSTRUCTION THAT THE AMOUNTS SPECIFIED ARE NOT LIMITATIONS FOR PURPOSES OF THE 1972 AND 1973 APPROPRIATION ACTS. SINCE THESE STATEMENTS ARE NOT INCONSISTENT WITH ANY OTHER SOURCE OF LEGISLATIVE HISTORY APPLICABLE TO THE 1972 AND 1973 ACTS, WE CANNOT DISREGARD THEM. MOREOVER, SINCE THE LANGUAGE OF THE 1974 APPROPRIATION ACT QUOTED ABOVE IS IN THIS REGARD SUBSTANTIALLY SIMILAR TO THE LANGUAGE WHICH THE STATEMENTS IN THE PRIOR SENATE REPORTS ADDRESSED, IT REMAINS ONLY TO CONSIDER WHETHER THE LEGISLATIVE HISTORY OF THE 1974 ACT CONFLICTS WITH SUCH STATEMENTS.

WHILE THE MATTER IS FAR FROM CLEAR, WE BELIEVE THAT THE STATEMENTS CONTAINED IN THE PRIOR SENATE REPORTS TO THE EFFECT THAT THE AMOUNTS SPECIFIED FOR LOANS FROM THE INSURANCE FUNDS - INCLUDING OPERATING LOANS FROM THE ACIF - DO NOT CONSTITUTE LIMITATIONS, APPLY AS WELL UNDER THE 1974 APPROPRIATION ACT.

DURING HOUSE HEARINGS ON DEPARTMENT OF AGRICULTURE APPROPRIATIONS FOR 1974, CONGRESSIONAL CONTROL OVER THE BUDGET, WITH PARTICULAR EMPHASIS UPON LOANS BY THE FARMERS HOME ADMINISTRATION, WAS A SUBJECT OF DISCUSSION. CHAIRMAN WHITTEN COMMENTED UPON THIS MATTER AS FOLLOWS:

THE FHA ILLUSTRATES WHY THAT JOINT COMMITTEE IS NEEDED BECAUSE IT CAN BE ARGUED THAT TODAY IS THE LAST DAY THAT THE APPROPRIATIONS COMMITTEE WILL HAVE ANY EFFECTIVE CONTROL OVER THE SIGNIFICANT PARTS OF THE FHA BUDGET.

SIMILAR ARGUMENTS CAN BE MADE ABOUT THE REA BUDGET AND PORTIONS OF THE EPA BUDGET.

THIS LOSS OF CONTROL SHOULD BE OF SERIOUS CONCERN TO THE CONGRESS.

WHILE THE ABOVE MAY SEEM LIKE EXTREME STATEMENTS, IT APPEARS THE FACTS CLEARLY DOCUMENT ITS ACCURACY FOR THE FARMERS HOME ADMINISTRATION.

WHERE LAST YEAR FHA HAD $322,016,000 OF DIRECT APPROPRIATIONS, DIRECT APPROPRIATIONS HAVE BEEN REDUCED TO $279,224,000 IN THE 1974 FHA BUDGET. THIS INCLUDES $163,724,000 FOR SUBSIDIZED INTEREST COSTS, WHICH THE COMMITTEE HAS NO ALTERNATIVE BUT TO FUND. IT IS ALSO THE BEGINNING OF SHARPLY INCREASED APPROPRIATIONS IN THE FUTURE FOR THIS PURPOSE. THE EFFECT WILL BE TO INCREASE THE UNCONTROLLABLE PART OF THE AGRICULTURE BUDGET IN FUTURE YEARS. INCLUDED IS $3 MILLION FOR MUTUAL AND SELF-HELP HOUSING. THIS IS UNDER COMMITTEE CONTROL, BUT IT IS A VERY SMALL PROGRAM. BUDGETED IS $112,500,000 FOR SALARIES AND EXPENSES, WHICH ARE THE ONLY EXPENSES REMAINING UNDER EFFECTIVE ANNUAL COMMITTEE CONTROL.

INSURED AND GUARANTEED LOANS TOTAL $1,133 MILLION IN THE 1974 BUDGET. THIS IS ALSO BEYOND THE EFFECTIVE CONTROL OF THE COMMITTEE, AS IS SHOWN BY THE FACT THAT THE ORIGINAL ESTIMATE WAS $623 MILLION, WHEREAS THE REVISED BUDGET IS PLUS $510 MILLION HIGHER. THIS CHANGE HAS TAKEN PLACE IN LESS THAN A MONTH.

THE 1973 BUDGET PROVIDED AN INSURED LOAN LEVEL OF $2,144 MILLION. THE CURRENT ESTIMATE IS THAT 1973 INSURED LOANS WILL TOTAL $2,011 MILLION. THIS CHANGE OF MINUS $133 MILLION WAS MADE WITHOUT COMMITTEE APPROVAL. THE DEPARTMENT CLAIMS THE RIGHT TO MAKE THESE CHANGES WITHOUT COMMITTEE APPROVAL BECAUSE IT CONSIDERS THE AMOUNT IN THE APPROPRIATION ACT AS ONLY ADVISORY AND NOT BINDING ON THE DEPARTMENT.

THE 1974 BUDGET ALSO PROPOSES THAT $3 MILLION OF THE FHA SALARIES AND EXPENSES APPROPRIATION BE TRANSFERRED FROM THE LOAN ACCOUNT. THIS MAY BE THE BEGINNING OF AN ATTEMPT TO SWITCH FROM DIRECT TO INDIRECT FINANCING OF SALARIES AND EXPENSES. IF THIS HAPPENS, THE COMMITTEE WILL LOSE ITS LAST EFFECTIVE HOLD OVER FHA.

AS THE ABOVE FACTS DEMONSTRATE, THE FHA PROVIDES A CLASSIC EXAMPLE OF HOW MORE AND MORE AUTHORITY IS BEING TAKEN AWAY FROM THE ANNUAL CONGRESSIONAL REVIEW OF THE APPROPRIATIONS COMMITTEE.

MR. SECRETARY, I BELIEVE ALL THESE ACTIONS INDICATE THAT MORE AND MORE IS BEING TAKEN AWAY FROM THE ANNUAL REVIEW PROCESS BY THE CONGRESS AND FROM CONGRESSIONAL CONTROL. THE PROVISIONS FOR EFFECTIVE ANNUAL CONGRESSIONAL REVIEW ARE BEING WEAKENED. COSTLY LONG-TERM COMMITMENTS ARE BEING MADE WHICH WILL REDUCE FUTURE CONTROL OF THE BUDGET. THE ULTIMATE COST OF INSURED LOANS MAY EXCEED THE COST OF ACHIEVING SIMILAR OBJECTIVES BY DIRECT LOANS. FUTURE GENERATIONS ARE BEING SADDLED WITH COMMITMENTS MADE BY THIS GENERATION.

I HAVE COVERED A LOT OF GROUND IN THESE COMMENTS AND I HOPE YOU WILL ADDRESS AT LENGTH EACH AND EVERY ONE OF THE COMMENTS BECAUSE I THINK THEY PRESENT CRUCIAL PROBLEMS WHICH ARE NOT RECEIVING SUFFICIENT ATTENTION WHEN BUDGET DECISIONS ARE BEING MADE.

HEARINGS BEFORE A SUBCOMMITTEE OF THE HOUSE COMMITTEE ON APPROPRIATIONS, ON AGRICULTURE-ENVIRONMENTAL AND CONSUMER PROTECTION APPROPRIATIONS FOR 1974 (PART 3, AGRICULTURAL PROGRAMS), 93D CONG., 1ST SESS., AT 97-98.

RESPONDING TO THESE COMMENTS, THE ASSISTANT SECRETARY OF AGRICULTURE FOR RURAL DEVELOPMENT STATED IN PART:

MR. ERWIN. I WANT TO MAKE IT CLEAR THAT WE INTEND TO ADHERE TO THE POLICY THAT THE DEPARTMENT HAS LONG MAINTAINED IN KEEPING THIS COMMITTEE INFORMED OF ANY SIGNIFICANT CHANGES IN THE METHOD OF FUNDING OR IN FUNDING LEVELS FOR ANY PROGRAMS OF THE DEPARTMENT. IF WE HAVE FAILED TO DO SO I APOLOGIZE.

NOW WITH REGARD TO YOUR SUGGESTION THAT THE FARMERS HOME ADMINISTRATION AND RURAL ELECTRIFICATION ADMINISTRATION BUDGETS NO LONGER ARE UNDER ANY EFFECTIVE CONTROL OF THE APPROPRIATIONS COMMITTEE, I DO NOT AGREE. RURAL CREDIT NEEDS ARE VERY DIFFICULT TO ESTIMATE. THIS PAST YEAR'S EMERGENCY LOAN PROGRAM IS A VERY GOOD EXAMPLE. INSURED LOAN PROGRAMS WHICH PROVIDE PRIVATE FUNDING FOR PUBLIC PROGRAMS HAVE LESS OF AN IMPACT ON THE BUDGET THAN DIRECT FEDERAL PROGRAMS. CURRENT LEGISLATION RECOGNIZES THIS AND HAS ATTEMPTED TO MOVE FARM CREDIT BACK INTO THE PRIVATE MARKET. THIS PROGRAM HAS EXPANDED VERY RAPIDLY, AND TO THE EXTENT THAT THERE IS A LITTLE OR NO INTEREST SUBSIDY, WE STRONGLY SUPPORT MOVING RURAL CREDIT BACK TO THE PRIVATE MONEY MARKET. I MAY BE WRONG BUT I FEEL THIS COMMITTEE HAS CONCURRED IN THE PAST IN NOT SETTING ARBITRARY LIMITS ON THIS TYPE OF CREDIT. MORE RECENTLY, THE SUBSIDIZED HOUSING PROGRAM HAS BEEN DISCONTINUED WHILE A STUDY IS BEING MADE ON HOW HOUSING CAN BETTER BE MANAGED TO PROVIDE THIS BENEFIT TO ITS NEEDY FAMILIES.

IF THE COMMITTEE FEELS THAT IT IS ESSENTIAL THAT FIRM CONTROLS BE PLACED ON THESE PROGRAMS EVEN THOUGH THEY ARE ESSENTIALLY PRIVATE CAPITAL PROGRAMS, PLACING A FIRM LIMITATION IN THE APPROPRIATION LANGUAGE WOULD SERVE THAT PURPOSE. WE CANNOT, HOWEVER, SUPPORT THAT TYPE OF CEILING. CHANGES IN RURAL CREDIT NEEDS ARE DIFFICULT TO DETERMINE WITH ANY DEGREE OF ACCURACY VERY MUCH IN ADVANCE. ID. AT 98.

WHILE THE FOREGOING INDICATES CONCERN OVER THE ABSENCE OF CONGRESSIONAL CONTROL, IT FAILS TO DISCLOSE ANY DISAGREEMENT WITH THE POSITIONS TAKEN BY THE ASSISTANT SECRETARY. MOREOVER, ALTHOUGH THE COMMITTEE REJECTED THE BUDGET PROPOSAL THAT OPERATING LOANS BE MADE IN "SUCH SUMS AS MAY BE NECESSARY," THE LANGUAGE ADOPTED BY THE COMMITTEE, AND EVENTUALLY ENACTED, WAS SUBSTANTIALLY THE SAME AS THE LANGUAGE WHICH THE PRIOR SENATE REPORTS HAD DESCRIBED AS NOT BEING LIMITATIONS. SEE H. REPT. NO. 93-275, AT 45.

IT IS NOTED THAT THE SENATE REPORT ON THE 1974 BILL DOES NOT CONTAIN A STATEMENT SIMILAR TO THAT CONTAINED IN ITS PRIOR REPORTS. HOWEVER, THE FACT THAT SUCH A STATEMENT WAS NOT MADE FOR THE THIRD CONSECUTIVE YEAR DOES NOT NECESSARILY IMPLY A CHANGE OF POSITION ON THE PART OF THE SENATE COMMITTEE, ABSENT AFFIRMATIVE DISAVOWAL OF ITS PRIOR POSITION.

IN VIEW OF THE FOREGOING, WE FIND NO CLEAR EVIDENCE THAT THE POSITION OF THE DEPARTMENT OF AGRICULTURE, AFFIRMED IN PRIOR SENATE REPORTS, WAS REJECTED IN THE CONTEXT OF THE 1974 ACT. ACCORDINGLY, SINCE THE $350 MILLION AMOUNT SPECIFIED FOR OPERATING LOANS WAS NOT INTENDED TO BE A LIMITATION, IT IS OUR CONCLUSION THAT FARM OPERATING LOANS MAY BE MADE IN EXCESS OF $350 MILLION. AT THE SAME TIME WE REITERATE OUR VIEW THAT THIS CONSTRUCTION, WHILE IT MAY BE JUSTIFIED BY THE LEGISLATIVE HISTORY IN THIS PARTICULAR CASE, SEEMS UNUSUAL IN TERMS OF THE ACTUAL STATUTORY LANGUAGE USED. SINCE OUR CONCLUSION IS NOT ENTIRELY FREE FROM DOUBT WE SUGGEST THAT THE MATTER BE CLARIFIED IN THE CONTEXT OF FUTURE APPROPRIATION LEGISLATION.