Statement of Administration Policy: H.R. 4515 - Urgent Supplemental Appropriations, 1986

(House Floor)
(Whitten (D), Mississippi)

The President's senior advisors would recommend veto of H.R. 4515 in its present form.

There are numerous extremely objectionable features to the bill in its present form, including:

• the inclusion of substantive law provisions in appropriations language designed to repeal the President's authority to defer budget authority under section 1013 of the Congressional Budget and Impoundment Control Act of 1974;
• the inclusion of language that would rewrite completely the recent farm bill for all major commodities and institute a program of advance non-recourse loans for crops. The potential three-year cost of these provisions is $17 billion and domestic market prices for wheat and cotton would be raised by 50 percent above current levels. Since prices would rise sharply, massive export subsidies would be required to make U.S. commodities competitive abroad at a potential cost of an additional $10 billion;
• the provision of debt relief for all agricultural producers adversely affected by government embargoes during the 1970's and by "failure to offer surplus commodities in world trade at competitive prices since 1980." The bill would also require the Farmers Home Administration to defer principal and interest repayments on agricultural loans. The potential FY 1986 cost is $5 billion.
• the provisions that would require diplomatic security appropriations to be derived by transfer from previously appropriated defense and unearmarked foreign aid funds;
• approval of only $29 million of the proposed $10 billion of rescissions proposed in the President's budget, and the disapproval of $4.7 billion of deferrals;
• $180 million in unrequested program supplemental and $1.0 billion in unrequested transfers that could add unnecessarily to spending in FY 1986 and later years. Any such increases are unwarranted and cannot be justified during this period of fiscal restraint;
• the inclusion of substantive law provisions in the appropriations language for impact aid; these provisions have the effect of providing inappropriate special relief and of increasing budget costs;
• the limitation that funds made available to the Department of Agriculture in Appropriations Acts shall be available only for the purposes for which appropriated unless the transfer of funds from such accounts is provided in advance in Appropriations Acts;
• failure to offset $115.5 million of requested increases for FAA and Coast Guard operating expenses with comparable decreases in other transportation programs as requested by the Administration.
• failure to include certain funding and language that the Administration requested;

It should be noted that the provisions outlined above are only the most objectionable provisions of the bill. A more comprehensive list of objectionable provisions is contained in- the attachment.

In addition, many of the proposed floor amendments resulting from Rules Committee action are objectionable, including:

• the "Buy American" provisions eliminated at the Administration's insistence from the recently signed reconciliation bill;
• an amendment blocking the sale of Power Marketing Administrations in the lower 48 States;
• an amendment blocking future nuclear tests;
• an amendment that would require embassy security funds be used consistent with the provisions of the embassy security authorization recently passed by the House (H.R. 4151);
• an amendment that would delay for one year the reform of the medicare hospital capital payment system; and
• an amendment providing economic and military aid for Haiti in the form of earmarks of existing funds.
• an amendment that would establish an arbitrary ceiling in the total amount of "policy" deferrals in any fiscal year, thereby impairing the President's ability to manage prudently the government's funds.

April 15, 1986 Attachment

OBJECTIONABLE PROVISIONS IN
H.R. 4515, URGENT SUPPLEMENTAL APPROPRIATIONS BILL, 1986

Chapter I. Title I

Department of Agriculture: Soil Conservation Service. The Administration's FY 1987 budget proposed rescission of funds for Water and Flood Prevention Operations. Instead, the Committee ignored the rescission and added $25 million more. In addition, the Committee provided an additional $10 million for Emergency Conservation activities. This $35 million is unnecessary.

Chapter I, Title II

Department of Agriculture: Limitation on transfer of funds. This section limits the Secretary of Agriculture's statutory authority to transfer funds to respond to emergencies that threaten U.S. agriculture. It states that funds made available to the Department in Appropriations Acts shall be availabe only for the purposes for which appropriated unless the transfer of funds from such accounts is provided in advance in Appropriations Acts.

Chapter I, Title III

Department of Agriculture: Special Supplemental Food Program for Women, Infants, and Children (WIC). This action would make available an additional $20 million for the WIC program in fiscal year 1986. WIC has received its full year appropriation; no supplemental is needed at this time. The States are aware of the fiscal year 1986 funding level and have planned their program years accordingly. Further, the WIC program has already received special treatment compared to other discreti on ary programs in that its fiscal year 1986 appropriation exceeds the 1985 level. WIC has also not been subject to a reduction under Gramm-Rudman-Hollings; had WIC been subject to this act, 1986 funding would have been reduced by $67 million.

Department of Agriculture: Commodity Supplemental Food Program (CSFP). This section would unnecessarily increase Federal outlays by $4 million by reversing the payment of $4 million by the Food and Nutrition Service to CCC for commodities provided by the CCC to CSFP grantees. The reimbursement of CCC for commodities included in food packages is a valid program expense. Reversal of the payment results in a subsidy from CCC to CSFP. Failure to pay for donated CCC items distorts the apparent amount of resources needed to maintain the food package.

Chapter I, Title IV, Section 1

Department of Agriculture: Commodity Credit Corporation. The language of this section is from a continuing resolution (H.J. Res. 465) that passed the House but died in Conference. It requests the Secretary of Agriculture to establish a program of advance non-recourse loans at a level that would give the farmer a fair return above the cost of production. The Secretary would be expected to run the program in a way that would provide for payment by the purchaser of agricultural commodities rather than by the taxpayer. Although H.J. Res. 465 did not address the method by which this would be accomplished, it is clear that the program would mean higher commodity prices and possibly some form of production quotas limiting supply.

If implemented, the program would raise domestic market prices by about 50 percent from current levels for wheat and cotton and almost 15 percent for corn. This would increase the cost of the Farm Bill by $17 billion over the next three years. Since prices would rise sharply, massive export subsidies wo.uld be required to make U.S. commodities competitive abroad. This could add another $10 billion to outlays.

Chapter I, Title IV, Sections 4 and 5

Department of Agriculture: Commodity Credit Corporation. These sections would require the transfer of funds from the Commodity Credit Corporation to the Animal and Plant Health Inspection Service (APHIS) for citrus canker indemnity payments and control activities for avian influenza. The Secretary of Agriculture has already acted to make $11 million available for canker indemnity payments, which is the amount for which claims have been received to date. The APHIS contingency fund contains sufficient resources to continue federal efforts to eradicate avian influenza. These sections would result in unnecessary increases of as much as $24 million in FY 1986 outlays.

Chapter I, Title V

Department of Agriculture: Farmers Home Administration. This section provides debt relief for all agricultural producers adversely affected by Government embargoes during the 1970s and "failure to offer surplus commodities in world trade at competitive prices since 1980." The FmHA Administrator would be asked to determine by April 1, 1986 -- a date that has passed -- the farmers eligible for FmHA assistance. The language of this section appears to require deferral of fiscal year 1986 principal and interest repayments to FmHA.

Determining the cost of this provision is extremely difficult for the following reasons:

-- "Should" rather than "shall" is the operative term throughout.

-- The language does not repeal the current test for loan eligibility that the farmer must be able to "cash flow" with the loan.

-- It is impossible to establish causal relationships between past embargoes and the current inability of some individual farmers to pay their debts. However, this provision puts the collection of farmers FY 1986 indebtedness to the Farmers Home Administration very much at risk. Estimated principal and interest repayments for agricultural loans to FmHA for FY 1986 total $4.8 billion.

This section could force FmHA to forgo the FY 1986 collections, thereby forcing an FY 1986 outlay increase of almost $5 billion.

Chapter II

State Department: Administration of Foreign Affairs. The Administration strongly supports the $702 million provided for the State Department to enhance diplomatic security and urges that the $4.8 million request of the President for anti-terrorism assistance to other nations also be appropriated. The Administration, however, vigorously opposes the provisos that would require diplomatic security appropriations to be derived by transfer from previously appropriated defense and unearmarked foreign aid funds. Funds already appropriated for defense and foreign aid must remain intact for the purposes for which appropriated if we are to attain vital defense and foreign policy objectives. Moreover, the Administration's request for increased diplomatic security appropriations does not require such a transfer. The $88 million increase in 1986 outlays resulting from the supplemental request is already offset by the outlay reductions from 1986 rescission proposals in the FY 1987 Budget. The $277 million in 1987 outlays are already scored in the total outlays in the FY 1987 Budget, which results in a 1987 budget deficit that is within the prescribed Gramm-Rudmann-Hollings maximum deficit amount.

Chapter III

DOD, Civil: Flood control and coastal emergencies. The Administration does not believe that a supplemental is necessary for this account at this time. Resources currently available are sufficient to meet the needs identified to date.

DOD, Civi1: Construction General. The Administration opposes the transfer of funds to remedy slope erosion along the Tombigbee River in Alabama. This is not a Federal responsibility.

Chapter IV

Bilateral Economic Assistance: Agency for International Development. The bill would earmark $50 million of funds already appropriated for the Economic Support Fund for a U.S.contribution to the International Fund established pursuant to the 1985 Anglo-Irish Peace Agreement. Earlier the Administration had requested a 1986 supplemental appropriation of $20 million to the Economic Support Fund for reconstruction and economic development in Ireland. Not only would the bill provide funds 150 percent more than requested, they would be taken from monies already appropriated for other intended recipients. Such disruptive action would reduce the U.S. ability to acheive important security and foreign policy objects. Moreover, as pointed out in the Administration request, the $20 million increase in 1986 outlays is offset by outlay reductions from rescission proposals transmitted in the FY 1987 Budget. The Administration supports its original request.

Chapter V

Environmental Protection Agency: Hazardous Substance Response Trust Fund. The language making $150 million immed i ately available for the Superfund program is no longer necessary and should be deleted. The language is almost identical to the recently passed H.J. Res. 573. While providing this language in the Urgent Supplemental Appropriation Bill would not provide any additional funds, it would create ambiguites in the language and cause considerable confusion.

Veterans Administration transfer of construction funding. The transfer of $71 million in VA construction funds, $36 million to VA medical and operating expenses programs and $35 million to the Veterans job training program, is unwarranted. These funds may need to be restored to construction in future years in order to maintain planned program levels. For the medical and operating expenses programs, the addition of 1986 funds runs counter to the Gramm-Rudman-Hollings reductions and is not necessary to avoid adverse personnel actions. Also, the addition of more funding for veterans job training has no meaning in 1986 because the program is not using the resources it already has available. Because funds used for operating expenses are obligated and spent more quickly than construction funds, this set of transfers would increase 1986 outlays by $30.9 million with a coresponding increase in the deficit.

Chapter VI

Strategic Petroleum Reserve and SPR Petroleum Account.. The Administration's 1987 budget proposes a moratorium on further fill of the Strategic Petroleum Reserve (SPR) in light of substantially improved world oil market conditions and the substantial level of protection afforded by the 500 million barrels of crude oil that are now stored in the SPR. Overturning of this deferral and mandating continued fill of the SPR at 100,000 barrels per day will increase Federal outlays by more than $500 million but will make a negligible contribution to U.S. energy security.

HHS: Indian Health Service. The Administration opposes adding an additiona1 $20 million for the Indian Health Service (IHS) in FY 1986. The President's Budget includes $786 million for IHS services, plus an additional $48 million to be collected from Medicare, Medicaid and other reimbursements. Against this total of $830 in obligational authority, there is no programmatic justification for adding $20 million. Enactment of this supplemental will negate the FY 1986 reductions of $10.7 million from the Balanced Budget and Emergency Deficit Control Act of 1985 while adding an additional $9.3 million that cannot be spent effectively in the time remaining in FY 1986.

Chapter VII

Department of Education: Impact aid. The supplemental of $20 million is not needed. Additional funds needed for disaster assistance are being met by funds already available to the Secretary.

Three substantive law provisions in the appropriation language are objectionable:

• A provision to instruct the Department to forgo seeking recovery of overpayments from certain school districts in Kentucky whose payments under Section 2 (payments to compensate for partial loss of tax base) were made on the basis of the school districts' inappropriate use of State rather than local property tax data. This form of special relief is not appropriate.
• A clause that changes the basis on which Section 2 payments will be made in the future to take into account State-levied property taxes. This clause, if enacted, would substantially change the nature and intent of the authorizing statute and increase the program cost by an indeterminate amount. This is a "back-door" increase in budget cost.
• A provision restricting the Department of Education's ability to recover fiscal year 1978 overpayments to school districts. The provision requires those recoveries to be made through reductions in future Impact Aid payments. As a result, the Department would be unable to collect overpayments from almost a dozen school districts no longer participating in the Impact Aid program.

Chapter IX

Department of Transportation: Coast Guard and FAA Operations. While the Administration supports an $80 million increase for the FAA and a $35.5 million increase for the Coast Guard, we believe strongly that the outlays from these increases should be offset as much as possible through reductions in lower priority transportation programs. On March 26, 1986, the President proposed offsetting reductions in the following activities: $8.7 million in Amtrak grants, $94.5 million from mass transit formula grants, $3.5 million for Coast Guard research, $2 million from the Coast Guard Retired Pay account, and $43.5 million from discretionary airport improvements grants.

Chapter X

Department of the Treasury; U.S. Customs Service. The unrequested increases for the Customs Service provided by the House Appropriations Committee are highly objectionable. These increases completely restore the reductions mandated by the Gramm-Rudman-Hollings measure.

In addition, the House Committee has included a bill language provision (identical to language included in the regular 1986 appropriations bill) which sets an FTE floor level for the Customs Service. This language provision is highly objectionable and will prevent the economies and efficiencies advocated by this Administration for the Customs Service to be implemented.

Chapter X, Title II

General Provisions: Section 201. The Administration strongly opposes the language designed to repeal the President's authority to defer budget authority under section 1013 of the Congressional Budget and Impoundment Control Act of 1974.

Section 203. The Administration strongly opposes the provision prohibiting implementation of the OMB proposal to restore an appropriate balance between federal support of scientific research and Federal payments for Uni versity-allocated overhead. Given the recent agreement to delay implementation for three months to permit further review and consultation, the prohibition would prevent a timely productive solution to the problem of steadily increasing payments for overhead and correspondingly less money for scientific research.

Section 204: The Administration objects to the language which bans the implementation of OPM's new regulations governing the Combined Federal Campaign. The new rules were written to implement the 1983 Executive Order (EO 12404) permitting traditional health and welfare organizations to participate in the fund-raising campaign, while excluding political advocacy groups from participating.

Other Objections:

Department of Transportation. The President's 1987 budget included supplemental language that would have the effect of prohibiting the Secretary of Transportation from borrowing from Treasury to cover the expanded cargo preference requirement enacted in the Food Security Act of 1985. The expanded cargo reference requirement was effective on April 1, 1986, although it is not expected that the Secretary of Transportation will have to borrow to meet the reauirement until later in the fiscal year.

Because the H.R. 4515 does not include the supplemental language proposed in the President's 1987 budget, the Secretary of Transportation will have to borrow an estimated $48M in 1986 for an unwarranted increased subsidy to the maritime industry.

EXECUTIVE OFFICE OF THE PRESIDENT
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON. D.C. 20503

April 23, 1986

TO: DISTRIBUTION

FROM: Chris Nolan
Budget Preparation Branch

SUBJECT: House Floor Action on H.R. 4515, Urgent Supplemental Appropriations Bill, 1986

Attached is a copy of the latest position statement on H.R. 4515, the Urgent Supplemental Appropriations Bill, 1986, sent to the House on Tuesday, April 22. On Tuesday, the House voted to defeat the rule allowing consideration of the bill. Further action is not expected until early next week.

Attachment