COMMODITY CREDIT CORPORATION Summary of major cost elements included in realized losses and gains applicable to restoration of capital impairment 1 Amounts shown for subitems under program loss are estimated because cost values of commodity dis positions are reported to Washington by totals only. STATUS OF CCC BORROWING AUTHORITY Mr. MARSHALL. What is the current status of your borrowing authority? Mr. BEACH. As of January 31, we had $850 million unused borrowing authority. We had estimated we would have a little more than that, so our requirements are running a little ahead of our estimates, which makes this supplemental we have asked for of $1.3 billion—a very important matter to us in the near future. Mr. McLAIN. I'm sure this committee, when you handle this supplemental, under your new arrangement, will be aware of that. Mr. MARSHALL. The budget indicates that you may submit a supplemental of $575 million. Can you explain that? Mr. BEACH. Yes, sir. Our projection ahead of the use of our borrowing power indicates that, based on current budget estimates, we'll get down to a margin of only about $251 million available by the end of the fiscal year 1960. That is too narrow a margin for comfort. If the estimates prove to be wrong, it could easily be that we will have to ask for an advanced restoration of capital impairment. This margin of $250 million that I speak of is after advanced reimbursement for Public Law 480 and other similar costs, so that we would have no other recourse except either an increase in the borrowing power itself, or an urgent deficiency for restoration of capital impairment, ahead of the time it would ordinarily be done. The amount of $575 million was placed in the budget because it was felt that, based on current projections, that would be ample to take us over the period to the end of the fiscal year. Mr. HORAN. When do you make those determinations that show up in the budget? Mr. BEACH. We make those estimates in November and Decemberthat is, the final adjustments are made in November and December. We actually start them in July and August. The November crop report is the first real basis for an estimate for the year ahead. Mr. MARSHALL. Did you have anything else? Mr. BEACH. Not with respect to the borrowing power. I can insert in the record a projection by months of the use of borrowing power. Mr. MARSHALL. We'll be glad to have that in the record at this point. (The material referred to follows:) Status of statutory borrowing authority, 1960 budget (July-December 1958 actual; remaining months estimated) 1 Assumes enactment of proposed supplemental appropriation for reimbursement to CCC for costs of special activities in fiscal year 1958, $1,337,000,000. Assumes appropriation for reimbursement to CCC of costs of special activities in fiscal year 1959, $1,268, to be included in the 1960 Appropriation Act. Assumes enactment of proposed supplemental appropriation for partial restoration of capital impairment at June 30, 1959, $575,000,000. Assumes expenditure of $50,000,000 under proposed extension and increase of title I, Public Law 480. LIMITATION ON ADMINISTRATIVE EXPENSES, COMMODITY CREDIT CORPORATION Mr. MARSHALL. Now, we come to "Administrative expenses." We'll insert page 489 of the justification in the record. This is an increase of $5,232,000. (The material referred to follows:) (b) Administrative expenses, Commodity Credit Corporation Increase in price support operations_ Increase to provide a contingency reserve to enable the Corporation to meet unforeseeable increase in workload_-_ 40, 067, 000 45, 300,000 +5, 233, 000 +$2,062,000 +3, 171, 000 The limitation includes $535,000 applicable to the $1,000,000 special limitation for sales expansion which it is estimated will not be obligated in fiscal years 1959 or 1960. Mr. MARSHALL. Can you tell us about this item? Mr. BEACH. This item is made up of two parts. One part of it is for the increase in program volume, and the other part of it is made up of an increase for the contingency reserve, to restore it back to the 7-percent level. The latter portion is $3,171,000. That, it is anticipated, will not be used if our program volume estimates are accurate. It could only be used, as you know, with the approval of the Bureau of the Budget. It has been in our administrative expense limitation now for a matter of 3 or 4 years. It was inserted by this committee. BASIS FOR INCREASED COSTS Our estimated increase of $2,062,000 for increased workload results primarily from the increase in the inventory management problem created by the production from this year's crops, and anticipated crops for next year. We have, as you know, a detailed system of work measurement and production rates for the many different transactions involved in CCC field office operations which gives us a reliable basis for estimating what it really costs us to do a given volume of business. We were able to accomplish an increase of 8 percent in our production rates last year, which means we did 8 percent more units of work per man-day than the year before. This saved over $1 million in salary costs out of the administrative expense authorization for 1958. Our budget estimate is projected at this higher rate. The 1958 rates were double what they were in 1952. We are proud of that record which these commodity officers have made in improving efficiency, and we believe they will continue to do so. This was a minimum estimate, we believe, to get the job done which appears to be ahead of us. Mr. MARSHALL. In your justification, on page 489, you indicated that the volume of price support operations in 1960 will be higher than for the current fiscal year. Mr. BEACH. That is right. The volume of the price support investment will be up to $10.4 billion at the end of June 1960, as compared with about $9.1 billion at the end of June 1959. Actually, as of January 31, 1959, it was $9 billion, so it is very close to the June 30 figure, already. The inventories will increase. They will increase about 67 percent in the 2-year period. BASIS OF BUDGET AND EXPENDITURE ESTIMATES Mr. MARSHALL. This item bothers me again, when we get to thinking about reduced costs, that were submitted in the Bureau of the Budget for this committee. It seems that most of these things we have been talking about, which you recognize as an expansion of the program-at the same time, in the budget, you are talking about a substantial figure of reduction. Mr. BEACH. As far as the budget figures are concerned, it is not an item that is appropriated for the use of the Corporation. The only funds made available to the Corporation for its use are restoration of capital impairment, which represents its realized losses 2 years back, plus the reimbursement for costs that had already occurred on Public Law 480 and other similar programs. In the overall budget estimates, there is included an estimate of the net outlay of Government funds by the CCC during the fiscal year. That net outlay is directly affected by the amount of loans, the amount of sales, and other transactions, sales, repayments, loans, and purchases, primarily. It is the net of the outflow of cash versus the income of cash to the Corporation. That is the figure which is reflected in the national budget picture. As far as appropriations are concerned, they represent only the restoration of capital impairment, and reimbursement for costs of special programs, plus the authorization to use capital funds for administrative expenses, which is the administrative expense limita tion. Mr. MARSHALL. Thank you, Mr. Beach. That is exactly what I expected you to say. Now as to a matter of balancing the budget, you have quite a wide latitude in the judgment you have in presenting this impairment of capital of Commodity Credit. Mr. BEACH. No, sir, not impairment of capital. That is a realized loss. The same thing is true with respect to reimbursements for Public Law 480 and other costs. Those are already realized, recorded on the books, and checked out. The latitude only exists in the estimates in advance of expenditures to be made by the Corporation, which are a part of the overall Government expenditures. That latitude exists only to the extent errors in judgment occur. Mr. MARSHALL. Which, in itself, could be quite a wide latitude. Mr. BEACH. We have had wide differences in the past, yes. Mr. MARSHALL. That is the point we were talking about awhile ago in these hearings, the matter of the range of judgment in making these estimates. Mr. BEACH. We know, for example, that our estimates for the fiscal year 1959 at the beginning of this fiscal year were considerably different than what they are now. I am speaking of the estimates of the volume of program activity, on which we base our allocation of administrative expense. |