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Letter to the Honorable David R. Obey [i] (June 2007)

handle is hein.congrec/cbo8154 and id is 1 raw text is: CONGRESSIONAL BUDGET OFFICE Peter R. Orszag, Director U.S. Congress Washington, DC 20515 June 22, 2007 Honorable David R. Obey Chairman Committee on Appropriations U.S. House of Representatives Washington, DC 20515 Dear Mr. Chairmnan, As you requested, CBO has reviewed draft language that would authorize the Rural Utilities Service (RUS) of the Department of Agriculture to guarantee loans to electric cooperatives to construct facilities for electricity generation. Under those proposals, rural electric cooperatives that would receive a loan guarantee from RUS would have to pay a fee to the government at least equal to the estimated cost of the guarantee as defined in the Federal Credit Reform Act of 1990. CBO estimates that implementing this program with certain safeguards could result in no significant net cost to the government. Howev er, in the absence of such safeguards, CBO expects that RUS would probably be unable to set fees for all projects so that the net cost to the government of those loan guarantees wxould be zero. In that case, wve estimate that the approved loan guarantees would have a credit subsidy cost to the government of at least 1 percent-or at least $20 million for the proposal to guarantee loans wxorth $2 billion. Challenges in Collecting Subsidy Fees that Cover Aggregate Costs Based on discussions with RUS and the Office of Management and Budget, CBO expects that RUS would charge most borrowers a uniform, average subsidy fee, largely reflecting cooperatives' current financial condition. CBO wvwx~bo.gov

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