Van Hollen Introduces Legislation to Support Federal Infrastructure and Reduce Wasteful Spending
Today, U.S. Senator Chris Van Hollen (D-Md.) introduced new legislation to improve the funding process for large federal building projects and reduce wasteful spending on expensive leases. Over the long-term, it is often less expensive for the federal government to construct or purchase a building rather than leasing it. However, since budget scorekeeping rules charge the purchase price as a lump sum within a single year, Congress and federal agencies sometimes opt for leases that spread a higher overall cost over many years. Senator Van Hollen’s legislation, the Federal Capital Revolving Fund Act of 2021, would address this issue by spreading the costs of major civilian capital projects over up to 15 years for budget scorekeeping purposes, which would remove the bias in favor of more expensive leases while continuing to fully account for the costs of these projects and maintaining the Congressional power of the purse. A Federal Capital Revolving Fund has received bipartisan support – having been included in President Donald Trump’s budget proposals, and in President Joe Biden’s American Jobs Plan.
“This common-sense proposal will ensure that the federal government is using taxpayer dollars efficiently and effectively when it comes to housing the many agencies that work on behalf of the American people. I’ll be working to pass this crucial legislation to permanently improve the way we invest in federal buildings as we look to modernize American infrastructure across-the-board,” said Senator Van Hollen.
"The Federal Capital Revolving Fund proposal is a much-needed, beneficial reform of the Federal Government's process for planning and budgeting for federally-owned capital assets. The Revolving Fund and the associated scorekeeping rules will be a major step toward rectifying one of the most vexing problems that I confronted in over 30 years as an OMB scorekeeper by incorporating a capital planning mechanism within the Appropriations process that will reduce wasteful federal spending and facilitate more efficient major capital projects,” said Art Stigile, OMB scorekeeper from 1984 to 2019 (retired).
According to the Office of Management and Budget, “the cost of two consecutive 15-year leases for a building can exceed its fair market value by close to 180 percent.” The headquarters facility for the Department of Transportation (DoT) shows how the current system is biased towards wasteful budget choices. In 2002, the federal government sold land to a private company for $40 million for the purpose of constructing a DoT headquarters that would be leased back to the government. Under the terms of this 15-year lease, the federal government would pay a total of $750 million. In 2018, the federal government was finally able to purchase the facility – at an additional cost of $760 million. This facility cost $326 million to construct and the land was initially owned by the federal government, but the budget constraints at the time of construction drove the government to choose a far more expensive option.
Under this new legislation, the Fund would start with $10 billion. As part of the annual appropriations process, Congress could make transfers from the fund to pay for major capital projects costing $250 million or more. When Congress makes such a transfer, the agency would then repay the fund over a period of up to 15 years in installments provided by Congress in annual appropriations bills.
The Federal Capital Revolving Fund Act prohibits any transfer or reprogramming from the fund that is not a transfer expressly authorized by Congress for a particular project. The annual repayments made by agencies would be counted against applicable discretionary spending limits for appropriations bills. This maintains controls on federal spending, while eliminating the bias in budget scorekeeping rules that currently favors leases over purchases for major capital projects.
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