[Congressional Record Volume 141, Number 80 (Monday, May 15, 1995)]
[Senate]
[Pages S6688-S6696]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. COCHRAN:
  S. 800. A bill to provide for hearing care services by audiologists 
to Federal civilian employees; to the Committee on Governmental 
Affairs.


               the hearing care for federal employees act

  Mr. COCHRAN. Mr. President, today I am introducing legislation to 
include audiology services in the Federal Employee Health Benefits 
Program [FEHBP].
  This bill would amend the statute governing the Federal Employees 
Health Benefits Program by requiring FEHBP insurance carriers to 
guarantee direct access to, and reimbursement for, audiologist-provided 
hearing care services when hearing care is covered under a FEHBP plan.
  The statute governing FEHBP, title 5, United States Code, section 
8902(k)(1), allows direct access to services provided by optometrists, 
clinical psychologists and nurse midwives, yet fails to allow direct 
access to services provided by audiologists in FEHBP plans covering 
hearing care services.
  The legislation I am introducing today would remedy this situation by 
permitting direct access to audiology services in FEHBP plans covering 
hearing care services. This measure will not increase health care costs 
since it would not mandate any new insurance benefits. On the contrary, 
the bill should reduce costs of hearing care by facilitating direct 
access to health care providers who are uniquely qualified to diagnose 
the extent and causes of hearing impairment.
  I hope my colleagues will carefully consider this legislation and 
join me in support of its enactment.
                                 ______

      By Mr. HOLLINGS:
  S. 802. A bill to authorize the Secretary of Transportation to issue 
a certificate of documentation and coastwise trade endorsement for the 
vessel Royal Affaire; to the Committee on Commerce, Science, and 
Transportation.


                     trading privileges legislation

 Mr. HOLLINGS. Mr. President, I am introducing a bill today to 
direct the vessel Royal Affaire, official No. 649292, to be accorded 
coastwise trading privileges and to be issued a certificate of 
documentation under section 12103 of title 46, United States Code.
  The Royal Affaire was constructed in Auckland, New Zealand, in 1980. 
The vessel, a sailboat, is 76.3 feet in length, 20.3 feet in breadth, 
and 8.8 feet in depth and is self-propelled.
  The vessel was purchased by Homer C. Burrous of Charleston, SC, in 
1989 for approximately $900,000, with the intention of chartering the 
vessel for cruises in and out of St. Thomas and other foreign ports in 
the Caribbean. Since purchasing the vessel in 1989, the owner has had 
the vessel refitted in a U.S. shipyard at a cost of over $800,000. Mr. 
Burrous would like to utilize the vessel to conduct coastal cruises. 
However, because the vessel was built in New Zealand, it does not meet 
the requirements for a coastwise license endorsement in the United 
States.
  The owner of the Royal Affaire is seeking a waiver of the existing 
law because he wishes to use the vessel for coastal cruises. His 
desired intentions for the vessel's use will not adversely affect the 
coastwise trade in U.S. waters. If he is granted this waiver, it is his 
intention to comply fully with U.S. documentation and safety 
requirements. The purpose of the legislation I am introducing is to 
allow the Royal Affaire to engage in the coastwise trade and fisheries 
of the United States.
                                 ______

      By Mr. McCAIN:
  S. 803. A bill to amend the Defense Base Closure and Realignment Act 
of 1990 in order to revise the process for disposal of property located 
at installations closed under that act pursuant to the 1995 base 
closure round; to the Committee on Armed Services.


                  the base transition acceleration act

 Mr. McCAIN. Mr. President, today I am introducing legislation 
that will finally ensure that fairness and discipline are exercised 
during the conveyance and land transfer portion of the 1995 BRAC round. 
The Base Transition Acceleration Act will do three things: eliminate 
the ability of special interests, under the existing process, to impose 
endless delays and reap unfair benefits; appropriately place control of 
the redevelopment process in the hands of the communities affected by 
the BRAC; and speed the economic recovery of those communities 
adversely impacted by the closing of a military installation in their 
midst.
  Mr. President, the end of the cold war provided a unique opportunity 
for this Nation to safely down-size our Armed Forces. Doing so required 
the execution of a two-phase plan; first, reduce the numbers of 
military personnel; and then, slash infrastructure to a level 
appropriate for the new size of the force. Toward that end, since 1986 
we have reduced our military force structure by nearly 40 percent. 
Infrastructure, however, has been trimmed by only about 15 percent.
  We asked the services to reduce their numbers, they succeeded. We 
attempted to create an apolitical mechanism through which excess 
infrastructure might be designated for closure; we failed, failed for 
two reasons--Government redtape and interference from special interest 
groups.
  Since 1988, a new Federal bureaucracy has grown up around the base 
closure process. Interagency squabbles and turf battles among DOD, EPA, 
Interior, HHS, GSA, and many other entities have caused excessive 
delays in Federal screening, issuance of conflicting and unhelpful 
regulations, and inordinately intrusive review of redevelopment 
proposals. The result has been increased costs to the Federal 
Government and communities alike--including costs to DOD to maintain 
idle military facilities in caretaker status.
  The Base Transition Acceleration Act legislation eliminates this 
excessive Federal regulation. The legislation strictly limits the 
timeframe for Federal property screening and empowers a single agency, 
DOD, to quickly and effectively manage the process. At the same time, 
it removes the Federal Government from the process of formulating 
redevelopment plans and places that responsibility within the purview 
of the communities themselves.
  Unfortunately, the problems associated with the BRAC process are not 
limited to those created between the Federal agencies.
 Each additional hand that enters the process brings further 
complication and added time. With every new round of the BRAC, more new 
hands enter the process. A cottage industry of consultants has evolved 
and flourished since 1988 when the first round of base closures were 
ordered. Special interests are inserting themselves with increasing 
frequency into the military property disposal process.

  Each of these competing interests has sought the assistance of their 
elected representatives or their sponsor agency, and in most cases 
received it. The result should come as a surprise to on one; this 
ostensibly apolitical process has become excessively politicized. This 
proposed legislation takes great strides to correct this problem and to 
restore fairness to the community redevelopment process.
  Over the past year or so, I, along with most other Members of the 
Senate, have talked extensively with constituents who are deeply 
troubled by the current round of base closing deliberations. Their 
anxiety is certainly not difficult to understand. The reasons for their 
concern are, however, dramatically different from those expressed in 
earlier rounds.
  During the first three rounds, community concerns tended to center 
around the simple question of whether a base in their community would 
be ordered closed. This time, the issues are far more complex. Not only 
do our constituents ask whether the base will close, they now ask 
other, more difficult questions. They want to know how to avoid a 
prolonged transition period. They want to know whether to hire 
consultants. They want to know how to handle special interest groups. 
They want to know how to deal with the bloated base closure 
bureaucracy. Most of all, they want to know when [[Page S6689]] they 
will be able to get their lives back on track.
  These questions represent valid concerns--concerns based in horrific 
example after horrific example of costly and lengthy legal and 
political battles among Federal, State, and local governments, special 
interest groups, and community members.
  Mr. President, the simple fact remains--until a reuse decision is 
made and property is conveyed to the new owners for redevelopment, the 
affected community suffers economically and emotionally.
  This legislation is simple and straightforward. It will significantly 
reduce the need for communities to employ expensive consulting firms 
because it will eliminate the redtape of excessive regulations for 
closing military bases. It will allow DOD to quickly realize the 
savings from relinquishing excess military infrastructure. And most 
importantly, it will relieve the economic stress on local communities 
and allow them to quickly redevelop these former bases in the manner 
best suited to the community's needs.
                                 ______

      By Mr. BRADLEY:
  S. 804. A bill to amend the Internal Revenue Code of 1986 to increase 
the excise taxes and tobacco products, and to use a portion of the 
resulting revenues to fund a trust fund for tobacco diversification, 
and for other purposes; to the Committee on Finance.


  THE TOBACCO CONSUMPTION REDUCTION AND HEALTH IMPROVEMENT ACT OF 1995

  Mr. BRADLEY. Mr. President, I came to the floor this afternoon to 
submit a revised version of my bill to increase the Federal excise tax 
on tobacco products. My original bill would take the current tax level 
for all types of tobacco products and multiply it by 5.167. This would 
raise the tax on a pack of cigarettes from 24 cents a pack to $1.24 a 
pack. My revised bill goes one step further to help Americans--
particularly children and teenagers--achieve a tobacco-free future.
  Mr. President, I have been on this floor many times talking about the 
dangers of tobacco use. I have repeatedly stated that tobacco use kills 
well over 400,000 Americans every year--more than alcohol, heroin, 
crack, automobile and airplane accidents, homicides, suicides, and AIDS 
combined. And I have sought to bring attention to the fact that each 
year a growing number of teenagers start smoking, despite the fact that 
selling cigarettes to minors is illegal. Virtually all new users of 
tobacco are teenagers or younger, and every 30 seconds a child in the 
United States smokes for the first time.
  Yet there is another aspect of the tobacco story which has not 
received much attention on the floor of this body. Generally, when 
people think about the dangers of tobacco use, they think about 
cigarettes. They think about the lung cancer, the emphysema, and the 
heart disease which cigarettes cause in those who use them. And they 
realize that these health impacts are not limited to those who actually 
smoke the cigarettes. Rather, environmental tobacco smoke--smoke from 
other people's cigarettes--causes tens of thousands of deaths each 
year.
  But as grave as the impacts of cigarette smoking are, they are only 
part of the story of the death and destruction which tobacco products 
wreak on our society. There is another, less well-known yet still 
devastating side to the tobacco story. And that is the tale of 
smokeless tobacco products.
  The use of smokeless tobacco--namely snuff and chew--is skyrocketing 
in the United States. Between 1986 and 1990, sales of snuff grew by 
close to 50 percent. This increase follows several decades of decline 
in sales and use. Part of this increase can be attributed to increased 
social pressures placed on smokers, due largely to concerns about 
second-hand smoke. And part of it has been fueled by perception that 
smokeless products are a safe alternative to smoking.
  But the belief that snuff and chew are safe is absolutely false. Let 
me state this very clearly: smokeless tobacco can kill you. It kills in 
different ways than cigarettes do, but it kills nonetheless. Smokeless 
tobacco causes mouth cancer. It causes gum cancer. It causes throat 
cancer. These are just a few of the oral problems smokeless tobacco can 
cause. And the threat of developing these diseases, and of dying of 
them, is very real. Long-term snuff users are 50 times more likely to 
develop gum cancer and four times more likely to develop mouth cancer 
than nonusers. Nearly 30,000 new cases of oral cancer are diagnosed 
each year in the United States. Half of those people are dead within 5 
years.
  Smokeless tobacco products are also highly addictive. A typical dose 
of snuff contains two to three times as much nicotine, the addictive 
substance in tobacco, as a single cigarette. Because of these health 
risks, snuff is banned in a growing number of countries, including the 
United Kingdom, France, Spain, Belgium, Holland, Germany, Denmark, 
Australia, and New Zealand.
  Despite these health risks, the use of smokeless tobacco is 
skyrocketing in the United States. So who are these new smokeless 
users--those individuals who are heading down a path of addiction, 
cancer, and death? For the most part, they are children. The average 
age of new smokeless users is 9\1/2\ years old. Two-thirds of smokeless 
users start their habit before they are even 12 years old. It is now 
estimated that 3 million Americans under age 21 use smokeless tobacco, 
including 1 out of every 5 high school males.
  Why is this happening? A large part of the explanation lies in the 
tobacco companies' aggressive marketing toward youth. But another part 
of the explanation is the cost of smokeless tobacco relative to 
cigarettes. Despite its dangers, smokeless tobacco is taxed at only 
about one-tenth the rate of cigarettes, making it a cheap alternative 
to cigarettes. And since kids are the most price-sensitive of all 
tobacco users, it is not surprising that they are turning to smokeless 
tobacco in ever growing numbers.
  My bill proposes to remove this price incentive for kids and adults 
to use smokeless tobacco. It does this by setting the Federal excise 
tax on tins of snuff and pouches of chew at the exact same dollar 
amount as on a pack of cigarettes. This means that the Federal taxes on 
these smokeless products will increase from their current level of less 
than 3 cents per container to $1.24 per container. In the previous 
version of my bill, I would have increased the tax on smokeless 
products by a factor of 5. While this is a significant increase, it is 
not enough to eliminate the incentive for cigarette smokers to switch 
rather than quit, or to discourage kids from ever starting the tobacco 
habit.
  Mr. President, I have spoken earlier this session about the many 
benefits which would be achieved by increasing the Federal tobacco tax. 
It will save billions of dollars in health care costs, not only for the 
Federal Government but for private insurers and citizens across the 
country. It will save countless lives. It will decrease unnecessary 
suffering. And it will discourage millions of children and teenagers 
from ever becoming addicted to tobacco.
  These changes to my earlier bill will make these benefits even more 
pronounced. Smokeless tobacco must no longer be seen as a safe and 
cheap alternative to cigarettes. Raising the excise tax will discourage 
children and teenagers from ever starting to use smokeless tobacco, and 
it will discourage adults from considering smokeless as a safe 
alternative to quitting tobacco use entirely.
  Mr. President, my tobacco tax bill, and the changes I am adding to 
it, are good health policy. They are good economic policy. And they are 
key to helping our children and teenagers achieve a tobacco-free 
future. I urge my colleagues to join me in support of this bill.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:
                                 S. 804

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,
     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Tobacco Consumption 
     Reduction and Health Improvement Act of 1995''.

     SEC. 2. INCREASE IN TAXES ON TOBACCO PRODUCTS.

       (a) In General.--
       (1) Cigars.--Subsection (a) of section 5701 of the Internal 
     Revenue Code of 1986 (relating to rate of tax on cigars) is 
     amended--
       (A) by striking ``$1.125 cents per thousand (93.75 cents 
     per thousand on cigars removed [[Page S6690]] during 1991 and 
     1992)'' in paragraph (1) and inserting ``$5.8125 per 
     thousand''; and
       (B) by striking paragraph (2) and inserting the following 
     new paragraph:
       ``(2) Large cigars.--On cigars weighing more than 3 pounds 
     per thousand, a tax equal to 65.875 percent of the price for 
     which sold but not more than $155 per thousand.''
       (2) Cigarettes.--Subsection (b) of section 5701 of such 
     Code (relating to rate of tax on cigarettes) is amended--
       (A) by striking ``$12 per thousand ($10 per thousand on 
     cigarettes removed during 1991 and 1992)'' in paragraph (1) 
     and inserting ``$62 per thousand''; and
       (B) by striking ``$25.20 per thousand ($21 per thousand on 
     cigarettes removed during 1991 and 1992)'' in paragraph (2) 
     and inserting ``$130.20 per thousand''.
       (3) Cigarette papers.--Subsection (c) of section 5701 of 
     such Code (relating to rate of tax on cigarette papers) is 
     amended by striking ``0.75 cent (0.625 cent on cigarette 
     papers removed during 1991 or 1992)'' and inserting ``3.875 
     cents''.
       (4) Cigarette tubes.--Subsection (d) of section 5701 of 
     such Code (relating to rate of tax on cigarette tubes) is 
     amended by striking ``1.5 cents (1.25 cents on cigarette 
     tubes removed during 1991 or 1992)'' and inserting ``7.75 
     cents''.
       (5) Snuff.--Paragraph (1) of section 5701(e) of such Code 
     (relating to rate of tax on smokeless tobacco) is amended by 
     striking ``36 cents (30 cents on snuff removed during 1991 or 
     1992)'' and inserting ``$16.53''.
       (6) Chewing tobacco.--Paragraph (2) of section 5701(e) of 
     such Code is amended by striking ``12 cents (10 cents on 
     chewing tobacco removed during 1991 or 1992)'' and inserting 
     ``$6.61''.
       (7) Pipe tobacco.--Subsection (f) of section 5701 of such 
     Code (relating to rate of tax on pipe tobacco) is amended by 
     striking ``67.5 cents (56.25 cents on chewing tobacco removed 
     during 1991 or 1992)'' and inserting ``$3.4875''.
       (8) Effective date.--The amendments made by this subsection 
     shall apply with respect to cigars, cigarettes, cigarette 
     paper, cigarette tubes, snuff, chewing tobacco, and pipe 
     tobacco removed after December 31, 1995.
       (b) Imposition of Excise Tax on Manufacture or Importation 
     of Roll-Your-Own Tobacco.--
       (1) In general.--Section 5701 of the Internal Revenue Code 
     of 1986 (relating to rate of tax) is amended by redesignating 
     subsection (g) as subsection (h) and by inserting after 
     subsection (f) the following new subsection:
       ``(g) Roll-Your-Own Tobacco.--On roll-your-own tobacco, 
     manufactured in or imported into the United States, there 
     shall be imposed a tax of $20.67 per pound (and a 
     proportionate tax at the like rate on all fractional parts of 
     a pound).''
       (2) Roll-your-own tobacco.--Section 5702 of such Code 
     (relating to definitions) is amended by adding at the end the 
     following new subsection:
       ``(p) Roll-Your-Own Tobacco.--The term `roll-your-own 
     tobacco' means any tobacco which, because of its appearance, 
     type, packaging, or labeling, is suitable for use and likely 
     to be offered to, or purchased by, consumers as tobacco for 
     making cigarettes.''
       (3) Technical amendments.--
       (A) Subsection (c) of section 5702 of such Code is amended 
     by striking ``and pipe tobacco'' and inserting ``pipe 
     tobacco, and roll-your-own tobacco''.
       (B) Subsection (d) of section 5702 of such Code is 
     amended--
       (i) in the material preceding paragraph (1), by striking 
     ``or pipe tobacco'' and inserting ``pipe tobacco, or roll-
     your-own tobacco'', and
       (ii) by striking paragraph (1) and inserting the following 
     new paragraph:
       ``(1) a person who produces cigars, cigarettes, smokeless 
     tobacco, pipe tobacco, or roll-your-own tobacco solely for 
     the person's own personal consumption or use, and''.
       (C) The chapter heading for chapter 52 of such Code is 
     amended to read as follows:

    ``CHAPTER 52--TOBACCO PRODUCTS AND CIGARETTE PAPERS AND TUBES''.

       (D) The table of chapters for subtitle E of such Code is 
     amended by striking the item relating to chapter 52 and 
     inserting the following new item:

``Chapter 52. Tobacco products and cigarette papers and tubes.''

       (4) Effective date.--
       (A) In general.--The amendments made by this subsection 
     shall apply to roll-your-own tobacco removed (as defined in 
     section 5702(p) of the Internal Revenue Code of 1986, as 
     added by this subsection) after December 31, 1995.
       (B) Transitional rule.--Any person who--
       (i) on the date of the enactment of this Act is engaged in 
     business as a manufacturer of roll-your-own tobacco or as an 
     importer of tobacco products or cigarette papers and tubes, 
     and
       (ii) before January 1, 1996, submits an application under 
     subchapter B of chapter 52 of such Code to engage in such 
     business,
     may, notwithstanding such subchapter B, continue to engage in 
     such business pending final action on such application. 
     Pending such final action, all provisions of such chapter 52 
     shall apply to such applicant in the same manner and to the 
     same extent as if such applicant were a holder of a permit 
     under such chapter 52 to engage in such business.
       (c) Floor Stocks.--
       (1) Imposition of tax.--On cigars, cigarettes, cigarette 
     paper, cigarette tubes, snuff, chewing tobacco, pipe tobacco, 
     and roll-your-own tobacco manufactured in or imported into 
     the United States which is removed before January 1, 1996, 
     and held on such date for sale by any person, there shall be 
     imposed the following taxes:
       (A) Small cigars.--On cigars, weighing not more than 3 
     pounds per thousand, $4.6875 per thousand.
       (B) Large cigars.--On cigars, weighing more than 3 pounds 
     per thousand, a tax equal to 53.125 percent of the price for 
     which sold, but not more than $125 per thousand.
       (C) Small cigarettes.--On cigarettes, weighing not more 
     than 3 pounds per thousand, $50 per thousand.
       (D) Large cigarettes.--On cigarettes, weighing more than 3 
     pounds per thousand, $105 per thousand; except that, if more 
     than 6\1/2\ inches in length, they shall be taxable at the 
     rate prescribed for cigarettes weighing not more than 3 
     pounds per thousand, counting each 2\3/4\ inches, or fraction 
     thereof, of the length of each as one cigarette.
       (E) Cigarette papers.--On cigarette papers, 3.125 cents for 
     each 50 papers or fractional part thereof; except that, if 
     cigarette papers measure more than 6\1/2\ inches in length, 
     they shall be taxable at the rate prescribed, counting each 
     2\3/4\ inches, or fraction thereof, of the length of each as 
     one cigarette paper.
       (F) Cigarette tubes.--On cigarette tubes, 6.25 cents for 
     each 50 tubes or fractional part thereof; except that, if 
     cigarette tubes measure more than 6\1/2\ inches in length, 
     they shall be taxable at the rate prescribed, counting each 
     2\3/4\ inches, or fraction thereof, of the length of each as 
     one cigarette tube.
       (G) Snuff.--On snuff, $16.17 per pound and a proportionate 
     tax at the like rate on all fractional parts of a pound.
       (H) Chewing tobacco.--On chewing tobacco, $6.49 per pound 
     and a proportionate tax at the like rate on all fractional 
     parts of a pound.
       (I) Pipe tobacco.--On pipe tobacco, $2.8125 per pound and a 
     proportionate tax at the like rate on all fractional parts of 
     a pound.
       (J) Roll-your-own tobacco.--On roll-your-own tobacco, 
     $20.67 per pound and a proportionate tax at the like rate on 
     all fractional parts of a pound.
       (2) Liability for tax and method of payment.--
       (A) Liability for tax.--A person holding cigars, 
     cigarettes, cigarette paper, cigarette tubes, snuff, chewing 
     tobacco, pipe tobacco, and roll-your-own tobacco on January 
     1, 1996, to which any tax imposed by paragraph (1) applies 
     shall be liable for such tax.
       (B) Method of payment.--The tax imposed by paragraph (1) 
     shall be treated as a tax imposed under section 5701 of the 
     Internal Revenue Code of 1986 and shall be due and payable on 
     February 15, 1996, in the same manner as the tax imposed 
     under such section is payable with respect to cigars, 
     cigarettes, cigarette paper, cigarette tubes, snuff, chewing 
     tobacco, pipe tobacco, and roll-your-own tobacco removed on 
     January 1, 1996.
       (3) Definitions.--For purposes of this subsection, the 
     terms ``cigar'', ``cigarette'', ``cigarette paper'', 
     ``cigarette tubes'', ``snuff'', ``chewing tobacco'', ``pipe 
     tobacco'', and ``roll-your-own tobacco'' shall have the 
     meaning given to such terms by subsections (a), (b), (e), and 
     (g), paragraphs (2) and (3) of subsection (n), and 
     subsections (o) and (p) of section 5702 of the Internal 
     Revenue Code of 1986, respectively.
       (4) Exception for retail stocks.--The taxes imposed by 
     paragraph (1) shall not apply to cigars, cigarettes, 
     cigarette paper, cigarette tubes, snuff, chewing tobacco, 
     pipe tobacco, and roll-your-own tobacco in retail stocks held 
     on January 1, 1996, at the place where intended to be sold at 
     retail.
       (5) Foreign trade zones.--Notwithstanding the Act of June 
     18, 1934 (19 U.S.C. 81a et seq.) or any other provision of 
     law--
       (A) cigars, cigarettes, cigarette paper, cigarette tubes, 
     snuff, chewing tobacco, pipe tobacco, and roll-your-own 
     tobacco--
       (i) on which taxes imposed by Federal law are determined, 
     or customs duties are liquidated, by a customs officer 
     pursuant to a request made under the first proviso of section 
     3(a) of the Act of June 18, 1934 (19 U.S.C. 81c(a)) before 
     January 1, 1996, and
       (ii) which are entered into the customs territory of the 
     United States on or after January 1, 1996, from a foreign 
     trade zone, and
       (B) cigars, cigarettes, cigarette paper, cigarette tubes, 
     snuff, chewing tobacco, pipe tobacco, and roll-your-own 
     tobacco which--
       (i) are placed under the supervision of a customs officer 
     pursuant to the provisions of the second proviso of section 
     3(a) of the Act of June 18, 1934 (19 U.S.C. 81c(a)) before 
     January 1, 1996, and
       (ii) are entered into the customs territory of the United 
     States on or after January 1, 1996, from a foreign trade 
     zone,
     shall be subject to the tax imposed by paragraph (1) and such 
     cigars, cigarettes, cigarette paper, cigarette tubes, snuff, 
     chewing tobacco, pipe tobacco, and roll-your-own tobacco 
     shall, for purposes of paragraph (1), be treated as being 
     held on January 1, 1996, for sale.
       (d) Establishment of Trust Fund.--
       (1) In General.--Subchapter A of chapter 98 of the Internal 
     Revenue Code of 1986 (relating to trust fund code) is amended 
     by adding at the end the following new section:

     ``SEC. 9512. TOBACCO CONVERSION TRUST FUND.

       ``(a) Creation of Trust Fund.--There is established in the 
     Treasury of the United [[Page S6691]] States a trust fund to 
     be known as the `Tobacco Conversion Trust Fund' (hereafter 
     referred to in this section as the `Trust Fund'), consisting 
     of such amounts as may be appropriated or credited to the 
     Trust Fund as provided in this section or section 9602(b).
       ``(b) Transfers to Trust Fund.--The Secretary shall 
     transfer to the Trust Fund an amount equivalent to 3 percent 
     of the net increase in revenues received in the Treasury 
     attributable to the amendments made to section 5701 by 
     subsections (a) and (b) of section 2 and the provisions 
     contained in section 2(c) of the Tobacco Consumption 
     Reduction and Health Improvement Act of 1995, as estimated by 
     the Secretary.
       ``(c) Distribution of Amounts in Trust Fund.--Amounts in 
     the Trust Fund shall be available to the Secretary of 
     Agriculture, as provided by appropriation Acts, for making 
     expenditures for purposes of--
       ``(1) providing assistance to farmers in converting from 
     tobacco to other crops and improving the access of such 
     farmers to markets for other crops, and
       ``(2) providing grants or loans to communities, and persons 
     involved in the production or manufacture of tobacco or 
     tobacco products, to support economic diversification plans 
     that provide economic alternatives to tobacco to such 
     communities and persons.
     The assistance referred to in paragraph (1) may include 
     government purchase of tobacco allotments for purposes of 
     retiring such allotments from allotment holders and farmers 
     who choose to terminate their involvement in tobacco 
     production.''
       (2) Clerical amendment.--The table of sections for such 
     subchapter A is amended by adding at the end the following 
     new item:

``Sec. 9512. Tobacco Conversion Trust Fund.''
                                 ______

      By Mr. SIMPSON:
  S. 805. A bill to improve the rural electrification programs under 
the Rural Electrification Act of 1936, to improve Federal rural 
development programs administered by the Department of Agriculture, to 
provide for exclusive State jurisdiction over retail electric service 
areas, to prohibit certain practices in the restraint of trade, and for 
other purposes; to the Committee on Agriculture, Nutrition, and 
Forestry.


                       rural electric legislation

  Mr. SIMPSON. Mr. President, today I am introducing legislation that 
will improve the Nation's Rural Electric Program by putting some common 
sense back into the way we use taxpayers' money to fund rural electric 
and rural development loans. The Rural Electrification and Rural 
Economic Development Improvement Act of 1995 would amend a law that 
clearly has not evolved in step with the industry.
  The fact is, the growth of our Nation's population has greatly 
changed--and continues to change--the nature of electric service areas. 
People are moving into previously underpopulated areas and our current 
statutes do not address that growth. There was once a widespread need 
for Government incentives in order to provide ``affordable'' electric 
service to consumers in many areas, but that need too, has changed.
  Many areas of our country which are no longer rural are still being 
served by Government-subsidized utilities, even though commercial 
utilities are willing to provide the service. The result is a current 
policy which puts the U.S. Government right into the fray. We end up 
with a policy that subsidizes one competitor over another and we charge 
the bill to the taxpayers. That terrible market distortion is the 
product of an outdated rural electric policy that must be changed.
  Since I arrived in the Senate in 1978, I have watched the current REA 
system transfer billions of dollars in interest subsidies from 
taxpayers to rural electric borrowers. Today, many of those borrowers 
are perfectly capable of competing in the open-market without 
Government subsidies.
  Certainly not all of the borrowers can compete. There are, indeed, 
many troubled cooperatives that need assistance. That is why the 
objective of this bill is to pare down the bloated system so that we 
can continue to fund hardship loans. Nobody wants to pass legislation 
that will push electric rates through the roof. I certainly do not, and 
that will not happen with this bill.
  My aim is to get the healthy borrowers ``off the dole'' so we can 
focus scarce funds on the hardship cases. That should be very clear 
from the beginning. I do not propose eliminating the Rural Utilities 
Service [RUS] or the subsidized loan program. But we should target 
assistance to the co-ops that really are incapable of providing 
affordable electric service in an open market. And we should offer 
healthy borrowers a nonpunitive road to the free market. Indeed, that 
is something many of them need.
  There are a great number of co-ops out there--both distributors and 
power suppliers--that are locked in to high cost Government loans. On 
top of that, many of those distributors are stuck with expensive power 
supply contracts. The co-ops cannot shop around because they are loaded 
down with Government-financed debt they cannot afford to privatize. So 
they must continue on--unable to openly compete--forced to purchase 
more expensive power and to offset it with Government interest 
subsidies, while their neighbors, the profit-driven corporations, 
become more efficient and more competitive.
  I trust my colleagues will agree that we should make every effort to 
get the ``biggest bang for our buck.'' That has been one of the catch 
phrases of this Congress. And it applies to every Government program, 
not just the Rural Utilities Service. This week, members of the Budget 
Committee are confronting the difficult choices essential to balancing 
the budget by 2002. This means they must identify over $30 billion in 
cuts each year, for 7 years, more than 10 times the painful cuts we 
just passed in the
 rescissions bill. Everyone had best be prepared to take their lumps as 
we debate reductions in agricultural research, the arts, education, 
transportation and a host of other important areas--this electric 
program should not be exempted.

  The overall size of the program is staggering. Current outstanding 
loans exceed $20 billion for distribution cooperatives--they call them 
``discos''--they danced through $20 billion and over $40 billion for 
power supply co-ops--the generation and transmission facilities, or 
G&T's. This is a behemoth of a Government business. The legislation I 
am introducing would save taxpayers millions of dollars on interest 
subsidies alone without repealing the program.
  As I say often; borrowers that really need loans should like this 
bill. Under current law, some of them must wait years to get loans 
because available funds are allocated on a ``first-come, first-served'' 
basis and there is not enough to go around. According to the latest 
rural electric survey there is a $405 million loan backlog this year. 
That will increase to more than $500 million next year and we still do 
not allow the RUS to prioritize the money, if you are in the back of 
the line, you just have to wait.
  And please hear this. The system is clogged because any entity that 
has ever received an REA-approved loan remains eligible for rural 
electric loans--forever. Hear that. It is a deal. It is ``once a 
borrower always a borrower'' and there is no end in sight. Even if a 
co-op is fully able to obtain market-rate credit elsewhere, it can keep 
coming right back to suckle at the teat of the Federal treasury's low-
interest loan program again and again, even sometimes when they have 
not paid up on the previous one. That is not appropriate and it is not 
fair and it is not just. My bill would subject RUS borrowers to the 
very same ``credit elsewhere'' test that all other agricultural 
borrowers must face.
  For example, under current law, the Farmer's Home Administration can 
only give a loan to a farmer who is unable to obtain ``reasonable 
credit elsewhere.'' Farmer's Home is ``the lender of last resort.'' But 
RUS is instead a ``lender of first resort.'' If Congress is serious 
about privatizing unnecessary Government lending, then we must put a 
realistic means-test on RUS loans.
  Some of the co-ops will tell you they already have a means-test, but 
let me tell you what that is. In 1992, we limited cheap Government 
financing for the really wealthy co-ops to 70 percent of their total 
debt-load. That is not a means-test. There is a big difference between 
70 percent and a ``credit elsewhere'' test.
  I believe we should retain the current three-tiered financing system 
that includes hardship loans, direct loans and guaranteed loans. I 
believe that applicants should only receive such assistance when they 
cannot get ``credit elsewhere.'' Then, they can come to the Government 
either for low-interest hardship loans, ``at-cost'' direct loans or a 
Government guarantee of up to 90 percent.
  Under my legislation, the RUS would review the borrower's books every 
2 [[Page S6692]] years. If a borrower's circumstances have improved 
they would then be allowed to prepay their Government loans, without 
penalty, in order to move into the commercial credit market.
  The budget savings in the legislation would come from a reduction in 
interest subsidies and administrative costs. In fiscal year 1995, the 5 
percent hardship loan subsidy cost the taxpayers $10 million, but 
``municipal rate'' direct loans cost over $46 million. On top of that, 
we spent $30 million on administration. Those interest subsidies 
provided $74 million in hardship loans and $536 million in direct loans 
from the revolving fund.
  My proposal would save over $60 million by using the treasury 
interest rate for non-hardship direct loans. With direct loans at 
treasury rate interest, we would save over $60 million next year. Some 
of that money would go to increasing the appropriation for hardship 
loans to $25 million, which should more than double the availability of 
truly necessary loans.
  The National Rural Electric Cooperative Association--the NRECA--will 
surely mobilize to fight this bill. Oh, you bet they will. Its 
representatives will come to the hill saying that this legislation is 
going to destroy their industry, it will be a tragic portrait right 
straight out of ``The Grapes of Wrath.'' But I say that this bill will 
not cause rural America to wither up and die. Those images are an 
absolute fiction.
  The reality is that the REA has accomplished its mission in many 
areas of our country. Proof of that lies in the simple fact that 
competition exists for electric service in many co-op territories. I 
would ask again, why should the Government continue to subsidize 
electric loans when private industry is ready and willing to provide 
reasonable service?
  The NRECA will also say that their competitors are trying to gobble 
up their choice customers. I have heard that one. To that, I would 
suggest that healthy co-ops should take advantage of this bill and
 privatize their debt. Investors are out there who want to put money 
into the co-ops because many of them have rapidly growing residential 
service areas that are a great investment. Those co-ops should be going 
head-to-head with their competitors on an even playing field.

  On the issue of annexation and territorial predation, I believe the 
leading role should be played by the State public service commissions. 
When there are difficult--perhaps even ancestral--disputes over 
territorial rights, State regulatory commissions are far better suited 
to make appropriate determinations than is the Federal Government. 
Local decisions should be made at the local level.
  The NRECA will also point a finger at tax incentives that are enjoyed 
by their profit-driven competitors. They will call that an unfair 
advantage. But these electric co-ops do not pay any Federal income 
taxes. They claim they do, indirectly, and that is true. When a 
cooperative distributes dividends to its members, the members must pay 
tax on that income. But any ``Joe Citizen'' who owns stock in a power 
company must also pay income tax on the dividends.
  The argument that investor-owned utilities have an unfair tax 
advantage is senseless. If the co-ops really want the same tax 
incentives, then we would have to start taxing them. I do not think 
they want that.
  Another very important part of the bill would improve the delivery of 
rural development funds, specifically low-interest ``water and waste 
disposal'' loans. We want to ensure that priority here is being given 
to nonprofit organizations whose projects are included in a local, 
regional, or statewide development plan. This would assist in the 
coordination of rural development efforts and it is consistent with the 
desire to eliminate duplicative spending.
  Another item that needs correction is a provision that--since 1987--
has allowed electric borrowers to invest up to 15 percent of their 
total plant value in rural development projects without RUS approval--
and without regard to their Federal debt status.
  The problem with this is that a co-op which is receiving interest 
subsidies on its Federal debt could actually invest any excess 
capital--up to 15 percent of its plant value--in ``rural development 
projects.'' In theory, the taxpayers subsidize the RUS loans so that 
borrowers can plug low-interest funds into rural development. But a 
1992 USDA inspector general's report uncovered a different picture. Of 
the more than $8 billion that had been invested by electric borrowers, 
less than 1 percent actually went to rural development investments.
  The inspector general found a disturbing trend in which borrowers 
took their Government interest subsidies right to ``market-rate Wall 
Street'' and invested hundreds of millions of dollars not in rural 
development, but in mutual funds. My bill would reduce that limitation 
to 3 percent. I believe excess capital should be used to pay off 
taxpayer-subsidized debt before it is used to enrich the cooperatives.
  Mr. President, I come from a State that has been magnificently served 
by the REA over the years. One of the first national directors of REA 
was one J.C. ``Kid'' Nichols, a Wyoming businessman who was a dear and 
lifelong friend of mine. He was there when the agency first embarked 
upon its mission in this country, a mission to bring electricity and 
lights to rural America. It was a stunning thing to see.
  But if we are to better the lot of rural Americans--and we all know 
that rural America can use some real help--we need to be honest about 
how far we have come to where we are and how we can change where we are 
going. And change we must--with responsibility and with courage. The 
task we face is great because we have to deal with a massive national 
debt, an ever-dwindling Federal trough, and the wants of voracious 
voters.
  The rural electric program is a microcosm of everything that is 
right--and wrong--with our country. On the one hand, the REA wired our 
homes for sound and light. It surely did that for the folks near my 
hometown of Cody, WY. And it changed the lives of rural people forever. 
On the other hand, we have allowed the program to grow so big and so 
far-reaching that we have lost sight of why it was created in the first 
place: it was to give rural Americans what the rest of the country 
had--electric power. Mr. President, that mission has been accomplished 
and the country has changed. Why does this program plod along--year 
after year--untouched by all sensibility and reason?
  I have often said you show me where we need power lines in rural 
America today, and I will be right here to appropriate and assist in 
getting the money to do that in every way, discussing density, 
discussing all the geographical aspects, all the rest. But I have been 
watching this issue like a hawk for a lot of years.
  I am pleased to offer this bill. I believe that it will save the 
integrity of the program. I will say it again. Congress must take its 
deficit cutting task seriously, and this legislation would be an 
important part of that.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:
                                 S. 805

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Rural Electrification and 
     Rural Economic Development Improvement Act of 1995''.

     SEC. 2. FINDINGS.

       Congress finds that--
       (1) the Rural Electrification Administration was created to 
     facilitate the electrification of rural America by providing 
     low-interest loans to electric cooperative associations and 
     other entities for the purpose of constructing and improving 
     rural electric systems;
       (2) more than 99 percent of the residents in rural areas of 
     the United States now have affordable and reliable electric 
     service;
       (3) a large volume of loans, at subsidized interest rates, 
     continue to be made under the Rural Electrification Act of 
     1936 to electric cooperative borrowers who could obtain 
     financing at reasonable rates and terms from a source other 
     than the Federal Government and these borrowers have become 
     significant and successful participants in an increasingly 
     competitive electric utility industry;
       (4) the Federal Government should make electric loans only 
     to entities that cannot otherwise obtain funding at 
     reasonable rates and terms;
       (5) the Rural Electrification Act of 1936 authorizes low-
     interest and zero-interest loans and grants to be made to 
     borrowers under the Act for the purpose of rural economic 
     development; [[Page S6693]] 
       (6) these rural economic development programs do not 
     provide benefits to most rural Americans since the majority 
     of these residents receive electric utility service from 
     entities that do not receive financing under the Rural 
     Electrification Act of 1963;
       (7) borrowers under the Rural Electrification Act of 1936 
     are directly eligible for some rural development programs 
     under the Consolidated Farm and Rural Development Act of 
     1972;
       (8) the limited funds made available each year for all 
     rural economic development programs should not favor these 
     individuals who reside in rural areas that are served by 
     borrowers under the Rural Electrification Act of 1936; and
       (9) borrowers under the Rural Electrification Act of 1936 
     should not have a competitive advantage in serving customers 
     in rural areas of the United States.

    TITLE I--IMPROVEMENTS TO THE RURAL ELECTRIFICATION LOAN PROGRAMS

     SEC. 101. REFERENCES TO THE RURAL ELECTRIFICATION ACT OF 
                   1936.

       As used in this title, the term ``the Act'' shall mean 
     ``the Rural Electrification Act of 1936'' (7 U.S.C. 901 et 
     seq.).

     SEC. 102. CONFORMING AMENDMENT.

       The Act is amended by striking ``TITLE I--RURAL 
     ELECTRIFICATION'' immediately prior to section 1 (7 U.S.C. 
     901).

     SEC. 103. OBJECTIVE OF THE ACT; INVESTIGATIONS AND REPORTS.

       Effective October 1, 1995, section 2 of the Act (7 U.S.C. 
     902) is amended to read as follows:

     ``SEC. 2. OBJECTIVE OF THE ACT; INVESTIGATIONS AND REPORTS.

       ``(a) The objective of this Act is to authorize and empower 
     the Secretary to make loans for the purposes of (1) 
     furnishing and improving electric energy services in rural 
     areas of the several States and Territories of the United
      States, (2) assisting rural electric borrowers to implement 
     demand side management practices, energy conservation 
     programs, and on-grid and off-grid renewable energy 
     systems, and (3) furnishing and improving telephone 
     service in such areas.
       ``(b) The Secretary may make, or cause to be made, studies, 
     investigations, and reports concerning the availability of 
     adequate electric and telephone services in rural areas of 
     the United States and its Territories and to publish and 
     disseminate information with respect thereto.''.

     SEC. 104. APPLICATION OF STATE LAWS OR ORDINANCES CONCERNING 
                   ELECTRIC SERVICE.

       The Act is amended by adding, after section 2 (7 U.S.C. 
     902), the following new sections:

     ``SEC. 2A. STATE REGULATION OF ELECTRIC UTILITY SERVICE.

       ``Nothing contained in this Act shall be construed to 
     deprive any State commission, board, or other agency of 
     jurisdiction, under any State law, now or hereafter 
     effective, to regulate electric service.

     ``SEC. 2B. APPLICATION OF STATE LAW.

       ``(a) Nothing in this Act is intended to prevent a State or 
     political subdivision thereof from enacting and enforcing a 
     law or ordinance concerning the curtailment, limitation, or 
     geographic area of service provided by an electric borrower 
     under this Act if such law or ordinance provides for the just 
     compensation of the borrower for any condemnation, 
     forfeiture, or involuntary sale of a facility, property, 
     right, or franchise of the borrower that secures a loan made 
     under this Act. Any such condemnation, forfeiture, or 
     involuntary sale shall not be construed as interfering with 
     the purposes of this Act.
       ``(b)(1) Not later than 30 days after a borrower receives 
     such compensation, the Secretary shall require the borrower 
     to use the proceeds of such compensation to prepay, without 
     penalty, all or any portion of the outstanding balance on any 
     loan that was made or guaranteed under this Act for which the 
     Secretary holds a mortgage to, or other security interest in, 
     the facility, property, right, or franchise for which the 
     compensation was provided.
       ``(2) The Secretary shall also permit the borrower to use 
     any proceeds of such compensation, in excess of the amount 
     needed to prepay a loan under paragraph (1), to prepay, 
     without penalty, all or any portion of any other loan of the 
     borrower made under this Act.''.

     SEC. 105. REPEAL OF AUTHORITY FOR TREASURY LOANS.

       Section 3 of the Act (7 U.S.C. 903) is repealed.

     SEC. 106. REPEAL OF AUTHORIZATION FOR 2 PERCENT INTEREST RATE 
                   ELECTRIC LOANS.

       Section 4 of the Act (7 U.S.C. 904) is repealed.

     SEC. 107. REPEAL OF AUTHORIZATION FOR 2 PERCENT ELECTRICAL 
                   AND PLUMBING EQUIPMENT LOANS.

       Section 5 of the Act (7 U.S.C. 905) is repealed.

     SEC. 108. AUTHORIZATION OF APPROPRIATIONS; REPEAL OF 
                   REQUIREMENT FOR TESTIMONY; FEES FOR NON-
                   FINANCIAL ASSISTANCE AND SERVICES.

       Section 6 of the Act (7 U.S.C. 906) is amended to read as 
     follows:

     ``SEC. 6. AUTHORIZATION OF APPROPRIATIONS: USER FEES FOR NON-
                   FINANCIAL ASSISTANCE AND SERVICES.

       ``(a)(1) Except as provided for in paragraph (2), there are 
     hereby authorized to be appropriated, out of any money in the 
     Treasury not otherwise appropriated, such funds as necessary 
     for the purpose of administering this Act and for the purpose 
     of making the studies, investigations, publications, and 
     reports provided for in section 2.
       ``(2) For each of the fiscal years 1996 through 2000, the 
     amount authorized to be appropriated under paragraph (1), or 
     otherwise made available pursuant to this Act, for the 
     purpose of administering the rural electric program, shall 
     not exceed $15,000,000.
       ``(b)(1) Effective October 1, 1995, the Secretary shall 
     establish a schedule of fees to be charged for non-financial 
     assistance and services provided by the Secretary to loan 
     applicants, borrowers, and others pursuant to this Act. Such 
     assistance and services shall include, but not be limited to, 
     those relating to accounting, personnel training, 
     engineering, management, auditing, data processing and 
     information system support, duplication of documents, 
     consolidations, and compliance with the provisions of other 
     Federal laws or State laws.
       ``(2) In establishing the schedule of fees under paragraph 
     (1), the Secretary shall ensure that the amount of each fee 
     shall be sufficient to cover the reasonable cost of the 
     assistance or service provided, as determined by the 
     Secretary.
       ``(3) The recipient of any non-financial service or 
     assistance provided by the Secretary shall pay to the 
     Secretary the amount of the fee as established in the fee 
     schedule for such service or assistance at such time as the 
     Secretary may require. All fees paid to the Secretary 
     pursuant to this subsection shall be deposited in the 
     Treasury and shall be available to the Secretary, without 
     fiscal year limitation, to pay the cost of providing such 
     non-financial assistance and services pursuant to this 
     Act.''.

     SEC. 109. CONFORMING AMENDMENTS.

       Section 7 of the Act (7 U.S.C. 907) is amended by--
       (a) in the first sentence, striking out ``from the sums 
     authorized in section 3 of this Act'', and inserting in lieu 
     thereof ``from funds made available for the purposes of this 
     Act''; and
       (b) in the second sentence, by striking out ``No borrower 
     of funds under sections 4 or 201'' and inserting in lieu 
     thereof ``No borrower liable for the repayment of any 
     telephone loan made under section 201, and, except as 
     otherwise provided for in section 2B or any other provision 
     of this Act, no borrower who is liable on any rural electric 
     loan made under this Act''.

     SEC. 110. REPEAL OF OBSOLETE PROVISION RELATING TO TRANSFER 
                   OF CERTAIN FUNCTIONS.

       (a) Section 8 of the Act (7 U.S.C. 908) is repealed.
       (b) Any action made pursuant to section 8 prior to its 
     repeal by subsection (a) shall remain valid and in effect 
     unless otherwise revoked.

     SEC. 111. EXPENDITURES FOR PERSONAL SERVICES, SUPPLIES, AND 
                   EQUIPMENT.

       Section 11 of the Act (7 U.S.C. 911) is amended by adding 
     after ``from sums appropriated pursuant to section 6'' the 
     following: ``or from funds otherwise made available for the 
     purposes of administering this Act''.

     SEC. 112. PAYMENT DEFERRAL AUTHORITY.

       Section 12 of the Act (7 U.S.C. 912) is amended to read as 
     follows:
       ``Sec. 12. Extension of Time for Repayment of Loans.--The 
     Secretary may extend the payment of interest or principal of 
     any loan made under this Act if the Secretary determines that 
     the borrower is experiencing a financial hardship. Any 
     payment of interest or principal shall not be extended for 
     more than 5 years after the date on which such was originally 
     due, and interest shall accrue on the amount of any such 
     payment at the rate of interest on the underlying loan, which 
     interest shall become due and payable at the same time as the 
     payment for which the extension was made.''.

     SEC. 113. DEFINITION OF RURAL AREA.

       Section 13 of the Act (7 U.S.C. 913) is amended by adding 
     at the end thereof the following: ``Any determination with 
     respect to whether an area is a rural area, under the 
     preceding sentence, shall be made at the time the application 
     is filed, and, under no circumstances, shall any previous 
     determination that the area was rural for the purposes of 
     this Act be used to make such determination.''.

     SEC. 114. GENERAL PROHIBITIONS; ORIGINATION FEES; USE OF 
                   CONSULTANTS.

       Section 18 of the Act (7 U.S.C. 918) is amended by--
       (a) in subsection (a), striking out ``reduce any loan or 
     loan advance'' and inserting in lieu thereof ``reduce any 
     rural telephone loan or loan advance'';
       (b) in subsection (b), after ``connection with any'', 
     inserting ``telephone''; and
       (c) striking out subsection (c).

     SEC. 115. AUTHORIZATION OF LOANS TO RURAL ELECTRIC PROVIDERS.

       Effective October 1, 1995, the Act is amended by adding 
     after section 18 (7 U.S.C. 918), a new Title I as follows:

                ``TITLE I--RURAL ELECTRIFICATION LOANS.

       ``Sec. 101. Limitation on Authority To Make, Insure, and 
     Guarantee Electric Loans.--No electric loan shall be made, 
     insured, or guaranteed, under this Act after September 30, 
     1995, except as authorized in sections 102 and 103.
       ``Sec. 102. Direct Electric Loans.--(a) The Secretary is 
     authorized and empowered to make loans to corporations, 
     States, Territories, and subdivisions and agencies thereof, 
     [[Page S6694]] municipalities, peoples' utility districts, 
     and cooperative, nonprofit, or limited-dividend associations, 
     organized under the laws of any State or Territory of the 
     United States, for
      the purpose of financing the construction and operation of 
     generating plants, electric transmission and distribution 
     lines or systems for the furnishing of electric energy to 
     persons in rural areas and for furnishing and improving 
     electric service to persons in rural areas, including 
     assisting electric borrowers to implement demand side 
     management, energy conservation programs, and on-grid and 
     off-grid renewable energy systems.
       ``(b) Loans made under this section shall be on such terms 
     and conditions relating to the expenditure of the money 
     loaned and the security therefore as the Secretary shall 
     determine.
       ``(c)(1) The Secretary shall prioritize the making of loans 
     authorized by this section to ensure that eligible applicants 
     with the greatest need for Federal assistance shall have the 
     highest priority for available loan funds.
       ``(2) In establishing such priorities, the Secretary shall 
     consider the following indicators of need:
       ``(A) The net income before interest of the applicant;
       ``(B) The weighted average of per capita personal income 
     for the area served or to be served by the applicant;
       ``(C) The weighted average unemployment rate of the area 
     served or to be served by the applicant;
       ``(D) An average annual rate of growth in the total 
     kilowatt hour sales of the applicant during the five year 
     period preceding the date on which the application is made;
       ``(E) The rate of disparity, measured as the difference 
     between the residential rate of the applicant and the average 
     residential rate in the State for all electric utilities, 
     including utilities that are not borrowers under this Act;
       ``(F) The rate level, measured by the average revenue per 
     kilowatt hour that is sold by the applicant to residential 
     and farm consumers;
       ``(G) The cost of power per kilowatt hour purchased or 
     generated by the applicant;
       ``(H) The total kilowatt hour sales per mile of 
     distribution and transmission line, excluding large 
     commercial and industrial consumers and sales for resale; and
       ``(I) The value of distribution and transmission plants in 
     service per kilowatt hours of electricity sold.
       '`(d)(1)(A) The Secretary shall not make any loan under 
     this section if the Secretary determines that the applicant 
     is capable of producing net income before interest of more 
     than 500 percent of the interest requirements on all of the 
     outstanding and proposed loans of the applicant for which the 
     final maturity is greater than one year.
       ``(B) If the Secretary determines that the applicant is 
     capable of producing net income before interest of more than 
     200 percent of the interest requirement of all of the 
     outstanding and proposed loans of the applicant for which the 
     final maturity is greater than one year, the Secretary shall 
     require the applicant to secure at least 10 percent of the 
     total financing required for the proposed project with a loan 
     from a commercial, cooperative, or other legally organized 
     non-governmental lending institution, which loan may not be 
     guaranteed under section 103.
       ``(2) The Secretary shall not make a loan under this 
     section unless the Secretary determines that the applicant is 
     capable of producing income sufficient to repay the loan in 
     accordance to its terms within the agreed time, pay interest 
     on the loan as it becomes due, and repay all other 
     outstanding and proposed indebtedness of the applicant, 
     together with any interest thereon, as payments become due.
       ``(3)(A) The Secretary shall not make any loan under this 
     section unless the Secretary determines that the applicant is 
     unable to obtain all or any part of the funds needed by the 
     applicant elsewhere, including from (i) general funds of the 
     applicant that are in excess of an amount needed for a 
     reasonable reserve, or (ii) loans (with or without a 
     guarantee under section 103) from commercial, cooperative, or 
     other legally organized lending institutions at reasonable 
     rates and terms for loans for similar purposes and periods of 
     time.
       ``(B) The Secretary shall require the applicant to certify 
     in writing that the applicant is unable to obtain sufficient
      credit elsewhere to finance all or any part of the actual 
     needs of the applicant at reasonable rates and terms, 
     taking into consideration prevailing rates for loans and 
     obligations for similar purposes and periods of time.
       ``(4) The Secretary shall not make a loan under this 
     section unless the Secretary determines that the security for 
     the loan will be adequate to ensure full payment of the loan.
       ``(5) The Secretary shall not make any loan under this 
     section unless the applicant has agreed to comply with the 
     requirements of the graduation program established under 
     section 105.
       ``(6) The Secretary shall not make any loan under this 
     section unless all additional requirements of section 104 
     have been met.
       ``(e) The term of each loan made under this section shall 
     be determined by the Secretary and shall not exceed 35 years, 
     or the expected useful life of the assets being financed, 
     whichever is less.
       ``(f)(1) Except as provided for in paragraph (2), the rate 
     of interest on loans under this section shall be equal to the 
     then current costs of money to the Government of the United 
     States for obligations of comparable maturity.
       ``(2)(A) If the Secretary determines that the applicant is 
     not capable of producing net income before interest of more 
     than 200 percent of the interest requirements on all of the 
     outstanding and proposed loans of the applicant for which the 
     final maturity is greater than one year, the rate of interest 
     on the loan shall be the rate established under paragraph (1) 
     but not more than 5 percent per year, except as provided 
     under subparagraph (B).
       ``(B) For any loan whose term is 10 years or more and whose 
     interest rate is limited to 5 percent per year under 
     subparagraph (A), the Secretary shall review the financial 
     status of the borrower every 2 years, and, if the Secretary 
     determines that the borrower is capable of producing net 
     income before interest of more than 200 percent of the 
     interest requirements on all of the outstanding and proposed 
     loans of the applicant for which the final maturity is 
     greater than one year, the 5 percent limitation shall no 
     longer apply to the loan and the rate for the remaining term 
     of the loan shall be the original rate established under 
     paragraph (1).
       ``(g) The Secretary shall charge a loan origination fee of 
     one percent of the amount of the loan if the Secretary 
     determines that the applicant is capable of producing net 
     income before interest of more than 200 percent of the 
     interest requirements on all of the outstanding and proposed 
     loans of the applicant for which the final maturity is 
     greater than one year.
       ``(h) The Secretary may provide a borrower the right to 
     make payment in full on a loan made under this section in 
     advance of final maturity on terms consistent with those 
     provided for commercial loans for similar purposes and 
     maturities.
       ``Sec. 103. Guarantees of Electric Loans from Non-
     governmental Sources of Credit' Lien Accommodations.--(a)(1) 
     To the extent set out in Paragraph (2), the Secretary is 
     authorized and empowered, to guarantee loans that are made by 
     commercial, cooperative, or other legally-organized non-
     governmental lending institutions to any entity, and for any 
     purpose, described in section 102(a).
       ``(2) The Secretary shall guarantee only the payment of 
     that portion of the principal of the loan, and that portion 
     of the interest thereon, that the lender requires as a 
     condition for making the loan. The amount of any such 
     guarantee shall not exceed 90 percent of the principal of the 
     loan and the interest thereon.
       ``(3) The Secretary shall not guarantee any loan to an 
     entity that the Secretary determines is capable of producing 
     income before interest of more than 600 percent of the 
     interest requirements on all of the outstanding and proposed 
     loans of the entity for which the final maturity is greater 
     than one year.
       ``(4) The Secretary shall impose such fees and charges to 
     cover the administrative expense related to any guarantee 
     made under this section as the Secretary determines 
     reasonable.
       ``(5) Any contract of guarantee executed by the Secretary 
     under this section shall be an obligation supported by the
      full faith and credit of the United States and incontestable 
     except for fraud or misrepresentation of which the holder 
     of the guarantee had actual knowledge at the time it 
     become a holder.
       ``(6) The Secretary shall not guarantee any loan under this 
     section unless all additional requirements of section 104 
     have been met.
       ``(b) In order to encourage non-governmental lenders to 
     make loans to eligible entities, or to provide a greater 
     portion of the credit needs of an applicant for a loan under 
     section 102, the Secretary is authorized to share the 
     Government's lien on the loan applicant's or borrower's 
     assets or to subordinate the Government's lien on the 
     property to be financed by the lender. The Secretary shall 
     not offer such accommodation or subordination unless the 
     Secretary determines that the security for all loans made or 
     guaranteed under this Act, the payment of which the borrower 
     is liable, will remain reasonably adequate.
       ``Sec. 104. Additional Requirements and Provisions Relating 
     to Loans and Guarantees.--(a) The Secretary shall not make 
     any loan under section 102 or guarantee any loan under 
     section 103--
       ``(1) if all or any part of the loan to be made or 
     guaranteed will be used to expand the service territory of 
     the applicant or borrower, as the case may be, into an area 
     in which consumers are being served by another utility;
       ``(2) if the applicant or the borrower, as the case may be, 
     has not agreed to follow generally accepted accounting 
     procedures and management practices;
       ``(3) if the applicant or borrower, as the case may be, is 
     prohibited by a charter, bylaw, statute, or regulation, or is 
     otherwise prohibited, from disposing of any or all of the 
     property of the applicant or borrower by a vote greater than 
     a majority of the membership of the applicant or borrower 
     voting in person or by proxy; and
       ``(4) if the applicant or borrower fails to agree to 
     provide to the Secretary a complete and current set of all 
     residential, commercial, or industrial tariffs or rate 
     schedules, power sale agreement, and transmission agreements, 
     and any subsequent changes made thereto, and any additional 
     power sale and transmission agreements entered into by the 
     borrower, during the term of the loan; any such tariffs, 
     schedules, and agreements [[Page S6695]] provided to the 
     Secretary shall be deemed public information and shall be 
     made available within 10 working days of receipt of a verbal, 
     written or electronically transmitted request reasonably 
     describing the information sought.
       ``(b) The Secretary shall ensure that funds shall not be 
     advanced under any loan made section 102 or guaranteed under 
     section 103 unless the approval of any State or Federal 
     agency required with respect to the project to be financed by 
     the loan, or its financing, has been obtained and remains in 
     effect.
       ``(c) If the Secretary determines that the level of general 
     funds of an applicant or borrower is in excess of that needed 
     for a reasonable reserve, the Secretary shall reduce (A) the 
     amount of the loan request in the case of an applicant under 
     section 102, (B) the amount of any advance on a loan made 
     under section 102, or (C) the amount of any guarantee under 
     section 103.
       ``(d) Loans may be made under section 102, or guaranteed 
     under section 103, only to the extent that electrical service 
     to consumers in rural areas will be provided or improved by 
     the facility being financed.
       ``Sec. 105. Graduation Program.--(a) The Secretary shall 
     establish a program under which at least once every 2 years 
     each loan made under section 102 shall be reviewed to 
     determine whether the borrower (1) is able to repay all or 
     any part of the loan with general funds in excess of that 
     needed for a reasonable reserve, or (2) may be able to obtain 
     credit from a commercial, cooperative, or other legally 
     organized non-governmental lending institution in an amount 
     sufficient to meet all or any part of the credit needs of the 
     borrower at reasonable rates and terms, taking into 
     consideration prevailing rates for loans and obligations for 
     similar purposes and periods of time.
       ``(b)(1) To the extent that the Secretary determines that 
     the borrower is able to repay all or any part of the loan 
     from general funds, the borrower shall make payment in full 
     or in part on the loan, without penalty, at such time as the 
     Secretary may require prior to the final maturity date of the 
     loan.
       ``(2) If the Secretary determines that the borrower may be 
     able to meet all or any part of its credit needs from other 
     lenders, with or without a loan guarantee under section 103, 
     the borrower shall be required to--
       ``(A) apply for and accept credit from such lenders, and 
     purchase any stock necessary in connection with the loan if 
     the source is a cooperative lending institution; and
       ``(B) use the proceeds of such credit to make payment, in 
     full or in part, without penalty, on any loan made to the 
     borrower under section 102 at such time as the Secretary may 
     require prior to the final maturity date of such loan.
       ``Sec. 106. Failure To Comply With the Act.--If a borrower 
     of a loan made under section 102 fails to comply with any 
     provision of this Act, or any agreement between the borrower 
     and the Secretary made pursuant thereto, including, but not 
     limited to, the provisions of section 104(a)(6) and section 
     105, the amount outstanding on the loan shall become due and 
     payable upon receipt of a written notice of such failure 
     issued by the Secretary to the borrower. Such notice shall be 
     given to the borrower as soon as possible after such failure 
     to comply with the Act occurs.
       ``Sec. 107. Limitation on Authorization for 
     Appropriations.--In the case of each fiscal year 1996 through 
     2000, there are authorized to be appropriated to the 
     Secretary for the cost, as defined in Section 502 of the 
     Congressional Budget Act of 1974, of loans made and 
     guaranteed under this title, $25,000,000.''.

     SEC. 116. CONFORMING AMENDMENT.

       Section 201 of the Act (7 U.S.C. 921) is amended, in the 
     first sentence, by--
       (a) striking out ``section 3 of''; and
       (b) striking out ``as are provided in section 4 of this 
     Act'' and inserting ``as was provided in section 4 of this 
     Act prior to its repeal.''.

     SEC. 117. RURAL ELECTRIFICATION AND TELEPHONE REVOLVING FUND.

       Section 301 of the Act (7 U.S.C. 931) is amended by--
       (a) redesignating subsection (a) as subsection (b);
       (b) adding a new subsection (a) as follows:
       ``(a) The provisions of this title shall be applicable only 
     to rural electric loans made prior to October 1, 1995, and to 
     rural telephone loans.''; and
       (c) in subsection (b), as redesignated,
       (1) in paragraph (1), striking out ``under sections 4, 5, 
     and 201 of this Act'' and inserting in lieu thereof ``under 
     sections 4 and 5, prior to their repeal, and section 201 of 
     this Act'';
       (2) in paragraph (2), striking out ``under sections 4, 5, 
     and 201'' and inserting in lieu thereof ``under sections 4 
     and 5, prior to their repeal, and section 201 of this Act''; 
     and
       (3) in paragraph (3)--
       (A) striking out ``notwithstanding section 3(a) of title 
     I''; and
       (B) striking out ``held under titles I and II of this Act'' 
     and inserting in lieu thereof ``held under sections 2 through 
     18 of this Act, prior to the amendments made thereto by the 
     ``Rural Electrification and Rural Economic Development 
     Improvement Act of 1995, and title II of this Act''.

     SEC. 118. CONFORMING AMENDMENTS.

       Section 302 of the Act (7 U.S.C. 932) is amended by--
       (a) in subsection (a), striking out ``under sections 4, 5, 
     and 201 of this Act'' and inserting in lieu thereof ``under 
     sections 4 and 5, prior to their repeal, and section 201 of 
     this Act''; and
       (b) in subsection (b)--
       (1) in paragraph (1), striking our ``under sections 4, 5, 
     and 201 of this Act'' and inserting in lieu thereof ``under 
     sections 4 and 5, prior to their repeal, and section 201 of 
     this Act''; and
       (2) in paragraph (2), adding after ``pursuant to section 
     3(a) of this Act'' the following: ``prior to its repeal''.
     SEC. 119. COST OF MONEY RATES FOR CERTAIN ELECTRIC BORROWERS.

       Section 305(c)(2) of the Act (7 U.S.C. 935(c)(2)) is 
     amended to read as follows:
       ``(2) Cost of money loans.--
       ``The Secretary shall make insured electric loans, to the 
     extent of qualifying applications, to eligible applicants 
     that do not meet the requirements for hardship loans under 
     paragraph (1) at the rate of interest equal to then current 
     cost of money to the Government of the United States for 
     loans of similar maturity.''.

     SEC. 120. LIMITATION OF TERMS OF LOANS.

       Section 305(c) of the Act (7 U.S.C. 935(c)) is amended by 
     adding at the end thereof a new paragraph (4) as follows:
       ``(4) Limitation on terms of loans.--
       ``The term of any loan made under this subsection may not 
     exceed the expected useful life of the assets being financed 
     or 35 years, whichever is less.''.

     SEC. 121. ACCOMMODATION AND SUBORDINATION OF LIENS TO ASSIST 
                   CERTAIN BORROWERS IN ACQUIRING CREDIT AFTER 
                   OCTOBER 1, 1996.

       Effective October 1, 1995, section 306 of the Act (7 U.S.C. 
     936) is amended by--
       (a) Adding ``(a)'' before the first sentence; and
       (b) Adding at the end thereof a new subsection (b) as 
     follows:
       ``(b) In order to assist borrowers with outstanding 
     electric loans made under this Act prior to October 1, 1995, 
     who are not eligible for loans under section 102 to meet 
     their further credit needs from commercial, cooperative, or 
     other legally organized lending institutions, the Secretary 
     is authorized to share the Government's lien on the 
     borrower's assets or to subordinate the Government's lien on 
     the property to be financed by the lender to the extent that 
     the Secretary determines that the security for all loans of 
     the borrower made or guaranteed under this Act will remain 
     reasonably adequate.''.

     SEC. 122. REPEAL OF AUTHORIZATION TO REFINANCE FEDERAL 
                   FINANCING BANK LOANS.

       Section 306C of the Act (7 U.S.C. 936c) is repealed.

     SEC. 123. REPEAL OF REQUIREMENT FOR SPECIAL TREATMENT OF 
                   CERTAIN ELECTRIC BORROWERS.

       Section 306E of the Act (7 U.S.C. 936e) is repealed.

     SEC. 124. REPEAL OF 30 PERCENT LIMITATION ON REQUIRED 
                   FINANCING FROM OTHER SOURCES.

       Section 307 of the Act (7 U.S.C. 937) is amended by 
     striking out the last sentence thereof.

     SEC. 125. REPEAL OF AUTHORIZATION TO REFINANCE CERTAIN RURAL 
                   DEVELOPMENT LOANS.

       Section 310 of the Act (7 U.S.C. 940) is repealed.

     SEC. 126. USE OF FUNDS.

       Section 312 of the Act (7 U.S.C. 940b) is repealed.

     SEC. 127. REPEAL OF CUSHION OF CREDIT PAYMENTS PROGRAM.

       Section 313 of the Act (7 U.S.C. 940c) is repealed.

     SEC. 128. REPEAL OF CERTAIN AUTHORIZATIONS FOR 
                   APPROPRIATIONS.

       Section 314 of the Act (7 U.S.C. 940d) is amended in 
     subsection (b) by--
       (a) striking out paragraphs (1) and (2); and
       (b) renumbering paragraphs (3) and (4) as paragraphs (1) 
     and (2), respectively.

  TITLE II--PRESERVATION OF EXCLUSIVE STATE JURISDICTION OVER RETAIL 
                     ELECTRIC SERVICE TERRITORIES.

     SEC. 201. AMENDMENT TO THE FEDERAL POWER ACT OF 1935.

       Section 201 of the Federal Power Act of 1935 (16 U.S.C. 
     824) is amended by adding at the end thereof the following 
     new subsection:
       ``(h) Exclusive State Jurisdiction Over Allocation of 
     Retail Electric Service Territories.--
       ``Notwithstanding any other provision of law, the 
     regulation and allocation of service territories or service 
     areas to providers of electric service shall be subject only 
     to State law and shall not be subject to the requirements of 
     this Act, or any other provision of Federal law. No Executive 
     agency (as defined in section 105 of title 5, United States 
     Code) shall have authority to preempt or interfere with the 
     operation of any law of a State or a political subdivision of 
     a State relating to a service territory or service area 
     allocation to providers of electric service.''.
 TITLE III--IMPROVEMENTS TO THE DELIVERY OF RURAL DEVELOPMENT PROGRAMS

     SEC. 301. ELIGIBILITY FOR WATER AND WASTE LOAN AND GRANT 
                   PROGRAMS.

       The Consolidated Farm and Rural Development Act (7 U.S.C. 
     1921 et seq.) is amended by--
       (1) in subsection (a) of section 306 (7 U.S.C. 1926(a)), 
     striking out the second sentence; and
       (2) in section 365 (7 U.S.C. 2008), striking out subsection 
     (h).
     [[Page S6696]]
     
     SEC. 302. REGULATIONS UNDER SECTION 370 OF THE CONSOLIDATED 
                   FARM AND RURAL DEVELOPMENT ACT.

       If the Secretary of Agriculture has not issued final or 
     interim final regulations to ensure compliance with the 
     provisions of section 370(a) of the Consolidated Farm and 
     Rural Development Act (7 U.S.C. 2008e) on or before September 
     30, 1995, the Secretary shall not make any loan, loan 
     advance, or grant for rural development purposes under any 
     provision of such Act or any loan, loan advance, or grant 
     under any provision of the Rural Electrification Act of 1936 
     until such regulations are issued.

     SEC. 303. ADMINISTRATION OF RURAL DEVELOPMENT PROGRAMS.

       The Consolidated Farm and Rural Development Act of 1972 (7 
     U.S.C. 1921 et seq.) is amended by adding at the end 
     therefore the following new section:

     ``SEC. 372. ADMINISTRATION OF RURAL DEVELOPMENT PROGRAMS.

       ``Notwithstanding any other provision of law, in 
     administering all rural development programs and activities, 
     other than rural development programs relating to rural 
     businesses and industry development, the Secretary shall give 
     priority, in the awarding of all loans and grants (including, 
     but not limited to, grants and loans provided under Title V 
     of the Rural Electrification Act of 1936), to rural 
     development projects that are included in a local, regional, 
     or State-wide development plan and the Secretary shall give 
     the highest priority to public bodies and nonprofit entities 
     that operate on a nonprofit basis.''.

     SEC. 304. EQUAL ACCESS TO FEDERAL RURAL DEVELOPMENT FUNDS.

       Section 502 of the Rural Electrification Act of 1936 (7 
     U.S.C. 950aa-1) is amended--
       (a) in paragraph (1) of subsection (b)--
       (1) in the first sentence, by striking out ``Borrowers 
     under this Act'' and inserting in lieu thereof ``Borrowers 
     under this Act and all nonprofit entities''; and
       (2) by striking out the second sentence.
       (b) in section (b), by adding at the end thereof the 
     following new paragraph:
       ``(4) Preference for Nonprofit Entities.--In reviewing 
     applications for assistance, the Secretary shall give the 
     highest priority to those applications and preapplications 
     submitted by nonprofit entities that operate on a nonprofit 
     basis.''; and
       (c) in subsection (e), by striking out the second sentence.

     SEC. 305. ELIMINATION OF DUPLICATIVE PROGRAMS.

       Section 2322 of the Food, Agriculture, Conservation, and 
     Trade Act of 1990 (7 U.S.C. 1926-1) is repealed.
     

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