[Congressional Record Volume 143, Number 152 (Tuesday, November 4, 1997)]
[Senate]
[Pages S11701-S11703]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       CBO COST ESTIMATE--S. 1228

 Mr. D'AMATO. Mr. President, the Committee on Banking, Housing, 
and Urban Affairs reported S. 1228, the 50 States Commemorative Coin 
Program Act on Friday, October 31, 1997. The committee report, Senate 
Report No. 105-130, was filed the same day.
  The Congressional Budget Office cost estimate required by Senate Rule 
XXVI, section 11(b) of the Standing Rules of the Senate and section 403 
of the Congressional Budget Impoundment and Control Act, was not 
available at the time of filing and, therefore, was not included in the 
committee report. Instead, the committee indicated the Congressional 
Budget Office cost estimate would be published in the Congressional 
Record when it became available.
  Mr. President, I ask that the full statement and cover letter from 
the Congressional Budget Office regarding S. 1228 be printed in the 
Record.
  The material follows:

                                                    U.S. Congress,


                                  Congressional Budget Office,

                                 Washington, DC, October 31, 1997.
     Hon. Alfonse M. D'Amato,
     Chairman, Committee on Banking, Housing, and Urban Affairs, 
         U.S. Senate, Washington, DC.
       Dear Mr. Chairman: The Congressional Budget Office has 
     prepared the enclosed cost estimate for S. 1228, the 50 
     States Commemorative Coin Program Act.
       If you wish further details on this estimate, we will be 
     pleased to provide them. The CBO staff contact is John R. 
     Righter (for federal costs), and Matthew Eyles (for the 
     private-sector impact).
           Sincerely,
                                                     James L. Blum
                                  (For June E. O'Neill, Director).
       Enclosure.


               congressional budget office cost estimate

     S. 1228--50 States Commemorative Coin Program Act
       Summary: S. 1228 would require the U.S. Mint to make 
     changes to the quarter-dollar and one-dollar coins and to 
     issue three coins commemorating the 100th anniversary of the 
     first flight at Kitty Hawk, North Carolina. CBO estimates 
     that enacting this bill would decrease direct spending by $15 
     million over the 1998-2002 period and by $40 million over the 
     1998-2007 period. Because the bill would affect direct 
     spending, pay-as-you-go procedures would apply. S. 1228 
     contains no intergovernmental or private-sector mandates as 
     defined in the Unfunded Mandates Reform Act of 1995 (UMRA) 
     and would not affect the budgets of state, local, or tribal 
     governments.
       Description of the bill's major provisions: S. 1228 would 
     direct the Secretary of the Treasury to design and issue a 
     series of quarters commemorating the 50 states over a 10-year 
     period beginning in 1999. During this period, designs for 
     each state would replace the current eagle design on the 
     reverse side of

[[Page S11702]]

     the George Washington quarter. The Mint would issue five 
     quarters a year in the order that the states ratified the 
     Constitution or were admitted into the Union. Before 
     selecting an emblem for each state, the Secretary of the 
     Treasury would consult with the state's governor and with the 
     federal Commission of Fine Arts (CFA) and would submit the 
     selected design for review by the Citizens Commemorative Coin 
     Advisory Committee (CCCAC). The bill would authorize the Mint 
     to sell silver replicas of the quarters--both in proof and 
     uncirculated versions.
       S. 1228 also would permanently replace the current Susan B. 
     Anthony one-dollar coin with a new dollar coin. Under the 
     bill, the Mint could produce additional quantities of the 
     Susan B. Anthony, if needed, until the new coin was ready for 
     circulation. (The Mint predicts that public demand will 
     exhaust its current inventory of approximately 130 million 
     coins in about 30 months.) The new one-dollar coin would be 
     golden in color and have distinctive tactile and visual 
     features but would have the same diameter and weight as the 
     current coin. In consultation with the Congress, the 
     Secretary of the Treasury would select the designs for both 
     sides of the coin. The bill also would direct the Treasury to 
     market the coin to the American public before placing it into 
     circulation and to study and report to the Congress on the 
     results of its efforts. In addition, the Mint would have the 
     authority to include quantities of the new coin in collector 
     sets sold to the public prior to its introduction into 
     circulation. Unlike previous proposals to introduce a new 
     dollar coin, S. 1228 would not eliminate the one-dollar bill.
       Finally, S. 1228 would direct the U.S. Mint to produce a 
     ten-dollar gold coin, a one-dollar silver coin, and a half-
     dollar clad coin in fiscal years 2003 and 2004 commemorating 
     the 100th anniversary of the first flight of Orville and 
     Wilbur Wright at Kitty Hawk, North Carolina. In selecting a 
     design for each coin, the Secretary of the Treasury would 
     consult with the Board of Directors of the First Flight 
     Foundation and the CFA and submit the designs for review by 
     the CCCAC. The coins would be available for sale from August 
     1, 2003, through July 31, 2004. The price of each coin would 
     equal the sum of its face value, the amount of the surcharge 
     set for it by the bill, and the costs of the Mint to produce 
     it. The bill would set a surcharge of $35 per coin for the 
     ten-dollar coin, $10 per coin for the one-dollar coin, and $1 
     per coin for the half-dollar coin. S. 1228 would require the 
     Mint to transfer all proceeds from surcharges to the First 
     Flight Foundation.
       Estimated cost to the Federal Government: The estimated 
     budgetary impact of S. 1228 is shown in the following table. 
     The costs of this legislation fall within budget function 800 
     (general government).
       In addition to the budgetary effects summarized in the 
     table, by increasing the public's holding of coins, S. 1228 
     also would result in the government acquiring additional 
     resources for financing the federal deficit. The seigniorage 
     (or profit, the difference between the face value of coins 
     and their cost of production) from placing the additional 
     coins in circulation would reduce the amount of government 
     borrowing from the public. Under the principles established 
     by the President's Commission on Budget Concepts in 1967, 
     seigniorage does not affect the deficit but is treated as a 
     means of financing the deficit.

------------------------------------------------------------------------
                                         By fiscal year, in millions of 
                                                   dollars--            
                                      ----------------------------------
                                        1998   1999   2000   2001   2002
------------------------------------------------------------------------
                       CHANGES IN DIRECT SPENDING                       
50 States Quarter Program:                                              
  Estimated Budget Authority.........      0     -8     -5     -5     -5
  Estimated Outlays..................      0     -8     -5     -5     -5
New One-Dollar Coin:                                                    
  Estimated Budget Authority.........      1      3      3      1      0
  Estimated Outlays..................      1      3      3      1      0
Net Change in Direct Spending Under                                     
 S. 1228:                                                               
  Estimated Budget Authority.........      1     -5     -2     -4     -5
  Estimated Outlays..................      1     -5     -2     -4     -5
------------------------------------------------------------------------
Note.--The table only includes provisions that would change direct      
  spending in fiscal years 1998 through 2002. S. 1228 also includes a   
  provision that would authorize the Mint to issue three commemorative  
  coins during fiscal years 2003 and 2004.                              

     Basis of estimate
       Direct spending
       50 States Circulating Commemorative Quarter Program. 
     Beginning in 1999, S. 1228 would authorize the Mint to sell 
     silver replicas of the redesigned 50 states quarters--both in 
     proof and uncirculated varieties. CBO estimates that enacting 
     this provision would decrease direct spending by $23 million 
     over the 1998-2002 period and by $48 million over the 1998-
     2007 period.
       CBO assumes the Mint would sell a five-coin proof set a 
     price of around $30, which would cover the full cost of the 
     set and provide it with a margin of profit consistent with 
     past silver proof sets. We also assume the Mint would sell 
     each uncirculated silver quarter at a price equal to the spot 
     price of silver plus a markup of 3 percent. Because the 
     silver replicas would be sold as a commercial product, the 
     receipts would constitute offsetting collections to the Mint. 
     Based on information provided by the Mint, including 
     historical sales and profit data for past silver proof and 
     uncirculated designs, CBO estimates that the sale of the 
     silver replicas would increase offsetting collections to the 
     Mint by about $10 million each year for a total of $40 
     million over the 1999-2002 period. This estimate assumes 
     that, on average, the Mint would sell about 1 million five-
     coin proof sets each year, which would generate the $10 
     million in profits. CBO expects that the profits earned in 
     any one year from selling uncirculated versions of the 
     quarters would not be significant.
       Public Law 104-52, which established the U.S. Mint Public 
     Enterprise Fund, requires the Mint to transfer any excess 
     funds to the general fund of the Treasury at least annually. 
     For the purposes of this estimate, CBO assumes that the Mint 
     would retain about one-half of the $10 million in increased 
     offsetting collections generated from annual sales of the 
     silver replicas. We estimate that half of the amount retained 
     would be spent in the same fiscal year, with the other half 
     spent in the following fiscal year. In total, net direct 
     spending would decrease by between $20 million and $25 
     million over the 1998-2002 period, or by about one-half of 
     the increase in offsetting collections to the Mint.
       New One-Dollar Coin. S. 1228 would replace the current 
     Susan B. Anthony one-dollar coin with a new one-dollar coin. 
     The bill would authorize the Mint to produce quantities of 
     the Susan B. Anthony, as needed, until the new coin was ready 
     for circulation. (The Mint has not produced any new Susan B. 
     Anthony coins since 1981). According to the Mint, it would 
     need at least 30 months to design, test, and produce a new 
     one-dollar coin for circulation. Thus, assuming this bill is 
     enacted within the next several months. CBO expects that the 
     new coin would not begin circulating before sometime in 
     fiscal year 2000. CBO estimates that producing a new one-
     dollar coin would increase direct spending by between $5 
     million and $10 million over the 1998-2002 period.
       Previously, the Mint has estimated cost of about $93 
     million to purchase the necessary infrastructure and 
     materials and to design and promote a new one-dollar coin. 
     That estimate, however, assumed that the one-dollar bill 
     would be eliminated, and that the Mint would produce an 
     initial supply of approximately 9 billion coins to meet the 
     public's demand for one-dollar currency. Under S. 1228, CBO 
     expects the public's annual demand for one-dollar coins would 
     approximate the roughly 50 million Susan B. Anthony coins 
     currently added to the nation's circulation of coins each 
     year. Thus, based on information provided by the Mint, CBO 
     estimates start-up costs under this bill of between $5 
     million and $10 million. That estimate includes the costs to 
     research, design, and test the new coin and to market it to 
     the public. CBO estimates the Mint would also incur costs of 
     less than $500,000 in fiscal year 2001 to study the effects 
     of the marketing program and report its results to the 
     Congress by March 31, 2001.
       S. 1228 also would authorize the Mint to include the 
     redesigned dollar coin in coin sets sold as commercial 
     products to the public. The Mint currently offers a five-coin 
     proof set, a five-coin silver proof set, and a 10-coin 
     uncirculated set. Adding a redesigned dollar coin to one or 
     all of these sets could increase offsetting collections to 
     the U.S. Mint Public Enterprise Fund if its addition 
     increases collectors' interest in the sets. It is uncertain 
     whether the Mint would add a redesigned dollar coin to each 
     of these sets. Given the addition of the commercial items 
     that would be included under the 50 states quarter program, 
     as well as the Mint's recent introduction of platinum coins 
     and its expected first-time issue of .9999 fine gold coin 
     sets, CBO estimates that even if the Mint does include the 
     new dollar coin, any increase in net offsetting collections 
     from the sale of all commercial products would be small--
     as much as several million dollars in the first two 
     years--and largely one-time. In addition, CBO estimates 
     that the Mint would retain and spend any additional 
     collections, resulting in no net budgetary effect over 
     time.
       Commemorative Coins. S. 1228 would direct the Mint to 
     produce and issue three coins commemorating the 100th 
     anniversary of the first flight at Kitty Hawk, North 
     Carolina. Because the coins would not become available until 
     2003, the provision would have no budgetary impact over the 
     next five years. CBO estimates that the provision would have 
     no net budgetary effect over the 1998-2007 period. The bill 
     could raise as much as $9.25 million in surcharges if the 
     Mint sold the maximum mintage level authorized for each coin, 
     although the experience of recent anniversary-based 
     commemoratives suggests that sales would be less than the 
     authorized total of 1.35 million coins. Because the bill 
     would require that the Mint transfer all surcharges to the 
     First Flight Foundation, a nonfederal entity, proceeds from 
     surcharges would have no net budgetary impact over time. We 
     expect that the Mint would retain and spend any additional 
     net proceeds generated from such sales to fund other 
     commercial activities.
       Seigniorage
       In addition to the bills' effects on direct spending, by 
     increasing the public's holding of quarters, S. 1228 also 
     would result in the government acquiring additional resources 
     for financing the federal deficit. Based on the previous 
     experience of both the United States, with the bicentennial 
     quarter in 1975 and 1976, and Canada, with its series of 
     quarters commemorating its 12 provinces and territories in 
     1992, CBO expects that enacting the bill would lead to a 
     greater production of quarters. The seigniorage, or profit, 
     from placing the additional coins in circulation would reduce 
     the amount of government borrowing from the public. Such 
     profits are

[[Page S11703]]

     likely to be very significant--the Mint estimates that the 
     seigniorage from making a quarter is 20.2 cents, so for each 
     additional $100 million worth of quarters put into 
     circulation each year for 10 years, the amount of seigniorage 
     earned by the federal government would increase by about $808 
     million over the ten-year period.
       By substituting a new dollar coin for the current Susan B. 
     Anthony, the legislation could also affect the seigniorage 
     earned--estimated at 92 cents per coin--from circulating one-
     dollar coins. That increase would occur only to the extent 
     that the public demanded more one-dollar coins than under 
     current law. (According to the Mint, the federal government 
     currently is increasing the amount of Susan B. Anthony 
     dollars placed in circulation by about 50 million coins each 
     year.) Because S. 1228 would not eliminate the one-dollar 
     bill, CBO expects that any increase in circulation of the 
     one-dollar coin would not be significant.
       Previously, CBO has done estimates for proposals that would 
     replace the one-dollar bill with a new one-dollar coin. S. 
     1228 would not remove the one-dollar bill from circulation. 
     Consequently, the savings in the production and handling of 
     the nation's currency and the changes in seigniorage 
     previously estimated by CBO would not apply to S. 1228.
       Pay-as-you-go-considerations: The Balanced Budget and 
     Emergency Deficit Control Act of 1985 specifies procedures 
     for legislation affecting direct spending or receipts. The 
     projected changes in direct spending are shown in the 
     following table for fiscal years 1998 through 2007. For 
     purposes of enforcing pay-as-you-go procedures, however, only 
     the effects in the budget year and the succeeding four years 
     are counted.

                                                   SUMMARY OF EFFECTS ON DIRECT SPENDING AND RECEIPTS                                                   
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                              By fiscal year, in millions of dollars--                                  
                                           -------------------------------------------------------------------------------------------------------------
                                               1998       1999       2000       2001       2002       2003       2004       2005       2006       2007  
--------------------------------------------------------------------------------------------------------------------------------------------------------
Changes in outlays........................          1         -5         -2         -4         -5         -5         -5         -5         -5         -5
Changes in receipts.......................                                                                                                              
(9) Not applicable                                                                                                                                      
--------------------------------------------------------------------------------------------------------------------------------------------------------

       Estimated impact on State, local, and tribal governments: 
     S. 1228 contains no intergovernmental mandates as defined in 
     UMRA and would not affect the budgets of state, local, or 
     tribal governments.
       Estimated impact on the private sector: S. 1228 contains no 
     private-sector mandates as defined in UMRA. However, some 
     private-sector entities would incur costs as a result of 
     provisions in the bill to issue a new dollar coin. Vending 
     machine operators who choose to accept the new coin, for 
     example, would be required to modify their machines because 
     the electromagnetic properties of the new gold-colored dollar 
     coin would be different from those of the Susan B. Anthony 
     dollar (which many machines are currently equipped to 
     accept). Costs of modification would be reduced if the new 
     coins were used with some regularity and operators were able 
     to eliminate bill acceptors from most vending machines. In 
     addition, to the extent that the dollar coin circulates even 
     modestly, depository institutions would incur some additional 
     expenses because they bear a substantial share of processing 
     costs for all circulating coinage. Other entities, such as 
     mass transit authorities, would experience lower costs 
     because coins can be collected and processed at a cost that 
     is significantly lower than notes. Mass transit authorities, 
     however, are generally publicly operated and therefore not 
     included in the private sector. Nevertheless, because no 
     provision in federal law requires any person or organization 
     to accept a specific form of payment, including the proposed 
     new dollar coin, S. 1228 contains no private-sector mandates 
     as defined in UMRA.
       Estimate prepared by: Federal Costs: John R. Righter. 
     Impact on the Private Sector: Matthew Eyles.
       Estimated approved by: Paul N. Van de Water, Assistant 
     Director for Budget Analysis.

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