TITLE:	Apportionment of Budget Authority for America West Airlines
BNUMBER:	  B-290600
DATE:		   July 10, 2002
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Apportionment of Budget Authority for America West Airlines, B-290600,
July 10, 2002

B-290600


July 10, 2002

The Honorable Bill Young
Chairman
Committee on Appropriations
House of Representatives

Subject:   Apportionment of Budget Authority for America West Airlines

Dear Mr. Chairman:

This responds to your letter dated May 20, 2002.  You requested that we
determine whether the Office of Management and Budget (OMB) violated the
Antideficiency Act in apportioning $172 million of budget authority for
airline loan guarantees authorized under Title I of the Air Transportation
Safety and System Stabilization Act, Public Law 107-42, 115 Stat. 230
(2001).  As explained in further detail below, both OMB and the Air
Transportation Stabilization Board (ATSB), in January 2002, violated the
Antideficiency Act.  Four months later, in May 2002, the Administration
corrected the violations.  On June 25, 2002, ATSB reported to the Congress
and the President that ATSB and OMB violated the Act, and that OMB had
implemented procedures expected to ensure that a violation of this type does
not occur again.

Congress established the ATSB to review and decide on applications for
federal credit instruments to air carriers.  It is composed of the Secretary
of Transportation, the Chairman of the Board of Governors of the Federal
Reserve System, the Secretary of the Treasury, and the Comptroller General
of the United States (a nonvoting member), or their designees.  Pub. L. No.
107-42, ï¿½ 102(b), 115 Stat. 231.  The Comptroller General does not
"participate in the review, operations, or deliberations of the Board in
connection with individual loan guarantees, or otherwise participate in the
Board's exercise of any executive power."  14 C.F.R. ï¿½ 1300.2.

The Air Transportation Safety and System Stabilization Act authorized the
President to issue up to $10 billion in federal credit instruments in the
form of loan guarantees,
and to provide the subsidy amounts necessary for such instruments,[1] to
assist air
carriers who incurred losses resulting from the September 11, 2001,
terrorist attacks on the United States.  Pub. L. No. 107-42, Title I, ï¿½
101(a)(1), 115 Stat. 230.  The Act designated "the amount of new budget
authority and outlays in all fiscal years resulting from this title as an
emergency requirement pursuant to section 252(e) of the Balanced Budget and
Emergency Deficit Control Act of 1985 (2 U.S.C. ï¿½ 901(e))."  Id. at ï¿½
101(b).  The Act further provided that budget authority "shall be available
only to the extent that a request, that includes designation of such amount
as an emergency requirement as defined in such Act, is transmitted by the
President to Congress."  Id.

At issue here is the subsidy amount for a loan guarantee for America West
Airlines.  ATSB approved America West's application for a loan guarantee on
December 28, 2001.  Shortly thereafter, on January 18, 2002, OMB apportioned
$172,067,610 to support the subsidy cost associated with the loan
guarantee.  Standard Form 132, Apportionment and Reapportionment Schedule,
20X0122 Air Transportation Stabilization Program Account, Jan. 18, 2002.  On
that same day, the ATSB signed the loan guarantee for America West.[2]
However, it was not until May 15, 2002, after a letter of that same date
from the Director, OMB, to the President, that the President transmitted to
the Congress the request, required by section 101(b), designating the $172
million in subsidy budget authority as an emergency requirement pursuant to
section 252(e) of the Balanced Budget and Emergency Deficit Control Act of
1985.  Letters from the President to the Speaker of the House and to the
President of the Senate, May 15, 2002.

In January, when OMB apportioned and ATSB obligated the $172 million at
issue here, there was no budget authority available for apportionment and
obligation.  The Stabilization Act clearly makes the budget authority
enacted therein available "only to the extent that" the President transmits
a request to the Congress designating the amount identified in the request
as an emergency requirement as defined in the Balanced Budget and Emergency
Deficit Control Act of 1985.  Pub. L. No. 107-42,
ï¿½ 101(b), 115 Stat. 230.  Even though the Stabilization Act envisions no
further congressional action in response to the President's request, the
availability of the
budget authority provided in the Act is expressly contingent upon
transmission of the request.  As a result, the $172 million at issue only
became available on May 15, almost four months after OMB apportioned and
ATSB obligated it.

The Antideficiency Act prohibits both the making or the authorizing of
obligations or expenditures in advance of, or in excess of, available
appropriations.  31 U.S.C.
ï¿½ 1341.  An agency may obligate an appropriation only after OMB has
apportioned it to the agency. [3]  31 U.S.C. ï¿½ï¿½ 1512(1), 1513(b); Exec.
Order No. 6166, ï¿½ 16 (June 10, 1933).  OMB apportioned the $172 million on
January 18, 2002, authorizing ATSB to obligate the amount, in advance of its
availability, and thus in excess of available amounts.  Apparently in
reliance on OMB's apportionment, ATSB obligated the amount in advance of its
availability, and thereby incurred an obligation in excess of available
amounts.  We conclude, therefore, that both OMB and ATSB violated the
Antideficiency Act.  The President, on May 15, satisfied the section 101(b)
request transmittal requirement, thereby curing OMB's and ATSB's January
violations.

The Antideficiency Act requires that if an officer or employee of an
executive agency violates the Act, the agency head "shall report immediately
to the President and Congress all relevant facts and a statement of actions
taken."  31 U.S.C. ï¿½ 1351.  OMB provides further instructions for preparing
the reports in OMB Circular A-34, section 40, "Requirements for Reporting
Antideficiency Act Violations" (2000).

In accordance with OMB Circular A-34, on June 25, 2002, ATSB reported "a
violation of the Antideficiency Act by the Air Transportation Stabilization
Board … and the Office of Management and Budget (OMB)."  ATSB stated
that "OMB's official signed the apportionment before the materials necessary
for Presidential designation of emergency spending had been signed and
transmitted to Congress."  ATSB stated that it violated the Act when it
obligated the budget authority "because the Presidential designation had not
occurred before the funds were obligated."  ATSB explained that "The
requisite papers were not timely requested, prepared and presented to the
President for his designation of the budget authority as 'emergency
requirements' as is required by OMB Circular A-11, section 111 (2001)."
ATSB noted that "Both OMB and the Board erroneously assumed that all
necessary steps to make the funds available had been completed."  ATSB said
that when OMB realized the error, "OMB prepared a request to Congress
designating $172 million in subsidy budget authority for the $429 million
America West loan guarantee as an emergency requirement."

ATSB stated that, in its future requests to OMB for apportionments related
to loan guarantees, it will include a copy of the executed presidential
emergency designation letter.  ATSB also reported that OMB will modify
Circular A-34 to include instructions for all agencies and OMB
representatives for processing presidential designation packages.  The
instructions will include a notice that "Agencies may obligate contingent
emergency funds only after the President formally designates the funds as an
emergency requirement."

We trust that this is responsive to your request.  If you have any
questions, please contact Susan Poling, Managing Associate General Counsel
(202-512-2667), of my staff.

Sincerely yours,
Anthony H. Gamboa
General Counsel

cc:  The Honorable J. Dennis Hastert, Speaker of the House of
Representatives
       The Honorable Richard Cheney, President of the Senate
       The Honorable David R. Obey, Ranking Minority Member, House
Appropriations
         Committee
       The Honorable Robert Byrd, Chairman, Senate Appropriations Committee
       The Honorable Ted Stevens, Ranking Member, Senate Appropriations
Committee
       The Honorable Joseph Lieberman, Chairman, Senate Governmental Affairs
          Committee
       The Honorable Dan Burton, Chairman, House Government Reform Committee



DIGEST



The Antideficiency Act prohibits both the making or the authorizing of
obligations or expenditures in advance of, or in excess of, available
appropriations.  31 U.S.C.
ï¿½ 1341.  When the Office of Management and Budget (OMB) apportioned, and the
Air Transportation Stabilization Board (ATSB) obligated, $172 million in
budget authority for the subsidy cost of a loan guarantee for America West
Airlines, authorized pursuant to Title I of the Air Transportation Safety
and System Stabilization Act, Public Law 107-42, 115 Stat. 230 (2001), prior
to the availability of the budget authority, both OMB and ATSB violated the
Antideficiency Act.

                          -------------------------

[1] Pursuant to the Federal Credit Reform Act, agencies are required to have
budget authority in advance to cover the long-term costs of direct loans and
loan guarantees.  2 U.S.C. ï¿½ 661c(b).  The cost of a loan guarantee (the
subsidy cost) is the net present value of estimated payments by the
government to cover defaults and delinquencies, interest subsidies, or other
payments and fees.  2 U.S.C. ï¿½ 661a(5)(C).  The
Stabilization Act requires that subsidy amounts for the Stabilization Act
loan guarantees be provided in accordance with the Federal Credit Reform
Act.  Pub. L. No. 107-42, ï¿½ 101(a)(1), 115 Stat. 230.

[2] For purposes of the Antideficiency Act, when an agency signs a loan
guarantee, the obligation arises to cover the subsidy cost.  2 U.S.C. ï¿½
661c(d)(1).
[3] An apportionment is "The action by which OMB distributes amounts
available for obligation  …  in an appropriation or fund account."  A
Glossary of Terms Used in the Federal Budget Process: Exposure Draft,
GAO/AFMD-2.1.1 at 15 (1993).  The Act permits apportioning by activities and
projects, as well as time periods.  31 U.S.C.
ï¿½ 1512(b)(1).