(Archived Content)
FROM THE OFFICE OF PUBLIC AFFAIRS
JS-634
July 30, 2003
The Honorable J. Dennis Hastert
Speaker of the House
U.S. House of Representatives
Washington, DC 20515
Dear Mr. Speaker:
On December 24, 2002, Treasury informed Congress that the public debt outstanding would reach the statutory limit of $6.4 trillion in the latter half of February 2003. The public debt outstanding first reached the statutory limit on February 20, 2003, and beginning on that date and thereafter, Treasury suspended additional investments of the Government Securities Investment Fund, as necessary, and took other lawful actions in order to keep from exceeding the statutory limit. On April 4, 2003, Treasury informed Congress that a debt issuance suspension periodwould begin as early as April 4, but not later than April 11, and last until July 11, 2003. Subsequently, on May 19, 2003, the debt issuance suspension periodwas extended from July 11 to December 19, 2003. From April 8 through May 27, 2003, outstanding Treasury debt would have exceeded the statutory limit if the Secretary of the Treasury had not taken actions relating to the investment of assets of the Civil Service Retirement and Disability Fund (CSRDF). This is the report required by section 8348 of Title 5, United States Code, concerning the operation and status of the CSRDF during the recent debt issuance suspension period. 1 As explained below, the CSRDF has been fully restored.
Section 8348(j)(1) authorizes the Secretary to suspend the issuance of obligations to the CSRDF if new obligations could not be issued without exceeding the public debt limit. In addition, if the Secretary determines that a debt issuance suspension periodexists, he is authorized by section 8348(k)(1) and (2) to sell or redeem securities held by the CSRDF to obtain any amount of funds not exceeding an amount equal to the total amount of the benefit and other payments authorized to be made from the CSRDF during the debt issuance suspension period.
On April 8, 2003 and May 20, 2003, investments 2 of the CSRDF were redeemed in order to prevent the public debt from exceeding the statutory limit. During the debt issuance suspension period, the CSRDF also received funds that could not be invested without exceeding the debt limit. CSRDF receipts received between April 8 and May 27 totaling $2,541,232,000 remained uninvested.
Section 8348(j)(3) requires the Secretary, upon expiration of a debt issuance suspension period, to issue to the CSRDF obligations that will ensure that the holdings of the fund replicate to the maximum extent practicable the obligations the fund would have held upon the expiration of the debt issuance suspension period if the debt issuance suspension period had not occurred. Section 8348(j)(4) requires the Secretary to pay to the CSRDF on the first normal interest payment date following the expiration of a debt issuance suspension period the amount of interest that would have been earned by the CSRDF if the debt issuance suspension period had not occurred.
On May 27, 2003, the debt issuance suspension period ended when the President signed legislation increasing the permanent debt limit to $7.384 trillion (P.L. 108-24). In order to place the CSRDF in the same financial position it would have been in had there not been a debt issuance suspension period, the following actions were taken on May 27 and June 30, the first normal interest payment date following the expiration of the debt issuance suspension period.
- On May 27:
- Uninvested receipts of the CSRDF totaling $2,541,232,000 were invested in a 4% certificate of indebtedness maturing June 30, 2003.
- Principal amounts of the 5% bond redeemed and not otherwise used for benefit payments during the debt issuance suspension period totaling $28,290,099,000 were
invested in a 5% bond maturing June 30, 2017. - A certificate of indebtedness maturing June 30, 2003 was redeemed with interest and principal totaling about $4,109,901,000. A principal amount of $4,109,901,000 was invested in the 5% bond maturing June 30, 2017. 3
- On June 30:
- Interest totaling $100,822,854.44, representing the amount that would have been earned, but for the debt issuance suspension period, was paid and invested. This represents interest lost from the early redemption of the 5% bond on April 8 and May 20 and interest on receipts uninvested between April 8 and May 27. Based on these actions, the CSRDF has been fully restored to the condition in which it would
have been had there not been a debt issuance suspension period.
Sincerely,
Brian Roseboro
Assistant Secretary for
Financial Markets
Letter sent to:
Rep. Hastert - Speaker of the House
Rep. DeLay - House Majority Leader
Rep. Pelosi - House Minority Leader
Rep. Thomas - Ways & Means Committee, Chairman
Rep. Rangel - Ways & Means Committee, Ranking Member
Rep. Nussle - Budget Committee, Chairman
Rep. Spratt - Budget Committee, Ranking Member
Rep. Oxley - Financial Services Committee, Chairman
Rep. Frank - Financial Services Committee, Ranking Member
Rep. Davis - Government Reform Committee, Chairman
Rep. Waxman - Government Reform Committee, Ranking Member
Sen. Frist - Senate Majority Leader
Sen. Daschle - Senate Minority Leader
Sen. Stevens - President Pro Tempore of the Senate
Sen. Grassley - Finance Committee, Chairman
Sen. Baucus - Finance Committee, Ranking Member
Sen. Shelby - Banking, Housing, and Urban Affairs Committee, Chairman
Sen. Sarbanes - Banking, Housing, and Urban Affairs Committee, Ranking Member
Sen. Nickles - Budget Committee, Chairman
Sen. Conrad - Budget Committee, Ranking Member
Sen. Collins - Governmental Affairs Committee, Chairman
Sen. Lieberman - Governmental Affairs Committee, Ranking Member
1 A similar report covering the operation and status of the Government Securities Investment Fund of the federal employeesThrift Savings Plan was submitted to Congress on June 27, 2003.
2 Par Value: $12,150,000,000; Maturity: June 30, 2017; Interest Rate: 5%; Redeemed April 8, 2003. Par Value: $20,250,000,000; Maturity: June 30, 2017; Interest Rate: 5%; Redeemed May 20, 2003.
3 This represents principal from the bonds redeemed on April 18 and May 20 and used to make the benefit payments during the DISP (May 1, 2003 - $3,959,209,000; May 7, 2003 - $75,346,000; and May 8, 2003 - $75,346, 000). Had the DISP not occurred, these payments would have been properly paid through the redemption of certificates of indebtedness.