CBO to Gregg: Asbestos Trust Fund Will Violate Budget Law
Feb. 14, 2006
CBO to Gregg: Asbestos Trust Fund Will Violate Budget Law
New Cost Estimate on Eve of Budget Objection Vote Confirms Fund Will Exceed Federal Spending Limits
WASHINGTON – A new Congressional Budget Office (CBO) report on a proposed asbestos trust fund indicates once again that the plan is unworkable and should be defeated by lawmakers. According to the CBO’s report, issued late Monday, the trust fund outlined in S. 852 will add billions to the federal deficit in the first 10 years and violate budget law, even without taking into account debt servicing. The fact that debt servicing costs were not included in the assessment is significant because the fund will require heavy borrowing in the initial period, when it will handle an estimated 600,000 claims now pending in the courts.
“Just wishing the trust fund would be financially sound won’t make it so,” said Joan Claybrook, president of Public Citizen. “You can’t devise a workable plan to compensate asbestos victims with corporate payments when the list of corporate contributors is kept secret, the amounts they will contribute are unknown and special payment exemptions for favored companies are tucked into the fine print.”
The CBO conducted the latest analysis in response to a request from Senate Budget Committee Chair Judd Gregg (R-N.H.), who sought the study in a last-ditch effort to show that the fund would not weigh heavily on the backs of taxpayers or violate budget law. On Feb. 9, Sen. John Ensign (R-Nev.) raised an objection to the bill on grounds that it would lead to federal spending in excess of budget ceilings. In fact, a CBO cost estimate prepared in August 2005 said just this. Ensign’s objection stalled progress on the bill and requires a supermajority vote to overrule it.
That’s when Gregg stepped in to ask the CBO to conduct another financial projection, this time based on a “fix” proposed by Senate Majority Leader Bill Frist. But the amendment did little to change CBO’s conclusions, which state:
- The fund will have expected revenues of $57 billion but require outlays of $64 billion in the first 10 years, not including the cost of debt servicing, leaving a $7 billion gap that will have to be covered by borrowing.
- Income from corporate taxes will be reduced by about $1.1 billion through 2015, as estimated by the Joint Committee on Taxation, as a result of defendant and insurer tax deductions allowed for contributions to the fund.
- After 2015, enacting the bill would violate fiscal 2006 budget rules that prohibit net federal spending in excess of $5 billion in any 10-year period up to 2055.
- The bill likely would require $128 million in 2006 spending by industry, insurers, health insurers, claimants and others to comply with the documentation requirements of the fund, in violation of the annual threshold imposed by the Unfunded Mandates Reform Act.
The CBO cost estimate is available at www.cbo.gov.
###