The bill mandates fair-value accounting for federal credit programs, requiring the Congressional Budget Office and the Office of Management and Budget to provide fair-value estimates for loan and loan guarantee programs to ensure budget compliance and transparency.
Ralph Norman
Representative
SC-5
The "Fair-Value Accounting and Budget Act" mandates the use of fair-value estimates, in addition to credit reform estimates, for all federal loan and loan guarantee programs by the Congressional Budget Office (CBO). It requires the CBO to include both fair-value and credit reform estimates in its annual budget and economic outlook. Additionally, the Office of Management and Budget (OMB) must submit an annual report to Congress on fair-value estimates of federal credit programs. Both CBO and OMB are required to use the Government Accounting Standards Board's definition of "fair value" in their estimates.
New Bill Mandates 'Fair Value' Accounting for Federal Loan Programs, Starting 2026
The "Fair-Value Accounting and Budget Act" aims to change how the government calculates the cost of federal loan and loan guarantee programs. Instead of using traditional methods, the bill requires "fair value" accounting, which takes into account market risks, to estimate the true cost of these programs.
Dollars and Sense
The core of the bill centers around getting a more accurate handle on the costs of federal credit programs. It does this by:
- Mandating Fair-Value Estimates: The Congressional Budget Office (CBO) must now provide "fair-value" estimates for any measure that affects loan or loan guarantee programs (SEC. 2).
- Integrating into Budget Outlook: The CBO will include both fair-value and traditional credit reform estimates in its regular "Budget and Economic Outlook" publications (SEC. 2). This provides a side-by-side comparison of the different accounting methods.
- Enforcing with Fair Value: Budget Committee chairs in both the House and Senate are directed to use these fair-value estimates to make sure budget rules are followed (SEC. 2).
- Annual OMB Reports: Starting in 2026, the Office of Management and Budget (OMB) must submit an annual report to the House and Senate Budget Committees detailing fair-value estimates of federal credit programs. This report is due within 90 days after the President submits the budget to Congress (SEC. 2).
- Standard Definition: Both the CBO and OMB must use the Government Accounting Standards Board's February 2015 definition of "fair value," ensuring everyone's on the same page (SEC. 2).
Real-World Rollout
So, what does this mean in practice? Imagine the government is considering a new loan program for small businesses. Under this bill, the CBO would have to estimate not just the direct cost of the loans, but also the potential market risks associated with them. Think of it like this: if a private bank were to offer these same loans, what would they charge to cover the risk of default? That's the kind of calculation the CBO will be making.
This shift could impact how Congress views the cost of new programs. A program that looks relatively cheap under traditional accounting might look more expensive (and therefore less attractive) under fair-value accounting, or vice versa. This could lead to shifts in which programs get funded, and which ones don’t.
The Bottom Line
The "Fair-Value Accounting and Budget Act" is all about trying to get a more accurate picture of government finances. By incorporating market risks, the hope is that Congress will have a clearer understanding of the long-term costs and benefits of federal credit programs. Whether this leads to better budgeting or simply adds another layer of complexity remains to be seen, but it certainly changes the rules of the game.