COST OF PIK CERTIFICATES TO BE EYED BY CONGRESS

  Congress, eager to find budget
  savings, launches a review of the U.S. Agriculture Department's
  generic commodity certificate program tomorrow, amid signs USDA
  and the General Accounting Office, GAO, are at odds over how
  much the program has cost U.S. taxpayers.
      The GAO concluded in a preliminary report last week that
  payment-in-kind, or PIK, certificates cost between five and 20
  pct more than cash outlays, administration officials who asked
  not to be identified said.
      USDA officials, however, took issue with the report, saying
  it did not take into account storage, handling and transport
  savings that accrue to the government. The GAO then decided to
  re-examine the costs, sources said.
      The issue is an important one, because congressional budget
  committees are known to be considering limiting the use of
  certificates as a means of cutting spending.
      Agriculture Under Secretary Daniel Amstutz and GAO Senior
  Associate Director Brian Crowley are set to testify before the
  Senate Agriculture Committee tomorrow.
      Amstutz is expected to tell the committee that there are
  uncertainties in determining the cost of certificates compared
  to cash outlays, and that savings to the Commodity Credit Corp,
  CCC, almost equal costs, department sources said.
      USDA estimates that it costs the government about 75 cents
  to store, handle and transport each bushel of commodity put in
  government storage.
      It was unclear whether the GAO, Congress' investigative
  arm, would stick by its original analysis that it costs the
  government more to use certificates instead of cash in farm
  price and income support programs, Reagan administration
  sources said.
      The GAO is expected to point out that use of
  payment-in-kind, PIK, certificates has helped relieve tight
  storage by moving grain that otherwise might not have been
  sold.
      The testimony by Amstutz and GAO Senior Associate Director
  Brian Crowley comes as congressional budget committees
  intensify their efforts to pinpoint ways to cut the federal
  budget deficit -- including considering limits on the use of
  PIK certificates.
      The CCC issues dollar-denominated PIK certificates, or
  certs, as a partial substitute for direct cash outlays to
  farmers or cash subsidies to exporters. Certs can be used to
  repay nonrecourse loans or exchanged for CCC commodities or
  cash.
      Between April and December 1986, CCC issued 3.8 billion
  dlrs worth of certificates, according to USDA. Up to another
  6.7 billion dlrs worth could be issued between January and
  August 1987, according to USDA.
      Certs can cost the government more than cash primarily
  because recipients can use the certificates to pay back
  government loans at levels below the loan rate.
      Eliminating this practice, called "PIK and roll," would save
  the government 1.4 billion dlrs between 1988-92, according to
  the Congressional Budget Office, CBO. That estimate, according
  to a CBO official, was based on an assumption that certificates
  cost the government about 15 pct more than cash payments.
      The Senate and House Budget Committees are known to be
  considering curbs on PIK-and-roll transactions among other
  savings alternatives.
      The GAO last week reached the tentative conclusion that the
  estimated three billion dlrs of certificates redeemed to date
  have cost the federal government between 150 mln and 600 mln
  dlrs, or between five and 20 pct, more than cash outlays, one
  administration official said.
      However, the GAO has decided to reassess those estimates
  based in part on USDA criticism, department officials said.
      The broad range of the cost estimate is partly attributable
  to the different effect certificates can have on market prices
  over the course of a crop year.
      USDA's Economic Research Service, for example, has found
  that between June and August last year, the 215 mln bushels of
  corn exchanged for certificates lowered the price of corn by
  between 35 and 45 cents per bushel.
      Between September and November, however, certificates had
  only a marginal impact on corn prices, according to the ERS
  study, obtained by Reuters.
  

