Download PDF — InRecap comments 02112026
There is now a website, OpenOMB, that tracks OMB apportionments since FY22, including those pertaining to EPA WIFIA. The site has an interesting backstory [1].
It seems that the EPA WIFIA program has two accounts which receive apportionments from OMB. One is the Program Account where discretionary and mandatory appropriations to cover net loan costs are recorded — the program’s ‘equity base’ provided by taxpayers. The other is the Direct Financing Account, which is where the annual lending authority and specific loan allocations are recorded.
This post will focus on the Program Account. I was able to see what appeared to be OMB’s final apportionment numbers for FY22-FY25. No surprises — the numbers tracked what I’d already seen in the WH Budget Technical Appendices for the same years. But there was an important detail, the clarification of which sheds light on the exact nature of the $2.1b loss.
Clarification: Interest Rate Re-Estimates vs. Technical Re-Estimates
I’ve been using ‘interest rate re-estimates’ as shorthand for the source of funding losses and huge mandatory appropriations. Given the current numbers, and my own analyses starting in 2021 which predicted them, I was sure that the mandatory appropriations surfacing in the Budget Appendices were caused by the effect of UST interest rate changes on program loan commitments. What else could they be?
Sure enough, the mandatory appropriations each year were due precisely to ‘WIFIA Upward Re-Estimates’ including internal interest thereon [2] as a use of the appropriated funds. But the re-estimates were not labelled as ‘Interest Rate’, but rather as ‘Technical’ re-estimates. So — back to OMB Circular A-11 to find out what was going on.
I remembered that there were two types of re-estimates but got the impression that the labels were self-explanatory. As usual with federal budgeting, however, it’s more complicated. Here’s my interpretation of the relevant parts of A-11:
- Interest Rate Re-estimates are to be used when the loan is at least 90% disbursed and estimated using all the same assumptions in the original commitment, except for UST discount rate changes, which also define the funding loss. It appears to be primarily an informational re-estimate, perhaps to determine the relative importance of factors in a loan’s final cost.
- Technical Re-estimates are for everything else, and whenever anything major changes in a loan. You’d think a high credit quality WIFIA loan would rarely change. But, in fact, WIFIA loans change all the time during the construction phase because their disbursement amount and timing are not fixed, but totally flexible and subject to borrower request. Since the purpose of technical re-estimates seems primarily to be budget reporting and credit subsidy adjustment in any fiscal year, updated factors, including then-current UST interest rates for funding disbursements, must be used in the calculation. In effect, the interest rate re-estimate is included in the technical re-estimate, though it is not broken out. For WIFIA loans, however, we know that changed UST rates are the cause of the upwards re-estimates of subsidy cost because they explain most if not all of the difference (i.e., see my various predictive analyses from 2021-2023).
The sequence appears to be that (1) a loan disbursement triggers a technical re-estimate, the calculation of which includes the then-current UST funding rate, which (2) in turn requires a re-estimate of the credit subsidy, which if positive or ‘upwards’, (3) activates FCRA permanent indefinite authority to incur mandatory appropriations. Since the disbursement is a ‘real-time, real-world’ allocation of resources within a fiscal year and the accounts with Treasury need to balance, the mandatory appropriations are immediately ‘spent’ — that is, permanently recorded as utilized subsidy to cover the now-certain shortfall in the PV of loan debt service. Hence, no carryovers of this type of funding appear in the accounts, in contrast to the big carryovers of unutilized discretionary budget authority.
That’s what I think is happening. Perhaps in future we’ll see some ‘interest rate re-estimates’ as part of a loan’s final cost numbers, but in any case, the technical re-estimates provide the key information. Importantly, this means that the upwards re-estimates in OpenOMB data all originate from actual disbursements, and the funding losses are not a ‘mark-to-market’ type of estimate on the loan commitment portfolio but realized only on amounts disbursed. An EPA WIFIA press release reported $10b in disbursements in mid-2025, close to the time the re-estimates were first done for the WH budget, so the $2.1b of total funding losses FY22-FY25 represents a 21% loss rate. Not pretty.
Patterns Emerge
Other than the EPA press release mentioned above, I can’t find any direct data on WIFIA loan disbursements. But we can make some informed guesses. For $10b of disbursements to cause $2.1b of funding losses, a 21% NPV loss, the negative spread between the average loan commitment rate and the UST funding rate on a typical ‘maxed out’ WIFIA loan pattern (i.e., 35Y term, 5Y deferral, 5Y interest only) has to be about 1.25%. The weighted average loan commitment rate in the $22b undrawn portfolio ranged from about 2.0-2.5%, but this number would rise as older, lower rate commitments were drawn first, perhaps by 1-1.5%. So, disbursements must have occurred when UST rates were in the range of 3.25-4.75% — exactly the pattern we see emerge in mandatory appropriations:
There are two other factors involved. First, although WIFIA allows completely flexible disbursements per borrower request, that is limited by the progress of construction and eligible expenditures. That schedule is also a bit flexible for financing purposes (e.g., when to pay for equipment purchase, contract advances, etc.) but it might be limiting as to amount, especially in the early years. Perhaps by FY25, the FY18-FY21 loan commitments could mostly be fully drawn.
Second, and much more relevant to how borrowers are using WIFIA loan commitments, we wouldn’t expect to see drawdowns until, on average, WIFIA loan commitment rates were lower than the rates on the borrower’s short-term financing alternatives. This crossover likely happened in FY22. As that spread grew dramatically FY23-FY24, you’d expect an increasing rate of disbursements. Since UST were also rising, there would be corresponding funding losses and mandatory appropriations — again, exactly the pattern we see.
There is also something we don’t see — minor funding losses or even gains (these presumably would show up as ‘downward estimates’ with a corresponding increase in program budgetary resources). OpenOMB only goes back to FY2022, but I didn’t see any from what I could understand about WH Budget Technical Appendices 2018-2021. I’d expect minor adjustments, notwithstanding borrower behavior — maybe we’ll see these in OMB FY26 apportionments.
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Notes
[1] From the ‘About’ page of the website:
“Congress created the apportionment process in the Anti-deficiency Act to ensure agencies spend within the limits of the law and do not prematurely exhaust the funds Congress has given them. But administrations of both parties have, at times, abused this authority to defy Congress’s spending laws — such as when President Trump’s OMB used the apportionment process unlawfully to withhold security assistance funds that Congress had appropriated for Ukraine.
“Until July 2022, however, OMB exercised its apportionment authority largely out of public view. Neither Congress nor the public had access to apportionments.
“In the Consolidated Appropriations Acts of 2022 and 2023, Congress took action on a bipartisan basis to fix this problem. It required OMB to post its apportionments on a public website. OMB does so at apportionment-public.max.gov. But OMB’s website is hard to navigate and has no search function, making it difficult to find apportionments and oversee OMB’s work.
“OpenOMB aims to make oversight of OMB’s apportionments easier for Congress, the press, and the public. Drawing on the data files from apportionment-public.max.gov, this site makes OMB’s apportionments searchable and easier to find.”
I looked at the legally required OMB apportionment site — yes, a bit harder to navigate but the same information as OpenOMB is presenting.
More interesting is what OpenOMB is trying to accomplish — in essence, I think, to stop Russ Vought’s OMB from slow walking the apportionment process to deny previously appropriated funds for purposes that the Trump administration opposes — like Ukraine (OpenOMB’s Advisory Board has several ultra-pro-Ukraine people).
Obviously, my interest is different. But OpenOMB’s stated goals made me think of the story behind The Zeldin Letters. Could the specific slowdown in WIFIA loan processing have been due to some stalling in apportionment, which is a final step? The speed at which loans closed thereafter suggests that was the case. Did the stalling come from some OMB officials raising concerns about WIFIA funding losses, $1b of which had surfaced for the WH FY 2026 Budget around May 2025? And the Zeldin Letters campaign was specifically directed at using political influence to override these concerns? Zeldin himself is not MAGA or onboard with Project 2025 — he seems more like a typical ‘narrative neoliberal’ who would want to make sure that EPA’s own ‘crony loaner’ program continued to deliver free interest rate options. The influence prevailed, probably due to a political cost-benefit calculation for this small issue, but could the concerns remain at OMB?
Is it possible that some at OMB would even welcome consideration of Anti-Deficiency Act violations to use as a ‘shield’ against two-bit political influence? Perhaps we’ll see.
[2] The actual funding loss at the time of disbursement is the technical re-estimate plus the interest re-estimate. The separate interest component is (I think) a kind of backdating to the time the commitment was made, i.e., the technical re-estimate alone is what the subsidy should have been at commitment, and the interest is what should have been ‘earned’ in UST SERs PV terms from that point to actual disbursement. Bottom line — the sum of the two numbers, precisely matched by mandatory appropriations, is the real economic loss in the fiscal year.