The text of the omnibus bill just released includes a waiver from statutory PAYGO enforcement for FY2023 and FY2024, which means, pending passage of the bill by both chambers, that subsidy payments of Build America Bonds (BABs) will be waived until 2025.
As reported in a recent GCR blog post, Congress created Build America Bonds during the Great Recession as one of several direct pay bond options, which provided a 35 percent subsidy from the federal government for the lifetime of the bond to cover a percentage of interest costs. But, the interest subsidy is subject to sequestration due to PAYGO requirements. Absent federal legislative action, the subsidy payments would have been eliminated in January 2023.
Without action, higher education institutions using BABs be required to spend an extra $10 million to more than $100 million more than anticipated. The issue reaches far beyond higher education, with states and local governments that engaged in the Build America Bonds program poised to lose billions in payments if the subsidy is eliminated.
Final action on the omnibus bill is expected by Friday, December 23.