WASHINGTON -- In its latest study prepared for Congress, regarding U.S. coinage management, the Government Accountability Office reported that $1.4 billion in $1 coins are held in Federal Reserve Banks -- enough to meet demand for the next 40 years. In fact, more than half of all $1 coins ever minted are in government vaults.
In 2012, the number of $1 coins returned to Reserve Banks exceeded the number of $1 coins paid out. According to the GAO, the audit and investigative arm of Congress, more businesses returned the underused high-denomination coins than asked for them, so the government's stockpile grew.
The GAO in late November released its latest report with the fitting title, "U.S. Currency: Coin Inventory Management Needs Better Performance Information." The report looks at the history of the $1 presidential coin program, from its inception in Congress in 2005 through the coin's initial distribution in 2007, to when the Mint stopped producing them in 2011. | DOWNLOAD THE STUDY
Despite the huge stockpile, coin advocates say obtaining $1 coins is difficult. The Dollar Coin Alliance, which consists of vending, foodservice, carwash, transit and mining interests, told the GAO that commercial and public access to the $1 coin is limited, and that some DCA members have had difficulty obtaining the coins from depository institutions.
In contrast, representatives of Reserve Banks, depository institutions, coin terminal operations and the vending industry who were interviewed by GAO said $1 coins are readily available to the public. They do not have problems obtaining $1 coins or supplying them to their customers, the GAO said, but they emphasized that there is low public demand for $1 coins. Transit agencies and vending operators make the most requests for coins. Overall, $1 coin deposits are made regularly, but withdrawals are rare.
Once again, the GAO noted that shifting American public opinion in favor of $1 coins could be achieved by eliminating $1 notes. The GAO report observed that in Canada and the United Kingdom, public resistance to coins disappeared within years when there was "no alternative to the note" -- a case the office has made before.
The Reserve Banks are responsible for ensuring the efficient distribution and circulation of coins, including the $1 coin, which co-circulates with the $1 note. Legislation has been introduced in Congress to eliminate the $1 note and replace it with the $1 coin. In 2012, the GAO reported that the federal government would receive $4.4 billion net benefits over 30 years (about $150 million annually) if Congress decided to replace the $1 note with the $1 coin.
GAO's latest savings estimate is lower than its previous analyses, in part, because the life of the $1 note has increased. The Presidential $1 Coin Act of 2005 requires the Federal Reserve and the Secretary of the Treasury to assess and submit an annual report to the Congress on the obstacles to the efficient and timely circulation of $1 coins, among other things. As GAO had previously found, while Congress sought to increase the use of $1 coins in recent years, circulation has remained limited, in part because the $1 note has remained in circulation.
A new Senate bill introduced in June by Sen. Tom Harkin (D-IA) -- the Currency Optimization, Innovation and National Savings Act (S. 1105) -- seeks to improve circulation of the $1 coin. However, GovTrack.us gives the bill only a 1% chance of making it out of committee.
The Dollar Coin Alliance's latest economic study -- "Time for Change: Modernizing to the Dollar Coin Saves Taxpayers Billions" by Aaron Klein, a former Treasury Department official -- puts the budget savings, if the $1 coin replaces its paper equivalent, at $13.8 billion over 30 years (about $460 million annually), three times the GAO estimate. DOWNLOAD THE DCA REPORT
When it decided to stop production of $1 coins two years ago, the Treasury Department said, "Minting $1 coins that ultimately end up sitting in Federal Reserve Bank vaults -- and serve no useful purpose for businesses, financial institutions and consumers -- is simply not a prudent use of taxpayer resources."
So the government has shunned the $1 coin, but it continues to mint copper pennies, which are largely zinc, and which now cost 5¢ to 6¢ to produce, and it mints nickels, which cost 9¢ to 11¢.
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