President Barack Obama’s proposed federal budget for fiscal year
2013 recommends legislation that would provide the Treasury secretary
the flexibility to change coin compositions to less costly alternatives.
Obama’s budget proposal is the fourth attempt in five years
seeking the transfer of Congress’ constitutional authority over
setting specifications for circulating coinage to the Treasury secretary.
According to the proposed FY 2013 budget, providing flexibility of
coinage compositions would provide the Mint with the ability to reduce
losses on some denominations and production costs associated with
volatile metal prices.
“Greater flexibility in the composition of coinage materials could
enable the Mint to utilize less expensive metals in the minting
process and substantially reduce its production costs,” according to
the proposed budget. “Using alternative coinage materials could save
the Mint millions annually after a potential initial period of
development and capital adjustments. Savings estimates will be
available after the Mint concludes ongoing research on the most
The Mint is currently testing alternative coinage compositions for
all denominations of U.S. coinage. The 2012 report must be submitted
to Congress by Dec. 14, 2012, under provisions of the Coin
Modernization, Oversight, and Continuity Act of 2010.
The 2012 report is to be the first of required reports to be
submitted by the Treasury secretary to Congress every two years on
production costs and possible new metallic materials or technologies
for the production of circulating coins.
The enabling act, based on legislation introduced Sept. 22, 2010,
by Rep. Melvin L. Watt, D-N.C., evolved from legislation drafted
following a two-hour hearing July 20, 2010, before the House
Subcommittee on Domestic Monetary Policy and Technology, of which Watt
During the hearing, then U.S. Mint Director Edmund C. Moy
presented an idea the bureau has promoted for at least three years —
granting the Treasury secretary discretion to adjust the composition
and size of circulating coins.
Authority to determine the composition, size and value of coins is
expressly delegated to Congress in the U.S. Constitution.
In his opening statement at the July 20, 2010, hearing, Watt
rejected Moy’s idea, instead recommending the Mint execute research
into alternative metals for circulating coinage, given that the costs
to produce and distribute both the cent and 5-cent coin were nearly
double their face value at the time.
Watt, who suggested the Mint report its findings to Congress after
completing its research, formalized the approach in his legislative proposal.
Copper and zinc, the Mint’s primary metals in coin production,
have risen in price more than 400 percent over the past 10 years,
while that of nickel, another of the Mint’s coinage metals, has
skyrocketed 500 percent over the same period, according to the
proposed FY 2013 federal budget.
The proposed budget notes that profits from the dime, quarter
dollar and dollar coins are used to offset the production costs for
the cent and 5-cent coin, which most recently were calculated to cost
2.4 cents and nearly 11.2 cents to produce.
The cost offset totals are being affected by Treasury Secretary
Timothy F. Geithner’s, Dec. 13, 2011, directive suspending production
of Presidential dollar coins for circulation. Geithner cited the 1.4
billion dollar coins in Federal Reserve inventory, more than a 10-year
supply without additional production, as the primary cause for
ordering the suspension of Presidential dollar coin production for circulation.
Native American changes
Provisions in the proposed budget would also eliminate the
legislative mandate that 20 percent of all dollar coins produced by
the U.S. Mint be Native American dollars.
“Numismatic quality dollar coins would remain available for
purchase, but eliminating the twenty percent requirement would
increase the Mint’s flexibility to match the supply to consumer
demand,” according to the proposed budget.
The U.S. Mint is still expecting to strike circulation-quality
Presidential and Native American dollars at the Denver and
Philadelphia Mints and offer them for sale at numismatic premiums
above face value. Full plans for ordering options have still not been
disclosed by U.S. Mint officials.
The suspension of Presidential dollar coin production is part of
Vice President Joe Biden’s Campaign to Cut Waste in federal government
spending. The suspension of Presidential dollar coin production for
circulation is forecast to save $50 million to $75 million annually.
However, the proposed FY 2013 budget notes that the suspension of
Presidential dollar production will also reduce the amount of revenue
available to the U.S. Mint to offset production costs for the cent and
5-cent coin, according to the proposed budget.
The revenue citation refers to seigniorage — the net profit
generated from the difference between the face value and the overall
production and distribution costs of each coin.
Seigniorage for the dollar coin was most recently reported at 82
cents per coin, according to the U.S. Mint’s annual report for FY