FACTBOX-Steps US Treasury could take to avoid debt limit

Nov 4 (Reuters) - The U.S. Treasury Department on Wednesday
said it expects to reach a congressionally set ceiling on U.S.
debt in mid- to late December.

Publicly held U.S. debt subject to the ceiling stands at
$11.918 trillion, leaving a $186 billion cushion for Treasury
borrowing, according to the Nov. 2 Daily Treasury Statement.

"However, the government's cash flows are volatile, and
forecasting a precise date is difficult," Treasury said.

Treasury asked Congress in August to raise the limit as
soon as possible to keep it from defaulting on its financial
obligations. At that time, it predicted it could hit the limit
as soon as mid-October.

While the department has an array of tools available to
help it from encroaching on the ceiling, Treasury said those
tools haven't kept pace with the dramatic increase in debt.

The tools used in previous debt limit impasses lasted as
many as five or six months, said Matthew Rutherford, deputy
assistant treasury secretary for federal finance.

"In this environment, depending on the date that we hit the
ceiling, that could last days or at most weeks and ... there is
a large jump in the debt subject to the statutory limit on Dec.
31," Rutherford said.

Below are brief descriptions of steps the Treasury could
take to avoid hitting the debt ceiling.

CASH MANAGEMENT BILLS

The Treasury could cut issuance of longer-term government
debt and rely more heavily on short-term cash management bills
to gain more day-to-day control over debt outstanding. Cash
management bills are typically issued for days instead of
normal Treasury bill maturities of four weeks to one year.

STATE AND LOCAL GOVERNMENT SERIES SECURITIES

The Treasury could suspend sales of state and local
government series securities, known as "slugs," which are
special low interest-bearing Treasury securities offered to
local governments and other tax-exempt entities for the
investment of bond-issue proceeds. Slugs, which count against
the debt limit, were last halted in September 2007 to avoid
hitting the ceiling then.

CIVIL SERVICE RETIREMENT AND DISABILITY FUND

As it has in the past, the Treasury could suspend payments
to the Civil Service Retirement and Disability Fund, a
government employee pension fund. For the first 11 months of
the fiscal year, the government has contributed an average of
$5.63 billion to this fund every month.

EXCHANGE STABILIZATION FUND

The Treasury could dip into this seldom-used pool of money
earmarked to stabilize currency rates. For the past year, the
Treasury has pledged $50 billion from this fund to guarantee
money market mutual funds, but that program expired on Sept.
18.

GOVERNMENT SECURITIES INVESTMENT FUND

To free up cash, the Treasury can stop investing in a
federal employee pension fund known as the G-fund. Normally,
the G-Fund is reinvested daily in government securities. But
the Treasury has statutory authority to retain a portion of the
fund daily, as long as it provides proper notification and
reimbursement for any lost earnings from the move.

FANNIE MAE AND FREDDIE MAC DEBT

The Treasury could sell its holdings of Fannie Mae and
Freddie Mac debt, totaling $165 billion.
(Reporting by Nancy Waitz; Editing by James Dalgleish)