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78–495 PDF 2003

S. HRG. 107–904

DEPARTMENTS OF VETERANS AFFAIRS AND

HOUSING AND URBAN DEVELOPMENT AND

INDEPENDENT AGENCIES APPROPRIATIONS

FOR FISCAL YEAR 2003

HEARINGS

BEFORE A

SUBCOMMITTEE OF THE

COMMITTEE ON APPROPRIATIONS

UNITED STATES SENATE

ONE HUNDRED SEVENTH CONGRESS

SECOND SESSION

ON

H.R. 5605/S. 2797

AN ACT MAKING APPROPRIATIONS FOR THE DEPARTMENTS OF VETERANS AFFAIRS AND HOUSING AND URBAN DEVELOPMENT, AND FOR

SUNDRY INDEPENDENT AGENCIES, BOARDS, COMMISSIONS, CORPORATIONS, AND OFFICES FOR THE FISCAL YEAR ENDING SEPTEMBER 30,

2003, AND FOR OTHER PURPOSES

Corporation for National and Community Service

Department of Housing and Urban Development

Department of the Treasury

Department of Veterans Affairs

Environmental Protection Agency

Federal Emergency Management Agency

National Aeronautics and Space Administration

National Science Foundation

Neighborhood Reinvestment Corporation

Nondepartmental witnesses

Printed for the use of the Committee on Appropriations

Available via the World Wide Web: http://www.access.gpo.gov/congress/senate
(II)

COMMITTEE ON APPROPRIATIONS

ROBERT C. BYRD, West Virginia, Chairman

DANIEL K. INOUYE, Hawaii

ERNEST F. HOLLINGS, South Carolina

PATRICK J. LEAHY, Vermont

TOM HARKIN, Iowa

BARBARA A. MIKULSKI, Maryland

HARRY REID, Nevada

HERB KOHL, Wisconsin

PATTY MURRAY, Washington

BYRON L. DORGAN, North Dakota

DIANNE FEINSTEIN, California

RICHARD J. DURBIN, Illinois

TIM JOHNSON, South Dakota

MARY L. LANDRIEU, Louisiana

JACK REED, Rhode Island

TED STEVENS, Alaska

THAD COCHRAN, Mississippi

ARLEN SPECTER, Pennsylvania

PETE V. DOMENICI, New Mexico

CHRISTOPHER S. BOND, Missouri

MITCH MCCONNELL, Kentucky

CONRAD BURNS, Montana

RICHARD C. SHELBY, Alabama

JUDD GREGG, New Hampshire

ROBERT F. BENNETT, Utah

BEN NIGHTHORSE CAMPBELL, Colorado

LARRY CRAIG, Idaho

KAY BAILEY HUTCHISON, Texas

MIKE DEWINE, Ohio

TERRENCE E. SAUVAIN, Staff Director

CHARLES KIEFFER, Deputy Staff Director

STEVEN J. CORTESE, Minority Staff Director

LISA SUTHERLAND, Minority Deputy Staff Director

SUBCOMMITTEE ON VA, HUD, AND INDEPENDENT AGENCIES

BARBARA A. MIKULSKI, Maryland, Chairman

PATRICK J. LEAHY, Vermont

TOM HARKIN, Iowa

ROBERT C. BYRD, West Virginia

HERB KOHL, Wisconsin

TIM JOHNSON, South Dakota

ERNEST F. HOLLINGS, South Carolina

CHRISTOPHER S. BOND, Missouri

CONRAD BURNS, Montana

RICHARD C. SHELBY, Alabama

LARRY CRAIG, Idaho

PETE V. DOMENICI, New Mexico

MIKE DEWINE, Ohio

TED STEVENS, Alaska (ex officio)

Professional Staff

PAUL CARLINER

GABRIEL A. BATKIN

ALEXA SEWELL

JON KAMARCK (Minority)

CHEH KIM (Minority)

Administrative Support

JENNIFER STORIPAN
(III)

CONTENTS

WEDNESDAY, MARCH 25, 2002

Page

Department of Veterans Affairs ............................................................................. 1

WEDNESDAY, MARCH 13, 2002

Department of Housing and Urban Development ................................................. 109

WEDNESDAY, MARCH 20, 2002

Environmental Protection Agency .......................................................................... 177

WEDNESDAY, APRIL 17, 2002

Corporation for National and Community Service ............................................... 303

WEDNESDAY, APRIL 24, 2002

Neighborhood Reinvestment Corporation .............................................................. 337

Department of the Treasury: Community Development Financial Institutions

Fund ...................................................................................................................... 354

WEDNESDAY, MAY 1, 2002

National Aeronautics and Space Administration .................................................. 409

WEDNESDAY, MAY 8, 2002

Federal Emergency Management Agency .............................................................. 481

WEDNESDAY, MAY 15, 2002

National Science Foundation .................................................................................. 533

Nondepartment witnesses ....................................................................................... 575

(1)

DEPARTMENTS OF VETERANS AFFAIRS AND

HOUSING AND URBAN DEVELOPMENT AND

INDEPENDENT AGENCIES APPROPRIATIONS

FOR FISCAL YEAR 2003

WEDNESDAY, MARCH 6, 2002

U.S. SENATE,

SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS,

Washington, DC.

The subcommittee met at 9:35 a.m., in room SD–138, Dirksen

Senate Office Building, Hon. Barbara A. Mikulski, (chairman) presiding.

Present: Senators Mikulski, Kohl, Johnson, Bond, Shelby, Craig,

Domenici, and Stevens.

DEPARTMENT OF VETERANS AFFAIRS

STATEMENT OF HON. ANTHONY J. PRINCIPI, SECRETARY OF VETERANS AFFAIRS

ACCOMPANIED BY:

FRANCES M. MURPHY, M.D., ACTING UNDER SECRETARY FOR

HEALTH

ROBIN HIGGINS, UNDER SECRETARY FOR MEMORIAL AFFAIRS

GUY H. MCMICHAEL, III, ACTING UNDER SECRETARY FOR BENEFITS

D. MARK CATLETT, PRINCIPAL DEPUTY ASSISTANT SECRETARY

FOR MANAGEMENT

JAMES W. BOHMBACH, CHIEF FINANCIAL OFFICER, VETERANS

BENEFITS ADMINISTRATION

DANIEL TUCKER, DIRECTOR, BUDGET AND PLANNING SERVICE,

NATIONAL CEMETERY ADMINISTRATION

VINCENT BARILE, DEPUTY UNDER SECRETARY FOR MANAGEMENT, NCA

NORA E. EGAN, CHIEF OF STAFF

TIM S. McCLAIN, GENERAL COUNSEL

MAUREEN P. CRAGIN, ASSISTANT SECRETARY FOR PUBLIC AND

INTERGOVERNMENTAL AFFAIRS

JOHN A. GAUSS, ASSISTANT SECRETARY FOR INFORMATION AND

TECHNOLOGY

DENNIS DUFFY, PRINCIPAL DEPUTY ASSISTANT SECRETARY FOR

POLICY AND PLANNING

ELIGAH D. CLARK, CHAIRMAN, BOARD OF VETERANS’ APPEALS

JOHN OGDEN, CHIEF CONSULTANT, PHARMACY BENEFITS MANAGEMENT STRATEGIC HEALTH GROUP
2

ART KLEIN, DIRECTOR OF BUDGET OFFICE, VETERANS HEALTH

ADMINISTRATION

JIMMY NORRIS, CHIEF FINANCIAL OFFICER, VETERANS HEALTH

ADMINISTRATION

JOHN R. FEUSSNER, M.D., CHIEF RESEARCH AND DEVELOPMENT

OFFICER, VETERANS HEALTH ADMINISTRATION

LAURA MILLER, ASSOCIATE UNDER SECRETARY FOR HEALTH,

VETERANS HEALTH ADMINISTRATION

GORDON MANSFIELD, ASSISTANT SECRETARY FOR CONGRESSIONAL AND LEGISLATIVE AFFAIRS

RITA A. REED, DEPUTY ASSISTANT SECRETARY FOR BUDGET

RICHARD J. GRIFFIN, INSPECTOR GENERAL

OPENING STATEMENT OF SENATOR BARBARA A. MIKULSKI

Senator MIKULSKI. Good morning, everybody, to the Subcommittee Veterans, Housing, and other Independent Agencies. We

will come to order.

Today we have the opportunity to listen to Mr. Secretary Anthony Principi, to present to us the appropriations request from the

administration on behalf—on behalf of the administration for the

Department of Veterans Affairs.

This is a wonderful day in the sense that we welcome you, Mr.

Principi——

Mr. PRINCIPI. Thank you.

Senator MIKULSKI [continuing]. An old and dear friend. And it is

also Senator Bond’s birthday.

And I am not going to tell any more. But, Senator Bond, you

know we, on the committee, love you. You know, we Democrats are

just crazy about you.

You are our little muffin here today.

Senator BOND. Thank you very much.

Senator MIKULSKI. That is just about the calorie count you and

I are supposed to have for all——

Senator BOND. I can only eat a quarter of it.

Senator MIKULSKI. I know you are—kind of a caffeine-kind of

guy.

Senator BOND. Yes, yes.

Senator MIKULSKI. No one ever thinks you are decaf; that is for

sure.

Senator BOND. No.

Senator MIKULSKI. But let me also present this to you this morning and just say, Senator Bond, you are the cream in my coffee.

Senator BOND. Thank you. I am deeply honored. Thank you.

Senator MIKULSKI. Now are you not glad we have gotten in a

good mood to talk to you?

PREPARED STATEMENT

Really, Senator Bond, you know that I think the world of you.

And I really enjoy so much our collegial relationship. And I would

like to take this time to wish you a happy birthday and lots of good

health and may you get all of your birthday wishes, including the

very, very best allocation for our subcommittee.

[The statement follows:]
3

PREPARED STATEMENT OF SENATOR BARBARA A. MIKULSKI

I am very pleased to welcome VA Secretary Principi to the Subcommittee. It is

appropriate that we are beginning our 2003 process with Secretary Principi, because

keeping our promises to our nation’s veterans is this Subcommittee’s highest priority. We look forward to another productive year working with Secretary Principi

and his team.

My goals for this hearing are two-fold. First, we must ensure that the 2003 budget

keeps the promises we made to our veterans. And second, we must make sure the

VA is a good steward of taxpayer dollars—so that our veterans and the American

people get the most for their hard earned money.

The budget requests $57 billion for veterans’ benefits and services: $29 billion for

entitlements, and $28 billion for discretionary programs that are under this Subcommittee’s jurisdiction. This is a $3 billion increase in discretionary funding over

2002.

Promises made must be promises kept.

This year’s request for medical care is $25.5 billion—a $2.6 billion increase over

2002. It includes $1.5 billion that the VA expects to collect from third-party health

insurance and co-payments from veterans, as well as $800 million in retirement liability accruals as proposed by the Administration.

So by our math, the real increase in VA medical care over 2002 is $1.4 billion—

excluding collections and accruals.

In the last three years, the Subcommittee has provided large increases for medical

care—$1.7 billion in 2000, $1.3 billion in 2001, and $1 billion in 2002, to encourage

more veterans to enroll in the VA system, and to provide them with the medical

care they deserve. At -a time when high private health insurance and prescription

drug costs are really straining our elderly on fixed incomes, we can only expect that

the Subcommittee will be urged to continue these increases.

That is why I am very concerned about two major issues affecting veterans’ medical care.

First, I am perplexed and perturbed that the VA tells us it has a $400 million

shortfall in 2002. The VA–HUD Subcommittee provided $350 million above the

President’s request for VA medical care to ensure that promises made to our—our

nation’s veterans can count on the Subcommittee to keep promises. But the Subcommittee needs to be able to count on the VA to provide accurate budget estimates,

and I am now very concerned about the VA’s ability to count.

Second, I am very troubled about a proposal in this budget to require certain veterans to pay a $1,500 deductible for medical care. VA tells us that most of our ‘‘Priority 7’’ veterans—those who are not disabled as a result of their service, and who

make more than $24,000 per year—have private insurance that will pick up the tab.

But that doesn’t mean much to the veteran who was lucky enough to avoid being

injured in battle, and who now makes a hard earned living in a small business that

doesn’t provide him with health insurance.

I am very concerned that a $1,500 deductible will leave some veterans without

any health care at all. Especially in today’s climate—where the private sector is abdicating its responsibility so frequently—we must protect those who use the VA system as a safety net. There are many flaws in this deductible proposal, but the worst

is that VA can’t tell us for certain how many veterans it will effect, because it has

a dismal performance of collecting insurance information from our veterans. We

have many concerns about the $1,500 deductible proposal, and I hope Secretary

Principi can answer our tough questions.

Instead of proposing deductibles to shift the healthcare burden onto our veterans,

the VA should be finding ways to improve what our veterans and taxpayers are

owed from private insurance companies. We need to do more in this area, and I

want to know what the VA is doing to ensure that our veterans and taxpayers get

what they are owed.

We understand that collections from veterans will also increase because the prescription drug co-payment has been increased from $2 to $7. Many of my veterans

in Maryland have been surprised by this increase, and I would like to know how

the VA decided on $7, and if there are plans to make further changes the copayment.

Also in the area of prescription drugs, I believe that the VA can provide us with

some very valuable lessons learned as we continue to look for a Medicare prescription drug benefit. The VA spends almost $3 billion each year on drugs, and its benefit program could serve as a model for the future. I’d like the Secretary to tell us

about the benefits that VA provides and how it develops its formularies so that we

can build upon this expertise.
4

On the other hand, unfortunately VA still has a way to go on waiting times. Veterans still have to wait too long to see a doctor.

And on the benefits side, while the VA has made progress in reducing its claims

processing time, 165 days is still unacceptable. I know Secretary Principi wants to

reduce processing time to 100 days by 2003, and I am interested in learning how

he plans to do this.

Finally, I also want to be sure that the VA is taking care of its own caregivers.

A recent Gallup poll found that nursing is the most respected profession in the

United States. Yet this country is facing a nursing shortage that we’re working hard

to address. I’d like to know what VA is doing to recruit, retain, and improve working

conditions for its nurses.

Again, I welcome Secretary Principi to his second appearance before the Subcommittee and I look forward to hearing his testimony.

Senator MIKULSKI. With that, Mr. Principi, why do you not go

ahead and proceed with your testimony?

STATEMENT OF ANTHONY J. PRINCIPI

Secretary PRINCIPI. Thank you, Madam Chairwoman.

Senator Bond, Senator Johnson, it is a great pleasure to be with

you.

And I, too, wish you a very, very happy birthday, Senator Bond.

It is always good to come up here on birthdays.

I am very pleased to have this opportunity to present our budget

request to you and am grateful to the President for his support. We

are requesting $58 billion for veterans’ benefits and services, $30.1

billion for entitlement programs, and $27.9 billion for discretionary

programs; an increase of $6.1 billion over our 2002 enacted level.

Let’s look specifically at our medical program. First, I think it is

important to back out accounting transfers, so that the budget proposal does not appear to include any smoke and mirrors or increases due to a proposed deductible. The real apples-to-apples increase is 7 percent for medical care, a $1,570,000,000 increase. I

will talk a little bit more about that increase and the challenges

we face in health care.

Next, we are requesting an increase of $17 million for burial

services, a $94 million increase for our Veterans Benefits Administration to continue the great work that our people are doing in reducing the claims backlog, and a $64 million increase for capital

programs. We have a robust medical research program. We are requesting an increase that would bring our appropriation to $409

million. Combining our $401 million subsidy from medical care

funding with the funds we receive through grants from universities

and other Federal agencies with our appropriation, we will have a

$1.46 billion program in medical research that we are very, very

proud of.

VA’S MEDICAL CARE PROGRAM

With the funds allocated for medical programs, members of the

committee, we will be able to treat nearly 4.9 million veterans in

the coming fiscal year. That is a 3.3 percent increase over fiscal

year 2002. But it does not tell the whole story. Clearly, we have

seen such a phenomenal growth in workload over the past several

years. The growth has been somewhat staggering since eligibility

reform went into effect in 1996 and we made the important transition to primary care and community-based outpatient clinics. Our

growth rate has been 38 percent in priorities one through six. But
5

the real story is the growth in priority seven, which has grown 500

percent since 1996.

In 1996, priority 7s represented 3 percent of our workload. Today

they represent 33 percent of our workload. And that number will

grow to over 42 percent by the end of the decade. The cumulative

cost for priority 7s alone, just this one category, is $20 billion between 2003 and 2007. In 2007 it will consume over $5 billion a

year of our budget.

So, we have grown in priority 7s from 200,000 veterans in our

system to over 1 million in 2002. And I believe patients are coming

to us for many, many reasons. I think there are some national policy issues involved here. Veterans seek our care because we have

a very, very fine benefit package from primary to nursing home

care, including the very, very important pharmacy benefit that we

provide.

Of course, more outpatient clinics have been opened. We have

622 now, across the country. Just as depicted in the movie, ‘‘If you

build it, they will come,’’ well, we have built them, we have opened

them, and they have certainly come. And I think our quality is

clearly so much better today. Our customer satisfaction is good. We

are not perfect, but we are doing good work.

Those factors, coupled with HMO’s, and Medicare HMO’s closing

down, or no longer offering a pharmacy benefit, and the fluctuating

economy in some parts of the country, have resulted in that increase in workload. That increase is something that we need to

deal with. I have been very, very honest in saying that, notwithstanding this record requested increase in medical care funding,

without some actions by the Congress or by me as Secretary, to either limit enrollment, or to require a greater sharing in the cost

of their care by priority 7s, or enactment of Medicare subvention,

or without increased collections for medical care cost recovery, we

will not have enough money to treat all of the veterans who come

to us in open enrollment. A lot of the changes that took place in

1996 were premised on Medicare subvention, which never happened.

I need to state for the record, because it is an important policy

issue that all of us have to grapple with to ensure that the quality

remains high, that the access times to get into clinics are not reasonable. We see longer and longer wait times in some parts of the

country, which is unacceptable and not good quality of care. We are

not meeting the expectations people have of us, and we need to

grapple with that issue.

$1,500 DEDUCTIBLE PROPOSAL

The service-connected and some of the poor feel that they are

being squeezed out in some areas of the country, so there are some

warning signs on the horizon. After looking at all of the options

available to me, I opted for a deductible where priority 7s would

share in the cost of their care, rather than closing off enrollment.

The deductible does not operate like a regular deductible. No one

is asked for money out-of-pocket at the beginning before the care

is provided. We will bill insurance companies for every dollar of

that deductible, and we will charge veterans without insurance a

percentage of reasonable charges.
6

The bottom line is we need to work with the members of this

committee and the House committee to devise a solution to this

problem, whether the deductible is modified or we look at other

steps that we can take to ensure that we manage our growth and

maintain high quality care.

GRANTS FOR VETERAN EMPLOYMENT

We are also requesting a transfer in funding of $197 million from

the Department of Labor for the Veterans Employment in Training

Service Program. Though this program has not worked as well as

it should at the Department of Labor, that is not an indictment of

the people in the program. I think it is more an indictment of the

system.

Veterans in the age group of 20 to 24—those recently discharged

from the military having served their Nation honorably, have a 9.6

unemployment rate compared to the general population of 4.2 percent. In 20 States, fewer than 11 percent of the veterans who go

to the employment service for help were place in suitable jobs. We

have over 500,000 veterans who are unemployed today, a third of

whom have been unemployed for more than 15 weeks.

I believe that VA, which has been entrusted with caring for veterans as its sole mission, could manage this employment program

very well by making it outcome-based, performance-based, and putting it into the continuum of programs we have for veterans

through vocational rehabilitation education, and other programs. I

support this transfer because I think it is good for veterans. I

would commission a task force, comprised of the stakeholders, to

help me identify how we can establish this new program in VA and

how it should work.

VETERANS BENEFITS ADMINISTRATION

On the benefits side of the house, I am pleased to report to you

that we are making progress on reducing the claims backlog. In

January of this year, we set a record in the number of claims we

decided: 62,536. That record was broken in February; we decided

62,900 claims. That compares to 29,036 in January of a year ago,

and 28,900 in February a year ago. So, we have doubled our productivity and our accuracy rate remains at an all-time high.

PROCUREMENT REFORM TASK FORCE

We are looking at how we manage the VA. I have established a

procurement reform task force to provide me with recommendations on how we can be better procurers of goods and services. Outside of Defense, we are probably the largest procurement department in government, with purchases of $5 billion annually in goods

and services. I think there is an awful lot of room for improvement.

I now have the report on my desk, and I intend to implement the

recommendations to standardize and use national contracting volume discounts to improve the bottom line so that we have more

money for veterans.
7

ENTERPRISE ARCHITECTURE

We did the same with our Information Technology Program, and

established an enterprise architecture strategy implementation and

governance plan with an information technology board to help us

end stove-pipe design, development, and procurement of IT. Under

the leadership of Dr. John Gauss, our new CIO, we will make some

real progress in that area.

NATIONAL CEMETERY ADMINISTRATION

With regard to our national cemetery system, we are in the process of opening 6 new national cemeteries across the country. They

are in different phases of development. Due to the aging of the

World War II population, interments are at an all-time high in our

national cemeteries. We have to ensure that we have space to

honor those who served their Nation in uniform.

PREPARED STATEMENT

We have great challenges, Madam Chair, Senator Bond, members of the committee. But I am convinced that we are on the right

road. And working together, I think we can overcome the challenges that we face.

Thank you very much.

[The statement follows:

PREPARED STATEMENT OF THE HONORABLE ANTHONY J. PRINCIPI

Madam Chair, and members of the Committee, good morning. I am pleased to be

here today to discuss the President’s 2003 budget proposal for the Department of

Veterans Affairs (VA) and tell you about the significant progress we are making on

behalf of the Nation’s veterans.

Our budget reflects the largest increase ever proposed for veterans’ discretionary

programs. It ensures more veterans will receive high-quality health care, that we

will provide more timely and accurate benefit claim determinations, and that we

will maintain a dignified and respectful setting for deceased veterans. Our proposal

reflects the debt of gratitude we owe to those who have served our country with

honor. It also signals our enduring commitment to the men and women in uniform

who today defend our freedom many miles away. We are requesting $58 billion for veterans’ benefits and services—$30.1 billion for entitlement programs and $27.9 billion for discretionary programs. This is an increase of $6.1 billion over the 2002 enacted level. Our budget increases VA’s discretionary funding by $3.1 billion over the 2002 level, including medical care collections. Increases for specific programs are as follows: $2.7 billion for medical programs; $17 million for burial services; $94 million for the administration of veterans’

benefits; and $64 million for capital programs and other departmental administration.

Our budget request includes $197 million for a new grant activity that replaces

programs currently administered by the Department of Labor and $892 million for

certain Federal retiree and health benefits as proposed by the Administration’s

Managerial Flexibility Act of 2001. Excluding these new activities, our budget for

discretionary programs reflects an increase of $1.9 billion, or 7.8 percent over last

year’s funding level.

MEDICAL CARE

For Medical Care, we are requesting budgetary resources of $25 billion, including

$1.5 billion in collections. This amount includes $793 million for accrual for certain

Federal retiree and health benefits and $260 million in increased collections related

to the proposed legislation deductible initiative. Under current law without the impact of these two variables, the Medical Care increase is $1.5 billion—comprised of

$1.4 billion in increased appropriations and $158 million in increased collections.

This increase when combined with the $1.1 billion impact of the deductible proposal,

equals $2.7 billion, the amount of the medical care increase that would be needed
8

to support the projected 6 percent increase in 2003, which is 290,000 more veteran

health care system users without the enactment of the deductible proposal.

Madam Chair, we are focusing on improvements needed to our billing and collection from third party insurers. While we have doubled our collections in the past

couple of years, we know we need to do more. In a collaborative effort with an external contractor, we have identified 24 actions that will yield significant enhancements to our ability to collect revenue. While many of these actions require time

and investment, we have already begun improvements to the revenue collection

process. I have directed that we begin the process of consolidating billing and collection services, and that we explore the cost and benefits of outsourcing these services.

In addition, we are aggressively pursuing insurance identification by obtaining new

HIPAA compliant software to facilitate exchange of medical information with nonVA entities. We are also mounting increased veteran and employee awareness and

training campaigns. Further, we have developed a web-based performance metrics

program that is used by central office and medical center staff to monitor and evaluate the critical steps in the revenue cycle. Following the original implementation of

reasonable charges in September 1999, we have implemented two updates. Work is

nearly complete on the next reasonable charges update, which we expect to publish

in the Federal Register as an Interim Final Rule and implement during Spring

2002. We expect to collect over $1 billion this year with continuing increases in 2003

and beyond. We are committed to maximizing our revenue opportunities from this

source. VA has experienced unprecedented growth in the medical system workload over

the past few years. The total number of patients treated increased by over 11 percent from 2000 to 2001—more than twice the prior year’s rate of growth. For the

first quarter of 2002, we experienced a similar growth rate when compared to the

same period last year. The growth rate for Priority 7 medical care users has averaged more than 30 percent annually for the last 6 years, and they now comprise

33 percent of enrollees in the VA health care system. Based on current law, this

percentage is expected to increase to 42 percent by 2010.

I am proud that an increasing number of veterans are choosing to receive their

health care in the VA system. Despite this success, we have much to accomplish.

Patient access to our medical facilities must be improved and this budget reaffirms

our commitment to do so. Our goal is for veterans to receive non-urgent appointments for primary and specialty care in 30 days or less, while being seen within

20 minutes of their scheduled appointment. We have included an additional $159

million in our request to work toward this goal.

Madam Chair, I know you agree that VA’s health care system should maintain

timely, high quality care for service-connected and low income veterans and remain

open to all veterans. To effectively manage participation in the system, we are proposing a $1,500 medical deductible for Priority 7 veterans. With no change in policy,

the cost of care for Priority 7 veterans would grow from $1 billion in 2000 to over

$5 billion in 2007. To assure that rising workload does not dilute the quality of care,

Priority 7 veterans are being asked to pay for a greater portion of their health care

than in the past. We are recommending that these veterans be assessed a deductible

for their health care at a percentage of the reasonable charges up to a $1,500 annual ceiling. This is not a standard deductible that must be paid upfront and veterans’ insurance may cover all charges. If all projections, funding levels, and the

new deductible are realized, VA anticipates continued open enrollment to all veterans in 2003 without detriment to our traditional core patients—those with serviceconnected disabilities and lower incomes.

VA is working to meet the challenges in long-term care for veterans. However,

we believe that a literal interpretation of Public Law 106–117, the ‘‘Veteran’s Millennium Health Care and Benefits Act of 1999’’ will result in less than optimal solutions for increasing our long-term care capacity. The number of individual veterans

who received care in VA increased from more than 3 million veterans in 1998 to

more than 4 million veterans in 2001, due primarily to VA’s efforts to expand access

for primary care. During that same time period, efforts have been made to meet the

increased demand for long-term care. Although the average daily census in VA nursing homes declined, veterans mandated under Public Law 106–117 to receive such

care are being served in VA and contract community nursing homes. VA is also supporting a significantly increased census of veterans in State veterans nursing

homes. At the same time, VA has been expanding care for veterans in home and

community-based extended care, consistent with the mandates of Public Law 106–

117. Indications we have received from veterans show that they are pleased with

options providing long-term care closer to home, as well as alternatives to more traditional skilled-nursing environments. We look forward to working with Congress to

pursue the best options to provide veterans with long-term care.
9

Our rapidly aging veteran population requires more health care services. Our re- quest includes $817 million to address this rising demand. These funds will support

our emphasis on access and service delivery, pharmaceutical support, prosthetics,

CHAMPVA for Life, and information technology. Management savings of over $316

million will partially offset resource needs. For example, I am establishing a program across the VA system that will implement ‘‘best practice’’ standards for dispensing and prescribing pharmaceuticals.

The 2003 budget supports our cooperative efforts with the Department of Defense

(DOD) to improve Federal health care delivery services. Over the past year, we have

undertaken unprecedented efforts to improve cooperation and sharing in a variety

of areas through a reinvigorated VA and DOD Executive Council. VA and DOD entered into a Memorandum of Understanding (MOU) in December 1999, with the objective of reducing contract duplication. The first addendum to that MOU resulted

in the conversion of DOD’s Pharmacuetical Distribution and Pricing Agreements

(DAPAs) to reliance on VA’s Federal Supply Schedule (FSS) contracts for pharmaceuticals, which was completed in December 2000. The second addendum is an

agreement to convert DOD’s DAPAs for medical/surgical products to reliance on

VA’s FSS. This effort was completed in December 2001. To address some of the remaining challenges, the Departments have identified four high-priority items for improved coordination: veteran enrollment, computerized patient records, cooperation

on air transportation of patients, and facility sharing instead of construction.

MEDICAL AND PROSTHETIC RESEARCH

VA’s clinical research program is funded at the highest level in history with a partnership of government, universities and the private sector. Over $1.46 billion

will be invested in 2003: $409 million in direct appropriation; $401 million in support from the VA Medical Care appropriation primarily in the form of salary support for the clinical researchers; $460 million from Federal organizations such as

DOD and NIH; and $196 million from universities and other private institutions.

This investment will allow VA to expand knowledge in areas critical to veterans’

and other citizens’ health care needs including schizophrenia, diabetes, further implementation of cholesterol and other guidelines, aging, renal failure treatment, and

clinical drug treatment evaluations. This investment is relevant to the medical

needs of the entire Nation and will enhance future quality of life.

CAPITAL ASSET REALIGNMENT FOR ENHANCED SERVICES (CARES)

We continue our effort to transform the veterans’ health care system under the

Capital Asset Realignment for Enhanced Services (CARES) initiative. We are evaluating the health care services we provide, identifying the best ways to meet veterans’ future medical needs, and realigning our facilities and services to meet those

needs more effectively.

Madam Chair, this initiative is not a perfunctory exercise. The CARES process

has already had a significant impact on our planning process. Last week, I announced my decision on realigning VA health care facilities in VISN 12. For example, we will shift inpatient services to a remodeled Chicago West Side Division, and

maintain a Lakeside Division multi-specialty outpatient clinic in the downtown

area. The Hines VA Medical Center will be renovated, including the Blind Rehabilitation and Spinal Cord Injury Centers. Sharing opportunities between the North

Chicago VA Medical Center and the adjacent Naval Hospital Great Lakes will be

enhanced.

CARES is critical to the future of VA health care. It will allow us to redirect funds

from the maintenance and operation of facilities we no longer need to direct patient

care. I am prepared to make the difficult choices necessary to ensure accessible care

to more veterans in the most convenient and appropriate settings. We will complete

CARES studies of our remaining health care networks within two years. Any savings that result from CARES will be put back into the community to provide higher

quality care and more services to veterans. Changes will affect only the way VA delivers care—health care services will not be reduced.

MAJOR AND MINOR CONSTRUCTION PROGRAMS

For all capital programs (construction and grants) this is the largest request since

1996. Specifically for major construction, new budget authority of $194 million is requested. We are requesting funds for four seismic projects in exceptionally high-risk

areas: two in Palo Alto, one in San Francisco, and one in West Los Angeles, CA.

These projects involve primary care buildings and a consolidated research facility—

all of which will be part of any service delivery option resulting from the CARES

process. Seismic improvements will ensure veterans and their families, and VA
10

staff, will continue to be cared for, and work in a safe environment. The 2003 Major

request also addresses critical National Cemetery needs. Resources are included for

new cemeteries in Pittsburgh, PA and Southern Florida and a columbaria and cemetery improvements project at the Willamette National Cemetery, OR. Design funds

are provided in the amount of $3.4 million for the design of new cemeteries in Detroit, MI and Sacramento, CA. We are also requesting funds to remove hazardous

waste and asbestos from Department-owned buildings, perform an emergency response security study, reimburse the judgment fund, and support other construction-related activities.

To date, we have received $80 million in Major Construction funding to support

the design and construction of projects that result from CARES studies. Our Major

request for 2003 includes $5 million to continue efforts to realign our facilities.

New budget authority in the amount of $211 million is requested for the Minor

Construction program. Particular emphasis will be placed on outpatient improvements, patient environment, and infrastructure improvements. A total of $35 million is earmarked for CARES-related design and construction needs. These funds

have been proposed to allow VA to immediately implement CARES options that can

be accomplished through the minor construction program (i.e., capital projects costing more than $500 thousand and a total project cost less than $4 million). In addition, $20 million is dedicated to a newly created category to fund minor seismic

projects, which will allow VA to further address its seismic corrections needs.

VETERANS’ BENEFITS

For the administration of veterans’ benefits, we are requesting $1.2 billion and

an additional 125 employees over the 2002 level. The President has promised to improve the timeliness and quality of claims processing. Last year, I established a

claims processing task force to recommend changes that would improve the time it

takes to process claims. The results of that task force, as well as implementation

plans, have been presented to me and we have already begun to execute many of

the recommendations.

I have set a goal of reaching 100 days to process compensation and pension claims

by the summer of 2003. While the annual average number of days for these claims

is projected to be 165 for 2003, we expect to achieve the 100-day goal by the last

quarter of the year. Four months ago, we began a major effort to resolve 81,000 of

the oldest Compensation and Pension claims. A key element of this effort involves

a ‘‘Tiger Team’’ at the Cleveland Regional Office that will tackle many of these

claims over an 18-month period. The team became fully operational in November

2001. Additionally, consolidation of pension benefit maintenance at three sites will

allow VBA to free up employees to focus on rating compensation claims.

At the same time we are reducing the time it takes to process claims, we continue

to improve the quality of claims processing. During 2003, the national accuracy rate

for compensation and pension claims is projected to grow to 88 percent—a significant improvement from the 59 percent rate evidenced in 2000. This budget contains

$3.5 million to support 64 additional employees dedicated to the Systematic Individual Performance Assessment (SIPA) initiative. This is an important contribution

to enhance internal control mechanisms and bring accountability to the accuracy of

claims processing.

This budget provides additional staff and resources to continue the development

of information technology tools to support improved claims processing. Over the last

several years, VBA has developed and implemented major initiatives, established cooperative ventures with other agencies, and used technology and training to address

accuracy and timeliness. This budget continues to focus on initiatives in these high

payoff areas. For example, this budget requests $6 million in support of the Virtual

VA initiative. This effort, when complete, will replace the current intensive paperbased claims folder with electronic images and data that can be accessed and transferred through a web-based application.

Our budget also addresses the mandate to ensure that Montgomery GI Bill

(MGIB) education benefits provide meaningful transition assistance and aid in the

recruitment and retention of our Armed Forces. Recent legislation has improved

these benefits and our priority is to deliver them as efficiently as possible. I am

pleased to report that the Imaging Management System (TIMS) is now functioning

in all four Regional Processing Offices. The electronic folders that result from this

effort have expanded access points, improved data access, and enhanced customer

satisfaction. This budget requests $6.2 million to develop and install the Education

Expert System (TEES). Among other benefits, this expert system will enable us to

automate a greater portion of the education claims process and expand enrollment
11

certification. In 2003, we will continue to improve the accuracy and timeliness of

education claims and improve blocked call rates.

Madam Chair, I would like to take this opportunity to mention one of VA’s great

success stories—the administration of more than 4 million insurance policies in

force. The American Customer Satisfaction Index (ASCI) and the University of

Michigan conducted a study of the insurance death claims process and the satisfaction of beneficiaries who received awards. This study gave the VA’s insurance program a score of 90 on a scale of 100. This is one of the highest scores ever recorded

for either government or private industry. This budget provides funding to continue

the Insurance Center’s history of excellence. Our request includes a paperless processing initiative, which improves timeliness and quality of service while reducing

the cost to policyholders.

NEW VETERANS EMPLOYMENT GRANTS PROGRAM

Veterans represent a unique and invaluable human resource for American society

and the economy. Service personnel leave the military knowing they have made a

vital contribution to their country. Veterans want to continue making meaningful

contributions as they return to civilian life. However, in 21 States, fewer than 10

percent of veterans between the ages of 22 and 44 were placed in employment after

seeking job search assistance from State service providers; during 2001, there was

an average of 519,000 unemployed veterans, and in the same time period, 32 percent of unemployed veterans experienced 15 or more consecutive weeks of unemployment.

America’s labor exchange market has evolved in the time since the foundation for

current programs was laid. This budget proposes legislation that will allow VA to

create a new competitive grant program to help veterans obtain employment. VA

is working with the Department of Labor (DOL), veterans’ service organizations and

others to propose a veterans’ employment program tailored to the needs of 21st century veterans seeking assistance in finding suitable employment. The details of the

legislative proposal to implement this initiative are not yet final. If authorized by

Congress, the new program will broaden our ability to assist veterans with employment and training services. Our first priority will be serving unemployed serviceconnected disabled veterans and those recently separated from military service. We

will also help other veterans searching for employment. Our budget request for discretionary programs includes $197 million for the grant initiative.

We have the flexibility to design a program that will incorporate elements currently contained in the DOL grant program—transition assistance; disabled veterans’ outreach; local veterans’ employment representatives; and homeless veterans

reintegration. Veterans look to the VA for education benefits, home loan assistance

and, in some instances, rehabilitation and employment, medical care and compensation benefits in the transition years after leaving active duty. Later in life, many

veterans may return to the VA for health care and ultimately burial benefits. Adding an enhanced employment opportunity program to the spectrum of care and services provided by VA would provide veterans with a single access point to a full continuum of benefits and services throughout their lifetime.

I know there are many questions left unanswered regarding this new program.

We are in the process of finalizing our legislative proposal within the Administration and will submit it to you in the near future. At that time, we will be prepared

to address your questions in greater detail.

NATIONAL CEMETERY ADMINISTRATION

The budget proposal includes $138 million to operate the National Cemetery Administration. The request preserves our commitment to maintain VA’s cemeteries as

National shrines, dedicated to preserving our Nation’s history, nurturing patriotism,

and honoring the service and sacrifice of our veterans. It provides a total of $10 million to continue renovation of gravesites, as well as clean, raise, and realign

headstones and markers.

As noted earlier in my testimony, our budget request for Major Construction includes funds for the development of two new national cemeteries in the vicinity of

Pittsburgh, PA and Miami, FL. Operating funds also are requested to prepare for

interment operations in 2004 at these two locations and to begin interment operations at new cemeteries at Fort Sill, OK, and near Atlanta, GA.

MANAGEMENT IMPROVEMENTS

Madam Chair, last year I stated my commitment to reform VA’s use of information technology. I am pleased to report that we have made substantial progress in

this area and will continue our reform efforts. As VA moves forward with implemen-
12

tation of the One-VA Enterprise Architecture developed in 2001, we will manage information technology resources to account for all expenditures and ensure our scarce

resources are spent in compliance with this Enterprise Architecture. A strong program is under development for Cyber Security. We are re-engineering our IT workforce to ensure we have the proper skill sets to support our program needs. I have

recently approved a comprehensive change in how we manage our IT projects to ensure they deliver high quality products, meet performance requirements, and are delivered on time and within budget.

VA is bringing enterprise-wide discipline and integration of our telecommunications capability to increase security, performance, and value. Command and control capabilities are being established to support the Department in times of emergency. Electronic government will be expanded and internet capabilities will be enhanced to improve the delivery of services and the sharing of knowledge for the benefit of the veteran. All of these efforts will focus on meeting the objectives of the

President’s Management Agenda.

We are pursuing other important initiatives that will promote better management

practices throughout the Department. For example, I recently convened the VA Procurement Reform Task Force to examine our acquisition process and develop recommendations for improvement. The Task Force has presented 60 recommendations

to accomplish several major goals that will enhance our ability to: 1) leverage purchasing power; 2) obtain comprehensive VA procurement information; 3) improve

VA procurement organizational effectiveness; and 4) ensure a sufficient and talented

VA acquisition workforce. Mandatory use of the Federal Supply Schedule, reorganization and elevation of the VHA logistics function to more quickly standardize

medical and surgical supplies, and establishment of a National Item File are some

of the more prominent recommendations being made in order to maximize savings

in our medical care procurements. We are well on our way to achieving savings and

increased effectiveness in VA’s acquisition arena.

Finally, our 2003 request includes funds for a new Office of Operations, Security

and Preparedness (OS&P). Since the tragic events of September 11, 2001, we have

made substantial investments to address the Department’s security and preparedness, and to meet our primary and critical emergency response missions. VA is the

only pre-deployed nationwide health care system. We must be prepared for any disaster response. OS&P will play an important role in the Federal government’s continuity of operations in the event of an emergency situation. The new office is

formed with the specific intent of improving VA’s ability to respond to any contingency with minimal disruption to services for veterans and their families. This office

will coordinate all VA involvement with the Office of Homeland Security, FEMA, the

Department of Health and Human Services and DOD.

Madam Chair, that concludes my formal remarks. Although many challenges lie

ahead, I am proud of the accomplishments that have taken place over the past year.

Our budget request for 2003 is a good budget for veterans and positions us for continued success. I thank you and the members of this Committee for your dedication

to our Nation’s veterans. I look forward to working with you. My staff and I would

be pleased to answer any questions.

SENATOR MIKULSKI’S COMMENTS

Senator MIKULSKI. Well, thank you very much, Mr. Secretary, for

that testimony and really the very serious both policy and appropriations issues that are raised in the course of appropriations testimony to policy and the changing nature of the enrollment in the

veterans health care system.

In my enthusiasm for wishing Senator Bond a happy birthday,

we did not go to opening statements. But also, I am just going to

ask unanimous consent that all Senators’ opening statements go

into the record. And then we can move very promptly to questions,

knowing that other subcommittee hearings are pressing other colleagues.

I would also like to ask unanimous consent that the letter from

the veterans organizations that—every year they do an analysis of

the Veterans Administration budget request. They do an outstanding job and, I believe, a service to the Nation. Their covering

letter to the committee and appropriate people, I would like to have
13

those introduced into the record just as their views. And then we

will be meeting with them separately on another occasion.

[The information follows:]

LETTER FROM THE INDEPENDENT BUDGET

JANUARY 7, 2002.

The Honorable GEORGE W. BUSH,

President of the United States, The White House, Washington, DC.

DEAR MR. PRESIDENT: On behalf of the co-authors of The Independent Budget,

AMVETS, Disabled American Veterans, Paralyzed Veterans of America, and the

Veterans of Foreign Wars of the United States, we are writing to strongly urge your

Administration to fully fund veterans’ medical care spending to $24.5 billion in fiscal year 2003.

The brave men and women called to service after the tragic events of September

11, to defend our interests here and abroad, will be tomorrow’s veterans. We implore

you to ensure that these service members and those who have served before them

in defense of our nation will have the health care and benefits they have earned

and deserve from the Department of Veterans Affairs (VA).

The fiscal year 2002 VA medical care budget falls $1.5 billion short of what is recommended by The Independent Budget. We are extremely disappointed that the Administration and Congress have gone forward with a VA appropriation that will not

even fund the pending mandated wage increase for VA’s employees. We are especially concerned about reports of VA facilities having significant waiting lists for initial services once a veteran is enrolled in the system, as well as closed enrollment

at some hospitals. Most disturbing are reports of severely disabled veterans having

to wait for health care services and specialized services such as home health care.

We understand that VISN directors were recently informed health care allocations

for fiscal year 2002 include a two percent ‘‘efficiency’’ cut. One medical center director reported his VISN must slice $80 million from its budget to help make up for

the deficit in the budget. He added that the VISN was required to submit its plan

to reduce spending to the VA by December 28, 2001. It is outrageous that hospital

directors, already struggling to meet demand, are now being forced to make further

cuts. New mandates coupled with an insufficient budget, will undoubtedly result in

rationed health care and closed enrollment. VISN directors will have no choice but

to close beds, consolidate services, and reduce the number of full-time employees.

This two percent cut could equate to a loss of 13,000 full-time employees. This pressure on the system will especially hurt sick and service-connected disabled veterans

and affect their access to timely health care.

We appreciate the Administration’s decision to provide additional funding to allow

the Department to continue to enroll all veterans in its health care system for next

year. Unfortunately, the fiscal year 2002 budget shortfall and continued open enrollment have stretched the Veterans Health Administration to its limits, making it extremely difficult for VA to provide timely, quality health care services veterans deserve. Current spending is a least $400 million below needs according to Secretary

Principi. We understand the deficit is actually closer to $750 million if you factor

in inflation and maintain workload at current levels. At the very least, in order to

continue enrollment of all veterans, Congress and the Administration must find the

additional funds necessary to address this shortfall.

Without additional funding, VA is unable to meet veterans’ health care needs and

provide the high quality care it is capable of delivering. The Veterans Health Administration (VHA) is a national treasure, responsible for training most of the nation’s medical care workforce. It is also responsible for great advances in medical

science due to VA research. These advances in medical science have benefited all

Americans, not just veterans. Finally, VHA is the most cost-effective application of

Federal health care dollars. Research shows VHA provides care for at least 25 percent less than comparable Medicare services. Given the proper resources, VA can

effectively function as a backup to the Department of Defense during a time of conflict or to the Federal Emergency Management Agency during a national emergency.

Therefore, it is an excellent investment, and it makes good fiscal sense to keep this

system functioning well, especially now while our nation is at war. Our treasured

way of life and freedom is a result of the sacrifices and commitment made by the

men and women serving in our armed forces.

The Administration can no longer ignore the serious financial problems VA is now

facing and its negative impact on sick and disabled veterans. Mr. President, the Administration must increase VA medical care spending to $24.5 billion in fiscal year
14

2003 to ensure a secure and stable future for those who have served our nation

through military service.

We urge you to continue to support our nation’s veterans by providing VA with

the funding needed to maintain a viable health care system now and in the future.

Sincerely,

ROBERT JONES,

Executive Director.

ROBERT E. WALLACE,

Executive Director, AMVETS Veterans of Foreign Wars.

DELATORRO L. MCNEAL,

Executive Director.

DAVID W. GORMAN,

Executive Director, Paralyzed Veterans of America Disabled American Veterans.

SENATOR MIKULSKI’S GOALS FOR THE HEARING

Senator MIKULSKI. Mr. Secretary, my goals for this hearing are

two-fold: one, to ensure that in fiscal 2003 promises made are

promises kept; and that, at the same time, to be good stewards of

the taxpayers’ dollars. I am concerned about several major issues.

But the two most dominant are those where we know that the VA

told us that they had a $400 million shortfall in 2002 after the subcommittee had provided $350 million over the President’s request,

and actually $1 billion more. I—and then that somehow or another

Congress is at fault. I am going to come back to that.

Then there is the issue of the priority 7 veterans and the deductible that you are proposing. I think you raise very challenging

issues. But we really do not want a moat. It is one thing for there

to be policy priorities. But we really do not want a money moat

around veterans health care. And these are other areas that we

will want to pursue. And, of course, I know the issues around construction and the maintenance of facilities are a significant issue,

as well as the CARES.

$400 MILLION BUDGET SHORTFALL

But let me go right on to my first set of questions here. Last

year, when we provided more money, there was an announcement

by you that there was a $400 million shortfall and that actions

were going to be taken, which essentially would have very much

limited veterans’ health care. And somehow or another, it looked

like it was our fault that we did not give you enough money, when

we gave you more money than the President asked and more

money than this subcommittee gave last year.

Could you tell us why you had this shortfall? And I do not—this

is not to be brusque or a spring hazing. I have so much respect for

you. But was it that the VA could not count? I mean, we had a

hearing; we had a discussion. And then we got this $400 million

shortfall and a letter going out to the veterans, really limiting their

access. So could you tell us why, number one; number two, how you

made it up; and number three, how we do not get into a jackpot

this coming year after we have done what we think is our job in

trying to help you do your job to protect our veterans?

Secretary PRINCIPI. Yes. I fully understand, Madam Chair. Our

workload projections for fiscal year 2002 were based upon the

workload growth that we had seen for the period 1998 through the

year 2000. We had been seeing a 5 percent growth in workload dur-
15

ing that period of time and projected that the growth would remain

around 5 percent.

Well, it doubled. It doubled in 2001 and then again in 2002, 11

to 12 percent a year. I think that is attributable to many factors.

One, a little bit of a fluctuating economy, so more and more veterans are coming to us for care. With open enrollment, any veterans, irrespective of service-connected disability or not, income,

poor, or middle income, can come to us any day of the year; and

indeed they have.

Senator MIKULSKI. Well, Mr. Secretary, excuse me. Are you say- ing that the shortfall, the $400 million shortfall, that you announced, I believe, last summer—am I—when did you make that

announcement?

Secretary PRINCIPI. In the fall.

Senator MIKULSKI. Excuse me. In the fall. Was that due to the

fact of the increased enrollment from priority 7? Or was it just

that, taken over in the transition, there were so many loose ends?

And I am going to acknowledge, you overtook a situation that had

not been well-managed for a significant amount of time. So I am

going to acknowledge that when you walked in, you had your

hands full. But was it because of more people or because the estimates were not proper?

Secretary PRINCIPI. No. I think the estimates were not proper for

the most part. There may have been some other smaller issues. At

that time, we also thought that the TRICARE for Life Program enacted into law by Congress, was a great program for military retirees and they would leave VA at age 65, but have some 600,000

military retirees enrolled in our health care system.

When Congress passed TRICARE for Life, so that these military

retirees could now receive their care through the TRICARE Program, we estimated that a significant number would go to Tricare.

We did not see that early on in the program. Their pharmacy benefit is a little bit more generous than our pharmacy benefit. It is

only $9 for a 90-day supply. We thought that the transition would

be a lot faster.

I think the shortfall really had to do with inaccurate projections

of workload.

Senator MIKULSKI. Well, are we going to have—do you think you

have estimated right this time? See, I have my doubts. And then

again, let me tell you why I have my doubts. And I would like you

to come back.

Number one, there are certain assumptions in your request, one

of which is that you are going to be able to recover a significant

amount of money from third parties. The VA has never been able

to meet their own targets. That is number one.

$1,500 DEDUCTIBLE FOR PRIORITY 7 VETERANS

Number two, you are proposing a $1,500 deductible for priority

7 veterans. That is an assumption which the Congress has not

agreed to and, as you know, is enormously controversial. It gives

many of us great pause about—in other words, if you can afford—

my own—if you can afford the $1,500, would you be in another program? In other words, is this really the cost of what you think their

prescription drugs are?
16

But those two items there tell me that you really—that I really

question the—I really question your request, because I believe the

assumptions are faulty. Would you like to comment? Because I

really do not want a jackpot this fall for our veterans or for this

committee.

Secretary PRINCIPI. You are absolutely right, Madam Chair. It is

a dilemma. Without the deductible, we, in my view, are over $1 billion short, $1.1 billion. That is why the deductible was proposed.

We have a 7 percent increase of $1.5 billion requested which, relative to other Federal programs, is a good increase. But without

the deductible, we cannot get there from here.

MCCF, medical care cost recovery. On the one hand I am pleased

to see a 13-percent improvement in our collections. We are 13 percent ahead of our projections. But we have a long way to go.

MEDICAL CARE FUNDING NEEDS

Senator MIKULSKI. So what do you think you are really going to

need? And then I am going to defer to Senator Bond.

Secretary PRINCIPI. Madam Chair, it depends on whether we

work out some cost-sharing arrangement for the priority 7s. Congress directed that I make an enrollment decision every year on

who we can afford to care for. Without some form of deductible or

some form of cost-sharing, I would probably make the decision to

limit enrollment for priority 7s, rather than reduce the quality of

care and the timeliness, which is getting worse.

So my choices are very narrow. Limit enrollment, as the Congress asks the VA Secretary to decide annually, because this is a

discretionary program, or work with Congress to see if there is a

cost-sharing arrangement that can be worked out for the priority

7s.

Senator MIKULSKI. Or ask for more money in the appropriations.

Secretary PRINCIPI. Yes, more money in the program.

Senator MIKULSKI. Well my time has expired. I know other members would want to pursue this.

Senator Bond?

OPENING REMARKS BY SENATOR CHRISTOPHER S. BOND

Senator BOND. Thank you, Madam Chair. And I want to thank

you for the birthday gift. I would have to say that the greatest gift

I have throughout the year is the fact that we have such a good

working relationship, whether it is ranking member and chair or

chair and ranking member. I have my preferences. We are not

going to get into that today.

Senator MIKULSKI. We do not get a veterans preference here.

Senator BOND. I would say to my colleagues that my high regard

for the Senator from Maryland is well known. I am going to be

roasted by a charity in Kansas City this spring. And they all wanted Senator Mikulski to come out, because they have heard so much

about her and figured that she would probably do the most effective job on me that anybody could do.

But I do want to turn to our leader on the Republican side, who

has to go to another hearing. So it would be my pleasure to yield

to Senator Stevens for his questions.
17

Senator STEVENS. Well, Madam Chair, if you go, I will go and

turn the spit. All right?

Senator MIKULSKI. Okay.

Senator BOND. Oh, that is dangerous.

ALASKAN VETERAN ISSUES

Senator STEVENS. And I am grateful to both of you for allowing

me to participate quickly. We have a defense hearing this morning,

and I hate to interrupt a birthday party. You all do know it is Senator Bond’s birthday, right?

Senator BOND. Oh, yes. That is what——

Senator STEVENS. All right. Let me say that I am grateful to you

for a conversation we had the other day about the homeless problems in Anchorage. And I do hope that we can find some way to

work on that outreach center. I do not know if you all know but

we have the largest number of veterans per capita in the United

States. And it is becoming increasingly difficult to deal with that

high portion of that population under some of the limitations we

have.

For instance, that 30-year rule, it applies to those who have been

involved in the rate reduction program, the bond program we have.

As I understand it, there is a provision that cuts off veterans who

served in Vietnam and the Persian Gulf and other conflicts. But

those lapse in 2007. Those people would no longer be eligible unless

they have been out of the service for more than 30 years. I do not

understand that 30-year rule. I would urge you to take a look at

that.

And I would also ask if you would help us on another problem.

I am really not asking questions. I would just make a statement,

if I can. We have States, 5 States, that are eligible for a program

on housing. As I understand it, it is—we have a cap on these

States. My State is one that has, as I indicated, so high a percentage of veterans, it is hard for us to work under that cap.

Are you familiar with that? We are allowed to—we are told that

we are down to a level of—let me be sure. The current allocation

for Alaska is $303 million limit under the AHFC program. That is

the Alaska Housing Finance Corporation dealing with the VA bond

cap. I want to talk to you about whether or not we could find some

way to either put an escalator for States that have a high percentage of veterans in their population. Either that or lift the cap. It

has been in place for a long time and it is not relevant to our program.

We are prepared, through the Alaska Housing Finance Corporation, to assist veterans. But we cannot do it unless we can issue

bonds for veterans housing under the Federal authorization. I

would urge you to take a look at that.

Secretary PRINCIPI. I will do that, sir.

[The information follows:]

ALASKA HOUSING FINANCE CORPORATION

We are aware that the basic criteria for Alaska Housing Finance Corporation

(AHFC) Veterans Mortgage Program (VMP) are that the veteran must have entered

the service prior to 1977 and cannot have been discharged for more than 30 years.

AHFC requires that when veterans apply to them for a loan, they submit a VA

issued Certificate of Eligibility along with their DD214 so that it can be determined
18

when they went into the military and what date they were discharged. However,

this program is administered by AHFC, not VA. Therefore, we have no authority

over the provisions of the program.

MAXIMUM FEDERAL BOND RATE

VA has no knowledge of or authority with respect to a Federal cap that may exist

on bond issues.

Senator STEVENS. Lastly, when I was in Juneau, I was made

aware of an issue there. The Juneau VA replaced a long-serving

staff member there. And the replacement staffer has 25 years with

the VA but is not authorized to approve medical treatment. It is

now my understanding that—that a problem is near solution, but

it is on your desk. Is that right?

Secretary PRINCIPI. I have not seen it.

Senator STEVENS. Are you familiar with that?

Secretary PRINCIPI. I have not seen that issue, but I will look for

it as soon as I return.

Senator STEVENS. Well, I am sure you know that for someone

who is in Southeastern Alaska to have to go either to Anchorage

or Seattle for authorization, when there is a staffer that has 25

years experience in VA but is not authorized to approve medical

treatment, is a difficult situation.

Secretary PRINCIPI. I will find out and I will report to your office.

MEDICAL SERVICES IN ALASKA

The Alaska VA Healthcare System and Regional Office (AVHSRO) operates a one

employee VA office within the federal building in Juneau, Alaska. A Contact Representative GS–11 employee staffs this office. Her duties include general health care

and benefits information and assistance to veterans in southeast Alaska. One major

customer service area for this position is support to the Fee Basis authorization program. Juneau, Alaska is 550 air miles from Anchorage and is not accessible by

ground transportation. Juneau is the capital of Alaska and VA has a long history

of providing a VA office there.

The individual who currently is staffing the VA office in Juneau, Alaska reported

for duty there December 4, 2001. The employee was previously on staff at our Anchorage facility working within the Veterans Benefits Administration (VBA) Regional Office component of our operation.

The AVHRSO is currently addressing the training and technical support needs of

our new VA representative. During the week of February 11–15, 2002, the employee

returned to Anchorage for training on the medical care authorization process. During this visit we also had a lengthy discussion of the computer problems she had

been experiencing.

As a result of this training visit to Anchorage it was determined that a visit by

our Technology Management Service (TMS) staff was necessary to fix her computer

and printer problems. These are necessary fixes in order for her to provide the level

of service expected by our Juneau area veterans. The TMS staff traveled to Juneau

during the week of February 25, 2002 to March 1, 2002. Computer related access

issues were corrected during this visit to allow our employee to process medical authorizations.

Throughout the training cycle and during periods of computer outage, staff in Anchorage is providing service regarding the authorization of medical claims. In fact

our Coordinated Care Department has organized along regional boundaries and one

team is dedicated to Southeast Alaska. Statewide veterans are able to reach VA by

a toll free number and receive service via the Southeast Alaska Regional Team. Our

Juneau representative will soon be an additional source of assistance for the Juneau

area veterans.

It is important to recognize that the employee on staff now in Juneau, Alaska has

many years of VA experience; she spent the past ten years working in the VBA Regional Office. The authorization of a Fee Basis Medical Claim often requires a clinical decision. It was never intended that this employee would be able to independently authorize all the medical care that Juneau area veterans will need. However,

when the decision can be made based upon reasonable judgment and the care will
19

obviously be approved, the Juneau office is delegated authority to issue such an authorization. This is a local operational issue regarding support and training for a

new employee. It does not represent a new process in Alaska and does not require

action in VA headquarters. During the training and development process the

amount of direct service provided in Juneau has been more limited than under her

predecessor. This should improve quickly as the Contact Representative gains experience and familiarity with the authorization process.

Senator STEVENS. Thank you. Thank you for your courtesy.

Senator MIKULSKI. Senator Johnson?

MEDICAL CARE SUPPLEMENTAL

Senator JOHNSON. Thank you, Madam Chairwoman. And thank

you, Secretary Principi and your staff, for joining us today. I am

also very appreciative of your willingness to spend some time just

the other day with me, talking through some of the budget issues

that veterans in South Dakota have raised with me.

Very quickly, again, you announced a $400 million shortfall for

the current fiscal year last fall. Would you share with us, very

briefly, the prospects for a supplemental appropriation and at what

level you anticipate that supplemental might be requested for?

Secretary PRINCIPI. Yes. I was prepared again to suspend enrollment for new priority 7s, because I felt that the funding was not

adequate to maintain the quality that we desired. In the eleventh

hour, so to speak, I received a commitment for supplemental funding of $142 million. And I believe that—supplemental is being

worked on. It should be coming up to the Hill very, very shortly,

possibly as part of the DOD supplemental that is being prepared.

We expect the request for supplemental funding to be forthcoming

very, very soon.

We have taken management actions to offset the balance of the $400 million through efficiencies in centralized funding. We have

recently distributed $162 million to the field, so the actions we are

taking in conjunction with the $142 million supplemental will allow

us to get through 2002 without eliminating enrollment to anyone

who comes to us.

Senator JOHNSON. If the shortfall is $400 million and the supple- mental is $142 million, that is a significant difference. So what you

will not be able to do that you would have done had you had the

full $400 million?

Secretary PRINCIPI. We re-estimated the impact of the new

CHAMPVA for Life Program, a health care program for spouses of

deceased service-connected men and women. We have re-estimated

that program, and there is a $94 million saving there.

There are certain information technology procurements that we

felt we could defer to out-years. There are a number of centrally

controlled programs, all of which have yielded resources that we

have been able to distribute to the field to meet more high priority

items.

There is a combination of management actions, some of which do

result in deferrals of information technology programs, but that

yield resources we can apply to needed areas.

HOT SPRINGS, MSD SURGICAL UNIT

Senator JOHNSON. With a budget shortfall within VISN–23, it is

beginning to have a negative impact on patient care. For example,
20

there are some discussions now regarding the surgical unit at the

Hot Springs VA Medical Center in South Dakota. The Hot Springs

surgical unit has had difficulty recruiting and retaining professional staff. And one of the proposals under consideration is to

close that surgical unit to all but minor outpatient procedures and

move the remaining surgeries to Fort Mead Medical Center.

Can you update me at all on the current situation with the Hot

Springs surgical unit? And are there any solutions to how we can

keep the surgical unit fully operational?

Dr. MURPHY. Sir, we just received that proposal from the network in Headquarters. Our routine is that—that proposal would be

reviewed by the surgical service. And we will look at not only their

proposal but alternatives to maintain the services to veterans. And

we will be happy to provide you information once we have had a

chance to fully look at that proposal and all the alternatives.

[The information follows:]

HOT SPRINGS SURGICAL UNIT

The surgical unit at Hot Springs Medical Center is currently short two nurses;

one operating room nurse and one nurse manager. The VA Black Hills Health Care

System has developed a very aggressive and creative plan to fill these positions. In

addition to the typical markets where the VA Medical Center in Hot Springs normally recruits nurses, the facility has expanded its search for nurses to wide ranging markets such as Sioux Falls, South Dakota; Omaha, Nebraska; Denver, Colorado; and Minneapolis, Minnesota. In addition, the VA Black Hills HCS is offering

a $5,000 sign-on bonus for the nurse manager and a $2,000 sign-on bonus for the

Operating Room nurses. VA Employees are being offered a $500 ‘‘finders fee’’ if they

assist in the successful recruitment of operating room personnel at the VA Hot

Springs medical facility. The community of Hot Springs has also been helpful in the

search for VA staff. The Job Service office is engaged in local (Rapid City area) recruitment at no cost to VA. Every effort is being made to assure uninterrupted surgical service at the Hot Springs VA Medical Center. VA officials are optimistic that

the positions will be successfully recruited.

$1,500 DEDUCTIBLE PROPOSAL

Senator JOHNSON. Well, thank you. And I appreciate any effort

you can do to retain full service wherever possible at our VA’s.

As we discuss priority 7s—and I share the concern expressed by

my colleagues here this morning about the need for full services to

all veterans. But one of the concerns I have, particularly one that

we have in rural States, where assets, such as land, are included

in the calculation of income, we have a lot of farmers and ranchers

in my State who own land that, on paper, is worth a fair amount,

but whose annual actual income, whose revenue flow, is far, far

below the VA threshold.

The administration’s proposal to impose a $1,500 co-pay on category seven vets is going to be particularly onerous on these people

who simply do not have a lot of cash income, despite the fact that

they do have some land. Do you support changing the law regarding eligibility standards to address that problem, or do you have

any ideas about how to address the people who fall under this circumstance?

Secretary PRINCIPI. I know it is an issue in rural America, and

I think it is an issue in urban America, too, where veterans own

small businesses, and they have a lot of their assets tied up in a

little shop or dry cleaners or whatever it might be. Those assets

count toward their overall assets. It is a real problem.
21

We could take a look at the income thresholds. Maybe they need

to be revised; different thresholds at which certain co-payments

would kick in or not. We could look at the percentage of reasonable

charges as a way of keeping the co-payments and the deductible

down.

Again, if our costs, for example, for an outpatient visit are $100, we would go to the insurance company first for that $100 to be applied toward the deductible. If the veteran does not have insurance,

then the deductible for which the veteran is responsible would be

a percentage of that. We started at 45 percent. We are looking at

20 percent. So it could be $20 or $45, which would be applied to

the deductible.

And many, many veterans would not come anywhere near the $1,500 limit, which would not be applied to the pharmacy benefit.

Prescriptions would still be $7 each. And there would not be any

further co-payment that would have to be paid.

If veterans could not afford it, we would never turn them away.

We would have a repayment plan. So we tried to take as many

steps as possible, recognizing that people with incomes of $25,000

to $30,000, and maybe assets tied up in the ranch or the farm, do

not have disposable income. Whether it be $10 a month, or whatever the veteran could afford, we would work out some kind of payment plan. The fact of the matter is that we need to address this

growth.

Senator JOHNSON. In the end, you would need better funding.

But in the meantime——

Secretary PRINCIPI. Oh, yes.

Senator JOHNSON [continuing]. As long as you have these priority

issues that you have to grapple with, I hope that you will be

sensitive——

Secretary PRINCIPI. Sure.

Senator JOHNSON [continuing]. To the actual resources available

to many of our veterans.

Thank you, Mr. Secretary.

Senator MIKULSKI. Senator Bond.

Senator BOND. Thank you very much, Madam Chair. I would like

to submit, for the record, the questions that Senator Domenici left

for the Secretary.

Senator MIKULSKI. Without objection.

OTHER FUNDING OPTIONS FOR MEDICAL CARE

Senator BOND. Mr. Secretary, we congratulate you on the steps

you have taken. I know that you are making real progress trying

to tackle the claims benefit processing problem.

You are addressing problems of homeless veterans. I think certainly veterans in my State are excited about your leadership. I

congratulate you on this. There are problems, obviously, with funding. You have continually, the Department of Veterans Affairs continually, from year to year, has received the greatest increase in

any budget from our subcommittee. And we are going to continue

to do so, but we need to look at some of the other alternatives.

VA, I guess, has sought the authority to bill private insurers and

Medicare. And the tax-writing committees do not want to approve

that. A lot of people have focused on the GAO reports that con-
22

cluded, when compared to the private collection efforts, private sector collection efforts, the VA is not collecting enough money. We

need to find out if there are ways that you can improve the collections.

But beyond that, I look at the numbers on priority seven partici- pants. And it is obvious that your suggestion of a $1,500 deductible

was not well received, I think, might be a happy euphemism for the

response it got. But if you look down the road, if the cost of medical

coverage for priority 7s continues to grow from an increase of $1.1

billion this year to $5 billion on top of all the other needs, we are

going to be very fortunate in this subcommittee if we can get anything like the allocations we would need to keep up with that.

So I would ask what steps you are taking, first with respect to

priority 7s. Are you meeting with the veterans’ service organizations, the authorizers and others? Are there options that you can

pursue that may not be as Draconian but might assist?

Secretary PRINCIPI. Yes, I have met with the leaders of all of the

service organizations. We have discussed this issue. I have explained the rationale. I have opened up the door to any recommendations they might have on how this deductible can be

modified to address our needs, at the same time making sure that

veterans can continue to access the system. I have engaged in highlevel discussions with Secretary Tommy Thompson, talking about

the issue of coordination of benefits, and Medicare subvention. We

are working on that. I do not see that happening for the reasons

you indicated. The tax-writing committees have been very, very reluctant to make any changes there.

So yes. We will meet day or night, whenever, to sit down and address this important policy issue, because it is getting to crisis proportions. It really is. And we are failing veterans if we cannot provide care to them in a timely manner. I think some good decisions

were made in the mid-1990’s, but all were premised on additional

funding outside of the appropriation process. Those decisions were

premised on Medicare subvention and on increased MCCF collections.

And guess what? It never happened. And we continue with open

enrollment. We continued opening clinics. We continued giving people expectations. And we did not do too much about it. And now

I find myself in the situation of having to tell veterans, ‘‘I am sorry,

there is no more room.’’

As I was telling Madam Chair, when a 100-percent service-connected veteran combatant takes a bullet to the spine and goes to

Florida, he is treated just like any other veteran who is non-service-connected or who may be wealthy; but by law they are both

equal. To me, that is wrong. And we need to do something about

it. But that is the way the law is structured by the authorizing

committees.

It seems to me that we have to address this in such a way that

gets people to understand and attempts to meet their expectations,

but to put some management processes in place to take a look at

this growth and manage it appropriately, like any private sector

health care company would. They have the same challenges we do.

With our MCCF, we are making progress, but I am to the point

of being totally frustrated. I am looking to bring in loaned execu-
23

tives from the private sector to tell me how we should do our billing and collection. We struggle with it. We do it in 163 hospitals

around the country and at some networks. It seems to me there is

a better way to do our collections. And we just continue to do the

same things and we just do not get there. I do not want to be critical, but we just do not get there.

I am at the point now where I really need to bring in some experts from the private sector; not consultants, per se, but experts

in business, to come here and tell me how to fix this problem once

and for all. Then go from there.

Senator BOND. Well, Mr. Secretary, my time has run out. But I

commend you for your willingness to address the much broader

problem. We are going to do everything we can in this committee.

We have always done as much as we can. The forces from the outside who keep thinking there are unlimited funds are absolutely,

you know, in the wrong ball park; they are on a different planet.

We have to focus on the severely wounded, service-wounded veteran. We have to focus on those who are poorest. And I am concerned that, if we do not get a handle on some of the lower priority

ones, we are going to hear stories today about lack of care or delayed care and inadequate care for veterans who really are needy,

whom we are not treating as well as we should because the resources are too short. And this is a problem that the authorizing

committees, as well as some of the other committees on the Hill,

need to be aware of. They think they can offer more benefits to everybody without providing the resources.

And we will work with you. And I commend you for carrying that

message.

Senator MIKULSKI. That was good, very good.

Senator Kohl?

KENOSHA, WI, CLINIC

Senator KOHL. I thank you, Madam Chairman.

Mr. Secretary, the significant increase in the medical care spending proposed in your budget, I believe, is well justified. I must also

say, however, that in addition to what you have heard from the

other Senators, I have heard from veterans who are concerned over

your proposed $1,500 deductible initiation for priority seven veterans. In seeking new funding sources, I know you would agree

that the VA must be careful not to erect new barriers for veterans

who are seeking VA care.

Mr. Secretary, as you may know, the State of Wisconsin’s VA facilities are part of Veterans Integrated Service Network 12, known

as VISN–12, which is the first network to undergo the VA’s CARES

for structuring process. The realignment package for VISN–12 that

you recently approved will include the establishment of several new

community-based outpatient clinics in my State of Wisconsin. The

timely construction of these clinics will be critical in the effort to

bring VA health care closer to the rural areas, where many of Wisconsin’s veterans live.

Over the past year, the VA has had difficulty in finding the

money to construct a clinic authorized to be built in Kenosha, Wisconsin. Can you walk me through the clinic funding process and assure me that, with the budget that you are proposing, the VA will
24

have the funding to build these clinics on schedule in my State of

Wisconsin?

Secretary PRINCIPI. Yes. Dr. Murphy can talk about the specifics,

but with regard to Kenosha, that decision has been made. That

clinic will open; we made a commitment to open that clinic. Some

later decisions seemed to run counter to that, but I felt that, in

view of the commitment, we needed to move forward. The network

director has been so informed, and steps are being taken to ensure

that the funding will be there for the clinic.

Dr. Murphy can talk about Green Bay and Wisconsin Rapids.

Senator KOHL. Yes.

Dr. MURPHY. You are absolutely correct, sir, that there were two

community-based outpatient clinics that were proposed by the contractor as part of the CARES process and that Secretary Principi

has approved options. We are moving forward very aggressively to

develop an implementation plan within the network to get all of

the changes that were approved in place in the shortest time possible.

Some of the major changes that will be implemented will be, you

know, the closure of inpatient beds at Lakeside. We will need to

renovate the West Side facility in Chicago in order to do that transfer. There will be significant savings in terms of personnel and

other management efficiency that will result from that. And those

resources will go back to delivery of health care services for services within Network 12, including those in Wisconsin.

So we expect to be able to implement those changes as quickly

as possible. The implementation plan should be delivered to headquarters within the next several months. We would be happy to

brief you on that when it is available.

[The information follows:]

CLINIC FUNDING PROCESS

Funding for VA Community-Based Outpatient Clinics (CBOCs) comes out of the

budget allocated to the VISN. Each medical center within the VISN is then provided

with an annual operating budget to support the full range of services and staff they

provide. Clinics under their jurisdiction must be funded out of their operating budgets. The directive governing the establishment of CBOCs has a provision that requires the VISN to have sufficient operating funds to open and manage the clinic.

The original business plan for the Kenosha clinic is being updated to reflect workload projections based on utilization of surrounding clinics and medical centers that

was not included in the original plan. The clinic is expected to open later this year.

Based on the outcome of the business plan and sizing model, we anticipate that

North Chicago VA Medical Center will have the funds necessary to activate the Kenosha clinic later this year and anticipate future budgets will support on-going operations. The other clinics in the CARES Implementation Plan are to be funded with

the saving by the realignment of inpatient services from Lakeside to West Side and

Hines. In addition there would be operating funds generated by the Enhanced Use

Lease of the Lakeside property.

Senator KOHL. I thank you and I am encouraged by what you

said about Kenosha. I would like to hope I could also be encouraged

with what you said as it reflects Green Bay and Wisconsin Rapids.

Dr. MURPHY. Yes.

Senator KOHL. Thank you.

CLAIMS PROCESSING

Mr. Secretary, one of the major commitments made to veterans

by the President was the reform of the inefficient claims processing
25

system. Veterans in Wisconsin and across the country continue to

wait too long, I am sure you would agree, to receive decisions on

their claims for benefits earned. In your statement, you have emphasized that it is your goal to reduce the current claims processing time to 100 days for compensation and pension claims by

the summer of 2003.

Too often, I hear complaints from Wisconsin veterans that new

and reopened claims are often taking as much as a year to process.

While 100 days is worthy goal, can you outline what you are doing

to achieve this goal in such a short period of time?

Secretary PRINCIPI. Senator, as you may know, shortly after coming on board I convened a claims processing task force to recommend practical hands-on solutions. And I was not interested in

recommendations that would deal with changes in law to curtail

benefits or abstract theories of veterans’ benefits. I just wanted

practical hands-on solutions of things we could do to reduce the

backlog.

I am proud that that group, including leaders of the veterans

service organizations, gave me 34 very concrete recommendations,

like triaging when claims come in. A group of people decide which

ones can be decided immediately and which ones need more claims

development work, so that those that can be decided immediately

can be signed off, rather than sitting on somebody’s desk for 6

months before the file is even opened. Other recommendations

called for more specialization, more accountability and performance

standards.

I created a tiger team specifically to address the claims of veterans over the age of 70 years old, whose claims had been pending

more than a year. Since the tiger team has been in existence about

4 months in Cleveland, Ohio, with 9 additional sites around the

country, they have decided 13,000 of the most complex claims that

have been sitting on someone’s desk for a year or 2 to 3 years.

I think the totality of these steps, including a lot more focus and

discipline on what we have to do, has resulted in a dramatic increase in the number of decisions to 62,000 each at the past 2

months, compared to 29,000 per month a year ago. We need to continue to do that. We also need to keep our eye on quality to make

sure we are not making a lot of mistakes in the process of expediting these claims.

I really do think, that by staying the course, we are going to get

claims processing time down to 100 days, maybe less, maybe a little bit more, but we are going to stay on that track.

Senator KOHL. Well, I thank you. And I am much encouraged by

what you have said this morning.

Secretary PRINCIPI. Thank you, Senator.

Senator KOHL. Thank you so much.

Thank you, Madam Chair.

Senator MIKULSKI. Thank you.

Senator Shelby.

Senator SHELBY. Thank you.

DISCRETIONARY FUNDING NEEDS

Mr. Secretary, we appreciate you coming here today. And I think

you feel the environment here is one to help you. We know you
26

have a lot of problems confronting you, mainly in resources, funding. For example, I have had a couple to come to my attention recently. In a meeting with members from the disabled American veterans in my office here, two examples of the problems that you

have questioned surfaced. And I am sure you have them all over

the country.

One veteran from Birmingham had fallen and knocked one of his

teeth out. He was told it would be 4 months to receive a new tooth.

Another veteran from Athens, Alabama, made an appointment for

a routine eye exam. That exam is 6 months away.

I think a lot of it is inability to provide you the resources you

need. Do you agree?

Secretary PRINCIPI. Yes, sir, I do agree. Again, it is infinite demand, finite resources. So yes, part of it is, the dollars we have

available. Part of it is how well we manage our system. It is a complicated issue. I think, in the final analysis, it is dollars that we

request of you and that you give us. I think the Congress has been

extremely generous to us, but the workload continues to grow.

And I think there are unfunded mandates, too. And again, I am

not trying to take a shot at the authorizing committees.

Senator SHELBY. I think you are being honest.

Secretary PRINCIPI. I grew up on an authorizing committee as a

staffer. But as was said yesterday in the House, I think it is my

curse.

Senator SHELBY. Welcome to the appropriations world.

Senator MIKULSKI. Very good.

Secretary PRINCIPI. I think, when the authorizers mandate some

programs with no increased funding specifically for those programs,

we have to take the resources for the new programs from existing

programs. And it makes it difficult, because there is only so much

of the pie to divvy up.

Senator SHELBY. Absolutely.

Secretary PRINCIPI. It becomes a problem we have to deal with.

Senator SHELBY. Well, I guess sometimes the authorizers want

to be Santa Claus. And we certainly do not want to be the Grinch.

You know we want to help you and you understand that. Some of

us also grew up on some of the authorizing committees. But at the

end of the day, the resources have to come out of this committee.

And we know you have a tough job. I know our leaders on the committee do, too. I believe all of us want to help you solve this job,

because we are committed to the veterans.

But I think you point out a good example. I think maybe they

are relative commitments, you know, to the disabled, to the people

who are disabled and wounded in combat. I think we owe them

first; I do.

Secretary PRINCIPI. I agree. The service-connected disabled followed by the poor.

Senator SHELBY. Absolutely.

Secretary PRINCIPI. The system was designed for them. And to a

degree it has always historically been as long as I can remember,

that the higher income, non-military medical condition veterans

were always treated on a space available basis. Again, I hope we

can treat as many veterans as possible. I do not think we can treat
27

all 25 million. The system is not built for that. We are up to almost

5 million now, 20 percent of the total.

We have to concentrate and make sure that the service-connected

disabled and the poor have access to our system, because they are

the ones that usually do not have other places to turn, either because they need the specialized programs of the VA, such as spinal

cord injury, blind rehabilitation, mental health, and PTSD, or, of

course, who are poor and who do not have insurance.

AVERAGE AGE OF WARTIME VETERANS

Senator SHELBY. Mr. Secretary, what is the average age of the

Second World War veteran today, roughly?

Secretary PRINCIPI. They are well into their 70’s, I would think

mid- to late 1970’s.

Senator SHELBY. Towards the 1980’s, are they not?

Secretary PRINCIPI. Probably. Maybe even 1980’s. Clearly, there

are only 5 million remaining of the 16 million who fought.

Senator SHELBY. What is the average age of the Korean War veteran? I know it is a little below, but not much, is it?

Secretary PRINCIPI. I think Korean has to be in the 65-to-70

range, as well.

Senator SHELBY. And how many would that be, roughly?

Secretary PRINCIPI. I will have to provide it for the record.

Senator SHELBY. You furnish it.

Secretary PRINCIPI. We have about eight to nine million Vietnam

veterans, five million World War II veterans. I think Korea is in

the neighborhood of four to five million.

Senator SHELBY. What is the average age of the Vietnam veteran?

Secretary PRINCIPI. The average age is probably 57/58 years old.

Senator SHELBY. You are using your measurement, right? That

is good.

Secretary PRINCIPI. I think I am 1970 vintage from Vietnam. So

yes, probably about in the mid- to late-50’s.

Senator SHELBY. Okay.

Madam Chairman, thank you.

Senator MIKULSKI. Thank you, Senator Shelby. And thank you

for your sentiments to the Secretary that, really, we are troubled

about what the VA is facing. And we can just see today, you yourself seem so troubled. But you are not alone here. And the veterans

are not alone. And we really have to solve these issues.

Senator Craig?

PREPARED STATEMENTS

Senator CRAIG. Thank you, Madam Chairman. Let me ask unanimous consent that my opening statement be a part of the record.

Senator MIKULSKI. That is without objection and we will also include statements from Senator Bond and Senator Domenici.

[The statements follow:]

PREPARED STATEMENT OF SENATOR LARRY E. CRAIG

Mr. Chairman, it is indeed a pleasure to welcome the VA Secretary Tony Principi

and members of his staff. I applaud you and your team in your efforts to ensure

our government honors our commitments to Veterans while implementing the most
28

beneficial and cost effective programs. To do this, we must continually look for opportunities to reform the VA health care system, while maintaining as our number

one priority, our combat veterans with disabilities and our veterans with low incomes who often rely exclusively on the VA for their care. The VA’s Budget proposal totals $56.5 billion for Veterans’ benefits and services, $30.1 billion for entitlement programs and includes $26.4 billion in discretionary

spending, for medical care, burial services, and the administration of Veterans’ benefits. This is an increase of almost $6 billion over last year’s budget, and it clearly

demonstrates the President’s commitment to Veterans’ Health Care.

I strongly support a VA which is committed to providing accessible, high quality

medical care and other Veterans benefits and services in a timely and effective manner. However, we must expand and improve the delivery of service and benefits so

that all Veterans have equal access to high quality medical care, particularly in

under served rural areas such as Idaho. I believe that a more localized care approach as opposed to a regionalized approach is most appropriate for areas of the

country such as Idaho. Currently, the Veterans in Lewiston of my State have challenges getting appointments at facilities in Washington, specifically Walla Walla,

and Spokane, as well as tremendous burdens trying to get to these facilities. I believe this area is a prime candidate for a Veterans Clinic. In the Southeast portion

of my State I have major concerns with the doctor shortage we are currently experiencing in our Pocatello facility. It is of utmost importance that the long list of Veterans waiting to receive various services, especially medical care, are able to get it

in a timely, courteous manner with a minimal amount of necessary travel time. In

recent years there were tremendous staff reductions that resulted in reduced services. The necessary steps must be taken to reverse this trend. I invite the Secretary

to come out to Idaho and discuss these issues with me and the Veterans of my State

sometime soon.

In closing, Mr. Chairman, there is no way to over emphasize the honor and respect this nation owes the military men and women who sacrificed so much to accomplish a strong national defense. I believe that this proposed budget is a good beginning for ensuring our Veterans will receive high-quality health care, that we

keep our commitment to maintain Veterans’ cemeteries as national shrines, and we

have the resources to process Veteran Benefit claims in a more timely and accurate

manner. I look forward to working with Secretary Principi to meet the many challenges that the VA will face in the coming years.

PREPARED STATEMENT OF CHRISTOPHER S. BOND

Thank you, Madam Chair. I also welcome back Secretary Tony Principi to our

subcommittee. I am pleased to have Secretary Principi here today to discuss the fiscal year 2003 budget for the Department of Veterans Affairs. Even though you have

been in your position for a little over a year, saying that a lot has changed over

the past year would probably be an understatement.

As the Secretary of VA, you face a number of daunting challenges that have

plagued the Department for several years. I applaud your efforts to tackle the

claims benefits processing problems and address the problems of homeless veterans,

to name a few.

However, my statement focuses on two other major challenges: (1) addressing the

escalating growth of the so-called Priority 7s and (2) transforming VA’s medical care

infrastructure and services to better meet the needs of veterans.

As you know, the most pressing budgetary problem facing the Department and

the Congress is the cost of maintaining an open enrollment policy for the Priority

7 veterans without compromising the quality of health care services for all veterans

served by the VA system. The fastest growing veteran group are those that have

incomes above $24,000 annually and have no service-connected disabilities. These

are defined as ‘‘Priority 7’’ veterans. VA projects that if no change to current policy

is enacted, the costs of providing medical care services to this category of veterans

will rise from $2 billion in fiscal year 2002 to over $5 billion in fiscal year 2007—

a 126 percent increase! Currently one-third of VA’s six million enrollees are Priority

7s and if no change in policy is enacted, this percentage is projected to increase to

42 percent by 2010.

We can all be proud that VA is successful in attracting so many veterans to its

services due to the recent improvements made in its delivery system and its generous benefits packages. However, there are significant costs for operating VA’s

medical care system, which must be addressed or else the system may collapse and

become a victim of its own success. To address this issue, the Administration has

proposed a new deductible or cost-share arrangement where Priority 7 vets would
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be charged at a rate of 45 percent of the reasonable charges, up to $1,500 annually.

VA proposed this deductible to not only stem the rapid growth in Priority 7s, but

to insure that timely, high quality care can be provided for VA’s higher priority veterans—those that are low-income and those with service-connected disabilities—

without having to stop enrolling Priority 7s.

Mr. Secretary, I am sympathetic to the Department’s dilemma and you have my

commitment that I will work with you to protect the long-term viability of VA’s

health care system. But I realize that you have already heard from the veteran service organizations and the authorizing committees that they will not support your

proposal. And to further box you in, they have demonstrated their objection to any

attempt to stop enrolling Priority 7s.

Where does that leave us? Clearly, at the appropriators’ door step. VA estimates

that it will need an additional $1.1 billion for fiscal year 2003 to maintain open enrollment for Priority 7s, but there is more than just this one year cost as I stated

earlier. If we do not make a policy decision this year on Priority 7s, then we will

be looking at an additional $5 billion by fiscal year 2007. I believe that it is too optimistic and risky to expect that the appropriators will come up with $1.1 billion this

year. The VA medical care account has been and always will be the top funding priority for this subcommittee but it cannot be at the expense of gutting other critical

programs for affordable housing and disaster relief.

We must work constructively with the VSOs and the authorizers to come up with

a fair, balanced approach to ensure that the VA health care system continues to provide quality care for all of our veterans. And, Mr. Secretary, we need your commitment to improve VA’s efforts in collecting funds due to VA from other health insurance programs. Your budget request is projecting collections totaling $1.45 billion,

but I have heard that VA has more than $700 million in outstanding receivables.

VA can obviously do a better job.

The other daunting challenge for VA that also has major cost implications is realigning the VA medical care infrastructure. I congratulate you, Mr. Secretary, for

your leadership in moving forward the Capital Asset Realignment for Enhanced

Services or ‘‘CARES’’ program in network 12. I think I know as well as anybody that

it was a difficult decision to implement CARES in that region but I cannot emphasize enough that it was the right thing to do.

Many oppose CARES, including some members on Capitol Hill, but I am convinced that CARES is the right approach that is badly needed. CARES is critical

in developing a long-term strategic plan to ensure that VA’s capital infrastructure

meets the healthcare needs of veterans in the most cost-effective manner while assuring the highest quality care system. For too many years, VA did not have a clear

capital asset plan that would justify the need for new construction projects or address the massive excess infrastructure in the system. Before CARES, VA hospitals

had been treated as trophies for members to bring home to their States or districts,

built with too many beds and too much gold-plating. Not too many years ago, new

VA hospitals were opening with entire floors empty because they were not needed.

It is also troubling to me that some VA facilities seem to exist primarily to serve

the research and financial interests of the medical schools. This is an important part

for VA as both research sites and teaching schools. However, in too many cases, veterans’ medical care has become a secondary concern in justifying those hospitals.

I was frankly appalled by the efforts of Northwestern University to block CARES

in Chicago. While I appreciate the medical research work done by fine institutions

such as Northwestern and am a big supporter of VA medical research funding, we

all know in this room that medical schools have more resources at their disposal

than the veterans who need medical care. Your decision, Mr. Secretary, was important because it sent out a signal that VA’s first and most important priority is meeting the needs of the veteran.

You took a major step with implementing CARES in VISN 12 but I believe that

we are at a critical juncture. Chicago was a pilot in some respects but now we must

tackle the Bostons, New Yorks, and San Franciscos of the country. You have shared

with me some details of your plan to complete CARES for the rest of the Nation

but there are some important questions that we—the Department and this subcommittee—need to work out. For example, I am concerned about the availability

of resources needed to perform the studies and the expertise of those staff performing the work. Further, it is important that the process be objective and independent. I am concerned that if a VISN director is in charge of his or her own

CARES study, there may be a conflict-of-interest in carrying out the review. And,

as demonstrated with Chicago, I am concerned about medical schools pressuring the

network to retain facilities at the expense of the veterans and the taxpayer. In

GAO’s testimony to this subcommittee back in 1999, it reported that ‘‘Medical
30

schools’ reluctance to change long-standing business relationships, for example, has

sometimes been a major factor inhibiting VHA’s asset management.’’

Lastly, we need to fund adequately CARES. We provided $100 million for fiscal

year 2002 to fund CARES but your budget request for fiscal year 2003 only asks

for $40 million. I do not understand why more CARES studies cannot be completed

in fiscal year 2003. I am further puzzled by the budget request’s inclusion of $94

million for seismic repairs at four California facilities, without any CARES review.

You need to provide us a comprehensive, strategic plan on how CARES will be carried out in a timely, efficient manner and how we should fund the construction of

new projects and disposal of old projects.

Mr. Secretary, I look forward to our continued working relationship in addressing

the needs of our veterans. Before I close, I want to express my sincere thanks for

your visit to my State. The veterans in Missouri appreciate your hard work and efforts. Thank you.

PREPARED STATEMENT OF SENATOR PETE V. DOMENICI

Mr. Secretary, it is a pleasure to see you again. Thank you for being here today

to discuss the enormously important issues that are of concern to our nation’s veterans.

We all have a great responsibility to assure that the needs of veterans throughout

this country are being met, and I want to compliment you for the job you are doing

to meet this challenge.

People from all walks of life in New Mexico have a long and proud tradition of

answering our nation’s call to duty.

Just last week about 40 members of the 49th Communication Squadron from

Holloman Air Force Base in Alamogordo, New Mexico shipped out as part of Operation Enduring Freedom.

I am personally very proud of them, and I know all of New Mexico is, as well.

At this time when our nation is actively engaged in conflict abroad, and we hear

reports of the danger our troops face everyday, we come away with a real sense of

the sacrifice our brave men and women in uniform are making.

For me, and I am sure this is true for you, too, Secretary Principi, the conflict

in Afghanistan also evokes memories of the great sacrifices that our military servicemen and women made throughout the last century in order to preserve our liberty.

And so it is vitally important that we provide our patriots with the very best care

available and I am committed to doing that.

As I travel around New Mexico, no matter where I go, I always meet a veteran

who says, ‘‘Senator, I served my country as part of the military. I am so proud to

have sacrificed for my country, and the VA has truly been a great provider for my

health needs. But in a rural State like New Mexico, I am forced to travel great distances to access a VA facility for the care that I require. What can be done?’’

Mr. Secretary, I know you, too, have traveled all around this country to listen to

veterans, including the rural parts of the country and heard similar concerns. In my

questioning today, I will be interested to hear what steps the VA will take to address this problem.

Another issue that is very important to all veterans is that of having a fitting

resting place, where the memory of their service to country will be preserved in an

honorable and dignified manner.

In New Mexico, this issue is manifesting itself in the reality that by 2008, the

Santa Fe National Cemetery will run out of sufficient plot space.

Last year, I sought a solution to this problem by introducing legislation calling

on the VA to initiate a planning study that would lead to the establishment of a

National Cemetery in Albuquerque.

I will continue to pursue this highly important issue because I believe it is a

pressing problem that needs to be addressed soon in light of our aging veteran population. It is critical that they have a place where they can be laid to rest alongside

their comrades.

So I will seek your thoughts on this, as well, Mr. Secretary.

And with that, I would, again, like to welcome you Secretary Principi, and thank

you Chairman Mikulski for calling this hearing.

Thank you.
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PHYSICIAN FOR POCATELLO, ID CLINIC

Senator CRAIG. Mr. Secretary, thanks for your passion. I think

we all feel it here and appreciate it. I get sensitized by it on a regular basis, and I am sure some of my colleagues have the same experience. I had to call a mom and a dad in Idaho yesterday, because I was tracking their injured son in a hospital in Turkey, who

was involved in that firefight last weekend and got beat up pretty

badly. A young man from southeastern Idaho, who some day is

probably going to need the help of the Department of Veterans Affairs, because he got beat up pretty badly.

And I think about the time we think periods of population transition occur by age and reality. We just went through with Senator

Shelby the litany of, of course, World War II and Korea and Vietnam. And while this current peace effort we are involved in is

going to bring less veterans, too, I hope, that need care to the system, it is going to bring some.

And many of my colleagues have covered the issues, the priority

7 issues, and how we deal with that medical deductibility. Yes, veterans in Idaho are reacting the same way. And I know you are trying to resolve that. With resources, it would be easier to do.

Let me give you an example, though, of a problem that is current

in southeastern Idaho. We, out West, ask our veterans to travel

phenomenal miles. And when World War II veterans and Korean

War veterans get in their cars and drive 300 miles to the clinic,

over snow-covered roads, not to get the services they need, finding

that they may need to stay overnight, to go back the next day, that

kind of thing, often times is very frustrating.

Pocatello, Idaho, a facility there, lost one of its doctors 3 years

ago; and, at that time, convinced me that—that doctor deficit could

be dealt with through a nurse practitioner. That has simply proven

not the case. Now those veterans, who were once serviced on that

250-mile drive from Salmon to Pocatello—or I guess it is about 200,

now have to add another 150 miles to go on to Salt Lake.

They are out recruiting. They say they cannot find at least someone to meet that. We have a residence program in the vicinity. And

it appears there is ample supply of willing and able medical professionals. I think that is something we ought to focus on in the Pocatello facility. It is of need there.

Secretary PRINCIPI. Yes. Dr. Murphy has some information specifically on that.

Dr. MURPHY. Senator Craig, I am happy to report that we have

just hired a physician for the Pocatello clinic.

Senator CRAIG. Hallelujah.

Dr. MURPHY. Pardon?

Senator CRAIG. Hallelujah.

Dr. MURPHY. Hallelujah. That physician is scheduled to begin

work in July of 2002. We are hoping that we will be able to bring

them on board sooner than that. But that will—that will bring the

staffing level up at Pocatello——

Senator CRAIG. Good.

Dr. MURPHY [continuing]. And hopefully resolve some of the

issues that are very important to veterans in Idaho.
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Senator CRAIG. Well, I try to get into all those facilities at least

once or twice a year to see how they are doing. And it is very important that those clinics, outside the major facilities, service because of the distances involved. It is not just a drive across town.

Back here it is a drive across several States to get to a facility,

comparatively speaking. And that is something that is just very,

very important.

CLAIMS PROCESSING

You have walked through how you are approaching the claims

issue. I will leave that question alone. I was—I just wondered why

you chose 100 days. I think it is probably the conclusion of the

group recommendation—when I would have suggested, gee, maybe

90 days or even 30 days, Tony, would have been the right way to

go here. But maybe 165 days down to 90 days is in itself a substantial accomplishment.

Secretary PRINCIPI. Indeed. I think that was done in consultation

with the leadership of the Veterans Benefits Administration and

the task force. And we felt 100 days was a very aggressive goal,

to shoot for that. I certainly would like to see it 90 or 60 days.

But, you know, sometimes it takes us so long to get the medical

and military records from DOD, or the archives, and then to schedule exams. So you are building in a delay right at the outset. But

we are taking steps to deal with that, too. And I am making

progress in working out memorandums of understanding with the

Records Processing Center in St. Louis to get those records much,

much quicker. And we are making good progress.

Senator CRAIG. Well, Madam Chairman, thank you very much.

I have other questions I will submit for the record.

We appreciate you being here. We are certainly going to do all

we can do. And I know that it is the commitment of the chairman

and our ranking member to make that happen within all of the allocation we can grab hold of. And your anticipated budget increase

is certainly respectable. We hope we can get there. Thank you.

Secretary PRINCIPI. Thank you, sir.

Senator MIKULSKI. Thank you, Senator Craig. And, you know, we

do not have mountains in Maryland like you have. And even

though we welcome the President to Camp David, I do not know

if he calls them mountains, but they are mountains to us. And our

own veterans up there, when you know that you have got—you are

old or you are sick and you have a colostomy bag and you are

riding over these very rugged terrains somewhere, that we are very

sympathetic to your situation.

Senator CRAIG. I have had the privilege now of being to Camp

David. It is a nice little rise in a flat place, you know.

Senator MIKULSKI. I am being sympathetic to you. Do not——

Senator CRAIG. Thank you.

Senator MIKULSKI. Do not push it.

PRIORITY 7’S VETERANS

Senator MIKULSKI. Mr. Secretary, first of all, what you hear from

the Senators is that we are on your side. We know that when you

took over the administration of VA that you faced, in some ways,
33

an administrative brown field. It had been long neglected, and so

we know that you have—that you are dealing with a very big job.

And that would even be the usual and customary systems. Now,

this demographic explosion that you are facing is just eclipsing everything. There are so many other questions that I would like to

pursue today, like facilities, the issue of long-term care, home

health care, the work force shortage—like, related to nursing, that

I would like to be able to bring up.

But the priority 7 issue, I think, is eclipsing everything. And

your testimony on page 6, I think, is really a bombshell. When you

talk about—since 1996 the priority 7 veterans increasing 500 percent when they were 33 percent earlier, now they are 33 percent

of the workload. They are projected to increase to 42 percent by

2010 with an enormous increase of, well, between now and 2007 of

$20 billion. That is almost doubling what we currently have, which

would take us to about $45 billion. Now, this is no finger-pointing

to the priority 7 veterans. There is a reason that they are coming.

And I am talking about the reasons. But before I do, I just want

to alert the committee that it could get worse. Senator Bond and

I represent industrial workers. You know we are facing a big crisis

right now, with something called legacy cost.

If that steel industry goes down the tube, we have over 600,000

retirees in the steel industry. Okay? They will lose their health

care. As you know, there were no draft counseling or draft dodging

lines at the steel mills. You know that. The movie ‘‘Deer Hunter,’’

I think, told us and taught us a lot.

Secretary PRINCIPI. Sure.

Senator MIKULSKI. Just as between us. This all could come to the

VA. These men who fought, if they lose their health care, they are

going to find it another way. And this is not dire predictions. So

let me go to the priority 7. I am a data driven—we have to be data

driven here.

DEMOGRAPHIC PROFILE OF PRIORITY 7 VETERANS

My question is: Have you, with the priority 7 coming in, do you

have a demographic profile of the priority 7 veterans entering the

system related to geography, age, income, and the reason they seek

you out? Because my hypothesis is that the lack of a universal

health care policy, lack of health insurance for some, the lack of a

prescription drug benefit for the older veterans, and then also the

lack of a national long-term care policy, which is quite piecemeal,

could you—let us start with the demography. Do you have—because I think if they knew the age—first of all, the geography. Is

this focused on particular geographic area?

Second, what are their ages? And are they rich, or are they just

kind of working stiffs who do not have the money or is—or do not

have health insurance? Do you see where I am heading? That for

the younger veteran it might be one reason; for the older it might

be another.

Dr. Murphy, do you have a demographic profile? You do not seem

to have it handy.

Dr. MURPHY I am searching for it.

Senator MIKULSKI. While you are looking——
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Secretary PRINCIPI. We will provide the precise information for

the record.

Senator MIKULSKI. But do you even have it now, in terms conceptually?

Secretary PRINCIPI. I think it is fair to say first that, many priority 7s are coming to us for prescriptions only.

Senator MIKULSKI. But is that like 60 percent, 70 percent, 10

percent?

Secretary PRINCIPI. I would be speculating, Madam Chair, and I

apologize for that.

Dr. Murphy, perhaps you can.

Dr. MURPHY. We do know that about 57 percent of the priority 7 veterans use less than $400 worth of health care. And that would

be their primary care visits plus other medication or——

Senator MIKULSKI. So 57 percent will come. But you see what I

am getting at? Can you tell me why they are coming and how old

they are? And is this the absence of other national policies? Again,

we are not passing judgment here. We are trying to get the data. So, you are saying 57 percent use less than $400 worth of care?

Secretary PRINCIPI. Yes.

Senator MIKULSKI. But why do they come?

Secretary PRINCIPI. I think they are——

Senator MIKULSKI. And how old are they?

Secretary PRINCIPI. I think they are older. I think they represent

the veteran populations generally coming to us. I think they tend

to be older, World War II veterans. This is based upon all the town

hall meetings that I have attended over the past year. They are

using our primary care facilities, our clinics, a great deal. I think

they are in the age range of 65–70 years old.

Their incomes tend to be a little bit higher than the threshold

for priority 7, but I do not think they are rich people. We do have

a few who are wealthy and come to VA for their prescriptions. They

are eligible. And rather than paying $400 a month, they pay $7 a

month.

Senator MIKULSKI. Okay. Well, I understand that, but—go

ahead. I am sorry. Go ahead.

Secretary PRINCIPI. I think the vast majority of priority 7s that come to us have incomes around $30,000. They are not making a

lot of money. They are ordinary Joes, who are working in the factories and on the farms, who have lost their health care coverage

or who do not or may not have it.

Senator MIKULSKI. But do we have a natural demographic profile, Dr. Murphy?

Dr. MURPHY. We do. And I——

Senator MIKULSKI. You do not have it with you.

Dr. MURPHY. I apologize, Madam Chairman. I thought I had that

data with me. And I know that we can pull it. Some of the income

data that we have is based on a survey that was done in 1999. In

my memory of the income profile of priority 7 veterans is that approximately 30 percent of them, about one-third, have incomes

above $35,000 a year. So the majority——

INCOME PROFILE OF PRIORITY 7 VETERANS

Senator MIKULSKI. Wait, wait, wait. Incomes above what?
35

Dr. MURPHY. Incomes above $35,000 a year. But I can get those

specific statistics.

Senator MIKULSKI. Well, let me tell you what the committee

wants and—because, again, we need to be data driven to also help

you parse out our recommendations, knowing that the recommendations are a stopgap. First of all, the $1,500 is a non-deductible, is a non-starter. And we will not do it unless the authorizers pass it.

At the same time, we know that there is a crisis here. It is a crisis for the people who are turning to you, and it is therefore a crisis

for those of us who have to provide the service and pay the bills.

They are not coming to you because it is a leisure choice option.

They are coming to you for a reason. Some, if they—they might like

the—but most of all, I think it is the lack of policy in other areas.

So we need data. We need a demographic profile, first of all, of

geography. Is it concentrated in, say, the rural areas? This is going

to help us get to our management solutions while we look to more

long-term systemic. We need geography.

Second, we need age. And I am really interested, particularly,

under the age of 65, the whole issue of every 5 years, if I could.

One of the policies would be people, primarily men, who had jobs

but are now not working after 60, either the collapse of an industry

or whatever, but they are too young for Medicare, but they cannot

get health care anywhere else.

So, you see where I am heading in terms of the age? Or are

young men coming, younger men, because of the lack of health insurance? So you see, one is the age; then, the other will be income,

because I think we have to face it. If it is people with incomes over

$70,000 coming to you for a prescription drug benefit, that is very

different than somebody coming for $27,000 or $32,000, the combined pension maybe, et cetera. And then that would be the ageincome.

And then, if you could, even anecdotally, do a survey of why are

they coming. Is it they like the Veterans—particularly now, when

there seems to be longer waiting times, work force shortages, other

challenges that you are facing in the system?

So you see where we are heading?

Secretary PRINCIPI. Yes.

Senator MIKULSKI. Because that, I think, will tell us a lot about

what we need to do. You know, do we do an age—and I am not

talking about what is the methodology for containing this issue.

Secretary PRINCIPI. Sure.

[The information follows:]

PRIORITY 7 DEMOGRAPHIC PROFILE

The following information is provided for the record (fiscal year 2001 information

is provided except as noted):

—Priority 7 Enrollees and Users by VISN fiscal year 1999-fiscal year 2001 with

comparisons to growth rates for Enrollees and Users in Priorities 1–6

—Priority 7 Enrollees and Users by VISN also shown as a Percentile of all Priority 1–7 Enrollees and Users, fiscal year 1999-fiscal year 2001

—Average Ages of Priority 7 Enrollees and Users by VISN fiscal year 1999-fiscal

year 2001 with comparisons to the Average Ages of Enrollees and Enrolled

Users in Priorities 1–6

—Fiscal year 2001 Priority 7 Enrollees and Users by VISN and Age Group with

comparisons to Priorities 1–6
36

—Priority 7 Average Annual Cost Per User fiscal year 1999-fiscal year 2001 with

comparisons to Average Annual Cost Per User for Priorities 1–6

—Priority 7 Average Overall Cost Per User and Average Outpatient Pharmacy

Cost Per User with Comparisons to Average Costs for Priorities 1–6

—Priority 7 Average Cost of Users Under 65 Years Old compared to those Age

65 and Over with further comparisons to Average Costs for Priorities 1–6

—Priority 7 Average Cost and Age comparisons with comparisons to Average Cost

and Age for Priorities 1–6

—Priority 7 Inpatient and Outpatient Reliance with comparisons to Inpatient and

Outpatient Reliance for Priorities 1–6

—Projections of Priority 7 Health Care Users (Unique Patients) by VISN and Age

Group—fiscal year 2002-fiscal year 2010 with comparisons to Projections for

Priorities 1–6

—Projections of Priority 7 Enrollees by VISN and Age Group—fiscal year 2002-

fiscal year 2010 with comparisons to Projections for Priorities 1–6

VA will provide a more in-depth analysis by May 27, 2002, to include distributions

of the above data by State and information on:

—Average income by priority group and State

—Employment status by priority group and State

—Insurance status by priority group and VISN

—Health status by priority group and VISN
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48
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Senator MIKULSKI. Now my time is up, but—because I want to

come back to the veterans’ prescription drug benefit. I think we

have a lot of lessons learned as we ponder what to do about Medicare. But let me turn to my colleague and I will come back to talk

about a prescription drug benefit.

Senator BOND. Thank you very much, Madam Chair. And I really

appreciate your pursuing this line of questioning, because I think

it is very important. And you were talking about steel workers

being laid off. I have to tell you that heavy industry in Northeast

Missouri, where I come from, used to be refractories. It is a highquality ceramic products that line the furnaces of steel and for aluminum. They are all being shut down because of asbestos litigation; 300,000 asbestos claims. All of the plants, heavy industry
50

plants, in Northeast Missouri are being shut; they are in bankruptcy. And they are going to move the industry to Canada or Mexico.

And we are going to have an additional load on the Department

of Veterans Affairs, because there are many veterans who have

been employed in those industries. And they are—as I said, they

are all in bankruptcy. So, we are getting it in a number of areas,

as well.

But we have a lot of things to cover. I am going to have to leave.

And I am going to leave some questions. But, Mr. Secretary, there

are a couple of things that are very important that I wanted to

touch on.

CARES

First, I congratulate and I thank you for making the capital asset

realignment for enhanced service, or CARES, program work. That

is not the most popular thing especially worth a lot of folks on Capitol Hill. But I am convinced that CARES is the right approach. It

is badly needed. There was no capital asset plan before CARES. VA

hospital had been treated as trophies for members to bring home

to their States or their districts, often built with too many beds, too

much gold-plating. VA hospitals were opening with entire floors

empty because they were not needed.

Well, I think we are beginning to turn that around, although

there is opposition here on the Hill. But one of the things that is

really troubling me, and I want to lay it out on the table. Some VA

facilities seem to exist primarily to serve the research and financial

interests of medical schools. It is an important part of the VA to

work as research sites and teaching schools. This works very well

together.

In too many cases, or in some cases at least, veterans’ medical

care has become a secondary concern in justifying those hospitals.

I was frankly appalled by the efforts of Northwestern University to

block CARES in Chicago. I appreciate the medical research work

done by fine institutions such as Northwestern. And it is one of the

very good ones. And I am very big supporter of VA medical research programs. But we all in this room know that medical

schools have more resources at their disposal than the veterans,

who need medical care, the ones that Senator Shelby mentioned,

the examples you set out.

Your decision, Mr. Secretary, was important because it sent out

a signal that VA’s first and most important priority is going to be

meeting the needs of veterans. And for that, I give you sincerest

thanks.

Now, by closing this, you are going to construct a new $40 million spinal cord and blind rehabilitation center and creating new

community-based outpatient clinics. You are going to save money,

adding these new facilities, because you were able to close one of

the four VA hospitals in Chicago.

Secretary PRINCIPI. Correct.

Senator BOND. You are going to be able to provide more specialized care, open community clinics, and still save money? Could you

tell us how that works?
51

Secretary PRINCIPI. That is correct. It was the right decision. It

was a difficult decision, and we were very sensitive to the concerns

of our veterans and our employees. I appreciate the important role

that medical schools play with the VA, but at the same time, our

first mission is treatment of veterans in modalities that make

sense for the 21st century.

The Chicago CARES decision was the right decision for the veterans of that area. I intend to implement the decision aggressively,

thoughtfully but aggressively. We need to get on with the modernization of the West Side facility, including an expansion of the

number of beds, get Lake Side closed down and get an outpatient

clinic built in the downtown area to address the outpatient needs

of our veterans in that area.

We are going to move forward and we are going to move forward

with the next phase of CARES, because we need to rationalize the

infrastructure of the VA system and make sure that we are properly structured for going forward and not back to the century gone

by.

CARES STUDY

Senator BOND. A few questions about the next phase. Do you

have the in-house expertise and staffing resources needed to perform the CARES study? And two, how will you ensure the studies

are objective? Because on that second part I am worried that if the

division directors who are in charge are conducting their own studies, there may be a conflict. If you bring it up to your level, Mr.

Secretary, you are not going to have an outside consulting firm to

blame it on. You are going to get the heat, all the heat, without

being able to shuffle it off.

Secretary PRINCIPI. That is correct. I sincerely believe that we

have the talented people, the skills and the right disciplines to develop a national plan for the future. The VISN directors will play

a role in providing data and input into the process, based upon a

template, and upon a specified data call. But that plan will be developed with our team in Washington. We will rely upon outside

experts on an as-needed basis.

I do not want to spend $20 million to $40 million on a consultant,

most of whom will contract with former VA employees. I think we

can do it. But you are absolutely right that we need to ensure that

the data is validated. The process and the data have to be absolutely perfect. People who do not want to see a facility closed or its

mission changed will take shots at us. The data is so terribly important, and we are going to take great pains to ensure that the

data are validated.

I intend to keep the process objective. I intend to stay out of it

until such time as the recommendations of the commission come to

me. And then I will approve or disapprove those recommendations.

We have an aggressive timetable. I think it can be done. And I

think it is absolutely necessary to address the category seven problem, for example. There is an awful lot of money there that can be

used to treat more patients.

Senator BOND. Well, Madam Chair, if I might impose for one

more question.
52

LEGISLATIVE MANDATES

And I congratulate, Mr. Secretary, because you have to—we have

to cover up the shortfalls in the care, in the health care, for the

highest priority. And you have touched on it, but let me go back

to it one more time.

Based on new benefit requirements authorized over the last few

years, I understand that—that has put a big hit on your budget.

And I am concerned that we are still short of the money we need

to provide health care. And I thought, maybe, you could outline for

us some of the new mandates affecting veterans’ health care services. What are the costly new requirements? And what impact do

these have on the basic health care that you can provide that we

discussed earlier?

Secretary PRINCIPI. Clearly, there have been a number of mandates that we have been required to fulfill. For example the Millennium Health Care Benefits Act, placed a floor on VA nursing home

beds. I agree we need to maintain a level of VA nursing home beds

because they are much needed beds. But, we need to also rely upon

our State veterans’ homes and our community nursing homes,

which are closer to where the veterans live, and to the non-institutional programs, which also are so beneficial to keeping veterans

in their homes: hospital-based home care, adult day care, respite

care.

We could do so much more, treat so many more veterans that

way, than we can by putting them into an institutional bed. The

way the law is constructed, it requires me to have 13,400 VA nursing home beds. We are currently 1,200 beds short of that floor. We

have requested that the floor include State veterans nursing home

beds and community nursing home beds and the non-institutional

care census. But the committees have been reluctant to do that.

That means I have to find somewhere in the neighborhood of $150 million out of existing programs, maybe the State veterans

home program or other programs, to achieve that floor, as set by

statute.

The wonderful provision about emergency room care, to allow

veterans who are enrolled in the VA system to go to any private

hospital for emergency room care, when fully implemented, will

cost us $441 million. I do not know where the money will come

from. It may have to come out of the community-based outpatient

clinics, because it is a zero-sum game.

We operate wonderful programs for the homeless. I think we are

doing great things for the homeless. But the new bill that came out

of the last session will cost hundreds of millions of dollars for new

homeless programs. Again, where do I get the money from?

I think it is that kind of laws that do, in fact, impede our ability

to address some other programs.

Senator BOND. Thank you, Madam Chair.

DEMOGRAPHICS PROFILE OF PRIORITY 7 VETERANS

Senator MIKULSKI. Thank you, Senator Bond. You raised, again,

very important questions.

I want to come back now again, in terms of the demographic profiles that I have asked for; Dr. Murphy, we would like to have,
53

really within 2 weeks, a demographic profile of the information you

currently have. I do not know if you are keeping the data the way

I have just said it, but we would like it to us the way we asked

for it, in addition to any other way you want to get it to us. But

I need to know the geography, the age, and the income. Okay? So,

that is one thing.

And then we would like to have another report around Memorial

Day where you have had a chance to even take a better, more indepth probing look. So, we want to have a first look-through. And

then—and hopefully, Mr. Secretary, you will then keep these type

of records, so that we can then get our handle. Because I think

they are coming for different reasons and different age groups. And

we should not have a one-strategy-fits-all.

The failure to have a long-term—my dear dad died of Alzheimer’s. We used geriatric evaluation. We did not use the veterans. Dad was not a veteran. He had 2 children when the war

began. But we used geriatric evaluation to get appropriate care for

him. We used adult day care that had a cognitive stretch-out program for an Alzheimer’s person. Then we had to turn to long-term

care.

When we look at our aging population—and we had means.

When we look at veterans, many of them do not have anything. So

they are coming to you exactly for what you said. The prescription

drug issue is another. The younger vet or the in-between vet, the

60-to-65 who has lost everything through no fault of his own, because of a factory closing or the loss of the family farm.

PRESCRIPTION DRUG BENEFIT

So, this is what we are going to look for. But let us go to the prescription drug benefit. Because the long-range solution is national

policies to address universal health care, a prescription drug benefit for our seniors, and a long-term care policy that does offer a

continuum of care so you use it appropriately for the patient and

appropriately for the person paying for the care.

Now, according to December, 2000, the VA’s Inspector General

said the use of the prescription drug benefit was due to the fact

that 90 percent really did not have a prescription drug benefit, either because they were on Medicare or because, if they were not

on Medicare, their health insurance did not pay for a prescription

drug benefit. And not only might they have a catastrophic situation

needing drugs, but they might have a chronic situation that required—let us take diabetes. You have to buy the equipment, the

daily testing, the medications, et cetera.

So let me get to where I am getting. Could you tell me—could

you give me a description of the veterans’ prescription drug benefit? And what does that cost you every year? And who are most

likely to use it?

Secretary PRINCIPI. I will start out and then I will let Dr. Murphy add, if I err or if I am not complete. Any veteran enrolled in

VA health care is entitled to have their prescriptions filled by VA

for a cost of $7 per prescription per month. That has gone up from

$2. It had not been increased since its enactment some 10 to 12

years ago, when the co-payment went into effect.
54

We spend in the neighborhood of $2.5 billion for ingredients only and approximately another $600 million in a very large pharmacy

program, the consolidated mail-out pharmacy program. Our pharmacy benefit is in the neighborhood of $3 billion a year and growing. It was $750 million some years ago, and it is now up to $3 billion.

I think we have done a tremendous job. Our country and HHS

and others can learn much by the way we have managed our pharmacy program through our national formulary. Clinical judgment

is always the overriding issue. We do sensitize our physicians to

costs. I think it is important that they be sensitized, but that they

make the clinical judgment about what they consider to be the

right drug.

I think we manage the pharmacy budget very well. We do a lot

of national contracting. Our formulary lets us do that, so we can

drive the prices down.

Senator MIKULSKI. What does national contracting mean? Could

you elaborate on that?

Secretary PRINCIPI. It means that we will buy through a national

contract, if you will. Through the large volume that we purchase,

we command a discount off the price of the drug. Although we do

very, well in our pricing, the law that was passed back when I was

deputy secretary, and played a very small role in enacting, gave

the VA very favorable pricing for pharmaceuticals, a 24-percent

discount off of the manufacturers average drug price. In some

cases, we negotiated even a greater discount off of manufacturers’

average price, so we command excellent pricing in pharmaceuticals.

We also procure pharmaceuticals for the Indian Health Service,

the Public Health Service, and the Bureau of Prisons. In many

cases, we are the procurer of pharmaceuticals for the Department

of Defense, so our procurement activity is very large. Through that

consolidated program, we are able to command even better pricing.

I think we are also the model for the government in a pharmacy

program that utilizes generic drugs.

PHARMACEUTICAL COSTS

Senator MIKULSKI. Well, yes. First of all, I think the cost speaks

for itself. And I am going to come back to how—what is the majority of the use, for what purpose? But the Nation has to consider

a prescription drug benefit for its seniors; it just has to. When

Medicare was invented under Lyndon Johnson, it was to deal

with—but people were afraid that if you had a heart attack, you

could lose everything. You would stay in the hospital for a month.

Dr. Murphy, you remember, I am sure——

Dr. MURPHY. Yes.

Senator MIKULSKI [continuing]. In your studies. You were not

practicing then.

Now, it is really—it is Part—B that is the big issue. And it is

the management of chronic illness or the chronic progressive illness, whether it is the diabetic, the heart person, et cetera.

Now, coming—so we are getting these kinds of estimates for a

garden variety, okay, Chevy Lumina/Ford Taurus prescription drug

benefit. They are talking about $400 billion a year over 10 years.

Looking at TRICARE, what TRICARE is spending; at the rate that
55

it is going, it could be $720 billion. So, we are looking, but I believe

that there are lessons learned. I believe that there are lessons

learned from VA. I believe that there are lessons learned from

TRICARE. I believe that there are lessons learned for what we

Federal employees get. I have a prescription drug benefit.

MEDICAL SUPPLY COST CONTAINMENT MEASURES

And the lessons learned, which is how do we do a formulary that

also allows clinical flexibility—because it is not one drug fits all.

That is why you see a doctor and not the coin-operated dispensers—and at the same time do cost containment. Now as I listen to you, the cost containment measures have been mail order

and consolidated discounts and then an awareness on the part of

the physician that, given 2 choices with the same safety and efficacy appropriate to the patient, that one might be a little bit cheaper than the other.

But could you furnish, then, for the committee what your cost

containment measures have been and how you regard them with

success? For example, on mail order, what does it work best for?

Because there are those who say sometimes this results in waste

and inappropriate use. But I know, coming back to my own dear

mother, who was a diabetic, it would have been very appropriate

for her to get her diabetic testing strips in the mail, to get her

lancets, in other words, but not if she had her—she was very susceptible to urinary tract infections, a well-known complication issue

with diabetics.

She needed to be able to go without a big surcharge on her, to

really get her—when she had an infection usually related to the

chronic situation. So you see where I am heading here?

[The information follows:]

PHARMACEUTICAL COSTS

A physician’s ability to have access to necessary pharmaceuticals is unquestionably an essential component of any clinically sound formulary management process.

There are at least four acceptable mechanisms that can be designed into a formulary system; (1) encouraging the appropriate use of drugs, (2) reducing the unitcost of drugs, (3) streamlining distribution of bulk drugs, and (4) increasing prescription dispensing efficiency.

Inappropriately restricting access to medically necessary drugs and unnecessarily

shifting drugs costs to the patient are unacceptable cost containment practices that

are unfortunately sometimes used. This is not to say that a properly administered

tiered co-payment structure is unacceptable. On the contrary, if well designed and

properly administered, a tiered co-payment system can be an effective formulary

management tool that does not impose an unnecessary financial burden on the beneficiary.

Encouraging the Appropriate Use of Drugs: By far, the cost containment strategy

that has the potential to yield the most significant cost containment while assuring

quality medication therapy is the use of evidence-based clinical guidance to encourage appropriate drug utilization. Guidance should be aimed at encouraging the cost

effective and appropriate use of pharmaceuticals and discouraging their inappropriate or cost ineffective use. Such guidance should be evidence-based, relevant, upto-date and easily accessible by prescribers. Providers should be actively encouraged

to provide input into guidance development to ensure greater acceptance of the final

documents. Further, efforts must be made to educate prescribers on the evidencebased criteria if it is to be accepted into their clinical practice. Regular feedback

should be provided to prescribers regarding their prescribing patterns. Physician

awareness of cost differences among alterative therapeutic regimens is also critically

important. VA experienced this success when coupled with the plan to ensure the

electronic medical record is available throughout the healthcare system. As the pa-
56

tient need changes from ambulatory care to acute care, home based primary care

and nursing home care, the access to the electronic medical record provides a continuous medication history and the clinical reasoning for use of appropriate drugs.

Reducing the Unit Cost of Drugs: In high-volume, high-cost drug classes where

therapeutic interchange opportunities exist, significant cost containment can be

achieved only by driving market share to a subset of all of the available products;

therefore, limiting physician flexibility to some degree is unavoidable. While there

are several ways to drive market share within a therapeutic class, and each has its

own advantages and disadvantages, the most effective approaches require limiting

access to pharmaceuticals within a drug class to some number of drugs less than

all commercially available products and negotiating discounts with drug manufacturers in exchange for increased market share for their products. Regardless of

which method of market share manipulation is employed, medically necessary clinical flexibility can be achieved by assuring that a non-formulary or waiver process

is in place. A good non- formulary request process should be timely and final decisions should be based on medical evidence as opposed to prescriber ‘‘preference’’

(which can be highly influenced by pharmaceutical manufacturer’s marketing practices) or the payer’s cost containment goals.

The use of generic products must be encouraged and should rely on Food and

Drug Administration guidance regarding product acceptability. Mandatory contracts

for generic products can also help ensure adequate product availability to meet the

market share and inventory management goals. It is important to reduce the dispensing of multiple generic brands to the same patient, as this practice is likely to

lead to patient confusion. A good formulary process allows for the prescribing of

brand name products, when patients have any adverse drug events to generic products. Patients should not be charged a higher co-payment when a brand name product is deemed necessary to achieve a desired clinical outcome. A higher co-payment

may reduce patient compliance and increase potential for a poor outcome.

Streamlining the Distribution of Bulk Drugs: Opportunities exist for large integrated health care systems that purchase bulk drugs to reduce their distribution

costs by contracting with a single Pharmaceutical Prime Vendor (PPV) for reduced

distribution fees. The reduced fees are possible if the purchaser uses a ‘‘prompt pay’’

mechanism whereby the PPV invests the purchaser’s payments in short-term financial markets before it is required to pay the manufacturer for the goods delivered.

In addition, it is possible to negotiate with the PPV to charge the purchaser contract

prices, rather than commercial prices when the purchaser has contracts in place

with pharmaceutical manufacturers. The PPV can then complete a ‘‘charge-back’’ to

the manufacturer to recapture the difference in its wholesale cost of the drug versus

the contract price. Lastly, contracting with a PPV reduces inventory carrying

charges because the PPV can provide ‘‘next-day’’ deliveries and there is no need to

keep a large amount of product on the pharmacy shelves.

Increasing Prescription Dispensing Efficiency: Improvements in prescription dispensing efficiency can be achieved through the use of automation, such as that seen

in VA’s Consolidated Mail Outpatient Pharmacies (CMOPs). In addition, automation

of prescription dispensing has been demonstrated to positively impact quality by introducing significantly fewer dispensing errors than manual processes. For this discussion, it is important to differentiate between the mechanical aspects of prescription dispensing versus the clinical aspects of patient education and counseling. How

the prescription is filled is not nearly as important clinically as is making sure the

patient is thoroughly educated and knowledgeable about his or her drug therapy.

When VA designed its CMOPs, it purposefully uncoupled the mechanical aspects

of prescription dispensing from the provision of patient education and counseling so

that each aspect of drug delivery could be optimized (i.e, make filling prescriptions

as efficient as possible, and make sure patients have access to pharmacist counseling and education as part of a multidisciplinary, integrated health care delivery

process). Medication counseling is best performed in person, by a pharmacist so that

the pharmacist can gauge a patient’s understanding of his or her medication therapy. Further, face-to-face interaction is important so that the pharmacist can ask

probing questions about over the counter drugs use, use of dietary supplements, alternative medicine, etc. This type of patient-pharmacist encounter is critical to assure that drugs are used appropriately and effectively and to obtain information

about side effects, intolerance, etc., which if not attended to can reduce the effectiveness of prescribed medications, or lead to drug induced morbidity.

Systems which use automated prescription dispensing, with an appropriate level

of patient education can reduce the overall costs of prescription dispensing. In addition, dispensing chronic medications for patients that are stabilized on them in

multi-month quantities (i.e., up to 90 day supplies) can also reduce the cost of processing prescriptions. VA has conducted analyses which show the cost associated
57

with unusable multi-month supplies (lost prescriptions, changes in drug therapy,

patient death, etc.) are more than offset by reduced production costs. A carefully designed Medicare drug benefit, which uses a Federal CMOP could avoid a significant

amount of necessary cost while increasing the quality of the dispensing process.

A flexible formulary that incorporates cost containment should:

—Be clinically rather than financially driven

—Be developed with input from end user clinical staff

—Be evidence-based

—Rely on the use objective drug use criteria

—Minimize the impact of marketing practices on clinical decision-making and prescribing patterns

—Use generic drugs products whenever appropriate

—Leverage purchasing power by using therapeutic interchange whenever clinically feasible

—Leverage distribution by using PPV contracts and good inventory management

practices

—Optimize prescription dispensing efficiency by using automation.

—Integrate patient education and drug therapy counseling to the greatest extent

possible

—Have a non-formulary waiver process

—Measure outcomes and provide feedback to prescribers

Secretary PRINCIPI. Absolutely.

Senator MIKULSKI. So we are looking at mail order, but mail

order does not solve everything, et cetera. So we are really want—

I need you, and I believe the Nation—and I know the Nation needs

you right now to tell us what works and, quite frankly, what has

fizzled and flopped or that gives you yellow flashing lights around

the efficacy of both patient care and cost containment. Sometimes

they are like this. Sometimes exactly efficacy is good cost containment, because it manages the disease.

Secretary PRINCIPI. I am half smiling. I am always a little concerned that we are so good it will ultimately drive our prices up

somewhat at the VA, that if HHS replicates our model.

Senator MIKULSKI. Maybe those priority 7 guys or gals—remember we cannot forget the China Beach women—that this might ultimately save money, because they are not coming to you.

The second thing is that, also, the better access you have for the

management of chronic disease that is systematic, regular, and

monitored, ultimately saves that kidney failure and heart disease

and all these other complications from chronic disease.

Secretary PRINCIPI. I think the pharmacy management program

is really one of the great success stories of the VA. They have done

great work, but there are other things we can do. We need to export what they have done in the pharmacy program to medical-surgical supplies and high-tech equipment. That is the next avenue we

are going to look at: why do we need 300 different styles of surgical

gloves? Surgical gloves are surgical gloves. And we do not command the best pricing because we just buy locally.

We buy using credit cards. We need to do in med-surg and equipment what we have done in pharmacy. I think there are so many

dollars there that we are leaving on the table.

Senator MIKULSKI. Yes. And I believe some of our excellent academic centers of excellence can offer you a tremendous number of

lessons learned. The reason I go to the academic centers is they

face the variety of patients that you do, and very often, because

they are academic centers, they are in urban areas serving a tremendous, often very poor, population that is uncompensated.
58

In other words—and they cannot raise their rates or their fees.

So I believe that they offer tremendous lessons for you.

Secretary PRINCIPI. I think so.

Senator MIKULSKI. And without—because they are academic centers of excellence, they do not sacrifice patient care or the worker

safety issues. Which takes me to another issue. I am going to talk

about workers.

RECRUITMENT AND RETENTION

You know, I am so impressed with the dedication of the people

who work for the VA, particularly in the health care area. And I

remember when we had shut downs at all some years ago in the

midst of ice storms. Those men and women were showing up at

Baltimore VA and the clinics, even though they were told they

were unnecessary, they were not getting paid. And you know what?

They just showed up, even though they had child care and so on.

So they were just fabulous.

But I am concerned, how are we doing in being able to attract

and retain particularly the nurses, the pharmacists, the others that

are so important to the team? I am particularly worried about the

nurses’ shortage. And we are also facing a shortage in other health

professionals that are critical to the team.

Dr. Murphy?

Dr. MURPHY. I think that there is a national shortage of health

care providers across the country. It is not a problem that is unique

to VA as a department. And it starts with nurses, physicians, physicians’ assistants, all mid-level providers, pharmacists, technicians

of all kinds.

One of the things that we have proposed is that a number of our

professional groups that provide health care need to be switched

from Title 5 to Title 38, to allow us to more effectively and

quickly——

Senator MIKULSKI. What is that? What is Title 5 and Title 38?

Dr. MURPHY. Title 5 is the regular GS schedule. Title 38 gives

us more flexibility in recruitments and some additional flexibility

in salary scale. And we think that—that would certainly help us

with our recruitment.

There was legislation passed last year that did give us some improvements in our nurse recruitments and our education programs

for nurses, that we believe will allow us to better retain and give

career progression to nurses in the VA.

I think patient safety is an important issue. And I was recently

talking with the dean of the School of Nursing at Johns Hopkins.

And Sue said that she tells all of her graduates in the School of

Nursing to go apply to VA. And the reason she does that is she believes that we are at the forefront of medical innovation; that the

quality, the occupational health and safety, the patient safety programs that we have in the VA are second to none, that it is an exciting place to work.

So, our focus on quality and safety have really positioned us to

be able to recruit and retain the best health care professionals.

Senator MIKULSKI. Well, what we would like, as part of our

work—and I know I speak for Senators Rockefeller and Specter on

authorizing, as well as Senator Bond. We, of course, believe that
59

we rely upon our physicians, but the physicians rely upon a team.

And if the team is not there, you cannot have—I mean, the doctor

is not able to give the highest and best care that we want.

So, we would welcome what we could do on the Appropriations

Committee to be able to give you the tools to be able to both recruit

and retain. Because the best way to recruit is through the people

you have now, who are very satisfied, who tell their classmates, et

cetera, to do this.

The second thing is that, also speaking for the authorizers, because I know they are very keenly interested in this, is what other

authorizing frameworks that we need—we need to do. And we are

working on this in another committee.

GRANTS FOR VETERANS EMPLOYMENT

Let me then switch gears, though, to the job training item in

there. This is somewhat controversial. The move from the job training programs that you spoke of in your testimony from DOL back

to VA or to VA, could you tell us what you are going to do and why

you want to do it? And that will be our last question for today.

Secretary PRINCIPI. I tried to articulate, Madam Chair, the deficiencies in the current program that have led to a high unemployment rate among veterans who are seeking employment. I think

the Department of Labor has many missions. And they are responsible for labor programs for veterans and non-veterans alike. I am

not sure that veterans receive the priority that they deserve.

VA was established to address the needs of veterans. And just

like our education programs, our health care programs could sit in

other agencies, but they are consolidated in the VA because our

focus is on veterans’ issues. That priority is very, very important

to everyone in VA.

I want to create a short fuse commission to make recommendations to me on how we can adopt this program to the new century,

to the new way of employing people, Internet-based, with outreach

to Fortune 500 companies, not just to McDonald’s and Burger King,

where veterans can find jobs; but rather good, meaningful jobs in

corporate America. I think that linkage needs to be there.

But most importantly, Madam Chair, I would make it outcomesbased. The program is very process-oriented today. Congress appropriates $200 million; appropriations are divvied up and sent to the

States. Whether they perform well or not, the following year another grant is going to be made. I would send a grant to the governor of the State and have the governor decide how that money

should be allocated. It could be to the States’ Department of Veterans Affairs or the States’ Department of Labor. I would put performance standards on the grant to say that grant recipients are

expected to find suitable employment for x percentage of the veteran population.

Through establishing standards and accountability, I think we

could improve the outcomes of the program.

Senator MIKULSKI. Well, Mr. Principi, I think, first of all, in the

President’s budget he said he would send us legislation on this.

Secretary PRINCIPI. Yes.

Senator MIKULSKI. So, I know it will go to the authorizer. We,

too, are troubled by the same issues that you are troubled. And I
60

hope that we could see this as an opportunity for veterans for the

new century. One of which I would like to just put on the table for

discussion is lifetime learning, which is not use it or lose it, but if

you do not use it—because many of our veterans come out, but they

reach a point in their life where, in order to really be a viable

member of the work force, that is when they go back to school.

So—and I am not say let us do this. I am saying let us look at

it——

Secretary PRINCIPI. Sure.

Senator MIKULSKI [continuing]. In the context of what we are

doing.

Secretary PRINCIPI. Absolutely.

JOB TRAINING VETERANS

Senator MIKULSKI. And second, for those who need initial training, but also those who need retraining. So that, for example, the

veteran who might have worked in a factory and that factory is

closing, but who had—maybe he was an electrical technician,

maybe this is the time that they can at a community college become a Microsoft engineer, which is a certificate program, not a degree program, and go into $65,000 a year.

Do you see how I want new thinking in this area? And we have

this.

The other thing is, I really—and I say this because I am a member of the Health, Education, Labor Committee—I do not have a

lot of confidence in a lot of these job training programs. I do not.

I think they were process driven. I do not think that they are related to the work force shortages in communities.

And, you know, I am a big believer in the community college, not

only for a degree program but for these certificate programs. And

they welcome all ages, et cetera. So I think we need new thinking.

And let us do it through the VA.

Secretary PRINCIPI. Sure.

Senator MIKULSKI. And let us view this as an empowerment

initiative——

Secretary PRINCIPI. Absolutely.

Senator MIKULSKI [continuing]. For the veteran, where those who

right now might not be able to make the highest and best use of

the talents God gave them, but we really have an real opportunity

matter. And I am ready to shake up the establishment on this.

Secretary PRINCIPI. I am grateful for your position.

Senator MIKULSKI. Really.

Secretary PRINCIPI. Yes.

Senator MIKULSKI. I am—you know, my own social work background says we have lessons learned from welfare reform, which

you might be able to learn. But in welfare reform, for years it was

very process-oriented. How many this, and the workshop, and did

you comb your hair. I mean, these men are veterans. They already

had authority training. What they need is real training——

Secretary PRINCIPI. Sure.

Senator MIKULSKI [continuing]. For real jobs where they are really needed. Let us look at the unions. Let us look at apprenticeship

programs. We have a terrible work force shortage right now for

plumbers, for electricians, and so on. And what about that? Be-
61

cause right now, if you are really a master electrician in Maryland,

you can earn over $40,000 a year. And the ads are just all the way

down.

Secretary PRINCIPI. That is right.

Senator MIKULSKI. So, you see, let us not just say, ‘‘Oh, let us

give it to a governor, let us give it to these agencies.’’ I am not so

sure the best job training programs are job training for the people

wanting the job training. And they are going to be really upset

when they hear what I am saying here. But we have new ways.

Maybe we have to contract out to technical schools, but not the

sham schools that ripped us off on the tuition benefit.

So we have a lot of lessons learned. But at the end of the day,

when a veteran walks into a job training program, I want them

first to get the training and then get the job. And that is what the

emphasis needs to be on. Are we on the same broad band here?

Secretary PRINCIPI. Oh, we certainly are and look forward to

working with you. I think it is very exciting. I am also thinking,

as you were speaking, Madam Chair, about licensure and certification. We have so many skilled people in uniform. When they

come out, there is the whole issue of their getting licensed in the

State and getting certified so that they can get that job as an aviation mechanic or in the trades with the unions. There is just so

much that needs to be done and should be done. And I welcome the

opportunity to work with you on it.

VETERANS EMPLOYMENT OPPORTUNITIES

Senator MIKULSKI. And I want to give you an idea today, as we

wrap this up, right now, as you know the United States Government and its Federal aviation security is under a significant mandate to federalize airport security. For those veterans that are coming to you that are unemployed, who have already demonstrated

their patriotism, already demonstrated their commitment to defend

America and took an oath to do so, why do we not see if there can

be a referral to the Department of Transportation where these veterans—we could use, one—-first of all, we can use their patriotism.

It deals with the citizen issue.

But also, these are going to be Federal jobs. Think about that.

Secretary PRINCIPI. To me, it is a no-brainer, Madam Chair. I

cannot think of a better population, than skilled, motivated, team

workers, a drug-free workforce:, people that would make better

Federal security officers than the men and women who are leaving

active duty. It is mind boggling to me that we do not take advantage of these highly trained individuals.

Senator MIKULSKI. Well, why do you not look at that? Why do

you not leave here and go call up Norm Mineta and see——

Secretary PRINCIPI. I am going to be with him Friday night at

a banquet honoring our Japanese-Americans. I am absolutely going

to sit next to him and talk to him about this issue and tell him

that we talked.

Senator MIKULSKI. Yes; and there you go.

Secretary PRINCIPI. I am going to do it.

Senator MIKULSKI. Okay.

Secretary PRINCIPI. I will be with him.
62

Senator MIKULSKI. Okay. And when I am going through Baltimore-Washington Airport and somebody says, you know, I was Corporal So-and-So, thanks for this idea, I will look forward to shaking

their hand.

Secretary PRINCIPI. I am going to do it; we will do it.

Senator MIKULSKI. Okay. This committee stands in recess——

Secretary PRINCIPI. Thank you so much.

[The following questions were not asked at the hearing, but were

submitted to the Department for response subsequent to the hearing:]

QUESTIONS SUBMITTED BY SENATOR BARBARA A. MIKULSKI

$400 MILLION BUDGET SHORTFALL

Question. Why is there a $400 million shortfall in VA Medical Care in 2002, even

though the Subcommittee provided $350 million more than requested?

Answer. The 2002 shortfall is the result of increased usage of VA’s health care

system, some of which we could not have anticipated. Some Medicare Health Maintenance Organizations (HMOs) have withdrawn from participation in the Medicare

program, and VA is now treating some patients who previously relied on these

HMOs for their health care needs. VA health care is now more accessible, due largely to the opening of many new community-based outpatient clinics. We are experiencing an increase in patients as a result of the Department’s continual improvements in the quality of the care provided. Where comparable data exist, VA outperforms the private sector for all indicators in health promotion and disease prevention. It is notable that VA has been able to achieve these improvements in the

quality of care while simultaneously achieving year-to-year decreases in the average

costs per patients treated.

In an effort to improve our workload projection capability, VA has enlisted the

support of a well-known actuarial firm, Milliman USA, to provide us with assistance

in making forecasts of the patient population. This has placed us in a much stronger

position to evaluate, and account for, the impact of a variety of different factors on

the size and distribution of our future patient population. The Department’s fiscal

year 2003 budget is the first to present workload projections that reflect the expert

assistance of this actuarial firm.

Question. Are you aware that the Statement of Administration Policy (SAP) for

the 2002 VA–HUD Conference Report said that this increase was not necessary to

‘‘optimize Federal resources?’’

Answer. Yes, I am aware that the SAP for the 2002 VA–HUD Conference Report

said that the increase of $350 million was not necessary to ‘‘optimize Federal resources.’’ Subsequent to the SAP, the VA health care system experienced increased

usage, some of which could not have been anticipated. We continue to experience

increases at unexpected rates due to HMO withdrawals from the Medicare program;

access to new community-based outpatient clinics; and improvements to the quality

of care in the VA health care system.

Question. Did the VA underestimate the number of veterans who would use the

VA healthcare system? By how much?

Answer. Yes. The fiscal year 2001 estimate used for the fiscal year 2001 budget

was 3,894,864 unique patients; the actual number was 4,247,204 unique patients.

The fiscal year 2002 estimate in the fiscal year 2002 budget submission was

4,118,565 unique patients. The current fiscal year 2002 estimate in the fiscal year

2003 budget submission is 4,737,518. As mentioned above, among the factors responsible for the increase are the withdrawal of many Medicare HMOs, improved

access to VA health care, and the Department’s continual improvements of the quality of care provided.

Question. The SAP also said that VA would get a $235 million savings because

military retirees would move over to the DOD healthcare system. Was this savings

realized?

Answer. The TFL benefit became effective on October 1, 2001. It is still too early

to determine the full impact on VA. We will be happy to share this information with

Congress when we have analyzed the information.

Question. How has VA made up for this shortfall? Specifically, what changes are

included in the VA’s 2003 operating plan to address this shortfall? Will VA have

a Supplemental funding request?
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Answer. Based on the continuation of full enrollment, VHA determined there

would be a shortage of about $441 million in fiscal year 2002. Approximately $300

million in management savings is anticipated in fiscal year 2002. We expect that

these savings will be generated from a multi-year effort to improve standardization

and compliance in the procurement of equipment, pharmacy, and medical supplies.

Other savings are expected from program efficiencies related to new criteria to assess community-based outpatient clinics and centrally managed programs. The balance of the fiscal year 2002 shortfall, $142 million, associated with the continued

enrollment of new priority 7 veterans, is anticipated as an fiscal year 2002 supplemental. The request for the supplemental was forwarded to Congress in on March

21, 2002.

Answer. As previously stated, the Department’s fiscal year 2003 budget is the first

to present workload projections that reflect the assistance of the actuarial firm,

Milliman, U.S.A. The President’s budget for fiscal year 2003 incorporates a ‘‘Base

Health Care Demand Adjustment’’ initiative that identifies and requests the resources required to support an actuary estimate of the demand and case mix

changes needed for all seven patient priorities in fiscal year 2003. Based on this initiative, the budget estimates should better account for the relationship of planned

workload requirements and the full funding needed.

Question. Are the VA’s networks being asked to make staff cuts as a result of this

shortfall?

Answer. At this time, we are not aware of two any networks that are considering

have performed reductions-in-force (RIFs) due to budgetary constraints. Based on

the continuation of full enrollment, VA determined there would be a shortage of

about $441 million in fiscal year 2002. Approximately $300 million in management

savings is anticipated in fiscal year 2002. The balance of the fiscal year 2002 shortfall, $142 million associated with the continued enrollment of new Priority Group

7 veterans, is anticipated as an fiscal year 2002 supplemental.

Question. How do VA’s estimates about its workforce compare to reality?

Answer. A comparison of the estimated and actual Medical Care full-time equivalent (FTE) employment for fiscal year 1999, fiscal year 2000, fiscal year 2001, and

fiscal year 2002 is provided below:

Medical Care FTE

Fiscal year

1999 2000 2001 2002

Estimate ........................................................................ 180,411 179,206 181,500 179,300

Actual ............................................................................ 182,661 179,520 182,946 1 181,500

Percent Change ............................................................ 1.2 0.2 0.8 1.2

1 Current Estimate.

Question. How can the VA–HUD Subcommittee help VA get its estimates on target?

Answer. In an effort to improve our workload projection capability, VA has enlisted the support of a well-known actuarial firm, Milliman USA, to provide us with

assistance in making forecasts of the patient population. This has placed us in a

much stronger position to evaluate, and account for, the impact of a variety of different factors on the size and distribution of our future patient population. The Department’s fiscal year 2003 budget is the first to present workload projections that

reflect the expert assistance of this actuarial firm.

$1,500 DEDUCTIBLE FOR PRIORITY 7 VETERANS

Question. Tell us about Priority 7 veterans—How many veterans are Priority 7?

How old are they? What is their average income? Where do they live?

Answer. The attached table shows the distribution of Priority 7 veterans by State

as projected for the end of fiscal year 2002.
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Priority 7 Veteran Population Projection by State as of 9/30/2002

STATE Priority 7

ALABAMA .............................................................................................. 238,715

ALASKA ................................................................................................. 36,494

ARIZONA ............................................................................................... 253,924

ARKANSAS ............................................................................................ 119,483

CALIFORNIA ......................................................................................... 1,265,007

COLORADO ........................................................................................... 218,009

CONNECTICUT .................................................................................... 158,201

DELAWARE ........................................................................................... 44,777

DISTRICT OF COLUMBIA .................................................................. 23,635

FLORIDA ............................................................................................... 883,266

GEORGIA ............................................................................................... 394,607

HAWAII .................................................................................................. 54,943

IDAHO .................................................................................................... 57,864

ILLINOIS ............................................................................................... 502,354

INDIANA ................................................................................................ 304,172

IOWA ...................................................................................................... 128,495

KANSAS ................................................................................................. 115,323

KENTUCKY ........................................................................................... 189,955

LOUISIANA ........................................................................................... 185,842

MAINE .................................................................................................... 76,289
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Priority 7 Veteran Population Projection by State as of 9/30/2002—Continued

STATE Priority 7

MARYLAND ........................................................................................... 296,798

MASSACHUSETTS ............................................................................... 280,784

MICHIGAN ............................................................................................ 488,031

MINNESOTA ......................................................................................... 229,020

MISSISSIPPI ......................................................................................... 106,360

MISSOURI ............................................................................................. 296,595

MONTANA ............................................................................................. 45,363

NEBRASKA ............................................................................................ 70,768

NEVADA ................................................................................................ 122,256

NEW HAMPSHIRE ............................................................................... 71,330

NEW JERSEY ........................................................................................ 348,246

NEW MEXICO ....................................................................................... 87,946

NEW YORK ............................................................................................ 672,474

NORTH CAROLINA .............................................................................. 376,443

NORTH DAKOTA .................................................................................. 24,869

OHIO ...................................................................................................... 551,307

OKLAHOMA .......................................................................................... 162,889

OREGON ................................................................................................ 181,727

PENNSYLVANIA .................................................................................. 610,029

RHODE ISLAND ................................................................................... 47,412

SOUTH CAROLINA .............................................................................. 214,241

SOUTH DAKOTA .................................................................................. 36,322

TENNESSEE ......................................................................................... 267,954

TEXAS .................................................................................................... 866,942

UTAH ...................................................................................................... 72,624

VERMONT ............................................................................................. 30,251

VIRGINIA ............................................................................................... 373,058

WASHINGTON ...................................................................................... 313,182

WEST VIRGINIA ................................................................................... 92,669

WISCONSIN .......................................................................................... 253,582

WYOMING ............................................................................................. 24,412

PUERTO RICO ...................................................................................... 70,328

Total ................................................................................................. 12,937,564

HOUSEHOLD INCOME OF PRIORITY 7 ENROLLEES

In 1999, VHA Office of Policy and Planning conducted a survey of veteran enrollees, ‘‘The 1999 Survey of Veteran Enrollees’ Health and Reliance Upon VA’’. The

major purpose of the survey was to provide national and VISN level input into actuarial enrollment, utilization and expenditure projections for use in the Secretary’s

annual enrollment level decision analyses and other policy analyses. There were

some 20,000 respondents to the telephone survey and results were weighted to be

representative of all 3.6 million veterans who were enrolled as of February 1999.

Surveyed veterans were asked to say which income group their total household income fell within: <$16k, $16,001–$25K, $25,001–$35K, or $35,001 or over, and most

surveyed veterans provided a response.

The following table shows the results from the 1999 Survey of Enrollees for Priority 7 enrollees responding to the question of total annual household income. This

table does not include data on assets, which is also used to determine eligibility for

Priority Level 7 status.

TOTAL ANNUAL HOUSEHOLD INCOME

Income Percent Cumulative Percent

<$16K ..................................................................................................................................... 14.11 14.11

16K–25K .................................................................................................................................. 24.28 38.39

26K–35K .................................................................................................................................. 23.01 61.40

>35K ....................................................................................................................................... 38.60 100.00

NOTE: Generally, income of enrollees is self-reported to VA and has not been validated recently, and income reporting is only required of veterans who must be

means tested. Priority 7 veterans do not have to report income if they agree to make
66

copayments. Thus, surveys are often good sources for more complete and accurate

data on veteran incomes.

Question. VA tells us that the number of Priority 7 veterans in the VA system

is skyrocketing. Do you think this is because of VA’s Prescription Drug benefit?

Answer. VA is currently looking at this issue and is also working with the General Accounting Office who is conducting an independent study of this issue. It is

recognized that VA fills the gap by providing uncovered services such as prescriptions for many of our nation’s veterans. For many Priority 7 enrollees, the VA

health care system is a ‘‘safety net’’, costing nothing to enroll and paying for services

as they are needed/used. VA has realized a tremendous increase in demand for

health care services from veterans in recent years. The total number of patients has

increased by over 11 percent from fiscal year 2000–2001. The growth rate for Priority 7 medical care users has averaged more than 30 percent annually for the last

6 years, and they now comprise 33 percent of enrollees in the VA health care system. Based on current law, this percentage is expected to increase to 42 percent by

2010. These increases reflect the fact that very few Priority 7 veterans were treated

before eligibility reform. In addition, many Priority 7 veterans rely on the VA for

only a portion of their care and pharmacy accounts for a greater portion of their

overall cost of care than that for all other priorities. VA’s pharmacy benefit and copayment structure remains an attractive choice for these veterans.

Question. Do you think that VA is faced with absorbing this new demand because

of a lack of national policies to address the aging of America and the collapse of

many HMOs?

Answer. We believe these are two of the significant factors affecting veteran’s desire to access VA health care. VA health care integrates a full continuum of care

for veterans of all ages, including mental health services and prescription drugs. VA

also emphasizes preventive care and leads the nation in many measures of performance in this regard. VA also provides many services that are tailored to meet the

needs of service-disabled veterans. So, in addition to the economic factors, we believe many patients come to VA because of the quality of care that we provide.

Question. Does VA know how many Priority 7 veterans have other health insurance?

Answer. Currently, we have identified that approximately 18 percent of all veteran users of VA health care have billable health insurance. This reflects the fact

that VA is prohibited by law from billing Medicare and Medicaid. In addition,

Health Maintenance Organizations (HMOs) and Preferred Provider Organizations

(PPOs) do not recognize VA as preferred providers and consequently do not usually

pay. Of the billable insurance identified, one-third is generated from Fee for Service

policies and two-thirds from Medigap policies. This information reflects the findings

from a national contracted survey. Although we do not have priority-specific information from this survey, based on the higher incomes of Priority 7 veterans, we suspect they have a higher percentage of billable insurance than average. We are examining ways to obtain more accurate information about insurance coverage by all veterans.

Question. Are veterans required to tell the VA if they have other health insurance?

Answer. Veterans are asked, but not legally required, to disclose health insurance

information to VA. Legislation is under consideration within the Administration to

require veterans to disclose health insurance information.

Question. What authority does VA have to require this deductible?

Answer. VA does not currently have authority to require this deductible and has

thus proposed legislation that, if enacted, would authorize the deductible.

Question. Does it require a specific change to the authorizing statutes?

Answer. Yes, and VA has proposed legislation to make the change.

Question. VA estimates that it will collect an additional $400 million as a result

of this new cost share proposal, and that this funding will go back into the system

to pay for veterans’ care. But VA couldn’t accurately estimate its total number of

patients for this year. How can we be sure that VA is able to accurately estimate

this savings?

Answer. In an effort to improve our workload projection capability, VA enlisted

the support of a well-known actuarial firm, Milliman USA, to provide us with assistance in making forecasts of the patient population. This has placed us in a much

stronger position to evaluate, and account for, the impact of a variety of different

factors on the size and distribution of our future patient population. The Department’s fiscal year 2003 budget is the first to present workload projections that reflect the expert assistance of this actuarial firm.

Milliman USA projected the reduced workload usage associated with this cost

sharing proposal. Approximately 10 percent fewer Priority 7 patients will likely use
67

VA health care services altogether. There will be an overall 31 percent reduction

in workload expenditures, since many patients who remain will use fewer VA services when faced with this charge. We project $885 million in savings directly related

to the 31 percent workload reduction. Collections in fiscal year 2003 from the proposed cost sharing initiative are estimated at $260 million.

Question. The VA also tells us that if Congress rejects the cost share proposal,

we will have to appropriate an additional $1.1 billion. Again, if VA couldn’t accurately estimate its total number of patients for this year, how can we be sure that

VA is able to accurately estimate this cost?

Answer. In an effort to improve our workload projection capability, VA enlisted

the support of a well-known actuarial firm, Milliman USA, to provide us with assistance in making forecasts of the patient population. This has placed us in a much

stronger position to evaluate, and account for, the impact of a variety of different

factors on the size and distribution of our future patient population. The Department’s fiscal year 2003 budget is the first to present workload projections that reflect the expert assistance of this actuarial firm. In addition, this budget does incorporate a ‘‘Base Health Care Demand Adjustment’’ initiative that identifies and requests the resources required to support an actuarial estimate of the demand and

case mix changes needed for all seven patient priorities in fiscal year 2003. Because

of this initiative, the fiscal year 2003 budget estimates should better account for the

relationship of planned workload requirements and the full funding needed.

PRESCRIPTION DRUGS

Question. Can the VA quantify how the lack of a Medicare benefit impacts the

VA health system?

Answer. As mentioned above, VA and the GAO are looking at the impact of the

lack of a Medicare benefit for prescription drugs on VA health care. More than 50

percent of VA users are Medicare enrolled. Priority 7 Medicare enrollees increased

138 percent between fiscal year 1999 and fiscal year 2001. Based on fiscal year 2000

data, age 65∂ Priority 7 pharmacy costs accounted for 29 percent of their total cost,

compared to 13 percent of the total cost for Priority 1–6, age 65∂.

Question. What is the VA’s Prescription Drug benefit? How does the VA’s program

work?

Answer. VA provides medically necessary pharmaceuticals to enrolled veterans if

prescribed by a VA authorized physician. This includes prescription and over-thecounter medications (OTC), as well as medical and surgical supplies. For over 50

years, VA has used drug formularies or drug lists. Over the years, the VA formulary

has evolved from a static list of drugs that are available to VA physicians and patients to a dynamic process where the use of drugs is actively managed using the

objective evidence culled from the medical literature.

Today, drug use in VA is managed through the VA National Formulary (VANF)

process. The VANF process has a centrally managed drug list which is considered

its core formulary (i.e., drugs listed on the VANF must be made available at VA

medical treatment facilities, however, each VISN has the option of establishing a

VISN formulary which can be used expand the list of drugs available through the

VANF to meet the unique needs of a VISN). The VANF also incorporates a nonformulary request or waiver process whereby medically necessary drugs which are

not included on the VANF or on the VISN formularies may be requested by individual physicians to meet the needs of individual patients.

Except for a very small number of exceptions, outpatient prescriptions are filled

exclusively in VA operated pharmacies. Mail prescription service is provided

through VA Consolidated Mail Outpatient Pharmacies (CMOPs), while in other

cases, prescriptions are made available for pick-up at pharmacies located in VA

medical treatment facilities. Maintenance medications are generally supplied in 90-

day quantities though the VA CMOPs.

VA’s pharmacy benefit also includes a co-pay system. In February 2002, the copay was increased from $2 for each 30-day supply of medication to $7 for each 30-

day supply. Medical and surgical supplies and any medications used to treat a service-connected condition are generally exempt from co-payment. In addition, some

veterans are exempt from all prescription co-payments (i.e., veterans that fall below

the means test threshold and veterans who are greater than 50 percent service connected.

Question. How much does VA spend each year on pharmaceuticals?

Answer. In fiscal year 2000 VA spent $2.2 billion on pharmaceuticals, and $2.5

billion in fiscal year 2001. The estimate for pharmaceutical expenditures in fiscal

year 2002 is $2.9 billion and fiscal year 2003 is $3.3 billion. VA manages costs by

utilizing generic drug products whenever possible, by encouraging the appropriate
68

use of drugs through the VANF process, by lowering unit costs through standardization contracting, by decreasing the cost of the distribution of bulk drugs products

through a Pharmaceutical Prime Vendor, by lowering the cost of dispensing prescriptions through the use of VA CMOPs, and by dispensing chronic medications in

90-day supplies.

Question. In December 2000, VA’s Inspector General (OIG) recommended changes

to make VA’s prescription benefit more efficient. One of the recommendations is for

the VA to fill privately written prescriptions. The Inspector General estimated that

this would save VA over $1 billion per year. What is VA’s response to this recommendation?

Answer. VA does not support the OIG’s recommendation. OIG recommended that

VA stop providing medical care and only provide pharmaceuticals. VA contends that

this recommendation would lead to fragmentation of care and that it is not in the

best interests of veterans. Additionally, if VA were required to fill privately written

prescriptions for any veteran, the system would be overwhelmed due to insufficient

infrastructure and resources to accommodate the additional workload. Using current

expenditures, it is estimated that for each one million veterans who are provided

the pharmacy benefit, VA’s costs would increase by $1 billion annually. Further, VA

would need to increase its staff of pharmacists by a very large number in an environment where they are in short supply and are able to command increasingly high

salaries.

Question. What mechanisms does VA use to manage: drug use? distribution of

drugs? costs?

Answer. To manage the appropriateness of drug therapy, the distribution of

drugs, and the costs of drugs, VA uses a variety of formulary management mechanisms and techniques. VA created a Service Line call the Pharmacy Benefits Management (PBM) Strategic Health Care Group in 1995 to coordinate the VANF process and encourage the appropriate use of drugs by veterans. The VANF process involves several tools designed to encourage the appropriate use of medications and

to positively impact the unit cost of drugs. Some of the tools include the development and dissemination of evidence-based clinical guidance [Drug Use Criteria,

Pharmacologic Management Algorithms, Drug Monitoring Criteria, Drug Class Reviews and other clinical guidance documents, managing drug utilization data to impact prescribing behavior, performing national standardization contracting, encouraging improvements in inventory management, and engaging in pharmaceutical outcomes research.

To manage the distribution of pharmaceuticals to VA treatment facilities, VA uses

a Pharmaceutical Prime Vendor, which distributes products to VA facilities at prices

that are negotiated with the drug manufacturers. The current contract results in

savings of over $50 million per year for VA below the VA contract price for pharmaceuticals. Distribution of drug products to individual veteran outpatients is accomplished by dispensing at VA treatment facilities and through VA mail prescription

service. Over 50 percent of all VA prescriptions dispensed are mailed to veterans.

As a result of these initiatives, the average cost of a 30-day supply of medication

in VA has increased very little over the past 3 years.

Question. And VA is able to do this without compromising the quality of care for

veterans?

Answer. Yes, all indicators of care reflect improvements in veterans care. These

include but are not limited to measures in the care of diabetes and blood cholesterol.

In the Congressionally mandated study on the VA National Formulary, the Institute

of Medicine concluded that there is no indication that the quality of care in VA has

decreased as a result of the VANF process. Additionally, in its studies of the VA

formulary management process, GAO concluded that the VA formulary process is

clinically sound and that it meets the needs of veterans.

Question. VA’s formularies help contain cost, while still ensuring that veterans

have access to the best medical care. How are these formularies developed?

Answer. The foundation for formulary management decisions is a comprehensive

review and analysis of the published medical literature. These reviews and analyses,

performed by VA clinical staff, result in evidence-based decisions regarding which

products should be included on the VANF, how those products should be used, and

the place in therapy of those products relative to alternative drug therapies. The

review processes focus primarily on a drug’s safety and effectiveness, as well as on

other measures of quality. Cost considerations, while important, are secondary to

quality considerations when determining a drug’s formulary status and place in

therapy in VA.

Final decisions on formulary management are made by two groups of field-based

clinical staff in VA. These two groups are the VA Medical Advisory Panel (MAP)

and the VISN Formulary Leaders Committee (VFL). The first group is comprised
69

of 12 VA practicing physicians and one Department of Defense physician. This

group provides physician oversight of the VANF process. The second group is comprised of 21 pharmacist or physician representatives from each of the 21 VA VISNs,

the Director of the VA CMOP program, a National Center for Patient Safety pharmacist representative, a pharmacist representative from VA’s National Acquisition

Center (NAC), and a pharmacist representative from the Department of Defense’s

Pharmacoeconomic Center (PEC). VA physician subspecialty representatives groups

are often invited to provide input on issues of interest prior to MAP and VFL formulary decisions.

VA offers one of the most generous pharmacy benefits and does so at an affordable cost, due to the managed formulary process. With rare exception, all available

therapeutic drug classes of drugs available in the United States are represented on

the VANF. The VA formulary management process provides a high level of access

to pharmaceuticals for VA clinicians and veteran patients. VANF drugs comprise

approximately 92 percent of all drug dispensing in VA, while VISN drugs comprise

an additional 6 percent. Considering that VA provides medical/surgical items and

OTC products, it is inarguable that the VA formulary process meets the needs of

veteran patients and VA clinical staff.

Question. In January 2001, GAO reported some networks were not applying the

formularies in a standardized way. Some networks were adding and omitting drugs

on an ad hoc basis. What is VA doing to ensure that there are national standards

for all VA networks—so that all veterans have access to the same drugs—no matter

where they are?

Answer. VA has rewritten its policy on the national formulary process to address

GAO’s concerns, has made adherence to the VHA Directive on the VANF a topic

for discussion in many forums with VA pharmacists and clinical leaders, and has

made explicit requirements in the Directive for national, regional, and local clinical

and administrative staff.

VA has taken the following specific actions: development of a template for VISNS

to use for considering drugs for inclusion on their VISN formularies; review of all

formulary actions taken by VISNS and distribution of that information among

VISNS, requiring a national review of all New Molecular Entities approved by the

FDA before a VISN can add it to its formulary, and a requirement that if a medication is added to 10 or more VISN formularies, a national review and decision will

occur. Additionally, VA has added a requirement that if a veteran has therapy initiated in one VISN and transfers his care to another VISN, that the therapy will not

be changed due to any variations with VISN formularies. Lastly, VA has started to

review access to pharmaceuticals (down to the individual facility level) where there

could be potential problems (i.e., drugs which are high cost, under used, over used,

etc.) and is reporting that data to VISNs on a regular basis with a request for follow-up.

Question. How could VA’s pharmacy benefits management initiatives serve as

benchmarks for a future Medicare drug benefit?

Answer. VA’s comprehensive approach of addressing the contracting, distribution

and clinical use of drugs clearly demonstrates that evidence-based formulary management can reduce cost while maintaining or improving the quality of care and access to pharmaceuticals.

Evidence-based formulary decisions and contracting within a therapeutic class can

manage cost and not compromise the quality of care. VA has been able to achieve

high compliance to both the formulary and contracts. Utilization management

through the use of disease and drug treatment guidelines also has application. Key

to the success of either program is organizational buy-in. VA utilizes practicing physicians within the VA system as decision makers. Additionally, VA uses experts

within the health care system when decisions are to be made in specific diseases,

i.e., HIV/AIDS, diabetes.

Additionally, the use of a Pharmaceutical Prime Vendor, a Consolidated Mail Outpatient Pharmacy and clinical pharmacists who can help manage individual patient

care would positively impact the system. Of course, considerable opposition to the

inclusion of some of these tools in a Medicare drug benefit by various stakeholder

groups should be anticipated.

Question. VA recently increased the Prescription Drug copayment from $2 to $7.

How did the VA arrive at this amount?

Answer. VA may not require a veteran to pay an amount in excess of the actual

cost of the medication and the administrative costs related to the dispensing of the

medication. VHA conducted a study of the pharmacy administrative costs relating

to the dispensing of medication on an outpatient basis and found that VA incurred

a cost of $7.28 to dispense an outpatient medication even without consideration of

the actual cost of the medication. This amount covers the cost of consultation time,
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1 Aiken, L. et al. ‘‘Nurses’ Reports on Hospital Care in Five Countries,’’ Health Affairs, May/

June 2001, 43–53.

Havens, D. S., & Aiken, L. H. (1999). Shaping systems to promote desired outcomes: The Magnet Hospital Model. JONA, 29(2), 14–20. 2 ANCC refers to Magnet status as representing a culture of excellence that includes: nurses

who have the status needed to influence people and procure necessary resources; good collaboration between nurses, physicians, and administrators; and established systems needed to insure

nurse participation in policy decisions.

filling time, dispensing time, an appropriate share of the direct and indirect personnel costs, physical overhead and materials, and supply costs. It was thus determined that $7.00 would be an appropriate co-payment.

Question. Does the VA plan further increases or adjustments to the co-pay? What

process will be used to determine any future changes to the co-pay?

Answer. The amount of the medication co-payment will be reviewed on an annual

basis. Increases will be based on the Prescription Drug Component of the Medical

Consumer Price Index.

NURSING SHORTAGE

Question. Does the VA agree that a quality work environment for VA nurses

translates directly into quality of care for our veterans?

Answer. VA agrees that a quality work environment for nurses translates into

quality of care for our veterans. Research has shown a strong link between positive

nursing work environments (including the involvement of nurses in decisions that

can have impact on patient care) and enhanced patient outcomes.1

The American Nurses Credentialing Center’s (ANCC) Magnet Hospital Recognition Program is designed to recognize excellence in nursing care based on a quality

work environment.2 Research has shown that magnet hospitals demonstrate outstanding outcomes in patient and staff satisfaction, staff productivity, and reduced

length of hospital stay for patients. The Tampa VA Medical Center is the first in

VHA to have attained Magnet status.

Question. More and more, VA nurses are asked to perform duties that are not directly related to the care of veterans—like administrative and janitorial duties. But

the VA doesn’t allow nurses to negotiate over these duties. How does this affect retention of VA nurses? The quality of care for our veterans?

Answer. The Report of VHA’s Nursing Workforce Planning Group states: ‘‘In VA,

nurses are routinely required to ‘‘substitute’’ for absent allied or ancillary staff, such

as laboratory or clerical support, simply because in the past there have always been

nurses present in the care environment to do so. This substitution for other workers

diminishes nurses’ capacity to provide nursing care and worsens the effect of the

nursing shortage.’’

VA recognizes that while the quality of our veterans care remains high, such utilization takes nurses and other healthcare providers away from patient care processes

and results in strong employment dissatisfaction that impedes both retention and

recruitment of staff.

Question. Would giving nurses collective bargaining authority provide a ‘‘double

value’’ by both increasing the ‘‘quality of life’’ for nurses, and ‘‘quality of care’’ for

veterans?

Answer. The Congress, in section 7422, title 38, U.S.C. extended collective bargaining rights to title 38 personnel to include nurses.

VA nurses currently have and utilize all collective bargaining authorities available to Federal employment. In addition, VA nurses are active participants in partnership councils at all levels of the organization.

Question. The VA Nurses Recruitment and Retention Act created a National Commission on VA Nursing. What is the status of this Commission?

Answer. The membership of the Commission has been appointed. The Commission

will hold its first meeting in May 2002.

Question. Could the Commission look into the collective bargaining issue?

Answer. Yes. The Commission has been charged to consider legislative and policy

changes to enhance recruitment and retention of nurses, and to make recommendations in these areas as appropriate.

Question. What other steps is the VA taking to recruit and retain nurses?

Answer. Understanding the gravity of the future nursing shortage situation, VA

recognized the need to bring together nursing and health care management experts

to fully explore all issues that have an impact on VA’s ability to maintain a highly

qualified nursing workforce. As a result, the Future Nursing Workforce Planning

Group (Planning Group) was established in August 2000.
71

3The nationally acclaimed Veterans Affairs Learning Opportunities Residency Program

(VALOR) is an honors program administered by local VA facilities but funded centrally. VALOR

provides specialized summer educational and clinical experiences to nursing students with

GPA’s of 3.0 or higher. Participants are paid 80 percent of RN pay and if they elect VA employment after graduation they are given special salary consideration. In fiscal year 2001 there are

267 VALOR students being supported in 77 VA medical centers.

In January, VHA released A Call to Action—VA’s Response to the National Nursing Shortage. The report is the product of VA’s National Nursing Workforce Planning Group whose membership was made up of nurses from a variety of positions,

labor partners, VA medical center administrators, and Human Resources experts.

This group consulted with national experts in nursing, government and academe,

conducted an extensive review of the literature and met with VA employees. What

emerged as a result is a frank discussion of VA’s ability to compete in today’s nursing labor market and the barriers that impede nurse retention, recruitment and utilization. Recommendations for diminishing these barriers are presented; they range

from the need for legislative initiatives to the need for flexibility and respect in the

work environment.

To disseminate the Report’s content, VHA has held policy level briefings and produced a national broadcast for all employees using the VA Knowledge Network. The

report and its recommendations will be the subject of national meetings and will

be considered by the VA Workforce Task Force and the National Commission on VA

Nursing.

VA has placed significant emphasis on the education and training of its nurses.

The National Nursing Education Initiative (NNEI), implemented in March 2000, is

a VA established subcomponent of the Employee Incentive Scholarship Program

(EISP) that supports educational opportunities for VA’s registered nurses to expand

their formal education. It helps ensure that VA nurses are educationally prepared

to provide the highest quality of health care to veterans across the full range of clinical practice roles. Additionally, the NNEI will prepare nurses for their new and

evolving roles as VA continues its transformation from a hospital-based system to

one that focuses on primary care and care management in outpatient, home, and

community settings. As of September 30, 2001, the NNEI accounted for nearly 90

percent of all the EISP participants. Academic year 2000–2001 was the first full

year of operation of the NNEIEISP. At the conclusion of fiscal year 2001, 2,087 VA

employees had been awarded EISP scholarships, including 1,870 registered nurses

under the NNEI subcomponent. The total cost of these scholarships, many of which

are multi-year awards that in some cases continue into academic year 2005–2006,

is approximately $23.3 million. The portion of the EISP funding that was specifically for the NNEI amounted to $21.3 million.

Additionally VA has increased its emphasis on recruitment outreach for registered

nurses. In fiscal year 2001, VA has more than doubled the number of the number

nursing conventions, job fairs and other recruitment forums where it sponsors exhibits to promote VA as an employer of choice. Similarly, VA has increased its nationwide advertising which includes eye-catching display ads prominently placed in

major newspapers and professional journals and internet advertising with links to

VA’s health care recruitment web site.

VA is in the process of implementing the Education Debt Reduction Program

(EDRP) that provides the authority to implement to help recently appointed health

care employees such as nurses reduce the interest and principle on government and

commercial loans that they obtained to fund their health care education. It appears

that some concerns with the National Partnership Council have been resolved and

that the award process will begin in the very near future. The EDRP is expected

to be a highly effective tool for recruiting nurses.

As another initiative, a senior VA nurse executive is now a member of the staff

of the Healthcare Staff Development and Retention Office to facilitate the utilization

of existing recruitment and retention programs and the creation of new programs.

Question. What will the VA spend on these initiatives in 2003?

Answer. Up to $10 million will be spent on the NNEI in fiscal year 2003 and $1.7

million is in the budget for VA Learning Opportunities Residency Program

(VALOR). About $5 million is available for the EDRP. The lion’s share of the VA’s

national health care advertising budget, which totals about $1.5 million, will be

shifted to nursing.

Question. How can the VA–HUD Subcommittee help bolster these initiatives?

Answer. It is critical that VA be a competitive employer of new nursing graduates.

The VA Learning Opportunities Residency Program (VALOR) 3, which has had a

positive impact on nurse recruitment in the past and has won national acclaim, is

a rich source of new nurses. VA will promote a positive work environment for nurses
72

and all employees and will continue to develop recruitment and retention strategies

that enable competitive employment of a qualified nursing workforce.

COLLECTIONS

Question. The 2003 budget assumes that VA will collect $1.4 billion in 2003, an

increase of about $500 million above the 2002 level. How much of this amount does

VA estimate would come from the proposed $1,500 deductible?

Answer. An estimated $260 million revenue increase is expected to come from the

$1,500 deductible proposal. This proposal is also expected to generate an overall net

workload expenditure reduction of $885 million, for an overall reduction in the appropriation request of $1.145 billion for veterans’ health services in fiscal year 2003.

Question. Last month, the VA’s Inspector General reported on missed billing opportunities, backlogs of claims worth a billion dollars, and poor follow-up on bills.

GAO has found similar problems about VA’s collections efforts. What is VA doing

to collect what veterans and taxpayers are owed?

Answer. For the past 41⁄2 years VA has contracted with a private vendor to followup on third parties receivables over 90 days old. This contract has resulted in collections totaling $200 million at a cost of a little more than $4 million. This contract

required the contractor to submit 5 additional follow-up letters to an insurance company for payment to VA for the service provided.

Additionally, the VHA Revenue Office is in the process of ‘‘testing’’ the concept

of outsourcing follow-up activities between one VISN and the Allied Interstate Company (a collection company). For a period of 120 days, the company will attempt to

resolve aged billing claims while on location in a VISN facility. This test will provide

insight into how well a private sector billing company can provide outsourcing for

billing services.

We have simultaneously encouraged VISNs to identify outsourcing opportunities,

not only for follow-up activities, but also for coding and billing. A number of VISNs

are in the process of developing statements of work for outsourcing and several others have issued solicitations.

Question. How much does VA spend on its collections efforts? For example, for

every dollar spent on collections, how much does VA actually collect?

Answer. VA’s cost to collect from third-parties is very difficult to compare with

private industry’s cost to collect. VA’s measurement for this process is a cost to operate. VA’s data systems cannot provide data for collections and costs to differentiate

between first and third-parties. The cost accounting system records only total collections and cannot identify cost expenditures to the first and third-party level. There

have been cost assessment studies done in prior years by contractors and one currently underway; both of which have shown (show) how the cost to collect/operate

has declined over the past few years. This decrease in cost to operate can be attributed to a number of improvements in the process for billing and collecting of first

and third-party receivables. These enhancements include the electronic generation

of patient statements from one location, the receipt of payments for first party

charges through a lock box bank, and the automatic posting of those payments to

a patient’s account. Additionally, improvements made to the third-party billing process include facilities using an Electronic Data Interchange (EDI) in the near future

to submit bills to insurance companies electronically, centralization/consolidation of

like collection functions, and outsourcing/contracting out follow-up activities.

Systems Flow, Inc., has been contracted to study and develop annual reports to

Congress on an assessment and an interim evaluation of alternative business models presented in VHA’s Business Plan for Revenue Collection. Systems Flow, Inc. reviewed three VISNs on various subject matters including cost to collect data. A draft

based on preliminary data results (using December 2001 data) was issued February

12, 2002. The cost to operate on average for three VISNs for third-party collections

averaged 22 cents to collect $1 and averaged 16 cents to collect $1 of total collections

(first and third-party).

Question. Does the VA know to what extent it is owed by deadbeat third parties?

Is VA able to estimate how much?

Answer. We are unable to systematically identify payers that routinely or frivolously deny payment of our claims. However, field staffs occasionally provide anecdotal information on the subject. Therefore, to provide an accurate response will require substantial systems development for monitoring and reporting on such occurrences. We anticipate a greater capacity to monitor such activity with advent of the

Electronic Data Interchange (EDI).

Question. Why has the VA chosen to keep billing in-house, rather than contracting

it out to the private sector, which has more experience in billing issues?
73

Answer. VA is in the unique situation of dealing with service connected and nonservice connected veteran patients for billing purposes. Due to the various rules and

regulations that deal with this situation, many private sector billing companies will

have to modify their software in order to bill for VHA services. VHA’s study of commercial-off-the-shelf billing products identified several vendors that could provide

billing outsourcing with effective training and the upfront work with the VistA software to extract the episode of care information. To that end, the Office of Information’s Software Design and Development section is in the process of making the

VistA software ‘‘billing aware’’ so that it can be integrated with potential private

sector billing companies. Another issue hindering the outsourcing of billing is obtaining security clearances for individuals performing billing work for a potential

contractor. Security clearances must be obtained for each individual accessing the

VHA computer systems. Further, the contractor must be physically located on VA

property to stay within the VA computer systems firewall to preserve the security

of the data. Another issue hindering the outsourcing of billing is the lack of consistent documentation and use of the Computerized Patient Medical Record System

(CPRS) at all clinics within a medical center. These issues are being addressed by

VHA management.

The VHA Revenue Office is in the process of ‘‘testing’’ the concept of outsourcing

follow-up activities between one VISN and the Allied Interstate Company (a collection company). For a period of 120 days, the company will attempt to resolve aged

billing claims while on location in a VISN facility. This test will provide insight into

how well a private sector billing company can provide outsourcing for billing services. The Revenue Office will be conducting weekly conference calls on the status

of this initiative with VISN 12, as well as receive monthly progress reports on the

amount collected by Allied Interstate Company.

In addition, we have simultaneously encouraged VISNs to identify outsourcing opportunities, not only for billing, but also for coding and accounts receivable management. In fact, several VISNs have such outsourcing situations in progress and several others have issued solicitations. The VHA Revenue Office maintains a list of

VISN/Medical Center contracts from across the country. This listing will be available to VISN/Medical Centers for information on contracts available.

The foregoing activities indicate a desire and commitment within VA to

outsourcing options.

Question. Has VA been able to develop a list of ‘‘lessons learned’’ to maximize collections?

Answer. VHA has identified 24 action items to enhance revenue operations.

Project Teams are pursuing the implementation of these action items in the areas

of Billing, Coding, Insurance, Utilization Management and Accounts Receivable

Management. These project teams will make recommendations for improvements to

the Revenue program and develop training programs for facilities to implement best

practices.

We are consolidating information into a central resource vehicle to assist field revenue staffs in maximizing their collection efforts.

WAITING TIMES

Question. What can the VA tell us about current waiting times? How long do veterans wait to get a doctors appointment? How long do they sit in the waiting room?

Answer. Eighty seven percent of primary care appointments and 83 percent of

specialty care appointments are scheduled within 30 days of desired date. This

measure includes ALL patients seeking an appointment. For new non-emergent patients seeking an appointment to primary care, the current waiting times is 58.7

days. In addition, 71 percent of patients reported that they waited 20 minutes or

less to see their provider.

VHA tracks and monitors other information on waiting time to provide a richer

context for evaluating performance. Information on performance for February 2002

is included in the table below. VHA tracks performance on these monitors over time

to assess the effectiveness of corrective actions as well as to monitor the effect of

other factors, such as eligibility changes and budgetary impacts on waiting times.

Attachment A provides data on general trends of nationwide improvements for

VHA’s average wait times for primary care and specialty clinics.

OTHER VHA WAITING TIME MONITORS—FEBRUARY 2002

Measure Specialty Clinic Plan/days Actual/days

Average next available primary care appointment ............................. (Primary) .............................. 30 38
74

OTHER VHA WAITING TIME MONITORS—FEBRUARY 2002—Continued

Measure Specialty Clinic Plan/days Actual/days

Average next available specialty appointment waiting time .............. Audiology .............................

Cardiology ............................

Eye Care ..............................

Orthopedics .........................

Urology .................................

30

30

30

30

30

31.8

35.8

61.7

34.4

41.1

Average primary care new appointment waiting time ........................ (Primary) .............................. 30 58.7

Average specialty new appointment waiting time .............................. Audiology .............................

Cardiology ............................

Eye Care ..............................

Orthopedics .........................

Urology .................................

30

30

30

30

30

53.5

35.7

77.4

38.6

45.5

Question. What are the goals for patient waiting time?

Answer. The Department level goals for waiting time for fiscal year 2003 are provided below.: The strategic goal for each of the performance measures below is 90

percent by 2006.

—89 percent of primary care veterans appointments will be scheduled within 30

days of desired date (excludes new enrollees who are pending scheduling of

their first appointment);

—87 percent of specialist appointments will be scheduled within 30 days of desired date (excludes new enrollees who are pending scheduling of their first appointment); and

—72 percent of patients will report being seen within 20 minutes of their scheduled appointments at VA health care facilities.

Note: pending scheduling is defined as a patient who has requested their first appointment and is waiting to be scheduled.

Question. How were these goals developed?

Answer. In 1995, a survey was conducted for actual wait times, by clinic. The data

were analyzed to determine which clinics had the most problematic wait times.

Measures were prioritized for those clinics with the highest wait times. Targets

were set based on community expectations based on literature searches and discussions with other managed care groups.

Question. What is the VA doing to develop a system to accurately quantify the

current situation?

Answer. VHA has identified some immediate issues that must be addressed:

—The current ‘‘30 days measures’’ do not accurately reflect the experience of new

patients.

—The present data exclude the wait time experience of new enrollees whose application for enrollment has been received but not processed and new enrollees

who indicate a desire for primary care appointment that has not been scheduled.

VHA recognizes that data credibility is compromised as the current ‘‘VHA–OMB

30 day wait measure’’ appears to be far better than anecdotally reported wait experiences. Whether due to absence of available slot or other reasons, ‘‘waiting lists’’

of Veterans to be entered into the scheduling system are known to exist. ‘‘Waiting

times’’ is an area of intense concern among facility and Network leadership.

In January 2002, VHA’s Policy Review Board recommended and VHA’s (Acting)

Under Secretary for Health approved the following proposed actions:

—Improve construction and communication of current measures to better reveal

wait experiences of both new and established patients in primary and specialty

care.

—Transition OMB/GPRA/VA Strategic Measures to either supplement or replace

‘‘percent with 30 days’’ with average wait times for primary or specialty care

categorized by ‘‘all patient’’ and ‘‘new patients’’

—Include new patient wait data in primary and specialty care in all VHA wait

times performance reporting

—Improve business processes to support improved data:

—Standardize the entry process for new enrollees, building on processes developed

in VISN 8. This should include standard ‘‘pre-triage’’ questions to determine

basic preference and reveal urgency of clinical needs at the time of enrollment.

Consider use of triage clinics, if primary care slots not available. Incorporate

principles of advanced access, including recommendations for primary care

panel size range into standard entry process design.
75

—Formalize ‘‘electronic wait list’’ in VISTA to more consistently and accurately

reflect demand across VHA, and reduce risk of enrollees lost to follow-up due

to clerical error.

—Conduct periodic survey of new enrollees at defined periods after enrollment to

assess their experience with waiting times.

Question. How much funding does VA anticipate devoting to quantify this problem

in 2003?

Answer. The fiscal year 2003 budget includes a request for $159 million to improve access and service delivery.

CLAIMS PROCESSING TIMES

Question. What is the current processing time for claims?

Answer. The current (through February 2002) average completion time for rating

claims is 222 days.

Question. What is the goal?

Answer. The fiscal year 2002 goal is 208 days.

Question. What lessons has the VA learned from past efforts to improve processing times?

Answer. Because of concern over the increasing VBA workloads and the length

of time veterans were waiting for decisions on their claims, the Secretary established the VA Claims Processing Task Force. The Task Force was charged with assessing VBA’s current operations and the impact of efforts to improve claims processing. The Task Force was asked to recommend measures and actions that would

increase the efficiency and productivity of VBA operations, shrink the backlog, and

reduce the time it takes to decide a claim.

The Task Force found that previous efforts to improve processing times had focused on the ‘‘back end’’ of the process—from preparation of the rating decision to

award and decision notification. Nearly all clerical positions had been eliminated

and replaced with additional ‘‘decision makers.’’ The Veterans Services Representative (VSR) position was created, which has been assessed to include over 10,900 separate tasks (including clerical functions), any combination of which a VSR could be

expected to perform on any given day.

It was the assessment of the Task Force that the broad scope of duties coupled

with the administrative ‘‘clerical’’ functions actually reduced the time available for

the VSR and the Rating Veterans Services Representative (RVSR) to make decisions. Little attention was paid to assuring proper and complete evidence development. As a result, claims were delayed time and time again as essential evidence

was not solicited until months after the claim had been received.

We have learned that our attention must focus on the entire claims process, from

the date the claim is received in the Regional Office to the time the final decision

is made on the claim, including any appeals that might have been filed. The Task

Force recommended specialization of claims processing in order to ensure complete

and timely development, reduction of cycle time delays, improved quality of decisions and awards, and complete and understandable notification to claimants. In addition, the Task Force recommended re-establishment of a clerical position to handle

the administrative function, thus freeing up more direct labor hours for the VSR

and RVSR. We are confident that these actions will improve both the timeliness and

quality of VBA decisions.

Question. How much funding does VA anticipate devoting to improving claims

processing time in 2003?

Answer. For fiscal year 2003, $50 million has been budgeted for initiatives to improve claims processing. These initiatives focus not only on timeliness, but also on

quality and other aspects of claims processing, and are not all short term initiatives.

Examples are Virtual VA (VBA’s imaging initiative), Systematic Individual Performance Assessment (SIPA), and Compensation and Pension Evaluation Redesign

(CAPER).

Question. How many new employees?

Answer. These initiatives will require 106 additional FTE (20 for Virtual VA, 64

for SIPA, 6 for CAPER, and 16 for other VBA-wide initiatives).

Question. How will VA train new employees so they will be able to make a real

difference?

Answer. Training programs have been created for delivery through a variety of

media, but the cornerstone of training for both RVSRs and VSRs is the Compensation and Pension (C&P) Training and Performance Support System (TPSS). For

RVSRs, formal training occurs over a period of 26 weeks. TPSS is supplemented

with training by student and instructor guides that includes a variety of practical

exercises. A great deal of time is also allotted for work with mentors, where stu-
76

dents are expected to demonstrate application of the knowledge they have obtained

through success with live cases. For VSRs, formal training is outlined in the ‘‘VSR

Field Guide’’. The Field Guide to VSR training website contains 48 weeks of training

materials including the course curriculum, schedules, and all materials for instruction. Last year’s VSR course design called for 12 weeks of initial instructor-led training. The purpose was to deliver uniform training in a compressed timeframe with

as little impact as possible to the resources of the individual Service Centers. Stations would then continue training the remainder of the 48-week curriculum as

trainees became more productive.

Question. How have the VA’s new duty to assist requirements impacted processing

times?

Answer. The Veterans Claims Assistance Act (VCAA) required that VBA readjudicate more than 98,000 previously denied claims, as well as review the 230,000

claims in our pending inventory at the time VCAA was enacted to ensure compliance with the Act. This major increase in our workload had a significant impact on

the average processing times.

All VCAA claims have now been added to the inventory. At the same time, we

have taken aggressive steps to increase rating production, which is the key to reducing the claims backlog and improving the timeliness of our decisions. From October

2001 through February 2002, VBA decided over 294,000 cases for a 5 month average

of 58,800. This represents a 47 percent increase over fiscal year 2001 production levels. We expect our production to continue to increase as many of our recently hired

employees gain additional experience and we begin to implement the recommendations of the Claims Processing Task Force.

We believe our increased production levels and the Task Force initiatives will now

enable us to make major inroads into the pending inventory. Our goal is to reduce

the pending rating inventory to 315,000 claims by the end of this year. Even though

we project major reductions in our pending inventory, the average days to complete

will continue to increase as we focus on completing the oldest claims in our inventory.

Question. Is the VA developing safeguards to ensure times won’t get worse as it

does more to help veterans develop their claims?

Answer. We have taken several steps to ensure our focus remains on timeliness

and accuracy. We have developed output targets for each regional office, and established national standards for Veterans Service Representatives and Rating Veterans

Service Representatives. We have established performance standards for regional office directors that include specific goals for improvement in the timeliness of rating

claims, reduction in the pending inventory of claims, etc. These performance plans

also state that if any goals are not met, the director must provide compelling mitigating reasons and identify actions being taken to improve the performance.

Wellness plans have already been requested of some station directors who have

thus far failed to achieve goals specified in the performance plan. The wellness plan

is a detailed analysis of the current situation, causes for the non-performance, and

development and implementation of countermeasures. If wellness plans do not result in performance improvements and no mitigating reasons exist, appropriate administrative action will be taken.

We are currently piloting a recommendation from the Claims Processing Task

Force to establish specialized teams within the claims processing functions of

Triage, Pre-determination, Rating, Post-determination, Appeals, and Public Contact.

The Triage team will assign work to the appropriate team or work the case in the

Triage unit if an issue can be quickly resolved. The Pre-determination team will ensure complete and timely development of rating claims received from the Triage

team. By addressing the current cycle time delays at the front end of both the rating

and non-rating claims process, we expect significant improvement in the overall

timeliness of claims processing. National implementation of this pilot will be complete by the end of this summer.

LONG TERM CARE

Question. What is the status of VA’s implementation of long term care?

Answer. VA has implemented a number of the major long-term care provisions of

the Millennium Act. Section 101(a), Nursing Home Care Eligibility, as implemented

in February 2000. Further guidance was provided in November 2000 with issuance

of VHA Directive 2000–044. Section 101(c), Extended Care Services and Extended

Care Copayments, has been partially implemented with issuance of VHA Directive

2001–061 in October. This directive notes that VA will amend the regulations establishing the benefits package to include outpatient geriatric evaluation, adult day

health care and home and community-based respite care. Home care, hospice/pallia-
77

tive care and inpatient respite were included in the benefits package under prior

authority. The amended Medical Benefits Package, Copayments for Extended Care

Services proposed regulation was published October 4, 2001. Final regulations were

forwarded to OMB on March 14, 2002.

Section 102—Long—Term Care Pilots-are in progress at three VA sites (Dayton,

Columbia, SC, and Denver, CO). The first veterans were enrolled in the pilot in mid2001 and the final report to Congress will be submitted in April 2005, 9 months

following the conclusion of the pilots. Section 103—Assisted Living Pilot—is in

progress in VISN 20, Pacific Northwest. The first veterans were enrolled in this

pilot in January 2002 and the final report to Congress will be submitted in October

2004, 90 days prior to the conclusion of the pilot. Lastly, implementation of Section

207—State Home Construction Grants—is nearly completed. Proposed regulations

were published June 26, 2001 and were utilized to establish the fiscal year 2002

State Home Construction Priority List. Publication of final regulations is expected

in April 2002.

Question. How much will VA spend on long term care in 2003?

Answer. VA projects that it will spend approximately $3.6 billion on long-term

care in 2003. Of this amount, $3.2 billion is for institutional long-term care and $0.4

billion is for non-institutional long-term care.

Question. What is the status of the assisted living pilots?

Answer. VA’s Assisted Living (AL) Pilot being conducted in Network 20 (Washington, Oregon, Idaho, Alaska) started admitting veterans in the pilot study group

to AL facilities in January 2002. Contract issues and Institutional Review Board

issues delayed implementation of this pilot program from the planned start of mid2001, but all of these issues have now been resolved. The pilot will be conducted

for 3 years, and the report to Congress on the outcomes will be provided 90 days

prior to the completion of the pilot as required in the Millennium Act. VA’s Health

Services Research Centers of Excellence are conducting the evaluation of this pilot.

FORT HOWARD

Question. Will the VA continue to move forward with the Mission Change and Enhanced Use project underway at Fort Howard?

Answer. Yes. The Mission Change is currently in progress. The estimated date to

complete the Mission Change is September 2002. In addition, the planning process

for the revitalization of the Fort Howard campus into a ‘‘Continuum of Care Retirement Community’’ utilizing Enhanced-Use legislation has been initiated. There is a

lot of interest in the project. This community concept would be a first in the VA,

and may likely prove to be a model for other VA sites nationally where aging buildings and abundant property are a capital burden on the VA system.

Question. What changes can veterans, their families, and VA employees expect in

the coming months?

Answer. The changes that veterans, their families, and employees will see in the

upcoming months will be the progressive relocation of inpatient programs and administrative functions to other VAMHCS sites where excess capacity exists. The

planned relocations will provide a better environment and accessibility for serving

the health care needs of Maryland’s veterans. No current program offered at Fort

Howard will be eliminated. As most of the program moves are dependent upon various construction projects, the estimated date to complete the Mission Change is

September 2002. The 32-bed Substance Abuse and Residential Rehabilitation Treatment Program (SARRTP) was relocated to Perry Point in February 2001. The Medical Care Cost Fund (MCCF) Office, also known as the Revenue Office, was relocated to Perry Point in June 2001. The Ventilator/Respiratory Therapy beds (12-bed

unit) were relocated to Perry Point in December 2001. Other planned relocations

and construction projects will follow this spring and summer. When the last of the

inpatient moves are completed, the current Fort Howard primary care outpatient

clinic will be relocated from the main hospital building to Building 249, which is

located behind the existing hospital building and adjacent to the main parking lot.

Question. Will the outpatient services continue at the Fort Howard campus

throughout the entire transition?

Answer. Yes. As noted above, when the last of the inpatient moves are completed,

the current primary care outpatient clinic will be relocated from the main hospital

building to Building 249. Veterans who are currently receiving primary care outpatient services will continue to receive these services without interruption during

the transition. Although Building 249, which was built in 1992, is the newest building located on the Fort Howard campus, construction is scheduled to begin in April

2002 to make the space more functional for the needs of the primary care outpatient

clinic.
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Question. Veterans with inpatient needs will be referred to the Baltimore VAMC.

What is the VA doing to prepare the Baltimore facility for its expected increase in

workload? What facility improvements are being made? What is the VA doing to ensure that healthcare workers at the facility are able to provide quality customer

service to an increased workload?

Answer. There will be no increase in inpatient workload at the Baltimore facility

as a result of the Fort Howard Mission Change. The Baltimore facility supports the

acute and critical care needs of veterans for the entire VAMHCS. Fort Howard is

a sub-acute care facility. Upon completion of the Mission Change, the Fort Howard

inpatient programs will be relocated to more modern and comfortable accommodations at the Perry Point and Loch Raven facilities. Over $7 million has been allocated for construction projects to accomplish the planned relocations (see attached

list). The transfer of patient workload and staff from Fort Howard to the Perry

Point and Loch Raven facilities will increase workload at these two locations; however, the overall system workload will not increase. Employees have been given the

option to relocate with their programs, as appropriate. We believe that the veteran

population will benefit from the planned relocations, and the current level of quality

care and customer service will be maintained.

FORT HOWARD MISSION CHANGE PROJECT COST SUMMARY

Site Project title Project number Project cost

Fiscal Year 2000 Funding:

LR Renovate BRECC1 For Rehab Therapy (Design/Construction) .......................... 512–00–166 ..... $179,650

PP Relocate Cardiology To 19H ............................................................................... 512–00–321 ..... 246,372

LR Rehab/Admin Bumpout Addition (Design) ......................................................... 512–00–168 ..... 52,500

LR Renovate Animal Facility For Orthotics (Design) .............................................. 512–00–167 ..... 83,000

PP Renovate 22H For SARTP (Design) .................................................................... 512–00–320 ..... 44,843

PP Add Bathrooms 23A (Design) ............................................................................ 512–00–322 ..... 27,880

PP Renovate 13H For Admin Svcs (Design) ........................................................... 512–00–323 ..... 0

Subtotal ......................................................................................................... ........................... 1 634,245

PP Renovate 14A & B ............................................................................................. 512–319 ........... 2 3,920,000

Fiscal Year 2000 Total .................................................................................. ........................... 4,554,245

Fiscal Year 2001 Funding:

PP Add Bathrooms 23A ........................................................................................... 512–00–322 ..... 152,500

FH Renovate Bldg 249 (Design) ............................................................................. 512–00–120 ..... 51,500

Subtotal ......................................................................................................... ........................... 204,000

Fiscal Year 2002 Funding:

LR Rehab/Admin Bumpout Addition (Construction) ............................................... 512–00–168 ..... 378,854

LR Renovate Animal Facility For Orthotics (Construction) ..................................... 512–00–167 ..... 400,000

FH Renovate Bldg 249 (Construction) .................................................................... 512–00–120 ..... 375,000

PP Renovate 13H For Admin Svcs (Construction) .................................................. 512–00–323 ..... 390,071

PP Renovate 22H For SARTP (Construction) ........................................................... 512–00–320 ..... 379,222

Fiscal year 2001 and 2002 total .................................................................. ........................... 3 1,923,147

Funding Pending:

BT Provide A&MMS Space in Warehouse ................................................................ SB–01–104 ....... 359,000

BT Renovate 2nd Floor Audiology ........................................................................... ........................... 20,000

LR Renovate B–4 basement area for EMS Offices & Linen Carts ........................ ........................... 75,000

LR Convert EMS Linen Cart Rm In BRECC to Offices ............................................ ........................... 25,000

LR Add Offices In B–4 Near Security (w/o bathroom) ........................................... ........................... 75,000

LR Expand Dental Suite @ BRECC ........................................................................ SB–02–202 ....... 80,000

Funding pending total ................................................................................... ........................... 634,000

Grand Total .................................................................................................... ........................... 7,315,392

1 $486,000 received in FCP 073 in fiscal year 2000.

2 $3,920,000 approved for 14H.

3 $2.0M received in FCP 1934 in fiscal year 2002.

Question. Will the VA stick to the current timetable that calls for the Mission

Change to be complete by September 2002, and for the Enhanced Use to be complete by January 2003?

Answer. The VAMHCS is doing everything possible to ensure the timelines presented to date are maintained. As most of the program moves are dependent on the
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completion of various construction projects, the estimated date to complete the Mission Change is September 2002. The Enhanced-Use portion of the project is a more

complex and difficult process to forecast. A contract was awarded to a consultant

to conduct an Environmental Assessment and the historical, marketing, land planning, and financial feasibility studies for the Enhanced-Use portion of the project.

These studies are necessary to properly validate the proposed concept and identify

any potential concerns. The marketing, land planning, and financial feasibility studies have been completed. The historical study is currently under final review by the

Maryland Historical Trust and the Historic Preservation Officer, VA Central Office.

At or near completion of the Environmental Assessment, a formal request to continue pursuit of the Enhanced-Use portion of the project will be forwarded to VA

Central Office for review and approval. Based on current estimations by the Office

of Asset Enterprise Management, VA Central Office, the Enhanced-Use process

takes approximately 12 months to complete which results in the awarding of a contract to a developer. It is unlikely that the formal Enhanced-Use process will be

completed by January 2003 as previously planned.

Question. Has the VA bid the Enhanced Use portion of the project in January

2002 as planned? If so, was notice provided to the Committee? If not, what is the

delay?

Answer. No. The formal Enhanced-Use process of the project was expected to

begin in January 2002 with the submission of a Business Plan. This Business/Concept plan is the first step in the formal process leading to execution of an EnhancedUse project. Subsequent steps necessary prior to ‘‘bidding’’ include plan approval,

conducting a public hearing, and notification to Congress of the Department’s designation of the site for an Enhanced-Use lease. As noted in the response above, prior

to submission of the Business Plan (formal request to continue pursuit of the Enhanced-Use project) there are several studies that must be completed to properly

validate the proposed project and identify any potential concerns. Most of these

studies have been completed with the exception of the Environmental Assessment.

At or near completion of the Environmental Assessment, a formal request to continue pursuit of the Enhanced-Use process will be forwarded to VA Central Office.

Question. If the State does not authorize a new State Veterans Home at Fort

Howard, what impact will it have on the Enhanced Use plan?

Answer. If the State of Maryland does not authorize a new State veterans Home

at Fort Howard, there will be no impact on the enhanced-use plan. If the State does

not build at Fort Howard, the land will be utilized to further enhance the retirement community, as appropriate.

MAJOR CONSTRUCTION

Question. The 2003 budget request includes 4 seismic projects in California totaling $94 million. While each of the 4 projects are on VA’s priority list, the request

skips over projects that are identified by VA as a higher priority—for example,

projects in Cleveland and Anchorage are of higher priority to VA, yet they are not

requested. What is the rationale for this?

Answer. All of the mentioned projects are important to VA, however, when putting together recommendations for the President’s fiscal year 2003 budget request

the concern for the life and safety risk associated with potential seismic related

structural failure of the listed facilities outweighed the Cleveland and Anchorage

projects.

Question. What is the authorization status of each of the projects on the VA’s fiscal year 2003 Priority Major Medical Construction Projects list? For each project

that is authorized, please provide: the date the project was authorized, the legislative citation, and when the authorization expires. Please note each project that is

not authorized. Please also note the CARES status of each project.

Answer. The proposed SCI/Blind Rehabilitation Project for Hines is the only

project on the List of 20, which is currently authorized for expenditure of funding.

This is also the only project associated with a completed CARES study.

Question. What are the VA’s plans for the CARES process?

Answer. The VA’s current plans for Phase II of the CARES process will begin in

Spring 2002. Phase II will call for all of the remaining Networks to develop CARES

plans based on actuarial projections provided, space and facility assessments and

other guidance and criteria provided to them by VACO. Preparations in VACO have

begun to initiate this process. All studies and decisions should be completed within

the next 2 years.
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MINOR CONSTRUCTION

Question. The Committee has not yet received notification of the fiscal year 2002

minor construction projects. Please provide this list to the Committee.

Answer. Attached are VHA minor projects that were approved by a Department

wide workgroup (as required by the Committees) and included in the fiscal year

2002 operating plan. This plan may be revised as needed. VA will forward the operating plan to the Committees as revisions are made.
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82
83
84

Question. In fiscal year 2002, the Committee provided $32 million above the budget request for minor construction projects. Please identify the projects funded as a

result of this increase.

Answer. VHA received $17.2 million of the additional funds. Out of the $17.2 million, $6 million has been allocated to seismic projects and $11.2 million was distributed to the VISNs in support of their greatest minor construction needs. NCA received an additional $2.8 million, VBA an additional $10 million, and Staff Offices

obtained an additional $2 million over the original 2002 request.

Question. What percentage of funding is for minor construction will support improvements to VA medical research facilities?

Answer. Based on the fiscal year 2002 minor construction applications and operating plan, only one project was identified for research. That project totaled $3.7

million and equates to 2.3 percent of the appropriation of $161.5 million.

Question. In fiscal year 2002, the Committee provided $25 million for CARES approved minor construction projects. How will VA allocate this funding?

Answer. VISN 12 received $17.5 million in CARES funding with $1.5 million set

aside to fund design work for additional VISN 12 CARES projects. The remaining

$6 million will be allocated to other approved CARES projects.

HOMELAND SECURITY

Question. VA’s Fourth Mission is to serve as a backup to the DOD healthcare system in times of national emergency. What does VA propose to spend in 2003 to prepare for this mission?

Answer. VA’s Preparedness Review Working Group identified a need to provide

direct interface and exchange of data with the DOD patient evacuation system to

be better prepared to assess hospital capability and capacity, track active duty casualties transferred to VA, and maintain casualty data within VA’s VISTA system

while military active duty patients are receiving treatment within VA’s healthcare

system. The report also recommended providing 1–800 access capability for information and location of military patients.

GERIATRICS

Question. The fiscal year 2002 Senate VA–HUD Report directed VA to report on

the feasibility of extending geriatric fellowships to 2 years, and to make additional

recommendations to make geriatric fellowship more competitive with the private

sector. The Committee appreciates receiving this report.

While the report noted that VA had created a specialized 2 year geriatric fellowship, but did not address the issue of making all geriatric fellowships 2 years. What

is the VA’s response to this specific issue?

Answer. VA supports two programs for physician training in geriatrics. The first

of these is geriatric medicine residency (or fellowship) positions in Accreditation
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Council for Graduate Medical Education (ACGME)-accredited subspecialty residency

training programs. The second program that VA supports is its Post-residency Special Fellowship Program in Advanced Geriatrics. VA established this program when

some VA and non-VA geriatric leaders expressed concerns that 1 year of geriatric

medicine subspecialty residency training was insufficient to educate leaders in geriatrics. They asked VA to continue its residency training and to develop advanced

geriatric medicine training opportunities. VA agreed. Continuing to fund ACGMEaccredited geriatric medicine and geriatric psychiatry residency training positions,

it also established a 2 year VA Special Fellowship Program in Advanced Geriatrics.

VA believes that it is important to support both of these programs to meet the

clinical needs of geriatric patients as well as to develop leaders in geriatrics for academic centers and health systems. The 1 year clinical residency programs accredited

by the ACGME provide the credentials necessary for practice in the specialty of geriatrics. The program length is set by the accrediting agency. The 2 year, VA post

residency Advanced Geriatrics Fellowship Program develops geriatrics leaders for

VA and the Nation.

Question. What is the VA doing to actually implement the recommendations of the

report?

Answer. VA established its Post-residency Special Fellowship Program in Advanced Geriatrics in 2000. This program is for post-residency physicians who have

completed ACGME-accredited subspecialty residency training in geriatric medicine

or geriatric psychiatry and want to lead geriatrics in academic centers and health

systems. Fellows receive 2 years of additional training in geriatric research, advanced education, and advanced clinical care. Fellows spend approximately 75 percent of their time in geriatrics research and education and 25 percent in advanced

clinical care. In 2000, VA competitively selected seven Geriatric Research, Education, and Clinical Center (GRECC) sites to implement the Advanced Geriatrics

Fellowship Program. The West Los Angeles/Sepulveda GRECC was selected as the

hub site to coordinate fellowship activities. The first fellows were selected in 2001,

and the second cadre will begin in 2002. The Hub site has coordinated curriculum

development, recruitment and evaluation at the selected sites. Accomplishments include:

—A coordinated series of recruitment activities has been undertaken.

—A cadre of fellows have been recruited and participated in a nationally coordinated curriculum of geriatrics education.

—A series of two-way interactive videos has been initiated.

—Fellows have been provided with travel and tuition assistance to attend at least

one national geriatrics meeting a year.

—As fellows enter their second year of fellowship training, special attention will

be paid to mentoring in career development and leadership development.

—A plan for evaluation of the program has been developed and is underway

MEDICAL RESEARCH

Question. The budget request is $394 million. What does that buy?

Answer. The 2003 request of $409 million will allow VA to fund 2,780 research

and development projects and 2,907 full-time equivalents. After adjusting for the

CSRS and FEHB accruals of $15 million, the request is $394 million. This request

consists of a program increase of $23 million. This program increase includes $12

million for payroll and inflation adjustments and $11 million for new research initiatives. The new research initiatives include the following:

—Two new Quality Enhancement Research Initiative Centers.

—Chronic disease management for Myocardial Revascularization On and Off

Cardiopulmonary Bypass and Open Versus Endovascular Surgery for Abdominal Aortic Aneurysms.

—New studies focused on ensuring homeless and minority veterans in rural areas

receive equal access to health care and ensuring quality of care outcomes for

primary care for diseases of particular importance in woman.

—Diseases of the brain (e.g., Alzheimer’s and Parkinson’s) to include the following

initiatives:

—New Parkinson’s Disease projects include stem cell and fetal transplantation

research in animal models, advances in neuroimaging technology to monitor

the progression of the disease, the role of neurotransmitters other than

dopamine in Parkinson’s Disease, gene therapy, and mechanisms of damage

to nerve cells.

—Neurorehabilitation researchers continue to capitalize on new findings surrounding the brain and its ability to reorganize following injury-ischemic or

traumatic. Initial success utilizing constraint-induced therapies for restora-
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tion of upper limb functions in hemiplegic patients requires evidence to assure optimal clinical implementation. In addition, premliminary research into

motor therapy for lower limb function and speech-language recovery, although

not as advanced, is showing cause for optimism in the neurorehab community. The coupling of pharmacotherapies with physical therapy remains a

course towards recovery of function that is promising, although not yet fully

understood. An additional adjunctive therapy with promise is functional electrical stimulation (FES), which has only begun to be explored. Although intensive physical therapy shows promise for recovery, it also requires inordinate and expensive clinical resources. Robotic technology is seen as a solution,

not only in response to manpower issues, but to delivering precise and consistent therapy, thereby enhancing improvement. Technology for the upper

limb is under development with VA sponsorship. Similar lower limb technology is not as advanced. Finally, application of neurorehab approaches has

only just begun to be studies for Parkinson’s Disease, ALS, and Alzheimer’s

Disease.

Other important areas that may receive additional funding include aging, micro

technology, stroke, multiple sclerosis, chronic viral diseases, and patient outcomes

in rehabilitative care.

In addition to the $409 million in the Medical and Prosthetic Research appropriation, the Medical and Prosthetic Research program is supported with $401 million

from Medical Care and $656 million from other Federal and private medical research organizations such as the Department of Defense, National Institutes of

Health, and pharmaceutical companies. The $1.5 billion in total funding will allow

VA to maintain research centers in the areas of Gulf War illnesses, diabetes, heart

disease, chronic viral diseases (e.g., HIV/AIDS), Parkinson’s disease, spinal cord injury, prostate cancer, depression, environmental hazards, and women’s issues, as

well as rehabilitation and Health Services Research and Development field programs.

Question. How does VA prioritize research?

Answer. VA currently focuses more than 99 per cent of its Medical and Prosthetic

Research budget on its nine designated research areas: Aging and Age Related

Changes, Acute and Traumatic Injuries, Chronic Diseases, Health Services and Systems, Mental Health, Military Occupational and Environmental Exposures, Sensory

Disorders and Loss, Special (Underserved, High Risk) Populations, Substance

Abuse.

The Office of Research and Development receives input from multiple sources to

prioritize research that will best meet the needs of the veterans population: the National Research Advisory Council, veterans service organization, other VA and VHA

offices.

Question. The budget request supports 3,167 FTE, the same as the 2002 level.

Why is the current estimate significantly lower—2,983 FTE?

Answer. VA submitted a fiscal year 2002 budget request of $360.2 million and

3,167 full-time equivalents (FTE). The fiscal year 2002 current estimate of $371.0

million and 2,983 FTE is the result of fiscal year 2002 Congressional action, which

supports the proposed increase in the fiscal year 2002 pay raise from 3.6 to 4.6 percent. The reduction of 184 FTE reflects the staffing requirement to maintain the

mix of projects estimated for fiscal year 2002.

QUESTIONS SUBMITTED BY SENATOR CHRISTOPHER S. BOND

COLLECTIONS

Question. I believe that VA must improve its collections from veterans’ private

health insurers. GAO recently testified that ‘‘long-standing problems in VA’s revenue operations appear to persist, and when compared to private sector standards,

VA’s collections performance is poor.’’ In fact, VA has over $700 million in outstanding receivables. First, how is VA improving its collection efforts? Second, what

is VA doing to collect its outstanding receivables?

Answer. For the past 41⁄2 years VA has contracted with a private vendor to followup on third parties receivables over 90 days old. This contract has resulted in collections totaling $184 million at a cost of a little more than $4 million. The VHA Revenue Office is in the process of identifying requirements to develop a Request for

Proposals (RFP) to outsource accounts receivable management of third-party accounts. We anticipate that multiple awards would be forthcoming from this effort

and expect a September 2002 award. Several VISNs have outsourcing efforts in

progress and others are in the process of soliciting bids.
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In addition, VHA has identified twenty-four action items to enhance revenue operations. Project Teams are currently implementing action items in the Billing, Coding, Insurance, Utilization Management and Accounts Receivable Management

areas. Question. Some believe that VA should be able to collect more than $1.4 billion

as projected in your budget request. Is this possible? Answer. The projected $1.4 billion includes $260 million for the proposed $1,500 deductible. If the $1,500 deductible is not implemented, the projected collection figure should be revised downward to $1.2 billion.

[Dollars in Millions]

October–February

fiscal year 2002

Fiscal year 2002

projected collections

Fiscal year 2003

projected collections

MCCF .......................................................................................................... 380 805 1,084

HSIF ............................................................................................................ 1 225 364

Extended Care Revolving Fund .................................................................. 0 20 40

Total .............................................................................................. 381 1,050 1,488

CARES—VISN 12 IMPLEMENTATION

Question. Last month, you made an announcement recommending the realignment of facilities in VISN 12. Your recommendation includes the closure of one of

four Chicago medical centers and the construction of a new $40 million spinal cord

and blind rehabilitation center at Hines. Your recommendation also includes other

costs such as the creation of new community-based outpatient clinics. Do you have

a cost estimate of the total amount of funds that VISN 12 will need to implement

your recommendation?

Answer. The costs for each option were identified in the VISN 12 report. The three approved options have costs of: Option B—$71.4 million, Option G—$33.8 million, and Option I—$7.6 million, for a total of $112.8 million. This figure reflects

the order of magnitude costs for easily identifiable major capital needs. It will be

upwardly adjusted as a result of the implementation plan. That plan will include

the full spectrum of capital investment requirements to put into operation the approved options B, G, and I.

Question. One of your press releases stated that VA expected to save an ‘‘estimate $720 million over the next 20 years.’’ Can you explain this cost savings estimate?

How will the appropriations committee see the impact of these savings in future

budget requests? Assuming no additional legislative mandates are enacted, can the

appropriators expect the savings from CARES to translate into lower budget request

needs?

Answer. A substantial portion of the estimated savings will be generated through

the eventual closure or substantial downsizing of the Lakeside VAMC facility. Operating costs for utilities and the buildings and grounds, salaries for in-direct patient

care staffing, and clinical program efficiencies all contribute to the savings. In addition, there is a potential for a revenue income if VA can successfully identify an Enhanced Use Lease partner for the property. Other savings accrue through a comparison of the life cycle costs for each option over the 20 year period calculated. Cost

savings will be re-invested throughout the VISN 12 facilities and CBOCs in order

to increase clinical staffing (reduction of waiting times) and provide otherwise limited or difficult to obtain services to veteran patients. Two new CBOC’s are planned

to be established in order to provide more accessibility to VA health care services

for Veterans.

CARES—NEXT STEPS

Question. With the completion of CARES in VISN 12, I would like to hear about

the next phase of CARES. VA’s original plan was to implement the CARES studies

in three phases. VA’s fiscal year 2003 budget justifications specifies that after completing VISN 12, Phase II would be carried out, covering 8 networks, and then complete CARES for the rest of the Nation. Are your current plans to still carry out

CARES in these Phases? What are your expected timeframes in completing these

Phases?

Answer. VA’s current plans are to complete the CARES planning process in all

of the remaining Networks in Phase II. The current expected timeframes call for

the planning process to be initiated in the Networks in 2002. Networks would develop their proposed plans under guidance from VACO and with actuarial and other
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data. At the end of October, their proposed plans would be sent to VACO. Following

a period of review in VACO, a CARES commission would review the plans, hold

public hearings, take public comment and ultimately provide final recommendations

to the Secretary. The Secretary would then make decisions on those recommendations and announce them sometime in Summer 2003.

Question. I am concerned about VA’s in-house ability to perform the studies. Two

questions: one, do you have the in-house expertise and staffing resources to perform

the CARES studies and two, how will you ensure that the studies are objective? I

am worried that if the VISN directors are in charge of conducting their own studies,

there will be a conflict-of-interest.

Answer. The VA will contract for actuarial studies to project veteran enrollment

for 20 years for each Network and facility. The VA has the in-house capability,

which may in some specific situations or issues that arise, have to be supplemented

by contractors in the other areas required for the CARES plans. Staffing in VACO

has been approved by VA, and recruitment is underway.

The studies will be objective for several reasons. First, the Networks will be given

specific guidance and criteria which they must use in order to complete their plans.

Secondly, the VA CARES Office will be reviewing Network plans to make sure that

the guidance has been followed. Thirdly, VA is planning to use a CARES commission, which will also review all the plans, hold hearings and allow for public comment.

FUNDING FOR CARES

Question. The last area of CARES that I would like to ask you about is funding.

Your budget request only proposes $40 million to fund CARES. This is a $60 million

reduction from the fiscal year 2002 enacted level. I am concerned that when the

CARES studies are completed, there will not be adequate funding available to pay

for the realignment costs. Based on the small funding request for CARES, is it your

expectation that very little if any at all CARES studies will be completed and implemented in fiscal year 2003? If you expect the studies to be completed in fiscal year

2004, can we expect a major budget request for CARES projects? Do we need to examine any changes in the funding process to take care of current and future CARES

project needs?

Answer. Implementation of the VISN 12 CARES study options will be fully underway in fiscal year 2003 and the requested funding is expected to be sufficient to

cover any design or design and construction initiatives expected to be obligated during that fiscal year. The remaining CARES service delivery options are expected to

be developed in fiscal year 2003 so only minimal design dollars for a few of those

selections are expected to be needed. It is expected that fiscal year 2004 and future

budget years will be when the major funding needs for CARES initiatives will result. There are no changes in the funding process for CARES needs known at this

time. As always, ensuring that initiatives are both authorized and adequately funded will require clear and open communications between VA and both authorizing

and appropriations committees.

CONSTRUCTION FUNDING

Question. I am puzzled by the request for $94 million in the major construction

account to fund four new seismic repair projects in California and another $130 million in the minor construction account to fund other projects. VA is proposing to rehabilitate these facilities without any CARES review. Further, in its February 2002

list of priority major medical construction projects, the four California facilities are

ranked 1, 3, 5, and 8. (#2 is for an ambulatory care project in Cleveland and #4

is for general upgrades in Anchorage). To add to my confusion, VA justified the inclusion of these four seismic projects because they were ranked #1, #2, #3, and #7

on its list of 73 identified ‘‘Exceptionally High Risk’’ facilities based upon a government-wide seismic review. Your staff has also indicated that, despite the expected

decrease in patient population, visits, and bed needs at these four facilities, the

main structures proposed to be upgraded will survive a CARES review.

First of all, can you explain why VA continues to propose funding for capital improvements in Major and Minor Construction accounts while we are awaiting the

restructuring plans from the CARES assessments? Why do we even have these separate priority lists instead of having one just based on CARES? Can you explain

to me how these four projects were included in the budget request even though they

do not all rank in the top four of any VA construction list I have seen? Second, what

criteria are you using to make these exceptions to the CARES process? How big is

this ‘‘exceptions to CARES’’ universe? Lastly, how do you plan to reconcile the funding of these exceptions with the planned CARES studies? Will an area such as San
89

Francisco have any incentive to perform a legitimate CARES study if they believe

that their projects will get funded outside the process?

Answer. There are many large veteran population areas that are currently only

served by single VA facilities. VA fully expects to maintain a viable presence in

these areas even though the type of services may change over time as the veteran

population ages and demands changing services. Infrastructure projects, like the

seismic structural projects or projects that upgrade the electrical distribution system

within an aged facility are meant to ensure a continued viable presence for whatever functional need is defined through the CARES process. The CARES process

will assist in defining the types and quantities of services these facilities should be

configured to house. In the case of a campus facility with a large main building and

multiple smaller buildings, the expectation is that as the workload at those facilities

decreases over the next 20 years, that services will be consolidated into the main

facility structures, making many of the ‘‘out buildings’’ unneeded by VA. The ‘‘ incentive’’ for a facility like San Francisco is that they will need future projects other

than the seismic upgrade to reconfigure their internal spaces to efficiently meet the

changing missions they will be assigned through the CARES ‘‘enhanced services’’ realignment.

VA–DOD COST-SHARING

Question. Another area that I believe needs some further exploration is cost-sharing arrangements with the Department of Defense. I am aware that VA and DOD

have made some joint arrangements such as in the pharmaceutical area. GAO reported last year that VA and DOD saved more than $40 million in fiscal year 2000.

I understand that you created your own internal task force to examine VA–DOD

cost-sharing. Further, a Presidential Task Force was created last May by President

Bush to improve coordination of health care delivery activities between VA and

DOD in order to improve benefits and services for veterans. Could you elaborate on

these cost-sharing efforts? What did your own internal task force accomplish? Also,

I would like to hear your views on the Presidential Task Force and how you are

supporting it.

Answer. Section 3(e) of the VA–DOD Health Resources Sharing Act (38 USC

8111) requires that ‘‘any funds received through earnings in VA–DOD sharing

agreements shall be credited to funds that have been allotted to the facility that

provided the care or services.’’ VA has followed this policy since the law was implemented. The law provides an incentive for VA facilities to enter into agreements

with DOD and has benefited veterans by allowing facilities to provide services to

veterans that would not otherwise have been available.

While the primary focus of the law is to allow facilities to expand services for its

beneficiaries, cost savings (cost avoidance) to the budget do occur, especially in the

purchase of services. By spending less on goods and services facilities have more

money available. VA purchased $22.6 million from DOD in sharing agreements in

fiscal year 2001 and estimates purchases of $22.9 million in fiscal year 2002 and

$23.2 million in fiscal year 2002 and fiscal year 2003. VA provided reimbursement

for VA/DOD sharing services of $38.6 million in fiscal year 2001 and estimates reimbursement of $39.6 million in fiscal year 2002 and $41.3 in fiscal year 2003. However, VA purchases in facility-to-facility sharing are difficult to quantify and are

quite small. For fiscal year 2001, VA purchased $20.4 million from DOD in local

sharing agreements (about .09 percent of VA’s fiscal year 2001 budget).

VA–DOD cost savings can be documented through joint procurement efforts, primarily in pharmaceuticals. As of the end of February 2002, there were 54 joint VA/

DOD joint contracts for pharmaceuticals; 37 additional joint contracts are pending

award. Sixteen joint contracts were not awarded due to the lack of cost savings to

the government through their award. The total estimated cost savings in fiscal year

2001 for both Departments from these contracts were $98 million ($80 million for

VA and $18 million for DOD.

The VA/DOD Executive Council, co-chaired by the VA Under Secretary for Health

and the Assistant Secretary of Defense for Health Affairs, serves as an umbrella organization for coordinating policy decisions between the two departments. Last year

the Executive Council established a new Financial Management Work Group to review and make recommendations to reduce financial and billing practice barriers to

interagency coordination. The Work Group meets regularly and has conducted a detailed review of reimbursement policies and practices between the VA and DOD.

The Financial Management Work Group has identified those VA and DOD policies

and practices requiring clarification or modification to remove reimbursement barriers and disincentives and developed recommendations for streamlined financial

processes and practices.
90

One of the identified barriers to increased Departmental collaboration, execution

of agreements and contracts has been the negotiation process, more specifically pricing issues. During the 1990’s, flexibility was given to VA and DOD personnel to establish locally developed rates for medical sharing agreements. This resulted in the

proliferation of rate setting mechanisms, as well as many independent rate structures for these agreements. To streamline practices between the two Departments

the Financial Management Work Group is exploring development of a single payment schedule for exchange of services between the two departments. The discussions center on developing a national pricing methodology that would be regionally

adjusted. The Work Group recently reported its progress to the VA/DOD Executive

Council and the Joint Executive Councils meeting hosted by the VA Deputy Secretary and the DOD Under Secretary for Personnel and Readiness. A final recommendation on the policy and proposed methodology is anticipated in late 2002.

As you know, President Bush established the President’s Task Force to Improve

Health Care Delivery for Our Nation’s Veterans (PTF) by Executive Order 13214

on May 28, 2001. The PTF is comprised of 15 commissioners led by two co-chairs.

Support includes a professional staff headed by an Executive Director and the PTF

has established seven work groups to review specific areas of interest. VA provides

staff, administrative and budgetary support to the PTF, as well as requested briefings and information. Both VA and DOD have provided detailees as subject matter

expert staff to the PTF.

The PTF conducts monthly open meetings attended by the Task Force members

and the public. VA and DOD have appeared before the PTF and have presented

overview briefings on the VA and DOD health care delivery systems benefits packages and the DOD TRICARE program. The VA/DOD Executive Council Work Group

Co-Chairs have provided the PTF staff with joint briefings on work group activities

as requested. PTF members and/or staff have toured VA/DOD joint venture facilities

in Alaska, Nevada, New Mexico, and Florida and plan multiple site visits around

the country in the coming months.

HOMELESSNESS

Question. I do not understand why there exists a significant population of homeless veterans on our streets. To address homelessness, I have been working with a

number of my Senate colleagues, such as Senator Specter on the VA committee, to

develop a more holistic Federal approach to prevent and end homelessness. One of

the group’s recommendations that was recently enacted was the reactivation and

funding of the Interagency Council on the Homeless. I am please that Secretaries

Martinez and Thompson are participating in this council but it is important that

other agencies, including VA play a active role. Can you tell me how VA plans to

participate in this Council? HUD Secretary Martinez is the current chair but the

position rotates annually. Is this something that you would be interested in

chairing?

Answer. On December 21, 2002 President Bush signed the Comprehensive Homeless Assistance Act of 2001 into law (Public Law 107–95). Among the provisions this

law calls upon VA, Housing and Urban Development (HUD) and the Department

of Labor (DoL) to take cooperative actions to more fully address the problems of

homelessness among veterans.

Section 11 mandates that the Interagency Council on Homeless (ICH) ..’’shall

meet at the call of its Chairperson or a majority of members, but not less often than

annually.’’ The ICH held its first meeting and HUD Secretary Mel Martinez was

elected Chair, Health and Human Services (HHS) Secretary Tommy Thompson was

elected Vice Chair and Mr. Phillip Mangano was selected as ICH Executive Director.

I look forward to working on the ICH and plan to both actively participate and will

take a leadership role with its work.

I would like to inform you that on April 9–11, 2002 VA–HHS and HUD co-sponsored a policy academy for State-level planning teams to improve coordination within State planning efforts to end chronic homelessness. This type of effort is exactly

the kind of joint Federal and State coordination that will make meaningful progress

toward ending chronic homelessness in America. VA will continue to support these

types of activities that will improve coordination of service delivery.

Public Law 107–95 also creates a fifteen member homeless advisory committee to

provide recommendations to the Secretary of Veterans Affairs. I have appointed the

committee members and we expect that committee to hold its first meeting in June,

2002. In addition, ex-officio members from the Departments of Defense, Labor,

Housing and Urban Development, and Health and Human Services will actively

participate. I am extremely pleased that these efforts, along with the tens of thou-
91

sands that receive medical care and benefits from my Department is making a real

difference in the lives of veterans and their family members.

VETERANS EQUITABLE RESOURCE ALLOCATION (‘‘VERA’’)

Question. GAO recently reported that VA can make several improvements to its

funding allocation to its networks. Although you concurred with GAO’s findings and

recommendations, it was unclear when you would make some of these improvements. Can you give me a sense of what changes to VERA you are considering and

when they might go into effect? I would especially like to hear if you plan to include

Priority 7s in the formula and how you plan to address GAO’s concerns about the

use of the National Reserve Fund to supplement networks’ funding allocation.

Answer. The VERA Patient Classification Workgroup is currently reviewing the

following potential VERA refinements for fiscal year 2003 implementation and beyond:

—Inclusion of Priority 7c veterans in the Basic Vested Care component of VERA,

—Use of multiple pricing groups, expanding from 3 to 10 price groups,

—Use most recent 1 year workload versus 3 years for Basic Care and 5 years for

Complex Care,

—Update the fiscal year 1995 allocation split between Basic and Complex Care

Price Groups to reflect changes in the distribution of actual costs between the

two groups,

—Use of reinsurance threshold for high cost patients, and

—Use of Diagnostic Cost Groups with reinsurance threshold and Complex Care

flags.

The workgroup is expected to evaluate the above issues and complete its recommendations for refinements to the fiscal year 2003 VERA methodology for review

by the VHA Policy Board by July 2002.

Each year since fiscal year 1999, a supplemental funding process has adjusted

VERA allocations. The need for adjustments to the VERA model does not necessarily mean that the model is flawed or that a particular VISN is inefficient or

mismanaged. This does not mean that incentives to improve do not exist, however;

a VISN could be very effectively managed but still require a VERA adjustment because of one or more factors. The reasons for the supplemental funding adjustments

vary by network. However, some of the factors involved include: Amount of VHA

budget relative to its workload; policy changes in the VERA model, workload

changes in the VERA model, and variation in actual budget year execution from

planning estimates for: (1) other revenue from 1st and 3rd party health insurance

collections, (2) other anticipated reimbursements, (3) projected workload changes

and estimated expenditure, and fixed infrastructure costs that cannot be changed

in the short-term.

Additionally, during the course of the fiscal year, VHA reviews the status of each

network in terms of its projected workload and revenues; including VERA, 1st and

3rd party collections, and reimbursements; relative to actual and projected workload

and expenses.

Over the course of this year, and the next 5 years, the refinements to VERA

should respond to various stakeholder concerns; be more consistent with enrollment

policy; improve an existing system that is widely understood and independently validated; and continue to tie resources to clinical performance (i.e., patient workload).

VHA is committed to ensuring that efficiently managed networks are not disadvantaged as a result of anticipated VERA changes and those that are not as efficiently

managed will improve over time.

CLAIMS PROCESSING

Question. Over the past 2 years, VA has hired hundreds of new staff to improve

the processing of claims benefits. But, despite the new staff, VA still projects the

average number of days to process claims to increase from 181 days in 2001 to 208

days in 2002. Can you explain why your projection is expected to increase?

Answer. The primary reason for the increase in the average number of days to

process claims is a significant increase in the volume of incoming work. The increased volume is attributed to the following factors:

—The review of more than 98,000 previously-denied cases, as well as 230,000

claims in our pending inventory to ensure compliance with the Veterans Claims

Assistance Act (VCAA).

—VA’s expanded outreach efforts to separating service members (Benefits Delivery at Discharge initiative).

—Receipt of 66,000 Type 2 diabetes claims based on exposure to Agent Orange.
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—The requirement to review 13,000 previously-adjudicated diabetes claims under

the Nehmer stipulation. (In the case of Nehmer v. VA, plaintiffs’ attorneys and

VA agreed, in a 1991 Stipulation and Order, on a process for applying an earlier

than usual effective date for certain claims for benefits based on Agent Orange

exposure. As a result of court decisions in the Nehmer case, VA is required to

re-adjudicate over 13,000 diabetes claims.)

All of the VCAA claims have now been added to the inventory. Following the initial surge of Type 2 Diabetes claims, the incoming volume of Diabetes claims is expected to taper off. We have also completed a significant portion of the Nehmer reviews.

At the same time, the aggressive steps we have taken to increase rating production have had a positive result. In the latter months of fiscal year 2001 and into

this year, production of rating decisions significantly increased—which is the key to

reducing the claims backlog and improving the timeliness of our decisions. From October 2001 through February 2002, VBA decided over 294,000 cases for a 5-month

average of 58,800. This represents a 47 percent increase over fiscal year 2001 production levels. We expect our production to continue to increase as many of our recently hired employees gain additional experience and we begin to implement the

recommendations of the Claims Processing Task Force.

We believe our increased production levels and the Task Force initiatives will now

enable us to make major inroads into the pending inventory. Our goal is to reduce

the pending rating inventory to 315,000 claims by the end of this year. Even though

we project major reductions in our pending inventory, the average days to complete

will continue to increase as we focus on completing the oldest claims in our inventory.

Question. Do you believe that VBA has enough staff or do you anticipate more

hiring in the next few years?

Answer. VBA secured funding during fiscal year 2001 to support the hiring and

training of more than 1,000 new employees. The addition of this many employees

in such a short period of time was critical to the Administration’s ability to manage

the increased workloads resulting from the Veterans Claims Assistance Act and the

addition of Type 2 diabetes to the list of Agent Orange presumptive conditions. A

hiring initiative of this magnitude strains VBA’s training infrastructure and places

a burden on its core of senior-level field employees.

VBA must now continue to focus on maximizing the impact of this hiring and ensure employee retention. As these recent hires are assimilated into the organization

and gain experience, we fully expect these employees to make a significant contribution toward achievement of our claims processing goals. Essentially, this is a period

of stabilization as VBA assesses the recent hiring and training of the new employees

and implements the Task Force recommendations. Once we achieve a more stable

situation, we will be able to make a reasoned assessment of our future staffing

needs.

However, we do know that our hiring and training will continue based on the

large numbers of decision-makers eligible to retire over the next few years. Therefore, although our fiscal year 2002 and fiscal year 2003 budgets maintain relatively

stable staffing levels, our plans call for significant hiring to replace losses due to

retirement and other factors. Even with our aggressive hiring over the past 2 years,

26 percent of VBA’s current workforce (nearly 3,350 employees) are now eligible or

will be eligible to retire in the next 3 years. Based on experience, we know that at

least 25 percent of those eligible to retire will do so, and that a certain percentage

of non-eligible personnel will leave the Department as well. These figures demonstrate how critical our succession planning efforts remain.

PHYSICIANS PAY AND MEDICAL SCHOOL AFFILIATIONS

Question. With changes being considered for physicians pay in order to recruit

and retain these professionals to meet the health care needs of veterans, how does

the dual compensation of many of these physicians by the VA and the universities

affect the achievement of VA’s health care mission? As you prepare a legislative proposal for physicians pay, are there any changes you are considering that might affect this relationship?

Answer. The working relationship between the Department and our university affiliates is a close one, resulting in numerous benefits to VA and its veterans, as well

as the universities. Among the advantages that VA derives are the exposure to and

the availability of the latest developments and innovations in health care treatments, technology, medical research, and procedures. The compensation that physicians receive for their work as faculty appointments is fair compensation for their

duties in resident education and supervision, and assists VA in offering competitive
93

salaries, as well as a recruitment tool to attract those professionals with an interest

in academic medicine and teaching.

At the same time, VA is aware of the potential for divided loyalties, or at least

the perception that VA’s interests are not paramount. The affiliation relationship is

indeed a matter for review and consideration in developing a legislative proposal.

If physicians are not able to receive compensation from the universities, VA must

be able to offer significantly higher salaries in order to recruit and retain high quality clinicians, teachers, and leaders in many locations.

HOMELAND SECURITY

Question. What preparedness initiatives are underway and how much do you expect VA to spend in fiscal year 2002 and 2003 for these initiatives? Do you expect

to receive any funds from HHS or FEMA? How much money do you need to address

adequately VA’s homeland security needs?

Answer. Based on recommendations contained in the Preparedness Review Working Group report, the Department is pursuing the following critical initiatives:

—Pharmaceutical and medical supply caches

—Personal Protective Equipment and training for VA medical centers

—Education, training and exercises for staff to respond to WMD attack

—Upgrade and train VA security forces

—Establish a centralized Incident Reporting Center

—Upgrade and test back up systems of Veterans Benefits Administration’s three

technical centers and upgrade communications

—Establish mirror ITSS server farm to maintain mission readiness

—Establish an Office of Operations, Security and Preparedness to coordinate Departmental emergency preparedness programs

—Plan to replicate VBA IT infrastructure

—Upgrade VA primary continuity of operations site

—Develop web-based tracking system and establish 1–800 number for information

on location of military patients

—Develop web site or toll free number for referral of severely disabled service

members to Vocational Rehab & Employment Services

VA will be spending $54.54 million in fiscal year 2002. We have projected funding

requirements of $92 million for fiscal year 2003. VA’s fiscal year 2003 Budget Request includes $55 million for Emergency Preparedness in Medical Care. VA has

been meeting with officials at HHS and will meet with FEMA officials to brief them

on VA emergency preparedness capabilities.

INTELLECTUAL PROPERTY RIGHTS

Question. What is the status of the agreements being reached with medical

schools? How many are there? Are they in compliance with the law (Bayh-Dole Act)?

Will these be put into place with all schools?

Answer. VA continues to seek Cooperative Technology Administration Agreements

(CTAA) with its affiliated universities. These agreements permit co-ownership between VA and its affiliates for inventions resulting from research that used VA assets (appropriated dollars, including grants to investigators; salaries; and laboratory

facilities). VA has established CTAAs with 36 universities since it began this initiative less than 2 years ago. These agreements are consistent with the requirements

of the Bayh-Dole Act. Inventions developed through NIH and VA funded research

can be assigned jointly to VA and the affiliated university.

VA would prefer to establish CTAAs with all affiliated universities because these

agreements facilitate local cooperation, strengthen long-term affiliations, and recognize fairly the VA’s role in research and innovation. However, these agreements on

intellectual property are not a required component of the local VA and individual

university affiliations. The Administration is considering legislation that would codify CTTAs between VA and its affiliate universities.

QUESTIONS SUBMITTED BY SENATOR TOM HARKIN

Question. Mr. Secretary, in the past year all the veterans hospitals and clinics in

Iowa have either stopped taking new patients or had delays of several months in

scheduling new appointments. Can you tell me the current wait for appointments

for new (non-emergent) patients at each of Iowa’s facilities, the current plans for improving the situation, and how long you anticipate waits will be when those plans

are implemented?
94

Answer. To date, the Iowa City VAMC has allocated resources to activate plans

developed to meet the unprecedented veteran care demand. Additional exam room

space has been created, providers have been hired, and other numerous actions are

currently taking place to enable the Iowa City VAMC and its associated CBOCs to

see the veterans on the waiting list as soon as possible. Existing providers have

been able to absorb additional patients into their current panels. A New Patient

Clinic at the Iowa City VAMC started seeing patients on January 28, 2002, where

two providers continue to see 16 new patients per day. Three new providers have

been hired, and recruitment is currently ongoing for a fourth provider for Iowa City

and/or the CBOCs. Contracting options are also being considered at some of the

smaller CBOCs. We expect all veterans on the waiting list to have an initial appointment by the end of September 2002.

The VA Central Iowa Health Care System Primary Care Service Line continues

to clinically review new enrollees for emergent and non-emergent care at the Des

Moines, Iowa division. Every effort is made to accommodate the veteran’s choice for

the primary site of care, i.e., a community based outpatient clinic (CBOC) or the

VA medical facility in Des Moines or Knoxville, Iowa. The average wait time for

non-emergent care at the Des Moines VAMC is 73 days; the Knoxville VAMC is 64

days; the Mason City CBOC is 67 days; and the Fort Dodge CBOC is 56 days. Primary care staff continues to manage unprecedented growth within appropriated

funding by evaluating systematic approaches to reduce wait times using advanced

clinic access’ concepts to help predict and respond to daily demand for care and by

maintaining adequate staffing levels through recruitment of employees as vacancies

occur and the use of Locum Tenens staff when employee recruitment is not successful.

Question. Can you also compare the waits for appointments for new non-emergent

patients in each of the VISN’s?

Answer. The following information on new patients is provided for each VISN as

of February 2002.

VISN AUDIOLOGY CARDIOLOGY

COMBINED

PRIM/CARE EYE CARE ORTHOPEDICS UROLOGY

1 ......................................................................... 55.2 27.3 53.8 64.1 38.3 34

2 ......................................................................... 39.2 30 39.3 48.4 25 39.7

3 ......................................................................... 47.5 52.6 57.3 66.4 24.4 36.6

4 ......................................................................... 49.5 33.7 55.9 101.7 52 42.8

5 ......................................................................... 26.8 27.7 39 43.1 27.6 27.6

6 ......................................................................... 30.2 34.4 60.6 95.7 48 51.5

7 ......................................................................... 34.2 33.3 65.9 61.8 30.9 36.2

8 ......................................................................... 109.4 37.4 67.9 73.8 34.7 47.1

9 ......................................................................... 56.8 30.7 81.7 78.8 39.8 49

10 ....................................................................... 38.4 32.6 49.1 79.5 41.2 74

11 ....................................................................... 43.5 36.4 64.2 72.2 38.1 37

12 ....................................................................... 59.6 39.8 55 103.7 31.9 55.3

15 ....................................................................... 57.2 30.6 63.3 91.4 50.5 40.5

16 ....................................................................... 44 33.1 53.3 70.4 28.5 41

17 ....................................................................... 19 38.4 52.8 64.5 58.3 54.4

18 ....................................................................... 28.5 41.3 69.6 89.7 50.5 43.5

19 ....................................................................... 47 36.1 61.1 57.1 54.2 40.8

20 ....................................................................... 34.8 21.4 35 51.7 28.9 55.5

21 ....................................................................... 37.2 32.4 55.4 66.4 61.7 40.1

22 ....................................................................... 64.2 47.3 43.9 64.1 19.4 60.3

23 ....................................................................... 37.6 35 76.8 161.1 45.4 41

Nat’l .................................................................... 53.4 35.7 58.7 77 38.6 45.5

Question. A recent GAO report found that the VERA model is unfairly hurting

several VISN’s and examined the effects of including Priority 7 patients, using more

patient categories, and using more recent data to determine the distribution. A

RAND study looked at other issues in the VERA model. Can you tell me what

changes, if any, you plan to make to the VERA model in distributing fiscal year

2003 funds? Please also give me any analysis the VA has done on how changes to

the VERA model would affect the distribution of health care funds.

Answer. The VERA Patient Classification Workgroup is currently reviewing the

following potential changes to VERA for fiscal year 2003 that will address the issues

raised in the recently completed (February 2002) GAO evaluation of VERA. The

workgroup is expected to finalize its recommendations for refinements to the VHA

Policy Board by July 2002.
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—Inclusion of Priority 7c veterans in the Basic Vested Care component of VERA

—Use of multiple VERA pricing groups, i.e., increase from three to 10 pricing

groups

—Update the fiscal year 1995 allocation split between Basic and Complex Care

Price Groups to reflect changes in the distribution of actual costs between the

two groups

—Change the basis for estimating VERA Basic and Complex Care workload to a

1 year actual compared to the current 3 year for Basic and 5 year forecast for

Complex

—Use of a re-insurance threshold in the VERA methodology for high cost patients

—Use of Diagnostic Cost Groups (DCGs) with a reinsurance threshold and Complex Care flags

In addition, the RAND Corporation’s VERA study is in its second phase and is

to be completed by September 2002. The Phase II VERA study is addressing a quantitative analysis of the VERA issues identified in its Phase I study to include: improved case-mix adjustment; geographic differences in prices paid for non-labor inputs and contract labor costs; the impact of teaching and research; and, the impact

of the facilities’ physical plants.

Various VERA simulations for fiscal year 2003 are being estimated based on potential refinements. Definitive fiscal year 2003 VERA distributions will depend on

the Medical Care appropriation passed by Congress and the VERA refinements approved by the VHA Policy Board.

Question. I often hear reports that while the veterans’ health facilities in Iowa

and nearby States have severe shortfalls of funds, other areas have (and are keeping) large surpluses. Can you tell me what the shortfall or surplus was for each

VISN in fiscal year 2001 and what is anticipated in fiscal year 2002?

Answer. To determine whether a network has a shortfall or surplus, if any, VHA

reviews each network’s financial status in terms of projected revenues including

VERA, 1st and 3rd party collections and reimbursements, relative to actual and projected workload and expenses. This analysis is what drives the VERA adjustment

process. In fiscal year 2002, as a result of this process, the five networks received

a VERA adjustment (supplemental): VISNs #1, #3, #12, #13 and #14 (VISN# 13 and

VISN #14 are now VISN #23).

The ‘‘Summary of the VERA Adjustments, fiscal year 1999-fiscal year 2002’’ table

indicates Iowa’s network (previously VISN #14; now VISN #23) received supplemental funding in each of the past 3 fiscal years.

SUMMARY OF THE VERA ADJUSTMENTS, FISCAL YEAR 1999-FISCAL YEAR 2002

[Dollars in millions]

VISN Name

Fiscal year

1999 2000 2001 2002

8 Bay Pines, FL ................................................................................................... $4.0 ............ ............ ............

9 Nashville, TN .................................................................................................... 5.0 ............ ............ ............

3 Bronx, NY ......................................................................................................... ............ $66.2 $73.8 $128.5

13 Minneapolis, MN .............................................................................................. ............ 14.7 44.7 43.9

14 Lincoln, NE ....................................................................................................... ............ 9.8 48.3 32.9

1 Boston, MA ....................................................................................................... ............ ............ 53.2 41.3

12 Chicago, IL ....................................................................................................... ............ ............ ............ 20.8

Total ................................................................................................... 9.0 90.7 220.0 267.4

Percent of Total System-Wide Allocation ........................................................ 0.1 0.5 1.2 1.5

The VERA methodology is workload driven and networks receive funding allocations commensurate with three workload components, i.e., Basic Vested Care, Basic

Non-Vested Care, and Complex Care. A Network’s total revenues include VERA distributions derived from the Medical Care appropriation, 1st and 3rd party health

insurance collections, and other anticipated reimbursements. A network can retain

all collections and reimbursements, and has the incentive to increase non-appropriated revenues each year. As shown in the fiscal year 1996-fiscal year 2002 VERA

Allocations with Adjustments and Estimated Receipts’’ table, VISNs #13 and #14,

now VISN #23, are rated at about the national average increase for the period fiscal

year 1996-fiscal year 2002. The national average increase of VERA allocations with
96

adjustments and estimated receipts for fiscal year 1996-fiscal year 2002 is 32.89 percent; VISN 13 had a 32.78 percent increase and VISN 14 had a 29.52 percent increase.
97

TABLE 20: FISCAL YEAR 1996—FISCAL YEAR 2002 VERA ALLOCATIONS WITH AdJUSTMENTS AND ESTIMATED RECEIPTS

[Dollars in millions]

VISN Network

Fiscal

year

1996 Allocations

And Receipts

Fiscal

year

1997

VERA

and Receipts

Fiscal

year

1998

VERA

and Receipts

Fiscal

year

1999

VERA

and Receipts

Fiscal

year

2000

VERA

and Receipts

Fiscal

year

2001

VERA

and Receipts

Fiscal

year

2002

VERA

and Receipts

Percent Changes

Fiscal

year

1996–

1997

Fiscal

year

1997–

1998

Fiscal

year

1998–

1999

Fiscal

year

1999–

2000

Fiscal

year

2000–

2001

Fiscal

year

2001–

2002

Fiscal

year

1996–

2002

1 Boston ................................................................................... $856 $848 $854 $821 $853 $936 $965 ¥1.02 0.78 ¥3.89 3.91 9.72 3.09 12.682 Albany ................................................................................... 438 435 441 431 478 516 527 ¥0.68 1.32 ¥2.12 10.81 7.94 2.18 20.383 Bronx ..................................................................................... 1,024 1,019 1,021 994 1,010 1,038 1,094 ¥0.48 0.16 ¥2.61 1.57 2.84 5.38 6.874 Pittsburgh ............................................................................. 776 781 819 828 901 988 1,004 0.53 4.85 1.21 8.72 9.71 1.61 29.315 Baltimore ............................................................................... 426 444 484 489 527 575 590 4.21 9.00 1.15 7.74 9.17 2.48 38.486 Durham ................................................................................. 687 713 749 754 828 893 924 3.68 5.12 0.67 9.77 7.88 3.50 34.497 Atlanta .................................................................................. 781 819 896 922 983 1,057 1,113 4.54 9.83 2.88 6.62 7.49 5.27 42.528 Bay Pines .............................................................................. 962 1,021 1,113 1,161 1,339 1,427 1,535 6.06 9.03 4.34 15.34 6.56 7.59 59.549 Nashville ............................................................................... 691 703 741 746 811 857 897 1.76 5.37 0.69 8.74 5.58 4.76 29.86

10 Cincinnati .............................................................................. 513 533 558 574 639 682 717 3.86 4.78 2.95 11.32 6.66 5.14 39.8711 Ann Arbor .............................................................................. 656 659 665 687 726 794 805 0.39 0.97 3.36 5.58 9.38 1.43 22.7212 Chicago ................................................................................. 839 832 840 820 868 928 948 ¥0.78 0.91 ¥2.38 5.87 6.95 2.13 13.0213 Minneapolis ........................................................................... 420 428 443 455 474 536 557 1.96 3.43 2.69 4.17 13.28 3.91 32.7814 Lincoln ................................................................................... 293 290 294 301 324 374 380 ¥1.18 1.35 2.59 7.64 15.50 1.39 29.5215 Kansas City ........................................................................... 587 618 645 635 669 717 760 5.25 4.41 ¥1.56 5.36 7.23 6.00 29.5416 Jackson .................................................................................. 1,077 1,139 1,245 1,283 1,434 1,497 1,555 5.76 9.30 3.08 11.73 4.39 3.90 44.4017 Dallas .................................................................................... 592 630 688 687 774 831 883 6.32 9.17 ¥0.13 12.72 7.39 6.21 49.0418 Phoenix .................................................................................. 495 528 579 597 715 752 766 6.58 9.67 3.16 19.64 5.25 1.84 54.6219 Denver ................................................................................... 368 386 412 407 449 488 512 4.82 6.79 ¥1.27 10.28 8.70 4.95 39.0520 Portland ................................................................................. 589 626 681 704 789 834 870 6.38 8.64 3.51 11.95 5.73 4.36 47.7721 San Francisco ....................................................................... 690 724 755 773 850 929 977 4.93 4.29 2.29 10.00 9.35 5.13 41.5422 Long Beach ........................................................................... 903 921 966 957 1,000 1,076 1,106 2.00 4.88 ¥0.95 4.51 7.60 2.84 22.54

VHA Totals ............................................................... 14,664 15,092 15,886 16,028 17,439 18,726 19,487 2.92 5.27 0.89 8.81 7.38 4.06 32.89

Note: The fiscal year 1998 MCCF totals include fiscal year 1997 4th quarter collections. The fiscal year 2002 MCCF and Reimbursement figures represent projected collections. The numbers may not add due to rounding. Fiscal year 1999

includes VERA plus 20 million earmarked by the Congressional Appropriations Conference Committee for Network 3. Fiscal year 1999 includes VERA plus adjustments for newly decentralized programs for networks which exceed the 5 percentlimitation. Fiscal year 1998, fiscal year 1999, fiscal year 2000 and fiscal year 2001 include supplemental funding adjustments. Fiscal year 2000 figures have been adjusted to reflect the centralized funding of Prosthetics for fiscal year 2001.Fiscal year 2002 includes the VERA adjustments for 5 networks. Fiscal year 2001 figures have also been adjusted to reflect the rescission (43 million).
98

Question. According to press reports last year, the VA health care system was short $400 million for fiscal year 2002. President Bush reportedly promised to make

up some of that shortfall, but has not sent us a request for additional funds or reprogramming of funds. Can you tell me how large is the current estimated shortfall,

whether you will be requesting additional funds for fiscal year 2002, how those

funds will be distributed, and how else you will make up the shortfall?

Answer. Based on the continuation of full enrollment, VHA determined there

would be a shortage of over $400 million in fiscal year 2002, after available resources were subtracted from projected expenditures. By taking additional management actions that will lessen expenditures, it is estimated that the shortage will be

reduced to $142 million, which is the amount related to the decision to continue enrolling new Priority 7 veterans. To make up the difference between any shortfall

and the anticipated supplemental, VHA anticipates savings from a multi-year effort

to improve standardization and compliance in the procurement of equipment, pharmacy, and medical supplies. Other savings are expected from program efficiencies

related to new criteria to assess community-based outpatient clinics and centrally

managed programs.

VA made a request to the Administration for supplemental funding of $142 million that was forwarded to Congress in on March 21, 2002. VA can provide health

care to an estimated 143,039 Priority 7 new enrollees during fiscal year 2002 with

$142 million in supplemental funding. This will ensure VA has health care funding

consistent with the President’s decision to keep VA veterans’ enrollment open for

all veteran health care. The $142 million will be distributed based on each VISN’s

updated Priority 7 Basic Vested workload.

Question. Many of our veterans seek care at VA hospitals because of the excellent

pharmacy benefits, sometimes even if they have another primary care physician. As

you know, our elderly on Medicare do not have coverage for prescription drugs.

Would it relieve some of the burden on the VA if Congress passed a real prescription

drug benefit in Medicare?

Answer. Providing a prescription drug benefit for Medicare beneficiaries would

certainly have some impact on the VA, however exact impact is currently unknown.

Veterans come to the VA for a number of reasons besides the fact that VA provides

services that aren’t covered by Medicare. VA health care integrates a full continuum

of care for veterans of all ages, including mental health services and prescription

drugs. VA also emphasizes preventive care and leads the nation in many measures

of performance in this regard. VA also provides many services that are tailored to

meet the needs of service-disabled veterans. So, in addition to the economic factors,

we believe many patients come to VA because of the quality of care that we provide.

QUESTIONS SUBMITTED BY SENATOR TED STEVENS

Question. First, to qualify for the veterans home purchase rate reduction, a veteran must have left active duty military service prior to 1977. This provision cuts

off many younger veterans who served in the Vietnam and Persian Gulf Wars and

other conflicts such as Granada and Panama. In addition, I am told the provision

will lapse in 2007 so that many veterans will no longer be eligible for the program

after 2007 unless they have been out of the service for more than 30 years. This

30-year limitation needs to be removed so that the five States currently participating in the program can serve more veterans and to end this discrimination

against younger veterans. Can we get your support in trying to rectify this discriminatory treatment for younger veterans who need the one percent rate reduction allowed under the program to be able to afford homes?

Answer. We are aware that the basic criteria for Alaska Housing Finance Corporation (AHFC) Veterans Mortgage Program (VMP) are that the veteran must

have entered the service prior to 1977 and cannot have been discharged for more

than 30 years. AHFC requires that when veterans apply to them for a loan, they

submit a VA issued Certificate of Eligibility along with their DD214 so that it can

be determined when they went into the military and what date they were discharged.

However, this program is administered by AHFC, not VA. Therefore, we have no

authority over the provisions of the program.

Question. My next question deals more directly with Alaska. Alaska will soon

reach the maximum amount it can bond for under the veterans rate reduction program based on both State and Federal law. We need the Federal cap lifted so that

we can serve more veterans in our State. Alaska State officials tell me that the

issue of the State’s internal bonding limit will go before the voters of Alaska this

fall as a bond vote to increase the State authorization level. However, we also need
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the overall Federal cap lifted. Alaska has the most veterans per capita of any State

and we are competing with huge States like California and Texas for these limited

dollars. Can we expect your support in trying to raise the amounts that can be

bonded for under this program?

Answer. VA has no knowledge of or authority with respect to a Federal cap that

may exist on bond issues.

QUESTIONS SUBMITTED BY SENATOR TIM JOHNSON

Question. There is growing concern in South Dakota about budget shortfalls in the

VA for fiscal year 2002. While there have been attempts to address the budget

shortfall through management efficiencies, it appears very unlikely these steps will

be enough to address the budget deficit. With this in mind, will there be an Administration request for a VA health care supplemental for fiscal year 2002? If so, how

much will the Administration request? Will this request cover the entire budget

shortfall in States like South Dakota?

Answer. When the President made the decision to continue open enrollment, it

was understood that adequate funds would be made available to support his decision. Therefore, VA made a request to the Administration for supplemental funding

of $142 million, which was forwarded to Congress in on March 21, 2002. VA can

provide health care to an estimated 143,039 Priority 7 new enrollees during fiscal

year 2002 with $142 million in supplemental funding. This will ensure VA has

health care funding consistent with the President’s decision to keep VA veterans’

enrollment open for all veteran health care. If received, the $142 million will be distributed based on each VISNs updated Priority 7c Basic Vested workload.

To make up the difference between any shortfall and the anticipated supplemental, VHA anticipates savings from a multi-year effort to improve standardization and compliance in the procurement of equipment, pharmacy, and medical supplies. Other savings are expected from program efficiencies related to new criteria

to assess community-based outpatient clinics and centrally managed programs. In

addition, on February 25, 2001, the Acting Under Secretary for Health approved the

transfer of $162 million of centrally managed program funds for distribution to all

VISNs. Of this amount, VISN #23 received $7.2 million (of which old VISN #13 received $4.4 million and old VISN #14 received $2.8 million in additional funds).

Question. I am very concerned that efforts to address the budget shortfall within

VISN 23 is starting to have a negative impact on patient care. For example, there

are ongoing discussions regarding the surgical unit at the Hot Springs VA Medical

Center. The Hot Springs surgical unit has had difficulty recruiting and retaining

professional staff. One of the proposals under consideration is to close the Hot

Springs surgical unit to all but minor, outpatient procedures and move the remaining surgeries to Ft. Meade VA Medical Center. Can you update me on the current

situation with the Hot Springs VAMC surgical unit and can you offer solutions as

to how we can keep the surgical unit fully operational?

Answer. The surgical unit at the VA Black Hills Health Care System (BHHCS),

Hot Springs division, is currently short two nurses; one operating room nurse and

one nurse manager. The VA BHHCS has developed a very aggressive and creative

plan to fill these positions. In addition to the typical markets where the VA Medical

Center in Hot Springs normally recruits nurses, the facility has expanded its search

for nurses to wide ranging markets such as Sioux Falls, South Dakota; Omaha, Nebraska; Denver, Colorado; and Minneapolis, Minnesota. In addition, the VA Black

Hills HCS is offering a $5,000 sign-on bonus for the nurse manager and a $2,000

sign-on bonus for the OR nurses. VA Employees are being offered a $500 ‘‘finders

fee’’ if they assist in the successful recruitment of operating room personnel at the

VA Hot Springs medical facility. The community of Hot Springs has also been helpful in the search for VA staff. The Job Service office is engaged in local (Rapid City

area) recruitment at no cost to VA. Every effort is being made to assure uninterrupted surgical service at the Hot Springs VAMC and VA officials are optimistic

that the positions will be successfully recruited.

Question. As you know, the Independent Budget for fiscal year 2003 calls for approximately $1.7 billion more for VA health care needs than what is included in the

President’s request. Will the President’s fiscal year 2003 request for VA health care

be sufficient to fund all VA facilities and functions? If not, how much do you estimate the VA will be short for fiscal year 2003?

Answer. There are many variables that impact health care in general (new diseases, new treatments, inflation changes, etc.) and that impact veterans use of VA

health care (other health care alternatives, availability and accessibility of VA services, etc.)., it is very difficult to be certain that the fiscal year 2003 budget will be
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adequate to support the health care demand of all enrollees. However, this budget

incorporates a ‘‘Base Health Care Demand Adjustment’’ initiative that identifies and

requests the resources required to support an actuary estimate of the demand and

case mix changes needed for all seven patient priorities in fiscal year 2003. Based

on this initiative, this year’s budget estimates should better account for the relationship of planned workload requirements and the full funding needed.

Question. As you and I have discussed, there have been several attempts to cap

enrollment at South Dakota CBOCs in the last few months. Can you assure me

these clinics will stay open and available to all veterans who need service?

Answer. Since 1995, VA has activated over 700 new CBOCs to bring health care

closer to veterans’ homes. Recent evaluations show CBOCs provide high quality

heath care and are effective in improving access to VA services. Since their inception CBOCs have been very popular with veterans. The number of CBOCs in VISN

23 totals 35 and to meet the growing number of veterans seeking care at a CBOC,

VISN 23 has steadily increased capacity. However the number of new veterans seeking VA care at CBOCs in VISN 23 has exceeded expectations, which has resulted

in some CBOCs reaching capacity. Following is a status on CBOC capacity in South

Dakota, which is managed by the VA Black Hills Health Care System (BHHCS).

CBOCs in Pierre, Winner, Rosebud, and Eagle Butte are open to new enrollments

and will continue to enroll veterans as long as there is capacity. The CBOC in Rapid

City, which is staffed by VA with two physician and two mid-level providers has approximately 2,615 veterans enrolled. One physician provider is not able to see patients at this time and this has resulted in the clinic being at capacity for new patients. Veterans interested in enrolling for VA care at the Rapid City CBOC are

being referred to the Fort Meade or Hot Springs VA Medical Centers. VA BHHCS

is working on plans to resolve the physician issue at the Rapid City CBOC so that

enrollment can be resumed.

Question. What was the purpose of the merger between VISN 13 and VISN 14?

What will be the impact on patient care? Will there be any budgetary savings? If

so, how much?

Answer. The merger of the two networks should be transparent to veterans. Each

medical facility within the Veterans Integrated Service Network (VISN 23) fulfills

important missions for VA and there are no plans to reduce or eliminate VA programs or services in any of the States served by the network. The new Network will

continue to face a number of challenges including managing unprecedented growth

within appropriated funding; exercising stewardship of all resources; increasing

market share; continuously improving quality of care and veteran satisfaction with

that care; fully integrating administrative and clinical programs and processes; investing in capital improvements and information technology; and effectively communicating with veteran groups, labor partners, educational affiliates and other stakeholders. And when you look at the challenges faced by the two relatively small networks, it makes good sense to form one integrated health care delivery structure

in order to enhance service and improve access across the Midwest. Individually the

two VISNs excel in many areas; both rank high in patient satisfaction; both maintain excellent Joint Commission for Accreditation of Health Care Organizations

(JCAHO) scores; and both are proven strong performers in quality measures. Together they share many commonalities. The two VISNs are in close geographic proximity and encompass veterans’ populations residing in largely rural areas. Significant financial challenges and small, declining veterans’ populations create urgency

for improving coordination of care and collaboration between health care providers.

Following are some examples of what we can expect to gain from integrating the

two Networks.

Improved Coordination and Collaboration.—The new VISN brings together a richer mix of experience and greater flexibility in allocating resources. Individually,

VISNs 13 and 14 excelled in practices which, when shared, will enhance the performance of both Networks. For example, VISN 14 excels in the coordination and

completion of compensation and pension exams. By sharing exemplary practices

across the Midwest, it is expected that compensation and pension exams will be

completed in a more timely manner. In mental health, we are seeing the benefits

of integration by the two mental health staffs working together to develop a proposal for establishing a Mental Illness Research and Education Center (MIRECC)

in VISN 23. In prior years, proposals submitted by former VISNs 13 & 14 were not

approved. The new network, VISN 23, offers the opportunity to study and treat a

larger veteran population and has improved chances for the Network to be selected

as a MIRECC. Other areas benefiting from combining experience and resources are

cardiac services, telephone triage, pharmacy formulary and pharmaceutical purchasing, laboratory contracting, and the exploration of opportunities for successfully

managing the large rate of growth in our community based outpatient clinics.
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Budget Flexibility.—Combining the budgets of former VISN 13 and 14 will give

VISN 23 greater flexibility in allocating the estimated one billion dollars on VA programs and services. There will be opportunities to implement management efficiencies and exemplary practices by integrating fiscal services, consolidating business offices, and materiel service functions, such as contracting, logistics, supply,

and warehouse functions. An integrated senior leadership team will work cooperatively to prioritize and coordinate health care programs in order to assure equitable

access to care across the Midwest. While the merger, in and of itself, will not bring

financial stability to the Networks, the merger is expected to generate cost savings

through economies of scales and reduced administrative overhead. The estimated

$1–6 million saved, over a period of time, will be redirected into expanding access

and enhancing services for veterans throughout the Midwest.

Quality.—VISNs 13 & 14 are strong performers in quality measures. Both demonstrated excellent performance in fiscal year 2001 and ranked exceptional within

the Veterans Health Administration (VHA) in the areas of clinical practice guidelines and 30-day mental health follow-up scores. Overall inpatient and outpatient

satisfaction scores for both Networks were among the best in VHA. Network leaders

will build on these successes and seize opportunities for enhancing quality, expanding access, gaining efficiencies and improving veteran satisfaction in areas that are

less than exceptional.

Question. Veterans in my State are very concerned about the current eligibility

standards for Priority 7 veterans. Priority 7 veterans are those who lack a disability

related to their military service or whose income is higher than the current VA eligibility standards. The current income standard is $24,000 annually for a single, or

$28,000 for a couple, and applies to 40 percent of the veterans in South Dakota. Assets, such as land, are included in the calculation of income. This is a concern for

many farmers and ranchers in my State who may own land worth a considerable

amount, but whose actual yearly income is well below the VA threshold. The Administration’s proposal to impose a $1,500 co-pay on all Priority 7 veterans would be

particularly onerous on these veterans. Do you support changing the law regarding

eligibility standards for Priority 7 veterans to address this problem?

Answer. We examined many options for implementing the deductible, including

the cost impact on Priority 7 veterans. We believe the proposal in the President’s

Budget will ensure that VA will be able to provide high-quality care to our nation’s

veterans in the most cost-effective manner.

QUESTIONS SUBMITTED BY SENATOR PETE V. DOMENICI

VETERANS DEPARTMENT AND DOD COORDINATION

Question. According to the President’s budget submission, the Veterans and Defense Departments historically has shown little cooperation between these departments. In the status report on selected programs for the Defense Department, DOD

received an ‘‘ineffective’’ rating in coordination with the Veteran’s Affairs Department.

Veterans switch back and forth between VA and DOD Hospitals with Doctors not

informed as to what care the patient received at the other hospital. The president’s

budget submission suggests that communications between the VA and DOD Hospitals would improve the quality of care veterans receive.

In what areas, other than medical care, would the two departments benefit from

sharing resources? In areas where the VA & DOD has been sharing resources, what

have the results been in terms of savings to the budget?

Answer. Medical Care.—Section 3(e) of the VA–DOD Health Resources Sharing

Act (38 USC 8111) requires that ‘‘any funds received through earnings in VA–DOD

sharing agreements shall be credited to funds that have been allotted to the facility

that provided the care or services.’’ VA has followed this policy since the law was

implemented. The law provides an incentive for VA facilities to enter into agreements with DOD and has benefited veterans by allowing facilities to provide services to veterans that would not otherwise have been available.

While the primary focus of the law is to allow facilities to expand services for its

beneficiaries, cost savings (cost avoidance) to the budget do occur, especially in the

purchase of services. By spending less on goods and services facilities have more

money available. However, VA purchases in facility-to-facility sharing are difficult

to quantify and are quite small. For fiscal year 2001, VA purchased $20.4 million

from DOD in local sharing agreements.

VA–DOD cost savings can be documented through joint procurement efforts, primarily in pharmaceuticals. As of the end of February 2002, there were 54 joint VA–
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DOD joint contracts for pharmaceuticals; 37 additional joint contracts are pending

award. Sixteen joint contracts were not awarded due to the lack of cost savings to

the government through their award. The total estimated cost savings in fiscal year

2001 for both Departments from these contracts were $98.3 million ($80.1 million

for VA and $18.2 million for DOD).

Veterans Benefits Administration.—In an effort to explore opportunities and common areas of interest, the Acting Under Secretary for Benefits recently initiated dialogue with the Assistant Secretary of Defense for Force Management Policy to create a VA/DOD Joint Benefits Council. As planned, the council will foster a formal

partnership between our respective departments and serve as a standing forum for

expanding interagency collaboration to ultimately improve the delivery of benefit

services to veterans and service members. Preliminarily, expanded data and information sharing, refinement of transition/separation procedures and protocols, and

collaborative pursuit of improved access to military records have been identified as

‘‘top tier’’ objectives.

There are no data presently available to quantify any budget savings which may

have been realized by VBA as a result of our expanded partnership with DOD. We

believe it would be extremely difficult, if not impossible, to identify and track such

savings. However, we can assure you that efficiencies resulting from continued and

enhanced collaboration between VA and DOD would be applied to further improve

the claims process.

National Cemetery Administration.—The National Cemetery Administration

(NCA) purchases headstones and markers to mark the graves of veterans, not only

in VA national cemeteries, but also in all other Federal national cemeteries, State

veterans cemeteries, and when requested, in private cemeteries. NCA has an automated, on-line system for ordering headstones and markers. The Department of the

Army’s Arlington National Cemetery also orders its headstones and markers

through this on-line, automated system. This sharing of resources has resulted in

increased efficiencies in the ordering process.

Question. What steps would need to be taken, with respect to information technology, in order to break down the wall that exists between the two departments?

Answer. There are three principle areas where effective data exchange between

the Department of Defense (DOD) and the Department of Veterans Affairs (VA)

would significantly improve service for our nation’s military personnel and our veterans: —Military personnel information provided to VA by DOD;

—Military eligibility and enrollment data provided to VA by DOD; and,

— Exchange of medical information between VA and DOD.

Efforts are underway between the two Departments to address these areas. Additionally, DOD and VA have established an Executive Steering Committee (ESC) cochaired by the VA’s Deputy Secretary and DOD’s Under Secretary for Personnel and

Readiness. This ESC is addressing not only those issues where information technology would help break down barriers, but also other areas where both Departments could achieve performance improvements, such as reduced cost for bulk purchasing of pharmaceuticals. With respect to the three areas where information technology could be an enabler, details of efforts that are underway are discussed below.

—DOD is developing the Defense Integrated Military Human Resources System

(DIMHRS) as a future replacement for legacy military personnel systems. The

Veterans Benefits Administration (VBA) and the Veterans Health Administration (VHA) have provided DOD with functional requirements as part of the design phase of DIMHRS. We will continue to follow up with DOD to ensure data

currently received by paper documents is received electronically in the future.

—As part of the fiscal year 2004 budget formulation process, VA will sponsor a

One-VA Eligibility and Enrollment initiative for obtaining necessary data from

the DOD Eligibility and Enrollment system called DEERS/RAPIDS. An analysis

of alternatives (AOA) will be conducted as part of the budget formulation process. Alternatives to be considered include reusing the DEERS/RAPIDS system

to meet VA’s eligibility and enrollment requirements, including VA requirements in the DEERS/RAPIDS system so that VA can obtain required data directly from DOD, implementing a Commercial Off the Shelf (COTS) Customer

Relations Management (CRM) software package that would interface with

DEERS/RAPIDS, as well as other potential alternatives. The results of the AOA

will produce a recommended approach for the fiscal year 2004 budget.

—VA and DOD have developed the Government Computer Patient Record (GCPR)

system that allows VA to have access to clinical data from DOD hospitals.

GCPR is in the final stages of testing and we anticipate full fielding of GCPR

within VA during the next 90 days. GCPR is a one-way interface from DOD to

VA. VHA is working with DOD’s Health Affairs to determine how to expand
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this capability for two-way data exchange. A key element of determining the

way ahead is in establishing common data definitions between DOD and VA for

health data. This work is in process.

Additionally, VA and DOD have formed a close collaborative partnership, under

the titles of the Federal Health Information Exchange (FHIE) and HealthePeople

(Federal), to exchange data and develop a common health information infrastructure

and architecture comprised of standardized data, communications, security, and

high performance health information systems.

This two phase effort will exchange patient data and will result in computerized

health record systems that ensure interoperability with DOD’s CHCS II and VA’s

HealtheVet strategy for VistA (HealtheVet-VistA). The first phase, FHIE, of this

plan focuses on DOD providing information to VA clinicians and includes the Federal Health Information Exchange (FHIE, formerly Government Computer-Based

Patient Record) effort, already in testing as of the end of calendar year 2001. The

second phase, HealthePeople (Federal), is a joint VA and DOD effort to:

—Improve sharing of health information,

—Adopt common standards for architecture, data, communications, security, technology and software,

—Seek joint procurements and/or building of systems,

—Seek opportunities for sharing existing systems & technology, and

—Explore convergence of VA & DOD health information applications consistent

with mission requirements.

Question. When veterans apply for benefits at the VA they must submit pages of

information on paper, which in many cases are available on DOD computers, what

steps should be taken so that this information would be available electronically to

the VA?

Veterans Health Administration.—When veterans apply for medical benefits from

VHA, they only need to fill-out the Application for Health Benefits, VA Form 10–

10EZ. An application can be completed at any VA health care facility, community

based clinic or on-line at http://www.va.gov/. The electronic application has been

very well received in the veteran community. While some of the information required, e.g., basic demographic data would be available from DOD, other information, e.g., income, eligibility status would not. In addition, VA is working with DOD

to examine potential collaborative use of DEERS/RAPIDS for VA health, benefits,

and other services.

Veterans Benefits Administration.—Every effort should be made to fully leverage

the data and technology capabilities of DOD to enhance delivery of services to veterans. The availability of accurate military service information is critical to accurate

and timely VBA eligibility determinations and benefit decisions. Current data and

information exchange processes between VBA and DOD are often fragmented. However, improvement efforts are underway. For example, to facilitate the automated

collection of essential military information, VBA has entered into an interagency

agreement with the Defense Manpower Data Center to establish an electronic exchange of demographic and military history data from the Defense Enrollment Eligibility Reporting System (DEERS). In addition, VA is working with DOD to examine

potential collaborative use of DEERS/RAPIDS for VA health, benefits, and other

services.

Question. Of the 1.8 million persons in New Mexico’s population, veterans make

up nearly ten percent of all New Mexicans. We know that the average age of these

veterans is rising sharply, and that despite the expansion program I initiated in

1999 for the use of flat markers at Santa Fe National Cemetery, given the current

rate of interments, the Cemetery will run out of space by 2008.

Could you provide an update on the planning study that my legislation directed

the VA to undertake to determine the efficacy of establishing a National Cemetery

for Veterans in Albuquerque?

Answer. Section 613 of the Veterans Millennium Health Care and Benefits Act

of 1999 (Public Law No. 106–117) required the Department of Veterans Affairs to

contract for an independent demographic study to identify those areas of the country with the greatest number of veterans that will not have reasonable access to a

burial option in a national or State veterans cemetery within 75 miles of their residence. The report will provide an assessment of the number of additional cemeteries

needed to ensure that a national or State veterans cemetery is within 75 miles of

the residence of 90 percent of veterans beginning in 2005 and projecting out to 2020.

The study will address the concerns raised in the Conference Report accompanying the fiscal year 2002 appropriations bill for VA. The analysis will take into

account the future burial needs of veterans throughout the United States, including

the needs of veterans in the area of Albuquerque, as well as all of New Mexico’s

veterans. The Honorable Robin L. Higgins, Under Secretary for Memorial Affairs,
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has met with Congresswoman Heather Wilson regarding this study and will continue to work with members of Congress to ensure that the burial needs of veterans

are met. We anticipate that the final report will be completed and delivered to Congress later this spring.

Question. I have worked very hard to bring more VA clinics to New Mexico to

meet the blooming health care needs of our veterans. Still, our veterans have many

pressing health care concerns and they need better access to VA facilities. Indeed,

the only VA hospital in the State is in Albuquerque, yet by land mass, New Mexico

is the fifth largest State. Geographically, this makes it very difficult on veterans

who need care.

The reality is, we need more VA clinics in New Mexico, or a better delivery system

for providing care to veterans. How will the VA approach this problem and enhance

the ability of veterans who reside in rural areas to more easily access the care they

need? Could you provide some suggestions specifically tailored to the needs of New

Mexico veterans on this matter?

Answer. VHA currently operates 13 Community Based Outpatient Clinics

(CBOCs) in the State of New Mexico. Present locations include: Alamogordo,

Artesia, Clovis, Espanola, Farmington, Gallup, Hobbs, Las Cruces, Las Vegas,

Raton, Santa Fe, Silver City, and Truth or Consequences. In addition, two of these

sites—Las Vegas and Espanola—provide services at an additional 10 access points

through a contractual arrangement. These additional locations include: Chama, Coyote, Embudo, La Loma, Penasco, Roy, San Miguel, Springer, Truchas, and Wagon

Mound. Thus, a total of 23 sites provide veterans in New Mexico with convenient,

local access to VA outpatient services throughout the State. Later this fiscal year,

the New Mexico VA Health Care System (NMVAHCS) plans to open an additional

CBOC in Durango, Colorado that will expand service to approximately 1,800 veterans residing in Northwestern New Mexico and Southwestern Colorado.

During the past 5 years, the number of veterans treated in New Mexico CBOCs

has risen by over 40 percent, from 11,700 unique patients in fiscal year 1997 to over

16,500 in fiscal year 2001. The largest annual increase (12.1 percent) occurred between fiscal year 2000 and fiscal year 2001 with the opening of the Alamogordo and

Truth or Consequences CBOCs.

Although there are no plans to open additional CBOCs in fiscal year 2003, the

NMVAHCS has made specific plans to increase the number of veterans served in

the Silver City CBOC (expanding services to accommodate 2,000 patients up from

1,600), in Raton (expanding services to accommodate 1,800 patients up from 1,000),

and in Gallup (expanding services to accommodate 1,800 patients up from 1,000).

Furthermore, plans are underway to expand the scope of mental health services

provided in New Mexico CBOCs. Additional resources will initially be targeted initially for CBOCs that have an enrollment of at least 1,000 veterans and a veteran

mental health penetration level of less than 10 percent. Mental health services will

be expanded at Espanola, Gallup, Hobbs, Raton and Silver City. Counseling and

psychiatric services will be increased to an appropriate level and the use of telemedicine and fee basis will also be increased where feasible. These actions will enable the network to increase the number of days per week that counseling, psychosocial services, and psychiatric medication services will be available to New Mexico

veterans.

Question. I regularly meet with veterans groups from New Mexico who tell me

that they are facing a critical direct care shortage. They simply cannot find enough

nurses or certified nursing assistants to meet health care demands. What is your

assessment of the root cause of this problem?

Answer. The national nursing shortage stems from a variety of factors. In its report of August 2001, VA’s Future Nursing Workforce Workgroup cited the following

factors that contribute to the shortage:

—A decline in enrollment in schools of nursing.

—Aging of the nursing workforce (average age nationally, 45.2 years, VA 46

years.).

—Average age of a new graduate in nursing has climbed to 30.5 in 1995—2000

versus 24.3 in 1995 or earlier.

—Poor image of nursing as a career choice and more career choices for women.

—Pay inequities.

—Perceived negative work environments.

—Inadequate numbers of qualified faculty to educate the numbers of nurses needed.

—Projected increase in aging veterans who will require more complex care by increasingly greater-skilled nurses.

While the New Mexico VA Health Care System did experience nursing shortages

in 2000 and 2001, they currently have a nurse vacancy rate of 4.4 percent, with only
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11 positions unfilled (3 of which have been selected and are pending a start date).

The health care system has been successful in recruiting and retaining enough

nurses to adequately staff their operating beds and clinic operations in all areas except for the Spinal Cord Injury (SCI) Center.

Question. Does the VA have a plan to address this shortage of nurses?

Answer. Yes. To help recruit and retain nurses in general, the NMVAHCS has

taken several actions:

—On-site critical care courses are provided.

—Reimbursement of past nursing education expenses is provided to qualifying

nurses.

—Tuition reimbursement is provided to staff seeking to obtain nursing degrees.

—Participation in the Veterans Affairs Learning Opportunities Residency Program (VALOR).

—Monthly advertisements in local newspapers for new nurses.

—Attendance at Health Career Fairs

—Attendance at Career Fairs for new graduates.

—Advertisement on the VA Intranet for nurse transfers to the NMVAHCS.

To help recruit nurses for the Spinal Cord Injury Center, the following additional

actions have been taken:

—Recruitment Bonuses are offered.

—Through close collaboration with the University of New Mexico, a SCI nursing

course has been developed and was offered at the University in November 2001.

A second offering of the SCI nursing course will occur in April 2002.

QUESTIONS SUBMITTED BY SENATOR LARRY E. CRAIG

Question. Currently, your budget contemplates moving the VETS program from

the Dept of Labor to VA. In my State there is some unrest about the potential ramifications to Veterans that may be harmed by such a move. The details I understand

are still in process of being worked out; once the details are finalized I would appreciate your office coming over to brief my staff and I on the details of how this will

impact the Veterans of Idaho.

Answer. I will be happy to arrange for you and your staff to be fully briefed on

the details of this initiative as soon as the Administration submits its bill to Congress.

I want to share with you, however, two essential elements of the Administration’s

proposal that will be beneficial to all veterans. The new grant program will be competitive and performance-based. These are two essential components directly affecting grantee performance.

First, VA intends to set clear, obtainable and easily measured outcome performance standards. Measures such as the number of veterans who obtain a job and duration of employment are examples of such outcome measures.

Second, there must be something at risk for the grantees in order for VA’s grant

oversight to be effective. Simply stated—rewards for exceptionally high performance

and a costs for failing to deliver agreed upon outcomes. Quite frankly, a new grant

program that is not competitive in nature can only fare marginally better than the

existing programs. This is not to suggest that the competition must be at the national level, competition within States can be just as effective.

Question. Three years ago we lost one of our two doctors from our Pocatello facility. Initially VA informed me that they would be able to address the doctor deficit

via nurse practioners. Over time it has become apparent that this is not sufficient.

Over a year ago VA initiated a doctor search for the Pocatello facility. VA indicates

to my staff that they can’t find a willing doctor in the area, though there is a residency program in the vicinity with an ample supply of willing and able medical professionals. Currently, because of the doctor deficit there at Pocatello, we have some

Veterans who commute from Salmon to Pocatello that now have to go to Salt Lake

City which is a 5 hour drive in order to obtain treatment. When do you anticipate

resolving the doctor deficit in Idaho?

Answer. We have recently resolved this issue with the selection of Dr.

Walaliyadda for the physician position. The selection of Dr. Walaliyadda is currently

in the approval phase. Dr. Walaliyadda is expected to start in this position by July

1, 2002, or sooner if possible.

Question. Your 2003 Budget proposes imposing a $1500 medical deductible for Priority 7 veterans. What other alternatives have you reviewed and dismissed before

deciding on this approach?

Answer. We also considered such alternatives as imposing an enrollment fee, a

first-user fee, other deductible options, and limiting enrollment.
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Question. Could you provide me some details and background on the $1.5 billion

in collections that you anticipate? How does this compare with what has been collected over the past 5 years? What do you anticipate collecting over the next 5 years,

will it be collected at a comparable rate or will it increase or decrease?

Answer. The projected fiscal year 2003 revenue collection is $1.488 billion, which

represents a 42 percent increase over the projected fiscal year 2002 revenue collection of $1.050 billion. The primary reasons for the increase in fiscal year 2003 to

$1.488 billion are $260 million projected as collections for the $1,500 deductible; a

$364 million full-year estimate for the $5 increase in medication co-payment (from

$2 to $7); and $40 million representing a full-year estimate for the long-term care

co-payment.

REVENUE COLLECTIONS BY FISCAL YEAR

[Dollars in Millions]

Fiscal year Amount Percent Inc.

Actuals:

1997 ............................................................................................................................................... $520 ................

1998 ............................................................................................................................................... 560 7.7

1999 ............................................................................................................................................... 574 2.5

2000 ............................................................................................................................................... 573 ¥0.2

2001 ............................................................................................................................................... 771 34.6

Projected:

2002 ............................................................................................................................................... 1,050 36.2

2003 ............................................................................................................................................... 1,488 41.7

2004 ............................................................................................................................................... 1,627 9.3

2005 ............................................................................................................................................... 1,739 6.9

2006 ............................................................................................................................................... 1,881 8.2

2007 ............................................................................................................................................... 1,981 5.3

2008 ............................................................................................................................................... 2,039 2.9

Question. In the recently submitted President’s Budget, one of your goals is to reduce the process time of processing claims from 165 days down to 100 days. Why

did you choose 100 days vs. say, 90 or even 30 days? What is the comparable

amount of time it takes for industry to process a claim?

Answer. The goal of 100 days on average to process rating-related claims was chosen for several reasons. VA is required by Federal regulation and the Veterans

Claims Assistance Act (VCAA) to afford veterans every opportunity to notify us of

any evidence they feel is relevant to their claims. VA is obligated to exhaust all efforts to obtain that evidence, whether the evidence comes from within VA, another

Federal agency, or a private source.

When attempting to obtain evidence from private sources, VA must allow 60 days

for a response before performing any action on the claim. Private sources are under

no obligation to submit evidence to VA in a timely manner. Additionally, a physical

examination is required in most cases to ascertain the extent of a disability and determine the veteran’s overall disability compensation rating. While it is in the best

interest of the veteran and VA to process the claim as quickly as possible, the reality is that most claims require some type of evidentiary development that adds

to the time it takes to process the claim.

VA is required to establish that the claimed disability was incurred in, aggravated

by, or otherwise determined to be a result of military service. In addition, VA must

determine the percentage at which a veteran’s disability detracts from his or her

overall ability to function. Finally, VA must determine the amount of compensation

based on a combined disability rating evaluation, as well as processing any ancillary

benefits to which the veteran may be entitled.

Given these realities, the goal of 100 days is thought to be a challenging yet attainable goal.

It is difficult to compare the VA’s claims processing function to private industry.

The closest comparison would probably be disability determinations that take place

in the insurance industry. However, most disability determinations by the insurance

industry are made without the requirement to establish a link between the claimant’s disability and the working environment. Evidentiary requirements are also

much more exhaustive for VA.

Question. When do you anticipate eliminating the backlog?
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Answer. VA’s goal is to reduce the inventory to approximately 250,000 rating-related claims by the end of fiscal year 2003. Our interim goal for the end of this fiscal

year is to reduce the rating inventory to approximately 315,000 pending claims.

Our efforts to achieve these goals are showing positive results. VBA significantly

increased its production of rating decisions in the latter months of fiscal year 2001

and into this year, which is the key to reducing the claims backlog. From October

2001 through February 2002, VBA decided over 294,000 cases for a 5 month average

of 58,800. This represents a 47 percent increase over fiscal year 2001 production levels. We expect our production to continue to increase as many of our recently hired

employees gain additional experience and we begin to implement the recommendations of the Claims Processing Task Force.

Even with the increased production, our current pending inventory remains unacceptably high. This is due to a significant increase in the volume of incoming claims,

attributed to the following factors:

—The review of more than 98,000 cases under the Veterans Claims Assistance

Act (VCAA).

—VA’s expanded outreach efforts to separating service members (Benefits Delivery at Discharge initiative).

—Receipt of 66,000 Type 2 diabetes claims based on exposure to Agent Orange.

—The requirement to review 13,000 previously-adjudicated diabetes claims under

the Nehmer stipulation. (In the case of Nehmer v. VA, plaintiffs’ attorneys and

VA agreed, in a 1991 Stipulation and Order, on a process for applying an earlier

than usual effective date for certain claims for benefits based on Agent Orange

exposure. As a result of court decisions in the Nehmer case, VA is required to

re-adjudicate over 13,000 diabetes claims.)

All of the 98,000 VCAA claims have now been added to the inventory. Following

the initial surge of Type 2 diabetes claims, the incoming volume of diabetes claims

is expected to taper off. We have also completed a significant portion of the Nehmer

reviews. We therefore believe our increased production levels and the Task Force

initiatives will now enable us to make major inroads into the pending inventory.

Question. Under the Veterans Benefits Administration, specifically the Housing

program, you are currently in the process of completing an A–76 study for potentially contracting out the property management function. How significant is this activity as far as dollars and people, and what is the breakdown by State?

Answer. At the inception of this A–76 cost comparison the Property Management

Operation involved 276 FTE at 46 regional offices around the country. There are

currently 185 FTE at those offices. A breakdown of the 276 FTE and the current

185 FTE is provided below along with pre A–76 local program expenditures for management brokers, repair cost, and sales brokers. Unfortunately, final program modifications and savings cannot be determined until the A–76 award decision is rendered.

VA PROPERTY MANAGEMENT ACTIVITIES

State VA Regional Office 1999 FTE Jan–02

Avg. Expenditures

Per Property

Alabama ................................................................ Montgomery ................................... 4 5 $4,113

Alaska .................................................................... Anchorage ..................................... 1 0.5 11,020

Arizona ................................................................... Phoenix .......................................... 10 8 8,258

Arkansas ................................................................ Little Rock ..................................... 4 1 5,831

California ............................................................... Los Angeles ................................... 24 8 8,222

California ............................................................... Oakland ......................................... 13 7 12,364

California ............................................................... San Diego ...................................... 14 3.5 11,477

Colorado ................................................................ Denver ........................................... 3 4 8,967

Florida ................................................................... St. Petersburg ............................... 13 12 9,822

Georgia .................................................................. Atlanta .......................................... 16 14 10,960

Hawaii ................................................................... Honolulu ........................................ 1 0 6,308

Idaho ..................................................................... Boise ............................................. 1 2 11,151

Illinois .................................................................... Chicago ......................................... 11 4 7,854

Indiana .................................................................. Indianapolis .................................. 2 2 9,402

Iowa ....................................................................... Des Moines .................................... 2 2 5,703

Kansas ................................................................... Wichita .......................................... 3 2 12,146

Kentucky ................................................................ Louisville ....................................... 2 1 6,271

Louisiana ............................................................... New Orleans .................................. 6 4 6,788

Maryland ................................................................ Baltimore ....................................... 4 3 17,474

Michigan ................................................................ Detroit ........................................... 11 7.5 8,967
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VA PROPERTY MANAGEMENT ACTIVITIES—Continued

State VA Regional Office 1999 FTE Jan–02

Avg. Expenditures

Per Property

Minnesota .............................................................. St. Paul ......................................... 6 5 8,807

Mississippi ............................................................ Jackson .......................................... 3 2 6,560

Missouri ................................................................. St. Louis ........................................ 7 3 7,334

Nebraska ............................................................... Lincoln ........................................... 1 1 10,205

New Hampshire ..................................................... Manchester .................................... 4 4.5 16,663

New Jersey ............................................................. Newark .......................................... 3 5 10,816

New Mexico ............................................................ Albuquerque .................................. 1 3 10,337

New York ............................................................... Buffalo .......................................... 1 1 5,913

New York ............................................................... New York ....................................... 3 5 5,477

North Carolina ....................................................... Winston-Salem .............................. 11 4.38 10,495

Ohio ....................................................................... Cleveland ...................................... 4 5 6,269

Oklahoma .............................................................. Muskogee ...................................... 5 1 4,034

Oregon ................................................................... Portland ......................................... 1 2 8,000

Pennsylvania ......................................................... Philadelphia .................................. 3 4 7,697

Pennsylvania ......................................................... Pittsburgh ..................................... 2 2 8,109

Puerto Rico ............................................................ San Juan ....................................... 1 0 5,667

South Carolina ...................................................... Columbia ....................................... 7 1 6,263

Tennessee .............................................................. Nashville ....................................... 5 1.25 5,522

Texas ..................................................................... Houston ......................................... 17 13.1 12,852

Texas ..................................................................... Waco .............................................. 13 4 12,133

Utah ....................................................................... Salt Lake City ............................... 0 1 11,910

Virginia .................................................................. Roanoke ......................................... 14 14 7,922

Washington ............................................................ Seattle ........................................... 7 5 13,579

Wisconsin .............................................................. Milwaukee ..................................... 3 0 10,865

Washington DC ............................. 9 7 14,037

National Total .......................................... ....................................................... 276 184.73 ................

Note: Some stations have jurisdiction over other States.

SUBCOMMITTEE RECESS

Senator MIKULSKI. The subcommittee stands in recess until next

week when we will take the testimony of Housing and Urban Development.

Secretary PRINCIPI. Thank you.

Senator MIKULSKI. Thank you.

[Whereupon, at 11:22 a.m., Wednesday, March 6, and the subcommittee was recessed, to reconvene subject to the call of the

Chair.]
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DEPARTMENTS OF VETERANS AFFAIRS AND

HOUSING AND URBAN DEVELOPMENT AND

INDEPENDENT AGENCIES APPROPRIATIONS

FOR FISCAL YEAR 2003

WEDNESDAY, MARCH 13, 2002

U.S. SENATE, SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, Washington, DC.

The subcommittee met at 9:35 a.m., in room SD–138, Dirksen

Senate Office Building, Hon. Barbara A. Mikulski (chairman) presiding.

Present: Senators Mikulski, Bond, and Craig.

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

STATEMENT OF HON. MEL MARTINEZ, SECRETARY OF HOUSING AND

URBAN DEVELOPMENT

OPENING STATEMENT OF SENATOR BARBARA A. MIKULSKI

Senator MIKULSKI. Good morning, everybody, to HUD; The subcommittee will come together.

This morning we are taking the testimony from our Secretary,

Mel Martinez. We look forward to hearing the Secretary present

the administration’s appropriations request and the priorities of

the administration for the Department of Housing and Urban Development.

I apologize for the Committee starting late. It took me an hour

and 45 minutes to get here from Baltimore today. So we are going

to move on quickly.

Mr. Secretary, let me start by once again thanking you for the

collegiality in which you have worked with the Subcommittee. I believe both Senator Bond and I feel that we have excellent response

from you and your staff and that our conversations have been candid and focused on empowering people in neighborhoods. So we

thank you for that and look forward to that.

Secretary MARTINEZ. Thank you.

Senator MIKULSKI. Mr. Secretary, I have three goals this morning. I want to make sure that HUD continues to stay focused on

its core program, housing programs. And it also that it has enough

resources for them. I want to hear your views on how we can also

help communities that are under stress.

In terms of those communities that are under stress, it is those

that have also been stressed both by age, demographic change, and

the changing HUD programs. The stressed communities I am talk-
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ing about are particularly in cities where parts of cities are what

we call the ‘‘middle ring’’ of a city, that are often are like little suburbs within a city. They were not the inner core. They were not the

neighborhoods under siege. But right now they are feeling older.

Predatory practices are beginning to come, blight begins to come.

But most of all, using FHA programs, we are concerned that people

buying homes, cannot keep them up and keep them going.

The other part is in the suburbs where public housing was not

built. And there was the great thinking of using Section 8 so that

people would have choice and mobility. But they went into apartment buildings that then became public housing by proxy. You and

I visited some of those in Prince George’s County just a couple of

weeks ago. By ‘‘public housing by proxy,’’ I mean a privately held

complex that rented to the poor. That was a good idea. Then they

abandoned their complex while renting to the poor. They either abdicated their mortgage requirements and certainly abdicated the

service and maintenance requirements.

And therefore, FHA subsidized, Section 8 subsidized by tenants,

all have become public housing by proxy with none of the social

services, none of the empowerment and, most of all, these apartments have become incubators for the distressed communities

around them.

HOPE VI is expiring, and we are very interested in your

thoughts on HOPE VI and those issues, as well as issues related

to management and oversight. Without good HUD oversight, we

see HUD at its worst. Instead of helping poor and hard-working

families to get to a better life, HUD ends up lining the pockets of

scums so that they can have a better life.

So, we want to really look at these neighborhoods. We are here

to make sure that the poor have a way to a better life, not the

scums having a better life. So, I think we are all in agreement on

the priorities; and we look forward to working towards them.

Some of the issues we are talking about are the $1 million for

home-owner counseling. We are committed to the American dream.

But often, people who are not prepared for home-ownership nor

have the resources to sustain home-ownership end up not being

able to fulfill their responsibilities. And it does not work. We really

need pre-purchase counseling. I want to hear more about that.

I am also concerned about what has happened in some community development corporations. The vast majority of CDC’s are

great engines of redevelopment in our communities. But some

CDC’s have now been created as almost faux corporations. Again,

skimming off the bucks and then leaving very little to show results.

A recent article in The Washington Post about some occurrences

in the District of Columbia shows an example of this. And this is

not finger-pointing at the District of Columbia or CDC’s; I am a big

believer in them. There was a guy who was the chief executive of

the Anacostia Economic Development Corporation. He took $25,000

from the group and invested in raw gold in Mali, nothing to do

with investing in the District of Columbia.

And another has taken nearly $40 million in public and private

funds and has yet completed 12 of its 37 projects in 10 years. So,

we need to look at how we can work with those CDC’s and yet pre-
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vent waste, fraud, and abuse, so that the good ones can really be

what we call those public/private partnerships.

PREPARED STATEMENT

There is much more to be said in detail, as we go through the

hearings, the capital management programs, the details, the budget, but those are my large area policy goals. And I am going to now

conclude my remarks and ask unanimous consent that my full

statement be in the record.

[The statement follows:]

PREPARED STATEMENT OF SENATOR BARBARA A. MIKULSKI

I would like to welcome Secretary Martinez to his second budget hearing before

this Subcommittee.

I have three goals for the hearing today. The first is to make sure that HUD is

committed to its core housing programs and has enough resources for them. Second,

we want to hear the Secretary’s views on how we can help communities that are

under stress. I’d like to hear from the Secretary about how the HOPE VI program

can best serve these communities, how we can help people who are ‘‘aging in place’’

stay in their neighborhoods, and, how we can prevent concentrations of poverty from

destabilizing communities. Lastly, I’d like to address problems that I see in the

oversight of HUD programs. We want HUD to be a good steward of the tax payer

dollar and a good neighbor in our communities. This subcommittee wants to help

HUD achieve these goals.

The Administration’s budget fully funds Section 8 renewals and requests modest

increases to HOME and CDBG block grant programs. Unfortunately, the Administration proposes to cut the Public Housing Capital Fund by $400 million, even

though public housing units have a $22 billion backlog in capital repairs.

HUD programs are seeing an increase in demand, but they don’t get increased

resources in this budget. This is true for Elderly and Disabled Housing programs

and for permanent housing for the homeless.

And, there are still serious problems in the Section 8 program. Working families

moving from welfare to work depend on this program, but some vouchers aren’t

being used, despite this high demand. Vouchers can’t solve all of our problems. Senator Bond and I believe that we need to do more housing production; we’d like to

hear your views on housing production.

HOPE VI expires this year. In June HUD will submit a report to Congress on

lessons learned in the HOPE VI program. In the meantime, we want to hear your

thoughts on what the program has achieved. What works? And what doesn’t? I

know in Baltimore they’re gearing up to start a new HOPE VI development, so

they’d welcome guidance from the Department. It’s also time to take inventory. We

want to know if we’ve met the need out there for severely distressed housing. If we

have, is it time to sunset HOPE VI?

We have neighborhoods that are under stress. Oftentimes this is because government walked away, or the landlords walked away. We have a real problem of predatory lending in communities across the Nation. The poor are being gouged, the taxpayers are paying for it, and scam artists are profiting. And predatory lending has

resulted in neighborhoods that were once stable turning into neighborhoods under

stress.

Secretary Martinez and I have formed the Prince George’s County to combat the

problems that we saw when we visited the inner beltway communities of the County. There, we saw the effects of absenteeism. We need to work together to build

neighborhoods where people live, work, shop, worship and raise their families.

Also of great concern to me are the needs of our aging population. Our senior citizens, particularly our frail elderly, have special needs. The housing stock for our elderly is out of date with today’s needs; the elderly need services and affordable

housing in communities, not just buildings.

In order to have a strong HUD, we need to have a well-managed HUD. HUD

must have good information technology systems, thorough oversight of programs,

and tough enforcement. Without good oversight we see HUD at its worst: instead

of helping poor and hardworking Americans to get a better life, HUD is lines the

pockets of scum so that they can have a better life. HUD needs to turn this equation

around.
112

The GAO has found serious deficiencies in the IT systems at HUD’s four Homeownership Centers. These deficiencies affect HUD’s ability to target high risk lenders and to investigate cases of fraud. These deficiencies hurt the work we’re doing

on predatory lending with HUD.

Around the country communities are being hurt by these schemes. Unscrupulous

investors buy up foreclosed properties. They flip the properties to unsuspecting

homebuyers. They inflate the costs of the houses, they hide fees and balloon payments. They gouge the poor, they rip off tax payers, and they destroy communities.

I’m pleased that the budget includes $35 million for homeowner counseling.

Clearly, better oversight of programs could have prevented the scandals being uncovered here in D.C. with Community Development Corporations. We know that the

vast majority of CDCs are great engines of redevelopment in poor communities. But,

these CDCs managed to scam the government, and hurt neighborhoods.

We know that some of this money came from HUD programs. One of the groups

profiled was the Asset Control Area receiver for the City. This is what the editorial

board of the Washington Post has to say on February 28:

‘‘The articles . . . show how CDCs, charged with bringing stability and development to scarred communities, have instead left a trail of sick business districts,

boarded-up apartment buildings and weed-filled lots across the city . . . Albert R.

‘‘Butch’’ Hopkins Jr., chief executive of the Anacostia Economic Development Corp.

in Southeast Washington, invested $25,000 from one of the group’s for-profit subsidiaries to buy . . . raw gold in Mali... Robert Moore’s Development Corp. of

Columbia Heights in Northwest Washington has taken in nearly $40 million in public and private funds, holds a large portfolio of properties—some of which it received

free from the city and yet has completed only 12 of its 37 major construction projects

in the past decade.’’

We know that Secretary Martinez shares these concerns with us. We look forward

to working with Secretary Martinez to help HUD fulfill its mission and be a real

partner to communities.

We’ll look forward to your testimony.

Senator MIKULSKI. And I will turn to my colleague, Senator

Bond.

STATEMENT OF SENATOR CHRISTOPHER S. BOND

Senator BOND. Thank you very much, Madam Chair. And I join

with you in welcoming Secretary Martinez to testify on the budget

request for 2003. Last year was the Secretary’s first opportunity to

testify before this subcommittee. And I found the Secretary’s testimony frank and refreshing. But I look forward to the second year

of testimony now that he has a full year of what I would call the

‘‘HUD experience’’ under his belt.

About a quarter of a century ago, I lost a reelection race I was

supposed to win. And one of the most consoling things that a friend

of mine said was ‘‘experience is what you get when you expected

to get something else.’’

Senator BOND. And I have a feeling that Secretary Martinez has

been having a lot of experience. I had a little experience yesterday,

I just started to mention. There was a bill that, in flush times with

big budgets, might have been very nice. There was the MurkowskiDaschle bill to create $100 million grant program for a rural access

to electric infrastructure, $100 million for a rural recovery community block grant program, $20 million in a grant program from

community electrification grants, all coming out of HUD.

I put a hold on it, and it was passed yesterday afternoon by

unanimous consent; and this is—it is just $220 million that we do

not have in the budget. So, Mr. Secretary, we need to work with

you on perhaps visiting that effort.

But let us get on to the things that are before us. We have to

do some tough battles in this subcommittee, balancing the afford-
113

able housing and economic development needs against priorities for

veterans, environmental protection, continuing investment in

science, technology, the expanding, greatly expanding, requirements of FEMA, particularly related to homeland defense.

But there are special challenges in HUD. As we have said, HUD

has been troubled and dysfunctional for a long time. Its primary

program missions have some real questions about them, as the

Chair has already mentioned. I know you have taken some steps

to reform staffing requirements. You are following through on contracts for the development of new computer and IT systems. These

are really not sexy, front-page stories. But I think it is only

through basic reforms like this that you will be able to get a handle

on the billions of dollars going through the department.

I have a number of concerns with the budget. I understand the department has requested almost $2 billion to cover all renewing,

expiring Section 8 contracts. But Section 8 is probably one of the

most troubling programs. Every year the administration, be it

Democrat or Republican, glosses over the way many Section 8 programs are administered, while the costs to the taxpayers continue

to escalate.

The programs lose over $1 billion annually due to fraud, neglect,

and abuse. I think it is time to fix it so we ensure Section 8 assistance really goes to the low income families to find and obtain affordable housing. I am tired of the myth that Section 8 vouchers

mean freedom to rent where you want to live. In too many parts

of the country, that is a hollow promise. There are not available

rental properties. And to give out vouchers in St. Louis County, for

example, is a wasted effort.

Yet instead of addressing the shortage of affordable housing, we

continue to get OMB recommendations to convert project-based

Section 8 assistance to tenant-based Section 8 assistance, leaving

low-income families without affordable housing in many areas with

a shrinking stock of housing. I am especially concerned about the

lack of affordable housing for the elderly and for persons with disabilities. But we need some support from OMB.

And in addition, OMB is pushing to cut, again, the funding for

public housing capital by over $400 million despite a backlog of

some $22 billion in needed repairs. The OMB suggests capital resources can be made up through the borrowing of private capital,

which would then be supported by Section 8 project-based assistance. What HUD does not advertise is that the proposal is designed

to convert this project-based assistance into vouchers and privatize

the public housing units. That means that the highest quality public housing units will be lost to low-income use, without any guarantee that needed affordable housing units will be preserved for

low-income families in tight rental markets.

In addition, the cost of this public housing proposal would be carried by the Housing Certificate Fund, which already has costs of

some $20 billion per year. I think it is a shell game especially shifting the costs from public housing capital to the Housing Certificate

Fund. And I really—I have a long way to go before I can be sold

on that turkey.

There are a number of other issues that I think we need for HUD

to address. I would like to thank OMB for proposing, once again,
114

to eliminate the Rural Housing and Economic Development Program that I fought so hard to get established a few years ago. It

may be because I have said bad things about OMB in the past. And

I intend to continue.

We also need the Administration’s help in re-authorizing the

HOPE VI program. It is slated for termination at the end of the

year. I think we need a comprehensive review and reformulation

of the program. But it is working. We want to make sure that we

improve it and make it continue.

Finally, real concerns about renewing expiring contracts under

Shelter-Plus Care, Section 811 housing. I do not think the budgets

for either are adequate. Shelter-Plus Care includes no funding for

the cost of expiring contracts and that is not right.

Well, having said that, Mr. Secretary, we have a lot of work to

do. And I look forward to your testimony.

And I thank the Chair.

Senator MIKULSKI. Senator Craig, would you like to say something now?

STATEMENT OF SENATOR LARRY E. CRAIG

Senator CRAIG. Thank you.

Mr. Secretary, it is obvious that we all share passion as it relates

to your agency. And I think you do, too. And we appreciate you

being here this morning.

Madam Chairman, I am sorry about your struggle to get here

this morning. What has happened is that Marylanders have seen

rain for the first time in, I guess, months. And it was such a surprising occurrence, they all stopped to look at it.

Senator MIKULSKI. That is exactly right, instead of looking at the

road.

Senator CRAIG. Exactly. Now, you know what we who live in

desert States experience when the rain comes; we all rejoice. And

I think that is what folks in this area were doing this morning.

Mr. Secretary, I share some of the same passions with some different focuses than do my colleagues, in part because I do not have

some of the inner-city concerns that are expressed by the Chairman

or by the ranking member. They have those, and I support their

concerns. But let me thank you for the work you have done with

the U.S. Department of Justice to restore HUD to what I think are

some original goals and missions.

I was more than a bit incensed by the former practice of reprogramming housing dollars for gun buy-back programs, funds

that were originally dedicated for house construction and mortgage

assistance programs. It was a detrimental and, I think, reckless

public policy, especially to the poor and the under-served. It was

a political statement made on the part of a former Secretary of

HUD and Administration. I believe it served little value.

I think it is also important that HUD no longer serves as a litigious tool against the manufacturers of firearms. Your dissolution

of HUD’s role as a police agency to attack the Second Amendment,

I think, was a responsible, Constitutionally tenable policy decision,

not to mention a victory for taxpayers who were wrongfully forced

to unjustifiably subsidize an inter-governmental political agenda

that I have mentioned.
115

Next, I wholeheartedly acknowledge the necessity for access to

affordable housing for the disabled, the infirm, and the elderly.

HUD’s effort to crack down on egregious violators and those who

callously disregard the rules should be applauded, and I do it. And

I know you are concerned about it.

However, despite HUD’s programs to educate developers and

construction workers about the vague regulations and the ambiguous guidelines under the Federal Fair Housing Accessibility

Standards, there are still incidents in my State of Idaho where

scrupulous, honest home builders and developers are pursued in a

manner that resembles bounty hunting. Now I know you have

changed that. You have changed the incentive there. And that is

the way it ought to be.

We need to be in the business of educating. And we need to be

in the business of searching for and evaluating compliance directives and doing that in a way that is responsible, both for those

who would be subject to the directives and those for whom access

is a problem, because they are disabled or elderly or infirm. We do

not need to drive away responsible builders who want to provide

that kind of housing and want to comply, only to find out that

someone is going through their facilities, whispering under their

breath: If we search long enough, we will find and file a violation.

That has happened too many times. I know you are working to

correct it; I appreciate it. HUD needs—has a responsibility and a

mission that I think you have it headed toward. It has a lot of fine,

responsible employees who want to do the right thing. And it can

be done without a visible, high-profile political agenda.

With that, I thank you for being here. There are a variety of

questions that, if I stay long enough, we will visit about, or I will

submit them for the record.

Madam Chairman, let us proceed. Thank you.

Senator MIKULSKI. Thank you. Excellent points, Senator.

Yes, Mr. Martinez. Please go ahead.

STATEMENT OF HON. MEL MARTINEZ

Secretary MARTINEZ. Thank you, Madam Chair and Ranking

Member Bond and Senator Craig. It is a pleasure to be back with

you today. And I think, as Senator Bond said, we are all a year

older and a year wiser, to be sure, Senator. But it has been an exciting opportunity to serve in a Department where I think we are

at a very close heartbeat of what is the American dream for so

many families.

And so, Senator, I enjoyed our opportunity to visit in your State,

to see some of the problems that you are dealing with. Amazingly

enough, those very problems you are speaking of are what were the

middle-class suburbs of the 1950’s and 1960’s that are now becoming areas under stress. It is something that I am very familiar with

from my home community.

But on to our budget, the 2003 budget, for the Department of

Housing and Urban Development. It is a $31.5 billion budget,

which represents a funding level increase of 7 percent over the fiscal year 2002. At a time when dollars are especially precious and

the cost of homeland security is consuming many Federal re-
116

sources, this shows the President’s commitment to improving housing and communities.

By helping Americans to become home owners, ensuring affordable housing opportunities for those who rent, and renewing communities, and preserving a safety net for the most vulnerable, this

budget will enable HUD to make a tremendous difference in the

lives of millions of Americans.

The housing market in 2001 was extremely vigorous. And we

enter a new year with home ownership rates at a record high. Because we know that home ownership gives families a stake in their

communities and creates wealth, the HUD budget makes owning a

home a viable option for even more Americans. President Bush and

I are committed to expanding home ownership, especially among

minority families.

As a first step, our budget quadruples the American Dream

Downpayment Fund to $200 million. This Presidential initiative

will help an estimated 40,000 first-time home buyers with a high

down payment and closing costs that are often a significant obstacle to home ownership.

A tax credit for developers for single family affordable housing

will promote home ownership opportunities among low-income

households by supporting the rehabilitation or new construction of

homes in low-income urban and rural neighborhoods.

Our budget proposes tripling funding for the Self-Help Homeownership Opportunity Program, the SHOP program, to $65 million, as committed by the President last spring. That will make

possible the construction of an additional 3,800 homes for many

disadvantaged Americans. SHOP is an excellent example of Government maximizing its resources, working with the private sector

partners and community organizations like ‘‘Habitat for Humanity.’’

Another exciting home ownership initiative targeted at low-income families will allow them to put a year’s worth of their Section

8 rental vouchers toward a home down payment. And because we

consider it to be a invaluable tool for prospective home buyers and

renters, the HUD Budget process proposes also making housing

counseling a separate program. The increase in sub-prime lending

has made financial literacy more important than ever; armed with

the facts, a consumer is far less likely to be victimized by predatory

lending. We are funding the Housing Counseling Program at $35

million, a $15 million increase over the previous fiscal year.

While we consider home ownership to be an important goal, we

recognize that it is not an option for everyone. Therefore, our Budget preserves HUD’s commitment to expanding the availability of affordable housing for many of Americans who rent their homes. The

Section 8 Tenant-Based Program, today, assists 2,000,000 families.

Our Budget provides an additional 34,000 housing vouchers. The

Budget also dedicates $16.9 billion to protect current residents by

renewing all expiring Section 8 contracts.

To encourage the production of moderate-income rental housing

in under-served areas, the HUD Budget would reduce the mortgage

insurance premium for the Federal Housing Administration multi

family insurance. Three times over the last 8 years, HUD has been
117

forced to shut down our multifamily mortgage insurance program

because of a lack of credit subsidy.

We made a commitment to a comprehensive review of the credit

subsidy program. Through our review, we were able to lower premiums, create a self-sustaining program, provide the industry with

stable financing at a much lower cost, and provide thousands of

new opportunities for rental housing across the country.

Today I am happy to report that our FHA business is strong,

both for single family and multi family housing. In fact, business

is so strong that if our insurance commitments continue at the current rate for the rest of the year, we will exceed our statutory limits for both MMI Fund and the GI Fund. If that continues, I will

have to come back here and ask the Congress to raise the statutory

ceilings enacted last October.

I am particularly pleased with our multi family business this

year. Through the first 5 months of the fiscal year, FHA has issued

insurance commitments totaling close to $1.4 billion, compared to

$900 million for the same period a year ago; that is up 50 percent.

Many in the industry and some in Congress were worried that raising the insurance premium would damage the multi family industry. Clearly, that has not happened.

FISCAL YEAR 2003 BUDGET HIGHLIGHTS

The 2003 Budget gives HUD new resources to further our mission of supporting the Nation’s most vulnerable. This includes lowincome families, homeless men and women, the elderly, individuals

with HIV/AIDS, victims of predatory lending practices, and families

living in housing contaminated with lead-based paint. Let me highlight some of those proposals.

To better coordinate the work of the many Federal agencies that

reach out and provide continuum of care to homeless men, women,

and families, the Budget calls for doubling HUD funding for the

newly reactivated Interagency Council on the Homeless. Additionally, converting three competitive homeless assistance programs

into one consolidated grant will eliminate the workload and expense of administering three separate programs. More importantly,

it will give local jurisdictions new discretion in how dollars are

spent.

In addition to that, and something I really love, is that it will

take from 18 months, the grant process, and compress that to 3

months before the money gets out the door.

HUD’s Lead Hazard Program is a central element of the President’s effort to eradicate childhood lead poisoning in 10 years or

less. The HUD Budget will fund the program at $126 million, a

substantial increase over the previous year.

The HUD budget also proposes spending $251 million under

HUD’s Section 811 program to improve access to affordable housing

for persons with disabilities. Many of the additional 34,000 Section

8 vouchers will be to assist non-elderly, disabled individuals.

Initiatives, such as the HOME Investment Partnership Program

and the CDBG program, address the Nation’s critical housing

needs and stimulate economic development and job growth. Combined, these two programs will distribute an additional $200 million formula dollars to State and local governments.
118

We have increased the CDBG formula grants next year by $95 million to $4.4 billion. In addition, we have proposed changing the

distribution of CDBG formula funds by reducing the size of grants

going to some of our wealthiest communities. This will help bring

dollars into those areas where they can do the most good and

where they are needed the most.

I am also excited about our brand, new concept to address the

large backlog of repair and modernization projects in public housing. The Public Housing Reinvestment Initiative represents a new

way of leveraging the value of public housing by allowing Public

Housing Authorities to borrow funds to make needed capital improvements. This will unlock the value of public housing assets by

allowing PHA’s to convert public housing units to project-based

vouchers.

Innovative thinking like this represents a departure from the

way things were done so often in the past. But being effective does

not mean spending more money, necessarily. Government works

best by being a good steward and facilitator and looking for results.

I am pleased that the President’s budget reflects our commitment

to efficiency, accountability, and the principles of excellence expressed through the President’s management score card. When

Government spends efficiently, the funds go much further; and we

reach many more citizens.

I am happy to tell you that, while virtually all agencies of the

Federal Government were given a red listing on the President’s

score card, HUD already has moved out of the all red. And we already enjoy a number of yellows and even some greens. And so

that is, Senator Bond, making us even more popular at OMB. So

we are very excited with that.

But let me just thank the committee for your cooperation and

your help and your support through this past year. I find our interaction to be very positive in the bipartisan spirit in which it is

done. And I look forward to your continued guidance as we go

through this budget process.

I would like to take a moment to introduce several people that

are here with me today, because they might be important in answering some questions. I just want to tell you that I am extremely

proud of the team we have assembled at HUD. In fact, we have a

team that I think is the best that HUD has ever had.

And I am proud to say we also have some additional members

of our team that are awaiting Senate confirmation, including the

very important Inspector General, which has, for several months,

been awaiting Senate final action. And I would urge the Senators,

if it is within your purview, to encourage the Senate to move forward on all of HUD’s pending nominees; most specifically and most

urgently the Inspector General.

But let me say that these folks are doing a terrific job for the

people of America. John Weicher, who is our Federal Housing Commissioner; Mayor Roy Bernardi, who is in Community Planning

and Development; Michael Liu in Public and Indian housing; and,

of course, Melody Fennel in Congressional Affairs, whom you know

well.

And not to diminish the folks to the right, but we will leave it

at that. Anyway, these are the Assistant Secretaries, I should say.
119

And, of course, Rob Woodson, who is my new Chief of Staff, and

I am very proud to have him.

So with that, I would be pleased to attempt to answer your questions.

Senator MIKULSKI. Well, thank you very much, Mr. Secretary.

[The statement follows:]

PREPARED STATEMENT OF MEL MARTINEZ

Chairwoman Mikulski, Ranking Member Bond, Distinguished Members of the

Committee:

Thank you for the opportunity to join you this morning to outline the proposed

fiscal year 2003 Budget for the Department of Housing and Urban Development

(HUD).

The $31.5 billion HUD budget represents a funding level increase of 7 percent

over fiscal year 2002. At a time when dollars are especially precious, and the cost

of homeland security is consuming many Federal resources, this shows the President’s commitment to improving housing and communities.

By helping Americans become homeowners, ensuring affordable housing opportunities for those who rent, renewing communities, and preserving a safety net for the

most vulnerable, this budget will enable HUD to make a tremendous difference in

the lives of millions of Americans.

The housing market in 2001 was extremely vigorous, and we entered the new

year with homeownership at a record high. Because we know that homeownership

gives families a stake in their communities and creates wealth, the HUD budget

makes owning a home a viable option for even more Americans. President Bush and

I are committed to expanding homeownership—especially among minorities.

As a first step, our budget quadruples the American Dream Downpayment Fund, to $200 million. This Presidential initiative will help an estimated 40,000 first-time

homebuyers a year overcome the high down payment and closing costs that are significant obstacles to homeownership.

A new tax credit for developers of single-family affordable housing will promote

homeownership opportunities among low-income households by supporting the rehabilitation or new construction of thousands of moderately priced homes in low-income urban and rural neighborhoods. This credit of $1.75 per capita matches in size

the existing Low-Income Housing Tax Credit and like the existing Credit would be

administered by the States. As these new homes are occupied by people who were

previously renting, their old apartments will become available for others to rent,

thereby effectively increasing the supply of affordable rental apartments in many

locations.

Our budget proposes tripling funding for the Self-Help Homeownership Oppor- tunity Program (SHOP) to $65 million, as committed to by the President last spring.

That will make possible the construction of an additional 3,800 homes for disadvantaged Americans. SHOP is an excellent example of government maximizing its resources by working with private-sector partners like Habitat for Humanity.

Another exciting homeownership initiative targeted at low-income families will

allow them to put up to a year’s worth of their Section 8 rental vouchers toward

a home down payment. Because we consider housing counseling a valuable tool for

prospective homebuyers and renters, we propose funding the program at $35 million—a $15 million increase over the previous fiscal year. The increase in sub-prime

lending has made financial literacy more important than ever; armed with the facts,

a consumer is far less likely to be victimized by predatory lending.

While we consider homeownership to be an important goal, we recognize that it

is not an option for everyone; therefore, our budget preserves HUD’s commitment

to expanding the availability of affordable housing for the millions of Americans who

rent their homes.

The Section 8 tenant-based program today assists nearly two million families. Our

budget provides an additional 34,000 housing vouchers, an increase of one and onehalf percent. The budget also dedicates $16.9 billion to protect current residents by

renewing all expiring Section 8 contracts.

To encourage the production of moderate-income rental housing in underserved

areas, the HUD budget would reduce the mortgage insurance premium for Federal

Housing Administration (FHA) multifamily insurance.

Three times over the last 8 years, HUD has been forced to shut down our multifamily mortgage insurance programs because of lack of credit subsidy.

We made a commitment to a comprehensive review of the credit subsidy program.

Through our review, we were able to lower premiums, create a self-sustaining pro-
120

gram, provide the industry with stable financing at a much lower cost, and provide

thousands of new opportunities for rental housing across the country.

Today, I am happy to report that our FHA business is strong, both for single family and multifamily housing. In fact, business is so strong that if our insurance commitments continue at the current rate for the rest of the year, we may exceed the

currently appropriated limitations for both the MMI Fund and the GI Fund.

If that continues, I will have to come back here and ask Congress to raise the

statutory ceilings enacted last October.

I am particularly pleased with our multifamily business this year. Through the

first 5 months of the fiscal year, FHA has issued insurance commitments totaling

close to $1.4 billion—compared to $900 million for the same period a year ago. That

is up 50 percent.

Many in the industry and some in Congress were worried that raising the insurance premium would damage the multifamily industry. Clearly, that has not happened.

The 2003 budget gives HUD new resources to further our mission of supporting

the Nation’s most vulnerable. This includes low-income families, homeless men and

women, the elderly, individuals with HIV/AIDS, victims of predatory lending practices, and families living in housing contaminated by lead-based paint.

Let me highlight just a few of our proposals.

To better coordinate the work of the many Federal agencies that reach out and

provide a continuum of care to homeless men, women, and families, the budget calls

for doubling HUD funding for the newly reactivated Interagency Council on the

Homeless. Additionally, converting three competitive homeless assistance programs

into a consolidated grant will eliminate the workload and expense of administering

three separate programs. More importantly, it will give local jurisdictions new discretion in how those dollars are spent.

HUD’s Lead Hazard Control program is the central element of the President’s effort to eradicate childhood lead poisoning in 10 years or less. The HUD budget will

fund the program at $126 million, a substantial increase over the previous year.

The budget also proposes spending $251 million under HUD’s Section 811 program to improve access to affordable housing for persons with disabilities. And

many of the additional 34,000 Section 8 housing vouchers will aid non-elderly, disabled individuals.

Initiatives such as the HOME Investment Partnerships Program and the Community Development Block Grant (CDBG) address the Nation’s critical housing needs

and stimulate economic development and job growth. Combined, these two programs

will distribute an additional $200 million in formula funding to State and local governments.

We have increased CDBG formula grants next year by $95 million, to $4.4 billion.

In addition, we have proposed changing the distribution of CDBG formula funds by

reducing the size of grants going to the wealthiest communities. This will help bring

dollars into those areas where they can do the most good.

I am excited about a brand-new concept to address the large backlog of repair and

modernization projects in public housing. The Public Housing Reinvestment Initiative represents a new way to leverage the value of public housing by allowing public

housing authorities (PHAs) to borrow funds to make needed capital improvements.

This will unlock the value of public housing assets by allowing PHAs to convert public housing units to project-based vouchers. The PHAs can obtain loans by borrowing

against individual properties—similar to private-sector real estate financing.

Innovative thinking like this represents a departure from the way things were

done so often in the past—but being effective does not have to mean spending more

money. Government works best when government serves as steward and facilitator,

and measures success through results. By facilitating the involvement of new local

partners, the Public Housing Reinvestment Initiative will breathe new life into public housing communities.

I am proud of the HUD budget and the way it reflects the Administration’s commitment to efficiency, accountability, and the principles of excellence expressed

through the President’s management scorecard. When government spends efficiently, the funds go much further. We reach more citizens. We help to change more

lives.

The people of HUD know that the American Dream is not some unattainable goal,

because we see it achieved every day, so often by families who never imagined owning their own home or reaching economic self-sufficiency. Through our budget—and

the continued commitment of President Bush—citizens will have tools and opportunities they can put to work improving both their lives and their communities...

as they travel the road to achieving their own American Dream.
121

I would like to thank each of you for your support of my efforts. The Subcommittee’s guidance throughout the appropriations process last year was invaluable. I

look forward to working with you in moving the fiscal year 2003 HUD budget forward, and I welcome your continued counsel as we work together on behalf of the

American people.

Thank you.

CORE HUD PROGRAMS

Senator MIKULSKI. I know my colleague, Senator Bond, will ask

in great detail the Section 8 questions. It is an issue in which we

share identical concerns. And I know both of us are concerned with

what is happening to the renewals, the whole issue of a database,

and, most of all, the issues around production.

Let me go to the core HUD programs. First of all, we know that

there is a modest increase in CDBG, which we appreciate. But let

me talk about the concerns I have in elderly, disabled, and ShelterPlus. I note that in the administration’s request, they did not fund

Shelter-Plus Care. Estimates say that this is a need for about a

$100 million program. This is viewed as one of the real effective

programs to serve the homeless. Could you tell us the rationale behind it not being funded? And what then would be other alternatives to shelter-plus care?

We were blessed this year with a mild winter. But still, if you

are outside, no winter is mild.

Secretary MARTINEZ. No, I understand.

Senator MIKULSKI. This was so much more comprehensive because it was service empowerment connected, as well as the temporary shelter one. Could you give us the thinking on that?

Secretary MARTINEZ. Well, Senator, first of all, let me say that

I am, you know, very passionate about the homeless issue. And I

have, since this summer, been saying that we should attempt to

eradicate chronic homelessness in the next 10 years. And I think

this is a dual goal, if we look at chronic homelessness as something

that has much to do with problems that are ancillary to an issue

of shelter, but more are really dealing with a person’s mental state,

or addiction issues, or other problems which is going to take this

combined effort of the interagency council that we have put together to begin to bring to bear all of the resources of the Federal

Government on this issue, so that we can make a difference and

advance the issue forward.

On the funding issue that you mentioned, though, what we have

is a proposal that consolidates funding for cities, county, and State

governments and would be based on a streamlined approach. No

unit of government would be automatically entitled to these funds.

Instead, eligible recipients would have to prove that their performance in expending funds met strong performance standards before

a grant recipient is allowed to continue to receive the funds.

But in terms of shelter care, the funding issue that you mentioned is that it was double-funded. And the Administration has

had a policy of not forward funding. So the 2003 is funded through

the appropriations in the year 2002. And we are now seeking to

continue in that vein. But then, 2004 will present a new challenge,

and we will deal with that at that time. So our goal is not to fund

that, but simply to utilize the funding that was provided in prior

appropriations and that should take care of 2003 expenditures.
122

HOMELESSNESS

Senator MIKULSKI. Well, Mr. Secretary, advocates for the homeless would dispute the OMB analysis. First of all, I think we are

all agreed in a national goal. If we could work together to really

have a foundation for eliminating chronic homeless in a decade,

that would be a stunning achievement, because we have at so

many of these programs for so many years, even going back to

when——

Secretary MARTINEZ. Sure.

Senator MIKULSKI [continuing]. Mr. McKinney slept on a grate,

Congressman McKinney. So, I think we want to do that.

The advocates for the homeless would dispute the whole issue of

the double-funding, and then they would analyze it, et cetera. So

why do we not just have our staffs get together——

Secretary MARTINEZ. Yes. We would do that.

Senator MIKULSKI [continuing]. And talk about this——

Secretary MARTINEZ. I think we can walk through——

Senator MIKULSKI [continuing]. So that we can assure that, number one, we work towards this national goal, that a core program

in which there is experience and seasoning work. We know these

are competitive grants. They are not micro-entitlements, which

means it keeps everybody on their toes with fresh thinking and,

yet, accountability.

Secretary MARTINEZ. If I might just assure you that the intent

is the same. It is an issue of the mechanics of funding, but that

there is no desire or intent to not continue to fund a Shelter Plus

Care program.

ELDERLY HOUSING

Senator MIKULSKI. Well, let us then go to the housing for the elderly. As we understand it, the elderly housing request is $783 million, the same as last year. And I believe that was pretty much the

same as the year before. I am concerned about the whole issue of

renewals and the increase in renewals.

My staff says the renewals this year will cost $15 million, and

that the renewal demand is growing. By their analysis of what the

renewal cost will be the renewal costs are more than they were last

year, which means——

Secretary MARTINEZ. Which program are we——

Senator MIKULSKI. We are talking about elderly.

Secretary MARTINEZ. A voucher—elderly—I am sorry, I am not

with you on this.

Senator MIKULSKI. We are talking about the elderly vouchers; excuse me.

Secretary MARTINEZ. Okay. I am sorry. Okay. I wanted to make

sure we are on the same page.

We are fully funding, although it is a flat funding level, but it

is fully funded from what it was in the prior year.

Senator MIKULSKI. You think you are going to have enough

money to meet the renewals and to also—they are nodding their

heads. Why?

Secretary MARTINEZ. I believe—yes. We feel comfortable with

what we are requesting, that we will be able to fund all renewals.
123

Senator MIKULSKI. Well, again, the sole renewal of contracts,

that is another area of concern that, I think, requires further conversation.

Secretary MARTINEZ. We should obviously——

Senator MIKULSKI. And the way we say further conversation is

that Senator Bond and I both have a very big amendment on the

floor this year, this minute.

HOPE VI

Let me get off the renewals and go to HOPE VI. HOPE VI is

scheduled to be re-authorized. Some people call it a big success.

Some people call it too costly. Some people say that the poor have

been displaced, not to be able to come back to the very community

that was helped or rebuilt. And also, HOPE VI has now been here

for a while. So the question is: Where are we on the future of the

HOPE VI? My question will be: What is the Administration planning to do for analysis and recommendation for the re-authorization? Senator Sarbanes and I, Senator Bond, and I know Senator

Graham want to work very closely on this.

And then, is it really time to think totally different than—have

we been? HOPE VI was created to deal with severely distressed

public housing. It came out of a housing report more than a decade

ago. Could you give us a navigational chart for where you want to

go with getting us ready for re-authorization?

Secretary MARTINEZ. Well, first of all, we think——

Senator MIKULSKI. And should we re-authorize it at all? Should

it be sun seted?

Secretary MARTINEZ. No. First of all, we think it should be reauthorized. We think it is a very positive program and one that has

done a lot of good across the country. We believe that there are

some things that we should do, as we go forward with the program,

and some improvements that we think would make it even better.

I think that we need to be very cautious about the dislocation issue

and the way in which we administer that, to ensure that people are

treated with the best amount of not only good intentions, but also

good outcomes in terms of their relocations.

We need to also be aware of the number of units that are devoted

to the people who are living in public housing. And it can be done.

We have a project here in the District where 100 percent of the

residents of public housing are going to be coming back to the new

project in a new, reconfigured development. And I think that is

very positive.

We believe that we need to even out the playing field, because

I think that in the past there has been a great accumulation of

HOPE VI grants in certain communities who have not the capacity

to put out the projects because so much money has come to them.

And we need to make sure that we are allowing other communities

to participate in the HOPE VI program. In other words, I think it

was focused on some of the most egregious mistakes of public housing. I think now we need to make that more available to more

places around the country.

Senator MIKULSKI. Well, are you doing an internal analysis?

Secretary MARTINEZ. Yes, we absolutely are. And we will be coming to you with recommendations. We believe a number of these
124

things can be done within the existing statutory framework. But

we want to have that discussion and present to you what our recommendations will be.

Senator MIKULSKI. So you have an internal analysis going on?

And then you are also, I presume, working with the Urban Institute, who has been conducting an almost ongoing longitudinal

study of lessons learned from HOPE VI? Because what we wanted

was not a real estate program. We did not want to do real estate

development. We wanted to do community building——

Secretary MARTINEZ. Right.

Senator MIKULSKI [continuing]. Both in terms of a fiscal infrastructure, but also a social infrastructure that took the people not

only away from distressed public housing, but through empowerment, job training, stakes in the community, et cetera.

Secretary MARTINEZ. There are some terrific examples out there.

And we are going to be working with the Institute. In fact, I can

recall being in Jacksonville, Florida, where they have done not only

a redevelopment of HOPE VI, but they have also incorporated in

it Habitat for Humanity housing within the property of what was

previously a public housing community.

And so, the public housing residents can then progress into home

ownership right there, in the same area as people who built the

house and then move on to a nicer house. So they have a nice cycle

of progression going on in the project in Jacksonville, which I think

is noteworthy. But yes, we are definitely pursuing that and working with the Institute.

Senator MIKULSKI. Well, I am going to turn to my colleague, Senator Bond. When do you think your analysis will be completed?

Secretary MARTINEZ. Well, I am told the Urban Institute draft is

now complete. So we should have a report—the Congress had

asked by June 15.

Senator MIKULSKI. That is fine. Thank you.

Secretary MARTINEZ. I think that would be the target date that

we should use.

Senator MIKULSKI. Thank you very much.

Senator Bond?

Senator BOND. Thank you very much, Madam Chair.

And thank you, Mr. Secretary, about your kind words about

HOPE VI. As one of the fathers of the program——

Secretary MARTINEZ. Yes, sir.

Senator BOND [continuing]. I am glad you did not trash it totally

out of the——

Secretary MARTINEZ. You should be——

Senator BOND. And we are very proud. Murphy Park in St.

Louis, which really was the prototype, shows great promise. And

we are working on Darts-Webby and some of the others. But having said that, we know that the costs are too great in many areas.

And the Federal Government winds up with significant soft costs.

So we are, while we think the program is going in the right direction, we really would like to reform it and make sure we get our

money’s worth out of it. Because it has the potential, it meets a

great need, we want to make sure it does it in a responsible manner.
125

CONFIRMATION OF INSPECTOR GENERAL

Turning now to your comment. I want to build on your comment

about the need to get an inspector general confirmed. And I am

very distressed with what is being held up. Because with the Department going through the kinds of changes that you are, you

need a new broom to sweep clean. And I am very much concerned

that a couple of my colleagues—and I say this for the record. And

I will be more specific when I go to the floor—several of my colleagues are holding up the nomination of the HUD IG because

HUD has refused to provide preferential treatment and funding for

HUD projects in Pittsburgh and Indianapolis.

I have very strong concerns about the proposed resolution of the

issue, because it would hold a community group harmless upon default of a HUD debt on a project it owns and for which it has promised to maintain as low-income housing for some 30 to 50 years. I

understand these projects are in poor shape and may not be appropriate for where they are located. But I would really hate to see

HUD end up rewarding the community group with future project

funding arising from this very same transaction, despite the failure

of the group to meet its legal obligations.

I do not believe it is appropriate that HUD provide incentives for

any number of owners to walk away from HUD projects when it

suits their convenience. And I intend to provide support for HUD

so it is not pushed into that position.

Would you care to comment?

Secretary MARTINEZ. Well, Senator, I appreciate your comments.

I believe that having a confirmed Inspector General is very, very

important to HUD’s work at a time when we are in the midst of

serious investigations dealing with Anti-Deficiency Act violations

by an agency under HUD tutelage, which has been of great concern. It is an issue where that Department, that agency, that entity

needs the leadership of an Inspector General and has been languishing for months.

The fact is that we have tried to be as flexible as we could to

provide assistance to communities by working with them. And we

have bent as far as we can bend in good conscience. We will not

go beyond good conscience. And at some point the Senate, in its

wisdom, will have to determine what happens to the nominees of

HUD.

The fact is that we are doing the best we can with the people

we have there. It would be great to have the nominees, but at some

point we have to do what we think is right for all the American

people. And then others will have to search their conscience to do

what they think is right.

Senator BOND. Stay with it, Mr. Secretary. I hope Senate wisdom

is not an oxymoron.

STAFFING ISSUES

Turning to HUD staffing, over the last few years, the Department depended on community builders to administer most of the

functions of the Department, without regard to program needs or

staff expertise. You now issued a new realignment and redevelopment plan. I think it is extremely important. This is one of those
126

non-sexy issues that is critical for the successful management of

your Department.

What is the status of it? Do you expect to have to hire additional

staff? And what will the impact on HUD’s Salaries and Expense account be?

Secretary MARTINEZ. Well, first of all, let me say that every function at HUD should be tied to a programmatic area. And so therefore, we took about 800-and-some-odd community builder positions

and have redeployed them back within the HUD system. What we

have done is we have done this with no layoffs and no firings. We

have done it also with only a very minimal number of upper management changes in terms of locations. So it has been very, very

little disruption to the work force, while at the same time bringing

people into focus to a specific program area where they should be

deployed. This is already well under way, pretty well taking place.

And as a result of it, I think we will have some period of time to

just see how it all shakes out in terms of the number of FTE’s that

we have.

We had—last year, at the beginning of our budget process, we

had about—a number of vacancies.

How many vacancies? Several hundred?

So, we believe that we do not need new positions at this point,

because we are going to try to fill in those extra several hundred

vacancies that we had. And as we do that, obviously in natural attrition taking place, we could not really handle bringing in more

people than that anyway, not doing it prudently and judiciously.

Something else we are doing, Senator, is we are retraining folks

as we do this redeployment so that I do not hear the stories I heard

when I first visited in some communities. And a HUD employee

would tell me: I used to be in housing. Now I am in public housing.

I do not know anything about public housing. So I do not know

what to do on my job. Because there were no dollars for training.

So we are making sure that work force is trained for the job to

which they are assigned.

Senator BOND. Sounds reasonable.

If you would permit me, Madam Chair, I want to follow up——

Senator MIKULSKI. Senator, I know that you are the lead sponsor

with Carl Levin on this amendment. And I will be joining you at

that 11 o’clock meeting.

Senator BOND. Okay.

Senator MIKULSKI. But why do you not take your time, so you

do not have to worry about a second round? And then I will do the

wrap-up. Does that sound good?

Senator BOND. I tell you what, let me just ask the public housing

questions. I need to see a constituent outside. And I will come back

and take one more, maybe take one more round.

Senator MIKULSKI. Okay.

PUBLIC HOUSING CAPITAL FUNDS

Senator BOND. But let me focus, Mr. Secretary, on the Public

Housing Capital funds. A proposed $400 million reduction in Public

Housing Capital Funds, I think that is very excessive. I would ask

you how OMB justifies the reduction from public housing.
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Secretary MARTINEZ. Well, first of all, Senator, I think we made

some very substantial changes in the way that Capital Fund is utilized last year. And I think that the Congress ought to be commended for that. I think it will be very, very positive in the way

that it assists the utilization of the dollars. But—and better management of them as well.

I think the concept there was to try to initiate a new way in

which we could allow project funding to obtain financing to redo

these projects and allow them to be modernized by using private

financing. To the extent that may be successful, and we think it

can be successful, we believe it can advance the opportunity for

projects within a public housing unit to be improved and modernized.

If that were not to work, I did not intend, in any of our discussions with OMB, that there should be a penalty associated with a

capital fund for public housing. So I would be prepared to come

back to you and request additional funds, if, in fact, the private financing options did not work and did not prove to be successful.

Senator BOND. Well, Mr. Secretary, I think you got my drift in

my opening comments. What I see this as is a back door way—and

there have been some in past administrations, apparently this administration, that want to voucher out public housing. So once you

get private funding in, I see this as the camel’s nose under the

tent, that you take the best projects, you get private funding for

them, then you just support them on vouchers. And you really

change the nature. And you put the burden—you move the burden

to the Section 8 program to keep these going, rather than funding

them as public housing.

I think you either see your costs go up with Section 8 and pay

a lot more in Section 8 or, if you do not keep it filled with Section

8 people, you are going to lose some of the best quality public housing to market rate or to others.

So, I see this as a proposal shifting the cost of public housing

from the Public Housing Operating in Capital Funds to the Certificate Fund. And I see the best units in public housing converted to

private housing with the inventory of affordable housing in many

market places shrinking. Why am I wrong in that assumption?

Secretary MARTINEZ. I am sorry, Senator. I am——

Senator BOND. What is wrong with my assumption? Can you

allay my fears and suspicions?

Secretary MARTINEZ. Secretary Liu and I were just discussing it,

because I wanted to have a chance to have the benefit of his thinking in how I should respond to your question. I think that——

Senator MIKULSKI. His questions really express my sentiments

completely. We are like twins on this.

Secretary MARTINEZ. I am going to ask Secretary Liu if he could

touch on this a little bit.

Mr. LIU. Senators, the proposal was by no means from HUD’s

view, a back door way, nor intended to be a way to voucher out the

program. We clearly see this as another tool, similar to what we

have developed under moving to work, where housing authorities

have been very aggressive in utilizing that mechanism to go into

the bond markets to get very sizeable investments from the private

sector, as well as doing debt financing.
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But a key barrier that they have found is that our subsidy methodology, whereby we give capital funds in the aggregate, makes it

much more difficult for them to target specific project sites in

which they can then bring in at a much more reasonable time

frame; i.e., in our lifetimes; the dollars to deal with the needed

backlog, which was mentioned by the members in their opening

comments.

We also see, in fact, that this is a methodology that could possibly deal with the need to develop more affordable housing. By

project-basing a building, initially, say if you have 100 units, that

does not mean that those 100 units need to be locked into that

physical setting for all time. It allows—it gives the option. And

again, this whole program is optional. This is not something that

we would be mandating any housing authority to move into. It

would allow a particular housing authority to move a segment of

units, or the value of those units, to other properties that they

might either acquire or want to develop to create even more affordable housing.

So, we view this as another tool among many; not a panacea, but

another tool to give housing authorities greater flexibility in which

to attract their needed financing to deal with their major rehab or

potentially new development needs. We have tremendous interest

by a number of housing authorities. I was out in Fairfax just 2

weeks ago. They would love to be able to use this tool.

We have had calls from ‘‘Moving-to-Work’’ cities that right now

looked at the concept and felt that, boy, perhaps they could do it

under ‘‘Moving-to-Work’’ right now. So, we have had very strong interest from housing authorities themselves, and from resident

groups.

Senator BOND. Well, obviously your objectives are similar to our

objectives. But, boy, we really have some questions about that road.

We really look forward to having further discussions.

And, Madam Chair, I am going to turn the questions back to you.

Thank you.

Senator MIKULSKI. Well, thank you.

MILLENNIUM COMMISSION

Of course, the whole issue of affordable housing and the best

ways to do it, you know, are really also being addressed by the Millennium Commission.

Secretary MARTINEZ. Yes.

Senator MIKULSKI. And while we are pondering this year’s appropriation, from what I have heard from participants I know on the

commission, they are really working very hard, can meet their

deadlines. And it is this committee’s intention to hold some type of

either hearing or round-table with them for these discussions, because we know they are intractable.

But let me come back to——

Secretary MARTINEZ. May I comment on that, Madam Chair——

Senator MIKULSKI. Yes. Please go ahead, sir.

Secretary MARTINEZ [continuing]. Just to be sure you know that

we have been very closely monitoring their work.

Senator MIKULSKI. Yes.
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Secretary MARTINEZ. Chairman Ravich and I have met on a

number of occasions, and also Vice-Chair Molineri, or co-chair.

Senator MIKULSKI. Yes.

Secretary MARTINEZ. And so we have been very much keeping up

with her work. And we would look forward to that kind of a dialogue when it comes.

Senator MIKULSKI. That is why I say we really look forward to

that.

Secretary MARTINEZ. Fine.

MANAGEMENT INFRASTRUCTURE AT PUBLIC HOUSING

Senator MIKULSKI. One of the things we talk about, though, the

issues of the Capital Fund, the shrinking Capital Fund is troubling

to me, the same as Senator Bond. What also, though, is troubling

to me is management infrastructure at public housing. So whatever

programs we do—and they go to the mayors or the county executives, as our able secretary once was and still thinks like one.

Secretary MARTINEZ. Right.

Senator MIKULSKI. You know, from reports that I have gotten,

there are 237 out of close to 2,000 public housing authorities that

have been scored as ‘‘troubled.’’ I do not know what ‘‘troubled’’

means. But I am troubled, because so many of the public housing

authorities do not seem to be able to keep track of their Section 8s.

They do not seem to know what to recommend in terms of their

backlogs. And I could go on.

Could you tell us what, number one, HUD means when they say

a public housing authority is ‘‘troubled’’; what is its criteria? And

what is its plans to turn them around? Because so much money ultimately comes to them. And if they do not know what to do with

the money, it certainly is not going to help the poor, the communities, et cetera.

Secretary MARTINEZ. Let me answer your question first in a

large, global sense. And then I am going to ask Secretary Liu to

answer in the more specific sense.

One of the things that I find most distressing in my job is to get

my morning clips and have my daily review of who has been indicted and who went to jail and who was fired because they were

using HUD funds in the public housing arena.

Unfortunately, that happens all too often. And I find it to be a

number of issues with it that, I think, I should comment on. First

of all, I believe that there has been sort of a ‘‘boys will be boys’’—

or ‘‘girls will be girls,’’ but a sort of an understanding that—that

is just part of what happens in public housing, that it just often

times ends up that way, and so be it.

This Administration has taken an attitude that this is not acceptable and that we have got to do better than that. Because, you

know, at any time, as you very well mentioned, that a dollar is

misused by a public housing agency and it is going to some person

whom it does not belong to, that is being taken away from a single

mother like we met that day at that new house that she was so

proud to be the owner of, trying to raise a couple of young children.

And it is about the way that people live in America in ways that

they should not live.
130

We recently have taken administrative action to completely manage—or completely take over the management of the New Orleans

Housing Authority, a troubled housing authority for many, many

years. I believe that, along with whatever we can tell you specifically as to what it means to be ‘‘troubled’’ and how we bring a

housing agency back into better management, that there is a tremendous amount of responsibility that rests with the Nation’s mayors and city councils and governing boards of communities that ultimately have the responsibility for their public housing.

And I want to make sure that we, as we go forward and do whatever we can from the Federal level, that we do not forget to put

the responsibility where it certainly lies, which is with the Nation’s

mayors, who appoint the people to the boards of public housing,

who in turn appoint their executive directors.

So I think it has to be a shared responsibility, part of it Federal,

but a huge part of it has to be an understanding that we will not

put up with it and that the locals have got to do better.

Now let me have Secretary Liu on the specifics.

PUBLIC HOUSING AUTHORITIES

Mr. LIU. Madam Chair, there are two evaluations that we use,

one specifically focused in on the management of the Section 8 program and another which looks at larger issues regarding performance for the public housing authorities. If they score below certain

levels, they then are considered ‘‘troubled.’’

Now even——

Senator MIKULSKI. What are the top three criteria, Mr. Liu?

Mr. LIU. Under Section 8, we have utilization rates, we have reporting requirements to report in a timely fashion. Are the vouchers that are issued actually issued in a timely fashioned? Are people actually placed?

So, the main thrust of the measurement is the Administration

getting the vouchers out. And then second, are they actually used?

Those are the major items which we are focusing on. And to put

into context, 237 is not insignificant, but there are close to 3,500

public housing authorities.

We have allocated approximately $10 million for the provision of

technical assistance to address those agencies which are troubled,

technical assistance in most cases in the form of providing contractor help to the housing authority for the specific problems that

they might have.

Then within the categories of troubled agencies, there are, of

course, varying levels. There are some which are border line, which

might need just a little assistance. Perhaps they are just not good

in reporting back to us in a timely fashion of what is going on. And

then, of course, there are the more egregious situations, where they

need a tremendous amount of assistance in providing counseling

and providing education to home owners, et cetera, apartment owners, et cetera, who are involved in the program.

So that, in a nutshell, is our approach to dealing with that and

our plan to deal with that.

Senator MIKULSKI. Well, first of all, I appreciate that. And I

want to acknowledge what the Secretary said. Where there is

fraud, that is totally unacceptable. And I believe that HUD, its In-
131

spector General—and I believe we need one approved expeditiously.

We have to really prosecute. And I mean it in the metaphorical

sense, through the proper authorities.

In addition to the overt fraud, there are the concerns that I have

over incompetency. And then just complacency and being a laggard.

First, I am going to salute any public housing authority that is

doing a good job. It is really hard to work with the poor, in poor

neighborhoods, with crack cocaine continuing to be an insidious

virus in our communities.

So for those who are doing a good job, God bless you. But for

these others, there is this culture that you are talking about that

is corrosive. And it goes at every staff level. So I believe that yes,

the mayors or county execs, the local governing body, have to take

initiatives. But I would hope that really what HUD does—and we

need to look at this—is set national standards and then training

of these housing authorities where they can also learn from their

peers.

Secretary MARTINEZ. Absolutely.

UTILIZATION OF VOUCHERS

Senator MIKULSKI. Because ‘‘been there, kind of done that,’’

knowing what the struggles and challenges are. And that is the

training aspect.

I am going to go to the criteria, though. It deals with the utilization of vouchers. That is one of the core aspects on which they

should be judged. But our concern is, are they just dumping the

vouchers? In other words, if they are measured by just getting

them out, are they just dumping the vouchers?

Number two, what are they dumping the vouchers on? A lot of

the places that I have seen that get Section 8 are really dysfunctional housing units. Then we saw what the housing Section 8 does

by taking over an apartment building and, where the poor have a

voucher, and they think it means something, but it means nothing

else than what they had lived in.

And therefore, what is the criteria for the housing? I know landlords do not always want to take the poor. There have to be incentives. This is a really big issue about how public housing authorities, what is our criteria? What should our criteria be? And then

also, it comes back to production.

Now, Senator Bond and I have a big amendment on the floor.

And we are going to be wrapping up in about 10 minutes. You see

how all this is linked? I am troubled about us not being able to

seem to get anywhere with this——

Secretary MARTINEZ. Well, Senator——

Senator MIKULSKI [continuing]. Acknowledging your goodwill and

your administrative talents. So——

Secretary MARTINEZ. Well, and let me say that we are focused on

the issues. And you raise some very good points. I think, number

one, we should give kudos to those good housing authorities. And

I know that sometimes the people in the industry feel that I am

always beating up on them because I talk about these problems.

We have to talk about the—you know, unfortunately, it is the troubled ones that usually get our attention. There are many, many

hundreds and thousands of them that are doing a great job.
132

But as to those that are troubled, we have got to pay attention

to them. You are absolutely right. We have dollars that go to training. We have dollars that go to training of the executives and the

commissioners, as well. And we understand the need for us not

only to deal with what might be fraud, what might be illegality,

but also what might be just plain management problems. And I

think those are important issues to focus on.

In terms of the Section 8 dumping, can you address that?

Mr. LIU. Madam Chair, as I mentioned, that is a concern, if that

is going on. But we link not only the issuing of the vouchers, we

also link the actual placement of people to get the right picture,

hopefully, across the board.

Senator MIKULSKI. I do not know what placement of people

means, Mr. Liu.

Mr. LIU. I mean, that once they get the voucher, they can actually get into an apartment, that they are actually——

Senator MIKULSKI. A safe, sound apartment?

Mr. LIU. Yes. But then, of course, they have to also follow inspection protocols. And they have to report to us on those inspection

protocols.

Senator MIKULSKI. I do not believe a lot of them do it.

Mr. LIU. Well, we——

Senator MIKULSKI. I do not believe they do it.

Mr. LIU. We hope that we catch them within the numbers that

you mentioned. And we will be taking the actions necessary, remedial in those cases where they are open to that and where that can

happen, and, of course, prosecutorial, if in fact it is required. You

are absolutely right.

Senator MIKULSKI. Senator Bond. We could talk all day about

this.

Senator BOND. Thank you, Madam Chair.

Let me just add—I’ll try to make these questions quick. And I

hope that the extensions can be for the record.

MARKET-TO-MARKET

Market-to-Market is obviously something we have worked on for

a long time, providing a mechanism to reduce the cost of over-subsidized, expiring Section 8 contracts while preserving the housing.

I would like for you to supply for the record how much Section 8

funding has actually been saved by the program, how many

projects have been preserved with Section 8, how many projects

have been removed from Section 8 inventories, who opted out of

their Section 8 project-based contracts.

And I would just ask if you can comment generally on the program?

Secretary MARTINEZ. Sir, we will provide you with the information that you seek.

Senator BOND. Thank you.

Secretary MARTINEZ. I think that we have—after a slow start,

that program, I think, has been hitting its mark, if you will. And

I think it is doing a good job of preserving the Section 8 contracts.

So, we feel good about where it is today. We think it took a long

time ramping up, but we do feel like it is beginning to bear some

fruit. And we will get you some details.
133

OFFICE OF FEDERAL HOUSING ENTERPRISE OVERSIGHT

Senator BOND. Okay. Something this Committee has been working on for years is OFHEO. It took almost 10 years for the Office

of Federal Housing Enterprise Oversight to issue risk-based capital

standards for Fannie Mae and Freddie Mac, despite a requirement

that they be issued within 18 months of the appointment of the director. I am very much concerned about a proposal that would remove funding for this office from the jurisdiction of the Appropriations Committee.

We see no good reason provided for the recommendation. Frankly, it is because we have been on their case because they have

failed to do their job. We ought to kick them and stomp them and

make them do their job. And now somebody thinks that they would

be better if they did not have our kind in general oversight.

A number of groups that do business with the GSE’s and who

will be impacted by the regulation express concern that there will

be little accountability of OFHEO for possible decisions that could

damage financial markets. Do you have any views on where

OFHEO ought to be and what is the best way to ensure its accountability?

Secretary MARTINEZ. I believe that it should be under your continued, gentle guidance. And I think that anything we can do to

strengthen OFHEO, to improve its ability to do its regulatory work

by having an OFHEO that is enhanced in its ability to do what it

does, staffing and otherwise, I think it is to the good. I think that

GSE oversight is a very, very important thing to our markets and

to our economy. And I believe that the best place to do this is within the current OFHEO frame work but with a strong, viable

OFHEO.

INTERAGENCY COUNCIL ON THE HOMELESS

Senator BOND. And finally, a couple years ago, the Subcommittee

reactivated the Interagency Council on the Homeless, because we

were very much concerned that we needed much better coordination in the programs and activities to prevent and end the tragedy

of homelessness. We made a number of important changes in the

operation to ensure that it was not a HUD-driven process and that

the council receives the support it needs from The White House.

We are thrilled that Philip Mangano has been selected to head

the Council. But I want to make sure the Administration is complying with the letter and intent of the legislation to ensure that

we have full participation from the various agencies, and it is not

solely a HUD-driven exercise.

Would you care to comment on that?

Secretary MARTINEZ. Yes, sir. And let me assure you that is the

case. It is intended to be a White House-driven initiative. Mr.

Mangano was hired through The White House. He is going to be

housed at HUD physically, but it is going—that inter-agency council, which had not convened since 1997, we are now bringing it into

full activity. We are doubling the budget for it. And, in fact, the

other departments that are asked to be participants in that are

going to be asked to participate.
134

Secretary Thompson and I have met on the issue of homelessness

before. We both sent together our people to work together to try to

come up with the kinds of interaction and conversation that would

lead to better outcomes and not just bureaucratic turf protection.

But I assure you that my intent is not to dominate this debate but

to share that opportunity with my colleagues in the Cabinet.

Senator BOND. Thank you very much, Mr. Secretary. I will have

questions for the record on Section 8 fraud and abuse by non-profits in D.C. and some more on the homeless issues. There are so

many things. Unfortunately, I have to leave. But I appreciate it,

Madam Chair.

Secretary MARTINEZ. Thank you, Senator.

Senator BOND. Thank you very much.

Senator MIKULSKI. Senator Bond and I, along with Senators

Allen, Stabenow, and others, have an amendment on the CAFE

standards. And for us, it is a big job issue. And it is a pretty intense day.

PREDATORY LENDING

Mr. Secretary, as we wrap up, I want to thank you for the ongoing engagement of HUD and your able staff on the predatory lending issues, both using Baltimore as the laboratory, and also—continuing to address these on a national level. I also note in the audience is Laurie Maggiano from HUD, and we want to thank her for

her ongoing involvement. We really appreciate her professionalism

and pragmatism in dealing with these issues. So, we want to thank

you for that, as well as we get ready issues to work on the Prince

George’s issue.

NATURALLY OCCURRING RETIREMENT COMMUNITIES

I was so pleased to hear you say that you are having ongoing

conversations with Secretary Thompson, because another issue I

know the Committee shares is what they call the NORC’s, the Naturally Occurring Retirement Communities, that cannot be solved

with housing and cannot be solved with social services by themselves.

And I know HHS is embarking on some demonstration projects

to look at how to deal with this. And I would ask your staff to liaison very assertively with those. Because I think this is a significant

issue that is emerging. And with common sense and creativity, I

think we can really be doing some very good things.

COMMUNITY DEVELOPMENT CORPORATIONS

And the last issue is, and it comes back to what we discussed

with public housing authorities, capacity building. We need to be

looking at building housing and promoting home ownership. But

the people issues, I think, are—not only the poor people, but those

who administer programs. I would really encourage you to look at

this for our public housing authorities but, also, how HUD can

work with Neighborhood Reinvestment or some of the other groups

can work to think about how we can think about capacity building

for our CDC’s.
135

One of the things that is emerging in my own home town are

even certificates and programs now for non-profit management.

The non-profit sector is such a robust sector, as you know. And we

are public/private partnership——

Secretary MARTINEZ. Sure.

Senator MIKULSKI [continuing]. We are a public/private partnership group here. But CDC’s are so uneven in terms of the executives’ abilities, background, and training. Again, this is no fault.

Secretary MARTINEZ. Right.

Senator MIKULSKI. And also, even their boards. You know, if you

are in a private sector, you have board scrutiny and transparency

and all those things; we are held accountable. But non-profit

boards, very often it is volunteer work.

Secretary MARTINEZ. Right.

Senator MIKULSKI. And some of the board members, a lot of the

board membership are community-based people who have not had

experiences with accountability. They want to do these things.

And I think that this whole issue of capacity building is something that we need to think about. I am not looking to put a lineitem in the bill; I am not looking to do this. But Neighborhood Reinvestment has done a lot of this thinking. And I would like HUD

to think about it, too.

I think we need to go over after the CDC types that really skim

the system or game the system. I think they are few. So, should

we have a CDC certification program, if you will? But I am interested in those CDC’s where the executive director is either a bachelor of arts, maybe like in my own field of social work, that did not

have business training, or it could be a community leader, who is

charismatic, who is compelling, who knows how to save a neighborhood, but wants to operate it like out of a cigar box herself or himself and has not had that background.

And things do not work out. And we want to be sure that they

do work out. And I know this has to be solved at the local level.

But I am looking, then, for creative ideas, because I truly believe

the Community Development Corporation could have the same impact on communities as our small to mid-sized business. It is where

the new ideas are. It is closest to the people. It should be governed

in a way that reflects those local needs and so on.

But I am really looking at ideas on how we can facilitate empowerment and training initiatives at the local level. And it

might——

Secretary MARTINEZ. I was just going to say, Senator, I share

your passion for that, because I think that is an engine of ingenuity and——

Senator MIKULSKI. That is a great phrase.

Secretary MARTINEZ. But I think in addition to that, that HUD

does a disservice to these organizations when we waive rules and

facilitate them getting in over their heads. And clearly, that is

what happened in the District of Columbia example that we have

been talking about today. I think when HUD works best is when

HUD forces the system to operate within the guidelines that have

been well laid out by the Congress and by regulations, to ensure

that the organizations receiving the funding or receiving the hous-
136

ing opportunities are organizations that have the capacity. And if

they do not, we can work with them to build them to that level.

But when we weigh the rules and pretend that is all going to

work out okay for some more immediate purpose, frankly, that

sometimes just does not work. And there was a tragic example here

in the D.C.; example, where a number of rules were waived and

they should not have been.

Senator MIKULSKI. Well, I think that is a very good point. But

again, along with that, because I think there is the criteria of getting rid of the fraud and focusing on those issues. But I really

would hope you would also look within HUD, the non-profit sector

that I know you have an excellent relationship with, and perhaps

even—like Neighborhood Reinvestment. That is only a suggestion.

ADDITIONAL COMMITTEE QUESTIONS

And it is this committee’s intention to have a longer conversation

with you on some of these priorities. And I really want to thank

the President and your leadership. Because the stresses of homeland security are indeed there, both from a physical as well as a

psychological standpoint in our communities. And the fact that we

could stay the course is very good. And so we are going to look at

how we can make even wiser use of the money, empower the poor,

build neighborhoods, and build capacity.

[The following questions were not asked at the hearing, but were

submitted to the Department for response subsequent to the hearing:]

QUESTIONS SUBMITTED BY SENATOR BARBARA A. MIKULSKI

INCREMENTAL VOUCHERS

Question. The fiscal year 2003 budget request includes 34,000 new incremental

vouchers. All of the vouchers requested are targeted to specific populations. What

is the justification for targeting versus providing some of the vouchers on a fair

share basis?

The Administration’s budget proposes to make $40 million for people with disabil- ities available from the request of $204 million for incremental vouchers. This would

allow for funding of approximately 7,900 vouchers for non-elderly people with disabilities that have lost (or are expected to lose) access to public and assisted housing

as a result of projects being designated as ‘‘elderly only.’’ If Congress accepts this

recommendation, it would bring the 7-year total for this effort to address the impact

of ‘‘elderly only’’ designation to nearly $300 million. Can you update the Committee

on HUD’s efforts to implement and monitor this program? Answer. The proposed budget legislation indicates that of the $204 million pro- posed for these vouchers, up to $40 million would be used for non-elderly disabled;

up to $6 million would be used for initiatives related to the Olmstead decision, that

allows the use of vouchers for persons currently living in institutions to live independently; and up to 500 units will be dedicated to homeless veterans pursuant to

the Homeless Veterans Comprehensive Assistance Act of 2001. The rest would be

split among the other uses including fair share with particular emphasis on downpayment assistance. Out of the $204 million designated for incremental vouchers, the Department pro- poses to make $40 million available for non-elderly persons with disabilities living

in public housing units or other subsidized housing units that are now being designated for occupancy by ‘‘elderly only’’. This $40 million will support approximately

6,700 vouchers.

From fiscal years 1997 through 2001, approximately $210 million has been appropriated for non-elderly disabled vouchers under the Housing Certificate Fund. Of

the total $210 million, approximately $150 million was used in connection with ‘‘elderly only conversions’’ based on the applications received by HUD for such funding.

The remaining $60 million was transferred to the mainstream program because

HUD did not receive sufficient applications from Public Housing Agencies (PHA) for
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elderly only conversions to make full use of these funds. In fiscal year 2002, another

$40 million was enacted that are expected to support additional 7,900 vouchers.

Question. Specifically, can you provide additional information regarding: a) whether housing authorities receiving these vouchers are making them available exclusively to people with disabilities after their initial 1-year term,

Answer. PHAs are advised in the Notice of Funding Availability (NOFA) that

PHAs are required to initially make these vouchers available only to non-elderly disabled households even if it takes more than 1 year to initially issue these vouchers

for this purpose. Furthermore, the NOFA also directs PHAs that if any of these

vouchers are returned within the first year term of the annual contributions contract, the turnover voucher must be made available to another non-elderly disabled

household. In the case of vouchers funded from Section 811 appropriations these

vouchers may only be used for elderly households with a disabled person, including

the use of any turnover or renewals.

HUD is in the process of developing the ability to track the actual number of

vouchers used by households having a person with disabilities for which funding

was specifically provided from the funds available for ‘‘elderly only conversions.’’

This is in the initial phases of development, and will be implemented within 1 year.

The most recent data shows that 39 percent of the households that receive voucher assistance have at least one person with disabilities; more than half (22 percent

of the total households receiving voucher assistance) are non-elderly households

with a person with a disability.

Question. Are housing authorities using turnover generated from these vouchers

to serve non-disabled families?

Answer. After the first year is up, these vouchers are renewed and the non-elderly

disabled households under a lease continue to receive the benefit of the voucher assistance. However, after the first year, it is up to the PHA to continue the use of

any turnover of these vouchers for non-elderly disabled households based on local

housing needs. It is worth noting that once a disabled family uses its voucher to

lease a unit, the turnover of such units is very low.

Question. Is HUD providing protection from recapture of these disabilities vouchers similar to the protection provided to ‘‘welfare-to-work’’ vouchers?

Answer. In appropriating funds for families affected by ‘‘elderly only conversions’’,

the objective was to protect persons living in the projects, or on the owner’s or

PHA’s waiting list, from any injury that would result in their loss of housing assistance as a result of the ‘‘elderly only conversions.’’ Once this initial protection was

provided, any other household with a disabled person may apply and be placed on

the waiting list for vouchers or public housing. Many PHAs give preference for admission to households having a person with disabilities.

Question. Are housing authorities that have had ‘‘Allocation Plans’’ approved contingent on seeking vouchers under this program have actually followed up and applied for them?

Answer. Welfare-to-Work (WtW) vouchers are afforded a longer ‘‘protection’’ in

order for HUD to comply with the law. Specifically, the law authorizing the WtW

program requires that HUD conduct research and evaluation concerning the effectiveness of this demonstration. In order to have sufficient vouchers on which to base

its evaluation, HUD had to extend the protection given to households participating

in the WtW program,

HUD does not have this information at this time. We will conduct an analysis of

plans approved to date to identify those with approvals contingent upon the receipt

of designated housing vouchers. We will also determine whether these agencies have

applied for and received designated housing vouchers through NOFAs.

COMMUNITY DEVELOPMENT BLOCK GRANTS

Question. The fiscal year 2003 budget makes a change in the CDBG formula in

order to fund the $16 million Colonias Gateway initiative. How did the Department

come up with the new CDBG formula? Was this a thorough review of the formula?

Please detail the staff and outside groups consulted as well as the process the department undertook in recalculating the formula.

Answer. The Department’s proposed budget for fiscal year 2003 requests $4.436

billion in budget authority for the formula CDBG program to address locally identified community and economic development needs. Although the CDBG program allocates funds by formula in a way that targets most funds to our neediest communities, the current formula distribution of these funds also provides grants to higher-income communities. Because of the great disparity in per capita income among

our grantees, the budget proposal seeks to re-evaluate the method of allocating the

limited resources of the CDBG program.
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A legislative change has been proposed for fiscal year 2003 to reduce, by 50 percent, the amount of the grant to communities with per capita income equal to, or

greater than, two times the national average. It must be noted that this proposed

legislative change is intended to further target limited CDBG funds to the neediest

communities. If this proposal is enacted, the Department will use data on per capita

income from the 2000 Census to identify the communities whose funding would be

reduced.

The funds captured by the 50 percent reduction would become available to other

entitlement communities with lower per capita incomes and would not directly fund

the Colonias Gateway Initiative. However, the savings achieved by this movement

of funds to more needy communities would create room in the budget to provide resources for the Colonias Gateway Initiative, which is designed to serve some of the

poorest communities in the Nation.

The Department does not consider this a new formula for CDBG. The data from

the 2000 census needed to do a professional and comprehensive analysis of the

CDBG formula should be available this fall. We expect to do a study and present

it to Congress for their consideration next spring so that consideration could be

made for the 2004 allocation of funds. Rather than wait for the process and a full

examination of the formula, we chose to propose this adjustment to move a limited

amount of funds from very wealthy communities. The Administration did not do a

formal consultation on this issue.

SHELTER PLUS CARE

Question. The fiscal year 2003 HUD budget does not request funding for Shelter

Plus Care renewals, but the Department has given assurances that these grants will

be funded. Is the Department providing a guarantee to SPC providers that their

grants will be renewed?

Answer. Funding of renewals will be of the highest priority but remain dependant

on adequate Appropriation. Grantees must meet certain capacity and threshold requirements in order to be eligible to have these grants renewed. Funds were provided for contracts that expire in fiscal year 2003 in the fiscal year 2002 Appropriations Act and were given a top priority. Therefore, the fiscal year 2003 Budget request did not include funds for contracts that will expire in fiscal year 2003. The

Department intends to fund contracts that expire in fiscal year 2004 from fiscal year

2004 Appropriations, reflecting both the expected streamlining of the Homeless Assistance Grants program and to be consistent with how renewals are handled in

other HUD programs.

Question. Will the Shelter Plus Care grantees still be required to compete and

participate in the Continuum of Care?

Answer. SPC grantees have always been required to participate in the Continuum

of Care and must be included on the Continuum’s project priority list. We anticipate

that they will be listed at the bottom of the list, as they have in the past several

competitions, and would be funded non-competitively.

Question. If so, please provide an explanation of how the SNAPs office will award

and administer the renewals in advance of knowing whether they’ve been funded.

Answer. The Special Needs Assistance Programs office could not award renewals

in advance of knowing whether they are funded. If funds are appropriated in fiscal

year 2004, they should be available for award by the time the fiscal year 2003 competition is completed, which we anticipate will be in the first quarter of fiscal year

2004.

Question. Why does HUD consider the SPC renewals to be ‘‘forward funded’’ by

the fiscal year 2002 VA–HUD appropriations act, but does not consider the other

expiring grants in the SHP program to be forward funded?

Answer. Shelter Plus Care renewal grants have been funded over the last several

years on a non-competitive basis for 1 year only. Supportive Housing Program

(SHP) grants, on the other hand, are funded competitively, are awarded conditionally, require additional information before the grants may be executed, and may

be multi-year awards. Due to the competitive nature of the process and the length

of time it takes for a grant to be executed from the time the awards are announced,

it is necessary to award the SHP grants with funds from the fiscal year prior to

grant expiration.

Question. Does the fiscal year 2002 bill also fund SHP grants that expire in fiscal

year 2003?

Answer. Yes, the fiscal year 2002 bill funds Supportive Housing Program grants

that expire in fiscal year 2003.
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EMPOWERMENT ZONES/ENTERPRISE COMMUNITIES

Question. The fiscal year 2003 budget eliminates funding for Round II empowerment zones, and justifies this cut by saying that ‘‘current available balances as well

as CDBG and HOME formula funds are sufficient to cover needs.’’ What are the unexpended balances in the EZ accounts?

Answer. Fiscal year 2002 awards of $3 million per EZ were just recently made.

Based on funds awarded between fiscal years 1999 and 2001, unexpended balances

are:

State Grantee Name

Total Dollars Awarded—Fiscal years

1999–2001

Total Disbursed

(Drawn Down) Unexpended Balance

Percent

Drawn

Down

MA Boston .................................................. $18,972,866 $1,550,249.00 $17,422,617.00 8.17

OH Cincinnati ............................................ 18,972,866 2,707,801.90 16,265,064.10 14.27

SC Columbia .............................................. 18,972,866 3,863,989.72 15,108,876.28 20.37

OH Columbus ............................................. 18,972,867 4,238,148.01 14,734,718.99 22.34

NJ Cumberland ......................................... 18,972,867 6,444,368.78 12,528,498.22 33.97

TX El Paso ................................................. 18,972,867 3,871,913.23 15,100,953.77 20.41

IN Gary/Hammond/E. Chicago .................. 18,972,867 3,213,353.91 15,759,513.09 16.94

WV/OH Huntington/Ironton ............................... 18,972,867 9,073,969.86 9,898,897.14 47.83

TN Knoxville ............................................... 18,972,867 3,413,759.00 15,559,108.00 17.99

FL Miami/Dade .......................................... 18,972,867 2,431,148.00 16,541,719.00 12.81

MN Minneapolis .......................................... 18,972,866 3,975,735.53 14,997,130.47 20.95

CT New Haven ........................................... 18,972,867 2,982,801.67 15,990,065.33 15.72

VA Norfolk/Portsmouth .............................. 18,972,866 9,088,428.00 9,884,438.00 47.90

CA Santa Ana ............................................ 18,972,867 6,283,208.00 12,689,659.00 33.12

MO/IL St. Louis/East St. Louis ....................... 18,972,866 2,755,961.00 16,216,905.00 14.53

Total ....................................... 284,592,999 65,894,835.61 218,698,163.39 23.15

Question. Have any of the EZ’s failed to spend funds in the allowable time

frames?

Answer. There is no statutory or regulatory timeframe for spend out. Thus, none

of the grantees have strictly failed to spend money in the allowable time frame but

both Congress and the Department have expressed concern with the pace of expenditures in the program. While it is only one of many factors, the efficient use of resources is an important one in evaluating a community’s revitalization efforts. As

part of its efforts to improve oversight, HUD is considering a timeliness policy for

the Round II EZ grant modeled after other HUD programs. HUD has learned from

over 25 years administering CDBG that timeliness of spend out is a risk factor in

community and economic development programs and has proactively shared this experience with EZ/ECs in lieu of issuing a punitive policy. HUD is currently modifying its performance measurement system to track grant obligations and timely

spend out so that the progress of the grantees can be better monitored.

ASSET CONTROL AREAS

Question. The fiscal year 2001 VA–HUD Conference Report expressed the Committee’s concerns over HUD’s implementation of the ACA program. The report asked

HUD to report on the disposition program by May 15, 2001. Where is this report?

Answer. This report was submitted to the Committees on May 31, 2001. A copy

of the report is attached for you convenience.

LETTER FROM SEAN G. CASSIDY

May 31, 2001.

Hon. ALAN B. MOLLOBAN,

Ranking Minority Member, Subcommittee on Veterans, HUD, and Independent Agencies, Committee on Appropriations, U.S. House of Representatives, Washington,

DC 20515–6022.

DEAR REPRESENTATIVE MOLLOHAN: I am pleased to enclose a report on the implementation of the Single Family property disposition reforms enacted in Title VI of

the Departments of Veterans Affairs and Housing and Urban Development, and

Independent Agencies Appropriations Act, 1999. The report is submitted in accordance with the requirements of Conference Report 106–988 accompanying the Departments of Veterans Affairs and Housing and Urban Development, and Independent Agencies Appropriations Act, 2001. The report describes actions taken by
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the Department to develop new Single Family claims payment and asset disposition

procedures and to develop a reformed process for the disposition of Single Family

HUD-owned properties in revitalization areas.

If you need additional information, please let me know.

Sincerely,

SEAN G. CASSIDY,

General Deputy Assistant Secretary for Housing, Deputy Federal Housing

Commissioner.

REPORT ON IMPLEMENTATION OF FHA SINGLE FAMILY PROPERTY DISPOSITION

PROGRAM

Background

Title VI of the Departments of Veterans Affairs and Housing and Urban Development, and Independent Agencies Appropriations Act, 1999 (the Act) made significant changes to the Federal Housing Administration (FHA). single family insurance

program.

Section 601 of the Act contained amendments to reform and make more effective

the methods for paying insurance claims and, disposing of single family acquired

notes, and properties: The section:

—reorganized and updated existing statutory authority to eliminate obsolete or

redundant provisions;

—authorized a new claims payment procedure under which HUD would be authorized to pay a claim upon assignment of the mortgage rather than upon conveyance of the property;

—authorized HUD to take assignment of notes and transfer them to private parties for servicing, foreclosure avoidance, foreclosure, property management and

asset disposition; and

—authorized HUD to be an equity participant with private entities in asset disposition.

The changes to the claims and asset management and disposition procedures were

intended to occur in the overall context of HUD’s existing procedures for encouraging lenders to perform loss mitigation and for contracting to private entities the

maintenance and management of the HUD owned single family property inventory.

Section 601 also established certain enforcement mechanisms to ensure loss mitigation would continue to be performed so that as many families as possible would keep

their homes.

Section 602 of the Act established special procedures for FHA single family property disposition. These procedures were designed to ensure that the FHA single family property disposition program, in addition to providing returns to the insurance

funds on an efficient basis, could assist the Department in identifying and improving local revitalization areas and in providing homeownership opportunities in these

areas. To do this, section 602:

—required the establishment of revitalization areas based on low income, a high

number of troubled assets, and a relatively low rate of homeownership compared to the surrounding jurisdiction;

—distinguished between preferred purchasers (local governments and non-profit

organizations) and regular purchasers of assets within revitalization areas and

established a preference for sale of properties to preferred purchasers;

—established discounts for preferred purchasers designed, among other things, to

facilitate upgrading or rehabilitating the housing; and

—authorized the establishment of asset control areas (ACAs) within which preferred purchasers, with a plan for revitalizing and increasing homeownership

in the area, would become responsible for purchasing all eligible assets.

REPORT REQUIREMENT

The Conference Report (Report 106–988) accompanying the Departments of Veterans Affairs and Housing and Urban Development; and Independent Agencies Appropriation Bill, 2001, directs HUD to report to the Committee on the implementation of the single family property disposition program, enacted as part of the VA/

HUD fiscal year 1999 appropriations bill, including the status of the program and

an analysis of all savings achieved to date and anticipated to be achieved over the

first 5 years.

STATUS OF IMPLEMENTATION OF SECTION 601

Implementation of claims reform and asset disposition alternatives is overseen by

HUD’s FHA Comptroller with assistance from the Office of Single Family Asset
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Management. HUD secured expert help in structuring this alternative disposition

program, which is being called the Accelerated Claims Disposition (ACD) Program.

Delivery and Presentation on ACD Program Design—Completed

In January 2000, HUD’s program advisor, Federal Asset Advisory Corporation

(FAAC) delivered the final Program Design which was subsequently reviewed and

accepted by senior management. In May 2000, FAAC finalized the Internal Control

and Accounting Report portion of the Program Design, which was subsequently reviewed and accepted.

Development of Proposed Regulations—Ongoing

In October 2000, HUD began developing regulations based on the ACD Program

design. HUD anticipates that proposed regulations will be published by the end of

September, 2001. The regulations will describe and seek comments on the procedures for determining the disposition alternative for individual high risk defaulted

loans, and the eligibility requirements and other matters relating to the program

framework. The disposition of individual loans will be determined in large part by

the probability or improbability that loss mitigation will succeed. The disposition alternatives will include: (a) transfer to a joint venture, which may proceed to foreclosure but will have additional loss mitigation options to explore—such as partial

write-off, recasting and securitization, (b) transfer to a servicer specializing in loss

mitigation servicing, or (c) assignment of the note to HUD in order to use the Department’s non judicial foreclosure authority.

Engagement of Transaction Advisor—Ongoing

In January 2001, HUD began the procurement process to hire a Transaction Advisor to assist in implementing the ACD Program. HUD anticipates having a Contractor engaged by June 30, 2001.

ACD Program Demonstration Project—Imminent

Before implementing the ACD Program, HUD will conduct a Demonstration

Project. The Demonstration Project will be limited to the mortgage loans within the

jurisdiction of the Philadelphia Homeownership Center and will initially target

5,000 assets to be transferred to a joint venture ‘‘JV’’ partnership. HUD’s Transaction Advisor will assist in assessing the defaulted loan portfolio; developing procedures, guidance and quality assurance plans for the program; marketing to potential

JV partners; evaluating JV bids; and assessing project results. HUD anticipates

partnering in a joint venture by March 31, 2002.

STATUS OF IMPLEMENTATION OF SECTION 602

Revitalization Areas

Under section 602 of the Act, revitalization areas are low and moderate income

communities that are targeted by HUD, local governments, and non profits for special assistance through the property disposition program to effect stability in the

community and provide homeownership opportunities for the residents. The law expanded the criteria for designation of a revitalization area, which required a reassessment of the current guidelines and a consultation process with stakeholders.

Undertake Consultation Process—Completed

The Office of Housing consulted with program participants, Homeownership Center Directors, HUD REO Specialists, and others to determine the guidelines which

should be used in implementing the new criteria to make the ACA desigations.

Stakeholders, including non-profits and local governments, worked, with HUD with

the objective of developing clear guidelines that provide uniformity without being

overly rigid.

Develop Field Guidance on Revitalization Areas—Completed

HUD developed and, on August 18, 2000, issued to the Field Housing Notice H–

00–16 with criteria for reviewing, selecting, and designating revitalization areas. As

of May 1, 2001, over 800 zip codes have been designated as revitalization areas.

Within these areas, HUD will work with local governments and non-profit community partners to designate asset control areas, as described below.

ASSET CONTROL AREA (ACA) PARTNERSHIP PROGRAM

Overview

The ACA Partnership Program assists in the revitalization of designated neighborhoods by creating homeownership opportunities for the residents through the

sale of HUD-owned single family homes. In an ACA Partnership, HUD sells 100
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percent of its single family homes located in designated revitalization zones directly

to either local governments or HUD-approved nonprofit organizations at discounts

of as much as 50 percent of appraised value.

The Local ACA partner selects an ACA territory and presents a revitalization

plan to HUD for the proposed territory. The ACA Plan must demonstrate the local

partner’s ability to purchase, rehabilitate and resell all of the vacant HUD homes

in the designated area. The Plan also must contain performance goals, rehabilitation

standards, and supporting services such as homeownership counseling and mortgage

loan financing. Once the ACA plan is approved, HUD and the local partner enter

into a formal contract that outlines the terms and conditions for partnership.

Through discounted direct sales, the Partner receives instant equity which is used

to assist in the capitalization of the ACA. This equity can be used to rehabilitate

homes and implement homeownership counseling programs that prepare potential

purchasers for homeownership. Additionally, HUD offers 90-day interest free financing to the Partner on all of the homes purchased through an ACA Program. Once

rehabilitated, the Partner resells the home to a qualified purchaser. All proceeds

from the sale must be reinvested into the ACA program. The ACA program empowers the Partners as a driving force in the rehabilitation of their neighborhoods.

SPECIFIC IMPLEMENTATION STEPS

HUD developed a comprehensive five-step process designed to implement pilot

ACA Partnerships. The pilot partnerships create a fertile environment where procedures are developed and tested, operational processes are refined, lessons are

learned, and best practices are implemented consistently throughout the country.

The five steps are summarized below:

Hire & Deploy REO Specialists—Completed

HUD, identified REO Specialists to serve as the key coordinators for the program.

The REO Specialists are deployed in strategic cities throughout the country and are

assigned various territories. In this capacity, these specialists identify areas that

qualify for the program and market the program to the potential partners. They assist the partners in developing their proposals and working through the issues of

the contract. The specialists also present and gain approval of the ACA Partnership

proposals and coordinate all aspects of implementing the partnerships with HUD’s

Homeownership Centers.

Create Model ACA Contracts—Completed

HUD created a model ACA contract for use in the program.

Market the Program—Ongoing

The REO Specialists performed a detailed analysis of HUD-owned single family

properties and compared this with the revitalization criteria contained in the legislation. From this analysis, they identified and assigned priorities to targeted areas

for pilot programs. The specialists built demand for the program by describing the

economic benefits to potential partners at various forums such as neighborhood

workshops and town meetings. Finally, potential partners are added after they contact HUD directly and express the desire to participate in the program.

Negotiate & Execute ACA Contracts—Ongoing

The REO Specialists serve as HUD’s agents and negotiate all aspects of the agreements. They coordinate closely with the appropriate executive, legal and operational

officials in Headquarters as well as the Directors and REO Division Directors of the

Homeownership Centers.

Monitor Implementation of ACA Partnership—Ongoing

Working together, HUD Headquarters, the REO Specialists and the Homeownership Centers monitor the implementation of the ACA contracts. The ongoing challenges and issues are shared and resolved through appropriate workshops and forums.

Based upon the results of the steps outlined above, HUD implemented the ACA

Partnership Program, through Administrative means, in October, 1999. This is to

be followed by rule making; which is in process and is expected to be completed by

November, 2001.

RESULTS

The three schedules below illustrate the Department’s implementation of the ACA

Partnership program. To date, HUD has implemented fourteen partnership agreements in major revitalization zones, vs. five a year ago (Schedule 1). We also have
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nine partnership agreements scheduled to begin within the next 150 days (Schedule

2). Finally, seventeen other potential partners have expressed interest in participating in this program (Schedule 3).

SCHEDULE 1.—CURRENT ACA AGREEMENTS IN PLACE

Place (ACA Partner) Date of Agreement

NBR of Prop.

Exected Per

Year

NBR of Awaiting Closing

Number of

Properties

Sold

San Bernardino, CA (County) ............................................. October 1999 ........ 450 130 352

Miami-Dade, FL (County Housing Agency) ........................ December 1999 .... 60 6 53

Rochester, NY (City) ........................................................... April 2000 ............ 300 256 154

Chicago, IL, (Hispanic Housing Develop./Neighborhood

Housing).

May 2000 ............. 200 35 78

Fort Lauderdale, FL (City Housing Authority) .................... May 2000 ............. 30 2 14

Cleveland, OH (Cleveland Housing Network ...................... July 2000 .............. 75 35 82

Reading, PA (City) ............................................................. September 2000 ... 75 24 20

Washington, DC (Church Association of Community Services).October 2000 ........ 200 75 0

Burlington, VT (non-profit) ................................................ October 2000 ........ 5 1 1

Denver, CO (City) ............................................................... October 2000 ........ 100 9 1

Los Angeles, CA (County) .................................................. December 2000 .... 500 6 0

Rhode Island (State Housing Authority) ............................ April 2001 ............ 12 0 0

Hartford & Manchester, CT (Corp. for Independent Living).April 2001 ............ 50 0 0

Bridgeport, CT (City) .......................................................... April 2001 ............ 75 0 0

Total ...................................................................... ............................... 2,132 579 755

SCHEDULE 2.—ACA AGREEMENTS UNDER NEGOTIATION

City Date of Proposed

Agreement

Expected Number

of Properties Per Year

Prince Georges County, MD .............................................................................................. May 2001 ............. 60

Lancaster, PA ................................................................................................................... June 2001 ............. 20

St Paul, MN ...................................................................................................................... June 2001 ............. 30

Montgomery County, MD .................................................................................................. July 2001 .............. 30

Norfolk, VA ........................................................................................................................ July 2001 .............. 30

Allentown, PA ................................................................................................................... July 2001 .............. 40

Bakersfield, CA ................................................................................................................. August 2001 ......... 35

Ontario, CA ....................................................................................................................... August 2001 ......... 30

Springfield, MA ................................................................................................................. August, 2001 ........ 50

SCHEDULE 3.—Expressions of Interest

Phoenix, AZ

Compton, CA

Fontana, CA

Rialto, CA

Riverside, CA

Sacramento, CA

Orlando, FL

Palm Beach, FL

Dekalb, County A

Harvey, IL

Yale/New Haven, MA

Baltimore, MD

Baltimore County, MD

Hartford County, MD

Detroit, MI

Coatesville, PA

York, PA

Status of Savings

HUD’s Budget Request for fiscal year 1999 contained legislation for claims and

asset disposition reform. The budget justification indicated that the proposal would

allow FHA to maximize returns to the insurance funds as well as have benefits to

homeowners. The Department also indicated that although the legislation was proposed for enactment in 1999, the program would not take full effect until fiscal year

2002 and then phase in through fiscal year 2003. The time lag was to allow for full

development of complicated financial and other procedures, changes in systems, and

training both lenders and HUD staff. Savings were not anticipated to be available

under the program until fiscal year 2002. At the time legislation was enacted, the

present value of discretionary savings attributable to the reforms was scored at

$400 million: This is included in HUD’s baseline budget.
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Question. When will HUD issue the pending rule on the pricing structure of the

ACA program?

Answer. On April 5, 2002, the Department announced that it would be conducting

a full review of the program, and that during the review period, existing Asset Control Areas (ACA) agreements would be allowed to expire. An important part of this

review will be to accelerate program rulemaking during the next 4 to 6 months.

Question. What are the Department’s plans for this program?

Answer. As described above, on April 5, 2002, the Department announced that it

would be conducting a full review of the program, and that during the review period, existing ACA agreements would be allowed to expire.

ACCELERATED CLAIMS PROCESS

Question. The Department’s fiscal year 2003 Budget Summary notes state that:

‘‘In 2003 FHA will begin to move out of the single family property management

business and accelerate the claims process by taking mortgage notes rather than requiring lenders to foreclose and transfer single-family properties to FHA. FHA will

sell defaulted notes to the private sector for servicing and or disposition, thereby

eliminating most of the real property that HUD currently acquires’’ (p. 3). Already

HUD has proposed a new ‘‘Accelerated Claim Disposition Demonstration’’ program

(Federal Register, Tuesday, February 5, 2002) to implement this policy. How will

HUD ensure that these distressed communities do not again become land banks for

speculators who prey on low-income families?

Answer. The ‘‘Accelerated Claim Disposition Demonstration’’ program implements

Section 601 of the fiscal year 1999 Appropriations Act as authorized by Congress.

The best way to ensure that these distressed communities do not become land banks

for speculators who prey on low-income families is to maintain/retain the existing

tenure of the homeowner and financial investment/asset of the existing families. To

address its objective of increasing recoveries on the sale of assets, the Accelerated

Claims Disposition Demonstration will move more quickly to address the homeowner issues of default and exhaust all opportunities to reinstate the financial viability of the mortgage instrument and the homeownership tenure. The simple fact

that a period of vacancy will be avoided in more cases than under the current process and that occupancy will be sustained in more cases will work to help fortify already distressed communities.

Maintaining the initial homeownership tenure and the mortgage instrument most

effectively thwarts any opportunity for speculators who prey on low-income families

and preserves the financial investment of the asset of that community.

If foreclosure is unavoidable, the Department plans to include in its Joint Venture

Partnership Agreement a requirement to use servicing and lending best practices

that mitigate the risks of predatory lending or unscrupulous speculation at the expense of low-income families.

Even in the few worst cases when foreclosure does occur by the Joint Venture

partner, it is anticipated that the results of Joint Venture decision making will be

to invest prior to resale in the property making it more likely and suitable to be

acquired directly by a homeowner rather than an investor.

Question. What will happen to the ACA program if the Department implements

the proposed Accelerated Claims Disposition Demo?

Answer. The areas involved in the existing Asset Control Areas will be excluded

from the Accelerated Claims Disposition Demonstration in 2002.

HOPE VI

Question. How does HUD define ‘‘severely distressed public housing?’’

Answer. HUD uses the definition set forth at section 24 (j)(2) of the U.S. Housing

Act of 1937 (42 U.S.C. 1437v(j)(2)) to define ‘‘severely distressed public housing.’’

The Department has operationalized this definition by requiring PHA’s who apply

for HOPE VI to certify through a independent third party architect that the criteria

identified in the statue have been met and that the subject development is indeed

severely distressed.

Question. How many units of severely distressed housing currently exist?

Answer. The Department has over the past decade identified public housing units

that meet various standards of severe distress and obsolescence through the implementation of Section 18, Section 202 Mandatory Conversion and the HOPE VI program. As a result of this combined effort, public housing authorities and HUD have

identified as of May 1, 2002, 142,392 units that meet the basic criteria for demolition. As of May 1, PHAs have demolished or disposed of 80,945 units. Thus, 61,447

units have been approved for demolition and disposition that remain in inventory.

In addition, the Department received 66 HOPE VI Revitalization applications in fis-
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cal year 2001. Together, these applications certified the severe physical distress of

approximately 18,000 public housing units. (Note that some of these 18,000 units

already received demolition approval and thus are included in the 61,447-unit figure.)

ELDERLY AND DISABLED HOUSING

Question. The Administration is requesting $251 million for the Section 811 program for people with disabilities for fiscal year 2003. This represents a $10 million

increase over the fiscal year 2002 funding. However, according to estimates included

in the budget request, renewal of all expiring 811 ‘‘mainstream’’ tenant-based rent

subsidies will cost $32 million in fiscal year 2003—consuming more than the entire

proposed increase for the program—both tenant-based and capital advance/projectbased. Similarly, the budget requests $783 million for the elderly housing program,

the same amount funded in fiscal year 2002, but a greater percentage is designated

for renewal contracts. What are the estimated costs of renewing contracts in the elderly and disabled programs for the next 5 fiscal years?

Answer. See tables below:

OUTYEAR PRAC/PAC RENEWAL ESTIMATES

Fiscal year Unit Expirations Unit Renewals Avg Per Unit

Cost

1-yr Renewal BA

Costs

2003 .............................................................................. 4,037 6,360 $3,403 $21,641,140

2004 .............................................................................. 3,570 9,930 3,455 34,307,905

2005 .............................................................................. 4,429 14,359 3,512 50,435,756

2006 .............................................................................. 2,977 17,336 3,569 61,873,929

2007 .............................................................................. 2,236 19,572 3,704 71,122,000

RENEWALS OF MAINSTREAM VOUCHERS (SECTION 811)

Fiscal year First Time Expirations Unit Renewals Total Units to

Renew

Avg Cost per

Unit

1-yr BA Renewal

Cost

2003 ................................................. 1,845 3,510 5,355 $6,005 $32,156,775

2004 ................................................. 1,455 5,355 6,810 6,131 41,752,110

2005 ................................................. 2,383 6,810 9,193 6,260 57,548,180

2006 ................................................. 2,383 9,193 11,576 6,391 73,982,216

2007 ................................................. 1,993 11,576 13,569 6,525 88,537,725

Question. How is the Department planning for growing renewal needs?

Answer. The full cost of renewing current rental assistance contracts are included

in the Department’s out-year budget estimates that are projected for 5 years beyond

the budget year and are a part of our budget baseline.

HOUSING COUNSELING

Question. I am pleased that the fiscal 2003 HUD budget includes increased funding for housing counseling assistance. The budget justification includes an estimate

that 150,000 additional clients will be served by the increased funds. How many

people will receive pre-homeownership counseling? How many will receive posthomeownership counseling? How many of the people assisted receive other?

Answer. Although we cannot say definitively how many clients will request any

specific type of counseling, recent past experience has shown us that a little over

a third of counseling clients seek out pre-purchase counseling and a little under a

third seek post-purchase counseling (the other third seek rental, homeless, HECM,

and ‘‘other’’ counseling assistance). However, we based our 2003 estimate on the assumption that counseling agencies will see an increased volume of customers seeking default/post-purchase counseling. The significant number of layoffs that resulted

from the events of September 11 and some slowing of the economy over the past

year suggest that more families will be seeking assistance with managing their

household finances to prevent foreclosure. Even in the last few months, anecdotal

evidence suggests this shift in counseling needs is already occurring. Therefore, we

expect that the numbers of clients seeking pre-purchase counseling will be approximately 50,000 to 55,000 and the number seeking post-purchase counseling will be

approximately 65,000 to 75,000. The remaining 20,000 to 35,000 clients would be

seeking ‘‘other’’ types of counseling.
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HOME DOWNPAYMENT ASSISTANCE INITIATIVE

Question. If the HOME down payment assistance initiative is funded, will prospective homeowners assisted by this program be required to undergo homeownership counseling?

Answer. Consistent with the block grant nature of the HOME Program, the decision as to whether prospective homeowners will be required to undergo homeownership counseling resides with the local agencies administering the program, and

many communities do in fact require pre- and post-purchase counseling. Consequently, while counseling will not be required, homebuyers receiving assistance

through the American Dream Downpayment Initiative will have the same opportunities to receive housing counseling as provided for those who currently receive

downpayment assistance through the use of regular HOME funds. Should the local

HOME program managers decide that a family being assisted to purchase a home

requires or would benefit from pre- or post-purchase counseling, they may use some

of their regular HOME allocation to pay for it or fund this counseling from other

resources, including the separate assistance provided by HUD specifically for this

purpose.

DEPARTMENTAL GRANTS MANAGEMENT SYSTEM

Question. As you know, Congress has long had concerns over HUD’s management

information systems, specifically, its inability to assess program expenditures, outputs and outcomes. The Department recently cancelled its plans to implement the

Departmental Grants Management System. What are your plans for implementing

a department-wide grants management system? When can we expect to see such a

system, and what do you estimate the cost of development will be?

Answer. The Department of Health and Human Services has the lead for developing a common system to be used by all Federal agencies under the President’s

e-grants initiative. Under the e-grants effort, HUD has been working closely with

the 26 other Federal grant making agencies to develop a system that would allow

the public to find, apply for funding opportunities and then report progress in the

implementation of its programs. The timetable for deployment of this system as

agreed to by all the Federal agencies is October 2003.

HUD has proposed that many of the elements developed for the Department’s

Grants Management System can be implemented as part of this larger governmentwide system and has been actively discussing this with HHS and other agencies.

Under the e-grants, initiative every Federal agency would contribute to the effort.

The full cost estimates for the e-grants system have not been determined at this

time.

QUESTIONS SUBMITTED BY SENATOR HERB KOHL

DOWNPAYMENT ASSISTANCE PROGRAM

Question. I am concerned that the set-aside for down payment assistance within

the HOME program is not the best use of HOME funds. HOME currently gives

States the flexibility to address the housing needs that are most pressing in their

communities. I am always reluctant to endorse a one-size fits all approach because

I usually find that Wisconsin loses out. Now, the goal of helping families own their

own homes is laudable and the State of Wisconsin is already using about one-third

of the funds it receives through the HOME program for homebuyers assistance,

leveraging the Federal funds with State, local and private funds to get families into

homes.

While I realize this program has yet to be authorized, does the Administration

propose that the set-aside for downpayment assistance be limited to communities

with 20 percent poverty levels? I ask because I am concerned that this program

could direct HOME funding away from those who may need it but are not clustered

in poor communities. While Wisconsin has some significant numbers at the poverty

level, our low income families are spread out across the State and are not in identifiable clusters or pockets in most cases.

Answer. The concept of ‘‘20 percent poverty communities’’ is not one that is used

in the HOME Program even though, as one might expect, a significant number of

HOME Participating Jurisdictions (PJs) would meet this standard. Consequently,

American Dream Downpayment (ADD) Initiative funds will not be limited to such

communities.

American Dream Downpayment Initiative funds would be allocated by a formula

that considers both community need (i.e., the current HOME formula) and the past
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efforts of PJs in providing downpayment assistance through their regular HOME

program funds. In addition, in order to maximize the number of PJs participating

in the American Dream Initiative, no PJ would receive more than 2 percent of the

ADD appropriation. Funds made available through use of this 2 percent cap would

be reallocated to all uncapped PJs. In addition, since PJs that have not done homebuyer projects in the past 10 years would be unlikely to start now if their share

of ADD funds is any less than $25,000, the final step of the allocation determination

process is to zero out allocations for PJs where: (1) the adjusted formula allocation

amount is less than $25,000; and (2) they have not undertaken any homebuyer activities using regular HOME funds during the life of their program.

Implementing this allocation process for the $50 million fiscal year 2002 ADD appropriation will result in Wisconsin PJs receiving approximately 2.18 percent of the

ADD funds available, while they receive about 1.88 percent of the regular 2002

HOME appropriation. The allocation process used under ADD actually works to

Wisconsin’s benefit.

Question. How will the downpayment assistance program address the needs of

these families?

Answer. Obtaining the resources to meet upfront downpayment and closing costs

is the most significant obstacle to homeownership among lower income groups. By

providing a dedicated stream of funding for homebuyer assistance, the American

Dream Downpayment Initiative would eliminate this obstacle for tens of thousands

of additional families each year while enabling jurisdictions to increase homeownership rates, broaden their tax base, and stabilize neighborhoods.

In a 2000 research report by the Local Initiatives Support Corporation (LISC) entitled Mind the Gap: Issues in Overcoming the Information, Income, Wealth, and

Supply Gaps facing Potential Buyers of Affordable Homes, it was determined that

30 percent of low-income buyers cannot afford to buy a modestly priced home because they lack sufficient funds for the downpayment while under 3 percent could

not do so because they could not afford the monthly payment. Since the average

amount of cash needed for downpayment on a modestly priced home in 1999 was

approximately $3,500 according to the report, the American Dream Fund would be

providing just the amount necessary at just the right point in the homebuying process to accomplish its goals. Like the successful Self-Help Homeownership Opportunities Program (SHOP) that targets assistance at the main obstacle to ‘‘Habitat for

Humanity’’ type development—land acquisition—by targeting assistance specifically

at overcoming the downpayment hurdle, the American Dream Fund would complement the use of regular HOME funds and would result in a significant increase

in the number of low-income homeowners.

In regard to those who do need assistance with their monthly payment, ADD

funds can be used as well to buy down the current interest rate available to the

homebuyer or the principal loan balance, thus saving a considerable amount in interest costs over the life of the loan.

Question. The downpayment assistance program you are proposing would direct

$200 million from the HOME program to 40,000 families. That works out to $5,000

per family. While this is not an insignificant amount, given the cost of home ownership these days can this make a difference for most families? Even assuming that

these families could get a 7 percent/30-year mortgage, $5,000 will only lower monthly payments $33/month. How is this an improvement as compared to what we are

doing already under the HOME program?

Answer. Again, citing the 2000 research report by the Local Initiatives Support

Corporation (LISC) entitled Mind the Gap: Issues in Overcoming the Information,

Income, Wealth, and Supply Gaps facing Potential Buyers of Affordable Homes, it

was determined that 30 percent of low-income buyers cannot afford to buy a modestly priced home because they lack sufficient funds for the downpayment while

under 3 percent could not do so because they could not afford the monthly payment.

Since the average amount of cash needed for downpayment on a modestly priced

home in 1999 was approximately $3,500 according to the report, the American

Dream Fund would be providing just the amount necessary at just the right point

in the homebuying process to accomplish its goals.

ELIMINATION OF CHRONIC HOMELESSNESS

Question. According to a study released in December by the U.S. Conference of

Mayors, 37 percent of requests from homeless people for emergency shelter went

unmet in 2001. On average, people remained homeless for 6 months in the cities

surveyed, an increase for 54 percent of the cities surveyed. These numbers are disturbing. I understand that the Administration has made a commitment to end

chronic homelessness in the next decade. This is an admirable goal, but there are
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some who work closely with the homeless who have questioned whether the modest

increases in homeless programs are sufficient to meet this goal.

If chronic homelessness is to be eliminated in the next 10 years, do you intend

to devote significantly more funding for homeless programs in future years budgets?

Answer. The Department is working with a variety of other Federal agencies to

end chronic homelessness in the United States. In particular, we have undertaken

several major initiatives with the Department of Health and Human Services (HHS)

to not only coordinate activities but, most importantly, to open up the enormous resources tied to the HHS mainstream supportive service programs for use in meeting

the critical supportive service needs of homeless persons. We are similarly working

with the Department of Veterans Affairs (VA), which has joined the HUD/HHS

Interagency Task Force, to better utilize the resources of that agency in eliminating

chronic homelessness. Similar inter-Departmental coordination has been achieved in

the development of Policy Academies jointly being sponsored by HHS, HUD and VA

in which State governments are actively engaged in identifying and eliminating barriers that currently prevent homeless persons from accessing supportive service

funding.

In addition, HUD’s efforts to coordinate access to Federal funds to end chronic

homelessness are now being assisted by the Interagency Council for the Homeless

(ICH). The Agency, with the new leadership of Executive Director Philip Mangano,

is responsible for planning and coordinating the Federal Government’s actions and

programs to assist homeless people, and making or recommending policy changes

to improve such assistance. ICH has committed to actively working with all its

member agencies to aggressively promote the goal of ending chronic homelessness

across the Nation.

HUD believes that, with effective coordination of all relevant Federal and State

Government agencies, improved targeting of all resources available for addressing

homelessness, and the expanded active involvement of non-profit provider agencies

so critical to this effort, the Nation can achieve the goal set out by Secretary Martinez last July.

In addition, the HUD program that most directly works toward ending chronic

homelessness is the Shelter Plus Care Program. This program provides rental assistance for permanent supportive housing for disabled homeless persons. HUD has

committed to request additional funding above the current funding level to ensure

that all otherwise eligible Shelter Plus Care renewal projects can be renewed. Although it is difficult to project exact renewal needs due to the flexible nature of the

5-year grants, based upon already approved 1-year renewals and projected renewals

of 5-year grants, it is estimated that the renewal demand for Shelter Plus Care will

be approximately $200 million in fiscal year 2004. The Department will carefully

scrutinize the total amount of homeless substitute funds needed in our initial request to OMB and this request will certainly take into full consideration both renewals and regular program costs.

HUD has moved aggressively to encourage our applicants to seek needed funding

for supportive services from the mainstream supportive service programs of HHS,

VA, the Social Security Administration, the Department of Agriculture and other

agencies. As the transition to other sources continues, a growing percentage of

HUD’s funding is being freed up for use in developing housing. As a result, large

additional increases in HUD’s homeless appropriations, beyond the Shelter Plus

Care renewal costs noted above, are not anticipated.

Question. Also, are you leaving out those who might not be deemed chronically

homeless but whose needs are also going unmet?

Answer. HUD’s initiative to end chronic homelessness will in no way ignore the

needs of persons who are homeless but not chronically so. A large majority of the

McKinney-Vento Act resources administered by HUD have traditionally addressed

persons who are not chronically homeless. Under HUD’s Continuum of Care process,

these decisions are made by the community itself, not HUD. However, HUD’s initiative to end chronic homelessness encourages communities to consider making additional efforts to especially address the needs of those homeless persons that are disabled and have been homeless for long periods of time. As a result, it is anticipated

that a greater percentage of available resources will be used to fight chronic homelessness but the bulk of those resources will continue to be used to address the approximately 80 per cent of homeless persons who are not considered chronic homeless.
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1Forty-four of those 49 grants, were obligated by September 30, 2001, but for a variety of reasons the PHA did not put the correct numbers in Line of Credit Control System (LOCCS). Four

of the 49 grants were Moving to Work grantees (MTW) that totaled approximately $46 million.

One of the 49 grants originally identified was a $6 million grant for the Virgin Islands Housing

Authority (VIHA). It was later determined that the $6 million was composed of an emergency

loan/grant. Consequently, this grant was excluded from the analysis of recaptures because the

24-month obligation deadline in the statute applies to regular formula grants and not grants

for disasters and emergencies. The total for the 49 grants that were excluded is $82,387,814.

Finally, four PHAs misreported the amount of unobligated funds. This required a $3 million adjustment in the amount of unobligated funds. The department intends to carefully review the

four misreported situations and will take corrective actions/sanctions against those PHAs if appropriate. 2There were a total of 67 PHAs that managed the 72 grants. Five of the PHAs had a grant

from fiscal year 1998 as well as fiscal year 1999.

QUESTIONS SUBMITTED BY SENATOR CHRISTOPHER S. BOND

PUBLIC HOUSING REINVESTMENT AND FINANCIAL REFORM

Question. HUD is proposing over $400 million less in Public Housing Capital

funding for fiscal year 2003 than fiscal year 2002. In addition, the fiscal year 2002

funding is some $150 million less than the fiscal year 2001 level. These reductions

seem excessive especially since public housing throughout the country has a capitalization backlog of some $22 billion. How does HUD justify this reduction from public

housing?

Answer. The proposed amount in the President’s Budget is sufficient to cover the

accrual of new Capital needs for fiscal year 2003. In addition, as of December 31,

2001, there were approximately $5.5 billion in unexpended Capital grant funds that

were provided to PHAs. Included within this amount there were approximately $3.2

billion in Capital grant funds that remained unobligated by the PHAs. These balances are significant. The Department will closely monitor obligations and expenditures and make appropriate budget proposals.

Question. In addition, the VA/HUD fiscal year 2002 Appropriations Act included

requirements to ensure the timely use of these funds last year, including a reallocation of the capital funds where a PHA does not obligate its capital funds within a

reasonable period of time. This change in the law was the result of HUD representing that a number of PHAs were not obligating their capital funds quickly

enough and that these funds were sitting unused. I have no problem in requiring

PHAs to address their capital needs to ensure that residents live in the best housing

possible. However, in retrospect, how big a problem are unobligated Public Housing

capital funds? Can you put a dollar number on this problem? Answer. HUD Initially identified 163 grants with approximately $212,608,002 in

fiscal year 1998 and 1999 Capital Fund grants in PHAs that failed to obligate 90

percent (the Quality Housing and Work Responsibility Act of 1998 (QHWRA) standard) or more of their grant award by the 24-month obligation deadline in the

QHWRA. We later subtracted 49 grants from the 163 grants that were found to be

legitimate obligations, as described in the footnote 1 As a result of this analysis, the Office of Public Housing identified a total of 117 grants with $126,821,817 of unobligated Capital Funds for the 2 years in question.

For the 117 grants, the HUD Field Offices were asked to provide a justification

and supporting documentation for each PHA that failed to obligate in a timely manner. The Department carefully reviewed each case and the justification proposed for

compliance with the section 9(j)(2)(A) of the 1937 Act, including cases where the

Field Offices had given the PHA an original obligation deadline beyond September

30, 2001, or the PHA had an extension granted by the field office or a self-granted

extension.

HUD identified a group of 24 grants that had unobligated balances as of September 30, 2001, that did not have either: (a) a PHA self-extension, or (b) a HUD

Field Office approved time-extension in accordance with the Comprehensive Grant

Guidebook, 7485.3 G, issued October 1996. PIH determined that these grants should

be recaptured. PIH has recently directed the HUD Field Offices to recapture these

funds.

HUD identified a second group composed of two parts: (a) 53 grants that were 100

percent obligated as of March 22, 2002, and (b) 19 grants that had time extensions

or an original obligation deadline dates after September 30, 2001, but were not

known- to be 100 percent obligated by March 22, 2002. On March 22, 2002, the Department sent a letter to PHAs 2 that managed 72 grants and requested that, within

5 days, they certify the amount of grant funds unobligated as of the date of the letter. Responses to HUD’s March 22, 2002 letters, from the PHAs (Table 2) were received and then tallied. As of April 3, 2002, the total funds unobligated from the
150

72 grants in Table 2 is $647,499 from 6 PHAs. (A copy of the table is attached.)

The remainder of the PHAs obligated 90 percent of their grant funds by March 22,

2002.

The combined total of funds unobligated as of March 22, 2002, is approximately

$6.2 million, which the Department plans to recapture.

The Department recognized that there have been differing interpretations as to

the effect of QHWRA as they relate to previous HUD guidance given to PHAs regarding the obligation of fiscal years 1998 and 1999 funds. However, the Department must still implement the law. In fairness to PHAs that have previously requested and received extensions that are not now valid under QHWRA, HUD decided to only recapture those funds that remain unobligated as of March 22, 2002,

when the PHAs were directed to immediately cease obligating fiscal years 1998 and

1999 funds. On April 5, 2002, the Department sent letters to the 6 PHAs in the

second group that had unobligated funds as of March 22, 2002, informing them that

the funds will be recaptured. On April 11, 2002, HUD Field Offices were directed

to take the appropriate steps to initiate the recapture of funds by amending the Annual Contributions Contract.

Twenty-one of the 117 grants were found to have justifications for extensions that

met the requirements of Section 9(j)(2)(A) of the Act, and have been recommended

to the Deputy Secretary for time extensions. We anticipate publishing a Notice in

the Federal Register shortly, which will identify grants by PHA where unobligated

funds will be recaptured, as well as the 21 grants that have been recommended to

the Deputy Secretary for time extensions. This action by the Deputy Secretary is

pending. (The exact date of publication of the Federal Register Notice is not known

at this time.)

PIH plans to take strong measures to implement additional procedures to closely

monitor obligations and expenditures. Specifically, PIH plans to require a new

monthly obligation and expenditure report, which will replace the current quarterly

reporting system. Implementing a monthly reporting system will enable the Department to implement section 9(j)(3) of the Act, Penalty for Slow Expenditure of Capital Funds, a 1/12-month penalty for failure to obligate Capital Funds within 24

months. We anticipate that the monthly reporting system will be implemented in

LOCCS October 1, 2002 in time to address the fiscal year 2003 Capital Fund Formula Grant distribution.

It is important to note that the question only related to the deadline for unobligated Capital Funds. The law provides for two deadlines, obligations and expenditures. Consequently, when looking at a PHA’s capacity to obligate funds, the Department must take into account a PHA’s unexpended funds that have already been

obligated. The Department must closely monitor compliance with both deadlines.

For example, as of December 30, 2001, there were approximately $5.5 billion in unexpended Capital Funds. Large unexpended balances may directly impact a PHA’s

ability to obligate current year funds.
151

GRANTS 90 PERCENT-100 PERCENT OBLIGATED AS OF MARCH 22, 2002 AND GRANTS WITH TIME EXTENSIONS BUT NOT OBLIGATED BY MARCH 22, 2002

Field office name Housing authority name Fiscal year Grant unobligated Authorized amount

ALBUQUERQUE PROGRAM CENTER .................................................................................................................... CHAMA HOUSING AUTHORITY, NM .............................. 1999 $75,217.00 $75,217.00ALBUQUERQUE PROGRAM CENTER .................................................................................................................... SUNLAND PARK HA, NM .............................................. 1999 90,964.00 67,264.00ATLANTA HUB OFFICE ......................................................................................................................................... BRUNSWICK HA, GA .................................................... 1999 924,936.00 576,780.00ATLANTA HUB OFFICE ......................................................................................................................................... GRIFFIN, GA ................................................................. 1998 430,342.00 251,899.00ATLANTA HUB OFFICE ......................................................................................................................................... CORDELE HA, GA ......................................................... 1999 702,335.00 347,913.00ATLANTA HUB OFFICE ......................................................................................................................................... QUITMAN, GA ............................................................... 1998 1,781,022.00 1,272,957.00ATLANTA HUB OFFICE ......................................................................................................................................... TIFTON HOUSING AUTHORITY, GA ................................ 1999 525,836.00 172,726.00ATLANTA HUB OFFICE ......................................................................................................................................... LAFAYETTE HA, GA ...................................................... 1999 305,392.00 248,664.00BALTIMORE HUB OFFICE .................................................................................................................................... ANNAPOLIS HOUSING AUTHORITY, MD ........................ 1999 1,838,764.00 581,973.00BIRMINGHAM HUB OFFICE ................................................................................................................................. BIRMINGHAM, AL ......................................................... 1998 10,932,880.00 1,270,836.00BIRMINGHAM HUB OFFICE ................................................................................................................................. TALLASSEE, AL ............................................................ 1998 150,000.00 45,649.00BIRMINGHAM HUB OFFICE ................................................................................................................................. TALLASSEE HA, AL ....................................................... 1999 190,772.00 190,772.00BOSTON HUB OFFICE ......................................................................................................................................... PLYMOUTH HA, MA ...................................................... 1999 149,480.00 125,210.00BOSTON HUB OFFICE ......................................................................................................................................... WEBSTER HA, MA ........................................................ 1998 492,500.00 286,330.00BOSTON HUB OFFICE ......................................................................................................................................... WEBSTER HA, MA ........................................................ 1999 81,413.00 71,413.00BUFFALO HUB OFFICE ........................................................................................................................................ WATERTOWN HA, NY .................................................... 1999 977,389.00 173,848.00BUFFALO HUB OFFICE ........................................................................................................................................ TROY HA, NY ............................................................... 1998 2,143,930.00 395,981.00BUFFALO HUB OFFICE ........................................................................................................................................ TROY HA, NY ............................................................... 1999 2,499,166.00 1,192,993.00BUFFALO HUB OFFICE ........................................................................................................................................ WATERVLIET HA, NY .................................................... 1999 471,295.00 70,222.00BUFFALO HUB OFFICE ........................................................................................................................................ RENSSELAER HA, NY ................................................... 1999 292,562.00 149,049.00CHICAGO HUB OFFICE ........................................................................................................................................ DECATUR HOUSING AUTHORITY, IL ............................. 1999 1,865,509.00 520,193.00CHICAGO HUB OFFICE ........................................................................................................................................ MENARD COUNTY HOUSING AUTHORITY, IL ................ 1999 410,257.00 71,830.00CHICAGO HUB OFFICE ........................................................................................................................................ KANKAKEE COUNTY HOUSING AUTHORITY, IL ............. 1999 552,216.00 140,616.00CHICAGO HUB OFFICE ........................................................................................................................................ ADAMS COUNTY HOUSING AUTHORITY, IL ................... 1999 182,727.00 69,200.00CHICAGO HUB OFFICE ........................................................................................................................................ LAKE COUNTY HOUSING AUTHORITY, IL ...................... 1999 1,415,393.00 310,677.00CHICAGO HUB OFFICE ........................................................................................................................................ WHITE COUNTY HOUSING AUTHORITY, IL .................... 1999 194,818.00 55,676.00CHICAGO HUB OFFICE ........................................................................................................................................ OAK PARK HOUSING AUTHORITY, IL ............................ 1999 264,259.00 247,079.00CINCINNATI COMMUNITY SERVICE CENTER ....................................................................................................... CLINTON MHA, OH ....................................................... 1998 202,280.00 117,453.00CINCINNATI COMMUNITY SERVICE CENTER ....................................................................................................... CLINTON MHA, OH ....................................................... 1999 61,177.00 24,611.00COLUMBIA PROGRAM CENTER ........................................................................................................................... GREENVILLE HA, SC .................................................... 1999 1,302,973.00 167,258.00COLUMBIA PROGRAM CENTER ........................................................................................................................... MYRTLE BEACH, SC .................................................... 1999 41,404.00 4,767.00COLUMBIA PROGRAM CENTER ........................................................................................................................... YORK, SC ..................................................................... 1999 227,128.00 41,606.00COLUMBIA PROGRAM CENTER ........................................................................................................................... CHARLESTON C0, SC ................................................... 1999 329,004.00 90,544.00DETROIT HUB OFFICE ......................................................................................................................................... DETROIT HC, MI .......................................................... 1999 20,258,934.00 8,567,878.00DETROIT HUB OFFICE ......................................................................................................................................... PONTIAC HC, MI .......................................................... 1999 1,178,664.00 247,375.00FORT WORTH HUB OFFICE ................................................................................................................................. PARIS, TX .................................................................... 1999 378,192.00 95,000.00
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GRANTS 90 PERCENT-100 PERCENT OBLIGATED AS OF MARCH 22, 2002 AND GRANTS WITH TIME EXTENSIONS BUT NOT OBLIGATED BY MARCH 22, 2002—Continued

Field office name Housing authority name Fiscal year Grant unobligated Authorized amount

FORT WORTH HUB OFFICE ................................................................................................................................. GRAND SALINE HA, TX ................................................ 1999 162,364.00 107,667.00GRAND RAPIDS COMMUNITY SERVICE CENTER ................................................................................................. MUSKEGON HEIGHTS, MI ............................................. 1999 891,694.00 751,030.00GRAND RAPIDS COMMUNITY SERVICE CENTER ................................................................................................. MUSKEGON, MI ............................................................ 1999 261,843.00 238,337.00GREENSBORO HUB OFFICE ................................................................................................................................ HA LUMBERTON, NC .................................................... 1999 1,196,802.00 705,931.00GREENSBORO HUB OFFICE ................................................................................................................................ BENSON, NC ................................................................ 1999 776,516.00 611,024.00GREENSBORO HUB OFFICE ................................................................................................................................ HA WADESBORO, NC ................................................... 1999 329,388.00 55,193.00GREENSBORO HUB OFFICE ................................................................................................................................ HA MIDEAST REGIONAL, NC ........................................ 1999 410,806.00 251,698.00HARTFORD PROGRAM CENTER ........................................................................................................................... MERIDEN HOUSING AUTHORITY, CT ............................ 1999 858,546.00 333,399.00HARTFORD PROGRAM CENTER ........................................................................................................................... GLASTONBURY HOUSING AUTHORITY, CT .................... 1999 383,497.00 203,737.00INDIANAPOLIS PROGRAM CENTER ...................................................................................................................... INDIANAPOLIS HA, IN ................................................... 1998 3,440,145.00 780,340.00INDIANAPOLIS PROGRAM CENTER ...................................................................................................................... INDIANAPOLIS HOUSING AGENCY, IN .......................... 1999 3,846,488.00 2,067,108.00JACKSON PROGRAM CENTER .............................................................................................................................. MCCOMB, MS .............................................................. 1999 615,301.00 268,532.30JACKSONVILLE HUB OFFICE ................................................................................................................................ ORLANDO, FL ............................................................... 1999 3,900,597.00 792,119.00JACKSONVILLE HUB OFFICE ................................................................................................................................ UNION COUNTY, FL ...................................................... 1999 214,967.00 214,967.00LOUISVILLE HUB OFFICE .................................................................................................................................... HA LEXINGTON, KY ...................................................... 1999 2,728,620.00 1,822,626.00MILWAUKEE PROGRAM CENTER ......................................................................................................................... CITY OF BELOIT, WI ..................................................... 1999 263,692.00 171,043.00NASHVILLE PROGRAM CENTER ........................................................................................................................... MEMPHIS, TN ............................................................... 1998 12,314,347.00 3,066,870.00NASHVILLE PROGRAM CENTER ........................................................................................................................... PULASKI, TN ................................................................ 1999 439,626.00 108,127.00NEW ORLEANS HUB OFFICE ............................................................................................................................... CROWLEY HOUSING AUTHORITY, LA ............................ 1999 708,324.00 687,074.00NEW YORK CITY HUB OFFICE ............................................................................................................................. WHITE PLAINS HA, NY ................................................. 1999 1,748,410.00 568,792.00NEW YORK CITY HUB OFFICE ............................................................................................................................. NORTH HEMPSTEAD HA, NY ........................................ 1999 252,717.00 103,052.00NEWARK HUB OFFICE ......................................................................................................................................... TRENTON HOUSING AUTHORITY, NJ ............................. 1999 4,717,627.00 1,624,992.00NEWARK HUB OFFICE ......................................................................................................................................... BEVERLY HOUSING AUTHORITY, NJ ............................. 1998 939,257.00 385,249.00NEWARK HUB OFFICE ......................................................................................................................................... BEVERLY HOUSING AUTHORITY, NJ ............................. 1999 128,111.00 24,934.00PHILADELPHIA HUB OFFICE ................................................................................................................................ MONROE COUNTY HOUSING AUTHORITY, PA ............... 1999 574,924.00 215,238.00PHILADELPHIA HUB OFFICE ................................................................................................................................ LACKAWANNA COUNTY HA, PA .................................... 1999 1,825,518.00 571,812.00PHILADELPHIA HUB OFFICE ................................................................................................................................ WILLIAMSPORT HOUSING AUTHORITY, PA ................... 1999 372,544.00 45,755.00PITTSBURGH HUB OFFICE .................................................................................................................................. JEFFERSON COUNTY HOUSING AUTHORITY, PA ........... 1999 448,655.00 210,008.00SAN ANTONIO HUB OFFICE ................................................................................................................................. DEL RIO HOUSING AUTHORITY, TX .............................. 1998 411,901.00 96,138.19SAN ANTONIO HUB OFFICE ................................................................................................................................. DEL RIO HOUSING AUTHORITY, TX .............................. 1999 483,059.00 77,860.16SAN ANTONIO HUB OFFICE ................................................................................................................................. EDCOUCH HOUSING AUTHORITY, TX ........................... 1998 350,000.00 110,129.00SAN ANTONIO HUB OFFICE ................................................................................................................................. INGLESIDE HOUSING AUTHORITY, TX .......................... 1999 179,647.00 60,078.00SAN ANTONIO HUB OFFICE ................................................................................................................................. STARR COUNTY HOUSING AUTHORITY, TX .................. 1999 163,288.00 157,063.00SEATTLE HUB OFFICE ......................................................................................................................................... TACOMA HOUSING AUTHORITY, WA ............................. 1999 4,571,296.00 1,366,829.00SEATTLE HUB OFFICE ......................................................................................................................................... SEDRO WOOLLEY HOUSING AUTHORITY, WA ............... 1999 127,909.00 32,918.00
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ST. LOUIS PROGRAM CENTER ............................................................................................................................ WEST PLAINS HOUSING AUTHORITY, MO ..................... 1999 313,340.00 92,709.00

TOTAL .................................................................................................................................................... ..................................................................................... 72 105,272,796.00 37,319,837.65
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Question. In addition, the HUD fiscal year 2003 Budget requests authority for

HUD to permit PHAs to borrow private capital as a way to fund needed capital improvements. These private funds would be repaid through the provision of Section

8 project-based assistance for these units. In turn, there is proposed authority to

convert this Section 8 project-based assistance to vouchers and allow this housing

to be rented on the private market. This essentially means that the best units in

public housing would be converted to private housing and the inventory of affordable housing in many marketplaces would shrink. How does the Administration justify the risk of losing this affordable housing, especially in tight marketplaces?

Answer. HUD believes that the result of this proposal will be a substantial improvement in the current public housing stock that would not have been possible

otherwise. The proposal is not designed to convert public housing to private housing,

does not cover the best units in particular and would not result in shrinkage in the

inventory of affordable housing.

The assistance proposed is Section 8 project-based vouchers. The ability to convert

public housing subsidy to project-based vouchers will enable PHAs to borrow funds

for capital improvements on a development-by-development basis, just like other

multifamily real estate. This will enable PHAs to leverage private dollars to help

address the $22 billion backlog in capital needs.

The proposal is not limited to the best public housing. All public housing is eligible. HUD only would approve transactions where significant enough capital work is

needed to justify use of this financing tool. Where a development has higher capital

needs than the amount that could be financed within program limits, PHAs would

have the choice of supplementing the funding with Capital Fund or other money.

The proposal does not assume private for-profit ownership in any fashion. It is

a voluntary program in which PHAs may participate. PHAs may retain control of

a participating development’s ownership, through a PHA-controlled subsidiary

where this will facilitate financing. If a PHA desires to dispose of the property to

any owner that is not PHA-controlled, the public housing disposition rules would

apply (as they would with any other public housing property).

A participating development would have a continuing contract for project-based

vouchers for all the units. The Administration proposal does allow renting of some

units to unassisted tenants, up to one third of non-elderly or disabled units. To the

extent this occurs, the PHA can use additional vouchers elsewhere, so that affordable housing opportunities are not lost. Even in that case, the project-based voucher

contract would remain for all of the units in the development, so that the PHA later

could again rent all the units at the development to assisted tenants (and reduce

the number of extra vouchers used in the community accordingly). This proposal is

designed to provide additional flexibility for producing mixed-income developments,

and should not be confused with an effort to ‘‘voucher out.’’

Question. If Congress does not provide this new authority to support the private

financing of rehabilitation through Section 8 funding, does Public Housing need the

additional $400 million that the Administration is recommending be cut from the

Public Housing Capital Fund?

Answer. If that proposal is not enacted, the HUD-proposed amount is sufficient

to cover the accrual of new capital needs during fiscal year 2003. As of December

31, 2001, there were approximately $5.5 billion in unexpended Capital grant funds

that were provided to PHAs. Included within this amount there were approximately

$3.2 billion Capital grant funds that remained unobligated by the PHAs. These balances are significant. The Department will closely monitor obligations and expenditures and make appropriate budget proposals.

Question. Doesn’t this proposal just shift the cost of public housing from the Public Housing Operating and Capital Funds to the Certificate Fund?

Answer. No, the proposal does not simply shift costs to the Certificate Fund. A

different product is being funded—deteriorated public housing with significant capital needs is being replaced with renovated or new assisted housing. As a result,

tenants will be able to live in decent conditions in the near future.

This renovation or replacement otherwise could not be afforded for years with the

resources available under historic patterns for Public Housing Capital Fund appropriations. At the same time, the developments will be managed and financed on a

property-by-property basis, which should lead to more sound management practices.

PROJECT-BASED OPT-OUTS

Question. I remain concerned about the Administration’s continuing emphasis on

section 8 vouchers to the detriment of preserving section 8 project-based housing especially in tight rental markets. Over the last 3 years, how many projects and units
155

have opted out of the section 8 project-based program with the tenants converting

to section 8 tenant-based assistance?

Answer. The Department is in the process of updating and revising its systems

for tracking opt-outs in its Real Estate Management System (REMS), including a

specific effort to confirm actual opt-outs from the project-based inventory and reconciling this data with public housing records for issuances of tenant protection vouchers for projects that have filed an intent to opt-out. Difficulty has been experienced

in tracking these actions because project owners sometimes give formal notice of an

intent to opt-out, but are later persuaded to continue with project-based assistance.

Another issue is that opt-out data has been combined with counts of Section 8 contracts that have been terminated by HUD because the property fails to meet program standards. Preliminary results, however, indicate that approximately 10,000

units in about 230 projects were removed from the project-based inventory in fiscal

year 2001 by a decision by a property owner to opt-out of the Section 8 project-based

program.

OPT-OUTS

Question. How many of these projects have been elderly projects or designated for

persons with disabilities?

Answer. The Department does not have data that identifies whether projects with

an elderly designation or primarily serving the disabled are among those to have

opted-out from project-based assistance, however, it is unlikely that there are a significant number of projects in this category. Anecdotal evidence indicates that where

there are opt-outs involving projects serving the elderly or disabled, the availability

of tenant protection vouchers generally permits residents to remain in the project.

HOMELESS ASSISTANCE

Question. HUD continues to fund over $1 billion per year in McKinney-Vento

homeless assistance through State and local continuums of care. These funds generally are funded through the CDBG formula which includes no consideration of

homelessness. What steps is HUD taking to ensure accountability that these funds

are being used to assist the homeless.

Answer. The CDBG formula is only applied to $150 million of the McKinneyVento appropriation for allocating the Emergency Shelter Grant program. Funds for

the remaining Homeless Assistance Grants are distributed based on competitions.

HUD uses a variety of methods to ensure that funds awarded are being used to assist homeless people. On-site monitoring of HUD grant programs is a key responsibility of HUD’s field staff. Monitoring is conducted using established standards and

procedures, and includes interviews, examination of files, and visits to grantee and

sub-grantee sites. Written monitoring findings and concerns are provided to the

grantee, and resolution is required within a specific time frame. Grantees are also

required to submit an Annual Progress Report for each year that funding is provided. The report includes financial and progress information.

In the annual homeless assistance competition, all grantees, including those applying for renewal grants, must meet application threshold review standards that

include applicant capacity, eligibility of the homeless participants, and cost-effectiveness. Many grant awards are conditioned, requiring the conditionally selected grantee to clarify or provide additional information before a final award is made. In some

cases, the original award offer is reduced or withdrawn, if program requirements

are not met, or funding amounts not justified.

Question. How are these accountability requirements different from a year ago?

Answer. Since last year, HUD has increased its efforts to further ensure accountability. The Annual Performance Report has been automated, and the database is

currently being populated. The data will not only enable better tracking of individual projects, but will also generate a variety of reports which will assist HUD

in developing policies and procedures to address any specific accountability issues

demonstrated in APRs.

The application for the 2002 competition includes stronger performance requirements for previous recipients applying for renewal grants. In addition, all applicants

must demonstrate specific actions they have taken with regard to ensuring clients

will be assisted to obtain benefits of mainstream programs for which they are eligible. The application also requires more budget detail to help applicants better plan

projects and request appropriate funding amounts. To address HUD’s goal of ending

chronic homelessness in 10 years, applicants in the 2002 competition are asked for

information that will enable us to establish a baseline against which progress toward the goal can be measured.
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EMERGENCY FOOD AND SHELTER PROGRAM

Question. The President’s Budget recommends that the Emergency Food and Shelter program be transferred from FEMA to HUD. This has been a very successful

program at FEMA and there are significant concerns that any transfer could reduce

the effectiveness of this program. What are the advantages to this transfer?

Answer. We agree that the Emergency Food and Shelter Program (EFSP) has

been efficiently and effectively administered and we propose to operate it in the

same fashion. Significant amounts of EFSP funds are provided for shelter resources,

often to the same entities receiving HUD’s Emergency Shelter Grants (ESG) funds

and Continuum of Care competitive funds. Many of the same activities are eligible

under EFSP and ESG. Given HUD’s successful role in implementing the Continuum

of Care, it is anticipated that EFSP can be administered in a manner that more

effectively coordinates EFSP with the Continuum of Care planning concept. However, HUD has no plan to alter the basic method of EFSP formula allocation. Any

efforts to better coordinate the programs will be done only after careful consultation

with key stakeholders in the EFSP allocation process, local providers and program

clients.

MARK-TO-MARKET SAVINGS

Question. The Section 8 Mark-to-Market program was enacted to provide a mechanism to reduce the cost of oversubsidized, expiring section 8 contracts to market

rents while preserving this housing as affordable, low-income housing. How much

section 8 funding has actually been saved since the beginning of the program? How

many projects have been preserved with section 8 project-based contracts?

Answer. Since inception of the Mark-to-Market (M2M) program through February

28, 2002, 1,354 properties, with a total of 105,834 units, of affordable housing have

been preserved. The M2M reviews resulted in:

—407 full debt restructurings, 32,870 units;

—270 Actions Other Than Closing (AOTC), 17,686 units. AOTC transactions are

comprised of those deals that are financially infeasible, or where the owner refuses to complete the closing, or where a bad owner/bad property is involved;

—572 lites (reductions in contract rents that do not require debt restructuring),

47,932 units; and

—105 comparability reviews, 7,346 units.

Of the 1,354 properties completed as of February 28, 2002, 968 properties with

80,584 units received reduced rents. The remainder were either still in process, have

ultimately been determined to have rents at or below market, or are not eligible for

the M2M program.

In the fiscal year 2003 Budget request, approximately $135 million in savings has

been assumed in Housing Certificate Fund for fiscal year 2002.

MARKET-TO-MARKET OPT-OUTS

Question. How many projects have been removed from the section 8 inventory by

owners who opted out of their section 8 project-based contracts?

Answer. Since inception of the Mark-to-Market program, through February 28, 47

owners with 2,498 total units gave notice to the Office of Multifamily Housing Assistance Restructuring that they would opt-out of their project-based Section 8 contracts; 34 owners, accounting for 1,382 total units, have actually done so.

PRESERVATION OF ASSISTED UNITS

Question. For fiscal year 2001 and 2002, the VA/HUD appropriations acts have

required HUD to preserve section 8 project-based assistance for the elderly and disabled upon foreclosure by HUD, except under certain circumstances. How many

projects have been preserved under this requirement? How many of these projects

have been disposed by HUD without maintaining the section 8 project-based assistance?

Answer. See table below.
157

Property Name Number of Units Location Preserved w/project-based Section 8? Date Closed Comments

Bethesda Manor II ......................................................................................... 12 Plainview, TX ........... No Property was vacant. 10/20/2000 Vacant property sold to Wayland Manor University.Kenilworth Park Plaza .................................................................................... 77 Portland, OR ............ Yes .............................. 11/01/2000 Sold to City of Portland.Project Independence ..................................................................................... 49 Arkansas City, KS ... No Other preservation

tools used.

11/01/2000 Sold to Arkansas City. The conditions of the sale were

agreed to by HUD before the field was aware of the newstatute regarding retention of project based Section 8.However, other preservation tools were used. All tenantswere provided rental housing vouchers, and rents wererequired to be maintained as affordable for 20 years.Nearly all of the tenants remained in residence usingtheir vouchers.

NMARC ........................................................................................................... 6 Santa Fe, NM .......... No Property was vacant. 01/26/2001 Vacant property. Sold to the Santa Fe Civic Housing Au- thority without restrictions.Monastery ....................................................................................................... 24 Way Sitka, AK .......... No Other preservation

tools used.

03/30/2001 The conditions of the sale were agreed to by HUD before

the field was aware of the new statute regarding retention of project based Section 8. However, other preservation tools were used. All tenants were provided rentalhousing vouchers. Nearly all of the tenants remained inresidence using their vouchers. Property sold to BaranofIsland Housing Authority for elderly housing.

Morningside Village ....................................................................................... 31 Alcester, SD ............. No Other preservation

tools used.

04/30/2001 The conditions of the sale were agreed to by HUD and the

City of Alcester before the field was aware of the newstatute regarding retention of project based Section 8.However, other preservation tools were used. All tenantswere provided rental housing vouchers, and HUD created ‘‘voucher ready units’’ by requiring that rents cannot exceed the voucher payment standard. Nearly all ofthe tenants remained in residence using their vouchers.

Elmwood Group Home .................................................................................... 15 Ottumwa, IO ............ No Property was vacant. 06/08/2001 Vacant property sold to the Area XV Multi-County Housing Agency.Edgewood/Eldercrest ...................................................................................... 147 Youngstown, OH ...... No Other preservation

tools used.

07/30/2001 The conditions of the sale were agreed to by HUD and the

City of Youngstown before the field was aware of thenew statute regarding retention of project based Section8. However, other preservation tools were used. All tenants were provided rental housing vouchers. Nearly allof the tenants remained in residence using their vouchers.
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Property Name Number of Units Location Preserved w/project-based Section 8? Date Closed Comments

J.C. Progress .................................................................................................. 204 Chattanooga, TN ..... No Other preservation

tools used.

08/24/2001 Property was only about 50 percent occupied by elderly.

The conditions of the sale were agreed to by HUD andthe City of Chattanooga before the field was aware ofthe new statute regarding retention of project basedSection 8. However, other preservation tools were used.HUD required that the property be repaired and providedan Up Front Grant to pay for part of the rehabilitationand conversion of the efficiencies to one bedroom unitsto better meet market demand for affordable elderlyand near-elderly housing. Occupancy is limited to theelderly and near-elderly. All tenants were provided rental housing vouchers, and HUD created ‘‘voucher readyunits’’ by requiring that rents cannot exceed the voucher payment standard. Nearly all of the tenants remainedin residence using their vouchers.

Tiffin VOA ....................................................................................................... 20 Tiffin, OH ................. No Property was vacant. 09/06/2001 Vacant property sold to Seneca County Commissioners to be used for public purpose.Pickwick/Royal Tower ..................................................................................... 233 Kansas City, MO ..... No Other preservation

tools used.

09/23/2001 Majority of residents were chronically mentally ill. Other

preservation tools were used. All tenants were providedrental housing vouchers, and HUD created ‘‘voucherready units’’ by requiring that rents cannot exceed thevoucher payment standard. Nearly all of the tenants remained in residence using their vouchers.

Gardner House ............................................................................................... 8 Gardner, MA ............ Yes .............................. 09/27/2001 Sold to North Central Human Services, Inc.Monadnock Workshop .................................................................................... 8 Peterborough, NH .... No Property was vacant. 09/27/2001 This was a vacant 8-unit property in an old historic prop- erty not suited for the elderly as configured. HUD sold

the property to the Contooncook Housing Trust whoplans to convert it to 3 units of affordable housing.

Sana ............................................................................................................... 271 Hartford, CT ............ Yes .............................. 02/01/2002 Sold to City of Hartford.
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HUD ASSISTED HOUSING IN FORECLOSURE AND IN INVENTORY

Question. For the record, I would like a list of projects by State, including location

and number of units.

Answer. See lists below.
160

MULTIFAMILY PROPERTIES IN FORECLOSURE AS OF 4/4/02

(Please note that most of the unsubsidized notes will be offered the next note sale)

FHA# Section of the Act Property Name No. of Units

023–35269 .......................................................................................................... 221D4 .................... EAST CANTON STREET APARTMENTS, 79 E CANTON STREET, BOSTON, MA 02118–2328 .................... 80017–44076 .......................................................................................................... 236 ........................ ST. CHRISTOPHER APTS., 360 MAIN STREET, HARTFORD, CT 06106 .................................................... 100024–22007 .......................................................................................................... 232 ........................ SEACOAST HEALTH CENTER, 777 LAFAYETTE RD., HAMPTON, NH 03842 ............................................. 169024–22019 .......................................................................................................... 232 ........................ FAMILY LIVING ADULT CARE, 24 HALL ST., SACO, ME 04072 ............................................................... 48024–EH078 .......................................................................................................... 202 ........................ OSSIPEE HOUSE, 70 MOULTONVILLE RD., CENTER OSSIPEE, NH 03814 ............................................... 8016–22006 .......................................................................................................... 232 ........................ DESILETS NURSING HOME, 642 METACOM AVE., WARREN, RI 02885 .................................................. 80016–43017 .......................................................................................................... 232 ........................ ROSE COTTAGE NURSING FACILITY, 151 HUNT STREET, CENTRAL FALLS, RI 02863 ............................ 100016–43062 .......................................................................................................... 232 ........................ EDMUND PLACE, 350 TAUNTON AVE., EAST PROVIDENCE, RI 02914 .................................................... 79016–43071 .......................................................................................................... 232 ........................ COVENTRY HEALTH CENTER, BROAD STREET, COVENTRY, RI ............................................................... 344012–43180 .......................................................................................................... 232 ........................ TAPPAN ZEE MANOR, MOUNTAINVIEW RD, NYACK, NY 10960 ............................................................... 100012–44159 .......................................................................................................... 236 ........................ PLEASANT EAST APARTMENTS, 446 E 117TH ST, NEW YORK, NY 10035–5038 ................................... 111012–57114 .......................................................................................................... 221D4 .................... HAROLD APTS, 437 MANHATTAN AVE., NEW YORK, NY 10026 .............................................................. 53012–57115 .......................................................................................................... 221D4 .................... DESCHLER APARTMENTS, 1871 7TH AVE., NEW YORK, NY 10026–2800 .............................................. 60012–57170 .......................................................................................................... 221D4 .................... PUEBLO DE MAYAGUEZ, 950 AVENUE SAINT JOHN, BRONX, NY 10455–3400 ...................................... 76013–35073 .......................................................................................................... 221D4 .................... WASHINGTON PARK APARTMENT, 212 THIRD STREET, TROY, NY 12180 ............................................... 34014–00002 .......................................................................................................... 207 ........................ TROUT BROOK MOBILE HOME, 8 GARDNERVILLE RD., LE RAY, NY 13637 ........................................... 100014–43009 .......................................................................................................... 232 ........................ BEECHWOOD RESTORATIVE, 900 CULVER RD., ROCHESTER, NY 14609 ............................................... 82014–43066 .......................................................................................................... 232 ........................ LORETTO-UTICA HEALTH CARE, 1445 KEMBLE STREET, UTICA, NY 13501 ........................................... 156014–EH182 .......................................................................................................... 202 ........................ ALFRED SENIOR HOUSING, 34 GLEN ST, ALFRED, NY 14802 ................................................................ 40035–43049 .......................................................................................................... 232 ........................ GREENBRIAR NURSING HOME, 191 N. EVERGREEN, WOODBURY, NJ 08096 ........................................ 220052–43051 .......................................................................................................... 232 ........................ ANNAPOLITAN SENIOR CARE, 84 NORTH OLD MILL BOTTOM RD., ANNAPOLIS, MD 21401–9003 ........ 84052–43064 .......................................................................................................... 232 ........................ NOBLE HOUSE NURSING HOME, 2327 NORTH CHARLES STREET, BALTIMORE, MD 21218 .................. 109052–44133 .......................................................................................................... 236 ........................ UPLANDS A, 4625 EDMONDSON AVE, BALTIMORE, MD 21229–2554 .................................................... 495052–44143 .......................................................................................................... 236 ........................ UPLANDS B, 4625 EDMONDSON AVE, BALTIMORE, MD 21229–2554 ................................................... 478052–44157 .......................................................................................................... 236 ........................ FREEDOM APARTMENTS, 4665 FREEDOMWAY W, BALTIMORE, MD 21213–2609 .................................. 308052–EH011 .......................................................................................................... 202 ........................ APOSTOLIC TOWERS, 201 N. WASHINGTON ST, BALTIMORE, MD 21231 ............................................... 215052–EH081 .......................................................................................................... 202 ........................ BEREA APOSTOLIC TOWERS, 1401 N. LAKEWOOD AVE, BALTIMORE, MD 21213 .................................. 102034–35193 .......................................................................................................... 221D4 .................... NORTH QUEEN STREET APARTMENTS, 424 N QUEEN ST, LANCASTER, PA 17603–3055 ...................... 8034–SH016 .......................................................................................................... 202 ........................ MOUNT OLIVET VILLAGE, 642 N 41ST STREET, PHILADELPHIA, PA 19104 ............................................ 220033–22003 .......................................................................................................... 232 ........................ INDEPENDENCE COURT-OAKL, 4700 FIFTH AVENUE, PITTSBURGH, PA 15213 ...................................... 128033–33501 .......................................................................................................... 221D4 .................... CORA STREET APTS, 525 CORA ST., PITTSBURGH, PA 15208 ............................................................... 22033–35159 .......................................................................................................... 221D4 .................... RENAISSANCE APARTMENTS, 308 N TAYLOR AVE, PITTSBURGH, PA 15212–4551 ............................... 57033–44015 .......................................................................................................... 236 ........................ BRADDEHANNA APARTMENTS, 7515 SUSQUEHANNA ST., PITTSBURGH, PA 15208 ............................... 45033–44028 .......................................................................................................... 236 ........................ STERRETT-COLLIER APARTMENTS, 7335 HAMILTON AVE, PITTSBURGH, PA 15208–1937 .................... 145
161

033–55008 .......................................................................................................... 221D3 .................... LIBERTY PARK APARTMENTS, 6209 BROAD STREET, PITTSBURGH, PA 15206 ...................................... 332033–55018 .......................................................................................................... 221D3 .................... WESTGATE I, 287 VILLAGE RD, PITTSBURG, PA 15206–3702 ............................................................... 206033–55032 .......................................................................................................... 221D3 .................... WESTGATE II, 287 VILLAGE RD., PITTSBURGH, PA 15205–1938 ........................................................... 230051–22001 .......................................................................................................... 232 ........................ LAUREL MEADOWS NURSING HOME, RT. 1, BOX 181B, LAUREL FORK, VA 24352–9707 ..................... 60051–43087 .......................................................................................................... 232 ........................ HERITAGE HALL XIII, 400 W. STARSBURG RD., FRONT ROYAL, VA 22630 ............................................ 60051–43088 .......................................................................................................... 232 ........................ HERITAGE HALL XV, 500 W. RIO RD., CHARLOTTESVILLE, VA 22901 .................................................... 120051–43109 .......................................................................................................... 232 ........................ HERITAGE HALL XX, 633 COOK AVE., BROOKNEAL, VA 24528–3111 .................................................... 60051–43110 .......................................................................................................... 232 ........................ HERITAGE HALL XXII, 203 HOUSTON ST., LEXINGTON, VA 24450–2415 ............................................... 60051–43113 .......................................................................................................... 232 ........................ HERITAGE HALL XXIX, 5580 DANIEL SMITH RD., VIRGINIA BEACH, VA 23462–1104 ............................ 90051–43116 .......................................................................................................... 232 ........................ HERITAGE HALL XIV, ROUTE 5, BOX 104, GRUNDY, VA 24614–9504 ................................................... 120051–43135 .......................................................................................................... 232 ........................ VANGILDERS CARE CENTER, 1011 PENNSYLVANIA AVENUE, WINCHESTER, VA 22601 ......................... 78051–43154 .......................................................................................................... 232 ........................ DOGWOOD NORTH, 30 KINGS CREST DRIVE, STAFFORD, VA 22554 ...................................................... 48051–44071 .......................................................................................................... 236 ........................ CARRINGTON GARDENS APARTMENTS, 1125 DOVE ST, RICHMOND, VA 23222–4524 .......................... 95000–44015 .......................................................................................................... 236 ........................ SAYLES PLACE HOMES, INC, 2700–07 DOUGLAS PL SE, WASHINGTON, DC 20020 .............................. 63000–94014 .......................................................................................................... 207 ........................ GOOD HOPE APARTMENTS, 1667 GOOD HOPE RD SE, WASHINGTON, DC 20020 .................................. 41061–43113 .......................................................................................................... 232 ........................ CAMPBELL-STONE ASSISTED L, 2911 SOUTH PHARR ROAD, NW, ATLANTA, GA 30305 ........................ 48062–11028 .......................................................................................................... 223F ....................... PINERY TOWNHOUSE APTS, 4930 PARKTOWNE WAY, MONTGOMERY, AL 36116 ................................... 202062–35087 .......................................................................................................... 221D3 .................... PARKSIDE APARTMENTS, 415 CUBA ST., MOBILE, AL 36603–5220 ...................................................... 48062–44065 .......................................................................................................... 236 ........................ SARALAND APTS., 527 US HIGHWAY, 43 SOUTH, SARALAND, AL 36571 ............................................... 60062–92002 .......................................................................................................... 207 ........................ STONEGATE VILLAGE APTS., 1238 2ND ST., SW, DECATUR, AL 35601 ................................................. 136056–35137 .......................................................................................................... 221D4 .................... THE PENTAGON APARTMENTS, 1919 PONCE DE LEON AVE., SANTURCE, PR 00916 ............................ 50054–11038 .......................................................................................................... 207 ........................ GREENWOOD PARK APARTMENTS, GREENWOOD PK, RT 3, TUBELLO CT, MARION, SC 29571–8040 ... 32054–35593 .......................................................................................................... 221D4 .................... MAGNOLIA LANE APARTMENTS, DESTINY LANE, CONWAY, SC 29526 .................................................... 48054–43070 .......................................................................................................... 232 ........................ RIVERSIDE AT BELFAIR, 56 OAK FOREST ROAD, BLUFFTON, SC 29910 ................................................ 101054–43073 .......................................................................................................... 232 ........................ COLONY HOUSE, 1036 MAXWELL MILL, FORT MILL, SC 29715–7852 ................................................... 92054–43077 .......................................................................................................... 232 ........................ SEVEN OAKS ASSISTED LIVING, 119 CHESTERFIELD HWY, CHERAW, SC 29520 ................................... 114053–35005 .......................................................................................................... 221D3 .................... THOMASVILLE CHURCH HOMES, 904 DOAK CT., THOMASVILLE, NC 27360 .......................................... 100053–94014 .......................................................................................................... 207 ........................ FOUR SEASONS APTS, 3129 SPRING VALLEY DR., GASTONIA, NC 28052 ............................................. 81063–22004 .......................................................................................................... 232 ........................ SOUTHLAND SUITES, RR 2 BOX 1785, MAYO, FL 32066–9201 ............................................................. 22063–35196 .......................................................................................................... 221D4 .................... WARRINGTON VILLAGE APARTMENTS, 34 PATTON DR., PENSACOLA, FL 32507–3805 .......................... 200066–43078 .......................................................................................................... 232 ........................ MUNNE CENTER AKA THE OAKS, 17250 SW 137TH AVE., MIAMI, FL 33177 ......................................... 94067–35331 .......................................................................................................... 221D4 .................... ASHLEY CROSSINGS, 401 ROSERY ROAD EAST, LARGO, FL 33770 ....................................................... 278067–43089 .......................................................................................................... 232 ........................ PALM TERRACE RESIDENT CARE, 5121 E. SERENA DRIVE, TAMPA, FL 33617 ..................................... 73083–35211 .......................................................................................................... 221D4 .................... BEECHER HOUSE, 203 S MAIN ST., SOMERSET, KY 42501 ................................................................... 62083–35272 .......................................................................................................... 221D4 .................... CYPRESS POINT, 1101 BURLEW BLVD., OWENSBORO, KY 42303 ......................................................... 120083–35345 .......................................................................................................... 221D4 .................... TOWN BRANCH APARTMENTS, 221–A S HORD STREET, GRAYSON, KY 41143 ...................................... 24083–35367 .......................................................................................................... 221D4 .................... DIXIE PARK HOMES, 219 HORD STREET, GRAYSON, KY 41143 ............................................................. 8083–35472 .......................................................................................................... 221D3 .................... KENTUCKY TOWERS, 514 S. FIFTH ST., LOUISVILLE, KY 40202 ............................................................. 275083–35544 .......................................................................................................... 221D4 .................... HAVERFORD PLACE, COLONY BLVD. & STURBRIDGE DR., GEORGETOWN, KY ....................................... 160083–43087 .......................................................................................................... 232 ........................ SHELBY MANOR HEALTH CARE, 100 CHURCH VIEW ST., SHELBYVILLE, KY 40065 .............................. 153
162

MULTIFAMILY PROPERTIES IN FORECLOSURE AS OF 4/4/02—Continued

(Please note that most of the unsubsidized notes will be offered the next note sale)

FHA# Section of the Act Property Name No. of Units

087–43046 .......................................................................................................... 232 ........................ VERANDA AT HAMILTON PLACE, 7429 SHALLOWFORD RD., CHATTANOOGA, TN 37421 ........................ 60081–15001 .......................................................................................................... 232 ........................ FOX ACRES, 2180 MAGNUM RD., MEMPHIS, TN 38134 ......................................................................... 10081–22003 .......................................................................................................... 232 ........................ MAPLE RIDGE MANOR, 705 LAKE ROAD, DYERSBURG, TN 38024 ........................................................ 43081–43021 .......................................................................................................... 232 ........................ FOX ACRES, 2180 MAGNUM RD., MEMPHIS, TN 38134 ......................................................................... 10081–55002 .......................................................................................................... 221D3 .................... WATKINS MANOR APTS, 2623 N WATKINS ST, MEMPHIS, TN 38127–8500 ........................................... 214071–94029 .......................................................................................................... 223F ....................... CRESTVIEW VILLAGE APARTMENTS, 208 NORTH CRESTLANE DRIVE, KANKAKEE, IL 60901 .................. 132072–35078 .......................................................................................................... ................................ SAINT NICHOLAS APARTMENTS, 400 E JEFFERSON STREET, SPRINGFIELD, IL 66666 ........................... 94046–35605 .......................................................................................................... 221D4 .................... KINGS CROSSING, 4106 KINGS HIGHWAY, DAYTON, OH 45406 ............................................................. 298046–44089 .......................................................................................................... 236 ........................ MORIANE APTS, 27 S LUDLOW ST, DAYTON, OH 45402–1832 .............................................................. 110046–44170 .......................................................................................................... 236 ........................ GLENCOE-AUBURN APARTMENTS, 10 VIEW CT, COLUMBUS, OH 45219–1724 ..................................... 90042–35195 .......................................................................................................... 221D3 .................... CARTER MANOR APTS., 1012 PROSPECT, CLEVELAND, OH 44115 ........................................................ 280042–35287 .......................................................................................................... 221D4 .................... PARK LANE VILLA, 10510 PARK LANE AVE, CLEVELAND, OH 44106–0000 ........................................... 185042–35326 .......................................................................................................... 221D4 .................... BUCYRUS ESTATES APTS., 1730 MARION RD., BUCYRUS, OH 44820 ................................................... 50042–35444 .......................................................................................................... 221D3 .................... THE NORTHWESTERLY, 1341 MARLOWE AVE., LAKEWOOD, OH 44107–0000 ........................................ 92044–SH004 .......................................................................................................... 202 ........................ ROCHDALE COURT APTS, 1584 E LAFAYETTE ST, DETROIT, MI 48207–2959 ....................................... 70044–SH012 .......................................................................................................... 202 ........................ FOUR FREEDOMS HOUSE, 1600 ANTIETAM ST, DETROIT, MI 48207 ..................................................... 320044–SH021 .......................................................................................................... 202 ........................ INDEPENDENCE HALL, 1935 CHENE CT., DETROIT, MI 48207 ............................................................... 216073–11144 .......................................................................................................... 223F ....................... VILLAGE PARK APTS., 2754 EAST PAULDING RD., FORT WAYNE, IN 46816 .......................................... 484073–44360 .......................................................................................................... 236 ........................ PARKSIDE TERRACE I, 2340 SUNBURST BLVD, EVANSVILLE, IN 47714–4610 ...................................... 202073–44457 .......................................................................................................... 236 ........................ PARKSIDE TERRACE II, 2340 SUNBURST BLVD, EVANSVILLE, IN 47714–4610 ..................................... 120075–EH251 .......................................................................................................... 202 ........................ MONROE MANOR, 2403 MONROE STREET, NEW HOLSTEIN, WI 53061–0000 ....................................... 12092–35133 .......................................................................................................... 221D3 .................... SOUTHGATE APTS. I, 3200 MAPLE AVE., SLAYTON, MN 56172–0000 ................................................... 31112–35015 .......................................................................................................... 221D3 .................... SUNNYDALE APT., 125 SUNNYDALE ST., JACKSONVILLE, TX 75766–3388 ............................................ 64112–35327 .......................................................................................................... 221D4 .................... PARK MANOR APTS., 2934 WEST PIONEER DRIVE, IRVING, TX 75061 .................................................. 210112–35380 .......................................................................................................... 221D4 .................... HIGHLAND COURT APARTMENTS, 3618 WHEELER, DALLAS, TX 75209 .................................................. 85112–43065 .......................................................................................................... 232 ........................ COUNTRY CLUB VILLAGE, 3400 NORTH COUNTRY CLUB RD., IRVING, TX 75062 ................................. 38113–44065 .......................................................................................................... 236 ........................ SABINE TERRACE, 600 WEST SADOSA STREET, EASTLAND, TX 76448–3343 ....................................... 70116–35121 .......................................................................................................... 221D4 .................... CUESTAS APTS., 2800 NORTH ROADRUNNER PKWY, LAS CRUCES, NM 88011 .................................... 104114–35280 .......................................................................................................... 221D4 .................... SATSUMA GARDENS APTS., 2008 JENKINS RD, PASADENA, TX 77506 .................................................. 232114–43032 .......................................................................................................... 232 ........................ PARK CENTRAL NURSING HOME, 425 LAKE ARTHUR DRIVE, PORT ARTHUR, TX 77642–0000 ............. 120059–35229 .......................................................................................................... 221D4 .................... SNAP II APTS., PO BOX 84, SHREVEPORT, LA 71161–0000 .................................................................. 59059–35236 .......................................................................................................... 221D4 .................... GRAMBLING DEVELOPMENT, 200 EDITH ROSE LANE, GRAMBLING, LA 71254–0000 ............................ 72117–35127 .......................................................................................................... 221D3 .................... WESTERN VILLAGE APTS., 120 N. EDWARDS STREET, HOLLIS, OK 73550 ............................................ 48117–35185 .......................................................................................................... 221D4 .................... APACHE TRACE APARTMENTS, 1301 E HIGHWAY 3, GUYMON, OK 73942–5431 .................................. 144
163

117–43028 .......................................................................................................... 232 ........................ CARRIAGE INN APTS., 1300 EAST AYERS, EDMOND, OK 73034–0000 .................................................. 94117–EH087 .......................................................................................................... 202 ........................ REDBUD HOUSING, PO BOX 10, OAKS, OK 74359 ................................................................................. 24115–35205 .......................................................................................................... 221D4 .................... LASBY PARK TERRACE APTS., 120 TERRACE DR., SAN BENITO, TX 78586–5906 ................................ 65115–43033 .......................................................................................................... 232 ........................ VILLA SERENA ALZHEIMER’S, 4455 HORIZON HILL BLVD., SAN ANTONIO, TX 78229 ........................... 36115–94015 .......................................................................................................... 221D4 .................... CAMELOT RETIREMENT COMMUN, 2015 S. CYNTHIA AVE., MCALLEN, TX 78503–2846 ....................... 120074–35162 .......................................................................................................... 221D4 .................... DAVENPORT MANOR APARTMENT, 7118 HILLANDALE RD, DAVENPORT, IA 52806–1049 ...................... 100074–44026 .......................................................................................................... 236 ........................ COUNTRY MANOR APTS., 1010 N. 16TH ST., CLARINDA, IA 51632–0000 ............................................ 48084–35252 .......................................................................................................... 221D4 .................... LOVETT PLACE, 2701–03 BENTON BLVD, KANSAS CITY, KS 64128 ...................................................... 48102–35139 .......................................................................................................... 221D4 .................... MULBERRY COURT APTS., 1500 N. CEDAR ST., ABILENE, KS 67410 .................................................... 37102–35172 .......................................................................................................... 221D4 .................... FOX RUN APTS., 206 E. MIAMI, HIAWATHA, KS 66434–0000 ................................................................ 44102–35177 .......................................................................................................... 221D4 .................... FLEMING PLACE APARTMENTS, 2914 FLEMING ST, GARDEN CITY, KS 67846–7409 ............................ 96102–43036 .......................................................................................................... 232 ........................ MEADOWBROOK MANOR OF TOPE, 711 SW GARFIELD AVE., TOPEKA, KS 66606 .................................. 168103–94006 .......................................................................................................... 221D4 .................... STREHLOW TERRACE APTS., 2007 N. 18TH ST., OHAHA, NE 68110 ..................................................... 70085–SH006 .......................................................................................................... 202 ........................ COUNCIL HOUSE APTS., 300 S. GRAND BLVD., ST. LOUIS, MO 63103–2400 ....................................... 287091–35093 .......................................................................................................... 221D3 .................... FRIENDSHIP VILLAGE, 211 S. WILSON AVE., FLANDREAU, SD 57028 .................................................... 18101–35167 .......................................................................................................... 221D3 .................... LAMAR APARTMENTS, 708 SOUTH MULLEN, LAMAR, CO 81502 ............................................................ 48101–35296 .......................................................................................................... 221D4 .................... ROTELLA PARK APARTMENTS, 1620 CORONADA PKWY, THORNTON, CO 80229 .................................... 82105–43038 .......................................................................................................... 232 ........................ SERENITY RANCH ASSISTED L, 360 WEST 4200 NORTH, OAKLEY, UT 84055 ....................................... 42123–43042 .......................................................................................................... 232 ........................ PALM VALLEY REHAB. AND CA, 13575 WEST MCDOWELL RD., GOODYEAR, AZ 85338 ........................ 155121–44082 .......................................................................................................... 236 ........................ UNIVISTA APTS., 1340 TURK STREET, SAN FRANCISO, CA 94115 ......................................................... 24121–EH065 .......................................................................................................... 202 ........................ HOMES NOW IN THE COMMUNITY, 1800 LINDEN STREET, OAKLAND, CA 94607 .................................. 10127–35257 .......................................................................................................... 221D4 .................... RIVERSIDE APTS., 1109 ARTHUR ST., ABERDEEN, WA 98520 ............................................................... 20171–43034 .......................................................................................................... 232 ........................ LOGANHURST HEALTH CARE, EAST 1515 ILLINOIS AVE, SPOKANE, WA 99207 ..................................... 45

TOTAL PROJECTS .................................................................................... ................................ ................................................................................................................................................................. 131TOTAL UNITS ........................................................................................... ................................ ................................................................................................................................................................. 14,750

Hud-Owned Multifamily Properties, As of 4/4/02

023–35213 .......................................................................................................... 221D3 .................... FRANKLIN PARK I, 278 HUMBOLDT AVE, DORCHESTER, MA 02121–2234 ............................................ 181023–35214 .......................................................................................................... 221D3 .................... THEROCH I, 107 ELM HILL AVE, DORCHESTER, MA 02121–2941 ......................................................... 106023–35216 .......................................................................................................... 221D4 .................... FRANKLIN PARK II, 278 HUMBOLDT AVE, DORCHESTER, MA 02121–2234 ........................................... 97023–35218 .......................................................................................................... 221D4 .................... THEROCH II, 129 COLUMBIA RD, DORCHESTER, MA 02121–3106 ....................................................... 109023–35229 .......................................................................................................... 221D4 .................... FIELDSTONE APTS, 887 BLUE HILL AVE, DORCHESTER, MA 02124–2902 ............................................ 84023–35292 .......................................................................................................... 221D4 .................... ACADEMY HOMES II, 2978 WASHINGTON ST, ROXBURY, MA 02119–1299 ........................................... 316023–55027 .......................................................................................................... 221D3 .................... GENEVA APARTMENTS, 229 GENEVA AVE APT B, BOSTON, MA 02121–3848 ....................................... 48023–55110 .......................................................................................................... 221D3 .................... CAMFIELD GARDENS, 115 LENOX ST, BOSTON, MA 02118–1051 ......................................................... 102023–55147 .......................................................................................................... 221D3 .................... ROXSE HOMES, 1070 TREMONT ST, ROXBURY, MA 02120–2119 ......................................................... 389023–99905 .......................................................................................................... 221D3 .................... BLUE HILL, BLUE HILL AVE, BOSTON, MA 02121 .................................................................................. 16023–99906 .......................................................................................................... 221D3 .................... CASTLEGATE, CASTLEGATE, BOSTON, MA 02121 ................................................................................... 54023–99907 .......................................................................................................... 221D4 .................... BLUE CASTLE GATE (DEMO), BLUE CASTLEGATE STREETS, BOSTON, MA 02121 .................................. 40
164

MULTIFAMILY PROPERTIES IN FORECLOSURE AS OF 4/4/02—Continued

(Please note that most of the unsubsidized notes will be offered the next note sale)

FHA# Section of the Act Property Name No. of Units

023–99909 .......................................................................................................... 221D3 .................... SONOMA, SONOMA STREET, BOSTON, MA 02121 .................................................................................. 22023–99910 .......................................................................................................... 221D4 .................... MAPLE, MAPLE STREET, BOSTON, MA 02121 ........................................................................................ 66023–99911 .......................................................................................................... 221D3 .................... SCHUYLER, SCHUYLER STREET, BOSTON, MA 02121 ............................................................................ 12023–99913 .......................................................................................................... 221D4 .................... WAUMBECK, WAUMBECK ST, BOSTON, MA 02116 ................................................................................. 32023–99914 .......................................................................................................... 221D3 .................... HUMBOLT, HUMBOLT STREET, BOSTON, MA 02121 ............................................................................... 52023–99915 .......................................................................................................... 221D3 .................... CRAWFORD, CRAWFORD STREET, BOSTON, MA 02121 .......................................................................... 89023–99916 .......................................................................................................... 221D4 .................... REGENT, REGENT STREET, BOSTON, MA 02121 .................................................................................... 15017–11019 .......................................................................................................... 223F ....................... WILLOW STREET APTS, 26–84 WILLOW ST, 111 PUTNAM ST., NEW BRITAIN, CT 06051 ...................... 50016–35056 .......................................................................................................... 221D4 .................... MELROSE APARTMENTS, 50 PRAIRIE AVE, PROVIDENCE, RI 02905–2437, HUD New York .................. 42012–44033 .......................................................................................................... 236 ........................ MEDGAR EVERS HOMES, 84 LIVINGSTON ST., BROOKLYN, NY 11201 ................................................... 318012–44043 .......................................................................................................... 236 ........................ JOSE DE DIEGO BEEKMAN I, 324 POWERS AVE, BRONX, NY 10454–1633 ........................................... 103012–44051 .......................................................................................................... 236 ........................ JOSE DE DIEGO BEEKMAN II, 328 BEEKMAN AVE, BRONX, NY 10454–1404 ........................................ 142012–44052 .......................................................................................................... 236 ........................ JOSE DE DIEGO BEEKMAN III, 694 E 141 ST, BRONX, NY 10454–2431 ............................................... 176012–44053 .......................................................................................................... 236 ........................ JOSE DE DIEGO BEEKMAN IV, 597 E 138TH ST, BRONX, NY 10454–2727 ........................................... 138012–44054 .......................................................................................................... 236 ........................ JOSE DE DIEGO BEEKMAN V, 578 E 141ST ST, BRONX, NY 10454–2350 ............................................ 150012–44134 .......................................................................................................... 236 ........................ JOSE DE DIEGO BEEKMAN VI, 570 SAINT MARYS ST, BRONX, NY 10454–1428 ................................... 185012–44140 .......................................................................................................... 236 ........................ JOSE DE DIEGO BEEKMAN VII, 615 E 141ST ST, BRONX, NY 10454–2317 .......................................... 165012–44160 .......................................................................................................... 236 ........................ JOSE DE DIEGO BEEKMAN V III, 590 OAK TER, BRONX, NY 10454–1408 ............................................ 172012–55183 .......................................................................................................... 221D3 .................... GATES AVENUE HOUSING, 650–700 GATES AVE, BROOKLYN, NY 11221–1701 .................................... 163012–57150 .......................................................................................................... 221D4 .................... EVENING STAR, 277 GATES AVENUE, BROOKLYN, NY 11238 ................................................................ 35012–HH002 .......................................................................................................... 202 ........................ BRONX INDEPENDENT LIVING, 1310 MORRIS AVE, BRONX, NY 10451 ................................................. 21031–94002 .......................................................................................................... 223F ....................... BRICK TOWERS, 685 MARTIN LUTHER KING JR BLVD, NEWARK, NJ 07102–1006 ................................ 320

HUD Baltimore

052–35332 .......................................................................................................... 221D4 .................... KENSETT HOUSE, 1700 EUTAW PL., BALTIMORE, MD 21217 ................................................................. 24052–35471 .......................................................................................................... 221D3 .................... SCHOOL 181, 1645 N CALHOUN ST, BALTIMORE, MD 21217–2800 ..................................................... 100

HUD Philadelphia

034–35175 .......................................................................................................... 221D4 .................... MACLAY STREET I APARTMENT, 501 MACLAY STREET, HARRISBURG, PA 17110 ................................. 129034–35211 .......................................................................................................... 223F ....................... MACLAY STREET II APARTMENT, 428 PEFFER STREET, HARRISBURG, PA 17102 ................................. 172

HUD Washington DC

000–44123 .......................................................................................................... 236 ........................ CAPITOL VIEW PLAZA, 5929 E CAPITOL ST SE STE 104, WASHINGTON, DC 20019–7237 .................... 309
165

HUD Jacksonville

066–R4071 .......................................................................................................... 236 ........................ HOLIDAY LAKES APARTMENTS, 973 N POWERLINE RD, POMPANO BEACH, FL 33069–2305 ................ 208

HUD Indianapolis

073–35475 .......................................................................................................... 221D4 .................... ORCHARD PARK APTS, 3102 BALTIMORE AVE, INDIANAPOLIS, IN 46218–2059 ................................... 94

HUD New Orleans

064–35040 .......................................................................................................... 221D4 .................... PECAN VILLA, 220 MARGARET ST, BREAUX BRIDGE, LA 70517–5942 ................................................. 103

HUD St. Louis

085–58505 .......................................................................................................... 236 ........................ JVL HOUSING CORP PACKAGE, 2754 BACON ST, SAINT LOUIS, MO 63106–1099 ................................ 56085–58508 .......................................................................................................... 236 ........................ JVL#14, 2754 BACON ST, SAINT LOUIS, MO 63106–1099 .................................................................... 65

TOTAL PROJECTS .................................................................................... ................................ ................................................................................................................................................................. 44TOTAL UNITS ........................................................................................... ................................ ................................................................................................................................................................. 5,270
166

NATIVE AMERICAN HOUSING BLOCK GRANTS FUND

Question. The Native American Housing Block Grant fund has been largely flat

funded at some $650 million since its inception. How many low-income units have

been preserved with these funds?

Answer. On average, during the 5 years that funding has been appropriated for

the Native American Housing Block Grant (NAHBG) program authorized by the Native American Housing Assistance and Self-Determination Act of 1996, as amended

(NAHASDA), Indian tribes or their tribally designated housing entities (TDHE)

have provided assistance designed to preserve the viability of 77,838 units each fiscal year. The unit count includes moderate or substantial rehabilitation, and modernization and operating assistance related to units currently in management. It

does not include other eligible affordable housing activities under the NAHBG, such

as down payment and buy down assistance, minor rehabilitation under $5,000,

housing services, housing management services, crime prevention and safety, and

model activities. The total does include Section 8 type programs operated by a tribe

or TDHE. Figures are derived from Formula Current Assisted Stock (FCAS) data

used to determine the FCAS allocation portion of the NAHBG formula.

Question. How many new units are created each year with these funds?

Answer. Using 4 years of Native American Indian Housing Block Grant (NAHBG)

funding (fiscal year 1998 through fiscal year 2001), on average, 2,149 units have

been created each year. Fiscal year 2002 figures are incomplete as of this date. Data

are derived from Annual Performance Reports and Indian Housing Plans, and in

one instance, an Area Office of Native American Housing Programs (ONAP) inhouse data report. In most instances, figures reflect dwelling units started and completed. Figures are reliable to the extent those reports contain accurate information.

Figures are affected by the transition from the way in which housing development

funds were awarded competitively under the United States Housing Act of 1937,

and the formula block grant allocation method under the NAHBG authorized by the

Native American Housing Assistance and Self-Determination Act of 1996, as amended. Numbers do not reflect ‘‘phased projects,’’ where it may be necessary for a tribe

or tribally designated housing entity (TDHE) to complete several pre-construction

steps, such as acquisition of land and development of infrastructure prior to actual

construction of dwelling units. Phased pre-construction activities are necessary in

most areas of Indian Country, but somewhat more common in the East, the Midwest

and the Northwest, less common in the Plains States. Alaska’s phased construction

is more the result of limited weather-related building seasons, materials acquisition

challenges and smaller project sizes.

HOPE VI

Question. The Public Housing HOPE VI program is scheduled to sunset at the end

of fiscal year 2002. This program has been tremendously valuable in revitalizing

both distressed public housing and distressed communities. Is the Administration

going to seek an extension of this program?

Answer. Yes, the Department submitted a reauthorization proposal.

Question. What is the cost of this program per unit?

Answer. The cost per unit of this program is $161,755. This amount represents

the amount budgeted from all sources, such as HOPE VI funds, leveraged funds,

and funding from other sources, as well as the hard and soft construction costs and

supportive services. The sum is based on the number of units planned for participating in the HOPE VI program. This information is based on the HOPE VI Quarterly Report for the quarter ending December 31, 2001.

Question. Please provide a breakdown of costs for all projects by unit with the soft

costs identified as a separate breakout?

Answer. Below is the breakdown of costs for all HOPE VI projects. Which is based

on data from the HOPE VI Quarterly Report for the quarter ending December 31,

2001. Total costs represents the amount budgeted from all sources. Number of units

represents all units planned (ACC and non-ACC as well as rental and homeownership).

All HOPE VI UNITS

Housing-Related Costs Soft Costs Total

Total Costs ............................................................................... $8,501,556,044 $3,159,331,262 $11,660,887,306

Number of Units ...................................................................... .............................. 72,090 ..............................
167

All HOPE VI UNITS—Continued

Housing-Related

Costs Soft Costs Total

Cost per Unit ........................................................................... $117,930 $43,825 $161,755

Question. Please identify the reforms that should be considered before additional

funds are appropriated?

Answer. The Department has requested the reauthorization of HOPE VI. HUD is

currently finalizing proposals for program reforms and believes that they are best

discussed in the context of reauthorization legislation. At the request of the Appropriations Committees, the Department submitted a report on the HOPE VI programs on June 14, 2002. The report describes the lessons that have been learned

during the first 10 years of the program’s operation.

LACK OF AFFORDABLE HOUSING

Question. There is a lack of affordable housing in many communities throughout

the country, especially for extremely low-income families (those at or below 30 percent of median income). Vouchers do not work well in these communities and housing is too expensive to build to assist many of these low-income families. How do

address this production problem, especially since tax credit production does not

reach extremely low-income families?

Answer. It is true that many Americans cannot afford the costs of rental housing

and that affordability problems are most prevalent among extremely low-income

families. The Department does not agree, however, that ‘‘vouchers do not work well

in these communities.’’ A recent HUD study found that in 2000, roughly 7 out of

10 families who received vouchers in metropolitan areas nationwide succeeded in

using them. Vouchers that are not used by the initial recipients are re-issued to

other families, and most of these families are successful.

With respect to the production of new rental housing, despite overall Federal

budget limitations due to the war against terror and the weakened economy, HUD’s

fiscal year 2003 budget seeks to expand the number of households that can afford

the costs of rental housing.

—HUD is requesting 34,000 additional housing vouchers—most of which will be

used to assist extremely low-income families.

—HUD is proposing a $74 million increase in HOME, in addition to the $200 million proposed for the American Dream Downpayment Fund.

—HUD continues its strong commitment to Section 202 for the elderly and Section 811 for the disabled.

—HUD is adding $15 million to the Housing Opportunities for Persons with AIDS

program—raising it from $277 million to $292 million.

Last year, HUD raised the loan limits for FHA multifamily insurance, a step that

has led to a substantial increase in volume in that program. HUD is also reducing

the mortgage insurance premium from 80 basis points to 57 basis points, effective

in October. Finally, it is important to note that in recent years, Congress has increased the Low-Income Housing Tax Credit by 40 percent and raised the caps on

tax-exempt bond authority.

Taken together, these changes will have a significant impact in expanding the

availability of affordable rental housing.

With respect to serving extremely low-income families, it is important to consider

that housing vouchers can be combined with existing production programs to make

units affordable to extremely low-income families. The Department would be happy

to discuss how to improve the linkages of these various programs.

D.C. SFPD FRAUD AND ABUSE

Question. There have been a number of recent news stories about a church-sponsored group in the D.C area called the Church Association for Community Service

which was identified as defrauding a HUD program whereby nonprofits rehabilitate

and resell HUD housing. In this case, the nonprofit used a private entity to rehabilitate the housing and made some $100 thousand on average per house in violation

of the rules. The news stories also indicated that this group did not qualify to participate in the program absent broad waivers by HUD under the last Administration. How big a problem is this type of fraud and what steps has HUD taken to

ensure accountability of HUD’s nonprofit partners in these types of programs?

Answer. On April 5, 2002, the Department announced that it would be conducting

a full review of the Asset Control Area (ACA) program, and that during the review
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period, existing ACA agreements would be allowed to expire. In part, this step was

taken in response to the concerns raised above and raised by HUD’s Inspector General in a report issued in February 2002. Two key components of this program review will be to determine if any additional fraud has taken place within the program, and what controls the Department must implement to prevent fraudulent activity.

HUD INTEGRATED INFORMATION PROCESSING SERVICE (HIIPS)

Question. HUD recently announced a re-competition of its HUD Integrated Information Processing Service (HIIPS) contract. This contract is key to HUD implementing a comprehensive IT system to track HUD programs and funding. When will

this contract be awarded and when will HUD have a comprehensive IT system in

place to track all HUD funding and programs?

Answer. The service that will be the follow-on contract to HIIPS has been named

the HUD Information Technology Service (HITS). HITS will be a 10-year IT infrastructure contract. The HITS contract is not a systems development contract and

is not pivotal in the development of a system to track HUD programs and funding.

The HITS contract is scheduled for award in November 2002. Implementation of

the HITS contract is not directly related to a system to track HUD programs and

funding.

Question. What are the overall expected costs for full implementation?

Answer. The existing HIIPS contract will transition to the next contract, HITS.

There is a transition cost associated with the migration from HIIPS to HITS. The

transition cost is considered source selection information and since this is an active

procurement, Pursuant to the Official Federal Procurement Policies Act, 41 U.S.C.

Section 423, HUD employees may not disclose contractor proposal or source selection information.

Question. Please describe what the IT system will do when complete?

Answer. HITS includes all of the supplies and services required to support HUD’s

Information Technology (IT) infrastructure. It includes:

Hardware Maintenance, Repair, Upgrade and Support

Data Storage and Retrieval

Database Management

Facilities Management

Telecommunications of Data and Video

Software Support (For Systems Software), Help Desk Operations for all Commercial off the Shelf (COTS) and HUD Unique Software

Electronic Data Interchange (EDI)

Configuration Management

Technology Assessment

Integration & Test Integration

Test Center Resources

IT Accessibility Support

Training

Enterprise Engineering Document Library Services

Nationwide IT including Telecommunications Disaster Recovery

FHA MULTIFAMILY PREMIUM REDUCTION

Question. HUD has proposed to reduce the mortgage insurance premiums for most

of its FHA Multifamily Mortgage Insurance programs. When would these reductions

go into effect and how many additional units does HUD anticipate will be funded

under this change?

Answer. The Department will soon publish a Notice in the Federal Register implementing the decreases in mortgage insurance premiums that will go into effect for

FHA Firm Commitments issued on or after October 1, 2002. The Department has

not estimated any potential unit increases in FHA commitments attributable to the

MIP decrease.

MULTIFAMILY ACCELERATED PROCESSING

Question. In addition, I have concerns that FHA’s Multifamily Accelerated Processing (MAP) does not have adequate protections against default since the owner/

lender essentially self-certifies the underwriting. How does HUD protect against unreasonable risk of default?

Answer. MAP does provide adequate protections against unreasonable risk of default through the HUD staff (architecture and cost, appraisal, mortgage credit) precommitment review of the lender’s underwriting package. The appraisal is the key

element of multifamily transactions and HUD appraisal staff are required to con-
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duct a field review of the property and the comparable rental properties which support the proposed rental estimates. The HUD technical staff can recommend modifications or rejection of the application if the underwriting conclusions are not supportable. The HUD staff recommendation must specifically address major issues like

the adequacy of the initial rent-up (operating deficit), escrow for new construction/

substantial rehabilitation transactions, the adequacy of the reserve for replacement

for existing transactions and any environmental concerns. The FHA supervisor in

the field office who makes the decision on issuing a commitment has clear authority

in the MAP Guide to modify or reject the lender’s underwriting package. MAP has

freed HUD staff from preparing much of the multifamily paperwork and allowed

staff to concentrate their review on the essential parts and risk of the proposed

transaction.

FHA DEFAULT RATE

Question. I am concerned that FHA single family mortgage insurance tends to

take the highest risk of default despite currently exceeding actuarial requirements.

What is the current rate of default on FHA single family mortgage insurance?

Answer. As of the quarter ending December 31, 2001, the 90-day default rate, including loans in foreclosure, was 4.60 percent of all FHA loans in force.

DEFAULT RATE FOR CONVENTIONAL HOME MORTGAGES

Question. How does this compare to the private market?

Answer. Using comparable data compiled by the Mortgage Bankers Association of

America, the 90-day default rate for conventional mortgages, including loans in foreclosure, was 1.11 percent as of the quarter ending December 31, 2001.

MMI RESERVES

Question. At what point does a downturn in the economy put the Mutual Mortgage Insurance Fund at risk of failing to meet its actuarial floor?

Answer. As of the end of fiscal year 2001, the Actuarial Review of Mutual Mortgage Insurance (MMI) Fund estimated the financial reserves of the Fund at approximately $18.5 billion, yielding a capital ratio of 3.75 percent. Based on estimates of

MMI activity for fiscal year 2002, the estimate of reserves was projected to increase

to $22.5 billion by the end of the fiscal year, with a capital ratio of 4.24 percent.

Actual program volume through the first half of this fiscal year indicates substantially increased performance over that projected in the Actuarial Review. Alternative economic scenarios analyzed in both the Actuarial Review and by the General

Accounting Office indicate that it is very unlikely that this substantial reserve

would be depleted to the extent of dropping below the currently mandated 2 percent

capital ratio established in the Cranston-Gonzalez National Affordable Housing Act

of 1990, however the prolonged and adverse economic circumstances that would

yield such a result cannot be eliminated as a possibility.

601 PROGRAM

Question. What is the status of HUD’s implementation of the single family property disposition program—more specifically, the asset control areas or ACAs? The

1998 property disposition legislation directed HUD to sell these properties to local

governments and qualified nonprofits at a price that allows their adequate rehabilitation and resale to low-income homebuyers, without the need for additional Federal

subsidies.

Answer. During the Accelerated Claims Disposition (Section 601) program demonstration phase, the initiative will have a limited scope and operate only in certain

regions of the country. Further, in those 16 communities that have signed Asset

Control Area (ACA) agreements, properties in those revitalization areas will be excluded from the Section 601 Demonstration, even during the ACA program review

period. In the initial demonstration phase of the Accelerated Claims Disposition program, the Department wants to learn if the profit-motivated Joint Venture Partner

will team with high capacity nonprofit organizations in carrying out loss mitigation

and asset disposition on notes in impacted revitalization areas to meet its recovery

objectives. The Department wants to be able to evaluate and report conclusively at

the end of the demonstration if the objectives of operationalizing the claim processing, increasing recoveries to the FHA fund and achieving budget savings have

been addressed. The Department, upon publishing Regulations, will consider allowing nonprofits to purchase mortgages in the future.
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SINGLE FAMILY PROPERTY DISPOSITION HOLDING COSTS

Question. Also, HUD is proposing to block sell many of the foreclosed FHA single

family properties and get HUD primarily out of the business of selling individual

houses. What are the current costs for HUD to hold foreclosed FHA houses, including the per unit cost of management and rehabilitation. This cost breakout should

include the costs associated with HUD staff and overhead as well as the per unit

cost for the use of management companies, including all associated costs. Answer. Daily per unit holding costs equal $36.75. This includes $4.00 for taxes, $30.84 for property management and marketing, $.63 for lost interest, and $1.28 for

HUD staff costs. (This assumes 30,000 on-hand properties and 125 HUD staff. Management & marketing costs include actual management fees, maintenance expenses,

and the costs for limited repairs completed to address health and safety concerns.)

PUERTO RICO HOUSING AUTHORITY

Question. What is the status of funding for PRPHA?

Answer. Under the operating fund the Puerto Rico Housing Authority has re- ceived $73,822,415 and is scheduled to receive an additional $18,948,123 for a total

of $92,770,538 for its fiscal year ending June 30, 2002.

PER UNIT AMOUNT OF OPERATING SUBSIDY FOR PUERTO RICO PUBLIC HOUSING

AUTHORITY

Question. How much funding does PRPHA receive per unit?

Answer. Under the Operating Fund, the Puerto Rico Housing Authority will receive a subsidy of $1,652 per unit for its fiscal year ending June 30, 2002.

COMPARISON OF PER UNIT AMOUNT OF OPERATING SUBSIDY

Question. How does this compare to the funding received 3 years ago per unit and

how does it compare to the funding received per unit by other PHAs such as Atlanta, New York City, Chicago and Los Angeles?

Answer. The data below shows a comparison of annual per unit amounts for the

Public Housing Authorities (PHAs) in question for operating subsidies received over

a 3-year period based on the PHAs’ fiscal years:

Fiscal Year Per Unit Cost

PRPHA:

6/30/2002 .......................................................................................................... $1,652

6/30/2001 .......................................................................................................... 1,433

6/30/2000 .......................................................................................................... 1,987

New York:

12/31/2001 ........................................................................................................ 4,687

12/31/2000 ........................................................................................................ 4,265

12/31/1999 ........................................................................................................ 3,724

Chicago:

12/31/2001 ........................................................................................................ 5,863

12/31/2000 ........................................................................................................ 5,898

12/31/1999 ........................................................................................................ 5,277

Los Angeles:

12/31/2001 ........................................................................................................ 3,507

12/31/2000 ........................................................................................................ 3,529

12/31/1999 ........................................................................................................ 3,244

Atlanta:

6/30/2002 .......................................................................................................... 4,031

6/30/2001 .......................................................................................................... 2,813

6/30/2000 .......................................................................................................... 3,191

As reflected by the above data, the per unit amount of subsidy received by an individual PHA can vary from year-to-year and there can be a significant variation

in funding levels between PHAs. For its December 31, 2001 fiscal year, the Chicago

Housing Authority received about 3.5 times the average funding per unit than the

Puerto Rico Public Housing Authorities (PRPHA’s) received for its June 30, 2002 fiscal year and 1.7 times the December 31, 2001 fiscal year average funding per unit

than the Los Angeles PHA. Using this gross type of average, however, masks the

impact of several important factors that determine operating subsidy eligibility and

would help explain why Chicago receives more funding than the Los Angeles PHA

or the PRPHA.

The amount of operating subsidy received by any particular PHA is determined

by a formula that takes into account factors such as routine operating expenses,
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utility costs, add-ons permitted by HUD, audit expenses, and rents charged to residents. For example, heating costs are a major expense to Chicago, but less of an

expense for the PRPHA. Another example where costs vary by PHAs is that of routine operating costs, which is represented by the Allowable Expense Level (AEL).

The AEL is a formula factor intended to represent the costs of operating a well-managed PHA. For the PRPHA, routine operating costs are low, but these costs are relatively higher for Chicago. Finally, in terms of comparing per unit amounts of operating subsidies, Chicago has a significant number of units approved for demolition

by HUD and, as a result, receives operating subsidy for phase down or transition

funding as well as funds to preserve and protect the units until they are demolished.

On the other hand, the Puerto Rico PHA is not undertaking major demolition actions.

QUESTIONS SUBMITTED BY SENATOR LARRY E. CRAIG

RURAL HOUSING

Question. I remain concerned over HUD’s decision to not request funds for the

rural Housing and Development Program. I am well aware other mechanisms exist

within HUD to fund development block grants and sweat-equity programs; however,

while that is encouraging, I find that HUD’s rationale in shifting responsibility for

the Rural Housing and Development Program onto the USDA, is questionable. What

assurances are there that this is not a cut or elimination of services?

Answer. The Rural Housing and Economic Development Program has a current

portfolio of grantees that include rural nonprofit organizations, community development corporations, Indian tribes, State Housing Finance agencies, and State economic development and/or community development agencies. HUD has grant agreements for up to 36 months with these entities to carryout the projects until they

are completed, based on the organization’s project timelines. The current projects

will be administered by HUD through fiscal year 2003. The Administration’s proposal to eliminate HUD’s program reflects the much greater assistance provided by

the U.S. Department of Agriculture and other agencies and presumes that there will

not be a meaningful change in the overall Federal assistance to rural America.

Question. What assurances can you give to me that at least the same level of services will be delivered, and that our government’s helping hand in rural America

would be made more effective by this change?

Answer. The U.S. Department of Agriculture (USDA) continues to manage a substantial portfolio of rural housing grant programs and economic development grant

programs, the service delivery will allow for a continuation of services provided to

rural constituents. USDA’s current rural development portfolio greatly exceeds

HUD’s Rural Housing and Economic Development Program in terms of programs

and services from budgets to staffing.

HOUSING COUNSELING PROGRAM

Question. I’ve noted the Administration’s proposal to restore funding for the Housing Counseling Program, which helps teach first-time home buyers with modest incomes about often-complicated things like mortgages, inspections, and predatory

lending practices. The previous Administration cut this funding, and also succeeded

in almost eliminating participation by State housing finance agencies (HFAs). This

made no sense, because State HFAs have the expertise and resources to offer new

home buyers the broadest possible range of services.

In Idaho, for example, our Idaho HFA is launching a program to help overcome

language barriers and reach out to the Hispanic population through its homebuyer

education program.

Am I correct in assuming the Administration proposal for increased funding reflects your plans to fully re-engage State HFAs in the Counseling program?

Answer. Most Housing Finance Agencies (HFAs) that operate good programs, such

as the Idaho HFA, should receive substantial awards with the funding proposed for

fiscal year 2003. The overall funding for the Housing Counseling program was increased and then cut significantly between fiscal years 1998 and 2000. An increase

from $15 million in fiscal year 1997 to $20 million in fiscal year 1998 permitted

HUD to seek out and fund additional organizations providing counseling services.

However, a cut back to $15 million in fiscal year 2000 forced HUD to make a decision regarding how to spread substantially less money among the same types of

groups.

Experience clearly demonstrated to HUD that many State HFAs were not able to

provide counseling services directly nor suballocate the funds to other local groups.
172

In fact, over the last few years, HUD has recaptured hundreds of thousands of

unspent funds from State HFAs. This funding was reserved in the names of several

HFAs for an entire year-long grant period, before HUD could recover it; clearly, it

could have been well-used by other counseling agencies to serve many hundreds of

clients in need. For this reason, HUD plans only a minimal increase in the amount

of funding available for State HFAs for fiscal year 2003. However, HUD’s decision

to increase funding for this category only minimally should not affect high-performing HFAs such as Idaho’s.

EQUAL OPPORTUNITY AND ACCESS TO HOUSING

Question. In the President’s basic budget document, one of HUD’s main strategic

objectives was to Ensure equal opportunity and access to housing, in other words,

promote fair housing. HUD’s own Budget Summary, spent just over a page describing HUD’s programs to enforce fair housing laws.

I commend the Administration’s emphasis in this year’s budget of assessing performance and effectiveness. However, I didn’t see assessments in the area of fair

housing.

Using the Administration’s red-light, green-light approach, how would you assess

HUD’s effectiveness in its strategic objective to ensure equal opportunity and access

to housing?

I realize, of course that you have inherited programs that previously were not

subject to performance measurement and that this Administration is still implementing its policy of conducting such reviews. HUD’s programs include both education and enforcement components. I think we all agree that an effective fair housing agenda includes both, adequate education and fair enforcement. How would you

assess HUD’s effectiveness in each of these areas?

Answer. HUD has made significant progress in accomplishing the Department’s

strategic objective to ensure equal opportunity and access to housing, but at the moment we would still have to give ourselves a red light in this area. While our enforcement efforts have contributed to the reduction of discrimination in America,

significant problems persist. The effectiveness of HUD’s enforcement efforts has

been historically impaired by the excessive length of time it has taken to resolve

discrimination complaints. Also, while knowledge of what constitutes illegal discrimination under the fair housing laws is generally high, research indicates that

the public requires more education about some prohibited practices.

HUD is completing several studies that provide quantitative measures of the level

of discrimination against different groups in our society. The preliminary findings

of the Department’s nationwide Housing Discrimination Study (HDS), to be released

shortly, show that the Nation has made progress on some measures of discrimination against African Americans and Hispanics over the last 10 years but some serious problems remain. Moreover, an examination of the actual instances of discrimination reveals that many real estate professionals blatantly disregard the law. For

example, in many cases agents openly confess their racial prejudices while steering

prospective renters and homebuyers to certain neighborhoods.

In the area of mortgage lending, HUD will release a study this month that shows

that generally Blacks and Hispanics in Chicago and Los Angeles are treated no

worse than whites when they inquire about financing options. However, the data

also indicates that Blacks and Hispanics are more likely to be quoted worse terms

and conditions on loans than equally-qualified or less-qualified whites. For example,

in Chicago, Whites were offered higher loan amounts than similarly-qualified Hispanics 51 percent of the time, while Hispanics were offered higher loans 19 percent

of the time. In Los Angeles, the study showed that Blacks who were clearly qualified

for conventional loans were steered to FHA loan products 31 percent of the time

while Whites with comparable profiles were steered to FHA 8 percent of the time.

The Department’s research and other activities also reveal widespread non-compliance with the fair housing laws that require that new multifamily buildings be

accessible to persons with disabilities. The Department will soon release a study

that provides quantitative measures of the extent of such non-compliance. In many

cases, the violations involve the failure to provide a basic level of accessibility (no

ramped access, front doorways are too narrow, lack of access to common areas).

HUD has made substantial progress in ameliorating these problems through its enforcement efforts and 14 years of education, but substantial non-compliance remains.

HUD has taken several steps to improve the effectiveness of its fair housing enforcement. The Bush Administration has made it a priority that fair housing complaints be processed in a timely manner. The Fair Housing Act requires that complaints be resolved in 100 days. Since President Bush took office, HUD has reduced
173

by 29 percent the number of complaints remaining unresolved past 100 days. HUD

accomplished this reduction through the commitment of additional staff and resources. Second, HUD is focusing more attention on particular communities and enforcement needs that weren’t adequately addressed in the past. HUD has identified recent immigrants and persons living in Southwest Border ‘‘colonias’’ as populations

who face significant barriers in the housing market, and have been traditionally underserved by HUD-funded fair housing programs. HUD’s fiscal year 2002 Notice of

Funding Availability (NOFA) and its fiscal year 2003 Budget emphasize fair housing

projects that provide greater assistance to these communities. The NOFA also recognizes the need to be responsive to circumstances when they first arise, emphasizing

projects that address national origin and religion discrimination that is on the rise

since the September 11 terrorist attacks. HUD has also entered into an Interagency

Agreement with the Department of State in furtherance of Executive Order 13166,

‘‘Improving Access to Services for Persons with Limited English Proficiency,’’ to

translate FHEO publications into Arabic, Cambodian, Chinese, Korean and Vietnamese. As the Administration has become aware of enforcement needs requiring greater

attention, HUD has committed additional resources to address them. For example,

HUD has proposed reprogramming $1.95 million of fiscal year 2001 FHIP funds,

originally planned for the third phase of HDS, to respond to immediate enforcement

needs, including addressing the kind of discrimination HDS is uncovering. The reprogrammed funds will also support projects to combat lending discrimination, including predatory lending; post-terrorism discrimination; and fair housing issues in

the colonias.

HUD continues to aggressively enforce the fair housing laws on behalf of people

with disabilities, seeking voluntary compliance where possible. As people with disabilities are disproportionately represented among low-income persons, HUD is responding to the lack of accessible housing units in public and assisted housing. HUD

has recently signed Voluntary Compliance Agreements with the District of Columbia and the Boston Housing Authorities, which collectively will create more than a

thousand new units of accessible housing. HUD has also developed a Web-based system that will assist its field offices in their review of non-compliant FHA-insured

properties and in targeting their enforcement efforts. In addition, as the IRS-administered low-income housing tax credit program currently produces more units of affordable housing than any other Federal program, HUD has joined forces with the

Department of Justice and the IRS to notify tax-credit beneficiaries that failure to

comply with the law places their tax credits in jeopardy.

Finally, HUD is moving toward more effective enforcement by making sure more

States, localities, and private organizations have the tools and the resources they

need to tackle the specific fair housing problems in their communities. HUD now

reimburses 95 States and localities for their enforcement of substantially equivalent

laws under the Fair Housing Assistance Program (FHAP). This includes 33 States

plus the District of Columbia. Under FHIP this past year, HUD awarded a recordnumber, 90 grants to a diverse range of fair housing groups throughout the country.

The Department is also providing a more continuous funding stream for FHIP enforcement projects by eliminating a policy that made successful applicants ineligible

for new enforcement grants the following year.

In the area of education, HUD’s soon-to-be-released Fair Housing Act Awareness

study indicates that while most people understand the most commonly discussed

provisions of the Fair Housing Act, a majority are not aware of the full scope of the

Act’s prohibitions. Moreover, a significant minority of people remain ignorant even

of the law’s most basic provisions.

The Department carries out much of its education activities through FHIP, for

which the 2002 NOFA provides $6 million in grants (grantees may also use a portion of enforcement and new-organization grants for education purposes). A few representative successes include: the education project of the Colorado Coalition for the

Homeless (CCH), who formed a statewide Fair Housing Task Force, which consists

of rank-and-file citizens and State, local, and Federal Government representatives,

delivering fair housing services to many communities throughout the State; Citizen

Action of New Jersey’s ‘‘train-the-trainers’’ sessions, whereby grassroots and faithbased organizations replicate trainings on predatory lending and other emerging

fair housing issues to fulfill the needs of their individual communities; and the work

of the State of Kentucky Fair Housing Commission, who have provided statewide

translators and disseminated Spanish-language materials to educate Kentucky’s

growing Hispanic population of their fair housing rights.

This year’s FHIP NOFA provides funding for a national Predatory Lending

Awareness campaign and greater outreach to underserved populations, including
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those persons living in the colonias. The NOFA also recognizes the historic role

faith-based organizations have played in educating people on their civil rights by

providing extra points for applicants who are either faith-based or grassroots organizations, or partnered with such organizations. Over the years, the Department has

undertaken several education and outreach initiatives to ensure greater access to

housing for people with disabilities. This has involved outreach to housing industry

groups and to advocates. The Department continues to build on these efforts. Not

only has HUD reprogramming proposed $1.7 million in Fair Housing Initiatives Program funds to continue a project that provides training and technical assistance in

a manner that the housing industry advises works best for them, but HUD also has

provided nearly $1 million to the International Codes Council, who are actively

working with the National Association of Homebuilders and others to encourage

States and localities to incorporate accessibility features into their building codes.

This latter effort will help address these matters upfront, when builders seek permits.

The Department believes that its retooled, more responsive enforcement program,

combined with enhanced education and outreach projects, will bring the fair housing

program closer to green-light status in the future.

FAIR HOUSING INITIATIVES PROGRAM

Question. In your proposed budget, how much is provided for each fair housing

component education and enforcement?

Answer. HUD’s fiscal year 2002 budget includes $6,000,000 to fund the Fair

Housing Initiatives (FHIP) Program education and outreach activities; $12,150,000

for private enforcement activities; and $2,100,000 to support the fair housing organizations initiative. To make additional funds available for education and outreach,

HUD allows grantees to allocate a percentage of fair housing organization grants

and private enforcement grants for these activities.

QUESTIONS SUBMITTED BY SENATOR PETE V. DOMENICI

COMMUNITY DEVELOPMENT BLOCK GRANTS

Question. Secretary Martinez, according to the latest CBO estimate of the President’s budget the funding level for the CDBG program drops about $300 million

from its 2002 level after you take out the $2.0 billion the program received in the

Emergency Response Fund.

Mr. Secretary could you please justify this cut to what many consider to be an

immensely important program?

Answer. The CDBG budget for fiscal year 2003 is a reduction from its 2002 level

because it does not request funding for several set-aside programs. The request for

the CDBG formula grants represents a 2 percent increase of $95 million over 2002.

Question. Mr. Secretary, the President’s budget briefly discusses a legislative proposal that would reduce the number of grants made to the wealthiest 1 percent of

eligible communities. The hope here, obviously, is to allocate more funds to those

who need it the most.

Could you please give this committee a bit more detail on this legislative proposal

and the Department’s rationale behind this proposal?

Answer. The Department’s proposed budget for fiscal year 2003 requests $4.436

billion in budget authority for the formula CDBG program to address locally identified community and economic development needs. Although the CDBG program allocates funds by formula in a way that targets most funds to our neediest communities, the current formula distribution of these funds also provides grants to higher-income communities. Because of the great disparity in per capita income among

our grantees, the budget proposal seeks to re-evaluate the method of allocating the

limited resources of the CDBG program.

A legislative change has been proposed for fiscal year 2003 to reduce, by 50 percent, the amount of the grant to the wealthiest one percent of eligible grantee communities. The wealthiest communities would be defined as those with per capita income equal to, or greater than, two times the national average. However, it must

be noted that this proposed legislative change is intended to further target limited

CDBG funds to the neediest communities. If this proposal is enacted, the Department will use data on per capita income from the 2000 Census to identify the communities whose funding would be reduced.

The funds captured by the 50 percent reduction would become available to all the

other entitlement communities with lower per capita incomes and would not directly

fund the Colonias Gateway Initiative. However, the savings achieved by this move-
175

ment of funds to more needy communities would create room in HUD’s overall budget to provide resources for the Colonias Gateway Initiative, which is designed to

serve some of the poorest communities in the Nation.

The Department does not consider this a new formula for CDBG. The data from

the 2000 census needed to do a comprehensive analysis of the CDBG formula should

be available this fall. We expect to do a study and present it to Congress for their

consideration next spring so that consideration could be made for the 2004 allocation of funds. Rather than wait for the process and a full examination of the formula, we choose to propose this adjustment to move a limited amount of funds from

very wealthy communities.

Question. Also can you give us a rough estimate of the percentage, or even better,

a dollar value of the funding that went to these wealthier communities as you define

them?

Answer. Provided is a list of those high-income entitlement communities that exceed 200 percent of the Per Capita Income (PCI) national average based on 1990

census data and their 2002 CDBG allocations. This list, however, is only illustrative

because the proposal would be based on 2000 census data, which will not be available until the spring. The list of the communities that would be affected based on

1990 census data is:

Community

Per capita

Income as

a multiple

of National

Average

Fiscal year 2002

CDBG funds

Greenwich, CT ................................................................................................................................. 3.2 $1,157,000

Newport Beach, CA ......................................................................................................................... 3.2 490,000

Lower Marion, PA ............................................................................................................................ 2.9 1,407,000

Naples, FL ....................................................................................................................................... 2.9 149,000

Palo Alto, CA ................................................................................................................................... 2.3 808,000

Westchester County, NY .................................................................................................................. 2.1 7,004,000

Santa Monica, CA ........................................................................................................................... 2.0 1,787,000

Brookline, MA .................................................................................................................................. 2.0 1,872,000

Newton, MA ..................................................................................................................................... 2.0 2,663,000

EMPOWERMENT ZONES AND ENTERPRISE COMMUNITIES

Question. Mr. Secretary, for fiscal year 2003 the President’s budget does not include any funding for Round 2 Urban Empowerment Zones and Enterprise Communities. In addition, a similar program but one that is funded through the Agriculture

Subcommittee, the Rural Empowerment Zone, has also received no funding in the

President’s budget. I hasten to add that the word ‘‘termination’’ is never used in the

President’s budget in relation to these programs but in budget materials received

from OMB no new budget authority is given to these programs over the next 10

years. I might also add that on page 176 of the President’s budget it is explained

how HUD has just designated communities for a Round 3 initiative.

Can you explain the discrepancy I have just described and could you please explain what the future holds for these programs, or at the very least, the future of

the Urban side of the EZ and EC initiative?

Answer. The EZ initiative is not being terminated even if no grant funds are included for fiscal year 2003. HUD’s efforts will henceforth concentrate on enabling

the Empowerment Zones to develop the capacity to use the funds they’ve received

over the remaining few years of the authorization. If successful, the Administration

would consider additional grants, if appropriate. HUD will also be emphasizing tax

incentives and leveraging funds in the Empowerment Zone program through greater

attention to Tax Incentive Utilization Plans.

Each of the Round III Empowerment Zone applications selected came with over

100 commitment letters from the private sector, non-profits and other public entities. One community remarked that it was refreshing to have partners come to the

table with commitments to offer instead of an open hand asking for grant money.

Rather than seeing the President’s fiscal year 2003 budget as a threat to the Round

II, we encourage them to see it as an opportunity to share the enthusiasm of the

Round IIIs. For example, they can take advantage of the two point scoring bonus

for HUD programs in our March 2002 SuperNOFA and bundle other Federal, State

and local grant and incentive programs for a prosperous tomorrow. All Empowerment Zones will qualify for Federal tax incentives until December 31, 2009.

Question. Is it your position that these programs have enough carryover from the

previous fiscal year and this is why they have received no funding for this year?
176

Answer. Yes. Funds were not requested for fiscal year 2003 because over $225

million in carryover remained. Collectively, the Empowerment Zones have only used

20 percent of the funds already appropriated. It would be more appropriate at this

time for HUD to concentrate on enabling the Empowerment Zones to develop the

capacity to use the funds they’ve received. HUD will also be emphasizing tax incentives and leveraging funds in the Empowerment Zone program through greater attention to Tax Incentive Utilization Plans.

SUBCOMMITTEE RECESS

Senator MIKULSKI. This Subcommittee stands in recess. Next

week we will take the testimony on the Environmental Protection

Agency. We look forward to working with you.

Secretary MARTINEZ. Thank you.

[Whereupon, at 10:55 a.m., Wednesday, March 13, the hearing

was concluded, and the subcommittee was recessed, to reconvene

subject to the call of the Chair.]
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DEPARTMENTS OF VETERANS AFFAIRS AND

HOUSING AND URBAN DEVELOPMENT AND

INDEPENDENT AGENCIES APPROPRIATIONS

FOR FISCAL YEAR 2003

WEDNESDAY, MARCH 20, 2002

U.S. SENATE,

SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS,

Washington, DC.

The subcommittee met at 9:36 a.m., in room SD–138, Dirksen

Senate Office Building, Hon. Barbara A. Mikulski (chairman) presiding.

Present: Senators Mikulski, Leahy, Kohl, Bond, Craig, and

Domenici.

ENVIRONMENTAL PROTECTION AGENCY

STATEMENT OF CHRISTINE TODD WHITMAN, ADMINISTRATOR

ACCOMPANIED BY:

LINDA FISHER, DEPUTY ADMINISTRATOR

ROBERT BOSTOCK, CHIEF SENIOR ADVISOR TO THE ADMINISTRATOR

MORRIS X. WINN, ASSISTANT ADMINISTRATOR, OFFICE OF ADMINISTRATION AND RESOURCES MANAGEMENT

JEFFREY HOLMSTEAD, ASSISTANT ADMINISTRATOR, OFFICE OF

AIR AND RADIATION

SYLVIA K. LOWRANCE, ACTING ASSISTANT ADMINISTRATOR, OFFICE OF ENFORCEMENT AND COMPLIANCE ASSURANCE

KIMBERLY T. NELSON, ASSISTANT ADMINISTRATOR, OFFICE OF

ENVIRONMENTAL INFORMATION

LINDA M. COMBS, CHIEF FINANCIAL OFFICER

MICHAEL W.S. RYAN, DEPUTY CHIEF FINANCIAL OFFICER

ROBERT FABRICANT, GENERAL COUNSEL, OFFICE OF GENERAL

COUNSEL

NIKKI TINSLEY, INSPECTOR GENERAL

JUDITH AYRES, ASSISTANT ADMINISTRATOR, OFFICE OF INTERNATIONAL ACTIVITIES

SUSIE HAZEN, DEPUTY ASSISTANT ADMINISTRATOR, OFFICE OF

PREVENTION, PESTICIDES AND TOXIC SUBSTANCES

HENRY L. LONGEST, II, ACTING ASSISTANT ADMINISTRATOR, OFFICE OF RESEARCH AND DEVELOPMENT

MARIANNE HORINKO, ASSISTANT ADMINISTRATOR, OFFICE OF

SOLID WASTE AND EMERGENCY RESPONSE

DIANE REGAS, ACTING ASSISTANT ADMINISTRATOR, OFFICE OF

WATER

BENJAMIN GRUMBLES, DEPUTY ASSISTANT ADMINISTRATOR, OFFICE OF WATER
178

THOMAS GIBSON, ASSOCIATE ADMINISTRATOR, OFFICE OF POLICY, ECONOMICS AND INNOVATION

EDWARD D. KRENIK, ASSOCIATE ADMINISTRATOR, OFFICE OF

CONGRESSIONAL AND INTERGOVERNMENTAL RELATIONS

JOSEPH MARTYAK, ACTING ASSOCIATE ADMINISTRATOR, OFFICE

OF COMMUNICATIONS, EDUCATION AND MEDIA RELATIONS

JOSEPH L. DILLON, COMPTROLLER, OFFICE OF THE CHIEF FINANCIAL OFFICER

NANCI E. GELB, DIRECTOR, ANNUAL PLANNING AND BUDGET DIVISION

OPENING STATEMENT OF SENATOR CHRISTOPHER S. BOND

Senator BOND. Good morning and welcome. The Subcommittee

on VA, HUD, and Independent Agencies will come to order for the

fiscal year 2003 appropriations for EPA.

The Chair is tied up in traffic, as I gather several people were.

I just went to the wrong room. So, I did not have an excuse.

But, Madam Administrator, we are always delighted to welcome

you to testify on the budget request.

As we discussed last year, EPA, has one of the most difficult

challenges of any Federal agencies, with the responsibilities for the

clean-up of Superfund and brownfield sites and the funding of

clean water and drinking water infrastructure to the enforcement

of environmental laws to representing our Nation with regard to

issues of climate change.

On top of these important responsibilities, EPA, since September

11, has embraced the unfortunate new challenges posed by the

threat of terrorism to our Nation’s water supply, and has provided

leadership within the Federal Government with regard to toxic biochemical agents and other hazards, such as Anthrax. This year, the Administration has requested some $7.7 billion in budget authority; a reduction of about $283 million from the fiscal

year 2002 funding level. However, assuming a number of adjustments, including the Administration’s fantasy reduction of $488

million in Congressionally designated EPA water and sewer grants,

the EPA funding level is approximately equivalent to the fiscal

year 2002 level.

Within these funding levels, the Administration is requesting

$200 million for the brownfields grant program, an increase of $100

million from fiscal year 2002, $21 million for a new targeted watershed program, a repeat request for a new State Enforcements

Grant Program at $15 million, and $124 million for Homeland Security.

I continue to have one primary area of concern, both in my role

here on this committee and as a member of the committee on Environment and Public Works. The Administration is again recommending a reduction of the Clean Water State Revolving Fund,

from $1.35 billion, for the current year, to $1.2 for the next year,

while maintaining a level request of $850 million for the Drinking

Water State Revolving Fund.

I strongly support the continued funding of both these State Revolving Funds at the 2002 level, especially the Clean Water Revolving Fund at $1.35 billion. The need is especially relevant, since the

EPA gap analysis is expected to indicate that the United States
179

will need to spend over $350 billion over the next two decades on

new and existing water infrastructure.

Even more troubling, outside estimates have concluded that as much as $740 billion is needed over the next 20 years, with some

$200 billion more in financing, and as much as $980 billion for

local governments to operate and maintain this water infrastructure.

The programs must be maintained and increased, if possible. The

huge funding estimates for water infrastructure needs also beg the

question of how Congress and the EPA should prioritize and allocate the available funding to meet our most pressing needs.

Now, Madam Administrator, I have places in my State, in rural

Missouri, where they do not have adequate water treatment. And

I can tell you that you do not have to get very close to them to tell

they have got a problem. You can smell it. And if you are talking

about cleaning up the environment and making sure we take care

of public health, when we do not take care of the clean water

needs, we are neglecting one of the most serious and real threats

to our environment and to the health of our population, because

with polluted water, comes significant health problems.

In addition, the EPA faces significant challenges with regard to

the new requirement for the total maximum daily load, or TMDL

pollutants, the impact on public health and the environment by

large animal feeding operations, increased public health risks attributable to combined sewer overflow problems, and statutory requirements for the protection of wetlands.

I also am concerned about issues related to air quality standards

on the Clean Air Act, including the implementation of the New

Source Review provisions of the Clean Air Act, which authorize

EPA to set standards for certain facilities for the installation of air

pollution control equipment.

It is an especially important issue, as we seek to maintain the

economic viability of U.S. producers of energy all meeting the air

quality standards.

I applaud EPA’s attention and commitment to homeland security. As a follow-up to the $175.6 million Congress appropriated for

EPA’s investment in 2002 emergency supplemental, the Administration is asking for an additional $124 million in follow-up funding

to protect the Nation’s water supply, for continued security upgrades to EPA facilities, and to continue to operate the West Coast

Emergency Response Team.

There is one other issue I am compelled to raise at this time. On

March 8, the Wall Street Journal printed an editorial regarding the

awarding of EPA funds to non-profit groups that have used the

funds primarily for lobbying or litigating on EPA issues, and that

these funds may have totaled as much as $2 billion from 1993 to

2001. The editorial goes on to indicate that EPA’s top six non-profits that have received these funds were not environmental organizations, but senior citizens’ groups. AARP received some $99 million. There are even allegations that EPA officials have erased hard

drives and destroyed e-mail tapes.

These, Madam Administrator, are very troubling allegations that

need to be addressed, especially since the VA/HUD Appropriations

Act prohibits the use of agency funds for lobbying or litigation, and
180

requires the Chief Executive Officer to certify that no funds have

been used to lobby or litigate on EPA issues. I trust you and the

Inspector General will pursue these allegations and report back to

us on what you found, and if there, in fact, has been such a problem, and the definitive steps that you are going to undertake to

make sure it never happens again.

Finally, I am very glad that EPA is focusing on meeting its primary program and legal obligations, rather than creating a new series of programs and responsibilities. You have got enough work to

do with what you have. In the past, we have seen lots of side efforts going off in different directions that took away from the main

responsibility. We are delighted that you are going to stick with the

very important primary responsibilities you have.

With that, I am going to turn to a distinguished member of the

committee, Chairman of the Budget Committee, in whose good

graces we all seek to be. And he can speak as long as he wants.

At least until the Chair arrives.

STATEMENT OF SENATOR PETE V. DOMENICI

Senator DOMENICI. I will not be long. I thank you very much,

Senator Bond. And let me open the discussion with you by telling

you that I understand that the nomination of Mr. Paul Gilman,

who has been selected by the President to work with you to be your

Science Director, was being held up. I did want to tell you that

there was a hold on his nomination but last night, it was released.

At least, the Senator that suggested the hold, when I went to talk

with him, said he would release it sometime yesterday. So, perhaps

it is ready to go through.

Senator BOND. Thank you.

Senator DOMENICI. We look forward to his being confirmed, and

I compliment you on getting a very talented science advisor, who

also understands a lot about the way things are done up here. I

might say that he used to work for me. He was my Administrative

Assistant or Chief of Staff, but he is a great scientist. I look forward to his being at EPA, so we can work science issues with him.

He will be a very big asset.

Now, I am going to talk about just one subject, and I will do it

as quickly as I can. I think if I said to you, write down the subject

that Domenici is going to talk about, you could write it down, because it is arsenic and the new arsenic standard in communities

and cities in my State, the State of Nevada, the State of Arizona,

and many others.

As an example, the City of Albuquerque has briefed us, Madam

Administrator, and told us that their estimate now is $150 million

to fix their system so it is in compliance. With that, we think we

have an estimate for the State of New Mexico, from the largest,

which is Albuquerque, down to some very small ones that if they

have to put in an arsenic treatment system, they will have to go

back to individual wells, because they will not be able to afford the

water. Between $400 million and $700 million will be the cost in

New Mexico. We are told that Arizona is very similar. So, they are

between $400 million and $700 million. When we were discussing

this issue on the floor, that last time, several Senators, including

Senator Mikulski, who chairs this committee, Senator Boxer, Sen-
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ator Clinton, Reed, Bingaman, Hagel, Hutchison, happened to be

on the floor, and each, in turn, stood up and said they would like

to be helpful in the passage of a bill that would grant assistance

to these cities that have to make these changes that you know,

they never would have made on their own. Many of them would

have fought to convince anyone that their water was not dangerous. We now have a standard that for many out in the Southwest is a ludicrous standard. I think you know how we feel about

it, but it is the standard.

I have two questions. One, if we were to pursue some kind of assistance, by way of grants or the like to communities so that they

might be able to afford the equipment and changes that are required, would you be supportive of that?

Ms. WHITMAN. Would you like me to answer that now, Senator?

Senator DOMENICI. Yes, please.

Ms. WHITMAN. We would certainly look very closely.

Senator DOMENICI. I am going to be leaving, so I cannot stay

long.

Ms. WHITMAN. Okay. I would be happy to answer that. We have

identified $20 million in our budget to begin this process. One of

the things we are looking at very closely is how we can aid these

communities with new technologies that will help bring down the

cost. We would look very closely at any legislation you propose, because we are very sensitive to this being an enormous issue for

those States where you have a lot of naturally occurring arsenic.

Senator DOMENICI. And the second issue has to do with one that

you touched on, that has to do with research and development of

technology. I gather, from looking at your budget, you have up to

$20 million for research and development in this area.

I am going to give you a hypothetical question. If, in fact, we had

a technology, and it was close, not quite there, but close, and if in

fact some kind of a certification could be obtained that will be

ready, but not exactly on time, will you have an open mind to considering, with these communities, some way of alleviating the enormous cost, as long as they are ready to go, thereafter, with new

technology?

Ms. WHITMAN. We are certainly going to do everything we can

to make sure that they have time to comply with the new arsenic

in drinking water standard, so it does not put them into bankruptcy and does not force people to drill their own wells, because

that is one of the issues that was of concern at the very beginning.

Then we have the ability to protect them against actually getting

water that has much higher levels of arsenic——

Senator DOMENICI. Right.

Ms. WHITMAN [continuing]. Than is acceptable. So, we would certainly look forward to working with you and the communities to

see what we can do to make this a feasible standard, an achievable

standard. We already have, in the rule, exemptions for which communities can apply.

Senator DOMENICI. I thank you so much. I will not be able to

stay. We are starting the budget mark-up, but I thank you for your

consideration. And we will be working with you and those in your

department who are experts in this field, because we have to solve
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this. So, I will be dedicating time to this is my number one—let us

solve the problem issue.

I think my friend would vouch that if I do that, we are probably

going to find a solution.

Senator BOND. Senator Domenici, you have made a very compelling case.

And I work with you, not always successfully, to try to find a

modus vivendi, but certainly, Madam Administrator, with research

dollars, with assistance, and where appropriate, if there are specific

actions you need to take or need legislative provisions, we would

like to work with you, because my great fear is that in seeking the

perfect, we will be the enemy of the good, and force many small

communities to go back to untreated wells. And by trying to do

something that is beyond our grasp, we could actually put people

in greater harm.

Senator DOMENICI. Thank you.

Senator BOND. So, with that, Madam Administrator, I know the

Chair—I am sure the Chair is avidly reading your opening statement as she comes in. She has asked that if you would go ahead

and present your comments, and then we will continue until she

is able to get here until traffic lets up, so she can be here.

So, Madam Administrator.

Ms. WHITMAN. Thank you very much, Senator. It is a pleasure

to appear before you, once again. It is always a pleasure to be able

to see you and to present the President’s budget for the Environmental Protection Agency for fiscal year 2003.

This budget request provides the funds that EPA needs to complete its mission efficiently and effectively. As you know, the President’s total request for fiscal year 2003 is $7.7 billion, which is

more than a $200 million increase over last year’s request.

Overall, our proposed budget reflects the goal that President

Bush and I have of leaving America’s air cleaner, it’s water purer,

and it’s land better protected.

I should also point out that EPA’s proposed budget is part of the

Administration’s record overall request of $44.1 billion for the environment and natural resources; the highest ever such request, representing a $1.1 billion increase over the enacted levels of the current fiscal year.

If I may, I would like to discuss some of the highlights of our proposal.

Madam Chair, good morning.

Senator MIKULSKI. Good morning.

Ms. WHITMAN. And submit a somewhat more detailed statement

for the record, if that is all right.

Senator BOND. We would be happy to have it. Thank you.

Ms. WHITMAN. I would defer to the Chair, if she wants to make

some comments, now.

Senator MIKULSKI. I apologize to the Administrator. It has taken

me 2 hours to get here this morning from Baltimore. Why do you

not go ahead with your testimony? And then, when I get ready to

ask you questions, I will do it that way. Let us keep our momentum going. We both have to be at a hearing. And thank you for——

Ms. WHITMAN. Thank you.

Senator MIKULSKI [continuing]. Starting, please.
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Ms. WHITMAN. All right. First, as you know, almost half our

budget is in grants to State, local and tribal governments. This is

reflective of our experience that many innovative, creative and effective environmental achievements are being made at the State,

local and county levels.

As I have traveled around the country during the past year, I

have seen some very exciting work in action. The Chair and I actually spent some time with the Alliance for Chesapeake Bay last

summer, and saw just how much strong partnerships can accomplish. Good work like this is taking place in countless communities

across the country, and the results speak for themselves.

In this budget, we are going to build on those results to achieve

even greater environmental progress, recognizing that not all wisdom resides in Washington.

Next, this budget more than doubles the funds available for

brownfields reclamation, as you pointed out, Senator, providing

$200 million. This money will lead to thousands of acres of better

protected land in the years ahead.

The success that so many communities have had already in

cleaning our less challenging brownfields will be replicated at thousands more difficult sites across the country.

We have also continued to ask for steady funding for the Super- fund Program at $1.3 billion. At a time of national crisis, this commitment to the continuity of Superfund reaffirms its significance to

this Administration.

Third, this budget provides important funding for a new water- shed initiative. As you mentioned, we are requesting $21 million

for a program that will allow us to build an effective public-private

partnership to help restore and protect 20 of the Nation’s most precious watersheds.

This initiative is another opportunity to show the real results

that partnerships can achieve and how such partnerships can bring

together existing programs in a unified approach, including the

Nonpoint Source Grant program, which we propose funding at

$238.5 million. As a result, this budget will help improve water

quality for drinking, boating, swimming and fishing, in those watersheds that we target.

There are numerous other important initiatives in our proposed

budget. They include funding to increase the development of new

technologies for environmental progress, funding for research that

could lead to the significant reduction or curtailing of animal testing by building on the discoveries of the human genome project,

and funding to increase our knowledge base about our air quality

challenges, so that we can save lives and prevent illnesses, such as

asthma, among America’s children.

In addition, the funding we propose for the Drinking Water and

the Clean Water State Revolving Funds is the largest such combined request. Of course, our budget request also includes significant new money to help EPA meet its homeland security responsibilities. The $124 million in new funding we are requesting, will

support such important efforts as protecting the Nation’s water infrastructure by funding vulnerability assessments at the Nation’s

drinking water utilities, and wastewater facilities securing additional personnel and equipment to expand our ability to respond to
184

biological attacks, and investing in research designed to enable the

Nation to better detect and respond to chemical or biological attacks.

PREPARED STATEMENT

I am pleased to say, Madam Chair, that taken together, the

President’s proposed EPA budget for fiscal year 2003 fully supports

the work of this Agency. It will enable us to transform the Agency’s

30-year mission to meet the challenges of the twenty-first century,

and it brings us that much closer to realizing that goal of cleaner

air, purer water, and better protected land.

I look forward to answering any questions that you might have.

[The statement follows:]

PREPARED STATEMENT OF CHRISTINE TODD WHITMAN

Madam Chair and Members of the Committee, I am pleased to be here to discuss

President Bush’s budget request for the Environmental Protection Agency (EPA).

The President’s budget provides the necessary funds for the Agency to carry out our

mission efficiently and effectively to protect human health and safeguard the environment. The fiscal year 2003 request is $7.7 billion, which includes more than a

100 percent increase in funding for Brownfields, and significant increases for watershed protection.

I would like to begin, Madam Chair, by emphasizing that the President’s budget

request for EPA reflects the Agency’s strong commitment to leaving America’s air

cleaner, its water purer, and its land better protected than it was when we took office. It promotes that goal in a manner consistent with our commitment to fiscal

responsibility; by further strengthening our partnerships with State, local and tribal

governments; by funding innovative new programs, and by strengthening existing

programs that work.

I’d like to touch on a few of the highlights: nearly half of EPA’s budget request provides funding for State and tribal programs, including almost $3.5 billion in assistance to States, tribes and other partners. The President and I both believe that

much of the innovative, creative, and effective environmental progress being made

comes from State, county and local governments and our budget request supports

that.

As I have traveled around the country during the past year, I’ve seen some really

exciting programs in action. From the people of Kentucky PRIDE to the members

of the Paiute Tribe in Nevada, and in countless other communities across America,

the EPA is building strong partnerships for environmental progress and the results

speak for themselves. In this budget, we will build on those results to achieve even

greater environmental progress.

Homeland Security

I would like to thank the appropriators for recognizing the important role EPA

plays in homeland security by providing $176 million in the fiscal year 2002 supplemental. Since September 11, we have seen the traditional mission of our Agency

safeguarding the environment and protecting the public health take on new meaning. We now play a critical role in preparing for and responding to terrorist incidents because of our unique expertise and experience in emergency preparedness

and response to hazardous material releases. Our new role of supervising the decontamination of anthrax infected buildings has shown us that better information and

new technologies are needed. To continue to do our part to ensure that the nation

is prepared to respond to terrorist incidents, we are investing an additional $124

million for homeland security.

Included in this figure is $75 million for research in technologies for decontaminating buildings affected by bioterrorists attacks. We will provide guidance, technical expertise and support to Federal, State and local governments in building contamination prevention, treatment and cleanup capabilities. Combined with resources

provided in the Emergency Supplemental Appropriation Act of 2002, this represents

a two-year total of $300 million in new resources. Also included in this figure is $20

million to address threats to the nation’s drinking water supply. We, at EPA, play

a significant role in working with State Governments and local utilities to protect

drinking water supplies. We have already begun working with states and local utilities to assess this vulnerability. The additional $20 million being requested in fiscal
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year 2003 will augment $88 million appropriated as part of the Emergency Supplemental Appropriation Act of 2002. Together, these funds will ensure that utilities

have developed a comprehensive assessment of these vulnerabilities and emergency

operations plans using the most current methods and technologies.

Brownfields

Our fiscal year 2003 budget more than doubles the funds available for brownfields

reclamation by providing $200 million. This money will allow states, tribes, and

local governments to build on the work they’ve already done in turning thousands

of neighborhood eyesores into community assets. Despite that progress, thousands

of brownfields still mar America’s landscape. That is going to change. Thanks to

President Bush’s commitment to brownfields, this money will help us get at some

of the most difficult brownfields challenges that remain. Those reclaimed

brownfields will provide their communities with new jobs, new places to play, and

a new sense of optimism for the future.

Watershed Projects

By providing $21 million for a new watershed initiative, our budget will target

up to 20 watersheds around the country for improvement funding that will lead to

millions of gallons of purer water in the years ahead. This initiative will allow us

to build on existing public-private partnerships to restore and protect up to 20 of

America’s most threatened watersheds. When I visited Boston last year and saw

first-hand the excellent work done by the Charles River Initiative, I knew we could

use that effort as a model for other communities. I’ve heard a watershed defined

as ‘‘communities connected by water.’’ Well, with this initiative, we are connecting

EPA with local watershed protection through the flow of Federal dollars. As a result, we will help improve water quality for drinking, boating, swimming, and fishing.

National Environmental Technology Competition

Of course, underlying everything we do is our commitment to partnership. One

of the most exciting new partnerships this budget seeks to build upon is our proposed National Environmental Technology Competition. Over the past 30 years, advances in technology have helped us address some of our most pressing environmental challenges. I believe technology can play an even greater role as we seek

to achieve the next generation of environmental progress. That is why we are proposing $10 million for our National Environmental Technology Competition. This

program will use competition to foster technological innovation through public-private partnerships. It will promote the development of new, cost-effective environmental technologies that will help clean the air, water, and land. For example, in

fiscal year 2003 EPA will solicit proposals related to arsenic removal in drinking

water. This work will help further EPA’s commitment to help fund, through research and development, cost effective methods of arsenic removal for small systems.

Cleaner Air

Under the Clean Air Act, we continue work to make the air cleaner and healthier

to breathe by setting standards for ambient air quality, toxic air pollutant emissions, new pollution sources, and mobile sources. In fiscal year 2003, we will assist

states, tribes and local governments in devising additional stationary and mobile

source strategies to reduce ozone and particulate matter, and other pollutants. A

key component to achieving the Clean Air Goal for all citizens is the request for over

$232 million for air grants to states and tribes. In addition, EPA will continue to

build upon its voluntary government/industry partnership efforts to achieve pollution reductions and energy savings. For example, as we continue our Energy Star

Labeling and Building Program efforts, our goal is to reduce the emissions of greenhouse gases by more than 40 million metric tons annually, by 2010, while saving

consumers and businesses an estimated $14 billion in net energy bill savings when

using energy-efficient products.

Purer Water

Over the past three decades, our nation has made significant progress in water

pollution prevention and cleanup. While we have substantially cleaned up many of

our most polluted waterways, and provided safer drinking water for millions of U.S.

residents, significant challenges remain. This budget request addresses the challenge to provide clean and safe water in every American community.

Protection from Drinking Water Contaminants.—The fiscal year 2003 request supports our coordinated efforts with the states and tribes to implement new health-
186

based standards to control for microbial contaminants, disinfectants and their byproducts, and other contaminants.

Drinking Water State Revolving Fund.—The Drinking Water State Revolving

Fund (DWSRF) request of $850 million will provide substantial funding to states

and tribes to upgrade and modernize their drinking water systems. At this funding

level, EPA will eventually meet its goal of providing an average of $500 million annually in assistance.

BEACHES Grants.—This budget includes $10 million to support our implementation of the ‘‘Beaches Environmental Assessment and Coastal Health Act of 2000.’’

The money will be provided in the form of grants to states to develop local monitoring and notification programs for coastal recreation waters.

New Watershed Investments.—Our $21 million Targeted Watershed Program is

designed to support the need for additional funding for priority watershed restoration efforts. This request supports a range of water quality restoration tools to assist

local communities in restoring their waterways. This Program would provide direct

grants to watershed stakeholders to implement comprehensive restoration actions.

Helping States Address Run-off and Restore Polluted Waters.—The President’s fiscal year 2003 Budget provides significant resources to states to build on successes

we have achieved in protecting the nation’s waters, by providing states and tribes

with grants to address polluted run-off, protect valuable wetlands, and restore polluted waterways.

Clean Water State Revolving Fund.—Our budget request includes $1.212 billion

for states and tribes for the Clean Water State Revolving Fund (CWSRF). States

receive capitalization grants, which enable them to provide low interest loans to

communities to construct wastewater treatment infrastructure and fund other

projects to enhance water quality. This investment allows our Agency to meet the

goal for the CWSRF to provide $2 billion average in annual financial assistance over

the long-term.

Protecting Human Health along the U.S.-Mexico Border.—This budget includes

$75 million for water and wastewater projects along the U.S.-Mexico Border. These

resources help our Agency to address the serious environmental and human health

problems associated with untreated and industrial and municipal sewage on the

U.S.-Mexico border.

Strong Science

The fiscal year 2003 budget supports our efforts to further strengthen the role of

science in decision-making by using scientific information and analysis to help direct

policy and establish priorities. EPA will achieve maximum environmental and

health protections through our request of $627 million for the Office of Research and

Development to address both current and future environmental challenges. This Administration is committed to the incorporation of science into regulatory decisions

by having scientists participate early and often in the regulatory development process. The budget request supports a balanced research and development program

that addresses Administration and Agency priorities, as well as meets the challenges of the Clean Air Act (CAA), the Safe Drinking Water Act (SDWA), the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), the Food Quality Protection Act (FQPA), and other environmental statutes.

Environmental Information

In fiscal year 2003, we will further our commitment to providing assistance to

states and tribes to develop and implement the National Environmental Information

Exchange Network. The goal of this program is to advance collaborative efforts to

integrate environmental data between and among EPA, states and the Agency’s

other partners. The ability to easily exchange up-to-date, accurate information is

critical to meet today’s increasingly complex environmental challenges. The grant

program has several components, each of which is aimed at building on the growing

success of states and tribes in finding smarter alternatives to the current approaches for exchanging environmental data. The grants being offered include

grants to enable states and tribes to re-engineer their environmental reporting;

grants to demonstrate progress in developing a joint EPA/state National Environmental Information Exchange Network, and grants that challenge State or multistate or tribal efforts to integrate environmental information.

As EPA works with states and tribes to develop the National Environmental Information Exchange Network, we will also continue to build and institutionalize a

Central Data Exchange (CDX) which will be EPA’s focal point for securely receiving,

translating, and forwarding data to EPA’s data systems. In fiscal year 2003, the

CDX will service 45 States and an assemblage of 25,000 facilities, companies, and

laboratories. By widely implementing an electronic reporting infrastructure, this in-
187

frastructure will reduce reliance on less efficient paper-based processes, thereby improving data quality, reducing reporting burden, and simplifying the reporting process.

ENFORCEMENT GRANT PROGRAMS

Most of our nation’s environmental laws envision a strong role for State Governments in implementing and managing environmental programs. The fiscal year

2003 request includes $15 million in a new grant program to continue to support

State agencies implementing authorized, delegated, or approved environmental enforcement programs. These funds will continue to afford states a greater role in the

enforcement of environmental laws and regulations.

This budget request will allow our Agency to continue to support the regulated

community’s compliance with environmental requirements through voluntary compliance incentives and assistance programs. We will provide information and technical assistance to the regulated community through the compliance assistance program to increase its understanding of all statutory or regulatory environmental requirements. The program will also continue to develop strategies and compliance assistance tools that will support initiatives targeted toward improving compliance in

specific industrial and commercial sectors or with certain regulatory requirements.

Safe Food

The fiscal year 2003 request includes $142.3 million to help meet the multiple

challenges of the implementation of the Food Quality Protection Act (FQPA) of 1996

so that all Americans will continue to enjoy one of the safest, most abundant, and

most affordable food supplies in the world. FQPA provides for the expedited registration of reduced risk pesticides to introduce alternatives to the older versions on

the market. EPA implements its various authorities in a manner to ensure that

farmers are able to transition with a minimal disruption in production to safer substitutes and alternative farming practices. Expanded support for tolerance reassessments will reduce the potential risks to public health from older pesticides. Reassessing existing tolerances promotes food safety, especially for infants and children,

while ensuring that pesticides meet the most current health and safety standards.

This budget request also supports FQPA-related science through scientific assessments of cumulative risk, including funds for validation of testing components of the

Endocrine Disruptor Screening Program.

Summary

Taken together, the President’s proposed EPA budget for fiscal year 2003 fully

supports the work of our Agency. It will enable us to transform the Agency’s 30-

year mission to meet the challenges of the 21st century. It brings us that much closer to realizing our goals of cleaner air for all Americans to breathe, purer water for

all Americans to drink, swim and fish in, as well as safeguarding public health.

This concludes my prepared statement. I would be pleased to answer any questions that you may have.

STATEMENT OF SENATOR BARBARA A. MIKULSKI

Senator MIKULSKI. Well, thank you very much, Administrator

Whitman. And sorry I was late. It was just rolling accidents this

morning. But we want to welcome you to your third hearing before

this subcommittee. You came last year for the EPA’s regular appropriations hearing, and then you testified in November about EPA’s

role in helping with the Anthrax decontamination, particularly in

the Hart Building. And we have worked together on many issues.

Before I go into my comments about the President’s request and

questions that I will be following, I really want to thank you, personally, and your entire team, for their dedication in helping us

come to grips with the Anthrax situation in the Hart Building, at

Brentwood, in our postal facilities, and also in the Nation. I know

that they were tireless. I know that they were dedicated.

And I just want to on behalf of our colleagues here and also postal employees, again, thank you for that. It was a very tough time

for our country. I have a saying that when we face tough times, the
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tough have to get going. We want to talk more about the threats

to the Nation and the role of EPA and homeland security, but let

me go on to some of the other basics, and then get to my questions.

I want to note that as we get ready to look at next year’s appropriation, we are at somewhat of a disadvantage, because we have

not received EPA’s operating plan. I am not finger-pointing you

about this, Madam Administrator. I know that you sent the operating plan to OMB some time ago. But it is the only agency for

which we have not received an operating plan. And we would like

you to really use your good office, as we believe you have developed

an operating plan. We know you have. We would like to see it. We

would just like to see it, so we can start operating on the plan. So,

we really do need that.

I am going to ask unanimous consent that my full statement go

into the record.

EPA serves this very important issue of protecting human health

and the environment. And I am so pleased where the appropriations request is strong in several key areas. I really acknowledge

the fact that doubling the brownfields program to $200 million will

create new jobs and increase the tax base in the communities. And

we want to work with you on, not only adequate funding, but really

robust implementation.

As a former governor of New Jersey, a former governor of Missouri, we know that brownfields are a cornucopia of opportunity to

clean up the environment, but turn them into greenfields of economic opportunity.

We also know that you have a request in here for the cost of

dealing with the Anthrax both here and at Brentwood—and we will

be talking more about that.

I want to talk about the enforcement of the environmental laws.

I am concerned that this year’s budget proposes to cut 100 ‘‘environmental cops on the beat,’’ and move more of our efforts into

State enforcement programs. I know that there has to be a partnership with the State, but in doing so, I do not believe we should

weaken Federal enforcement capabilities. And in our question and

answer, I would like to probe that in more detail.

I know that, right now, there are 130 unfilled positions at EPA.

And these have been jobs that have been vacant since 2001. So, let

us have a conversation about that.

Enforcement will be a big issue. Water infrastructure is another

very big issue. I am very pleased that the appropriations request

fully funds the Drinking Water State Revolving Loan Fund. This

is absolutely crucial to our communities. But I am puzzled by the

$140 million cut in the Clean Water State Revolving Fund. Communities in Maryland and across the Nation are really challenged

by the enormous cost of upgrading old and failing sewer systems.

In Maryland, these projects, of course, are critical to the Bay.

Now, water and sewer are just not sexy issues. We do not have a

‘‘Save the Sewer’’ group, like we have a ‘‘Save the Whale’’ group,

but it is a whale of a job trying to save the sewers.

Everywhere I go in my State and I think Senator Bond can speak

to this as well—when I go in my State to every county, they ask

me for two things for the—to help them cope with twenty-first century demands. They want a fiberoptic system for schools, business,
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and economic development. And they either want a new sewer

grant or a new waste water treatment facility. And just the cost

of modernizing, replacing, or even building, is just really overwhelming.

We cannot be skimpy on this priority. EPA is currently negotiating with Mayor O’Malley on this issue. I am not going to get into

the negotiations. It is not appropriate at the hearing. But it could

cost us $1 billion to comply with what we ought to comply with,

but where is the $1 billion? It is not that kind of stalemate.

The State of Maryland has recently done a survey through a task force process. We have got $3.5 billion that we could spend in

Maryland.

I know that OMB is critical of what we call our ‘‘earmarks.’’ We

call them ‘‘Congressionally-designated projects,’’ probably, the biggest demand that we get are from our colleagues, really, on waste

water and sewer replacement. And I feel that if we could give every

one of the states $1 billion, that they would spend it wisely, going

on your own excellent criteria for State plans.

So, this is an area where I think we are really in a national crisis, here. And vigorous enforcement to communities who do not

have the power to pay to comply, when they want to comply—this

is not stonewalling you and pushing you aside and, you know, the

way we sometimes run into. They want to comply with you. And

when I say, ‘‘with you,’’ comply with the law and the regs. But it

is really just a tremendous economic issue.

So, we—I think we need a new national plan for this, and a national plan that would really modernize our sewers and waste

water treatment. And at the same time, this would really be creating jobs in the private sector and laying the groundwork.

Now, another area that is very troublesome is the air quality

power plant issue. I am concerned about the impact of the recent

decision to revisit the section of the Clean Air Act called the New

Source Review, and replace it with something called the Clear

Skies Initiatives. I understand that there is a desire to find ways

to increase domestic utility and refinery capacity, but at the same

time, taking what is a mandated proposal and turning it into a voluntary proposal. We need to hear more about that.

Also, I believe Senator Bond and I want to work very closely with

you and our colleagues in the House. We really do not want riders

this year, as we have resisted every year. But I am concerned that

in the power plant issue, we could end up with the committee being

caught in the middle, between those who want to stay the current

course and those who want to follow the new course. And we become the authorizers by proxy.

The other is the issue of homeland security. And I know you

have a request in here on the role you want EPA to play in Anthrax research. We would like to know how you want to do this and

how this coordinates with CDC and the other Federal—even DOD,

in working on this, because one agency cannot do this by itself.

And we saw that here and at Brentwood.

PREPARED STATEMENT

And then the other is, particularly, when protecting America’s

water supply. And I know that mayors and governors have spoken
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to Senator Bond and I about this. They are very concerned. And

yet, local government cannot do this on its—on its own. So, we look

forward to hearing your comments on that.

So, that is my opening statement.

[The statement follows:]

PREPARED STATEMENT OF SENATOR BARBARA A. MIKULSKI

I welcome Administrator Whitman to her third hearing before the Subcommittee.

She appeared before us last year for EPA’s regular budget hearing, and also testified in November about EPA’s role in anthrax decontamination. We have worked

with her through arsenic and anthrax, and I thank her for the very productive relationship we have with her and her team.

Where is the Operating Plan?

Unfortunately, the Subcommittee is at a disadvantage right now because we still

have not received EPA’s 2002 Operating Plan. The Operating Plan is required within 30 days after our bill is finalized. So I am puzzled why, over 3 months after the

VA–HUD bill was signed into law, we still have not gotten the plan. In fact, EPA

is the only Agency within our jurisdiction that we haven’t heard from yet.

It’s not a question of fault. I know that EPA sent the Operating Plan to OMB

some time ago. But it is really unacceptable that we are beginning the 2003 budget

cycle without knowing how the funding we provided last year is being prioritized.

I know Administrator Whitman’s staff has been willing to provide some details. But

in order for the Subcommittee to give EPA the resources it needs, we really need

to see the entire big picture.

Overall Budget

The 2003 budget request for EPA totals $7.7 billion, a $,175 million decrease from the 2002 level. But the request includes over $100 million for retirement funding

that the budget shifts government wide. When we exclude this shift of mandatory

funding to the discretionary side, the 2003 EPA budget is $7.6 billion, or about $300

million below the 2002 level.

Every Administration responds to cuts in EPA by saying that the budget eliminates earmarks. Each year, the Administration tells us that many of the Committee’s priorities are not important enough to be carried in the budget. This is troubling because it implies that our decisions are inferior or not an appropriate use of

limited resources. But we know that what it really means is cuts in programs to

protect water quality, infrastructure, clean air, and scientific analysis.

EPA serves the very important mission of protecting human health and the environment, so I am pleased that the budget is strong in several key areas. The budget

proposes to double the Brownfields program to $200 million. This will create new

jobs and increase the tax base in our communities, and I thank Administrator Whitman for her support of this important program. The budget also proposes to spend

$75 million researching ways to cleanup contaminated buildings. This will help ensure that places like the Brentwood postal facility are cleaned up and safe for employees. The budget also increases funding for State air programs to help manage

and reduce pollution from factories and traffic congestion.

But I am also puzzled about many areas of this budget proposal. I know that EPA

didn’t get everything it wanted from OMB, but I really question some of the priorities here.

For example, once again, the budget seeks to reduce Federal enforcement capacity. It also cuts critical water infrastructure funding at a time when many communities—large and small, urban and rural—are facing enormous challenges in getting

their facilities to comply with the law.

Enforcement of Environmental Laws

Once again, the budget proposes to shift enforcement resources from the Federal

government to the states. The Committee had serious concerns about a similar proposal last year, and we rejected it. We were troubled that cuts in Federal enforcers

would result in more polluters ignoring the law. So I am perturbed that this year’s

budget proposes to cut another 100 ‘‘environmental cops on the beat.’’

Instead, most of the resources freed by these cuts would go to the states in the

form of a new enforcement grant program. I know that we need to do more to help

enhance State enforcement programs, but in doing so we should not weaken our

Federal enforcement capabilities. We need both a strong Federal and strong State

enforcement presence to achieve compliance with our environmental laws not one

or the other. The Committee was clear on this last year, and we will be clear again.
191

So I am very interested in hearing more about this proposal and how it differs from

the proposal we rejected last year.

I also want to know how priorities are being set within the enforcement funding

this Committee provided in 2002. Last year, we told EPA to fund Federal enforcement at no less than the 2001 level—about $465 million. I understand that EPA

met that goal by eliminating about 130 unfilled positions. These were jobs that had

been vacant even prior to 2001. Administrations—current and past—failed to fill

them. Nobody lost their job, and I know that even under this year’s proposal there

wouldn’t be any layoffs.

I also know that OMB sets artificial personnel ‘‘ceilings’’ that Agencies never

meet. But at the same time, there are currently over 100 unfilled enforcement jobs

at EPA. So it’s not just a question of funding—this Subcommittee has really emphasized Federal enforcement. This is really a question of management, and the Administration’s priority in recruiting and retaining the experts it needs to enforce environmental laws. We’re not talking about building bureaucracies or empires, just

about giving the Agency the resources and staff it needs.

We have ‘‘cut all the fat’’ that we can, and this year we don’t want to hear that

there are vacancies that should be eliminated. These are real jobs that provide real

expertise to get polluters to comply with the law. The Subcommittee doesn’t want

to take the position of micromanaging staff positions. But if we have to this year,

we are prepared to do so. So I want to know why EPA isn’t doing more to fill these

slots and how can the Subcommittee be helpful in this area.

Water Infrastructure

Water and sewer are not sexy issues. We don’t have ‘‘Save the Sewer’’ groups like

we have ‘‘Save the Trees’’ or ‘‘Save the Whales.’’ But water funding means just as

much to the environment. Water infrastructure funding gives us ‘‘double value’’ for

the taxpayer dollar. It helps keep our waterways clean and safe. And for every $1

billion spent, about 19,000 jobs are created.

But Baltimore City can’t hold a cocktail party to raise money to fix its crumbling

sewer system. And Albuquerque can’t have bingo night to raise dough to get arsenic

out of its drinking water. We just cannot skimp on this priority. We can’t expect

communities to comply with numerous regulations—arsenic, radon, discharges, just

to name a few—without giving them the money to do so.

So while I am pleased that the budget fully funds the Drinking Water State Revolving Loan Fund (SRF) at $850 million, I am puzzled by the $140 million cut to

the Clean Water SRF. Communities in Maryland and all across the nation are challenged by the enormous costs of upgrading old and failing sewer systems. In Maryland, these projects are critical to protecting the Chesapeake Bay.

In fact, Maryland recently identified over $3.5 billion in immediate needs. Nationwide, it is estimated that we will need to invest over $20 billion each year for the

next 20 years in wastewater infrastructure.

This budget does not acknowledge these needs. It cuts the Clean Water SRF from

$1.35 billion to $1.2 billion. And those who have not read the finer print in the

budget will be startled to know that it ZEROES out the Clean Water SRF program

in 2006 and beyond. I have to believe that this is just a budgeting gimmick by OMB

to make the numbers add up. But the Committee is really paying attention to the

commitments made in this area, and we’re not pleased.

I know that our authorizing committee is working to reauthorize these critical

programs at much higher levels in the future. While I have serious concerns about

the new formula they are proposing, I applaud Senator Jeffords’ leadership in seeking additional resources for critical water infrastructure improvements. This is even

more important now that water utilities must take steps to safeguard their facilities, and the chemicals they use, from possible threats.

Anthrax Decontamination

Again, I am pleased that the budget proposes $75 million to research ways to decontaminate buildings from chemical and biological agents. We need better science

in this area. I have several hundred of constituents who worked out of the Brentwood postal facility, which remains closed. So I am interested in hearing how EPA

plans to move forward with this research, and how the Agency will be involved at

Brentwood.

I really want to thank EPA for its outstanding work at the Capitol complex, including the Hart building. I know many employees worked around the clock to get

us back up and running safely.

The Subcommittee provided some $21 million in last year’s Supplemental Appropriations bill for decontamination, including $12.5 million in Superfund funding to

ensure that EPA didn’t have to divert regular cleanup resources to pay for the Hart
192

building. This was based on EPA’s best estimates at the time, and we know now

that the cleanup actually cost much more. So we’d like to know how much in anticipation of another Supplemental. We want to be sure that EPA, and the Superfund

program, are made whole for their efforts. I also look forward to hearing what

progress EPA has made since our hearing last fall.

Environmental Education

For many years, EPA has run an environmental education program called the

STAR fellowship program. The budget proposes to shift this modestly funded program—just $10 million per year—to the National Science Foundation. I have heard

from many graduate students who are concerned that this means their funding will

be canceled. So I would like to know why this shift has been suggested, and what

this proposal will mean for students who are specializing in the environmental

sciences and engineering.

Regulations and Riders

I am concerned about the impact of the recent decision to revisit the section of

the Clean Air Act called ‘‘New Source Review,’’ and to replace it with the proposed

‘‘Clear Skies Initiative.’’

I understand the desire to find ways to increase domestic utility and refinery capacity. But we must have certainty and reliability in the program for industry and

the environment. I want to be sure that we’re not changing the rules midstream.

We can’t have an open-ended dodge ball situation on this.

We need to protect children and the elderly, who are most vulnerable to the

health effects of air pollution. We have record-high levels of childhood asthma, and

a recent study has confirmed that air pollution contributes to lung cancer. Many

water quality problems in the Chesapeake Bay and other waterways are due to air

pollution. So we want to be sure that we continue the public health and environmental gains made under the Clean Air Act.

Finally, Senator Bond and I have always taken the position that the VA–HUD

bill should not be a vehicle for environmental riders—good or bad ones. And I hope

that as we move a bill through the Committee this year, we can continue this policy.

Ouster Study Thank You

In closing, I want to personally thank Administrator Whitman for working quickly

to help fund a study by the National Academies of Sciences on the possibility of introducing a new oyster species into the Bay. I understand that EPA was able to

dedicate $90,000 of existing resources for this study—more than any other Federal

agency that is involved. The environmental groups and watermen who are working

so hard to bring oysters back to the Bay really appreciate your efforts, and so do

I.

Senator MIKULSKI. Do you want to kick off the questioning part

by going right to this whole issue of enforcement? And we understand that the budget cuts $10 million from enforcement, 100 ‘‘environmental cops on the beat.’’ And I wonder, what are the consequences of this policy shift? What will be the consequences to the

environment? And then, you want to do a State program, and do

we need authorizing? So, why do I not just offer some broad questions and—but let us go for it.

And, again, thank you.

Ms. WHITMAN. Certainly, Senator. First, let me say that the

budget that we have proposed for enforcement, represents the highest funding level in that part.

Okay. In that part of the Agency, it is the largest commitment

to vigorous enforcement. We expect to hire up another 100 in the

coming months. We are looking forward to it.

We have just come off one of the most successful years ever in

enforcement. We had outstanding results. Last year, alone, it was

nearly record-setting. It was not quite record-setting, but nearly

record-setting expenditure for violators of pollution controls and environmental clean-up.
193

As you know, states typically do about 90 percent of the enforcement and compliance work. And what we are seeking to do with

this budget is to enhance that. Again, that is the $15 million program that we have in this budget. But we are very comfortable

that the levels proposed for enforcement in this budget proposal

will enable us to continue the very successful track record that we

established last year. And we do not see any reduction in enforcement focus. There is going to be no reduction in the kind of dedication that we commit to enforcement.

What we are doing and what you are seeing reflected in numbers, is a reduction of the overhead. But as you pointed out, we

have about 130 vacant positions. And that has been somewhat traditional for the Agency. I think we have lapsed about 120 each

year. It is a question of getting people in and keep training them,

keeping them in, and people leaving. The normal attrition.

So, we do not feel that this reduction in the overhead is actually

going to be detrimental to the enforcement efforts of the Agency,

particularly if we are able to help the States some more.

Senator MIKULSKI. So, I just want to be clear. The request is to cut $10 million from enforcement. You have 100-and-some vacancies. Then you are saying you are going to hire 100 people. Is that

correct?

Ms. WHITMAN. Right. We anticipate hiring 100.

Senator MIKULSKI. Now, is that 100 to fill the vacancies?

Ms. WHITMAN. That will—yes. It is part of the normal——

Senator MIKULSKI. Or is that in addition to, and therefore, you

would have 200 people——

Ms. WHITMAN. No. It will be——

Senator MIKULSKI [continuing]. To fill the vacancies, plus the

100?

Ms. WHITMAN. They—it will be to fill the vacancies.

Senator MIKULSKI. Fill the vacancies. And then you are saying

the $10 million cut would have no consequence on enforcement.

Ms. WHITMAN. It is not coming out of those people who are doing

the actual enforcement and inspections. It is coming from other

parts within the Agency. The actual personnel of the enforcement

division represents about a fifth of the overall personnel of the

Agency. And that will continue to be true.

Senator MIKULSKI. Well, I think we want to see how that really

works, in terms of this, and ask your staff to be able to follow-up.

Ms. WHITMAN. I would be happy to give you a more detailed

breakdown for the record, if you would like it.

ENFORCEMENT: STATE GRANT PROGRAM

Senator MIKULSKI. Now, you are requesting a $15 million for a

new State Enforcement Program. I would like you to describe that.

And, also, do you need authorizing legislation to be able to create

this, or do you want us to create it by a line item?

So—but tell us, now, what this $15 million would buy to protect

the environment, if it protects it at all?

Ms. WHITMAN. Well, as I indicated to you before, the States now

do 90 percent of the compliance and 90 percent of the inspections.

What we want to do is leverage that, to make it as effective as it

can possibly be.
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They are the ones on the ground. They know where the problems

are. They know who they have to go after. Some States are more

sophisticated in their enforcement than others. What we are proposing, it would be a competitive program that States would submit to us what they would do with those dollars; whether they

would use it to enhance—some States, for instance, may be very

good on water enforcement; they may have all the technology and

trained personnel, but not as good in air. And with a little bit more

money, particularly, now, when they are facing budget squeezes,

they could use that to enhance their ability to do the air monitoring. Others might see it as an ability to make a commitment

that they have not made before to enforcement.

And so, it would be a competitive program, but it is reflective of

the fact that they already do a great deal of the work. And it

makes sense that they do a great deal of the compliance and enforcement work, because they are there full-time.

Senator MIKULSKI. Do you need an authorization to do this?

Ms. WHITMAN. No, we do not.

Senator MIKULSKI. But it does create a new enforcement program. You think you can do it through an executive direction.

Ms. WHITMAN. It is a current—I mean, we——

Senator MIKULSKI. That is not a confrontational question.

Ms. WHITMAN. Yes. We have current grant authority in this area.

This is an enhancement. It is a change, in that we have current

grant authority but are proposing to expand the current grant authority.

Senator MIKULSKI. I see. Senator Bond? Thank you. We will

come back——

CLEAN WATER FUNDING

Senator BOND. Thank you very much, Madam Chair.

Pursuing the line that you and I both mentioned in our opening

statements, I am very disappointed that the EPA did—or the OMB,

for EPA, requested a $138 million reduction from the O2 level for

clean water fund. As I mentioned in my statement, the—there are

tremendous needs. And we see it in each State.

I would like your views on what a reasonable level of funding

should be. How do we prioritize it? We have got aging and obsolete

water infrastructure of concern to many cities in the East and Midwest, and yet, we just heard Senator Domenici talk about the huge

new capital costs that the arsenic standard is going to pay require

is going to require in the West, and yet, we see, with the needs

going up, the money coming down. How do we balance it?

Ms. WHITMAN. Well, Senator, first of all, I would repeat what I

said in my opening statement; that, in fact, the combined monies

for the two programs, $1.2 billion for the Clean Water State Revolving Loan Fund, and $850 million for the State Revolving Loan

Fund for the Drinking Water, is the highest request that has been

made before.

But the issue that you are talking about is one where had a little

bit of this discussion last year. And it is becoming even more important. I honestly, believe that water is going to be the major environmental challenge of the twenty-first century; both in quantity

and quality.
195

Obviously, our responsibility, here, is not quantity. But the numbers that we are talking about are going to require that we engage

very closely with Congress; that we reach out and work with

States, and with local water authorities. Whether you take our projections or you take the gap analysis or you take the utilities’ projections, we are talking about literally billions and billions,—upwards of a trillion dollars in infrastructure needs. This is far beyond the ability of any one branch of government to satisfy.

We are putting money into a great deal of research, to see if

there are new technologies out there, to look at new technologies

that can help address the needs. We are working closely with the

water utility organizations to see what we can do to support the

kind of work they are doing; to see how, in fact, we can help lower

the cost for this enormous challenge that we have in both drinking

water and sewer, as well as septic systems.

But this is something that is going to be far beyond any one

budget cycle. And we really do need to work closely with you.

HOMELAND SECURITY: TECHNOLOGIES AND METHODOLOGIES

Senator BOND. We very much appreciate your attention to it, because I really think that the problems are big and they are getting

bigger. And I would just note, parenthetically, I have had discussions with high Administration officials, who do not think that

members of Congress should be able to provide funding for highpriority needs in their States.

I assure you that we see those needs. We are going to continue

to do it. I know the Executive Branch does not like it. You have

lots of authority, but we also are living with and listening to our

people. We are going to continue to provide a very small portion

where the needs are greatest. And just—my only suggestion is just

relax and enjoy it, because we are going to help where we think

the needs are most pressing in our State.

Let me turn to the matter that Senator Mikulski was discussing,

and that is—well, first, let me turn to some problems in counterterrorism. There are many, many challenges that you have faced.

And we congratulate you and the agencies who worked with them,

but you had to coordinate with FEMA at the World Trade Center

site, and with the Department of Justice. You have a special role

to play in researching technologies and methodologies. How are you

coordinating with other Federal agencies?

Ms. WHITMAN. We are coordinating very well. Most of it is done

through the Office of Homeland Security, as a clearinghouse, but

we also do it directly.

For instance, in the situation of the World Trade Center and up

in lower Manhattan, I have put together a task force of the other

Federal agencies, as well as the State and the city, to look at the

issue of indoor air. If there is a gap in response, that is where we

have it. I believe determining who is responsible for the indoor air

and the clean-up is required after something as catastrophic as

what we saw September 11.

We are working directly with drinking water systems to ensure

the safety of drinking water supplies. We have been working since

September 11 with the various water companies. There are 165,000

independent, individual, municipal, and State water systems na-
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tionwide. We have worked with them. We work closely with Sandia

Labs and the Department of Defense in enhancing our knowledge

of what kind of chemical or biological attack could be expected; best

ways to detect contaminants; and what is the most current technology available to deal with that.

We also, obviously, are working with the chemical industry to ensure that they have done vulnerability assessments, as well. We

have done the same thing with the water systems, to make sure

that they know what their vulnerabilities are. We have worked

with the FBI and conducted outreach to every single local law enforcement agency right after September 11 to help expand their

knowledge of what to look for around reservoirs and what kind of

vulnerabilities water systems have, so that they could, in fact, help

us. They need to help the systems.

We have been working very closely, as an agency, with the individual groups for which we have a responsibility, and then reaching out to our Federal counterparts. We work closely with ATSDR,

the CDC, the Department of Defense, on a regular basis.

SMALL AND RURAL WATER SYSTEMS VULNERABILITIES

Senator BOND. Madam Chair, if I may just finish up on that,

without asking a question.

I would ask that you submit it for the record, Madam Administrator, but we have a number of small businesses in our State,

working on decontamination processes, remediation processes. One

of them was working with the Department of Defense on a electrostatic decontamination. I want to make sure that those technologies are reviewed by the appropriate scientists in EPA to see

what works, because we have got a new challenge. And our small

businesses are very mobile. They may be coming up with something. We would like to be able to work that.

The other thing, for the record, I would like to know how you are

planning to help small and rural water systems prepare for and reduce their vulnerabilities. I have been very impressed. The large

water systems are very sophisticated.

And just for the record, if you would let us know what you can

do to help the small systems, because a water system attack in a

small community could be very deadly, because they do not have

the protections built in that the large systems have.

And thank you, Madam Chairman.

Ms. WHITMAN. I can give you a little bit of that answer right

now, Senator, if you would like. We are doing a great deal of work

with the small and mid-sized water systems. We are conducting

training for them in the use of vulnerability assessments and in

the development of emergency operations plans. As I indicated before, we worked with Sandia Labs, and enabled them to move

ahead in much more rapid fashion with a vulnerability study and

training manuals and a disk that we are adapting that methodology to supply the small water systems.

To support them, there is $3 million that we are putting toward

working with the small and medium water systems to train them

on the use of vulnerability assessments and the development of

emergency response plans. So that they know what they need to

look for and how they need to better protect themselves.
197

We are very sensitive to that. Our focus is on making the most,

the safest, fastest. That is how we have been guiding—how we

have gone forward with the overall process of protecting the Nation’s drinking water supply. As far as research is concerned, we

are constantly getting applications for approval as new technologies

to deal with contaminants, such as Anthrax and other types of biological and chemical weapons. We are reviewing those as quickly

as we can. We have an expedited process that we are undergoing,

but, obviously, we have to make sure they do what they claim.

Senator MIKULSKI. Thank you very much. I am going to do a—

kind of a next-come/next-serve, if you would proceed—Senator

Craig and then Senator Kohl.

COEUR D’ALENE BASIN SUPERFUND SITE

Senator CRAIG. Well, Madam Chairman, thank you. I will be

very brief.

And I apologize for running late, Director Whitman, and missing

your opening comments. I will read your testimony. The EPA is

very important to all of us and the work you do and the work you

are doing is critical. And I thank you for it.

I have got a brief statement that will probably only require a

brief comment from you, that is of great concern to the Idaho delegation and our governor. And I am quite sure that, by now, you are

aware of it. We have a Superfund site in north Idaho, in the Coeur

d’Alene Basin area. Most know it is an old lead and silver mining

area that has been in operation for nearly 100 years. And we are

in what I hope are the final days of that effort. A great deal of

work has been done. A great deal of time and money has been

spent, but the communities involved are still in limbo as the site

continues to work its will.

You are probably also aware that the citizens of north Idaho are

profoundly concerned, as are we, about EPA’s proposal for a 30-

year, $1.3 billion clean-up in the basin. That is currently a proposal

that is out there. I must tell you, in as blunt a term as I can, it

does not make any damn sense.

Now, having said that, and that is probably as blunt as I will

get, EPA’s proposal plan is so aggressive and so far-reaching, that

I do not believe that it can be effectively implemented. It will allow

EPA staff a generational opportunity to live in one of the most

beautiful areas in the world, which is a prime vacation site for

most of the inland empire.

No, Madam Chairman, we are talking about a Superfund site.

No, we are talking about one of the prime vacation sites in the

United States. That is why, Director Whitman, I think it is so important that you come to the ground and see this.

Anything that is going to ask of you to find $1.3 billion and dedicate your Agency for 30 years in a place that has one of the premier golf courses of the world, one of the top destinational resorts

of the world, and some of the most beautiful glacierly gouged lakes

in the northern tier of our country, deserves your attention.

Now, having said that, our frustration is multiple. We know that

EPA has spent a good deal of time and a lot of money. It is a 21-

square-mile site. There are recommendations that it be expanded

to over 1,200 square miles. Now, if you think you have got manage-
198

ment problems, now, try to manage a 1,200-square-mile Superfund

site. That is bigger than some of the eastern States.

Senator MIKULSKI. How big is that?

COEUR D’ALENE BASIN: NATIONAL ACADEMY OF SCIENCE STUDY OF

CHILDREN’S HEALTH

Senator CRAIG. 1,200 square miles is what some EPA people are

proposing be a new Superfund site. It is watershed upon watershed, mountain range upon mountain range. It is time we all get

real. The bureaucracy has run amok.

And here is what I am proposing we do: While the State of Idaho

would like to manage this, because they think they can do it with

so much more efficiency, less bureaucracy, and get a good deal

more done in a shorter period of time—what I am proposing is that

we ask the National Academy of Science to come in and look at the

science.

While there is physical work to be done here and there, and hot

spots left, what is driving all of this are blood-level measurements

of the children of the area. There is, in my opinion, ample evidence

to demonstrate that those blood levels have plummeted dramatically over the course of the last two decades. We have taken all of

the top soil away and replaced it. We have torn down all of the old

buildings and buried them. We are reconstituting the area, totally.

The streams now run clear. They are swimmable and fishable. And

yet, somehow, the old science lingers on and drives the bureaucracy

forward, in my opinion.

Even the website of EPA on this issue has the old science. It is

one of the fastest growing economic areas in Idaho, outside the

edge. And yet, we had a company with 300 new jobs, less than 6

months ago, look at the website and look at the old science in a

final decision-making process whether to come and locate in that

area, and they left. And it was devastating to the opportunity of

the economy of that area.

It really, I believe, demands our attention. Now, what I am proposing, Madam Chairman, is that we get the National Academy of

Science in to look at the science, to peer review it, to give it an objective second- or third-party view. It has had none of that. It has

been in-house science. And I believe it is obsolete science today.

And to do that, I am going to be asking this committee to help me

find some money to direct them. I would like your support, Director

Whitman. But most importantly, we need your attention to resolve

this issue.

I hold a golf tournament in the middle of a proposed Superfund

site each year, along the shores of this beautiful lake that is full

of boats and vacation homes and all of that, and people say, ‘‘Larry,

they are talking about this being a Superfund site?’’ And I say,

‘‘Uh-huh.’’

It just does not stand the test. Therefore, it does, I believe, require your attention, and ours, to resolve this issue, to bring some

closure to it and some permanency and some direction. It should

not allow 30 years and $1.3 billion, because this committee and

this Congress and America’s taxpayers do not have that kind of

money to waste, when, I believe, for a less than a third of that, you
199

can clean up the remaining hot spots and let Mother Nature help

to finish the rest.

That is all I have to say, but I hope I have gained your attention

and that we can work together to resolve this. I know that you are

aware of it, and we chatted about it. It is time, now, for us to lead

on this issue and bring some finality to it.

Thank you, Madam Chairman.

Senator MIKULSKI. Thank you, Senator Craig.

And the Idaho situation has—I think, first of all, its enormity

and significance is most compelling for, really, your personal attention, I believe, Madam Administrator.

And I know Senator Murray also wanted to be at the hearing,

because of its impact also on Washington State, and would ask that

whatever dialog occurs and problem-solving, that Senator Murray

be included. But there is no doubt that this is a big issue and it

is a big buck issue, and its consequences are significant to Idaho,

Washington State.

SPOKANE RIVER HOT SPOTS

Senator CRAIG. Thank you, Madam Chairman. That is well put,

because these drainages do flow into the State of Washington. And

we have done work in that area to know that there are hot spots

along the Spokane River that deserve our attention—the Coeur

d’Alene River.

Senator MIKULSKI. Senator Craig, I think Senator Murray wanted to talk, but I—I think, right now, let us really make this a really top priority with EPA, and perhaps could make it really an—a

real model for cleaning up this. But when you are talking about

cleaning up mountain ranges and so on, this is—this is something.

So, let us turn, then, to Senator Kohl. I hope you have some easier problems.

Senator CRAIG. Madam Chairman.

Senator MIKULSKI. Yes, sir. I just——

Senator CRAIG. Could we give the Director an opportunity to

make a comment on that?

Senator MIKULSKI. Oh, I am sorry. I am sorry. Go ahead.

Ms. WHITMAN. No. That’s all right. I just wanted——

Senator MIKULSKI. Please. I apologize, Senator Craig.

Ms. WHITMAN. I wanted to assure the Senator that his eloquent

plea has not gone unheard. I have had the opportunity to talk to

Governor Kempthorne on a number of occasions. We have sent the

Regional Administrator for Region 10 there to sit down and see if

we cannot bring a resolution to this issue.

The National Academy of Science remains a very real potential

possibility. I know there are some proposals that would clean up

at least the residential area, within 5 years, at a much lower cost

than had originally been proposed by the Agency. We are looking

at all of those things.

I also believe that they are trying to set up a trip for me to be

able to go out there and see it and take advantage of the beautiful

park.

Senator CRAIG. Well, we would like to have you. We will—we will

show you a good time. And what is most important about that is

to look, Madam Chairman, in its whole perspective. A lot of work
200

has been done. A lot of good work has been done. An awful lot of

money has been spent, and a phenomenal amount of time.

It is not a showcase of efficiency, but it has solved a lot of problems. And I am not condemning the work of the past. What I am

condemning is the perspective of the past lurking in future proposals.

Thank you.

Ms. WHITMAN. I look forward to working with you on this, Senator.

Senator CRAIG. Thank you very much. Thank you, Madam Chairman.

Senator MIKULSKI. Senator Kohl.

STATEMENT OF SENATOR HERB KOHL

Senator KOHL. Thank you, Senator Mikulski. Governor Whitman.

Ms. WHITMAN. Senator.

Senator KOHL. Lord Alfred Tennyson wrote, and I quote, ‘‘In the

spring, a livelier iris changes on the burnished dove. And in the

spring, a young man’s fancy lightly turns to thoughts of love.’’

Senator KOHL. However, Governor Whitman, in Wisconsin——

Ms. WHITMAN. I do not think that is what is happening.

REFORMULATED GAS PRICE INCREASE

Senator KOHL [continuing]. We worry about whether gasoline

prices are going to go through the roof, again. I can assure you, as

my constituents start to defrost this year, we—you and I are going

to be grilled, and rightly so, over what we are doing to make sure

that regional gas prices do not go through the roof again, like they

did last year.

We do appreciate, very much, the new regulations that EPA has

put forth, allowing refiners some flexibility in making the shift

from winter to summer fuel. And we are hopeful that will be

enough to solve the problem; however, if it is not, and if we see another gas price spike unique to our region, will the EPA be prepared with some additional policy or response? Can we get your

commitment that if gas prices skyrocket again, solely, in the Chicago-Milwaukee area, EPA will engage immediately and actively to

fix the problem?

Ms. WHITMAN. We will certainly work with you to determine,

first of all, what is causing that problem and if we need to take

some action to help alleviate it, as we did last year.

As you point out, we have made some regulatory changes that

should ease the burden. And we do not believe that with the flexibility we have given to the refineries on the blended stock and the

flexibility we have given on the 2 percent, that there is no reason

to assume, unless there is a major catastrophe at one of the refineries, that there should be any price spike due to the reformulated

gas. But we certainly will watch that very carefully and work with

you on that.

FOX RIVER CLEANUP PROJECT

Senator KOHL. I thank you. Governor Whitman, EPA has issued

a new guidance for river clean-up or sediment management. You
201

recommend a so-called iterative process, that is being used on the

Hudson River clean-up. As I understand, it means that the EPA

will clean up large river sites in phases, starting upstream and

moving downstream, so that you can learn from the work and modify the remedy as the work is done.

For us, in Wisconsin, what could this mean for the Fox River

Clean-Up Project?

Ms. WHITMAN. Well, Senator, we are moving forward, obviously,

with Fox River. We are very focused on it. Fox River is larger and

there are more contaminants to be taken out of the river there. At

this point, it appears to be a much less expensive program, but

that is because of the way that the sediments will be handled once

they are taken out of the river.

There is not a transportation issue, because of some of the willingness of the responsible parties and agreements that have been

reached that settle—the sediment will be taken care of closer to the

site. And that vastly reduces the cost.

I believe, as we go forward on any of these major undertakings,

that we should constantly be looking at the science, looking at the

results, to determine whether or not what we project is going to

happen is happening, and be willing, as we look at these, to

change, if we see we are having an adverse impact; if something—

if we are resuspending more than we thought we were resuspending, and it becomes a bigger threat to the health and the environment of the river, then we ought to stop and take another look

and go back at it in the right way.

These are large undertakings. The Hudson River and the Fox

River Project are both enormous. They are very important. They

need to get done, but they need to get done right. We believe we

have the science. We believe we have the appropriate approach, but

I do not think there is anything wrong with checking yourself as

you go along.

There have been some allegations that have said that if you do

that, you are really just looking for a way out. I do not see it that

way at all. I see it as a way of doing it better, making sure we are

getting it right, making sure we are doing exactly what we said we

would do for the river and for people who live in those areas.

FOX RIVER CLEANUP PROJECT: COST AND PUBLIC ACCEPTANCE

Senator KOHL. Okay. In the case of the Fox River, there is a

great deal of uncertainty about the cost of the clean-up, because

people are concerned that the disposal site identified in the plan

is not practical. Local disposal sites for dredge sediments are an

important part of any clean-up effort, as we know. The disposal site

influences costs and public acceptance of the clean-up plan, as we

know.

Should EPA try to identify and tell the public about potential

disposal sites before the clean-up plan is proposed for public comment?

Ms. WHITMAN. Well, we are in the process of reviewing the comments. As far as the actual work on the river goes, as you may

know, we did a demonstration project that we did with the State

of Wisconsin, and were able to meet all the goals.
202

Once we have proposed the solution, we go through the comment

period and the proposed plan, and that will obviously include the

concerns raised by citizens as for ultimate disposal. And that will

be part of our response to the citizens and to the concerns that they

raise.

Senator KOHL. As I understand it, the disposal site permit has

not been granted, and there is some considerable question as to

whether or not it is going to be granted.

Ms. WHITMAN. I am not as up-to-date with that.

Senator KOHL. I will, perhaps, work with your office on that in

greater detail.

Ms. WHITMAN. Certainly.

ENVIRONMENTAL EDUCATION: TRANSFER TO NATIONAL SCIENCE

FOUNDATION

Senator KOHL. One other question, Governor Whitman. I have

been told that the Office of Management and Budget has proposed

a transfer of the EPA’s Office of Environmental Education to the

National Science Foundation. OMB claims that the transfer was

made because the Environmental Education Program was ineffective; however, supporters of the program think this is only an attempt to de-fund Environmental Education. And I have heard nothing but good things about the work that the EPA is doing.

Was EPA unhappy with the way Environmental Education was

working? As an Administrator of EPA, did you recommend that the

Environmental Education Program be transferred to the National

Science Foundation? Does the EPA agree with OMB’s evaluation of

the Office of Environmental Education, or was this an attempt to

cut the budget for Environmental Education?

Ms. WHITMAN. Senator, I do not believe this was an attempt to

cut the budget for the Environmental Education. When I talked to

those who were concerned about it and making the recommendation, it was more an effort to consolidate Environmental Education

at the National Science Foundation. There was a finding that, in

fact, their work had not been recognized enough in previous budgets and they need to and deserved to continue to broaden the scope

of their work, and that they, in fact, have the ability to administer

this very well.

We did keep, as you know, a part of our research fellowship program, our work with minority universities. I think we were doing

a pretty good job on the Environmental Education program, but I

can understand the desire to consolidate Environmental Education

in one place, if that allows you to maximize your dollars and make

sure you are having the most effect that you possibly can.

Senator KOHL. It was my understanding that this was a $9 million program, and when it was transferred to the National Science

Foundation, the funding did not go along. So, the inference was at

least given that the program was going to be de-funded, which, to

most people, means it is going to be, basically, eliminated.

I do not know whether or not you are aware of those details,

but——

Ms. WHITMAN. No.
203

Senator KOHL [continuing]. But that is the information that I

got. And it is in that connection that I bring the question to you

today.

Ms. WHITMAN. I can appreciate that. I am not aware of the National Science Foundation’s budget, as it reflects environmental

education.

Senator KOHL. I thank you very much. And I thank you, Madam

Chairman.

Senator MIKULSKI. Senator, you have raised some very important

questions. And the questions that you raised regarding environmental education, really, very much paralleled my own. And I want

you to know, as we look at NSF, which is funded at this committee,

that I would encourage you and your very able staff to also look

at it.

I am concerned about the transfer. Everyone who seems to work

with the small but obviously very effective program, and the EPA

is quite satisfied. The Chesapeake Bay Foundation, which is a premier environmental advocacy and education agency just speaks so

highly of it, and their networks with their counterparts around the

country speak about this. And this is really where we teach the

stewardship of the environment, where the young people get

hands-on experience and so on.

So, I think we need to look at it. Senator Bond and I need to talk

about it. And we welcome your input. Just rearrange—the question

is: What is the objective we seek? If it is really to have a really

outstanding environmental education program, it is where is the

best place to put it, and where should we be putting our money?

So, we thank you for that.

CHESAPEAKE BAY RESEARCH PROGRAM: RECRUITMENT

Administrator Whitman, I am going to come back to the—speaking of the Bay, before I go on to clean water. How are we on getting

a permanent head of the Chesapeake Bay Foundation Research—

I mean, the Chesapeake Bay Research Program?

Ms. WHITMAN. We have a number of outstanding candidates. We

have winnowed the list down from seventy. We had seventy applications. We have gotten that down now to a number where we are

going to start to do the interviewing and hope to be able to appoint

somebody very quickly.

CLEAN WATER REVOLVING LOAN PROGRAM

Senator MIKULSKI. Yes. Because we have been without one since

Mr. Murkowski retired. And so, we really think it needs the—needs

a permanent appointment. So, we look forward to hearing about

this.

Let us go on, back to the Clean Water State Revolving Loan Program. In the budget, it really does cut it from $1.35 billion to $1.2,

and also, when we read the fine print, it startled us, because the

fine print indicated to myself and my staff that it will zero out the

Clean Water State Revolving Loan Program when we get to 2006,

just at the same time when—I think if the committee had its way,

we would make this a $3 billion or even $5 billion program.

Have we read this wrong, or is this OMB? We do not want to put

you in a difficult situation with OMB, but we—and I know they are
204

trying to cope with how to achieve the budget, homeland security,

and Nonpoint source. I mean, this is not the committee that is

going to debate that. But we will debate that this program cannot

be phased out and we cannot use budget gimmickery with it.

Ms. WHITMAN. Senator, I think the important thing here is that

the fund has enough money and will continue to have enough

money to revolve at more than $2 billion a year. It has been at

least for the last few years. It is revolving at almost $4 billion now,

because it is a fund that gets repaid and replenished by those who

are using it.

It is really at a very healthy stage. Now, this gets back to the

broader question that both you and Senator Bond have been talking about this morning, which is that the needs are far, far greater

than that. And that is why we need to have vigorous support of

Congress in the discussion of how we address these issues. But as

far as the actual dollars going in, the fund will be able to continue

to revolve. Congress initially had supported a $2 billion revolving

loan fund. It will certainly be at that, even if no more money is provided. Right now, it is revolving at closer to $4 billion.

Senator MIKULSKI. Well, I am troubled about this. I am troubled

by the whole Clean Water SRF and its lack of funds. I know our

colleague, Senator Jeffords, is leading an effort to re-authorize this

program. I am concerned about the formulas. And we do not want

to get into an East Coast-Midwest-Western struggle. Under the

current proposal, I lose out. What I do think, when they are—I just

heard, ‘‘Me, too.’’

So, you can understand. The appropriators are not going to lose

out to the authorizers.

Ms. WHITMAN. You never do.

Senator MIKULSKI. No. We just will not but I think that this is

the time where, really, you and your team have to really get in it

with the efforts that are being made by the Environmental Public

Works Committee. They are the authorizers. We respect them. We

value them, but not necessarily their formula changes.

But really, this is a great opportunity for us to create a 21st century Clean Water State Revolving Loan Fund and to be serious

about what we need to do and the amount that it is going to take,

and then the best way to do it.

We really would encourage your very strong hands-on involvement with the committee. You know it as a governor, you know it

now as an Administrator; you—you were very active, of course,

with the National Governors Association. I mean, you have kind of

been there, too. And you know what it is like passing water

weights along to those—like those older communities in New Jersey. And we could go to—we could go to Wisconsin, we could—you

heard Senator Craig talk about arsenic. Anyway——

Ms. WHITMAN. Senator, there is no question that there is a gap

developing between the existing level of water and waste water infrastructure investment and the growing need. There is just no

question about that. Just to reassure you that, while the planning

assumptions of the President’s budget do recognize a ramp-down,

that is nothing new. It does not reflect any policy decisions.

This is the way the formula was set up in the beginning, and it

will not affect any of the decisions that we are making, but we do
205

need to address what is a very serious growing gap. When I say

I think water, both its quality and its quantity is the environmental challenge for the Twenty-first Century, I mean it. And this

discussion is part of it. We do need an investment in water infrastructure, but we are going to have to work together. We need to

work very closely with you to try to identify the best way.

Senator MIKULSKI. Well, are you actively involved with the efforts of the Environmental Public Works Authorizing Committee on

this topic, and their legislative initiatives?

Ms. WHITMAN. Yes. Yes.

U.S. GEOLOGICAL SURVEY: CONTAMINENTS IN WATER

Senator MIKULSKI. And so, we—we do need to be talking about

it. My time has expired, and I want to go to Senator Bond, but one

other question about water. I was very troubled to read about the

U.S. Geological Survey recently identifying that there is a number

of contaminants showing up in water, from birth-control pills to

steroids to pesticides to—et cetera. As a result of the recent study,

FDA said it was going to take a look at its effects on the environment.

Where do you come in, with this startling report of the U.S. Geological Survey? Again, validating your belief and mine, that water

is the big issue.

Ms. WHITMAN. We’re working very closely with all of the other

Federal agencies that are addressing this issue, to get an understanding of what this means. This is reflective of something that

we have seen coming and, I think, all of us have seen coming for

some time. As science gets more sophisticated, it is able to identify

more substances. It is not, at the same time, able to tell us exactly

what the impact of those substances are on the human body or on

the environment, in general. That is where we need to turn our attention, now that we are beginning to identify that, in fact, these

things are appearing in water.

We need to get a better understanding of what levels do they affect humans or at what levels do they affect the environment? We

need a lot of scientific research here. We are putting our scientific

focus on this. And we are working very closely with all those who

are involved in it in the Federal Government.

Senator MIKULSKI. Are you working with FDA——

Ms. WHITMAN. Yes.

Senator MIKULSKI [continuing]. And the Geological Survey?

Ms. WHITMAN. Yes.

Senator MIKULSKI. Well, again, I would like to come back to that,

probably, even, maybe, at another hearing, because it is—the question is: Where—how did this get into the water? And now that it

is in, what—what is the effect, but also, what is the synergistic effect? But that is a little bit more than for this appropriations hearing. But I really welcome your staff paying very close attention to

this. And your own commitment to science, I think, will help us be

able to get in—get into this and solve it.

Senator Bond?
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NEW SOURCE REVIEW

Senator BOND. Thank you very much, Madam Chair. I am going

to have to ask you a couple of quick questions, because we have

got a long way to go and a short time to get there. And the Chair

and I both have other hearings we are supposed to be in.

Number one, I commend you on your emphasis on water. We

look forward to working with you. I commend you for having the

largest request in history for the SRFs. It is not enough. This committee criticized previous Administrations, because they provided

even less. So, we look forward to working with you on that.

New Source Review—this is going to be a real challenge to balance the environmental goals, the energy policy, without driving up

costs. Give a quick thought on how you balance those two compelling needs.

Ms. WHITMAN. Well, New Source Review is a part of the Clean

Air Act that has been subject to a lot of attention and the subject

of a lot of concerns particularly from the utility industry. Some of

the concerns are the lack of clarity in some of the definitions, what

was routine maintenance, repair and replacement; what triggered

New Source Review. There is some compelling evidence that, in

fact, initiatives that might have cleaned up some emissions from

power plants were not undertaken, because of concern of triggering

New Source Review, but it is always hard to prove the negatives.

So, it is something that has been very contentious.

The New Source Review reform was first undertaken by the previous Administration, back in 1996. We are looking very closely at

what was proposed there. It was also a plea from the National Governors Association that we look at how we can reform New Source

Review, in order to ensure that we protect the environment. We

need to make it more efficient and more effective. And, we are looking at doing that.

INSPECTOR GENERAL DRAFT REPORT: POLLUTION ENFORCEMENT

Senator BOND. I will be looking forward to working with you in

the EPW Committee, there, as well.

In addition, EPA IG issued a draft report out, criticizing the EPA

for failing to monitor and enforce pollution levels. Only 64 percent

of the major sources apparently have obtained permits. The New

England region and the States near and dear to us are at the bottom of the list.

How does the EPA plan to address the problem?

Ms. WHITMAN. We are continuing to focus on that. We have done

a great deal, even since the draft report was issued, to address the

failings that they found and the concerns that they raised, to ensure that we continue to enforce the laws. And we are enforcing the

laws. As I said, last year, we had almost the best year ever as far

as enforcement actions that were undertaken against those who

had violated permits. We have required them to spend a great deal

of money because we believe in polluter-pays to rectify the situation. And we will continue to enhance the enforcement efforts of

the Agency.
207

WALL STREET JOURNAL ARTICLE: NON-PROFIT GRANTS

Senator BOND. I mentioned, in my opening statement, the allegations in the Wall Street Journal editorial about EPA funds being

used by not-for-profits.

What steps has the EPA taken to ensure that—that this has not

occurred? Have—have you done any preliminary investigations?

What steps can you take to make sure these allegations do not, in

fact, occur in the future?

Ms. WHITMAN. The first and most important thing is we are

going to move to a competitive basis for non-profit grants. That, I

think, is a very important commitment. And that is the way we are

going to move those non-profits grants to a competitive funding

source.

We are also going to ensure that we are focusing on the kind of

compliance that is required of the grantees; those that get these

awards. We are going to ensure that we are doing everything possible to have them submit to us, in a timely fashion, the kind of

data that would ensure that what was alleged has not gone on or

does not go on in the future. And we will look at what has been

done.

Senator BOND. We would like you to advise us when you find out

what has happened or has not happened—

Ms. WHITMAN. Certainly.

Senator BOND [continuing]. We would like to know, because

the—the allegations are very serious. If they are untrue, we need

to put them to rest.

Ms. WHITMAN. Yes.

HOMESTAKE MINES IN SOUTH DAKOTA: INDEMNIFICATION

Senator BOND. If they are true, then we also need to know about

it.

The final issue I am going to have time to ask about today, I

would like just your quick response, Homestake Mine in South Dakota. We are very much concerned about that. This is a potential

multi-billion dollar project. We are going to have to ask the NSF

about it. There are environmental reviews required, but I have a

specific question about indemnification.

A January 29th Associated Press article said the Mining Committee was unhappy, because the legislation did not protect the

company from litigation regarding environmental hazards. The article mentioned that some kind of side letter would be, essentially,

developed as a memorandum of understanding to outline that the

Department of Justice and EPA would implement indemnification

measures.

This is a very major project, with some very serious implications

for funding, as well as remediation.

Is there any truth to the report, or where does that process

stand?

Ms. WHITMAN. Right now, Region 8 is working very closely with

South Dakota Department of Environment to address this issue.

We intend to continue to work together and to try to work with the

company to see if we cannot get resolution as quickly as possible.

We are in the process of consultation and due diligence, and public
208

participation to meet the requirements of the time tables and the

legislation.

Senator BOND. Well, if you would keep us involved, because this

committee is in the middle of this thing. And this could be an extremely expensive effort. We need to know what your take is on it.

Thank you, Madam Chair.

Madam Administrator, always a pleasure.

Senator MIKULSKI. Thank you, Senator Bond, for those insights

and also calling to the attention the excellent work of the IG. In

fact, perhaps, while you are here, would you, would Ms. Tinsley

come up, please, for a minute?

Ms. TINSLEY. Yes, ma’am.

WALL STREET JOURNAL ARTICLE: INSPECTOR GENERAL DRAFT REPORT

Senator MIKULSKI. First of all, this committee really appreciates

the role of the Inspector General. And though they—we sometimes

do not extend our hearings, et cetera, and we are not going to ask

the IG to testify, but we want to express the—really, the outstanding work that IGs perform in all of the agencies and bring

them to our attention.

And we are going to ask Ms. Tinsley to brief both of our staffs

on, kind of, what you consider some of the flashing yellow lights

in the Agency.

But Senator Bond raised something, and then I am going to come

back, in my round of questioning, to—to the issues over the Clear

Skies Initiative. The—The Journal, on March 12th—and I ask

unanimous consent that it go into the record—says that you concluded that efforts to monitor and enforce pollution levels have fallen behind, and asserts that EPA has not realized the benefits from

Congress—that Congress intended in the 1990 Clean Air Act, and

that it should give us pause, because of the tremendous backlogs,

bureaucratic confusion, and so on.

[The information follows:]

[From The Wall Street Journal, March 12, 2002]

REPORT SAYS MANY MAJOR POLLUTERS OPERATE WITHOUT REQUIRED PERMITS

A third of the nation’s major polluters operate without permits and monitoring

systems that Congress had required by 1997 because of a chronic lack of resources

and bureaucratic confusion in State agencies, according to a draft report by regulators.

The report from the Environmental Protection Agency’s inspector general’s office

concludes that efforts to monitor and enforce pollution levels have fallen behind, and

asserts that the EPA has ‘‘not realized’’ benefits that Congress intended in 1990,

when it made the last major changes to the Clean Air Act.

The latest report is likely to give Congress pause as it considers deeper cuts in

pollution levels being pressed by both Democrats and the Bush administration.

In 1990, Congress required each major industrial polluter to obtain one permit

that holds their emissions on regulated pollutants to specific levels and requires

monitoring. The permit was to be issued by state agencies paid through fees charged

to polluters based on emissions.

The report states that by last July, only 63 percent of the 19,025 major sources

of industrial pollution in the U.S. had obtained permits, although the law imposed

a deadline of 1997. The most delinquent region, according to the report, is New England, where on average only 37 percent of the permits had been issued. Among

states, the most delinquent region is New Jersey, where only 30 percent have been

issued.

Kyla Bennett, director of the Boston office of Public Employees for Environmental

Responsibility, which had obtained a copy of the internal report, said the ‘‘poor track
209

record’’ of industrial states ‘‘should be setting off alarm bells.’’ The largest polluters,

such as power plants, are generally the ones lacking permits, according to PEER,

which represents employees in some of the 112 State and local agencies that implement the program.

EPA spokesman Joe Martyak acknowledged the program has had problems and

blamed some of the delays on lawsuits by industries. ‘‘We’ve given the message to

our offices in various regions to focus on things that really matter and to get these

permits in place and correctly in place.’’ The final version of the report is expected

to be released in April.

Bradley Campbell, named last week as commissioner of New Jersey’s Department

of Environmental Protection, said, ‘‘I share the concerns that are raised in the report.’’ He has launched an investigation on the permit backlog and how to deal with

it.

The report noted that several states in the EPA sample lacked sufficient resources

to run the program and that many states had difficulties getting EPA guidance on

how the agency’s regulations should be applied to a specific polluter.

One big problem is a so-called new source review section of the Clean Air Act that

applies to power plants and other complex facilities. John D. Walke, a lawyer who

formerly oversaw the program for the EPA, said that industries often pressured

State legislatures to ‘‘low ball’’ the fees charged to operate the program. Legislatures

in states that had collected adequate fees sometimes shifted the money to other purposes. ‘‘These were two of the dirty secrets we had to deal with,’’ Mr. Walke said.

Senator MIKULSKI. Again, this is not meant to be a debate or a

confrontation. It is meant to—how do we get a cleaner environment?

Could you share with us—essentially, is what was reported in

The Journal your position? And could you then share with the committee your concerns, as the Inspector General, about the pollution

control efforts that are hit by bureaucratic concerns and the lack

of funds?

And I think Senator Bond would like to hear this. And we work

together on these kinds of issues. So——

Ms. TINSLEY. The comments in the Wall Street Journal were actually premature. The Wall Street Journal got a copy of a report

that was a draft document. We have not issued that report, in

final, yet. We hope to have it out by the end of March. We have

a revised draft that the Office of Air and Radiation is looking at

now.

And so, I would really rather wait until we have a final report

to give you to talk about that in detail, because the comment process is very important to us on draft documents.

Senator MIKULSKI. No. I am not asking you to comment here.

Ms. TINSLEY. Right. And so——

Senator MIKULSKI. No. We believe that you are supposed to find

things, and then the agencies are supposed to tell you if they think

you really did find them.

Senator MIKULSKI. I mean, is that not right?

Ms. TINSLEY. Well, yes. I probably would not say it exactly that

way, but, yes, we value the agencies’ comments, because we want

to make sure that what we do report is as accurate as possible.

Senator MIKULSKI. Well, Ms. Tinsley, this is what The Journal

reported prematurely still is of concern. We recognize the appropriateness that we discuss this after the final report is issued,

which is in a matter of weeks—a matter of a week. And we really

invite you, then, to come and brief our staffs and, perhaps, if appropriate, then—or necessary, to come back and discuss this with Senator Bond and myself.
210

But before I turn back to Ms. Whitman, are there any other

flashing yellow lights that you want to tell us about at EPA? And

then—or did I catch you by surprise, here?

Ms. TINSLEY. Yes. Well, you caught me by surprise, but I am trying to be responsive. We have a lot of issues around the management challenges. And, in fact, the President’s Management Score

Card, that we are working closely with the Agency on. And these

are important to help this Administration better manage Agency

activities and make better decisions about how to spend the limited

resources that it does have.

Senator MIKULSKI. Well, why do we not take a look at the report? And I know—first of all, Administrator Whitman, everything

I know about her and everything I believe about her is she really—

really sound management and good management is really kind of

one of her—in—in terms of being the way—one of her signature

issues.

So, we did not mean to catch you by surprise or—or whatever,

but you never know what we are going to do here.

Ms. TINSLEY. No. No. That is fine. I am happy to speak to you

about that.

CLEAR SKIES INITIATIVE AND NEW SOURCE REVIEW

Senator MIKULSKI. Well, let us get that report, and then let us

look at this report, because whether it is—whether it is the Clear

Skies Initiatives or the New Source Review, again, if it is not working at the State level and so on, all we are doing is top-down rearrangement.

[The information follows:]

[CLERK’S NOTE.—The Office of Inspector General Evaluation Report on Air EPA and State Progress In Issuing Title V Permits, can

be found at the following website www.epa.gov/oigearth.]

Senator MIKULSKI. So, let me say thank you. And I am going to

turn, now, to Administrator Whitman.

Senator Bond raised issues about the Clear Skies Initiative. And

as you know, Administrator Whitman, they have become enormously controversial. There are ads about you by TomPayne.com

and a variety of things.

My questions goes, I think, to the core. How will replacing this

mandatory review with a voluntary program, be better to protect

the environment and public health, when the mandatory program,

in and of itself, had so many problems? And why would volunteer

be good? And is this not just a loophole for community—for polluters to squeeze-out, fade-out, loophole-out?

Ms. WHITMAN. Well, Senator, I am glad you asked that question,

because there is nothing voluntary about the Clear Skies proposal.

It is mandatory. It proposes mandatory caps. It is based on what

I think was a very prescient piece of legislation enacted by the

Congress when they did their reforms to the Clean Air Act, which

was the Acid Rain Trading Program, which has been enormously

successful.

The proposal, here, is to establish mandatory caps on three of the

most onerous emissions from power plants: SO2, NOX, and mercury. Under the proposal, what we would do is set those standards

up front, so that the utilities understand exactly what those stand-
211

ards are. Under the current Clean Air Act, we have at least five

different regulatory proceedings that are either in place or about

to be in place, but they come at different time frames, and they are

subject to litigation.

They are subject to a lot of back and forth. They do not result

in the environmental benefits that we necessarily seek in the time

frame that we want to seek it.

What we are proposing is, to have Congress set out, now, standards for SO2 emissions, for emissions of NOX for emissions of mercury. The utilities will know what they are. We establish a cap and

trade program. And as with the Acid Rain Program, we feel, and

all our models show, this will be faster; we will get deeper cuts,

deeper reductions.

In fact, from our modeling, at the numbers that the President

has proposed in the Clear Skies Program, we should get 25 million

tons better reductions in sulfur dioxides over the next 10 years,

than under the Clean Air Act; 10 million tons better reduction in

nitrogen oxides over the next 10 years, than under the current

Clean Air Act; and 20 tons better reduction in mercury over the

next 6 years, than under the current Clean Air Act.

That is because you make it simpler. We are not proposing to roll

back the Clean Air Act. We are not proposing to do away with New

Source Review, until we know what those numbers are. But if the

numbers are what the President proposed, we are actually getting,

as I indicated, better reductions than under the current regulatory

process, which is very complicated and convoluted, takes a long

time, and costs a lot of money. Then New Source Review as it applies to utilities, would become redundant, and there would not be

a need for it. But that is not something that we could do. That is

something that Congress would have to consider, as they consider

the legislation.

The reform of New Source Review was first seriously undertaken

by the previous Administration. And with the support of governors

and State environmental commissioners, we are looking at again,

subject to a lot of misinformation, shall we say—looking at finalizing, over the next few months some parts of those original proposals that were put out in 1996 and have been subject to the full

comment period. Then moving it on to the White House.

Along with that, we would make other recommendations for anything else that we thought would improve the program. Anything

else would have to be subject to the regular rule-making process,

which is at least a 3-year process.

Clear Skies is totally separate from New Source Review; however, in our minds, as we look at the numbers, if the Clear Skies

mandatory cap on these emissions is set in accordance with what

the President recommended, then New Source Review becomes redundant and, in fact, could be a deterrent to moving forward and

reaching these goals.

CARBON DIOXIDE EMISSIONS: VOLUNTARY VS. MANDATORY

REGULATION

Senator MIKULSKI. Well, I want to just take a minute to talk

about carbon dioxide. As you talked about the voluntary—that it is

not a voluntary program; that it is a mandatory program.
212

Ms. WHITMAN. Right. For those three emissions.

Senator MIKULSKI. My—what staff has shared with me, as we

looked at this, is that, yes, the carbon dioxide, though—the carbon

dioxide pollutant is—would be a voluntary one, and the other three

would stay—would be a mandatory effort. And my——

Ms. WHITMAN. Clear skies it does not deal with carbon dioxide.

Senator MIKULSKI. Tell me about carbon dioxide.

Ms. WHITMAN. It does not deal with carbon dioxide. It talks

about sulfur dioxide, nitrogen oxides, and mercury. Carbon dioxide

is an issue that I know will be subject to a very broad and thorough and in-depth discussion. But these three emissions are the

ones that have the most immediate impact on public health, on

asthma, bronchitis, heart disease. They are the ones that contribute to smog. They are the ones that impact on our visibility at

national parks. And we feel it is important to move forward with

these three, but carbon dioxide is not part of the President’s proposal.

Senator MIKULSKI. Well, during President Bush’s campaign, he

said that carbon dioxide emissions should be regulated as a pollutant, and that—because the CO2 is a greenhouse gas, a great contributor to global warming, and spoke from there.

You even spoke in support of the Kyoto Protocol, which would

talk about the CO2. Now—and I am not trying to re-hash things.

I know it was a very awkward time as the—last year, when the

Administration—but what is the Administration’s position on carbon dioxide? Does it want it regulated? And how does it want it

regulated? And when does it want it regulated?

Ms. WHITMAN. Well, Senator, first of all, let me just say that

even as a governor, I was opposed to the Kyoto Protocol. The issue

of carbon dioxide is something else, again. And as you know, last

year, the President indicated, given the overall concerns he had

about energy demands and energy self-sufficiency for this country,

he did not feel it was appropriate, along with the additional science

that he had received, to mandate a cap on carbon dioxide.

He did propose, at the same time that he proposed Clear Skies,

a separate program to address global climate change. What he has

done for the first time is to set a target for the United States of

an 18-percent reduction in intensity of greenhouse emissions over

the next 10 years. It is with a proviso that if the science justifies,

at the end of that time, to not just reduce the intensity, but to stop

the production of greenhouse gases entirely, and then to reverse

the trend. But that is if science justifies it.

The proposal also calls for a program of technology transfer to

bring in some of the developing countries by provide a structure,

such that they could continue to grow their economies, but not committing the same kind of mistakes that we did when we went

through the Industrial Revolution and all the harm that we caused

to the environment. China is the second largest emitter of greenhouse gases and India in the top five.

We have come too far in environmental technology not to be able

to provide them with alternatives to some of the development that

we see occurring now. The argument has been that you cannot involve the developing Nations, until their economies reach the same

plateau or are equal with the developed Nations. The President—
213

and I concur, believes that this just does not make any sense, because for the overall environment, that is very harmful.

In this program, he has provided a baseline protection for any

company that wants to take early action to start reducing their

greenhouse gas emissions. He has called for the Environmental

Protection Agency to work with the Department of Energy to enhance their reporting model, so that companies can come in and report their greenhouse gas emissions. We will have the appropriate

base and know where we are coming from; and companies have

some kind of protection, should there be a regulatory change in the

future that would put a cap on carbon dioxide.

The program also has a great deal of money focused on technology and science, because there is an understanding that while

we recognize that global climate change is occurring, the science is

not nearly as precise as to all that goes into that as you would like

it to be.

What is the role of black soot? If we are going to make these

enormous investments in addressing global climate change, then

let us make sure we are absolutely certain of where to make them.

But the President said, at the same time, he does not believe that

that means we should sit back and do nothing, which is why he set

that carbon intensity target, which links our greenhouse gas emission to the economy and allows for economic growth at the same

time that we are decoupling the same rate of greenhouse gas emissions.

Senator MIKULSKI. Well, I think that as we move on, eventually,

to our mark-up, this is—the—the Clear Skies issue, the carbon dioxide issue, will be a controversial issue. And, again, we, as appropriators, do not want to become the Conflict Resolution Committee,

though——

Ms. WHITMAN. That is a good role.

Senator MIKULSKI [continuing]. You know, we are prepared to do

it. It is a very good role and—and so on, but, first of all, you—you

explained the Administration’s position quite well. I think we do

need further conversation on it, but my time is complete.

And I would like to turn to Senator Leahy.

NEW SOURCE REVIEW: AGENCY RELAXATION OF ENFORCEMENT

Senator LEAHY. Thank you, Madam Chair.

Administrator Whitman, everybody is talking about terrorism.

And sometimes we forget that you actually have one of the most

difficult jobs in Washington, because it is so important to each and

every American.

The EPA’s mission to safeguard our Nation’s land and air, water,

to protect the health of our children, our citizens—especially, our

children—from environmental pollutants. And you have got to balance all of the major health and environmental issues we face

today, and do it with increasingly limited resources.

Now, I have appreciated the work the EPA—in my home State

of Vermont, EPA has been instrumental in helping Vermont’s citizens restore the health of Lake Champlain and the Connecticut

River watersheds. You have worked with local communities. You

made a commitment to cleaning up two Superfund sites, and in-
214

cluding the Elizabeth Mine. Vermonters, over the years, thought of

the EPA as one of our greatest protectors and best friends.

So, with that as a backdrop, I have got to tell you, I do not know

when I have been so disappointed in you or your Agency. I think

of how vigorously the Administration has worked to undermine enforcement of the Clean Air Act, which was enacted with strong bipartisan support. My predecessor, Senator Bob Stafford, was actively involved in that.

So, you have—careful balancing is required to protect public

health, but now that balance has been unbalanced, because special

interests have been permitted to put their thumb on the scales.

And I am talking about the New Source Review regulations that

the EPA is on the verge of announcing. And I know Senator Mikulski and others may have talked about this, but I look at months

of meetings with the energy industry lobbyists, and the Administration came up with a wish list of items for power companies that

we can—New Source Review, that is right at the top.

From a cold financial perspective, I can see why power companies want a special interest provision that gives them immunity

from a Federal law. They just simply look at dollars and cents. Of

course they want that.

The New Source Review requires the oldest and dirtiest power

plants comply with clean air requirements, when they make upgrades of these facilities. It is a core provision that is supposed to

gradually eliminate—but everybody knew there was a loophole in

the Clean Air Act, but a loophole that was allowed, because it was

going to be eliminated over time. A loophole that lets power plants

emit thousands of tons of pollutants into our Nation’s air and into

our children’s lungs and everybody else’s.

A lot of years, power companies ignored the requirement. Their

oldest plants add controls. Your immediate predecessor, Administrator Browner, made it a priority to enforce, not undermine, the

New Source Review regulations. She followed up on Agency investigations and found energy companies illegally exploiting a loophole

in the Clean Air Act. She found those irresponsible power producers that chose to put the money back into the profits, rather

than cleaning our air, and she said, ‘‘Enough is enough.’’ And she

went to the Department of Justice in November of 1999. She filed

lawsuits against the facilities with these egregious violations.

And guess what happened? When the violators actually believed

somebody was going to call them on it and actually bring them to

court on it, they started lining up, and said, ‘‘Okay. How do we settle all of this?’’

And the settlements, of course, meant cleaning the air of millions

of tons of pollutants. It also meant billions of dollars in fines that

would go into our—the coffers for—to help the taxpayers of this

country.

One settlement, alone, resulted in, I think, about $1 billion in

fines and reduced about 200,000 tons of pollutants. Another recent

settlement had around $350 billion in fines and over 50,000 tons

of pollutants.

So, it is fulfilling EPA’s mission to enforce the Clean Air Act, and

it also said we are serious about it.
215

Then the new Administration came to town. First major energy

proposal by the Bush Administration was that the New Source Review enforcement should be undermined by administrative debt.

And guess what? Two major companies who had previously announced agreements in principle to settle said, ‘‘Oh, boy, new sheriff in town. We do not have to do it. We can back off.’’

Even though their settlements would have reduced pollution by

over 750,000 tons and would have given $3 billion back to our Nation’s taxpayers. They said, ‘‘Heck. If we are not going to be enforced, you know, if it is going to be,’ go ahead and pollute, we do

not give a hoot,’ that is a great symbol, and let us go for it.’’

And so, the pollution still goes on. The polluters do not pay for

the crime.

As a matter of public record, the energy companies wanted this

relaxation of New Source Review. Many were already under the

gun and knew that they were going to have to pay up and actually

obey the law. But your Administration, suggest EPA, chose to listen to these people, actually act upon their request, and roll back

the Clean Air Act, It just baffles me, because we had already proven—all you have to do is enforce it, and they will show up.

A lot of us in the Northeast asked you about it. In January, the

Department of Justice found that all current New Source Review

cases were legally justified and the violators were right to be prosecuted. I mean, this is during Attorney General Ashcroft’s Justice

Department. But you continue to follow the requests of the energy

industry.

Two weeks ago, one of your experts of the Clean Air law resigned

in dismay at the handling of the matter at your Agency. Monday,

the Washington Post reports you are continuing to follow their requests.

I have heard you say that the Administration’s legislation to cut

emissions from power plants, your Clear Skies Initiative is a replacement for the New Source Review. Well, that is not true at all.

The New Source Review is specific to individual facilities. It is also

mandatory.

The Clear Skies Initiative is about voluntary lowering of emissions. It does nothing for the communities stuck next to a 1950s

coal-fired power plant.

I will tell you, right now, anybody in the Justice Department—

I see you shaking your head, but I disagree. The relaxation in New

Source Review regulation would cover far more than 1,100 coalfired power plants that are under your Clear Skies Initiative. New

Source Review applies to more than 15,000 industrial facilities or

refineries—pulp, paper mills.

Also, New Source Review is in the—in the law right now. Why

not enact it right now? When I was a prosecutor, I believe if you

had a law on the books, you enforce it. If the legislature or, in this

case, the Congress wants to change the law, let them do it. But this

idea of saying, ‘‘We do not like that a lot. We do not want to protect

the environment. We do not want to stop pollutants coming down

into the waters and the streams of Vermont or anywhere else in

the Northeast.’’
216

Heck, when you were governor of the great Garden State, you

strongly supported the strongest clean air regulations, including

enforcement under the New Source Review.

I—the Administration is—if you tell people we are not going to

enforce the law, none of these companies—I mean, they have already shown that when the law is being enforced, then they start—

they pay the fines, they start cleaning up. You tell them the law

is not going to be enforced, they say, ‘‘Okay. Good-bye. See you.’’

It is like having a speed limit somewhere. You have got one

where you have got the radar——

Senator MIKULSKI. Excuse me, Senator. I have to get to another

mark-up. Do you want to continue for an extended line of questioning and——

Senator LEAHY. If I could.

Senator MIKULSKI. I would ask you, then, to close out the hearing.

Senator LEAHY. Certainly.

Senator MIKULSKI. It is a mark-up on the pension bill. So, I did

not mean to interrupt your train——

Senator LEAHY. I appreciate that.

Senator MIKULSKI. I am going to, then, yield the gavel to Senator

Leahy.

Senator LEAHY. I am only going to be a few more minutes, anyway, but thank you.

Senator MIKULSKI. And—and then, Senator—and then, Administrator Whitman, we look forward to working with you.

Senator LEAHY. I would have been here earlier, but we had a

closed meeting with the intelligence agencies on another mark-up.

So, I had to be at that. Thank you.

Senator MIKULSKI. Yes. And I have got to get to the pension——

Senator LEAHY. Thank you.

Senator MIKULSKI. So, please, continue. And—and then I will ask

you to, then, conclude the hearing.

Senator LEAHY. Yes. And—okay. I have—and that is also fair.

Then I will give you time to respond. But, I tell you, in Vermont,

we look at this—well, we take a bipartisan attitude toward the environment. And I hear it from just as many Republicans as I do

Democrats, saying, ‘‘What in heaven’s name is going on at the

EPA?’’

Ms. WHITMAN. Well, Senator, if all I did was read the papers, I

would probably ask the same question. As a person in public life,

and as I certainly found as a governor of the State of New Jersey,

I learned to have a little bit of skepticism about everything I read

in the paper. I, too, believe that our NSR cases are strong. We continue to urge companies to come to the table. In fact, one of the

two settlements that you talked about was with, a New Jersey

company, PSE&G, and was concluded just recently. It was part of

the work that we have done. We have gone forward.

We continue to enforce New Source Review. In fact, in the last

year, we made approximately 87 information requests to power

plants, refineries, and other facilities. We issued about 22 notices

of violation. We have concluded at least seven cases. We are still

vigorous in our pursuit of New Source Review.
217

Senator LEAHY. Are you—are you going to prosecute violations of

it? Are you going to——

Ms. WHITMAN. We are going to continue to prosecute violations.

Senator LEAHY [continuing]. Prosecute as aggressively as the last

Administration did?

Ms. WHITMAN. Absolutely. We are going to continue to prosecute.

What we are talking about in reform of New Source Review is

what was proposed by the previous Administration back in 1996.

We will make some proposals to the White House within the next

couple of months that would be based on what was proposed by the

Clinton Administration in 1996, subject to full public review.

Any additional comments that we make, as far as how to streamline and make New Source Review more efficient and more effective, would be subject to the full public process, which is about a

3-year process.

Senator LEAHY. Do you have any companies that announced

agreements in principle, who have now changed their mind?

Ms. WHITMAN. We are in negotiations with a number of companies. And some are more active than others. We continue to have

settlement agreements every week. But as you well know, as a

former prosecutor, not all cases have a very smooth road to completion and that people go forward and they move back and they go

forward and they move back. But we are continuing. We have negotiations going on for settlement every week.

Senator LEAHY. Well, did we talk about what is in the—did the

energy companies want—did any energy companies want relaxation of New Source Review?

Ms. WHITMAN. Oh, I am sure there are a number of them that

would love it.

Senator LEAHY. Are there any that came to you or met with you

and asked you to do that? You or your Agency?

Ms. WHITMAN. There have been discussions of what is going on,

but no, I have not been individually lobbied.

Senator LEAHY. No energy companies have come to the EPA and

asked for relaxation of New Source Review?

Ms. WHITMAN. No. They have asked us to look at changes and

how we could make it more efficient. But they have not asked me

to relax it. They have not asked me—I have not been personally

lobbied by anyone asking me to change New Source Review.

Senator LEAHY. Are you aware—are you aware of——

Ms. WHITMAN. They have certainly indicated their displeasure

with it.

Senator LEAHY. Are you aware of anybody in the Administration

who has been lobbied for—by any energy companies for relaxation

of New Source Review?

Ms. WHITMAN. I am not, personally. I would not be surprised, because, certainly, this has been something that has gone on for a

long time. It is why the National Governors Association unanimously asked that the Agency look at streamlining New Source Review.

Senator LEAHY. But you are not aware of any energy companies—you are not aware.

Ms. WHITMAN. Not personally. No, sir.
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Senator LEAHY. Well, what do you mean, ‘‘not personally’’? I

mean, you are either aware of it or you are not aware of it.

Ms. WHITMAN. I do not know whether there have been meetings.

I am not aware of them.

Senator LEAHY. I am not asking you about—you are not aware

of it. Okay.

Ms. WHITMAN. No.

Senator LEAHY. Would you be amazed to hear that some have

come to the Administration to ask for that?

Ms. WHITMAN. Would I be amazed if what? I am sorry.

Senator LEAHY. To hear that some have come to the Administration—some energy companies—asking for relaxation of New Source

Review?

Ms. WHITMAN. No. Not at all. And any meetings, by the way,

Senator, that we have, will be part of the record.

Senator LEAHY. And no one in the Administration has asked you

to.

Ms. WHITMAN. I am sorry, Senator.

Senator LEAHY. No one in the Administration has asked you to

relax New Source Review.

Ms. WHITMAN. I have been asked, as you know, under the auspices of the energy policy, to conduct a review of New Source Review. I have had numerous meetings with energy companies, with

environmentalists, with the States’ Attorneys General, on the issue

of New Source Review and on the issue of enforcement, but I have

not been specifically requested by anyone to make any particular

changes to New Source Review.

Senator LEAHY. No one has asked you to relax the issue of—on

enforcement.

Ms. WHITMAN. No. They may complain, but they do not ask.

ENFORCEMENT PROGRAM

Senator LEAHY. Years ago, we had a predecessor—yours—who

took the enforcement department, and about every 6 weeks she

would reorganize it, so nobody could ever get started on enforcement. I mention that only because some worry that—and just administratively, you can have a law on the books, but make sure it

is not being enforced.

It is something that we—I imagine many will—many will watch,

because, frankly, I do not see this—well, let me ask you this: Is

EPA’s enforcement budget—your proposal, is it the same this year

as last year? More or less? What?

Ms. WHITMAN. The overall request for enforcement is higher than

last year. And, Senator, if I might, if you look at last year’s record,

when ‘‘this new boy in town,’’ as you said, or the new gang in town

was there, our——

Senator LEAHY. I did not say ‘‘this new boy in town.’’

Ms. WHITMAN. Well, I am sorry. Whatever. The new—the new

sheriff.

Senator LEAHY. I would not be that disrespectful. I would not

be——

Ms. WHITMAN. I think you said ‘‘new sheriff in town.’’

Senator LEAHY. I would not be—I would not call any

President——
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1These activities reflect EPA’s approach to enforcement generally, which includes the following steps:

Investigate possible violations by gathering information, e.g., through information. requests,

citizen complaints, inspections or other reports;

Review collected information to determine compliance

Issue ‘‘Notices of Violation’’ or other formal notification to the violator to alert them to the

violations detected and give them an opportunity to correct those violations

Enter into negotiations with the violator in an attempt to reach an agreed upon settlement

to resolve the violations

Continued

Ms. WHITMAN. I—I apologize.

Senator LEAHY [continuing]. A boy.

Ms. WHITMAN. New sheriff in town. But our enforcement program achieved outstanding results. It was almost a record-setting

amount of penalties.

Senator LEAHY. And these are all——

Ms. WHITMAN. Almost——

Senator LEAHY. These are all actions that your Administration

began. None of them were left over from the past——

Ms. WHITMAN. Oh, no. Some of them were left over, but we had

to——

Senator LEAHY. Ah.

Ms. WHITMAN. We had to finish enforcing them. If we were not

interested in enforcing them, it is just as easy to walk away from

an ongoing negotiation.

Senator LEAHY. No. It is not, actually. Actually, it is not, because

if you had some——

Ms. WHITMAN. Well——

Senator LEAHY [continuing]. Enforcement that was successfully

going forward, the political cost would have been enormous to walk

away from them.

Ms. WHITMAN. Well, Senator, I would be very happy to give you

a complete breakdown of all the cases that we have brought in this

year; that we have brought——

Senator LEAHY. I would appreciate that.

Ms. WHITMAN [continuing]. And all the actions that we concluded. And suffice it to say that maybe we would not have walked

away from ongoing cases, but the fact that the penalties we got

were almost record level and the time served by people we were

able to convict, were almost record level, I believe, indicates a commitment to enforcement that belies some of what you have been

reading in the press about a hidden agenda to walk away from

what is important to this country.

ENFORCEMENT PROGRAM: FTE REDUCTION

Senator LEAHY. Well, and please supply that for the record, because I—I do not want to——

Ms. WHITMAN. I would be happy to.

[The information follows:]

CLEAN AIR ACT/NEW SOURCE REVIEW ENFORCEMENT ACTIVITY

EPA’s enforcement activities under the Clean Air Act to address New Source Review (NSR) violations continue to be vigorous. Beginning with investigations, of

which we have over 100 under way, and concluding with a filed case or settlement,

EPA aims to reduce harmful air pollution caused by refineries, power plants and

other industrial processes, such as paper mills.1
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Proceed with formal enforcement by filing a case for litigation if no resolution of the violations

could be achieved. 2 Current data as of April 19, 2002.

Our current data shows that—between January 2001 and March 2002—EPA

made 115 information requests; issued 23 Notices of Violation; filed and settled 15

cases, concluding 7 of them (i.e., they were entered by the appropriate court); and

engaged in numerous other enforcement activities such as depositions, motion practice and on-going settlement discussions—all to enforce the Clean Air Act’s NSR requirements.

Since the start of NSR initiative in 1997, EPA has, through settled cases alone,

reduced nitrogen oxides (NOX) and sulfur dioxide (SO2) emissions by approximately

329,000 tons per year; ordered nearly $3 billion in injunctive relief aimed to rectify

the violations; required that nearly $43 million be spent on environmental mitigation projects; and ordered over $57 million in civil penalties to be paid.

Further pollutant reductions and reparations are expected from cases in which we

have a settlement agreement in principle: a reduction in nitrogen oxides (NOX) and

sulfur dioxide (SO2) emissions by approximately 591,000 tons per year; $3 billion in

injunctive relief; over $35 million in environmental mitigation projects; and almost

$14 million in civil penalties.2

SO2 and NOX are significant contributors to acid rain and fine particulates. NOX

also contributes to the formation of ground level ozone, which is a component of

smog. Fine particulate matter
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Senator LEAHY. I do not want you to, in any way, feel that you

were not given a chance to answer these questions. And I will

make sure they are part of the record. And—because, you know, I

have a great deal of respect for you, personally. And I want to

make sure that you have a full opportunity to answer.

I am concerned that, as I read the EPA enforcement budget, I

see it as a cut. The—when I have asked questions about this, I

have been told that it was simply allocating more power to the

States. But I find most States, especially small States, do not want

that. They want you to do it, because they do not have the ability

to. Is there a dichotomy that I am missing here?

Ms. WHITMAN. There are two different things, here, Senator.

Senator LEAHY. Oh.

Ms. WHITMAN. The fiscal year 2003 request for enforcement and compliance is, in fact, higher than last year’s. It totals $482 million, which is the highest ever for the program. That is over $16

million higher than fiscal year 2001 and $7 million higher than last

year’s request.

But what we are also showing as part of the overall effort as—

one of the things that Congress requested of us a couple of years

ago or last year was to continue to tighten our overhead. And so,

what we are showing is a reduction of full-time equivalents of 100

or 113.

We are also in a position where we have unfilled positions. We

lapse about 120 positions a year. We anticipate hiring 100 new people into the enforcement program in the coming year, to fill those

that have left.

Our program, essentially, will be pretty close to what it is—what

it is now, in terms of bodies. About one-fifth of the overall personnel of the Agency resides in that office.

And we believe, because of the success we had last year, that we

are not going to see any kind of backing away from that. The $15

million program for the States is first of all, in recognition, that the

States do 90 percent of the compliance and enforcement work. And

we want to be able to enhance that; particularly at a time when

States are facing tighter budgets.

There are some States that have very sophisticated enforcement

programs. But they may not be consistently sophisticated. They

may—for instance, be very good at air monitoring and not water,

and with some extra money, they would be able to bring it all up.

They are on the ground. They know where the bad actors are. They

know where to target the resources.

And we believe that combined with the strong emphasis on enforcement at the Federal level, leveraging the States’ abilities can

only enhance enforcement, overall.

ENFORCEMENT: COMPETITIVE GRANT PROGRAM

Senator LEAHY. But this is not a case of putting unwanted enforcement on the—on the States. In other words, every State that

will ask EPA for help in enforcing will still get the same help today

that they would have a couple of years ago.

Ms. WHITMAN. This would be a largely competitive program. Any

State that would be interested in putting in a proposal to access

these dollars, it would be done on a competitive basis.
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Senator LEAHY. Enjoying the job?

Ms. WHITMAN. It is a challenge.

Senator LEAHY. Do you miss being governor?

Ms. WHITMAN. Oh, yes.

Senator LEAHY. The—well, you have an interesting job. I am curious. With all your knowledge of the politics in New Jersey, did

Mr. Ray talk to you about running for the Senate prior to leaving

his office?

Ms. WHITMAN. He did not talk to me about running—his personal running. He talked about whether or not the Senate race—

well, no. Actually, I take it back. What he did was say he might

have an interest in it, but he did not ask for my support or get into

any particulars as to how you would run a Senate race.

ADDITIONAL COMMITTEE QUESTIONS

Senator LEAHY. Well, that is not a matter for this thing anyway.

I was just curious.

Thank you very much.

Ms. WHITMAN. Thank you, Senator.

Senator LEAHY. And we will leave the record open for further

questions.

Ms. WHITMAN. Certainly.

[The following questions were not asked at the hearing, but were

submitted to the Department for response subsequent to the hearing:]

QUESTIONS SUBMITTED BY SENATOR BARBARA A. MIKULSKI

ENFORCEMENT OF ENVIRONMENTAL LAWS: BUDGET PROPOSAL

Question. Once again, EPA’s budget proposes a fundamental shift in policy. It

shifts enforcement resources from the Federal to State governments. How does the

budget proposal differ from last year’s request?

Answer. Last year when the President’s fiscal year 2002 Budget proposed a $25

million enforcement grant program, EPA worked extensively with States and Tribes

to solicit and consider their comments and suggestions. The design for the proposed

$15 million program in the President’s fiscal year 2003 Budget will build on the

comments and suggestions received previously to create a program that is effective

and responsive to State priorities.

In terms of a shift in resources, it should be noted that the President’s request

for the enforcement office at EPA represents the highest funding level in that office’s history. The proposed State grant program will help ensure that states have

the resources they need to be effective partners with EPA in enforcing our environmental laws.

ENFORCEMENT OF ENVIRONMENTAL LAWS: BUDGET CUTS AFFECT ON ENFORCING

ENVIRONMENTAL LAWS

Question. The budget cuts $10 million from enforcement, and 100 environmental

‘‘cops on the beat.’’ How will this affect EPA’s ability to carry out its responsibilities

to enforce environmental laws?

Answer. As noted, the President’s request for EPA’s enforcement office represents

the highest funding level in that office’s history. The fiscal year 2003 budget provides EPA’s enforcement and compliance assurance program sufficient resources to

carry out the appropriate Federal role, focusing on Federal cases involving multistate or multi-facility corporations, environmental programs which cannot be delegated to states due to statutory prohibition, or issues for which EPA can provide

specialized expertise. The shift of some resources to the states tracks what has happened on a national level. ECOS has documented a substantial increase in programs

delegated to the states over the last decade.’’
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ENFORCEMENT OF ENVIRONMENTAL LAWS: CONSEQUENCES OF BUDGET REDUCTION ON

CATCHING PROSECUTING POLLUTERS

Question. What are the consequences of this reduction? How many fewer polluters

will be caught and prosecuted?

Answer. We expect performance results in the national Enforcement and Compliance Assurance program to remain the same, with states picking up an additional

increment of that work. EPA and the states have different, but complementary roles

when it comes to enforcement of our Nation’s environmental laws. States have primary responsibility for implementing and enforcing most environmental programs

through delegated authority from the EPA. In addition to ensuring a presence in

the regulated universe, and identifying violations that need to be corrected, the

EPA’s Federal role is to implement and enforce programs that cannot be delegated

to states, to handle more complex cases involving multiple states or corporations

with multiple facilities, to deal with issues that require expertise or resources that

only EPA can provide, and to enforce when states are unable or unwilling to. Given

the interplay between the State and Federal programs, we believe the State and

tribal enforcement grant program will enhance both State and EPA efforts to increase compliance with environmental laws.

ENFORCEMENT OF ENVIRONMENTAL LAWS: NEW STATE GRANT ENFORCEMENT PROGRAM

Question. The budget requests $15 million for a new State enforcement grant program. How does EPA plan to award the new State grants?

Answer. Though details of the proposed enforcement grant program have not been

finalized we anticipate that funds will be awarded through a combination of one or

more of the following mechanisms: competitive grants available to states and tribes,

base-share grants available to states, and a competitive set-aside available only to

tribes. Options for allocating grant funds identified during the outreach process are

outlined below.

Options for Allocating Funds to States and Tribes (One or a combination of options may be used)

—Competitive Awards: funds will be awarded based on the merits of the proposal;

not all states and tribes would receive funds.

—Base Share Grants: each State receives a minimum amount, plus additional

funds are available through the competitive award process.

—Tribal Set-Aside: Recognizing that Tribal environmental programs may not compete well with states, it may be necessary to set aside a portion of the funds

for Tribal grants.

ENFORCEMENT OF ENVIRONMENTAL LAWS: SPECIAL OR NEW AUTHORITY LEGISLATION

Question. Does EPA need special authority or new authorizing legislation to create a new State enforcement grant program?

Answer. While we believe we have existing authority, we are proposing an expansion of that authority to accommodate the multimedia context in which the grants

will be administered. Accordingly, authorizing language in the appropriations bill

that funds the program would facilitate the administration of the grants.

ENFORCEMENT OF ENVIRONMENTAL LAWS: GAO REPORT ON STATE ENFORCEMENT

WEAKNESSES

Question. GAO has reported weaknesses in State enforcement programs. Will

states with good enforcement records be given preference? Or will the grants go to

states with poor records?

Answer. Based on comments received, and draft guidance prepared for the grant

program proposed in the President’s 2002 budget, we anticipate that the grant program will have base-share and competitive components. Competitive grants will be

awarded to those states whose proposals address significant environmental problems, and have the greatest potential for achieving measurable environmental results. Base-share grants will be available to all states that submit an acceptable

proposal that implements a problem-based strategy or program improvement.

ENFORCEMENT OF ENVIRONMENTAL LAWS: WORK WITH STATES WITH POOR RECORDS

Question. How will EPA work with states that have poor records?

Answer. With respect to the proposed grant program, we expect that most of the

base-share grants would be used by states to bolster existing programs, or address

specific state program deficiencies. Implementation of competitive grant proposals

will also help to improve State program performance.
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In general, EPA helps to improve the capacity of states, local, and tribal government compliance and enforcement programs through the delivery of training and

other capacity building activities. In fiscal year 2001 EPA delivered 128 training

courses, reaching over 4,700 students; and conducted approximately 900 EPA assisted inspections to help build capacity of State, local, and tribal governments. EPA

provides environmental management, planning, funding, and regulatory information

to local governments through the Local Government Environmental Assistance Network (LGEAN). Additionally, when requested, EPA assists states with specific enforcement and compliance initiatives.

ENFORCEMENT OF ENVIRONMENTAL LAWS: MONITORING STATES’ USE OF FUNDS

Question. How will EPA monitor states’ use of these funds?

Answer. States will be approved for grant funding only if their grant proposal includes specific plans to measure and report on their performance in achieving results. For example, states will need to define performance measures for determining

whether they are having an impact on the environmental risk or noncompliance pattern they are addressing with the grant funds. EPA will establish required reporting

intervals for states to provide performance information that can be reviewed by EPA

on a regular basis.

ENFORCEMENT OF ENVIRONMENTAL LAWS: STATES’ USE OF FUNDS FOR ENFORCEMENT

ACTIVITIES VS OTHER ACTIVITIES

Question. Will EPA require that these funds be used solely for enforcement activities, or will states be able to use the grants for other activities?

Answer. States and tribes will be required to use grant funds for enforcement and

compliance assurance activities. We anticipate states will use the funds for general

enforcement capacity building or to implement problem-based strategies to address

a specific risk or non-compliance pattern.

WATER INFRASTRUCTURE: INFRASTRUCTURE FUNDING

Question. The budget cuts $138 million from the Clean Water SRF and $340 million in targeted water projects. What are the consequences of this cut? How many

water projects won’t be funded as a result of these cuts? How many jobs won’t be

created?

Answer. For fiscal year 2003 the President has requested $1,212,000,000 for the

Clean Water State Revolving Fund (CWSRF), the largest request since fiscal year

1997. At the $1,212,000,000 funding level, and without further capitalization, the

CWSRF would revolve at an average of $2.22 billion annually between 2010 and

2035. The CWSRF long-term revolving level, which includes loan repayments, is the

projected average annual amount of funds available to states for clean water infrastructure. Because the CWSRF has been well-capitalized over the years, changes in

the appropriated level do not significantly affect the revolving level.

WATER INFRASTRUCTURE: WATERY SECURITY IMPROVEMENT

Question. Water utilities are facing enormous burdens in meeting water regulations and upgrading aging infrastructure. Now, they’re also facing needs to improve

security. What is EPA doing to help wastewater and drinking water utilities improve security

—of their physical infrastructure?

—of the chemicals they use?

Answer. EPA is working with other Federal agencies, states, tribes and utilities

to improve water security with the goal of ‘‘making the most systems safest soonest.’’ To achieve this goal, the Agency and its partners are working to: (1) accelerate

the development and testing of counter terrorism tools, such as vulnerability assessment methods; (2) train utilities in the development of vulnerability assessments

and emergency operations plans; (3) provide needed technical and financial assistance to utilities conducting vulnerability assessments and other security-related

work; (4) identify research needs and conduct research on topics such as detection

technologies, potential contaminants, and treatment effectiveness for water collection and treatment systems; and (5) test new technologies and disseminate information on their application.

EPA currently is reviewing grant applications to conduct vulnerability assessments at the approximately 400 largest drinking water systems nationwide, and

plans to award $53 million for these assessments by the end of July 2002. EPA also

is working with its partners to support assessments at the Nation’s small and medium-sized drinking water systems. Vulnerability assessments are designed not only
228

to identify weaknesses in the physical infrastructure of water systems, but also in

the protocols for safeguarding the chemicals used in water treatment processes. In

subsequent years, EPA will revise the training and tools it provides to utilities

based on (1) the new monitoring and detection technologies under development, and

(2) new approaches to continuously improve water security as a result of utilities’

experience conducting vulnerability assessments.

WATER INFRASTRUCTURE: METHODS FOR DETECTING SECURITY VIOLATIONS

Question. What is EPA doing to help water systems develop methods for detecting

security violations like contaminants in the drinking water? Answer. Through $2 million of the fiscal year 2002 Supplemental Appropriation, and $500,000 in fiscal year 2002 earmarked funds, the Agency currently is supporting the development of water security-related detection, monitoring and treatment tools. There are several initiatives underway or in the planning phase for fiscal year 2002. Specifically, EPA is:

Supporting research by the University of North Carolina at Greensboro to research real-time detection methods for pathogens.

Co-sponsoring a detection technologies conference at Rutgers University in June.

This was a forum where water utilities, regulatory agencies and scientific researchers could discuss needs and solutions to issues in water safety and security related

to real-time monitoring and modeling.

Developing a water security technology verification and outreach program to

verify the performance of innovative technical solutions to intentional contamination

that threatens human health or the environment. This program is designed to accelerate the entrance of new environmental technologies into the domestic and international marketplace.

HOMELAND SECURITY: STATUS OF FUNDING FOR HOMELAND SECURITY AND ACTIVITIES

UNDERTAKEN

Question. Congress provided $176 million in the 2002 Supplemental for EPA

Homeland Security efforts. What is the status of this funding? What specific activities has EPA undertaken?

Answer. Of the $176 million EPA received the Emergency Supplemental, $12.5

million was for partial reimbursement for the Capitol Hill anthrax cleanup. An additional $5.5 million was allocated to establish a western branch of the Environmental

Response Team in Las Vegas, NV improving our ability to provide timely technical

expertise to emergency situations nationwide. $23 million has been primarily allocated to our ten regional emergency response centers, to provide response staff,

equipment and contract support, with the goal of developing sustained response capability throughout the country. EPA also received $1.5 million and 2 FTE as part

of the fiscal year 2002 Emergency Supplemental for Homeland Security research.

EPA has used these resources to: (1) evaluate the performance of drinking water

treatment systems for their ability to cost-effectively remove inactive biological and

chemical agents; (2) work with State and Federal agencies to coordinate research

efforts and (3) prepare for the implementation of the proposed Homeland Security

research in 2003.

EPA’s Office of Administration and Resources Management (OARM) is responsible

for leading and managing physical security efforts at EPA’s facilities nationwide.

Under the President’s Supplemental Counter Terrorism Budget, OARM is being appropriated $30 million for physical security improvements, including vulnerability

risk assessments, guard services, equipment, communications systems, and window

enhancements. OARM has obligated 6 percent of the $30 million as of May 20, 2002.

These funds were used for conducting vulnerability risk assessments at EPA facilities nationwide, procuring additional security guard services nationwide, purchasing

and installing a smart card system at EPA’s Region 2 Office in New York City, and

purchasing and installing an integrated emergency communications system at EPA’s

Federal Triangle Complex in Washington, DC.

The Acute Exposure Guideline Levels (AEGL) Program was established to develop

short-term exposure limits applicable to the general population for a wide range of

extremely hazardous substances for purposes of chemical emergency response, planning, and prevention related to chemical terrorism and chemical accidents. EPA

would use Supplemental Homeland Security funding to accelerate the development

of guidelines in 2002 and beyond.

EPA’s Office of Pollution Prevention and Toxics (OPPT) is participating in national and international efforts to develop one standardized set of scientifically

sound short-term exposure values. EPA also planning to use Supplemental Homeland Security funding to initiate work in concert with the International Chemical
229

Weapons Convention (CWC) to identify and fill analytical gaps in the assessment

of potential risks of chemicals potentially used in the manufacture of chemical weapons. EPA would offer Structure Activity Relationship expertise to assist in expanding the information available on CWC-listed chemicals to include chronic toxicity

and ecotoxity aspects, would expand its work in the Green Chemistry program to

include CWC-listed chemicals in tools (e.g., expert systems), and broaden the Green

Chemistry Challenge program to identify alternatives to CWC-listed chemicals.

$89 million in supplemental appropriations was provided for water infrastructure

protection. It has been allocated as follows.

$53 million for water security planning grants for the largest drinking water utilities that regularly serve populations over 100,000. Collectively, these large systems

provide drinking water to nearly half of Americans served by public water systems.

Over 380 applications from publicly owned drinking water utilities were received.

EPA plans to approve all eligible grants by the end of July.

$23 million to address the needs of small and medium-size utilities. EPA is working with the industry, environmental groups, and the states to define the best approach for providing these utility systems with awareness training, technical assistance, vulnerability assessment tools, and capacity building.

$5 million in grants to support State, tribal, and territorial counter-terrorism coordination (from State/Territorial Assistance Grants). EPA Regions are now working

with states to award these funds.

$2 million for investigation of security-related detection, monitoring and treatment tools.

$3 million for wastewater tool development, training on vulnerability assessments

and emergency operations, technical assistance, and investigation of treatment and

detection tools.

Nearly $2 million for additional needs, including training of public health officials,

local government, law enforcement, and support for the information sharing and

analysis center.

HOMELAND SECURITY: PROGRESS FOR IMPROVING HOMELAND SECURITY

Question. What progress has been made in improving homeland security with this

spending?

Answer. The Environmental Response Team (ERT) is EPA’s premier technical

support group for emergency response operations; historically, the team has been

based in Edison, NJ, with a small annex in Cincinnati. We are nearing the completion of establishing a western ERT branch in Las Vegas, NV, which will improve

EPA’s coverage of the western half of the country, as well as build staff capacity

in specific technical areas, such as bio-hazard assessment and remediation.

One of the lessons we learned from the 9/11 events and the anthrax incidents was

that our response capacity was dangerously low; we were forced to draw on resources from all ten of our regional emergency response programs and curtail other

time-critical response work. The fiscal year 2002 supplemental budget provides each

region with an additional five response personnel and approximately $1.6 million in

funds for equipment and contract support, increasing our overall response capacity

by 20 percent.

The resources received in fiscal year 2002 for Homeland Security research also

helped EPA to prepare for the efficient use of the $75 million requested in fiscal

year 2003 for Homeland Security research. This preparation will allow for quicker

and more effective development and certification of new methods as well as techniques for detecting, treating, disposing, and understanding how best to manage

buildings contaminated with biological or chemical agents.

Office of Administration and Resources Management (OARM) is in the process of

conducting vulnerability risk assessments at EPA’s 146 facilities nationwide. These

assessments will provide EPA with the current physical security conditions at its

facilities, including identifying and documenting vulnerabilities and risks, assessing

human threat, and determining the overall qualitative risks as it relates to perimeter security, entrance and exit security, interior security, and security planning.

Based on the findings from the assessments, OARM will develop recommendations

and cost estimates to mitigate the risks, and implement mitigation and countermeasure efforts, where appropriate.

OARM is using a phased approach in conducting these assessments, where our

more critical facilities are assessed first and the less critical facilities are assessed

last. To date, we have completed site visits at 50 facilities and laboratories nationwide, and completed 25 reports of findings. We are currently in the process of ranking and prioritizing the risks associated with our most critical facilities, and expect

to make funding decisions in June 2002. This funding will be used to purchase addi-
230

tional guard services, equipment, and communications systems. OARM plans to continue this process until we complete the assessments and mitigate the

vulnerabilities at all our facilities nationwide.

EPA’s Water Protection Task Force and Regional Offices, working with many

partnering organizations, are taking actions to improve the security of the nation’s

drinking water and wastewater infrastructure. The actions underway:

To date, the Task Force has:

—Supported development of vulnerability assessment tools (developed by Sandia/

AWWA, and AMSA) and released emergency operations planning guidance;

—Trained thousands of water utility personnel on security planning and vulnerability assessment methodologies;

—Completed an assessment of the State of knowledge on technologies to detect

contaminants, monitoring protocols and techniques, and treatment effectiveness.

On-going actions include:

—Providing technical assistance, training, and capacity building tailored to the

needs of small and medium drinking water, and wastewater utilities;

—Supporting information sharing between government organizations and industry by funding start-up of a secure Information Sharing and Analysis Center;

—Supporting research to improve treatment and detection methods.

HOMELAND SECURITY: DEVELOPMENT OF OUTCOME-BASED MEASURES AND SPECIFIC

SPENDING PLANS

Question. Has EPA developed outcome-based measures and specific plans to assure that this spending will improve the security of our homeland?

Answer. Prior to the events of last fall, EPA had undertaken a comprehensive review of the agency’s Emergency Response Program, developing standards and measures to ensure a high degree of consistency and responsiveness in regional response

operations. Subsequent to the terrorist responses, we took the lessons learned from

those actions and integrated them into the overall response program framework.

This effort will be reflected in the Agency’s GPRA measures for the fiscal year 2003

enacted budget, as well as the fiscal year 2004 President’s Budget.

EPA has also developed goals and measures to support all aspects of the draft

Agency Homeland Security Strategy to help ensure efficient and effective spending.

EPA’s goal for water infrastructure security is to get the most systems as secure

as possible as soon as possible. EPA works closely with utility organizations, the

states, and security experts to identify the most effective approaches and tools needed to improve the security of the nation’s critical water infrastructure.

EPA has developed a new Annual Performance Goal in its fiscal year 2003 President’s Budget request to track development of Acute Exposure Guideline levels

(AEGL) for additional chemicals. The measures are quantitative, so they will clearly

identify the additional numbers of chemicals and guidelines developed each year.

Additionally, EPA is continuing to review the program activities and has identified

areas for improvement, including development of health and safety plans for select

agent, developing occupational and medical monitoring plans, addressing containment issues, securing laboratory space and identifying and tracking samples.

HOMELAND SECURITY

Question. How does EPA plan to spend the additional $124 million requested in

fiscal year 2003?

Answer. EPA Superfund plans to continue to improve the emergency response

program by insuring that the additional capacity and technical capability that were

first funded in fiscal year 2002 will be maintained in fiscal year 2003 and beyond(including both the ERT-West operation and regional and HQ response program improvements).

EPA requested $75 million for Homeland Security research. Work will focus on

five main areas: detection of contaminants, containment of contaminants, decontamination of indoor materials, disposal of contaminated clean-up equipment and

supplies, and risk communication including the transfer of improved methods to

users. Before initiating efforts in any of these areas EPA will survey the private sector and other agencies and organizations to assess existing capabilities and where

possible work to bring that technology, information or process to those who need it.

Where others have already established a lead in a given area, EPA can defer to that

organization. In other cases, a collaborative working relationship may be best suited. A leadership role may also be appropriate for EPA.

EPA has requested $22 million in fiscal year 2003 for critical water infrastructure

protection. $17 million of the request will support continued work to: develop tools

and training for small and medium drinking water utilities to complete vulnerability
231

assessments; develop and enhance emergency response plans, and; develop and disseminate detection, monitoring and treatment technologies. $5 million of the request

will be directed to states to support state-level coordination of homeland security activities with EPA and drinking water utilities.

HOMELAND SECURITY: ANTHRAX DECONTAMINATION SPENDING

Question. How much did EPA spend on this effort? Did this funding come from

the Superfund program?

Answer. EPA has expended over $28 million for Capitol Hill response out of its

Superfund removal program.

In general, the USPS, other government agencies and privately owned facilities,

such as the America Media, Inc. site in Florida, are funding their own cleanups.

EPA is providing technical assistance from our On-Scene Coordinators, our Environmental Response Team, and other personnel. EPA estimates that it has spent approximately $2 million for anthrax cleanup and technical assistance at sites other

than the Capitol Hill Complex.

Estimated costs for OPPT in fiscal year 2002 are approximately $900,000. These

funds were not provided from the Superfund program, they are being paid by the

pesticides program.

HOMELAND SECURITY: ANTHRAX DECONTAMINATION FULL REIMBURSEMENT

Question. How much more does EPA need in order to be fully reimbursed?

Answer. EPA has expended over $28 million for Capitol Hill response out of its

Superfund removal program. The fiscal year 2002 Supplemental Appropriations bill

reimbursed EPA for $12.5 million of that. The Administration has requested an additional $12.5 million in reimbursement.

HOMELAND SECURITY: LESSONS LEARNED FROM THE ANTHRAX DECONTAMINATION AT

THE HART BUILDING

Question. What ‘‘lessons learned’’ can EPA provide about the anthrax decontamination at the Hart building?

Answer. We verified that our basic response infrastructure and authorities are

sound, and that our regional response programs are up to the task of mitigating

new and unique threats to public health. We also learned that we need to enhance

and develop our short term assessment and mitigation methods.

HOMELAND SECURITY: PROGRESS MADE ASSURING CLARITY OF ROLES AND SAFETY

Question. What progress has EPA made in assuring clarity in: Who is in charge?

Answer. We believe the basic roles and responsibilities defined by the Federal Response Plan, the National Contingency Plan and PDDs 39 and 62 are clear and do

not need further amendment. However, the execution of these authorities may be

compromised by inconsistent application in different situations; we have discussed

this with the Office of Homeland Security and are hopeful that clarifying guidance

will be forthcoming.

The National Response Team has established an ad hoc committee, which includes EPA, CDC, OSHA, USCG and other agencies, to consolidate and coordinate

civilian and military expertise on detecting and cleaning up anthrax contamination.

This committee is close to completing an interim final technical assistance document

that begins to address this issue for anthrax. Lessons learned by this group will be

applied to broader efforts to address risk-based decision making in other scenarios

involving chemical or biological terrorism. We believe the continuing dialogs and related improvements in cross-agency coordination in this area will improve our ability to make definitive cleanup decisions in the future.

Question. How clean is safe?

Answer. The risk-based response protocols established by the Superfund program

provide a solid foundation for making site-specific cleanup decisions, but these decisions must be informed by improved government-wide understanding of the nature

of biological risks. We believe the continuing dialogs involving EPA, CDC and other

agencies will improve our ability to make definitive cleanup decisions in the future.

PHARMACEUTICAL POLLUTION OF WATERWAYS

Question. A recent study by the USGS found trace pharmaceuticals in 80 percent

of streams analyzed. What is EPA’s role in looking at the possible effects of drug

wastes on the environment? Is EPA looking at how these contaminants affect drinking water?
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Answer. EPA has statutory responsibilities under the Clean Water Act and the

Safe Drinking Water Act to evaluate the environmental and human health risks of

pollutants, including pharmaceuticals and personal care products (PPCPs) , and to

determine whether ambient water quality criteria or drinking water standards are

needed. In response to this mandate, EPA is focusing on collecting and evaluating

occurrence data in water sources to assess potential ecological and human health

risks. Based upon the risk assessments, EPA will develop intra- and inter-agency

research strategies for future research. EPA has been exploring the effect of

chlorination (which is commonly used to treat both waste water and drinking water)

on selected pharmaceuticals to determine if the process is effective at removing the

compounds from the water, as well as what by-products are formed. This data was

presented at the Society of Environmental Toxicology and Chemistry (SETAC) annual meeting in November 2000, and is currently being summarized for publication

in fiscal year 2002. In addition, EPA has previously funded several PPCP-related

research projects, including aquatic effects studies through the Sceince to Acheive

Results (STAR) program. Information on these projects is available at: http://

www.epa.gov/nerlesd1/chemistry/pharma/star.htm The EPA also hosts the world’s

only web site devoted to environmental issues associated with PPCPs (http://

www.epa.gov/nerlesd1/chemistry/pharma/index.htm.

Question. As a result of the recent study, FDA said it would take a closer look

at the effects on the environment. Is EPA working with FDA on this issue?

Answer. EPA and FDA staff interactions have resulted from joint participation in

organizing a scientific session devoted to PPCPs (the 2000 American College of Toxicology Annual Meeting) and from FDA review of EPA PPCP-related presentation

materials. EPA plans to engage FDA in the development of an inter-agency research

strategy to establish risk-based research priorities and opportunities for inter-agency collaborations.

Question. The U.S. Geological Survey is also looking at how these contaminants

might affect drinking water. Is EPA working with USGS?

Answer. EPA has collaborated and co-authored published papers with USGS on

a Neuse River Basin, North Carolina, field study to develop better measurement

methods and to collect occurrence data for antibiotic and endocrine disrupting compounds near animal feeding operations. EPA is currently collaborating with USGS

on a project using pharmaceuticals, as well as other chemicals found in human

waste streams (e.g, detergents, surfactants), as tracers of human fecal contamination. As part of this work, samples will be taken upstream, at the point of discharge,

and at two points downstream of waste water discharges. This data should provide

information about the lifetime of pharmaceuticals in the environment (i.e, are they

found one mile downstream from the discharge point, or are they removed/reduced

due to effects such as photo- or bio-degradation, sedimentation, and dilution), which

will be useful for exposure assessment. The EPA and USGS staff have also been

collaborating by exchanging information, reviewing each other’s documents, and collaborating on research. EPA–USGS collaborated on the research project: ‘‘Analytical

Chemistry for Mapping Trends of Pharmaceutical and Personal Care Product Pollution from Personal Use: Some Current Research and Future Needs.’’

Question. Is EPA developing technologies for ways to remove these contaminants

from drinking water?

Answer. EPA is evaluating the removal of steroid hormone compounds by various

drinking water treatment processes. In the future, a group of nonylphenolic compounds and additional pharmaceuticals will also be added. Analytical methods to

identify and quantify the steroid hormones will be developed, and a reporter gene

assay, the MVLN assay, will evaluate the removal of estrogenic activity from the

water samples. Once the analytical and MVLN assays are in place, bench, pilot, and

field-scale evaluations of various drinking water treatment processes will be conducted. Of special interest are technologies amenable to small systems. To reduce

the need for treatment, EPA also is considering ways to minimize the occurrence

of PPCPs in drinking water sources, such as encouraging safer disposal of discarded

pharmaceuticals.

Question. Is there any funding in the budget related to these efforts?

Answer. In the fiscal year 2003 President’s Budget, EPA requested approximately

$1.2 million and 11 FTE for PPCP research. This includes work focusing on collecting and evaluating occurrence data in water sources to assess potential ecological and human health risks, developing intra- and inter-agency research strategies

to determine risk-based priorities for future research, the effects of chlorination on

selected pharmaceuticals to determine if the process is effective at removing the

compounds from the water as well as evaluating the removal of steroid hormone

compounds by various drinking water treatment processes.
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ENVIRONMENTAL EDUCATION: RATIONALE FOR ELIMINATION OF APPROXIMATELY $10M

FROM K–12 ENVIRONMENTAL EDUCATION

Question. The budget proposes to eliminate approximately $10 million for K–12

environmental education. What is the rationale for this cut?

Answer. The President’s fiscal year 2003 budget transfers the Agency’s Environmental Education Grant program to the National Science Foundation’s (NSF) math

and science program. The functions of the EPA’s grant program will continue at

NSF.

Consolidation of the EPA’s Environmental Education program with those of NSF

will combine similar programs, improve the services delivered to environmental institutions, and reduce costs. The function of Environmental Education is better

served by one agency and NSF is fully capable of administering the requirements

of S. 876.

STAR FELLOWSHIP: RATIONALE FOR SHIFT FROM EPA TO NSF

Question. The budget proposes to shift the STAR fellowship program from EPA

to NSF. What is the rationale for this shift?

Answer. The President’s Budget proposes to strengthen math and science education in the United States by improving the quality of math and science education

in grades K–12 and by attracting the most promising U. S. students into graduate

level science and engineering by providing more competitive stipends. The President’s K–12 math and science initiative and the higher graduate stipends are being

funded through the National Science Foundation’s (NSF) budget. NSF is noted for

its expertise and success in funding competitive programs in math and science.

Funding for EPA’s STAR Fellowship Program was shifted to NSF in fiscal year 2003

as part of the Federal initiative to strengthen math and science programs.

EPA will continue funding its Minority Academic Institutions (MAI) Fellowships

program at $1.5 million in 2003. The Minority Academic Institution (MAI) fellowship program offers undergraduate and graduate fellowships in academic disciplines

relating to environmental research, and are intended to help defray costs associated

with environmentally-oriented study leading to the bachelor’s, master’s or doctoral

degree. Undergraduate fellows agree to participate for up to 12 weeks at an EPA

laboratory/center as a summer intern. Eligible students in both the undergraduate

and graduate programs must attend a 4-year U.S. Minority Academic Institution,

defined as Historically Black Colleges or Universities (HBCUs), Hispanic Serving

Institutions (HSIs), and Tribal Colleges (TCs).

STAR FELLOWSHIP: GRADUATE STUDENTS COMPLETING FELLOWSHIPS?

Question. How would this affect graduate students who are completing their fellowships? Will their funding be canceled?

Answer. No, the STAR fellows funding will not be canceled. EPA presently supports about 200 STAR fellows. The terms of those agreements provide funding for

the next 1 or 2 years. EPA plans to fully fund the present fellows for the intended

duration of their fellowships. EPA will use fiscal year 2002 resources to fund students presently in the STAR fellowship program through the completion of their fellowships.

STAR FELLOWSHIP: THE STAR PROGRAM?

Question. How does EPA propose to spend 2002 funding provided for the STAR

fellowship program?

Answer. EPA will use fiscal year 2002 resources to fund students presently in the

STAR fellowship program for the duration of their fellowships.

STAR FELLOWSHIP: CITATION

Question. Please provide the citation within the NSF budget where this program

is proposed to be funded in 2003.

Answer. Resources for the STAR Fellowship Program, previously funded by EPA,

were redirected to the National Science Foundation (NSF), though the program

itself was not transferred. No funding exists within the NSF Budget for the STAR

Fellowship program. Funding to graduate students pursuing studies in some of the

environmental sciences supported by EPA is available through existing well-established graduate research fellowship and traineeship programs in NSF. These programs are discussed on pages 285–286 of NSF’s fiscal year 2003 Budget Justification to Congress.
234

STAR FELLOWSHIP

Question. If NSF takes over this program, would it remain as a separate program

focusing on the environmental sciences, or would it be folded into NSF’s other

science education programs?

Answer. As mentioned above, EPA’s STAR Fellowship Program was not transferred to NSF. However, NSF does provide financial assistance to graduate students

across the nation studying scientific disciplines through existing well-established

graduate research fellowship and traineeship programs. Graduate students pursuing

degrees in a subset of the environmental sciences who previously sought EPA’s financial assistance may apply to these NSF programs.

BROWNFIELDS: QUESTIONS RAISED CONCERNING EFFECTIVE USE OF FUNDING

Question. Recent reports by the House Energy and Commerce Committee (Nov.

2000) as well as GAO (Dec. 2000) and the EPA Inspector General (Sept. 2000) all

raised serious questions about whether past funding for the program had been effectively used. Specifically, few cleanup loans had been made, and EPA could not demonstrate what tangible results had been achieved with the funding that had been

provided. Have these past problems been corrected? If so, how?

Answer. EPA has responded to the recommendations in numerous ways. EPA has

clarified certain critical requirements and streamlined them. Currently 143

Brownfields Cleanup Revolving Loan Funds Pilots (BCRLF) have been selected. In

addition, EPA has deobligated eleven BCRLF where progress has not been made by

the recipient in making loans. Recent improvements to the BCRLF program include

the development of model documents and a marketing guide.

In the past year, the number of loans being made by BCRLF pilots has more than

doubled to 17 loans with an additional three expected within the next quarter and

more under discussion with EPA regions. We attribute the lag in community participation in this program to a number of factors, including lack of familiarity with the

program requirements and the limited competitiveness of Federal funds that require

recipients to comply with all Superfund requirements. Improved outreach on the

part of the EPA Brownfields program, increased understanding of this program, and

the increasing competitiveness of these funds has increased the rate of loans being

made in the last year. We anticipate that communities will continue to find the

BCRLF funds attractive when combined with other public and private resources.

Most importantly however, the new legislation signed by President Bush on January 11, 2002, the Small Business Liability and Brownfields Revitalization Act, provided significant relief to the program from its current regulatory burdens. The new

Act provides that the EPA may determine which specific provisions of the Superfund National Contingency Plan are applicable to the brownfields program and thus

use only provisions which are needed in implementing the program. EPA’s Legislative Implementation work group is developing a transition guidance to outline the

requirements of the new law. This will assist grant recipients in determining whether to choose to take advantage of the new statutory provisions. We anticipate that

many grant recipients will take advantage of the new statutory provisions and a

substantial increase in loans and/or cleanup subgrants will result from the transition.

BROWNFIELDS: INCREASE IN FUNDING FOR FISCAL YEAR 2003

Question. How will the large increase in funding for fiscal year 2003 be used effectively?

Answer. Increased funding will be focused upon several significant areas. These

areas include increasing the number of grants, and supplemental funding for existing grantees for assessment and brownfields cleanup revolving loan funds. New

grant categories are also created by the legislation including direct and indirect

grants for cleanup and funding for assessment and cleanup of petroleum-contaminated properties. In addition, funding to the fully authorized ceiling has been requested for State and tribal response programs.

ROLES AND RESPONSIBILITIES OF EPA’S REGIONAL OFFICES: WORKFORCE ANALYSIS AND

PROJECTIONS

Question. Different regions do their jobs in different ways, in terms of the levels

of effort they apply to enforcement actions, technical compliance assistance, community outreach efforts, and so forth. OMB has asked all agencies, including EPA, to

provide workforce statistics now and as they would see their workforces changing

over the next 5 years. What is the status of EPA’s workforce analysis for OMB, and

what do the workforce projections show?
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Answer. The Agency submitted the Workforce Analysis to OMB on June 29, 2001

in response to OMB Bulletin 01–07. Projections included in that report show a

changing workforce in age and other demographics. By 2005, 25.6 percent of the

workforce will be eligible for voluntary, FERS 10-year, or Law Enforcement Officer

retirement.

ROLES AND RESPONSIBILITIES OF EPA’S REGIONAL OFFICES: ANALYSIS PERFORMED TO

DETERMINE SIZE OF REGIONAL OFFICES

Question. Has EPA performed an analysis to determine the appropriate size of the

regional offices? If not, will such an analysis be done?

Answer. The Agency has not completed an analysis to determine the appropriate

size of regional offices, and does not plan such a specific study. However, EPA is

undertaking an Agency study to determine the competencies necessary to meet mission needs in the future which may in turn have organizational impacts. The resultant workforce planning system from this study is to be available for EPA line manager’s use second quarter of fiscal year 2004.

ROLES AND RESPONSIBILITIES OF EPA’S REGIONAL OFFICES:

Question. Has or will the issue of different regional approaches to carrying out

EPA’s responsibilities be addressed?

Answer. The Agency has not completed an analysis of various regional approaches. The Agency will, however, continue to examine how to best perform EPA’s

responsibilities.

QUESTIONS SUBMITTED BY SENATOR CHRISTOPHER S. BOND

COMPLIANCE ASSISTANCE: LIST OF RULES FOR DEVELOPING COMPLIANCE ASSISTANCE

TOOLS

Question. List the rules currently considered economically significant for the purposes of developing compliance assistance tools? Provide the rule finalization date

and the status of any tools development for rules finalized or to be finalized by December 2002.

Answer. EPA develops compliance assistance tools for rules that have an economic

impact of $100 million or more on companies and/or government facilities or other

rules, as appropriate. EPA also develops compliance tools for rules that have a significant economic impact on a substantial number of small entities as defined under

the Small Business Regulatory Enforcement Fairness Act.

The potential universe of regulations for which compliance guides may be developed is continually changing based on changes to specific provisions of a regulation

and subsequent economic analysis. Also, changes in rule finalization dates alter the

compliance tool schedule. Extensions in developing compliance tools are allowed because of factors such as resource constraints, providing for greater stakeholder involvement, or demands of other work.

For the purposes of this response, Attachment A contains information, as of May

22, 2002, on the three economically significant rules finalized or expected to be finalized by December 2002.

COMPLIANCE ASSISTANCE—LIST OF RULES FOR DEVELOPING COMPLIANCE ASSISTANCE TOOLS

Regulation Projected/Actual Final Publication Date

Projected/Actual Compliance Tool Completion Date Estimated Compliance Tool Cost

Office of Air and Radiation:

Emissions from Nonroad SparkIgnition Engines and Standards for Recreational Spark

Engines (Contact: A. Stout,

734–214–4805).

September 2002 .......... December 2002 ............ Uncertain 1

Office of Prevention, Pesticides and

Toxic Substances:

Groundwater and Pesticides Management and Plan Rule (Contact: A. Williams, 703–305–

5239).

September 2002 2 ........ December 2002 ............ Not Applicable. See Note 2
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COMPLIANCE ASSISTANCE—LIST OF RULES FOR DEVELOPING COMPLIANCE ASSISTANCE TOOLS—

Continued

Regulation Projected/Actual Final Publication Date

Projected/Actual Compliance Tool Completion Date Estimated Compliance Tool Cost

Office of Water:

National Primary Drinking Water

Regulations: Arsenic and Clarifications to Compliance and

New Source Containment Monitoring (Contact: A. Bielanski,

202–564–3824).

January 2001 ............... June 2002 .................... $52,000

1 EPA will work with the regulated community to develop the appropriate compliance assistance tool. EPA expects to use in-house resources

to complete the tool. 2 The Projected Final Publication date is delayed until the end of fiscal year 2002. The delay is allowing EPA to explore potential modifications to the proposed final regulation to address issues raised by the regulated community and co-regulators.

COMPLIANCE ASSISTANCE: ESTIMATE OF COST TO DEVELOP COMPLIANCE ASSISTANCE

TOOLS

Question. Provide an estimate of the cost of developing compliance assistance tools

for each economically significant rule finalized or to be finalized in 2002?

Answer. The costs associated with developing compliance assistance tools for economically significant rules vary significantly. Cost variations are based on the type

of technical issues associated with the substantive requirements of a rule, the degree of experience that the regulated community has in dealing with environmental

rules, and the diversity of the regulated community (e.g., need for bilingual assistance materials). In addition, cost variations arise because of the multiple ways in

which information exchanges occur with the regulated community, including faceto-face training and delivery of information via computer-based technology. Cost

variations are also associated with whether EPA develops a compliance guide within

the agency or uses contractor assistance to develop the guide. Attachment A contains information on the cost associated with each completed compliance guide for

economically significant rules or estimated costs for upcoming compliance guides.

COMPLIANCE ASSISTANCE—ESTIMATE OF COST TO DEVELOP COMPLIANCE ASSISTANCE TOOLS

Regulation Projected/Actual Final Publication Date

Projected/Actual Compliance Tool Completion Date Estimated Compliance Tool Cost

Office of Air and Radiation:

Emissions from Nonroad SparkIgnition Engines and Standards for Recreational Spark

Engines (Contact: A. Stout,

734–214–4805).

September 2002 .......... December 2002 ............ Uncertain 1

Office of Prevention, Pesticides and

Toxic Substances:

Groundwater and Pesticides Management and Plan Rule (Contact: A. Williams, 703–305–

5239).

September 2002 .......... December 2002 ............ Not Applicable. See Note 2

Office of Water:

National Primary Drinking Water

Regulations: Arsenic and Clarifications to Compliance and

New Source Containment Monitoring (Contact: A. Bielanski,

202–564–3824).

January 2001 ............... June 2002 .................... $52,000

1 EPA will work with the regulated community to develop the appropriate compliance assistance tool. EPA expects to use in-house resources

to complete the tool. 2 The Projected Final Publication date is delayed until the end of fiscal year 2002. The delay is allowing EPA to explore potential modifications to the proposed final regulation to address issues raised by the regulated community and co-regulators.

COMPLIANCE ASSISTANCE: RANKING OF TOP TEN COMPLIANCE ASSISTANCE NEEDS

Question. Provide a ranking of the top 10 compliance assistance needs and identify the criteria used for the ranking such as risk of environmental damage or susceptibility of the problem to compliance assistance techniques.
237

Answer. EPA integrates compliance assistance as appropriate when addressing

national enforcement and compliance assurance priorities, newly promulgated regulations, and special needs of specific industry sectors. OECA has also developed

guidelines for staff to use in reviewing the regulatory agenda to determine whether

new or upcoming rules would be good candidates for compliance assistance. Attachment A contains these guidelines for determining rules which are good candidates

for compliance assistance.

National priorities are environmental risks or noncompliance patterns that can

often be addressed using compliance assistance in combination with compliance incentives, inspections and investigations, and enforcement actions. Decisions about

whether to use assistance to address specific national priorities are based on the nature and complexity of the regulatory requirement, the compliance history of the industry sector(s) to which the requirement applies, the capacity of the sector to receive and utilize assistance, and whether assistance can be effective (by itself or in

combination with other tools) in increasing compliance or reducing risks associated

with a specific priority.

Compliance assistance needs are also identified through consultation with industry sectors about the compliance challenges confronting these sectors. This consultation can result in development of tailored compliance guides and creation of sectorbased online compliance assistance centers.

GUIDELINES FOR SCREENING NEW RULES FOR COMPLIANCE ASSISTANCE

Screening Guidance

As you are reviewing the list of Tier I, Tier II and Tier III proposed rules, consider the following factors in determining whether the proposed regulations are good

candidates for compliance assistance.

Compliance Assistance Required

Is the rule an ‘‘economically significant rule?’’ (impact of 100M or more on regulated community. See RFA (Regulatory Flexibility Act)/SBREFA tracking report in

RAPIDS (Rule and policy Information Development System) or the Rule Tiering

Forms.)

—Compliance guide, fact sheet or expert system required by Aiming for Excellence Report

Is the rule a ‘‘SBREFA rule?’’ (rule has a significant impact on substantial number of small entities. See RFA/SBREFA tracking report in RAPIDS or Rule Tiering

Forms)

—Compliance guide required under Small Business Regulatory Enforcement Fairness Act (SBREFA))

Possible Candidate for Compliance Assistance

Does the rule impact a sector with a large number of small businesses who may

lack the resources/ability to obtain compliance assistance on their own? (See RAPIDS for list of rules that impact small businesses but don’t meet SBREFA threshold

or check SBA guidance on definition of small business)

—May be candidate for compliance assistance

Does the proposed rule impact a larger number of entities with varying degrees

of prior regulatory experience and access to compliance assistance resources?

—May be candidate for compliance assistance

Does the proposed rule embody new or novel concepts to which existing compliance assistance concepts or activities are inappropriate or ineffective?

—May be candidate for compliance assistance

Is the regulated community willing and able to assist EPA in developing compliance assistance tools?

—May be candidate for compliance assistance

Is the sector(s) impacted by the proposed rule on the ‘‘emerging sector’’ list?

—May be a candidate for compliance assistance

Does the rule address an Agency initiative, priority in the Strategic Plan or OECA

or program office MOA priority?

—May be a candidate for compliance assistance

Less Likely Candidate for Compliance Assistance

Is the proposed rule concise and easily understood by the regulated community?

Does it mirror existing, familiar regulatory approaches that apply to the same regulated community?

—Compliance assistance may not be needed
238

Does the proposed rule impact a small number of regulated entities that are reasonably expected to be familiar with the regulatory environment and/or have access

to existing compliance assistance resources?

—Compliance assistance may not be needed

Does a large proportion of the industry sector(s) affected by the rule belong to a

trade association?

—Compliance assistance may not be needed

COMPLIANCE ASSISTANCE: ACTIVITY PLAN

Question. Describe how does the Compliance Assistance Activity Plan direct EPA

actions and resources to meet these priority needs?

Answer. The Compliance Assistance Activity Plan is helpful in guiding EPA toward the best opportunities for using compliance assistance. The Plan reflects EPA’s

continuing efforts to better identify the priority needs for compliance assistance, improve the process for obtaining stakeholder input, engage in dialogue on how best

to meet the identified needs, and provide guidance on how to direct resources to the

highest priority needs.

COMPLIANCE ASSISTANCE: ANALYSIS OF NEW REGULATORY REQUIREMENTS AND

COMPLIANCE ASSISTANCE TOOLS IN FISCAL YEAR 2003

Question. In fiscal year 2003, how will EPA comprehensively analyze its upcoming

new regulatory requirements and determine the compliance assistance tools most

likely to help bring about compliance with those requirements?

Answer. EPA will continue to utilize the mechanisms developed in prior years for

determining needed compliance assistance tools to address upcoming regulatory requirements. One mechanism EPA uses for continuing the compliance assistance

needs discussions with its partners is the National Compliance Assistance Forum.

Discussions and information provided at the Forum have been used to identify compliance assistance needs and provide input on EPA’s National Compliance Assistance Activity Clearinghouse (Clearinghouse) and the Annual Compliance Assistance

Activity Plan. Another vehicle for assessing compliance assistance needs comes from

EPA’s work with the Compliance Assistance Advisory Committee (CAAC) which is

a component of the National Advisory Council for Environmental Policy and Technology (NACEPT). These efforts not only support the development of compliance assistance tools, but they also provide a forum to assess the effectiveness of EPA’s

compliance assistance efforts. Through all of these activities EPA is comprehensively analyzing forthcoming regulatory requirements to identify which are best

suited to compliance assistance.

Based on discussions with stakeholders, EPA has also decided to identify, through

the rule development process, rules that have an ‘‘economically significant’’ impact

on the regulated community, defined as $100 million or more, and EPA may develop

compliance guides for those rules as appropriate. Similarly, as mandated by the

Small Business Regulatory Enforcement Fairness Act (SBREFA), based on the regulatory flexibility analysis conducted early in the rule development process, EPA develops plain English compliance assistance guides for all SBREFA rules. OECA has

also developed guidelines for staff to use in reviewing the Regulatory Agenda to assess whether regulations would be good candidates for compliance assistance. Attachment A contains these guidelines for identifying compliance assistance candidates.

GUIDELINES FOR SCREENING NEW RULES FOR COMPLIANCE ASSISTANCE

Screening Guidance

As you are reviewing the list of Tier I, Tier II and Tier III proposed rules, consider the following factors in determining whether the proposed regulations are good

candidates for compliance assistance.

Compliance Assistance Required

Is the rule an ‘‘economically significant rule?’’ (impact of 100M or more on regulated community. See RFA (Regulatory Flexibility Act)/SBREFA tracking report in

RAPIDS (Rule and policy Information Development System) or the Rule Tiering

Forms.)

—Compliance guide, fact sheet or expert system required by Aiming for Excellence Report

Is the rule a ‘‘SBREFA rule?’’ (rule has a significant impact on substantial number of small entities. See RFA/SBREFA tracking report in RAPIDS or Rule Tiering

Forms)
239

—Compliance guide required under Small Business Regulatory Enforcement Fairness Act (SBREFA))

Possible Candidate for Compliance Assistance

Does the rule impact a sector with a large number of small businesses who may

lack the resources/ability to obtain compliance assistance on their own? (See RAPIDS for list of rules that impact small businesses but don’t meet SBREFA threshold

or check SBA guidance on definition of small business)

—May be candidate for compliance assistance

Does the proposed rule impact a larger number of entities with varying degrees

of prior regulatory experience and access to compliance assistance resources?

—May be candidate for compliance assistance

Does the proposed rule embody new or novel concepts to which existing compliance assistance concepts or activities are inappropriate or ineffective?

—May be candidate for compliance assistance

Is the regulated community willing and able to assist EPA in developing compliance assistance tools?

—May be candidate for compliance assistance

Is the sector(s) impacted by the proposed rule on the ‘‘emerging sector’’ list?

—May be a candidate for compliance assistance

Does the rule address an Agency initiative, priority in the Strategic Plan or OECA

or program office MOA priority?

—May be a candidate for compliance assistance

Less Likely Candidate for Compliance Assistance

Is the proposed rule concise and easily understood by the regulated community?

Does it mirror existing, familiar regulatory approaches that apply to the same regulated community?

—Compliance assistance may not be needed

Does the proposed rule impact a small number of regulated entities that are reasonably expected to be familiar with the regulatory environment and/or have access

to existing compliance assistance resources?

—Compliance assistance may not be needed

Does a large proportion of the industry sector(s) affected by the rule belong to a

trade association?

—Compliance assistance may not be needed

COMPLIANCE ASSISTANCE: ANALYSIS OF PROSPECTIVE ENFORCEMENT ACTIVITIES IN

FISCAL YEAR 2003

Question. In fiscal year 2003, how will EPA analyze its prospective enforcement

activities to determine where compliance assistance might fill the gaps where the

enforcement program does not currently reach?

Answer. EPA will continue to use a problem-solving approach that applies integrated strategies tailored to address specific environmental risks and noncompliance

patterns. For some of these problems a period of assistance designed to increase

compliance is the best approach. For other problems, assistance combined with incentives for self-policing works best. In other instances, bringing enforcement actions can be used as a tool with compliance assistance. Assistance will be used with

inspections, incentive policies, and enforcement actions in combinations appropriate

to the problem.

COMPLIANCE ASSISTANCE: DOCUMENTING AND MEASURING ENVIRONMENTAL

IMPROVEMENTS

Question. How is EPA documenting and measuring environmental improvements

from compliance assistance activities? Provide the results of these efforts.

Answer. EPA is advancing management of environmental improvements from its

compliance assistance activities through tracking of outcomes from specific compliance assistance initiatives, surveys of compliance assistance recipients, and by providing grants to states for measurement of assistance outcomes. Beginning in fiscal

year 2003, all regional offices are being required to report on the outcomes of compliance assistance projects. These results will be compiled in a national database

and analyzed to learn more about the results of assistance. The database will capture outcome measures in three broad areas: (1) understanding of regulatory requirements; (2) changes within the regulatory community to improve environmental

performance; and, (3) direct reduction of emissions/discharges.

In 2001, the Compliance Assistance Centers conducted a survey of their users.

Ninety percent of the regulated survey respondents reported the Centers helped

them understand applicable environmental requirements. Survey respondents indi-
240

cate that Center information is well used. In fact, 73 percent of the regulated entity

respondents took one or more actions as a result of Center use. Actions ranged from

contacting a regulatory agency, changing a process or practice, to conducting a self

audit. Additionally, 69 percent of the survey respondents indicated a cost savings

from actions taken as a result of using a Center. Furthermore, 85 percent of respondents indicated an environmental improvement from actions taken as a result

of using a Center. In addition to the survey results, annual usage of the Centers

by the target audience has increased three fold since 1998.

To encourage State programs to measure compliance assistance outcomes EPA has awarded approximately $2.3 million in grants to states in the last 2 years. A

limited amount of funds are available in fiscal year 2002 for this purpose.

COMPLIANCE ASSISTANCE: STATUS OF TOTAL RESOURCES DEVOTED TO COMPLIANCE

ASSISTANCE

Question. What is the status of EPA’s efforts to determine total resources devoted

across the agency to compliance assistance activities?

Answer. EPA has completed its efforts to determine total resources devoted across

the agency to compliance assistance programs. A Compliance Assistance key program was created to track planned resources and FTE for this activity across the

Agency.

COMPLIANCE ASSISTANCE: COMPLIANCE ASSISTANCE ANALYSIS IN ANALYTIC BLUEPRINT

FOR NEW REGULATIONS IN FISCAL YEAR 2003

Question. In fiscal year 2003, how will EPA ensure that the analytic blueprint for

each new regulation includes a compliance assistance analysis?

Answer. Pursuant to the Small Business Regulatory Enforcement Fairness Act

(SBREFA), EPA has committed to develop compliance guides for Federal regulations

that have a ‘‘significant economic impact on a substantial number of small entities.’’

The Agency also develops either a compliance guide or a self-audit checklist for Federal regulations with an ‘‘economically significant’’ impact of $100 million or more

on companies and/or government facilities. As of April 5, 2002, there are seven rules

for which EPA expects to develop a guide or checklist in calendar year 2002.

Further, Agency guidance requires program offices responsible for ‘‘Tier 1 and

Tier 2’’ regulatory actions (i.e., those that require participation of the Administrator’s office and those that need cross-media or Assistant Administrator-level involvement) to develop an ‘‘analytic blueprint’’ as an initial step in the regulatory development process. An analytic blueprint is a plan for development of the rule. It identifies the significant issues in the rule and discusses the methodologies that will be

used to resolve them. This includes the economic, scientific, technical and intergovernmental information that will be developed; the analyses that are required by law

and Executive Order; and, the significant policy issues, including implementation

issues, that need to be addressed.

An Agency-wide Task Force on the EPA Regulatory Development Process has reaffirmed the importance of preparing an analytic blueprint. EPA is updating its internal guidance on the preparation of an analytic blueprint, a process which is

scheduled to be completed this year. The revised guidance will address implementation issues such as whether the proposed rule will likely require the preparation of

a compliance guide or whether other types of compliance assistance tools should be

developed.

The analytic blueprint is prepared by the lead Program Office for the rule. As a

result of the Task Force recommendations, EPA’s Office of Enforcement and Compliance Assurance (OECA) now has the opportunity to review blueprints for, among

other things, the analysis of compliance assistance opportunities.

COMPLIANCE ASSISTANCE: RESOURCES FOR IMPLEMENTATION AND PERFORMANCE AND

ASSESSMENTS

Question. In fiscal year 2003, how will EPA ensure that each rulemaking working

group performs an assessment of the compliance assistance needs associated with

the various regulatory options, including an assessment of the resources needed for

implementation?

Answer. EPA examines the need for compliance assistance through several different mechanisms throughout the rule development process. The Small Business

Regulatory Enforcement Fairness Act (SBREFA) requires EPA to develop compliance guides for Federal regulations that have a ‘‘significant economic impact on a

substantial number of small entities.’’ The Agency also has decided to prepare either

a compliance guide or a self-audit checklist for Federal regulations with an ‘‘economically significant’’ impact of $100M or more on companies and/or government fa-
241

cilities. The Agency’s ‘‘1999 Revised Interim Guidance for EPA Rulewriters: Regulatory Flexibility Act as Amended by the Small Business Regulatory Enforcement

Fairness Act,’’ directs regulatory workgroups to begin developing compliance assistance guides as early in the process as there is enough information to do so, with

a goal to publish the guides within 2 months of promulgation of the rules. This

helps ensure timely consideration of resources necessary to implement the guide.

The guidance further states that ‘‘[i]t remains EPA policy that program offices

should assess the direct impact of every rule on small entities and minimize any

adverse impact to the extent feasible, regardless of the magnitude of the impact or

number of small entities affected.’’

In addition, the recent Agency-wide Task Force report on the EPA Regulatory Development Process mandates that EPA improve consideration of implementation

issues, including the provision of compliance guides, throughout the regulatory development process. This report reaffirms the importance of preparing an analytic

blueprint for ‘‘Tier 1 and Tier 2’’ regulatory actions (i.e., those that require participation of the Administrator’s office and those that need cross-media or Assistant Administrator-level involvement). An analytic blueprint is a plan for development of

the rule. It identifies the significant issues in the rule and discusses the methodologies that will be used to resolve them. This includes the economic, scientific, technical and intergovernmental information that will be developed; the analyses that

are required by law and Executive Order; and, the significant policy issues, including implementation issues, that need to be addressed. Revised Agency guidance on

the analytic blueprint is scheduled for completion this year. The revised guidance

will address implementation issues such as whether the proposed rule will likely require the preparation of a compliance guide or whether other types of compliance

assistance tools should be developed and the resources necessary to provide that assistance.

COMPLIANCE ASSISTANCE: TARGETING COMPLIANCE ASSISTANCE TO CONSTITUENCIES IN

FISCAL YEAR 2003

Question. In fiscal year 2003, how will EPA better target compliance assistance

to constituencies which have not traditionally participated in compliance assistance

activities?

Answer. EPA is taking numerous steps to draw more diverse constituents into

compliance assistance activities. In particular, EPA is soliciting more input from our

stakeholders. The Office of Enforcement and Compliance Assurance (OECA) sponsors the Compliance Assistance Advisory Committee (CAAC), a multi-stakeholder

working group of the National Advisory Council for Environmental Policy and Technology to provide input and guidance into the national compliance assistance program. OECA also broadly solicits input into its compliance assurance priorities by

holding stakeholder meetings and issuing a Federal Register Notice prior to its selection of priorities. EPA also seeks out new constituents through the annual Compliance Assistance Providers Forum which brings together an array of compliance

and environmental assistance providers and industry to collaborate and identify

compliance assistance priorities.

COMPLIANCE ASSISTANCE: DOLLARS AND FTE FOR COMPLIANCE ASSISTANCE ACTIVITIES

WITHIN AND OUTSIDE OF OECA

Question. Provide the dollars and FTE for compliance assistance activities, within

and outside OECA. In meeting this request, provide resource levels from the fiscal

year 2002 enacted, fiscal year 2002 actuals, and fiscal year 2003 request. Organize

the information by Appropriation, Office or Region, and Activity.

Answer. Provided below are resource and FTE for Agency-wide compliance assistance activities from the enacted fiscal year 2002 operating plan and the fiscal year

2003 President’s request by Appropriation and Office. The Agency does not track

key programs, including Compliance Assistance, by Activity or by actual obligations.

Appropriation/Office

Fiscal year

2002 Enacted Op Plan 2003 President’s Budget

EPM ......................................................................................................... $60,376.3/465.9 FTE $60,579.2/455.1 FTE

Office of Air and Radiation ........................................................... 1,003.4/5.2 FTE 1,005.6/5.2 FTE

Office of Water ............................................................................... 23,940.7/161.2 FTE 24,684.8/162.3 FTE

Office and Pesticides & Toxic Sub. ............................................... 1,257.2/0.0 FTE 1,257.0/0.0 FTE

Office of Solid Waste/Emerg. Resp. .............................................. 7,168.3/75.0 FTE 7,168.3/75.0 FTE

Office of Enforcement & Compliance Assistance ......................... 25,706.7/206.1 FTE 25,103.5/194.2 FTE

Office of the Administrator ............................................................ 1,300.0/18.4 FTE 1,300.0/18.4 FTE
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Appropriation/Office

Fiscal year

2002 Enacted Op Plan 2003 President’s Budget

S & T ....................................................................................................... $5,340.6/54.0 FTE $6,315.0/54.0 FTE

Office of Air and Radiation ........................................................... 5,340.6/54.0 FTE 6,315.0/54.0 FTE

STAG ........................................................................................................ $2,459.3/0.0 FTE $2,459.3/0.0 FTE

Office and Pesticides & Toxic Sub. ............................................... 250.0/0.0 FTE 250.0/0.0 FTE

Office of Enforcement and Compliance Assurance ....................... 2,209.3/0.0 FTE 2,209.3/0.0 FTE

LUST ........................................................................................................ $670.0/5.5 FTE $689.8/5.5 FTE

Office of Enforcement and Compliance Assurance ....................... 670.0/5.5 FTE 689.8/5.5 FTE

OIL ........................................................................................................... $264.8/1.8 FTE $271.4/1.8 FTE

Office of Enforcement and Compliance Assurance ....................... 264.8/1.8 FTE 271.4/1.8 FTE

TOTAL ......................................................................................... 69,111.0/527.2 FTE 70,314.7/516.4 FTE

COMPLIANCE ASSISTANCE: CUTS PROPOSED BY FISCAL YEAR 2003—PRESIDENT’S BUDGET

FOR COMPLIANCE ASSISTANCE AND CENTERS KEY PROGRAM

Question. Provide a detailed explanation of the cuts proposed in the fiscal year

2003 President’s Budget for the Compliance Assistance and Centers key program.

Answer. In fiscal year 2003, EPA is requesting a total of $26,067,900 and 201.5

workyears for the Compliance Assistance and Centers key program. This represents

a total reduction of 11.9 workyears and $602,300 from fiscal year 2002. This reduction is part of the Agency’s efforts to redirect resources from Federal to State enforcement and compliance programs. The Office of Enforcement and Compliance Assurance (OECA) will reduce development of guidance and policies, and assistance

tools by about 3 FTE. The remaining 9 FTE reduces general assistance provided to

the regulated community. We expect that the states will use their increased funding

to increase the assistance provided to the regulated community on the environmental programs delegated to their states.

ENFORCEMENT: FTE CEILING AND ON-BOARD LEVELS AS OF OCTOBER 1, JANUARY 1,

MARCH 1, AND JULY 1 FOR OECA

Question. Provide the FTE ceiling and on-board levels as of October 1, January

1, March 1, and July 1 in each of the last 3 years for OECA, the Office of Regulatory

Enforcement, the Office of Compliance, and the Office of Criminal Enforcement,

Forensics, and Training.

Answer. The following tables provide the FTE and on-board levels for the Office

of Enforcement and Compliance Assurance (OECA), Office of Regulatory Enforcement, Office of Compliance, and the Office of Criminal Enforcement, Forensics, and

Training. The workyear ceiling is allocated at the beginning of the fiscal year and

did not change during the year. The on-board levels reflect the total number of full

and part time employees at the beginning of the pay period close to the dates listed

below. It is important to note that the Office of Regulatory Enforcement, Office of

Compliance, and the Office of Criminal Enforcement, Forensics, and Training include headquarters FTE only. Regional and headquarters FTE are included in the

OECA chart.

OFFICE OF ENFORCEMENT AND COMPLIANCE ASSURANCE (OECA)

Fiscal year FTE

On-Board Employees

Oct 1 Jan 1 March 1 July 1

1999 ................................................. 3,645.6 3,060 3,380 3,368 3,463

2000 ................................................. 3,565.0 3,505 3,449 3,459 3,463

2001 ................................................. 3,536.8 3,404 3,411 3,401 3,420

2002 ................................................. 1 3,456.8 3,383 3,304 3,303 3,335

(May 17)

2003 ................................................. 3,311.3

1 Fiscal year 2002 includes 50.0 FTE from the emergency supplemental for Homeland Security.
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OFFICE OF REGULATORY ENFORCEMENT (ORE)

Fiscal year FTE

On-Board Employees

Oct 1 Jan 1 March 1 July 1

1999 ................................................. 148.1 150 151 151 148

2000 ................................................. 138.9 147 146 145 142

2001 ................................................. 143.5 141 140 143 145

2002 ................................................. 136.8 144 144 144 145

(May 17)

2003 ................................................. 127.8

OFFICE OF COMPLIANCE (OC)

Fiscal year FTE

On-Board Employees

Oct 1 Jan 1 March 1 July 1

1999 ................................................. 168.0 169 167 170 173

2000 ................................................. 158.7 171 170 166 158

2001 ................................................. 155.9 158 151 148 144

2002 ................................................. 145.5 145 145 146 148

(May 17)

2003 ................................................. 135.5

OFFICE OF CRIMINAL ENFORCEMENT, FORENSICS, AND TRAINING (OCEFT)

Fiscal year FTE

On-Board Employees

Oct 1 Jan 1 March 1 July 1

1999 ................................................. 394.4 404 401 399 399

2000 ................................................. 386.1 390 384 379 370

2001 ................................................. 385.8 364 360 361 360

2002 ................................................. 1 454.3 361 363 367 397

(May 17)

2003 ................................................. 399.8

1 Includes 50.0 FTE from emergency supplemental for Homeland Security.

ENFORCEMENT: FEDERAL INSPECTIONS TO AREAS THAT POSE GREATEST RISK TO HUMAN

HEALTH OR THE ENVIRONMENT IN FISCAL YEAR 2003

Question. In fiscal year 2003, how will EPA target Federal inspections to the

areas that pose the greatest risk to human health or the environment? Discuss the

technical tools as well as management attention necessary to ensure inspections

focus on the greatest risks to human health or the environment.

Answer. EPA targets Federal inspections for three elements of the national enforcement and compliance assurance program: national priorities, core program

areas, and special initiatives.

National priorities are selected as a result of reviewing Agency compliance data

systems, feedback from field inspectors, discussions with EPA program offices and

State environmental agencies, and comments from external stakeholders. Through

this process EPA selects the most important environmental risks and noncompliance

patterns. In developing strategies for each of these priorities EPA determines the

need for inspections and investigations that will help reduce risks and improve compliance. The priorities for fiscal year 2003 are:

—Clean Water Act—Wet Weather

—Safe Drinking Water ActMicrobial Rules

—Clean Air Act—New Source Review/Prevention of Significant

—Deterioration

—Clean Air Act—Air Toxics

—Resource Conservation and Recovery Act (RCRA)—Permit Evaders

—Petroleum Refining

Core program areas under the 14 Federal laws for which EPA has enforcement

authority also receive inspection coverage as part of EPA’s national enforcement and

compliance assurance program. For example, EPA conducts inspections under the
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Clean Air Act and Clean Water Act to ensure an appropriate level of compliance

monitoring for basic provisions of these laws.

Inspections are also conducted as part of special initiatives that EPA develops to

address specific risks or noncompliance patterns associated with economic sectors,

geographic areas, pollutants, or particular regulatory requirements. These initiatives are sometimes developed using tools such as the On-line Targeting System

(OTIS), a multi-media database that contains information on approximately one million facilities nationwide. This internal database contains information such as basic

facility and permit data, Federal and State enforcement and compliance data (inspections, enforcement actions, significant violations), environmental justice data,

and pollutant release information. The data base can be accessed by EPA and State

employees, and it helps inspectors identify facilities that consistently pose a threat

to human health and the environment by allowing them to review patterns of noncompliance and pollutant emissions by industry sector and geographic location.

ENFORCEMENT: CIVIL ENFORCEMENT ACTIVITIES TO AREAS THAT POSE THE GREATEST

RISK TO HUMAN HEALTH OR THE ENVIRONMENT IN FISCAL YEAR 2003

Question. In fiscal year 2003, how will EPA target its civil enforcement activities

to areas that pose the greatest risk to human health or the environment? Discuss

specifically the role of OECA management in ensuring that OECA civil enforcement

efforts remain focused on the greatest risks to human health or the environment.

Answer. For fiscal year 2002/2003, OECA management collaborated with the

Headquarters’ Program Offices, Regional offices, and State and Tribal agencies in

developing national priorities, as delineated in the Office of Enforcement and Compliance Assurance’s Memorandum of Agreement (MOA) 2002/2003 guidance. National priorities are selected for a two year cycle. In selecting the national priorities

for fiscal year 2002/2003, stakeholders were asked to consider three criteria in their

decision making. These three criteria were: (1) risk reduction—program areas or

sectors where significant reductions in risks to human health or the environment

may be made through concerted Federal attention; (2) noncompliance—consistent

patterns of noncompliance in particular programs or sectors where concentrated

Federal effort will result in improvement; and, (3) EPA responsibility—identified

problem areas or programs that can better be addressed by EPA nationally due to

a lack of delegation or State capacity/performance issues.

The six priorities that the Agency selected for the fiscal year 2002/2003 MOA

cycle are:

—Clean Water Act—Wet Weather

—Safe Drinking Water Act—Microbial Rules

—Clean Air Act—New Source Review/Prevention of Significant

—Deterioration

—Clean Air Act—Air Toxics

—Resource Conservation and Recovery Act (RCRA)—Permit Evaders

—Petroleum Refining

In addition, much of the Agency’s core enforcement and compliance program focuses resources, through long standing enforcement response policies and program

guidance, on those violations that present the greatest risk to the environment and

human health. As directed by the OECA MOA guidance, each Region develops and

submits their MOA work plan each Fall to OECA. OECA management and staff review the activities in each of the Regional work plans to ensure that Regional work

supports the national priorities, thereby ensuring that the work of the Regions is

focused on the greatest risks to human health or the environment. Division Directors in OECA must concur on each Region’s final MOA workplan.

ENFORCEMENT: EPA’S INHERENT CONFLICT BETWEEN DESIRE TO MEET INSPECTION AND

CASE OUTPUT PERFORMANCE GOALS AND STRATEGIES

Question. Given that in certain circumstances or sectors regulatory or non-enforcement initiatives or incentives may produce greater benefits to the environment or

reductions in pollution than traditional enforcement actions, how will OECA avoid

the inherent conflict between its desire to meet inspection and case output performance goals and strategies which may prove more beneficial to the environment?

Answer. EPA takes a problem-solving approach to identifying environmental problems and devising the best strategies to deal with them, focusing on the most effective and efficient ways to use our resources to achieve the best possible environmental results. EPA uses an integrated approach to strategically mix our available

tools incentives, compliance assistance, inspections, investigations, settlements in a

manner targeted and tailored to particular problems and situations, to produce the

most benefit to the public and the environment.
245

One example of a recent successful integrated approach is the Federal Lead Paint

Program, in which EPA identified the significant environmental and public health

problem of childhood lead poisoning (48 million homes contain lead-based paint and

nearly 890,000 children have elevated lead levels) and partnered with states and

HUD to implement a solution in cities across the nation. The strategy uses a mix

of tools including dedicated compliance assistance, audit incentives, and focused enforcement to combat the problem.

Specifically, EPA has partnered with State and local agencies to deliver compliance assistance by providing members of the real estate community with compliance

assistance packages, sample disclosure forms and information on how to achieve

compliance. We have conducted seminars for local State and real estate associations

and provided mailings and TV/radio public service announcements. EPA and HUD

have taken advantage of the existing framework of EPA’s Audit Policy, which allows

the disclosure and correction of violations at a substantially reduced penalty, to

reach out to landlords in 11 cities across the nation and return them to compliance.

EPA, HUD and the Department of Justice have focused their enforcement actions

in four major cities Los Angeles, Chicago, New York, and the District of Columbia

on large management companies responsible for buildings which were covered by

the disclosure rule and had multiple incidents of children with elevated blood levels.

EPA sets annual performance goals for inspections, but not for cases. By setting

an annual goal for inspections EPA ensures a presence in the regulated universe,

and identifies violations that need to be corrected. There are no performance goals

set for cases, as this would establish a quota that might lead to less serious cases

taken for the sake of meeting an annual target.

ENFORCEMENT: PROCESS USED TO CHOOSE AND EMPLOY THE MOST EFFECTIVE

REGULATORY TOOL

Question. In fiscal year 2003, what process will EPA management use to choose

and employ the most effective regulatory tool in a given sector or circumstance—

albeit traditional enforcement by OECA, or other approach by OECA or another

EPA office including regulatory flexibility, compliance assistance or incentive—to

produce the greatest benefit to health of the environment?

Answer. The Office of Enforcement and Compliance Assurance (OECA) uses a

problem-solving approach to identify and address environmental risks and noncompliance patterns, and to devise the best ways to deal with them. OECA strategically combines our available tools compliance assistance, inspections and investigations, enforcement and innovative settlements using Supplemental Environmental

Projects, and incentives provided by the Agency’s self disclosure policies to achieve

the desired environmental results. OECA works with other EPA Program and Regional offices, states, the regulated community and public interest groups, as appropriate, to identify and analyze the cause of compliance problems and develop strategies integrating use of all appropriate compliance and enforcement tools to address

problems.

OECA currently has four efforts underway to improve and refine identification of

environmental problems and development of strategies to address them. First, a

pilot project is underway that has established a problem identification and analysis

team to review data bases and other information sources for noncompliance patterns. Second, an analysis of industry sectors is being conducted to determine

whether there are particular sectors with new or emerging compliance problems.

Third, a mechanism for gathering feedback more systematically from field inspectors is being developed to ensure that their experience informs the selection of national priorities and initiatives. Fourth, a work group of senior managers is currently reviewing ways to improve the development and implementation of strategies

that integrate assistance, inspections, incentives, and enforcement.

ENFORCEMENT: APPROPRIATE BALANCE, ROLES, AND RESPONSIBILITIES BETWEEN STATE

AND FEDERAL ENFORCEMENT AGENCIES

Question. What is the appropriate balance, roles and responsibilities between

State and Federal enforcement agencies?

Answer. Enforcement of environmental programs is done in cooperation with

states and Indian tribes. States have the primary authority for implementing and

enforcing most environmental programs through authorization or delegated authority from the EPA. The EPA’s Federal role is to implement and enforce programs

that cannot be delegated to States and Indian tribes, to handle more complex cases

involving multiple states or corporations with multiple facilities, to deal with issues

that require expertise or resources which only EPA can provide, and to enforce

when states are unable or unwilling to do so.
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ENFORCEMENT: IMPACT OF REDUCTION OF ENFORCEMENT FTES AND ADDITIONAL STATE

ENFORCEMENT RESOURCES ON ENFORCEMENT OUTPUT

Question. How will the proposed reduction of enforcement FTE and additional

State enforcement resources impact enforcement outputs—Federal, State and total?

Answer. We expect performance results in the national Enforcement and Compliance Assurance program to remain the same, with states picking up an additional

increment of that work. EPA and the states have different, but complementary roles

when it comes to enforcement of our Nation’s environmental laws. States have primary responsibility for implementing and enforcing most environmental programs

through delegated authority from the EPA. The EPA’s Federal role is to implement

and enforce programs that cannot be delegated to states, to handle more complex

cases involving multiple states or corporations with multiple facilities, to deal with

issues that require expertise or resources that only EPA can provide, and to enforce

when states are unable or unwilling to. Given the interplay between the State and

Federal programs, we believe the State and tribal enforcement grant program will

enhance both State and EPA efforts to increase compliance with environmental

laws.

States will be approved for grant funding only if their grant proposal includes specific plans to measure and report on their performance in achieving results. For example, for environmental risks or noncompliance patterns they are addressing with

the grant funds, states will need to define performance measures for determining

whether they are having an impact (e.g., pollution reductions, improved environmental practices at facilities or within an industry, increased compliance rates).

EPA will establish required reporting intervals for states to provide performance information which can be reviewed on a regular basis by EPA.

ENFORCEMENT: IMPACT OF REDUCTION OF ENFORCEMENT FTES AND ADDITIONAL STATE

ENFORCEMENT RESOURCES ON NATIONAL ENVIRONMENTAL INDICATORS

Question. How will the proposed reduction of Federal enforcement FTE and additional State enforcement resources impact national environmental indicators, such

as clean air and clean water?

Answer. National environmental indicators such as clean air and clean water are

affected by a number of factors such as land usage, stress from population, economic

and financial considerations, compliance rates, and the severity of violations. We expect that the proposed resource shift will result in a national level of enforcement

activity that is equal to or greater than baseline levels.

ENFORCEMENT: GEOGRAPHIC AREAS SUBJECT TO DECREASE IN FEDERAL ENFORCEMENT

FTE REALIZE INCREASE IN STATE ENFORCEMENT RESOURCES

Question. How will EPA ensure that geographic areas subject to a decrease in

Federal enforcement FTE personnel realize an increase in State enforcement resources?

Answer. The President’s fiscal year 2003 budget proposes a reduction of 100

workyears from EPA’s enforcement and compliance assurance program to help fund

the proposed State and tribal enforcement grant program. states will use the grant

funds to address important environmental risks and noncompliance patterns. In addition, the fiscal year 2003 budget provides EPA’s enforcement and compliance assurance program sufficient resources to carry out the appropriate Federal role, focusing on more complex cases involving multi-state or multi-facility corporations,

dealing with issues that require expertise or resources that only EPA can provide,

ensuring compliance with environmental programs that cannot be delegated to

states due to statutory prohibition, and to enforce when states are unable or unwilling to do so.

ENFORCEMENT: ACCEPTANCE OF MULTIPLE PROPOSALS FROM STATES FOR NEW

ENFORCEMENT GRANTS

Question. Will EPA accept multiple proposals from states for the $15 million in

new enforcement grants and thereby reward states which have the resources to submit numerous high quality proposals?

Answer. Based on feedback from states and tribes EPA will likely require a lead

agency within a State or tribe to submit a single, consolidated proposal. Agencies

other than the lead agency will remain eligible to receive grants funds if they are

included in the proposal.
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ENFORCEMENT: NEW ENFORCEMENT GRANT PROGRAM GRANTS AWARD TO STATES AND/

OR USED BY EPA

Question. Will states receive the entire $15 million from the new enforcement

grant program or will EPA use some of that money?

Answer. EPA will distribute the entire $15 million to states, tribes, and other eligible entities.

ENFORCEMENT: INFORMATION OBTAINED FROM STATES MEASURING OUTPUTS OR

OUTCOMES FROM USAGE OF NEW ENFORCEMENT GRANTS

Question. How will EPA obtain information from states measuring their outputs

and outcomes from usage of the new $15 million?

Answer. States will be approved for grant funding only if their grant proposal includes specific plans to measure and report on their performance in achieving results. For example, states will need to define performance measures for determining

whether they are having an impact on the environmental risk or noncompliance pattern they are addressing with the grant funds. EPA will establish required reporting

intervals for states to provide performance information that can be reviewed by EPA

on a regular basis.

ENFORCEMENT: DETERMINING IMPACT ON ENVIRONMENT BY ENFORCEMENT FTE CUTS

FROM INFORMATION FROM STATES

Question. Will the information EPA obtains from states on their use of the $15

million be sufficient for EPA to determine whether the environment was hurt by the

enforcement FTE cuts?

Answer. Information gathered from states and tribes on their use of grant funds

will allow the Agency determine the impact they are having on the environmental

problems they chose to address. In addition, EPA will continue oversight of State

enforcement programs, reviewing not just what is being achieved with grant funds,

but the overall performance of the enforcement program of each State.

EPA will continue to collect and analyze performance information about its own

programmatic outputs and outcomes to ensure we are focusing on important problems, and achieving the right results and outcomes. By monitoring the use of the

grant funds, providing oversight of State programs, and analyzing the performance

of the Federal enforcement effort, EPA believes it can provide a credible deterrent

to pollution while maximizing compliance.

ENFORCEMENT: VERIFICATION AND VALIDATION OF ACTUAL ACCOMPLISHMENTS FROM

ENFORCEMENT ACTIVITIES

Question. In fiscal year 2003, how will EPA verify and validate that actual accomplishments resulted from EPA activities?

Answer. EPA’s attorneys and technical staff analyze completed enforcement actions and report an estimated, predicted outcome in terms of reduced emissions, preventive management of potential pollutants, treatment of contaminated materials,

and industrial modifications. These estimates are produced using technical guidance

EPA revised and issued in fiscal year 2001. The guidance was developed in consultation with engineers, environmental management practitioners, and experienced environmental attorneys and administrators. EPA is currently completing detailed

training on this guidance in all of its regional offices and in headquarters, for hundreds of EPA staff. As a result of the guidance and training, EPA expects that there

will be an improvement in the quality of the estimates, and an increase in the number of concluded enforcement actions that report such estimates.

The Agency can and does, in conjunction with the Department of Justice and

under the supervision of the Courts, confirm that the terms of court imposed settlement agreements are adhered to by Defendants. Additionally, in a memorandum

dated February 8, 2001, EPA’s Office of Regulatory Enforcement and Office of Site

Remediation and Enforcement, in response to recommendations from the EPA’s Inspector General, reemphasized to regional offices that progress towards meeting the

terms of compliance in Federal judicial settlements must be monitored, documented

and tracked in a data system from which reports can be issued quarterly. This will

help ensure that EPA will monitor, and take further action if necessary, to ensure

required steps are taken to achieve the environmental progress required for compliance in orders and settlements.
248

GRANTS: NUMBER OF NON-PROFIT RECIPIENTS OF NON-CONSTRUCTION GRANT AWARDS

IN LAST THREE YEARS

Question. How many different non-profit recipients received non-construction

grant awards in each of the last 3 years?

Answer. EPA awarded grants to 846 different non-profit recipients in fiscal year

1999, 759 in fiscal year 2000, and 772 in fiscal year 2001.

GRANTS: DOLLARS OF NON-PROFIT RECIPIENTS OF NON-CONSTRUCTION GRANT AWARDS

IN LAST THREE YEARS

Question. How many dollars did the Agency award to non-profit recipients in nonconstruction grants in each of the last 3 years?

Answer. EPA awarded $249,983,517 to non-profit recipients in fiscal year 1999,

$264,898,545 in fiscal year 2000, and $349,978,246 in fiscal year 2001.

GRANTS: TOP TWENTY NON-PROFIT GRANT RECIPIENTS BY NUMBER OF AWARDS IN

FISCAL YEAR 2002

Question. List the top twenty non-profit EPA grant recipients by number of

awards in fiscal year 2002. Provide also the number of awards and total dollar

amount awarded.

Answer.

FISCAL YEAR 2001—TOP 20 NON-PROFIT GRANTEES BY NUMBER OF AWARDS

Number of

awards Amount

NATIONAL OLDER WORKER CAREER CENTER, WASHINGTON, DC ........................................... 75 $20,805,037

NATIONAL CAUCUS & CENTER ON BLACK AGED, WASHINGTON, DC ...................................... 74 10,285,948

NATIONAL SENIOR CITIZENS ED & RSCH CTR, SILVER SPRING, MD ...................................... 61 11,544,270

NATL ASIAN PACIFIC CENTER FOR AGING, SEATTLE, WA ........................................................ 48 6,330,332

NATIONAL ACADEMY OF SCIENCE, WASHINGTON, DC ............................................................. 36 6,816,253

THE ENVIRONMENTAL CAREERS ORGANIZATION, BOSTON, MA .............................................. 30 5,833,801

NATIONAL COUNCIL ON AGING, WASHINGTON, DC .................................................................. 28 4,415,772

NATIONAL ASSOCIATION FOR HISPANIC ELDE, PASADENA, CA ............................................... 24 5,700,429

INTERNATIONAL CITY/COUNTY MGMT. ASSOC., WASHINGTON, DC .......................................... 16 2,716,184

NORTHEAST STATES FOR COORDINATED AIR U, BOSTON, MA ................................................ 10 3,313,275

NATL CONFERENCE OF STATE LEGISLATURES, DENVER, CO .................................................. 9 749,532

ENVIRONMENTAL LAW INSTITUTE, WASHINGTON, DC .............................................................. 8 689,272

CENTER FOR CLEAN AIR POLICY, WASHINGTON, DC .............................................................. 8 1,055,224

NATIONAL ASSOCIATION OF COUNTIES, WASHINGTON, DC ..................................................... 8 870,300

INTER TRIBAL COUNCIL OF ARIZONA INC., PHOENIX, AZ ....................................................... 8 1,352,277

ENVIRONMENTAL COUNCIL OF THE STATES, WASHINGTON, DC .............................................. 7 805,488

NATIONAL CENTER FOR MANUFACTURING SCIE, ANN ARBOR, MI .......................................... 7 1,319,615

WV UNIVERSITY RESEARCH CORPORATION, MORGANTOWN, WV ............................................ 7 5,515,808

RESEARCH TRIANGLE INSTITUTE RESEARCH, TRIANGLE, NC .................................................. 7 2,354,288

WESTERN GOVERNORS’ ASSOCIATION, DENVER, CO .............................................................. 7 3,200,806

This data is for fiscal year 2001. Fiscal year 2002 data can be provided at end of fiscal year.

GRANTS: TOP TWENTY NON-PROFIT GRANT RECIPIENTS BY TOTAL AMOUNT OF FUNDS

AWARDED IN FISCAL YEAR 2002

Question. List the top twenty non-profit EPA grant recipients by total amount of

funds awarded in fiscal year 2002. Provide also the number of awards and total dollar amount awarded.

Answer:

FISCAL YEAR 2001—TOP 20 NON-PROFIT GRANTEES BY DOLLARS AWARDED

Number of

awards Amount

NORTH AMERICAN DEVELOPMENT BANK, SAN ANTONIO, TX .................................................. 1 $84,000,000

NATIONAL OLDER WORKER CAREER CENTER, WASHINGTON, DC ........................................... 75 20,805,037

NATIONAL SENIOR CITIZENS ED & RSCH CTR, SILVER SPRING, MD ...................................... 61 11,544,270

NATIONAL RURAL WATER ASSOCIATION, DUNCAN, OK ............................................................ 5 10,631,100

NATIONAL CAUCUS & CENTER ON BLACK AGED, WASHINGTON, DC ...................................... 74 10,285,948

BORDER ENVIRONMENTAL COOPERATION COMM., EL PASO, TX ............................................ 5 8,192,000
249

FISCAL YEAR 2001—TOP 20 NON-PROFIT GRANTEES BY DOLLARS AWARDED—Continued

Number of

awards Amount

HEALTH EFFECTS INSTITUTE, CAMBRIDGE, MA ....................................................................... 2 7,500,000

NATIONAL ACADEMY OF SCIENCE, WASHINGTON, DC ............................................................. 36 6,816,253

NATL ASIAN PACIFIC CENTER FOR AGING, SEATTLE, WA ........................................................ 48 6,330,332

THE ENVIRONMENTAL CAREERS ORGANIZATION, BOSTON, MA .............................................. 30 5,833,801

NATIONAL ASSOCIATION FOR HISPANIC ELDE, PASADENA, CA ............................................... 24 5,700,429

WV UNIVERSITY RESEARCH CORPORATION, MORGANTOWN, WV ............................................ 7 5,515,808

AMERICA’S CLEAN WATER FOUNDATION, WASHINGTON, DC ................................................... 3 5,080,000

GAS TECHNOLOGY INSTITUTE, DES PLAINES, IL ..................................................................... 1 4,989,000

THREE RIVERS WET WEATHER INC., PITTSBURGH, PA ........................................................... 1 4,845,000

NATIONAL COUNCIL ON AGING, WASHINGTON, DC .................................................................. 28 4,415,772

CANAAN VALLEY INSTITUTE, DAVIS, WV .................................................................................. 4 4,194,800

WATER ENVIRONMENT RESEARCH FOUNDATION, ALEXANDRIA, VA ........................................ 2 3,966,400

NORTHEAST STATES FOR COORDINATED AIR U, BOSTON, MA ................................................ 10 3,313,275

WESTERN GOVERNORS’ ASSOCIATION, DENVER, CO .............................................................. 7 3,200,806

This data is for fiscal year 2001. Fiscal year 2002 data can be provided at end of fiscal year.

GRANTS: NUMBER OF BENCH REVIEWS CONDUCTED OF NON-PROFIT NON-CONSTRUCTION

GRANTEES FROM FISCAL YEAR 2000 TO FISCAL YEAR 2002—BY REGION

Question. How many bench reviews did EPA conduct of non-profit non-construction grantees in fiscal year 2000, fiscal year 2001 and fiscal year 2002? List by Region.

Answer.

Regional Grants Management Office

Bench Reviews Fiscal Year

2000 2001 2002 as of 5/25/

2002

I ................................................................................................ 0 0 0

II ............................................................................................... 0 2 1

III .............................................................................................. 3 0 0

IV .............................................................................................. 0 22 18

V ............................................................................................... 0 0 0

VI .............................................................................................. 2 4 4

VII ............................................................................................. 0 0 1

VIII ............................................................................................ 0 2 10

IX .............................................................................................. 0 0 0

X ............................................................................................... 0 0 1

HQ ............................................................................................ 15 21 10

Total ............................................................................ 20 51 45

GRANTS: NUMBER OF ON-SITE REVIEWS CONDUCTED OF NON-PROFIT NONCONSTRUCTION GRANTEES IN FISCAL YEAR 2000 TO FISCAL YEAR 2002 BY REGION

Question. How many on-site reviews did EPA conduct of non-profit non-construction grantees in fiscal year 2000, fiscal year 2001 and fiscal year 2002? List by Region.

Answer.

Regional Grants Management Offices

On Site Reviewz Fiscal Year

2000 2001 2002 as of 5/25/

2002 (to date)

I ................................................................................................ 2 1 0

II ............................................................................................... 3 3 4

III .............................................................................................. 1 2 2

IV .............................................................................................. 0 0 0

V ............................................................................................... 2 2 1
250

Regional Grants Management Offices

On Site Reviewz Fiscal Year

2000 2001 2002 as of 5/25/

2002 (to date)

VI .............................................................................................. 0 0 0

VII ............................................................................................. 0 1 1

VIII ............................................................................................ 0 2 0

IX .............................................................................................. 5 3 1

X ............................................................................................... 0 0 2

HQ ............................................................................................ 13 22 23

Total ............................................................................ 26 36 34

GRANTS: NUMBER OF FTES AND ON-BOARD PERSONNEL CONDUCTING ON-SITE REVIEWS

OF GRANTEES IN FISCAL YEAR 2002 AND FISCAL YEAR 2003

Question. How many FTEs and on-board personnel are and will be devoted to conducting on-site reviews of grantees in fiscal year 2002 and fiscal year 2003?

Answer. To date, Headquarters and Regional Grants Management Offices devoted

approximately 4 FTEs to conducting on-site reviews in fiscal year 2002. In addition,

EPA awarded three contracts to perform eleven evaluative on-site reviews of nonprofit grantees.

In fiscal year 2003, EPA plans to devote a minimum of 4 FTEs to conducting onsite reviews and continue to procure additional contractor support to perform reviews of non-profit grantees.

GRANTS: NUMBER OF HOURS OF PAPERWORK BURDEN IMPOSED ON BUSINESSES

Question. How many hours of paperwork burden did EPA impose on businesses

in the last reporting year and each of the previous 3 years?

Answer. Total EPA burden hours (including both business and State burden) at

the end of each of the last four fiscal years are listed below:

[In millions]

Fiscal year Burden hours

2001 ......................................................................................................................... 131

2000 ......................................................................................................................... 129

1999 ......................................................................................................................... 119

1998 ......................................................................................................................... 115

GRANTS: NUMBER OF HOURS OF PAPERWORK BURDEN IMPOSED ON BUSINESSES

Question. In fiscal year 2003, how will EPA reduce the paperwork burden it imposes on businesses?

Answer. Many EPA programs are taking the initiative to reduce reporting and

record-keeping burden. Although EPA does not have quantified burden reductions

estimates for these initiatives, these efforts include:

Resource Conservation and Recovery Act (RCRA) Burden Reduction Initiative (Office of Solid Waste and Emergency Response), a broad-based initiative aimed at

streamlining paperwork and regulations associated with RCRA .

Reg-in-a-Box Expert Advisors (Office of Prevention, Pesticides, and Toxic Substances), an expert software system which can aid the public in understanding if

and how regulations affect them.

Toxic Release Inventory (TRI) Made Easy (Office of Environmental Information),

an expert software system that assists facilities in reporting their TRI data.

Central Data Exchange (CDX) (Office of Environmental Information), a single

Agency portal enabling the submission of data via the Internet and aimed at improving the collection, management, and sharing of environmental information

among the states, Tribes, and EPA.

Performance Track (Office of Policy, Economics, and Innovation), an initiative designed to motivate and reward top environmental performers that take a systematic

approach to managing environmental responsibilities and are leading the way to environmental excellence while saving money and improving productivity.
251

GRANTS: OEI WORK WITH PROGRAM OFFICES TO TAILOR NEW RULES TO IMPOSE LESS

PAPERWORK BURDEN

Question. In fiscal year 2003, how is the Office of Environmental Information

working with program offices to tailor new rules to impose less paperwork burden?

Answer. The Office of Environmental Information (OEI) is working on the following initiatives which are aimed at helping program offices decrease the amount

of paperwork burden imposed on the public.

Guidelines on Minimizing Burden and Ensuring Sound Burden Estimates

OEI is working on several guidelines to assist program offices in developing information collections which minimize the burden imposed on regulated entities. These

guidelines highlight examples of successful streamlining efforts in program offices

and offers numerous suggestions for areas where burden may potentially be decreased. The guidelines currently under development are:

—Guidelines on Streamlining Existing Collections

—Guidelines on Streamlining New Collections

—Guidelines for Estimating the Burden Impacts of Electronic Reporting

—Guidelines for Preparing Sound Burden Estimates

Effort to Increase Electronic Reporting and the Integration of Information

The National Environmental Information Exchange Network (Network) is a partnership program with the states and Tribes aimed at developing an integrated, electronic environmental data exchange. It includes efforts to: build a single point of exchange for electronic reporting through EPA’s CDX portal; propose alegal framework

for electronic reporting; and apply specific data standards across information systems. CDX currently offers electronic reporting options in four program areas, and

is testing two new programs for implementation by the end of fiscal year 2002. As

EPA’s point of exchange or ‘‘Node’’ on the Network, CDX completed the first Node

test with six states in early fiscal year 2002 and plans to expand Node testing this

year.

STANDARDIZING DATA ELEMENTS

EPA has a very active environmental data standards program and has finalized

seven standards in cooperation with states and tribes. Three additional standards

are near completion and are anticipated to be adopted within fiscal year 2002. Three

others are being considered; most of these more fully define program specific information that complements existing standards. One of the benefits of expanding environmental data standards is that programs are better able to compare the content

of various information systems, thereby reducing duplicative applications. This, in

turn, results in the elimination of some sub-applications and an increase in savings

to the states, Tribes, and EPA. Yet another benefit of promoting environmental data

standards is the identification of similar data shared by multiple programs. This

provides an opportunity to develop registries that contain commonly used data that

programs can rely on as an authoritative source, which can result in the removal

of duplicative requests for information collection. One example of this is the reliance

on facility identification information from the Facility Registry System by OSWER,

rather than requesting the collection of this information continually from the facilities.

GRANTS: PROGRAM OFFICES REVIEW OF CURRENT PAPERWORK REQUIREMENTS TO

REDUCE BURDEN ON BUSINESSES IN FISCAL YEAR 2002

Question. In fiscal year 2003, how will the program offices, either with or without

the help of OEI, review current paperwork requirements to reduce their burden on

businesses?

Answer. EPA will reduce burden on businesses in the following ways:

Program Initiated Efforts.—Several programs have taken the initiative to reduce

burden by throughly analyzing their collections to identify requirements which can

be streamlined. For example, in fiscal year 2003, the Office of Solid Waste (OSW)

will publish a final rule that incorporates many burden reduction components into

RCRA requirements. OSW initiated a two-phase burden reduction initiative that

first examines reporting requirements and then proposed a rule that will streamline

the collection. To reduce reporting burdens to facilities, OSW first evaluated all of

EPA’s current RCRA reporting requirements. As a result, OSW drafted a proposed

rule that was published in February 2002 in the Federal Register. OSW estimates

that this proposed rule will eliminate nearly 1 million burden hours from the total

RCRA paperwork burden (which is currently nearly 8 million hours). This is a 12

percent reduction from current burden hours. The proposed rule is also estimated
252

to have annual cost savings of $120 million, mostly from the Land Disposal Restrictions changes. In fiscal year 2003, OSW will continue work on a second phase of

the Burden Reduction Initiative (BRI), which focuses on the RCRA Biennial Report.

Currently, all large quantity generators of hazardous waste and all treatment, storage, and disposal facilities have to complete a Biennial Report. The second phase

of the BRI will propose alternatives such as conducting a survey of facilities rather

than requiring the completion of a report by every facility. OSW will publish their

findings in a Notice of Data Availability in fiscal year 2003.

Supporting Environmental Performance.—The Office of Policy, Economics, and Innovation continues to develop and expand the Performance Track program to motivate and reward facilities that achieve better environmental performance than is required under existing regulations. This program enhances the current regulatory

system by offering recognition and other incentives to facilities that have shown a

commitment to going beyond basic compliance with environmental regulations. EPA

is developing a rule to propose specific regulatory changes as incentives for participation in Performance Track. These incentives would offer a reduction in the reporting and other operating costs of the current regulatory system and would be implemented nationally.

Encouraging Non-Traditional Burden Reduction Efforts.—EPA continues to encourage a number of innovative activities which are not typically counted in burden

reduction estimates. These include web-based Compliance Assistance Centers, the

promotion of internal facility audit policies to detect violations, and options for regulatory compliance such as emissions trading. EPA continues to implement easier to

understand regulatory language and continues providing reporting and compliance

assistance to small businesses through the Office of the Small Business Ombudsman.

Supporting Streamlining Collections.—Preparers of new regulations, as well as

those involved in the development of Information Collection Requests are required

to verify that no other similar collections exist as part of the development process

entailed in these activities. OEI will also be working to make the newly developed

streamlining guidelines available to the rest of the Agency, which provide step-bystep guidance on how to reduce burden in both new and existing collections, in addition to estimating burden reductions associated with the use of electronic reporting.

Finally, OEI held a ‘‘Burden Reduction Workshop’’ in the Fall of 2001, highlighting

seven major efforts to decrease burden through streamlining existing collections,

consolidating collections, and using innovative technologies. OEI is committed to

continuing to recognize and promote these types of program efforts which are aimed

at decreasing burden, in both traditional and non-traditional ways.

NPDES PERMITTING: STATUS OF EFFORTS TO REDUCE FEDERAL AND STATE NPDES

PERMITS BACKLOG

Question. What is the status of EPA’s efforts to reduce the backlog of Federal and

State NPDES permits? Provide a breakdown by region and state.

Answer. Although EPA did not meet the 2001 target of 10 percent backlog for

major permits, EPA has made substantial progress in reducing the NPDES permit

backlog. Currently, EPA’s backlog of major permits is 16 percent, down from about

48 percent in January 2000. EPA is continuing its effort to reduce this backlog of

major permits, while also focusing on the 2004 goal of 10 percent backlog for all permits. EPA currently has a significant backlog of minor permits (67 percent expired)

and is addressing it through a streamlining effort and the release of several permitting tools.

The authorized states, as a whole, have shown improvement in reducing their

backlog. Currently, the major permits backlog for authorized states is 19 percent,

down from about 26 percent in January 2000. Authorized states are making strides

through both permit issuance and data clean-up and are on target to meet the 2004

backlog reduction goal of 10 percent backlog for all permits.

The attached charts provide data on state and Regional progress toward meeting

backlog reduction goals.
253

BACKLOG STATUS REPORT FOR MINORS (INDIVIDUALS PERMITS ONLY)—APRIL 2002

August 2000 Goal for April

2002

Actual for April 2002 On target to meet December

2004 Goal 2 Permit Deficit 3 Total facilities Expired 1 Backlog (percent) Total facilities Expired 1 Backlog (percent)

EPA Region 1:

CT ..................................................... 129 98 76.0 50.6 97 43 44.3 YES ................................. 0GB 4 .................................................. 14 14 100.0 65.4 ( 5 ) ( 5 ) ( 5 ) ( 5 ) .................................. ( 5 )MA 4 .................................................. 521 423 81.2 53.8 439 357 81.3 Unlikely ........................... 120.78ME .................................................... 261 182 69.7 46.8 258 140 54.3 Possible .......................... 19.36NH 4 .................................................. 186 161 86.6 57.1 121 100 82.6 Unlikely ........................... 30.89RI ...................................................... 109 87 79.8 53.0 103 87 84.5 Unlikely ........................... 32.45VT ..................................................... 108 20 18.5 15.2 115 12 10.4 YES ................................. 0

EPA Issued ................................................ 982 780 79.4 52.7 560 457 81.6 Unlikely ........................... 161.73State Issued .............................................. 346 205 59.2 40.3 573 282 49.2 Possible .......................... 51.04

Region Total ................................. 1,328 985 74.2 49.5 1,133 739 65.2 Unlikely ........................... 178.28

EPA Region 2:

AT 4 ................................................... 6 6 100.0 65.4 7 7 100.0 Possible .......................... 2.42NJ ...................................................... 2,664 263 9.9 9.9 2,755 353 12.8 Possible .......................... 81.02NY ..................................................... 1,761 305 17.3 14.5 1,449 61 4.2 YES ................................. 0PR 4 .................................................. 197 100 50.8 35.1 200 109 54.5 Unlikely ........................... 38.83VI ...................................................... 77 44 57.1 39.0 80 46 57.5 Unlikely ........................... 14.79

EPA Issued ................................................ 203 106 52.2 36.0 207 116 56.0 Unlikely ........................... 41.52State Issued .............................................. 4,502 612 13.6 12.2 4,284 460 10.7 YES ................................. 0

Region Total ................................. 4,705 718 15.3 13.2 4,491 576 12.8 YES ................................. 0

EPA Region 3:

DC 4 .................................................. 12 3 25.0 19.2 12 3 25.0 Possible .......................... 0.69DE ..................................................... 41 2 4.9 4.9 39 3 7.7 YES 6 ............................... 0MD .................................................... 564 229 40.6 28.8 499 215 43.1 Unlikely ........................... 71.13PA ..................................................... 3,952 508 12.9 11.8 4,008 595 14.8 Possible .......................... 123.80VA ..................................................... 2,835 1,943 68.5 46.0 1,119 61 5.5 YES ................................. 0WV .................................................... 1,459 647 44.3 31.1 1,189 455 38.3 Possible .......................... 84.80
254

BACKLOG STATUS REPORT FOR MINORS (INDIVIDUALS PERMITS ONLY)—APRIL 2002—Continued

August 2000 Goal for April

2002

Actual for April 2002 On target to meet December

2004 Goal 2 Permit Deficit 3 Total facilities Expired 1 Backlog (percent) Total facilities Expired 1 Backlog (percent)

EPA Issued ................................................ 12 3 25.0 19.2 12 3 25.0 Possible .......................... .69State Issued .............................................. 8,851 3,329 37.6 27.0 6,854 1,329 19.4 YES ................................. 0

Region Total ................................. 8,863 3,332 37.6 27.0 6,866 1,332 19.4 YES ................................. 0

EPA Region 4:

AL ..................................................... 1,385 140 10.1 10.1 1,388 61 4.4 YES ................................. 0FL ...................................................... 348 69 19.8 16.0 300 25 8.3 YES ................................. 0GA ..................................................... 784 0 0.0 0.0 658 0 0.0 YES ................................. 0KY ..................................................... 1,860 84 4.5 4.5 1,788 78 4.4 YES ................................. 0MS .................................................... 1,841 326 17.7 14.7 1,788 404 22.6 Possible .......................... 140.39NC ..................................................... 1,344 192 14.3 12.6 1,237 166 13.4 Possible .......................... 9.68SC ..................................................... 495 73 14.7 12.9 450 71 15.8 Possible .......................... 12.85TN ..................................................... 1,321 224 17.0 14.3 1,295 45 3.5 YES ................................. 0

EPA Issued ................................................ NA NA NA NA NA NA NA NA ................................... NAState Issued .............................................. 9,378 1,108 11.8 11.1 8,904 850 9.5 YES ................................. 0

Region Total ................................. 9,378 1,108 11.8 11.1 8,904 850 9.5 YES ................................. 0

EPA Region 5:

IL ...................................................... 1,787 373 20.9 16.7 1,774 460 25.9 Possible .......................... 163.90IN ...................................................... 1,174 150 12.8 11.7 1,140 78 6.8 YES ................................. 0MI ..................................................... 532 57 10.7 10.4 500 53 10.6 YES ................................. 0MN .................................................... 1,019 509 50.0 34.6 1,010 419 41.5 Possible .......................... 69.69

OH .............................................................. 2,571 680 26.4 20.1 2,716 417 15.4 YES ................................. 0

WI ..................................................... 859 165 19.2 15.7 798 77 9.6 YES ................................. 0

EPA Issued ................................................ NA NA NA NA NA NA NA NA ................................... NAState Issued .............................................. 7,942 1,934 24.4 18.8 7,938 1,504 18.9 Possible .......................... 9.14

Region Total ................................. 7,942 1,934 24.4 18.8 7,938 1,504 18.9 Possible .......................... 9.14

EPA Region 6:

AR ..................................................... 729 56 7.7 7.7 721 31 4.3 YES ................................. 0
255

LA ..................................................... 3,640 2,910 79.9 53.0 3,476 2,507 72.1 Unlikely ........................... 663.22NM 4 .................................................. 221 203 91.9 60.4 111 44 39.6 YES ................................. 0OK ..................................................... 560 176 31.4 23.2 476 96 20.2 YES ................................. 0TX ..................................................... 2,666 719 27.0 20.4 2,567 400 15.6 YES ................................. 0

EPA Issued ................................................ 221 203 91.9 60.4 111 44 39.6 YES ................................. 0State Issued .............................................. 7,595 3,861 50.8 35.1 7,240 3,034 41.9 Possible .......................... 490.60

Region Total ................................. 7,816 4,064 52.0 35.8 7,351 3,078 41.9 Possible .......................... 443.13

EPA Region 7:

IA ...................................................... 1,660 568 34.2 24.9 1,342 199 14.8 YES ................................. 0KS ..................................................... 1,161 753 64.9 43.8 1,171 129 11.0 YES ................................. 0MO .................................................... 3,015 972 32.2 23.7 3,139 826 26.3 Possible .......................... 82.51NE ..................................................... 1,184 806 68.1 45.7 835 422 50.5 Possible .......................... 40.09

EPA Issued ................................................ NA NA NA NA NA NA NA NA ................................... NAState Issued .............................................. 7,020 3,099 44.1 31.0 6,487 1,576 24.3 YES ................................. 0

Region Total ................................. 7,020 3,099 44.1 31.0 6,487 1,576 24.3 YES ................................. 0

EPA Region 8:

CO ..................................................... 418 212 50.7 35.1 378 180 47.6 Unlikely ........................... 47.48MT ..................................................... 147 45 30.6 22.7 149 62 41.6 Unlikely ........................... 28.20ND ..................................................... 127 16 12.6 11.6 116 1 .9 YES ................................. 0SD ..................................................... 380 82 21.6 17.1 377 99 26.3 Possible .......................... 34.44UT ..................................................... 84 4 4.8 4.8 84 3 3.6 YES ................................. 0WY .................................................... 1,149 87 7.6 7.6 1,325 51 3.8 YES ................................. 0

EPA Issued ................................................ NA NA NA NA NA NA NA NA ................................... NAState Issued .............................................. 2,305 446 19.3 15.8 2,429 396 16.3 Possible .......................... 13.35

Region Total ................................. 2,305 446 19.3 15.8 2,429 396 16.3 Possible .......................... 13.35

EPA Region 9:

AS 4 ................................................... 3 0 0.0 0.0 3 0 0.0 YES ................................. 0AZ 4 ................................................... 144 49 34.0 24.8 143 29 20.3 YES ................................. 0CA ..................................................... 686 245 35.7 25.8 652 245 37.6 Unlikely ........................... 76.63GU 4 .................................................. 11 5 45.5 31.8 14 1 7.1 YES ................................. 0HI ...................................................... 40 7 17.5 14.6 42 2 4.8 YES ................................. 0
256

BACKLOG STATUS REPORT FOR MINORS (INDIVIDUALS PERMITS ONLY)—APRIL 2002—Continued

August 2000 Goal for April

2002

Actual for April 2002 On target to meet December

2004 Goal 2 Permit Deficit 3 Total facilities Expired 1 Backlog (percent) Total facilities Expired 1 Backlog (percent)

JA 4 ................................................... 1 0 0.0 0.0 1 0 0.0 YES ................................. 0MW 4 ................................................. 1 1 100.0 65.4 ( 5 ) ( 5 ) ( 5 ) ( 5 ) .................................. ( 5 )NI 4 ................................................... 3 3 100.0 65.4 ( 5 ) ( 5 ) ( 5 ) ( 5 ) .................................. ( 5 )NV ..................................................... 70 18 25.7 19.7 70 25 35.7 Unlikely ........................... 11.23

EPA Issued ................................................ 163 58 35.6 25.7 161 30 18.6 YES ................................. 0State Issued .............................................. 796 270 33.9 24.7 764 272 35.6 Unlikely ........................... 83.14

Region Total ................................. 959 328 34.2 24.9 925 302 32.6 Possible .......................... 71.73

EPA Region 10:

AK 4 ................................................... 282 262 92.9 61.0 159 143 89.9 Unlikely ........................... 45.98ID 4 ................................................... 277 262 94.6 62.1 174 138 79.3 Unlikely ........................... 30.03OR ..................................................... 283 180 63.6 43.0 301 219 72.8 Unlikely ........................... 89.61WA .................................................... 654 519 79.4 52.7 618 476 77.0 Unlikely ........................... 150.43

EPA Issued ................................................ 559 524 93.7 61.5 333 281 84.4 Unlikely ........................... 76.10State Issued .............................................. 937 699 74.6 49.8 919 695 75.6 Unlikely ........................... 237.76

Region Total ................................. 1,496 1,223 81.8 54.2 1,252 976 78.0 Unlikely ........................... 297.98

All Minors .................................................. 51,812 17,237 33.3 24.3 47,776 11,329 23.7 YES ................................. 0EPA Issued ................................................ 2,140 1,674 78.2 52.0 1,384 931 67.3 Unlikely ........................... 211.54State Issued .............................................. 49,672 15,563 31.3 23.1 46,392 10,398 22.4 YES ................................. 0

1 Includes no date facilities.2 Possible indicates that permit deficit is within 10of the monthly target to meet the 2004 goal or is of 5 permits or less.3 The number of permits that needed to be issued through the reporting period to remain on target to meet the December 2004 goal.4 Indicates EPA is the permitting authority.5 Based on 9/30/2000 download, there are no individually permitted facilities in the Midway Islands. Based on 1/31/2001 download, there are no individually permitted minor facilities in the Northern Mariannas. Based on 3/31/2001

download, there are no individually permitted minor facilities in the Georges Banks.

6 Although the State is below the 10 percent goal, the State’s backlog is beginning to trend upwards.
257

BACKLOG STATUS REPORT FOR MAJORS—APRIL 2002

Backlog Percent

Actual For April 2002

Backlog Percent At 10 percent Goal? 2 3-Month Trend 3 Permit Deficit 4

Total Facilities Expired 1

EPA Region 1:

CT ..................................................................................... 10.0 113 14 12.4 NO 6 ..................................................... ∂ 1.68MA 5 .................................................................................. 10.0 138 33 23.9 NO ....................................................... ∂ 17.96ME .................................................................................... 10.0 87 23 26.4 NO ....................................................... ∂ 13.52NH 5 .................................................................................. 10.0 60 8 13.3 NO 6 ..................................................... ¥ 1.46RI ...................................................................................... 10.0 25 2 8.0 YES ...................................................... 0 0.00VT ..................................................................................... 10.0 33 0 0.0 YES ...................................................... ¥ 0.00

EPA Issued ................................................................................ 10.0 198 41 20.7 NO ....................................................... ¥ 19.42State Issued .............................................................................. 10.0 258 39 15.1 NO ....................................................... ∂ 10.88

Region Total ................................................................ 10.0 456 80 17.5 NO ....................................................... ∂ 30.30

EPA Region 2:

NJ ..................................................................................... 10.0 160 48 30.0 NO ....................................................... ¥ 30.56NY ..................................................................................... 10.0 355 11 3.1 YES ...................................................... 0 0.00PR 5 .................................................................................. 10.0 84 27 32.1 NO ....................................................... ¥ 17.84VI ...................................................................................... 10.0 6 4 66.7 NO ....................................................... ∂ 3.35

EPA Issued ................................................................................ 10.0 84 27 32.1 NO ....................................................... ¥ 17.84State Issued .............................................................................. 10.0 521 63 12.1 NO 6 ..................................................... ¥ 6.21

Region Total ................................................................ 10.0 605 90 14.9 NO 6 ..................................................... ¥ 24.06

EPA Region 3:

DC 5 .................................................................................. 10.0 4 2 50.0 NO ....................................................... 0 1.56DE ..................................................................................... 10.0 23 6 26.1 NO ....................................................... 0 3.49MD .................................................................................... 10.0 97 12 12.4 NO 6 ..................................................... ¥ 1.43PA ..................................................................................... 10.0 382 76 19.9 NO ....................................................... ∂ 34.36VA ..................................................................................... 10.0 140 19 13.6 NO 6 ..................................................... ¥ 3.74WV .................................................................................... 10.0 93 28 30.1 NO ....................................................... ¥ 17.86

EPA Issued ................................................................................ 10.0 4 2 50.0 NO ....................................................... 0 1.56State Issued .............................................................................. 10.0 735 141 19.2 NO ....................................................... ∂ 60.89
258

BACKLOG STATUS REPORT FOR MAJORS—APRIL 2002—Continued

Backlog Percent

Actual For April 2002

Backlog Percent At 10 percent Goal? 2 3-Month Trend 3 Permit Deficit 4

Total Facilities Expired 1

Region Total ................................................................ 10.0 739 143 19.4 NO ....................................................... ∂ 62.45

EPA Region 4:

AL ..................................................................................... 10.0 194 6 3.1 YES ...................................................... ¥ 0.00FL ..................................................................................... 10.0 255 28 11.0 YES ...................................................... ∂ 0.21GA ..................................................................................... 10.0 171 1 0.6 YES ...................................................... ¥ 0.00KY ..................................................................................... 10.0 132 2 1.5 YES ...................................................... ∂ 0.00MS .................................................................................... 10.0 98 10 10.2 YES ...................................................... ∂ 0.00NC .................................................................................... 10.0 231 68 29.4 NO ....................................................... ∂ 42.82SC ..................................................................................... 10.0 185 45 24.3 NO ....................................................... ∂ 24.84TN ..................................................................................... 10.0 156 9 5.8 YES ...................................................... ¥ 0.00

EPA Issued ................................................................................ .............................. NA NA NA NA ....................................................... NA NAState Issued .............................................................................. 10.0 1,422 169 11.9 NO 6 ..................................................... ∂ 14.00

Region Total ................................................................ 10.0 1,422 169 11.9 NO 6 ..................................................... ∂ 14.00

EPA Region 5:

IL ...................................................................................... 10.0 278 36 12.9 NO 6 ..................................................... 0 5.70IN ...................................................................................... 10.0 185 78 42.2 NO ....................................................... ∂ 57.84MI ..................................................................................... 10.0 184 25 13.6 NO 6 ..................................................... ∂ 4.94MN .................................................................................... 10.0 86 40 46.5 NO ....................................................... ∂ 30.63OH .................................................................................... 10.0 294 73 24.8 NO ....................................................... ∂ 40.95WI ..................................................................................... 10.0 134 10 7.5 YES ...................................................... ¥ 0.00

EPA Issued ................................................................................ .............................. NA NA NA NA ....................................................... NA NAState Issued .............................................................................. 10.0 1,161 262 22.6 NO ....................................................... ∂ 135.45

Region Total ................................................................ 10.0 1,161 262 22.6 NO ....................................................... ∂ 135.45

EPA Region 6:

AR ..................................................................................... 10.0 109 13 11.9 NO 6 ..................................................... ¥ 1.12LA ..................................................................................... 10.0 250 119 47.6 NO ....................................................... ¥ 91.75NM 2 ................................................................................. 10.0 35 3 8.6 YES ...................................................... 0 0.00OK ..................................................................................... 10.0 95 5 5.3 YES ...................................................... 0 0.00
259

TX ..................................................................................... 10.0 565 96 17.0 NO ....................................................... ¥ 34.42

EPA Issued ................................................................................ 10.0 35 3 8.6 YES ...................................................... 0 0.00State Issued .............................................................................. 10.0 1,019 233 22.9 NO ....................................................... ¥ 121.93

Region Total ................................................................ 10.0 1,054 236 22.4 NO ....................................................... ¥ 121.11

EPA Region 7:

IA ...................................................................................... 10.0 129 18 14.0 NO 6 ..................................................... ∂ 3.94KS ..................................................................................... 10.0 58 0 0.0 YES ...................................................... ¥ 0.00MO .................................................................................... 10.0 148 40 27.0 NO ....................................................... ∂ 23.87NE ..................................................................................... 10.0 55 30 54.5 NO ....................................................... ∂ 24.01

EPA Issued ................................................................................ .............................. NA NA NA NA ....................................................... NA NAState Issued .............................................................................. 10.0 390 88 22.6 NO ....................................................... ∂ 45.49

Region Total ................................................................ 10.0 390 88 22.6 NO ....................................................... ∂ 45.49

EPA Region 8:

CO .................................................................................... 10.0 112 33 29.5 NO ....................................................... ∂ 20.79MT .................................................................................... 10.0 43 16 37.2 NO ....................................................... ∂ 11.31ND .................................................................................... 10.0 26 0 0.0 YES ...................................................... 0 0.00SD ..................................................................................... 10.0 29 4 13.8 YES ...................................................... ∂ 0.84UT ..................................................................................... 10.0 33 0 0.0 YES ...................................................... 0 0.00WY .................................................................................... 10.0 26 0 0.0 YES ...................................................... ¥ 0.00

EPA Issued ................................................................................ .............................. NA NA NA NA ....................................................... NA NAState Issued .............................................................................. 10.0 269 53 19.7 NO ....................................................... ∂ 23.68

Region Total ................................................................ 10.0 269 53 19.7 NO ....................................................... ∂ 23.68

EPA Region 9:

AS 5 .................................................................................. 10.0 4 0 0.0 YES ...................................................... 0 0.00AZ 5 .................................................................................. 10.0 50 0 0.0 YES ...................................................... 0 0.00CA ..................................................................................... 10.0 239 48 20.1 NO ....................................................... ∂ 21.95GU 5 .................................................................................. 10.0 6 2 33.3 NO ....................................................... 0 1.35HI ...................................................................................... 10.0 22 2 9.1 YES ...................................................... ¥ 0.00NI 5 ................................................................................... 10.0 20 0.0 YES 0 .......................................................... 0.00NV ..................................................................................... 10.0 10 2 20.0 YES ...................................................... ¥ 0.91
260

BACKLOG STATUS REPORT FOR MAJORS—APRIL 2002—Continued

Backlog Percent

Actual For April 2002

Backlog Percent At 10 percent Goal? 2 3-Month Trend 3 Permit Deficit 4

Total Facilities Expired 1

EPA Issued ................................................................................ 10.0 62 2 3.2 YES ...................................................... 0 0.00State Issued .............................................................................. 10.0 271 52 19.2 NO ....................................................... ¥ 22.46

Region Total ................................................................ 10.0 333 54 16.2 NO ....................................................... ¥ 17.70

EPA Region 10:

AK 5 .................................................................................. 10.0 75 4 5.3 YES ...................................................... ¥ 0.00ID 5 ................................................................................... 10.0 57 5 8.8 YES ...................................................... 0 0.00OR .................................................................................... 10.0 78 51 65.4 NO ....................................................... 0 42.50WA .................................................................................... 10.0 86 33 38.4 NO ....................................................... ¥ 23.63

EPA Issued ................................................................................ 10.0 132 9 6.8 YES ...................................................... ¥ 0.00State Issued .............................................................................. 10.0 164 84 51.2 NO ....................................................... ¥ 66.12

Region Total ................................................................ 10.0 296 93 31.4 NO ....................................................... ¥ 60.74

All Majors .................................................................................. 10.0 6,725 1,268 18.9 NO ....................................................... ∂ 534.98EPA Issued ................................................................................ 10.0 515 84 16.3 NO ....................................................... ¥ 27.87State Issued .............................................................................. 10.0 6,210 1,184 19.1 NO ....................................................... ∂ 507.11

1 Includes no data facilities.2 YES indicates that the State is meeting or has met the December 31, 2001 backlog reduction goal of 10 OR is within 1 permit.3¥ indicates that the backlog percent has gone down over the last 3 months (since January 31, 2002) ∂ It has gone up; 0 Stayed the same.4 The number of permits that needed to be issued (in addition to ones that will be expiring) to achieve a 10 percent backlog reduction.5 Indicates EPA is the permitting authority.6 A NO indicates that the State is within 5 percent of the backlog reduction goal.
261

NPDES PERMITTING: LEVEL OF RESOURCES DEVOTED TO REDUCE NPDES BACKLOG FROM

FISCAL YEAR 2002 AND FISCAL YEAR 2003 REQUEST

Question. Provide the level of resources EPA is devoting to reduce the NPDES

backlog from fiscal year 2002 and in the fiscal year 2003 request.

Answer. Both EPA and state permitting agencies have developed strategies that

affirm permit issuance as a high priority task and in many cases, have reorganized

staff to reduce permit backlog.

NPDES permit issuance is a substantial undertaking in EPA Regional Water Divisions and in state water pollution control agencies. To help reverse the trend in

rising backlogged permits, EPA is devoting about $300,000 for permit issuance in

fiscal year 2002, and we anticipate making the same level of assistance available

in fiscal year 2003. Additionally, in fiscal year 2002, EPA is spending approximately

$340,000 to help reduce the backlog by tracking the NPDES permit backlog and developing tools, such as an electronic permit application and an electronic water quality based permit writing tool. A similar level of spending is anticipated for fiscal

year 2003.

In fiscal year 2002, EPA established Blanket Purchase Agreements (BPAs) under

GSA contracts. These agreements will support the permitting efforts of EPA as well

as the states, if they so request, through in-kind assistance, as part of their Section

106 grant. A user guidance web page is being developed also. This will assist states

with permit issuance, data clean up, and other water program work that will lead

to appropriate permits being issued. States have begun to use this support, and

EPA anticipates continuing this process in fiscal year 2003.

REINVENTION: STATUS OF REVIEW OF REINVENTION PROGRAMS

Question. What is the status of EPA’s review of its reinvention programs?

Answer. On April 10, 2001, Administrator Whitman issued a memorandum charging EPA’s Innovation Action Council (IAC) to formulate recommendations for updating EPA’s innovation strategy. In considering strategic application of innovation, the

IAC looked at both the challenges (environmental, regulatory or programmatic) facing the Agency, and the innovative approaches and tools needed to meet those challenges. The IAC consulted with state environmental commissioners and key stakeholders (e.g., states, industry, and the NGO’s) as it developed its recommendations.

On April 24, 2002, Administrator Whitman released EPA’s new innovation strategy, Innovating for Better Environmental Results: A Strategy to Guide the Next

Generation of Innovation at EPA at the 2002 ECOS meeting. The strategy provides

a framework for using innovation to move the Agency toward a system of environmental protection in which we:

—focus on environmental performance and results;

—emphasize comprehensive environmental responsibility, not just pollution control;

—integrate environmental management across facilities, problems and media;

—use market-based incentives and the full range of available tools to achieve ambitious environmental goals; and

—foster partnerships with others who can contribute to environmental solutions.

The strategy presents four ways we plan to move toward results-based environmental protection through innovation: (1) strengthen our innovation partnerships

with states and Tribes; (2) focus our innovation efforts on priority environmental

problems B reducing greenhouse gases and smog, improving water quality, and reducing the cost of water and wastewater infrastructure; (3) make fuller use of a diverse range of tools such as information and environmental technology, marketbased incentives, environmental management systems, and measurable performance

goals; and (4) make EPA’s culture and management systems more Ainnovation

friendly.

We are currently moving into the implementation phase of the strategy, promoting innovation in all parts of EPA. We have drafted an implementation plan

that represents an initial set of activities that will support our innovations work

through both ongoing projects and some Presidential 2003 budget initiatives. Along

with the four mentioned above, these key actions also include:

—expanding Brownfields economic redevelopment,

—forging stronger partnerships with the agriculture community,

—promoting better environmental information,

—promoting innovative technology, using incentives,

—expanding use of environmental management systems,

—testing, evaluating and deploying innovative approaches,

—ensuring support for innovation through planning and budgeting, and

—fostering a more innovation friendly culture within EPA.
262

A synopsis of these activities are located on our website, http://www.epa.gov/opei/

strategy.

REINVENTION: SPREADING THE CULTURE OF REINVENTION BY LIMITING ITS

APPLICATION

Question. While EPA states a desire to spread the culture of reinvention efforts

to all program areas, the agency is currently limiting reinvention activities to a few

specific activities. Please explain how EPA will spread the culture of reinvention by

limiting its application?

Answer. EPA’s new innovation strategy draws on our experience and the experience of our business, state and NGO partners and numerous policy and academic

cementers who have been working together for over a decade to foster innovation

in environmental protection. A critical lesson communicated across the spectrum is

that one of the keys to unleashing innovation on a broad scale is to set clear and

ambitious goals for solving important problems. That is what EPA’s new innovation

strategy does. By focusing innovation on key problems, we will make the most

progress toward the most important goals.

While EPA is focusing its Agency-wide innovation efforts, it is not limiting innovation in other areas. In fact, the Office of Solid Waste and Emergency Response is

supporting an intensive focus on innovation in several areas not mentioned in the

strategy, but which are important to improving waste management and disposal

systems.

While a key to the strategy’s effectiveness is its clear focus, EPA will draw on and

foster the broadest possible participation in innovating to solve these problems.

Within EPA, every program and region will be undertaking significant actions toward these goals. EPA has also made it a top priority to strengthen the burgeoning

innovation partnerships with states and tribes by aligning goals and actions

through partnership agreements.

EPA’s innovation strategy also commits to fostering innovation at the very core

of EPA’s culture through actions that address both cultural and administrative barriers to innovation.

REINVENTION: EXAMPLES OF DIRECTING PROGRAM OFFICES AND OECA TO REDUCE

BARRIERS, TRANSACTION COSTS AND APPROVAL TIME FOR REINVENTION PROJECTS

Question. Provide examples of how EPA is directing the program offices and

OECA to reduce barriers, transaction costs and approval time for reinvention

projects?

Answer. In the development of regulatory flexibility agreements and supporting

legal documents, EPA program offices and OECA provide valuable expertise that ensures the viability of the agreement if challenged. However, EPA is continuing to

explore ways to reduce transaction costs and approval time and, in particular, EPA

will continue to streamline internal review and decision-making where appropriate.

For its programs that rely on voluntary participation in exchange for flexibility

or recognition, EPA has continually worked to reduce the transaction costs. For example, in a mid-course re-engineering, the XL program cut approval and negotiation

times significantly. We were able to do so by clarifying program elements, helping

sponsors develop better projects and proposals, improving stakeholder involvement

processes, and streamlining internal review and decision-making. EPA will continue

to place a high priority on reducing transaction costs for participants, co-regulators,

stakeholders and itself. Because the innovations agenda may affect some of these

programs, specific actions cannot be initiated until the innovations agenda is established.

The program offices and OECA are significantly involved in expanding the application of successful innovations tested under reinvention projects. For example, the

Environmental Results Program (ERP) was designed by the Massachusetts Department of Environmental Protection. ERP is a self-certification program that replaces

individual facility permits for small sources with a set of multi-media industry-wide

performance standards and a facility-derived annual certification of compliance.

Using a combination of compliance assurance tools, ERP has improved performance

for small business sectors and resulted in savings for these businesses, thereby allowing regulators to focus resources on more pressing environmental problems.

EPA, in partnership with the State of Massachusetts, is working to disseminate

the successful elements of ERP to other states facing environmental issues in small

business sectors. EPA program offices and OECA are providing technical and financial assistance to identify areas and problems that ERP could solve to the District

of Columbia, Florida and Maryland.
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REINVENTION: ENVIRONMENTAL BENEFITS OF REGULATORY FLEXIBILITY VS. STATUS

QUO REGULATORY SCHEMES

Question. Describe the ways EPA can further articulate the environmental benefits of regulatory flexibility v. status quo regulatory schemes.

Answer. EPA is at an important juncture in the cycle of testing and broadening

the application of innovative approaches. EPA has recently issued its first Innovation Strategy, which explicitly charges the Agency to establish a system to move innovative approaches from testing to broader application. Critical to this system is

the evaluation of new approaches to establish their effectiveness relative to the status quo regulatory system. EPA recognizes this and has been collecting the data

necessary for those analyses as it implements its innovations programs.

EPA routinely measures and makes public the environmental benefits of the regulatory flexibility granted in its innovations programs. In developing the flexibility

in a pilot project, EPA establishes the expected environmental performance baseline

of the status quo and also characterizes the expected environmental benefits of the

new approach. Second, EPA tracks and measures the environmental results of the

pilot and reports results against the baseline annually.

The goal of these assessments is to identify new ideas and approaches that work

and then put them to use on a broader scale so that the environment, industry, and

communities can benefit. As these projects have had time to demonstrate whether

the approaches are effective or not, EPA will evaluate their appropriateness for further application. For example, significant data were collected from early tests of the

Environmental Results Program, a program developed by the State of Massachusetts and tested by EPA, that clearly demonstrate the environmental benefits of the

self-certification approach for small businesses. Based on that information, EPA is

working with Massachusetts to demonstrate the value of the approach to other

states. This approach has been very successful with several states in the process of

adopting the approach.

As part of managing the full cycle of the innovations process, EPA will regularly

review innovations being tested for their potential for broader application. Those

that are will be evaluated for their environmental benefits relative to the status quo

regulatory system.

SMALL BUSINESS: EXAMPLES OF PROGRAM OFFICES TAILORING ANALYSIS AND

REGULATORY PROPOSALS TO REALITIES OF GIVEN INDUSTRIAL SECTORS

Question. Provide examples of how incorporation of small business concerns are

enabling program offices to more closely tailor their analysis and regulatory proposals to the realties of given industrial sectors?

Answer. The impact of the Small Business Regulatory Enforcement Fairness Act

on EPA’s regulatory analysis and proposals has been far-reaching, and consideration

of small-business concerns is now prominent in many sectoral actions. For example,

when regulating engine emissions, the Office of Transportation and Air Quality typically considers modified requirements or even exclusions for certain engine families

or a set quantity of units in order to reduce burden on small-quantity manufacturers. When issuing Maximum Attainable Control Technology standards for a given

industry under the Clean Air Act, the Office of Air Quality Planning and Standards

typically excludes area sources or low-capacity sources defined otherwise to reduce

the number of small businesses likely to be subject to technology requirements.

Likewise, the Office of Science and Technology in the Office of Water typically

writes Effluent Limitation Guidelines by excluding low-flow systems in order to

avoid regulatory costs for small businesses that typically operate under low-flow

conditions. By its nature, the Safe Drinking Water Act governs the water-supply

sector, and EPA typically accommodates small systems by granting delayed implementation schedules, reduced monitoring requirements, and alternative technologies. We are also investing in alternatives to regulations, such as Environmental Management Systems and the Environmental Results Program. Mechanisms

such as these hold high promise of relieving small businesses of costly requirements.

SMALL BUSINESS: INCREASE KNOWLEDGE OF IMPACT OF REGULATORY REQUIREMENTS

IN FISCAL YEAR 2003

Question. In fiscal year 2003, how will EPA further increase its knowledge of the

impacts of its regulatory requirements on small business?

Answer. It continues the Agency’s policy that program offices should assess the

direct impact of every rule on small entities and minimize any impact to the extent

feasible, regardless of the magnitude of the impact or number of small entities affected. This ‘‘any-any’’ policy, which goes beyond the requirements of the Regulatory
264

Flexibility Act, has been the Agency’s policy since before the inception of the Small

Business Regulatory Enforcement Fairness Act and will continue to be so in the future. To build upon this important policy, the Agency will increase its knowledge

of its regulatory requirements on small business by:

Greater Utilization of the Small Business Division (SBD).—EPA’s SBD assists the

program offices by helping identify and characterize small businesses affected by

Agency actions, sharing insights on regulatory impacts, and encouraging innovative

approaches to regulatory development. In fiscal year 2003, the SBD will enhance its

outreach efforts with the program offices by recommending small businesses for consultation activities, participating on workgroups to provide early guidance on rules,

and developing training materials to promote better understanding of small business issues during the rulemaking process.

Training.—The Agency’s Regulatory Steering Committee (RSC) is currently developing a training curriculum to implement the Agency’s 2001 EPA Task Force on

Regulatory Development recommendations. The initial training will be for Assistant

Administrators; however, the goal is to eventually provide training for all decisionmakers and rule writers. The initial training for Assistant Administrators will include an overview of the importance and necessity of small business outreach to understand and mitigate adverse impacts. The training will include guidance on how

to address this important responsibility.

Guidance.—The RSC is also revising its ‘‘Analytical Blueprint’’ (Blueprint) guidance. The Blueprint is a planning document that is developed early in the process

to guide the analytic support developed for priority regulations. The guidance will

include small business considerations so that potential impacts may be analyzed, as

appropriate.

Outreach.—Program offices are encouraged to attend briefings, interact with

stakeholders, and participate in conferences and other events to help increase

knowledge of the impacts of its regulatory requirements on small businesses. One

such example is the annual Small Business Ombudsman (SBO)/Small Business Assistance Program (SBAP) National Conference. This year’s conference is hosted by

the Illinois Department of Commerce and Community Affairs and will be held in

Chicago on June 29–July 3. These conferences provide an opportunity for the state

small business programs and EPA to share information about small business needs

across the country. The conference provides training and interactive opportunities

for all that attend. Each year, representatives from EPA program offices and regions

participate and learn about small business characteristics, impacts, and needs. In

addition, the Agency will continue to facilitate meetings between the Deputy Administrator and small business groups to ensure that small businesses have an opportunity to share their issues and concerns with the Agency’s senior management. Finally, the Agency’s Small Business Advocacy Chair will continue to work with the

Small Business Administration, the Office of Management and Budget, and small

business stakeholders, as appropriate.

Improved Access.—The Agency is providing better ways for small businesses to

share their views on proposed regulations and policies. The Agency has created

EDOCKET, an electronic public docket and on-line comment system designed to expand access to documents in EPA’s major dockets. EDOCKET will enable small

businesses to participate in the rule-making process and access electronic docket

materials more easily and more efficiently by using the Internet. This system was

developed to process and manage public information, including rule making documents, supporting documentation, and Federal Register notices. It will also help

small businesses view, retrieve, and submit comments online. Such improved access

will help the Agency increase its knowledge of the impacts of its regulatory requirements on small businesses.

Innovative Approaches.—In April, the Agency released its Innovation Strategy.

This strategy reflects EPA’s commitment to explore new and creative ways of

achieving cleaner air, purer water, and better protected land. The strategy provides

the Agency with a practical framework for encouraging innovative solutions to environmental challenges. Key actions in this framework include strengthening environmental partnerships, targeting priorities, expanding the current collection of tools,

and creating a more innovative culture to effectively address challenging problems.

Small businesses will be an integral component of the Agency’s innovative approach.

SMALL BUSINESS: INCREASE KNOWLEDGE OF IMPACT OF RULEMAKING IN FISCAL YEAR

2003

Question. In fiscal year 2003, how will EPA increase its knowledge of the impacts

on small business of rulemakings under consideration?
265

Answer. Understanding the impacts on small business is a critical component of

the Agency’s rulemaking process. In fiscal year 2003, the Agency will continue to

implement recommendations from the Task Force on Regulatory Development to

strengthen the analysis of policy issues, including the impact on small businesses.

Small business considerations will be specifically addressed in the Analytic Blueprints for priority actions. In addition, the Agency will continue to solicit the input

of small businesses during public comment periods for proposed rules, as well as

outreach to small business stakeholders under the Agency’s ‘‘any/any’’ policy. Finally, the Agency’s Small Business Advocacy Chair will continue to work with the

Small Business Administration, the Office of Management and Budget, and small

business stakeholders, as appropriate.

In fiscal year 2003, the Agency’s Small Business Division will continue to work

with the program offices to ensure that rulemakings that are under consideration

adequately address small business issues. Such activities include participating on

current workgroups, as well as helping program offices identify and consult with affected small business sectors. The Agency will increase its knowledge of impacts on

small business by:

Greater Utilization of the Small Business Division (SBD).—EPA’s SBD assists the

program offices by helping identify and characterize small businesses affected by

Agency actions, sharing insights on regulatory impacts, and encouraging innovative

approaches to regulatory development. In fiscal year 2003, the SBD will enhance its

outreach efforts with the program offices by recommending small businesses for consultation activities, participating on workgroups to provide early guidance on rules,

and developing training materials to promote better understanding of small business issues during the rulemaking process.

Training.—The Agency’s Regulatory Steering Committee (RSC) is currently developing a training curriculum to implement the Agency’s 2001 EPA Task Force on

Regulatory Development recommendations. The initial training will be for Assistant

Administrators; however, the goal is to eventually provide training for all decisionmakers and rule writers. The initial training for Assistant Administrators will include an overview of the importance and necessity of small business outreach to understand and mitigate adverse impacts. The training will include guidance on how

to address this important responsibility.

Guidance.—The RSC is also revising its ‘‘Analytical Blueprint’’ (Blueprint) guidance. The Blueprint is a planning document that is developed early in the process

to guide the analytic support developed for priority regulations. The guidance will

include small business considerations so that potential impacts may be analyzed, as

appropriate.

Outreach.—Program offices are encouraged to attend briefings, interact with

stakeholders, and participate in conferences and other events to help increase

knowledge of the impacts of its regulatory requirements on small businesses. One

such example is the annual Small Business Ombudsman (SBO)/Small Business Assistance Program (SBAP) National Conference. This year’s conference is hosted by

the Illinois Department of Commerce and Community Affairs and will be held in

Chicago on June 29–July 3. These conferences provide an opportunity for the state

small business programs and EPA to share information about small business needs

across the country. The conference provides training and interactive opportunities

for all that attend. Each year, representatives from EPA program offices and regions

participate and learn about small business characteristics, impacts, and needs. In

addition, the Agency will continue to facilitate meetings between the Deputy Administrator and small business groups to ensure that small businesses have an opportunity to share their issues and concerns with the Agency’s senior management. Finally, the Agency’s Small Business Advocacy Chair will continue to work with the

Small Business Administration, the Office of Management and Budget, and small

business stakeholders, as appropriate.

Improved Access.—The Agency is providing better ways for small businesses to

share their views on proposed regulations and policies. The Agency has created

EDOCKET, an electronic public docket and on-line comment system designed to expand access to documents in EPA’s major dockets. EDOCKET will enable small

businesses to participate in the rule-making process and access electronic docket

materials more easily and more efficiently by using the Internet. This system was

developed to process and manage public information, including rule making documents, supporting documentation, and Federal Register notices. It will also help

small businesses view, retrieve, and submit comments online. Such improved access

will help the Agency increase its knowledge of the impacts of its regulatory requirements on small businesses.

Innovative Approaches.—In April, the Agency released its Innovation Strategy.

This strategy reflects EPA’s commitment to explore new and creative ways of
266

achieving cleaner air, purer water, and better protected land. The strategy provides

the Agency with a practical framework for encouraging innovative solutions to environmental challenges. Key actions in this framework include strengthening environmental partnerships, targeting priorities, expanding the current collection of tools,

and creating a more innovative culture to effectively address challenging problems.

Small businesses will be an integral component of the Agency’s innovative approach.

SMALL BUSINESS: INCREASE KNOWLEDGE OF DELIVERY OF INFORMATION ABOUT

REGULATORY REQUIREMENTS IN FISCAL YEAR 2003

Question. In fiscal year 2003, how will EPA increase delivery of information about

its regulatory requirements to small businesses?

Answer. The Agency is committed to working with small businesses to ensure that

they are aware of, and understand, their environmental regulatory responsibilities.

While the Agency has made great strides to reach out to small businesses, it continues to look for new opportunities to address this key component of the regulatory

system. In fiscal year 2003, the Agency will build upon its progress by:

Greater Utilization of the Small Business Division (SBD).—The SBD hosts a tollfree hotline to answer small businesses’ questions about environmental regulations.

The hotline receives over 1,000 calls a month. The hotline will continue to be promoted as it provides one-stop’ assistance to help America’s small businesses find answers to their environmental questions. In addition, program offices will continue

to use the SBD’s vast network of small business contacts to distribute notices, announcements and other relevant compliance information to small business groups.

The SBD will continue to publish a newsletter twice a year that reports on important Agency activities. In addition, the new Small Business Environmental Assistance Providers Directory will be distributed to small business groups. The directory

is an easy-to-use quick reference of the key Federal, State and private programs

that can address small business environmental compliance, pollution prevention and

other related questions and concerns. It provides all of the relevant environmental

contacts a small business needs in one convenient location. The SBD will continue

to keep the small business community updated on Agency regulatory activities by

distributing EPA’s weekly press releases and the Small Business Quarterly Alert to

its comprehensive e-mail network.

Outreach.—The Agency will continue to support access to regulatory assistance

via comprehensive websites. These resources include the EPA websites targeting

small businesses (www.epa.gov/smallbusiness; www.epa/sbrefa; the small business

regulatory library (http://yosemite1.epa.gov/OPEI/smallbus/nsf)) and EPA-supported

sites such as one dedicated to small business issues (www.smallbiz-enviroweb.org).

In addition, the Agency has initiated over 100 activities designed to help small businesses fulfill their environmental responsibilities.

In fiscal year 2003, the Agency will continue to build upon these activities, including promoting the successful compliance assistance centers (http://www.epa.gov/compliance/assistance/centers/index.html) and sector resources, developing expert systems to help specific industries address compliance questions, holding workshops in

the regions to educate small businesses on new rules, and developing fact sheets to

help simplify small business obligations. Lastly, the Agency will continue to work

with small business stakeholders throughout the rulemaking process to identify effective approaches to deliver information to small businesses. Specific examples include Small Business Advisory Chair outreach, early consultation with small business representatives, Small Business Regulatory Enforcement Fairness Act

(SBREFA) panels, and SBREFA Compliance Guides, as appropriate.

Partnerships.—The Agency will continue to work with the regions, states, and

compliance assistance providers such as the State Small Business Assistance Program to deliver information to small businesses. Partnering with these stakeholders

will help amplify EPA’s message and ensure that information is reaching the small

business community.

SMALL BUSINESS: PROGRAM OFFICES CONSIDERING RULEMAKINGS DETERMINING IMPACT

ON POTENTIAL SMALL BUSINESS IN FISCAL YEAR 2003

Question. In fiscal year 2003, how will EPA further ensure that program offices

considering rulemakings determine potential small business impacts in areas which

they may not already be aware?

Answer. For Agency rules to be effective, the rule writers must understand the

industry being regulated. EPA’s current regulatory process requires rule writers to

identify rules that will affect small businesses and investigate options that could

minimize adverse burden. EPA will continue to support this important step in the

regulatory process. In fiscal year 2003, the program offices will continue to work
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with the Small Business Advocacy Chair, the Small Business Regulatory Enforcement Fairness Act (SBREFA) Team, and the Small Business Division to identify

and consult with affected small business entities. With additional emphasis on Analytic Blueprints and on early planning, consideration of small business issues should

improve. To further support these efforts, EPA is improving the guidance and training associated with its Action Development Process, as well as maintaining information on its SBREFA website (www.epa.gov/sbrefa).

Furthermore, the Agency will complete the revision to its Small Business Strategy

in fiscal year 2003. Significant research has been conducted to investigate what is

working at the Agency and what activities need to amended to effectively address

small business issues. The intent of the strategy will be to better integrate Agency

activities that support small businesses, including technical assistance and outreach, regulations that minimize burden, and participation in EPA’s voluntary programs. A primary goal of the strategy will be to ensure that program offices have

the tools and information needed to understand the small business sector and, thus,

appropriately regulate the selected industry. The Agency will determine potential

small business impacts by:

Greater Utilization of the Small Business Division (SBD).—EPA’s SBD assists the

program offices by helping identify and characterize small businesses affected by

Agency actions, sharing insights on regulatory impacts, and encouraging innovative

approaches to regulatory development. In fiscal year 2003, the SBD will enhance its

outreach efforts with the program offices by recommending small businesses for consultation activities, participating on workgroups to provide early guidance on rules,

and developing training materials to promote better understanding of small business issues during the rulemaking process.

Training.—The Agency’s Regulatory Steering Committee (RSC) is currently developing a training curriculum to implement the Agency’s 2001 EPA Task Force on

Regulatory Development recommendations. The initial training will be for Assistant

Administrators; however, the goal is to eventually provide training for all decisionmakers and rule writers. The initial training for Assistant Administrators will include an overview of the importance and necessity of small business outreach to understand and mitigate adverse impacts. The training will include guidance on how

to address this important responsibility.

Guidance.—The RSC is also revising its ‘‘Analytical Blueprint’’ (Blueprint) guidance. The Blueprint is a planning document that is developed early in the process

to guide the analytic support developed for priority regulations. The guidance will

include small business considerations so that potential impacts may be analyzed, as

appropriate.

Outreach.—Program offices are encouraged to attend briefings, interact with

stakeholders, and participate in conferences and other events to help increase

knowledge of the impacts of its regulatory requirements on small businesses. One

such example is the annual Small Business Ombudsman (SBO)/Small Business Assistance Program (SBAP) National Conference. This year’s conference is hosted by

the Illinois Department of Commerce and Community Affairs and will be held in

Chicago on June 29–July 3 These conferences provide an opportunity for the state

small business programs and EPA to share information about small business needs

across the country. The conference provides training and interactive opportunities

for all that attend. Each year, representatives from EPA program offices and regions

participate and learn about small business characteristics, impacts, and needs. In

addition, the Agency will continue to facilitate meetings between the Deputy Administrator and small business groups to ensure that small businesses have an opportunity to share their issues and concerns with the Agency’s senior management. Finally, the Agency’s Small Business Advocacy Chair will continue to work with the

Small Business Administration, the Office of Management and Budget, and small

business stakeholders, as appropriate.

Improved Access.—The Agency is providing better ways for small businesses to

share their views on proposed regulations and policies. The Agency has created

EDOCKET, an electronic public docket and on-line comment system designed to expand access to documents in EPA’s major dockets. EDOCKET will enable small

businesses to participate in the rule-making process and access electronic docket

materials more easily and more efficiently by using the Internet. This system was

developed to process and manage public information, including rule making documents, supporting documentation, and Federal Register notices. It will also help

small businesses view, retrieve, and submit comments online. Such improved access

will help the Agency increase its knowledge of the impacts of its regulatory requirements on small businesses.

Innovative Approaches.—In April, the Agency released its Innovation Strategy.

This strategy reflects EPA’s commitment to explore new and creative ways of
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achieving cleaner air, purer water, and better protected land. The strategy provides

the Agency with a practical framework for encouraging innovative solutions to environmental challenges. Key actions in this framework include strengthening environmental partnerships, targeting priorities, expanding the current collection of tools,

and creating a more innovative culture to effectively address challenging problems.

Small businesses will be an integral component of the Agency’s innovative approach.

SMALL BUSINESS: ENSURE PROGRAM OFFICES’ ECONOMIC ANALYSIS OF SMALL BUSINESS

IMPACTS DO NOT OMIT SMALL BUSINESS OR INDUSTRY SECTORS IN FISCAL YEAR 2003

Question. In fiscal year 2003, how will EPA further ensure that program office

economic analysis of small business impacts do not omit small businesses or industry sectors it believes may be impacted by the rulemaking but on which the agency

does not currently possess impact information?

Answer. The Agency will continue to stress the importance of outreach to small

business sectors to ensure that its rules accurately represent the industry that is

being regulated. Mechanisms for ensuring consideration of small business issues include: attention during the analytic blueprint development stage; continued implementation of the Agency’s ‘‘any/any’’ policy; RFA/SBREFA guidance, including assistance to rule writers on completing Initial Regulatory Flexibility Analysis (IRFA)

and Final Regulatory Flexibility Analysis (FRFA); and implementation of the Agency’s Guidelines for Preparing Economic Analyses, which includes a section on addressing small businesses.

In fiscal year 2003, the Agency will also continue to improve communications with

small business groups and trade associations by preparing newsletters for small

business stakeholders and holding meetings with trade association representatives.

Such activity will help educate the small business community about upcoming regulations and provide opportunities for small businesses to participate in the process.

Furthermore, EPA will continue to publish and distribute, via mechanisms including the Small Business Division (SBD), the semi-annual Regulatory Agenda to small

business contacts, which serves as an effective alert on upcoming regulatory actions.

The SBD will continue to be the lead conduit to receive information from small business groups on upcoming rules, and is charged with alerting the program offices accordingly.

NEW SOURCE REVIEW

Question. There are roughly 20,000 sources in this country subject to the Clean

Air Act, and EPA may take the position that any repair or replacement work at

these sources (other than minor maintenance that occurs frequently at an individual

facility) triggers an analysis under the new sources review (NSR) modification rule.

How many NSR applicability determinations do you estimate will be required annually for those 20,000 sources? Has this question been part of your review of NSR?

Answer. The impact of EPA’s ‘‘routine maintenance’’ policies is a question that we

examined during the NSR review. Many commenters expressed concern about the

potential impact of EPA’s policy. Commenters did not provide sufficient data to estimate the number of NSR applicability determinations undertaken annually. EPA

does not consider routine maintenance, repair or replacement work to trigger NSR

rules.

Question. A nationwide census of coal-fired boilers indicates that each existing

coal-fired boiler, on average, repairs or replaces the types of equipment that EPA

has identified in its NSR enforcement actions at least once per year. Assuming that

this is correct, how many additional NSR permits would such repair and replacement activity entail each year?

Answer. EPA’s enforcement records do not support the assumption presented by

this question. If a utility undertakes non-routine types of changes on an annual

basis, which would be uncommon, only those changes that result in significant net

emissions increases would trigger NSR. Simply performing a non-routine repair or

replacement does not necessarily lead to NSR.

As to the number of NSR permits needed, EPA’s records indicate that utility companies have about 1,100 coal-fired boilers currently in use, but we would need more

specific information about the types of changes and their effect on emissions increases before determining which ones may require permits.

Question. An EPA NSR expert has testified that, if a motor in a factory broke

down and had to be replaced, the factory could not reopen for up to 2 years while

the company processed paperwork and obtained an NSR permit. Even then, the facility could not resume operations until it retrofit new sources control technologies.

Is this correct? Have you performed an analysis of what this means for the nation’s

energy supply?
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Answer. We are unable to ascertain whether this is a correct interpretation of testimony provided by an EPA expert. It is important to note that only non-routine

changes that significantly increase emissions are required to undergo major NSR

permitting. The determination of whether a change is routine, and if not, its effect

on emissions, are based on case-specific facts, and the question does not provide

enough information to draw a conclusion for the case described. In cases where unexpected equipment failure has occurred in the past, the Agency has consistently

worked with industry and state and local permitting authorities to allow the facility

to get the unit back in operation quickly. Moreover, it is unlikely that the replacement of a minor factory component would require major NSR permitting.

EPA reviewed the impacts of NSR on investment in new utility and refinery generation capacity, energy efficiency, and environmental protection, as recommended

in the National Energy Policy. The report examined among other things, the impact

of delays associated with NSR. We reported to the President on our findings on

June 13, 2002.

Question. Over the last 30 years, EPA’s regulations and practices have excluded

from NSR all ‘‘routine maintenance, repair and replacement’’ and that EPA’s regulations specifically exclude any increases in emissions associated with operating a facility more hours, unless such an increase is prohibited by a federally enforceable

permit condition. So if all of this is correct, then how can it be explained that emissions are down under the CAA?

Answer. Under the Clean Air Act, NSR is only one tool to manage and reduce

emissions. In addition, there are several other significant Clean Air Act programs

working to provide substantial emissions reductions. For example, the Title IV Acid

Rain Program has reduced SO2 emissions from the electric utility industry by more

than 7 million tons per year. The Tier 2 motor vehicle emissions standards and gasoline sulfur control requirements will ultimately achieve NOX reductions of 2.8 million tons per year. Standards for highway heavy-duty vehicles and engines will reduce NOX emissions by 2.6 million tons per year. Standards for non-road diesel engines are anticipated to reduce NOX emissions by about 1.5 million tons per year.

The NOX ‘‘SIP Call’’ will reduce NOX emissions by over 1 million tons per year.

These reductions, together with NSR’s minimization of increases from new sources

and modifications that increase emissions, have worked together to ensure that

emissions have continued to decrease as the economy has grown.

Question. Owners of electric generating units may be able to avoid NSR by surrendering voluntarily available capacity through ‘‘minor source’’ permit proceedings.

Under these procedures capacity, whose construction states have authorized and

which ratepayers have paid for, could not be used. What are the potential impacts

on the national and state economies of this potential loss of generation capacity?

Answer. The NSR program does not require a utility making a change that results

in an emissions increase potentially subject to NSR to surrender generation capacity

in order to avoid major NSR permitting. In the limited cases where NSR potentially

applies, the source has options for how to assure that its emissions do not increase

as a result of the change. While some options may involve limiting operation to historic levels, others include reducing the emissions rate at the unit or at other units

at the plant. Nevertheless, the EPA examined the extent to which generation capacity may be affected by NSR as part of its review and reported to the President on

June 13, 2002.

Question. As the summer electric peak season draws near, the operators of our

nation’s electric generating fleet are still waiting for published guidelines on how

your agency will view maintenance and repair under the NSR program. These

guidelines have been promised for months. Without these EPA guidelines for plant

operators to follow, this reliability and the ability to meet the summer peak demands could be threatened. When will these guidelines be published?

Answer. As noted previously, the EPA has been looking closely at this question

as part of its review of NSR and is proceeding as expeditiously as possible to determine how best to respond to concerns raised by operators of electric generators and

other stakeholders. We reported to the President on June 13, 2002 on our review

of the NSR program. In that report, EPA proposed to initiate a rulemaking and public comment process on routine maintenance, repair and replacement. As has been

done in the past, EPA will continue to work closely with generators and regulators

alike to ensure that electric generation needs are met in harmony with the nation’s

clean air goals.

TOXICS RELEASE INVENTORY (TRI) PROGRAM AND THE TRI LEAD RULE

Question. The newly enacted Information Quality Act requires agencies to ensure

and maximize the quality, objectivity, utility, and integrity of data disseminated by
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the agencies. How does EPA plan to meet these goals with regard to the reporting

data generated under the TRI lead rule?

Answer. Section 313 of the Emergency Planning and Community Right-to-Know

Act (EPCRA) of 1986 and section 6607 of the Pollution Prevention Act (PPA) of 1990

requires EPA to annually collect releases and other waste management quantities

of listed toxic chemicals from covered facilities. EPCRA section 313 also requires

EPA to make this information available to the Federal, State, and local governments, researchers, and the public. EPCRA section 313 is very clear that EPA

should not require facilities to conduct any additional monitoring or testing to comply, but that facilities should use readily available information, such as monitoring

data collected pursuant to other laws, or make a reasonable estimate of their release

information. Therefore, the quality of the TRI data is dependent upon the information submitted by each facility.

To assist facilities in developing their release and other waste management estimates, the TRI Program provides extensive compliance assistance, such as:

—industry-specific or chemical-specific guidance documents;

—annual industry training workshops;

—user-friendly software such as the TRI Made Easy (TRI–ME). TRI–ME is an

interactive, intelligent software tool that guides facilities through the TRI reporting experience;

—annual updates of the Reporting Forms and Instructions;

—TRI User Support: a mechanism by which individuals with questions or need

assistance can contact EPA’s TRI Program directly to the EPA headquarters

TRI staff;

—EPCRA Call Center is a toll free number industry may call to obtain answers

and guidance to questions about completing the TRI (EPCRA section 313)

forms. The EPCRA Call Center number is (800) 424–9346. For callers in the

Washington, DC area the number is (703) 412–9810. The TDD is (800) 553–

7672; and

—facilities are also encouraged to write to the TRI Program directly, asking site

specific questions relating to TRI reporting requirements. The TRI program will

respond directly to the facility in writing.

In addition to the above compliance assistance activities, the TRI Program has a

number of procedures in place to ensure the quality of the data. Below are some

examples of the types of procedures implemented by the program:

EPA’s Data Entry Process is virtually (99.9 percent) error free. A key component

of this process is double key entry.

Once a facility’s data is entered into the EPA database, EPA prints out the entered data in a ‘‘facility data profile’’ (FDP) that is sent back to the facility to check.

The FDP automatically checks for data errors and notes those on the FDP that is

sent back to the facility. Facilities can then make revisions to their data if needed.

Independent of the ‘‘FDP process,’’ EPA has a process for facilities to revise or

withdraw their chemical reports if they discover they have made an error in reporting. For the 2000 reporting year, EPA evaluated approximately 350 such requests

from facilities to withdraw reported data from the TRI database and about 10,000

requests for revisions to data.

EPA sends each state a list of all the facilities that submitted a TRI report to

EPA and all the chemicals that they reported so that the states can check this

against the TRI reports they directly receive.

EPA sends each state a list of the 100 facilities with the largest releases in that

state. EPA asks the state to make sure that there are no facilities included or excluded that should not be. EPA follows up with telephone calls to the states.

Once all the data has been entered into the TRI database, EPA calls facilities that

may have an error in reporting, e.g., those facilities that reported very large increases or decreases in their releases from 1 year to the next and facilities with very

large quantities of releases and total production-related waste. EPA called more

than 200 facilities this year that met that criteria. Approximately 27 of the facilities

called had significant errors that needed to be corrected.

This year, for the newly-reported persistent bioaccumulative and toxic (PBT) data,

EPA identified 560 facilities to be called regarding their PBT chemical reports. As

a result of these calls, approximately 130 facilities revised their reported release and

other waste management data for PBT chemicals. For example, facilities revised

their total release quantity of dioxin and dioxin-like compounds to 95,910 grams

from the 750,226 grams originally reported.

Lastly, with regard to the Information Quality Guidelines, EPA is developing Information Quality Guidelines to be issued by October 1, 2002, as specified in the

guidelines published by the Office of Management and Budget (OMB). EPA’s guidelines will build upon ongoing efforts to improve the quality of the information used
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to support Agency policy and regulatory decisions. Given existing Agency-wide systems and procedures and the TRI Program methods, EPA is confident that the TRI

Program will be consistent with OMB’s Information Quality Guidelines.

AGENCY’S RESPONSE TO INCORRECT DATA IN TRI DATABASE

Question. How does EPA plan to identify information contained in the database

that does not meet the data quality standards, to correct or remove it, and educate

citizens that the TRI database contains such information?

Answer. EPA currently provides information to the public on its website that explains the benefits and limitations of the TRI data. In a document called ‘‘The

Toxics Release Inventory (TRI) and Factors to Consider When Using the TRI Data’’

EPA explains that facilities may report estimated data to the TRI Program and that

the program does not require them to conduct additional monitoring. This document

also explains that various estimation techniques may be used by facilities when

monitoring data are not available. EPA intends to continue to make this type of information available to TRI data users and provide context about the TRI data.

EPA is currently in the process of drafting its Information Quality Guidelines. As

part of this effort, EPA is reviewing its existing procedures for correcting information the Agency disseminates to the public. EPA’s guidelines, which are due to be

issued October 1, 2002, will address the identification and correction of information

that does not comply with the guidelines.

TRI LEAD RULE DATA QUALITY

Question. What measures has EPA instituted to ensure that data collected under

the rule requiring TRI reporting for lead and lead compounds are of high quality?

Answer. EPA does not require facilities to conduct any monitoring or testing solely for the purpose of TRI reporting. The TRI data reported by facilities represent

facility estimates based on monitoring data required by other provisions of law, or

if not available, on the best available information. Therefore, the quality of the TRI

data is dependent upon each facility.

The Agency has been very active in publicizing the new EPCRA section 313 reporting requirements for lead and lead compounds, and in providing compliance assistance. A primary purpose of EPA’s compliance assistance is to help those facilities

that may need to comply with the new TRI reporting requirements make more accurate threshold determinations and more accurate estimates of releases and other

waste management quantities of lead and lead compounds.

SMALL BUSINESS CONCERNS WITH DATA TRI DATA QUALITY

Question. In view of concerns raised by small business associations in their February 21, 2002, letter to EPA Administrator Whitman about implementation problems with this rule, how confident is the Agency in the quality of the data that it

will receive in the first reporting cycle under the lowered thresholds for lead and

lead compounds?

Answer. The Agency has been very active in publicizing the new EPCRA section

313 reporting requirements for lead and lead compounds, and in providing compliance assistance. A primary purpose of EPA’s compliance assistance is to help those

facilities that may need to comply with the new TRI reporting requirements make

more accurate threshold determinations and more accurate estimates of releases

and other waste management quantities of lead and lead compounds. The TRI Program has a number of procedures in place to improve the quality of the data. The

TRI Program believes that, collectively, these practices plus the compliance assistance activities help to ensure the quality of the TRI data. The Agency recognizes

that the first year data is inevitably for many a trial year and, therefore, not as

reliable as subsequent years. However, it believes that the data will not be any

worse than would normally be expected in a first reporting year.

IDENTIFICATION OF BUSINESS REQUIRED TO REPORT UNDER TRI LEAD RULE

Question. How will EPA identify the businesses required to report under the TRI

lead rule, especially the numerous small businesses that are newly subject to TRI

reporting requirements under the rule? What outreach efforts has EPA made to ensure that each of them is aware of the new reporting requirements?

Answer. EPA has been very active with outreach efforts during the entire development of the lead rule. This includes three public meetings that EPA conducted with

special emphasis on potential small business impacts of the lead rule in Los Angeles, Chicago, and Washington, DC. The notices announcing the meeting were reviewed by the Small Business Association (SBA). The meeting was also announced
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in a targeted mailing. EPA has been very active in announcing the final TRI lead

rule, and informing those who may have to comply with the new reporting requirements for lead and lead compounds. In addition to the Federal Register notice (April

17, 2002) and subsequent press releases, and extensive media coverage announcing

the final lead rule, EPA’s TRI Program has conducted extensive outreach efforts to

inform those who may need to comply with the TRI lead rule of the new reporting

requirements, and to provide compliance assistance, especially to those who are not

familiar with TRI reporting. These outreach efforts are described briefly below.

Fact Sheet.—In August of 2001, the TRI Program developed a ‘‘Fact Sheet’’ that

announces: 1) the new TRI lead rule; 2) the development of a guidance document

to provide technical assistance for complying with the lead rule; and 3) compliance

assistance workshops. This Fact Sheet was distributed electronically by EPA’s Small

Business Office to many individuals and organizations (i.e., businesses, including

small businesses and trade associations) that may be affected by the new rule.

Guidance Document.—The TRI Program developed a technical guidance document

through a public notice and comment process. A draft version was released on September 10, 2001, within 5 months after the lead rule became effective. A public

(stakeholder) meeting was held on September 24, 2001, to discuss the draft version.

A final version was released at the beginning of January 2002.

Lead Rule Training Workshops.—The TRI Program conducted nine lead rule

workshops that were held throughout the various regions of the country in the fall

of 2001. Approximately 730 people registered for the fall 2001 workshops. In general, the feedback received by the TRI Program from the participants was positive.

EPA’s Small Business Ombudsman Office sent out e-mail announcements to trade

organizations and interested parties, including the SBA, announcing the lead rule

workshops.

EPA published a Federal Register notice announcing the lead rule workshops and

sent flyers directly to interested parties via e-mail.

EPA spoke at conferences, attended meetings, and assisted in the development of

outreach materials for trade associations upon the request.

EPA posted announcements of all of these efforts on the TRI Program’s internet

homepage, and EPA Regional offices sent out mass mailing announcements to regulated entities and states.

In addition to the above-mentioned special assistance for the lead rule, the TRI

Program has established an extensive compliance assistance program to all those

who need to comply with TRI reporting requirements (including the lead rule), including those in small businesses. The TRI Program provides this assistance

through the:

—TRI hotline;

—TRI Industry Workshops.—TRI Program sponsors compliance assistance workshops which are offered every spring in each EPA Region (approximately 3,000

attendees for the spring 2001 workshops). Currently, the TRI Program is conducting forty-two workshops across the country. These workshops cover the new

reporting requirements for lead and lead compounds (the training materials for

the 2002 spring workshops are available from the TRI Program’s internet homepage);

—TRI User Support.—A mechanism by which individuals with questions who

need assistance can contact EPA’s TRI Program; and

—TRI–ME: TRI–ME is an interactive, intelligent, user-friendly software tool that

guides facilities through the TRI reporting requirements.

EPA believes that its outreach efforts to reach small businesses have been effective; this is supported by the fact that every year TRI-training workshops are well

attended, and that the Agency has received many compliance-related questions from

individuals from different types of facilities, sizes, and industry sectors. Also, during

the public comment period of the proposed lead rule (published August 3, 1999), the

Agency received many comments from small and large businesses and trade associations that represent diverse industry sectors. In addition, since promulgation of the

final rule, the Agency has received many inquiries from: trade associations that represent small businesses and large businesses; the SBA; and individuals (e.g., presidents, CEOs) from businesses.

SMALL BUSINESS UNAWARE OF REPORTING REQUIREMENTS

Question. Are there still small businesses that are unaware of their reporting requirements, and if so, how will EPA educate them and require them to submit reports?

Answer. EPA does not have a listing of the number of small businesses that are

unaware of and not in compliance with the new reporting requirements. EPA will
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continue with its compliance assistance and outreach efforts and work with trade

associations to assist businesses in complying with the TRI lead rule.

GENERAL AWARENESS OF REPORTING REQUIREMENTS AMONG THOSE REQUIRED TO

REPORT

Question. How confident is EPA that the entire population of those required to

report under the new TRI lead rule are aware that they must report? What steps

is EPA taking to ensure that all those who must report have received reporting

forms, including those who will be reporting for the first time?

Answer. EPA is confident that those facilities who may have to comply with the

new TRI lead should be aware of it by now. This confidence is based on: (1) the attention that this rule has drawn from businesses and other entities during the public comment period of the proposed rule, and after the rule became final; (2) the

mass announcements of the rule and new reporting requirements, training workshops, and a technical guidance document made by EPA via Federal Register notices, electronic mailings, flyers, and postings on the TRI Program’s internet site;

(3) notifications sent to the trade associations of activities related to the workshops

and guidance documents; (4) attendance at the fall and spring training workshops;

and (5) the many inquiries received by EPA from small and large businesses; trade

associations; the SBA; and others regarding the new rule.

EPA announces the availability and how to obtain the TRI reporting forms and

instructions through a variety of mechanisms. These include: the TRI internet home

page, the technical guidance manual for lead and lead compounds; the training

workshops and the materials distributed at the workshops; TRI User Support (a

mechanism by which individuals with questions or need assistance can contact

EPA’s TRI Program; and the TRI Hotline. Businesses may also obtain details regarding TRI Reporting forms from their trade associations.

PRESIDENT’S DIRECTIVE FOR TECHNICAL ASSISTANCE TO SMALL BUSINESS REGARDING

TRI LEAD RULE

Question. In his press release dated April 17, 2001, the President asked Administrator Whitman to provide technical assistance to affected small businesses to help

them prepare their first reports under the TRI lead rule. What has been done to

meet the President’s directive? Have these efforts been adequate to ensure that

these small businesses can provide high quality data?

Answer. Subsequent to the decision to move forward with the final lead rule, the

President specifically directed the EPA to provide compliance assistance to affected

businesses, especially small businesses, to help them prepare their first release reports which are due by July 1, 2002.

EPA has worked hard to provide this assistance. The Agency issued a technical

guidance document on how to comply with the new lead rule and held nine workshops throughout the country last fall on the new rule. More than 700 individuals

attended the workshops. These workshops and the availability of the draft and final

versions of the guidance document were extensively publicized. This information

was made available through announcements and notices published in the Federal

Register, the Agency’s TRI web page, and e-mail announcements sent out by EPA’s

Small Business Ombudsman Office to trade organizations and interested parties, including the SBA. In addition, TRI user support and access to TRI experts have been

available through the TRI web page and interactive software link, as well as

through the Agency’s TRI telephone hotline.

The Agency continues to work hard to provide compliance assistance. More than

forty EPA workshops on compliance with the TRI reporting requirements are being

held this spring in various areas of the country, and these workshops will be especially helpful to those who will be responsible for reporting lead and lead compounds

for the first time. Also, the training materials used at these workshops are available

on the Internet through the TRI web page.

EPA’s outreach to the small business community and compliance assistance efforts to help small businesses comply with the new lead reporting requirements

have been unusually extensive and robust. The Agency will continue to be diligent

in its contacts with affected businesses to give them the assistance necessary to

comply with the new regulation.

While EPA has been diligent in providing assistance to small businesses, the quality of the data is dependent on facilities because they have the best knowledge of

their processes and the quantities of the chemicals that they use or manufacture.
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ASSISTANCE TO SMALL BUSINESS WITH COMPLIANCE TO TRI LEAD RULE

Question. In my March 7, 2002 letter to Administrator Whitman, I raised concerns

over EPA’s failure to assist small businesses with compliance on the TRI lead rule.

Does EPA plan to enforce the reporting requirements of the TRI lead rule during

this first year when small businesses still have not received adequate guidance to

assist in their compliance?

Answer. As with any new TRI rule, EPA emphasizes compliance assistance during

the first year of implementation rather than enforcement. In fact, the compliance

assistance provided by the TRI Program regarding the new reporting requirements

for lead and lead compounds has been unusually extensive and robust, and we believe sufficient to achieve compliance for the 2001 reporting year. EPA intends to

continue promoting compliance by providing assistance with lead and lead compound reporting to TRI. Should a small business discover a violation after taking

advantage of compliance assistance, either that provided by EPA or by another compliance assistance provider, it may be eligible for the Agency’s Small Business Compliance Policy. This policy provides for the elimination or significant reduction of

penalties for small businesses (those with 100 or fewer employees) if the company

discovers, discloses, and promptly corrects the violations. Those businesses with

greater than 100 employees may be eligible for similar penalty elimination or reduction through the Agency’s Incentives for Self-Policing: Discovery, Disclosure, Correction and Prevention of Violations.

SMALL BUSINESS TRI REPORTING

Question. What materials are EPA making available to educate small businesses

on how to report accurately under the TRI lead rule?

Answer. The Agency’s outreach to the small business community and compliance

assistance efforts to help small businesses comply with the new lead reporting requirements have been unusually extensive and robust. A primary purpose of EPA’s

compliance assistance is to help those facilities that may need to comply with the

new TRI reporting requirements make more accurate threshold determinations and

estimates of releases and other waste management quantities for lead and lead compounds. One example of a product the Agency has made available to educate small

businesses on how to report accurately is the lead guidance document, which is a

technical document that offers assistance in complying with the new rule. In addition, TRI user support (a mechanism by which individuals with questions or need

assistance can contact EPA’s TRI Program and access to TRI experts are available

through the TRI web page and interactive software link, as well as through the

Agency’s TRI telephone hotline). The training materials used at the spring 2002

training workshops are available on the Internet through the TRI web page. The

TRI Program has recently developed TRI–ME: TRI–ME is an interactive, intelligent,

user-friendly software tool that guides facilities through the TRI reporting requirements.

SMALL BUSINESS TRI REPORTING WITHOUT COMPUTERS

Question. How does EPA intend to educate small businesses required to report

under the rule that do not have access to a computer or the Internet?

Answer. There are many means (other than the internet) by which anyone can

obtain information on how to comply with any TRI-related regulation, including the

lead rule. One example includes the TRI Program’s annual training workshops.

These workshops are publicized in several different ways, such as through mailing

announcements and Federal Register Notices. EPA has also established various

other mechanisms for facilities to receive information or assistance. For example, facilities can contact the TRI Program directly by submitting written questions about

site specific questions, and the TRI Program will respond in writing. Also, questions

about the implementation of the TRI reporting requirements may be directed to the

TRI User Support telephone line at 202–566–0250. Calls received will be forwarded

directly to TRI Program staff. Upon request, the TRI Program will send out hard

copies of the lead rule guidance document. The TRI Program has also established

a hotline, the EPCRA Call Center, which is a toll-free number facilities may call

to obtain answers and guidance to questions about completing the TRI Form R reporting form. The EPCRA Call Center number is (800) 424–9346. Callers in the

Washington, DC area should call (703) 412–9810. The TDD is (800) 553–7672. This

contact information is available through a variety of EPA publications. In addition,

many trade associations have this information. EPA plans to continue these and

other outreach and assistance efforts.
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TRI: HOW HAS THE GUIDANCE DOCUMENT RECEIVED BY THE SMALL BUSINESS

COMMUNITY

Question. How has the guidance document for the rule, which is over 200 pages

and was not finalized until after the first reporting period was complete, been received by the small business community? To the extent concerns have been raised,

how does EPA plan to address them?

Answer. The TRI Program developed the guidance document through a public notice and comment process. A draft version was released on September 10, 2001

(which is within 5 months after the lead rule became effective). A public (stakeholder) meeting was held on September 24, 2001. This meeting provided the TRI

Program with the opportunity to discuss the draft version with stakeholders, and

listen to comments offered by stakeholders. The final version of the document was

developed from consideration of the comments submitted to EPA in writing during

the public comment period, and comments raised at the public meeting. The final

version was released at the beginning of January 2002: nearly 7 months before the

deadline for submitting the first year release reports.

The actual body of the lead rule guidance document is only 65 pages long. The

remaining sections are appendices. The appendices contain extensive and valuable

information such as emission factors, thereby minimizing the time for facilities to

search for this information elsewhere (e.g., saves facilities time from having to

search for the factors on the Internet or elsewhere). The guidance document is well

organized and easy to use: it contains a table of contents, a list of figures, a list

of tables, and an index. The guidance document contains many real-world examples

of scenarios likely to be encountered at facilities. Detailed explanations are provided

on how facilities should deal with these scenarios with regard to the new reporting

requirements for lead and lead compounds. In addition, Appendix B of the document

‘‘Selected Questions and Answers,’’ provides EPA’s answers to commonly asked

questions regarding the new reporting requirements for lead and lead compounds.

The TRI Program has a policy for revising its guidance documents. Guidance documents will be revised as appropriate, based on changes in information, rules, or

TRI Program policies and practices. The TRI Program always welcomes comments

and additional information for all of its guidance documents, from all stakeholders.

The Agency may choose to revise the lead guidance document at a future date if

the Agency believes that such revision is needed based on constructive comments

received.

TRI: UNUSUAL ASPECTS OF THE TRI LEAD RULE

Question. Because the TRI lead rule has aspects that are unique or unusual, such

as the retroactive reporting obligation and the elimination of the de minimis reporting exemption, what specific guidance has the Agency developed to address these

issues?

Answer. The TRI lead rule does not impose a retroactive reporting obligation because it does not alter the past legal consequences of past actions. This rule does

not affect a facility’s liability for past conduct.

In addition, no reporting obligation was placed on affected facilities prior to the

rule’s effective date. Reports are not required to be filed until July 1, 2002. Nor does

the rule require facilities to have developed or kept records for any period predating

the effective date of the rule; facilities are not required to conduct any testing or

monitoring in order to report. EPCRA section 313(g)(2) only requires facilities to use

‘‘readily available data’’ or to make reasonable estimates based on whatever information they have, to develop their report.

EPA’s 1999 persistent, PBT chemicals rule eliminated the de minimis exemption

for TRI reporting of PBT chemicals. In the TRI lead rule, EPA determined that lead

and lead compounds are PBT chemicals. EPA has provided facilities with guidance

in the lead guidance document, as well as in the training workshops, to aid facilities

in meeting their reporting obligations in the absence of the de minimis exemption.

TRI: ASSISTANCE TO SMALL COMPANIES

Question. Will EPA assist small companies in dealing with the retroactive effect

of the rule by allowing them to estimate their lead usage during the months of January through April by extrapolating from data concerning their lead usage after the

rule was made effective?

Answer. EPCRA only requires facilities to use ‘‘readily available data (including

monitoring data) collected pursuant to other provisions of law, or, where such data

are not readily available, reasonable estimates of the amounts involved.’’ The lead

rule does not alter this requirement. Thus, if facilities only have information con-
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1See, e.g., U.S.C. 41507; Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380 (1947).

cerning their lead use and/or ‘‘releases’’ after April 17, 2001 (the date the rule became effective) they may extrapolate from that to make reasonable estimates of the

amount of lead ‘‘released’’ during the reporting year. However, to the extent that

facilities have records of their use and releases of lead and lead compounds for other

reasons, such as to demonstrate compliance with air or water permits, or for tax

purposes, they would be required to consider that information in developing their

threshold and release calculations.

TRI: SMALL BUSINESS AND THE 100-POUND THRESHOLD

Question. With regard to the deletion of the de minimis exemption, how are small

businesses to determine if they meet the 100-pound threshold for reporting under

the rule?

Answer. EPCRA section 313 is very clear that EPA should not require facilities

to conduct any additional monitoring or testing to comply, but that facilities should

use readily available information, such as monitoring data collected pursuant to

other laws, or make a reasonable estimate of their release information. Guidance

for determining whether a facility exceeds the 100-pound threshold for manufacturing, processing, or otherwise using lead or lead compounds is presented: in the

lead guidance document; at the training workshops; in materials distributed at the

workshops and currently available from the TRI Program’s internet home page

(http://www.epa.gov/tri/report/training/index.htm); and directly from the TRI Program.

TRI: SMALL BUSINESS REPORTING RESPONSIBILITY IN THE CASE OF ‘‘NO KNOWLEDGE’’

Question. What responsibility does a small business have for reporting under the

TRI lead rule if it has no knowledge that it manufactures, processes, or otherwise

uses lead above 100 pounds per year?

Answer. If a small business has no actual or constructive knowledge that it manufacturers, processes, or otherwise uses lead above the threshold (100 pounds per

year), then it has no reporting responsibility for lead under the TRI lead rule.

TRI: KNOWLEDGE IN THE CONTEXT OF TRI REPORTING

Question. What constitutes knowledge in the context of TRI reporting?

Answer. In this context, knowledge concerns both knowledge of the facts at a facility and knowledge of the law. It has been EPA’s experience that facilities have

knowledge, at a minimum, of the following: the facility’s processes, EPA reporting

instructions, EPA guidance documents, supplier notifications, trade association documents, the facility’s air and water permits, and hazardous waste manifests. Regarding the issue of what constitutes a business’ knowledge of the law, courts have

long held that everyone possesses constructive knowledge of the laws passed by

Congress and implementing rules and regulations published in the Federal Register.1

However, EPA has engaged in outreach efforts to promote awareness among those

required to report, including a robust compliance assistance program. These efforts

include: a technical guidance document devoted specifically to assisting businesses

to comply with the lead rule (developed through public notice and comment), and

nine lead rule workshops that were held throughout the various regions of the country in the fall of 2001. EPA estimates that more than 700 individuals participated

in the fall 2001 workshops. The Agency announced these workshops through several

channels, including: e-mail announcements to trade organizations and interested

parties, including the SBA; a Federal Register notice; flyers sent directly to interested parties via e-mail; announcements posted on the TRI Program’s internet

homepage; and mass mailings conducted to states and regulated entities.

In addition to this special assistance for the lead rule, EPA has an extensive compliance assistance program for all those subject to basic TRI reporting requirements.

The TRI Program provides ongoing assistance through: a toll-free hotline staffed

with individuals trained to answer TRI-related questions; workshops which are offered every spring in each EPA Region (approximately 3000 attendees for the spring

2001 workshops); TRI User Support, which is a mechanism by which individuals can

directly contact EPA headquarters TRI staff; and TRI–ME, an interactive, intelligent, user-friendly software tool that guides facilities through the TRI reporting requirements.
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DISTINCTION BETWEEN ‘‘HAVING NO KNOWLEDGE’’ AND ‘‘NOT REPORTING’’ UNDER TRI

LEAD RULE

Question. What is the difference between ‘‘having no knowledge’’ and ‘‘not reporting’’ under the TRI Lead rule?

Answer. Knowledge raises the issue of whether an entity has an obligation to report. ‘‘Reporting’’ or ‘‘not reporting’’ is a solely an issue of whether an entity subject

to the requirements has submitted reports or not. An entity ‘‘having no knowledge’’

would not report, but ‘‘not reporting’’ does not imply that a TRI reporting threshold

has not been exceeded.

TRI: KNOWLEDGE IN AN ENFORCEMENT CONTEXT

Question. What is the difference in an enforcement context?

Answer. The extent of an entity’s knowledge about a regulatory obligation is one

factor in determining the level and type of enforcement response.

TRI: BURDEN OF PROOF IN AN ENFORCEMENT CONTEXT

Question. Who has the burden of proof in an enforcement context?

Answer. In enforcement proceedings, the EPA has the burden of proof that the

violation occurred as set forth in a complaint. Following EPA’s presentation of a

prima facie case, a respondent has the burden of proof as to any defenses.

IRIS/RESIDUAL RISK RULEMAKING

Question. In fiscal year 2002, the Committee provided an additional $5,000,000

above the budgeted request to accelerate the development of new and update current Integrated Risk Information System (IRIS) values. The Committee continues

to be concerned that EPA is not meeting its goals and, more importantly, is not

making the systemic improvements in its IRIS program to achieve the primary goals

of A) updating existing risk values to reflect the current best available science and

B) generating new values to meet growing demands by state, Federal, and even

international users of IRIS. What plan is ORD following in spending the $5M?

Answer. The new funds are available for extramural support to EPA’s program

offices through the Environmental Program Management (EPM) account. This support will be directed towards the scientific development and peer review of IRIS assessments. The Administrator has stated that developing options for the updating

and improvement of IRIS is a key function of ORD’s Assistant Administrator in his

new capacity as EPA Science Advisor. ORD has convened an intra-Agency group

and is coordinating development of a plan among the program offices for spending

the $5M designated by Congress in fiscal year 2002 for updating and adding assessments to IRIS.

Question. What systemic improvements will ORD achieve through its expenditures that will (A) lead to a steady, sustainable update of existing IRIS values, and

(B) lead to a quicker rate of throughput for new IRIS risk values?

Answer. EPA has a system in place for the generation and review of IRIS assessments across the Agency. ORD is coordinating a plan by which EPA program offices

will expend the fiscal year 2002 additional funds. The new extramural funds will

help in the scientific development and peer review of IRIS assessments during fiscal

year 2002–2003, thereby increasing both the number of existing IRIS values that

are up-to-date and the number of new assessments added to the database.

Question. How is ORD working with external experts toward achieving the primary IRIS improvement goals for which the Committee provided additional funding?

Answer. ORD recognizes that significant expertise exists outside of EPA that can

assist in developing and peer reviewing IRIS assessments. This expertise can contribute to the primary improvement goals of updating IRIS and adding new assessments. ORD is coordinating a plan by which EPA program offices will expend the

fiscal year 2002 additional funds by engaging external experts in IRIS improvement

through contractual mechanisms. The funds will be used to access EPA contractors

to help with the scientific development and peer review of IRIS assessments.

Question. The Agency is now facing a series of deadlines to promulgate residual

risk standards under Section 112(f) of the Clean Air Act. An important element of

this process is the selection of health benchmark values that represent for each

major air toxic the best available, updated information on potential health effects.

Unfortunately, IRIS includes many values for which new, more accurate data is

available. How many IRIS updates does the Agency expect to complete in fiscal year

2002? How many do you plan to complete in fiscal year 2003?
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Answer. EPA is aware of the requirements to promulgate residual risk standards

under the Clean Air Act. The Agency has identified 53 air toxics that are important

to early residual risk assessments. Twenty-seven of these air toxics were determined

to be highest priority for assessment or reassessment and are in progress in the

IRIS program. Four assessments of the high priority air toxic chemicals will be completed in fiscal year 2002 and seventeen are scheduled for completion in fiscal year

2003.

Question. What criteria did the Agency use to determine the values that would

be updated in fiscal year 2002 and fiscal year 2003?

Answer. For fiscal year 2002, EPA’s approach to developing the annual IRIS agenda was to compile nominations for priority chemicals for new assessments and reassessments, and to apply a general set of criteria to determine which to undertake.

The criteria were, (1) Agency statutory, regulatory, or program implementation

need; (2) the availability of new scientific information or methodology that might

significantly change current IRIS information; (3) interest to other levels of government or the public; (4) completion of most of the scientific assessment work while

meeting other Agency requirements such that only a modest additional effort is

needed to complete the review and documentation for IRIS. The priorities that

emerged from the application of these criteria were then considered in light of available Agency staff to manage assessments and available extramural resources. Application of these criteria are standard practice for the IRIS program. Similar or identical criteria will be applied to develop the agenda for fiscal year 2003.

Question. What is the process for incorporating the 2002 and 2003 updates into

the 112(f) rules, which are due beginning in 2003, or alternatively, what process will

be employed to incorporate these values into the residual risk rule if IRIS updates

are not completed?

Answer. OAR has identified those substances which it believes will play a significant role in the early 112(f) assessments and thus require updated assessments via

the IRIS process. These are under development for completion in 2002 and 2003.

As these IRIS assessments are available, they will be relied upon in risk assessments completed under 112(f). As information is available regarding pending

changes to IRIS assessments, it will be used to supplement 112(f) risk assessments

and to inform 112(f) rule development as feasible and where scientifically appropriate. Our general policy is that any dose-response (or health) assessment that

would significantly affect a regulatory decision should be peer reviewed prior to finalization of that decision.

Question. In response to questions submitted last year on your fiscal year 2002

budget proposal, EPA stated that the primary determinant of how many new assessments can be undertaken in fiscal year 2002 is the ‘‘availability of scientific staff

to lead or oversee the work.’’ Please provide the number of scientific staff EPA dedicated to IRIS updates over the past four fiscal years and the Agency’s plans for fiscal year 2003.

Answer. Availability of scientific staff to lead or oversee assessment development

and review is key to the IRIS process of generating Agency consensus documents.

Over the past 4 years, an average of 40 ‘‘IRIS chemical managers’’ have been involved across the Agency. In addition, 16 ‘‘consensus reviewers’’ and many other internal peer reviewers have contributed to the scientific process. Most have multiple

responsibilities in addition to participating in the IRIS program. A central IRIS staff

also contributes to scientific quality assurance. In fiscal year 2003, EPA staffing is

likely to continue at approximately the same level.

Question. One way to accelerate IRIS updates is to make greater use of external

entities in helping to conduct risk assessments, subject to EPA review and approval.

In response to questions on your fiscal year 2002 budget submittal, your Agency

stated that it has 6 pilot assessments underway which involve collaborative efforts

to develop assessments with other Agencies and the private sector, and ‘‘that the

Agency will have sufficient experience with these efforts to evaluate them in terms

of quality and timeliness of products in fiscal year 2002.’’ What were the results of

this review and what are the Agency’s plans to expand the use of outside entities?

Answer. EPA has been interested in the possibilities for accelerating IRIS updates

by making greater use of health assessments generated by external entities. The

Agency undertook six pilot assessments in fiscal year 2000 whereby EPA could engage in a dialogue with and provide feedback to external parties developing health

assessments which could then be used as supporting documents for EPA’s IRIS assessments. Other IRIS assessments in progress also engage external entities in various aspects of data or model development and review, but the aforementioned pilots

test whether a full health assessment generated externally can be useful for EPA.

Two of these pilots have since been discontinued, and the remaining four are still

in progress. The need for sustained engagement of EPA chemical managers to inter-
279

act with external entities is one important aspect of ensuring usable, timely products. Expansion of this effort to engage external entities in the development of assessments useful to EPA for IRIS will depend in part on availability of staff and

evaluation of the four remaining pilot assessments when they are completed.

Question. As noted in previous correspondence to the Agency, EPA committed in

an August 26, 1994, Air Office Guidance on the Use of integrated Risk Information

System to incorporate new toxicological information during rulemakings. This commitment was repeated by Administrator Whitman on September 7, 2001 (66 FR

46929) when she stated that ‘‘IRIS values are not legally binding and are not entitled to conclusive weight in any rulemaking.’’ To make this commitment a reality

during the development of residual risk standards, how many FTEs with scientific

background does the air program office have to evaluate new toxicological data?

Answer. Different program offices within EPA participate in the IRIS process in

different ways. Some program offices have an in depth expertise in toxicology and

thus update and/or develop most of their IRIS assessments. OAR has limited expertise in this area and thus has relied to a large extent on the Agency’s Office of Research and Development (ORD)/National Center for Environmental Assessment

(NCEA) offices to update reference concentrations (RfCs) for priority chemicals. This

support is critical to our regulatory program. ORD assists OAR in the air toxics residual risk program by reviewing toxicological data and in the consultative review

of other residual risk assessments. ORD devotes approximately 9 FTE per year to

assist OAR with IRIS. In addition, OAR has 2 FTEs with the requisite scientific

knowledge to evaluate new toxicological data. The air program currently has 0.2

FTE of these FTEs available in OAR to do this kind of work. Discussions are currently in progress to determine how OAR can begin to develop IRIS files for chemicals that are not high priorities for other program offices and to help the Agency

speed up the process of evaluating new toxicological data.

Question. If EPA expects ORD to conduct any review, please describe the process

by which this data will be reviewed to ensure a timely evaluation, especially in instances where there is inadequate time for a full fledged IRIS value review and update? How many FTEs in ORD will be devoted to reviewing toxicological data submitted during or in anticipation of rulemakings?

Answer. ORD will continue to assist the Office of Air and Radiation (OAR) in the

air toxics residual risk program. ORD reviews toxicological data in the standard

process for developing air toxics assessments for IRIS. Where there is inadequate

time or priority for developing an IRIS assessment, ORD recommends other sources

for dose-response values. ORD also assists in the consultative review of other residual risk assessments for OAR. ORD devotes approximately 8 FTE per year to the

development of assessments for chemicals of priority to the residual risk program,

and less than 1 FTE per year for consultative review.

MACT STANDARD SETTING

Question. How many MACT standards have yet to be promulgated? Please provide

an updated list of the remaining MACT source categories and the Agency’s current

schedule for when the Agency will promulgate standards for these source categories.

Answer. There are 36 10-year Maximum Achievable Control Technology (MACT)

standards that are yet to be promulgated; three of the promulgations represent a

combination of 2 standards from the original list of categories subject to MACT.

These were efficiently combined because they addressed the same industry. The updated list of remaining MACT standards and the draft schedule for completion are:

Signature by June 30, 2002

Large Appliances

Polyvinyl Chloride & Co-polymer Production

Signature by November 30, 2002

Municipal Solid Waste Landfills

Friction

Paper & Other Web Coating

Signature by February 28, 2003

Flexible Polyurethane Foam Fabrication Operations

Coke Ovens; pushing, quenching & battery stacks

Reinforced Plastics

Semiconductors

Miscellaneous Metal Parts & Products (Surface Coating) (&Asphalt/Coal Tar Application on Metal Pipes)

Refractories Manufacturing
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1These promulgations represent a combination of 2 standards from the original list of categories subject to MACT. These were combined because they addressed the same industry.

Brick, Structural Clay Products & Clay Ceramics Manufacturing 1

Asphalt Roofing/Asphalt Processing

Integrated Iron & Steel

Hydrochloric Acid Production Industry/Fumed Silica 1

Engine Test Cells/Stands

Metal Furniture

Fabric Printing, Coating & Dyeing

Signature by August 30, 2003

Combustion Turbines

Wood Building Products

Lime Manufacturing

Site Remediation

Iron Foundries

Taconite

Miscellaneous Organic Chemical Products & Processes (MON)

Organic Liquids Distribution

Primary Magnesium

Metal Can

Plastic Parts (Surface Coating)

Bin 5 Signature by February 28, 2004

Industrial, Commercial & Institutional Boilers & Process Heaters 1

Plywood & Composite Wood Products

Reciprocating Internal Combustion Engines (RICE)

Auto & Light Duty Truck Manufacturing (Surface Coating)

MACT STANDARD SETTING

Question. Under the Section 112(j) of the Clean Air Act, if the Administration fails

to promulgate a MACT standard within 18 months of the statutory deadline—May

15, 2001—owners and operators must file a permit application with their state and

local permitting authorities that includes a source-specific MACT determination—

a very burdensome requirement on sources. Part I of this application is due on May

15, 2001. How many individual sources does EPA estimate will have to submit Part

I applications? When will the Part II applications be required?

Answer. As of May 15, 2002, the Part I permit application deadline, we had not

promulgated 36 MACT standards covering 62 source categories. We roughly estimate that there are over 84,000 emitting facilities located at major sources subject

to the Part 1 submittal requirements. The actual number of Part 1 applications will

be significantly less because many major sources contain multiple emitting facilities

contained in the source categories. However, each application will cover as many of

the emitting facilities as are located at that source.

In the recent rule amendments which created the two-part application process, we

made it clear that the Part 2 application must include certain source-specific information needed to make a MACT determination, but the application itself need not

include a ‘‘source-specific MACT determination.’’ Although the current regulation

specifies that sources have 24 months to submit the Part 2 application after submitting the Part 1 application, a national environmental group has filed a petition for

judicial review to challenge this provision. We are currently engaged in settlement

discussions in that case, and these discussions will most likely lead to a proposed

change in this timetable. If we fail to reach a settlement an adverse judicial determination in that case could also change the timetable.

Question. If EPA has yet to promulgate standards by this date, what additional

information will have to be included in the Part II permit application?

Answer. Part 2 of the permit application requires:

—The anticipated date of startup of operation of any new affected source.

—The hazardous air pollutants emitted by each affected source in the relevant

source category and an estimated total uncontrolled and controlled emission

rate for hazardous air pollutants from the affected source.

—Any existing Federal, State, or local limitations or requirements applicable to

the affected source.

—For each affected emission point or group of affected emission points, an identification of control technology in place.

—Information relevant to establishing the MACT floor.
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—Any other information reasonably needed by the permitting authority including

at the discretion of the permitting authority, information required pursuant to

Subpart A [the general provisions] of this part.

Question. How many individual sources does EPA anticipate under best and worst

case scenarios will have to submit a Part II application?

Answer. We estimate that anywhere from 0 to over 84,000 emitting facilities at

major sources could be subject to the Part 2 application requirements. We are currently engaged in settlement discussions with an environmental group to establish

a fairly tight schedule to promulgate the remaining MACT standards. Under the 24

month timetable in the current promulgated section 112(j) rule, we would expect to

promulgate all MACT standards before any Part 2 applications are due, so that no

sources would be affected. However, if the timetable is changed as a result of the

legal challenge to the rule that has been filed, a significant number of Part 2 applications could be required. The number of affected facilities is greatest for the MACT

standards that we expect to promulgate last. Of the 84,000 facilities, approximately

79,000 are in source categories for which we expect to issue a final standard more

than 1 year after the submission of Part 1 applications.

Question. EPA’s current failure to meet the May 15, 2002 ‘‘hammer’’ deadline is

perplexing to the Committee given the Agency’s previous public comments that assured state regulators and sources that the deadlines would be met. For instance

in a May 19, 1999 letter, Ms. Sally L. Shaver, Director of the Emission Standards

Division, wrote a letter to STAPPA and ALAPCO stating that ‘‘EPA intends to promulgate all standards by the hammer date.’’ Why now, less than 2 years later, is

EPA saying that it will miss the hammer date for many source categories? What

has happened to change this picture so dramatically that was not foreseen in May

1999?

Answer. In May 1999, when the letter was written, the Agency was being realistic

about the completion of the 10-year MACT standards. We did intend to promulgate

all standards by the ‘‘hammer date.’’ We continued reinvention approaches such as

consolidating rules, partnerships with states in making presumptive MACT determinations, generic MACT approach where rulemakings for source categories with

four or fewer major facilities would be developed as a broad-based rule, and working

with partners to reduce cost of rules to help with our goal to meet the ‘‘hammer

date.’’ We had less information on the 10-yr MACT sources categories than we had

on earlier MACT source categories, therefore we needed information from industry

as we developed the standards. We did not anticipate the amount of information we

received on these source categories, and in some cases the information was not received in a timely manner, so additional time was required to analyze the information. There were also procedural changes in our review process for the standards.

Question. Even as recent as last year, the Agency’s budget justification for fiscal

year 2002 stated that: ‘‘EPA plans to have all the 10-year MACT standards proposed

and completed in fiscal year 2002.’’ Will EPA meet even this deadline and, if not,

why not?

Answer. No, but we plan to have all the 10-year MACT proposed by November

2002. We fully intended to have the 10-year MACT standards completed by the

‘‘hammer date,’’ but due to reasons mentioned in the previous response, we will still

have 36 standards to promulgate.

EPA’s failure to meet the hammer date is all the more troubling when considering

EPA’s repeated decisions to ‘‘retarget’’ resources away from MACT standard setting

activities. For instance:

Fiscal year 2000 budget justification.—‘‘(∂$6,600,000) The Agency proposes to retarget resources from setting MACT and residual risk standards to better characterize total environmental toxic risk, particularly in urban areas.’’ (Page I–47)

Fiscal year 2001 budget justification.—(∂$10,600,000) The Agency continues to

retarget resources from setting MACT and residual risk standards to better characterize the total environmental toxic risk, particularly in urban areas.’’ (Page I–52)

Fiscal year 2002 budget justification.—(¥$2,030,300) This reduction reflects that

resources have been decreased for MACT standard development since EPA plans to

have all the 10-year standards proposed and completed in fiscal year 2002. Some

resources have been reprogrammed from MACT development for modeling and emission inventory efforts to characterize air toxics risk and exposure and for residual

risk assessments on implemented MACT standards. In addition, resources were reduced for the one year effort to ensure all stakeholders have the latest information

about air pollution control technologies and full access to RACT/BACT/LEAR Clearinghouse for Control Technologies.’’ (Page I–62)

Question. Why did the EPA repeatedly propose to redirect resources away from

MACT standard setting given the costly and onerous consequences for states and

sources if the Agency fails to meet the statutory deadlines?
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Answer. Section 112 of the Clean Air Act has many requirements. Title III of the

Amendments, which contains major stationary and area source requirements, lists

188 HAPs and requires EPA to develop standards for major stationary sources of

these pollutants. Within 8 years after promulgating these MACT standards, EPA

must evaluate the residual risk posed by these sources and promulgate risk-based

standards, if needed, to provide an ample margin of safety to protect public health

or the environment.

As part of its ongoing efforts to protect public health in urban areas, and in response to the requirements of sections 112(c)(3), (k) and 202(l), EPA released the

Integrated Urban Air Toxics Strategy which builds on the substantial emission reductions already achieved from the larger industrial stationary sources. While the

Strategy is not a rule, additional regulations are required to establish emission

standards for additional categories of area sources, and may be needed to fully address remaining risks posed by the combination of emissions from mobile, major stationary, and area sources. The goals of the Strategy are to reduce by 75 percent the

risk of cancer associated with air toxics from large and small industrial/commercial

sources, to substantially reduce noncancer health risks (such as birth defects and

reproductive effects) from small industrial/commercial sources known as areas

sources, and to address disproportionate impacts such as those in ‘‘hot spots,’’ highly

exposed population subgroups such as children and the elderly, and predominately

minority and low income communities.

Because of these requirements, we started retargeting resources to meet these

goals. In addition, some of the MACT resources were allocated to address litigation

on the 2-, 4-, and 7-year MACT standards, which we continue to be sued on. Our

focus continues to be the completion of the 10-year MACT standards, but because

of new industry information, procedural changes and other issues mentioned in previous responses, we did not meet the MACT standard deadlines.

Question. Why did the Agency believe that other activities, such as obtaining more

information on the nature of the air toxics problem, was more important than assuring that Congressional deadlines are met?

Answer. As mentioned in prior response, EPA was trying to meet the many requirements of Section 112 of the Clean Air Act. We intended to meet the goal of

completing the 10-year MACT standards and started shifting resources into riskbased activities and balance funding between residual risk and national, urban, and

community assessment activities. Also, inventories are an integral part of the riskbased program and are needed to meet the residual risk requirements with technically-credible assessments.

Question. What is the Agency doing now to avoid the mistakes of the past and

assure that sufficient resources are now being dedicated to assure that all of the

MACT standards will be issued before the Part II applications are due?

Answer. We are doing our best to develop and promulgate the remaining MACT

standards. We believe that the resources are adequate, but the critical resource is

time. Many of these standards are very involved and cannot be sped up, while adhering to the Agency’s internal review process and quality control procedures and

allowing for appropriate stakeholder involvement as the standards are developed.

We cannot assure with certainty that all remaining MACT standards will be promulgated before the Part 2 applications are due, especially if litigation settlement

discussions result in a change in the timetable for submitting Part 2 applications.

Question. Please provide the Committee with yearly estimates of the number of

FTEs and budget resources that have been dedicated to MACT standard development for fiscal years 1999 to 2002 and your current proposal for fiscal year 2003.

Answer. The following are the yearly estimates of the FTEs and budget resources

that have been dedicated to MACT standard development:

1999 2000 2001 2002 2003 request

FTE ................................................... 102.1 92.8 88.4 63.7 61.4

Contract ........................................... $10,890.0 $8,286.0 $10,700.0 $8,237.0 $8,162.0

Question. The existing 112(j) MACT rule states that the Part 1 application must

include an identification of the ‘‘types of sources’’ that belong to the source category.

Please explain to the Committee whether this requires sources to identify and list

specific equipment or emission points at the source.

Answer. The Part 1 application is designed to be relatively general in nature and

not require specific information. The more detailed, specific information is intended

to be supplied in Part 2 of the application. We do not intend sources to identify and

list specific equipment or emission points when identifying the ‘‘types of sources’’

that belong in a source category. Instead, the source should generally describe what
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types of emission points are included by the source category at the source. For example, an asphalt processing facility (covered under the asphalt processing source

category) would be composed of asphalt flux storage tanks, oxidized asphalt storage

tanks, one or more blowing stills, and oxidized asphalt loading racks.

HYDRAULIC FRACTURING: TIMETABLE

Question. Provide a timetable describing EPA’s review of questions surrounding

hydraulic fracturing and study to review this issue.

Answer. EPA’s coalbed methane hydraulic fracturing study grows out of issues

concerning the scope of EPA’s Underground Injection Control authorities. In August

1997, the 11th Circuit Court of Appeals (the Court) ruled that either Alabama must

regulate hydraulic fracturing in coalbed methane wells or EPA must take over Alabama’s program and regulate the process under the SDWA as underground injection

(LEAF v. EPA, 118 F. 3d 1467). In 1998, the Court issued a writ of mandamus ordering EPA to withdraw Alabama’s UIC program or approve a revised program by

December 1999.

EPA worked with Alabama to modify the state’s program consistent with the

Court’s decision, and published approval to a revised UIC program for Alabama in

January 2000. Concurrent with the Agency’s efforts to modify the state’s program,

members of Congress began to contact the Agency in March 1999 to recommend

that EPA collect more information on the possible contamination of aquifers, and

the Administrator responded within weeks to inform the Congress of the Agency’s

intentions to conduct a study. In April 2000, EPA launched a process to develop a

study to evaluate the impacts to underground sources of drinking water (USDWs)

from hydraulic fracturing of coalbed methane wells.

In addition to requesting written comments on its draft study design, in August

2000 EPA held a public meeting in Washington, DC to receive stakeholder input on

the scope of the study and the process EPA would follow in completing the study.

After considering the extensive written and oral comments from a wide variety of

stakeholders, including industry, state oil and gas agencies, public interest groups,

and concerned citizens, EPA proposed its final design in the Federal Register in

July 2001.

Question. Why has the study taken so long to complete and why it is so far behind

the original schedule?

Answer. The study was designed to have three possible phases, and at the completion of each phase, EPA must determine whether the findings to-date warrant continuation into the next phase. The Agency is currently engaged in Phase I, a limited

assessment designed to enable the Agency to determine whether hydraulic fracturing of coalbed methane wells clearly poses a threat to USDWs. If EPA decides

further investigation is warranted, the study will continue into Phase II. Phase II

would consist of additional data collection and the completion of a risk assessment.

Phase III would be a review of existing regulations and a regulatory determination.

Early in the implementation of Phase I of the study, EPA proposed the initial

schedule with the expectation that we would find no hazardous constituents in the

fracturing fluids. We have identified several constituents of concern, however, including diesel fuel. Further, the Agency intends to thoroughly investigate the economic as well as environmental implications identified in the process of implementing the study.

EPA is taking the time necessary to ensure that the study is thorough and accurate before publishing a draft for stakeholder comment. And because the study results could have a great impact on many stakeholders, including states, industry,

and other Federal agencies, the Agency is attempting to engage all affected interests

at an appropriate level to collaborate on the data collection.

HYDRAULIC FRACTURING: PEER REVIEW PROCESS

Question. Could you please explain the peer review process for this study?

Answer. The hydraulic fracturing study is carefully designed to ensure extensive

peer review by experts in industry, academia, and state and Federal agencies of the

study’s data sources, analytical approaches, and conclusions. The peer review process has been conducted in four stages: (1) internal Agency review by headquarters

offices and EPA Regions; (2) inter-agency review by the U.S. Department of Energy,

U.S. Geological Survey, and state agencies dealing with ongoing hydraulic fracturing issues; (3) independent peer review by an EPA-convened scientific panel of

experts from industry, academia, and state and Federal agencies; and (4) stakeholder review.

All supporting documentation and data from the study are part of the project files,

and all reviewer comments are preserved as a part of the public record.
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HYDRAULIC FRACTURING: PEER REVIEW PANEL

Question. In correspondence with members of the peer review panel on the study,

EPA apparently indicated that the panel would have a final review prior to the public release of the study. More recent correspondence with the peer review panel has

indicated that the panel will not see the study again until it is released publicly,

at which time the panel would be invited to comment as part of the public comment

process. This seems to violate the Agency’s commitment to peer review studies to

produce the best possible science. Why was the peer review panel denied the opportunity to again review the study prior to its public release and doesn’t this weaken

the study and throw into question its scientific validity?

Answer. EPA’s Peer Review Policy establishes the criteria and requirements for

independent evaluation of scientific and technical studies and documents. The Agency has conducted the peer review for the hydraulic fracturing study consistent with

that policy, and assembled an expert panel with representation from industry, academia, and State and Federal agencies. The charge to the peer review committee

was to review the report to determine if (1) the report is complete, thorough, and

accurate and (2) the scientific/technical studies reviewed are applied in a sound, unbiased manner. The peer review panel has provided extensive and useful comments.

After addressing the panel’s comments, EPA determined that no additional review

was necessary from the panel. The peer review panel members will have additional

opportunities to comment once the study is released.

HYDRAULIC FRACTURING: STATE OIL AND GAS AGENCIES

Question. States in the United States have for decades regulated hydraulic fracturing in the United States. Were State Oil and Gas agencies contacted directly by

the authors of the study to determine if and how states regulate hydraulic fracturing? If so, please document those contacts. If not, why not?

Answer. An initial investigation by the Ground Water Protection Council (GWPC)

into state regulation of hydraulic fracturing raised questions about whether technical requirements regulating the practice of hydraulic fracturing exist. In its investigation, GWPC contacted state oil and gas agencies for information related to complaints on the impacts of hydraulic fracturing.

EPA did contact state oil and gas agency officials during Phase I to determine

how they were responding to citizen complaints, to understand states’ unique geologic conditions, and to learn more about hydraulic fracturing industry practices in

individual states. The Agency is close to completing the final draft report for Phase

I of the study; if it necessary to continue on to Phase III of the study, EPA will

contact state oil and gas agencies again specifically to determine how states regulate

hydraulic fracturing.

HYDRAULIC FRACTURING: LANDOWNERS

Question. Were landowners contacted directly by the authors of the study in an

attempt to determine if any landowner’s wells were damaged by hydraulic fracturing? If so, please document those contacts. If not, why not?

Answer. In the implementation of Phase I of the study, landowners contacted

EPA, concerned that coalbed methane development had impacted their drinking

water wells. Landowners voiced their concerns to EPA through electronic mail, letters, telephone interviews, and local meetings. The Agency responded to these concerns by conducting follow-up phone interviews with nine individuals. Through

these conversations, EPA has heard from citizens in all of the most active coalbed

methane production basins: Black Warrior (Alabama), San Juan (Colorado and New

Mexico), Powder River (Montana and Wyoming), and the Central Appalachian (Virginia). In response, the Agency contacted more than 30 employees at state and local

agencies to better understand ground water issues, investigations, and any actions

taken in response to citizens’ concerns.

A few citizens reported that they believed their drinking water wells were impacted from hydraulic fracturing of coalbed methane wells; others expressed concern

about the risks associated with hydraulic fracturing. Most of the citizens reporting

problems did not specify hydraulic fracturing, but noticed that their problems started after coalbed methane production began. Citizens and county agency employees

also reported that the ‘‘dewatering’’ of coal seams that occurs during production creates several environmental problems, such as: (1) contamination of wells with methane, hydrogen sulfide, and bacteria; (2) explosive levels of methane and toxic levels

of hydrogen sulfide accumulating under buildings and in living spaces; (3) spontaneous combustion and continued burning of completely dewatered coalbeds; and, (4)

flooding from water pumped to the surface.
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Based on its discussions with landowners, coalbed methane production may be

negatively impacting drinking water wells. In two of the most active basins (San

Juan and Powder River), drinking water wells appear to have been negatively impacted because large amounts of ground water are removed from coalbed formations

in order to release the methane in coal seams. The hydraulic fracturing study conducted by EPA’s UIC Program, however, is narrowly focused on hydraulic fracturing

in coalbed methane wells, and does not address the potential impacts of ground

water removal and subsequent discharge.

Subsequent to these conversations, in July 2001 EPA published a notice in the

Federal Register requesting further information from the general public. The Agency then sent copies of the notice to nearly 500 local agencies to ensure that communities with aquifers that may have been impacted by coalbed methane development

would contact EPA. EPA received four responses from counties it had not heard

from previously, but none of these contacts produced information confirming that

drinking water wells had been impacted from hydraulic fracturing activities. EPA

heard from only two county agencies representing citizens that had contacted EPA

to express concern that coalbed methane development had impacted their drinking

water. This low response rate was not unexpected, however, since each of the Federal Register notices was accompanied by a cover note explaining our project and

a request that agencies not contact EPA if they had already provided information

to the Agency.

LEAD: BIO-AVAILABILITY OF LEAD SULFIDES VS LEAD OXIDES

Question. What is the bioavailability of lead sulfides as opposed to lead oxides?

Answer. ‘‘Bioavailability’’ is a simple term used to describe a complex concept.

Aside from chemical influences, bioavailability is also very dependent on particle

matrix (micro structure of the particles) and particle diameter (particle size) as well

as physiological status (pregnancy, age, nutritional status, etc) of the receptor. It is

dependent upon the solubility/availability (both intensity and capacity) of the compound in an exposure matrix and its transport (active and passive) across a biological barrier. One suggested definition is ‘‘that fraction of the total amount of material

in contact with a body portal-of-entry (lung, gut, skin) that enters the central compartment (blood).’’ This is the definition used in the comparison described below.

EPA Region 8 has evaluated in vivo (swine) bioavailability for a number of lead

contaminated soils as well as soil spiked with lead minerals. Additionally, the soils

have been evaluated by in vitro bioavailability techniques. Both techniques have illustrated that lead mineralogy influences bioavailability. Galena (lead sulfide) has

low bioavailability (0–5 percent in vivo Relative Bioavailability) whereas litharge

(lead oxide) has high bioavailability (80–100 percent in vivo Relative Bioavailability). The Agency considers these bioavailability factors and other factors,

such as particle size and timing of soil/dust ingestion relative to meals, in making

adjustments to the IEUBK model default value.

LEAD: LEAD SULFIDE IN GALENA FORM VS LEAD IN OXIDE FORM AFFECT ON HUMAN

BODY

Question. Does lead sulfide, as it is found in its natural state of galena and mined

to obtain lead, taken up and affect the human body differently than lead in the

oxide form as found in lead-based paint or emissions from smelting?

Answer. It is reasonable to assume that, all other factors being the same, lead

oxide would dissolve more quickly than equal amounts of lead sulfide, in an acidic

environment. However, small amounts of either form of lead might completely dissolve, or nearly so, in the stomach environment over a period of hours. The total

amount of dust and the residence time in the stomach are key factors in this. The

combination of the warm, chemically acidic environment, the constant agitation, and

the 2–3 hour time period virtually assures the dissolution of the 80–130 mg of small

particles ingested per day, which is the default range of age-related ingestion rates

in the Integrated Exposure Uptake Biokinetic (IEUBK) model (discussed in the following question). However, as this gastric solution is passed into the duodenum, a

sudden change to a basic pH occurs which, in the presence of normal amounts of

phosphate, causes a precipitation of all lead to the highly insoluble form of lead

pyrophosphate. From this point on, only about 1 percent of the pyrophosphate lead

is available for absorption in the small intestine at any given time. If larger particles were ingested that didn’t totally dissolve in the stomach, some of this lead,

whether in the sulfide or oxide form, would continue to be slowly dissolved in the

small intestine at different rates and made available for absorption at different

times from ingestion. As the small amount of soluble lead from both the

pyrophosphate and the partially dissolved particles is absorbed, more lead is dis-
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solved, and during the total residence time in the small intestine, about eight hours,

about 30 percent of the total amount of lead would be absorbed. In the IEUBK

model, the default absorption percentage is 30 percent (regardless if ingested as lead

sulfide or lead oxide) for lead in both soil and dust, based on the assumptions discussed here.

LEAD: POTENTIAL RISK OF DIFFERENT FORMS OF LEAD TO REGULATORY DECISIONS

Question. What information does EPA have on this issue and how does it analyze

and apply the varying potential risk of different forms of lead to its regulatory decisions?

Answer. EPA has access to the published literature on the topic as well as knowledge of ongoing work and unpublished data. In performing risk assessments for

childhood exposure to lead (Pb) in support of regulatory decisions, U.S. EPA routinely uses the Integrated Exposure Uptake Biokinetic (IEUBK) Model for Lead in

children. This model developed by U.S. EPA’s National Center for Environmental

Assessment (NCEA), considers all normal sources of lead in its various chemical

forms. Under current guidance, ‘‘total’’ contaminant concentration in soils is used to

establish risk based clean-up levels. In the case of Pb, the IEUBK model is used

to establish acceptable levels of soil Pb. The IEUBK is designed to predict the probable blood Pb concentration (PbB) for children between 6 months and 7 years of age

who are exposed to Pb through multiple environmental media (e.g., air, water, soil,

dust, and diet). Using an assumed (30 percent) absolute bioavailability of soil Pb,

the PbB level is estimated by the model.

In the case where there is evidence for a percentage other than the default 30

percent absorption, the model permits the risk assessor to make such an adjustment

to this parameter, either more or less than the default 30 percent. Risk assessors

are always encouraged to use non-default parameters in the IEUBK model whenever they can present scientific evidence to support their use.

EPA Region 8 has encouraged exposure-based monitoring aimed at quantitative

evaluation of site-specific risk. The use of an immature swine model to estimate

site-specific oral Pb bioavailability in children who are exposed to Pb has been used.

Approximately 20 different Pb contaminated soils on 10 different hazardous waste

sites have been analyzed. Preliminary site-specific estimates of relative soil Pb absorption (relative bioavailability) range from 6 percent to greater than 85 percent

when compared to soluble Pb acetate. These values translate to 3 percent to 42.5

percent absolute bioavailability, as used in the IEUBK model. The use of these values in the IEUBK model rather than the 30 percent default value results in different cleanup values. For example, a site-specific bioavailability study of Bingham

Creek Utah (costing approximately $100K) provided a bioavailability factor of 19

percent. The use of the site-specific bioavailability of 19 percent rather than the assumed default value (30 percent) resulted in reductions in estimated remedial costs

on the order of $4 million.

WATER INFRASTRUCTURE FUNDING: REASONABLE LEVEL OF FUNDING TO PRESERVE

EXISTING INFRASTRUCTURE

I consider the status of our Nation’s water infrastructure as the most pressing

issue facing the EPA, and one of the most important issues for the Nation, both for

quality of life and public health. In particular, while I support the funding of $850

million for the Drinking Water State Revolving Fund, I am extremely disappointed

that EPA has requested only $1.212 billion for the Clean Water State Revolving

Fund, a reduction of $138 million from the fiscal year 2002 level.

This is especially troubling since the next EPA Gap Analysis is expected to confirm the need for some $350 billion in water infrastructure needs over the next 2

decades. Moreover, outside groups have indicated that the need could be as high as

some $740 billion over the next 20 years, with $200 billion more in financing and

another $980 billion for local governments to maintain and operate this infrastructure. These additional costs are intended to include the cost to replace aging and

failing infrastructure, activities which are not currently eligible.

Question. These funding estimates are far in excess of any current level of funding

and likely far in excess of any funding proposed at least in the foreseeable future.

What is a reasonable level of funding needed to preserve the existing infrastructure?

Answer. The financial demands that communities face in providing clean and safe

water to all Americans are substantial, and the Administration is committed to

helping find ways to meet those demands. The Federal government has provided

more than $80 billion in wastewater assistance since passage of the Clean Water

Act, which has dramatically increased the number of Americans enjoying better

water quality. This includes replacement of aging and failing infrastructure, which
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is certainly an eligible use of the Clean Water State Revolving Fund (CWSRF)

under Section 212 of the Clean Water Act in fact, the CWSRF has provided some

$5.8 billion to repair aging and failing wastewater collection systems alone.

For fiscal year 2003, the President’s requests of $850,000,000 for the Drinking

Water State Revolving Fund and $1,212,000,000 for the Clean Water State Revolving Fund, for a total of $2,062,000,000, is the largest-ever combined request for the

State Revolving Funds.

EPA’s most recent Drinking Water and Clean Water Needs Surveys have identified $150.9 billion and $150.5 billion, respectively (both in 1999 dollars), in documented needs eligible for SRF assistance in the coming decades. More recent estimates associated with correcting sanitary sewer overflows may increase the estimated total Clean Water needs, and the Agency expects to release a new Clean

Water Needs Survey in August 2002.

Over the past year or so, several stakeholder groups have issued reports estimating water infrastructure needs that are substantially higher, based on different

methodologies and definitions. With that in mind, the Agency is actively working

to improve information about long-term infrastructure needs, assess different analytical approaches to estimating those needs, and estimate the gap between needs

and spending. We expect to release the Agency’s Gap Analysis this summer.

While the Agency’s Gap Analysis can help quantify the Nation’s infrastructure

challenges, the numbers themselves do not take into consideration how the various

roles of Federal, State and local governments should be balanced. For the last 30

years, Federal, State and local governments have shared responsibility for infrastructure financing. Under any funding arrangement, therefore, the vast majority

of future funds likely will come from local sources. It is also important to reduce

capital, operation and maintenance costs through better management and more efficient service delivery, and by capturing productivity gains through innovations.

WATER INFRASTRUCTURE FUNDING: PRIORITIZING FUNDING NEEDS

Question. How should we prioritize the funding needs in the Nation? For example,

what do we do about the aging and obsolete water infrastructure which is the concern of many cities and communities in the East and Midwest? How do prioritize

these funding needs with new infrastructure requirements which have been created

by the new arsenic standards?

Answer. EPA recognizes the challenges facing America’s communities. The Agency

believes that the touchstone of our strategy to meet these challenges should be

building fiscal sustainability. In particular, several basic principles should guide our

pursuit of clean and safe water through fiscal sustainability:

Utilizing the private sector and existing programs.—Fostering greater private sector involvement and encouraging integrated use of all local, State, and Federal

sources for infrastructure financing.

Promoting sustainable systems.—Ensuring the technical, financial, and managerial capacity of water and wastewater systems, and creating incentives for service

providers to avoid future gaps by adopting best management practices to improve

efficiency and economies of scale, and reducing the average cost of service for providers.

Encouraging cost-based and affordable rates.—Encouraging rate structures that

cover costs and more fully reflect the cost of service, while fostering affordable water

and wastewater service for low-income families.

Promoting technology innovation.—Creating incentives to support research, development, and the use of innovative technologies for improved services at lower lifecycle costs.

Promoting smart water use.—Encouraging states and service providers to adopt

holistic strategies to manage water on a sustainable basis, including a greater emphasis on options for reuse and conservation, efficient nonstructural approaches,

and coordination with state, regional, and local planning.

Promoting watershed-based decision-making.—Encouraging states and local communities to look at water quality problems and drinking water source water protection on a watershed scale and to direct funding to the highest priority projects needed to protect public health and the environment.

The Agency has developed a comprehensive strategy to help drinking water systems that are affected by the new arsenic in drinking water standard. As described

in its Report to Congress entitled ‘‘Small System Arsenic Implementation Issues,’’

beginning in fiscal year 2002 the Agency will engage in three major activities: (1)

a review EPA’s small system affordability criteria to address affordability concerns

raised by stakeholders and small communities; (2) develop and implement a small

community drinking water assistance plan, which will enhance small systems’ ac-
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cess to financial assistance and expand technical assistance and training; and (3)

spend $20 million over fiscal year 2002 and fiscal year 2003 for research, development, testing and implementation of effective, practical, and affordable treatment

technologies to reduce compliance costs for drinking water systems affected by the

new arsenic in drinking water standard.

In addition, the Agency will continue its ongoing work with states to take full advantage of the suite of tools the SDWA provides to help small systems achieve compliance not only with the arsenic standard, but with other drinking water standards, including those for microbial contaminants, disinfectants, and disinfection byproducts, and for radon and radionuclides. A key component of this work is to maximize the availability of financial assistance to small systems under the Drinking

Water State Revolving Fund (DWSRF). Finally, EPA and the U.S. Department of

Agriculture (USDA) have signed a Memorandum of Agreement (MOA), under which

USDA’s Rural Utilities Service (RUS) commits to assigning high funding priority to

projects that assist small communities in complying with the new arsenic in drinking water standard. The Agency further commits to enhance coordination of EPA

and USDA programs to ensure that the maximum possible assistance is available

to small communities for compliance with the new arsenic in drinking water standard.

SUPERFUND CLEANUP: PACE OF SUPERFUND CLEANUP

Question. What is the pace of Superfund cleanup compared to recent years and

what can we do to ensure that the cleanup of SF sites are expedited to the extent

possible?

Answer. Conducting cleanups and achieving construction completions are Agency

priorities. The amount of cleanup work the Agency has been performing during the

last few years has been relatively stable. However, with nearly two thirds of the

sites on the NPL cleaned, the remaining sites are lager and more difficult. (We are

enclosing below a chart that explains Superfund cleanup compared to recent years).

To make sure Agency resources are properly focused to achieve maximum results,

we have initiated a Pipeline Management Review of Superfund sites that will result

in a multi-year, site-specific strategy to ensure construction progress. Additionally,

we are working to further enhance the ‘‘enforcement first’’ approach to increase

early Potentially Responsible Party (PRP) involvement and maximize our use of

PRP-funded special cleanup accounts.

Question. I understand that some states are pushing for greater control over the

SF program. To what extent do you support this approach and what are the pluses

and minuses to greater state control?

Answer. The Superfund program over the past several years has sought to ensure

greater State involvement in the program. We have worked with states to support

the development of State programs, such as voluntary cleanup programs, with a

goal of getting more sites cleaned up by more people. The maturing of State programs, coupled with personnel and funding ceilings at the State level, in most cases

has led to mutually agreed upon worksharing, where states and EPA strive to do

the work each is best suited for. Let me provide a few examples.

Since 1996, Superfund has followed a State concurrence policy that requests State

or governor concurrence in decisions to place sites on the National Priorities List.

This builds on fiscal year 1995 and 1996 appropriations language. There has only

been one exception to this policy since 1996. That site remains proposed to the NPL

and EPA is working with the State (Wisconsin) in an effort to address the site without the need to finalize. Further, states frequently work with EPA in workshare arrangements where sites are assigned to EPA or the State for study and possible

cleanup.

In March 1998 Superfund published a Plan to Enhance the Role of States and

Tribes in the Superfund Program. This allowed states to pilot activities that would

establish new areas of involvement in the Superfund program. There were eight

State pilots, most centering on the cleanup part of the process. As a result of the

plan, Superfund developed an internal workgroup to continually explore ways of enhancing State and tribal roles, and is working with the Association of State and Territorial Solid Waste Management Officials towards this end.

Both Superfund and RCRA management are working with State managers on the

Senior Cleanup Council to increase understanding and cooperation across waste remediation programs. This is an issue that has long been of concern to states. Finally, the recently-signed Brownfields legislation requires extensive interaction between EPA and States in an effort to develop guidance and criteria for implementing the legislation. States are on a number of workgroups related to

Brownfields legislation needs, limited by the requirements of the Federal Advisory
289

Committee Act. We anticipate that the opportunity for states to continue to build

and expand their own programs will continue to have Federal and State programs

complement each other.

EPA has been and will continue to be supportive of greater State involvement because it reduces duplication of effort and makes better use of resources.

Number of Superfund sites cleaned up each year, 1990 to present

Number of sites

cleaned up Year

1990 ......................................................................................................................... 8

1991 ......................................................................................................................... 12

1992 ......................................................................................................................... 88

1993 ......................................................................................................................... 68

1994 ......................................................................................................................... 61

1995 ......................................................................................................................... 68

1996 ......................................................................................................................... 64

1997 ......................................................................................................................... 88

1998 ......................................................................................................................... 87

1999 ......................................................................................................................... 85

2000 ......................................................................................................................... 87

2001 ......................................................................................................................... 47

2002 target ............................................................................................................. 40

2003 target ............................................................................................................. 40

SUPERFUND CLEANUP: ADEQUATE FUNDS TO CONTINUE SUPERFUND CLEANUPS

Question. How do we ensure there are adequate funds in the future to continue

Superfund cleanups? Answer. For fiscal year 2002, the President requested $1.3 billion for the Superfund program, excluding post 9/11 supplemental resource requests, consistent with

the previous year’s budget. For fiscal year 2003, the Administration requested a

similar budget to enable a comparable level of activity, while increasing the request

for homeland security resources. The fiscal year 2003 budget will allow Superfund

to continue to make cleanup progress at sites. We are currently considering what

level of funding to request for fiscal year 2004 to ensure maximum Superfund performance and balance with other Administration priorities.

CLIMATE CHANGE KYOTO ACCORD

Question. The United States has made it clear that it would not be bound to the

Kyoto Protocol until developing nations are subject to binding emission targets. This

is a key economic concern as well as a fairness issue. Nevertheless, sound science

on global climate change issues also is key to both the United States domestic policy

decisions on climate change and international agreements. While the EPA is not the

primary Federal agency with regard to U.S. policy on international climate change

issues, the EPA is an important partner in developing the environmental modeling

and scientific research that will be critical to the continued evolution of U.S. policy.

From your perspective as Administrator of EPA, what is the current status of the

United States’ international policy on climate change issues and what are the key

issues and challenges facing the United States?

Answer. Climate change is a complex, long-term challenge that will require a sustained effort over the long term. The Administration is opposed to the Kyoto Protocol because it exempts many countries from its requirements and could cause serious harm to the U.S. economy. However, America is committed to the United Nations Framework Convention and its central goal to stabilize atmospheric greenhouse gas concentrations at a level that will prevent dangerous human interference

with the climate, though, as the President has noted, we do not yet know what that

level is.

The Administration’s immediate goal, announced by President Bush on February

14, is to reduce the greenhouse gas intensity of the U.S. economy by 18 percent in

the next 10 years, thereby slowing the growth of net emissions as they relate to economic output. While we have yet to determine what level of ghg concentrations

would be dangerous, the Administration recognizes that achieving long-term stabilization of atmospheric greenhouse gas concentrations will require as the science

justifies stopping and reversing greenhouse gas emissions growth. Slowing the

growth of these emissions through expanded use of voluntary initiatives and proposed tax incentives will enable the development of technology to substantially reduce greenhouse gas emissions in the long term without the risk of harming the
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economy in the short term. The President has also committed that if progress is not

sufficient by 2012 and sound science justifies further action, the United States will

respond with additional measures that may include a broad, market-based program,

as well as additional incentives and voluntary measures designed to accelerate technology development and deployment.

EPA is working to accomplish the President’s commitment though reducing greenhouse gas emissions in partnership with businesses and consumers through our voluntary programs. We have found that these programs, such as Energy Star and

Natural Gas STAR, can be incredibly effective, and we have every confidence that

they will be able to lead us toward our goals for emissions reductions. We have also

launched new programs such as Climate Leaders, which enables companies to voluntarily evaluate their impact on the environment and then act to change for the

better in order to build on the successes of these voluntary programs.

We are also looking beyond our borders to address this challenge. The United

States has recently reached agreements with Australia and Canada which will focus

on practical and economically efficient solutions to the climate issue, such as common approaches for emissions measurement, climate change science, technology development, and market-based approaches. We have also identified similar areas for

cooperation with Japan and Italy specifically on the development of climate science

and technology. Finally, we have formed Working Groups on climate change with

China and India. The struggle to halt the effects of climate change does not recognize political boundaries, and we must work together with interested partners from

around the world if we are going to effectively to address this long term, global

issue.

GLOBAL AND CROSS-BORDER ENVIRONMENTAL RISKS

Question. What is EPA doing to minimize pollution in the United States from pollution hazards originating outside the United States, such as from Mexico or Canada?

Answer. EPA is actively engaged in a range of activities intended to reduce, prevent or otherwise minimize the impacts on the U.S. environment and public health

from sources of pollution originating outside of our borders. The broad responses address a wide range of the contaminants of concern, a diversity of pollution source

types and media transport mechanisms. EPA’s activities include working along our

borders with Canada and Mexico and cooperation with a substantial number of

other countries across a wide area of the globe, for example by participating in

multi-lateral agreements to address identified regional and global transboundary

pollution threats. Many of EPA’s major program offices, regional offices and laboratories are involved in these efforts, and in many of its endeavors the Agency also

cooperates with other Federal and State agencies, non-governmental organizations

and multilateral/international bodies.

EPA’s international efforts include environmental protection capacity building,

technical assistance, technical information exchange, international monitoring and

assessment, cooperative research and development, and negotiation of international

agreements. However, the specific responses are a function of the particular pollutant’s chemical behavior, media transport mode, nature of the source types and circumstances of the foreign involvement.

The Agency is also concerned with conducting research and assessments of new

or unaddressed risks, and improving the scientific basis of our general understanding of the known transboundary environmental threats, such as the global

flows of mercury. EPA has both internal and international cooperative efforts aimed

at improving our understanding of the problems, including research into the chemical and physical processes involved in long-range transport and transformation of

pollutants, such as the global flows of mercury. The Agency also engages in technology development addressing the international problems.

EPA’s major efforts in addressing transboundary pollution impacting the U.S.

mostly fall into the following four broad categories:

—the U.S. border areas with Mexico and Canada and general cooperation with

these immediate U.S. neighbors on transboundary contamination problems,

—efforts addressing regional Arctic contamination and threats to Alaska and indigenous populations, mostly from pollution sources in Russia,

—international cooperation and agreements addressing global sources of persistent organic pollutants (POPs) and other toxic substances, and

—very long-range air transport of a variety of pollutants and the problem of global cycling of mercury
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PROGRAM SPECIFICS

U.S. border Areas with Mexico and Canada and General Transboundary Contamination Cooperation with these Immediate U.S. Neighbors:

U.S.-Mexico

The U.S. and Mexico cooperate on a number of programs to protect the U.S. from

transboundary pollution. Formal cooperation dates back to 1983, when the U.S. and

Mexico signed the La Paz Agreement to promote cooperation for the protection and

improvement of the environment in the border region. This agreement serves as the

basis for joint activities to protect public health and the environment in both the

U.S. and Mexico. Two formal ‘‘environmental plans’’ have been implemented by EPA

and its Mexican counterpart, SEMARNAT, and we are currently working on a plan

that will cover the next 10 years. Detailed information on these activities is available in the U.S.-Mexico Border XXI Program: Framework Document and the U.S.-

Mexico Border XXI Program-Progress Report 1996–2000. Examples have some of

these activities are provided below:

Air

Binational air quality planning and management activities have been conducted

in the sister cities of San Diego-Tijuana; Imperial Valley-Mexicali; Nogales-Nogales;

and Douglas-Agua Prieta. Recent efforts have concentrated on establishing and operating air quality monitoring networks in Tijuana and Mexicali, similar to those

operating in San Diego and Imperial Valley.

A Joint Advisory Council for the Improvement of Air Quality in the Ciudad

Jua ́ rez/El Paso/Doa ̃ Ana County Air Basin (JAC) was created to provide locallybased recommendations to the Air Workgroup on how to manage air quality in the

region. The JAC, completed a strategic plan in May 1999 that includes 26 priorities

for improving air quality.

Hazardous Wastes.—The EPA and Mexico’s National Ecology Institute (Instituto

Nacional deEcologRa, or INE) have operated the Hazardous Waste Tracking System

(Haztraks) for several years. In 1998, Haztraks was replaced in Mexico with INE’s

version of a hazardous waste tracking system, known as SIRREP (Sistema de

Rastreo de Residuos Peligrosos). The use of both systems has considerably improved

the ability to monitor transboundary hazardous waste shipments in the U.S.-Mexico

border region. It is worth noting that a 1999 study carried by the Texas Natural

Resources Conservation Commission (TNRCC) determined that the operation of

SIRREP and the Haztraks systems is the most effective way of tracking the movement of hazardous wastes between the two countries.

A Consultative Mechanism for the Exchange of Information on New and Existing

Facilities for the Management of Hazardous and Radioactive Waste within 100 Kilometers of the U.S.-Mexico Border has been developed. This mechanism serves to address public concern on both sides of the border as it relates to the siting and operation of hazardous and radioactive waste facilities in the border region. The agreement will allow for both countries to exchange data and other information on new

and existing treatment, storage, and disposal facilities for these types of waste in

the border region.

In addition to the activities under the border plan, two binational institutions

were set up between the U.S. and Mexico under a supplemental agreement to the

North American Free Trade Agreement (NAFTA). These institutions are the North

American Development Bank (NADB) and the Border Environment Cooperation

Commission (BECC), which were established to develop and finance solid waste,

waste water and drinking water infrastructure in the border area to reduce the possibility of cross border pollution. To date, 55 projects have been certified and more

than 30 are either operational or under construction. When all 55 projects are completed they will serve more than 9 million people. In Juarez, Mexico a city of over

1 million, the first wastewater treatment systems are now operational.

The EPA Office of Pesticides Programs (OPP) has a number of programs and activities concerned with the transport of agricultural products across the border.

These actions have contributed to the reduction of pesticide residues on the imported agricultural products.

U.S.-Canada

The U.S. and Canada cooperate extensively on monitoring, assessment, reporting

and control and prevention of chemical, physical, and biological pollution, including

increasing their focus and cooperation on biological pollution (e.g., invasive species

of concern). A great deal of this cooperation includes overarching goals to better protect many, diverse, shared ecosystems and the public health of populations (including indigenous peoples) particularly along the shared extensive border areas, but
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also in the inland areas of both countries. In addition, binational cooperation has

been underway since the early 1990s to better protect U.S.-Canada marine regions

such as the Gulf of Maine.

The U.S. and Canada have a long history of working together to control, reduce,

and prevent cross border pollution. The Boundary Water Treaty of 1909 , which applies along the entire 5,500-mile inland border area, was in part designed to protect

transboundary waters and U.S.-Canada watersheds, including protecting the public

health of populations in both countries from the adverse effects of water pollution.

Many major projects and activities addressing actual or potential pollution of

transboundary waters continue to be conducted under the water pollution control

and prevention requirements of the 1909 treaty.

Specifically, binational cooperation is underway to fulfill the treaty requirements

for binational surface waters: e.g., St. Croix River, Lake Champlain, Great Lakes

Basin including the Upper St. Lawrence River, Rainy River, Red and Souris Rivers

system, Poplar River, Flathead River, Columbia River, Puget Sound-Georgia Basin,

Taku River, and the Yukon River. The U.S.-Canada International Joint Commission

(IJC) assists both countries with boundary waters management and protection for

a number of the listed watersheds. 1909 Treaty cooperative efforts protect the U.S.

portions of many shared U.S.-Canada watersheds.

Since the 1970’s up to the present, the U.S. and Canada have steadily increased

their binational cooperative frameworks and attendant activities along the common

border area.. These activities concerned with improved management and prevention

of transboundary pollution, have been conducted between Federal, provincial, state,

tribal, and some local governments, and frequently include involvement of the NGO

community, the private sector and the general public as well.

Cooperation with Canada under the Great Lakes Water Quality Agreement, beginning in 1972, has resulted in substantial progress in restoring the quality of

these important natural resources. Lake Erie, once considered an ecological wasteland, is now substantially restored, with fish eating birds, like eagles and ospreys,

having made strong recoveries. DDT and PCB contamination has been reduced by

80 or 90 percent. U.S.-Canada cooperation to protect and restore the Great Lakes

Basin ecosystem includes many goals that serve to better protect U.S. public health

and the U.S. parts of the shared aquatic ecosystems.

EPA Region 5 has the lead on Great Lakes water quality issues, with many activities conducted or coordinated by the Great Lakes National Program Office

(GLNPO). In addition, Regions 2 and 3, the Office of Water (OW), the Office of Prevention, Pesticides and Toxic Substances (OPPTS), as well as the Offices of Research and International Affairs (ORD and OIA) have all been active in these activities.

Unfortunately, although a lot of progress has occurred, many large Great Lakes

fish are still unsafe to eat due to their accumulating burden of toxic pollutants. Also,

the Great Lakes basin ecosystem is being subjected to harmful changes due to the

effects of a substantial number of foreign alien invasive species, so that the two

countries continue to address new challenges.

Under the 1991 U.S.-Canada Air Quality Agreement, emissions of sulphur dioxide

and nitrogen oxides (key contributors to acid rain) have been substantially reduced,

benefitting the Northeastern United States. A recently negotiated annex to the

Agreement, signed in December 2000, will lead to reductions in ground level ozone

pollution. Priority cooperation under the Agreement also covers particulate matter,

ensuring certain existing or proposed point sources of air pollution along the common area do not cause significant transboundary air pollution which can harm one

side or the other. Efforts are also underway to protect visibility in natural areas

along the border. On air quality activities, EPA’s Office of Air and Radiation (OAR)

leads; other EPA offices involved include ORD and EPA Regions 1,2, 5, 8 and 10.

EPA also is furthering the existing bilateral agreements concerning mercury and

other toxic substances, such as the1997 Great Lakes Binational Strategy, with the

goal of 50 percent reduction in use and emissions of mercury by 2006. The Northeast Mercury Study of the U.S. Northeast States and Eastern Canadian Provinces,

has focused on reduction of uses and emissions of mercury and safe management

of the mercury life cycle. In 1997, Canada and the United States signed an agreement for the Virtual Elimination of Persistent Toxic Substances (PBTs) in the Great

Lakes. The strategy sets long-term goals to promote emissions reductions of these

toxic substances. EPA coordinates the U.S. activities by engaging all relevant stakeholders, developing action plans, coordinating reduction activities and reporting on

progress. OPPTS and OSWER in EPA have major involvement in matters concerning PBTs and other hazardous substances.

The two national governments have established three binational agreements that

cover preparedness and response to pollution release accidents/emergencies which
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could arise along the border. These agreements could also be used by one country,

in certain emergency instances, to call upon the other country to assist with a response to an emergency which may occur inland away from the binational border.

One of the three agreements covers the four U.S.-Canada marine water regions and

Great Lakes waters for oil and hazardous materials. Another one covers the rest of

the inland border for oil and hazardous materials. The more recent third one covers

radiological emergencies. Since September 11 , 2001, the two national governments

are also carrying out special cooperation on security issues along the border and on

related domestic issues of common concern related to homeland security.

North American Trilateral Cooperation between the U.S., Mexico and Canada

In the 1990s, co-led by the U.S. and Canadian Federal governments, the U.S. and

Canada developed new trilateral cooperation with Mexico to increase multilateral

cooperation on major issues such as persistent bioaccumulative toxic (PBT) pollutants, their sources, air transport, fate and deposition. Long-standing shared goals

by the U.S. and Canada under their Great Lakes Water Quality Agreement on PBTs

helped catalyze and focus larger trilateral efforts. The three countries are focusing

together on PBTs and other pollutants, their environmental transport and other

pathways. The U.S. , Canada and Mexico have increased their consultations and cooperation on the northward migration, or introduction, of animals, plants, and

pathogens not native to North America (i.e., invasive species), with the shared goal

of improving protection of the biological integrity of many North American ecosystems, and in the case of some invasive species, to protect the public health of

populations of North America.

In 1993, Canada, Mexico, and the United States established the Commission for

Environmental Cooperation (CEC) under the North American Agreement on Environmental Cooperation (the NAAEC) to address regional environmental concerns.

The NAAEC complements the environmental provisions of the North American Free

Trade Agreement (NAFTA). The CEC is facilitating tri-national coordination and cooperation on matters of cross-border flows of air pollutants, as well as invasive biological species. Capacity building, public participation, and facilitation of risk management actions through pollution prevention, market-based incentives, and technological controls are priorities.

In 2001, two meetings of air quality experts were sponsored by the CEC to address the exchange of emissions information for criteria air pollutants and greenhouse gases and to address air quality impacts of transboundary trade and transport corridors. To support environmental capacity building, a Mexican association

of air quality experts has been established and a newsletter has been created to inform stakeholders in Mexico about the air quality program. The CEC is also providing funding for Mexican participation in the meetings of North American air

quality experts addressing problems common to the three countries.

Under the auspices of the NAAEC, in 1995, Mexico, Canada and the United

States have developed a regional initiative on the sound management of chemicals.

Under this initiative, CEC has already established regional action plans for PCBs,

DDT, and chlordane and is developing an action plan for dioxins, furans and

hexachlorobenzene. U.S.EPA provides technical input to these plans and coordinates

relevant capacity building activities, such as providing support for dioxin measurements, and assisting Mexico with obtaining international funding to address DDT

stockpiles.

In 2001, the CEC air program collaborated with the Sound Management of

Chemicals (SMOC) program and developed a national mercury air emissions inventory in Mexico. It is being combined with the national inventories in Canada and

the United States to give a continental perspective for the globally cycling pollutant.

Data comparability and information access are key to its success.

In addition to mercury, air quality experts in the three countries are developing

inventories for sulfur dioxide, nitrogen oxides, carbon monoxide, volatile organic

compounds, particulate aerosols, and greenhouse gases. They are also developing

plans to obtain the needed information through monitoring and other implementation tools for any significant data gaps that may be identified.

Under SMOC, the North American Regional Action Plan (NARAP) on monitoring

and assessment of persistent toxic substances, with a leading effort addressing mercury, is being carried out through a tri-national task force of experts, with peer reviewed and published results. The monitoring effort is being coordinated with the

development of EPA’s routine monitoring strategy, and another important component is focusing on family and child environmental health indicators and monitoring

parameters for mercury and other PBTs. Workshops facilitate the progress in the

assessments and capacity building, and a leveraging of funds supports the implementation for phase 2 of the mercury NARAP, and those for DDT and PCBs,
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dioxins, furans and hexachlorobenzene. These are all being examined to ensure that

objectives are met.

Consideration also is being given to how the CEC, and particularly SMOC, could

facilitate the regional implementation by the Parties to the 2001 Stockholm Convention on Persistent Organic Pollutants. The effects of persistent toxics on wildlife are

being monitored as well as human health endpoints. A North American Pollutant

Release and Transfer Register project addresses the sources, handling and stewardship of toxic chemicals from industrial activities in North America, and allows for

better management of these transboundary pollutants.

EPA’s Office of International Affairs has the overall Agency lead on environmental issues concerning the U.S.-Mexico border. There is also major participation

by EPA’s Office of Water (OW), OPPTs and most EPA Regions. Other EPA program

offices are also involved to varying degrees.

Regional Cooperation Addressing Contamination Threats to Alaska and the Arctic, Including Indigenous Populations:

The fragile Arctic environment and ecosystems, Alaska and indigenous populations are threatened by transboundary contamination mostly from sources in Russia. Transboundary transport mechanisms include atmospheric and ocean circulation and biological transmission through the Arctic food chain. The Russian contaminant sources are largely a legacy of the Soviet Union’s armaments and military

activities in the far North, the Cold War era industrial/agricultural infrastructure

and practices, and related un-managed waste. The principal contaminant sources of

concern include radioactive waste and spent nuclear fuel, PCBs mostly from the

power grid system, dioxins/furans from incinerators and industrial sources, obsolete

pesticides from huge collective farm era stockpiles, and heavy metals such as lead

and mercury from industrial activities.

In the 1990’s Russia had the highest concentrations of unsecured Cold War legacy

radioactive waste in the world, and very little waste management infrastructure to

address the deteriorating situation. The problems mounted rapidly as the nuclear

submarine dismantlement program obligatory under the START treaty continued to

generate large amounts of radioactive waste and unsecured spent nuclear fuel. Russia dumped the low-level liquid radioactive waste produced in the submarine decommissioning and dismantlement process in the Arctic, while the spent nuclear fuel

accumulated in unsecured circumstance at Arctic coastal sites in Northwest Russia.

Under an EPA initiative responding to a Russian request for assistance, the U.S.

(EPA, DOS/AID, DOD, and DOE) undertook in 1994 a multilateral project with Russia and Norway to upgrade and expand Russia’s only operational radioactive liquid

waste processing facility (originally developed for the Russian nuclear icebreaker

fleet) to process the low-level liquid waste from the nuclear submarine disarmament

program. The facility is now undergoing final operational testing and Russia terminated all ocean dumping of radioactive liquid waste since the start of the project.

The unsecured spent nuclear fuel in the Russian Northwest constitutes 95 percent

of the high level radioactive waste threat to the Arctic environment. EPA proposed

the development of a prototype transportable spent nuclear fuel dry storage cask as

a means of securing Russia’s inventory of spent nuclear fuel arising from the decommissioning and dismantlement of large portions of their strategic submarine fleet

under START. The U.S. nuclear power industry had pioneered dry cask storage, and

the EPA proposal was to develop a low-cost prototype transportable storage cask for

use in Russia, based on a unique Russian concrete-metal cask concept.

The Transportable Spent Nuclear Fuel Storage Cask Project was organized as a

trilateral effort between the U.S., Russia and Norway under a military environmental cooperation declaration involving the three countries and lead by their respective defense establishments. For the U.S., the effort has involved cooperation

among DOD, EPA, DOE and DOS. The successful testing of the prototype cask has

caused serial production to start under separate programs within Russia and, bilaterally, as part of the cooperative threat reduction efforts between Russia and the

U.S. A prototype concrete storage pad was proposed by EPA to hold the loaded

casks. This portion of the cooperative program is also nearing completion.

Since 1998, the EPA multilateral strategy on Arctic contamination has been shifting emphasis to the problem of non-radioactive chemical threats to the Arctic environment and Alaska emanating from Russia’s Cold war era legacy. The U.S. proposed a three phased project to the Arctic Council to assist Russia in addressing

its PCB problems: (1) development of a PCB inventory for the Russian Federation,

with emphasis on sources potentially impacting the Arctic, (2) assessment/feasibility

of available technologies to address the particular major source problems identified

by Russia, (3) selection and demonstration of at least one technology addressing one

or more major source categories.
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The Russian PCB Project was endorsed as an official project of the Council’s new

Arctic Council Action Plan and EPA was asked to provide the project technical lead.

The project has received funding from EPA and DOS plus all other Arctic nations

and the Netherlands. The first (inventory) phase is now completed and the second

phase is nearing completion, with the focus on PCB destruction technologies and alternative dielectric fluids. The project model is being applied under the Arctic Council to ‘‘Russian Sources of Dioxin/Furans’’ under Swedish project lead and U.S./EPA

co-lead and to ‘‘Obsolete Pesticides in Russia’’ under U.S./EPA project lead.

International Cooperation and Agreements Addressing Global Sources of Persistent Organic Pollutants (POPs) and Other Toxic Substances:

Many Persistent Organic Pollutants (POPs) are subject to long-range transport

processes, and consequently pose a common threat to human health and the environment ( particularly sensitive ecosystems), all over the world. The United States

has taken a leading role to reduce and/or eliminate POPs and their releases on a

regional and global basis. In 2001, the U.S. signed the Stockholm Convention on

POPs and is working to ratify the treaty. The 1997 Canada-U.S. agreement for the

Virtual Elimination of Persistent Toxic Substances in the Great Lakes and the and

the 1993 tri-national NAAEC agreement between the U.S., Mexico and Canada and

establishment of the CEC have all been discussed previously.

Since the early 1990’s, EPA has been involved with activities concerned with identifying and quantifying sources of contamination impacting the Arctic environment,

ecosystems and populations under the Arctic Environmental Protection Strategy

(AEPS). Subsequently, the AEPS was subsumed under the Arctic Council, a consultative mechanism whereby the eight Arctic nations collaborate and, for example, provide assistance to Russia in meeting environmental goals.

In 1998, the United States signed the legally binding regional protocol with other

members nations of the United Nations Economic commission for Europe (UNECE)

on POPs under the Convention on Long-Range Transboundary Air Pollution. This

agreement seeks to eliminate production and reduce emissions of POPs in the

UNECE region and addresses the 12 Stockholm Convention POPs and 4 additional

chemicals (hexachlorocyclohexanes, hexabromobiphenyl, chlordecone, and polycyclic

aromatic hydrocarbons). U.S. EPA is involved in ensuring the U.S. meets the obligations of the protocol and is actively engaged in the scientific assessment of potential

additional chemicals. The EPA also continues activities under the Convention on

Long-Range Transboundary Air Pollutants (LRTAP Convention) Heavy Metals Protocol, signed by the U.S. in June 1998 and ratified in January 2001, whereby nations of the UN Economic Commission for Europe agree to control emissions of mercury, lead and cadmium.

EPA has initiated activities (previously described) under the Arctic Council/Arctic

Council Action Plan (ACAP) intended to assist Russia in accepting and implementing the LRTAP protocols, as well as the Stockholm Convention. Russia has now

signed the Stockholm Convention. The United States has also provided technical

and financial assistance for POPs-related activities to a variety of countries besides

Russia and regions other than the Arctic, including Mexico, Central and South

America, Asia, and Africa. Examples of this assistance include projects led by the

U.S.EPA on the development of dioxin and furan release inventories in Russia and

Asia, the Chemicals Information Exchange and Networking Project for chemical

managers in targeted countries in Africa and Central America, the destruction of

pesticide stockpiles in Africa and Russia, and the reduction of PCB sources in Russia and the Philippines.

Other international work has addressed trade in hazardous substances, some of

which are POPs. The United States, along with 71 other countries and the European Community, have signed the Rotterdam Convention on the Prior Informed

Consent (PIC) Procedure for Certain Hazardous Chemicals and Pesticides in International Trade, building on a 10-year-old voluntary program. The PIC Convention

identifies pesticides and industrial chemicals of concern, facilitates information

sharing about their risks, and provides countries with an opportunity to make informed decisions about whether they should be imported. U.S. EPA has been actively involved in the voluntary program by engaging in the development and implementation of the PIC procedure.

The following two successful projects, are examples of efforts involving EPA that

the U.S. has supported within a regional context, in cooperation with other organizations and countries:

Connecting POPs Managers Via the Internet: the Chemicals Information Exchange

Network (CIEN)

In a partnership with the United Nations Environment Programme (UNEP), and

funding from the U.S. State Department, U.S.EPA is providing Internet access and
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training to chemical management officials and other stakeholders in Africa. Africa

was chosen for initial focus because it is the continent with the lowest Internet

connectivity and the greatest need. It is planned that the project will be expanded

to Central America in the near future, and beyond that as resources become available. Internet access will assist implementation of the Stockholm Convention by providing POPs chemical information to decision-makers. Internet access also will enable chemical and pesticide regulators, as well as health and safety ministries, to

access information on best practices and funding opportunities, and will allow them

to promote regional cooperation and action plan development. EPA is also participating in the information Exchange Network on Capacity Building for Sound Management of Chemicals (INFOCAP) under the auspices of the Intergovernmental

Forum on Chemical Safety.

PCBs in Russia

The U.S. State Department has funded and U.S.EPA is implementing a project

in Russia to address environmental problems resulting from the manufacture and

industrial use of PCBs. Partners in this effort include Norway, Denmark, Sweden,

the United Nations Environment Programme (UNEP), and the Arctic Council. The

project aims to reduce emissions of PCBs and enable Russia to meet the requirements of both the Stockholm Convention and the LRTAP POPs Protocol. The project

involved conducting a PCB inventory, the results of which were presented at an official ceremony at the Norwegian Embassy in Moscow in September 2000. It will also

entail a demonstration project to evaluate and showcase a selected PCB destruction

technology.

Very Long-Range Air Transport of Pollutants and Global Cycling of Mercury:

Very long-range air transport of pollutants and the global cycling of mercury is

a rapidly growing area of attention for the U.S. and other countries. At the present

time these matters, are heavily concerned with research, monitoring and development. EPA has taken many steps to better understand the sources and mechanisms

of long-range transport of persistent bioaccumulative toxic (PBT) substances and

other air pollutants, as well as undertaking some initial steps in developing co-benefit technologies for emissions control, promoting pollution prevention.

In May 2000, the EPA Office of International Affairs (OIA) and the Office of Air

(OAR) initiated an agency-wide workgroup on the International Transport of Air

Pollutants (ITAP). The first year was devoted to developing an appreciation for all

the activities ongoing within the Agency related to long-range transboundary transport, including monitoring, modeling, emissions inventory development, control technology development, technology and information transfer, and analysis related to

international policy development.

In July 2000, OIA, with support funding from OAR and the Office of Research

and Development (ORD), co-sponsored the First International Conference on TransPacific Transport of Atmospheric Contaminants, involving scientists from both sides

of the Pacific Basin, including China, Japan, Russia, South Korea, Canada, and the

U.S. The conference discussed the state of science on long-range atmospheric transport in the North Pacific region, identified uncertainties and gaps in our knowledge,

and promoted a network of individuals and organizations interested in these issues

to further international collaboration.

In June 2001, OAR co-sponsored a workshop with Environment Canada entitled

‘‘Photo-oxidants, Particles, and Haze Across the Arctic and North Atlantic: Transport Observations and Models.’’ This conference was conducted as part of the U.S.

participation in the Convention on Long Range Transboundary Air Pollution

(LRTAP Convention) and the Arctic Monitoring and Assessment Program (AMAP)

under the Arctic Council. The meeting focused on identifying the research needed

to quantify the sources-receptor relationships for ozone and fine particle transport

across the North Atlantic and Arctic.

EPA is currently shaping a PBT routine monitoring strategy, coordinating with

other agencies, states, tribes, intergovernmental organizations and the private sector, which will incorporate the international dimension. Such a strategy will help

establish trends for long-range transport, and also help us evaluate effectiveness of

our risk management actions.

For mercury specifically, the Agency priority pollutant which cycles globally, ORD

was instrumental in developing new methods for measuring the various species to

assess long-range transport mechanisms. EPA is developing state-of-the-art knowledge about transformation of mercury into various species in the atmosphere and

the transport consequences. The species determines distance traveled and ultimate

fate. Research utilizing these new analytical methods has been ongoing in South

Florida, Cheeka Peak, Washington; Barrow, Alaska; and Mauna Loa, Hawaii to dis-
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tinguish local sources of mercury from external sources. These studies have involved

the first aerial measurements and studies at elevation as well as at ground level.

In regard to pollution emissions minimization abroad, OIA is sponsoring a mercury-SO2 co-benefit demonstration project at a small coal-fired facility in Russia, in

order to evaluate the effectiveness of emissions reduction using an electrostatic precipitator (ESP) add-on system. If the expected minimum of 50 percent reduction in

mercury is achieved, it will be possible to utilize this low-technology approach in

many countries where similar Russian ESP systems are in place. Additionally, a

higher technology, although higher cost, approach has also been identified which is

expected to reduce mercury by 99 percent in conjunction with SO2 reduction, is

being considered for application in China.

In conjunction with the Department of State Cooperative Threat Reduction Program, OIA has initiated development of a proposal for mercury bioremediation at

a former chloralkali facility in Kazakhstan, and in preparation for this project, sponsored a meeting in May 2002 of all scientists engaged in mercury research and pollution prevention in Kazakhstan and the neighboring countries of Kyrgystan, Azerbaijan, and Russia.

The Office of International Affairs also played an instrumental role with Department of State during the UNEP Governing Council session in February 2002, at

which UNEP launched a global mercury assessment, with a technical report and set

of alternatives for decisions to be presented to the February 2003 UNEP Governing

Council.

PESTICIDES

Question. The administration is again proposing to replace appropriations to fund

the pesticides reregistration program with a fee-based system. Many small businesses believe that a fee registration program would hurt their economic viability

and place them at an unfair business disadvantage to larger businesses. How would

the EPA address these concerns?

Answer. There are a few different fee programs in the pesticide program. All of

the programs have provisions for reduced fees or waivers for companies that are

small businesses or can demonstrate economic hardship. The various fees are discussed below.

Registration Fees.—These fees were originally enacted in 1988 and immediately

suspended by amendments to the Federal Insecticide, Fungicide and Rodenticide Act

(FIFRA) in 1988. However, that prohibition expired in September 2001 and was renewed for 1 year by the Congress. These fees could not be used for pesticide reregistration, since they are based on recovering costs of the registration program. The

fees are currently set up to go directly into the Environmental Services account at

Treasury. While the receipts could be separately appropriated to the Agency, generally such fees are deposited to Treasury and are not available to the Agency.

When last in effect, the registration fee rule provided for fee waivers or refunds in

whole or in part for minor uses, if the action was in the public interest, or upon

request by the applicant if they can demonstrate severe economic impact.

Reregistration/Maintenance Fee.—Reregistration/maintenance fees were first introduced in FIFRA 1988 and re-authorized in Food Quality Protection Act (FQPA).

This fee will expire on September 30, 2002. The maintenance fee addresses small

business concerns in two ways. First, the per product fee for each registrant’s first

product is discounted by 50 percent. In fiscal year 2002, the fee structure was

$1,225 for the first product and $2,550 for each subsequent product. Second, the fee

structure includes caps. No registrant pays more than $55,000 for their first 50

products and $95,000 total. For small businesses these caps are set at $38,500 for

the first 50 products and $66,500 total. Although all companies not paying at one

of the caps benefit from this discount, it especially helps the nearly 800 companies

that pay for only one product.

Tolerance Fees.—The proposed fee is authorized by FQPA 1996 amendments to

FIFRA and Federal Food, Drug and Cosmetic Act (FFDCA). The proposed rule essentially updates the existing tolerance fees. This fee is intended to recover all costs

for processing tolerance actions, including petitions and reassessed tolerances. The

fee is structured so that the first tolerance of an active ingredient (a single ingredient may have many tolerances) would be assessed the highest fee, then quickly

diminish per each successive tolerance relating to the active ingredient. The proposed rule was published in the Federal Register on June 6, 1999 (OPP–30115),

however in 2000, 2001 and 2002, Congress prohibited EPA from promulgating a

final tolerance fee rule.

The proposed rule provides that the Administrator may grant a waiver on a case

by case basis when requested in writing by the petitioner or registrant, for an appli-
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cation for a tolerance or a tolerance reassessment action that meet the criteria for

safer products, products that are in the public interest, and registrants who can

demonstrate an economic hardship. The concerns of small business would be one of

the Agency’s priorities in reviewing the requests.

QUESTIONS SUBMITTED BY SENATOR PETE V. DOMENICI

ENVIRONMENTAL AIR QUALITY: CONTRIBUTION TO PUBLIC HEALTH BURDEN

Question. In the environmental air quality arena, most of the Agency’s research

effort is being directed toward understanding the health effects of fine particles.

This effort responds to congressional direction and current public concerns, and is

based on the epidemiological evidence that airborne particles are statistically associated with death and illness. Yet, all recent studies that examine the effects of multiple air pollutants indicate that not only particles, but also other air pollutants are

associated with death and illness. Is it not true that many air pollutants are likely

to contribute to the public health burden?

Answer. We agree that many air pollutants are likely to contribute to the public

health burden of air pollution. For example, recent National Scale Assessment of air

toxics based on 1996 data revealed several pollutants with health risks to the American population. The third external review draft of the Air Quality Criteria Document for Particulate Matter summarizes the body of science associating fine particles (and other air pollutants) with death and illness. This draft has recently been

released and will be undergoing review by the EPA’s Science Advisory Boards

CASAC Committee. The document evaluates the strength and coherence of the statistical associations between health effects and particulate matter (PM). The extent

that the associations with PM also apply or are confounded by other pollutants is

a matter of much debate and continued research. In general, associations of health

effects with air pollutants seem to be dominated by PM, with occasional emergence

of other pollutants as co-factors or appearing as an equal determinant. These copollutants have ranged from nitrogen dioxide to sulfur dioxide to carbon monoxide

depending on study venue. But these co-pollutants have been of inconsistent importance, suggesting that they may indeed be important considerations but are likely

of secondary contribution. The extent to which toxicological evidence has provided

biological plausibility to the findings regarding PM supports this contention.

ENVIRONMENTAL AIR QUALITY: EFFECT OF AIR POLLUTANTS AND CONTAMINANTS

Question. What is the Agency doing to determine how the mixtures of air pollutants that people actually breathe affect health, and which of the hundreds of air

contaminants are most important?

Answer. Several of the Agency’s current research efforts relate to understanding

how complex air pollutant mixtures affect health. Particulate matter (PM) is itself

a complex mixture of components contributed by various air shed sources and secondary transformations. The health effects research under EPA’s PM research program will help our understanding of the observed excess mortality and morbidity

associated with particulate air pollution. This research is evaluating the contributions of individual constituents as well source-attributed mixtures in both epidemiological and toxicological studies. Results from these studies will help: (1) determine

the biological mechanisms underlying PM-related effects; (2) identify which PM components (or sources) are most responsible for health effects; and (3) quantify the factors affecting susceptibility in the population. In addition, research to elucidate

whether, and to what extent, the effects attributed to PM exposures are confounded

by other commonly occurring pollutants such as SO2 and ozone will be performed

to improve interpretation of the epidemiological studies on which the NAAQS are

based.

The Agency also has additional efforts underway to understand and quantify air

pollution risks in the air toxics program. Air toxics research covered by the draft

Air Toxics Research Strategy (ATRS) and the draft Air Toxics Multi-Year Plan

(MYP) have grouped and prioritized air toxics to aid in determining risk across multiple scales and from stationary (residual risk), mobile, and indoor air sources. The

ATRS also identifies key research directions for mixtures including identification of

those not following the default assumption of additive toxicity and identification of

the constituent interactions of mixtures.
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ENVIRONMENTAL AIR QUALITY: INCORPORATING NATIONAL ENVIRONMENTAL RES- PIRATORY CENTER RESEARCH STRATEGY INTO AGENCY’S ASSESSMENT OF PUBLIC

HEALTH BURDEN AND FUTURE REGULATORY STRATEGIES

Question. In New Mexico, the National Environmental Respiratory Center

(NERC) is pursuing a strong research strategy aimed at dissecting the contributions

of many different classes of air pollutants to the death and illness associated statistically with airborne particles and the few other pollutants that are measured routinely. How does the Agency plan to incorporate this program into its assessment

of the public health burden from air pollution, and the future regulatory strategies

that may be required to address multi-pollutant effects?

Answer. EPA believes the research approach taken by the NERC will eventually

provide important insights into appropriate approaches to addressing multiple air

pollutants. One way we are involved in NERC is our active representation on the

Scientific Advisory Committee of the NERC, which meets twice a year to advise the

program on its strategic plan as well as to review program progress. This involvement incorporates the Agency view and communicates program status back to the

Agency.

As the NERC recognizes, the assessment of the health effects of air pollution is

complicated by its complex nature. The regulatory approaches taken by EPA have

focused both on single pollutant classes as in the National Ambient Air Quality

Standards (NAAQS; e.g., ozone, lead, SO2, etc.) as well as control of complex mixtures that are emitted from a number of regulated source categories. Even the

NAAQS regulations often result in multiple pollutant control, and at least one

NAAQS pollutant, particulate matter, is itself a complex mixture. Reductions of

multiple pollutants in these programs has undoubtedly benefitted public health, but

we need more information on pollutant and source combinations to improve both the

effectiveness and efficiency of such programs. As the approach of the NERC to the

study of air pollutants, which is inclusive of the complex emissions of sources, is

complicated by design, analyses of the findings is also complicated. However, there

is growing interest in the integrated control of air pollution by source,’ and when

paired with new statistical applications (e.g., principal component analyses) to both

epidemiological and toxicological studies of complex mixture exposures, we anticipated that the more complete understanding of source contributions to health rather

than individual pollutants will lead to significant advances in public health protection.

EPA is paying close attention to how these research developments can inform and

improve air quality management. At present there is no clear best method’ for incorporating the health impacts of complex source emissions, since often multiple

sources emit the same pollutants in varying quantities and under various conditions

of operation. Appreciating how source emissions affects health is also complicated

by factors such as aging of the atmosphere, photochemical processes, and multiple

source contributions. Yet, it is clear that health will be better protected if the entire

matrix of a polluted air shed can be considered in developing control strategies and

our understanding of source-based health impacts will allow the Agency to target

pollutant control with greater efficacy and reduced overall cost to governments and

the economy.

One non-regulatory area in which we would like to consider multiple pollutants

is the system for providing air quality information to the public. Currently, public

notices on daily air quality are usually driven by an individual pollutants, reported

to the media as an Air Quality Index that can be better appreciated by the lay community. We are currently examining research from NERC, EPA’s internal research

program and other programs to determine whether and how the current index

might be modified to differentiate the message when multiple as opposed to single

pollutants are elevated. This examination will help us formulate additional research

questions for NERC and others to facilitate improved public health communication

in the future.

ENVIRONMENTAL AIR QUALITY: RESEARCH TO UNDERSTAND HEALTH EFFECTS

Question. The Agency’s air pollution research tends to focus on a few classes of

pollutants, such as particles, that are reviewed, debated, and regulated one-at-atime. Although the single-pollutant approach stems from the language of the Clean

Air Act, which has certainly helped to clean up the air, epidemiological studies have

now made it clear that all routinely measured air pollutants are associated to some

degree with death and illness. These are signals that the single-pollutant approach

may not continue to serve us well in the future. What research is the Agency supporting to understand the health effects of the much larger number of air pollutants

that people actually breathe every day?
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Answer. The Agency supports both single pollutant and multiple pollutant research. Epidemiology studies, by their very nature, include multiple pollutants in

their analyses of health outcomes. By and large, a single pollutant (usually PM or

ozone) dominate the responses, but other pollutants also have an impact on the outcomes and the importance of these multiple factors is widely appreciated and considered in the risk assessments. Additionally, both panel/field (human) and laboratory

toxicological studies (both human and animal) that incorporate mixture approaches

are supported with the view that complex air pollution exposure scenarios are the

reality. The Agency’s involvement with the National Environmental Respiratory

Center in New Mexico provides one example where this ‘‘top-down’’ approach to the

study of emission mixtures is currently be employed. Analogous and complementary

studies with fuel oil and coal emissions are being studied intramurally by EPA.

There is growing appreciation of the potential for source-based analyses of exposures

in the field and the laboratory (e.g., concentrated air particulate exposure units) to

improve understanding of health effects and control opportunities. These analyses

are gaining in importance in study design and assessments.

In addition the draft Air Toxics Research Strategy and draft Multi-Year Plan have

grouped and prioritized the 188 air toxics listed in the Clean Air Act Amendments

of 1990 as a way that allows health effects research to focus on those associated

with the likely worst health effects. For example, research in the areas of mode of

action, shape of dose response curves, irritancy of the respiratory system, and physiologically-based pharmacokinetic models have potentially broad application across

several air pollutants.

ENVIRONMENTAL AIR QUALITY: NATIONAL ENVIRONMENTAL RESPIRATORY CENTER INCORPORATED INTO AGENCY’S STRATEGY FOR UNDERSTANDING EFFECTS OF COMPLEX

AIR POLLUTANT MIXTURES

Question. How does the Agency propose to incorporate the forward-looking multipollutant research of the National Environmental Respiratory Center in New Mexico into its strategy for understanding the effects of complex air pollution mixtures?—And evaluating how regulatory strategies may need to evolve in the future?

Answer. The NERC recognizes that the assessment of the health effects of air pollution is complicated by its complex nature. As stated in Question 3 above, EPA believes the research approach taken by the NERC will yield insights into appropriate

approaches to managing multiple air pollutants as well as information on pollutant

and source combinations that can improve both the effectiveness and efficiency of

our regulatory programs. There is growing interest in the integrated control of air

pollution by source’, and when paired with new statistical applications (e.g., principal component analyses) to both epidemiological and toxicological studies of complex mixture exposures, we anticipate that a more complete understanding of source

contributions to health rather than individual pollutants will lead to significant advances in public health protection.

EPA is paying close attention to how these research developments can inform and

improve air quality management. At present there is no clear best method’ for incorporating the health impacts of complex source emissions, since often multiple

sources emit the same pollutants in varying quantities and under various conditions

of operation. Understanding how source emissions affect health is also complicated

by factors such as aging of the atmosphere, photochemical processes, and multiple

source contributions. Yet, it is clear that health will be better protected if the entire

matrix of a polluted air shed can be considered in developing control strategies, and

our understanding of source-based health impacts will allow the Agency to target

pollutant control with greater efficacy and reduced overall cost to governments and

the economy.

QUESTIONS SUBMITTED BY SENATOR PATTY MURRAY

COEUR D’ALENE BASIN: FINAL RECORD OF DECISION (ROD)

Question. Is the EPA still planning to issue the final Record of Decision (ROD)

for the Coeur d’Alene Basin this summer? Has EPA responded to the Idaho delegation’s request for an NAS study on EPA’s proposed ROD and for a delay in the final

ROD? If not, when does EPA expect to respond? If so, what was EPA’s response?

Answer. EPA Region 10 still intends to issue the Record of Decision (ROD) for

the Coeur d’Alene Basin this summer. In letters dated April 15, 2002, Regional Administrator John Iani replied to the Idaho congressional delegation’s requests for a

ROD delay and an NAS study. The reply assured the delegation that EPA is working closely with the State of Idaho regarding their concerns on the ROD, and is also
301

supportive of the State’s recently formed Coeur d’Alene Basin Improvement Environmental Project Commission. EPA welcomes an independent review by the NAS

but would like to move forward with the ROD with a commitment to modify the

ROD in the future based on any new information or findings.

In addition, EPA is working with the Federal trustees, tribes, local communities,

the State of Washington and other stakeholders.

SUPERFUND TAX: ADMINISTRATION’S OPPOSITION TO TAX CHEMICAL AND PETROLEUM

INDUSTRIES

Question. Is the Administration still opposed to reinstating the Superfund tax on

the chemical and petroleum industries?

Answer. A number of years have passed since the Superfund taxes expired. Although the Superfund taxes expired, the annual appropriations for the program

have remained relatively steady. It is important to note, that the expiration of the

taxes has not affected the appropriated funding for the Superfund program. I am

confident that Congress and the Administration will continue to work together to

provide appropriate funding for the Superfund program.

The Administration continues its strong commitment to the polluter pays principle. In fiscal year 2001 EPA successfully managed the Superfund enforcement program whereby 70 percent of Superfund long-term cleanups at non-Federal facility

sites are performed or paid for by parties responsible for the contamination (PRPs).

Last year (fiscal year 2001), EPA produced a near record amount in private party

cleanup commitments for cleanup and cost recovery—$1.7 billion—an increase from

the previous year of almost $300 million. Of the $1.7 billion, EPA obtained commitments from PRPs to reimburse EPA $413 million in past cleanup costs—a large increase from the $145 million achieved in the previous year.

SUPERFUND CLEANUP: ADEQUATE FUNDING IN FISCAL YEAR 2003 FOR WASHINGTON

STATE SUPERFUND CLEANUPS

Question. I am concerned that the Administration has not requested enough funding for Superfund to keep cleanups in Washington state (and throughout the nation)

on schedule—I am especially concerned about potential slowdowns at the Asarco site

in Tacoma, Washington, and the Midnight Mine site on the Spokane Reservation.

Will the Administration’s request of $1.29 billion for Superfund in fiscal year 2003

provide enough additional funds to ensure that Superfund cleanups in Washington

state are not delayed because of insufficient funding?

Answer. Status of Asarco.—Based on the current schedule, approximately $60 million in work is scheduled in the next 3 years. This includes completion of excavation

and filling the onsite landfill, armoring the shoreline, completion of cleanup of approximately 500 yards, and beginning offshore sediment remediation. Asarco has

been identified as the Potentially Responsible Party (PRP), and the Agency is working to have Asarco as the fund lead for this site. However, Asarco currently does

not have funds to do more than a fraction of the work. Due to the financial situation

of the PRP, the burden of completing the cleanup may, at some point in the future,

fall on the Superfund program.

Status of Midnight Mine.—Contaminated water emerging from the Midnight mine

is currently captured for treatment in an on-site treatment system; however, a longterm solution is needed to address the site as a whole. Data evaluation, hydrologic

modeling and preparation of the remedial investigation report are currently underway. Human and ecological risk assessments and a feasibility study of cleanup alternatives will be initiated in fiscal year 2003. The schedule for completion of the

study and selection of a remedy will be based on EPA regional funding allocations

and priorities for fiscal year 2003 and beyond. EPA continues to work with the Spokane Tribe on the issues surrounding this complex site. The Agency is also attempting identify PRPs to conduct the cleanup.

ASBESTOS: LIBBY, MONTANA ASBESTOS CLEAN-UP

Question. What is the Administration’s request for funding in fiscal year 2003 to

clean up contaminant asbestos from Libby, Montana? What is the Administration’s

request to address broader issues surrounding asbestos, such as implementing recommendations from the EPA’s Inspector General (for example, creating the Blue

Ribbon Panel on Asbestos, updating EPA’s IRIS for asbestos, developing a NESHAP

for contaminant asbestos etc.).

Answer. EPA has committed more than $60 million in fiscal years 2000 through

2002 for environmental investigations, cleanup actions and medical investigations in

Libby. Current estimates place fiscal year 2003 needs at approximately $21 million.

These projections include many assumptions about the number of homes or addi-
302

tional properties which may require clean up, and may be subject to significant revision as field work progresses.

In addition to the Administration’s request for funding in fiscal year 2003 to clean

up contaminant asbestos from Libby, Montana, EPA’s fiscal year 2003 request also

addresses the broader issues surrounding asbestos, which includes funding for implementing recommendations from the EPA Inspector General’s report and recommendations to be developed in 2002 by a Blue Ribbon Panel, and funding for

other actions to reduce potential asbestos risks, such as lung cancer, asbestosis, and

mesothelioma.

EPA recently signed a cooperative agreement with former EPA Deputy Administrator Hank Habicht and the Global Environment Technology Foundation to convene a Blue Ribbon Panel (formerly the Asbestos Focus Group) of national experts

to provide the Agency with guidance on how best to respond . Discussions are currently underway to identify the team of national experts that will comprise the

Panel. The panel is expected to meet several times over the course of the next several months.

In response to the Inspector General’s report EPA also created an Asbestos Coordination Team (ACT) to facilitate internal and external communications and information sharing on asbestos issues. EPA is also a member of the OMNE committee

(consisting of the Occupational Safe and Health Agency [OSHA], the Mine Safety

and Health Administraion [MSHA], the National Institute for Occupational Safety

and Health [NIOSH] and the Environmental Protection Agency [EPA]) within the

Department of Labor to coordinate on asbestos and other worker chemical safety

issues.

Other actions EPA has already taken or will take in 2002 and 2003 to reduce asbestos risks include updating lists of producers and processors of vermiculite, reviewing and updating other pertinent documents and studies, and developing a

product sampling and analysis plan for gardening products and home attic insulation. EPA published its horticultural study of vermiculite products in August, 2000.

The results indicated that, in general, the use of these products poses minimal risk

to recreational gardeners, but there may be cause for concern for occupational exposures. EPA’s study of asbestos contaminated vermiculite home attic insulation

began in January 2001, is being peer reviewed in July and August 2002, and is expected to be published in September 2002.

ASBESTOS: BROADENING AND CHANGING THE DEFINITION OF ASBESTOS

Question. Does EPA have any plans at this time to look into broadening and/or

changing the definition of asbestos to include nonasbestiform varieties and/or additional minerals which may pose health threats?

Answer. EPA’s Office of Research and Development is updating the Agency’s Integrated Risk Information System (IRIS) file on asbestos, which may address expanding the definition of asbestos, but the Agency is awaiting the deliberations of the

Asbestos Focus Group (formally called the asbestos Blue Ribbon Panel) before coming to any conclusions regarding future actions on this issue. The Asbestos Focus

Group assists the Agency with recommendations on how best to use its resources

for the oversight of Asbestos in use in products and in buildings and its manufacture, processing and distribution in commerce. Final recommendations will be provided to the Agency in early 2003.

SUBCOMMITTEE RECESS

Senator LEAHY. With that, let us have a recess.

[Whereupon, at 11:30 a.m., Wednesday, March 20, the subcommittee was recessed, to reconvene subject to the call of the Chair.]
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DEPARTMENTS OF VETERANS AFFAIRS AND

HOUSING AND URBAN DEVELOPMENT, AND

INDEPENDENT AGENCIES APPROPRIATIONS

FOR FISCAL YEAR 2003

WEDNESDAY, APRIL 17, 2002

U.S. SENATE,

SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS,

Washington, DC.

The subcommittee met at 9:30 a.m., in room SD–138, Dirksen

Senate Office Building, Hon. Barbara A. Mikulski (chairman) presiding.

Present: Senators Mikulski, Johnson, Bond, and Domenici.

CORPORATION FOR NATIONAL AND COMMUNITY SERVICE

STATEMENT OF LESLIE LENKOWSKY, CHIEF EXECUTIVE OFFICER

OPENING STATEMENT OF SENATOR BARBARA A. MIKULSKI

Senator MIKULSKI. Good morning. The Subcommittee on VA–

HUD appropriations will come to order. This hearing will focus on

the appropriations request for the Corporation for National and

Community Service. I want to warmly welcome the National Service CEO, Dr. Leslie Lenkowsky.

I was pleased to hear from him last week at the Health Committee, where we were authorizing the service and working with

the President of the United States in his review, and invigorated

call for service. I’m glad to have you here today before this subcommittee, because this is where the so-called rubber meets the

road here. We operationalized those good intentions that are envisioned in authorizing with, of course, our own perspective.

Dr. Lenkowsky comes to us with a great deal of experience. His

long history of national service is going to make him, I believe, the

right man at the right time. Appointed by President Bush I to

serve on the original commission to establish the Commission on

National Service, National and Community Service, but when it

was meant to be a demonstration project, then President Clinton

as part of a bipartisan effort appointed him as one of the founding

Directors of the corporation.

So he knows the whole history, he knows the story, he knows the

intent, so as well as coming with an incredible background from

the academic community, where really his career has been focused

on the role of philanthropy and its intersection with public policy,
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but how to stimulate innovation, creativity, accountability without

big bureaucracy, so you are the kind of guy this committee likes.

So we look forward to working with you and to bringing all of

this experience to bear, because National Service is in a new century, and we need to meet the new challenges of our country while

at the same time retaining that very important value base of

neighbor helping neighbor.

Last week, the President released his principles for National

Service reauthorization. We are pleased the President has embraced National Service, and look forward to working with him in

a bipartisan way to foster those objectives.

Some of my goals in this hearing are going to be twofold, one a

continuation of last week’s hearings to have a better opportunity to

look at the President’s principles, and then how that would be put

into the appropriations. Second, how to work with this Director as

a part of our appropriations to see how we can take National Service into the new century, continuing to create the habits of the

heart that make our Nation great, but at the same time providing

qualitative and quantifiable service to the communities, reducing

student debt, and maintaining proper fiscal management.

Volunteerism is our Nation’s trademark. It highlights what is

best about America. It is the backbone of our communities. Preserving safety nets for seniors, keeping communities safe, and getting kids ready to learn. The idea behind National Service was to

link values to public policy, and to help young people with an opportunity to serve their communities while helping to pay for higher education, either to reduce their debt or to have like a nugget,

particularly for poor kids to be able to go on to higher education.

It was also to link responsibility to opportunity, and we must remember that, so that for every opportunity there is an obligation,

whether it is a legal one, or one that you feel in your heart for

being a citizen of the greatest Nation in the world.

But while we’re looking at the noble aspects of community service, we really have to be accountable to the taxpayer and financial

management, which has not been one of the National Corporation’s

strong suits. We want to commend the corporation for a clean audit

two years in a row, with no material weaknesses and only one reportable condition, and we will be discussing that with you.

We have come a long way since 1996, when accountants were unable to audit the corporation’s financial statements because they

were in such a mess. The reportable condition is in grants management, which is crucial, but we have every faith, Doctor, in your

ability, both your programmatic ability as well as your management ability. This is not about how do we get the accounting right.

It’s how do we get the corporation right.

In the budget review, the President asked for $638 million. This

is the biggest request that we’ve gotten in a long time. It is in addition to $397 million requested under Labor-HHS, and also in addition to what is asked for in FEMA. The 2003 request asked for

$403 million for AmeriCorps State and national programs, $162

million more than last year. The President wants to add 25,000

new AmeriCorps volunteers for a total of 75,000 volunteers. Twenty-three thousand of these would be AmeriCorps State and national

programs.
305

Second, the request would be to expand the National Civilian Conservation Corps $10 million over last year for 35, opening two

new campuses and adding 500 members responding primarily to

public safety. Also, $57 million for the National Service Trust to

pay for AmeriCorps education awards. In 2002 we did not appropriate into the trust because there simply was not enough funding.

This year, we want to make sure we have the figure right. The budget eliminates $11.5 million designated by this subcommittee for national organizations, and as I have discussed with

you privately, and I want to say publicly, we’ve got to look at how

we support those national programs.

Those large corporations are like large caps. They are the blue

chips of volunteerism in our country. We know what dividends they

can pay, and we have to see how we are going to be a public investor as a part of their efforts.

The Challenge Grants offer an opportunity to discuss this. We

look forward to working with the President in his reauthorization,

his new ideas for the Freedom Corps, and we are pleased that at

this juncture, both a new century and after September 11 a new

call to duty, that we work with him. We believe that this President

himself is a duty-driven kind of guy, and he wants the rest of

America to embrace those values of honor and duty and a call to

citizenship.

So we look forward to working with you, and I would turn to my

colleague, Senator Kit Bond, who as the chairman of the subcommittee over the years has played an absolutely critical role in

sustaining National Service when those in the other body wanted

to terminate it.

Senator Bond.

STATEMENT OF SENATOR CHRISTOPHER S. BOND

Senator BOND. Thank you, Madam Chair. It is a pleasure to join

you in welcoming Dr. Les Lenkowsky as Chief Executive Officer of

CNCS.

Les, my sincere thanks to you and the Director of USA Freedom

Corps, Josh Bridgeland, for a very constructive meeting on Monday, and as I told you then, not only is our chair really the godmother of AmeriCorps and National Service, she has been the

greatest champion, and it is with great excitement that together we

look at the new reinvigorated budget request, the spirit that the

CNCS has, because really—I guess it was de Tocqueville who said

that the real spirit of America comes from the volunteer sector,

that great fire that burns in the churches and the voluntary organizations.

We look to you to nurture that fire and to provide the fuel, because along with—and I stop to compliment you on the progress

you have made on turning the corner on the management problems

and now we can start addressing the performance of the corporation’s program, because along with the Peace Corps, the CNCS

does play a unique and leading role in volunteer activities.

We saw out of the tragedy of the terrorist attacks on September

11 a public cry for citizens to become more involved in public service and help communities respond to the new threats. As I told you,

I have never seen more people in my home State wanting to volun-
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teer. As I travel across Missouri, people from all walks of life, college graduates, high school students, senior citizens have all come

up and said they want to help.

Retired health care professionals want to be able to participate

if there is another tragedy. I have had World War II veterans who

want to sign up and go back to war, and I said, maybe we can use

your enthusiasm and your training, but probably we are not going

to send you to the mountains of Afghanistan.

Really, the events of September 11 reinvigorated our spirit of

public service and compassion and responsibility, and I think we

now have the unique opportunity to capture and harness this spirit

to improve our communities. We won this spirit out of the great

tragedy of September 11. It came at a great cost. We cannot afford

to lose that which was so expensively won for us, but I am concerned the current structure of the programs, the corps may not essentially meet effectively and efficiently the volunteer needs of

Americans, and I question whether the corporation is getting the

biggest bang for its buck, and I think we need to work together on

fundamental reforms.

My view is very strongly that the corporation ought to be focusing less on retail activities and more on wholesale activities. That

means we need to focus the funds, the training, the work of the

CNCS on training the volunteers to mobilize other volunteers. In

other words, the corporation should train the trainers, because

there is a much broader reach of people with volunteer time and

talents that I believe that the members of the organization can mobilize.

As the chair said, she and I both sit on the authorizing committee as well as the appropriating committee, and so you will get

your fill of us this year, and we look forward to working on the reauthorization programs. I think we can truly make volunteerism

more meaningful and accountable.

There have been, as we have discussed, inadequate management

systems and oversight practices have been lacking, and a lack of

performance outcome data, and these have made it a little bit more

difficult to get the budget through in the Congress, and it has

made it an easy target of criticism, and I think we are all best

served if we can avoid that, those openings for attack up front.

You have received a clean opinion with only one general question, and this is the second year in a row. We do know that the

President has released his principles and reform for a Citizens

Service Act, and one of the noteworthy items is improving the accountability of the corporation’s grantees.

I like the fact that he has called for clearly defined performance

goals that are measurable. One of my first stints in public office

was as a State auditor, and we did performance audits and asked

people, what is it you are trying to provide, and how do you know

you are doing it? Do not just give us the inputs, how much you

spend on it, what good comes out of it, and I think the corporation

needs to be taking a much harder look to see those grantees that

get the job done, and more money, and those who do not, move

them out the door.

I think this kind of strong tough love is going to be important.

As we work, we hope to expand the budget and the responsibilities
307

of the corporation, but management and accountability are our top

priorities.

One other issue is the National Service Trust Fund. Last year,

the chair and I requested the CNCS Inspector General to review

the financial condition of the corporation’s trust fund. I’m not going

to go into details here, but there is a major discrepancy between

what the corporation is requesting, and what the OIG is estimating

for the trust fund. It just does not compute. Maybe we do not know

how to figure, but there is some major disconnect there.

Finally, I will focus in the Q&A on the issue of sustainability. By

law, Congress envisioned the corporation would consider the grantees’ reliance on Federal funding. In reviewing the application it expected some grantees would eventually operate without Federal

funding, but in practice the corporation continues to fund the same

grants. It is a problem we see throughout Government. The rich

get richer. Whoever got last year gets this year.

The corporation provided funding year after year for really good

organizations, and I have no complaint about the organizations—

Habitat for Humanity—these are worthwhile organizations and

perform valuable service, but should the corporation be looking for

new areas to encourage and enhance and support with the programs that have not had the benefit of Federal assistance?

With that, Madam Chair, I look forward to the questions and answers, and we will see how much we can do before they ring the

bell for us.

Senator MIKULSKI. Thank you very much. Senator Johnson, do

you have an opening statement?

Senator JOHNSON. No, Madam Chairwoman. I would simply submit a statement of welcome to Dr. Lenkowsky. The AmeriCorps

and National Service Corps are obviously very important to my

State of South Dakota, and I am pleased you are holding this hearing and look forward to working to provide an adequate budget.

Senator MIKULSKI. Thank you very much.

With that, we would ask you to proceed, Doctor.

Dr. LENKOWSKY Thank you very much, Madam Chair, Senator

Bond, Senator Johnson. I greatly appreciate having the opportunity

to appear before you this morning. As a former board member, I

am most grateful for the efforts you have put into making the Corporation for National and Community Service what it is today, and

laying the groundwork for what it can become in the future.

Senator MIKULSKI. Doctor, this is your oral statement, is that

correct?

Dr. LENKOWSKY. That is correct. I have both an oral and a written statement.

Senator MIKULSKI. I did not mean to interrupt.

Dr. LENKOWSKY. Again, thank you for all you have done to lay

the groundwork for what this corporation can become in the future.

This is an extraordinary moment in the history of our country, and

for the agency I head. Since the terrible events of September 11,

we have seen expressions of patriotism in the United States unlike

any I can remember in my lifetime, and at a tragically high price.

All of us have again realized how precious our freedoms are and

why it is important for all of us to accept the responsibilities of

being citizens.
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A survey taken in January by a research center at the University

of Maryland found that 81 percent of young adults between the

ages of 15 and 25, cutting across all demographic groups and political affiliations, favor a year of voluntary national or community

service to earn money towards college or advanced training. Applications to AmeriCorps and SeniorCorps are up substantially over

what they were a year ago, and a blue ribbon committee chaired

by former Senator John Glenn has just called upon the Nation’s

schools to invest more heavily in service learning.

Despite all of the renewed interest in serving, however, what

Americans have been doing lately tells a different story. The University of Maryland survey, for example, reported that 37 percent

of those young adults never volunteer, up from 27 percent in 2000.

Fewer people volunteer occasionally as well in that 2-year period.

To make what so many Americans have been feeling since September 11 into a lasting change in what they do, President Bush

has called on all Americans to give at least 2 years of their lives

to serving their country, and established the USA Freedom Corps

as a White House Council to mobilize the resources of the Federal

Government to help them do so.

Along with the Peace Corps and a new Citizens Corps, which will

focus on homeland security, the Corporation for National and Community Service is proud to be one of the operating arms of this historic new initiative. Through our programs, AmeriCorps, Senior

Corps, and Learn and Serve America, we support the President’s

call to service by helping to create opportunities for all Americans

to serve full-time, part-time, and while they are students.

We will also work closely with our Nation’s many worthwhile

charities and nonprofit organizations to assist them in recruiting

and managing volunteers, as well as accomplishing their missions,

including providing security for our homeland.

The budget request before you aims to provide the resources necessary for the corporation to do this, and last week the President

submitted to Congress principles and reforms for a Citizens Service

Act which will be the first reauthorization of the corporation since

it was created in 1993.

We believe strongly that for the corporation to play the role the

President wants us to in the USA Freedom Corps, we need to make

AmeriCorps, Senior Corps, and Learn and Serve America more responsive to State and local needs, more able to support and encourage volunteering, more accountable for results, and more effective

in assisting hard-pressed charities, especially faith-based and community organizations.

I would like to submit these principles for the record as well, and

would be glad to answer questions about them. We are currently

working with the Senate Health and the House Education and

Workforce Committee on reauthorization of the corporation’s programs. We will keep you and your staffs fully informed on our

progress.

While our existing authorizing laws, together with the management improvements we have made in recent years, are enabling

the corporation to make progress, we believe that the changes the

President is calling for would produce more volunteers and more

help for nonprofit organizations for each Government dollar spent.
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Our request to the subcommittee totals $638 million, an increase

of about $229 million over the amount appropriated for 2002.

Included in this increase are funds for 25,000 additional

AmeriCorps members, two additional National Civilian Community

Corps campuses, and a Challenge Grant program to expand private

support for teaching and other National Service programs. Other

elements of the President’s proposed budget for the corporation, including an increase of 100,000 members in Senior Corps, and an

additional 1,000 AmeriCorps VISTA and AmeriCorps NCCC members, will be considered by the Appropriations Committee’s HHSLabor Subcommittee.

We are mindful that this is going to be a difficult year for the

Federal budget. The requirements of the war on terrorism and

homeland security, as well as the lingering effects of the economic

recession, have created sizeable demands for additional spending.

However, President Bush feels strongly, and we agree, that our Nation has a window of opportunity that occurs only once or twice a

century.

Through the USA Freedom Corps we have a chance to help bring

forth a new, great generation whose contributions to addressing

our most serious problems will be felt far into the 21st Century. By

investing a relatively modest amount of additional resources in the

work of the corporation for national and community service, you

will be assisting Americans to answer the question, what can I do

to help, by increasing the opportunities they have to be good citizens.

We have a written statement which we have submitted for the

record, and I would be glad to answer your questions.

[The statement follows:]

PREPARED STATEMENT OF LESLIE LENKOWSKY

Madam Chair, Senator Bond, and Members of the Subcommittee: Thank you for

the opportunity to discuss the views of the Administration concerning the fiscal year

2003 budget request for the Corporation for National and Community Service.

This is my first opportunity to appear before you, since the Senate confirmed my

nomination by President Bush to be the Chief Executive Officer of the Corporation

for National and Community Service. Prior to this appointment, I served three consecutive terms as a Member of the Corporation’s Board of Directors and the Board

of its predecessor organization.

Most importantly, this is an extraordinary moment in the history of our country

and the Agency I head. Since the terrible events of September 11, we have seen expressions of patriotism in the United States unlike any that I can remember in my

lifetime. At a tragically high price, all of us have again come to realize how precious

our freedoms are and why it is important for all of us to accept the responsibilities

of citizenship in order to preserve them.

To make this a lasting change in our civic consciousness, President Bush has

called on all Americans to give at least two years of their lives in service to their

country. As the President has said, we can build a stronger Nation and fight terrorism by making a commitment to service in our own communities, whether that

be tutoring a child, volunteering at a hospital, or participating in a neighborhood

crime watch.

Most of our Nation’s civic work is being done without the aid of the Federal Government. That is as it should be, as the Federal Government did not create this

civic spirit. At the same time, the Federal Government can do a better job in helping

to support and encourage it where it can.

Therefore, through an Executive Order, the President established the USA Freedom Corps, which will build on existing Federal programs that engage citizens in

service, as well as create new opportunities related to homeland security and meeting other critical needs.
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The USA Freedom Corps initially will have three major components, which will

be administered separately but coordinated through a White House council. It includes an improved and enhanced set of programs supported through the Corporation for National and Community Service. Specifically, the Administration has proposed additional community-based service opportunities and leveraging thousands of

additional volunteers by adding 25,000 new AmeriCorps members and 100,000 new

volunteers in senior service, and by removing current barriers to service.

As part of the announcement of the USA Freedom Corps, the Administration indicated its intent to work closely with the Congress on a bill that will reform and extend the Corporation’s programs and authorities. The Administration’s reforms were

outlined in the document entitled ‘‘Principles and Reforms for a Citizen Service Act,’’

released on April 9.

For the Corporation to play the role envisioned by the President under the USA

Freedom Corps, we need to make AmeriCorps, Senior Corps, and Learn and Serve

America more responsive to State and local needs, more accountable for results,

more adept at leveraging private resources, and more effective in assisting hardpressed charities, including faith-based and community organizations. The $229 million increase the President has requested for fiscal year 2003 for the

Corporation, in the VA–HUD appropriations bill, is less than one-quarter of one percent of the total bill—but it is a vital part of the President’s initiatives to strengthen

our Nation at this critical time in our history. Defending our Nation requires more

than a strong military—it requires a strong and enduring civic spirit and commitment to serving our neighbors, our communities, and our country.

Following is a summary of the Administration’s plans for service and volunteerism and the fiscal year 2003 budget request.

USA FREEDOM CORPS

In his State of the Union address, President Bush announced the formation of the

USA Freedom Corps—a White House council that coordinates and is working to enhance the many service opportunities, both domestic and international, available to

Americans of all ages. The Freedom Corps, which is chaired by the President, brings

together under one umbrella, the Corporation for National and Community Service,

the Peace Corps, and a new Citizen Corps dedicated to homeland security.

As part of the USA Freedom Corps announcement, President Bush called on all

Americans to serve their country for the equivalent of two years—or 4,000 hours—

over their lifetimes. Some Americans—such as those just graduating from high

school or college or those beginning their retirement—may want to perform one or

more years of uninterrupted service. Other Americans may wish to commit service

hours over many years. Some citizens will serve for many more than two years, others for less. This initiative is not a Federal mandate—it is a profound individual

commitment and a worthy national goal.

The President’s Budget for 2003 includes more than $560 million in new funds

to support these new citizen service initiatives. Of these increases, $290 million is

earmarked for the programs of the Corporation for National and Community Service, the largest share of which, $229 million is under the jurisdiction of this Subcommittee.

The USA Freedom Corps initiative is directed by an Assistant to the President,

John Bridgeland. The Freedom Corps Council, established by an Executive Order

and comprised of a number of Federal departments and agencies, will make further

policy recommendations to the President on new ways to enhance service, help agencies recruit and mobilize volunteers, chart civic progress, and recognize the participation of Americans in serving their neighbors, their communities, and their country.

PRINCIPLES FOR A CITIZEN SERVICE ACT OF 2002

As part of the announcement of the USA Freedom Corps, the Administration indicated its intention to work closely with the Congress on a bill that will reform and

extend national and community service programs. The legislation that authorized

these programs has proven to be remarkably resilient, but there are significant opportunities to make the programs more effective.

On April 9, the President presented to the Congress a set of principles for legislation that would reauthorize and reform the Corporation’s programs. The principles

seek to: (1) support and encourage the greater engagement of citizens in volunteering; (2) make Federal funds more responsive to State and local needs; (3) make

Federal support more accountable, and more effective by focusing on sustainability

of community service programs; and (4) provide greater assistance to secular and

faith-based community organizations.
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1 Abt Associates. 2001. AmeriCorps Tutoring and Student Reading Achievement. Final Report.

Cambridge, MA. 2 Aguirre International. 1999. Making a Difference: Impact of AmeriCorps*State/National Direct on Members and Communities 1994–1995 and 1995–1996. San Mateo, CA.

FISCAL YEAR 2003 BUDGET REQUEST

The budget request before this Subcommittee totals $632.6 million. This is an in- crease of $229.4 million above amounts available in fiscal year 2002.

STRENGTHENING AMERICORPS

The majority of the requested funding increase would support 25,000 additional

AmeriCorps members, an increase of 50 percent above the level of 50,000 that we

are supporting in 2002. AmeriCorps members mobilize, manage, and train volunteers. The members, and the volunteers they help organize, engage in a wide variety

of activities, for example teaching children to read, working to make neighborhoods

safer, and helping build affordable homes for low-income families. With the coming

class this fall, more than 300,000 Americans, 18 or older, will have participated in

AmeriCorps since it was created in 1993 through amendments to the National and

Community Service Act of 1990 (‘‘the Act’’).

Still today, many members of the public do not understand how AmeriCorps functions.

AmeriCorps members serve in nonprofit and community organizations like Habitat for Humanity, neighborhood watch organizations, the American Red Cross, Boys

and Girls Clubs, local faith-based organizations, and many more local community

organizations. These organizations, not the Federal government, select most of the

members and manage them. The members assist those organizations in meeting

community needs, as the organizations define them.

AmeriCorps is largely decentralized. State commissions on community service, led

by citizen volunteers appointed by governors, select most of the programs in which

AmeriCorps members serve. Most of the projects, and the needs being met, are determined in States and local communities, not in Washington.

AmeriCorps has both full-time and part-time members. Slightly more than half

of the individuals in these programs serve full-time and receive a very modest living

allowance, slightly over $9000 per year, in order to be able to serve. The other half

serve part-time; they generally do not receive any living allowance from the Corporation.

All AmeriCorps members, both full-time and part-time, receive an education

award, available for seven years, to help finance college or pay back student loans

upon successful completion of service. At the end of this year, we estimate the first

AmeriCorps class will have used about 72 percent of the education award amounts

that were earned.

It’s also important to understand that States, local communities, and the private

sector make financial commitments to AmeriCorps. There are various statutory provisions that mandate such cost sharing.

There are three main components to the AmeriCorps program: First,

‘‘AmeriCorps*State and National’’ provides grants to States and to national organizations to support members in local nonprofit organizations across the country. Second, ‘‘AmeriCorps*VISTA’’—the continuation of the Volunteers In Service To America program—focuses its members’ activities on supporting community and faithbased organizations in meeting the needs of low-income communities. And third, the

‘‘AmeriCorps*National Civilian Community Corps,’’ or ‘‘NCCC’’, is a ten-month, fulltime residential service program for men and women that combines the best practices of civilian service with the best aspects of military service, including leadership

and team building. As you know, AmeriCorps*State and National, and NCCC are

funded by your VA–HUD appropriations bill and the AmeriCorps*VISTA program

is funded through the Labor-HHS-Education appropriations bill.

Since it was created in 1993, AmeriCorps projects have involved our members in

meeting community needs in education, health and human services, public safety,

and the environment. Initial evaluations have found positive results. For example,

a review of tutoring programs found that ‘‘tutored students at all grade levels improved their reading performance from pretest to post-test more than the gain expected for the typical child at their grade level.’’ 1 Other studies have identified positive results consistent with the basic purposes of the legislation.2 In addition, we

are currently conducting a ‘‘longitudinal’’ study to measure the long-term impact of

AmeriCorps service upon the individuals who have served.

At the same time, the program has had its share of challenges and problems over

the years. As a Board member, I called for more independent assessments and eval-
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uations, and upon becoming the Chief Executive Officer I promptly established a

new Office of Research and Policy Development, reporting directly to me, for this

purpose.

Further, over the years, several members of Congress have identified the need to

achieve greater efficiency and accountability. As a result, AmeriCorps has tightened

its financial management, reduced its per-member costs, and adopted and enforced

tough rules on political activity. I am very pleased to report to the Subcommittee,

that the Corporation has just received its second consecutive ‘‘clean opinion’’ from

outside auditors, and for the first time the opinion finds ‘‘no material weaknesses.’’

Having come this far, this Administration is seeking to strengthen AmeriCorps

and create additional opportunities for national and community service. Specifically,

our fiscal year 2003 budget requests: —$57 million for the National Service Trust. When combined with the balances

in the Trust and interest earnings, these monies will support the anticipated

education award and interest costs of up to 75,000 members. —$403.3 million for AmeriCorps* State and National Programs. These funds are

used by State commissions and nonprofit organizations to support AmeriCorps

programs. The Budget proposes an increase of $162.8 million above current levels in order to add 24,000 members in 2003. (The other 1,000 additional members are to be supported through the National Civilian Community Corps and

AmeriCorps*VISTA). Within this category, we propose funding for:

—Homeland Security.—In general, activities in this area fall within the categories of public safety, public health, or disaster response and preparedness.

We support thousands of volunteers serving police departments, fire departments, rescue teams, emergency response agencies, and land management

agencies. They are not armed, nor can they make arrests, but they carry out

vital tasks including organizing neighborhood watch groups, community policing, victim assistance, fingerprinting and other tasks that free up officers and

other professionals to do front line work. Volunteers in public health roles assist in immunizing children and adults, serving as case managers, distributing health information, and providing health screenings. AmeriCorps members also have a long track record of working with FEMA and other relief

agencies in helping communities respond to disasters and will work actively

with Citizen Corps councils throughout the country on homeland security. —A Senior Service Initiative.—The Corporation requests AmeriCorps funding

for up to 10,000 seniors to serve 900 hours over a 1–2 year period and earn

a part-time education award of $2,362.50. This award could be used by the

senior for education or given to a grandchild or other designated individual

as a scholarship for future education. This initiative is intended to build on

successful pilot programs known as the Experience Corps, which uses retirees

for activities requiring significant skills or training. An independent evaluation of the Experience Corps’ school-based programs concluded that 92 percent of students measured showed improved reading during the school year.

In addition to tutoring, as with other AmeriCorps programs, seniors would

perform a wide range of services to meet community needs, including homeland security.

—A Literacy Initiative.—The Corporation will continue to emphasize the placement of members in programs designed to help teach reading. These efforts

will be conducted in coordination with the Department of Education.

—A Technology Initiative.—The Corporation will continue its emphasis on involving AmeriCorps members in programs that: (1) assist in delivering internet access and other technologies to low-income individuals and families; (2)

help train school teachers and staff in community organizations in using technology in their work with young people; (3) build the technology skills of

Americans, especially children, who have not yet been exposed to computers;

and (4) use technology to meet the needs of communities.

—AmeriCorps Education Award Program.—This program—providing education

awards, but no living allowances—is currently funded from demonstration authority under Subtitle H of the Act. The President’s Budget proposes to fund

this as an ongoing program (within Subtitle C), in order to increase the types

of programs and organizations in which AmeriCorps members may serve,

while minimizing the cost to the Corporation.

—An AmeriCorps ‘‘Promise Fellows’’ Program.—The activities under this program, previously funded from Subtitle H demonstration authority, are also

proposed to be funded through Subtitle C, AmeriCorps*State and National.

This change would more fully integrate the activities of AmeriCorps members

serving in support of the ‘‘five promises to youth’’ under America’s Promise.

With this transfer to subtitle C, States and nonprofit organizations would
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have the flexibility to determine the level of support for AmeriCorps*Promise

Fellows, who specialize in helping organizations and communities increase

their capacity to help needy young people.

—Faith and Community-Based Activities.—Building on the initiative begun in

fiscal year 2002, program guidelines will continue to reflect an increased emphasis

on supporting and expanding activities related to faith- and community-based programs, including additional outreach and capacity-building, and the expectation

that grantees will include faith-based and small community organizations as they

develop and implement their programs. In fiscal year 2003, the Corporation anticipates a significant increase in the number of faith-based and small community

organizations participating in AmeriCorps, either directly or through intermediaries. As has been the case ever since the Federal Government began the

VISTA program in the 1960s, assistance to faith-based organizations will continue

to be strictly for secular activities. —Volunteer Mobilization and Management.—For the current fiscal year, a fundamental objective of AmeriCorps is to help mobilize, support, and manage

the vast networks of volunteers assisting non-profit organizations in meeting

community needs. This includes working cooperatively with the many volunteer networks that already exist in the field. In fiscal 2003, we will seek to

further strengthen AmeriCorps’ capacity-building activities. —$35 million for the AmeriCorps*National Civilian Community Corps. Under this

budget request, the AmeriCorps*National Civilian Community Corps would expand from five to seven campuses. This expansion would permit the most costeffective deployment of a proposed 1700 members in fiscal year 2003. The expansion is planned in areas of the country that do not currently have adequate

support from AmeriCorps*NCCC—the South and the Midwest. Homeland security and disaster response will continue to be a high priority for

AmeriCorps*NCCC. —$10 million for funding of challenge grants to enhance sustainability of non- profits by the private sector. The Corporation requests $10 million under Innovation, Demonstration and Other Activities for challenge grants to support the

expansion of teaching and other national service programs under AmeriCorps.

Private sources would provide at least 50 percent of the amount required to expand existing national service programs under AmeriCorps. The Corporation

has supported effective teaching programs in the past, such as Teach for America and Notre Dame’s Alliance for Catholic Education, but has not used an authority that targets Federal funds to challenge the private sector to help expand

these efforts. Further, this request would support other national service programs that have the capacity to raise substantial amounts of new private funds.

When fully implemented, we estimate that up to 5,000 additional members

could be supported with these funds.

I’d like to take a few minutes now to address some of the questions that you and

others may have about our budget requests.

One question you may have is whether nonprofit organizations will be able to recruit 25,000 additional AmeriCorps members. We believe that many Americans

want to serve and that nonprofit organizations, with appropriate funding and lead

times, will have little difficulty in recruiting an additional 25,000 members. Since

the State of the Union, the number of applications submitted through our on-line

recruitment system, when compared to a comparable period a year ago has increased by more than 100 percent (although on-line applications are still a minority

of applications received). Individual programs have experienced increases as well.

For example, Teach for America (TFA), an AmeriCorps program, told us a couple

weeks ago that they have seen more than a 180 percent increase in applications

compared to a year ago. As a result, they are projecting an incoming corps this year

of between 1,700 and 1,900—up from 900 last year.

Not all of the more than 900 programs across the country have seen these results.

But our informal surveys this past fall indicate that they are seeing greater interest

in service among young people. In short, we believe that people will apply and that

the national service network will be able to recruit many thousands of additional

participants in AmeriCorps, who will in turn recruit many more volunteers—at least

3 for every AmeriCorps member. We call this leveraging of additional volunteers.

A second question you may have is whether organizations have the capacity to

use these additional participants effectively. That is a question we have also discussed with existing programs, and potential new grantees. A sample of programs

surveyed last fall indicated that many are hoping to double in size. In addition, a

conference of small community and faith-based organizations last year revealed a

strong interest in accessing additional national service resources, as long as we take

steps to minimize the administrative burdens on these organizations. Also State
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3 National Center for Education Statistics. 1999. ‘‘Service-Learning and Community Service in

K–12 Public Schools.’’ Statistics in Brief. Office of Educational Research and Improvement. U.S.

Department of Education. 4Gray, Maryann J., E. H. Ondaatje, and L. Zakaras. 1999. Combining Service and Learning

in Higher Education: Summary Report, RAND.

service commissions, as well as the Corporation, each year turn down many qualified applicants. And, finally, it’s important for you to know that we are committed

to actively assessing the effectiveness of all existing and new grants through an aggressive set of outcome measures.

A third question you may be considering is whether more Federal resources are

needed in order to generate 25,000 additional members. Couldn’t we rely on other

sources of funding to do this? In fact, our budget assumes approximately $350 million in financial and in-kind support for AmeriCorps from non-Corporation resources, including funding from the private sector, individuals, States, and community organizations. We believe there are opportunities to expand this funding, such

as through the challenge grants mentioned above. At the same time, the Federal

Government has an important role to play in enabling thousands of additional

Americans to make a substantial time commitment to national service thereby

building a vital non-profit infrastructure. In addition, small hard-pressed community organizations need our assistance to build their capacity to provide services.

Except for individuals with substantial means, providing these organizations with

full-time assistance requires the availability of modest living allowances, and educational awards provide additional important incentives.

I intend to continue to work with the Congress to achieve the proper balance of

public and private sector support for national and community service.

EFFECTIVE SERVICE-LEARNING

Our budget request includes $43 million for the support of service-learning programs—known as Learn and Serve America—in our Nation’s elementary and secondary schools and institutions of higher education. Over the last decade, growing

numbers of our Nation’s elementary and secondary schools and institutions of higher education have used service-learning as a way of integrating education and service.

A 1999 U.S. Department of Education study found that 32 percent of all public

schools organized service-learning as part of their curriculum, including nearly half

of all high schools. In addition, an impressive fifty-seven percent of all public schools

organized community service activities for their students. This growth is significant

when compared to a similar study conducted in 1984 that found only 9 percent of

all high schools offered service-learning, and twenty-seven percent of all high

schools offered some type of community service.3

A 1999 study by the Rand Corporation found that Learn and Serve America participants had a positive impact on the organizations they served. Student volunteers

helped community organizations reach more people and improve the quality of their

services. These accomplishments included: improving (younger) students’ school

achievement; promoting children’s readiness for school; improving the English skills

of immigrants; improving adult literacy and job skills; and strengthening parents’

child care skills.4

Our objective is to encourage schools at all levels to respond to the President’s

call to service—for 4000 hours of service over one’s lifetime—and institute more

service-learning programs. Such programs, which tie rigorous school studies to

worthwhile volunteer work in the community, are critically important if we are to

instill the ethic of a lifetime of service and civic involvement in a rising generation

of Americans.

We do not propose additional funding for Learn and Serve, but instead propose

to target more Learn and Serve resources on improving the quality of programs.

And, as we did in the reauthorization of the Elementary and Secondary Education

Act, we will propose to add more accountability to this system of Federal support.

For higher education, in fiscal year 2003 we propose to continue individual campus grants, designed to allow individual institutions of higher education to create

sustainable programs that are conducted in collaboration with schools, nonprofits,

and other local organizations and institutions. We also propose new grants to higher

education associations and to consortia that include higher education institutions

and other organizations. Examples of previously funded higher education consortia

include Campus Compact, the American Association of Higher Education, the

United Negro College Fund, and Community-Campus Partnerships for Health.
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MANAGEMENT AND ADMINISTRATIVE IMPROVEMENTS

All of us involved with national and community service—the Corporation’s Board,

its previous CEOs, the Congress, State Service Commissions, and programs across

the country—have recognized the significant management and administrative challenges that have faced us over the last decade. The Corporation has made progress

over the last couple years, but much more remains to be done and the Bush Administration is committed to making the necessary reforms.

In this effort to improve the Corporation and its operations, fiscal year 2000 was

a landmark year. The Corporation received an unqualified opinion on its financial

Statements for the first time. This achievement resulted from a commitment to

strong management controls and accountability for financial resources. In addition,

we have during the last month received the results of the 2001 audit from the independent auditor under contract to the Office of the Inspector General, and the Corporation received an unqualified opinion for the second year in a row. Significantly,

this year, the auditors reported no material weaknesses.

In general, the Congress has provided the Corporation with the tools and support

necessary to achieve management improvements. However, we have additional ideas

that are intended to strengthen our ability to carry out our programs efficiently and

effectively. As you know, we are discussing these ideas in with our authorizing committees.

Our budget request for fiscal year 2003 includes $35 million for program administration, of which $14 million would support State Service Commissions. Most of the

$4 million increase in requested administrative funds would be targeted to State

Commissions to support the program expansion to 75,000 AmeriCorps members,

and their efforts to meet standards we have developed for Commission accountability. The other portion of the increase would support inflationary costs, including

civilian pay raises proposed in the President’s Budget, as well as further improvements in our financial and systems performance.

Having completed installation of a new accounting and financial management system—that has proven essential to our positive financial audits in 2000 and 2001—

the Corporation is now implementing a new electronic grant system, using funding

provided specifically for this purpose by the Congress. We expect to complete systems development and testing this fiscal year, conduct training, and begin implementation on a phased basis throughout fiscal year 2003, consistent with our established grant cycles. When completed and fully operational, the Corporation will have

an integrated grants management system providing comprehensive financial management information for all grants and cooperative agreements. Grantees will apply

for and receive assistance electronically, thereby greatly reducing current paperwork

burdens. And the grant system will interface with the Corporation’s financial management system. The design meets the Grants Financial System Requirements of

the Joint Financial Management Improvement Program, and the requirements of

the Government Paperwork Elimination Act and the Federal Financial Assistance

Management Improvement Act.

OTHER BUDGET REQUESTS

Innovation, Demonstration, and Other Assistance

In the area of innovations and demonstrations, the Administration is requesting

$25.5 million (in addition to the $10 million identified above for challenge grants)

for various purposes, including: training and technical assistance, recruitment, Martin Luther King, Jr. Day grants, and other activities that are critical to the support

of high quality programs. Moreover, if Congress approves our request to transfer the

AmeriCorps Education Awards program and the Promise Fellows program from this

category, we will have greater flexibility in carrying out the original intent of this

type of support which is to develop new methodologies for encouraging service. I

continue to believe that a critical role for the Corporation is to support those innovative activities that will lead to the overall strengthening of programs and service

experiences across the country.

EVALUATION

The Corporation conducts or contracts for evaluations of its programs, initiating

several studies each year on a range of issues. These studies originate from several

sources. The National and Community Service Act mandates several evaluation

studies. Other studies are an important part of the Corporation’s compliance with

the Government Performance and Results Act (GPRA). Other research derives from

the Corporation’s Strategic Plan, which is developed through our Board of Directors.
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In fiscal year 2003, we are requesting $5 million to support the studies identified

in our budget justification.

These evaluations are a major part of the effort to enhance program performance

and collect data addressing critical program issues. I believe strongly in the centrality of research and evaluation to the future of national and community service,

and have therefore created an Office of Research and Policy Development (RPD), reporting directly to me, to focus greater attention in this area.

Increasingly, I expect the Corporation’s new Office of Research and Policy Development to be recognized by the broader governmental, philanthropic and nonprofit

communities as a resource on a wide range of research and evaluation issues.

Points of Light Foundation

The fiscal year 2003 budget requests $10 million for the activities and operations

of the Points of Light Foundation that are designed to:

1. Encourage every American and every American institution to help solve the

Nation’s most critical social problems by volunteering their time, energies, and services through community service projects and initiatives;

2. Identify successful and promising community service projects and initiatives

with nonprofit organizations, corporations, families, and youth, and disseminate information concerning such projects and initiatives to other communities in order to

promote their adoption nationwide;

3. Build the capacity of institutions to support volunteer service, and develop individuals as leaders to serve as strong examples of a commitment to serving others

and to convince all Americans that a successful life includes community service; and

4. Expand its efforts to build the capacity, visibility, and sustainability of a unified nationwide network of local Volunteer Centers.

America’s Promise: The Alliance for Youth

The 2003 budget requests $7.5 million for America’s Promise: The Alliance for

Youth. That organization, founded by Secretary of State Colin Powell and currently

led by former Senator and CEO of the Corporation, Harris Wofford, seeks to act as

a catalyst to challenge, energize, and inspire individuals, organizations, and communities to expand efforts to ensure that youth become productive, responsible adults.

Earmarked Grants

The fiscal 2002 appropriations for the Corporation for National and Community Service marked the third year of funding for ‘‘earmarked grants’’ and included $11.5

million for five specified organizations: Communities in Schools, the Parents as

Teachers National Center, the Youth Life Foundation, Teach for America, and the

YMCA of the USA.

Although it is Congress’ prerogative to set earmarks, I would urge restraint in

this area. The Corporation’s Board of Directors and I believe very strongly that the

best results occur when organizations are required to compete for available public

funds. The fiscal year 2003 budget therefore does not propose any earmarks. Moreover, several grants awarded under this category in fiscal years 2001 and 2002 were

for multi-year efforts, thereby eliminating the need for any additional funding for

the activities of those organizations in fiscal year 2003.

Office of the Inspector General

As a separate request, the President’s Budget requests $5.1 million for the audit

and investigative activities of the Office of the Inspector General.

I value the important work of that office to conduct independent and objective audits and investigations and to prevent and detect fraud, waste, and abuse. Furthermore the reforms being put in place to strengthen program accountability will require an active partnership between that Office and the Corporation’s senior management.

The President has nominated J. Russell George to be the Inspector General of the

Corporation for National and Community Service. Mr. George has an extensive

background in working to promote effectiveness and efficiency in government. Most

recently, he has served as the Staff Director and Chief Counsel to the U.S. House

of Representatives Committee on Government Reform, Subcommittee on Government Efficiency, Financial Management and Intergovernmental Relations, that has

jurisdiction over the Inspector Generals program nationwide.

Madam Chair, that concludes my statement concerning the Corporation’s budget

request for fiscal year 2003. We are clearly at an opportune moment in the history

of Federal support for service, and I look forward to working with you, Senator

Bond, and the other Members of this Subcommittee and the Congress to make the

President’s proposals a reality. I am available to address any questions that the

Subcommittee may have.
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FREEDOM CORPS

Senator MIKULSKI. Thank you very much, Doctor. Let me go

right to our questions.

I think that there is confusion over the Freedom Corps,

AmeriCorps, and so on, and could you share with the committee

what is the Freedom Corps, and second, how does the national and

community service fit into this?

Dr. LENKOWSKY. Thank you, Senator. We do have a bit of what

I call a corps identity crisis going on at the moment. The Freedom

Corps is a White House Coordinating Council. It is a Cabinet-level

council chaired by the President, consisting of Members of the Cabinet and heads of independent agencies such as myself, and staffed

by John Bridgeland, the Special Assistant to the President. It can

be thought of as analogous to the National Security Council or the

National Economic Council.

The USA Freedom Corps was established by executive order, but

it does not affect the legislative authority or my responsibility to

you as CEO of the Corporation for National and Community Service. The same would be true of my colleagues in the Peace Corps

and the various agencies in the Citizens Corps.

There are three major operating arms right now under the umbrella of the Freedom Corps. One is the Peace Corps, which engages in overseas volunteer activities. The second is the corporation. We’re going to continue to do the range of activities we currently do on the domestic front. The third one is the Citizens

Corps. That’s the new one. It will be chaired, coordinated through

the Federal Emergency Management Agency, and it consists of a

number of programs, such as the Department of Justice’s Neighborhood Watch organization, that are focused on homeland security.

The corporation’s role vis-a-vis the Citizens Corps is to provide

support to it. About 30 percent of our AmeriCorps and Senior

Corps members are already engaged in public safety, public health,

and disaster preparedness activities. We expect, as part of the

State and local level planning, that this will go on under the aegis

of Citizens Corps. In the event, which we hope will not occur, of

another tragedy striking our cities or rural areas, there is going to

be a need to get people.

Senator MIKULSKI. So essentially it is like just, I will call it a coordinating council?

Dr. LENKOWSKY. That is correct.

Senator MIKULSKI. Then within this subcommittee we are being

asked to fund two programs, one, the National Service Corporation

that you are here for, and the other one is the Citizen Corps, which

would be under FEMA.

Dr. LENKOWSKY. That is correct.

Senator MIKULSKI. Now then, what President Bush is asking

under our subcommittee is the expansion of the programs as we

know it, which means AmeriCorps, the Senior Corps, and the

Learn and Serve America, am I not correct?

Dr. LENKOWSKY. That is correct.

Senator MIKULSKI. So it does not break new ground. He wants

an expansion of what we have, and will work with us and the authorizing on what should be a new framework for the new century?
318

Dr. LENKOWSKY. That is correct.

Senator MIKULSKI. And it would be to essentially call for the

new, reinvigorated sense of patriotism, is that correct?

Dr. LENKOWSKY. That is correct, Senator.

SENIOR CORPS

Senator MIKULSKI. Now, I am going to come back to the Citizens

Corps in a minute but for now let’s go to the Senior Corps. You are

talking about expanding the number of volunteers, but also saying

that the seniors—first of all you want to change the age.

Dr. LENKOWSKY. Correct.

Senator MIKULSKI. Then you want to change what they do. You

want to have them have a benefit that they can use either for their

own education or to give it to a grandchild, is that correct?

Dr. LENKOWSKY. We want to make a Silver Scholarship available

to seniors who commit a significant amount of their time to the

Senior Corps program, that is correct, Senator.

Senator MIKULSKI. This would be up to 10,000 seniors who serve 900 hours over 2 years would get a $2,300 education grant. Now,

here is my question, okay, because first of all I am going to ask

you, do you think you will need authorization to do this, and number two, then do you think you need the Finance Committee’s permission, or legislative permission, shall we say, to do this, and are

we—it is hard enough to fund AmeriCorps for young people to have

education. Why are we getting into this? Would you comment?

Dr. LENKOWSKY. There are two provisions related to seniors, Sen- ator. The one you cited, the $2,300 for 900 hours, is actually part

of AmeriCorps today. In AmeriCorps you can be a senior and serve,

and you can earn an education award. That is the law today, so

you are absolutely right, we do not have any authorization issue

there. The problem that has arisen is that for a senior who is serving at, say, age 55 or older, to get an award useful only for their

own education is not necessarily the most valuable way we can

thank them for their service.

I was on a talk show, and a woman who served in VISTA, or in

the Senior Corps, or in AmeriCorps at age 62 said, well, thanks for

the ed award, but you know, my education is done. Can I not transfer this award, say, to a child or grandchild, or maybe a tutee that

I have been working with, or someone I have been mentoring. We

do need legislative authority to enable us to do that, Senator.

Senator MIKULSKI. And does the administration believe that that

should be tax-free?

Dr. LENKOWSKY. Senator, we do not think the ed award for anyone should be taxable. This is a major part of our proposals for all

age groups, not just the senior group.

Senator MIKULSKI. Well, my time has expired. Is it the administration’s position, then, that the education awards, regardless of

how they are garnered, either in AmeriCorps or Senior Corps,

should not be taxable?

Dr. LENKOWSKY. That is correct, Senator.

Senator MIKULSKI. And this is going to require an action by the

Finance Committee?

Dr. LENKOWSKY. I think that is probably correct, Senator, but I

can tell you, I was just visiting our NCCC campus in Denver and
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there I heard what I hear whenever I meet with AmeriCorps members regardless of their age, that the taxability of this ed award is

their single largest complaint. Remember, these people, particularly the young people, do not actually see the money. The money

goes from our trust fund into the school, or to pay back a loan, but

what they do see is the tax bill, and since they are young people,

often going to school, they do not have a lot of money stored away

to pay taxes.

Senator MIKULSKI. I am not arguing with the merits. I am arguing where we are. In other words, as we authorize it, do you have

a Finance Committee—are you discussing this with the Finance

Committee?

Dr. LENKOWSKY. We will be talking with the Finance Committee,

yes.

Senator MIKULSKI. Well, I will come back for other questions, but

I think this helps clarify Freedom Corps, then the National Service

program within it, and then your desire to both expand it, as well

as for Senior Corps change the age and change what can be done

with the education, am I correct in that?

Dr. LENKOWSKY. There is a separate provision for Senior Corps.

It is a little bit different. That one also requires authority. The Silver Scholarship is a much smaller amount, $1,000 for seniors who

commit through Senior Corps and not through AmeriCorps a substantial amount of time.

Senator MIKULSKI. I think we need to get a list of these education benefits.

Senator Bond.

Senator BOND. Thank you, Madam Chair. It appears that the

vote has started, but that always makes it interesting around here.

Senator MIKULSKI. Senator, if I would suggest, why don’t I leave

and you pursue your line of questions, and Senator Domenici, if

you feel comfortable with the vote, and if I am not back just recess,

and then we will come back for a second round. Does that sound

good?

Senator BOND. That is my suggestion. Thank you, Madam Chair.

It is always good to get the gavel back, even though it is briefly.

Senator MIKULSKI. That has a geopositioning device on it.

CITIZEN CORPS

Senator BOND. Dr. Lenkowsky, I am concerned, as the chair is,

as I discussed with you yesterday, locating the new proposed Citizen Corps to be run by FEMA. Frankly, FEMA has not run volunteers. You are the people that run volunteers, and FEMA is going

to have an awful lot of work to do when we get finished with all

the funds we dump on them, so we want to continue to discuss

with you whether in fact FEMA would be better off describing and

defining the roles that volunteers need to play, and tasking CNCS

to mobilize the volunteers.

There is a heck of a lot of difference between running the FEMA

programs and doing what you do, which is a very staff-intensive effort to mobilize volunteers, but we will continue to work with you

on that.

Dr. LENKOWSKY. I can assure you, Senator, that is appropriate.

At both the State and local level we will provide as much support
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to that effort as we can, and the larger questions I think are questions you need to discuss with your colleagues.

Senator BOND. That may not be at your pay grade. We will work

with others on that.

On the sustainability question I mentioned some fine organizations that are getting funded regularly, and I just would like your

view on why would AmeriCorps continue to fund Youth Build when

it already receives substantial funding, much more funding really

from HUD, and do you expect that these existing grantees will just

continue getting the money that is available, or should there be

some effort to move dollars into new promising programs to get

them started?

Dr. LENKOWSKY. As a board member, Senator, I was strongly in

favor of making sure that sustainability was emphasized in all our

programs. Our proposals envision a number of steps to enhance

sustainability by grantees, and especially by the kinds of grantees

that are large and well-established.

The most important is our Challenge Grant program. The Challenge Grant has been part of our authority since the corporation

was established, but if I am not mistaken, until President Bush, no

one has proposed actually funding it. We have put a fairly modest

amount of $10 million in the budget request. We can discuss that

if you would like, but the aim of the Challenge Grant program is,

of course, to give well-established organizations a real incentive to

develop private support for their activities, and to move to less dependence on funding from the corporation so we can reach out to

the smaller groups.

As you suggested, Senator, we are also going to put a greater emphasis on capacity building, part of which involves the capacity to

go out and get resources from throughout one’s community, so we

want to help them become sustainable that way. The challenge we

are facing, of course, is that one of the glories of our nonprofit

world is, there is a lot of variation in it, and we do not want to

create a cookie-cutter approach that says, 3 years and you are out.

We want to be sensitive to what different organizations are doing

and what their situations are.

I visited an AmeriCorps program in Red Hook, New York, which

is taking back a neighborhood that for 40 years has been the object

of benevolent but misguided intentions on the part of public policy.

Until AmeriCorps got there, people were afraid to walk out their

doors. Now the Red Hook Public Safety Patrol is bringing back this

neighborhood. It is cleaning it up. Crime rates are down, drug use

is down. The members come predominantly from the community,

and they are using AmeriCorps as a stepping stone to getting higher education themselves.

We have been there 7 years. That is a long time, but I visited

that one personally, and frankly, I think while we obviously want

to push towards sustainability, and there is a fair amount of support coming from the City of New York. As with all of our programs, as you know, there is a matching requirement. We do not

want to arbitrarily say, enough is enough, because this is a deepseated poverty situation.

Senator BOND. Well, I think that is a unique situation, but the

Challenge Grant was going to be my next question. We are inun-
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dated with earmarks, with scores of wonderful organizations such

as the Girl Scouts, Camp Fire USA. Because they do not appear

to fit into the strict AmeriCorps funding programs you have urged

that the best results occur when organizations are required to compete for available public funds. If we expanded the Challenge

Grant program, would you be able to allocate grants to these people and make these choices?

Dr. LENKOWSKY. Yes, Senator. Again, we have to have a competitive process for doing so, but the whole idea is that the other area

I would like to call your attention to as well is our National Direct

program, which is also a vehicle for funding. Most of the groups,

in fact, you mentioned I think are probably National Directs. We

want to make that more competitive as well. We proposed additional funding for National Directs. We want to be competitive.

Senator BOND. If you will excuse me, I want to turn to Senator

Domenici so he can ask questions before we have to go vote.

SPECIFICS OF THE PRESIDENT’S BUDGET

Senator DOMENICI. Again, I cannot come back, but before we finish, are you going to be able to straighten us out as to which programs we are going to be funding and which ones the President is

asking us to fund? There are so many things we have going that

he does not want any more, but he wants some new things in this

area of public service, is that correct?

Dr. LENKOWSKY. That is correct. The only things before you now

are what have always been part of the National Community Service Act legislation. That is to say, funding for AmeriCorps in particular, and for the National Civilian Community Corps Challenge

Grants. There is a separate appropriations bill as you know, Senator, that deals with VISTA and some of our senior programs.

There is no change at all in what we have done in years past.

Senator DOMENICI. So the President’s budget supports

AmeriCorps continuation?

Dr. LENKOWSKY. That is correct.

Senator DOMENICI. And what is the President’s proposal?

Dr. LENKOWSKY. We are proposing a Citizens Service Act which

encompasses the reforms of AmeriCorps and our other programs.

I think it is very important to emphasize that. I think we have listened to the members of this committee and of other committees,

learned from our own experience, and as a former board member

I have been particularly involved in this discussion, so what we are

proposing is not simply an expansion of our existing programs at

all. It is really a significant overhaul and improvement.

The expansion really reflects two things. First, once we have

done that, we think we can really make these programs work. Second, the moment in our time when so many people are looking for

ways to serve this country, we think through these improved programs we can be helpful.

Senator DOMENICI. Now, the new approaches by the President,

could you just state quickly what that is going to be? Are we going

to pay those volunteers like we did under AmeriCorps?

Dr. LENKOWSKY. A portion of them are stipended, that is correct,

Senator, but it is now less than half, and we have added to our mix

various kind of nonstipended or partially stipended programs. One
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of the President’s principles, in fact, is to take the education-awardonly version of AmeriCorps, where participants do not receive a stipend from the Federal Government, just an education award on the

completion of their service, move that from the demonstration

phase, where we are limited to how many of those we can do, and

into the regular AmeriCorps, giving more discretion to the State

and local folks as to whether they want to use that approach or

other approaches.

Senator DOMENICI. I just wanted to comment for the record, and

to my good friend from Missouri, I was unaware that in my little

State, there are 12,000 New Mexicans that are in this American

Service Corporation program, and the amount of money spent just

on us is $6.7 million. Do you believe that the corporation is now

on track as far as carrying out the work that Congress intended

when it authorized these programs?

Dr. LENKOWSKY. I think we are certainly moving in the right direction. We have, as has been noted, our second clean audit in a

row, and while I would like to take full credit for that, the truth

of the matter is that a lot of the hard work to get there reflects

the efforts of the career employees and other board members in the

agency. We are going to build on that, and we think through the

proposal in our reauthorization package we will move even further

in the right direction and make this a program we are all going to

be proud of.

Senator DOMENICI. Senator Bond, there are several types of programs that are funded by the corporation we are speaking of in

New Mexico, and they have gone to existing institutions, so you do

not have to go back and start over, like the Boys and Girls Club,

and it is wonderful to see us fund a Boys and Girls Club and expand in a poverty area.

It would take them 2 years of fundraising and all kinds of activity to double the size. Instead of doing work helping these kids the

adults are busy trying to put the building together and come up

with the money, and so I am one who thinks that Boys and Girls

Clubs, existing organizations, if they apply and are doing the kind

of work you are generally doing, that you would get a very good

bargain by not starting over with a whole new staff trying to add

criteria.

The Boys and Girls Clubs in New Mexico, I do not know about

yours, but there are eight or nine that receive funding from your

bill, and it is a very good way to spend our money in my opinion.

Dr. LENKOWSKY. That is the challenge of sustainability as well.

You do not want to throw out good organizations that are doing

good work.

I should also tell you about a wonderful program at the University of New Mexico, where we are getting students out into some

of the poorer communities. They are all just getting an award from

the corporation. They may have received some stipends locally, but

basically these are getting college students engaged.

Senator DOMENICI. Can you give us that name for the record?

Dr. LENKOWSKY. I will make sure you get that in the record.

[The information follows:]

The Learn and Serve America Higher Education Program at University of New

Mexico—Gallup (UNM-Gallup) involves 525 college students and 600 K–12 students
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in conducting service-learning projects in McKinley County, a highly impoverished

area in which 72 percent of inhabitants are Native Americans. The UNM-Gallup

students mentor kindergarten-through 12th-graders and tutor Family Literacy,

Adult Basic Education, and college developmental students. They also conduct

human service, housing, conservation, and environmental service-learning projects

and leadership development activities in conjunction with 40 community organizations. The project uses summer institutes, in-service workshops, and mini-grants to

assist 100 faculty members in adding strong service-learning components to their

curriculum and instruction designs in order to ensure that service-learning will be

sustained over the long-term at UNM-Gallup and in the surrounding community.

In the past year, UNM-Gallup, has provided tutor/mentor assistance to over 400

students in family literacy and adult basic education programs in McKinley County,

New Mexico. These students, ranging in age from youth to senior citizens, have received over 9,000 hours of one-on-one tutoring.

The college has conducted two regional ‘‘College, Career and Service’’ fairs drawing 400 high school students and over 300 college students to an exploration of more

than 50 public service, education and business opportunities. This initiative offers

students the opportunity to be of service to others and become more civically engaged.

During their annual Earth Week activities, the college initiated a community

clean-up effort in central public area where car bodies, glass and other trash have

been dumped for years. This clean-up effort has lead to the city and county collaborating to introduce three sponsored clean-up days this spring addressing litter

hotspots and citizen involvement. The Learn and Serve America program also organized a forum in which nearly 100 community members and representatives from

the Navajo Nation Division of Forestry, the Zuni Department of Natural Resources,

the Plateau Sciences Society, UNM-Gallup, K–12 institutions and other interested

citizenry, met concerning community environmental issues. A planning group was

formed to pursue an academic and service-learning program at UNM-Gallup that

will focus on the study and use of native plants and indigenous knowledge in pursuit of a new vegetation, soil and water management system for the Southwest and

beyond.

The Learn and Serve America program provides mini-grants for a number of service-learning programs designed to link older with younger students or students with

others in the community. This year for example, middle and high school students

participated in an essay contest on the issue of safety in our communities, families

and individual lives. Students read their essays before 150 peers and other community members and the contest was judged by college students. Mini-grants also supported a pre-school program involving 40 students in planting flower gardens at the

school, who then presented the flowers to the senior citizen residents of Red Rocks

Care Center. In another project, a class of 4th graders created activity packs containing books, writing and thinking activities for pre-schoolers and instructed 40

children in the activities included in the packs. One mini-grant funded an innovative ‘‘Listening, Language and Literary Skills’’ project in which high school students

recorded elementary level books for younger students to check out of the library for

use in building reading comprehension and fluency. Other projects this year focused

on building arts, geometry and science skills through community beautification.

To ensure the long-term sustainability of service-learning and partnerships among

schools, colleges, and community groups over time, the Learn and Serve America

program provided seven training events this year alone. Through these events, 180

college students, 60 faculty, and 40 community members a better understanding and

appreciation of service-learning as an educational method linking academic work

with community service.

Senator DOMENICI. Thank you, Mr. Chairman.

Senator BOND. Senator Domenici, thank you very much for your

comments and your interest. This is a very exciting time, and I

think we have an opportunity to support the corporation. It is truly

exciting, but we hear our master’s voice, and I will take the prerogative of the chair and declare a recess until the chair returns.

NATIONAL PROGRAMS

Senator MIKULSKI. The subcommittee will reconvene. Doctor, I

want to raise the issue of the national program, which is to get the

administration’s perspective on how it wishes to fund the national
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programs. This committee is challenged by the fact that these outstanding programs like Teach for America, the Y, and a list that

I could have, have—and this committee has pursued an earmark

strategy that leaves—but that is not a way to do it. In this year’s request alone we have $38 million worth of requests and each one has merit, so we are not even disputing that.

I would like to get your perspective on, number 1, how do you

think we should work together to handle this? What should be the

role of the national groups, and how—again, there is no relationship between the money they ask for and the number of people

they serve. There is not a clear—and I am not saying we should

go to a formula.

Some have been flat-funded, like Teach America over the years

when they were just a small start-up, and they were like an IPO,

and they are now a blue chip, and paying enormous dividends. The

Scouts, that really goes to leadership money, not directly to individual Scouts, and I am going to support them, and I ask you for

your advice on really—this is both an authorizing and an appropriations question. Could you share your thoughts from the administrative perspective on how we can deal with this, or how do you

propose to deal with this in this year’s appropriations?

Dr. LENKOWSKY. Yes, Senator. I was really taken by your analogy yesterday to large caps, mid caps, and small caps, but it fits

well with what I have thought ever since I began my career years

ago as a grant-maker for a private foundation, that good grantmaking—and that is what we do here—ought to be like good investing. You need to diversify the portfolio, and a good balance,

some that are your blue-chippers, some that are your organizations

that may have a niche appeal, that would be the mid-cap kind of

approach, and some that are the start-ups, the innovators that you

think can grow, and some are risky, but you want to take that risk

prudently because you think they do have that potential.

Our view is, in fact, to try to have that kind of diversified portfolio. We share your concern about doing things through earmarks.

We also need to improve the way I think we report on a lot of these

organizations, and what we do administratively. For example,

while it is true, if you look at Teach for America—which is a wonderful program. I was privileged to have known its founder when

she was just getting it going—it looks like we do not give them a

lot of money, a little more than $1 million, but that money pays

for their recruitment and training efforts, which are critical, but

the big value-added of the corporation’s involvement with Teach for

America is for our award-only program.

Every member of Teach for America receives an ed award on the

completion of service, which amounts to millions of dollars. It does

not show up in the budget because it is a trust fund expenditure.

We want to be very clear on how we are funding organizations. We

want to focus them a little bit more, and make sure that our National Directs are, in fact, national organizations, blue-chippers are

really blue-chippers, and not organizations that may work in one

or two States and somehow have gotten into the National Direct

pool.

The big issue we need to talk about in the context of authorization and appropriation is the cap that exists on National Directs
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in current law, and our authorization proposals. We do not propose

to change this. One-third of the AmeriCorps allotment is reserved

for these blue-chippers. The other two-thirds under our proposals

for reauthorization would go to the States, and through the formula

grants, and that would be to handle those mid-caps as you put it,

the State-relevant programs.

However, through the budget process there has been a second

cap put on, which is about 18 or 19 percent of the funding for

AmeriCorps slots. We have proposed in the President’s budget a

substantial increase in dollars for the National Directs, but we

chose not to increase the percentage in relationship to the State

funds. That may be something you would like to revisit as we go

forward here, because a lot of the groups that come in for earmarks

could just as easily be competitive in the National Direct pool, and

that would also give us a good check on quality.

Let me just say a word about the small caps, the innovators. One

of the things we are proposing in this budget and in our reauthorization principles is to move a couple of things we have been trying,

the ed award only program, the America’s Promise Fellows, out of

the demo phase and into the regular AmeriCorps funding pool. We

think they have proven their worth and it is time to make that

change. That would have a very nice consequence as well, since we

are proposing continued funding of our research and demo phase

at its current levels to free up some funding for us to try to do a

little more demo type activity and really try to find those small

caps, those start-ups, or those new approaches to AmeriCorps.

One interesting one that I have been considering is our NCCC

program, the National Civilian Community Corps. It is a great program but it is an expensive program, because in addition to a stipend we have to provide room and board, because these are people

who live on campuses like the one in your State at Perry Point.

Well, we ought to think a little bit about some new models to

take the best of in NCCC, but apply them in a new way. I like to

say the equivalent of the ready reserve. If you think of NCCC as

the Regular Army, maybe we ought to think a little bit about the

Ready Reserve type that not only gives the experience of NCCC to

more people, potentially at a lower per-member cost, but enable us

to partner with other kinds of not-for-profit organizations that

want to do the kind of NCCC work which is very much a part of

our homeland security effort. Our range for experimentation and

innovation is going to be broader under the President’s proposal.

CHALLENGE GRANTS

Senator MIKULSKI. I am going to come back to that. Going back

to the days of the original administration project, the part-time

versus full-time, the belief that the poor have capacity to serve and

not only be beneficiary of services. That was one of the innovations

of Senator Dodd, actually, in the early days of our work, as our

thinking evolved from military service to National Service.

Tell me your vision of the Challenge Grants. This subcommittee,

though authorized, has never funded the Challenge Grants simply

because we were under very spartan circumstances, and political

prickliness, and we did not fund it. We just did not have the money

and there was not the political will within the Congress. Working
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now with this bipartisan effort under President Bush, how do you

see—and presuming we get a decent allocation, what do you see

the role of the Challenge Grants as being, does this deal with

maybe the earmark ideas, and essentially your thoughts on the

Challenge Grants.

Dr. LENKOWSKY. The Challenge Grants are going to be very useful, we think, for those organizations that are requesting earmarks,

because these are usually well-established organizations that have

a proven track record, but have not always generated the level of

private support that they are capable of generating.

A lot of our National Directs do generate a lot of private support.

City Year gets about two-thirds of its revenues from the private

sector. The percentage for Teach for America is even greater, but

we think there is probably room to expand, and through the Challenge Grant process we want to put up a relatively small amount

of Federal funds that will have to be matched by private contributions.

As you know, the matching grants provide often a great inducement for private funders to join in a project. We want to give our

successful, well-established organizations opportunities to go to potential private supporters, corporations, foundations, wealthy individuals and say, okay, if you provide support for these volunteer

service activities it will be matched by the Corporation for National

Community Service.

What we propose is a one-to-one match. One corporation dollar

for every private one, but in our reauthorization proposal after a

number of years we increase that to two to one—two private for

every one public, to give a stronger incentive for the private sector

to get behind these excellent groups, and hopefully reduce the pressures for earmarks or just for competition through our National Direct pool.

Senator MIKULSKI. Senator Bond, I was asking Dr. Lenkowsky

about the whole issue of the national groups and the earmarks,

and he gave us some really excellent insights, but in my conversation with him yesterday what I was talking about was, first of all,

or often, we encourage Government to be run like a business.

And I said, so let us think like a business, and we are public investors, and this was just kind of fun that we think about the national groups like the Y, and Teach for America, which you have

been so supportive of, as large caps, and then there is the wonderful programs run by the States under the Governor’s Commission,

so they are responsive to the States and the needs of that community.

And then third, there is the kind of small cap, and that is the

small start-up, really new, social entrepreneurs that have new

ideas, maybe with part-time, or weekend, or generational issues, et

cetera, so that is what we were also talking about.

You are here, and let us give you time for a second round, and

then I am going to come back to the part-timers.

Senator BOND. Thank you, Madam Chair. Not to flog the investment analogy too far, but if you are investing in a large blue chip

or mid cap or small cap, the only reason you do it is to see a return

on your investment, and I would suggest that whether you are

looking at a large organization that we know is great, or a small
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organization that is just starting up, one of the tests ought to be,

what new are you going to get from this investment, and you

talked about the Red Hook and the tremendous progress.

Okay, you are seeing a pay-off there. Are there new things where

we can get these existing agencies to expand? If you are just putting money into a grant program that is going to continue to go on,

there may be other needs, and so I would urge you and the corporation to look very carefully at again performance measurements,

expectations, standards by which to measure what are you going

to get when you put the money in, and I would really like to see

that test applied.

I need to go back to the very first question I mentioned earlier

about the National Service Trust. Senator Mikulski and I asked the

OIG to review the trust fund, and no new funds were needed in

2002, and recommended $75 million in new funds for 2003 to enable the corporation to meet its liabilities to fund 43,000

AmeriCorps members.

The administration’s request, however, assumes the funds for

75,000 volunteers but only requests $57 million. Where does the

money come from?

NATIONAL SERVICE TRUST FUND

Dr. LENKOWSKY. What we are dealing with here, Senator, are the

differences between financial statements, which are retrospective,

and actuarial estimates, which as you know are prospective and depend on such things as estimates of the take-up of what rate of utilization of the ed awards will we see going forward, and so on.

We brought PriceWaterhouseCoopers in to look at this as well,

and we have been working very carefully to try and get an accurate

estimate of how much we need so that going forward we will have

the funds on hand to meet the anticipated usage of the education

awards. We think the $57 million proposed in the President’s budget will enable us to do that, but we would also be glad, together

with our IG, to sit down with your staff and review these calculations with you.

It is like anything else in this financial business.

Senator BOND. The cash flow, and I am no fan of accrual accounting for small business. We work with the IRS to give them

some relief, but if you say that you are going to start up new programs and going to be accruing, say, roughly $150 million in obligations, you need to put that in the budget authority even if you

only cash-flow out $57 million, because we do not have a bow wave

coming down where you load up a whole bunch of volunteers and

say, well, we can cover them this year, because the cash-out is only

$57 million.

If you are incurring those liabilities, that is where we need you

to come up with the budget authority to make sure we do not wind

up with programs that we cannot afford as the bills come due.

Dr. LENKOWSKY. We certainly agree with you on that. We ought

to work together and let your staff have a look at these estimates,

and if you think there are some things we need to do to adjust

them, we would be glad to do that.
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HOMELAND SECURITY

Senator BOND. Now, I mentioned the concern I have about the

Citizen Corps being in FEMA. Could you discuss the corporation’s

current activities related to homeland security and disaster relief?

For example, is the corporation planning to award grants this year

to support communities and organizations in initiatives like public

safety, health, disaster preparedness? Is this different from the

supplemental proposal for $50 million to jump-start a Citizen

Corps in 2002, and where do we stand on this?

Dr. LENKOWSKY. Our request has nothing to do with the supplemental. We do have in the 2002 budget about, $20 million of additional spending that is to be used for homeland security. This was

immediately after September 11. We have just put the notices of

fund availability out. I am glad to tell you we had an extraordinary

response from not-for-profit groups interested in participating.

Senator BOND. Was this done in cooperation with FEMA?

Dr. LENKOWSKY. No. I should make it clear, and I believe we are

submitting to you at your request a copy of our memorandum of

understanding with FEMA. We have a longstanding understanding

with FEMA, so while we are moving forward with our own programming this is nothing new qualitatively. It is just an increase

in the amount, in light of the conditions we have seen in this country post September 11. As we go forward in 2003, we expect that

we will continue to see about 30 percent or so of our AmeriCorps

and Senior Corps slots engaged in public safety, public health, disaster preparedness. These are things that the groups have identified as priorities for their own activities.

I think, and you are aware, that a number of our NCCC folks

came into your State after some recent weather-related damage to

help work with all of the other first responders and volunteer

groups.

Senator BOND. That was the Kansas City ice storm.

Dr. LENKOWSKY. Exactly, to help get things back in working

order. We are going to continue to do this. What Citizens Corps

does, though, is going to give a little more structure at the State

and local level so that our State commission, our gubernatorial

State commission folks will be able to participate at the State level

in inventorying and planning a little more systematically for the

use of our assets should disaster strike. The same will be true at

the local level. It is really our participation in the coordinating effort, and not really to change our programming as such.

Senator BOND. Well, this obviously will be continued, but I have

made my views clear as to who is better running volunteers, and

we will take that up later.

Thank you very much.

CITIZEN CORPS

Senator MIKULSKI. Thank you very much. I would like to pick up

just for one quick moment on the line of questioning of Senator

Bond for the Citizen Corps. First of all, we support what the President wants to do in terms of a new call to service. Senator Bond

and I have been working for almost a decade on the reform of

FEMA, really, because when President Bush I was in, and Hurri-
329

cane Andrew devastated Florida, FEMA was the second disaster to

hit Florida, and Bush I sent down Andy Card, so we have had a

rocky road, but it has developed into a good road.

We now are working with Joe Allbaugh to help FEMA become an

all-hazards agency, and there are issues there over what—Tom

Ridge wants to expand it. Senator Bond and I have really serious

yellow flashing lights over FEMA’s ability to organize and train

and sustain volunteers, not to do the FEMA job, and for us to continue now to do our reform, because it takes in homeland security

and all hazards. That is a big job. Allbaugh has a big job, and

working very hard to do it very well, so we are clear about that.

There is a myth about volunteers, that people can just show up,

and give them a rake, and it is going to be all fine. There is the

issue of screening, training, and then sustaining both their motivation and their skills, and we really do not think that FEMA is the

place to really think about doing this, but perhaps we should have

a memorandum, perhaps with you.

And then there is this whole issue of how Citizen Corps fits in

with the volunteer fire fighters who they think are already the Citizen Corps, so we have got some real issues here. I hope to meet

with the Director of Freedom Corps, but we would hope that perhaps we can resolve this in some collegial way, keeping the momentum that the President has created. We want to keep that momentum, and yet at the same time have what he wants to do in

the right place with the right policies and the right funding.

Dr. LENKOWSKY. I understand completely, Senator. All I can say

for our agency is, everybody in this agency and all of our members

of AmeriCorps, Senior Corps, and Learn and Serve are ready to

serve when and how asked.

NATIONAL SERVICE VS. NATIONAL GUARD

Senator MIKULSKI. Right. Let me then go back to two other

issues while Senator Bond is here. I just want to have us also for

the record—two things. Because you were part of the founding of

National Service and the commission, I want to get your view—

well, first of all, as I recall, when we founded it National Service,

meaning citizen volunteers, were never to compete with the National Guard, who were citizen soldiers, and the reason for that is

that both offered education grants. The guard was always worried

that it could not compete, so we were very clear there was a distinction.

Senators’ Bayh and McCain have a proposal of 18 months’ military duty, 18 months’ reserves, 18 months of community service, a

total of 54 months, very different from what we have. Is it your

recollection—and also a reaffirmation of policy that the National

Guard, and whatever we do to expand AmeriCorps or other opportunities for volunteerism were never to compete with the National

Guard. In other words, that there were two distinct routes for service.

Dr. LENKOWSKY. That is exactly right, Senator. I was a National

Guardsman myself many years ago. I know the differences. I know

the distinctive and valuable contributions the National Guard

makes and National Service makes, but they are separate and

should be kept separate. People who want to serve at both in var-
330

ious points in their life, they should be able to do that. That is

great. But we certainly understand the distinction between the

two, and should not confuse it.

PART-TIME MODEL FOR NATIONAL SERVICE

Senator MIKULSKI. Now, let me go to the part-time, and we invented again National Service, and this goes to the innovations

that you have talked about. Even in homeland security there was

an understanding that not everyone could go away, or should go

away. It was essentially a model of a 2-year affluent person using

the Peace Corps model. We knew that for many they had technical

skills, like now in technology, where they could not go away but

they wanted to serve. Or second, it might be that single mother

who in the process of volunteering is getting an incredible experience and an education voucher maybe to go on and get that nursing degree at the local community college.

Could you share with us, number 1, your view of the part-time

model, and is there funding in your request to affirm this, and is

this also a tool for, again, creativity within this new framework

that not everybody can do 2 years, and it also has meant, quite

frankly, we did not have a housing allowance but you could get the

education.

Dr. LENKOWSKY. Yes, Senator, that is exactly still our understanding. Whenever I travel, I am really quite privileged, because

I often go into some of the worst parts of every community and see

the best people. These are people who are bringing back their own

neighborhoods. They are people who are not Ivy League college

graduates. They live in those neighborhoods. They are engaged in

AmeriCorps full-time or part-time, a mixture of both, usually, and

through their work they are contributing not only to their communities in a very positive way but also to themselves, taking the next

step up the ladder of social mobility.

I was doing a little research recently and it turns out that one

out of every five AmeriCorps members had a parent who received

food stamps, so AmeriCorps looks like America. We want to keep

it that way, and we want to have the kinds of flexibility in how we

can bring people into AmeriCorps to make sure that a very diverse

group of people can participate. The President’s budget does contemplate that partly by moving our ed award, which also includes

a lot of our part-time, into the general AmeriCorps mix, where we

will have more room to offer those kinds of positions.

We made certain assumptions just coming up with the number,

but basically there is lots of room within that number for a mixture

of full-time, part-time, and ed award only placements.

Finally, under our innovation area, one of the things I am very

eager to try and have actually written a little bit about this, are

more varieties of AmeriCorps that would enable people to participate in different ways. For example, if you were a young person living in Madison, Indiana, and you wanted to join AmeriCorps today,

the odds are you would have to move, because we probably do not

have an AmeriCorps grantee in Madison, Indiana.

Now, that puts an additional burden on somebody to participate

who wants to participate, but suppose we had a variety of

AmeriCorps, or form of AmeriCorps which you might call individ-
331

ualized model, where you could actually become a member of

AmeriCorps through a selection process. If you were chosen, you

could find an organization within certain limits, such as an accredited organization, or United Way organization. It could be a nursing home that took care of your grandmother for years and years,

and you would like to spend a year or two giving back that way.

I mean, an individualized model rather than the kind of group

models which we have, which are typical right now.

There are some disadvantages to it. It probably makes the problems of accountability and management a little trickier, so we want

to test it. We do not want to jump right into it. But it also gives

us the flexibility to get people from all walks of life into our programs.

Senator MIKULSKI. I think that is excellent. I want to come back

to the variety, because it could very well be someone who has technology skills and says, well, there is nothing in Madison, but I

would like to work in the Police Athletic League program. They

have tech centers, and I would like to help all of the people there

to be able to teach tech to the kids.

Dr. LENKOWSKY. Exactly.

Senator MIKULSKI. Senator Bond.

Senator BOND. Madam Chair, I am going to submit the rest of

my questions for the record.

CHALLENGE GRANTS

Senator MIKULSKI. I am just going to clarify the Challenge

Grants, then, one other thing related to variety, but with the Challenge Grants, what do you see as being encountered in the Challenge Grants? There is confusion now whether State and local

funds would be counted in the Challenge Grant, and I am not talking necessarily about the teacher’s salary being paid to a teacher

in AmeriCorps, but where the City of Baltimore, along with the

Abell Foundation was contributing to the administration of Teach

for America in Baltimore.

Dr. LENKOWSKY. As you know, there is a matching requirement

in existence today for AmeriCorps. I believe it is a 15-percent

match, and that could be accomplished by any non-Federal source,

including State or city funding and, of course, private funding.

To be honest, I do not think we have really thought carefully

enough yet about the Challenge Grants. My own instincts, given

what we are trying to accomplish, would be that the match would

come from private sources, but I think we need to consult with our

grantees, the Teach for Americas, the City Years to make sure that

as we set up the provisions of this program we are doing it in a

way which ultimately achieves the goal, which is to enable them

to generate the kinds of resources they need to become as self-sufficient as possible, so we want to keep the goal in mind here, and

my view would generally be that Challenge Grants ought to be

matched with private money, but I think we need to consult carefully with our grantees.
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COMMUNITY SERVICE IN RURAL AREAS

Senator MIKULSKI. Well, as we move forward with our appropriations and the desire to see if we cannot fund Challenge Grants this

year, we really need very clear guidance from you on that matter.

One of the things I would like to just bring to your attention is

the issue around rural communities, or where they do not have

foundations. I have been struck, and I know my colleague has been

a real advocate for rural communities, where we have county commissioners who are part-time people who run a county.

My mountain county in Garrett, my Somerset County on the

shore do not have these foundations—the Abell Foundation, or the

kind of United Way we have, and yet I have been so impressed by

their dedication to try to empower and help people in their own

community, and if they put some money in I think you ought to

look at it.

I am going to really ask you for the policy recommendation, but

communities that do not have access to foundations, where there

are at least a modest, or modicum of local effort and local commitment, I would like us to see how we could recognize that, because

that is the point. We have challenged that.

Dr. LENKOWSKY. We might also need to think of the Challenge

Grant also valuing volunteer time. A major part of the President’s

principles calls for judging AmeriCorps programs by their ability to

leverage nonstipended volunteers, those occasional volunteers who

on average give 31⁄2 hours a week.

Senator MIKULSKI. It would be simple enough to implement. You

are very good at that, but I would like to have guidance on whether, in addition to foundations or any type of private, literally private money, to look at also State and local or other income.

We are going to say goodbye to Senator Bond. I am just going

to ask another set of questions related to your testimony. I want

to go to your written testimony, and I want to give you the Challenge Grant part, because we really have worked in partnership,

and I cannot say enough about Senator Bond’s commitment to sustaining this program during very difficult times.

ESTABLISHMENT OF ECORPS

I want to go to page 6 of your testimony, where you talk about

the senior initiatives, the literacy initiatives, and the technology

initiatives, all of which are really quite interesting. I want to go to

things like technology. I am trying to establish an eCorps within

AmeriCorps. Now, I am really asking your advice as to how—and

I think we can agree upon the technology, and that goes to my concern about the digital divide, that second—the digital divide, as I

define it, as access to technology and access to people who can

teach you how to use it.

I was thinking about it in schools and community-based centers,

PAL programs and so on. But the eCorps from AmeriCorps was literally teaching the people who need to teach, who in many ways

themselves have not had access, in other words, an eCorps. I call

it an eCorps. I do not care what we call it, but what I was looking

for, that there are a lot of people who are not even infotech majors,
333

but have those skills, and they could be the part-timers, and again

I am going to leave it to your creativity.

I do not think this has ever really quite gotten off the ground,

and I just wanted to lay out my picture, and could I hear from you,

your description, and we have had a good discussion on the Senior

Service initiative, but on the literacy and the technology side, and

see what your thoughts are to be able to stimulate that.

Dr. LENKOWSKY. Let me start with the technology one, because

I know that is an interest of yours. We are, in fact, funding a large

number of technology initiatives now, and would be glad to submit

a list of those to you for the record, but I completely agree. I think

with what you are suggesting, that what we really ought to be

doing in our technology efforts is, again, part of our general theme

of capacity-building.

We ought to be teaching the teachers. We ought to be helping the

organizations develop the capacity to use modern technology. You

usually talk about the digital divide as being one between different

people, and there is one, but there is also a great digital divide between different kinds of organizations, those big national organizations are moving very quickly into all sorts of electronic technology,

electronic fundraising, membership development, all sorts of

things, but our smaller groups stay level who are often on the front

line. They are ones that need the help getting that new capacity.

I think that is a very valuable part of what we can do through programs like VISTA and so on.

I think where I might differ a little with you, Senator, is, I would

not want to limit this to AmeriCorps. As you know, we are also

proposing a significant increase in the Senior Service Corps.

Senator MIKULSKI. That is an excellent recommendation.

Dr. LENKOWSKY. You and I talked a little bit yesterday about trying to make sure that our senior programs and senior volunteers

generally is as attractive to the rising generation of seniors, and I

am on the front end of that one, approaching retirement, as it has

been to the previous generation who have that strong sense of duty

to country.

We know that a lot of the motivation behind the rising generation of seniors is related to using the skills they acquired in their

working years, but putting them to some other use once they are

approaching their retirement years, and I think if we could engage

our seniors in some of these technology activities, too, we have a

win-win here. We will get more attention on the part of the rising

generation of retirees and bring a lot of valuable skills to organizations and people in the technology arena, so that is my vision for

the use of technology.

Literacy, as you know, a very large fraction of our AmeriCorps

members are engaged in tutoring and mentoring. I would expect

not only to continue that, but to expand that. One of the President’s proposals which is not before this committee is an appropriations matter, and we did discuss a bit in my testimony with the

Health Committee concerning the Federal Work-Study program.

The Federal Work-Study program is really a very creative idea.

Back in the 1960’s it was part of the war on poverty, and the idea

was that young people from modest backgrounds who had got the

grades, the ability to go to college, would get a certain amount of
334

financial aid that would be premised on their going back into their

communities and tutoring and mentoring younger people just like

them who needed that sense of hope and aspiration, and that has

changed.

Work-Study programs are used by colleges and universities for

all sorts of things these days, and I am sure they are very valuable.

The President’s proposals call for making available setting a target

of 50 percent of Federal Work-Study slots which will be used for

community service, and I would expect that if we were able to do

this a fairly large proportion of those would be related to literacy.

The colleges and universities have very justifiable concerns with

that proposal, and we are going to be sensitive to that and work

with them, but there are a lot of ways that you can achieve the

President’s goal.

For example, I learned of a program—I believe it is at Harvard—

where they are doing distance tutoring. They have really set this

up through technology to be able to tutor children all around the

country in reading and other skills, and these are Federal WorkStudy students, so the opportunities here to be creative are enormous.

One of the things that is most inspiring to me about the President’s call to service is when you start thinking seriously about this

you see there are all sorts of creative ways to do it using a lot of

existing resources. This is not something, as we discussed earlier,

where we have got to have a 10-year R&D effort before we can figure out some good things to do.

LITERACY AND TECHNOLOGY

Senator MIKULSKI. Well, we know that the First Lady is devoting

herself to education, and we salute her on that, and her motherin-law, Barbara Bush, really did an outstanding job on the whole

issue particularly of adult literacy, to show that there was not

something to be ashamed or stigmatized about, and I really think

did an important service. We want to be able to support the literacy issue, and we will work that out in appropriations and authorizing, but we see literacy and technology as linked. Often, technology is a tool for literacy, as you have indicated, and we look forward to how we can foster those, but not have so many specific line

items that we don’t lose out of creativity and flexibility.

The whole idea, when we were working to create this, Senator

Nunn, myself, and folks like yourself and the Mandel Foundation,

was that this was not to be just one more Government program.

It was not meant to be one more social program. It was to be about

a social movement around the habits of the heart, for every opportunity there is an obligation and so on, and it was meant to be

flexible, not so prescribed. In other words, get away from the mentality of the sixties programs, not the value base of those, but remember how they were overprescribed, over-line-itemed, and over

what I call—you would have 30 line-item boutique programs, but

you could not get a critical mass to achieve a critical mass of social

good.

So I am looking out for these initiatives, but really I am going

to again invite you to keep us in the spirit of creativity, flexibility,

local needs, because they are different, and at the same time na-
335

tional standards that we expect for training, appropriateness, fiscal

accountability and so on, but we really do want to keep that local

flexibility and creativity.

Dr. LENKOWSKY. I could not agree more with that, Senator.

Senator MIKULSKI. I think we have really covered everything. I

want to thank you for your excellent testimony. I think your written testimony also provides a very good road map. We are going

to be as good as our allocation, which is kind of sitting out there.

I am going to need the Hubbell telescope to see it, but it is on the

horizon for us, and again we just welcome you with enthusiasm

and hospitality.

Dr. LENKOWSKY. I look forward to working with you, Senator.

SUBCOMMITTEE RECESS

Senator MIKULSKI. This subcommittee stands in recess until next

Thursday—excuse me, next Wednesday, on April 24, in which we

will be taking testimony from the Neighborhood Reinvestment Corporation and the CDFI.

Thank you very much, and we are recessed.

[Whereupon, at 11:10 a.m., Wednesday, April 17, the subcommittee was recessed, to reconvene subject to the call of the Chair.]

(337)

DEPARTMENTS OF VETERANS AFFAIRS AND

HOUSING AND URBAN DEVELOPMENT AND

INDEPENDENT AGENCIES APPROPRIATIONS

FOR FISCAL YEAR 2003

WEDNESDAY, APRIL 24, 2002

U.S. SENATE,

SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS,

Washington, DC.

The subcommittee met at 9:37 a.m., in room SD–138, Dirksen

Senate Office Building, Hon. Barbara A. Mikulski (chairman) presiding.

Present: Senators Mikulski and Bond.

NEIGHBORHOOD REINVESTMENT CORPORATION

STATEMENT OF ELLEN LAZAR, EXECUTIVE DIRECTOR

ACCOMPANIED BY:

MARGO KELLY, DEPUTY EXECUTIVE DIRECTOR

CLARENCE J. SNUGGS, DEPUTY EXECUTIVE DIRECTOR/TREASURER

JEFFREY BRYSON, GENERAL COUNSEL

OPENING STATEMENT OF SENATOR BARBARA A. MIKULSKI

Senator MIKULSKI. Good morning, everybody. The VA–HUD

Committee will now come to order.

And we want to welcome Ellen Lazar, the Executive Director of

the Neighborhood Reinvestment Corporation, and her team; and

Mr. Tony Brown, the new Director of the CDFI Fund, who we also

welcome. Both Neighborhood Reinvestment and CDFI seek to improve conditions in low income neighborhoods.

We asked you to testify together at the panel, recognizing the

distinct, but complementary, missions in a way that we could get

right to the questions. And some of the questions deal with predatory lending, the ability of nonprofits to really function in neighborhoods and community development corporations. There are many

questions that really go both to your distinct missions. There are

parallels or even collaborations, so we thought we would do that.

And also, we have a markup in Senator Kennedy’s committee at

quarter of 11:00. So we are going to try to move very rapidly.

First of all, both of your institutions recommend, really, the area

of community development. And we are very interested in wanting

to know what is working, what is not, what are the lessons

learned.
338

Also, we are very cognizant of the fact that in terms of the President’s budget, the President has proposed level funding of $105

million for the Neighborhood Reinvestment Corporation. And we

want to know the consequences of flat lining.

Though when I took over this subcommittee in 1988, it was $10

million, and I am not sure, if it were indexed and all, where it

would be. But Congress has had a steady commitment to the

Neighborhood Reinvestment Corporation.

For CDFI, the President’s budget request is at $68 million, a $12

million or 15 percent cut from last year. I have a lot of yellow flashing lights about that.

And, Mr. Brown, we would like to know what are the consequences of this cut, and get a picture from you.

This hearing will focus on really the role, the mission, and the

resources of both institutions. We are very impressed that in fiscal

year 2001 at Neighborhood Reinvestment, which has been an important tool in assisting communities with housing and economic

development, but also community development and capacity building. I think that is one of the signatures of Neighborhood Reinvestment, and that you are not just another housing program. You are

not a real estate program. You are a real community program. And

it is about community development and capacity development.

We know that what has been so impressive to the Congress over

the year is the way that Neighborhood Reinvestment has leveraged

funds right at the local level to promote economic development,

neighborhood stability, and home ownership. We know that you

have helped many first-time home buyers in purchasing and keeping their homes.

Due to our concern about the shortfall in rental housing, we

know that you have had a real effort to explore innovative ways to

produce mixed income rental housing for very low income families

and have a whole new initiative on that. And we are very much

interested in the whole multi-family area.

The whole issue of promoting Section 8 for home ownership, everyone says ‘‘Let us do that,’’ but I am concerned about the ability

of new homeowners who are very poor and often have not been

given the financial literacy skills that they need to sustain this. I

do not want an American dream to become a family nightmare, and

how we can avoid that from happening.

This committee has been troubled for some time about the whole

issue of FHA defaults in neighborhoods, where they become what

they call HUD houses. And that is the way they are referred to,

‘‘Senator Mikulski, there’s a HUD house in my neighborhood.’’

And rather than remarking on how wonderful it is, it usually has

been someone has defaulted on their mortgage, usually because of

no fault of their own. And HUD wants to sell it, and HUD becomes

a slum landlord and then just unloads it, sometimes to even predatory or scum-bum people. So we want to know kind of where you

are on that.

And also, in terms of CDFI, CDFI provides financing and technical assistance while the BEA program awards banks and such for

providing similar services. We know that you are doing a new market program, and we want to hear about that. We know that you
339

are working hard on performance measures and your experience in

the private sector.

We are particularly pleased that there is a Native American initiative, so that the only money coming in is not more of the old

Federal stuff that has not worked or casino money. And I am not

knocking casino money, but there needs to be other forms of empowerment for our Native American community.

For both of you, I know that you have done significant work in

the rural communities. And this is really an outstanding achievement because often they do not have access to technical assistance,

foundations. The Big Macs do not always want to come to the little

nuggets in the rural communities.

PREPARED STATEMENT

So we look forward to hearing from you about your work, about

what you need to do your work, and is the resource that is being

proposed adequate and, at the same time, really remaining the

stewards on taxpayers’ funds. Not only what you do, Mr. Brown,

for example, better management of the legacy of CDFI, but really

to make sure that—there are those out in the neighborhoods, not

the poor themselves, but who gouge the poor and gouge our taxpayers, and that kind of fraud really I find doubly despicable.

[The statement follows:]

PREPARED STATEMENT OF BARBARA A. MIKULSKI

Today we welcome two witnesses to testify on their fiscal year budget submissions: Ellen Lazar, the Executive Director of Neighborhood Reinvestment Corporation, and former director of the CDFI Fund, and Tony Brown, the new Director of

the CDFI Fund.

We are delighted to have you both here. Both Neighborhood Reinvestment and the

CDFI Fund seek to improve conditions in low-income communities. Neighborhood

Reinvestment trains nonprofits and builds capacity, while CDFI provides grants and

loans to financial institutions serving low-income neighborhoods

In the area of community development, we want to know: what is working out

there, what isn’t, and what are the lessons learned? I am especially interested in

two areas—how you certify your members, and what you are doing to stop predatory

lending.

If we are asking nonprofits to take on more responsibility, then we must make

sure they are ready. Last year, Neighborhood Reinvestment provided over 200,000

training hours to nonprofits and community leaders in support of this goal. As the

federal government sends more money to nonprofits, we need to make sure that

they are ready for prime time. But we also need to remember that community based

groups are not a substitute for government—they are a partner to government.

We also want to know what Neighborhood Reinvestment and CDFI are doing to

help communities fight predatory lending. In my own hometown of Baltimore, nonprofits like St. Ambrose Housing Aid Center are on the front lines fighting flipping.

This is an area that I know your members have spent a lot of time on, whether

its providing loans, homeownership counseling or doing damage control in the neighborhoods hardest hit by the predators. We really need you to tell us what can be

done to prevent these scum—be it lenders, appraisers or investors—from destroying

neighborhoods and dreams. And also, how do we help neighborhoods devastated by

these practices to pick up the pieces.

My own goals for community development have grown out of my own experiences,

as a community activist, a social worker, and an appropriator. I believe there are

three types of neighborhoods: stable, stress and siege. I believe we are best off focusing our resources on neighborhoods under stress that are teeter-tottering on the

edge of siege. We want to move them into the stable column and fight to make sure

they don’t come under siege. I know that both Neighborhood Reinvestment and

CDFI support this goal. Neighborhood Reinvestment builds capacity of communitybased nonprofits by providing capital and ‘‘training the trainers’’ and CDFI gets capital to underserved communities where there has been little investment.
340

These two agencies are in a unique position. They play a support role for community-based groups on the front lines in their neighborhoods. So they are able to respond to the unique needs of each community. Too often we make the mistake of

confusing program development with community development when we know that

no two neighborhoods are the same, and no two neighborhoods have the same needs.

Low-income neighborhoods can’t afford to navigate giant bureaucracies and the federal government can’t afford to maintain them, which is why we need to target resources carefully.

In considering the President’s budget, we want to learn from you what the impact

of the fiscal year 2003 budget submission will be. The President has proposed level

funding of $105 million for Neighborhood Reinvestment and funds CDFI at $68 million, a $12 million, or 15 percent cut from last year. I am disappointed by this because I know how important community development funds are to our neighborhoods. We want to know what the consequences of this cut will be and how CDFI

is working to better measure the impact it’s having in communities.

Today we hope to learn what is working to revitalize our communities, and what

is not working as well. We need to ensure that Neighborhood Reinvestment and the

CDFI Fund make the best use of scarce resources to create communities where families can live, work, worship and shop. We look forward to your testimony.

Senator MIKULSKI. So I am going to turn to my very able and

dear friend, Senator Bond, for any comments he wishes to make.

STATEMENT OF SENATOR CHRISTOPHER S. BOND

Senator BOND. Thank you very much, Madam Chair. And I share

the concerns that you raised.

As I am sure that you all know, this committee operates in a

very bipartisan way and we are very proud of the work that the

agencies under this committee’s jurisdiction have performed, and

we share the concerns to make sure they continue to serve as they

should.

I join in welcoming Ellen Lazar and Tony Brown. I think, Mr.

Brown, this is your first appearance before the subcommittee. Fasten your seat belt. It is always interesting. We never know what

is going to happen next.

Ms. Lazar is probably on the verge of breaking a subcommittee

record in the number of appearances that she has testified as head

of CDFI in the past.

NRC and CDFI are two of the smaller agencies within the VA–

HUD jurisdiction. But clearly, they are not forgotten, and we do

not want to overlook them. You do not have the same level of resources of other Federal agencies and departments with which we

work, but both of your agencies play a vital role in serving the

needs of distressed communities. And that is why this separate

hearing is designed to focus on your work.

It would be very difficult for me to forget Neighborhood Reinvestment due to the great work it has done and is doing in my home

State of Missouri. NRC affiliates in St. Louis and Kansas City have

been working in some of the most distressed communities and have

been instrumental in revitalizing the neighborhoods. I am proud of

the work they have done. I have seen the value that they have

added.

I am also excited about the merger between Neighborhood Housing Services of St. Louis and another successful organization called

Beyond Housing. These are two of the leading CDCs in the St.

Louis area. And it seems to me that the combining of their talents

is a great move. I hope this merger may become a model for other

CDCs in St. Louis, where there are dozens of small-sized, special-
341

ized organizations that may not have the capacity to take on muchneeded, larger-scale housing and economic development projects.

Today I would be interested in hearing more about NRC’s activities, especially in affordable housing programs. Addressing the

shortage of affordable housing is one of my highest priorities. It

has to be one of the highest priorities of this committee. It is obviously clear that we need to stimulate and support the production

of more affordable housing, especially for extremely low income

families.

We have a situation in St. Louis County, Missouri, where we do

not even apply for more Section 8 vouchers, because there is no

place for them to be used. A voucher without a house to go with

it is not very useful.

In the 2002 VA–HUD appropriations bill, I worked to add $5 million for Neighborhood Reinvestment to expand their multi-family

housing programs. However, the administration and OMB, in their

wisdom, did not continue this important initiative in the budget request. I am disappointed. I do not agree. But I am not deterred.

And we will continue to seek support for multi-family production.

Further, we need to know how NRC has been involved in helping

HUD dispose of its single-family assets and administer the new

Section 8 home ownership program. Like the Chair, I have questions about some of these things.

First, HUD’s decision to impose a moratorium on the asset control program, I think it makes a lot of sense to suspend those organizations that have not performed or have not complied with program rules. But punishing good nonprofits puzzles me. It is sort of

like throwing the baby out with the bath water.

The alternative of HUD using its own resources to dispose of the

assets is definitely a worse option. And as the Chair said, we want

to make sure that the home ownership, the Section 8 home ownership program, does not become a trap for families that are not prepared to assume the responsibility of home ownership.

Now with regard to the CDFI, I commend Treasury Secretary

O’Neill’s initiative to have the fund develop real outcome measurements of its program and past reports. It has focused too much on

the outputs or how much money it spent rather than the outcomes.

I hope that this effort will help us understand how cost-effective

and efficient the CDFI programs are, especially in comparison to

other similar Federal activities. If you are not giving more valueadded for the buck, then we are going to cut it back. We want to

see programs and agencies that work. And we need to be convinced

that they are making the kind of difference that warrants the allocation of resources to them.

There are two other issues I need to highlight. One, again, I am

disappointed by the administration’s decision not to fund the Native American CDFI technical assistance program. It is a modest

$5 million program for a population that has significant needs. The

Treasury Department’s own study identified significant barriers to

capital access for Native Americans. And it recently released the

Native American lending study, which found that many communities located in Indian lands face economic and social challenges

that place them significantly behind the rest of the U.S. economy.
342

To me, it is clear from the report that CDFI should be playing a

role in Native American lands.

The second issue I would like to raise is the future of CDFI.

What are you, fish or fowl? With the addition of the new markets

tax credit program, I want to know whether this program will be

the fund’s primary activity. In other words, should CDFI focus its

activities on grant-making, as it has in the past, or is it going to

be an allocated tax credit to meet its mission? Which one is it going

to be? And I am concerned that there may be different skills needs.

And I want to see where you can get the most effective result of

the resources allocated.

PREPARED STATEMENT

Lastly, I am concerned about the fund’s effort in addressing distressed communities in rural areas. I happen to live in a rural

area. And I know many of our colleagues do, and they share my

concerns. I would like to hear how the fund has proposed and has

been addressing this issue, because this clearly is a concern as

much as the concern about distressed communities in urban areas.

With that, Madam Chair, I thank you and look forward to hearing the testimony of our two good friends and witnesses.

[The statement follows:]

PREPARED STATEMENT OF SENATOR CHRISTOPHER S. BOND

Thank you, Madam Chair. I also welcome Ms. Ellen Lazar from Neighborhood Reinvestment and Mr. Tony Brown from the CDFI. This is Mr. Brown’s first appearance before the Subcommittee but I think that Ms. Lazar may be on the verge of

breaking a Subcommittee record in number of appearances since she has also testified as the head of the CDFI.

NRC and the CDFI are two of the smaller agencies within the VA/HUD jurisdiction but they are not forgotten. While these agencies may not have the same level

of resources of other Federal agencies and departments such as HUD, both agencies

play a vital role in serving the needs of distressed communities.

It is especially difficult for me to forget Neighborhood Reinvestment due to the

great work it has performed in my home state of Missouri. NRC affiliates in St.

Louis and Kansas City have been working in some of the most distressed communities and have been instrumental in revitalizing neighborhoods. I am proud of the

work they have done and I have seen the value they have added. I am also excited

about the merger between the Neighborhood Housing Services of St. Louis and another successful organization called Beyond Housing. These are two of the leading

CDCs in the St. Louis area and combining their talents is a great move. I hope that

this merger will become a model for other CDCs in St. Louis where there are dozens

of small-sized, specialized organizations that do not have the capacity to take on

much needed larger scale housing and economic development projects.

Today, I would like to hear more about NRC’s activities, especially its affordable

housing programs. Addressing the shortage of affordable housing is one of my highest priorities. It is obviously clear that we need to stimulate and support the production of more affordable housing, especially for extremely low-income families. In the

fiscal year 2002 VA/HUD appropriations bill, I sponsored the addition of $5 million

for Neighborhood Reinvestment to expand their multifamily housing programs.

However, the Administration and OMB did not continue this important initiative in

its budget request. I am disappointed but not deterred, and I will continue to advocate for multifamily production.

Further, I would like to hear how NRC has been involved in helping HUD dispose

of its single-family assets and administer its new Section 8 homeownership program. I have questions about HUD’s decision to impose a moratorium on the Asset

Control Area program. While I support the suspension of those organizations that

have not performed or complied with program rules, punishing good non-profits is

puzzling to me. HUD’s decision is like ‘‘throwing the baby out with the bath water.’’

And, the alternative of HUD using its own resources to dispose of its assets is definitely a worse option.
343

In regards to the CDFI, I support Treasury Secretary O’Neil’s initiative to have

the Fund develop real outcome measurements on its programs. In past reports, GAO

found that its programs emphasized outputs rather than outcomes. I hope that this

effort is able to help us understand how cost-effective and efficient the CDFI programs are, especially in comparison to other similar Federal activities.

There are two other issues I would like to highlight. One, I am disappointed with

the Administration’s decision to not fund the Native American CDFI Technical Assistance program. This is a modest $5 million program for a population that has

significant needs. The Treasury Department’s own study identified significant barriers to capital access for Native Americans. Its recently released Native American

Lending Study found that ‘‘many communities located in Indian Lands face economic and social challenges that place them significantly behind the rest of the U.S.

economy.’’ It is clear from this report that the CDFI must play a role in Native

American lands.

The second issue I would like to raise is the future of the CDFI. With the addition

of the New Markets Tax Credit program to the CDFI portfolio, I am interested in

whether this program will become the Fund’s primary activity. In other words,

should the CDFI focus its activities on grant-making or the allocation of tax credits

to better meet its mission?

Lastly, I am concerned about the Fund’s efforts in addressing distressed communities in rural areas. Many members of this Subcommittee share this concern. I

would like to hear how the Fund has addressed this issue.

Thank you.

Senator MIKULSKI. Well, we welcome both of our witnesses. And

we ask them to proceed with their testimony. Ms. Lazar, you come

with considerable background in public service. And we would just

ask you to proceed.

Ms. LAZAR. Thank you. Good morning, Madam Chair Mikulski,

and Ranking Member Bond. My name is Ellen Lazar, and I am the

Executive Director of Neighborhood Reinvestment Corporation.

I am joined today by Margo Kelly and Clarence Snuggs, who are

my Deputy Executive Directors, and Jeff Bryson, our General

Counsel.

This past year, we were fortunate to have very strong leadership

from our board of directors. Governor Edward Gramlich of the Federal Reserve, serves as our chair. John M. Reich, Director of the

Federal Deposit Insurance Corporation, serves as our vice-chair.

Among the other members of our board are James E. Gilleran, the

Director of the Office of Thrift Supervision; Deborah Matz, Director

of the National Credit Union Administration; John C. Weicher, Assistant Secretary for Housing and the Federal Housing Commissioner; and Julie Williams, the Deputy Comptroller from the Office

of the Comptroller of the Currency.

I am here today to talk about Neighborhood Reinvestment and

the experience of over 225 affiliated community development nonprofits, known as the NeighborWorks network, that serves over

2,000 urban, suburban, and rural communities in 49 States, the

District of Columbia, and Puerto Rico, and to talk about the work

these organizations are doing to revitalize communities and help

low- and moderate-income families achieve a personal stake in the

renewal of their communities.

Neighborhood Reinvestment supports and strengthens

NeighborWorks affiliates through technical assistance, training, direct funding through grants, program review and oversight, and access to a unique secondary market. I ask you to support Neighborhood Reinvestment’s budget request of $105 million. There are

three reasons why a continued investment by Congress in Neighborhood Reinvestment——
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Senator MIKULSKI. Wait a minute. I am lost here in testimony,

Ms. Lazar.

Ms. LAZAR. I am sorry.

Senator MIKULSKI. I have an oral testimony. And then it talks

about Neighborhood Reinvestment. And then I have your formal

testimony. What are you—where are we here?

Ms. LAZAR. I am on the second page of the oral testimony.

Senator MIKULSKI. I have it now. Thank you.

Ms. LAZAR. Okay. Thank you.

There are three reasons why a continued investment in Neighborhood Reinvestment is a wise use of this Nation’s Federal resources.

STEWARDSHIP OF FEDERAL RESOURCES

First, Neighborhood Reinvestment takes very seriously its stewardship of its Federal appropriation by maximizing the effectiveness and efficiency of the NeighborWorks network. We use Federal

funding to attract private sector resources. For every dollar appropriated to Neighborhood Reinvestment, the NeighborWorks system

generated more than $15 from private sector and other sources, resulting in a direct investment of nearly $1.4 billion.

We can achieve this level of impact because our programs and

services are highly flexible and tailored to fit the credit and resource gaps that cannot be filled otherwise. We use a communitybased approach to direct our activities. Essentially, we ask each

NeighborWorks organization to identify the specific challenges in

their communities. We respond with a unique combination of training, technical assistance, and financial support.

As you know, two-thirds of our budget goes out to

NeighborWorks organizations as direct grants, but we provide

much more than just funding to local community development organizations. Our capacity-building services include technical assistance, which responds to intricate and timely organizational issues;

our risk management system, which monitors the organization and

its financial health, productivity, and viability; and our training institutes, which help to educate and ensure that local staff are well

informed.

In fiscal year 2001, we trained more than 4,200 people. Our

training institutes not only serve our network, but the broader

community development and housing field. Our services improve

the local organization, mitigate long-term risk, and maximize the

impact of the Federal resources we use.

Secondly, Neighborhood Reinvestment continually looks toward

the horizon, seeking new opportunities to address persistent challenges, thereby serving as the laboratory environment Congress intended. The challenges facing this country are ever changing.

Neighborhood Reinvestment was chartered and directed to serve as

a laboratory for the community development field.

HUD’s Section 8 home ownership option is a good example.

NeighborWorks organizations provide a bridge between private

lenders and public housing authorities to make home ownership a

reality. Organizations receive technical and grant support from

Neighborhood Reinvestment. And this subcommittee has provided
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the resources that have created this laboratory and seeded this effort.

We have assisted 21 NeighborWorks organizations, working with

26 public housing authorities, and have trained over 1,000 professionals on this option through courses we offer.

Our multi-family funding has been another significant area for us. Last year we received $5 million, which was designated to explore ways to serve families with incomes below 30 percent of area

median income in mixed income rental housing. This is especially

difficult since low-income families’ income is often unable to cover

the operating costs of the rental unit.

The majority of the allocation that we received is going out to

NeighborWorks organizations to fund the development of mixed income properties that house families with incomes below 30 percent

of median income. The organizations will employ a variety of strategies. We will gather information on how these properties and others will financially support a wide mix of incomes. We appreciate

the opportunity to examine viable options in this important area

and to report our results to you.

Our most visible laboratory effort to date is the NeighborWorks

Campaign for Home Ownership. In fiscal year 1998, Congress seeded our home ownership efforts with a $25 million set-aside. That

funding has helped produce some remarkable results. The average

income of the families we serve is nearly half of the national average, $29,300. Ninety-five percent of these folks are first-time home

buyers. Fifty-two percent are ethnic minorities. Forty two percent

are female buyers.

We have produced a series of integrated strategies, including

comprehensive home buyer education, NeighborWorks Home Ownership Centers, and a financial literacy initiative. We are on target

to surpass our 5-year goal to create 40,000 new home buyers.

Lastly, Neighborhood Reinvestment provides strategies for a

range of housing and community development challenges. The onesize-fits-all approach does not work. We are addressing the needs

of under-served communities and populations with a particular

sensitivity to the needs of low-income families, immigrants, the disabled, and the elderly. This requires more than grants. We need

strong organizations led by strong community leaders, local resident leaders, leading to greater civic involvement, which helps effectuate positive change.

CONCLUSION

Let me close by thanking Madam Chair Mikulski and Ranking

Member Bond for the wonderful opportunity you and the subcommittee have given this organization to serve America’s communities and by asking for your continued support.

At the $105 million level, we will leverage $1.6 billion in direct

total investment in distressed rural, suburban, and urban communities. We will assist more than 71,000 families obtain and maintain safe and affordable rental and home ownership housing. We

will provide pre-and post-purchase home ownership counseling and

financial literacy to nearly 70,000 families.

You have encouraged us to be flexible, creative, nimble, and responsive in designing and delivering our services and resources.
346

And this flexibility and your demonstrated confidence in us has

created remarkable results. We know that your investment in

Neighborhood Reinvestment is an investment and expression of

confidence in America’s communities. And all of America benefits

when its communities are healthy, strong, and safe.

PREPARED STATEMENT

Thank you. And I am happy to take any questions.

Senator MIKULSKI. Thank you very much, Ms. Lazar. And with

unanimous consent of the committee, your entire testimony will be

included in the record.

[The statement follows:]

PREPARED STATEMENT OF ELLEN LAZAR

Good morning, Chairman Mikulski, Ranking Member Bond, and members of the

subcommittee. My name is Ellen Lazar and I am the Executive Director of the

Neighborhood Reinvestment Corporation. I am here this morning to talk with you

about the work that Neighborhood Reinvestment is doing to revitalize communities

and help low- and moderate-income families achieve a personal stake in the renewal

of their communities.

My testimony is based on the experience and considerable successes of 225 community development organizations serving more than 2,000 urban, suburban, and

rural communities. These nonprofits are collectively known as the NeighborWorks

network and operate in 49 States, the District of Columbia, and Puerto Rico.

The Neighborhood Reinvestment Corporation was created by Congress in 1978.

Since that time, Neighborhood Reinvestment and its affiliated NeighborWorks network have continuously evolved to become increasingly effective and efficient in

leveraging significant private-sector resources for community revitalization and affordable housing. This could not have been accomplished without this subcommittee’s commitment of Federal funds. In fiscal year 2001, the NeighborWorks system

generated nearly $1.4 billion in direct investment, helping nearly 64,000 families obtain and maintain safe and affordable rental and homeownership housing.

I thank the subcommittee for supporting Neighborhood Reinvestment through the

fiscal year 2002 budget appropriation of $105 million. Neighborhood Reinvestment’s

fiscal year 2003 Budget Justification outlines proposed activities at a $105 million

budget level. This includes $10 million to further expand a groundbreaking effort

to utilize the HUD Section 8 program in support of home ownership for low-income

families.

Before I move further into the details, I would like to express my immense pride,

and my good fortune, in leading a Corporation that works to build community and

public-private cooperation as its fundamental, day-to-day business. Throughout the

Corporation and the NeighborWorks network, we feel an increased responsibility

to the concepts of positive action, purposeful change, and communitywide commitment that is so critical to our country today.

THE NEIGHBORWORKS SYSTEM

The NeighborWorks system is three-pronged

Neighborhood Reinvestment Corporation.—Is a Congressionally chartered, public

nonprofit corporation, headquartered in Washington, D.C., and staffed in nine regional offices. Neighborhood Reinvestment has five core activities:

We charter new NeighborWorks organizations through an extensive educational

and partnership-building effort, involving residents, business leaders and government representatives.

We provide funding for capital projects and operating grants to NeighborWorks

organizations, enabling them to create and build their own community-revitalization

initiatives from a solid asset base.

We provide a high degree of management and technical assistance to

NeighborWorks members and the broader community development field, in order

to expand their delivery programs and better serve their communities.

We conduct extensive reviews of NeighborWorks organizations, focusing on their

capacity to successfully manage their resources and programmatic risks. These program reviews monitor performance on an ongoing basis and serve as a platform for

providing management and technical assistance. They also unearth best practices
347

at the street level. Our goal is to increase the health, performance, productivity and

effectiveness of the entire NeighborWorks network.

We conduct national Training Institutes in major cities throughout the United

States for anyone interested in affordable housing and community revitalization,

particularly private- and public-sector practitioners and community leaders. Typically, 70 courses centered on such topics as management and leadership, community

building, community economic development, neighborhood revitalization and affordable housing are offered at each Training Institute. We conduct at least five Training Institutes each year, attracting up to 1,200 participants at each venue. We also

offer other training opportunities such as specialized resident leadership workshops

and regional trainings.

These activities individually and collectively help build the productivity and

strength of local community development organizations.

The NeighborWorks network.—Was founded by Neighborhood Reinvestment.

This network of community-based nonprofits has evolved from 34 organizations operating in about a dozen States in the 1970s to the impressive 225-member network

working today in more than 2,000 communities across the country. NeighborWorks

organizations operate in our Nation’s largest cities and in some of its smallest rural

communities. Regardless of their target communities, NeighborWorks organizations function as partnerships of local residents, lenders and other business leaders,

and local government representatives. They produce creative strategies, share best

practices, and develop flexible financing mechanisms.

Neighborhood Housing Services of America (NHSA).—Is a secondary market for

a range of investment vehicles originated by NeighborWorks organizations. It is

funded primarily by social investors that purchase loans made by NeighborWorks

organizations, thus replenishing local revolving loan funds and enabling them to finance even more homeownership, rehabilitation and multifamily housing. NHSA’s

services focus on lower-income borrowers; the median borrower income is $24,652.

Over the years, NHSA has purchased more than $461 million in loans from local

NeighborWorks organizations and their local lending partners.

The NeighborWorks system is the only coordinated effort of its type in the Nation. It is unique in that it:

—Provides a national delivery system built on locally-directed, community-based

partnerships;

—Fosters local and regional leveraging of scarce Federal resources;

—Serves as a laboratory for developing and testing creative solutions to problems

that impede affordable housing production and neighborhood revitalization;

—Sets high standards for participating in the network and maintains them

through a strenuous approval process and a comprehensive system of ongoing

performance reviews; and

—Facilitates a learning environment for benchmarking and disseminating best

practices in the field.

The system’s unique qualities pay off in increased reinvestment. Through the

guidance of the Corporation’s Board of Directors, the experience of Neighborhood

Reinvestment staff, and the willingness of NeighborWorks organizations to share

the fruits of their labors, the NeighborWorks system will, with your support, continue to strengthen communities and improve lives throughout America in the year

ahead.

STEWARDSHIP OF FEDERAL RESOURCES

As a recipient of congressional appropriations, Neighborhood Reinvestment recognizes its responsibility for proper stewardship. Neighborhood Reinvestment has an

established track record for using the resources granted to us by Congress in a productive and efficient manner. Further, Neighborhood Reinvestment extends its stewardship by maximizing the effectiveness and efficiency of the NeighborWorks network in ways that strengthen communities, transform lives and bring more of America’s families into the economic mainstream.

Neighborhood Reinvestment and the NeighborWorks network use Federal funding to attract private resources. The typical NeighborWorks organization receives

most of its funding support from private sources and fees. Private investors have

viewed the NeighborWorks network as an increasingly sound investment. In fiscal

year 2001, for every $1 appropriated to Neighborhood Reinvestment, the

NeighborWorks system generated more than $15 from private sector and other

sources, resulting in a direct investment of nearly $1.4 billion in communities served

by NeighborWorks organizations. We can achieve this level of impact because our

programs and services are highly flexible and tailored to fill credit and resource

gaps.
348

Neighborhood Reinvestment bridges the gap between public and private funding

by integrating public and private support. One critical financing vehicle that we provide to NeighborWorks organizations is equity capital, for real-estate development

and lending grants, and for local revolving loan funds. The NeighborWorks organizations, in turn, use these funds to draw private capital in a variety of ways, including:

—Equity and gap financing for home purchase loans, including down payment

and closing costs;

—Capital for property rehabilitation, micro-enterprise and small business loans;

and

—Capital costs associated with the acquisition and development of residential and

commercial real estate for long-term ownership by NeighborWorks organizations.

Locally directed revolving loan funds are essential to the network’s success. Revolving loan funds provide flexible funding for community priorities, such as homeownership, rehabilitation, multifamily housing, and commercial and economic development. Neighborhood Reinvestment Corporation supports these revolving loan

funds through technical expertise, training, and funding. NHSA aids the liquidity

of the local revolving loan funds by buying revolving loan fund loans.

Most of the funding for revolving loan funds comes from local sources—loans and

grants made by banks, insurance companies, foundations, local governments and

other local investors. Loan recipients are typically underserved families. Seventyone percent of loans made through NeighborWorks revolving loan funds are made

to very low- or low-income households, 53 percent to minority-headed households,

and 43 percent to female-headed households. Loans carry a rate and term that the

borrower can afford to pay back.

The NeighborWorks system is the only national nonprofit network with expertise in designing, originating and servicing small non-conventional loans to lowerincome families. These loans help create first-time homebuyers, often prevent mortgage delinquencies, provide money for repairs, and may ensure accessibility for

those with disabilities. Generally, the loans offered by local NeighborWorks organizations provide a blanket of security for neighborhoods of modest means. By designing loans to fill the gap between the capacity of the borrowers and the parameters

of conventional lenders, the NeighborWorks organizations complete transactions

that could not otherwise be prudently realized.

Neighborhood Reinvestment employs a grassroots-directed approach to our service

design or service delivery. We ask each NeighborWorks organization to identify

the specific challenges they face in attempting to ensure strong, safe neighborhoods

of choice. Neighborhood Reinvestment responds with a tailored and solution-oriented combination of training and technical assistance in balance with any necessary financial support, including:

—Our national Training Institutes, which provide education and practitioner-focused training, to ensure that local staff is well-equipped and informed. Last

year, more than 4,200 community development professionals and others attended the Training Institutes.

—On-site specialized technical assistance in areas such as lending, loss mitigation, resource development and marketing, community revitalization, and business planning. This on-site assistance is coordinated with and augmented by

the extensive array of formal training conducted at our Institutes and in other

trainings.

—On-going and responsive program reviews through our Risk Management Unit

that monitors the organizational and financial health of each NeighborWorks

organization. We make a site visit to each NeighborWorks organization at

least every 24–36 months.

Together, these supportive services help ensure that funding is used responsibly,

efficiently and effectively at the local level.

Over the years, Neighborhood Reinvestment has earned a reputation for helping

communities achieve their revitalization goals. I am convinced we can further improve. We have undertaken a corporate-wide strategic planning process that will

better position our organization and our network to meet the challenges of America’s communities with even greater creativity and success. Emerging goals for our

future include bringing more private investment into our neighborhoods, building

stronger community leaders and civic commitment, collaborating with new partners

and building new alliances with long-standing friends, continuing our dramatic success in creating homeownership opportunities, and assisting in the effort to create

safe, affordable, attractive housing for low- and moderate-income families.

The plan encompasses our commitment to do several things:
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—Increase the capacity of NeighborWorks organizations to help underserved

communities meet their revitalization goals;

—Expand the impact and reach of the NeighborWorks network;

—Increase private-sector resources for the work of the NeighborWorks network;

—Provide responsive, integrated, seamless and efficient customer-oriented services; and

—Be in the vanguard of the community development field.

COMMUNITY DEVELOPMENT LABORATORY

Neighborhood Reinvestment continuously looks toward the horizon, seeking new

opportunities to address persistent and emerging challenges facing America’s communities. The constant evolution of communities did not escape the notice of Congress when Neighborhood Reinvestment was chartered and directed to serve as a

laboratory for the community development field.

The flexibility of our dollars and the broad reach of the NeighborWorks network

allows the Corporation to directly tackle some of the serious issues that impact communities, as well as contribute to broader public policy discussions. Neighborhood

Reinvestment and the NeighborWorks network have played a creative, collaborative role in effecting positive community change—and we are well positioned to

continue our efforts in fiscal year 2003 and beyond.

I would like to share with you some of the successes of our laboratory environment, and how they have helped strengthen the community development field and

America’s communities.

Section 8 Homeownership.—A good example of our laboratory environment can be

seen in Neighborhood Reinvestment’s work with HUD’s new Section 8 homeownership option. With strong technical support from Neighborhood Reinvestment, local

NeighborWorks organizations have been able to serve as an efficient and effective

bridge between private lenders and public housing authorities to make homeownership a reality for qualified Section 8 recipients. This subcommittee provided the resources that seeded our effort, allowing the NeighborWorks network to provide

high-quality counseling and small second mortgages that are paid off by the Section

8 voucher.

The $5 million that you allocated in our fiscal year 2001 appropriation allowed

us to expand our efforts—from four to 21 NeighborWorks organizations. The funds

helped capitalize the revolving loan funds of these NeighborWorks organizations,

which served as a source for second mortgages. A portion of the set-aside was used

for capacity building, which helped some NeighborWorks organizations tailor their

housing counseling services to the specific needs of their Section 8 population, and

to work with public housing authorities.

Of the families assisted by NeighborWorks organizations in fiscal year 2001, 85

percent of the borrowers are single, female-headed households, and 35 percent are

very-low income. The median purchase price of the homes is $85,000.

The Administration and this subcommittee were supportive of the strides made

in fiscal year 2001; subsequently this subcommittee allocated $10 million of Neighborhood Reinvestment’s fiscal year 2002 budget to continue our work on helping

Section 8 voucher holders move into homeownership. Over $9.2 million of this allocation is going to NeighborWorks organizations as grants and we expect to announce grantees in early May. In fiscal year 2002, we expect to attract a number

of new public housing authority partners to this option, as well as assist experienced

Section 8 homeownership NeighborWorks organizations in their partnerships to

include additional public housing authorities. Through your support, Neighborhood

Reinvestment and the NeighborWorks network have become sophisticated in our

approach to this option. We have and will continue to share or successful strategies

with others in the field.

We have concentrated heavily on sharing what we have learned through our Section 8 homeownership laboratory with the broader field. We have developed a course

for the Neighborhood Reinvestment Training Institute solely on this program that

attracts many beyond the NeighborWorks network. Through the Neighborhood Reinvestment Training Institute and other training partnerships, we have conducted

over 28 outreach sessions, which educated more that 1,000 public housing authority

professionals, nonprofit staff, and lender partners. We are also coordinating our

training and information efforts with HUD and public housing trade groups. We will

continue these efforts throughout fiscal year 2002 and 2003.

The NeighborWorks system has made significant headway in establishing positive, productive relationships with public housing authorities across the country and

has made scholarships available for public housing officials to attend Section 8

courses at our Training Institutes. The strong partnerships established between
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NeighborWorks organizations and their local public housing authorities is expected to open the doors of homeownership to more than 500 families that were previously dependent on ongoing Section 8 rental subsidies. With continued support

from this subcommittee, Neighborhood Reinvestment will continue to play a leadership role in making the Section 8 homeownership option available to voucher recipients across the country.

Mixed-Income Rental Housing.—Last year, this subcommittee provided Neighbor- hood Reinvestment with a $5 million set-aside to support our work in establishing

mixed-income, multifamily rental developments and explore ways to serve families

with incomes below 30 percent of area median income. This allocation recognizes

that the challenge of affordably housing this Nation’s extremely low-income families

is complicated. We appreciate the opportunity to test a range of approaches and

eventually report our results to you.

Understanding the importance of multifamily rental housing in a comprehensive

neighborhood revitalization strategy, a group of NeighborWorks organizations

formed the NeighborWorks Multifamily Initiative in 1999. Together, these organizations own more than 30,000 rental housing units that provide attractive and affordable housing for families where renting is currently a more appropriate option

than owning. The members of the NeighborWorks Multifamily Initiative make it

their mission to provide sustainable multifamily homes, which are marked over the

long-term by:

—Affordability;

—Well-maintained and attractive physical condition;

—Access to on-site learning centers designed to support the technological and social infrastructure of educational success; and

—Ongoing economic viability.

Research by the NeighborWorks Multifamily Initiative has demonstrated that in

all markets, the fundamental economics of serving families with incomes under 40

percent of area median income requires some level of on-going subsidy. A housing

cost equal to 30 percent of this household’s income yields a rent payment that is

less than the operating expenses for their unit—leaving no funds for the payment

of debt service. Similarly, in many markets, creating new housing for those at 60

to 100 percent of area median income is equally difficult, since many existing subsidies are targeted to households with incomes below 60 percent of area median income. Nevertheless, with creativity, tenacity and resolve, the Multifamily Initiative

members are creating mixed-income properties that serve families under 30 percent

of area median income in a variety of ways. We have used the $5 million set-aside to promote mixed income properties that

dedicate a portion of their units to extremely low-income families. The elements of

this program include:

Mixed Income Property Development Grant Incentive Set-Aside. Our goal under

this component of the allocation was to promote the production of units affordable

to extremely low-income families within mixed-income properties. We have received

17 applications from NeighborWorks organizations for this allocation, totaling $6.1

million for 191 units affordable to those at or below 30 percent of the area median

income, in developments that total 1,400 units. We will select a set of demonstration

projects that serve diverse market settings and employ a variety of subsidy strategies. Awards will be finalized by the first week of June 2002.

Neighborhood Capital Corporation. The Multifamily Initiative was the catalyst for

creating the Neighborhood Capital Corporation (NCC), which provides affordable,

short-term financing to NeighborWorks organizations to acquire multifamily properties that are at risk of deterioration or of being lost as affordable units available

in a community. NeighborWorks organizations and other nonprofit developers find

the primary obstacle to purchasing a property is the lack of flexible pre-development

and acquisition financing that allows an organization to respond quickly when a

property becomes available. Neighborhood Reinvestment responded to this problem

by making an initial investment in NCC. NCC provides essential loans so that

NeighborWorks organizations can purchase multifamily properties, many of which

are preservation properties. This funding will support the production pipeline of

mixed-income properties by financing acquisition and preservation of existing properties. The Corporation expects that over the next 2 years, NCC will leverage $20

million from private sector investments.

Symposium on Mixed-Income Properties.—A symposium was conducted in April

2002 to foster dialogue among experienced practitioners from across the real estate

development, finance, and public agency arenas, including housing finance agencies

and public housing authorities. This symposium examined various real estate development models, operating strategies, existing finance tools, and the impact of State

and local policy and regulations on achieving mixed income properties that can
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house extremely low-income families. The Symposium, which attracted some of the

best minds in our field, was held on April 4, 2002 during Neighborhood Reinvestment’s recent Training Institute in Chicago.

Research Findings.—A portion of this set-aside will also allow us to prepare and

present a report on strategies and financing currently employed to develop mixedincome properties. This report will examine properties already in the

NeighborWorks portfolio and will make observations on those funded through

Neighborhood Reinvestment’s special set-aside for mixed income housing. We expect

to have a full report to share with you by the end of the year.

Advanced Training for Experienced Practitioners.—Our national Training Institutes are widely acknowledged to be at the cutting edge of training for housing and

community development practitioners. As we have monitored the capacity of the

professionals in this field, it has become apparent that there are huge benefits to

be gained from additional training and coaching of the most experienced housing

and community development practitioners. To respond to this capacity need, we are

collaborating with Harvard’s Hauser Center to develop state-of-the-art training for

seasoned leaders in an intensive learning environment. Our goal is to advance the

quality of community development leadership, analyze more thoroughly the challenges facing America’s neighborhoods, and develop even more powerful strategies

to strengthen our communities.

New Homeowners.—Perhaps our best-known laboratory effort to date is the

NeighborWorks Campaign for Home Ownership, our very successful effort to assist

families of modest means become successful long-term homeowners. In fiscal year

1998, Congress seeded our homeownership efforts with a $25 million set-aside. That

funding has helped produce remarkable results—the average income of the homebuyer is nearly half of the national average, $29,300; 95 percent are first-time buyers; 52 percent are ethnic minority buyers; and 42 percent are female buyers. Currently, we are on target to surpass our 5-year goal to create 40,000 new homebuyers.

The NeighborWorks Campaign for Home Ownership has identified a series of

well-integrated strategies to help lower income Americans become homeowners.

These strategies include comprehensive homebuyer education, Full-Cycle LendingSM, NeighborWorks HomeOwnership Centers, and an emerging financial literacy pilot. We are currently planning for the next 5 years of the Campaign, and

I know we will continue to strive to help lower-income Americans successfully

achieve the American dream.

SOLUTIONS TO A RANGE OF CHALLENGES

No ‘‘one size fits all’’ approach can match the wide range of economic markets,

housing stock, and employment challenges experienced in this Nation’s urban, suburban and rural communities. Older rural communities vary significantly from firstring suburbs, which differ distinctly from Native American lands.

The flexibility that you have allowed us in designing strategies and targeting our

resources has given us the ability to devise extraordinarily successful tools and

strategies, as well as build a network of strong and diverse local community development organizations. The power and impact of our grants are directly attributable

to their flexibility. We are in the business of helping develop a network of strong

nonprofit organizations that can respond to vulnerable neighborhoods in a changing

environment. Underserved populations need to be connected—to private markets,

mainstream lenders, and conventional products. Since its inception, Neighborhood

Reinvestment has always been about addressing the needs of underserved communities and populations. This focus has allowed the Corporation and its affiliated

NeighborWorks organizations to develop a particular sensitivity and approach to

the specialized needs of low-income families, immigrants, minorities, the disabled,

and the elderly. Serving the needs of these populations requires more than grants.

We are committed to building strong organizations, led by strong community leaders. We are especially committed to developing local resident leaders because we believe greater civic involvement helps effectuate positive change in communities.

Resident leadership development continues to be a core value in the

NeighborWorks network’s approach to community revitalization. To respond to a

need for enhanced resident leadership development, we sponsor regional Community

Leadership Institutes. These programs enable resident leaders to share their experiences, hone their leadership skills and bring innovative ideas back to their communities. This reflects the Corporation’s conviction that while new homeowners, improved housing and increased investment are essential to revitalization, the most

essential ingredient for long-term success is informed, effective and motivated resident leaders.
352

To examine the strategies and best practices of outcome-based community organizing, the NeighborWorks network has recently developed a community organizing pilot. Twenty NeighborWorks organizations have developed action plans

and will be documenting their progress toward their goals. Over the next year, this

pilot will develop best practices as well as produce a framework for evaluation of

community organizing. Our increased focus on the needs of rural communities is an

example of Neighborhood Reinvestment’s commitment to diverse communities. In

1990, three NeighborWorks affiliates identified their primary service areas as

rural communities. By fiscal year 2001, that number had grown to 59 organizations,

which is 27 percent of the total number of organizations in the NeighborWorks

network. The network has proven its efficiency in addressing housing needs in rural

communities, particularly through our partnership with a peer organization, RNA

Community Builders. With seed funding from Neighborhood Reinvestment and the

Northwest Area Foundation, rural NeighborWorks organizations have transformed

this peer-to-peer membership organization into a shared revolving loan fund that

provides bridge financing for local housing or economic development projects at

below-market rates.

Last year, we worked closely with our rural members to deliver a week-long sequence of courses at our Training Institute specifically focused on the unique barriers to community development in rural areas. While the challenges in rural, suburban and urban settings are, in many instances, similar, the means to effectively

address them are often very different. We are engaged in a similar effort to design

courses that address the very acute barriers to creating homeownership and economic development opportunities for Native Americans.

In fiscal year 2000, more than 50 NeighborWorks organizations provided housing for non-elderly persons with disabilities, assisting more than 800 families. More

than 45 organizations provided housing services for the elderly, benefiting more

than 3,300 households. And as the needs in these communities grow, our capacity

to serve them responds in tandem.

As you can see by the vast network of services that Neighborhood Reinvestment

provides—either directly or through integrated channels and partnerships—we are

committed to building strong communities. The needs of underserved communities

are as diverse as the Nation itself. Therefore, our approach to revitalization must

reflect those diverse needs.

CONCLUSION

For fiscal year 2003, we are requesting an appropriation of $105 million, which

includes $10 million to further Neighborhood Reinvestment’s and the network’s pioneering efforts in using Section 8 vouchers to purchase a home. At this funding

level, Neighborhood Reinvestment will be able to maintain its current level of services to the NeighborWorks network and produce modest increases to the outputs

and measures.

A $105 million appropriation will assist the NeighborWorks network to:

—Leverage nearly $1.6 billion in direct total investment in distressed rural, suburban and urban communities;

—Assist more than 71,000 families obtain and maintain safe and affordable rental

and homeownership housing;

—Provide pre- and post-purchase homeownership counseling and financial literacy

training to nearly 70,000 families, including many potential Section 8 buyers;

and

—Continue to educate the public housing industry and potential partners on the

homeownership option.

To support and expand these significant accomplishments, the Neighborhood Reinvestment Corporation and NHSA expect to:

—Add 12 new organizations to the network, increasing the NeighborWorks network to 245 organizations serving 2,200 communities;

—Conduct 240 reviews of member organizations;

—Provide over 190,000 training contact hours to community development leaders

and practitioners, not only through the Neighborhood Reinvestment Training

Institute but also through local and district training opportunities; and

—Purchase $60 million in loans from NeighborWorks organizations.

Let me close by thanking the subcommittee for the wonderful opportunity you

have given Neighborhood Reinvestment and the NeighborWorks network to serve

America’s communities, and by asking for your continued support. Because Neighborhood Reinvestment is efficient in the services it provides, communities and residents benefit. Because our systems continually evolve to address ever-changing

needs, communities and residents benefit. And because the communities and resi-
353

dents are many in number and need, we are continually aware of ground-level challenges across this great Nation.

With your assistance, we will continue to strengthen underserved communities

and populations across this country. You have encouraged us to be flexible, creative,

nimble and responsive in designing and delivering our services and resources, and

this flexibility and your demonstrated confidence in us has created remarkable results. In addition to transforming lives and neighborhoods in incredibly diverse settings, the NeighborWorks network now serves as an increasingly effective laboratory for testing new ideas and solutions to new and long-standing problems. We

know that your investment in Neighborhood Reinvestment is an investment and expression of confidence in America’s communities. And all of America benefits when

its communities are healthy, strong and safe.

Neighborhood Reinvestment Corporation is committed to building healthy, strong

and safe communities all across America. Your continued support is vital to us in

accomplishing this goal.
(354)

DEPARTMENT OF THE TREASURY

COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND

STATEMENT OF TONY T. BROWN, DIRECTOR

Senator MIKULSKI. We want to welcome for his first time Mr.

Tony Brown, who began his tenure at CDFI in August. Prior to

that, he was a senior vice-president for Bank of America in Jacksonville, Florida. And he is a graduate of Xavier University in Ohio

with a master’s in business, with a specialty in finance and a degree in international affairs in business. So he comes with a very

strong background, educational background, in the area of finance,

as well as considerable private sector experience, particularly in

the field of banking.

And we do know that Bank of America is one of the real recognized banks in reaching out, in fulfilling its obligation on the Community Reinvestment Act.

So you come with a lot of experience. And we really do need it.

So we welcome you for your first time. We look forward to getting

better acquainted with you. And this is a good way to do it. So we

ask you to please proceed.

Mr. BROWN. Thank you, Madam Chair, Senator Bond, and members of the subcommittee. I thank you for the opportunity to testify

before you today on behalf of the Department of Treasury’s CDFI

Fund and in support of the President’s fiscal year 2003 budget. I

do apologize. We did not submit a formal oral statement. I do request respectfully that the written testimony be included for the

record. And I will keep my remarks brief.

As Chairwoman Mikulski indicated, I come to the government

with 20 years’ prior banking experience and with over a decade of

community development experience. Community development has

been a career. Community development is a passion. And I thank

the President and Secretary O’Neill for the opportunity to be part

of the CDFI team. And I know, and I have witnessed firsthand, the

remarkable work of CDFIs and the value of community development lending and investment services in improving our low income

communities.

And so when the Secretary asked us to find ways to help show

how CDFIs improve and have impact in our Nation’s low income

communities, I knew, I know, from firsthand experience that that

would be an easy undertaking from the standpoint of the things I

have witnessed firsthand. And I will share some of those with you

as I speak.

As you know, the CDFI Fund is a wholly owned government corporation within Treasury that promotes access to capital and local

economic growth in distressed communities and with under-served

populations through community development finance. And it is
355

that statement, community development finance, that I think best

highlights what the value of the fund is and what we do.

CDFIs support and provide loans and investments in financial

services to improve the economic vitality of our low income communities. And they do it in ways that are more flexible and innovative

than regulated financial institutions. To date, we have certified 565

CDFIs covering all 50 States. These CDFIs provide a wide range

of investment and lending activities. And I would like to just highlight a few.

Our leading fund categories are those that we categorize as housing and facility loan funds. These entities provide loans, as an example, to nonprofit housing developers to help them secure site

control or conduct due diligence. Our partnership with

NeighborWorks and NRC is an example. We have certified 66

NeighborWorks organization of 565 CDFIs. And as Ellen has indicated, they show a tremendous record of providing housing loan

funds to improve our low income communities.

Other examples in the housing and facility loan category would

include loans to nonprofit healthcare providers in order to provide

healthcare centers in low income communities. And again, the distinction is that they do it in ways that are innovative and more

flexible than our regulated financial institutions. They may take

second and third mortgage positions in order to make those facilities happen.

Our second leading category are business loan funds.

Senator MIKULSKI. What page are you working on?

Mr. BROWN. As I said, I apologize, I did not submit an oral statement. So——

Senator MIKULSKI. No, but it would helpful if you were following

in order from your written testimony. It is very informative, but it

is hard for us to follow, Mr. Brown. If you could work off the outline of your testimony, so we know at least the topic, sir.

Mr. BROWN. I will do that, then. I will speak from——

Senator MIKULSKI. Sure.

Mr. BROWN [continuing]. The written testimony.

Senator MIKULSKI. We appreciate that.

Mr. BROWN. Okay. The first two pages.

As I was explaining, on the first page of my written testimony

in talking about the CDFI Fund being a wholly owned government

corporation in that second paragraph, I am highlighting information about 565 certified CDFIs by giving you a few examples of

what they do. I just highlighted information on the housing loan

funds.

Another example of the 565 certified CDFIs, 25 percent of those

CDFIs are engaged in business loan funds. They provide financing

to low income immigrant, minority, and women populations, again

with innovative and flexible underwriting guidelines.

Our third category of the CDFIs that I have highlighted in that

second paragraph on page one are community development credit

unions. These credit unions are specialized neighborhood-based financial service centers. Many of them have been formed out of the

basement of churches and have come together as a result of faithbased initiatives.
356

The remaining category of funds are those that have been formed

by bank holding companies, those that are engaged in micro-enterprise lending, and then we have venture capital funds.

On page two of my written testimony, as I indicated, our vision

for the CDFI Fund is to become a leading vehicle and best practice

government agency for financing economic and community development activities. Our mission is to help make America a place where

all of its people have affordable access to credit, capital, and financial services. This administration is committed to shifting the fund

from merely a grants-making organization to one that addresses

the economic ills of low income communities through targeted investments and community development finance.

Also on page two, I talk about the vision of the fund for 2003 and

beyond. And in that we make mention of our New Markets Tax

Credit Program. And highlighting that is the fact that the opportunity for the fund to achieve major impact is not isolated or sporadic, when you consider that 40 percent of the Nation’s low income—40 percent of the Nation’s census tracks are low income

areas that qualify for our major programs. What that means for the

State of Missouri is that nearly half, 48 percent, of your census

tracks qualify for our major programs. And in Maryland, that number compares to the national average at about 38 percent. So I

share that information to let you know that we understand how

important the CDFI program is to you and your constituents. And

we are committed to making it a world-class organization.

Some of our successes this past year have included, as you indicated, release of the Native American Lending Study. And along

with that was the first year that we provided our Native American

CDFI Technical Assistance Program. We are quite pleased at both

products. And the fact that our NACTA Program, our Native American CDFI Technical Assistance Program, has brought in 45 applications totaling nearly $6 million in requests. And it is a program

that we are committed to and that, though our budget does not

contain a set-aside, it is included for 2003. And we do plan to issue

another NOFA related to our NACTA Program.

Also, this past year was the first year of our SECA program. This

is the investment program that we make to small and emerging

CDFIs. We are pleased to announce that we awarded over $8 million to 70 small and emerging CDFIs throughout the country.

NEW MARKETS TAX CREDIT PROGRAM

Last year we received comments on the New Markets Tax Credit

Program. This year, and within the next 30 days, we will be

issuing our Notice of Allocation Availability, which will officially

start the application process for the New Markets Tax Credit Program. And we are certainly pleased to have the opportunity to use

tax credits as an incentive to see an increase in private sector capital, a goal of $15 billion in private sector equity, flowing into low

income communities.

Now our budget does respectfully request $68 million in appropriations. This comes in recognition of tight budget concerns related to tough priorities for international and homeland securities.

We feel that the reduction in the budget will be made up through

increased private sector investments, through our New Markets
357

Tax Credit Program. We have retooled our organization, and we

think that more efficient operations with quicker disbursement

processes will also aid in providing the dollars that our communities so vastly need to work in improving their low income neighborhoods.

Senator Bond, to your question of the value of New Markets Tax

Credit relative to our other Programs, we see it as being an integral part of what we do. I often say that our strategy at the Fund

is a three-part strategy. One is the investments we make, our traditional investment programs, our Core and SECA Programs and

what we do to help our communities create specialized loan funds.

It is an important part of the strategy and one that we are committed to maintaining.

The second part of that strategy is the Bank Enterprise Award

Program. We have substantial financial institutions that are willing to leverage their balance sheet, their income statements, to

make a difference in the communities we serve. And many have

been the major investors to many of the CDFIs that have been

formed on the local level.

And then, obviously, the third part of that strategy is the New

Markets Tax Credit Program. In order to have sustaining economic

activity, we must have an increased flow of private sector dollars

into our low income communities.

PREPARED STATEMENT

So with that, I will end my opening remarks. And, again, thank

you for the opportunity to testify. And I am available to answer

any questions you may have.

[The statement follows:]

PREPARED STATEMENT OF TONY T. BROWN

INTRODUCTION

Madam Chair, Senator Bond and members of the subcommittee, I appreciate the

opportunity to testify before you today on behalf of the Department of Treasury’s

Community Development Financial Institutions (CDFI) Fund and in support of the

President’s fiscal year 2003 budget. I am Tony Brown, the new Director of the CDFI

Fund. The Secretary of the Treasury selected me as Director in August of last year.

I bring a 20-year prior experience in banking to the CDFI Fund with a decade of

service in community development where I managed the community development

program for the largest financial institution in the State of Florida. Joining me

today are Fred Cooper, Deputy Director for Policy and Programs, and Owen Jones,

Deputy Director for Management/CFO.

As you know, the CDFI Fund is a wholly owned government corporation within

the United States Department of the Treasury. The Fund promotes access to capital

and local economic growth by directly investing in and supporting community development financial institutions (CDFIs) that provide loans, investments, financial

services and technical assistance to underserved people and economically distressed

communities. CDFIs are specialized financial institutions operating in market

niches that have not been adequately served by traditional financial institutions. Included in the various types of CDFIs are community development banks, credit

unions, business loan funds, housing/facilities loan funds, microenterprise loan

funds, and venture capital funds. As of February 15, 2002, the Fund has certified

565 institutions as CDFIs. These CDFIs operate in all 50 States.

Our vision for the CDFI Fund is to become a leading vehicle and the best practice

government agency for financing economic and community development activities in

low-income areas to improve the standard of living for Americans living in distressed and underserved communities. Our goal is to help make America a place

where all of its people, including those in such communities, have access to affordable credit, capital and financial services so that they too can realize the American
358

dream. We characterize fiscal year 2003 as a transition year where the Fund shifts

from an organization seen primarily as a grants-making organization to one that addresses the economic ills of low-income communities through targeted investments

and community development finance.

By so doing we will help the Department of Treasury achieve its economic mission

of a prosperous and stable America. This ambitious undertaking is explained in this

testimony.

My testimony will focus on four key areas: the performance of the CDFI Fund in

2003 and beyond; the President’s fiscal year 2003 budget; management and operations; and CDFI Fund programs.

PERFORMANCE OF THE CDFI FUND: 2003 AND BEYOND

Treasury Secretary O’Neill has challenged all employees of the Department to

make the Treasury a world-class organization. Additionally, he has instructed the

CDFI Fund to develop procedures to provide a meaningful measurement of the impact and results of taxpayer dollars awarded through CDFI Fund programs. In

order to successfully work toward the goals set by the Secretary, I have asked CDFI

Fund staff to help me establish the CDFI Fund as a leading vehicle for the delivery

of community development finance, capital and service activities within the Federal

Government as well as in the Nation, so that we have a demonstrable impact on

low-income communities. I envision the CDFI Fund becoming an ‘‘expert’’ source in

this regard.

As we reported last year, Treasury Secretary O’Neill intends that performance

measures of the CDFI Fund and all Treasury activities be more useful and relevant

to the decision-making process, and improve the timeliness and accuracy of the information systems that capture and report performance data. To move forward on

this commitment, the Secretary has called for a fundamental review within all

Treasury bureaus of what we do and why we do it, resulting in a determination of

what measures of outputs and outcomes best capture what we are trying to achieve.

This points out the need for consistent ways to evaluate the effectiveness of the various incentives for investment in low-income communities so that we have a better

understanding of what works and what does not work. The CDFI Fund is committed

to working with the Secretary in this important initiative. Our budget includes

$500,000 in additional administrative funding so that we can collect loan-level data

to report performance and impact of CDFI activities similar to the administration

of the Community Reinvestment Act and the Home Mortgage Disclosure Act.

This initiative will, I believe, enable us to measure the types of impact of our

funding that Secretary O’Neill is seeking. The CDFI Fund is working with the community development industry to build a set of performance measures and establish

a ‘‘performance matrix’’ for our awardees. This matrix will rate financial stability

and community development impact. By using financial and economic factors, we intend to assess how CDFIs improve economic conditions of communities that are underserved by traditional financial institutions.

Our plan is to use this rating system to better manage the CDFI Fund’s portfolio

of investments and to identify under performing entities and create a compliance

‘‘watch list.’’ We believe a significant investment to collect and analyze loan-level

data will enhance our ability to report impact in various forms. These initiatives

will be incorporated into the CDFI Data Project, making that industry-wide data

collection effort even more useful to the CDFI Fund and others interested in CDFIs.

Turning to the impact that CDFI Fund awardees are having in their communities,

the CDFI Fund is keenly interested in the issue of impact and how it is measured.

The Fund is on the forefront of improving data collection and reporting in the CDFI

industry and is one of the founders of the CDFI Data Project (CDP), a collaborative

effort of 13 entities—including the Ford and MacArthur Foundations and the six

major CDFI trade associations—to develop a standardized data collection system for

the CDFI industry. The goal of the CDP is to produce comprehensive, high-quality

activity and performance data on CDFIs. The CDFI Fund and other CDP participants issued their first collaborative annual survey last spring; selective results for

CDFI awardees are described below.

Measuring community development impact has been a challenge to the CDFI

Fund and the industry overall. The General Accounting Office (GAO) recognized this

in its 1998 report, entitled ‘‘CDFI Fund Needs Better Systems to Measure, Monitor,

and Evaluate Awardees’ Performance.’’ In the next 2 years, the CDFI Fund increasingly will focus on identifying additional measures of impact. For example, the Fund

has begun an initiative to collect loan-level data from CDFIs. This data will show

exactly where CDFIs are lending relative to more traditional lenders and thus give

us a better idea of the role CDFIs play in filling the gap in affordable financial serv-
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ices. The MacArthur Foundation has embraced this initiative, and the CDP has incorporated loan-level data collection as well as broader impact measurement research into its strategic plan.

Internally, the CDFI Fund is reviewing the way we collect outcome information

from our awardees. To date, each awardee’s performance goals and measures have

been tailored to their specific activities. While these measures were rich in their

uniqueness, the outcomes they measured could not be aggregated across CDFIs because they were not comparable. The CDFI Fund plans to revise its awardee performance goal and measurement system so that it produces standardized information on all CDFIs. To the extent possible, we will incorporate the CDFI Fund’s reporting requirements in the annual survey in order to minimize reporting burdens

on CDFIs and facilitate data analysis at the Fund.

Finally, the CDFI Fund is beginning to conduct peer analyses in an effort to develop industry performance benchmarks for each type of CDFI. We will use this information to ‘‘risk rate’’ our portfolio of awardees. Once it is tested and proven, we

will consider other uses such as incorporating it into our award decision-making

process. All of these efforts respond to findings and recommendations in the 1998

GAO report.

It is incumbent upon the CDFI Fund to continually improve its processes and develop a system for accurately measuring the real impact of CDFI Fund dollars in

the communities served by our customers.

PRESIDENT’S FISCAL YEAR 2003 BUDGET

The President’s fiscal year 2003 budget requests $68 million in appropriations for

the CDFI Fund. This is the same funding level as requested in last year’s Presidential budget. The Administration request should be considered in light of several

factors.

First, the proposed budget for the CDFI Fund reflects overall Federal budget priorities for increased National Security and Homeland Security.

Second, the fiscal year 2003 budget level of $68 million maintains a basic level

of funding to support CDFI Fund programs and assumes significant improvements

in how we process applications. To do this we hope to successfully streamline our

award approval and disbursement processes. We believe substantial savings in staff

time will occur through streamlined efforts. This will enable us to provide the much

needed community development capital to qualifying organizations with a quicker

disbursement of funds for those organizations who meet all program criteria at the

date of application.

Third, the enactment of the Community Renewal Tax Relief Act of 2000 will devote substantial additional resources to new incentives for investment in low-income

communities. This includes the New Markets Tax Credit (NMTC) Program, to be

administered by the CDFI Fund. The NMTC Program is a new and, we believe, an

exciting program for the CDFI Fund. The NMTCs are expected to generate $15 billion in investments in low-income communities over the next 7 years. We are working diligently to allocate credits this year and measure their impact in fiscal year

2003, or as quickly as these credits are used, as an incentive to attract equity capital. Although the allocations for NMTCs are expected to be announced in the fall

of calendar year 2002, we may not see the effect of the NMTC-leveraged equity investments in low-income communities before calendar year 2004. Obviously, the

first year of this program will be a work in progress since we have a limited sense

of the demand or actual appetite of investors for these types of tax credit allocations.

The successful implementation of the NMTC Program is one of our highest priorities. The NMTC Program offers us a unique opportunity to measure the increased

flow of private capital into low-income communities. Our resources are mobilized to

ensure a successful introduction of the NMTC Program this calendar year.

Lastly, we anticipate that approximately $30 million of the proposed fiscal year

2003 budget will be used to fund the Core and Intermediary Components of the

CDFI Program and Training Program; approximately $11 million (including the carryover from the prior year) will be made available for the Small and Emerging CDFI

Assistance (SECA) and the Native American CDFI Technical Assistance (NACTA)

Components of the CDFI Program; and $20 million will be used to fund the Bank

Enterprise Award (BEA) Program. The remainder will be used to cover the CDFI

Fund’s administrative costs, including the costs of administering the NMTC Program.

The CDFI Fund will continue to focus efforts on serving those markets, including

rural and Native American communities, that have relatively low levels of CDFI activity and inadequate access to financial services. In these areas, we will continue

to conduct workshops (both in-person and via satellite broadcasts) detailing the
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CDFI certification and funding application processes. We also expect that the SECA

Component, the NACTA Component, and the Training Program will be of particular

benefit to CDFIs and CDFIs in formation that serve these difficult markets.

MANAGEMENT AND OPERATIONS

The CDFI Fund has implemented effective financial and management controls as

verified by our independent auditors (KPMG, LLP). These controls have allowed the

CDFI Fund, for the fifth consecutive year, to receive an unqualified (clean) audit

opinion. Additionally, this marks the fourth consecutive year that the independent

auditors have identified no material weaknesses or reportable conditions. KPMG’s

opinion affirms the CDFI Fund’s Statements of Financial Position, Operations, and

Changes in Net Position and Cash Flow are fairly presented. These findings reflect

the commitment of the CDFI Fund to sustaining and improving upon its internal

controls, operating policy and procedures, and awards management.

The CDFI Fund continues to comply with the Federal Managers’ Financial Integrity Act (FMFIA) and the Federal Financial Management Improvement Act

(FFMIA). The CDFI Fund’s system of internal management, accounting and administrative controls are operating effectively.

During my 7 months as Director, I have spent a significant amount of time reviewing the internal operations at the CDFI Fund. It is my intention to make necessary changes, which will streamline and make more efficient our processes and

procedures. It is my hope that, once implemented, these changes will accomplish

four key goals. First, as mentioned above, we need to reduce the amount of time

currently required for our award processes. This includes reducing time used for application reviews, awards obligation and disbursement of funds. Second, our plan

will successfully integrate the NMTC Program within our existing operations without significantly increasing the number of new employees above fiscal year 2002 levels. Third, we need to enhance the CDFI Fund’s ability to perform research, market

and portfolio analysis to measure the availability of financial services in underserved markets and critique the financial and program performance of existing

CDFIs. Finally, I want to position the CDFI Fund to be better prepared and anticipate future responsibilities.

CDFI FUND PROGRAMS

The CDFI Fund supports its economic development mission of providing capital

to underserved persons and in underserved markets by investing in CDFIs, and by

providing incentives for mainstream financial institutions to invest in CDFIs and

increase their activities in distressed communities. In addition to three traditional

programs (the CDFI Program, the Bank Enterprise Award (BEA) Program, and the

Training Program), the CDFI Fund has introduced two new programs. We anticipate these programs will provide additional capital in the markets served by our

customers. These new programs are the New Markets Tax Credit (NMTC) Program,

described above, and the Native American CDFI Technical Assistance (NACTA)

Component of the CDFI Program.

CDFI Program

The CDFI Program provides financial assistance in the form of grants, loans, equity investments or deposits to CDFIs. Since its inception, the CDFI Fund has made

over 780 CDFI Program awards totaling $357 million. The CDFI Program is composed of three separate funding components, each attempting to reach a different

type of CDFI or market: the Core Component; the Small and Emerging CDFI Assistance (SECA) Component (formerly the Technical Assistance Component); and the

NACTA Component.

CDFIs also provide their clients with training and technical assistance that help

organizational clients to better manage community development projects and help

individual clients to improve their financial decision-making skills and increase

their options for accessing credit. This type of borrower education is the foundation

for mitigating losses in the CDFI industry overall. In fiscal year 2000, the CDFI

Fund’s awardees provided business training, financial management education, credit

counseling, and homebuyer training to 51,059 individuals and 6,298 non-profits and

other organizations.

In addition to financing activities, CDFIs are also depository institutions; 159 of

the 553 certified CDFIs are regulated financial institutions (banks, thrifts, and credit unions). In a survey completed in 2000, 21 depository awardees—primarily lowincome designated credit unions and community development banks—provided

141,440 checking and savings accounts, with $257 million on deposit for an average

of $1,815 per account. Each of these institutions has a mission of reaching low-in-
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1Source: CDFI Fund Fiscal Year 2000 Annual Survey of Core Awardees.

come and underserved populations, and some provide products specifically designed

to help low-income individuals build wealth, such as Individual Development Accounts. In all, 985 Individual Development Accounts held savings of $388,545, an

average of $395 per low-income account holder.

Finally, CDFI Fund awardees have leveraged significant additional capital. A

sample of non-depository CDFIs estimated that they were able to raise an additional

$69 million over and above the required 1:1 match due to being a CDFI Fund

awardee or certified CDFI, representing an additional $1.48 raised for every CDFI

Fund award dollar. This capital has come from banks, foundations, State and local

government, and others.1

The Core Component is directed at building the financial capacity of CDFIs by

enhancing the capital base. Awardees of the Core Component represent some of the

Nation’s largest loan funds and financial institutions. At the end of fiscal year 2000,

122 Core awardees reported $2 billion in outstanding loans and investments.

For the fiscal year 2001 funding round the CDFI Fund provided 51 Core Compo- nent awards totaling $48 million. These 51 awardees are based in 27 States. There

are now CDFI Program awardees in 49 States, the District of Columbia, Puerto Rico

and the U.S. Virgin Islands. Of these 51 awardees, 10 have multi-State or national

service areas; 38 serve rural markets.

In addition to geographic diversity, the types of CDFIs assisted and the array of

loan or investment products provided is broad: 26 provide loans for housing development or ownership; 20 have micro- or small-business loan products; five are credit

unions; three are community development bank holding companies; and two are

venture capital funds.

Entities selected for Core Component awards typically have business strategies

that support economic stabilization or building wealth in low-wealth markets. A few

examples include:

Homeward Inc. of Allison, Iowa, was formed out of a consortium of eight rural

electric cooperatives to provide loans for housing development and for economic development activities.

Home Headquarters of Syracuse, NY helps to stabilize distressed neighborhoods

and build assets in Onondaga County through home purchase financing targeted to

lower income households.

Kentucky Highlands Investment Corporation is a nonprofit business development

firm founded in 1968 to provide venture capital and debt financing to start-up and

expanding businesses. In a nine-county region of Appalachia, Kentucky Highlands,

through its financial products, has helped to create or retain 7,000 jobs. This means

that, on average, 12 percent of the households in this rural nine-county region have

a family member employed by a company that Kentucky Highlands assisted. In the

local Empowerment Zone, which is located within the nine-county region, this

CDFI’s impact is even greater: since 1994, Kentucky Highlands helped create or retain 3,086 jobs in the area that is now part of the Empowerment Zone. This translates into an average of 39.7 percent of EZ households with a family member employed by a company that Kentucky Highlands helped.

On September 24, 2001, the CDFI Fund published a Notice of Funds Availability (NOFA) announcing the availability of $36.9 million in Core Component awards for

fiscal year 2002. The application deadline was December 11, 2001; we received 136

applications, requesting a total of $198 million.

The Intermediary Component allows the CDFI Fund to invest in CDFIs through

intermediary organizations that support other CDFIs and emerging CDFIs. These

intermediary entities, which are also CDFIs, generally provide financial and technical assistance to small and growing CDFIs. Like Core awardees, Intermediary

awardees are required to obtain matching funds in comparable form and value to

the financial assistance they receive from the CDFI Fund. Since inception, the CDFI Fund has obligated awards totaling over $20 million

to 11 different intermediary institutions. Beginning with the fiscal year 2001 funding round, the Intermediary Component has been announced and evaluated as part

of the Core Component and CDFI Intermediaries now compete directly with other

Core Program applicants.

The Small and Emerging CDFI Assistance (SECA) Component was initiated in

fiscal year 2001. It replaces the Technical Assistance (TA) Component, which was

first introduced in 1998 to build the capacity of CDFIs to serve their target markets—particularly ‘‘start-up,’’ young and small institutions. Under the TA Component, the CDFI Fund directed relatively small amounts of funds—generally $50,000

or less—to CDFIs that could demonstrate significant potential for generating community development impact, but whose institutional capacity needed to be strength-
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2Distressed Community is a defined area that must have a poverty rate of at least 30 percent

and an unemployment rate that is at least 1.5 times greater than the national rate.

ened in order to fully realize this potential. Some typical uses of TA grants included:

computer system upgrades and software acquisition; developing loan underwriting

policies and procedures; evaluating current loan products and developing new ones;

and training staff. Under the SECA Component, the CDFI Fund has augmented the

range of assistance provided under the predecessor TA Component. In addition to

TA grants, eligible applicants can also request Financial Assistance, generally used

for enhancing the applicant’s lending capital, up to $150,000. Small and emerging

CDFIs generally have less than $5 million in assets and have never received Financial Assistance from the CDFI Fund. Requests for Financial Assistance must be

matched dollar-for-dollar with other non-Federal funds.

In fiscal year 2001, the Fund provided 70 SECA/TA Component awards totaling $8 million. Of the fiscal year 2001 awardees, 32 (45 percent) are start-ups. We are

pleased to report that the SECA Component has been particularly responsive to the

needs of community development credit unions: 20 (or almost 30 percent) of the fiscal year 2001 SECA awardees are credit unions. The SECA Component also has

proved to have national reach: the 70 SECA awardees are located in 26 States,

Washington, D.C., and Puerto Rico. Of these 70 awardees, about half (37) include

rural markets within their service areas.

On September 24, 2001, the CDFI Fund published a NOFA announcing the avail- ability of $5.6 million under the SECA Component for fiscal year 2002. A total of

120 applications was received, for $18 million.

SECA Component awardees are serving some of the Nation’s most economically

distressed and hardest to serve markets and are exhibiting important programmatic

innovations. The CDFI Fund’s SECA Component awards are helping to build the

organizational infrastructure to increase the flow of capital in economically distressed areas and to low-wealth populations:

The Bushwick Federal Credit Union is a recently chartered start-up serving the

economically distressed Bushwick neighborhood of Brooklyn, New York. It provides

financially literacy to a largely unbanked population. It proposes to use its award

to capitalize a micro loan product and to expand its ATM services.

Nevada Microenterprise Initiative, based in Reno, provides training and financing

to lower income entrepreneurs that lack sufficient collateral for conventional financial institutions and proposes to use the award to obtain staff training and to refine

its business plan.

Azteca Community Loan Fund of San Juan, Texas, proposes to build its capacity

to help build assets among very low-income people through development services

and loans that will increase the rate of homeownership in colonias in the south

Texas border region.

The Bank Enterprise Award (BEA) Program

The Bank Enterprise Award (BEA) Program is the principal means by which the

CDFI Fund achieves its strategic goal of expanding financial service organizations’

community development lending and investments through regulated institutions.

The BEA Program recognizes the key role played by mainstream depository institutions in promoting the growth of CDFIs and the revitalization of distressed communities.

The BEA Program provides monetary incentives for banks and thrifts to expand

investments in CDFIs and/or to increase lending, investment and service activities

in distressed communities. BEA Program awards vary in size, depending upon the

type and amount of assistance provided by the bank and the activities being funded

through the bank’s investments. In general, banks that provide equity investments

to CDFIs are likely to receive the largest awards relative to the size of their investments.

Through 2001, 577 BEA Program awards totaling over $182 million have been

provided to banks and thrifts. Banks and thrifts receiving BEA Program awards

have provided $959 million directly to CDFIs, and $2.5 billion to distressed communities 2 in the form of direct loans, investments and services.

Of the fiscal year 2001 funding round awardees, the CDFI Fund made 139 BEA

Program awards totaling $46 million. On September 24, 2001, the CDFI Fund published a NOFA announcing the availability of $16.5 million in BEA Program funds

for fiscal year 2002. The application deadline for this NOFA was November 13,

2001.

The CDFI Fund has made BEA Program awards to 386 different institutions since

1996. The average Total Assets of the 386 BEA Program awardees is just under $10

billion. BEA Program awardees range in size from $585 billion in assets to $8 mil-
363

lion. BEA Program awardees have an average Return on Assets of 1.1 percent and

average Tier One Capital of $407 million. The BEA Program award as a percentage

of Tier One Capital is less than 3 percent on average. All BEA awardees whose BEA

Program award represents more then 10 percent of Tier One Capital are certified

CDFIs.

All but two BEA Program awardees have Satisfactory or Outstanding Community

Reinvestment Act (CRA) ratings. About one-third have Outstanding CRA ratings

and about 60 percent have Satisfactory ratings. The BEA Program awardees with

Outstanding CRA ratings have an average size (in terms of assets) of $17 billion,

while awardees with Satisfactory Ratings have an average of $6 billion in Total Assets.

A few examples of BEA Program awardees include:

AmSouth Bank of Birmingham, Alabama received an award of $221,600 for pro- viding $300,000 in grants and $1.6 million in loans to ten CDFIs: Affordable Housing Resources; Community Equity Investments; Enterprise Corporation of the Delta;

Florida Community Loan Fund; Local Initiatives Support Corporation; Neighborhood Housing Services; Southern Development Bancorporation; Nashville Housing

Fund; Chattanooga Neighborhood Enterprise; Structured Employment Economic Development Corporation; and Technology 2020 Finance Corporation. The awardee is

a State chartered bank with total assets of $39 billion.

Providian National Bank of Tilton, New Hampshire, received a BEA Program

award of $1,110,000 for making a $7.5 million equity like loan to the National Community Capital Association, a certified CDFI. Providian’s investment will help fund

the first national childcare facilities fund, which will provide financial assistance to

childcare providers and thereby increase the availability of affordable childcare slots

for disadvantaged families and communities in New Hampshire and throughout the

country. The awardee is a national bank with total assets of $15 billion.

Since first participating in the BEA Program in 1996, KeyBank, a national bank

based in Cleveland, Ohio, has received a total of $2.3 million for providing over $22

million in financial support (including grant, equity-like loans, and loans) to several

CDFIs: Cascadia Revolving Loan Fund, Coastal Enterprises, Coastal Ventures Limited Partnership, Coastal Ventures II, LLC, Cincinnati Development Fund, Columbus Growth Fund, Community Capital Development, Capital District Loan Fund,

Community Preservation Corporation, Denver Neighborhood Housing Fund, The Enterprise Foundation, Funding Partners for Housing Solutions, the Housing Partnership Development Fund, Growth Finance Corporation of Oxford Hills, Housing Partner Development Fund, Impact Capital, Jubilee Community Loan Fund, Local Initiatives Support Corporation, Mutual Financial Services, NHS of Toledo, Northern

Community Investment Corporation, Progressive Neighborhood Federal Credit

Union, Rural Opportunities Enterprise, Vermont Community Development Loan

Fund, and Western Maine Finance. The awardee is a national bank with total assets of $76 billion.

The Training Program

The Training Program, begun in fiscal year 1999, is aimed at supporting the

CDFI Fund’s strategic goal of strengthening the organizational capacity and expertise of CDFIs and other Financial Service Organizations. The Training Program provides funds that support the development and delivery of training products to

CDFIs and other entities engaged in community development finance. Training is

addressed via classroom instruction, web-based distance learning, and other electronic formats. The CDFI Fund is particularly excited about providing the support

to help build the electronic teaching capacity of the CDFI industry. Through distance learning, the cost of accessing training is reduced for the CDFIs (elimination

of the time and cost of travel) and the ability of CDFIs that are either of limited

resources or of remote locations to access training is enhanced.

In fiscal year 2001, the CDFI Fund awarded contracts to four training providers

for curriculum development and the delivery of three courses: How to Do a Market

Analysis; How to Prepare Financial Projections; and How to Develop and Operate

a Community Development Lending Program. Training has already begun under

each of these courses. Through February 2002, there have been 60 offerings of the

three courses supported by the Fund. Each class usually serves up to 30 participants. Through February 2002, it is estimated that 1,200 individuals will have participated in Fund-supported training. Of the four training providers, two providers

(the National Community Capital Association and the National Federation of Community Development Credit Unions) are CDFI trade associations. Support to their

members and others is provided through advisory services, which is now enhanced

through these training products. The CDFI Fund has found these trade associations

and other contractors to be good partners in helping to build the capacity of CDFIs
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in serving their communities—they couple a deep knowledge of the circumstances

of the industry with a mission to serve.

New Markets Tax Credit (NMTC) Program

Congress enacted this program in December of 2000 to attract private sector investment in businesses located in low-income communities to improve economic conditions in such communities. Under the NMTC Program, taxpayers will be provided

a credit against Federal income taxes for qualified investments made to acquire

stock or other equity interests in designated Community Development Entities

(CDEs). In turn, substantially all of the proceeds of qualified investments must be

used by the CDE to make qualified investments in low-income communities. These

qualified low-income community investments include loans to or equity investments

in, businesses or CDEs operating in low-income communities. The credit provided

to the investor covers a 7-year period. In each of the first 3 years, the investor receives a credit totaling 5 percent of the total value of the stock or equity interest

at the time of purchase. For the final 4 years, the value of the credit is 6 percent

annually.

This calendar year, NMTCs will be allocated annually by the CDFI Fund to forprofit CDEs under a competitive application process. These CDEs in turn will pass

the credits to investors (such as banks, corporations, mutual funds, and/or individuals). To qualify for CDE designation by the Fund, an entity must be a domestic

corporation or partnership that: (1) has the primary mission of serving, or providing

investment capital for low-income communities or low income persons; and (2) maintains accountability to residents of low income communities through representation

on a governing or an advisory board.

On April 20, 2001, meeting its statutory mandate, the CDFI Fund issued Guidance relating to the certification of CDEs and the competitive allocation of NMTCs.

The Guidance was published in the Federal Register on May 1, 2001—the same day

that the IRS issued an Advanced Notice of Proposed Rule Making (ANPRM) announcing its intention to develop regulations covering all tax-related aspects of the

NMTC Program. Both the Guidance and the ANPRM requested public comments,

which were due to the Fund and IRS, respectively, on July 2, 2001. The CDFI Fund

received public comments from over 40 different organizations and trade associations.

On December 20, 2001, less than 1 year after Congress enacted the NMTC Program, the CDFI Fund released application materials enabling organizations to apply

to the Fund for designation as CDEs—effectively launching the NMTC Program.

The CDFI Fund has fully implemented rules to permit entities to becoming certified

CDEs. To date, approximately 211 organizations have been certified as CDEs or currently have CDE applications pending with the CDFI Fund.

The CDFI Fund’s objectives for the remainder of the year are to publish an NMTC

allocation application, select qualified CDEs to receive an allocation of tax credits,

and complete the awards allocation process for 2001/2002 tax credits. The CDFI

Fund expects to issue a Notice of Allocation Availability (NOAA) next month announcing the availability of tax credits supporting up to $2.5 billion worth of equity

investments in CDEs. The CDFI Fund will review applications from CDEs under

a competitive review process, with the goal of finalizing award decisions by the fall

of 2002. In this manner, investors making equity investments into eligible CDEs

would be able to claim tax credits during this calendar year.

By offering a tax credit, the NMTC Program encourages private investment in underserved communities. If investors embrace the program, it will be a significant

source of new capital that could help to stimulate new industries and entrepreneurs,

diversify the local economy, and generate new jobs in low-income communities. Our

fiscal year 2003 budget requests $2.7 million in administrative funds to operate this

program. This request accounts for 24 percent of our administrative budget.

Native American CDFI Technical Assistance (NACTA) Component

A second recent initiative at the Fund is focused on Native American communities. This initiative includes the Native American CDFI Technical Assistance

(NACTA) Component of the CDFI Program and the Native American CDFI Training

Program. The CDFI Fund’s fiscal year 2001 and 2002 appropriations bills each include a $5 million set-aside for this effort. The purpose of this initiative is to increase access to capital in Native communities. In response to the set-aside contained in the fiscal year 2001 budget, the Fund issued a Notice of Funds Availability

(NOFA) on September 24, 2001, requesting applications under the NACTA Component. Approximately $3.5 million of the $5 million set-aside will be available for this

round.
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3 Core Component awardee dollar amounts were estimated by applying the awardees’ estimated percentage of fiscal year 2000 customers located in rural areas to the awardees’ total financing closed in fiscal year 2000. BEA Program awardee dollars were estimated by applying

the awardees’ estimated percentage of total lending in rural areas to the sum of their total community development and service activities, and CDFI support activities during the BEA assessment period.

The CDFI Fund has received 46 applications for assistance under the NACTA

Component. The applications, which are currently under review, represent 21

States. A second NACTA NOFA will draw from the set-aside contained in the fiscal

year 2002 CDFI Fund appropriations. Funds will be allocated under the NACTA

Component through direct grants to Native CDFIs, Tribal organizations, and other

financial institutions and organizations serving these communities. It is anticipated

that these funds will: (i) enable financial institutions to enhance their capacity to

provide access to capital and credit to these communities; and (ii) assist such communities in establishing their own CDFIs.

Another $1.5 million of the set-aside is being used to develop a training program.

This training program will be designed to help Native American communities build

leadership skills enabling them to create and manage CDFIs.

The need for this new initiative was identified during the workshops organized

by the CDFI Fund in conjunction with the development of the Native American

Lending Study/Action Plan. This Study examines the key barriers to accessing debt

capital and equity investments in Native American communities. Numerous actions

that could be taken by Tribes, lenders, and local and national policy makers were

identified. These ranged from the adoption of the Uniform Commercial Code by

Tribal governments to the capacity-building efforts now underway at the CDFI

Fund. The final report was distributed in December 2001 to the House and Senate

Committees who hold jurisdiction over the CDFI Fund and Native American issues,

as well as to the President.

In developing this study, the CDFI Fund conducted 13 regional workshops across

the country and two roundtable meetings. The CDFI Fund also administered a national survey of 860 tribal organizations and 750 financial institutions located near

Indian reservations, Alaska Native Villages, and Native Hawaiian Communities.

The survey collected data such as barriers to accessing capital, accessibility of bank

services and products, availability of technical assistance, industrial sector financing

gaps and strength of internal tribal resources and policies. The CDFI Fund also administered an equity investment research project to assess the gap and potential opportunities for Native Americans to access this kind of investment.

Rural Community Assistance

Lastly, the fiscal year 2002 appropriations for the CDFI Fund contained report

language requesting an update on rural lending practices as part of the fiscal year

2003 budget submission. Core Component and BEA Program awardees are indeed

reaching rural areas. Of 123 surveyed Core awardees, 21 (17 percent) estimated

that 100 percent of their activities went to rural areas and an additional 15 (12 percent) estimated that 51 to 99 percent of their activities went to rural areas. Out of

160 surveyed BEA awardees, 11 (7 percent) said that 100 percent of their business

activities went to rural areas, and an additional 18 (11 percent) said that 51 to 99

percent of their business went to rural areas. Considering that 22 percent of U.S.

households reside in non-metropolitan areas, the percentage of Core awardees that

target more than half their activities to rural areas (29 percent) compares favorably,

while BEA falls slightly short at 18 percent.

The CDFIs focusing on rural areas tend to be smaller than their urban counterparts and the actual dollar amount that awardees’ lend to rural areas is proportionally less than the percent that serve rural areas. An estimated 17 percent ($351 million) of Core Component awardees’ lending and 11 percent ($161 million) of BEA

awardees’ lending went to non-metropolitan counties 3. The CDFI Fund has identified several options that may increase the flow of CDFI Program and BEA Program

awardees’ dollars to rural areas. For the BEA Program, the most significant of these

would require changes to the Fund’s authorizing statute. For example, under the

BEA Program, a ‘‘distressed area’’ must have a population of at least 4,000. Distressed areas are composed of census tracts. Many rural census tracts do not have

4,000 people, which in many cases precludes their eligibility as BEA distressed

areas. Eliminating the BEA Program population requirement for rural areas would

result in more people becoming eligible for consideration under the BEA Program.

In addition, almost all of the new NACTA Component dollars are expected to flow

to rural areas: 46 of 47 current NACTA applicants target rural areas.
366

SUMMARY

Treasury Secretary O’Neill and the Administration have set the bar high for the

expected performance from us at Treasury as well as the entire Federal Government. As you can see, I have laid out a blueprint for the CDFI Fund to enable us

to reach goals that will improve and enhance our performance and service to our

customers. These goals will hopefully provide an increased efficiency in the use of

taxpayer dollars. Our goals are numerous and in some instances, very ambitious.

It undoubtedly will require a very focused and conscientious effort by all of us at

the CDFI Fund. During my short time at the CDFI Fund, I have developed the utmost confidence in the commitment of our staff toward our customers and the communities that they serve. I am certain that we will all rise to the occasion to meet

our goals and do so in a timely and professional manner. I look forward to working

with the members of this subcommittee towards achieving these goals. Again, I

thank you for the opportunity to present my testimony in support of the President’s

2003 budget request and look forward to answering any questions you may have for

me.

Senator MIKULSKI. Well, thank you. You did very well, Mr.

Brown and Ms. Lazar.

Let us move right to the questions. And I am going to start first

with really the President’s budget. Ms. Lazar, you talked about in

your testimony what you would do with the $105 million, which,

of course, are both the goals and specific objectives that you wish

to achieve. What can you not do that you would like to do this

year?

Ms. LAZAR. We would like to do more the multi-family work. I

am cognizant of how desperately we need more rental housing opportunities in this country for low-income people. Our groups,

through our multi-family initiative, have capacity, and their capacity is growing, to explore a variety of means of developing and preserving affordable rental housing. So that is certainly a piece that

we only have limited funds to explore.

Senator MIKULSKI. And what would it take to keep that momentum going? Because one of the issues that both the Chairman and

I share is our great concern for the lack of production in the area

of rental housing for people of very modest incomes. And also, the

success in some neighborhoods means that people no longer really

want to take Section 8. We keep funding Section 8 and now there

is a backlog of unused vouchers in many of our communities, because people just will not accept them.

Do you have—so is it——

Ms. LAZAR. I have——

Senator MIKULSKI. Go ahead.

Ms. LAZAR. I have a sense that if we were to receive an additional $5 million to $10 million for multi-family housing, for the

work that we began this year, we could continue to expand that activity. I would want to make sure, before I gave you a firm number,

that that money would really be able to be——

Senator MIKULSKI. But that is generally the area of the priority

that you would like to continue to keep the momentum going——

Ms. LAZAR. Yes, absolutely.

Senator MIKULSKI [continuing]. That you have undertaken. And

I am going to come back to some of the policy questions, but I

wanted to get that on the record.

Ms. LAZAR. Sure.

Senator MIKULSKI. Mr. Brown, in your first appearance before

the community, you certainly are a good administration soldier.
367

You said 15 percent does not bother you a bit. It is going to be

made up in private sector investment. And you outlined the 3 priorities. So Secretary O’Neill, he did the right thing.

But let us go to really the CDFI and two issues that arose that

I would like to raise in both the expenditure. First of all, we want

to compliment you on focusing on internal controls. And there has

been a lot of issues in the transition over the last year.

And the second issue that you raised, though, is CDFI is now involved in funding healthcare centers. This is something the committee was not aware of. We want to hear your views. Number one,

what are you talking about? Number two, why did you get into

this? And are you being a healthcare bonding authority by proxy?

And number three, why do you think this is an appropriate role for

CDFI, because just the demands in housing, micro-enterprise, and

that venture capital that we have talked about, where you, too, are

an incubator agency?

Could you share with us this healthcare? And then I will go on

to some other questions, if my time permits.

Mr. BROWN. Senator, what I was merely doing was giving you an

example of the types of things our CDFIs do. I think that the value

of the CDFI program, and one of the things that I think is remarkable about the program is that our funds are driven based on what

the needs are in the local community.

And in the category of housing and facility funds, obviously the

major needs in our communities, low income communities, are

what we call community facilities. Examples of community facilities could be a retail shopping center that our CDFIs may fund.

Some have provided assistance to helping create charter schools.

Others in my example I gave have helped to see that there is the

availability of healthcare centers. One in particular that has demonstrated what I consider to be a world-class example is in New

York City. And we highlighted them in our last newsletter, that

they have played a leading role——

Senator MIKULSKI. Tell me what you did. And why did you do it?

Mr. BROWN. We did it because we matched the funding, because

there was a need to provide services to low, very low, income people who are in dire need of medical or healthcare services. The

money——

Senator MIKULSKI. But what did you do? Did you provide funds

for a building? Did you match funds?

Mr. BROWN. We matched funds for the financing of the building.

In several examples, the organization provided financing to a nonprofit healthcare provider who renovated a grocery store that had

left the community. So it provided the value of turning a vacant

storefront facility into a medical center for residents that were in

need of healthcare services.

Our money was matched to help that organization to continue to

provide financing for nonprofit healthcare providers, in this case in

New York City.

Senator MIKULSKI. So just to be clear, this was one initiative.

But it is not one of your core things. This is just an example of trying to be creative and respond to local community need.

Mr. BROWN. Yes.
368

Senator MIKULSKI. And where really the conversion of that grocery store into a supermarket of healthcare, if you will, I mean,

this is not like a hospital, like a Hopkins or a Mercy or a Sinai

going to get bonding authority to build a new wing.

Mr. BROWN. That is correct.

Senator MIKULSKI. This is really very small. It is almost like a

micro-enterprise healthcare. Am I correct?

Mr. BROWN. And in this example, maybe to clarify further, in the

example that I am giving in this case, the organization helped finance what I would consider a full-care medical service center in

not only providing family care, but they had an office for dentistry,

psychiatric assistance.

Senator MIKULSKI. Yes. I understand the services that would go

on. I just wanted to know what CDFI was doing.

Mr. BROWN. Yes.

Senator MIKULSKI. I have other questions that I am going to pursue on predatory lending and so on. But let me turn to my colleague for his questions.

Senator BOND. Thank you, Madam Chair.

Mr. Brown, following up on that question, there is no question

that many of our communities need accessible healthcare. As a

matter of fact, one of my major initiatives in another subcommittee

has been to, along with Senator Hollings, double the funding for

community health centers, because community health centers are

the ultimate safety net. We are trying to make sure that those are

robustly funded, that we have funds available for capital improvements.

So I do not doubt that a community needs, health centers. And

we are working hard to fill more of the gaps. But I get a little concerned when I try to figure out what your focus is. And you are getting over into other areas.

I think that we need to get a better handle on what the focus

will be. You have said that it is all part of one strategy. We are

going to be handing out grants, and we are going to be allocating

tax credits. But which do you see as the main focus? Do you need

more staff? What do you have on board? Do you have the staff that

is proficient in allocating credit? What is going to be your focus?

This is a small agency. There is a lot of work to do. To make an

impact, you have to focus and do a job well. What job are you

doing? And what is the staff you are utilizing to do it?

Mr. BROWN. And Senator, again, to clarify, our primary mission,

our core competency is to help eliminate impediments that deal

with the flow of capital, and particularly the flow of capital in low

income communities. So if the need in your community is jobs and

small business, and the flow of that capital has been an impediment to help businesses with their financing needs, then our role

at the CDFI Fund and working with your local communities is to

provide the cash by which those loans can be made to small businesses.

Senator BOND. I have another hat. I also am ranking member on

the Small Business. What is the difference between the 7A program and the micro-loan program and the small business investment company? You are in that area now.
369

Mr. BROWN. You are asking the same type of questions that Secretary O’Neill has asked. How does our mission and the mission of

the fund, relative to the Treasury, coincide with SBA, with HUD,

who does housing, NRC and their community-based——

Senator MIKULSKI. The community development block grant

money.

Mr. BROWN. All the above. But if you have been engaged in community development, you understand that you need equity, you

need bank financing, you may need the SBA. And then maybe in

some cases, that is not enough. You might need the financial assistance of your local CDFI, or the loan may have been done in a

way, as I mentioned in my opening remarks, that is more innovative and flexible than perhaps the SBA guidelines, as well as what

you may get from your local lender.

So that is in general the best way I can categorize the unique

role that our specialized, certified, community development financial institutions play. And they have created a niche, a market, in

providing the type of financing that is needed to get the types of

specialized services in low income communities.

The second part of your question relative to our budget and our

staffing needs is one that we have concentrated on here at the

fund. As I mentioned earlier, we have reorganized our staffing in

order to take on a very important program of new markets tax

credits. Our budget request includes a significant amount to help

with our performance measuring systems and our ability to collect

low level data to report on the types of loans in rural communities,

in prominent areas, et cetera, that CDFIs are doing in conjunction

with and complementary with traditional financial institutions.

We are currently undergoing our strategy plan in preparation of

our 2004 budget that, when I come to you next year, will be more

directional in terms of what we need in order to maintain compliance with the New Markets Tax Credit program, as well as other

programmatic changes we may propose at that time.

Senator BOND. Thank you very much, Mr. Brown. I am delighted

that you would come and testify before our committee. We may

have to have you testify before the full committee. It seems that

your breadth of activity is as broad as Governor Ridge. And we are

certain to have a coordinating entity like CDFI that covers the waterfront from Health and Human Services and CHCs to small business to lending.

So, Madam Chair, I am impressed.

Mr. BROWN. Senator, I would add it seems that was the vision

of the fund when it was formed. As a reminder, our advisory board

does include representatives from Commerce, HUD, SBA, Interior,

and Treasury.

Senator MIKULSKI. Mr. Brown, we are not being critical. You

have $16 million. HUD has $32 billion. And both of you are meant

really to be incubators. And I think what Senator Bond is saying

is, how do we get maximum coordination and yet not for CDFI become these other programs by proxy because of a variety of reasons. We pass no judgment on it. We just are looking for focus.

But let me go to a focus that this committee has had. And I

must, again, thank my colleague for his bipartisan support on this.

And that is the issue of predatory lending.
370

As you know, for a number of years now I have been raising the

issue of predatory lending and also on the issue of what we call in

Baltimore flipping, where someone buys a house, even a HUD

house, for a very low, flips it with just a patina of repair, sells it

to the poor at really exaggerated prices, but they think they are

paying $500 a month. And then they end up with like balloon payments at the end of 15 years of $70,000.

I would like to know from both of you what is the leadership, as

well as concrete action that you are taking to deal with the issue

of predatory lending. The committee is particularly interested in

where you are promoting home ownership. So that home ownership, when people enter into that, like the Section 8, that they can

sustain it.

So we really want to know what you are doing and your view of

the problem. What are you doing about it? And do you have the

adequate resources to really do this, because it gouges the poor. It

gouges the taxpayer.

Ms. LAZAR. I am happy to start and tell you about what we are

doing, both through the NeighborWorks organizations and what

Neighborhood Reinvestment is doing in partnership with others.

We have been very, very focused on public education, as well as

product development. And we are working on both paths to make

sure that we can address predatory lending issues.

Neighborhood Reinvestment has established a national financial

literacy pilot to promote financial literacy education for consumers

in 24 cities across the country. This work will help us establish

baseline for financial literacy training for individuals, which we

hope will give them the——

Senator MIKULSKI. What do you mean by that?

Ms. LAZAR. What I mean by that is the resources to understand

what their obligations are as a homeowner.

Senator MIKULSKI. How will this work? How will this work at

the neighborhood level?

Ms. LAZAR. At the neighborhood level, our NeighborWorks organizations have classes on a regular basis, financial literacy classes.

People sign up for them. They make a commitment to come. We

also do fairly intensive training of the trainers for those classes.

We just entered into a partnership last week with the Federal Deposit Insurance Corporation to use their Money Smart curriculum

as part of our financial literacy training.

Through our HomeOwnership Centers, we have the facilities

where there is always ongoing classes to help get people better acquainted with their——

Senator MIKULSKI. Okay. Now how does this work with your Section 8 program? Secretary Martinez has a great passion for promoting home ownership as well. And he has been really great to

work with on many of these issues. Again, how does this go to the

Section 8 program that you have.

Ms. LAZAR. Sure.

Senator MIKULSKI. And how does that work?

Ms. LAZAR. For the Section 8 program, we again bring families

into our HomeOwnership Centers for financial literacy and other

home ownership counseling services. What we have been finding is

that we have to work much more directly on a one-on-one basis
371

with the individuals who have already gotten some training

through the Family Self-Sufficiency Program, through the PHAs

that they have been working with.

So we bring them in and really get them acquainted with the

housing, housing finance, home ownership maintenance issues, the

long-term obligation——

Senator MIKULSKI. How are you different than HUD with what

they want to do on such Section 8?

Ms. LAZAR. Our home ownership campaign has developed a set

of counseling curricula that we use on a regular basis. It has been

fairly well recognized around the country as a strong basis and a

strong curriculum for bringing families into home ownership and

helping them maintain sustainability over the long term.

Senator MIKULSKI. Well, I would like to be able to come back to

that. But, Mr. Brown, could you just comment on predatory lending? Because I know you do not want to inadvertently end up underwriting it.

Mr. BROWN. Yes. Well, as you know from Treasury, addressing

predatory lending is one of Secretary O’Neill’s highest priorities. In

fact, his focus is on financial literacy, and how do we make credit

education an integral part of our education system in that regard,

as well as Assistant Secretary Bayer has been promoting a national

code of ethics in addressing a lot of the lending ills related that

could lead to predatory practices.

What we have done at CDFI has been a number of different

things. Many of our certified community development financial institutions, banks, thrifts, credit unions provide IDA type of accounts. Many of our CDFIs provide, as part of their service, credit

counseling to potential borrowers.

One particular leading example is an organization out of North

Carolina, a self-help credit union, which has been on the forefront

of addressing predatory lending practices and getting legislative

changes in North Carolina that have led to other State——

Senator MIKULSKI. We appreciate North Carolina, but what do

you at your headquarters do in terms of having an organized, systematic message out to all CDFIs on this issue of predatory lending? I know you are big on data collection. And we love that. Do

you have a watch list that you are watching trends? And are you

doing training for CDFIs and so on?

Mr. BROWN. Senator, specifically to that question, we have not

collected data specifically to how CDFIs have addressed the impact

of predatory lending. But what we have measured and recovered is

the types of loans that our organizations make to provide affordable credit to low income communities.

Examples, our bank enterprise award program provides a major

incentive for financial institutions to target their mortgage products in low income communities. And many do provide those loans

at below market rates in order to get loans to low income people

at affordable rates. The example I was going to provide with selfhelp is that one of the issues of some of the traditional financial

institutions that, as they underwrite these loans, a typical subprime loan historically has not met the underwriting or the secondary market guidelines for Fannie and Freddie. So as a result,
372

many of the CDFIs have perhaps negotiated with local banks to do

portfolio lending.

In the self-help example is that they have created a secondary

mechanism so that those banks that are doing portfolio lending, in

order to provide affordable mortgage loans to low income communities, have found a way to buy those loans and to put those loans

out in the secondary market. And I think that that is an example

of a model that we are looking at. And, in fact, we are currently

conducting a study to see if there is a way that we can create a

whole loan or a secondary market mechanism that could allow for

loans that do not meet Fannie or Freddie guidelines, as well as

other community development loans, if they can be sold in the secondary market.

Senator MIKULSKI. I have to think about this. First of all, I am

going to come back to my original point. Number one, I would encourage you at CDFI to have some type of national way of watching

the trends on predatory lending that the CDFIs might inadvertently be getting into or become aware of, because predatory lending

has the right name. It is about predators. And they look at every

opportunity to gouge. They are predators. And we have gotten lots

of programs that I find the predators have really milked, squeezed,

and so on, that then did not result in value for the poor, a different

way of life, a different opportunity.

We need you to really be watching this. So that is number one.

Number two, CDFI was meant to come into small areas where

banks or others would not have come in. And what I want you to

be very careful about what you underwrite that does not meet

other guidelines, so we do not end up with a whole set of bankruptcies on our hand or defaults. I really am going to insist on this,

because we have gone down the line of promoting home ownership.

We have gone down the line of FHA. And we have been pushing

FHA and home ownership.

And I have in Baltimore City in FHA 50 percent of the people

in default. Now something is real wrong somewhere. So before we

get into how do we underwrite and so on where there are not even

usual and customary guidelines, I just want you to be very careful

because the predators will come in. That is number one. Or number

two, the whole issue of financial literacy, which I really think could

be one of the most important areas for both of you to pursue, using

the appropriate tools available to you.

And I know this goes to the civil rights organizations are interested in it. Reverend Jackson and others have spoken to this. Financial literacy is the way to have people clean up their credit, get

ready for another opportunity, make sure that opportunity is sustainable.

But anyway, I have gone over my time. Senator Bond, why do

you not——

Senator BOND. Thank you, Madam Chair.

Ms. Lazar, to follow up on a question that the Chair asked earlier about production, what kind of experience has NRC had in producing rental housing for extremely low-income families while

maintaining the property’s long-term viability? Is it possible to

structure properties with only up-front capital so that ongoing subsidy needs are not necessary? And how much money is NRC dedi-
373

cating to the multi-family activities? And what other resources are

you using?

Ms. LAZAR. Senator, as you know, last year this committee pro- vided us with $5 million to look at the possibility of maintaining,

and creating mixed income properties that serve some families

below 30 percent of area median income. We have just received the

applications for the grants that we are going to make in June.

Some of the uses that have been proposed include reducing a property’s mortgage debt, which will then allow the property to charge

lower rents for percentage of units, rents that are affordable to extremely low-income people.

Other applicants are working with local housing authorities to

make a percentage of units available to extremely low-income holders of housing choice vouchers and using the grants to support the

additional resident services and more intensive management as appropriate to support a mixed income profile.

We are continuing to look through the applications for funding

that we received this year at a range of options to create mixed income housing. We just sponsored a symposium in Chicago a couple

of weeks ago, where we brought the best thinkers around the country to think and talk——

Senator BOND. You are still in the planning stage.

Ms. LAZAR. We are still in the planning stage on pursuing——

Senator BOND. You have not done it.

Ms. LAZAR [continuing]. The work that we had been funded for

this past year. We are working on a study that we will have probably for you later in the fall, early winter, on mixed income housing

opportunities. We are doing a wide range of activities that will help

us develop more of an educational base of what is possible.

Senator BOND. In sum, it is all planning.

Ms. LAZAR. Most of it is in the planning stage right now. We will

be getting grants out in June. And it will start going into real properties in the summer.

Senator BOND. Well, being from Missouri, I would like for you to

show me.

Ms. LAZAR. I will.

Senator BOND. Planning is great.

Ms. LAZAR. I will be glad to.

Senator BOND. Yes. Planning is fine and all that, but we want

to know not what you plan, but what you do.

Ms. LAZAR. We expect to have the grant list available in June.

We will come up and share it with you, so that you know what is

on the board.

Senator BOND. Okay. Appreciate that.

Let me turn back to an area that is very closely related to the

problems that my colleague has indicated may be existing in Baltimore. NRC and other organizations are involved in disposition of

HUD assets located in designated distressed neighborhoods called

asset control areas. Recently you conducted a review of the program. One of the studies’ major findings was that the use of other

Federal programs, such as HOME, CDBG, HUD, neighborhood initiative grants, and Hope 3, went into the ACA program.

At least from my standpoint, I do not know about anybody else

in Congress, but I never contemplated that this disposition pro-
374

gram would involve the use of other funds. We put the other funds

out there for other programs.

What has been NRC’s experience with HUD’s asset control program? Do you have any suggestions on how to improve it? And why

is there a need for other Federal subsidies? Something is amiss

here.

Ms. LAZAR. I think I could answer that question concisely. The

asset control area program has been an effective tool, particularly

for our NHS organization in Chicago, to gain back positive momentum in the Back of the Yards and the Chicago Lawn neighborhoods. There has been an increase in sub-prime and predatory

lending in that community. And there has been some very serious

resultant foreclosures.

When neighbors see rehab activities on homes that have been vacant for months or even years, they are more inclined to invest in

the upkeep of their own properties. This activity has helped preserve the values of other homes in the neighborhood rather effectively.

Now the ACA program in Chicago had some additional funding

put in it to help close the appraisal gap. When we are rehabing

houses throughout the NeighborWorks network, we want to make

sure that the rehabilitation creates a safe, sound unit that is going

to be housing for that family over the long term. What we were

finding was that the cost of the house, plus what was necessary for

the rehab costs, went beyond the appraised value of the property.

The additional funding that the NHS was able to negotiate through

Congressman Gutierrez’s office has really helped bridge that appraisal gap.

Saying that, I think if my colleague, Bruce Gotchall from the

NHS, were here, he would say that if he had gotten the house for

$1, had been able to make the necessary repairs to it and then split

the proceeds with HUD, they would have had a much more successful transaction.

Senator BOND. Yes. I think that is the 50-percent requirement.

That seems to be the real problem.

Madam Chair, if I may just ask one final question.

Senator MIKULSKI. Please keep going.

Senator BOND. I would like to hear from both of you what your

agencies are doing in rural communities and how are you working

with USDA and HUD and other Federal agencies. Let us start with

Mr. Brown. How is your rural effort?

Mr. BROWN. Our rural effort is a significant part, Senator, of

what we do. And it is important to the CDFI Fund. What we have

done in the past is we have surveyed our core recipients to get an

understanding specifically of the markets that they serve and the

types of services that they provide into our rural communities.

What we do know is that when we surveyed our core recipients

from 1996, the lending activity between 1996 and 1999, they reported that over half of their products and services were in rural

communities. And when we surveyed the banks that are participating in our bank enterprise award program, they indicated that

60 percent of their services and loans were made in rural communities.
375

1This does not include those non-metropolitan census tracts that, based on the census data

for those census tracts, do not qualify on their own but would qualify if included in a county

that qualified based on county-wide census data. (CDFI Fund regulations allow non-metropolitan counties or census tracts to qualify as Investment Areas; however, metropolitan areas may

only qualify based on census tracts).

We are putting the finishing touches on our rural findings and

survey as part of the appropriation language that was attached last

year. And we will provide you and staff a full copy of that report.

[The information follows:]

COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND ACTIVITIES: TRACKING

RURAL OUTCOMES

The conference report for the fiscal year 2002 VA, HUD, and Independent Agencies appropriations bill requested that the CDFI Fund report on its rural activities:

The Committee remains concerned about [the CDFI Fund’s] lending activities in

rural areas, especially the Fund’s use of its Bank Enterprise Award (BEA) Program.

The Committee urges [the CDFI Fund] to increase its activities in rural areas, especially in light of the abundance of Federal programs already dedicated to urban

areas. Further, CDFI is directed to include details on its rural lending activities in

its fiscal year 2003 budget justifications. These details should include the number

of CDFIs approved [for funding] in rural areas by State and the amount of funds

provided to each rural area by program activity [Core/Intermediary Component,

Small and Emerging CDFI Assistance (SECA) Component, and the Bank Enterprise

Award (BEA) Program].

Findings

Thirty-two percent ($73.5 million) of all the CDFI Program dollars awarded to the

121 1996–2000 Core Component Awardees went to CDFIs for whom a majority of

their customers are located in rural areas.

Seventeen percent of the 542 certified CDFIs (as of December 2001) are

headquartered in rural areas.

The CDFI Fund has made $62.5 million in awards (12 percent of 1996–2001 total

awards) to CDFIs and banks headquartered in rural areas.

Eligible Census Tracts

Forty-one percent of the Nation’s census tracts qualify as eligible Target Markets

under the CDFI Program’s Investment Area test.1 Of these total eligible tracts, 25

percent are defined as non-metropolitan areas (see Table 1). Large expanses of rural

areas are eligible, including most of central Appalachia, the Mississippi Delta, most

of the non-metropolitan counties along the Mexican border, and Native American

lands. Certified CDFIs provide services to a minimum of 38 percent of the Nation’s

eligible tracts, including 25 percent of eligible tracts in non-metropolitan areas. It

should be noted that these coverage figures understate the actual coverage of certified CDFIs because they include only the 355 CDFIs that designated Investment

Areas. It does not include the 187 CDFIs that designated a Low-Income Targeted

Population or an Other Targeted Population. Neither does it include the 18 CDFIs

that report a national service area. If the national service areas had been included,

the table would show 100 percent coverage in both non-metropolitan and metropolitan areas. We did not include these because we cannot validate that the national

CDFIs have had actual lending or investment activity in every eligible census tract

in the country.

The Fund recognizes the importance of tracking the precise location of CDFIs’

lending activity. Therefore, in fiscal year 2003 the Fund plans to collect detailed

loan-level data that will show which census tracts CDFIs are lending and investing

in. When the Fund has that loan level data, it will be able to report exactly how

many loans and investments CDFIs made in eligible census tracts, which resulted

from the leverage of our direct investments.

CDFI Fund Awards

The Fund can provide a more detailed analysis of rural coverage for a subset of

all awardees. These are the 121 CDFIs that received Core Component awards from

1996 through 2000. These awardees respond to a detailed annual survey, from

which this data is analyzed. As Table 2 shows, nearly one-third of all the CDFI Program dollars awarded to these 121 CDFIs went to CDFIs for whom a majority of

their customers are located in rural areas. An additional 8 percent went to CDFIs
376

for whom 25 percent to 50 percent of their customers are located in rural areas. For

a complete list of surveyed CDFIs and their locations by State, see Table 3.

The 121 Core Component Awardees report that an estimated 24 percent of their

financing went to customers in rural areas. This estimate is based on the percentage

of customers that each CDFI reported as located in rural areas and the CDFI’s financing outstanding at the end of fiscal year 2000. This estimate is the closest the

Fund can get given the data we now collect. Once loan-level data is collected, the

Fund will be able to report exactly how many loans and investments CDFIs made

in rural areas and what the total dollar amount was.

Another, less accurate, measure of rural activity is the location of the institutions’

headquarters. As Table 4 shows, 17 percent of all certified CDFIs are headquartered

in rural areas. From 1996 through 2001, 19 percent of all SECA/TA Component

award dollars went to rural-based CDFIs. 15 percent of Core Component and 4 percent of Bank Enterprise Award (BEA) Program dollars have been awarded to institutions headquartered in rural areas. However, many CDFIs that are headquartered

in urban areas provide services to rural areas and may even have rural branch offices. Table 4 does not include that data.

We cannot estimate BEA Awardee services provided to rural areas because of the

unavailability of data. The statutorily prescribed definition of ‘‘Distressed Community’’ under the BEA Program restricts award dollars to rural communities. First,

rural areas have difficulty meeting the program’s 30 percent poverty requirement

because populations in rural areas are often scattered, with Low-Income households

mixed with households of higher incomes, and have fewer concentrations of poverty

than is often found in urban areas. Second, over 40 percent of the Nation’s rural

population resides in communities with fewer than 2,500 people but located in metropolitan areas. These communities are too small to meet the BEA Program’s statutorily required population minimum of 4,000 people in metropolitan areas. Further,

in non-metropolitan counties there is a minimum population requirement of 1,000

people in a qualifying census tract. This figure also precludes otherwise qualifying

economically distressed rural areas from BEA Program eligibility.

Senator BOND. Well, we look forward to seeing that.

The other, for the NRC, Ms. Lazar, what do you——

Ms. LAZAR. We have a rural initiative, which is one of our four

major initiative programs, that has had steady growth. Fifty-nine

of our 225 NeighborWorks organizations, or 27 percent of the network, is serving rural areas. We are a resource for training and

technical assistance provider to these organizations.

We provide them with grant funding. We established an organization called RNA Community Builders, which is a national CDFI

intermediary, which is supporting the work of rural practitioners

around the country.

We are working closely with the Department of Agriculture,

through the Department of Agriculture’s 504 program. We are looking at other ways of using Agriculture’s programs in helping to deliver services to these rural communities. We do a great deal of

work through our education programs. Next week we are hosting

a conference in Oak Ridge, Tennessee, for our rural organizations,

to help them do some problem solving together. We do specialized

courses and programs of study at our training Institute. And we

have actually a very unique partnership in Montana, which is a

model for statewide activity, where we work with our organization

in Montana to increase home ownership through a statewide counseling program. We have gone from 134 home buyers in 1998 to

409 new home buyers in 2001.

As you know, Montana is a good example of great geographic distances and a very, very hard place to do community-based work.

The Great Falls NHS has done a fabulous job partnering with a variety of agencies and with a variety of players on the State and

local level to really provide services all across the State.

Senator BOND. Thank you very much, Ms. Lazar.
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Thank you.

Senator MIKULSKI. I want to support those initiatives that you

have just discussed and also my colleague’s area of questioning in

that area. My observations as a Senator, having been a city councilwoman and a congresswoman from one of the poorest areas of

our State, is that rural poverty is so different. And often, people in

rural areas do not have the resources, as I said, to technical assistance, foundations, the kinds of things that are available in a St.

Louis or a Baltimore or a Bethesda. And so we really want to encourage you on this.

I want to ask a question about faith-based engagement. Wherever I go in my State, people are saying to me, particularly institutions, where the leadership are people of color, are saying, ‘‘Senator, what is this faith-based initiative, and how can I get in on it?’’

That is one thing.

The second thing is, everywhere I go I am seeing the merging of

community development corporations, which were a very important

tool at the grassroots, but they are popping up like flowerbeds and

that they vary in capacity. And I am concerned about the issue of

capacity building, is that new people coming into new organizations, with new access to funds, without the capacity to move into

sound financial management.

My observation of community development is often it is a charismatic leader, who gets involved in solving a neighborhood problem. The people come together in a very dynamic and exciting and

wonderful, energetic way. They become a CDC. They start to get

grants. And that charismatic leader’s experience has been on

household finance, not organizational finance. And then we get into

all kinds of other issues.

Could you share with the subcommittee, because both of you are

there, what you see, number one, in your work in faith-based organizations, because these will not necessarily be the big churches.

They might be mid-sized. And for whatever we do, we want it to

work. We really want it to work and not have either homeowners

in default or CDCs in default.

As you know, Washington, D.C., has had some really bad experiences of late. And we do not want this to be throughout the country. Could you share with us that?

Ms. LAZAR. I will be glad to get started.

Senator MIKULSKI. And am I raising very real issues?

Ms. LAZAR. Oh, absolutely. I would like to invite Margo Kelly, my

deputy, to join me, because she has had a great deal of experience

with this and how we have been working with faith-based organizations over time.

When the administration came in last year and brought a lot of

focus on faith-based organizations, our first reaction was, so what

is new? Those of us working in the CDC field for many years had

had experiences with leaders, particularly through Catholic Charities and other faith-based organizations, for very many years. I

know that the earliest organizations I worked with were all an outgrowth of faith-based organizations.

Within our network, we have a number of organizations that are

rooted in faith communities. We treat them like we treat everybody

else wanting to make sure——
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Senator MIKULSKI. Well, what do you do about capacity building?

We are really talking about the African-American churches, the

Latino communities. Because the big associates, like the Catholic

Charities associations, they know how to work with agencies. They

are constitutionally compliant. But this is a new thing that the

President wants to start. And we think it is worth taking a look

at, as long as there is constitutional compliance and capacity, particularly because these are new startups.

Ms. KELLY. I began my career in this organization doing startup organizations. I know that one of the first places you go when

you are in a new community is to the churches, because that is

where the leadership is.

I think Neighborhood Reinvestment has provided four aspects of

capacity building that have worked, both with the faith-based organizations that are in our network and with our other organizations.

The first one is technical assistance. When an organization is interested in joining the network, we take a close look at their performances in six key areas that we refer to as PROMPT planning, resource development, oversight, management system, financial systems, et cetera. We help them to develop in the areas where they

are weak.

The second place we provide assistance is in training through our

national training institutes and on-site. This is another critical aspect of building capacity. We also, in conjunction with our training

and technical assistance, provide grants. In some cases with a

small organization, one of the critical needs that they have is for

financial management systems. Sometimes it is for computers,

hardware or software. Sometimes it is for training for their staff

who need to learn those systems and how to operate them.

And our fourth area, which is very critical, is an area that we

refer to as risk management or program review. This is an annual

process, where a unit that works with Clarence Snuggs, our other

deputy, spends time on-site reviewing these organization and gives

them a report card. It tells them how they are doing in these areas.

If there are serious shortcomings, we ask them to develop a corrective action plan with our assistance and to address them.

So it is a multifaceted approach. It works very well on the

ground. And I think it has kept our network quite strong.

Senator MIKULSKI. Well, that is outstanding. I am going to turn

to Mr. Brown. But does HUD do this, also?

Ms. KELLY. Madam Chair, I do not know exactly what HUD

does. I think that the training, the resources and the tools that we

use are available. Actually, our training institutes are a really good

opportunity for people to access those tools and apply them for

themselves.

Senator MIKULSKI. Thank you very much. What we like to have

is really that specific description of PROMPT. I like that. And I

think we want to also discuss this with Secretary Martinez. We do

not want the taxpayers gouged and, you know, the capacity—Mr.

Brown, and then I am going to turn to Senator Bond. This will

then conclude our testimony.

Yes?

Mr. BROWN. Senator Mikulski, building capacity and technical

assistance is the cornerstone of the CDFI program. As I mentioned
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earlier, 100 of our 550-some-odd certified community development

financial institutions are community development credit unions.

Our SECA program this past year, 20 percent of the awards were

made to community-based credit unions.

And as I stated in my opening testimony, many of the credit

unions were formed and came out of church basements. And so our

SECA program, as an example, particularly in your State, we funded the Faith Fund of Baltimore, which is a startup, multi-faith entity with a technical assistance award.

So we dedicate 20 percent of our budget to building capacity and

expertise of CDFIs. And our SECA program has been one of the

ways in which local community-based, faith-based initiatives have

been able to take advantage of our funding.

Senator MIKULSKI. Well, thank you. We could pursue this. The

little white light means that there is a vote.

But we will let this point of light ask his questions here.

Senator BOND. Well, my bulb is dimmed. And I am going to put

the rest of my questions in for the record, Madam Chair. We have

miles to go before sunset. And we have another couple things

going.

So I appreciate very much your testimony. It is two small agencies with very big responsibilities. And we appreciate your dedication to trying to bring all these things together. You certainly have

broad scopes of interest that mirror in many ways this committee.

And we thank you for your testimony and look forward to reading

your written responses to the questions we submit.

Thank you, Madam Chair.

ADDITIONAL COMMITTEE QUESTIONS

Senator MIKULSKI. I, too, will have written questions. We want

to thank you, first of all, for appearing today and the work that you

do in every way. I think we have articulated the areas that we

have concern about. But most of all, it is that American dreams

really are American dreams, whether they are an individual buying

a home or a community development corporation.

And we will be having further discussions with you. And we look

forward to working with you in this year’s appropriation.

[The following questions were not asked at the hearing, but were

submitted to the Agencies for response subsequent to the hearing:]

QUESTIONS SUBMITTED TO THE NEIGHBORHOOD REINVESTMENTS CORPORATION

QUESTIONS SUBMITTED BY SENATOR BARBARA A. MIKULSKI

PREDATORY LENDING

Question. Describe what your membership is doing to combat predatory lending?

Answer. We have been increasingly concerned with the growth of predatory lending practices. The concern focuses on protecting new homebuyers the

NeighborWorks network has assisted, but our concern also extends to the threat

predatory lending poses to entire communities and to the safety and soundness of

regulated financial institutions and its impact on their ongoing work in expanding

responsible ownership opportunities for low- and moderate-income families. We have

pursued a number of efforts to document and analyze predatory-lending practices

and create a series of strategies to combat abusive lending practices.

Financial Literacy Training

Neighborhood Reinvestment has established a national pilot program to promote

financial literacy education for consumers in 24 cities across the country using the
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FDIC’s Money Smart curriculum. The purpose of this program is to assist the

NeighborWorks network to establish a high-quality financial literacy training program for lower-income families across the Nation. In 2001, the 24 NeighborWorks

organization participating in this pilot accomplished the following:

—2,491 graduates of program;

—Average of 10 contact hours per participant (total of 27,400 contact hours);

—Average income of participants is $22,927;

—93 percent of program participants are renters;

—67 percent of participants are female;

—39 percent of participants are very-low income households;

—36 percent of participants are African-Americans; and

—21 percent of participants are Latino or Hispanic.

‘‘Don’t Borrow Trouble’’ Campaign

Neighborhood Reinvestment is participating with Freddie Mac to expand a consumer education program called ‘‘Don’t Borrow Trouble’’. With Freddie Mac’s support, the campaign has been expanded to 12 major cities to launch local campaigns

that will alert millions of Americans about the dangers of predatory lending and set

up special hotlines they can call to get advice and report problems. The innovative

campaign uses a combination of ads, billboards, Web sites, and public service announcements in English and Spanish to educate borrowers about predatory lending

practices and encourage them to call a toll-free number for referrals to local government and non-profit agencies to help them understand and resolve specific lending

problems.

NeighborWorks HELP Program

In response to an increase in predatory lending activities, Neighborhood Reinvestment Corporation has worked with Freddie Mac to develop a product that is currently being tested in 10 communities. The NeighborWorks Home Equity Loss Prevention (HELP) product offers victims of predatory lenders an opportunity to refinance out of their predatory mortgage to a reasonable and fair mortgage product,

thereby helping targeted homeowners avoid imminent foreclosure.

The product is designed to help homeowners with impaired credit and excessive

debt to refinance on affordable terms. Freddie Mac is using the HELP initiative to

buttress the ‘‘Don’t Borrow Trouble’’ ad campaign in select cities, where the HELP

program is introduced as a possible refinance program with local government participating in the marketing effort.

Through this pilot effort, Freddie Mac will purchase up to $20 million in HELP

loans, which will be originated by Wells Fargo Mortgage Corporation and insured

by Mortgage Guaranty Insurance Corporation of Milwaukee and PMI Mortgage Insurance Company. The NeighborWorks HELP loan is a fixed-rate, 30-year market

rate mortgage.

As part of the refinancing, homeowners will obtain intensive and personalized financial counseling and may use up to 10 percent or $10,000 of the new refinanced

mortgage—whichever is greater—for property improvements or debt consolidation,

provided borrowers meet certain requirements. Borrower debt-to-income ratio is limited to 42 percent and may go up to 50 percent provided that the borrower’s overall

monthly payments after the debt consolidation are less than before the refinance.

Research and Education

Neighborhood Reinvestment has funded and participated in research studies of

the growth of subprime lending and foreclosures in several cities and regions. The

studies have been conducted in Atlanta, Chicago, Boston and Connecticut. Abt Associates, the research firm that conducted some of these studies, has done follow-up

research and analyses with HUD on the impact of subprime lending in Baltimore,

Atlanta, Chicago and Boston.

Neighborhood Reinvestment also conducted a symposium—‘‘Tools and Tactics to

Combat Predatory Lending: A Practitioners’ Forum.’’ Major speakers represented

Fannie Mae, Freddie Mac, Atlanta Legal Aid Society, Center for Community SelfHelp and the Office of Thrift Supervision. Workshops presented a range of cuttingedge tools on prevention, education, analysis and intervention. More than 200 community-development practitioners attended.

Neighborhood Reinvestment and the Joint Center for Housing Studies of Harvard

University together published a research paper, ‘‘Understanding Predatory Lending:

Moving Toward a Common Definition and Workable Solutions,’’ that explored the

range of predatory-lending practices and proposed three potential regulatory and

legislative solutions.
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Post-Purchase Services

Counseling prospective buyers and following up new homeowners with post-purchase education are key elements of the proven system for promoting affordable

home ownership that local NeighborWorks organizations pursue, in partnership

with residents, local business and government. Post-purchase services build the capacity of new homebuyers, strengthen the neighborhoods they move into, and reinforce the effectiveness of their local NeighborWorks organizations.

In Chicago, for instance, Neighborhood Housing Services of Chicago has initiated

a comprehensive neighborhood stabilization program that fights predatory lending

and its almost-inevitable consequence, foreclosure. The Neighborhood OwnershipRecovery Mortgage-Assistance Loan (NORMAL) program is a partnership among

lenders, the city and Neighborhood Housing Services of Chicago. One main goal is

to create a loan fund to refinance qualified borrowers who have been victims of

predatory-lending practices.

Question. What success has Neighborhood Reinvestment Corporation had in its

collaboration with Freddie Mac? How many loans have you restructured? Is the program replicable on a national scale?

Answer. The HELP program is an aggressive, innovative mortgage product that

can provide relief to those who have been victimized or are vulnerable to the practice of predatory lending. It is the first national program that incorporates the assistance of the secondary market to combat predatory lending.

In order to restructure loans, a lender partner had to be identified at a national

level; after a concerted search, Wells Fargo Mortgage Corporation was selected as

the loan originator nationally. All partners recognized that this was a

groundbreaking effort—one that would include changing systems, and labor-intensive counseling that could last up to a year.

The customer service system is currently being refined, and the pipeline homebuyers in need of refinancing is being built. Under HELP, 225 homeowners have

received credit counseling and foreclosure intervention services. Unfortunately, the

number of owners that have closed on a HELP loan is negligible. We continue to

work with Wells Fargo and Freddie Mac on customer service, and NeighborWorks

organizations on technical assistance and best practices. We are hopeful that HELP

will provide an appropriate route for victims of predatory lenders in keeping their

homes, and it will be readily replicable nationally; however, at this time, we continue to work with our partners in refining the product.

Question. Are you developing any training materials on predatory lending, or putting together a report for use in other communities?

Answer. Since 1999, a total of 184 practitioners have completed a special course

offered at our national Training Institutes on preventing predatory lending called

‘‘Helping Homeowners Avoid Delinquency and Predatory Lenders.’’ This two-day

course covers:

—Delinquency prevention and financial trends;

—Debt warning signs for homeowners;

—Outreach and programs for debt management;

—Post-purchase delinquency and debt management counseling;

—Recognizing lending abuses; and

—Strategies for success.

Additionally, over the past year we have been working with a number of

NeighborWorks organizations to assess their ability to act as mortgage brokers in

their communities. Many of these organizations are pursuing this activity as a way

to prevent further predatory lending from occurring in their markets. The

‘‘NeighborWorks Network Mortgage Broker Handbook’’ publication details a range

of issues that organizations should consider prior to launching a mortgage brokerage. In particular, the Handbook contains two assessment tools that help organization measure the feasibility of assuming the broker role.

The broker feasibility tool was created to assist NeighborWorks organizations

with initial planning activities for an in-house mortgage brokerage. The feasibility

tool uses a series of questions to help network members evaluate issues related to

the mortgage operation. The resolution of these questions provides the organization

with a framework to pursue the mortgage broker activity, or the justification to decline it.

We developed the broker production tool to assess the financial benefits of developing an in-house mortgage brokerage. The production tool projects income, expenses, and production for a 24-month period. It is meant to provide nonprofit organizations with projections that supplement the decision-making process.
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AFFILIATION OF NEIGHBORWORKS ORGANIZATIONS

Question. Explain the process, step-by-step, that Neighborhood Reinvestment Corporation uses to make a non-profit a part of the NeighborWorks network?

Answer. Interested organizations must apply to Neighborhood Reinvestment for

membership. Since the application process is a competitive and membership is extended to a limited number of organizations every year, meeting all national criteria

and district priorities does not automatically guarantee an organization will be extended the opportunity for membership in the network.

The national threshold criteria for membership include:

—The organization must be a partnership of residents, the private sector, and the

public sector;

—The organization must be resident led;

—The organization must engage in community revitalization and housing production;

—The organization must have garnered broad support in the community;

—Potential affiliates must have the organizational capacity to accomplish the mission, strong financial support from local sources, and a high quality financial

management and internal operating systems.

Neighborhood Reinvestment reaches under-served communities and populations

by bringing organizations into the NeighborWorks network. In all cases applicant

organizations must have a clear understanding of the expectations and benefits of

membership and have a demonstrated enthusiasm for becoming an active network

member.

The average length of time from submission of application to charter eligibility

is 12 to 18 months. The length of time does vary depending on the scope of development work that an organization must do to comply with all of the chartering requirements. The length of time is also dependent on the capacity—staff and resources—of Neighborhood Reinvestment to work with the organization throughout

the process.

Once interested organizations have submitted an application, the review process

for membership in the NeighborWorks network begins with a careful evaluation

and screening of all applications. At present, the current growth strategy for the

NeighborWorks network is focusing priority attention on:

—States and cities with populations over 500,000 where we have no current presence,

—Sites that are significantly underserved in terms of community development efforts and resources,

—A blend of organizations representing single and multi-family producers who

work within the context of neighborhood or community revitalization,

—Sites where the specific needs identified are a good match for the specific resources we currently offer, and

—A geographic mix that represents rural, small city, large city and suburban

sites.

A select group of applicant organizations that meet specific membership criteria

and are considered to be competitive for membership participate in a rigorous review and assessment process. The assessment process may include an initial site

visit, a detailed field assessment, and an analysis by Neighborhood Reinvestment.

Requirements of NeighborWorks membership include an unqualified annual

audit and compliance with a variety of other operating standards that we regularly

review. We are the only network of community development organizations that has

implemented a series of formal conditions and standards of operations as a prerequisite for membership. Any NeighborWorks organization that wishes to benefit

from the Corporation’s resources must subscribe and continue to meet these conditions and standards.

CAPACITY BUILDING

Question. How do you increase the capacity of non-profits?

Answer. Neighborhood Reinvestment Corporation engages in five key activities

specific to increasing the capacity of NeighborWorks organizations:

We charter new NeighborWorks organizations through an extensive educational

and partnership-building effort, involving residents, business leaders and government representatives.

We provide funding for capital projects and operating grants to NeighborWorks

organizations, enabling them to create and build their own community-revitalization

initiatives from a solid asset base.
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We provide a high degree of management and technical assistance to

NeighborWorks members and the broader community development field, in order

to expand their delivery programs and better serve their communities.

We conduct extensive reviews of NeighborWorks organizations, focusing on their

capacity to successfully manage their resources and programmatic risks. These program reviews monitor performance on an ongoing basis and serve as a platform for

providing management and technical assistance. They also unearth best practices

at the street level. Our goal is to increase the health, performance, productivity and

effectiveness of the entire NeighborWorks network.

We conduct national Training Institutes in major cities throughout the United

States for anyone interested in affordable housing and community revitalization,

particularly private- and public-sector practitioners and community leaders. Typically, 70 courses centered on such topics as management and leadership, community

building, community economic development, neighborhood revitalization, home ownership and community lending and affordable housing are offered at each Training

Institute. We conduct up to five Training Institutes each year, attracting up to 1,200

participants at each venue. We also offer other training opportunities such as specialized resident leadership workshops and regional trainings.

We are undertaking advanced training to build capacity of the most seasoned

practitioners for the future. We have accepted 45 executive directors into an Achieving Excellence program, which includes coursework at Harvard that is specifically

focused on community development and application of that learning when those directors return to their communities.

These activities individually and collectively help build the productivity and

strength of local community development organizations.

Neighborhood Reinvestment also increases organizational capacity by bridging the

gap between public and private funding through integrating public and private support. One critical financing vehicle that we provide to NeighborWorks organizations is equity capital, for real estate development and lending grants, and for local

revolving loan funds. The NeighborWorks organizations, in turn, use these funds

to draw private capital in a variety of ways, including:

—Equity and gap financing for home purchase loans, including down payment

and closing costs;

—Capital for property rehabilitation, micro-enterprise and small business loans;

and

—Capital costs associated with the acquisition and development of residential and

commercial real estate for long-term ownership by NeighborWorks organizations.

Locally directed revolving loan funds are essential to each organization’s and the

collective network’s success. Revolving loan funds provide flexible funding for community priorities, such as homeownership, rehabilitation, multifamily housing, and

commercial and economic development. Neighborhood Reinvestment Corporation

supports these revolving loan funds through technical expertise, training, and funding. Neighborhood Housing Services of America aids the liquidity of the local revolving loan funds by buying revolving loan fund loans. With this increased loan fund

capability, NeighborWorks organizations experience a tremendous surge in their

capacity, and the increase is ultimately felt at the community level.

Network capacity is further enhanced through the flexibility that you have allowed us in designing strategies and targeting our resources. This has given us the

ability to devise extraordinarily successful tools and strategies, as well as build a

network of strong and diverse local community development organizations. The

power and impact of our grants are directly attributable to their flexibility.

Question. What is your strategy for working with members who are having problems?

Answer. We manage risk through our standing Risk Analysis Committee, which

meets quarterly to review NeighborWorks members classified as ‘‘vulnerable.’’ The

Risk Analysis Committee examines the results of data collection and analysis, onand off-site program reviews and the ongoing technical assistance and capacity

building efforts of Neighborhood Reinvestment. The Risk Analysis Committee reviews thoroughly all data on targeted organizations and maintains an approved risk

ranking system.

Based on an on-site review, organizations failing to meet performance standards

in any of the eight PROMPTSM dimensions will receive a request for ‘‘corrective actions.’’ We require organizations to file a corrective action plan; Neighborhood Reinvestment’s technical assistance and grants will be targeted toward resolving the

conditions underlying the organization’s vulnerability. Neighborhood Reinvestment

staff then ascertain whether corrective action has been taken and whether a recommendation can be made to the Risk Analysis Committee for a stable or exem-
384

plary ranking. We also provide many other forms of technical assistance to build

capacity in organizations. This may be in the areas of financial management and

accounting, fund-raising and marketing, funding, partnership building and the development of resident leaders. Staff may also work with an organization’s partners

to explore mergers with other community development organizations in their community. The Corporation also provides scholarships to staff and board members of

NeighborWorks organizations to participate in the Neighborhood Reinvestment

Training Institute.

Ultimately, the responsibility for the continued viability and successful management of risk in an environment of growth lies with the skills and commitment of

an organization’s board and staff. Neighborhood Reinvestment provides strategic

funding and assistance for organizations to pursue strategies in preserving affordable housing and revitalizing communities.

BOARD OF DIRECTORS

Question. Do you train the boards of these non-profits? How? Why is this important?

Answer. Each of our nine districts has at least one staff member whose expertise

is in organizational development, including training and orientation of nonprofit

boards of directors. As community development organizations have become more

complex, we find that to maintain an informed, partnership-based board with engaged resident participation is a growing challenge. However this kind of board composition—one that includes the private, public and community sectors—is a cornerstone of Neighborhood Reinvestment’s beliefs about how credible community development needs to be accomplished.

We continue to prioritize board orientation, training and leadership development

as a key area for technical assistance. While our national Training Institutes provide an outstanding venue for training, it is difficult for many board members to

devote time during the week, out of town, to take advantage of the courses available. Presently we are seeking new ways to provide training to board members, including designing joint trainings of several boards at the district or regional level.

In addition to helping board members understand their appropriate roles and responsibilities, we also work closely to assist them to understand and exert conscientious oversight of program operations. The check-and-balance system that can be

achieved by an informed and empowered local board of directors is irreplaceable.

While we wish we had more resources to devote to this increasingly challenging and

time-consuming effort, it is an area of endeavor that we will never abandon. We will

continue to seek new, more effective and efficient ways to use our staff skill and

resources to create positive, measurable outcomes in this area.

CERTIFICATION OF NONPROFIT ORGANIZATIONS

Question. Do you think other Federal agencies that partner with nonprofits should

be certifying them?

Answer. Neighborhood Reinvestment utilizes a process that combines both:

—A formal chartering process; and

—A methodology for monitoring the ongoing health of an organization, through

program reviews and risk evaluation procedures.

We have developed this system in order to protect the investment of the Corporation in local organizations—grants, as well as training, technical assistance—to

mitigate exposure to risk encountered by individual organizations and the

NeighborWorks network as a whole, and to increase the confidence level of other

investors in the activities of these organizations.

This process has worked well for Neighborhood Reinvestment. However, for other

Federal agencies, circumstances and capacity vary greatly. Certifying nonprofit organizations is a labor- and cost-intensive process. Therefore, the question of other

agencies’ ability and willingness to certify nonprofits would seem to depend on a

number of considerations, including issues such as:

—The level of funding being provided;

—The type of funding relationship—one time funding or a long-term funding arrangement; and

—The maturity of the organization receiving funding—a more mature, sophisticated organization might take less time to certify, versus an upstart, emerging

organization that might not meet certification standards, or might require slight

technical assistance to achieve those standards.

Most Federal programs, particularly those available to nonprofit organizations,

fund specific programmatic initiatives. In contrast, Neighborhood Reinvestment emphasizes underwriting the nonprofit organization through its certification process.
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With a paradigm shift, Federal agencies could embrace this model as the first step

to certifying and more efficiently funding nonprofit organizations. More specifically,

Federal agencies’ underwriting and oversight of any specific project could be commensurate with their level of funding in that project.

As an example of today’s practices, HUD provides a fairly consistent degree of underwriting and oversight for any project utilizing HUD grant funds—regardless of

whether the total project cost includes two percent of its funding from HUD, or 80

percent. In the conventional lending environment, it is commonplace for several

lenders to participate in financing a real estate project. Typically, one lender functions as a lead lender. The lead lender typically provides the highest percentage of

funding in the transaction, and the other participating lenders agree to accept the

underwriting and project oversight decisions and actions provided by the lead lender.

Similarly, Federal agencies could view their funding in specific projects as participation with other investors in the project. If another investor is providing a higher

level of funding to the project, the Federal agency should regard that investor as

the lead-lender and reduce their level of underwriting/oversight involvement accordingly—commensurate with their reduced financial exposure and risk.

To summarize, Neighborhood Reinvestment would not fund an organization without thoroughly reviewing the ability of that organizations to execute the activities

for which its seeking funding. While up-front costs would be high, if other Federal

agencies were to follow the Neighborhood Reinvestment model, the long-term benefits would include a reduced risk of fraud, waste, and abuse of Federal funds, and

a more efficient, streamlined, and user-friendly process for certified organizations

seeking Federal funds.

NEIGHBORWORKS MULTIFAMILY INITIATIVE

Question. Does Neighborhood Reinvestment Corporation’s multifamily initiative

have lessons for communities like Prince George’s County, that have dilapidating

multifamily developments because of delinquent landlords?

Answer. Members of the NeighborWorks Multifamily Initiative believe that multifamily properties should be cornerstones of community health. To achieve this end,

the property must be both capitalized and owned/operated according to principles

of ‘‘sustained excellence.’’ We believe the key markers of sustained excellence in affordable rental properties should include:

—Ongoing economic viability

—Well-maintained and attractive physical condition; and

—Resident access to learning centers for the technological and social infrastructure of educational success.

Guided by these principles, NeighborWorks organizations attempt to make units

affordable without sacrificing the long-term economic viability of the property. These

principles do not happen without a dedicated owner—one who is committed to making the property a long-term neighborhood asset, and not solely an income stream.

Often the choices made by the latter sacrifice the long-term viability in favor of

short-term gain.

The lessons of the Multifamily Initiative include:

Select owners not just properties.—The ownership of multifamily properties is critical. Property owners must be motivated to provide a long-term housing resource to

their community. Strong property owners can demonstrate successful portfolio performance over time, have a strong track record with regards to capital expenditures

on their properties, and pay close attention to management and resident selection

at their properties. These owners are beginning to be called ‘‘preservation owners’’.

They stand in stark contrast to those motivated strictly by real estate depreciation

tax shelter, who are not apt to be strong long term owners.

Capitalize properties for long term success.—We focus on what we call ‘‘sustainability’’ planning, structuring and financing properties so that they will not need future subsidies. One important principle is reserves that are adequate to cover the

property’s expected future capital replacement needs—for appliances, carpets, roofs,

and so forth. The second important principle is to be realistic about what it will

really cost to operate the property, over the long term, realizing that in some years

operating conditions may be difficult. This requires being particularly careful in our

underwriting. However, in practice, it is very tempting to under-fund properties, in

the name of producing more housing right now.

Services can be an important enhancement.—Depending on the target market,

services such as employment training, after school academic support, or financial literacy and homeownership preparation can go a long way to building a resident base

as committed to the neighborhood as homeowners.
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Use restrictions can protect the public sector investment.—As cities, counties or

States invest tax credits, HOME or CDBG, the use restrictions and liens that are

established can establish important long term oversight in the hands of the public

sector investor. In addition to long term affordability restrictions, periodic property

inspections, crime reviews, and occupancy compliance reviews can be required as

part of the public investment and can help ensure that the community is getting

what it was investing to obtain.

The price of better housing is somewhat deeper equity subsidies.—To achieve this

type of sustainable housing and long-term ‘‘preservation owners’’, public funders

may need to fund properties so that less mortgage debt is needed. This will mean

the units produced are far more desirable, and are designed, overseen, owned and

operated to provide a cornerstone housing resource in the community.

Question. Can you share the results of the fiscal year 2002 mixed income demonstration program? What have you learned?

Answer. We would like to thank you again for the additional $5 million to fund

the demonstration program in mixed-income housing that will serve extremely lowincome households. We issued our request for grant proposals in February, and

funded 14 proposals to produce 1,364 units, 120 of which would be affordable to extremely low-income families. A full analysis of the ‘‘lessons learned’’ that can be obtained from our demonstration applications will be completed by the end of June.

We also sponsored a national symposium on mixed income rental developments

in April. This symposium included nationally recognized and respected participants

from the various parties needed to develop and maintain high-quality, affordable

rental properties—from State housing finance agencies, to nonprofit, for-profit and

PHA owners and developers, to lenders. Participants explored how to develop and

sustain these properties in five different market environments. Each market environment had its own advantages and challenges. We came away from the symposium with a healthy respect for the high level of flexibility that is needed to make

mixed-income communities work across our very diverse country. A primary theme

that emerged was that mixed income neighborhoods ‘‘trump’’ mixed-income properties—implying that if the neighborhood has a strong income mix, then the property itself might bring (or preserve) a more deeply skewed income mix (more lowerincome residents) and still produce a very healthy property and community. In other

words, there is no one ‘‘right income mix’’ to attain the benefits of mixed-income and

sustainability. Participants also identified a number of areas in which existing programs do not promote mixed-income properties as we would want. Our research will

yield a paper later this summer on the leading barriers to the development of mixed

income housing.

The initial feedback on the applicants is that, as we hoped, the grant applicants

want to pursue a wide variety of approaches.

Some applicants propose to use the grant to reduce a property’s mortgage debt,

thereby allowing the property to charge lower rents for a percentage of the units—

rents that are affordable to extremely low-income households.

Other applicants are working with the local Housing Authority to make a percentage of units available to extremely low-income holders of Housing Choice Vouchers,

and using the grant funds to support additional resident services and more intensive management, as appropriate to support a mixed-income resident profile. Using

Housing Choice Vouchers seems particularly useful in areas in which the Housing

Authority reports a shortage of units available to voucher holders.

One applicant is seeking to extend the income range upwards as well as downwards—to incorporate additional higher-income households as well as additional extremely low-income households, to provide for both a healthier income mix, and create a cross-subsidy aimed at reducing the housing cost burden of the extremely lowincome families.

Applicants have identified a variety of management and operations innovations,

to provide the more intensive management that mixed-income communities often require. We are very excited about putting this money to work to serve extremely lowincome households, and about using the demonstration grants to learn more about

what it takes to develop and sustain successful mixed-income communities in a diverse range of communities.

Question. Will the lessons learned in the mixed-income demo be applicable to

HOPE VI developments?

Answer. We believe most of the lessons learned from the $5 million demonstration

will have broad application, including to projects such as HOPE VI.
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AGING

Question. What sort of strategies are your members using to address the needs

of our aging population?

Answer. NeighborWorks organizations plan, develop and execute programs

based on the needs of local populations. Their work involves people from all backgrounds, genders, ages and abilities. The NeighborWorks network is primarily

‘‘place-based’’, rather than ‘‘population-based’’; in other words, Neighborhood Reinvestment does not typically seek particular populations such as the elderly or the

disabled. The focus for our attention and resources is on strengthening

communities— and most of the communities served by our network include the elderly and the disabled. While working with the aging or with disabled populations

may not be a planned initiative, NeighborWorks organizations routinely provide

rehabilitation counseling, work write-ups and loans to elderly homeowners on fixed

incomes and to disabled homeowners who are seeking to make their units more accessible.

Other than when required by Federal or State eligibility standards,

NeighborWorks organizations respect the privacy of customers and do not require

applicants to disclose physical disability as a condition of service. Because of this

sensitivity, NeighborWorks organizations may be underreporting their involvement with disabled populations and the elderly. Nonetheless, we know that in 2000,

more than 30 NeighborWorks organizations provided housing for non-elderly persons with disabilities, assisting more than 1,000 families. More than 30 organizations provided housing services for the elderly, benefiting nearly 2,800 households.

Neighborhood Reinvestment provides financial resources, leadership, research and

information that benefit the aging and the disabled. Expendable and capital grants

help fund housing and support NeighborWorks organizations’ efforts to assist residents. Neighborhood Reinvestment publishes information, such as a recent paper

written in conjunction with the Joint Center on Housing, Aging and Health Care

and ‘‘Winning Strategies’’, best practices from the NeighborWorks network. The

Corporation convenes forums for discussion such as the upcoming Neighborhood Reinvestment Training Institute that will include a symposium on ‘‘Aging in Place’’.

Neighborhood Reinvestment is also exploring opportunities for collaboration with

AARP.

The following is merely a sampling of the ways that NeighborWorks organizations are assisting the elderly and persons with disabilities to meet their particular

housing needs.

Chattanooga, Tennessee

Chattanooga Neighborhood Enterprise in partnership with the Alexian Village of Tennessee has begun construction on a $4.5 million conversion of the St. Elmo Elementary school into an apartment complex for the elderly to be known as the

Alexian Court apartments. Financing the conversion of the 95-year old building is

one of the most complex deals Chattanooga Neighborhood Enterprise ever put together, which included eight sources of funds. Funding includes historic preservation and low-income tax credits, partners’ equity, grants and a mortgage. Neighborhood Reinvestment’s flexible $200,000 capital grant covering a portion of the predevelopment and development costs was critical to making the deal work. The City

of Chattanooga donated the school property (vacant since 1989) for the project, but

did not provide any tax money to the effort.

Alexian Court, future home of residents age 62 and older, will contain 47 units. Rents will range from $450 to $600. Resident income will be limited to a maximum

of 60 percent of median income. The development was planned with input from

neighborhood residents, who wanted to preserve the structures and bring back the

original look of this Victorian neighborhood. The complex is composed of two school

buildings plus eight duplex bungalows. A third building, formerly the cafeteria and

gymnasium, will become a community center for residents of the entire St. Elmo

neighborhood.

New Haven, Connecticut

The Mutual Housing Association of South Central Connecticut (MHA) is committed to developing economically, ethically and culturally diverse communities that

are accessible and affordable. This commitment adheres to the principles of equalopportunity housing, which ensures access and inclusion for people with disabilities.

MHA strives to comply with and exceed regulations set forth by the Americans with

Disabilities Act to accommodate people with disabilities at Mutual Housing properties. This is reinforced through organizational policies that include an affirmative

fair housing marketing plan and fair housing policy, an affirmative-action policy,

and an ADA notice and grievance policy that provides prompt and equitable solu-
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tions to complaints. In addition, MHA’s resident-selection process was approved by

the Connecticut Department of Housing in 1994.

MHA staff, board members and residents participate in ongoing training to keep

apprised of fair housing developments, and planning, monitoring and evaluation to

insure accessibility for people with disabilities at Mutual Housing properties. Current activities include evaluation and audit of structural design and compliance with

housing code, marketing to people with disabilities, and supporting disabled residents in securing rental assistance through Section 8. Because of coordination with

social service, church and community agencies such as the Center for Disability

Rights, and Shoreline Association for Retarded and Handicapped Citizens, MHA receives guidance in ensuring properties are accessible, marketing to people with disabilities and providing support for disabled residents.

Chicago, Illinois

Roseland Ridge Apartments is a $6.4-million, affordable-housing development in

Roseland, a neighborhood on the far South side of Chicago. Roseland Ridge provides

40 units of high-quality housing for people making less than 60 percent of the area

median ($40,750 for a family of four). The development contains one- and two-bedroom, garden-style units and two- and three-bedroom duplexes. Each unit features

such amenities as central air conditioning, washers and dryers, off-street parking,

security systems, and patios or balconies. Rents range from $525 to $665.

The development was a collaborative effort of Neighborhood Housing Services of

Chicago, government agencies, other nonprofits and business partners. The city Department of Housing provided more than $2 million in low-interest loans and

$445,270 in Federal low-income housing tax credits, which generated nearly $3 million in equity. The project received additional financing and support from Bank of

America, the Illinois Department of Commerce and Community Affairs, State Farm

Insurance, and others.

Rutland, Vermont

Rutland West Neighborhood Housing Services won a Housing Preservation Grant

from Rural Development in 2000 to rehabilitate 20 homes belonging to very low-income residents in a tri-county region. The grant proposal featured a partnership between Rutland West Neighborhood Housing Services and the Vermont Center for

Independent Living and gives immediate priority to very low-income individuals/

households with special needs. Examples of typical projects include access modifications for individuals discharged from the regional medical center and for mentally

retarded/mentally ill individuals attempting to live independently.

SECTION 8 HOMEOWNERSHIP OPTION

Question. The Administration’s 2003 request funds the Section 8 to Homeownership program at nearly 10 percent of Neighborhood Reinvestment Corporation’s

budget. Is it working? What will be achieved with the new funds?

Answer. Overall, we consider the initiative to be going very well and there continues to be great interest among the NeighborWorks network as well as public

housing authorities and lender partners.

Nationally, through the end of December 2001, HUD’s Section 8 Homeownership

Option had assisted 135 Section 8 families to purchase a home using the Section

8 homeownership option. Ninety-two of those families—representing 68 percent of

all of the Section 8 families assisted nationally—were in sites where there was assistance from a NeighborWorks organization. Nearly 1,600 Section 8 families are

in the homeownership pipeline of the 21 NeighborWorks sites, and 560 of these

families have already completed a pre-purchase counseling course. The 21 funded

NeighborWorks organizations have partnered with 27 public housing authorities

in providing this option to Section 8 families, with an additional 15

NeighborWorks/public housing authority partnerships currently under development. Certainly, the 2003 request would enable us to cast our net even further to

more communities, more public housing authorities and more Section 8 families.

We are meeting our established production goals for this initiative. We are also

collecting data on the families assisted by NeighborWorks organizations and developing best practices. Our most important work is reaching out to public housing authorities, to inform their decisions on this option and to encourage partnerships

among local public housing authorities, community-based nonprofit organizations

and lenders in implementing the homeownership option. Our experience has demonstrated that to be successful at creating sustainable homeowners through this option, such partnerships are critical.

There have been a number of challenges that we would like to share with you.
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There are limited opportunities for our NeighborWorks organizations to recapture the higher administrative and counseling costs associated with this initiative.

High-quality pre- and post-purchase counseling is important to creating successful

and sustainable homeowners. This is particularly true for families of modest means.

NeighborWorks organizations have invested substantial resources thus far in preparing a pipeline of mortgage-ready Section 8 buyers. In some markets it is taking

up to three times longer in preparing a Section 8 buyer than what we find with a

typical NeighborWorks first-time homebuyer.

Lenders have responded positively to providing the first mortgages, which are accompanied by a second mortgage provided by another source, such as a

NeighborWorks organization, and paid down by the Section 8 voucher. However,

few national lenders are positioned to manage multiple payments for mortgage—

e.g., one from the public housing authority and one from the family. Loan servicing

is more complicated—and therefore more costly—with two payments for one mortgage, which poses a challenge for most conventional lenders.

Knowing the growing expertise among selected NeighborWorks organizations,

public housing authorities have approached NeighborWorks organizations for assistance in developing and implementing a Section 8 homeownership option. Neighborhood Reinvestment is challenged to help NeighborWorks organizations address

these exciting opportunities and expand where appropriate.

We feel it is important that we share the learning of the funded sites with other

interested NeighborWorks organizations and the broader community development

field. We developed a course offered at the Neighborhood Reinvestment Training Institute on the homeownership option. Further, we distribute best practices on this

option.

QUESTIONS SUBMITTED BY SENATOR CHRISTOPHER S. BOND

MULTIFAMILY HOUSING

Question. What kind of experience has your organization had in producing rental

housing for extremely low-income families while maintaining the property’s longterm viability? Is it possible to structure properties with only up-front capital so

that on-going subsidy needs are not necessary? Lastly, how much money is Neighborhood Reinvestment Corporation dedicating to its multifamily activities and what

other resources it is using?

In 1999, Neighborhood Reinvestment and the NeighborWorks network launched

the NeighborWorks Multifamily Initiative in order to bring high standards in

asset management and peer learning to those NeighborWorks organizations that

own or manage multifamily rental properties. The members of the Multifamily Initiative own nearly 30,000 units and make it their mission to provide multifamily

homes, which are marked over the long-term by:

—Affordability;

—Well-maintained and attractive physical condition;

—Access to learning centers for the technological and social infrastructure of educational success; and

—Ongoing economic viability.

Guided by these principles, NeighborWorks organizations attempt to make units

affordable without sacrificing the long-term economic viability of the property. In

support of these principles, Neighborhood Reinvestment grants are provided, which

help increase the equity position of the NeighborWorks organizations in the properties, thereby reducing the need for debt. Lower debt is key to these goals, freeing

the operating budget to support higher levels of replacement reserves, asset management fees, and much needed services.

The following are some observations NeighborWorks organizations and Neighborhood Reinvestment have found in serving extremely low-income families.

Forty percent of area median income is the ‘‘breaking point’’.—In most markets,

the fundamental economics of serving families with incomes under 40 percent of

area median income is infeasible without subsidy. A housing burden of 30 percent

of household income yields a rent payment that is less than operating expenses—

those costs necessary to maintain the unit and keep it on-line—leaving no cash to

repay loans.

Market areas vary widely.—The communities served—rural, low-income urban,

and higher-income suburban, for example—vary in character and social dynamic,

which therefore affect the property’s market appeal and market rent. Development

and operating costs vary greatly across markets. Designing a Federal program that
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fits the varied markets of this country and the varied needs of families is exceptionally difficult.

Mixed income strategies can be used.—To house families in this income range

some form of subsidy is essential. Theoretically, a property with a 100 percent capital grant for development enables internal cross subsidization—having units with

higher rents cover the operating costs and debt service for those units rented to extremely low-income families—to some degree. This may be one solution for smaller

properties in lower income markets, which is often the case for revitalization areas.

Larger properties in higher income markets may need a smaller grant, since it can

support perhaps up to 50 percent of the development cost of the property.

Rental subsidy approaches serve as a solution as well.—Section 8 vouchers and

rental assistance from USDA Rural Development enable properties to house extremely low-income households in all markets. This operating subsidy over the long

term also enables use of debt, instead of grants.

Feasibility of older, smaller properties demands realistic maintenance, replacement

and utility budgeting.—NeighborWorks properties represent all types of rental

housing—1 to 3 unit houses, small apartments, and large. They tend to be older

(over 20 years old), and many of the properties are smaller, 30–60 units in size. As

with all existing, older stock, they carry higher expenses in the areas of maintenance, replacements, and utilities. Property—and therefore neighborhood—success

depends upon realism in budgeting for these critical cost areas.

When housing extremely low-income families, a modest operating investment in an

amenity package targeting personal asset building supports the long-term viability

of the properties.—Most extremely low-income families have access barriers to the

‘‘economic ladder’’. These barriers include night jobs, which require older children

to step into oversight roles for younger children after school; language barriers;

transportation; and lack of post-secondary or even complete high school education

at the parental level. As the percentage of extremely low-income residents increases

in a property, access to resident-directed, personal asset-building services becomes

critical. In addition to advancing resident goals, these services have been shown to

enhance the long-term viability of the property, in terms of improved occupancy and

collections; reduced turnover; and lowered security and maintenance costs. These

costs are built into the budgets of a number of the ‘‘live properties’’ in amounts

which may exceed the ‘‘minimum levels’’ allotted for in the ‘‘model properties’’. The

experience of our NeighborWorks organizations shows that an additional operating

expense of approximately $25 per unit per month, while inadequate to support an

intensive welfare-to-work package, is adequate to maintain services important to a

viable apartment community serving extremely low-income households.

Short-term acquisition loans are needed.—Because the vast majority of

NeighborWorks properties are existing, NeighborWorks organizations are often

purchasing them to either prevent the loss of affordability or to reverse years of neglectful ownership. In either event, the seller oftentimes requires a 90 to 120 day

acquisition timeframe. In such cases, the acquisition may need to occur prior to all

subsidy layers being in place. Short-term acquisition funding has been historically

missing from the marketplace, and therefore properties that could be preserved

have been lost. To fill this historic gap in funding, Neighborhood Reinvestment and

the NeighborWorks network formed the Neighborhood Capital Corporation, which

provides subordinate loans for up to 25 percent of the purchase price. These loans

will leverage up to nine times the capital from the conventional lenders in the first

mortgage position.

Because of this Subcommittee’s leadership on multifamily rental issues, we were

able to nearly double our planned budget for multifamily activities in fiscal year

2002. Combined with the $5 million set-aside, Neighborhood Reinvestment allocated

nearly $10.4 million to multifamily activities, 85 percent of which were distributed

in the form of equity grants.

ASSISTANCE FOR NATIVE AMERICANS

Question. Please describe Neighborhood Reinvestment Corporation’s activities on

Indian Lands. Also, please describe the major impediments to homeownership you

have found.

Answer. When Neighborhood Reinvestment was created by Congress in 1978, we

primarily focused on urban areas. However, the Corporation’s commitment to serving underserved markets and populations led us into Indian Country. Although the

environments are different, the inability of low- and moderate-income individuals to

gain access to homeownership lines of credit is similar.

Individual NeighborWorks organizations have developed programs to meet the

needs of local Native American populations. These programs are varied according
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to the geographic region served by an organization, the needs of each community,

and the organization’s capacity. At least ten NeighborWorks organizations have

developed specific programs to assist Native Americans, though many more work

with Native Americans on a case-by-case basis.

The Neighborhood Reinvestment Training Institute has offered training opportunities for Native Americans and those working in Indian Country. One course, ‘‘Developing a Homeownership Program in Indian Country,’’ was offered at the Minneapolis Institute in October 2001. Numerous scholarships have also been offered

for Native Americans attending other institute classes.

Neighborhood Reinvestment was a catalyst behind the One Stop Mortgage Center

Initiative in Indian Country, a 2-year study sponsored by HUD and Department of

the Treasury that paired Federal agencies, financial institutions, and Tribal representatives to jointly identify the barriers to mortgage products and solutions to

lending in Indian Country.

Focusing exclusively within tribal land, the Navajo Partnership for Housing, in

Window Rock, Arizona, was created by Neighborhood Reinvestment at the request

of the Navajo Nation in 1996 to increase homeownership opportunities throughout

the Navajo Nation, working in partnership with a variety of lending institutions and

government agencies.

Most NeighborWorks organizations that serve native communities also work

with non-natives. For example, over 53 percent of Fairbanks Neighborhood Housing

Services’ clients are Alaskan native, to whom they provide important and culturallyrelevant homebuyer education and housing counseling services in partnership with

the local Indian Housing Authority. Partnerships are critical to these programs.

Neighborhood Housing Services of Santa Fe is working with four Pueblos in northern New Mexico—Santa Ana, San Juan, Santo Domingo and Jemez—to build the

capacity of the tribes to offer high quality homeownership opportunities. In Montana, the newly formed statewide Montana Homeownership Network, an initiative

started by Great Falls Neighborhood Housing Services, has included the Assiniboine

and Sioux Tribal Enterprise Community.

Neighborhood Reinvestment has provided financial support to Sicangu Enterprise

Center, an affordable housing and loan provider, for the past 13 years. Sicangu Enterprise Center provides services to the Rosebud Reservation in southern South Dakota. The Rosebud Reservation experiences a 74 percent unemployment rate, and

the average income is just over $10,000 per year. Housing is at such short supply

that the Housing Authority on the Reservation maintains a waiting list of 1,000

families.

Native American housing and economic development issues are fundamentally different than affordable housing needs of other populations. Most native communities

suffer from very weak economies, with few job opportunities and critically low incomes. When these market challenges are coupled with unfamiliarity or incompatibility with conventional mortgage models and lands held in trust by the Bureau of

Indian Affairs, the housing needs and issues grow severe and complicated.

Our NeighborWorks organizations also report the impact of non-streamlined

mortgage lending process across various Federal agencies and Government Sponsored Enterprises. The lack of standard lease and loan documents presents confusion and breeds distrust and reluctance among uninformed buyers.

NeighborWorks organizations are currently enhancing the readiness of Native

Americans to become homeowners through financial literacy, culturally sensitive

homebuyer education, credit repair and savings programs. However, other private

and public entities need to contribute to these efforts in order to significantly improve the prospects for homeownership among Native Americans. For example, the

home-buying process would be eased through the increased availability of title insurance and appraisals for Native American buyers, and through reducing lender

transaction costs, largely a function of the time it takes to process loans. Finally,

NeighborWorks organizations have witnessed the need for local municipalities to

encourage land use planning and infrastructure development, and for more training

and support of private non-profits and Indian Housing Authorities to deliver mortgage based homeownership programs.

SECTION 8 HOMEOWNERSHIP

Question. Neighborhood Reinvestment has received $15 million over the past 2

years to expand partnerships between NeighborWorks organizations and PHAs in

implementing the Section 8 homeownership option. For fiscal year 2003, you are requesting another $10 million set-aside.

Answer. Why are the NeighborWorks organizations participating in the Section

8 option and what value do they add? Do you have any suggestions, based on your
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early experience, to improve the program? Lastly, do you anticipate that after you

have established a track record for the program that conventional lenders may provide financing?

We believe that NeighborWorks organizations bring three competencies to this

option that will help make it a long term success—the deep expertise in preparing

families of modest means for the responsibilities to be homeowners, the experience

of bridging the gap between the private market and public funding, and the dedication to the long term success of neighborhood revitalization and individual family

stabilization.

Neighborhood Reinvestment Corporation and the NeighborWorks network bring

years of experience in helping families of modest means become successful long-term

homeowners. For the past 10 years, many NeighborWorks organizations have consciously focused on homeownership as a strategy to further neighborhood revitalization. And we have done so with remarkable results—since 1992, the

NeighborWorks network has created more than 53,000 homebuyers of modest

means.

Since 1998, the median income of the typical buyer through a NeighborWorks

organization is $29,472, while the median income of the typical U.S. buyer is

$51,642. Ninety-five percent of the NeighborWorks buyers are first-time buyers,

over 52 percent are ethnic minority—compared to 19 percent by the conventional

mortgage market—and 43 percent are female buyers.

As a result of assisting so many underserved families, the NeighborWorks system brings with it a unique set of tools that are targeted to families similar to those

found in the Section 8 homeownership program. The Section 8 homeownership option allows the NeighborWorks system to apply its deep experience to lower income population.

The foundation of NeighborWorks organizations’ significant experience and success in creating homeownership opportunities for those of modest means is their expertise in Full-Cycle LendingSM, which emphasizes pre- and post- purchase counseling. Neighborhood Reinvestment has set rigorous standards in terms of curriculum content and hours. NeighborWorks organizations also have experience

with nontraditional mortgage products, such as USDA Rural Development and State

housing finance agency products, and second mortgages—all of which have proven

to be critical pieces in building successful Section 8 homeownership programs across

the country.

Many NeighborWorks organizations have as their mission to provide homeownership opportunities for low- and moderate-income families—often acting as a

bridge between the public and private sector in order to meet their mission. This

long-standing partnership approach is critical in the success of Section 8 homeownership programs.

The under-girth of neighborhood revitalization and employing homeownership as

a strategy is that of long-term stability. Neighborhood Reinvestment and the

NeighborWorks organization network believe that homeownership is a successful

revitalization strategy only if it is sustainable. As such, intensive and, at times,

lengthy homebuyer education and counseling are necessary. We have developed

partnerships to begin a financial literacy pilot to further ready potential homebuyers and strengthen the existing asset base of existing homeowners. We believe

the Section 8 homeownership option will be as successful as the individual homebuyers themselves.

A key to making successful homeowners is intensive preparation and counseling.

In some markets NeighborWorks organizations have had to triple their pre-purchase education and counseling efforts, in comparison to the time a typical first time

homebuyer requires. To the extent that more resources could be dedicated to sustaining counseling services, we believe that the need for aggressive post-purchase

counseling will be necessary. Certainly assisting new Section 8 homeowners maintain the asset of their new home and avoid any predatory lending risk is as critical

as the time and effort put into the pre-purchase efforts.

Already the private market has been a strong and essential partner in this effort.

In some cases, the private market is providing the entire mortgage and accepting

the Section 8 voucher as income. In many cases, we have seen smaller, regional

banks becomes the first lending institutions to participate, as they seem to be more

nimble in responding to the unconventional mortgage structures. We hope that the

activity from these banks will spur bigger financial institutions to become active

partners in this program. Although the single mortgage model is fairly rare in our

experience, it is an important step toward higher privatization of the financing for

the Section 8 clients. Fannie Mae has been particularly accommodating with its

guidelines, particularly in considering the voucher income in progressive ways.
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Freddie Mac has also been responsive to this program in looking for new ways for

Section 8 mortgages to be originated.

OVERLAPPING FEDERAL PROGRAMS

Question. I am concerned about overlapping Federal programs. It is clear that

Neighborhood Reinvestment Corporation works with the same communities and institutions that HUD and other Federal agencies work with.

Answer. Please tell me about any informal and formal efforts to coordinate Federal activities in assisting distressed communities. How do your organizations ensure that its activities are not duplicative of other Federal activities?

Neighborhood Reinvestment has worked to establish and maintain strong working

relationships and communication with senior staff at HUD, Department of Agriculture, various offices within the Treasury Department, and other appropriate Federal agencies. Neighborhood Reinvestment staff also serve on various work groups,

task forces and committees established by Federal agencies around specific issues.

Through these communications, we are able to keep representatives of the appropriate Federal agencies informed of corporate directions and initiatives, and abreast

of successes and challenges being encountered by its local affiliates at the community level. The Corporation also disseminates information to its affiliates regarding

proposed statutory and regulatory changes that might significantly affect their work

and/or the communities they serve. The Corporation submits, as appropriate, written comments to various Federal agencies regarding the impact that proposed statutory or regulatory changes may have on our affiliated NeighborWorks organizations or the communities they serve.

Other Federal activities provide important complementary support to the work of

Neighborhood Reinvestment and its local affiliates, but the NeighborWorks system

is the only coordinated effort of its type in the country.

While it is true that like HUD, Neighborhood Reinvestment focuses on expanding

affordable housing opportunities for low- and moderate-income households and on

community revitalization, there is in fact a tremendous level of difference between

the mission and programmatic approaches of Neighborhood Reinvestment and

HUD—and other Federal programs. Most Federal programs, particularly those

available to nonprofit organizations, essentially fund projects or specific programmatic initiatives.

Neighborhood Reinvestment does not fund freestanding projects. We support a national network of community-based nonprofit organizations through a tapestry of

services. Other Federal entities may provide some of these services, but Neighborhood Reinvestment is the only entity that provides, in a systematic way:

—A formal chartering process that requires adherence to an established set of vigorous requirements regarding things as diverse as board make-up, financial

management and internal controls, programmatic delivery and production

standards, quarterly reports and annual audits;

—Comprehensive training, through the nationally recognized Neighborhood Reinvestment Training Institutes and other vehicles;

—On-site technical assistance to staff and boards of local NeighborWorks organizations;

—Quality control of all NeighborWorks organizations, through on-site program

reviews, risk management approaches and review of annual audits;

—Connectivity among NeighborWorks organizations through actualized peer-topeer initiatives—such as the NeighborWorks Campaign for Home Ownership;

the Rural NeighborWorks Alliance; the NeighborWorks National Insurance

Task Force; the NeighborWorks Multifamily Initiative; the NeighborWorks

Resident Leadership Initiative—and through publications, a members-only Web

site, computer-based listserves, and other vehicles; and

—Access to a specialized secondary market that enables NeighborWorks organizations to sell loans that they have made from their own revolving loan funds.

Woven throughout the various organizational and programmatic tactics supported

by Neighborhood Reinvestment is a steadfast belief that approaches that dictate to

communities, or decide what is in the best interest of communities, or attempt to

‘‘parachute’’ help into communities, are inevitably doomed to failure. The Corporation firmly believes that community residents, armed with appropriate information

and tools, are the only ones who truly have the ability to change their neighborhoods.

By statute, our Board of Directors includes representatives from the five Federal

banking regulators—Board of Governors of the Federal Reserve System, Comptroller

of the Currency, National Credit Union Administration, Federal Deposit Insurance

Corporation, and Office of Thrift Supervision—and HUD. This relationship uniquely
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situates Neighborhood Reinvestment to act as a bridge between the all-too-separate

worlds of housing and the financial services industry, as well as between government, the for-profit and nonprofit environments. For example, a recent partnership

with the Federal Deposit Insurance Corporation resulted in the NeighborWorks

network using the FDIC’s Money Smart financial literacy program. This curriculum

will help train adult educators and teach money management skills to thousands

of people. In addition, our work with HUD on the Section 8 homeownership option

allowed for coordination of efforts, and created a delivery system for advancing the

homeownership option.

As a result of these and other efforts, no organization can match the demonstrated track record of Neighborhood Reinvestment and its affiliates when it

comes to leveraging Federal resources—and attracting private capital in support of

distressed urban, suburban and rural communities across America.

After more than two decades of experience, the NeighborWorks network now

serves approximately 2,100 urban, suburban and rural communities across America—and is uniquely positioned to not only continue to serve as a laboratory, but

also serve as a fast track implementation testing ground for new approaches.

Further, the Corporation has always believed its public responsibility goes far beyond the direct services we provide to the NeighborWorks network—and as such,

we have always attempted to share our learnings and experiences to support and

strengthen the broader housing and community development field.

OVERSIGHT

Question. Ms. Lazar, could you tell us how Neighborhood Reinvestment Corporation is able to provide adequate oversight and ensure accountability within the

NeighborWorks system?

Could you also discuss what sort of risk-management system you have in place

to monitor your affiliates?

Answer. We are strongly committed to promoting and maintaining a network of

productive, well-managed, nonprofit community development corporations that deliver high quality services responsive to local needs and have a measurable impact

on communities. One of the tools employed in doing this is a uniform program review and assessment system. The purposes of this system are to assist in:

—Enhancing the performance and productivity of network organizations;

—Assessing the health and risk-taking capacity of individual network organizations and the network as a whole;

—Determining organizational compliance with Neighborhood Reinvestment Corporation, Neighborhood Housing Services of America and related contract and

network standards;

—Evaluating whether organizations are using Federal funding from Neighborhood

Reinvestment appropriately; and

—Assessing newly developed or potential affiliate organizations to ensure their capacity to meet NeighborWorks network membership standards and performance objectives.

The heart of the system is a set of performance standards used to assess a

NeighborWorks organization’s health and how well it manages risk. Recognized by

the PROMPTSM acronym, organizations are evaluated using performance standards

in eight areas:

P—PLANNING

How well does the organization’s mission accord with Neighborhood Reinvestment’s and to what degree does strategic and business planning support this mission?

R—RESOURCE DEVELOPMENT

Does the organization have sufficient operating and capital resources to support

organizational needs and an active oversight process to monitor fund-raising

progress and the status of the budget?

O—ORGANIZATIONAL OVERSIGHT

How well is the Board meeting its fiduciary responsibility in overseeing an organization’s operations, its finances, its production and contract management, and its

planning? How well is resident participation enabled through the Board?

M—MANAGEMENT

Financial Management.—How well does the accounting and financial management system provide current and accurate records of the organization? Does the

Board receive timely financial reports that are understandable?
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Contract Management.—Is the organization meeting its contractual obligations

with funders including production and reporting and how satisfied are funders with

the organization’s performance?

Personnel Management.—Are there legally sound and updated personnel policies

in place that are followed? What is the status of the performance appraisal system

and is the executive director regularly appraised?

P—PRODUCTION/PROGRAM SERVICES

How congruent is production and provision of services with the wants of the community and is the level of production consistent with the resources available to the

organization?

T—TECHNICAL OPERATING SYSTEMS

Are standard operating procedures and practices consistent with legal and funding source requirements and do they promote an effective and efficient delivery of

services?

Through a system of continuous monitoring, each NeighborWorks organization

is subject to an annual risk assessment through either off-site or on-site program

reviews.

Off-site reviews involve the collection and analysis of all data available about the

organization from within Neighborhood Reinvestment and from Neighborhood Housing Services of America. Data for each organization is analyzed quarterly in terms

of eight risk areas. If a risk alert is identified, we determine whether the organization has the capacity to manage the risk. In cases where more information is needed

or where the risk is deemed to be serious, an on-site review is scheduled.

On-site reviews of organizations are conducted in addition to off-site reviews for

approximately two-fifths of the NeighborWorks organizations each year. There are

several conditions that would lead to an on-site review. An on-site review may be

an outcome of an off-site review where serious risk was discovered. All new applicants for membership are evaluated on-site before being offered a charter as a

NeighborWorks member. An on-site membership review is conducted for new network members within 2 years of chartering.

A typical on-site review involves three phases: preparing for a review, conducting

the review, and reporting review results. In preparation for a review, the review

team evaluates documents that have been requested from the organization, analyzes

all available data within Neighborhood Reinvestment about the organization, and

reviews outcomes from the previous on-site review. The actual site-visit involves

typically one to three reviewers depending on the size and complexity of the organization. Most visits last three days and the review team employs interview, documentation, and observation techniques in assessing capacity and risk management

in the organization. Finally, the review team prepares a site-visit profile that will

be used by Neighborhood Reinvestment’s Risk Management Unit in its continuous

risk monitoring system until the next on-site review.

Question. When you identify an organization as ‘‘troubled,’’ what actions do you

take?

Answer. For a complete response to how we address troubled organizations, please

see our response to the Chairman on page 8.

Question. I understand that you revoked the NHS of St. Joseph, Missouri. What

happened to them?

Answer. Neighborhood Housing Services of St. Joseph has recorded many accomplishments over its 10-year history. It has done much to revitalize neighborhoods

and offer homeownership opportunities to an under-served segment of the community. It can be proud of what it has created.

However, the last few years have been extremely difficult for this organization.

The City of St. Joseph withdrew its financial support of the Neighborhood Housing

Services in early 1999. Loss of a major funding partner can be a devastating blow

to an organization working in a relatively small community. Along with this loss

of funding came a continuing decrease in support from the insurance and lending

institutions.

The organization had a number of directors who had served on the Board for

many years. Their dedication allowed Neighborhood Housing Services of St. Joseph

to significantly improve neighborhoods over the years. In spite of their fervor, the

Board was unable to pull together and successfully compete for additional resources

to fill the void left by the City’s withdrawal of support.

Faced with seemingly overwhelming issues, the Board numbers continued to decrease to its present seven directors. Reduced revenues resulted in elimination of

staff positions and, with them, significant reduction in programs and services.

Neighborhood Housing Services of St. Joseph no longer provides lending services,
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nor does it have the capacity to offer post-purchase counseling or foreclosure prevention.

Further, with a soft real estate market, the organization found itself in a situation

in which it can no longer be assured of recapturing its investment in properties it

purchased with the intent of rehabbing for resale. These uninhabitable properties

are generating no income, but are a continuing drain on the organization’s limited

resources because of required maintenance and security.

Our last program review concluded the following:

—Neighborhood Housing Services of St. Joseph incurred a major budget deficit

last year and lacks the capacity to provide adequate systems to monitor, control

and resolve the impact on the organization.

—The Board’s financial oversight and decision-making practices do not ensure

compliance with their fiduciary responsibility to safeguard the organization’s assets.

—The organization can no longer pay staff salaries, and medical benefits were

withdrawn 2 months ago.

—Neighborhood Housing Services of St. Joseph no longer has the staff capacity

or funds to ensure quality delivery of program services. There is no capacity/

procedures to adequately mange rental/lease purchase programs.

Based on the findings of the review, it is our recommendation that the Board

work quickly to dissolve Neighborhood Housing Services of St. Joseph. It is not an

easy decision to make, but the Board can be assured that Neighborhood Reinvestment will work closely with them in this process. To continue to operate this agency

with full awareness of its severe funding deficit only increases the continuing liability to the organization. The Board can no longer assure the quality of programs and

services that the organization is providing. The Board also can no longer assure accurate and proper reporting or tracking of the organization’s assets.

GEORGE KNIGHT SCHOLARSHIP PROGRAM

Question. Two years ago, we provided $2.5 million to endow a ‘‘George Knight

Scholarship Fund,’’ named after our good friend and former Executive Director,

George Knight. This fund was established to allow local leaders, community developers, and residents to receive training from your training institute.

Can you give us an update on this program? Is there a large demand for this program?

Answer. The George Knight Endowment Fund has begun to fill a deep need within the community development field—that of providing financial support to worthy

community development professionals who might otherwise not be able to attend the

Neighborhood Reinvestment Training Institute. Since Congress’ initial investment of

$2.5 million is used as an endowment, the George Knight Endowment Fund will be

able to provide access to high-quality training for years to come.

To date, George Knight scholarships have been awarded to 242 Neighborhood Reinvestment Training Institute participants for a total $134,612. As indicated in the

chart below, the number of awards granted decreased for the Minneapolis and San

Francisco Training Institutes when interest earnings on the endowment declined.

GEORGE KNIGHT ENDOWMENT FUND ACTIVITY SUMMARY—APRIL 2001–APRIL 2002

Neighborhood Reinvestment Training Institute Dates Scholarship Recipients Awards

Chicago 2001 ................................................................ April 15–20 ................................ 44 $22,534

Washington, DC 2001 ................................................... August 19–24 ............................ 54 32,925

Minneapolis 2001 .......................................................... October 14–19 ........................... 23 14,770

San Francisco 2001 ...................................................... December 9–14 .......................... 21 11,293

Atlanta 2002 ................................................................. February 17–22 .......................... 38 17,540

Chicago 2002 ................................................................ April 2–6 .................................... 62 35,10

Total ................................................................. .................................................... 242 134,162

As a result of Congress’ investment, we have secured $1 million from Washington

Mutual to capitalize a similar scholarship endowment.

ELDERLY NEEDS

Question. Ms. Lazar, there are tremendous housing needs for the elderly and disabled populations in this country. In St. Louis, for example, there is a significant

shortage of affordable housing that meets ADA requirements.
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What are Neighborhood Reinvestment Corporation and its network doing to address these needs?

Answer. For a complete response, please see our answer to the Chairman on page

13.

CDC MERGERS

Question. I am excited about the merger of the St. Louis NHS and Beyond Housing. Not only will this merger combine the talents and skills of these successful organizations, it will enable them to take on larger scale projects.

What are your views about mergers? Why are mergers important?

Answer. We have encouraged and assisted an increasing number of mergers in

our network over the last 5 years. There is no question that the proliferation of nonprofit community-based development organizations has led, in some instances, to potential duplication of effort and stretched resources. There are also instances, like

St. Louis, where two strong organizations discover new opportunities by joining

hands. Neighborhood Reinvestment is committed to supporting local solutions and

local governance. However, we are also committed to deploying our precious resources as effectively and efficiently as possible. We will continue to respond very

positively to inquiries about merger partners and we will continue to provide technical assistance, evaluation and support for member organizations who seek to create additional strength, health or efficiency through mergers. I should note that the

amount of time, politics and negotiations involved in merger activities can never be

underestimated.

LAND TRUSTS

Question. Ms. Lazar, one impediment to developing affordable housing is the cost

of acquiring land. I am interested in the use of land trusts.

Do you see this as a viable tool for developing and maintaining affordable housing? To what extent is Neighborhood Reinvestment Corporation promoting the creation of land trusts?

Answer. While Neighborhood Reinvestment has not promoted the creation of land

trusts as an affordable housing tool, we have actively supported applications from

non-profit land trusts seeking to become network members. Land trusts appear to

be most abundant on the east and west coasts. Several of the members of our network in the State of Vermont are land trusts, including one of our premiere Section

8 to Homeownership pilot sites, the Burlington Community Land Trust. Ultimately,

the land trust concept appears to be suitable in some geographic locations and less

appealing in others.

The Neighborhood Reinvestment Training Institute offers a course on ‘‘Community Land Trusts: A Tool for Neighborhood Revitalization.’’ The course describes how

community land trusts combine affordable private home ownership with community

ownership of land to help turn deteriorating neighborhoods into neighborhoods of

choice and help prevent displacement of low-income residents due to gentrification.

It educates participants on the creation of a land trust, how land trusts can be used

as part of a comprehensive neighborhood revitalization strategy, and how a land

trust seeks to balance the seemingly competing goals of providing homeowners with

a fair return on their housing investment while ensuring that housing is kept permanently affordable for future occupants.

RESIDENT INVOLVEMENT

Question. Neighborhood Reinvestment has always had a focus on developing resident leaders as a strategy that leads to neighborhood revitalization.

Can you tell us how you engage residents and develop leaders? Why is this an

important component for your work?

Answer. Most community development efforts in this country grew out of problemsolving efforts by neighborhood residents at the local level. Early in this movement,

resident leaders were regularly in the driver’s seat in determining priorities and

strategies for revitalizing their neighborhoods. As time passed and community development activities became more sophisticated, things began to change. Resident

leaders on community Boards began to disappear to be replaced by professionals

with finance, housing development and legal backgrounds. Staff recruitment that

had once emphasized leadership development skills and neighborhood organizing experience, now focused on practitioners with the same finance and development skill

sought for Boards of Directors. And as funders have increasingly emphasized unit

production as a primary measure of organizational effectiveness, technical skill and

expertise at the Board and staff level has been in even greater demand. The debate

about the dwindling number of resident-led organizations has been fueled by the in-
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1Target Market is defined as an Investment Area(s) and/or a Targeted Population(s).

2Market Accountability is defined as having area and/or population representation on its governing board or otherwise.

creased complexity and attendant risks that characterize community development

activity and the honest questions that have been raised about the kind of skill and

oversight needed at the Board level to manage these sophisticated institutions.

Resident leaders are developed through a variety of strategies:

—Many NeighborWorks organizations incorporate resident leadership development directly into their staffing and business plans.

—Our Community Leadership Institutes provide training for resident leaders.

Residents return prepared for deeper leadership roles in local NeighborWorks

organizations.

—Our Resident Leadership Initiative is building resources to support community

leadership development at the wider neighborhood level, bringing both homeowners and renters into community leadership forums.

—The Multifamily Initiative provides specialized resident leadership development

resources, to ensure that rental residents are trained in asset management, so

that they can be knowledgeable participants in Boards, committees, and resident councils.

Neighborhood Reinvestment grew out of a resident-led effort—one that started

with residents, and grew to include public and private partnerships. This three

pronged partnership ensures that the products and outcomes remain firmly grounded in and accountable to a legitimate customer base. The credibility of our work

rests on our commitment to insuring that resident leaders are at the heart of the

work of our network.

QUESTIONS SUBMITTED TO THE COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS

FUND

QUESTIONS SUBMITTED BY SENATOR BARBARA A. MIKULSKI

Question. What criteria do you use for certifying new CDFIs?

Answer. The CDFI certification criteria are prescribed in the Fund’s regulations

and application materials. There are six criteria: (1) having a primary mission of

community development; (2) serving an eligible Target Market; 1 (3) being a financing entity; (4) being accountable to the Target Market; 2 (5) providing development

services (training or technical assistance) to borrowers and potential borrowers; (6)

and being a non-governmental entity. CDFI certification does not entail a competitive process, applicants for certification are deemed to either meet the criteria or

not.

Question. What is the process for certification?

Answer. An entity may apply for CDFI certification to the Fund at any time or

it may do so in conjunction to applying for funding under the CDFI Program. Once

a certification application is received, it is first reviewed for completeness. When

deemed to be complete, a staff reviewer determines whether the applicant meets the

six tests described above. The reviewer makes a certification recommendation,

which is then reviewed for approval by a Program Manager. If the applicant is certified, it receives a letter that describes its Target Market and the end of the term

of the certification (3 years from date of approval). If not certified, the applicant is

sent a letter describing which of the tests it did not pass. CDFIs must be re-certified

every 3 years. As of February 15, 2002, the Fund has certified 553 CDFIs in all 50

states, DC, USVI, and PR.

Question. How do you monitor the performance of CDFIs? Has the Fund ever revoked the certification of a CDFI?

Answer. Annual Reporting.—The Fund requires awardees to submit performance

and financial reports on a semi-annual and annual basis. Performance reports indicates how well an Awardee is achieving the goals and measures that it negotiated

with the Fund, as incorporated in its assistance agreement. Financial reports demonstrate the fiscal health of the overall operation of the Awardee organization and/

or its affiliates. The Compliance Monitoring and Evaluation (CME) staff of the Fund

reviews these reports.

Reports are reviewed and awardees rated as compliant, on ‘‘compliant watch’’,

non-compliant but not resulting in an event of default, or non-compliant. Awardees

are automatically deemed noncompliant if they fail to submit required reports by

the deadlines stated in their Assistance Agreements.
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3PLUM is defined to include P (performance effectiveness/community impact), L (leverage, liquidity, solvency), U (underwriting), and M (management).

If an Awardee is noncompliant under the terms and conditions of its Assistance

Agreement, CME staff will contact it to discuss the noncompliance and its plans for

improvement; CME staff then prepares and presents its recommendations to the

Fund’s Portfolio Committee. Corrective actions approved by the Portfolio Committee

can range from an amendment of the assistance agreement so as to adjust for unforeseen conditions, to de-obligation of undisbursed funds, to (in the most serious

cases) a demand that award funds be returned to the Federal Government.

On-site Reviews.—In the very near future, the CME unit will begin conducting onsite visits to examine certain organizations’ operations more closely, and to ensure

their compliance with the CDFI Fund’s requirements. Organizations will be selected

for on-site visits through a risk assessment process, with those deemed at higher

risk being examined first. Some on-site visits are planned to organizations that are

not considered at higher risk in order to balance the portfolio of on-site visits and

to establish baseline procedures.

Program Suspensions.—In certain cases, the Fund has revoked the certification of

CDFIs. A CDFI certification can be revoked when the Fund is notified of material

changes in an organization, meaning that the entity no longer satisfies all six CDFI

certification criteria. The manner in which the Fund learns of such changes occurs

in several ways, including notification by a CDFI’s regulator, notification by the

CDFI itself, notification by an unrelated third party, or upon the Fund’s review of

reports submitted annually by the CDFI.

Performance Measures.—The Fund is reviewing its current methodology for developing performance goals and measures to incorporate a more quantitative analysis

of the Awardee’s community development impact, solvency, asset quality and management capacity (PLUM 3). Analysis is being conducted to identify peer groups and

benchmark data. Based on this information, acceptable levels of achievement will

be determined and applied to awardees to achieve the following: identify CDFI Fund

portfolio risk and to identify CDFIs that have achieved higher success in fulfilling

its community development mission. Based on this information, the Fund can conduct targeted analysis of its portfolio, highlight best practices that can be shared

with the CDFI field, and better assess CDFIs’ abilities to expand or stabilize underserved market areas.

Yes, the Fund has revoked certification status of a CDFI. As the Fund is notified

of material changes in a certified CDFI’s organization, material enough so that the

entity no longer satisfies all six certification criteria, certification statuses are revoked.

Question. What strategies have CDFIs used in preventing predatory lending?

Answer. CDFIs have been among the leaders in bringing attention to harm caused

by predatory lending. For example, Self-Help, a CDFI serving North Carolina, was

instrumental in documenting the results of predatory practices in that state. It

measured the ‘‘equity-stripping’’ effect of predatory lending. An outcome of its efforts

was the pioneering legislation passed by the state legislature in 1999. That legislation decreased the attractiveness of several predatory practices.

Other CDFIs have promoted public policies to reduce the corrosive effects of predatory lending on individuals and on neighborhood revitalization efforts. The Reinvestment Fund, a Philadelphia-based CDFI, launched a predatory lending strategy

in that city in 2000; a year later the city council passed an anti-predatory lending

ordinance. CDFIs also provide needed financial counseling to lower income households (which is one of the six requirements to be a certified CDFI). Knowledge

gained from such counseling arms lower-income borrowers so that they are not victimized by predatory lending practices.

Question. What strategies have CDFIs used to help victims of predatory lending?

Answer. CDFIs, by definition, engage in consumer-friendly lending. They help provide low cost alternatives for financial services. The activities of a successful CDFI

demonstrate that it is possible to lend in a manner that is not abusive. Those CDFIs

that lend to individuals (rather than solely to businesses) are able to design loan

products or financial services that either help correct for the damage done by a

predatory lender or can demonstrate alternatives to abusive lending in low-income

markets. For example, though ‘‘payday loans’’ can service a short-term financial

need of some customers, Northside Federal Credit Union in Chicago developed an

alternative to the ‘‘payday loan.’’ It provides short term, small signature loans to its

members that allow ready access to needed cash but with interest rates and terms

that are manageable.

The Fund’s awards have been used by CDFIs to capitalize anti-predatory loan

products designed to help victims of abusive practices. NHS of New York is an ex-
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ample of a Fund Awardee whose loan product will wrap in a single re-financing first

and subordinated mortgage debt, as well as consumer debt. This is considered a

risky loan in that it generally requires providing a loan well in excess of the value

of the underlying collateral (the house). Without an investment source like the CDFI

Fund, this entity may not have had sufficient resources to launch the product or

meet demand without extensive long-term fund-raising at the local level.

The Reinvestment Fund, a Philadelphia-based CDFI, and the Neighborhood Lending Services, a Chicago CDFI, also have developed similar products to assist predatory loan victims. Such loans refinance predatory loans and are coupled with intensive counseling. Additionally, the work of Self Help (noted above) is creating a largescale alternative to predatory loans. It has developed a secondary market for nonconforming mortgage loans, thus allowing low-wealth households to buy homes with

conventional financial institutions providing financing, as opposed to meeting interest in ownership through the services of sub-prime lenders. Self-Help used the

Fund’s award to capitalize this effort and included a requirement that banks from

which Self-Help purchased loans had to use the proceeds from these loan sales to

continue making similar loans serving the low-income, first-time homebuyers.

Through the BEA Program the conventional financial institutions are encouraged

to provide products and services that would create constructive alternates to predatory lenders. For example the BEA Program encourages banks to start First Account programs and adding ATMs or branches in underserved neighborhoods. Increased access to such services foster competition and provides low-cost alternatives

to compete effectively with check-cashers or payday lenders. Additionally banks are

rewarded for increased mortgage lending in lower income areas, another alternative

to non-regulated predatory lenders.

Question. Do CDFIs ever work with FHA’s inventory? Is there a role for CDFIs

in property disposition?

Answer. CDFIs are lenders; many CDFIs lend to developers of housing that is affordable to lower-income households. Many CDFIs have lent to non-profit developers

of housing that work with FHA inventory, either single family or multi-family.

CDFIs can make logical partners for such housing developers. Many CDFIs understand working with troubled properties and in risky markets. Developers of FHA

inventory often need such lenders. Further, CDFIs can provide debt with flexible

terms, allowing for lease-up or marketing periods that may be longer than would

typically be available for housing targeted to a more affluent market or terms more

flexible than can be provided by a traditional lender.

Question. Do CDFIs help in restructuring bad loans? If so, what percentage of

these was FHA insured?

Answer. CDFIs often serve the most difficult to underwrite customers. The provision of development services (credit counseling), required in order to be certified as

a CDFI, helps to keep these loans from going bad. On occasion, a CDFI may need

to re-structure its own loans, depending on the borrower and its overall portfolio

policies and procedures. There are only a handful of CDFIs that are FHA-insured

lenders. Most CDFI mortgage lending is in the form of second, or subordinated,

mortgages. The first mortgage is typically the one with mortgage insurance. The

number of CDFI-financed deals that have had some FHA lending is not known. The

Fund anticipates collecting loan level data in the near future. However, until that

form of data collection is attained, such information is anecdotal. More importantly,

a CDFI is often the type of lender that would be turned to in order to help re-finance a property if the original financing was inappropriate or the borrower faced

potential foreclosure.

Question. Explain the timing of the New Markets Tax Credits—when will they hit

the street?

Answer. To date, the NMTC Program has achieved a series of critical milestones.

We successfully launched the allocation application process that introduces the New

Markets Tax Credit (NMTC) Program on June 7, 2002. The Fund anticipates that

selection of applicants and the making of allocations will occur in early winter 2002,

possibly allowing Allocatees time to secure investor funding and/or make investments in 2002 with the proceeds of investment in CDEs.

On April 20, 2001, the Fund issued guidance (which was published in the Federal

Register on May 1, 2001 at 66 FR 21846) that provided general programmatic information, as required by the NMTC Program statute. On December 20, 2001, the

Fund issued additional guidance in the Federal Register (at 66 FR 65806), which

provided specific guidance on how an entity may apply to be certified as a ‘‘community development entity’’ (CDE). On December 26, 2001, the Internal Revenue Service (IRS) published temporary regulations in the Federal Register (at 66 FR 66307)

that provide guidance to taxpayers claiming New Markets Tax Credits (NMTCs).
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Also, on December 26, 2001, the Fund made CDE Certification Applications available through its website, www.cdfifund.gov.

Question. What activities will the New Markets Tax Credits finance? How are

those activities different from what the CDFI Fund supports?

Answer. The NMTC Program permits taxpayers to claim a credit against Federal

income taxes for Qualified Equity Investments (QEIs) made to acquire stock or a

capital interest in designated Community Development Entities (CDEs). Designated

CDEs must use substantially all of the proceeds from the QEIs to make Qualified

Low Income Community Investments (QLICIs). The tax credit provided to the investor (either the original holder or a subsequent purchaser) is claimed over a 7-year

credit allowance period. In each of the first 3 years, the investor receives a tax credit equal to 5 percent of the total amount paid for the stock or capital interest at

the time of purchase. For the final 4 years, the value of the tax credit is 6 percent

annually. The Fund certifies CDEs on an ongoing basis, and will allocate NMTCs

annually to CDEs through a competitive application process.

The CDFI Program, in contrast, helps to capitalize community development lenders (CDFIs) through direct investments from the Fund. These investments, which

take the form of grants, loans, equity investments and deposits, are made to qualified institutions that provide access to credit and capital in economically distressed

and underserved markets. We believe that by providing financial investments and

technical assistance support to CDFIs, they in turn will better serve their communities. Providing financial and other services in these communities helps low-income

families to build wealth (through savings and use of financial services less costly

than provided by non-regulated entities), increase economic self-sufficiency, and reduce dependence on transfer payments.

Question. What effect will this multi-billion dollar program have on the CDFI

fund office? Do you have enough staff to adequately oversee this program in addition to the fund?

Answer. The cost to administer the New Markets Tax Credit Program is currently

24 percent of the Fund’s administrative budget. It is anticipated that with full implementation of this program, from application review to NMTC allocation to compliance monitoring, the Fund’s administrative costs to support NMTC Program will

increase. The new FTEs requested in the fiscal year 2003 budget request are earmarked for the NMTC Program and additional administrative support staff. We believe that we have adequate resources to administer both the NMTC Program and

our award programs through fiscal year 2003.

Question. Will your management of the Tax Credits take away from your focus

on managing the CDFI core programs?

Answer. No. The Fund envisions that the NMTC Program will complement the

Fund’s existing programs that provide direct funds to community development financial institutions.

Question. What steps is the CDFI Fund taking to improve its outcome measures

and data collection?

Answer. Our objective is to show how the investments we make in CDFIs, and

the loans they make in turn, fill gaps in financial services for distressed areas and

populations. Our program performance measures will show the impact CDFIs’ loans

made to stabilize or improve our Nation’s underserved communities and target populations through community development financing activities.

The Fund is reviewing its current methodology for developing performance goals

and measures to incorporate a more quantitative analysis of the Awardee’s community development impact (improvement in community conditions), and it’s financial

capacity to sustain its lending activities—solvency, asset quality and management

capacity.

Question. Do the grants and loans provided by the CDFI fund serve a unique purpose? How are they different from what is available through the Small Business Administration? Through Community Development Block Grants?

Answer. Yes, the awards administered by the Fund serve a unique purpose. Investments by the Fund serve a special purpose in that they help to capitalize specialized loan funds that fill voids in the conventional capital markets. Such loan

funds must serve economically distressed places or underserved populations. CDFIs

serve a wide array of such communities through a wide array of financial services.

SBA’s products generally are for a range of small business loan services with limited

risk profiles for borrowers than a small business loan fund may provide.

CDFIs may lend in ways that banks, thrifts and other conventional lenders find

too risky or unprofitable. They may lend in order to make major projects happen,

such as by providing development loans to non-profit organizations; they may take

subordinate (2nd or 3rd) loan positions to convince a bank to lend to bring a major

grocery store or medical center into a distressed area. These institutions may take
402

the first credit risk to ensure that a bank’s loan meets safe and sound underwriting.

CDFIs are distinct from other financial institutions in that CDFIs may provide

training and technical assistance (development services) to borrowers and potential

borrowers. This is one way that CDFIs build markets where conventional lenders

do not see opportunity. Support from the Fund may allow a CDFI to absorb the cost

of development services delivery and innovation that it could not fully recover

through its lending operations.

The CDBG Program provides local governments with grants, which they design,

localized programs to meet needs of their low-income populations. It appears that

the majority of HUD’s CDBG funds are used for infrastructure redevelopment (such

as installation of water and sewer lines and/or road and street improvements).

Grants to low-income residents may be provided for housing development and rehabilitation. These grants sometimes are used in conjunction with loans from CDFIs

and may be used to reduce the costs of meeting standard zoning requirements so

as to make homeownership affordable to low-income people. A CDFI may make a

loan to a non-profit affordable housing developer to help meet the project feasibility

requirements for a CDBG grant or qualify for conventional financing from a traditional lending institution. CDFIs can help communities underwrite small-scale or

scattered site affordable housing units, thus helping to improve and increase the

Nation’s stock of affordable and decent housing. Therefore, the capital provided by

the Fund to CDFIs, which may in turn be used to make loans to non-profit housing

developers, and the CDBG grants that developers may receive from HUD are in fact

two complementary efforts that in many cases result in an increase of the Nation’s

stock of decent and affordable housing. CDFIs democratize the availability of credit

and capital to scores of underserved communities and populations.

Question. What community development activities does the CDFI Fund most often

fund or underwrite? Please break out the activities by type, and grant/loan amount.

Answer. As the following table shows, in terms of both number and dollar amount

of awards, the Fund supports CDFIs that engage in housing/community facilities

most frequently, followed by those engaged in business lending and consumer lending/financial services (the latter includes credit unions and banks). CDFI Intermediaries, the fourth category, support all types of CDFIs. Venture Capital CDFIs

provide equity to businesses. Multi-bank CDCs are primarily business lenders,

though some are housing lenders.

CDFI FUND AWARDS BY TYPE OF AWARDEE—1996–2001 CORE, INTERMEDIARY, & SECA/TA

AWARDS

Type of Awardee by Primary Business Activity

Award Amounts Number of Awards

Dollars Percent of

Total Numbers Percent ofTotal

Housing/Facilities ................................................................................. $152,294,696 42 210 32

Business ............................................................................................... 76,237,083 21 177 27

Consumer Lending and Financial Services .......................................... 49,800,801 14 130 20

CDFI Intermediary ................................................................................. 25,027,201 7 20 3

Venture Capital ..................................................................................... 20,664,301 6 23 3

Microenterprise ..................................................................................... 18,748,642 5 67 10

Multi-Bank CDC .................................................................................... 16,490,987 5 22 3

Total ........................................................................................ 359,263,711 100 649 100

Question. What percentage of the loans that originate from the CDFI Fund go into

default?

Answer. To date, no CDFIs have defaulted on loans from the Fund. A couple of

CDFI borrowers have been late on interest payments but all have otherwise met the

terms and conditions of their debt instruments with the Fund.

Question. Do private banks get CRA credit for investments in low-income communities that are also incentivized by Bank Enterprise Awards? Please document some

cases in which this could happen.

Answer. The BEA Program is intended to encourage FDIC-insured depository institutions to go beyond just serving the ‘‘convenience and needs of the communities

in which they operate’’ (as called for by the CRA). The BEA Program provides an

incentive to banks and thrifts to serve areas or people that the institution may not

necessarily have to serve in order to receive a Satisfactory CRA rating. The BEA

Program award should therefore be seen as a complement to the CRA activities of

an institution.
403

Generally, the types of activities that would qualify for a BEA Program award

would also be viewed favorably by the regulatory agency in developing the CRA rating for the institution—provided the activities occurred within the bank’s CRA Assessment Area.

For example, take a bank whose CRA Assessment Area is the Washington DC

metropolitan area. This bank could apply for a BEA Program award for increasing

its lending within the Anacostia area (which qualifies as a BEA Distressed Community). In the current funding environment, the bank would have to increase its activities significantly to increase the probability of receiving an award. (When the

Fund lacks sufficient resources to fund all qualified activities for which BEA applications are submitted, it must follow statutorily prescribed priorities, which include

ranking applicants by the ratio of activity level to asset size. Thus, the greater the

activity level, the greater the probability of an award.)

These activities—because they are within a low-income community—would likely

also receive positive CRA consideration. The regulator, in developing a CRA rating

for the bank, would view these activities in the context of the bank’s overall operations. Because the regulator is looking for a reasonable level of activity within the

low-income areas of the Assessment Area, there is no incentive to maximize or exceed a certain the level of investment activity. The BEA Program regulations, on

the other hand, encourage the institution to provide more lending in the Distressed

Community than required for ‘‘Satisfactory’’ ratings under CRA. Moreover, areas

must pass a more stringent level of distress to qualify for the BEA Program (which

considers poverty rate and unemployment rate of the area) than under the CRA regulations (which just consider income level of the census tract). Financial institutions

participating in the BEA Program manage some of the Nation’s best CRA programs,

as nearly one-third of BEA Program participants have received ‘‘Outstanding’’ ratings under CRA. According to bank regulators, only 10 percent of regulated institutions receive ‘‘Outstanding’’ CRA ratings.

QUESTIONS SUBMITTED BY SENATOR TIM JOHNSON

RURAL COMMUNITIES AND THE BEA PROGRAM

Question. The CDFI Fund has identified several options that may increase the

flow of CDFI Program and BEA Program funding to rural areas. Your testimony

notes that within the BEA program authorizing language would be needed to alter

the definition of ‘‘distressed areas’’ which currently only applies to communities with

a population of 4,000 or greater.

Could you provide me with a breakdown of obstacles you’ve determined would

need to be address in authorizing legislation? Second: Could you provide us with

any examples of administrative and regulatory modifications you intend to implement to better serve rural communities?

Answer. The statutorily prescribed definition of ‘‘Distressed Community’’ under

the BEA Program is an obstacle and disadvantages rural communities. First, rural

areas have difficulty meeting the program’s 30 percent poverty requirement because

populations in rural areas are often scattered, with Low-Income households mixed

with households with higher incomes, and have fewer concentrations of poverty than

is often found in urban areas. Second, over 40 percent of the Nation’s rural population resides in communities with fewer than 2,500 people. These communities are

too small to meet the BEA Program’s statutorily required population of 4,000 people

in metropolitan areas. Further, in non-metropolitan counties there is a minimum

population requirement of 1,000 people in a qualifying census tract. This figure also

precludes otherwise qualifying economically distressed rural areas from BEA Program eligibility. To best address the issue, statutory modifications would be necessary.

Background

According to the statute that created the BEA Program, a Distressed Community

consists of contiguous Geographic Units (e.g., census tracts) located within the

boundaries of one Unit of General Local Government (e.g., town, city, or country)

that meet certain minimum population, poverty, and unemployment requirements,

as follows:

Minimum Population Requirements.—Metropolitan Statistical Areas: The population of a Distressed Community must be at least 4,000 people if any portion of

the area is located within a Metropolitan Statistical Area. Non-Metropolitan Statistical Areas: The population of a Distressed Community must be at least 1,000 people if no portion of the area is located within a Metropolitan Statistical Area. Indian
404

Reservations: If a Distressed Community is located entirely within an Indian Reservation, it is not required to meet the minimum population requirements.

Minimum Poverty Requirements.—At least 30 percent of the Residents of the Distressed Community must have incomes that are less than the national poverty level,

as determined by the latest decennial census.

Minimum Unemployment Requirements.—A Distressed Community must have an

unemployment rate that is at least 1.5 times greater than the national average, as

determined by the Bureau of Labor Statistics’ most recent statistics.

In addition, the BEA Program regulations allow that a Distressed Community

may consist of Geographic Units that (1) individually meet the minimum population,

poverty, and unemployment requirements discussed below, or (2) in the aggregate

meet the poverty and unemployment requirements, provided that no designated Geographic Unit within the Distressed Community has a poverty rate of less than 20

percent.

NATIVE AMERICAN CDFI TECHNICAL ASSISTANCE PROGRAM

Question. Forty seven organizations have applied for awards in the first round of

funding in that Native American CDFI Technical Assistance (NACTA) program,

demonstrating very strong interest on the part of tribes and other organizations

serving Native Americans in expanding the work of CDFIs in Indian country. Fiscal

year 2002 will be the first year that monies will be awarded through the NACTA

program.

What kind of priority will the NACTA program have to the Fund, if resources are limited to the President’s budget request of $68 million?

Answer. It is the intent of the Fund to have a second round of the NACTA Component in fiscal year 2003.

PERFORMANCE MEASURES FOR RURAL AND RESERVATION COMMUNITIES

Question. With regard to performance measures. I am concerned that seemingly

straightforward standards may in fact work to the detriment of some communities.

Particularly where they may aggravate the barriers rural and Native American

areas already face in securing CDFI investments.

For example, it is very straightforward to measure the success of an investment

in terms of the number of jobs created and wages paid.

However, it’s equally important to consider the services provided and the impact

that a business may have on the quality of life in the community. This is particularly important in rural and isolated areas.

How do we measure the impact on a rural or reservation community by establishing a welding shop, a cafe, a grocery store, or a gas station? The business my

only create 3 or 4 jobs, but area families no longer must drive 20, 30, 40 miles or

more to utilize that service.

In developing the ‘‘performance measures’’ required by Secretary O’Neill, how can

we make sure rural and Native American CDFIs are not penalized for investing in

small main-street business that may only create a handful of jobs, but significantly

enhance the community?

Answer. Performance measures will not disadvantage rural communities. The

Fund’s measure of impact will not focus on volume but will attempt to assess the

local community improvement impact of each award made by the CDFI Fund. The

Fund’s Small and Emerging CDFI Assistance (SECA) Component, in particular,

seeks to assist small lending operations that demonstrate that they are likely to

achieve impact in the communities they serve.

QUESTIONS SUBMITTED BY SENATOR CHRISTOPHER S. BOND

PERFORMANCE MEASURES

Question. I am pleased that Secretary O’Neill has recognized the importance of

performance outcomes because it is still unclear to me if CDFI’s programs make a

significant difference in helping distressed communities and if its programs are

more cost-effective and efficient than other similar Federal efforts.

For example, I would like to know to what extent the Bank Enterprise Award program motivate financial institutions provide capital in distressed communities, especially when they are required to perform these activities under the Community Reinvestment Act.

Answer. Congress, in passing the BEA Program legislation, intended the BEA

Program to encourage FDIC-insured depository institutions to go beyond just serving the ‘‘convenience and needs of the communities in which they are chartered.’’
405

1PLUM is defined to include P (performance effectiveness/community impact), L (leverage, liquidity, solvency), U (underwriting), and M (management).

Congress wanted to provide an incentive to banks and thrifts to do business in highly distressed communities that may not necessarily be part of their Community Reinvestment Act (CRA) assessment areas or to serve as partners with local CDFIs

that serve populations that the institutions may not necessarily have to serve in

order to receive Satisfactory CRA ratings. A BEA Program award should therefore

be seen as a complement to the CRA activities of an institution.

Question. In response to Secretary O’Neill’s initiative, when do you expect to be

able to provide this committee with data on program performance? Do you expect

to collect and analyze data that will compare the performance of CDFI’s programs

to other Federal activities?

Answer. The Fund is able to provide program performance data now. Our objective is to show how the investments we make in CDFIs, and the loans they make

in turn, fill gaps in financial services for distressed areas and populations. Our program performance measures will show these investments improve our Nation’s underserved communities and target populations through community development financing activities.

The Fund is reviewing its current methodology for developing performance goals

and measures to incorporate a more quantitative analysis of the awardee’s community development impact, solvency, asset quality and management capacity

(PLUM 1). Analysis is being conducted to identify peer groups and benchmark data.

Based on this information, acceptable levels of achievement will be determined and

applied to awardees to achieve the following: identify CDFI Fund portfolio risk and

to identify CDFIs that have had achieved higher success in fulfilling its community

development mission. Based on this information, the Fund can conduct targeted

analysis of its portfolio, highlight best practices that can be shared with the CDFI

field, and better assess CDFIs’ abilities to expand or stabilize underserved market

areas.

The awards administered by the Fund serve a unique purpose. Investments by

the Fund serve a special purpose in that they help to capitalize specialized loan

funds that fill voids in the conventional capital markets. Such loan funds must serve

economically distressed places or underserved populations. CDFIs serve a wide

array of such communities through a wide array of loan products and financial services. The Fund differs from many other Federal activities in that the Fund invests

in institutions not projects. CDFIs are local market-based institutions that respond

to market demand in their communities. Support from the Fund may allow a CDFI

to absorb the cost of development services delivery and innovation that it could not

fully recover through its lending operations.

OVERLAPPING FEDERAL PROGRAMS

Question. I am concerned about overlapping Federal programs. It is clear that

CDFI works with the same communities and institutions that HUD and other Federal Agencies work with.

Please tell me about any informal and formal efforts to coordinate Federal activities in assisting distressed communities. How do your organizations ensure that its

activities are not duplicative of other Federal activities?

Answer. The Fund has a structured means of coordination with other agencies

through the Community Development Advisory Board, which includes representatives from six Federal Agencies (USDA, Commerce, HUD, Interior, Treasury, and

the SBA). The statute that created the CDFI Fund requires the Advisory Board. In

addition, the Fund, by law, coordinates with the banking and credit union regulatory agencies while in the process of considering Fund investments in regulated

entities.

Programmatically, the Fund regularly engages in discussion with other agencies.

For example, there is current strategizing with HUD as to how to increase the level

of resources available to the colonias in the U.S.-Mexico border region. The Fund

has shared with HUD information about CDFIs serving these distressed areas in

which the Fund has invested and described how CDFIs can help provide a permanent flow of capital in otherwise underserved areas. HUD in turn has shared its

information regarding the concentrations of colonias. Both entities are interested in

improving data-gathering to document the level of financial services activities in

these areas. The Fund is also engaged in a dialog with Federal Reserve Board of

Governors and the Federal Reserve Bank of Richmond as to the development of

measurements that will serve to allow comparative classification of levels of finan-
406

cial services. Achieving this will help the Fund to improve its ability to target dollars to areas of market dysfunction.

NATIVE AMERICAN CDFI TECHNICAL ASSISTANCE PROGRAM

Question. The Treasury Department’s November 2001 ‘‘Native American Lending

Study’’ clearly indicates a need for capital access and financial lending on Indian

lands. Further, the study recommends, ‘‘creating more financial institutions, including CDFIs, on Indian Lands’’ and ‘‘encouraging existing financial institutions that

are not located on Indian Lands to open branches on Indian Lands.’’ However, the

Administration has not requested any new funds for fiscal year 2003 for the Native

American Technical Assistance program.

Can you explain this disconnect? By not funding this initiative, does this mean

that you disagree with the study’s recommendations?

Answer. The Fund supports the recommendations set forth in the Native American Lending Study report. The reason we have not included a request for Native

American CDFI Technical Assistance (NACTA) funding in our fiscal year 2003 budget is because we believe that the carryover (unused funds) from fiscal year 2002 will

be sufficient to meet the fiscal year 2003 need.

MONITORING AWARDEES

Question. How does the CDFI monitor the management of grantees? Has the

Fund ever revoked the certification of a CDFI?

Answer. The Fund uses several methods to monitor its awardees. They include

the following:

Annual Reporting

The Fund requires awardees to submit performance and financial reports on a

semi-annual and annual basis. Performance reports tell how well an awardee is

achieving the goals and measures that it negotiated with the Fund, as incorporated

in its assistance agreement. Financial reports demonstrate the fiscal health of the

overall operation of the awardee organization and/or its affiliates. The Compliance

Monitoring and Evaluation (CME) staff of the Fund reviews these reports.

Reports are reviewed and awardees are rated as compliant, on ‘‘compliant watch’’,

non-compliant but not resulting in an event of default, or non-compliant. Awardees

are automatically deemed noncompliant if they fail to submit required reports by

the deadlines stated in their Assistance Agreements.

If an awardee is noncompliant under the terms and conditions of its Assistance

Agreement, CME staff will contact it to discuss the noncompliance and its plans for

improvement; CME staff then prepares and presents its recommendations to the

Fund’s Portfolio Committee. Corrective actions approved by the Portfolio Committee

can range from an amendment of the assistance agreement so as to adjust for unforeseen market conditions, to de-obligation of undisbursed funds, to (in the most

serious cases) a demand that award funds be returned to the Federal Government.

On-site Reviews

In the very near future, the CME unit will begin conducting on-site visits to examine certain organizations’ operations more closely, and to ensure their compliance

with the CDFI Fund’s requirements. Organizations will be selected for on-site visits

through a risk assessment process, with those deemed at higher risk being examined first. Some on-site visits are planned to organizations that are not considered

at higher risk in order to balance the portfolio of on-site visits and to establish baseline procedures.

Program Suspensions

In certain cases, the Fund has revoked the certification of CDFIs. A CDFI certification can be revoked when the Fund is notified of material changes in an organization, meaning that the entity no longer satisfies all six CDFI certification criteria.

The manner in which the Fund learns of such changes occurs in several ways, including notification by a CDFI’s regulator, notification by the CDFI itself, notification by an unrelated third party, or upon the Fund’s review of reports submitted

annually by the CDFI.

Performance Measures

The Fund is reviewing its current methodology for developing performance goals

and measures to incorporate a more quantitative analysis of the awardee’s community development impact, solvency, asset quality and management capacity (PLUM).

Analysis is being conducted to identify peer groups and benchmark data. Based on

this information, acceptable levels of achievement will be determined and applied
407

to awardees to achieve the following: identify CDFI Fund portfolio risk and to identify CDFIs that have had achieved higher success in fulfilling its community development mission. Based on this information, the Fund can conduct targeted analysis

of its portfolio, highlight best practices that can be shared with the CDFI field, and

better assess CDFIs’ abilities to expand or stabilize underserved market areas.

SUBCOMMITTEE RECESS

Senator MIKULSKI. This subcommittee stands in recess until next

Wednesday, May 1, in which we will be taking testimony from

NASA.

So thank you very much.

Ms. LAZAR. Thank you both.

Senator MIKULSKI. And we are in recess.

[Whereupon, at 10:55 a.m., Wednesday, April 24, the subcommittee was recessed, to reconvene at 9:47 a.m., Wednesday, May 1.]

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DEPARTMENTS OF VETERANS AFFAIRS AND

HOUSING AND URBAN DEVELOPMENT AND

INDEPENDENT AGENCIES APPROPRIATIONS

FOR FISCAL YEAR 2003

WEDNESDAY, MAY 1, 2002

U.S. SENATE, SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS, Washington, DC.

The subcommittee met at 9:47 a.m., in room SD–138, Dirksen

Senate Office Building, Hon. Barbara A. Mikulski (chairman) presiding.

Present: Senators Mikulski, Bond, Shelby, Craig, DeWine, and

Stevens.

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

STATEMENT OF SEAN O’KEEFE, ADMINISTRATOR

ACCOMPANIED BY:

DR. JOHN GRUNSFELD, ASTRONAUT

STEVE ISAKOWITZ, COMPTROLLER

DR. EDWARD J. WEILER, ASSOCIATE ADMINISTRATOR FOR SPACE

SCIENCE

DR. GHASSEM ASRAR, ASSOCIATE ADMINISTRATOR FOR EARTH

SCIENCE

ROBERT W. COBB, INSPECTOR GENERAL

OPENING STATEMENT OF SENATOR BARBARA A. MIKULSKI

Senator MIKULSKI. I want to convene the Subcommittee hearing

on VA–HUD appropriations to take the testimony of Mr. Sean

O’Keefe, our NASA administrator, to review the NASA appropriations request.

Mr. O’Keefe, this is the first time that we are welcoming you before this Appropriations Committee, and we look forward to listening to you and working with you.

You come with a great deal of—you come with many credentials

and we know that you come also with the confidence of the White

House. I know that before this, before you took over NASA, you

were deputy director of OMB. So you are used to being in orbit.

That is a joke, but we will just let it go.

Senator MIKULSKI. You come with a great deal of management

experience and won all kinds of awards, and I believe your expertise in management is just what NASA needs right now. We are

hoping that if anyone can get NASA back on track, it is really

going to have to be you.
410

We look forward to working with you and I am going to go

through some of the challenges I believe that NASA is facing that

we would like to hear your views on today and, of course, we hope

to have other conversations with you as we prepare for markup.

The President has proposed a flat budget for NASA this year at

$15 billion. I must say I am disappointed that we continue to see

the flat budgets for NASA, especially considering the enormous

needs that NASA has.

We have issues related to shuttle upgrades, additional scientific

commissions, and an aging infrastructure that is troubling. These

are just a few of the needs that need to be addressed. Along with

that is the significant issue of the ongoing issue of the cost overruns of the space station.

NASA has to have a balanced program in terms of human space

flight, scientific research and aeronautics. In a speech you gave at

Syracuse last month, you said that NASA’s mission and vision was

to improve life here on earth and find life beyond. I think that is

an excellent vision. And to me, that is earth science, space science,

and biological and physical science.

But we are very troubled about the space station. The space station continues to be NASA’s number one problem. With the $5 billion in cost overruns, the station continues to be a dark cloud over

NASA’s horizon rather than a bright opportunity for research.

NASA must implement the management reforms and creditable

cost estimating this year. Otherwise, I am concerned that Congress

will have no faith in NASA’s cost estimates until the management

reforms are firmly in place and NASA starts delivering results.

Second, NASA must reaffirm that scientific research is the primary purpose of the space station. I am concerned that if we only

have three astronauts in the station, all they are doing is housekeeping, rather than the scientific discovery, some of which I know

we are going to see today.

Third, NASA needs to present Congress with a scientific research

plan that then lays out what it is going to do. The cuts to scientific

research aboard the space station have really cost support for the

program.

Another important issue is the future of the space shuttle. The

shuttle now costs $3 billion per year to operate, almost 20 percent

of the NASA budget. I know you are starting to look at privatizing

of the shuttle program as a solution. I believe that NASA must proceed very, very, very carefully before making any decisions related

to privatizing. And I know you will share with us what you think

is the best way.

I know that you are absolutely as committed as this committee

is to the safety of our astronauts. And we need to look at what is

the best way to get them into space safely and to return them to

safety safely and to be able to sustain them when they are. So we

look forward to the ideas and the money to do this.

I know we cannot fly the shuttle forever, and that is why we look

at other initiatives like the space launch.

Moving on to science, aeronautics, and technology, I am glad to

see that the administration has proposed a 10 percent increase in

the funding. I know that you want to start an in-space nuclear
411

power program, and I think NASA is—I think we need to discuss

this.

I am concerned that you have zeroed out Pluto. We could be

missing an opportunity if it does not launch. We only get every 200

years to do this.

Earth science, I am beginning to think we are beginning to see

the benefits of that investment, record numbers of users on earth

science, improving their understanding of how the earth works,

and even other Federal agencies making use of this information.

I know that we will always get double value from what we do

at NASA, that science, technology, discovery always leads to the

new ideas that either save lives, save communities, or generate

jobs. We really look forward to hearing what you want to do with $15

billion, how we can keep NASA flying, and I turn now to my very

able colleague, Senator Bond, for his comments.

STATEMENT OF SENATOR CHRISTOPHER S. BOND

Senator BOND. Thank you very much, Madam Chair. I join with

you in welcoming the new NASA Administrator Sean O’Keefe, the

first appearance before this subcommittee. It is usually not too

painful and we hope we can be constructive on all sides, but we do

have some very serious questions as we have discussed previously.

Mr. O’Keefe has some big boots to fill in replacing Dan Goldin,

who spent almost a decade at the helm of the agency. It is a big

job to fill not only because of the imprint that Mr. Goldin left, but

also because the agency continues to face a number of management

and budget concerns, many associated, as the Chair has said, with

the International Space Station and the space shuttle program, two

of NASA’s best known and visible programs.

I have a great deal of confidence that Sean will be a great NASA

administrator. And while he does not have an aerospace background, I think what is clearly needed at this agency are the critical management skills and budgetary expertise that I believe he

brings to address the previous inability of NASA to provide an adequate budget for its programs and to solve the management problems.

Mr. O’Keefe has been the staff director for the Senate DOD Appropriations Subcommittee, a comptroller of DOD, Secretary of the

Navy, most recently deputy director at OMB, and frankly he has

survived the blood and the water mentality at OMB, which should

auger well for his ability to succeed in another agency with a little

blood around it.

I also believe every new agency head must be provided an opportunity to demonstrate leadership and management abilities. We

will do all we can to support Mr. O’Keefe in meeting the many

challenges facing him at NASA.

In particular, the International Space Station, which is been

touted as the new crown jewel of NASA, now appears to be a rather expensive bit of costume jewelry. And since 1993 when the ISS

redesign work began, the program has gone through continuing fits

and starts, delays, additional costs resulting from Russia’s failure

to meet certain commitments, as well as other costs and delays resulting from problems caused by NASA and its contractors.
412

It would not surprise me if the Harvard Business School decided

to use the ISS decision-making and funding process for a whole

year’s worth of courses on government and business mismanagement. It has been that bad. That could keep a whole raft of students busy and professors for many, many months.

The problems all came to a head, at least most recently, in February 2001 when the key management personnel of the ISS identified just another little $5 billion in cost overruns for the space station to meet the assembly fact—those facts, and the crew has—this

has been a major problem. They have let the assembly and completion requirements, set that time—the administration and NASA

decided to reduce station funding requirements by cancelling or indefinitely deferring construction of ISS hardware, and by cutting

funding for space station research.

As currently formulated, NASA plans to reach what it calls ‘‘core

complete’’ by launching and completing assembly of the existing

ISS elements and then adding lab modules being built by Europe

and Japan.

I think the decision is correct, because of other funding priorities,

both within NASA and within the VA–HUD Subcommittee. I am

disturbed that we will not realize fully the potential of ISS as a

world-class research facility for science conducted in a micro-gravity environment.

This failure is further highlighted by the fact that the crew size

of the ISS is limited to a crew of three, while it requires two and

a half crew to operate and maintain the station. Despite arguments

to the contrary by some NASA staff, I do not believe that we are

serving our scientific mission well when we have one half time of

one crew member devoted to science.

At a minimum, without additional investment for a crew return

vehicle or the addition of more Soyuzes from Russia, most of the

complex science research that was anticipated to be conducted on

the station is not going to be accomplished.

Equally troubling is NASA’s attempt to control the costs and pay

for cost overruns by slashing $1 billion from space station research

budget projections from fiscal year 2002 through 2006. In the current year, there are $140 million in terminations within the ISS research account. Now, that is very troubling to us for a program

that costs as much as $100 billion after completion and operation.

On top of this and contrary to concerns raised last year in the

NASA budget hearing, NASA has allowed policies to be put in

place that will further reduce the stature of ISS from a research

facility to a guest hotel for the super rich.

Last year, Dan Goldin promised the international agreements on

visitors and crew standards would ensure that all visitors to the

space station would be trained comprehensively and qualified before permission would be granted to visit the station.

Instead I believe that the proposed policies on station visitors are

weak, insubstantial and could pose a deadly risk to every crew

member on the station. To me that is unacceptable, especially during the assembly of the station, which is a period of heightened

risk in an already extremely hazardous environment.

Well, I have a number of other issues I want to raise today for

the record. I am concerned about NASA meeting all the funding
413

needs associated with the space station program. The Aerospace

Safety Advisory Panel recently concluded its March 2002 annual

report by saying, ‘‘current and proposed budgets are not sufficient

to improve or even maintain the safety risks of operating the space

station or the ISS.’’

I think that raises additional issues as to the future of the shuttle, how safety concerns are prioritized, what is the relationship between the space station program, the development of a crew return

vehicle and the SLI, designed to develop second and possibly third

generation reusable launch vehicles. Each of these programs has

substantial costs. I am not convinced that the NASA budget can

sustain even the shuttle program and the SLI without a clearer vision of the goals and relationships.

Finally, on a positive note, I am gratified NASA is working with

the University of Missouri’s Center for General Physiology in the

area of gender-related issues in space flights.

As we look to explore the universe, commit men and women to

long periods of time in space, we need to understand the risks and

stresses on the human body of living in space. In particular, it is

critical to know the sex-specific factors that influence our ability to

adapt to the challenges posed by living in the harsh environments

encountered in the exploration of space.

Thank you, Madam Chair.

Senator MIKULSKI. Thank you.

[The statement follows:]

PREPARED STATEMENT OF SENATOR CHRISTOPHER S. BOND

Thank you, Madam Chair. I welcome the new NASA Administrator, Mr. Sean

O’Keefe, to his first appearance before the Senate VA/HUD Appropriations Subcommittee. Mr. O’Keefe has some big boots to fill in replacing Dan Goldin who spent

almost a decade at the helm of this agency. This is a big job to fill, not only because

of the imprint that Dan left on the agency, but also because the agency continues

to face a number of management and budget concerns, many of which are associated

with the International Space Station and the Space Shuttle Program, two of NASA’s

best known and visible programs.

However, I have a great deal of confidence that Mr. O’Keefe will be a great NASA

Administrator. And while Mr. O’Keefe does not have an aerospace background, he

does have the critical management skills that I believe are needed to address

NASA’s inability to budget adequately for its programs, and that once we solve

these management problems NASA will be on a smooth flight plan. In particular,

Mr. O’Keefe has been the staff director for the Senate DOD Appropriations Subcommittee, the Comptroller of DOD, Secretary of the Navy, and most recently the

Deputy Director at OMB. Just to survive the ‘‘blood in the water’’ mentality at OMB

augurs well for his success at NASA.

I also believe every new agency head must be provided an opportunity to demonstrate their leadership and management abilities and I intend to provide whatever support I can to Mr. O’Keefe in meeting the many challenges facing him at

NASA.

In particular, the International Space Station which has often been touted as the

new crown jewel of NASA now appears to be little more than very expensive costume jewelry. Since 1993, when the ISS redesign work was begun, the program has

gone through many fits and starts, including delays and additional costs resulting

from Russia’s failure to meet certain commitments as well other costs and delays

resulting from problems caused by NASA and its contractors. It would not surprise

me if the Harvard Business School decided to use the ISS decisionmaking and funding process for a whole year’s worth of courses on government and business mismanagement. It has been that bad.

These problems all came to a head in February 2001 when the key management

personnel of the ISS identified another $5 billion in cost overruns for the Space Station to meet assembly and completion requirements.
414

Since that time, the Administration and NASA decided to reduce station funding

requirements by canceling or indefinitely deferring construction of some ISS hardware and by cutting funding for space station research. As currently formulated,

NASA plans to reach what it calls ‘‘core complete’’ by launching and completing assembly of the existing ISS elements and then adding laboratory modules that are

being built by Europe and Japan.

While I believe the decision is correct because of other funding priorities, both

within NASA and within the VA/HUD Appropriations Subcommittee, I am disturbed that we will not realize fully the promise of the International Space Station

as a world class research facility for science conducted in a microgravity environment. This failure is further highlighted by the fact that the crew size of the ISS

is limited to a crew of three while it requires 21⁄2 crew to operate and maintain the

station. Despite arguments to the contrary by some NASA staff, I do not believe

much compelling science can be accomplished by only one-half a crew member. At

a minimum, without additional investment for a crew return vehicle or the addition

of more Soyuzes from Russia, most of the complex science research that was anticipated to be conducted on the Station will never be accomplished. Equally troubling

is NASA’s attempts to control costs and pay for cost overruns by slashing some $1

billion from space station research budget projections from fiscal year 2002 through

fiscal year 2006. In fiscal year 2002 alone, there are $140 million in terminations

within the ISS research account.

This is not acceptable for a program that could cost as much as $100 billion after

completion and operation. On top of this and contrary to concerns raised last year

in the NASA budget hearing, NASA has allowed policies to be put in place that will

further reduce the stature of the ISS from a research facility to a guest hotel for

the super rich. Last year, Dan Goldin promised that international agreements on

visitors and crew standards would ensure that all visitors to the Space Station,

would be trained comprehensively and qualified before permission would be granted

to visit the Station. Instead, I believe that the proposed policies on Station visitors

are weak, unsubstantial and could pose a deadly risk to every crew member on the

Station. Again, this is unacceptable, especially during the assembly of the Station

which is a period of heightened risk in an already extremely hazardous environment.

I have a number of other issues and concerns that I intend to raise today or as

questions for the record. In particular, I am concerned about whether NASA is

meeting all the funding needs associated with the Space Shuttle program. The Aerospace Safety Advisory Panel recently concluded in its March 2002 annual report

that ‘‘current and proposed budgets are not sufficient to improve or even maintain

the safety risks of operating the Space Shuttle or the ISS.’’ This raises additional

issues as to what is the future of the Shuttle, how safety concerns are prioritized

and what is the relationship between the Space Shuttle program, the development

of a crew return vehicle and the Space Launch Initiative (SLI) which is designed

to develop second and possibly third generation reusable launch vehicles. Each of

these programs have substantial costs and I am not convinced the NASA budget can

sustain even the Shuttle program and the SLI without a clearer vision of the goals

and relationship of these programs.

Finally, I am very gratified that NASA is working with the University of Missouri’s Center for Gender Physiology in the area of gender-related issues in space

flight crews. As we look to explore the universe and commit men and women to long

periods of time in space, we need to understand the risks and stresses on the

human body of living in space. In particular, it is critical to know the sex-specific

factors that influence our ability to adapt to the challenges posed by living in the

harsh environments encountered in the exploration of space.

Thank you, Madam Chair.

Senator MIKULSKI. I note that Senator Ted Stevens is here, the

ranking member.

Sir, I know that you have many demands on you. Would you like

to make a statement?

STATEMENT OF SENATOR TED STEVENS

Senator STEVENS. Madam Chair, you are very kind. Senator

Inouye is opening our defense hearing, well, in just 2 minutes. I

came to pay my respects to Administrator O’Keefe and to just put
415

one little item in the budget, which—in the record, which I will

bring to Mr. O’Keefe.

I am a little worried about the fact that Gilmore Creek, I hear,

is maybe subject to being closed. That is the last tracking station

on American soil. I would urge that you put down that rumor if it

is not true and review it if it is.

Thank you very much.

Senator MIKULSKI. Thank you, Mr. Chairman.

In order of arrival, it was Senator Craig, Senator Shelby, and

Senator DeWine. I wonder if you want to make any statements

now or if you would prefer to do that as you move into your questions or concerns you might have—Senator Craig or——

Senator SHELBY. Madam Chairman, I just want to associate my

remarks with those of Senator Bond. I think he laid out some very

serious and important questions that I hope Mr. O’Keefe will address.

Senator MIKULSKI. Thank you, sir.

Senator Craig.

STATEMENT OF SENATOR LARRY E. CRAIG

Senator CRAIG. Madam Chairman, thank you.

Director O’Keefe, we welcome you to the committee. I also am

frustrated by the very concerns that Senator Bond has spoken to.

We Americans have a love affair with space, and it is still there.

There is no question about it. And so we here who appropriate for

your activities have a similar excitement about it.

But you are there and I think you have been put there to bring

some sense of balance and fiscal responsibility to this agency and

also to chart new directions for it. And that is extremely important

for all of us, because in reference to science and what can be

gained, this morning once again we are seeing those phenomenal

new images coming out of Hubble and going, ‘‘Whoa, that is exciting.’’ And if it were not for the space program, we would not have

been able to make that step.

I have been associating myself with it for some time as Senator

Bond mentioned, university programs that are extremely valuable.

Many of the researchers and educators from Idaho who take part

in those programs see phenomenal benefit from them.

We, in Idaho, have grown increasingly excited about the Educator in Space Program. As many know, mission specialist Barbara

Morgan is from McCall, Idaho, and she is slated to go up sometime

in 2004 in a mission.

That excites us all. But it is an opportunity to extend once again

to our young people a tremendous challenge towards space, space

exploration and as my colleague from Missouri mentioned, as the

chairman mentioned, science. We have invested a great deal in the

biological sciences for the last decade and this Congress has been

committed to them as the physical sciences in part have languished.

And I would hope that we can reinstate our purpose there, and

NASA plays an extremely important role in that. Your new nuclear

system initiative is exciting for me to see where you want to go.

And I say that, and your jointly working with the Department of

Energy is an opportunity.
416

It is not only an opportunity for us to be able to build long-term

energy supplies or energy capability, but also to extend greater research into the area of nuclear reactors and energy from that type

of thing.

We in Idaho are very proud of the fact that in our laboratory

over 52 nuclear reactors have been built over the last five decades

of all shapes and sizes. Working with Argonne and other laboratories around the Nation, we can lead the world, and this is an initiative that I am pleased that you are looking at. I think it is important for all of us in the long-term efforts in space and the longterm efforts of producing viable energy for our country.

Madam Chairman, let me put the balance of my comments in the

record.

We are pleased to have you before us, sir, Mr. Administrator.

And I trust that next year you will be able to tell us about all of

the corrective measures made and the great new direction and

course that NASA is taking.

Thank you.

Mr. O’KEEFE. Thank you, sir.

Senator MIKULSKI. Without objection, sir, your statements are in

the record.

[The statement follows:]

PREPARED STATEMENT OF SENATOR LARRY E. CRAIG

Today we are hearing from the Administrator of NASA about the important programs conducted by this leading science agency. Over the last several months, I

have met with many researchers and educators from Idaho who take part in and

benefit from NASA’s programs. Administrator O’Keefe, I commend you and the people of NASA for the excellent work you do in getting young people excited about

science.

I know your testimony makes reference to the sobering statistics regarding the

workforce challenges faced by—not only NASA but all of the Federal Government—

in terms of the aging of our Federal scientists and engineers. We must do all we

can to reinvigorate our science and engineering base in this country—to arrest this

decline, and starting turning those statistics around.

One of the ways that students really become engaged is through the ‘‘Educator

in Space’’ program. I am obviously very excited that you recently announced—and

personally conducted a joint press conference with—NASA’s first ever ‘‘Educator in

Space’’—Mission Specialist Barbara Morgan from McCall, Idaho. You can bet that

school children all over Idaho and all over the world will be following Barbara’s

story as she prepares to take part in her space mission in 2004.

In your testimony we will also hear about a new NASA initiative that has really

peaked my interest. This new initiative is the Nuclear Systems Initiative. This new

program would cost about $800 million over 5 years. What excites me about this

new program is that it acknowledges something I have long believed. If this country

intends to explore the far reaches of the universe, it will not be possible to power

these craft without nuclear power.

Working jointly with the Department of Energy, NASA has used nuclear power

systems in space for over 35 years. These nuclear generators use the heat of the

decay of nuclear materials to generate electricity. These systems are safe, proven,

reliable, maintenance free, and capable of producing heat or electricity for decades

under remote, harsh environments such as deep space.

NASA’s new Nuclear Systems Initiative will improve upon these existing nuclear

generators. Additionally, this new program will seek to develop a uranium-fueled

nuclear reactor that will power an advanced electric propulsion system. I think this

development is critical to the future of deep space exploration.

The Department of Energy’s Office of Nuclear Energy has been a partner with

NASA in all of its nuclear space initiatives. The same will be true of this new initiative. When it comes to the development of new, nuclear reactor technology, the

Idaho National Engineering and Environmental Laboratory along with Argonne

West—in Idaho—are DOE’s lead laboratories.
417

Over the course of the last five decades, 52 nuclear reactors have been built at

the INEEL. I encourage you to visit these facilities in Idaho and see for yourself

what we can do. Working jointly with NASA and DOE, I look forward to the contributions that Idaho can make to this new Nuclear Systems Initiative

Senator MIKULSKI. Senator DeWine.

STATEMENT OF SENATOR MIKE DEWINE

Senator DEWINE. Madam Chair, thank you very much.

Administrator O’Keefe, good to see you again.

Let me express my support for your efforts in getting the Nuclear

Systems Initiative started. I have confidence that this will provide

the agency and the country with the technologies that we need to

support future space missions, and I applaud you for that.

Let me also say that the NASA Glenn Center in Ohio is a NASA

Center that is really, I think, able to contribute to this initiative

through its electric propulsion technology capabilities and flight developmental heritage. And you and I have talked about that extensively in the past.

So, again, we welcome you here and look forward to your testimony.

And, Madam Chair, I would just ask unanimous consent that the

balance of my statement be made a part of the record.

Senator MIKULSKI. Thank you, Senator DeWine.

[The statement follows:]

PREPARED STATEMENT OF SENATOR MIKE DEWINE

I would like to recognize the NASA Glenn Center in Ohio as an outstanding

NASA Center that is able to contribute to this initiative through its electric propulsion technology capabilities and flight development heritage. NASA Glenn provides

a significant contribution to the economy of Ohio. The Glenn Research Center has

a total employment impact of more than 12,000 Ohio jobs and an economic output

of approximately $1.1 billion for the entire State. Glenn is particularly well suited

to have a major leadership role as part of this initiative. I will also point out that

NASA Glenn is uniquely qualified to lead systems analysis and engineering efforts

in the development of many non-nuclear technologies including: (a) high performance ion thrusters, (b) high voltage power management and distribution systems,

and (c) power systems including high temperature lightweight radiators.

HUBBLE SPACE TELESCOPE

Senator MIKULSKI. Mr. O’Keefe, we now turn to you for your testimony on the appropriations request and the management guidance that you want to provide the agency. But we also know that

Hubble—as the new retrofitted Hubble with its new eye in the sky

has sent back some really wonderful pictures and pictures that tell

us even more about the universe.

You know, we are very proud of Hubble, because of Hubble itself

out there looking to the edges of the universe, but the fact that

Goddard is the catcher’s mitt of the information coming in and

then it tosses it to the Johns Hopkins Space Telescope Institute for

its marvelous analysis and so on.

So we in Maryland view the Hubble kind of—right now, it has

been up there so long, it is kind of like the Cal Ripken of space

telescopes.

And so we are—but unlike Cal, we had a very expensive contact

lens that we had to retrofit, which also says something about the

fact that even with the station, we know it has got problems, but
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when we get it on track, like we got Hubble on track, the results

can be stunning.

So why do you not go ahead and tell us about your request and,

of course, bring to the table whoever you wish?

STATEMENT OF SEAN O’KEEFE

Mr. O’KEEFE. Thank you, Madam Chair, Senator Bond, members

of the committee. Thank you all very much for your hospitality and

willingness to consider our requests on a variety of fronts and, your

very important, I think, opening statements have touched on the

very challenges that I have seen in the course of my vast tenure

of 4 months now at NASA. These are exactly the kinds of issues

that I am wrestling with every day, and I think you put your finger

to them.

First and foremost, I want to tell you how pleased I am to be

here at this committee, being an alumni of the Senate Appropriations Committee staff longer ago than I care to admit, but nonetheless a very proud member of that alumni team and very grateful

for the opportunity to be here.

I would like to submit a statement for the record, if you would

permit, and quickly summarize a couple of points, and then touch

on the Hubble images, Madam Chair, that you referred to up front.

Senator MIKULSKI. Without objection, it will be.

Mr. O’KEEFE. First and foremost, the issues I think that best

characterize the approach that we are taking for the fiscal year

2003 budget before you and the request that the President has advanced, is characterized first by an approach to try to emphasize

enabling technologies to overcome technical limitations that have

been structural for some time.

That is a mission objective of trying to deal with some of the enduring kinds of challenges that sort of limit our ability to explore

and discover anywhere. Most characteristic of that and touched on

in the statements of several members here this morning, is our objective of trying to look at propulsion systems and power generation

capacities that get us past what our current limits that, quite

frankly, in the speed that we travel once we do the amazing effort

of getting into low-earth orbit in 8 and half minutes, we are basically traveling——

Senator MIKULSKI. Mr. O’Keefe, I appreciate you giving oral

testimony——

Mr. O’KEEFE. Yes, ma’am.

Senator MIKULSKI [continuing]. But could you follow your written

one in some order as you summarize it? It is hard for us to follow

you in a very complex technical testimony.

Mr. O’KEEFE. Oh, I apologize.

Senator MIKULSKI. Okay.

Mr. O’KEEFE. I am sorry. I have got to get the statement then.

Senator MIKULSKI. Yes, because we have got a statement. We

cannot read the statement and listen to you.

Mr. O’KEEFE. I understand.

Senator MIKULSKI. But if you could just follow some order with

your priorities.

Mr. O’KEEFE. I apologize.
419

Senator MIKULSKI. Please—and I am prepared to listen to the

oral, but I have got to have a framework.

Mr. O’KEEFE. My apologies. All right.

I am sorry. I attempted to just cut through two issues as a

means to just summarize this statement and then move to the

Hubble issues to quickly work through that.

First and foremost, our mission objectives and the statement that

we have prepared here for the vision and mission of where we

would like to take the agency is best summarized by a concern that

we focus on and establish a priority for enabling technologies. And

that is essentially what the first initial couple of pages here has

attempted to touch on.

And so our attempt is to emphasize what have been structural

deficiencies and difficulties that we have encountered as part of our

challenge to explore and discover. And so in that nature, the objective here is to look at very specific technologies that would overcome propulsion system and power generation capacity limits that

would otherwise exist.

And in that regard, our primary effort for the most mature technology we seek to emphasize is for nuclear systems initiative,

which is a maturing technology that gives us an opportunity to

travel at speeds that exceed what we are currently restricted to,

which right now are precisely or within the same realm or framework of what we did on Friendship Seven 40 years ago when Senator Glenn took his first trip.

So as a consequence, we are in that same set of limitations there.

And part of what we attempt to describe here in the opening statement as that objective is to look at the enabling technologies to

achieve that vision and mission statement objective.

A second area I want to touch on very briefly that is summarized

towards the end of the statement as well, and then we will move

from there again, with your indulgence, Madam Chair, to a discussion of the Hubble imaging that has just come back as of yesterday,

is to touch quickly on the International Space Station and the approach that we are taking in this regard. And this is summarized

later on page six and thereafter, in which our attempt is to look

at five very specific dimensions of International Space Station to

infuse a sense of management discipline to this particular process

that we believe will correct some of the deficiencies and I think

that Senator Bond touched on very, very clearly in his opening

commentary as what we see as the nature of our problem.

First and foremost is to emphasize the science priorities. This

must be driven by science requirements. The purpose of having an

International Space Station is multi-fold, but its first primary objective should be to achieve the science and research objectives that

have been outlined.

And in that regard there is a wide array of scientific community

assessment and judgment that has been rendered over the course

of the years, which unfortunately does not have any specific priority order attached to it.

In that regard, what we have done is asked a team of external

scientists who represent all of the disciplines within the scientific

community to look at this range of approaches that have been advocated for what the scientific and research objectives will be on
420

station and rank order prioritize what should be accomplished

using this astonishing capability and infrastructure that we have

managed to deploy at this juncture.

That is the first objective, to reach a prioritization effort, which

gives us a very clear understanding of what we can use to maximize the research potential for those research objectives that

uniquely require the kind of capability and micro-gravity condition

that exists on the International Space Station; and then as a follow-on matter, also to emphasize those research opportunities

which would give us a breakthrough potential in those particular

fields or disciplines.

A second area of concern that is, again among the five focus

areas that we are looking at for station, I think address the issues

that were summarized well in the opening statement, is to focus

very specifically on the engineering challenge of what we are dealing with here.

Over the course of the next 2 years to achieve the core configuration—this is not so much limited by resources as it is by just the

dynamics of large scale systems integration challenge.

And, again, summarized as item two is the engineering objectives

on page seven, which very specifically we looked to the course of

the next 2 years through early fiscal year—I am sorry—through

early calendar year 2004.

There are ten successive shuttle flights with payloads that will

build out the International Space Station in the graphic—both here

on the chart as well as before you—that need to be achieved in succession. And every one of those missions must be successful. Everyone has to be building on the success of the previous mission.

That is not so much limited by resources as it is by just the engineering challenge of that many flights, that much of a payload and

the succession of that kind of a payload integration challenge.

So as a consequence, our approach is to focus very directly on the

program management challenges of what it will take to achieve

that particular objective, that milestone, which then could permit

and facilitate the opportunity to consider the larger international

partner assembly complete configuration that was envisioned so

many years ago.

But as an engineering matter between now and, you know, 2

years from this stage in early 2004, if we do not achieve that milestone, we cannot look at expanding the scope of the International

Space Station beyond what it is today. So it must be achieved and

it must be done successfully in each of those successive ten missions to build out the entire station to facilitate that opportunity.

The third quick item, again, touched on in your opening statements that is a matter of extreme interest and concern to me is the

cost estimation and analysis problem. There is no question that exactly the history that Senator Bond recounted is the manner in

which it was revealed.

In early 2001, the determination was that we were $5 billion at

present over the estimate. And at this juncture, we have asked for

and commissioned, as the statement describes, is an internal cost

estimating procedure to validate what it will take to achieve core

configuration and then to look at what the additional excursions
421

would be for the international partner complete configuration that

would follow thereafter.

Secondary, we have also asked for an independent cost assessment, part of the recommendations of the Young Commission that

reviewed this matter last fall and made recommendations to NASA

on that point. We have commissioned that particular independent

cost assessment, all of which we expect to converge this summer.

So I can give you an estimate of what we believe to be the cost

engaged in this particular activity. At this juncture, it is our best

estimate, but it is one that I think needs to be validated further

with a more disciplined cost estimating approach.

The fourth area is the international partnership dimension that

you referred to as well. The international agreements call for a

build out of International Space Station beyond what is referred to

as node two, which is that particular milestone that occurs in the

early part of 2004. And to reach those agreements and to make

sure that we have accomplished that task is what we attempt to

touch on in that last point.

And, finally, on the fifth objective of where we are on the International Space Station is to look at what the flight rate requirements are for shuttle and payload missions for Soyuzes, for

progress flights from our Russian partners engaged in the activity,

to assure that we have supported this particular 2-year endeavor

at this juncture to assure we reach that core configuration and

then can discuss beyond that.

As it stands now, the flight rate that is built into the budget is

the maximum achievable flight rate to support this particular engineering dynamic. So as a consequence, there is no more aggressive

deployment of that particular build-out procedure according to the

project management and engineering team that manages the International Space Station and what we have built into the program.

And it is designed purposely in order to achieve that systems integration success.

With that, Madam Chair, if you would permit me, those two

issues are the primary topics I wanted to at least touch on briefly,

and then to defer quickly to a discussion of the Hubble imaging effort that just occurred. And, again, I think your characterization of

it is precisely right.

And I would simply add one footnote to the history of it. Ten

years ago, this was an asset that was roundly criticized as an absolute failure, and as you correctly described, a corrective lens was

installed by a remarkable astronaut by the name of Story

Musgrave, who performed a series of space walks that were just

positively over the top in terms of what anybody thought was

achievable to bring this into a serviceable condition.

But what we are getting back today as a consequence of the

Hubble servicing missions that have occurred since that time, since

his success in 1993, have really been beyond what we ever could

have expected. And a gent that I have asked to join us here today

is a veteran astronaut of four different missions, two of which were

Hubble servicing missions to include the most recent one, STS 109,

which was launched on March the 1st and returned in mid-March

after the very successful upgrade of the power units aboard as well
422

as the infrared imaging systems, all of which exceeded our expectations.

Our fondest hope was that we would get a ten-fold increase of

what we would see coming back as imaging from Hubble, which

has already, even before the servicing mission, rewritten the astronomy books.

But as a consequence of this latest mission, I think we have not

seen anything yet in terms of the caliber of materials that has

come back.

John Grunsfeld is, again, a veteran astronaut, a fellow who was

aboard the last mission, and in the history and in the legend of a

guy like Story Musgrave, he too is becoming legendary, given the

fact that he has done two of these servicing missions. And among

all of his extraordinary characteristics as an astrophysicist and just

a remarkably talented fellow, it turned out that his greatest attribute on this mission, on the several EVA space walks that he did

to service the Hubble mission over the course of several hours, to

include almost 7 and a half to 8 hours each mission—his greatest

attribute is because all the control panels on Hubble are on the

left-hand side, he is a left-hander, and so it made it an awful lot

easier to service. So around NASA he is referred to as the ‘‘southpaw savant.’’

So I would like to introduce Dr. John Grunsfeld, who will walk

us through a few of the images that have just returned from

Hubble and released just yesterday.

Senator MIKULSKI. Thank you.

[The statement follows:]

PREPARED STATEMENT OF SEAN O’KEEFE

I appreciate the opportunity to appear before the Subcommittee today in my new

capacity as NASA Administrator. My objective throughout my stewardship of this

storied Agency is to ensure that the Congress and the public are fully aware of our

accomplishments, our current efforts and our plans for the future. My job as Administrator is to remind everyone of what NASA does and what we are capable of doing.

It’s a responsibility I take very seriously. I believe we are at a crossroads in NASA’s

history. We have an opportunity here and now to reinvigorate the Agency’s agenda

and renew the entrepreneurial spirit present at NASA’s beginning—a continued

characteristic of American culture.

The President’s fiscal year 2003 budget proposal for NASA of $15.1 billion reflects

the Administration’s commitment to NASA’s core research efforts and its fundamental mandate to advance aeronautics and aerospace science and technology. This

budget initiates exciting new efforts in the realms of space transportation and propulsion. It builds upon our abilities to measure and understand our home planet

and the natural—and unnatural—forces that shape our environment. I believe it is

a well-balanced and progressive budget that allows us to set the stage for the future. Enclosure 1 displays NASA’s fiscal year 2003 budget request.

In the 4 months since my confirmation, I have traveled across the country to visit

each of our 10 Centers to meet NASA’s dynamic workforce and have seen firsthand

the remarkable science and technology efforts that are the underpinning of our endeavors. In this relatively short period of time, the Agency has taken a fresh look

at the long-term management, resource, and technical challenges while continuing

to expertly carry out highly complex day-to-day operations. Together we have

charted a vision and mission that I look forward to sharing with you this morning.

My testimony today will focus on the talent and technology that is embedded in

the NASA organization, the challenges we face, and, more importantly, the steps we

will take as an Agency to chart a clear course for the future. We are intent on continuing the gains made over 44 years while pushing the edge of the envelope of

what appears today to be impossible. NASA today is working together, as one Agency, committed to a clear vision and refined mission that will serve as the blueprint

for service to America.
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What NASA needs now is a roadmap to continue our work in a more efficient,

collaborative manner. I first outlined this roadmap for NASA on April 12 at the

Maxwell School of Citizenship and Public Affairs, Syracuse University. NASA’s imperative is not only for the sake of knowledge—it is for our future and our security.

I have introduced a new strategic framework and vision for NASA. It is a blueprint

for the future of exploration. It is a roadmap for achievement that we hope will improve the lives of everyone in this country and everyone on this planet.

That is a bold statement, I know. But, I am confident in saying this because the

unique work that NASA does truly touches all of our lives.

This is NASA’s vision for the future. Our mandate is:

—To improve life here;

—To extend life to there; and,

—To find life beyond.

This vision is much more than carefully arranged words; it frames all that we do

and how we do it.

So, how do we get to that impressive picture of the future? The answer is by executing NASA’s mission:

—To understand and protect our home planet;

—To explore the Universe and search for life; and,

—To inspire the next generation of explorers as only NASA can.

To understand and protect our home planet, NASA develops and employs the

technology to make our nation and society a better place. We forecast the impact

of storms on one continent upon crop production on another continent, track and

predict the patterns of mosquito-borne diseases, and study climate, geography and

the environment.

NASA’s contribution to security comes from increased cooperation and the sharing

of imagery and unique technology with the Federal agencies charged with the defense of our homeland. Aerospace innovations developed at our centers prevent civilian aircraft from being used as weapons. Improved air traffic control safety systems

and engineering that will make future airplanes more efficient and environmentally

sound are clear examples of our role in the changing nature of transportation and

our Nation’s security. Hypersonics and quiet aircraft are efforts to speed transport

and, in doing so, bolster the economy.

Our mission’s second theme is to explore the Universe and search for life. NASA

will exploit advanced technology, robotics, and will eventually use humans to explore and seek the answers and the science behind our most fundamental inquiries:

How did we get here? Where are we going? Are we alone? If we are to achieve our

ambitious objective of exploring the universe and the searching for life beyond our

Earth, be it through flights to Mars or observing faraway planets, we must continue

to learn about and overcome the technical hurdles that remain in our quest to answer our most probing questions.

NASA’s recent achievements are only the beginning of the Agency’s role in rewriting tomorrow’s textbooks for America’s children, as well as for today’s astronomers

and astrophysicists alike. Just yesterday, NASA released the first images received

from the newest science instrument on the Hubble Space Telescope, the Advanced

Camera for Surveys (ACS). The new ACS was part of the recent and highly successful STS–109 servicing mission, during which astronauts helped take Hubble to the

next level of excellence. This new and improved camera now offers us 10 times the

discovery power than the camera it replaced. With the ACS, our view into the

depths of our Universe has been taken to a new level. I would like to share with

you today a set of the stunning new images from the Hubble Space Telescope, including an image of a spiral galaxy dubbed ‘‘Tadpole,’’ residing in a constellation

about 420 million light years away; an image of the center of the Omega Nebula,

a hotbed of newly born stars, 5,500 light years away; and, an image of a pair of

colliding galaxies nicknamed ‘‘The Mice,’’ more than 300 million light years away.

Later this month, we will launch the GALEX, Galaxy Evolution Explorer, which

will use ultraviolet light to conduct an all-sky ultraviolet survey and detect millions

of galaxies located billions of light years from our earth. Next year, we will travel

further into our own solar system with the launch of the Mars Exploration Rovers

and Mars Express missions. The Mars Rovers will take us beyond the success of

the Mars Pathfinder mission in 1997 and allow us to analyze rock and soil samples

on the Martian surface at a microscopic level. Mars Express, a mission planned by

the European and Italian space agencies, will be the result of international collaborative efforts with NASA. This mission will take us another step closer to our search

for evidence of past or present life on Mars. In January 2003, we will launch the

last of NASA’s great observatories, the Space InfraRed Telescope Facility, destined

to be a cornerstone in our Astronomical Search for Origins Program and allowing

us to peer into regions of space currently hidden from our view.
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If we are to achieve the mission of exploring the universe and searching for life,

there is much we must still learn and many technical challenges that must be conquered. Today’s chemical energy rockets that have been the engine of exploration

since the inception of space travel are today at the limit of what they can deliver.

Using current technology, if we were to embark to explore Pluto in 2006, the earliest

we could arrive there is 2014–2016; and then, upon our arrival, we would only be

able to obtain meaningful research for 4–6 weeks. That is an 8–10 year travel period

for 4–6 weeks of science. NASA’s fiscal year 2003 budget includes nearly $1 billion

for a nuclear systems initiative as a first step in addressing this challenge. Nuclear

propulsion is a mature technology that has been used safely by the U.S. Navy since

1955. Since that time, the Navy has sailed over 120 million miles encompassing

5,000 reactor years without incident. This technology may hold the key to overcoming the time/distance challenge, and its application to space travel has great potential.

Propulsion is only one of the challenges facing further human exploration of

space. Still unknown are the long-term effects of radiation and exposure to a microgravity environment on humans. The fiscal year 2003 budget includes funding for

a new initiative for space radiation research.

Our third mission objective is to inspire the next generation of explorers. America

looks to NASA to build an unequalled scientific base of knowledge and motivate our

youth to embrace math, science and engineering. While opportunities in the technology sector are expected to quadruple this decade, the pool of college students enrolled in science and engineering courses continues to decline. NASA has an obligation to the nation and its own workforce to reverse this trend.

NASA faces similar challenges with its scientific and engineering workforce. During one of my recent Center visits, I found that only 62 engineers out of a 3,000-

person workforce were less than 30 years old. In fact, as an Agency, our over-60

population is three times larger than the under-30 workforce. Inspiring the next

generation of explorers to enter fields of science and engineering is integral to

NASA’s success in reconstituting our workforce for the 21st Century challenges.

Students are only part of the education equation at NASA. Our Nation’s educators

are also a critical component of NASA’s revitalized education focus. Teachers at all

levels already possess the skills to inspire and plant the seeds necessary for this

Nation to grow the next generation of science and technology leaders. NASA can

best introduce itself and the science that it represents into the classroom by teaming

up with educators, especially at the younger grade levels.

Inspiring future generations works in synergy with NASA’s mission to protect our

home planet. The U.S. Commission on National Security for the 21st Century (the

Hart-Rudman Commission) concluded that advances in technology and changing

economies mandate an increase in the level of technology literacy across society. It

is clear that technological human capital is an essential component of our national

security equation.

Our mission concludes with the statement, ‘‘as only NASA can.’’ Our Agency is

one of the Nation’s leading research and technology Federal agencies with unique

tools, capabilities and expertise that represent a National asset. The Agency contributes to America in a broad spectrum of areas. Medical technologies, aerospace innovations, spin-offs, nano-technologies, and countless commercial applications are rooted in NASA discovery. Our commitment to the American taxpayer is to continue

providing a direct and very tangible means of improving life on our planet. Extending life beyond the reaches of our earth is not a process driven by any particular

destination, but by science that will contribute to the social, economic, and intellectual growth of our society.

NASA provides a constant return on taxpayer dollars with each new discovery,

telescope picture, launch, patent, and newly inspired child or adult. That being said,

none of the ambitious plans that I have detailed for the Agency will take root if we

fail to improve the management of our resources, commit to fiscal responsibility, and

establish a clear set of priorities. A clear vision and integrated mission are important foundations for NASA’s future success, but success requires that we embrace

a wide variety of tools to move us forward.

At NASA, and at other departments and agencies across the Federal Government,

we are vigorously implementing the President’s Management Agenda as a powerful

management initiative. Each of the five items included in the Agenda applies directly to NASA.

First on the Agenda is the strategic management of human capital. As I mentioned previously, we face challenging times as we reconstitute and reshape our

workforce for the 21st century. Today we have an extremely experienced workforce

in terms of overall capability. The downside, however, is that almost one-third of

the workforce will be eligible to retire within the next 3–5 years. We must aggres-
425

sively deal with this leadership and workforce challenge. I have recently forwarded

a series of legislative provisions to the Office of Management and Budget, which address this challenge head-on. These provisions will complement the Administration’s

Managerial Flexibility Act, and I look forward to working with the Congress to ensure that these essential tools are enacted into law.

The second element of the Agenda is competitive sourcing. We are thoroughly examining the best ways to motivate a competitive sense in all we do. By focusing on

results and outcomes, we will find the most efficient means to accomplish our goals.

The third element of the Agenda is expanded electronic government. We must pay

specific attention to information technology and ensure that the information technology process is integrated into Agency decision-making.

The fourth element of the Agenda is improved financial management. I am

pleased to report that we are aggressively implementing our integrated financial improvement program, which is now in the third year of its implementation schedule.

I have tasked the staff to explore all options to determine whether we can accelerate

implementation throughout the Agency.

The fifth element of the Agenda involves budget and performance integration. We

must become results-oriented and link our budgets to performance. We will breathe

new life into the Government Performance and Results Act. We in NASA are spending a great deal of effort into developing metrics to measure performance.

I would now like to provide a status of two of our major programs.

International Space Station

The International Space Station (ISS) is without precedent in the history of the

U.S. space program. The ISS Program has had a year of spectacular technical

achievements, which include ground preparation and checkout, launch integration,

and on-orbit assembly and operations. To date, the ISS program has achieved remarkable technical successes; however, it has not been equally successful in controlling cost growth. Last year, NASA projected an overrun in the amount it needed

to complete the space station, as then planned, of up to $4.8 billion. While some of

that growth may be attributable to such factors as inadequate initial requirements

definition, added content, late delivery, and development problems leading to cost

variance, there are clearly areas of fiscal management and program control that

need improvement.

The President’s Budget Blueprint for fiscal year 2002 laid the groundwork for attaining cost control and regaining credibility for the program to reach its full potential. As a result, a course of action was prescribed to get cost growth under control

and restore confidence in NASA’s cost management, and to achieve the science priorities for which the Nation has made a large investment. We are continuing with

the reassessment and review activities that we began last year that followed the

Blueprint, but did not eliminate the cost challenge. The President’s fiscal year 2003

budget projections include about $600 million of savings that NASA will realize

through the implementation of identified program initiatives, and a process that

continues to seek additional savings while containing the threats to further ISS cost

growth. While steps taken last year were designed to contain cost growth and to

gain better understanding of its source and nature, this year will be one of corrective action—putting in place the right processes, tools, management controls, and

measures to improve and evaluate the ISS program.

Thanks to the efforts of the ISS Management and Cost Evaluation (IMCE) Task

Force, led by Mr. Thomas Young, we are well along in effecting proper controls and

regaining credibility. I have reviewed the Young team’s recommendations and have

endorsed them as a roadmap to improve the ISS Program management. As a result,

the ISS management has already taken actions to develop implementation strategies.

The following five points are guiding our efforts at reform and revitalization of

the ISS program:

Research Priorities.—Establishing an integrated portfolio of science and technology priorities that maximize the benefits of space-based research within available

resources. In addition to addressing the cost challenges of the ISS, we must make

a renewed determination of the research goals and on-orbit capabilities that we

want the ISS to achieve. Our priority should not be to simply build an ISS to a specific hardware complement and then seek research and experiments to make use of

the hardware. The ISS Program should be driven by high-priority research objectives. NASA has recently established a Research Maximization and Prioritization

(ReMaP) Task Force to assess how high-priority research objectives can be best met

by ISS within available resources, and how the resulting research strategy might

evolve, given the possibility of research-driven enhancement to the ISS beyond U.S.

Core Complete.
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Engineering Development/Deployment.—Development of a program road map that

focuses on successfully achieving a ‘‘core complete’’ configuration within budget. This

will not be easy, but we are dedicated to making it happen. Therefore, it is imperative that Congress provide us with the requested funds so that we can meet our

commitment to achieving a core Station. Should NASA demonstrate that reforms

are implemented and cost credibility is regained, this will enable future decisions

towards a requirements-driven ‘‘end state’’ that will, defined in terms of science priorities, allow an expanded research potential for us and our international partners.

Cost Estimation and Analysis.—The ISS is the largest and most complex engineering development program ever pursued by the United States. Implementation

of improved methodologies, tools and controls are underway and will allow us to regain credibility and improve our ability in financial forecasting and strategic planning capabilities. An independent cost review is underway to better understand our

costs. These projects will also be beneficial to the Agency at large.

International Partnerships.—An important challenge is maintaining the ISS international partnerships. Our partners have expressed their concerns stemming from

NASA working to get the fundamentals right to achieve U.S. core complete; and

then to identify options beyond U.S. core complete to realize the full potential of the

ISS. Although the configuration of the ISS has been modified to meet the cost challenges we face, the fundamental purposes remain—research and international cooperation. To reaffirm NASA’s strong commitment to its international partnerships,

I have formed a team to meet with representatives of all our partners to understand

their concerns and to work with them in the spirit of cooperation.

Mission and Science Operations.—Advanced planning for Space Shuttle and ISS

operations to maximize the productivity of on-orbit research and ensure the safety

of real time operations.

Space Shuttle

NASA is proud of its historic record of 106 Shuttle missions and, in particular,

the accomplishments of the last year in support of the ISS. Last year, seven Shuttle

missions were flown with five of those missions launched during a 6-month period.

This budget continues to invest in safety and supportability improvements for the

Space Shuttle and increases the investment in repairing aging Shuttle infrastructure. These investments, totaling $1.35 billion over the next five years, will ensure

that the Space Shuttle can meet NASA’s space transportation needs for at least the

next decade. NASA seeks to implement these upgrades as quickly as possible, and

is working to accelerate the availability of planned upgrades. These investments are

an integral part of NASA’s Integrated Space Transportation Plan (ISTP), which also

includes investments in the Space Launch Initiative (SLI) for NASA’s next-generation reusable space transportation system.

As recommended by the IMCE Task Force, reducing the Space Shuttle flights to

four per year appears to be sufficient to meet ISS needs. However, we are reviewing

this decision to determine whether any additional flights are necessary.

The President’s budget also provides for the continued pursuit of Shuttle competitive sourcing. The anticipated benefits of competitive sourcing include: (1) greater

flexibility to recruit and retain the skilled personnel necessary to safely operate the

Shuttle; (2) avoiding potential continued cost growth for Shuttle operations by moving to a private organization that has greater flexibility to make business decisions

that increase efficiency; and, (3) significant culture change in Human Space Flight

at NASA by making it a purchaser of services rather than an operator of infrastructure.

Mr. Chairman, I believe the vision, mission, programs, initiatives and budget I

have described represent a strong commitment to a healthy and forward-moving

NASA. I believe it is deserving of the Subcommittee’s strong support and I look forward to working with the Subcommittee to achieve an appropriation that supports

the President’s budget request.

I have mentioned the opportunity I have had to meet the men and women of

NASA, working in our installations across this land. We have a diverse and resilient

workforce, and they are proud and excited about the work they are doing. They are

our greatest assets and I believe our greatest hope for the future of this Agency.

They have shown me their desire to be a part of the work contributing to even

greater meaning in the larger dreams represented by this Agency. Their eagerness

and dedication and the strength of their resolve tell me that, together with the support of Congress and this Subcommittee, we can achieve what we have set out in

this budget to accomplish—and more.

Thank you.
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NATIONAL AERONAUTICS AND SPACE ADMINISTRATION FISCAL YEAR 2003 ESTIMATES

[In Millions of Real Year Dollars]

Fiscal year

2001 Op plan revised 12002 Initial Op

plan

2003 Pres budget

Human Space Flight .................................................................................. 7,153.5 6,830.1 6,130.9

International Space Station ....................................................................... 2,127.8 1,721.7 1,492.1

Space Shuttle ............................................................................................. 3,118.8 3,272.8 3,208.0

Payload & Elv Support ............................................................................... 90.0 91.3 87.5

Heds Investments and Support ................................................................. 1,247.8 1,214.5 1,178.2

Space Communications & Data Systems .................................................. 521.7 482.2 117.5

Safety, Mission Assurance & Engineering ................................................. 47.4 47.6 47.6

Science, Aeronautics & Technology ........................................................... 7,076.5 8,047.8 8,844.5

Space Science ............................................................................................ 2,606.6 2,867.1 3,414.3

Biological & Physical Research ................................................................. 362.2 820.0 842.3

Earth Science ............................................................................................. 1,762.2 1,625.7 1,628.4

Aerospace Technology ................................................................................ 2,212.8 2,507.7 2,815.8

Academic Programs ................................................................................... 132.7 227.3 143.7

Inspector General ....................................................................................... 22.9 23.7 24.6

Total Agency ................................................................................. 14,253.2 14,901.7 15,000.0

1 Fiscal year 2001 restructured to reflect two-appropriation structure

HUBBLE SPACE TELESCOPE IMAGES

Senator MIKULSKI. Good morning, Doctor. Come on up.

We are looking forward to hearing you. You know, they often say

about this agency and these appropriations for it really is rocket

science. But we are glad to really meet a rocket scientist, so——

Dr. GRUNSFELD. Do you have a baseball analogy for a lefty?

Senator MIKULSKI. No. I am going to just——

Dr. GRUNSFELD. All right.

Senator MIKULSKI. I am going to just sit in the dugout here and

look at the pictures.

Dr. GRUNSFELD. Well, it is truly a pleasure to be here. And I

thank you very much for allowing my participation.

First, let me say that I was on the Hubble Space Telescope a

month and a half ago, and the Hubble Space Telescope is a national treasure. I would just like to report to you that the telescope

is in fantastic shape.

We spent about 35 hours space walking on the Hubble Space Telescope. While the outside may look a little tattered, inside it is a

brand new telescope. And even more so now that we have made the

upgrades, as Mr. O’Keefe told you, the telescope is now ten times

better and has a new power system, so I think effectively we can

consider it a brand-new telescope.

It is very exciting for me to be involved in the Hubble project as

an astronomer simply because it is kind of a Mecca for astronomers

in that it is the most productive scientific instrument ever created

by people. I think that is just incredible, we are all alive at this

time in history to be participants. So I would like to bring all of

you as participants into that a little closer by showing a short video

with some of the early results. And I really want to just remind

you that the best is yet to come. This is just a sneak preview.

So we are going to start with the first images. These were released yesterday. They are from work that occurred in April from
428

the advanced camera for surveys, a digital camera. It actually has

three cameras inside of it, but it is the digital camera.

We are going to show you four pictures today. The first picture

is called the cone nebula. And this is a very large turbulent pillar

of gas very much like the Eagle nebula pictures from the wide field

camera. But this is unprecedented detail of this nebula. And this

nebula is a star forming region.

We are seeing where baby stars are born and start to grow.

There is another star off field that is illuminating this and giving

us just beautiful views of this.

The next picture is zooming in from an earth-based optical picture, which is now low resolution compared to the new Hubble images. You can see it getting blurry until you get to the Hubble

image. And as we zoom in, you can see the very, very small detail.

This picture is only about 3,500 times as big as our solar system.

The next is the Mice. And this is a zoomed-in view of the tail,

and the detail is unbelievable. This is a 16 million pixel camera,

and we are seeing a galaxy that has collided with a much smaller

galaxy and thrown out a pillar of gas. The two galaxies are interacting and the tails—but in the background, you see all these other

objects. And it comes out more in this picture, which has been

named the Tadpole. And, again, it is interacting galaxies that have

thrown out a tail. Star formation is occurring in that tail, spawning

off new galaxies.

The incredible thing about this picture is in the background—the

main thing to take was the picture of the Tadpole galaxy, but in

the background, it is virtually another Hubble deep field. This picture was taken over the course of about 1 day of observation compared to the 12 days of the deep field.

When we take pictures like this, I think we are going to get a

deep field in every picture, and it is just incredible. There is a total

of about 6,000 galaxies in the background of this picture, twice——

Senator MIKULSKI. 6,000 galaxies?

Dr. GRUNSFELD [continuing]. The number that we saw in the two

deep fields that were dedicated precious Hubble time.

We saw pictures of bright young stars in those pictures. I had

the opportunity last week to talk to third-graders in my hometown,

which is the south side of Chicago. That is the age at which I kind

of became inspired to do science. It was when I had to do a biography of Enrico Fermi, a famous American physicist.

I had the opportunity to talk to a third-grade class about the

Hubble mission. There was one little girl in that class who raised

her hand and asked me a question, and it was more of a statement

than a question. She said, ‘‘Did you know that 3 billion years or

4 billion years from now, our sun is going to explode and create a

planetary nebula like the ones you showed in the pictures?’’

Senator MIKULSKI. She said that to you from the third grade?

Dr. GRUNSFELD. She said that to me. I thought this is incredible

that a third-grader knows enough about stellar evolution and the

course of stars like our own, that there is hope for all of us yet.

And I think those are the bright young stars that these Hubble images really talk to is our young people, getting them interested in

that age in technology and science. I thank you very much.
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HUBBLE MISSION

Senator MIKULSKI. Well, thank you very much, Doctor.

First of all, I think in behalf of the Committee and the Congress

and the country, we really want to thank you and we want to

thank the astronauts who went on this mission. It was not an easy

mission. It was a white-knuckled mission in terms of the complexity of the retrofitting.

All the hard work and the training that you all did in order to

be efficient and safe in space, first of all, we want to thank you for

the successful completion of the retrofitting that adds not only new

life to the Hubble, but a whole new incredible capacity, bringing it

far beyond what we wish we had even thought of for Hubble.

And so we would like to thank you and, of course, everyone connected with Hubble in terms of what they are doing. And some day

that little third grader is going to be—I have a feeling, is going to

be up in space.

And so, again, do you not think we ought to just give them a

round of applause here?

MANAGEMENT REFORMS OF THE STATION

And after that, it seems kind of nickel and dime to be talking

about the budget, but we must. So thanks again and we look forward to this.

Thank you. I am going to move now to my questions and let us

go to the issues related to—I know that Senator—let us go to the

questions related to the space station.

In your written testimony on pages six and seven, you really go

into what you want to be the management reforms of the station.

$4 billion in overruns; $4 billion in overruns. You give these excellent five points and you had them in your testimony, the research

priorities, engineering developments, cost estimates, holding steady

our international partners, which is getting tattered and worn, and

then, of course, mission.

What can we expect over the next year in terms of the bringing

this into some form of discipline and some form of really true cost

estimates in terms of what the station will be able to do?

Mr. O’KEEFE. Well, first of all, if you would permit me, Madam

Chair, I want to thank you again for the recognition of John

Grunsfeld, Scott Altman and his extraordinary crew that performed

this mission. It was really remarkable, and I thank you for the opportunity to present that today.

As it pertains to the International Space Station, I think you put

your finger right to it. What we are focused on and clearly dedicated to is to focus on program management and fiscal discipline

principles to achieve the core configuration so we can then have a

meaningful discussion and debate of how to best utilize the scientific requirements or to employ the scientific requirements that

will emerge from that.

My strongest hope and frankly confidence is that this summer as

we complete the internal, as well as, independent cost estimates,

that we are going to find ourselves within the range of what we

presented as the budget for this particular endeavor and assure

that we stick to that as a means to accomplish this particular task.
430

Again, the pacing milestone that is most critical, for which everything needs to be discussed from that point is the accomplishment

of node two, which is part of the international partner deployment

of that module, which then facilitates a larger configuration potential. But between now and then, what you see in the budget for

2003 as well as the projections for 2004 is the amount required to

achieve the core configuration, and based on the map out here of

each of the fiscal years laid out, or each of the calendar years; and

to achieve that task then makes open the possibility for a larger

discussion of what assembly complete would look like with all the

international partner components that would go to that.

If we do not meet that milestone, that objective, there is not a

discussion beyond that. As an engineering matter, the end state,

not because it is resource constrained, not because anyone wants

it to be that way, but because that becomes the reality of what we

are faced with if we cannot achieve the core configuration by that

stage.

So our focus is very much on the knitting of getting from here

to that big milestone, and then assuring that each of the international agreements that we have entered into can then follow on

from there to achieve what could be the assembly complete configuration.

But until that point, our focus has to be primarily on the core

configuration between the elements, and the budget includes——

SPACE STATION COST OVERRUNS

Senator MIKULSKI. We appreciate the focus on the core configuration. And here is my question: based on what you’re bringing to

bear on the space station through your executive ability and management methodologies, can we have your assurance that the cost

overruns are over?

Mr. O’KEEFE. This summer, when the internal, as well as independent cost estimate is complete, I will be able to give you a definitive answer on that.

Senator MIKULSKI. Oh, we take you for your word. We believe

you are a man of integrity and that is why we need candor here.

Mr. O’KEEFE. Sure. I appreciate that. Yes. At this juncture, I

cannot give you an assurance that this is the end of it. I do not

know, until that independent cost estimate and the internal estimate is complete.

I think we are heading in that direction. There is nothing so far,

that I have seen in the last 4 months that has been a surprise or

anything even approaching what we saw emerge as a consequence

of the early January 2001 revelations of what the cost configurations were here.

So there is nothing along that run, or line. But I think by this

summer, I will be able to give you a definitive answer to that. Until

then I am withholding judgment myself. We are trying to exert as

much of a discipline in that process to make what we have sent

and the President has proposed for 2003 as well as projections for

2004 for the International Space Station, the resources we think at

this juncture are necessary to achieve that task.
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CORE COMPLETION—CREW SIZE

Senator MIKULSKI. Well, first of all, I want to salute you, because

I think that you are ending this culture associated with the station

that it did not matter if there were cost overruns, that we would

make it up in other programs. And all of us feel that other programs have suffered because of it.

But one last question and then we will be turning to Senator

Bond. I understand that the core completion means that the station

would be able to house three crew astronauts, am I correct in that?

Mr. O’KEEFE. Yes.

Senator MIKULSKI. And that anything to go to the seven, which

we had already envisioned, would be beyond core. So this is really

the basics, not even the basics. This is the bare minimum to even

justify the station. Am I correct?

Mr. O’KEEFE. Well, the——

Senator MIKULSKI. And then the question is: Can you really do

research with three astronauts?

Mr. O’KEEFE. Yes. This is definitely a chicken and egg problem.

I think you put your finger right to it, Madam Chair. But let us

recall, again, as a systems integration, an engineering reality, we

are through 2004—under any configuration whether we agreed to

a ten-astronaut configuration, or twenty, or whatever other number

you would like. The reality is in the next 2 years, the engineering

principles driving the direction, and the systems integration challenges driving the direction of an International Space Station, between now and 2004, that will accommodate three.

There is no way to accommodate larger than that between now

and then, and never was part of the plan. Even before the cost estimates were revealed to have increased, there was not a point

where we would have achieved more than three crew members, up

until 2004.

It was beyond that that was the original agreement and understanding, because, again, the buildout time it takes to do this is

such that we are about halfway there right now, maybe a little

more than that. And so as a consequence, the reality is we are

going to be at a three-crew-member configuration. We were going

to be at that a year ago. We were going to be at it yesterday. We

will be at it tomorrow.

The plan, the objective, the clear intention is to get to the point

by early 2004 where we can look at the deployment of modules and

components that would make this a larger configuration for a crew

size driven by the science requirements, not by some number we

all make up. Instead, it ought to be driven by what those requirements are and how many crew it takes in order to conduct that set

of priorities that are there.

So part of the discussion we need to engage in here over the

course of the next year, as we reach that configuration that facilitates this meaningful discussion, is to talk about what those priorities are and how far we want to go, how deep down that priority

list we want to achieve this and, therefore, how many crew members it will take to accomplish that task.

That is a more, I think, appropriate way to look at the nature

of the objective, the mission of what is required and the require-
432

ments for this extraordinary capability, rather than backing into it

by some crew configuration number that is different.

Again, the total crew size that exists today was the crew size

that was envisioned at the time of the international agreements at

this time. And all the way through 2004, that was going to be the

crew size configuration. My fondest hope is that we not stop there.

Nonetheless, we need to exert the discipline to assure that we can

at least get there before we can even entertain a discussion beyond

that.

Senator MIKULSKI. Senator Bond, I know you have questions on

this.

PRIORITIZING SCIENCE RESEARCH

Senator BOND. This is an area we have discussed before and one

of great concern to me. The core complete, obviously you have got

to take the first step before you can start to jog or run, and one

of my questions was going to be how you prioritize the science research.

And you have indicated briefly that you are going to move to the

science side first and use the science requirements to drive the configuration needs for manning the space station. Is that a fair assessment?

Mr. O’KEEFE. Yes, sir. I think the science and research objectives

are the primary, not the only, but the primary reason why we have

engaged in this remarkable challenge of building something this

big, 250 miles straight up that is moving at 18,000 miles an hour

while we are trying to build it. It is a challenge, yes.

Senator BOND. And in prioritizing the science—we talked about

it yesterday—tell us about how you are prioritizing the science for

the station. What kind of tests are you doing? Are they laying out

in each project the time, the crew man hours or time hours, the

costs? How are you prioritizing the science?

Mr. O’KEEFE. Thank you, Senator. The approach is to pull together, and what we have assembled now is a group of scientists

who represent all of the respective disciplines, to include a plant

scientist, to include Dr. Vitchi, as well, who is one of the members

of that particular group, that is prioritizing the full range of all the

scientific objectives that has been expressed by each of those communities, chemists, biologists, plant scientists, across the board, everyone who has articulated what they think are the purposes or the

utilization of capability that is continuous microgravity

condition——

Senator BOND. Yes.

Mr. O’KEEFE [continuing]. And for which there would be extraordinary breakthrough research opportunities, if conducted in that

atmosphere. So in other words, what we have asked them to do in

representing all of those disciplines is, give us your highest priorities that meet those two criteria, then use this capability uniquely.

Senator BOND. When is that due? When are you going to get——

Mr. O’KEEFE. That would be finished by early June. Within the

next 6 weeks, we will have that in hand. Yes, they have committed

to that. They are on track for that too.

Senator BOND. Yes. Do you get it prioritized? Do they say, This

is going to take—this project, we estimate will take so many crew
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hours, so many crew days, so many crew years‘‘? How do you—if

you are going to meld that in, you need to know the cost of it.

Mr. O’KEEFE. Sure, yes, sir.

Senator BOND. You need to know the extent of the equipment.

And I gather from what you are saying, although you have not said

it explicitly, the crew size you are going to shoot for ultimately is

going to depend upon the human needs associated with each experiment.

Are they going to give you an estimate of the crew time? Is that

going to drive the habitation needs?

Mr. O’KEEFE. Yes, sir. Well said. That is exactly the objective, to

look at that as the driving requirement. While this particular group

is not making an assessment of how many people to take or how

much does it cost, we already have that in the can by virtue of the

fact that most of the efforts that are underway in each of these research communities are identified. What they are doing is

prioritizing them, so therefore you can draw from each——

Senator BOND. So you have the crew—each project has a crew

time, cost and all that.

Mr. O’KEEFE. Can be derived.

Senator BOND. They are just prioritizing their—okay.

Mr. O’KEEFE. It can be derived, yes.

BEYOND CORE COMPLETE CONFIGURATION

Senator BOND. And at what point, assuming they come up with

some things that require, say, for example, that you go up to the

seven-man crew. Under what proposal, when would you be able to

provide for and fund a habitation module and the crew return vehicle necessary? What are you doing in that area to—I know you

have some options. Tell us about those if you would, please.

Mr. O’KEEFE. Yes, sir. Thank you. As it stands, several of the decisions that are necessary to look at beyond core complete configuration can be made in 2003 and the early part of 2004. There are

a few that really need to be considered and thought about as early

as this fall, or certainly by the time the 2004 budget is presented

to the Congress for your consideration.

So there are a few issues that are pacing items that need to be

considered on that point. The most critical of them is the successful

development and production of the node two module, which the

Italians are very ably conducting right now. We have been working

with them extensively to assure delivery of that module that then

opens up the opportunity for the habitation module you described.

Senator BOND. Yes.

Mr. O’KEEFE. So the decisions are about a year off, and we need

to assess that to see where we are on the deployment of that particular configuration by that time.

On the crew return vehicle that you have discussed, we are looking at several alternatives that will be platforms to accomplish

multiple objectives, not single purpose objectives.

And as it stands now, the X38 crew return vehicle, which is a

single purpose mission craft which was designed and developed,

there has been a test article of it. We know how far that is going

to go and we got a pretty good idea of how to make it, and instead

of going ahead and producing or investing the $1 billion plus that
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it takes for a single purpose craft, we are setting that aside and

looking at other alternatives that would give us multiple mission

objectives for transportation, for resupply, for logistics, for payload

requirements, and crew return capacity.

So there are a number of options we are looking at right now

that are developed, that are flight tested as well, that if we can deploy in the same time frame coincident with any change that would

necessitate a crew size larger than three, then we have got an opportunity, I think, to look at those options right now, this year and

develop them during the course of the next two, in order to achieve

that set of objectives.

So we are on track to do that. I think we have got the options

ready to go to consider it and if need be, if we have to go to a single

purpose craft like an X38, we have got that ready to re-energize,

if necessary, or reactivate in order to achieve that task.

But at this juncture, investing in a single-purpose craft that

meets a crew-size objective greater than what we currently have

and investing what we know is going to be a substantial amount

for a single-purpose objective, we are looking to buy that extra time

in order to achieve the multiple mission objectives and to leverage

that investment for those multiple purposes.

Senator BOND. It sounds like it makes a lot of sense to me. I

hope it works. And we will be watching that.

Thank you, Madam Chairwoman.

Mr. O’KEEFE. Thank you, sir. I appreciate your support.

Senator MIKULSKI. Those were excellent questions, Senator

Bond. They parallel my thinking.

Again, I think you can see you have got really bipartisan support

and you have bipartisan questions.

Senator Shelby.

PRIORITIZING RESEARCH FOR THE ISS

Senator SHELBY. Thank you. Thank you, Madam Chairman.

I just want to briefly associate myself with Senator Bond’s questions regarding the prioritizing of the research for the International

Space Station.

Mr. O’KEEFE. Sure.

Senator SHELBY. I think we have to, Mr. O’Keefe, recognize the

importance of material science research, as a key enabler to our future success in space. And I hope that NASA will remain committed to working with industry to develop materials, devices and

processes that we are going to need tomorrow.

Mr. O’KEEFE. Yes, sir.

Senator SHELBY [continuing]. I think that there is so much out

there, if we will not ignore it. And I hope you remain committed

to this.

Mr. O’KEEFE. Yes, sir. No, very much so. I think that you put

your finger to a very important element of the research agenda

that must be emphasized that gives us the unique capability to utilize the space station for what it was envisioned to be used for, and

can give us some breakthrough opportunities. I think you are exactly right.
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NUCLEAR SYSTEMS INITIATIVE

Senator SHELBY. There is no telling where it will carry us in the

future with our industrial products and everything that goes with

it.

Mr. O’Keefe, the nuclear systems initiative, my colleague from

Ohio touched on earlier. I know you mentioned it in your written

testimony.

Compared to current technology, what specific capabilities is the

nuclear initiative designed to produce for our spacecraft? And how

will this initiative’s success impact future missions, particularly

NASA’s ability to conduct space science? I think it has a lot of

promise, as Senator DeWine said, but I thought you might want to

touch on it here in the open hearing.

Mr. O’KEEFE. No, I appreciate it. Thank you, Senator. First and

foremost, this is the best example of what I think we can find and

what we see in the manifest and the budget for enabling technologies to get past what had been structural limitations for exploration and discovery for 40 years.

And the fact of the matter is, again boldly stated, that we travel

beyond lower earth orbit at speeds that roughly approximate that

which John Glenn flew at in Friendship Seven 40 years ago. We

are stuck in that laws of physics paradigm. And we have not found

a successful method of——

Senator SHELBY. We have got to break out of it.

Mr. O’KEEFE. I am sorry, sir?

Senator SHELBY. We have to break out of that.

Mr. O’KEEFE. I mean, we have got to find a leap ahead technology. We have got to find an enabling capability to get past that

structural limitation of speed or on orbit time, one of two.

And what we see generated, I think, by a power generation or

propulsion system, and the specific objectives we have in mind is

to decrease the time to traverse distances or increase on-orbit time,

one or the other or both in that task.

Senator SHELBY. Yes.

Mr. O’KEEFE. And we are setting as a near term, I think, conservative objective improving that speed to achieve distance by a

factor of three or improving on-orbit time by much more than that,

than what we achieve today. And the most mature technology that

is out there right now that has a means to be developed is nuclear

fission, and a means to either upscale what has been a very strong

experience that NASA has had with power generation units, RTGs

that we used on Cassini and a number of other missions over the

course of the past 20 years, but that only is a power generation capacity.

What we are looking for is a propulsion capability that can then

beat those longer distances because right now we are limited by

solar electric capacity, which the further away from the sun we get,

the more dependent we are on gravitational pull as a means to

deep space exploration.

As a consequence, the further away you get, even a non-engineer,

non-physicist, non-scientist like me understands, the lights go out.

As a result, you cannot depend on solar electric for long. It is

very——
436

Senator SHELBY. This could keep the lights on, could it not?

Mr. O’KEEFE. Yes, sir. Keep the lights on and move faster.

Senator SHELBY. Sure.

Mr. O’KEEFE. And stay on orbit for a greater period of time.

Senator SHELBY. It has got a lot of promise.

Mr. O’KEEFE. That is the objective behind the nuclear——

Senator SHELBY. A lot of promise. And we are closer to it than

many think, are we not?

Mr. O’KEEFE. I think so. I think we can get there.

SPACE LAUNCH INITIATIVE (SLI)

Senator SHELBY. Briefly, I want us to touch on the Space Launch

initiative. In this budget, NASA has requested $759 million to execute the SLI program. This technology program is of critical importance, I believe, to the future of NASA.

And I assume, Mr. Administrator, that you would oppose any effort to reduce funding by SLI in 2003.

Mr. O’KEEFE. Yes, sir. I think it is a critical initiative, one that

is the future of reusable launch vehicles, space flight——

Senator SHELBY. Yes.

Mr. O’KEEFE [continuing]. And the objectives for launch to

achieve ultimately shuttle replacement. All those ride in the balance. It is a very important issue. Yes, sir.

Senator SHELBY. Okay.

Thank you, Madam Chair.

Senator MIKULSKI. Thank you, Mr. Shelby.

Mr. DeWine.

NUCLEAR SYSTEMS INITIATIVES PROGRAM/ENERGY DEPARTMENT

Senator DEWINE. Thank you very much.

Mr. O’Keefe, we talk about the nuclear power. This nuclear

power program, what will be the role of the Department of Energy

in this?

Mr. O’KEEFE. The——

Senator DEWINE. What is the big picture?

Mr. O’KEEFE. Yes, sir. We are beginning to sort that out. I have

had several discussions with the Naval Reactor side of the Department of Energy through Admiral Skip Bowman to discuss how we

could take the mature technology they have developed to generate

power for substantially larger platforms than what we need frankly. But they have had a long experience of producing advanced reactor capabilities that now power every nuclear powered vessel in

the United States Navy safely without incident for 45 years, have

had a stellar record of doing just that. In the process, they have

managed to design and produce nuclear reactors that are substantially smaller, as in more compartmented, that they take up a lot

less space. On a submarine that is a big deal, kind of like it is on

space shuttle or any kind of space launch vehicle. And they have

increased the capacity.

When H. G. Rickover first designed the reactors that went

aboard Enterprise and earlier than that for Sea Wolf, they celebrated the fact they lasted 18 months before refueling. Today,

every reactor lasts the full life of a 40-year-old ship.
437

So as a consequence, the operational experience that they have

achieved is something we seek to tap in dealing with this as well

as the design experience they have achieved, which is to reduce the

size, mass, and compartmentalization of that reactor capability,

which, again, far exceeds what we need and then to upscale what

it is we have been doing on RTG’s for the last 25 years.

Senator DEWINE. So when you talk about ‘‘X’’ number of dollars,

a long-term vision, obviously the Department of Energy is involved

in that significantly?

Mr. O’KEEFE. I think there is certainly a very close collaboration

we are seeking to develop. We are kind of in the initial phases

right now. We are setting up the project team. Again, this is a fiscal year 2003 initiative that we are going to have to step up in a

big way here in the month’s ahead. So putting together a project

management team, as well as how to develop that close professional inter-rogatory-agency cooperation with all the elements of

the Department of Energy, which includes the Naval Reactor side,

will be critical, as well as the nuclear energy piece.

There is a civilian commercial component within DOE. Certainly

many of the DOE labs have been involved in this activity. We have

got to parse through how we maximize and leverage that technology experience best.

RE-EXAMINING HEAD CENTERS

Senator DEWINE. Mr. Director, you have stated that you intend

to recentralize programmatic authority at NASA headquarters,

rather than the centers. How is that process coming?

Mr. O’KEEFE. Well, I think that may be——

Senator DEWINE. Is that too strong a statement?

Mr. O’KEEFE [continuing]. Too definitive a statement.

Senator DEWINE. Where are we? What are you going to do then?

Mr. O’KEEFE. I basically looked at a request through the agency

to reexamine the proposition of lead centers. The notion that everything is delegatable for program management, oversight, and all

other purposes to individual elements of what is conducted

throughout the agency.

Indeed, I think what we have an opportunity to do, like on the

nuclear initiative, is to collaborate very extensively on extant capabilities within NASA that is not individually center-centric, if you

will.

On the nuclear initiative, clearly the prowess demonstrated by

NASA Glenn, by the Marshall Space Flight Center, by the Jet Propulsion Lab in Pasadena, California, all of them are going to be

contributors in how we develop this initiative.

So rather than designating any individual center as the dominant or only, instead we are looking at it more as a case of ‘‘How

do you maximize core competencies that exist at each of those centers and then collaborate for the purpose of trying to develop end

products, end purposes that are greater for the advantage, I think,

of the agency overall?’’

Senator DEWINE. All right.

Mr. O’KEEFE. So that is a bit of a difference there, and that does

not necessarily mean we are going to drag everything into head-
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quarters. Indeed, not an awful lot really, you know, visionary

comes from headquarters any time of any agency.

So as a consequence, we are seeking to keep the delegated program management authority within the centers, but to establish a

firm policy and oversight function within headquarters.

Senator DEWINE. Good. Thank you very much.

Mr. O’KEEFE. Thank you, Senator. I appreciate your question.

ENVIRONMENTAL COMMUNITY—NUCLEAR POWER

Senator MIKULSKI. Let me go to the questions related to the

space shuttle.

I think we have covered a lot of the information related to the

station as well as these new innovations on nuclear propulsion.

And we can understand the merits of that.

I believe that there will be a lot of concern from the environmental community about nuclear power in space. And I would just

hope that we would acknowledge that, number one, there will be

concerns, and that we address them——

Mr. O’KEEFE. Absolutely.

Senator MIKULSKI [continuing]. Rather than the—often the usual

way is—and I am not saying this about you, Mr. O’Keefe, but usually when the environmental community raises an issue, everybody

says it is not an issue. They are ignored. And it becomes a very

prickly issue within this institution. So let us just deal with it.

Mr. O’KEEFE. Absolutely.

Senator MIKULSKI. And let us just deal with the groups who

want to raise those flags, because often they have very good insights that help us provide the opportunity to do bold things but

ensure the safety for those who are traveling on the mission as well

as for the planet. So now speaking——

Mr. O’KEEFE. Madam Chair, would you permit me to just comment real quick?

Senator MIKULSKI. Yes. Please go right ahead.

Mr. O’KEEFE. I think you have hit the nail exactly on the head.

This is something not to be avoided. We really need to engage on

this question.

And there is a couple of facts that I think really are persuasive

in my mind. Pioneer 10 was launched in 1972. We are still getting

information back from it. It still has a nuclear capability that is

generating power to keep that communication coming back to us

that is 7.5 billion miles away. I mean, this has been done safely

in the past and it has a success rate on this and a track record that

is clear.

The second one is, again, the nuclear reactor performance record

of the United States Navy over the course of the last 50 years is

very, very reassuring. It says we know how to design capabilities

and we know how to operate them.

So you are exactly right. We need to engage this debate with the

environmental interests to be sure that we are doing this right and

doing it in a way that assures public safety. And I appreciate your

point and associate myself completely with the sentiments you

have expressed.
439

RELIABILITY OF THE SHUTTLE

Senator MIKULSKI. Well, then this takes me, since we are talking

about safety, this then takes us to the issue of the space shuttle.

We are very concerned about the shuttle. The shuttle is wearing

out. The shuttle has a limited shelf life.

And my question is: What can we do now in terms of the resources to ensure the reliability of the shuttle in terms of its transportation mission, but also the reliability of the shuttle in terms of

the safety of the astronauts?

I know they are entwined, but we need to be sure, one, that it

is the mule train that was supposed to go into space, So its reliability to take off and get the missions up, but once we are going,

to make sure that our astronauts can go and come back.

Mr. O’KEEFE. Yes. Indeed, I think the——

Senator MIKULSKI. Do you think you have the right resources?

Do you think you have the right management?

Mr. O’KEEFE. There is, I mean, more important than any other

factor, the right culture exists at NASA to focus on safety. I think

it is up there with a theological calling. I mean it is unbelievable

to see the, I think, the real commitment to safety objectives.

On the Hubble mission that we talked about a little bit earlier,

for the STS 109 flight, I attended a flight readiness review at Kennedy Space Center 2 weeks before the mission took off. They

worked through second, third and fourth-level indenture issues

over the course of a day and a half that I found to be absolutely

unbelievable. They leave absolutely nothing unturned.

And as a consequence, all the way up until the final moment of

launch, there is an obsession that if there is anything, even the

slightest deviation from what should be acceptable, the launch is

postponed. As a consequence of that, that is reassuring. I have seen

that now every step of the way through this process and am impressed with the manner in which they do that. And, again, it is

easily a rival of what I saw in the nuclear Navy. It is an absolute

obsession of how that is conducted.

So what we have included as part of the fiscal year 2003 budget,

I think, is a responsible allowance for continuing safety upgrades

and operational upgrades. The issue that I find disconcerting,

though, is our safety panel of outside experts who have come in,

who report annually to us—I just got the outbrief of that about a

month and a half ago—have determined that the safety upgrade requirements as well as potential modifications and service life extension requirements, if we extend the orbiters past 2012, are insufficient the way we are looking at it right now.

So what I have asked them to do as their next order of priority

here over the course of the next 6 months leading up to the 2004

considerations, is to give us a very specific understanding of what

they advise—and again this is an outside group of experts who represent every discipline on the engineering and safety regime that

I have—the quality assurance business that I have ever seen, to

give us a very clear understanding of what upgrades they think

would be most significant, which ones we missed, what we should

be doing differently.
440

We are concurrently doing an internal review of that as well as

the Office of Space Flight has conducted, to see what it would take,

if we extend it past 2012, what would that take. So there is a

whole revision, I think, of the safety upgrades, as well as major

modifications and capabilities enhancements that we need to look

at and consider what those options will call for.

In 2003, I think we put in a safety upgrade modifications portfolio that is appropriate to get us from here to that consideration.

SHUTTLE PRIVATIZATION

Senator MIKULSKI. Well, where does privatization come in, and

what are your thoughts on privatization?

You know, the word ‘‘privatizing’’ sounds like——

Mr. O’KEEFE. Yes. Yes.

Senator MIKULSKI [continuing]. You know, is there a space Greyhound that is going to take over and——

Mr. O’KEEFE. Right, exactly. I have, you know——

Senator MIKULSKI. And that, you know——

Mr. O’KEEFE. The reason I was pausing here is I get the same

reaction. Another step beyond that is that when you say privatization that means you made up your mind what the outcome is going

to be.

In my judgment, and more importantly in the President’s management agenda, the focus on competitive sourcing is the approach

we are after at this stage, so rather than preordaining what the result will be, what we are after right now is developing a business

case of what it would take, what would be involved to take all the

range of shuttle operations and consider an alternative means of

delivery than what we are doing today. That may mean more public servants, less public servants, more private company, more nongovernmental organizations, whatever it calls for. We are just

starting with an approach that says do not preordain what you

think the right answer is. Let us ask the question of what needs

to be accomplished and then what is the alternative means to go

about accomplishing those tasks?

Senator MIKULSKI. I did not understand that. What would be like

examples? Are you saying who does the mechanics? Who does

what? I don’t understand what you are——

Mr. O’KEEFE. You are exactly right, the functions that would be

involved are ‘‘What does it take for maintenance modifications, for,

safety and mission assurance?’’

Senator MIKULSKI. And I appreciate that then, but is your objective to save money or to save the shuttle when you do this?

Mr. O’KEEFE. Yes, the primary objective is to enhance safety.

Whatever that takes in order to achieve that task, we need to figure out what the best way is to deliver that activity. The fondest

hope would be we find an efficient way to do that. And certainly

in the risk management arena and community, there is a very

strong school of thought that says it does not necessarily cost more.

It means you do it differently, in order to assure a higher grade of

quality assurance.

So looking at those kinds of challenges in that way may result

in a different cost model, maybe more, maybe less. I do not know.

But the primary objective in looking at the business case is: Let us
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first look at the functions. How do we do this safer than what we

are doing today? How do we do it more efficiently than what we

are doing today? And achieve the operational readiness rates that

we want.

Senator MIKULSKI. Well, I think there needs to be far more extensive conversation about this. First of all, I want to just say we

are so glad that you are as safety-obsessed as the members of the

committee.

Mr. O’KEEFE. Indeed.

Senator MIKULSKI. So that is number one. Number two, I mean,

we are going to turn to Senator Bond—we do need to look at ‘‘What

does integrated transportation mean? What would be some other

vehicles to get other things, say, up to the station?’’ and the space

launch initiative—I know that it has been raised by colleagues.

Of course, you know, I am interested in the whole possibility that

perhaps out of something like a Wallops, that an unmanned vehicle

could go up and act like a cargo shuttle, and use the astronauts

for only what the astronauts need to do.

But they do not need to be delivering cargo. Okay? They need to

be delivering other astronauts. And so there is a lot for us to talk

about.

But let me turn to Senator Bond.

SPACE LAUNCH INITIATIVE/NUCLEAR PROPULSION PROGRAM

Senator BOND. Well, the Chair has raised a whole interesting

area. You certainly have a broad field to resolve some very sticky

questions. We are most interested in them.

I just want to pick out a couple while we still have time and I

am going to submit a lot more for the record and look forward to

continuing the discussion, but there are significant costs associated

with both the Space Launch Initiative, the Nuclear Propulsion Program.

What do you see the out year costs, and how do we balance these

programs to ensure that they complement each other, they do not—

we are always worried about robbing from one program to deal

with another. What are your projections on those?

Mr. O’KEEFE. Well, certainly over the course of the next 5 years,

we are looking at about a $4.5 to $5 billion initiative for Space

Launch Initiative alone. That is the current projection where we

are to down select from about a half-a-dozen-plus options of where

we are today, to think about what the most likely vehicle prospects

would be to achieve not only shuttle replacement, but a range of

others, mission objectives as Senator Mikulski identified very clearly.

Coincident with that, though, I think is an opportunity that we

are at right now in this unique period of history in which there is

a convergence between requirements NASA has in terms of longer

term exploration platform discovery objectives, as well as that

which we see on the Air Force side of the equation for reusable

launch vehicles.

They are probably a little bit further behind in terms of their requirements definition than we are at this juncture for our requirements, but not so substantially that it would not be possible to consider those requirements on both sides of the equation and think
442

about how we leverage the technology best in order to meet multiple objectives.

So while we may not end up with the same vehicle or same end

item, it has the opportunity to draw on comparable technologies for

propulsion, aerodynamics, a range of different disciplines and technology breakthrough opportunities that we really need to converge

this a little more closely.

As a result, we are spending a lot more time now getting closer

to understanding each other’s requirements as they are emerging

to see as we move through this as a program management and contractual matter how we can best utilize those technologies for multiple means.

INTEGRATED FINANCIAL MANAGEMENT PROGRAM

Senator BOND. Well, let me move from the exciting projections to

some really mundane management questions. Over the last 5

years, NASA has been judged by its auditor, Arthur Andersen, to

meet all of the Federal financial reporting requirements. This was

at a time GAO was saying NASA procurement was high risk, and

the new auditor, PriceWaterhouseCoopers disclaimed an opinion on

NASA’s fiscal year 2001 financial statements because of internal

control weaknesses.

What are you doing—they said that the financial management

systems do not substantially comply with the requirements of

FFMIA. What are you doing to address these concerns, and what

are you doing to address the GAO identified contracting management risks specifically?

Mr. O’KEEFE. Senator, thank you for the question. I regret to advise that management mundanery for financial management systems apparently is proclaimed as a forte of mine by many of——

Senator BOND. I am afraid we may lose half of the crowd here,

but these are unfortunately very important issues.

Mr. O’KEEFE. No, they are ones I think are critically important.

I have just taken a fair amount of commentary of why that is a

forte as opposed to some other areas that some would prefer. But

I frankly agree with you. I think this is the number one structural

management issue across the agency that we have got to arrest

and bring to absolute discipline control.

We are implementing an integrated financial management program now that is intended to look at accounting, finance, human

resource management, contract management, logistics, inventory

control, all that in a method that is full management information

system exposed.

And we have brought in the best experts I know how to recruit

in the information technology (IT) arena, and in the financial management arena, from in the private communities for financial management and IT to come to NASA to deal with this particular set

of problems as a Kaizon team to arrest it and to make it work.

So it is the number one priority that every center director, every

enterprise manager knows is the first order of priority we have got

to do. It is the idea of coming up with a disclaimed opinion from

the independent auditors, because they could not get the data is

unacceptable.
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So in my judgment this will not be a topic of discussion next year

in this vein. It will be more that, yes, we have beaten that problem

to death and we have implemented a integrated financial management system that satisfies not only your, but all of our questions

on what it costs to do anything. That is first.

Senator BOND. That is an easy promise to remember. We will

keep that one in mind.

Mr. O’KEEFE. Yes, sir. I intend to keep——

Senator BOND. Okay. We will look for it.

Mr. O’KEEFE [continuing]. That, if it is the last thing I do.

HUMAN CAPITAL

Senator BOND. Let me just ask you one very quick question.

Senator MIKULSKI. I am not even going to go there. You go.

Senator BOND. One very quick question, that something that concerns us on this committee a great deal. Your specific problem, the

Aerospace Advisory Panel said that their hiring freeze on planned

departures has produced critical skill deficits, and we know that

NASA is beginning to—in the serious shortfall of younger scientists

and engineers, you are beginning to address it.

Is this one of your top priority attention areas? Do we need a national policy to ensure that we have an adequate number of scientists, engineers and researchers? First, is this a high priority

concern, and is this one of your major concerns?

We would like to work with you, because we see this in NSF and

so many other areas. And we will look forward to seeing your action steps in this area.

Mr. O’KEEFE. Yes, sir. Well, thank you for the question, Senator.

I guess beyond my priorities, this is the number one priority the

President has articulated for the strategic management of human

capital as part of the President’s management agenda.

There is no question, the most polite way to say this is we have

a very mature workforce. No doubt about it. The experience rate

and the level of talent we have in the agency has never been higher. The catch is we have got roughly a third of that workforce that

is eligible to retire in the next 5 years.

Senator BOND. Yes.

Mr. O’KEEFE. So we are looking at some real serious challenges

on this front in the technology and engineering fields, particularly

math, science, technology and engineering, those are the kinds of

disciplines that we are seeing a real departure of not only talent

and experience, but not a lot behind it in terms of cohort capability,

numbers of people to fill those capacities. That is true not just at

NASA, I think across the entire frame. And you are exactly right.

The President submitted back in October the Manager Flexibilities Act that has now manifested itself in the form of, I want to

say it is a Senate bill that was introduced by Senator Voinovich

that has been modified since that time that we are very, very enthusiastic about in the administration, and we will love to see enacted because it provides the tools on the personnel, human resource front to start to arrest this problem and to deal with the

issue of recruitment, retention and how to really deal with the

technology, engineering, math, science kinds of disciplines that are

necessary to continue to recruit for.
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Senator BOND. Thank you. That is very, very interesting to us.

Senator MIKULSKI. Very, very good.

Senator BOND. Thank you, Madam Chair.

Mr. O’KEEFE. Well, thank you, Senator. I appreciate the question.

CIVIL SERVICE REFORM

Senator MIKULSKI. You were talking about the Voinovich civil

service reform.

Mr. O’KEEFE. Indeed, exactly.

Senator MIKULSKI. Yes. We are interested in that too.

Mr. O’KEEFE. He has done a superb job of really pulling together

some great tools to help manage the human resource challenge we

are all facing at every agency.

Senator MIKULSKI. Senator Shelby.

Mr. O’KEEFE. Thank you.

AIR FORCE/SPACE LAUNCH INITIATIVE

Senator SHELBY. Could you elaborate a little bit about the involvement of the U.S. Air Force in the SLI program and what does

the Air Force bring to the table and how cooperative is the effort

thus far?

Mr. O’KEEFE. Very cooperatively, if I can take the last part of

this first, because we are really very much in the formative discussion phase. I think the idea of how much and what type and so

forth is yet to be determined.

Senator SHELBY. Yes.

Mr. O’KEEFE. Again, the sum and substance of where I think we

are right now is just this interesting historic convergence in which

the Air Force has a set of demands for reusable launch vehicles

and a concern about long-term reliability of expendable launch vehicles.

Senator SHELBY. Yes.

Mr. O’KEEFE. We, in turn, have, a set of structural challenges,

that many members here this morning have identified when the retirement rates of assets will occur, shuttle orbiters to be specific

about it. As a consequence, that convergence gives us a unique opportunity to look at how we can leverage technologies to meet different purposes, but to derive from similar technological basis.

So it is very much in the formative phase. It is very much cooperative. Just 2 weeks ago, I met at an extended series of meetings

over a course of a couple of days with the Commander in Chief of

the U.S. Space Command, with the Under Secretary of the Air

Force, Under Secretary Teets, and General Eberhart, and respective staffs from the Office of Secretary of Defense, and their research and engineering teams, as well as within the aerospace community, to think about what is laying on the table, what are all

those requirements and how can we choose the technologies that

best leverage and maximize the efficiency of what we select to meet

multiple objectives. We conducted a study that lasted about 4

months with the Air Force in an attempt to converge these. We

still have to go back and look at it again, because I think we are

a little bit behind step. But in terms of collaboration and cooperation, it is real close. We are at least identifying what we see are
445

mutual problems or mutual challenges, mutual opportunities, and

we are now just about the business of trying to identify them.

Senator SHELBY. Thank you very much.

Mr. O’KEEFE. Thank you, Senator. I appreciate the question.

Senator SHELBY. Thank you.

Senator MIKULSKI. Yield?

Senator SHELBY. Yes.

Senator MIKULSKI. Senator DeWine?

Senator DEWINE. Nothing further, Madam Chair.

NATIONAL SECURITY ISSUES

Senator MIKULSKI. Well, I want to raise some questions about

the Russians and knowing both of your interests in national security, it might be of interest to you.

My colleagues—by way of background, when the Cold War ended

or was about to end, we looked forward to how to cooperate with

the Russians in a very different way. And one of the things that

we were concerned about is the issue of proliferation, and I know

my two colleagues here have been very keenly interested in that.

And we engaged the Russian scientists in being involved with us

on the International Space Station, so that the Russian scientists

rather than selling rocket launch capability to people that we did

not want to have rocket launch capability would be involved with

us in the new world order and democratic Nations who have been

involved as our international partners on the space station.

We have been very unhappy about this. And I would like to

know, Mr. O’Keefe, exactly where are we in terms of, one, insisting

with the Russians that they are not engaging in proliferation and,

number two, we have been very much involved in the Iran non-proliferation act. That requires the President to certify that Russia is

not assisting Iran with ballistic missile technology or other assistance in the development of mass destruction, meaning launch capacity or whatever. Without the Presidential certification, you are

to be prohibited from sending funding to Russia under certain circumstances.

Now, let us step back here. First of all, we know we are engaged

with the Russians in our fight against terrorism, that Mr. Putin

has been very cooperative, but yet at the same time we see Iran

poses great threats to allies and to the strategic interest of the

Mid-East. Could you tell us, one, where are we with the Russians,

where are we in what you believe their cooperation is in the Iran

non-proliferation or selling their technology, and do you believe

that they are really stepping up and that their scientists have been

truly engaged with us?

I pass no judgment on the technical competency of the scientists,

but I really wonder if our money to the Russians is going to the

Russian scientists or is going to the Russian, you know—so we are

interested in this, we are very much interested in how, through the

use of engaging the Russians in civilian space like the space station, we help them make sure that their scientists or other mechanisms out of Russia are fostering the proliferation of weapons of

mass destruction.

Mr. O’KEEFE. Thank you for a very timely question. I just last

week spent 2 days with Deputy Secretary Armitage in Moscow. He,
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in discussing, the bilateral discussions leading up to the President’s

summit meeting later this month, early June, and I spent most of

my time with RosaviaKosmos, and the general director of that

space agency as well.

And we reconverged towards the end of our meetings with Foreign Minister Primakov as well as Foreign Minister Ivanov, who

then discussed this with Koptev who is the general director of

RosaviaKosmos on very, very similar lines as your discussion has

just gone down.

It is a challenge in the sense that we have a very strong close

working relationship with RosaviaKosmos, and the operations and

the activities of the International Space Station are heavily dependent on our meeting the build out requirements. For example,

as I discussed at length, and their objectives as well as commitments to help the support and logistics requirements for progress

and Soyuzes flights. As a consequence, their continuing efforts on

that front are critical to achieving the milestones I have talked

about. I think we are there. It is a very close collaborative relationship. The issue that clearly is always going to be on the table in

the foreign policy discussion that Secretary Armitage had, as well

as the closer intergovernmental discussion I had with Director

General Koptev is over the matter of the Iran non-proliferation

treaty or agreements act.

And it means that we really need to be conscious of how that is

implemented and we are continuing to work at every opportunity

to try to reach agreement on how that can be, not only adhered to,

but verified. There is a very strong interest, I sensed in the couple

of days I spent there in wrestling with that question successfully.

There is a very strong view in that direction.

Senator MIKULSKI. Well, Mr. O’Keefe, this is a subject of great

interest I know to the members of this subcommittee, and I would

like to suggest that I coordinate a meeting with you and welcome

any members of this subcommittee who wish to have a more indepth conversation with you about that.

Mr. O’KEEFE. Terrific.

Senator MIKULSKI. I do know that members of the subcommittee

are actively engaged. And Senator Lugar, really our outstanding

Senator——

Mr. O’KEEFE. You bet.

NON-PROLIFERATION

Senator MIKULSKI [continuing]. On non-proliferation has invited

us to join with him in a group to Russia on the issues of non-proliferation. So I think it is timely that we perhaps talk with you on

how we can make wise use of our time there, enhance this and also

get a more in-depth view that I know you and your team could

share with us.

So would you just presume that we are going to coordinate a

meeting and we will make the arrangements and we will invite the

appropriate people and look forward to working with Senator

Lugar who has been a real champion on this, and then how we can

really keep the Russians engaged in civilian science.

Mr. O’KEEFE. Absolutely. No, I would be delighted, Madam

Chair. That would be terrific.
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Senator MIKULSKI. And so let us talk some more about that.

Mr. O’KEEFE. If you would permit me, my intent would be to be

in touch with Secretary Armitage, as well, and see if we can coordinate an effort that meets your schedule and timing as well. I think

that would be terrific.

Senator MIKULSKI. I think that would be great. We have worked

with Secretary Armitage on a number of issues and I have great

admiration for him.

Mr. O’KEEFE. Great. I appreciate it.

Senator MIKULSKI. Senator Shelby, did you wish to comment on

this?

Senator SHELBY. Yes, I do.

Senator MIKULSKI. I know you have been——

Senator SHELBY. I want to follow up and I appreciate you bringing it up.

Senator MIKULSKI [continuing]. An expert on this, as Senator

DeWine.

Senator SHELBY. I do not know about that. But all three of us,

plus Senator Lugar that you mentioned, Mr. O’Keefe, serve on the

Intelligence Committee, and we are very interested in this subject

matter, not just for this committee but for what we do in our government and the security of our Nation.

So I appreciate, Madam Chairman, you bringing this up. And I

think a meeting with Mr. O’Keefe at the right time would be well

attended and be very important.

Senator MIKULSKI. Very good.

Mr. O’KEEFE. Thank you, Senator. I appreciate that.

Senator MIKULSKI. Senator DeWine, did you want to comment

or——

Senator DEWINE. I am fine.

PLUTO MISSION

Senator MIKULSKI. Okay. There are many other areas that we

could pursue. We thank our colleague, Senator Bond, for raising

the work force issue.

Let me go to some issues with space science and then I think we

will be ready to conclude our hearing.

I was concerned that OMB cancelled Pluto in space science or I

guess that the administration’s fiscal 2003 cancels the Pluto mission.

The opportunity to go to Pluto will not come again for another

200 years and we understand from the applied physics lab that

would do the Pluto mission that they have estimated their costs at

$450 million, much less than what NASA originally thought.

Could you tell us where we are on the Pluto mission? What is

the rationale for cancelling it? Was it financially driven? Was it

science-driven? And is there any way that we can get this back on

track——

Mr. O’KEEFE. Thank you for the question, Senator.

Senator MIKULSKI [continuing]. Working with the subcommittee?

Mr. O’KEEFE. Well, first and foremost, the requirement, or at

least the mission objectives, the research that could be gained by

a mission to the outer edge of this solar system is something that

clearly has captured the attention of the scientific community and
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they view it as an important objective, to the point where the National Academy of Sciences this summer, we are hopeful they are

going to conclude by this summer, is rank ordering the priorities

of where they see exploration objectives. This clearly is among the

missions they are considering very seriously in terms of what its

standing and prioritization should to be. So we will be driven and

guided by that determination as well from the National Academy.

But nonetheless it is one that, I think as you are well aware,

Madam Chair, they view as an important set of objectives, so I

think that is not in dispute, the criticality of it.

The second issue that we have really run across is the how to

get there, how to accomplish it. The stark reality is much in the

vein of the earlier discussions we have had or at least touched on,

this is a quintessential example. But then, again, any destination

in the solar system and indeed in this universe would be an example too, of how long it takes to get anywhere.

A very responsive proposal that was advanced, as I understand

it, would call for a launch as soon as 2006, or a vehicle probe by

that time, and achievement of the objectives by about the 2015,

2016 time frame. So in that rough parameter, maybe as early as

2014, maybe as late as 2017, we are still talking about a period of

time that is approaching 15 years from now, roughly within that

parameter, which therefore suggests, two problems.

The second issue that really is dominant there as well is given

the existing capability we have for propulsion and power generation, once we pass or get to Jupiter, we basically run out of the option, not completely, but for all practical purposes of solar electric

capability.

We, therefore have to depend on the gravitational slingshot effect, if you will, off Jupiter to meet the timelines you are talking

about. That is the most aggressive approach we could possibly employ in order to be on station about 15 years from now to achieve

that task, and through the Kuiper Belt beyond. What would

amount to a few months worth of imagery that would be of higher

caliber than what we can do today.

So not a challenge at all, not a problem at all about what the

mission objective, the requirement, the scientific research opportunity would be. We will be, again, guided by the National Academy of Sciences in terms of where they think that prioritization

fits.

Our greatest obsession at this juncture is how to get there and

stay on station for a long enough period of time in order to truly

inform the research and scientific objectives.

There are options that we are clearly looking at if the National

Academy comes up with findings that say this is a very high priority, that may be we will be able to do that.

Senator MIKULSKI. Mr. O’Keefe, when is the National Academy

going to complete its work?

Mr. O’KEEFE. We are told this summer, but——

Senator MIKULSKI. But what does ‘‘this summer’’ mean? The

committee is going to be marking up in June.

Mr. O’KEEFE. I know. This has been a question on my mind as

well. I would really appreciate your assistance in this regard too.
449

Senator MIKULSKI. What can we do to help you out here, because

first of all, we welcome the National Academy’s advice. They have

been such an excellent resource to we policymakers.

Mr. O’KEEFE. They are indeed.

Senator MIKULSKI. But their timeline and ours do not—and we

do not mean—we really want to welcome their priority commentary. But would you let my staff know how we can help you

be a booster rocket here?

Mr. O’KEEFE. I appreciate that. I would welcome that opportunity.

Senator MIKULSKI. Because we would really like their advice, if

we could, really sometime in June.

Mr. O’KEEFE. Yes, ma’am.

Senator MIKULSKI. At least certainly perhaps into the top tier of

what they are recommending.

We would also like their specific commentary on Pluto. It is

something that I have very keen interest in and also the fact that

it will only come in 200 years. So we are either going to do it, we

should do it right. We should do it prudently. So let us work together on this.

Mr. O’KEEFE. I would enjoy that very much. Thank you.

NEXT GENERATION OF SPACE TELESCOPES

Senator MIKULSKI. We cannot conclude this hearing without asking about Hubble.

NASA’s current plans for Hubble is to receive one more servicing

mission and then have it operating until 2010. Then the next generation space telescope will be launched to replace the Hubble.

Well, I understand that schedule has slipped.

As we look at the next generation of space telescope, which I am

a supporter of, should we develop a contingency plan that will enable Hubble to operate beyond 2010? And we are seeing now, here

it is, 2002, and I was really taken aback by these photographs. I

mean, even—this is better than Spielberg and he makes it up, you

know——

Mr. O’KEEFE. It is the real thing.

Senator MIKULSKI [continuing]. And in some ways has a bigger

budget than the Hubble has.

Maybe you ought to trade places here.

But truly even to the untrained scientific eye that you could look

at it and not only were they dazzling, but you know that a gifted

and talented scientific analytical group of people are going to glean

so much about the universe and so tell me what you think. First

of all, I know that eventually we will need a next generation. We

want to prepare for it and it has got to be reliable and sustainable,

all the management words you would use.

But tell us what you think about Hubble and should we have a

contingency plan?

Mr. O’KEEFE. Sure. Thank you, Madam Chair.

Senator MIKULSKI. Should we have two space telescopes?

Mr. O’KEEFE. Thank you, Madam Chair. I think the logic that

you are employing here has a lot of merit. It is something that I

have begun to inquire about as well internally.
450

Given the stunning results we have seen thus far exceeded our

expectations. And this is not just because the great unwashed type

like me is looking at this, because what I know about this you can

summarize in a matter of moments, but more importantly the astronomers who are looking at this, the astrophysicists who are examining this, the scientific community is stunned by the value of

what they are getting out of this.

It is not just the new imagery. It is the archival imagery. It is

the things that we have downloaded as imagery from prior transmissions that was archived and viewed as available and indeed

some of the most stunning discoveries were made 2 and 3 years

after the images were transmitted, because someone, a scientist, a

researcher, a principal investigator, thought to go look at some particular aspect, dig it out of the archives, see what it may reveal,

and then drew a series of conclusions from that.

So the data that is being gathered is not just a one-trick pony

opportunity. It is something that is a longstanding set of requirements or information bits that in turn then are revealing things

over a period of time that we did not expect, even though they were

gathered 2, 3, 4, 5 years ago.

So that alone tells that the logic that you have employed is precisely the way we have got to look at this. We ought to be thinking

about, given the results we are achieving here, what is it going to

take in order to operate that?

Certainly the next mission in 2004 is planned. We are going to

press on ahead with that. But we then have to trade that off relative to what we would gain thereafter. And that is precisely the

kind of analysis we have got to conduct, more rigid analysis, I

think, than we have employed so far to see exactly what that would

take. And now, again, seeing the advantages that come from this

that exceeded our expectations, it clearly is something that merits

that kind of attention.

EARTH SCIENCE MISSIONS

Senator MIKULSKI. Well, know that I do believe we do need a

next generation of space telescope and I think we can really plan

and get the highest use of it by making use of both telescopes that

we have, those space telescopes.

Earth science, we understand that the NASA budget indicates

that the future for earth science mission is kind of in limbo, until

the administration completes an interagency review on global

warming. I am concerned about that because as you know, you are

an old hand at these things, interagency reviews can take forever.

And we have an excellent earth science program and I believe you

know how there are multiple agencies that are making use of this.

Could you tell us: When do you expect the administration to release the details of this review, and what does it mean for the EOS

follow-on projects that will be re-proved or where are we on earth

science?

Mr. O’KEEFE. And I think your characterization of the interagency process is polite, diplomatic.

Senator MIKULSKI. That is me.
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Mr. O’KEEFE. Well, in that case, uncharacteristically understated

in terms of the challenges of the interagency process. You are exactly right.

Nonetheless, what I have been really struck with, as Secretary

Evans has taken this challenge, he and Secretary Abraham, but

Secretary Evans is leading it at this juncture, to pull together all

the agencies necessary. We meet pretty regularly. I have been surprised at the intensity, frequency and deliberation that has gone

into this particular task, so the President’s challenges we have accepted as an administration and we are moving ahead smartly on

it.

Exactly when the deliverable will be, let me give you a more

comprehensive answer after a little more research, because I am

wrestling to remember the dates of when various elements are to

be delivered back to the White House. But it is not necessarily

holding up or driving what we are doing at NASA as well though.

It is a very important consideration, but it is not one that I would

say is limiting.

The Aqua launch occurs 7 o’clock today?

STAFF. On the 4th.

Mr. O’KEEFE. Oh, on the 4th. Excuse me. I am sorry. On the 4th

of May. So we are proceeding apace with a series of earth science

activities and as a result, we are continuing to use EO1, which has,

proven to be an extraordinary source of imagery and information

on weather and geological phenomenon.

TDRSS continues to be deployed. We have got another launch of

that due in October, I guess. So we are pursuing a series of earth

science objectives that I think are as aggressive as we think are

necessary for this coming year. I do not see it constrained by that

particular review at all. If anything, I see a very aggressive effort

underway to try to beat that interagency challenge that I think you

very accurately described.

Senator MIKULSKI. Well, we want to, of course, talk more about

that.

Mr. O’KEEFE. Sure.

SENATOR MIKULSKI’S CLOSING REMARKS

Senator MIKULSKI. We are not sure when we are going to get our

allocation, but we believe that there is a variety of views looking

at how we are going to be proceeding on the budget resolution, et

cetera. But it is our estimate that we will be marking up sometime

in June, of course, working with the House, but at least a preliminary framework.

So we look forward to further conversations with you as we prepare for markup, Mr. O’Keefe, because you have got studies and all

online that are going to be relevant to our decision making process.

So we really need to continue our very close collaboration. We want

to thank you and your entire team for what they do every day for

the NASA mission, but also their very collegial and cooperative

spirit in working with the committee.

ADDITIONAL COMMITTEE QUESTIONS

So we want to say thank you and God bless you and God bless

everyone who is trying to do so much in our space program.
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[The following questions were not asked at the hearing, but were

submitted to the Department for response subsequent to the hearing:]

QUESTIONS SUBMITTED BY SENATOR BARBARA A. MILKULSKI

SPACE LAUNCH INITIATIVES

Question. What is your approach with regard to SLI flight tests to evaluate key

technologies?

Answer. SLI continues to emphasize the importance of testing advanced enabling

technologies in their relevant environment. In some cases, flight-testing can provide

validation of key technologies that cannot be adequately tested on the ground. SLI

evaluates each individual technology test and evaluation effort based upon the benefit for the program relative to its cost. Some of the technologies being evaluated

for testing in a flight environment include airframe and mechanical systems, thermal protection system, operations, avionics, power, crew escape systems, and integrated vehicle health management systems. SLI’s flight test programs complement

its integrated ground testing and simulation tasks. There are currently three companies under contract to provide flight demonstrations for the SLI-Kistler Aerospace, Orbital Sciences Corporation, and the Boeing Company. In addition, one of

the primary objectives of the ongoing NRA 8–30 Cycle II procurement is to identify

cost-effective candidates for flight-testing.

Question. What is your strategic plan for Wallops Flight Facility and does it include SLI flight-testing?

Answer. Currently, there are no current plans to perform SLI flight-testing at

WFF. The SLI program is evaluating industry proposals for flight demonstration of

key technologies for a 2nd Generation Reusable Launch Vehicle. These proposals include the identification of flight test launch site operations of which WFF is eligible

for consideration. In addition, the SLI Program is actively engaged in discussions

with WFF to determine other areas where WFF flight-testing and operations expertise can be utilized. Decisions to use WFF or other flight test facilities will be made

competitively based on these proposals and discussions.

AERONAUTICS BLUEPRINT

Question. Mr. O’Keefe, during your testimony before the House VA/HUD Subcommittee 2 weeks ago, you answered ‘‘I think so’’ in response to a question asking

if the current aeronautics budget is sufficient to realize the vision in the Aeronautics

Blueprint.

Could you please expand on that answer and explain how a major new undertaking in aeronautics is to be funded in a budget that is cut under your request?

When can we expect a budget estimate of what will be required to implement the

Blueprint?

Answer. The Aeronautics Blueprint addresses how new technology can be brought

to bear on the issues facing aviation in the United States. These technologies, still

in their infancy, have the potential to create a new level of performance and revolutionize aviation by addressing key public good issues (aviation safety, air system

congestion, and aircraft noise and emissions) that could constrain future air system

growth. NASA aeronautics programs have been realigned and investments have

been reprioritized toward the vision articulated in the Blueprint. The NASA funding

request for aeronautics research and technology is sufficient to formulate the development of the necessary fundamental understanding of these technologies. As

progress is made on this long-term technology development, planning will be updated and technology investments revised.

Question. Given the opportunity presented by the slow-down in air traffic after 9/

11, what is NASA doing to move ahead as soon as possible with improvements to

the national air system?

Answer. In cooperation with the Federal Aviation Administration, NASA is developing technology for air traffic decision support tools in support of the FAA’s Operational Evolution Plan. Additionally, NASA is investigating potential future air traffic management concepts of operation and the technologies that support them.

Question. Can NASA truly take advantage of the current slow down and aggressively work to meet the 4 Airspace System goals of the Blueprint (reduced throughput in bad weather, en route congestion/poor traffic flow, better manage aircraft

movements at HUB airports, develop precision navigation systems) when you propose cutting the Airspace Systems Program?
453

Answer. As the events of September 11 slowed air traffic in the skies and transformed the current-world aviation situation to increase emphasis on the aviation security, there has been no change in the (already increased) momentum in which

NASA strives to resolve the current Airspace Systems goals. The $8.8 million reduction in Airspace Systems was a planned reduction. The NASA request for the

projects in this program supporting the airspace systems goals (Advanced Air Transportation System and Virtual Airspace Modeling and Simulation) is at the same

level as the fiscal year 2002 appropriation.

Question. Are you concerned with the position taken by the Europeans in their

‘‘Vision 2020’’ plan to be the world’s undisputed leader in aviation 2 decades from

now?

Answer. NASA has been focused for several years now on the key public good

issues (aviation safety, air system congestion, and aircraft noise and emissions) that

Europe is beginning to address in an integrated fashion through the ‘‘Vision 2020’’

document. These public good issues pose the largest constraints on continued air

system and aviation market growth.

Question. Is your ‘‘Aeronautics Blueprint’’ in response to the Europeans ‘‘Vision

2020’’? If so, why is there no discussion of the funding that should be committed

to this effort?

Answer. The Aeronautics Blueprint is not in response to the Europeans’ ‘‘Vision

2020.’’ The Blueprint was prepared to provide more details to NASA strategic plan

for aeronautics developed in 1997, well in advance of the European vision. It is interesting to note that the targets established in the Europeans’ vision are consistent

with NASA’s goals of 1997. Furthermore, NASA believes it has sufficient funding

to pursue the vision articulated in the Blueprint.

Question. Does NASA anticipate that we will need a comparable level of funding

to what the ‘‘Vision 2020’’ calls for—roughly a billion per year for the next 20 years

to help our aviation industry remain competitive in the face of their increased investment?

Answer. NASA believes that the five-year funding plan for aeronautics accompanying its fiscal year 2003 budget request will enable the agency to pursue revolutionary technologies over the next five years that will provide this country’s aviation

system with unparalleled capability.

Question. Do you believe that the cuts to NASA’s aeronautics research and development enterprise over the last 5 years have played a major role in the government’s backpedaling on what were once priorities for improved air service in this

country?

Answer. NASA’s aeronautics research and technology funding peaked at an all time high of $920 million in fiscal year 1998. This peak funding was largely due

to the budget ramp-up associated with the High Speed Research program, a program to develop an environmentally compatible, commercially viable supersonic passenger jet in partnership with industry. This program was cancelled when technology and market projections led industry to defer funding commitments to the development of a supersonic passenger jet into the future. Prior to this peak, NASA

aeronautics research and technology has been funded at about $500–$600 million

per year, adjusted for inflation, as far back as the early 1970s. NASA’s fiscal year

2003 budget request and five-year budget projection for aeronautics research and

technology is consistent with these levels and provides adequate funding to pursue

key technology goals over the next five years that could improve aviation safety and

capacity and reduce aircraft noise and emissions.

Question. Why was it so important for NASA in the past to enumerate such goals

when the Aeronautics Blueprint fails to mention any time frame for accomplishing

similar goals regarding safety, emissions, noise and cost of air travel?

Answer. The Aeronautics Blueprint is consistent with NASA’s strategic plan for

aeronautics, which lays out technology goals that could enable the nation to realize

improvements in aviation safety, capacity and mobility and mitigate the impact due

to noise and emissions by 2022.

Question. Do you anticipate incorporating time frames for the goals enumerated

in the Aeronautics Blueprint? If not, why?

Answer. The Blueprint states general objectives. NASA’s strategic plan for aeronautics, which has specific time frames, has targeted 2022 for the development of

technology to enable revolutionary improvements in aviation safety, capacity and

mobility and mitigate the impact due to noise and emissions.

Question. Is the problem of drawing students to aeronautical engineering degrees

at U.S. universities so great, and the problem of bringing on new talent to replenish

the depth of expertise that has been lost at the NASA Aeronautics Centers so critical, that NASA undergraduate and graduate research opportunities need to be larger by an order of magnitude?
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Answer. We believe that we can refocus our programs in such a way to expand

the university community’s participation in the full range of aerospace technology

research and education programs. Examples of such activity are reflected in our recent selection for further negotiations of seven leading American academic institutions for research and education program development in emerging technology

areas. We believe that by providing the opportunity for high quality collaboration

by the academic community we can stimulate and attract the best and brightest of

the university populations to our programs.

INTERNATIONAL SPACE STATION

Question. A principal justification for undertaking the International Space Station

program was to conduct world class, groundbreaking research across multiple scientific disciplines over a 10 to 15 year period. Achieving that goal will be difficult.

In the past, GAO has pointed out that funding the research program has been a

challenge for NASA, given the need to fund other important development activities.

Today, NASA’s ‘‘core complete’’ concept limits permanent presence on the station to

3 people, one of whom must be a Russian pilot to operate the Soyuz crew return

vehicle. This scenario obviously places additional limits on the amount of research

that can be performed.

What is your vision as to the purpose of the research component of station operations and what is the scope of the research that can be completed under the ‘‘core

complete’’ concept?

Answer. NASA’s Biological and Physical Research (BPR) Enterprise seeks to use

the unique space environment to conduct research and to develop commercial opportunities that could not otherwise be pursued on Earth, while building the vital

knowledge base needed to enable efficient and effective systems for protecting and

sustaining humans during extended space flights. BPR addresses the two fundamental challenges associated with human space flight: (1) understanding nature’s

forces in space; and (2) understanding the human experience in space.

Established in fiscal year 2001, BPR closed its first year with a significant record

of accomplishment. ISS outfitting for research began with the delivery of the

Human Research Facility in March 2001. After more than a year of continuous

human occupation, the ISS now has 5 research racks. There are 26 investigations

currently underway aboard ISS, representing research from government, industry

and academia; 54 investigations have been carried out since ISS construction in

orbit began. The Agency is on-track to deliver an additional five research equipment

racks by the end of 2002. Expeditions 5 and 6 will also fly during fiscal year 2002,

and 41 experiments will be conducted in the areas of biomedical research, biotechnology, microgravity fluid physics research, materials science, agriculture, and

Earth observations.

In spite of a significant unscheduled ISS upkeep and troubleshooting activities

during Expeditions 1 and 2, the ISS team was able to meet the minimum research

objectives of the first four research increments. NASA continues to prepare for ISS

on-orbit research through the preparation and testing of five additional research

racks and ongoing payload crew training. In addition, NASA looks forward to

launching STS–107 in the late summer, a Space Shuttle mission dedicated to biomedical and biological research. .

Throughout the ISS construction phase, NASA is continuing to achieve a balanced

program of scientific exploration that will contribute, along with ground-based research, to the fields of biology, physics, chemistry, and the long-term effects of space

flight on humans.

In response to the second part of your question concerning the scope of the research that can be completed under ‘‘core complete,’’ the U.S. core complete will be

achieved in February/March 2004, at the conclusion of Increment 9, which is

planned as Mission 10–A, by which there will be an average of 15 continuing experiments and 7 new experiments (delivered by Shuttle resupply missions) onboard.

U.S. core complete will include 5 EXPRESS racks, featuring Physical Sciences research and Space Product Development; 2 Human Research Facility racks, hosting

Bioastronautics experiments; one Microgravity Sciences Glovebox, hosting Physical

Sciences and Commercial experiments, and the Window Observational Research Facility (WORF), collecting observational data for Earth Sciences and the Office of

Space Flight. Enclosure 1, which includes graphs (a), (b), and (c), shows ISS experiments by discipline or category and by increment, comparing the growth in number

of experiments for each discipline as the increments continue.

Although NASA did not plan to expand the crew size beyond three members until

2006, a permanent crew of three could preclude certain experiments that are very

crew time-intensive or complex and which do not lend themselves to automation.
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Examples include experiments that involve crew manipulation such as time-course

sampling of plants.

In addition, BPR is stressing the maximization of research return from the ISS

by actively seeking options for broadening its access to flight platforms in pursuit

of the answers to its driving scientific questions. NASA is working with the White

House Office of Science and Technology Policy (OSTP) and the Office of Management and Budget (OMB) to engage the scientific community and reestablish clear

high-priority, affordable science objectives with near-term focus on improving scientific productivity. The results of this review, which was conducted by the Research

Maximization and Prioritization (ReMaP) Task Force, became available in early

July. The ReMaP results will help set the BPR science agenda that will, in turn,

drive how the ISS is used. We expect the ReMaP recommendations to increase the

efficiency and output of ISS research and realign NASA’s ISS research portfolio to

reflect current scientific priorities.

Question. What opportunities do you see for increasing the amount of research

time on the station?

Answer. NASA is currently evaluating several options for increasing research

time on the ISS, including the recommendations of the ReMaP, which will play a

role in determining the cost/benefit of adopting one or more of these approaches to

enhancing crew time for research. NASA plans to discuss a set of option paths in

the fall of 2002 and determine the optimal ISS configuration to maximize research

in 2003.

Prior to the program restructuring, the crew size was not planned for expansion

beyond three until 2006. Research plans through that time remain largely unchanged. Experiments until 2006 are specially designed and chosen through peer review to not require significant crew involvement. The ReMaP results will provide

guidance on research priorities that will allow informed decisions to be made on the

areas of research on which to focus.

During Fall 2001, the International Space Station (ISS) Management and Cost

Evaluation (IMCE) Task Force recommended that extended Soyuz sortie missions

coupled with Space Shuttle Extended Duration Orbiter (EDO) missions be considered to provide additional crew time for scientific research to supplement a crew

size of 3.

The IMCE also recommended a Space Shuttle flight rate of no more than 4 per

year. This results in significant constraints to research due to limited ability to

launch and resupply research equipment. The addition of Shuttle missions in the

2006∂ timeframe will supplement research crew time by freeing the ISS crew from

some of their EVA requirements and thereby increasing the crew time available for

research; and by allowing the visiting shuttle crew to perform short duration experiments during the docked mission, or initiate long duration experiments which would

then be completed by the ISS crew

Use of overlapping Soyuz for gaining additional crew time is of limited

attractiveness. Overlapping Soyuz opportunities could potentially provide 300–400

hours of additional research, presuming the docking time is extended. However, it

would add significant logistical burdens to the existing Shuttle flights; since it

would be necessary to accommodate for the additional life support and crew provisions. Further, there is a significant learning curve for visiting Soyuz crews that

would limit the productivity during the first several weeks of the mission. Additional study is required to assess cost verses benefit of this particular option. The

use of an Extended Duration Orbiter for existing or new missions appears promising

and is under consideration.

Question. What are the obligations of both the U.S. and Russia regarding the

long-term operations of the space station?

Answer. The specific responsibilities of NASA and the Russian Aviation and Space

Agency (Rosaviakosmos) are listed in Article 6 (enclosed) of the Memorandum of Understanding (MOU) on the International Space Station (ISS) signed in January

1998. This detailed list of responsibilities includes separate sections for the design

and development phase and for the assembly, operation and utilization (long-term)

phase. These responsibilities cover a wide range of issues from management mechanisms, to logistics arrangements, to training facilities and simulators. NASA provides the basic infrastructure of ISS, including four solar arrays that generate the

majority of power to ISS and two significant research modules. In addition, other

NASA key obligations regarding operations include: (1) logistics support for delivery

of supplies to ISS on the Shuttle; (2) Mission Control from Houston; (3) crew rotation on the Shuttle; (4) crew return after assembly complete; and (5) life support

systems. Many of Rosaviakosmos’ key obligations regarding operations are similar

to those of NASA, including: (1) logistics support for delivery of supplies and propel-
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lant; (2) Mission Control from Moscow; (3) crew rotation; (4) crew return during assembly; and (5) life support systems for the Russian segment.

Question. How can NASA effectively manage its work on the station given its dependence on its international partners?

Answer. The deployment, operation and utilization of the significant capabilities

already attained with the ISS demonstrate what international partnering can

achieve. While the failure of some partners to deliver certain elements according to

schedule has been a past issue, the issues addressed in the recent ISS Independent

Management and Cost Evaluation (IMCE) task force did not raise concern in this

regard.

Partnerships, by definition, ascribe certain rights and responsibilities to each of

the parties, and the ISS international partnership is no exception. As such, NASA,

like each of the ISS partners, expects the others to fulfill their obligations and fully

intends to continue meeting its own. Meanwhile, NASA is effectively managing its

own domestic team of civil servants and contractors, continuing to integrate U.S.

elements of the ISS, and, in concert with the international partners, accomplishing

program objectives including the integrated operation of the overall ISS vehicle and

the execution of an internationally-coordinated research agenda.

Question. Under the terms of the NASA/OMB agreement, will the final space station configuration conform to the expectations set out when the program began, that

is, 7-person capability? If not, what are the differences?

Answer. The final configuration of the ISS has not been determined. The NASA/

OMB agreement takes the ISS through the core complete configuration that accommodates deployment of the International Partners elements. The launch and assembly of this configuration is our first and foremost priority. We are currently defining

research requirements, after which we will perform an analysis of resource capacity

to meet those requirements. We recently completed two separate independent life

cycle ISS cost estimates. When all of this requisite knowledge is in hand, we can

begin considering potential option paths to address delta requirements.

Question. How can NASA meet its commitments to the international partners if

the station does not progress beyond a 3-person crew capability?

Answer. NASA is committed to meeting its obligations to the International Partners under the ISS international agreements and has made no decision to reduce

the crew size from that specified in the ISS international agreements. NASA has

initiated a five-point assessment to reform and revitalize the ISS Program and ensure the construction of a viable ISS that fulfills its potential as a world-class research facility. The five areas of this assessment are: science priorities, engineering

development and deployment, cost estimating and analysis, mission and science operations, and international partner coordination. The resources required to meet the

science priorities of ISS will determine the ultimate crew size. NASA is working

closely with the International Partners throughout this process to ensure that the

United States meets its commitments in a manner consistent with the ISS Agreements. The International Partners have demonstrated a willingness to work with

NASA as we assess the ISS Program and develop an end state acceptable to the

partnership. If, as a result of this process, it is determined that specific provisions

under the ISS international agreements require renegotiation, NASA will work with

relevant International Partners to seek consensus on the changes.

Question. How will the loss of the habitation module and the crew return vehicle

and the U.S. resulting dependence on the Russians impact U.S. leadership on the

station/in space?

Answer. NASA’s leadership role in the International Space Station (ISS) is a fundamental principle in the Intergovernmental Agreement among the ISS Partners

and in the Memoranda of Understanding between NASA and each of the cooperating space agencies. NASA’s contribution to the ISS Partnership outweighs that of

any other partner many fold, but the Partnership is still dependent on each of its

members to provide certain goods and services. Over the course of the design and

development of the ISS there have been a number of changes in the planned contributions of the various Partners. NASA, executing its responsibility for overall

management and coordination, has led the Partnership through the requisite

changes and adjustments. As the ISS has evolved, changes have occurred on a number of smaller scale items and, most notably, on a larger scale when the Russian

Federation joined the Partnership in 1993. The ISS is a partnership, with all Partners dependent on the performance of the others. NASA has embarked on a fivepoint effort to reform and revitalize the NASA ISS Program. This plan is premised

on research requirements driving the ISS vehicle configuration. We have, with the

Heads of the ISS Cooperating Agencies, agreed to a Program Action Plan for the

remainder of calendar year 2002 that will allow for multilateral endorsement of an

option path to meet utilization and research requirements. This option path will ad-
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dress NASA’s demonstration that it has regained programmatic cost control, the

timing of research requirements on orbit, as well as budgetary requirements and

constraints, while recognizing NASA’s prerequisite coordination with the Administration and Congress.

SPACE SHUTTLE

Question. What are NASA’s current plans for and cost of upgrading the shuttle?

Answer. Current plans include the following for upgrading the space shuttle:

Safety upgrades

The Cockpit Avionics Upgrade Increment 1 (CAU) will enhance crew situational

awareness and reduce crew workload by providing automated control of complex

procedures. The fiscal year 2003 President’s budget estimate of total funding is $442

million. The Preliminary Design Review for CAU Increment 1 was held the week

of April 22, 2002.

The Advanced Health Management System Phase I (AHMS) upgrade to the Space

Shuttle Main Engines (SSME) will provide improved real-time vibration monitoring

of the SSME and will provide improved engine anomaly response capabilities. The

fiscal year 2003 President’s Budget estimate of total funding is $55 million. The first

flight of AHMS Phase I is scheduled for 2004

Friction Stir Welding (FSW) increases External Tank (ET) reliability by improving weld joint strength, weld margins, and fracture toughness, FSW also enhances

process control. In addition, this project decreases ET production time and cost and

is an operational demonstration of large-scale use of FSW technology. The total

funding is $21 million. The first production use on an ET will be in April 2003.

Main Landing Gear (MLG) Upgrade improves tire designs that could allow for

higher landing speeds and increases in cross winds and landing load limits. It will

also mitigate obsolescence issues and improve margins for pressure leakage and

colder temperature environments. The tire improvement project received the authority to proceed in May 2002. The fiscal year 2003 President’s Budget estimate of total

funding is $11 million.

Industrial Engineering For Safety (IES) Upgrades identify and reduce risks to

ground operations personnel and flight hardware by optimizing human-system

interfaces. The IES project will also enhance maintainability and improve overall

processing operations of flight hardware and vehicle systems. Total funding is estimated at $90 million

Supportability Upgrades

Long Life Alkaline Fuel Cell (LLAFC) upgrade modifies cells of the Shuttle’s existing stack to lengthen corrosion path, reduce reactant temperatures, upgrade external seals and insulator plate, and modify regulator housing to eliminate aluminum corrosion. The total cost for this upgrade is $28 million. The new hardware

will be available for installation into the fleet on an attrition basis starting in 2005.

Solid Rocket Booster (SRB) Range Safety Command Receiver—Decoder (CRD) upgrade eliminates a criticality 1 failure mode, decreases destruct reaction time, mitigates obsolescence of key components, and enhances maintainability. The total cost

for this upgrade is $5 million. New hardware will be available for installation into

the booster fleet in early 2003, with first flight expected in 2004.

SRB Altitude Switch Assembly (ASA) upgrade is a pressure-sensing device to initiate SRB recovery sequence (one unit per SRB). The ASA upgrade eliminates an

escalating failure rate and a poor repair record and improves fault tolerance and

reliability. The total cost for this upgrade is $4 million. New hardware will be available for installation into the booster fleet in early 2003, with first flight expected

in 2004.

Reusable Solid Rocket Motor Nozzle/Case Joint J-Leg upgrade eliminates potential for hot gas intrusion into the joint and eliminates significant time and effort

expended evaluating hot gas pass-throughs. The total cost for this upgrade is $9

million. First flight for the improved joint insulation design is targeted for 2004.

NASA is currently assessing the Space Shuttle supportability and upgrade candidates, ground support equipment supportability and upgrade candidates, and infrastructure supportability and upgrade candidates. The primary objective of this

activity is to understand options to maintain safe space shuttle operations through

2020, should NASA need to fly the Shuttle until that time. No decisions have been

made to fly the Shuttle beyond 2012.

Question. What is the impact on these plans since the shuttle will only be flown

four times a year in support of the International Space Station?

Answer. The limit of four Shuttle flights a year applies only to ISS missions.

NASA retains the flexibility to fly additional missions if the benefiting party (NASA
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enterprises/DOD/Commercial) provides funding. Currently, there are no impacts to

the existing Shuttle upgrades.

Question. What is the status of NASA’s efforts to solve the agency’s space shuttlerelated human capital challenges?

Answer. NASA is making key investments in recruiting, training, and retaining

a dedicated and skilled workforce. At the end of fiscal year 1999, OSF undertook

an assessment of its staffing requirements at the field centers. Our internal assessment of core civil service workforce requirements at the four Space Flight Centers

revealed that full-time equivalent (FTE) targets would have to be adjusted upwards.

In late December 1999, each Center was directed to address critical Space Shuttle

Program (SSP) workforce shortfalls. The objective was to hire employees to support

flight safety and the Space Shuttle Upgrades program, including addressing critical

skill shortages. Since January 2000, we have seen our Space Shuttle Full Time

Equivalents (FTE) levels grow from a fiscal year 1999 base of 1819 to a planned

fiscal year 2002 level of 1986. The SSP has made significant progress in addressing

the skills imbalance identified in 1999; however, like other programs it has been impacted by normal attrition. Having completed two consecutive years of hiring, our

fiscal year 2003 hiring efforts will target critical skills.

Question. NASA has convened an independent business review team to evaluate

market potential, financing and indemnification issues associated with transitioning

the Shuttle to private industry. With the uncertainty associated with how long the

Shuttle will operate under a competitive sourcing scenario, how can this team develop a reasonable financial assessment?

Answer. NASA commissioned RAND to assemble a business review team consisting of representatives from across the private sector (business management,

marketing, finance, insurance, safety, and academia) to evaluate the various business models that could be considered to competitively source Space Shuttle operations. For each proposed business model, RAND defined the conditions and requirements necessary for the business model to be financially viable. This will enable

NASA and the Administration to fully understand the level of commitment (including required policy and regulatory changes) necessary if they choose one of these

business models or a variant option. To ensure the financial viability for each business model, the President’s fiscal year 2003 Budget lays out key criteria for Space

Shuttle competitive sourcing proposals, including financial viability within the Shuttle’s planned retirement in 2012.

Question. Is the review team considering the possibility of private industry accepting the Shuttle fleet only if maintainability upgrades have been made at NASA’s

expense?

Answer. The issue of who pays for maintainability upgrades is tied to the years

of contractor commitment needed and will be considered in NASA’s competitive

sourcing analysis.

Question. At one time, NASA was considering privatizing one of the Orbiters.

What was the reason why this was not pursued?

Answer. In 1996, United Space Alliance (USA) was given the opportunity to ‘‘sell’’

one Shuttle flight to commercial customers. USA pursued this offer, but, was unable

to find sufficient commercial market demand to underwrite the flight. If a market

does not exist for one flight, then the concept of privatizing an entire Orbiter for

commercial purposes is unrealistic. It is important to note that privatization is a

mechanism distinct from competitive sourcing, which could or could not include privatization of some portion of the Space Shuttle fleet or infrastructure.

Question. NASA recently announced a decision to move space shuttle maintenance

from California and consolidate space shuttle operations at Kennedy Space Center

facilities. Reportedly, the decision was made after ‘‘years of study’’, and will save

‘‘millions of dollars’’. What is the estimated cost saving? What is the analytical basis

for the estimated cost savings? Will the facilities used to house the maintenance activities be renovated existing facilities or new construction? To what extent has the

cost of providing the facilities been included in any analysis justifying the move? To

what extent have all the costs to terminate maintenance activities in California

been included in any analysis justifying the move?

Answer. The estimated cost savings is $30 million. The JSC Systems Management

Office independent cost/risk assessment is attached as Enclosure 2. Additional independent cost assessments were performed (see Enclosure 3). All three assessments

indicated that cost savings would be realized in moving OMM from Palmdale to

KSC.

The Orbiter modifications in Florida will use existing facilities and there are no

plans for renovation or construction of new facilities. OMM at Palmdale is conducted

in a government owned facility and the government will retain it. USA and Boeing
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are conducting studies to determine the best location to complete the Space Shuttle

work that currently remains at Palmdale, CA.

SPACE LAUNCH INITIATIVE

Question. NASA and the Space Launch Initiative Program Office did not conduct

a cost estimate prior to initial contract awards in May 2001. At this time an independent cost estimate for total program costs has not yet been conducted. What is

the timeframe for completing an independent cost estimate for the Space Launch

Initiative program?

Answer. An independent group, the Space Launch Initiative Cost Credibility

Team, formed in February 2002, has been chartered to review the current state of

cost effectiveness for development, production, and operations in the aerospace industry and to formulate recommendations for applying the findings to the life cycle

cost estimates for the next generation of RLVs. The team includes members of the

MSFC SLI program office, MSFC Systems Management Office (SMO), NASA IPAO,

Department of Defense, Aerospace Corporation, Rand Corporation, Institute for Defense Analysis, and the COTRs for each Integrated Architecture team

The team is collecting the data from each industry-led architecture development

team to serve as the basis for the initial estimates. The preliminary estimates will

be available to support a Non-Advocate Review (NAR). The estimates for full-scale

development cost will be directly dependent upon the results of the systems requirements review process and the awards from the RFP currently scheduled for late

next calendar year.

Concurrent with the SLI Independent Cost Team, the Systems Engineering and

Integration Office is developing a ‘‘bottoms-up’’ cost and schedule estimate on the

basis of the system design fidelity. The systems engineering review process factors

in comprehensive budget estimates, detailed project schedules, and business and

performance plans, against the goals of safety, reliability, and cost, in addition to

overall technical feasibility. This approach forms the basis for the investment decisions in the 2nd Generation RLV program’s risk reduction activities.

Question. How are you measuring progress toward achieving full-scale development decision in fiscal year 2006?

Answer. We added the word ‘‘decision’’ in the text of the question because SLI has

never planned to have Full-Scale Development (FSD) of the 2nd Generation RLV

by fiscal year 2006, but rather an FSD decision by fiscal year 2006—the critical

milestone facing the Agency. SLI is on track to provide the necessary scientific and

technological data required to design, evaluate, and formulate realistic plans leading

to a FSD decision in 2006. NASA is pursuing priority investments for designing the

2nd generation system, maturing critical subsystems to technology readiness levels,

and developing credible cost and performance estimates.

Question. In light of NASA’s problems in controlling costs on previous programs,

what will you do to ensure that the agency adequately defines requirements and

adequately manages the program within established cost guidelines?

Answer. As outlined in the strategic plans for SLI, the program continues to refine the Level I requirements and design reference missions in order to maintain

focus on the Full Scale Decision by fiscal year 2006. Comprehensive top-to-bottom

systems engineering and the cost-control process ensure that the Government gets

what it pays for by measuring technical progress against the schedule at regular

intervals. The cost-to-benefit ratio must prove a wise investment; gated procurements provide built in ‘‘off ramps’’ to discontinue efforts after a period of performance, as well as ‘‘starting gates’’ to add new tasks to fill technology gaps and spur

competition. The research funded must be directly relevant to SLI goals to reduce

the technical and business risk of developing a new RLV system. In addition to the

multiple internal reviews and analysis teams, the requirements are also reviewed

by an external group. The External Requirements Assessment Team (ERAT) was

chartered to provide senior-level advice and recommendations to MSFC on this program. Specifically the ERAT will provide an independent assessment of NASA’s requirements development processes and resulting documented requirements. The

ERAT is further chartered to recommend specific refinement (if necessary) of the

program’s goals and objectives.

The 2nd Generation RLV External Requirements Assessment team reports to the

Manager of the 2nd Generation RLV program office at the NASA, Marshall Space

Flight Center. The team is supporting all relevant reviews and requirements development activities required to provide a detailed assessment of the processes and resulting documented requirements.

The process of narrowing architectures completed a major milestone—the Interim

Architecture and Technology Review—in the second quarter of fiscal year 2002. The
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next phase will continue to focus space transportation system designs from many

concepts to several of the most promising candidates to go forward into more detailed development. As technology trade studies are focused and validated through

a rigorous systems engineering process, the two merge again in the Systems Requirements Review milestone, anticipated in the first quarter of fiscal year 2003.

This further narrows the field to a select few designs and defines which technologies

require further investment to enable the eventual winner to be built and become

operational. In this way, the Space Launch Initiative is reducing the risks inherent

in an advanced research and development program of this magnitude, while fostering a fair business environment for industry and ensuring the wise use of valuable resources.

In conjunction with the numerous technical requirements reviews, SLI has implemented a disciplined Earned Value Management (EVM) process across all projects.

EVM is implemented on the SLI contracts consistent with NPD (NASA Program Directive) 9501.3, ‘‘Earned Value Performance Management’’. The EVM reports are

specified within each contract and are reported to the Program Manager on a

monthly basis.

Question. The X–37 is to serve as a platform for integrated flight demonstration

of reusable space system technologies thus advancing technologies to reduce risk to

the overall Space Launch Initiative program. Is NASA providing adequate funding

to support the X–37 program through the aerodynamic drop tests in fiscal years

2004 and 2005?

Answer. The X–37 continues to serve as a one of multiple platforms for integrated

flight demonstrations of reusable space system technologies thus advancing technologies to reduce risk to the overall Space Launch Initiative program. The X–37

program is currently planned through an atmospheric drop test, scheduled to begin

in 2004, to demonstrate approximately 18 imbedded technologies. Funding for the

X–37 in fiscal year 2004 timeframe will be contingent upon the final evaluations of

the current NRA 8–30 Cycle II.

SPACE LAUNCH INITIATIVE RESERVES

Question. In fiscal year 2002, each Space Launch Initiative project included five

percent in reserves. By 2nd quarter fiscal year 2002, the reserves have been significantly depleted.

What was the basis for determining the adequacy of a 5 percent allowance for SLI

reserves? What are the plans for replenishing the reserves and what impact will

this have on program risks?

Answer. The program allocated an initial 5 percent reserve to each project based

upon the contracts awarded from NRA 8–30 Cycle I. In addition to the project reserve allocation, the program carries approximately 15 percent reserve each fiscal

year. Each project can request funds from the program reserves through the Risk

Management Board, chaired by the Program Manager, as required. The program

level reserves are allocated by the Program Manager consistent with program priorities and assessment of each task’s associated risk to achieving the overall program

goals and objectives.

CONTRACT MANAGEMENT/INTEGRATED FINANCIAL MANAGEMENT PROGRAM

Question. GAO has reported that NASA’s contract management is a continuing

area of high risk, because the agency lacks effective systems and processes for overseeing contractor activities. For example, in a recently issued report on International Space Station cost limits, GAO found that NASA was unable to provide

auditors with detailed, transaction-based data to support the dollars obligated for

the space station, and did not have support for the actual cost of completed space

station components—either in total or by subsystem or elements. As a result NASA

is not able to re-examine its cost estimates for validity once costs have been realized. A key effort to address these weaknesses is the implementation of a new integrated financial management system. Implementation of the system and its integration with full cost accounting have been delayed for several years, however, because

of significant development and implementation problems. NASA has started its

third attempt at developing such a system, after having spent $180 million over 12

years on two failed efforts. Until the new system is operational, performance assessments relying on cost data may be incomplete.

After two failed attempts, what is your expectation for fully implementing the Integrated Financial Management System (IFMS)?

Answer. We are currently on schedule for implementing all eight (8) modules comprising the IFMS. To date, the Travel Manager, Resume Manager and Position Description modules are in various stages of Agency-wide deployment and the rollout
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of our Core Financials module pilot (at Marshall Space Flight Center) is on schedule

with a ‘‘go live’’ date of October 2002. The remaining four (4) modules, Budget Formulation, HR, Integrated Asset Management (IAM), and Contract Administration

(CA) are also on schedule for rollout over the next thirty six (36) months.

Question. What lessons learned from the previous attempts do you plan to apply

to increase the probability of success on the current effort?

Answer.

—Use COTS software

—Use a phased approach for module rollout

—Involve the end-users early into the deployment process

—Drive the change management process as an integral part of the transformation

Question. What type of management attention are you providing to this effort?

Answer. After Safety, the Administrator has made the successful and accurate implementation of the Integrated Financial Management System the primary goal. In

addition, he has hired a Special Assistant who is the Program Executive Officer of

IFM and reports directly to him. He has also directed a re-focus of the field centers

to include financial analysis to be complete with the implementation of the IFM program.

Question. What is the estimated completion date for fully implementing the

IFMS?

Answer. December 2005 for all eight modules. Resume Management was implemented in January 2002, Position Description in August 2002, Core Financials will

be fully implemented in June 2003, Budget Formulation in February 2004, Human

Resources, Integrated Asset Management and Contract Administration are currently scheduled for December 2005.

Question. What are the total estimated costs to develop and implement the IFMS? Answer. The PCC number is $644.8 million (fiscal year 2001 through fiscal year

10). Details are:

[Dollars in millions]

Amount

Fiscal year: 2001 .................................................................................................................. $76.7

2002 .................................................................................................................. 73.3

2003 .................................................................................................................. 85.1

2004 .................................................................................................................. 91.2

2005 .................................................................................................................. 90.8

2006 .................................................................................................................. 48.2

2007 .................................................................................................................. 67.0

2008 .................................................................................................................. 37.5

2009 .................................................................................................................. 37.5

2010 .................................................................................................................. 37.5

Question. What are the advantages and risks for NASA to accelerate progress on

developing the IFMS?

Answer. The IFM will give the tools to NASA necessary to manage in a timely

and efficient its finances. So far, the IFM implementation is on schedule and any

additional acceleration analysis will include a detailed risk identification and mitigation strategy comparable to the one adopted for the Core Financials module.

Question. Do the centers have the resources and knowledge to implement the

IFMS?

Answer. Yes. They are working in very close coordination and concert with the

IFM program office.

Question. How will NASA’s new financial management system change the way

NASA tracks and uses cost information for activities such as estimating and controlling costs, performance measurement and making economic trade-off decisions?

Answer. IFM will provide NASA with timely, accurate and highly detailed and

correlated financial information capable of supporting both full-cost accounting requirements and program and project level performance analysis. It will help shift

the financial management focus of the Agency from ‘‘spending to budget’’ to ‘‘managing to cost’’ by providing the necessary information for effective decision support

in a timely, user-friendly and reliable environment.

Question. Given the fundamental changes in NASA’s financial management, how

will NASA manage the cultural and workforce changes needed for the project to succeed?

Answer. NASA is keenly aware that one of the major success factors related to

implementing a new Agency-wide system like IFM resides in transferring as quickly

as possible the ‘‘ownership’’ of the new system and its related processes from the

Project Office to its ultimate constituencies. In parallel to the software technical im-
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plementation, the Agency is scheduling the related change management activities

following a timetable closely coupled with individual user/constituency feedback.

Question. What other steps will you take to enhance oversight of contract management activities?

Answer. The appointment of a Program PEO and the competitive sourcing of future module, such as Payroll, focusing on ‘‘best of Breed’’ and e-government guidelines will enhance contract management oversight.

WORKFORCE ISSUES

Question. Between fiscal year 1993 and fiscal year 2000, NASA experienced a 26

percent civil servant reduction. The downsizing skewed the age distribution of

NASA’s workforce and contributed to critical skill shortages. More people in the

workforce are over 60 than are under 30, and there is concern about the prospect

of large numbers of future retirements. Since the completion of downsizing in fiscal

year 2000, NASA has shifted its focus to workforce revitalization and restructuring.

What progress has NASA made toward mitigating critical skill imbalances and reversing adverse workforce demographic trends?

Answer. NASA has taken, and continues to pursue, efforts to address Agency

workforce issues, including skill imbalances and adverse workforce demographic

trends.

To help us better manage the existing workforce and enable better strategic decisions about future workforce needs, the Agency has undertaken an initiative to develop and implement an Agency-wide integrated workforce planning and analysis

capability that will permit us to track the distribution of NASA’s workforce across

programs, capture critical competencies and skills, and allow an analysis of gaps between current and desired states.

The Agency is very focused on addressing the adverse workforce demographic

trends it faces, including the shrinking S&E pipeline, lack of diversity within that

pipeline, and NASA’s aging workforce. In order to reshape and reconstitute the

workforce for the future, NASA Centers are re-establishing recruitment networks

and rebuilding the once extensive Co-operative Education Program. The Agency will

continue to use these programs, as well as the Presidential Management Intern Program, the Federal Career Intern Program, and other student employment programs

as tools for entry-level hires.

NASA uses available financial incentives to attract and retain a workforce that

has the right skills for the future and is representative of the Nation’s diversity.

For example, NASA Centers will offer starting salaries above the minimum rate of

a grade and when appropriate offer recruitment bonuses to attract, and retention

allowances to retain, needed talent. Use of these incentives has increased in the recent past—a trend the Agency expects to continue because of an increasingly competitive job market and high cost of living surrounding some NASA Centers. The

Centers are now also able to repay student loans as a way to attract or retain employees.

The National Recruitment Initiative study, completed in January 2002, was created to develop Agency-wide hiring strategies and tools for NASA’s current and future science and engineering recruitment needs. Information gathered was used to

develop recruitment enhancements that focus on the candidate instead of the hiring

process; leverage partnerships and alliances with universities; and coordinate Agency-wide recruitment opportunities and outcomes. In addition, the Agency’s automated resume submission process enables applicants to apply for jobs using an online service called NASA Staffing and Recruitment System (NASA STARS). We recently added an on-line notification system that allows individuals to be automatically notified of new vacancies that may be of interest to them.

Given current workforce demographics, particular attention must be focused on

assuring the Agency captures and makes available the wealth of expertise and experience the current workforce possesses—as well as that which resides outside the

Agency in similar organizations—to aid in developing the next generation of project/

business managers and leaders. Accordingly, NASA has identified an ‘‘improvement

initiative’’ to ensure training and development programs build needed competencies,

including more effective incorporation of knowledge sharing and mentoring in the

development of employees.

To help ensure a continuing pipeline of future talent, NASA has a number of programs, K–12 through post-graduate, to encourage students to pursue science, math,

engineering, and technology studies. The Agency has made education a core mission

and is pursuing a more coordinated management approach that will further enhance

our reach and improve our performance in the education area. In addition to those
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efforts, NASA is working to improve the linkage between these ‘‘feeder’’ programs

and projected workforce requirements.

We face challenging times as we reconstitute and reshape our workforce for the

21st century. While we continue to use our existing flexibilities, they are not entirely adequate. To help us address the challenge head-on, in May 2002, we recently

forwarded to Congress a series of legislative provisions dealing with human capital.

These provisions will complement the Administration’s Managerial Flexibility Act,

and we look forward to working with the Committee and Congress to ensure that

these essential tools are enacted into law this year.

Question. What barriers impeded NASA from achieving proper staffing levels?

Answer. The rigidity of Federal workforce restructuring, recruitment and compensation laws and rules impede NASA’s ability to respond in an agile and efficient

manner to mission or program changes and workforce trends. NASA needs additional flexibilities and authorities to address its human capital challenges.

NASA must reshape and reconstitute its current workforce to address its skills

imbalances and lack of depth in critical competencies. The buyout and early retirement authorities are very useful tools to facilitate downsizing, but management

must be able to use them for restructuring and reshaping (not just downsizing) and

be able to target them on the basis of skills and occupations.

Financial incentives are needed to attract and retain a world-class workforce and

avoid a sudden drain of talent and corporate knowledge that could result from the

departure of too many key employees at critical points. More competitive and flexible recruitment, relocation, and retention bonuses would address this need. Other

incentives, such as the authority to offer new employees the same travel and transportation benefits available to permanent employees who transfer to other duty locations would make a difference when recruiting new employees for positions in high

cost areas.

Federal recruitment and placement processes are overly cumbersome and time

consuming. As a result, NASA loses highly qualified candidates to the private sector, which can extend more lucrative offers much more quickly. Streamlining these

processes will enable NASA to respond more quickly and effectively to workforce

changes and compete more successfully with the private sector for talent. Among

some of the suggested changes include:

A streamlined hiring authority for severe shortage and critical needs positions.

A more flexible term (time-limited) appointment authority. Term appointments,

which currently are limited to 4 years, often are used to support scientific and technical projects and programs. The completion of such projects often is dependent on

the technology, so their duration may extend beyond the original anticipated date—

and beyond 4 years. NASA needs the authority to make/extend a term appointment

for up to 6 years. In addition, the process of converting term employees to permanent must be simplified. Doing so is likely to make term appointments more attractive to potential applicants and thereby provide a more robust labor pool from which

to draw.

Question. What is the status of the agency-wide workforce planning system NASA

is developing, and what is its relationship to the Integrated Financial Management

Project? How will the new system assist the agency in making strategic decisions

about future workforce needs, including the size of the workforce and the knowledge, skills, and abilities needed to carry out agency operations?

Answer. As mentioned previously, we are implementing a three-phase plan for developing an improved workforce planning capability at the Agency level. This effort

began in fiscal year 2002 and is scheduled for completion in fiscal year 2005. The

plan focuses on the competencies required and those possessed within the NASA

workforce. Ultimately, we plan to use the Human Resources (HR) capabilities of the

IFM enterprise software to integrate workforce planning with other planning processes in the Agency.

Initially, we have had the Centers update an inventory of competencies in their

civil service and contractor workforces. We are refining that data and improving our

competency definitions. We will go back to the Centers later this year to get input

identifying specific competency gaps related to NASA program needs. Simultaneously, we are working on standardizing and extending the use of a competency

management system model devised at the Kennedy Space Center. A team has begun

work on this model, which will provide the common framework needed across all

the Centers to identify competencies and workforce needs. This framework will be

used to configure the HR module in the IFM system. The new IFM HR software

will give us the capability, for the first time at the Agency level, to associate skills

and competencies with positions and with employees. It will further enable us to

associate employees with the programs and projects on which they work. This will
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give us the information needed to plan and target hiring and training to the needs

of the programs and agency operations.

NEXT GENERATION SPACE TELESCOPE

Question. NASA’s current plans are for the Hubble Space Telescope to receive one

more servicing mission and then to operate it until 2010 or until subsystem failures

render the Observatory inoperable. The schedule for the Next Generation Space Telescope (NGST)—an observatory that will enable NASA to estimate the total mass

in galaxies even in non-luminous regions due to sensitive infrared capability—has

been extended. NASA has acknowledged that delays are due to a number of factors,

including foreign partner concurrence and the performance of an improved instrument cost estimate. Down select to a single prime contractor is currently scheduled

for this fiscal year.

Uncertainty in the details regarding the transition from the Hubble to the NGST

is not unlike that associated with the transition from the Shuttle to a replacement

Reusable Launch Vehicle. Indeed, in both the case of the Hubble and Shuttle, we

are a long ways away from an operational replacement system, costs for the replacement are uncertain, and decisions need to be made in short order if additional upgrades to extend the life of the current system are to be cost-effective.

As the NGST schedule is extended, is it prudent to develop a contingency plan

that will enable Hubble to operate beyond 2010? Has NASA developed such a plan?

If so, what is the range of costs associated with possible contingencies? Are skill

shortages a concern among HST staff in light of possible operations beyond 2010?

Is sufficient time being allotted for testing to ensure that NGST’s needed technologies—such as lightweight optical structures, new generations of infrared detectors, and energy-efficient cooling techniques—will operate successfully when

launched?

Answer. We currently plan to launch NGST in 2010. It is important to note that

NGST and HST look at different portions of the electromagnetic spectrum, so even

in the event that NGST slips, trying to keep HST going past 2010 wouldn’t ‘‘make

up’’ for the delayed science. This is not to say that astronomers interested in HST

visible/ultraviolet data would not be interested in NGST infrared data, but it is

worth noting the difference. Therefore, because there is no pending ‘‘data gap’’ to

mitigate, we have not developed a contingency plan to extend Hubble’s operational

life.

It is also important to point out that the amount of archival data from Hubble

is immense and could easily keep the scientific community occupied for years. In

fact, one of our most important discoveries from Hubble over the past year—the existence of ‘‘dark energy’’ that pushes galaxies apart—resulted from archival data,

not from a recent observation. Even if there is a delay in NGST development or if

HST’s planned operational life is unexpectedly shortened, NASA plans to continue

to provide grants to researchers to make use of archival data from Hubble.

AERONAUTICS RESEARCH

Question. NASA’s fiscal year 2003 Budget Estimates says that: ‘‘U.S. competitors

are targeting aviation leadership as a stated strategic goal. Without careful planning and investment in new technologies, near-term gridlock, constrained mobility,

unrealized economic growth, and the continued erosion of U.S. aviation leadership

could result’’.

Mr. Administrator, I too am concerned about the apparent loss of U.S. aviation

leadership. While NASA expresses concern, its budget request seems to say otherwise. How else could you interpret the decreasing funding trends in aeronautics research? Take ‘‘Breakthrough Vehicle Technologies’’ for example, a component of the

Vehicle Systems Program. Fiscal year 2001 and fiscal year 2002 appropriations were

$84.4 million and $83.2 million respectively. The fiscal year 2003 request is for

$61.9 million. Does this trend mean that the continued erosion of U.S. leadership

has stopped?

Answer. During fiscal year 2001 and fiscal year 2002, the budget for the Breakthrough Vehicle Technology project included a task associated with 3rd generation

reusable launch vehicles unrelated to aeronautics technology. During the fiscal year

2003 program restructuring to provide more focus on aeronautics, this work ($20.5

million) was appropriately consolidated with the Space Transfer and Launch Technology program. The fiscal year 2003 NASA request for aeronautics work within the

Breakthrough Vehicle Technology project has increased over the fiscal year 2002 request.

Question. The Aerospace Technology Enterprise Plan issued in April 2001 is

NASA’s blueprint for a new era in Aerospace for the United States. Focusing on the
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goal of pioneering technology innovation, I am struck by the apparent absence of

key markers that would demonstrate NASA’s resolve. Is this indicative of a void in

the Nation’s strategic approach to aeronautics research?

Answer. NASA is in the process of defining metrics for its pioneering technology

innovation goal. NASA’s Office of Aerospace Technology is working with its partners

and customers in the NASA Enterprises to establish definitive objectives and

metrics for this goal. The absence of the metrics is not an indication of a void in

the Nation’s approach to aeronautics research. For example, NASA’s strategic plan

has established quantitative metrics for aviation safety as follows: technology development to enable an 80 percent reduction in fatal accident rates by 2007, and a 90

percent reduction by 2022. Similar quantitative metrics have been established for

aviation noise and emissions reduction, and capacity and mobility improvements.

SPACE SHUTTLE SAFETY/ASTRONAUTS

Question. Richard Blomberg, who recently completed his term as chairman of an

independent panel that oversees human space flight safety at NASA, told the House

Science Committee: ‘‘In all the years of my involvement, I have never been as concerned for Space Shuttle safety as I am right now.’’ Is this country on the verge of

another Challenger tragedy? What is NASA doing to allay Mr. Blomberg’s concerns?

Answer. The Space Shuttle is safe to fly. The recent discovery of the flow liner

cracks exemplifies the risk adverse nature of the Shuttle team. For the future,

NASA is currently assessing Space Shuttle supportability and upgrade candidates

for hardware, infrastructure and obsolescence, and reviewing human capital investment required to operate the shuttle beyond 2012. The primary objective of this activity is to understand options to maintain safe Space Shuttle operations through

2020 should Agency planning for a transition to a second-generation vehicle by 2012

change. No decisions have been made to extend Shuttle operations beyond 2012.

Question. Last year, your predecessor was quite concerned about the prospect of

‘‘tourists’’ on the space station. But now NASA and the other space station partners

have agreed to allow Russia to send ‘‘spaceflight participants’’ to visit the space station regularly. Another one—a millionaire from South Africa—is up there now, and

several more candidates are waiting in the wings. Do you consider this an appropriate use for the world-class research facility that we’re building? Is this what

NASA means by ‘‘space station commercialization’’? What are NASA’s plans for flying non-professional astronauts either on the space shuttle or the space station?

Answer. The International Space Station (ISS) is a partnership venture, where

each partner has rights associated with activities utilizing the resources and capabilities that they contribute to the venture. As such, the Russian partner has the

right to utilize their portion of the ISS to accommodate ‘‘spaceflight participants’’

whom they choose to sponsor and transport to the ISS. In general, each partner selects candidates for its own ISS crewmembers based on its own criteria and procedures. The ISS partnership has agreed on a set of criteria and processes to be used

by all ISS partners when assigning their professional astronauts/cosmonauts or

spaceflight participants as ISS (Expedition and Visiting) crewmembers. This document addresses the requirements for candidate crewmembers in the following areas:

general suitability, medical requirements, behavioral suitability, linguistic ability,

crew code of conduct, and training requirements.

NASA has no plans for flying non-professional astronauts (‘‘spaceflight participants’’), either on the Space Shuttle or the ISS, and does not envision any consideration of such individuals until assembly of the ISS is completed (‘‘US Core Complete’’). Any future consideration to fly spaceflight participants on the Space Shuttle

or the ISS would only be considered if it were deemed to be in the ‘‘national interest.’’

Question. Do women astronauts have the same opportunities as their male counterparts? We have heard that NASA’s decision to curtail funding of a ‘‘small torso’’

spacesuit severely limits the number of women who can be assigned to space station

crews. Is that correct? What percentage of the women in the astronaut corps currently cannot be assigned to space station crews because of the spacesuit issue? If

women are not part of the long duration crews on space station, how will data be

acquired on women’s adaptation to the space environment to ensure they can be included on trips to Mars, for example? How much money will NASA save by not

building that version of the spacesuit? What scientific research objectives will not

be achieved—particularly in understanding human adaptation to the space environment—because there are so few women on space station crews?

Answer. NASA’s anthropometric criteria for astronaut candidates are intentionally broad to allow us to select from the nation’s best and brightest, regardless
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of gender. Naturally, all astronauts are not going to be qualified for all the possible

roles on a mission, with respect to their size or other characteristics.

It is important to note that only EVA suits, which are only used for space walks,

are in any way limiting which astronauts can fly on Shuttle missions. The Shuttle

spacesuits for launches and landings accommodate all astronauts. While the small

EVA suit could affect 31 women astronauts in the current astronaut corps, only

three are currently impacted for future missions. These three women have yet to

be assigned to a mission, but they will likely be assigned within the next year.

Given a recent change in policy that allows astronauts to be assigned to ISS Expedition crews even if they are not EVA qualified, it is now possible for these three

women astronauts to qualify for an ISS Expedition mission.

As far as the other 28 women astronauts potentially affected, fifteen can be accommodated in the medium EVA suit. One recent graduate of Astronaut Candidate

training has yet to be evaluated for EVA suit sizing requirements. Seven female astronauts are not eligible for EVAs regardless of suit size. Four of these seven women

are on inactive status and have already completed multiple space flights as mission

specialists or pilots. The other three have been assigned mission-critical roles as

Shuttle pilots or as a mission commander. Of the remaining women astronauts, five

have already had multiple flight assignments in mission-critical roles, such as

Robotic Manipulator System operators, and have been instrumental in International

Space Station (ISS) assembly operations. Deferral of the development of the small

EVA suit will not eliminate opportunities for assignment to ISS flights since all

long-duration crewmembers do not require EVA qualification. The length of the

EVA suit shoulder determines who can wear the existing suits. Some male astronauts are too big for the extra large suit just as some women are too small for the

medium EVA suit. Thus far, many women and men have trained and qualified in

the medium, large, and extra large EVA suits. Women astronauts have performed

significant EVAs in support of the ISS assembly within the past year most recently,

Dr. Linda Godwin and Col. Susan Helms.

NASA recognizes that the current EVA suit has limitations, including size constraints and interchangeability, which we hope to improve through further evolution

in suit design and configuration. The next generation of EVA suits that we develop

will improve functionality for all users and will also accommodate a broader range

on both extremes of the anthropometric spectrum, small and large.

We must emphasize that NASA has not terminated the small EVA suit, although

its certification and production have been deferred in favor of higher funding priorities. Even if the development of the small suit resumed immediately, it could not

be ready for use during the assembly phase of the ISS, when the demand for EVA

is at its peak. In addition, operational problems would still exist since the small

EVA suit parts are not compatible with the other suits.

MERGERS IN THE AEROSPACE INDUSTRY

Question. Has there been any impact on competition in NASA contracting because

of mergers in the aerospace industry?

Answer. Mergers in the aerospace industry have reduced the number of competitors for NASA contracts. Despite these changes, however, NASA has experienced an

increase in the percentage of competitive contract actions from 75 percent in fiscal

year 1997 to 81 percent in fiscal year 2001. In spite of a relatively flat budget over

the last several years, the percentage of dollars awarded competitively has also increased from 61.9 percent in fiscal year 1997 to 64.1 percent in fiscal year 2001.

Question. Is competition less fierce today than, say five years ago?

Answer. There is no indication that competition among contractors vying for work

with NASA is any less fierce today than it was five years ago.

Question. If so, is NASA paying more for products and services?

Answer. To the extent that we obtain competition for NASA business as noted

above, we believe that the prices are reasonable and reflective of the marketplace.

Question. Should additional mergers such as Northrop Grumman’s proposed merger with TRW be discouraged?

Answer. In general, NASA defers to the Departments of Commerce and Justice

to evaluate potential mergers. We believe each proposed merger should be reviewed

on a case-by-case basis in cooperation with those Departments. NASA does not anticipate any adverse impact from the pending Northrup Grumman/TRW merger.

NUCLEAR PROPULSION

Question. When do you expect nuclear propulsion for planetary probes to be ready

to fly? You have said that we should wait until nuclear propulsion is available to

send a probe to Pluto because it can get there without a gravity assist from Jupiter,
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and will be able to conduct longer term studies of Pluto once it arrives. Assuming

your nuclear systems initiative is funded as planned for the next 5 years, when will

that nuclear-propelled Pluto probe be launched? Will it arrive at Pluto by 2020,

when scientists say the atmosphere is likely to collapse?

Answer. The proposed Nuclear Systems Initiative research and development program could enable the flight of a nuclear fission-powered spacecraft early in the

next decade. A mission to orbit Pluto would take approximately 10 years to reach

and orbit Pluto. There is currently no consensus among the scientific community as

to when or even if Pluto’s atmosphere will freeze out. Nuclear electric propulsion

reduces or eliminates the need for planetary gravity assists, and would therefore not

have launch date constraints.

The abundant on-board power and propulsion enabled by the nuclear fission system (more power than approximately 250 watts electric from a radioisotope power

system) would permit the spacecraft to orbit the Pluto/Charon system, rather than

simply fly-by, allowing significantly more time for detailed survey of Pluto/Charon

through the use of remote sensing instruments. Additionally, the abundant energy

would enable a much greater scientific data-return communications link to Earth

compared to what could be achieved with a radioisotope power system.

STATUS OF RUSSIAN COMMITMENTS

Question. What is the status of Russia fulfilling its commitments to the space station program? The cost overruns on NASA’s part of the program have overshadowed

concerns about Russia’s ability to fund construction and launch of Progress and

Soyuz spacecraft. Are you confident that Russia will meet those commitments? If

not, what remedy do you propose?

Answer. Russia continues to meet flight commitments including the provision of

Service Module life support systems and launch of Progress and Soyuz spacecraft

for re-supply, reboost, and crew escape functions. It is our expectation that Russia

will continue to meet these commitments.

Question. Of the space station segments Russia promised to build—such as the

Science Power Platform, docking units, and Research Modules—which do you still

anticipate will be constructed? If Russia does not provide the Science Power Platform, will we have to provide electrical power for their segment of the space station?

If so, will they be charged for that resource?

Answer. The Science Power Platform (SPP) as originally envisioned has not been

completed due to budget shortfalls and design uncertainties. Although some hardware has been built, it became clear that the original design would be too heavy

for launch on the Space Shuttle. Most work on the project was halted, in order to

allow time to re-design the SPP. The primary consequence of not building the SPP

as planned is to reduce the amount of power available to the Russian Segment of

the ISS.

Relative to additional assembly hardware to be delivered, progress on these elements has also been limited due to funding issues. However, like the SPP, the primary consequence of not building out the full Russian segment is an impact to the

Russian segment utilization.

NASA has received alternative Russian design options for technical consideration.

However, NASA is not in a position to discern whether Russia will be able to address the financial issues that continue to delay progress on their plans to build out

the Russian segment nor the specific elements that will ultimately be deployed to

orbit.

Question. What is the status of discussions with Russia about providing additional

Soyuz spacecraft to enable the space station crew size to grow to six? How much

do you think Russia will charge the ISS partnership for two additional Soyuzes per

year?

Answer. NASA is currently not engaged in discussions with the Russian Aviation

and Space Agency (Rosaviakosmos) on the subject of additional Soyuz vehicles to increase the size of the International Space Station (ISS) crew from three to six. A

decision on the most effective crew size and associated crew return requirements is

not expected until NASA completes its five-point assessment to reform and revitalize the ISS Program. The five areas of this assessment are: science priorities, engineering development and deployment, cost estimating and analysis, mission and

science operations, and international partner coordination.

Moreover, NASA is legally prohibited from purchasing ISS-related goods and services from any entity or element of the Government of the Russian Federation under

Section 6 of the Iran Nonproliferation Act of 2000 (INA) (Public Law 106–178) unless the President determines that Russia meets specific nonproliferation conditions.

NASA has made it clear to Rosaviakosmos that any potential future purchase of
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crew return services would have to be within U.S. non-proliferation regulations, including INA.

With USG interagency approval, NASA did discuss the feasibility of extending/expanding the use of Soyuz crew return vehicles with Rosaviakosmos in February

2002. Rosaviakosmos indicated willingness and ability to supply additional Soyuz

spacecraft if NASA is able to provide lead funding at least 2 years prior to delivery.

NASA did not enter into negotiation regarding the price of Soyuz crew return vehicles. The price would depend on the number of vehicles required and delivery schedule. Any requirement for additional crew return capability will come from the ongoing five-point NASA assessment of the ISS Program. This plan is premised on research requirements driving the ISS vehicle configuration. We have, with the Heads

of the ISS Cooperating Agencies, agreed to a Program Action Plan for the remainder

of calendar year 2002 that will allow for multilateral endorsement of an option path

to meet utilization and research requirements. This option path will address NASA’s

demonstration that it has regained programmatic cost control, the timing of research requirements on orbit, as well as budgetary requirements and constraints,

while recognizing NASA’s prerequisite coordination with the Administration and

Congress.

ORBITER MAJOR MODIFICATIONS

Question. Your decision to move Shuttle ‘‘Orbiter Major Modifications’’ (OMM)

work to Florida from California has stimulated some controversy.

Kennedy Space Center’s press release announcing the transfer stated that performing all the OMM work in Florida ‘‘would also minimize risk.’’ What risks are

minimized by moving this work to Florida? What risks are increased? For example,

it would seem that there are increased risks in having the entire shuttle fleet in

the same geographical location. Wouldn’t it be prudent to keep at least one orbiter

in a different location in case terrorists or natural disasters strike Kennedy Space

Center?

Answer. Several risk factors are lessened by the transfer of OMM to KSC: reduced

risk of transporting orbiters cross-country from Palmdale to KSC; reduced Shuttle

manifest impact planning risk; reduced Shuttle ground operations risk, reduced

overall costs per year ($30 million); reduced risk of ‘‘redoing’’ OMM work. KSC is

constantly improving its security procedures to protect the nation’s Space Shuttle

and ground facility assets, with an accelerated improvement effort in light of the

events of September 11. While we must remain vigilant for future missions, past

experience has shown that the orbiters are very well protected at KSC. Placing a

single orbiter at a different location in order to protect it from a natural disaster

or terrorist attack will only increase the strain on NASA security forces to protect

more than one location.

Question. How many people in California will lose their jobs? How many people

in Florida will be hired? Are you or your contractors trying to motivate workers to

move to Florida so their experience is not lost?

Answer. Due to the periodic nature of the OMM’s in Palmdale, the workforce is

hired/terminated based on need. Utilizing synergies of a common workforce, United

Space Alliance’s plan uses 235 workers. This workforce is a combination of current

and new hires. In addition, 30 Boeing engineers for design-engineering support will

be used. Management has been drawn from the existing Orbiter Element and

Ground Operations Element teams.

In September 2001, and March 2002, United Space Alliance held an ‘‘Open House’’

in Palmdale for the purpose of interviewing and extending offers to Palmdale employees to relocate to KSC in Florida. Approximately 300 attended the September

event, and 90 attended the March event. USA has extended 25 relocation offers, of

which 15 have been accepted. Currently there are no other offers pending to California workers to relocate to Florida. It should be made clear that the Palmdale

workforce was laid off after the completion of the last OMM, not as a result of the

transfer to KSC. This is a cyclical process that occurs after each OMM at Palmdale.

Many of the laid-off Palmdale workers have secured other positions at area aerospace firms.

Question. What is your current estimate of how much money will be saved by this

transfer on an annual basis for the next 5 years? What is your current estimate of

the costs (including costs to the Federal Government, State government, local government, and contractors)? Please specify any facilities that must be built, renovated, or upgraded and the associated costs.

Answer. The proposal to conduct OMM at KSC was based on a plan to use existing facilities, in their current configuration. The current savings per year due to the

relocation is $30 million. NASA and United Space Alliance will perform OMM’s in
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existing Orbiter Processing Facilities (OPF). Since OMMs are a labor-intensive effort and we are using existing facilities at KSC, there are no costs associated with

this transfer. A declining flight rate has alleviated processing dependencies on facilities.

Question. When will the transfer be completed and the Palmdale, CA facilities

closed?

Answer. The transfer has already begun and closure is dependent upon the USA

& Boeing evaluation of remaining work at Palmdale.

Question. How has your approach to shuttle security changed since the September

11 terrorist attacks? Much attention has been given to your decision not to announce shuttle launch times until 24 hours in advance. Since all shuttle flights,

with one exception, are to the space station, and launch times can be calculated easily based on the space station’s orbit, is it correct that the reason behind your decision was related to that one exception—this summer’s launch of STS–107, which includes an Israeli astronaut? If so, will you return to your prior practice of announcing launch times well in advance of a launch after STS–107 is completed?

Answer. Subsequent to the events of September 11, KSC received approximately

$45 million to enhance security. While this work is in progress, a variety of security

efforts have already been instituted. No, the decision not to announce shuttle launch

times until 24 hours in advance is not related to STS–107—this decision was initiated immediately following the events of 9/11 and will remain in effect until NASA’s

security policy changes.

RADIATION EXPOSURE

Question. In addition to the spacesuit issue, another factor that may limit women’s participation in space station crews is radiation exposure limits. For example,

your guidelines are that women who make their first long duration 6-month space

flight at age 45 cannot make another long duration flight, but a male of the same

age can make two such spaceflights. You note that the data on which you base your

guidelines is quite dated, and new research could change those guidelines. Do you

anticipate that your Space Radiation Initiative will demonstrate that women can

participate in space missions to the same extent as men? If not, what are the implications for women participating in trips to the Moon or Mars? In general, your radiation exposure guidelines limit most men and women to either one or two 6-month

spaceflights over their lifetime. Is that a ‘‘showstopper’’ for human trips to Mars?

Answer. The safety of flight crews is NASA’s highest priority. As such, we strive

to ensure that our astronauts are protected from undue hazards, including excessive

exposure to radiation. NASA’s standards for radiation safety are based on recommendations from the National Council on Radiation Protection and Measurements (NCRP) and approved by the Occupational Safety and Health Administration

(OSHA). Several radiation limits are used to deal with specific exposure types. The

current NASA radiation limits are based on NCRP guidelines issued in 1989. New

guidelines were published in 2000 and recommended for adoption by the NASA

Aerospace Medical Advisory Board; procedures for implementation of that recommendation are being developed.

The most restrictive radiation limit is the career radiation exposure limit. This

limit has been set to ensure that the probability of fatal cancer during the individual astronaut lifetime is not increased by more than 3 percent above the average

lifetime risk for the U.S. population (which is approximately 20 percent). This risk

limit is imposed equally for both male and female astronauts of all ages. The radiation exposure of astronauts is controlled to ensure that this risk level is not exceeded. However, the risk associated with a given radiation dose is different for men and

women, mainly due to radiation-sensitive organs in women. The risk is also dependent on age. For this reason, the cumulative career radiation dose allowed for women

is less than that for men, and the cumulative career radiation dose allowed for

younger astronauts is less than that allowed for older astronauts of either gender.

The probability of fatal cancer is calculated using measured radiation doses. Current knowledge is not sufficient to establish this relation accurately, and therefore

there are large uncertainties in the risk prediction for a given radiation dose. For

this reason, large margins of safety are required to ensure that the risk is not exceeded. At a given radiation dose, the risk may be as much as three times greater

than the average estimate. Therefore, in order to have reasonable confidence that

the risk limit is not exceeded, further radiation exposure needs to be restricted after

a radiation dose corresponding to only a third of the dose corresponding to a 3 percent risk limit.

The Space Radiation Initiative will contribute in several ways to demonstrate that

women can participate in space missions to the same extent as men. The increased
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knowledge gained from the research will reduce the uncertainty in risk prediction,

allowing narrower safety margins to be applied. This means that higher dose and,

therefore, longer duration missions for both men and women astronauts can be accepted with the same confidence that risk limits will not be exceeded. The Space

Radiation Initiative will also provide significantly better data in physics and biology.

This data will lead to improved utilization of spacecraft components for radiation

shielding. Finally, development of a significant radiobiology research community

will allow NASA to participate in, and benefit from the breakthroughs in biology.

Even minor advances could lead to significant benefits for NASA, as well as society

at large. For example, improvements in biochemical diagnostic techniques that lead

to earlier diagnosis and lower fatality rates for breast cancer would significantly reduce the risk attributable to radiation in a given mission. Even further along the

horizon, biological intervention to mitigate risks of all fatal disease is a realistic

hope. A science community attuned to NASA mission requirements will be able to

translate its benefits into meeting NASA requirements.

The current limitations on astronauts are applicable to the Space Station. A Mars

mission would have greater uncertainties, and require greater margins of safety.

The Space Radiation Initiative is necessary for Space Station and is intended to be

sufficient to assure three 180-day missions for men and women astronauts within

adequate safety margins. The advances of the Initiative are necessary for a Mars

mission, but are not sufficient. Better prediction of biological health effects, including effects other than fatal cancer, is required for a Mars mission than for a stay

on Space Station. In addition to optimization of spacecraft design for radiation

shielding properties it will be necessary to design shielding for a planetary surface;

a new concept of radiation shielding may also be developed for a long interplanetary

transit. A Mars mission with only our present knowledge is likely to result in radiation exposures that exceed current NASA limits. However, it is reasonable to assume that, on the time scale needed for the execution of a Mars mission, adequate

progress could be made to enable a Mars mission to proceed without exceeding safe

risk limits.

EARTH SCIENCE ENTERPRISE

Question. How has your strategy changed regarding commercial remote sensing

applications?

Answer. With the advent of successful deployments of commercial remote sensing

satellite systems starting in 1999, NASA assessed that it was appropriate to expand

its role in the area of Earth science applications. In January of this year, NASA

released the ‘‘Applications Strategy: 2002–2012’’ for the Earth Science Enterprise

(ESE). The focus of this strategy is on national applications that extend and accelerate the operational use of the results of NASA research and development in Earth

science and technologies. A copy of the Strategy is available at: http://

www.earth.nasa.gov/visions.

The Applications Strategy indicates a role for commercial remote sensing in serving NASA research purposes in understanding the Earth system. The Applications

Program undertakes the functions of evaluating potential sources of commercial

data, verifying and validating the data and information technologies, and then

benchmarking their use for scientific research and applications development and

demonstration.

NASA proactively develops opportunities for using commercial data; e.g., partnerships with industry and leveraging investments in new products and services to

serve the research agenda. The Landsat Data Continuity Mission (LDCM) is a public/private partnership enabling the private sector to provide data to meet a government specification for the Earth science community. This multi-year development effort sets a precedent for government requirements that may be served by the private sector on a sustained basis into the future.

Question. For example, what is the significance of your decision to change the

Commercial Remote Sensing Program (CRSP) at Stennis Space Center to the Earth

Science Applications Directorate?

Answer. The title was changed to reflect the broader role of the Earth Science Applications Directorate (ESAD) at Stennis in support of the ESE. The ESAD contributes to the systems engineering functions of evaluation, verification and validation,

and benchmarking associated with the use of commercial remote sensing data, and

for the use of NASA results in the national applications. ESAD serves in leading

many of the crosscutting solutions associated with the systems engineering to enable the effective use of Earth science predictions and observations to be assimilated

into decision support tools, including assessments and decision support systems.

This approach is consistent with the approach of the Climate Change Research Ini-
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tiative (CCRI) and other Federal agencies in addressing national needs for Earth

science results to be deployed effectively to serve our citizens.

Question. Your fiscal year 2002 budget estimate states that the goal of the CRSP

program was to ‘‘accelerate the development of a preeminent U.S. remote sensing

industry,’’ but your fiscal year 2003 budget documents state that, as of fiscal year

2002, that no longer is a strategic objective. What has changed, and why?

Answer. The U.S. remote sensing industry has grown in capacity recently, as

manifested by the successful launches of commercial remote sensing satellites and

successful operations of a number of airborne commercial remote sensing systems.

The ESE recognizes the importance of systematically enabling the results from

NASA’s research and development of aerospace science and technology for increasing the understanding of the Earth system to enable decision support systems to

serve our Nation. In January of this year, NASA released an Applications Strategy

to accomplish the purpose of serving national applications (including energy forecasting, public health, agricultural competitiveness, homeland security, coastal management, etc.). The strategy directly addresses the NASA mission objective of ‘‘understanding and protecting our home planet’’.

The National Academy of Sciences (NAS) is currently reviewing the Strategy, and

their report is due to be released this fall. The NAS, the Earth Systems Science and

Applications Advisory Committee (ESSAAC), the CCRI and the U. S. Global Change

Research Program) (USGCRP) have all documented the importance of effectively enhancing and expanding the benefits of our increased understanding of the Earth

system (in general) and NASA ESE results (specifically) to beyond the traditional

scientific community. The ESE Applications Program’s focus is to accomplish this

purpose.

Question. When do you expect the Administration to release its Climate Change

Research Initiative and make decisions about the future of the EOS program?

Answer. The Climate Change Science Program Office (CCSPO), led by Dr. James

R. Mahoney, the Assistant Secretary of Commerce for Oceans and Atmospheres, and

the National Climate Change Technology Initiative (NCCTI) group is coordinating

the review of multi-agency climate research activities called for by the Administration in its fiscal year 2003 budget submission. The inventory began in early 2002

and was completed in July 2002. The CCSPO integrated the information submitted

into a single document shared among the Federal agencies. Draft criteria for the

evaluation of the research programs have been iterated among the agencies and

CCSPO. The other affected agencies are currently presenting their climate change

activities to the CCSPO, and it is expected that all presentations and the overall

synthesis of this information should be completed in time to affect the fiscal year

2004 President’s budget submission to Congress.

The CCSPO’s interagency review process of agency activities is expected to

produce recommendations about plans for individual agencies from CCSPO to both

the agencies and those components of the Executive Office of the President that

oversee the overall budget process and content. However, any CCSPO recommendations will occur only after all agencies have made their presentations, and subsequent deliberations are carried out, which should be completed in August. NASA

strongly believes that our EOS follow-on plans are critical to the success of the

CCRI and the USGCRP, especially meeting the goal identified in the draft memo

on criteria for program review to ‘‘Enhance observation and monitoring systems to

support scientific and trend analyses and to improve decision support tools.’’

Question. Have you received any indication so far as to what EOS-Follow On

projects will be approved? If so, what are they?

Answer. The fiscal year 2003 budget continues funding for three Follow-On missions and one study for a mission:

National Polar-orbiting Operational Environmental Satellite System (NPOESS)

Preparatory Project (NPP) ($153 million)

Landsat Data Continuity Mission (LDCM), which is being planned as a data purchase ($45 million)

Ocean Topography ($32 million)

Study of a potential Global Precipitation Mission (GPM) ($8 million)

All other EOS follow-on missions are on hold until the CCRI review is complete.

ORBITAL DEBRIS

Question. There have been conflicting accounts of NASA’s plans regarding continuation of the office at Johnson Space Center that analyzes orbital debris. As

space becomes more littered with debris, it would seem that more attention, not

less, needs to be given to this type of analysis. Are you planning to close that office?

If so, why?
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Answer. The NASA Orbital Debris Program Office, based at the Johnson Space

Center, is not being closed nor does NASA plan to eliminate capabilities in this

area. Customers that benefit from the expertise of the Orbital Debris Program Office are being identified to assure that requisite funding is maintained to meet those

customers’ requirements.

DREAMTIME

Question. Press reports indicate that the space station commercialization agreement you signed with DREAMTiME has not been successful. What is the status of

that agreement? What difficulties were encountered? What does the failure of

DREAMTiME imply for other space station commercialization concepts?

Answer. Dreamtime’s funding to support its performance of the Agreement was

largely based upon obtaining venture capital and anticipated revenues from Internet

business ventures. With the general downturn in interested businesses beginning

shortly after the Agreement was signed, Dreamtime was unable to raise the funds

necessary to perform a number of its principal obligations under the Agreement. Because this was a collaborative agreement, rather than a normal procurement agreement, and NASA did not have significant resources at risk, NASA chose to give

Dreamtime every opportunity to perform. However, by early this year it became obvious that Dreamtime’s situation was unlikely to improve, and NASA elected to proceed to terminate under the terms of the Agreement. The termination became effective on June 1, 2002. The failure of Dreamtime was due to circumstances specific

to the nature of its proposed business operations, and does not suggest that other

types of space station commercialization initiatives would suffer a similar fate.

REUSABLE LAUNCH VEHICLE

Question. You are developing technologies both for a ‘‘2nd generation’’ reusable

launch vehicle (RLV), and a ‘‘3rd generation’’ RLV. According to your briefings, you

expect a 2nd generation RLV to be operational by 2012, and a 3rd generation RLV

by 2025. Why develop a 2nd generation RLV that would be obsolete in such a short

period of time? Would it be more cost effective to invest in the 3rd generation technologies, and continue to rely on the shuttle until they are available? What costbenefit studies have you conducted of the trade-offs between doing 2nd and 3rd generation programs versus focusing on the 3rd generation technologies while continuing to rely on the shuttle? Please provide those studies to the committee.

Answer. The 2nd Generation RLV program is pursuing the development of key

technologies that are essential for future generations of RLVs. Specifically, the 2nd

Generation RLV program is maturing technologies such as thermal protection systems, avionics, operations, long-life engines, and integrated vehicle health management systems. The 3rd Generation RLV program relies on these advancements as

a foundation in its pursuit of breakthrough technologies required to help America

maintain leadership in space far into the foreseeable future. NASA believes the risk

associated with achieving 3rd Generation RLV technology breakthroughs is currently too high to justify maintaining the decades old Shuttle fleet until these breakthroughs occur. NASA’s ISTP (Integrated Space Transportation Plan) lays out the

agency’s space transportation strategy for improving mission affordability and safety

over multiple generations of launch vehicles.

Over the past few months, NASA has conducted a number of reviews to assess

the Integrated Space Transportation Plan (ISTP), which includes the Space Launch

Initiative (SLI), the Space Shuttle hardware and infrastructure upgrades, and the

longer-term 3’d Generation Reusable Launch Vehicle Program. The ISTP update has

incorporated the ongoing reviews of the Space Shuttle Program, and has included

an assessment of the timetable for a multipurpose vehicle to serve crew transfer and

crew return functions. The ISTP review will conclude shortly. The outcome of the

ISTP update will be a roadmap for future investment decisions including phasing

decisions concerning Shuttle, 2nd Generation and 3rd Generation systems.
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QUESTIONS SUBMITTED BY SENATOR LARRY E. CRAIG

NUCLEAR SYSTEMS INITIATIVE

Question. NASA has proposed a new program, the Nuclear Systems Initiative,

that will spend about $800 million over 5 years to develop new space nuclear power

systems.

The funding level in fiscal year 2003 would be about $125 million.

How would this initial increment of funding be used?

Answer. This initial increment will fund initiation of the Stirling Radioisotope

Generator and Multi-Mission Radioisotope Thermoelectric Generator development

projects; both technologies are under consideration for the 2009 Mars Smart Lander/

Mobile Laboratory mission. In addition, technology research and development for

next-generation power conversion for radioisotope power systems will be started via

competitive solicitations.

In the area of fission electric power and propulsion research and development, fiscal year 2003 funding would be used to support four principle areas: (1) electric propulsion research and development (via competitive selection of several proposed approaches) for electric thrusters that are about 10 times more powerful than those

that have been flown before (e.g. the Deep Space-1 ion electric thruster); (2) power

conversion research and development (via competitive selection of several proposed

approaches) for power conversion about 25 times more powerful than what has been

flown before (e.g. the SNAP–10A power conversion system); (3) reactor research to

investigate design options for a fission reactor capable of supporting a nuclear electric propulsion system (which could ultimately be used for expanded exploration of

the solar system); and (4) mission and spacecraft system design studies to enable

the selection of the optimal fission power and propulsion technologies for expanded

solar system exploration.

Question What will be the division of responsibilities between NASA and DOE for

this nuclear program?

Answer. The DOE is responsible for developing all civilian technologies directly

involving nuclear materials. Therefore, the DOE is responsible for Stirling Radioisotope Generator and Multi-Mission Radioisotope Thermoelectric Generator development, and for fission reactor development.

NASA is responsible for power conversion and electric propulsion research and development, overall spacecraft design and integration, mission planning and design,

and expanded scientific exploration of the solar system using radioisotope and fission power and propulsion systems.

Your testimony makes reference to the Naval Nuclear Propulsion program, which

has a proud history in the State of Idaho. The Naval Reactors Facility in Idaho continues to receive all expended Navy fuel cores for examination and storage.

Question. The Naval Reactors program operates under strict secrecy requirements

because of national security implications. Will that environment of secrecy be a complicating factor in collaboration?

Answer. Any potential area of coordination or collaboration involving the Naval

Reactors program must and will attend to national security requirements.

Because the NASA Nuclear Systems Initiative is in the early stage of research,

NASA and DOE are exploring available technical options to assess their applicability to, and utility for, expanding the exploration of the solar system using fission

power and propulsion. At present, it is too early to determine the optimal combination of technologies for this task, and therefore too early to determine whether

Naval Reactors program technologies might be appropriate.

Question. NASA has traditionally worked with DOE’s Office of Nuclear Energy on

space nuclear applications. Is NASA collaborating with DOE–NE on the Nuclear

Systems Initiative?

Answer. DOE has supported NASA for over 30 years to enable solar system exploration, including exploration of the outer planets, using radioisotope power systems

(e.g., radioisotope thermoelectric generators, or RTGs). This work has been accomplished by DOE through its Office of Nuclear Energy (NE) or its predecessor organizations. DOE has identified NE (specifically NE–50) as the lead for radioisotope

power system development (at present, this includes the Multi-Mission Radioisotope

Thermoelectric Generator, and Stirling Radioisotope Generator). DOE has also identified NE (specifically NE–50) as the lead for reactor system development planning.

We anticipate that our close relationship, built over several decades of cooperation, will be a critical factor in the success of the Nuclear Systems Initiative.
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QUESTION SUBMITTED BY SENATOR TED STEVENS

GILMORE CREEK TRACKING STATION

Question. With the potential of the Gilmore Creek Tracking Station, coupled with

the other two facilities, cannot more be done to maintain or upgrade our domestic

satellite tracking capabilities and not ship our Nation’s meteorological satellite systems of the Department of Defense, Department of Commerce (DOC) and NASA to

a foreign country?

Answer. The Fairbanks, Alaska area hosts many satellite tracking stations, including the National Oceanic and Atmospheric Administration (NOAA) Tracking

Station at Gilmore Creek and the NASA Tracking Station hosted on the University

of Alaska’s Poker Flat research launch range. There are commercial Datalynx and

Universal Space Net stations, as well as a station associated with the Alaska Synthetic Aperture Radar Facility on the University campus.

NASA’s Ground Network (GN) is composed of a mix of assets owned by NASA and

commercial service providers. The capabilities of NASA’s and associated commercial

tracking stations are focused on supporting science research missions rather than

operational meteorological satellites. The locations of NASA’s tracking stations are

driven by mission needs related to on-board satellite data storage capacity, data delivery latency, and orbit geometry.

Concerning the NOAA Fairbanks Command and Data Acquisition station

(FCDAS) at Gilmore Creek, Alaska, the station is now and will remain an important

capability to support multi-agency satellite programs. Indeed, significant resources

have been expended and additional investments are planned in the future to maintain and upgrade NOAA’s FCDAS. A recent upgrade added the NASA Ground System Interface Processing facility at Gilmore Creek, which makes the FCDAS a telecommunications hub. The new capability sends data collected from NASA’s Earth

Observing System (EOS) satellites to Goddard Space Flight Center in Greenbelt,

MD. This connects the NASA Poker Flats operations to the FCDAS for initial processing of EOS mission data through local fiber optic telecom links.

More broadly, the communications infrastructure in Alaska has benefited from approximately $29.5 million in investments in the last 3 years alone. These include

three new 13-meter antenna systems, signal and data processing equipment upgrades and control software upgrades. The upgrades added new commercial satellite

communications systems to receive and disseminate mission data to Department of

Defense and Department of Commerce operational weather users within the continental United States.

QUESTIONS SUBMITTED BY SENATOR PETE V. DOMENICI

NUCLEAR PROPULSION

Question. One of the highlighted programs in this year’s submitted budget, as well

as in your testimony today, concerns research with nuclear propulsion. The research

necessary to conduct this research may be able to be done through collaborative

work with other Federal agencies. As an example, the DOE labs in New Mexico

have extensive expertise in fission electric power systems.

How does NASA intend to ensure that expertise of the national laboratories will

be strongly incorporated into development of the fission electric power systems that

will be required by NASA?

Answer. The majority of this program will be competitively sourced, and NASA

fully expects that the national laboratories will propose to lead or to team with industry for nuclear fission reactor research and development.

Question. Can you explain further where the nearly $1 billion in funding comes

from and how NASA intends to proceed with research on the feasibility and safety

of nuclear propulsion in space?

Answer. The budget for the Nuclear Power and Nuclear Electric Propulsion programs represents mostly new funding for NASA. There was some rebalancing within

the overall Space Science program to cover a portion of this initiative; however, no

Space Science missions were cancelled to pay for this initiative. The nuclear electric

propulsion portion of this initiative will likely be a research program for the near

future, leading to engineering test components that could then be developed for

flight. During this stage, NASA will have the lead for non-nuclear portions of the

initiative, and will work closely with the Department of Energy (who will have the

lead for nuclear fission reactor research) to research and develop the safe and effective propulsion systems we will need to continue our exploration of the solar system.
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MANAGEMENT EFFECTIVENESS

Question. The Administration in its submitted budget has taken to reviewing programs, throughout the Federal Government to see what is being done effectively,

and what is not. Two of NASA’s highest profile endeavors, the International Space

Station and the Space Shuttle, for safety upgrades, were assessed as being ineffective. The Mars exploration was given only a moderately effective assessment, with

a comment that ‘‘recovery from failures successful so far.’’

What will NASA be doing under your leadership to make all of NASA’s programs

more effective, and are these reforms addressed in your proposed 2003 budget?

Answer. The President’s Management Agenda is at the center of NASA’s efforts

to make its programs more effective. In pursuit of this Agenda, NASA has completed a pilot of its first agency-wide human resources tracking system, increased

the number of positions that could be open to competition by 70 percent over its

fiscal year 2000 FAIR Act inventory; and developed an interim plan for competing

up to 40 percent of the positions identified as potentially commercial on its 2000

inventory. We have aligned our budget structure with program outputs and prepared for full cost and performance budgeting in fiscal year 2004. We will be working this fall with the Office of Management and Budget to review four major programs as part of the President’s Management Agenda in Budget and Performance

Integration. Those four programs will be the Space Shuttle, Space Station, Space

Launch Initiative, and the Mars Exploration Program.

As a major effort at removing internal barriers to program effectiveness, NASA

has devoted considerable effort to its Freedom to Manage tiger teams. At the initiative of NASA staff and leadership, numerous personnel authorities previously held

at Headquarters have been delegated to Center Directors; the number of overlapping Councils and Boards has been reduced, and on-going efforts are aimed at combining responses to numerous internal and external reviews.

The major management reforms being undertaken at NASA, such as greater use

of human resources flexibilities, competitive sourcing, e-government initiatives, full

cost accounting, and integrated financial management, are designed to create a

more efficient and productive agency. This is accomplished by creating greater cost

transparency across the agency, lowering the transaction costs involved in maintaining a competitive, diverse work force, and improving productivity in creating more

scientific and technological results and research opportunities in line with NASA’s

Vision and Mission.

ATTRACTING AND RETAINING SCIENTISTS

Question. Many agencies within the Federal Government are going to see large

amounts of employees retiring from Federal service in the next decade. There has

also been difficulty within the Federal Government to keep and attract scientists

and employees with high technical skills.

The National Space Grant College and Fellowship program is one of the tools at

NASA’s disposal to help promote research at the undergraduate and graduate education levels. This program is funded in the President’s request at $19.1 million.

(The New Mexico Consortium is ranked 8th in funding out of the 52 consortia nationwide.)

How is NASA working to keep its scientists at NASA, as well as working to attract new scientific talent to come work for NASA?

Answer. NASA reduced its civil servant workforce during the 1990’s. This reduction along with little turnover in the scientist occupations has significantly compounded the phenomenon of the ‘‘aging’’ NASA S&E workforce. As these men and

women choose to draw their successful and productive careers to an end, NASA may

experience a serious loss in scientific competencies in addition to existing skills imbalances. While NASA does, and will continue to, take advantage of existing human

resource flexibilities to recruit and retain needed talent, the current retention incentives are not always adequate to retain employees with critical skills. NASA is emphasizing strategic recruitment initiatives and creating long-term ‘‘pipeline’’ interest

in scientific and engineering occupations to address skills imbalances.

Our recruitment strategy to increase interest in NASA jobs includes personal networking and extensive networking with professional associations and universities to

increase awareness in interested individuals of our NASA employment opportunities. As you mention, we do have access to some of the leading scientists through

our promotion of research at the undergraduate and graduate education levels. We

plan to aggressively leverage our alliances by networking with principal investigators at these colleges and universities to ensure that we have access to the students

who are working on projects through our research and grant programs.
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We have identified scientific professional associations and established internet

links on these associations’ and universities’ website to our NASAJobs web site

(http://www.nasajobs.nasa.gov/). Adding instant access to NASAJobs from these

websites will increase the level of awareness of NASA employment opportunities in

the scientific community and will also serve as a catalyst to increase the number

of highly qualified scientists who apply for our vacancies.

NASA uses all available and appropriate financial incentives to make competitive

job offers, including recruitment bonuses, salaries above the minimum rate of the

grade, and repayment of federally insured student loans. In offering jobs, we emphasize the entire Federal package since our retirement, health, leave, and life insurance programs are competitive with those offered by many private sector companies.

We also emphasize the other benefits we can offer, such as flexible work schedules,

family friendly programs, professional development opportunities, and tuition support.

But the currently available tools are no longer enough. We are faced with the convergence of several trends: a decrease in the number of students entering the scientific and engineering fields, an increase in competition for the S&E graduates

from both the traditional aeronautics private sector and new, non-aeronautics business sectors (e.g., banking, entertainment) and the upcoming retirement wave mentioned earlier. NASA is finding it increasingly difficult to attract and retain the best

and brightest S&E talent.

NASA needs more tools to enhance our current efforts and initiatives to reshape

and reconfigure our workforce. For example, we need streamlined and flexible recruitment and employment processes, recruitment and retention incentives that are

flexible and meaningful to ‘‘fresh out’’ and mid-level employees, and a position classification and compensation system that is market sensitive and rewards performance. We also need voluntary separation and early retirement incentives not tied

to a reduction in the workforce, but to reshape the workforce; that is, to reallocate

the slots to areas where they are needed.

These tools are critical for NASA to compete successfully for scientific talent in

this increasingly competitive marketplace, and they require legislation. For these

reasons NASA earlier this year submitted a series of legislative proposals to Congress and is working with its oversight committees to secure their enactment.

SUBCOMMITTEE RECESS

Senator MIKULSKI. The subcommittee stands in recess until next

Wednesday, May 8, on which we will be taking testimony from

FEMA.

Mr. O’KEEFE. Thank you, Madam Chair. I appreciate your courtesy.

Senator MIKULSKI. Thank you.

[Whereupon, at 11:38 a.m., Wednesday, May 1, the subcommittee

was recessed, to reconvene subject to the call of the Chair.]
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DEPARTMENTS OF VETERANS AFFAIRS AND

HOUSING AND URBAN DEVELOPMENT AND

INDEPENDENT AGENCIES APPROPRIATIONS

FOR FISCAL YEAR 2003

WEDNESDAY, MAY 8, 2002

U.S. SENATE,

SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS,

Washington, DC.

The subcommittee met at 9:35 a.m., in room SD–138, Dirksen

Senate Office Building, Hon. Barbara A. Mikulski (chairman) presiding.

Present: Senators Mikulski, Kohl, Johnson, Bond, Shelby, Craig,

Domenici, and Stevens.

FEDERAL EMERGENCY MANAGEMENT AGENCY

STATEMENT OF JOE M. ALLBAUGH, DIRECTOR

ACCOMPANIED BY GEORGE OPFER, INSPECTOR GENERAL

OPENING STATEMENT OF SENATOR BARBARA A. MIKULSKI

Senator MIKULSKI. Good morning, everybody. The subcommittee

of VA–HUD will come to order. This morning we are going to take

the testimony of Mr. Joe Allbaugh, the very able director of FEMA,

and we have many issues to talk about. First of all, we want to acknowledge the tremendous role that FEMA has done in the last fiscal year. Who knew what was going to happen to our communities

and to the United States of America. We know that FEMA has responded to over 50 disaster declarations that have ranged from the

aerial terrorist attack on the United States of America to a tornado

in my own State.

We want to hear from the director of FEMA on what we can do

to be able to help FEMA continue to be first responders, through

prevention, readiness, response and recovery, we can save lives,

save jobs, and save our community.

Speaking as the Senator from Maryland, last week we were once

again reminded how important FEMA is to our country. An F4 tornado swept through three counties, Calvert, Charles and Dorchester hitting a number of our communities now called La Plata.

I visited La Plata with my senior Senator and I will never forget

what I saw, destruction and devastation. As I walked down St.

Mary’s Avenue, we saw the courthouse and across from that we

saw Delegate Van Mitchell’s Value City business just absolutely destroyed. Residential areas and parks devastated, local banks de-
482

stroyed. The Catholic church and Catholic school and other churches, other schools and as the Senator from Maryland I am going to

do everything I can to help those communities rebuild and recover.

The people of Charles, Calvert and Dorchester County should

know I am on their side as the Senator for Maryland. I am making

sure the Federal Government is an active part in the rebuilding efforts. I talked to the county officials and all of the counties to hear

directly from them about their needs. Today I want to thank President Bush for his very swift response to this tragedy. He signed a

disaster declaration within 24 hours. We want to thank the President. Mr. Allbaugh, we want to thank you and the very able FEMA

team that rushed to the aid of our State and local government.

FEMA’s role really shows that they can count on FEMA.

This morning I want to go over some of the issues involved with

that and I am going to hear from him what the people are doing,

how the families need to connect to FEMA to get help. What actions they can expect in short term and long term and what can

we do to start looking at recovery. As I visited La Plata, I was once

again struck by the heroism of our first responders. Throughout

southern Maryland, police, fire and emergency workers risked their

lives to save others. It is so clear that we need to continue to support our first responders. That is why I am going to do everything

I can to provide the $900 million for the program to give our firefighters the best equipment and training. We have to look at how

we are going to spend the money.

We also, I think, need to be really committed to make sure our

first responders are all hazards, again whether it is a terrorist attack or tornado, whether chemical incident, our responders need to

be ready. I am concerned that as we provide more resources to

fight the war on terror, we make sure that we reinforce FEMA’s

role also in natural disasters.

Fifty disasters, not including September 11. It is amazing. We

want to hear what you do, what we need for your team and for

those at the local levels so that we are getting double value for our

taxpayers’ dollars by being ready for all hazards, both natural disasters and other attacks. We want to hear about State preparedness as well. We also want to hear about your new thinking on

hazard mitigation. Of course, there is the issue of flood modernization because so many Americans are hit by floods. Just over this

weekend in West Virginia and once again FEMA had to respond,

and I know you are very interested in flood insurance. Issues we

need to talk about in the beginning of the year and that, of course,

FEMA has been a partner in the emergency food and shelter program which gives FEMA really high marks for this program. So

Mr. Allbaugh, we really want to thank you for the job that you

have been doing in keeping up the spirit of reform that was started

many years ago in both reform and at the same time response. So

we look forward to hearing what you need and how we can show

that by helping you we are helping the American people. Senator

Bond, do you wish to have an opening statement?

STATEMENT OF SENATOR CHRISTOPHER S. BOND

Senator BOND. I certainly do, madam chair. Thank you very

much and my welcome to Director Allbaugh as well. We have had
483

the pleasure of hearing the director testify on several occasions this

year regarding the President’s proposal on homeland security, and

making FEMA the primary Federal domestic agency. That is an

important area, one that we are going to have to address, but this

is an important opportunity to focus on the needs for FEMA in carrying out its more traditional and primary responsibility in responding to natural disasters.

As we all know, since its founding in 1979, FEMA has been the

backbone of the Federal response to all types of hazards through

a comprehensive emergency management program of mitigation,

preparedness, response, and recovery. An area of responsibility for

FEMA that has not been discussed this year as it has been overshadowed by the tragedy and horrific terrorist events of September

11 and FEMA’s new efforts in developing a comprehensive homeland security strategy.

I believe generally that FEMA has been doing a very good job in

responding to the needs of States and localities, as well as our citizens in harm’s way. I know Senator Mikulski has been very much

involved and concerned as we all have been about the swath of

damage and death left by tornados in La Plata and others. Those

of us who see those tornados frequently know the extent and the

scope of the damage they can cause. Missouri also has not had a

good spring, ice storms in Kansas City late January and February

and more recently, severe storms and tornados that struck

Bollinger, Butler, Carter, Howell and Madison Counties in late

April.

We lost a 12-year-old boy from Marble Hill in those storms, but

the tragedy simply reinforced FEMA’s ability to respond quickly to

national disasters. I have just been handed an article in today’s

Cape Gerardo Southeast Missourian saying Tornado Victims Have

Trouble with Federal Aid. While others are speaking, I am going

to see what the problems are in Southeast Missouri and I will

share that with you later. But we do appreciate the response of

FEMA.

Nevertheless, a lot needs to be done as the chair has already

mentioned and that includes improving accountability for disaster

relief expenditures, revamping the flood insurance program,

streamlining disaster field operations and improving the management of mitigation programs. FEMA is also proposing a number of

controversial reforms to the flood insurance program, as well as a

controversial new program for funding disaster mitigation efforts

that would replace several current successful mitigation funding

approaches. I guess you thought we weren’t paying attention. We

are.

But I look forward to working with the chair, members of the

subcommittee and FEMA on these important issues, but effective

implementation, accountability with respect to the disaster relief

program and the flood insurance program are my key priorities.

They become even more important as we begin to face a series of

natural tornados throughout the Nation that we have already discussed, and FEMA is already responding to major disasters in 11

States. The year is still young. We want to make sure that you

have adequate resources to respond to what nature does to us as

well as the other problems we may have.
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I would also ask that FEMA work closely with your FEMA Inspector General. As I noted the appropriate expenditure of FEMA

funds accountability is key to FEMA’s credibility and effectiveness.

And in particular, the Federal Government and FEMA are dealing

with really huge sums of money as we try to rebuild the New York

City portions destroyed on September 11. There is great pressure

to get FEMA money funds out quickly, however, we have seen in

the past that quick sometimes means sloppy, and can result in excessive expenditures of tax dollars. They say we need to do it right,

and I think FEMA can help make sure it is done right and I think

the same is true as FEMA winds down to Cerro Grande office in

New Mexico. A lot of it has gone up as the system, an appropriate

system, has been in place to make sure that the people who need

it got it and others did not.

I also want to make sure that FEMA is not strapped with so

many responsibilities that it cannot meet its primary mission in responding to disasters. There has been so much focus on homeland

security and more recently on related new proposals such as the

CitizenCorps that I am concerned that FEMA’s disaster relief responsibilities may be forced to a back seat to homeland security

issues.

We need to ensure that FEMA is capable and committed to meeting all of its responsibilities. FEMA needs to be balanced in how

it meets them. I know we on this subcommittee will want to ensure

that you, your staff had the funding and the capabilities to meet

whatever responsibilities are placed in your portfolio. Thank you,

madam chair.

Senator MIKULSKI. Senator Stevens? As a courtesy?

Senator STEVENS. Thank you very much. I have no statement.

Senator MIKULSKI. Senator Shelby?

STATEMENT OF SENATOR RICHARD C. SHELBY

Senator SHELBY. Madam Chairman, Thank you, I would like to

welcome Mr. Allbaugh to the committee. We had a nice conversation about a lot of issues that I will bring up with him in a few

minutes publicly. We welcome you and look forward to your testimony.

Senator MIKULSKI. Mr. Allbaugh, why don’t you proceed to address the committee.

Mr. ALLBAUGH. Thank you Madam Chairwoman, Senators Bond,

Shelby, Stevens. It is an honor to be before this committee primarily because you have been strong supporters of our agency over

the years. I am pleased to come here today to talk about three particular priorities. I have submitted for the record a written statement and I will just take a few minutes, Madam Chairman.

Senator MIKULSKI. Without objection.

Mr. ALLBAUGH. I will talk about three priorities in our budget

that deal first with FEMA and homeland security and part of that

is driven by our new responsibilities, visibility and scope that has

grown since 9–11. Two primary areas in homeland security. The

first responder initiative that the President has talked so much

about as well as myself and our new responsibility for our Office

of National Preparedness. Management in the First Responder ini-
485

tiative will capitalize on FEMA’s great ability to expedite grant

money out the door to those who actually need it.

FIRST RESPONDER INITIATIVE

First, let me speak about the First Responder initiative. $3.5 billion for planning, training, equipment and exercising will focus on

two particular areas within that. Interoperability, both of individuals and communities. I witnessed as you may have heard me say

before individuals in New York City passing notes back and forth,

communications was a disaster in and of itself. When it comes to

personnel, oftentimes individuals show up at a disaster who are not

properly trained, and put into harm’s way, and thus putting additional lives in jeopardy.

Second to that, is planning. We do not provide enough assistance,

in my opinion, for States and the local level in the area of planning

and exercise. We want to improve our intra and interstate mutual

aid agreements, which means that we need to do a certain amount

of resource typing. When one county across the State calls for assistance from another county 100 miles away, we need to ensure

that the assets that they are calling for are exactly what they need

and everyone understands that.

I hope that the $3.5 billion will be a down payment for years to

come. There is no way, in one budgetary year, that we can address

all of the needs. And I know you all feel the same way, quite frankly. This is a problem nationwide trying to improve our infrastructure. $175 million in the supplemental, which I will talk about in

a minute, will be 100 percent money to the States this year. From

the $3.5 billion, we want to give all States $5 million and distribute

the remainder based on a population formula.

Our supplemental funding request is critical, so that States and

communities can start to develop their plans now. We will distribute the money down to the local level, but at the same time,

our Office of National Preparedness will be charged with developing national standards to use that money. We desperately need

national standards. The central role of the Office of National Preparedness is to be the focal point for coordination for all Federal

response activities.

In addition to developing those standards, will deal again with

equipment standards, interoperability, training standards. We

want to make sure that everyone knows the capabilities of their

neighboring responders and again to re-emphasize the importance

of mutual aid agreements.

ODP TRANSFER

Let me speak for a minute about the transfer that the President

has proposed from ODP to Justice to FEMA. It makes sense. One,

as I said earlier FEMA has a great history of grant management.

Last year alone we did $3.5 billion in grants. We are on our way

to $8 billion currently. We also want to eliminate the redundancy

in our Federal training programs. The recipients of these training

programs across the country are the State and local individuals

who are the first responders. I want to make sure that there is uniformity in our training.
486

And lastly, I want to build upon the positive relationship with

our first responder community. Let me say, as a couple of members

have already addressed, that our new responsibilities, our enhanced responsibilities, will not compromise our responsibilities in

natural disaster response management. That is one of our core responsibilities. I know everyone is focused on weapons of mass destruction, terrorism preparation, training since 9–11, but at the

same time, we have responded just since Sunday evening, five disasters. Our core responsibility will not fall away, which brings me

to point number two of our priorities.

PRE-DISASTER MITIGATION

It is the hazard mitigation grant program. The President wisely

has suggested in his 2003 budget for FEMA a new program which

will amount to $300 million in the first year, a predisaster grant

process. We want to be able to help communities who have identified their risk before a disaster hits. Right now, communities identify their risk and they sit on the shelf at city hall until the disaster happens and we can come in with post disaster mitigation.

I want to make sure, as the President does, that we can address

these risks up front prior to a disaster and at the same time keep

our post disaster mitigation intact. And this will require us, which

we are in the process of developing a competitive grant process as

I said to take effect before, any disaster that takes place. The third

component and third priority of our budget this year is another

mitigation program that the President requests.

FLOOD MAP MODERNIZATION

It is our flood map modernization project. Everywhere I go, everyone, members in both houses, members from State legislatures

across the country, mayors, city council members, all are asking

about flood mapping. And quite frankly to solve the problem it is

a matter of money. We have historically been given $5 to $15 million annually to address a billion dollar problem. I think the President has wisely stepped forward, stepped up to the plate, and

asked the Congress for $300 million to update and digitize our current flood mapping problem.

We can address this in a 3-year program to improve these maps,

and they are absolutely essential for better planning for these communities and again identifying those risks up front. The 3-year program at $300 million a year will essentially wipe out our current

backlog of flood mapping.

SUPPLEMENTAL APPROPRIATION REQUEST

Finally, let me take a moment to highlight FEMA’s portion of the

supplemental appropriation request. The request totals were $3.07

billion, $2.75 billion of which is requested for further World Trade

Center relief efforts, focusing on public infrastructure. The other

$326 million for planning and assistance are broken down in the

following ways. $175 million for planning to first responders, $56

million for State and local planning for emergency operations centers, $50 million for Citizen Corps and $32.4 million for weapons

of mass destruction training, for the balance of our urban search
487

and rescue teams. As you know we only have six of our 28 USAR

teams that are WMD trained. I think it is inexcusable for our agency not to go forward and fund the rest of the teams, the other 22

teams, to make sure that they are WMD trained and qualified. We

need to be prepared. We never know when an incident is going to

be taking place, and it is important that all 28 teams are trained

to the same standard.

THE FEMA TEAM

Those basically complete my, conclude my oral remarks. I want

the members to know that it is an extreme honor and privilege for

me to serve our President, to serve our country, to be a part of a

great FEMA team.

I am not the one that makes this thing work. It is the long hours,

the sweat, the toil, the sacrifices that FEMA employees make, not

only the full-time employees, but the disaster assistance employees

who are at each one of our open disasters right now across the Nation and they number about 5,000 that we have the ability to draw

from. This is a tremendous responsibility. It is our core mission

and I am honored to be in this position for a short period of time

and I thank you for the opportunity to be here today.

[The statement follows:]

PREPARED STATEMENT OF JOE M. ALLBAUGH

INTRODUCTION AND BACKGROUND

Good morning Madam Chair, Senator Bond, and members of the subcommittee.

I am Joe Allbaugh, Director of the Federal Emergency Management Agency

(FEMA). Thank you for the opportunity to brief you today on FEMA’s budget proposal for fiscal year 2003.

FEMA is the Federal Agency responsible for coordinating our nation’s efforts to

mitigate against, prepare for, respond to and recover from all hazards. Our success

depends on our ability to organize and lead a community of local, State, and Federal

agencies, volunteer organizations, private sector entities and the first responder

community. We know whom to bring to the table when preparing for a disaster and

when a disaster strikes in order to ensure the most effective management of the response and recovery effort. We provide management expertise and financial resources to help State and local governments when they are overwhelmed by disasters.

When I say ‘‘we’’ do that I’m talking, of course, of FEMA. FEMA has a lot of Cal

Ripkens; the folks that come to work each day and do their job with skill and grace.

I depend on those staff for their counsel and advice due to the experience and perspective they possess.

But I am also referring to this Committee that has provided us so much support,

and the resources we need to do our job. You have a great amount of experience—

you have seen FEMA through the rough times and the good times. In fact, a lot

of those good times were partly a result of your efforts, so I want to acknowledge

that help and express the thanks of our staff for that steady support.

As I explained, we don’t profess expertise in every subject area, but we do know

whom to bring to the table. The best example of this convening process is the Federal Response Plan (FRP). The FRP forms the heart of our management framework

and lays out the process by which interagency groups work together to respond as

a cohesive team to all types of disasters. This team is made up of 26 Federal departments and agencies, and the American Red Cross, and is organized into 12 emergency support functions based on the authorities and expertise of the members and

the needs of our counterparts at the State and local level.

Since 1992, in all manner of horrific natural disasters like the Northridge Earthquake and Hurricane Floyd and also in response to the Oklahoma City bombing and

the terrorist attacks of September 11, 2001, the FRP has proven to be an effective

and efficient framework for managing all phases of disasters and emergencies. The

FRP is successful because it builds upon existing professional disciplines, expertise,

delivery systems, and relationships among the participating agencies. FEMA has
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strong ties to the emergency management organizations—fire service, law enforcement and emergency medical communities—and we routinely plan, train, exercise,

and operate together to remain prepared to respond and recover from all types of

disasters.

FISCAL YEAR 2003 REQUEST

First, I will outline our 2003 request. Then, after I’ve completed that review, I

will explain our recent request for emergency supplemental funding for this fiscal

year.

As you are aware, FEMA’s budget request is for appropriations totaling $6.44 billion. A significant increase from the 2002 budget, the bulk of this funding is requested to dramatically enhance the homeland security preparedness capabilities of

our nation’s first responders. In addition, this budget will fully fund FEMA’s core

operations for responding to disasters and continues to emphasize empowerment

and personal responsibility as they pertain to disaster preparedness and mitigation.

NATIONAL PREPAREDNESS—HOMELAND SECURITY RESPONSIBILITIES

The President has requested that FEMA receive $3.5 billion to administer a major

component of the Homeland Security efforts—the First Responder Initiative. Grants

based on this initiative will give the first responder community—firefighters, police

officers, and emergency medical personnel—critically needed funds to purchase

equipment, train their personnel and prepare for a Weapons of Mass Destruction

(WMD)/terrorist incident. The Office of National Preparedness (ONP) within FEMA

will be responsible for administering these First Responder grants.

Following the events of September 11, and in light of the funding this Committee

approved as part of the December 2001 Emergency Supplemental, FEMA has

staffed up and refined the mission and functions of the ONP to fully support the

budget initiatives of the President.

Some of the goals established by ONP for the First Responder Initiative are as

follows:

—Giving the first responder community critically needed funds to purchase equipment, train their personnel and plan;

—Provide states and localities with the proper balance of guidance and flexibility

so that the funds are used in the local areas where they are needed most;

—Establish a consolidated, simple, and quick method for disbursing federal assistance to states and localities;

—Foster mutual aid across the nation so that the entire local, state, federal and

volunteer network can operate together seamlessly;

—Create an evaluation process to make sure that all programs are producing results and to direct the allocation of future resources, and;

—Involve all Americans in programs to make their homes, communities, states

and nation safer and stronger.

ONP will first concentrate on developing a streamlined mechanism designed to

speed the flow of resources to the States and localities. The $3.5 billion will be used

to sustain the first responder activities with a special focus on the following areas:

—Planning.—Support state and local governments in developing comprehensive

plans to prepare for and respond to a terrorist attack;

—Equipment.—Allow State and local first responder agencies to purchase a wide

range of equipment needed to respond effectively to a terrorist attack, including

personal protective equipment, chemical and biological detection systems, and

interoperable communications gear;

—Training.—Train firefighters, police officers, and emergency medical technicians

to respond and operate in a chemical or biological environment;

—Exercises.—Support a coordinated, regular exercise program to improve response capabilities, practice mutual aid, and assess operational improvements

and deficiencies.

We fully intend to keep the focus of this program at the State and local level. The

program will be run through and coordinated by the States. States will be allowed

to use up to 25 percent of the funds, with at least 75 percent of the funds distributed to local jurisdictions.

But we will also insist on the funds being based on comprehensive planning. As

a condition of receiving these grants, States will receive plans from local jurisdictions, submit their own plans, and allocate funding based on locally driven needs

identified through various assessments. The funding will have a matching requirement, and in-kind matches will be allowable. This match can be part of the money

that States have spent to secure a facility for training, or the costs that have been
489

incurred paying overtime to employees who are providing coverage for other employees participating in exercises or training.

The final component we will insist on at all levels—from FEMA to the State to

the local governments—is full accountability. We must maintain the confidence of

our citizens that the funds are being used swiftly but wisely to provide increased

protection for our nation.

TRANSFER OF THE OFFICE FOR DOMESTIC PREPAREDNESS TO FEMA

Of the $3.5 billion funding request, $235 million represents the President’s request that the Office for Domestic Preparedness (ODP) be transferred from the Department of Justice to FEMA. With this proposal the President has shown true leadership in his willingness to address a long-standing problem—the need for central

coordination among the myriad Federal programs dealing with terrorism preparedness.

Some forty Federal Departments and Agencies have been involved in the overall

effort to build the national capability for preparedness and response to the consequences of terrorist incidents. Many of these activities have been primarily focused on the development or enhancement of Federal capabilities to deal with terrorist incidents, including plans, personnel and physical security upgrades, and specialized resources such as protection and detection technology and response teams.

Other Federal programs and activities are focused on building the local and State

first responder and emergency management capabilities, to include the provision of

resources and funding to support planning, training, exercises and equipment acquisition.

Various independent studies and commissions have recognized the problems inherent in this uncoordinated approach. Recommendations by the Gilmore Commission, for example, stress the importance of giving states and first responders a single point of contact for Federal assistance for training, exercises and equipment.

At the request of the Appropriations Committees we recently completed an ‘‘Assessment of Federal Terrorism Preparedness Training’’ report that we transmitted

to the Committees last month. The study found that Federal training is generally

effective, but that it is also fragmented and, in some instances, redundant. State

and local officials continue to be frustrated by the lack of a single coordinating point

through which they can obtain the needed training.

In the post-9/11 environment, we can ill afford to wage turf battles that in effect

protect the inefficiencies of the status quo. We must instead focus on the merits of

a proposal that seeks to address duplication, shore up gaps, eliminate confusion and

reduce complication. As the attacks of September 11 have drawn much comparison

to the attacks of December 7, 1941, there is a forward to a book about Pearl Harbor

that has been brought to my attention that speaks of the worst-case scenario in a

government’s preparation and response:

‘‘Surprise, when it happens to a government, is likely to be a complicated, diffuse,

bureaucratic thing. It includes neglect of responsibility but also responsibility so

poorly defined or so ambiguously delegated that action gets lost...

‘‘. . . It includes the contingencies that occur to no one, but also those that everyone assumes somebody else is taking care of. It includes straightforward procrastination, but also decisions protracted by internal disagreement. It includes, in addition, the inability of individual human beings to rise to the occasion until they are

sure it is the occasion—which is usually too late,’’ (Thomas Schelling, forward to Roberta Wohlstetter’s Pearl Harbor: Warning and Decision).

FEMA’s core responsibilities are its all-hazard emergency management activities

involving preparedness, response, recovery and mitigation. FEMA’s involvement in

terrorism preparedness and response is based on statutory authorities, executive orders, and Presidential Decision Directives (PDDs). As the designated lead agency for

consequence management, FEMA coordinates Federal disaster and emergency assistance programs and activities to support state and local governments in their preparedness and response efforts.

FEMA’s role in planning for the response to and the recovery from any type of

disaster or emergency, including WMD/terrorist incidents, is clear under the authority granted by the Robert T. Stafford Disaster Relief and Emergency Assistance Act.

Also clear is the fact that FEMA is the lead Federal entity empowered by statute

and executive direction to facilitate and oversee the implementation of the national

preparedness effort as it applies to consequence management. This includes the responsibility for ensuring that a coordinated and comprehensive emergency preparedness and response capability exists among Federal, State, and local governments for

dealing with all hazards, natural and man-made.
490

Lest there be any question about FEMA’s commitment to our communities or our

ability to live up to the mission of ONP, we have available upon request a chart

that documents FEMA’s long and successful record of distributing grant monies to

States and local jurisdictions. Indeed, that track record and the relationships our

people have made with local communities around the country have made FEMA the

first federal point-of-contact for local First Responders for many years.

CITIZEN CORPS

In order to help Americans strengthen their communities, President Bush tasked

FEMA with overseeing the Citizen Corps. This initiative is part of the overall effort

of Freedom Corps, whose mission is to assist individuals and communities with implementing Homeland Security Programs in their areas.

Since September 11, 2001, Americans are more aware than ever of the threat of

terrorist acts on home soil. In the days following the attacks we saw immediate and

selfless volunteering, generous monetary gifts, blood donations, and an outpouring

of support and patriotism across America. The President has understood the need

for people to be involved, to feel that they are making a contribution toward the

health and safety of their communities. Citizen Corps taps into those civic desires

through the organization and coordination of a lot of ongoing efforts across the nation. Sustaining that spirit of volunteerism and unity is crucial to defending the

homeland.

FEMA expects that $230 million will be needed to help with the Citizen Corps

initiative. This broad network of volunteer efforts will harness the power of the

American people by relying on their individual skills and interests to prepare local

communities to effectively prevent and respond to the threats of terrorism, crime,

or any kind of disaster.

The Citizen Corps will build upon existing crime prevention, natural disaster preparedness, and public health response networks. The Citizen Corps will initially

consist of participants in the following five programs:

—the Volunteers in Police Service Program—this unique program provides volunteer support for law enforcement by tapping volunteers to perform administrative and non-intervention policing activities to free up officers to be out in the

community;

—an expanded Neighborhood Watch Program—will incorporate terrorism prevention and education into its existing crime prevention mission;

—the Medical Reserve Corps—currently practicing and retired health care professionals will augment emergency medical response resources during large-scale

emergencies. These volunteers can also support non-emergency public health

needs of the community throughout the year;

—Community Emergency Response Teams (CERT)—the CERT program trains individuals in emergency preparedness and basic response techniques to enable

them to take a more active role in personal and public safety; and

—Operation TIPS—the Terrorist Information and Prevention System, will tap

millions of workers who, by the nature of their jobs, are well-positioned to serve

as eyes and ears for law enforcement. Operation TIPS will provide them with

a toll free number to report suspicious activity to the nearest FBI field office.

FEMA has the responsibility for approving additional programs to be affiliated

with Citizen Corps in the future. We will call upon our communities to employ their

creativity and inventiveness to develop other programs that will encompass the

needs of the community and encourage more people to be involved.

Finally, the Citizen Corps will bring together local government, law enforcement,

educational institutions, the private sector, faith-based groups and volunteers into

a cohesive community resource. The Federal role is to provide general information,

to develop training standards and materials, and to identify volunteer programs and

initiatives that support the goals of the Citizen Corps.

THE U.S. FIRE ADMINISTRATION

The U.S. Fire Administration (USFA) provides a unique focus on fire programs

within the Federal Government. These programs are included in the Agency’s mission-related preparedness and mitigation strategies.

The Assistance to Firefighters Grant Program remains an important element in

supporting the most pressing needs of at risk communities and fire service providers

in reducing the loss of life and property from fire, including loss of life and injury

to firefighters. As a result of the last year’s appropriations, the Grant Program has

received $150 million that must be obligated by September 30 of the current fiscal

year and an additional $210 million received in last December’s Emergency Supplemental that is expendable until September 30, 2003. We expect most of the supple-
491

mental appropriation will be obligated in fiscal year 2002 with almost all of the remainder obligated in the first quarter of fiscal year 2003.

I have confidence that we can do that, and that confidence is based on our experience last year. In less than a year the USFA, with a lot of dedicated work from

other parts of FEMA, especially Financial Management, was able to get out $100

million in grant funds to more than 1,800 communities. This was a cooperative effort not only within FEMA but also with the Fire Service organizations that volunteered their expertise to make our peer review panels just that; the work of true

peers that understand fire fighting issues and needs. So I’m pleased to take on this

challenge again this year.

The fire fighters obviously were heroes on September 11, that’s a given. But we

need to remember that they are heroes every day of the year in towns large and

small across the country. So we at FEMA are particularly proud to administer programs that help them to carry out their jobs.

Our nation’s firefighters will continue to bear an increasing portion of the burden

for Homeland Defense, responding to a variety of emergent issues including terrorism. I would like to again thank the Subcommittee for all of the support they

have given to the fire community over the last few years.

While FEMA’s role in Homeland Security is expanding, we will continue to meet

our core functions of natural disaster response and mitigation. I would like to touch

upon just a few of our major funding requests in our other program areas.

FLOOD MAP MODERNIZATION FUND

FEMA’s 2003 request includes $300 million in new discretionary appropriations

for our Flood Map Modernization Fund and $51 million from the federal policy fee

for a total appropriation of $351 million.

Since the late 1960’s, the Federal Government has produced flood maps for over

19,000 communities. The maps and flood data are used an estimated 20 million

times a year by communities, lenders, insurance agents, and many others to make

critical decisions on where to build, where insurance is required, and what is the

appropriate premium to pay. Two-thirds of these maps are over 10-years old, and

many do not reflect the change in risk that has occurred due to increased development. Nearly all of the maps have out-dated streets that make it difficult to accurately determine if a property is located in the most risky flood zones. Furthermore,

there are 2,700 flood-prone communities that have never been mapped. This adversely affects the ability of communities to guide new development away from flood

risks, impacts the ability of the National Flood Insurance Program to collect appropriate premiums to pay flood claims, and the Federal government is forced to pay

more in disaster assistance. It is estimated that some $800 million in new funding

is needed to fully update and modernize the maps. It is conservatively estimated

that benefits exceed cost by a factor of two, and over the next fifty years, the savings

will amount to $26 billion.

FEMA has reengineered the way we make maps with increased focus on technology, such as GIS, exciting new remote sensing techniques, and the opportunities

for Internet distribution that will reduce costs. In addition, FEMA has established

the Cooperating Technical Partner initiative, a program that brings together other

Federal, state, and local governmental agencies into long-term partnerships to actively participate in the re-mapping process, and to share in the cost. This partnership is essential. These are not just FEMA maps, they need to belong to the communities. Through this partnership communities will take on ownership of these maps,

both in their quality and in their responsibility to reflect the risks outlined in the

maps when they go about their planning and policy-making at the local level.

In my 12 months as Director of FEMA, I have not come across many who disagree

with the map modernization initiative, and I have heard from environmentalists,

homebuilders, realtors, lenders, insurance companies, engineers, planners, surveyors, and numerous organizations representing state and local governments. Each

year that implementation is delayed, the cost of the plan, and the cost to the Nation,

increases.

The result of getting this funding will be greater reliability and accessibility for

State Emergency Managers, local planners, and developers alike. It’s a win-win investment situation, and again, I thank you for your help on this issue.

NEW PRE-DISASTER MITIGATION GRANT PROGRAM

The fiscal year 2003 budget proposal includes $300 million in no-year monies

under the National Pre-Disaster Mitigation Fund to initiate a shift from a post-disaster grant system to a pre-disaster, competitive grant process. These changes will

in no way limit FEMA’s basic Disaster Relief efforts—as always, when tragedy
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strikes, we will be there. However, I also believe we must refocus our efforts to save

lives, protect property, and, over the long term, increase overall Federal assistance

for local communities.

The proposed program creates a separate funding source for pre-disaster mitigation and continues to support the goals of the Disaster Mitigation Act of 2000

(DMA2K). DMA 2000 provides a real incentive for communities to assess their risks,

evaluate their vulnerabilities, and incorporate an action plan into the ongoing planning processes that many jurisdictions undertake already. With the recognition of

the importance of mitigation planning, many communities are better positioned to

develop cost-effective proposals for mitigation projects and activities.

An annual grant program that provides a consistent source of funding would allow

States and communities to develop more comprehensive proposals and projects to

reduce their overall risks. Communities would no longer be dependent on a disaster

declaration in order to obtain a FEMA grant to help protect their constituents.

Specifically, the proposal calls for the grants to be awarded on a competitive basis.

This will help to ensure that the most worthwhile, cost-beneficial projects receive

funding. In addition, grants will be made without reference to State allocations,

quotas or other formula-based allocation of funds.

The goal is to fund activities that will reduce the risks of future damage in hazard

prone areas, thereby reducing the need for future disaster assistance. Eligible activities would include: vulnerability assessments; State and local mitigation planning;

the reinforcement of structures against seismic, wind, and other hazards; elevation

of flood-prone structures; acquisition or relocation of structures at risk; and minor

flood control or drainage management projects.

As States currently play an essential role in the implementation of all of FEMA

mitigation grant programs, FEMA’s strategy is to include the States in the new program. States provide technical assistance to communities, solicit and review applications, and coordinate statewide mitigation activities. A project evaluation process

will be established to determine how well projects achieve mitigation goals. This effectiveness evaluation would help to better link resources to performance information for planning and reporting purposes. Results will also be used in reviewing and

adjusting the evaluation criteria for future grant competition, as appropriate.

Mitigation should be a regular investment priority and should not only track with

the unpredictable level of disaster activity in a given year. The new competitive

process will make sure the best thought out and cost-effective programs get funded

every year, so that our communities are prepared before disaster strikes.

NATIONAL FLOOD INSURANCE PROGRAM

The 2003 Budget proposes several reforms to the National Flood Insurance Program to improve financial performance and transfer greater financial liability to individuals building in flood-prone areas. Some of the primary reforms are as follows:

(1) Phase out insurance policy rate subsidies for non-primary residential structures, including second homes, vacation properties, rental properties and non-residential properties. Rates for primary residences, which represent the majority of the

program’s policies, would not change under this proposal.

—The net savings in fiscal year 2003 would be $13 million;

—The estimated net savings grows to about $200 million annually in the outyears;

—Approximately 350,000 policyholders would be affected by this proposal;

—The average premiums for the policyholders impacted would increase from $650

to an average between $1,600 and $1,800; and

—Assuming a 5-year phase-out, premium increases for these policies would average about 20 percent a year during the phase-out.

(2) Require that mortgage borrowers insure the full replacement value of their

properties. Under current law, lenders must only ensure that flood insurance covers

the outstanding principal balance of a loan.

—Changing the requirement for the amount of insurance to be the value of the

property brings the requirement in line with what is the general practice in the

insurance and lending industries for about the last 25 years.

—By providing full coverage this reduces the need for disaster assistance and tax

write-offs for uninsured losses.

DISASTER RELIEF FUND

The 2003 Budget request fully funds the Disaster Relief Fund’s (DRF) 5-year average obligation level of $2.9 billion. The President’s Budget includes $1.8 billion in

new funds for the Disaster Relief Fund. An aggressive campaign is also promised
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during the remainder of 2002 and 2003 to recover unspent balances from previous

disaster declarations.

Once a Hazard Mitigation Grant Program (HMGP) project has been approved and

funding has been obligated, the performance period for construction grants ranges

from 1 to 5 years, depending on the complexity of the project and length of the construction season. Given the 5-year window for completing projects and liquidating

funds, FEMA is focusing its efforts to liquidate and/or recover funds on HMGP

grants obligated during and prior to fiscal year 1997.

DISASTER, RESPONSE & RECOVERY

In fiscal year 2003, the Readiness, Response and Recovery (RRR) Directorate will

continue to focus resources on carrying out its core function of coordinating the activities of the interagency community to prepare for, respond to, and recover from

all significant disasters and emergencies to minimize the suffering and disruption

that they cause. Emphasis will be placed on working with the interagency community to incorporate disaster lessons learned into the Federal Response Plan to continue its improvement and ensure that it can be effectively implemented to manage

the consequences of all types of disasters, including acts of terrorism. By utilizing

lessons learned from past disasters, such as the World Trade Center, we can develop

more effective and efficient response and recovery capabilities. Related to this, work

will continue on enhancing existing plans and preparedness measures to address

special events, such as the Weapons of Mass Destruction Contingency Plan that addresses terrorist attacks in the National Capital Region.

The RRR Directorate programs will work toward improving disaster response capabilities and the speed and effectiveness with which disaster assistance can be provided to disaster victims, while reducing costs and achieving greater accountability

of disaster equipment and assets. We are also examining a number of possible alternative approaches for building a more nationally integrated and robust operational

capability to address more complex future Federal disaster operations. We will continue to work with the States to maximize their role in managing disasters and will

begin producing incident-specific response plans for truly catastrophic disasters,

such as hurricanes, earthquakes, and terrorist attacks. The importance of satisfying

the needs of disaster victims is paramount in our Individual Assistance and Public

Assistance disaster recovery programs. In this capacity we will provide resources to

ensure timely and efficient inspections of damages to residences and provide the capability to respond to multiple disasters requiring manufactured housing.

THE EMERGENCY FOOD & SHELTER PROGRAM

The 2003 Budget proposes the transfer of the Emergency Food and Shelter Program to the U.S. Department of Housing and Urban Development (HUD). The purpose of this proposal is to permit better coordination of services for the homeless

under one agency.

Funds for this program are obligated to a National Board, which is chaired by

FEMA and whose non-profit partners (The Salvation Army, American Red Cross,

United Way of America, and others) provide professional expertise to the board. The

National Board then works through similarly composed Local Boards to advertise

the availability of funds, assess community needs, and make allocation choices.

In fiscal year 2002, FEMA is allocating $140 million for this program. Due to the

proposed transfer, no resources are shown in the FEMA Budget request for the

Emergency Food and Shelter Program.

FISCAL YEAR 2001 INDEPENDENT AUDITOR’S REPORT

I would also like to discuss briefly the fiscal year 2001 Independent Auditor’s Report. We welcome this kind of review of accounting practices government-wide. After

3 years of ‘‘clean’’ opinions, FEMA’s 2001 financial statements were issued a ‘‘qualified’’ opinion.

There are two reasons for the qualifications: (1) adjustments to unliquidated obligations and (2) property and equipment tracking and accounting. First, FEMA reduced it unliquidated obligations by $77 million or 1.27 percent. This reduction was

necessary because of errors made when converting financial data to a new general

ledger based financial management system in 1996. It is FEMA’s belief, however,

that the one time adjustment has improved the overall accuracy of the financial

statements and should satisfy any further audit requirements on obligations.

Second, with regard to property and equipment tracking and accounting, FEMA

did not maintain customary records for its equipment and related depreciation,

therefore the auditors determined that it was not practicable to extend their audit-
494

ing procedures to sufficiently satisfy themselves as to the accuracy of the equipment

with a net book value of $10.8 million.

Finally, the audit concluded that FEMA has long-standing internal control/material weaknesses in several areas. We generally agree with the overall findings of the

audit and have in fact already taken many steps to correct the identified shortcomings. For instance, a remediation plan, developed in September 2001, will be refined and updated to address needed improvements to assure compliance with the

ever-changing government-wide accounting standards and OMB and Treasury reporting requirements. A JFMIP compliant version of our financial management system is currently being implemented. This system upgrade will greatly enhance

FEMA’s reporting capabilities and correct many of the deficiencies cited in the report. Resources and expert personnel are key to assuring changes and improvements. We are seeking additional qualified staff and contractor support to help us

improve FEMA’s financial management operations. FEMA will continue to address

the issues identified in the audit and work toward making improvements.

FISCAL YEAR 2002 SUPPLEMENTAL REQUEST

The President’s request for supplemental appropriations includes just over $3 billion for FEMA. From that total, $2.75 billion is devoted to the Disaster Relief Fund

to assist in the ongoing recovery efforts from September 11.

The remaining $326 million is requested to enable FEMA to immediately begin

getting our Urban Search and Rescue Teams WMD-capable, to assist the States

with comprehensive planning that includes mutual aid and other important operational elements, and to begin the Citizen Corps initiative.

This supplemental, if approved, will give FEMA the opportunity to jump-start several critical preparedness-related initiatives that shouldn’t wait for the changing of

the fiscal year.

The additional funds for the Disaster Relief Fund will ensure that our commitment to New York and New Jersey and Virginia to assist in their recovery from the

events of September 11 will proceed without interruption.

The start-up funding for the First Responder Grant Program is vitally important.

The funding will allow us to begin to construct an infrastructure at the State level

to support the larger grant program next year. For example, this will include secure

phone and fax lines for the States to use.

Senator Mikulski, you have often mentioned the importance of having strong offices at the State level that would be able to coordinate with the Federal agencies.

A good example is the funding in the Supplemental to support security clearances

at the State level. Getting these basic administrative steps in place is going to make

the program of real help to the State and local first responder community from the

moment the funds are available. It can increase both their effectiveness and their

long- term accountability.

Another important element in the request will support improvements and greater

support to our Urban Search and Rescue (USAR) Teams. Senator Bond, I know this

is of great interest to you because you have introduced legislation recently along

these lines. I think you can see from the details of the Supplemental that we are

in synch on the importance of these teams. We agree on the need to provide them

with increased support that will allow for updated equipment and additional training. Believe me, my experience in New York with our USAR teams as they

searched, day after day, 24 hours per day, will always be etched in my memory. And

I intend to turn that experience into informed support for those teams.

This Supplemental legislation also puts in motion our new Citizen Corps program.

These funds will assist communities in organizing their volunteers and giving their

citizens the opportunity to realize their greatest wish since September 11; to be of

service in protecting the health and safety of their communities.

While this hearing is rightly devoted to the 2003 budget, I hope you will be able

to look favorably on this Supplemental request as a logical and appropriate starting

point to move us toward the direction of the 2003 funding proposals.

CONCLUSION

While there are more goals for FEMA in the coming year, these are some of the

major ones. I look forward to working with this committee on these priorities. Again,

I thank you for the opportunity to be here this morning and will be happy to answer

any questions you may have.
495

LA PLATA, MARYLAND DISASTER

Senator MIKULSKI. Thank you very much, Mr. Allbaugh. We have

a lot of ground to cover. I’d like to ask some questions about southern Maryland. First of all, I understand that as of yesterday,

FEMA received close to 360 applicants from Charles, Calvert and

Dorchester County. The bulk of the applicants were from Charles

County and also Governor Glendening is also asking for disaster

declaration.

Could you tell us what is FEMA’s current estimate of the cost

of the tornado that hit southern Maryland last week?

Mr. ALLBAUGH. I can’t give you a hard number. We are in the

process of reviewing with our disaster assistance teams the damage

that has taken place. I believe we amended the disaster declaration

yesterday for two of these three counties, adding those counties for

public assistance. We will add the third should the teams agree

with the governor’s request. But it will take a while to recover from

an F4 tornado, as you heard me talk last week. Then-Governor

Bush and I participated after the fact in an F5 tornado in Jarrell,

Texas. Lives were lost. That community is still rebounding.

FEMA will be there as long as we need to be there. I think my

numbers show 87 homes were totally destroyed, 174 received major

damage, 368 received minor damage. We are there. We have already processed I do not know how many hundreds of thousands

of dollars in assistance to those individuals, and the businesses

who have been affected.

DELIVERY OF ASSISTANCE

Senator MIKULSKI. That is exactly right. There were three categories of injury. One, of course, was the homes. The others were

to people’s livelihoods such as the hardware store, florist shop,

bank building; at the same time was the public infrastructure aspect. How long do you think it will take to provide assistance to

everyone who is eligible and when do you think that we can expect

that the checks will start to arrive?

Mr. ALLBAUGH. The checks were electronically transferred or in

the mail within 24 hours of when the President declared this disaster when we got his request. We have a fabulous system that

Larry Zezinger runs in our office for the agency. We have that ability, normally within 2 to 5 days, to put money in the hands of those

individuals who are harmed, and we have already done that.

Senator MIKULSKI. I know that our very able county commissioners established something called People’s Place. I bet you like

that because it put all of the agencies like FEMA, SBA and some

that were going to help families in one place while they had an incident management operation center someplace else. If you recall,

our rescue squad even lost its roof. From the people operating out

of People Place, would you describe for committee how it works,

how someone comes in and how they apply and what can they expect in terms of timeliness?

Mr. ALLBAUGH. Normally what takes place is we try to lean as

far forward out of the foxhole as we can when one of these incidents takes place. That basically entails a disaster response team

that is flown to the site. They start searching for an area where
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we can house all the Federal and State agencies under one roof so

we can offer in a disaster field office setting a one-stop shopping

for those individuals who have been harmed. This happens in two

ways: they can either come to the disaster field office to register

in person for State and Federal assistance, and even local assistance, and also charitable organizations are a part of that disaster

field office, or mainly the norm is to call our 800–621–FEMA, our

hotline, where we teleregister those individuals who have been

harmed or even think that they have been harmed.

Senator MIKULSKI. We think that is a terrific system. I think

part of preparedness has to do with where would you operate an

incident management situation which goes then to your need for

technology, interoperibility, and mutual aid. We were gratified in

southern Maryland the way others responded to help our responders. Therefore we need to be looking at interoperability incident

management and then preparedness which is where would the people go if they need to seek shelter, where do the people who are

going to help them get benefits need to go and where would be the

command and control environment.

Is that part of what you see needs to be, therefore not only helping, would help both as I said against tornados or national disasters, as well as against terrorism?

CITIZENS CORPS

Mr. ALLBAUGH. The interesting thing about our agency is that we

believe we are an all hazards agency, whether it is man-made or

of natural design. We implement the same process. We go through

the same procedures. Our people are very well trained in going in

and quickly making assessments as to individuals, businesses and

a community’s need. Nine times out of 10, the individuals who respond to a disaster are those innocent citizens who were right

there if they have not been harmed themselves. That is why I

think one of our programs which is a part of Citizen Corps is a

great program. It is a Community Emergency Response Training

that we do. We certify individuals with 18 hours of training. And

we essentially have a fabulous program in Pittsburgh where we

train the trainers trying to reach as many people as we possibly

can to identify when they are in a disaster situation and respond

immediately to before fire, police and utility individuals can show

up at the scene and clearly before the Federal assets are able to

arrive.

But our system works. We reach out with great regularity to

State and our local partners and communities to make them aware

of how our programs work, and again, it is the tireless effort of the

FEMA employees who actually make this work day in and day out.

Senator MIKULSKI. Thank you. Just one final question. How

many offices do you have in southern Maryland, and how long will

they remain open?

Mr. ALLBAUGH. They will remain open as long as they need to

be open in assessing and assisting those individuals. We have 77

FEMA employees on the site right now. I think there is one main

disaster field office and two satellite offices. We may even have a

mobile office in the area. I do not know. But I will find out exactly

and respond back.
497

Senator MIKULSKI. Again, the next time you see the President

and the next time I do on behalf of all of southern Maryland and

all of Maryland, we just want to say thank you. I think our colleagues know when they are hit by something, nobody knows that

lady with that flower shop or that man with his business or that

senior citizen with their home, nobody knows if they are Republican or Democrat. They just know they are Americans. And thank

you very much for your response.

Mr. ALLBAUGH. Thank you, Senator.

Senator MIKULSKI. Senator Bond.

HAZARD MITIGATION GRANT PROGRAM

Senator BOND. Thank you, madam chair. You mentioned the proposal to replace the hazard mitigation grant program which now

retroactively awards percentage of the disaster relief for future

mitigation. With a forward-looking approach. This is something

that I have asked about over the last several years. I believe your

IG is also supporting it. Now FEMA is proposing to establish a new

$300 million competitive mitigation program. I’d like to ask you

sort of a three-part question.

How—what benefits do you see accruing in this program, rather

than in the current HMGP program since we do not have any authorizing language, how would the program be structured, two.

And three, what would be the priorities for funding? Advantages.

Structure. Priorities.

Mr. ALLBAUGH. Senator, the biggest benefit is that you remove

individuals from harm’s way immediately by buying out those businesses or homes that have been identified as being at risk. I remember last year touring the Red River of the North in the Grand

Forks area. They identified many areas from the flood of 1993

where the community had gone in, identified after the fact and

subsequently bought out those homes and businesses that were in

harm’s way. This time around, last year when flooding was severe,

those homes and businesses were not at risk. Basically that area

had been turned into a green belt area or park and—

Senator BOND. I fully support mitigation. I am just saying with

a, what would be, how do you see the advantages of the new program, rather than the previous program which did provide mitigation resources on a percentage basis to the disaster relief?

Mr. ALLBAUGH. The biggest thing immediate would be that the

vast communities across the country already know where their risk

are. They have identified them. They are on the shelf. They do not

have the ability to buy those properties right now and remove them

from any type of threat. This allows them up front a competitive

basis to remove those properties from risk, as opposed to waiting

until a disaster takes place where we go in after the fact and offer

up mitigation money to buy individuals out.

Senator BOND. How would the program be structured? What

would be the guidelines? What would be the priorities?

Mr. ALLBAUGH. Well, we are in the process of establishing that.

There would be eligible activities based upon vulnerability assessments.

Senator BOND. Maybe we ought to ask you to submit that for the

record. Maybe part of the answer is in my second question. Accord-
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ing to FEMA’s IG’s 2001 report, as of April 2001, out of more than

$2.5 million for the HMGP program since 1989, 48 percent had not

been disbursed. The bulk of the funds that make the disasters have

been sitting there 5 to 11 years. In particular the HMGP funds

generated by two disasters, Northridge Earthquake and Hurricane

Georges in Puerto Rico account for more than one-third of the total

amount of HMGP funds awarded since the program’s inception and

nearly 75 percent of all undisbursed funds. It appears that only a

couple of areas backed the tank truck up to suck out of that wonderful trough.

What is, what is happening? What is the problem with everybody

else?

Mr. ALLBAUGH. Well, we had a history of allowing communities

to not step up to the plate and take advantage of those HMGP

funds. I realize it is a problem. It is a priority for me to close out

those loans. They are given 4 or 5 years to tap into HMGP and we

need to reclaim that money. We have not done a good job on that

and the IG is absolutely on target.

TORNADO DAMAGE IN MISSOURI

Senator BOND. I mentioned the article. I just read the article today’s Southeast Missourian, tornado victims have problem with

Federal aid. 19 areas hit, 86 homes completely destroyed. They had

been denied individual assistance. My own friend, the fire county

chief, Chief Bollinger appropriately enough said we got people here

that are beyond welfare. One is living out of a car. Other is living

in a house with a tarp over it and they say we do not qualify. If

the tornado hit a metropolitan area, the situation would have been

handled differently. People in rural areas are penalized and he is

aggravated. I guess the other thing that is aggravating is that

FEMA put in place a toll free number urging families to apply for

individual assistance and when they called the number they found

out that they were not eligible for individual assistance, which kind

of raised some expectations that were destroyed.

If you followed——

Mr. ALLBAUGH. This is the first I have heard about it. I will sure

check in and respond back to you. There could be a sizable portion

of those individuals who are insured and that may preclude them

from being eligible.

Senator BOND. There is some that are insured. We have not

looked at it.

Mr. ALLBAUGH. I was just handed it as well.

Senator BOND. That brightens your day.

Senator MIKULSKI. Senator Shelby.

Senator SHELBY. Thank you, Madam Chairman. We talked about

Maryland and Missouri. I thought I would get into my home State

of Alabama, Mr. Director.

Mr. ALLBAUGH. Good.

CHEMICAL STOCKPILE EMERGENCY PREPAREDNESS PROGRAM (CSEPP)

Senator SHELBY. I have been working, as you know with Senator

Sessions, and Congressman Riley to facilitate the discussions between the Army and FEMA and our State and local officials in Ala-
499

bama regarding critical CSEPP safety requirements associated

with chemical weapons. CSEPP, you are familiar with that?

Mr. ALLBAUGH. Yes, sir.

Senator SHELBY. Officials from your agency participated in all

the operational assessment team meetings which were convened at

the direction of Secretary Rumsfeld and overseen by Under Secretary Pete Aldridge regarding funding for critical CSEPP safety

requirements. Two issues remain unresolved as of today. While the

Army has transferred the necessary funding to FEMA and the

State and county EMA have developed training to make those

plans, funding for level A suits and protective hoods remains

blocked. The OAT process provided numerous opportunities for

FEMA representatives to raise important concerns. But none of the

recent criteria produced by FEMA for the level a suit and protective hoods were brought up during the process.

Several questions. First, tell us why FEMA officials, your officials, did not raise objections to these protective suits and hoods

during the OAT process and second, since DOD and the Army have

transferred the funding to you, this is not an issue—it shouldn’t be

an issue of money. What are the reasons FEMA continues to refuse

to agree with DOD and the Army that protective suits and hoods

are a safety device?

Mr. ALLBAUGH. Senator, I have no idea why FEMA employees

who attended those meetings failed to speak up. They have known

our position from day one and there is no excuse for them not making people’s position well-known.

Senator SHELBY. Will you look into this?

Mr. ALLBAUGH. Sure. I will report back to you.

Senator SHELBY. And straighten that out.

Mr. ALLBAUGH. To the best of my ability. I sure will.

Senator SHELBY. You are the director. I think you can straighten

it out. In FEMA. Maybe not elsewhere in the government. In

FEMA. I have confidence in you as the director to run your agency,

and if you run your agency as I believe you have and will, you will

straighten that out.

Mr. ALLBAUGH. Well, I have been about the business of trying to

straighten out the issue on Anniston since this has come to my attention several months ago. What I am concerned with first and

foremost and if you want to blame someone for the holdup, you can

blame me and hold me responsible.

Senator SHELBY. We are more interested in performance. We

have talked about this. I am not here to blame you. I am here to

get it straightened out.

Mr. ALLBAUGH. I understand. We are in the position right now

of trying to work with the community to make sure that they have

a certain amount of training. We have asked for a plan and proposal from the city after they were not too interested in what we

had offered up and I expect that to take place in short order, Senator, and we can resolve those issues. I do want to make sure that

individuals if we are going to be buying hoods or masks are properly trained.

Senator SHELBY. Absolutely. We are all interested. The bottom

line at Anniston dealing with chemical demilitarization is nothing
500

but safety. Safety at whatever because the people there have no

one to speak up.

Mr. ALLBAUGH. I agree.

Senator SHELBY. If we do not speak up, if we up here do not

speak up, no one will. I want to commend again Senator Mikulski

for conducting the hearing regarding other issues in Anniston several weeks ago.

Mr. ALLBAUGH. There is not anything more paramount to our

agency than safety. We are about the business of protecting lives

and saving properly property, and just as soon as it is feasible, I

have the ability to sit down with the Anniston folks, I think we can

resolve this issue. We have given them everything that the Army

has promised except for the issue on the hoods and I see no reason

why this cannot be solved in short order.

FEMA’S ROLE IN CSEPP

Senator SHELBY. Mr. Director, I only have a minute. Given our

recent conversation about your level of frustration with the CSEPP

program, I want to know what your thoughts are regarding

FEMA’s continued involvement in the program. Second, do you believe any statutory changes need to be made that would improve

FEMA’s ability to execute the CSEPP program and third, what discussions have you had with Dr. Fiori and Secretary Aldridge regarding these unresolved OAT safety issues?

Mr. ALLBAUGH. I have not had any personal conversations with

Dr. Fiori. I know numerous members of our staff have. I believe

the CSEPP program is better served returning to the Department

of the Army. We have nine facilities nationwide. Our only role in

CSEPP programs needs to be continued and that is one of planning, assisting those communities with their evacuation routes, and

their planning. But I believe the Army runs a program that is a

good program. I think they should have the entire program, just

not part of the program.

Senator SHELBY. Thank you, Madam Chairman.

Senator MIKULSKI. Senator Johnson?

Senator JOHNSON. Thank you, Madam Chairman. Welcome.

Mr. ALLBAUGH. Good to see you, Senator Johnson.

PROJECT IMPACT

Senator JOHNSON. Thank you for your attendance. I observed the

Project Impact is not part of the initiative we are talking about

today. It has been a popular program in my State, numerous communities have been able to secure the resources they have needed

to prepare in advance of disaster. How does FEMA intend to support legal strategic disaster planning at the local level outside of

the project impact?

Mr. ALLBAUGH. The President’s First Responder program serves

that purpose, to offer assistance, technical assistance and planning,

training, equipment purchases and exercises. Standardization is

probably one of our number one priorities across the Nation. Many

communities have plans that have not been looked at in recent

years. They need to be taken off the shelf once again, dusted off

and we can provide that assistance through our State partners to

improve those disaster response plans.
501

Senator JOHNSON. Any sense of what kind of, you not only have

to work with communities that have no plans but update communities that do have old plans which may not be up to date, may not

be appropriate to contemporary needs. How far down the road are

we going to get in assisting these communities?

Mr. ALLBAUGH. Well, the supplemental has $175 million to be

used totally for planning. We already asked States and communities to start their planning process so if Congress acts in the affirmative with the $175 million it will be 100 percent grant money

and we can expedite getting that money out the door to further assist those communities.

Senator JOHNSON. Very good. Thank you.

Senator MIKULSKI. Mr. Allbaugh, I’d like to pick up on that—excuse me. Senator Craig. Sorry.

Senator CRAIG. If you have got a follow through on that.

Senator MIKULSKI. You go right ahead. You have been waiting

very patiently. Please proceed, sir.

INTER-AGENCY FIRE CENTER

Senator CRAIG. Madam chair, welcome. Joe, welcome to committee. One question—well a couple in relation to the fire administrations and the National Fire Act. Do you see expanding roles

with the Interagency Fire Center in Boise? I know FEMA has a

presence there now on a concurrent basis with all of the other

agencies that interface as it relates not just to fire, but they also

deploy equipment materiel in national disasters?

Mr. ALLBAUGH. Actually, I’d like to have a more expanded role

there at the center. It is a fabulous facility. We only have personnel

there located during the seasonal hot spots.

Senator CRAIG. The peak of the season. That’s right.

Mr. ALLBAUGH. Yes, sir. We have a great organization in the

United States Fire Administration led by chief Dave Paulison. I

would like to improve that relationship. I was there last year.

There is a willingness with the Ag department to do the same

thing. As you know we are about the business early on in the fire

season of administering our fire management grants which used to

be called fire suppression grants. We have done several over the

last several days, I think 5 in the last 3 days alone where private

property and public buildings have been threatened. It is an area

that we need to work closer with Ag to improve our relationship,

and I’d like to achieve that.

FIRE GRANT PROGRAM

Senator CRAIG. Fire management grants are different than the

kind of grants that are going to the local communities and local fire

departments?

Mr. ALLBAUGH. That is correct. Yes, sir, they are. Fire management grants tend to be one of an emergency nature where there is

an immediate threat to property and individuals. The fire grant

program that Congress in my opinion wisely passed last year, we

had a 5-month period to get the first $100 million out. We were

successful. That goes to basic firefighting needs to local fire departments. This year Congress has given us $150 million plus $210

million in the supplemental for a total of $360 million, which I
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know will be out the door by the end of this calendar year and I

thank you for that support. It is a strong program, and it makes

a difference in those local fire departments.

Senator CRAIG. That is a strong program. It is very popular in

my State. I have been visiting most of my fire departments. They

just do not want it lost inside the bigger issue today.

Mr. ALLBAUGH. I agree with that, Senator if you do not mind me

interrupting. I know OMB wants to combine the fire grant program

with First Responder program. I am dead set against that. It is for

two different purposes. And I think it is a mistake to try and put

those—I am going to get in trouble for this, but it is a mistake

quite frankly.

Senator CRAIG. You won’t get in trouble with this Senator and

my guess is my colleagues will agree with that.

Senator BOND. Last time I agreed with somebody disagreeing

with OMB, he was canned 3 days later. We wish you well, Joe.

Senator CRAIG. I will leave you my phone number.

Senator BOND. Mike Parker.

Mr. ALLBAUGH. I consider myself not only working for the American public, but directly for the President of the United States and

I think I still have a fairly good relationship. I might survive this

area.

Senator CRAIG. The program that you have talked about is very

popular amongst fire departments because it picks up some of the

pieces they cannot afford to pick up in training, equipment and material. It remains very valuable. I met with Idaho’s fire chiefs a

couple of weeks ago and that was their first request. Do not lose

this program. It is the best we have seen to date. It is quick to respond to our needs. And it is an opportunity. I am pleased also to

hear you talk about the potential of an expanded role at the Interagency Fire Center in Boise because while we look at it as a fire

center, it will also buy caches of equipment and readiness, it does

respond and has responds to communities all over the country with

the deployment of communications equipment and all kinds of

things. It is a natural for the area, the region because it services

the whole western States that it literally is the whole national center. I am glad that you see that in its provincial and present management system.

Mr. ALLBAUGH. It is a tremendous facility. I look forward to expanding our role there. Back on the fire grant program just for a

minute to refresh everyone’s memory. Last year the first year we

had over 20,000 applications for $100 million. Twenty thousand

plus applications represented over $3 billion in needs and requests.

This year, we are right at 19,000 and some applications and we are

going to be moving quickly getting that money out the door, so it

is an extremely popular and successful program.

Senator MIKULSKI. I just want to reiterate how supportive we are

of the fire grant program because it helps particularly the volunteer fire departments where we are asking people on their own

time and in their own mind, to meet the bottom line. This has been

an excellent program. This then also takes me to the whole issue

of State and local, strengthening State and local emergency management.
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INTEROPERABILITY AND MUTUAL AID

First of all, we want to thank Governor Tom Ridge for taking a

look at our capital region in terms of the need for disaster planning. That is the District of Columbia, my own State of Maryland

and Virginia. We are the capital region. I must say, we are a high

security issue but also as part of that, is southern Maryland and

La Plata, a little county run by commissioners and a lot of great

volunteer fire departments. So let me get to the point. I’d like you

to elaborate what is in this year’s budget to help with interoperability and mutual aid. What I heard you talk about was in New

York people wanted to help but they couldn’t because of the failure

for interoperability. When I walked the streets of La Plata, what

I saw was that county executive Doug Duncan from Montgomery

County rushed to be able to help La Plata. That the Ocean City

mayor had come because they had some experience with natural

disasters, and it showed why we need to have mutual aid and also

the need for interoperability in communications. Mr. Duncan of

Montgomery can talk to Mr. Curry of Prince George’s, but I am not

sure both of them can talk to Charles County or be able to even

go across the river to get help from Northern Virginia.

I note this is a high priority with you. Could you tell us how we

could put money in the Federal budget to ensure interoperability

and also this great approach of mutual aid where I think is the key

to a successful rescue and recovery operation.

Mr. ALLBAUGH. Thank you Senator, for the question. Interoperability comes in many forms, not only in communications, but

equipment, personnel. In our first year, which would be this year

I hope with the supplemental, $175 million we are requesting

which is 100 percent money to go to those local departments to

start that planning process. It is basically similar to playing a football game. You do not want to go out and put your players on the

field until you have a game plan, and it is important that States

and local communities have that game plan and we need to assist

those communities in that game plan. Coupled with that, there are

two particular areas in mutual aid arena that we want to spend

$5 million in assisting those communities in crafting the requirements when it comes to mutual aid, and $7 million for secure communications with State and local individuals nationwide.

It is important for us, when there is an incident that is ongoing,

to have the ability to communicate in a secure fashion, something

that we do not have between the governors and other State officials

and the Federal Government. We do among most Federal agencies,

but not at the State level. So there is $7 million we would like to

spend in that arena. We are asking for $50 million in the area of

Citizen Corps. This is probably one of the greatest programs that

can help a community be prepared. And the reason we are asking

for that money is to accentuate an already excellent program that

started in Los Angeles in 1985 and we picked it up in the later

1980s, which is the community emergency response team, the

CERT training. It’s a fabulous opportunity to train the trainers, get

them out of the communities and train individuals on how to respond to a disaster to assist their fire, police utility departments,

city council, hospitals, EMTs. Many people just do not know what
504

to do and what we will do by making this training available is enhance the already well-established local response capability. That

is just some of the dollars we will be spending this year, I hope.

Senator MIKULSKI. Mr. Allbaugh, I want to assure you that I regard the whole issue of interoperability and mutual aid to be one

of our highest priorities to be able to serve our communities and

serve the Nation. I am going to work with you through the appropriations process and any help that you need with other Federal

agencies on establishing national standards for equipment and

using other resources like the National Institutes for Standards

and Technology. The private sector is developing excellent technology and improving it every day and second, we want to have

this interoperability and mutual aid. I have seen it at the Pentagon

when Maryland and Northern Virginia responded with citizen soldiers helping our American military and now I have seen it in my

own disasters and you have heard it from my colleagues. So we

really want to work with you because I think this is how we are

going to get maximum value for our dollar and maximum assistance for our communities.

Mr. ALLBAUGH. If I could add two more points, Senator. At the

Federal level, there has been some confusion in the interoperability

arena. We have taken steps with Treasury to head up a consortium

of all Federal agencies called SAFCOM that will solve this interoperability problem at the Federal level. I believe first we have to

get our own house in order before we can help others.

Second to that, Bruce Baughman, who is heading up our Office

of National Preparedness, second from your left is doing a fabulous

job. One of his challenges is to set nationwide standards in the

area of communications and equipment interoperability. I hate to

be redundant but I remember so vividly showing up at the Pentagon and people had their own breathing apparatus with them

and they couldn’t use the freshly charged bottles because the

threads would not be interchangeable.

In New York City we had pumper trucks that we desperately

needed from lower Manhattan and Yonkers and New Jersey, great

vehicles, great equipment, people with the drive and training to

use them and we couldn’t use those pumper trucks when we wanted to use them because the threads weren’t uniform. We had a variety of uniformity issues across the board in equipment and personnel we are going to solve.

Chief Paulison and I are going to have all the manufacturers in

the next couple of weeks to use my 275 pounds of intimidation and

kind of beat them about the heads and say we are putting lives at

risk unnecessarily because we cannot solve the interoperability

problem and we are going to solve it.

Senator MIKULSKI. Terrific. Senator Bond?

Senator BOND. Senator Domenici has come in.

CERRO GRANDE FIRE

Senator DOMENICI. I think my first round here I will talk about

a parochial issue, the fire in New Mexico that you are wrapping up

in terms of the management plans, the Cerro Grande forest fire in

the Los Alamos area. First, I want to thank you personally for the

attention that you have given to the recovery of Los Alamos and
505

the surrounding areas around the Cerro Grande fire. Just about 2

years ago is when it occurred. The fire consumed about 50,000

acres, 48,000 I think, destroyed about 400 homes, caused damages

and injuries to a thousand families and countless businesses. The

county of Los Alamos, State of New Mexico, four Indian Pueblos

and the Federal laboratory. I want to remind my colleagues that

this was started by Federal Government when a monument burned

out of control.

For that reason Congress enacted the Cerro Grande fire claim assistance act of 2000 and appropriated $455 million to FEMA to establish a claims program to compensate victims of the fire. Senator

Bond, I remember vividly your cooperation after you went through

this issue and made sure that we understood that FEMA had not,

before that had not been doing this kind of work but remember

they had an emergency response and then somebody else would do

the kind of things that we had here, Small Business Administration, HUD, etc.

But I want to suggest to you that from what I know, they have

done an excellent job. They are not quite finished, but I think today

you can wrap this up for us and perhaps you could, we could start

by saying as of the 28th of August the fire claims under this act

will expire. There will be no more time to file their claim. They had

a short time fuse if they wanted to participate under this act this

they to file claims. Perhaps some will save their claims and file in

Federal court.

Director, would you please give the subcommittee the latest figures on the fire, the number and amount of the claims filed, the

number of claims approved, and the number of claims paid and the

pending number of claims and the number of claims anticipated to

be filed by August 28. Could you do that or would you rather do

it——

Mr. ALLBAUGH. I will take a stab at it, Senator, based on what

I recall. Principally to remind everyone, I was aware that the program would not be extended. The clock is running. They need to

file their claims by August 28 of this year. Originally the program

officials on site only estimated they would be the recipient of about

1,500 claims. We have handled over 20,000 claims to date thus far

and we spent almost $300 million of the original $455 million that

was granted by the Congress. We expect another 2,000 claims to

be added to that prior to the 28th of August.

I have not paid any insurance company the subrogation of claims

because I wanted to make sure that 95 percent or so of the claims

of individuals would be paid prior to the insurance companies and

we are adhering to that and I am proud of all of our agency folks

for helping us achieve that goal.

I do believe that there, in my request for an additional $80 million there is a need to have a safety net. I would prefer to disclose

and play all my cards on top of the table. There is no reason to

believe we are going to go beyond the $455 million, but to protect

ourselves and make sure everyone is taken care of I think it is a

prudent course and action to take. If this committee gives us the

$80 million extra, we would turn back anything that is unused. I

would be happy to do that. We are well on track. We still have
506

about a, 45 individuals at the Los Alamos office every day and I

am pleased with our progress of this program.

Senator DOMENICI. I am going to submit further questions to you

for the record.

Senator MIKULSKI. Absolutely, Mr. Chairman. We really look forward to cooperating with you. We know that it is a most devastating, devastating situation.

Senator DOMENICI. I have some other questions, but I will wait.

Senator MIKULSKI. Senator Kohl.

FIRST RESPONDER GRANT PROCESS

Senator KOHL. Thank you, Mr. Allbaugh. There were a number

of concerns regarding FEMA grant process and I will address just

two of his and my concerns. First the emergency response community in Wisconsin is pleased that FEMA is taking over the Office

of Domestic Preparedness programs in the Department of Justice

for First Responder assistance and I have heard several complaints

regarding the complex process that the Office of Domestic Preparedness had used to provide equipment grants to first responders. Many local people believe that these programs were too cumbersome and took too long for the money to filter down to the people who needed it. So will FEMA make a concerted effort to make

the process easier for local communities so that the money can be

spent more rapidly?

Mr. ALLBAUGH. That is our plan, Senator. I think our fire grant

programs our application is down to a page and a half, maybe two

pages maximum. We believe training for first responders ought to

be consolidated into one location regardless of where it is as opposed to a fragmented system that we currently have right now.

The Office of Domestic Preparedness of Justice has focused in my

opinion on the small part of the entire emergency response arena.

It is something we do. This is our core mission. This is why we

exist, and I hope that at some point we will be able to consolidate

these programs but I appreciate what you are saying.

Senator KOHL. Second, State and local emergency management

officials are concerned that all the additional funds provided at the

Federal level will not be well used if there is not a strong foundation at the local level to absorb these funds. They tell me they need

money to hire full time staff, coordinate local and regional efforts.

This funding for emergency management performance grants

should be boosted so States and localities can have the staff and

infrastructure to handle these new funds as widely as possible.

Mr. ALLBAUGH. I’d like to see that we improve our funding to assist the States in those arenas. I know they cannot do it with the

resources they have right now. We need to assist them with personnel and technical assistance to make sure the money goes exactly where it is intended to go.

Senator KOHL. So we can hope maybe there will be some additional funds for personnel?

Mr. ALLBAUGH. I hope so, too. For a number of years EMPG

funding has been level. I am not sure I understand the rationale

why we did not include an upgrade in our EMPG money for the

2003 budget, except we were totally focused on events after 9–11.

It is my plan to increase that money. State directors in NEMA
507

know that. They understand that. If there is any money that I can

utilize in the interim, I would be happy to do that.

Senator KOHL. I thank you so much. I thank you, madam chair.

Senator MIKULSKI. Senator Bond.

CERRO GRANDE AUDITS

Senator BOND. Following up on my good friend from New Mexico

there asking questions about the Cerro Grande program, I wonder

if the FEMA IG Mr. George Opfer could come forward and answer

a couple of questions if you would please. We want to find out how

you think it is been going. Are there adequate accountability requirements to assure that payments were consistent with losses?

Was the office providing accountability, were they cooperative and

were the payments consistent with the types of models used by insurance company for losses?

Mr. OPFER. Senator, there was a learning curve for both for the

FEMA and OIG personnel who were assigned there. We had some

coordination problems in the initial stages of operations, that is,

making sure program officials understood the role of the Inspector

General both in terms of our audits and investigations. That relationship has worked out very well recently and, we are seeing a

number of improvements. We have full time audit personnel assigned there who are now working closely with FEMA management. Once our work is done, we intend to prepare an after-action

report from the General’s perspective addressing questions concerning operational effectiveness and accountability, as well as our

own experiences in dealing with program officials.

Right now we think that the process or the experience level of

the people who are involved with the Cerro Grande program has

dramatically improved and it is functioning quite well.

Senator BOND. Joe, you had a view on that? It is not as bad?

Mr. OPFER. We had some problems in the field in the beginning.

We had to address it at a higher level in the agency. Program staff

appear to be cooperating now, however. I would like to comment on

the efforts of the Acting Deputy Director, Mike Brown, in helping

us attain that cooperation. When things came to my level, I oftentimes turned to Mike for assistance. He was very helpful in making

sure personnel from the management side of the Cerro Grande program were responsive to our inquiries. We have had excellent cooperation from Mike.

NEW YORK INVESTIGATIONS

Senator BOND. While you are up there, Mr. Opfer, we indicated

lots of money going into New York after the tragedy of 9–11. Are

there adequate controls in place, procedures in place to ensure that

any fraud or abuse or misuse of taxpayer money with regard to

New York City assistance are in place? Can we be comfortable that

all the money going there is being spent well?

Mr. OPFER. I think you can understand from my accent that I am

quite familiar with New York, being born and raised there. I started my government career with the Secret Service in 1969 working

in the New York field office. I was with the Secret Service for 25

years before coming to FEMA.

Senator BOND. Takes one to know one.
508

Mr. OPFER. We worked very hard with the District Attorney in

New York. He has opened up his office to us. We actually have our

agents located in the Manhattan District Attorney’s office so, from

an investigative point of view, we are working quite well with the

city of New York and their police department, investigators, and all

their appropriate law enforcement agencies. We are also working

with the U.S. Attorney’s Office in Manhattan. I believe we have a

very good handle on how the money is being used in New York

City. Furthermore, some of the other Federal agencies involved, Social Security Administration Inspector General, for example working very closely with us are reviewing all complaints or allegations

that are referred to us to determine whether. Federal funds are involved, and to determine who would be best equipped to address

the issue. We are on site, and from our perspective, we feel very

comfortable at this stage that all the appropriate Federal guidelines are being followed.

Senator BOND. Are there a relatively large number of actual indictments or criminal proceedings which have been commenced in

New York City?

Mr. OPFER. At this stage, we have made 39 arrests, mostly dealing with false applications for Federal assistance. In one case an

applicant claimed that her spouse was killed in the World Trade

Center, but was actually alive and well in another State. We are

also looking at some contractor fraud that is, false billings. Unfortunately, what we are seeing is not anything that we do not see

in other major disasters. In the Northridge Earthquake, for example, we had people that would take the identity of the deceased victims and file for Federal assistance. We are basically, unfortunately, seeing the same type of problems in New York.

Senator BOND. Thank you very much.

MERGER OF TRAINING PROGRAMS

Senator SHELBY. Thank you, Madam Chairman. Director

Allbaugh, in earlier conversations, you discussed the need to collapse all training programs into one. Could you explain to me in

detail what you mean by collapse? Does this merely mean put all

existing programs under one roof or literally collapse them all and

give rise to another, to one specific training program? In other

words, could you discuss exactly how you envision FEMA operating

at the current national domestic preparedness consortium that the

President has proposed your agency take over?

Mr. ALLBAUGH. I think what we have to do is merge those programs that we know about that exist at the Federal level already,

and take advantage of the pluses of all the programs, improving

those programs and training so that the recipients of the training

can go one place, as opposed to hunting around for training. Now

what concerns me right now is that I cannot certify the type of

training that ODP is conducting nor can they certify the type of

training that we are doing. The American taxpayer deserves to

know that there is one entity, regardless of where it is, that is

going to be held accountable for that training that local responders

desperately need.

Senator SHELBY. Mr. Director, could you discuss how FEMA proposes to deal with a live agent training facility at the center for do-
509

mestic preparedness? How does FEMA propose to obtain live

agents for training? Under the current law I believe it authorizes

the Secretary of Defense to transfer chemical agents to the Department of Justice. In addition, there are issues relating to the existing Chemical Weapons Treaties. If you could comment on these

issues and how FEMA proposes to address them?

Mr. ALLBAUGH. Well, I can’t speak to the law, Senator, directly.

I will have to check on that and respond back. But there are two

particular facilities that I know, have seen one and know about another. Yours at Fort McClellan is a first class facility that I think

would do nothing but enhance the training that already goes on for

our first responders. The other facility is the Nevada test site outside of Las Vegas. It is extremely important for individuals, whether it is hazmat, chemical, radiological or biological to experience as

much as they possibly can reality in real live exercises.

Last week I was at the Nevada test site and witnessed a radiological exercise where a hazmat team had come in from another

State, for the specific purpose of this type of training and those individuals learned so much from this exercise.

Senator BOND. Under real conditions.

Mr. ALLBAUGH. That makes a vast amount of difference as opposed to a table top exercise in a classroom, or even exercises that

they may do in their own community. It is a vital asset to take advantage of what you have at Fort McClellan and at the Nevada test

site.

Senator BOND. Thank you, Madam Chair.

Senator MIKULSKI. All right. I see Senator Domenici.

FIRST RESPONDER GRANT PROGRAM

Senator DOMENICI. Could we talk a minute about first responders.

Mr. ALLBAUGH. I will do my best.

Senator DOMENICI. First responders are statutory and they are

created by law. As I understand it, what you wanted to do, I do

not have any feelings as to whether I favor it or do not. I would

assume that for consolidation purposes if nothing else that I will.

But as I understand it, this activity by our Federal Government

has been shifted from one place to another over the last three or

4 years. It is very hard at this point to decide who really has jurisdiction. I think it is the Justice Department. I am not sure. Have

you been told that to do the consolidating that you desire you are

going to have to pass a statute permitting this First Responder

training?

Mr. ALLBAUGH. What I understand, Senator, is that for the most

part under the fire act we really have broad authority to implement and operate these programs, but we are working with our authorizing committees in both houses with language that OMB has

brought forth to further clarify the authorization that some individuals believe that we need to have. And we will continue to do that.

Senator DOMENICI. Under the First Responder program that the

Appropriations Committee finally put into effect through the great

efforts of Senator Judd Gregg who worked for a year and a half,

as I understand it, that program has been used in 128 cities of

America to bring the responders together programmatically and
510

they worked together, the fire department, the police department,

the doctors in the town, the hospitals and they prepared a so-called

preparedness First Responder plan. Now, that whole effort is going

to change and be under FEMA?

Mr. ALLBAUGH. I wouldn’t say it is going to change. I think we

will merge the two programs and it will be a stronger program at

the end of the day. We do that with the rest of the communities

across the country right now to the best of our ability along with

the States.

Senator DOMENICI. Well, I think it ought to be in one place and

if we can get it in your shop, I am all for it, count me as one at

this point from what you have told me we ought to do something

like that. There is no reason to have it in three places.

Mr. ALLBAUGH. I commend Senators Shelby and Gregg and Hollings. They were caring about this program long before others did.

It was shopped around and it was, ended up in Justice and probably, in my opinion based upon what my 15-month exposure has

been at FEMA, it should have been in FEMA all along.

Senator DOMENICI. Actually that is a statute prepared by Senators Lugar, Nunn and myself. We left it up to the President as

to the whole program and where it would be headquartered. We

thought it would be best as part of a national security effort with

the country but nobody wanted it and he did not want to push too

hard so maybe we could make it work in a consolidated matter.

Mr. ALLBAUGH. It is a high priority for this President, as all of

you know.

FIRE MANAGEMENT ASSISTANCE

Senator DOMENICI. One last question has to do with forest fires.

Actually it hardly seems realistic that the fire season is back upon

us, but—for forest fires, but it is. And New Mexico is currently in

a drought State, which you know from going out there, and on top

of that, we had already some major fires. We now have a fire management assistant system assistance grant program. We did not

have that before, and it is kind of a program that is born out of

frustration that there weren’t any adequate assistance grants for

drought areas that had forest fires.

Could you explain to the subcommittee what authorities you

have and how you are responding to wildfire forest fire emergencies

now?

Mr. ALLBAUGH. Yes, sir. I have learned also in that 15-month period that many of the programs that we now have, have been born

out of frustration with the inability to respond immediately, which

is why FEMA exists to begin with.

Senator DOMENICI. That’s right.

Mr. ALLBAUGH. Fire Management Assistance Program is a wonderful program that gives us real time ability to respond to a

States request when life and property are in danger. We turn this

around within a 24-hour process. It is a verbal communication. We

have done five in the last 3 days. We have three or four in New

Mexico, a couple in Colorado that we utilized. It is a successful program and the greatest benefit of this program quite frankly, most

of these small communities worry about how they are going to pay

for a fire that could get out of control. We removed that responsi-
511

bility right at the outset, that way they can focus on putting out

the fire when they need to do it and utilizing the assets they need

to and to the State it is a 75/25 match program.

It is a very successful program and unfortunately, as you pointed

out we will probably use this program quite a bit this year. We are

suffering a drought all over the United States and fires tend to

start in the South but later on in the year and move North, Northwest and I remember vividly using a couple of fire management

grants in January and February of that year, which is basically unheard of. It is going to be a tough year, but it is a successful program and I appreciate your support for the program.

Senator DOMENICI. I just wondered since every one knew that

was going to be a tough year, was there an extra amount of money

asked for in the President’s budget because of this, it was pretty

obvious we would all predict you would have a heavy load in this

area. Do you remember whether there was any extra money?

Mr. ALLBAUGH. This comes out of our disaster relief fund. I don’t

remember if we asked for extra money. It is treated as part of a

whole. I know that Congress will always make sure we have

enough money in the disaster relief fund to do what we need to do.

Senator DOMENICI. Thank you.

FLOOD MAPPING

Senator MIKULSKI. The time is growing short and we have so

many questions. I am going to submit for the record my questions

on flood insurance reforms, as well as the very important need for

mapping because I feel that so much of our communities are hit by

flooding that really flood mapping would go a long way to maximizing resources for hazard mitigation. In fact, that was the flooding in Senator Bond’s State and my own.

CITIZENS CORPS

I really need to ask some questions about the Citizen Corps initiative. First of all, we support President Bush’s effort for renewed

and reinvigorated sense of volunteerism and the concept behind

freedom Corps but the Citizen Corps is something that I have questions about whether not the need to volunteer, but the need for

FEMA to be in charge of a volunteer effort.

Looking at the President’s request, he is talking about, for example, five programs under FEMA, one would be what you are doing

already, the CERT program. You spoke about that. But then there

are three Department of Justice programs, volunteers in police

service, a neighborhood watch program and something called TIPS,

terrorist information and prevention. Why FEMA would be involved in that I do not know. Then there is the Medical Reserve

Corps, $10 million which I think would be a new program which

I think offers tremendous potential. Why you and not HHS that

interacts with the timing they have this excellent office of bioterrorism that my own former head of the school of public health Dr.

Henderson was involved in.

I am concerned that we are going into a corps du jour with a lot

of new corps and then second, others that are just not connected

to FEMA where a CERT definitely is. I see volunteers in disasters

even in La Plata for many nights showed up really to help with
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building, women who had heard that a senior citizen in the hospital lost her wedding band and some key things and over 30

women showed up to dig to help her find her treasures. You know

what, they found it. They found her wedding ring of over 60 years.

This is terrific.

But at the same time why would you be involved in terrorist information tips. What do you have to do with the Neighborhood

Watch Program? And I will tell you, the volunteer firefighters are

prickly about this because they feel they are the volunteers and

last year we were foraging for funds to put money in the fire program. So we have got $360 million, we have a request here for

$230 million more than we put in fire grants so you see where we

are headed here?

Mr. ALLBAUGH. I sure do.

Senator MIKULSKI. We want to encourage volunteerism, to have

them really help you in response to any disasters, but I think we

are not so sure the Citizen Corps is the way to go. Could you tell

us about this?

Mr. ALLBAUGH. The best logic I can offer is one that makes sense

is that we do well in coordinating other activities at Federal agencies when there is any type of response mechanism required. We

have a great relationship with all of these agencies you mentioned,

and I believe the President, what he had in mind was one of a coordinating role. Except for Citizen Corps. There we have the ability

to specifically offer technical assistance.

I know it is a concern of members of the committee that it detracts from our obligations day-to-day. Thus far from what I have

seen there has been no inability to provide those services. Quite

frankly, it occupies a few individuals, their time on a regular basis,

but it is not something that will ever detract from our core responsibilities responding to man-made or natural disasters. That is

probably about the best logic on the coordination of those other programs that I can offer you at this time, Senator.

Senator MIKULSKI. Let me conclude. First of all, you have got the

CERT program. And there is a request in that, there is a line item

for $61 million. We absolutely want to help you with CERT but let

me ask, are you going to own and operate the Medical Reserve

Corps?

Mr. ALLBAUGH. No, ma’am. That will be at HHS.

Senator MIKULSKI. I apologize. Are you going to own and operate

that?

Mr. ALLBAUGH. That will be under coordination.

Senator MIKULSKI. Same with the Neighborhood Watch Program?

Mr. ALLBAUGH. Correct.

Senator MIKULSKI. Same with the police search program?

Mr. ALLBAUGH. Yes, ma’am.

Senator MIKULSKI. How do you coordinate it, and why does it

mean anything to FEMA? Particularly with the watch program and

TIPS program. The Medical Reserve, of course, is very important.

Mr. ALLBAUGH. I think there is an advantage to be in a coordinating role because of our relationships with State and local officials already. We are just trying to capitalize to make sure that everyone knows what is going on. It is not that we are going to be
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running those programs. It is more one of awareness than anything

else.

Senator MIKULSKI. Well, I do not know. I do not know. But I do

know that some of the programs have been outstanding. The

CERTS program. We really do applaud the Medical Reserve Corps.

Those are the programs that we respond to. But Neighborhood

Watch and TIPS. I am not sure. I will yield now to Senator Bond.

FIRE FIGHTER GRANTS

Senator BOND. Thank you very much, Madam Chair. I want to

say thanks and amen to a couple of things. Number one, the fire

grant program, the firefighters in my State is I think as in all

States really believe strongly in the peer review process and we are

delighted to understand where you are coming from, and whatever

your position was, I think we could say that Congress was probably

going to keep that fire grant program administered by fire professionals.

CITIZEN CORPS AND VOLUNTEERS

Second, I concur 100 percent with the chair on the Citizen Corps.

I admit having daily conversations with my good friend John

Ridgeland. I have a minimum amount of high enthusiasm for adding that responsibility of coordinating those programs to people. We

have gone down a whole list of things that you have to do and we

are going to give you more and you have got, you have got every

kind of crisis to handle and if you think that with just a few individuals and taking away very little time from your other responsibilities, you could coordinate large groups of volunteers, you have

not had the same experience with volunteers I have.

We have traditionally had the best volunteer organization when

it comes to politics in the State of Missouri. We have a dynamite

volunteer organization, but if you do not have a good professional

staff running it, they are going to run into each other, run over

each other, get you in trouble and absolutely drive you nuts. Volunteers well managed are the greatest resource we have. I think we

have got something called National Service Corps, which has been

in the business of dealing with volunteers. I’d like to see them use

their people, their recipients as wholesale coordinators. We will

have, we will continue that discussion later, but I just, I like the

President’s idea. I think it is great. I just think that you have got

more than you can shake a stick at and you do not need to put a

new volunteer coordinator hat on.

Mr. ALLBAUGH. Senator, thank you for your comments on the fire

grant program. And one of the reasons I feel so strongly about the

fire grant program is that for years and years firefighters have always been the first in line for budget cuts and the last in line for

recognition and for the first time in a very long time Congress has

recognized the need, Congress has stepped up to the plate to devise

a very successful program and we are doing a good job of implementing it, and I thank you for your support.
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FLOOD INSURANCE PARTICIPATION

Senator BOND. I have just got two quick questions remaining.

They are not brief ones and you may want to submit more for the

record. The first is what can we do about the poor participation in

the flood insurance program? I have seen ads. This thing, this

thing requires more people involved. We are not getting involved

in it. And really what can we do? How can we get more people?

Mr. ALLBAUGH. I would like to respond because it does take an

elaborate answer that is pretty lengthy to solve this. There are

ways to improve it. I think we have taken some concrete steps just

recently with Bob and hopefully today Anthony Lowe is having his

hearing as new Federal Insurance Administrator. We will have him

on board. That will be a tremendous step.

PREVENTION AND CONSEQUENCE MANAGEMENT

Senator BOND. The final one I will pass along to my colleagues.

We are, I believe very strongly that FEMA should handle the consequence management in any kind of homeland security emergency. I think that is very clear that is what you do. That is what

you ought to focus on. The question is how do we draw the line between prevention and consequence management and that is I think

that is going to be a lengthy discussion. We have already raised a

lot of troubling questions and we would like to be able to discuss

with you and that your thoughts on how we draw that line.

Mr. ALLBAUGH. I would be happy to do that, Senator. We have

had great conversations about this. I would point out to the members here that we may have stumbled into a process and a template that works in the future, and by that I mean the setup between the Secret Service, the FBI, and FEMA that we utilized at

the Super Bowl this past year and the Olympics that took place.

It was a relationship. It was a partnership that absolutely worked

when it comes to delineating those lines of responsibility between

crisis and consequence and response. I think it is something that

we can look to to talk about in the future.

Senator BOND. Thank you very much.

Senator MIKULSKI. Senator Shelby.

FIRST RESPONDER TRAINING BUDGETS

Senator SHELBY. Mr. Director, you might want to, submit this

answer for the record, and I hope you will. Could you please explain to the subcommittee the budget request for the existing consortium members, specifically, how much money FEMA proposed to

spend on each of the consortium members and how those programs

will expand or contract in light of the new focus on First Responder

training?

Mr. ALLBAUGH. It is a great question. I would like to respond for

the record. I’d like to do a little research. I know a little bit about

it, but I would respond for the record.

Senator SHELBY. Thank you for your appearance today.

Mr. ALLBAUGH. Thank you.
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CONCERN FOR FEMA

Senator MIKULSKI. Well, thank you very much, Mr. Allbaugh. I

think the number of Senators that appeared, the length of questions shows our concern of course, like yours and the President’s

for the Nation and we do look forward to working with you and

making sure that FEMA has the right sources as well as the right

framework to respond. We look forward to seeing you again and we

look forward also in seeing you take a tour of southern Maryland

and also for the excellent responsibilities that you have assigned to

the Fire Academy in Emmitsburg. So again, 50 disasters, an aerial

attack on the United States. You and your team have had a lot on

your plate.

ADDITIONAL COMMITTEE QUESTIONS

We would like to thank you for really all that you have done and

know that you and your team are not alone.

Mr. ALLBAUGH. Thank you very much.

[The following questions were not asked at the hearing, but were

submitted to the Department for response subsequent to the hearing:]

QUESTIONS SUBMITTED BY SENATOR PATRICK J. LEAHY

Question. Director Allbaugh, I am very happy to see the proposal to add $300 million for FEMA’s flood map modernization initiative. Many town and regional planners in Vermont do not have updated maps, so it is difficult to know exactly what

areas might be affected by different rain or run-off levels. I am concerned, though,

that a small State like Vermont will not receive adequate funding from the program,

either because it lacks the matching funding or because funds might be distributed

in a manner that favors more urban areas. Can you please tell me exactly how

FEMA plans to distribute this funding? Do you see the need for Congress to include

strong small-State minimums when it authorizes the modernization program?

Answer. It is important to note that FEMA’s Map Modernization Plan, if funded

and implemented as planned, will result in the issuance of modernized flood hazard

mapping for all States and territories, regardless of size. The plan requires funding

in fiscal year 2003 and the two subsequent fiscal years to accomplish this.

Over the past several months, FEMA has been working with the States and territories to develop statewide mapping plans to accomplish the remapping effort. These

plans call for remapping work to commence in all fifty States in fiscal year 2003.

Accordingly, FEMA sees no need for Congress to include strong small-State minimums when it authorizes the modernization program.

Question. Director Allbaugh, I am very concerned about proposed reductions to

the Hazard Mitigation Grant Program, otherwise known as 404 mitigation funds.

This funding allows communities to reduce potential repeats of disasters, permitting

such sensible moves as buying out homes located in floodplains. This program needs

improvements, especially in disbursing funds more quickly and fairly to small

States. Yet it will save lives and reduce disaster costs over the long-term. Don’t you

think it would have been more effective to make changes to the program, including

adding in very strong small-State minimum funding levels, than to request a total

elimination of the program?

Answer. The President’s 2003 Budget did not propose a reduction in funding for

FEMA mitigation programs overall. In general, the Hazard Mitigation Grant Program has been a flexible and effective tool for States and communities to accomplish

mitigation priorities in the aftermath of a disaster, while at the same time assisting

residents affected by the disaster. However, because the funds are tied to specific

disaster events, implementation of long-range mitigation priorities established

through a comprehensive planning process at the State and local community level

is sometimes difficult to achieve. Therefore, I believe that some combination of both

pre and post-disaster mitigation is worth considering.
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QUESTIONS SUBMITTED BY SENATOR CHRISTOPHER S. BOND

HMGP PLANS

Question. HMGP permits States to receive an increased amount of HMGP’s funding from 15 percent to 20 percent of the disaster funds if the State has an approved

State Hazard Mitigation Plan. This plan would ensure that HMPG funds are used

for important and comprehensive mitigation efforts. How many States have these

plans in effect and what is FEMA doing to ensure that States develop these plans.

Answer. The Disaster Mitigation Act of 2000 (DMA) amended the Stafford Act by

adding Section 322 on Mitigation Planning. FEMA’s new planning regulation, 44

CFR Part 201, Hazard Mitigation Planning, which was published as an Interim

Final Rule in the Federal Register on February 26, 2002, establishes new criteria

for State and local hazard mitigation planning consistent with the requirements of

Sec. 322. The deadline for approval of State and local mitigation plans as a condition of receiving Hazard Mitigation Grant Program (HMGP) grants will be November 1, 2004. A November 1, 2003 deadline for plans has been set as a condition for

local governments to receive Pre-Disaster Mitigation (PDM) grants (authorized by

Section 203 of the Stafford Act, as amended by the DMA) for ‘‘brick and mortar’’

mitigation projects. The Interim Final Rule:

—Continues the requirement for State mitigation planning as a condition of disaster assistance (which allows a State, tribal or local government to receive

HMGP funding based on 15 percent of the total estimated eligible Stafford Act

assistance), and;

—Provides incentive for strengthening mitigation programs by establishing criteria for States to receive increased (20 percent) HMGP funding if, at the time

of the declaration of a major disaster, they have an enhanced mitigation plan

in place;

—Establishes a new requirement for local mitigation plans as part of the HMGP,

which will be phased in; and

—Allows States to use up to 7 percent of HMGP funds for the development of

State, Tribal, and local mitigation plans. This provision has been in effect for

all disasters declared after October 30, 2000.

The new planning initiative provides a framework for linking pre- and post-disaster mitigation planning and initiatives with public and private interests to ensure

a comprehensive approach to disaster loss reduction. Such decision-making, based

on sound understanding of vulnerability to hazards and appropriate mitigation

measures, is the best indicator of a successful mitigation strategy that can be sustained over the long-term.

Because meaningful, effective mitigation planning takes both time and resources,

FEMA established the 2003 and 2004 deadlines to give States, tribal and local governments sufficient time to understand the intent and scope of the requirements,

and to undertake the planning process that will meet those requirements. It is in

the States’ interest to submit and have approved an Enhanced Mitigation Plan as

soon as possible. Although no States have yet met the requirements for an Enhanced Plan, several States have submitted plans to their FEMA regional offices to

get feedback on what it will take to upgrade them to the Enhanced level, so we

know that work is underway to develop these plans.

FEMA has undertaken an aggressive technical assistance effort to ensure that

States develop plans that meet the Standard Plan requirements at a minimum, and

to go beyond those to meet the Enhanced Plan requirements as well. Technical assistance is also being provided to support local and tribal governments efforts to

meet the new plan requirements.

Shortly after publication of the Interim Final Rule, FEMA conducted mitigation

planning workshops in all 10 FEMA Regional Offices for Regional and State mitigation staff, to provide a detailed orientation on the planning provisions of the DMA

and requirements of the Interim Final Rule. In addition to training on the requirements of local plans and Standard and Enhanced State Mitigation plans, the workshops included an opportunity for each State, in close coordination with the FEMA

regional office staff, to begin developing its approach to meeting the requirements

for the Enhanced Plan.

Each workshop also explained and provided copies of planning technical assistance tools developed by FEMA to assist State and local governments in undertaking

a meaningful mitigation planning process that will meet the requirements of the

DMA. These materials include Mitigation Plan Guidance and Evaluation Criteria,

a ‘‘canned’’ workshop for local mitigation planning that each State may use ‘‘as is,’’

or adapt as it chooses, a series of ‘‘How-To’’ Guides for Mitigation Planning, and numerous other publications, courses, etc.
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In fiscal year 2002, FEMA awarded PDM grants to every State as well as the District of Columbia, the U.S. Virgin Islands, the Commonwealth of Puerto Rico, American Samoa and the Commonwealth of the Northern Mariana Islands. FEMA placed

an emphasis on mitigation planning in fiscal year 2002 in order to position States

and local governments to meet the new criteria for State and local hazard mitigation

plans. Most States have chosen to use fiscal year 2002 PDM funds to support planning and risk assessment for local governments. In addition, we awarded 18 PDM

grants directly to Indian tribal governments for hazard identification and risk assessment, comprehensive multi-hazard mitigation planning, and public education

and outreach.

The mitigation planning process begun at the Regional workshops held in March

and April, 2002 envisioned continual two-way communication between States and

their respective FEMA Regional Offices to facilitate the development of effective

mitigation plans that will meet the new requirements. We know from our Regional

Offices that this process is, in fact, occurring. Further, FEMA Regional and Headquarters staff are also taking every possible opportunity to speak at national, regional and State-level conferences and meetings held by professional associations,

States, etc., to discuss the mitigation planning process and the new requirements,

and disseminate our technical assistance materials. FEMA is providing materials in

both traditional hard copy, as well as on CD–ROM, and posting them on our

website.

FEMA is confident that all States will have an approved Standard Plan in place

by the November 1, 2004 deadline, and that several States will have approved Enhanced Plans by then, if not sooner.

GOALS FOR ASSISTING DISASTER VICTIMS

Question. Per the Budget, the Administration has set a goal of meeting the needs

of disaster victims for shelter, food and water within 12 hours after the President

declares a major disaster. What has FEMA done to meet this goal?

Answer. Mission assignments are one tool that FEMA uses to meet requests for

Federal assistance. When a State lacks the capability to perform or to contract for

eligible emergency work, FEMA may issue direct Federal assistance (DFA) mission

assignments to provide essential assistance for eliminating an immediate threat to

life and property resulting from a major disaster or emergency. FEMA has been

working with the U.S. Army Corps of Engineers to develop pre-scripted statements

of work (SOWs) under FEMA issued mission assignments. These pre-scripted SOWs

are intended to expedite the mission assignment process and provide the needed assistance quickly and effectively. When mission assignments are required, it is anticipated they will be issued from the Regional Operations Center and/or the Disaster

Field Office.

FEMA has also improved its ability to preposition essential supplies and equipment in affected States and has accelerated the establishment of FEMA’s field infrastructure, including disaster field offices and disaster recovery centers.

FEMA DISASTER RELIEF FUND

Question. Outside of the available FEMA Disaster Relief funds for New York City,

how much Disaster Relief funding is available for the rest of the Nation for fiscal

year 2002? Are these funds consistent with the 5-year rolling average that FEMA

uses to assess its needs for disaster assistance?

Answer. Outside of the set-aside for the Inspector General and the funding provided as a result of the September 11 terrorist attacks, there was approximately

$2.7 billion available for other disasters in 2002. Fortunately, 2002 was a less than

normal year in disaster activity with no disasters that exceeded $500 million in projected costs.

BUYOUTS

Question. As you know, former FEMA Director Witt was a big supporter of

buyouts of properties in the floodplain. Unfortunately, despite massive dollars provided by Congress for buyouts, FEMA still does not have a coordinated cohesive

buyout program with clear rules and procedures. What is your view about the role

of Federal buyouts in terms of a national mitigation plan?

Answer. FEMA’s Mitigation grant programs generally operate successfully as

flexible and effective tools for States and communities to accomplish mitigation priorities, including buyouts. In fact, these programs have become an integral part of

the overall recovery process. Many States across the nation have successfully used

buyouts to move homes and businesses out of harm’s way. As many as 24,000 properties have been purchased nationally as part of this program since 1993. In many
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of those cases, the land left behind has been flooded again. Without a buyout, those

homes and families would have suffered once more.

To the extent allowable, given differences in the authorizing statutes, FEMA guidance on buyouts for all funding sources is consolidated and consistent. Our guidance

provides adequate flexibility to States and local communities to plan and implement

the best project to meet their unique situations and needs.

FEMA continues to evaluate the implementation of buyouts in order to strengthen

our ongoing program. During fiscal year 2002, FEMA entered into a cooperative

agreement with the University of North Carolina to conduct a study on the Impact

of Property Acquisition Programs on Participating Communities. The purpose of this

research is to conduct a national study that focuses on the process of conducting

buyout programs as well as an evaluation of outcomes of these programs. The research focuses on examining the structure of buyout programs and their impact on

individual decision-making. The study will provide FEMA with useful information

to evaluate existing practices in the property acquisition program, and to identify

steps to strengthen coordination and collaboration with other Federal programs,

such as the National Flood Insurance Program (NFIP) and the Small Business Administration (SBA) in order to better assist households and communities affected by

disaster events.

In addition, FEMA’s believes that effective coordination and planning at the local,

Tribal, State and Federal Government levels, as well as the coordination of pre- and

post-disaster mitigation funding opportunities, is essential to achieving mitigation

goals and the prevention of disaster losses. FEMA’s new planning regulation, 44

CFR Part 201, Hazard Mitigation Planning, establishes new criteria for State and

local hazard mitigation planning, carrying out the authorities provided by Congress

in the Disaster Mitigation Act of 2000. With this emphasis on mitigation planning,

many communities will be better positioned to develop proposals for cost-effective

mitigation projects and activities, including buyouts, and to link pre-and post-disaster mitigation planning and initiatives with public and private interests to ensure

a comprehensive approach to disaster loss reduction. Such decision-making, based

on sound understanding of vulnerability to hazards and appropriate mitigation

measures, is the best indicator of a successful mitigation strategy that can be sustained over the long-term.

In fiscal year 2003, FEMA expects to publish a proposed regulation that will

amend the existing regulations for HMGP. The proposed rule revises the existing

regulations to implement amendments to the Stafford Act that provide for delegating the administration and management of the HMGP to States. FEMA is taking

this opportunity to amend the existing regulations to clarify implementing procedures for buyout projects and open space maintenance, to more fully reflect program

and grants management practices previously detailed in guidance, to strengthen the

use of cost-effectiveness in prioritizing and selecting projects at the State level, and

to make the rule more reader-friendly.

CERRO GRANDE FIRE ASSISTANCE

Question. On May 4, 2000, the National Park Service initiated a prescribed burn

that exceeded the containment capabilities and destroyed a significant amount of

New Mexico. In response, the Congress appropriated $455 million through the Cerro

Grande Fire Assistance Act to compensate residents for losses from the Cerro

Grande fire. What is the status of this program? I also would like to understand

what accountability requirements were put in place to ensure that any payments

were consistent with losses.

Answer. Earlier this year, FEMA notified Congress of a projected $80 million

funding shortfall. In July, $61 million of the projected $80 million shortfall was included in a $20 billion supplemental appropriations bill passed by Congress. This

$80 million was included in the $5.1 billion in non-emergency funding contained in

the supplemental appropriation and, as a result, was not funded. Without an additional appropriation, FEMA will run out of claims money early in fiscal year 2003

before all valid claims are paid. Consistent with the priority provisions of the Cerro

Grande Fire Assistance Act, FEMA has not paid any of the subrogation claims,

which are estimated to total around $104 million.

FEMA plans to prioritize payments within the remaining appropriation pending

receipt of additional funding. FEMA will use the following order of priority in paying claims: individual claimants, business claimants, claimants awarded compensation during the administrative appeal process, claimants awarded compensation in

an arbitration decision, claimants seeking individual mitigation measures and lastly, insurance subrogation claimants. If insufficient funds remain to pay claims,
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FEMA will notify claimants with valid claims that the claim will be paid pending

the appropriation of additional funding.

The deadline to receive all claims except those seeking mitigation assistance

passed on August 28, 2002. Now that the final date to submit most claims has

passed and the universe of claims is known, FEMA estimates that as of September

17, 2002, an additional $150 million plus $5 million in administrative costs will be

needed to complete the program.

Initial claim evaluation and approval is now nearly completed, and the program

is beginning to transition the remaining files to FEMA’s National Processing Service

Center in Denton, Texas. As FEMA brings the initial claim process to a conclusion,

however, claimants who are dissatisfied with the award continue to pursue the internal appeal process implemented by regulation that serves as the preliminary to

statutorily-mandated arbitration. FEMA anticipates that the appeals and arbitrations procedures will not be completed for most claims until well into 2003 and for

claims for mitigation assistance through 2004.

FEMA has implemented procedures to ensure that payments from the Cerro

Grande Fire fund are consistent with losses suffered in the fire. First, the Agency

prepared policy guidelines that deal with the most common types of losses and provide guidance on the appropriate methodology to document, analyze and pay each

claim. To ensure consistency and accountability, each claim is processed by a minimum of four people: (1) a thorough review is made by claims reviewers who make

an initial payment recommendation; (2) the recommendation is reviewed and approved by a supervisor; (3) an authorized official then independently reviews the

claim on the merit of the documentation provided and either approves or reduces

the recommended amount; and (4) a comptroller signs the payment schedule.

Computer systems and a mandatory review help us to identify and avoid duplicating benefits from insurance companies or other aid providers. FEMA’s Office of

the General Counsel provides periodic legal review of the policies and procedures

to ensure that our determinations are consistent with New Mexico law. An experienced private contracting firm with expertise in evaluating medical records and personal injury claims reviews the bodily injury claims and assists us in determining

whether an injury was caused or aggravated by the fire and in setting a fair amount

of compensation consistent with similar claims paid elsewhere in New Mexico.

NEW YORK CITY 9/11 LOSSES FROM TERRORISM

Question. What steps has FEMA put in place to ensure that fraud and abuse with

regard to FEMA disaster assistance funds are minimized?

Answer. Under the direction of FEMA’s Inspector General, George Opfer, the Office of Inspector General at FEMA became proactively involved within a week after

the September 11 attack. Both auditors and investigators were dispatched to New

York and have remained on site since that time actively auditing and investigating

allegations or complaints of fraud, waste and abuse involving the FEMA programs.

They provided fraud awareness and financial accountability briefings to FEMA,

State, and City disaster personnel. They created a permanent satellite office in New

York and staffed it with five full-time employees. In addition, they continue to rotate five to six temporary disaster assistance employees to the Disaster Field Office

on a regular basis. They are currently auditing the City’s major debris removal contracts and working criminal investigations with the Manhattan District Attorney’s

Office, the Southern and Eastern Districts of the United States Attorney’s Offices,

and the State of New York Attorney General’s Office. The OIG’s investigative cases

are being coordinated with the New York Police Department, Port Authority Police

Department, New York Department of Investigations, Small Business Administration OIG, Internal Revenue Service Criminal Investigation Division, General Services Administration OIG, Social Security Administration OIG, and others. Following

are their investigative statistics as of September 30, 2002:

Information/Indictment ......................................................................................... 61

Arrests .................................................................................................................... 60

Open Complaints ................................................................................................... 91

Closed Complaints ................................................................................................. 619

Open Investigations ............................................................................................... 104

Closed Investigations ............................................................................................. 24

FLOOD MAP MODERNIZATION

Question. FEMA’s Budget Request for fiscal year 2003 includes $300 million for

flood map modernization as well as $51 million derived from flood insurance premium fees. This must be a priority since flooding causes some $6 billion annually.

Unfortunately, 63 percent of the flood maps are more than 10 years old and some
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38 percent are more than 15 years old. How much are the overall costs to improve

or replace the old and inaccurate maps? Does FEMA have any estimate for savings

once all flood maps are modernized? How does the flood map modernization program

work with the Flood Insurance program?

Answer. Funding levels of $300 million in new monies (over and above $51 million

derived from flood insurance premium fees through the National Flood Insurance

Program) in fiscal year 2003 and the two out years are planned to fund the Map

Modernization Program. Program costs will be evaluated and refined as scoping

meetings are held with the individual communities to be mapped, and community

needs are factored into the mapping process.

The following chart illustrates that that modernized flood mapping for the Nation

will help avoid an estimated $45 billion in flood damages to new buildings and infrastructure over a 50-year period.

The modernized flood maps will serve as the actuarial and floodplain management

bases of the National Flood Insurance Program. Moreover, the digital form of the

flood mapping will facilitate policy rating by insurance agents, enhanced floodplain

management by communities, and more accurate determinations by banks of whether a structure must be protected by flood insurance.

FLOOD INSURANCE PROGRAM

Question. FEMA is recommending that the Flood Insurance program be reformed

to, among other things, (1) phase-out the pre-firm taxpayer subsidy on second

homes, vacation properties and rental properties; and (2) include the expected costs

of coastal erosion in the premiums for policies in coastal areas. I assume that these

changes need legislation. Are you working with the appropriate authorization committees?

Answer. Yes, legislative changes will be needed in order to bring about these proposals. FEMA has briefed key staff on the appropriate subcommittees of both the

Senate Committee on Banking, Housing and Urban Affairs and the House Committee on Financial Services, on the legislative changes needed for these proposals.

Question. The Flood Insurance program is not actuarially sound. What does this

program owe on its Treasury line of credit? What other steps can FEMA take to

make this program actuarially sound?

Answer. Although the NFIP is not actuarially sound in the traditional sense the

term is used of charging full actuarial rates for all coverage, NFIP enabling legislation authorizes the charging of actuarial rates only for structures that are newly

constructed after being provided with detailed flood risk information by FEMA. At

the same time, such legislation has required the charging of highly subsidized rates

for older, existing structures in Special Flood Hazard Areas. In the aggregate, NFIP
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premium levels are sufficient to pay losses associated with the average NFIP historical loss year.

In addition to the proposal contained in FEMA’s portion of the President’s fiscal

year 2003 budget, to phase out the pre-FIRM taxpayer subsidy on second homes,

vacation property and rental property, as mentioned above, FEMA engages in a

number of activities that assist in making the program more actuarially or financially sound. FEMA continues to review its annual and historic loss experience to

determine and make annual adjustments to NFIP rates, as needed, and within the

limitations contained within the NFIP’s enabling legislation. At this point in time,

more than 70 percent of NFIP policyholders are charged premiums that are considered to be full-risk premiums. Annual review and adjustment maintains the integrity of these rates. Slower progress is being made in reducing the levels of program

subsidy by gradual rate changes for older construction.

FEMA also continually promotes sound floodplain risk management among State

and local governments to minimize the risk of flooding to new structures, which lowers their flood risk exposure and related loss potential. FEMA estimates that these

efforts result in reduced damages by about $1 billion each year.

Finally, FEMA further promotes sound floodplain risk management by aggressively administering the Flood Mitigation Assistance and Hazard Mitigation Grant

Programs, encouraging State and local governments to take definitive flood loss reduction actions to properties at risk. Marketing the NFIP Community Rating System and providing technical assistance to local communities also promotes loss reduction which contributes to a more actuarially sound program.

Question. FEMA has a poor record of getting homeowners to participate in the

Flood Insurance program. What is the current rate of participation? How does this

compare over the last 4 years and what is FEMA doing to ensure increased participation?

Answer. As of July 31, 2002, the NFIP has 4,370,066 policyholders with over $617

billion of insurance coverage in force. Participation in the NFIP varies around the

country. In areas without recent flood threats or with low mortgage activity, it can

be particularly low. On the other hand, market penetration in much of the Southeast and States bordering the Atlantic and the Gulf of Mexico is relatively high.

As an example of the result of that market penetration, in 2001 the NFIP paid

over $1.1 billion in claims to more than 30,000 flood insurance policyholders in

Texas and Louisiana after Tropical Storm Allison—the NFIP’s biggest payout to

date. Tropical Storm Isidore struck in September 2002 and is projected to result in

9,200 claims from policyholders in Louisiana, Mississippi, Alabama, Florida and

Texas. Hurricane Lili affected many of the same Louisiana and Mississippi policyholders in October 2002, with 3,000 claims projected.

Total flood insurance policies in force over the last four calendar years are as follows:

Calendar Year Policies in Force

2001 .................................................................................................................. 4,476,836

2000 .................................................................................................................. 4,369,087

1999 .................................................................................................................. 4,329,985

1998 .................................................................................................................. 4,235,138

In fiscal year 2001, through the work of our stakeholders, new business increased

nearly 15 percent with the addition of 630,944 new policies to the National Flood

Insurance Program’s (NFIP’s) books. These gains in flood insurance policies, however, were offset by attrition (552,783 policies) from the previous year’s total number

of policies in force. While a certain degree of policyholder non-renewal has to be expected, we recognize that to improve overall NFIP participation we must not only

continue to attract new business, but also boost the retention of current policyholders. Therefore, we have initiated a number of strategies and tactics to improve

policy retention, both from a mandatory and a voluntary purchase perspective.

FEMA will be working to reinvigorate its marketing and advertising campaign.

FEMA will be developing a fresh campaign with a paramount objective of increasing

the number of NFIP policies. This new national marketing and advertising campaign will be grounded in effective risk communication principles and practice. In

this way the campaign will address one of the major obstacles to flood insurance

purchase, the lack of perception of risk. It is expected that the campaign will effectively convince consumers of their vulnerability to flood damage and the value of

buying and retaining flood insurance protection. Retention has been identified as a

key issue.

FEMA does not have oversight authority for lending institutions. Nevertheless, we

foster lender compliance with mandatory purchase provisions by conducting lender

training seminars across the country, developing guidance materials for lenders
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both in hard copy and electronically via our website, and by maintaining regular

communication with Federal lending regulators, Government Sponsored Enterprises

(GSE’s), and the lending community.

Recent analyses indicate that lenders may be correctly requiring the purchase of

flood insurance as a condition of mortgage loan origination. We believe, based on

policy attrition rates for the past several years and other data, that enough borrowers may not be maintaining flood insurance throughout the term of the loan, as

required by law, to have a significant impact on our policy retention. GAO issued

a June 2002 report on this issue, ‘‘Flood Insurance: Extent of Noncompliance with

Purchase Requirements Is Unknown’’.

We plan to work with Federal lending regulators and GSE’s to identify actions

we can take to ensure borrowers are required to renew flood insurance policies annually. Although we do not have oversight authority, we can help identify whether

there are any means by which we can prevent renewals of mandatory purchased

policies from ‘‘falling through the cracks.’’

Also, we plan to assess State escrow laws and systems to determine whether any

obstacles to flood insurance escrow may exist and, where necessary, work with the

States on amendments. It bears further research and consideration because monthly-automated payments have been shown to improve the persistency of flood and

other lines of insurance.

To better guide our strategies we need current information regarding customers’

views of our products. FIMA is in the process of contracting for research to determine why policyholders do or do not renew their policies. Another research project

will assess the relationship of customers’ perception of risk to the pricing and structure of the flood insurance product.

To encourage retention of policies voluntarily purchased, we are seeking opportunities to drive the message that flood insurance should be maintained. When maps

are updated and a flood risk zone is determined to be of lower risk than before, the

message will be for policyholders to switch to a lower premium policy, not to drop

coverage. Additionally, as the memory of certain significant flood events fades, we

are working to convey to policyholders the importance of renewing their coverage,

and that damaging floods can occur again. These efforts involve working through

the media and asking lenders, insurance companies and agents to amplify the messages through their own direct mailings, advertising and public relations.

A pilot project is underway to enable certain State risk pools to sell flood insurance to publicly-owned buildings. These risk pools will operate under the same rules

as insurance companies that participate in the Write Your Own Program.

Additionally, FEMA published an interim final rule on September 30, 2002 to adjust the Group Flood Insurance Policy (GFIP) to be consistent with changes in the

disaster assistance program. At that time we asked for comments about allowing the

States to renew GFIP policies after the 36 month expiration, provided the States

pay the premium on behalf of certificate holders. This rule has a 6-month comment

period.

Last, we are implementing a number of technology improvements over the next

several years that will make flood insurance easier for insurance companies and

agents to sell and for consumers to buy.

EMERGENCY FOOD AND SHELTER PROGRAM

Question. The Administration is recommending that FEMA transfer the Emergency Food and shelter program from FEMA to HUD. This program has a long history of success at FEMA. What are the advantages to moving this program to HUD?

Answer. The success of the Emergency Food and Shelter (EFS) Program is primarily due to the structure in which Congress established the program. As such,

the program is administered by FEMA and governed by a board whose membership

includes representatives from six national non-profit organizations. The National

Board, as it is referred to, governs the day-to-day operations of the program, develops program policies and requirements, ensures the timely distribution of funds,

monitors program compliance by the funded agencies, and compiles reports detailing

accounting of the use of all program funds. FEMA’s role is to chair the National

Board and provide oversight and guidance to ensure adherence to Federal laws.

Therefore, continued success is predicated on preserving the current structure of the

EFS Program, which is allowing the National Board to continue to govern the program and allowing a Federal agency to administer it. Should the program be transferred to HUD and operated in the same manner, it will continue to be successful.

The advantages of transferring the program to HUD are:

—It will be easier to assess how the EFS Program is being coordinated with other

major Federal homelessness prevention and assistance programs and to deter-
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mine if structural changes to the program are necessary to ensure an integrated

approach to assisting persons facing housing emergencies.

—It will enable the EFS Program to link housing and services for the chronically

homeless to other comprehensive services. Linking emergency homeless services

for the homeless would mean that a full range of needs of the homeless could

be addressed in a coordinated and comprehensive manner.

—It would decrease duplication of services and allow for scarce resources to be

utilized more efficiently and effectively. Currently, several Federal homeless assistance programs are providing funding to the same agencies for the same

services and same individuals.

FISCAL YEAR 2001 INDEPENDENT AUDITOR’S REPORT

Question. After 3 years of clean opinions, FEMA’s 2001 financial statement was

issued a qualified opinion. What are the key concerns raised in the qualified opinion

and what steps is FEMA taking to address these concerns?

Answer. A qualified opinion was received in the fiscal year 2001 Independent

Auditor’s Report for the following reasons: (1) the auditors could not sufficiently satisfy themselves as to the accuracy of the net amount ($10,753,000) of FEMA’s equipment and related depreciation and (2) FEMA recorded an unsupported reduction

($77,000,000) to unliquidated obligations. FEMA management has addressed these

areas and both financial management and the IG expect an unqualified opinion for

fiscal year 2002. To resolve the equipment issues, a complete inventory of equipment is being conducted and values established for fiscal year 2002 statements. This

effort and new procedures for the current year should eliminate this qualification

in fiscal year 2002. To resolve the reduction to unliquidated obligations issue, a complete reconciliation of all unliquidated obligations has been completed which will

eliminate this qualification.

PREVENTION VS. HOMELAND SECURITY

Question. There remain significant concerns among Members as to how best to allocate Homeland Security responsibilities among Federal agencies. The President

supports FEMA as the lead domestic agency over DOJ because of its experience and

expertise in responding to natural disasters, such as earthquakes, hurricanes and

tornados. In addition, FEMA has been developing additional expertise to plan and

respond to acts of terrorism through its Office of National Preparedness. Others suggest that DOJ is the appropriate agency because of its experience in developing strategic planning through the Office of Domestic Preparedness. What are the strengths

and weaknesses of each of these agencies in taking on the responsibilities for being

the lead domestic agency in preventing and responding to acts of terrorism?

Answer. In preparing and responding to a man-made national disaster or emergency, FEMA’s core mission is to save lives, limit casualties, and minimize damage

to property. Police officers, firefighters, and emergency medical teams are America’s

front-line responders in the event of both man-made and natural disasters, including a terrorist attack. With the right training and equipment, these first responders

have the greatest potential to accomplish the mission of saving lives, limiting casualties, and minimizing damage to property. In the same terrorist scenario, Justice’s

core mission is to gather intelligence to prevent or mitigate the event, and to conduct the criminal investigation to identify and prosecute the perpetrator(s).

FEMA has an established history of working with the State and local governments and the first responder community to prepare for, mitigate against, and respond to all-hazards. Our mission is to provide leadership and support to reduce the

loss of life and property and to protect our nation’s institutions from all types of

hazards through a comprehensive, risk-based, all-hazards approach. As evidenced in

the Federal Response Plan, FEMA coordinates all facets of emergency management

without directly ‘‘owning’’ many of the specific programs and activities. The First

Responder Initiative will require an agency well skilled in coordination, and FEMA

is the lead agency in both Federal and State and local government coordination.

This permits FEMA to coordinate programs in the most effective manner possible.

One of the primary reasons for locating the new consolidated program within

FEMA is the agency’s strong record for quickly distributing emergency planning and

assistance grants. FEMA has extensive experience providing direct assistance to

local governments through its disaster assistance programs and its Fire Grant program. Because First Responder grants will be allocated to States according to a formula, FEMA will be able to disburse these funds quickly and without difficulty. We

are already working with our State and local partners to establish a sound, working

grants management process specifically for this program so that a system is in place

and ready should the First Responder Initiative receive Congressional approval.
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Since FEMA is the lead agency for consequence management and for preparing

State and local governments for all hazards, including weapons of mass destruction

terrorism, FEMA is the most logical agency to coordinate all these functions.

Question. There seem to be a clear demarcation in how we view the responsibilities of domestic Federal agencies with regard to acts of terrorism. First, there is

prevention and then there is response and consequence management. It seems clear

that DOJ is best equipped to handle prevention and FEMA is best equipped to handle response and consequence management. The key appears to be, in part, how we

define prevention and how we define consequence management. How do we define

these issues? Are there overlapping issues? What are those issues and how do we

reconcile overlapping issues in order to allow DOJ and FEMA to work together?

Answer. FEMA is not seeking the transfer of a law enforcement function. In preparing and responding to a man-made national disaster or emergency, FEMA’s core

mission is to save lives, limit casualties, and minimize damage to property. Police

officers, firefighters, and emergency medical teams are America’s front-line responders in the event of a terrorist attack. With the right training and equipment, these

first responders have the greatest potential to accomplish the mission of saving

lives, limiting casualties, and minimizing damage to property. In the same terrorist

scenario, Justice’s core mission is to gather intelligence to prevent or mitigate the

event, and to conduct the criminal investigation to identify and prosecute the perpetrator(s). FEMA has not, nor does it intend to train and exercise law enforcement

officials with respect to these core investigative duties.

In the President’s Executive Order establishing the Office of Homeland Security,

elements of preparedness and prevention were defined. Preparing for and mitigating

the consequences of terrorist threats or attacks involves working with Federal,

State, and local agencies and private entities to review and assess emergency response plans, coordinating domestic exercises and training programs, ensuring the

readiness of response teams, and ensuring national preparedness programs and activities are evaluated under appropriate standards.

Prevention involves working with Federal, State, and local agencies and private

entities to facilitate the exchange of information related to preventing the entry of

terrorists and terrorist materials, coordinating investigations of threats and attacks,

and coordinating the security of borders, water, and airspace.

To reconcile these issues, the President has recommended in both the fiscal year

2003 Budget and the Department of Homeland Security proposal that the Office for

Domestic Preparedness be transferred to FEMA. With this proposal, the President

has shown true leadership in his willingness to address a long-standing problem—

the need for central coordination among the myriad of Federal programs dealing

with terrorism preparedness.

FEMA looks forward to enhancing the training provided by ODP and serving as

a ‘‘single point of contact’’ for State and local governments as numerous Commissions and recent GAO reports have recommended. In fact, by eliminating the duplication, confusion and inefficiencies of the current system as the fiscal year 2003

budget proposes, we will be helping to ensure that our nation’s first responders are

better trained, better equipped and better prepared. This consolidation and simplifying of the Federal Grant process by consolidating all First Responder grants at

FEMA will allow our terrorism preparedness programs to mirror our terrorism response programs and satisfy repeated State and local government requests.

FIRE ACT GRANTS

Question. FEMA currently is administering the FIRE Act Grants program at $360

million in fiscal year 2002. This is a popular program that targets funds to firefighters, who are the first line of response to both disasters and terrorism. The program is authorized at $900 million for both Fiscal Years 2002 and 2003. Nevertheless, the Administration’s budget assumes that this program will be absorbed into

a proposed larger block grant program that is administered by States. There are

real concerns that these funds will be slowed by a new bureaucracy and watered

down at a time of great need. I believe that we need to preserve this program. However, if we do, how will this impact the proposed Homeland Security block grant and

is there a way to reconcile this program with the block grant proposal?

Answer. We believe as you do that the FIRE Act program does need to be preserved separately from the grants provided to States for the first responder initiative. Subsequent to the President’s submittal to the Congress of the 2003 budget,

the Administration is on record as supporting separate programmatic funding between the first responder grant program and the Assistance to Firefighter grants.

There are numerous reasons to maintain this separation: (1) the governing statute

for the fire grants emphasizes fire prevention as well as response capacity (2) the
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first responder program funding priorities will be based on a different threat profile

(i.e., terrorism) than the fire grants; and (3) the fire grants are required by statute

to be made directly to local fire departments, not to the States as the first responder

grants will be made.

Nevertheless, there clearly are ties between the two programs, and therefore we

also believe these two programs demand a close coordination with each other.

LEGISLATION

Question. Many of the Administration’s proposals for Homeland Security depend

on appropriations without any authorization structure. I believe that we need authorizing legislation in order to ensure a set of standards and benchmarks with regard to Homeland Security as well as ways to ensure accountability on how Homeland Security funds are spent. Please provide your comments.

Answer. We believe FEMA’s current authorities, transferred to the Department

of Homeland Security as well as sections 502 and 506 of H.R. 5005, or section 102

of S. 2452 should provide adequate authority and accountability.

Question. On March 21, 2002, I introduced the S. 2061, the National Response to

Terrorism and Consequence Management Act of 2002, which is designed to provide

a statutory structure for the full funding of the Urban Search and Rescue Response

System as well as a new FEMA program to provide technical and planning grants

for States to develop State and local capacity to respond to acts of terrorism, including those involving weapons of mass destruction. If you have had an opportunity

to review the legislation, I would like your views on the bill. If not, I would like

your views on the need to fund fully the urban search and rescue response system.

Answer. We have reviewed the legislation and believe that it contains important

authorizing language for the National Urban Search and Rescue System. We have

taken steps to develop a rulemaking for the system, which is currently under review. Your legislation provides FEMA with an important framework for the system

and will allow for better financial support to the program in future years. Under

the legislation the number of teams will continue to be 28, with the option for expansion resting on the judgment of the agency based on need and the expectation

that all 28 teams will be fully capable and mission ready. We support this concept

as we work to develop greater capability within the existing system. We feel that

it is critical to provide the utmost support to the existing teams before adding additional teams.

We believe it important to fully fund the National Urban Search and Rescue System to include the 28 teams and their equipment, training, exercises and support

for deployment. It is also critical that we have the staff resources within the program office to provide an outstanding level of support to the teams before, during,

and after deployment. Toward that end we have requested the $32 million in the

emergency supplemental for fiscal year 2002 to bring the teams up to status to respond to WMD situations. Thanks to your support that effort to equip and train all

of the teams is underway. We also have requested $16 million for fiscal year 2003

to develop the training and exercise program further and to allow us to implement

improved team accountability and peer review programs. We are looking at the addition of at least seven critical positions to the National Urban Search and Rescue

Division of USFA to carry out these tasks. It is essential that we develop the system

with care to provide increased capability, while meeting the needs of the teams and

providing them with the training and equipment they need.

DISASTER ASSISTANCE CRITERIA

Question. Congress has repeatedly sought to have FEMA establish clear criteria

for evaluating a Governor’s request for a presidential disaster declaration. However,

FEMA has continued to employ county-wide and State-wide per capita cost thresholds as its primary means of determining whether damages exceed a State’s capabilities. The FEMA Office of Inspector General and the General Accounting Office

have suggested alternative methods to determine a State’s financial ability to respond to a disaster, including assessments of its total taxable resources. Recently,

the President, in his fiscal year 2002 budget plan, called on FEMA to develop ‘‘improved guidelines for disaster assistance that provide States with meaningful criteria that must be met in order to become eligible for Federal disaster assistance.’’

What is the status of these efforts and review?

Answer. During fiscal year 2001, a FEMA-State Working Group consisting of staff

from FEMA headquarters, regions, and selected States, including leadership from

the National Emergency Management Association, conducted a broad review of the

disaster declaration factors and considered various options for revising them. A considerable amount of discussion focused on the specificity of the factors—if the factors
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are very definitive and precise, they are perceived as too stringent and inflexible

(and possibly too complicated), not allowing the agency the discretion to address the

varying nature of disasters and the range of impacts on States. The opposing viewpoint is that factors that are more flexible and open to interpretation are seen as

too vague and subjective, not defining a true baseline for assistance. Though a number of possible revisions to the factors were discussed (including using total taxable

resources as a criterion), the Working Group generally supported the current factors, stressing their simplicity and the agency’s inherent discretion in using the factors to evaluate Governors’ requests for disaster assistance. One common concern

within the Working Group was that any effort to revise the factors that would devolve more responsibility to the States for responding to and administering disasters, would equate to passing on additional costs at a time when State budget surpluses were turning into budget deficits.

As a result of the Working Group’s efforts and subsequent discussions, FEMA is

continuing to use the current disaster declaration factors, as they provide general

guidelines for the States to use in determining whether they are eligible for disaster

assistance. For example, the factors that provide a baseline for assistance from the

Public Assistance Program (which represents the majority of FEMA disaster assistance expenditures) are generally well understood. For example, the factor that focuses on the per capita impact of disaster damages on a State, clearly establishes

that a figure of $1.09 per capita is used as an indicator that the disaster is of such

size that it could warrant Federal assistance. Other more general factors (such as

whether other Federal program assistance is available and the amount of insurance

coverage in force) are also considered, allowing the agency to look at the collective

impact of all of the factors when making a recommendation to the President. This

approach considers the total impact and specific circumstances of a unique disaster

within a particular State. Thus, the current declaration process provides an appropriate level of executive discretion, as well as flexibility for the President and the

Governors.

QUESTIONS SUBMITTED BY SENATOR PETE V. DOMENICI

Question. Director Allbaugh, those of us in the west are facing a 100-year drought

by some accounts, and the forest fire season looks to be the worst in decades. New

Mexico has had its first fires of the season, and I was interested to see that FEMA

has a role in responding to wildland fires under its fire management assistance

grant program. Could you explain to the Subcommittee what authorities FEMA has

in responding to wildland fire emergencies? What new activities can FEMA undertake in these situations that it couldn’t under earlier authorities? What actions did

FEMA take in assisting New Mexico communities in the recent fires? What is the

fiscal year 2003 request for these grants, and what is FEMA’s estimate of the potential need for this type of assistance next year? Did FEMA anticipate a significant

fire season when it developed its fiscal year 2003 budget request?

Answer. Could you explain to the Subcommittee what authorities FEMA has in

responding to wildland fire emergencies?

The Fire Management Assistance Grant Program (FMAGP) is the primary vehicle

FEMA uses to provide assistance to State and local governments for wildland firefighting activities. Section 420 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act), 42 U.S.C. 5187, as amended by the Disaster

Mitigation Act of 2000, established FMAGP. Under approved fire management assistance declarations, FEMA provides assistance, primarily in the form of grants, to

any State or local government for the mitigation, management, and control of any

fire on public or private forest or grassland that threatens such destruction as to

constitute a major disaster.

Under fire management assistance grants, total eligible costs are reimbursed at

a 75 percent Federal and 25 percent non-Federal cost share. Eligible wildland firefighting activities covered under FMAGP may include costs for field camps; equipment use, repair, or replacement; tools, materials, and supplies; mobilization and

demobilization; limited pre-positioning; emergency work; and temporary repair of

damage caused by firefighting activities.

In addition to submitting requests to FEMA for fire management assistance declarations, States may submit requests to the President for emergency or major disaster declarations for wildland fire emergencies. If a declaration were warranted,

the President would authorize FEMA to provide the Federal disaster assistance designated in the declarations. It should be noted however, that funds for recovery and

hazard mitigation can be designated only under a Presidential major disaster declaration.
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Question. What new activities can FEMA undertake in these situations that it

couldn’t under earlier authorities?

Answer. Section 420 of the Stafford Act, Fire Management Assistance, expands

the scope and level of assistance previously available under Section 420 of the Stafford Act, Fire Suppression Assistance. Instead of limiting Federal assistance to the

‘‘suppression’’ of forest or grassland fires that threaten such destruction as would

constitute a major disaster, Section 420, Fire Management Assistance, expands the

range of eligible activities to include the ‘‘mitigation, management, and control’’ of

such fires. In the final rule for FMAGP, ‘‘mitigation, management, and control’’ is

interpreted as a flexible and broad-based provision intended to reduce the spread

of a fire, reduce associated health and safety threats, prevent potential damages by

the fire, repair damage caused by the firefighting activities, and provide for the limited pre-positioning of certain types of wildland firefighting resources.

Another activity FEMA is authorized to undertake under FMAGP are those activities allowable under Section 403 (42 U.S.C. 5170b), Essential Assistance, of the

Stafford Act necessary to mitigate, manage, and control the fire. Section 403 authorizes assistance for activities required to meet threats to life and property. Section

403 activities that may be eligible for funding under FMAGP include police barricading and traffic control, evacuations and sheltering, search and rescue, arson patrol, and the dissemination of public safety information.

Under FMAGP, FEMA is also authorized to provide funding to State and local

governments. Previously, we could only provide assistance to the State as the sole

applicant eligible for assistance.

Question. What actions did FEMA take in assisting New Mexico communities in

the recent fires?

Answer. Between March and August 2002, the State of New Mexico submitted

and FEMA approved nine requests for fire management assistance declarations. The

State has a maximum timeframe of up to one year from the date of the fire management assistance declarations to submit its grant applications to FEMA for review

and processing. We have already obligated approximately $5 million to the State for

one fire management assistance declaration and our Regional staff is continuing to

work with the State and local governments to document actual eligible costs so that

the State can submit its eight other fire management assistance grant applications

within the timeframes allowed.

Question. What is the fiscal year 2003 request for these grants, and what is

FEMA’s estimate of the potential need for this type of assistance next year?

Answer. FMAGP provides reimbursement to State and local governments in the

form of grant assistance for actual costs incurred in the performance of eligible

wildland firefighting activities for a declared fire. We have not received any requests

for fire management assistance declarations since October 1, 2002, the beginning of

fiscal year 2003. It should be noted, however; that as part of the Regulatory Planning and Review requirement published as part of the final rule for FMAGP, we

estimated that in extraordinary years, with severe fire conditions and a high level

of fire activity, fire management assistance grants may total more than $50 million.

Question. Did FEMA anticipate a significant fire season when it developed its fiscal year 2003 budget request?

Answer. FEMA did not anticipate a significant fire season when it developed the

fiscal year 2003 budget request due to uncertainties in trying to forecast the number

and severity of wildland fires that would be eligible for assistance under FMAGP.

Question. Director Allbaugh, I want to thank you for your personal attention to

the recovery of Los Alamos and surrounding areas from the devastating Cerro

Grande Fire that occurred in New Mexico just about two years ago. This fire consumed almost 48,000 acres of forest, destroyed nearly 400 homes and caused damage or injury to 1,000 families, countless businesses, the county of Los Alamos, the

State of New Mexico, four Indian pueblos, and Los Alamos National Laboratory. I

would remind my colleagues that this fire was started by the Federal Government

when a controlled burn at Bandelier National Monument burned out of control. For

that reason, the Congress enacted the Cerro Grande Fire Claims Assistance Act of

2000, and appropriated $455 million to FEMA to establish a claims program to compensate victims of the fire. New Mexicans had until August 28 of this year to file

claims under the Act, and according to recent assessments of the Cerro Grande fire

claims program, additional appropriations will be needed to pay anticipated claims.

Would you please give the Subcommittee the latest figures on: the number and

amount of claims filed; the number and amount of claims approved; the number and

amount of claims paid; the number and amount of claims pending; and the number

of claims anticipated to be filed by August 28.

Answer. Claims filed: 21,512

Claims paid: 14,614 ($430 million)
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Claims closed: 19,060 (included in $430 million)

Number of claims pending: 2,452 ($150 million)

Question. Under the recent assessment of the program, FEMA indicated that additional appropriations will be needed. What is FEMA’s estimate of the additional

appropriations needed to pay anticipated claims?

Answer. We estimate that we will need an additional $150 million to pay all

claims. The amount is based on estimates of our current liabilities. Please see Table

below:

OCGFC CLAIMS LIABILITY AS OF 10/03/02

Category Sub-Totals Totals

Total Appropriation ................................................................................................... .............................. $455,000,000

Reimbursement from Stafford .................................................................................. $2,305,601 2,305,601

Total Paid to Date .................................................................................................... .............................. (424,554,223)

Estimated Remaining Liabilities:

Individual Claims Liability ............................................................................... 23,311,587 ................................

Business Claims Liability ................................................................................ 18,004,441 ................................

Government Claims Liability ............................................................................ 16,313,928 ................................

Pueblo Liability ................................................................................................ 4,984,127 ................................

Appeals Liability ............................................................................................... 100,615 ................................

Sub-total Liabilities ..................................................................................... .............................. 62,714,698

Liabilities Remaining without Subrogation and Unknowns ..................................... .............................. ¥29,963,320

Subrogation ............................................................................................................... 103,775,814 ................................

Projections for Inestimable Liabilities:

Potential appeals ............................................................................................. 2,552,766 ................................

Potential arbitrations/Federal Court ................................................................ 10,000,000 ................................

Mitigation ......................................................................................................... 2,910,000 ................................

Sub-total Inestimable ...................................................................................... .............................. 119,238,580

Additional Funds Required ........................................................................................ .............................. ¥149,201,900

The formula to determine the OCGFC liability will be as follows: Appropriation; Plus Reimbursement from Stafford; Less Total Paid to Date;

Reserves on Individual, Business, Government and Pueblo Claims (Open Claims); Open Appeals; Subrogation liability.

Projections for Inestimable Liabilities: Mitigation; Future Appeals; Future Arbitrations/Federal Court.

Equals—Additional Funds Required.

Question. When does FEMA expect to need these funds, and for what purpose?

Answer. The funding will be needed by the end of the first quarter to continue

processing payments. We continue to hold payments to insurance companies, as

specified in the Act, until additional funding is available. However, we are fast approaching a time when additional dollars will be needed in order to continue payments to individuals and businesses affected by the fire.

Question. With these funds, will FEMA be able to keep on schedule processing

and paying claims?

Answer. Depending on the amount of funding approved, whether it is the full

amount or a partial amount, we could continue the processing of payments and

delay payment of subrogation claims until funding becomes available.

Question. What would be the effect of not receiving these funds in the fiscal year

2002 supplemental appropriations bill now before Congress?

Answer. The effect of not receiving the funds would be that starting in late November 2002 any additional payments would be prioritized. We would continue to

pay claims already in process. Those that cannot be paid would receive a letter detailing the agreed award to be paid contingent upon funding.

Initially, FEMA would cease making payments to all claimants other than individual and business claims received before a financially determined cut off date. Individuals and businesses who filed after the calculated cut off date would be paid

initial awards on a first completed basis from remaining funds until funding was

depleted. Remaining amounts awarded through appeals, mitigation claims, or arbitrations would not be awarded until funding was made available.

Director Allbaugh, I would first like to say that I support President Bush and his

Administration 100 percent in their efforts regarding the war on terrorism. There

is nothing more important and no higher priority for this country at this time in

history. That having been said I would like to ask you some questions regarding

the shift in funding regarding the training of our first responders, an activity that,
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up until this particular Presidential budget request, has been administered by the

Department of Justice (DOJ).

Question. Has the entire activity of first responder training been transferred to

the Federal Emergency Management Agency (FEMA) or does DOJ still retain some

aspects of this critically important function?

Answer. The fiscal year 2003 Budget and the President’s Department of Homeland Security proposal would transfer all functions and activities of the Office for

Domestic Preparedness (ODP) of the Department of Justice to FEMA. FEMA will

continue the preparedness activities at facilities currently funded by ODP, and will

build upon and enhance those activities at a greater level. These are not law enforcement functions. They include only those activities that have long been a part

of the FEMA preparedness mission.

FEMA is not seeking the transfer of a law enforcement function. In preparing and

responding to a man-made national disaster or emergency, FEMA’s core mission is

to save lives, limit casualties, and minimize damage to property. Police officers, firefighters, and emergency medical teams are America’s front-line responders in the

event of both natural and man-made disasters, including terrorist attacks. With the

right training and equipment, these first responders have the greatest potential to

accomplish the mission of saving lives, limiting casualties, and minimizing damage

to property. In the same terrorist scenario, Justice’s core mission is to gather intelligence to prevent or mitigate the event, and to conduct the criminal investigation

to identify and prosecute the perpetrator(s). FEMA has not, nor does it intend to

train and exercise law enforcement officials with respect to these core investigative

duties.

Question. Director Allbaugh, I think we all agree that a shift in first responder

training responsibilities would require legislative authorization by the Congress.

You recently mentioned that you were working with the Environment and Public

Works Committee on such legislation. As a new member of that Committee, could

you tell me the nature of these discussions, and bring me and my staff up to date

on those discussions?

Answer. Senator Jeffords introduced S. 2664, the First Responder Terrorism Preparedness Act of 2002, in June 2002. This bill would amend the Robert T. Stafford

Disaster and Emergency Assistance Act to establish a program to provide assistance

to enhance the ability of first responders to respond to incidents of terrorism, including incidents involving weapons of mass destruction. To accomplish this purpose,

the bill would establish the Office of National Preparedness within FEMA to coordinate and build viable terrorism preparedness and response capability at all levels

of government.

The Committee on Environment and Public Works met to consider S. 2664 on

June 27, 2002. By voice vote, the committee agreed to three amendments offered

by Senator Clinton. The first amendment, as modified, established a program to protect the health and safety of first responders. The second amendment required

States to use criteria established by FEMA to disburse funds to local governments

and local entities within 45 days and to coordinate with them concerning the use

of this assistance. The third amendment provided that FEMA will coordinate with

the Department of Justice in relation to the Community Oriented Policing Services

program. The committee then agreed to favorably report S. 2664, as amended, by

voice vote. Report Number 107–295 was reported by Senator Jeffords on October 1,

and the bill, as amended, was placed on the Senate Legislative Calendar; Calendar

number 625.

Under the leadership of Senator Judd Gregg as the then-Chairman of the Senate

Commerce, Justice, State, and the Judiciary Appropriations Subcommittee, the Congress established the first responder training program in the Department of Justice,

and it has been extremely successful in training 80,000 police, fire, and emergency

personnel. Last May, when the President proposed the transfer of first responder

training to FEMA, it was a program of about $30 million. For fiscal year 2002, the

National Domestic Preparedness Consortium received $32.7 million with an additional $63 million added after the September 11 attacks. The President proposes to

transfer $234.5 million for all Department of Justice counter-terrorism funding associated with domestic preparedness to FEMA, and the new program is now proposed

at $3.5 billion!

Question. The proposed $3.5 billion program is a significant expansion of the first

responder training program. I asked this same question to the Attorney General—

would FEMA have the capability of implementing a dramatically expanded first responder training program in fiscal year 2003 considering that legislation has not yet

been considered to establish this program?

Answer. Yes. FEMA believes it has existing authority to implement the First Responder Initiative as derived from the Stafford Act as well as the Federal Fire Pre-
530

vention and Control Act. Grant making or other financial assistance authority for

training is found in a number of sections of the Stafford Act. The Stafford Act (42

USC 5196(f)) authorizes the Director of FEMA to ‘‘conduct or arrange, by contract

or otherwise, for training programs for the instruction of emergency preparedness

officials and other persons in the organization, operation, and techniques of emergency preparedness’’ as well as ‘‘conduct or operate schools’’ and ‘‘provide instructors

and training aids as necessary.’’

In addition, the Federal Fire Prevention and Control Act (15 U.S.C. 2206) authorizes the establishment of the National Fire Academy and permits the Superintendent to ‘‘admit to the courses and programs of the Academy individuals who

are members of the firefighting, rescue, and civil defense forces of the Nation and

such other individuals [. . .] as he determines can benefit from attendance.’’

Question. Is FEMA prepared to implement this program in a fashion that will not

delay critical first responder training activities while it sets up an internal structure

to implement this new program responsibly? Other significant program expansions

are proposed for FEMA in the budget that will also place administrative burdens

on the agency.

Answer. One of the primary reasons for locating the new consolidated program

within FEMA is the agency’s strong record for quickly distributing emergency planning and assistance grants. FEMA has extensive experience providing direct assistance to local governments through its disaster assistance programs and its Fire

Grant program. Because First Responder grants will be allocated to States according

to a formula, FEMA will be able disburse these funds quickly and without difficulty.

That being said, FEMA intends to monitor the funds closely, ensure they are awarded based on risk and need and require that mutual aid agreements are in place as

a prerequisite to funding.

The Administration expects that FEMA will begin operating the First Responder

program immediately following the passage of FEMA’s 2003 appropriations bill.

FEMA intends to award grants to the States shortly after receiving the appropriation from Congress. FEMA has developed a process for the distribution of the fiscal

year 2002 supplemental grants that will be adapted and used for the fiscal year

2003 First Responder grants.

Question. How would FEMA utilize the current training partners of the National

Domestic Preparedness Consortium, which includes the New Mexico Institute of

Mining and Technology, under its proposed first responder training program?

Answer. FEMA intends not only to continue the preparedness activities at the

New Mexico Institute of Mining and Technology and the other facilities currently

funded by ODP, but also to build upon and enhance those activities at a greater

level. Training is a crucial component of this countries’ ability to prepare and respond to terrorism activities. The request for $3.5 billion will ensure that we begin

providing the enhancements and new efforts necessary to get our First Responders

on track for the level of preparedness that is necessary to deal with any future terrorist or WMD events.

ODP provides funding for a number of training programs and non-Federal terrorism centers. In 2003, FEMA will continue to fund those activities for which the

Administration requested funding in fiscal year 2002, including:

—Center for Domestic Preparedness (Ft. McClellan)—chemical weapon training

—Texas A&M—Emergency response training

—Louisiana State University—Bio-preparedness training

—DOE Nevada Test Site—Large-scale WMD training

—New Mexico Institute of Mining and Technology—Live explosives training

Question. How would FEMA make provision to train first responders for weapons

of mass destruction, including biological, chemical, and radiological weapons, which

require highly specialized facilities to ensure safe exercises?

Answer. FEMA will continue the preparedness activities currently funded by the

Office of Domestic Preparedness that offer specialized training activities, to include

live-agent training and will build upon and enhance those activities at a greater

level. Training is a crucial component of this country’s ability to prepare for and respond to terrorism activities.

Question. Assuming that a comprehensive first responder training program is developed, it is clear that responding to potential attacks using weapons of mass destruction—chemical and biological agents and even nuclear devices—requires very

specialized training. In your opinion, are there necessary trainers available throughout the country to carry out a significant first responder training program, specifically one that is comprehensive and coordinated to provide a seamless response to

a disastrous attack?

Answer. It is critical that a comprehensive, coordinated and consolidated terrorism training program be established. This is why the President asked FEMA to
531

manage the First Responder Grant Program which would provide over $1 billion in

training funding alone. It is also why I have put all FEMA training under the same

directorate, so all first responder training could be centrally coordinated and each

emergency discipline could learn to work as a team with others. FEMA has for

many years used a robust and coordinated training system that utilizes over 50

State fire academies and State emergency management training programs, there

are also robust State and local fire, emergency medical services and police academies as well. These systems train hundreds of thousands of responders each year

and have largely been left out of the funding and support from DOD and the Justice

Department’s programs. There are thousands of trainers that can be brought to bear

on this issue. We are also aggressively working to develop additional train-the-trainer opportunities to assist first responder training systems with the expertise they

need. Chemical incidents are not dissimilar whether the cause is accidental or terrorism and our nation’s hazardous materials teams are well suited to respond. We

continue to work with the Environmental Protection Agency, the Department of

Transportation and others to strengthen their training. Biological events, while having some similarities to chemical incidents, do require additional training and we

look forward to working with the CDC and the Department of Health and Human

Services to address these needs. The bottom line is that through FEMA, we need

to fully utilize the existing robust training systems we have in place, that have not

yet seen significant support, rather than creating new mechanisms that will perpetuate a disjointed program of Federal assistance. In that way we can make sure that

our first responders are well prepared to respond to any attack regardless of cause.

Question. On Sunday April 28, 2002 a tornado touched down in Southern Maryland destroying many homes and businesses in Charles and Calvert Counties. It

also caused an estimated $3.5 million in damages to Southern Maryland Electric Cooperatives (SMECO) facilities which serves the entire area. Can you give me a time

frame as to when SMECO can expect reimbursement from FEMA and an approximate percentage of recovery?

Answer. Six Project Worksheets (PW) totaling $1,100,358.09 (75 percent Federal

Share) were approved and obligated for the SMECO on or before 5/31/02. The majority of these projects were 100 percent completed at the time of the PW preparation

and therefore actual eligible costs were reimbursed. There are currently no outstanding issues related to this applicant.

Question. Over the past decade FEMA has stepped in and provided vital support

in helping to rebuild local communities and entire regions when natural disasters

have occurred. Timely assistance in helping homeowners rebuild, small businesses

recover from structural and economic damages, and providing grant assistance for

public and cooperatively-owned utilities in order to restore critical infrastructure

will be essential to Southern Maryland’s recovery. Do you foresee any delays or

problems with the State of Maryland’s request?

Answer. The incident occurred on Sunday, April 28, 2002, and was declared on

Wednesday, May 1, 2002. Tornado damage is normally covered by homeowners’ insurance. While the majority of applicants received insurance settlements, FEMA

was able to provide disaster housing assistance in the amount of $158,247.60 to 87

eligible applicants. The Individual and Family Grant (IFG) Program provided grant

awards for serious unmet needs in the amount of $175,676.00 to 70 eligible applicants. Disaster Unemployment Assistance (DUA) was given to 50 applicants in the

amount of $32,618.00. To date, Crisis Counseling grants have been awarded in the

amount of $716,617.00. In addition to FEMA assistance, the U.S. Small Business

Administration (SBA) has given 106 loans totaling $5,987,600.00 (70 home loans in

the amount of $3,268,200 and 36 business loans in the amount of $2,719,400.00).

A total of $1,100,358.09 (75 percent Federal Share) was approved and obligated

for Southern Maryland Electric Cooperatives to reimburse them for emergency costs

incurred and to restore their infrastructure. All of these funds were obligated by 5/

31/02.

SUBCOMMITTEE RECESS

Senator MIKULSKI. God bless you. God bless America. And this

hearing stands in recess until next week Wednesday, May 15,

when we will listen to the National Science Foundation and the Office of Science and Technology Policy.

[Whereupon, at 11:10 a.m., Wednesday, May 8, the subcommittee

was recessed, to reconvene subject to the call of the Chair.]

(533)

DEPARTMENTS OF VETERANS AFFAIRS AND

HOUSING AND URBAN DEVELOPMENT AND

INDEPENDENT AGENCIES APPROPRIATIONS

FOR FISCAL YEAR 2003

WEDNESDAY, MAY 15, 2002

U.S. SENATE,

SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS,

Washington, DC.

The subcommittee met at 9:46 a.m., in room SD–138, Dirksen

Senate Office Building, Hon. Barbara A. Mikulski (chairman) presiding.

Present: Senators Mikulski, Johnson, Bond, and Domenici.

NATIONAL SCIENCE FOUNDATION

STATEMENT OF DR. RITA COLWELL, DIRECTOR

ACCOMPANIED BY:

DR. WARREN WASHINGTON, CHAIR, NATIONAL SCIENCE BOARD

TINA BOESZ, INSPECTOR GENERAL

EXECUTIVE OFFICE OF THE PRESIDENT

OFFICE OF SCIENCE AND TECHNOLOGY POLICY

STATEMENT OF JOHN H. MARBURGER III, DIRECTOR

OPENING STATEMENT OF SENATOR BARBARA A. MIKULSKI

Senator MIKULSKI. My colleague, Senator Bond, is on his way

from a meeting, but I am going to go ahead and start the hearing

and then he will be able to join in his statement, because we have

to wrap up as close to 11 o’clock as we can, just because of all of

the things going on, on the floor.

So, I want to state that the subcommittee on VA/HUD will come

to order. And today we are going to take the testimony for fiscal

year appropriations from Dr. Rita Colwell, the Director of the National Science Foundation, who is now approaching her fourth year

of her term; and we welcome her.

To Dr. Warren Washington, the new chair of the National

Science Board. And, Doctor, I understand that you were just elected by your peers to be the next chairman of the National Science

Board, so congratulations and a most warm and cordial welcome to

you.

And also we have asked Dr. John Marburger to come, as well.

He is the Director of the Office of Science and Technology Policy,
534

the President’s advisor on science. Dr. Marburger, this is your second appearance before this subcommittee. You and Administrator

Whitman, the administrator of EPA, testified last year on the Anthrax situation concerning the Hart Building and the Brentwood

Mail Facility, in which you helped to get the post office very important and crucial technical assistance. So, we welcome you as well.

In reviewing this year’s appropriations requests from the administration, I was really taken aback at what I regard as a rather

spartan budget for the National Science Foundation. I really, in the

course of our testimony this morning, will want to ask all of you

what you think the administration’s long-term plan is for scientific

research.

Last year—I was disappointed as well in the administration’s

budget, because it actually cut into research. And everyone from

those who are advocating the United States of America maintaining its strategic and competitive edge, to those interested in national security and homeland security, we are all turning to science

and technology, and we are turning to scientists to help maximize—to really maximize the human capacity we have in our country.

So looking at this, I was really concerned. Last year, Senator

Bond and I worked on a bipartisan basis to increase NSF by 8 percent. It is well known that Senator Bond and I want to double the

National Science Foundation. And he and I continue to be committed to that on a bipartisan basis.

And I know he will speak for himself in his usual unabashed

way; it is the characteristics of who chairs this committee.

This year’s budget sent up by the Administration is a bit better.

It does contain a 5 percent increase, but one-third of the increase

is made up from programs from other agencies, meaning a transfer

of—from NOAA and other agencies. So it is really only 3 percent.

I find this really disturbing in light of: This is the beginning and

the dawn of the 21st Century and some of the great institutions

created in the last half of the last century are staying—seeing us

well.

And I just point to NATO and the National Science Foundation.

NATO has helped preserve the peace, bring about the end of a Cold

War, has protected both this country and its allies, and was a very

crucial institution in this century.

The National Science Foundation was created so that we could

advance science and technology, particularly in the civilian sector.

Science and technology helped us win World War II, and we knew

that it would help win the war of the future, in terms of economics

and national security.

So we want to make sure, of course, NATO is strong. But I want

the National Science Foundation to be strong and funding the cutting edge research that needs to be done, and bringing along the

next generation.

We have to do more than keep up with inflation if we are to expect our scientific enterprise to give us the ability to meet our national and economic security challenges. And, again, I will reiterate

that Senator Bond and I want to double this budget.
535

In order to meet that goal, we would need a 15 percent increase

in NSF this year, not 3 percent proposed by the Administration. So

we are going to have a tremendous amount of work to do.

In the areas of research, the Administration is proposing transferring three programs from other agencies to NSF. NOAA’s Sea

Grant program—and Dr. Colwell, I know this is one of your great

areas of interest, because of your previous job heading up the Marine Biotech Center at the University of Maryland.

But really, does Sea Grant belong at NSF, or does it stay at

NOAA where it has done such an outstanding job over the years?

Then there is EPA’s environmental education program and, of

course, the Administration wants to transfer the U.S. Geological

Survey’s water quality research program.

To me this is the illusion of creating an increase; this is not an

increase. It simply moves the responsibility from one area to another. We want to be able to discuss this.

I do not believe a merger of these programs is warranted—but

I do want to hear the justification of the Administration.

I am pleased, however, with proposed increases in information

technology, nano-technology and bitechnology. I believe that these

are cutting edge, and we will want to discuss these further.

Though in reviewing the basics, which is always the basics, I was

disappointed with the funding level of basic science, or the core

sciences, to really see that in areas like physics and chemistry that

I know you, Dr. Colwell, have said have long been neglected, are

really again at—they have gone from spartan to—I am afraid they

are on the verge of skimpy.

We can see that the investments in science are yielding results.

My colleague here, Senator Bond, has been a very strong advocate

of mapping the plant genome. And we see the results of this.

They have completed the genetic map of rice, which, of course,

could have untold consequences in terms of world food supply, disease resistance, all of these things. I mean, this is what—you

know, this is what we want to be able to help do, not only the practical applications, but the basics, so that even the private sector

can value add. This discovery will be a major step, as I said, in preventing world hunger.

Then we look at things like info-tech. That takes us to issues like

cyber-security, when just about everything we do relies on a computer network, cyber-attacks could make us very vulnerable in the

United States of America.

So, we want to discuss the core science programs and what really

is needed to maintain this.

In the area of education, of course, I am interested in the next

generation of science. I know that over 40 percent of our PhD’s—

students studying for PhD’s, are from other countries. That is not

a xenophobic statement on my part.

But what is happening to our young people? Where are they in

science and in engineering and so on?

Well, I know that one of it is that the stipends used were really

quite modest and we were able to increase that to $21,500. And I

note that this goes a long way to increasing it to $25,000. So in my

mind, one of the jobs of NSF is to be bringing along the next gen-
536

eration, which if it were medicine, it would be interns and

residencies and so on.

And this is what we need to be thinking about here, as well as

them being attracted to the basic sciences, so we can move ahead

in other areas of science and technology.

I am concerned that undergraduate education funding declines

by 5 percent and that programs for women and minorities decline

by over 7 percent.

I think that is very shortsighted. Then there is the issue of work

force readiness. I think it is well-known that I believe, like our Secretary of Labor, Elaine Chao, that we do not have a job shortage

in this county; we have a skill shortage. And then that takes us,

again, through this.

I will be at a press conference shortly after this on the issues related to the digital divide. So, we are looking at the basics—our

basic scientists, our basic research, the future scientists of America.

Well, we know that science education really starts at the K through

12 level and even before that.

Finally, we go to NSF management. We want to know what NSF

and the National Science Board have done to improve its project

and fiscal management of large-scale projects.

We need to understand how NSF sets priorities, particularly

among new, major equipment projects and how are they being

managed. We need to maintain a strong management focus particularly as—hopefully as the budget increases. This budget proposes a significant increase in salaries and—increases. So, we want

to hear from you on that.

Dr. Marburger, also, we welcome you, as we will be asking you:

What are the administration’s over-arching objectives in science

and technology? What is the role of OSTP when it comes to major

agency science programs, such as the space station? Does it really

do cutting edge research? Where are we going in areas that have

specific strategic interest to the United States and, of course, the

balance between the life sciences, and physical sciences and engineering science?

We really would like to also know what kind of interagency task

forces are going on in the area of science and technology and particularly in the areas of education.

And we will have more to go in on this. I note that my ranking

member has arrived. I want to really thank him for his very strong

advocacy on the National Science Foundation.

We have worked on a bipartisan basis on this. And I think it is

one of the things that we have really enjoyed working together. So

Senator Bond, let me turn it over to you.

STATEMENT OF SENATOR CHRISTOPHER S. BOND

Senator BOND. Thank you very much, Madam Chair; I thank you

for your kind words. I also thank you for your leadership and I

could just say, ‘‘Amen, I agree with everything you said,’’ but being

this is the United States Senate, I am going to say it anyhow. Because this is an area where we both have a deep personal interest

and concern, I want to share with you some of those concerns, some

of the optimism, some of the hope.
537

I apologize to you, Madam Chair, and to the witnesses. I was

late. I was on the phone with another friend from the White House

talking about VA/HUD issues. It is certainly nice to be popular.

They have our phone numbers and I apologize for the delay.

I join in welcoming Dr. Colwell, Dr. Marburger, and Dr. Washington.

Dr. Washington, in your first appearance as the Committee—before the Committee as chair of the National Science Board, I look

forward to working with you. You have very big shoes to fill, since

Dr. Kelly was very active, very helpful to us and played a major

role in boosting NSF’s budget.

I also understand that the Inspector General, Dr. Tina Boesz, is

here. She has done an outstanding job in reviewing NSF management practices, especially of the large facility project area.

Also, I add a special commendation for the outstanding work of

Dr. Bob Eisenstein, who is departing the Foundation at the end of

the month. Dr. Eisenstein is a native Missourian, who is in charge

of the math and physical sciences directorate at NSF, and leaves

a very distinguished record. I wish him the very best and thank

him for his great service.

This is our last budget hearing, or at least regularly scheduled

hearing in this Committee. But it is very important to us, because

it gives an opportunity to talk about the critical role that science

and the National Science Foundation, OSTP play in the economic

and intellectual growth and in the well-being of the Nation.

According to many economists, over the past half century, advances in science and engineering have stimulated at least half of

the Nation’s economic growth. Further, investment in scientific research has led to innovative developments in the high-tech industry, most notably the Internet, lasers, and supported notable scientists such as Carl Sagan and John Nash.

And that is why my colleague, Senator Mikulski, and I have led

the bipartisan, effort to double NSF’s budget. As she has said, unfortunately, we have a long way to go. We do not have the budget

recommendation.

And while Federal support in life sciences, specifically NIH, has

increased significantly. The combined share of the funding for

physical sciences and engineering in the Federal research budget

total has actually dropped.

I am very disappointed that the Administration has not demonstrated the same level of support for NSF, as we have continued

to argue for NSF and ask Dr. Marburger to help us change the Administration’s views about the importance of the physical sciences.

Support for NSF is vital to the research in the bio-medical field,

as well. And that is what so many doctors have told me throughout

Missouri and throughout the country.

They have been alarmed at the disparity in Federal funding between life science that NIH supports and the physical sciences that

NSF mainly supports. Without NSF’s supported research and the

physical sciences, medical advances will stagnate.

Many medical technologies such as magnetic resonance imaging,

ultrasound, digital mammography, genomic mapping, could not

have occurred and cannot improve to the next level of proficiency

without underlying knowledge from NSF supported work in biol-
538

ogy, physics, chemistry, math, engineering, and computer sciences.

Simply put, supporting NSF supports the work of NIH.

Now, the Federal Government’s drop in support of the physical

sciences has also alarmed the high-tech industry, because of the

significant decline in bachelor degrees in physical sciences. As the

chair pointed out, this decline has put our Nation’s capabilities for

scientific innovation at risk; and equally important, at risk of falling behind other industrial Nations.

The high-tech industry is struggling to find qualified engineers

and scientists and, as noted, becoming much more reliant on foreign nationals to fill those positions. That is fine if we can encourage those people to come here and stay here, but when they go

home and take their knowledge with them, that is a serious brain

drain.

Many notable researchers in the high-tech industry have told me

that the shortages of trained American scientists and engineers has

limited the growth potential of the electronics and software industries and allowed foreign competitors to catch up to U.S. industry.

To address the shortage of the tech talent in this country, I have

joined with Senate colleagues, including Senator Mikulski, Senator

Lieberman, Senator Frist, and Senator Domenici, in introducing

legislation to improve undergraduate education in math, science,

engineering, and technology.

I appreciate the Administration’s support of the program and its

budget request and hope we can provide more money there this

year.

As, again, as the Chair has mentioned, one of my specific areas

of interest is plant biotechnology. I strongly believe that biotechnology, namely the plant genome research, is critical in maintaining the long-term sustainability and competitiveness of our Nation’s agriculture. In particular, NSF’s plant genome program has

generated exciting possibilities for improving human health and

nutrition.

It can be a very powerful tool for addressing hunger in many

third-world countries, as well as improving our own environment

and our own nutrition values in food.

Now, while I would prefer to spend more minutes highlighting

the importance of scientific endeavors, such as the plant genome,

I need to raise some questions about the Foundation’s management.

As you all know, I am a big advocate for the Foundation. But my

enthusiasm for boosting the NSF’s budget runs into problems when

we have management problems.

In the inspector general’s written testimony submitted for this

hearing, she found three significant management problems related

to post-award management, work force planning, and most notably,

large facility project management. These findings are troubling, especially since these issues are not new and are not difficult to resolve.

The most troubling management issue is NSF’s management and

oversight in large research facilities. At my request, the I.G. audited NSF’s funding and management of major research equipment

and facilities, and recently issued its final report on May 1.
539

The I.G. report noted that the Foundation has made some effort

to improve its management and oversight of large facilities; however, the I.G. found that the lack of adequate guidance ‘‘have allowed NSF to use multiple appropriation accounts to fund the acquisition and construction costs of major research and equipment

and facilities, and led to inconsistency in the types of costs funded

through the MRE account.’’

Unbeknownst to the science board and Congress, NSF practices

have resulted in significant cost overruns and cannibalization of

funds from other worthy research projects. For example, the I.G.

report found that NSF’s contribution to the Large Hadron Collider

project would exceed its budgeted amount by $59 million or 73 percent. According to the I.G.’s report, this practice seems to be common in other large facility projects.

This report confirmed my fears about the oversight of NSF’s

large facilities. It appears that once the money is out the door, too

little follow-up occurs.

Now, NSF has taken some important steps, such as developing

a management and oversight plan, but much more needs to be

done and needs to be done very promptly. I’ve seen how mismanagement often leaves other agencies open to budget cuts and

NSF would not be immune.

Related to this issue is my concern about the Foundation’s process for prioritizing its large facility projects. I have recently asked

my staff to begin discussions with the National Academy of

Sciences to see if the Academy could provide us some guidance on

how NSF can better prioritize its numerous large facility projects.

I plan to pursue this matter and hope that the Science Board

and the Foundation can work with us and we can develop a better

plan.

Lastly, I need to express my concern about the proposed national

underground science laboratory at the Homestake Mine in South

Dakota. Since I first became involved with this subcommittee, I

have defended the peer review system.

However, despite my remarks—or remarks made by the lab’s political advocates that the Homestake project will be judged solely

on the scientific merits, I am skeptical. I fear that the peer review

system is in danger and that political pressure may prevail.

I have been concerned about the project ever since the

Homestake Identification Bill was forced through Congress last

year. I believe that the passage of the indemnification bill has

tainted what could otherwise be a scientific worthy project. The bill

has created a dark cloud around the Homestake Mine project, due

to the dangerous legal, budgetary, and policy implications it may

create.

And it could be, unfortunately, a great, big, black hole in the

ground where we pour research dollars badly needed in other

areas.

This very costly program may be largely redundant since there

are already sophisticated neutrino labs in Canada and Europe. I

urge NSF and the Science Board to review this project carefully

and I assure you I intend to monitor it carefully as well.

With that, I thank the Chair for her indulgence. I have a lot to

say, because this is a very important agency to me.
540

Senator MIKULSKI. Yes, absolutely.

Senator Johnson, did you want to have an opening statement or

any remarks?

STATEMENT OF SENATOR TIM JOHNSON

Senator JOHNSON. Well, Madam Chairman, I will submit an

opening statement. I want to expedite the opportunity to listen to

this panel.

I would make just a very brief observation. One is just that I

want to express my enthusiasm for Federal science and technology

investments, despite the fact that my own State of South Dakota

ranks 52nd in Federal expenditures in research and development,

dead last behind the District of Columbia and Puerto Rico.

And I share your support for higher education, NSF stipends. I

benefitted, myself, as a graduate student from an NSF grant.

I want to express strong support for the EPSCoR program, which

has done a great deal to help small States develop the research infrastructure that they need to have at their colleges and universities. And lastly, I want to observe that a panel of experts convened by the NSF recommended the Home Stake Gold Mine as a

potential site for a national underground science laboratory.

That assessment was conducted by scientists who evaluated the

proposals on the merits, and the subsequent proposal is now before

the NSF for further consideration and peer review.

I appreciate that the future of the proposal be determined by its

scientific merit. And I do not believe the South Dakota delegation,

the bipartisan delegation effort to make sure that the Home Stake

Mine as an option is inappropriate political intervention.

We have had to work with the Home Stake Mining Company to

see that they do not flood this unique resource, an 8,000-foot shaft,

so that it remains an option. But the Congressional delegation from

South Dakota has no intention of intervening and otherwise pressuring or causing the selection process that would involve anything

other than scientific peer review on its merits.

We have worked on a parallel track to ensure that the research

opportunities of mining are available, should the NSF and the National Science Board recommend proceeding with such an initiative. And I want to thank Madam Chairman for her work in that

regard to allow us to preserve this as an option. But that is the

extent of the Congressional involvement in this NSF project, and

it is my hope it will go forward untainted by any political concerns,

and that the base science in the end wins out.

So thank you, Madam Chairman, and I will submit a more complete statement for the record.

Senator MIKULSKI. Thank you, Senator Johnson.

Senator JOHNSON. Oh, I would observe that, unfortunately, I

have a conflicting obligation involving a foreign trade delegation

and I am going to have to leave much sooner than I would otherwise like. But I do want to welcome the panel. And I appreciate

their working with this subcommittee. Thank you

Senator MIKULSKI. Let us now turn to our witnesses. And the

way we would like to proceed is first to Dr. Colwell, then to Dr.

Washington; and then Dr. Marburger, we are going to ask you to

be the wrap up.
541

I am going to ask unanimous consent that your written statements be included in the record. I know you have—each have oral

statements. And in the interest of time, just presume that you have

all been introduced and proceed, kind of like you are defending

your dissertation, okay?

Dr. COLWELL. Thank you, Chairwoman Mikulski, Senator Bond,

and members of the committee. Thank you for providing the opportunity to discuss the President’s budget request for the National

Science Foundation.

Before I begin, I would just like to say that we are thrilled to

have Dr. Warren Washington, the newly elected chair of the National Science Board here with us. And with your permission, I

would ask that Dr. Washington be permitted to address the committee.

So, Dr. Washington.

STATEMENT OF DR. WARREN WASHINGTON

Dr. WASHINGTON. Thank you. First of all, I would like to say,

Madam Chair and to Ranking Member Bond, and the members of

the subcommittee, I appreciate having the opportunity to testify before you as chair——

Senator MIKULSKI. Dr. Washington, would you pull that microphone closer?

Dr. WASHINGTON. Okay.

Senator MIKULSKI. Thank you.

Dr. WASHINGTON [continuing]. As chair of the National Science

Board. I am Warren Washington, senior scientist and section head

of the climate change research section of the National Center for

Atmospheric Research.

On behalf of the science board, I thank the subcommittee for its

sustained commitment to a broad portfolio of investments in

science, mathematics, engineering and technology research and

education. These investments contribute to our Nation’s long-term

security and economic vitality, and to the well-being of all Americans.

The National Science Board has approved and supports the National Science Foundation’s budget request for fiscal 2003. The 5

percent increase in funding will allow NSF to continue to nurture

people, ideas, and tools needed to generate new knowledge and new

technologies.

Among the important initiatives that this budget includes are

priorities for science and engineering work force, mathematical and

statistical science research that will advance interdisciplinary

science and engineering, and research in the social, behavioral and

economic sciences to explore the complex interactions between technology and society.

The NSF director, Dr. Rita Colwell, will discuss these and other

specifics of the budget request in her testimony.

Among the Federal agencies, NSF has the unique mission of advancing the Nation’s health, prosperity, and welfare by supporting

basic research and education in all fields of science and engineering.

NSF programs support new discoveries and innovative educational programs at all levels. NSF funded research and education
542

are critical to sustaining United States strength in science and

technology, which is a key element of national security.

Revolutionary advances such as those in information technology,

nano-technology, materials and biotechnology, remind us that such

breakthroughs with promising benefits to the economy, the work

force, education, health, and national security require long-term,

high-risk investments.

Despite wide-spread recognition of the benefits that flow from

federally supported research, as a Nation, we are seriously underinvesting in basic research. In our $10 trillion gross domestic product, the Federal Government budgets $24 billion to basic research,

which represents one-fourth of 1 percent of the gross domestic

product. Of the $24 billion, NSF receives $3 billion to support cutting

edge science. It is estimated that the NSF proposals, representing

another $5 billion, are worthy of investment if funds were available.

Achieving a balanced portfolio in the basic sciences is as important as the quality and quantity of the research funded. For example, as Congressional leaders and others have pointed out, the success of the National Institutes of Health’s efforts to find cures for

deadly diseases depends heavily on the underpinning of basic research supported by NSF.

In addition to providing oversight to NSF, the board provides advice to the President and Congress on matters of science and engineering policy. I would like to mention some of our current activities related to major issues affecting the health of the science and

engineering enterprise.

The level of Federal investment is crucial to the health of the

science and engineering enterprise. Equally crucial is how effectively that investment is made. The growing opportunities for discovery and the inevitable limits on Federal spending mean that

hard choices must be made and priorities set.

In its recent report, ‘‘Federal Research Priorities, A Process for

Setting Priorities,’’ the board offers its recommendations for a more

effective budget process, including an improved information base

and a process for allocating Federal funding to research.

The conduct and the communication and the use of science are

intrinsically global. The collaborations and international partnerships contribute to addressing a broad range of international problems and help build more stable relations among Nations.

In its recent report ‘‘Towards A More Effective Role for the U.S.

Government in International Science and Engineering,’’ the board

recommends that the Federal Government increase the effectiveness of its coordination activities, increase international cooperation, especially with developing countries and by younger scientists,

and improve the use of science and engineering information in

dealing with global issues.

An area of constant concern for the NSF and the board is the

quality and the adequacy of infrastructure to enable scientific discoveries in the future. The rapidly changing environment of new

knowledge, new tools, and new information capabilities has created

a demand for more complex and more costly facilities for scientific

research. A board task force is assessing the changing needs and
543

strategies to ensure that the Nation will have the infrastructure to

sustain cutting-edge science and engineering research.

We expect to receive the task force’s preliminary findings this

summer.

For the U.S. leadership in science and engineering, there is no

more important an issue than the development of a skilled technical work force. As a Nation, we are not attracting the number of

science and engineering students our Nation needs to sustain its

leadership, nor are we successfully tapping all of our domestic resources, especially the under-represented minorities and women.

A board task force is considering policy options for ensuring an

adequate science and engineering work force for the future. We anticipate receiving the task force’s report by the end of the year.

Madam Chair, at this point I would like to close my formal remarks. I thank the subcommittee for its long-time support of

science—for the science community, especially the National Science

Foundation, and for allowing me to comment on significant national policy concerns, as well as on the foundation’s budget. Thank

you.

[The statement follows:]

PREPARED STATEMENT OF DR. WARREN WASHINGTON

Madame Chair, Ranking Member Bond, and members of the Subcommittee, I appreciate having the opportunity to testify before you as Chair of the National

Science Board. I am Warren Washington, Senior Scientist and Section Head of the

Climate Change Research Section at the National Center for Atmospheric Research.

On behalf of the National Science Board, I thank the Subcommittee for its sustained commitment to a broad portfolio of investments in science, mathematics, engineering, and technology research and education. These investments contribute to

our Nation’s long-term security and economic vitality and to the well being of all

Americans.

The National Science Foundation’s Budget Request

The National Science Board has approved and supports the National Science

Foundation’s budget request for fiscal year 2003. The 5 percent increase in funding

will allow NSF to continue to nurture the people, ideas, and tools needed to generate new knowledge and new technologies. Among the important initiatives that

this budget includes are priorities for the science and engineering workforce; mathematical and statistical science research that will advance interdisciplinary science

and engineering; and research in the social, behavioral, and economic sciences to explore the complex interactions between technology and society. The budget continues

support for the Math and Science Partnership program; increases funding for the

Foundation’s six priority areas, which have the potential of enormous payoff for the

Nation; and provides a much-needed increase in annual stipends for graduate fellows in a critical investment, the future U.S. science and engineering workforce. The

NSF Director, Dr. Rita Colwell, will discuss these and other specifics of the budget

request in her testimony.

As this Committee recognizes, NSF is a major contributor both to scientific research and science education. Federal investments in the basic sciences through

NSF have produced new discoveries and new technologies essential to our national

security and economic prosperity. In addition, NSF supports innovative education

programs from pre-kindergarten through graduate school, preparing the next generation of scientists and engineers and contributing to a more scientifically literate

workforce and society.

Each year NSF evaluates, primarily through external peer review, 32,000 proposals from 2,000 colleges, universities, and institutions. The value of the proposals

is approximately $16 billion. NSF annually makes 10,000 awards, totaling nearly

$3 billion, in a highly competitive merit review process. It is estimated that NSF

proposals representing an additional $5 billion are worthy of investment if the funds

were available.
544

The Health of the Science and Engineering Enterprise

The new knowledge and technologies emerging today are a tribute to Federal research investments made years ago in a spirit of bipartisanship. When those investments began, no one could foresee their future impact. Revolutionary advances such

as those in information technology, nanotechnology, materials, and biotechnology remind us that such breakthroughs with promising benefits to the economy, the workforce, our educational systems, and national security require long-term, high-risk investments. Among Federal agencies, NSF has the unique mission of advancing the

Nation’s health, prosperity, and welfare by supporting research and education in all

fields of science and engineering. NSF plays a critical role in supporting new discoveries and knowledge as well as innovative educational programs at all levels. NSFfunded research and education are critical to sustaining U.S. strength in science and

technology, a key element of national security.

Despite widespread recognition of the benefits that result from federally supported scientific research, as a Nation, we are seriously under-investing in basic research. In our $10 trillion Gross Domestic Product, the Federal Government budgets

$24 billion to basic research, which represents one-fourth of 1 percent of the Nation’s Gross Domestic Product. Of the $24 billion, NSF receives $3 billion to support

cutting-edge science and the search for new knowledge.

Achieving a balanced portfolio in the basic sciences is as important as the quality

and quantity of research funded. For example, as Congressional leaders and others

have pointed out, the success of the National Institutes of Health’s efforts to find

cures for deadly diseases depends heavily on the underpinning of basic research

supported by the National Science Foundation.

National Science Board Policy Studies

In addition to providing oversight to NSF, the Board provides advice to the President and the Congress on matters of science and engineering policy. I would like

to mention some of our current activities related to major issues affecting the health

of the science and engineering enterprise.

FEDERAL INVESTMENT IN SCIENCE AND ENGINEERING

The level of Federal investment is crucial to the health of the science and engineering enterprise. Equally crucial is how effectively that investment is made. The

growing opportunities for discovery and the inevitable limits on Federal spending

mean that hard choices must be made and priorities set.

In its recent report, Federal Research Resources: A Process for Setting Priorities,

the Board offers its recommendations for a more effective budget process, including

an improved information base and a decision-making process for allocating Federal

funding to research. The Board’s conclusions are based on reviews of the literature

on budget coordination and priority setting for public research and invited presentations from and discussions with representatives of the Office of Management and

Budget, the Office of Science and Technology Policy, the Federal research and development agencies, congressional staff, high-level science officials from foreign governments, experts on data and methodologies, and spokespersons from industry, the

National Academies, research communities, science policy community, and academe.

U.S. GOVERNMENT ROLE IN INTERNATIONAL SCIENCE AND ENGINEERING

In the 21st century, advances in science and engineering will to a large measure

determine economic growth, quality of life, and the health and security of our planet. The conduct, communication, and use of science are intrinsically global. New

ideas and discoveries are emerging all over the world and the balance of expertise

is shifting among countries. Collaborations and international partnerships contribute to addressing a broad range of international problems. They also contribute

to building more stable relations among nations by creating a universal language

and culture based on commonly accepted values of objectivity, sharing, integrity,

and free inquiry. The Federal Government plays a significant role in promoting

international science and engineering activities and supporting research with international dimensions.

In its recent report entitled Toward a More Effective Role for the U.S. Government in International Science and Engineering, the Board concludes that new approaches to the management and coordination of U.S. international science and engineering activities are needed if the United States is to maintain the long-term vitality of its science and engineering enterprise and the vitality of its economy. The

Board recommends that the Federal Government (1) increase the effectiveness of its

coordination of international science and engineering activities, (2) increase international cooperation in fundamental research and education, particularly with de-
545

veloping countries and by younger scientists and engineers; and (3) improve the use

of science and engineering information in foreign policy deliberations and in dealing

with global issues and problems.

U.S. SCIENCE AND ENGINEERING INFRASTRUCTURE

An area of constant concern for NSF and the Board is the quality and adequacy

of infrastructure to enable scientific discoveries in the future. The rapidly changing

environment of new knowledge, new tools, and new information capabilities has created a demand for more complex and more costly facilities for scientific research.

A Board task force is assessing the current status, changing needs, and strategies

needed to ensure that the Nation will have the infrastructure to sustain cuttingedge science and engineering research. We expect to receive the task force’s preliminary findings this summer.

NATIONAL WORKFORCE POLICIES FOR SCIENCE AND ENGINEERING

For U.S. leadership in science and engineering, there is no more important issue

than the development of a skilled technical workforce. As a Nation, we are not attracting the numbers of science and engineering students our Nation needs to sustain its leadership. Nor are we successfully tapping all our domestic resources, especially under-represented minorities and women. The pool of potential science and

engineering students will increasingly reflect the growing diversity in the American

workforce and society.

A Board task force on workforce policies for science and engineering is reviewing

U.S. workforce needs, the role of foreign students and workers, and policy options

for ensuring an adequate science and engineering workforce for the future. We anticipate receiving the task force’s report by the end of this year.

Madame Chair, at this point I would like to close my formal remarks. I thank

the Subcommittee for its long-time support of the science community, especially the

National Science Foundation, and for allowing me to comment on significant national policy concerns, as well as on the Foundation’s budget request.

Senator MIKULSKI. Thank you very much, Dr. Washington.

Dr. Colwell.

STATEMENT OF DR. RITA COLWELL

Dr. COLWELL. I would—will continue, Madam Chair. Every year,

the foundation’s optimal use of limited public funds has relied on

two conditions. One is ensuring that our research and education investments are aimed and continuously re-aimed at the frontiers of

understanding, and then certifying every dollar goes to competitive

merit reviewed and time limited awards with clear criteria for success.

NSF has been proactive in implementing the President’s management agenda, and we welcome—and we will apply input from many

sources to continuously improve the way we manage programs at

NSF.

As an aside, I would say that NSF is, by far, the leading agency

in the world and looked to by other countries in following the procedures that we have developed.

When these conditions are met, our Nation gets the most intellectual and economic leverage from its research and education investment. The National Science Foundation is requesting $5.036

billion for fiscal year 2003, $240 million or 5 percent more than the

previous year.

For the United States to stay on the leading edge of discovery

and innovation, we cannot do less. Before providing a few highlights of the budget, let me stress that the priority setting process

at NSF results from continual consultation with the research community.
546

New programs are added or enhanced only after seeking the combined expertise and the experience of the science and engineering

community, the Director, the Deputy Director and the National

Science Board.

Programs are initiated or enlarged based on consideration of

their intellectual merit, the broader impacts of the research that is

done, the importance to science and engineering for the United

States and balance across fields and disciplines, as well as synergy

with research and other agencies and other Nations.

NSF coordinates its research with our sister research agencies

informally by program officers being actively informed of other

agencies’ programs and formally through interagency agreements

that spell out the various agency roles in research activities.

Moreover, through our committee of visitors process, there is continuous evaluation. There is feedback of information on how the

NSF programs are performing. One of the highlights of the budget

of this year is the second installment of $200 million for the national 5-year, $1 billion Math and Science Partnership Program,

the President’s program, which we heartily and thoroughly endorse.

The program links local schools with colleges and universities to

improve pre-K to 12 math and science education, trains teachers,

and to create innovative ways to raise the performance of all students and schools.

An investment of approximately $37 million will increase the an- nual stipends for graduate fellows to $25,000, to attract more of the

Nation’s most promising students in science and engineering. I

would like to thank the Chair and Senator Bond for your support

of graduate student fellowships.

The budget also includes funding for six priority areas, including $221 million for nano-technology research, fundamental and important for our country; $286 million for information technology research; and $60 million as part of the new priority area in mathematical and statistical sciences research that will ultimately advance interdisciplinary science and engineering.

We will direct $185 million to the NSF’s Learning for the 21st

Century Work Force priority area, including $20 million to fund

three or four new multi-disciplinary, multi-institutional Science of

Learning Centers to enhance our understanding of how we learn,

how the brain stores information, and how we can best use the new

information technology to promote learning in our classrooms.

We are also requesting $10 million to seed a new priority area

in the social, behavioral, and economic sciences to explore the complex interactions between new technology and society, so that we

can better anticipate and prepare for their consequences.

Finally, the budget requests $79 million for research on bio-complexity and the environment. Now, this builds on the past investments to study the remarkable, the dynamic web of interrelationships that arise when living things at all levels interact with their

environment. Research in two new areas this year as part of biocomplexity are the microbial genome sequencing and the ecology of

infectious diseases that will help us develop strategies to assess

and manage the risks of infectious diseases, invasive species, and

biological weapons.
547

I should add that as part of the Administration’s new multi-agen- cy Climate Change Research Initiative, we will implement a $15

million research program to advance understanding in highly focused areas of climate science to reduce uncertainty and facilitate

policy decisions. Our budget also includes $76 million for programs slated to be

transferred to NSF from NOAA, EPA, and the USGS. I want to assure the committee that NSF has been working closely with these

agencies to develop plans for implementing these transfers, should

they be approved by Congress.

In large facilities, we will continue support for the next phase of

construction for the Atacama Large Millimeter Array, ALMA. New

construction projects in fiscal year 2003 include two prototype sites

for the National Ecological Observatory Network, NEON, at a cost

of $12 million to analyze data to detect abrupt changes or longterm trends in the environment.

The budget also requests $35 million for EarthScope to detect

and investigate earthquakes, volcanic eruptions, and landslides on

the North American continent.

The events following September 11 demonstrated our capacity—

the National Science Foundation’s capacity to engage the research

community in ways that are immediately responsive to national

needs. We owe this flexibility to a highly trained scientific and engineering work force that’s capable of selecting the most interesting, the most challenging problems for their research.

It is this flexibility, enabled by the merit review system, that

makes ours a model of scientific support that is clearly the envy

of the world. Madam Chair, I thank you for allowing me to include

a copy of the NSF budget summary as part of my testimony and

I will be pleased to respond to any questions that the committee

may have. Thank you.

[The statements follow:]

PREPARED STATEMENT OF DR. RITA R. COLWELL

Chairwoman Mikulski, Senator Bond, and Members of the Committee, thank you

for providing this opportunity to discuss the President’s budget request for the National Science Foundation.

Every year, the Foundation’s optimal use of limited public funds has relied on two

conditions: Ensuring that our research and education investments are aimed—and

continuously re-aimed—at the frontiers of understanding; and certifying that every

dollar goes to competitive, merit-reviewed, and time-limited awards with clear criteria for success.

When these two conditions are met, our nation gets the most intellectual and economic leverage from its research and education investments.

The National Science Foundation is requesting $5.036 billion for fiscal year 2003,

$240 million or 5 percent more than the previous fiscal year. For the United States

to stay on the leading edge of discovery and innovation, we cannot do less.

Before providing a few highlights of the budget, let me stress that the priority

setting process at NSF results from continual consultation with the research community. New programs are added or enhanced only after seeking the combined expertise and experience of the science and engineering community, the Director and

Deputy, and the National Science Board. Programs are initiated or enlarged based

on considerations of their intellectual merit, broader impacts of the research, the importance to science and engineering, balance across fields and disciplines, and synergy with research in other agencies and Nations. NSF coordinates it its research

with our sister research agencies both informally—through the active monitoring by

program officers of other agencies’ programs—and formally, through more than 150

MOUs and Interagency Agreements that spell out the various agency roles in research activities.
548

One of the highlights of the budget is a second installment of $200 million for the national 5-year, $1 billion Math and Science Partnership Program. The program

links local schools with colleges and universities to improve pre-K–12 math and

science education, train teachers, and create innovative ways to raise the performance of all students and schools.

An investment of approximately $37 million will increase annual stipends for graduate fellows to $25,000 to attract more of the Nation’s most promising students

to science and engineering. The budget also includes funding for six priority areas, including $221 million for nanotechnology research, $286 million for information technology research, and $60

million as part of a new priority area in mathematical and statistical sciences research that will ultimately advance interdisciplinary science and engineering. $185

million is directed toward NSF’s Learning for the 21st Century Workforce priority

area—including $20 million to fund three to four new multi-disciplinary, multi-institutional Science of Learning Centers to enhance our understanding of how we learn,

how the brain stores information, and how we can best use new information technology to promote learning. We are also requesting $10 million to seed a new priority area in the social, behavioral, and economic sciences to explore the complex interactions between new

technology and society so that we can better anticipate and prepare for their consequences. Finally, the budget requests $79 million for research on biocomplexity in the environment. This builds upon past investments to study the remarkable and dynamic

web of interrelationships that arise when living things at all levels interact with

their environment. Research in two new areas this year—microbial genome sequencing and ecology of infectious diseases—will help develop strategies to assess and

manage the risks of infectious diseases, invasive species, modified organisms, and

biological weapons.

I should add that as part of the Administration’s new multi-agency Climate Change Research Initiative, we will implement a $15 million research program to

advance understanding in highly focused areas of climate science, to reduce uncertainty and facilitate policy decisions. Our budget also includes $76 million for programs slated to be transferred to NSF from NOAA, EPA, and the USGS. I want

to assure the Committee that NSF has been working closely with these agencies to

develop plans for implementing these transfers should they be approved by Congress.

In large facilities, we will continue support for the next phase of construction of

the Atacama Large Millimeter Array (ALMA). New construction projects in the fiscal year 2003 budget include two prototype sites of the National Ecological Observatory Network (NEON) at a cost of $12 million to analyze data to detect abrupt

changes or long-term trends in the environment. The budget also requests $35 million for EarthScope to detect and investigate earthquakes, volcanic eruptions, and

landslides on the North American continent.

Madam Chair, if there are no objections, I would like to include a copy of the NSF

budget summary as part of my testimony, and I would be pleased to respond to any

questions that the committee may have.

PREPARED STATEMENT OF DR. CHRISTINE C. BOESZ

Madam Chair, Senator Bond, and distinguished members of the Subcommittee, I

am Dr. Christine Boesz, Inspector General at the National Science Foundation

(NSF). I appreciate the opportunity to appear before you today. As you know, NSF

continues to be an innovative agency dedicated to maintaining American leadership

in the discovery and development of new technologies across the frontiers of scientific and engineering research and education. NSF has had an extraordinary impact on scientific and engineering knowledge, laying the groundwork for technological advances that have shaped our society and fostered the progress needed to

secure the Nation’s future. Because the scientific enterprise and its underlying basic

research are everchanging, NSF continuously faces new challenges. Consequently,

my office is working closely with NSF management to identify and address issues

that are important to the success of the Agency. Today I would like to provide an

update on the status of NSF’s progress in three areas critical to its success: postaward management, workforce planning, and large facilities management.

POST-AWARD MANAGEMENT

NSF’s primary mission is to fund extramural research and education activities

that will advance science and engineering. Over 95 percent of NSF’s fiscal year 2002
549

1Memorandum from Christine C. Boesz, Inspector General, National Science Foundation, to

Eamon M. Kelly, Chairman, National Science Board, and Rita R. Colwell, Director, National

Science Foundation (January 30, 2002) (on file with the National Science Foundation Office of

Inspector General) [hereinafter 2001 Management Challenges]; Letter from Christine C. Boesz,

Inspector General, National Science Foundation, to Senator Fred Thompson, Chairman, Senate

Committee on Governmental Affairs (Nov. 30, 2000) (on file with the National Science Foundation Office of Inspector General) [hereinafter 2000 Management Challenges]. 2 Auditor’s Report, fiscal year 2001 National Science Foundation Financial Statement Audit,

(January 18, 2002). 3 Compare NSF’s fiscal year 1983 Budget Request to Congress with NSF’s fiscal year 2001

Budget Request to Congress. Between 1983 and 2001, FTEs increased by less than 2 percent,

from 1200 to 1220. 4 2001 Management Challenges and 2000 Management Challenges, supra note 1.

5 Executive Office of the President of the United States, the President’s Management Agenda:

Fiscal Year 2002 (Aug. 2001). 6 High-Risk Series: An Update, GAO–01–263 (2001); Human Capital: Meeting the Government-wide High-Risk Challenge, GAO–01–357T (2001). 7S. REP. NO. 107–43 (2001).

budget is in support of these activities, which are funded primarily through grants

and cooperative agreements. The Agency’s scientific directorates and offices have a

shared responsibility with the Office of Budget, Finance, and Award Management

to oversee the financial and programmatic management of these awards. Because

of its enormous impact on NSF’s daily operations, for the past 2 years I have identified award administration as one of NSF’s top ten management challenges.1

In addition, during the most recent annual audit of NSF’s financial statements,

our external auditors identified, as a reportable condition, weaknesses in NSF’s internal controls over the financial aspects of post-award management.2

The auditors found that, while NSF has a robust system of award management

over its pre-award and award phases, it needs to develop a more rigorous, riskbased monitoring program for the post-award phase. In addition, NSF needs to significantly improve its current policies and procedures for the valuation and tracking

of its assets, including facilities and equipment held and maintained by other entities.

NSF management agrees that award administration is one of NSF’s top management challenges, but disagrees that it should be classified as a reportable condition

for the purposes of financial statement reporting. Nevertheless, NSF is working to

continuously improve its business processes by refining its award management procedures to include a more structured, risk-based monitoring element. Further, NSF

is taking steps to improve its oversight of assets for which it holds title.

In support of these efforts, my office is currently conducting a review of best practices in grant award administration to assist NSF in addressing this audit finding

and meeting its management challenge. We are looking at organizations in both the

public and private sectors that dispense and administer financial assistance awards,

and we plan to issue our report by the end of the year. In addition, we will continue

to assess NSF’s overall progress in developing a more effective post-award management system.

WORKFORCE PLANNING

Despite an increasing workload and a budget that has grown from $1 billion to

$5 billion over the past 20 years, the number of full-time equivalent positions

(FTEs) at NSF has remained relatively static.3 In addition, NSF, like much of government, is vulnerable to a wave of retirements in key areas. Because of these concerns, I identified workforce planning and training as another management challenge for NSF.4

The strategic management of human capital is a major component of the President’s Management Agenda 5 and has been identified by the Government Accounting

Office (GAO) as posing a significant risk government-wide.6 Last year, this Subcommittee requested that my office analyze the adequacy of the agency’s staffing

and management plans in light of the efforts to expand NSF’s budget over the next

5 years.7 In response to that request, my office has performed a review of NSF’s

workforce planning activities.

NSF’s workforce planning to date, like that of most Federal agencies, has largely

been confined to stating broad goals and standards. It falls short of an actionable

plan, which requires specific objectives, clearly assigned responsibilities, well-defined milestones for discrete actions, and practical measures of effectiveness for accountability. However, NSF is in the process of contracting for a multi-year business
550

8 NSF has issued a Request for Quotations for a multi-year business analysis of its operations,

including a comprehensive human capital management plan. NSF expects to award this contract, which is estimated at $15 million over a 3 to 4 year period, next month. RFQ Number

CPO 020027. 9 2001 Management Challenges and 2000 Management Challenges, supra note 1.

10 Executive Office of the President of the United States, A Blueprint for New Beginnings: A

Responsible Budget for America’s Priorities 161 (Feb. 2001). 11 National Science Foundation, Large Facility Projects Management & Oversight Plan NSB–

01–153 (Sept. 2001). 12Office of Inspector General, National Science Foundation, Audit of Funding for Major Research Equipment and Facilities, Report No. 02–2007 (May 1, 2002). 13Office of Inspector General, National Science Foundation, Audit of the Financial Management of the Gemini Project, Report No. 01–2001 (Dec. 15, 2000).

analysis of its operations that will include a human capital management plan component identifying its future workforce requirements.8

While it may be premature to attempt a meaningful assessment of future workforce planning at NSF, due to the imminent launch of the Agency’s ambitious business analysis initiative, I can offer some preliminary conclusions. I believe that the

Agency’s proposed business analysis, if diligently conducted by the contractor and

properly overseen by NSF, represents a comprehensive and rigorous approach to reviewing NSF’s primary operations and the human resources needed to staff them.

It has the potential to generate an actionable plan that will help NSF identify and

meet its current and future workforce needs, as well as plan ways to head off future

problems. The ultimate value of the initiative, of course, will be determined by the

validity of the findings of the business analysis and the actions that NSF takes pursuant to them. Given NSF’s investment in time and resources, I look forward to substantial, concrete results that will improve the agency’s business processes, including workforce planning and management.

LARGE FACILITIES MANAGEMENT PLAN

NSF’s management of large facility projects is another issue that I have identified

as one of the Agency’s top ten management challenges.9 In response to the President’s Budget Blueprint,10 increased scrutiny from the Office of Management and

Budget (OMB) and the Congress, and recommendations from my office, NSF developed a Facilities Management and Oversight Plan (Plan) last fall.11

As part of its implementation, the Plan calls for significantly upgrading the current procedures and guidelines for oversight and management of large facility

projects. The implementation has been slower than originally anticipated, and recruitment of a new Deputy Director for Large Facility Projects is now expected to

be completed this summer. However, despite the delay, I am encouraged by recent

progress. Last month, members of the team charged with drafting the new guidelines and procedures briefed my office on their progress, and I am pleased to see

NSF is on track for full implementation later this year.

To assist NSF in carrying out this plan, we have identified additional ways that

NSF can enhance its policies and procedures to provide a more robust facilities management system.

During our audit of the Major Research Equipment (MRE) appropriation account,

which was requested by this Subcommittee, we found several areas that NSF needs

to address to continue improving its management and oversight for large projects

and facilities. My office issued a report responding to your request earlier this

month.12 We found that questionable practices discovered during our audit of the

Gemini project 13 have occurred in other MRE-funded projects as well. NSF’s existing policies and procedures have led the Agency to apply funding sources inconsistently among these projects and fail to account for each project’s total cost.

As a result of these findings, we have recommended that NSF revise its financial

management policies and procedures to ensure that it identifies the full cost of

major research equipment and facilities and improves its administration of MRE accounts.

NSF should be able to incorporate these improvements into its current efforts to

implement the large facilities Plan.

Finally, the MRE account provides funding for two distinctly different types of

projects: those that invest in state-of-the-art, scientific tools for research and the development of new knowledge and ideas; and those that support the investment in

mission critical property, plant, and equipment (PP&E) owned by NSF. The latter

provide the facilities and logistical means for a broad range of science endeavors,

primarily in NSF’s Polar Programs. Both types of projects require effective management, i.e., planning, budgeting, construction oversight, and risk management, to ensure that these multimillion-dollar projects proceed on schedule, stay within budget,
551

and perform as expected. Both also require full-cost accounting in accordance with

Federal accounting standards.

But funding these types of projects from a single appropriation account creates

a situation where the replacement, renovation, and upkeep of assets critical to the

safety and health of researchers and their support personnel could potentially compete with new scientific tools for limited funding. In updating its large facilities policies and procedures, therefore, NSF should (1) plan and prioritize the mission critical PP&E projects separately from the development and construction of research

tools and (2) distinguish their different funding sources, to avoid possible negative

impact on the broad range of programs these assets support. More specific accounting will reduce confusion about how funds are being allocated, improve the accuracy

of budget planning, and allow more effective monitoring of the use of funds.

I am pleased to see NSF addressing large facility management through the development of this Plan. As the guidelines and procedures are fully developed and implemented, my office will continue to assess this critical area and recommend further enhancements where necessary. We share the same goal—efficient and effective management of these large and complex projects—and I look forward to assisting NSF in realizing this goal.

Madam Chair, this concludes my statement. I would be happy to answer any

questions you or other members of the subcommittee may have, or to elaborate on

any of the issues that I have addressed today.

CONTACT INFORMATION

For information about this statement, please contact Dr. Christine C. Boesz at

703–292–7100 or cboesz@nsf.gov.

Senator MIKULSKI. Thank you very much, Dr. Colwell.

Dr. Marburger, please.

STATEMENT OF JOHN H. MARBURGER III

Dr. MARBURGER. Madam Chairman and members of the subcommittee, I am pleased to appear before you today. And I ask that

my written testimony, which described OSTP’s budget and highlights of the Administration’s fiscal year 2003 R&D budget request,

be included for the record.

Senator MIKULSKI. So ordered.

Dr. MARBURGER. As you well know, the terrorist attacks on September 11th dramatically changed the context for this budget. The

attacks laid bare vulnerabilities in our physical security and exacerbated weaknesses in our economy.

The priorities of the Nation drastically changed in a matter of a

few hours. And this budget reflects the change in priorities and

three primary goals, winning the war on terrorism, protecting the

homeland, and reviving our economy.

Recognizing that science must play a role in these priorities, the

President provides for an unprecedented level of investment in

Federal R&D, marking the first time in history that a President

has requested an R&D budget greater than $100 billion. It is

$111.8 billion, up eight points—8 percent overall from the previous

fiscal year. This is the largest requested increase for R&D in over

a decade.

I cannot emphasize enough how dedicated the Administration is

to working with you to see this R&D budget enacted.

Madam Chairman, I believe you and I share a commitment to

keeping America the world’s leader in science and technology, and

I hope you agree that OSTP plays a vital role in leveraging the

government’s science and technology investments for broad national goals.
552

Our small staff advises the President on fast breaking science

and technology developments. We coordinate the work of the R&D

agencies to ensure that we get the biggest bang for our science and

technology bucks, and we promote strategic partnerships among

science and technology stake holders including State and local government, industry, the academic sector, and various international

players as well.

We bring real value added to the national science and technology

enterprise, and I have two examples in my oral testimony that I

would like to give that provide a sense of breadth of our scope.

The two examples are the Administration’s initiative on nanotechnology, an interagency committee, and our efforts to improve

mail security in response to the anthrax contamination, a relatively

new type of function for our office.

As you know, Madam Chairman, OSTP was deeply involved in

the formation of the multi-agency, national nano-technology initiative. And your help was key to its implementation. OSTP, through

the auspices of the National Science and Technology Counsel, convened an interagency working group to look into the feasibility of

a nano-technology initiative for fiscal year 2001.

This subcommittee continues to provide the important interagency coordination and long-range planning for Federal research

and nano-scales science and engineering and technology. These ongoing efforts have culminated this year in providing the nano-technology initiative with a 17 percent increase in funding, bringing

the total effort to $679 million distributed among nine Federal

agencies. This $100 million increase over last year’s budget will accelerate

long-term research in the manipulation of matter down to the

atomic and molecular levels, increasing our understanding of fundamental building blocks for both material and microscopic devices.

Research at the nano-scale promises revolutionary advances in

pharmaceuticals, more efficient manufacturing, higher performance

materials, faster computers and networks, and a cleaner environment.

Priority research areas for this year will range from research to

enable efficient nano-scale manufacturing to innovative nano-technology solutions for the detection of and protection from bio, chemical, and radiological explosive agents.

Roughly 70 percent of the funding proposed under the initiative

continues to go to university-based research. These investments

will help provide the education and training of a new generation

of workers for future industries and partnerships to enhance industrial participation in the nano-technology revolution.

Another quite different example of the diverse work of OSTP is

our response to the anthrax contamination last fall. As I previously

testified to, the office of homeland security requested that our office

help resolve this issue. We assembled an irradiation technical team

on short notice, which performed experiments at the U.S. Postal

Service irradiation facilities to optimize the proper configuration of

mail and to ensure the proper dose of sterilizing radiation is delivered.

This team, which is still in existence, updates OSTP bimonthly

and offers recommendations to the postal service to refine the irra-
553

diation process. We have added experts for the—from the Centers

for Disease Control and Prevention on—to conduct ongoing experiments that have helped to eliminate some of the negative effects

of irradiation.

The ability of OSTP to coordinate rapidly the many Federal

agencies involved in these issues allowed the generation of scientific data from which recommendations were made to the postal

service within 1 month of the original contamination.

While irradiation of the letters and flat mail solves one set of

problems, irradiation may not be the answer for parcels and packages due to irregularities in thickness and density.

OSTP has formed an ethylene-oxide technical team, with support

from the Department of Justice, experts from FDA, EPA, AFRE,

CIA, OSHA, U.S. Postal Service, have designed and are conducting

experiments to test the ability of this ethylene to oxide gas to sterilize packages.

The recommendations from this technical team will be presented

to the postal service, and will include guidelines and parameters,

by which to document the sterility of the packages and protect critical contacts from harm.

While our work on nano-technology and mail irradiation are just

two examples of the outstanding work that OSTP does for the Nation, over the past year, we have also played a critical role in developing coordinated interagency budgets and policies in the areas of

the homeland security, plant genome, food safety, networking and

information technology, educational research, as well as others.

I ask today for your continued support of OSTP’s role in coordinating science and technology policy for the executive branch for

our Nation at large. Our budget request of $5.37 million and 40

FTE’s for the fiscal year 2003 represents no increase in the FTE

level and a slight increase in budget authority of less than 2 percent.

These additional resources are essential to continue to provide

the highest quality of work across our broad spectrum of responsibilities.

Madam Chairman and members of the subcommittee, I hope that

this brief overview, combined with my written statement, convey to

you the extent of this Administration’s commitment to advancing

science and technology in the national interest and the importance

of OSTP’s role in that enterprise. I ask, of course, not only for your

support for our budget for OSTP, but also want to express my appreciation for the longstanding, bipartisan support of this committee for the Office of Science and Technology Policy and for the

Science and Technology Research Enterprise.

Madam Chairman, you mentioned a large number of issues and

questions in your opening statement. I would be glad to respond to

these now, as time permits, and would respond to others in writing,

if that is necessary. Thank you.

[The statement follows:]

PREPARED STATEMENT OF JOHN H. MARBURGER III

Madam Chairman, Members of the Subcommittee, I am pleased to appear before

you today to discuss the Office of Science and Technology Policy’s (OSTP) budget

request for fiscal year 2003.
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When I testified before the House Committee on Science prior to my confirmation

by the Senate last October, I expressed my desire to ‘‘form a close and productive

relationship with Congress, which has long provided bipartisan and enduring support of our world-leading science and engineering enterprise. The counsel and support of Members of Congress is an essential element of continued U.S. leadership

across the frontiers of scientific knowledge.’’ I look forward to working with you,

Madam Chairman, and your Subcommittee, to demonstrate this commitment to

science and engineering excellence once again this year. President Bush has set

forth an agenda for science funding in the forthcoming fiscal year that takes advantage of important opportunities for discovery and development and sustains the

basic machinery of research and development that is necessary for continued national leadership in science and technology.

Last October I also referred to the fact that we must make important choices together because we have neither unlimited resources nor a monopoly of the world’s

scientific talent. I continue to believe that wise choices among the multitudes of possible research programs are necessary and that we must decide which programs to

launch, encourage, and enhance and which ones to modify, reevaluate, or redirect

in keeping with our national needs and capabilities. The President’s fiscal year 2003

Budget includes principles that will improve the management of the Nation’s

science and technology enterprise, taking advantage of best practices, and emphasizing the importance of good planning, execution, reinforcement of good performance, and changing poor performance. I look forward to working with Congress to

ensure that the Federal Government’s significant investment, now over $100 billion,

in science and technology is deployed to optimal effect.

President Bush’s fiscal year 2003 R&D budget

Shortly after I was confirmed the Director of OSTP at the end of October, the Director of the Office of Management and Budget invited me to attend and participate

in internal OMB decision-making sessions involving science programs. This series

of meetings gave me a greater appreciation for the issues and an opportunity to represent the science perspective on important aspects of the forthcoming budget, such

as increased accountability and performance measures for R&D agencies. Following

these meetings, my office has continued to work closely with OMB to share information and develop mutual understanding of the complex issues involved in establishing the Nation’s science and technology budgets.

As you well know, agency budget proposals are submitted to OMB in mid-September for their review. The terrorist attacks on September 11 dramatically

changed the context for this budget. The attacks laid bare vulnerabilities in our

physical security and exacerbated weaknesses in our economy. The priorities of the

Nation drastically changed in a matter of hours.

The budget reflects the change in priorities by focusing on three primary goals:

—Winning the war on terrorism;

—Protecting the homeland;

—Reviving our economy.

Recognizing that science must play a role in these priorities, the President provides for an unprecedented level of investment in Federal R&D, marking the first

time in history that a President has requested an R&D budget greater than $100

billion. The precise figure is $111.8 billion, up 8 percent overall from last year—the

largest requested increase for R&D in over a decade.

In addition to the R&D budget, another compilation, the Federal Science and

Technology Budget, was originally proposed by the National Academy of Sciences

to highlight the Federal investment in research programs central to the creation of

new knowledge. In this ’’FS&T’’ portfolio, the President’s budget is up 9 percent. The

FS&T activities account for nearly all of Federal basic research, over 80 percent of

Federal applied research, and about half of civilian development.

Madam Chairman, this is a good budget for science, and I look forward to working

with Congress to see it successfully enacted.

These science and technology investments will enable the Administration to:

—Enhance homeland defense, national security, and global stability;

—Promote long-term economic growth that creates high-wage jobs;

—Sustain a healthy, educated citizenry;

—Harness information technology;

—Improve environmental quality; and

—Maintain world leadership in science, engineering, and mathematics. Now let

me direct your attention to some specifics within this budget.
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Interagency Initiatives

The budget increases funding for a number of priority research areas that require

multi-agency efforts. Information technology, nanotechnology, and health research

continue to be high priorities for our Nation. The past year also has seen an increase in priority for climate change R&D. After the events of September 11,

antiterrorism efforts naturally lead the list.

—Antiterrorism—our success in preventing, detecting, and responding to terrorist

activities over the long term will depend on technology. The President’s fiscal

year 2003 Budget continues the Administration’s strong support of research and

development to counter emerging terrorist threats by increasing R&D funding

for homeland security and combating terrorism (including protecting critical infrastructure) from nearly $1 billion in 2002 to an estimated $3 billion in 2003.

—The National Nanotechnology Initiative will increase by 17 percent over last year. This $679 million multi-agency initiative focuses on long-term research on

the manipulation of matter at the atomic and molecular levels, giving us unprecedented opportunities for new classes of devices as small as molecules and

machines as small as human cells.

—Networking and Information Technology R&D will increase by 3 percent. This brings the overall investment to $1.9 billion in this mature, but still critically

important area. It provides the base technologies necessary for the U.S. to

maintain its dominant position in the application of information technology to

critical national defense and national security needs, as well as to scientific research, education, and economic innovation.

—Improving human health depends on health research that draws on the capabilities of many agencies. During the Presidential campaign, the President

promised to double the budget of NIH by 2003 from its 1998 levels. That commitment is met in this budget, which includes the final installment, a $3.9 billion increase, paving the way toward better diagnostics, treatments, and cures

that affect the lives of all Americans.

—Climate Change research has become an important driver for the Nation’s research agenda. The President created two new initiatives in this budget. The

Climate Change Research Initiative will share $40 million among five agencies,

and the National Climate Change Technology Initiative will receive $40 million

within the DOE budget. The ongoing U.S. Global Change Research Program

will receive $1.7 billion, a $44 million (3 percent) increase.

Highlights of Agency FS&T Budgets

The following examples provide a snapshot of the Administration’s S&T request

within the agencies under the jurisdiction of the Subcommittee.

—National Aeronautics and Space Administration (NASA). The budget provides $8.7 billion (an 8 percent increase) for NASA’s programs in the FS&T budget,

including $3.4 billion for Space Science (a 13 percent increase) and $2.9 billion

for Aerospace Technology. The latter includes planned funding increases for

NASA’s Space Launch Initiative ($759 million), which will lead to safer and

lower cost commercial launch vehicles to replace the Space Shuttle.

—National Science Foundation (NSF). The budget provides a $241 million increase (5 percent) for NSF. This increase will provide $678 million for NSF’s

lead role in the Networking and Information Technology R&D program, and

$221 million for NSF’s lead role in the National Nanotechnology Initiative. The

President’s Math and Science Partnerships Initiative, aimed at increasing the

quality of math and science education in Grades K–12, will increase by $40 million to $200 million. The budget also raises graduate level stipends from

$21,500 to $25,000 annually, in order to further attract and retain the most

promising U.S. students into graduate level science and engineering. NSF is

very effective at managing competitive research programs, and the budget proposes transferring to NSF programs that will benefit from their effective management. These programs include Sea Grants from the National Oceanic and

Atmospheric Administration, Water Quality Research from the U.S. Geological

Survey, and Environmental Education from the Environmental Protection

Agency.

—Environmental Protection Agency (EPA). The budget provides $797 million (a

6 percent increase) for EPA’s programs in the FS&T budget. The EPA budget

funds research that provides a sound scientific and technical foundation for environmental policy and regulatory decision-making. The budget includes $75

million for R&D in technologies and procedures to cope with future biological

or chemical incidents.

In addition to the agencies that fall within your Subcommittee’s jurisdiction

Madam Chairman, the Department of Defense R&D efforts increase $5.4 billion (an
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11 percent increase) to $54.5 billion and the National Institutes of Health budget

increases by $3.9 billion (a 17 percent increase) to $27.3 billion.

The President’s Management Agenda

In addition to funding these priority areas, the budget places emphasis on spending dollars effectively. The budget includes a scorecard to rate agency performance

and progress in five important management areas. I am pleased to point out that

the only agency to achieve a green light in any category is the National Science

Foundation. The President’s Management Agenda is as relevant to science missions

as to other agency operations, and I look forward to working with OMB to make

its provisions a more useful tool for all the agencies.

Among the other provisions of the President’s Management Agenda are investment criteria for R&D programs, pilot-tested at DOE this past year. In consultation

with agencies, industry, and academia, OMB and OSTP will broaden the design of

the criteria to all R&D and apply them to other R&D agencies in the preparation

of the 2004 budget.

The OSTP mission

In support of our Nation’s science and technology priorities, OSTP has two primary responsibilities: advising the President on S&T and providing leadership and

coordination for our government’s role in the national S&T enterprise.

In the 1950’s, in response to Soviet advances, highlighted by the launch of Sputnik, President Eisenhower saw the need for expert S&T counsel, and he invited

James Killian, then president of MIT, to Washington to serve as the head of the

first President’s Science Advisory Committee, an OSTP predecessor. Since then our

Nation’s Presidents have drawn on the expertise of our office for S&T policy advice,

and I see this as a contribution that will continue to grow in value as the challenges

we face become increasingly complex.

Within our agency, a small staff of professionals analyzes developments at the

frontiers of scientific knowledge and aids the President in shaping policy. OSTP also

provides scientific and technical information and recommendations to the Vice President, the White House Offices, the Executive Branch Agencies, and Congress.

A second responsibility of OSTP is to provide leadership and coordination across

the Administration. OSTP plays this role for a range of Administration priorities,

including national security and global stability, environment, science, and technology. The National Science and Technology Council has been an invaluable partner with OSTP in developing interagency evaluations and forging consensus on

many crucial S&T issues.

OSTP Budget Request

I ask today for your continued support of OSTP’s role in coordinating S&T policy

for the Executive Branch and for our Nation at large. OSTP’s budget request of

$5,368,000 and 40 full-time equivalent positions in fiscal year 2003 represents a net

increase of $101,000, or 1.9 percent, over our fiscal year 2002 enacted budget. The

number of full-time equivalent positions remains unchanged.

The requested amount would allow OSTP to fulfill its responsibilities in a White

House committed to an increased role for science and technology in achieving national goals, including strengthening the economy, creating high quality jobs, winning the war against terrorism, defending the homeland, protecting the environment, and improving health care.

The requested fiscal year 2003 budget will support the Director and two Associate

Directors plus a staff of seasoned professionals with diverse training and experience.

Our requested increase is essential to continue to provide quality support to the

President and information to the Congress. Since personnel costs constitute the

largest portion of OSTP’s budget, our fiscal year 2003 budget request reflects our

commitment to operate more efficiently and cost-effectively without compromising

the essential element of a top caliber science and technology agency—high quality

personnel.

National Science and Technology Council

To meet the Administration’s priority S&T goals, we must combine the efforts and

the expertise of multiple agencies. OSTP personnel support the work of the NSTC,

a Cabinet-level Council that sponsors interagency initiatives to advance key S&T

objectives.

Our distributed system of research funding also places a premium on coordination

among complementary agency programs. The NSTC improves such coordination.

NSTC membership includes Cabinet Secretaries, heads of science and technology

agencies, and key White House officials with significant S&T responsibilities. In the

process of generating specific budgetary and policy recommendations, NSTC rou-
557

tinely reaches beyond the Federal Government to seek input from a wide spectrum

of stakeholders in the public and private sectors.

An important objective of the NSTC is to guide individual agency budget priorities

for R&D and orient the S&T spending of each Federal mission agency toward

achieving national goals. To this end, in late 2001 the NSTC established an interagency Task Force on Antiterrorism Research and Development with several working groups to address broad categories of issues. The four working groups focus on:

—Biological and Chemical Preparedness

—Radiological and Nuclear Detection and Response

—Protection of Vulnerable Systems

—Social, Behavioral, and Education Sciences A fifth working group—a rapid-response team—serves as an action-oriented team to grapple with emergencies

that may arise.

Other standing NSTC committees, along with ad hoc working groups within the

NSTC, provide an effective forum to resolve crosscutting issues such as nanoscale

science, engineering, and technology, information technology R&D, and plant genome research.

The President’s Council of Advisors on Science and Technology

As Director of the Office of Science and Technology Policy, I co-chair the President’s Council of Advisors on Science and Technology with Floyd Kvamme. The

PCAST, which consists of distinguished individuals from industry, education, research institutions, and other non-governmental organizations, serves as the highest

level private sector advisory group for the President and the NSTC.

President George Bush originally established PCAST in 1990 as a means to gain

advice from the private sector and academic community on technology, scientific research priorities, and math and science education. The organization follows a tradition of Presidential advisory panels on science and technology dating back to Presidents Eisenhower and Truman.

Madam Chairman and Members of the Subcommittee, I hope that this overview

has conveyed to you the extent of this Administration’s commitment to advancing

science and technology in the national interest. I look forward to achieving bipartisan support for a national S&T strategy that will combine the resources of industry, academia, non-profit organizations, and all levels of government to protect our

citizens, advance knowledge, promote education, strengthen institutions, and develop human potential.

I ask not only for your support of OSTP’s fiscal year 2003 budget request, but I

also want you to know how much I appreciate the long-standing bipartisan support

of the Subcommittee for the Office of Science and Technology Policy and for the

science and technology enterprise. I would be pleased to answer any questions.

TRANSFERRED PROGRAMS TO NSF

Senator MIKULSKI. Thank you all very much for your testimony.

And each one of the aspects presented could be the subject of a

hearing unto itself and so—but let me go right to the core of this

hearing, which is an appropriations hearing.

As I said in my opening statement, there is an apparent 5 percent increase in the funding for the National Science Foundation,

but one-third of it comes from the transfer of three programs. I

would like to raise the issues around those three programs and

these questions are really for you, Dr. Colwell.

Why is the Administration proposing to transfer the Sea Grant

program from NOAA to the National Science Foundation and what

is it that we are trying to fix by doing this? The authorizers strongly object to the transfer of these three programs.

Dr. COLWELL. Let me say that the Administration views the

management of the NSF, of which we are very proud, to be very

strong and the merit review process to be consistent with the President’s management agenda. The Administration believes that increased use of competitive merit-based processes will improve the

performance and the effectiveness of the investments.
558

But NSF, since the Sea Grant program originated at the National Science Foundation, will operate the program as a competitive merit-based research, education and outreach program.

Senator MIKULSKI. It is not being operated that way at NOAA?

Dr. COLWELL. I am sure it is being operated effectively. Should

it be transferred, we would continue the processes.

Senator MIKULSKI. So what is the reason for moving it though,

because you started it there?

Dr. COLWELL. It is a matter of merit-based review and the integration of the management with the National Science Foundation.

Senator MIKULSKI. Well, Dr. Colwell——

Dr. COLWELL. This is not——

Senator MIKULSKI. I am not going to debate this with you, because you did not make the decision, but the transfer so it could

be merit based and peer reviewed and all that, we presumed that

is going on at NOAA.

And if it is not going on at NOAA, that needs to be done through

the authorizing and appropriations, not a transfer to you.

With all due respect. So I do not want to debate that point.

Why are they moving the Environment Education Program? One

of my concerns is that EPA graduate fellowship programs would

have no funding.

Dr. COLWELL. Let me just point out that the overhead costs at

NOAA are higher. They are lower at the National Science Foundation. That is not the sole justification, but is a point I would like

to make.

With the Environment Protection Agency transfer, we will work

out the process with the EPA. And, again, it is the management

process that fits with the President’s agenda.

The research grants program fits with the current educational

program we have underway at NSF. And, again, I would have to

say, this is not my highest priority.

PROPOSED NSF FISCAL YEAR 2003 BUDGET INCREASE

Senator MIKULSKI. Well, as you know, there are very serious objections to these three transfers. It gives the illusion that the NSF

has increased. You really are only getting a 3 percent increase

here.

Dr. COLWELL. I have to agree that it is——

Senator MIKULSKI. That is pretty spartan.

Dr. COLWELL. Three fourths percent increase.

CORE SCIENCES

Senator MIKULSKI. Which takes me, though, to the core sciences.

And I know you have been so passionate—you and Dr. Kelly and

I know Dr. Washington have been, ‘‘We have got to do the core

sciences.’’

Do you remember when you came over with your charts on how

the funding has gone up for life science, but everything else was

flat? Young people were being discouraged that there was no

money either in stipends or the opportunity for research. And then

zip, it is being cut here.

Why are the core science programs being cut? And what do you

think are the consequences of this?
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Dr. COLWELL. Well, let me point out that the core areas benefit

from the priority areas. In other words, each of the directorates

participates in the information technology priority, similarly in

nano-technology, so that if one adds the components of those initiatives that involve mathematics, chemistry, and physics, you will

find that it is more like level funding for these disciplines.

I agree that we need to invest in the future, very heavily in these

areas. We are doing this in a planned step-wise process, working

with OSTP and the Office of Management and Budget.

The budget that has been given us addresses our priorities and

it is a budget that can advance science and engineering.

Senator MIKULSKI. Well, you know, we are looking at also a decade of decline. And we are hoping that through our doubling, which

we are committed to, that these would be the areas of increase,

which would be in the core sciences.

Do you remember when I proposed my strategic research initiative and scientists all over America jumped all over me, and you

and Dr. Brody and Dr. Vest, helped sort all of that out.

Well, I am ready to fund the core, while we also look at those

things that do maintain homeland security, competitive edge and

all that. But this is the core.

Dr. COLWELL. Senator, I am married to a physicist. He reminds

me daily of the necessity of funding physics, chemistry, and mathematics. I agree with you, Senator; I do.

Senator MIKULSKI. I am going to turn to Senator Bond, but there

has been a 3 percent cut in chemistry and a 3 percent cut in physics. And——

Dr. COLWELL. When one takes into account the participation I

am not arguing. I am simply saying that when one takes into account IT and nano-tech, it is about level.

Senator MIKULSKI. Senator Bond.

FEDERAL R&D SUPPORT

Senator BOND. Thank you, Madam Chair.

While we are on a roll, I thought I would turn to Dr. Marburger

and continue this line of questioning.

According to the National Research Council report on trends and

Federal support of research and graduate education, there is ‘‘cause

for concern about the allocation of funding among fields, in the

Federal research portfolio in particular, with respect to most of the

physical sciences and engineering, whose funding in contrast with

the biomedical sciences has, with few exceptions, stagnated or declined.’’

Dr. Marburger, would you agree with the Research Council’s

view on that?

Dr. MARBURGER. Well, far be it from me to disagree with the National Research Council. The fact is that the balance issue, the

issues that are assembled under the phrase balance are important

issues. And we believe that it is necessary to tune the mechanism

of science, so that it can move forward effectively.

We do not believe that the right way to do that is to fix on arbitrary formulas of doubling or tripling, but rather to identify those

areas that need funding and address them and fund them—give
560

them priority and over a period of years bring back the necessary

balance if there is an imbalance.

In this budget for fiscal year 2003, the President has identified

a priority for science spending and funded it quite substantially in

the life sciences. And I believe that subsequent years will see an

addressing of the balance issues that are being identified at this

time.

Senator BOND. I think I heard what you said, but I am not sure

that I got an answer to my question. You said that arbitrary doubling or something like that, yes, well the Chair and I are pushing

for an arbitrary doubling, because we started out with the NIH

budget and the NSF budget here. And everybody agreed on the arbitrary doubling of NIH. And it has now so far outstripped NSF

that we are absolutely falling behind.

Do you agree that advances in biomedical science depend upon

things like fundamental research and physics, chemistry, electrical

engineering, chemical engineering, and the other things?

Dr. MARBURGER. I do, indeed. It is interesting to note that in the

accounting of the budget for fiscal year 2002, the current year, the

annual study that is made by the American Association for the Advancement of Science, takes a look at each of these areas of science,

life sciences, physical sciences, engineering, and so forth.

And in that accounting, they show that NIH, for example, owns

about 15 percent of the funding in the physical sciences; whereas

NSF owns only 12 percent of the funding for physical sciences. The

major player in the physical sciences game is the Department of

Energy, then NASA, but actually NIH is quite substantially supporting the physical sciences, so that it is not the case that funding—increased funding for NIH necessarily means that there is not

increased funding for the physical sciences as well, through their

allocations.

Through an interagency effort that was sponsored by my predecessor in the Office of Science and Technology Policy, we arranged

for NIH to provide very substantial support in basic energy

sciences through the Department of Energy, supporting beam lines

at—synchrotron light sources around the country, which are heavily used by biological science researchers.

So, the—my point is, and the point of the Administration is, that

the balance issue is a complicated issue. Many agencies are involved; many fields of science are involved. And we would like to

go at it in a sort of a rifle-shot approach, establishing priorities and

funding them systematically. And I believe that—that is what is

going to happen.

FUNDING PHYSICAL SCIENCES

Senator BOND. Well, Dr. Marburger, as I understand it, what little I know about the NIH physical science, that is more applied

science. We are talking about the need for basic science that only

comes through NSF.

And the White House has taken great pride in doubling the NIH

budget.

Can you sit here and tell me, as a scientist who is looking over

the whole area, that there is not an imbalance between what we
561

are putting in NIH and what we are putting in the basic physical

sciences?

Dr. MARBURGER. I would like to see more money in all of them.

It is hard for me to tell——

Senator BOND. No, no, no, no; that is not the question.

Dr. MARBURGER. There is no doubt that priorities have been

identified and that some areas are funded more than others, and

there is no question that life sciences has received more support.

Senator BOND. Thank you.

Dr. MARBURGER. That was done intentionally.

Senator BOND. I give up, Madam Chair, here.

I turn the questions back to you.

UNDERGRADUATE AND MINORITY PROGRAMS

Senator MIKULSKI. Well, I see I agree with that line of questioning, but let me also turn—first of all, in the areas of nano-technology, info technology and your bio-complexity. I think we are on

the right track. We would like to pursue those, but, again, I am

under very difficult time constraints this morning.

I am going to go to the attraction of undergraduate students into

science. Dr. Colwell, I am going to ask—and Dr. Washington, I

would like you both to be able to respond.

We are committed to K through 12, and the funding of informal

science education. And, again, we could talk about those, but our

undergraduates are now looking at business. They are looking at

marketing. They are looking at areas other than science and technology.

And I am not—I mean, everybody has got to follow their dream

and their passion. But today, the foreign students do comprise 40

percent of our PhD’s. You cannot go for a PhD unless you have an

undergraduate major.

Yet, this budget cuts undergraduate programs by over $10 million. The community college program declines, which is also a way

particularly for first generation people to go to college to get into

it and maybe pursue the night school programs at wonderful places

like University of Maryland and Hopkins. The the new undergraduate ‘‘tech talent’’ program declines by 60 percent.

My question is: What are the resources that are needed to truly

fund undergraduate science programs in—I mean, really to be able

to, again, attract more undergraduate students into science, and

also the whole issue of recruiting the entire American community,

which is women and minorities, who are often discouraged now because of the issue around money, particularly the minority students? And I am thinking of the Latino community, first generation, moving in.

Dr. COLWELL. Senator, you touch on one of the most perplexing,

and one of the most difficult, international problems.

I have just returned from a G–8 meeting of the heads of research

councils. This problem is universal.

In fact, in Japan, where the meeting was held, we learned that

even though the Japanese students performed better in math and

science, after they get to a university, they deflect off into business

and other areas.
562

Senator MIKULSKI. Just talk to me about our own country

today——

Dr. COLWELL. Yes, I will.

Senator MIKULSKI [continuing]. With all due respect.

Dr. COLWELL. I just wanted to point out that it is an international problem.

Having said that, we are focusing on women and minorities,

bringing them into science and engineering. Because, as you have

pointed out, it is the human resources, that are going to make the

difference if we have decreased participation in foreign students.

We have taken a different approach—or we are beginning to take

a different approach, at the National Science Foundation in integrating horizontally all of our efforts that address students, from

K–12 through continuing education, and are focusing on undergraduate education, as well. And that is to link our programs and

to link our efforts with those of other agencies.

If you look only at the specific programs addressing women and

minorities, it appears to be a decrease. In fact, we have programs

within the directorates that are addressing bringing women and

minorities, for example, into mathematics, physics and bio-sciences

directorates, so that we have, in fact, a greater effort

financially——

ADDITIONAL FISCAL YEAR 2003 FUNDS

Senator MIKULSKI. So, you are talking about leveraging and synergistic effects of the money you have?

Dr. COLWELL. Yes.

Senator MIKULSKI. Could you use more money in this area?

Dr. COLWELL. We can always use more money and, this is an

area——

Senator MIKULSKI. And I am not always talking about ‘‘always

use more money.’’ Could you use more money in this area?

Dr. COLWELL. Let me answer by saying that this is the most important problem we address as a Nation. And I would quote the

Hart-Rudman report, which says that second only to an invasion

or an attack on one of our major cities, losing leadership in science

and math and in science and math education.

Senator MIKULSKI. Well, Dr. Colwell, I—again, not to cut you

short. I am going to turn to Dr. Washington, because here is where

I am. First of all, I agree it is a national problem. I believe it is

an international problem. But my responsibility is to the United

States of America, and then to the world.

I have got to know what we really need here. Now, I know that

you are a good soldier and you have to work under OMB and everything done as vetted and checked to see who has been naughty and

who has been nice, but I really must know, and I know my colleague, here——

Dr. COLWELL. Yes.

Senator MIKULSKI [continuing]. We believe in the farm team. You

know, if sports can have a farm team, certainly science should.

Dr. COLWELL. So do I.

Senator MIKULSKI. We spend more money on our academic institutions being a farm team for the NFL than for the Nobel prize.

Now, I think we’ve got to get our priorities straight as a country,
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1 National Science Board. National Science Board Strategic Plan, p.11.

and I am ready to use whatever money muscle I have here to do

that.

Dr. Washington, how do you think we ought to do it?

Dr. WASHINGTON. Well, first of all, let me say that the——

Senator MIKULSKI. What would be required?

Dr. WASHINGTON. I think I would actually like to sort of list several things. One is that the National Science Board regards education as one of our key priorities for the Nation and for the National Science Foundation.

We are now in the process of preparing a report on the work

force and that will be ready sometime in the summer or the fall.

At the board meeting last week—we issued a diversity statement

that deals with women and minorities, and it reaffirms a very

strong commitment of the National Science Board to this issue and

with regard to additional funds. There is a—the board feels very

strongly that we can make very wise use of increased funding in

the area of education.

There are proposals out there that are very high merit and—

however, with limited funding, we cannot fund them all. And I

think that we could actually make——

NSB RECOMMENDATIONS

Senator MIKULSKI. Well, Dr. Washington, I am going to turn to

the board as we ponder how we are going to do this year’s appropriations. We would like to hear from the board what their specific

recommendations would be, particularly on this, what we consider,

crisis issue. I view this as a crisis issue.

And while we want to fund the research, we have got to fund the

people who are going to do the research. And we believe that this

excellent board of which you are a chair—I think you will continue

the great tradition—we really would like to have like five ideas on

what you think it would take to really keep the momentum going.

I think Dr. Colwell, I know has had a great commitment, but we

would like to really turn to the board to be able to do that, as well

as, of course, you, Doctor. But you are shackled in a lot of ways

for what you can ask for. So——

Dr. WASHINGTON. I think that the board can——

Senator MIKULSKI [continuing]. I am going to turn to the

unfettered——

Dr. WASHINGTON [continuing]. Easily—I should not say easily,

but the board would—will be very happy to respond.

Senator MIKULSKI. Thank you very much, Dr. Washington. I look

forward to getting better acquainted.

[The information follows:]

NATIONAL SCIENCE BOARD ACTIVITIES ON SCIENCE AND ENGINEERING EDUCATION

AND WORKFORCE

It is the National Science Board’s position that ‘‘there is no greater challenge and

no more fundamental a need than the assurance of a skilled, highly educated, and

diverse workforce (for science and engineering) and of a public that is not just well

disposed toward science, but one that is also able to use its knowledge of science

and mathematics for individual and collective improvement.’’ 1 Education and the

development of our human resource base and workforce for science and technology
564

2 ‘‘The National Science Board affirms the significance of both the intellectual merit and the

broader impacts of projects supported by NSF, and endorses actions to raise awareness of the

importance of both merit review criteria. These actions should include wide dissemination of generic examples of activities that address the broader impacts criterion, and amendments to policies and procedures for proposers, reviewers and NSF Program Managers on the use of both

criteria in the proposal and award process.’’ 3 ‘‘The National Science Foundation (NSF) invests public resources to realize ‘‘a diverse, internationally competitive and globally-engaged workforce of scientists, engineers and well prepared

citizens′′(NSF GPRA Strategic Plan for fiscal year 2001–2006, p.3). This goal, encompassing a

variety of strategies, supports NSF’s mission to strengthen scientific and engineering research

and education and their integration. In this context, the National Science Board believes such

a diverse science and engineering workforce is necessary to ensure the Nation’s health, prosperity, and security.

As Congress declared in the Science and Engineering Equal Opportunities Act of 1980, 42

U.S.C. 1885, ‘‘the highest quality science and engineering over the long-term requires substantial support, from currently available research and educational funds, for increased participation

in science and engineering by women and minorities.’’ The National Science Board recognizes

that an integral part of accomplishing NSF’s strategic goals requires engaging all those who are

under represented in the Nation’s science and engineering enterprise. Therefore, the Board

strongly supports the Foundation’s commitment to developing and strengthening all of its programs for this purpose, ensuring broader individual and institutional participation across all research and education programs.’’ 4 Charge to Education and Human Resources Committee: http://www.nsfaov/nsb/committees/

ehrcharve.htm; ‘‘EHR Committee Workplan’’ (NSB 99–179): http://www.nsf.gov/pubsys/ods/

getpub.cfin?nsb99179 5 Charge to the Task Force on National Workforce Policies (NSB 00–192) http://www.nsf.gov/

nsb/committees/nwpcharge.htm.

is the most important science policy issue confronting the Nation today. Consistent

with this view, the Board has been examining education and workforce issues from

a number of perspectives, from K–12 through the graduate and postdoctoral levels.

The Board has made numerous statements addressing all levels of education within the last several years alone, and has developed a range of recommendations on

nurturing the S&E workforce. A few of the most important include:

(1) Preparing Our Children on K–16 education in science, mathematics, engineering, and technology, March 1999. The report focuses on the need for partnerships

across sectors at the State and local levels to achieve a continuum of excellence in

K–16 education, and recommends active participation of individual scientists and

engineers and their institutions in creating a seamless K–16 system for science,

mathematics, engineering and technology education (http://www.nsf.gov/pubsys/ods/

getpub.cfm?nsb9931a);

(2) The Federal Role in Science and Engineering Graduate and Postdoctoral Education (NSB 97–235), 1997, offers recommendations for a more productive Federal/

university partnership in graduate and postdoctoral education (http://www.nsfgov/

pubsys/ods/getpub.cfm?nsb97235);

(3) Resolution NSB 01–167, October 2001, affirming the importance of Criterion

Two for evaluating proposals for funding in the Merit Review process. Criterion Two

addresses broader impacts of proposed research and education activities, including

impacts on the workforce; 2 and

(4) ‘‘National Science Board Statement Concerning NSF’s Continuing Role in Promoting Diversity in Science, Technology, Engineering and Mathematics’’ (NSB–02–

75) 3 in May 2002, focusing on the importance of broad participation of U.S. citizens

in the science and engineering workforce.

The National Science Board, primarily through its standing Committee on Education and Human Resources, 4 exercises oversight of the National Science Foundation programs and activities to support the development of human resources for

science and engineering and scientific and mathematical literacy for the general

public. The Board fully supports the objectives of the new Math and Science Partnership initiative funded through the National Science Foundation, which is in accord with the work the Board has undertaken on K–16 math and science education

policy and with the long-term NSF investment in State, rural, and urban systemic

initiatives to reform math and science education at the K–12 level.

The Board’s ongoing national policy efforts that concern the science and engineering workforce include the establishment in October 2000 of a special Task Force on

National Workforce Policies (NWP), 5 reporting to the Education and Human Resources Committee. The Task Force is charged with examining workforce development issues in a systemic framework that incorporates various levels of the educational process, industry roles and requirements, and national policies related to

education and immigration. This is one of two current Task Forces charged by the

Board to undertake special studies. The second is the Task Force on Science and
565

6 Charge to the Committee on Programs and Plans Task Force on Science and Engineering

Infrastructure (NSB 00181): http://www.nsfgov/nsb/committees/infcharge.htm.

Engineering Infrastructure, 6 reporting to the Committee on Programs and Plans,

which is charged to assess the quality and adequacy of the infrastructure for U.S.

fundamental science and engineering.

In addition to the work of the NWP Task Force, the Education and Human Resources Committee is now focusing its attention on policies for undergraduate education in science, technology, engineering, and mathematics (STEM). I will be happy

to keep you informed on our progress in ongoing policy activities related to the

workforce, especially the recommendations of the Board pursuant to the completion

of the work of the Task Force on National Workforce Policies, expected by the end

of this year.

Senator Bond.

Senator BOND. Senator, if I could——

Senator MIKULSKI. Okay.

Senator BOND. All right.

Senator MIKULSKI. I am going to turn the gavel over to Senator

Bond. I have to be somewhere really on the topic of the digital divide with my colleague, Senator Cleland, our civil rights organizations. I know that Senator Bond—well, first of all, we—you know,

we are like the Amen chorus here.

Why do I not turn it to you, Senator Bond? I know you have

management issues, and then would you please make sure that

Senator Domenici has all rights for the committee?

Thank you very much. And we look forward to further conversation on this.

NSF IG REPORT

Senator BOND [presiding]. Thank you.

Might I invite the inspector general, Dr. Boesz, to come up

please?

I want to follow up on some of these questions I raised in my

opening statement, particularly the audit of the NSF’s major research equipment and facilities. Can you summarize for us, please,

because I want to hear your side, and also I want to hear the Foundation’s response and comments on it? I would like to get it out

here in the open.

Can you summarize your audit findings and illustrate those findings with some—perhaps some examples? And based on your observations, do you believe the NSF has the ability to provide a full

cost accounting of each of its large facilities?

Dr. BOESZ. Good morning, Senator. I will be happy to respond to

that. My name is Tina Boesz, I am the Inspector General.

And we did do an audit of the large facility projects at NSF and

we do recognize that in the past year, NSF has made a concerted

effort to improve the general management and oversight of these

projects. However, it still needs to do a lot of work on improving

the financial management of the projects.

NSF’s current policies and practices do not yet provide adequate

guidance to program managers to oversee and manage the financial

aspects of the major research equipment and facilities projects.

The current policies have allowed NSF to use multiple appropriation accounts to fund the acquisition, construction, and development cost of major research equipment and facilities. This has led
566

to inconsistencies in the types of costs funded through the MRE account.

And in addition, NSF’s current practice is to track only those

costs funded from the MRE account, and not the full costs of the

projects. As a result, NSF today cannot ensure that it stays within

the authorized funding limits that have been approved by Congress

or by the National Science Board for any one particular project.

This makes it impossible without having the total costs of a

project—it is impossible for decision makers to monitor how well

the projects are going. For example, in the report, I mention the

large Hadron Collider as one project which the National Science

Board approved, the construction of two detectors at an amount approximately of $81 million. We know that NSF has already spent $2 million from the R&RA

research and related activities, account to develop software. We

also have identified approximately $57 million that NSF intends to

fund from the research and research affiliated account to fund additional software development—this is software that is necessary

for the detectors to work. They also—this money would go for implementing or putting the detectors into the collider and also the

commissioning costs.

So it does not really—the $81 million does not get at a full functioning detector operating in a collider. That is one example.

And I—so I think that the issue basically is how is NSF going

to get at the issue of total project costs. At the present time, their

systems are not able to do that.

We are told by the end of the summer, they intend to have these

policies and procedures in effect. We have reviewed some of the

drafts. They are making progress. They intend to have a large facilities manager, a deputy to the CFO in place. And we think that

by the end of the summer, we are hopeful that many of these items

will be addressed.

NSF RESPONSE TO IG REPORT

Senator BOND. Dr. Colwell, I raised this question previously and

I had hoped to have it resolved. I would like to hear your comments

on it.

Dr. COLWELL. Yes.

Senator BOND. And where you think—what can be done and

when?

Dr. COLWELL. Well, first, Senator, I genuinely want to say to you

and Senator Mikulski that I deeply appreciate your commitment to

the foundation.

NSF believes in continued improvement of our financial management and policies. The recommendation of the inspector general is

sound. The recommendations, in fact, endorse many of the changes

we already are implementing as part of the new plan for management in oversight of the large facility projects.

I would like to emphasize that it is vital to retain the flexibility

that allows these projects to realize their full potential to the Nation, like encouraging participation by EPSCoR States and institutions.

What we have done is complete our guidelines and procedures.

We are instituting internal controls to prevent mixing of R&RA
567

with MRE funds. We are revising our criteria for prioritizing large

projects. We are hiring staff and providing travel funds for increased oversight of large facilities, and we are providing management reviews of each of the MRE projects to the committee of programs and plants of the National Science Board.

I would say that the draft audit report of the I.G. does set forth

several recommendations, but in part some are characterizations

that do not fully and accurately describe our processes of the specific projects mentioned. And we will have a full report of our response no later than June 15, which we would be very pleased to

provide you, Senator Bond, because I know you are keenly interested.

Finally, let me say that the agency is recognized as one of the

best managed in the entire Federal Government, if not the best

managed. We are very proud of that.

We can always do better. We are already taking these recommendations into account and changing processes accordingly.

NSB RESPONSE TO IG REPORT

Senator BOND. Dr. Washington, any comments on this before we

turn to Senator Domenici?

Dr. WASHINGTON. No.

Senator BOND. Okay. Well, that solves that. Well, thank you.

Senator Mikulski and I are going to be the best friends of NSF. We

are going to continue to fight. It looks like we have to fight some

on our own team to get the resources. We want to make sure that

we have solved all the management problems; and the accounting

problem is a troubling one that needs to be resolved.

With that, let me turn to Senator Domenici.

Senator DOMENICI. Thank you very much, Senator.

Dr. Colwell, how are you? It is nice to see you again.

Dr. COLWELL. Thank you, Senator. It is a pleasure to see you.

HOMESTAKE MINE AND NEUTRINO RESEARCH

Senator DOMENICI. Last year when we met in June for this hearing, I had just been in Carlsbad, New Mexico, with the National

Science Foundation Committee that was reviewing the potential for

a new underground science facilit7 in the United States.

In New Mexico, the waste isolation pilot project, commonly

known as WIPP, was being looked at and evaluated. The NSF—the

committee eventually came up with the Home Stake Mine in South

Dakota as the best alternative, based on the advantages of a very

deep facility for neutrino studies.

I still am doubtful about that choice, but things have to move

along. Certainly evident in the discussions at WIPP was that many

experiments that benefit from an underground facility do not need

an ultra-deep site.

In fact, for many experiments, scientists have told me that the

extremely low background radiation and very dry conditions of

WIPP lend themselves to better experiments than relatively high

radiation backgrounds and better experiments can take place.

What is the current plan for the Home Stake Mine and the neutrino research?
568

Dr. COLWELL. Senator, we are in the process of reviewing scientifically, the proposal that has come to the NSF. There has been

no decision. We are also awaiting, in concert with the Office of

Science and Technology Policy, Dr. Marburger, a report from the

National Academy of Sciences, which will convene a work shop,

with participation by the physics community, to determine priorities for neutrino research.

I do think since, to my right is an expert in physics, that I will

ask Dr. Marburger also to comment.

Senator BOND. Dr. Marburger.

Dr. MARBURGER. There is no—thank you very much, Mr. Senator. There—the—there is no question that neutrino research is a

very interesting area of fundamental science, and that there are a

number of experiments ongoing in other countries, as well as in the

United States.

It—I believe that the choices among the different options available to us have to be made by the science community in the context

of a considered review of all the factors. I am not prepared or—nor

am I technically capable, despite my colleagues’ confidence in my

expertise, to make a statement about that at this time.

I think it is going through the right process. We are asking the

right people and I am certain that this decision will be made on

the basis of good science.

Senator DOMENICI. Doctor, while I have you. Why do I not just

go through a couple of questions with you?

First, it is nice to have you up here, too, and to visit with you.

Dr. MARBURGER. It is a pleasure.

FEDERAL COORDINATION OF NANO-TECHNOLOGY

Senator DOMENICI. One of the more recent scientific watch words

is nano-technology. The DOE’s Office of Science has a significant

nano-technology program; and three centers are being constructed,

including one center for integrated nano-technology, called CINT,

which is a combination of Sandia National Laboratory at Los Alamos National Laboratory, and NSF.

The NSF’s budget includes $221 million for nano-science and engineering, and other departments of the government seem to be

finding that nano-science fits them also. Do you think that the

many different approaches to nano-technology by various agencies

are coordinated and integrated to avoid duplication and to present

our country with the maximum productivity?

Dr. MARBURGER. Yes, I do, Mr. Senator. The National Nano-technology Initiative is coordinated through my office. There is an

interagency working group that meets frequently and tries to understand the scope of the nano-technology field.

As you probably know, nano-technology encompasses much of

chemistry and the whole promise of being able to make materials

and make what I call functional materials from scratch, atom by

atom.

Senator DOMENICI. Correct.

Dr. MARBURGER. And the capabilities are—for doing this are distributed throughout a number of different agencies. And we believe

that request in the 2003 budget accurately reflects the capabilities

as they are distributed throughout the agencies.
569

There is an 11 percent increase in this program in NSF. There

is a 53 percent increase in the DOE program to address the centers

that you described in your question.

VERY LARGE ARRAY (VLA)

Senator DOMENICI. Dr. Colwell, this is my last question. Last

year, the NSF included funding in its budget for the expansion and

modernization of the Very Large Array, commonly known as the

VLA.

Dr. COLWELL. Yes, sir.

Senator DOMENICI. It is a world class center, in radio-astronomy,

near Socorro, New Mexico. The project has been reviewed and approved by the National Science Board and also approved as a second priority for ground-based astronomy by the Decadal survey. It

is my understanding that the budget request is $5.3 million short

of providing the resources that are needed to operate the National

Radio Astronomy Observatories and to continue with the plan and

the VLA expansion. Is that number correct?

Dr. COLWELL. I am not sure about the exact number, but I must

say that we do have a crunch in the major research equipment and

that certainly is one of our priorities.

As part of the ongoing project management, there has been a

management peer review completed on the upgrade. The report is

to be released in about 2 months.

The upgrade presently is adhering to the projected time schedules and budgets, so we are on time and on budget for that particular project, Senator.

Senator DOMENICI. Well, the same thing is happening with the

National Solar Observatory at Sacramento, Peak, New Mexico. The

way the monies are being applied be NSF there is not going to be

enough for what it needs. I will just give you that question in writing and you can answer it.

Dr. COLWELL. Yes. Yes, sir. Thank you, Senator.

Senator BOND. If you have—if you want to go ahead, you may.

PHYSICAL SCIENCES SUPPORT

Senator DOMENICI. That is fine. Mr. Chairman, let me just say

that I know you and the chairperson have already spoken to the

fact that we have our national funding a little bit out of balance,

in terms of the physical sciences versus the more readily supportable NIH.

Some of us are trying to get the natural sciences back into a

rhythm where they can be doubled within a given period of time,

if that is what it takes around here to make progress.

To me, we are doing a very big disservice by not pushing funding

for the physical sciences up, as we let NIH go very, very alive with

new ventures. I think one is going to stop the other. I think you

are going to need more of the physical science break throughs to

keep the NIH programs going, as we hope they will.

We are going to continue in this subcommittee and elsewhere to

do what we can to see that the National Science Foundation is

funded.

It is the one Agency that we know. It is not exactly like the Department of Energy, which runs the programs themselves. It is a
570

different model. I believe it is very, very imperative. I would ask

you, Doctor—many people are showing great respect for you when

they ask you for your opinions.

On the same token, you work for the President, and he produced

the budget. We are all his friends. I mean, at least the two of us

are his good friends.

If it is not going to affect anybody out there, could—you tell me

whether I am on the right track that we better put some more

funding into the physical sciences.

Dr. MARBURGER. I think the track is good. The fact that is balance is important and that the machinery of science—the pieces of

the machinery have to work together.

The issue that we have, this Administration has, with the concept of doubling is its lack of specificity, its lack of prioritization,

and recognizing the differentiation among different areas of

science.

And there are certain things that need to be funded, probably deserve more money, and we will get it. We are getting the attention,

and there may be other things in that mix of activities that we call

science or even physical sciences, that are perfectly healthy and do

not require the additional funding.

So as I pointed out in response to Senator Bond’s question, I believe, yes, that physical sciences are, in fact, supported by a number of different agencies. And they—it encompasses a very wide

range of sciences.

I think it is important for us to be—to have an intelligent approach that makes distinctions, establishes priorities and funds—

pulls out the things that need funding and fund them.

It includes nano-science, instrumentation. It includes basic computer sciences. We need all of these things to keep the machinery

of science going.

And many of these have been identified as priorities in the President’s 2003 budget request and signal the intention to continue to

tune up the funding in future years.

Senator DOMENICI. Well, let me just close my comments and say

to Senator Bond, and I am sure I am speaking to the chairperson

just in the same manner, but I think it really behooves us to pursue funding of NSF to a larger extent than our President is able

to do, and where we can to boost the physical sciences.

And I close today by inviting you, Doctor, at some point in time

to come out and see Sandia’s Nano-Research Facility. Right now,

they are in some old barracks from whence some of the best nanoscience has evolved. And micro-engineering is going full blast there

too in some broken-down buildings. But they will soon be the beneficiary of a very major $400 million facility, which would put them

apparently at the cutting edge for most Americans who are interested in nano-science and micro-engineering.

I thank you for your great work.

Dr. MARBURGER. Thank you.

Dr. COLWELL. Senator, I would like to express my appreciation

to you for your commitment and support of the National Science

Foundation. We really very much appreciate it. Thank you, Senator

Domenici.

Senator DOMENICI. Thank you very much, Doctor.
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ADDITIONAL NSF FUNDING IN FISCAL YEAR 2003

Dr. Washington, I did not have any questions for you, but I do

not want you to feel that is neglecting you.

Dr. WASHINGTON. Well, I do want to just comment on one thing.

In my oral presentation, I did mention that there are many unfunded proposals that are very high in their merit rating, but due

to the lack of funds, we are not able to fund those. And I think that

additional resources would help.

LARGE FACILITY PRIORITIZATION

Senator BOND. Thank you very much, Senator Domenici. I like

Senator Domenici’s question and Dr. Washington’s answer, and I

think we will put those two together.

I do not think there is any question and I do not have a science

degree or a science background, but I do not think there is any

problem finding very useful, fruitful investments that the NSF

could make if we were able to get the dollars there, and I believe

I speak for—on a bipartisan basis for this whole committee.

But having said that, let me—let me get back to the questioning

and one of the things that I thought we would go into is the priority setting for the large research projects. We have heard complaints about the Foundation’s process for ranking and prioritizing

large facility proposals. Some have said to us that it appears to be

subjective and ad hoc.

Now, I understand the House Science Committee’s re-authorization bill requires NSF to submit a report to Congress, ranks the

project, describes how each project was prioritized. It sounds like

a good idea and, as I indicated, I wanted to ask the National Academy of Science to work with you to ascertain whether there is adequate criteria, what criteria should be used to rank and prioritize

large research facilities.

Dr. Colwell, I would like to hear your views on that. And what

do you think about the House Science Committee’s action?

Dr. COLWELL. I think that it is very, very important to note that

priority setting is an integral part of the NSF budget and planning

process. It is based really on a very rigorous internal review by

NSF senior management.

That is a project that comes out of the NSF to the Board to be

considered can really usually take years.

Senator BOND. Yes.

Dr. COLWELL. In the case of ALMA, there was about 8 years of

really very careful review and analysis.

The ultimate decision has to be made by the director with the

OMB guidance. The dominant factors are readiness, timeliness,

and appropriateness for funding in a given fiscal year.

We have to take into account balance, including disciplinary balance. It is really critical that there be flexibility in order for us to

address all of these factors.

Having said that, we do have a priority that ongoing projects

have the highest priority to ensure that they get completed, in

order to be fiscally well managed and sound. Then to simply rank

numerically, one, two, three, four, does not take into account the

need to balance disciplines and the need to be flexible.
572

Now, again, it means that the priority setting process that includes the community, the NSF, the director, senior management,

the science board, and OMB, is complicated. I do believe it has

served the Nation well for the past 50 years.

NATIONAL ACADEMY OF SCIENCES

Senator BOND. Well, you have outlined things that may be legitimate criteria that go beyond the strict science ranking, but I think

perhaps a problem may be that the—that it is not sufficiently

transparent, because there is a sentiment that there is not an understanding of how it is done.

You say, ‘‘Okay. We have to have—we have to spread it out over

disciplines to utilize for other reasons.’’ I would like to see you

work with the National Academy of Science. We would like to talk

with you about that, to make sure that when you are applying the

scientific criteria, it is readily understandable and the scientific

community knows how you are going to rank them.

Dr. Washington, any question—any comment on that?

Dr. WASHINGTON. Well, I just want to point out that we have a

standing committee of the board, a committee on programs and

plans, and they do a very thorough review of each of these projects,

and we have to explicitly approve them.

And we have a set of guidelines for how the projects are approved inside of the Science Board processes.

Dr. COLWELL. Let me add, Senator, that we do indeed call on the

National Academy of Sciences. A case in point is the Home Stake

Mine issue.

Neutrinos, I should say, to put it more appropriately, the neutrino research. There is, for example, a neutrino experiment in

Japan. There is one in Italy. There is one in Sudbury, Canada.

There is one in Antarctica, underway and to be extended, Ice Cube,

for example.

The question is how do we prioritize and how many neutrino experiments does the world need?

Senator BOND. Yes.

Dr. COLWELL. We have called on the National Academy, so I

agree with your suggestion.

NSB MEETINGS

Senator BOND. Yes. Well, I have a view on that one, too; but I

will let the scientists reach that conclusion.

Dr. Washington, you have only been on board a few days, so I

want to ask you this question. You are coming in fresh. And I

have—again, we have received complaints that the board holds

most of its meetings, including committee meetings, where much of

the board’s work is done behind closed doors with a single session

open to the public at the meetings’ end.

Do you think this is the right way to do its business? The House

Science Committee apparently included something about opening

up the meetings. What does your view on letting the public, but

primarily the scientific community, which you serve, hear the debates and the discussions and the deliberations of the board?
573

Dr. WASHINGTON. I think philosophically I agree that we should

do as much of the business as we can in the—in public open meetings.

I wonder if I could get back to you on this, because I think this

will be one of the issues that I need to have a little bit more time

to look into.

PLANT GENOME

Senator BOND. I think that would be a good idea, because this

one may become a problem. If it can be dealt with, let us save the

heartburn and not go down that path.

Dr. Colwell, I want to thank you for holding the work shop at

the Plant Science Center in St. Louis on the new math and science

partnership program. From all accounts, it was very well received.

How is the planning going for the program? What is your—what

do you see the goals this year?

Dr. COLWELL. Senator, if I may, I would like to say that the

Plant Science Genome Program is spectacular, and that we have

had great success in completing the arabidopsis genome.

We are in the process now also of establishing a microbial

genomes program, because we need to look at plant pathogens——

Senator BOND. Yes.

Dr. COLWELL.—As well as the plant genome itself. And that is

a very rich area exploit what we know about the plant genome to

determine how best to deal with resistance to disease and infection.

It is going splendidly and I would be very happy to provide any

additional information you would like.

MAIZE SEQUENCING PROJECT

Senator BOND. The—of course, the sequencing grant—and we appropriated an initial $10 million for the plant genome program and

for economically important crops such as maize, wheat, and barley.

Is the sequencing project for maize still under consideration, and

how are you using the additional funds and supporting the sequencing projects?

Dr. COLWELL. The maize project is continuing and it is my understanding that it is doing very well. I do not know of any difficulties and it is very exciting.

The rice genome project has gone extremely well; that has been

international. It is extremely useful to have partnerships with

other countries and to have this be an open process, with the data

shared in order to benefit all of humankind.

Senator BOND. Well, thank you very much, Dr. Colwell, Dr.

Marburger, Dr. Washington. We will have some additional questions for the record and I assume that maybe some other members

of the committee will as well.

CONCLUSION OF HEARINGS

I believe the Chair had said she would do it. And we thank you

very much for your participation. And with that, the hearing is recessed.
574

[Whereupon, at 11:25 a.m., Wednesday, May 15, the hearings

were concluded, and the subcommittee was recessed, to reconvene

subject to the call of the Chair.]
(575)

DEPARTMENTS OF VETERANS AFFAIRS AND

HOUSING AND URBAN DEVELOPMENT AND

INDEPENDENT AGENCIES APPROPRIATIONS

FOR FISCAL YEAR 2003

U.S. SENATE,

SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS,

Washington, DC.

NONDEPARTMENTAL WITNESSES

[CLERK’S NOTE.—The following testimonies were received by the

Subcommittee on VA, HUD, and Independent Agencies for inclusion in the record. The submitted materials relate to the fiscal year

2003 budget request.

The subcommittee requested that public witnesses provide written testimony because, given the Senate schedule and the number

of subcommittee hearings with Department witnesses, there was

not enough time to schedule hearings for nondepartmental witnesses.

PREPARED STATEMENT OF ALACHUA COUNTY, FLORIDA

Mr. Chairman: Thank you for allowing the Alachua County Board of County Commissioners to submit this written testimony before your Subcommittee regarding

two innovative initiatives the County has undertaken: (1) Partners for a Productive

Community Enhancement Initiative and (2) the Emerald Necklace Land Conservation Initiative.

PARTNERS FOR A PRODUCTIVE COMMUNITY ENHANCEMENT INITIATIVE

Alachua County seeks $2.3 million in federal funds to assist in the expansion of

its award winning neighborhood revitalization program. This public/private program

has been designed, developed and implemented to stabilize, revitalize and sustain

specific at risk communities in Alachua County. Funding is being sought as an Economic Development Initiative (EDI) through the Department of Housing and Urban

Development (HUD).

In response to a spiraling crime rate in southwest Alachua County, the Alachua

County Sheriff’s Office requested help from the Board of County Commissioners in

1993. Specifically, the Sheriff reported that 57 percent of its 911 calls came from

an area that had only 3.2 percent of the County’s population. The County Commission responded by providing $38,000 in funding for a Program Manager to staff the

Partners for a Productive Community (PPC) Program in fiscal year 1994.

The PPC was launched as a strategic planning effort with three goals: the establishment of neighborhood-based services, the development of public/private partnerships and a focus on crime prevention. The success of this project depends upon the

coordinated efforts of the Alachua County Sheriff’s Office, the Courts and the

Alachua County Department of Community Support Services. The goal of the Sheriff’s Office was to reduce the number of calls from the area, and to develop a relationship of trust with the area’s residents. The goal of the Courts was to help with

the swift prosecution of cases, and to increase personnel in key areas. Finally, the

goal of the County’s Department of Community Support Services was to develop and

implement a neighborhood needs assessment process that would determine the so-
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cial service needs in the targeted area. The Community Support Services Department was also responsible for developing public/private community partnerships,

and community based organizations comprised of tenants, property owners and

managers. Thus, this project represents a multi-agency strategy to stabilize, revitalize and sustain five specific neighborhoods of Alachua County.

In addition to improving the area’s basic infrastructure, federal funding is also

being requested to provide community recreational programs for the area’s youth.

These activities will provide positive alternatives to crime, and allow youth to participate first hand in community improvement programs. In doing so, these programs will build and encourage positive self-esteem, leadership skills and academic

achievement. To complement these programs, additional improvements will be made

in the community Safe Havens.

Finally, the requested funding will also allow the PPC to expand this successful

demonstration program into other at-risk Alachua County communities such as Archer, Florida. Specifically, the PPC will develop a partnership strategy to address

the unmet needs of health care, education, training, employment, youth recreation

and transportation for the residents of Archer. This request for federal funding is

justified by the tremendous improvements and accomplishments that have been

made in the five targeted southwest neighborhoods since 1995. These achievements

include: free community day care for 75 children, 30 community day care slots, 24

in-home day care slots, the creation of 30 new jobs by the Early Progress Center,

the reduction in 911 calls from 57 percent to 14 percent of total calls in the area,

and substantial increases in the property values for four of the five neighborhoods.

Furthermore, the implementation of seasonal recreation programs in the targeted

Communities by the Y.M.C.A. has been instrumental in providing positive, character-building activities for children, teenagers and adults. Day camps are provided

during the summer months, and backyard sports are provided at the end of the

school day during the school year. In addition, two 4–H Clubs serving 60 neighborhood children were established along with after school and community designed teen

programs. Adult literacy and GED classes were made available at a nearby school

campus. Finally, other programs have been established for the purpose of creating

a sustainable neighborhood.

These programs include quarterly informational forums concerning small business

development, educational opportunities, self-help seminars, budget management and

landlord/tenant issues. With respect to community-wide improvement programs, a

total of nine neighborhood cleanups were completed this year. With the active involvement of the residents of the neighborhoods, the Alachua County Office of Codes

Enforcement has been able to reduce from twenty to two the number of abandoned

and vandalized buildings. Furthermore, a new Waste Collection Ordinance, which

was supported by the PPC, permits the efficient and timely citation of violators.

The sustaining factor within this program is the formally organized Partners for

a Productive Community Council. The Council is the guiding force that deals with

issues and determines unmet needs. For example, a block captain organization was

started this year with the assistance of the PPC Council, and the Alachua County

Sheriff’s Office. This group monitors and manages crime prevention programs block

by block. In recognition of the numerous accomplishments described above, the PPC

received the National Association of Counties’ Achievement Award in 1996 for distinguished and innovative contributions to improving county government.

The League of Women Voters presented the County with a similar award for outstanding community service. Additionally, in December 1999, Alachua County received Official Recognition from the Executive Office of Weed and Seed for two of

the neighborhoods being served by the Partners for a Productive Community Program. Pursuant to this recognition, these communities have been awarded a

$175,000 Weed and Seed Grant for prevention and intervention strategies focusing

on Cedar Ridge and Linton Oaks neighborhoods. This grant will further strengthen

the long-term efforts to improve the quality of life in these neighborhoods. As previously indicated, the federal funding requested will also be used to expand the successful Partners Initiative into the rural community of Archer. Incorporated in 1858,

Archer is located in the southwestern portion of Alachua County. Archer and the

rural areas surrounding it have a population of 16,348, of which 16 percent fall

below the poverty level. The Town of Archer has one elementary school. Emergency

rescue, fire and police services are contracted from Gainesville and Alachua County.

There are also two public housing communities, and a small obsolete community

center that is used as a congregate meal site for senior citizens. Consequently, many

of Archer’s residents travel to Gainesville for employment, social services, recreational activities, adult and continuing education and health care.

Recently, the University of Florida School of Nursing received $200,000 from the

Florida Legislature to provide primary health care through a clinic based in Archer.
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This minimal funding does not provide adequate funding for the primary health

care needs for this area. Thus, a portion of the federal funding in this request could

be channeled through the Alachua County Health Department in our continuing effort to develop partnerships, maximize resources and expand services to the citizens

of Alachua County through our rural service initiative.

Employment opportunities, recreation for teens and outreach social services continue to be a challenge for the community of Archer. According to the Alachua County Sheriff’s Office, Archer’s crime rate is disproportionately high for a community

its size. In 2000, the Alachua County Sheriff’s Office received 2,657 calls for service.

Of the dispatched calls, 30 were assaults and batteries, and 5 were for sexual battery. The largest number of dispatched calls (869) concerned burglary and theft.

In conclusion, Alachua County requests $2.3 million in federal funding to continue

it’s highly successful and award winning neighborhood revitalization programs; and

to expand these successful model programs to other neighborhoods, including the

Town of Archer, Florida.

EMERALD NECKLACE LAND CONSERVATION INITIATIVE

Alacua County is also seeking funding for its Emerald Necklace Land Conservation Initiative. This intergovernmental land conservation initiative will provide a

publicly accessible, connected, and protected network of trails, greenways, open

spaces and waterfronts surrounding the Gainesville urban area. The County is seeking $10 million to directly provide for multiple public uses and benefits, including

passive recreation opportunities, protection of drinking water sources, watershed

restoration, and preservation of diminishing fish and wildlife habitats.

On November 7, 2000, a large turnout of Alachua County voters overwhelmingly

endorsed passage of a local land acquisition bond referendum that provides up to

$29 million in local funds to acquire and preserve environmentally significant lands.

This local initiative received broad public support, with endorsements from diverse

community interests including business, environmental and community organizations.

Alachua County is seeking state and federal matching funds to leverage this substantial local commitment to land conservation. Property acquisitions are proposed

to link existing conservation lands to provide for connected areas of protected water

quality and wildlife habitat, as well as resource-based recreational opportunities.

Federal matching funds will be critical to the success of this project. Alachua County is committed to responsible land use practices and conservation policies that encourage future growth to occur in areas of lesser environmental sensitivity with adequate infrastructure.

Alachua County has five large-scale land acquisition projects (5,000∂ acres) on

Florida’s Conservation and Recreation Lands (CARL) acquisition list.

—Paynes Prairie Additions (a large freshwater wetland and watershed, managed

as a state preserve)

—San Felasco Hammock Additions (a mature hammock and sandhill forest, with

ravines and unique sinkhole drainage features)

—Watermelon Pond (an upland sandhill and scrub forest community with important ephemeral wetlands surrounding a relatively pristine lake)

—Newnan’s Lake (a diverse flatwoods forest surrounding a major community fishing lake with declining water quality)

—Lochloosa Forest (a pine flatwoods forest, largely in commercial timber production surrounding two large fishing lakes)

These tracts are under substantial land development pressures that, if left unchecked, will further fragment and diminish their environmental, water resource,

and recreational values.

A major portion of the larger tracts proposed for acquisition are currently

timberlands. Timber production, where conducted in conformance with best management practices to avoid soil erosion and water quality degradation, is a land use

considered to be generally compatible with Alachua County’s land conservation

goals. In these areas, the purchase of development rights and conservation easements, as opposed to fee simple acquisition, are proposed as key components of the

Emerald Necklace acquisition strategy. These conservation alternatives, which

stretch the available acquisition dollars, allow the properties to continue to be used

for lower impact, more compatible land use activities while remaining under private

ownership and management.

In addition to these five larger tracts, acquisitions are proposed for smaller, but

environmentally significant properties that will preserve vital connections between

the larger tracts, creating the ‘‘Emerald Necklace.’’ These smaller, linking parcels,

often overlooked by state and federal land acquisition programs, are easier to man-
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age by a local land conservation program such as that established by Alachua County.

Although most of the properties proposed to be included in this project are relatively undisturbed, an important objective of the Emerald Necklace initiative is to

accomplish several critical restoration projects. Alachua County in consultation with

the City of Gainesville has identified four priority restoration areas:

Newnan’s Lake; a large lake in a relatively natural setting with spectacular recreational, scenic, and wildlife resources that is being adversely affected by water

quality degradation and sedimentation. Specific projects requiring federal assistance

include: investigations to determine the source of water quality problems and appropriate remedies, mechanical removal of muck and sedimentation, land acquisition

for surrounding properties, a multi-use trail system circling the lake and connecting

two existing rail-trails, and the designation and enhancement of a canoe trail connecting Newnan’s and Orange Lake via Prairie Creek and the River Styx. The St.

Johns River Water Management District is another willing partner for this restoration project, having made substantial commitments in the past and demonstrating

an interest to expand land conservation and water resources protection in the area

while enhancing public access.

Sweetwater Branch watershed restoration to improve water quality, reduce sedimentation, and to prevent adverse impacts on Paynes Prairie State Preserve (a designated National Natural Landmark) and the underlying Floridan Aquifer, the region’s primary source of drinking water. Prior to draining into the drinking water

aquifer via Alachua Sink on Paynes Prairie, this urban creek in eastern Gainesville

is severely impacted by untreated stormwater runoff and further eroded by a major

discharge of treated municipal waste-water.

Tumblin Creek watershed restoration to improve water quality, reduce sedimentation and toxicity to fish, and to prevent adverse impacts to Paynes Prairie State Preserve and the Floridan Aquifer. This severely degraded urban creek flows through

a minority neighbor-hood and a public school campus prior to transporting untreated stormwater and potentially toxic sediments into Bivens Arm Lake. This

lake, a state-designated wildlife sanctuary, provides an increasingly rare opportunity for subsistence and recreational bank fishing for low income and unemployed

residents.

The restoration of Hogtown Creek, which drains the largest watershed in Gainesville. The City of Gainesville has acquired $3.0 million in properties to establish the

Hogtown Creek Greenway. Federal funding assistance is needed for the development of recreational trails and for water quality improvements.

The Emerald Necklace initiative, with federal assistance, can serve as a model

land conservation program, demonstrating a successful local, state, and federal environmental partnership as well as effective conservation alternatives to fee simple

acquisition.

We hope that the Subcommittee will look favorably upon these worthwhile and

innovative projects as the appropriations process moves forward.

Thanks you for your consideration.

PREPARED STATEMENT OF THE ALLIANCE TO SAVE ENERGY

INTRODUCTION

My name is David Nemtzow. I am the President of the Alliance to Save Energy,

a bi-partisan, non-profit coalition of business, government, environmental, and consumer leaders dedicated to improving the efficiency with which our economy uses

energy. Senators Charles Percy and Hubert Humphrey founded the Alliance in

1977. The leadership of the Alliance is also a partnership between the private sector

and government chaired by Senator Byron Dorgan (D-ND) and co-chaired by Dean

Langford the former CEO of Osram Sylvania. Over seventy companies currently

participate in the Alliance’s Associates program and with your permission Mr.

Chairman, I would like to include for the record a complete list of the Alliance’s

Board of Directors and Associates. This list includes the nation’s leading energy efficiency firms, electric and gas utilities, and other companies committed to promoting

sound energy use.

Thank you for the opportunity to testify regarding the energy-related components

of the Environmental Protection Agency’s fiscal year 2003 budget request. Specifically, I respectfully urge you to significantly increase your support for Energy Star,

a program of the Environmental Protection Agency (EPA) which uses energy efficiency to deliver significant environmental benefits to the nation while yielding significant economic benefits for businesses, state and local government institutions
579

such as colleges and universities, public schools, and hospitals, and of course to millions of consumers who purchase Energy Star-labeled products.

The Alliance has a long history of advocating for as well as researching and evaluating the effectiveness of federal efforts to promote energy efficiency. While many

of these include laws passed by this Congress and federal regulations and standards

issued pursuant to those laws, we especially applaud those that rely not on government mandates, but on cooperative partnerships between government and business

and between the federal and state governments. The EPA Energy Star program is

a shining example of these voluntary partnerships. President Bush and Vice President Cheney have referred to Energy Star for furthering national goals of broadbased economic growth, environmental protection, energy security and economic

competitiveness simultaneously. The Climate Protection Division at EPA works

closely with private sector manufacturers, retailers, building owners, and energy

service providers, as well as state and local governments, non-profits, and other organizations to promote energy efficient products and buildings. And they do it extremely well for every tax dollar spent by the Energy Star program, 75 dollars

worth of energy savings is returned.

Energy Star Improves Energy Reliability

Mr. Chairman, last year our nation faced emergencies in energy reliability. This

could happen again. The dire situation surrounding electricity supply in California

and the West brought renewed concern about America’s energy needs. President

Bush took a large step in issuing conservation orders for federal agencies in the

midst of the crisis, yet this could do little to address demand. It was the help of

Americans who stood up to the crisis and reduced their demand that helped prevent

a further strain on supply. While this winter was mild, last year Americans staggered under massive increases in natural gas for their heating needs.

Energy Star has an important role to play in reliability. By promoting energy-efficient buildings, appliances, and other products Energy Star is helping reduce peak

demand for electricity in homes, businesses, hospitals, and government buildings.

By giving consumers guidance on heating and cooling equipment, Energy Star is

helping those homeowners take back control of their home finances.

Energy Efficiency as a Potent Energy Resource

Mr. Chairman, the debate over energy policy is in full swing on the Senate floor.

Much of that debate can be boiled down to the simple elements of supply and demand. There are those who are focusing on the supply end, calling for increasing

the supply of our energy resources through expanded drilling, power plant licensing,

and through other avenues. Then, there are those Senators who have turned their

backs to supply to focus on demand. While we at the Alliance to Save Energy applaud that endeavor we realize that we cannot save our way our out of our dependence on fossil and nuclear fuels. An effective energy policy must include a combination of measures that provides electricity, heating fuel, and motor fuel to Americans.

But to do that we must first go after the resource that is cheapest, can be delivered

most quickly, and can stand up to all environmental scrutiny that resource is energy

efficiency.

Energy efficiency isn’t just a marginal activity by which we can chip a little bit

off of our consumption and save a few bucks around the edges. Energy efficiency

measures are powerful and dynamic policy tools through which prices, supply, and

emissions can be radically changed. It seems that every year technological developments bring more and better measures at our disposal to reduce electricity demand,

make homes more energy-efficient, and go further on less gasoline. But Mr. Chairman, a strategy to maximize these resources must begin with reasoned analysis of

our energy situation, not a predisposition to one course or another.

Energy Star Capitalize on this Resource

Mr. Chairman, EPA’s Energy Star has proven to be an extremely effective way

for this nation to capitalize on the untapped potential of energy efficiency as a resource. In fact, Energy Star proves that environmental protection can not only be

achieved without harming the economy, but also that such protections can act to

boost consumer savings and economic growth.

Energy Star is composed entirely of voluntary partnerships, and they have grown

since the early 1990s to include thousands of partnerships with product manufacturers, private and public building owners and operators, homebuilders, small businesses, utilities, and retailers. The sheer number of these partnerships is a testament to the fact that energy efficiency delivers ‘‘pollution prevention at a profit.’’

Recently, the Alliance to Save Energy asked many of Energy Star’s partners if

they would support our request for a significant increase in funding for these important programs. The response was remarkable. Hundreds of businesses, from large
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manufacturers like Canon USA in New York to smaller businesses like Mayer Electrical Supply Co. in Alabama, have pledged their company’s support for these important programs. Each member of the Subcommittee with receive a copy of this letter

with the list of businesses.

Energy Star serves broad constituencies across every state in the country. Energy

Star includes over 1,600 manufacturing partners of over 30 different product types,

who make and market over 11,000 different models of Energy Star compliant products. Energy Star assists over 2,800 small businesses with their efforts to maximize

the energy efficiency of their facilities. Energy Star’s work with partners further advances the education of energy efficiency and the reduction in energy consumption.

For example, by working with builders, Energy Star helps the customers of those

builders make smart decisions decisions that will save the consumer money and the

country pollution for as long as the home is standing. Energy Star counts more than

1,600 builder partners and partners who supply products and services for energyefficient home construction. To date, more than 25,000 Energy Star labeled homes

have been built, locking in financial savings for homeowners of more than $7.5 million annually. Energy Star Buildings participants now include over 15 percent of the

nation’s total commercial, public, and industrial market, resulting in more than 25

billion kilowatt hours of energy saved.

Energy Efficiency Investments Pay Back for Years

Energy efficiency improvements achieved through Energy Star are like ‘‘the gift

that keeps on giving.’’ There are not only the immediate environmental and economic benefits, but also those that are achieved through the long term investments.

While consumers who purchase Energy Star labeled products save through the

life of the product, product manufacturers get the economic boost and incentives

from the purchases of these products. EPA predicts expenditures on energy-efficient

technology of almost $13 billion through 2010. In addition, EPA predicts cumulative

net energy bill savings for consumer and businesses of $70 billion through 2010 an

average net savings of more than $5 billion per year.

Pollution savings are as dramatic as the financial savings. In 2001 alone, reductions in greenhouse gas emissions totaled 38 million metric tons of carbon equivalent (MMTCE) that’s similar to taking more than 25 million cars off the road. Last

year, emissions of 140,000 tons of nitrogen oxides (NOX) were also prevented. Because many of the investments in energy-efficient technology promoted by Energy

Star offer a life of ten years or more, these investments will continue to deliver economic and environmental benefits through 2010 and beyond. EPA estimates that

emissions reductions averaging more than 35 MMTCE per year between now and

2010 were locked in last year based on actions already taken by Energy Star partners.

In considering the environmental value of the purchasing decisions that Energy

Star helps consumers make more wisely, it is important to realize that over 50 percent of U.S. greenhouse gas emissions in 2010 will be coming from products and

capital equipment not yet purchased. The Energy Star program seeks to influence

those capital investment decisions in a way that helps individual purchasers save

money while simultaneously helping the nation meet its clean air and greenhouse

gas emissions-reduction goals.

All of this through voluntary participation in Energy Star, and the voluntary,

market-based choices made by thousands of partners and millions of American consumers. No regulations, no government mandates.

Energy Efficiency Enhances Electric System Reliability

Mr. Chairman, Energy Star, and energy efficiency in general, also enhance the

security of our energy supply in another very significant, but largely unappreciated,

way. I am referring to the reliability of our electric system. As every member of

Congress is aware, the nation is in the midst of a transition in the structure of our

electric utility industry from a system of regulated monopolies to a competitive market for electricity generation and retail sales. While true competition should be a

boon for efficiency on the generation side, this transition brings with it many uncertainties. Under regulation, utilities planned for and built power plants to meet a

predetermined reserve generation capacity, and were assured of recovering costs

plus a profit margin through the regulatory rate-setting process. Under competition,

markets composed of electric generating businesses, investors, and consumers will

decide which supplies will be needed and economical. The ability of markets to accurately forecast future demand and potential revenues and translate those into timely investments in supply capability remains to be seen.

Compounding this problem, impending restructuring has put a chill on utilities’

interest in helping their customers to use energy more efficiently. Since 1993, utili-
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ties have slashed spending on their ‘‘demand-side management’’ programs, the largest component of which is usually energy efficiency, by 45 percent. The reason for

this is simple: in a competitive environment, electricity generators no longer have

an interest in helping their customers reduce the consumption of their product. The

foregone energy savings and peak demand reductions from energy efficiency programs have been substantial, and they have exacerbated the steady growth in demand for electricity created by our strong economy. Many summers have brought

‘‘capacity crunches’’ in various regions of the country; shortages of either electric

supply or transmission and distribution capacity needed to deal with peak demand

on hot summer days.

Energy efficiency, by reducing demand, unquestionably contributes to system reliability. Quite simply, energy efficiency reduces both the base load, the amount of

energy required to be supplied to an area or region, as well as the peak power demand. Different technologies may contribute primarily to one or the other, for example: lighting and refrigeration efficiencies reduce base load, while air conditioner efficiency improvements reduce summertime peak load. (Of course, any reduction in

base load also reduces the ‘‘height’’ of peak loads.) Thus, energy efficiency in the aggregate helps maintain adequate margins of generation supply, and by reducing the

load and stress on various points in the power distribution network, also enhances

the security of the system. Energy Star, with its broad reach, covers all the bases.

In fact, EPA works with more than 100 utilities and state energy efficiency providers that serve approximately 50 percent of the households in the United States

in promoting energy efficiency with Energy Star.

The Bush Administration’s energy policy released last year also touted the benefits of the Energy Star program and called for an expansion of this important initiative. In their report to the President, the National Energy Policy Development

Group recommended that: ‘‘the President direct the EPA Administrator to develop

and implement a strategy to increase public awareness of the sizable savings that

energy efficiency offers to homeowners across the country. Typical homeowners can

save about 30 percent (about $400) a year on their home energy bill by using Energy

Star labeled products.’’ The report further complimented the program. Noting not

only that ‘‘Conservation and energy efficiency are important elements of a sound energy policy’’ but also that ‘‘The federal government can also promote energy efficiency through programs like the Energy Star program, and search for more innovative technologies that improve efficiency and conservation through research and development.’’

The Need, and the Answer, Are Clear

The need for energy efficiency to contribute even more strongly to our nation’s

economic growth and energy security is clear. The potential for energy efficiency

programs like Energy Star to meet that need is just as clear, and just as strong.

At the end of its first decade, Energy Star is now achieving widespread recognition.

EPA’s latest market research shows that not only do most American’s recognize the

unique Energy Star label, but it also is highly influential in influencing their purchases. Each year, Energy Star recognizes companies and organizations that go

above and beyond to advance energy efficiency, and these honors speak volumes

about the program itself.

Corporations such as Maytag, located in Newton, Iowa, are being recognized this

year for their products and public education efforts that demonstrate that, working

with businesses, Energy Star can leverage private sector dollars to advance marketing efforts for efficient products. Maytag now offers 68 Energy Star qualified appliance models, which is almost 100 percent increase over last year. In 2001,

Maytag concluded a concert tour with educational messages about energy and water

savings and their ‘‘Mother Earth’’ float in the Macy’s Day Parade displayed the Energy Star logo reaching millions of consumers around the country with messages of

energy saving.

In addition to marketing efforts with Energy Star partners, the Energy Star program participates in research and is always on the lookout for new and innovative

ways to reduce energy use. This year, a West Virginia company will receive one of

the special recognition awards for technical innovation. Royal Venders, Inc. located

in Kearneysville, West Virginia has developed a new vending machine technology;

Royal Vendors’ customers use approximately 50 percent less energy. The technology

consists of a more energy efficient T8 lighting package, cooling unit, GE evaporator

fan, and software to further reduce consumption during non-peak hours. All new

2002 Royal Vendors machines are available with the optional energy efficiency package, which saves energy, money, and maintenance/service calls. With approximately

one million Royal Vendors machines in place in the United States, upgrading the

existing stock of machines will bring energy savings for years to come. Recognition
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of the technology is another way that Energy Star helps push energy efficiency advancements into more common use.

Much Has Been Accomplished, but Huge Potential Remains Untapped

The questions are often asked: ‘‘If energy efficiency is so great, why don’t consumers and businesses just do it on their own? Why do we need a government program to promote it and incent people to do it?’’ Well, we know that for reasons

sometimes hard to understand, people often don’t do what is in their own interest.

For example, people should save for their retirement, right? It’s certainly in their

long-term self-interest. Yet, the government goes to great lengths, and great expense, to goad people into saving for their retirement, through tax breaks for

401(k)s and other retirement plans, IRA’s etc. How about home ownership? It’s the

American dream to own your own home for peace of mind, long-term security, etc.

yet Congress long ago enacted the home mortgage-interest tax deduction, to convince people to buy their home and help them afford it. Compared to things like

these, the federal funds spent on Energy Star are a pittance.

There are no tax breaks or subsidies in these programs. Appropriations go directly

to fund the underlying research, program implementation, and technical assistance

to partners. These funds are hugely leveraged through EPA’s thousands of voluntary partnerships with product manufacturers, home builders, state and local

government institutions, commercial building owners, and small businesses. For

every federal dollar spent on these programs, EPA can show an average of $75 in

utility bill savings to someone, $15 in private sector investment in energy efficient

technology, reductions in greenhouse gas emissions of 1.0 MMTCE, and an addition

of over $60 to the economy.

Conclusion

Over the past decade, the Energy Star programs have demonstrated their effectiveness by achieving great savings in the nation’s collective energy bill and in energy-related pollution. But, as successful as these programs have been, much more

could be accomplished with increased funding. It is estimated that if all consumers

chose only Energy Star-labeled products over the next decade or so, the nation’s energy bill would be reduced by about $100 billion, while avoiding 300 MMTCE in

greenhouse gas emissions. If all commercial building owners took advantage of the

cost-effective efficiency-improvement opportunities, they could achieve another $130

billion in energy savings and 350 MMTCE in emissions reductions over the next 10

years.

These programs are wildly successful by any measure. They are well-run, they are

cost-effective, they have consistently exceeded their goals, and they have the support, even explicit endorsement of businesses across the country. Unfortunately,

these important programs have received a virtual level funding request for the past

2 years, even as the number of products and manufacturers in the Labeling program

has greatly expanded, the number of partners in the Buildings, Homes, and Small

Business programs have soared, and both President Bush and Vice President Cheney have publicly touted the benefits of Energy Star and promoted voluntary pollution reduction.

Energy Star’s effectiveness in terms of national energy bill savings and pollution

reduction are truly impressive. While there are many demands on the countries financial resources, I respectfully urge greater support to what works. Energy Star

has proven tremendously cost-effective and it can deliver even greater benefits to

the nation with increased funding resources.

Thank you again for the opportunity to testify.

PREPARED STATEMENT OF THE AMERICAN ASTRONOMICAL SOCIETY

EXECUTIVE SUMMARY

ASTRONOMY AND ASTROPHYSICS IN THE NEW MILLENNIUM

In the first decade of the new millennium, we are poised to take a giant step forward in understanding the universe and our place within it. The decade of the

1990s saw an enormous number of exciting discoveries in astronomy and astrophysics. For example, humanity’s centuries-long quest for evidence of the existence

of planets around other stars resulted in the discovery of extrasolar planets, and the

number of planets known continues to grow. Astronomers peered far back in time,

to only a few hundred thousand years after the Big Bang, and found the seeds from

which all galaxies, such as our own Milky Way, were formed. At the end of the decade came evidence for a new form of energy that may pervade the universe. Nearby
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galaxies were found to harbor extremely massive black holes in their centers. Distant galaxies were discovered near the edge of the visible universe. In our own solar

system, the discovery of Kuiper Belt objects—some of which lie beyond the orbit of

Pluto—opens a new window onto the history of the solar system. This report presents a comprehensive and prioritized plan for the new decade that builds on these

and other discoveries to pursue the goal of understanding the universe, a goal that

unites astronomers and astrophysicists with scientists from many other disciplines.

The Astronomy and Astrophysics Survey Committee was charged with surveying

both ground- and space-based astronomy and recommending priorities for new initiatives in the decade 2000 to 2010. In addition, the committee was asked to consider the effective implementation of both the proposed initiatives and the existing

programs. The committee’s charge excludes in situ studies of Earth and the planets,

which are covered by other National Research Council committees: the Committee

on Planetary and Lunar Exploration and the Committee on Solar and Space Physics. To carry out its mandate, the committee established nine panels with more than

100 distinguished members of the astronomical community. Broad input was sought

through the panels, in forums held by the American Astronomical Society, and in

meetings with representatives of the international astronomical community. The

committee’s recommendations build on those of four previous decadal surveys (NRC,

1964, 1972, 1982, 1991), in particular the report of the 1991 Astronomy and Astrophysics Survey Committee, The Decade of Discovery in Astronomy and Astrophysics

(referred to in this report as the 1991 survey; also known as the Bahcall report).

The fundamental goal of astronomy and astrophysics is to understand how the

universe and its constituent galaxies, stars, and planets formed, how they evolved,

and what their destiny will be. To achieve this goal, researchers must pursue a

strategy with several elements:

—Survey the universe and its constituents, including galaxies as they evolve

through cosmic time, stars and planets as they form out of collapsing interstellar clouds in our galaxy, interstellar and intergalactic gas as it accumulates

the elements created in stars and supernovae, and the mysterious dark matter

and perhaps dark energy that so strongly influence the large-scale structure

and dynamics of the universe.

—Use the universe as a unique laboratory for probing the laws of physics in regimes not accessible on Earth, such as the very early universe or near the event

horizon of a black hole.

—Search for life beyond Earth, and if it is found, determine its nature and its

distribution.

—Develop a conceptual framework that accounts for all that astronomers have observed.

Several key problems are particularly ripe for advances in this decade:

—Determine the large-scale properties of the universe: the amount, distribution,

and nature of its matter and energy, its age, and the history of its expansion.

—Study the dawn of the modern universe, when the first stars and galaxies

formed.

—Understand the formation and evolution of black holes of all sizes.

—Study the formation of stars and their planetary systems, and the birth and

evolution of giant and terrestrial planets.

—Understand how the astronomical environment affects Earth.

These scientific themes, all of which now appear to offer particular promise for

immediate progress, are only part of the much larger tapestry that is modern astronomy and astrophysics. For example, scientists cannot hope to understand the

formation of black holes without understanding the late stages of stellar evolution,

and the full significance of observations of the galaxies in the very early universe

will not be clear until it is clear how these galaxies have evolved since that time.

Although the new initiatives that the committee recommends will advance knowledge in many other areas as well, they were selected explicitly to address one or

more of the important themes listed above.

In addition, the committee believes that astronomers can make important contributions to education. Building on widespread interest in astronomical discoveries,

astronomers should:

—Use astronomy as a gateway to enhance the public’s understanding of science

and as a catalyst to improve teachers’ education in science and to advance interdisciplinary training of the technical work force.
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OPTIMIZING THE RETURN ON THE NATION’S INVESTMENT IN ASTRONOMY AND

ASTROPHYSICS

The United States has been generous in its support of astronomy and astrophysics

and as a result enjoys a leading role in almost all areas of astronomy and astrophysics. So that the nation can continue to obtain maximum scientific return on its

investment, the committee makes several recommendations to optimize the system

of support for astronomical research.

Balancing New Initiatives with the Ongoing Program

An effective program of astronomy and astrophysics research must balance the

need for initiatives to address new opportunities with completion of projects accorded high scientific priority in previous surveys.

—The committee reaffirms the recommendations of the 1991 Astronomy and Astrophysics Survey Committee (NRC, 1991) by endorsing the completion of the

Space Infrared Telescope Facility (SIRTF), the Millimeter Array (MMA; now

part of the Atacama Large Millimeter Array, or ALMA), the Stratospheric Observatory for Infrared Astronomy (SOFIA), and the Astrometric Interferometry

Mission (now called the Space Interferometry Mission, or SIM). Consistent with

the recommendations of the Task Group on Space Astronomy and Astrophysics

(NRC, 1997), the committee stresses the importance of studying the cosmic

microwave background with the Microwave Anisotropy Probe (MAP) mission,

the European Planck Surveyor mission, and ground-based and balloon programs.

The committee endorses U.S. participation in the European Far Infrared Space

Telescope (FIRST), and it endorses the planned continuation of the operation of the

Hubble Space Telescope (HST) at a reduced cost until the end of the decade.

—To achieve the full scientific potential of a new facility, it is essential that, prior

to construction, funds be identified for operation of the facility, for renewal of

its instrumentation, and for grants for data analysis and the development of associated theory.

NASA already follows this recommendation in large part by including Mission Operations and Data Analysis (MO&DA) in its budgeting for new missions. The committee recommends that funds for associated theory be included in MO&DA as well.

It recommends further that the National Science Foundation include funds for facility operation, renewal of instrumentation, and grants for data analysis and theory

along with the construction costs in the budgets for all new federally funded,

ground-based facilities. These recommendations are consistent with those of the

1991 survey. For the purpose of total project budget estimation, the committee

adopted a model in which operation amounts to 7 percent of the capital cost per

year and instrumentation amounts to 3 percent per year for the first 5 years of operation. The committee recommends that total project budgets provide for grants for

data analysis and associated theory at the rate of 3 percent of the capital cost per

year for major facilities and 5 percent per year for moderate ones. On the basis of

this model, the committee has included funds for operations, instrumentation, and

grants for a period of 5 years in the cost estimates provided in this report for most

ground-based initiatives.

—Adequate funding for unrestricted grants that provide broad support for research, students, and postdoctoral associates is required to ensure the future vitality of the field; therefore new initiatives should not be undertaken at the expense of the unrestricted grants program.

Grants not tied to a facility or program—unrestricted grants—often drive the future directions of astronomy.

Strengthening Ground-Based Astronomy and Astrophysics

The committee addresses several structural issues in ground-based astronomy and

astrophysics.

—U.S. ground-based optical and infrared facilities, radio facilities, and solar facilities should each be viewed by the National Science Foundation (NSF) and the

astronomical community as a single integrated system drawing on both federal

and nonfederal funding sources. Effective national organizations are essential to

coordinate, and to ensure the success and efficiency of, these systems. Universities and independent observatories should work with the national organizations to ensure the success of these systems.

—Cross-disciplinary competitive reviews should be held about every 5 years for

all NSF astronomy facilities. In these reviews, it should be standard policy to

set priorities and consider possible closure or privatization.

The National Radio Astronomy Observatory (NRAO) and the National Astronomy

and Ionosphere Center (NAIC) currently serve as effective national organizations for
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radio astronomy, and the National Solar Observatory (NSO) does so for solar physics. The National Optical Astronomy Observatories (NOAO) as currently functioning

and overseen does not fulfill this role for ground-based optical and infrared astronomy. A plan for the transition of NOAO to an effective national organization for

ground-based optical and infrared astronomy should be developed, and a high-level

external review, based on appropriate, explicit criteria, should be initiated.

The Department of Energy (DOE) supports a broad range of programs in particle

and nuclear astrophysics and in cosmology. The scientific payoff of this effort would

be even stronger with a clearly articulated strategic plan for DOE’s programs that

involve astrophysics.

—Given the increasing involvement of the Department of Energy in projects that

involve astrophysics, the committee recommends that DOE develop a strategic

plan for astrophysics that would lend programmatic coherence and facilitate coordination and cooperation with other agencies on science of mutual interest.

Ensuring the Diversity of NASA Missions

NASA’s Great Observatories have revolutionized understanding of the cosmos,

while the extremely successful Explorer program provides targeted small-mission

opportunities for advances in many areas of astronomy and astrophysics. The committee endorses the continuation of a vigorous Explorer program. There are now

fewer opportunities for missions of moderate size, however, despite the enormous

role such missions have played in the past.

—NASA should continue to encourage the development of a diverse range of mission sizes, including small, moderate, and major, to ensure the most effective

returns from the U.S. space program.

Integrating Theory Challenges into the New Initiatives

The new initiatives recommended below are motivated in large part by theory,

which is also key to interpreting the results. Adequate support for theory, including

numerical simulation, is a cost-effective means for maximizing the impact of the nation’s capital investment in science facilities. The committee therefore recommends

that

—To encourage theorists to contribute to the planning of missions and facilities

and to the interpretation and understanding of the results, one or more explicitly funded theory challenges should be integrated with most moderate or major

new initiatives.

Coordinating Programs among Federal Agencies

Because of the enormous scale of contemporary astronomical projects and the

need for investigations that cross wavelength and discipline boundaries, cooperation

among the federal agencies that support astronomical research often has benefits.

To determine when interagency collaboration would be fruitful, each agency should

have in place a strategic plan for astronomy and astrophysics and should also have

cross-disciplinary committees (such as DOE and NSF’s Scientific Assessment Group

for Experiments in Non-Accelerator Physics [SAGENAP] and NASA’s Space Science

Advisory Committee [SSAC]) available to evaluate proposed collaborations. The Office of Science and Technology Policy could play a useful role in facilitating such

interagency cooperation.

Collaborating with International Partners

International collaboration enables projects that are too costly for the United

States alone and enhances the scientific return on projects by bringing in the scientific and technical expertise of international partners. In many cases, international collaboration provides opportunities for U.S. astronomers to participate in

major international projects for a fraction of the total cost, as in the case of the European Solar and Heliospheric Observatory (SOHO), XMM-Newton, Planck Surveyor, and FIRST missions, and the Japanese Advanced Satellite for Cosmology and

Astrophysics mission. Valuable opportunities for international collaboration exist for

smaller missions as well. Collaborations on major projects require the full support

of the participating scientific communities, which can be ensured if the projects are

among the very highest priorities of the participants, as is the case with ALMA.

The committee affirms the value of international collaboration for ground- and

space-based projects of all sizes. International collaboration plays a crucial role in

a number of this committee’s recommended initiatives, including the Next Generation Space Telescope, the Expanded Very Large Array, the Gamma-ray Large Area

Space Telescope, the Laser Interferometer Space Antenna, the Advanced Solar Telescope, and the Square Kilometer Array technology development, and it could play

a significant role in other recommended initiatives as well.
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NEW INVESTMENTS IN ASTRONOMY AND ASTROPHYSICS

Many mysteries confront us in the quest to understand our place in the universe.

How did the universe begin? What is the nature of the dark matter and the dark

energy that pervade the universe? How did the first stars and galaxies form? Researchers infer the existence of stellar mass black holes in our galaxy and supermassive ones in the nuclei of galaxies. How did they form? The discovery of

extrasolar planets has opened an entirely new chapter in astronomy, bringing a host

of unresolved questions. How do planetary systems form and evolve? Are planetary

systems like our solar system common in the universe? Do any extrasolar planetary

systems harbor life? Even a familiar object like the Sun poses many mysteries.

What causes the small variations in the Sun’s luminosity that can affect Earth’s climate? What is the origin of the eruptions on the solar surface that cause ‘‘space

weather’’?

To seek the answers to these questions and many others described in this report,

the committee recommends a set of new initiatives for this decade that will substantially advance the frontiers of human knowledge. Table ES.1 presents these initiatives, combined for both ground- and space-based astronomy, in order of priority.

The committee set the priorities primarily on the basis of scientific merit, but it also

considered technical readiness, cost-effectiveness, impact on education and public

outreach, and the relation to other projects. The initiatives were divided into three

categories—major, moderate, and small—that were defined separately for groundand space-based projects based on estimated cost (see Chapter 1). The estimated

cost of the recommended program for the decade 2000 to 2010 is $4.7 billion in fiscal

year 2000 dollars, about 20 percent greater than the $3.9 billion inflation-adjusted

cost of the recommendations of the 1991 survey. Two of the recommended projects,

the Terrestrial Planet Finder (TPF) and the Single Aperture Far Infrared (SAFIR)

Observatory, could start near the end of this decade or at the beginning of the next.

The committee has assumed that about 15 percent of the total estimated cost for

these two projects will fall in this decade.

Major initiatives

The Next Generation Space Telescope (NGST), the committee’s top-priority recommendation, is designed to detect light from the first stars and to trace the evolution of galaxies from their formation to the present. It will revolutionize understanding of how stars and planets form in our galaxy today. NGST is an 8-mclass

infrared space telescope with 100 times the sensitivity and 10 times the image

sharpness of the Hubble Space Telescope in the infrared. Having NGST’s sensitivity

extend to 27 μm would add significantly to its scientific return. Technology development for this program is well under way. The European Space Agency and the Canadian Space Agency plan to make substantial contributions to the instrumentation

for NGST.

The Giant Segmented Mirror Telescope (GSMT), the committee’s top ground-based

recommendation and second priority overall, is a 30-m-class ground-based telescope

that will be a powerful complement to NGST in tracing the evolution of galaxies

and the formation of stars and planets. It will have unique capabilities in studying

the evolution of the intergalactic medium and the history of star formation in our

galaxy and its nearest neighbors. GSMT will use adaptive optics to achieve diffraction-limited imaging in the atmospheric windows between 1 and 25 μm and unprecedented light-gathering power between 0.3 and 1 μm. The committee recommends

that the technology development for GSMT begin immediately and that construction

start within the decade. Half the total cost should come from private and/or international partners. Open access to GSMT by the U.S. astronomical community

should be directly proportional to the investment by the NSF.

The Constellation-X Observatory is a suite of four powerful x-ray telescopes in

space that will become the premier instrument for studying the formation and evolution of black holes of all sizes. Each telescope will have high spectral resolution

over a broad energy range, enabling it to study quasars near the edge of the visible

universe and to trace the evolution of the chemical elements. The technology issues

are well in hand for a start in the middle of this decade.

The Expanded Very Large Array (EVLA)—the revitalization of the VLA, the

world’s foremost centimeter-wave radio telescope—will take advantage of modern

technology to attain unprecedented image quality with 10 times the sensitivity and

1,000 times the spectroscopic capability of the existing VLA. The addition of eight

new antennas will provide an order-of-magnitude increase in angular resolution.

With resolution comparable to that of ALMA and NGST, but operating at much

longer wavelengths, the EVLA will be a powerful complement to these instruments
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for studying the formation of protoplanetary disks and the earliest stages of galaxy

formation.

The Large-aperture Synoptic Survey Telescope (LSST) is a 6.5-m-class optical telescope designed to survey the visible sky every week down to a much fainter level

than that reached by existing surveys. It will catalog 90 percent of the near-Earth

objects larger than 300 m and assess the threat they pose to life on Earth. It will

find some 10,000 primitive objects in the Kuiper Belt, which contains a fossil record

of the formation of the solar system. It will also contribute to the study of the structure of the universe by observing thousands of supernovae, both nearby and at large

redshift, and by measuring the distribution of dark matter through gravitational

lensing. All the data will be available through the National Virtual Observatory (see

below under ‘‘Small Initiatives’’), providing access for astronomers and the public to

very deep images of the changing night sky.

The Terrestrial Planet Finder (TPF) is the most ambitious science mission ever

attempted by NASA. It is currently envisaged as a free-flying infrared interferometer designed to study terrestrial planets around nearby stars—to find them, characterize their atmospheres, and search for evidence of life—and to obtain images of

star-forming regions and distant galaxies with unprecedented resolution. The committee’s recommendation of this mission is predicated on the assumptions that TPF

will revolutionize major areas of both planetary and nonplanetary science and that,

prior to the start of TPF, ground- and space-based searches will confirm the expectation that terrestrial planets are common around solar-type stars. Both NGST and

SIM lie on the technology path necessary to achieve TPF.

The Single Aperture Far Infrared (SAFIR) Observatory is an 8-m-class spacebased telescope that will study the important and relatively unexplored spectral region between 30 and 300 μm. It will enable the study of galaxy formation and the

earliest stage of star formation by revealing regions too enshrouded by dust to be

studied by NGST, and too warm to be studied effectively with ALMA. As a followon to NGST, SAFIR could start toward the end of the decade, and it could form the

basis for developing a far-infrared interferometer in the succeeding decade.

Moderate Initiatives

Ground-Based Programs.—The committee’s recommended highest-priority moderate initiative overall is the Telescope System Instrumentation Program (TSIP),

which would substantially increase NSF funding for instrumentation at large telescopes owned by independent observatories and provide new observing opportunities

for the entire U.S. astronomical community. Its second priority among ground-based

initiatives is the Advanced Solar Telescope (AST), which offers the prospect of revolutionizing understanding of magnetic phenomena in the Sun and in the rest of the

universe. The committee’s next recommendation is that a program be established to

plan and develop technology for the Square Kilometer Array, an international centimeter-wave radio telescope for the second decade of the century. In order of priority,

the other recommended moderate initiatives are the following: The Combined Array

for Research in Millimeter-wave Astronomy (CARMA) will be a powerful millimeterwave array in the Northern Hemisphere. The study of very-high-energy gamma rays

will take a major step forward with the construction of the Very Energetic Radiation

Imaging Telescope Array System (VERITAS). The Frequency Agile Solar Radio telescope (FASR) will apply modern technology to provide unique data on the Sun at

radio wavelengths. The South Pole Submillimeter-wave Telescope (SPST) will take

advantage of the extremely low opacity of the Antarctic atmosphere to carry out surveys at submillimeter wavelengths that are possible nowhere else on Earth.

Space-Based Programs.—The committee’s top recommendation for a moderate

space-based mission is the Gamma-ray Large Area Space Telescope (GLAST). This

joint NASA-DOE mission will provide observations of gamma rays from 10 MeV to

300 GeV with six times the effective area, six times the field of view, and substantially better angular resolution than the Energetic Gamma Ray Experiment aboard

the Compton Gamma Ray Observatory. The committee’s second-priority space-based

project is the Laser Interferometer Space Antenna (LISA), which will be able to detect gravity waves from merging supermassive black holes throughout the visible

universe and from close binary stars throughout our galaxy. The committee has assumed that LISA’s cost will be shared with the European Space Agency. Four additional space-based missions have priority. The Solar Dynamics Observer (SDO), a

successor to the path-breaking SOHO mission, will study the outer convective zone

of the Sun and the structure of the solar corona. The highly variable hard-x-ray sky

will be mapped by the Energetic X-ray Imaging Survey Telescope (EXIST), which

will be attached to the International Space Station. The Advanced Radio

Interferometry between Space and Earth (ARISE) mission is an orbiting antenna

that will combine with the ground-based VLBA to provide an order-of-magnitude in-
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crease in resolution for studying the regions near supermassive black holes in active

galactic nuclei.

Small Initiatives

Several small initiatives recommended by the committee span both ground and

space. The first among them—the National Virtual Observatory (NVO)—is the committee’s top priority among the small initiatives. The NVO will provide a ‘‘virtual

sky’’ based on the enormous data sets being created now and the even larger ones

proposed for the future. It will enable a new mode of research for professional astronomers and will provide to the public an unparalleled opportunity for education

and discovery.

The remaining recommendations for small initiatives are not prioritized. The committee recommends establishing a laboratory astrophysics program and a national

astrophysical theory postdoctoral program for both ground- and space-based endeavors. Augmentation of NASA’s Astrophysics Theory Program will help restore a balance between the acquisition of data and the theory needed to interpret it.

Ultralong-duration balloon flights offer the prospect of carrying out small spacebased experiments at a small fraction of the cost of satellites. The Low Frequency

Array (LOFAR), a joint Dutch-U.S. initiative, will dramatically increase knowledge

of the universe at radio wavelengths longer than 2 m. The Advanced Cosmic-ray

Composition Experiment for the Space Station (ACCESS) will address fundamental

questions about the origin of cosmic rays. Expansion of the Synoptic Optical Longterm Investigation of the Sun (SOLIS) will permit investigation of the solar magnetic field over an entire solar cycle.

Technology

Technological innovation has often enabled astronomical discovery. Advances in

technology in this decade are a prerequisite for many of the initiatives recommended

in this report as well as for initiatives in the next decade. For the recommended

space-based initiatives, technology investment as specified in the existing NASA

technology road map is an assumed prerequisite for the cost estimates given in

Table ES.1. It is essential to maintain funding for these initiatives if NASA is to

keep these missions on schedule and within budget. The committee endorses

NASA’s policy of completing a mission’s technological development before starting

the mission. The committee similarly endorses such a policy as the NSF is applying

it to the design and development of ALMA.

For possible ground-based initiatives in the decade 2010 to 2020, investment is

required in very large, high-speed digital correlators; in infrared interferometry; and

in specialized dark-matter detectors. Future space-based initiatives require investment in spacecraft communication and x-ray interferometry, as well as technology

for the next-generation observatories. Such technology will include energy-resolving

array detectors for optical, ultraviolet, and x-ray wavelengths; far-infrared array detectors; refrigerators; large, lightweight optics; and gamma-ray detectors.

ASTRONOMY’S ROLE IN EDUCATION

Because of its broad public appeal, astronomy has a unique role to play in education and public outreach. The committee recommends that the following steps be

taken to exploit the potential of astronomy for enhancing education and public understanding of science:

—Expand and improve the opportunities for astronomers to engage in outreach

to the K–12 community.

—Establish more pilot partnerships between departments of astronomy and education at a few universities to develop exemplary science courses for preservice

teachers.

—Improve communication, planning, and coordination among federal programs

that fund educational initiatives in astronomy.

—Increase investment toward improving public understanding of the achievements of all NSF-funded science and facilities, especially in the area of astronomy.

TABLE ES. 1.—Prioritized Equipment Initiatives (Combined Ground and Space) and

Estimated Federal Costs for the Decade 2000 to 2010 1 2

Initiative Cost 3

Major Initiatives:

Next Generation Space Telescope (NGST) 4 ................................................. 1,000

Giant Segmented Mirror Telescope (GSMT) 4 .............................................. 350

Constellation-X Observatory .......................................................................... 800

Expanded Very Large Array (EVLA) 4 .......................................................... 140
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TABLE ES. 1.—Prioritized Equipment Initiatives (Combined Ground and Space) and

Estimated Federal Costs for the Decade 2000 to 2010 1 2—Continued

Initiative Cost 3

Large-aperture Synoptic Survey Telescope (LSST) ..................................... 170

Terrestrial Planet Finder (TPF) 5 .................................................................. 200

Single Aperture Far Infrared (SAFIR) Observatory 5 .................................. 100

Subtotal for major programs .................................................................. 2,760

Moderate Initiatives:

Telescope System Instrumentation Program (TSIP) ................................... 50

Gamma-ray Large Area Space Telescope (GLAST) 4 ................................... 300

Laser Interferometer Space Antenna (LISA) 4 ............................................. 250

Advanced Solar Telescope (AST) 4 ................................................................. 60

Square Kilometer Array (SKA) Technology Development ........................... 22

Solar Dynamics Observer (SDO) ................................................................... 300

Combined Array for Research in Millimeter-wave Astronomy (CARMA) 4 11

Energetic X-ray Imaging Survey Telescope (EXIST) ................................... 150

Very Energetic Radiation Imaging Telescope Array System (VERITAS) 35

Advanced Radio Interferometry between Space and Earth (ARISE) ......... 350

Frequency Agile Solar Radio telescope (FASR) ............................................ 26

South Pole Submillimeter-wave Telescope (SPST) ...................................... 50

Subtotal for moderate initiatives ........................................................... 1,604

Small Initiatives:

National Virtual Observatory (NVO) ............................................................ 60

Other small initiatives 6 ................................................................................. 246

Subtotal for small initiatives .................................................................. 306

Total .......................................................................................................... 4,670

1 Cost estimates for ground-based capital projects include technology development plus funds

for operations, new instrumentation, and facility grants for 5 years. 2 Cost estimates for space-based projects exclude technology development.

3 Best available estimated costs to U.S. government agencies in millions of fiscal year 2000

dollars and rounded. Full costs are given for all initiatives except TPF and the SAFIR Observatory. 4 Cost estimate for this initiative assumes significant additional funding to be provided by

international or private partner; see Panel Reports (NRC, 2001) for details. 5These missions could start at the turn of the decade. The committee attributes $200 million

of the $1,700 million total estimated cost of TPF to the current decade and $100 million of the

$600 million total estimated cost of the SAFIR Observatory to the current decade. 6See Chapter 1 for details.

PREPARED STATEMENT OF THE AMERICAN GEOLOGICAL INSTITUTE

To the Chairman and Members of the Subcommittee: I appreciate this opportunity

to present testimony on behalf of the American Geological Institute (AGI) in support

of fiscal year 2003 appropriations for the National Science Foundation (NSF). The

fundamental research supported by NSF has fueled our present economic growth

and contributed to improvements in our health, safety, and quality of life. This subcommittee has shown leadership in expanding the federal investment in fundamental research, and that leadership will be even more critical in the coming year.

AGI urges the subcommittee to carefully examine the president’s request. In particular, we encourage the Subcommittee to reconsider the requested program transfers, enhance support for core programs in the Geosciences Directorate, and expand

the Major Research Equipment account to accommodate both existing projects and

the requested new starts. Such increases represent an important investment in the

future of our nation and our planet at a time when we can ill afford not to make

that investment.

AGI is a nonprofit federation of 40 geoscientific and professional societies representing more than 100,000 geologists, geophysicists, and other earth scientists.

Founded in 1948, AGI provides information services to geoscientists, serves as a

voice for shared interests in our profession, plays a major role in strengthening geoscience education, and strives to increase public awareness of the vital role the geosciences play in mankind’s use of resources and interaction with the environment.

The rationale for supporting geoscience research and education has never been

stronger. Global climate change, natural disasters, energy resources, and water
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quality issues are reported daily by the news media. Geoscience research plays an

increasingly important role in an ever- growing range of scientific and societal problems, and federal investments in geoscience research should increase accordingly.

Federal investments in geoscience R&D continue to pay enormous dividends, and

both the federal government and the nation clearly have a stake in maintaining the

health of the basic science on which applications and policy decisions ultimately

must be based.

NSF support for geoscience research activities covers the entire spectrum from individual investigators to major research centers and large research programs. Many

of the most creative and important advances in geoscience research continue to be

made by individual investigators and small research teams that are the backbone

of the research and graduate education system. NSF should maintain and enhance

support for this vital component of geoscience research.

NSF Geosciences Directorate

The NSF Geosciences Directorate (GEO) is the principal source of federal support

for academic earth scientists who are seeking insight into the fundamental earth

processes that ultimately sustain and transform life on our planet. The president’s

request appears to provide a significant increase to this directorate, but the bulk

of the increase is due to several proposed transfers. In fact, all of the proposed

transfers into NSF go into this one directorate. As a result, an apparent 13.4 percent requested increase for GEO includes only a 1.2 percent increase for existing

programs. Whether or not the transfers are approved, we encourage the Subcommittee to provide real increases to existing programs in the Earth Sciences,

Ocean Sciences and Atmospheric Sciences Divisions within GEO.

AGI asks the Subcommittee to take a hard look at these proposed transfers to determine whether they fit the NSF mission or whether they are better left in their

current agencies. We recognize that these transfers reflect the president’s desire to

reward agencies like NSF that have demonstrated good management practices. But

there may be a mission mismatch, particularly in the case of the proposed transfer

of the U.S. Geological Survey’s Toxic Substances Hydrology program, which funds

highly targeted, long-term, mission-oriented research that is very different from the

fundamental, university-based research NSF supports.

NSF Major Research Equipment Account: EarthScope

AGI urges the subcommittee to support the NSF Major Research Equipment

(MRE) budget request of $35 million for a new earth science initiative called

Earthscope. Taking advantage of new technology in sensors and data distribution,

this four-pronged initiative will systematically survey the structure of the Earth’s

crust beneath North America. The fiscal year 2003 request includes support for

three components: a dense array of digital seismometers that will be deployed in

stages across the country; a 4-km deep borehole through the San Andreas Fault,

housing a variety of instruments that can continuously monitor the conditions within the fault zone; a network of state-of-the-art Global Positioning System (GPS) stations and sensitive strainmeters to measure the deformation of the constantly shifting boundary between the Pacific and North American tectonic plates. The fourth

component will move forward in conjunction with NASA: a satellite-based Synthetic

Aperture Radar mission that can measure changes in the Earth’s crust after earthquakes and volcanic eruptions. All data from this project will be available in real

time to both scientists and students, providing a tremendous opportunity for both

research and learning about the Earth.

EarthScope has broad support from the earth science community with endorsements from a number of AGI’s member societies, including the Association of American State Geologists, Geological Society of America and Seismological Society of

America. The National Science Board has not only endorsed EarthScope but has

listed it as a priority for fiscal year 2003, a first for the Board. EarthScope has received a very favorable review from the National Academy of Sciences, which released a report last year entitled Review of EarthScope Integrated Science. Some

key assertions from the report:

‘‘The committee concludes that EarthScope is an extremely well articulated

project that has resulted from consideration by many scientists over several years,

in some cases up to a decade. During that time, the proponents have become experts, not just in the observing technology but in the data handling and retrieval

systems that are necessary to manage information on this vast scale.’’

‘‘The committee concludes that EarthScope will have a substantial impact on

earth science in America and worldwide. It will provide scientists with vast amounts

of data that will be used for decades.’’
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‘‘The time is right to undertake a full exploration of the nature of the continental

crust of the United States and its underlying mantle. Such exploration is a critical

requirement for understanding the nature of the earth on which we live and how

society needs to manage and adapt to its rhythms and processes.’’

‘‘EarthScope provides an excellent opportunity to excite and involve the general

public, as well as K–12 and college students, to work together with the earth science

community to understand the earth on which they live.’’

‘‘The NSF should ensure that EarthScope’s scientific potential is effectively realized and capitalized upon by continuing its support for the disciplinary and interdisciplinary programs within NSF’s Division of Earth Sciences (EAR) that form the

scientific foundation of the project.’’

‘‘The committee concludes that InSAR is an integral part of the EarthScope vision

that will greatly enhance the effectiveness of the project, and it should not be

viewed merely as a desirable add-on to the project. The committee urges NSF and

NASA to collaborate to realize this goal at the earliest opportunity, so as to make

[Interferometric Synthetic Aperture Radar] capability a reality during the lifetime

of the other EarthScope components.’’

AGI applauds the Subcommittee’s commitment to fund existing MRE projects, but

at the same time we strongly encourage the Subcommittee to provide enough funding to accommodate the president’s requested projects as well.

NSF Support for Earth Science Education

Earth science plays a unique and essential role in today’s rapidly changing world.

Most human activities involve interactions with the planet Earth, and citizens need

a basic understanding of the Earth in order to make informed decisions about the

delicate balance between resource use and environmental protection. NSF can improve the nation’s scientific literacy by supporting the full integration of earth

science information into mainstream science education at the K–12 and college levels. The inclusion of earth science as a key component in the National Science Education Standards developed by the National Academy of Sciences presents a tremendous opportunity to achieve this goal.

AGI urges the subcommittee to support the 25 percent increase that the president

has requested for the NSF Math and Science Partnerships program with the Directorate for Education and Human Resources (EHR). These partnerships will be

awarded through competitive, merit-reviewed process, and will work to develop and

implement plans to raise math and science standards at both the classroom level

and above. Unlike the similar partnerships that would be provided to each state by

the Department of Education, the NSF partnerships will provide an opportunity for

university scientists to play an active role.

We encourage the EHR directorate to expand its interaction with the Directorate

for Geosciences to further integrate research and education activities in the geosciences. Improving geoscience education to levels of recognition similar to other scientific disciplines is important because:

—Geoscience offers students subject matter that has direct application to their

lives and the world around them. Civilization depends on responsible use of

Earth’s natural resources, including energy, minerals, and water. Moreover,

geoscience plays a key role in environmental protection.

—Geoscience exposes students to a diverse range of interrelated scientific disciplines. It is an excellent vehicle for integrating the theories and methods of

chemistry, physics, biology, and mathematics.

—Geoscience awareness is a key element in reducing the impact of natural hazards on citizens—hazards that include earthquakes, volcanic eruptions, hurricanes, tornadoes, and floods.

We urge NSF to continue playing an active role in the major transformation that

is taking place in geoscience education. For example, at the college level, geoscience

curricula are changing to better incorporate environmental issues and changing employment opportunities. Improved teaching methods and new educational technology, combined with improvements in college and pre-college geoscience curricula,

may help capture and hold the curiosity and enthusiasm of students and better prepare them for the workplace of the 21st century. At the graduate and postdoctoral

level, fellowships are increasingly critical in the geosciences because students, following the lead of industry and consumer needs, are conducting research that

crosses traditional departmental, disciplinary, and funding boundaries.

Yet some Americans, particularly those of lower income, are still significantly

underrepresented in geoscience education. The problem is substantially worse at the

graduate level. It is unlikely that any profession, including the geosciences, can

flourish without greater participation by all Americans, including those from historically underrepresented groups such as ethnic minorities and women. Continued
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NSF leadership is needed to increase recruitment and retention of students from

these groups through improved access to education and research experiences. We

must all work together to address the underlying factors that prevent such participation.

I appreciate this opportunity to provide written testimony to the Subcommittee

and would be pleased to answer any questions or to provide additional information

for the record. I can be reached at 703–379–2480 ext. 228, 703–379–2480 fax,

applegate@agiweb.org, or 4220 King Street, Alexandria VA 22302–1502.

PREPARED STATEMENT OF THE AMERICAN INDIAN HIGHER EDUCATION CONSORTIUM

Mr. Chairman and Members of the Subcommittee, on behalf of this nation’s 32

American Indian Tribal Colleges and Universities (TCUs), which comprise the

American Indian Higher Education Consortium (AIHEC), thank you for the opportunity to express our views and requests for fiscal year 2003, to the Subcommittee.

SUMMARY OF REQUESTS

Department of Housing and Urban Development (HUD).—In fiscal year 2001 a

TCU initiative was established and funded within the Community Development

Block Grant program. This competitive program is designed to help address the dire

facilities and infrastructure needs at tribal colleges. We strongly urge the Subcommittee to support this program at a minimum $3 million, included in the President’s fiscal year 2003 budget request.

National Science Foundation (NSF) Programs:

—Tribal Colleges and Universities Program (TCUP).—This $10 million program

is designed to encourage American Indians to pursue Information Technology

and other science and technology fields by building capacity at eligible institutions and assisting them in strengthening teaching and learning in ways that

improve student access, retention, and completion of science, technology, engineering and mathematics (STEM) programs. We request Congress expand the

$10 million included in the President’s budget request and fund this vital program at $15 million, to help support the addition of the Alaska Native and Native Hawaiian serving institutions as eligible participants in the program.

—Tribal College-Rural Systemic Initiative (TC–RSI) was created within NSF’s

Educational System Reform (ESR) division, to promote systemic change in the

areas of science, technology, engineering and mathematics (STEM) at K–12 reservation schools through partnerships with tribal colleges. There are currently

14 tribal college partners in this program. We strongly urge the Subcommittee

to support the ESR division budget. Additionally, we seek report language reaffirming the expansion of the tribal college program to include the remaining

18 tribal colleges.

—Louis Stokes Alliances for Minority Participation (LSAMP) Program.—In fiscal

year 2001, funding was secured for phase II of the All Nations Alliance for Minority Participation program, which provides services to tribal colleges and is

based at Salish Kootenai College in Pablo, Montana. The goal of the program

is to establish a comprehensive interactive network to substantially increase the

number of American Indians receiving baccalaureate and graduate degrees in

science, mathematics, engineering, and technology. We urge Congress to continue to support and build upon this program to help prepare all Americans for

the 21st Century workforce.

National Aeronautics and Space Administration (NASA).—In fiscal year 2001, the

tribal colleges established a formal cooperative agreement with NASA for a $1.197

million project designed to increase access, participation, and success of American

Indians in high quality pre-K to 16 mathematics, science, engineering, and technology programs. The agreement includes a tribal college liaison between AIHEC

and NASA to oversee implementation of the project and provides modest program

enrichment grants to the colleges. We urge Congress to include report language that

encourages NASA faculty exchange programs and IPA contracts with TCUs to provide on-site expertise and partnerships. We respectfully request additional report

language to encourage expansion of existing NASA programs, as well as new initiatives to address the critical technology infrastructure needs at TCUs.

BACKGROUND

The Tribal College Movement began in 1968 with the establishment of Navajo

Community College, now Dine ́ College, in Tsaile, Arizona. A succession of tribal colleges soon followed, primarily in the Northern Plains region. In 1972, the first six
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1The Tribal Colleges and Universities are accredited by regional accreditation agencies and

must undergo stringent performance review on a periodic basis. The higher education division

of the respective regional accreditation agency accredits twenty-seven of the TCUs. Two TCUs

are at the Pre-candidate stage as they complete work to attain Candidate status; one TCU is

at Candidate status. Two TCUs are accredited as ‘‘Vocational/Adult Schools’’ by the ‘‘schools’’

division of the respective regional accreditation agency.

tribally-controlled colleges established AIHEC to provide a support network for

member institutions. Today, AIHEC represents 32 Tribal Colleges and Universities

located in 12 states, begun specifically to serve the higher education needs of American Indian students. Collectively, they serve approximately 30,000 full-and parttime students from over 250 Federally recognized tribes.

All tribal colleges offer 2 year degrees, and several institutions offer baccalaureate

and graduate-level degrees. The majority of the tribal colleges are fully accredited

by independent, regional accreditation agencies.1 In addition to college level programming, TCUs provide much needed high school completion (GED), basic remediation, job training, college preparatory courses, and adult education. Tribal colleges

fulfill additional roles within their respective communities functioning as community centers, libraries, tribal archives, career and business centers, economic development centers, public-meeting places, and child care centers. Each TCU is committed to improving the lives of students through higher education and to moving

American Indians toward self-sufficiency.

Tribal colleges provide needed access to higher education for American Indians

and others living in some of this nation’s most rural and economically depressed

areas. These institutions, chartered by their respective tribal governments, were established in response to the recognition by tribal leaders that local, culturally-based

education institutions are best suited to help American Indians succeed in higher

education. TCUs combine traditional teachings with conventional postsecondary

courses and curricula. They have developed innovative means to address the needs

of tribal populations and are successful in overcoming long-standing barriers to

higher education for American Indians. Since the first tribal college was established

on the Navajo reservation, these vital institutions have come to represent the most

significant development in the history of American Indian higher education, providing access to under-represented students and promoting achievement among students who may otherwise never have known postsecondary education success.

Despite their remarkable accomplishments, tribal colleges are the most poorly

funded institutions of higher education in the country. Grossly inadequate funding

levels remain the most significant barrier to their success. Funding for basic institutional operations for 25 reservation-based colleges is provided through the Tribally

Controlled College or University Assistance Act (TCCUAA), Public Law 95–471.

Funding was first appropriated through the Act in 1981, and is still less than twothirds of its authorized level of $6,000 per full-time Indian student. In fiscal year

2002, these colleges receive $3,916 per full-time Indian student. While mainstream

institutions have a foundation of stable state tax support, TCUs must rely on annual appropriations from the Federal government for their institutional operating

funds. Because tribal colleges are located on federal trust territories, states have no

obligation to fund them. In fact, most states do not even pay our colleges for the

non-Indian state-resident students who account for approximately 20 percent of

TCU enrollments.

Inadequate funding has left many of our colleges with no choice but to operate

in severely distressed conditions. Many colleges operate in surplus trailers; cast-off

buildings; and facilities with crumbling foundations, faulty wiring, and leaking

roofs. Sustaining quality academic programs is a challenge without a reliable source

of facilities maintenance and construction funding.

Today, one in five American Indians live on reservations. As a result of more than

200 years of Federal Indian policy—including policies of termination, assimilation

and relocation—many reservation residents live in abject poverty comparable to that

found in Third World nations. Through the efforts of tribal colleges, American Indian communities receive services they need to reestablish themselves as responsible, productive, and self-reliant.

JUSTIFICATIONS

Department of Housing and Urban Development.—We are pleased that the Presi- dent’s budget request for fiscal year 2003 includes $3 million for HUD–TCUP, the

TCU initiative funded under the Community Development Block Grant program.

This competitive grants program enables our institutions to expand our roles and

effectiveness in addressing development and revitalization needs in our communities. Some areas that currently receive support include housing rehabilitation,
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business development, job training, pre-employment counseling, and job creation.

We strongly urge Congress to continue to fund this program at a minimum $3 million, included in the President’s budget request, to help ensure that much needed

community services and programs are continued.

National Science Foundation Programs:

—Tribal Colleges and Universities Technology Initiative.—In fiscal year 2001, NSF

launched a new tribal college initiative designed to enhance the quality of

science, technology, engineering and mathematics (STEM) instruction and outreach programs, with an emphasis on the leveraged use of information technologies at tribal colleges. Through the program, colleges are able to implement

comprehensive institutional approaches to strengthen teaching and learning in

ways that improve access, retention, and completion of STEM programs, particularly those that have a strong technological foundation. Through this program, colleges gain support their efforts to bridge the ‘‘digital divide’’ and prepare students for careers in information technology, science, mathematics, and

engineering fields. Because this program was broadened to include Alaska Native and Native Hawaiian serving institutions in its first year, after the original

TCU-based funding level had been determined, we request that Congress build

upon the funds requested in the President’s budget to better reflect the true

needs of the greatly expanded eligible pool, and fund this program at $15 million.

—Tribal College Rural Systemic Initiative.—NSF expanded its commitment to the

High Plains Rural Systemic Initiative (HP–RSI) and created a tribal college

component of the project. Currently there are 14 tribal colleges participating in

this program. Each college is responsible for providing leadership to the K–12

school systems located on their respective reservations. All aspects of the school

system are addressed in systemic reform, including community and parental

participation, professional development activities, broad-based business community support, convergence of multiple resources to support the initiative, and coordinated student assessment systems. All of these activities are organized and

implemented with careful consideration of the cultural academic needs of the

respective tribe and students being served. We strongly urge Congress to support the ESR division budget. We request report language to reaffirm the expansion of the tribal college program to include the 18 remaining tribal colleges

and to afford them greater access to other NSF programs.

—Louis Stokes Alliances for Minority Participation (LSAMP) Program.—The All

Nations Alliance for Minority Participation, which provides services to tribal

colleges, is based at Salish Kootenai College in Pablo, Montana. The program

brings together 25 TCUs and 32 state colleges and universities in nine states

and is designed to substantially increase the quantity and quality of American

Indian students receiving baccalaureate degrees in science, technology, engineering and mathematics (STEM). Subsequently, AMP aims to increase the

number of these students entering graduate school to attain doctorates in

STEM fields. AMP supports undergraduate systemic reform within this Alliance

with partners from both 2 and 4 year colleges; businesses and industries; national research laboratories; and local, state and federal agencies We strongly

urge Congress to continue to support the Louis Stokes Alliance for Minority

Participation program, at the highest possible level.

National Aeronautics and Space Administration (NASA).—Through AIHEC, the

tribal colleges have established a cooperative agreement with NASA to increase access, participation, and success of American Indians in high quality pre-K to16

science, mathematics, engineering, and technology programs. This cooperative

agreement includes the appointment of a TCU liaison between AIHEC and NASA

to serve as the focal point for implementation of the agreement. Additionally, the

agreement provides modest funding to help improve the capacity of each TCU to

help fulfill its technology objectives, as they relate to the mission and goals of

NASA. We urge Congress to include report language that would encourage NASA

faculty exchange programs and IPA contracts with TCUs to provide needed on-site

expertise and partnerships. Additionally, we ask for report language to encourage

expansion of existing programs, as well as new initiatives to address the technology

infrastructure needs at the Tribal Colleges and Universities.

CONCLUSION

In light of the justifications presented in this statement and the overwhelming

evidence of inequitable access to technology in rural America, we respectfully request the Subcommittee to increase funding for Tribal Colleges and Universities to

help bring economic self-sufficiency to Indian Country. Fulfillment of AIHEC’s fiscal
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year 2003 request will strengthen the missions of TCUs and the enormous, positive

impact they have on their communities. Your support will help ensure that they are

able to properly educate and prepare thousands of American Indians for the workforce of the 21st Century. Tribal colleges have been proven to be very responsible

with the Federal support they have received in the last 21 years. It is important

that the Federal Government now capitalize on its investment.

Thank you again for this opportunity to present our views and requests to this

Subcommittee. We respectfully request your continued support and full consideration of our fiscal year 2003 appropriations requests.

PREPARED STATEMENT OF THE NATIONAL CONGRESS OF AMERICAN INDIANS

On behalf of the National Congress of American Indians (NCAI) and its more

than 200 member tribal Nations, we are pleased to have the opportunity to present

written testimony on the fiscal year 2003 VA–HUD Independent Agencies appropriations bill.

The tragic events of September 11 brought forth the strength and the determination of our Nation to survive in the face of adversity. It is this same spirit that has

carried Indian Country through years of annihilation and termination. It is this

same spirit that has propelled Indian Nations forward into an era of self-determination. And it is in this same spirit of resolve that Indian Nations come before Congress to talk about honoring the Federal Government’s treaty obligations and trust

responsibilities throughout the fiscal year 2003 budget process.

The Federal trust responsibility represents the legal obligation made by the U.S.

Government to Indian tribes when their lands were ceded to the United States. This

obligation is codified in numerous treaties, statutes, Presidential directives, judicial

opinions, and international doctrines. It can be divided into three general areas protection of Indian trust lands; protection of tribal self-governance; and provision of

basic social, medical, and educational services for tribal members.

NCAI realizes that Congress must make difficult budget choices this year.

Aselected officials, tribal leaders certainly understand the competing priorities that

members of Congress must weigh over the coming months. However, the fact that

the Federal Government has a solemn responsibility to address the serious needs

facing Indian Country remains unchanged, whatever the economic or political climate may be. We at NCAI urge you to make a strong commitment to meeting the

Federal trust obligation by fully funding those programs that are vital to the creation of vibrant Indian Nations. Such a commitment, coupled with continued efforts

to strengthen tribal governments and to uphold the government-to-government relationship, will truly make a difference in helping us to create stable, diversified, and

healthy economies in Indian Country. NCAI’s statement focuses on our key areas

of concern surrounding the President’s budget request. Of course, there are numerous other programs and initiatives within the VA–HUD-Independent Agencies appropriations bill that are important to American Indians and Alaska Natives. Attached to this testimony is a breakdown of key programs for which we urge your

support at the highest possible funding level as the appropriations process moves

forward.

DEPARTMENT OF VETERANS AFFAIRS

Native American veterans have served the United States with honor and distinction since this Nation was founded, and Indian people have the highest percentage

of veterans of any population within the United States. Native people also carry the

proud distinction of being the most decorated group in this country’s history. Today,

Native veterans have many pressing needs such as housing, health care, benefits,

and other concerns that include issues unique to Indian Country.

We urge continued support for the Native American Veterans Housing Loan Program. While small, it serves an important function, providing direct loans to veterans living on trust land. Many times, these veterans are unable to secure such

loans through local banks or credit unions. In these instances, the Native American

Veterans Housing Loan Program provides the resources to help purchase, construct,

or improve their homes. A VA direct loan can be used to purchase, construct, or improve a home on Native American trust land. These loans may also be used to simultaneously purchase and improve a home or to refinance another VA direct loan

made under this program in order to lower the interest rate. The principal amount

of loans under this authority is generally limited to $80,000 or the cost of the home,

whichever is less.
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

According to statistics provided by the National American Indian Housing Council, 40 percent of the homes in tribal communities are overcrowded and have serious

physical deficiencies. The comparable national average is 5.9 percent, almost six

times lower. These types of conditions have a very real and detrimental impact. Respiratory illness, skin conditions, head lice, sleep deprivation that affects schooling,

and a lack of privacy that sometimes leads to child physical and sexual abuse can

all be traced back to the housing crisis that plagues some of our reservations.

The fiscal year 2003 request for programs under the Native American Housing

Assistance and Self-Determination Act (NAHASDA) block grant actually cuts funding for training and technical assistance and for loans and loan guarantees, and it

fails to provide adequate base funding for the NAHASDA block grant program. Per

NCAI Resolution #SPO–01–094, NCAI supports the NAIHC proposed request and

urges Congress to address the real housing need in Indian Country by appropriating

$1.1 billion in fiscal year 2003 for the NAHASDA block grant.

ENVIRONMENTAL PROTECTION AGENCY

Tribes are sovereign entities with the ability to set environmental quality standards, make environmental policy decisions, and manage programs consistent with

EPA standards and regulations. In order to preserve and enhance the environmental quality of Indian Country for present and future generations and sustain

tribal cultures, tribes deserve equitable funding for their environmental regulatory

programs. Therefore we urge support for the following funding levels:

General Assistance Program.—Tribal environmental program managers view GAP

activities, funded under the multimedia section of State and Tribal Assistance

Grants, as their highest priority. We request that the program receive $75 million,

a $25 million increase, which would provide the minimum coverage needed for all

federally recognized tribes to build capacity for EPA-delegated environmental programs.

Clean Water Act State Revolving Fund.—We request that Congress raise the program cap from 1.5 percent to 2 percent for tribal governments to help address the

estimated $650 million in wastewater treatment unmet needs in Indian Country.

Within the State Revolving Fund program, we urge continued funding for wastewater treatment facilities for Alaska Natives.

Safe Drinking Water Act State Revolving Fund.—Section 1452(i) provides a tribal

government allocation for public water system expenditures to facilitate compliance

with the national primary drinking water regulations. NCAI urges Congress to provide an additional $5 million for tribal drinking water programs under this program

and raise the program cap from 1.5 percent to 2 percent.

Cooperative Agreements.—Congress in fiscal year 2001 and fiscal year 2002 authorized EPA to enter into cooperative agreements with tribal governments and

tribal consortia to assist the agency in implementing Federal environmental programs. NCAI strongly recommends the permanent continuation of this authority

and that $2 million be appropriated for tribal-EPA cooperative agreements.

CONCLUSION

Thank you for this opportunity to present written testimony regarding VA–HUDIndependent Agencies programs that benefit Indian Country. The National Congress

of American Indians calls upon Congress to fulfill the Federal Government’s fiduciary duty to American Indians and Alaska Native people. This responsibility should

never be compromised or diminished because of any political agenda or budget cut

scenario. Tribes throughout the Nation relinquished their lands and in return received a trust obligation, and we ask that Congress maintain this solemn obligation

to Indian Country and continue to assist tribal governments as we build strong, diverse, and healthy Nations for our people.

ATTACHMENT A: VA–HUD-INDEPENDENT AGENCIES APPROPRIATIONS BENEFITING

TRIBES

Department of Veterans Affairs

The President’s budget increases the VA’s discretionary budget authority from

$24.7 billion to $26.4 billion, with much of the increase going toward health care

for veterans.
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(Dollars in millions)

VA Fiscal year 2001

enacted

Fiscal year 2002

enacted

Fiscal year 2003

request

Native American Veterans Housing Loan Program ................................... $.54 $.54 $.56

Department of Housing and Urban Development

The President has requested $31.4 billion for HUD, a $2 billion increase in budget

authority, including $204 million for 34,000 new housing vouchers to subsidize rental housing for the poor and a $238 million increase to the HOME investment partnerships program for housing rehabilitation and to encourage home ownership

among low- and moderate-income households. The budget cuts several NAHASDA

programs, but provides a $3 million increase for the Indian Community Development Block Grant.

(Dollars in millions)

HUD Fiscal year 2001 enacted

Fiscal year 2002 enactedFiscal year 2003

request

Indian Housing Block Grant ...................................................................... $650.0 $648.6 $647.0

Title VI Loans ............................................................................................. 6.0 6.0 2.0

Section 194 Indian Housing Loan Guarantee Program1 .......................... 6.0 6.0 5.0

Indian Community Development Block Grant 2 ......................................... 71.0 70.0 73.0

Rural Housing and Economic Development (small amt to tribes) ........... 25.0 25.0 0

Empowerment Zones Round II ................................................................... 200.0 45.0 0

1 Fiscal year 2002 funding for the Section 184 Loan Guarantee Program will subsidize a loan principal of not more than $234.3 million. The fiscal year 2003 request will support a loan principal of not more than $197 million. 2 The $4.3 billion appropriated for the Community Block Grant Development program in fiscal year 2002 includes the following additional set-asides for Indian programs: $4 million for Alaska Native and Native Hawaiian-Serving Institutions; $2.6 million for the National American Indian Housing Council; and $3 million for competitive facilities grants for tribal colleges and universities. The fiscal year 2003 request of

$4.4 billion for CDBG includes level funding for tribal colleges, $2 million for Alaska Native and Native Hawaiian-Serving Institutions, and $2 million for the NAIHC.

NCAI Resolution #SPO–01–094 Supports $1.075 billion for the Indian Housing Block Grant.

Environmental Protection Agency

The President’s budget would cut EPA spending from $7.9 billion in fiscal year

2002 to $7.6 billion in fiscal year 2003, primarily by eliminating $300 million in

Congressional earmarks and projects that were not requested in the Administration’s fiscal year 2002 budget. The budget includes $4.1 billion for general operations, the highest funding level ever for regulatory, enforcement and State grants,

but would freeze hiring to fill vacancies in the enforcement division while shifting

$15 million to the States for increased enforcement activities.

(Dollars in millions)

EPA Fiscal year 2001

enacted

Fiscal year 2002

enacted

Fiscal year 2003

request

Environmental Programs and Management .............................................. $2,083 $2,055 $2,048

Water and Wastewater Grants for Alaska Natives and Rural Areas ........ 35 40 40

Clean Water State Revolving Fund Tribal ................................................. 20.2 20.2 18.2

Safe Drinking Water State Revolving Fund ............................................... 823 850 850

Superfund ................................................................................................... 1,267 1,270 1,000

Leaking Underground Storage Tank Facilities ........................................... 71 73 72

State and Tribal Assistance Grants .......................................................... 3,621 3,733 3,464

Tribal General Assistance Grants .............................................................. 52.5 52.5 52.5

American Indian Tribal Environmental Office ........................................... n/a 9.9 10.2

NCAI recommends that the 2003 appropriation for EPA include permanent authorization for tribal cooperative agreements; a $25 million increase for the tribal

General Assistance Program (GAP) to provide minimum coverage to all federally

recognized tribes; $10 million for Section 106 Clean Water Act grants; a $20 million

earmark for tribes under the new watershed management grants to States; increased funding for tribal air quality programs; and, a permanent increase in the

tribal set-aside from 1.5 percent to 2 percent for both the Clean Water Act State

Revolving Fund and the Safe Drinking Water Act program.
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PREPARED STATEMENT OF THE AMERICAN PSYCHOLOGICAL ASSOCIATION

The American Psychological Association (APA) is a scientific and professional organization of more than 155,000 psychologists and affiliates. Because our behavioral

scientists play vital roles within the National Science Foundation (NSF), the National Aeronautics and Space Administration (NASA) and the Department of Veterans Affairs (VA), APA will address the proposed fiscal year 2003 research budgets

for each of these three agencies.

NATIONAL SCIENCE FOUNDATION

As a member of the larger science community and an active leader in the Coalition for National Science Funding (CNSF), APA strongly recommends increasing

NSF’s overall budget by $718 million (or 15 percent) above the fiscal year 2002 level

of $4.79 billion, bringing the agency’s budget to $5.508 billion in Fiscal Year 2003.

We also would like to highlight the importance of fully funding two new NSF priorities in 2003, the special research initiative in the Social, Behavioral and Economic

Sciences, slated to receive $10 million in its first year of support, and the Science

of Learning Centers (SLCs), proposed at $20 million.

Core Psychological Research at NSF

NSF is the only federal agency whose primary mission is to support basic research

and education in math, engineering and science including behavioral and social

science. NSF’s investment in basic research across these disciplines has allowed for

extraordinary scientific and technological progress, ensuring continued economic

growth, improved prevention of disease, and strengthened national security. NSF’s

concern for education from kindergarten through graduate school allows for what we

know about developmental processes, cognition, learning, and the environment to

best construct the schools in which our children learn and to well inform the teachers who educate them, enabling our citizens to meet the intellectual and social challenges of the Twenty-First Century.

The necessity to support basic research continues to be paramount. With the increasing globalization of science, the U.S. faces greater-than-ever competition for scientific innovation and discovery. At the same time that we must work in international communities of researchers and scholars, we must find new ways to make

our country safe from threats not only to our physical structures but to the American tradition of free and shared science and to the many challenges we face at

home. Our best defense is an offensive strategy in which we continue to be the best

producer of science, ideas, and technology. We can do this only on the basis of a

solid foundation of basic research.

APA and CNSF recommend that additional funds for NSF above the fiscal year

2002 baseline be devoted to achieving the following objectives: (1) increase by $220

million the funding for core programs of research and education; (2) increase funding by $220 million to continue supporting key initiatives, including nanotechnology,

biocomplexity, information technology research, workforce development (including

mathematics and science partnerships), mathematics research, and a new priority

area in social, behavioral and economic sciences; (3) provide an additional $130 million to increase grant size and duration; (4) provide an additional $100 million for

Major Research Equipment and Facilities Construction and Major Research Instrumentation; (5) provide an increase of $25 million to assist with homeland security

and anti-terrorism efforts; and (6) provide $23 million to increase graduate student

stipends.

Although psychologists receive funding from diverse programs within NSF, most

core psychological research is supported by the Social, Behavioral and Economic

Sciences Directorate (SBE), with its focus on the variables that determine human

behavior across all ages, affect interactions among individuals and groups, and decide how social and economic systems develop and change. A number of psychological scientists funded through SBE also lead ongoing basic research efforts with

direct relevance to the events of September 11 and their aftermath, and APA applauds SBE for moving quickly to provide psychological researchers with emergency

grants (through the agency’s Small Grants for Exploratory Research program) to address time-critical issues such as trauma prevention and intervention and largescale risk management.

The Biological Sciences Directorate provides support for psychologists who ask

questions about the very principles and mechanisms that govern life at the level of

the genome and cell, or at the level of a whole individual, family or species. Our

increasing sophistication about the genetic mechanisms of life allows us to ask increasingly complex questions about brain functioning. It also can lead us to ask how

the genome is translated into a functioning, thriving organism that is, what is the
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exchange of gene and environment that decides whether the individual is more likely to learn than to forget, to love than to hate? These kinds of question cannot be

answered by biology alone. An understanding of behavior requires analysis at all

levels of functioning, from the cell to the whole organism, and an appreciation of

the complex ways in which the environment impacts on the individual. It also requires description of the manner in which such interactions are written into the individual’s history, and then serve to shape its behavior in the future.

Special Research Priority in the Social, Behavioral and Economic Sciences

Given the pace and demands of our increasingly technological society, APA strongly supports NSF’s proposed $10 million initial investment in fiscal year 2003 for a

new priority area in Social, Behavioral and Economic Sciences to further explore the

complex interactions among society, its institutions, and technology. This priority

area will examine human issues in the design and development of technological advances along with human adaptation to these dramatic changes, enabling us to develop technologies which enhance human capabilities while giving us tools to take

greater advantage of technology and better anticipate and prepare for its consequences. The rapidly changing societal capabilities associated with technological

development provide us with new opportunities to interact with the natural environment as well as with social and economic systems, and the new SBE priority area

also will seek to address questions about these human-ecosystem interactions in

support of the Administration’s climate change research program. APA expects that

the initial level of support for the special SBE research priority area will be a ‘‘down

payment’’ on more significant investments in future years.

New Science of Learning Centers

Investment in research on the learning process, the context of learning and learning technologies is crucial to both successful educational reform and effective workforce development, and the new NSF Science of Learning Centers (SLCs) will serve

as the foundation-wide centerpiece of the Learning for the 21st Century Workforce

priority area in fiscal year 2003. These multidisciplinary, multi-institutional centers

will build collaborative research communities of scientists, educators, community

groups and industries capable of addressing fundamental questions in learning and

applying that knowledge to schools and workforce contexts.

APA strongly recommends that Congress support the new SLCs, with the longerterm goal of making strides in math and science education analogous to the tremendous leaps forward we currently are making by applying research on reading. These

improvements in our understanding of how children learn to read and how teachers

can better help them are due in large part to research sponsored by the National

Institute of Child Health and Human Development at the National Institutes of

Health. NSF is uniquely poised to support similar breakthroughs in the critical

areas of math and science learning, skills which are particularly critical in our technologically-sophisticated world. NSF scientists can engage investigators from the

range of disciplines it supports, from cognitive psychology and neuroscience to geography, engineering and robotics, and examine learning in adult and child populations to support both workforce and formal education needs.

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

Humans perform critical functions throughout all aspects of every NASA mission

from concept development, system design and acquisition through operations. People

are critical elements of complex aerospace systems. The ability to measure and predict human performance through all mission phases enhances mission safety and

mission success. NASA Human Factors research and technology enhance the national capability to explore the stars and understand our own planet while contributing to the safety, affordability and efficiency of aerospace operations.

Office of Biological and Physical Research

In order to continue advancing our understanding of human adaptation to space,

APA joins the Federation of American Societies for Experimental Biology (FASEB)

in recommending an annual increase of $100 million for investigator initiated, peer

reviewed research in fiscal year 2003 for the Office of Biological and Physical Research (OBPR).

NASA is demonstrating an unprecedented interest in psychological and behavioral

research. That interest stems from historical observations of astronauts and cosmonauts living aboard Mir and the recognition that a multicultural workforce is building and occupying the International Space Station. Psychologists are involved at

many levels within NASA, studying everything from basic neuroscience in rats to
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optimization of the habitability of next-generation space suits. Much of this research

has been funded OBPR.

The Biomedical Research and Countermeasures and Advanced Human Support

Technologies Programs are both involved in reducing threats to humans exposed to

physiological and psychological health risks during space flight. NASA has focused

considerable energy on sleep and circadian rhythms, performance related to

neurovestibular function, psychophysiological monitoring, and cognitive performance

on short-duration missions. There is increasing recognition, however, that NASA

needs to devote greater attention to behavioral health and psychosocial adaptation

as these factors could significantly impact the success of long- duration missions.

Human factors considerations for long-duration spaceflight extend far beyond

physical crew interfaces into considerations of behavioral, psychological, physiological, and operational factors’ influence on human performance and safety. The

use of isolation chambers such as the Bioplex facility at Johnson Space Center offer

the potential, and have been used successfully, to study behavior and performance

under conditions of extended isolation and confinement. As such, it represents a

high fidelity simulation facility for the development of advanced technologies and

methodologies for monitoring individual and interpersonal behavior, as well as for

studies of countermeasure testing and evaluation.

Office of Aero-Space Technology

This arm of NASA makes good use of psychological science closer to Earth. APA

applauds NASA for its attention to human factors research and recommends at least

the $220.1 million requested for the Office of Aeronautics and Space Technology

(OAST) to allow for critical Aviation Systems Safety and Airspace Systems programs

to continue as planned.

Two of NASA’s long-term interests have been to reduce the aircraft accident rate

and increase the aviation throughput. The vast majority of accidents are attributed

to human error. Recent increases in air traffic volume and airport delays make

these challenges especially daunting. NASA will need to make an extraordinary investment in human factors research to achieve these ambitious milestones. Fortunately, several NASA programs support these important goals most notably the

Aviation Safety Program but also Aerospace Operations Systems, Engineering for

Complex Systems, Advanced Air Transportation Technologies and Virtual Airspace

Modeling Systems. Critical research focuses on data mining, modeling and visualization for the proactive management of aerospace system risk, allowing for the monitoring of incidents and normal operations to identify precursors of error and mitigate risk before accidents happen.

However, in order to do this, enormous volumes of qualitative and quantitative

data must be transformed into useful information for expert analysts through the

application of new information technology tools. For example, the Aviation Safety

Reporting System (ASRS) is a national aviation safety resource consisting of firsthand verbal reports of accidents and mishaps from a broad spectrum of aviation professionals (e.g., pilots, controllers, mechanics, dispatchers, flight attendants). These

reports provide critical data for expert trend analyses and queries that are then

made available to the public and private sector. Further, the Aviation Performance

Measuring System (APMS) provides a set of information technology tools to support

content analysis of the hundreds of flight data recorder parameters (even thousands

in the case of the Boeing 777) that are collected on every commercial airline flight.

These tools allow the reconstruction of problems and entire flights from the collected

data set and can identify common problems across flights. Finally, from the control

tower, the Performance Data Analysis and Reporting System (PDARS) routinely collects, processes and disseminates Air Traffic Control radar track data for use in

identifying normal operations and anomalous flightpaths.

Collectively, such data tracking systems will become part of a model to assess the

impact of perturbations in the National Airspace System.

Perturbations could include proposed technical innovations (such as advanced automation-assisted decision support) and changes in organizational structure or procedures, as well as accidents or terrorist attacks. Such a model will require a distributed simulation capability that can represent the full range of system behaviors

at multiple levels of analysis, including people the current backbone of the aviation

system.

DEPARTMENT OF VETERANS AFFAIRS

Investment in investigator-initiated research projects at the VA have led to an explosion of knowledge that promises to advance our understanding of disease and

unlock new strategies for prevention, treatment and cures. Psychological researchers

play crucial roles in addressing the many health challenges still confronting the vet-
601

eran community. APA joins the Friends of VA Medical Care and Health Research

(FOVA), a coalition of over 50 organizations concerned about veterans’ health, in

recommending $460 million for the VA Medical and Prosthetic Research Account in

fiscal year 2003. We also strongly support the Subcommittee’s recommendation to

expand the VA’s Mental Illness Research, Education and Clinical Center (MIRECC)

program.

Psychological Research in the VA

Through its Medical and Prosthetic Research Account, the VA funds intramural

research that supports its clinical mission to care for our nation’s veterans. VA psychologists play a dual role in providing care for veterans and conducting research

in all areas of health, including high-priority areas such as mental health, agingrelated disorders and substance abuse. Psychological researchers continue to make

great strides in: improving the diagnosis and treatment of Post Traumatic Stress

Disorder; developing more sensitive diagnostic tools to detect the early stages of Alzheimer’s disease and other dementias (problems increasingly seen both in our veterans and our aging population in society at large); and developing and implementing important substance abuse prevention programs. Because research has

such a positive impact on the quality of care, APA strongly encourages the VA to

ensure that neither research nor care suffers by developing mechanisms to designate time for clinicians to conduct research.

Mental Illness Research, Education and Clinical Centers

APA supports the important work being conducted by the eight VA Mental Illness

Research, Education and Clinical Centers (MIRECCs) currently in existence

throughout the country, but is disappointed that the VA did not increase the number of MIRECCs in fiscal year 2002 as directed by the Senate in last year’s report.

These MIRECCs sponsor important basic and applied research as well as educational outreach to the VA community, and have been particularly effective in

translating the findings of basic research into improved treatment protocols. The

MIRECCs substantially support and upgrade the provision of mental illness services

in their areas, but they exist in only eight of 22 networks and are clustered on the

East and West coasts. We recommend that the Subcommittee provide funds for the

establishment of three additional MIRECCs in fiscal year 2003.

Summary

APA appreciates this opportunity to provide written testimony in support of psychological research sponsored by NSF, NASA and the VA, and strongly encourages

the Subcommittee to reaffirm its commitment to basic behavioral science at all three

agencies. We recognize that this year there is a special need to strengthen research

programs and operations related to national security, and we hope that Congress

also will reinvest in the longer-term basic research which enables us to meet the

full range of social, economic, health, and security challenges ahead.
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1These groups have endorsed ‘‘The River Budget 2003’’, a report of national funding priorities

for local river conservation. A list of groups endorsing the River Budget can be viewed at http:/

/www.americanrivers.org/riverbudget/default.htm

PREPARED STATEMENT OF AMERICAN RIVERS

This year, American Rivers was joined by over 600 local, regional and national

conservation organizations 1 from all 50 states in calling for significantly increased

funding for the following Environmental Protection Agency (EPA) programs and

other programs funded through the Veteran’s Affairs, Housing and Urban Development, and Independent Agencies (VA–HUD) Appropriations bill. I urge that these

requests be incorporated in the VA–HUD Appropriations bill for fiscal year 2003.

ENFORCEMENT OF DISCHARGE PERMITS UNDER THE CLEAN WATER ACT

The Environmental Protection Agency’s (EPA) ability to enforce environmental

laws is critical to our nation’s efforts to fulfill the Clean Water Act’s clearly stated

objective of restoring waters to fishable and swimmable conditions. While our nation

has made great progress toward cleaning up our water, 40 percent of waters remain

unsafe for fishing or swimming, illustrating a continuing need for enforcement.

The Clean Water Act prohibits discharges of pollutants through point sources into

U.S. waters without a National Pollution Discharge Elimination System permit.

These permits contain limits on what can be discharged, monitoring and reporting

requirements, and other provisions to ensure that discharge does not harm water

quality or human health. To ensure that the permits are current and properly complied with, EPA engages in enforcement activities, including inspections, sampling,

and testing, as well as civil and criminal enforcement actions. Civil and criminal

enforcement activities result in real improvements in environmental quality. For instance, in fiscal year 1999, EPA’s civil enforcement actions achieved over 6.8 billion

pounds of pollutant reductions.

For the last 2 years, the Administration has proposed significant reductions in

funding for EPA’s Office of Enforcement and Compliance. Last year the Congress

rejected this initiative, yet the Administration has again recommended cuts for fiscal year 2003 that would reduce EPA staff in the enforcement office by over 200

employees. It is essential that Congress fund the EPA Office of Enforcement and

Compliance at a level sufficient to retain fiscal year 2001 staffing levels with adequate increases to allow for cost of living increases. Congress should fund EPA’s enforcement programs at $485 million.

CLEAN WATER STATE REVOLVING FUND

The Clean Water State Revolving Fund (SRF) provides capitalization grants to

states, who in turn provide low-cost loans to communities for a variety of programs

to clean up impaired water bodies and protect pristine waters. This program has

been extremely effective in helping communities to improve water quality and provide safe drinking water. However, the needs to improve, repair and replace the nation’s aging water infrastructure are tremendous. EPA and the WIN (Water Infrastructure NOW) coalition estimate that between $450 billion and $600 billion will

need to be spent over the next 20 years just to ensure that water quality standards

are met and that drinking water supplies are safe. Although the Federal Government should not be expected to bridge that funding gap, higher SRF funding is a

clear and urgent priority. Postponing necessary water infrastructure investments

will only defer and increase costs that must eventually be met. Congress has recognized this fact, giving strong bipartisan support to legislation authorizing substantially higher SRF funding in bills currently pending in the House and Senate.

Despite the pressing need for more water infrastructure funding and strong support for the SRF program across the nation, the Administration’s budget calls for

a 10 percent cut in SRF funding for fiscal year 2003. We urge Congress to fund the

Clean Water and Drinking Water SRF programs at the full authorization levels

called for in any bill eventually passed this year by Congress. At a minimum, Congress should sustain past funding levels: $1.35 billion for Clean Water SRFS, and

$859 million for Drinking SRFs.

TOTAL MAXIMUM DAILY LOADS, CLEAN WATER ACT SECTION 303(D)

One of the most powerful tools to reduce nonpoint source pollution—the leading

cause of impairment of the nation’s waters—is the Clean Water Act’s Total Maximum Daily Load (TMDL) provision. The TMDL provision is unique because it addresses the total level of pollution regardless of its source and requires the EPA to

step in if a state fails to combat chronic water pollution problems. EPA conserv-
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atively estimates that there are an average of 300 impaired water bodies in every

state in need of a TMDL plan. The polluted waters include approximately 300,000

miles of river and shoreline and approximately 5 million acres of lakes.

Given the scope of water body impairment across the nation, and the need to help

states develop and implement TMDL plans, we urge Congress to ensure that the

TMDL program, receives an increase in funding. Congress should appropriate $250

million for EPA’s State Program Management Grants (Section 106 of the Clean

Water Act) for grants to states for funding for pollution control activities, surveillance, monitoring, enforcement, and advice and assistance to local agencies to meet

TMDL development and implementation deadlines.

NONPOINT SOURCE MANAGEMENT PROGRAM

Another tool for reducing nonpoint source pollution is the Clean Water Act Section

319 Nonpoint Source Management Program. This program provides grant money to

states, territories, and Indian tribes that can be used for a variety of nonpoint

source pollution reduction activities including technical and financial assistance,

education, training, technology transfer, demonstration projects, and monitoring.

Congress should fund the Section 319 Nonpoint Source Management Program at

$250 million.

WATERSHED ASSISTANCE GRANTS

Solving today’s water quality challenges, especially habitat loss and nonpoint

source pollution, requires the active involvement of citizens who care about the

water quality where they live and are willing to take action to improve it. In most

cases, solutions will be most effective when they address problems on watershedwide bases and all affected parties are included in the development of the solutions.

To facilitate such solutions, EPA teamed up with citizen activists to institute the

Watershed Assistance Grants program. To date, 1,162 proposals (requesting approximately $15 million) have been submitted; 68 awards have been made to locally

initiated watershed partnerships in 36 states.

In order to build the capacity of this program in fiscal year 2003, Congress should

fund the Watershed Assistance Grants program at $2 million.

PROJECT IMPACT

The 20th century approach to flood control—trying to contain rivers with dams

and levees and allowing excessive development in flood-prone areas—has devastated

many river ecosystems while failing to adequately protect communities. Dams and

levees that break during floods release even more devastating torrents, while those

that hold often merely shift the brunt of a flood to other areas. Poorly planned floodplain development has put countless people in harm’s way and eroded natural flood

protections. According to the Federal Emergency Management Agency (FEMA), flood

damages average more than $4 billion a year.

Project Impact, run by FEMA, is changing how the nation deals with floods by

turning nature into an ally instead of an enemy. Project Impact helps communities

dramatically reduce disruption and loss caused by floods and other natural disasters

by restoring and protecting healthy, more natural ecosystems.

FEMA estimates that every dollar spent on damage prevention in its 250 Project

Impact communities saves two dollars in repairs. In fiscal year 2003, Congress

should appropriate $50 million to expand FEMA’s Project Impact to safeguard people and the environment.

CHESAPEAKE BAY PROGRAM

The Chesapeake Bay is the nation’s largest estuary and one of the most productive in the world, home to 3,600 species of plants and animals. The 64,000 square

mile watershed drains more than 100,000 rivers and streams; provides important

opportunities for recreation and refuge for fish and wildlife; and is a key resource

for the prosperity of the region.

Unfortunately, the ecological integrity and productivity of the Chesapeake’s watershed have been severely compromised by development, agriculture, over-harvesting of resources, and more than 2,500 small dams that block migratory fish from

their historic spawning habitats.

Concern over these threats culminated in the creation of the Chesapeake Bay Program in 1983, establishing what is now a national and international model for estuarine research and restoration. In fiscal year 2003, Congress should provide the

Chesapeake Bay Program with $30 million to better protect and restore this valuable ecosystem.
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BEACH ACT

The Administration’s budget proposes $10 million for the Beaches Environmental

Assessment and Coastal Health Act (BEACH Act) of 2000, equal to the amount approved by Congress for fiscal year 2002. While $10 million was a helpful start for

the BEACH Act program’s first year, it represents only one-third of what Congress

originally authorized for the Act. Under the BEACH Act, grants are provided to

states to help them improve water quality monitoring and public notification programs. When it created the program in 2000, Congress unanimously authorized $30

million for these grants. Congress should fund the BEACH Act grant program at

$30 million.

PREPARED STATEMENT OF THE AMERICAN WATER WORKS ASSOCIATION

Introduction

The American Water Works Association (AWWA) appreciates the opportunity to

present AWWA views on the Environmental Protection Agency (EPA) budget for fiscal year 2003 (fiscal year 2003). AWWA and its members are dedicated to providing

safe, reliable drinking water to the American people.

Founded in 1881, AWWA is the world’s largest and oldest scientific and educational association representing drinking water supply professionals. The association’s 57,000 plus members are comprised of administrators, utility operators, professional engineers, contractors, manufacturers, scientists, professors and health

professionals. The association’s membership includes over 4,500 public water systems that provides over 80 percent of the nation’s drinking water.

AWWA utility members are regulated under the Safe Drinking Water Act (SDWA)

and other statutes. AWWA believes few environmental activities are more important

to the health of this country than assuring the protection of water supply sources,

and the treatment, distribution and consumption of a safe and healthful adequate

supply of drinking water. We strongly support adequate levels of funding for EPA’s

drinking water, ground water protection and clean water pollution prevention programs in fiscal year 2003.

The events of September 11, 2001, have added a new dimension to the protection

of drinking water. In addition to protecting drinking water from contamination,

America’s homeland security requires a secure water supply. Public health, fire protection, and sanitation depend on it. The role of public water systems for first responders has been largely overlooked in the discussions concerning homeland security funding priorities. AWWA strongly urges both the Congress and the Administration to correct this oversight and make the protection of public water systems a

high priority for homeland security. The al Qaeda terrorists network and others are

known to have conducted research on public water systems in the United States.

If the intent is to create terror in our society, water systems are targets of opportunity for terrorists, not only to contaminate the water supply, but also to deny first

responders water for fire protection in a coordinated terrorist attack.

Drinking water suppliers have a long history of security preparedness. However,

the post-September 11, world has added a new understanding of security and has

added an unprecedented financial burden on public water systems for immediate

steps needed to protect our citizens. AWWA does not believe that the President’s

Budget request for EPA is adequate for EPA to meet the homeland security needs

of our Nation’s public water system infrastructure. We respectfully request the Congress to appropriate significantly increased funds for public water system security

efforts that are essential to help provide a secure water supply for our citizens and

first responders in either an emergency supplemental appropriation for fiscal year

2002 for security needs that require immediate funding or in the EPA fiscal year

2003 appropriation. Our testimony today will highlight some of the major public

water system security needs.

Request Overview

AWWA recommends that the following funding be specifically appropriated for the

indicated purpose: —For public water system water vulnerability assessments.—$450,000,000 to complete vulnerability assessments for systems serving over 3,300 peopleas required in H.R. 3448.

—For immediate public water system security upgrades.—$1,600,000,000 for capital improvements to ensure security of access to critical public water system

assets through barriers, detection devices and cyber security systems.

—For public water system security training.—$2,500,000 designated for AWWA to

develop and initiate peer-review or third party certification programs to assure
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ongoing vigilance against terrorist acts and educate water systems in distribution system security and vulnerability assessments. —For public water system security research.—$15,000,000 to develop technologies

and methodologies to help prevent and respond to the contamination or disruption of public water systems. (Funding expected to be authorized in H.R. 3448.) —For the drinking water State revolving fund.—A minimum of $1,000,000,000 as

authorized in the SDWA. —For the AWWA Research Foundation (AWWARF) drinking water research.— $7,000,000. —For public water system supervision (PWSS) grants to States.—$100,000,000 as

authorized in the SDWA. —For drinking water research.—As requested in The President’s fiscal year 2003

Budget. —For the EPA drinking water program.—As requested in The President’s fiscal

year 2003 Budget.

Public Water System Vulnerability Assessments

Congress should appropriate $450 million to complete vulnerability assessments

for public water systems. The cost of completing vulnerability assessments and revise emergency plans in all drinking water systems serving more than 3,300 people

as mandated in the House version of H.R. 3448 is approximately $450 million, in

addition to funds already appropriated. The Defense appropriations bill for fiscal

year 2002 provided $83 million for assessment for the largest public water systems. —Recommended Action in the Fiscal Year 2002 Emergency Supplemental or Fiscal

Year 2003 Budget.—Appropriate $450,000,000 to complete vulnerability assessments for public water systems.

Immediate Public Water System Security Upgrades

Congress should appropriate $1.6 billion specifically for capital improvements to

ensure security of access to critical public water system assets through barriers, detection devices and cyber security systems. AWWA research has determined the cost

of immediate security upgrades for public water systems to ensure secure control

of access to critical utility assets is approximately $1.6 billion. This will provide initial security improvements for about 53,800 water systems serving more than 264

million people. This does not include future capital costs of upgrades to address

vulnerabilities identified in vulnerability assessments such as hardening pumping

stations, chemical storage buildings, transmission mains, add redundant infrastructure or relocate facilities and pipelines. —Recommended Action in the Fiscal Year 2002 Emergency Supplemental or Fiscal

Year 2003 Budget.—Appropriate $1,600,000,000 for capital improvements to ensure security of access to critical public water system assets.

Public Water System Security Training

Congress should appropriate $2.5 million for AWWA to develop and initiate peerreview or third party certification programs to assure ongoing vigilance against terrorist acts; educate water systems in distribution system security and vulnerability

assessments; and teach emergency communications and legal issues. The details of

this proposal are in a letter previously sent to the subcommittee. As the world’s

largest educational and scientific organization dedicated to safe drinking water,

AWWA is uniquely qualified and has the proven expertise to accomplish these important tasks more effectively and in a more timely manner than any other entity

in the United States. Before September 11 and since then, AWWA has been providing information and training to prepare water utilities for terrorist attacks and

measures to prevent such attacks. With Federal assistance, AWWA can continue to

deliver this training at little or no cost to participants. With our broad membership

of over 57,000 members, AWWA can reach a large audience of water suppliers and

utilities of all sizes—small, medium, and large. AWWA believes that these programs

will significantly improve the security of the Nation’s public water supply.

—Recommended Action in the Fiscal Year 2002 Emergency Supplemental or fiscal

year 2003 Budget.—Appropriate $2,500,000 specifically designated for the

American Water Works Association for drinking water security training.

Public Water System Security Research

Congress should appropriate $15 million for a new program to improve the technologies and processes that provide security for public water systems. Funding for

this program is expected to be authorized in H.R. 3448 that is currently in a joint

conference committee. One of the most pressing needs facing public water systems

is to develop technologies and methodologies to help prevent and respond to terrorist actions to contaminate or disrupt the water supply. Now is the time to strate-
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gically invest in water security research and development in order to deploy realtime detection, identification and response tools to the field as soon as possible. Critical research needs are for the identification and characterization of biological and

chemical agents, biological and chemical agent detectors, and security of cyber command and control systems. This new program will promote the transfer of results

of research on critical infrastructure protection to the private sector, public water

systems and other parts of the Nation’s infrastructure. AWWA believes that public

water system security research is an essential part of homeland defense and strongly urges Congress to fund this new program. —Recommended Action in the Fiscal Year 2003 Budget.—Appropriate $15,000,000

to develop technologies and methodologies to help prevent and respond to the

contamination or disruption of public water systems.

Drinking Water State Revolving Fund (DWSRF)

AWWA believes that past funding to capitalize the DWSRF is not adequate to

meet the Nation’s drinking water needs. The SDWA Amendments of 1996 authorized for the DWSRF $599,000,000 for fiscal year 1994 and $1,000,000,000 for fiscal

years 1995 through 2003. Through fiscal year 2002, Congress has appropriated approximately $5.2 billion—which is approximately $3.4 billion less than authorized

for the DWSRF up to this fiscal year. According to the 1999 EPA Drinking Water

Infrastructure Needs Survey released in February, 2001, $150.9 billion is needed

over the next 20 years just to comply with the requirements of the SDWA. We believe that the EPA Needs Survey is conservative. More recent comprehensive estimates developed by EPA in the Gap Analysis, AWWA and the Water Infrastructure

Network (WIN) indicate that the need is much higher. WIN estimates that the Federal share to meet the needs of replacing aging drinking water pipes should be approximately $28.5 billion over the next 5 years. We urge Congress to appropriate

at least the $1 billion authorized for the DWSRF in fiscal year 2003 to assist States

and public water systems in meeting current public health related infrastructure

needs. Although it represents only a fraction of the need, the amount recommended

by AWWA for the DWSRF will be a start and provide a source of much needed loans

for financial disadvantaged communities that cannot obtain financing through other

means. The Federal funds will leverage State and local resources, thus helping communities to comply with the mandates of the SDWA. —Recommended Action in the Fiscal Year 2003 Budget.—Appropriate a minimum of $1,000,000,000 as authorized in the SDWA.

AWWA Research Foundation

In a separate statement, the American Water Works Association Research Foundation (AwwaRF), (an organization independent of AWWA), requested that

$7,000,000 in drinking water research funds be designated specifically for AwwaRF

for drinking water research. AwwaRF proposes to allocate $5,000,000 of this amount

for its ongoing research programs that address issues such as the link between disinfection by-products and miscarriages, compliance with the new arsenic regulation,

emerging contaminants such as perchlorate, infrastructure needs, and a host of

other drinking water public health related issues. The other $2,000,000 will be allocated to high-risk security issues identified by a comprehensive workshop. AwwaRF

will produce the May workshop that will include stakeholders from State and Federal Government, water utilities, and leading academic institutions. A research plan

will emerge from this expert workshop on how to best protect public water systems

from terrorism. Since fiscal year 1984, when Congress appropriated the first grant

for AwwaRF, the Foundation has leveraged an additional $228,000,000 from its subscribers to support research projects across the country. Each dollar appropriated

by Congress for AwwaRF produced over $6.00 in drinking water research. AWWA

strongly believes that this kind of local/Federal research partnership is a wise and

cost effective use of public funds and the only way to secure science-based drinking

water regulations in these difficult budgetary times. —Recommended Action in the Fiscal Year 2003 Budget.—Appropriate $7,000,000

specifically designated for the American Water Works Association Research

Foundation for drinking water research.

Public Water System Supervision Grants

To comply with the SDWA, Congress intended that EPA develop drinking water

regulations and that the States implement and administer the program to ensure

compliance with and enforcement of its provisions. Implementation, administration,

compliance and enforcement activities are collectively known as ‘‘primacy’’ requirements and Federal grants to the States are known as Public Water System Supervision (PWSS) grants. The massive demands on States arising from the SDWA have

become increasingly apparent because of the dramatic increase in the number of
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regulated contaminants over the past few years. As each regulation is added, State

resource shortfalls become more acute. Additional regulations are scheduled to be

promulgated over the next few years and the SDWA Amendments of 1996 added

new responsibilities for the States such as source water assessments, a consumer

confidence report program and alternative monitoring programs. The SDWA authorizes a Federal share of up to 75 percent, but Federal funding has approximated only

35 percent. EPA’s budget requests for the last several years for PWSS funding for

States has remained essentially static in the face of increasing requirements. We

strongly urge Congress to appropriate the $100,000,000 authorized for PWSS grants

to States as the minimum necessary . —Recommended Action in the Fiscal Year 2003 Budget.—Appropriate $100,000,000 for Public Water System Supervision (PWSS) grants to States.

Drinking Water Research Funding

Over the past several years, public water suppliers have worked together with

EPA and the Congress to secure increased research funding for the Nation’s drinking water program. We believe that, through this cooperative effort, needed increases in research dollars have been obtained for drinking water over the past few

years after several years of steady decline. The use of good science as the foundation

of the new drinking water standard-setting process under the SDWA amendments

of 1996 will require extensive drinking water research—particularly health effects

research. Funding for drinking water research is becoming more of a critical issue.

Every 5 years EPA is required by the SDWA to select at least five contaminants

from the Contaminant Candidate List (CCL) and determine whether to regulate

them. To determine whether to regulate a contaminant and establish a maximum

contaminate level (MCL) or another regulatory approach, EPA will need good health

effects research. Recognizing the serious burden this regulatory mandate presents,

the drinking water community has offered its time, resources and expertise to work

with EPA to develop a research plan for the contaminants on the CCL. Given the

enormous need for immediate research to meet the deadlines of the SDWA amendments of 1996, AWWA urges Congress to appropriate at least the amount requested

in the President’s fiscal year 2003 Budget for drinking water research and specifically designate it in the appropriation. —Recommended Action in the Fiscal Year 2003 Budget.—Appropriate funding for

the EPA drinking water research program as requested in the President’s fiscal

year 2003 Budget.

EPA Drinking Water Program

EPA’s drinking water program took on greatly increased responsibilities in the

1996 SDWA amendments. In satisfying these requirements, EPA has involved the

public in the regulatory process to an extent not equaled by another Federal agency

and stands as a model for Federal rule making.. EPA and the Office of Drinking

Water and Ground Water are to be commended for taking this new approach which

should result in better regulations that protect public health. AWWA believes that

funding the EPA drinking water program is vital to continue this new regulatory

approach and urges Congress to appropriate the funds requested in the President’s

fiscal year 2003 Budget for the drinking water program to continue to implement

the new provisions of the SDWA. —Recommended Action in the Fiscal Year 2003 Budget.—Appropriate funding for

the EPA drinking water program as requested in the President’s fiscal year

2003 Budget.

This concludes the AWWA statement on the fiscal year 2003 EPA budget.

PREPARED STATEMENT OF THE AMERICAN SOCIETY OF MECHANICAL ENGINEERS

ASME International is a worldwide engineering society focused on technical, educational and research issues. It conducts one of the world’s largest technical publishing operations, holds some 30 technical conferences and 200 professional development courses each year, and sets many industrial and manufacturing standards.

NATIONAL SCIENCE FOUNDATION (NSF)

The National Science Foundation Task Force of the American Society of Mechanical Engineers (ASME International) is pleased to provide the following comments

on the NSF fiscal year 2003 budget request.

NSF Fiscal Year 2003 Budget Request Overview

The National Science Foundation plays a critical leadership role in directing the

nation’s non-defense related scientific and engineering research. Through thoughtful
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and visionary planning, NSF has greatly contributed to advancements in science,

engineering and technology. The Task Force shares NSF’s broad-based, cross-cutting

vision for basic engineering and scientific research. As such, we strongly endorse the

Foundation’s efforts to continually improve and expand the ‘‘innovative ideas, outstanding people, and cutting-edge tools’’ that comprise the nation’s technological and

scientific infrastructure.

The Budget Request for fiscal year 2003 reflects a 5.0 percent increase over the

fiscal year 2002 Current Plan to $5.04B. Within this request, funding for the Engineering Directorate would increase 3.3 percent to $488M.

NSF has identified six initiative areas to headline the fiscal year 2003 budget request. These are:

—Information Technology Research (ITR),

—Nanoscale Science and Engineering (NSE),

—Biocomplexity in the Environment (BE),

—Learning for the 21st Century Workforce (STEM),

—Mathematical Sciences,

—Social, Behavioral and Economic Sciences (SBE).

Though not specifically identified as such, the Math and Science Partnerships

(MSP) is essentially a seventh initiative area. This program began in fiscal year

2002 as part of President Bush’s initiative to enhance K–12 math and science education contained in his ‘‘No Child Left Behind’’ proposal.

Funding has been requested to create two new initiative areas, Mathematical

Sciences ($60.1M) and SBE ($10M) while expanding the four ongoing areas: ITR by

3.0 percent (to $286M), NSE by 11.3 percent (to $221M), BE by 36.3 percent (to

$79M) and STEM by 27.5 percent (to $185M). Each of these priorities, NSE and

STEM in particular, continue to be strongly supported by the Task Force.

TABLE 1.—NSF BUDGET OVERVIEW WITH AND WITHOUT THE INITATIVE AREAS

[In million of dollars]

NSF Agency Wide Engineering (ENG)

Fiscal year

2002 current

plan

Fiscal year

2003 request

Percent

change

Fiscal year

current plan

Fiscal year

2003 reqest

Percent

change

Total Budget ............................... $4,795.88 $5,035.79 5.0 $472.32 $487.98 3.3

Salaries and Expenses ...... 176.40 210.16 19.1 n/a n/a n/a

Inspector General .............. 7.04 8.06 14.5 n/a n/a n/a

Total Program Budget ................ 4,612.44 4,817.57 4.5 472.32 487.98 3.3

ITR ..................................... 277.52 285.83 3.0 10.23 11.17 9.2

NSE .................................... 198.71 221.25 1.3 86.30 94.35 9.3

BE ...................................... 58.10 79.20 36.3 3.69 6.00 62.6

STEM ........................................... 144.82 184.69 27.5 3.40 4.87 43.2

Mathematical Sciences ..... 30.00 60.09 100.3 0 0.91 n/a

SBE .................................... 0.00 10.00 n/a 0 0 n/a

Remaining Funds ....................... 3,903.29 3,976.51 1.9 368.70 370.68 0.5

Comparisons include both agency-wide and engineering directorate.

In spite of the requested 5.0 percent overall increase in the total NSF budget, expansions in the initiative areas significantly inhibit growth in other programs. Table

1 clearly shows the impact on funding for core programs. Agency-wide, there will

only be a 1.9 percent increase in funding available for core programs relative to current year plans. If one accounts for the $76M in programs being transferred from

the Environmental Protection Agency (EPA), National Oceanic and Atmospheric Administration (NOAA) and the United States Geological Service (USGS), there will

actually be a slight net loss in overall funds for core programs. Flat funding for core

programs is reflected within the Engineering Directorate (ENG). After initiative

areas are removed, there will be a mere 0.5 percent increase in funding for core research programs.

Position

The Task Force endorses the leadership role that NSF has played in guiding the

nation’s basic research activities. Combining exciting new developments with core

programs to incubate such breakthroughs, NSF has built an outstanding record of

supporting a broad spectrum of research of the highest quality. This record has been

made possible only through strict adherence to the independent peer review process.

We recognize the importance and timeliness of NSF’s initiative areas that address
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major national needs for the 21st century. However, as will be discussed in the next

section, it is not clear that an optimum balance has been achieved.

There are a number of particularly positive items in the fiscal year 2003 budget

request, beginning with the planned increase in graduate fellowship stipend levels.

Ensuring a continuous stream of well-trained, highly qualified research scientists

into leadership positions is critical to our economic growth and national security. In

this respect, we strongly endorse NSF’s planned increase in stipends for graduate

fellows from $21,500 to $25,000. Making fellowship stipends attractive to the nation’s best and brightest students is certainly a positive step. This serves to enhance

the nation’s pool of science, engineering and technology educators and leaders.

The increase in numbers of graduate fellowships is also especially positive. NSF

is the only Federal agency directly chartered to train graduate students for research

and development careers. It is therefore imperative that this be a major priority

area in perpetuity. It is interesting to note however that $80.6M is requested for

the Graduate Research Fellowship (GRF) program to support ∼2,350 students in fiscal year 2003 while $41.4M for the GK–12 Fellowship program will support only 800

students. It is not clear that the GK–12 program has sufficient value added to justify its higher cost. Nor is it clear that the correct balance between types of graduate

fellowships has been struck. It is critically important that education-based programs

do not jeopardize funding for research programs at NSF.

In general, the Task Force also supports and applauds activities within ENG.

NSF’s vision of a committed balance between people, ideas and tools is exemplified

within ENG. It is important to recognize that fundamental sciences and engineering

funded by NSF quite frequently spawns next generation technologies. Examples of

successes emerging from ENG include development of an artificial retina and, a biocapsule for insulin delivery. ENG is also funding work on microscopic chains for

magnetized particles that may be precursors of materials that will protect buildings

from earthquakes.

ASME has strongly supported the nanotechnology initiative since its inception as

an NSF emphasis area in fiscal year 2000. In the past two years, funding for this

initiative has grown substantially. With a growing record of research and development successes, the transitioning of nano-science and engineering into commercially

viable technologies is becoming a pressing challenge for NSE. For this reason, it is

important that multi-institutional tools be developed in the near term in which access, maintenance and staffing issues have been resolved.

Finally, the Task Force continues to endorse NSF’s participation in K–12 math,

science and engineering education initiatives consistent with the agency’s broader

mandate to lead the nation’s research and development enterprise. Most notably,

NSF has included $200M in its fiscal year 2003 budget request for the Math and

Sciences Partnership (MSP) program. The goal of MSP is coupling K–12 and higher

education STEM education into a single integrated effort by encouraging universities to adopt STEM into their core missions.

In this technological age, providing the highest quality math, science and technology education to all children should be a national imperative. We applaud the

‘‘No Child Left Behind’’ Act and NSF’s role. However, the Task Force cautions that

a proper balance’ must be struck to preserve the integrity of NSF’s fundamental research and development mission.

Concerns

Maintaining a fundamental knowledge base is essential for intelligent and effective response to rapidly evolving technological challenges facing the nation. Events

since September 11th highlight the impossibility of predicting what scientific and

engineering disciplines will be needed in response to future technology challenges.

Because of its commitment to core programs, ENG was able to rapidly respond to

the World Trade Center collapse by funding work on the failure of one of the steel

beams hit by a hijacked plane. However, the track record on funding core programs

over the past few years has not been strong. As noted earlier, funds available for

core programs are essentially flat across NSF in fiscal year 2003. Thus, as in previous years, Our key questions and concerns arising from the fiscal year 2003 budget request center on matters of balance. In particular, the Task Force is concerned

with:

—the gross funding imbalance in the Federal R&D portfolio,

—inadequate funding levels for existing grants.

—insufficient support for core engineering programs at NSF, and

The overall imbalance in the Federal R&D portfolio remains a major concern. The

requested increase for NIH this year is equal to the entire requested appropriation

for Research and Related Activities at NSF. Focusing purely on health issues while

the nation faces threats from dwindling energy supplies, aging infrastructure and
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geopolitical instability, to name but a few, is entirely inconsistent with a balanced

leadership plan. Failure to adequately support broad, cross-cutting fundamental research inherent to most NSF programs continues to undermine the long-term health

and vitality of the nation.

To date, NSF has had considerable success in stretching its funds to bridge (i.e.

mask) this imbalance. Indeed, NSF richly deserves the governmental acclaim it has

received for its efficiency and impact in managing basic research and development.

However, this efficiency is coming at the expense of partial payment for the research. The projected median research award size for fiscal year 2003 is estimated

to be $87,400 per year. This is in general sufficient to support one graduate student

and a senior investigator with only a limited amount remaining to actually conduct

the research. An extended period of constant grant sizes has eroded buying power

and the ability to adequately support professional development. Further, forming

small teams (2–3 senior investigators) to pursue and define the major initiative

areas of the future is virtually impossible. Thus, to truly advance the frontiers of

science, engineering and technology, significant increases must be made not only to

the number of grants, but to the size of each grant as well. By way of reference,

NIH’s projection for the average size of new research project grants (RPGs) in fiscal

year 2003 will be ∼$370,000; this is coupled with an estimated 4 percent increase

in the total number of RPGs funded.

As indicated in Table I, growth in NSF for fiscal year 2003 is targeted at initiative

areas and the transfer of programs from other agencies. After inflation, there will

be a net decrease in funding for core programs. As an illustration of the imbalance

this creates, consider the World Trade Center disaster of September 11. In its budget request documents, NSF points to the analytic and diagnostic tools available to

examine failure of structural steel beams at the point of impact by the hijacked airliners. Funding for this work would come from the Civil and Mechanical Systems

(CMS) subactivity within ENG, an area of strong interest to mechanical engineers.

Yet CMS has seen, at best, minimal growth over the past five years. It appears that

this is principally because steel (for example) is not tied to one of the initiative

areas and has not been included in the growth plan of the Federal R&D portfolio.

Summary

The Task Force continues its enthusiastic support for the National Science Foundation and its leadership in articulating the nation’s basic research and development vision. In fiscal year 2003, NSF has requested funding to expand major, cross

cutting initiatives addressing pivotal technological issues facing the nation. This includes the nanotechnology initiative strongly endorsed by ASME. Expansion of the

graduate fellows programs coupled with increases in stipend levels reinforces NSF’s

commitment to graduate education. The focus on developing people and ideas in

general is certainly reflected throughout the ENG directorate’s budget request as

well. The challenge for this year appears to be maintaining a healthy balance between core research programs and new initiatives such as the new K–12 Math and

Science Partnerships.

There is also great concern over continued growth in the imbalance between Federal funding of life sciences and the physical sciences and engineering. Crises, such

as those occurring in the gasoline and power production industries, reflect long term

failure to value and support core research focused at advancing the nation’s technological infrastructure. In addition, recent events strongly underscore the fact that

it is impossible to know what part of the science, engineering and technology base

will be needed on short notice to respond to rapidly developing opportunities or crises. The current budget plan does not appear to permit NSF to meet key fiscal year

2003 Performance Goals (i.e. Goals III–1a and III–2). Increasing the number and

size of its awards will enable NSF to better position itself to fulfill its leadership

responsibility in directing the nation’s research and development activities.

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION (NASA)

The American Society of Mechanical Engineers (ASME International) Aerospace

Division and the Aviation Research and Technology Task Force are pleased to provide their views on the NASA fiscal year 2003 budget request as it affects the aeronautics research and technology programs.

In recent years, the Task Force has written at length about our concerns that reducing Federal funding for aviation research and technology will jeopardize the nation’s leadership in providing the technologies needed to develop the next generation

aircraft, improve aviation safety and security, and attract the next generation of scientists and engineers. Over the last decade, funding for NASA’s aeronautics research and technology program has fallen by approximately 50 percent, and unfortunately, this trend is continuing. The Administration’s fiscal year 2003 request of
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$541.4M for aeronautics is a reduction of $58M from fiscal year 2002 appropriated

funding.

Although we continue to view with concern the level of government investment

related to aeronautics in NASA, we would like to commend the NASA Leadership

for their strategic plan called the ‘‘Aeronautics Blueprint.’’ NASA’s Aeronautics

Blueprint not only describes the issues and challenges facing U.S. aviation, but describes a vision for reshaping the future architecture of the U.S. aerospace industry.

The Aeronautics Blueprint acknowledges many of the same concerns our Task

Force has addressed in earlier testimony, particularly our concerns about the declining investment in aeronautics research and development, the aeronautics infrastructure, and the aerospace workforce. It is important to note that the Aeronautics Blueprint states ‘‘. . .the steady erosion of U.S. leadership in aeronautics, which is being

directly challenged by international competitors, must be reversed’’ and ‘‘. . .the

cost of inaction is gridlock, constrained mobility, unrealized economic growth, and

loss of U.S. aviation leadership.’’

NASA has taken the first step toward articulating a vision for aviation research

and technology. But that vision cannot be realized unless the continued decline in

aeronautics funding is reversed and sufficient funding provided to develop near-term

and revolutionary technologies. We are disappointed with the reductions to the aeronautics programs. We are also disappointed with the elimination of the rotorcraft

program from NASA’s budget. NASA has eliminated from its vision all rotary wing

related activity, despite the fact that rotary wing vehicle technology is substantially

less mature (by approximately four decades) than its fixed wing counterpart. Rotary

wing vehicles have a potential for revolutionizing our air transportation system and

make an important contribution to our national security.

The ‘‘Commission on the Future of the U.S. Aerospace Industry,’’ a congressionally

mandated Commission, recently issued their interim report calling for the creation

of ‘‘a multi-agency task force with the leadership to develop and implement an integrated plan to transform our air transportation system.’’ The Commission recommends ‘‘significant increases (in NASA R&D) to start developing a new air transportation system for the nation. R&D investments should focus on: security, noise

and emission reductions, high bandwidth communications, precision navigation and

surveillance, small aircraft transportation technologies, ground and airborne control

automation, and advanced weather sensing. New mechanisms and incentives need

to be developed to accelerate the application of existing and new technologies and

concepts into the marketplace.’’

We heartily endorse the Commission’s recommendations, and we urge Congress

to provide sufficient funds to enable the development of new technologies that would

reduce aviation gridlock, increase the margin of safety for the flying public, and reduce the impact of aviation on the environment.

Last year, in testimony to this Subcommittee, our Task Force noted with concern

the release of a report called the ‘‘European Aeronautics: A Vision for 2020.’’ This

strategy document charts the path for the European Union to become a global leader in aeronautics, estimating that total funding required to achieve their vision—

from all public and private sources over the next 20 years—could go beyond $95 billion over the next 20 years.

Is there evidence to support the European Union’s objective to become a world

leader in aerospace technology? In February 2000, the National Research Council

reported that the U.S. has been losing ground in world aerospace market share, falling from over 70 percent in the 1980’s to 55 percent in 1997. Today this situation

continues, as U.S. aerospace industries are being severely challenged by the European aerospace industry, which is garnering a significant portion of the U.S. market

as well as of the world market.

In the past, large investments in evolutionary significant-risk technologies, such

as the transition to commercial jet aviation, have been accomplished through a

partnering among industry, NASA (and its predecessor NACA), DOD and the FAA.

These partnerships have proven to be an efficient means for maintaining the past

U.S. lead in aeronautical technology with concomitant economic benefits. We are not

suggesting that the government share the cost of specific commercial aviation developments, as has been the case in other countries. Rather, we recommend that NASA

undertake high-risk, potentially high-payoff R&D, which then can become the basis

for commercial enterprises. In our view, NASA must resume its intellectual and financial support for partnerships that sustain mid- and long-term innovative basic

research in core technologies (fluids, structures, materials) applicable not only to

spacecraft, but also to future fixed and rotary wing vehicles. Partnerships between

government and the private sector are essential to meeting these growing challenges.
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Turning the Aeronautics Blueprint into reality will require sustained partnerships

between NASA, the Department of Defense, Department of Transportation, and the

Federal Aviation Administration to develop a national aviation research and technology policy to plan and provide adequate resources that will ensure sustained U.S.

world leadership in civil and military aviation.

For the past 75 years American universities have provided creative, skilled engineers for national defense and aeronautical commerce. The development of an efficient global air transportation system has been driven by American engineering.

Students who have come from American university campuses to industrial and governmental facilities have been the source of an undisputed American commercial

success; sales of aircraft and aircraft equipment accounts for one of the largest single positive balance of trade with other nations.

The nation is experiencing a diminishing pipeline of qualified aeronautical engineering students at both the undergraduate and graduate levels; young engineers

and scientists do not consider aerospace a growth industry. Therefore, they are pursuing careers in life sciences, bioengineering, and other growth fields. We are very

concerned about this issue and look to NASA leadership to make a course correction

for the future.

In recent testimony before the Commission, Dr. John Marburger, the Director of

the Office of Science and Technology Policy stated ‘‘the President wants to make

sure that U.S. aerospace leadership continues in the 21st century,’’ and ‘‘Improvements in homeland defense, national defense and civil aviation require the same

core suite of technologies. We can enhance the security while creating greater mobility for America. This is what the Administration wants and what our country

needs.’’

Aviation and aerospace are vital to the U.S.’ future. If Americans fail to support

aeronautics and aviation-related research, there will be no next generation of professionals to solve the obvious looming problems and create products the world will demand. And without that, the U.S. puts at risk a linchpin of its economy, national

security and quality of life.

Conclusions

Air transportation is a key ingredient to economic growth and prosperity. Therefore, the decline of U.S. global market share in air transportation products and services over the past two decades, combined with European determination to become

the dominant supplier of such products and services within the next two decades,

should be of major concern to U.S. policy makers.

The need for adequate funding for NASA and DOD aviation R&T must be addressed, not only with respect to the fiscal year 2003 budget, but also—and even

more significantly—with respect to the preservation of U.S. capability and leadership in long term aeronautics research and technology.

It is essential that the aeronautics research and technology programs at key agencies (NASA, DOD and FAA) continue to be clearly identified and defined as a separate line item, as required by Congress in the fiscal year 2002 budget.

A fully coordinated National Aviation R&T policy—combining the efforts of NASA,

DOD, DOT, and FAA—is essential to plan and provide adequate resources that will

ensure sustained U.S. world leadership in civil and military aviation.

ENVIRONMENTAL PROTECTION AGENCY (EPA)

The Environmental Protection Agency (EPA) Task Force of the ASME Environmental Engineering Division (EED) of the Council on Engineering, is pleased to

have this opportunity to provide comments on the fiscal year 2003 budget request

for the Environmental Protection Agency (EPA).

Sound science is one of the key underpinnings of credible and defensible policy

formulation and decision making in environmental management. The Task Force believes that the EPA’s risk-based approach, which engages all interested parties (i.e.,

‘‘stakeholders’’) provides a good framework for the formulation of environmental

policies. We support EPA’s continuing effort to implement a research program aimed

at expanding the role, and improving the state-of-the-art, of environmental science

as it pertains to decision-making and policy formulation. Overall, the requested increase in fiscal year 2003 budget over fiscal year 2002 levels in most key R&D areas

contributing to environmental decision-making is fully supported by the Task Force.

One area that the Task Force believes deserve more attention is the development

and implementation of a decision-making framework that integrates scientific information with socio-economic values and issues. The continuous focus on strong, fundamental scientific research is essential; however, increased understanding is needed in the non-scientific (e.g. social/societal) aspects of risk-based decision-making.

We recommend that efforts in the latter should commence.
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The Task Force is encouraged by the fact that the Science Advisory Board’s (SAB)

budget will remain fundamentally steady from fiscal year 2002 to 2003. The SAB

plays a key role in the prioritization of EPA’s research activities and addressing key

emerging issues. We believe that, given the SAB’s pivotal role, the funding for SAB

could be increased.

Specific, focused research areas representing significant challenges to the environment and human health have been identified in the fiscal year 2003 budget request.

We strongly support efforts in these research thrust areas due to the potential impact that may be generated by the substantial resources involved.

Climate Change Research.—The Task Force believes that the EPA should commit

more resources to the problem of greenhouse gas emissions and climate change. The

fiscal year 2003 appropriations request for climate change research is $21.7M, a

slight increase of $0.4M (1.9 percent) over the fiscal year 2002 appropriation. Climate change is an issue of global significance. With the U.S. not participating in

the Kyoto framework regarding climate change, we must ensure that we maintain

and advance our scientific credibility and technological leadership in climate change

research and in the development of technologies that reduce or eliminate the emissions associated with climate change. It is imperative that the complex interplay of

increased energy demand and the environmental impacts that this produces be addressed on a scientific and technological basis. We strongly recommend increased

funding in this area, which we project to be one of the most significant environmental issues for the next decade or more.

Particulate Matter Research.—The Task Force supports continued research on the

formation, migration, and mitigation of fine particulate matter (particulate matter

smaller than 2.5 micrometers, termed PM2.5). These particles, primarily from combustion sources, have been shown to have significant acute and chronic impact on

human health. The appropriation requested, $66.6M, is a slight increase (1.8 percent) from the fiscal year 2002 enacted budget of $65.7M. We believe that EPA’s

commitment to ongoing research to address this significant health concern is essential.

Tropospheric Ozone Research.—The Task Force supports continued research into

the formation and mitigation of troposhperic (ground-level) ozone. Repeated exposure to ozone pollution can cause permanent damage to the lungs, even at low levels. Ground-level ozone damages plant life and is responsible for $500 million in reduced crop production in the United States each year. The appropriation requested,

$6.8M, is a 4.6 percent increase from the fiscal year 2002 enacted budget of $6.5M.

We support EPA’s commitment to ongoing research to address this costly environmental and health problem.

Air Toxics Research.—The Task Force supports continued research in the identification, reduction, and mitigation of air toxics. Humans and animals can experience

health problems when exposed to sufficient concentrations of air toxics over time.

Numerous studies conclude that deposited air toxics are contributing to birth defects, reproductive failure, and disease. Persistent toxic air pollutants are of particular concern in aquatic ecosystems because the pollutants accumulate in sediments and may bioaccumulate in tissues of animals at the top of the food chain to

concentrations many times higher than in the water or air. The fiscal year 2003 appropriation request for Air Toxics Research, $19.8M, is a 4.8 percent increase from

the fiscal year 2002 enacted budget of $18.1M. We support EPA’s commitment to

ongoing research to reduce the formation of air toxics.

Pollution Prevention.—The Task Force strongly supports EPA’s commitment to

pollution prevention research and strategies. The appropriation requested, $25.1M,

represents a significant increase (16.2 percent) from the fiscal year 2002 enacted

budget of $21.6M. However, the fiscal year 2003 request is still substantially lower

(–8.4 percent) than the fiscal year 2000 enacted budget of $27.4M. Pollution prevention technologies can provide both environmental and economical benefits while also

avoiding the damage to human health and the ecosystem that arises from the release of toxic and hazardous substances. We urge EPA to increase funding for pollution prevention to at least fiscal year 2000 levels and to maintain strong support

for this critical area of research.

Watershed and Drinking Water Research.—The Task Force remains concerned regarding overall Federal funding necessary to protect watersheds and drinking water

supplies. Watershed protection comprises a key issue, especially since severe

drought conditions exist in both Eastern and Western states. Competing needs in

agriculture, protection of endangered species, and water rights represent just a few

of these issues. The President’s fiscal year 2003 budget proposal for EPA in the

areas of ecosystem protection remains essentially flat from fiscal year 2002 levels

at $38M. We are encouraged by the proposed increase (18.6 percent, to $38.3M) in

the Environmental Monitoring and Assessment Program (EMAP), designed to pro-
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vide watershed data for key inland waterways, and by a proposed increase of 8.6

percent, to $49.5M in funding for safe drinking water research. While EPA’s proposed research program addresses important needs, we are concerned that proposed

funding reductions for collaborative Federal agencies (USGS, USACE, USDA) pose

significant risks to improvement of the technical basis of watershed protection. We

suggest that the overall Federal budget for watershed research be considered as a

whole, and urge increased funding over the overall levels proposed for fiscal year

2003.

Hazardous Waste Research/Superfund Innovative Technology Research.—Hazardous waste cleanup, especially at Federal sites (i.e., Department of Defense and

Department of Energy facilities) represents a significant challenge for the EPA.

Many of these challenges relate to gaps in the scientific basis for risk assessment

strategies and ongoing needs for both policy changes and technology advances to

achieve cleanup at complex sites. For example, many hazardous waste streams resulting from decades of nuclear weapons research lack identified disposal methods.

Through partnership agreements with industry and other governmental entities,

EPA traditionally leverages its own research efforts. The Task Force supports these

collaborative efforts, but further recommends a more aggressive approach, such that

the Agency assumes a leadership role in the resolution of hazardous (including radioactive) waste disposition. Target areas for this recommendation are provided

within the specific Agency funding objectives.

The budget request for hazardous waste research (science and technology) for fiscal year 2003 is $9.6M, including continuation of SITE (Superfund Innovative Technology Evaluation). The Task Force supports these efforts, and recommends that the

Agency continue to leverage its own research funding to support related efforts at

the State and local level. We also note, with approval, that EPA recognizes the need

to reconsider policy decisions in the Resource Conservation and Reclamation Act in

view of recent technical advances or identified needs. The Agency also proposes implementation of National Academy of Sciences recommendations in contaminated

sediment remediation. In view of potential funding reductions for the USGS and

USACE, measurable progress in this effort remains at risk for 2003.

The EPA’s environmental education program has been transferred to the National

Science Foundation (NSF) for fiscal year 2003. We are concerned with regard to the

possible adverse impact this transfer could have on environmental education. In

particular, the STAR Fellowship Program has been eliminated in the EPA’s fiscal

year 2003 budget. In the past, this program provided a funding source for graduate

students interested in the solution of environmental problems and allowed them to

undertake research in areas directly relevant to EPA’s mission and objectives. It is

the opinion of the Task Force that EPA has a vested interest in environmental education and therefore EPA would be a better steward of the environmental education

initiatives.

The mechanism must be in place to train substantial numbers of graduate students in areas relevant to EPA’s core research areas if the Agency is to maintain

or strengthen its Science and Technology base. Sound public policy requires a strong

scientific and technological basis. The overall decline in funding for physical sciences

and engineering within the Federal budget over the past decade must be reversed

in order to assure that the complex problems associated with issues such as environmental contamination and public health can be solved. In this vein, the Task Force

recommends that extramural research funding, such as the STAR Grants Program,

allocated to the EPA should increase, concomitant with the leadership role the

Agency must play. Furthermore, the research portion of the Federal budget is the

largest share of support for U.S. graduate students in fundamental science and engineering disciplines, through both fellowships and research grants to Universities. In

areas such as environmental science and national defense, a broad view across agencies, rather than a programmatic view, is necessary to ensure sufficient graduates

and continuing quality in graduate programs to solve science and technology problems of the future. The Task Force encourages lawmakers to consider not only current programmatic needs, but also the number of graduate students to be funded

by Federal programs in particular science and engineering disciplines, as vital to ensuring future success in addressing national science and technology issues.

Conclusions

Because of the complex, multidisciplinary nature of environmental issues, it is imperative that EPA base its actions on sound science. The change from a commandstyle regulatory/compliance model to a participatory risk-based model only heightens the need for a keen awareness of the environmental science in making policy

decisions and recommendations. A strong R&D program is essential for the ongoing

development of science- based decision-making. The Task Force supports:
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—Strong input and involvement of the Science Advisory Board in helping set EPA

research priorities;

—Focusing on national environmental priorities that impact human health, ecosystem health, and climate, particularly particulate matter, greenhouse gases,

and water quality;

—Education of future environmental professionals, and building interdisciplinary

teams through the support of extramurally-funded research; and

—Building a strong science and technology base, both within EPA, and through

partnerships with industry and other Federal and State government agencies.

These collective comments represent the views of the NSF Task Force of the

Council on Education, the Aviation Research and Technology Task Force of the

Aerospace Division and the Environmental Protection Agency (EPA) Task Force of

the Environmental Engineering Division, of the Council of Engineering, of the

ASME International and are not necessarily a position of the Society as a whole.

PREPARED STATEMENT OF THE AMERICAN THORACIC SOCIETY AND THE AMERICAN

LUNG ASSOCIATION

The American Thoracic Society (ATS) and the American Lung Association are

pleased to present our recommendations for programs in the Environmental Protection Agency and the Department of Veterans Affairs medical and prosthetic research program.

The American Thoracic Society founded in 1905, in an independently incorporated, international education and scientific society which focuses on respiratory

and critical care medicine. The Society’s members help prevent and fight respiratory

disease around the globe through research, education, patient care, and advocacy.

The Society’s long-range goal is to decrease morbidity and mortality from disorders

and life-threatening acute illnesses.

The American Lung Association, established in 1904, is the nations oldest voluntary health association. The ALA is committed to improving the nation’s lunghealth through programs of education, community service, advocacy and research.

The ATS and the ATS are united in our support for programs that protect the

lung-health of the American public.

Lung disease is a significant health problem in the U.S. Lung disease is the third

leading cause of death in the U.S.—responsible for one in every seven deaths. More

that 25 million Americans suffer from a chronic lung disease. Lung diseases cost the

U.S. economy an estimated $89.1 billion annually. Lung disease represent a spectrum of chronic and acute conditions that interfere with the lung’s ability to extract

oxygen from the atmosphere, protect against environmental and biological assaults,

and regulate a number of vital metabolic processes. Lung diseases include: chronic

obstructive pulmonary disease (COPD—which includes emphysema and chronic

bronchitis) lung cancer, tuberculosis, pneumonia, influenza, sleep-disordered breathing, pediatric lung diseases, occupational lung diseases, sarcoidosis, asthma and

acute lung injury.

Nearly all lung diseases are impacted by air pollution. How well or poorly our

lungs perform is contingent on the quality of air around us, making the impact of

air pollution inescapable. Air pollution remains a primary contributor to a high

prevalence of respiratory diseases.

For nearly 40 years, the American Thoracic Society and the American Lung Association have conducted scientific, public health and educational programs to fight air

pollution and to improve the quality of the air we breathe. We remain strong supporters of the Clean Air Act and its amendments. We can attest to the significant

impact that the Clean Air Act has had in improving the quality of our nation’s air.

However, much remains to be done. It is estimated that millions American’s live

in counties that do not meet current Clean Air Act health-standards, including our

nation’s Capitol. The American Lung Association State of the Air 2001 report estimates that 141 million Americans live in areas that expose them to unsafe levels

of ozone. Millions live in areas that experience unsafe levels of particulate air pollution.

Research has shown that air pollution is causing the premature death of literally

thousands of people due to complications from exposure to air pollution.

ENVIRONMENTAL PROTECTION AGENCY

Federal Enforcement Funding

The ATS and the ALA are extremely concerned that the Administration has proposed dramatic reductions in EPA federal enforcement budget. We are extremely

concerned that the proposed reductions in the federal enforcement program are a
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1 R. McConnell et. al, Asthma in Exercising Children Exposed to Ozone: A Cohort Study, Lancet, Feb. 2, 2002, p.386–391. 2 C. Pope, et.al., Lung Caner, Cardiopulmonary Mortality, and Lung-term Exposure to Fine

Particulate Air Pollution, JAMA, March 6, 2002, p. 1132–1141.

calculated attempt to weaken enforcement efforts of the Clean Air Act. Without

strong federal leadership in the EPA enforcement, increases in funding for State,

Tribal and local government enforcement efforts will ineffective and will ultimately

erode recent gains in the quality of our nations air.

The American Thoracic Society and the American Lung Association strongly encourage the Subcommittee to reject the Administration’s proposed cuts to EPA

Clean Air federal enforcement budget.

NAAQS Research

The American Thoracic Society and the American Lung Association strongly supports the EPA National Ambient Air Quality Standards (NAAQS) research program.

The NAAQS research program provides value information the health effects of exposure to polluted air. The NAAQS also helps develop the monitoring and pollution

control technology that will ultimately lead to cleaner air of all of America.

The American Thoracic Society and the American Lung Association recommend

a $50 million increase in the EPA NAAQS research program.

Fine Particulate Matter and Ozone

Recent studies have confirmed the significant adverse impact that existing levels

of smog and fine particles have on health. Two recent studies have made clear the

need to proceed with enforcement of the health-based Clean Air standard established 1997. A study published in the February 2, 2002 issue of Lancet showed a

relationship between exposure to high levels of ozone and the development of asthma in children.1 A second study published in the March 6, 2002 edition of the Journal of the American Medical Association establishes a correlation between exposure

to fine particulate air pollution and increased mortality from lung cancer and

cardiopulmonary diseases.2 Despite the growing body of evident that air pollution

plays a direct role in causing lung disease, the EPA has yet to implement the new

more protective standards finalized in July 1997.

The American Thoracic Society and the American Lung Association urge the Subcommittee to oppose any amendments, which would impair the expeditious implementation and enforcement of these standards.

New Source Review

We are extremely concerned about the Administration initiatives to weaken the

Clean Air Act and undermine the enforcement of the law. In particular, we are concerned about the effort to undercut the Clean Air Act’s New Source Review Program. New Source Review (NSR) is a simple concept, made extremely complicated

by those who want to avoid complying with the law. Simply stated, the NSR program requires facilities that undergo modification that significantly increase emissions, to install pollution control equipment. If the facility does not increase pollution, NSR does not apply. Do not buy the rhetoric. This program only applies when

pollution increases. The NSR program is reducing pollution that is saving lives this

year and every year. Legislative proposals promising greater air pollution reductions

are no substitute for NSR. Such proposals must be implemented in concert with

NSR, just as the current acid rain reduction program is. The public demands cleaner air and this program provides substantial public health benefits.

The American Thoracic Society and American Lung Association urge the Subcommittee to resist efforts by the Administration to weaken the implementation or

enforcement of the EPA New Source Review program.

Tier 2 and Heavy Duty Vehicles Standards

In 1999 the Environmental Protection Agency established new tailpipe and gasoline standards for cars, light trucks, minivans and SUVs. The EPA also established

new limits on sulfur in gasoline. When fully implemented, this program would be

the equivalent of taking 164 million cars off the road. EPA calculates that the final

rule will prevent as many as 4,300 deaths, more than 10,000 cases of chronic and

acute bronchitis, and tens of thousands respiratory problems a year.

In 2000, EPA established new emission standards for heavy-duty vehicles and diesel fuel. These standard provide dramatic pollution reduction from heavy-duty vehicles. As a result of this program, each new truck and bus will be more than 90 percent cleaner than current models. The clean air impact of this program will be dramatic when fully implemented. This program will provide annual emission reduc-
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tions equivalent to removing the pollution from more than 90 percent of today’s

trucks and buses, or about 13 million trucks and buses.

The American Thoracic Society and the American Lung Association encourage the

Subcommittee to provide EPA the resources necessary to proceed with implementation and enforcement of the Tier 2 and Heavy-Duty Vehicle Standards.

VA MEDICAL AND PROSTHETIC RESEARCH PROGRAM

The ATS/ALA recommends $460 million for the VA medical and prosthetic research program for fiscal year 2003. The fiscal year 2003 2003 recommendations

build on the $20 million increase provided for the current year. The Administration’s fiscal year 2003 budget request for a $38 million (10 percent) increase in research program dollars is notable for being the first time in many years that an administration has proposed funding sufficient to maintain VA’s current level of effort

in advancing treatments for conditions particularly prevalent in the veteran population including prostate chronic obstructive lung disease (COPD) lung cancer, pneumonia and other pulmonary related diseases that impact the America’s veterans. We

applaud the Administration and Department of Veterans Affairs Secretary Anthony

J. Principi for recognizing the invaluable contribution VA research makes to delivering high quality care for veterans and toward improving the health of veterans

and the nation.

The American Thoracic Society and the American Lung Association recommend

the Subcommittee provide at least 4460 million for the VA medical and prosthetic

research program.

Please note that the Administration’s budget request for a $38 million increase

for VA research includes a shift from OPM to VA of $15 million in accrued government health and retirement benefit funds. Consequently, the Administration’s budget proposes a $23 million (6 percent) increase in research program funds plus $15

million in federal employee benefit expenses previously paid by an OPM account,

for a total increase of $38 million (10 percent) over current year funding of $371

million. We strongly recommend that the entire $38 million increase be allocated

to VA research’s programmatic needs and that accrued benefits continue to be paid

out of the OPM trust fund.

However, even a $38 million increase would not allow VA to address all of the

opportunities it has to improve care for veterans, nor to meet the new challenges

presented by the tragedies of September 11 and subsequent events. We strongly encourage the VA–HUD Subcommittee to recommend an fiscal year 2003 appropriation of at least $460 million for the VA medical and prosthetics research program.

This represents growth in program dollars of $89 million (24 percent).

Four core needs justify the ATS/ALA recommendation of $460 million:

Investments in investigator-initiated research projects at the VA have led to an

explosion of knowledge that promises to advance our knowledge of disease and

unlock new strategies for prevention, treatment and cures. Attachment 1 is a list

of just a few of VA’s recent achievements and initiatives. However, many health

challenges still confront the veteran community. Additional funding is needed to

take advantage of the burgeoning scientific opportunities and to improve quality of

life for our nation’s veterans as well as the general public. We urge the Committee

to support additional funding for the following research priority areas identified by

the VA for fiscal year 2003:

—Special Populations.—VA would expand research in quality of care, community

access and restoration of function to achieve greater understanding of existing

racial, ethnic and gender disparities in health care.

—Micro Technology.—In the area of low vision, work in retinal prostheses is an

emerging science and may restore sight lost as a result of a variety of disorders

including age-related macular degeneration and retinal pigmentosa.

—Patient Outcomes in Rehabilitative Care.—Specific areas of emphasis include

long-term care strategies to enhance patients’ independence and activities of

daily life, consequences of community reintegration and the impact of assistive

technology on quality and functionality of life.

—Chronic Disease Management.—VA is proposing two major initiatives in comparing clinical efficacy of (1) vascular surgery conducted on and off

cardiopulmonary bypass machines, and (2) open versus endovascular surgery for

abdominal aortic aneurysms. The ATS/ALA are working with the VA to expand

the Chronic Disease Management concept to include COPD—a major cause of

morbidity and morality in the veteran’s population.

The complexity of research combined with biomedical research inflation has increased the costs of research. The average cost of each VA research project is now
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$150,000, a 9 percent increase in just 2 years. As a result, VA requires an increase

of at least $15 million just to maintain a stable number of programs.

In response to the events of September 11, VA seeks to establish a research portfolio to address the threats of bio-terrorism. This objective is consistent with VA’s

statutory obligation to provide medical back-up services in times of national emergencies. VA has an established history of research accomplishments in the areas of

infectious diseases and immunology, including vaccine development. The laboratories of VA research scientists are disseminated nationwide, and are affiliated with

top-flight universities. VA research provides a unique national resource that can be

readily adapted and quickly mobilized in response to diverse biological threats.

To meet this emerging challenge, consistent with H.R. 3253, the National Medical

Emergency Medical Preparedness Act of 2001, we strongly support VA’s proposal to

establish four new centers of research excellence focusing on fundamental issues

critical for responding to chemical, biological and radiological threats to public safety. The targeted research portfolio would include pathogen detection, disease diagnosis and treatment, protection, and vaccine development. The mission of these centers would also encompass the evaluation and management of illnesses consequent

to military service, especially in our current conflict.

VA’s career development programs are a national resource for training the next

generation of clinician scientists, those doctors who treat patients and address questions that have a direct impact on patient care. Additional funding is needed to expand this program in order to address the growing national shortage of clinicianinvestigators.

In 1997, NIH conducted site visits of six VA research facilities and concluded that,

‘‘VA has had increasing difficulty in providing sufficient resources via its congressional appropriation to satisfactorily fund the infrastructure necessary to support research at the VAMCs.’’ It is our understanding that VA has made no significant,

centrally administered investment in its existing research facilities since this finding. Ventilation, electrical supply and plumbing appear frequently on lists of needed

upgrades along with space reconfiguration. Substandard facilities make VA a less

attractive partner in research collaborations with affiliated universities; reduce VA’s

ability to leverage the R&D appropriation with other federal and private sector

funding; and make it difficult to attract cutting edge researchers, both clinician investigators and laboratory scientists, to careers in VA. Facility R&D Committees

regularly disapprove projects for funding consideration because the facility does not

have the necessary infrastructure and has little prospect of acquiring it.

Under the current system, research must compete with other medical facility and

clinical needs for basic infrastructure and physical plant support. Unfortunately, the

minor construction appropriation is chronically inadequate to meet facility needs for

clinical improvements much less research upgrades, and year after year the list of

urgently needed research repairs and upgrades grows longer. VA has identified 18

sites in urgent need of minor construction funding to upgrade their research facilities. These sites plus the many facilities with smaller, but no less important needs,

provide more than sufficient justification for an appropriation of $45 million specifically for research facility improvements.

We recommend that a new funding mechanism, such as a minor construction appropriation specifically for research facilities, be developed to provide a permanent,

steady stream of resources dedicated to upgrading and renovating existing research

facilities. State-of-the-art research requires state-of-the-art facilities.

Separate from its recommendations for the VA research appropriation, ATS/ALA

strongly encourage the Committee to address the increasingly urgent need for improvements in VA’s research facilities by providing $45 million to address research

facility improvements.

The America Thoracic Society and the America Lung Association thank the Committee for consideration of its views. We look forward to working with the Subcommittee to further promote and protect the health of the American public.

PREPARED STATEMENT THE AMERICAN PSYCHOLOGICAL SOCIETY

Madam Chair, Members of the Committee: Thank you for this opportunity to

present the views of the American Psychological Society (APS) on the fiscal year

2003 appropriations of the National Science Foundation (NSF). I am Alan Kraut,

Executive Director of APS. We are a 15,000-member organization of scientists and

academics, most of whom are located in colleges and universities across the country.

Many members of the American Psychological Society are supported by the NSF,

and much basic research in our field could not exist without NSF funding.
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APS strongly supports the Coalition for National Science Funding’s recommenda- tion of $5.5 billion for the National Science Foundation in fiscal year 2003. This

would be a 14.7 percent increase over fiscal year 2002.

Both Congress and the Administration have expressed a high degree of confidence

in NSF’s mission and its efficient management of resources. As the only government

agency to receive a ‘‘green light’’ rating from the Office of Management and Budget

(OMB) for financial management in the President’s budget, NSF has proven that

this would be an investment that pays off for Congress and America. OMB’s praise

did not end there—its director, Mitch Daniels, added last November that ‘‘The National Science Foundation is one of the true centers of excellence in this government

It has supported eight of the 12 most recent Nobel Prize awards earned by Americans at some point in their careers. Programs like these. . . deserve to be singled

out, deserve to be fortified and strengthened.’’

More recently, the House Budget Committee proposed an increase of 11 percent

for NSF in the fiscal year 2003 budget resolution passed on March 13th. Chairman

Boehlert’s assessment, that ‘‘the federal investment in science and technology is absolutely vital to our nation’s economic stability and national security,’’ could not be

more accurate. However, it should be noted that $76 million of this increase is due

to the transfer into NSF of three programs formerly operated run by other agencies.

The increase that you and your colleagues in the Senate provided for NSF in fiscal year 2002, and the increase that we are recommending in fiscal year 2003, are

important steps in offsetting the comparative under-funding that has characterized

NSF’s budget in the past several years. The scientific community is grateful for your

support and it is our hope that you will continue to approve the much-needed expansion of NSF’s budget.

Within the NSF budget, we ask the Committee to continue its history of support

for behavioral and social science research at NSF. This Committee was instrumental

in encouraging NSF to establish its Social, Behavioral, and Economic Sciences (SBE)

Directorate a decade ago, and over the years has encouraged many of the initiatives

coming out of that directorate. The fiscal year 2003 budget request to Congress contains a 15.9 percent increase for SBE as a whole, and an 11.6 percent increase in

the Behavioral and Cognitive Science program.

These increases reflect the high regard in which NSF holds these fields. For the

first time at NSF, the budget calls for funding of a Foundation-wide priority area

in the Social, Behavioral and Economic Sciences, which will explore the complex

interactions between society and technology. NSF’s budget recommendation calls for

$10 million in ‘‘seed money’’, with this goal in mind: for our society to take greater

advantage of the technology available to it, and to prepare for further advances.

There will be an emphasis on studies of decision-making, cognition, and learning.

The money is there, and the time is now.

Before addressing specific activities of the SBE directorate, I first want to provide

a brief overview of basic psychological research, to give you an idea of the scope and

breadth of the field that I represent.

An Overview of Basic Psychological Research: Programs and initiatives that involve psychological science are our best chance to solve the enigma that has perplexed us for so long: How does the human mind work and develop? APS members

include thousands of scientists who conduct basic research in areas such as learning, cognition, and memory, and the linked mechanisms of how we process information through visual and auditory perception. Others study decision-making and

judgment; mathematical reasoning; language development; the developmental origins of behavior; and the impact of individual, environmental and social factors in

behavior. The basic psychological research conducted by APS members has implications for a wide range of applications, including designing technology that incorporates the perceptual and cognitive functioning of humans; teaching math to children; improving learning through the use of technology; developing more effective

hearing aids and speech recognition machines; increasing workforce productivity;

and ameliorating social problems such as prejudice or violence. While this is a diverse range of topics, all of these areas of research are bound together by a simple

notion: that understanding the human mind, brain, and behavior is crucial to maximizing human potential. That places these pursuits squarely at the forefront of several of the most pressing issues facing the Nation, this Congress, and the Administration.

Progress and investments in psychological science will not simply lead us to a better understanding of how humans think, decide, evaluate, and adapt. It will lead

us to revolutionary advances in our powers to predict, detect, and prevent. In this

time of uncertainty, where we can come to rely so heavily on technology to keep us

safe and confident, we must turn to cognition in order to maximize this technology.

An understanding of how people process information will enable us to design tech-
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nology and computers that fit our needs and make us comfortable when using them.

The potential for advances would be limitless.

Turning now to the SBE Directorate, I’d like to highlight some of its programs,

specifically those cognitive neuroscience, and those in child development. These initiatives exemplify SBE’s essential leadership on the cutting-edge frontiers of research, and they illustrate the important work that will only flourish if funded to

the levels that they deserve.

NSF’s Cognitive Neuroscience Initiative.—Basic behavioral science supported by

SBE traditionally has included research in cognition, perception, language, development, emotion/affect, and social psychology. These have been funded primarily

through its Division of Behavioral and Cognitive Sciences. Theoretical work in behavioral science has greatly advanced our understanding of the basic mechanisms

underlying memory, emotion, learning, and other psychological and cognitive processes. Recognizing the potential contributions of neuroscience to these and related

areas, the directorate has added funds to these programs for the express purpose

of bringing more neuroscience perspectives to bear on these topics to map these psychological mechanisms onto the physical dimensions of the brain.

NSF, with the right support, will have the ability to link advances in human

thought and behavior to the natural and social sciences. Now, with brain imaging

and other non-invasive techniques, we are poised to confirm and extend these theories through studies of the living brain. Scientists from a range of areas will be able

to test theories about normal brain functioning; assess the behavioral consequences

of brain damage; and reach new levels of understanding of how the brain develops

and matures, in terms of both structure and function. NSF is currently seeking

highly innovative, interdisciplinary proposals aimed at advancing the understanding

of how the brain supports thought, perception, action, social process, and other aspects of behavior.

One final point on this topic: Investment in new technologies is no longer the sole

domain of the physical sciences. A stable, long-term commitment to the study and

development of new technology ensures continued advances in all fields, including

our own discipline of psychological science, which is part of the broader behavioral

and social science research enterprise. Emerging fields, such as behavioral genetics

and cognitive neuroscience—which employ the latest in imaging and computing

technology to unlock the mysteries of the mind and the origins of behavior—are examples of where gains in technology are necessary if we are to see a return on our

investment in science. In addition, addressing human factors in the design of technology is essential; advances in technology would be severely undermined unless we

incorporate what we know about perception, learning and memory, and other behavior-based processes that people draw on in using technology. Advances in science

and technology will not only make the U.S. a world leader in many arenas, but will

also contribute to better homeland security and a stronger economy.

NSF’s Children’s Research Initiative.—Recognizing that a combination of perspectives—cognitive, psychological, social, and neural—is needed to fully understand

how children develop and how they acquire and use knowledge and skills, the SBE

directorate will support new interdisciplinary research centers that will focus primarily on integrating traditionally disparate research disciplines concerned with

child development. Known as the Children’s Research Initiative (CRI), this program

will bring together such areas as cognitive development, cognitive science, developmental psychology, linguistics, neuroscience, anthropology, social psychology, sociology, family studies, cross-cultural research, and environmental psychology, to

name only some of the relevant disciplines. Basic researchers from these areas will

focus on problems that cannot be solved through single investigator studies. This

initiative aims to enhance the content knowledge of the fields involved; build an intellectual infrastructure within and among disciplines; and build a program of research in relevant aspects of developmental, learning, and human sciences.

One of the CRI’s four research centers is the one led by principal investigator and

psychology researcher Stephen J. Ceci, of Cornell University. The Cornell Institute

for Research on Children will conduct rigorous multi-disciplinary research on issues

of significance to children and their families. Specifically, the center will commission

national teams of the nation’s most distinguished developmental scientists to study

policy relevant questions, and to create a consensus position for dissemination to the

public. Ultimately, this project will place science-based information in the hands of

Congress and other policymakers.

The two initiatives I just described are in the Division of Behavioral and Cognitive Science. SBE’s other main component, the Division of Social and Economic

Sciences, also supports a substantial amount of basic psychological science. Examples of research topics being addressed in that division include: human dimensions

of global change, group and individual decision making, risk management, and
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human factors. Research in these areas has the potential to increase employee and

organizational productivity, improve decision making in critical military or civilian

emergency situations, and inform the public policymaking processes across a range

of areas.

The Science of Learning.—How people think, learn and remember is a core area

of interest at NSF. Known as the science of learning, this field draws from a variety

of research topics across psychology, such as brain and behavior, learning, memory,

perception, social psychology, and development. The basic challenge for both the

science and education communities is this: How can we apply and extend our knowledge of how people think, learn and remember to improve education?

NSF’s program has two broad goals: improving our understanding of the learning

process, and then transferring that understanding into application. We have the

knowledge base and a critical mass of top-flight scientists to help solve the educational and learning issues that have been identified by the government as high

priorities. But getting that knowledge into the classroom is going to require a multidisciplinary, multi-agency effort. This will be facilitated via investigations in

human-computer interactions, cognitive psychology, cognitive neuroscience, and

other activity related to child learning and cognitive development. Through the establishment of three or four multi-disciplinary Science of Learning Centers, NSF

will for the first time attempt to focus the full range of science and research onto

a scientific workforce objective. These centers will also provide a research base for

the President’s Math and Science Partnership.

I’m pleased to report to the Committee that two recent editions of the APS journal

Psychological Science in the Public Interest (PSPI) are excellent examples of how

psychological science can be used to enhance the education of our children. One of

three scientific journals we publish, PSPI presents reports modeled after those generated by the National Academy of Sciences. Developed by panels of distinguished

scientists, our reports focus on issues where psychological science can contribute to

our understanding of topics of national importance, such as education and education

research.

The May 2001 issue of PSPI, entitled ‘‘Does Class Size Matter,’’ describes what

we know about the effects of class size on children’s learning. Of all the ideas for

improving education, few are as simple or attractive as reducing the number of pupils per teacher. With its uncomplicated appeal, class-size reduction has lately gone

from being a subject of primarily academic interest to a policy juggernaut. In the

United States, more than 20 states and the federal government have adopted policies aimed at decreasing class sizes, and billions of dollars have been spent or committed in the past few years. But those policies are based on anecdotal assumptions.

The research summarized in this report indicates that class size alone is not the

only determinant of effective learning.

Similarly, in the November 2001 issue of PSPI, ‘‘How Psychological Science Informs the Teaching of Reading,’’ the authors examine research, theory, and practice

relevant to how children learn to read English, summarizing research from developmental psychology on children’s language competency when they enter school and

on the nature of early reading development. Two inescapable conclusions emerged:

(a) Mastering the alphabetic principle (Phonics) is essential to becoming proficient

in the skill of reading, and (b) methods that teach this principle are more effective

than those that do not. Using whole-language activities to supplement phonics for

instruction does help to make reading fun and meaningful for children, but ultimately, phonics instruction is critically important because it helps beginning readers understand the alphabetic principle and learn new words. Thus, elementaryschool teachers who make the alphabetic principle explicit are most effective in

helping their students become skilled, independent readers. I’m pleased to provide

copies of these reports to the Committee. In addition, they are available online at

our website: www.psychologicalscience.org/journals. You should also know that NSF

has supported the development and dissemination of PSPI.

These are just two examples among a range of others that illustrate how important the science of learning is when it comes to getting the most out of education.

We ask this Committee to monitor and support NSF’s efforts to bring the science

of learning to bear on the nation’s educational needs. Congress has demonstrated

that it understands the importance of education research by introducing such legislation as HR 3801, which will provide for education research, and HR 3130, the

Technology Talent Bill. The expanded budget we recommend for fiscal year 2003

will allow NSF to capitalize on the growing momentum surrounding this issue both

at NSF and in the field. Last year, Congress passed the historic ESEA, promising

to leave no child behind. Using the science of learning and education research to

develop education will make sure that none are.
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In closing, I want to note that building and sustaining the capacity for innovation

and discovery in the behavioral and social sciences is a core goal of the National

Science Foundation. We ask that you encourage NSF’s efforts in these areas, not

just those activities I’ve described here, but the full range of activities supported by

the SBE directorate and by NSF at large. Your support in fiscal year 2003 will help

NSF lay the groundwork for this long-overdue emphasis on these sciences.

Thank you again for the opportunity to appear before you to present our recommendations. I would be pleased to answer questions or provide additional information.

PREPARED STATEMENT OF THE ASSOCIATION OF AMERICAN UNIVERSITIES

Madam Chair and Members of the Subcommittee: My name is Nils Hasselmo and

I am president of the Association of American Universities (AAU), which includes

63 of North America’s most prominent public and private research universities.

These universities are among the main recipients of research and education grants

provided by the National Science Foundation (NSF) and the National Aeronautics

and Space Administration (NASA).

While policymakers disagree over precisely the right mix of fiscal and monetary

policy to ensure a continuation of our nation’s prosperity, many now recognize that

continued investment in basic scientific research and in the people who do this research is an essential catalyst for progress. A study released last year by the prestigious Council on Competitiveness, which includes some of our nation’s leading

chief executives in industry and academia, called for an increasing commitment to

innovation, particularly to Federal investments in research and development funding. The study said these investments were necessary ‘‘just to maintain the position

of the United States, much less improve in relative terms.’’

Basic research in each field of science expands the knowledge base in that field

and, increasingly, creates new opportunities and raises new questions that can only

be addressed by interdisciplinary research. Thus, a thriving research base in many

scientific disciplines is important to the vitality of them all: research advances in

the physical sciences, mathematics and engineering are increasingly interdependent.

There is also growing interdependence between these disciplines and the biological

and medical sciences. Medical technologies such as magnetic resonance imagery,

ultrasound, and genomic mapping could not have occurred without underlying

knowledge in biology, physics, mathematics, chemistry and engineering. Continuing

significant medical advances in our lifetime will require concomitant advances in

other sciences.

NATIONAL SCIENCE FOUNDATION

The National Science Foundation (NSF) is at the heart of the Federal investment

in basic scientific research. Since its founding in 1950, NSF has had an extraordinary impact on American scientific discovery. Despite its small size, it is the only

Federal agency with responsibility for research and education in all major scientific

and engineering fields.

NSF is also widely recognized for excellence in the management of Federal funds.

Approximately 95 percent of the agency’s total budget goes directly to support the

actual conduct of research and education, while less than five percent is spent on

administration and management at NSF. NSF was the only agency in the entire

Federal government to receive a ‘‘green light’’ for Financial Management in a review

utilizing the ‘‘traffic light’’ grading system by the Treasury Department, General Accounting Office and Office of Management and Budget. The review was published

in the Administration’s fiscal year 2003 budget request. All other agencies were

graded either with ‘‘yellow’’ or ‘‘red’’ lights.

Two years ago, congressmen and senators from both parties began to pursue the

objective of doubling the budget of NSF from its funding level in fiscal year 2000

($3.9 billion) to approximately $8 billion by 2005. This process began in the fiscal

year 2001 appropriation with the largest increase that Congress has provided NSF

in a single year an increase of $519 million, or 13.3 percent, over the fiscal year

2000 level. Last year, although President Bush had requested an increase of only

one percent for the Foundation above the fiscal year 2001 appropriation, the Congress provided an increase of $374 million, or 8.5 percent. You and Senator Bond

played a critical role in securing these increases, Madam Chair, and the university

community is enormously grateful for your support. This year, we believe it is critical not to lose the opportunity to build on this strong start, and we strongly hope

the fiscal year 2003 appropriation will continue this effort.
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The Administration has requested $5.036 billion for NSF in the fiscal year 2003

NSF budget request. AAU recommends $5.508 billion, an increase of $718 million

(or 15 percent) above the fiscal year 2002 appropriation. We suggest that the additional funds, above the fiscal year 2002 appropriation, should be devoted to achieving the following objectives:

Advance core programs for research and education.—Presently, 13 percent of highly rated proposals to NSF are not funded because of inadequate resources. High

quality NSF research contributes to the development of new knowledge and the

preparation of the next generation of scientists and engineers. NSF education programs contribute to improved student learning at all levels in science, engineering

and mathematics. The proposed increase would provide $220 million to enable more

highly rated proposals to be funded and to strengthen NSF’s important education

programs.

Continue supporting key initiatives.—Nanotechnology; biocomplexity; information

technology research; workforce development (including math and science partnerships); mathematics research; and social and behavioral sciences have all been identified as fields ripe for advances. An increase of $220 million would continue

progress in these critical areas.

Increase grant size and duration.—The average NSF grant in the year 2001 was

for $93,000 and lasted for just under three years. By comparison, the average NIH

grant in 2000 was for $338,000 and lasted for just over four years. Increasing the

size and time period of grants will enable researchers to concentrate on discovery

rather than paperwork. Of the proposed increase, $135 million would be devoted to

increasing grant size and duration.

Add funding for Major Research Equipment and Facilities Construction and Major

Research Instrumentation.—Several proposals are pending for large-scale research

resources that would provide benefits not only to the institution or region where the

research project is located, but also to researchers throughout the United States and

the world. An increase of $50 million to the Major Research Equipment and Facilities Construction program would hasten progress on these important capital

projects. In fiscal year 2001, the NSF Major Research Instrumentation program

awarded $75 million, but many worthy applications could not be funded. NSF could

easily and quickly award an additional $50 million for needed research instrumentation in fiscal year 2003. If additional funds were made available, this equipment

(virtually all of which is supplied by American companies) could be purchased rapidly from American vendors. Not only would these purchases advance important scientific research goals, but they would also benefit the domestic economy.

Assist with Homeland Security and anti-terrorism efforts.—The September 11 calamity has greatly increased recognition of the role of science and engineering in

preventing and/or mitigating future disasters. Working closely with other Federal

agencies, NSF can enhance support for groundbreaking research into information

security, detection of airborne hazards, structural studies to improve building safety,

psychological effects of living with terrorism, wireless communications, and a broad

range of other relevant issues. Of the proposed increase, $25 million would support

grants in critical areas related to the War on Terrorism.

Increase graduate student stipends.—Providing better compensation to graduate

students will attract more qualified Americans to science and engineering careers,

thereby addressing long-term workforce needs. With an additional $23 million above

the fiscal year 2002 appropriation, NSF can increase these stipends from $21,500

per year in fiscal year 2002 to $25,000 in fiscal year 2003.

INTERNATIONAL TRAFFIC IN ARMS REGULATION (ITAR)

Universities engaged in space science research have been concerned over the past

2 years by Executive Branch and space contractors interpretations of the International Traffic in Arms Regulation (ITAR) that place increasingly strict restrictions

on unclassified, civilian research collaborations with foreign-born scientists. Science

is an international activity, and space science, in particular, has thrived through

such interactions. Indeed, Congress has encouraged such partnerships in the past.

Although we recognize that security considerations have changed dramatically since

September 11, we continue to believe that scientists carrying out unclassified research on civilian spacecraft do not pose a threat to national security.

In both the fiscal year 2001 and fiscal year 2002 conference reports, the VA–HUDIndependent Agencies Appropriations Subcommittees directed the Office of Science

and Technology Policy (OSTP) to work jointly with other government agencies, including the National Security Council, NASA, and the State Department, to expeditiously issue clarification of ITAR in order to allow important university collaborations and personnel exchanges to continue. A report was issued on March 18, and
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while we have not yet had time to determine whether this will adequately address

the universities’ concerns, we appreciate the Subcommittee’s support in this area.

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

Both the current and former NASA Administrators have publicly expressed concern on NASA’s ability to continue to attract and retain qualified scientists and engineers. Within the next 5 years, one third of NASA’s workforce will be eligible for

retirement. At the same time, the pipeline of the next generation of space scientists

and engineers is declining. The consequence could be an inability to ensure success

in any challenging future NASA program. In some fields the problem is acute, with

the major scientists all in their sixties, and limited enrollments of graduate students

to follow them. In other areas, there is expected growth major new initiatives to be

undertaken and yet no certainty that the required educated workforce will be available.

The workforce problem is seen in another area as well. Over the last decade there

has been a growing recognition of the need for infusion of new technology to execute

the space program, and considerable funds to pursue this new technology have been

applied. And yet new and better technology is only one part of the problem. Unless

there is an adequate workforce that is well trained, with imagination and vigor, the

space program cannot succeed. However, NASA’s investment in producing the required workforce has been minimal.

The nation’s security also depends on a space program, both for surveillance and

active defense, and the economic impact of space communications and remote sensing is large. An educated workforce can be seamlessly applied to any and all space

applications, for defense or for economic growth. Undergraduate education is often

not sufficient, however. Graduate education, at the Master’s and Doctoral level is

required, and for the graduate training to be most effective, the students must participate in forefront research during their graduate studies.

At the inception of the space program, NASA recognized that the talent necessary

to pursue the science and engineering for the space program resided in the universities, and that in universities the required future workforce would be developed.

NASA invested heavily, in infrastructure and capabilities, in research and education, and virtually every success that the nation has enjoyed in space can be

traced back to this investment. This includes scientific discoveries, new instrumentation, or simply the graduate student support that allowed individuals who have

devoted their careers to the pursuit of space to be trained.

These initial investments have run their course. The current aging workforce benefited greatly from it, as did the nation, but it is time for a new generation to be

developed. It is time to invest again in the capabilities of the nation’s universities

to pursue forefront research, to have faculty who are leaders in space science and

engineering, to have students who are well- supported, well-trained, and determined

to continue this nation’s exploration and utilization of space.

The Administration has requested $8.918 billion for NASA’s Science, Aeronautics

and Technology (SA&T) account in fiscal year 2003. The AAU recommends $9.054

billion for these activities. Within the SA&T account, the following items are of particular interest to research universities.

Space Science.—AAU supports the Administration’s request of $3,428.3 billion for

the Office of Space Science (OSS). This represents a 19 percent increase over fiscal

year 2002, although since $210 million of this is due to the transfer of the Deep

Space Network to OSS, the net increase is 11.7 percent. Space science missions

produce basic knowledge about our environment, the solar system, and the universe.

This information gives us a deeper understanding of the history and condition of our

world that enables us to make better decisions about how to sustain and improve

it.

The most substantial proposed changes in NASA’s budget concern planetary exploration. The Administration has proposed an unprecedented long-term plan for

planetary science and exploration. For the first time in a decade, the budget provides a real, albeit small, increase in Research and Analysis funds. This line has

long been a priority of the space science community. The request also maintains a

vigorous program to explore Mars, adds a line (New Frontiers) for moderate-size

missions, and supports the development of nuclear power and propulsion technologies to allow longer-lived landers and more capable space missions. The Explorer and Discovery programs, both of which have strong university components,

would receive increases as well. We applaud these developments that augur well for

future solar system exploration.

The New Frontiers activity will be competitively selected and, according to current

guidelines, are restricted to missions concerned with origins and the outer solar sys-
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tem. We appreciate the focus on competitive selection but suggest that the scientific

priorities being established by the ongoing National Research Council planetary

decadal survey be used to guide selections. This program will re-invigorate our exploration of the solar system.

The development of nuclear capabilities should revolutionize the type of planetary

missions that can be flown a decade hence. We are enthusiastic about this revitalization and believe that the support of other technologies may also yield significant

benefits to the planetary program. We caution that these improvements, however,

will not be available for a decade or more.

Biological and Physical Research.—Last year, significant cost overruns were identified in the International Space Station (ISS). In a report released last November,

the ISS Management and Cost Evaluation Task Force reaffirmed the importance of

research as a primary rationale for the ISS and emphasized the indispensable role

of the ISS life science centrifuge facility.

The quality of the ISS research facilities is a crucial factor in determining the

value of its scientific program. There is already a queue of over one hundred flight

investigations waiting their turn for access to these on-orbit facilities. These investigations encompass five disciplines in the physical sciences in addition to biological

and biomedical research. Although NASA emphasizes the biomedical research associated with crew health maintenance and preservation, a large number of investigations address cutting-edge scientific problems of fundamental importance, but also

with direct application to Earth-based technological, industrial, and health issues.

Advances in the scientific understanding of these issues can be significantly advanced through low-gravity experiments.

Ground-based research is also essential for developing the knowledge base and for

validating experimental approaches for spaceflight experiments. NASA currently

funds approximately five ground-based investigations for each flight investigation,

and hopes to eventually reach an eight to ten-to-one ratio to guarantee that the

highest quality research goes on for further testing on a flight platform.

NASA’s Office of Biological and Physical Research (OBPR) currently provides

multi-year grant support to approximately 450 investigators. Last year, OBPR received roughly 430 investigator-initiated grant applications. Of this amount, over

one-third were judged as meritorious and worthy of funding by the peer-review system. However, due to budget constraints, less than 20 percent of the submitted proposals were funded. Increased funding for OBPR extramural research would permit

grants to be funded at higher levels for longer periods of time and would allow a

second review cycle to be added. AAU recommends an increase of $100 million to

enhance these research opportunities.

AAU also recommends that the National Space Biomedical Research Institute receive $25 million in fiscal year 2003, a $2.5 million increase over fiscal year 2002.

These two recommended augmentations to the budget would increase overall funding for OBPR to $953.8 million.

Earth Science.—AAU urges that the Earth Science Enterprise (ESE) receive an

increase equal to inflation. The Administration requested $1.64 billion, which is $14

million, or 0.9 percent below the fiscal year 2002 level. A 2 percent inflationary increase would be $29.5 million, raising the total for the office to $1.67 billion. ESE

is in the midst of deployment of the Earth Observing System (EOS), a set of spacecraft and associated interdisciplinary science investigations to initiate a long-term

data set of key parameters required for the study of global climate change. A number of academic institutions and other partners are also working with ESE to develop the next generation of new instruments and smaller, more capable spacecraft.

Increased funding would help achieve these goals.

Space Grant.—The Space Grant College system continues to play an important

and successful role in workforce development through its university programs and

its K–12 outreach. Its matching funds result in a highly leveraged program. AAU

urges Congress to fund the Space Grant program at its authorized level of $28 million. The Administration has requested $19.1 million for this program in fiscal year

2003, while Congress appropriated $24.1 million for it last year.

Competitive Merit Review.—Finally, NASA’s numerous scientific achievements are

due both to the hard work of agency and university scientists and to the agency’s

use of merit review for allocating research funding. We believe that merit review

should continue to be the method NASA uses to allocate research funds, since this

system has helped produce the discoveries and advances from which the nation has

benefited.

Thank you for your attention to these matters, and for the opportunity to provide

this testimony.
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PREPARED STATEMENT OF THE ASSOCIATION OF MINORITY HEALTH PROFESSIONS

SCHOOLS

Mr. Chairman and members of the subcommittee, thank you for the opportunity

to express the views of the Association of Minority Health Professions Schools

(AMHPS).

I am Dr. John E. Maupin, Jr, President of Meharry Medical College, and President of the Association of Minority Health Professions Schools. AMHPS is an organization which represents twelve (12) historically black health professions schools

in the country. Combined, our institutions have graduated 50 percent of AfricanAmerican physicians and dentists, 60 percent of all the nation’s African-American

pharmacists, and 75 percent of the African-American veterinarians.

AMHPS has two major goals (1) to improve the health status of all Americans,

especially African-Americans and other minorities; and (2) to improve the representation of African-Americans and other minorities in the health professions. We are

working toward achieving this goal by seeking to strengthen our institutions and

fortify other programs throughout the nation that will improve the role of minorities

in the provision of health care and research.

AGENCY FOR TOXIC SUBSTANCES AND DISEASE REGISTRY

Congress created the Agency for Toxic Substances and Disease Registry (ATSDR)

to implement the health-related sections of law that protect the public from hazardous wastes and environmental spills of hazardous substances. The mission of

ATSDR is to prevent exposure and adverse human health effects and diminished

quality of life associated with exposure to hazardous substances from waste sites,

unplanned releases, and other sources of pollution. ATSDR works in partnership

with Environmental Protection Agency, the Centers for Disease Control and Prevention, and the National Institute of Environmental Health Sciences to carry out its

public health activities.

ATSDR is performing critical work in the field of environmental and toxicological

studies that has a profound impact on public health. In order to carry out the level

of activity that is called for in its mission statement, AMHPS recommends an appropriation of $85,000,000 for ATSDR in fiscal year 2002, an increase of $6,765,000

over fiscal year 2002.

THE ATSDR/AMHPS COOPERATIVE AGREEMENT ON ENVIRONMENTAL HEALTH AND

TOXICOLOGY RESEARCH

In 1992, ATSDR identified a need for enhanced information on 38 hazardous substances. Through a cooperative agreement between ATSDR and the Minority Health

Professions Foundation (MHPF), the historically black health professions schools

that I represent are engaged in research on twelve of these priority hazardous substances. They include: Lead; Mercury; Benzene; Cadmium; Benzo (a) pyrene;

Flouranthene; Trichlorocthylene; Toluene; Zinc; Manganese; Chlordane; and Di-nbutylphthalate.

Mr. Chairman, I would like to express my appreciation to the subcommittee for

its support again last year of the ATSDR/MHPF Cooperative Agreement. The productivity of this research program is evidenced by the number of publication and

scientific presentations made by the funded investigators. To date, more that 55

manuscripts reporting the finding of the various research projects have been published in peer-reviewed and prestigious scientific journals. These journals include:

Brain Research, Neurotoxicology, Journal of Neurochemistry, and Environmental

Health Prospectives.

Moreover, investigators have made more than 120 presentations at national and

international scientific meetings, including the annual meeting of the Society of

Toxicology, the Experimental Biology meeting, the International Congress of Toxicology meeting, and the International Society of Psyschoneuropharmacology meeting. Finally, the ATSDR/MHPF Cooperative Agreement has contributed significantly

to the training of students in toxicology and environmental health. Annually, more

than 30 students, both graduate and undergraduate, are actively involved in the research program.

Mr. Chairman, MHPF and ATSDR are completing 10 years of successful research.

We expect to continue with a new cooperative agreement in fiscal year 2003, to not

only conduct toxicological research, but to also engage in health services and health

disparity research. For fiscal year 2003, we ask that the subcommittee provide $4

million for this important research collaboration.
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Thank you very much for the opportunity to present the views of the Association

of Minority Health Professions Schools. I would be pleased to answer any questions

that you may have.

PREPARED STATEMENT OF THE AEROSPACE ENGINEERING DIVISION, AMERICAN SOCIETY OF MECHANICAL ENGINEERS; AEROSPACE INDUSTRIES ASSOCIATION; AMERICAN

ASSOCIATION OF ENGINEERING SOCIETIES; AMERICAN HELICOPTER SOCIETY; AMERICAN INSTITUTE OF AERONAUTICS AND ASTRONAUTICS; AMERICAN SOCIETY OF CIVIL

ENGINEERS; GENERAL AVIATION MANUFACTURERS ASSOCIATION; INSTITUTE OF

ELECTRICAL AND ELECTRONICS ENGINEERS-U.S.A.; NASA AERONAUTICS SUPPORT

TEAM; AND NASA ALUMNI LEAGUE

In 1947, the American Institute of Biological Sciences was federally chartered as

a non-profit scientific organization to advance research and education in the biological sciences. Today the American Institute of Biological Sciences comprises 86 scientific societies with a collective membership of over 240,000 scientists in disciplines

spanning all of biology—from basic to applied, from molecular to landscape ecology,

from agronomy to zoology. AIBS facilitates communication and interactions among

biologists, biological societies, and biological disciplines in order to serve and advance the interests of organismal and integrative biology in the broader scientific

community and other components of society on issues related to research, education,

and public policy.

We appreciate the opportunity to provide testimony on these important matters.

If we may be of further assistance, please do not hesitate to contact Dr. Adrienne

Froelich at the AIBS Public Policy for further assistance (afroelich@aibs.org or 202–

628–1500 x232).

The need for biological science funding from NSF

Much has been said about the need for more balance in funding between the various scientific disciplines. At a recent House Science committee hearing on the future of the NSF budget, several witnesses presented charts documenting funding in

physical sciences and engineering, as compared to the life sciences. While funding

for a portion of the life sciences, that related to human health, has steadily increased in recent years due to increased funding for the NIH, funding for the biology

of the natural world has not matched that pace. The NSF remains the principal federal supporter of academic, non-medical research in biology and ecology. In the fiscal

year 2002 appropriations, most of NSF’s research directorates received increases

(over fiscal year 2001 appropriations) greater than 8 percent, except for the Biology

Directorate, which increased by only 4.9 percent from fiscal year 2001 to $509 million.

In many cases, the link between hot issues like West Nile Virus and pesticides,

and work funded by the biological sciences directorate at NSF, may not be immediately obvious. For instance, we have seen ridicule of NSF funding for research into

the sexual behavior of insects, which can lead to the development of non-chemical

pest control. In fact, one of the earliest Golden Fleece awards targeted a research

grant entitled ‘‘The Sexual Behavior of the Screw-worm Fly.’’ Former NSF deputy

director Richard Atkinson, in a 1999 talk at UC Berkeley, recalled that Sen. William Proxmire, who created the Golden Fleece award, got tremendous attention for

this particular award. However, Atkinson recalled, Proxmire later admitted that the

study of the sex life of the screw-worm fly had been of major importance in the field

of non-chemical pest control. (Colloquium Series on the History of Science and Technology, University of California at Berkeley, 10 November 1997, and published in

the Proceedings of the American Philosophical Society, Vol. 143, No. 3, September

1999).

Similarly, in 1996 The Conference of the Parties to the Convention on Biodiversity

(COP) requested a report from the Subsidiary Body on Scientific, Technical and

Technological Advice (SBSTTA) on ways to overcome the shortage of taxonomists

available to inventory and characterize the world’s biodiversity a word that is now

in everyday usage by the general public. Yet, the Association for Systematics Collections (now the Natural Science Collections Alliance) says taxonomy is largely outside the world economy. It and reliable knowledge about the natural world are

taken for granted as a free good by governments, resource managers, drug and seed

companies, and even by many scientists. People want taxonomy, but do not see the

connection between that need and the need for increased funding at the National

Science Foundation.

In our testimony, we address funding levels for NSF’s Research and Related Activities, with particular emphasis on the Biological Sciences directorate and the Geo-
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logical Sciences directorate. A summary of funding requests is below, followed by a

detailed explanation of each request.

Summary of budget requests

The American Institute of Biological Sciences requests the following items:

—$5.2 billion for NSF, $4.0 billion of which would be for ‘‘Research and Related

Activities,’’ as included in the House Budget Resolution;

—$550 million for the Biology Directorate;

—$15 million for the National Ecological Observatory Network;

—$79.2 million for the Biocomplexity in the Environment initiative;

—$37 million to increase the annual stipend for graduate students from $21,500

to $25,000;

—$200 million for the Math and Science Partnership program;

—$185 million for the Learning for the 21st Century Workforce program.

—Funding for the core programs of the GeoSciences Directorate should be increased at the same rate as other directorates of NSF, independent of any funds

that may be transferred from other agencies.

—AIBS does not support the transfer of programs from NOAA, USGS or EPA.

However, should the transfer of Sea Grant to NSF remain in place, we request

that it be funded at a minimum of the fiscal year 2002 appropriation of $62.4

million. Likewise, we request the fiscal year 2002 appropriated level for the

USGS Toxic Substances Hydrology program, which would be downsized to $10

million under the President’s budget.

Overall funding for the National Science Foundation

At the March 2002 House Science Committee hearing on the NSF budget, Dr. Stephen Director of the University of Michigan told the committee that of the NSF proposals receiving ‘‘Very good’’ to ‘‘Excellent’’ reviews, only 56 percent are actually

funded. Even more disturbing, 14 percent of the proposals receiving an evaluation

of ‘‘Excellent’’ were not funded. Dr. Director noted that low funding rates ‘‘discourage faculty from submitting good ideas because of the low probability of success Success rates below one-third are generally viewed as detrimental to encouraging the

submission of best ideas, and the NSF rate is now below this level.’’ He also told

the committee that one impact of low NSF funding is that researchers are tailoring

their research programs to meet the needs of more ‘‘mission-oriented’’ research

agencies such as the Department of Defense. In the long-term, low funding rates

are also influencing career decisions of future young scientists. Dr. Irwin Feller from

Pennsylvania State University told the committee that:

‘‘students with talents and aptitudes for research perceive research as life on a

treadmill, one that constantly requires them to run in place to stand still, much less

progress. Being at a formative period of their career, graduate students are apt to

focus on those aspects of academic life that involve constantly writing proposals

rather than the challenge and excitement of finding answers to intrinsically and extrinsically rewarding questions. Talented and flexible as they are, they opt out of

academic careers and indeed careers in research in other settings, becoming in

many ways productive members of society, but also failing to replenish or add to

the nation’s pool of scientific and engineering personnel.’’

While we support the move to double the research budget at NSF, we acknowledge that initiating a 5-year doubling effort under the current budget scenario may

not be possible. However, we believe that a substantial increase in funding for core

NSF programs is long overdue. We support the House Budget Resolution funding

levels for the National Science Foundation, which would provide $5.2 billion for the

agency, $4.0 billion of which would be for NSF’s ‘‘Research and Related Activities’’.

This represents an 11.1 percent increase in the major grant programs, but assumes

the inclusion of the programmatic transfers included in the President’s budget.

AIBS does not support the transfer of these programs and respectfully requests that

the entire 11.1 percent increase in funding for NSF’s grant programs be distributed

equally among the existing, core programs for each directorate.

Biological Sciences Directorate

Advances in understanding the biology of the natural world are dependent on advances in each of the disciplines represented by our member societies. To provide

an example, the field of parasitology is a classic example of the interaction of the

many disciplines of biology it draws from taxonomy, epidemiology, ecology, wildlife

biology, genetics, molecular biology, physiology, biochemistry and other disciplines

and has a wide range of applications. The various disciplines of biology are not mutually exclusive and increased funding for one sector of the field should not come

at the expense of other disciplines.
631

Advances in ecology and interdisciplinary programs such as biocomplexity depend

on a foundation of biological studies at the organismal level, as well as taxonomy

and systematics. Ecological theory and large-scale projects enable managers to

evaluate impacts of various activities on a system, and thus enhances their ability

to provide useful recommendations regarding policy.

Traditional, single-organism zoological and botanical studies are essential not only

to investigators working at larger scales, but to natural resource managers who

must make decisions with the data that is available. While managers use ecological

theories to predict impacts of human activities, management of threatened and endangered species is first dependent on basic biological information for those species

(e.g., range of occurrence, life span, food habits, reproductive rate). Having a foundation of rigorous, peer-reviewed studies on the basic biology of those species is essential for agencies tasked with determining critical habitat and imposing regulations

on activities in that area. Unfortunately, managers must make decisions with or

without quality science to guide their decisions. Decisions made without adequate

scientific information have proven to be extremely costly, and could have been

avoided with a better investment in the biological research programs funded by the

National Science Foundation.

A high-profile controversy regarding an endangered species highlights this point.

In late 2000, a lawsuit by environmental groups prompted the National Marine

Fisheries Service (NMFS) to issue strict fishing regulations in habitat used by

steller sea lions, an endangered species of marine mammal. Acting on the assumption that Alaskan pollock was the preferred food source of the mammals, NMFS

issued strict regulations that severely threatened the nearly $1 billion pollock fishery. In March 2002, the Anchorage Daily news reported that approximately $80 million of federal funding is being spent to study the sea lions to determine the cause

of their decline. Hundreds of scientists from at least 25 institutions have initiated

over 150 studies on the sea lions in the past 2 years. In one such study, scientists

have discovered that even where pollock is abundant, sea lions forage only on a different species of fish, herring. Thus, harvest restrictions on pollock would not aid

recovery of steller sea lions. This instance highlights that even basic biological studies on the feeding habits of a single species are of extremely high value. Having that

information available before controversies erupt could save American taxpayers a

substantial amount of money spent on lawsuits.

In addition to the societal benefit to funding research at the organismal level,

studies of this type are ideal for smaller universities and undergraduate research

projects. Organismal studies are typically of a shorter duration and smaller spatial

scale than ecological studies. To attract top talent into the pool of U.S. scientists,

students must have first-hand experience with what scientists do. For students to

be involved in all aspects of conducting research (hypothesis formation, study design, data collection and analysis), there must be funding available for small, shortterm projects.

In the fiscal year 2002 appropriations, most of NSF’s research directorates received increases (over fiscal year 2001 appropriations) greater than 8 percent, except

for the Biology Directorate (BIO; up 4.9 percent from fiscal year 2001 to $509 million). It is difficult to determine how much funding is necessary for research in the

various disciplines. However, given the immediate relevance of studies funded by

NSF–BIO to natural resource management, we believe that BIO should receive an

increase of at least that received by other directorates in fiscal year 2002. Therefore,

we request an 8 percent increase in funding for the Biology Directorate in fiscal year

2003 to a level of approximately $550 million.

Transfer of programs from NOAA, EPA and USGS

Whatever the merits of the proposed transfers, we are concerned that the probable costs have not been adequately considered. These changes may have dire effects

on these programs. In some cases, the effect may be tantamount to termination and

valuable research efforts will be lost. It can be difficult and costly to rebuild strong

scientific research programs, if it can be done at all, so it is important to assess

carefully the costs and benefits of major structural changes such as those under consideration by OMB.

We appreciate the fact that this administration values competitive research, and

we also agree with Mr. Daniel’s view that the National Science Foundation has an

excellent record of supporting the Nation’s research. We whole-heartedly support

NSF. However, NSF is legislatively mandated to fund basic research. Therefore, we

question whether NSF is the best place for the USGS and Sea Grant. Sea Grant’s

research agenda is based on the needs of marine industry, government, resource

managers and the public. We question whether NSF can and will fund this kind

of research. The National Research Program of the USGS Water Resources Division,
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as well as the entire USGS research program, are commonly characterized as ‘‘applied’’ research. Indeed, it is the very research that is needed for management of

the quality and quantity of the natural resource that is vital to our very existence.

We are concerned that NSF cannot and will not fund much of the research underway at USGS, not because it is not valuable or of high-quality, but because it is

of a different nature from that typically funded at NSF. Therefore, AIBS does not

support the transfer of these programs.

Within the transferred programs, we note that Sea Grant only receives $55.8, a

10 percent decrease from its fiscal year 2002 appropriation. Should the transfer of

Sea Grant to NSF remain in place, we request that it be funded at a minimum of

the fiscal year 2002 appropriation of $62.4 million. Likewise, we request the fiscal

year 2002 appropriated level for the USGS Toxic Substances Hydrology program,

which would be downsized to $10 million under the administration’s budget.

GeoSciences Directorate (GEO) and Ocean Research Funding

While it appears that GEO will receive a 13.4 percent increase of approximately

$82 million in fiscal year 2003, $74.0 million of that increase is due to the transfer

of programs from NOAA, EPA and USGS. The remaining $8.0 million represents

a mere 1 percent increase in funding. We are particularly concerned about the funding level for the Ocean Sciences Division, which is slated for an approximate decrease of 2 percent in funding, notwithstanding transfers of programs from other

agencies. Combined with the decrease in funding for the Sea Grant Program, total

funding for ocean science and research would decrease by 3.5 percent. The decreases

in ocean research funding for NSF and Sea Grant proposed in the President’s budget are in stark contrast to the testimony presented before the President’s Commission on Ocean Policy, which was created through the Oceans Act of 2000. While the

Commission will not issue its recommendations until next year, numerous credible

witnesses have testified before the Commission that funding for ocean research and

education is sorely inadequate. Therefore, we oppose the administration’s decrease

in ocean research funding and respectfully request that funding for the core programs of the GeoSciences Directorate be increased at the same rate as other directorates of NSF, independent of any funds that may be transferred from other agencies.

National Ecological Observatory Network (NEON)

With NEON, NSF hopes to improve scientific understanding of complex ecosystem

dynamics and to enhance the ability to predict the effects of changes from such

trends as climate change. Because of its ultimately wide network across the nation,

NEON would have the potential to detect threats ranging from invasive species to

chemical or biological terrorist activities. NEON has gone through peer review, with

the National Science Board recommending its funding. Through its Major Research

Equipment budget area, NSF is requesting $12 million to launch to NEON prototype sites. An additional $3 million for operational support of the two prototype sites

is included in the Biological Sciences Directorate under Biological Infrastructure.

AIBS strongly supports the administration’s total request of $15 million for NEONrelated expenses.

Biocomplexity in the Environment

The Biocomplexity initiative is designed to respond to the demand for new approaches to investigating the interactivity of biota and the environment. It will result in more complete understanding of natural processes, of human behaviors and

decisions in the natural world. The Biocomplexity initiative encourages collaboration

among investigators in multiple fields of science, extending questions of sustainability beyond biology to include, among others, mathematicians, social scientists

and economists. AIBS supports the administration’s request of $79.2 million for the

Biocomplexity in the Environment initiative.

Investing in the future U.S. scientific workforce

Graduate Student Stipends.—The average starting salary for students holding a

Bachelor’s degree in science or engineering are nearly twice the level of current stipends for graduate students. The amount of debt incurred by U.S. undergraduates

has more than doubled in the 1990’s. The low level of stipends, combined with the

increasing burden of debt, acts as a deterrent, limiting the number of students

choosing to pursue advanced studies. A student’s time in graduate school will be

much more effective if they are not constantly worrying about making ends meet.

Therefore, we support the administration’s request for $37 million to increase the

annual stipend for graduate students from $21,500 to $25,000.
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Math and Science Partnership and Learning for the 21st Century Workforce

AIBS believes that safeguarding the biosphere and promoting sustainable global

development increasingly depends upon understanding the earth’s biological interactions. Maintaining the integrity of the biosphere therefore depends upon a strong

research, education, and outreach program with resources adequate to support the

increasing demand for biological scientists and students, as well as a scientificallyliterate public. NSF’s programs, Math and Science Partnership and Learning for the

21st Century Workforce, will result in a more scientifically- literate public and will

increase the number of talented young people entering the U.S. scientific workforce.

Therefore, we support the administration’s request for $200 million for the Math

and Science Partnership program and $185 million for the Learning for the 21st

Century Workforce program.

PREPARED STATEMENT OF THE AVIATION RESEARCH AND TECHNOLOGY

THE CRISIS IN U.S AVIATION RESEARCH AND TECHNOLOGY

We are deeply concerned about the lack of a national commitment to sustain U.S.

leadership in aviation research and technology. While public demand for aviation

transportation services is expanding, federal funding for civil and military aviation

research is declining. Since 1998, the combined NASA and DOD investment in aeronautics research and technology programs has been reduced by one-third, and this

trend is continuing. Advanced technologies are needed to assure public safety and

on-time flight schedules. Without continued investment in aviation R&T, U.S. market share in aviation products and services will decline, as will employment in the

nation’s aviation industry.

The NASA and DOD aeronautics R&T budgets have been cut dramatically over

more than a decade, and tens of thousands of skilled workers have left the industry.

U.S. graduates at the bachelor and master degree levels in aerospace engineering

and related disciplines have dropped by 57 percent and 39 percent, and Electronics

respectively, since 1990. These facts, combined with the fact that the average age

of those employed in the aerospace industry is in the mid-to-upper 40s and climbing,

suggest a potentially catastrophic loss of one of the nation’s most important sources

of societalbenefits.

NASA and DOD have taken the first steps toward clearly articulated visions for

aviation research and technology. These visions must now be supported by national

aviation research and technology strategy that maintains and builds U.S. market

share in aviation products and services, ensures our national security, provides a

continuing supply of qualified people to meet the nation’s future aviation workforce

needs and creates an environment conducive to a healthy U.S. aviation industry.

While U.S. government support for aviation research is declining, foreign government funding is increasing. European and Asian countries recognize the value of the

aviation industry and its quality jobs to their economies. National will, available

capital, and investments in leading edge technology are determining winners in this

global competition.

According to a 1999 National Research Council report, ‘‘Recent Trends in U.S.

Aeronautics Research and Technology,’’ the U.S. aviation and rotorcraft industries

(Boeing, Pratt & Whitney, General Electric, General Dynamics, Lockheed Martin,

Textron, and others) contribute approximately $436 billion per year of total output

to the U.S. economy. Of this amount, air transportation and aircraft manufacturing

account for approximately $339 billion, accounting for over half a million manufacturing and engineering jobs. If the American public expects the U.S. aviation industry to continue to be the largest positive contributor to U.S. balance of trade, then

we must have the ability to develop the next generation of aircraft that will enable

them to compete internationally.

The future of U.S. aviation, with respect to both global competition and societal

benefits, depends on new technology and new concepts. Government research establishments have conducted essential fundamental and applied research, which were

high risk, high cost, and long term. The uncertainty and risk inherent in revolutionary concepts cannot be undertaken solely by the private sector. The future demands a clear statement of national policy, establishing U.S. leadership both in aircraft and rotorcraft technology development that assures national security with additional societal benefits, such as:

—Advanced vehicle technologies for innovative applications;

—Increased safety;

—Efficient air traffic management systems to reduce delays;

—Reduced air transportation cost and travel time;
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—Increased fuel efficiency; and

—More environmentally friendly aircraft.

Historically, the government’s support of aeronautics and rotorcraft research and

technology (in collaboration with industry and universities) has been indispensable

in for attracting highly talented people whose contributions have made possible the

societal benefits that we have seen to date. If America fails to support aviation R&T,

it may well fail to provide an essential nucleus of next generation professionals for

the nation’s aviation future.

Recommended Actions:

—Adequate funding for NASA and DOD aviation R&T must be addressed, not

only with respect to the fiscal year 2001 budget, but also—and even more significantly—with respect to the preservation of U.S. capability and leadership in

long term aeronautics research and technology, as required by law.

—As the fiscal year 2000 federal budget has generally subsumed aeronautical research and technology programs within an all-encompassing category termed

‘‘Aerospace Research and Technology,’’ it is essential that the aeronautics R&T

programs at the key mission agencies (NASA, DOD and FAA) be clearly identified and adequately funded within this category.

—The establishment of a National Aviation R&T policy to plan and provide adequate resources that will ensure sustained U.S. world leadership in civil and

military aviation.

As we approach the centennial of the Wright Brothers’ first flight, it is more important than ever that America renews our national commitment to leadership in

aviation. In order to do so, we must ensure the strength and stability of the nation’s

aviation infrastructure by formulating and committing to a national aviation research and technology policy that incorporates adequate federalfunding for longterm aviation research.

PREPARED STATEMENT OF BABYLAND FAMILY SERVICES, INC.

Mr. Chairman: Thank you for giving me an opportunity to submit written testimony on behalf of Babyland Family Services, Inc. about two economic development

initiatives: (1) Project NET-TO-WORK: A Neighborhood Employment and Technology Initiative for Healthy Children and Self-Sufficient Families and (2) the

Babyland Pediatric Health Center.

PROJECT NET-TO-WORK

Babyland Family Services seeks $1 million through the Department of Housing

and Urban Development (HUD) and the Economic Development Initiative (EDI).

Project NET-TO-WORK is a 1-year capital and program start-up request in which

federal funding will enable the agency to complete the construction or renovation

of a major facility (approximately 36,000 square feet) that will thereafter offer the

ongoing employment training, placement and support services necessary to promote

economic development. It will also provide the necessary seed funds for program operations, which will be sustained through the generation of program income, local

and state government contracts and grants from foundations.

Project NET-TO-WORK will provide a comprehensive safety net and partnership—one-stop employment and self-sufficiency services that eliminate common barriers to employment for TANF recipients and low to very low-income families in

Newark and surrounding areas. Babyland’s current service area includes those portions of Newark (Central, West and North Wards) and East Orange that are still

economically distressed. The project will target low-income African-American and

Latino families who are receiving or at risk of receiving public assistance. In particular the initiative will be addressing the needs of single mothers, teenage parents

and males involved in or at risk of involvement in the criminal justice system.

The project will create 50 new child care jobs and will provide employment training and placement services for 150 residents. In addition, the project will address

multiple barriers to job training and employment retention, including: (1) Full-day,

year-round child care, especially for infants; (2) Pediatric health care services, including asthma management and preventive health education; (3) Family counseling, especially substance abuse and mental health services and (4) Quality of life

and violence issues, especially family violence, crime and dilapidated housing.

The main components of the project include the following:

—Employment training, placement and follow-up support services—which includes individualized assessment, planning, basic skills development including

literacy and computer skills, mentorship, peer counseling, support service refer-
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rals, classroom instruction, internship placements, job placements and ongoing

mentorship after placement.

—Child care and early childhood education services for 198 children, from infant

to 5 years old, and their families through center-based and family child care options.

—Preventive health services will be provided onsite at the facility, including assessment, screening and examination, education, referral and follow-up for children and families.

—Access to Computer Technology for community residents through the creation

of computer labs and training programs.

—Family counseling to prevent and address family violence and child abuse

issues, with an emphasis on parent education, substance abuse counseling and

mental health counseling.

—Neighborhood safety and quality of life initiative that trains and empowers residents to develop a five-block safety zone around their neighborhood through the

creation and development of block associations, community policing, local business associations and other community organizing efforts.

The goal of Project NET-TO-WORK is to help eliminate physical and economic

distress in the communities that the agency serves. Through this project, Babyland

expects to create at least 200 new jobs, especially in the areas of education, security,

medical child care, human services and food preparation. The agency also expects

to create a facility that will serve as a stabilizing force in an economically distressed

neighborhood. A child care component will promote the healthy development of 198

children as well as serve as a job-supporting service for 198 parents.

A health component will directly benefit over 1,500 at-risk children in the

Babyland service area through the prevention and management of childhood illnesses, thereby further preventing parent absenteeism from work. A computer technology component will provide over 300 low-income residents with access to basic

and individualized computer technology knowledge that is essential to their longterm success at work. Finally, a grass-roots neighborhood violence reduction component will promote partnerships among residents, law enforcement, churches, businesses and other stakeholders and achieve the following: the reduction of physical

blight (graffiti and dilapidated housing), prostitution, drug dealing, car jacking, domestic violence and various forms of crime.

There is widespread support for this very important initiative. Babyland Family

Services, Inc. expects to receive funding for the project from the following sources:

—The Annie E. Casey Foundation Families Count Award—$166,000 unrestricted

funds

—The Newark Public Schools—approximately $1 million for early childhood education

—Private lending institutions—$1 million for capital support

—Local government (City and County)—$250,000 for employment training and

employment support services.

—Local Foundations—$70,000 for health and community organizing projects.

—United Way—$200,000 for program operations

—Other potential funders include The Healthcare Foundation of New Jersey and

the Prudential Foundation.

THE BABYLAND PEDIATRIC HEALTH CENTER

Babyland Family Services seeks $1 million as an Economic Development Initiative (EDI) through the Department of Housing and Urban Development (HUD). The

project is a 1-year capital and program start-up request that will enable the construction or renovation of a facility that will offer direct family health services and

employment training in the pediatric health care field. Federal funding will also

provide the seed funds for program operation which will be sustained through local

and state government contracts, third-party affiliations and foundations.

Background.—Babyland provides child care and early childhood education services for 750 children (0 to 5 years old) at eight child care centers and provides emergency shelter and family support services to 750 other at-risk and low-income children and families. Babyland is currently Newark’s Early Head Start grantee (serving children 0 to 3 years old, pregnant teenagers, young fathers and families living

with HIV/AIDS) and has a partnership with the Newark and East Orange Public

Schools to provide Abbott preschool services to over 250 children. The agency has

an extensive partnership with the New Jersey Department of Human Services for

the provision of child welfare, family violence and child care services.

Babyland is a lead agency for the United Way’s Success By 6 Initiative and the

State’s Family and Children Early Education Services (FACES) Initiative which,
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combined, provides early childhood support services to 2,000 children and over 30

other child care agencies and schools. The agency provides employment training and

placements in the areas of child care and medical day care for TANF recipients as

well as accreditation support for local teachers and child care centers. Babyland is

implementing the Open Airways Asthma Education Program at eight elementary

schools through a grant from the Centers for Disease Control. Finally, the agency’s

newly established Technology Initiative is providing early computer education to

preschool children, a Technology Center for computer-related employment skills to

local residents and an agency intranet that will develop an outcome and servicebased model for family support services.

Project Description

Babyland is in a unique position, as the lead agency for several collaborative initiatives that promote the development of young children under 6 years old, to

launch a pediatric health initiative that will prevent and manage childhood illnesses

in Newark. In partnership with over 30 child care agencies, elementary schools and

local health care providers, Babyland will develop a coordinated community-based

approach for residents to gain access to health care services. As part of the agency’s

new multipurpose building, this grant will enable the agency to include a pediatric

and family health center that will directly provide basic health services to over

1,000 families and provide health education, assessments, screening and follow-up

services to 2,000 families with children under 6 years old.

In addition to the pediatric and family health center, the new multipurpose building will include a child care center for 198 children (0 to 5 years old), a computer

technology center, an employment training and placement center and family resource center. The new health center will particularly focus on increasing immunizations, screening for lead poisoning, asthma management, preventive dental care

services, nutrition, prenatal care, home safety, parent education and child development, HIV/AIDS prevention and other preventive health education.

Increased access to health care services will be achieved through the following

methods: training and placing 45 low income residents in the medical day care/special needs field; training for over 50 Abbott Family Workers who provide case management services for 2,000 preschoolers; parent-to-parent workshops that will be

part of a series of parent and health education workshops; and creative grass-roots

efforts that will encourage families to utilize the health center’s resources. Community outreach workers, parents, nurses and a team of other health professionals will

provide health outreach, education and services. Services will be coordinated with

existing partners that include the Newark Department of Health, the Newark Public Schools, child care agencies and other local health care service providers.

In conclusion, the project will also eliminate physical distress by developing a facility that will serve as a stabilizing center that will help revitalize a distressed

neighborhood. The health center will prevent illnesses and provide health maintenance support for young, sick, low-income children. In addition, the center will serve

as an onsite employment-training center for TANF recipients who will enter the

health-related field for children with special needs. The project’s health services will

reduce the need for emergency services and lost time and wages for working parents.

Matching Funds.—$1 million capital funding from the following: The Annie E.

Casey Foundation ($166,000 unrestricted award) and $500,000 from a lender. Operating funds will come from the United Way, Essex County and the State of New

Jersey. Other potential funders could include previous health-related supporters

such as the Robert Wood Johnson Foundation, the Johnson and Johnson Company

and the Healthcare Foundation of New Jersey.

We hope the Subcommittee will support these two critically important economic

development initiatives as the appropriations process gets underway.

Thank you for your consideration.

PREPARED STATEMENT OF THE CALIFORNIA INDUSTRY AND GOVERNMENT CENTRAL

CALIFORNIA OZONE STUDY (CCOS) COALITION

Mr. Chairman and Members of the Subcommittee: On behalf of the California Industry and Government Central California Ozone Study (CCOS) Coalition, we are

pleased to submit this statement for the record in support of our fiscal year 2003

funding request of $2.5 million from the Environmental Protection Agency (EPA) for

CCOS as part of a Federal match for the $8.7 million already contributed by California State and local agencies and the private sector.
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Most of central California does not attain federal health-based standards for ozone

and particulate matter. The San Joaquin Valley is developing new State Implementation Plans (SIPs) for the federal ozone and particulate matter standards in the

2002 to 2004 timeframe. The San Francisco Bay Area has committed to update their

ozone SIP in 2004 based on new technical data. In addition, none of these areas attain the new federal 18-hour ozone standard. SIPs for the 8-hour standard will be

due in the 2007 timeframe and must include an evaluation of the impact of transported air pollution on downwind areas such as the Mountain Counties. Photochemical air quality modeling will be necessary to prepare SIPs that are approvable

by the U.S. Environmental Protection Agency.

The Central California Ozone Study (CCOS) is designed to enable central California to meet Clean Air Act requirements for ozone State Implementation Plans

(SIPs), as well as advance fundamental science for use nationwide. The CCOS field

measurement program was conducted during the summer of 2000 in conjunction

with the California Regional PM10/PM2.5 Air Quality Study (CRPAQS), a major

study of the origin, nature, and extent of excessive levels of fine particles in central

California. CCOS includes an ozone field study, a deposition study, data analysis,

modeling performance evaluations, and a retrospective look at previous SIP modeling. The CCOS study area extends over central and most of northern California.

The goal of the CCOS is to better understand the nature of the ozone problem

across the region, providing a strong scientific foundation for preparing the next

round of State and Federal attainment plans.

The study includes six main components:

—Developed the design of the field study

—Conducted an intensive field monitoring study from June 1 to September 30,

2000

—Developing an emission inventory to support modeling

—Developing and evaluating a photochemical model for the region

—Designing and conducting a deposition field study

—Evaluating emission control strategies for upcoming ozone attainment plans

The CCOS is directed by Policy and Technical Committees consisting of representatives from Federal, State and local governments, as well as private industry. These

committees, which managed the San Joaquin Valley Ozone Study and are currently

managing the California Regional Particulate Air Quality Study, are landmark examples of collaborative environmental management. The proven methods and established teamwork provide a solid foundation for CCOS. The sponsors of CCOS, representing state, local government and industry, have contributed approximately $8.7

million for the field study. The federal government has contributed $2,150,000 to

support some data analysis and modeling. In addition, the CCOS sponsors are providing $2 million of in-kind support. The Policy Committee is seeking federal cofunding of an additional $6.75 million to complete the remaining data analysis and

modeling portions of the study and for a future deposition study. California is an

ideal natural laboratory for studying deposition given the scale and diversity of the

various ground surfaces in the region (crops, woodlands, forests, urban and suburban areas).

There also exists a need to address national data gaps, and California should not

bear the entire cost of addressing these gaps. National data gaps include issues relating to the integration of particulate matter and ozone control strategies. The

CCOS field study took place concurrently with the California Regional Particulate

Matter Study previously jointly funded through Federal, State, local and private sector funds. Thus, CCOS was timed to enable leveraging the efforts of the particulate

matter study. Some equipment and personnel served dual functions to reduce the

net cost. From a technical standpoint, carrying out both studies concurrently was

a unique opportunity to address the integration of particulate matter and ozone control efforts. CCOS was cost-effective since it builds on other successful efforts including the 1990 San Joaquin Valley Ozone Study. Federal assistance is needed to address these issues effectively.

For fiscal year 2003, our Coalition is seeking funding of $500,000 from the Department of Energy (DOE) Fossil Program.—The California Energy Commission is a key

participant, having contributed $3 million. Consistent with the memorandum of understanding between the California Energy Commission and the DOE, joint participation in the CCOS will result in: (1) enhanced public interest in programs on energy research, development, and demonstration; (2) increased competitiveness and

economic prosperity in the United States; and (3) further protection of the environment through the efficient production, distribution, and use of energy.

The CCOS program coincides with DOE’s initiative to develop the Federal Government’s oil technology program. In fact, the oil industry in California has been

working for several years with DOE to identify innovative partnerships and pro-
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grams that address how changes in those sectors can cost-effectively reduce particulate matter and ozone-related emissions. This approach will likely result in new

ideas for technologies to improve oil recovery technologies, as well as improve environmental protection in oil production and processing operations. The overlap of

CCOS and the California Regional Particulate Matter Air Quality Study provides

a unique opportunity to perform research related to petroleum-based VOC and particulate matter emissions as well as methods to characterize these categories of

emissions. The CCOS program is utilizing modeling, instrumentation, and measurement to obtain results that can be used to better understand the impact of oil and

gas exploration and production operations on air quality. CCOS program results

might also be applied to identify the most efficient and cost-effective methods of reducing emissions from oil and gas operations.

The Department of Energy has been a key participant in many programs with the

oil and agricultural sectors. By becoming a partner in this program, DOE will be

furthering its own goals of ‘‘Initiatives for Energy Security’’ by aiding domestic oil

producers to enhance their environmental compliance while reducing their costs.

DOE will also be building upon an established and effective partnership between

state and local governments, industry, and institutional organizations.

For fiscal year 2003, our Coalition is also seeking funding of $250,000 from the

National Park Service (NPS) and $250,000 from the Forest Service.—The National

Park Service and Forest Service conduct prescribed burns that contribute to both

ozone and particulate matter pollution. Prescribed burns are needed for forest

health or to reduce fuel loads, and must be carefully managed to minimize public

health and visibility impacts.

Improving the fundamental science related to emissions, meteorological forecasting, and air quality modeling will help in designing effective smoke management

programs. In addition, attainment of air quality standards is an important goal for

protecting national parks and forests. Ozone damage to trees and vegetation in national parks and forests is well documented in California and nationwide. The National Park Service and Forest Service are key stakeholders relying on the success

of SIPs in achieving the emission reductions needed to attain air quality standards.

The participants in the CCOS have been partners in regional study efforts addressing visibility and haze impacts on national parks and forests in the West. The results of this study will provide valuable information that will further those efforts

on a regional basis.

Scientists at the University of Nevada, Desert Research Institute (DRI) are involved with the CCOS. To expedite research studies related to biomass burning and

smoke management for CCOS, it is requested that funds provided by the National

Park Service and Forest Service be allocated directly to DRI.

Thank you very much your consideration of our requests.

PREPARED STATEMENT OF THE CITY OF GAINESVILLE, FLORIDA

Mr. Chairman: On behalf of the City of Gainesville, Florida, I appreciate the opportunity to present this written testimony to you today. The City of Gainesville is

seeking Federal funds in the fiscal year 2003 HUD Appropriations bill to assist with

the following two innovative projects the City is undertaking:

—The Depot Regional Stormwater Park, to provide stormwater treatment for approximately 125 acres of the Downtown and allow the redevelopment of existing

buildings and parking lots within Downtown into mixed residential, commercial,

and office uses. This project will serve as a mechanism not only to further the

revitalization of Downtown but also to treat the stormwater runoff prior to discharging to Sweetwater Branch and ultimately Paynes Prairie and the Floridan

Aquifer, and

—The Underserved Neighborhood Improvement Project, to upgrade the public infrastructure in particular older neighborhoods in east Gainesville. Specifically,

the City has identified the neighborhoods that are encompassed in the newly

designated Eastside Redevelopment District and the Porter’s Neighborhood,

which is included in the Downtown Redevelopment District Expansion Area.

The Eastside Redevelopment District is primarily residential in nature but includes commercial sections along NE Waldo Road, East University Avenue and

SE Hawthorne Road. Except for a few businesses on the periphery, the Porter’s

Neighborhood is strictly residential.

Depot Regional Stormwater Park

The Depot Regional Stormwater Project is a U.S. Environmental Protection Agency (USEPA) and Florida Department of Environmental Protection (FDEP) des-
639

ignated Brownfield pilot project. The project includes the cleanup of contaminated

soils, construction of the regional stormwater management facilities, installation of

reuse water system for irrigation, and development of the recreational components

of the park.

The Depot Regional Stormwater Project is located on the southern boundary of

Downtown. The Downtown area is located within the Sweetwater Branch watershed, which contains approximately 3 square miles of Gainesville. The Sweetwater

Branch drains into Paynes Prairie Preserve, which is part of the State of Florida

Park System and has been designated as an Outstanding Florida Water. An earthen

levee segregates creek flow to a small area of the prairie before discharging into

Alachua Sink, a natural sinkhole located on the northeast boundary of the prairie.

Alachua Sink is an active sink with direct hydraulic connection to the Floridan aquifer.

Urbanization of the watershed has resulted in significant pollution loads entering

the creek from non-point sources. Land use within the urban sections of the Sweetwater Branch watershed includes commercial, industrial and residential types. Most

of the surfacewater runoff is discharged directly to the creek without receiving treatment or attenuation. The urbanization of eastern Gainesville took place prior to implementation of regulations requiring on site treatment of surfacewater. The Saint

Johns River Water Management District’s (SJRWMD) non-point source-screening

model indicates that the non-point pollution load to Sweetwater Branch is significant. The water quality within Sweetwater Branch adversely impacts the Paynes

Prairie ecosystem and contributes to the degradation of the Floridan aquifer.

The Paynes Prairie Preserve provides habitat to a variety of wildlife, including

threatened species and species of special concern including the, bald eagle, white

ibis, roseate spoonbill, and Florida sandhill crane. It is believed that the degraded

water quality within Sweetwater Branch has had an adverse impact on vegetative

communities in Paynes Prairie. A diagnostic study is currently underway to determine the extent of this problem.

Water quality within Sweetwater Branch is described as fair according to the

Water Quality Index (WQI) presented in the State of Florida Department of Environmental Protection’s (FDEP) 1996 305(b) Report, see Appendix E. The WQI is the

arithmetic mean of anywhere from 1 to 6 water quality index categories (water clarity, dissolved oxygen, oxygen demanding substances, nutrients, bacteria, and biological diversity).

The Depot Regional Stormwater Park will provide stormwater treatment for approximately 125 acres of the Downtown and allow the redevelopment of existing

buildings and parking lots within Downtown into mixed residential, commercial,

and office uses. This project will serve as a mechanism not only to further the revitalization of Downtown but also to treat the stormwater runoff prior to discharging

to Sweetwater Branch and ultimately Paynes Prairie and the Floridan Aquifer.

The regional stormwater management facility is being planned as a landmark

stormwater park that will not only serve as a functional stormwater management

facility, but will return unusable brownfield property into an active land use. The

project is located on the southern boundary of Downtown adjacent to the City’s Historic Train Depot (built in 1907) and the City’s Electric Utility’s historic Kelly Power

Plant, which has recently been repowered. The Historic Train Depot was purchased

by the City and is in the process of being renovated in accordance with Federal and

State Historic requirements and using Transportation Enhancement Program and

State Historic Preservation funding. The Historic Train Depot will be a vital component of the regional stormwater park to allow a center of activity that is complementary of the overall goals of the Depot Regional Stormwater Management Project and

the Revitalization of Downtown.

The Stormwater Park will also function as a Rail Trail Hub to provide linkage

of four primary existing and proposed rail trail systems. From the south the existing

Gainesville Hawthorne Rail Trail provides a linkage to the Historic Boulware

Springs facility and proposed park owned by the City, the State Payne’s Prairie Preserve and further out to the City of Hawthorne. The proposed Downtown Connector

will connect the Gainesville Hawthorne Rail Trail through the Stormwater Park and

is being implemented with funding through the Transportation Enhancement Program. From the east the existing Waldo Road Beautification Trail connects the

Stormwater Park with the City’s recently completed Martin Luther King Multipurpose Center, a community sports complex that provides much needed community

meeting space and recreational programs. In addition, the Waldo Trail provides a

linkage to many predominately African American neighborhoods including the Citydeveloped Cedar Grove residential affordable housing neighborhood. The proposed

6th Street Rail Trail will provide access to the north and west through three historic, and predominantly African American communities: the Porters, Pleasant
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Street, and Grove Street Neighborhoods. The 6th Street Trail will be constructed

using a combination of local, State and Federal dollars. The existing Depot Avenue

Rail Trail connects these trails along the borders of the Stormwater Park and Depot

Avenue. The trail and enhanced roadway will provide a primary multi-modal transportation corridor connecting the University of Florida and Shands Medical Complexes to Downtown.

The Depot Regional Stormwater Park component will provide stormwater treatment for Depot Avenue, the proposed Rail Trails, as well as the Downtown portion

of the Sweetwater Branch watershed located upstream of the park. The site of the

proposed Park served as the rail transportation hub linking Fernandina Beach on

the east coast of Florida to Cedar Key on the west coast in the mid-1800’s. The Historic Train Depot’s under-roof, otherwise open loading docks will provide open vistas

to the proposed Sweetwater Urban Stormwater Park. The historic Depot building’s

unique character and location will serve to make it both a lively destination hub

for the neighborhood and a catalyst for further redevelopment of Downtown. The

building is a standing testament to and a significant visual emblem of Gainesville’s

rich history. The restoration of this building in conjunction with the restoration of

the 22-acre Sweetwater Urban Stormwater Park is expected to provide a major community destination and regional ‘‘eco-tourism’’ attraction for the community.

The remaining unfunded costs of the Depot Regional Stormwater Park are esti- mated at $10,700,000.00. The City of Gainesville has acquired approximately 25

acres for the project and anticipates completing acquisition of the balance of the

property by summer of 2002. The City has set aside $1 million of the Stormwater

Management Utility revenues for construction of the stormwater management components. Grant funding from a variety of Federal, State and local sources totals

$3,111,365.00. Among these are a Florida Communities Trust grant to assist with

acquisition costs, State and Federal Brownfield grants for site investigation and design activities currently underway, and an EPA grant for $500,000 for preliminary

engineering and environmental work for a portion of the stormwater component of

the project. The City’s Federal funding request is for $10,700,000.00 to complete the

Depot Regional Stormwater Park.

The Underserved Neighborhood Improvement Project

The City of Gainesville is pursuing a strategy to assist in upgrading the public

infrastructure in its older neighborhoods. Gainesville has a significant number of

older, predominantly low- and moderate-income neighborhoods that lack adequately

paved roadways, curbs and gutters, and sidewalks. The population of these neighborhoods tends to include a disproportionately large percentage of children and

youth, single-parent families and the elderly. Due to income limitations of the residents, it is not feasible to utilize special assessment districts as a funding mechanism for upgrading the infrastructure in these neighborhoods.

The City currently allocates 15 percent of its annual Community Development

Block Grant (CDBG) entitlement for upgrading public infrastructure in eligible

neighborhoods. This year (fiscal year 2001–02), that amounted to about $230,000.

However, due to the significant numbers of neighborhoods that need assistance, this

funding strategy is inadequate to meet the demand.

To make a meaningful impact on the problem, the City is requesting $1 million

to upgrade the public infrastructure in particular older neighborhoods in Gainesville. Specifically, the City has identified the neighborhoods that are encompassed

in the newly designated Eastside Redevelopment District and the Porter’s Neighborhood, which is included in the Downtown Redevelopment District Expansion Area.

The Eastside Redevelopment District is primarily residential in nature but includes

commercial sections along NE Waldo Road, East University Avenue and SE Hawthorne Road. Except for a few businesses on the periphery, the Porter’s Neighborhood is strictly residential.

According to the 1990 Census, the Eastside Redevelopment District had a total

population of 4,043 persons, with 71 percent qualifying as low- and moderate-income

under HUD’s definition (80 percent of median family income). The Porter’s Neighborhood had a total population of 441 persons in 1990, with 87 percent low- and

moderate-income. This compares with about 49 percent low- and moderate-income

for the city as a whole in 1990.

As part of the City’s November 2000 Finding of Necessity for the 4th Redevelopment District (now known as the Eastside Redevelopment District), the City Public

Works Department identified approximately 11 miles of semi-paved local streets and

seven miles of local streets with pavement only meaning no sidewalks or storm

drainage facilities in the District. The total cost to repave or reconstruct all of these

semi-paved streets and streets with pavement alone, including providing sidewalks

where needed, was estimated to be $9 million. The Department estimated that it
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would cost another $1 million to repave the approximately 6.5 miles of streets with

curb and gutter in the District.

Similarly, the Porter’s Neighborhood has numerous deficiencies in its public infrastructure. The December 2000 Assessment of Need Study prepared for the Downtown Redevelopment District Expansion Area noted a general lack of sidewalks in

the neighborhood, narrow streets with deteriorated pavement surfaces and a widespread absence of stormwater management and pollution control facilities. While

the cost to upgrade the infrastructure in the broader Downtown Redevelopment District Expansion Area is estimated at upwards of $4.4 million, a sizable portion of

this cost (approximately $1 million) can be attributed to just the Porter’s Neighborhood.

Street and structure (mainly residences) flooding is known to occur at several locations in the Eastside Redevelopment District and the Porter’s Neighborhood due

to inadequate and non-existent storm drainage facilities. This results in unsafe and

unsanitary conditions. None of the semi-paved streets in either area have curbs and

gutters, as most of these neighborhoods pre-date local government requirements for

stormwater management and treatment.

In order to address these critical needs in the Eastside Redevelopment District

and the Porter’s Neighborhood, the City proposes to replace open drainage swales

with closed drainage systems, build sidewalks in locations where they are needed,

and continue work on master stormwater management systems. An infusion of

$1,000,000.00 additional capital would allow the City to make a significant impact

in both areas.
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PREPARED STATEMENT OF THE CITY OF MIAMI BEACH, FLORIDA

Mr. Chairman: On behalf of the City of Miami Beach, Florida, I appreciate the

opportunity to submit this written testimony to you today on three extremely important initiatives, currently underway within our city, for which we are requesting

Federal assistance.

HUD Requests

Initiative on the Homeless.—Miami Beach seeks $1 million in assistance for the

development of a Homeless Assistance program under the sole jurisdiction of the

City of Miami Beach. (Priority #1)

North Beach Cultural Center.—The City seeks $5 million for the rehabilitation of

a large downtown theater to serve as a cultural and community center. (Priority #3)

EPA Request

Stormwater Infrastructure Improvements.—The City is seeking a 90 percent-10

percent local/Federal split of the total cost through the wastewater account within

the EPA, with the total Federal share for this project being $9 million. (Priority #2)

The Homeless Issue on Miami Beach

Every day, by some accounts, many Miami Beach residents are homeless. Homeless individuals and families live in substandard conditions in places usually not

suitable from human habitation, and face violence, sickness and despair; as well as

the attendant issues resulting from abject poverty. Public health and safety are affected, and community concerns spur the City to undertake service enhancements

such as additional police, fire, rescue, parks and street maintenance, sanitation

services, and others. Within the Miami-Dade County area, the City of Miami Beach

is singularly attractive to homeless migration. Routinely, the City receives a number

of homeless that have left neighborhood municipalities in search for a place to sleep.

With its tropical climate and beautiful beaches, the City provides a comfortable environment for encampments to take root. To address this continuing challenge, the

City of Miami Beach provides funds to local nonprofit organizations and service providers, who attempt to serve the needs of the homeless population. The City also

funds the enhancements that result from this activity.

In 1994, homeless individuals in Miami settled a historic lawsuit with the City

of Miami. Although not a party to this lawsuit, the City of Miami Beach is, however,

directly affected by it. City of Miami Beach homeless individuals and families were

left out of the zoning for the Homeless Assistance Center built by the Miami-Dade

County Homeless Trust. In practical terms, this means that on any given day,

homeless found in Miami Beach will only have access to a limited amount of shelter

beds, which are shared by all other municipalities in the County. In 1999, the City

Administration, the City of Miami Beach Police Department and the Committee on

the Homeless developed a 3-year pilot program to further address the needs of

homeless individuals and families on Miami Beach.

The program tied into the City’s adopted ‘‘Continuum of Care’’ Plan, which is a

part of the City’s Consolidated Plan for Federal Funds. Services included outreach

and emergency shelter for homeless individuals identified by the Police Department

and local service providers. The program served a total of 185 individuals and families. At the end of the first 3 years of the program, several obstacles have been identified that have an impact on the ability of the City of Miami Beach to meet the

needs of its homeless population.

First and foremost is the lack of funds. Current Federal programs for the homeless are allocated on a competitive basis rather than to each community. This has

benefited the Miami-Dade County community; however, there are still significant

needs that are not being addressed in Miami Beach. The County allocates funds received under the SuperNOFA, to address countywide priorities that may not coincide with local, municipal priorities, such as the need for emergency shelter and

transitional housing. It is estimated that approximately $1,000,000 will be needed

over the next 3 years to fund a sufficient amount of emergency shelter beds in available facilities, to address the needs of the Miami Beach homeless population. An additional amount of $1,300,000 will be needed to fund transitional housing over the

next 3 years. To complete the Continuum of Care System for Miami Beach, permanent housing must also be funded, at an estimated amount of $1,500,000 over the

next 3 years.

The second largest obstacle is the need for coordination of housing and supportive

services, regardless of funding source. In addition to its funding of homeless activities, the City also expends approximately $2 million each year in Federal funds for

affordable housing initiatives for very low, low and moderate-income residents. The

City funds approximately $500,000 each year in social services for low and mod-
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erate-income residents, which includes homeless individuals. Although the City of

Miami Beach’s homeless individuals and families are currently participating and

benefiting, in part, by the countywide Continuum of Care system, better linkages

and coordination between the City’s Federally-funded affordable housing, social

services and homeless activities—and the SuperNOFA-funded programs at the

County level needs to take place. The City estimates that the development of such

service coordinators and the establishment of an intake facility will represent an expenditure of approximately $900,000 over the next 3 years.

The third and final obstacle is the lack of data on the homeless population in

Miami Beach and its treatment needs. The information is key to tracking the

progress or failure of the homeless person after a shelter intake; report on and

evaluate results; and recommend program changes, treatment gaps, and funding

needs. The development and implementation of an information tracking system is

estimated at approximately $300,000 over the next 3 years. A total of $1,560,173 is currently being targeted from diverse sources to assist the

homeless in Miami Beach. The County applies for, and receives the City’s Pro-Rata

share from the HUD-funded SuperNOFA each year. This amounted to $766,963 last

year. Additionally, the City has set aside approximately $752,750 for activities that

include homeless prevention activities, outreach, emergency shelter and transitional

housing for homeless individuals. Approximately $40,500 of City of Miami Beach Police Department funds are used to support these activities.

The City of Miami Beach has identified that need exists for $1,000,000 for emergency shelter beds, $1,300,000 for transitional treatment beds, $1,500,000 for permanent housing for formerly homeless individuals and families; $900,000 for the development of intake and outreach facility and staffing for the City; and finally

$300,000 for an information system. This cost of this program is estimated at

$5,000,000 over the next 3 years.

The City of Miami Beach requests Federal assistance in the amount of $3,439,000

for the development of a 3-year Homeless Assistance Program on Miami Beach, beginning with an appropriation of $1 million in the 2003 VA, HUD and Independent

Agencies Appropriations Bill.

Stormwater Infrastructure Improvements

The City of Miami Beach is facing a significant financial challenge in its attempts

to provide adequate potable water and stormwater treatment/protection to its citizens. The City Commission has approved a local expenditure of $60,000,000 for the

water and stormwater improvements, which has resulted in water and sewer rate

increases to 126 percent of national averages in fiscal year 2000 with approved increases bringing rates to 144 percent by fiscal year 2006. Unfortunately, the estimated cost to complete construction of these water and stormwater improvements

is $90,000,000. The City does not have the ability to fund this entire amount. We

are here today to ask for supplemental funding of $9,000,000 from U.S. EPA’s State

and Tribal Assistance Grant Account. This figure represents 10 percent of the

project cost. The funds will be spent in the most socio-economic disadvantaged

neighborhoods in the City.

The City is responsible for distribution of potable water and providing stormwater

conveyance, treatment and disposal to a diverse permanent population of 87,933

people, and a seasonal population of approximately 140,000 people. During the mid

to late 1990s, the City of Miami Beach commissioned the preparation of a Water

Master Plan, Sewer Master Plan and Comprehensive Stormwater Management

Master Plan. These planning efforts evaluated the existing infrastructure and recommended improvements to meet the needs created by changes in land use and

aging infrastructure. These Master Plans led to the creation of the City of Miami

Beach Neighborhood Right-of-Way Infrastructure Program (‘‘Program’’), the funded

portions of which the City anticipates to complete in late 2006. The City is reconstructing aged watermain and stormwater infrastructure in existing neighborhoods

to maintain safe and reliable potable water service, improve water quality in the

Biscayne Bay aquatic preserve and minimize stormwater flooding damage to public

and private property. Individual neighborhoods will benefit from infrastructure upgrade projects relating to watermain replacement, sanitary sewer rehabilitation, and

stormwater collection, treatment and disposal facility improvements.

The majority of existing watermains in the City were installed anywhere from 50

to 80 years ago, and have reached the end of their useful life. Planned enhancements will replace corroded galvanized pipes and pipes installed with lead joints

and will improve safety issues related to potable water distribution. Some water

mains have become almost ‘‘blocked’’ by a process called tuberculation, where deterioration of a pipe’s interior wall lining has occurred as result of chemical reactions

with potable water. Excessive tuberculation has significantly decreased the effective
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pipe diameter, thereby affecting public safety through inadequate fire flows and by

decreasing water pressure at the household tap, or more drastically, causing pipe

collapse or failure. The new or rehabilitated watermains will improve water pressure and provide appropriate internal pressure to safeguard against backflow contamination during fire flows or other peak use situations.

With regard to the City’s stormwater system, the Master Plan identified over 160

drainage basins throughout the City of Miami Beach. Approximately 34 basins were

identified as a priority based upon pollutant loading, pollutant concentration, flooding potential, citizen complaints and City operational staff rankings. The City experiences various levels of flooding, depending on the extremity of the rain event. With

many of the City’s priority drainage basins barely above sea level, and the system

not being capable of handling a 5-year storm event, flooding occurs in many of the

basins during a regular rain event, with higher flooding levels occurring during high

tide or a major storm. Due to high groundwater elevations, drainage is slow, requiring extensive periods of time to dissipate. Continuous excessive ponding over the

long term causes the deterioration, and ultimately failure, of paved roads, and can

lead to mosquito breeding areas. When the proposed improvements are completed,

these priority basins will dispose of a 7.2-inch rainfall (5-year storm) event over a

period of 24 hours.

All of the City’s stormwater runoff is drained into Biscayne Bay, a nationally recognized aquatic preserve. Biscayne Bay was identified as one of Florida’s highest

priority water bodies and was the subject of a specific plan developed to help protect

and enhance it. This plan is referred to as the Biscayne Bay Surface Water Improvement and Management (SWIM) Plan. One of the main goals of the plan is to maintain and improve water quality to protect and restore natural ecosystems and compatible human uses of Biscayne Bay. The City’s plan to construct and/or enhance

existing systems for stormwater conveyance, treatment and disposal facilities helps

achieve that goal. As a municipality within Miami-Dade County, the City is a National Pollutant Discharge Elimination System (NPDES) Phase I permittee, and is

required to eliminate pollutants to the maximum extent practical. The proposed

stormwater improvements will enhance treatment of runoff prior to discharge, minimizing pollutant loadings into the Bay and help the City fulfill its requirement.

While the majority of the Program is currently locally funded, requesting Federal

cost sharing is reasonable. The City is one of the few large Dade County communities to embark on such a program before regulatory pressures require it. Typically,

municipalities have waited to make such improvements until either State or Federal

officials used regulatory reform or enforcement actions to force the issue through a

consent degree, administrative order or court judgments. In contrast, the City has

already bonded $60,000,000 for these improvements from local resources, which represents two-thirds of the total Program cost. The City is considered a major vacation

spot in the County, as well as the nation. Regular flooding impedes the commercial

uses of the City and detracts from the City’s reputation as a tourist destination. The

City’s system is not even capable of expelling stormwater at a 5-year storm level,

whereas most places in the nation are able to expel stormwater at that level.

The City has limited its Funding Request to four neighborhoods that comprise the

City’s North Beach area. These neighborhoods, including Biscayne Point, North

Shore, Normandy Shores and Normandy Isle, have very low Median Household Incomes (MHI). The targeted neighborhoods’ average MHI is approximately $18,000,

or 70 percent of the State of Florida average. These neighborhoods include a variety

of land uses, including highly urban commercial, residential, recreational and multifamily areas, with some pockets of single-family residential, and are eligible for such

Federal funding as the US Department of Housing and Urban Development (HUD)

Community Development Block Grant and Section 108 funds.

As discussed earlier, the City seeks to have funding in the amount of $9,000,000

for this Program approved in the fiscal year 2003 VA, HUD, and Independent Agencies Appropriations Act’s STAG Account by having the following language included:

‘‘A $9,000,000 grant to the City of Miami Beach, Florida for the watermain reconstruction and stormwater improvements in the neighborhoods of Biscayne Point,

North Shore, Normandy Shores and Normandy Isle.’’

The City is in a position to accept the traditional local match share requirement

of 45 percent and will make the $7,000,000 in local funds available upon approval

of the funding. However, without the approval of this grant, portions of the Program

will be in jeopardy of not being constructed because of lack of local financing.

To date, this Appropriations Act has granted $4,894,812,625 in ‘‘special needs’’

water related grants between fiscal year 1992 and fiscal year 2002 to similar

projects in municipalities across the nation. During this same time frame, Florida

has received $117,945,000 of the total monies granted. This is the City of Miami

Beach’s first request for funding from this source. This Program truly impacts the
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health and safety of City residents by replacing deteriorated watermains that will

improve fire flows and prevent backflow contamination during peak use. In addition,

enhanced stormwater collection, treatment and disposal will provide residents and

property with adequate storm protection, facilitate the dissipation of standing water,

and remove pollutants from stormwater runoff flows prior to disposal to the Biscayne Bay, a nationally recognized aquatic preserve.

North Beach Cultural Center

The Byron Carlyle Theater was an abandoned 7-screen movie theater that is located in the central business district of Miami Beach’s North Beach area. The theater was closed by Regal Cinemas in 1999, and was vacant until the City purchased

it and leased a small portion to four local non-profits in late 2001. The City of

Miami Beach has begun the implementation of a strategic plan for the revitalization

of the North Beach area, which includes approximately $124 million in capital improvement projects that will be implemented during the next 6 years. The redevelopment of vacant buildings such as the theater is crucial to the economic and business development components of the North Beach Strategic Plan. However, due to

the unique layout and structural nature of older movie theaters, such as this, redevelopment options are limited and expensive.

There are two reasons that Miami Beach is transforming this building into the

North Beach Cultural Center. First, the redevelopment of this theater is an integral

component of the Strategic Plan for the economic revitalization of the North Beach

area of Miami Beach. While other areas of Miami Beach have enjoyed tremendous

economic success over the last 10 years, the North Beach area has lagged in its

growth and continues to evidence a concentration of low-income households and a

lack of private sector investment. The emergence of cultural institutions during the

beginnings of the economic revitalization of South Beach’s Art Deco District directly

contributed to the area’s continued success. Secondly, the success that cultural organizations helped create in South Beach is also a reason for the creation of a cultural

facility in North Beach. As South Beach boomed, local cultural institutions became

self sufficient and successful, area market trends began to improve and property

values appreciated significantly. In 1993, the primary cultural area in South Beach

was on Lincoln Road, where rental rates averaged $12 per foot. In 2000, rental rates

reached $75 per square foot, and many small businesses and cultural organizations

were forced to either relocate or dissolve. Additionally, many cultural organizations

currently housed in City-owned facilities will soon have to relocate as the City expands to meet the ever-increasing service levels expected by the citizens. A central

facility that accomplishes both goals is critical to the economic revitalization of

North Beach. To date, the City has completed the Phase I renovation of the former

lobby area, and has leased this new office space to three cultural organizations that

were displaced from South Beach. The City has leased additional space in the facility to the North Beach Development Corporation.

The development of the North Beach Cultural Center will also help transform the

entire City of Miami Beach into a world-renowned center for the creation and consumption of culture. Miami Beach is home to many internationally acclaimed cultural organizations, such as the New World Symphony, the Miami City Ballet, and

the Bass Museum. These organizations, however, are located in a small concentrated area of South Beach. The City also has over 75 smaller cultural groups

that are the true cultural heart of Miami Beach. Organizations such as the Concert

Association of Florida, Ballet Flamenco La Rosa, and the Performing Arts Network

continue to struggle for their economic survival. The ability to provide a facility that

allows these groups to remain in Miami Beach will provide a venue where many

emerging small organizations can continue to grow and prosper and at the same

time provide a catalytic cultural component to the revitalization effort in North

Beach.

In 1999, in an economic impact report to the City of Miami Beach’s Mayor’s Economic Council, Florida International University identified that investment in the

cultural arts has the highest economic output multiplier of all local industries. The

challenge for cities such as Miami Beach, however, is, providing the level of Cultural

Arts investment that is required to generate this ‘‘biggest bang for the buck.’’

The City of Miami Beach purchased the facility for $1.7 million, and spent an additional $500,000 on the Phase I renovations. Phases II and III are much more extensive and costly, and projected costs are approximately $6 million. These phases

will include renovation of two of the former movie theater spaces into a single use

space capable of accommodating 250 people. The City has applied to the State of

Florida for a $460,000 grant for this project, and the North Beach Development Corporation, the Miami Beach Community Development Corporation, and Miami-Dade

County have committed a total of $750,000 to the Phase II renovations. The City
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has also identified funding sources that will be committed to the annual operation

of the facility once it opens. When completed, the Facility will interact with the

nearby North Beach Youth Center, a $6 million project that is currently under development one block away. The City of Miami Beach requests an appropriation of

$5 million for the North Beach Cultural Center in the 2003 VA, HUD and Independent Agencies Appropriations Bill.

PREPARED STATEMENT OF THE CITY OF NEWARK, NEW JERSEY

The City of Newark, NJ hereby submits for the record, testimony regarding three

projects that are of great importance to the State of New Jersey’s largest City. The

projects described below each address an aspect of the needs of Newark’s low income

population. The third oldest major city in America, Newark is also one of the most

densely populated. The provision of educational, cultural and recreational opportunities for our residents continues to be critical to the economic and social growth of

the City. Through partnerships with other levels of government and the non-profit

and private sectors, Newark is involved in expansive change. Your assistance is

sought on the three projects described below.

NEWARK PUBLIC LIBRARY

The Newark Public Library system is one of the unsung foundations of the City.

It has serviced every segment of the Newark community for over 100 years. Located

in the heart of the city’s James Street Historic District, the Newark Public Library

has since 1888 served as a major influence in the intellectual and cultural life of

this great American city. The Newark Public Library system, anchored by the Main

Library on Washington Park, includes 10 branches one in every neighborhood of the

city. The library system offers service to 270,000 city residents, to 175,000 people

who commute to Newark every day to work or attend college and university classes,

and to many individuals and libraries from the surrounding region and throughout

the state.

The Newark Public Library’s mission is to be Newark’s premier center for education and learning. Fulfilling this mission, it serves as an education and learning

support center, a reference and research library, a popular materials library, and

a community center. The Library offers encouragement and support to all people in

the achievement of their educational goals and their pursuit of lifelong learning. It

provides people of all ages with abundant opportunities for enrichment and supports

them in the discovery of the joy of reading.

During the past several years, the Newark Public Library has systematically improved and modernized each of its ten branches, which serve as homework centers

and Internet access sites, in addition to more traditional library functions. Indeed,

the City’s $5 million capital allocation has enabled the Library to completely renovate one branch in each of the City’s five wards.

With an operating budget of approximately $12 million dollars, the Library still

relies upon foundation, corporate, individual and State/Federal grants to meet the

increasingly diverse needs of the patrons. With grants from funders like the Prudential Foundation, the Victoria Foundation, Lucent, MCI, and the Turrell Fund, the

Library is able to augment its operating budget by approximately $2 million dollars

per annum.

Now the Library, recognizing that Newark requires and deserves a first rate

downtown facility, will undertake a major renovation of its landmark main building.

The Library needs to add environmentally controlled collection space, accessible

reader areas, parking facilities, and upgraded systems to support expanding technology capabilities. A comprehensive fundraising campaign has been planned and

adopted by Library leadership to reach out to private donors, corporations, foundations and government sources. The Library’s current donor base, including the 13-

year old organization, Friends of the Library, will also be asked to make significant

pledges over a 5-year period. The Library has hired professional fundraising counsel, a feasibility study has been completed and the leadership gift phase of the campaign is underway with its first gift of $1 million.

In addition to the lead gift from The Prudential Foundation, the Library has received $289,733 from the Public Library Construction Bond Fund, and $90,000 in

project support from the Victoria Foundation. Federal funds are sought to support

the renovation initiatives and to act as a critical incentive for private source giving.

An investment in the Main Library facility is also an investment in its services

and programs. For decades, the Newark Public Library has provided significant programming for its entire community. The Library’s summer educational program for

children is a model for the nation. That program provides unique weekly activities
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for thousands of children throughout the summer. During the academic year, the

Library, together with the Newark School District, provides daily educational services for children in grades K–12.

Evening cultural programs include lectures by significant authors and other educational and cultural figures. Performances conducted in Library facilities encompass the full spectrum of the arts including, dance, theater, film, and music. Adults

have been attending in record numbers in recent years.

Classes for adults include English as a Second Language, literacy, and computer

skills training. The Library is, appropriately, the city’s primary source for Hispanic

collections and translation services. Sign language classes are also conducted on a

regular basis to assist the deaf community. The Library’s facilities are a significant

resource for local organizations. The Main Library provides free meeting rooms and

program space for many local organizations.

FISCAL YEAR 2003 REQUEST

An appropriation of $5 million is sought to assist in the implementation of the

Newark Public Library renovation and modernization.

NAT TURNER FIELD DEVELOPMENT

Nat Turner Field is an undeveloped tract of land that the City of Newark acquired with NJ Green Acres funding so that it would be preserved as parkland rather than undergo development. It is surrounded by newer housing developments on

the west, a City pool/recreation center and elementary school on the east, and an

elementary school to the south. To the north was a large abandoned factory, which

was a troublesome brownfield site for many years. It has recently been demolished,

and has been selected by the Newark Public Schools as the site of a new high

school, to be built through the State Abbott District program. This activity presents

a unique opportunity for partnership between the Schools and the City.

It is proposed that Nat Turner Field be developed into a recreational facility that

will jointly serve the needs of the two elementary schools and the new high school,

as well as the community at-large beyond school hours. The existing pool and recreation center could be renovated to be part of a larger, more comprehensive complex,

and serve the schools as well. The schools will educate approximately 1,800 students. The summer recreation program will serve over 2,000 low to moderate income

families from the neighborhood.

FISCAL YEAR 2003 REQUEST

The City of Newark is seeking $3,000,000 in order to take the conceptual design

to an implementable plan, and construct the Nat Turner Field. It will serve as the

recreation focus for thousands of students and families in a redeveloping neighborhood, as part of a comprehensive revitalization plan.

JOHN F. KENNEDY RECREATION CENTER MODERNIZATION

The JFK Recreation Center was built in the 1960’s, and serviced the population

of several high-rise public housing projects. The Newark Housing Authority has proceeded with the demolition of those failed projects, and has recently received

$35,000,000 for its HOPE VI Redevelopment plan. The 45 acre site is being completely renovated, with 755 new townhouse and low-rise public housing units, which

will become a part of the fabric of the City. The State of New Jersey is committed

to building new schools in the neighborhood through its Abbott District program,

and new commercial facilities are planned nearby.

The City of Newark proposes to modernize and improve its neighborhood recreation facility so that it can serve as the neighborhood center for the newly rehabilitated area. The JFK Recreation Center has, in two buildings, a full sized gymnasium, and an Olympic-sized swimming pool under a retractable roof. But the

buildings are not connected children must walk outside to get from the pool to the

gym. This causes difficulty in programming and management, as well as potential

health problems for young, as well as elderly, program participants. In addition, the

buildings present fortress-like brick walls to the street; rather than being a neighborhood beacon, the facility appears forbidding. There is no green space or outdoor

play areas, and no parking facilities. Equipment modernization is also needed for

the pool filtration and air systems, so that activities can go on 365 days a year. To

date, the City of Newark has allocated Capital Budget funds of $6,731,173 to this

project.
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FISCAL YEAR 2003 REQUEST

The City of Newark is seeking $3,000,000 in order to upgrade mechanical systems, construct a new entryway, and make other improvements to make the JFK,

Jr. Recreation Center a full-service community facility for the HOPE VI neighborhood.

The consideration of this committee will be greatly appreciated by the citizens of

the City of Newark.

PREPARED STATEMENT OF THE COALITION FOR INDIAN HOUSING AND DEVELOPMENT

On behalf of the members and Board of Directors of the Coalition for Indian Housing and Development, I would like to thank Chairwoman Mikulski, Ranking Member Bond and other distinguished members of the Subcommittee for the opportunity

to submit public witness testimony.

HUD’S BUDGET REQUEST

As Chairman of the Coalition for Indian Housing and Development and the National American Indian Housing Council, and Executive Director of the Navajo

Housing Authority, I come to you representing Americans who daily endure the

most deplorable housing conditions in the country. These are people within America’s borders who commonly live 15 to 20 people in one small house. These are people for whom proper sewage facilities, roads, and indoor plumbing is often a luxury,

rather than a standard. These are people who, like many other Americans, dream

of owning their own homes.

Indian housing is at a crucial stage. Many of the housing problems that have long

plagued Indian communities remain unresolved. The passage of the Native American Housing Assistance and Self-Determination Act of 1996 (NAHASDA) has given

tribes and Tribally Designated Housing Entities (TDHEs) incredible new opportunities, and with adequate funding, NAHASDA can be the most important tool in

building sustainable, healthy communities in Indian Country. President Bush has requested roughly $646 million for the NAHASDA block grant

for fiscal year 2003. This is four million dollars less than was proposed in fiscal year

2002, and roughly two million less than appropriated for fiscal year 2002. In light

of current events, the Coalition recognizes the new priorities of the Federal government in terms of homeland security; however, it is important intrinsic needs like

housing for Americans are not sacrificed for the wartime effort. In times of peace

or conflict, homeland security begins with a home, and it is only through steady increases in the NAHASDA block grant that the Native American population may

begin to realize a home life outside of third-world-like destitution.

FUNDING NEEDS FOR INDIAN HOUSING

CIHD believes Indian housing could be in more need of federal support than any

other housing program in this country. The lack of significant private investment

and the dire conditions faced in many communities mean that federal dollars make

up a larger portion of the total housing resources than in other areas. NAHASDA

has been one key to housing improvement and homeownership in Indian country.

By direct application of NAHASDA funds, or by leveraging their tribe’s NAHASDA

allocation for large-scale projects, tribal housing authorities have been able to use

NAHASDA to dramatically improve the severe living conditions on their reservations.

CIHD supports NAHASDA and believes it has been effective in providing better

housing for American Indians and Alaska Natives. Housing production under

NAHASDA has more than tripled since its passage in 1996. Before NAHASDA,

there were only around 2000 homes being built per year, now more than 25,000

homes are complete or under construction.

For NAHASDA to continue to be effective, however, an increase in funding is necessary to meet existing housing shortages. CIHD estimates 71,000 units need renovation or replacement, with an average cost of $26,000 each. New housing needs

are at least 4,500 new units per year at an average cost of $96,000 per unit. Finally,

existing housing operation and program operating costs are expected to be over $300

million.

The Coalition for Indian Housing and Development estimates that, to meet the

suitable housing shortage as presented to us now, we need at least $1.0752 billion

in funding for the NAHASDA block grant. Increasing the size of the block grant

given to the office of Housing and Urban Development through the Native American

Housing Assistance and Self-Determination Act (NAHASDA) from $650 million per
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year to $1 billion per year is necessary to provide the nearly 200,000 housing units

currently needed in Indian Country.

Native communities are in dire need of improved housing. The Coalition for Indian Housing and Development and the National American Indian Housing Council

estimate more than 40 percent of the Native American population lives in overcrowded or physically inadequate housing. For the Navajo Nation alone, the immediate need is between 20,000 and 30,000 housing units. Spanning over 18 million

acres of land, the Navajo Nation suffers from chronic unemployment and massive

housing need. Over 56 percent of Navajos live below the poverty level. As for many

other tribes across the nation, this is a situation that requires drastically increased

federal assistance to remedy.

Indian housing needs are many and varied. Basic infrastructure, low-rent housing, homeownership and housing counseling services are all crucial. The NAHASDA

block grant allows tribes to determine their own needs and their own course of action. In this respect, NAHASDA is a model program and should be supported. In

supporting NAHASDA, however, the Congress must also support improved technical

assistance for tribes seeking to efficiently and effectively utilize NAHASDA’s unique

features.

Although fully funding NAHASDA to meet the existing needs would require an increase in funds of $350 million, Native Americans would be well served if the Congress chose to increase the program incrementally over the next 5 years. For fiscal

year 2003, $700 million, for fiscal year 2004 $775 million, for fiscal year 2005 $850

million, for fiscal year 2006 $925 million and for fiscal year 2007 $1 billion.

Without an increase in funding, tribes and tribally designated housing entities

will not be able to provide housing for the 1.6 million Native Americans and Alaskan Natives who live without proper shelter. CIHD urges you to support an increase

in NAHASDA block grant funding to at least $1 billion over the next five fiscal

years.

THE EFFECT OF NEW CENSUS DATA

Recently released census data for 2000 confirm a major increase in the Native

American population. Data show a doubling of the number of Native Americans and

Alaska Natives from 1.96 million to 4.1 million, including Americans of mixed-race

Native descent. For Native Americans and Alaska Natives that are not of mixedrace, data show an increase of over 28 percent for a total of 2.5 million.

For a population struggling intensely to provide adequate shelter for its families,

an increase of this magnitude puts an incredible strain on the restricted funds

tribes rely on. These census figures only confirm what tribal leaders and tribal

housing administrators have known for some time—housing needs on reservations

have outgrown available funding. While not all Native Americans live on reservations where housing needs are the most severe, tribal leaders attest to population

increases across the board, including on reservations.

In light of this new data, it is the Coalition’s hope that Native communities will

receive the funding increases outlined to offset hardship brought on by rapidly growing need.

TOXIC BLACK MOLD

The growth of black mold in tribal homes has been linked to health risks ranging

from flu-like symptoms, skin rashes, fever, and headaches to inflammation of the

respiratory tract, neurological problems and suppression of the immune-system. In

more recent years, black mold is also suspected to blame for several deaths, particularly of children. As of August 1, 2001, HUD compiled a list of over 20 tribal areas

experiencing mold problems, including 320 federally-subsidized homes on the Turtle

Mountain Indian Reservation. Other areas affected are concentrated in the northeast, northwest, and northern plains where wet seasons and flooding have exacerbated the mold growth. Tribal housing officials say black mold is ravaging their

homes, putting a terrible strain on already tight housing funds, since many homes

with black mold must be remodeled or completely destroyed to remedy the situation.

No specific funding currently exists for addressing black mold in tribal homes, but

estimates are that $20 million is needed to fix the situation at Turtle Mountain

alone. Tribes have been trying to address the problem with their NAHASDA block

grant funds (approximately $650 million for fiscal year 2002), but this block grant

was not created for disaster relief. It was created for new construction and normal

rehabilitation of aging homes. Under objection from CIHD, $5 million was taken

from NAHASDA in fiscal year 2001 specifically for Turtle Mountain for black mold.

NAHASDA is not large enough to support this sort of set-aside, particularly since

so many other tribes across the country are experiencing the same problem.
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Black mold is not only a problem for tribes, however. It has also be causing problems for the rest of America, but to date, no particular agency or program has been

able to fill in the gaps.

Recently, HUD Secretary Mel Marinez authorized the use of a new weapon for

tribes and other affected groups to battle Black Mold. Secretary Martinez is opening

up the Lead Based Paint Hazard Control Grant Program and Healthy Homes Initiative to those homes and families being harmed by Black Mold. Having been highly

successful program in dealing with the lead based paint crisis, the Coalition is excited by the prospect of a new awareness and remedy of Black Mold on reservations;

with adequate funding, the incorporation of Black mold into the accepted uses of the

Lead Based Paint Hazard Control Grant Program could mean its eradication. The

Coalition for Indian Housing and Development supports budget increases for HUD’s

Lead Based Paint Hazard Control Grant Program and Healthy Homes Initiative to

a total allocation of $30 million.

PUBLIC AND INDIAN HOUSING DRUG ELIMINATION PROGRAM

Eliminating funding for the Public and Indian Housing Drug Elimination Program (PIHDEP) would abruptly halt successful efforts by tribes around the country

to combat drug abuse and its resulting effects on tribal communities. The President

has put an end to this important program with a redistribution of funds to increase

operating subsidies for public housing authorities in hopes that PHAs will use the

funds for more effective anti-drug activities or for other priorities.

Tribes and TDHEs do not participate in public housing programs and therefore

receive no public housing operating subsidies. The Administration claims the program should be eliminated because of general misuse of funds and ineffective antidrug activities, but in Indian Country, these programs have seen remarkable success.

According to an eleven-month study conducted by NAIHC in 1999 and 2000, the

PIHDEP has created an opportunity for TDHEs to develop innovative, creative,

unique solutions to crime reduction in Native communities. A National American Indian Housing Council study noted that, prior to the Public and Indian Housing Drug

Elimination Programs, tribes reported feeling overwhelmed with the burden of having to address these problems on their own, without knowledge of how to solve the

problems or money with which to build an infrastructure of programs and services

designed to address these community issues.

HUD Secretary Mel Martinez has said that the PIHDEP is too open-ended and

that HUD has no business being involved in such a program. While it is not possible

at this point to come to quantitative conclusions about the percentage of improvement in these communities in regard to any decrease in crime or substance abuse,

the NAIHC study indicates that the PIHDEP is having a positive effect in tribal

communities. Decreased crime and improvements in community values can do much

to support sustainable housing conditions on reservations.

The Coalition for Indian Housing and Development feels it was an oversight on

the part of the Administration to end this program without arranging for supplemental funding for tribes elsewhere. A blanket verdict on the Drug Elimination Program does not take into account several successful programs around the country,

including Indian Drug Elimination activities. If this is the direction the Department

chooses to go, providing operating subsidies to take the place of PIHDEP, then the

tribes must be compensated with an increase in the NAHASDA block grant to support drug elimination programs on reservations.

RURAL HOUSING AND ECONOMIC DEVELOPMENT PROGRAM

CIHD is also concerned with the elimination of the Rural Housing and Economic

Development Program from the President’s budget for the second year in a row. We

are grateful to the Senate Appropriations Committee for insuring that the program

was funded in fiscal year 2002 despite it being left out of the President’s budget and

the House appropriations bill.

Although funded at only $25 million for the past 2 years, a large portion of RHED

grant recipients have been tribes and TDHEs. Furthermore, although RHED has

been said to duplicate USDA programs, on the contrary, this program has been able

to fill in for tribes where other programs have not. It has been a new and useful

tool in capacity building and for supporting innovative housing and economic development activities. Taking into consideration the limited resources available in Indian Country, removing useful programs is counter-productive. If the goal is to increase the capacity of tribes and other rural communities in order to make them

self-sustaining, this is just the sort of program that ought to be supported by the

Congress and Administration.
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FUNDING FOR NATIVE HAWAIIAN HOUSING

In 2000, Congress enacted the Native Hawaiian Housing Assistance program

(Title II, Public Law 106–568). This is the first such effort to provide aid for Native

Hawaiians since the Hawaiian Homes Commission Act of 1920. Modeled after the

NAHASDA, the new Native Hawaiian Housing Assistance program provides tools

desperately needed to improve Native Hawaiian housing.

Although housing conditions for the greater Native American population are appalling, Native Hawaiians continue to have the greatest unmet need and the highest

rates of overcrowding in the United States. Overcrowding is seen in Native Hawaiian homes at a rate of 36 percent as opposed to 3 percent for all other homes in

the United States. While housing problems are seen in 44 percent of American Indian and Alaska Natives homes, the number is actually higher at 49 percent for Native Hawaiians, and only 27 percent for other homes in the United States. Right

now there are 13,000 Native Hawaiians, or 95 percent of those eligible to live on

the Hawaiian Home Lands, who are in need of housing.

In light of these desperate conditions in Hawaii, the President has authorized $10

million in fiscal year 2003 for the Native Hawaiian Housing Block Grant. The Coalition for Indian Housing and Development supports this request, and is encouraged

by the Administration’s support of this new program.

COMMUNITY DEVELOPMENT BLOCK GRANTS

The Community Development Block Grant (ICDBG) program is a crucial tool in

the development of infrastructure and economic opportunities in tribal communities.

The Indian set-aside under the CDBG program has been 1.5 percent of the total appropriation for several years. The Coalition for Indian Housing and Development believes that to both develop effective housing strategies and to stimulate economic

development needed to support homeownership and necessary to job creation, this

ICDBG amount should be expanded. The President’s budget reflects an increase of

$2.5 million to the Indian Community Development Block Grant program. While

CIHD is encouraged by the President’s recognition of the need to increase ICDBG,

the Coalition feels that to adequately meet the basic needs of tribes, the fiscal year

2003 increase should be boosted to reflect at least 3 percent of the total CDBG program allocation, or $144 million.

CONCLUSION

In closing, I would again like to thank all the members of this subcommittee, in

particular Chairwoman Mikulski and Ranking Member Bond for their continuing

support for Indian housing programs and the tribes. CIHD looks forward to working

with each of you in this and future sessions of Congress and I am happy to answer

any questions you may have.

PREPARED STATEMENT OF COLLEGE PARTNERS, INC.

Madame Chairwoman and members of the subcommittee, thank you for opportunity to submit testimony on behalf of College Partners, Inc (CPI) regarding fiscal

year 2003 appropriations for the Department of Housing and Urban Development.

CPI is a not-for-profit organization comprised of Spelman College, Morehouse College, and the Morehouse School of Medicine in Atlanta, Georgia.

CPI evolved out of a shared commitment to enhance the revitalization of Atlanta’s

West End community which sits at the boundary of the Atlanta University Center

(AUC), and is less than three miles from downtown. Our principal objective is to

acquire and revitalize an eleven acre plot of land in Atlanta’s West End which holds

tremendous potential for our institutions and the surrounding community. With the

acquisition of this property we will blend the colleges with the community and create sustainable development through activities focused on quality housing, youth

and adult education, job training, health services, and public awareness.

We would like to express our appreciation for the $200,000 that was provided for

this important initiative in the fiscal year 2002 VA–HUD appropriations conference

report. With respect to fiscal year 2003, we request that the subcommittee provide

$5 million from the Economic Development Initiatives account to support this innovate project.

We would now like to discuss in greater detail the CPI partnership, and what we

are trying to accomplish for our institutions and the West End community.
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The West End Community

The immediate West End includes the now-demolished Harris Homes public housing project, minor retail and commercial properties, an insurance field office, and

a MARTA rail and bus line. Moving outward, the property is three miles southwest

of prime commercial developments such as Phillips Arena, the Georgia Dome, and

the World Congress Center. Despite the West End community’s strategic location,

however, the area has been unable to significantly capitalize on the current renewed

interest in ‘‘in town’’ residential and commercial development. Recent reports profile

the West End as a community with high unemployment, low educational attainment, deteriorating and/or vacant housing, and a preponderance of families that live

at, or below, the federal poverty level. According to the 1990 U.S. Census data, statistics show that this community suffers from an unemployment rate of over 25 percent, while the median income of the Harris Homes community in particular was

a staggering $5,912. Moreover, while 61 percent of the families are living below the

poverty level, over 70 percent of the female-headed households are similarly situated. Additionally, these and other statistics significantly affect the health and mortality rates of city residents. Subsequently, the overall mortality rate of Atlanta African American residents, which are the overwhelming majority in the West End

community, is almost one and one-half times that of white residents.

The Vision

Our vision includes transforming the under-developed property in the Lee Street

Corridor into an inviting entrance to a vibrant learning and living environment. The

development will integrate the colleges with the surrounding neighborhoods to create an educational corridor or ‘‘College Town’’ and will provide an improved physical

linkage between the neighborhoods and adjacent college campuses. Ashby Street,

traditionally a dividing line between the Colleges and neighborhoods west of the

campuses, will be redesigned with a fabric of public spaces, landscaping and localserving retail uses. Ashby Street will become a ‘‘seam’’ joining the neighborhoods

and the Colleges, as opposed to the divider it has been in the past.

CPI is working in partnership with the Atlanta Housing Authority (AHA) to acquire the 11-acre tract of land in a value-for-value land swap. As part of an agreement signed in May 1999, CPI agrees to purchase real estate in other parts of

southwest Atlanta in exchange for the 11-acre tract held by AHA. Acquisition of this

property is critical to our efforts to expand the campuses for future growth. Such

expansion is currently curtailed by Interstate Highway 20 and the 2,700 public

housing units that are within a one-mile radius of our campuses. The requested

land will enable the surrounding community development process to continue and

remain on target with the objectives of the city’s Empowerment Zone, which already

has improved the neighborhoods east and north of the campuses.

With the acquisition of the requested land, the Colleges will be in a stronger position to expand their capabilities and establish and/or expand programs in our institutional areas of expertise and experience. For example;

Spelman College, through its Education department, plans to provide local residents with training in early childhood development and childcare while simultaneously providing a hands-on laboratory for student education majors. Through the

College’s Continuing education program, Spelman would be able to work with single

heads-of-households to transition from welfare to work. Additionally, Spelman would

be able to expand it’s Entrepreneurial Business Development Program, which already has provided nearly 200 local community residents with training on how to

establish, maintain, and expand a home- based or micro-enterprise in retail, service,

and manufacturing industries.

Morehouse College anticipates expanding its partnership with the Fannie Mae

Foundation and HUD to provide leadership training to community organizers, local

nonprofit organizations, and the members of the Neighborhood Planning Units

(NPUs). The Fannie Mae project is designed to establish mutually beneficial relationships with adjacent communities that will result in sustained economic and social improvement and provide students with service- learning opportunities that cultivate civic growth and development. Additionally,

Morehouse, in partnership with each of the other AUC institutions, has already

taken the lead to work with the Atlanta Public Schools in the development of an

application to establish a charter school, which will have an emphasis on mathematics and science and will provide clinical experiences for aspiring teachers from

each of the AUC institutions.

The Morehouse School of Medicine has made health services an integral part of

its focus in developing primary care physicians and anticipates expanding its Community Health and Preventive Medicine Programs. Several components of the program include a Health Promotion Resource Center, a Center for Public Health Prac-
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tice, and a Preventive Medicine Residency Program. Each of these programs is designed to partner with communities to provide services to assist with health related

issues. Additionally, the School would like to expand its Benjamin Carson Science

Academy, an initiative to introduce minority elementary and middle school students

to health and science careers early in their education. The program, which has

worked aggressively with youth from Harris Homes, consists of a Saturday academy

and a four-week summer component.

Additionally, the acquisition of the property will allow all three CPI institutions

to expand their campuses, helping to alleviate problems associated with projected

student enrollment increases and limited space within the AUC generally. The combined student enrollment for all six AUC institutions is approximately 12,700, up

from 8,400 in 1990, an increase of over fifty percent. Moreover, combined enrollment

is expected to grow by approximately 2,000 students over the next twenty years. All

six AUC institutions are in full support of CPI and this initiative.

A study conducted by real estate appraisers Pritchett, Ball, & Wise comments on

the West End community that, ‘‘within the life cycle of a neighborhood, including

growth, stability, decline, and revitalization, we place this neighborhood in the early

stages of revitalization.’’ The West End’s geographic proximity to the downtown epicenter, coupled with its balanced set of land uses, lends the area to reap secondary

benefits from housing to entertainment to small-, mid- and large-scale commercial

development. CPI acknowledges and appreciates the academic, community, and municipal support that it has received from the City of Atlanta generally and the West

End community specifically. By acquiring this land and utilizing it, CPI will be able

to give back to the West End community and assist it in its development efforts.

Madame Chairwoman, thank you for the opportunity to submit testimony to the

subcommittee and for your support of this important initiative. If you have any

questions or need additional information, please do not hesitate to contact us.

PREPARED STATEMENT OF THE CONSORTIUM OF SOCIAL SCIENCE ASSOCIATIONS

(COSSA)

The Consortium of Social Science Associations (COSSA) represents over 100 professional associations, scientific societies, universities and research institutes concerned with the promotion of and funding for research in the social, behavioral and

economic sciences (SBE). COSSA functions as a bridge between the research world

and the Washington community. A list of COSSA’s Members, Affiliates, and Contributors is attached.

COSSA appreciates the Subcommittee’s past strong support for NSF, particularly

last year’s substantial increase over the President’s proposed budget. We are well

aware that every year the Subcommittee confronts difficult choices among competing agencies under its jurisdiction in a budget constrained by the desires of some

to limit Federal spending. COSSA hopes that NSF will remain an important priority

for the Subcommittee.

COSSA strongly believes that investing in NSF’s research and education efforts

will help ensure this country’s future economic well-being and national security.

Therefore, COSSA finds the administration’s proposal for a 5 percent increase for

NSF in fiscal year 2003 inadequate. In agreement with Coalition for National

Science Funding (CNSF), recommends a fiscal year 2003 budget for NSF of $5.5 billion. COSSA strongly endorses this recommendation. This budget enhancement will

return many-fold its value in economic growth, help save lives, promote prosperity,

improve society, and provide more excellent science from more excellent scientists.

Over the past half century science has been the engine that has driven the nation’s economic success and quality of life improvements. Fundamental universitybased science has clearly delivered the great technological advances that provided

new methods and products that have advanced our nation forward. These include:

geographic information systems, World Wide Web search engines, automatic heart

defibrillators, product bar codes, computer aided modeling, retinal implants, optical

fibers, magnetic resonance imaging, and composite materials used in aircraft.

A substantial increase for NSF in fiscal year 2003 will help prepare us for the

great advances in the 21st Century. It would provide NSF a much-needed boost for

the size and duration of its research and education grants. It would also lead to improving the scientific literacy of the nation’s students and general population. As our

business leaders continually point out, without improvements in education and

training and new innovations and scientific findings, economic growth stagnates.

NSF needs a significant influx of new funds.
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The Fiscal Year 2003 Budget and the Social, Behavioral, and Economic Sciences

(SBE)

COSSA supports a substantial increase for the Research and Related Activities

account, so that SBE and the other directorates can continue to fund important research seeking scientific breakthroughs to help secure a better life for people and

society. A significant increase will also provide enhanced support of the fundamental

research that social, behavioral, and economic scientists conduct to understand economic, social, and political behavior.

COSSA is delighted with the substantial percentage increase in the President’s

proposed budget for the SBE directorate. However, because of its small base, the

absolute dollar increase remains smaller than the research opportunities in the

areas this directorate supports. In addition, for Fiscal 2003, NSF has designated the

SBE directorate a ‘‘priority area,’’ and provided it with a down-payment on significant increases in the future. As Norman Bradburn, the Assistant Director for SBE,

told COSSA’s 20th Anniversary symposium, new tools will enable the social and behavioral sciences to expand their research and produce new breakthroughs. These

tools include: neuroimaging, collaboratories, wireless computers, web-based surveys,

geographic information systems, and statistical techniques like data mining and

hierarchical analysis. In particular, the importance of data mining techniques grows

more important as the quantity and complexity of data grows immense.

SBE Research and Technological Change

SBE will support research with the use of these new tools to study how technology

and society advance through continual interactions. Rapid technological change impacts all areas of our lives. We need to know how this alters our economic, political

and social systems. It has clearly led to the growth of new businesses in areas of

biotechnology, geographic information systems, and now nanotechnology. Social and

behavioral scientists continue to study how these new tools have impacted business

organizations and the SBE’s Innovation and Organizational Change program is at

the forefront of supporting this research.

As members of Congress know, the new technologies have changed how we communicate with our decision-makers, and have also raised the possibilities of voting

through the Internet. We have also tragically learned that these tools also create

opportunities for anti-government groups to communicate and plan acts of destruction. They also raise questions of how governmental policies regarding intellectual

property and privacy can be sustained in the face of all this change. SBE continues

to support research in all of these areas.

Our educational system has been overwhelmed by the introduction of technologies

in the classroom and their use as a pedagogical tool. Yet, we still know little about

its impact on learning. The social consequences of the Internet and other new forms

of interpersonal communication also need investigation. How individuals interact

with each other and with their society are also being affected by technology. Robert

Putnam in Bowling Alone suggests that Americans have become less community oriented. September 11 may have changed that. However, we need to study the manifestations of that change and whether it has staying power.

SBE stands ready to support studies on the social, political, and economic consequences of all of these changes and needs a significant influx of funds to do it.

We urge you to support the SBE priority with a substantial increase for the SBE

directorate.

SBE Research and Terrorism

The tragic events of September 11 have certainly changed how Americans look at

the world and their country. Utilizing hypotheses and tools derived from research

on reactions to earlier disasters, natural and man-made, SBE investigators have

studied the reactions of people to the World Trade Center and Pentagon bombings.

Using Small Grants for Exploratory Research (SGER), NSF’s SBE directorate was

able to rapidly fund post-September 11 research in Social Psychology, studying such

issues as: predicting affective reactions to collective loss; how individuals respond

to a salient and pervasive health threat such as anthrax; resiliency and coping in

the wake of the attacks and ongoing threats. SGER awards were also made in other

SBE programs: Human Cognition and Perception, Geography, Sociology, and Political Science. The sociology awards included one for a supplement to the General Social Survey for field work starting on September 13 to assess attitudes towards a

number of issues, including confidence in government, civil liberties, and health

issues. Another award was for a post-crisis analysis of attitudes and values of the

Islamic public in Egypt, Iran and Morocco.

The SBE directorate’s long-term approach to research on terrorism includes the

expectation of increased funding for basic research in a number of areas, including:
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the communication of risk; decision-making and responses of institutions, governments, organizations and social groups to extreme events including terrorism, natural and human-generated disasters; the structure, formation, and behavior of social

groups and networks; formation, mobilization, trajectories and consequences of social protest; social identities of immigrant, racial, and ethnic groups; experimental

studies on the formation of status beliefs, trust and cooperation; fundamental research on democratization; multi-linguality (basic linguistic research on the structure of languages underlying natural language understanding, speech recognition

and automatic translation); corpus linguistics, the statistical and linguistic analysis

of bodies of text, including written documents e-mail correspondence to discover patterns and regularities that can be used for analysis, including source attribution; developmental research, including research on adolescence, to examine attitude formation, group behavior and the effects of mediators of learning, transfer of learning

and environmental factors on behavior, emotion, cognition, and perception.

Since terrorists are people, and terrorism is behavior, SBE scientists are participating in the National Academy of Sciences’ efforts to help understand terrorism,

terrorists, and how to stop further destructive actions. There is a sub-panel, chaired

by Neil Smelser, of the Branscomb-Klausner committee, that is investigating the social/behavorial aspects of terrorism. In addition, the National Research Council’s

Committee on Law and Justice has instituted a roundtable chaired by Assistant Attorney General Michael Chertoff and former Deputy Attorney General Philip

Heymann, which explored many issues at its first meeting on March 18. One of

these used basic research on adolescent behavior to examine how young men are

recruited into terrorist groups. The other focused on criminal deterrence research

to look at disincentives for participating in terrorist activity. Also at the meeting

Martha Crenshaw, a political scientist presented a history of terrorist activities in

the past 30 years, that puts September 11 into perspective.

NSF has also funded a workshop that helped geographers develop a research

agenda on terrorism. Geographers were instrumental in helping New York City respond to the attacks on September 11 by using geographic information systems to

dispatch rescue teams and disaster response units. The geographers will employ

their experience in researching hazards and natural disasters, regional and international activities, and the tools of geospatial data and technologies to examine all

aspects of terrorism. In the past few weeks, psychologists, political scientists and

others have met with the FBI Behavioral Science Unit at Quantico, VA to their expertise from their research experiences to combating terrorism in the U.S. Much of

the basic research that contributes to these activities has been supported by NSF’s

SBE directorate.

Social and Behavioral Science Research Contributions to Public Policy

As part of the Consortium’s 20th Anniversary, late last year we published Fostering Human Progress: Social and Behavioral Contributions to Public Policy. In the

book, COSSA discussed how social and behavioral research has impacted six societal

goals: Creating A Safer World; Increasing Prosperity, Improving Health, Educating

the Nation, Promoting Fairness, and Protecting the Environment. Many of the research studies cited either had initial NSF support or grew out of the basic research

supported by the Foundation. This includes the training of researchers and policy

makers.

One example of the NSF supported research under Creating A Safer World focuses on the difficulties nations have had with their transitions to democracy. Research conducted by James Gibson of Washington University, St. Louis, Donna

Bahry of Vanderbilt, and Brian Silver of Michigan State have examined the struggles in Russia, while Gibson has also looked at South Africa.

Another aspect of Creating A Safer World deals with reductions in personal violence. The NSF-supported National Consortium on Violence Research continues to

research into the causes and correlates of crime and the impacts of various policies

on big city crime reduction in recent years.

Nobel Prizes validate research that helped Increase Prosperity. The 2001 award

went to three NSF supported economists—George Ackerlof, Michael Spence, and Joseph Stiglitz—for their fundamental contributions to the understanding of asymmetric markets. These are markets in which one side has more information than

the other. The film and book ‘‘A Beautiful Mind,’’ illustrated that game theory and

its applications have also played a significant part in our understanding of prosperity and markets. Robert Solow’s Nobel winning work on economic growth and the

importance of technology to that growth is still studied and refined today. Another

Nobel prize winner, Robert Mundell, researched exchange rates, which helped lay

the intellectual groundwork for Europe’s common currency.
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Improving Health is not just a biomedical research endeavor, nor does it just result from discoveries in the physical sciences and engineering. Basic research in the

social/behavioral sciences has examined the importance of lifestyle and behavior to

good health. Interventions to change behavior stem from basic research in social

psychology and other behavioral sciences. Studies of aging also utilize research in

linguistics to examine how older people communicate and use language.

Enormous contributions from the social and behavioral sciences influence how we

Educate the Nation. The discoveries in basic cognitive science have determined how

children learn. Research on childhood development focuses on the importance of

early social relationships as a source of either support and adaptation or risk and

dysfunction. The NSF support for Science of Learning Centers, Research on Learning and Education (ROLE), and the Interagency Education Research Initiative

(IERI) carry on this research and merits support. In addition, the Children’s Research Initiative deserves enhanced funding.

In Promoting Fairness, the study of how our legal system works has been a province of NSF’s Law and Social Science program for many years. Support for research

of the jury system has resulted in landmark studies on how those bodies make their

decisions. Research into police investigation practices has also discovered the difficulties of using eyewitness identifications and line-ups as evidence in criminal

trials.

In studies associated with Promoting the Environment, social scientists have

played a significant role in researching various responses to environmental degradation. Economists, such as William Nordhaus of Yale, have developed models to examine the economics of global climate change. Geographers have demonstrated the

importance of mitigation and adaptation strategies. The NSF-supported Center for

Integrative Assessment at Carnegie Mellon University discovered that slowly changing environmental conditions did not tend to motivate adaptation and mitigation

strategies. Other scientists have looked at societal responses to environmental challenges. Economists have developed cost/benefit analysis that has been an important

tool in regulatory responses to environmental problems. Elinor Ostrom and her colleagues at Indiana’s Center for the Study of Institutions, Population and Environmental Change have had NSF support to devise ways for institutions to equitably

manage common pool resources such as fisheries, grazing grounds, and water supplies.

On all these issues of public policy and others, NSF support for basic research

in the social, behavioral and economic sciences has been vital. COSSA urges the

Subcommittee to enhance that support.

Other Issues

COSSA also supports increased funding for the Graduate Research Fellows program. It is time to provide the funds to increase the stipends to make them competitive with other Federal agencies’ graduate fellows. Increasing the stipends should

not occur as a trade off with the number of fellowships available. The stipends

should be increased without a corresponding reduction in the number of these prestigious, portable, student controlled support for graduate training.

The SBE directorates’ Science, Resources and Statistics division is slated for a significant increase. This boost would allow for the once-per-decade incorporation of the

results of the decennial census to redesign the samples and surveys used to collect

data on the scientific and engineering workforce. We urge the Subcommittee to support this increase.

COSSA is concerned that the proposed project for neutrino research for the

Homestake Mine in South Dakota, if funded without peer review and National

Science Board approval, would create a dangerous precedent for NSF. The NSF

budget must remain free of directed spending to a specific project that has not been

through the merit review process. We are also concerned that the indemnification

and liability costs, if incurred by NSF without large infusions of new funds, would

dwarf NSF’s other programs. We urge the Subcommittee to examine this project and

ensure that NSF’s integrity and budget are protected.

Conclusion

The National Science Foundation remains the key funding agency for fundamental research in the social and behavioral sciences. Indeed, it is the premier funding agency in the world for basic research across all the sciences and engineering.

The SBE community joins with the rest of the science community and the business

and industrial community in supporting a substantial increase for NSF. We urge

the Subcommittee to be as generous as it can in providing NSF with the support

it needs to keep the U.S. on top in science and engineering to provide this nation
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and the world with the scientific and technological advances that will, as John Kennedy said, ‘‘light the world,’’ and bring us back from the darkness of September 11.

Thank you for the opportunity to present COSSA’s views on the fiscal year 2003

budget for the National Science Foundation and its Social, Behavioral, and Economic Sciences directorate.

PREPARED STATEMENT OF THE DORIS DAY ANIMAL LEAGUE

Mrs. Chairwoman and members of the Subcommittee, thank you for the opportunity to present testimony relevant to the fiscal year 2003 budget request for the

U.S. Environmental Protection Agency’s (EPA) Office of Research and Development

(ORD) and the Endocrine Disruptor Screening Program (EDSP). I hope the Subcommittee willconsider the concerns of the 300,000 members and supporters of the

Doris Day Animal League and take steps to ensure the EPA recognizes the necessity

of sound science approaches in its research, development and validation of non-animal, alternative toxicological test methods. These methods can significantly reduce

the numbers of, and ultimately replace, animals in its testing programs.

Research, Development and Validation of Non-Animal, Alternative Test Methods

In recent fiscal years, the enacted budget for the ORD has hovered at approxi- mately $500 million, comprising just 9 percent of EPA’s total budget. In a report

filed by the agency’s own Science Advisory Board, fiscal year 2002 Presidential

Science and Technology Budget Request for the Environmental Protection Agency:

An SAB Review, the SAB urged Congress to increase the proportion to 12 percent

by 2004. However, within these appropriations, we have found it difficult, if not impossible, to track funding by ORD for specific non-animal, alternative test methods

to meet the EPA’s needs in new testing programs. It is our contention that many

emerging technologies, which often prove to be faster to run, less expensive and at

least as predictive as current animal tests used for hazard and risk assessment,

would benefit from research and development dollars.

Thanks to the leadership of Chairman James Walsh, House Subcommittee on VA, HUD and Independent Agencies Appropriations, the House inserted a $4 million directive for the EPA to research, develop and validate non-animal, alternative test

methods in the fiscal year 2002 bill. Ultimately, the conference committee for the

VA, HUD and Independent Agencies fiscal year 2002 bill agreed to the request.

The animal advocacy community is greatly appreciative of this first-ever directive

to the EPA. However, we have had significant difficulty in obtaining concrete information from the agency on the expenditure of funds to date and the plans for the

rest of the fiscal year. Should this committee decide to champion a request for a

directive for fiscal year 2003, I strongly urge you to include a reporting requirement

in the language. I request that $10 million, from the current budget request, be set aside for research, development and validation for regulatory acceptance of non-animal, alternative test methods. Activities funded by these allocations shall be designed in consultation with the Office of Pollution Prevention and Toxic Substances. It is our

preference that these test methods have direct relevance to new EPA testing programs, including the High Production Volume chemical testing program, EDSP and

Children’s Health initiative. Our request for $10 million represents just 2 percent

of the total ORD budget and would be perceived by all stakeholders as a genuine

commitment by EPA to new non-animal, alternative test methods.

I also request that the Subcommittee require the EPA report to the Subcommittee

by March 30, 2003 regarding expenditures and plans for additional expenditures for

fiscal year 2003 funds.

Endocrine Disruptor Screening Program (EDSP)

The Environmental Protection Agency has been mandated, under the Food Quality Protection Act and the Safe Drinking Water Act Amendments of 1996, ‘‘to determine whether certain substances may have an effect in humans that is similar to

an effect produced by a naturally occurring estrogen, or such other endocrine effects

as EPA may designate.’’ This statutory requirement was in response to concerns

about abnormal reproductive and developmental effects in wildlife exposed to various chemicals in their natural environments. The EDSP is an effort to primarily

assess the health effects to humans, with wildlife concerns a component of the program. On its face, it is a worthy endeavor.

However, as currently proposed by the agency, thousands of chemicals may be

tested by a protocol comprised of 16 test methods, most which are animal tests. It

has been estimated that as many as 1.2 million animals will be killed per every

1,000 chemicals tested under the current structure of the EDSP. These projections
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make this proposed program the largest use of animals in toxicological testing by

a federal agency. For this reason, it is being carefully scrutinized by concerned animal protection organizations wanting to ensure that all concrete steps are taken

with this new science to protect animals both wildlife and animals in the laboratories.

The very language in the FQPA on which the EDSP is based can strongly address

one of the concerns of the animal protection community. To my knowledge, this is

the first time that the word ‘‘validation’’ has been used as a requirement for sound

science in developing test methods for a federal toxicological program. The statutory

language required the screens and tests used in the EDSP to be validated to ensure

appropriately relevant, reliable and reproducible tests and screens for the best

science. The EPA, as co-chair of the Interagency Coordinating Committee for the

Validation of Alternative Methods, supports the following definition of validation:

the process by which the reliability and relevance of a procedure are established for

a specific purpose. (‘‘Validation and Regulatory Acceptance of Toxicological Test

Methods,’’ NIH Report 97–3981).

In 1996, when the Acts were passed, the Interagency Coordinating Committee for

the Validation of Alternative Methods (ICCVAM) was in its infancy. Since then, federal regulatory and research agencies, including the EPA, have benefited from the

effective assessment of validity of new screens and tests afforded by ICCVAM. The

ICCVAM assesses the validity of new and revised test methods, including alternatives, that have cross-agency application. In light of the interagency agreements

between EPA and the Food and Drug Administration’s National Center for Toxicological Research and the National Institute of Environmental Health Sciences and

the fact that the proposed test methods for the EDSP are new or revised for new

endpoints, the ICCVAM could clearly provide a uniform assessment of the validity

of all EDSP test methods. Indeed, the ICCVAM was permanently authorized by

Congress in recognition of the continuing crucial role it can play to facilitate assessment of test methods that have cross-agency application, while giving a level of confidence in the scientific assessment to various stakeholders.

The Advisory Committee on Alternative Toxicological Methods for the National

Toxicology Program, comprised of scientists from the public and private sectors,

passed unanimous resolutions on two occasions strongly supporting the ICCVAM assessment. However, EPA continues to assert that the non-animal, alternative test

methods can be reviewed by ICCVAM, while the animal test methods will solely be

reviewed by the agency’s Science Advisory Board/Scientific Advisory Panel (SAP/

SAB). This approach gives animal protection advocates and other stakeholders cause

to believe that two different standards of scientific validity may be applied. And

while the agency claims it will use the same criteria for assessment of validation

as the ICCVAM, the level of confidence in the ICCVAM is stronger. Also, any claim

made by the agency that ICCVAM assessment may slow down implementation of

the EDSP is simply hyperbole.

I urge the Subcommittee to support the assessment of validation of tests and

screens for the EDSP by the ICCVAM with appropriate fiscal support from the EPA.

This interagency process can provide appropriate peer review of new tests and

screens proposed for the EDSP. The ICCVAM should work with the EPA’s SAB/SAP

to avoid unnecessary delay in the program. Among other things, ICCVAM’s assessment can serve to ensure due consideration is given for the replacement, reduction

and refinement of the use of animals in these new tests and screens. This request

should in no way be perceived as calling for a reduction of the President’s request

for activities in the Science and Technology account addressing endocrine disruption.

I would also request that the Subcommittee require the Agency provide a report

to the Subcommittee by March 30, 2003 regarding expenditures and plans for additional expenditures for fiscal year 2003 funds under the EDSP.

Conclusion

I respectfully request that the Subcommittee direct the EPA provide $10 million

for the ORD to research, develop and validate non-animal, alternative toxicological

test methods for regulatory acceptance.

I also respectfully request that the Subcommittee direct the EPA to provide appropriate fiscal support to the ICCVAM for assessment of validation of all tests and

screens to be incorporated into the EDSP.
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PREPARED STATEMENT OF THE FEDERATION OF AMERICAN SOCIETIES FOR

EXPERIMENTAL BIOLOGY

Madam Chair and distinguished Members of the Subcommittee, I am Robert R.

Rich, M.D., President of the Federation of American Societies for Experimental Biology (FASEB) and Executive Associate Dean at Emory University School of Medicine

in Atlanta, GA.

FASEB is the largest coalition of biomedical research associations in the United

States and is comprised of 21 societies with more than 60,000 scientist-members.

FASEB’s mission is to enhance the ability of biomedical and life scientists to improve, through, their research, the health, well-being and productivity of all people.

It is my privilege to join my colleagues in other fields of science and engineering

in thanking you for the Subcommittee’s strong support for the National Science

Foundation over the past years. Your commitment, Madam Chair, and that of Ranking Member Bond to a doubling of the NSF budget has inspired the research community to join with you in advocating such a worthy goal.

We join with you, Madam Chair, and Senator Bond in urging the Subcommittee

to recognize the vital contribution of NSF basic science research to our economy and

our national security by increasing funding for NSF by at least $718 million, or 15

percent, over the $4.8 billion appropriated in Fiscal 2002.

MISSION

NSF supports the ideas, people and tools necessary to maintain our leadership in

science and engineering, which in turn significantly contribute to improvements in

the nation’s health, prosperity and welfare. NSF support has been central to the development of new technologies, promotion of national economic growth and establishment of the world’s premier graduate research and education system. Although

NSF’s share of the federal research and development budget is less than 4 percent,

NSF provides nearly a quarter of all Federal support for basic research at academic

institutions.

RECENT ACCOMPLISHMENTS

Since its establishment in 1950, the NSF has served the nation by investing in

the core disciplines of science, mathematics and engineering. Over the years, NSF’s

investments in research and education have helped the nation achieve an unmatched capability in scientific and technical fields. From 1960 to the present, a

total of 117 NSF-funded scientists have won the Nobel Prize. This prestigious group

includes three physicists, three economists, a chemist and a biologist. One of the

physicists, Eric Cornell, was awarded the NSF Alan T. Waterman Award for Outstanding Young Scientists in 1997. The biologist, yeast geneticist Leland Hartwell,

was awarded the Nobel Prize in Physiology or Medicine for his contributions toward

the discovery and understanding of genes that regulate cell division in all living organisms. This seminal research that began in the 1960s, paved the way for understanding how healthy cells divide and how errors in a cell division may lead to cancer and related diseases.

Included below are a few examples of the bold and practical initiatives funded in

the last year. These illustrate NSF’s accomplishments in the generation, communication and translation of science in the United States.

—An NSF-funded biomedical engineer at the University of Illinois at Chicago has

developed an implantable capsule that releases a steady supply of insulin into

the bloodstream of diabetics. The capsule contains insulin-secreting cells that

are protected from the immune system by a silicon membrane containing

nanoscale pores that allow insulin to flow out while preventing antibody access

to the pancreatic cells.

—The NSF investment in plant genomics has yielded a wealth of new information

about the genomes of economically important crop plants, including corn, barley, soybean and tomato. Newly funded projects focus on the complex gene networks that regulate plant responses to drought, disease and changing climate

conditions.

—Training professionals to handle cyber-threats that have the potential to breach

internet security is a national priority. This year the NSF announced the establishment of the Scholarships for Service Program to educate college students in

information assurance.

—The program will offer Federal internships and will require a commitment of

working for the Federal Government for 1 year for each year of scholarship received upon graduation.
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—Building on its longstanding sponsorship of basic research in engineering, robotics, and social sciences, NSF was able to respond promptly to the events of September 11, 2001. Immediately after the terrorist attacks, NSF issued grants for

studies of structural failures, search robots and social responses to the terrorist

attacks.

SCIENTIFIC OPPORTUNITIES

Recent investments in science, engineering and mathematics have given us revolutionary new products and technologies that will enhance our quality of life. The

potential to create, improve and harness technology for the betterment of humankind has never been greater. We must continue our investments in basic research,

instrumentation and education in order to ensure continued improvement in our

quality of life.

Research and Related Activities

The NSF Research and Related Activities budget supports fundamental research

in science, engineering and mathematics through research grants awarded to scientists from research institutions across the nation on the basis of competition. NSF

grants provide support for research in core disciplines as well as for interdisciplinary projects. Currently, the budget of the NSF is insufficient to support all of the

meritorious proposals submitted. These unfunded proposals represent lost opportunities for advancing our knowledge in important fields of research. In order to maximize the number of proposals funded, NSF is forced to make smaller awards. Adjusting for inflation, the average size of an NSF grant is now worth less than it was

40 years ago. NSF grants are also shorter than those awarded by many other research sponsors. This means that NSF-supported scientists must apply for funding

frequently, spending a higher fraction of their time seeking support and less time

in the laboratory and classroom.

Research Instrumentation as Science Infrastructure

Cutting edge technology and instrumentation have become far too expensive for

many individual laboratories. Examples of such advanced instrumentation include

mass spectrometers, DNA sequencers, and the computers and software for the analysis of data derived from use of this instrumentation. Extensive training in the use

of this technology is necessary and costly. Complicated, state-of-the-art instrumentation also requires expensive maintenance and operation.

The continued progress of science and engineering in the U.S. is dependent on the

availability of advanced research equipment. NSF provides support to more than

2,000 colleges, universities and other research and education institutions for multiuser instrumentation, the development of new instrumentation and the improvement of research facilities at biological field stations and marine laboratories. NSF

also invests in internet-based and other computer resources that advance research

capabilities, allowing the U.S. to remain at the forefront of research.

Human Resources as Science Infrastructure

At NSF, research and science education go hand in hand. Over 100 U.S. Nobel

laureates have had research funded by NSF and future Nobel laureates benefit from

the many science education programs it sponsors. NSF provides educational support

for almost 200,000 individuals, including teachers, students in primary and secondary schools, undergraduates, graduates and post-doctorates. NSF is a leader in

reforming the science curriculum, and its innovative efforts are a key ingredient in

the recipe for sustained progress in biomedical science.

NSF support for science education programs is also critical for the general citizenry. Only a scientifically knowledgeable public will understand the social and cultural changes resulting from advances in science and technology. NSF continues its

commitment to bring the best in science education to the general public, reaching

over 150 million people through its programs.

RECOMMENDATIONS

FASEB supports a significant increase in the NSF budget to allow this agency to

provide greater support for the fundamental research and interdisciplinary workforce training that has been its hallmark. Such an investment will allow larger and

longer grants resulting in increased productivity and reduced administrative expenses. In addition, more proposals should be funded.

To address these pressing needs, provide access to major research instrumentation and continue to educate Americans in the crucial fields of science, engineering

and mathematics, we recommend that the NSF budget be increased by $718 million

(15 percent) in fiscal year 2003.
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FASEB recommends a return to the commitment to double the NSF budget, in

5 years and therefore FASEB recommends that the NSF budget for fiscal year 2003

be increased by at least 15 percent, to $5.5 billion.

PREPARED STATEMENT OF THE FLEET RESERVE ASSOCIATION (FRA)

Madame Chairman: The Fleet Reserve Association (FRA) is grateful to have been

invited to submit a statement on its request for funding the Department of Veterans

Affairs for fiscal year 2003. On behalf of more than 140,000 shipmates, I extend

gratitude for the concern and active interest generated by the Subcommittee in protecting, improving, and enhancing benefits that are richly deserved by our Nation’s

veterans.

FRA was established in 1924 and its name is derived from the Navy’s program

for personnel transferring to the Fleet Reserve or Fleet Marine Reserve for the Marine Corps after 20 or more years of active duty but not 30 years to fully retire.

During the required period of service in the Fleet Reserve, assigned personnel earn

retainer pay and are subject to recall by the Secretary of the Navy.

FRA is the oldest and largest professional military enlisted association exclusively

serving and representing men and women of the three Sea Services. It continues

to seek protection and equity for those who serve in or have retired from the United

States Navy, Marine Corps, and Coast Guard, plus those veterans requesting assistance. The Association has been active over the past 78 years in pursuing Congressional and the respective Administration’s support for enlisted quality of life and

veterans’ programs for Sea Services’ personnel. FRA is also the leading enlisted association in The Military Coalition, which is compromised of thirty-two military and

veterans’ organizations representing 5.5 million Active Duty, Reserve, Guard, Retired, and Veterans, their families and survivors.

LEGISLATIVE GOALS IN BRIEF

FRA’s membership has an average age of 68 years, all veterans of as many as

three wars, mostly retired and from the Sea Services. They have tasked the Association to seek Congressional action to authorize and fund the following:

—Expand health care benefits for all veterans to include Medicare Subvention.

—Funds for the construction and leasing of additional nursing and long-term care

facilities.

—Appropriate funds for the repeal of the statute requiring the repayment of separation pay if the service member becomes entitled to VA compensation.

—Enhance educational programs and provide voluntary open enrollment in the GI

Bill for all current active duty military personnel, including military personnel

who never enrolled in VEAP or MGIB.

DEPARTMENT OF VETERANS AFFAIRS FISCAL YEAR 2003 BUDGET

Fiscal Year 2003 Budget

FRA continues its quest for a DVA budget that will provide adequate funding to

care for the Nation’s veterans, their families and survivors. Although the fiscal year

2003 budget is the largest increase ever for the DVA, FRA has listed the following

veterans’ programs it believes should be authorized and funded in full. The Association urges their consideration and adoption to assure America’s veterans they will

be fully compensated for their sacrifices while in the uniform of the Armed Forces

of the United States, and that their families and survivors will be cared for as prescribed in the mission of the Department of Veterans Affairs.

VETERANS HEALTH ADMINISTRATION

Expand Access to Veterans Health Care

VA treatment facilities should be accessible to military retirees’ use at no cost to

the veteran. The Veterans Millennium Heath Care and Benefits Act (Public Law

106–117) Section 113 authorizes the Department of Defense (DOD) to reimburse the

Department of Veterans Affairs (VA) for medical care provided to eligible military

retirees. However, recent benefit changes under Public Law 106–398 with regard to

TRICARE and Medicare eligible retirees have delayed retirees’ who are enrolled as

Priority Category 7 from utilizing the VA facilities without cost. This especially affects non-disabled military retirees under 65 years old, who do not have access to

military treatment facilities (MTF).

Eligibility Reform and the Uniform Benefits Package are appealing concepts offering our veterans a comprehensive health care plan that provides the care they need.

However, the annual enroll ment requirement is of concern in addition to the uncer-
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tainty about what priority levels will be enrolled each year. FRA believes the Veterans Health Administration (VHA) medical treatment and care centers should be

open to all veterans regardless of their ability to pay. The Association agrees there

must be a system granting priority access for certain veterans; i.e., service-connected disabled at 30 percent or more; however, all veterans rated 20 percent or

less, or non-rated, should be granted access on an equal basis first come, first

served. FRA commends Secretary Principi for retaining Category 7 veterans in the

VA Health system. Unfortunately, FRA strongly disagrees with the Department’s

proposal to change its policy to include a $1,500 yearly deductible for higher income,

non-service-connected veterans. This would mandate forced choice between the VA

and DOD Health systems. FRA opposes the forced choice proposal. Military retirees

shouldn’t have to choose, if they are eligible for both systems. The mission of these

two systems is dissimilar in many ways, and focused on serving different populations with diverse needs.

The Association supports continued collaborative efforts between the DOD and

VA, to enhance the Defense Health System and provide the necessary care for a

very deserving population. The Conference Report for the National Defense Authorization Act for fiscal year 2002 (H.R. 2620), requests both the Secretaries of VA and

DOD to submit to the Committees on Appropriations a credible plan to fully integrate facilities at three demonstration sites. FRA is opposed to a complete integration of these two Health systems, (per H.R. 2667). Before Congress considers this

issue any further, it should wait until the President’s Task Force to Improve Health

Care for Our Nation’s Veterans (PTF) issues its findings. {Please note that a copy

of FRA’s testimony to the PTF is available upon request.}

Medicare Subvention

FRA is concerned about dwindling access to health care. When military retirees

made decisions to retire in certain areas of our country, they did so with the thought

of being close to a military installation or military treatment facility. Now because

of BRAC actions, many of those military installations and MTF’s are no longer

available.

In recent years, the House and Senate have passed VA Subvention in separate

sessions of Congress, but have not been able to agree on a plan to test the use of

Medicare funds in VA facilities. Medicare Subvention could prove beneficial to the

government and stakeholders. For veterans, VA Subvention would mean improved

access to care, as nearly 60 percent of enrolled veterans are Medicare eligible. These

beneficiaries have paid into Medicare throughout their working lives. One important

question that needs to be evaluated is whether the VA can deliver Medicare-sponsored services more efficiently than Medicare in the private sector.

FRA recommends a demonstration project for the VA to test the feasibility of establishing Medicare Subvention programs within its health care facilities. FRA believes that VA Subvention could enhance older veterans’ access to VA health care

and determine whether government resources can be used more efficiently to pay

for the care of growing numbers of older Medicare-eligible veterans. FRA also believes with Medicare Subvention, the VA can withdrawal its proposal for a $1,500

deductible for Category 7 veterans a proposal the Association strongly opposes.

Nursing Homes, Long Term Care, and other Health Care Programs

FRA believes Public Law 106–117, Section 101, The Veterans Millennium Health

Care Act makes great strides in providing the long-term care our veterans deserve.

However, this program is only authorized for a period of 4 years, and only for veterans who need care for a service-connected disability, and/or those with service-connected disability ratings of 70 percent or more. The Association urges the extension

of this program and expansion to include veterans with service-connected disability

ratings of 50 percent or more.

Veterans of World War II and Korea are in their 60s or older, as are some Viet

Nam veterans, and many require a greater level of long-term care. As our veterans

are aging, more will become dependent upon the VA to provide the necessary care

in nursing homes, domiciles, state home facilities, and its underused hospital beds.

The methodology used in collecting funds for the Millennium Act and then transferring the money over to the Treasury is flawed. VA’s rationale for this practice

is to allow more discretionary VA spending under the current caps set in the Balanced Budget Act. This is slight of hand rather than a reliable business practice and

FRA firmly believes any money collected from veterans for veteran’s health care

should remain within the VHA.

Tobacco-related Illnesses

In 1998, Congress changed the law prohibiting service-connection for disabilities

related to smoking. Many veterans began using tobacco during their military serv-
664

ice. It was a way of life and information on health risks associated with tobacco use

and nicotine addiction was nonexistent. In earlier years it could be said that the

Armed Services facilitated smoking by including cigarettes in meal rations, and selling cigarettes at discounted prices in military exchanges. FRA recommends that the

Subcommittee urge the oversight panel to repeal the 1998 decision not to review tobacco-related claims and, if adopted, to provide the necessary appropriations.

Medical and Prosthetic Research

VA is widely recognized for its effective research program. FRA continues to support adequate funding for medical research and for the needs of the disabled veteran. In particular, FRA supports the fiscal year 2002 Senate Appropriations Committee report language that states, ‘‘Prostate cancer research has not kept pace with

scientific opportunities and the proportion of the male population who are afflicted

with the disease.’’ FRA urges Congress to fund new research opportunities through

inter-institutional collaboration.

TRICARE

The VA’s role as a TRICARE network provider is a potential source for increased

access to quality health care for all DOD beneficiaries. If VA’s capacity allows, and

its core mission is not compromised, then the VA should play a vital role in offering

primary and specialized care to TRICARE beneficiaries as a network provider.

In a June 1995 Memorandum of Understanding, TRICARE contractors were authorized to include VA medical centers (VAMCs) in provider networks and, therefore, TRICARE contrac tors were encouraged to use VA facilities. Due to persistent

billing and reimbursement problems, VA’s potential as a network provider has not

been fully realized. Despite 80 percent of VAMC’s currently being considered

TRICARE network providers, three-quarters of the activity occurs in only 26 facilities and the total level-of-effort was miniscule according to the GAO (May 2000).

Current TRICARE contracts will begin to expire over the next few years, and FRA

is pleased that the VA is represented in the new contract development. TRICARE

Management Activity (TMA) has acknowledged the importance of considering the

VA in the next generation of contracts. In light of the growth of VA’s Community

Based Outpatient Clinics (CBOCs), the VA could be a service delivery alternative

for TRICARE beneficiaries where capacity exists.

The Association supports greater utilization of VA networks in partnership with

TRICARE. Although many VA providers are also TRICARE network providers, actual usage has been marginal. Some reasons why this partnership has not been

fully realized include:

—VA providers are not qualified in specialties most in demand by DOD beneficiaries. I.e. pediatrics and obstetrics and gynecology.

—VA providers often cannot meet TRICARE Prime access standards.

—Business practices in the areas of claims processing, IM/IT systems’ incompatibility, conflicts over pricing of services, various administrative limitations and

a lack of aligned incentives impede use of VA providers by TRICARE Managed

Care Support Contractors.

Expanding the use of VA providers as TRICARE-authorized providers to care for

all TRICARE beneficiaries may improve active duty and retirees’ access to care in

areas where TRICARE Prime is not available.

VETERANS BENEFITS ADMINISTRATION

Separation Pays

Under current law, service members released from active duty who fail to qualify

for veterans’ disability payments and are not accepted by the National Guard or Reserve, never have to repay any portion of separation pay. If, however, qualified for

either, it’s time for payback. FRA can not understand why an individual awarded

service-connected disability compensation should have to repay the Federal government for that privilege.

FRA is totally opposed to the repayment requirement. The Association recommends the Subcom mittee to seek repeal of the applicable provisions in Chapters

51 and 53, 38 USC, to terminate the requirement to repay the subject benefits and,

if necessary, to provide the required funding.

Court-Ordered Division of Veterans Compensation

Service-connected disability payments are intended to financially assist a veteran

whose disability may restrict his or her physical or mental capacity to earn a greater income from employment. FRA believes this payment is exclusively that of the

veteran and should not be a point at issue in any States’ Civil Actions. If a Civil

Court finds the veteran must contribute financially to the support of his or her fam-
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ily, let the court set the amount allowing the veteran to choose the method of contribution. If the veteran chooses to make payments from the VA compensation

award, then so be it. The Federal government, however, should not be involved in

enforcing collections ordered by the states. Let the states bear the costs of their own

decisions. FRA recommends the Subcommittee seek the adoption of stronger language offsetting the provisions in 10 USC, now authorizing Federal enforcement of

state court ordered divisions of veterans’ compensation payments.

Montgomery GI Bill (GI Bill)

The Montgomery GI Bill is one of the major enticements for enlisting in the

United States Armed Forces. FRA believes that continued improvements to the GI

Bill are necessary in order to continuously attract new recruits per congressionally

mandated recruitment levels each year.

The Association is grateful for the passage of Public Law 106–419 during the first

session of the 107th Congress, which included the enhancement of MGIB benefits.

However, FRA believes Congress should increase MGIB annually based on a benchmark of the current average cost of a 4-year state run college education.

Would be participants in the MGIB are not permitted to enroll into the new

MGIB because they never enrolled in the VEAP program. During the VEAP era,

that program was considered to be insufficient in providing adequate funding for a

college education. Therefore, current active-duty military personnel that never enrolled in VEAP or MGIB should be given an opportunity to participate. FRA recommends that if authorized, the Subcommittee provide the necessary funding.

The Association continues to believe that veterans who take advantage of the GI

bill will eventually return more money to the U.S. Treasury than was spent by the

Federal government for their education. A concept once offered by the Treasury Department.

Disability Compensation Claims Processing

Among veterans, VA’s inability to process claims in a timely, accurate fashion continues to be one of its most serious problems and a primary source of dissatisfaction

with the Federal government.

The Veterans Benefits Administration (VBA) reports the average processing time

for initial claims is 225 days. If that claim is appealed to the Board of Veterans Appeals (BVA), as many are, the average time for a decision is 620-plus days. Speed

is an issue. More important is accuracy, a component of processing ignored for years

and the cause of many delays in finalizing claims.

As then Chairmen of the VA Claims Processing Task Force, Daniel L. Cooper stated on 8 November 2001, ‘‘I must say that I think the VA has the necessary resources right now to do the job the Agency can’t justify asking for more people right

now.’’ To improve quality, VBA must devote adequate resources for training personnel. It needs additional staff to conduct quality reviews of the work of each of

its claims adjudicators in order to assess performance, impose accountability, and

remedy deficiencies on the individual employee level. FRA believes the recommendations and changes proposed by the Task Force should be implemented and funded

in order to improve the way VA does business.

NATIONAL CEMETERY ADMINISTRATION (NCA)

Cemetery Systems

The NCA has undergone many changes since its inception. Currently, the administration maintains more than 13,850 acres of developed and undeveloped land containing more than 2.3 million grave sites as well as 33 soldier’s lots and monument

sites. That equates to 120 cemeteries throughout 39 states, the District of Columbia,

and Puerto Rico. One quarter of the nation’s 26 million veterans alive today are over

the age of 65. Rapidly aging veteran populations coupled with the death rate of

World War I, World War II, and Korean veterans create resource chal lenges within

the NCA. It was estimated that the number of deaths in 2001 were 674,400 veterans, and by 2006 that number will increase to 687,000 annually, or an average

of 1,900 funerals a day. During this time period, the interment rate will continue

to rise thereby placing even greater strain on NCA’s workforce and equipment.

FRA is grateful to Congress for its increased funding for the new construction of

future cemeter ies. The NCA is doing much to meet resource challenges and the demand for burial spaces for aging veterans. It could do more, but without sustained

additional funding, the system will never meet the demand. FRA urges increased

funding, so the NCA has exclusive rights for the purchase of land, preparation, construction and operation of new cemeteries, the maintenance of existing cemeteries,

and the expansion of grants to states to construct and operate their own cemeteries.
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As part of the Veterans Education and Benefits Act of 2001, the government also

will provide grave markers for veterans whenever requested, even if there is another marker on the grave. However, as it stands the law only applies to new burials, FRA believes the grave marker rule should be amended and funds appropriated

to include the thousands of families denied grave markers in the past decade.

OTHER RECOMMENDATIONS FOR CONSIDERATION

The following miscellaneous goals are offered for your support.

—Continue to monitor implementation and ensure adequate funding of military

health care program enhancements.

—Amend SBP to increase the annuity to 55 percent and shift the paid up coverage effective date from 2008 to 2003.

—USFSPA Support legislation eliminating inequities in the Uniformed Services

Former Spouses Protection Act (USFSPA).

—Increase military manpower commensurate with demanding operational commitments.

—Improve compensation for career noncommissioned and petty officers of the U.S.

Armed Forces.

—Provide adequate funding for military commissaries and continue supporting its

exchange systems.

—Support equity in cost-of-living adjustments for all beneficiaries.

—Protect personnel benefits for retirees and families residing at or near BRAC

sites.

—Authorize and fund construction and maintenance of family and bachelor housing, child care centers, and MWR facilities.

—Support permanent change of station (PCS) process reform.

—Support full funding for the Impact Aid Program for schools enrolling children

of military personnel.

—Ensure parity for Coast Guard personnel with DOD pay and benefits.

—Amend the tax code to exclude taxation on residential sales for active duty

members returning from overseas assignments.

—Support enactment of a Flag desecration statute.

CONCLUSION

Madame Chairman. In closing, allow me to again express the sincere appreciation

of the Association’s membership for all that you, the Subcommittee, have done for

our Nation’s veterans over these many years.

FRA is grateful to address its recommendations for funding of the Department of

Veterans Affairs. Granted, not all veterans’ issues are cited in this statement; however, the Subcommittee does have the Association’s support for the improvement or

enhancement of any veterans programs not addressed herein.

PREPARED STATEMENT OF THE FRIENDS OF VA MEDICAL CARE AND HEALTH

RESEARCH

The Friends of VA Medical Care and Health Research (FOVA), a coalition of 78

medical research, specialty, physician, academic, patient advocacy and industry organizations committed to quality care for veterans, is pleased to provide recommendations regarding fiscal year 2003 funding for the Department of Veterans

Affairs (VA) medical and prosthetics research program. FOVA strongly encourages

the Senate Subcommittee on Veterans, Housing and Urban Development to support

VA research by recommending an fiscal year 2003 appropriation of at least $460

million.

FOVA’s fiscal year 2003 recommendations build on the $20 million increase provided for the current year. The Administration’s fiscal year 2003 budget request for

a $38 million (10 percent) increase in research program dollars is notable for being

the first time in many years that an administration has proposed funding sufficient

to maintain VA’s current level of effort in advancing treatments for conditions particularly prevalent in the veteran population including prostate cancer, diabetes,

heart diseases, Parkinson’s disease, mental illnesses, spinal cord injury and aging

related conditions. We applaud the Administration and Department of Veterans Affairs Secretary Anthony J. Principi for recognizing the invaluable contribution VA

research makes to delivering high quality care for veterans and toward improving

the health of veterans and the nation.

Please note that the Administration’s budget request for a $38 million increase

for VA research includes a shift from OPM to VA of $15 million in accrued govern-
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ment health and retirement benefit funds. Consequently, the Administration’s budget proposes a $23 million (6 percent) increase in research program funds plus $15

million in federal employee benefit expenses previously paid by an OPM account,

for a total increase of $38 million (10 percent) over current year funding of $371

million. FOVA strongly recommends that the entire $38 million increase be allocated to VA research’s programmatic needs and that accrued benefits continue to

be paid out of the OPM trust fund. However, even a $38 million increase would not allow VA to address all of the

opportunities it has to improve care for veterans, nor to meet the new challenges

presented by the tragedies of September 11 and subsequent events. FOVA strongly

encourages the VA–HUD Subcommittee to recommend an fiscal year 2003 appropriation of at least $460 million for the VA medical and prosthetics research program. This represents growth in program dollars of $89 million (24 percent). Four core needs justify the FOVA recommendation of $460 million:

Investments in investigator-initiated research projects at the VA have led to an

explosion of knowledge that promises to advance our knowledge of disease and

unlock new strategies for prevention, treatment and cures. Attachment 1 is a list

of just a few of VA’s recent achievements and initiatives. However, many health

challenges still confront the veteran community. Additional funding is needed to

take advantage of the burgeoning scientific opportunities and to improve quality of

life for our nation’s veterans as well as the general public. FOVA urges the Committee to support additional funding for the following research priority areas identified by the VA for fiscal year 2003: —Quality of Care.—Additional funding for the Quality Enhancement Research

Initiative (QUERI) program would be used to fund centers in prostate cancer

and dementia/Alzheimer’s. —Special Populations.—VA would expand research in quality of care, community

access and restoration of function to achieve greater understanding of existing

racial, ethnic and gender disparities in health care. —Diseases of the Brain.—Additional studies are needed on the impact of different

classes of psychiatric drugs on cognitive and behavioral function. —Treatment Strategies in Chronic Progressive Multiple Sclerosis.—Recent studies

have shown that immunotherapy of acute MS can reduce disability. More studies are needed to determine the optimal therapy for patients. —Micro Technology.—In the area of low vision, work in retinal prostheses is an

emerging science and may restore sight lost as a result of a variety of disorders

including age-related macular degeneration and retinal pigmentosa. —Patient Outcomes in Rehabilitative Care.—Specific areas of emphasis include

long-term care strategies to enhance patients’ independence and activities of

daily life, consequences of community reintegration and the impact of assistive

technology on quality and functionality of life.

—Chronic Disease Management.—VA is proposing two major initiatives in comparing clinical efficacy of (1) vascular surgery conducted on and off

cardiopulmonary bypass machines, and (2) open versus endovascular surgery for

abdominal aortic aneurysms.

The complexity of research combined with biomedical research inflation has increased the costs of research. The average cost of each VA research project is now

$150,000, a 9 percent increase in just 2 years. As a result, VA requires an increase

of at least $15 million just to maintain a stable number of programs.

In response to the events of September 11, VA seeks to establish a research portfolio to address the threats of bio-terrorism. This objective is consistent with VA’s

statutory obligation to provide medical back-up services in times of national emergencies. VA has an established history of research accomplishments in the areas of

infectious diseases and immunology, including vaccine development. The laboratories of VA research scientists are disseminated nationwide, and are affiliated with

top-flight universities. VA research provides a unique national resource that can be

readily adapted and quickly mobilized in response to diverse biological threats.

To meet this emerging challenge, consistent with H.R. 3253, the National Medical

Emergency Medical Preparedness Act of 2001, FOVA strongly supports VA’s proposal to establish four new centers of research excellence focusing on fundamental

issues critical for responding to chemical, biological and radiological threats to public safety. The targeted research portfolio would include pathogen detection, disease

diagnosis and treatment, protection, and vaccine development. The mission of these

centers would also encompass the evaluation and management of illnesses consequent to military service, especially in our current conflict.

VA’s career development programs are a national resource for training the next

generation of clinician scientists, those doctors who treat patients and address questions that have a direct impact on patient care. Additional funding is needed to ex-
668

pand this program in order to address the growing national shortage of clinicianinvestigators.

Separate from its recommendations for the VA research appropriation, FOVA

strongly encourages the Committee to address the increasingly urgent need for improvements in VA’s research facilities.

In 1997, NIH conducted site visits of six VA research facilities and concluded that,

‘‘VA has had increasing difficulty in providing sufficient resources via its congressional appropriation to satisfactorily fund the infrastructure necessary to support research at the VAMCs.’’ It is FOVA’s understanding that VA has made no significant,

centrally administered investment in its existing research facilities since this finding. Ventilation, electrical supply and plumbing appear frequently on lists of needed

upgrades along with space reconfiguration. Substandard facilities make VA a less

attractive partner in research collaborations with affiliated universities; reduce VA’s

ability to leverage the R&D appropriation with other federal and private sector

funding; and make it difficult to attract cutting edge researchers, both clinician investigators and laboratory scientists, to careers in VA. Facility R&D Committees

regularly disapprove projects for funding consideration because the facility does not

have the necessary infrastructure and has little prospect of acquiring it.

Under the current system, research must compete with other medical facility and

clinical needs for basic infrastructure and physical plant support. Unfortunately, the

minor construction appropriation is chronically inadequate to meet facility needs for

clinical improvements much less research upgrades, and year after year the list of

urgently needed research repairs and upgrades grows longer. VA has identified 18

sites in urgent need of minor construction funding to upgrade their research facilities. These sites plus the many facilities with smaller, but no less important needs,

provide more than sufficient justification for an appropriation of $45 million specifically for research facility improvements.

FOVA recommends that a new funding mechanism, such as a minor construction

appropriation specifically for research facilities, be developed to provide a permanent, steady stream of resources dedicated to upgrading and renovating existing research facilities. State-of-the-art research requires state-of-the-art facilities.

FOVA thanks the Committee for consideration of its views. For questions or additional information, please contact any member of the FOVA executive committee

listed on this letterhead. Thank you for your consideration.

Organizations that have endorsed FOVA’s fiscal year 2003 recommendations: Administrators of Internal Medicine; Alliance for Aging Research; Alzheimer’s Association; American Academy of Child and Adolescent Psychiatry; American Academy of

Neurology; American Academy of Opthalmology; American Academy of Orthopaedic

Surgeons; American Association of Colleges of Osteopathic Medicine; American Association of Colleges of Pharmacy; American Association of Neurological Surgeons;

American Association of Spinal Cord Injury Nurses; American Association of Spinal

Cord Injury Psychologists and Social Workers; American College of Clinical Pharmacology; American College of Physicians-American Society of Internal Medicine;

American College of Rheumatology; American Dental Education Association; American Federation for Medical Research; American Gastroenterological Association;

American Geriatrics Society; American Gold Star Mothers of America; American

Heart Association; American Lung Association; American Military Retirees Association; American Nurses Association; American Optometric Association; American Osteopathic Association; American Paraplegia Society; American Physiological Society;

American Psychiatric Association; American Psychological Association; American Society for Pharmacology and Experimental Therapeutics; American Society of Hematology; American Society of Nephrology; American Thoracic Society; American War

Mothers; Association for Assessment and Accreditation of Laboratory Animal Care

International; Association for Research in Vision and Ophthalmology; Association of

Academic Health Centers; Association of American Medical Colleges; Association of

Pathology Chairs; Association of Professors of Medicine; Association of Program Directors in Internal Medicine; Association of Schools and Colleges of Optometry; Association of Subspecialty Professors; Association of VA Chiefs of Medicine; Blinded

Veterans Association; Blue Star Mothers of America; Clerkship Directors in Internal

Medicine; Coalition for American Trauma Care; Coalition for Heath Services Research; Congress of Neurological Surgeons; Digestive Disease National Coalition;

Gerontological Society of America; Independence Technology, Inc.; Johnson & Johnson; Juvenile Diabetes Research Foundation International; Legion of Valor; Medicine-Pediatrics Program Directors Association; National Alliance for the Mentally

Ill; National Association for Biomedical Research; National Association for the Advancement of Orthotics and Prosthetics; National Association for Uniformed Services; National Association of State Universities and Land Grant Colleges; National

Association of VA Dermatologists; National Association of VA Physicians and Den-
669

tists; National Association of Veterans’ Research and Education Foundations; National Mental Health Association; National Multiple Sclerosis Society; National Organization of Rare Disorders; Nurses Organization of Veterans Affairs; Paralyzed

Veterans of America; Partnership Foundation for Optometric Education; Research

Society on Alcoholism; Research!America; Society for Investigative Dermatology; Society for Neuroscience; Society of General Internal Medicine; Veterans Affairs Physician Assistant Association; and Veterans of the Vietnam War.

ATTACHMENT 1—VA RESEARCH—RECENT ACHIEVEMENTS AND INITIATIVES

Promise for TB Vaccine.—Researchers at the Portland VA have found a unique

mechanism by which human T cells recognize cells infected with Mycobacterium tuberculosis, the bacteria that cause TB. They have found that the molecule HLA-E

can present TB antigens to cytotoxic T cells. A further understanding of this mechanism may facilitate the development of an improved TB vaccine. Worldwide, over

2 million people die each year from TB. Advancement towards an effective TB vaccine has significant potential to improve both national and global health.

New Centers to Study Parkinson’s Disease.—VA created six new centers specializing in research, education and clinical care for Parkinson’s disease. The centers—

in Houston, Philadelphia, Portland (Ore.), Richmond (Va.), San Francisco and West

Los Angeles—will conduct research covering basic biomedicine, clinical trials, rehabilitation, and health services. In addition, each center will take part in a major VA

clinical trial to assess the effectiveness of surgical implantation of deep brain

stimulators to reduce symptoms. (Feb. 2001)

Key to Wasting Syndrome Discovered.—Researchers at the San Diego VA Medical

Center have unraveled the biological chain of events that causes wasting syndrome

in mice, and identified the same process in liver and tissue from cancer patients.

Wasting syndrome or cachexia, affects about half of all cancer and HIV/AIDS patients, as well as those with bacterial and parasitic diseases, rheumatoid arthritis,

and chronic diseases of the bowel, liver, lungs and heart. By noting the similarities

between animal and human models, researchers hope to expedite the development

of treatments to help patients. (Dec. 2001)

VA Evaluating Robotic Walker for Vision-Impaired.—VA researchers in Pittsburgh

and Atlanta are testing a new high-tech walking frame designed to promote mobility

and independence for the vision-impaired frail elderly. Using laser range finders,

sonar sensors, steering motors and a motion controller, the Personal Adaptive Mobility Aid (PAM–AID) seeks to build the functionality of a guide dog into a robust

walking frame. (Oct. 2001)

VA Establishes New HIV Research Center.—VA is the nation’s largest single provider of health care to HIV-infected persons. A new Center of HIV Research Resources at the Palo Alto VA Health Care System seeks to improve health care for

veterans by assessing research and clinical trials throughout VA and other agencies

and determining their potential for further research and clinical application. (Oct.

2001)

Rehab Researchers Collaborate in Artificial Retina Trials.—VA researchers from

the Rehabilitation Research and Development Service have recently collaborated

with colleagues at the Louisiana State University Medical Center on studies to implant silicon-chip retinas in the eyes of patients blinded by retinal disease. About

the size of a pinhead, the artificial silicon retinas are completely self-contained and

require no wires or batteries. They contain 3,500 microscopic solar cells that generate electrical current in response to light. The implants stimulate healthy retinal

cells underneath the retina in a pattern that resembles the light images focused on

the chips. These images are then transmitted to the brain via the optic nerve. The

implants are designed to treat retinitis pigmentosa and macular degeneration.

(Sept. 2001)

New Blood Test Speeds Diagnosis of Heart Attacks.—Researchers at the San Diego

VA Medical Center have developed a simple, inexpensive blood test to increase the

speed at which heart attacks are diagnosed in hospital emergency rooms. The new

blood tests can rule out a heart attack with 100 percent accuracy within 90 minutes

by looking for three cardiac enzymes released by distressed heart tissue during an

attack. Ruling out a heart attack by traditional methods usually takes 6 to 24

hours. As a result, critical care admissions dropped 40 percent and overall hospital

admissions dropped 20 percent. (Sept. 2001)

Chronic Lymphocytic Leukemia May Be Underestimated.—VA researchers at the

Central Arkansas Veterans Healthcare System have found that the true incidence

of Chronic Lymphocytic Leukemia (CLL) is substantially higher than estimated

from the tumor registry database. Researchers credited the VA’s Computerized Patient Record System (CPRS) as making the study possible by allowing researchers
670

to review data from a large patient population without handling paper records. Revision in the data may show CLL to be the most common lymphoid malignancy in

the United States. (Sept. 2001)

Friendly Virus May Slow Replication of HIV.—VA researchers at the University

of Iowa have shown that a form of the hepatitis virus called GPV–C may prolong

the life of patients with HIV by preventing the HIV from replicating. GPV–C does

not appear to cause any symptoms and may provide future therapy options for HIV.

Specifically, the VA team showed that infecting human blood cells with GPV–C in

the laboratory slowed the rate at which HIV multiplies. (Sept. 2001)

Higher Estrogen Doses May Enhance Memory for Alzheimer’s Patients.—VA researchers have found that higher doses of estrogen may enhance memory and attention for post-menopausal women with Alzheimer’s Disease. Building on previous research showing the positive effects of estrogen administered by a skin patch, the researchers showed that a short-term administration of a higher dose of estrogen was

found to significantly improve verbal and visual memory as well as attention in

post-menopausal women. Although estrogen therapy does not show improved brain

function for patients with mild to moderate Alzheimer’s, it may slow the progression

or prevent the disease. (Aug. 2001)

Diet and Exercise Reduce Risk and Delay Onset of Type 2 Diabetes.—As part of

the Diabetes Prevention Program (DPP), researchers at the VA Puget Sound Health

Care System and the University of Washington have collaborated in a major clinical

trial that showed at least 10 million Americans can reduce their risk of contracting

Type 2 diabetes with a regimen of diet and exercise. Funded by a wide group of federal agencies, private associations, pharmaceutical companies and product manufacturers, the DPP was ended a year early because the data had clearly answered the

major research questions. (Aug. 2001)

VA Researcher Identifies Breast Cancer Gene.—A VA researcher at the San Francisco VA Medical Center and the University of California at San Francisco led a

study that showed that women who have a specific sequence of a transforming

growth-factor gene have a 60 percent lower risk of developing breast cancer. (June

2001)

Increased ‘‘Good’’ Cholesterol Reduces Rate of Strokes.—A VA Cooperative Study

at 20 VA Medical Centers has found that treatment aimed at raising levels of highdensity lipoproteins (HDL), commonly called ‘‘good’’ cholesterol, substantially reduces the incidence of strokes in some patients. Patients who received the drug

Gemfibrozil had a 31 percent lower incidence of stroke. The result is part of a larger

study aimed at showing that higher HDL levels reduce the risk of major cardiovascular events. (June 2001)

Brain Development Continues into Late 40’s.—An inter-agency study led by a VA

researcher at the Central Arkansas Veterans Healthcare System has shown that the

brain continues to develop in late 40-year olds. This view contradicts the current

view that brain maturation ends before age 20 and may shed light on brain ailments such as Alzheimer’s Disease, schizophrenia and drug addiction. Using magnetic resonance imaging (MRI) to measure brain development, the study showed

that so-called white matter—where memory, higher reasoning, and impulse functions take place—continues to develop until the age of 48, on average. (May 2001)

Reduced Opiate Treatment May Increase Efficacy of Chronic Pain Treatment.—Researchers at the Tampa VA Medical Center have found that patients taking opiates

for chronic pain conditions reported no greater pain intensity than those not taking

the drugs. Those receiving opiate treatment did report increased impairment. The

program gradually phased out opiate use and those who remained off the drugs reported less pain and increased functionality and reduced depression. (May 2001)

New Technique to Evaluate Corneal Tissue for Implants.—Researchers at the Central Arkansas Veterans Healthcare System and the Jones Eye Institute at the University of Arkansas for Medical Sciences have developed a new technique to evaluate the surface of a cornea to determine suitability for transplantation. The new

technique allows for evaluation of the entire surface of the cornea; current inspection is done visually or by methods that detect only large lesions. (May 2001)

Old Drug Resists Pull of Cocaine.—Researchers at the Philadelphia VA Medical

Center and the University of Pennsylvania report that Propranolol, a drug currently

used to treat high blood pressure, helps addicts remain in treatment when the withdrawal effects of cocaine are especially high and treatment dropout rates are otherwise high. The research suggests that the drug reduces withdrawal symptoms by

lowering the anxiety causing effects of adrenaline. (April 2001)

New Method to Treat Osteoporosis, Grow Bone Tissue.—By using a synthetic form

of estrogen that promotes bone growth without affecting the reproductive system,

researchers at the Central Arkansas Veterans Healthcare System and the University of Arkansas for Medical Sciences may have discovered a new way to treat
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1The Administration casts its proposed fiscal year 2003 budget in terms of the EPA strategic

plan’s goals. For GLIFWC’s ceded territory purposes, the relevant goals and related funding categories appear to be: Goal 2: Clean and Safe Water; Goal 4: Preventing Pollution and Reducing

Risk in Communities, Homes, Workplaces and Ecosystems; Goal 6: Reduction of Global and

Cross-Border Environmental Risks; Goal 7: Quality Environmental Information; and Goal 8:

Sound Science, Improved Understanding of Environmental Risk and Greater Innovation to Address Environmental Problems.

osteoporosis. Existing estrogen replacement therapy for osteoporosis is associated

with several side effects including uterine cancer. This conceptual breakthrough

could lead to a new generation of drugs and hormone therapies. (March 2001)

Natural Recovery from Spinal Cord Injury Shown in Rats.—Researchers at the

San Diego VA Medical Center have found that rats with spinal cord injuries develop

some spontaneous re-growth of nerves leading to increased motor function. In rats

where 97 percent of the spinal cord connections are severed, rats were able to regain

function within four weeks of surgery. Further research in continuing to determine

how this process of ‘‘sprouting’’ can be enhanced. (March 2001)

Flu Vaccines Could Save the Nation $1.3 Billion Annually.—Routine influenza

vaccinations of all working adults could save the nation as much as $1.3 billion each

year according to a study led by researchers at the Minneapolis VA Medical Center

and the University of Minnesota Medical School. By examining both the direct and

indirect costs associated with influenza, researchers estimated that health care costs

could be reduced by an average of $13.66 per person vaccinated. (March 2001)

Implanted Electrodes Help Stroke Patients Walk.—Using a technique known as

Functional Neuromuscular Stimulation (FNS), VA scientists implanted electrodes in

the leg muscles of stroke patients and used sophisticated software to electrically

stimulate the muscles over a 6-month course of treatment. The patients experienced

significant improvements in gait and other abilities, with no adverse effects. The research was described in the Journal of Rehabilitation Research and Development

and other journals. (Feb. 2001)

PREPARED STATEMENT OF THE GREAT LAKES INDIAN FISH & WILDLIFE COMMISSION

Environmental Protection Agency Appropriations.—GLIFWC seeks $310,000 from

various EPA programs for its ceded territory treaty rights environmental protection

program:

Ceded Territory/Crandon Mine Assessment Project.—$160,000 for hydrological

modeling, contaminant transport analysis, baseline biomonitoring studies, and participation as a ‘‘cooperating agency’’ in the preparation of a Federal EIS by the Army

Corps of Engineers for a proposed zinc and copper mine near Crandon, Wisconsin.

Lake Superior Bi-National Program, Great Lakes Strategy for 2002, and Lake Superior LaMP.—$80,000 for continued GLIFWC participation in the Bi-National Program, in the recently announced U.S. Policy Committee’s Great Lakes Strategy for

2002 A Plan for the New Millennium, in the preparation and implementation of the

Lake Superior LaMP, and in IJC, SOLEC and other Great Lakes forums.

Habitat and Human Health Research.—$70,000 for research projects on invasive

species, including zebra mussels, on potentially contaminated whitefish and lake

trout spawning grounds in Lake Superior, and on contaminant levels in Lake Superior lake trout.

EPA Budget Categories and Priorities.—Over the past 7 years, Congress and EPA

have funded GLIFWC’s treaty rights environmental protection program under a variety of budget categories, including: wetlands (Section 104(b)(3) funds), coastal environmental management (CEM), the Great Lakes National Program Office

(GLNPO), the Office of Pollution Prevention and Toxics, and environmental justice

grants.1 The Clean Water Act (33 U.S.C. § 1268) requires the EPA and GLNPO to

integrate tribal agencies in the development and implementation of action plans to

carry out the United States’ responsibilities under the Great Lakes Water Quality

Agreement. In addition, GLIFWC and its member tribes are among the partners

that will be implementing the Great Lakes Strategy for 2002 A—Plan for the New

Millennium.

Ceded Territory Treaty Rights and GLIFWC’s Role.—GLIFWC was established in

1984 as a ‘‘tribal organization’’ within the meaning of the Indian Self-Determination

Act (Public Law 93–638). It exercises authority delegated by its member tribes to

implement Federal court orders and various interjurisdictional agreements related

to their treaty rights. GLIFWC assists its member tribes in:

—securing and implementing treaty guaranteed rights to hunt, fish, and gather

in Chippewa treaty ceded territories; and
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—cooperatively managing and protecting ceded territory natural resources and

their habitats.

For the past 15 years, Congress and Administrations have funded GLIFWC

through the BIA, EPA and other agencies to meet specific Federal obligations under:

(a) a number of U.S./Chippewa treaties; (b) the Federal trust responsibility; (c) the

Indian Self-Determination Act, the Clean Water Act, and other legislation; and (d)

various court decisions, including a 1999 U.S. Supreme Court case, affirming the

treaty rights of GLIFWC’s member Tribes. GLIFWC serves as a cost efficient agency

to conserve natural resources, to effectively regulate harvests of natural resources

shared among treaty signatory tribes, to develop cooperative partnerships with

other government agencies, educational institutions, and non-governmental organizations, and to work with its member tribes to protect and conserve ceded territory

natural resources.

Under the direction of its member tribes, GLIFWC operates a ceded territory

hunting, fishing, and gathering rights protection/implementation program through

its staff of biologists, scientists, technicians, conservation enforcement officers, and

public information specialists. Its activities include: natural resource population assessments and studies; harvest monitoring and reporting; enforcement of tribal conservation codes into tribal courts; funding for tribal courts and tribal registration/

permit stations; development of natural resource management plans and tribal regulations; negotiation and implementation of agreements with State, Federal and

local agencies; invasive species eradication and control projects; biological and scientific research; and development and dissemination of public information materials.

Tribal members rely upon fish, wildlife, and plants for religious, cultural, medicinal, subsistence, and economic purposes. Their treaty rights mean little if contamination of these resources threatens the health, safety, and economy of tribal members, or if the habitats supporting these resources are degraded.

GLIFWC Programs Currently Funded by EPA.—GLIFWC currently administers

EPA funding for a variety of ceded territory environmental protection programs and

studies. —Study of Proposed Crandon Mine in Wisconsin.—GLIFWC’s work related to the

proposed mine includes hydrological modeling, contaminant transport analysis,

and baseline biomonitoring studies. In fiscal year 2002, GLIFWC will administer $68,700 in EPA wetlands (Section 104(b)(3)) funds to continue its technical

studies and assessments. —Participation in the Lake Superior Bi-National Program.—Since fiscal year

1996, EPA has provided CEM funds for a 1 FTE equivalent to facilitate

GLIFWC’s participation in the Bi-National Program to Restore and Protect

Lake Superior, including preparation of the Lake Superior LaMP and participation in various International Joint Commission (IJC) and State of the Lake Ecosystem Conference (SOLEC) forums. In fiscal year 2002, GLIFWC will administer $76,800 in EPA CEM funds to facilitate participation in these forums as

well as in the implementation of the Great Lakes Strategy for 2002 A Plan for

the New Millennium.

—Research and Special Projects.—Since fiscal year 1997, EPA has provided a

combination of CEM, GLNPO, and Environmental Justice funds for GLIFWC to

conduct scientific research to produce data relevant to the Bi-National Program/

Lake Superior LaMP and to human health. In fiscal year 2002, GLIFWC will

administer $62,400 from EPA’s Pollution Prevention and Toxics program to test

several Lake Superior fish species for dioxin.

Fiscal year 2003 Funding Needs/Rationale.—GLIFWC would use fiscal year 2003

funds for these same purposes.

—Work on the Proposed Crandon Mine.—$160,000 for GLIFWC’s review, analysis

and GIS mapping related to the mine, particularly as to completion of an ongoing baseline biomonitoring project, participation as a ‘‘cooperating agency’’ in

the preparation of the Federal EIS, and maintenance of hydrological and contaminant transport expertise.

—Rationale.—The mine will impact ceded territory natural resources that are

subject to the tribes’ treaty rights to hunt, fish, and gather. State and Federal

permit processes are moving toward Environmental Impact Statements (EIS),

with the State EIS expected within a year and the Federal EIS about 6

months later. GLIFWC needs to be ready to fully participate both in the State

and Federal EIS processes and in the permit hearings that will follow. With

the requested fiscal year 2003 funds, GLIFWC will:

—Complete Baseline Biomonitoring Studies ($53,000).—GLIFWC must complete the final year of its 3-year study to establish baseline data for contaminants found in surface water, plants and animals near the proposed mine
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site. GLIFWC used EPA funds provided pursuant to Congress’ fiscal year

2001 $168,000 Crandon mine appropriation and EPA wetlands (Section

104(b)(3)) funds to collect data in the study’s first 2 years. It does not have

funding for the third year.

—Serve as a ‘‘Cooperating Agency’’ in the Federal EIS Process ($67,000).—

GLIFWC is participating as a ‘‘cooperating agency’’ from the ceded territory

perspective for its member tribes in the preparation of the Federal EIS under

§ 404 of the Clean Water Act. As such, GLIFWC has the opportunity to develop and present independent analyses of a variety of potential mine impacts

for inclusion in the Federal draft EIS. This will require a substantial amount

of staff time for computer modeling and analysis, preparation of written comments and assessments, and attendance at various meetings.

—Maintain Hydrological and Contaminant Transport Expertise ($40,000).—

Through Congress’ fiscal year 2001 Crandon Mine appropriations, GLIFWC

received funds to enlist the help of outside experts in specific technical areas,

including: (1) The hydrology of water flowing through the mine and methods

(such as grouting) to slow down that flow; (2) The uncertainty associated with

various impact predictions and monitoring programs proposed by the mining

company; (3) Contaminant transport issues related to water flowing through

the mine and potential contamination of the groundwater; and (4) Mercury

contamination that may result from wetlands drying up. This initial funding

is not sufficient to cover the costs of the much more in-depth analyses that

will be necessary as the mine’s design and engineering proposals are finalized

and fully scrutinized during the EIS processes and permit hearings.

—Participation in the Lake Superior Bi-National Program.—$80,000 for continued

funding of GLIFWC staff (1 FTE equivalent, and related travel and other expenses) who will participate in the Bi-National Program, in the preparation and

implementation of the Lake Superior LaMP, in IJC and SOLEC forums, and in

the implementation of the recently announced Great Lakes Strategy for 2002

A Plan for the New Millennium.

—Rationale.—GLIFWC has been actively involved in the Bi-National Program

since 1993. However, it was not able to adequately participate until EPA first

provided CEM funds for this purpose in fiscal year 1996. As a result,

GLIFWC currently serves on the Bi-National Program’s Task Force and

Workgroup, and on the Workgroup’s chemical, terrestrial and habitat committees. It is participating in the preparation of the LaMP 2002. It also helps

to liaison with other relevant Great Lakes institutions, such as the Great

Lakes Fishery Commission, on issues of mutual concern between environmental and natural resource managers.

As for IJC forums, GLIFWC staff regularly attend the biennial IJC meetings and provide periodic comments when issues arise in the interim, such

as on the matter of Great Lakes water diversions. As for SOLEC, GLIFWC

staff addressed the 2000 plenary session on the topic of wild rice and organized a breakout session on wild rice.

This funding is necessary for GLIFWC to live up to its partnership responsibilities under the Great Lakes Strategy for 2002 A Plan for the New Millennium.

—Continuing Research and Special Projects.—$70,000 for Lake Superior habitat

and human health research projects related to the Bi-National Program and the

Great Lakes Strategy for 2002 A Plan for the New Millennium.

—Rationale.—GLIFWC has undertaken a number of studies over the years related to the Lake Superior ecosystem. For example, with GLNPO and CEM

funds, GLIFWC is preparing a report on the threat of wetland and terrestrial

exotic plants to Lake Superior, has studied sturgeon in the Lake Superior

basin, and has prepared GIS maps of fish spawning and nursery locations for

both native and exotic species. In addition, as part of its ongoing natural resource contaminant/human health research, GLIFWC used Environmental

Justice grants to update its fish consumption advisory database and to undertake wild rice contaminant research for heavy metals.

For fiscal year 2003, GLIFWC would explore EPA funding for four projects:

—Assess impacts from mining waste (stamp sands) dumped into Lake Superior

during the late 1800s, map an important whitefish and lake trout spawning reef

in Keweenaw Bay, and determine the distribution of stamp sands in relation

to the spawning reef.

—Assess whether seed mixtures currently used in northern upland forest re-vegetation projects contain exotic invasive species, and identify and recommend native plant species that would be appropriate substitutes.
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—Inventory zebra mussels in Chequamegon Bay and establish an interagency

workgroup to inventory, monitor, and develop strategies to minimize the spread

of zebra mussels in Lake Superior and inland waters.

—Assess mercury, PCB and organochlorine levels in lake trout harvested by

tribes in the 1842 ceded territory waters of Lake Superior, and evaluate how

the new data compares to the advisories currently being issued by the States

of Wisconsin, Minnesota and Michigan.

PREPARED STATEMENT OF THE HUMANE SOCIETY OF THE UNITED STATES

On behalf of our 7 million members and constituents, The Humane Society of the

United States (HSUS) appreciates the opportunity to submit testimony regarding

fiscal year 2003 appropriations for the Environmental Protection Agency (EPA). We

wish to thank the Subcommittee for directing the EPA to spend $4,000,000 for the

research, development, and validation of non-animal, alternative chemical screening

and prioritization methods. Prioritizing funding for non-animal test methods is a

critical step, encouraging the EPA to promote and support these more humane,

often faster, less expensive, and more scientifically sophisticated procedures. We

wish to commend the Subcommittee for improving federal regulatory decision-making processes on chemical safety and for helping to reduce needless animal suffering. Our testimony for fiscal year 2003 focuses on the EPA’s Office of Research

and Development (ORD) and the agency’s Endocrine Disruptor Screening Program

(EDSP).

The EDSP is the largest of several chemical testing programs administered by the

EPA. These programs will collectively subject millions of animals to suffering and

death in painful toxicity tests. Indeed, the EDSP itself is perhaps the largest government-sponsored animal testing program in history. Yet without the Subcommittee’s intervention, the EPA’s ORD budget has no identifiable program to develop alternative tests that can replace, reduce, or refine existing animal-based tests. Eli

Lilly and Company eliminated its cat test for glucagon, replacing it with an alternative test, and calculated that it was saving $1 million a year as a result of the

new test. However, there may need to be some up-front investment—it cost Eli Lilly

$2 million to develop and validate the alternative. We are still not seeing sufficient

commitment from EPA to provide the initial investments needed to produce alternatives (or batteries of alternatives) to address issues such as the Endocrine

Disruptors.

The EPA, moreover, is not taking full advantage of an existing interagency committee with expertise in assessing new testing methods to evaluate their acceptability for regulatory use. The Interagency Coordinating Committee on the Validation of Alternative Methods (ICCVAM) is the federal government’s focal point for assessing the validation and regulatory acceptability of new test methods. The EPA

is a participating member of ICCVAM and was very involved in developing and approving the ICCVAM structure. Yet the EPA is bypassing the ICCVAM’s review

mechanism for many of the new tests in its EDSP, instead relying on in-house assessments. This move has worried many animal protectionists as well as other

stakeholders.

The HSUS respectfully urges this Subcommittee to request that the ORD establish a substantial program to research and develop alternative methods (as it already committed to do for the High Production Volume chemical testing program

but has not yet pursued), and that the EPA take full advantage of ICCVAM’s expertise in evaluating new testing methods of multi-agency interest.

RESEARCH AND DEVELOPMENT OF ALTERNATIVE TESTING METHODS AT EPA’S ORD

The ORD budget in recent years has been approximately $500 million. Within

these appropriations, it has been nearly impossible to identify funding by the ORD

for non-animal alternative testing methods to meet EPA’s specific needs in new testing programs. We believe that innovative non-animal alternative testing technologies would benefit from research and development funding. Therefore, we respectfully request that at least $10 million either from the existing budget or over

and above the President’s budget request be appropriated for research, development

and validation of non-animal, alternative testing methods. Given the potential longterm benefits of such investment in alternatives development, it is surprising to us

that the EPA is not already actively pursuing this approach. Activities funded by

these allotments should be designed in consultation with the Office of Pollution Prevention and Toxic Substances.

It would be appropriate for this funding to be targeted at testing methods with

direct application to recent and new EPA testing programs, which include the
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EDSP, High Production Volume (HPV) chemical testing program, and the Voluntary

Children’s Chemical Evaluation Program (VCCEP). For example, there is a specific

rat neurological development test that is widely regarded as inadequate but is still

being proposed as one of the battery of tests under the VCCEP.

The HSUS also asks that the Subcommittee require the EPA to submit a report

to the Subcommittee by March 30, 2003 regarding expenditures and plans for additional expenditures for fiscal year 2003 funds under the EDSP.

The request for $10 million represents approximately 2 percent of ORD’s total

budget, a modest but nonetheless significant commitment by EPA to alternative test

methods. The HSUS would like to emphasize that, in making this request, we believe this course of action would also be in the best interests of human and environmental safety.

THE ENDOCRINE DISRUPTOR SCREENING PROGRAM (EDSP)

Under the 1996 Food Quality Protection Act (FQPA) and the Safe Drinking Water

Act Amendments, Congress mandated that EPA determine whether certain substances may have an effect in humans that is similar to an effect produced by a

naturally occurring estrogen, or such other endocrine effects as EPA may designate.

The congressional mandate came as a response to public concern that exposures to

synthetic chemicals in the everyday environment may be adversely affecting the endocrine systems of wildlife and humans, thereby causing reproductive and developmental anomalies.

In response to Congress’ mandate, the EPA formed the Endocrine Disruptor

Screening and Testing Advisory Committee at the close of 1996. This entity devised

the testing framework for the EDSP. Currently, the proposed EDSP testing scheme

consists of a battery of 16 tests designed to assess the toxicity of up to 80,000 chemicals. These tests are largely animal-based. Some scientific estimates have projected

that between 600,000 and 1.2 million animals will be killed for every 1,000 chemicals tested.

Animal protection organizations and members of the public have serious concerns

about the process by which the proposed EDSP tests will be evaluated. The FQPA

stated that all screens and tests used in the EDSP should be properly validated,

to ensure the their relevance and reliability for assessing endocrine disruption. The

proposed EDSP testing methods are all either new or revised for new endpoints, and

therefore each should be evaluated for the EDSP as a matter of sound science. The

natural entity to conduct this evaluation is the ICCVAM. Since its creation in 1994,

the ICCVAM has benefited EPA and many other federal agencies, as well as research entities, by successfully evaluating the validity of new and revised testing

methods (alternatives included) that have cross-agency relevance.

In December of 2000, Congress upgraded ICCVAM from an ad hoc committee to

a standing body, thereby solidifying its crucial role. It is clear that ICCVAM can

provide a standardized assessment of the validity and regulatory acceptability of all

EDSP tests and screens. This would be particularly appropriate given the level of

interest in these methods by other federal agencies such as the Food and Drug Administration and other national and international organizations, including the Organization for Economic Cooperation and Development.

However, EPA has developed a bifurcated validation plan for the EDSP that calls

upon its own Science Advisory Board (SAB)/Science Advisory Panel (SAP) to review

all the animal-based tests and screens, while asking the ICCVAM to review only the

non-animal testing methods. This approach has many observers worried that the

animal-based methods will be evaluated using lower standards than the non-animal

methods. In addition to qualms voiced by animal protection advocates, the Advisory

Committee on Alternative Toxicological Methods (ACATM) for the National Toxicology Program passed two unanimous resolutions questioning the EPA’s plan and

supporting the mission of ICCVAM. The Committee’s primary concern is that both

in vitro and in vivo methods be subjected to the same rigorous peer review and validation process to ensure the highest likelihood of acceptance by the regulatory agencies, the scientific community and the public.

The HSUS strongly urges the Subcommittee to call on the EPA to use ICCVAM’s

expertise to assess the validity and regulatory acceptability of all EDSP tests and

screens, with appropriate fiscal support from the EPA. Furthermore, ICCVAM

should collaborate with EPA’s SAB/SAP to avoid any unnecessary delay in the program. Among other things, ICCVAM’s review of the EDSP testing methods can

serve to ensure that proper consideration is granted for the replacement, reduction,

and refinement of the use of animals in these proposed tests and screens.
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CONCLUSION

The HSUS respectfully requests that the VA–HUD Appropriations Subcommittee

provide funding to the EPA with the direction that the ORD expand its research

and development activities to include alternative methods. We also urge the Subcommittee to ensure that any new or revised testing methods with multi-agency or

international interest be evaluated through the Congressionally-established

ICCVAM for sound science and consistency with the replacement, reduction, or refinement of animal use.

PREPARED STATEMENT OF THE JOSLIN DIABETES CENTER

INTRODUCTION

Mr. Chairman, thank you for this opportunity to provide a status report on the

Diabetes Project conducted jointly by the Joslin Diabetes Center in Boston, MA and

the Department of Veterans Affairs (Medical Care account), for which you provided

$5 million each in the fiscal year 2001 and the fiscal year 2002 Appropriations Acts. Our request for fiscal year 2003 to continue this project with the VA is $5 million

in the Medical Care account, of which the VA’s costs represent approximately 50

percent.

I am Dr. Sven Bursell, Principal Investigator of the project and Associate Professor of Medicine at the Harvard Medical School.

BACKGROUND

Joslin Diabetes Center has been involved with the Department of Defense and the

Department of Veterans Affairs in a pilot demonstration project for the advanced

detection, prevention, and care of diabetes. The Joslin Vision Network (JVN) has

been deployed in VA sites in VISN 21 in Hawaii (Honolulu, Hilo and Maui), VISN

1 in New England (Boston, Brockton in Massachusetts, and Togus, Maine) and

VISN 19/20 (Seattle and Tricities in Washington, Anchorage in Alaska and Billings

in Montana). The JVN employs telemedicine technology to image the retina, through

an undilated pupil, of patients with diabetes, and produces a digital video image

that is readable in multiple formats.

This project was funded initially through the Department of Defense Appropriations Act. The Department of Veterans Affairs medical staff was eager to expedite

the deployment of this advanced diabetes technology beyond the limited resources

available through participation in the DOD funded project. We petitioned this Subcommittee for additional resources to be made available to the VA for discretionary

diabetes detection and care.

This Committee provided $2 million in fiscal year 2000 and $5 million each in fiscal year 2001 and fiscal year 2002 for expansion of this project within the VA. The

VA has indicated a desire to continue expansion, citing the JVN as the model of

the future telemedicine in a recent conference of the Association of Military Surgeons-General of the U.S. (AMSUS). We are seeking $5 million to continue this expansion, and are supported by the VA medical policy staff.

The leadership shown by this Subcommittee has enabled the VA to provide its patient population the best diabetes care, prevention, and detection in the world. We

extend our sincere appreciation to you for your response to that request.

FISCAL YEAR 2002 ACTIVITIES

The policy and program officials of the VA have established the appropriate contracts and statements of work that resulted in consensus with respect to deployment

of the Joslin Vision Network (JVN) technology to three sites: Anchorage, Alaska,

TriCities, Washington, and Billings, Montana. A Reading Center will be created and

utilized in Seattle, Washington. In addition, the refinement of JVN technology, both

hardware and software, will move toward developing a scalable system that is capable of widespread deployment agency-wide. This system was completed and it is anticipated that this next generation of the system will be completely integrated into

the VA’s VISTA Medical Records System and the VA communications infrastructure.

Results from our various demonstration installations have shown that appropriate

clinical resources can be efficiently allocated with respect to appropriate ophthalmology referral. For example, the installation in Togus Maine where there is no

ophthalmology resources on site has shown that the use of the JVN system can effectively prioritize patients that need to be seen by the opthalmologist at the time

when the ophthalmologist plans to visit that clinic. This site is imaging approxi-
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mately 10 patients per day and they find the JVN program extremely resource efficient in providing the appropriate eye care to their patients.

The same experience was noted from the VA clinics in Hilo and Maui where the

Optometrist from the Honolulu VA visits these island clinics once a month and was

able to effectively focus his time on the patients that really needed his expertise for

managing their diabetes eye complications.

An equally important concentration of resources in fiscal year 2001–2002 was focused on refining the technical core using outcomes based medical and case management scenarios to develop a diabetes healthcare model that is modular, customizable

and that can be seamlessly integrated into the existing VA telemedicine systems.

This is the stated goal of the medical leadership in the VA, DOD and HIS health

care systems. The overarching vision for the VA/JVN project is a web-based comprehensive diabetes health care system that can be interactively used by both patients and providers, that incorporates diagnosis specific education and training

modules for patients and providers and that incorporates software applications that

allow outcome measures to be statistically assessed and individual treatment programs to be interactively adjusted based on these outcome measures. The JVN Eye

Health care system exists as a component of a comprehensive diabetes management

system, incorporating other clinical disciplines such as endocrinology, vascular surgery and internal medicine.

The effort for fiscal year 2002 will result in the development of modular applications associated with different aspects of total diabetes disease management such

as clinical risk assessment, outcomes assessments, behavior modification in an

interactive electronic environment, and education programs. These applications will

be designed in collaboration with participating VA sites to provide an ultimate product that appropriately assesses the clinical diabetes risk and provides treatment

plans and behavior modifications that are tailored to any particular patients needs.

The programs will also be designed so that they can realize a significant cost and

resource efficiency with respect to support and maintenance of the JVN component

and the diabetes management programs that will facilitate an accelerated deployment in the future.

Technologically, we will be providing an application that automatically detects

retinal pathology from the JVN images. Using this first step approach it is anticipated that we can reduce the load on the reading center by as much as 50 percent.

This is achieved through the use of a computer application that scans the images

and detects any abnormalities that may be associated with the development of diabetic retinopathy. In those cases where the computer detects pathology a reader will

be notified to perform the appropriate reading for retinopathy assessment. In the

case where the computer does not detect any pathology the patient can be assigned

to a low risk priority where the computer findings can be rapidly confirmed by the

reader and the patient asked to return for repeat JVN imaging in a year.

FISCAL YEAR 2003 REQUEST

For fiscal year 2003, we request that in the VA Medical Account $5 million be

allocated to continue and expand this project. The positive response within the VA

system indicates that with sufficient resources, the JVN technology would be deployed in a number of sites with the ultimate goal of incorporating the JVN technology throughout the VA Medical Care system. The VA Budget Request by the fiscal year 2004 cycle will include provisions for full deployment for the JVN throughout the VA Medical Care system. As the technology, systems and production of

equipment are standardized to off the shelf specifications, the expense per site will

decrease.

The specific goals for fiscal year 2003 include the following:

—Establish specific medical codes that will allow the VA to track performance

with respect to these JVN examinations and to ensure that it conforms with VA performance criteria in multiple remote VA outpatient settings;

—Improve adherence to scientifically proven standards of diabetes eye care and

diabetes care;

—Improve/promote access to diabetes eye care;

—Increase number/percentage of patients with Diabetes Mellitus obtaining eye

care;

—Provide education patients and providers in the clinical setting.

The use of the JVN equipment and expansion of screening opportunities are a

continuing major focus for fiscal year 2003 activities. The actual number of sites deployed to will be determined on the locales with the greatest need for diabetes care

in conjunction with the telecommunications infrastructure at the identified sites and
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the ease and costs associated with interfacing the JVN technology into the existing

infrastructure.

We have expended considerable effort in migrating the JVN demonstration technology platform into an application that is totally compliant with existing medical

informatics infrastructures and the existing VISTA infrastructure of the VA system.

This will encompass the integration of hardware and software in close collaboration

with available resources from the VA VISTA program that will allow a highly

scaleable transparent integration of the JVN Diabetes Eye Health Care system into

the existing health informatics infrastructures of the VA system.

For the fiscal year 2002–2003 project phase, we have established the following

tasks, targets, and activities:

—Deployment of a viable, sustainable, and refined operating JVN Diabetes Eye

Health Care model and Comprehensive Diabetes Management program.

—Develop a modularized medical outcomes based telemedicine diabetes management program in continued collaboration with the VA with outcome measures incorporated into software based on clinical results and research experiences of the fiscal

year 2001 efforts.

—Develop curriculum based patient and provider educational modules.

—Integrate internet based portals that are accessed by patients for reporting of

glucose values and receiving feedback with respect to goals for self management of

their diabetes and adjustments of their treatment plans based on these goals. These

portals will also provide regular education modules for the patients that are customized to their particular needs and clinical diabetes risk assessment.

CONCLUSION

We request continuation and maintenance of this Committee’s policy of support

for the improvement of the diabetes care in the VA medical system. Through funding of

This $5 million request, the benefits by the close of fiscal year 2003 will include:

—Deployment of JVN detection and care at 5 different VA centers where each

center will provide services for 6 different remote sites for a total 35 sites;

—JVN accessibility to increase VA capability to achieve patient compliance to eye

examinations to at least 95 percent of the diabetic patient population in any area

being serviced. From an estimate of the VA diabetic patient population we would

estimate that the JVN would be accessing an estimated patient population of

196,000, or an estimated 11 percent of the total VA Diabetic population after completing anticipated 2002 deployments.

—The model for VA’s deployment of the JVN as a diabetes detection and Disease

management platform for expansion to availability for the entire VA Patient population.

Thank you for this opportunity to present this request for $5 million for fiscal

year 2003 and status report for fiscal year 2002 on a medical technology breakthrough for the patients and health care system within the Department of Veterans

Affairs.

PREPARED STATEMENT OF THE METROPOLITAN WATER DISTRICT OF SOUTHERN

CALIFORNIA

The Metropolitan Water District of Southern California (MWD) is pleased to submit comments for the record regarding programs contained in the U.S. Environmental Protection Agency’s (EPA) fiscal year 2003 budget for your Subcommittee’s

hearing.

MWD is responsible for meeting the supplemental water requirements of 17 million people living in the Southern California coastal plain and the economy which

supports them. Our sources of water supply are the Colorado River and surface waters from Northern California. Of particular interest to MWD and our 26 member

agencies are those federal programs that provide assistance and facilitate partnerships for addressing critical water resources issues.

One of the most challenging water resource issues in Southern California is ensuring adequate supply of high quality water. To increase our ability to achieve

these goals, we strongly urge that you designate $2 million of funding appropriated

for State and Tribal Assistance Grants (STAG) to ensure the continuation of the Desalination Research and Innovation Partnership (DRIP). DRIP is a major applied research program which seeks to develop and demonstrate next-generation desalination and disinfection technologies to economically treat large volumes of water for

potable and non-potable uses.
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MWD also asks that you support adequate funding for another STAG program,

the Drinking Water State Revolving Fund (DWSRF). The President’s budget request

of $850.0 million falls short of the $1 billion authorized by Congress in the 1996

Amendments to the Safe Drinking Water Act. We urge that you support funding at

the authorized level. Water supplies, treatment facilities, and distribution systems

also require adequate protection from terrorist activities. We strongly urge you to

support the President’s request of $5.0 million for homeland security for public

water systems.

We further ask that you fully support the $49.5 million request for safe drinking

water research in the President’s budget. Lastly, we ask that you designate $7 million for the American Water Works Association Research Foundation (AWWARF) for

research and studies, including those related to the protection of drinking water

supplies from terrorist acts. These and several other requests to support funding are

discussed in more detail below.

State and Tribal Assistance Grants (STAG)

Desalination Research and Innovation Partnership (DRIP) Funding.—Water quantity and quality are priority issues in Southern California where approximately half

of the water used is imported. Much of our imported supply is from the Colorado

River, a source that is high in salinity (i.e., mineral content). Although not a health

concern, high salinity can cause scaling and corrosion of plumbing fixtures, adversely affect salt-sensitive agricultural crops, and limit the ability to recycle water.

Local groundwater supplies cannot always be utilized, in part because of high salinity.

Several years ago, MWD and its partners embarked on a public-private partnership (DRIP) to develop innovative technologies for cost-effectively reducing salinity

in Colorado River and other non-traditional sources such as brackish groundwater,

municipal wastewater and agricultural drainage water. The program was subsequently expanded to evaluate new technologies for the inactivation of pathogens resistant to commonly used disinfectants. In its first 5 years, DRIP has investigated

pretreatment to optimize the performance of reverse osmosis for reducing salinity

in Colorado River water and municipal wastewater, the use of ultra-low pressure

membrane technologies to improve the economics of salinity removal from a variety

of water sources, brine minimization and disposal strategies, and the effectiveness

of ultraviolet light as a disinfectant for resistant pathogens like Cryptosporidium.

In part because of these early successes and to address the statewide concern with

high salinity, the partnership now includes water utilities from Northern California.

MWD asks that you identify $2 million of the STAG appropriation to support the

continuation of DRIP. This funding will leverage the financial commitments made

by the DRIP partners and support near-term activities aimed at demonstrating

large-scale desalination and ultra-violet light technologies for Colorado River water

and municipal wastewater, increasing the amount of water recovered from RO processes, and improving methods for concentrating brine.

Drinking Water State Revolving Fund.—STAG funding is also critical for the

DWSRF. In California, water suppliers have identified drinking water infrastructure projects totaling in excess of $17.5 billion that could benefit from low-cost

DWSRF financing. This amount likely understates the true needs since these estimates do not take into account the infrastructure costs of complying with a maximum contaminant standard nor the costs of other drinking water standards likely

to be promulgated over the next several years. Low-cost financing for projects which

ensure safe drinking water supplies is critical for protecting the health of the more

than 240 million Americans served by public water systems, and MWD strongly

urges that you provide $1 billion, the amount authorized by Congress for fiscal year

2003. This amount, while greater than the amount requested in the President’s

budget, is still only a small fraction of the funding needed by drinking water suppliers to meet existing Safe Drinking Water Act requirements.

Clean Water State Revolving Fund.—Significant investments are needed to repair

and replace aging municipal wastewater infrastructure and combined sewer systems. Low-cost financing is necessary to support substantial municipal water quality infrastructure needs over the next 20 years. The President has requested $850.0

million for fiscal year 2003 for the CWSRF to support these activities, many of

which are vital for ensuring protection of drinking water sources. MWD asks that

you support funding at least at the level in the President’s budget.

Non-point Source Grants.—Another critical source of funding for source water protection projects is grants under the Clean Water Act’s Section 319 Non-point Source

Program (NPS). The President has requested $180.4 million for NPS grants for fiscal year 2003 and MWD requests your support at the level in the President’s budg-
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et. Non-point source pollution is the primary cause of impairment of our nation’s

waterways.

Homeland Security

We are pleased that the President’s budget provides for funding to protect public

water systems from terrorist attacks through support of a public-private partnership

to safeguard the nation’s water supplies and wastewater systems. We urge you to

support funding at least at the $5 million level requested in the President’s budget.

Safe Drinking Water Research

Scientifically sound research provides the underpinnings for effective drinking

water quality programs. EPA’s fiscal year 2003 budget, under its strategic goal of

clean and safe water, includes $49.5 million for safe drinking water research. Of

particular interest to Metropolitan is EPA’s research on emerging pathogens, including the development of dose-response relationships and evaluation of cost-effective

treatment technologies for removal and inactivation. Several pathogens are on the

Contaminant Candidate List (CCL), and further research is needed to support decisions of whether or not to proceed with the rulemaking process. We ask that you

fully support the President’s request of $49.5 million.

Drinking Water—Public Water Systems Supervision Program Grants

EPA’s 2003 budget allocates $93.1 million for Public Water Systems Supervision

Program grants. This funding is necessary for states with primary enforcement responsibilities to carry out their duties, including implementation of the 1996 SDWA

regulations, and we ask that you support this funding level.

Designation of Funding for AWWARF

EPA has an opportunity to leverage its research budget through designating part

of EPA’s appropriation for AWWARF. Any EPA funding will be matched up to 100

percent from AWWARF and participating public water suppliers. We ask that you

designate $7 million for AWWARF for research, including research that will lead

to better protection of public drinking water supplies from acts of terrorism.

We look forward to working with you and your Subcommittee. Please contact Brad

Hiltscher, MWD’s Legislative Representative in Washington, D.C. at (202) 296–

3551, if we can answer any questions or provide additional information.

PREPARED STATEMENT OF THE NATIONAL COUNCIL FOR SCIENCE AND THE

ENVIRONMENT

SUMMARY

The National Council for Science and the Environment (NCSE) strongly supports

bipartisan efforts to double the budget of the National Science Foundation (NSF).

To that end, we encourage Congress to appropriate at least $5.5 billion for NSF in

fiscal year 2003, an increase of $718 million or 15 percent relative to the fiscal year

2002 level.

We encourage Congress to strongly support full and effective implementation of

the National Science Board (NSB) report, Environmental Science and Engineering

for the 21st Century: The Role of the National Science Foundation, within the context of efforts to double the budget of the NSF. The NSB report calls for significant

improvements in the way that NSF supports environmental research, assessment

and education, and proposes that the Foundation invest an additional $1 billion per

year in these areas, to be phased in over five years. NSF has begun to implement

the NSB report and deserves full support from Congress. We also emphasize the

need for increased funding for NSF’s priority area on Biocomplexity and the Environment. In addition, we recommend full funding for two large projects the National

Ecological Observatory Network (NEON) and EarthScope which are included in

NSF’s budget request for Major Research Equipment and Facilities Construction.

These projects would create unprecedented opportunities for environmental research.

We urge Congress to restore full funding for the Environmental Protection Agency’s (EPA) Science to Achieve Results (STAR) graduate fellowship program. EPA’s

budget request for fiscal year 2003 would eliminate funding for new STAR fellowships.

INTRODUCTION

The National Council for Science and the Environment thanks the Senate Appropriations Subcommittee on VA, HUD and Independent Agencies for the opportunity
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to provide testimony on the National Science Foundation’s budget request for fiscal

year 2003.

NCSE is a nonprofit, nonpartisan organization that has been working since 1990

to improve the scientific basis for environmental decisionmaking. Our work is endorsed by nearly 500 organizations, ranging from the U.S. Chamber of Commerce

to the Sierra Club, including the National Association of Attorneys General, National Association of Counties, some 300 colleges and universities, and more than

80 scientific and professional societies. As a neutral science-based organization,

NCSE promotes science and its relationship with decisionmaking but does not take

positions on environmental issues themselves.

We greatly appreciate the Subcommittee’s sustained support for the National

Science Foundation. We are especially grateful for the Subcommittee’s support over

the past six years for NCSE’s efforts to encourage the NSF to expand scientific activities that can help to improve environmental decisionmaking.

FEDERAL INVESTMENTS IN ENVIRONMENTAL R&D

Federal investments in R&D and science education are essential to the future

well-being and prosperity of the nation and deserve the highest priority of the Congress. The long-term prosperity of the nation and the maintenance of our quality

of life depend on a steady and growing commitment of Federal resources to science

and technology.

Environmental R&D is a critical component of the nation’s R&D portfolio. Based

on NCSE’s Handbook of Federal Funding for Environmental R&D, we estimate that

Federal funding for environmental R&D in fiscal year 2002 is approximately $7.5

billion, an increase of $315 million or 4.4 percent relative to fiscal year 2001 (Table

1). Federal funding for environmental R&D grew at less than one-third the rate of

total R&D, which increased by 13.5 percent to $103.7 billion in fiscal year 2002.

Appended to our testimony is a letter signed by more than 120 university and college presidents, as well as business, scientific and environmental leaders calling for

significantly increased funding for scientific programs about the environment at the

National Science Foundation, EPA, NASA, and other Federal agencies. We encourage Congress to support this initiative.

TABLE 1.—ENVIRONMENTAL R&D BY FEDERAL AGENCY

Agency

Environmental R&D (millions of dollars) Change from fiscal year

2001 (percent)

Fiscal year

2000 actual

Fiscal year

2001 estimate

Fiscal year

2002 request

Fiscal year

2002 enacted

Fiscal year

2002 request

Fiscal year

2002 enacted

National Aeronautics and Space Admin. ........... $1,690 $1,716 $1,515 $1,573 ¥11.7 ¥8.3

Department of Energy ........................................ 1,502 1,774 1,398 1,862 ¥21.2 5.0

National Science Foundation 1 ........................... 671 752 829 829 10.2 10.2

Environmental Protection Agency ....................... 558 609 569 702 ¥6.5 15.4

Department of Defense ...................................... 399 450 382 410 ¥15.1 ¥9.0

Department of Commerce—NOAA ..................... 643 726 772 836 6.4 15.3

Department of the Interior ................................. 618 631 593 673 ¥6.1 6.5

U.S. Department of Agriculture .......................... 370 410 411 451 0.2 9.9

National Institutes of Health ............................. 60 63 70 81 11.7 28.4

Department of Transportation ............................ 37 41 61 71 47.0 72.2

Smithsonian Institution ...................................... 14 14 14 14 1.4 1.4

Corps of Engineers ............................................. 11 10 11 11 1.4 1.4

Total ...................................................... 6,573 7,197 6,624 7,512 ¥8.0 4.4

1 NSF Environmental R&D provided by NSF.

Source: AAAS/NCSE estimates of environmental R&D based on enacted appropriations bills, OMB R&D data, Budget of the United States

Government, agency budget documents, and information from agencies.

NATIONAL SCIENCE FOUNDATION BUDGET REQUEST FOR FISCAL YEAR 2003

The National Council for Science and the Environment strongly supports bipartisan efforts to double the budget of the National Science Foundation. We commend

the Chair and Ranking Minority Member of the Subcommittee for their leadership.

We encourage Congress to appropriate at least $5.508 billion for NSF in fiscal year

2003, an increase of $718 million or 15 percent relative to the fiscal year 2002 level.

This level of support is recommended by the Coalition for National Science Funding,
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which includes NCSE and 70 other scientific organizations and academic institutions.

Biocomplexity in the Environment Priority Area.—NCSE is particularly supportive

of NSF’s priority area on Biocomplexity in the Environment. This initiative provides

a focal point for investigators from different disciplines to work together to understand complex environmental systems, including the roles of humans in shaping

these systems. The resolution of many important environmental and societal problems is lagging, in part, because of insufficient scientific understanding of complex

issues that span the boundaries of traditional scientific disciplines.

NSF is already a leading Federal sponsor of peer-reviewed research regarding the

environment, with a portfolio exceeding $700 million. Most of this investment is directed at scientific advances within particular disciplines. An interdisciplinary approach is needed to build on this base to truly understand the environment and the

relationships between people and the environment. The Biocomplexity in Environment priority area is an important step towards a comprehensive understanding.

NSF proposes to increase funding for its priority area on Biocomplexity in the Environment by 35.6 percent to $79 million. This priority area would be expanded to

include research in two new areas this year microbial genome sequencing and ecology of infectious diseases to help develop strategies to assess and manage the risks

of infectious diseases, invasive species, and biological weapons. We urge Congress

to support this critical initiative and to consider funding it at a level of $136 million,

as proposed in fiscal year 2000 budget request for NSF.

Major Research Equipment.—The NSF budget request includes initial funding for

two large projects, the National Ecological Observatory Network (NEON) and

EarthScope, under its account for Major Research Equipment and Facilities Construction (MRE). These projects would provide major new opportunities for environmental research.

—National Ecological Observatory Network.—NEON would be a continental scale

research instrument consisting of 10 geographically distributed observatories,

networked via state-of-the-art communications, for integrated studies to obtain

a predictive understanding of the nation’s environments. In addition, NEON

would serve as a ‘‘biological early detection system’’ that is designed to provide

an invaluable resource and a front line of homeland defense both for its scientific potential and for enabling rapid detection of chemical and biological terrorist threats. NSF is requesting $12 million in initial funding for this project

for proof of concept prototyping and for construction and networking of two initial sites.

—EarthScope.—EarthScope would be a distributed, multi-purpose geophysical instrument array that is designed to make major advances in our knowledge and

understanding of the structure and dynamics of the North American continent.

Three components of the project would be the United States Seismic Array

(USArray), the San Andreas Fault Observatory at Depth, and the Plate Boundary Observatory. NSF is requesting $35 million for initial funding of this

project.

Both NEON and EarthScope were included in NSF’s budget request for fiscal year

2001 but funding for the projects was not included in the enacted appropriations

bill. NSF’s budget request for fiscal year 2002 did not contain any new starts for

the MRE account. We urge Congress to provide full funding for NEON and

EarthScope.

NATIONAL SCIENCE BOARD REPORT ON ENVIRONMENTAL SCIENCE AND ENGINEERING

The National Council for Science and the Environment is the primary proponent

of an effort to expand, improve and enhance the relevancy of the scientific efforts

of the National Science Foundation regarding the environment. We believe that

NSF as an independent, non- regulatory science-funding agency is an important

source of credible scientific knowledge about the environment.

NCSE’s efforts have had considerable support from Congress. The House Appropriations Committee report accompany the fiscal year 1998 appropriations bill directed NSF to study how it would establish and operate a National Institute for the

Environment that, ‘‘provides a major role for stakeholders in defining questions

needing scientific attention and which funds ongoing knowledge assessments, extramural research, on-line information dissemination, and education and training

through a competitive peer reviewed process.’’

The National Science Board responded to Congress by unanimously approving a

report, Environmental Science and Engineering for the 21st Century: The Role of

the National Science Foundation, on February 2, 2000. The NSB report sets out a

bold, ambitious set of recommendations that could dramatically improve the sci-
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entific basis for environmental decisionmaking. The first keystone recommendation

is as follows:

‘‘Environmental research, education, and scientific assessment should be one of

NSF’s highest priorities. The current environmental portfolio represents an expenditure of approximately $600 million per year. In view of the overwhelming importance of, and exciting opportunities for, progress in the environmental arena, and

because existing resources are fully and appropriately utilized, new funding will be

required. We recommend that support for environmental research, education, and

scientific assessment at NSF be increased by an additional $1 billion, phased in over

the next 5 years, to reach an annual expenditure of approximately $1.6 billion.’’

The National Council for Science and the Environment encourages Congress to

support full and effective implementation of the National Science Board’s report,

Environmental Science and Engineering for the 21st Century: The Role of the National Science Foundation, within the context of a doubling of the budget for the

NSF.

NSF has begun to implement the recommendations of the NSB. It has appointed

an environmental coordinator and created a new position in the Office of the Director. NSF has formed an Advisory Committee on Environmental Research and Education. It has established a priority area on Biocomplexity and the Environment

that provides new opportunities for multidisciplinary research on the interactivity

of biota and the environment.

The NSB recommendations are consistent with the direction provided by the Appropriations Committee. Full implementation of the NSB report will require strong

support from Congress and a significant increase in funding for NSF’s portfolio of

environmental science, engineering and education.

EPA’S STAR PROGRAM

NCSE urges Congress to restore full funding for the Environmental Protection

Agency’s Science to Achieve Results (STAR) graduate fellowship program. EPA’s

budget request for fiscal year 2003 budget request for EPA would eliminate funding

for new STAR fellowships. This is the only Federally supported fellowship program

specifically aimed at graduate students in the environmental sciences and policy

areas. From 1995 to 2001, EPA funded over 800 STAR fellows at 168 colleges and

universities, including 28 STAR fellows in Maryland and 8 STAR fellows in Missouri. The STAR program is highly competitive, with a success rate of only 10 percent. Like the environmental programs at NSF, the STAR fellowship program suffers from a serious imbalance between resources and highly qualified applicants. Investment in environmental scientists, engineers, policymakers and professionals is

essential for the nation to reap the benefits of scientific advances.

HOMELAND SECURITY AND ENVIRONMENTAL R&D

Environmental R&D is a critical component of homeland security. For example,

understanding the dispersal of toxic substances in water and air is directly relevant

to counterterrorism. NSF has supported research in these areas for many years.

NSF is requesting funding for new environmental projects that could strengthen

homeland security. For example, NSF Director Rita Colwell said that NSF’s proposed National Ecological Observatory Network (NEON) could detect abrupt

changes or long-term trends in the environment and could also serve as ‘‘an early

warning and detection system for a wide array of chemical and biological warfare

agents.’’ We encourage Congress to explore the role of environmental R&D in homeland security and counterterrorism and to recommend actions that would improve

the nation’s capacity in this area. Thank you very much for your interest in improving the scientific basis for environmental decisionmaking.

ATTACHMENT

Letter calling for significant funding increases for environmental science, engineering, and education programs signed by more than 120 national leaders of academic, scientific, environmental, and business organizations.

NATIONAL COUNCIL FOR SCIENCE & THE ENVIRONMENT,

Washington, DC, March 8, 2001.

President GEORGE W. BUSH

The White House, 1600 Pennsylvania Avenue NW, Washington, DC 20500.

DEAR PRESIDENT BUSH: During your recent election campaign, you talked about

the importance of basing environmental decisions on science. We, as a diverse coalition of academic, business, environmental, governmental and community leaders,
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working with the National Council for Science and the Environment agree with you

in this regard.

We are writing to urge you to implement your campaign commitment by making

investment in science for environmental decisionmaking a priority in your administration. In particular, we are asking you to provide significantly increased funding

for scientific programs to:

—Assess what is known about the environment;

—Better understand the environment;

—Provide scientific information about the environment; and

—Support science-based education about the environment.

These programs include:

—National Science Foundation’s biocomplexity in the environment initiative and

portfolio of environmental science, engineering and education programs

—U.S. Geological Survey’s biological, geological, hydrological, and mapping divisions

—U.S. Environmental Protection Agency’s Office of Research and Development,

especially the Science To Achieve Results (STAR) research and fellowship programs

—National Oceanographic and Atmospheric Administration

—U.S. Department of Agriculture’s environmental research programs through

CSREES and the Agricultural Research Service, particularly the Natural Resource Initiative

—U.S. Forest Service forestry research

—Department of Energy’s environmental science programs

—National Aeronautics and Space Administration earth exploration programs.

—National Institute of Environmental Health Sciences

We hope that your initial budget will support science as an investment that will

lead to a stronger economy, healthy people, and a healthy environment.

Sincerely,

PETER D. SAUNDRY, PH.D.,

Executive Director, National Council for Science & the Environment.

PREPARED STATEMENT OF THE NATIONAL EMERGENCY MANAGEMENT ASSOCIATION

INTRODUCTION

Thank you Chair Mikulski, Ranking Member Bond, and distinguished members

of the Committee for allowing me the opportunity to provide you with testimony on

the Federal Emergency Management Agency (FEMA) fiscal year 2003 budget. I am

Dale Shipley, the Director of the Ohio Emergency Management Agency and I am

here today representing the National Emergency Management Association (NEMA).

Currently, I am the Chairman of the NEMA Legislative Committee and I come before you today to represent the state emergency management directors in the 50

states and the U.S. territories who are its core members. NEMA’s members are responsible to their governors for emergency preparedness, mitigation, response and

recovery activities.

The FEMA budget provides critical support to State and local emergency management programs through actual dollars, grants, and program support. This year,

NEMA would like to address three main issues with the proposed Federal budget

for FEMA.

—The first is our concern for the lack of attention to building emergency management capabilities through the Emergency Management Performance Grant

(EMPG) program and our request for supplemental assistance;

—The second is our support for the First Responder Grant program and the intention to coordinate these grants through the States; and

—The third is our concern about the proposal to fold the Hazard Mitigation Grant

Program (HMGP) into the pre-disaster competitive mitigation grant program.

SUPPLEMENTAL APPROPRIATIONS AND EMPG

The existing national emergency increases demands on State and local governments to provide heightened preparedness and response for domestic terrorism and

has stretched or exhausted emergency management functions in local jurisdictions.

While States had been contributing significantly more towards emergency management over the last decade, the national emergency declaration and State and local

budget demands and deficits make that continued effort impossible.

Emergency management is heartened by the proposal to make $3.5 billion available to the nation’s first responders, but we cannot wait until Fall to address these
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immediate needs. Building a statewide emergency management capability is key to

ensuring national preparedness. Resources for personnel both at the State and local

level to manage the programs are critical to completing the preparedness mission.

NEMA and emergency management directors from the States and territories respectfully request that Congress provide additional funding for State and local

emergency management programs through FEMA in the Spring fiscal year 2002

supplemental appropriations bill. We ask that $200 million be added to the Emergency Management Performance Grant Program (EMPG) in the FEMA budget to

address unmet needs and to assist in capacity building.

A recent NEMA survey revealed total program support needs in the amount of

$2.1 billion. The $200 million urgent request specifically represents a $117 million

EMPG shortfall and $83 million to address facilities and communications needs.

NEMA’s Report on Local Emergency Management Program Capability Requirements and Shortfalls details the survey results identifying shortfalls in emergency

management. The $117 million shortfall identified represents data from 38 States.

It will likely increase as the remaining State data is received.

The current Emergency Management Performance Grant system of funding State/

territory and local governments has its history dating to World War II Civil Defense

programs and through the Cold War years. As the threat was perceived we funded

Civil Defense and Disaster Services programs to the level needed to meet the threat.

As the Cold War diminished and the threat was perceived as lessening, the funding

system was kept in place, but the funding levels did not keep pace with expanding

programs and capability requirements.

Now the nation is faced with a new threat of terrorism and the necessity for increased planning and coordination with public health, law enforcement, agriculture

and other State and local organizations plus significant grants management responsibilities with all response organizations cannot be accomplished effectively with

current capabilities. An additional $200 million in funding for EMPG in the Spring

supplemental appropriations package would essentially be a down payment for addressing emergency management needs.

The Emergency Management Performance Grant (EMPG) are ‘‘pass through’’

grants to State and local governments to provide a foundation for basic emergency

capabilities. EMPG is intended to be a 50/50 matching contribution program for

Federal and State Governments. Unfortunately, EMPG funds have been virtually

the only area where FEMA has not received an increase in the past 8 years, thus

eroding State and local emergency management capabilities. EMPG funding is the

lifeblood for State and local governments to prepare for, respond to, recover from,

and mitigate losses from future disasters.

FIRST RESPONDER GRANT PROGRAM

Long before September 11, 2001, NEMA had established itself as a leader in providing input to Congress and Federal agencies on issues of domestic preparedness.

States have been in the forefront of preparing for and responding to all types of disasters, both natural and man-made. We take an all-hazards approach to disaster

preparedness and have integrated our domestic preparedness efforts into the proven

systems we already use for dealing with both man-made and natural disasters. We

also recognize clearly the value of prevention and mitigation in minimizing the consequences of disasters and we incorporate those considerations in all our efforts.

NEMA supports Federal efforts to increase emergency management capacity

building at the State, territory, and local level for personnel, planning, training,

equipment, coordination, and exercising. A significant Federal commitment must be

made to give State, territorial, and local governments the tools to ensure adequate

preparedness. While States have significantly increased their commitment to emergency management over the last decade, States are struggling with budgetary issues

and the increased investments necessary to meet new demands.

There are five issues that we would like to bring to your attention as you address

the proposed First Responder Grant program:

—All efforts need to be coordinated through the States;

—State and local governments need funding to be flexible enough for personnel

to manage the program;

—Standards must be developed to ensure interoperability of equipment, communications, and training;

—Mutual aid both intrastate and interstate—is a key component to capacity

building; and

—State and local government must be fully, directly and continuously involved

and consulted in the development of the National Domestic Preparedness Strategy.
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State Coordination

All efforts to increase emergency management capacity building must be coordinated through the States to ensure harmonization with the State emergency operations plan, ensure equitable distribution of resources, and to synthesize resources

for intra-state and inter-state mutual aid. Also, the Stafford Act, which governs the

way disaster assistance is allocated, successfully uses States and Governors as the

managers of Federal disaster relief funds for local governments which are overtaxed and need assistance when disasters occur. States understand the need to get

funding to the first responders and have long coordinated statewide and regionally

to ensure adequate State assistance to local governments for emergency preparedness and response. There is no question that most of the $3.5 billion proposed first

responder grant funds need to get to police, fire fighters, emergency medical workers, and other front-line local responders after all, disasters are local in nature. The

health community must not be forgotten and must be integrated into all planning,

training, and exercising under the State emergency operations plan. We can effectively ensure this by working through the States to build on the needs identified

in the plans that FEMA, the Department of Justice, and other agencies have required statewide.

Further, because this is a national emergency and States and local governments

are in difficult fiscal situations, we must we wary of programs that would require

significant matches. In fact, for local governments to meet the match would be even

more difficult given their fiscal constraints. If a significant match is required, the

application of this initiative will only go to those agencies and governments that can

fiscally afford the match and not necessarily where the need is greatest. If a match

is necessary, we would suggest that the match be non-fiscal or in the form of a deliverable as opposed to soft or hard dollars.

Flexibility for Personnel to Manage the Program

State emergency managers need to have a commitment for sustained Federal resources and the flexibility to insure the hiring and training of sufficient professional

personnel to manage the expanding antiterrorism programs. We are concerned that

an influx of funding programs from the Federal Government could detract from the

‘‘all hazards’’ approach and we will have to turn our focus away from natural disaster preparedness and response and thereby actually reduce overall preparedness

and efficiency. Building a statewide emergency management capability is key to ensuring preparedness across the board. Flexibility to use some of the first responder

grants for personnel both at the State and local level to manage the programs is

critical to completing the preparedness mission.

NEMA has long advocated an increase in the only flexible source of federal emergency management funding, the Emergency Management Performance Grant

(EMPG). EMPG is the only line item in the FEMA budget that has not received an

increase in the last decade, yet it is the only consistent source of Federal funding

for State and local capacity building. As an existing funding stream, EMPG could

be used to hire State and local staff to manage critical programs and build the incremental emergency management capacity to prepare for the first responder grants

and the coordination that will be required to effectively execute the program. State

and local government emergency management is already over-stressed and working

to capacity.

Standards

Standards must be developed to ensure interoperability of equipment, communications, and training across state, regional, and local jurisdictions. In terms of establishing voluntary minimum standards for the terrorism preparedness programs of

State and local governments, NEMA offers itself as a resource in this area. Our organization, along with other stakeholder groups such as the Federal Emergency

Management Agency, the International Association of Emergency Managers, National Governors’ Association, National League of Cities, International Association

of Fire Chiefs, and others, has developed and is implementing an Emergency Management Accreditation Program (EMAP). EMAP is a voluntary standards and accreditation program for State and local emergency management that is based on

NFPA (National Fire Protection Association) 1600 Standard for Disaster/Emergency

Management and Business Continuity Operations (an ANSI or American National

Standards Institute approved standard) and FEMA’s Capability Assessment of

Readiness (CAR). Consequence management preparedness, response and recovery

standards are being developed in conjunction with those for the traditional emergency management functions. NEMA suggests that these standards already being

collaboratively developed through EMAP be considered in the development of minimum standards for training, exercises and equipment. Additionally, EMAP accept-
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ance would provide the natural mechanism for Federal and State agencies to meet

the requirements of the Government Performance Results Act (GPRA). EMAP has

already completed a pilot phase in North Carolina and North Dakota and will begin

receiving State program applications in April. Pilot assessment of county and city

programs will begin this Spring. Mutual Aid Mutual aid is one key to capacity

building. A proven system we need to take advantage of for all domestic preparedness planning is the Emergency Management Assistance Compact (EMAC). EMAC

is an interstate mutual aid agreement that allows States to assist one another in

responding to all kinds of natural and man-made disasters. EMAC offers a quick

and easy way for States to send personnel and equipment to help disaster relief efforts in other States. There are times when State and local resources are overwhelmed and Federal assistance is inadequate, inappropriate, too far away or unavailable. Out-of-state aid through EMAC helps fill such shortfalls. There are 46

States and two territories that are members of EMAC and other States and territories are planning to join. In response to the September 11 tragedy, emergency

managers from several States provided technical assistance and personnel support

to New York through EMAC. A system like this enables experts and specialized

equipment to be used across jurisdictions and regions based on the nature of a particular event. NEMA and FEMA are currently working together to standardize resource typing. By having commonly understood descriptions of resource packages,

impacted jurisdictions will know just what they are going to get when they request

each standard package.

National Domestic Preparedness Strategy

NEMA has long requested for Congress to put in place an inclusive national

framework for developing a National Domestic Preparedness Strategy and a single

point of contact within the Federal Government that is accountable to Congress to

coordinate the Federal efforts in implementation of that strategy. Please also note

that we espouse a collaboratively developed national strategy, not just a Federal

one. We now look forward to working with the Office of Homeland Security towards

the development and implementation of that strategy. In addition to NEMA’s ‘‘Ten

Principles for a National Domestic Preparedness Strategy’’ adopted in 2000, we also

developed a White Paper on Domestic Preparedness in the aftermath of 9/11 that

is also supported by the Adjutants General Association of the U.S., the Council of

State Governments, International Association of Emergency Managers, and the National Guard Association of the U.S. A copy of this White Paper is attached, along

with NEMA’s ‘‘Ten Principles’’.

In any way possible, the Federal Government needs to coordinate efforts for domestic preparedness and avoid duplication of efforts and programs. The Office of

Homeland Security assured that State emergency managers and first responders

from the State and local level will be invited to participate in development of the

national preparedness strategy.

HAZARD MITIGATION GRANT PROGRAM & PREDISASTER MITIGATION

The Administration’s budget proposal includes a request to create a new pre-disaster mitigation program that will combine the predisaster mitigation program authorized by the Disaster Mitigation Act of 2000 and the post-disaster Hazard Mitigation Grant Program (HMGP). While Federal costs towards disasters remain a concern, significant commitments must be made towards both pre-disaster and post-disaster mitigation in order to lower overall disaster costs in the long run.

Replacing the HMGP program, which may provide up to 20 percent of total disaster costs towards post-disaster mitigation grants, would prevent the lessons

learned from disasters from being immediately incorporated into mitigation projects

to prevent losses of life and destruction of property.

The HMGP was authorized under Section 404 of the Stafford Act, and administered by FEMA. The program provides grants to States and local governments to

implement comprehensive and long-term hazard mitigation measures after a major

disaster. Examples of risk reduction measures include: acquisition, relocation or elevation of flood damaged homes and businesses; relocation and fortification of critical

public infrastructure; rebuilding at a higher building code level, for purchasing repetitive loss properties, and for the development of local mitigation plans, projects

and strategies to make communities more disaster resistant and resilient. The

months immediately following disasters provide unique opportunities to efficiently

incorporate risk reduction measures in a very cost-effective manner, in many cases

lowering the overall cost of the project by leveraging other funding sources including

insurance settlements.

The HMGP has proven to be a highly effective tool in steering communities toward risk reduction measures, in many cases breaking repetitive loss cycles that
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have cost other Federal disaster relief programs multiple times. Cost-benefit analysis is currently a requirement for predisaster mitigation programs.

In a purely competitive grant program, lower income communities, often those

most at risk to natural disaster will not effectively compete with more prosperous

cities. Also, disasters graphically and vividly expose the need for and value of mitigation projects. We must not lose these opportunities to initiate projects to enhance

our communities and reduce future disaster costs. Damage caused by disasters

would go largely unrepaired thereby further impacting the economic and social recovery of particular areas. There are not enough mitigation dollars available to address all of the vulnerabilities that exist in this country.

Making mitigation funds available only in a predisaster competitive environment

will set this country’s mitigation efforts back by removing the prime motivation factor, the disaster itself, as the motivation. The proposal is not a cost-savings initiative, as disaster costs to the Federal Government would be expected to significantly

increase. HMGP could be modified to include performance measures, but HMGP

should not be rolled into the predisaster mitigation program.

Probably the best recent example of post-disaster hazard mitigation in the recent

years is the $836 million appropriated by the North Carolina General Assembly

after Hurricane Floyd. This funding was nearly equal to the entire Federal contribution. Without State level funding to provide all the non-Federal cost share for programs, and the financing of innovative risk reduction programs to compliment Federal programs, mitigation techniques would never have been incorporated into the

rebuilding process. In excess of $200 million in State funds was committee to relocate over four thousand families, dozens of businesses and agricultural operations

from the floodplain, thus guaranteeing they will not be devastated by future floods.

In addition, North Carolina and other States are now undertaking the task of updating Flood Insurance Rate Maps, a traditional Federal responsibility and expense,

to ensure communities have the best available information on where flood hazards

exist.

By the same token, predisaster mitigation is also a key component to effective disaster mitigation. Over the last 5 years, predisaster mitigation programs and initiatives have proven their value in not only saving lives and property in recent disasters, but also in many cases have negated the need for any emergency response and

recovery. Pre-disaster mitigation is essential, but we need to ensure that pre-disaster mitigation corresponds with the Disaster Mitigation Act of 2000 that was

passed overwhelmingly by the House and Senate and signed into law. NEMA

worked with Congress to draft the Disaster Mitigation Act of 2000 (DMA2K), which

authorized predisaster mitigation; works with small impoverished communities to

lessen their vulnerability to natural disasters; established a National Pre-disaster

Mitigation Fund in the Treasury of the United States; and provided for the development of multi-hazard advisory maps. It took many years for Congress to agree on

language to amend the Stafford Act and we are so grateful that the Disaster Mitigation Act was signed into law. As FEMA implements DMA2K, we must not lose the

opportunity to prevent the loss of life and destruction of property prior to disasters.

NEMA calls on Congress to maximize the benefits of both HMGP and predisaster

mitigation, while including provisions for increased accountability. NEMA supports

increasing funding for predisaster mitigation, but maintains that HMGP should be

retained as a separate and funded post-disaster program.

OTHER ISSUES

Congress should support funding for modernization of floodplain mapping, since

many of the flood plain maps are 15–30 years old and considered out of date. Any

updates to flood maps should be made with the coordination of State and local governments. Flood maps play a key role in disaster reduction, mitigation, and community planning and development activities. Many of the flood maps in place do not

reflect recent development, and may contain inaccurate information about the

floodplains as a result. FEMA has estimated the cost of a comprehensive multi-year

map modernization plan at $750 million over a 7-year period. Congress has recognized the need to update the floodplain maps in the fiscal year 2002 budget and

the commitment should continued in fiscal year 2003 and beyond to insure currency

in our mapping. NEMA supports the proposed $300 million for flood mapping modernization included in the President’s Budget

NEMA is currently looking closely at the proposal in the Administration’s budget

that would end State taxation of insurance premiums to the National Flood Insurance Program. Current estimates from FEMA anticipate that eliminating the tax

would reduce State revenue nationwide by $29 million. We would like to reserve the

right to report back to you with information on how this proposal may impact the
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States as you consider the FEMA appropriations bill in the coming months, but we

see no rationale for the Federal Government to eliminate this tax revenue to States.

CONCLUSION

While emergency management has been the driving force in our nation’s preparedness, we must not forget the lessons learned on September 11, 2001 that

translate into the need for increased preparedness and response capabilities. If in

fact we want to truly commit our nation to preparedness, we must tale advantage

of the memories still fresh in our mind of both man-made and natural disasters. Retaining the ‘‘all-hazards’’ approach will prevent our nation from losing focus on the

daily perils that we face and translate into double value in preparedness.

Whether it is a hurricane in Florida, earthquakes in the pacific northwest, or tornadoes in Maryland, States need a Federal commitment to recognize that each State

and local government has unique disaster preparedness and response needs that require flexible, predictable, and adequate funding assistance that is coordinated with

the State emergency management plan.

While we cannot completely prevent events and natural disasters from occurring

we can be prepared for them and help our communities minimize the impact of lives

lost and destruction of our critical infrastructure. I ask that you please consider our

recommendations as you consider difficult budget decisions this year.

I thank you for the opportunity to testify on behalf of NEMA and welcome any

questions that you might have. Only through a partnership of Federal, State, and

local governments, can our country prepare and respond to emergencies and disasters. Thank you for your consideration.

WHITE PAPER ON DOMESTIC PREPAREDNESS—OCTOBER 1, 2001

Background

Emergency management as a discipline has been shaped by historical events, both

nationally and internationally. During World War II, it became apparent for the

first time that our nation was susceptible to enemy attack. As a result, the first organization and function of what is called Civil Defense was established. The majority of civil preparedness and disaster response capability at the local level had its

foundation in the Civil Defense program. Federal financial assistance to State and

local jurisdictions for civil defense programs was begun in 1958 and provided Federal matching funds (50/50) for personnel and administrative expenditures for civil

defense preparedness. Attack preparedness was mandated as a joint Federal-Statelocal responsibility. This funding base provided the very foundation upon which civil

preparedness (what we now refer to as emergency management) was built.

The recent terrorist attacks demonstrate the fact that the nation needs to develop

a capability reminiscent of the past when there existed a robust State and local

emergency management and response capability. A strengthened national program

incorporating today’s all hazards approach to emergency preparedness is imperative.

Congress, Federal agencies, governors, State and local emergency management directors, other local officials and all disciplines of emergency responders must work

together to develop a strategy for standardized, bottom-up national capabilities to

effectively respond to catastrophic disaster situations.

In addition to the States Principles for a National Domestic Preparedness Strategy, adopted in February 2000, NEMA thinks it critical that the following enhancements be incorporated into a nationwide strategy for catastrophic disaster preparedness. Items are listed by category and not necessarily by priority.

Emergency Preparedness and Response

Congress should provide to the States immediate Federal funding for full-time

catastrophic disaster coordinators in moderate and high-risk local jurisdictions of

the United States, including the 120 largest cities where training and equipment

was provided under the Nunn-Lugar-Domenici domestic preparedness programs.

These personnel will have responsibility for developing and maintaining terrorism

consequences plans, procedures, exercises, and resources. For those states with appropriate jurisdictional staffing levels already in place, the flexibility to utilize Federal funds to enhance the overall emergency preparedness program based on identified priorities is critical. Measures should be implemented to ensure this funding

does not supplant existing State and local emergency management funding commitments.

States need financial assistance to improve catastrophic response and Continuity

of Operations Plans (COOP) and Continuity of Government (COG) for States. FEMA

should be provided additional funding to develop, construct and/or retrofit Federal/

State/local command and control centers (Emergency Operating Centers) for NBC
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events. These coordination centers must exist at each level of government. Alternate

EOC locations must be available should the primary center be damaged or destroyed by the event.

Interstate and intrastate mutual aid assistance must be recognized and supported

by the Federal Government as an expedient, cost-effective approach to disaster response and recovery. The Emergency Management Assistance Compact (EMAC) has

been adopted by 41 States and two territories with additional States planning to

join. EMAC is an interstate mutual aid agreement ratified by Congress, passed by

state legislatures and signed into law by governors, and is well coordinated with the

Federal Response Plan. Other States utilize the existing Interstate Civil Defense

and Disaster Compact as well as regional compacts that are similarly coordinated

with existing plans. These complementary operational systems should be linked as

the framework and procedures for all response and recovery activities.

The Emergency Management Accreditation Program (EMAP) should be implemented and recognized by Federal agencies as a strategic tool to build greater

multi-discipline/all-hazards capabilities at the state and local level, including domestic terrorism. EMAP is a voluntary, national standards and accreditation program

for state and local emergency management programs. The initiative is being developed in partnership by NEMA, FEMA and the International Association of Emergency Managers and is currently in the pilot phase.

FEMA, State and local emergency managers must implement renewed emphasis

on family and community preparedness to ensure Americans have necessary skills

to survive a catastrophic disaster.

A standardized national donations management protocol is needed to address the

outpouring of food, clothing, supplies, and other items that are commonly sent to

impacted states and localities following a disaster. If not handled properly, large

amounts of unnecessary or inappropriate donations can add another level of complication to the disaster itself. We believe the shoring up of State and local emergency management agencies will provide the necessary organization to improve this

system; however, additional planning and an information management capability

are desperately needed.

Health and Medical

The medical surge capacity must be strengthened. The emergency management,

medical and public health professions must work with lawmakers to ensure each region of our nation has a certain minimum surge capacity to deal with mass casualty

events. Hospitals should agree to provide defined and standardized levels of resources, capabilities and assistance to handle mass casualties, especially those contaminated by chemical/biological agents. Funding for equipment and supplies to accomplish this mission should be provided to develop this additional capability, in exchange for their agreeing to participate as a local receiving hospital and as part of

the U.S. Public Health Service’s National Disaster Medical System (NDMS). Funding for the health care system for emergency planning and extraordinary operation

response costs that are not available from any other means must be provided by the

Federal Government. Additionally, the Federal government needs to provide the

equipment and supplies to accomplish this mission and develop this additional capability; also, states need assistance to complete the National Pharmaceutical Stockpile distribution response plan.

State-Local Disaster Medical Assistance Teams should be developed across the

country with standardized equipment, personnel and training. These teams would

serve as the first line of response to support impacted communities within impacted

states, and could be required to respond outside the state as a mutual aid resource

upon request. Self-contained capability to respond outside their jurisdiction should

be provided by military Reserve Component assets available in each state.

The current sixty U.S. Public Health Service NDMS Disaster Medical Assistance

Teams (DMAT) should be uniformly enhanced for Weapons of Mass Destruction

(WMD) response, including focus on personnel protection and training for WMD.

Currently only four of the teams have been upgraded and equipped to serve as National Medical Response Teams (NMRTS).

Additional WMD Recommendations

The Department of Justice should immediately release the fiscal year 2000 and

fiscal year 2001 equipment funds in order to begin implementation of these recommendations, and then require a basic statewide strategy in order to receive fiscal

year 2002 funds; and further, provide funding to states to administer the equipment

program. Also, allow greater flexibility with the approved equipment list in order

to accomplish any of these recommendations. Specifically, this should include the

use of funds for the purchase of necessary equipment for hospitals and the health
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care industry, regardless of the private sector ownership of these critical first receiver response system components. In addition, Congress should increase funding

to DOJ to provide detection, personnel protection and decontamination equipment

for the nation’s emergency response agencies. Lastly, Federal training and maintenance money must be included in any national terrorism response program.

Congress and the Department of Defense should authorize homeland defense as

a key Federal defense mission tasking for the National Guard. By providing this authorization and removing restrictive language and funding on utilization of National

Guard assets and personnel, the civil-military integrated response will be dramatically improved. In addition, Congress should provide funding to DOD for full-time

staffing of state joint civil-military emergency operations centers. Further, Congress

should provide funding to National Guard Bureau to complete fielding of National

Guard Civil Support Teams in additional states and territories.

State-Local Urban Search and Rescue capabilities should be developed across the

country with standardized equipment, personnel and training. These teams would

serve as the first line of response to support impacted communities within impacted

states, and may be required to respond outside the state as a mutual aid resource

upon request. Self-contained capability to respond outside their jurisdiction should

be provided by National Guard assets available in each state. Further, standardization of the national USAR format and approach should be accomplished in such a

way that there is a gradation in the USAR response teams to enhance overall national capability.

The Department of Defense should undertake a review of the distribution of aviation assets to the National Guard in each state, territory and District of Columbia.

National interagency and intergovernmental information management protocols

are needed to support information sharing (ie. Damage/Situation Reports, Warning/

Intelligence Reports, Resource Coordination). Further, an unclassified version of

INTELINK needs to be developed for use by the greater emergency response community.

Better Federal interagency coordination is needed to assist states in identifying

and accessing the full range of Federal resources and assistance available to them.

Currently, states are left on their own to identify individual agency programs and

then contact each agency to determine programs and resources available.

Security clearances must be more standardized and reciprocal between agencies

and levels of government. Use of a compartmented, need-to-know system would

greatly facilitate secure sharing of critical intelligence. Additionally, a critical need

exists to enhance the ability of local and state officials to receive Federal security

clearances more expediently.

FEMA’s fire grant program should be expanded and modified to strengthen regional and national, not just local, fire protection capabilities to respond to catastrophic disasters. State level involvement in the program would allow increased coordination and prioritization of resource needs within each state. A comprehensive

national strategy would ensure best use of available funding provided to local fire

departments to enhance regional and national response capabilities.

The National Warning System (NAWAS), maintained by FEMA, has been

downsized in recent years. This system was designed to provide rapid communications and warning capabilities between Federal, State and local emergency management agencies. The Congress should provide funding to rapidly upgrade and expand

a sustainable national intergovernmental communication and warning system.

FEMA, in collaboration with state, local, private and other Federal agency emergency response partners, should rapidly develop a standardized emergency responder identification and accounting system to improve personnel credentialing

and accountability at scenes of catastrophic disasters.

The Environmental Protection Agency should be provided funding to develop additional guidance on shelter in-place strategies for nuclear/biological/chemical (NBC)

events, especially in urban centers.

There is a need for technology transfer from the Federal Government and its contractors to state and local governments to support an automated decision support

system. Several Federal agencies have data that is unclassified that could be used

for planning, response and recovery activities. These Federally developed systems

would contribute immensely to accomplishing many of the recommendations set

forth in this paper and do so in a cost effective manner.

RESOLUTION ON STATES PRINCIPLES FOR A NATIONAL DOMESTIC PREPAREDNESS

STRATEGY

WHEREAS, The National Emergency Management Association (NEMA), represents the state emergency management directors in the 50 states, territories and
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District of Columbia who are responsible to their governors for preparing for, responding to and recovering from natural and manmade disasters, as well as consequence management for incidents of domestic terrorism; and

WHEREAS, NEMA believes the following principles provide the necessary framework for a National Domestic Preparedness Strategy:

1. The United States needs to have a viable national vision to guide the development of a clear, comprehensive and integrated national domestic preparedness

strategy to prepare for and manage the consequences of terrorism—one that utilizes

the nation’s existing all hazards emergency management and response system. The

strategy must clearly define federal, state and local government roles and responsibilities and articulate a clear direction for federal priorities and programs to support state and local responders. The strategy must be developed in coordination with

state and local entities, include measurable performance objectives, and address sustainable infrastructure.

2. There must be increased and productive coordination of all federal domestic

preparedness programs and resources and improved interface with governors and

states. A single, visible point of coordination is essential at the federal level with

the appropriate degree of authority to ensure that all federal agency resources, programs, and policies are consistent with and supportive of the national strategy. A

mechanism must be provided to this coordination point in order to influence federal

agency budgets and program authorizations to ensure consistency with the national

strategy. This entity must be codified in authorizing legislation rather than the current practice of appropriations language, and the entity must be appropriately

resourced to fulfill its mission.

3. All federal resources, programs, and activities must be coordinated through the

nation’s governors and their state emergency management agencies to ensure a

comprehensive state-wide domestic preparedness strategy that reflects the unique

characteristics and needs of each individual state.

4. Government at all levels must ensure that the protection of civil liberties and

states’ rights remain the highest priority within the context of national security as

the United States prepares for and addresses the consequences of terrorism.

5. There are at least fifteen different Congressional committees with jurisdiction

over components of the domestic preparedness issue. There should be a special committee on domestic preparedness to better ensure the coordination of federal programs, coordination of funding, avoid duplication of programs, and to provide centralized, coordinated oversight.

6. Credible, timely threat information is needed by state and local governments

that is based upon solid research, analysis, and sound science rather than worstcase scenarios.

7. The issue of increased tactical and strategic capabilities for communication and

information sharing between and among all levels and disciplines of government is

essential to effective domestic preparedness. Information sharing by law enforcement must be addressed to allow emergency responders at the state and local level

the ability to deter, interdict or respond to a potential terrorist incident.

8. The nation’s public health and medical system capabilities, including that of

private hospitals, must be substantially enhanced and fully integrated into the domestic preparedness program with increased and improved coordination between

emergency management, law enforcement and the fire community.

9. National standards should be developed for responders at all levels of government, particularly in the areas of planning, training, equipment and communications, in order to ensure common approaches between communities and states. In

addition, a standardized approach to preparing for and respond to terrorist events,

including cyber terrorism, is critical to local, state and the federal government’s ability to work effectively as a team and therefore NEMA recommends that all states

and all federal agencies adopt the incident command/management system as a way

to ensure an integrated and coordinated local, state and Federal response.

10. The National Emergency Management Association offers to partner with Congress and the federal government to develop the national domestic preparedness

strategy—one that can be implemented effectively by all levels of government.

NEMA has the ability to facilitate the input of all state and local responder groups

into the development of such a strategy.

NOW THEREFORE BE IT RESOLVED, that NEMA encourages Congress and

the federal government to adopt these ten principles in developing a National Domestic Preparedness Strategy.

MOVED: Keven Leuer (MN)

SECOND: Ed Gleason (WI)

DISPOSITION: Passed unamiously
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Authenticated: Myra Thompson Lee, NEMA Secretary NEMA 2000 Annual Conference, August 20–25, 2002, Palm Beach, Florida

PREPARED STATEMENT OF THE PEOPLE FOR THE ETHICAL TREATMENT OF ANIMALS

(PETA)

Chairwoman Mikulski and Members of the Subcommittee: People for the Ethical

Treatment of Animals (PETA) is the world’s largest animal rights organization, with

more than 750,000 members and supporters. We greatly appreciate this opportunity

to submit testimony regarding fiscal year 2003 appropriations for the Environmental Protection Agency (EPA).

My testimony will focus on the EPA’s use of animals in chemical testing programs. We are grateful to the Subcommittee for providing the first-ever appropriation for the development of non-animal test methods by the EPA in fiscal year 2002.

We cannot overstress the importance of this initiative, as the EPA requires more

chemical toxicity tests on animals than any other federal agency. Each year thousands of animals are subjected to painful procedures in which pesticides and industrial chemicals are forced into their lungs, throats, or stomachs. These animals include pigs, dogs, rabbits, rats, guinea pigs, hamsters, mice, birds, turtles, frogs, and

fish.

Frequently, non-animal test methods are more economical, more reliable, and

more relevant to human health than animal tests. They are obviously more humane.

Despite its rhetoric to the contrary, the EPA has steadfastly refused to spend funds

on the development of methods that could replace the animal tests it currently requires. In the international arena, the United States (as represented by the EPA)

has been a main obstacle to the acceptance of alternative methods by the Organization for Economic Cooperation and Development.

In one example of needless animal testing, the EPA spent more than $400,000 to

fund studies in which pigs were fed toxins in an attempt to estimate human exposures to arsenic and lead from the soil of sites of former mines, mills, and smelter

waste facilities. Non-animal test methods utilize a simulated gastrointestinal tract

in which contaminated soils are ‘‘incubated’’ in acidic solutions that mimic gastrointestinal fluids. The fraction of the metals that dissolve represents the fraction capable of causing toxicity. These approaches to the assessment of metal bioavailability have been available and in widespread use since 1994, and can be conducted for a small fraction of the cost of animal tests. Yet the EPA chooses to use

animals.

The EPA’s Office of Pesticide Programs requires at least 14 individual tests for

pesticide active ingredients, some of which kill thousands of animals at a time. The

EPA’s high production volume (HPV) chemical testing program will kill more than

1 million animals. And the agency’s proposed Endocrine Disruptor Screening Program (EDSP) is the largest animal-testing plan in U.S. history. Tens of thousands

of chemicals are slated to be included in the EDSP, and scientific estimates are that

between 600,000 and 1.2 million animals will be killed for every 1,000 chemicals

tested.

These programs require a variety of animal tests including assays for genetic toxicity, acute toxicity, reproductive toxicity, and hormone ‘‘disruption.’’ Amazingly, not

one of these tests has ever been formally validated for its relevance to human health

effects.

There is tremendous potential for non-animal methods to replace animal tests in

these programs. Several non-animal test methods have recently been formally validated as total replacements for animal studies, including four skin corrosion assays,

in vitro tests for skin penetration and phototoxicity, and three in vitro/ex vivo tests

for embryotoxicity. Basic genetic toxicity can also be studied entirely without the

use of animals. Three methods in particular (the Bacterial Reverse Mutation Test,

In Vitro Cell Gene Mutation Test and In Vitro Chromosomal Aberration Test) have

been accepted by government regulators worldwide as valid alternatives to using

animals.

There is also a great deal of work under way to develop and validate non-animal

methods for assessing other health effects. For example, acute toxicity can be studied using cell culture systems, since the actions of toxic chemicals are often focused

at the cellular level. For example, a series of four cell culture tests can predict toxicity in humans with nearly 85 percent accuracy (compared to an at best 65 percent

in acute toxicity studies using animals). This method should, within several years,

be able to replace the horrendously cruel use of animals in acute lethal poisoning

testing.
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Reproductive toxicity studies, which are required under all of the EPA’s animaltesting programs, can kill anywhere from 800 to several thousand animals per test.

Computer models are currently the most promising prospects for replacing animals

in these studies. For example, the MULTICASE expert system, which is currently

undergoing development and prevalidation by the Food and Drug Administration

(FDA), reduces a compound to all possible 2- to 10-atom fragments and identifies

‘‘structural alerts’’ associated with chemical reactivity. The model then applies a

weight-of-evidence approach to evaluate the toxic potency of structural alerts, both

individually and collectively, to determine the likelihood of toxic effects in a living

system. The results of FDA prevalidation studies have been promising, but additional development, in collaboration with the EPA, will be needed before this model

is likely to achieve widespread regulatory acceptance.

For estrogen, androgen, and thyroid hormones, receptor binding and

transcriptional activation assays are rapid, non-animal methods of detecting and

measuring chemical interactions with cellular receptors. Many endocrine-disrupting

chemicals function by binding to hormone receptor sites on cells, often out-competing the body’s naturally-occurring hormones for access to these receptor sites. Receptor binding assays model this activity in vitro. Transcriptional activation assays

measure the presence of ‘‘gene products,’’ which are created as a result of receptor

binding. Both types of assays are rapid, inexpensive and highly effective in detecting

chemicals that mimic estrogen and androgens and interact with their receptors in

the cell. In fact, one receptor binding assay was found to be five orders of magnitude

more sensitive than the uterotrophic animal test currently proposed by the EPA.

High throughput screens (HTPS) are automated systems capable of rapid screening of thousands of chemicals. One particularly promising example of an HTPS

model is the CALUX (Chemically Activated Luciferase Expression) assay. This

method is based on a genetically engineered cell line that responds to specific compounds by producing a chemical called firefly luciferase. For example, when a target

chemical enters the cell, it binds to the cellular receptor, which turns on the luciferase, lighting up like a firefly. This assay is currently being adapted to screen for

androgen and thyroid active hormones in addition to estrogenic chemicals.

A HTPS could screen out many chemicals from further testing in the EDSP. Without it, millions of animals will be killed to test chemicals that would have been

eliminated early on in the program. Congress appropriated $4 million in fiscal year

1999 to develop and implement the EDSP, including a HTPS. After spending only

$70,000 and conducting one feasibility study, the EPA is not applying the balance

of the funds to develop a HTPS. The EPA appears to have abandoned further development of a HTPS, despite the ongoing progress being made on this technology by

researchers in Japan. Although the EPA claims it will use structure activity relationship (SAR) modeling in place of a HTPS, the agency fails to recognize that SAR

models rely on data generated by a HTPS.

Another area of research that the EPA ignores is the very valuable discipline of

epidemiology. Epidemiological studies do not involve experiments or tests on people.

They are observational studies of people who have been (or are likely to have been)

exposed to an agent to see if they March 22, 2002 People for the Ethical Treatment

of Animals Page 4 have differential rates of a given outcome than people who have

not been exposed to the agent. There are generally two types of studies: (1) prospective—when researchers know a population has been exposed, and then they follow

the population over time to see whether the rates of an adverse outcome happen

in the population that has been exposed more than it happens to a population that

has not been exposed; and (2) retrospective—if researchers have a suspicion of the

kind of health problem associated with exposure to a particular agent, they find a

population with that problem, and compare its rate of exposure to that agent with

that of a population that does not have the problem.

Epidemiological studies are the premiere method of gathering medical information. It is through epidemiological studies that we have learned most of what we

know about public health—that smoking causes cancer (contrary to many conclusions from animal experiments), that cholesterol causes heart disease, that fruits

and vegetables prevent disease, that obesity leads to diabetes, that lead paint leads

to developmental problems in children, and that chromium in water causes cancer,

to cite just a few examples.

The irony is that animal experimentation often impedes the ready acceptance of

evidence found through epidemiology. The chemical industry has long approved of

the EPA’s near-exclusive reliance on animal testing, since the results of these tests

are always subject to interpretation. The controversy over arsenic is a perfect example of how animal studies delayed regulation of a dangerous chemical. For years,

epidemiological studies have shown that arsenic in drinking water causes cancer in

humans. Yet the EPA dragged its feet for more than 20 years while thousands of
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1 National Toxicology Program Advisory Committee on Alternative Toxicological Methods, resolution passed unanimously at its meeting on 28 November 2000.

animals were killed in tests that attempted to reproduce the effects already seen

in humans.

As a case in point, take the fact that the EPA paid the National Institute of Environmental Health Sciences (NIEHS) $400,000 to immobilize rats in small bottle-like

devices and conduct inhalation studies with mercury vapor. Scientists have known

the hazards of mercury for decades and have seen reproductive effects illustrated

in epidemiological studies of dental hygienists exposed to mercury in fillings.

Yet the EPA spent our tax dollars unsuccessfully attempting to duplicate these

effects that have already been seen in epidemiological studies of humans by forcing

rats into contraptions that resemble medieval torture devices. As stated in the researchers’ own words in a feature article in NIEHS’ publication Environmental

Health Perspectives (April 2000):

Says NIEHS toxicologist Dan Morgan, ‘‘The first mercury study we did was in response to studies... that showed that female dental hygienists, who are exposed

to mercury quite often in preparing fillings, had more problems conceiving than

women who were not exposed. So in order to study the mechanism of this effect,

we tried to duplicate the results in animals.’’ Of the results, Morgan says, ‘‘We

weren’t able to reproduce any of those effects in our animal model.’’ (our emphasis)

What possible purpose did this experiment and gross waste of funds serve?

In addition to the ethical and scientific problems associated with animal tests, another issue is whether or not they are being appropriately validated. At present,

none of the animal tests planned for the EDSP are being validated for their relevance to human health effects. Therefore, the resulting data will not prompt any

meaningful regulatory action to protect human health. The same is true with respect to ‘‘ecotoxicity’’ tests, which examine chemical effects in one species of wildlife

and extrapolate these observations to hundreds, or perhaps thousands, of other species. Many scientists now agree that such broad and sweeping generalizations are

simply not credible or valid scientifically (i.e. what is true in Mallard ducks may

not be relevant to other species of ducks, let alone to songbirds or birds of prey).

It is also important to recognize that Congress’ intent for the EDSP, as articulated

in the Food Quality Protection Act (FQPA), was for the EPA to examine chemical

effects on human health, not ecotoxicity. Therefore, the EPA’s inclusion of

ecotoxicity effects in the EDSP represents both an unnecessary and useless massive

amount of additional animal testing. Moreover, it is simply unrealistic to believe

that the detection of adverse health effects in wildlife will lead to the regulation of

a chemical where adverse health effects in humans have not. Given the profound

scientific and practical limitations associated with ecotoxicity studies, and the lack

of a Congressional mandate for their inclusion in the EDSP, it is inappropriate for

the EPA to continue its development of such studies at this point in time.

The EPA does not plan to require the rigorous validation of the animal tests that

is required of all non-animal tests. Indeed, the agency awarded a $34 million contract to a laboratory for the development and validation of tests for the EDSP from

a proposal in which validation experience was barely even mentioned.

The Advisory Committee on Alternative Toxicological Methods (ACATM) for the

National Toxicology Program (NTP) has expressed ‘‘grave concern’’ over the EPA’s

double standard in validation and has twice unanimously recommended that all proposed test methods for the EDSP be validated through the Interagency Coordinating

Committee on the Validation of Alternative Methods (ICCVAM).1 However, the EPA

rejected this recommendation. Although it does indeed require the validation of all

non-animal tests to be assessed through ICCVAM with very rigorous and thorough

standards, the EPA follows a dangerous double standard by not requiring this same

validation assessment of the animal tests. Allowing quicker and less rigorous validation procedures for animal tests not only creates a bias against non-animal tests,

it compromises the reliability of the resulting data as well.

We were pleased to see that last year’s appropriations for the EPA included a $4

million earmark in the Science and Technology account for the research, development, and validation of non-animal, alternative chemical screening and

prioritization methods. We respectfully make the following requests for the EPA’s

fiscal year 2003 appropriations:

—that $10 million in the Office of Research and Development budget be allocated

for the research, development, and validation of non-animal screens and tests;
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2This reporting mechanism is critical due to the fact that the EPA has repeatedly ignored

requests from the animal protection community regarding expenditures for non-animal methods.

A coalition of animal protection groups is identifying and prioritizing the non-animal tests that

are close to being ready for use and which desperately need funding and other resources. We

hope the Subcommittee will encourage the EPA to meet with us to discuss the manner in which

funds can best be put to use to effect the most rapid and substantial reduction possible in animal suffering and death at the EPA.

—that the EPA be required to report to Congress on how the above funds are utilized;2

—that no funds for the EDSP be used for animal tests until the development of

a HTPS has been completed, and no funds be used to conduct animal testing

on a chemical until that chemical has been analyzed by a HTPS;

—that because the current state of the science precludes ‘‘appropriate validation,’’

as required by the FQPA, for ecotoxicity tests (which are not covered by the

FQPA), no funds be used for ecotoxicity test development at this point in time;

—that the EPA provide to Congress an analysis of the cost requirements for the

epidemiological studies recommended as part of the EDSP by the National

Academy of Sciences in its 1999 report ‘‘Hormonally Active Agents in the Environment’’ along with an explanation as to why the EPA decided on an animaltesting program instead of epidemiological studies;

—that the EPA provide the necessary funds to ICCVAM for the validation assessment of all screens and tests proposed for the EDSP.

These steps will promote the sound scientific practices needed for the tangible

protection of human health and the environment, as well as a significant reduction

in the use of animals. Thank you for your consideration of our request.

PREPARED STATEMENT OF THE SOCIETY FOR NEUROSCIENCE

Mr. Chairman and members of the Committee, I am Dr. Fred H. Gage, the president of the Society for Neuroscience and a professor at the Salk Institute for Biological Studies, a private, non-profit research organization located in La Jolla, California. I am here today to testify on behalf of the Society for Neuroscience, the largest scientific organization in the world dedicated to the study of the brain and nervous system. Neuroscience forms the fundamental basis of the medical specialties of

psychiatry, neurology, neurosurgery, and an important portion of many other medical specialties.

The Society for Neuroscience is comprised of more than 29,000 basic and clinical

researchers affiliated with universities, hospitals and scientific institutions throughout North America and in other countries. The Society’s primary goal is to promote

the exchange of information among researchers. We are also devoted to education

about the latest advances in brain research and the need to make neuroscience research a funding priority.

Mr. Chairman, the Society appreciates this opportunity to testify and to discuss

some of the important VA and NSF-sponsored research being conducted in the field

of neuroscience. We thank the members of this Subcommittee for their dedication

to biomedical research at the National Science Foundation (NSF) and the Veterans

Administration (VA).

The Society for Neuroscience requests increased research funding for the National

Science Foundation and for the Department of Veterans Affairs to facilitate the

progress of research already being conducted at these institutions.

National Science Foundation

As the Committee is aware, the President’s fiscal year 2003 budget request for

the National Science Foundation is $5.036 billion. This is an increase of $240 million, or 5 percent, over the fiscal year 2002 request. As our nation progresses, a

more solid foundation of science will be necessary to support growing technological

advances including those integral to conducting biomedical research. The Society for

Neuroscience endorses the Coalition for National Science Funding’s (CNSF) request

for an increase of $718 million, or 15 percent, above the fiscal year 2002 level. This

would bring the agency’s budget to $5.508 billion.

Interdisciplinary research funded by NSF complements research currently conducted by other federal agencies. The nature of interdisciplinary scientific research

has allowed investigators from each of the separate scientific disciplines to benefit

and expand upon research conducted by colleagues in other fields. NSF-supported

research embodies a collaborative enterprise and the results have provided immense

benefits in our search for treatments and cures to deadly diseases.
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NSF-supported neuroscience research has played a major role in improving our

understanding of neurological and mental disorders. NSF funds hundreds of studies

in the area of basic neuroscience, and these studies have contributed immensely to

our knowledge of the brain and central nervous system. The cross-disciplinary approach employed by NSF is particularly beneficial to research on the brain and central nervous system. New engineering advances, for example, have led to new and

more powerful imaging technologies, which have greatly aided researchers in their

study of the brain.

In the wake of the tragic events of September 11th, our nation has become more

aware of potential lapses in national security; such concerns affect our mental wellbeing. In addition to research conducted on bioterrorism, NSF can enhance support

for research on the psychological effects in the aftermath of terrorist attacks, anthrax threats and living with terrorism.

As the Committee is aware, nearly all NSF-appropriated funds are received

through competitively awarded grants, with only 5 percent going to salaries and expenses. NSF is unique in its ability to channel the majority of its funding to the

specific goal of acquiring knowledge and conducting research. To promote this worthy endeavor, the Society supports an increase in NSF grant size and duration. The

average 2000 NSF award was $93,000 and lasted for just under 3 years, whereas

the average 2000 NIH award was $283,000 and lasted for just over 4 years. By increasing the award duration, valuable time is spent conducting actual research rather than submitting proposals. Lapse time in research is reduced and a trained and

knowledgeable staff can be more easily retained. In addition, less NSF staff time

is dedicated to reviewing and approving research which has already been deemed

valuable.

We are pleased with the NSF request for $37 million to increase graduate student

stipends from $21,500 per year in fiscal year 2002 to $25,000 in fiscal year 2003.

We believe this is critical to ensuring that the best students continue with graduate

and postgraduate study in the scientific fields. The Society for Neuroscience supports continued funding for Nanoscale Science and Engineering. In its third year of

funding, this priority area holds great promise of discovery for the future of neuroscience as well as other scientific endeavors.

Department of Veterans Affairs

As you know, the Veterans Administration (VA) is the nation’s largest direct provider of healthcare services and the nation’s most clinically focused setting for medical and prosthetics research. As a result of the VA’s ability to integrate clinical and

basic research application by research physicians, the nation’s medical research enterprise benefits our nation’s veterans with rapid transfer of new medical knowledge.

The President’s budget request for VA health research is $409 million. This recommendation includes a $23 million increase in actual research funding from the

fiscal year 2002 level of $371 million. The Society for Neuroscience supports the

Friends of VA (FOVA) and the Independent Budget for the Veteran’s Administration

request $460 million for the Medical and Prosthetic Research account for fiscal year

2003. This increase is necessary to offset the higher costs of administration resulting from inflation and wage increases.

In order to continue to provide our nation’s veterans with the best possible care,

the VA needs to attract highly qualified researchers and clinicians. The VA Research and Development program, one of the nation’s premier research endeavors,

was established to improve health care for veterans and focus research on injuries

and illnesses specifically relevant to veterans. In keeping with progress on other

medical research initiatives through the National Institutes of Health, the Society

believes research focused specifically on improving the health and quality of life for

our nation’s veterans is a worthwhile investment.

The VA has delineated several areas of research which are funding priorities for

fiscal year 2003. Included in this list is the Quality Enhancement Research Initiative (QUERI) program, a portion of which would be used to fund centers in dementia/Alzheimer’s and diseases of the brain, where the VA has indicated additional

studies are needed on the impact of different classes of psychiatric drugs on cognitive and behavioral function.

The Quality Enhancement Research Initiative (QUERI) was launched in 1998 by

the Office of Research and Development to create and implement a national system

to translate research discoveries, and innovations of known effective and efficient

diagnostic and treatment strategies into high-quality patient care and system-wide

improvements. QUERI is a multidisciplinary, data driven, outcomes-based quality

improvement program that promotes the use of evidence in the provision of outpatient, inpatient, and long term care.
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QUERI is based on a strategic framework that supports a comprehensive process

for translating research evidence into action. The QUERI process includes the following six steps:

—Identify high-risk/high volume diseases or problems

—Identify best practices

—Define existing practice patterns and outcomes across VA and current variation

from best practices

—Identify and implement interventions to promote best practices

—Document that best practices improve outcomes

—Document that outcomes are associated with improved health related quality of

life

Conclusion

Mr. Chairman, the National Science Foundation and the VA medical system serve

a critically important role by providing our nation’s researchers the opportunity to

learn more about the diseases and conditions that affect our quality of life. With

advanced research performed collaboratively with NSF or with the VA, all Americans stand to benefit. We would encourage the committee to include increased funding within NSF and VA research programs among the Subcommittee’s highest priorities. We thank you for your interest and consideration.

PREPARED STATEMENT OF THE UPPER MISSISSIPPI RIVER BASIN ASSOCIATION

The Upper Mississippi River Basin Association (UMRBA) is the organization created in 1981 by the Governors of Illinois, Iowa, Minnesota, Missouri, and Wisconsin

to serve as a forum for coordinating the five States’ river-related programs and policies and for collaborating with Federal agencies on regional water resource issues.

As such, the UMRBA has an interest in the budget for both the U.S. Environmental

Protection Agency (EPA) and the Federal Emergency Management Agency (FEMA).

ENVIRONMENTAL PROTECTION AGENCY

State Pollution Control Grants (Section 106)

Funding for Section 106 State Pollution Control Grants would decline by $12.1

million under the Administration’s fiscal year 2003 budget request. This cut would

translate into a loss of $1.482 million to State water quality programs in the five

Upper Mississippi River Basin States. The Federal Section 106 funds, in combination with the States’ matching dollars, support the core State water quality programs, including water quality assessment and monitoring, surface and ground

water standards, point source permitting, and training and public information. Adequate funds are particularly critical to supporting the States’ development and implementation of total maximum daily loads (TMDLs). The tasks associated with developing TMDLs for impaired waters include watershed characterization, computer

modeling and related analyses, allocation of permissible loads, development of

TMDL reports and plans, and public outreach and stakeholder development. These

responsibilities have the potential to overwhelm State agency resources that are in

many cases already strained. At a minimum, UMRBA supports maintaining Section

106 funding at the fiscal year 2002 level of $192.5 million. To the extent possible,

funding should be enhanced to $200 million.

Clean Water State Revolving Funds

The UMRBA is deeply concerned about the lack of support in the Administration’s

fiscal year 2003 budget proposal for the Clean Water State Revolving Fund

(CWSRF), which helps address wastewater infrastructure needs. The CWSRF has

made tremendous contributions to improving the nation’s water quality. In fiscal

year 2002, the five Upper Mississippi River Basin States received a total of $177

million in CWSRF funding. However, the CWSRF is proposed to be cut by 10.2 percent in fiscal year 2003, funding it at $1.212 billion, rather than at its authorized

historical level of $1.35 billion. Given the flexibility to redirect wastewater funds to

the Drinking Water State Revolving Fund (DWSRF), even less than $1.212 billion

might well be available for the wastewater SRFs. While the flexibility to shift

among these programs can help the States address their most pressing needs, it is

no substitute for adequate funding. Estimates of the nation’s wastewater infrastructure needs certainly vary, as evidenced in the Congressional deliberations on new

water infrastructure financing legislation (H.R. 3930 and S. 1961). However, there

is absolutely no doubt there are substantial unmet needs. The high demand for

these funds underscores the need to reauthorize CWSRF funding and increase annual Federal appropriations to $2 billion.
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State Nonpoint Source Grants (Section 319)

The Administration has requested $238.5 million for the Section 319 State

nonpoint source (NPS) grant program, a modest increase of $1 million above fiscal

year 2001 and 02 funding levels. Nonpoint sources are one of the major causes of

water pollution in the Upper Mississippi River Basin, which drains the nation’s agricultural heartland. Adequate funding for Section 319 and complementary efforts,

including the USDA’s conservation programs, is essential to meeting the region’s

major water quality challenges. While the UMRBA is pleased that the Administration is seeking a slight increase in Section 319 funding, it should be recognized that

continued progress in addressing nonpoint pollution will require significantly increased resources.

Watershed Initiative

The Administration has proposed $20 million in fiscal year 2003 for a new targeted Watershed Initiative. While the details of how the program will be implemented are not yet available, the intent is to provide grants to approximately 20

local watershed efforts on a competitive basis. Although UMRBA supports funding

for watershed planning and management, it should not come at the expense of wellestablished programs such as Section 106 and Section 319. Redirecting this funding

to existing State grant programs would also obviate the need to establish new bureaucratic mechanisms within EPA to administer this new grant program. The fiscal year 2003 budget identifies $1 million and 10 additional FTEs to simply administer the new program. These resources could be much more productively employed

in existing programs.

Environmental Monitoring and Assessment (EMAP)

EPA’s fiscal year 2003 budget includes $38.26 million for its Environmental Monitoring and Assessment Program (EMAP). Of this amount, $4.875 million is proposed

as a new initiative to extend the EMAP approach to large rivers in the Mississippi

River Basin (Central Basin). Initially, under such an initiative, the scientific principles developed by EMAP for regional scale assessment and monitoring will be applied to the Missouri and Upper Mississippi Rivers. These rivers are challenged by

long term loadings of nutrients, 2 sediments, and toxic chemicals, as well as extensive habitat alternatives. The Central Basin EMAP initiative is intended to fill the

scientific gaps (indicators, sampling design, and sampling methodology) that currently limit our ability to assess baseline conditions and measure the performance

of environmental protection activities. The resulting advancements in monitoring

technology and approaches could be potentially useful in guiding the development

of TMDLs on major rivers such as the Missouri and Mississippi Rivers. UMRBA

thus supports proposed funding of $4.875 million for the Central Basin EMAP.

Hypoxia Action Plan

The UMRBA is disappointed that the Administration’s fiscal year 2003 budget

proposal does not include additional new resources to address the recommendations

in the Hypoxia Action Plan, submitted by the Mississippi River/Gulf of Mexico Watershed Nutrient Task Force in January 2001. The States in the Upper Mississippi

River Basin have consistently said that reductions in nutrient inputs to the Gulf of

Mexico and monitoring to evaluate the effectiveness of these efforts will only be possible if significant new budgetary resources are provided by the Federal Government. While the States continue to support the goals and strategies set forth in the

Action Plan, little progress will be made to reduce the Gulf hypoxic zone and improve water quality conditions throughout the basin without a major Federal financial commitment.

FEDERAL EMERGENCY MANAGEMENT AGENCY

Mitigation—Of particular interest to UMRBA is funding for mitigation of future

flood hazards. Mitigation, which is the on-going effort to reduce or eliminate the impact of disasters like floods, can include measures such as relocating homes or community facilities off the floodplain, elevating structures, and practicing sound land

use planning. Mitigation planning and implementation measures are essential to reducing the nation’s future disaster assistance costs. Given the importance of mitigation, UMRBA supports the new Pre-Disaster Mitigation grant program proposed by

FEMA and funded at $300 million in the President’s proposed fiscal year 2003 budget. Such a program would significantly enhance communities’ ability to prevent future damages, particularly in areas that have not experienced a major disaster and

thus have not had access to postdisaster mitigation assistance through the Disaster

Relief Fund. In addition, pre-disaster mitigation assistance is an effective means of
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meeting the on-going need in—all communities to plan for future floods and reduce

their vulnerability before the next flood disaster.

Unfortunately, the Administration’s proposal for a new Pre-Disaster Mitigation

Program is based on the premise that the existing post-disaster Hazard Mitigation

Grant Program (HMGP) will be eliminated. The HMGP has been a particularly popular and enormously helpful program. Authorized under Section 404 of the Stafford

Act, the HMGP provides grants to States and local governments to implement longterm hazard mitigation measures after a major disaster declaration. Because grant

funds are made available during the immediate recovery from a disaster, it offers

a particularly attractive option for communities that may not otherwise consider

mitigation. It is critical to maintain this post-disaster option, in addition to creating

a new pre-disaster mitigation option. Local communities need both. In addition, by

retaining the HMGP, mitigation assistance specifically for flood damages would continue to be available to communities that experience disastrous flooding. In contrast,

flood mitigation projects under FEMA’s new pre-disaster program will need to compete for funding with mitigation projects for a wide variety of other potential disasters, thus diminishing the likelihood that flood mitigation needs will be met.

Therefore, UMRBA supports funding of $300 million for a new Pre-Disaster Mitigation Program and urges Congress to reject the Administration’s proposal to eliminate the postdisaster HMGP.

Flood Map Modernization—UMRBA enthusiastically supports the Administration’s proposal to provide $300 million to modernize and digitize flood maps. Among

other things, flood maps are used to determine risk-based NFIP premium rates and

develop disaster response plans for Federal, State, and local emergency management personnel. However, most flood maps are over 15 years old and axe rapidly

becoming obsolete. Many flood maps are outdated by the effects of land use changes

in the watersheds. When out-dated maps underestimate flood depths, it can often

lead to floodplain development in high risk areas. It is therefore important that

flood maps be updated on an ongoing basis and in a timely way.

The Corps of Engineers is currently conducting a Flow Frequency Study that will

update the discharge frequency relationships and water surface profiles of approximately 2,000 river miles of the Upper Mississippi, Lower Missouri, and Illinois Rivers. This data will have a variety of uses, including updating Flood Insurance Rate

Maps (FIRMs) used by hundreds of flood prone communities along these rivers. The

Corps and FEMA have estimated that 4,237 map panels in the 130 counties along

these rivers will need to be revised at a cost of approximately $30 million. Using

data from the Corps study will be a far more cost-effective way to update FIRMs

than having FEMA independently study flood hazards and update the maps.

UMRBA therefore urges Congress to designate funding specifically for the Upper

Mississippi flood mapping project and direct FEMA and the Corps to coordinate

their efforts to advance FIRM updates.

PREPARED STATEMENT OF THE UNIVERSITY CORPORATION FOR ATMOSPHERIC

RESEARCH

On behalf of the University Corporation for Atmospheric Research (UCAR) and

the university community involved in weather and climate research and related

education, training and support activities, I submit this written testimony for the

record of the U.S. Senate Committee on Appropriations, Subcommittee on VA, HUD

and Independent Agencies for the fiscal year 2003 budget.

UNIVERSITY CORPORATION FOR ATMOSPHERIC RESEARCH

UCAR is a consortium of 66 universities that manages and operates the National

Center for Atmospheric Research (NCAR) and additional research, education, training, and research applications programs in the atmospheric and related sciences.

The UCAR mission is to support, enhance, and extend the research and education

capabilities of the university community, nationally and internationally; to understand the behavior of the atmosphere and related systems and the global environment; and to foster the transfer of knowledge and technology for the betterment of

life on earth. In addition to its member universities, UCAR has formal relationships

with approximately 100 additional undergraduate and graduate schools including

several historically black and minority-serving institutions, and 40 international

universities and laboratories. UCAR is supported by the National Science Foundation (NSF) and other federal agencies including the National Aeronautics and Space

Administration (NASA).
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INTRODUCTION

Recent events that have shaken our nation’s physical and economic well-being,

point unequivocally to the fact that we must depend now, more than at any time

in the country’s history, on investments in science and technology. In his remarks

at his confirmation hearing, Dr. John Marburger, the President’s Science Advisor,

stated that, ‘‘More than any other nation, we have used science and technology wisely to create peace, advance democracy, and provide for the well-being of our citizens

Economists tell us that fully half of our economic growth in the last half-century

has come from technological innovation and the science that supported it. . . The

Federal role is crucial If we sustain our investments in basic research, we can ensure that the United States remains at the forefront of scientific capability, thereby

enhancing our ability to shape and improve the world’s future.’’ The science agencies

funded by the VA, HUD and Independent Agencies budget have an enormous role

to play in shaping that future. I would like to comment on the budget requests for

two of those agencies, NSF and NASA.

NATIONAL SCIENCE FOUNDATION (NSF)

The President’s fiscal year 2003 Budget Request of $5.02 billion for NSF, a 4.9 percent increase from fiscal year 2002, includes $76.0 million in transfers from other

agencies. Subtracting those transfers, the real increase for NSF is $155.0 million,

or 3.4 percent over fiscal year 2002. When inflation is taken into consideration, this

is essentially a flat budget. Yet the President’s NSF Budget Request states that the

established priorities, ‘‘take into account both growing needs and expanding opportunities for high-impact investments to strengthen world leadership in science, engineering and technology. They aim to keep the nation’s science and engineering enterprise healthy, dynamic and relevant.’’ Last year, 54 U.S. Senators signed a ‘‘Dear

Colleague’’ letter to the Senate leadership supporting doubling the NSF budget over

5 years. If that formula is followed, then addressing the priorities that have been

established by the Administration could be within reach. If the numbers in the

Budget Request prevail, then we will fail to address those priorities, as critical as

they are to the current and future health and security of our nation. The productivity of the U.S. science and engineering enterprise, and to some extent, the technology used for national security applications, depend on NSF support of fundamental research. I agree with the call from the American Association of Universities

(AAU) and the Coalition for National Science Funding (CNSF) to appropriate for the

agency a 15 percent increase thereby continuing the momentum of the NSF doubling effort begun in fiscal year 2001 and continued at a more constrained level in

fiscal year 2002. However, I also understand that these are extraordinary times

with extraordinary fiscal pressures. Therefore, I ask the Committee to continue in

fiscal year 2003, to the extent possible, the effort to double the NSF budget by supporting at least a 10.0 percent increase for a total budget of at least $5.34 billion.

(This figure includes the proposed transfers in addition to a real 10.0 percent increase over fiscal year 2002.)

This is an increase that the science community has the capacity to use immediately and well. A 10 percent increase can be productive in terms of the NSF grant

size and duration. The average grant size has been falling in constant dollars over

many years. According to the CNSF, ‘‘The average NSF grant in the year 2000 was

for $93,000 and lasted for just under 3 years. By comparison, the average NIH grant

in 2000 was for $283,000, and lasted for just over 4 years. Increasing the size and

time period of grants will enable researchers to concentrate on discovery rather than

paperwork.’’ Each year, NSF receives approximately 30,000 proposals and has the

resources to fund only one third of them. Nearly $2.0 billion worth of proposals

rated very good to excellent through the merit review process go unfunded. Recent

national competitions have produced success rates as low as 7.0 percent, not because

of a paucity of excellent proposals, but because of lack of adequate funding. These

low proposal success rates reflect a capacity for progress in this country that is not

being realized.

Within the NSF, I would like to comment on the following specific initiatives and

programs that are of great importance to the country’s global scientific leadership

and to the advancement of the atmospheric and related sciences:

Research and Related Activities (R&RA)

When the transfers mentioned above are subtracted from the fiscal year 2003

budget request for NSF’s R&RA, the heart of this nation’s non-medical basic research budget, the numbers are increased by only 3.0 percent over fiscal year 2002

levels. This amount, barely enough to cover inflation, is then reflected in the budgets of most of the NSF Research Directorates. The peer-reviewed work supported
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by these directorates represents a major portion of the nation’s scientific research

achievement and technological advancement. I urge the Committee to allocate for

Research and Related Activities an amount that reflects an overall increase of at

least 10.0 percent for NSF as requested above.

Geosciences (GEO) Directorate.—The Budget Request for RRA’s GEO Directorate

shows a 13.0 percent increase over fiscal year 2002. When the proposed external

agency transfers, all of which affect the GEO budget, are removed from the request,

the apparent real increase for GEO is $4.0 million, or 0.65 percent much less than

inflation. However, when fiscal year 2003 mandated programs (these include the

proposed transfers and the Climate Change Research Initiative detailed below) are

subtracted from the GEO total, the Directorate’s funding is actually down by $22.0

million from the fiscal year 2002 Current Plan total. This represents a significant

decrease for core research that is of direct importance to the physical safety of our

citizens, our economic health, and global issues of national security relevance, such

as climate change and the environmental health of the planet.

The GEO Directorate is this country’s principal source of funding for universitybased research in the atmospheric, earth and ocean sciences. As the Budget Request

states, ‘‘GEO plays a critical role in addressing the nation’s need to understand, predict and respond to environmental events and changes and to use the Earth’s resources wisely.’’ Through involvement in such interagency programs as the U.S.

Weather Research Program (USWRP), the National Space Weather Program

(NSWP), and the U.S. Global Change Research Program (USGCRP), GEO core research advances our ability to predict natural phenomena of economic and human

significance such as severe storms, solar variability, and climate patterns and

change that affect food production, potable water supplies, human migration, the

survival of plant and animal species, and the security of coastal zones. The fiscal

year 2003 Budget Request lists GEO involvement in a new program of the Administration, the Climate Change Research Initiative (CCRI—see below for more detail),

at a total of $10.0 million. While the CCRI activities listed are of importance to climate research, there appears to be no new money in the request to cover this worthy, proposed work. The CCRI mandated research is therefore part of the $22.0 million total in Administration-requested programs that will negatively affect the funds

available for the core GEO program. Both the Federal government and the private sector estimate that over $2.0 tril- lion of the $10.0 trillion U.S. gross national product is affected annually by weather

and climate. Given the current struggles within our energy sector and within the

economy as a whole, this is an unfortunate time to decrease research efforts that

could help to anticipate weather and climate variability more effectively. I urge the

Committee to allocate for the GEO Directorate an amount that reflects an overall

real increase of at least 10.0 percent for NSF as requested above. I further urge the

Committee to take into consideration in final allocations, the impact of the proposed

agency transfers on GEO. If the language of the final bill allocates any increased

RRA funding to NSF scientific directorates in proportion to percentages in the original request, but fails to include the amount of the proposed transfers if they are

not accomplished, then the academic community funded by the GEO Directorate will

be at a great disadvantage since its requested real increase is the lowest of all the

NSF directorates.

Atmospheric Sciences (ATM).—Within the GEO Directorate, the Division of Atmospheric Sciences supports research that contributes new understanding of the behavior of the Earth’s atmosphere and its interactions with the sun. The fiscal year

2002 Current Plan total is $202.0 million. The Budget Request includes as ATM responsibilities two of the agency transfers. Once those are subtracted from the total

request, ATM must still reduce its base by $7.4 million from fiscal year 2002 Current Plan numbers in order to accommodate additional requested mandates such as

the new CCRI. Therefore, while it appears that ATM’s Atmospheric Sciences Research Support line receives an 11.3 percent increase (once $8.56 million in agency

transfers is subtracted), this amount is quickly eroded by the Administration’s CCRI

new initiative. ATM funds fuel a major percentage of the country’s university research in weather, climate, and the solar-terrestrial system. The ATM programs

highlighted in the fiscal year 2003 request include enhancing computer systems and

numerical models; continuing to evolve our understanding of the processes that control the atmospheric distribution of carbon, water, and other nutrients; and continuing to develop an upper atmospheric radar system to mitigate society’s vulnerability to space storms. I question whether these advances are possible in the face

of no real funding increase.

Also funded within ATM, the world-class National Center for Atmospheric Research (NCAR) supports the country’s entire atmospheric and related sciences community through observational and computer facilities, instrumented research air-
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craft, and an extensive visiting scientist program. In fiscal year 2002, more than

1,500 researchers and students will use the NCAR facilities and approximately 150

visiting scientists will stay for extended periods. NCAR has just been given excellent

marks in a rigorous peer review conducted by NSF with heavy involvement from

the university community. The center’s research spans areas that are of great significance to the safety of our citizens, the health of our economy, and the security

of our communications infrastructure, yet, apparently in order to accommodate the

Administration’s mandated programs, the President’s Budget Request for fiscal year

2003 decreases the NCAR budget by 3.9 percent based on Current Plan fiscal year

2002 amounts. This reduction, when combined with the effects of inflation, will significantly reduce the productive and highly valued programs of NCAR that support

the national, university-based atmospheric sciences community.

I urge the Committee to allocate for ATM an amount that reflects a real overall

increase of at least 10.0 percent for NSF as requested above, in order to enable the

agency to adequately fund the university community involved in atmospheric

sciences research and to provide a super-inflationary increase for the National Center for Atmospheric Research to preserve and enhance its highly valued, communitysupporting programs. I further urge the Committee to take into consideration in

final allocations, the effect of two proposed agency transfers on ATM. If the language of the final bill allocates any increased RRA funding to NSF scientific directorates and programs in proportion to percentages in the original request, but fails

to include the amount of the proposed transfers if they are not accomplished, then

the academic community funded by ATM, including NCAR, will be at a great disadvantage since its requested real increase is extremely low.

As a contribution within the GEO budget to the NSF Learning for the 21st Century overall NSF priority area, we appreciate the funding being allocated for innovative approaches to education including the continued development of the geosciences

community’s Digital Library for Earth Systems Science (DLESE). We would also

like to call your attention to the UCAR program, Significant Opportunities in Atmospheric Research and Science (SOARS), which is funded directly by ATM within

GEO. Recipient of a 2001 Presidential Award for Excellence in Science, Mathematics, and Engineering Mentoring, SOARS is having a positive impact on the number of ethnically diverse atmospheric sciences graduate students through its model

mentoring approach and research orientation, and is an excellent example of NSF’s

efforts to produce a diverse, internationally competitive workforce to meet the challenges of this new century.

Major Research Equipment and Facilities Construction (MREFC) Programs

The Tools section of the NSF Budget Request states that, ‘‘NSF provides support

for large, multi-user facilities which give researchers access to essential state-of-theart facilities. Support for these unique national facilities is necessary to advance

U.S. capabilities required for world-class research.’’ Yet NSF’s MREFC account, the

major NSF resource for non-medical research facilities in this country, is decreased

by 9.3 percent from the fiscal year 2002 actual level. I urge the Committee to examine the Major Research Equipment and Facilities Construction account cuts and to

add funding for programs that have been planned carefully, that have been partially

funded already, and that promise tremendous advances in this country’s research

capabilities.

Terascale Computing Systems.—The multi-agency terascale effort is a key component of this country’s strategy to gain leading edge access to computing capabilities.

For years, this country has lagged behind other developed nations in high-end computing, a situation that has adversely affected the atmospheric science community’s

ability to run the complex models necessary to understand and predict regional and

global climate change. Advances that accompany the completion of the terascale effort will return significant scientific advancements in all fields. I urge the Committee to support the President’s fiscal year 2003 request of $20.0 million for

Terascale Computing Systems that will enable U.S. researchers to gain access to

leading edge computing capabilities, and to support the budget request for NSF’s

Directorate for Computer and Information Science and Engineering (CISE) in its

oversight of the terascale project through the Advanced Computational Infrastructure Subactivity.

High-performance Instrumented Airborne Platform for Environmental Research

(HIAPER).—While we support the great advances in science and technology that all

MREFC-funded programs represent, we are disappointed as a community to see

that HIAPER is not included in the fiscal year 2003 Budget Request. Following approval of the program by the National Science Board, funding for this modern research aircraft was begun by Congress in fiscal year 2000 and continued in fiscal

year 2001 and fiscal year 2002, for a total of $55.97 million of the $81.5 million
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project total. We sincerely hope that funding is completed in fiscal year 2003 since

NSF has just retired one other research aircraft and all delays in instrumenting the

already procured Gulfstream airframe for HIAPER will result in higher completion

costs. We look forward to HIAPER’s vital contribution to our understanding of how

severe weather and other weather and climate phenomena develop and impact the

nation and the globe.

Earthscope.—This multi-purpose geophysical instrument array will allow scientists to make major advances in our knowledge and understanding of the structure and dynamics of the North American continent. The initial Earthscope activity,

deployment of high-capability seismometers throughout the United States, will improve our resolution of the subsurface structure and lead to advances in understanding fault conditions and the rupture processes of earthquakes. I applaud the

Administration’s inclusion of Earthscope in the fiscal year 2003 MREFC request and

urge the Committee to support this program.

Education and Human Resources (EHR)

Nothing is more important for the future of our nation than the education of next

generations of leaders, of a work force skilled in uses of technology, and of citizens

who can make informed decisions in our democratic society. I applaud the long overdue request for increased stipends (to $25,000 annually) to attract our best graduates for research and teaching fellowships and ask the Committee to make sure

that this stipend increase is included in the final budget bill.

I support also the Administration’s call to strengthen NSF’s ability to leverage institutional partnerships for the systemic improvement of math and science education. However, I ask the Committee to ensure that EHR existing programs are

complemented and strengthened, not compromised, by the expansion of the Math

and Science Partnership program. This EHR program receives an additional $40.0

million in this year’s request while all of EHR is increased by only $33.0 million,

an obvious and significant $7.0 million gap.

While the 3.8 percent requested overall increase for EHR may not seem adequate

to meet the country’s needs, it is my belief that the NSF science directorates and

the MREFC account are in far greater need of enhancements this year. Therefore,

I urge the Committee to support the President’s request of $908.0 million in fiscal

year 2002 for Education and Human Resources, a 3.8 percent increase over fiscal

year 2002.

National STEM Education Digital Library (NSDL).—The NSDL goal is to produce

a digital library of high-quality educational materials at all levels in science, technology, engineering and mathematics (STEM,) that enables the development of virtual learning communities. This research, teaching and learning resource is being

developed by a broad range of universities and UCAR in response to needs articulated by the academic community. NSDL presents a tremendous opportunity to improve access to superior instructional materials and advanced classroom technologies. The fiscal year 2003 NSDL request represents a cut of $960,000, or 2.0

percent below fiscal year 2002 levels. This decrease will cause a 10.0 percent reduction in collections supported. I urge the Committee to support the National STEM

Digital Library (NSDL) by appropriating at least the President’s fiscal year 2003 request of $23.6 million, and ask that the momentum to fund this important activity

be resumed at a higher level in fiscal year 2004.

U.S. Global Change Research Program (USGCRP)

The President’s request for USGCRP activities within NSF is $188.0 million for

fiscal year 2003. This amount has been absolutely flat since fiscal year 2000 and

therefore represents the continued erosion of NSF’s contribution to this interagency

program that addresses interactions among physical, biological, ecological, and

human systems at various scales. Working with national and international research

institutions, this program allows the atmospheric sciences community to improve

prediction capabilities for climate fluctuations between excessively wet and dry periods, and for long-term climate change. This research is a critical investment for the

future of this nation, its economy, and the health and safety of its citizens.

In fiscal year 2003, the Administration will institute the Climate Change Research Initiative (CCRI) as part of a new interagency effort. CCRI deliverables will

be targeted at information of strategic use to policy-makers, such as advanced understanding of the carbon cycle, improved ability to manage risk associated with climate change, more and better measurements of greenhouse gases, and improvements of climate models. It is critical, for both financial and scientific reasons, that

the CCRI build on the extensive knowledge already gained under USGCRP activities, and that Initiative and Program activities be coordinated and leveraged to the

greatest extent possible. Therefore, I urge the Committee to support the establish-
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ment of the Climate Change Research Initiative with new funding so that this initiative does not compromise existing core research programs, to enable to the fullest

extent possible CCRI enhancement of and collaboration with USGCRP research, and

to support the Initiative’s and the Program’s needed growth in years to come in

order to provide continuous knowledge and guidance that contributes to the nation’s

security and well-being.

NSF Priority Areas

Information Technology Research (ITR).—The ongoing ITR investment is enabling

the development of tools to strengthen all-pervasive information technology applications in science, commerce, education, and government. Advances include the creation of new integrative software for high-end computing, applications to provide security for cyberinfrastructure in the academic, government, and business communities; support for the creation of digital library collections; and the strengthening

of large-scale computer networks. The initiative promises innovations that will provide efficiencies in the way university researchers process and access data, communicate with collaborators, and share research results. Given the enormous Earth

systems and solar-terrestrial data sets that are critical to atmospheric sciences research, it is possible that the ITR computational effort could advance our field of

science through innovative processing, archiving, and networking methods which we

have not yet imagined. I urge the Committee to support the President’s fiscal year

2003 request of $285.8 million, a 3 percent increase, for Information Technology Research, to increase funding, if possible, for this initiative that has direct applications

to our national security and economic well-being, and to support the NSF in its role

as leader of this multi-agency initiative.

Mathematical Sciences.—Mathematics is a basic and indispensable tool for many

scientific fields including the atmospheric sciences; recent progress in climate

science in particular has been made possible by new mathematical and statistical

tools and applications. One of the great challenges to advancing climate change research, weather prediction, and the study of solar-terrestrial interactions is the incredible amount of data that must be captured, organized, and analyzed. I applaud

the Mathematical Sciences focus on investigating the challenges posed by large data

sets such as those generated by today’s sophisticated sensors and satellite observations systems. I urge the Committee to support the Administration’s scale-up efforts

in Mathematical Sciences by allocating the $6.0 million request, a 100.3 percent increase, for Mathematical Sciences.

Social, Behavioral and Economic (SBE) Sciences.—This new priority area seems

to take a creative approach toward achieving the goal of enabling this country to

take greater advantage of technology while anticipating and preparing for the very

real and significant accompanying challenges and consequences. As part of the Climate Change Research Initiative (CCRI) mentioned above, SBE priority area support is requested by the Administration for research on decision-making under uncertainty within the context of global change research. While much is known about

climate change and its potential societal impacts, much is left to be discovered and

much may remain unknowable given the great difficulties inherent in attempting

to reproduce the entire Earth system in computer models. If the $10.0 million requested for this priority area is new money to be added to the SBE Directorate, then

I urge the Committee to approve the request to establish the Social, Behavioral and

Economic Sciences priority area.

Learning for the 21st Century.—In order to remain a global leader in most scientific fields and competitive in all areas, and to maintain national security at the

highest possible level, this country must offer the opportunity for all of our citizens

to increase their understanding of science, mathematics, and technology and to meet

the challenges of the dramatic global transition to a technology-literate workforce.

The goals of this initiative in fiscal year 2003 are to establish national centers to

expand our understanding of the learning process and demonstrate effective workforce preparation strategies, and to explore the potential of information technology

to strengthen links between formal and informal education across all levels. I urge

the Committee to support the President’s fiscal year 2003 request of $184.7 million,

a 27.5 percent increase, for the Learning for the 21st Century initiative.

Biocomplexity in the Environment (BE).—This interdisciplinary initiative is rapidly advancing our ability to understand the complex systems that are structured

or influenced by living organisms and the interactions within biological systems and

physical processes. We are confident that BE efforts will lead eventually to better

understanding of human impacts on the environment and enhanced predictability

of environmental systems, including climate, that will assist environmental decision

makers and contribute to society’s ability to adapt to natural hazards. I urge the
706

Committee to support the President’s fiscal year 2003 request of $79.2 million, a

36.3 percent increase, for Biocomplexity in the Environment.

Nanoscale Science and Engineering.—Nanotechnology promises to revolutionize

our control of matter in areas such as information technology and to change the way

in which most products are made. We look forward to the manner in which it may

advance research in the field of the atmospheric sciences, particularly through possible major breakthroughs in the development of technology such as computers, radars, and satellites. I urge the Committee to support the President’s fiscal year 2003

request of $221.2 million, an 11.3 percent increase, for Nanoscale Science and Engineering.

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION (NASA)

NASA supports science, technology, and exploration that enables us to better understand the origin and evolution of the universe, better comprehend Earth’s climate and other environmental forces, study living and physical systems in the environment of space, and improve aviation safety and efficiency. The agency provides

crucial support for research and education by awarding, through the competitive selection of merit-reviewed proposals, approximately $1.0 billion annually to colleges

and universities across the country. The Administration’s fiscal year 2003 overall request for NASA is $15.1 billion,

a 1.4 percent increase over fiscal year 2002 estimates. (This includes pension expenses that NASA now may have to incur.) This request reflects less, in real dollars,

than the investment our country made in NASA’s science 10 years ago. While I understand that significant budgetary issues exist, and that the nation’s resources are

stretched during these extraordinary times, I believe that NASA’s current and potential contributions to the nation’s security and scientific knowledge are so great

that the agency should be given some budgetary flexibility and room for growth. I

urge the Committee to support NASA with a modest 5.0 percent increase, or a total

of $15.7 billion, for fiscal year 2003.

NASA’s Science, Aeronautics and Technology (SAT) appropriation provides funding for all of the research and development activities of NASA including the application of technologies critical to the economic, scientific, and technical competitiveness

of the nation. The Budget Request for SAT is $8.84 billion. This appears to be a

9.9 percent increase over fiscal year 2002, however approximately half of this

amount consists of operations transfers formerly budgeted under the Human Space

Flight account. Therefore, I urge the Committee to appropriate for the fiscal year

2003 Science, Aeronautics and Technology budget a real 5.0 percent increase, or a

total of $9.28 billion, an amount that reflects an overall increase of 5.0 percent for

NASA as requested above.

I would like to comment on the budgets of the following SAT programs that contribute to the health and well-being of the nation, in part through the achievements

of the atmospheric and related sciences community:

Earth Science Enterprise (ESE)

The goal of the Earth Science Enterprise is to understand Earth’s environmental

system and its response to natural- and human-induced changes, thus enabling improved prediction of climate, weather, and natural hazards as well as responsible

stewardship of the planet. NASA ESE missions play a pivotal role for the entire national environmental research community in providing critical data sets on key parameters that describe the Earth system and the human influences on that system.

In the past 3 years, Earth Science has successfully launched 11 missions and six

more are scheduled for launch this year. The fiscal year 2003 Budget Request proposes a total of $1.62 billion for Earth Science. This is a 0.17 percent increase over

fiscal year 2002 that does not even cover inflation and essentially mirrors increases

to this crucial NASA program in recent years. Therefore, I urge the Committee to

support the Earth Science Enterprise at $1.75 billion, a 5.0 percent increase, in fiscal year 2003 so that NASA may have the flexibility to enhance ESE programs that

are crucial to understanding our planet’s environmental system.

ESE contains several programs that are of great benefit to society, and are of particular importance to the atmospheric sciences community, including the following:

Earth Observing System (EOS).—As part of NASA’s contribution to the interagency U.S. Global Change Research Program (please see details below), the Earth

Observing System (EOS) satellites have been deployed to collect data on the major

interactions of the land, oceans, atmosphere, ice, and life that comprise the Earth

system in order to answer questions about how the Earth is changing and what the

consequences of those changes are for life. EOS data sets are used broadly by scientists and are crucial for research in a number of scientific fields. I urge the Committee to support the fiscal year 2003 request of $410.9 million, a 6.6 percent in-
707

crease over fiscal year 2002 levels, for the next phase of EOS programming that includes the following components: —EOS Data and Information System (EOSDIS).—EOSDIS is operating the EOS

satellites now in orbit and retrieving flight data and converting it into useful

scientific information. Development of EOSDIS is nearly complete with remaining activities timed to support the upcoming launches of EOS missions through

AURA in 2004, therefore the EOSDIS request is decreased appropriately from

that of past years. I urge the Committee to support the President’s request of

$74.3 million for EOSDIS in fiscal year 2003. —AURA (Mission of the EOS Common Spacecraft).—In the troposphere and lower

stratosphere (altitudes up to 20 km), the four instruments of the AURA mission

will measure ozone, aerosols, and several other key atmospheric constituents

that play an important role in atmospheric chemistry, air quality, and climate.

Scheduled to launch in January 2004, this mission will provide data to answer

such critical questions as whether the Earth’s ozone layer is recovering and

whether air quality is deteriorating around the globe. These are issues that affect environmental policies and international agreements. I urge the Committee

to support the fiscal year 2003 budget request of $85.3 million, a necessary 21.0

percent increase over fiscal year 2002 levels, for AURA instrument completion. —EOS Follow-On.—As the first cycle of EOS missions comes to a close, EOS Follow-On missions are being planned to continue to meet the scientific needs of

the NASA Earth science projects. This next generation of missions will provide

new technology and space systems to continue global climate change observations, extend the global land cover change data set, and create improved observations of atmospheric phenomena such as global precipitation, ocean wind vectors, and aerosol levels. Much of the fiscal year 2003 EOS Follow-On requested

increase is directed to the NPOESS Preparatory Project (NPP), which will fulfill

NASA’s commitment to obtain and make available a 15-year data record for

fundamental global climate change observations. I urge the Committee to support the Administration’s fiscal year 2003 request of $238.5 million, a 117 percent increase, for EOS Follow-On programs.

Space Science Enterprise

The extraordinary mission of the Space Science Enterprise to chart the evolution

of the universe and understand its galaxies, stars, planetary bodies, and life; to discover planets around other stars; and to understand the behavior of the sun and

its interaction with Earth, is of great interest to the public as well as the academic

community. These challenges form the basis of the country’s space science program

over the next several decades. While Space Science appears to receive a 19.1 percent

increase in the Budget Request, $200.0 million of the $547.0 million increase consists of the transfer from the Human Space Flight account of the operations for the

Deep Space Network and the Mission Services for Space Science missions. This

transfer results in no significant budgetary impacts. I urge the Committee to support the Administration’s fiscal year 2003 request for the Space Science Enterprise

of $3.4 billion, a 10.0 percent increase over fiscal year 2002 once transfers are subtracted.

Sun Earth Connections (SEC).—The SEC program within the Space Science Enterprise formulates missions to investigate the effects of solar phenomena on Earth

and on the space environment. Its overall goal is to understand the changing sun

and its effects on the Solar System, life, and society. I urge the Committee to support the Administration’s request for growth within Sun Earth Connections by appropriating the request of $117.8 million, a 107.0 percent increase over fiscal year

2002 levels.

SEC contains several missions within its Solar Terrestrial Probes program that

promise great benefit to society, and are of particular importance to our community,

including the following:

—Thermosphere, Ionosphere, Mesosphere Energetics and Dynamics (TIMED), the

first science mission of Solar Terrestrial Probes within SEC, was successfully

launched last December. Data are being now collected for the first time on the

composition of the Mesosphere and Lower Thermosphere/Ionosphere (MLTI) region of the Earth’s atmosphere, the layer that is the fragile gateway between

the Earth’s environment and space. Through data analysis, TIMED will investigate the influences of the sun and humans on this region of the atmosphere

(60–180 km altitude) in order to understand MLTI variability and the potential

impact of these changes on satellite tracking, spacecraft lifetimes, degradation

of spacecraft materials, and re-entry of piloted vehicles. I urge the Committee

to support the fiscal year 2003 request of $3.1 million for continued TIMED operations as well as the $6.9 million request for TIMED mission data analysis.
708

—Solar-B, scheduled to launch in 2005, is a U.S./Japan collaboration to investigate the interaction between the Sun’s magnetic field and its corona. The mission will provide space weather data to help understand events such as solar

mass ejections that can endanger astronauts in orbit and impact Earth’s atmosphere with enough force to cause expensive communications disruptions. Much

of the instrument development phase of this mission is complete, therefore the

fiscal year 2003 request shows a decline from fiscal year 2002. The amount requested may be adequate for the current program phase, but reviews are underway now to determine if the delay of another program (the Astro-E Mechanical

Thermal Model) has adversely affected Solar-B. Given information available

now, however, I urge the Committee to support the fiscal year 2003 request for

$16.2 million for the continued NASA development of the Solar B mission’s instrument subsystems.

Focused Technology Programs.—The Office of Space Science Technology Program

has as its goal the development of new technologies to enable innovative and less

expensive research and flight missions. The Focused Programs component enables

the most effective alignment of technology development programs with future missions in order to ensure that proposed mission studies are realistic and can be implemented. Solar Probe, a mission that has the potential to unlock some of the mysteries of the energetic solar coronal material, is an example of the important future

programs being evaluated by the Focused Technology Program. I am concerned that

funding for the Office of Science Focused Technology Program is essentially flat and

I urge the Committee to provide better support for this crucial, mission-oriented

function.

Office of Aerospace Technology

Aviation Safety Program Weather Safety Technologies.—While the rate of commercial aviation accidents is very low worldwide, recent dramatic increases in air traffic

(with the exception of the months following September 11) have resulted in an increase in the number of accidents. If the recent rate of increase were to stay constant over the next 15 years, the result will be an average of 50 catastrophic accidents per year—almost one per week. According to the National Transportation

Safety Board, approximately 30 percent of all aviation accidents, and 37 percent of

the fatal accidents, are weather related.

The goal of NASA’s Aviation Safety Program (AvSP), within the Office of Aerospace Technology, is to develop and demonstrate technologies that contribute to a

reduction in the aviation fatal accident rate by a factor of five (compared to the 1994

1996 average) by the year 2007 and by a factor of ten by the year 2022. The Aviation Safety Program encompasses three areas, one of which is Weather Safety Technologies. In partnership with the FAA, the Department of Defense and the aviation

industry, this program develops and supports the implementation of technologies to

reduce fatal aviation accidents and delays caused by weather hazards. I urge the

Committee to uphold the goal of reduced aviation accidents and fatalities by supporting the fiscal year 2003 request for the Weather Safety Technologies program

of $20.9 million, a 17.0 percent increase over fiscal year 2002 levels.

U.S. Global Change Research Program (USGCRP)

NASA is a major contributor to the interagency USGCRP. NASA research efforts

in global change involve space-based, satellite studies of the Earth as an integrated

system with remotely-sensed observations carried out as part of additional flight

missions. With USGCRP efforts concentrated within the Earth Science Enterprise,

NASA studies are expected to yield improved weather forecasts, tools for managing

agriculture and forests, information for fishermen and local planners, and eventually, the ability to predict how the climate will change. This research is a critical

investment for the future of this nation, its economy, and the health and safety of

its citizens. I urge the Committee to support the President’s request of $1.09 billion,

a 2.0 percent increase over fiscal year 2002 levels, for NASA U.S. Global Change

Research Program activities.

As stated above in the testimony presented for the NSF budget, the Administration will institute in fiscal year 2003 the Climate Change Research Initiative (CCRI)

as part of a new interagency effort. The President’s fiscal year 2003 request for

CCRI activities within NASA is $3.0 million. As stated in the NSF testimony, it is

critical for both financial and scientific reasons, that the CCRI build on the extensive knowledge already gained under USGCRP activities, and that Initiative and

Program activities be coordinated and leveraged to the greatest extent possible.

Therefore, I urge the Committee to support the establishment of the Climate

Change Research Initiative with new funding, to enable to the fullest extent possible CCRI enhancement of and collaboration with USGCRP research, and to sup-
709

port the Initiative’s and the Program’s needed growth in years to come in order to

provide continuous knowledge and guidance that contributes to the nation’s security

and well-being.

NASA Education Programs

Since the creation of NASA through the Space Act of 1958, the agency has made

a substantial commitment to education at all levels. Because of NASA’s inspiring

mission, the agency’s work is of great interest to people of all ages. NASA is in a

unique position to recruit the education community to help leverage the agency’s scientific achievements, to interest students and citizens in the scientific enterprise,

and to motivate many to pursue scientific study and careers. NASA’s comprehensive

portfolio of education programs includes teacher/faculty preparation and enhancement, student support, educational technology, support of systemic improvement,

curriculum support and dissemination, and research and development. I urge the

Committee to support NASA’s continuing contributions to this country’s broad education interests by appropriating the education programs imbedded throughout the

strategic enterprises and offices delineated in NASA’s fiscal year 2003 Budget Request.

CONCLUSION

I ask that the Committee continue the commitment made last year to invest

steadily in our country’s future. During this extraordinary time in our history, we

must continue to support science in order to reap the benefits that accrue from the

best research the world has to offer. History has shown that these investments will

pay tremendous dividends to the country in lives saved, technologies developed, the

economic health of the nation expanded, national security enhanced, and American

leadership sustained throughout the world.

On behalf of the UCAR community, I want to thank the Committee for the important work you do for U.S. scientific research, education, and training. We appreciate

your attention to the recommendations of our community concerning the fiscal year

2003 budget of the National Science Foundation and the National Aeronautics and

Space Administration.

(i)

LIST OF WITNESSES, COMMUNICATIONS, AND

PREPARED STATEMENTS

Page

Aerospace:

Engineering Division, prepared statement ..................................................... 629

Industries Association, prepared statement ................................................... 629

Alachua County, Florida, prepared statement ...................................................... 575

Allbaugh, Joe M., Director, Federal Emergency Management Agency ............... 481

Prepared statement .......................................................................................... 487

Alliance to Save Energy, prepared statement ....................................................... 578

American:

Association of Engineering Societies, prepared statement ........................... 629

Astronomical Society, prepared statement ..................................................... 582

Geological Institute, prepared statement ....................................................... 589

Helicopter Society, prepared statement .......................................................... 629

Indian Higher Education Consortium, prepared statement ......................... 592

Institute of Aeronautics and Astronautics, prepared statement .................. 629

Lung Association, prepared statement ........................................................... 617

Psychological:

Association, prepared statement .............................................................. 598

Society, prepared statement ..................................................................... 620

Rivers, prepared statement ............................................................................. 604

Society of:

Civil Engineers, prepared statement ....................................................... 629

Mechanical Engineers, prepared statements...................................... 609, 629

Thoracic Society, prepared statement ............................................................. 617

Water Works Association, prepared statement .............................................. 606

Asrar, Dr. Ghassem, Associate Administrator for Earth Science, National

Aeronautics and Space Administration .............................................................. 409

Association of:

American Universities, prepared statement, ................................................. 624

Minority Health Professions Schools, prepared statement ........................... 628

Aviation Research and Technology, prepared statement ..................................... 633

Ayres, Judith, Assistant Administrator, Office of International Activities, Environmental Protection Agency ........................................................................... 177

Babyland Family Services, Inc., prepared statement ........................................... 634

Barile, Vincent, Deputy Under Secretary for Management, NCA, Department

of Veterans Affairs ............................................................................................... 1

Boesz, Tina, Inspector General, National Science Foundation ............................ 533

Prepared statement .......................................................................................... 548

Bohmbach, James W., Chief Financial Officer, Veterans Benefits Administration, Department of Veterans Affairs ................................................................. 1

Bond, Senator Christopher S., U.S. Senator from Missouri:

Opening remarks .............................................................................................. 16

Opening statement ........................................................................................... 178

Prepared statements............................................................................. 28, 342, 413

Questions submitted by ............................................. 86, 149, 235, 389, 404, 516

Statements of............................................................ 112, 305, 340, 411, 482, 536

Bostock, Robert, Chief Senior Advisor to the Administrator, Environmental

Protection Agency ................................................................................................. 177

Brown, Tony T., Director, Community Development Financial Institutions

Fund, Department of the Treasury .................................................................... 354

Prepared statement .......................................................................................... 357

Bryson, Jeffrey, General Counsel, Neighborhood Reinvestment Corporation .... 337
Page

ii

California Industry and Government Central California Ozone Study (CCOS)

Coalition, prepared statement ............................................................................. 636

Cassidy, Sean G., General Deputy Assistant Secretary for Housing, Deputy

Federal Housing Commissioner, letter from ...................................................... 139

Catlett, D. Mark, Principal Deputy Assistant Secretary for Management,

Department of Veterans Affairs .......................................................................... 1

City of:

Gainesville, Florida, prepared statement ....................................................... 638

Miami Beach, Florida, prepared statement .................................................... 643

Newark, New Jersey, prepared statement ..................................................... 647

Clark, Eligah D., Chairman, Board of Veterans’ Appeals, Department of Veterans Affairs ......................................................................................................... 1

Coalition for Indian Housing and Development, prepared statement ................ 649

Cobb, Robert W., Inspector General, National Aeronautics and Space Administration ................................................................................................................. 409

College Partners, Inc., prepared statement ........................................................... 652

Colwell, Dr. Rita, Director, National Science Foundation .................................... 533

Prepared statement .......................................................................................... 547

Statement of ...................................................................................................... 545

Combs, Linda M., Chief Financial Officer, Environmental Protection Agency .. 177

Consortium of Social Science Associations (COSSA), prepared statement ......... 654

Cragin, Maureen P., Assistant Secretary for Public and Intergovernmental

Affairs, Department of Veterans Affairs ............................................................ 1

Craig, Senator Larry E., U.S. Senator from Idaho:

Prepared statements...................................................................................... 27, 416

Questions submitted by ...................................................................... 104, 171, 477

Statements of................................................................................................ 114, 415

DeWine, Senator Mike, U.S. Senator from Ohio:

Prepared statement .......................................................................................... 417

Statement of ...................................................................................................... 417

Dillon, Joseph L., Comptroller, Office of the Chief Financial Officer, Environmental Protection Agency .................................................................................... 178

Domenici, Senator Pete V., U.S. Senator from New Mexico:

Prepared statement .......................................................................................... 30

Questions submitted by .................................................... 100, 174, 298, 478, 526

Statement of ...................................................................................................... 180

Doris Day Animal League, prepared statement .................................................... 658

Duffy, Dennis, Principal Deputy Assistant Secretary for Policy and Planning,

Department of Veterans Affairs .......................................................................... 1

Egan, Nora E., Chief of Staff, Department of Veterans Affairs ........................... 1

Fabricant, Robert, General Counsel, Office of General Counsel, Environmental Protection Agency .................................................................................... 177

Federation of American Societies for Experimental Biology, prepared statement ...................................................................................................................... 660

Feussner, John R., M.D., Chief Research and Development Officer, Veterans

Health Administration, Department of Veterans Affairs ................................. 2

Fisher, Linda, Deputy Administrator, Environmental Protection Agency ......... 177

Fleet Reserve Association (FRA), prepared statement ......................................... 662

Friends of VA Medical Care and Health Research, prepared statement ............ 666

Gauss, John A., Assistant Secretary for Information and Technology, Department of Veterans Affairs ..................................................................................... 1

Gelb, Nanci E., Director, Annual Planning and Budget Division, Environmental Protection Agency .................................................................................... 178

General Aviation Manufacturers Association, prepared statement .................... 629

Gibson, Thomas, Associate Administrator, Office of Policy, Economics and

Innovation, Environmental Protection Agency .................................................. 178

Great Lakes Indian Fish & Wildlife Commission, prepared statement .............. 671

Griffin, Richard J., Inspector General, Department of Veterans Affairs ............ 2

Grumbles, Benjamin, Deputy Assistant Administrator, Office of Water, Environmental Protection Agency .............................................................................. 177

Grunsfeld, Dr. John, Astronaut, National Aeronautics and Space Administration ........................................................................................................................ 409

Harkin, Senator Tom, U.S. Senator from Iowa, questions submitted by ............ 93
Page

iii

Hazen, Susie, Deputy Assistant Administrator, Office of Prevention, Pesticides and Toxic Substances, Environmental Protection Agency .................... 177

Higgins, Robin, Under Secretary for Memorial Affairs, Department of Veterans Affairs ......................................................................................................... 1

Holmstead, Jeffrey, Assistant Administrator, Office of Air and Radiation,

Environmental Protection Agency ...................................................................... 177

Horinko, Marianne, Assistant Administrator, Office of Solid Waste and Emergency Response, Environmental Protection Agency .......................................... 177

Humane Society of the United States, prepared statement ................................. 674

Independent Budget, letter from ............................................................................ 13

Institute of Electrical and Electronics Engineers-U.S.A., prepared statement .. 629

Isakowitz, Steve, Comptroller, National Aeronautics and Space Administration ........................................................................................................................ 409

Johnson, Senator Tim, U.S. Senator from South Dakota:

Questions submitted by ................................................................................. 98, 403

Statement of ...................................................................................................... 540

Joslin Diabetes Center, prepared statement ......................................................... 676

Kelly, Margo, Deputy Executive Director, Neighborhood Reinvestment Corporation ................................................................................................................. 337

Klein, Art, Director of Budget Office, Veterans Health Administration, Department of Veterans Affairs .............................................................................. 2

Kohl, Senator Herb, U.S. Senator from Wisconsin:

Questions submitted by ................................................................................... 146

Statement of ...................................................................................................... 200

Krenik, Edward D., Associate Administrator, Office of Congressional and

Intergovernmental Relations, Environmental Protection Agency .................... 178

Lazar, Ellen, Executive Director, Neighborhood Reinvestment Corporation ..... 337

Prepared statement .......................................................................................... 346

Leahy, Senator Patrick J., U.S. Senator from Vermont, questions submitted

by ........................................................................................................................... 515

Lenkowsky, Leslie, Chief Executive Officer, Corporation for National and

Community Service .............................................................................................. 303

Prepared statement .......................................................................................... 309

Longest, Henry L., II, Acting Assistant Administrator, Office of Research

and Development, Environmental Protection Agency ....................................... 177

Lowrance, Sylvia K., Acting Assistant Administrator, Office of Enforcement

and Compliance Assurance, Environmental Protection Agency ....................... 177

Mansfield, Gordon, Assistant Secretary for Congressional and Legislative Affairs, Department of Veterans Affairs ................................................................ 2

Marburger, John H., III, Office of Science and Technology Policy, Executive

Office of the President:

Prepared statement .......................................................................................... 553

Statements of................................................................................................ 533, 551

Martinez, Hon. Mel, Secretary of Housing and Urban Development, Department of Housing and Urban Development ......................................................... 109

Prepared statement .......................................................................................... 119

Statement of ...................................................................................................... 115

Martyak, Joseph, Acting Associate Administrator, Office of Communications,

Education and Media Relations, Environmental Protection Agency ............... 178

McClain, Tim S., General Counsel, Department of Veterans Affairs .................. 1

McMichael, Guy H., III, Acting Under Secretary for Benefits, Department

of Veterans Affairs ............................................................................................... 1

Metropolitan Water District of Southern California, prepared statement ......... 678

Mikulski, Senator Barbara A., U.S. Senator from Maryland:

Opening statements ................................... 2, 109, 187, 303, 337, 409, 481, 533

Prepared statements...................................................................... 3, 111, 190, 339

Questions submitted by ............................................. 62, 136, 225, 379, 398, 452

Miller, Laura, Associate Under Secretary for Health, Veterans Health Administration, Department of Veterans Affairs ......................................................... 2

Murphy, Frances M., M.D., Acting Under Secretary for Health, Department

of Veterans Affairs ............................................................................................... 1

Murray, Senator Patty, U.S. Senator from Washington, questions submitted

by ........................................................................................................................... 300
Page

iv

NASA:

Aeronautics Support Team, prepared statement ........................................... 629

Alumni League, prepared statement .............................................................. 629

National:

Congress of American Indians, prepared statement ..................................... 595

Council for Science and the Environment, prepared statement ................... 680

Emergency Management Association, prepared statement .......................... 684

Nelson, Kimberly T., Assistant Administrator, Office of Environmental Information, Environmental Protection Agency ........................................................ 177

Norris, Jimmy, Chief Financial Officer, Veterans Health Administration, Department of Veterans Affairs .............................................................................. 2

O’Keefe, Sean, Administrator, National Aeronautics and Space Administration ........................................................................................................................ 409

Prepared statement .......................................................................................... 422

Statement of ...................................................................................................... 418

Ogden, John, Chief Consultant, Pharmacy Benefits Management Strategic

Health Group, Department of Veterans Affairs ................................................ 1

Opfer, George, Inspector General ........................................................................... 481

People for the Ethical Treatment of Animals (PETA), prepared statements .................................................................................................................... 3, 693

Principi, Hon. Anthony J., Secretary of Veterans Affairs, Department of Veterans Affairs ......................................................................................................... 1

Prepared statement .......................................................................................... 7

Statement of ...................................................................................................... 4

Reed, Rita A., Deputy Assistant Secretary for Budget, Department of Veterans Affairs ......................................................................................................... 2

Regas, Diane, Acting Assistant Administrator, Office of Water, Environmental

Protection Agency ................................................................................................. 177

Ryan, Michael W.S., Deputy Chief Financial Officer, Environmental Protection Agency ........................................................................................................... 177

Shelby, Senator Richard C., U.S. Senator from Alabama, statement of ............. 484

Snuggs, Clarence J., Deputy Executive Director/Treasurer, Neighborhood Reinvestment Corporation ....................................................................................... 337

Society for Neuroscience:

Prepared statement .......................................................................................... 696

Statement of ...................................................................................................... 417

Stevens, Senator Ted, U.S. Senator from Alaska:

Questions submitted by ................................................................................. 97, 478

Statement of ...................................................................................................... 414

Tinsley, Nikki, Inspector General, Environmental Protection Agency ............... 177

Tucker, Daniel, Director, Budget and Planning Service, National Cemetery

Administration, Department of Veterans Affairs .............................................. 1

University Corporation for Atmospheric Research, prepared statement ............ 700

Upper Mississippi River Basin Association, prepared statement ........................ 698

Washington, Dr. Warren, Chair, National Science Board, National Science

Foundation ............................................................................................................ 533

Prepared statement .......................................................................................... 543

Statement of ...................................................................................................... 541

Weiler, Dr. Edward J., Associate Administrator for Space Science, National

Aeronautics and Space Administration .............................................................. 409

Whitman, Christine Todd, Administrator, Environmental Protection Agency ... 177

Prepared statement .......................................................................................... 184

Winn, Morris X., Assistant Administrator, Office of Administration and Resources Management, Environmental Protection Agency ................................. 177
(v)

SUBJECT INDEX

CORPORATION FOR NATIONAL AND COMMUNITY SERVICE

Page

AmeriCorps, strengthening ..................................................................................... 311

Budget request, fiscal year 2003 ............................................................................ 311

Challenge grants ................................................................................................. 325, 331

Citizen Corps ....................................................................................................... 319, 328

Community service in rural areas .......................................................................... 332

Effective service-learning ........................................................................................ 314

Establishment of ECORPS ...................................................................................... 332

Evaluation ................................................................................................................ 315

Freedom Corps ......................................................................................................... 317

Homeland security ................................................................................................... 328

Literacy and technology .......................................................................................... 334

Management and administrative improvements .................................................. 315

National:

Programs ........................................................................................................... 323

Service trust fund ............................................................................................. 327

Service vs. National Guard .............................................................................. 329

Other budget requests ............................................................................................. 315

Part-time model for national service ...................................................................... 330

Principles for a Citizen Service Act of 2002 .......................................................... 310

Senior Corps ............................................................................................................. 318

Specifics of the President’s budget ......................................................................... 321

USA Freedom Corps ................................................................................................ 310

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Accelerated claims process ...................................................................................... 144

Additional committee questions ............................................................................. 136

Asset control area (ACA) partnership program ................................................ 139, 141

Budget highlights, fiscal year 2003 ........................................................................ 117

Chronic homelessness, elimination of .................................................................... 147

Community development:

Block grants.................................................................................................. 137, 174

Corporations ...................................................................................................... 134

Comparison of per unit amount of operating subsidy .......................................... 170

Confirmation of Inspector General ......................................................................... 125

Conventional home mortgages, default rate for .................................................... 169

Core HUD programs ................................................................................................ 121

D.C. SFPD fraud and abuse .................................................................................... 167

Departmental grants management system ........................................................... 146

Downpayment assistance program ......................................................................... 146

Elderly:

And disabled housing ....................................................................................... 145

Housing ............................................................................................................. 122

Emergency food and shelter program .................................................................... 156

Empowerment zones and enterprise communities ........................................... 139, 175

Equal opportunity and access to housing .............................................................. 172

Fair housing initiatives program ............................................................................ 174

FHA:

Default rate ....................................................................................................... 169

Multifamily premium reduction ...................................................................... 168

Single family property disposition program, report on implementation

of ..................................................................................................................... 140
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Home downpayment assistance initiative ............................................................. 146

Homeless assistance ................................................................................................ 155

Homelessness ........................................................................................................... 122

HOPE VI ..................................................................................................... 123, 144, 166

Housing counseling .................................................................................................. 145

Program ............................................................................................................. 171

HUD:

Assisted housing in foreclosure and in inventory .......................................... 159

Integrated Information Processing Service (HIIPS) ...................................... 168

Incremental vouchers .............................................................................................. 136

Interagency Council on the Homeless .................................................................... 133

Lack of affordable housing ...................................................................................... 167

Management infrastructure at public housing ...................................................... 129

Market-to-market .................................................................................................... 132

Opt-outs ............................................................................................................. 156

Savings .............................................................................................................. 156

Millennium Commission ......................................................................................... 128

MMI reserves ........................................................................................................... 169

Multifamily accelerated processing ........................................................................ 168

Native American housing block grants fund ......................................................... 166

Naturally occurring retirement communities ........................................................ 134

Office of Federal Housing Enterprise Oversight ................................................... 133

Opt-outs .................................................................................................................... 155

Predatory lending .................................................................................................... 134

Preservation of assisted units ................................................................................. 156

Project-based opt-outs ............................................................................................. 154

Public housing:

Authorities ........................................................................................................ 130

Capital funds .................................................................................................... 126

Reinvestment and financial reform ................................................................. 149

Puerto Rico:

Housing Authority ............................................................................................ 170

Public Housing Authority, per unit amount of operating subsidy for .......... 170

Report requirement ................................................................................................. 140

Results ...................................................................................................................... 142

Rural housing ........................................................................................................... 171

Shelter Plus Care ..................................................................................................... 138

Single family property disposition holding costs ................................................... 170

601 Program ............................................................................................................. 169

Specific implementation steps ................................................................................ 142

Staffing issues .......................................................................................................... 125

Status of implementation of:

Section 601 ........................................................................................................ 140

Section 602 ........................................................................................................ 141

Utilization of vouchers ............................................................................................ 131

DEPARTMENT OF THE TREASURY

COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS FUND

Aditional committee questions ................................................................................ 398

Aging ......................................................................................................................... 387

Board of directors .................................................................................................... 384

Capacity building ..................................................................................................... 382

CDC mergers ............................................................................................................ 397

CDFI fund programs ............................................................................................... 360

Certification of nonprofit organizations ................................................................. 384

Community development financial institutions fund activities: tracking rural

outcomes ............................................................................................................... 375

Elderly needs ............................................................................................................ 396

Federal programs, overlapping, .............................................................................. 393

George Knight Scholarship Program ..................................................................... 396

Land trusts ............................................................................................................... 397

Management and operations ................................................................................... 360

Monitoring awardees ............................................................................................... 406

Multifamily housing ................................................................................................ 389

Native American:

Assistance for .................................................................................................... 390
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Native American—Continued

CDFI technical assistance program............................................................ 404, 406

NeighborWorks: Affiliation of organizations .............................................................................. 382

Multifamily initiative ....................................................................................... 385

New markets tax credit program ........................................................................... 356

Overlapping Federal programs ............................................................................... 405

Oversight .................................................................................................................. 394

Performance:

For rural and reservation communities .......................................................... 404

Measures ........................................................................................................... 404

Of the CDFI fund: 2003 and beyond ............................................................... 358

Predatory lending .................................................................................................... 379

President’s fiscal year 2003 budget ........................................................................ 359

Resident involvement .............................................................................................. 397

Rural communities and the BEA program ............................................................ 403

Section 8 homeownership ........................................................................................ 391

Option ................................................................................................................ 388

DEPARTMENT OF VETERANS AFFAIRS

$400 million budget shortfall ................................................................................. 14, 62

$1,500 deductible proposal ....................................................................................... 5, 20

Alaska:

Housing Finance Corporation .......................................................................... 17

Medical services in ........................................................................................... 18

Veteran issues ................................................................................................... 17

Capital asset realignment for enhanced services (CARES) ................................... 9, 50

Funding for ....................................................................................................... 88

Next steps ......................................................................................................... 87

Study ................................................................................................................. 51

VISN 12 implementation ................................................................................. 87

Claims processing...................................................................................... 24, 32, 75, 91

Clinic funding process ............................................................................................. 24

Collections................................................................................................................ 72, 86

Construction funding ............................................................................................... 88

Discretionary funding needs ................................................................................... 25

Enterprise architecture ........................................................................................... 7

Federal bond rate, maximum ................................................................................. 18

Fort Howard ............................................................................................................. 77

Geriatrics .................................................................................................................. 84

Homeland security .................................................................................................. 84, 93

Homelessness ........................................................................................................... 90

Hot Springs surgical unit ....................................................................................... 19, 20

Independent budget, letter from the ...................................................................... 13

Intellectual property rights ..................................................................................... 93

Job training veterans .............................................................................................. 60

Kenosha, WI, clinic .................................................................................................. 23

Legislative mandates ............................................................................................... 52

Long term care ......................................................................................................... 76

Major:

And minor construction programs ................................................................... 9

Construction ...................................................................................................... 79

Management improvements .................................................................................... 11

Medical:

And prosthetic research ................................................................................... 9

Care ................................................................................................................... 7

Funding needs ........................................................................................... 16

Other funding options for ......................................................................... 21

Supplemental ............................................................................................. 19

Research ............................................................................................................ 85

Supply cost containment measures ................................................................. 55

Minor construction ................................................................................................... 80

National Cemetery Administration.......................................................................... 7, 11

New veterans employment grants program .......................................................... 11

Nursing shortage ..................................................................................................... 70

Pharmaceutical costs............................................................................................... 54, 55

Physician for Pocatello, ID clinic ............................................................................ 31
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Physicians pay and medical school affiliations ..................................................... 92

Prescription:

Benefit ............................................................................................................... 53

Drugs ................................................................................................................. 67

Priority 7:

Demographic profile ......................................................................................... 35

Household income of enrollees ........................................................................ 65

Veterans ............................................................................................................ 32

$1,500 deductible ...................................................................................... 15, 63

Demographic profile of.............................................................................. 33, 52

Income profile of ........................................................................................ 34

Procurement reform task force ............................................................................... 6

Recruitment and retention ...................................................................................... 58

VA–DOD cost-sharing ............................................................................................. 89

VA’s Medical Care Program .................................................................................... 4

Veterans:

Benefits Administration ................................................................................... 6

Department and DOD coordination ................................................................ 101

Employment:

Grants for .................................................................................................... 6, 59

Opportunities ............................................................................................. 61

Equitable resource allocation (‘‘VERA’’) .......................................................... 91

Veterans’ benefits .................................................................................................... 10

Waiting times ........................................................................................................... 73

Wartime veterans, average age of .......................................................................... 27

ENVIRONMENTAL PROTECTION AGENCY

Additional committee questions ............................................................................. 225

Agency’s response to incorrect data in TRI database ........................................... 271

Asbestos:

Broadening and changing the definition of .................................................... 302

Libby, Montana asbestos clean-up .................................................................. 301

Assistance to small business with compliance to TRI lead rule .......................... 274

Brownfields:

Increase in funding for fiscal year 2003 ......................................................... 234

Questions raised concerning effective use of funding .................................... 234

Carbon dioxide emissions: voluntary vs. mandatory regulation .......................... 211

Chesapeake Bay research program: recruitment .................................................. 203

Clean:

Air Act/New Source Review Enforcement Activity ........................................ 219

Water:

Funding ...................................................................................................... 194

Revolving loan program ............................................................................ 203

Clear skies initiative and new source review ........................................................ 210

Climate change Kyoto Accord ................................................................................. 289

Coeur d’Alene basin:

Final record of decision (ROD) ........................................................................ 300

National Academy of Science study of children’s health ............................... 198

Superfund site ................................................................................................... 197

Compliance assistance:

Activity plan ...................................................................................................... 238

Analysis of:

New regulatory requirements and compliance assistance tools in fiscal year 2003 .......................................................................................... 238

Prospective enforcement activities in fiscal year 2003 ........................... 239

Analysis in analytic blueprint for new regulations in fiscal year 2003 ....... 240

Cuts proposed by fiscal year 2003—President’s budget for compliance

assistance and centers key program ........................................................... 242

Documenting and measuring environmental improvements ........................ 239

Dollars and FTE for compliance assistance activities within and outside

of OECA ......................................................................................................... 241

Estimate of cost to develop compliance assistance tools ............................... 236

List of rules for developing compliance assistance tools ............................... 235

Ranking of top ten compliance assistance needs ........................................... 236

Resources for implementation and performance and assessments .............. 240

Status of total resources devoted to compliance assistance .......................... 240

Targeting compliance assistance to constituencies in fiscal year 2003 ........ 241
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Distinction between ‘‘having no knowledge’’ and ‘‘not reporting’’ under TRI

lead rule ................................................................................................................ 277

Enforcement:

Acceptance of multiple proposals from States for new enforcement grants 246

Appropriate balance, roles, and responsibilities between State and Federal enforcement agencies ............................................................................ 245

Civil enforcement activities to areas that pose the greatest risk to human

health or the environment in fiscal year 2003 ........................................... 244

Competitive grant program ............................................................................. 224

Determining impact on environment by enforcement FTE cuts from information from States ....................................................................................... 247

EPA’s Inherent conflict between desire to meet inspection and case output performance goals and strategies ......................................................... 244

Federal inspections to areas that pose greatest risk to human health

or the environment in fiscal year 2003 ....................................................... 243

FTE ceiling and on-board levels as of October 1, January 1, March

1, and July 1 for OECA ............................................................................... 242

FTE reduction ................................................................................................... 219

Geographic areas subject to decrease in Federal enforcement FTE realize

increase in State enforcement resources ..................................................... 246

Grant Programs ................................................................................................ 187

Impact of reduction of enforcement FTES and additional State enforcement resources on:

Enforcement output .................................................................................. 246

Environmental indicators ......................................................................... 246

Information obtained from States measuring outputs or outcomes from

usage of new enforcement grants ................................................................ 247

New enforcement grant program grants award to States and/or used

by EPA ........................................................................................................... 247

Of environmental laws:

Budget cuts affect on enforcing environmental laws .............................. 225

Budget proposal ......................................................................................... 225

Consequences of budget reduction on catching prosecuting polluters .. 226

GAO report on State enforcement weaknesses ....................................... 226

Monitoring States’ use of funds ................................................................ 227

New State grant enforcement program ................................................... 226

Special or new authority legislation ........................................................ 226

States’ use of funds for enforcement activities vs other activities ........ 227

Work with States with poor records ........................................................ 226

Process used to choose and employ the most effective regulatory tool ........ 245

Program ............................................................................................................. 218

State grant program ......................................................................................... 193

Verification and validation of actual accomplishments from enforcement

activities ......................................................................................................... 247

Environmental air quality:

Contribution to public health burden ............................................................. 298

Effect of air pollutants and contaminants ...................................................... 298

Incorporating national environmental respiratory center research strategy into agency’s assessment of public health burden and future regulatory strategies ............................................................................................ 299

National environmental respiratory center incorporated into agency’s

strategy for understanding effects of complex air pollutant mixtures ..... 300

Research to understand health effects ............................................................ 299

Environmental education:

Rationale for elimination of approximately $10M from K–12 ...................... 233

Transfer to National Science Foundation ....................................................... 202

Fox River cleanup project ....................................................................................... 200

Cost and public acceptance .............................................................................. 201

General awareness of reporting requirements among those required to report ........................................................................................................................ 273

Global and cross-border environmental risks ........................................................ 290

Grants:

Dollars of non-profit recipients of non-construction grant awards in last

three years ..................................................................................................... 248

Number of:

Bench reviews conducted of non-profit non-construction grantees

from fiscal year 2000 to fiscal year 2002—by region .......................... 249

FTEs and on-board personnel conducting on-site reviews of grantees

in fiscal year 2002 and fiscal year 2003 ............................................... 250
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Grants—Continued

Number of—Continued

Hours of paperwork burden imposed on businesses ............................... 250

Non-profit recipients of non-construction grant awards in last three

years ........................................................................................................ 248

On-site reviews conducted of non-profit non-construction grantees in

fiscal year 2000 to fiscal year 2002 by region ..................................... 249

OEI work with program offices to tailor new rules to impose less paperwork burden .................................................................................................. 251

Program offices review of current paperwork requirements to reduce burden on businesses in fiscal year 2002 ......................................................... 251

Top twenty non-profit grant recipients by:

Number of awards in fiscal year 2002 ..................................................... 248

Total amount of funds awarded in fiscal year 2002 ............................... 248

Guidelines for screening new rules for compliance assistance ........................ 237, 238

Homeland security ................................................................................................... 230

Anthrax decontamination:

Full reimbursement .................................................................................. 231

Spending .................................................................................................... 231

Development of outcome-based measures and specific spending plans ....... 230

Lessons learned from the anthrax decontamination at the Hart

Building ......................................................................................................... 231

Progress:

For improving homeland security ............................................................ 229

Made assuring clarity of roles and safety ............................................... 231

Status of funding for homeland security and activities undertaken ............ 228

Technologies and methodologies ...................................................................... 195

Homestake mines in South Dakota: indemnification ........................................... 207

Hydraulic fracturing:

Landowners ....................................................................................................... 284

Peer review:

Panel ........................................................................................................... 284

Process ........................................................................................................ 283

State oil and gas agencies ................................................................................ 284

Timetable .......................................................................................................... 283

Identification of business required to report under TRI lead rule ...................... 271

Inspector General draft report: pollution enforcement ......................................... 206

IRIS/residual risk rulemaking ................................................................................ 277

Lead:

Bio-availability of lead sulfides vs lead oxides ............................................... 285

Lead sulfide in galena form vs lead in oxide form affect on human

body ................................................................................................................ 285

Potential risk of different forms of lead to regulatory decisions .................. 286

MACT standard setting ...................................................................................... 279, 280

New source review............................................................................................... 206, 268

Agency relaxation of enforcement ................................................................... 213

NPDES permitting:

Level of resources devoted to reduce NPDES backlog from fiscal year

2002 and fiscal year 2003 request ............................................................... 261

Status of efforts to reduce Federal and State NPDES permits backlog ...... 252

Pesticides .................................................................................................................. 297

Pharmaceutical pollution of waterways ................................................................. 231

President’s directive for technical assistance to small business regarding TRI

lead rule ................................................................................................................ 273

Program specifics ..................................................................................................... 291

Reformulated gas price increase ............................................................................. 200

Reinvention:

Environmental benefits of regulatory flexibility vs. status quo regulatory

schemes .......................................................................................................... 263

Examples of directing program offices and OECA to reduce barriers,

transaction costs and approval time for reinvention projects ................... 262

Spreading the culture of reinvention by limiting its application ................. 262

Status of review of reinvention programs ...................................................... 261

Report says many major polluters operate without required permits ................ 208

Roles and responsibilities of EPA’S regional offices ............................................. 235

Analysis performed to determine size of regional offices .............................. 235

Workforce analysis and projections ................................................................. 234

Small and rural water systems vulnerabilities ..................................................... 196
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xi

Small business:

Concerns with data TRI data quality ............................................................. 271

Ensure program offices’ economic analysis of small business impacts do

not omit small business or industry sectors in fiscal year 2003 ............... 268

Examples of program offices tailoring analysis and regulatory proposals

to realities of given industrial sectors ......................................................... 263

Increase knowledge of:

Delivery of information about regulatory requirements in fiscal year

2003 ......................................................................................................... 266

Impact of regulatory requirements in fiscal year 2003 .......................... 263

Increase knowledge of impact of rulemaking in fiscal year 2003 ................. 264

Program offices considering rulemakings determining impact on potential

small business in fiscal year 2003 ............................................................... 266

TRI reporting .................................................................................................... 274

Without computers .................................................................................... 274

Unaware of reporting requirements ................................................................ 272

Spokane River hot spots .......................................................................................... 199

Standardizing data elements .................................................................................. 251

Star fellowship ......................................................................................................... 234

Citation .............................................................................................................. 233

Graduate students completing fellowships? ................................................... 233

Rationale for shift from EPA to NSF .............................................................. 233

The Star program? ........................................................................................... 233

States with poor records .......................................................................................... 226

Superfund cleanup:

Adequate funding in fiscal year 2003 for Washington State superfund

cleanups ......................................................................................................... 301

Adequate funds to continue superfund cleanups ........................................... 289

Pace of superfund cleanup ............................................................................... 288

Superfund tax: administration’s opposition to tax chemical and petroleum

industries .............................................................................................................. 301

Toxics release inventory (TRI) program and the TRI lead rule ........................... 269

TRI:

Assistance to small companies ........................................................................ 275

Burden of proof in an enforcement context .................................................... 277

How has the guidance document received by the small business community ................................................................................................................. 275

Knowledge in:

An enforcement context ............................................................................ 277

Context of TRI reporting .......................................................................... 276

Lead rule data quality ...................................................................................... 271

Small business:

And the 100-pound threshold ................................................................... 276

Reporting responsibility in the case of ‘‘no knowledge’’ ......................... 276

Unusual aspects of the TRI lead rule ............................................................. 275

U.S. Geological Survey: contaminents in water .................................................... 205

Wall Street Journal article:

Inspector General draft report ........................................................................ 208

Non-profit grants .............................................................................................. 207

Water infrastructure funding:

Prioritizing funding needs ............................................................................... 287

Reasonable level of funding to preserve existing infrastructure .................. 286

Infrastructure funding ..................................................................................... 227

Methods for detecting security violations ....................................................... 228

Watery security improvement ......................................................................... 227

EXECUTIVE OFFICE OF THE PRESIDENT

Federal:

Coordination of nano-technology ..................................................................... 568

R&D support ..................................................................................................... 559

Funding physical sciences ....................................................................................... 560

Homestake mine and neutrino research ................................................................ 567

Physical sciences support ........................................................................................ 569

FEDERAL EMERGENCY MANAGEMENT AGENCY

Additional committee questions ............................................................................. 515
Page

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Buyouts ..................................................................................................................... 517

Cerro Grande:

Assistance .......................................................................................................... 518

Audits ................................................................................................................ 507

Fire .................................................................................................................... 504

Chemical stockpile emergency preparedness program (CSEPP) ......................... 498

Citizen Corps .............................................................................................. 490, 496, 511

And volunteers .................................................................................................. 513

Delivery of assistance .............................................................................................. 495

Disaster assistance:

Criteria .............................................................................................................. 525

Relief fund ......................................................................................................... 492

Response & recovery ........................................................................................ 493

Emergency food and shelter program................................................................ 493, 522

FEMA:

Concern for ........................................................................................................ 515

Disaster relief fund ........................................................................................... 517

Role in CSEPP .................................................................................................. 500

Team .................................................................................................................. 487

Fire:

Act grants .......................................................................................................... 524

Fighter grants ................................................................................................... 513

Grant program .................................................................................................. 501

Management assistance ................................................................................... 510

First responder:

Grant process .................................................................................................... 506

Grant program .................................................................................................. 509

Initiative ............................................................................................................ 485

Training budgets .............................................................................................. 514

Fiscal year:

2001 independent auditor’s report .................................................................. 523

2003 request ...................................................................................................... 488

Flood:

Fund .................................................................................................................. 491

Insurance participation .................................................................................... 514

Insurance program ........................................................................................... 520

Map modernization ...................................................................................... 486, 519

Mapping ............................................................................................................. 511

Goals for assisting disaster victims ........................................................................ 517

Hazard mitigation grant program .......................................................................... 497

Independent auditor’s report, fiscal year 2001 ...................................................... 493

Inter-agency fire center ........................................................................................... 501

Interoperability and mutual aid ............................................................................. 503

La Plata, Maryland, disaster .................................................................................. 495

Legislation ................................................................................................................ 525

Missouri, tornado damage in .................................................................................. 498

National:

Flood insurance program ................................................................................. 492

Preparedness—Homeland security responsibilities ....................................... 488

New pre-disaster mitigation grant program .......................................................... 491

New York:

City 9/11 losses from terrorism ....................................................................... 519

Investigations .................................................................................................... 507

ODP transfer ............................................................................................................ 485

Office for Domestic Preparedness to FEMA, transfer of the ................................ 489

Pre-disaster mitigation ............................................................................................ 486

Prevention and consequence management ............................................................ 514

Prevention vs. homeland security .......................................................................... 523

Project impact .......................................................................................................... 500

QHMGP plans .......................................................................................................... 516

Supplemental:

Appropriation request ...................................................................................... 486

Request, fiscal year 2002 ................................................................................. 494

Training programs, merger of ................................................................................. 508

U.S. Fire Administration ........................................................................................ 490

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

Additional committee questions ............................................................................. 451
Page

xiii

Aeronautics:

Blueprint ........................................................................................................... 452

Industry, mergers in the .................................................................................. 466

Research ............................................................................................................ 464

Air Force/space launch initiative ............................................................................ 444

Beyond core complete configuration ....................................................................... 433

Civil service reform ................................................................................................. 444

Contract management/integrated financial management program ..................... 460

Core completion—crew size ..................................................................................... 431

Dreamtime ................................................................................................................ 472

Earth science:

Enterprise ......................................................................................................... 470

Missions ............................................................................................................. 450

Environmental community—nuclear power .......................................................... 438

Gilmore Creek tracking station .............................................................................. 478

Hubble:

Mission .............................................................................................................. 429

Space telescope ................................................................................................. 417

Images ........................................................................................................ 427

Human capital ......................................................................................................... 443

Integrated financial management program ........................................................... 442

International space station ..................................................................................... 454

Prioritizing research for the ............................................................................ 434

Management:

Effectiveness ..................................................................................................... 479

Reforms of the station ...................................................................................... 429

National security issues .......................................................................................... 445

Next generation:

Of space telescopes ........................................................................................... 449

Space telescope ................................................................................................. 464

Non-proliferation ...................................................................................................... 446

Nuclear propulsion .............................................................................................. 466, 478

Nuclear systems initiative.................................................................................. 435, 477

Program/Energy Department .......................................................................... 436

Orbital debris ........................................................................................................... 471

Orbiter major modifications .................................................................................... 468

Pluto mission ............................................................................................................ 447

Radiation exposure .................................................................................................. 469

Re-examining head centers ..................................................................................... 437

Reliability of the shuttle ......................................................................................... 439

Reusable launch vehicle .......................................................................................... 472

Russian commitments, status of ............................................................................. 467

Science research, prioritizing .................................................................................. 432

Scientists, attracting and retaining ....................................................................... 479

Shuttle privatization ............................................................................................... 440

Space launch initiative .............................................................................. 436, 452, 459

Nuclear propulsion program ............................................................................ 441

Reserves ............................................................................................................ 460

Space shuttle ............................................................................................................ 457

Safety/astronauts .............................................................................................. 465

Space station cost overruns .................................................................................... 430

Workforce issues ...................................................................................................... 462

NATIONAL SCIENCE FOUNDATION

Contact information ................................................................................................. 551

Core sciences ............................................................................................................ 558

Federal investment in science and engineering .................................................... 544

Fiscal year 2003:

Additional NSF funding in .............................................................................. 571

Funds, additional .............................................................................................. 562

Homestake mine and neutrino research ................................................................ 567

Large facilities:

Management plan ............................................................................................. 550

Prioritization ..................................................................................................... 571

Maize sequencing project ........................................................................................ 573

National:

Academy of Sciences ......................................................................................... 572
Page

xiv

National—Continued

Science Board activities on science and engineering education and workforce ................................................................................................................ 563

Workforce policies for science and engineering .............................................. 545

NSB:

Meetings ............................................................................................................ 572

Recommendations ............................................................................................. 563

Response to IG report ...................................................................................... 567

NSF:

IG report ............................................................................................................ 565

Response to ................................................................................................ 566

Proposed fiscal year 2003 budget increase ..................................................... 558

Transferred programs to .................................................................................. 557

Plant genome ........................................................................................................... 573

Post-award management ......................................................................................... 548

U.S.:

Government role in international science and engineering .......................... 544

Science and engineering infrastructure .......................................................... 545

Undergraduate and minority programs ................................................................. 561

Very large array (VLA) ........................................................................................... 569

Workforce planning ................................................................................................. 549

NEIGHBORHOOD REINVESTMENT CORPORATION

Additional committee questions ............................................................................. 379

Community development laboratory ...................................................................... 349

Solutions to a range of challenges .......................................................................... 351

Stewardship of Federal resources ...................................................................... 344, 347

NeighborWorks system ......................................................................................... 346

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