U.S. GOVERNMENT PRINTING OFFICE

37–344 CC WASHINGTON : 1997

THE NEED FOR REGULATORY REFORM

HEARINGS

BEFORE THE

SUBCOMMITTEE ON NATIONAL ECONOMIC GROWTH,

NATURAL RESOURCES, AND REGULATORY AFFAIRS

OF THE

COMMITTEE ON GOVERNMENT

REFORM AND OVERSIGHT

HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTH CONGRESS

FIRST SESSION

APRIL 17, 1995

Printed for the use of the Committee on Government Reform and Oversight

(
(II)

COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT

WILLIAM F. CLINGER, JR., Pennsylvania, Chairman

BENJAMIN A. GILMAN, New York

DAN BURTON, Indiana

CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut

STEVEN SCHIFF, New Mexico

ILEANA ROS-LEHTINEN, Florida

WILLIAM H. ZELIFF, JR., New Hampshire

JOHN M. MCHUGH, New York

STEPHEN HORN, California

JOHN L. MICA, Florida

PETER BLUTE, Massachusetts

THOMAS M. DAVIS, Virginia

DAVID M. MCINTOSH, Indiana

JON D. FOX, Pennsylvania

RANDY TATE, Washington

DICK CHRYSLER, Michigan

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

WILLIAM J. MARTINI, New Jersey

JOE SCARBOROUGH, Florida

JOHN B. SHADEGG, Arizona

MICHAEL PATRICK FLANAGAN, Illinois

CHARLES F. BASS, New Hampshire

STEVEN C. LATOURETTE, Ohio

MARSHALL ‘‘MARK’’ SANFORD, South

Carolina

ROBERT L. EHRLICH, JR., Maryland

CARDISS COLLINS, Illinois

HENRY A. WAXMAN, California

TOM LANTOS, California

ROBERT E. WISE, JR., West Virginia

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

JOHN M. SPRATT, JR., South Carolina

LOUISE MCINTOSH SLAUGHTER, New

York

PAUL E. KANJORSKI, Pennsylvania

GARY A. CONDIT, California

COLLIN C. PETERSON, Minnesota

KAREN L. THURMAN, Florida

CAROLYN B. MALONEY, New York

THOMAS M. BARRETT, Wisconsin

GENE TAYLOR, Mississippi

BARBARA-ROSE COLLINS, Michigan

ELEANOR HOLMES NORTON, District of

Columbia

JAMES P. MORAN, Virginia

GENE GREEN, Texas

CARRIE P. MEEK, Florida

FRANK MASCARA, Pennsylvania

CHAKA FATTAH, Pennsylvania

———

BERNARD SANDERS, Vermont

(Independent)

JAMES L. CLARKE, Staff Director

KEVIN SABO, General Counsel

JUDITH MCCOY, Chief Clerk

BUD MYERS, Minority Staff Director

SUBCOMMITTEE ON NATIONAL ECONOMIC GROWTH, NATURAL RESOURCES, AND

REGULATORY AFFAIRS

DAVID M. MCINTOSH, Indiana, Chairman

JON D. FOX, Pennsylvania

JOHN M. MCHUGH, New York

RANDY TATE, Washington

GIL GUTKNECHT, Minnesota

JOE SCARBOROUGH, Florida

JOHN B. SHADEGG, Arizona

ROBERT L. EHRLICH, JR., Maryland

COLLIN C. PETERSON, Minnesota

HENRY A. WAXMAN, California

JOHN M. SPRATT, JR., South Carolina

LOUISE MCINTOSH SLAUGHTER, New

York

PAUL E. KANJORSKI, Pennsylvania

GARY A. CONDIT, California

EX OFFICIO

WILLIAM F. CLINGER, JR., Pennsylvania CARDISS COLLINS, Illinois

MILDRED WEBBER, Staff Director

KAREN BARNES, Professional Staff Member

DAVID WHITE, Clerk

BRUCE GWINN, Minority Professional Staff
(III)

C O N T E N T S

Page

Hearing held on:

April 17, 1995, Indianapolis, IN ...................................................................... 1

April 17, 1995, Muncie, IN .............................................................................. 83

Statement of:

Anderson, Robert, plant manager, Delphi Interior and Lighting Systems .. 148

Applegate, Malcolm, president and general manager, Indianapolis Newspapers ............................................................................................................. 18

Baird, Warren, farmer ..................................................................................... 8

Bartlett, Gary, president, G.W. Bartlett Co ................................................... 132

Baumgartner, Jerry, president, Tri-County Bank and Trust ....................... 50

Black, Paul, EENC Poultry Association ......................................................... 71

Bowe, Jeff, president, Benham Press .............................................................. 22

Brand, Myles, president, Indiana University ................................................. 39

Brannum, George, MD, Pathologists Associated ........................................... 172

Brodhead, Robert, president, Ball Memorial Hospital .................................. 122

Brown, Richard, sales manager, Beckett Bronze ........................................... 139

Bryan, Mark, territory manager, National Federation of Independent

Business ......................................................................................................... 176

Conaway, Dan, Abate of Indiana PAC ............................................................ 169

Currier, James, MD, radiation oncologist ...................................................... 120

Devoe, Betty, executive director, Westminster Village ................................. 84

Dye, Bart, farmer ............................................................................................. 5

Fenney, Nancy, member, Indianapolis City Council ..................................... 70

Grunwald, John, president and CEO, Endeburg, IN .................................... 71

Harcourt, Jean Ann, president, Harcourt Outlines, Inc ................................ 14

Hyde, Chris ....................................................................................................... 174

Keach, John, Jr., president, Home Federal Savings Bank ........................... 43

Kemper, Alan, farmer ...................................................................................... 3

Kersey, Robert, president, Rochester Metal Products ................................... 143

Kleber, Katherine, Abate of Indiana PAC ...................................................... 167

Lunsford, Mike, realtor .................................................................................... 159

Miller, Thomas, vice president, commercial lending, American National

Bank ............................................................................................................... 101

Morgan, Willard ................................................................................................ 185

Probst, Edward, physician ............................................................................... 68

Quinter, Terri, Rose View Transit .................................................................. 166

Roach, Dr. Eugene, medical director, Anderson Center of St. John’s .......... 114

Robinson, Jeff, director of water quality, Indiana American Water Co ....... 56

Russell, Joe, farmer .......................................................................................... 92

Sargent, Bob, mayor ......................................................................................... 60

Sham, Michael, resident, Delaware County ................................................... 186

Sullivan, Richard, vice president and division manager, New Venture

Gear ................................................................................................................ 155

Townsend, Wayne, farmer ............................................................................... 97

Van Middlesworth, Gary, Van’s Restaurant Service, Richmond, IN ............ 177

Wheatley, John, Delta Faucet Co., Greensburg, IN ...................................... 177

Williams, Lowell, senior vice president, First Merchants Bank ................... 106

Letters, statements, etc., submitted for the record by:

Anderson, Robert, plant manager, Delphi Interior and Lighting Systems,

prepared statement of ................................................................................... 150

Bartlett, Gary, president, G.W. Bartlett Co, prepared statement of ............ 136

Baumgartner, Jerry, president, Tri-County Bank and Trust, prepared

statement of ................................................................................................... 52

Bowe, Jeff, president, Benham Press, prepared statement of ...................... 26
Page

IV

Letters, statements, etc., submitted for the record by—Continued

Brodhead, Robert, president, Ball Memorial Hospital, prepared statement

of ..................................................................................................................... 123

Brown, Richard, sales manager, Beckett Bronze, prepared statement of ... 141

Currier, James, MD, radiation oncologist, prepared statement of ............... 121

Devoe, Betty, executive director, Westminster Village, prepared statement of ........................................................................................................... 86

Dye, Bart, farmer, prepared statement of ...................................................... 6

Keach, John, Jr., president, Home Federal Savings Bank, prepared statement of ........................................................................................................... 46

Kersey, Robert, president, Rochester Metal Products, prepared statement

of ..................................................................................................................... 145

Lunsford, Mike, realtor, prepared statement of ............................................. 161

Miller, Thomas, vice president, commercial lending, American National

Bank, prepared statement of ....................................................................... 103

Roach, Dr. Eugene, medical director, Anderson Center of St. John’s, prepared statement of ........................................................................................ 115

Russell, Joe, farmer, prepared statement of .................................................. 94

Sargent, Bob, mayor, prepared statement of ................................................. 62

Wheatley, John, Delta Faucet Co., Greensburg, IN, prepared statement

of ..................................................................................................................... 180

Williams, Lowell, senior vice president, First Merchants Bank, prepared

statement of ................................................................................................... 108
(1)

THE NEED FOR REGULATORY REFORM

MONDAY, APRIL 17, 1995

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON NATIONAL ECONOMIC GROWTH,

NATURAL RESOURCES, AND REGULATORY AFFAIRS,

COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT,

Indianapolis, IN.

The subcommittee met, pursuant to notice, at 10 a.m., at the

War Memorial, 431 North Merridian, Indianapolis, IN, Hon. David

M. McIntosh (chairman of the subcommittee) presiding.

Present: Representatives Gutknecht and Peterson.

Staff present: Mildred Webber, staff director; Karen Barnes, professional staff member; David White, clerk; and Bruce Gwinn, minority professional staff.

Mr. MCINTOSH. The Subcommittee on National Economic

Growth, National Resources, and Regulatory Affairs, is called to

order. As chairman of the House Subcommittee on Regulatory Affairs, I would like to welcome you all to our subcommittee’s first

field hearing.

Congressman Collin Peterson of Minnesota, the ranking member

of the subcommittee, and Congressman Gil Gutknecht, also of Minnesota, join me today in this hearing. Let us give them a great big

Hoosier welcome.

Thank you. I would like to also acknowledge my wife, Ruthie,

who has been kind enough to come down.

The mission of our subcommittee is to cut back on unnecessary,

burdensome and sometimes just plain stupid regulations. Red tape

and excessive regulation are a hidden tax on the American middle

class. They are choking America’s competitiveness, cost workers

their jobs, force families to pay more for everything from cars to

food, causing farmers to lose their property, and forcing local taxpayers to foot the bill.

Congress is committed to putting a hold on new regulations and

cutting back on unnecessary red tape. We will force the bureaucracies to consider the loss of jobs and competitiveness, use good

science, and protect private property rights.

It is fitting today that we are meeting in the Patton Room. The

view of this subcommittee on Federal regulations is a lot like General Patton’s view on fighting a war. Take no prisoners and go

until you have won the battle. So, I am pleased that we were able

to be here today.

In last November’s election, Hoosiers and Americans everywhere

made it clear that they want to change the way business is done

in Washington. In the first 100 days of this Congress, my col-
2

leagues and I made this message our mission. Our subcommittee,

working in a bipartisan fashion with Mr. Peterson and Mr.

Gutknecht, introduced a bill to put a freeze on new regulations.

We are also committed to working with the rest of Congress in

changing the way we write regulations. Your suggestions today will

be particularly useful as we identify regulations which need to be

addressed through Corrections Day. Corrections Day is Speaker

Newt Gingrich’s plan to convene the House of Representatives once

every other week specifically to repeal onerous rules and regulations. He has appointed me to be on a steering committee to help

implement this new process.

By holding field hearings, as Members of Congress, we will be

able to hear directly about regulations that have posed the greatest

burdens on you and take them to Washington, so that we can address them in the Corrections Day process.

Significant regulatory reform is needed to stop the growth of big

government. Currently, there are over 110 agencies with over

130,000 employees, who issue, write and enforce regulations everyday. In 1994, alone, the Federal Register was nearly 65,000 pages,

the largest it has been since 1979. It has increased every year during the current administration from 57,000 in 1992 to the 65,000

pages today.

Further, the cost of regulations has skyrocketed. The Clinton administration’s National Performance Review stated that compliance

cost by Federal regulations on the private sector were at least $430

billion a year, 9 percent of the gross domestic product.

Other economists have estimated that the burden is even higher,

between $600 and $800 billion a year. That is $6,000 for every family in Indiana.

The burden of regulation does represent a tax on the middle

class. Companies are forced to comply with regulations and raise

their prices in doing so, passing along the cost to the consumer. In

fact, about 10 percent of the average grocery bill can be attributed

to the cost of regulations.

Moreover, regulations cost jobs and economic growth. Time and

time, I hear from Hoosier businessmen and businesswomen about

lost opportunities being forced to reduce or scale back on their

plans to expand their businesses. The bottom line is that we have

fewer good paying jobs in Indiana as a result.

Let me thank you again for coming and participating in this

hearing. Your views are what will become part of the official record

in Congress. Also, let me again thank the members of the subcommittee who have traveled from their homes, both in Minnesota.

I would like to take a moment to thank the staff, who have worked

very hard to put this together, Mildred Webber, David White,

Karen Barnes, who are all from the subcommittee and from my

staff in Washington, Chris Jones. From here in Indiana, Steve Austin, David Holt, Kim Orlaski, and I believe, Scott Bauers is here.

So, we have a lot of folks working on your behalf to cut back these

regulations.

Also, before we continue, let me apologize that we do not have

more time to hear your views at length. I may ask you to end up

summarizing your proposals, but any written documents you have
3

will become a full part of the record. Our goal today is to allow as

many people as possible to come forward and testify before us.

Now, before we start with the official panel, although if you want

to start coming forward, let me pause a moment and ask all of you

to join me in taking an oath. The chairman of the full committee,

Mr. Clinger, has asked that we swear in witnesses, but rather than

do that for each witness, I think I will just ask everyone to join me

in doing that.

[Witnesses sworn.]

Mr. MCINTOSH. Thank you. Let the record show that all of the

witnesses were sworn in.

Our first panel of witnesses are Mr. Kemper, Mr. Baird and Mr.

Dye, all of them reflecting the views of the farming community

here in Indiana. Mr. Kemper, if you could lead off for us.

STATEMENT OF ALAN KEMPER, FARMER

Mr. KEMPER. Thank you, Congressman. I believe you have a tremendous task ahead in reforming regulations that negatively affect

the very productivity of which this country was founded. I am Alan

Kemper, a fourth generation farmer and agri-businessman and

owner of Kemper Farms, a 1,700 acre grain and livestock farm

near Lafayette in West Central Indiana.

Mr. Chairman, today I want to address my thoughts to the areas

that affect everyone in this room, and that area is regulations. Regulations relate to everything we do, from breathing to eating to the

clothes we wear. I want to share only about the ones I have to directly deal with as a farmer and an agri-businessman.

Let me start by mentioning some of the Federal and State agencies and departments I must deal with to stay in business. The

U.S. Department of Agriculture, the Environmental Protection

Agency, the Food & Drug Administration, the Internal Revenue

Service, Department of Transportation, Federal Aviation Administration, Department of Commerce and others.

It would not be so bad if you just had one or two regulations, or

one or two people at each agency to deal with, but a farmer has

a multitude of different staff and regulations to deal with. Take the

USDA, for example. You have the Consolidated Farm Service Agency, which used to be the Agricultural Stabilization & Conservation

Service, which as a Commodity Credit Corporation which puts out

dozens of regulations and forms to comply with each year.

Also in USDA, you have the Natural Resources Conservation

Service, which used to be the Soil Conservation Service, the U.S.

Forestry Service, Food Safety & Inspection Service, Federal Grain

Inspection Service, which has more forms to complete, most of

them written only so a lawyer could understand them.

The Natural Resources Conservation Service must sign off on all

repairs. For example, I have a field which has been continuously

farmed since the 1800’s, when my grandfather put in a drainage

tile. He put it in in the 1920’s and it is a 4-inch tile. This spring,

I noticed a small hole in it. To legally repair this tile, I had to go

to the Farm Service Agency, get a proper form, fill it out, take it

to the National Resources Conservation Agency, where the staff

must make a determination and then recommend to the National

Resources Conservation Committee to approve the small repair.
4

The committee then approves and sends in writing to me the approval. This process can take up to a month or more. Once I get

the approval, I can take a shovel, and in 30 minutes to an hour,

fix the tile. Once again, I get the approval.

This is one example why productivity is falling in the United

States. Another example of over-regulations is in the drying field

part. In the drying process, part of the corn plant called ‘‘bees

wings’’ come off the kernels. For this, Mr. Congressman, I have a

sample of ‘‘bees wings.’’ As I mentioned, it is part of the corn plant

that comes off in the drying process.

As you can see, they are small red pieces of the corn plant. They

are no more dangerous than grass clippings from your own yard.

They are not nuclear waste, but the Environmental Protection

Agency regulations say these ‘‘bees wings’’ must be contained. This

is not realistically or economically possible on the farm.

It seems to me that when regulations are written for even the

best laws, like the Clean Air Act, which the above example was

from, common sense was left out.

I could go on with several other examples of overburdening regulations, but I must move on. There must be some reform in the respective agencies. It seems to us in small business and agriculture

that these agencies have an agenda of their own, not the public

wishes. You can build a strong case that the regulations are out of

control.

Let me at this point name a few acts that need refining: Clean

Air Act, Endangered Species Act, Worker Protection Safety Act,

American Disabilities Act, Clean Water Act, Wetland Provisions

and Conservation Provisions of the National Food Security Act, referred to as Farm Belt, Planning and Community Right to Know

Act, the Federal Insecticide, Fungicide Act.

It is my belief when it comes to regulations, most businessmen,

including myself, are running on information overload. Federal regulators and policymakers must realize that a highly productive

modern agriculture cannot be turned on and off on a day’s notice

with often conflicting regulations and the lack of common sense in

the decisionmaking process.

Federal, State and local governmental officials must allow the

latitude in the decisionmaking process for their field staff. On my

farm, I did a small study and found out that it takes 28 to 32 hours

a month of my office time to comply with all Federal, State and

county regulations. These hours are really non-productive time for

me.

Farmers and small businessmen need to once again feel comfortable when a Government car pulls in the driveway, that the

Government is here to help them find solutions, not find violations

and impose fines and give more mandates.

Mr. Chairman, in summary, I have only three recommendations.

Have less regulations, or at least slow down the pace of new ones;

keep regulations small business/farmers’ regulations to regulations

that are easily understood; and keep common sense as one of the

first priorities of all regulations. Thank you, Mr. Chairman.

Mr. MCINTOSH. Thank you, Mr. Kemper. I appreciate you coming

today. I might add, when we get to the question period, that you
5

bring up that notebook that you had earlier. I will tell people about

it.

Mr. Dye, I have read about your case in some of the testimony

that was coming before us when we were considering regulatory reform. Could you share with us your experience of Federal regulation?

STATEMENT OF BART DYE, FARMER

Mr. DYE. Yes, sir, I would be very happy to, and I appreciate the

opportunity to be here with you gentlemen today. I will be brief,

and I would endorse Mr. Kemper’s remarks, in that those are the

same ones that I have to contend with, also, but I would extend

mine in this respect.

In 1984, Farmers Home Administration, a governmental agency,

came in and illegally seized my farm, despite congressional laws,

court orders and FMHA regulations. They kept me from that farm

for 7 years, and destroyed it. I finally got the place back, but only

with Fish & Wildlife and Corps of Engineers’ and everybody else’s

regulations on it, that took 300 acres of my 1,000 acre. That will

prevent me from farming the rest of the farm.

Because of those regulations, I cannot get an operating loan, or

I cannot get a market loan. So, I cannot get my farm back.

The total extent of those regulations are one, they say that I

have potential habitat. I do not have any endangered species on my

part. One of the potential habitats is for bats. Their reference is

that they are some place in southern Indiana, so therefore, they

need to take my farm for habitat for those bats. They might want

to land there sometime in the next 100 years.

The other one is for eagles. I do not have any eagles. Again, it

is potential habitat. They also want it for mussels that are in the

river.

Now, White River, that goes by my farm, north of Shoals, the

upper watershed of that covers 16 counties and over 1,200 miles of

stream banks, and all of that has to come back past my farm. I do

not feel that my farm is the total problem of the mussels.

Congressman, these inane regulations have just totally devastated my family, and we need some help. We appreciate the opportunity to be here. It is not only the regulations, but the arrogant, belligerent attitude that the agencies involved in this use. We

do not have any appeal process to these people or anything.

I have been told that if I complain, they are going to come back

and do something else. I am a combat veteran, sir, and we did not

go to combat to have to come back to this kind of stuff. We need

some help.

[The prepared statement of Mr. Dye follows:]
6
7
8

Mr. MCINTOSH. You wonder what happens to freedom when that

starts happening in this country.

Mr. DYE. It is gone.

Mr. MCINTOSH. Thank you for sharing that with us, Mr. Dye. We

will come back at the end for some questioning.

I would like to now ask Mr. Warren Baird to share with us his

testimony.

STATEMENT OF WARREN BAIRD, FARMER

Mr. BAIRD. Thank you. I am a farmer from Tipton County and

also a member of the Soil & Water Conservation Districts, supervisor in that, and I would like to share with you my concerns about

some of the regulations that face farmers and private property

owners in my county, which is Tipton.

The Drainage Board has been trying to do reconstruction on

what they call the Round Prairie Ditch, and I believe you have

probably heard of this project before. But, the drainage ditch is one

of many ditches in central Indiana farming community that are so

vitally important for crop production.

Many of these ditches were installed in the 1800’s and early

1900’s by farmers who had the wisdom to realize that by draining

the excess water from the rich soils, crop production would be

much improved. These drainage ditches were not natural drains

but were put in by local farmers. These open drains are part of a

network, including tile drains, that are very successful in draining

the soils.

This particular project has been through several delays that have

been imposed by many agencies that are issuing permits and regulations. It used to be that the local drainage boards and land owners could get together and agree on what should be done and get

the project done, without all the red tape and permits.

These delays in permits cost the land owner by one, not having

improved drain for use, and two, the additional maintenance fund

required to do the project. Today, we have the U.S. Army Corps of

Engineers, U.S. Fish & Wildlife, IDEM and the IDNR all serving

authority of various degrees on these small, man-made drains.

I suggest at most we need only to have Federal and State regulations that controls the quality of these waters that flow downstream, and may be used by others for drinking water and so forth.

I question why the Corps has jurisdiction of these small, man-made

drains. It would seem to me that they should concentrate their efforts on the larger, natural drains. All these drains should be identified and labelled as to whom has the jurisdiction of them.

I suggest that this can best be done on a drain per drain assessment by Federal, State and local people, as the determination is

made, the maps can be labelled, and in the future, there will be

no question where the responsibility lies.

Requirements should be realistic and make sense. In other

words, do not impose requirements that have nothing to do with

the objective of draining the land. When these drains were first installed, there were no trees and shrubs along either side of the

ditch. Why should that be a requirement now? This should be an

alternative that is determined by the local drainage board and the

landowners. The landowner should have the right to determine
9

whether he has trees or shrubs or grass drip along the ditch on his

property, as long as it meets the requirements of plain water.

It makes no sense to require trees to be planted along a ditch

during reconstruction, if it is not required that they be retained

after the project is completed. How the dredge material is handled,

on what side of the drain the work is done, and the design of the

project is once again something that can best be determined by the

local drainage board, the Salt Water Conservation District, the contractor and the landowners.

When these drains were first installed, wildlife and aquatic life

were not a primary objective, but a secondary benefit that developed over the years. Why is it now important to go to the extra expense and pretense that these drains are the major supporter of

wildlife and aquatic life? Many of these drains are bone dry in the

summer, fall and in times of low rainfall. After the reconstruction

is completed, in a short time, wildlife will take their place along

the drains as the supporting habitat develops.

Some of the requirements imposed by these agencies may even

prevent these drains from functioning properly, especially if trees

and shrubs are left in the slope of the channel of the ditch. Another

concern I have as a landowner is the wetland restrictions and the

delineations that have been imposed at various times.

I currently do not know who or what agency has control, and I

am not sure anyone else knows. I class this as one of the most

wasteful and confusing issues to face area farmers that fall under

some of the concerns that need to be addressed.

I am not opposed to preserving wetlands that are truly wetlands,

and are serving a significant purpose. However, I do not believe

that the areas that have been farmed, whether you call them farm

wetlands or prior converted wetlands, should be considered as wetlands, or have any restrictions placed on them.

I suggested using what I call ‘‘common sense’’ would many times

solve these issues. If early settlers had never drained the central

Midwest wetlands, food production as we know it today would not

be possible, and the consumer would no doubt be spending more of

their income for food. Many farmers have farmed these areas with

the intention that as finances became available, they would improve the drainage to make a more profitable and efficient operation. Farmers should not be denied this opportunity.

Small, insignificant wetlands under 2 acres should not be regulated. This allows a farmer flexibility in making a more efficient

operation.

Developers can mitigate wetlands. The farmer should have the

same option available.

My last comment has to do with the Endangered Species Act,

and I see it as a wolf in sheep’s clothing. Let me ask, what is the

Government’s role? I say it is to provide a healthy, safe and economically sound place for a man to live and raise his family. Protection of plants, animals and other creatures of God’s creation can

best be served by the private sector whose interest is at stake. Government tax money should not be used to force the saving or protection of an endangered species, unless there is scientific proof

that protecting a species is beneficial to all mankind.
10

Species that have become extinct will not be a detriment to society. If society believes strongly enough that an area of species

needs to be protected, then the ones that are interested should buy

the area and compensate the owner of the area for the protection

right.

Government officials should not have free access to one’s property without permission. This right is protected by the fourth

amendment to the Constitution.

Things change over time, and the needs of man changes also. I

have noticed lately that there are no dinosaurs. However, I am also

aware that I have no immediate need for one. In fact, if one was

to show up, I am not sure what I would do with it.

In the future, there will be other examples of species that have

served their purpose and will no longer exist. Do not misunderstand me. I am a true believer that we should do all that is in our

ability to preserve the existing species as long as it does not interfere with the management of man’s own quality of life. There are

examples in other parts of the country where operations have been

shut down for the protection of a species, and we just heard of one

a while ago, without any compensation for the loss of value or income. This is not right.

In some cases, the species that are being protected are in conflict

with the farmer’s management, and may inflict loss of crops. I

would like to take this opportunity to express my gratitude to Congressman McIntosh and his very efficient staff for the invitation to

express some of the concerns of the farmers and private property

owners in this great United States, in particular, the State of Indiana. Thank you.

Mr. MCINTOSH. Thank you very much, Mr. Baird. Before we start

questioning, let me just point out a book that Mr. Kemper brought

in earlier. It was a copy of one that was given to me by the Farm

Bureau in Washington, and it is a list of all the different regulations that farmers have to live under in this country and it is not

the entire regulation. It is a common sense summary of a couple

pages for each one.

It was impressive to me that there was this degree of regulation

that if somebody was trying to earn their living farming their land,

they had to become familiar with and make sure they were on the

right side of all of these conflicting and often counterproductive

regulations. So, thank you for bringing that copy with you.

I want to go on with the questioning but first—to my colleagues—I did not give them a chance to have an opening statement and I apologize for that. But, if you would like to make any

comments, please go forward.

Mr. Peterson.

Mr. PETERSON. Thank you, Mr. Chairman. I appreciate the invitation to come to Indiana. I think it is the second time or third

time I have been here. I want to tell the folks here in Indiana that

I found the chairman is someone I have been able to work with.

We have a group of what are now referred to as Blue Dog Democrats in the House. He has read about us in the Wall Street Journal, who agree with a lot of what Mr. McIntosh and some others

are doing. Our group was formed to try to end some of the partisanship that goes on in Washington, and you cannot believe some
11

of the stuff that goes on. It is this kind of attitude that if the Republicans are for it, the Democrats have to be against it and vice

versa.

The truth of the matter is that neither side is right all the time.

In fact, most of the time, one side or the other is wrong, and we

are just trying to put aside all of this partisanship and try to get

down to doing what we think makes sense and not worry about

who gets credit, who gets blamed, and just try to move things

ahead.

So, we have worked, and I have worked a number of different

areas, but particularly on the Regulatory Affairs Subcommittee

here. We did not get everything we wanted, but I think we did improve legislation as it moved along, and we have been able to work

together. We look forward to doing that in the future.

I would just say that there are a number of Democrats who feel

like this regulatory process has gotten out of control. I think we

had, what, somewhere between 50 and 75 Democrats that supported most of the regulatory reform issues, and we hope that we

are successful in halting the successive regulation.

I represent a farming area in northwestern Minnesota. My district runs 300 miles long from north of the Twin Cities up to Canada. We have, we like to think, the most productive agricultural

land in the world. I am sure you think you have it down here in

Indiana. But, my farmers have the same problems that you folks

do, and we sympathize, and we have been trying to work on these

issues—wetlands.

Last week the Transportation Committee passed a clean water

bill that is going to start to address the 404 parts of the wetlands

law and some other areas. I think we had 60 to 65 percent of the

Democrats on that committee supported those changes.

The farm bill, which we are going to start having hearings tomorrow traveling the country—I serve on the Agriculture Committee, we are going to be looking at the wetlands and other issues

in the farm bill, and hopefully, we are going to get some common

sense brought to some of these things.

Frankly, if we are not able to resolve this, I think you are going

to see a lot of producers who are just going to drop out of the farm

program and go their own way. We are hoping that this time we

can move some of this stuff back the other direction.

Do I have time to ask?

Mr. MCINTOSH. Yes.

Mr. PETERSON. Mr. Dye, I was just curious how you got into this?

You probably like my position, because I have been saying for the

last couple of years that we should abolish the Farmers’ Home Administration. You probably support that, I would say?

Mr. DYE. Yes, sir.

Mr. PETERSON. I was just wondering why you were not able to

get an appeal?

Mr. DYE. We were never even advised we had an appeal.

Mr. PETERSON. So, the time ran before you knew you could——

Mr. DYE. They just backed up to the door and loaded everything

up and went down the road with it.

Mr. PETERSON. Were you in some kind of a conflict on payments

with them?
12

Mr. DYE. Yes, sir. They had messed me up the year before. I

needed a little money to dry some corn, and they went to the banks

and told the banks not to loan me any money, so I could not get

the gas to dry the corn. So, the corn stayed in the bin while the

river came out and the river took the whole corn crop down the

river. So, I lost a whole year’s crop, and they could not understand

why I could not pay the bill.

Then, the next year we had a drought, in 1983, and you do not

raise much in a drought, as you are well aware. So, I was very

much behind that year. I asked for a year that we could get something worked out. They said, that was fine, then they switched personnel and the next guy came in and backed up and loaded everything up and went down the road with it.

Mr. PETERSON. You never got to appeal?

Mr. DYE. No, sir.

Mr. PETERSON. They were never willing to open it up?

Mr. DYE. No, sir. Well, the other reason that they put these on,

I was told, I sued Farmers’ Home because of their contempt of

court and this sort of thing. They said, one was because I sued

them, two was how I voted, and there is a whole litany of reasons.

Every time you talk to them, there is a different reason.

Mr. PETERSON. They do have the right under the way the law is

constructed to go in and they have first right to buy these wetlands

and so forth, which is something I think we need to look at.

Mr. DYE. Yes, sir. In my particular case, they held my farm back

from me for 7 years. They took out 14 farms in the county that 1

year, and by their own documentation, they excepted me personally, and would not lease that farm back to me until they put the

easements on.

Mr. PETERSON. Yes, I have had similar situations. When people

call my office and ask for my help to get a Farmers’ Home loan,

the first thing I ask is if they are currently involved with Farmers’

Home, and if they are not, I tell them, absolutely, under no circumstances, should you get involved with those people, because

what is going to happen to you is this sort of thing.

They tie you up, tie your collateral up, and if you get on the

wrong side of them, you are just out of business, is apparently

what happened to you.

Mr. DYE. Right.

Mr. PETERSON. Well, we are going to work on that and see what

we can do.

Mr. DYE. We appreciate it very much, sir.

Mr. MCINTOSH. Thank you, Collin. Another example where the

private sector can do a better job.

Let me also now recognize one of my colleagues in the freshman

class on the Republican side of the committee. Mr. Gil Gutknecht

is from Minnesota, and I am delighted you are able to join us.

Mr. GUTKNECHT. Thank you, Chairman McIntosh. It is a pleasure to be here. I have been to Indiana before, but I have never been

here when it is so warm. I usually come through in the winter. I

have never been to Indianapolis before.

I just want to say that in the long light of history, I think the

work that this subcommittee and the full committee do in terms of
13

regulatory reform may have more of an impact on the general economy than most people would ever give it credit for.

As the chairman mentioned in his opening remarks, and I have

been astonished at the overall costs of regulations to the American

economy, we have had some interesting discussions in the full committee with some of our colleagues, like Representative Waxman

from the State of California. There are other Members that have

completely different viewpoints. I would have to say that among

the three of us, we are generally in agreement that historically,

and what has happened over the last several years, is the Federal

Government has begun to impose more and more $50 solutions to

$5 problems.

I love the comments of Mr. Kemper relative to having more farmer friendly type regulations that relate to farming. I had not seen

this, and I do hope that I get my own copy of the environmental

laws. I must say that we had a hearing in my district, and my district, as well, is very dependent on agriculture in southeastern

Minnesota. We had a farm forum about a couple of months ago. I

really expected the people who had come to testify to talk mostly

about farm price support programs and the milk program and a lot

of the other things the Federal Government was doing.

But, I must say, as I mentioned to several of you before the hearing, at least two-thirds of the time was taken up by farmers talking

about the unbelievable mountain of regulations that they have to

deal with everyday. If you tend to be a relatively large farm operation, it is manageable. But, if you are trying to run a 300 acre

dairy operation in southeastern Minnesota and you have to deal

with all these regulations, day by day and month to month, and

you are dealing with attorneys and bureaucrats from Washington

or St. Paul, it becomes just almost impossible, particularly to the

small operators.

We talked about wanting to help the small family farmer, but in

many respects, I think regulations alone are making it next to impossible for them to stay in business.

So, I appreciate the opportunity to come to Indianapolis. I appreciate this testimony and I am doubly appreciative of the fact that

we led off the hearing with some of the people in agriculture.

Mr. MCINTOSH. Thank you very much, Mr. Gutknecht. I will forego any further questioning. Mr. Kemper, did you have one other

statement you wanted to make?

Mr. KEMPER. Just one other, Mr. Congressman. I appreciate the

book that you gentlemen have held up. It only addresses, however,

the environmental regulations.

Let me suggest to you that a lot of farmers, small businesspeople

and other people in this country deal with financial, taxing and

other regulations that could equal mountains of regulations.

Mr. MCINTOSH. So, there is another book out there?

Mr. KEMPER. The only other thing I would suggest to you is that

there is the old adage out in agriculture that taxes could put you

out of business someday, but regulations could put you out of business by lunchtime. So, that is a fear that not only agriculture, but

a lot of the business community lives with when they wake up in

the morning, as well as when they go to sleep at night. Thank you,

Mr. Congressman.
14

Mr. MCINTOSH. Thank you. Thank you all for joining us today.

I appreciate hearing from you.

I am going to try to keep this on a tight schedule, so we get a

chance to have the open mic at the end. Let me call forward the

next witness. Ms. Jean Ann Harcourt is president of Harcourt Outlines, and I have known Jean Ann for a good while now, and want

to say that she is one of the most dynamic businesswomen that I

have had a chance to meet. I was excited when she offered to come

and testify today.

I have been through her facility in Milroy, and I can tell you,

they have one of the sharpest operations around. No wasted time

there and every effort to be productive and do a good job and have

a good record on safety and environmental issues. So, it is a privilege to be able to welcome you here today, Jean Ann.

As we were driving in from the airport, Mr. Gutknecht told me

that he used to sell school supplies. So, perhaps this is going to do

some good for business.

Mr. GUTKNECHT. Matter of fact, Mr. Chairman, I sold crayons,

mats and globes. I think they are here in Indianapolis.

Mr. MCINTOSH. That is great.

Welcome, Jean Ann. Thank you.

STATEMENT OF JEAN ANN HARCOURT, PRESIDENT,

HARCOURT OUTLINES, INC.

Ms. HARCOURT. Mr. Chairman and distinguished panel members,

thank you for traveling to Indiana to hear our concerns about business.

I am Jean Ann Harcourt, and I am the co-owner of two small

family businesses located in rural Rush County, or Milroy, which

is approximately 50 miles from here. Harcourt Outlines was established in 1956 by my parents and the primary purpose was to manufacture and distribute school supplies. The No. 1 product, as I

have put on the table for you, are the wood case pencils. I have also

given you a brochure of our family business.

In 1993, my brother, Joe Harcourt, and I started a pencil manufacturing facility in order to better serve Harcourt Outlines. Today

I offer testimony about the burden of over-government regulation.

However, I first wish to preface that we do not consider all Government regulation bad. Regulations requiring employees in the pencil

factory to wear headgear, that is good, because it is very loud. Regulations that require when you are cutting the magnesium slugs to

print the pencils to wear eye goggles, that is very good. So, we are

not totally negative on Government regulation.

However, we do object to the volume of regulation, the cost of

these regulations and we question the necessity of some of these

regulations. I submitted to you last week a clever satire published

in the June 1993, Indiana Policy Review entitled, Pencils, Killers

of the 1990’s. It is humorous. It is very humorous, but it is not far

from the truth about the over-government regulation.

Since 1981, there have been volumes of regulations placed on

small business. The number provided to me by the Indiana Manufacturer’s Association has over 80,000 regulations. I actually

brought one volume here today to show you. It is not as big as the

other volume you have there, but this is only one of many volumes.
15

I wanted to point out that we use this book. It is highlighted. We

look at the regulations. We try to follow the regulations. We have

all those pages marked in there of things to comply with.

However, the regulations are too numerous for small businesses

to track, or even understand what they mean, if you look in here.

It would take several full time employees to catalog and track, let

alone implement, all these regulations.

With my limited time today, I wish to concentrate on only two

areas involved in our new, 1993 pencil manufacturing company.

The No. 1 area is the Title V Operating Permit Program, which is

part of the 1990 Clean Air Act. The other is the Building Inspection Programs, however, administered by the State, it is still a

major regulation we have to comply with.

Back to the Clean Air Act and the permitting program. The Government, or you gentlemen, are requiring us at our pencil company

to calculate our annual emission rate for the lacquer fumes which

we are emitting into the air after we have painted the pencils. All

the paints and lacquers that we are using now are non-toxic. They

are safe for children. Children can chew on these pencils. We are

selling directly to schools. I have here just a few of the binders that

have the MSDS sheets in them that covers every single lacquer

and any type of raw material that comes into our facility, that documents everything and everything is non-toxic.

Therefore, that is where the confusion comes in. If we already

have documentation that the paint is non-toxic when it is being applied to the pencils, I cannot understand how it becomes so dangerous when we are taking the fumes and emitting them out in the

air. It just really has us confused.

The other point we need to talk about today, too, is that we have

to prove to the State that we are emitting less than 25 tons of regulated pollutant into the air in a single year. I readily admit that

I do not understand this program. So, I instructed our Safety Director, Jay Evans, to get advice from an environmental consulting

firm, because we do not have in our facility a technical staff person

or do we have the equipment required to test emissions of paint

fumes going in the air.

Well, the quote came back from a Columbus, IN, company, and

it would cost us up to $5,000 to provide the documentation to the

State. We believe that with our purchase records of the paints and

lacquers that we bring in and the raw materials, that we are not

going to be anywhere near that 25 ton level. Therefore, we do not

understand how emissions could possibly be much greater than

what the raw material is that we are putting on the pencils. Therefore, we feel that this is a very unnecessary expense, and would be

very time consuming for us to calculate. But, we do not see anyway

around it, and we are going to have to comply.

The last thing I would like to talk about in my opinion is the excessive burden in the building industry. We built a brand new facility in rural Rush County for a pencil factory, 6,100 square feet. It

is a metal building, just like this here. We had 13 inspections on

this building. We thought that was a little excessive.

When business was good in the pencil industry, we turned

around in 1994, we doubled the size, built another full building

identical to it, designed to add onto it, and had another five inspec-
16

tions. We felt like 18 inspections on this type of facility was just

an overburden. We felt like it was a harassment, and it cost our

maintenance man up to $500 in labor time. I did submit to you last

week the documentation of how I did arrive at that figure, using

his benefit sheet.

So, I would just like to wrap up today and say I am very frustrated. I join the farming community in saying that we appreciate

you being here. It is nice to have somebody listen to us. Hopefully,

we can get something done. I feel real positive with my Congressman, David McIntosh, in Washington doing that, that we could do

that.

I would just like to say that this regulation, it is hurting our

business and it is hurting our employees. A lot of their raises for

the next couple of years are going to be tied up in trying to comply

with some of these regulations. So, again, thank you very much for

being here today.

Mr. MCINTOSH. Thank you very much, Jean Ann. Let me ask you

a question about your MSDS, material safety data sheets, which

has come up in other context. Are those ones that you have to keep

on file there in the plant for materials that you use?

Ms. HARCOURT. Yes, and we are in violation today, cause they

are here. I am going straight home from here. [Laughter.]

Mr. MCINTOSH. You better get there before OSHA does, right?

Ms. HARCOURT. That is right.

Mr. MCINTOSH. Let me ask you this. How often do you have employees come in and ask to read through those for a concern about

safety?

Ms. HARCOURT. In 20 years that I have been running the company, I have had one employee ask to see one of these, but safety

is No. 1 with us, and we train them about it. I have never been

asked to see it.

Mr. MCINTOSH. All of that paperwork does not help you increase

your safety or healthiness of the employees at all in your plant, because they do not look at that?

Ms. HARCOURT. That is right, absolutely.

Mr. MCINTOSH. I have heard a lot of complaints about those

sheets. Do you send any out with your pencils, as well?

Ms. HARCOURT. No.

Mr. MCINTOSH. That would be next step on disclosure on pencils.

Ms. HARCOURT. Yes.

Mr. MCINTOSH. I was impressed by your statement on the safe

fumes that are from paints that can be chewed by children, and yet

they are worried about them being toxic if they are released into

the air.

Ms. HARCOURT. Right. We have an elaborate venting system that

pulls the fumes, what limited fumes there are.

Mr. MCINTOSH. You keep them away from the employees?

Ms. HARCOURT. Right.

Mr. MCINTOSH. Vent them out into the atmosphere?

Ms. HARCOURT. Right. They do have a little odor to them outside.

Mr. MCINTOSH. Thank you. I appreciate you coming today. I

think your statement is exactly on point.

Let me ask any of my colleagues if they have any questions for

you?
17

Mr. PETERSON. Thank you, Mr. Chairman. Has anybody ever

looked at those sheets?

Ms. HARCOURT. Our safety director looks at these sheets.

Mr. PETERSON. No, I mean, has OSHA ever looked at them?

Ms. HARCOURT. Not recently.

Mr. PETERSON. Are they required——

Ms. HARCOURT. Yes, they are required. We have not seen OSHA

recently, knock on wood.

Mr. PETERSON. But, when they come in, do they look at them?

Ms. HARCOURT. Yes, it is part of the inspection process.

Mr. PETERSON. Just to see if they are there?

Ms. HARCOURT. Yes, and they were there.

Mr. PETERSON. We are so hung up in this country on quality

process and filling out forms. I do not know how we change that

mentality, but it does not seem like we are accomplishing a whole

lot.

Maybe the Governor of Florida had the best idea. He is going to

eliminate all the regulations I read about a month ago. He is going

to abolish all the rules and regulations and he is just going to have

guidelines and his commissioners are going to use common sense.

Now, I do not know how it is going to work, but it sounds like a

good idea.

Ms. HARCOURT. I think that is what we need, a little more common sense.

Mr. PETERSON. Thank you.

Mr. MCINTOSH. Thank you, Mr. Peterson.

Mr. Gutknecht, do you have any questions?

Mr. GUTKNECHT. I do not have a question, just if I might add to

that. I think I sent a note to Mildred, if she has not received it yet,

request that this subcommittee go together and buy a bunch of reprints of the Reader’s Digest from about a month ago, which is a

shortened version of a book that is out now called The Death of

Common Sense, and there are some great examples. I think this

subcommittee ought to make them available to more people.

I had not heard about the Governor of Florida, but I think that

is a great idea. I think that is all the American people want. I

think, as you said, not all regulations are bad, and I think most

businesspeople want to do the right thing. Most businesspeople,

whether they are farmers or in the pencil business or whatever

business they are in, want to do the right thing, and they do appreciate some guidelines, I think, from the Government regulators, but

it just seems like we have gone from the ridiculous to the sublime

in the last 10 or 15 years. Somehow, we have to slow that whole

process down and get back to common sense.

Ms. HARCOURT. That is all we are asking today.

Mr. MCINTOSH. Thank you very much for joining us. I appreciate

that.

I will also share the satire that Jean Ann brought with, at some

point, Gil, and I will send it around to all the different committee

members, because it points out the ridiculousness of some of the

lengths to which we go at regulation.

Let me call the next witness for our panel, Mr. Malcolm Applegate, who is the president and general manager of the Indianapolis

Newspapers. Mr. Applegate, we appreciate your input. You work
18

with the side of the newspapers that the general public does not

get to see as often, how they are produced and some of the problems that you have to deal with in the regulatory side.

STATEMENT OF MALCOLM APPLEGATE, PRESIDENT AND

GENERAL MANAGER, INDIANAPOLIS NEWSPAPERS

Mr. APPLEGATE. We are out there everyday for everybody to critique, as a matter of fact.

Chairman McIntosh and members of the subcommittee, I do appreciate the opportunity to appear before you this morning, to give

the views of the Indianapolis Star and the Indianapolis News on

over-burdensome regulations that affect the newspaper business.

Believe me, we appreciate and applaud your subcommittee’s mission, as you clearly stated, Congressman McIntosh.

Given the brief amount of time I have before you today, I am

going to limit my statement to the proposed rules recently published by the Federal Trade Commission related to telemarketing

fraud. First, the outcome of this rulemaking is absolutely critical

to the newspaper business in several ways, not only us, but newspapers around the country.

Newspapers, on average, obtain about 50 percent of their subscriptions from telemarketing, much of which includes simple reminders to subscribers to renew their subscriptions. The Indianapolis Star, for example, secures 39 percent of its home delivery subscribers from telemarketing. Our afternoon paper, the News, 52

percent, and the Sunday Star, 29 percent. These percentages represent only starts from our sales operation. We have about as many

through a voluntary kind of restart.

Telemarketing really has become central to building and maintaining our circulation, the lifeblood of our newspaper business. Mr.

Peterson, I think my friend in St. Cloud, Sonja Sorenson, the publisher there, would support these remarks.

Likewise, we use telemarketing to sell classified advertising, both

for new runs, as well as to elicit continuous ad runs. Classified advertising comprises about 30 to 40 percent of our total advertising

revenue.

The last Congress, as you know, passed telemarketing fraud legislation and ordered the Federal Trade Commission to write regulations to prevent fraud and abuse in telemarketing. The intent was

to prevent con artists from scamming senior citizens and

unsuspecting victims, and then packing up shop before law enforcement officials would catch up with them.

We certainly support the thrust of this law. But, the FTC’s proposed rules would virtually label all telemarketing practices as deceptive or abusive. Contrary to the clear intent of Congress, we do

not believe that that is necessarily the case. Let me give you a few

examples of how the FTC’s proposed rules would cripple two core

functions of our business, circulation and advertising.

First, the definition of telemarketing as proposed by the FTC

would include inbound calls, calls made by the public to the business in response to advertising. There is just no evidence that Congress intended these types of calls to be covered.

It hits newspapers in two ways. Any advertisement in the newspaper that receives a call from the public in response to an ad
19

could be deemed by those proposed rules to be a telemarketer. If

the unsuspecting advertiser, who had merely placed a telephone

number in his or her ad, arranges a sale during the course of that

phone call, he or she must then make a litany of disclosures to the

caller that are both unnecessary and a nuisance. The advertiser

must comply with a host of recordkeeping requirements that make

no sense whatsoever.

It should be rather obvious what this rule would do to newspaper

advertising of virtually any kind. This rule also would affect our efforts to build and maintain circulation. There is no way to know

for sure whether or not an incoming call is the result of one of our

ads. We get hundreds of voluntary subscriptions and to comply

with the proposed regulations, would have to treat all inbound calls

as telemarketing.

Therefore, if the newcomer to Indianapolis phones the paper to

request a home delivery subscription, we have to treat that as a

telemarketing call, although we did not solicit the subscription. Let

me tell you what that would entail. A host of disclosures involving

total cost, terms and material restrictions, limitations or conditions

of receiving any goods or services, quantity of goods or services,

and material terms and conditions of refunds, cancellations, exchanges or repurchase policies.

This is probably a 2 or 3 minute recitation that is nothing but

a nuisance to the caller. The Commission’s proposed rules would

also require these disclosures repeated during a subsequent verification of the sale, even if it takes place in the same phone call.

These disclosures would also apply to us when we answer telephone advertising calls.

In addition to oral disclosures, we would have to maintain

records for 2 years of who took the call, including name, address

and title, even after they had left our employment, the date the

goods or services were purchased and the date the goods or services

were delivered. With respect to our regular advertisers, this becomes an absolute recordkeeping nightmare.

Please understand that almost everything I have described to

you does not involve what most people consider telemarketing,

where a business calls a potential customer. All of this would happen when the customer, on their own, calls us or the advertiser.

The proposed rules would also bar us from calling our subscribers for renewal reminders until their subscription had actually

lapsed. I can only hope that this is not an intentional prohibition,

because that is no way to run a business.

Some of our subscribers depend upon us for reminder calls prior

to their subscription expiring. What the FTC calls abuse, we simply

call customer service.

Likewise, we would be prohibited from calling classified advertisers to see if they would like to extend the run of their ad until it

had expired. The result is missed opportunity for both the advertiser and the newspaper. Another portion of the FTC’s proposed

rules with unintended yet disastrous consequences for the newspaper industry is a prohibition on sending a courier to pick up a

payment which would prevent your newspaper carrier from collecting on the route. Delivery route collections are a longstanding and

worthy service we offer our subscribers. This method of payment is
20

most frequently used by and particularly useful to home bound individuals, inner city residents and the elderly. We want to make

it easier for our readers to obtain the newspaper, not more difficult.

Another practice that would be off limits if the proposed rules

are adopted is a prohibition on calling a resident more than once

in a 3-month period, without the called party’s consent. This prohibition would wreak havoc on the time tested tradition of selling

newspapers in 8 week packages. It is bad customer service to leave

new subscribers hanging for weeks without calling to see if they

are enjoying their subscription, have had any delivery problems,

have any questions, or would like to continue receiving the newspaper.

Even the fact that we already maintain company wide do not call

lists pursuant to rules enforced by the Federal Communications

Commission in which we support, the FTC’s proposed 3 month rule

is unnecessary. There is already a mechanism in place to accommodate persons that object to telephone solicitations from newspapers

or anyone else. The FCC rule stems from another telemarketing

law passed by Congress in 1991, the Telephone Consumer Protection Act.

Mr. Chairman, members of the committee, the bottom line is that

the Congress charged the Federal Trade Commission with stopping

fraudulent schemes and abusive practices in telemarketing. But,

the FTC has responded by proposing rules that make telemarketing virtually impossible for every business, large or small, in this

company. Telemarketing is the way newspapers compete with each

other, with magazines, with billboards, with radio, television and

cable TV. Telemarketing is relied upon for the circulation for advertising by the Indianapolis Star and the Indianapolis News, and

papers such as the Muncie Star and the smaller market Noblesville

Daily Ledger.

No business will survive today unless it takes marketing and

customer service seriously. In our business, we try to do much of

it by phone.

Our industry is so concerned about what these rules could do to

us that we have asked the FTC for an exemption for newspapers

when final rules are issued in August, but we have no reason to

believe or to be encouraged by FTC actions to date.

I want to be very clear. Our industry and hundreds of other businesses, large and small, believe it is wrong for Congress to allow

a Government agency to effectively eliminate a legitimate business

practice, especially when we follow the present rules of the road,

and there is no record of anything approaching fraud or abuse. I

appreciate the opportunity to present our views and I will look forward to working with you and the subcommittee in the future to

make sure that rationality becomes a part of this process and common sense, we hope. I will be happy to answer any of your questions.

Mr. MCINTOSH. Thank you very much, Mr. Applegate. Let me

just say in listening to your testimony today, I had heard a little

bit about this rule, but not very many of the details, and it seems

like an excellent example of something we should consider for Corrections Day. It is a case where the agency has gone way beyond

the intended mandate of Congress.
21

As Mr. Gutknecht pointed out, they came up with a $50 solution to a $5 problem, and it is causing enormous headaches in your industry, and I am sure, others.

One quick question. The exemption you referred to for newspapers, would it not make sense for us to perhaps go through and

change the program for all businesses that are legitimate users of

the telemarketing?

Mr. APPLEGATE. I am sure there are a lot of businesses out there

that would make equally as strong a statement, and would indicate

that it would hurt them as much as it would us, yes.

Mr. MCINTOSH. I appreciate you coming today and I appreciate

you coming forward. I really do think it would be a great example

of something to correct on Corrections Day.

Any quick questions?

Mr. PETERSON. Well, I am inclined to get to the point where I

do not dare vote for anything anymore that goes through Congress.

I voted for this particular bill and I was promised that we were not

going to get into this kind of situation. It seems like every time we

vote for one of these ideas, we end up with a regulation that is way

beyond what anybody supports or makes sense, and it happens

time and again with cable TV or whatever it is we are trying to

regulate.

I do not know what we do about this sort of taking away the regulatory power of the agencies and doing it ourselves. I am not so

sure whether that would work, either.

I think the one thing, if we could get the moratorium bill

through, that would put a hold on this regulation until December,

and we could maybe talk some sense into them, or the 45 day legislative veto that passed through the Senate. The best idea, I think,

would be to put those two together, and give us some kind of ability to get at this.

I mean, we were promised—I mean, I specifically asked the author of the bill before this passed if we were going to get into this

kind of situation. No, we were just going to go after these bad apples in telemarketing, selling time shares and doing some of this

stuff that I think all of us agree needs to be controlled. It seems

like every time we turn around, we get off in some other antic.

By the way, your colleagues in Minnesota have been in contact

with me and have done their work.

Mr. APPLEGATE. I bet they have.

Mr. PETERSON. I am with you all the way and we are going to

do what we can.

Mr. APPLEGATE. Great. We certainly recognize that there is some

deception and some fraudulent telemarketing going on out there.

But, on the other hand, there is a lot of business that is done in

a very legitimate way through telemarketing, and a lot of businesses, as you have pointed out, Congressman McIntosh, that literally would be crippled in many ways, if these restrictions were

approved.

Mr. MCINTOSH. I appreciate that. Gil, would you have anything?

Mr. GUTKNECHT. Mr. Chairman, I would just say, and this has

been excellent testimony, and it is kind of interesting to see that

some of the people in the media are caught in the net this time,

as well. I would say that I hope we would not give exemptions to
22

this, because I think, in fact, rather than granting exemptions, I

think we ought to be more inclusionary.

As a matter of fact, I think there is one group that is excluded

from this law, and it is politicians. Frankly, I think if we had to

live by some of the telemarketing rules and regulations, my suspicion is, we would probably have much more reasonable regulations. We were involved in the very first day of this Congress, passing the Congressional Accountability Act, which makes Congress

abide by most of the employment laws that everybody else has to

abide by. I think this is one that we may have escaped.

Perhaps rather than giving exclusions for your group, maybe we

ought to offer an amendment that would make certain Members of

Congress abide by some of these, because telemarketing is a big

part of politics today.

Mr. APPLEGATE. We certainly would not prefer to be an exempt

group, as a matter of fact, and we realize that certainly there are

businesses that would be affected as much as we, but we certainly

are also concerned about our businesses if these regulations are

passed. Thank you very much.

Mr. MCINTOSH. Thank you. I like that idea a lot, Mr. Gutknecht.

Perhaps we will give Congress a choice of either abolishing the law

or applying it to themselves. We will definitely be able to win on

Corrections Day if we do that.

Thank you very much for coming, Mr. Applegate.

Our next witness today is Mr. Jeff Bowe. I appreciate you coming

today. Mr. Bowe is with the Indiana Water Co.—no. I will let you

introduce yourself. The purpose here today is to give people a

chance to testify and then open it up for the general audience. So,

Mr. Bowe, thank you for coming, and let us hear.

STATEMENT OF JEFF BOWE, PRESIDENT, BENHAM PRESS

Mr. BOWE. Congressman McIntosh and members of the committee, I would like to welcome you to Indianapolis, also, and thank

you for the opportunity to address you this morning. I supplied copies of my comments, gave you the background for my comments,

and also gave you a list that I have that I will be referring to in

a minute.

My name is Jeff Bowe and I am president of Benham Press, Inc.

We are a medium sized printing company here in Indianapolis, producing roughly $5 million worth of customized printing products a

year, employing roughly 45 moderately to highly skilled employees.

I am also immediate past president of Printing Industries of Indiana. I am informed that our industry employs almost 20,000 people in this State and about 1,000 companies, making us an industry of small businesses. Nationally, we employ around 800,000 people, which makes us the third largest industry, again, with an average company size of around 12 people, the prototype of a small

business industry.

However, small does not mean unaware, nor does it mean

uncaring. I am willing to talk about Government regulations of environmental matters. While no one in our industry recommends the

abolishment of EPA or the other agencies commissioned to protect

and preserve our delicate environment, we do feel their goals could

be met with less cost, less paperwork and less confusion.
23

In 1993, our national association, Printing Industries of America,

conducted a study to determine how many different Federal reporting requirements might apply to the small business. We determined upfront that we would not limit our research strictly to

those that would apply to the printing company, because we felt

that first there might not be that many, and second, we were hoping to supply the study to other groups.

However, when the study was completed, we were amazed to find

47 different Federal reporting requirements on environmental regulations. Those 47 fell primarily into the following acts, some of

which were mentioned earlier: the Clean Air Act, Emergency Planning and Community Right to Know Act, Toxic Substances Control

Act, Occupational Safety and Health, which is OSHA, RCRA, Resource Conservation Recovery Act, CERCLA, Comprehensive Environmental Response Comprehensive and Liability Act, the Clean

Water Act and the Safe Drinking Water Act.

If some of these acronyms sound familiar and the names sound

repetitive, that is exactly our point. I have included the results of

a study and the corresponding one line description of each in my

comments, and that is eight pages long. When I reviewed the list,

I found more like 65 requirements, but I could not contact the author over the weekend to clarify 47 versus 65, but either way, it

is an amazing number.

I will not try to mislead you that any one printing company or

any company would be subject to all 47. However, our company is

subject to around 19 of them. The only way to know whether you

are subject to all 47, however, is to read them, evaluate them and

perform the calculations and evaluate those results. Which leaves

the only thing not doing in filing a report, however, I am not suggesting that I would like to file an additional 28 reports.

Which brings me to my main point, is how many people, companies, organizations are actually in compliance with all these requirements? I really could not say, although I have repeatedly estimated compliance with the Clean Air Act to be around 20 percent,

because of the difficulty in reading and applying those regulations,

as was testified to by the lady a few minutes ago.

I would have to claim that we are in compliance, although I really could not guarantee that, because I am not sure if my level of

technical knowledge would allow me to make such a judgment.

Like most small business people, in addition to having to be a market guru, human resources specialist, financial accounting expert,

coach, counselor and personal financial bank to my employees, I

now also have to be a process engineer, chemical engineer, purchasing agent, inventory control specialist and hazardous waste

disposal technician.

I cannot adequately judge or nowhere even expect to know what

some of these chemicals are just by looking at their cast number

or generic chemical name, let alone how these chemicals interact

during our process, whether we can change any of them or still

come up with the same results, or know exactly how much we purchased when and had on hand at any one time and how every single drop was disposed of. It is simply an impossible task.

There are two ways we can try. We use a combination of both

from time to time. First, because my signature is on those reports,
24

I end up digging out how much we bought, when, how we used it

and how we disposed of it. The problem is, those 47 requirements

all want the information in a slightly different format over different periods of time, and calculated or tabulated in a slightly different manner, which means that on average, I spend about 4 work

weeks per year learning these requirements and collecting and

evaluating this information.

I work on a committee here in Indiana that is writing the Clean

Air Act statement of notation plan, and have been working on that

committee for 2 years. So, I am more familiar with that program

than probably 60 to 80 percent of the people in business out there.

To you, spending 4 weeks a year might not seem like a whole lot

of time, but it represents 8 percent of my total time available to

my business, and that is time I cannot spend increasing sales, researching new technology or creating more jobs by investing that

time and money into increasing our capabilities and output.

As for competitiveness between companies, those who play by the

rules are severely limited and restricted because of doing what we

feel is right. Even though there are penalties and they are severe

for failure to report, it is still not fair that we would be subject to

the same penalties as someone who did not report at all.

I was talking to a group of fellow printers a few weeks ago, actually was making a presentation on the Clean Air Act that is going

into effect over the next 18 months, and we were discussing how

to calculate VOC emissions for the permit applications, which will

be due sometime in the next 15 months, but we do not know when,

because EPA has not yet approved our plan. So, we do not know

exactly what timeframe for the application, even though they are

due in the fairly immediate future.

I made a misstatement during my presentation. However, it was

not because I was unfamiliar with the regulations. I was familiar

with the regulations. What I was not familiar with was one paragraph in a document prepared by a third party on another matter,

which stated how much of the VOC’s are actually absorbed and retained by the paper. That one paragraph made a 400 percent difference in my calculations.

I estimate that cost of a mistake in my company would be about

$5,000 a year permit fees, and probably would require about 500

man hours of work per year, depending on how that calculation

went. Again, it is my opinion and the opinion of my peers that I

know these regulations, because I spend time with them.

One of my suppliers at that meeting said if it takes me 4 hours

to fill out the report, it probably takes most of his customers 25 to

30 hours for each report, and again, I am subject to 19 of them.

There is, of course, another answer which is mentioned earlier,

to hire a consultant. That is easy to do, and I have looked at that

also. You can pick up a telephone book or call the trade association

or use your law firm, but this is expensive.

I found, also, that the basic consulting contract, and by basic, I

mean, they quickly review your product, your material safety data

sheets, which I could not carry in here, because I have four books

which are about that tall—that is about $3,000, just to review the

products to see which programs you might be subject to. If you

want them to prepare the reports for all the programs, including
25

researching your records, to know in a more definitive manner

which ones they think you are still subject to, the estimates are

around 10 times that, or around $30,000.

That still does not account the man hours to maintain the reporting records for the next cycle, after you are now subject to the requirements. As a comparison, most small businesses did not make

$30,000 last year.

As I said earlier, no one thinks this information is unimportant

and certainly, no one is opposed to reasonable control to protect our

environment. But, 47 different departments on the same information is nothing but replication, duplication and excess paperwork.

I would like to point out one bright side that our national trade

association is working on two products to address this. The first is

the great printers project being done in connection with the EPA,

and the second is the common sense initiative. Both projects have

the same goal, unified reporting form, which would be one form per

company with the same information for all projects.

Now, again, that form would be larger and more complex than

any one form we currently produce. However, if I had to mail one

form to 19 or even 47 different places, it would represent a reduction in paperwork of probably 90 percent, and I have estimated

about 75 percent in time.

So, it is this type of innovative yet simplistic thinking that is required to free American business and the American businessmen

and women to do what we do best, which is to grow our business,

grow our employee force, and to grow the national economy.

[The prepared statement of Mr. Bowe follows:]
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28
29
30
31
32
33
34
35
36
37
38

Mr. MCINTOSH. Thank you very much, Mr. Bowe. Let me ask you

very quickly on the Clean Air Act, the permitting process, especially since you spent a lot of time working here in Indiana on the

State implementation plan, is it necessary in order to get the emissions reductions under the Clean Air Act, or could we eliminate the

permitting requirements, and just have people abide under the different emissions controls?

Mr. BOWE. In my opinion, the Clean Air Act really does nothing

to reduce emissions. There are, at this point in the State legislation

regulations, no requirements to actually reduce pollution or emissions. It is just a matter of how much do you want to pay to be

allowed to emit whatever level you wish.

Mr. MCINTOSH. So, this regulation does not help us get cleaner

air. It is simply an extra burden, both a fee and paperwork requirement.

Mr. BOWE. At this point, right, there are no strict requirements

to reduce emissions in the Clean Air Act.

Mr. MCINTOSH. Under Title V?

Mr. BOWE. Under Title V.

Mr. MCINTOSH. Thank you very much. Any questions?

Mr. PETERSON. Mr. Chairman, I would like to ask—I do not often

quote from news magazines, but there was this article in Newsweek on April 10 where Robert Samuelson wrote this kind of editorial, I guess, and he said that, ‘‘The modern environmental movement is a parable of our times. It is a huge success that is mainly

unrecognized and a source of continuing alarm which is mainly unjustified.’’

He talks about this book that was written by an environmentalist who basically says that we have vast groups of problem solvers,

Government officials, professional advocates, scientists and journalists, whose very being requires that they perpetuate the problems

they purport to solve.

The perverse result is to create a false reality in which almost

nothing good ever happens. I think we ought to get a copy of this

book here by Greg Easterbook, A Moment on Earth, the Coming

Age of Environmental Optimism. I think this guy is right on, and

is a lot of what is driving this problem.

We get all wrapped up in the minutiae of these rules and it

drives us nuts on these little points, but if we do not back off

enough and look at the big picture, basically what this article says

is that we are trying to—you know, that they have looked at who

has looked at this, and this guy is an environmentalist, and he

finds dramatic progress and few impending calamities. They kind

of manufacture these crises and try to come up with solutions to

problems that do not exist. The result is all this stuff that drives

you nuts.

We are not really accomplishing anything, other than keeping all

these bureaucrats in business and keeping——

Mr. BOWE. Correct. The thing I would add on top of that is that

we end up trading new program and another set of regulations for

the same situation, before the first one actually takes effect. So, before the Clean Air Act fully becomes in effect, which will take anywhere in the next 5 to 8 years, we will see another set of regulations on top of that.
39

Mr. MCINTOSH. Thank you.

Mr. Gutknecht, did you have any questions?

Mr. GUTKNECHT. No, Mr. Bowe has done a great job, and I know

there are a number of other people that want to testify, so I will

let them come up and share with us.

Mr. BOWE. Thank you.

Mr. MCINTOSH. Thank you. Thank you very much.

For our next witness, we are going to change the order slightly.

Mr. Miles Brand, president, the new president of Indiana University. I appreciate you joining us today. I know there are a lot of

IU fans in the audience and throughout Indiana. Thank you for

joining us, and please share with us some of your experience on

costs of regulations in providing higher education.

STATEMENT OF MYLES BRAND, PRESIDENT, INDIANA

UNIVERSITY

Mr. BRAND. Thank you. I very much appreciate the opportunity

to be here. Thank you, Representative McIntosh, and also the distinguished panel members. I appreciate the opportunity.

Before I begin, I would like to personally commend Representative McIntosh for his leadership in addressing the problems of overregulation and the need for bringing prudence and common sense

into the Federal regulatory arena. I thank you gentlemen, as well.

Regulatory reform is absolutely essential to improve administrative efficiency within the Federal Government to streamline regulatory activity outside the Government and eliminate duplicative

process. My comments this morning will focus primarily on the

State Post-Secondary Review Program, or SPRE, an egregious example of onerous regulation imposed by the Federal Government.

I have also submitted a 17 page document from Indiana University that illustrates the areas in which we have additional strong

regulatory concerns. When the SPRE program was approved, the

intent was to control fraud and abuse in the use of Federal student

financial aid moneys. I fully support the intent of the Congress, but

4 year, degree granting institutions are adversely affected in a

number of areas by the new regulations issued by the U.S. Department of Education, which implements the SPREs.

Since Title IV funds are involved, the statute covers all post-secondary institutions receiving those funds, including proprietary and

2 and 4 year degree granting institutions. It is widely agreed that

the fraud and abuse in question are found primarily among proprietary institutions, particularly in regard to repayment for Federal

student loans.

Thus, my colleagues and I believe that the inclusion of a broad

spectrum of colleges and universities in the program distorts the

original intent of Congress. Moreover, regulations adopted by the

Department of Education have broadened the scope of the SPREs

beyond the statutory authorization by intruding into academic affairs in a way not required by the statute, and imposing significant

and counterproductive burdens in recordkeeping and reporting, and

causing needlessly high compliance costs. For Indiana University,

estimates for compliance run as high as $500,000 to $1 million a

year, incremental moneys.
40

Let me illustrate three specific examples of the adverse effects

for 4 year institutions overburdened by SPREs.

First, SPREs receive power to monitor academic matters that are

properly under the jurisdiction of faculty, administrators and

boards of trustees, and that have never been the province of external Government agencies.

For example, some SPRE standards seek to monitor faculty credentials, course content and frequency of course offerings.

Second, SPREs require recordkeeping of a magnitude that is not

cost effective, and may in some cases not even be feasible for 4 year

institutions. An illustration is recordkeeping regarding the rate at

which graduates find employment in their occupationally specific

programs.

While we can often, though not always, track initial employment

of our students, once they leave campus, it is inordinately difficult

to follow the career paths of our former students. Meeting such recordkeeping requirements would require a financial outlay disproportionate to any potential benefit to students, the institutions

or the government.

Third, SPRE has imposed inappropriate measurements that may

interfere with an institution’s ability to serve students of varied

backgrounds and educational objectives, which would create a potentially false picture of the institution’s quality. Illustrations are

the minimum standards and acceptable percentages for graduation

withdrawal rates.

Graduation rates are directly dependent upon the population

that an institution serves. For example, those institutions with a

commuting adult student population will have a lower graduation

rate than one serving tradition 18 to 24 year olds in a residential

setting.

The original intent of Congress is clearly correct in its effort to

curb abuses in student financial aid programs. However, it is widely held that 4 year institutions such as Indiana University are generally not guilty of such abuses, and that existing audit and program review processes in the U.S. Department of Education are

adequate to resolve compliance problems at such institutions.

I am pleased to note that the U.S. House of Representatives is

taking action on this matter in the recently passed rescission bill.

Unfortunately, the Senate continues to recommend funding for

SPREs that will yield the problem cited as well as others. The right

course, it would seem, is to forthrightly address the problems with

proprietary institutions, and not cast the regulatory net so wide

that it creates more problems than it solves.

Elsewhere at the college and university level, the burden posed

by over-regulation is tremendous. I have submitted a two page

summary of regulatory challenges we face, and these range from 60

new regulations issued by the Department of Education since 1994,

alone, to increased encroachment by the Internal Revenue Service

in taxes, income and benefits. Other instances of over-regulation

include myriad environmental, safety and health regulations and

overzealous certification procedures for research.

I welcome the opportunity to work with you and others to identify these areas and to propose appropriate remedies. Let us be

clear that my intention is not to absolve colleges and universities
41

from appropriate oversight, compliance and audit activities by the

Federal Government.

I am simply urging that these regulatory activities not exceed

reasonable bounds in achieving the overall desired outcomes. I

thank you, and I am happy to answer any of your questions.

Mr. MCINTOSH. Thank you very much, Dr. Brand. I appreciate

you joining us here today. Two things, really, one fairly specific on

the SPRE and one general.

The specific on the SPRE, if we simply address it as a funding

matter, would you not still have a problem with the statute being

in place and possibly providing an opportunity at some future date

to see these regulations be resurrected or have a legal mandate to

still follow through with many of them? So, we may need to go in

and change the organic statute on that.

Mr. BRAND. I agree entirely. I think that as a stop gap measure,

no funding would be the best course, but I believe over the long

run, you are exactly right, Congressman, that the regulation itself

is overburdening, and suggests inappropriately to State, as well as

Federal agencies, that this kind of regulation is productive. It is

not.

Mr. MCINTOSH. The other question which is more general and

may be difficult to give us an empirical answer, but as these regulations are applied to your university and other institutions of

higher education, is the ultimate effect that tuition needs to be increased, or you have got to find sources of funding to be able to pay

for the overhead to comply with a lot of these?

Mr. BRAND. Congressman, you are exactly right on that count, as

well. As you know, States for various reasons, understandably, but

for various reasons, are backing out of their commitments to supporting public higher education. As a result, more of the burden is

being shouldered by students.

Here in Indiana, we have gone from about less than a third or

approximately a third of a cost of public education in the State on

students’ shoulders up to 43 percent, and that is increasing. One

of the reasons it is increasing is needless regulation. You are absolutely right, sir.

Mr. MCINTOSH. So, if we can address this problem of needless

regulation, students can expect to see some benefit in the amount

of tuition they would have to pay?

Mr. BRAND. It will decrease the rate of which we have to increase

tuition.

Mr. MCINTOSH. That is known as a cut in Washington. Thank

you very much, Dr. Brand.

Mr. BRAND. Thank you.

Mr. MCINTOSH. Any questions?

Mr. PETERSON. I hesitate to put you on the spot, but we get put

on the spot all the time. You said that the Department of Education put 60 regulations on you just recently?

Mr. BRAND. Yes.

Mr. PETERSON. Does your university or the group that you are

associated with have a position on abolishing the Department of

Education?

Mr. BRAND. I do not have a position on that, but I should note

in the last couple of years, that the Department of Education,
42

under the current leadership in the Department of Education, has

accelerated the regulatory burdens, without question.

Mr. PETERSON. Your association of universities has not—I had

not thought about it until we were sitting here——

Mr. BRAND. From my own personal view or from Indiana University’s point of view, I do not have a position on that.

Mr. PETERSON. You are not aware of whether your overall group

has taken a position on that? You are a land grant university?

Mr. BRAND. Excuse me, sir?

Mr. PETERSON. You are a land grant university?

Mr. BRAND. No, we are not.

Mr. PETERSON. Oh, you are not?

Mr. BRAND. No, but we are members of the Association of American Universities.

Mr. PETERSON. Have they taken a position on it?

Mr. BRAND. I do not know. Probably, they would support the Department of Education, but I have not—my guess is, they would

continue to support it.

Mr. PETERSON. Even though they are putting 60 new regulations

on you?

Mr. BRAND. We have seen in the last couple of years, the Department of Education, unfortunately, enhance that. I think, with a

much more common sense approach, we can bring things back to

reason.

Mr. PETERSON. Thank you.

Mr. MCINTOSH. Thank you, Dr. Brand. Very well done.

Mr. GUTKNECHT. I know you want to run and we have other people to hear from, but I just wanted to commend you for coming forward and testifying today. I could not help but think as you were

testifying, first we heard from a newspaper publisher, someone

from the media, and now from academia. I think perhaps now we

are finally reaching a critical mass here, so we can really launch

a real offense relative to this over-regulation.

I think when you have even university presidents saying enough

is enough, then clearly we have reached that point. I appreciate

your coming forward.

I would also echo the comments of Congressman Peterson, that

I think perhaps the University Association should look at the whole

issue, because the Department of Education is a classic example,

in my opinion, of bureaucratic inertia, where it just continues to

grow, where it reaches a point where I think, my observation is in

terms of value added for the average student, for the average family, it is hard for me to argue that we are getting real value for

the student from that department. It is one that is high on our list

to at least examine whether or not it should continue to exist. I

think the universities ought to ask themselves that question, are

they really adding value to the students in the long run?

Mr. BRAND. Fair enough. We will. I want to thank you and the

entire subcommittee for looking at the issue of over-regulation. I

am pleased to learn it was a critical mass building to be able to

deal with this quite important issue, and thank you again for the

opportunity.

Mr. MCINTOSH. Thank you. I appreciate that very, very much,

Dr. Brand.
43

As you can see, the freshman and the Blue Dog Democrats are

stirring things up in Washington, and asking the questions that

heretofore have not been put on the table.

Let me now go back to the order we were in, and call forward

Mr. John Keach and Mr. Jerry Baumgartner. Mr. Keach is president of Home Federal Savings Bank and Mr. Baumgartner is president of Tri-County Bank and Trust Co.

Thank you both for joining us today. Many consumers of your

product do not realize the amount of paperwork and cost that the

regulatory process imposes ultimately on them, as they have to pay

for the services that you provide, so I appreciate you coming forward and sharing that with us.

Mr. Keach, would you like to lead off?

STATEMENT OF JOHN KEACH, JR., PRESIDENT, HOME

FEDERAL SAVINGS BANK

Mr. KEACH. I would. I just wish that we could have kept those

binders here probably for the whole day. We could all just kind of

swap them around, because what I am going to talk about also pertains to that a little bit.

I am John Keach, president of Home Federal Savings Bank, $570

million savings bank, focusing on consumer and business banking

services in certain markets in south central portions of Indiana.

The bank does business through 15 full service offices and one

loan production office. Home Federal Bancorp is organized as a

unitary savings and loan holding company, and owns all the stock

of Home Federal Savings Bank.

The Federal Deposit Insurance Corporation Improvement Act of

1991, FDICIA, is a far reaching regulation that touches on many

facets of the financial industry. My remarks today will focus on

only two pieces of this cumbersome legislation.

Section 112 of FDICIA, the Congress added Section 36, Early

Identification of Needed Improvements in Financial Management,

to the Federal Deposit Insurance Act, as part of the Federal Deposit Insurance Corporation Improvement Act of 1991, Section 112,

which became law in December 1992.

The rule intended to facilitate the early identification of problems

in financial management through annual independent audits, more

stringent reporting requirements and internal controls. Institutions

with assets greater than $500 million are required to take the following actions: conduct annual independent audits, appoint independent audit committees of outside directors, report on and assess

management’s responsibilities for preparing financial statements

and establishing and maintaining internal control structure and

procedures for financial reporting and compliance with designated

laws and regulation.

We must also have an independent accountant attest to and report on the assertions of management’s reports concerning internal

controls.

The requirement that an independent accountant must perform

an examination level attestation audit has proven to be expensive,

as I am going to explain. It is time consuming and in many instances, redundant. I say redundant, because we are already subject to the Office of Thrift Supervision examination covering safety
44

and soundness, compliance, data processing and CRA. Three years

ago, we had three of the four of these examinations going on at the

same time.

In addition, we have the FDIC, and of course, our external auditors coming in annually to oversee our work. We also employ an

internal audit department of four people. The cost to comply with this attestation requirement is $47,000

for us in our first year of implementation to the outside auditors,

plus $20,000, which is estimated at about 15,000 man hours in

staff time.

This increased the cost of last year’s audit by 80 percent over

what it would have been without the FDICIA mandates. Here is

what we received. A four paragraph letter from our auditors, three

paragraphs of which were honestly written by their attorneys to

take them off the hook if they missed something, and one paragraph that says we comply in all material respects. That was it.

That was the $67,000 worth.

Copies of this letter were sent to the FDIC and OTS. I assume

they were reviewed by someone, although I do not know for sure,

because we have never been asked by the FDIC or the OTS to comment on this part of the audit.

The point is this. We are audited and examined so much that it

is becoming increasingly difficult for us to find time to focus on new

products and technologies that can truly benefit our customers and

consumers in general.

Another piece of this FDICIA was the Truth in Savings Act, another integral part, very complex, and it was intended to provide

the consumer with appropriate information to make informed decisions about accounts at depository institutions. One important

point, though. The brokerage industry remains exempt from the

burdens of truth in savings, as they continue to offer similar products to the general public, the same products, some regulated, some

not.

One might ask, why is this regulation necessary for one industry,

but not for another? A major part of the legislation which I had

submitted to you in advance as an example had to do with the

changing of the calculation on an annual percentage rate or annual

percentage yield as it is now referred to, and I did submit this to

you. There is an example that is provided by the Federal Reserve

Bank in March 1993, and I would challenge any of you to attempt

this without a cheat sheet, and that is what the consumer has if

they are truly trying to compare rates of one institution to those

of another. While the attempt may seem simple and good, in reality, it just does not work.

Recent banking publications have indicated that changes are now

in the process of being revised again in this APY calculation, so

from the first standpoint or bank standpoint, we do the disclosures,

we do the advertising, and before we even get to really see how it

works, now they are changing it again. The cost of these regulations are not so much in dollars, but in energies that are directed

to areas that are not productive for the company or the economy

in general.

There are many cases of dollars invested with no return. When

that happens, we can either increase our product’s cost to consum-
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ers to make up for the lost revenues and opportunities, or simply

absorb the expense, which results in reduced capital, therefore, in

conflict with the intentions of FDICIA. So, there is a cycle that we

are dealing with.

One other piece that I would just like to touch on briefly in closing, RESPA, which was the Real Estate Settlement Procedures Act

started in 1974, was to provide effective advance disclosures to borrowers, settlement disclosures to buyers and sellers, eliminate kickbacks and direct escrow requirements of banks and others who

take the payments.

There is some new legislation that is out now pertaining to this

area. The latest change of RESPA, which takes effect this May, will

require banks to use what we call aggregate accounting for escrow

accounts. Aggregate accounting specific procedures for collecting

monthly escrow account deposits, provides specific arithmetic steps

to calculate escrow and mandates additional disclosure requirements, as you would expect.

These additional regulatory burdens disincent the community

bank from offering this optional escrow service, therefore giving the

first time or low income home buyer less opportunity for home ownership. This is required in a lot of the low downpayment types of

programs, which are targeted to first time home buyers or low income areas.

This scenario would be counterproductive to the Community Reinvestment Act efforts of most financial institutions.

Additional potential burdens may be borne by municipalities due

to the collection of property taxes currently being collected by local

financial institutions. Needless to say, this latest change has potential expense ramifications on our local communities.

According to an April 6, 1995 article in the American Banker, a

bill has been proposed in Congress that would shift responsibility

for the enforcement of RESPA from HUD to the Federal Reserve

Board. While I cannot speak to the benefits of transferring the

oversight responsibilities of RESPA, I would encourage Congress to

insure that any additions to this regulation are consistent with the

original intent of the law. Just by switching it to another area, I

hope they just do not reinvent the whole wheel.

Last year HUD said 90 percent of the RESPA related complaints

it received about lenders’ actions came from other lenders. Lenders

complaining about other lenders is not benefiting the consumer.

Mr. Chairman, I applaud you and your committee for your

proactive approach in combating the continued onslaught of government regulations. Thank you for allowing me to be part of the

process.

[The prepared statement of Mr. Keach follows:]
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Mr. MCINTOSH. Thank you very much, Mr. Keach. Mr.

Baumgartner.

STATEMENT OF JERRY BAUMGARTNER, PRESIDENT, TRICOUNTY BANK AND TRUST

Mr. BAUMGARTNER. I would like to thank the Subcommittee on

National Economic Growth, Natural Resources, and Regulatory Affairs for giving me the opportunity to speak to them today and for

coming to the State of Indiana to listen to our concerns.

I am president of a community bank located in west central Indiana by the name of Tri-County Bank & Trust Co. with assets of

$86 million. Our earnings last year were $1,191,000 and our tier

one leverage capital to average assets stood at 10.1 percent. We

serve communities that are anywhere from 400 people to 20,000

people in population, with the largest community being

Crawfordsville, IN.

Four years ago, when the FDIC came in to do an exam, they had

six examiners here for a period of 2 weeks. When they came back

in late 1994 to examine us, they had two examiners in for a period

of 3 weeks to do a compliance exam, seven examiners in for 3

weeks to do a safety and soundness exam, and then in January,

two more examiners came back and spent an additional 4 days

doing an EDP exam of the bank.

Generally, whenever an exam team is in, you can assume that

one of our officers and many times it is usually a senior officer, is

tied up talking to one of the examiners for the entire time the

exam team is here. This is almost never productive time for our

shareholders, because we cannot be providing services to our customers during that time.

In the last exam, one examiner spent approximately 2 days calculating the tax liability on earnings up in the holding company to

see whether or not the holding company was paying its quarterly

tax assessment to the bank. Total investment income in the holding company through the first 9 months had only been $2,161. The

examiner then wrote this up as a violation, as an unsafe and unsound practice, because we had been making a loan to the holding

company according to the examiner, without a note, a promise to

pay, signatures of those obligated to pay or an interest rate.

Our policy, which had passed all previous exams since 1986,

states that the estimated taxes will be borne on an appropriate

split between the companies, except when an immaterial amount

of $5,000 or less is due on the estimated payment dates. With total

income of only $2,161, we thought we were well within our policy,

and that it was not a significant item, considering that we had $9

million in capital.

We are a one bank holding company. Regulations need to have

some common sense to them. If it is not a significant amount of

money and it does not materially affect the overall situation of the

bank, why then would anyone spend any time and write up such

an insignificant complaint and waste an hour of my time discussing

it with me?

Also, when the examiners were doing the CRA exam, one of the

comments they made was that CRA really was not expensive to the

bank. It could not have cost the bank more than $7,500 or $8,000
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to maintain this file and do the paperwork. I questioned this figure

in my own mind, and quickly decided that what we would do would

be to keep track of our time and the effort that would go into putting together the CRA report for the board of directors for the first

quarter of 1995.

In calculating the cost for the quarter, we took all the time and

effort of all of our officers and employees and multiplied it by a figure of four. Our cost for the year 1995 for CRA will be $79,481. In

the CRA Act, it states that the bank will maintain a file that customers can come in and look in your CRA report.

Mr. MCINTOSH. Mr. Baumgarten, can I ask you to just go ahead

and summarize, so we can make sure we can get everybody in?

Mr. BAUMGARTEN. OK. During that time, in the last 11 years, we

have never had a customer come in and ask whether or not they

could look at our CRA report, and they have never filed a complaint.

It has become an extremely expensive process, and what we really need to do is get rid of the CRA. It does not serve our community, and I would much prefer to take that $80,000 expense and either pay it out to my depositors in added interest, or reduce the

expense to my borrowers, because they are ultimately paying the

costs.

[The prepared statement of Mr. Baumgartner follows:]
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Mr. MCINTOSH. Thank you. I would appreciate hearing from both

of you. One of the things I noted was that a lot of the costs are

borne by the smaller institutions, much more disproportionately,

and often times, you are the ones who really serve a lot of our

smaller communities and rural areas, which is where I represent,

and all three of us have a lot of that in our districts.

One thing Mr. Keach mentioned was that sometimes it is your

competitors who end up filing the complaints and reviewing the

process, and you wonder if Government is really being set up to

interfere with the competitive marketplace, and I appreciated you

noting that to us, Mr. Keach.

Thank you for coming. Any questions?

Mr. PETERSON. Well, I would just say I am a CPA and I used to

audit banks, but I am also in favor of a flat tax and abolishing the

IRS.

Mr. KEACH. We have nothing against our CPAs.

Mr. PETERSON. I understand. You must feel, did you go through

the whole debacle with the savings and loan?

Mr. KEACH. We did.

Mr. PETERSON. And you survived?

Mr. KEACH. We did, as did all in Indiana. Indiana is a very

strong State from the capital standpoint.

Mr. PETERSON. It is kind of ironic when the Government on one

hand tells you to change your accounting rules so they do not tell

the truth, then they turn around and put all this burden on top of

you. A lot of us also support getting rid of the CRA. We are trying

to get rid of it.

Mr. KEACH. Thank you, good.

Mr. MCINTOSH. Thank you both for coming. I appreciate that,

particularly mentioning the CRA and getting rid of it.

Now, we will get to Mr. Jeff Robinson, who is with the Indiana

American Water Co. Is Mr. Robinson here? Great. I know because

he came in to see me in Richmond, they have a facility there, but

they also have a very effective presentation on a lot of the work

you are doing to make sure we have clean water and a clean environment, but also the highest standards of health in our safe

drinking water.

I appreciate you coming here today and sharing with us your

company’s experience in some of these regulatory areas.

STATEMENT OF JEFF ROBINSON, DIRECTOR OF WATER

QUALITY, INDIANA AMERICAN WATER CO.

Mr. ROBINSON. I appreciate the opportunity. My name is Jeff

Robinson and I am with the Indiana American Water Co. Indiana

American Water Co. is a water utility serving approximately

500,000 people in the State of Indiana. We are a subsidiary of the

American Waterworks Co., the largest investor owned water utility

in the United States, serving 6 million people in 21 States.

As director of water quality for Indiana American, I am able to

speak personally about the company’s commitment to meet all safe

drinking water regulations. We take pride in the quality and reliability of our operations.

Indiana American is fortunate to have the resources to cope with

the myriad of regulations and requirements set by the U.S. Envi-
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ronmental Protection Agency. Drinking water regulations are technically complex. Many public water systems, especially the small

ones, have difficulty meeting the regulations and often do not know

what is required of them.

There is a proposed drinking water legislation that adds significantly to the cost of treating water, but provides marginal, if any,

benefit to the customer. Proposed regulation for radionuclides is a

very good example of this. There is widespread agreement among

State health and radiation protection agencies, the scientific community, water suppliers and other Federal agencies that the EPA

has overestimated the incremental benefits associated with a proposed maximum contaminant level while underestimating the cost

of compliance.

A study published in the American Waterworks Association Journal estimates the cost of installing and operating radon removal

technologies across the United States will amount to $2.5 billion

per year, with more than two-thirds of those costs being borne by

very small water systems that serve 500 or fewer people.

A report to the EPA Science Advisory Board in 1993 states that,

‘‘The overall risks associated with radon in drinking water are

small compared with the average radon exposures due to indoor

air, and the drinking water risks should be placed in context with

other radon risks.’’ Setting a maximum contaminant level of 3,000

pic/L would result in water contributing no more radon to indoor

air than is currently present in outdoor air.

Proposed legislation for arsenic demonstrates another example of

extreme legislation. The USEPA has discussed lowering the MCL

to a point between 2 and 20 parts per billion. USEPA estimates

that the initial compliance cost for a level of 20 parts per billion

could run $140 million, while a lower MCL could run as high as

$6.2 billion, and affect 60 percent of all public water systems.

Furthermore, current technology does not allow us to accurately

quantify arsenic at 2 parts per billion. This is an example of regulating beyond the capabilities of current technology.

There are three other rules proposed that concern us. These are

the Disinfectant/Disinfection By-Products Rule, the Enhanced Surface Water Treatment Rule and the Information Collection Rule.

These three rules address complex and interrelated issues. They attempt to balance the risk of microbial disease, such as the Milwaukee Cryptosporidium outbreak, against the risk associated with disinfectants and their by-products. I might mention that

Cryptosporidium and Giardia are two of the primary concerns with

drinking water industries throughout the United States. They are

microscopic parasites, and they are of very significant health importance.

At this point, little is known about the occurrence of most disinfectant by-products and the lack of knowledge regarding treatment effectiveness for disinfection by-product control inhibits sound

regulatory decisionmaking. For this reason, the rule is implemented in two stages.

American Water Systems oppose the implementation of stage two

of the Disinfectant/Disinfection By-Product Rule. We believe that

there are not enough health effects data currently available to justify the levels being proposed. Setting a disinfection by-product
58

standard too stringent may compromise the ability of many water

systems to effectively treat for Cryptosporidium and Giardia.

The proposed Information Collection Rule is intended to provide

data to further support regulatory development of the proposed

Disinfectant/Disinfection By-Product Rule and the Enhanced Surface Water Treatment Rule. This rule is perhaps the most significant nationwide effort ever proposed to compile water quality data

over a fixed time period.

Public health is better protected by spending resources on improving water quality than on performing the tests required by the

Information Collection Rule. The test for Cryptosporidium is poor

and cumbersome, and not all labs can perform it reliably. Utilities

using a poor lab may receive inaccurate results, because finding

oocysts is very unlikely with inaccurate techniques. Testing does

not protect public health. Treatment does. The EPA should concentrate efforts on developing the proper treatment method, and

not proceed with the Information Collection Rule.

Experience being gained by the American Waterworks Systems

and others reveals that certain treatment changes can improve removal of Cryptosporidium. American Water subscribes to the Partnership Program, a voluntary agreement between USEPA and public water systems throughout the USA. The program is designed to

address concerns surrounding Cryptosporidium and Giardia. EPA’s

goal was to enhance the treatment of surface water provided to a

population of 75 million people.

Concerned water utilities serving over 79 million people, signed

on to support the program prior to the public announcement. This

illustrates the commitment of the water industry to continuously

provide the highest quality water possible to the public without

regulatory mandates.

Legislation such as the examples I have cited have a monetary

cost, but there is another cost, as well, the cost of lost opportunity.

Every moment we spend treating, testing or otherwise complying

with unneeded regulations, we lose the opportunity to direct our

time and energy toward efforts which truly enhance the quality of

our water. Thank you very much.

Mr. MCINTOSH. Thank you very much, Mr. Robinson. Let me

make sure I understand the implication of what you are saying, because I think it is quite significant. The current regulations in safe

drinking water misdirect much of the cost that you have, so that

it is not spent on addressing one of the major health threats that

we potentially could have in this country, Cryptosporidium?

Mr. ROBINSON. That is correct, especially with the Information

Collection Rule, which is a very complex rule. That is designed to

collect data nationwide to address Cryptosporidium and Giardia,

and the point is, there is enough research available to show that

there are Cryptosporidium and Giardia in all surface waters

throughout the United States, and our treatment and our focus

needs to be on what does it take to effectively treat for

Cryptosporidium and Giardia, rather than do a nationwide, very

expensive survey.

Mr. MCINTOSH. So, a company that might not have as much resources as your company, more limited resources, would end up by

law having to spend them to comply with that regulation, and may
59

not do the most effective job they otherwise would be able to in

combating that health threat?

Mr. ROBINSON. That is exactly right. They will spend their time

and resources toward doing this nationwide survey, and we know

that the Cryptosporidium are there. They need to direct their attention toward what does it take to treat this organism.

Mr. MCINTOSH. So, it is kind of a classic example of where a Government regulation potentially makes it less safe for the consumer?

Mr. ROBINSON. Well, very possibly, especially when there are inaccurate techniques involved, and even detecting Cryptosporidium.

What you are going to have, you are going to have a nationwide

survey looking at Cryptosporidium in source waters and finished

waters. They are not going to find it, because of the inaccuracy of

the results, and they are going to gain a false sense of security.

Mr. MCINTOSH. I really appreciate your coming today, because

we have been attacked a lot in Congress for trying to cut back on

these regulations, and one of the claims was that we would create

unsafe drinking water in the country. I have always been suspicious that the current Government regulatory apparatus in that

area and in food safety misdirected a lot of the effort and the resources, and your experience and information there would be helpful to us in letting the public know exactly what has been going

on.

Mr. ROBINSON. I appreciate sharing it with you.

Mr. MCINTOSH. Thank you. Any questions from any of the other

panel?

Mr. PETERSON. During the subcommittee hearings on the moratorium bill, we got into quite a discussion about these

Cryptosporidiums or whatever they are called, and some members

of our subcommittee told us that unless the EPA was able to go

ahead with this rule, and unless the EPA passed the rule, we were

not going to be able to fix the problem.

In other words, if you at the local level could not do this, that

you had to have the EPA do it, and you are disputing that?

Mr. ROBINSON. Unfortunately, most of the information that is

being required to be collected by the Information Collection Rule

has already been collected, and we know the occurrence of

Cryptosporidium and Giardia. What we need to do is focus on what

does it take to provide adequate treatment for Cryptosporidium

and Giardia.

Mr. PETERSON. I wish you could have been at the hearing and

straightened out Mr. Waxman for us.

Mr. ROBINSON. I would not mind sharing that information with

you.

Mr. MCINTOSH. I always suspected that if we could have these

things out of Washington, we would get better information. Thank

you.

Any comments, Mr. Gutknecht? Thank you very much for coming, Mr. Robinson.

Mr. ROBINSON. Thank you very much.

Mr. MCINTOSH. At this point, we are going to turn over to the

next segment in the hearing process, something that I have been

looking forward to and think will be quite valuable. It is what I

think of as the open mic part of our field hearing. I would like to
60

invite anybody from the audience to come forward and discuss or

address any regulatory issue that you may have or think that we

have forgotten.

Karen Barnes, who is there with the microphone, can come to

you and make sure that you will be heard and recorded, so that

testimony will be taken back with us to Washington. If you would

be sure and let us know what your name is, so that we can get it

for the official record and I might ask you afterwards to go over

and make sure they have spelled it correctly and everything, so

that they can take that back to us.

Mildred tells me that the best thing is just to raise your hand

and Karen can go to you, and if you could stand up as you are

making your statement, I think that will help everybody hear you.

Yes.

STATEMENT OF BOB SARGENT, MAYOR

Mr. SARGENT. My name is Bob Sargent, and I am the mayor.

Mr. MCINTOSH. How do you do, Mayor? Good to see you.

Mr. SARGENT. Good morning. Appreciate your coming here. I do

not know, I guess, what a Blue Dog Democrat is.

Mr. MCINTOSH. We think a Blue Dog Democrat is one that has

been squeezed till they turn blue. A yellow dog—we feel like that

sometimes.

Mr. SARGENT. In the late 1970’s and early 1980’s, going into

Bramfield, a four county landfill was located out in Fulton County.

We hauled sewage. We had permits to do that. The landfill was

permitted. Then, they decided to close that facility and then they

made us a PHP—potentially harmful——

Mr. MCINTOSH. Go ahead and explain to everyone else. That is

under the Superfund Act?

Mr. SARGENT. Yes.

Mr. MCINTOSH. You could be potentially held liable for the entire

clean up as a result?

Mr. SARGENT. Yes, but they decided that they would do it by volume, and we put tons of sludge in there, which was really inert

material, used as fertilizer.

So, they wanted us to pay $160,000 a year. We were looking at

over $2 million for the city of Kokomo for closure of this landfill.

We wanted to take the leaching from that landfill, bring it to Kokomo and run it through our sanitation plant, which legally you can

do under EPA regulations.

In fact, we ran some hazardous material through our sanitation

plant for EPA, when they were cleaning up the—steel plant. Now,

we wanted to take that leaching, run it through our wastewater

treatment plant, which we did have, and they said we could not do

that.

Now, the manhole they wanted to dump it in was offsite the

sewer plant. That would be OK. I mean, it is just absolutely ridiculous. It would be humorous, really, if it did not cost us a couple of

million dollars and maybe more.

Mr. MCINTOSH. Let me make sure I have that correct. You could

take that leaching and you could dump it into the manhole or if

it were in the manhole, you could process it?
61

Mr. SARGENT. We do that all the time with the leaching from the

landfill in Rochester, and it helps us offset our costs, and they say

we cannot do that.

Mr. MCINTOSH. They will not let you take it directly to the plant

to be able to treat it?

Mr. SARGENT. No, and we tried just outside the plant, and they

said no——

Mr. MCINTOSH. Let me ask you this, Mayor, if you have to comply with the clean up costs in that area, who ends up paying that

bill?

Mr. SARGENT [continuing]. Kokomo is the largest employer. I

cannot recall the other PRT’s in that.

Mr. MCINTOSH. If the city has to pay any part of that bill, then

ultimately, it would be the taxpayers of Kokomo?

Mr. SARGENT. Sure, we are paying $160,000 a year right now. A

minimum of $2 million, that is less sewers we can build, police officers we can hire, you know, all the things that people need. They

are taking the leaching from the four county landfill, putting it in

a truck, and hauling it to Ohio, at a cost of $275,000 a year, and

are putting it in a hole in the ground in Ohio, untreated. We call

it the—of Ohio. That is absolutely ridiculous.

Mr. MCINTOSH. I will tell you, it makes you a lot more sympathetic to Senator Coat’s proposal to not allow interstate transportation of this.

Mr. SARGENT. Absolutely. Thank you very much.

[The prepared statement of Mr. Sargent follows:]
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Mr. MCINTOSH. Thank you very much, Mr. Mayor. Appreciate it.

Any comments.

VOICE ONE. Thank you. My name is—we currently have 18 sewers and over 3,300 associates and—cardboard bailer. We have had

two instances of hazardous complying by OSHA. One of the problems I have had is that as a means of their investigation, what

happens, I am visited by a labor representative, a representative,

and they proceed to call the people—even throwing the boxes away

instead of operating the bailer.

Based on the number of responses I get back, they do a little bit

more investigation, then they come to us saying, these paper or

cardboard, we are going to view these as signs of OSHA violations.

In 1991, the first cite from this 6 of the 14 individuals that they

cited us for were among our employees at that time, and one of

them had—for over 5 months previous to their investigation. At

that time, our fine started at $32,000. We went to OSHA, had a

hearing, and we were fortunate to have it reduced to $17,000,

$1,000 of that for—$16,000 for compliance.

Recently, $1,000 for an occurrence, up to $10,000 for occurrence.

Three months ago, we were cited again and we were fortunate to

be fined only $1,200 a person.

One of the things we do at our company is safety. A lot of the

16 and 17 year olds we have employed are part of our work force,

employee orientation and all that.

Over 3,300 people, some of them teenagers, there is no way we

can have someone follow them around, check and make sure they

are throwing boxes or not. I really appreciate you coming.

Mr. MCINTOSH. Thank you very much. Let me just make sure,

if you have somebody who is 18 years or older, then you will not

get fined if they——

VOICE ONE. If they are over 18 and they throw something, they

are not—it is not a violation.

Mr. MCINTOSH. So, if I were you, I would start not hiring people

who are 16 and 17 year olds, because I would not want to pay the

fines. But, then, our high school kids would not have a chance to

have a job after school. It seems like it is kind of misdirected in

some of the efforts there.

VOICE ONE. Yeah, like I said, we have to keep our doors open.

Mr. MCINTOSH. I know Steven Austin who works for me started

out his life as a check boy at one of the stores in Muncie, and look

where he has gotten. But, I think he survived OK, and I am sure

had to operate some of that machinery. I appreciate you bringing

that forward.

I remember reading before we left on break that one of the Members of Congress had introduced a bill to try to get that corrected,

and I will look into that. Any suggestions or comments from my

colleagues? That is a good example of something maybe we can

take up on Corrections Day. Thank you.

I appreciate all of the enthusiasm, and probably will not ask too

many questions so we can get to as many people as possible.

Mr. HEDDERICH. Good morning. My name is Tom Hedderich and

I am currently serving as president of the Indiana Association of

Mortgage Brokers. We are an affiliate of the National Association
67

of Mortgage Brokers, which is responsible for the origination of

about 49 percent of all home mortgages last year.

I would like to speak to you about the Home Ownership and Protection Act, more commonly known throughout the industry as the

act, the rules were published October 1, and it is written—lending

in a high risk market. The act amended the Truth in Lending Act,

the purpose of which is—consumer created disclosures and not in

terms of costs.

This act should be repealed. It obstructs the flow of credit by—

Truth in Lending has specified that this regulation does not govern

charges for consumer credit. Yet, by setting arbitrary, high cost

rates, we have established—many lenders who have attempted to—

disclosure requirements and various—others will leave the industry and invest their capital elsewhere.

The makers of this act presume the credit terms found in federally subsidized conforming programs are the norm. Government is

imposing restrictions on lenders that are willing to take risks the

Government will not take. This act eliminates the whole recourse

status. Mortgage capital flows through the country by a secondary

market. One of the inefficiencies of the system is—they ask owners—eliminates the whole recourse status. The result will be the

elimination of a majority of secondary funding sources, increase in

the cost of capital, and a decrease in the funds available to consumers that the act is intended to protect.

Since Congress amended RESNA in October 1992—and most

mortgages on residential properties, including those that become

high cost. These are now subject to RESNA and the disclosures

that RESNA requires. Additional regulation is redundant.

Also, this act—standard business practices, such as balloon mortgages, which will be severely limited by the act. These have been

used in many contracts for many years. They are commonly used

by bridge loans or short term notes to renovate a financial property, such as stopping a foreclosure, or moving equity from one

property to another for repurchase.

The prohibition of balloon mortgages hinders consumers who

need a short term remedy to accommodate their immediate financial need. Furthermore, this act is ambiguous. There are numerous

ambiguities in the proposed regulations. These demonstrate a lack

of understanding of the business practices of the mortgage finance

industry and a further reason for repeal of the program.

I would like to tell you also that our association supports the following bills currently before Congress. The first one is House bill

1362 from Congressman Bereuter of Nebraska. The bill will transfer authority of RESNA from HUD to the Fed, streamline RESNA

and truth in lending. It takes certain—out of RESNA and lets

truth in lending take care of problems. All of these things are very

good for investors.

Second, we support the Senate bill 660, which is the Chevy—bill

dealing with regulatory relief matters of this magnitude.

Last, we also support House bill 1380, which is sponsored by

Congressmen McCullom and Gonzalez and is a truth in lending

class action of 1995. This act also calls for more—I also would like

to commend you for having your hearings in the field, and would

like to thank you for the opportunity to speak.
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Mr. MCINTOSH. Thank you very much. Appreciate you bringing

that forward to our attention. It sounds like it is making homeowners more difficult to be able to get their mortgages.

Mr. HEDDERICH. Absolutely.

STATEMENT OF EDWARD PROBST, PHYSICIAN

Dr. PROBST. Thank you, also, for coming to the field. I am Edward Probst. I am a physician here in Indiana, and I have been

impacted and you have been impacted adversely by the—Laboratory Improvement Amendments, and I want to talk just about four

things that we try to do in our offices, which are for the benefit of

our patients.

One is—preps. Preps for fungal diseases, fungal cultures, and

reading slides. I will drop the slides, because those are prepared

and brought back and read. What normally would be required if a

patient came in and had a condition that required one of these

studies, it would be a part of that evaluation, as an area. We would

take a little slide, take it to the laboratory in the next room, look

at it under the microscope, see what we saw, go back to the room,

write in the record, tell the patient what we found, and give them

their therapy.

Under the new act, and I might mention that this is being administered by the Indiana State Department of Health, and the administrator said there has never been a single complaint of a dermatologist on any of these three subjects. Nonetheless, it is the

law, and they will make us subject to it.

So, what we have to do now, we have to create a manual that

would explain everything in detail about how we did this procedure, how we had changed the light bulb should it burn out and—

we were written up for that because we did not have a policy manual on what we would do if a light bulb would burn out. We never

worried about it. We had a light bulb in the drawer for the microscope, but we were written up because we did not do that.

The American Academy—sent us the booklet, which is—in order

to help us write the manual that we need in order to be able to

perform three studies that are necessary for you to receive adequate care at the time of your visit.

So, what we now are required to do is that we have to be registered, we have to have a manual which is over 360 pages and

took over 200 hours of a physician’s time to put together, as well

as secretarial time. We estimate probably $6,000 to $8,000 that we

have invested in order to be able to do procedures that we charge

$20 for, and we do not accumulate more than $2,000 in a year.

Also—$10,000 for taking on compliance. What I have to do is, in

order to do that procedure, I have to write a request to myself,

cause no one else does that, I am required to fill out the request

with specific information, hand it to me, re-enter the patient’s

name, identification number, eight sets, requesting physician,

which is me, laboratory, which is me, date of collection, time of collection, and then receive my ticket, and clinic location, all written

on a separate piece of paper.

This, then, has to be taken to the laboratory, where there is a

laboratory test requisition and report log, also on each patient.

Every patient who has a laboratory test that is done by us, which
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is simply looking under the microscope and writing this down.

Then, we have to rewrite the patient’s name, the doctor, the specimen collected, date and time, patient identification number, test to

be done, laboratory test, when it was performed, time of receipt

and time it was done, at the same time, and who it was performed

by, which is me, and then the results of the tests and the action

I might take.

Then, after I have done that, then I have to fill out the test request, the second part of this resultant test. Then, I can go back

to the patient and I can then write it in the chart which I would

normally have done, take the extra piece of paper, stick it in the

chart because they require that it be there, and then I can go

ahead and finish my evaluation of the patient and inform them

what I have found they could do.

If I do not decide to be under this regulation, then I have several

choices, and they are all bad for me, they are bad for the patient.

That is to take a sample, send it to the hospital laboratory where,

in the process of straightening of the small pieces they are diluted

and dried out, there is a lag in time, it can be lost, and there is

a greater chance of a negative result, because of all the time lost

and the way the sample is carried by the hospital.

If the patient takes it there, he will probably get it there within

an hour. If it is sent by courier, it would probably get there within

4 or 5 hours, which really complicates the problem.

What then happens is that the pathology department of the hospital will send a report back to me. I will receive it the next day.

I then have to reschedule the patient back in the office to go over

them with a report of what you found and then go ahead with your

procedure, not necessitating extreme expense to the patient, frustration for me, any—for general health care, decreasibility of the

likelihood of getting a positive result, and the correct diagnosis.

This is in the area where there has not been a single complaint

ever, based on any of those three procedures.

We have a law, we abide by the law, it is very difficult. We have

one partner who does a half a day practice in another community.

This regulation does not cover that. He has to redo all these in the

other location. The law makes efficient, less expensive, better quality and more accurate office care illegal in Indiana. Please help to

repeal this and get us out of this burner, so we can do what we

need to do.

Mr. MCINTOSH. Thank you very much, Dr. Probst. This was one

thing we had looked at right at the end of my time with Vice President Quayle at the Competitiveness Council, and because of a

change during the election, we were not able to forestall that.

It is also a classic example of where we are made less healthy

as a result of these Government regulations. Finally, this reminded

me that we may need to now update the old joke about how many

EPA officials it takes to screw in a light bulb. Ten—one of them

to screw in the bulb, and nine of them to fill out the environmental

impact statement. So, you now have pointed out another example

of how Government just creates busy work for us.
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STATEMENT OF NANCY FENNEY, MEMBER, INDIANAPOLIS

CITY COUNCIL

Ms. FENNEY. Thank you, Congressman. I am Nancy Fenney, a

member of the Indianapolis City Council, but today I am here—I

do not want to take a lot of time to read all of this, but I would

like to say that we feel regulations backfire on the intent of the

original law, and it is costly and burdensome and inflexible mandates on the Government.

Something I would like to share is that when you are looking at

funding or past—local level, please remember those of us at the

local level. The local government is the one that has to do the job,

and we are the ones that sometimes never receive the money. It

has to go to the State first, and local government means different

things to different people. So, I hope you will take that message

back, if you do not take any other message back today. Local government is right here, but basically, I think we have to keep in

mind, if they are going to get recommended by local government,

please send it to us.

May I comment on the flexibility in the regulations? Here in Indianapolis, we have different scales and cycles of—to put up with

these inflexible regulations, and we think that we should be encouraged to find the most innovative solution, as long as we can

meet the bottom line. I think that should be the whole thing right

there.

When you are making these regulations, if you would involve

local government in some of the discussion before—for instance, in

some regulations, EPA did listen to a group, a partnership, and

this partnership did make a difference, because EPA changed the

regulations from 1989 to 1994, and we were able to remain flexible.

This is going to make a lot of difference here in Indianapolis on

what we spend. We are estimating $300 million for combined overflows. We could save about a tenth of that, if we are allowed to do

things that are bottom line.

Also, the one thing I really would like to decide, before you do

decide on regulations, if you would—and have scientific evidence

that these hazardous fumes, before you come up with something,

sometimes something is hazardous, but it is not hazardous unless

you get a certain amount.

The other part is, we have had great success with—let us assess

the most serious areas to put our dollars, before we do little things

that are popular and leave big rifts untouched. I think that is terribly important.

Basically, I can just tell you that I wanted to be sure my testimony is heard, because I—and what is sad is EPA mandated—our

plant for solid waste, reduces—but after this mandate, many of us

felt like we were guaranteed of certain amounts of—solid waste

and flood control. My last question is, is there any congressional

help or do we have—catch 22 between mandated action and judicial prohibition? I hope you will. Thanks for listening.

Mr. MCINTOSH. Thank you. I also want to commend you for actually traveling out to Washington to bring that flow control problem

to my attention. I appreciate it when local officials are willing to

go that extra effort to try to get what is best done for the community. I appreciate you coming today.
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STATEMENT OF PAUL BLACK, EENC POULTRY ASSOCIATION

Mr. BLACK. Thank you, Mr. Chairman and members of the committee. I am Paul Black of the EENC Poultry Association and I will

be very brief. There is a new regulation this year that relates to

us in the meat processing industry. It is known as a megareg. This

is the attempt to regulate the size, taste and control to insure food

quality.

I can see for the poultry industry the same—what we are concerned about is that the—will be instituted on top of the current

regulations which make it look small. The current regulations are

more public in measure and determinance, to examine—and so

forth.

The science based approach is certainly correct in the way it

should be going, but in terms of sheer volume, we need to peel off

the first layer, first several layers before we institute the new

layer. Thank you.

Mr. MCINTOSH. Thank you. I appreciate that. Something called

a megareg is scary.

Mr. GUTKNECHT. Let me just say that coming from Minnesota,

both Collin and I have a lot of turkey processors and producers,

and we have been briefed on some of the influence.

Mr. PETERSON. I serve on the Livestock Subcommittee and I am

going to be going to six hearings in the next couple of weeks, but

we held a meat inspection school to try to get other folks to understand what is going on. We are trying to move on legislation so

what you are saying does not happen. We are going to try to hold

up the finalizing of the rule and try to see if we can get a legislative solution, so we do not lay one on top of the other.

Mr. BLACK. The members will appreciate it.

Mr. MCINTOSH. We will take your testimony, and I will send it

over to that group who is doing it, so they can put it in their official

records, as well.

Thank you. We have time, unfortunately, for just one more person. Let me ask everyone else, if you have anything in writing, we

will be able to take that, or if you could give your names to one

of the staff members, we will be sure and make sure your views

get included.

STATEMENT OF JOHN GRUNWALD, PRESIDENT AND CEO,

ENDEBURG, IN

Mr. GRUNWALD. Mr. Chairman, Representative Peterson and

Gutknecht, my name is John Grunwald, and I am the president

and CEO of the—Company in Edenburg, IN, a manufacturer of—

and lumber to be used in manufacturing furniture and architectural—I would like to talk to you about two mandates, the reorganization and administration of the Clean Water Act of 1970 and

the contradiction between the attempt of the environmental legislation and the rendition of the law.

On November 29, 1994, the David L. Rek Co. plea bargained as

the U.S. Department suggested, regarding a violation of the Clean

Water Act, because of an illegal discharge of industrial wastewater

into the Big Blue River near Edenburg, Justin County, IN.

The company denied the violation, but it cannot prove as a result

of laboratory tests, that we did not do any damage to the river and
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its ecosystem, as improper discharge was first of all minuscule in

quantity, and second, contained no hazardous waste whatsoever.

The discharge was caused by an unpermitted connection of the

drain from a long pipe to the storm sewer of the city of Edenburg.

When this charge first caused concern in 1991, instead of picking

up the telephone and directing an inquiry to top management, he

initiated an undercover investigation. As it turned out, the investigation did nothing but extend the duration of the unpermitted

discharge into the river.

The Conservation Office said the investigation would only end in

Federal criminal charges, surge water and raids on our facility by

FBI and other Federal and State agencies in 1992. Prior to the

raid, top management had no knowledge of the violation. As soon

as top management was informed, the discharge was stopped,

modifications were made to provide the discharge into the sanitary

sewer, and we reached an agreement.

Had the Government agency informed top management upon discovering the discharge, the entire matter would have been resolved

quickly and effectively. I do not disagree that some sort of fine was

in order, although the people who ordered the unpermitted connection were not aware of the fact that there actually was a requirement.

Nevertheless, the combination of fines, restitutions and probations which resulted in the agreement with the U.S. Department

of Justice—the result of the plea bargain agreement was

$1,100,000, while the company was put on a 2-year probation. In

addition, the company was ordered to pay $2,500 to the United

States of America, $250,000 to the Indiana Department of Environmental Management and $250,000 to the Fish & Wildlife Division

of the Indiana Department of Special Resources, altogether, payments of $625,000. This is an inordinately high amount of money

for such a small company, considering the extent of the violation,

and the fact that the violation itself was extended due to the cops

and robbers game played by the Conservation Office, the Indiana

Department of Environmental Management, the Indiana Department of Natural Resources and the U.S. Justice Department.

I might add that the only reason why the company agreed to settle was to prevent the possible incarceration of one or more of its

supervisors. The explicit threats made by the Office of the U.S. Attorney, documented in a letter dated July 1, 1994 by the Assistant

U.S. Attorney——

Mr. MCINTOSH. Sir, let me just interrupt you there, because we

have to close up. It sounds to me like much of the problem could

have been avoided if the Government had actually been trying to

work with you to solve the problem.

Mr. GRUNWALD. That is exactly my point. Exactly. Or, instead of

playing cops and robbers, instead of attacking the problem.

Mr. MCINTOSH. What would have happened had a requirement

to give you notice and an opportunity to correct the problem before

pursuing criminal sanctions?

Mr. GRUNWALD. The problem would have been resolved, as it was

resolved after management found out about it.
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Mr. MCINTOSH. I appreciate you coming and sharing that with

us today. If I could ask you to just make the rest of your testimony

available and any summarizing or closing statement.

Mr. GRUNWALD. Thank you very much.

Mr. MCINTOSH. Thank you. I appreciate everyone coming today,

and I apologize to those who we were not able to participate in the

session. Please do make your views available to us and we will include them in the written part of the record.

To me it is striking that we can be here 21⁄2 hours and still have

a dozen or so people who have other regulatory problems that we

need to address. It shows the magnitude of the problem.

We have had everything from pencils to bits of corn to drinking

water, as heavily regulated and often counterproductive in ways

that do not add any safety or health or environmental protections

and in some cases, may detract from that effort.

So, I appreciate the effort of the public in participating today,

and this subcommittee will stand adjourned.

Your views will be taken back with us to Washington. Thank

you.

[Whereupon, at 12:30 p.m., the subcommittee was adjourned.]

[Additional information submitted for the hearing record follows:]
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(83)

THE NEED FOR REGULATORY REFORM

MONDAY, APRIL 17, 1995

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE ON NATIONAL ECONOMIC GROWTH,

NATURAL RESOURCES, AND REGULATORY AFFAIRS,

COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT,

Muncie, IN.

The subcommittee met, pursuant to notice, at 3:05 p.m., in the

Ball Community Room, Ball Corp., 345 South High Street, Muncie,

IN, Hon. David M. McIntosh (chairman of the subcommittee) presiding.

Present: Representatives Peterson and Gutknecht.

Staff present: Mildred Webber, staff director; Jon Praed, counsel;

Karen Barnes, professional staff member; David White, clerk; and

Bruce Gwinn, minority professional staff.

Mr. MCINTOSH. The Subcommittee on National Economic

Growth, Natural Resources, and Regulatory Affairs is called to

order.

This is our first day of field hearings in what we plan to have

as a national effort to try to gather information from people around

the country about problems of Government regulations.

We have a big agenda today and a lot of people want to talk. At

the end of the hearing, I want to open it up in an open mic format

and hear from people who do not have prepared testimony, necessarily, but just are citizens who wanted to come here today.

And, so, in the interest of time, I am going to dispense with my

prepared statement. There are copies of it which you can get from

the staff.

Let me just quickly say that I want to thank two of my colleagues for coming here today.

One of them is Collin Peterson who is the ranking Democratic

member of the subcommittee. He is from Minnesota.

The other is—Gil Gutknecht—excuse me, Gil; I owe him one

there. [Laughter.]

He is one of my freshman colleagues, also from Minnesota.

And let us give them a big Hoosier welcome. [Applause.]

I will say that we had a hearing earlier this morning and found

an incredible array of problems with the regulatory system as citizens came forward. We are going to take these ideas and use them

in Washington as this Congress moves forward in tackling the regulatory problem.

Newt Gingrich has decided that there will be a new procedure

called Corrections Day, through which Congress has a chance to
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undo some of the problems that have been created with legislation

over the past.

The issues that are brought forward today will be considered by

this subcommittee as recommendations to go forward on that calendar.

We will also pass on the information to other committees who

have jurisdiction and use it in our work in some of the general regulatory issues such as the bill that we passed out of committee putting a moratorium on new regulations.

So, thank you for coming. I really appreciate the input and the

ability to hear from American citizens. And all of your comments

will be put on record.

The chairman of the full committee has asked that we swear in

all of the witnesses. Rather than do that one by one, I am going

to ask everybody today to join me in taking the oath. And then all

of the witnesses will be duly sworn in.

So, if you could all stand and raise your right hand.

[Witnesses sworn, en banc.]

Mr. MCINTOSH. Let the record show that all the witnesses were

duly sworn in. [Laughter.]

And, now, let us proceed with our first witness.

Would you like to testify from there, Betty, or would you like to

come up here?

Ms. DEVOE. Whatever you would like me to do.

Mr. MCINTOSH. I think they would like you up here for the court

record.

By the way, we apologize for the slow start, but the court reporter here was the same person who was down in Indianapolis

and he had to tear down everything before he could come up here.

So, he was not, like all of us, where we could leave immediately

and get up here and have a chance for lunch. And I appreciate your

hard work in that area.

Our first witness today is Ms. Betty Devoe, the executive director

of Westminster Village.

Ms. DEVOE. Thank you.

Mr. MCINTOSH. Betty came to me and said, you know, health

care costs are increasing dramatically in this country and we take

care of a lot of people who have Medicare as the means of payment

for their health care. Let me tell you some of the regulations that

increase the cost of the services that we have been providing.

And I asked her if she would come here today and share some

of those with us.

So, let me turn it over to you. Thank you.

STATEMENT OF BETTY DEVOE, EXECUTIVE DIRECTOR,

WESTMINSTER VILLAGE

Ms. DEVOE. David and members of the subcommittee, it is my

pleasure to be here today.

Previous to moving to Indiana, I lived nine——

Unidentified VOICE. Turn it up.

Ms. DEVOE. Previous——

Unidentified VOICE. Turn it up. We cannot hear.

Mr. MCINTOSH. Can we turn up the volume? OK.

Ms. DEVOE. Try it again? How is that?
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Unidentified VOICE. That is better.

Mr. MCINTOSH. There is feedback.

Ms. DEVOE. OK.

Mr. MCINTOSH. Thank you.

Ms. DEVOE. Thank you for letting me be here today.

Previous to moving to Indiana, I lived 9 years in Minnesota. So,

I know what your weather is like.

My name——

Mr. GUTKNECHT. It is almost spring. [Laughter.]

Ms. DEVOE. Yes, I know. I talked to my daughter yesterday.

Before he begins my time, I do have part of my staff here in the

room and also my board chairman and there may be other board

members.

My name is Elizabeth Devoe. I am the executive director of Westminster Village, Muncie. We are a continuing care retirement community serving the needs of approximately 270 elderly citizens.

Two hundred of those residents live and are residing in the residential apartment complex which is licensed by the State.

We also have a 76-bed Medicare-certified health care unit or a

skilled nursing facility or a SNF, which is what it is commonly referred to in the industry.

Our clients’ needs are important. They eventually are the people

who will pay for the increasing demands of regulatory reform in

our facility.

The Medicare SNF regulations were revised with a nursing home

reform bill known as OBRA, which was passed in 1987. It was implemented in the Nation in 1990.

And I want to bring to your attention that regulations passed by

the Federal Government have increased the paperwork and labor

costs for paper compliance listed by that reform.

I can only speak for our facility, but we saw the costs of the

health care center increase by $166,000 in 1 year. That was between 1990 and 1991. Approximately $100,000 of that would have

been additional staff and staff time to implement paper compliance.

As a licensed health facility administrator of Westminster, I have

watched my staff devote more and more time to computer programs

required by OBRA.

The majority of that time is required—2 minutes remaining—is

required for MDS.

Mr. MCINTOSH. If you would like to summarize it, we can put the

full written text into the record.

Ms. DEVOE. All right. OK. I am asking that you look into the

HCFA requirements for MDS. They are trying to get them implemented by January 1996 and they will require computer changing

across the Nation and new programs.

Also, I would like you to put a regulatory freeze on Government

regulations, the interpretive guidelines and enforcement rules that

were issued in the Federal Register, November 10, 1994 and, therefore, the name is the Survey Certification of Skilled Nursing Facilities and Nursing Facilities, the Medicare/Medicaid Programs.

Thank you very much.

[The prepared statement of Ms. Devoe follows:]
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Mr. MCINTOSH. Thank you. Betty, if you have a few seconds, let

me see if we have any questions for you.

You mentioned you thought that almost all of that cost could be

avoided and, therefore, lower the cost of your operations out there?

Ms. DEVOE. Well, I do not know that we can stop anything that

has been implemented. You cannot go back and change OBRA, but

they just keep pushing more and more on us and someone has to

say, we cannot participate in this anymore.

And our national not-for-profit association has been working with

HCFA trying to get some of this stopped. And right now, evidently,

the House was ready to go on this, but the Senate did not consider

it a priority.

But we have you gentlemen in town, so I know you can help us.

Mr. MCINTOSH. Thank you. Yes, we are discovering that.

Let me just see if my colleagues have any questions for you.

Mr. GUTKNECHT. Just one quick question, Mr. Chairman. To put

this in context. You said it would cost about an extra $100,000?

Ms. DEVOE. $100,000, because when——

Mr. GUTKNECHT. What is your total budget? I just want to——

Ms. DEVOE. What is our total budget?

Mr. GUTKNECHT. Yes.

Ms. DEVOE. $5 million, but, remember, I am running an apartment complex and then I am running a health care facility. So, the

total budget for the health care center, that year, might have been

$2.5 million.

Mr. GUTKNECHT. Thank you.

Ms. DEVOE. Mmm-hmm.

Mr. MCINTOSH. So, quickly, about 4 or 5 percent of your

costs——

Ms. DEVOE. Right.

Mr. MCINTOSH [continuing]. Are directly related——

Ms. DEVOE. Right.

Mr. MCINTOSH [continuing]. To that.

Ms. DEVOE. And it was paper compliance. And now they are

going to do it all over.

Mr. MCINTOSH. OK. Well, thank you.

Ms. DEVOE. All right.

Mr. MCINTOSH. I appreciate you coming. And that will be very

helpful to us in going forward with that. We will share it with the

Senate as well.

Ms. DEVOE. All right.

Mr. MCINTOSH. Our next panel includes two members of the agriculture community. I would like to call forward Joe Russell and

Wayne Townsend. Is Joe here?

Joe was over to our house the other night telling stories on his

colleagues in the Farm Bureau. We will not have any of those put

on the record, but I appreciate you coming by today, both of you,

and welcome to the subcommittee hearing.

I will let each of you discuss your statements and then see if we

have any questions.

Joe, do you want to go first?

Mr. RUSSELL. OK, thank you.
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STATEMENT OF JOE RUSSELL, FARMER

Mr. RUSSELL. I want to thank you for coming to Muncie, IN

where we work. It is not always convenient for us to make it to

Washington to air some of our concerns.

My name is Joe Russell and I farm 1,150 acres of corn and soybeans near Muncie, IN. My roots in Indiana and agriculture go

back six generations to 1810 when Indiana was still a territory and

my great-great-great-grandfather carved a farm out of the wilderness.

This will be my 20th year to farm and I have seen an increasing

number of regulations applied to an increasing number of aspects

of my family farming operation. I have survived weeds, insects,

floods and droughts, but probably the greatest threat to my farming operation is out-of-control regulations.

As my forefathers planted their crops, they never had to worry

about the impact of wetlands, Endangered Species Act, Clean

Water Act, Clean Air Act, OSDA, NRCS, CFSA, OSHA, EPA, FDA,

FIFRA, the Delaney Clause, Fish and Wildlife Service and the

Army Corps of Engineers. Regulations cost agriculture and consumers billions of dollars annually.

Production in agriculture employs less than 2 percent of the people, but utilizes 44 percent of the land. Thus, agriculture is on the

front lines of any regulatory implementation.

There is a saying that a well-fed nation has many problems and

a hungry nation only has one. The United States is a well-fed Nation. In fact, we are the best fed nation in the world. Yet, we worry

about every aspect of my farming operation. Not only do we worry

about, but we have a multitude of Government agencies to regulate

those worries.

The recently completed agricultural handbook, Environmental

Laws and Regulations for Indiana, summarizes regulations governing agriculture. It condenses thousands of pages of rules and regulations into 20 chapters using layman’s terms to better help today’s

farms attempt to comply with agricultural regulations.

It scares me to death to read it. And most of the farmers are not

aware of all the regulations that they are forced to comply with

today.

I jokingly told my children a few years ago that if they wanted

to farm some day, they better get a degree in law to cut through

all the red tape necessary to be a farmer in tomorrow’s world.

Today, that joke is becoming a reality.

How do the rules and regulations affect my farming operation

today? I spend more time complying with or learning about regulations than I spend planning my crops! Compliance costs time and

money, while non-compliance could lead to expensive fines, criminal charges or putting me out of business.

As part of the 1985 and 1990 farm bills, all farm land was reevaluated using aerial photographs and soil maps to assess its potential for erosion and identifying wetlands. Several Government

agencies sitting in offices far from my farm made these determinations.

Some of my land was classified highly erodible and because of

that classification, I had to purchase a no-till planter costing

$13,000.
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After several years of urging soil conservation officials to field

verify my highly erodible land, it was determined that my land was

not highly erodible.

The interpretation of one soil conservation official said it was

highly erodible and the other said it was not highly erodible. Who

am I to believe?

A few years ago I took some of Representative Phil Sharp’s legislative assistants around showing them the inconsistencies of wetland classifications. We saw wetlands that were not even close to

being wet. In fact, two of the wetlands were gravelly hill tops. Yet,

they were classified as wetlands. It restricts lands use and is a

nightmare to get it changed to a proper classification.

Let me summarize here. If I am to survive in the NAFTA and

GATT world we live in today, I must compete with farmers from

all over the world. Because the cost of land, machinery and labor

is high in this country, we must have access to new technology.

The United States leads the world in agriculture science and

technology, but I am afraid that unnecessary regulations may prevent or delay this new technology from reaching my farm.

In summary, regulations are necessary. However, Government,

by regulation, has become the fourth branch of Government.

Unelected regulators make the law, enforce the laws, serve as

judge and jury for the violators of their laws and assess penalties

and fines for the guilty. This is not what the original framers of

the Constitution envisioned.

Regulation needs to be based on good science, not emotions or

the whims of radical environmental groups. Peer review, risk assessment and cost-benefit analysis should be an integral part of all

regulations.

And I think that I am out of time.

[The prepared statement of Mr. Russell follows:]
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Mr. MCINTOSH. Great. I appreciate that very much. Thank you,

Mr. Russell. We will get back to you with some questions.

Mr. Townsend, I thank you for joining us today.

STATEMENT OF WAYNE TOWNSEND, FARMER

Mr. TOWNSEND. Thank you, Chairman McIntosh. Thank you for

coming to Muncie. I deeply appreciate this. And thank you for the

invitation to appear to discuss the concerns that we have about

regulation and agriculture.

I am Wayne Townsend. I am 68-years-old. I have farmed all my

life in Grant and Blackford Counties near Hartford City. We raise

corn, soybeans and wheat and specialize in hog production.

Twenty-two of those 68 years, I spent as a State legislator in Indiana, actively participating in the lawmaking process.

As a legislator, if I fail to respond to the public, they have an opportunity to pass judgment on me at the ballot box.

My observation of regulation writing and rulemaking is that it

is a bit different. I am not sure what constituents say that I respond to.

In September 1988, we purchased an adjoining farm of 535 acres

at a public auction from a State university. That farm had been

used for 50 years in experimental pasture research.

Although some drainage work had been done in that time, there

were a few trouble areas that were a concern to me because of an

outlet problem that had not had attention. The previous owner,

years before, had ditched the farm, but the outlet had not been

cleaned.

Prior to the purchase in August 1988, I asked a local office of

SCF to come to the farm and assess the potential wetland problems

we might have. And upon that visit, three areas were noted totaling 4.4 acres, which 2.6 acres were uncultivated land.

In December 1988, after the purchase, another technician from

the same office officially noted seven areas totaling 14 acres in size

and later expanded that to 221⁄2 acres instead of the original 4.4.

In the spring of 1989, I began an appeals process through the

area, State and Federal offices of Soil Conservation. A final determination was made in the summer of 1989. Each level had a different approach or different findings.

We have had, at this point, one failed litigation procedure where

we offered to develop permanent water pools, but that was rejected.

Since the final appeal, we have farmed around three spots—one

2.2 acres in size, one .4 of an acre and another .4 of an acre in size.

These are out in the middle of a 135-acre field.

Now, what is to be learned from this? Well, in the first place,

there has got to be a better way.

There has been no real agreement on what constitutes a wetland.

We thought it took the presence of water. We were wrong. [Laughter.]

And I quote from the letter from more than one official, ‘‘The

water pool, if any, of a wetland does not determine the boundaries

of a wetland. A wetland boundary is determined by the presence

of hydric soils and hydrophilic vegetation.’’
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Now, if that is the criteria, I have 1,200 acres I am really concerned about because it is hydric soil and occasionally you find hydrophilic plants.

Today, 10 years after the passage of the 1985 farm bill, the first

mention to wetland issue, there seems to be no generally accepted

agreement on what a wetland really is among the EPA, the Corps

of Engineers, the Fish and Wildlife, National Academy of Science

and the Natural Resources and Conservation Service.

The present policy is driving a wedge between the Natural Resources and Conservative Service and the farm people of this country. For years, the SCS and farmers have been partners in progress

and worked closely together to accomplish very much in the way

of being better stewards of our soil, but this role that the SCS has

been placed in makes them an unwelcome guest on many farms.

Finally, we are involved in a very competitive global economy

where it is terribly important that we make wise decisions in public policy not only in agriculture but elsewhere as well if we are to

be competitive with the rest of the world.

Too often we have rejected economically sensible ways of deciding environmental problems. We cannot continue to a $50 benefit for

$1,000 costs. We can accomplish what the environmental community would like with regulations that farmers could live with if we

would try and use a stick—or, rather, a carrot instead of a stick.

The idea of free market environmentalism is not new. We can

achieve the goal protecting valuable wetlands without the dead

weight of protecting wetlands of no environmental significance.

Gentlemen, we need to bring order out of chaos. We need your

help.

Mr. MCINTOSH. Thank you. We appreciate that. I appreciate you

also keeping your oral statements brief so we can get to hear as

many people as possible.

We struggled a lot when I was working with Vice President

Quayle on the definition of a wetland and tried very hard to establish what I thought was a common sense principle that you had to

have water involved with a wetland but the Government agencies

think they know better.

There is legislation that is moving through the committees and

we will be discussing it on the floor in the coming months that, I

think, will greatly improve that situation.

Let me ask you one question. Did you ever receive any offer of

compensation for the lost value of your land when it was declared

to be a wetland?

Mr. TOWNSEND. No.

Mr. MCINTOSH. Do you think if the agency had to do that, they

would have been more reasonable in defining what a wetland was?

Mr. TOWNSEND. Well, there has to be some reasonable judgments

in the process. The land in question is of no value to me. We farm

around it. We get no production from it, yet we pay taxes, we pay

interest on the mortgage, we pay the mortgage, but it sits there.

I doubt that it is of much value to the environmental community

as well. We need to make a judgment between what is important

in this area and what is not. You have not done that.

Mr. MCINTOSH. I appreciate that. Thank you both very much. Let

me see if my colleagues have any questions.
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We have heard a lot of people from the agriculture community

and they both have very large farming interests in their districts.

Mr. PETERSON. Thank you, Mr. Chairman. You think that you

have got wetlands, you ought to come to my district. Now it is totally under water, just about.

Mr. TOWNSEND. There are about as many wetlands in Minnesota

as there are Petersons.

Mr. PETERSON. That is right. [Laughter.]

We are hoping that they all fly over and take pictures right

about now because we will be out of business.

My district, by the way, is from 300 miles along north of the

Twin Cities up to Canada. Part of my district, you have to go

through Canada in order to get there. You cannot get there

through the United States. [Laughter.]

Anyway, it is great fishing up there, if you ever want to.

I serve on the Agriculture Committee and we are going to be taking up this issue. I want to commend your Congressman and the

chairman here for the work that he has been doing in the regulatory reform area. We have been working together.

Myself and some of our group of conservative Democrats agree

that are over-regulated, along with some members of the other

party.

But the one thing that I want to say with this wetlands issue is

that we are going to try to change the law; try to do something

about type 1s and try to get some of the nuisance problems solved.

But, frankly, part of the problem, in my judgment, is with the

folks that are administering the law. And in my area where I have

tons of wetlands and I have been dealing with this when I was in

State legislature and now here in Congress, I have a county where

because of the people that were administering the law, they worked

out every single wetland issue. We had no problems. They just

used common sense and they worked it out.

If you went over to the next county, the same type of land, the

same situation. You have the biggest hornet’s nest you ever saw because the folks that were running it over there did not want to

work it out.

So, to some extent, I mean, with all of the good work that we are

going to do in regulatory reform, part of this problem is just with

the people that are running or that are administering the law. I

am not sure what we do about that because we have a difference

of opinion about what these things are worth.

But we are looking at some solutions. And one of the things that

we are looking at right now is using the CRP as a way to maybe

try to deal with these issues using a carrot instead of a stick like

you were talking about.

I have been working with your Senator, Senator Luger, on this.

In fact, we have been communicating with his offices last week.

They are putting that CRP stuff together right now and we are

going to send it next to the staff level.

So, we are going to look at some other ways to come at this and

hopefully we can resolve this issue and make it more workable.

But we have the same kind of problems. I had a gentleman that

had the exact same story that you had. Bought a piece of property.
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He had been told there were no wetlands. Right after he bought

it, they came in and found 26 acres of wetlands.

And what happened in my district is we now have 3,500 people

on a private property, landowners rights groups, that are storming

the capital because of it.

And that is helping us to change some of this regulation. So, we

appreciate your testimony and, hopefully, we can make some

changes that will take care of some of the problems.

Mr. TOWNSEND. Thank you.

Mr. MCINTOSH. Thank you very much, gentlemen. Let me check.

Do you have any questions?

Mr. GUTKNECHT. Mr. Chairman, let me just say that I first saw

this three-ring binder from the Indiana Farm Bureau and I think

that is excellent. And I just want to compliment the Farm Bureau

for putting that together.

I would also say—and as I mentioned in Indianapolis this morning—I had a farm forum and I represented a farm district in

Southern Minnesota.

We had a farm forum a couple of months ago and I was surprised. I expected to hear a lot from the farmers about dairy price

supports and the various Government programs, but they spent

fully two-thirds of the time of that hearing talking about various

environmental regulations that they had to deal with.

And it really has become a big problem, particularly for small

farmers. Now, the big farms, the big chunks of land that can afford

some of the legal work and everything that goes into it, you know,

they complain, but they can deal with it.

But if you are trying to make a living on 300 acres of hilly land

in Southern Minnesota, it is tough.

Mr. RUSSELL. And this is the first time in 10,000 years that we

are approaching sustainability on the farm because of applied

science and technology. Yet, we are so overburdened by regulations

that it may do us in.

And that came because of basic research, not from that regulatory whip that is held over us.

Mr. MCINTOSH. Let me mention one thing. We have a hearing in

Washington with our subcommittee on possibly sunsetting regulations and a colleague of yours—I know you know and work with

her, Joe—Kaye Whitehead came out and testified that for her facility where she has to dispose of the hog manure that her pork-producing facility produces as a byproduct, if you will, that she has

two choices. She can spread it on the field or she can till it into

the ground.

One agency has required that she spread it on the field without

tilling it into the ground. And another agency requires her to till

it into the ground. She really does not care which one she does, but

she reported to us that she could not get the two of them to agree.

And, so, she was stuck with a choice of violating one or the other’s

dictates under their regulations.

And I was wondering if you all were familiar with those type of

situations where you get conflicting results, depending on who you

talk to.

Mr. RUSSELL. Between the result and the bigger thing, the interpretation of the law. And you hear both sides of it, just like as
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Wayne said and I see it in my operation, too, but who do you believe.

Mr. TOWNSEND. I had not heard about the hog manure study, but

I am going to satisfy my neighbors first, Congressmen.

Mr. MCINTOSH. And that is what she said, when I asked her

which one she did. The neighbors had a clear preference on that.

[Laughter.]

Thank you both for coming.

Mr. TOWNSEND. Thank you.

Mr. RUSSELL. Thank you.

Mr. MCINTOSH. Let me call forward our next group of witnesses.

Tom Miller is vice president for commercial lending with American National Bank and Lowell Williams is senior vice president of

First Merchants Bank.

We appreciate you both coming and speaking with us today. I

know that all of us have bank accounts and many of us do not realize the amount of regulation that you have to contend with in order

to maintain those accounts in your lending operations.

Mr. Miller, do you want lead off?

STATEMENT OF THOMAS MILLER, VICE PRESIDENT,

COMMERCIAL LENDING, AMERICAN NATIONAL BANK

Mr. MILLER. Yes, thank you. We appreciate the opportunity to be

here and speak with you, Mr. Chairman.

My name is Thomas Miller. I am vice president of commercial

loans and compliance officer for American National Bank and Trust

Co. in Muncie.

American National Bank is a subsidiary of ANB Corp. with as- sets totaling approximately $320 million. The bank has 152 full

time equivalent employees and 13 banking centers servicing Delaware County and the community of Portland in Jay County.

As you may be able to tell by my title, being a compliance officer

is only a portion of the responsibilities that I have assumed at the

bank. My primary function is as a commercial lender.

The compliance function was bestowed upon me in 1983 when I

was placed in charge of our Consumer Loan Department. In community banks of our size or smaller, I think you will find that that

is the rule rather than the exception. This is simply a result of economics.

Hiring in-house legal representation is not practical or cost effective. As a result, the compliance function becomes decentralized

within most institutions whereby bank supervisors and officers all

become part of the compliance staff, responsible for administering

regulatory guidelines within their respective departments.

My function is to coordinate and oversee that the bank is complying with the spirit and the letter of the law. Approximately 20 percent of my day is dedicated to dealing with some aspect of regulatory compliance. As a result, that time is taken away from lending money to prospective customers.

Three specific areas of concern regarding the regulatory burden

by which banks are expected to comply are the cost, constant

change and uniform administration.

A prime example of the added cost burden occurred with the passage of regulation DD or better known as Truth-In-Savings. Amer-
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ican National Bank incurred approximately $100,000 in additional

software and hardware expenses alone to automate the new account function just to comply with one regulation’s mass of paper

disclosures and mathematical calculations.

This figure does not take into account the man hours for training, programming or the additional storage allocation necessary to

retain the required information. By implementing Truth-In-Savings, most community banks had to take a long hard look at the

products offered to the consumers pre-regulation DD to determine

if it was reasonable to continue to offer them post DD. I suspect

fewer products are currently being offered and marketed due to the

additional disclosure burden.

One of the main factors driving the costs of compliance is the

constant change. Each modification or revision to existing regulations creates additional programming, administration and training

expense. The ultimate result is that somebody has to pay that expense.

Shifting that cost to the consumers only drives away individuals

that are already utilizing alternative financial services in record

numbers.

Many of them are not subject to the same regulations that banks

must adhere to. Examples include credit unions and security brokers and dealers.

Absorbing the cost only drives margins down and expenses up,

weakening the profit potential for banks. If regulations were written so that all financial institutions and those offering financial

products must comply, then banks could compete on a level playing

field.

When we have to invest substantial dollars into compliance when

others offering similar services do not, it places us in an unfair advantage with our competitors. The continuing cost associated with

implementing and administering new and revised regulations undermines the stability that the regulations are attempting to promote and forces unwanted documentation and expenses on the very

people that they are attempting to protect.

As a community bank, it is imperative that we remain up front

and honest with the public that we serve. These customers are our

friends, neighbors and relatives. We cannot afford to deceive them

when depositing or borrowing funds.

We believe, too, that consumers have a right to know the true

cost of borrowing funds and the interest earned on deposits. However, constant change and excessive disclosure are not what our

customers want.

Eight 81⁄2 by 11 sheets of disclosure material are currently required for a new checking account. That is too much for the average consumer to digest.

Fifteen to 20 pages of documentation to close a real estate mortgage does not allow the consumer the freedom to review and analyze documents. Typically, the consumer only wants to sign in the

appropriate place and to be done with the transaction.

Service and convenience are truly the only distinction between

community banks and large regional conglomerates, but regulatory

burdens have all but eliminated some competitive advantages in

this area.
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We ask that consideration be given to the non-mega, non-super

regional banks when new and changing regulations are debated.

Our customers want to trust their local banker, but find it difficult

to not be suspicious when burdened with a sea of paperwork to accomplish simple transactions.

[The prepared statement of Mr. Miller follows:]
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Mr. MCINTOSH. Thank you very much.

Mr. Williams.

STATEMENT OF LOWELL WILLIAMS, SENIOR VICE PRESIDENT,

FIRST MERCHANTS BANK

Mr. WILLIAMS. I would have brought our regulatory manuals

over, but Allied Van Lines did not have a van available today.

[Laughter.]

It is a privilege and a pleasure to appear before you today and

speak on behalf of community banks.

Let me begin by saying that I and community bankers all over

the country appreciate the efforts of this Congress to do something

about the over-regulated banking industry.

Fair Lending has always been a practice of our bank even before

it might have been popular to do so or the attempt to mandate the

practice by the Federal Government.

A community bank’s existence depends on people doing business

in that bank. A good loan knows no difference who it is made to

regarding sex, race or national religion. Good loans are good loans.

I or a member of my staff review every consumer and mortgage

loan made or rejected to see that everyone is being treated fairly.

A few years ago, a Federal examiner brought me an application

of a minority that had been rejected as it should have been. The

examiner then spent hours going over approved loans to see if he

could find a similar situation of a white applicant that had been

approved. And he found none.

This action by a Federal examiner is very scary after the Department of Justice’s actions against Chevy Chase, Shawmut and

Vicksburg.

Our bank has some 40 loan officers and there will be isolated instances of loans that could have or maybe should have been made.

If there is not a pattern of violations of Fair Lending by a bank,

the threat of actions by the Department of Justice should not be

held over a bank’s head for isolated instances.

The Home Mortgage Disclosure Act was enacted in June 1976

and was not a large burden until the changes by FIREA in November 1991.

Until 1991, reporting was rather simple. Since 1991, the collection of data and reporting of the data has become very complex and

expensive for the banking industry.

I am sure you are aware that the Grant Thornton study showed

that the annual costs to Community Banks as defined by the Independent Bankers Association of American for HMDA reporting was

$17,463,692. The estimate of our bank, for annual HMDA compliance, was $200,000 as part of the study.

The form of data reporting has again been changed and we have

just spent $2,200 for new software. The system we previously used

was provided by the Federal Government and our bank feels the

system is no longer adequate to give a proper and accurate report

that the Government requires. I am not sure the results justify the

costs.

The reports are required to be available to the general public.

Since enactment in 1991, our bank has had six requests for the re-
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port. It appears to me the report could easily be misinterpreted and

the total cost for information received is not justified.

This act is one of the most costly and burdensome on every banker’s list, including mine. And the best answer to the act is probably

to repeal the act. This has even been suggested by a highly respected former Comptroller of the Currency, Robert Clark.

The Community Redevelopment Act was first established in

1977. Very little attention was given to the act until the late 1980’s

when the Federal Government became serious concerning the act.

It has become the most burdensome and costly of all acts concerning banking. The Grant Thornton study estimates that the annual cost for community banks for CRA is $1,032,466,852. The estimate of our bank on an annual basis is $250,000.

Our bank, like other banks, has file after file of documents and

paper to support our CRA efforts. There is one person in our marketing department that spends 80 percent of her time with CRA

documentation.

Our bank has long been a lender to the minority churches to finance new churches in the minority community. This has given the

bank a very good relationship with the minority ministers who

have helped us with the educational programs and many other

good loans in the minority communities. We are extremely proud

of this relationship at our bank.

The Coalition of Concerned Clergy, a group of black ministers,

has presented two of our officers the annual Martin Luther King

Award for outstanding dedication and leadership in the community.

Our bank does these things not because of CRA, but because of

our concern and dedication to the community. The Federal Government has painted our bank and other community banks with the

same brush as the larger ‘‘Too big to fail’’ metropolitan banks

which is not necessary.

While I support CRA, the system needs to be streamlined. There

should be a tiered system of CRA. For banks under $250,000 and

other banks up to $1 billion should be allowed to use a streamlined

procedure, not to be held to the same CRA qualifications as our big

city brothers.

In conclusion, the banking industry is over regulated. Other providers of the same financial services that banks offer such as credit

unions, do not work under the same regulatory burden, nor do they

pay any State or Federal taxes. I would hope this could be another

subject at another time.

Thank you for the opportunity for this testimony and I would be

glad to answer any questions.

[The prepared statement of Mr. Williams follows:]
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Mr. MCINTOSH. Thank you very much, Mr. Williams.

Let me ask both of you two questions, really. The first is what

impact do these regulations have upon people who either borrow

money or depositors?

Are you able to or have you seen in the literature any indication

of whether you have to raise the rates or the fees on both of those?

Mr. WILLIAMS. Certainly, you do.

Mr. MCINTOSH. Do you have any estimate of the magnitude of

that?

Mr. WILLIAMS. I do not have an estimate of the fees or cost, but

I do have an estimate of the public’s perception of this. They do not

care about it.

They do not care about Truth-In-Lending. They do not care about

Truth-In-Savings. They do not care about the Real Estate Settlement Procedures Act. They want to get the job done and they trust

you; let us get on with it and give me my money and we will go

on our way.

I cannot tell you the cost, but it is burdensome.

Mr. MCINTOSH. But you do have to pass on that——

Mr. WILLIAMS. Certainly.

Mr. MCINTOSH [continuing]. In higher fees?

Mr. WILLIAMS. Certainly. We are not going to absorb it.

Mr. MCINTOSH. And the other question, is do these regulations

make it more difficult for locally owned banks to stay in business?

There has been an increasing tendency toward mergers and I realize a lot of banks have tried to keep a lot of local affiliation and

guidance and control over the decision, but would you say that it

is harder and harder for the small banks to stay in business?

Mr. WILLIAMS. The big banks have batteries of people to handle

the same regulatory burden that community banks have. And, certainly, they have got a leg up on us.

Mr. MILLER. One of our affiliates has only eight staff members.

If one of those individuals spends all of his time doing compliance,

that leaves the other seven people to carry on the burden.

So, absolutely. The difference is, as Mr. Williams stated, the larger banks have people and they can afford to have people on staff

to do it.

Smaller banks have to distribute that throughout the whole staff.

Mr. MCINTOSH. And as a result, if you want to have a loan, you

have to go oftentimes to get approval from far away, depending on

the structure——

Mr. MILLER. Absolutely.

Mr. MCINTOSH [continuing]. Of the particular bank.

Mr. MILLER. Absolutely.

Mr. MCINTOSH. Thank you both for coming. Let me see if my colleagues have any questions for you.

Mr. PETERSON. Were you just being nice when you said that you

did not want to repeal CRA?

Mr. WILLIAMS. No, I think CRA, properly tiered, properly structured is not a bad act, as long as it is not so burdensome and costly. I do not have a problem if we are in a proper tier reporting.

Mr. PETERSON. I thought they were up to trying to get $500 million exempt.
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Mr. WILLIAMS. Well, I have read and read and read. It has been

$1 billion. It has been $500 million. It has been $750 million. It has

been $250. And it has been as low as $50.

I think $250 is right for the low tier. I think maybe $500 billion

to $100 billion is a proper tier for a bank with—they do not need

to be under the same regulatory burden as big banks.

Mr. PETERSON. Well, I hear what you are saying, but I just have

a real question that if we keep it in place, whether it is ever going

to get simplified.

Mr. WILLIAMS. No.

Mr. PETERSON. I mean, I am for getting rid of it because I agree

with you. I do not think that people——

Mr. WILLIAMS. I will go along with you.

Mr. PETERSON. I do not think—[laughter]—I do not think people

care about it.

Mr. WILLIAMS. They do not.

Mr. PETERSON. And I do not think that it is accomplishing anything, that I can see. It is not in my district. It just causes people

to spend a whole bunch of money for no good reason.

Mr. MILLER. I think Mr. Williams made a good point and we are

in the same boat since the act has been enforced. We have probably

had less than a dozen people that have requested the information

that is being garnered on a yearly basis.

Mr. PETERSON. You have had more examiners in your office than

you have had——

Mr. MILLER. Absolutely.

Mr. PETERSON [continuing]. People in there that have been——

Mr. MILLER. Absolutely.

Mr. PETERSON [continuing]. In there asking about it.

Mr. WILLIAMS. But there would not be a thing wrong, you would

not break our heart if you repealed it.

Mr. MCINTOSH. One other quick question. You had mentioned,

Mr. Miller, that you thought a lot of times the problem was uneven

playing fields.

Is it your sense that some of these regulations are in place in

order to give certain institutions an advantage over the others?

Mr. MILLER. I am not sure that they are put in place to give

someone an advantage, but they certainly give the banks a disadvantage.

Mr. WILLIAMS. The results are that.

Mr. MCINTOSH. You say you do not have an uneven playing field

in terms of the cost of delivering similar services?

Mr. MILLER. Certainly not. Based on the regulations that we

have to adhere to, they are more in number than some of the others.

Mr. WILLIAMS. The credit unions do not adhere to the minute

amount of regulations than we do. And as I say again, they do not

pay any Federal or State taxes. It is hard to compete on that basis.

Mr. MCINTOSH. Yes, when your competitors have a different

structure.

Thank you both for coming. I appreciate that.

Mr. MILLER. Thank you.

Mr. WILLIAMS. Thank you.
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Mr. MCINTOSH. Our next panel has to do with regulations in the

health care delivery area. I would like to invite forward Dr. Eugene

Roach who is the medical director at the Anderson St. John’s Hospital; James Currier who is a radiation oncologist; and Robert

Brodhead, the president of Ball Hospital; and George Brannum

who is the head of Pathologists Associated.

Is George here?

Welcome. I appreciate you all joining us here today. We had

health care issues come up in Indianapolis and, in fact, some of the

people who did not have a chance to provide testimony were interested in those. So, I am glad that we are able to hear from all of

you today.

Let me just start out with you, Dr. Roach.

STATEMENT OF DR. EUGENE ROACH, MEDICAL DIRECTOR,

ANDERSON CENTER OF ST. JOHN’S

Dr. ROACH. Thank you, Mr. Chairman and members of the committee.

My name is Dr. Eugene Roach and I am a board-certified psychiatrist. And I am currently medical director of the Anderson Center of St. John’s in Anderson, IN.

I arise today to speak about an issue that has plagued my ability

to render good high-quality medical care to my patients since 1983.

Under the Medicare and Medicaid guidelines there are two types

of hospitals and units within hospitals. Attached to my testimony

today is a regulation which will be available to you.

For reimbursement there are exempt and non-exempt units

under the DRG prospective payment. Traditionally, psychiatry

units and psychiatric hospitals have been exempt. Reimbursement

issues are not my main concern today, but medical care is.

What is the regulation when a patient is admitted to an exempt

unit and is transferred to a non-exempt unit? The HFCIA regulations demand that the patient be discharged and re-admitted.

From a practical standpoint, this means when a patient is moved

from a medical surgical unit to a psychiatric unit or vice versa the

medical record is broken down, a new history and physical is required, as well as a discharge summary from the previous unit.

This little process may seem to be no big deal, but let me share

with you some of the horror stories where patient care and welfare

have been compromised by this regulation.

When a patient enters the hospital, there are series of procedures and processes that are done. The medical record becomes the

major document in guiding and caring for the patient.

It documents all contact with the patient. It documents all procedures done and the results; nursing and medical observations; allergic reactions; and, really, everything that is known about the patient is contained in that document.

For this data to be separated from the patient and sent to medical records for processing can be a hazard to the patient and can

be an economic hardship.

I have seen duplication of tests run, failure of allergic reactions

to be transferred with the patient, and, under this regulation, it deprives the new units the experience of knowledge of this patient’s

total care and their response to previous interventions.
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To interrupt the medical chart during a patient’s spell of illness,

regardless of what services are needed, I believe is dangerous. I

feel this regulation needs to be revised or to be rescinded. It is a

bureaucratic decision made by someone who has never cared for a

patient within a hospital setting.

Mr. Chairman and members of the committee, I respectfully submit these comments and will be glad to answer any questions that

you have later.

[The prepared statement of Dr. Roach follows:]
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Mr. MCINTOSH. Thank you, Dr. Roach. That sounds like a catch–

22 situation where you want to provide the best health care possible, but the regulations will not let you or make it a lot harder

for you to do that.

Let me allow each member of the panel to submit their testimony

before we have questions.

Dr. Currier.

STATEMENT OF JAMES CURRIER, MD, RADIATION

ONCOLOGIST

Dr. CURRIER. I appreciate presenting this to you this afternoon.

My contention this afternoon is that the Nuclear Regulatory

Commission regulation of the medical use of radioactive materials

is not needed at this time and that much of the $528 million budget for this agency could be better spent.

We now have alternative methods of ensuring the safety of use

of radioactive materials—to a degree, unmatched by other branches

of medicine and most other industries.

Currently, the adversarial method of regulation used by the Nuclear Regulatory Commission is probably contributing more to the

detriment of quality patient care in the United States than to protection of the population.

It is also a contributor to the increasing costs of health care in

America. In one study I have read, there are an average of 60

misadministrations reported each year to the Nuclear Regulatory

Commission. A review of 66 such misadministrations found only

four cases in which there may have been a significant adverse affect.

In contrast, a study of 1984 New York State hospitalizations

found about 6,900 deaths through negligence. I find significant the

regulatory effort to prevent four injuries or deaths nationally due

to radiation misadministrations compared with 6,900 deaths in one

State due to negligence in other aspects of patient care.

To support my contention that NRC medical oversight is now unnecessary, I would like to quote Dr. Ivan Selin, the NRC chairman,

who recently wrote that his successors, ‘‘Should get the NRC out

of the business of regulating the medical use of radioactive materials.’’

There are, of course, many anecdotes one could share. One of my

associates had an experience with one misadministration in which

there was a calculation error. The calculation error was discovered

in time to prevent any injury. The patient was treated more quickly than prescribed and, therefore, was a misadministration.

After reporting it to the NRC and after over a year of effort—

including at least 8 days of physician efforts, 9 days of PhD physicist time, 2 days of hospital administrator time, in addition to two

NRC physician advisor visits and quite a great deal of paperwork—

it finally was agreed that there was no cause for a fine and they

censured the department for allowing it to happen in the first

place.

Other stories could easily be given. And if you are interested, I

would be glad to provide additional names and phone numbers and

such.
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Again, I would hope that the advice of the NRC chairman that

the NRC be gotten out of the business of regulating the medical

use of radioactive materials, not be delegated to his distant successors.

[The prepared statement of Dr. Currier follows:]
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Mr. MCINTOSH. Thank you. I appreciate that very much, Dr.

Currier.

Mr. Brodhead, thank you for joining us today.

STATEMENT OF ROBERT BRODHEAD, PRESIDENT, BALL

MEMORIAL HOSPITAL

Mr. BRODHEAD. You are welcome. Mr. Chairman and distinguished members of the committee, my testimony is entitled ‘‘Time

Is Up for Peer Review Organizations.’’

Peer Review Organizations were created by Congress in 1982 to

ensure that services provided to Medicare recipients were medically

necessary, met professionally recognized quality standards, and

were provided in the most suitable setting.

Also with the implementation of the Prospective Payment System, whereby hospital reimbursement for Medicare was based on

set fees, there was a perception by the Government that hospitals

would discharge patients ‘‘quicker and sicker’’ to protect themselves

financially.

Under the PRO system, which, today, includes 54 PROs, contracts are given at the State level to conduct reviews. At Ball Memorial Hospital, we feel the PRO system is no longer effective, nor

is it needed.

The PRO is finding utilization problems in only 1 percent of the

cases reviewed at our hospital. You have to ask the question, is

this worth the expense and effort.

In a recent report on results of the PRO system nationwide,

PROs completed more than 4 million hospital reviews over a 2-year

period.

According to the report, only 3,358 quality problems were found.

This is approximately one-half of 1 percent of the cases reviewed.

And it is estimated that the cost of these reviews is nearly $74 million.

Looking solely at the hospital’s cost in providing Medicare and

PRO review services, our direct and indirect expenses are approximately $116,000 a year. If you take just a portion of that—let us

say $50,000—and multiply it by the 5,000 hospitals nationwide, the

price tag to hospitals alone is $25 million.

At Ball Hospital our physicians have internally established

mechanisms to look at quality and utilization on both a case-bycase and overall basis.

Those of us in health care today agree that recipients are entitled to oversight to ensure an acceptable level of care, but we do

not believe that the current PRO program and its multimillion dollar price tag is the most cost effective way to do it. Thank you.

[The prepared statement of Mr. Brodhead follows:]
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Mr. MCINTOSH. Thank you very, very much. Thank all of you for

joining us here today.

We are hearing a lot about the increasing costs in health care

and one of the proposals that was not talked about very much during the health care debate was the effort to standardize the reporting requirements; and, in particular, the claims report both for the

private and government-provided claims.

Would that be an area where, if we could reach a standard claim

report and use that across-the-board, that that would save costs?

I think probably, Mr. Brodhead, you deal with that particularly

at the hospital.

Mr. BRODHEAD. Well, I think it would save significant costs. And

I think, certainly, a goal ought to be to standardize and eliminate

a lot of the paperwork. It would definitely reduce costs.

And there have been studies done that it is anywhere from 10

to 25 percent of the costs in the health care system.

Mr. MCINTOSH. Which reaches a magnitude of nearly $1 trillion

that are estimated in the next few years. So, 10 percent of that

would be $100 billion dollars of savings. That is phenomenal if we

are able to do that.

Do any of my colleagues have any questions?

Mr. PETERSON. I do not know if you are aware of it, but there

is, in the last 2 or 3 weeks, a real serious effort started in trying

to do a bipartisan health care reform bill that takes care of the

things that everybody agrees on, including the one form and that

and getting it done, which we tried to do the last time and were

unsuccessful, but I really feel hopeful that we are going to get

something done in short order here and get part of the things fixed.

Hopefully, some of the regulatory overkill that we are doing.

But it is my judgment, in the long run, that we just have to look

at some other kind of system for Medicare and Medicaid. It just

seems to me that this thing is beyond hope and we have to look

at totally revamping it.

Do you agree with that, No. 1. And, No. 2, do you have a solution

as to what the alternatives should be?

I see you are shaking your head there in the middle, but—No?

Dr. ROACH. It was someone in Indiana who has put forth the concept of the IRA for medical care. And I think that is very viable.

Mr. PETERSON. Do you think we can replace the whole Medicare

system?

Dr. ROACH. Right. Exactly, with an IRA kind of concept. And you

get to keep what you do not spend.

Mr. PETERSON. What about the folks that are 65 now and have

never had an IRA? What do we do with them?

Dr. ROACH. Well——

Mr. PETERSON. You know, that is part of the problem, I guess,

is getting——

Dr. ROACH. Yes, right.

Mr. PETERSON [continuing]. To a new system. Has anybody done

that within your group?

Dr. BRANNUM. Well, I think within the State of Indiana, they

have started a managed Medicaid program. That started last year

and I think managed care, the attractiveness of that is that it

tends to drive down costs without impacting quality.
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So, my feeling is I do think that the system needs to be reformed.

And my suggestion would be that both for Medicaid and Medicare,

that we look at a managed care type of approach.

Mr. MCINTOSH. Thank you. Or do you have any questions?

Mr. GUTKNECHT. Well, yes. Mr. Chairman, health care is a big

issue to me because I represent a little town called Rochester, MN.

Two brothers started a little clinic there a few years ago and it has

grown and grown.

I was curious, though, Dr. Currier, you had talked about $528

million. Is that the total budget of the NRC or is that just what

they spend to regulate nuclear medicine?

Dr. CURRIER. The quote I had, it sounded like that was the total

budget. And that is in my papers here that I will be giving you,

but that was my understanding that that is the total budget.

In 1990 or 1991, I believe, they required, as I understand it, that

the NRC get the funds from those it regulates. And, as a result,

there has been a rather steep increase in the fees for licensure because a lot of people are dropping out. So, there is a smaller group

supporting the larger bureaucracy.

Mr. GUTKNECHT. Let me see what you think about this. And we

had a problem with an ice cream maker in Minnesota and a number of people got sick from eating that ice cream. OK?

But that was in an USDA-inspected plant. The Government inspectors, everybody was there. And people still got sick.

Nobody went back and sued the Government inspectors; the regulators. And my suspicion is that if something goes wrong with any

of your machines, that they are not going to go back to the NRC

anyway. They are going to go back to you.

And, ultimately, it is you that bears the responsibility. And that

is where, I think, this whole debate—whether we are talking about

health care reform, whether we are talking about welfare reform

or whether we are talking about regulatory reform—really gets

back to, basically, an issue of responsibility. Who really is responsible?

And we have an awful lot of people in Washington who think

that they are responsible, but, ultimately, it is those small business

people, it is the doctors, it is the people who we are hearing testimony from today who bears the responsibility of guaranteeing

whatever it is they do, will do what they say it will do.

And somehow we have got to get back to that basic notion of personal responsibility and this idea that somehow you can protect.

We have had this debate with—and I am sorry that he is not

here today—one of our colleagues, Mr. Waxman, from California.

And I told the story then and I will share it with this group, too.

Last year I was invited to the Governor’s Mansion in Minnesota.

And they served pineapple at this little breakfast reception. And a

bunch of us got violently ill after that.

And I told Mr. Waxman, I said, You know, I got sick; that was

USDA-inspected pineapple and we got sick despite all those Federal regulations.

In fact, he looked at all the regulations and the inspections that

went on from the time that pineapple came into the United States.
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We got sick in spite of the Federal regulations and, surprisingly

enough, we got well in spite of all the Federal regulations. [Laughter.]

And I think there is a theory that has persisted and broadened

in Washington over the last 3 or 4 years that somehow if we have

enough Federal regulation and rules and guidelines and books and

all the rest, that you can create a risk-proof society.

And the truth of the matter is you cannot. Bad things happen.

Sometimes things go wrong despite the best regulations.

And now what we have, more and more—and I am sorry, I am

lecturing now more than asking questions—but I think, as we have

said earlier, and I state often, we create these $50 solutions to a

$5 problem.

And yours is the best example, Dr. Currier. I like that. If those are the numbers and my staff—I will get into this—if it is $528

million because there were four potential cases where there may

have been danger to the patients——

Dr. CURRIER. In roughly a year.

Mr. GUTKNECHT [continuing]. That is a huge cost per patient.

And in spite of regulations, there may have been four that actually

slipped through the cracks anyway. Thank you very much.

Mr. MCINTOSH. Thank you all for coming. I appreciate it. It

sounds like we have yet another good idea for Corrections Day.

Thank you for coming.

We will take those materials and go ahead and put them into the

official record.

Let me move on to the next panel. This panel represents manufacturing concerns and has several individuals on it. One is Gary

Bartlett, president of G.W. Bartlett Co.; Richard Brown, who is

sales manager of Beckett Bronze; Robert Kersey, president of—they

have down here Rochester Metal Products. I think of it as Indiana—have you changed your name, Robert?

Mr. KERSEY. No, we did not. It is another company.

Mr. MCINTOSH. Another company. Oh, I see. OK. Robert Anderson, plant manager of Delphi Interior and Lighting Systems and

Richard Sullivan, vice president and division manager of New Venture Gear.

Thank you all for joining us. Let me kick it off by turning to

Gary Bartlett, who just handed us this thick booklet. I will let you

tell us about this, Gary.

STATEMENT OF GARY BARTLETT, PRESIDENT, G.W. BARTLETT

CO.

Mr. BARTLETT. Actually, it is a little difficult to squeeze 5 or 6

years of regulatory problems into 5 minutes, so I thought that I

would give you a 5-minute talk and then also give you just a little

idea of some of the problems that we have run across with regulations, I would give you that.

Thank you for asking me to testify at the House Subcommittee

on National Economic Growth, Natural Resources, and Regulatory

Affairs field hearing.

Unidentified VOICE. Cannot hear anything.

Mr. BARTLETT. We will try it again. Is that a little better now?

Mr. MCINTOSH. Is that mic working? Is the witness’ mic——
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Unidentified VOICE. That is not the mic. This is the mic.

Mr. BARTLETT. Oh. There is a difference?

Unidentified VOICE. It should pick up the whole thing.

Mr. BARTLETT. Unless I can scoot over.

Unidentified VOICE. This is the cord for the court reporter.

Mr. MCINTOSH. It looks like we can only handle a couple of problems at a time. [Laughter.]

Unidentified VOICE. That is the one.

Mr. BARTLETT. OK.

Mr. MCINTOSH. Thank you.

Mr. BARTLETT. We will try it again.

Mr. MCINTOSH. All right.

Mr. BARTLETT. Now, can we hear better back there?

Unidentified VOICE. Speak up a little more.

Mr. BARTLETT. Still cannot hear.

Mr. MCINTOSH. Just talk into the flower plant. [Laughter.]

Mr. BARTLETT. As I mentioned, it is a little difficult to squeeze

5 or 6 years of regulatory problems into a 5-minute talk. So, what

I thought I would do would be put together a book that has more

information than I can give you in 5 minutes about a problem that

we have had ongoing for 5 or 6 years. So, that is what the book

is.

Thank you for asking me to testify at the House Subcommittee

on National Economic Growth, Natural Resources, and Regulatory

Affairs field hearing.

I am Gary Bartlett, president of G.W. Bartlett Co. of Muncie, IN.

I started G.W. Bartlett Company in October 1975, while working

for my dad and uncle at their tire store on Broadway here in Muncie. Before and after their normal working hours, my brother and

I rented space and equipment from them to perform the necessary

duties for my newly formed company. We did mechanical work on

foreign cars that my dad and Uncle Ed otherwise would have chosen not to work on.

The new business moved to 1912 Granville Avenue here in Muncie in October 1976. Although the business started primarily to

work on foreign cars, it has evolved over the years into a manufacturer of high end interior trim components for use in the automotive aftermarket and the automotive original equipment market.

Our market place is evenly split between Europe and America.

We have grown from two people in 1975, to about 100 here in

American and 10 in our office in Kempston, England.

Of the Government created regulatory problems that I have experienced in the past 9 years—not the 191⁄2 that I have been in

business, but just the latter part of that—including frivolous EEOC

claims and non-existent OSHA infractions, an EPA (or IDEM, Indiana Department of Environment Management) problem that I have

has been unsolvable.

The problem started in March 1986 when I received a letter from

the State Board of Health asking me to report any underground

storage tanks that were on my property. And all of the documenting evidence is in the book as well.

Being a good citizen and a responsible business owner, I duly reported a partially submerged 275 gallon crankcase waste oil tank.
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When we would change the oil in a car, we would pour used oil

into a big funnel that was inside of the building. The used oil

would go from the funnel through the wall via a three-inch pipe

into this partially submerged 275 gallon tank.

In October 1989, a heavy rain caused the tank to ‘‘float’’ up from

its position. And this was just a partially submerged tank. It was

only halfway under the ground.

As the tank was no longer used, I made the second mistake. I

decided to have it removed by the book.

At that time, October 6, 1989, I had no idea of the test procedures and requirements necessary. Subsequent soil testing required showed hydrocarbon soil contamination around the tank or

waste oil around the tank. Over the years, there were times that

the tank did overfill and oil did escape. These times were rare and

were caught and rectified quickly.

I thought that a minor excavation would correct an otherwise insignificant problem. After the monitored excavation, I was instructed to fill in the hole by IDEM field rep, Phil Eley. I thought

that the problem was behind me.

By August 1991 approximately, I had not received a ‘‘No Further

Action Required’’ letter from IDEM and discovered that IDEM

would not approve or disapprove my actions to date. And, again,

the letter is in there from Anne Black from IDEM. And further to

my dismay, Phil Eley and the others that I had worked with were

no longer with IDEM.

In February 1992, I needed to expand part of our building over

the contaminationsite. The clean-up process began all over again.

I hired Ontario Environmental to do a Phase II Environmental

audit to determine the exact location of the remaining contamination. After numerous calls and letter to local, State and Federal officials, including President Bush, Kathy Prosser the Commissioner

of IDEM did finally respond and sent Clean-Up Project Manager

Michael Anderson to oversee our project.

We partially demolished the building in question and excavated

yet more soil.

In May 1994, after rebuilding the partially demolished old building and building over the contaminationsite, Ashlee Insco from

IDEM misread an engineering report and reclassified as from ‘‘Special Waste’’ to ‘‘Hazardous Waste’’. Even with test results to the

contrary, she refused to back off.

Mike Penning from IDEM’s Hazardous Waste Compliance Section drove up to Muncie to inform me that IDEM was in the process of filing criminal charges against me.

This time, I had to hire another consulting firm, Hydrotech, of

Anderson, to utilize the services, once again, of Kerimeda Environmental and Barnes and Thornburg to defend myself against these

charges.

Ashlee Insco still refused to back off. And had it not been for

Mike Anderson of IDEM and his intervention, I do not know where

this case might have gone.

We did prevail, but the engineering report is an engineering report. The results are the contaminated soil is still there. There is

no ground water contamination. It is not migrating and there are

no threats to humans, plants or animals.
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I would guess that the contamination did not come from our

waste oil tank, but, rather, the 1950’s and 1960’s when a print

shop was in the building.

It will cost me an additional $90,000 to $150,000 to complete a

useless clean up. I have wasted $55,919.11. I have wasted hundreds of unproductive hours.

And I own this building. I have $400,000 of my own money invested in the real estate. And at this time, we need to sell this

property to finance construction of a new building, but, unfortunately, banks will not finance property if you have got an environmental problem. They will not loan money to anybody if you have

an environmental problem.

The biggest cost to me, though, is now how I view my own Government. After years of continual attacks, I have come to look at

them as the enemy.

Small business people, like me, have many major obstacles to

constantly overcome. These can include foreign competition, changing market trends or hundreds of others, but, for me, the largest

impediment to growth is the current adversarial posture of the

Federal Government. Thank you.

[The prepared statement of Mr. Bartlett follows:]
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Mr. MCINTOSH. Thank you very much, Mr. Bartlett.

Let me go all the way through the panel and then we will ask

questions at the end of it.

Mr. Brown, would you like to present your testimony?

STATEMENT OF RICHARD BROWN, SALES MANAGER, BECKETT

BRONZE

Mr. BROWN. Well, primarily, Beckett Bronze Co. is a small business, as you know. I know the chairman has visited our plant and

shook the hands of practically everybody in there.

We operate both a foundry and a machine shop. And since we

produce bronze products, including leaded bronze, environmental

laws, rules and regulations are a costly problem for our company

as they are for everyone in our field.

With domestic competition, we are all in the same boat. With foreign competition, competitiveness can be a serious problem. However, environmental problems are just a part of the competitive

problem. As a small business, we are faced with all kinds of rules

and regulations from the Federal Government.

I chose to take a look at an inquiry which we received from the

Navy because I think that it sort of indicates the kind of regulations that are going on.

This inquiry lists 51 applicable FAR and DEFAR clauses or regulations to which the supplier must conform. These are all from the

bills promoted by the President and/or Members of the Senate and/

or House.

Just attempting to keep up with the regulations is an almost impossible task for small businesses. We just do not have the staff

and legal departments to do so.

They are sure these bills are introduced to right a perceived

wrong or some ethnic or disadvantaged citizens, although there are

times when we suspect the author may give some thought to the

voting possibilities from their constituents.

There is one of the FAR regulations that I would like to read in

its entirety. It is FAR 52–215–7:

Unnecessary elaborate brochures or other presentations beyond those sufficient to

present a complete and effective response to this solicitation are not desired and

may be construed as an indication of the offeror’s lack of cost consciousness. The

elaborate artwork, expensive paper and bindings and expensive visual and other

presentation aid are neither necessary nor wanted.

It is rather ironic that this came in a 49-page request for a bid

on four pieces of bronze. [Laughter.]

I find that the Government might listen to what they write up.

I think that we have to take a look at competitiveness from the

standpoint of our Nation’s ability to compete in the world market

place and our own domestic market. As the national debt continues

to grow, we come closer and closer to the kind of calamity that

Mexico is experiencing.

The major contributor to our problems is government bureaucracy which is absorbing too much of the Nation’s wealth. Government agencies have a tendency to continue uncontrolled growth in

spite of other needs.

The exponential growth of regulations, protection for any kind of

minority and perceived social problems always seem to result in
140

new bureaus and programs to correct the problem—no matter what

the cost—and old programs never die. Nor do the size of the bureaus ever seem to be reduced.

In the meantime, business, which provides the jobs and income

of the working people of the Nation, as are the working taxpayers

taxed for more and more money to carry the bureaucracy which

generates no wealth, but, unfortunately, supports this maze of

rules and regulations which is a serious problem for the competitiveness of our business and Nation.

The bureaucracy likes to blame programs as social security for

the problems of high Government expenditures. This is the same

group who collected the money withheld for social security ever

since its inception and spent the money for social security and

other purposes.

Somehow, they reason that the Government is giving away this

money, when, in fact, the Government used the money when the

politicians spent it to cover the cost of the bureaucracy and its

other programs.

Had the money been invested outside the Government in mutual

funds, stocks, property or practically any wealth-producing area,

there would be no shortage of funds for social security.

I will stop at this point.

Mr. MCINTOSH. If you would like to go ahead and summarize any

other points.

Mr. BROWN. Yes. I think I would just present a list of all these

regulations that we are expected to read and study when we try

to quote something to the Government, because the Government

lists them all.

[The prepared statement of Mr. Brown follows:]
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Mr. MCINTOSH. I appreciate that. And thank you for bringing

that.

One of the complaints that we have had in our efforts to cut back

on regulations is that we may be putting the Government through

a few too many hoops in order to write new regulations.

And I find this highly ironic since they are quite willing to come

up with regulation after regulation for the private sector, but do

not want to have to go through any procedures themselves.

You often think maybe if they live with many of the things that

they write, then you would have a lot better results.

Thank you very much.

Let me call now on Mr. Kersey representing Rochester Metal

Products. Why not trade places?

STATEMENT OF ROBERT KERSEY, PRESIDENT, ROCHESTER

METAL PRODUCTS

Mr. KERSEY. Right, Rochester Metal Products. We also make

lawnmowers, but under a different name. This is a foundry operation that grew out of the lawnmower operation and moved to

Rochester many years ago.

I want to thank you for allowing me to testify. And I am testifying about Title V, the Clean Air Act.

As president of the Rochester Metal Products Corp., and also as

a director of the Indiana Cast Metals Association that represents

45 foundries in the State of Indiana, I am particularly hopeful that

what I have to say will be useful.

Title V is, first, overburdensome. In States already having to

comply, such as Wisconsin, foundries are reporting that permits require 700 to 900 written pages.

Sensing a huge handling and storage problem due to paperwork,

Ohio’s Environmental Protection Agency has announced that it will

disallow ‘‘hard copy’’ applications, but its ‘‘on-line’’ electronic permitting system is said to consist of 1,400 data screens.

Indiana initially is setting up an electronic system. Our people

attended the first conference and the system did not work.

Title V is unreasonable in the sense that it requires foundries to

specify ‘‘alternative operating scenarios’’ in all aspects. You have

got to predict what you are going to do for the next 5 years.

Failure to identify the ‘‘right’’ alternative will require filing an

amendment to the permit and loss of the valuable ‘‘permit shield’’.

And isn’t that kind of a humdinger of bureaucratic jargon; we have

a bureaucratic permit shield.

We are faced with a no-win situation. We do not want to be constrained by our permit restrictions from taking advantage of future

economic expansion, so we must assume maximum capacity for this

period, but this will result in higher potential emissions, higher

permitting fees and increased regulations.

Title V is costly. And I am speaking strictly of the paperwork

part of it. This is before anything is ever done about cleaning up

pollution.

Grede Foundries, Inc. in Milwaukee, a large and a well-respected

competitor, estimates that permits will cost them over $58,000 for

each facility. That is over $1,000 a week.
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This is a lot of money in our industry. And rather than being

spent on preparing a massive document to satisfy the act’s bureaucratic requirements, should go for better control equipment.

Our costs would be very close to Grede’s and this does not cover

the added permitting fees that are going to be charged by IDEM

to try to control or handle this.

The act is redundant. The States already have permitting procedures.

And, finally, it is nonsensical in many ways. Let us assume that

every major emission source submits permit applications completely and timely. We are talking about close to 1,000 pages. How

will this information be used? Can it be used?

One of the questions deals with how much ‘‘fugitive dust’’ goes

airborne when trucks pull into a parking lot. Now, is that during

a rain? Is that during a wind storm? Is that—you know.

They are impossible questions to answer. Environmental agencies will be required to process unprecedented amounts of information. Does anyone honestly believe that the governing agencies will

be able to process this information, let alone put it to good use.

The Ohio EPA could not effectively handle the NPDES—that is

the stormwater permitting—permit submissions because of the

complexity and volume. And we had people waiting around for

rains and timing them to take samples of runoff to do that kind

of work.

As a foundryman, I believe that the Clean Air Act was born of

a good idea, less emissions, but has been transformed into a bloated administrative nightmare with emphasis on the permitting process, not on improvement of the environment.

We need help. We need delay and review and cuts in those requirements. And I am certain that if others who are still unaware

understood what is required, you would be getting hundreds of letters objecting to this, but many of us—I do not claim to understand

all of it. Thank you.

[The prepared statement of Mr. Kersey follows:]
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Mr. MCINTOSH. Thank you very much, Mr. Kersey. I appreciate

that.

The next witness is Robert Anderson, plant manager at Delphi

Interior and Lighting System. Welcome.

STATEMENT OF ROBERT ANDERSON, PLANT MANAGER,

DELPHI INTERIOR AND LIGHTING SYSTEMS

Mr. ANDERSON. Good afternoon, gentlemen. My name is Bob Anderson. I am the plant manager at the Delphi Interior and Lighting

Systems plant in Anderson.

I appreciate the opportunity to briefly address this audience regarding the growing impact of the Government regulation on plant

operation.

Delphi Automotive Systems is a business sector of the General

Motors Corp. Delphi Interior and Lighting Systems has been in

business in Anderson since 1929.

Our 3,800-person team designs and manufactures exterior lighting for cars and trucks—including signal lamps, tail lamps, turn

signals, parking lamps and high-mounted stop lamps.

Our plant is actually the largest manufacturer of vehicle lighting

products in the world. Our Anderson team supplies over 95 percent

of the signal lighting used in vehicles produced by General Motors—over 5 million vehicles in 1994 alone.

At Delphi we have persevered over the years to reach our

present position and we are committed to working even harder in

the future to retain our status as the No. 1 producer of quality

lighting products.

There has been great progress made in protecting human health

and safety and the environment and we are pleased to be a part

of that progress. In fact, our lighting business was started 89 years

ago based on products to make cars and trucks safer.

Now, each and every product we make is totally regulated, and

regulatory requirements facing manufacturing facilities in the

United States today are increasingly complex and costly.

By example, over the last 20 years the number of environmental

regulations with which plants must comply has grown phenomenally. According to one estimate, the pages of the Code of Federal

Regulations devoted to plant environmental regulations alone increased from 450 pages in 1972 to 9,200 pages in 1988.

The EPA regulations alone take up 15 volumes similar to this

one (holding up EPA regulations book). One analysis of the cost of

reporting showed that at our plant alone, we spent over $5.8 million in 1994 to comply just with environmental regulations.

At our plant we have five professional employees who spend most

of their time on environmental regulation conformance and reporting. We deal with a number of regulatory agencies at the national,

State and the local level.

Obtaining permits from regulatory agencies is a costly and timeconsuming process. In one case, the process to obtain a hazardous

waste storage permit took 10 years and required several submissions and revisions due to inefficiencies in the review system.

Nearly $200,000 was spent to modify a drum storage area to

meet rigid regulations, even though the area was being properly

managed and had no documented releases to the environment.
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These stationary source requirements are pervasive and regulate

virtually every phase of manufacturing activity. As you know, manufacturing plants comply with a myriad of regulation and reporting

requirements generated from laws such as the Community Right to

Know, Resource Conservation and Recovery, Clean Water and

Clean Air Acts.

Today we operate in the increasingly competitive international

lighting market by focusing on producing quality products at a reasonable price. Our engineers develop innovative designs that are

cost effective as well as providing an added benefit to the customer

in terms of safety and efficiency.

Delphi Interior Lighting, Anderson Operation, has invested over

$100 million in research and development over the last 5 years and

another $40 million in capital improvements in our plant over the

same time period. This included multicolor molding equipment,

toolroom and other production equipment—191⁄2 single-spaced

pages in this computer printout of capital improvements in the last

5 years.

These types of expenditures are necessary in order to improve

our ability to compete as we look to expanding our markets nationally as well as overseas.

We produce lighting not only for the U.S. market, but also for vehicles exported to other countries. The intense competition that has

developed as our market has become global means we have to

eliminate every bit of waste from our operations. We have to have

the best products in the world, but we also have to be price competitive to be able to sell them.

It certainly defeats the purpose of and wastes our internal efforts

to be competitive when the Federal Government imposes regulations which, though well intentioned, have not been adequately

considered from a cost benefit standpoint or which unnecessarily

complicate operations or which require continuous or detailed compliance which no one is likely even to read.

Although reasonable review of business practices is beneficial,

the Government’s regulator role has exploded in the last 4 years.

Regulatory reform, such as the legislation recently passed by the

House, offers a reasonable approach to begin looking at the costbenefit ratio of the many regulations.

Regulations that promote a benefit should be retained. Those

that do not meet the criteria should be flushed out. In fact, this

concept is not different than the scrutiny American enterprise faces

every day in today’s global marketplace.

Again, thank you for providing a forum to begin discussions on

the important subject of bringing unnecessary regulation under

control. I assure you, it is one of the keys to our ability to compete

globally. Thank you.

[The prepared statement of Mr. Anderson follows:]
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Mr. MCINTOSH. Thank you very much, Bob. We appreciate it.

Let me turn now to Mr. Richard Sullivan, vice president and division manager for New Venture Gear. Welcome.

STATEMENT OF RICHARD SULLIVAN, VICE PRESIDENT AND

DIVISION MANAGER, NEW VENTURE GEAR

Mr. SULLIVAN. Good afternoon. First, I would like to thank you

for the privilege of speaking here this afternoon.

The Muncie Transmission Division of New Venture Gear is a

manual transmission supplier located on the southwest side of

Muncie. We are a joint venture formed and owned by Chrysler

Corp. and General Motors. Our facility has been producing transmission components at this location since 1919. Throughout these

years, we have been a major provider of jobs for Hoosiers and a

major consumer of goods and services from the area.

During the last few years, competitive pressures have caused

business loses, resulting in downsizing. Our employment has fallen

from a maximum of 3,000 in the early 1980’s to its current level

of 1,300.

Our plant lost $52 million last year and will lose about $40 million this year. Our board of directors have told NVG it must make

the Muncie plant profitable. Obviously, to do that, we have to have

aggressive cost-cutting reduction measures implemented.

And although our business losses are not a direct result of the

added regulatory burden, they do impact our profit picture.

Environmental and health and safety spending, on a one-time basis, from 1989 to 1994, was over $3.2 million with ongoing annual recurring costs of grown to over $1.3 million.

We ask you to consider the financial impact regulations may

have on American competitiveness and that the proposed benefit be

weighed against the cost.

While we acknowledge that the workplace and the environment

are definitely safer and cleaner than ever before, we also stress the

need to be cost competitive. Thank you.

Mr. MCINTOSH. Thank you very much. I appreciate that.

That leads to one of the general questions that I would like to

ask each of you. And I appreciate you all being here. We have a

good variety of smaller businesses to larger businesses—GM being

a major employer in both Anderson and Muncie; and the small

businesses, really, generating a lot of the job growth opportunities

historically.

But let me ask you to think about the impact of these regulations

and others on the ability to create new jobs or sustain the existing

jobs.

And if you could give me either a quantitative sense of what the

job loss due to regulations is or the job gain, if there is one—if you

have to hire more people for some reason on the paperwork—that

would be helpful to us.

And I would appreciate it also if, as you are thinking about that,

regulations have an impact in particular on decisions to expand

and invest in new equipment.

I noticed Mr. Anderson and Mr. Sullivan both had fairly large

sums of cost of regulation and I did some quick math. Over at the

Delphi plant, if you had employees making $50,000 a year and
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taxes and benefits package of another $25,000 in cost, you could

take that $5.8 million and hire an additional 75 people.

And, so, the numbers are significant and do have a significant

impact on employment. Now, obviously, you might not be able to

translate all of that into that many jobs, but that, I think, gives

you an idea that you are spending the salaries of 75 people to comply with those regulatory costs.

So, let me ask each of you to comment generally on the impact

on jobs of these and other Government regulations. Gary, do you

want to lead off?

Mr. BARTLETT. In 1994, we had—at the end of 1993, rather—we

had about 50 employees in our American facility. And through an

aggressive sales program, we doubled our employees over 1994.

And we are trying to hire people and train them.

We do our own training—of course, in-house—as fast as we can,

but we have reached the limits that our building will allow us to

grow.

And, certainly, this building in Muncie will continue to be here

and maybe even be our home office, but we have had an offer from

a company in England—since we sell so much in England—to expand our operation and participate in a joint venture in England.

And when you are faced with things like that and you work in

the international marketplace, certainly it does make things like

that attractive.

It would be one of the last things I would want to do because I

am an American. I like the idea of selling American parts in Europe, but, yet, if the Government continues this type of an approach to small business people like myself, what do you do when

you are faced with something like that?

So, in terms of real jobs, it could, realistically, cost in 1995 and

1996, 100 jobs here; that we would hire foreign employees.

The jobs that we have here will stay here, but the expansion will

take place somewhere else.

Mr. MCINTOSH. I appreciate that. That would be a tragedy, I

think, if our Government regulations end up creating incentives for

you to have to expand overseas.

Yes, Mr. Brown?

Mr. BROWN. Yes. We employ 50 to 60 employees. It varies up and

down.

Our biggest problem with the regulations is the cost of ending

these problems. In fact, as a small company, we do not have the

people to stay on top of these things. And the Government just

keeps piling them on.

We spend a great deal of money complying with all of the regulatory issues. Being a foundry, using leaded bronzes, gives us all

kinds of problems. And lead in the air, lead in blood, water off the

roof tops—which is some of our environmental problems.

I am sure that there is not much lead on the roof top, but the

government is worrying a great deal about it.

So, whether we would expand any great amount? I could not say,

really. That is the management of the company.

Mr. MCINTOSH. Are you in the marketplace where there is severe

competition from overseas?
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Mr. BROWN. We are in a marketplace where there is competition

from overseas. Whether I would call it ‘‘severe’’; in some cases, yes.

When we lose business to overseas, we definitely consider it severe.

The majority of our business is still domestic business. And we

are fighting the battle here.

Mr. MCINTOSH. Do you find that the overseas competitors have

the same concerns with lead on the roof or with regulatory agencies

that are concerned about that?

Mr. BROWN. No, I am afraid that most of them do not pay a bit

of attention to these problems.

Mr. MCINTOSH. Thank you.

Mr. Kersey.

Mr. KERSEY. It is very difficult to put a number of people that

you might have hired.

I think one of the aspects that Gary mentioned that needs to be

emphasized and that is as a small business, we really are all living

in fear of having something happen like it happened again because

we, frankly, do not have the people who can really get their arms

around these new regulations.

This Title V is so big that we have nobody in our organization,

so we rely on lawyers and consulting firms to do that kind of thing.

It takes dollars that we would use for other things and it generally takes people in our operation, who are really key, from the

important things that they would be doing otherwise.

So, where we lose it is just lack of the kind of growth that we

would get otherwise. And, so, I would say that I do not know how

to put a number to it, but economic growth of our particular company is definitely much slower because of the regulatory burdens

just because we have to spend so much time on it.

Mr. MCINTOSH. Thank you. I appreciate that.

Mr. Anderson.

Mr. ANDERSON. To try to quantify the magnitude of regulation

and what it can mean to employment in our business—specifically,

in automotive lighting—I touched on just one small slice of regulation.

We see regulation from all levels of Government dealing with our

people, our products and our processes. Just in my operation—$5.8

million last year—just dealing with one small slice of process regulation dealing with the environment.

Not touching health and safety. Not touching transportation.

Just environment. That explodes into a large number of people. If

we look at that whole overall impact, its tens of millions of dollars.

As I touched on earlier, our business is primarily within General

Motors. So, the opportunity for growth is staggering.

We have our own internal challenges to take waste out, as I

mentioned, but the Government regulation is another opportunity

for us to remove waste from our operation and excess cost from our

business that could give us the opportunity to compete in a more

global basis.

So, the opportunity within just our little piece of business of signal light—although very, very big within our company—could be

many times as big as it is today if we are able to be truly globally

competitive.
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And the effort that you gentlemen are working on is an area that

can help us in that.

Mr. MCINTOSH. So, if we are able to tackle some of these regulatory costs, you would foresee the possibility of being able to expand operations and to increase job opportunities?

Mr. ANDERSON. Absolutely. We have the capacity. We are just

not globally competitive yet.

Mr. MCINTOSH. Thank you.

Mr. Sullivan.

Mr. SULLIVAN. As Delphi mentioned, we probably have six to

seven full-time people to keep up with the regulatory burden. And,

obviously, those are unproductive people in terms of providing a

payback to the company.

So, in our position where we are losing money and we have got

to get profitable, obviously, we want everybody to be productive.

And if we do not get productive, then we have to what we call

a ‘‘survival mode’’ which is maintenance only, which is going to

mean quite a reduction in terms of people at our plant.

We do not want to get to that point, obviously, but the thing that

this adds to us is cost. When we go out and bid product, that is

part of our cost. We make what we call a profit that allows us to

pay salaries, but we cannot cover all the burden that a plant our

size generates.

And this is one of those contributors to the burden. We cannot

cover these fixed-type costs that are overburdening our manufacturing operations.

So, we look at it in terms of a cost that is really not contributing

to our being competitive. If we reduce that cost, we could be more

competitive as we go out for new business.

Mr. MCINTOSH. And did I understand you correctly? In the case

of New Venture Gear, that is critical at this stage because you

have received word that——

Mr. SULLIVAN. Well——

Mr. MCINTOSH [continuing]. Perhaps——

Mr. SULLIVAN [continuing]. We have two divisions. The other division is extremely profitable. And we are not profitable. So, obviously, there is a contrast there and the pressure is on us to get

profitable.

Mr. MCINTOSH. And reducing regulatory costs is one way to assist in that?

Mr. SULLIVAN. Well, it is one of the costs for the plant.

Mr. MCINTOSH. What would you say it is as a percentage of the

costs in the plant?

Mr. SULLIVAN. Not a big percent.

Mr. MCINTOSH. Not big?

Mr. SULLIVAN. Probably 5 percent.

Mr. MCINTOSH. Five percent? OK. Thank you. I appreciate that.

Are there any questions from my colleagues? I have one other for

Mr. Barlett.

You mentioned that a lot of this effort is to clean up waste. What

percent of the costs that you have incurred have gone to actual

clean-up activities of removing the waste or containing it?

And what percent has gone to either legal fees or consultant

fees?
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Mr. BARTLETT. Probably on waste removal, I would—in fact, all

of the invoices are in your book—but I would say to haul the material away and construction, probably $25,000 consulting and legal

fees; probably $34,000, $35,000.

Mr. MCINTOSH. So, well over half of the money has been spent

on things other than actually cleaning up the environment.

That is typical from what we have seen in a lot of the Superfund

and clean-up activities around the country; that it is a tremendously wasteful program and ends up not getting us all the benefits

that we would expect from the money being spent on it.

I appreciate you particularly putting together that book for us.

It will be very helpful.

Mr. BARTLETT. I think one of the keys, though, that all of us hit

on while we were here is that we all believe in a clean environment. We all want clean water. We all want clean air.

But the way that the Government goes about enacting some of

this regulation, I just do not understand what the motive is.

Is the motive to punish people in business? Is the motive really

to clean up the environment because I see some of the things that

they do that really does not clean up the environment. It just simply is wasteful.

Mr. MCINTOSH. I hear from people over and over again that it

is simply that business seems to be the enemy and not a real

means for getting a cleaner environment or a safer workplace. And

that is an unfortunate attitude when you encounter that.

Thank you all very much. I appreciate that.

Let me move on to our next witness. He is someone whom all of

you know, if you have watched cable television here in Delaware

County. Mike Lunsford, who is one of our local realtors, will talk

with us a little bit about some of the regulations that affect his

business.

Thank you very much, Mike. I appreciate your appearing with us

here today. Please tell us what your experience has been.

STATEMENT OF MIKE LUNSFORD, REALTOR

Mr. LUNSFORD. OK, thank you. Thank you very much. I am Mike

Lunsford. My primary business is the real estate business, both

commercial and residential.

And I wanted to speak of three or four issues, a couple of which

have happened and a couple of anticipated regulations that are

coming down the road.

Increasingly, the real estate transaction process has become a

trigger point for imposing a myriad of regulatory burdens. While

many of those are well intentioned, administratively they are very,

very cumbersome, as many people have shared today.

One example is the Lead-Based Paint Act that was enacted in

1992. It is disclosing the presence of lead-based paint for sales of

any properties pre-1978. For the sales of pre-1978 properties, the

seller or agent of any property leased or sold must provide a lead

hazard pamphlet, disclose any known lead hazards and provide a

10-day or mutually agreement period of time for a lead paint assessment or inspection.

Just recently, in November 1994, the EPA and HUD issued new

proposed regulations to be sure that this was being complied with
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and it included a host of new paperwork requirements ensuring

that compliance.

This would affect, potentially, 2.9 million sales and 9.3 million

rental transactions annually at an estimated cost—and these are

EPA and HUD’s estimates—of $75 million in the compliance paperwork in the real estate industry.

It appears to me as though this is largely necessary at the Federal level because right now there are 25 States that currently

have a property disclosure requirement on sellers. Indiana enacted

one July 1, 1994 and 15 other States are currently in the process

of setting up that kind of a disclosure requirement already.

In addition, last year the House passed legislation that would

have imposed a similar disclosure requirement for radon. This

would only have exacerbated the regulatory burden.

As an example, radon testing in Muncie, IN, if I want a radon test today, I have to go to Indianapolis and the cost is about $150

to get that done.

The test results are, at best, inconsistent. An example is that if

I went up to almost any house sealed up in this area and took a

radon test, that radon test would come back positive.

If I aired the house out, kept it open and kept a lot of ventilation

in the house, in all likelihood I could provide a negative report.

The bottom line is that it is so inconsistent, depending on who

takes the test, you never know what the results are going to be.

If it comes up positive, the remediation costs can be anywhere from $1,500 to $3,000 as a direct cost to the seller or the buyer or

a combination. Generally, it would be the seller.

It is a very, very inconsistent test. Does our Federal Government

need to be involved in that? It does not appear to me as though

they need to be.

Coming down the road is computerization in the real estate

transaction. Currently when we have a buyer, they ask for mortgage rates information and we will give them several lenders. They

will look at that information and they will make a decision as to

where they want to go.

Right now there is currently computerized lending operations

that are now coming into effect whereby in my office I might have

a computer that says that I can pull up a series of rates. We can

do comparisons of those rates and the buyer can then make a decision as to who they want to use.

Recently, the Clinton administration issued a proposed rule in

1993 that will increase the Government intrusion. It will require

that a computer system have any 20 lenders that wanted to be on

it.

In addition to that, if anyone used that system, the origination

fees would need to be paid up front. They are currently paid at the

point of closing. A tremendous burden on the buyer.

The goal of the real estate industry is to provide more services

at less cost. We can do that if we are allowed to offer some of these

services. In the future, we will have increasingly larger bundling

of services that will become very, very important.

I also was going to touch on environmental rules and regulations.

I think Mr. Bartlett has covered that very, very well. From my perspective, we run into a lot of testing that increases cost and the
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reason it does is because of the fear of what happened with Gary

and some of the superfund clean ups.

Anything that even smells as though there may be a problem

with environmental issues, scares buyers and it scares the banks

and rightfully so. It scares them to death because of the way in

which many of those rules and regulations are enforced.

Thank you very much. I really appreciate your coming to Muncie

and taking some time to talk with us.

[The prepared statement of Mr. Lunsford follows:]
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Mr. MCINTOSH. Thank you very much, Mr. Lunsford. I appreciate

that. And thank you for sharing those examples with us.

Let me ask you one question from some testimony that was given

earlier today in Indianapolis and you did not have the benefit of

hearing it, but let me summarize it briefly for you.

It essentially had to do with an additional requirement that borrowers would have if they used a mortgage broker in a transaction;

that they would have to lay over for, I think it was a period of 3

or maybe 5 days and have an option of rescinding the loan.

This person essentially said that this would lead to the elimination of the holder in due course and make many of these notes

unmarketable unless you could demonstrate that that person had

not exercised those rights.

It seemed, at the time, an example of a regulation that was well

intended, giving people a chance to maybe rethink the process.

But is it your experience that when you are selling somebody a

home or a piece of property that they would, on the whole, want

to have the option of 3 or 5 days later rescinding the deal—knowing that that might mean that they could not really close on it for

that period of time?

Mr. LUNSFORD. I think that could create a significant problem in

that right now we do so many things today to structure our transactions so that the buyer has as much disclosure as possible.

They have the ability to ask for all the tests, the inspections, all

those kinds of things that they would like to have to satisfy themselves as to the nature of the property that they are acquiring.

All the lenders information is disclosed well in advance of closing—from the closing expenses, the Truth-In-Lending form—all of

those kinds of things.

And by the nature of the transaction with all of the title work

and all of the other things that come together, an additional 3 days

before disbursal of funds, I think would be very detrimental to the

transaction in general. I do not think that it is necessary because

of all the other due diligence that happens.

Mr. MCINTOSH. As a result of that. So, the result is that it would

make it more difficult to engage in the transaction. And, so, although it appears to help people, it may make it harder for them

to buy a home——

Mr. LUNSFORD. Exactly.

Mr. MCINTOSH [continuing]. Or actually engage in many of these

transactions.

Mr. LUNSFORD. I mentioned the seller disclosures that are occurring now. Indiana used to be a buyer-beware State. And I think

today, disclosure is important in all cases.

It is a fact that whenever you buy a used piece of property, something is going to happen to it after you close it.

I mean, it is 10, 15, 20 years old. Some buyers are buying a property expecting it to be like it was brand new and that it will last

for 5 or 10 years before something happens to it. That is an impractical expectation.

I think when the Government steps in and continues to try and

make sure that what you and I do with our money and investments

and protects us, I do not think that it is necessary.
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Mr. MCINTOSH. It sometimes has unintended negative consequences.

Mr. LUNSFORD. Absolutely.

Mr. MCINTOSH. I am getting the stop sign from the timer.

Would any of my colleagues like to ask any questions? OK.

Mr. LUNSFORD. OK.

Mr. MCINTOSH. Thank you very much.

Mr. LUNSFORD. Thank you very much.

Mr. MCINTOSH. I appreciate that.

Let me call forth our next witness, Terri Quinter, who is the supervisor of Rose View Transit Co.

Thank you very much, Terri, for joining us.

STATEMENT OF TERRI QUINTER, ROSE VIEW TRANSIT

Ms. QUINTER. Thank you Mr. Congressman and panel. It is a

privilege and an honor for me to be here today to represent the

Municipal Government of the city of Richmond, IN.

My name is Terri Quinter and I am currently serving as supervisor of our Rose View Transit System. I am here to share with you

one instance of many situations that face our Municipal Government on a regular basis as a result of Federal regulations.

Our community of 38,000 people operates a public transit system

which is composed of six fixed routes served by nine buses. In addition, we operate a paratransit system for the exclusive use of the

handicapped and our senior citizens.

This system has five fully equipped vans that provide on-call

service 12 hours a day from 6 a.m. to 6 p.m. 6 days a week. These

vehicles are all equipped with wheelchair lifts and other amenities

to satisfy the requirements of their constituents: senior citizens and

the handicapped. The 1995 operating budget for this entire system is $968,000.

Based on 350,000 rides this year, the expected collections from the

users is $126,000. This then creates a subsidy by the Federal Government to operate this system of $842,000.

In 1993, it became necessary to replace some of the buses for the

fixed routes. As a result of the new Federal regulations under the

Americans with Disabilities Act, the new buses had to be equipped

with wheelchair lifts even though we were operating fully equipped

paratransit system. The additional cost per bus to provide this

equipment was over $6,500 per unit.

So, far, we have received five buses for an additional cost of over

$32,500 with a sixth bus on order and, ultimately, all nine buses

will be converted for a total cost of over $58,500. The total cost of

all nine buses is $414,900—80 percent of which is paid by the Federal Government.

So far, one citizen has used the lifts on the fixed route buses.

Even though this is not a tremendous amount of money, it is an

example of an unnecessary expenditure in our community because

of the ‘‘one size fits all’’ mentality.

In the future, we will have to modify the sidewalks wherever the

bus stops to allow for a level spot to land the lift. It makes no sense

to spend the great amount of money necessary to comply to this additional requirement when only one citizen is unnecessarily using

the equipment.
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There is no question that we, in our community, could run this

system more effectively with less cost if we had more freedom to

act in a manner that is more appropriate for our community and

our citizens.

Mr. MCINTOSH. Thank you very much, Ms. Quinter. [Applause.]

I appreciate your coming forward with that. And it is certainly

a classic example of where the Government had tried to do good

and has failed in terms of being cost effective in its approach.

But that is mind boggling that one citizen used it. Let me ask

you one thing that came to mind. You had mentioned that you had

to change the sidewalks. Is this after recently having to modify all

of the curbs in order to make them slope so that they would be

wheelchair accessible?

Ms. QUINTER. Right.

Mr. MCINTOSH. And, so, now, you have to come back and make

them level so that the lift would work?

Ms. QUINTER. That is correct. And above and beyond what our

budget can hold, the city of Richmond will have to pick up the additional cost. The engineer’s department is not very happy about

that.

Mr. MCINTOSH. Do you sometimes wonder who comes up with

these ideas?

Ms. QUINTER. Yes. It is obviously a person who does not ride on

a city bus. [Laughter.]

So, it is just a duplication of services. And the wheelchair lifts,

we have to operate them daily so that the hydraulics do not freeze

up. And the drivers just come in and let it down and put it back

up and then they go on.

Mr. MCINTOSH. And you are confident that you could fully satisfy

all of the needs of the handicapped community in Richmond——

Ms. QUINTER. Yes, sir.

Mr. MCINTOSH [continuing]. Through your paratransit service?

Ms. QUINTER. Yes, sir.

Mr. MCINTOSH. I have no other questions. Thank you very much

for coming.

Ms. QUINTER. Thank you.

Mr. MCINTOSH. Do either of you have any questions?

Mr. GUTKNECHT. I do not think that there is anything that we

could add to that testimony. [Laughter.]

Ms. QUINTER. Thank you so much.

Mr. MCINTOSH. Thank you. I appreciate that. Believe me, that

will be made known in Washington.

Ms. QUINTER. OK, thanks.

Mr. MCINTOSH. Let me call forward our final scheduled witness,

Katherine Kleber with ABATE and Dan Conaway with ABATE of

Indiana. Welcome.

Dan and I have met here and also in Washington.

I appreciate you coming, Katherine. I have not had a chance to

meet you. I appreciate your coming and sharing with us your testimony. I will let you lead off.

STATEMENT OF KATHERINE KLEBER, ABATE OF INDIANA PAC

Ms. KLEBER. OK. Can you hear me?

Mr. MCINTOSH. Yes.
168

Ms. KLEBER. OK. Chairman McIntosh, Mr. Peterson and Mr.

Gutknecht, I would like to thank you for this opportunity to express my concerns before your subcommittee.

My name is Katherine Kleber and I live in Seymour. I represent

ABATE of Indiana which is American Bikers Aimed Toward Education.

I requested permission to address you today because the focus of

this subcommittee is regulatory issues and I am very concerned

about a matter which is regulatory in nature, yet it does not focus

on one single law or rule. I come to this committee to request an

investigation into the policy and procedures being practiced in the

operation of a Federal regulatory agency, the National Highway

Traffic Safety Administration.

The laws governing virtually every aspect of the activity that

takes place on our roads—including automobile travel, bicycles, motorcycles, school buses and pedestrians—depend heavily on recommendations and information supplied by this agency. Highway

trust fund programs, law enforcement procedures, road design,

safety equipment, educational programs and skills requirements

are only a few of the areas of their influence. Therefore, every citizen in this country is affected on a daily basis by this agency

known as NHTSA.

The magnitude of the decisions made and the vast influence represented by this Federal regulatory agency places it in a position

of responsibility that calls for leadership that is trustworthy and

above reproach.

So many daily activities of U.S. citizens are restricted and regulated that honesty and integrity of the people who are in positions

of control is demanded or no person can be assured of the fair and

equal consideration that is their right as a citizen of this country.

My request is based on 3 months of personal investigation into

questionable practice and, most recently, having witnessed firsthand, a blatant attempt to manipulate information which was requested by the President to help determine a need for reviewing

regulatory practices.

In December 1994, I witnessed a large group of professional people—including emergency medical services and children’s safety

program administrators—use documentation provided by NHTSA

to justify the need for legislative regulation of bicycles, motorcycles

and equestrians.

Most of the documentation was derogatory and renounced by

NHTSA itself as long ago as 1991. Yet, the accusations and inflammatory statements had proved to be such an effective tool, not only

do they continue to release the information already confirmed by

them to be false, they also provide instructions explaining how to

use this information to give credibility to their fight for legislative

regulation.

On March 29, 1995 an acquaintance of mine from Washington,

DC sent me a notice that, at the request of President Clinton, the

National Highway Traffic Safety Administration would be holding

public hearings to listen to the opinions of the people regarding

regulatory measures which are obsolete or ineffective. One of the

meetings was to be held in Indianapolis, IN on April 4th at 7:30

a.m. However, this meeting was not publicized. On the contrary, it
169

was so well hidden, that the hotel where it was scheduled did not

even know about it.

I arrived with 11 motorcyclists who, at great effort and personal

expense, travelled from all corners of the State to speak for the

20,000 members of ABATE of Indiana. These 20,000 members of

the public are also members of a motorcycle safety and education

organization which did have their voice heard that day.

However, that voice was heard only because a friend of mine

thought I might be interested. There are many voices and opinions

in Indiana who were not heard and are still unaware that the hearings took place.

It was obvious to all that the voice that was intended to be heard

at this covert meeting and presented in Washington to the President of the United States as the voice of the people was actually

the voice of professional speakers skilled at presenting the recommendations of those same self-acknowledged regulatory advocates who were at the symposium in Iowa that I previously mentioned.

Obvious, because the public hearing—unknown to the public—

was a part of the annual safety meeting held by this same group

which is sponsored by NHTSA called Lifesavers 13.

Questionable ethics, manipulation of facts and use of our Federal

tax dollars to promote the lobbying efforts of a handpicked group

of associations representing the monetary interest of big business

and a personal agenda of the administrator are sufficient reasons

for an investigation into the National Highway Traffic Safety Administration.

I am one person who, in December last year, stumbled into a culture whose philosophy threatened my values and freedoms. Two

weeks ago, I saw enough to convince me that the agency which was

created to protect our interest and assist us in questions of highway safety and awareness is not protecting me, representing me or

even interested in hearing the voices who would speak for me.

Regulatory decision based on this type of practice is a violation

of the trust of the American people and an insult to the integrity

of our country.

I thank you again for this opportunity to speak before this committee and I wish you success in the endeavors of your subcommittee.

Mr. MCINTOSH. Thank you very much. We endeavor to allow people to know where we are meeting and encourage participation.

So, I will make those views known back there. I will transmit

them to the President myself.

Mr. Conaway.

STATEMENT OF DAN CONAWAY, ABATE OF INDIANA PAC

Mr. CONAWAY. Mr. McIntosh, Mr. Peterson and Mr. Gibenich——

Mr. GUTKNECHT. Gutknecht.

Mr. CONAWAY [continuing]. Gutknecht. That is a hard one, sir.

Mr. GUTKNECHT. It means ‘‘good guy’’.

Mr. CONAWAY. ‘‘Good guy’’, I believe that. [Laughter.]

I thank you for this opportunity to testify before your subcommittee to express the views of American Bikers Aimed Toward Education.
170

I am here today primarily to ask this subcommittee to review the

effectiveness of regulations created by Section 153 of Title 23 of the

U.S. Code enacted by the Intermodal Surface Transportation Efficiency Act of 1991, which required States to pass mandatory seat

belt and helmet laws by October 1, 1993.

Those States without both laws in effect would face financial

penalties. The first year 1.5 percent of the Department of Transportation funds would be removed from the construction budget and

transferred to safety programs. The following year, the percentage

would double.

This is nothing short of the Federal Government using blackmail

tactics against the States using the States own tax dollars.

The authors of Section 153 had the wisdom to foresee continued

reluctance of some States to sell their rights for a small quantity

of highway money. The incentive grant program provided the

States that came into compliance with an opportunity to apply for

grant money available for additional safety program funding.

These additional funds would be available beginning fiscal year

1992 and continue through the end of fiscal year 1994 when the

penalties of Section 153 came into effect.

In our opinion, it has been proven these sanctions are not only

ineffective, but have undermined the stated goal which would implement universal mandatory motorcycle helmet laws.

From 1989 to the summer of 1991, five States—Oregon, Nebraska, Washington, Texas, and California—passed helmet laws.

Section 153 offered incentive grants without threat of sanctions

until 1993.

In 1992, one State—Maryland—passed a helmet law. So, in the

4 years before the Federal Government started penalizing States

for not having motorcycle helmet laws, six States passed helmet

law on their own initiative.

But, in the 3 years of being threatened with Federal sanctions

on their highway construction funds, not one State has passed a

helmet law.

Not only have the Section 153 penalties failed to force more

States to pass helmet laws, it has stopped what appears to have

been a trend of States passing helmet laws on their own.

Twenty-five States have stood up to 3 years of sanctions. We feel

this is a significant message from the States that not only is this

type of Federal blackmail unacceptable, but also the determination

of safety issues are the rights of the individual States.

In support of this subcommittee’s goal to overhaul the Nation’s

regulatory system, we request elimination of the penalties in Section 153 of the 23 U.S. Code.

In closing, I would like to thank the three of you for co-sponsoring H.R. 899 which would repeat these penalties and for allowing

me this opportunity to speak to your committee.

Mr. MCINTOSH. Thank you very much, Mr. Conaway. As you indicated, I think you will see a lot of support for allowing the States

to make those determinations from us here.

Let me ask my colleagues if they would like to make any comments.

Mr. PETERSON. Amen. [Laughter.]
171

Mr. GUTKNECHT. Well, Mr. Chairman, I would just say that both

Representative Peterson and myself came from the State legislature.

And I remember a number of years ago when the Federal Government wanted us to pass a 21-year-old drinking age law, I sent

a letter to President Reagan, who I was a big supporter of, and reminded him of what he had said many times and that is that the

Federal Government is the creation of the States; not the other

way around.

And, somehow, we have got to re-instill that basic notion that

there has been entirely too much of this nanny states coming from

the Federal Government trying to intimidate and use blackmail to

get the States to do something that they think is a good idea.

Thank you.

Mr. MCINTOSH. Thank you both for coming. I greatly appreciate

it.

Now, for the remaining period of time, I would like to open up

the microphone to any of the people who have come here today.

Before we got started, I wanted to ask if either Robert Marquis

or Shelby Upchurch were here. They wrote a letter to the editor requesting that we hear from dissenting viewers. And I would be

happy to give you the first opportunity in the open mic.

Let me ask everyone to be sure and give your name and see the

reporter afterwards so we get it spelled correctly. I appreciate your

coming, though.

Mr. REDWINE. On behalf of a group of concerned workers from

Muncie, IN we would like to thank the representatives, David

McIntosh and his committee for their attention.

We are citizens who have been neglected by lack of Government

rules and enforcement of existing regulations. A lack of Government interest and the working citizen has been overridden by special interest groups who manipulates or interferes with legislature’s ability to represent the best interest of our country and its

people.

The founding fathers of this Nation established this country and

set up our Government through rules and regulations. We still believe today that the Constitution and the Bill of Rights are the best

set of rules in this world.

The Constitution was written so that it could be improved upon

at later times during the history of this country. Therefore, it

should be done for the improvement of its people and all of its people—rich and poor.

This country should be governed for the improvements and safety

of the citizen’s work place, home and environment.

If the corporations are not governed and commerce by rules and

regulations, they will run rampant to obtain profit with disregard

to life and welfare of the citizens of this country.

We submit to you, as an example, a real story. In the worse interest of commerce, a list of citizens who, we believe, have been

cheated of their representations. Their numbers and death is a statistic that should never be accepted.

Chemical exposures to the workers, families and communities

cause injury to mind, body and future generations of America.
172

And I will leave with this here, sir. And if you have any questions, I would like for you to type them up and send them to me

and I will gladly answer them for you.

Mr. MCINTOSH. Good. Let me just ask you one question at this

point.

Many of the folks who testified today indicated that they saw the

regulations as not really accomplishing the stated goal.

The lady from the Richmond Transit Authority indicated that

they could take care of all of the people who were disabled and did

not have to spend the money to change their buses in order to

serve just one individual.

Do you not think that it would be better to allow local government and people working in their own work places to accomplish

those goals without some of the counterproductive regulations that

we have heard about today?

Mr. REDWINE. Well, if you could keep corrupt politicians out of

it, we could do it.

Mr. MCINTOSH. Fair enough. [Laughter.]

Thank you for your views. I really appreciate that.

Are there any comments or questions from my colleagues? No?

Thank you. And we will stay in contact.

Be sure and state your name for the microphone and also see the

reporter afterwards to make sure that we have it spelled right.

Now, I understand that Dr. Brannum is here. He was scheduled

to testify earlier. We will let him speak.

And then, Karen, if you could take the microphone around to

some of the other folks.

You could talk from right there if you would like to, Dr.

Brannum.

STATEMENT OF GEORGE BRANNUM, MD, PATHOLOGISTS

ASSOCIATED

Dr. BRANNUM. Thank you. Hello? It works.

I would like to apologize to this panel. I appreciate the opportunity to be here. And to my medical cohorts who were here earlier,

I live too close, so it was hard to get here on time.

But I do appreciate this opportunity to share some experiences

which I think would illustrate some need for regulatory reform.

I would like to skip through some of the ideas that I have had

because of the interest of time and focus on just a couple of them.

One of them has to do with the factor that laboratories, I think,

are a worry. We have anywhere from two to eight inspections a

year that involve the FDA and the American Association of Blood

Banks, the Indiana State Board of Health, the Clinical Laboratory

Improvement Act of 1967 and 1988, the College of American Pathologists and the Joint Commission for the Accreditation of Hospitals organizations. All of these involve the laboratory to a great

extent.

There is a lot of duplication and overlap. And in addition, we are

subject right now to inspections by OSHA where we occasionally

have Medicare.

We estimate the cost of this is roughly around $200,000 a year,

not only in the direct certification and registration expenses, but in

the actual work that is required to meet those regulations.
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Another area is the so-called ‘‘medical necessity requirements’’

which, I understand, are currently under review, but this is an effort in order to control expenditures for laboratory work in which

they had decided that the laboratory should be replaced, which, I

suggest is an impossible thing because laboratories have received

blood from the doctor’s offices, other hospitals and situations where

there is absolutely no contact with the patient.

And, yet, they are required in the laboratories or they propose

to require the laboratories to document for the payor or the carrier

the medical necessity of the test which has proved absurd because

we do not have access to the patients.

The third thing that I would like to mention is the fact that the

Government has made or are instituting requirements with respect

to cytology proficiency testing. And that involves the so-called Pap

smear—which I think most everybody is familiar with—to detect

cancer of the cervix and the uterus.

And because of the implementation of regulations a few years

ago, the wage for cyber technologists have roughly doubled from

approximately $25,000 to $30,000 to twice that amount in the span

of 6 months because what they did was require certain things be

done that were obviously very expensive.

On the other hand, they turned around and tell us that they are

not going to pay us anything other than what appears to be a relatively small amount for the work.

So, we just think basically that the regulatory efforts that Congress and some of the agencies have imposed upon health care are

ineffective, they interfere with our ability to do a good job.

I was interested in some of the other comments that people were

making about the burdensome requirement of the regulations, but

now not only are we required to comply with the regulations, then

they tell us what they are going to pay us.

Mr. MCINTOSH. The ultimate in regulations—price controls.

Thank you very much, Dr. Brannum. I appreciate that.

Has it been your experience that there are regulations that sometimes make it either difficult or downright impossible to offer the

best possible health care to people?

Have you ever encountered a regulation that made you choose an

option that was, perhaps, not best for the medical indication that

was needed?

Dr. BRANNUM. A lot of these regulations come about as a result

of adverse publicity about some isolated events that serve as a crisis mentality that says, Gosh, we have got to rush out and protect

the public from something.

And when, in fact, they investigate a situation, very often they

will find that there are ways of coping with the problem that would

not impose, on a total field, an enormous cost.

And since they have not done that in some areas, the total cost

is getting to be so much for certain things that I believe that there

will be a diminished access to good quality care.

And I think particularly with respect to laboratories, it requires

that you draw blood or take a specimen from a patient, examine

it, get a report back usually in some timely way and cost efficient

manner.
174

And I think that, over time, these increasing costs will diminish

significantly the access to that kind of care.

Mr. MCINTOSH. So, the regulatory costs could have a real burden,

not only on medical costs, but access to good health care?

Dr. BRANNUM. I think so.

Mr. MCINTOSH. All right. I appreciate your coming today and

participating.

Dr. BRANNUM. Yes, I am sorry that I was late.

Mr. MCINTOSH. That is all right.

Dr. BRANNUM. Thank you for asking me.

Mr. MCINTOSH. Karen, I will let you. Please just raise your hand

and Karen will bring you the microphone.

STATEMENT OF CHRIS HYDE

Mr. HYDE. Thank you gentlemen. I appreciate your patience

today. I know that you have heard a lot of testimony through the

course of the day between Indianapolis and here.

My name is Chris Hyde and I appreciate being given an opportunity to share with you some of my experiences with certain Government entities.

Let me briefly state that in the latter 1970’s, my father pioneered

in a program of developing subsidized apartment projects for the

U.S. Department of Agriculture, the farmers owned administration.

The purpose was to provide low to moderate income families in

rural communities decent housing. Back then, the paperwork requirements were relatively simple.

In the latter 1970’s, it took maybe about half a dozen pages of

paperwork to complete the Ag requirements for the FMHA.

In 1988, there was maybe a dozen pages. And in 1994—and it

is not even complete yet.

Mr. MCINTOSH. Good grief. Now, is that what has to be filled out

by an individual who wants to take advantage of this loan?

Mr. HYDE. No. This is an ongoing management—not just the

initial loan arrangements or any of the initial buildings. This is

just an ongoing year-to-year reporting requirements of existing

projects.

Bear in mind that we were one of the original developers in this

State in this program. I do not know when it was actually initiated,

but I think sometime in the latter half of the 1970’s.

Over the passing years, the Government attitude has basically

progressed from a trust between the owners, the agents and the

Government to a situation of one complex legal hurdle after another.

And the general attitude has developed that every move and

every effort that the owners or their agents take in managing these

projects are scrutinized under the auspices of being fraudulent.

Since 1990 or shortly thereafter, all you hear preached within

the workshops and the communications with the Government is

fraud and waste, fraud and waste.

And I think that the other issue that I want to get on the

record—because I know that I am being asked to stop here—is the

fact that we have come to the resolve that the bureaucracy and the

red tape has become so extreme that the Government itself cannot

even perform the most basic tasks.
175

In other words, they require reports from us within 30 to 60

days, yet they cannot even get to the reports in the course of years.

Just 30 days ago I was given a report for 1993. And after we had

already worked through 1993 and then the budgets of 1994, 1993

had been disapproved. Which is absolutely ridiculous.

Mr. MCINTOSH. It was long gone, huh?

Dr. HYDE. Right.

Mr. MCINTOSH. Well, I appreciate that. I am sorry for the time

restrictions. I want to try to get to as many people as possible.

Dr. HYDE. I appreciate the opportunity.

Mr. MCINTOSH. And we will put the full written testimony into

the record.

Dr. HYDE. Thank you.

Mr. MCINTOSH. Mr. Peterson, you had some interesting comments this morning on that program on how you advised some of

your constituents.

Mr. PETERSON. Well, I was talking about the county Farmer

Lender part, although I am pretty familiar, I used to own one of

these buildings.

And one of the good things about being elected to Congress, they

made me sell it. [Laughter.]

That was 1990 before I had to fill out all that paperwork, but I

used to do the books for it. I am also a CPA.

And I guess I would be interested, before I leave, in seeing what

it is they have added to this since I——

Mr. HYDE. May I make on additional comment relative to that?

I think something you said earlier today hit upon it, was that a

majority of the problem lies with the people that administer the

law. And that is my immediate problem right now.

We have put in for a prepayment on this. And the original loan

agreement stated in one sentence that we were allowed to prepay

it.

When I asked for the request to prepay, they sent me an 108-

page——

Mr. PETERSON. I tried to do that once, too.

Mr. HYDE [continuing]. A 108-page requirement to prepay this

loan.

Now, this is not a Government project. This is, as you know, selfowned.

Mr. PETERSON. I tried to do that, too.

Mr. HYDE. So, they put in front of you an impossible hurdle to

get out from underneath it, yet they make it an impossible hurdle

to comply. So, it is like you are damned if you do and you are

damned if you do not.

So, right now as it stands, we have been working without any

management plans, any management agreements for the past several years.

And, of course, they threaten from 1 minute to the next to withhold the subsidies and what have you. I have got letter after letter

after letter threatening. And I asked——

Mr. MCINTOSH. And all you want to do is to get out of the program at this point?

Mr. HYDE. Well, that is what we had come to resolve. That we

just wanted to get out of the program. And, basically, what it gets
176

down to, after probably another 1,000 pages of documentation, then

they sit down and a Government official will make a decision

whether he is going to let you get out or not.

Mr. PETERSON. Well, Mr. Chairman, there is a lot of pressure

from different forces trying to keep these from being converted because they want to keep them for low income housing and so forth.

So, there is a lot of things that play into, and pressure that

comes out of these folks and so forth.

Mr. HYDE. Right. And if somebody thinks that I do not care

about those 46 families that are being subsidized, I certainly do.

The last thing in the world I want to see happen is——

Mr. PETERSON. I understand.

Mr. HYDE [continuing]. Is that.

Mr. PETERSON. These so-called advocates and legal aid societies

and all of that will end up getting involved.

Mr. HYDE. Yes. This meeting was brought to my attention because I called Mr. McIntosh.

Mr. MCINTOSH. I really appreciate that. Thank you, Mr. Hyde.

Karen, who——

Ms. BARNES. Could we have people sit here so that the court reporter can get them?

Mr. MCINTOSH. Oh, OK. A change in the procedure slightly. If

you would come forward.

Mr. BRYAN. Thanks.

Mr. MCINTOSH. Welcome. State your name for the record if you

would.

STATEMENT OF MARK BRYAN, TERRITORY MANAGER,

NATIONAL FEDERATION OF INDEPENDENT BUSINESS

Mr. BRYAN. I am Mark Bryan, territory manager for NFIB, the

National Federation of Independent Business. Thank you Congressman McIntosh and distinguished committee co-members for having

us here today to testify briefly.

And as I mentioned to my new business interviews, I will be

brief.

As you have heard today, the American free enterprise system is

in danger. I hear those comments daily from 10 to 15 business

owners that I will personally see on an individual basis.

You have heard testimony from many of our members today on

many issues. And I wanted to inform this committee that I hear

these words coming from most owners that their biggest fears are

not accounts receivables or sales numbers, but compliance. State

and Federal regulations that are putting them into a regulatory

nightmare.

I have a very wonderful couple that I know from Indiana that

are dry cleaners sitting directly behind me. They are reaching retirement age and are wondering about selling their business because they do not know if the people taking over their business can

meet Federal regulations and let them continue on to a brighter

day.

Many business people feel that America’s most endangered species is small business. And the American free enterprise system is

the greatest system in the world if allowed to work. And when allowed to work, it is successful. Thank you.
177

Mr. MCINTOSH. Great. Thank you very much, Mr. Bryan. I appreciate that.

STATEMENT OF GARY VAN MIDDLESWORTH, VAN’S

RESTAURANT SERVICE, RICHMOND, IN

Mr. VAN MIDDLESWORTH. Mr. Chairman, members of the panel,

my name is Gary Van Middlesworth. I am the owner of Van’s Restaurant Service in Richmond, a small State inspected meat processing plant and purveyor, started by my father in 1947.

The business is located just 3 miles from the Indiana/Ohio State

line, but is not permitted to do business in Ohio because of the

1967 Federal Meat Inspection Act. This act requires State meat

and poultry inspection programs to be at least equal to the USDA’s

Federal inspection program, but denies small processors the right

to compete against large corporations and foreign producers by denying them the right to sell their products in States other than

their own.

Here in Indiana, the State inspection program is more efficient

and less costly than the Federal program for small processors.

Without it, many small family owned meat processing facilities

would go out of business.

Four States—Arkansas, Idaho, Kentucky and Michigan—have

given up their State programs in recent years. According to the

documentation presented to the House Agriculture Subcommittee

on Livestock last year, these plants have lost 947 of the 1,409

plants operating under State inspection at the time of their State’s

change to Federal inspection.

With the passage of the North American Free Trade Agreement

and the General Agreement on Tariffs and Trade, meat processors

from Canada, Mexico and other countries can legally sell their

products in all 50 States.

And, yet, as the owner of a State-inspected plant in a country

with the most stringent inspection system in the world and as a

tax paying American and Vietnam era veteran, I am not permitted

to sell my company’s products 3 miles away in Ohio.

I urge Members of Congress to show their support for small business and free enterprise by eliminating the inequities caused by

the outdated 1967 Federal Meat Inspection Act. Thank you.

Mr. MCINTOSH. Great. I appreciate that, Mr. Van Middlesworth.

Let me ask if my colleagues have any questions or comments.

Mr. PETERSON. I served on the Livestock Subcommittee and we

are trying to legislatively overhaul that law this year.

There is also a regulation that is pending that is mixed up in

this, but we are going to make a serious attempt. We understand

what the problems are and we are going to try to do something

about it.

Mr. VAN MIDDLESWORTH. Thank you.

Mr. MCINTOSH. Thank you very much for coming.

Welcome. Thanks for coming all the way up here.

STATEMENT OF JOHN WHEATLEY, DELTA FAUCET CO.,

GREENSBURG, IN

Mr. WHEATLEY. Thank you. My name is John Wheatley and I

represent the Delta Faucet Co. in Greensburg, IN.
178

In the 20 years that I have worked for Delta, I either worked at,

advised or supervised the environmental services department.

During that 20-year period of time, I have seen the regulations

at the local, State and Federal levels grow at almost an exponential

rate year after year.

The regulations are usually so lengthy and so complex that a

company’s responsibility under any given regulation is often hard

to determine without the help of outside consultants or lawyers.

Our regulatory system is out of control and needs to be overhauled. It needs to become more efficient, more effective and more

responsible to the taxpayers.

The American public is under the mistaken impression that all

the government regulations are there to protect and benefit the

country. This is not the case.

Under our present regulatory system, everyone loses. Due to the

high cost of regulations, we have weakened our international competitiveness. This results is lost jobs and lower productivity.

Businesses lose because the talent, time and resources of workers

must be spent complying with extensive regulations and paperwork

requirements, rather than doing activities that create products or

services that are beneficial to society.

Consumers lose because businesses are forced to transfer the cost

of compliance to the prices they charge for their goods and services.

This last point is very interesting. The Clinton administration re- cently estimated the cost of Federal regulations to be $430 billion

per year. Private studies have projected the cost to be even higher;

perhaps as much as $600 billion per year or about $5,900 annually

for every family in America.

An example of costly and unneeded regulations are the Metal

Products and Machinery effluent guidelines, also known as

M.P.&M.

These new categorical limitations and standards will cover facilities that manufacture, rebuild or maintain finished metal parts,

products or machines.

Tens of thousands of indirect water discharges will be regulated

by M.P.&M., including facilities that are covered under existing

categorical standards for metal finishing, electroplating and 14

other metal effluent guidelines.

M.P.&.M. would nearly double the number of regulated indirect

discharges by adding 10,300 to the 12,000 existing sources.

While existing effluent guidelines are sector specific, M.P.&M.

would apply across numerous diverse industries that only have certain unit operations in common.

Delta Faucet would be responsible for compliance under this new

regulation. We think this is unnecessary and an unreasonable burden since our operations are already covered under existing regulations.

At Delta, we pride ourselves in being exemplary stewards of the

environment and the communities where we are located. We have

taken a pro-active approach to managing our environmental affairs, but we do not think the M.P.&M. regulations are in the best

interest of business, the environment or the general public.

The impact on local industry and local treatment works would be

enormous. According to EPA, the majority of the M.P.&M. popu-
179

lation is estimated to indirectly discharge the publicly owned treatment works.

This would significantly increase the number of discharge permits required to be written by publicly owned treatment works.

M.P.&M. could be considered yet another unfunded mandate and

State and local POTWs will be required to bear the cost.

In closing, I would urge the Congress to undertake a thoughtful,

prudent approach to regulations and regulatory reform so that the

American public truly gets the benefits that they pay for.

Mr. MCINTOSH. Thank you. I appreciate that.

If we could have the full testimony for the record, that would be

great.

Mr. WHEATLEY. Sure.

[The prepared statement of Mr. Wheatley follows:]
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182
183
184
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Mr. MCINTOSH. You had mentioned when I was at a town meeting down in Decatur County an example of how the copper requirements that you have for your wastewater would make it illegal for

you to run a hose from the tap to the wastewater line because the

requirements are so stringent.

Mr. WHEATLEY. Right. During a period of excessive algae growth

in the Greensburg reservoir, they treated the reservoir with copper

sulfate and it would have been illegal for us to discharge city tap

water into the city sewer. [Laughter.]

Mr. MCINTOSH. So, you get a completely absurd result as a result

of the regulations that you are working on in your plant down

there.

Mr. WHEATLEY. Unfortunately, yes.

Mr. MCINTOSH. Well, I appreciate your coming forward.

Mr. WHEATLEY. Thank you.

Mr. MCINTOSH. And, please, please make the rest of your remarks available and then we will get them into the record.

Mr. WHEATLEY. Thank you.

Mr. MORGAN. Good afternoon.

Mr. MCINTOSH. Good afternoon. Welcome.

STATEMENT OF WILLARD MORGAN

Mr. MORGAN. Mr. McIntosh, my name is Willard Morgan. Members of the panel, I would like to thank you for having the opportunity to address you.

I am a retiree from Westinghouse Large Power Transformer Division. Back in 1992, a reporter from WTTV, Channel 4 in Bloomington, IN—Wendy Stamp—came to Muncie and interviewed myself, Wendell Stevens, Dave King, and a Mr. Baker.

I have been diagnosed as having PCBs. This is from being exposed to polychlorinated biphenyl or PCBs. As you know, in 1979

both Houses banned the use of PCBs unless it was a closed circuit

or system.

But Ms. Stamp came down and interviewed myself and, like I

said, Mr. Baker, Mr. King and Mr. Stevens. The next day, she was

taken off the air.

She called me the next morning and advised me and said, Mr.

Morgan, after today, after tonight’s interview, WTTV news will not

be able to report; they are not going to be on the air anymore.

And she called me back again and related the information that

they would not even be able to do that evenings news.

Westinghouse—now ABB, whichever—has laid off completely

just about everyone. A large number of layoffs. The plant is being

shelled out.

They said on these tapes—and I have them and they are available to you and your committee at any time—that they had no

toxic chemicals in their plant. Although documents from your predecessor, Congressman Phil Sharp, were made available to me and

we did not learn of this until 1992 or 1993.

And these documents show that Westinghouse, indeed, had PCBs

in their factory. They had a problem with PCBs. They had leakage.

They had citations issued for records violations.

And this is a case where we have a case pending down in the

southern district of Indiana in Superior Court, District Court Seven
186

or something like that. And this is a case where, the law itself, has

not been enforced. The Delaware County Board of Health of Delaware County found out what the problem was and put a stop to it.

The State of Indiana, why did they not bring it to their attention.

I tried to get them to see Evan Buyh without any luck whatsoever.

I did not come here to make a speech. I came here to let you

know that I had no funny stories to tell you today, sir. My daughter has severe pain, joint pain. She has been run through the

MRIs. It is pain that they cannot explain. They do not know why

she is hurting. She cannot move. She crawls up and down the hall,

sir, crying.

And I have worked out there for quite some time. My father

passed away from malnutrition.

As I said, I have proved beyond a shadow of a doubt that the

water out there, some rain water has been tested—well, some of

the parts—well, I will not go into the parts, sir, because it is in litigation. I will not go into that, but it is way over the—I think anything over 50 parts per million is considered a hazardous waste.

Mr. MCINTOSH. Now, I appreciate your coming forward because

there are, in fact, serious problems.

And although we have heard about a lot of problems in regulations here, that does not mean that we should not take seriously

when there are hazards that are in there in the work place.

I do not know the details of the particular facility out there. As

you mentioned, there is a court case that is pending in that area.

But I do not think that anybody should misunderstand our effort

to say that there are not serious problems that need to be addressed by these safety and health regulations. We just want to

focus the effort in what we are doing at the Federal level into

those, as you are indicating, that sometimes those are overlooked

in favor of some of the things that maybe are not as important or

pressing because they are easier.

So, I do very much appreciate your coming forward today and

sharing that with us.

Mr. MORGAN. I might also say that—I do not know. I agree that

people need to work. We need jobs. But these people need to be acting in a responsible manner. You cannot just go in and systematically poison people and walk away with clean hands. I thank you,

gentlemen.

Mr. MCINTOSH. Thank you very much for coming.

We have time for about one more person—he is letting me know.

I apologize to everybody else.

If you have things in writing, which you could make available to

the staff, we will put it into the record. And, also, we would be glad

to set up a meeting for you later. We have to get my colleagues

back to the airport. Yes, sir?

STATEMENT OF MICHAEL SHAM, RESIDENT, DELAWARE

COUNTY

Mr. SHAM. I will be as brief as possible. My name is Michael

Sham. I am a resident of Delaware County.

I really applaud you gentlemen for coming in with your subcommittee hearings. And I think that these hearings and the sub-
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sequent action by the Congress very much is needed, but it is more

of a compos mentis, sort of a competency hearing on our society.

What I am hearing here today disturbs me a great deal. It is not

that I do not believe in a smaller government. I believe in a smaller

government but also in an effective government.

I think that as we go through time—and just to tell you something, I am qualified to say this—I look back at the development

of not only this country, but the industry of this country and the

technology and I see that there has been continually a need for regulation.

These regulations did not come into being by spontaneous generation. They came in by a reason of need.

Now, I agree that they are, at times, overburdensome. I believe

that many of them could be focused and there could be many duplications and subsequent reduction of these regulations, but I am

leery not to throw out the baby with the bath water, folks.

I lived in Muncie at a time when White River was an open sewer.

When it was not safe to have your children play in the yard because of particulate matter in the air. Now, I have been here long

enough and I am old enough to have seen what the Clean Air and

Water Act has accomplished in this country.

My son is an environmental scientist, so I do understand the implications of not only national, but international.

What I am finding, this is not a segment to any of the people on

the panel, nor the people who have participated in the hearing because I know many of these people and find them to be good and

competent people.

But the idea that we take and always use a cost effective manner, you know, on business, bothers me a great deal. I am not as

concerned—look. You go to Mexico City. Look at the pollution problems there. Other places in the Third World where we are sending

our manufacturing jobs and bringing the product back in, that is

very good, but we are not getting the benefit of those cost reductions.

I have not seen the bill of my replacement parts, nor my other

things go down. All I have seen is their countries becoming the

sewer that we do not want ours to become and we have tried to

stop that by regulation.

I think we need to maybe make a little bit more effort in our ties

with other countries, to bring them up to our standards.

We have the best system in the world for the production and distribution of goods and services without question. So, let us help the

rest of the world come up to our standards. Let us not go down to

theirs. Thank you very much, gentlemen.

Mr. MCINTOSH. Thank you. I appreciate that. Let me just say in

general, I think our challenge is to use some of the new technologies that we now have and new approaches and better understanding of how markets work that have been successful in creating economic wealth and now apply these to some of the regulatory

challenges in the environmental and health and safety areas.

And, so, I welcome your caution that we cannot just throw out

the entire system or return to a completely unregulated state

where these problems would reoccur.

Mr. SHAM. How about a little bit of streamlining on oversight.
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Mr. MCINTOSH. Yes.

Mr. SHAM. I think that would help us a great deal.

Mr. MCINTOSH. I think that is right. Use some market approaches. Use better technology as we learn more things. Use good

science.

Mr. SHAM. But it is not cheap, remember that.

Mr. MCINTOSH. OK, thank you. I appreciate your coming. I appreciate everybody coming today and I apologize to those whom we

were not able to get to. We will include your remarks in this and

I will be back. So, I will be able to hear from you directly.

Let me, before we leave, thank a couple of people. First of all,

let me thank Ball Corp. for letting us use this meeting facility.

I also want to thank my colleagues, Collin Peterson who is here

and Gil Gutknecht for traveling from Minnesota.

And I want to thank the staff of the subcommittee who have

travelled here today: Mildred Webber, David White, Karen Barnes,

Jon Praed—were all here and were participating in it, as well as

my staff: Steve Austin and Jeff Cox, Kim Orlosky, Scott Bowers

and David Holt. They have worked very hard to make this happen

and I appreciate all of their hard work.

So, thank you all for coming and we will take all of these back.

We have a lot of good ideas for Corrections Day.

[Whereupon, at 5:50 p.m., the subcommittee was adjourned.]

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