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79–868 PDF 2002

PAPERWORK INFLATION—PAST FAILURES AND

FUTURE PLANS

HEARING

BEFORE THE

SUBCOMMITTEE ON ENERGY POLICY, NATURAL

RESOURCES AND REGULATORY AFFAIRS

OF THE

COMMITTEE ON

GOVERNMENT REFORM

HOUSE OF REPRESENTATIVES

ONE HUNDRED SEVENTH CONGRESS

FIRST SESSION

APRIL 24, 2001

Serial No. 107–68

Printed for the use of the Committee on Government Reform

(

Available via the World Wide Web: http://www.gpo.gov/congress/house

http://www.house.gov/reform

(II)

COMMITTEE ON GOVERNMENT REFORM

DAN BURTON, Indiana, Chairman

BENJAMIN A. GILMAN, New York

CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut

ILEANA ROS-LEHTINEN, Florida

JOHN M. MCHUGH, New York

STEPHEN HORN, California

JOHN L. MICA, Florida

THOMAS M. DAVIS, Virginia

MARK E. SOUDER, Indiana

JOE SCARBOROUGH, Florida

STEVEN C. LATOURETTE, Ohio

BOB BARR, Georgia

DAN MILLER, Florida

DOUG OSE, California

RON LEWIS, Kentucky

JO ANN DAVIS, Virginia

TODD RUSSELL PLATTS, Pennsylvania

DAVE WELDON, Florida

CHRIS CANNON, Utah

ADAM H. PUTNAM, Florida

C.L. ‘‘BUTCH’’ OTTER, Idaho

EDWARD L. SCHROCK, Virginia

——— ———

HENRY A. WAXMAN, California

TOM LANTOS, California

MAJOR R. OWENS, New York

EDOLPHUS TOWNS, New York

PAUL E. KANJORSKI, Pennsylvania

PATSY T. MINK, Hawaii

CAROLYN B. MALONEY, New York

ELEANOR HOLMES NORTON, Washington,

DC

ELIJAH E. CUMMINGS, Maryland

DENNIS J. KUCINICH, Ohio

ROD R. BLAGOJEVICH, Illinois

DANNY K. DAVIS, Illinois

JOHN F. TIERNEY, Massachusetts

JIM TURNER, Texas

THOMAS H. ALLEN, Maine

JANICE D. SCHAKOWSKY, Illinois

WM. LACY CLAY, Missouri

——— ———

——— ———

———

BERNARD SANDERS, Vermont

(Independent)

KEVIN BINGER, Staff Director

DANIEL R. MOLL, Deputy Staff Director

JAMES C. WILSON, Chief Counsel

ROBERT A. BRIGGS, Chief Clerk

PHIL SCHILIRO, Minority Staff Director

SUBCOMMITTEE ON ENERGY POLICY, NATURAL RESOURCES AND REGULATORY

AFFAIRS

DOUG OSE, California, Chairman

C.L. ‘‘BUTCH’’ OTTER, Idaho

CHRISTOPHER SHAYS, Connecticut

JOHN M. MCHUGH, New York

STEVEN C. LATOURETTE, OHIO

CHRIS CANNON, Utah

——— ———

——— ———

JOHN F. TIERNEY, Massachusetts

TOM LANTOS, California

EDOLPHUS TOWNS, New York

PATSY T. MINK, Hawaii

DENNIS J. KUCINICH, Ohio

ROD R. BLAGOJEVICH, Illinois

EX OFFICIO

DAN BURTON, Indiana HENRY A. WAXMAN, California

DAN SKOPEC, Staff Director

BARBARA F. KAHLOW, Deputy Staff Director

REGINA MCALLISTER, Clerk

ELIZABETH MUNDINGER, Minority Counsel

(III)

C O N T E N T S

Page

Hearing held on April 24, 2001 .............................................................................. 1

Statement of:

LaGrande, Ken, vice president, Sun Valley Rice, Colusa, CA; James M.

Knott, president and CEO, Riverdale Mills Corp., Northbridge, MA;

John Nicholson, owner, Company Flowers, Arlington, VA; and John

L. Bobis, director of regulatory affairs, Aerojet, Rancho Murieta, CA ..... 75

Rossotti, Charles O., Commissioner, Internal Revenue Service; J. Christopher Mihm, Governmentwide Management Issues Director, General

Accounting Office; and Austin Smythe, Executive Associate Director,

Office of Management and Budget .............................................................. 6

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

Bobis, John L., director of regulatory affairs, Aerojet, Rancho Murieta,

CA, prepared statement of ........................................................................... 104

Knott, James M., president and CEO, Riverdale Mills Corp., Northbridge,

MA, prepared statement of .......................................................................... 84

LaGrande, Ken, vice president, Sun Valley Rice, Colusa, CA, prepared

statement of ................................................................................................... 78

Mihm, Christopher, Governmentwide Management Issues Director, General Accounting Office, prepared statement of ........................................... 25

Nicholson, John, owner, Company Flowers, Arlington, VA, prepared statement of ........................................................................................................... 95

O’Keefe, Sean, Deputy Director, Office of Management and Budget, prepared statement of ........................................................................................ 44

Ose, Hon. Doug, a Representative in Congress from the State of California, prepared statement of ........................................................................... 3

Rossotti, Charles O., Commissioner, Internal Revenue Service:

Information concerning alternative minimum tax ................................. 62

Information concerning labels .................................................................. 64

Prepared statement of ............................................................................... 9

Smythe, Austin, Executive Associate Director, Office of Management and

Budget:

Information concerning complying with procedural guidelines ............. 57

Information concerning expired collection requests ............................... 55

Information concerning the Paperwork Reduction Act .......................... 50

(1)

PAPERWORK INFLATION—PAST FAILURES

AND FUTURE PLANS

TUESDAY, APRIL 24, 2001

HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON ENERGY POLICY, NATURAL

RESOURCES AND REGULATORY AFFAIRS, COMMITTEE ON GOVERNMENT REFORM, Washington, DC.

The subcommittee met, pursuant to notice, at 10:03 a.m., in room

2154, Rayburn House Office Building, Hon. Doug Ose (chairman of

the subcommittee) presiding.

Present: Representatives Ose, Otter, and Shays.

Staff present: Dan Skopec, staff director; Barbara Kahlow, deputy staff director; Jonathan Tolman, professional staff member; Regina McAllister, clerk; Elizabeth Mundinger, minority counsel; and

Jean Gosa, minority assistant clerk.

Mr. OSE. I will now call this meeting of the Government Reform

Subcommittee on Energy Policy, Natural Resources and Regulatory

Affairs to order.

Every year during tax season, this subcommittee turns its attention to paperwork, as does the rest of the country. Last week, as

people all over the country prepared to file their tax returns, they

again saw firsthand the kind of paperwork and red tape the government imposes on the public. The Office of Management and

Budget estimates the Federal paperwork at nearly 7.6 billion

hours. That means it would take 3.6 million people, working 40

hours a week, 52 weeks of the year to simply fill out all the forms

the Federal Government requires each year. The price tag for all

that paperwork, according to OMB, is $190 billion per year.

Now, much of the information that is gathered from this paperwork is important, sometimes even crucial, for the government to

function. However, much is duplicative and unnecessary. In 1995,

Congress passed amendments to the Paperwork Reduction Act

[PRA]. The goal of the act was to reduce red tape each year. These

annual reductions in paperwork, however, have not been achieved.

Instead, paperwork burdens have increased in each of the last 5

years.

Under the PRA, the Office of Management and Budget is supposed to be the watchdog on paperwork. In the last administration,

OMB failed to push the IRS and other Federal agencies to cut existing paperwork. Even worse, according to the GAO—and I apologize for all these acronyms—according to the General Accounting

Office, OMB included some paperwork adjustments as paperwork

reduction accomplishments. The point of the Paperwork Reduction

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Act is to reduce the actual burden on the American public, not to

simply make it look like the burden has gone down through accounting gimmicks.

As it relates to OMB’s actions, instead of a watchdog it seems

like we have a lapdog. Although many Federal agencies impose paperwork burdens, the IRS imposes by far the most, accounting for

82 percent of all paperwork. The IRS has had a dismal record during the last 8 years, showing few paperwork reduction initiatives

and virtually no accomplishments. According to OMB data, the burden imposed by the IRS last year rose by nearly 250 million hours.

IRS Commissioner Rossotti testified before this subcommittee in

April 1999 and April 2000, promising more initiatives this year. We

do look forward to his testimony today.

In addition to increasing burdens by the IRS, numerous other

Federal agencies promulgated major regulations that increased the

paperwork burden on the American public. Some of these regulations were finalized in the waning hours of the Clinton administration. For example, on the very last day of the previous administration, the Department of Labor finalized a rule changing occupational injury and illness reporting requirements. This rule added

over 1 million paperwork hours. Two days prior to that, the EPA

lowered the reporting threshold for lead under its toxic release inventory program, increasing paperwork by 9 million hours. And,

late last December, the three principal procurement agencies

changed their rules on contract responsibility, increasing paperwork by over one-half million hours.

In the 1999 and 2000 hearings, administration witnesses testified that much of the paperwork burden was not able to be reduced

because it was statutorily required; that is, not discretionary. As a

result, discretionary paperwork requires special review by OMB.

On January 19, 2001, the Department of Labor issued a final rule

entitled Occupational Injury and Illness Recordkeeping and Reporting Requirements. It added over 1 million discretionary paperwork

hours. It added requirements for reporting injuries and illnesses

that have no, or insufficient, relationships to the workplace, including those occurring in home work offices.

In addition, this rule removed protections for the privacy of individual employees by requiring disclosure of the names of employees

and their injuries. Much of the new paperwork has no practical

utility, since Department of Labor is precluded from regulating

home offices.

These are but a few examples of the new discretionary paperwork. Such burdens should necessitate close scrutiny by OMB before they are imposed on the public. Federal agencies must be

forced to find less burdensome ways to collect their information.

Reducing government red tape and paperwork is not a partisan

issue. With the technology available today, there is no reason why

the burden on the American public cannot be decreased.

I am going to recognize Mr. Otter now for purposes of an opening

statement.

[The prepared statement of Hon. Doug Ose follows:]

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Mr. OTTER. Thank you, Mr. Chairman. I really do not have an

opening statement, but I did notice that throughout your opening

statement one of the areas that we have neglected in paying some

attention to is the suffering that States and State governments and

State agencies go through in reporting to Federal agencies as well.

That has always been one of the areas I have been the most concerned about, along with business and industry, having been a

graduate of both. So I look forward to our panel and their statements and their responses to some of our questions.

Thank you, Mr. Chairman.

Mr. OSE. Thank you, Congressman Otter. If and when other

members show up, we will enter their statements in the record.

This committee requires all testimony to be under oath, and so I

will swear in our witnesses now.

[Witnesses sworn.]

Mr. OSE. Let the record show the witnesses all answered in the

affirmative.

Mr. OSE. On our first panel today we are joined by three individuals: We have Commissioner Charles Rossotti from the Internal

Revenue Service; J. Christopher Mihm, Governmentwide Management Issues Director from the General Accounting Office; and Mr.

Austin Smythe, Executive Associate Director, Office of Management and Budget.

Gentlemen, we have a lot of questions. I am going to hold you

to the 5-minute rule, so, Mr. Rossotti, you are first for 5 minutes

with an opening statement.

STATEMENTS OF CHARLES O. ROSSOTTI, COMMISSIONER, INTERNAL REVENUE SERVICE; J. CHRISTOPHER MIHM, GOVERNMENTWIDE MANAGEMENT ISSUES DIRECTOR, GENERAL

ACCOUNTING OFFICE; AND AUSTIN SMYTHE, EXECUTIVE ASSOCIATE DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET

Mr. ROSSOTTI. Thank you, Mr. Chairman.

Mr. Chairman and Mr. Otter, I am pleased to report on the Internal Revenue Service’s efforts and initiatives to reduce the paperwork and administrative burdens faced by America’s taxpayers.

Through a dual approach of both short-term and longer-term improvements, we are working to provide taxpayers both immediate

and longer far-reaching burden relief. Our short-term efforts include reducing the number of taxpayers required to file specific

forms, simplifying or eliminating forms and notices altogether, and

making it easier through electronic means to file and pay. So let

me provide some examples of this approach.

Through our efforts, millions of taxpayers are no longer required

to file the 54-line Schedule D, Capital Gains and Losses. They can

now use the short and simpler form, which greatly reduces their

burden in this area. And, by next filing season, only 650,000 taxpayers will have to use the long form.

Last year, I announced the IRS had increased the threshold from

$500 to $1,000 for required tax deposits. That change meant that

about one-third of the Nation’s 6.2 million small business employers would not have to deposit employment taxes. This year, to go

even further in this area, we have raised the threshold yet again

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from $1,000 to $2,499 in quarterly employment taxes. This affects

the payment requirements for about 1 million small businesses.

Through this effort, we are estimating now that 78 percent of small

businesses can be relieved of the burden of making as many as 12

deposits annually. This is the most frequent transaction small businesses have with the IRS.

Further, with respect to small business, in April 2000, the IRS

and the Treasury Department issued a revenue procedure that permits qualifying small business taxpayers, with average annual

gross receipts of $1 million or less to use the cash method of accounting. The new procedure has tremendous impact on lessening

the recordkeeping and tax-cutting burden for small businesses. We

estimate now that the overwhelming majority of small business

taxpayers who otherwise would have been required to use the accrual method are now allowed to use the much simpler and easier

to understand cash method.

Another area reflecting individual taxpayers, due to an agreement between the IRS and the Postal Service, as well as some internal systems improvements, taxpayers who move after filing

their tax returns will now have their addresses automatically updated, even if they don’t notify us. We estimate that this initiative

will substantially reduce about 5 million pieces of undelivered mail

we get back each year.

Again, in terms of saving trips to the post office, we are estimating that 100 million taxpayers will be downloading forms this year

from our Web site, saving them trips to the post office. I mentioned

that another fruitful area is providing electronic options, including

the Internet to conduct transactions with the IRS rather than the

more time-consuming process of filling out and mailing in forms,

letters and payments. We, this year and next year, are eliminating

the paper signature requirement for e-filing and are adding more

schedules to our 1040 programs. So next year, 99.1 percent of all

taxpayers will be able to file electronically with no paper. And, for

the first time ever, even taxpayers who need an extension this season can do so with just a simple phone call, no paper.

Still another area we are testing are electronic tax payment systems. So for those small businesses that do have to make tax deposits, they will be able to do that again over the Internet with no

paper.

I think these are significant short-term steps, but there is obviously more work to be done. And, through our long-term modernization efforts, we are working through our business systems

improvements and our work with customer groups in figuring out

how to reduce burden for all types of taxpayers beyond what we

have so far accomplished. As a matter of fact, we recently completed our strategic plan that was approved by the IRS Oversight

Board, and one of the key strategies in that plan, in fact, is reducing taxpayer burden. This can be done in a variety of ways, such

as the ones I have mentioned, which includes not only redesigning

of forms but most especially eliminating them completely, using

electronic approaches where possible, and even where filings are

required reducing the amount of errors that exist in these forms

and filings so that they will not have further burdens after they

file.

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While we continue to focus aggressively on reducing burdens

both in the short term and long term, I do want to note for the

committee that our efforts at paperwork and burden reduction are

limited by the requirements of the tax code and its inherent complexity. We are issuing a report, as required by law, we issued one

last year and will be issuing another one this year, on key sources

of complexity in the tax code, and that will identify some areas that

we believe are fruitful for simplification.

In addition, we have a whole new model that we are developing

on how to measure burdens which we think will be helpful in identifying future areas.

Thank you, Mr. Chairman.

[The prepared statement of Mr. Rossotti follows:]

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Mr. OSE. Thank you, Mr. Rossotti. Next will be Director Mihm

from the GAO. Mr. Mihm for 5 minutes.

Mr. MIHM. It is a pleasure and honor to be here today, and, Mr.

Chairman, I will take your guidance and just hit the highlights.

Obviously, Federal data information collection is one of the ways

that will help Federal agencies carry out their missions. Notwithstanding the importance of information to Federal efforts, however,

under the Paperwork Reduction Act, Federal agencies are required

to minimize the burden that they impose upon the public. In this

regard, the Paperwork Reduction Act set ambitious goals to help

minimize the burden.

As shown in figure 1 on page 4 of my written statement, and on

the screens in front of you, these goals are far from being met. As

you can see, if we had reduced Federal paperwork at the schedule

anticipated in the Paperwork Reduction Act, the current level

would be about 4.9 billion burden-hours per year. However, we

have not met that goal and are now up to 7.4 billion burden-hours

per year.

As you mentioned in your opening statement, Mr. Ose, the increase over the last year is largely attributable to the IRS. In fact,

for the rest of the government, they actually decreased its burden

estimate by about 70 million burden-hours during the last fiscal

year.

As you also mentioned, Mr. Ose, the IRS accounted for the lion’s

share of the governmentwide burden estimate. In fact, about 95

percent of the Department of the Treasury’s estimated burden increase during fiscal year 2000 was attributable to two IRS forms,

the 1040 and the 1040A, and the accompanying schedules with

those forms.

Therefore, although all agencies must ensure that their information collections impose the least amount of burden possible, it is

clear the key to controlling Federal paperwork governmentwide lies

in understanding and controlling the increases at the Internal Revenue Service. As Commissioner Rossotti detailed, IRS has a large

number of initiatives under way to help reduce the taxpayers’ burden, and many of these initiatives appear to be quite favorable.

In terms of other Federal agencies, on table 1 of my prepared

statement, it is actually on pages 6 and 7, the situation is far more

mixed. Some were successful in reducing their paperwork burden

estimates, while others increased their estimates. Also, and that is

a point I would underscore, some of the reported reductions in

agencies’ estimates were not attributable to specific agency actions

to reduce those burdens. Rather, they were, for example, reestimates, in this case obviously reduced estimates, of the burden associated with the particular data collection. In other cases the reported reduction was the result of actions outside of the agency,

such as a reduction in the number of individuals applying for a

particular benefit.

In regards to violations of the Paperwork Reduction Act, another

topic you asked us to cover, the agencies identified for OMB a total

of 487 violations of the act during fiscal year 2000. Now, this is a

significant reduction over the 710 violations that they identified

during fiscal year 1999, and in that sense that is good news. However, even though the number of violations went down, we do not

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think there is cause for celebration when there are still 487 violations of the Paperwork Reduction Act over a 1-year period. Some

of these violations have been going on for years and they collectively represent substantial opportunity costs, as detailed in my

prepared statement.

OMB has taken some steps to encourage agencies to comply with

the Paperwork Reduction Act, and those steps appear to be paying

off in terms of the fewer reported violations. For example, OMB

has added information about recently expired approvals to its

Internet homepage. This allows the potential respondents to be informed about those data collection efforts that may be in violation.

Nonetheless, as we have said for the last 2 years, we believe that

OMB can do more to ensure that agencies are not conducting information collections without proper clearance. For example, OMB

could better identify information collections for which authorizations are about to expire, contact the collecting agency to see if the

collection is still needed and, if so, work with that agency to get

collection reauthorized promptly.

In cases where data collections are found to be in violation, OMB

could take any of a number of actions, which we have outlined,

such as placing a notice in the Federal Register notifying the public

it does not need to provide the agency with information requested

in the expired collection.

In summary, Mr. Chairman and Mr. Otter, the need for agencies

to collect information to accomplish their missions and protect and

enhance the well-being of the American people does not need to be

inconsistent with the Paperwork Reduction Act’s requirements that

all data collections be authorized. In fact, we believe the more

clearly agencies can demonstrate the value of those collections, the

easier it should be for them to obtain OMB approval and public

support.

This concludes my statement. I am happy to respond to any

questions you may have.

[The prepared statement of Mr. Mihm follows:]

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Mr. OSE. Thank you, Mr. Mihm. Our third witness on the first

panel is Mr. Austin Smythe, who is the Executive Associate Director for the Office of Management and Budget, recognized for 5 minutes.

Mr. SMYTHE. Mr. Chairman, Sean O’Keefe was originally scheduled to testify. He cannot be here because he has been asked to

meet with the President.

Our past practice is that only Senate-confirmed officials appear.

I am not a Senate-confirmed official, I am a political appointee in

the Bush administration, but the Director and the Deputy Director

wanted to be responsive to the subcommittee’s need to hear from

OMB, so they asked me to appear on OMB’s behalf.

Mr. OSE. We welcome you.

Mr. SMYTHE. Thank you. We still have four more Senate-confirmed positions at OMB to fill. Two of those in this area that are

particularly important are John Graham, the OIRA Administrator.

We hope to get him confirmed in the Senate shortly. The other is

the Deputy Director for Management. The President has not nominated anyone yet for that position, but we hope to find an individual for that spot and to get that slot filled.

While we are a bit shorthanded now, we hope to have a quality

team in place to meet all of OMB’s responsibilities, including a vigorous effort to minimize the paperwork burden. I am not an expert

on the Paperwork Reduction Act, but I have had a chance to study

up on it and I just want to sort of provide an overview today.

I would start by saying we very much applaud the objectives of

the act, and that is to minimize the paperwork burden on the public and to maximize the usefulness of data that is collected. Actual

experience with paperwork reduction shows that both Republican

and Democratic administrations have struggled on trying to meet

the paperwork reduction goals called for in the Paperwork Reduction Act.

If you look at the overall experience of the past 2 decades, the

Congress has set a reduction of 5 to 10 percent in paperwork. If

you look at that total period, it works out to be an 85 percent reduction between 1981 and 2001. We estimate that the total annual

burden of Federal information collections actually went up by over

50 percent during this period.

In our minds, unless Congress and the administration are willing

to make some dramatic changes to the laws and administrative

procedures that generate a lot of these requirements, these goals

are going to be very difficult, if not impossible, to achieve. But, we

feel that we should reduce the paperwork burden in a responsible

manner, form by form, regulatory requirement by regulatory requirement. However, making blanket reductions under these requirements that we currently face does not make sense to us at

this stage.

Since 1981, looking at past experience, Americans answering

Federal questionnaires went up by roughly 24 percent, national

economic activity tripled, Federal agencies issued nearly 100,000

regulations, and Congress enacted over 5,000 laws. Based on statutory direction given by Congress, Federal agencies provide the

American people with an array of protections and services, from

health and safety to collecting taxes necessary to finance all these

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activities. To carry out these and other responsibilities, the Federal

Government collects information, lots of information, from grant

applications to tax forms, from medical reports to monitoring job

opportunities for foreign nationals.

Whenever Congress enacts new legislation, it frequently expands

upon this burden. I could go through a number of statutes. I will

not do that, but Gramm-Leach-Bliley expanded on this burden, the

Taxpayer Relief Act expanded on this burden, and so forth.

In addition to passing laws increasing the level of paperwork

burden, Congress also imposes its own reporting requirements on

the Federal agencies. Last year’s omnibus appropriations bill included requirements for 75 reports to Congress. It had 25 separate

provisions calling for information to be collected from the public.

Even when Congress seeks to eliminate reporting requirements,

there is a tendency to restore certain reports. Congress should be

applauded that in 1995 it passed a statute calling for the elimination of a number of reports. But, since then, Congress has reimposed over 250 of those reports.

The Federal agencies and OMB can do a lot more in reducing the

paperwork burden and recordkeeping requirements. The Paperwork Reduction Act requires agency CIOs to certify the need for information collection and the burden it imposes. OMB must review

information collection activities to assure that CIOs are meeting

their responsibilities. But the Bush administration and OMB and

OIRA cannot solve this problem alone. Congress must be part of

the solution.

In the case of budget legislation, I am familiar with the budget

process, the law requires an assessment of the budget cost of legislation. Something Congress may want to consider is to assess more

thoroughly the paperwork burdens for legislation as it is enacted.

We ought to minimize reports that agencies must send to Congress,

and I think we ought to work together to identify and correct provisions of existing laws and proposals in new legislation to correct

burdensome paperwork requirements.

While I am not an expert on the Paperwork Reduction Act, I

urge that we work together to assure the Federal Government

minimizes the burden on the public as it collects needed information. Thank you very much, Mr. Chairman.

[The prepared statement of Mr. O’Keefe, as delivered by Mr.

Smythe follows:]

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Mr. OSE. Thank you, Mr. Smythe. I thank the witnesses for the

brevity of their remarks. We will go to questions now on this first

panel. I will start. I see Mr. Shays has joined us. He will be back.

I want to ask Mr. Smythe, at OMB, as it relates to the Paperwork Reduction Act, does the administration support or not support

the Paperwork Reduction Act?

Mr. SMYTHE. It supports the Paperwork Reduction Act.

Mr. OSE. So there are requirements within that act for OMB to

look at, if you will, requests for discretionary information; the difference between statutory and discretionary? OMB is required to

look at agency requests for discretionary information. Am I correct

on that?

Mr. SMYTHE. That’s correct.

Mr. OSE. In terms of submittals, is OMB receiving any such submittals that you are aware of, and what is OMB doing with those

submittals?

Mr. SMYTHE. I would have to go back and get back to you on the

specifics of that. I have only had a chance to review it generally.

I think one of the problems we face is that we get requests on

a piecemeal basis. We don’t look at an entire program. We get a

form or a reporting requirement that we are asked to approve and

it puts us in a situation where we could reject on a piecemeal fashion some of these discretionary requests. On the other hand, it may

make sense for us to sort of step back and look at the overall requirement to try to see how this fits into the overall demands.

But I want to stress, I think if there has not been a strenuous

effort on paperwork reduction, we want to do more. We want to

scale back on these reports where they are not necessary. We need

to get the agencies more involved. The statute calls for the agencies

to be more involved. We want to get them more involved in reducing these burdens instead of landing them at OMB. They ought to

start in their houses in reducing this. But, Mr. Chairman, we want

to work with you all to address this problem.

[The information referred to follows:]

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Mr. OSE. In terms of the different agencies, like Agriculture or

Defense, or HHS, or any of that, and I actually read Mr. O’Keefe’s

prepared testimony, but I didn’t see any specific suggestions. I saw

some generalities that Congress is passing laws that require reporting of information, but how about some specifics in terms of

how we go about reducing paperwork within some of these agencies?

Mr. SMYTHE. I think it is a bit premature for us to try to get into

those specifics. I think we are not equipped at this stage. I think

we need to get the OIRA Administrator confirmed and get him involved in this process. I do not want to make it sound like we are

trying to shirk our duties here. We are not trying to do that. We

have been a little busy. We have been in office now for 3 months.

There are a lot of things on our desks we are trying to deal with.

So what I would like to suggest is that we get back to you with

some proposals in terms of areas where we can make some improvements.

[NOTE.—The information referred to was not provided.]

Mr. OSE. Actually, Mr. Smythe, I am on your side here. I want

to be clear about that. But there are some issues here that trouble

me, and one is that we were supposed to have the 2001 ICB, the

information collection budget and we did not get that. When can

we expect that?

Mr. SMYTHE. Well, I think we have two reports in the works. We

did not want to just simply take what we had, put a cover on it,

and send it up to Congress. We have tried to take a look at those

things.

My recollection is there is a regulatory budget that’s normally required to be submitted with the President’s budget and it usually

comes up with the President’s budget. My understanding is that

should have been sent to the Federal Register, or should shortly be

submitted to the Federal Register for comment.

The separate report you talked about, the ICB, is still under

OMB review. I cannot give you an exact date, but we are going to

deliver that report to the Congress.

Mr. OSE. There is a report due on July 1st from OMB regarding

the extent to which the PRA has reduced burden. It is supposed to

evaluate the extent by which the PRA has reduced the burden imposed by each major rule with more than 10 million hours of paperwork burden, and it is supposed to identify specific expected reductions in fiscal year 2001 and fiscal year 2002.

Is that report that is supposed to be here by July 1 going to be

here by July 1?

Mr. SMYTHE. Yes.

Mr. OSE. I want to recognize Mr. Otter for 5 minutes.

Mr. OTTER. Thank you, Mr. Chairman. I am going to begin with

Mr. Rossotti, if I might. And this is sort of a three-phase question,

so bear with me, if you will, Commissioner.

Does the Internet application of your reporting responsibilities

actually reduce the amount of paperwork that is required, and paperwork here let us say is synonymous with time spent in front of

the machine clicking on various options; and are the forms the

same, will they appear the same on the screen for the computer;

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and, finally, is the only difference really that I have got to put a

stamp on it and go to the mailbox instead of clicking on send?

Mr. ROSSOTTI. Let me try to explain a little bit because there is

more than one way to do this.

In terms of the Internet, the Web site that the IRS has right

now, the thing that you can do that is most directly related to

forms is simply get the forms. That is just downloading a form, and

we had 100 million of those. So the time that is saved with that

has nothing to do with filling out the form, it has to do with getting

the form.

That is not an insignificant point, because people often find they

need a certain schedule or a certain form that they did not have,

and you hear stories about I had to go to the post office to try to

find that or write in. So the time saved on just that one kind of

thing is simply getting a form. It does not change the form.

The other big part, though, the actual preparation of, say, the

1040 form is done in today’s world primarily by taxpayers either

buying software from private vendors that prepare their, say their

1040 form and then filing it with us, or signing onto a private sector Web site that provides this service. That is not software that

is provided by the IRS. In fact, the IRS is precluded from being in

that business based on provisions that have been attached to various appropriation bills and through the Restructuring Act. So the

role of the IRS is to work with the private software industry to provide those various products that allow taxpayers to prepare their

software on their home computers through the Internet.

This is a rapidly growing part of the population, where we are

estimating that about 13 million to 15 million taxpayers this year

actually did their returns that way, at home, through that software.

Mr. OTTER. Do you have an estimate of the time saved?

Mr. ROSSOTTI. Well, we do not have the estimate for the time

saved yet.

Mr. OTTER. How many did you have last year?

Mr. ROSSOTTI. What’s that?

Mr. OTTER. How many did you have last year?

Mr. ROSSOTTI. I do not have the numbers that we had. We had

about a 35 percent increase this year in the number that were

filed. There are some people that prepare them and then send them

in by paper, so there is another variety of options there.

But I think the reason this is growing so fast is that it makes

the whole process easier for the taxpayer. Whether it actually saves

time is something we are getting measurements on. And it may be

that it does not actually save the amount of time that it takes to

do the whole process in terms of preparing it, but what it does—— Mr. OTTER. You have hit on the essence of my question, because

I know before I can click on go there is probably an awful lot of

paperwork that I do not have on the computer screen. But eventually what I am clicking to you is the answers that may have taken

hours and hours and hours to ascertain.

I do not want to beg the question, but on the other hand, it

seems to me that simply shifting the venue by which I use, in order

to send the master copy to the IRS, if ultimately the paperwork reduction has not been achieved according to the request of the PRA,

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then we really have not, I think as has been testified to by both

Mr. Smythe and Mr. Mihm, we really have not achieved the goal

of the PRA. So subsequently we are still filling out paperwork and

we are not plowing the fields. We are not doing the work.

Mr. ROSSOTTI. There is no question that the requirements to provide the information are the driving factor, whether you do it

through a computer or you do it through paper, although there are

some significant benefits in terms of use of the computer. But I do

not disagree with your point.

The underlying driver is the need to collect the information, and

the use of the computer has certain benefits in terms of doing that.

But the underlying requirement is the requirement that is imposed

by the statutes and then as interpreted by us through these different forms.

Mr. OTTER. Thank you, sir. Mr. Smythe and Mr. Mihm, I will ask

you both this question because I am running out of time. It seems

to me that rather than within the bureaucracies you both operate

within, you only 90 days, and I do not know how long you have

been here.

Mr. MIHM. Substantially more than 90 days.

Mr. OTTER. All right, substantially more than 90 days. Other

than operating within those agencies themselves, and perhaps

going through a certain amount of bureaucratic incest in the process of trying to reach goals for the PRA, have you ever sought to

go out into the marketplace itself and say, geez, here you, small

businesses, like the small independent business group, where is the

burden? You tell us. Here is the mission; here is what we need to

know for OSHA, for EPA, for IRS, for the whole alphabetic group.

Here is what we need to know. Now, why do you folks not sit down

together and design a simple form that will do that?

Have you ever done that with farmers, with small business

groups, with anybody that has these reporting responsibilities? And

if not, why not?

Mr. MIHM. I can go first. Do you want to?

Mr. SMYTHE. Well, I have not done it in the 90 days I have been

there. The President has an Interagency Working Group on federalism and feels very strongly about working with States and localities. In my mind, that would be one area we might want to look

at, to try to find out how they might view some of these burdens

and get their feedback there.

Again, I would want to defer to the OIRA Administrator, when

we get somebody confirmed in that spot, to really pursue that, but

I think it is an excellent suggestion.

Mr. MIHM. At the request of Congress, we have attempted to look

at the cumulative burden that is put on businesses and local governments, this is in a study a number of years ago, and found, as

I think Mr. Smythe was alluding to in his opening statement, that

a lot of these burdens are just put on, as you put it, sir, by individual agency incest; each agency is putting on its own burdens unaware of how that may interact or how that may be duplicative of

other burdens imposed by agencies.

We did not go, and we were not asked to go to the next step to

see concretely what sort of opportunities were there to start with

business and then work back into the Federal regulatory process.

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Mr. OTTER. Thank you.

Mr. OSE. Mr. Mihm, on page 13 of your written testimony, you

have an example of violations that would probably fall in the egregious category. Six of USDA’s collections have been in violation for

over 2 years of OMB approval, four have been in violation for 3

years. The Department of the Interior indicated that four of their

collections have been in violation for more than 5 years, but no action has been taken to correct.

I want to make sure I understand what you are driving at there.

As I understand your point, the agency has put out a request or

a form to provide certain information. It has not gone to OMB and

had the procedural sign-off accordingly.

Mr. MIHM. Yes, sir. Most typically these are where they had gotten an initial authorization, and OMB under the Paperwork Reduction Act can give a 3-year authorization for data collection. That

authorization has expired and then the agency has not returned to

OMB for this extended period of time.

What makes this particularly troublesome from our perspective

is that the vast majority of cases where there is a violation it is

for a relatively short term, weeks or even a few months. These

types of cases that go on for years and years are ones that need

to be attacked, or looked at rather.

Mr. OSE. Mr. Smythe, what about that? If OMB does not track

the expired collection requests, how do we know when they have

expired and how do we know when they’re applicable? My point

being is that before asking our citizens for something that we can’t

procedurally ask for, it seems to me like we are creating a culture

of almost disrespect.

I am just trying to strike at that. If we are asking for something,

we at least ought to have the procedural ‘‘I’s’’ dotted and the procedural ‘‘T’s’’ crossed.

Mr. SMYTHE. I am not aware of the specifics on the Agriculture

example or the Department of the Interior example. What we can

do is look into it for you, Mr. Chairman, and find out what the past

experience has been and get back to you in terms of how we would

propose to address it. But I just can’t speak to the individual cases

that GAO has just referred to.

[The information referred to follows:]

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Mr. OSE. Well, again on Mr. Mihm’s testimony, on page 12, there

is a table that shows the 487 reported violations that he referenced, and I imagine we could get an item-by-item list from GAO

and perhaps we could send you a letter and ask you for a response.

I just have a hard time understanding when we set up the law

that says we will have these procedural hurdles met before we put

this burden on our citizenry, why it is that we aren’t complying

with the procedural guidelines.

Mr. SMYTHE. Well, we will review it and get back to you, Mr.

Chairman.

[The information referred to follows:]

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Mr. OSE. All right. I appreciate that.

In terms of OMB’s actual latitude in dealing with this, do you

have any sense of what options exist for you? I mean, obviously,

you can put something in abeyance, you can reject it, you can approve it, you can take it under advisement. As it relates to these

487, in general what options exist at OMB for dealing with this?

Mr. SMYTHE. Again, I am not going to try to get into each of the

agencies’ violations and how we respond to this particular matter.

I think in general the President has a great desire for better management of Federal agencies. If we have a situation where agencies

are not complying with the law, that is something we want to

change, and we are going to look into that.

I would go back to the beginning of my testimony, that we need

to get the DDM confirmed. He’s a key official on the issue of chief

information officers. The OIRA Administrator, in terms of the dayto-day activities, will be a key official. But, I can make the statement if there are these violations, we want to address them.

Mr. OSE. I do recall the first time I met Mr. Daniels, I had the

opportunity to ask them who is your OIRA person, and at that time

Graham had not been identified. I guess that was 45 days ago. So

I know your comments earlier that you had not been Senate confirmed, perhaps we have found some of the impediment here.

I do want to go back to Mr. Rossotti. Mr. Otter was talking about

the preparatory paperwork before you click through on your submittal. One of the issues that comes to mind in that regard has to

do with the alternative minimum tax. I’d be curious what the IRS

is doing or considering relative to easing the paperwork burden of

that particular calculation.

Mr. ROSSOTTI. Well, first let me just say that the alternative

minimum tax is a significant complex portion of the tax code, and

it is going to get a lot worse if it continues in place because more

people will be affected by the alternative minimum tax. And, of

course, there frankly is limited—we are looking at this, but there

is relatively limited flexibility that we have to simplify this by redesigning forms. I mean, unfortunately, the complexity is largely

built into the statutory requirements.

I will give you some numbers, though, because I think you are

pointing in a direction where if you want to really talk about increasing burdens, this could be measured. In tax year 1997, which

was filed in 1998, we have very complete statistics, and we had

about 618,000 taxpayers who filed Form 6251, which was the particular form for the alternative mimimum tax. But what is interesting is about seven times that many that actually paid, about seven

times that many taxpayers had to fill out the form to calculate

whether they needed to pay. So you have almost a worst case here,

seven times as many people have to go through this exercise in

order to find out if they have to pay.

But, what is I think more alarming is that our estimates are that

this number is going up over 1 million during the past year, actual

payers, not the ones that calculate, and it could go up to, in 5

years, as high as 6 million that would actually be paying. If you

multiply that by how many would have to be completing the form,

you could be talking about tens of millions of taxpayers that would

have to be completing this item.

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So, I think in terms of burden and the issues of going through

the process of calculating your tax forms, this is definitely a significant item. I am not going to say there’s nothing the IRS can do

about it. We are certainly looking at it. But, frankly, up until now

we have not found any highly fruitful area to simplify just the

forms process. You get back to the underlying statute.

I will say that in the complexity report that the IRS is required

to produce each year for the Congress, this is one area that we are

going to be reporting on in more detail. This report will be coming

out with the support of the Treasury Department in the next couple of months, and it will lay out even more some additional data

in this area.

Mr. OSE. My time has expired. I will come back to this question

on the second round. Mr. Otter.

Mr. OTTER. Thank you very much, Mr. Chairman. Mr. Rossotti,

in the first round I asked the GAO and OMB if they had gone to

the victims, so to speak, and said here is our mission, this is what

we need to achieve. Has the IRS done that?

Mr. ROSSOTTI. As a matter of fact, we not only have, we do it

every year.

Mr. OTTER. Which groups have you gone to?

Mr. ROSSOTTI. I have a list of nine groups here we go to on a regular basis. Most of these are practitioner groups that represent

business, like the National Association of Enrolled Agents, the National Farm Income Tax Extension Committee. These are committees who are representatives of people that generally are involved

in tax preparation services. We also had a special conference last

year in conjunction with OMB with small business representatives.

We meet with these groups on a regular basis and go over specific items with them for the very purpose that you are talking

about. We also vet all of our draft forms, our new forms, by sending

them to these groups, posting them on our Web site, getting comments back and so forth.

So, we have a regular process we use to try to solicit comments

from interested groups that are involved with tax paying.

Mr. OTTER. Let me ask this question in a different way. I do not

mean to cut you off, but I think I already got the gist of your answer. I am not interested in going to the accountants and saying,

how much more work do you want or how much of the work you

now do for me do you want me to cut out. What I am interested

in doing is going directly to the farmer. Now, if he has an intermediary that converts what he’s done into your language, I am not

interested in getting a response from that person, because it would

seem to me it would be in their best interest to keep those rules

and regulations coming.

I want to know if you have actually gone to the payor and said

to the farmer, how much of this stuff is really necessary in order

to arrive at the information that I need to assess the level of taxes

that your government has sought to inflict on you? To the small

businessperson. To the large businessperson.

Mr. ROSSOTTI. We have to work with their representatives in

some form. We have no way of going—except through the Web site,

where we do get individual comments from taxpayers, but generally speaking we work through various associations and industry

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groups. They are not all accountants. There are various industry

groups. For example, this Farm Income Extension Committee is a

group of people that are, I think, based out of the University of

Oklahoma that involve various farmers, actually. In fact, I spoke

to one of them in Oklahoma last week.

Last year we did have this open house where we invited not only

these practitioners groups, but also people from different small

business associations to participate. So, I think we have tried as

best we can. We are actually going to be doing more of this. We

have beefed up our partnership outreach, as we call it, to actually

go out to talk to particular small business groups.

I will say to you, though, that some of these practitioners, especially people like the enrolled agents that represent a lot of small

business groups, if you were to meet with them, they’re very vocal

about trying to reduce the complexity of the forms that they file.

They take the position of trying to represent their clients, I think.

Mr. OTTER. The nine groups which you met with last year, what

was the total reduction they came up with, and did you affect that?

Mr. ROSSOTTI. I think the No. 1 thing they recommended we

work on was the capital gains form. We have had 3 years where

we have done some improvements to the capital gains forms.

Mr. OTTER. How much have you reduced it? What are the actual

hours?

Mr. ROSSOTTI. I can tell you that.

Mr. OTTER. Sheets of paper.

Mr. ROSSOTTI. I can give you that in a second here. We have reduced capital gains. We have done three things. The first thing we

did was to eliminate the need for people with mutual funds to fill

out the capital gains form and put it directly on the 1040. That was

23 million hours reduced for 6 million taxpayers. In the 2001 filing

season, we did the same thing for 1040A filers. That’s about 2.2

million hours. In the next season what we are doing is, actually for

the remaining people who still have to fill out Schedule D, we are

reducing it from 54 lines to 40 lines, which we estimate is going

to save about 6 million hours and means that basically only about

650 filers will have to fill out the full form.

So that is one, that was viewed as the No. 1 problem area or

complaint area, so we focused on that one.

Mr. OTTER. Mr. Mihm, 31 million hours, Mr. Rossotti said that

they have reduced. Do you agree with that?

Mr. MIHM. Well, we have not looked exactly at what the IRS has

done in terms of Schedule D. I would note, though, that overall for

IRS that was a sizable increase last year. So notwithstanding any

reductions in streamlining and real ones they took on for the

Schedule D that we all benefited from, overall there was a 180 million or so hour increase in regards to IRS.

Mr. OSE. Mr. Rossotti, I want to go back on the AMT issue. If

we have a million people now who actually have to file that form

and you are expecting it, I think your testimony was possibly seven

times that many in the near future.

Mr. ROSSOTTI. Up to six times, yes.

Mr. OSE. OK, 6 million people. Does the Service have any sense

of the amount of time required in preparing that form per person?

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Mr. ROSSOTTI. I do not have that with me this morning, but that

is a number I could get for you and get back to you on. We just

need to take these numbers—I just did not have it available this

morning, but we could make that estimate for you.

[The information referred to follows:]

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Mr. OSE. What generically is it? Is it an hour, or is it 5 hours?

Do you have any recollection?

Mr. ROSSOTTI. I don’t have a personal recollection. I might have

some staff that can give me that during the hearing.

Mr. OSE. If you will provide that, that will be very helpful.

Second item, on the actual forms, and I am looking at this on a

comparative basis, between someone who files a paper-based return

versus someone who files an electronic return. When you file an

electronic return, I presume you fill in your basic personal data

once, whereas on a paper return, depending on what forms you

have to use, you end up inserting your name and the personal data

over and over and over.

I am curious whether or not the Service has looked at, for instance, when I receive my personal form every year in the mail, it

has the little peel-on, stick-on label, but the interior is not filled

out. It does not have any of the personal information. Is it possible

when you send, for instance, to Doug Ose in Sacramento, his return, to take that basic information and embed it in the forms?

Mr. ROSSOTTI. I don’t know. I could find out. I could check into

that and get back to you. That is a thought.

Mr. OSE. I mean, to put your name and address and Social Security number over and over and over.

Mr. ROSSOTTI. Just, really, your Social Security number and your

name is generally enough to repeat the address. But the question

is could we put the name and Social Security number, which are

really the two pieces of identifying information that you need, and

I do not know the answer to that. But it’s an interesting thought,

and I’d like to be able to investigate that and get back to you.

[The information referred to follows:]

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Mr. OSE. It would seem to me that, based on prior-year returns,

at whatever point you can get the current data from a final basis,

the Service technologically ought to be able to embed in the new

returns being mailed out for a future submittal of that base data.

Mr. ROSSOTTI. Let me look into that for the attachments and see

if that is a possibility.

[NOTE.—The information referred to was not provided.]

Mr. OSE. I would appreciate that. The other question I have relates to the incentives that IRS uses in its Senior Executive Service

in terms of identifying paperwork reduction as a measurable performance standard.

Does the current SES performance standard include paperwork

reduction thresholds or objectives? If it does, is there a way to improve them or increase their importance, what have you?

Mr. ROSSOTTI. What we have been moving to, and I think there

is a possibility of going in that direction, because what we have

been doing is with our new reorganization of the IRS we have identified, for both individual taxpayers and small business taxpayers,

which is where most of the paperwork problem is, and not just the

paperwork, but the overall burden of complying with the tax system, individuals within those units that are responsible for the taxpayer education, communication, basically the forms and everything that has to do with the filing and prefiling area. I think what

we have done with those people is basically make them the accountable executives, if you will, for trying to make the whole process of complying with the tax system easier.

That includes more than just the paperwork, but it does include

all the burden that is involved with applying the system. So, I

think it would be possible to take your concept and embed that as

part of the goals and objectives for those particular executives.

Mr. OSE. I do not know quite the structure it would take, but I

certainly understand the cause and effect of making a specific performance standard be a reduction of paperwork burden.

Mr. ROSSOTTI. Yes. I would only want to make sure that it was

considered broadly enough, because as we know, the current methodology for strictly dealing with forms is a bit limited. But let me

take that concept under advisement. I think there is a good concept

there.

Mr. OSE. I am tempted to ask you what the manager’s performance standards are, but I really don’t want to put that in the public

domain, because then we will have the internal code completely

gamed, but I would appreciate your review of that. And I want to

make sure that I understand that—is that a commitment on your

part to look at it?

Mr. ROSSOTTI. Yes, I will.

Mr. OSE. I like to use that word, ‘‘commitment.’’

Mr. ROSSOTTI. Well, actually, we call them commitments internally. So I will. As long as we can interpret it broadly enough, I

think it is a good concept.

Mr. OSE. All right. Mr. Smythe, if I might, one of my favorite—

I say that somewhat facetiously. Not entirely, but somewhat. One

of my most interesting agencies in my district is the Bureau of Reclamation, and we are going to hear testimony from one of my conVerDate 11-MAY-2000 10:20 Jun 27, 2002 Jkt 000000 PO 00000 Frm 00069 Fmt 6633 Sfmt 6633 C:\DOCS\79868.TXT HGOVREF1 PsN: HGOVREF1
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stituents later today about, if you will, the statutory versus the discretionary information requests.

I would commend to you his testimony for review. Because having represented this district now for more than one term, actually

more than 3 days, if you are the member from the Third District

of California it takes you 3 days to get a clear understanding of

this, the overwhelming requests for information absolutely unrelated to bureau operation or need is ridiculous. It is Mr.

LeGrande’s testimony.

I just think OMB needs to look at this stuff. These requests for

information are imposing a huge burden on my farmers. We would

all be far better off if they were out in the field working than in

the office filing paperwork for which there is no statutorily approved basis for the collection of the information therein.

So I just offer that to you for your evening reading, if you will.

Mr. SMYTHE. I will review it.

Mr. OSE. Mr. Otter, for 5 minutes.

Mr. OTTER. Thank you, Mr. Chairman.

Mr. Mihm, is Congress part of the—I’m the new kid on the block

here. I’m 90 days, too, Mr. Smythe, 90-day wonders. Are we part

of the problem?

Mr. MIHM. Well, it depends on how you define ‘‘problem.’’ Clearly

there are statutes that Congress passes, and many of these—or

more recent ones are detailed in Mr. Smythe’s testimony, which entail in their implementation additional paperwork burdens put on

the American people. The question in each case, though, has to be

a careful balancing as to, is that additional burden that’s placed on

the people worth the value that we’re getting from that information. So, in that sense, Congress is the source of a lot of this paperwork burden.

It’s also agency actions, though, that are also the source. I would

underscore what Mr. Smythe said. There’s plenty in the sense of

blame to go around, or I guess in a more positive way, there’s a

lot that all of us can do to attack the paperwork problem.

Mr. OTTER. Let me ask both the General Accounting Office and

the Office of Management and Budget. At the same time, then, how

do we red-flag this? How do we say—you see, because we can’t

have it both ways, really. I mean, if we think the risk—the labor

that has to go through is worth the benefit that we’re going to receive so that we can, ‘‘plan the economy,’’ make adjustments for the

future where we need to in order to be the leaders—provide the

leadership that we’re supposed to for this country, how do we redflag that?

Do we say, look, we want this great, marvelous idea. How many

hours is that going to take for each citizen to comply with this?

How do we red-flag this? Give me an idea.

Mr. SMYTHE. I think there are two ways. One is I think we ought

to look at existing law and existing programs, an inventory of

what’s going on. I know the President has made—in working on

the budget, one of our priorities was to eliminate duplication in

Federal programs. Well, if there’s duplication in paperwork, that’s

an area we ought to look at, make sure people aren’t producing the

same report to a multitude of agencies.

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So I would—the one thing would be to look at existing programs

and what’s going on. The other would be to review—to review legislation that comes along. My impression is legislation is developed—

is it’s developed without a sense of what’s going on in other programs. Committees tend to have a fairly narrow jurisdiction when

you look at the entire government as an enterprise, and there

ought to be a better assessment of what the burden is going to be

on—when you add it to everything else the government is doing.

Mr. OTTER. Have you thought, Mr. Smythe, about——

Mr. OSE. Will the gentleman yield?

Mr. OTTER. The gentleman yields.

Mr. OSE. Mr. Smythe, your comment about having the government look at duplicative requests for information, isn’t that within

OMB’s jurisdiction right now, and if it is, why—I mean, just do it.

Mr. SMYTHE. We plan on looking at those things. We’ve started

on that in terms of—I’m more familiar initially with what we did

with the budget. One of the areas we did when we went through

the budget is try to identify cases of duplicative programs.

Mr. OSE. Have you found any?

Mr. SMYTHE. Yes, we found some, and we’ve tried to consolidate—in education we tried to consolidate a number of programs.

We’ve proposed that in the President’s budget. We’ve looked in

other areas where you have programs trying to address the same

problem. We found cases where more than one program does the

same thing. We looked at the one that didn’t work as well. There’s

a drug treatment program for public housing that we felt didn’t

work as well, that the government had other efforts going on, and

we should steer resources to where programs work better.

Mr. OSE. How about on the—you’re talking about actually the

program and the implementation. Have those investigative efforts

extended to the paperwork side of any program?

Mr. SMYTHE. I think that’s an area where we need to do some

more work on.

Mr. OSE. I thank the gentleman for yielding.

Mr. OTTER. Thank you, Mr. Chairman. Getting back to that

question, has either OMB or GAO ever thought about putting a solicitor general for paperwork reduction in these agencies?

Mr. MIHM. I guess in—from our perspective, that would be the

responsibility of the chief information officer, which was established under previous legislation. In fact, what made that decision

wise, in our view, is it brings together responsibilities for paperwork reduction and technology. And, in response to your earlier

question about how we red-flag these things, that would be—one

of the points that I would make is that when we look at Federal

technology programs, we find that the transformational aspects of

technology are not being nearly as exploited as they could. I mean,

the jargon here is e-government. We need to do a much better job

at the Federal and at all levels of government in using technology

not just to do things differently and a little bit faster, but to fundamentally do things in a completely different way.

If you saw the chart earlier, sir, that’s where we will begin to

have a hope of beginning to close that gap between goals and

where we actually are. Other than that, we really—using current

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procedures, we may be able to get some incremental improvements,

but we’re not going to be able to fundamentally close the gap.

Mr. OTTER. Let me just ask all three of you in general, this question, and it would have to do with the people who are filling out

these forms. Do you make an appreciable assessment of what is the

original information given, and that’s worth so many hours, and

then the secondary information that’s asked for, and that’s worth

so many hours? And perhaps the IRS is best suited to answer that

question, and I hate—I don’t want to pick on any one person here,

but I’m familiar with phase 1, phase 2 and phase 3.

When the information originally comes in, they say, no, we need

more information than that. So another form goes back out saying—or the same form saying, no. You didn’t sufficiently answer

this information. The initial information that comes in, it seems to

me, is probably required. It is probably something in the mission

which Congress gave you, whether it’s to gather the information or

collect taxes or submit to the rules and regulations by an agency.

But if the form is sufficiently nondescriptive in the information

that it wants, then simplification would help us. Then, it seems to

me, by the amount of secondary information that’s asked for, we

should be able to assess to ourselves, geez, our form maybe isn’t

asking the right information in the first place. So do we break this

information down phase 1, phase 2, phase 3?

Mr. ROSSOTTI. Well, just speaking for the IRS, I mean, essentially for any given tax filing, we—our goal, and it’s, I think,

achieved in almost all cases, is that if the particular form—take

the 1040 form, with the schedules that are required—is completed

accurately, there will be no followup requirement. The only time

there would be a followup requirement would be if there was an

audit initiated in which the IRS had a reason to question a particular item, and then there might be, for example, additional documentation submitted to substantiate, say, a particular item on a return, a particular deduction or a particular dependent that might

be claimed and so forth. And those are a very small percentage of

the returns that are filed. I mean, most of them are just accepted

as filed. So at least——

Mr. OTTER. Is that the occasion, believe everybody else, or is that

just because you suspect one or two?

Mr. ROSSOTTI. Well, I think it’s basically—it’s a question of—

well, first of all, I think most people actually do file, quite accurately. Fortunately in this country, it’s remarkable, but people do

the best job that they can. We do send out a lot of notices to people

for potential small errors, like, their Social Security number might

not match, and then we, send them a notice back, and then if they

have a problem, they correct it. That we could do with computers,

but in terms of audits, it’s a fairly small percentage. One of the

problems is it’s basically limited by resources and the number of

audits that have been going down over the past 10 years, but even

when it was higher, it was still a relatively small percentage.

Mr. OTTER. Mr. Smythe, in your case, do you think it’s a good

idea for your agency to break this down between phase 1 and phase

2; then we’ll understand the clarity of the initial request for information?

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Mr. SMYTHE. The only comment I would make is my understanding is that OIRA is put into a situation where it never has a chance

to look back and look at the whole thing. It’s asked to approve this

form or this report, sort of in isolation. I think what you’re getting

at is maybe a sense of staging these things, get a better idea where

we want to end up.

Mr. OTTER. Well, I’m concerned. But I’m really concerned, because, for instance, in the little State of Idaho, we get roughly 6

percent of our entire budget in education comes through the Department of Education on the Federal level, and yet the head of our

education system in the State of Idaho, which is an elected position, superintendent of public instruction, tells me it accounts for

67 percent of her paperwork at the State level. So we get 67 percent of the money. We get to a point finally where we say, we can’t

afford to take the money. We can’t afford to take the money. Of

course, then we don’t have all the rules and regulations that I

guess we’d have to put up with.

But, my question still comes back to, there’s got to be something

wrong, and it’s got to be pretty obvious that there’s something

wrong when you have those kind of differences between the actual

benefit received and the reporting that’s necessary to receive the

benefit.

Mr. SMYTHE. Well, I think the President’s budget, attempts to

address the issue you raise. You can’t just come in and change the

reporting requirements if you don’t change the programs. In the

education area we have a number of categorical grants that generate a lot of this. The President has proposed to consolidate a

number of those programs to loosen up some of the strings. Those

strings end up generating a great deal of reporting requirements

on localities, and I think the whole thrust of his education proposal

is to give the States more latitude, to demand some accountability,

and to demand some results. I would hope that in terms of implementing it, we can also reduce that 67 percent burden that you

mentioned. It seems to me that goes hand in hand.

Mr. OTTER. In pursuit of the objectives of this committee, it

would really be a help to this committee if a lot more expression

of the consolidation of these—and I’d like to see that, Mr. Smythe,

I really would. We’re going to consolidate these five agencies, and

it’s going to require a 31-million-hour reduction in paperwork. I

think that would be very beneficial, not only to the work of this

committee and its intent in this meeting today and your being here

today, but I think it would also be a benefit to the American people

and whoever has to fill out these papers.

What concerns me as much as filling out these papers is think

how many people we’ve got to have to read them. That’s what’s

really scary.

Thank you, Mr. Chairman.

Mr. OSE. Thank you, Congressman Otter.

Mr. Mihm, I want to explore something with you. Your statement

on page 7 talks about program changes versus adjustments in

terms of the calculation on the paperwork burden.

Mr. MIHM. Yes, sir.

Mr. OSE. I think I understand. I just want to hear from you the

difference between program changes and/or adjustments.

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Mr. MIHM. The program changes are those changes that result

in a different estimate of burden that are the result of direct government action, and so it would be things that—we would break it

out by three categories; for example, new statutes, reinstatement

of expired authorizations or agency actions that lead to streamlining.

Adjustments are generally those things that are outside—are

still changes in the estimated burden, but those things that are

outside the control of the agency. In some cases, it can be just a

reestimate, and often downward—I shouldn’t say often—downward

or upward of what the original burden is, in which case there’s no

change to the people that are filling out the forms. It’s just the government is getting a better idea of what that burden was.

Or it could be just—an adjustment—another example of an adjustment would be more or fewer beneficiaries applying for a benefit, filling out forms, and that then would influence the total burden hours.

Mr. OSE. Let me just explore something in table 1, then, with

you.

Mr. MIHM. Yes, sir.

Mr. OSE. Let me find one that offers interest. On the transportation line item, there’s an adjustment of 50 million hours and a

total change of 22 million hours; a downward adjustment in the

burden of 50 million hours and total change of 22 million hours.

Mr. MIHM. Yes, sir.

Mr. OSE. Which indicates to me that somehow or another, the

formulation—or the algorithm that generated the number in the

first place, the basic structure was changed. How do you get to an

adjustment of 50 million hours downward, but a total change of

only 22 million?

Mr. MIHM. Well, this is the—in the case of IRS—I’m sorry, in the

case of DOT, you’re exactly on the right issue there, is that DOT’s

estimated burden would have increased by more than 28 million

hours due to the reinstated collections, without the more than 50

million hours in adjustments downward. And so, I mean, this is—

and the precise nature of those adjustments is something that at

least to us was—we’re working off of the—the collection budget

that has come in from the agencies that OMB will be rolling up

from their budget that we could get behind, but I don’t have that

readily available for me right now.

But, the point there is—or at least the point that we use in

breaking this out for the table is to show it’s important to get behind each individual agency’s claimed reductions or increases to

better understand the sources of those.

In some cases it can just be an agency action. In other cases it

can just be merely the agency recalculating or reestimating an existing burden that’s already felt by the people and saying, hey, we

now have a better handle on what that burden actually is.

I should state, sir—and this gets back, if I may, just to Mr. Otter’s question right before it turned. You were asking about the different phases. Mr. Otter, it wasn’t until last year as a result of the

bipartisan urging of this subcommittee over several years that this

type of breakout was even available. Before then it was all rolled

up as to changes, and we didn’t have a handle—or the collective

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‘‘we’’ didn’t have a handle on whether or not these changes were

due to adjustments or program changes or new statutes. That’s

something that this subcommittee had to work—on a bipartisan

basis, had to work with OMB over a couple of years in order to get

them to make that change.

Last year was the first year, and we’re happy to see that they’re

obviously continuing it this year. So we’re quite a ways from the

three-phased approach that you were talking about.

Mr. OSE. On your Defense line item, you have a total change of

18 million hours.

Mr. MIHM. Yes, sir.

Mr. OSE. Now, how do you—I guess my question is, where does

the intersection between OMB’s analysis and, say, DOD come in

terms of calculating those hours? Maybe that’s a question for Mr.

Smythe.

Mr. MIHM. Well, I can take the first shot at it. I mean, all of the

information that we have here is information that we received from

OIRA over at OMB. These are from the individual agency submissions that go into OMB, and then OMB, therefore, rolls up into this

summary document that becomes the executive—the Federal Government’s information collection budget.

The important thing to note here, sir, is that obviously you’re

dealing with a huge executive branch. OMB only has 20, 22 people,

I think, in the entire OIRA office that are taking a look at this

stuff. In fact, there’s one—if I understand correctly, person responsible for IRS on a part-time basis, and even accounting for the normal heroic abilities of our colleagues over at OMB, that does seem

like a substantial workload. So there is two—the point I’m making

is that there isn’t an awful lot of opportunity for OMB to step back

and really get in a very serious way behind these numbers. They’d

really have to pick targets of opportunity and prioritize where they

want to get behind the numbers.

Mr. OSE. Mr. Mihm, you beat me to my question.

Mr. MIHM. Sorry, sir.

Mr. OSE. That’s OK. Pleased to see somebody ahead of me.

Mr. Smythe, that brings me to my basic question, is that if we

have most of the change in the burden of hours for paperwork

placed—or coming or originating from one agency, Mr. Mihm cited

a part—or a half-time—full-time equivalent of a half a position

being committed to IRS review of paperwork, why wouldn’t we take

some of our resources that we might be spending somewhere where

there’s little, if any, expected or actual change in paperwork burden and shifting it over where we’re getting a whole bunch of

change in paperwork burden?

Mr. SMYTHE. I’d like to defer to the OIRA Administrator on that.

I think you raise a good point, but that’s something for John

Graham if he gets confirmed, that’s something that he needs to

look at and figure out how he best wants to deploy the people

under him to address his responsibilities.

We’ve not made any changes yet. What we have is the structure

and the way people are deployed or the way they were deployed

when we arrived.

Mr. OSE. You understand my point, though.

Mr. SMYTHE. Yes, sir.

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Mr. OSE. Put your resources where you can get the big bang for

the buck, so to speak?

Mr. SMYTHE. Yes, sir.

Mr. OSE. It’s your understanding that OMB has no current plans

to change staffing in terms of the 22 or 25 people on staff right now

as to whether they’re going to be focusing, as they have historically, or refocused to where the problems seem to be?

Mr. SMYTHE. I think it’s something that’s going to involve, first

of all, getting the various positions filled, getting the OIRA Administrator confirmed. I think it would be inappropriate for us to start

moving around people within OIRA before he’s confirmed. The

DDM is another issue. In all of this, the Director needs to make

an assessment of where resources can be best deployed for OMB’s

mission.

Mr. OSE. I think that’s the basic thrust of my question here, so

I appreciate your recognizing that.

I want to come back to Mr. Rossotti. In your opening remarks,

you talked about the strategic plan, having identified key strategies, one of which was reducing taxpayer burden. I can’t help but

think that whether we’re talking about the AMT filings that are

on—at present a million, projected to go to 6 million, or small business tax submittals, or have you—I can’t help but think asking the

senior managers—or requiring the senior managers to factor into

their performance evaluations some means of paperwork reduction

to a greater degree than we have, whether it’s in a narrow sense

or a broader sense, as you suggested, I can’t help but think that

redounds to the benefit of every taxpayer who’s otherwise got this

burden.

Mr. ROSSOTTI. I would agree with that.

Mr. OSE. My tax return was this big this year, and I’m just—I

find that an amazing consequence, and I’d really love to reduce it.

I understand your point about Congress changing the law every

6 months. I think it’s valid. I would commend it to every single

Member of Congress. I mean, we have to have some stability here.

Stability will lead to simplicity, but somehow or another we’ve got

to get the managers recognizing it’s in their best interest, not only

in the taxpayers’ best interest, but in the managers’ best interest,

to work toward reducing the paperwork burden.

Mr. ROSSOTTI. Well, I agree with that. That’s why we’ve identified it as one of our key strategies. We now have with our new

structure, some people positioned to exercise responsibility on that.

I do have to point out that the IRS does not have much of a role

with respect to the tax code.

Mr. OSE. That I understand. I understand that. I’m not quibbling

over that. I mean, I’ll take that responsibility as a Member of Congress.

Mr. ROSSOTTI. We do what we can to point out things like the

alternative minimum tax, the capital gains. They’re very consistent

in terms of complexity, but in the end all we can do is point them

out. We can’t change the world.

Mr. OSE. I understand, and I don’t quibble over that. Mr. Otter,

I don’t have anything else.

Mr. OTTER. I just have a couple of questions, if I might, Mr.

Chairman.

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No. 1, Mr. Rossotti, have you held field hearings on this, gone

out and had people come in and testify as to the complexity and

perhaps some simplification efforts?

Mr. ROSSOTTI. We don’t actually have hearings, but we have

meetings.

Mr. OTTER. Do you have the power? Do you have the authority

to have hearings?

Mr. ROSSOTTI. You know, I’ve never thought—I don’t know. I

mean, we can certainly hold open meetings. I mean, I don’t know

whether they would be considered hearings, but we do have meetings, and we have a variety of adviser groups that meet with us

regularly on these kinds of things.

Mr. OTTER. Let me put it a little bit differently. If you had the

authority, would you have hearings and I happen to believe that

you do have the authority.

Mr. ROSSOTTI. Yeah.

Mr. OTTER. Don’t you think that kind of input would be useful?

And if you find out that you do have the authority to have hearings, would you hold them?

Mr. ROSSOTTI. Well, I guess the—I don’t know what exactly the

difference is between hearings and meetings. I mean, we do have

a lot of meetings with different kinds of groups, and we intend to

have more of them, and they focus on topics like this. And, we had

a whole series of them last year in conjunction with OMB, specifically with self-employed and small business taxpayers. So I’m not

sure whether there’s something specific about a hearing that’s different than a meeting, but we do have a great number of those.

And, actually, we—part of our strategy is to hold more of them, to

get more input, especially on the small business side, because actually a lot of the—a lot of the burden actually that is some of the

more significant is actually on small businesses.

Mr. OTTER. Well, as a matter of fact, you and I probably could

have had a cup of coffee this morning and exchanged all the information that we have right here, but the fact that it is a public

forum, the fact that you are on record, the fact that there is an expectation at the end of the hearing that something is going to happen, sometimes good, sometimes bad, I think that when the IRS

would go out and hold a hearing, or any government agency would

go out and hold a hearing, it sends a very clear and precise message to the public who submit all this information to you that we

do care, and how can we lessen your burden. I think that’s important, not only from the political aspects, but as you said so clearly

earlier, it’s amazing to you how much information people voluntarily give to the Internal Revenue Service. I’ve never quite felt

that mine was voluntarily, because I suspected there was going to

be an action taken if I didn’t. So I hardly consider that voluntarily.

Let me commend a name in Idaho to you. The name is Dewey

Hammond. Dewey Hammond happens to be the head of the Idaho

Tax Commission. Mr. Hammond, I charged him when I was Lieutenant Governor with responsibility—I became familiar, after working for a large manufacturing company for 30 years, with a form

that was 14 pages long and said, Dewey, I’d like you to see what

you can do in order to reduce this down. He now has a 11⁄2-page

form that four agencies of the State use. I recognize the tax senVerDate 11-MAY-2000 10:20 Jun 27, 2002 Jkt 000000 PO 00000 Frm 00077 Fmt 6633 Sfmt 6633 C:\DOCS\79868.TXT HGOVREF1 PsN: HGOVREF1
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sitivity, the number sensitivity and that sort of thing, but the general information that’s given on that is now used by four agencies.

It took him 2 years to do it. But he took that and he reduced it

down to 15 percent—less than 15 percent of what it was.

Mr. ROSSOTTI. We’ll get in touch with him.

Mr. OTTER. And I think that sort of action is really important.

Mr. Mihm, I would wonder if under the PRA, the Paper Reduction Act, did Congress put themselves on notice as well?

Mr. MIHM. Not—in a statutory sense, I don’t think so, sir, that

Congress usually exempts itself from those types of requirements.

Clearly, the language surrounding the act in the floor debate, without being intimately familiar with it, I’m sure that there was a recognition, as we have expressed here today, that it’s joint responsibilities if we want to attack the paperwork problem. It’s not all

on the agencies. It’s not all OMB, and it’s not all Congress. There’s

plenty of work for everyone to do.

Mr. OTTER. I understand that, but a few years ago we decided

we were going to walk the walk. Well, Congress then decided it

was going to walk the walk and talk the talk, and so we subjected

ourselves, I thought, to all of those other burdens and responsibilities that we put on the agencies and business and the general public. So we now have all the ADA requirements, all the OSHA requirements, all the affirmative action requirements, all the other

rules and regulations that we force on the IRS and the OMB and

the GAO and all the businesses and industries.

I would like to know how to do that. I would like to know how

we could submit to Congress and say to them, look, if you’re going

to insist on this—we should add an assessment, for instance, in the

last tax bill that we passed in the House. The $1.6 trillion, we

should add an assessment and say, how much paperwork is this

going to add to the burden and then decide for ourselves—well,

take a look in that mirror and say to ourselves, do we really want

to do this, or do we want to simplify it in the process as well?

Mr. MIHM. I agree—or rather, sir, I think that’s the point that

Mr. Smythe was making in his opening statement, is that there

needs to be more of a consideration in the part where we’re considering legislation upfront on what’s going to be the end-stream paperwork burden that’s associated with this.

Mr. OTTER. Mr. Smythe, this fellow is going to seem like the second coming to us for all the expectation that you’ve given me this

morning on what he’s going to do to the paperwork in government.

Thank you.

Mr. OSE. Thank you, Mr. Otter.

I do want to—I want to end on somewhat of a positive note, recognizing—not meaning to lessen the importance of all we’ve talked

about, but, Mr. Rossotti, I do want to compliment the Service on

the change they’ve made for qualifying small business corporations

in terms of allowing them to go to a cash method as opposed to previously requiring an accrual method. I think that’s a marvelous

step forward, and small business in America appreciates that.

That’s a great first building block, if you catch the drift of my comments.

Mr. ROSSOTTI. Thank you.

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Mr. OSE Mr. Mihm, I appreciate what GAO does in terms of analyzing these things for the benefit of Congress and the agencies

throughout the Federal Government.

And, Mr. Smythe, I have to applaud your courage in coming here

today. It’s impressive.

I do think we have some work to do. I want you to understand

that this committee is ready, willing and able to work with OMB,

with Mr. Daniels, yourself, Mr. O’Keefe, the fellow who’s coming on

at OIRA to try and bring these things to a head and make some

progress on this. I just think that’s something that you’re interested in. I know we are, and I look forward to doing it. So I want

to thank you all for coming today. We have work to do. We need

to get on with it.

Mr. SMYTHE. Thank you, Mr. Chairman.

Mr. MIHM. Thank you, Mr. Chairman.

Mr. ROSSOTTI. Thank you, Mr. Chairman.

Mr. OSE. I want to call the second panel up at this point. That

would be Mr. LaGrande, Mr. Knott, Mr. Nicholson and Mr. Bobis—

excuse me, Dr. Bobis.

OK. Before we start, I want to make sure we’ve got—it’s Mr.

LaGrande, Mr. Knott, Mr. Nicholson, and is it Dr. Bobis, Bobis or

Bobis?

Mr. BOBIS. B-O-B-I——

Mr. OSE. Bobis, long O. Right?

Mr. BOBIS. Yes.

Mr. OSE. Gentlemen, we do swear in our witnesses here. If you’ll

rise.

[Witnesses sworn.]

Mr. OSE. Let the record show the witnesses answered in the affirmative.

Mr. Otter and I have already provided our opening statements.

We’re going to provide each of you with 5 minutes for your opening

statements. We have a heavy hammer here on the clock, so please

be brief.

We’re going to first go to Mr. Ken LaGrande, who’s the vice

president of Sun Valley Rice in Colusa, CA. Mr. LaGrande, you’re

recognized for 5 minutes.

STATEMENTS OF KEN LaGRANDE, VICE PRESIDENT, SUN VALLEY RICE, COLUSA, CA; JAMES M. KNOTT, PRESIDENT AND

CEO, RIVERDALE MILLS CORP., NORTHBRIDGE, MA; JOHN

NICHOLSON, OWNER, COMPANY FLOWERS, ARLINGTON, VA;

AND JOHN L. BOBIS, DIRECTOR OF REGULATORY AFFAIRS,

AEROJET, RANCHO MURIETA, CA

Mr. LAGRANDE. Chairman Ose and members of the subcommittee, thank you for the opportunity to testify on behalf of my fellow

farmers on the Paperwork Reduction Act and the nearly unbearable burden that paperwork and recordkeeping requirements place

on us. My name is Ken LaGrande, and I farm about 900 acres of

rice in Colusa County, CA. When I came home to begin farming

with my father several years ago, I quickly discovered that knowing about cropping patterns, fertilizer rates, and seed germination

were neither more important nor time-consuming than having a

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desk and an adding machine and a full supply of U.S. Government

forms.

My days were spent managing operations on the ranch; my evenings, weekends and, literally, my rainy days were spent at the

computer and at the filing cabinet. I had to buy a copy machine

and a second filing cabinet. Almost immediately I was forced to

hire a professional accountant to prepare my taxes, as I couldn’t afford to take the chance of inadvertently missing some calculation

and, thus, invoking the wrath and the penalties of the Internal

Revenue Service.

The forms that I file with the IRS each year have a little box on

them that indicates, pursuant to the Paperwork Reduction Act, the

estimated average time of preparation. I added these little boxes up

the other day, and I discovered with no great surprise, that the IRS

estimates that I spend 542 hours and 38 minutes each year on

their behalf.

So I hired a part-time bookkeeper. I burdened my bookkeeper

with OSHA compliance regulations, Federal payroll tax reporting,

bookkeeping and tax preparation, filing, recordkeeping, W–2s, I–9s,

1099s, the Employer’s Annual Tax Return for Agricultural Employees, the Employer’s Annual Federal Unemployment Tax Return,

forms for the U.S. Department of Agriculture, the Commodity

Credit Corporation, the Farm Services Agency, Reclamation Reform

Act reporting for the Bureau of Reclamation and the like.

After we think we’re in compliance with all of the Federal mandates, we start in with the State and then the county. It was not

long before 2 days a week—the 2 days a week that I employ my

bookkeeper became insufficient, and so I was forced to hire a second part-time employee to deal with the overflow, and I had to rent

a self-storage unit in town to store the dozens and dozens of boxes

of records that I’m required to keep by Federal law in physical

form, and I have on hand for years on end.

Each spring I find myself at the local office of the FSA completing new and yet usually unchanged versions of exactly the same

paperwork that I completed the year before. Especially problematic

is that there is no published handbook or set of rules or regulations

available to producers with respect to FSA rules.

In terms of redundant bureaucratic paperwork, however, the

worst of them seems to be when we arrived for our appointments

at the water district. The U.S. Bureau of Reclamation requires that

each farmer submit paperwork under the Reclamation Reform Act

as part of his or her water application. These forms fly in the face

of the notion of paperwork reduction and seem to serve the sole

purpose of ensuring the continued employment of Federal employees.

This debacle has been compounded tenfold, however, by the promulgation just this year of a new set of rules that require farm operators to file reporting forms. Farm operators are not farmers.

They’re independent contractors that we hire to perform certain

tasks on our farms, such as crop dusters, truck haulers or custom

harvesters. Why the Bureau of Reclamation has any need to know

who is applying my fertilizer or who is hauling my harvested rice

to the elevator is beyond my comprehension. It seems to be an invasion of privacy, and it is as yet unjustified by Bureau staff.

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So far as I know, the Bureau has provided no information or instructions to any of these potential operators, and they have not

amended the instructions on the farmers’ forms to indicate the existence of the new rules. So unless you retain the services of an attorney to follow unpublicized rule changes, you must depend on

word of mouth at the coffee shop to continue to be able to receive

Federal water.

More galling is this: Anyone I hire as a contractor must ensure

his or her own compliance with the Bureau’s river of regulatory

muck, and I am required to police their compliance.

Mr. Chairman, farmers across our Nation fight costs every day,

and we are faced with the specter of having to hire professional accountants, consultants and attorneys to ensure our compliance with

Federal regulations and paperwork requirements. The cost of farmers to comply is enormous, both in time and real dollars.

In light of depressed markets, low commodity prices and an overall increased cost of doing business, an excellent manner by which

Congress could provide immediate assistance to our Nation’s farmers would be to reduce the paperwork burden and simplify the compliance requirements imposed upon them. This assistance would

add little or no cost to the Federal budget, I would imagine.

Mr. Chairman and members of the committee, I urge you to provide critical relief to your farmers. We are drowning under the sea

of paperwork promulgated by the Federal Government.

I’d be happy to answer any of your questions. Thank you.

Mr. OSE. Thank you, Mr. LaGrande.

[The prepared statement of Mr. LaGrande follows:]

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Mr. OSE. Now I recognize Mr. James Knott, who’s president and

chief executive officer of Riverdale Mills Corp. in Northbridge, MA.

You’re recognized for 5 minutes.

Mr. KNOTT. Good morning, Mr. Chairman, and good morning,

Mr. Otter.

I started my first business in 1956 immediately after getting out

of the Army, and I have been familiar with OSHA since 1970 when

they came into being. I bought its book, which was the Federal

Register, and it was about the size of a city of Boston white pages.

Now it’s many, many times thicker.

The business that I started in 1956 was in an abandoned mill

building, and, because there were no employees except myself in

the very beginning, I had to do every single job in that business,

and I did the same thing again in 1978 when I started my second

career out in Northbridge, MA.

What I do in that business is I make a plastic-coated welded wire

mesh that was originally intended to be used for lobster traps in

the New England fishery. Today, that product is used for many,

many other things, and we’re shipping it all over the world.

This business of OSHA reaching out beyond the occupational

area, which I consider to be the four walls of the factory, and becoming interested in pain that people might bring to work, to me,

is an overreaching of its authority. OSHA really shouldn’t be going

out that far.

The first—or the second business, rather, that I started, as I

said, we make the wire for lobster traps, but it’s also going all over

the world. The building was a 20,000-square-foot building. Today

it’s 265,000 square feet, and we’ve set up a program to achieve zero

accidents in the business. We have a safety committee, consisting

of about 30 people, and those 30 people rotate regularly. Thirty

people is approximately 25 percent of the total employment. They

meet, and they come up with suggestions for making things safer,

and we have no budget limitations on what it takes to make things

safer in that business because people are the base of the business.

In the first quarter of this year, we had a zero accident rate with

one minor exception. We’re members of the National Association of

Manufacturers that I joined about 3 years ago, and I’m now serving

on its board of directors, and I never realized before I met them

how important they are to this manufacturing business in the

United States of America. We spend—last year we spent about

$41,000 working on OSHA problems, and we, as I say, have the

committee that works on this all the time.

One of the interesting things in talking about overburdening not

only with respect to paperwork, but also with time spent dealing

with agencies such as OSHA, was an event that took place 1 day

in 1996. We had a flood at the Riverdale Mill, which is on the

Blackstone River, and a hole had opened up in the street. One of

my maintenance men, who’s been with me for many years, had put

a ladder down into the hole, and he stepped down a few rungs to

measure the hole to see what it would take to fill it.

Well, there were some OSHA people there that day on an entirely unrelated matter, and one of them happened to walk out into

the street. And he said to the man, ‘‘get out of that trench.’’ Well,

my maintenance man, who is a year older than I am and has had

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a lot of experience, said, ‘‘this isn’t a trench.’’ ‘‘This is a hole, and

I’m going to fill it.’’ So the OSHA man said, ‘‘get out of that trench

right now.’’ Well, my maintenance man felt that there wasn’t any sense in

talking to him, so he did his calculations and left. I got a thing in

the mail a few weeks later, and what it said was that I had endangered a man’s life by putting him into a trench and that I should

pay a fine. Well, a trench does not have a poured concrete wall,

and it’s more than 5 feet deep, and this was neither of those things.

So I called the OSHA office. I went through the procedure, and the

procedure, of course, is to call a local office. I told them I wanted

to appeal, and the fellow who I spoke to, said, look, this is going

to cost you a lot of time and money. I can cut the fine in half. I

said, well, the time and money isn’t what bothers me. What bothers me is that you have people out here like this damaging the

economy of the United States. They’re taking a lot of my time, and

I just want this sort of thing exposed. So he said, very well. I’ll see

you in court.

Well, next call I got was from an OSHA attorney in Boston. I had

filed my appeal, which was about a half an inch thick, and he said,

Mr. Knott, I’ve read your appeal, and I can understand where

you’re coming from. Look, I can cut the fine in half again. I said,

that’s not what I’m interested in. What I’m interested in is exposing these people. I’d like to get this young man up on a stand in

front of the media and let him explain why he thinks a hole is a

trench and why I should pay fines for it. Well, the attorney said,

I’ll see you in court.

The next thing I got was a letter in the mail, and the letter was

from the court. What it said was the joint motion to dismiss has

been granted. I called my attorney. I said, what is this business

about a joint motion? He said, well, that’s what they said the— that’s what they told the court. And, I said, I don’t want this case

to be dismissed.

My attorney said, Jim, there’s nothing we can do. The judge has

made his ruling.

So that’s been some of my other experiences with OSHA, and——

Mr. OSE. Mr. Knott, we’ll enter your statement in the record, but

you’re over your 5 minutes.

Mr. KNOTT. Oh, I’m sorry.

Mr. OSE. That’s OK. I appreciated the story. I wanted to get to

the end of it before I cut you off. But we’ll enter your statement

in the record. I need to go on to Mr. Nicholson at this point.

[The prepared statement of Mr. Knott follows:]

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Mr. OSE. Mr. Nicholson for 5 minutes joins us. I appreciate your

taking the time. Mr. Nicholson is the owner of a company called

Company Flowers in Arlington, VA. You’re recognized for 5 minutes.

Mr. NICHOLSON. I’m honored to appear before you today to talk

about some of the problems posed to small business by the Internal

Revenue Service. My wife and I operate a small flower shop in Arlington, VA, sometimes described as the ‘‘best ’lil’ flower shop in all

of Washington.’’ I can’t afford national promotions—I need advertising—so thank you!

I have joined the Government Relations Committees of NFIB and

the FTD because I feel strongly that we should try to do something

about some of the problems, not just complain about them. So, I

am pleased to appear before you today as a representative of both

organizations.

Let me—in an effort to cut down on the amount of time here, let

me turn to page 2 and point out that there are really three things

I’d like to suggest that we focus on. Let’s one, simplify the tax code;

two, make it as equitable as possible across the board; and, three,

perhaps give taxpayers a method to right the balance so that the

IRS auditors don’t always have the upper hand.

First, we need to simplify the code, but simplicity will have a

cost. Those who are engaged in arcane or unusual endeavors may

very well lose their special, if perhaps valid arguments. Simplicity

will encourage most of us to abide by the law, because then we’ll

understand it. Right now I cannot grasp what the tax code wants

from me, other than money. I must hire an expert, a CPA or a tax

lawyer. Other than fear of arrest, I have no incentive to abide by

the code, because I don’t understand it.

Some of my equals know better how to work the tax code than

I do. Equality of treatment under the code doesn’t seem to be taking place, and while, comparisons are difficult because of direct

concerns about privacy, nonetheless there are enough anecdotal instances to certainly raise strong suspicion that only the clever get

rewarded. And, of course, those who are wealthy have both the reason and the wherewithal to hire the experts to improve their position under the code. That is hardly fair, but maybe life is not supposed to be fair.

Those first two solutions, the request for a simplification and for

an equitable treatment, are really going to require legislation, and

that’s at your doorstep more than at the agency’s.

The third idea that I’m suggesting is that there might be a way

to improve the administration. Several years ago when I was audited, I approached the IRS with much fear and trembling, for I

didn’t know what to expect. I found an auditor who was each time

concerned mostly with finding enough additional revenue to check

off the box labeled ‘‘get more money for his or her work.’’

There ought to be a well-recognized way to reassure the average

taxpayer that upon audit, there is a method by which to balance

the discussion. Fortunately, I’ve been able to hire a CPA who would

accompany me today, but for small business owners who cannot afford or do not want to hire a CPA or a tax lawyer, perhaps there

could be some sort of a preliminary step undertaken with an advocate, maybe a retired auditor, someone who can be available to

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help the taxpayer before they meet with the auditor. Why must the

average Joe or Josephine be made to feel helpless when sitting

across the table from a skilled, knowledgable IRS auditor? What we

need is a conference before meeting the auditor and an ‘‘assemble

of records’’ session so that the conference with the IRS auditor can

be expedited, as well as more balanced.

In sum, it’s clear to me, and I hope to you, that we need to simplify our tax code, and we need to make it more equitable. We cannot do just that by patchwork. We have to resume the national debate over a major revision of the entire tax concept such as a flat

tax and the other ideas. The debate seems to have gone off the

front pages. I’d like to see it return, because I think that the time

is now for change while we have a White House dominated by concern for reducing the tax burden. So that’s one of our major compelling reasons to revise the code. Let’s get to it. Thank you.

Mr. OSE. Thank you, Mr. Nicholson.

[The prepared statement of Mr. Nicholson follows:]

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Mr. OSE. Finally, our fourth witness on this panel is Dr. John

Bobis, who’s the director of regulatory affairs for Aerojet, from Rancho Murieta, CA. Welcome. You’re recognized for 5 minutes.

Mr. BOBIS. Good morning, Mr. Chairman, Honorable subcommittee members. I am employed by Aerojet General Corp., which is

wholly owned by GenCorp. I am the director of regulatory affairs,

among other things, and I am delighted to have the opportunity to

testify in front of you today. Due to the short time that I had to

prepare for this hearing, I am only going to attack—or, rather, address one governmental agency. That’s the Occupational Safety and

Health Administration [OSHA].

I am not here to talk about—I am not going to, rather, talk about

the general duty clause that OSHA uses in the enforcement toward—specifically in areas where appropriate occupational safety

and health regulations have not been promulgated. Also, I am not

going to talk about OSHA’s egregious penalty assessment policy,

nor am I going to discuss OSHA’s multiemployer citation policy. All

of these are not only unreasonably burdensome and costly, but, in

my opinion, may even be unconstitutional.

My company manufactures rockets, and we are heavily regulated

by all the regulatory agencies that you can think of. Focusing on

OSHA, its authority is granted by the Occupational Safety and

Health Act of 1970. The act, in itself, intended by Congress was to

assure safe and healthy working conditions for working men and

women. The act itself does not state that Congress intended OSHA

and its enforcement mechanism to be used as a revenue-generating

scheme.

Now I’m going to focus on two particular interests at hand. One

is about paperwork burden and the other being the recordkeeping

requirements imposed on businesses by many of the regulations

promulgated by OSHA. The regulatory burden that OSHA standards impose upon the regulated community can be attributed largely to OSHA’s rulemaking process. Since the enactment of the act,

Federal OSHA has undertaken the concept of adopting general

standards and vertical standards for certain industries, such as

construction, agriculture, what have you.

The general industry safety standards contain hazard-specific requirements, and they do not apply to construction, agriculture or

other exempted industries unless they are reprinted specifically for

that industry. Adoption of vertical standards results in an absolute

standard duplication or the use of the general duty clause. The duplication causes potential conflicts and misunderstandings and an

increased compliance burden upon the regulated industry. Many of

these regulations have numerous recordkeeping requirements.

Other areas of concern in the general industry standard promulgation pertains to occupational health standards. OSHA over the

years has promulgated 22 substance-specific standards. The practice of adopting substance-specific standards is an enormous duplication of the voluminous, almost identical requirements. Many of

the requirements deal with definitions, exposure monitoring, recordkeeping, what have you. All of these could be simplified by developing one standard or a generic set of regulations with appropriate, charts and references.

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As long as I have this opportunity to address you, I would also

like to address another important area of the rulemaking process

that directly affects the quality of the standards OSHA adopts.

This process is called negotiated rulemaking, or the advisory committee consensus approach, that has been used in California successfully for decades. In fact, this process has been so successful in

California that none of the safety standards have ever been challenged in court. This method permits labor, management, technical

experts and other interested parties to deliberate in an informal

forum and agree upon a consensus performance standard. The result of this process is having industry and labor, the regulated community, writing its own regulations, improving the quality and intent of the regulations and thereby enhancing compliance. Once a

consensus standard has been developed, then it is ready for the

agency to go through the normal rulemaking process, pursuant to

the procedures of the Administrative Procedure Act.

Now, I want to spend a little time on the recordkeeping requirement of Federal OSHA. It has not been an unusual occurrence during the last couple of decades to read the morning headline news

that a company has been cited by OSHA and received well-publicized egregious penalties amounting to millions of dollars. A closer look at these alleged violations disclosed that the employers

were accused of improper recordkeeping practices particularly involving ergonomic-related issues, such as cumulative trauma disorders, muscular skeletal disorders, what have you.

As you may recall, Congress in its wisdom recently voided the

new ergonomic regulations promulgated in the last hour by the

previous administration. This may be, however, a double-edged

sword, because, in the absence of specific regulations, OSHA will

continue to enforce the provision of the so-called general duty

clause to cite employers in situations where standards have not

been promulgated. Each alleged violation of the general duty clause

carries a maximum fine, and under the egregious penalty policy,

the penalties are assessed on a violation-by-violation basis, which

can result in enormous fines.

The obvious question one can raise with respect to assessment of

these large fines due to recordkeeping violations is how the requirements and associated fines enhance work safety. In my opinion, recordkeeping requirements and their associated fines for improper recordkeeping provide nothing more than a revenue-generating means for the agency. It has absolutely no effect on the quality or the safety in the workplace. Its sole purpose is to provide

means for the agency to get the data for the alleged purpose of establishing trends and allocating resources.

About 27 years ago, I was the first technical person that Cal

OSHA Standards Board hired in 1974 at the beginning of the Cal

OSHA program. I was intimately involved in the standard development process for many years before moving to the private sector.

Based on my knowledge and experience, I think a change at the

Federal level is way overdue. The health regulation recordkeeping

requirements are especially a maze. I feel very sorry for small employers. I urge OSHA and all of the agencies to make every effort

to simplify.

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My written comments contain suggested remedial solutions for

OSHA, and that concludes my testimony. I will be happy to answer

any questions you may have.

Mr. OSE. Thank you, Dr. Bobis.

[The prepared statement of Mr. Bobis follows:]

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Mr. OSE. I’m going to recognize Congressman Otter for 5 minutes.

Mr. OTTER. Thank you very much, Mr. Chairman. And I thank

the panel for being here.

I have shared, in one form or another, most of your horror stories. I worked for a food processing, fertilizer processing and large

cattle feeding operation for 30 years before I retired in 1993, and

I went through all those from 1971 on with OSHA and many of the

others. And, so I can see now that, since my retirement, nothing

has gotten better.

So, I am particularly interested. Mr. LaGrande, have you ever

broken down your cost of regulation per acre? Water is going to be

probably in your area, $120 an acre; fertilizer, $80; plowing, $14.

What is—have you ever broken it down? You farm, 900 acres, as

I understand.

Mr. LAGRANDE. I do.

Mr. OTTER. If you were to put a cost per acre on that, could you

give me a swag or some kind of an idea?

Mr. LAGRANDE. I would say it’s probably in the neighborhood of

approaching $20 an acre.

Mr. OTTER. So $20 an acre, which would be $18,000——

Mr. LAGRANDE. Yes.

Mr. OTTER [continuing]. Wouldn’t that be right?

Mr. LAGRANDE. Yes.

Mr. OTTER. That would be $18,000 a year?

Mr. LAGRANDE. Yes.

Mr. OTTER. Would you say that would be the same for all folks

in the California area? Are you in the San Joaquin Valley?

Mr. LAGRANDE. I’m in the Sacramento Valley.

Mr. OTTER. I see.

Mr. LAGRANDE. I would guess that would be an average. I’m

guessing that is my cost of compliance with all the recordkeeping

types of paperwork, and I would say I’m fairly average in that respect.

Mr. OTTER. Do you belong to any—in fact, I think you did say

in your testimony, and I apologize, sir, that you did belong to a couple of national organizations, farm organizations?

Mr. LAGRANDE. Yes. That’s right. The Farm Bureau.

Mr. OTTER. The National Farm Bureau—is that one of them?

Mr. LAGRANDE. Yes, sir.

Mr. OTTER. I apologize. I don’t know if you were here earlier

when we had——

Mr. LAGRANDE. I was.

Mr. OTTER [continuing]. The IRS, the OMB and the GAO. But

during the inquiries to that panel, they were asked if they would

hold—or had held field hearings to get the input from the victim—

or from the folks that were required to fill out all this information

and everything. Do you think that the Farm Bureau would be interested in providing information to those folks?

Mr. LAGRANDE. I would suppose that they would be very interested in testifying before such a hearing.

Mr. OTTER. Now, there was just three agencies, as I recall, that

most of your testimony spoke to. How many other agencies—how

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many total agencies, in one way or another, require a report or demand information or input from your 900 acres?

Mr. LAGRANDE. Well, I would suppose on the Federal level, there

are probably 8 to 12, and then you have to start in with the State,

and you probably have as many there.

Mr. OTTER. And is it true that the State reports are different

than the Federal reports?

Mr. LAGRANDE. Oh, absolutely.

Mr. OTTER. Is it a different language?

Mr. LAGRANDE. Absolutely.

Mr. OTTER. I see.

Mr. Knott, I’m interested in a couple of things in your situation

with OSHA. Do you have any idea what the cost, your legal costs,

your costs involved in administrative time and that sort of thing

with OSHA, which was eventually, I guess, dismissed?

Mr. KNOTT. Well, actually, they requested that it be dismissed,

but I had another interesting one recently involving a young man

who fractured three fingers by putting them up against some rolls,

and the penalty for that was $4,500. What had happened was the

inspector from the OSHA said that his arm had gone between the

rolls up to the elbow. Well, interestingly enough, the space between

the rolls was 15/16ths of an inch. So had his arm gone in there,

it would have been 18 inches wide. And when we asked the inspector under oath during depositions how she knew, she said, I saw

it right after the accident. Well, she apparently didn’t notice it was

18 inches wide. So the—as I say, the fine was $4,500, and the——

Mr. OSE. Did you pay that?

Mr. KNOTT. No, I probably spent $45,000, not paying $4,500.

The OSHA prosecuting attorney said to me, ‘‘Mr. Knott, why do

you let a minuscule little thing like this bother you? Just pay the

fine.’’ I said, ‘‘I don’t want to do that. I can’t live with these people

inventing and making up noncompliant systems and saying things

happened when they didn’t happen. I want to take this thing to

court.’’ He said, ‘‘Well, I’ll tell you, it’s going to cost you a lot of

time and money.’’

And, he made good on his word. He deposed 10 people. We went

to trial for 2 days, and he took 10 people up there sitting in the

courtroom for 2 days. So, as I say, probably around $45,000. But

I don’t think it’s right to let these things get away.

We had another experience with OSHA in a place called the

Whiten Community Center, which is a community center in this

town I live in, and they were remodeling the place. The building

was built in 1923. OSHA came in and fined them $9,000 for having

receptacles in the wall without three-pronged receptacles. Well, in

1923, they didn’t have three-pronged receptacles. It was $9,000.

And they had another interesting one. They fined $750 for having an IBM typewriter without a three-pronged plug. There’s never

been an IBM typewriter with a three-prong plug. Some of the directors of the community center went up to Springfield and made an

arrangement with OSHA without my knowledge, I didn’t know this

was even going on, and OSHA cut the fine in half. It was only

$4,500. And the director said, ‘‘Well, we don’t have any money,’’ so

OSHA let them pay it for over three payments of $1,500.

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When I learned about this, I said, ‘‘Why in the world did you pay

that fine? You don’t have to have three-pronged plugs. You are not

required to have three-hole receptacles any more than I have to

have a catalytic converter on my Model A. Why did you do that?’’ They said, ‘‘Well, we knew if we didn’t, they’d come back and do

it to us again.’’ Mr. OTTER. Mr. Chairman—excuse me, Mr. Knott—I realize my

time is up. It’s too bad perhaps OSHA isn’t as grounded as they

would like all our electricity to be, no matter when it was invented.

Thank you very much, Mr. Knott.

Are we going to have another round?

Mr. OSE. Yes.

Mr. OTTER. Thank you, Mr. Chairman.

Thank you, Mr. Knott.

Mr. OSE. Thank you, Congressman Otter.

Dr. Bobis, I want to turn first to you. Mr. LaGrande, Mr. Knott,

Mr. Nicholson are business owners, and they do not have nearly

the experience that you have, I presume, from the procedural side

of the regulatory world.

I read your written statement carefully. One of the things that

jumps off the pages is the many of the rules that are promulgated,

particularly with respect to OSHA, have not been through the Administrative Procedure Act. I’m curious, from the concept of certainty versus uncertainty or enforceability versus lack thereof, if

something hasn’t been through the Administrative Procedure Act,

in other words it has not been lawfully promulgated, what are the

consequences to businesses? For instance, Aerojet, in this case, in

terms of an agency coming out and attempting to enforce such regulatory rulings?

Mr. BOBIS. A good example, of course, are the two major ones I

mentioned. One is the egregious penalty citation policy. Basically

what that does, if you have an ungrounded plug, for example, and

it is a $4,000 fine and you have 10 of those, it automatically becomes a $40,000 fine. You just multiply it by the number of instances, which is ludicrous, as far as I’m concerned.

The egregious penalty policy has not gone through the Administrative Procedure Act as far as a rulemaking is concerned. It is

strictly nothing more than a policy.

Mr. OSE. Before you leave that, there is an issue of significant

rules versus nonsignificant rules versus guidance documents.

Mr. BOBIS. Yes.

Mr. OSE. Is the egregious penalty a guidance document?

Mr. BOBIS. It is a guidance document for OSHA to assess their

penalties.

Mr. OSE. So it has not been through the formal rulemaking process?

Mr. BOBIS. Absolutely not.

Mr. OSE. And the reason that we require a formal rulemaking

process—and I’m trying to think back to my civics class—is that,

without a formal rulemaking process those who might be affected

in the future prospectively by a rule are not given any opportunity

to comment on the rule itself. In effect, it becomes almost a star

chamber proceeding, if you will.

Mr. BOBIS. Basically—simply put, we were denied due process.

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Mr. OSE. You are far more eloquent than I am on that. So these

guidance documents have no basis in procedural applicability because they have no basis in law.

Mr. BOBIS. That’s right.

Another example, of course, is a multi-employee work site citation policy, that’s very, very bothersome to me especially. On a

daily basis, we have hundreds of contractors or subcontractors at

our facility. Basically what it does, it puts us on notice that a subcontractor, or the sub of a sub, if they make a mistake, we can be

held responsible and liable and co-cited for unsafe acts that they

may perform. This particular policy also has not gone through the

Administrative Procedure Act.

But, let me tell you the real horror story of what happened in

California. Labor filed a CASP, which is a Complaint Against State

Plan, and Federal OSHA made a determination that the State program, the State plan, was not at least as effective as the Federal

program. Therefore, it was deficient, and it was forced to adopt a

particular policy. In California, however, you cannot enforce a policy unless you go through the Administrative Procedure Act.

So, the enforcement agency, which is the Division of Occupational Safety and Health, in fact held a public hearing and adopted

the regulations effecting a policy, regardless of my testimony

against it, indicating that in fact it is not a standard pursuant to

the provision of section 6 of the act and it should not be construed

to be considered as such. My comments were absolutely disregarded, and the regulation went into effect.

Now, in 2000, the legislature in California, basically what it did

was it revised the labor code and by operation of law they adopted

into the statutes the regulations that CAL OSHA adopted, because

it was already law, and they didn’t have to take any testimony on

it. So now it’s in the statutes.

Mr. OSE. My time is about to expire.

Mr. Otter for 5 minutes. Thank you, Mr. Bobis.

Mr. OTTER. Yes, thank you, Mr. Chairman.

Mr. Bobis, is it?

Mr. BOBIS. Yes.

Mr. OTTER. Mr. Bobis, you heard Mr. Knott’s testimony on the

OSHA regulation and the process that he went through. Have you

gone through that process of taking an OSHA fine through the

court system?

Mr. BOBIS. Yes, we have. We have been quite successful, and for

a very simple reason. We have a very complex manufacturing facility. We deal with explosives, and when OSHA people show up, they

don’t know anything about explosives, so they usually cite the

wrong section and we usually go and fight them and win every one

of them.

Mr. OTTER. Too bad French fries weren’t that difficult. I want

you to take us through the process. The first level is, you’re cited

by a field agent; is that right?

Mr. BOBIS. Yes.

Mr. OTTER. Somebody cites you and says you did this wrong.

Mr. BOBIS. Yes.

Mr. OTTER. Then, what’s the first level of appeal?

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Mr. BOBIS. First level of appeal is usually to call up the district

manager and appeal the citation, basically have an informal conference with them. All you are doing is asking a supervisor to overrule one of his lieutenants, and basically that’s a waste of money;

a waste of effort.

Mr. OTTER. Is this a judicial proceeding?

Mr. BOBIS. Yes. It’s an informal proceeding. It’s not a judicial

proceeding.

Mr. OTTER. What is the next level?

Mr. BOBIS. The next level is you formally appeal within 15 working days.

Mr. OTTER. To whom?

Mr. BOBIS. To the CAL OSHA appeals board, which is an independent agency.

Mr. OTTER. All right. So now let’s go to the third level. And, they

say, no, you’re still guilty. What is the third level?

Mr. BOBIS. The third level, they have a telephone conference

with an assigned administrative law judge.

Mr. OTTER. Who appoints the administrative law judge?

Mr. BOBIS. The appeals board.

Mr. OTTER. OSHA.

Mr. BOBIS. Yes.

Mr. OTTER. OK.

Mr. BOBIS. Then, if you don’t settle that, you actually go through

a formal hearing and another administrative law judge presides

over that.

Mr. OTTER. Who appoints that administrative law judge?

Mr. BOBIS. Same appeals board.

Mr. OTTER. OK, so we have four strata here so far, and we’re not

out of OSHA yet.

Mr. BOBIS. Oh, no, you’re not yet.

Mr. OTTER. OK, keep going.

Mr. BOBIS. Then, of course, you’ll want to get legal counsel to assist you throughout the process, and you can go through the—just

like the gentleman said, you can take depositions of the compliance

officers, and then you try to impeach them and whatever, and

eventually you present your case and hope to win it.

Mr. OTTER. OK. How many hearings and administrative rulings

and appeals do you go through before you finally get out of OSHA

and into the criminal or civil proceedings of the judicial system?

Mr. BOBIS. If the appeal is granted, then the proceeding stops.

Mr. OTTER. But let’s——

Mr. BOBIS. Or they may not stop, however, because the enforcement agency——

Mr. OTTER. Let’s say this is one rule that they understood.

Mr. BOBIS. OK.

Mr. OTTER. What I want to know is how many appeals and how

much time and how many legal fees and how much testimony is

given before you finally get to an independent party that isn’t hired

by OSHA?

Mr. BOBIS. That would be the Superior Court.

Mr. OTTER. What level is that? How many times have you gone

through the hearings and the processes and appeals and everything?

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Mr. BOBIS. That would be—the next step after the administrative

law judge’s decision would be appealed to the CAL OSHA appeals

board, and then you go to Superior Court.

Mr. OTTER. So it is no different than EPA?

Mr. BOBIS. Oh, no.

Mr. OTTER. Or Army Corps of Engineers?

Mr. BOBIS. Oh, no.

Mr. OTTER. Or IRS?

Mr. BOBIS. No.

Mr. OTTER. Or almost any other government agency?

Mr. BOBIS. No.

Mr. OTTER. King George III never had it so good, did he?

Mr. BOBIS. That’s right.

Mr. OTTER. That’s what I thought. Seems to me we resisted that

once before.

OK. Let’s say when you get to the Superior Court and you finally

won—let’s say you won. You were found innocent. The rule that

was permitted or the rules that were cited were wrong. What happens to that agent that brought that charge against you?

Mr. BOBIS. In California, we do have some recovery. We can re- cover up to $5,000 in damages and legal fees.

Mr. OTTER. Seven levels.

Mr. BOBIS. Yes.

Mr. OTTER. Seven levels, and if Mr. Knott’s even close, $45,000

for two levels before he finally got his remedy. So if we go to seven

levels, that’s a pretty expensive $5,000; isn’t it?

Mr. BOBIS. Yes. I think the gentleman is on the light side, on the

conservative side when we talk about legal fees.

Mr. OTTER. If you were writing the law—let’s say you went from

Aerojet, or you ran for Congress.

Mr. OSE. Someone else’s district, Dr. Bobis.

Mr. OTTER. If you ran for Congress, would you be interested in

a law which actually pursued—allowed you, as a private individual,

to pursue civil penalties against a government agent that brought

wrong charges against you?

Mr. BOBIS. Oh, absolutely. Absolutely. Not only that, I would be

very much in favor of also issuing citations to employees who willfully disregard company laws and rules.

Mr. OTTER. Or overstepped their boundaries?

Mr. BOBIS. Absolutely.

Mr. OTTER. Or exceeded their authority?

Mr. BOBIS. You bet.

Mr. OTTER. You see, I’m reminded that if you, as the compliance

officer for Aerojet, disobeyed any of those rules, and you told somebody, no, don’t do that; don’t do that safety thing; no, don’t hire

that person because I don’t like them; for whatever reason, so you

went against affirmative action, any of those Federal laws, that you

personally could be held criminally and civilly liable, isn’t that

right?

Mr. BOBIS. That’s right.

Mr. OTTER. Don’t you think it would be fair if the regulators operated under the same rules and regulations and constraints, constraining themselves to the rule of law?

Mr. BOBIS. You bet. Equal protection under the law.

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Mr. OTTER. So you would introduce that law?

Mr. BOBIS. I would have done it yesterday.

Mr. OTTER. Thank you, Mr. Chairman. I appreciate your patience.

Mr. OSE. Thank you, Mr. Otter.

I want to go back to something. Dr. Bobis, you are a wealth of

information. Don’t worry, I have questions for the other three, but

I want to make sure I get through with Dr. Bobis.

The vertical standard concept. I’m not quite sure I understand

that. Could you just take us through that one more time?

Mr. BOBIS. Oh, very simply, Federal OSHA has exempted some

special interest groups, such as agriculture, such as construction,

such as telecommunications, and basically only one set of regulations apply in that industry. But, that’s really a misnomer because

what happens, for example, if you dig a trench on a farm, even

though there are no trenching regulations and if there’s an injury,

they are going to come in and cite you under the general duty

clause, and it carries an automatic $70,000 fine for every one of

those.

So, what we have here is we basically have no regulation, written regulation. It is kind of like driving on the freeway and there

are no speed limits posted, but they pull you over to the side and

issue you a ticket for violating the speed limit which has not been

posted. That is what is wrong with that.

Now, on the other hand, if they elect to adopt, for example, lead,

there’s regulations for lead in the general industry, and there’s

identical regulation in construction. Absolutely duplicated. There’s

no reason for that.

Mr. OSE. Now your point is that these unposted mileage markers, or whatever, these have been issued actually not in compliance

with the Administrative Procedure Act. They are guidance documents.

Mr. BOBIS. That’s right.

Mr. OSE. Now, it’s my understanding—and I want to be sure I’m

clear on it. It is my understanding that case law is that guidance

documents are unenforceable, is that correct?

Mr. BOBIS. The State law?

Mr. OSE. No, Federal guidance documents are unenforceable.

Mr. BOBIS. They should be unenforceable.

Mr. OSE. Again, getting back to the due process issue.

Mr. BOBIS. That’s right.

Mr. OSE. All right. Thank you, Dr. Bobis. I am very appreciative

of your input.

Mr. BOBIS. Thank you for inviting me.

Mr. OSE. I want to go on to a couple other questions I have.

Mr. Knott, in your written testimony you cite the example of

OSHA’s attempt to enter our homes in terms of an employee working at home. Now, it’s my understanding that—and I can’t remember what it was, he was secretary of something or other—this guy

Charles Jeffress, he’s the Administrator of OSHA, now he stated

very specifically in front of a Senate committee that OSHA will not

hold employers liable for work activities in employee home offices.

That was about a year and 3 months ago.

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Now, the question I have is that the new rule that has been promulgated by OSHA, in effect, says that OSHA can go into people’s

homes to analyze in-home injuries. I’m trying to understand, when

was the rule put through the Administrative Procedure Act that allows that?

Mr. KNOTT. That allows them not to go into homes?

Mr. OSE. No, that allows OSHA to go into homes.

Mr. KNOTT. Well, they can’t do it now. They can’t go into homes

now. But an employee can bring something from home to the business. If he has been hurt at home and he comes in to work and

that hurt is aggravated, then it becomes reportable and documentable as a business-related injury. This is the problem. They have

reached out far beyond the workplace.

Mr. OSE. I think the phrase you used was ‘‘the reporting trigger

has been greatly expanded.’’ Mr. KNOTT. Exactly.

Mr. OSE. Now, what is the basis under which OSHA has expanded that recording trigger?

Mr. KNOTT. What is the basis?

Mr. OSE. Yes.

Mr. KNOTT. Merely expansion of their empire. They are looking

for more business.

Mr. OSE. Is there a statutory underpinning to their expansion of

the recording trigger?

Mr. KNOTT. Of the recording—yes, that was the ergonomics

thing. Ergonomics, of course, was defeated.

Mr. OSE. We defeated that.

Mr. KNOTT. Right, but the reporting paperwork burden remains

in place, and that, too, needs to be erased.

Mr. OSE. Well, I’m suffering from confusion. Either I’m confused

or you’re confused. If there is no rule, how can you have a reporting

trigger?

Mr. KNOTT. Oh no, they do have that rule. If there’s a problem

with the employee at home and that problem creates a problem for

him or her at work, then it must be reported.

Mr. OSE. But I’m not aware of any statutory basis for OSHA’s

requirement to report.

Mr. KNOTT. No, OSHA doesn’t report. We have to report.

Mr. OSE. For OSHA to require that employers report that situation, what is the statutory basis by which OSHA puts that burden

on you to report that?

Mr. KNOTT. That was what was left over from the ergonomics

statute. That reporting requirement was part of that.

Mr. OSE. Well, this is where I got confused. Because Mr. Jeffress’

comment last January was very clear——

Mr. KNOTT. Yes.

Mr. OSE [continuing]. That OSHA would not be holding employers liable for work activities in the employees’ home offices. So

there’s a logical disconnection here. Because, if OSHA’s authority

does not extend to the home office, and the injury does not occur

onsite at the business, how can the business be held accountable

for the injury?

Mr. KNOTT. Because they say that it was aggravated by the business. In other words, if the person was hurt at home, say he slid

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into third base and hurt his leg and now he’s got to walk around

the plant, the plant is aggravating a problem that happened outside. So, therefore, it has to be reported, and the employer becomes

responsible.

Mr. OSE. Even though the action causing the injury did not

occur—— Mr. KNOTT. Exactly.

Mr. OSE [continuing]. Under your control?

Mr. KNOTT. Exactly.

Mr. OSE. So what’s the purpose of that?

Mr. KNOTT. I can’t tell you. I don’t know. It’s just, as I said

earlier—— Mr. OSE. You can’t tell me or you don’t know? That’s two different answers.

Mr. KNOTT. Both. As I said earlier, to me it is merely an expansion of the OSHA empire, the reach beyond the workplace to have

some more paperwork.

Mr. OSE. Well, it seems to me that OSHA has clearly—I’m going

to put this in the record—OSHA Directive CPL 2–0.125—homebased work sites, published February 25, 2000, stipulates—OSHA

stipulates, the OSHA act, the Occupational Safety and Health Act,

neither applies to an employee’s house nor to a home office. The

provisions in the final rule that require the recordation of injuries

and illnesses occurring in an employee’s home office where an employer has no control over the office’s layout or the equipment used

exceed OSHA’s statutory authority. I’m trying to get the connection

between that particular stipulation and this rule that—it just

seems like they are going this way.

Mr. KNOTT. Well, it certainly does, but that is what OSHA is still

hanging on to, is that if someone has a problem at home or outside

of the workplace and that problem is aggravated by work in the

workplace, then it becomes the responsibility of the employer.

You’re perfectly correct in saying it is illogical, but it exists.

Mr. OSE. Is that the standard used by any State workers’ compensation plan?

Mr. KNOTT. No, it is not, not in any State that I know, at least.

Mr. OSE. I’m not aware—I think that’s something we ought to

followup in California in terms of—I mean, Massachusetts doesn’t

have it, California doesn’t. We don’t know if California has it. But,

again, what is the basis for the recording trigger is what I’m trying

to get at and what are the related requirements at the State level.

What I hear you saying is Massachusetts recognizes that this is not

something the workers’ compensation would compensate for.

Mr. KNOTT. Correct. Massachusetts Department of Labor will, if

you request, perform an OSHA inspection on your facility. I requested the Commonwealth of Massachusetts Department of Labor

to do that, and they spent several days going through the place. I’m

always looking for suggestions and ideas.

When the OSHA inspector came in to do a wall-to-wall, as he

said, I said, well, we just had one from the Commonwealth of Massachusetts, would you like to see that? He said, ‘‘They don’t know

what they’re doing.’’ Mr. OSE. My time is way over. I apologize.

Mr. Otter, for 5 minutes.

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Mr. OTTER. Mr. Chairman, I apologize to not only you but also

the panel, because I think this could go on a long time and we

could find out a great deal more, but I have a 12:30 p.m. appointment that I am going to have to get to.

But I don’t want to leave Mr. Nicholson out. I think he deserves

an opportunity to respond. Does Virginia have an OSHA—a State

correspondent to OSHA?

Mr. NICHOLSON. Yes, sir.

Mr. OTTER. Do you think they care any less about the accident

and health rate in the workplace than, say, does the Federal

OSHA?

Mr. NICHOLSON. I don’t think so. I think they do a fine job.

Mr. OTTER. In your estimation, is the Federal Government any

more qualified than your State OSHA to guide the responsibilities

of employment to less accidents and better health?

Mr. NICHOLSON. It is my belief that most of the Federal OSHA

enforcement is left to the Virginia group because the State is so effective in what they’re doing.

Mr. OTTER. Do you find that when you are dealing with the State

you are kind of dealing with a neighbor and when you are dealing

with the Federal OSHA you are dealing with an enforcement policeman?

Mr. NICHOLSON. Absolutely. I think the Federal personnel have

a quite different perspective. They don’t understand that there are

local conditions that can have a significance.

Mr. OTTER. How many bouquets do you sell a year?

Mr. NICHOLSON. Gee, I’ve never counted the number of bouquets.

Mr. OTTER. Well, I like to be able to always reflect on these

things, so that I can tell the next girlfriend that I give a bouquet

to, or my mother, that $2 of this bouquet is government regulation.

That what I wanted to get down to, because I want to know what

it costs you in your business to comply with the reporting responsibilities, whether it’s the IRS, OSHA, or anybody else, probably

USDA, because you are dealing with live flowers in some cases.

Mr. NICHOLSON. Actually, we are a significantly small business,

so we are exempt from Federal regulation on purpose.

Mr. OTTER. I see. In other words, hoof and mouth is only for the

big guys?

Mr. NICHOLSON. That’s right. But, we figure I pay probably $100

a week for outside contractors, CPA, and bookkeeping and that

kind of thing; and then I also have about 10 to 15 hours per week

of my time devoted to a whole series of bookkeeping stuff. Although, as I pointed out, in order to do a good job in managing my

business, I ought to be doing most of that bookkeeping already anyway.

Mr. OTTER. I see.

Well, Mr. Chairman, members of the panel, as I began, I apologize once again for having to rush, but I would like each of you to

consider whenever you express in terms of government reporting

and government regulation, to do it in unit cost terms. Because I

found out—and I sold McDonald’s a lot of French fries; and when

people started complaining about $1.35 for an order of French fries,

I said I just want you to know that 38 cents of that is government

regulation.

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We care about our customers, because we know the first time we

sell them a French fry is not where we make the profit. It is when

they come back and buy it again and again and again. So, we really

care about them—where the government would have you think

that we don’t care about them.

I would hope that, no matter what your product is, no matter

how many acres you have, no matter how many pieces of netting

you sell for crab traps, that if you could express that in a per-unit

cost and when your customers come in you could say, you know,

I’m sorry it could be a lot cheaper, the only thing is it is your government cost.

Not only that, but the national organizations that you belong to,

have them break it down to per-unit cost, and pretty soon we are

getting somewhere with the real cost of government, the hidden

costs, the hidden taxes that we have.

Thank you, Mr. Chairman.

Mr. OSE. Thank you.

Mr. Otter, I want to tell you, if it’s 38 cents per $1.35 of French

fires, over the spring break I think I spent $217 on government

regulation for French fries. They were good, though.

Mr. OTTER. Would the gentleman yield? I would just have you

know that I one time figured out how many taxes and regulations

there were on two all-beef patties, special sauce, onions, lettuce,

pickles, cheese on a sesame seed bun, and it’s $2.54.

Mr. OSE. Wow.

I need to ask a couple other questions. I want to thank Mr. Otter

for coming.

This hearing is about paperwork, and every time we get back to

what is the required paperwork under the results from these statutory, discretionary or guidance document requests. Dr. Bobis, on

the guidance document requests, things that are not binding, relative to your overall expense for paperwork, how much do you

think you are spending? Twenty percent? Fifty percent?

Mr. BOBIS. It’s very difficult to quantify, and I—just a wild

guess, between 10 and 20 percent.

Mr. OSE. For guidance document compliance?

Mr. BOBIS. Yes.

Mr. OSE. Mr. Nicholson, you said you were exempted from most

of the provisions. Any feedback here?

Mr. NICHOLSON. Well, I don’t know exactly what you mean by

feedback. It certainly has crossed my mind that the expansion and

growth of our business might reach a level where I’m not sure I

want to grow much longer because I’ll go beyond all the limits, the

thresholds. As a result, I am sort of looking at if I can continue to

expand and use the same number of employees, I might continue,

but I’m not sure I want to hire a bunch of additional people. Because right then and there I’m off into a whole different realm than

I am as a mom and pop.

Mr. OSE. As a mom and pop, how much do you think you spend

in complying with IRS reporting requirements each year?

Mr. NICHOLSON. Well, I’ve got probably $100 a week, as I say,

for outside bookkeeping-type, combination CPA and the bookkeeper

and that sort of thing. I’d say for Federal income tax purposes,

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probably more than half of that is used to compile the Federal income tax, the 940’s and all the rest of the Federal reporting.

Mr. OSE. So you are somewhere around $5,000 to $7,000 a year

in your business?

Mr. NICHOLSON. Yes.

Mr. OSE. Mr. Knott, on the requirement to comply with what appears to be a reporting requirement that has not followed the Administrative Procedure Act, that being the home-based occupational and safety health issue, and I’m characterizing this in my

words, how much do you spend or expect to spend complying with

that requirement?

Mr. KNOTT. My human relations manager estimates that it’s

going to take about 25 percent of an assistant’s time, which is

about, say, $10,000.

Mr. OSE. OK. And you have about 125 employees?

Mr. KNOTT. Yes. I estimate that I spend about 80 percent of my

time dealing with OSHA, the EPA and the FAA. Having started

the business with my own two hands and worked out in the plant,

that’s quite a switch, to spend 80 percent of my time dealing with

bureaucracies.

Mr. OSE. You bring me back to one of the points. I was reading

your written statement last night, and I just want to—if I can find

it—you have a comment in here that I thought was particularly

telling. Here it is, on page 4. This is your statement, which I

thought was very, very good. ‘‘People who make things in America

have to divert their attention from productivity and quality goals

to deal with bureaucracies, inspectors, complainants, lawyers and

courts, a diversion with which people who make things in America

have had to deal with time and again.’’ And your point, if I understand the prefacing comments in your

testimony, is that you are a producer; you make things. You are

not interested in the paperwork. It is not your reason for being.

Your reason for being is that you want to produce something, to

create jobs and revenue and all the different things that result.

Mr. KNOTT. Make those profits to send those tax dollars down to

Washington.

Mr. OSE. I understand. I almost slipped there and said the same

thing. But my point is, you are a producer; you’re not a consumer

here.

Mr. KNOTT. That’s right.

Mr. OSE. I don’t understand why we are promulgating upon you

guidance documents ad infinitum, or ad nauseam, which takes you

away from your productive time. That’s the thing that just strikes

me here. So I want to thank you for coming. I appreciate that.

Mr. LaGrande, I want to go through your testimony somewhat

at length, so if the other witnesses will be patient. I am particularly interested in the impact on agricultural production from Bureau of Reclamation efforts to collect this, that or the other piece

of information, which your testimony indicates—I think your

phrase was ‘‘finds no basis in law,’’ on page 3.

One of your suggestions is that when your operating entities file

on a new year or annual basis, if you could have a spot on the

forms that you file that says ‘‘no change from previous year,’’ that

would save you an enormous amount of time and effort. You’ve got

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900 acres. How many of those 900 acres from year to year change

in terms of operator or operating entity or crop or water use?

Mr. LAGRANDE. None of them.

Mr. OSE. Zero.

Mr. LAGRANDE. Yes, that’s correct.

Mr. OSE. So, in effect, you could take almost a Xerox of a previous year’s filing, in terms of the basic data. You would have to

change the date, of course, but——

Mr. LAGRANDE. You could, but the forms they provide you have

on the top of them the year. So this is a form for 2000, and you

can’t turn in the 2001 form. You can’t turn this in in place of the

2001 form, although the form hasn’t changed nor has any of the information or the data that I’m going to fill in.

Mr. OSE. Are you able to file that information electronically with

the Bureau?

Mr. LAGRANDE. No.

Mr. OSE. They cannot take it electronically or they will not take

it electronically?

Mr. LAGRANDE. I’m not sure if they cannot, but they will not.

Mr. OSE. All right. So maybe one of the things we need to do legislatively is at least discuss with the Interior Department and the

Bureau of Reclamation, if the circumstances of any one person’s

water use have not changed from year to year, for what purpose

are we requiring a whole new set of documents? We should put

that little line item in there.

Mr. LAGRANDE. I think that would be appreciated.

Mr. OSE. If that option were available to you on that particular

form, how much time would it save you?

Mr. LAGRANDE. Oh, it would save hours. I don’t have a good

sense of how many hours, but probably 20 to 25 hours in the spring

each year.

Mr. OSE. And, that’s on your 900 acres?

Mr. LAGRANDE. Yes, something like that.

Mr. OSE. In my district, and I’m just talking about rice, there are

550,000 acres of rice grown in my district. So, if all 900 acres of

yours is rice, that’s 1/600th of the total, so it would be 600 times

whatever time you would be saving, and then we could just replicate that for every programmed crop throughout the State.

Mr. LAGRANDE. That’s right.

Mr. OSE. Just by putting a box that says ‘‘no change from previous year.’’

Mr. LAGRANDE. For those that have no changes.

Mr. OSE. I understand.

Mr. LAGRANDE. Absolutely.

Mr. OSE. As far as the information that the Bureau requests for

who your fertilizer applicator is, who hauls your product to market,

who drives your rice, who provides natural gas to dry your rice,

who works in your field with your custom harvester, what possible

purpose could the Bureau have for asking for that information?

Mr. LAGRANDE. Well, it seems to find its origins in efforts that

were made under the Clinton Interior Department to placate a few

environmentalists, namely the NRDC, who really tried to stretch

the rules as they applied to the word lease.

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When the Reclamation Reform Act was originally considered by

Congress in the early 1980’s, they wanted to limit the size of farms

that could be the recipient of Federal water. So the basis on which

that limitation was derived was on ownership. Because everyone

could clearly agree on who owned the land, and then you had the

case of lease, and that was not quite so clear, but there are relatively clear definitions available. So the one they decided on is

someone who has an economic interest in the crop. If you have control of the property and you have an economic interest in the crop,

you are a lessor.

But, then there were objections raised by environmental organizations that, hey, there are a few organizations that try to get

around that by leasing out their property and then, in fact, they’re

farming different people’s entities and acreage for them and charging a fee for that, and so we should go after them.

Well, that died out in the late 1980’s. They made those arguments to Congress, Congress overruled that, and so 12 years later

the Bureau of Reclamation put forth rules chasing down that lead

as a result of a settlement that the Department of the Interior

made with the NRDC under the Department of Justice. And one

of the terms of the settlement was that they would put forth rules

that would cause farmers to identify their farm operators and notify the Bureau of Reclamation as to the identity of their farm operators.

Mr. OSE. Are those rules being promulgated now?

Mr. LAGRANDE. Yes, this year.

Mr. OSE. They have been issued?

Mr. LAGRANDE. Yes, but not publicized. None of us have received

any notification.

Mr. OSE. Have they been through the Administrative Procedure

Act?

Mr. LAGRANDE. I have no idea.

Mr. OSE. I think that’s something we will inquire about.

Now, the Reclamation Reporting Act has not changed since 1987.

Mr. LAGRANDE. That’s correct.

Mr. OSE. If I understand correctly, the Reclamation Reporting

Act does not require the reporting of all these people who work for

a farmer.

Mr. LAGRANDE. That’s correct. It’s also public information. So

someone who, say, is a crop duster and wants to go and, under a

Freedom of Information Act request, look at who their competitor’s

customers are, they can do that. So suddenly there are confidential

customer lists, and information such as that is public information.

Mr. OSE. Now, one of the things, if I might expand this a little

bit from, say, the Bureau. I want to go over to the Farm Service

Agency. The FSA each year meets with the growers in an area, collects data as they relate to program crops and the like, your base

acres, all the stuff. Do the reports at FSA allow a farmer to check

a box that says he or she is just going to do what they did last

year?

Mr. LAGRANDE. Yes.

Mr. OSE. They do?

Mr. LAGRANDE. The FSA’s process is quite a bit more streamlined. They don’t actually——

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Mr. OSE. Wait. Wait a minute. So one agency says that—the

agency at the top of the food chain, so to speak, the FSA, says you

can check off a box that says no change from last year, but an

agency lower down on the food chain doesn’t?

Mr. LAGRANDE. Correct.

Mr. OSE. Why?

Mr. LAGRANDE. I don’t know.

Mr. OSE. Actually, why not?

Mr. LAGRANDE. That’s a good question, and it is a source of frustration for all of us.

Mr. OSE. So on a comparative basis you can turn in your forms

to FSA literally with the flick of a wrist. Whereas over here at Bureau, where you are using what they provide as an input to which

you report to FSA, it requires a rather onerous drill, if you will?

Mr. LAGRANDE. That’s right.

Mr. OSE. Is the information you’re reporting to the Bureau any

different than the information you’re reporting to the FSA? Excuse

me, is the information being required to be reported to the Bureau

different from the information you’re required to report to the FSA?

Mr. LAGRANDE. Slightly, particularly under these new rules. The

FSA doesn’t require any information about who your providers are

of any services and that sort of thing. The FSA does require—they

both have in common the requirement that you have to indicate the

land, identify the land that you are farming and identify whether

you own that land or you lease that land. They both require that,

and they both require evidence of the lease. So the majority of the

information is common.

Mr. OSE. Duplicative in nature.

Mr. LAGRANDE. Correct.

Mr. OSE. Why? I mean, I understand why it’s duplicative. I don’t

understand why it’s being asked for twice. I don’t understand that.

Mr. LAGRANDE. I would imagine that the Farm Service Agency

and the Bureau of Reclamation staffs have not found a way to get

together and utilize a common form.

Mr. OSE. But, again, it gets back to your point under the Reclamation Act this information is not required anyway, from the Bureau of Reclamation standpoint.

Mr. LAGRANDE. That’s right.

Mr. OSE. So the differences between FSA’s form and the Bureau’s

form boils down to that which the Bureau requests is not being authorized to collect under law?

Mr. LAGRANDE. In substance, I would say that’s the difference.

The forms are, of course, set up differently, and you get to a little

bit different arrangement of the data.

Mr. OSE. How many boxes per year of paperwork do you end up

having to accumulate for this stuff?

Mr. LAGRANDE. You can accumulate more boxes than for which

you have storage capability in your office very quickly.

Mr. OSE. So you end up renting a mini-storage unit to put your

paperwork in.

Mr. LAGRANDE. Yes.

Mr. OSE. And, then you have to hold it for 7 years?

Mr. LAGRANDE. Some of it 3, some of it 5, some of it 7, some of

it indefinitely.

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Mr. OSE. Have you ever had anybody come back and look at your

paperwork?

Mr. LAGRANDE. Never.

Mr. OSE. Your family has been farming out there for how long?

Mr. LAGRANDE. I’m the fifth generation.

Mr. OSE. So, what, 1875? Early 1900’s?

Mr. LAGRANDE. That’s right, late 1800’s, early 1900’s.

Mr. OSE. And, no one has ever been in your storage unit to look

at your files? No one from the Bureau?

Mr. LAGRANDE. Not in mine.

Mr. OSE. I want to thank the witnesses for coming. You have

given us significant input in terms of the paperwork burdens that

you bear. I am particularly concerned about the manner in which

information is requested for which there is no statutory authority

to ask for in the first place; and it clearly ranges from corporate

America, where Dr. Bobis works, to where Mr. Nicholson, Mr.

Knott, and Mr. LaGrande work. It is across all industries and in

all States and, clearly, in virtually every possible nook or cranny

where such information might exist.

It is all-encompassing and, clearly, some of the information is

statutory. To the extent that it’s statutory information, I don’t

think any of us object to its collection. But when it’s discretionary,

and there is no clear understanding or reason or basis for the collection, I have to admit to some confusion as to why we burden our

people with that.

I want to thank our witnesses for coming today. I appreciate it.

This committee will be following up on these items, and your testimony today has been very helpful.

We are adjourned.

[Whereupon, at 12:48 p.m., the subcommittee was adjourned.]

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