Datasets:

anumafzal94

/

1k-govreport-4096

like 0

The Individuals with Disabilities Education Act (IDEA) is a grants and civil rights statute which provides federal funding to the states to help provide education for children with disabilities. If a state receives funds under IDEA, it must make available a free, appropriate public education (FAPE) for all children with disabilities in the state. Under the law prior to the enactment of P.L. 105-17 in 1997, states were required to set forth policies and procedures to ensure that provision was made for the participation of children with disabilities who are enrolled in private schools by their parents consistent with the number and location of these children. These requirements were further detailed in regulations which required that local education agencies (LEAs) provide private school students an opportunity for equitable participation in program benefits and that these benefits had to be "comparable in quality, scope, and opportunity for participation to the program benefits" provided to students in the public schools. The vagueness of the statute and the "equitable participation" standard led to differences among the states and localities and to differences among the courts. Prior to P.L. 105-17 , the courts of appeals that had considered these issues had sharply divergent views. Some courts gave local authorities broad discretion to decide whether to provide services for children with disabilities in private schools which generally resulted in fewer services to such children while others attempted to equalize the costs for public and private school children. The Supreme Court had granted certiorari in several of these cases but when Congress rewrote the law in 1997, the Court vacated and remanded these cases. The IDEA Amendments of 1997 rejected the "equitable participation"standard and provided that to the extent consistent with the number and location of children with disabilities in the state who were enrolled in private schools by their parents, provision was made for the participation of these children in programs assisted by Part B by providing them with special education and related services. The amounts expended for these services by an LEA were to be equal to a proportionate amount of federal funds made available to the local educational agency under Part B of IDEA. These services could be provided to children with disabilities on the premises of private schools, including parochial, elementary and secondary schools. There was also a requirement that the statutory provisions relating to "child find," identifying children with disabilities, are applicable to children enrolled in private schools, including parochial schools. More changes to these provisions were made by the 2004 reauthorization. The Senate report observed that "the intent of these changes is to clarify the responsibilities of LEAs to ensure that services to these children are provided in a fair and equitable manner." In addition, the Senate report stated that "many of the changes reflect current policy enumerated either in existing IDEA regulations or the No Child Left Behind Act." The House report noted that "the bill makes a number of changes to clarify the responsibilities of local educational agencies to children with disabilities who are placed by their parents in private schools. The Committee feels that these are important changes that will resolve a number of issues that have been the subject of an increasing amount of contention in the last few years." A child with a disability may be placed in a private school by the LEA or the State Educational Agency (SEA) as a means of fulfilling the FAPE requirement for the child. In this situation the cost is paid for by the LEA. A child with a disability may also be unilaterally placed in a private school by his or her parents. In this situation, the cost of the private school placement is not paid by the LEA unless a hearing officer or a court makes certain findings. However, IDEA does require some services for children in private schools, even if they are unilaterally placed there by their parents. The 2004 reauthorization includes several changes to the provisions relating to children who are placed in private school by their parents. The provisions relating to children placed in private schools by public agencies were not changed. Generally, children with disabilities enrolled by their parents in private schools are to be provided special education and related services to the extent consistent with the number and location of such children in the school district served by a LEA pursuant to several requirements (§612(a)(10)(A)(I)). In addition to this general LEA responsibility, there are also five specific requirements regarding parentally placed children. The general provision discussed above was changed from previous law by the addition of the requirement that the children be located in the school district served by the LEA. The Senate report described this change as protecting "LEAs from having to work with private schools located in multiple jurisdictions when students attend private schools across district lines." Although the intent was to protect LEAs from working with private schools in multiple jurisdictions, this provision has generated considerable controversy. A detailed discussion of this issue is beyond the scope of this report; however, several of the issues raised include the disproportional effect on LEAs with large concentrations of private schools, the lack of change in the funding formula to reflect the change, and potential conflicts with state laws. There are five requirements regarding children parentally placed in private schools. The first is that the funds expended by the LEA, including direct services to parentally placed private school children, shall be equal to a proportionate amount of federal funds made available under part B of IDEA. The 2004 reauthorization added the phrase regarding direct services. The Senate report stated that "it is the committee's intent that school districts place a greater emphasis on services provided directly to such children—like specifically designed instructional activities and related services—rather than devoting funds solely to indirect services such as professional development for private school personnel." Second, a new provision relating to the calculation of the proportionate amount is added. In calculating this amount, the LEA, after timely and meaningful consultation with representatives of private schools, shall conduct a thorough and complete child find process to determine the number of children with disabilities who are parentally placed in private schools. The final regulations provide a discussion and example of the proportionate share calculation. Third, the new law keeps the previous requirement that the services may be provided to children on the premises of private, including religious schools, to the extent consistent with law. P.L. 108-446 added the term "religious" while deleting the term "parochial." Fourth, a specific provision regarding supplementing funds, not supplanting them, is added. State and local funds may supplement but not supplant the proportionate amount of federal funds required to be expended. Fifth, each LEA must maintain records and provide to the SEA the number of children evaluated, the number of children determined to have disabilities, and the number of children served under the private school provisions. The House report stated that "such requirement ensures that these funds are serving their intended purpose." The general requirement regarding child find is essentially the same as previous law. The requirement for finding children with disabilities is the same as that delineated in §612(a)(3) for children who are not parentally placed in private schools, including religious schools. As was done in the previous section, the former use of the term "parochial" is replaced by the term "religious" in the new law. New provisions are added concerning equitable participation, activities, cost and the completion period. Child find is to be designed to ensure the equitable participation of parentally placed private school children with disabilities and their accurate count. The cost of child find activities may not be considered in meeting the LEA's proportional spending obligation. Finally, the child find for parentally placed private school children with disabilities is to be completed in a time period comparable to that for students attending public schools (§612(a)(10)(A)(ii)). P.L. 108-446 adds requirements concerning LEA consultation with private school officials and representatives of the parents of parentally placed private school children with disabilities. This consultation is to include the child find process and how parentally placed private school children with disabilities can participate equitably; the determination of the proportionate amount of federal funds available to serve parentally placed private school children with disabilities, including how that amount was calculated; the consultation process among the LEA, private school officials and representatives of parents of parentally placed private school children with disabilities, including how the process will operate; how, where, and by whom special education and related services will be provided for parentally placed private school children with disabilities, including a discussion of the types of services, including direct services and alternate service delivery mechanisms, how the services will be apportioned if there are insufficient funds to serve all children and how and when these decisions will be made; and how the LEA shall provide a written explanation to private school officials of the reasons why the LEA chose not to provide services if the LEA and private school officials disagree (§612(a)(10)(A)(iii)). The Senate report described the consultation procedure as similar to that in the No Child Left Behind Act and "therefore, the committee does not believe including these provisions places an undue burden on LEAs." The new law requires a written affirmation of the consultation signed by the representatives of the participating private schools. If the private school representatives do not sign within a reasonable period of time, the LEA shall forward the documentation to the SEA (§612(a)(10)(A)(iv)). Compliance procedures also are added by P.L. 108-446 . Generally, a private school official has the right to submit a complaint to the SEA alleging that the LEA did not engage in meaningful and timely consultation or did not give due consideration to the views of the private school official. If a private school official submits a complaint, he or she must provide the basis of the noncompliance to the SEA, and the LEA must forward the appropriate documentation. If the private school official is dissatisfied with the SEA's determination, he or she may submit a complaint to the Secretary of Education, and the SEA shall forward the appropriate documentation to the Secretary (§612(a)(10)(A)(v)). The 2004 reauthorization contains a specific subsection regarding the provision of equitable services. Services are to be provided by employees of a public agency or through contract by the public agency. In addition, the services provided are to be "secular, neutral, and nonideological" (§612(a)(10)(A)(vi)). The new law further states that the funds that are available to serve pupils attending private schools shall be controlled and administered by a public agency (§612(a)(10)(A)(vii)). As noted above, when a child with a disability is unilaterally placed in a private school by his or her parents, the cost of the private school placement is not paid by the LEA unless a hearing officer or a court makes certain findings. As in previous law, this reimbursement may be reduced or denied if the child's parents did not give certain notice (§612(a)(10)(C)(iii)). Both the 1997 and 2004 reauthorizations contain an exception to this limitation, but this exception is changed somewhat in the new law. Under the new law, the cost of reimbursement is not to be reduced or denied for the failure to provide notice if: the school prevented the parent from providing such notice; the parents had not received notice of the notice requirement; or compliance would likely result in physical harm to the child. Previous law had included a provision requiring that reimbursement not be reduced or denied if a parent is illiterate and had included "serious emotional harm." P.L. 108-446 also contains a provision allowing, at the discretion of a court or hearing officer, the reimbursement not to be reduced or denied if: the parent is illiterate or cannot write in English; or compliance with the notice requirement would likely result in serious emotional harm to the child (§612(a)(10)(C)(iv)). An issue that is not specifically addressed in the statute is whether parents of a child with a disability are entitled to private school reimbursement even though the student had never received special education services from the school district. In the Supreme Court's most recent IDEA decision, Board of Education of the City School District of the City of New York v. Tom F. , the Court, dividing 4-4, upheld an appeals court ruling that parents of a child with a disability are entitled to private school reimbursement even though the student had never received special education services from the school district. The Court's per curiam decision does not set a precedent for lower courts; therefore, the issue is not settled. On October 15, 2007, the Supreme Court denied certiorari in another case presenting the same issue.

The Individuals with Disabilities Education Act (IDEA), as amended by P.L. 108-446, provides for services for children with disabilities in private schools. A child with a disability may be placed in a private school by the local educational agency (LEA) or the State Educational Agency (SEA) and costs are paid by the agency. Children with disabilities enrolled by their parents in private schools are treated differently; generally, they are to be provided special education and related services to the extent consistent with the number and location of such children in the school district served by a LEA pursuant to several requirements. These requirements include provisions relating to direct services to parentally placed private school children with disabilities, the calculation of the proportionate amount of funds, and a requirement for record keeping. Compliance procedures for these requirements were added by the 2004 reauthorization. For a general discussion of the changes made by P.L. 108-446, see CRS Report RL32716, Individuals with Disabilities Education Act (IDEA): Analysis of Changes Made by P.L. 108-446, by [author name scrubbed] and [author name scrubbed]. This report will be updated as necessary.

T he National Trails System Act (16 U.S.C. §§1241-1251) of 1968 established the Appalachian and Pacific Crest National Scenic Trails, and authorized a national system of trails to provide outdoor recreational opportunities and to promote access to the nation's outdoor areas and historic resources. Since the act's passage, the system has grown to encompass trails in every U.S. state, Washington, DC, and Puerto Rico. The system has expanded over time and now includes four types of trails: National Scenic Trails (NSTs) display significant characteristics of the nation's "physiographic regions," representing desert, marsh, grassland, mountain, canyon, river, forest, or other areas. NSTs provide for outdoor recreation and for the conservation and enjoyment of significant scenic, historic, natural, or cultural qualities. National Historic Trails (NHTs) identify and protect travel routes of national historic significance, along with associated remnants and artifacts, for public use and enjoyment. NHTs can include land or water segments, marked highways paralleling the route, and sites that together form a chain or network along the historic route. National Recreation Trails (NRTs) are on federal, state, or private lands that are in, or reasonably accessible to, urban areas. They provide for a variety of outdoor recreation uses. Connecting or Side Trails provide public access to the other types of nationally designated trails or connections between such trails. Congress plays an ongoing role in shaping the National Trails System through legislation and oversight. Congress establishes new trails within the system; directs the Administration to study potential new trails; determines the level of agency funding for trail management; and considers whether new trail categories (such as "national discovery trails") should be included in the system, among other roles. For individual trails, Congress has made specific provisions concerning land acquisition, trail use, and other matters. Ongoing issues for Congress include whether to designate additional trails, how to balance trail designation with other potential land uses, whether trail designation should be accompanied by federal land acquisition, what activities should be permitted on trails, and how to appropriately balance federal and nonfederal funding for trails, among other issues. During the early history of the United States, trails served as routes for commerce and migration. Since at least the early 20 th century, trails also have been constructed to provide access to scenic areas. The first interstate recreational trail, now known as the Appalachian National Scenic Trail, was developed in the 1920s and 1930s. In 1945, legislation to establish a "national system of foot trails" was introduced but not reported. In the years following the Second World War, the nation sought better opportunities to enjoy the outdoors. In 1965, in a message to Congress on "Natural Beauty," President Lyndon Johnson called for the nation "to copy the great Appalachian Trail in all parts of our country, and make full use of rights-of-way and other public paths." Three years later, the National Trails System Act was enacted. The system began in 1968 with two scenic trails: the Appalachian National Scenic Trail, which stretches roughly 2,180 miles from Mount Katahdin, ME, to Springer Mountain, GA; and the Pacific Crest National Scenic Trail, which covers roughly 2,650 miles along the mountains of Washington, Oregon, and California. The system was expanded a decade later when Congress designated four historic trails, with more than 9,000 miles, and another scenic trail, along the Continental Divide, with 3,100 miles. Currently, there are a combined 30 NHTs and NSTs covering almost 55,000 miles. (See Table 1 and Figure 1 .) Additionally, the system contains more than 1,200 NRTs and 6 connecting or side trails, including trails in every state, Washington, DC, and Puerto Rico. The National Trails System Act also authorizes the preservation of abandoned railroad rights-of-way for rails-to-trails conversions (16 U.S.C. §1247). NSTs and NHTs are designated by acts of Congress. Prior to establishing a trail, Congress typically directs the Secretary of the Interior or the Secretary of Agriculture to study the route for potential inclusion in the system. The studies address both the suitability (i.e., characteristics that make the proposed trail "worthy of designation as a national scenic or national historic trail") and the feasibility (i.e., physical and financial viability) of adding the trail to the system. The act contains additional criteria for NHTs, which must (1) be established by historic use and be significant because of that use; (2) be significant with respect to a broad facet of American history, such as trade and commerce, exploration, migration and settlement, or military campaigns; and (3) have significant potential for public recreational use or historical interest. In contrast to national scenic and historic trails, national recreation trails may be designated by the Secretaries of the Interior and Agriculture with the consent of the federal agency, state, or political subdivision with jurisdiction over the lands involved. Recreation trails must be reasonably accessible to urban areas and must meet other criteria as prescribed by the act or by the Secretaries. The Secretaries also have authority to designate connecting and side trails. For all four trail types, routes may intersect both federal and nonfederal lands. The law provides limited authorities for federal land acquisition in connection with the trails. Along the designated rights-of-way for NSTs and NHTs, the Secretaries may acquire land in areas that are already under their administrative jurisdiction (e.g., on trail segments that lie within the boundaries of an existing national park or national forest but are not federally owned). Outside their administrative boundaries, the Secretaries are to encourage state and local governments either to acquire trail lands or to enter into agreements with private landowners for the necessary rights-of-way. Only if state and local governments fail to do so may the federal government acquire the land or form cooperative agreements with landowners. For NRTs, the provisions are more limited, in that federal land acquisition may take place only within existing administrative boundaries. Connecting and side trails may only include nonfederal lands if no federal acquisition is involved. When adding individual trails to the system, Congress has often included specific land acquisition provisions—for example, authorizing federal acquisition only from willing sellers or establishing a geographical boundary for land acquisition, such as within a quarter-mile on either side of the trail. P.L. 111-11 gave federal land management agencies the authority to purchase land from willing sellers for a number of trails that had previously prohibited any federal land acquisition. The 30 national scenic and historic trails are administered by either the Secretary of the Interior or the Secretary of Agriculture, acting through the land management agencies. The NPS administers 21 of the 30 trails; the FS administers 6 trails; the Bureau of Land Management (BLM) administers 1 trail; and the NPS and BLM jointly administer 2 trails. The administering agency typically develops the trail management plan, oversees development of trail segments, coordinates trail marking and mapping, develops maintenance standards, coordinates trail interpretation, administers cooperative and interagency agreements, and provides financial assistance to others for trail purposes, among other functions. The agencies point to a distinction between trail administration and trail management : while there is usually only one administering agency, multiple federal agencies, state and local governments, private groups, and individuals may own and manage lands along a national scenic or historic trail. The National Trails System Act authorizes the administering Secretary to enter into cooperative agreements with state, local, and private landowners or organizations for trail development, operation, and maintenance. In addition, several federal agencies involved with the trails signed a memorandum of understanding (MOU) in 2006 to coordinate federal trail management. In contrast to the NSTs and NHTs, NRTs are typically administered by states, localities, and private organizations, with federal agencies participating when the trails cross federal lands. The National Park Service is responsible for the overall coordination of the national recreation trails, including nonfederal trails. Nonfederal trail managers have access to federal training and technical assistance, and are eligible for some types of federal funding. Connecting or side trails are administered by the Secretary under whose jurisdiction the trail lands fall. The six existing trails are all administered by the Secretary of the Interior. The FY2013 annual report of the Federal Interagency Council on Trails discussed a number of management issues facing the agencies that administer the National Trails System. These issues included tight federal agency budgets, financial constraints among partner groups, inconsistent mapping, aging volunteers, and expansion of energy projects and the transmission grid in ways that affect the trails. Another challenge cited was the lack of awareness among many Americans of the system and its health, community, economic, and educational benefits. The administering Secretary may regulate the use of federally owned portions of the national trails, in consultation with relevant agencies. The Secretary may permit uses "which will not substantially interfere with the nature and purposes of the trail." Such uses may include but are not limited to bicycling, cross-country skiing, day hiking, equestrian activities, jogging or similar fitness activities, overnight and long-distance backpacking, snowmobiling, and surface water and underwater activities. The use of motorized vehicles by the general public is typically prohibited on national scenic trails. However, motorized vehicles may be allowed on national historic trails if they do not substantially interfere with the nature and purposes of the trail and were allowed by administrative regulations at the time of designation. Trail uses on nonfederal lands—whether segments of scenic, historic, recreation, or connecting trails—are typically controlled at the state and local levels. State, local, and private-sector trail managers may work together to develop cooperative principles for use and management. Each agency with management authority over national trails has its own funding for carrying out activities related to trail administration and management. Since 2006, federal land management agencies have agreed, within the limits of agency authorities, to eliminate duplicate efforts and increase effectiveness by coordinating requests for and obligation of funds for the National Trails System. Since 1992, the Department of Transportation, through federal transportation programs authorized by Congress, has provided more than $11 billion for bicycle and pedestrian transportation projects, including many transportation trails. Additional sources of funding for trails have included challenge cost-share projects, cooperative agreements with trail partner organizations, charitable foundations, corporations, permits and fees, local excise taxes, and dedicated funds. In the 114 th Congress, H.R. 1865 and S. 1423 would designate a new Condor National Recreation Trail in California. H.R. 984 and S. 479 would direct a study of a proposed Chief Standing Bear National Historic Trail running through the states of Oklahoma, Kansas, and Nebraska. Another proposal ( H.R. 2661 ) would add a new type of trail—"national discovery trails"—to the system. National discovery trails would be extended, continuous interstate trails that provide for outdoor recreation and travel and that connect representative examples of America's trails and communities. These and other 114 th Congress bills affecting the National Trails System are shown in Table 2 . Many comparable bills had also been introduced in previous Congresses.

The National Trails System was created in 1968 by the National Trails System Act (16 U.S.C. §§1241-1251). The system includes four types of trails: (1) national scenic trails (NSTs), which display significant physical characteristics of U.S. regions; (2) national historic trails (NHTs), which follow travel routes of national historical significance; (3) national recreation trails (NRTs), which provide outdoor recreation accessible to urban areas; and (4) connecting or side trails, which provide access to the other types of trails. As defined in the act, NSTs and NHTs are long-distance trails designated by acts of Congress. NRTs and connecting and side trails may be designated by the Secretaries of the Interior and Agriculture with the consent of the federal agency, state, or political subdivision with jurisdiction over the lands involved. Congress plays an ongoing role in shaping the National Trails System through legislation and oversight. Broad issues for Congress include, among others: whether and where to establish new trails in the system, whether to establish new categories of trails (such as "national discovery trails"), and how much funding to provide to agencies for trail management. When designating individual trails, Congress has considered issues such as: how to balance trail designation with other potential land uses, how to address federal land acquisition, and whether to make specific provisions for trail use that may differ from those in the overall act. Congress has established 11 NSTs and 19 NHTs, as well as several NRTs (although recreation trails are more typically designated administratively). In addition, the Secretaries of the Interior and Agriculture have designated more than 1,200 NRTs and 6 connecting or side trails. The scenic, historic, and connecting trails are federally administered by either the National Park Service (NPS) and/or the Bureau of Land Management (BLM) in the Department of the Interior, or the U.S. Forest Service (FS) in the Department of Agriculture, with cooperation from states and other entities to operate nonfederal trail segments. The roughly 1,200 national recreation trails are typically managed by states, localities, and private organizations, except where they cross federal lands. The act limits federal land acquisition for the trails system, with specific provisions for different trail types. Each federal agency with management authority over national trails has its own budget for trail administration and management. Trails have also received funding from federal transportation programs, private donations, permits and fees, and local excise taxes, among other sources. Uses of the national trails may include, but are not limited to, bicycling, cross-country skiing, day hiking, equestrian activities, jogging or similar fitness activities, overnight and long-distance backpacking, snowmobiling, and surface water and underwater activities. Provisions for motorized vehicle use vary among the different types of trails. Legislation in the 114th Congress would designate a new national recreation trail (H.R. 1865 and S. 1423), direct a study of one trail route for potential addition to the system as a national historic trail (H.R. 984 and S. 479), and make other changes. As in earlier Congresses, a bill (H.R. 2661) has also been introduced to add a new type of trail—national discovery trails—to the system.

On June 23, 2005, the Supreme Court handed down Kelo v. City of New London , one of its three property rights decisions during the 2004-2005 term. In Kelo , the Court addressed the City's condemnation of private property to implement its area redevelopment plan aimed at invigorating a depressed economy. By 5-4, the Court held that the condemnations satisfied the Fifth Amendment requirement that condemnations be for a "public use," notwithstanding that the property, as part of the plan, might be turned over to private developers—a private-to-private transfer. Under the Fifth Amendment, the United States may invoke its power of eminent domain to take private property—known as "condemnation"—only for a "public use." This public use prerequisite is made applicable to the states and their political subdivisions, as in Kelo , through the Fourteenth Amendment due process clause. In addition, states and their subdivisions must comply with state constitutions, which use phrases similar to "public use." The issue in Kelo was not whether the landowners were compensated; condemnation, under the federal or state constitutions, must always be accompanied by just compensation of the property owner. Rather, the issue was whether the condemnation was not for a public use and thus may not proceed at all , even given that just compensation is paid. Kelo prompted immediate debate whether Congress should respond by protecting property owners from the use of eminent domain for economic development. The overall issue is this: When does a private-to-private transfer of property through eminent domain, as in Kelo , satisfy the constitutional requirement that eminent domain only be used for a public use—notwithstanding that the transferee is a private entity. For our nation's first century, "public use" generally was construed to mean that after the condemnation, the property had to be either owned by the government (for roads, military bases, post offices, etc.) or, when private to private, by a private party providing public access to the property (as with entities, such as railroads and utilities, having common carrier duties). Beginning in the late 1890s, however, the Supreme Court rejected this public-access requirement for private-to-private condemnations, asserting that "public use" means only "for a public purpose." Even without public access, the Court said, private-to-private transfers by eminent domain, could, under proper circumstances, be constitutional. In 1954, the owner of a department store in a blighted area of the District of Columbia argued to the Supreme Court that the condemnation of his store for conveyance to a private developer, as part of an areawide blight-elimination plan, failed the public use condition. He pointed out that his particular building was not dilapidated, whatever the condition of other structures in the area might be. The Supreme Court in Berman v. Parker unanimously rejected the no-public-use argument. The Court declined to assess each individual condemnation, but rather viewed the blight-elimination plan as a whole. So viewed, the plan furthered a legitimate public interest. Indeed, the public use requirement was said to be satisfied anytime government acted within its police powers. Not surprisingly, the Berman decision is heavily relied upon by municipalities across the country engaged in blight removal. The 1980s saw further extensions of "public use" in the realm of private-to-private condemnations. In 1981, Detroit sought to condemn an entire neighborhood to provide a site for a General Motors assembly plant. Unlike in Berman , the neighborhood was not blighted ; the City simply wanted to improve its dire economic straits by bringing in the plant to increase its tax base. The Michigan Supreme Court in Poletown Neighborhood Council v. Detroit interpreted "public use" in its state constitution to allow the condemnation. A few years after Poletown , the U.S. Supreme Court in Hawaii v. Midkiff dealt with Hawaii's use of condemnation to relieve the highly concentrated land ownership there. The state's program allowed a land lessee to apply to the state to condemn the land from the owner, for sale to the lessee. Again unanimously, the Supreme Court perceived a public use, this time in the elimination of the claimed adverse impacts of concentrated land ownership on the state's economy. As in Berman , the Court declared that the public use requirement is "coterminous with the scope of the sovereign's police powers." The effect of Berman , Poletown , and Hawaii , and kindred decisions, was to lead some observers to declare that "public use" had been so broadly construed by the courts as to have been effectively removed from the Constitution. To exploit the new latitude in "public use," and with Poletown specifically in mind, local condemnations assertedly for economic development began to increase in the 1980s—some of them pushing the envelope of what could be considered economic development with a primarily public purpose. Predictably, litigation challenges to such condemnations increased in tandem, property owners charging that even under the courts' expansive view of "public use," the particular project could not pass muster. In one of the early property-owner successes, a New Jersey court in 1998 rejected as not for a public use a proposed condemnation of land next to an Atlantic City casino, for the casino's discretionary use. A few other cases also rejected "public use" rationales for economic-development condemnations, either because the project's benefits were primarily private, or because economic development categorically was not regarded as a public use. Most dramatically, in 2004, the Michigan Supreme Court unanimously reversed Poletown . All this set the stage for Kelo . In the late 1990s, Connecticut and the city of New London began developing plans to revitalize the city's depressed economy. They fixed on a 90-acre area on the city's waterfront, adjacent to where Pfizer Inc. was building a $300 million research facility. The intention was to capitalize on the arrival of the Pfizer facility. In addition to creating jobs, generating tax revenue, and building momentum for revitalizing the downtown, the plan was also intended to make the city more attractive and create recreation opportunities. The redevelopment would include office and retail space, condos, marinas, and a park. However, nine property owners in the redevelopment area refused to sell, so condemnation proceedings were initiated. In response, the property owners claimed that the condemnations of their properties were not for a public use. In his opinion for the 5-justice majority, Justice Stevens held that the condemnations, implementing a carefully considered areawide revitalization plan in an economically depressed area, were for a public use, even though the condemned properties would be redeveloped by private entities. The majority opinion noted preliminarily that there was no suggestion of bad faith here—no charge that the redevelopment was really a sweetheart deal with the private entities that would benefit. The case therefore turned on whether the proposed development was a "public use" even though private-to-private transfers with limited public access were involved. Without exception, said the majority, the Court's cases defining "public use" as "public purpose" reflect a policy of judicial deference to legislative judgments—affording legislatures broad latitude in determining what evolving public needs justify. While New London was not confronted with blight, as in Berman , "their determination that the area was sufficiently distressed to justify a program of economic rejuvenation is entitled to our deference." But just as in Berman , the plan was comprehensive and thoroughly deliberated, so the Court again refused to consider the condemnations of individual parcels; because the overall plan served a public purpose, it said, condemnations in furtherance of the plan must also. The property owners argued for a flat rule that economic development is not a public use. Rejecting this, the Court said that promoting economic development is a long-accepted function of government, and that there is no principled way of distinguishing economic development from other public purposes that the Court has recognized as public uses—as in Berman and Hawaii . Nor is the incidental private benefit troublesome, as government pursuit of a public purpose often benefits private parties. And, a categorical rule against development condemnations is not needed to prevent abuses of eminent domain for private gain; such hypothetical cases, said the Court, can be confronted as they arise. Also rejected was the property owners' argument that for cases of this kind, courts should require a "reasonable certainty" that the expected public benefits of the project will accrue. Such a requirement, the Court noted, asks courts to make judgments for which they are ill-suited, and would significantly impede carrying out redevelopment plans. Finally, the majority opinion stressed that it was construing only the Takings Clause of the Federal Constitution. State courts, it pointed out, remain free to interpret state constitutions more strictly, and state legislatures remain free to prohibit undesired condemnations. Other opinions in Kelo warrant mention, as they have echoed in the ensuing congressional debate. Justice Kennedy, one of the majority-opinion justices, filed a concurrence emphasizing that while deference to the legislative determination—"rational basis review"—is appropriate, courts must not abdicate their review function entirely. A court should void a taking, he said, that by a "clear showing" is intended to favor a particular private party, with only incidental or pretextual public benefits. In dissent, Justice O'Connor, joined by the Court's three core conservatives, argued vigorously that "[u]nder the banner of economic development," the majority opinion makes " all private property ... vulnerable to being taken and transferred to another private owner, so long as it might be upgraded." Justice O'Connor allowed as how private-to-private condemnations without public access could on some occasions satisfy "public use"—as in Berman and Hawaii. But in those cases, she asserted, "the targeted property inflicted affirmative harm on society." In contrast, in Kelo the well-maintained homes to be condemned were not the source of any social harm, so their elimination to allow a new use produces only secondary benefit to the public, something that almost any lawful use of real property does. She also questioned whether Justice Kennedy's test for acceptable development condemnations was workable, given that staff can always come up with an asserted economic development purpose. Property rights advocates assert that Kelo marks a change in existing takings jurisprudence, but the reality is arguably more subtle. Very possibly, some of their adverse reaction is attributable to the opportunity lost in Kelo to do away with economic-development condemnations in one fell swoop. After Kelo , property rights advocates will have to pursue their goal in multiple state courts and legislatures. The doctrinal crux of the matter appears to lie in the majority and dissenters' divergent readings of the Court's prior public-use decisions. Justice Stevens for the majority finds no principled difference between economic-development condemnations and condemnations the Court has already approved, as in Berman and Hawaii , while Justice O'Connor for the dissenters does. Justice Stevens' view arguably takes insufficient account of the distinction between projects where economic development is only an instrumental or secondary aspect of the project and those where economic development is the primary thrust. On the other hand, the distinction drawn by Justice O'Connor between projects whose primary thrust is elimination of affirmative harms and other projects, while intuitively appealing, requires a dichotomy between elimination of harm and creation of benefit that the Court has previously critiqued as unworkable. Moreover, Justice O'Connor had to backpedal on the statement in Hawaii , which she authored, that "the public use requirement is coterminous with the scope of the sovereign's police powers." Some exercises of that police power, she now would hold, are not public uses. Of course, what Kelo really means will not be known until the lower courts have had a few years to interpret and apply it. It will be interesting to see whether Justice Kennedy's "meaningful rational basis" review has any content, or whether the dissenters' more skeptical view, that a plausible economic development purpose can always be conjured up by competent staff, will ultimately prove correct. In the meantime, frequent efforts can be expected by property owners and like-minded public interest law firms to expand the number of states whose courts find fault under state constitutions with development condemnations. The interest group alignment on how to respond to Kelo does not break down along stereotypical liberal-conservative lines. A conservative, one supposes, would side with the property owners, but having a states-rights orientation might resist federal constraints on what local governments can do. On the other hand, liberals might be comfortable with municipal efforts to guide the market toward economic development, but resist on the ground that such efforts disproportionately displace minority and low-income communities. Some options that Congress might consider for responding to Kelo are— Kelo made plain that it was interpreting solely the Takings Clause in the U.S. Constitution. As in other constitutional areas, state courts remain free to interpret state constitutions more stringently, and indeed some state high courts have read their constitutions to bar condemnation for economic development. Moreover, whatever the state constitution says, state legislatures are free to statutorily prohibit development condemnations, and indeed, once again, at least a few have. In light of the foregoing, Congress might conclude that it was appropriate to let the matter simmer for a few years in the states, and then act only if unsatisfied with their response. Proposals have already surfaced in Congress to prohibit the use of federal money for state and local projects with an economic development purpose—usually through conditions on federal grants. There are several ways this could be done. The prohibitory condition could be attached solely to the monies for the particular economic development project involving the condemnation. More broadly, the condition could be applied to a larger pot of money (e.g., Community Development Block Grants) still having some relation to economic development condemnations. Most expansively, the condition could be attached to the largest federal funding program one can find (or all federal funding), though this course of action may run afoul of the constitutional requirement that conditions on federal funding must relate to the underlying purpose of the funding. The suggestion has been raised that Congress could direct how states exercise their eminent domain authority for economic development projects, regardless of whether federal funds are involved. Such legislation, however, arguably might exceed congressional power under the Commerce Clause and the Fourteenth Amendment, and may even raise Tenth Amendment issues. This statute requires compensation of persons who move from real property, voluntarily or by condemnation, due to a federal project or a state or local one receiving federal money. Its raison d'etre is that the constitutional promise of just compensation covers only the property taken, leaving the condemnee to bear the often substantial additional losses associated with having to move. Some of those losses are compensated under the URA. The statute, however, has long been criticized as inadequate both as to the losses covered and the amounts of compensation available. Moreover, it creates no cause of action allowing condemnees to enforce its terms. Expanding the Act would at least assure that persons displaced by economic-development condemnations receive fuller compensation. This is perhaps the most direct, but logistically difficult, option.

In Kelo v. City of New London , decided June 23, 2005, the Supreme Court held 5-4 that the city's condemnation of private property, to implement its area redevelopment plan aimed at invigorating a depressed economy, was a "public use" satisfying the U.S. Constitution—even though the property might be turned over to private developers. The majority opinion was grounded on a century of Supreme Court decisions holding that "public use" must be read broadly to mean "for a public purpose." The dissenters, however, argued that even a broad reading of "public use" does not extend to private-to-private transfers solely to improve the tax base and create jobs. Congress is now considering several options for responding to the Kelo decision.

During the 1970s, the poor accounting practices of state and local governments put into question the security of federal funds provided to those governments. The 1975 New York City financial crisis focused increased attention on this problem. It was found that New York City consistently overestimated its revenues, underestimated its expenses, never knew how much cash it had on hand, and borrowed repeatedly to finance its deficit spending. Compounding the poor accountability practices prevalent at that time, for the most part, state and local governments were not receiving independent financial statement audits. In the early 1980s, the Congress became increasingly concerned about a basic lack of accountability for federal assistance provided to state and local governments. The assistance grew from 132 programs costing $7 billion in 1960 to over 500 programs costing nearly $95 billion by 1981. In 1984, when the Single Audit Act was signed into law, federal assistance to state and local governments had risen to $97 billion, more than doubling what it was a decade before. Before passage of the act, the federal government relied on audits of individual grants to help gain assurance that state and local governments and nonprofit organizations were properly spending federal assistance. These audits focused on whether the transactions of specific grants complied with their program requirements. The audits usually did not address financial controls and were, therefore, unlikely to find systemic problems with an entity’s management of its funds. Further, grant audits were conducted on a haphazard schedule, which resulted in large portions of federal funds being unaudited each year. The auditors conducting grant audits did not coordinate their work with the auditors of other programs. As a result, some entities were subject to numerous grant audits each year while others were not audited for long periods. As a solution, the concept of the single audit was created to replace multiple grant audits with one audit of an entity as a whole. Rather than being a detailed review of individual grants or programs, the single audit is an organizationwide audit that focuses on accounting and administrative controls. The single audit was meant to advise federal oversight officials and program managers on whether an entity’s financial statements are fairly presented and to provide reasonable assurance that federal assistance programs are managed in accordance with applicable laws and regulations. At the time the Single Audit Act was enacted, it received strong bi-partisan support in the Congress and from state and local governments. The objectives of the Single Audit Act are to improve the financial management of state and local governments receiving federal financial assistance; establish uniform requirements for audits of federal financial assistance provided to state and local governments; promote the efficient and effective use of audit resources; and ensure that federal departments and agencies, to the extent practicable, rely upon and use audit work done pursuant to the act. The act requires each state and local entity that receives $100,000 or more in federal financial assistance (either directly from a federal agency or indirectly through another state or local entity) in any fiscal year to undergo a comprehensive, single audit of its financial operations. The audit must be conducted by an independent auditor on an annual basis, except under specific circumstances where a biennial audit is allowed.The act also requires entities receiving between $25,000 and $100,000 in federal financial assistance to have either a single audit or a financial audit required by the programs that provided the federal funds. Further, where state and local entities provide $25,000 or more in federal financial assistance to other organizations (“subrecipients” of federal funds) they are required by the act to monitor those subrecipients’ use of the funds. This monitoring can consist of reviewing the results of each subrecipient’s audit and ensuring that corrective action is taken on instances of material noncompliance with applicable laws and regulations. Over the past 12 years, single audits have clearly proved their worth as important accountability tools over the hundreds of billions of dollars that the federal government provides to state and local governments and nonprofit organizations each year. As discussed in our June 1994 report, the Single Audit Act has encouraged recipients of federal funds to review and revise their financial management practices. This has resulted in the state and local governments institutionalizing fundamental reforms, such as (1) preparing annual financial statements in accordance with generally accepted accounting principles, (2) obtaining annual independent comprehensive audits, (3) strengthening internal controls over federal funds and compliance with laws and regulations, (4) installing new accounting systems or enhancing old ones, (5) implementing subrecipient monitoring systems that have greatly improved oversight of entities to whom they have distributed federal funds, (6) improving systems for tracking federal funds, and (7) resolving audit findings. The single audit process has proven to be an effective way of promoting accountability over federal assistance because it provides a structured approach to achieve audit coverage over the thousands of state and local governments and nonprofit organizations that receive federal assistance. Moreover, particularly in the case of block grants—where the federal financial role diminishes and management and outcomes of federal assistance programs depend heavily on the overall state or local government controls—the single audit process provides accountability by focusing the auditor on the controls affecting the integrated federal and state funding streams. At the same time, areas of improvement in the single audit process have been identified through the thousands of single audits conducted annually and a consensus has been developed on the needed solutions. I would now like to highlight these areas and strongly support the proposed amendments you are considering which would strengthen the single audit process. Last December we testified before the Senate Governmental Affairs Committee in support of changing the Single Audit Act. Those changes are reflected in S.1579, the Single Audit Act Amendments of 1996—a bill which is identical to the amendments you are now considering. Today, I will focus on the two main areas of improvement: ensuring adequate coverage of federal funds without placing an undue administrative burden on entities receiving smaller amounts of federal funds; and making single audits more useful to the federal government. The criteria for determining which entities are to be audited is based solely on dollar amounts, which have not changed since the Act’s passage in 1984. The initial dollar thresholds were designed to ensure adequate audit coverage of federal funds without placing an undue administrative burden on entities receiving smaller amounts of federal assistance. In 1984, the dollar threshold criteria for entities ensured audit coverage for 95 percent of all direct federal assistance to local governments. Today, the same criteria cover 99 percent of all federal assistance to local governments. As a result, some local governments that receive comparatively small amounts of federal assistance are required to have financial audits. If the thresholds were raised, as is proposed in the amendments, audit coverage of 95 percent of federal funds to local governments could be maintained while roughly 4,000 local governments that now have single audits would be exempt in the future. More than 80 percent of the federal program managers we interviewed in preparing our 1994 report favored raising the thresholds to at least the levels proposed in the amendments. We strongly support the proposed change and believe it strikes the proper balance between cost-effective accountability and risk. Entities that fall below the audit threshold would still be required to maintain and provide access to records of the use of federal assistance. Also, those entities would continue to be subject to monitoring activities which could be accomplished through site visits, limited scope audits, or other means. Further, federal agencies could conduct or arrange for audits of the entities. The act’s current criteria for selecting programs to be covered as part of a single audit focuses solely on dollars expended and does not consider all risk factors. In our 1994 report, we noted that less than 20 percent of the programs in our sample met the selection criteria regardless of whether they would be considered high risk. However, those few programs provided 90 percent of the entities’ federal expenditures. At the same time, programs that could be considered risky because of their complexities, changed program requirements, or previously identified problems would not have to be covered. The proposed amendments would require OMB to develop a risk-based approach to target audit resources at the higher risk programs as well as focusing on the dollars expended. We strongly support this change and note that the overwhelming majority of federal managers we interviewed agreed with this proposal. The proposed amendments include two primary changes to enhance the content and timeliness of single audit reports. First, single audit reports contain a series of as many as seven or more separate reports, and significant information is scattered throughout the separate reports. Presently, there is no requirement for a summary although several state auditors (for example, California’s state auditor) prepare summary reports. In this regard, as discussed in our 1994 report, 95 percent of the federal program managers we interviewed were very supportive of summary reports. Managers said that a summary report would save them time and enable them to more quickly focus on the most important problems the auditors found. The proposed amendments address this need by requiring auditors to provide a summary of their determinations concerning the audited entity’s financial statements, internal controls, and compliance with federal laws and regulations. We support their enactment. Second, entities now have 13 months from the end of the fiscal year to submit their single audit reports to the federal government. The proposed amendments would shorten this to 9 months. The amendments would require OMB to establish a transition period of at least 2 years for entities to comply with the shorter time frame. After the transition period, federal agencies could authorize an entity to report later than 9 months, consistent with criteria issued by OMB. We strongly support these provisions. Of the officials we surveyed, 84 percent of the federal program managers and 64 percent of the state program managers believe the 13-month time frame is excessive. Moreover, in fiscal year 1991, 44 percent of state and local governments were able to submit their reports within 9 months after the end of their fiscal years. Over time, I hope that it will be the rule, rather than the exception, for the audit reports to be submitted in less than 9 months. The proposed amendments would also expand the Single Audit Act to include nonprofit organizations, thereby placing all entities receiving federal funds under the same ground rules. Presently, the Single Audit Act applies only to state and local governments while nonprofit organizations are administratively required to have single audits under OMB Circular A-133, “Audits of Institutions of Higher Education and Other Nonprofit Organizations.” OMB is in the final stages of revising Circular A-133 to parallel the requirements of the proposed amendments to the Single Audit Act. The proposed amendments would provide a statutory basis for consistent, common requirements for state and local governments and nonprofit organizations. We strongly support this change. The proposed amendments would also reinforce one of the goals of the act to use single audits as the foundation for other audits. Combined with summary reporting, the ability of federal agencies to review single audit working papers, and make necessary copies, can provide valuable information in their oversight of federal assistance programs. In closing, a number of organizations have worked for some time in gaining consensus on how to make the single audit process as efficient and effective as possible. The proposed amendments you are now considering represent that consensus and have broad support among stakeholder groups, including the National State Auditors Association and the President’s Council on Integrity & Efficiency which represents the federal inspectors general. The Single Audit Act has been very successful. The amendments build on that success based on lessons learned and changed conditions over the past 12 years. We encourage the enactment of the proposed amendments and commend the Subcommittee for focusing on this important issue. Mr. Chairman, we would be pleased to work with the Subcommittee as it considers the amendments to the Single Audit Act. I would be happy to answer any questions that you or members may have at this time. The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (301) 258-4066, or TDD (301) 413-0006. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.

GAO discussed proposed amendments to the Single Audit Act of 1984 and the act's importance. GAO noted that: (1) Congress enacted the act in response to state and local governments' poor accounting practices and lack of accountability for federal funds; (2) audits were not uniform and some grantees were subjected to multiple annual audits while others were not audited for long periods of time; (3) state and local governments have greatly improved their accountability and financial management under the act; (4) proposed amendments would reduce administrative burdens on grantees who receive comparatively small amounts by raising audit thresholds so that audit coverage returns to the 95-percent level; (5) grantees below the thresholds would still have to maintain records and be subject to monitoring; (6) the amendments require the Office of Management and Budget to develop a risk-based approach to targeting audit resources at higher-risk programs; (7) the amendments' required summary reports would increase audit timeliness and usefulness; (8) shortening the audits' due date to 9 months from the fiscal year's close would also improve the audits' timeliness; (9) bringing nonprofit organizations under the act would subject all grantees to uniform requirements; and (10) the proposed amendments would make the single audits the basis for other audits.

RS21462 -- Russia and the War in Iraq Updated April 14, 2003 Most discussions of Russian interests in Iraq focus on economic factors. Moscow, however, has cultivated friendly relations withBaghdad since the 1960s as part of its general strategy toward the region in connection with the Arab-Israeli conflictand the broaderCold War. The U.S.S.R. was Saddam's main arms supplier during Iraq's 1980-1988 war with Iran. Russia stillperceives itself ashaving strategic interests and an historic role in that region and does not want to be seen as betraying a long-timefriend. Nevertheless, many analysts assume that economic factors have driven Russian policy toward Iraq. Baghdad owed Moscow $7-$8billion for Soviet-era arms sales during the Iran-Iraq War. Adjusted for inflation, this debt may total $10-12 billiontoday. It is widelybelieved that one of the reasons why Russia regularly took Iraq's side in U.N. debates in the 1990s over liftingsanctions was tofacilitate debt repayment, especially as Russia was very short of hard currency. Russian oil companies havecontracts that could beworth as much as $30 billion over 20 years to develop Iraqi oil fields. In addition, Russian firms have contractsworth billions to helpmodernize Iraq's economic infrastructure. In August 2002, Iraq announced that Russian firms would receivecontracts worth $40billion over 5 years to modernize Iraq's oil, electrical, chemical, agricultural, and transport sectors. (1) Another Russian interest is the price of oil. The Russian economy is extraordinarily dependent on oil and gas exports. In 2000,Russia's oil exports earned $25.3 billion. The total Russian Federal budget in 2000 was $48 billion. The price ofoil peaked near $40per barrel ($/bbl) in early March 2003. Russia profits greatly from high oil prices, the biggest single factor behindRussian economicgrowth today. But Russian leaders fear that a post-Saddam Iraq (with the second largest proven oil reserves in theworld) mightmaximize its oil output, dramatically driving down the price of oil. Some analysts estimated that a $6/bbl fall inthe price of oil couldcut Russia's projected economic growth in 2003 in half. A sharper price drop, below $18/bbl, would severely impactRussiangovernment revenues, jeopardizing Moscow's ability to pay salaries and pensions and to fund its already meagersocial expenditures. With a Duma (lower legislative chamber) election in December 2003 and Putin expected to seek reelection in March2004, such adevelopment is dreaded in the Kremlin. (2) Many observers believe that Russian policy is also motivated by a desire to restrain U.S. global domination and rein in perceived U.S.tendencies toward unilateralism and excessive reliance on military force. The idea of a multi-polar world not totallydominated by asingle "hyper-power," in which Russia would be a major international player, still has strong appeal in Russia. Although Putin hasadopted a generally cooperative stance toward the United States, he does not want to be perceived at home as anAmerican "vassal"nor to give the Bush Administration a blank check where Russian interests are concerned. Thus, Russia may havehad an interest inprinciple in opposing "unilateral" U.S. military action in Iraq. Putin does not seek to project Russia into theforefront of ananti-American coalition. He seeks, in cooperation with traditional U.S. allies France and Germany as well as withRussian partnerssuch as China, to put some limits on U.S. power, especially its recourse to "unilateral" military force. Against Russia's economic interests in Iraq and its interest in restraining American global domination, is the strategic decision Putinmade in 2001 to reorient Russian foreign and defense policy toward broad cooperation with the United States. Putinsees Russia'seconomic reconstruction and revitalization proceeding from its integration in the global economic system dominatedby the advancedindustrial democracies - something that cannot be accomplished in an atmosphere of political/military confrontationor antagonismwith the United States. Putin therefore shifted Russian national security policy toward integration with the Westand cooperation withthe United States. (3) Most observers believe thisremains the basis of Putin's national security policy. By February 2003, Russian experts concluded that war in Iraq was virtually inevitable and Russia began evacuating its citizens. Although Russia opposed U.S. military action. it hoped to prevent this disagreement from damaging broaderbilateral relations. OnMarch 12, Deputy Foreign Minister Georgi Mamedov said that if war erupts, Russia "will cooperate with the UnitedStates for anearly resolution" of the conflict. "We will strive to minimize negative effects and bring the situation back topolitical and diplomaticarenas." (4) As the Bush Administration began to make clear in 2002 its determination to overthrow the regime of Iraqi President SaddamHussein, Moscow reassessed its Iraq policy. By mid-2002, some Russian officials and scholars hinted that Moscowmight not objecttoo strongly to U.S. military action against Iraq, provided that Washington did not act unilaterally and that Russianeconomic interestsin Iraq were respected. (5) These discussions werereported in the Russian and U.S. press and undoubtedly were detected in Baghdad. Iraq's announcement (August 16, 2002) of the $40 billion agreement for Russian firms to modernize Iraq'sinfrastructure may havebeen an attempt to ensure Russian political support. However, in December 2002, Iraqi authorities cancelled a $3.7billion contractwith Lukoil, Russia's largest oil company to develop the huge West Qurna oil field. Many analysts viewed this asretaliation againstLukoil, whose CEO, Vagit Alekperov, reportedly held discussions with U.S. Energy Secretary Spencer Abrahamand Iraqi oppositionleaders about Lukoil's future role in a post-Saddam Iraq. (6) Moscow can also be seen trying to balance its interest in preserving a major role for itself in a multi-polar world in cooperation withFrance, Germany, and China, on one hand, against its desire to avoid conflict with the United States on an issueWashington views asvital, on the other. This was demonstrated in the negotiations leading up the U.N. Security Council's (UNSC)approval of Resolution1441 (November 8, 2002), in which France took the lead in pressing the United States for concessions while Russiaplayed a moremoderate role. Many observers believed that the conclusion of Putin's balancing act would be a deal with Washington whereby Russia would agreenot to use its UNSC veto in return for U.S. guarantees of Russian economic interests in Iraq. A Russianparliamentary leader close toPutin suggested such a deal in October 2002. (7) InFebruary 2003, Boris Nemtsov, former Deputy Premier and now leader of a liberalpolitical party, wrote that, "If the Americans and British can reassure Moscow that a future Iraqi regime will not beprejudicial toRussian economic interests, they will be better placed to secure its acquiescence." (8) Putin sent his chief of staff, Aleksandr Voloshin,to Washington (February 24-25, 2003), where he met with the President, Secretary of State, and National SecurityAdvisor. TheRussian press reported his trip as, "an attempt to seal concrete economic deals in return for Russia's support orabstention on theSecurity Council." U.S. sources made a similar assessment. (9) Based on U.S. and Russian press reports and discussions with U.S. and Russian officials, it appears that the U.S. response is asfollows: Russia's economic interests in Iraq will receive due consideration. However, a) Iraq owes money to manycountries. Its debtto Russia ought not be put in a special category in preference to all others. b) U.S. oil companies, among others,have been shut out ofIraq for years. Why should Russian firms be guaranteed a special privileged place in post-Saddam Iraq, possiblyat the expense ofU.S. firms? c) Contrary to persistent Russian belief, the United States does not control the price of oil and cannotguarantee specificprice levels. U.S. officials reportedly suggested an informal "gentleman's agreement" to respect Russian economic interests in Iraq. (10) Russiawanted concrete, unequivocal guarantees. As one Russian think tank director put it, "There were talks with the U.S.about Russianeconomic interests in Iraq, but they did not succeed. There were [American] expressions of sympathy but noguarantees." (11) On February 28, 2003, the U.S. State Department designated three Chechen groups with alleged links to Al Qaeda as terroristorganizations. On March 6, the Senate unanimously approved the Strategic Offensive Reductions Treaty, and onMarch 10, SenLugar introduced a bill ( S. 580 ) to exempt Russia from the provisions of the Jackson-Vanik amendment. None of thesemoves are directly related to Iraq, except perhaps in their timing. (12) The Bush Administration also brandished sticks as well as carrots. U.S. Ambassador to Russia Alexander Vershbow reportedly toldRussian reporters on March 12 that a Russian veto of the U.S.-backed Security Council resolution on Iraq woulddamage bilateralrelations. Vershbow mentioned cooperation on security, energy, antiterrorism, antimissile defenses, and the spaceprogram as areasthat could be adversely affected by a Russian veto of the resolution. (13) In February 2003, Russian opposition to U.S. military action against Iraq hardened. February 9-12, Putin traveled to Berlin and Parisand joined French President Chirac and German Chancellor Schroeder in a joint declaration stating that there wasstill an alternativeto war and that Russia, France, and Germany were determined to work together to complete disarmament in Iraqpeacefully. (14) On March 2, Putin rejected regime change as a legitimate goal in Iraq. "[T]he international community cannot interfere with thedomestic affairs of any country in order to change its regime.... [T]he only legitimate goal the United Nations canpursue in thissituation is the disarmament of Iraq." (15) On March10, Foreign Minister Ivanov declared that if the U.S.-backed resolutionauthorizing war was submitted to the UNSC, Russia would vote against it." (16) Soon after the U.S.-led coalition began military operations in Iraq, Putin called the attack "a big mistake," "unjustified," and insistedthat military action be ended quickly. Russian media, like that in many other European countries, took a generallynegative attitudetoward coalition military action, emphasizing innocent civilian casualties and coalition mistakes and problems. InRussia, however,the Kremlin exercises very strong influence over the media, especially TV. Russian public opinion overwhelminglyopposed whatmost Russians saw as U.S. aggression. There were large anti-war rallies in major cities and spontaneousmanifestations ofanti-Americanism. 'There is something slightly alarming in Russia's new, more hard-line stance toward the United States over Iraq," observed the Moscow Times editorial page on February 27. "President Vladimir Putin changed the tone ... when hewarned of the dangers of U.S.and British warmongering and called on the military to be ready to defend Russia's interests. Then ... Russia, whichhad beenstraddling both sides, jumped firmly into the French and German camp." Moscow's shift suggests two questions: why the more hard-line stance toward U.S. policy on Iraq; and has Putin irrevocably "jumpedinto the French and German camp"? There are probably multiple factors behind Putin's more hard-line stance toward the United States. There is Russia's interest inpromoting a "multi-polar world" and bolstering the stature and authority of the U.N. vis-a-vis the United States. Most of Russia'spolitical elites as well as the majority of the national security establishment were hostile to the prospect of a U.S.war in Iraq. Over90% of Russians also strongly opposed the war. (17) Putin may feel that he cannot appear completely to ignore the opinions of hisgenerals and diplomats, the political establishment, and the voters. By early April, the demonstration - yet again - of America's unrivaled military capability must have been very disturbing to manyRussians, especially in view of Moscow's miserable experiences in Chechnya. Russian military spokesmen regularlyclaim that theU.S. Government is hiding its true casualty figures, which must be much higher than announced. Thewide and widening gap betweenU.S. and Russian military capabilities both embarrasses and frightens many Russians. Finally - and perhaps most important - it appears that the Bush Administration has not given Moscow the firm assurances it wantsguaranteeing Russian economic interests in Iraq. Now that the battlefield aspect of the Iraq conflict is essentially over, it remains to be seen how strong Russian opposition will be toU.S. policy in Iraq. That may depend on how Putin weighs the benefits of "principled" and domestically popularopposition to theUnited States against the costs of incurring the enmity of the Bush Administration on an issue that Bush clearlyconsiders to be ofsupreme importance. The two presidents spoke by telephone on March 18 and reportedly agreed that despitedifferences on Iraq,bilateral cooperation on other issues would be increased. On March 20, Putin criticized the U.S. attack as a"political blunder" thatcould jeopardize the international security system. At the same time, other Russian officials emphasized theimportance ofminimizing the damage in bilateral relations. U.S. Ambassador Vershbow, speaking on Russian TV on March 20,also said thatU.S.-Russian tension over Iraq would soon pass. The Russian Duma postponed action on the Strategic OffensiveReductions Treaty,citing the Iraq conflict. Several legislative leaders close to Putin, however, criticized this action as against Russianinterests andpredicted Russian approval of the treaty soon. (18)

Now that the U.S.-led coalition has overthrown Saddam Hussein's regime in Iraq, thequestion of Russia's position on the conflict again focuses on political and economic issues, including Russia's rolein the U.N.. President Putin still appears to be trying to balance three competing interests: protecting Russian economic interestsin Iraq;restraining U.S. global dominance; and maintaining friendly relations with the United States. This report will beupdated periodically.

Campaign Finance Reform: A Legal Analysis of Issue and Express Advocacy 98-282 -- Campaign Finance Reform: A Legal Analysis of Issue and Express Advocacy Updated March 15, 2002 Used to describe political advertisements, the terms "issue advocacy" and "express advocacy," were created by the Supreme Court and do not appear in federalcampaign finance law, i.e. the Federal Election Campaign Act (FECA). (1) However, whether an advertisement is classified as either "issue advocacy" or "expressadvocacy" will determine whether it is subject to FECA regulation. The attendant practical implications aresignificant. If a communication is deemed toconstitute "express advocacy," it will be subject to the disclosure requirements, source restrictions, and contributionlimits set forth in FECA. (2) On the other hand,if a communication is deemed to be "issue advocacy," it cannot be constitutionally subject to any regulation and,therefore, may be funded with unregulated or"soft money." In the 1976 landmark decision, Buckley v. Valeo , (3) the Supreme Court provided the genesis for the concept of issue and express advocacy communications. In Buckley, the Court evaluated the constitutionality of provisions of the Federal Election Campaign Act(FECA) that applied to expenditures "relative to a clearlyidentified candidate" and "for the purpose of influencing an election." The Court found that such provisions did notprovide a sufficiently precise description ofwhat conduct was regulated and what conduct was not regulated, in violation of First Amendment "void forvagueness" jurisprudence. Furthermore, the Courtwas concerned, under the overbreadth doctrine, that the statute could encompass not only communications with anelectoral connection, but could encompassconstitutionally protected issue-based speech as well. In order to avoid these vagueness and overbreadth problems, the Court held that the government's regulatory power under FECA would be construed to reach onlythose funds spent for communications that "include express words of advocacy of the election or defeat" of a clearlyidentified candidate. Hence, the Buckley Court began to distinguish between communications that expressly advocate the election or defeat of a clearlyidentified candidate and those communications thatadvocate a position on an issue. The Court found that the latter type of communication is constitutionally protectedFirst Amendment speech and that only"express advocacy" speech could be subject to regulation. (4) Further, in animportant footnote, the Court provided some guidance as to how to determine whethera communication is "express advocacy" or "issue advocacy." That is, the Court stated that its construction of thesubject provisions of FECA would only apply tocommunications that included words "such as," "vote for," "elect," "support," "cast your ballot for," "Smith forCongress," "vote against," "defeat," or "reject." (5) These terms are often referred to as the "magic words," which many lower courts have ruled are required, under Buckley, in order for a communication toconstitute express advocacy. In the 1986 decision of Federal Election Commission v. Massachusetts Citizens for Life, Inc., (MCFL) , the Supreme Court continued to distinguish between issueand express advocacy, holding that an expenditure must constitute express advocacy in order to be subject to theFederal Election Campaign Act (FECA)prohibition against corporations using treasury funds to make an expenditure "in connection with" any federalelection. (6) In MCFL the Court ruled that apublication urging voters to vote for "pro-life" candidates, while also identifying and providing photographs ofcertain candidates who fit that description, couldnot be regarded as a "mere discussion of public issues that by their nature raise the names of certain politicians." Instead, the Court looked at the "essentialnature" of the publication and found that it "in effect" provided an "explicit directive" to the reader to vote for theidentified candidates. Consequently, the Courtheld that the publication constituted express advocacy. (7) In 1995, the Federal Election Commission (FEC) promulgated regulations defining express advocacy, which are currently in effect: Expressly advocating means any communication that-(a) Uses phrases such as "vote for the President," "re-elect yourCongressman," "support the Democratic nominee," "cast you ballot for the Republican challenger for U.S. Senatein Georgia," "Smith for Congress," "BillMcKay in '94," "vote Pro-Life" or "vote Pro-Choice" accompanied by a listing of clearly identified candidatesdescribed as Pro-Life or Pro-Choice, "vote againstOld Hickory," "defeat" accompanied by a picture of one or more candidate(s), "reject the incumbent," orcommunications of campaign slogan(s) or individualword(s), which in context can have no other reasonable meaning than to urge the election or defeat of one or moreclearly identified candidate(s), such as posters,bumper stickers, advertisements, etc. which say "Nixon's the One," "Carter '76," "Reagan/Bush" or "Mondale!"; or (b) When taken as a whole and with limited reference to external events, such as the proximity to the election,could only be interpreted by a reasonable person ascontaining advocacy of the election or defeat of one or more clearly identified candidate(s) because-- (1) The electoral portion of the communication is unmistakable, unambiguous, and suggestive of only onemeaning; and (2) Reasonable minds could not differ as to whether it encourages actions to elect or defeat one or more clearlyidentified candidate(s) or encourages some otherkind of action. (8) With the exception of the Ninth Circuit, the prevailing view of the U.S. appellate courts is that Supreme Court precedent mandates that a communication containexpress words advocating the election or defeat of a clearly identified candidate in order to be constitutionallyregulated. In Federal Election Commission v.Furgatch , the Ninth Circuit in 1987 found that in order to constitute express advocacy, speech need notinclude any of the specific words set forth in Buckley v.Valeo . (9) Instead, the court of appeals presented a three part test fordetermining whether a communication is issue advocacy: First, even if it is not presented in the clearest, most explicit language, speech is 'express advocacy' for the presentpurposes if its message is unmistakable and unambiguous, suggestive of only one plausible meaning. Second,speech may only be termed 'advocacy' if it presentsa clear plea for action, and thus speech that is merely informative is not covered by the Act. Finally, it must be clearwhat action is advocated. Speech cannot be'express advocacy of the election or defeat of a candidate' when reasonable minds could differ as to whether itencourages a vote for or against a candidate orencourages the reader to take some other kind of action. (10) Notably, the third prong of the test exempts speech from constituting "express advocacy" when reasonable minds could disagree as to whether it encourages a votefor or against a candidate or encourages some other kind of action. In contrast, in Maine Right to Life Committee v. Federal Election Commission, (MRLC) , the First Circuit invalidated the "reasonable person" standard, which theFederal Election Commission has promulgated into regulations consistent with the Furgatch decision. (11) In MRLC , the court found that the Supreme Court in Buckley had drawn a "bright line" that errs toward "permitting things that affect the election process,but at all costs avoids restricting, in any way, discussion ofpublic issues." According to the First Circuit, the advantage of this rigid approach, as presented in Buckley , is that it notifies a speaker or writer at the outset ofwhat communication is regulated and what is not. (12) Consistent with MRLC , in the 1997 case of Federal Election Commission v. Christian Action Network ,theFourth Circuit also found that the Supreme Court has "unambiguously" held that the First Amendment "forbids theregulation of our political speechunder...indeterminate standards." Further, the court noted that the Supreme Court has held that express wordsadvocating the election or defeat of a candidate arethe "constitutional minima." (13) In June 2000, in Vermont Right to Life v. Sorrell , the Second Circuit similarly interpreted Buckley to stand for the proposition that in order to regulate acommunication, it must expressly advocate the election or defeat of a clearly identified candidate. According to theSecond Circuit, the Supreme Court limitationreflects a concern that because disclosure requirements can significantly infringe on privacy of association and beliefas guaranteed by the First Amendment, they"must be specifically directed to the government's legitimate purpose in seeking to insure 'the reality and theappearance of the purity and openness of' theelection process." The Supreme Court adopted the standard of express advocacy, the Second Circuit opined, toinsure that the regulations were neither too vaguenor intrusive on First Amendment protected issue advocacy. (14) Most recently, on January 17, 2001, in Florida Right to Life v. Lamar, (15) the Eleventh Circuit upheld a lower court ruling striking down a Florida statute because itunconstitutionally regulated issue advocacy through an overbroad definition of "political committee." The Floridastatute required disclosure of any group whose"primary or incidental purpose" is to support or oppose candidates, issues, or parties. The court found no error inthe lower court enjoining the enforcement of thestatute because it was "unconstitutionally overbroad under the First Amendment." (16) S. 27 , the "Bipartisan Campaign Reform Act of 2001," (McCain/Feingold), passed the Senate on April 2, 2001. With regard to issue and expressadvocacy, it incorporates the Snowe/Jeffords amendment language and would create a new term in federal electionlaw, "electioneering communication." Specifically, it would regulate political ads that: "refer" to a clearly identified federal candidate, are broadcast within30 days of a primary or 60 days of a generalelection, and are made to an audience that "includes" voters in that election. Generally, it would require disclosureof disbursements over $10,000 for suchcommunications, including identification of each donor of $1,000 or more, and such communications would beprohibited from being financed with union orcertain corporate funds. With respect to corporate funds, it exempts Internal Revenue Code � 501(c)(4) or � 527tax-exempt corporations from making"electioneering communications" with funds solely donated by individuals, who are U.S. citizens or permanentresident aliens, unless the communication is"targeted," i.e., it was distributed from a broadcaster or cable or satellite service whose audience"consists primarily" of residents of the state in which thecandidate is running for office. S. 27 expressly exempts from the definition news events, "expenditures," and"independent expenditures." If thisdefinition of "electioneering communication" is ruled unconstitutional, S. 27 provides an alternativedefinition, based on FEC v. Furgatch, (807 F.2d857 (9th Cir. 1987)): a communication promoting, supporting, attacking, or opposing a candidate,regardless of whether it expressly advocates a vote for or againsta candidate and is suggestive of no plausible meaning other than an exhortation to vote for or against a candidate. With regard to issue and express advocacy, H.R. 2356 , the "Bipartisan Campaign Finance Reform Act of 2001," (Shays/Meehan), which passed theHouse on February 14, 2002, is similar to S. 27 : it would create a new term in federal election law,"electioneering communication," which wouldregulate political ads that: "refer" to a clearly identified federal candidate, are broadcast within 30 days of a primaryor 60 days of a general election, and (differingfrom S. 27 ) for House and Senate elections, is "targeted to the relevant electorate." Generally, it wouldrequire disclosure of disbursements over$10,000 for such communications, including identification of each donor of $1,000 or more, and suchcommunications would be prohibited from being financedwith union or certain corporate funds. With respect to corporate funds, it exempts Internal Revenue Code �501(c)(4) or � 527 tax-exempt corporations frommaking "electioneering communications" with funds solely donated by individuals, who are U.S. citizens orpermanent resident aliens, unless the communicationis "targeted," i.e., (differing from S. 27 ) it was distributed from a broadcaster or cable or satelliteservice and is received by 50,000 or more persons inthe state or district where the Senate or House election, respectively, is occurring. H.R. 2356 expresslyexempts from the definition news events,"expenditures," and "independent expenditures," and (differing from S. 27 ) candidate debates and certainother communications expressly exemptedby FEC regulation. If this definition of "electioneering communication" is ruled unconstitutional, H.R. 2356 provides an alternative definition, basedon FEC v. Furgatch, (807 F.2d 857 (9th Cir. 1987)): a communication promoting,supporting, attacking, or opposing a candidate, regardless of whether itexpressly advocates a vote for or against a candidate and is suggestive of no plausible meaning other than anexhortation to vote for or against a candidate. The Supreme Court, in Buckley and Massachusetts Citizens for Life, has distinguished between express advocacy and issue advocacy communications. With theexception of the Ninth Circuit, the prevailing view of the federal circuit courts is that Supreme Court precedentmandates that a communication contain expresswords advocating the election or defeat of a clearly identified candidate in order to be constitutionally regulated. If a communication fails to meet this "brightline" express advocacy standard, most lower courts have considered it issue advocacy, notwithstanding whether thecommunication is likely to be interpreted tofavor or disfavor certain candidates while also informing the public about an issue.

Issue advocacy communications have become increasingly popular in recent federalelection cycles. Theseadvertisements are often interpreted to favor or disfavor certain candidates, while also serving to inform the publicabout a policy issue. However, unlikecommunications that expressly advocate the election or defeat of a clearly identified candidate, the Supreme Courthas determined that issue ads areconstitutionally protected First Amendment speech that cannot be regulated in any manner. According to mostlower court rulings, only speech containing expresswords of advocacy of election or defeat, also known as "express advocacy" or "magic words" can be regulated aselection-related communications and thereforebe subject to the requirements of the Federal Election Campaign Act (FECA). Unlike express advocacycommunications, therefore, issue ads may be paid for withfunds unregulated by federal law, i.e., soft money. H.R. 2356 (Shays/Meehan), as passed by the House, would create a new term in federal election law,"electioneering communication," which wouldregulate political ads that: "refer" to a clearly identified federal candidate, are broadcast within 30 days of a primaryor 60 days of a general election, and, forHouse and Senate elections, are "targeted to the relevant electorate." Generally, it would require disclosure ofdisbursements over $10,000 for suchcommunications, including identification of each donor of $1,000 or more, and would prohibit the financing of suchcommunications with union or certaincorporate funds. Likewise, S. 27 (McCain/Feingold), as passed by the Senate, would regulate the samecommunications as H.R. 2356 inthe same manner except, with regard to the audience receiving the communication, S. 27 provides that thecommunication be made to an audiencethat "includes" voters in that election.

The September 11, 2001 terrorist attacks and the subsequent deliberate release of anthrax sporesin the mail have focused policymakers' attention on the preparedness and response capability of theU.S. public health system. Though small in scale compared to the scenarios envisioned bybioterrorism experts and played out in recent government exercises, the recent anthrax attacksstrained the public health system and exposed weaknesses at the federal, state, and local levels. Many bioterrorism experts believe that had those responsible for the anthrax attacks employed amore sophisticated delivery mechanism or released a deadly communicable biological agent suchas smallpox, the health care system may have been overwhelmed. Bioterrorism poses a unique challenge to the medical care and public health systems. Unlike an explosion or chemical attack, which results in immediate and visible casualties, the public healthimpact of a biological attack can unfold gradually over time. Until a sufficient number of peoplearrive at emergency rooms and doctors' offices complaining of similar illnesses, there may be nosign that an attack has taken place. The speed and accuracy with which doctors and laboratoriesreach the correct diagnoses and report their findings to public health authorities has a direct impacton the number of people who become ill and the number that die. The nation's ability to respondto a bioterrorist attack, therefore, depends crucially on the state of preparedness of its medical caresystems and public health infrastructure. Public health experts have for years complained about the deterioration of the public health system through neglect and lack of funding. They warn that the nation is ill-equipped andinsufficiently prepared to respond to a bioterrorist attack. For example, they point out that there aretoo few medical personnel trained to spot biological attacks, a shortage of sophisticated laboratoriesto identify the agents, and inadequate supplies of drugs and vaccines to counteract the threat. Theyalso contend that inadequate plans exist for setting up quarantines and emergency facilities to handlethe sick and infectious victims. Improving public health preparedness and response capacity offersprotection not only from bioterrorist attacks, but also from naturally occurring public healthemergencies. Public health officials are increasingly concerned about our exposure andsusceptibility to infectious disease and food-borne illness because of global travel, ubiquitous foodimports, and the evolution of antibiotic-resistant pathogens. On June 12, 2002, the President signed into law the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 ( P.L. 107-188 , H.R. 3448 ), which is intendedto bolster the nation's ability to respond effectively to bioterrorist threats and other public healthemergencies. This report provides a brief overview and legislative history of P.L. 107-188 , followedby a detailed side-by-side comparison of the act's provisions with preexisting law. Appendix A lists,by committee, all the bioterrorism-related hearings held in the 107th Congress prior to enactment of P.L. 107-188 . In most cases, hearing testimony is available on the committee Web sites. AppendixB provides a list of bioterrorism-related Web sites. For a discussion of bioterrorism preparednessissues, see CRS Report RL31225, Bioterrorism: Summary of a CRS/National Health Policy ForumSeminar on Federal, State, and Local Public Health Preparedness. Representatives Tauzin (R-LA) and Dingell (D-MI) introduced the Public Health Security and Bioterrorism Response Act ( H.R. 3448 ) on December 11, 2001. The bill wasimmediately considered under suspension of the rules and passed by the House the following dayon a vote of 418-2. H.R. 3448 built on the provisions of a bipartisan Senate bill, theBioterrorism Preparedness Act ( S. 1765 ), which had been introduced by Senators Fristand Kennedy on November 15, 2001. S. 1765 incorporated ideas and objectives fromseveral other Senate bioterrorism bills introduced in the wake of the anthrax attacks. (1) The Senatetook up H.R. 3448 on December 20, 2001, following its passage in the House, substitutedthe text of S. 1765 and passed H.R. 3448, as amended, by unanimous consent. A conference report ( H.Rept. 107-481 ) was filed on May 21, 2002. The next day the House agreedto the conference report by a vote of 425-1. The Senate approved the conference report 98-0 on May23, 2002. The President signed H.R. 3448 into law ( P.L. 107-188 ) on June 12, 2002. As enacted, P.L. 107-188 incorporates many of the provisions in the original House and Senate-passed bills. It adds to the programs and authorities established in Title III of the PublicHealth Service (PHS) Act by the Public Health Threats and Emergencies Act of 2000 ( P.L. 106-505 ,Title I) and creates a new PHS Act Title XXVIII: National Preparedness for Bioterrorism and OtherPublic Health Emergencies. P.L. 107-188 is a 5-year authorization act, which calls for a total of $2.4billion in funding for FY2002, $2.0 billion for FY2003, and such sums as may be necessary for theremaining years. The act authorizes grants to state and local health departments and hospitals toimprove planning and preparedness activities, enhance laboratory capacity, and educate and trainhealth care personnel. It also directs the Secretary to upgrade and renovate CDC's facilities. Inaddition, the act authorizes the HHS Secretary to purchase smallpox vaccine and expand the nationalstockpile of medicine and medical supplies to meet the nation's health security needs. To help prevent bioterrorism and to establish a national database of potentially dangerous pathogens, P.L. 107-188 requires the HHS Secretary to register facilities and individuals inpossession of biological agents and toxins that pose a severe threat to public health and safety, andto promulgate new safety and security requirements for such facilities and individuals. The actgrants authority to the Secretary of Agriculture to establish a parallel set of requirements for facilitiesthat handle agents and toxins that threaten crops and livestock. The bioterrorism legislation alsoincorporates language taken from S. 1275 that authorizes grants to states and localitiesto increase public access to defibrillators (i.e., devices that restore normal heart rhythm to patientsin cardiac arrest by administering a controlled electric shock). P.L. 107-188 contains several provisions to protect the nation's food and drug supply and enhance agricultural security. The act authorizes $545 million for FDA and USDA to hire newborder inspectors, develop new methods of detecting contaminated foods, work with state foodsafety regulators, and protect crops and livestock. It also provides FDA with new regulatory powersto require prior notice of all imported foods and detain suspicious foods for inspection. All foreignand domestic food facilities are required to register with the FDA. Finally, P.L. 107-188 includesa set of provisions aimed at protecting the nation's drinking water supply, including authorizing $160million to provide financial assistance to community water systems to conduct vulnerabilityassessments and prepare response plans. The bioterrorism legislation also includes language reauthorizing the Prescription Drug User Fee Act (PDUFA), which was set to expire on September 30, 2002. Congress first enacted PDUFAin 1992. (2) The original law authorized the FDA tocollect fees from pharmaceutical companies anduse the funds to hire additional reviewers to expedite the drug review and approval process, inaccordance with performance goals developed by the agency in consultation with the industry priorto PDUFA enactment. The 1992 law directed the FDA to provide Congress with an annual reporton the agency's progress in achieving those goals. Encouraged by the success of the user feeprogram, Congress in 1997 reauthorized PDUFA through FY2002. (3) Under PDUFA II, the FDA triedto meet tighter performance goals, as well as achieve more transparency in the drug review processand better communication with drug makers and patient advocacy groups. For more information onPDUFA, see CRS Report RL31453(pdf) , The Prescription Drug User Fee Act: Structure andReauthorization Issues. Table 1 below summarizes the bioterrorism legislation's authorizations of appropriations forFY2002 and FY2003. Only those authorizations that specify a dollar amount are included. Table 1. P.L.107-188: Authorizations of Appropriations for FY2002 and FY2003 ($ millions) Table 2 , beginning on page 6, provides a detailed side-by-side comparison of the provisionsof P.L. 107-188 with preexisting law, where applicable. All the PHS Act Title III provisions relatingto public health emergencies that were established by P.L. 106-505 (i.e., Sections 319, 319A --319G) are included in the table, regardless of whether they are amended by the bioterrorism bill. Unless specifically noted otherwise, the term Secretary refers to the Secretary of HHS. Table 2. Comparison of P.L.107-188 with Preexisting Law

Last fall's anthrax attacks, though small in scale compared to the scenarios envisioned by bioterrorism experts, strained the public health system and raised concern that the nation isinsufficiently prepared to respond to bioterrorist attacks. Improving public health preparedness andresponse capacity offers protection not only from bioterrorist attacks, but also from naturallyoccurring public health emergencies. On June 12, 2002, the President signed into law the Public Health Security and Bioterrorism Preparedness and Response Act of 2002 ( P.L. 107-188 , H.R. 3448 ), which is intendedto bolster the nation's ability to respond effectively to bioterrorist threats and other public healthemergencies. The act builds on the programs and authorities established in Title III of the PublicHealth Service (PHS) Act by the Public Health Threats and Emergencies Act of 2000 ( P.L. 106-505 ,Title I). P.L. 107-188 is a 5-year authorization bill, which calls for a total of $2.4 billion in funding in FY2002, $2.0 billion in FY2003, and such sums as may be necessary for the remaining years. Theact authorizes the Secretary of Health and Human Services (HHS) to upgrade and renovate facilitiesat the Centers for Disease Control and Prevention (CDC), purchase smallpox vaccine, expand thenational stockpile of drugs, vaccines, and other emergency medical supplies, and provide grants tostate and local governments and hospitals to improve preparedness and planning. The Secretariesof HHS and Agriculture are required to register and regulate facilities that handle potentiallydangerous biological agents. The anti-bioterrorism legislation also includes provisions to protect the nation's food and drug supply and enhance agricultural security, including new regulatory powers for the Food and DrugAdministration (FDA) to block the importation of unsafe foods. To protect the drinking watersupply, the act requires community water systems to conduct vulnerability assessments and developemergency response plans. P.L. 107-188 also reauthorizes the Prescription Drug Use Fee Actthrough FY2007. The following analysts may be contacted for additional information:

In the early 1980s, U.S. satellites tracked a growing indigenous nuclear program in North Korea. A small nuclear reactor at Yongbyon (5MWe), capable of producing about 6kg of plutonium per year, began operating in 1986. Later that year, U.S. satellites detected high explosives testing and a new plant to separate plutonium. In addition, construction of two larger reactors (50MWe at Yongbyon and 200MWe at Taechon) added to evidence of a serious clandestine effort. Although North Korea had joined the Nuclear Nonproliferation Treaty in 1985, the safeguards inspections that began only in 1992 raised questions about how much plutonium North Korea had produced covertly. In 1994, North Korea pledged, under the Agreed Framework with the United States, to freeze its plutonium programs and eventually dismantle them in return for several kinds of assistance. At that time, Western intelligence agencies estimated that North Korea had separated enough plutonium for one or two bombs; other sources estimated four to five bombs. Acquiring fissile material—plutonium-239 or highly enriched uranium (HEU)—is the key hurdle in nuclear weapons development. Producing these two materials is technically challenging; in comparison, many experts believe weaponization to be relatively easy. North Korea has industrial-scale uranium mining, and plants for milling, refining, and converting uranium; it also has a fuel fabrication plant, a nuclear reactor, and a reprocessing plant—in short, everything needed to produce Pu-239. In its nuclear reactor, North Korea uses magnox fuel—natural uranium (>99%U-238) metal, wrapped in magnesium-alloy cladding. About 8000 fuel rods constitute a fuel core for the reactor. When irradiated in a reactor, natural uranium fuel absorbs a neutron and then decays into plutonium (Pu-239). Fuel that remains in the reactor for a long time becomes contaminated by the isotope Pu-240, which can "poison" the functioning of a nuclear weapon. Spent or irradiated fuel, which poses radiological hazards, must cool after removal from the reactor. The cooling phase, estimated by some at five months, is proportional to the fuel burn-up. Reprocessing to separate plutonium from waste products and uranium is the next step. North Korea uses a PUREX separation process, like the United States. After shearing off the fuel cladding, the fuel is dissolved in nitric acid. Components (plutonium, uranium, waste) of the fuel are separated into different streams using organic solvents. In small quantities, separation can be done in hot cells, but larger quantities require significant shielding to prevent deadly exposure to radiation. North Korea appears to have mastered the engineering requirements of plutonium production. Its 5MWe nuclear reactor operated from 1986 to 1994, restarting in January 2003. North Korean officials claimed to have separated plutonium in hot cells and tested the reprocessing plant in 1990, and to have reprocessed all 8000 fuel rods from the 5MWe reactor between January and June 2003. The January 2004 unofficial U.S. delegation reported that "All indications from the display in the control room are that the reactor is operating smoothly now....However, we have no way of assessing independently how well the reactor has operated during the past year." The same delegation reported that the reprocessing "facility appeared in good repair," in contrast to a 1992 IAEA assessment of the reprocessing plant as "extremely primitive." In the end, however, significant growth in North Korea's arsenal depends on the completion of the two larger reactors and progress in the reported uranium enrichment program. In January 2004, North Korean officials showed an unofficial U.S. delegation alloyed "scrap" from a plutonium (Pu) casting operation. Alloying plutonium with other materials is "common in plutonium metallurgy to retain the delta-phase of plutonium, which makes it easier to cast and shape" (two steps in weapons production). Dr. Siegfried Hecker, a delegation member, assessed that the stated density of the material was consistent with plutonium alloyed with gallium or aluminum. If so, this could indicate a certain sophistication in North Korea's handling of Pu metal, but without testing the material, Hecker could not confirm that the metal was plutonium or that it was alloyed, or that it was from the most recent reprocessing campaign. There is no reliable information on North Korean nuclear weapons design. Although the U.S. Director of National Intelligence confirmed that a nuclear test was conducted on October 9, 2006 in the vicinity of P'unggye, the sub-kiloton yield of the test suggests that the weapon design or manufacturing process likely needs improvement. Environmental clues suggest that the device used plutonium. By comparison, a simple plutonium implosion device normally would produce a larger blast, perhaps 5 to 20 kilotons. The first nuclear tests conducted by other states range from 9 kt (Pakistan) to 60kt, but tests by the United States, China, Britain and Russia were in the 20kt-range. Implosion devices, which use sophisticated lenses of high explosives to compress fissile material, are generally thought to require testing, although the CIA suggested in 2003 that North Korea could validate its weapons design using extensive high explosives testing. It is possible that Pakistani scientist A.Q. Khan may have provided North Korea the same Chinese-origin nuclear weapon design he provided to Libya. If so, this might help North Korea develop a reliable warhead for ballistic missiles—small, light and robust enough to tolerate the extreme conditions encountered through a ballistic trajectory. Although former DIA Director Jacoby told the Senate Armed Services Committee in April 2005 that North Korea had the capability to arm a missile with a nuclear device, Pentagon officials later backtracked from that assessment. Most estimates of nuclear weapon stockpiles are based on estimated fissile material production. Factors in plutonium production include the average power level of the reactor; days of operation; how much of the fuel is reprocessed and how quickly, and how much plutonium is lost in production processes. According to North Korea, the 5MWe reactor performed poorly early on, unevenly irradiating the rods. There is no data on the reactor's current performance or the reprocessing facility's efficiency. North Korea told the IAEA that during the 1990 "hot test," it lost almost 30% of the plutonium in the waste streams. A key consideration is whether or not the reprocessing plant can run continuously, since frequent shutdowns can lead to plutonium losses. According to North Korean officials in January 2004, the plant annual throughput is 110 tons of spent fuel, about twice the fuel load of the 5MWe reactor. A final factor in assessing how many weapons North Korea can produce is whether North Korea's technical sophistication enables it to use more or less material than the international standards of 8kg of Pu and 25kg for HEU per weapon. North Korea's abilities here are unknown. Secretary of State Powell stated in December 2002 that "We now believe they [North Koreans] have a couple of nuclear weapons and have had them for years." On February 10, 2005, North Korea announced that it had manufactured "nukes" for self-defense and that it would bolster its nuclear weapons arsenal. In June 2005, Vice Foreign Minister Kim Gye Gwan told ABC News that "We have enough nuclear bombs to defend against a U.S. attack. As for specifically how many we have, that is a secret." Kim also said North Korea was building more bombs and when asked about delivery systems, said "our scientists have the knowledge, comparable to other scientists around the world." Some Members of Congress interpreted then-CIA Director Porter Goss' statements in March 2005 on a "range" of nuclear weapon estimates to confirm that North Korea's arsenal has multiplied. In December 2005, the North Korean foreign ministry stated that it would "increase [its] self-reliant national defense capacity, including nuclear deterrent." In October 2006, North Korea's Foreign Ministry said that "nuclear weapons will serve as [a] reliable war deterrent." On July 13, 2003, North Korean officials told U.S. officials in New York that they had completed reprocessing the 8000 fuel rods on June 30. On January 8, 2004, North Korean officials told an unofficial U.S. delegation that the reprocessing campaign began in mid-January 2003 and ended at the end of June 2003. In all, they reportedly reprocessed 50 tons of spent fuel in less than six months, which tracks with earlier estimates that North Korea could reprocess about 11 tons/month, roughly enough plutonium for one bomb per month. An unofficial U.S. delegation in January 2004 concluded that the spent fuel pond no longer held the 8,000 fuel rods and surmised that they could have been moved to another storage location, but not without significant health and safety risks. The delegation was not allowed to visit the Dry Storage Building, where the fuel rods likely would have been stored before reprocessing. The delegation also did not visit waste facilities. Reprocessing the 8,000 fuel rods from the 5MWe reactor would yield between 25 and 30kg of plutonium, perhaps for four to six weapons, but the exact amount of plutonium that might have been reprocessed is unknown. In 2004, North Korean officials stated that the reprocessing campaign was conducted continuously (four 6-hour shifts). U.S. efforts to detect Krypton-85 (a by-product of reprocessing) reportedly suggested that some reprocessing had taken place, but were largely inconclusive. On February 6, 2003, North Korean officials announced that the 5MWe reactor was operating, and commercial satellite photography confirmed activity in March. In January 2004, North Korean officials told U.S. visitors that the reactor was now operating smoothly at 100% of its rated power. The U.S. visitors noted that the display in the reactor control room and steam plumes from the cooling towers confirmed operation, but that there was no way of knowing how it had operated over the last year. In April 2005, the reactor was shut down, and on May 11, 2005, North Korean officials stated they harvested fuel rods for weapons. According to commercial satellite images, the reactor resumed operations in August 2005. A common estimate is that the reactor generates 6 kg of Pu per year, roughly one bomb per year, but the reactor would likely be operated for several years before fuel is withdrawn. One estimate is that the reactor held between 10 and 15 kg Pu in April 2005, and that North Korea could have reprocessed all the fuel by mid-2006. From August 2005 to 2006, the reactor could have produced another 6 kg of Pu; in total, there could be enough separated plutonium for another three weapons. The reactors at Yongbyon (50MWe) and Taechon (200MWe) are likely several years from completion. U.S. visitors in January 2004 saw heavy corrosion and cracks in concrete building structures at Yongbyon, reporting that the reactor building "looks in a terrible state of repair." The CIA estimates that the two reactors could generate about 275kg of plutonium per year. In August 2005, another unofficial U.S. delegation to Pyongyang was told by North Korean officials that they planned to finish building the 50MWe reactor within two years. Commercial satellite images in 2005 and 2006 showed little progress. A 2002 unclassified CIA working paper on North Korea's nuclear weapons and uranium enrichment estimated that North Korea "is constructing a plant that could produce enough weapons-grade uranium for two or more nuclear weapons per year when fully operational—which could be as soon as mid-decade." Such a plant would need to produce more than 50kg of HEU per year, requiring cascades of thousands of centrifuges. The paper noted that in 2001, North Korea "began seeking centrifuge-related materials in large quantities." Pakistani President Musharraf revealed in his September 2006 memoir, In the Line of Fire , that "Doctor A.Q. Khan transferred nearly two dozen P-1 and P-2 centrifuges to North Korea. He also provided North Korea with a flow meter, some special oils for centrifuges, and coaching on centrifuge technology, including visits to top-secret centrifuge plants." However, the United States has not been able get direct confirmation from Khan. Questions have been raised about whether U.S. estimates were accurate. In a hearing before the Senate Armed Services Committee on February 27, 2007, Joseph DeTrani, the mission manager for North Korea from the Office of the Director of National Intelligence, was asked by Senator Reed whether he had "any further indication of whether that program has progressed in the last six years, one; or two, the evidence—the credibility of the evidence that we had initially, suggesting they had a program rather than aspirations?" DeTrani responded that "the assessment was with high confidence that, indeed, they were making acquisitions necessary for, if you will, a production-scale program. And we still have confidence that the program is in existence—at the mid-confidence level." Information about North Korea's nuclear weapons production has depended on remote monitoring and defector information, with mixed results. Satellite images correctly indicated the start-up of the 5MWe reactor, but gave no details about its operations. Satellites also detected trucks at Yongbyon in late January 2003, but could not confirm the movement of spent fuel to the reprocessing plant; imagery reportedly detected activity at the reprocessing plant in April 2003, but could not confirm large-scale reprocessing; and, satellite imagery could not peer into an empty spent fuel pond, which was shown to U.S. visitors in January 2004. Even U.S. scientists visiting Pyongyang in January 2004 could not confirm North Korean claims of having reprocessed the spent fuel or that the material shown was in fact plutonium. Verifying those claims would require greater access to the material and North Korean cooperation. This is particularly true in the case of uranium enrichment; U.S. intelligence officials have said they do not know where the uranium program is and more recently, have shown less confidence about what the scope of the program might be. Although seismographs registered the October 9 th detonation, and environmental sampling confirmed radioactivity, there is still no information on what North Korea intended to accomplish with the test, from technical, security, political, and diplomatic perspectives. More data is necessary to project what this "new" capability might mean for North Korea, the region, and the United States.

On October 9, 2006, North Korea conducted a nuclear test, with a yield of under 1 kiloton (vice the anticipated 4-kiloton yield). The United States and other countries condemned the test and the U.N. Security Council passed Resolution 1718 on October 14, which requires North Korea to refrain from nuclear or missile tests, rejoin the Nuclear Nonproliferation Treaty (NPT), and dismantle its WMD programs. The test is the latest provocative act of many since 2002, when North Korea ended an eight-year freeze on its plutonium production program, expelled international inspectors and restarted facilities. North Korea may now have enough Pu for eight to ten weapons. On February 13, 2007, North Korea reached an agreement with other members of the Six-Party talks to begin the initial phase (60 days) of implementing the Joint Statement from September 2005 on denuclearization. Key components include halting production at Yongbyon and delivery of heavy fuel oil. Many other aspects are yet to be decided. This report will be updated as needed.

Most civilian federal employees participate in one of two federal retirement systems. In general, employees hired before 1984 are covered by the Civil Service Retirement System (CSRS) and those who were hired in 1984 or later are covered by the Federal Employees' Retirement System (FERS). Employees enrolled in CSRS do not pay Social Security taxes and do not earn Social Security benefits based on their employment in the federal government. Employees enrolled in FERS pay Social Security taxes and earn Social Security benefits. Employees in either system can contribute to the Thrift Savings Plan (TSP), but only employees enrolled in FERS receive employer matching contributions. As governmental plans, CSRS and FERS are not subject to the Employee Retirement Income Security Act of 1974 (ERISA; P.L. 93-406 ), which governs many aspects of employer-sponsored retirement plans in the private sector. ERISA establishes certain rights for the spouses and former spouses of participants in private-sector plans. To protect spouses and former spouses, ERISA requires that the default form of benefit in a defined benefit pension plan must be a joint and survivor annuity with at least a 50% survivor benefit; a retirement plan must comply with the terms of a qualified domestic relations order (QDRO) issued by a state court that divides retirement benefits between the parties to a divorce; the written consent of both spouses must be secured in order for a married participant in a defined contribution plan to name anyone other than his or her spouse as the beneficiary if the participant were to die; and the default form of annuity in a defined contribution plan that offers this form of benefit must be a joint and survivor annuity. Retirement benefits for federal employees are governed by chapters 83 (CSRS) and 84 (FERS) of Title 5 of the United States Code. These chapters establish rights of the spouse or former spouse of a current or former federal employee that are similar in many respects to those established by ERISA for private-sector plans; however, there are a few important differences. For example, like ERISA, Title 5 requires the default form of benefit under CSRS and FERS to be a joint and survivor annuity, and both ERISA and Title 5 require the written consent of the participant and spouse in order to waive the survivor annuity. On the other hand, while both ERISA and Title 5 allow a pension to be divided between the parties to a divorce, the laws differ with respect to when pension payments to the former spouse can begin. Under ERISA, a court can require a plan to begin paying benefits to the former spouse when the plan participant has reached the earliest retirement age under the plan, regardless of whether the participant has yet retired. In contrast, even if a state court decree of divorce or annulment has awarded a share of a federal employee's retirement annuity to a former spouse, Title 5 prohibits payment of any part of a CSRS or FERS annuity to a former spouse until the employee has separated from federal service, is eligible to receive a CSRS or FERS annuity, and has applied for an annuity. Another difference between ERISA and Title 5 is in the designation of beneficiaries in defined contribution plans. ERISA requires a married participant in a defined contribution plan to secure the written consent of his or her spouse in order to name anyone other than the spouse as the plan beneficiary in the event of the participant's death. In contrast, federal regulations allow a participant in the Thrift Savings Plan for federal employees to name anyone as the plan beneficiary in the event of the participant's death "without the knowledge or consent of any person, including his or her spouse." A state court decree of divorce, annulment, or legal separation can award a former spouse of a federal employee either a share of the employee's retirement annuity, a survivor annuity, or both types of annuity. To award a former spouse both a share of the employee's retirement annuity and a survivor annuity, the court order must specify both benefits. The Office of Personnel Management (OPM) will pay only the benefits that are specified in the court order. Section 8346 of Title 5 generally exempts CSRS from the proceedings of state courts. However, Section 8345 of Title 5 allows a former spouse of a federal employee to be awarded a share of the employee's CSRS retirement annuity in accordance with the terms of a state court decree of divorce, annulment, or legal separation or a property settlement pursuant to such decree. OPM will divide the retired employee's monthly annuity as directed by the court order and pay the specified share to the former spouse. Only payments made after OPM receives the court order will be divided between the employee and his or her former spouse. OPM will not execute a court order dividing a federal employee's retirement annuity until the employee has separated from federal service, is eligible for an annuity, and has applied for an annuity. The right of a former spouse to receive a share of a retired federal employee's retirement annuity terminates when the retired employee dies. For the former spouse to receive a survivor annuity, either the retiree must have elected a survivor annuity for the former spouse or a court order must specify that the former spouse is to receive a survivor annuity. A former spouse of a deceased federal employee may receive a CSRS survivor annuity if the employee elected a survivor annuity for the former spouse or if a state court decree of divorce, annulment, or separation requires a survivor annuity. A CSRS survivor annuity is 55% of the single-life annuity that the retired worker would have received. To fund the joint and survivor annuity, the retired worker's annual pension is reduced by 2.5% of the first $3,600 plus 10% of the annuity above that amount. This entitles the worker's spouse or former spouse to a survivor annuity equal to 55% of the worker's full annuity before the reduction for survivor benefit is taken into account. The sum of CSRS survivor annuities paid to the employee's spouse at the time of death and all former spouses cannot exceed 55% of the single-life annuity to which the annuitant was entitled. If the full amount of a survivor annuity has been awarded to a former spouse through a court order, the employee's current spouse is not entitled to receive a survivor annuity unless the former spouse has died or remarried before the age of 55. A survivor annuity paid to a former spouse of a federal employee terminates when the former spouse dies or if he or she remarries before the age of 55. There is an exception to the termination of a survivor annuity paid to a former spouse in the case of remarriage prior to age 55 if the former spouse's marriage to the employee lasted at least 30 years (applicable to remarriages that have occurred on or after January 1, 1995). If the remarriage ends in death, divorce, or annulment, the annuity restarts in the same amount. An employee's election to provide a survivor annuity, or a court order awarding a survivor annuity to a former spouse, can be modified only before the employee retires or dies. A court order awarding a survivor annuity to a former spouse of an employee will not be honored by OPM if the former spouse previously waived his or her right to a survivor annuity. If an employee separating from federal service elects to receive a refund of his or her contributions to the retirement system, he or she forfeits the right to receive a CSRS annuity. Section 8342 of Title 5 allows a state court to block payment of a refund if a former spouse has been awarded a share of the employee's annuity or a survivor annuity. Section 8470 of Title 5 generally exempts FERS from the proceedings of state courts. However, Section 8467 allows a FERS retirement annuity to be divided between a federal annuitant and a former spouse, pursuant to a state court decree of divorce, annulment, or legal separation. OPM will divide the retired employee's monthly annuity as directed by the court order and pay the specified share to the former spouse. Only payments made after OPM receives the court order will be divided between the employee and his or her former spouse. OPM will not execute a court order dividing a federal employee's retirement annuity until the employee has separated from federal service, is eligible for an annuity, and has applied for an annuity. The right of a former spouse to receive a share of a retired federal employee's retirement annuity terminates when the retiree dies. For the former spouse to receive a survivor annuity, either the retiree must have elected a survivor annuity for the former spouse or a court order must specify that the former spouse is to receive a survivor annuity. Section 8445 of Title 5 allows a federal employee to elect a FERS survivor annuity for a former spouse, and it permits a state court to award a former spouse of a federal employee a survivor annuity in the event that the employee predeceases the former spouse. A survivor annuity under FERS is equal to 50% of the single-life annuity to which the retired worker would have been entitled. The joint and survivor annuity is funded by reducing the retiree's single-life annuity amount by 10%. In return for this reduction, the worker's spouse or former spouse is entitled to a survivor annuity equal to 50% of the worker's full annuity before the reduction is taken into account. An employee may provide for the equivalent of no more than one FERS spouse survivor annuity. The sum of FERS survivor annuities paid to the employee's spouse at the time of death and all former spouses cannot exceed 50% of the single-life annuity to which the annuitant was entitled. If the full amount of a survivor annuity has been awarded to a former spouse through a court order, the employee's current spouse is not entitled to receive a survivor annuity unless the former spouse has died or remarried before the age of 55. A survivor annuity terminates when the spouse or former spouse dies or if he or she remarries before the age of 55. In the case of remarriage prior to age 55, there is an exception to the termination of a survivor annuity paid to a former spouse if the former spouse's marriage to the employee lasted at least 30 years (this exception applies to remarriages that have occurred on or after January 1, 1995). If the remarriage ends in death, divorce, or annulment, the annuity restarts in the same amount. An election to provide a FERS survivor annuity or a court order awarding a FERS survivor annuity to a former spouse can be modified only before the employee retires or dies. A court order awarding a survivor annuity to a former spouse of an employee will not be honored by OPM if the former spouse previously waived his or her right to a survivor annuity. If an employee participating in FERS dies after having completed at least 18 months of service, but fewer than 10 years of service, his or her spouse is eligible for a lump-sum survivor benefit equal to one-half of the employee's annual basic pay plus a lump-sum payment (approximately $31,786 in 2014). This lump-sum survivor benefit may be paid to a former spouse or divided between a current and former spouse, pursuant to a state court order. If an employee dies after completing at least 10 years of service, the surviving spouse (or former spouse, pursuant to a court order) receives a lump sum and an annuity equal to 50% of the annuity that the employee had earned at the time of his or her death. A separating employee who elects to receive a refund of contributions to the retirement system forfeits the right to receive a FERS annuity. A state court can block this refund if a former spouse has been awarded a share of the employee's FERS retirement annuity or a FERS survivor annuity. An employee or former employee can designate a beneficiary or beneficiaries who will receive his or her TSP account balance in the event of the participant's death. This must be done by filing Form TSP-3 with the Federal Retirement Thrift Investment Board. The Thrift Board is not authorized to recognize wills or other estate planning documents. A married participant is not required to designate his or her spouse as the beneficiary of the TSP account, nor is the spouse's consent required to designate someone other than the spouse as the beneficiary of the TSP account. A married FERS participant must obtain his or her spouse's written consent before receiving a loan from his or her TSP account, receiving an in-service distribution from the TSP, and withdrawing money from the TSP after leaving federal employment. CSRS participants are not required to obtain the spouse's written consent, but the spouse will be notified by the TSP before a loan is approved or in the event of an in-service or post-employment withdrawal from the TSP. The spouse of a married FERS participant is legally entitled to a joint and survivor annuity with 50% survivor benefit from the TSP. The participant's spouse must waive his or her right to that annuity in writing before the participant can withdraw money from the TSP. The TSP is authorized to recognize state court orders of divorce, annulment, or legal separation and property settlements pursuant to a court order. The TSP also is authorized to recognize state court orders respecting payment of alimony and child support. Federal employees enrolled in FERS participate in Social Security. The former spouse of a worker is eligible for a Social Security spouse's benefit at the age of 62 if the couple were married for at least 10 years, and if the worker is receiving, or is entitled to, Social Security benefits. If the former spouse of the worker remarries, he or she generally cannot collect benefits on the worker's record unless the marriage ends by death, divorce, or annulment. The divorced spouse of a worker insured by Social Security can receive widow or widower benefits if the couple were married at least 10 years. Survivor benefits terminate if the divorced spouse remarries before the age of 60 unless the later marriage ends, by death, divorce, or annulment. Remarriage does not affect Social Security survivor benefits being paid to the children of a deceased worker.

A former spouse of a federal employee may be entitled to a share of the employee's retirement annuity under the Civil Service Retirement System (CSRS) or the Federal Employees' Retirement System (FERS) if this has been authorized by a state court decree of divorce, annulment, or legal separation. An employee also may voluntarily elect a survivor annuity for a former spouse. A state court can award a former spouse a share of the employee's retirement annuity, a survivor annuity, or both. A court also can award a former spouse of a federal employee a portion of the employee's Thrift Savings Plan (TSP) account balance as part of a divorce settlement.

This report compares selected recommendations of the President's Commission on Care for America's Returning Wounded Warriors (PCCWW), often called the Dole-Shalala Commission in reference to its co-chairs, and the Veterans' Disability Benefits Commission (VDBC). The recommendations presented are those that relate to the transition of injured servicemembers from military service to civilian life and/or veteran status. This report does not examine certain other recommendations, such as those in the VDBC report regarding benefits for survivors of deceased servicemembers, or regarding evaluation of presumptive disability , i.e., establishing service connection for certain long-term health effects of hazardous exposures. Congress, the two commissions, and others have determined that certain programs and systems that involve both the Department of Defense (DOD) and the Department of Veterans Affairs (VA) are particularly problematic in providing continuity and quality of care and services to injured servicemembers. In January 2008, Congress passed the National Defense Authorization Act for Fiscal Year 2008 ( P.L. 110-181 ). Titles XVI and XVII of the act address matters related to the care and treatment of servicemembers and former servicemembers (i.e., veterans) who were wounded, or who contracted an illness, while serving on active duty. Among the problems addressed in the act are the efficient maintenance and transfer of servicemembers' health and benefits records between the departments, and the separate evaluations of disability by each department. Efforts to address these and other transition problems were already under way in both departments, partly in response to the recommendations of the PCCWW, the VDBC, and several other commissions or task forces. These legislative and administrative actions constitute the first wave of responses to the recommendations of these bodies. Further congressional and administrative actions are anticipated. As this report is limited to a comparison of the final recommendations of the PCCWW and the VDBC, it will not be updated. The commissions were given different charges. The PCCWW was established by Executive Order 13426 in March 2007, and was to focus on the needs of a specific population, namely, seriously injured servicemembers returning from combat theaters in support of Operations Enduring Freedom and Iraqi Freedom (OEF/OIF). The commission was asked to look broadly at services and benefits provided by all relevant Cabinet departments—principally the Departments of Defense (DOD) and Veterans Affairs (VA)—as well as the private sector, and at a broad slate of services and benefits, including health care, disability, traumatic injury, education, employment, and other benefits. The PCCWW was to study individuals' experiences as servicemembers and, for those who were retired or separated from military service, their transition from military to civilian and/or veteran status, problems in providing services and benefits across that transition, and subsequent experiences in civilian life. Though the PCCWW's recommendations were to apply narrowly to seriously injured OEF/OIF servicemembers, it could prove difficult, politically and administratively, to implement the recommendations in this fashion. Doing so could run counter to existing policies, such as compensating service-connected disabilities equally whether or not they are combat related, and prioritizing groups of veterans to receive VA health care. The VDBC was established in Title XV of the National Defense Authorization Act of 2004 ( P.L. 108-136 ) to study benefits provided to veterans and their survivors to compensate for service-connected disabilities and deaths. The VDBC was to consider these benefits regardless of the time or manner in which a disability or death occurred, and whether it occurred during a conflict or during peace time. While the VDBC examined certain transition issues for injured OEF/OIF servicemembers who were retired or separated from military service, this was not its principal focus. The VDBC examined services and benefits for veterans across their life spans, making a more comprehensive assessment of the full complement of veterans' benefits than did the PCCWW, but a less comprehensive assessment of DOD services, benefits, authorities and policies. The PCCWW made six broad recommendations, each with several specific action steps directed to the Congress, DOD and/or VA, and published a matrix of the 23 action steps in its main report. The six broad recommendations are as follows: 1. Implement comprehensive recovery plans for returning injured servicemembers. 2. Restructure the military and veterans disability and compensation systems. 3. Improve care for people with post-traumatic stress disorder (PTSD) and traumatic brain injury (TBI). 4. Strengthen support for families. 5. Transfer patient information across the DOD and VA systems. 6. Support Walter Reed Army Medical Center (WRAMC) until its closure. The VDBC made 113 recommendations , also directed to the Congress, DOD and/or VA, designating 13 of them as priority recommendations. Recommendations were made in the following broad categories: disability evaluation and compensation; determining eligibility for benefits; appropriateness of the benefits; appropriateness of the level of benefits; survivors and dependents; disability claims administration; transition; and establishing an executive oversight group to implement recommendations. The attached Table 1 compares selected action steps from the PCCWW and recommendations from the VDBC that relate to the transition of injured servicemembers from military service to civilian life and/or veteran status. Since the PCCWW focused on these individuals, all of its action steps are discussed, and the table is organized according to the PCCWW's six broad recommendations. The table does not include all of the VDBC recommendations, but only those that relate to the transition of injured servicemembers or that are otherwise comparable to recommendations of the PCCWW. Each table entry notes the entity (Congress, DOD and/or VA) to whom the recommendation is directed. Bracketed notations show the relevant numbered recommendation(s) from the PCCWW and VDBC respectively. Because the commissions had distinct charges and areas of emphasis, head-to-head comparison of their recommendations must be made with care. For example, the commissions largely agreed on the proposed end point for a revised disability compensation system, namely, that DOD would evaluate the fitness of injured servicemembers for continued duty, while VA would evaluate for disability compensation. But the commissions differed in their priorities for implementing this revised system, reflecting their focus on different populations. When comparing PCCWW and VDBC recommendations, it must be borne in mind that unless otherwise stated, PCCWW recommendations would apply, at least initially, only to injured OEF/OIF servicemembers and veterans, while VDBC recommendations would apply to all servicemembers or veterans, including those from previous conflicts, who are otherwise eligible for the service or benefit being discussed. The following CRS Reports discuss the variety of DOD and VA programs and benefits that are addressed by the commissions and referred to in this report: CRS Report RL33991, Disability Evaluation of Military Servicemembers , by [author name scrubbed] et al.; CRS Report RL33537, Military Medical Care: Questions and Answers , by [author name scrubbed]; CRS Report RS22366, Military Support to the Severely Disabled: Overview of Service Programs , by [author name scrubbed]; CRS Report RL33446, Military Pay and Benefits: Key Questions and Answers , by [author name scrubbed]; CRS Report RL33449, Military Retirement, Concurrent Receipt, and Related Major Legislative Issues , by [author name scrubbed]; CRS Report RL33985, Veterans' Benefits: Issues in the 110th Congress , coordinated by [author name scrubbed]; CRS Report RL33993, Veterans' Health Care Issues , by [author name scrubbed]; CRS Report RL33113, Veterans Affairs: Basic Eligibility for Disability Benefit Programs , by [author name scrubbed]; CRS Report RL33323, Veterans Affairs: Benefits for Service-Connected Disabilities , by [author name scrubbed]; CRS Report RS22666, Veterans Benefits: Federal Employment Assistance , by [author name scrubbed]; CRS Report RS22804, Veterans' Benefits: Pension Benefit Programs , by [author name scrubbed] and [author name scrubbed]; CRS Report RL34371, "Wounded Warrior" and Veterans Provisions in the FY2008 National Defense Authorization Act , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]; CRS Report RL34169, The FY2008 National Defense Authorization Act: Selected Military Personnel Policy Issues , by [author name scrubbed] et al.; CRS Report RL31760, The Family and Medical Leave Act: Legislative and Regulatory Activity , by [author name scrubbed]; and CRS Report RL34055, Walter Reed Army Medical Center: Realignment Under BRAC 2005 and Options for Congress , by [author name scrubbed] and [author name scrubbed].

This report compares selected recommendations of the President's Commission on Care for America's Returning Wounded Warriors (PCCWW), often called the Dole-Shalala Commission in reference to its co-chairs, and the Veterans' Disability Benefits Commission (VDBC). The VDBC was established in 2004 to study veterans' benefits in a broad context. The PCCWW was established in 2007 following reports of problems among injured servicemembers returning from Iraq and Afghanistan with medical rehabilitation and access to benefits. The PCCWW was charged to focus specifically on the needs of these individuals. The recommendations presented in this report are those that relate to the transition of injured servicemembers from military service to civilian life and/or veteran status. This report does not examine certain other recommendations, such as those in the VDBC report regarding benefits for survivors of deceased servicemembers, or regarding evaluation of presumptive disability, i.e., establishing service connection for certain long-term health effects of hazardous exposures. As this report is limited to a comparison of the final recommendations of the PCCWW and the VDBC, it will not be updated.

T his report presents information on the constitutional basis for vetoes, veto override procedure, and veto threats. It concludes with tables providing the counts of regular vetoes, pocket vetoes, and vetoes of appropriations acts. The President's veto authority is among the most significant tools in the executive branch's dealings with Congress. The U.S. Constitution outlines the veto authority in Article I, Section 7. Thirty-seven of 44 Presidents have used the veto. Presidents have vetoed 2,572 acts since 1789; of these, Congress has overridden 110 (4.3%). The U.S. Constitution (Article I, Section 7) provides that, for a bill to become law, it must be approved by both houses of Congress and presented to the President for approval and signature. Article I, Section 7 also provides the President with the power to veto, or "forbid," the bill from becoming law. The President may sign a bill into law within the 10-day period (excluding Sundays), let the bill become law without signature, or veto the bill. The Constitution states that when the President vetoes a bill, "he shall return it, with his Objections to that House in which it shall have originated." For example, if the President vetoes a bill that was introduced in the Senate, the bill will be returned first to the Senate where the possible override process would begin. This type of action is called a "regular" or "return" veto. If, on the other hand, Congress has adjourned within the 10-day period after presentation of the bill to the President (thereby preventing the return of the bill to Congress), the President may refuse to sign the bill, and the act does not become law—a practice called a "pocket" veto. If a bill is pocket vetoed while Congress is out of session, the only way for Congress to circumvent the pocket veto is to reintroduce the legislation as a new bill, pass it through both chambers, and present it to the President again for signature. On the other hand, Congress may override a regular veto without introducing new legislation through the process described in the U.S. Constitution. According to Article 1, Section 7 of the Constitution, when the President chooses not to sign a bill and instead returns it to the chamber from where it originated, the chamber enters the message of the President detailing the reasons for his or her refused approval into its Journal and then proceeds "to reconsider" the bill. Because the Constitution does not state exactly how Congress should reconsider a vetoed bill, House and Senate procedures govern the specific treatment of acts returned by the President. Passage by a two-thirds margin in both chambers is required to override a veto before the end of the Congress in which the veto is received. If a two-thirds vote is successful in the originating chamber, that chamber informs the other of its decision to override the veto by message. Neither chamber is under any constitutional, legal, or procedural obligation to schedule an override vote. It is not unusual for Congress to make no effort to override the veto if congressional leaders do not believe they have sufficient votes. A veto threat can also prove to be an effective tool for the President, sometimes forcing Congress to modify legislation before presenting the bill to the President. In addition to public addresses concerning legislation, the President has the ability to issue Statements of Administration Policy (SAPs) to express the Administration's view on a bill. SAPs are a written form of communication between the Administration and Congress and are typically issued shortly before floor action on the bill. The Office of Management and Budget coordinates the creation of SAPs on behalf of the Executive Office of the President. SAPs communicate varying levels of Administration support or opposition to a bill. Importantly, SAPs are generally the first formal indicator of the Administration's intent to veto a bill. SAPs containing veto threats contain language indicating either the President's intent to veto, the President being advised to veto by agencies, or the President being advised to veto by the Administration's senior advisors. SAPs are transmitted by the White House to Congress; they are also available on the White House website. Table 1 shows that 37 of 44 Presidents have exercised their veto authority on a total of 2,572 occasions since 1789. Of that number, 1,506 (58.6%) were regular vetoes—that is, the rejected legislation was returned to the congressional chamber of origin, while it was in session, with a presidential message of explanation—and 1,066 (41.5%) were pocket vetoes, or rejected while Congress was adjourned. Congress has overridden 110 (7.3%) of the 1,506 regular vetoes. This percentage is skewed downward by the large number of vetoes prior to the 87 th Congress (which began in 1961). If one counts only the regular vetoes since 1961 (the beginning of the Kennedy Administration), one finds 241 vetoes and 37 overridden (15.4%). George W. Bush (2001-2009) was the first President since John Quincy Adams (1825-1829) to serve a full four-year term without using his veto. No President since Thomas Jefferson (1801-1809) has served two full terms without vetoing a bill, as President Bush used his veto in July 2006. President Barack H. Obama has vetoed 10 bills since taking office in 2009. The three most recent vetoes, which all took place during the second session of the 114 th Congress, were of H.R. 3762 , Restoring Americans' Healthcare Freedom Reconciliation Act of 2015; S.J.Res. 22 , A joint resolution providing for congressional disapproval under Chapter 8 of title 5, United States Code, of the rule submitted by the Corps of Engineers and the Environmental Protection Agency relating to the definition of "waters of the United States" under the Federal Water Pollution Control Act; and H.J.Res. 88 , Disapproving the rule submitted by the Department of Labor relating to the definition of the term "Fiduciary." A veto of an appropriations bill can result in a funding gap, which may lead to the closure of federal agencies, the furlough of federal employees, and the interruption of federal programs and services. Despite these potential outcomes, Presidents have vetoed 83 appropriations bills since 1789; more than half of these vetoes have occurred since 1968. For example, Presidents Carter, Reagan, George H. W. Bush, and Clinton were presented with a total of 387 appropriations acts and vetoed 30 of them (7.8%). President Barack H. Obama has vetoed one appropriations bill. Congressional overrides of vetoes of appropriations are not unusual; 12 of the 83 vetoes (14.5%) have been overridden (see Table 2 ).

The veto power vested in the President by Article I, Section 7 of the Constitution has proven to be an effective tool in the executive branch's dealings with Congress. In order for a bill to become law, the President either signs the bill into law, or the President allows the bill to become law without signature after a 10-day period. Regular vetoes occur when the President refuses to sign a bill and returns the bill complete with objections to Congress within 10 days. Upon receipt of the rejected bill, Congress is able to begin the veto override process, which requires a two-thirds affirmative vote in both chambers in order for the bill to become law. Pocket vetoes occur when the President receives a bill but is unable to reject and return the bill to an adjourned Congress within the 10-day period. The bill, though lacking a signature and formal objections, does not become law. Pocket vetoes are not subject to the congressional veto override process. Since the founding of the federal government in 1789, 37 of 44 Presidents have exercised their veto authority a total of 2,572 times. Congress has overridden these vetoes on 110 occasions (4.3%). Presidents have vetoed 83 appropriations bills, and Congress has overridden 12 (14.5%) of these vetoes. President Barack H. Obama has vetoed 10 bills since taking office in 2009. The three most recent vetoes, which all took place during the second session of the 114th Congress, were of H.R. 3762, Restoring Americans' Healthcare Freedom Reconciliation Act of 2015; S.J.Res. 22, A joint resolution providing for congressional disapproval under Chapter 8 of title 5, United States Code, of the rule submitted by the Corps of Engineers and the Environmental Protection Agency relating to the definition of "waters of the United States" under the Federal Water Pollution Control Act; and H.J.Res. 88, Disapproving the rule submitted by the Department of Labor relating to the definition of the term "Fiduciary."

This report focuses on the transformation of U.S. naval forces—the Navy and the Marine Corps, which are both contained in the Department of the Navy (DON). For an overview of defense transformation in general, see CRS Report RL32238, Defense Transformation: Background and Oversight Issues for Congress , by [author name scrubbed]. Table 1 summarizes several key elements of U.S. naval transformation. Each of these elements is discussed below. In late 1992, with the publication of a Navy document entitled ...From the Sea , the Navy formally shifted the focus of its planning away from the Cold War scenario of countering Soviet naval forces in mid-ocean waters and toward the post-Cold War scenario of operating in littoral (near-shore) waters to counter the land- and sea-based forces of potential regional aggressors. This shift in planning focus has led to numerous changes for the Navy in concepts of operation, training, and equipment over the last 12 years. Among other things, it moved the focus of Navy planning from a geographic environment where it could expect to operate primarily by itself to one where it would need to be able to operate effectively in a joint manner, alongside other U.S. forces, and in a combined manner, alongside military forces of other countries. It also led to an increased emphasis on amphibious warfare, mine warfare, and defense against diesel-electric submarines and small surface craft. The Littoral Combat Ship (LCS) and the DDG-1000 (formerly DD(X)) destroyer are key current Navy efforts intended to improve the Navy's ability to operate in heavily defended littoral waters. The Navy in mid-2005 began implementing several initiatives intended to increase its ability to participate in what the administration refers to as the global war on terrorism (GWOT). These initiatives include the establishment of the following: a Navy Expeditionary Combat Command (ECC); a riverine force; a reserve civil affairs battalion; a maritime intercept operations (MIO) intelligence exploitation pilot program; an intelligence data-mining capability at the National Maritime Intelligence Center (NMIC); and a Navy Foreign Area Officer (FAO) community consisting of officers with specialized knowledge of foreign countries and regions. The concept of network-centric operations, also called network-centric warfare (NCW), is a key feature of transformation for all U.S. military services. The concept, which emerged in the late 1990s, involves using computer networking technology to tie together personnel, ships, aircraft, and installations in a series of local and wide-area networks capable of rapidly transmitting critical information. Many in DON believe that NCW will lead to changes in naval concepts of operation and significantly increase U.S. naval capabilities and operational efficiency. Key NCW efforts include the Navy's Cooperative Engagement Capability (CEC) network, the Naval Fires Network (NFN), the IT-21 investment strategy, and ForceNet, which is the Navy's overarching concept for combining the various computer networks that U.S. naval forces are now fielding into a master computer network for tying together U.S. naval personnel, ships, aircraft, and installations. A related program is the Navy-Marine Corps Intranet (NMCI). Many analysts believe that unmanned vehicles (UVs) will be another central feature of U.S. military transformation. Perhaps uniquely among the military departments, DON in coming years will likely acquire UVs of every major kind—air, surface, underwater, and ground. Widespread use of UVs could lead to significant changes in the numbers and types of crewed ships and piloted aircraft that the Navy procures in the future, in naval concepts of operation, and in measurements of naval power. The LCS is to deploy various kinds of UVs. Unmanned air vehicles (UAVs) and unmanned combat air vehicles, or UCAVs (which are armed UAVs), if implemented widely, could change the shape naval aviation. Unmanned underwater vehicles (UUVs) and UAVs could significantly expand the capabilities of Navy submarines. Naval forces are inherently sea-based, but the Navy is currently using the term sea basing in a more specific way, to refer a new operational concept under which forces would be staged at sea and then used to conduct expeditionary operations ashore with little or no reliance on a nearby land base. Under the sea basing concept, functions previously conducted from the nearby land base, including command and control, fire support, and logistics support, would be relocated to the sea base, which is to be formed by a combination of amphibious and sealift-type ships. The sea basing concept responds to a central concern of transformation advocates—that fixed overseas land bases in the future will become increasingly vulnerable to enemy anti-access/area-denial weapons such as cruise missiles and theater-range ballistic missiles. Although the sea basing concept originated with the Navy and Marine Corps, the concept can be applied to joint operations involving the Army and Air Force. To implement the sea basing concept, the Navy wants to field a 14-ship squadron, called the Maritime Prepositioning Force (Future), or MPF(F) squadron, that would include three new-construction large-deck amphibious ships, nine new-construction sealift-type ships, and two existing sealift-type ships. Additional "connector" ships would be used to move equipment to the MPF(F) ships, and from the MPF(F) ships to the operational area ashore. Some analysts have questioned the potential affordability and cost effectiveness of the sea basing concept. The Navy in the past relied on carrier battle groups (CVBGs) (now called carrier strike groups, or CSGs) and amphibious ready groups (ARGs) as its standard ship formations. In recent years, the Navy has begun to use new kinds of naval formations—such as expeditionary strike groups, or ESGs (i.e., amphibious ships combined with surface combatants, attack submarines, and land-based P-3 maritime patrol aircraft), surface strike groups (SSGs), and modified Trident SSGN submarines carrying cruise missiles and special operations forces —for forward presence, crisis response, and warfighting operations. A key Navy objective in moving to these new formation is to significantly increase the number of independently deployable, strike-capable naval formations. ESGs, for example, are considered to be formations of this kind, while ARGs generally were not. The Navy in 2006 also proposed establishing what it calls global fleet stations, or GFSs . The Navy says that a GFS is a persistent sea base of operations from which to coordinate and employ adaptive force packages within a regional area of interest. Focusing primarily on Phase 0 (shaping) operations, Theater Security Cooperation, Global Maritime Awareness, and tasks associated specifically with the War on Terror, GFS offers a means to increase regional maritime security through the cooperative efforts of joint, inter-agency, and multinational partners, as well as Non-Governmental Organizations. Like all sea bases, the composition of a GFS depends on Combatant Commander requirements, the operating environment, and the mission. From its sea base, each GFS would serve as a self-contained headquarters for regional operations with the capacity to repair and service all ships, small craft, and aircraft assigned. Additionally, the GFS might provide classroom space, limited medical facilities, an information fusion center, and some combat service support capability. The GFS concept provides a leveraged, high-yield sea based option that achieves a persistent presence in support of national objectives. Additionally, it complements more traditional CSG/ESG training and deployment cycles. The Navy is implementing or experimenting with new ship-deployment approaches that are intended to improve the Navy's ability to respond to emergencies and increase the amount of time that ships spend on station in forward deployment areas. Key efforts in this area include the Fleet Response Plan (FRP) for emergency surge deployments and the Sea Swap concept for long-duration forward deployments with crew rotation. The FRP, Navy officials say, permits the Navy to deploy up to 6 of its 11 planned CSGs within 30 days, and an additional CSG within another 60 days after that (which is called "6+1"). Navy officials believe Sea Swap can reduce the stationkeeping multiplier—the number of ships of a given kind needed to maintain one ship of that kind on continuously station in an overseas operating area—by 20% or more. The Navy is implementing a variety of steps to substantially reduce the number of uniformed Navy personnel required to carry out functions both at sea and ashore. DON officials state that these actions are aimed at moving the Navy away from an outdated "conscript mentality," under which Navy personnel were treated as a free good, and toward a more up-to-date approach under which the high and rising costs of personnel are fully recognized. Under the DOD's proposed FY2008 budget and FY2008-FY2013 Future Years Defense Plan (FYDP), active Navy end strength, which was 365,900 in FY2005, is to decline to less than 325,000 by FY2010. Reductions in personnel requirements ashore are to be accomplished through organizational streamlining and reforms, and the transfer of jobs from uniformed personnel to civilian DON employees. Reductions in personnel requirements at sea are to be accomplished by introducing new-design ships that can be operated with substantially smaller crews—a shift that could lead to significant changes in Navy practices for recruiting, training, and otherwise managing its personnel. Current ship-acquisition programs related to this goal include the LCS, the DDG-1000, and the Ford (CVN-78) class aircraft carrier (also known as the CVN-21 class). DON is pursuing a variety of initiatives to improve its processes and business practices so as to generate savings that can be used to help finance Navy transformation. These efforts are referred to collectively as Sea Enterprise. Many DON transformation activities efforts take place at the Navy Warfare Development Command (NWDC), which is located at the Naval War College at Newport, RI, and the Marine Corps Warfighting Laboratory (MCWL), which is located at the Marine Corps Base at Quantico, VA. These two organizations generate ideas for naval transformation and act as clearinghouses and evaluators of transformation ideas generated in other parts of DON. NWDC and MCWL oversee major exercises, known as Fleet Battle Experiments (FBEs) and Advanced Warfighting Experiments (AWEs), that are intended to explore new naval concepts of operation. The Navy and Marine Corps also participate with the Army and Air Force in joint exercises aimed at testing transformation ideas. Potential oversight questions for Congress include the following: Are current DON transformation efforts inadequate, excessive, or about right? Are DON transformation efforts adequately coordinated with those of the Army and Air Force? Is DON striking the proper balance between transformation initiatives for participating in the global war on terrorism (GWOT) and those for preparing for a potential challenge from improved Chinese maritime military forces? Is DON achieving a proper balance between transformation and maintaining near-term readiness and near-term equipment procurement? How might naval transformation affect Navy force-structure requirements? Will the need to fund Army and Marine Corps reset costs in coming years reduce funding available for Navy transformation?

The Department of the Navy (DON) has several efforts underway to transform U.S. naval forces to prepare them for future military challenges. Key elements of naval transformation include a focus on operating in littoral waters, increasing the Navy's capabilities for participating in the global war on terrorism (GWOT), network-centric operations, use of unmanned vehicles, directly launching and supporting expeditionary operations ashore from sea bases, new kinds of naval formations, new ship-deployment approaches, reducing personnel requirements, and streamlined and reformed business practices. This report will be updated as events warrant.

E nacted over three decades ago, Title IX of the Education Amendments of 1972 prohibits discrimination on the basis of sex in federally funded education programs or activities. Although Title IX bars recipients of federal financial assistance from discriminating on the basis of sex in a wide range of educational programs or activities, both the statute and the implementing regulations have long permitted school districts to operate single-sex schools. In 2006, however, the Department of Education (ED) issued Title IX regulations that, for the first time, authorized schools to operate individual classes on a single-sex basis. The issuance of these regulations has raised a number of legal questions regarding whether single-sex classrooms pose constitutional problems under the equal protection clause or conflict with statutory requirements under Title IX or under the Equal Educational Opportunities Act (EEOA). Under Title IX, "No person ... shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any education program or activity receiving Federal financial assistance." Although the statute prohibits a broad range of discriminatory actions, such as bias in college sports and sexual harassment in schools, Title IX does contain several exceptions. One of these exceptions provides that, with respect to admissions, Title IX applies only to institutions of vocational education, professional education, and graduate higher education, and to public institutions of undergraduate higher education, unless the latter has traditionally admitted students of only one sex. As a result, Title IX does not apply to admissions to nonvocational elementary or secondary schools, nor does it apply to certain institutions of undergraduate higher education. This means that Title IX permits public or private single-sex elementary and secondary schools, as well as some single-sex colleges. This exception for single-sex schools has existed since the legislation was enacted, and "the legislative history indicates that Congress excepted elementary and secondary schools from Title IX because of the potential benefits of single-sex education." Less clear is whether Congress intended to permit coeducational schools to establish individual classes on a single-sex basis, as ED's regulations now allow. Noting that some studies demonstrate that students learn better in a single-sex educational environment, ED issued new Title IX regulations in 2006 that provide recipients of educational funding with additional flexibility in providing single-sex classes. The regulations apply to both public and private elementary and secondary schools but not to vocational schools. Specifically, the regulations permit recipients to offer single-sex classes and extracurricular activities "if (1) the purpose of the class or extracurricular activity is achievement of an important governmental or educational objective, and (2) the single-sex nature of the class or extracurricular activity is substantially related to achievement of that objective." In its regulations, ED identified two objectives that would meet the first requirement: (1) to provide a diversity of educational options to parents and students, and (2) to meet the particular, identified educational needs of students. According to the regulations, any schools that choose to provide single-sex classes must meet certain requirements designed to ensure nondiscrimination. For example, participation in single-sex classes must be completely voluntary, recipients must treat male and female students in an "evenhanded" manner, and a recipient's justification must be genuine. These latter requirements mean than a school's use of overly broad sex-based generalizations in connection with offering single-sex education would be sex discrimination. Thus, recipients are prohibited from providing single-sex classes on the basis of generalizations about the different talents, capacities, or preferences of either sex. In addition, although schools must always provide a "substantially equal" coeducational class in the same subject, they are not always required to provide single-sex classes for the excluded sex, unless such classes would be required to ensure nondiscriminatory implementation. If recipients can show that students of the excluded sex are not interested in enrolling in a single-sex class or do not have educational needs that can be addressed by such a class, then they are not required to offer a corresponding single-sex class to the excluded sex. Although schools must offer classes that are substantially equal, these classes do not have to be identical. In comparing classes under the "substantially equal" requirement, ED will consider a range of factors, including, but not limited to, admissions policies; the educational benefits provided, including the quality, range, and content of curriculum and other services, and the quality and availability of books, instructional materials, and technology; the qualifications of faculty and staff; the quality, accessibility, and availability of facilities and resources; geographic accessibility; and intangible features, such as the reputation of the faculty. In order to ensure compliance with the regulations, recipients are required to periodically conduct self-evaluations, and students or their parents who believe the regulations have been violated may file a complaint with the school or with ED. ED also has the authority to conduct periodic compliance reviews. According to the National Association for Single Sex Public Education, there are currently at least 514 public schools in the United States that offer single-sex education in the form of single-sex schools or classrooms. As noted above, the enactment of the new regulations raises questions regarding whether ED has the statutory authority under Title IX to authorize single-sex classrooms and whether the regulations comply with the statutory requirements of the EEOA. Although Title IX explicitly authorizes single-sex schools, the statute is silent with respect to the question of single-sex classrooms within schools that are otherwise coeducational. As a result, it is possible that the regulations could face a legal challenge on the grounds that ED exceeded its statutory authority. Any court ruling as to the validity of ED's regulations would hinge on the level of deference paid to the agency decision by the reviewing court. The standard for judicial review of such agency action was delineated in Chevron U.S.A. Inc. v. Natural Resources Defense Council . There, the Supreme Court established that judicial review of an agency's interpretation of a statute consists of two related questions. First, the court must determine whether Congress has spoken directly to the precise issue at hand. If the intent of Congress is clear, the inquiry is concluded, since the unambiguously expressed intent of Congress must be respected. However, if the court determines that the statute is silent or ambiguous with respect to the specific issue at hand, the court must determine "whether the agency's answer is based on a permissible construction of the statute." It is important to note that the second prong does not require a court to "conclude that the agency construction was the only one it permissibly could have adopted to uphold the construction, or even the reading the court would have reached if the question initially had arisen in a judicial proceeding." The practical effect of this maxim is that a reasonable agency interpretation of an ambiguous statute must be accorded deference, even if the court believes the agency is incorrect. Ultimately, given Title IX's silence with respect to single-sex classrooms, it's possible, but not certain, that a court could determine that the statutory language was ambiguous enough to support ED's interpretation of the statute. Although the EEOA contains a congressional finding that "the maintenance of dual school systems in which students are assigned to schools solely on the basis of race, color, sex, or national origin denies to those students the equal protection of the laws guaranteed by the fourteenth amendment," the statute's prohibition against "the deliberate segregation" of students applies only to segregation on the basis of race, color, or national origin, but not sex. Therefore, ED's regulations regarding single-sex classrooms do not appear to conflict with the EEOA. Over the years, several courts have considered the question of whether single-sex education violates the EEOA. Although these cases, which are few in number, have contemplated single-sex schools rather than single-sex classes, they are instructive. For example, in Vorchheimer v. School District of Philadelphia , the Court of Appeals for the Third Circuit considered a challenge filed by a female student who was denied admission to an all-male public high school in Philadelphia. Because the statute did not explicitly prohibit the segregation of schools by sex and because the corresponding all-female high school was found to provide equal educational opportunities for girls, the court rejected the EEOA challenge. In United States v. Hinds County School Board , however, the Fifth Circuit held that the EEOA prohibited a Mississippi school district from splitting the four schools in the district into two all-male schools and two-all female schools. The court distinguished the case from the Vorchheimer decision, noting that Vorchheimer involved two voluntary single-sex schools in an otherwise coeducational school system while the Mississippi school district in question involved the mandatory sex segregation of all of the schools, and therefore all of the students, in the system. Read together, these cases indicate that the EEOA may permit single-sex schools as long as coeducational options are available. Such an interpretation would mean that the new Title IX regulatory requirements are consistent with the EEOA. As noted above, the 2006 Title IX regulations may raise constitutional issues for public schools that offer single-sex classes. Under the equal protection clause of the Fourteenth Amendment, which prohibits the government from denying to any individual the equal protection of the law, governmental classifications that are based on sex receive heightened scrutiny from the courts. Laws that rely on sex-based classifications will survive such scrutiny only if they are substantially related to achieving an important government objective. Currently, there are only two Supreme Court cases that address the equal protection implications of sex-segregated schools. Although both of these cases occurred in a higher education setting, they provide some guidance that may be applicable to the elementary and secondary education context. In the earlier case, Mississippi University for Women v. Hogan , the Court held that the exclusion of an individual from a publicly funded school because of his or her sex violates the equal protection clause unless the government can show that the sex-based classification serves important governmental objectives and that the discriminatory means employed are substantially related to the achievement of those objectives. Because the Court found that the state had not met this burden, it struck down Mississippi's policy of excluding men from its state-supported nursing school for women. The Court's most recent constitutional pronouncement with respect to sex discrimination in education occurred in United States v. Virginia . In that case, the Court held that the exclusion of women from the Virginia Military Institute (VMI), a public institution of higher education designed to prepare men for military and civilian leadership, was unconstitutional, despite the fact that the state had created a parallel school for women. Although the Court reiterated that sex-based classifications must be substantially related to an important government interest, the Court also appeared to conduct a more searching form of inquiry by requiring the state to establish an "exceedingly persuasive justification" for its actions. According to the Court, this justification must be genuine and must not rely on overbroad generalizations about the talents, capacities, or preferences of men and women. In applying this standard, the Court rejected the two arguments that Virginia advanced in support of VMI's exclusion of women, namely, that the single-sex education offered by VMI contributed to a diversity of educational approaches in Virginia and that VMI employed a unique method of training that would be destroyed if women were admitted. In rejecting VMI's first argument, the Court concluded that VMI had not been established or maintained to promote educational diversity. In fact, VMI's "historic and constant plan" was to offer a unique educational benefit to only men, rather than to complement other Virginia institutions by providing a single-sex educational option. With respect to Virginia's second argument, the Court expressed concern over the exclusion of women from VMI because of generalizations about their ability. While the Court believed that VMI's method of instruction did promote important goals, it concluded that the exclusion of women was not substantially related to achieving those goals. After determining that VMI's exclusion of women violated constitutional equal protection requirements, the Court reviewed the state's remedy, a separate school for women known as the Virginia Women's Institute for Leadership (VWIL). Unlike VMI, VWIL did not use an adversarial method of instruction because it was believed to be inappropriate for most women, and VWIL lacked the faculty, facilities, and course offerings available at VMI. Because VWIL was not a comparable single-sex institution for women, the Court concluded that it was an inadequate remedy for the state's equal protection violations, and VMI subsequently became coeducational. In light of the VMI case, it appears that schools that establish single-sex classrooms under ED's Title IX regulations may face some legal hurdles but are not necessarily constitutionally barred from establishing such classes. Consistent with the Court's ruling, the Title IX regulations require schools that wish to establish single-sex classes to demonstrate that such classes serve an important governmental objective and are substantially related to achievement of that objective. What is unclear is whether the objectives approved by the Title IX regulations—to provide a diversity of educational options to parents and students and to meet the particular, identified educational needs of students—would be sufficiently "important" to pass judicial review. Although the Virginia Court rejected VMI's diversity rationale, it did so because it found that VMI's justification was not genuine. As a result, the Court has not ruled on whether diversity is an important governmental objective in cases involving sex-based classifications, although the Court, which stated in the VMI case that it does not question "the State's prerogative evenhandedly to support diverse educational opportunities," may be inclined to uphold the diversity rationale with regard to the new Title IX regulations. Moreover, the Virginia Court ruled that the parallel school Virginia established for women—VWIL—was not a sufficient remedy for the exclusion of women from VMI because it lacked the faculty, facilities, and course offerings available at VMI. In contrast, the Title IX regulations require schools that offer single-sex classes to provide "substantially equal" classes to the excluded sex. While it's not clear whether the Court would view the "substantially equal" requirement as sufficient to pass constitutional muster, judicial resolution in a given case would most likely depend on the specific facts surrounding a school's single-sex class offerings. Indeed, organizations such as the American Civil Liberties Union (ACLU) regularly file lawsuits against schools that provide single-sex education. For example, the ACLU has filed a lawsuit alleging that single-sex classrooms in Breckenridge County, KY violate the Constitution, Title IX, the EEOA, and state antidiscrimination law and that ED's Title IX regulations violate the Constitution, Title IX, and the Administrative Procedures Act.

Under Title IX of the Education Amendments of 1972, which prohibits sex discrimination in federally funded education programs or activities, school districts have long been permitted to operate single-sex schools. In 2006, the Department of Education (ED) published Title IX regulations that, for the first time, authorized schools to establish single-sex classrooms as well. This report evaluates the regulations in light of statutory requirements under Title IX and the Equal Educational Opportunities Act (EEOA) and in consideration of constitutional equal protection requirements.

From the late 1930s through the 2004 crop, the USDA operated the tobacco price support program. It was designed to raise and stabilize farm tobacco prices at higher levels than they otherwise would have reached. This was accomplished through a combination of farm marketing quotas and federal nonrecourse commodity loans. Administration was done through the county offices of the Farm Service Agency (FSA), and loan program funding was provided through the Commodity Credit Corporation (CCC). In 1982, legislation was adopted that applied an assessment on all tobacco marketings to be used to offset price support losses and make the loan operations function at no net cost to taxpayers. On two occasions legislation relieved the program of its obligations on large inventories. These actions cost about $1 billion. In addition, Congress made so-called tobacco loss payments of $852 million during FY2000-FY2003 to offset a sharp decline in farm sales to domestic and foreign buyers. Overall, from FY1982 through FY2005, tobacco support net expenditures totaled about $1.57 billion, for an annual average cost of $71 million. After Congress enacted the Fair and Equitable Tobacco Reform Act of 2004 ( P.L. 108-357 ), the tobacco support program came to an end. Tobacco quota owners and farm operators were compensated for the diminished value of their farms and the loss of future support with a payment of $9.6 billion over 10 years, funded by an assessment on tobacco manufacturers and importers. Because of this tobacco buyout, CCC support program expenditures have been eliminated, and it is not anticipated there will be any future ad hoc assistance to tobacco farmers. FSA administrative expenditures associated with the buyout are estimated to be $1.827 million in FY2006, and the budget for FY2007 is zero. (For additional information, see CRS Report RS20802, Tobacco Farmer Assistance , and CRS Report RS22046, Tobacco Quota Buyout .). The federal crop insurance program, administered by USDA's Risk Management Agency, provides farmers with subsidized multi-peril insurance on tobacco and other crops. The insurance covers unavoidable production losses due to adverse weather, insect infestations, plant diseases, and other natural calamities. It does not cover avoidable losses caused by neglect or poor farming practices. Sales and servicing of policies are done by private companies with some federal reimbursement, and most of the net indemnity losses fall upon the government. Additionally, the premiums have been subsidized since 1980 in order to encourage participation and avoid enactment of ad hoc disaster assistance programs. Experimental Crop Revenue Coverage, available for wheat, corn, and soybeans, is not available for tobacco. Total net federal expenditures for tobacco crop insurance coverage include outlays for crop loss indemnity payments, plus the premium subsidies, plus sales administrative expenses, less the farmer-paid premiums. Net federal outlays are estimated to be $27.9 million in FY2006, and are budgeted at $28.7 million for FY2007. The USDA's Agricultural Marketing Service (AMS) carries out voluntary inspection and grading services at tobacco auction markets and import terminals. The establishment of uniform standards of quality, with grading by unbiased experts, helps assure that auction markets perform efficiently and fairly. Historically, federal grading provided an assurance of quality for tobacco held as collateral for CCC price support loans. Additionally, imported and domestic tobacco is inspected voluntarily to guard against illegal pesticide residues. Since 1981, the grading and inspection services have been financed through user fees (now set at $0.62 per 100 pounds for grading and $0.85 per 100 pounds for pesticide testing). These fees are sufficient to fully cover the costs of inspection activities as well as the cost of developing and maintaining the standards applied by the inspectors. This has dramatically reduced the use of AMS inspectors. AMS inspection work now is done on imported tobacco, as nearly all of the domestic crop is contracted for sale rather than auctioned. The Agricultural Marketing Service provides a market news service for sellers and buyers of tobacco. Daily reports of grades, prices, and sales volume at the auction markets are distributed throughout the tobacco industry. The cost of the tobacco news service in FY2006 is an estimated $190,000, and the budget for FY2007 is $194,000. Similar market news services are provided for all major agricultural commodities. Market news services are designed to provide farmers, and others in the marketing chain, with timely, accurate, and unbiased information on market conditions, to help them make better decisions on where and when to sell and buy commodities. According to economists, such information is necessary for a market economy to function efficiently and effectively. In the absence of a taxpayer-funded market news service, the information might be collected and sold by commercial enterprises, but questions of bias could arise. In the past, USDA-funded research related to tobacco production, processing, and marketing. Some of the research was carried out by Agriculture Research Service (ARS) scientists and some was done by university scientists funded through the Cooperative State Research, Education, and Extension Service (CSREES). Annual research spending by the USDA averaged about $6.6 million until it was terminated under the FY1995 agricultural appropriations law and subsequent laws. The restriction does not apply to research on medical, biotechnological, food, and industrial uses of tobacco. A special research grant of $329,000 was approved for FY2006 to investigate alternative uses of tobacco plant material. No similar spending is anticipated in FY2007. The jointly funded federal-state-county extension education and technical assistance program is designed to serve as a link between the nation's agricultural research institutions and farmers. The term extension conveys the concept of extending the work of researchers into the community. At the county level, extension agents distribute information and expert advice to farmers and others through published materials, seminars, and direct consultation. The state extension staff, given their close proximity to researchers, continuously trains the county agents and designs and prepares materials for use by the county agents. In FY1997, CSREES spent $680,000 on tobacco-related extension activities. Federal funding was eliminated in FY1998 by the Administration and remains at zero. All state and county extension activity related to tobacco is funded by the states. The Economic Research Service (ERS) is responsible for assembling and analyzing economic data and forecasting market data within the USDA. As with the other major commodities, ERS assembles and analyzes supply and demand data on tobacco. ERS periodically publishes analytical findings in a Tobacco Situation and Outlook Report. Economists also conduct studies on related topics, such as the structural characteristics of tobacco farming, the role of tobacco in local economies, and the likely impact of program changes and policy options. ERS spending on tobacco analysis during FY2006 is estimated at $123,000, and the budget for FY2007 is $125,000. The Foreign Agriculture Service (FAS), through its network of agricultural counselors and attaches, collects economic intelligence throughout the world. This intelligence is used by trade negotiators, economists, policymakers, and the business community. Tobacco is one in a long list of commodities on which the FAS staff collects information. The USDA estimates that the cost of this effort for tobacco will be $200,000 in FY2006, and the budget for FY2007 is $205,000. The National Agricultural Statistics Service (NASS) collects field-level data on planting intentions, crop conditions, harvesting progress, yield, and production. This information helps the business community, including farmers develop marketing plans. Also, it serves to alert policy officials of likely shortages or surpluses, thereby facilitating plans for any government action that might be taken. The information that NASS compiles and distributes is considered by economists to be critical to an efficiently functioning market economy. It is argued that the absence of NASS data would most severely disadvantage farmers and government officials, who are least able to obtain information through alternative sources. Tobacco is one in a long list of commodities on which NASS staff collects information. The estimated cost of this effort for tobacco is $231,000 in FY2005, and the budget for FY2007 is $231,000.

The U.S. Department of Agriculture (USDA) has long operated programs that directly assist farmers and others with the production and marketing of numerous crops, including tobacco. In most cases, the crops themselves have not been controversial. However, where tobacco is involved, the use of federal funds has been called into question. Taken together, all of the directly tobacco-related activities of the USDA generated net expenditures of an estimated $30.8 million in FY2006, and the budget anticipates net expenditures of $29.5 million for FY2007. Over 90% of this spending is related to crop insurance. The federally financed tobacco price support program, once the major form of tobacco farmer assistance and in some years a costly program, was terminated at the end of crop year 2004. The USDA is prohibited by language in the annual appropriations law from spending funds to help promote tobacco exports and to conduct research relating to production, processing, or marketing of tobacco and tobacco products. Other tobacco-related activities have been subjected to congressional scrutiny. The USDA does operate numerous programs that are not tobacco-specific, but are available to farmers that produce tobacco and other crops. These are not examined in this report.

The estate and gift tax debate focuses on issues of equity and long-term economic efficiency. Many observers opposed to the estate tax on grounds of equity suggest that taxing the assets of decedents is unfair because the decedent has already paid taxes on the assets as they accumulated value. There is also a perceived need to provide heirs of family farms and businesses a tax preference for family assets that are transferred at death. Opponents of the estate tax on economic efficiency grounds cite research that suggests the estate tax is a tax on saving and investment, which, like other taxes on capital, would tend to impede long-term economic growth. Those in favor of retaining some type of estate tax counter that many estates include assets with accumulated capital gains that have not been subject to income taxes. For example, publicly traded stock transferred at death would avoid taxation on the increased value from the time of purchase to the date of transfer. Estate tax proponents maintain that other assets, such as family business assets and family farm assets, should not be afforded special preferences in the tax code. Repeal or modification of the estate and gift tax for all estates would achieve the policy objective of tax relief for farm and small-business estates. However, farm assets and business assets represent a relatively small share of total taxable estate value, approximately 17.1% of gross taxable estate value in 2009. Thus, repeal or modification of the estate tax would benefit more estates with a variety of different asset types. Examining the asset distribution of estates that paid at least some estate tax more closely will provide some guidance for policy makers about the current impact of estate taxes on business-type assets and farms. The Internal Revenue Service (IRS) annually publishes data on the distribution of assets in estate tax returns filed in a tax year. This report uses data for returns filed in 2009 and 2010. The 2009 data are more representative of the estate tax burden in 2012 than the 2010 data. The estate tax was repealed for those who died in 2010, thus the data for the returns filed in 2010 do not reflect the impact of the tax. The 2010 data are provided as an Appendix to this report. These data are from estates from decedents who died before 2010 and those estates that chose to file using the pre-EGTRRA law. Data from returns filed in 2009 include the returns of many decedents who died in 2008. The biggest difference between 2008 and 2009 is the exemption amount, which was $2 million in 2008 and rose to $3.5 million in 2009. For 2011 and 2012, the exemption amount is $5 million ($10 million for married decedents). On December 17, 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ) reinstated the estate tax beginning with 2010 decedents and sunsets after 2012. Executors of estates of decedents who died in 2010, however, may also choose to file under the EGTRRA laws in place before passage of P.L. 111-312 . The new law sets the estate tax exemption level at $5 million per decedent in 2010 (indexed for inflation) and establishes a top marginal tax rate of 35%. Any unused exemption amount is transferrable to a surviving spouse, yielding an effective exemption amount of $10 million for married decedents. The Joint Committee on Taxation estimates the temporary estate tax modifications to reduce revenue by approximately $136.7 billion over 10 years. The number of decedents that will be affected by the estate tax will rise significantly in 2013, as the law will return to the pre-EGTRRA parameters. The estate and gift tax minimum filing requirement is $5,120,000 for deaths occurring in 2012. Generally, estates valued below the threshold are not required to file a return. Estates valued over the threshold amount calculate their tax liability based upon the entire (or gross) value of the estate inclusive of the $5,120,000. Deductions from the gross estate value, such as bequests to a surviving spouse (the marital deduction), state estate and inheritance taxes, and donations to charitable organizations, are then subtracted from the gross estate value. The tentative tax liability is determined by the progressive rate schedule provided for in the tax code. The next step in the calculation of estate tax liability, and perhaps the most important, is the applicable credit. The applicable credit is set such that an estate has the equivalent of a $5,120,000 exemption (for deaths occurring in 2012 the amount is $1,772,800, see Table 1 below). In many cases, the marital deduction combined with the deduction for charitable contributions can eliminate all estate tax liability. Before 2005, estates were allowed to claim a credit for state death taxes paid. EGTRRA, however, gradually repealed the credit for state death taxes, eliminating it in 2005 and replacing it with a deduction for taxes paid. Many states have relied on the federal credit for their estate tax and will need to modify their tax laws to continue collecting their estate and inheritance taxes. According to a January 2012 evaluation of state laws by the Center on Budget and Policy Priorities, "Some 22 states—continue to collect either an estate or inheritance tax." The data utilized in this report are from the Internal Revenue Service (IRS), Statistics of Income (SOI) Division. The SOI data report the assets held by estates by gross estate value classes. For this report, farm returns are defined as estates reporting farm assets. Business returns are defined as those estates that include assets typically held by businesses: "closely held stock," "limited partnerships," "real estate partnerships," and "other non-corporate business assets." Estates reporting one or more of the four assets were termed business returns. This methodology is imperfect and likely double counts many estates. As a result, the number of business estates would be significantly overstated by this estimate. Of the approximately 2.43 million deaths in 2008 of people 25 years old and over, 0.6% incurred estate and gift tax liability. Further, in 2009 only 1,846 decedents with taxable estates included farm assets (0.08% of all deaths), and 8,055 taxable estates listed assets of the type typically held by businesses (0.34% of all deaths). The primary reason for the low number of filers relative to the number of deaths in 2008 is the high gross estate value filing threshold. In tax year 2008, only estates valued at greater than $2 million were required to file an estate and gift tax return. (The 2008 decedents would likely file returns in 2009.) This makes the estate tax a relatively progressive tax source. Table 2 suggests the progressivity of the estate and gift tax in 2009. Taxable estates worth over $10 million accounted for 11.2% of the total taxable estates, yet 61.0% of all estate tax revenue. The 4,296 estates (29.2% of taxable estates) larger than $5 million generated over 81.9% of total estate tax revenue. Recall that only 0.7% of deaths generated any estate tax liability. The SOI data do not distinguish estate tax returns by detailed occupation of the decedent, such as farmer or business person. However, the data do provide significant detail on the distribution of the decedent's assets. Table 4 summarizes estate tax return asset data from the returns filed in 2009. Generally, assets that represent more of the taxable estate shoulder a greater share of the tax burden. The value of taxable estates is concentrated in the following asset categories: publicly traded stock, cash assets, state and local bonds, other real estate, and closely held stock. These five assets represent 66.2% of total taxable estate value in 2009. Thus, eliminating the estate tax will reduce the tax burden chiefly on these assets. Table 3 reports that the value of total farm assets is approximately 3.25% of total taxable gross estate value. The business assets in Table 3 represent approximately $14.1 billion of total taxable estate value (or 13.9%). The largest is closely held stock, worth approximately $7.2 billion. However, total business assets as reported do not explicitly indicate the portion of those assets held in small businesses. Though farm and business decedents may have other taxable assets—such as equities and cash—the burden on farm and business assets alone is quite small relative to other assets. Thus, removing the estate and gift tax or lowering the rates in general will have a much greater effect on non-farm and non-business assets. Table 4 presents detailed data on farm and business assets by gross estate value. Relatively large farm estates, those valued between $2 million and $3.5 million, comprise a relatively larger share of total estate value for that estate size category. Overall, however, farm estates appear to be evenly distributed across the estate size categories. Note that farm assets account for approximately 3.25% of total taxable estate value. In contrast to farm estates, assets typically associated with non-farm businesses are concentrated in estates valued over $10 million. In fact, of the $14.1 billion in total business assets in estates, over $11.0 billion (77.7%) is held in those estates valued over $10 million. As a consequence, smaller-business taxable estates, those valued at less than $10 million, contribute very little to the estate and gift tax base. In summary, repeal of the estate and gift tax would clearly achieve the policy objective of relief for estates composed of farm and small-business assets. Farm assets and business assets, however, represent a relatively small share of total taxable estate value, approximately 17.1% at the most.

This report provides data on the distribution of assets in estates as reported on estate tax returns filed in 2009 and 2010. The data for 2010 are unique, as the estate tax was repealed for those who died in calendar year 2010. Thus, the 2010 data are presented as an appendix to this report. Based on the 2009 data, this report finds that farm and business assets represent a small share of the total value of taxable estates that filed tax returns in 2009 (3.25% and 13.86%, respectively). That share is concentrated in estates valued over $10 million. For an overview of the estate tax, see CRS Report RL30600, Estate and Gift Taxes: Economic Issues, by [author name scrubbed] and [author name scrubbed]. This report will be updated as new data become available.

The introduction of significantly redesigned currency began in March 1996, with the introduction into circulation of the newly designed $100 note. Redesigned lower denomination notes were expected to be introduced into circulation at subsequent 9- to 12-month intervals, but the introduction of the $50 note has been delayed because of efforts to make the denomination easier to read by the visually impaired. The note is now expected to be introduced later this month. The redesigned currency includes several new security features. Some of these features are overt; that is, they are designed to be recognized by the public. The other features are covert; that is, they are intended to be used by the banking system. One of the overt security features on the $50 note is concentric fine lines printed in the oval shape that is behind Ulysses S. Grant’s portrait on the front of the note. During the initial production of the newly designed $50 notes, BEP detected flaws in some of the notes, specifically a gap, or white space, between some of the concentric lines surrounding Grant’s portrait. Neither BEP nor the Federal Reserve know specifically how many flawed notes are among the 217.6 million redesigned notes produced before September 8, 1997. Although both BEP and the Federal Reserve have done some inspections to identify flawed notes, neither has done a complete count or a statistically projectable sample. BEP said it is not prepared to estimate the number of flawed notes without more thorough sampling, which it plans to do. In Philadelphia, Federal Reserve officials looked at 200 of the $50 notes and estimated that 50 to 60 percent were flawed. On September 30, 1997, we and Federal Reserve officials jointly reviewed judgmentally selected samples of newly redesigned $50 notes that had been shipped to the Philadelphia and Richmond Federal Reserve banks. We jointly determined that 56 percent of the 1,200 notes we reviewed that were produced before September 8, 1997, and were shipped to Philadelphia did not meet the Federal Reserve’s standards for circulation concerning the clarity of the concentric lines surrounding President Grant’s portrait. At Richmond, we jointly inspected 1,000 $50 notes produced before September 8, 1997, and found that 45 percent contained similar flaws. We also jointly inspected 1,000 $50 notes at Richmond that were printed after September 7, 1997, and found that 2 percent were flawed. On September 30, 1997, we independently inspected 1,664 $50 notes at BEP headquarters that were printed after September 7, 1997, and found that 12 percent were flawed. A better estimate of the number of flawed notes at BEP and the Federal Reserve banks cannot be made until more rigorous and scientific sampling procedures are used for the note inspections. more lines not printing completely. These gaps were inconsistently distributed throughout the notes, thus making them difficult to correct. BEP viewed the problem as a start-up issue to be expected with production of a completely new note design. BEP officials told us that although they viewed the new notes as acceptable for distribution to the Federal Reserve and for circulation, they believed that the quality of the concentric lines needed to be improved. Accordingly, they made a number of changes in their production, including adjustments to printing presses, changes in the ink, and changes to the printing plates used to create the face of the new note. For example, BEP made modifications to the printing plates by cutting small horizontal grooves into the concentric lines, called dams, that permit ink to be deposited more successfully on the paper. According to BEP, these changes reduced, but did not eliminate the concentric line gaps in some of the $50 notes. In September, Federal Reserve and BEP officials, at a regularly scheduled meeting, discussed the importance of note quality. Immediately after that meeting, BEP invited the Federal Reserve to view some of the new $50 notes that it had produced to get its customer’s input on the quality of the notes. According to Federal Reserve officials, this was the first time they were informed of the problems with the concentric lines surrounding President Grant’s portrait. BEP officials said they did not tell the Federal Reserve about the problem earlier because they believed the notes were of acceptable quality and that the production problems were typical of those that could be expected in producing a newly designed note. According to Federal Reserve and BEP officials, the printing problems with the concentric lines did not appear in test notes that BEP supplied to the Federal Reserve prior to full scale production of the notes. BEP officials stated that printing difficulties often appear only in the production process. They said that test currency is produced under more carefully controlled conditions and is not produced at the same press speeds and volumes. concentric lines behind the portrait to be certain that they are clear. In mid-September, Federal Reserve officials met with BEP, U.S. Secret Service, and other Treasury representatives who agreed with the Federal Reserve’s concerns and also agreed on quality standards for determining note acceptability. These standards were then programmed into BEP’s automated currency inspection equipment. BEP and the Federal Reserve refer to notes produced before the dams were cut as phase I notes, and those produced after the dams were cut as phase II notes. They refer to notes produced after BEP’s currency inspection devices were recalibrated as phase III notes. BEP and Federal Reserve officials believe phase II notes are of higher quality than phase I notes, and that the quality of phase III notes is higher than that of both phase I and II notes. Beginning in June 1997, BEP produced a total of 160 million phase I notes, of which about 59.5 million were shipped to 16 Federal Reserve banks and 100.5 million are stored at BEP headquarters. Beginning around August 1, 1997, BEP produced 57.6 million phase II notes, all of which are stored at BEP. Production of phase III notes began around September 8, 1997, and as of September 24, 1997, BEP reported having shipped about 11.7 million of the phase III notes to Federal Reserve banks and storing about 4.3 million of the phase III $50 notes in its inventory. Secret Service, Federal Reserve, and BEP officials said the flaws in the notes did not increase the risk of counterfeiting or further delay the notes’ introduction. According to a Secret Service official, issuing the flawed notes would not make them more susceptible to counterfeiting or impede counterfeiting detection. However, the official noted that the flaw in the concentric lines could result in increased public questions about the note’s authenticity. Federal Reserve officials voiced similar concerns, particularly in regard to foreign countries where U.S. currency is often more closely scrutinized. Much of their concern stemmed from the emphasis given to the concentric lines in the promotional material being disseminated on the new $50 note. Federal Reserve and BEP officials stated that the flawed notes would not cause a further delay in the issuance of the new note to the public because the $50 note represents a relatively small portion of BEP’s total production, and it does not take long for it to make enough notes to meet the public demand. As of September 29, 1997, Federal Reserve officials told us that they had not decided what to do with the flawed notes but expect to decide by the end of the year. According to Federal Reserve officials, there is no need to rush to make a decision because the newly designed $50 notes are not scheduled to be released for circulation until October 27, 1997, and they believe that they will have enough of the good notes to put into circulation. The Federal Reserve has identified three options that it is considering: destroy all 217.6 million phase I and phase II $50 notes and replace them; inspect the 217.6 million phase I and phase II $50 notes and destroy and replace only those notes that are found to be flawed; or circulate the 217.6 million phase I and phase II $50 notes after the higher quality new notes have been in circulation for a few years. Before decisions can be made on which option to select, Federal Reserve officials described several steps that they planned to take. First, they said they would determine costs of developing and installing sensors on their currency processing equipment to inspect the phase I and phase II $50 notes. The Federal Reserve said that although its equipment—normally used to inspect recirculating notes—has the capability to check certain aspects of individual notes, it does not have the sensors needed to detect the gaps in the background of the portrait. According to BEP, its equipment can detect the gaps in the background of the portrait but only in its normal production format—that is, in sheets of 32 notes. Since all the phase I and phase II notes have been cut into individual notes, BEP’s detection equipment cannot be used for such an inspection. Thus, sensors that have the capability to detect such gaps would need to be developed by a vendor and then purchased by the Federal Reserve. The second planned step would be to determine how much it would cost to identify the acceptable notes and reprint only those that were unacceptable. The third planned step would entail the Federal Reserve and BEP conducting scientific samples of the entire inventory to identify what portion is acceptable and unacceptable. Finally, the fourth step would be to use the data obtained in the first three steps to determine the most cost beneficial option between destroying and replacing all the notes or identifying and destroying and replacing only the flawed notes. According to Federal Reserve officials, they do not believe that there is a high probability that they would choose the third option of distributing all 217.6 million phase I and phase II notes at a later time. The Federal Reserve has not estimated the complete costs of reproducing the flawed $50 notes. As an example to provide perspective on the costs of the options under consideration, according to BEP and Federal Reserve officials, if the Federal Reserve were to decide to destroy all 217.6 million of the $50 notes and replace them, it would cost approximately $7.2 million for printing replacement notes plus an additional $360,000 to destroy the notes at the Federal Reserve banks and BEP and to ship the replacement notes. This amount is about $1 million less than the $8.7 million the Federal Reserve initially paid for the phase I and phase II $50 notes because the replacement production costs do not include charges for capital equipment and fixed costs that were already included in the charges for the original production runs. The Federal Reserve was not able to estimate the costs associated with option two because the costs of obtaining and installing the sensor equipment are not known at this time; nor does it yet know what proportion of the 217.6 million notes are acceptable or what the costs of inspecting them would be. According to the Federal Reserve, the costs associated with the third option would probably be minimal and would be mostly storage costs. All costs incurred by the Federal Reserve due to the replacement of the flawed notes would result in a reduction in the amount of money the Federal Reserve returns to the Department of the Treasury after it subtracts its operating expenses from its revenues. Mr. Chairman, while our review of this matter has not been extensive, we have made two observations that should prove useful in the future production of redesigned currency. These observations relate to (1) the Federal Reserve’s and other stakeholder involvement in inspecting BEP production and limiting the number of notes produced until production problems are resolved and (2) resolving the problems with printing fine concentric lines before new denominations are produced. currency production, primarily because BEP has generally produced high quality currency; the currency designs have not significantly changed for many years; and BEP experienced no major problems with the printing of the newly designed $100 note last year. Federal Reserve officials said that they are now reassessing their approach to monitoring the quality of currency production. Both BEP and Federal Reserve officials said that they agree that early inspection of BEP production would be worthwhile after the experience with the production of the newly designed $50 note, but said they have not yet agreed on the specifics of the Federal Reserve’s early involvement. Once BEP and the Federal Reserve reach agreement on the details, we believe it would be helpful for them to formalize their agreement in writing. In addition, BEP and the Federal Reserve may wish to include Secret Service and other Treasury officials in their discussions and agreements. Based on the problems encountered with the newly designed $50 note, the BEP and Federal Reserve might also want to limit the production of newly designed currency until all production problems are resolved and to include such a limitation in their written agreement. Our second observation deals with the resolution of problems in printing concentric fine lines surrounding the portrait on denominations lower than the $50 note, which the Treasury Department and the Federal Reserve plan to introduce at 9- to 12- month intervals following the introduction of the $50 note. According to BEP, the fine concentric line design on the face of the new $50 note poses particularly difficult challenges to print clearly, and the fine concentric lines will be somewhat different for each denomination because the configuration of the portraits will vary. For example, BEP officials said that printing the fine concentric lines on the newly designed $100 note, which has a portrait of Benjamin Franklin with long hair taking up a large area of the oval surrounding Franklin’s portrait, has not been as difficult as printing the lines on the newly designed $50 note, which has a portrait of Ulysses S. Grant with relatively shorter hair taking up a smaller area of the surrounding oval. It may prove helpful for BEP to explore whether design changes would lessen the chances of production problems for future denominations. very limited observations of $50 note production this week, we observed some imperfect concentric line backgrounds, but it is important to note that our sampling was not statistically representative and we cannot make any projections on the overall rate of imperfection. In view of the experience with the early production of the redesigned $50 note, we recommend that the Secretary of the Treasury and the Board of Governors of the Federal Reserve: Formalize an agreement to have Federal Reserve, BEP, Secret Service, and other relevant Treasury officials involved early in the currency production process for future redesigned notes to inspect production and agree on an acceptable level of quality; Limit initial production of newly designed currency to the number that would be necessary to provide reasonable assurance that all production problems are resolved, and include such a limitation in their written agreement; and Explore the feasibility of design changes that might lessen the potential for production problems for future redesigned denominations. Mr. Chairman, that concludes my prepared statement and I will be happy to answer any questions that the Subcommittee may have. The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 37050 Washington, DC 20013 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.

GAO discussed issues related to the Treasury's recent production of flawed, newly redesigned $50 notes. GAO noted that: (1) neither the Bureau of Engraving and Printing (BEP) nor the Federal Reserve know specifically how many flawed notes are among the 217.6 million redesigned notes produced before September 8, 1996; (2) BEP views the problem as a start-up issue to be expected with production of a completely new note design; and (3) Federal Reserve officials have not decided what to do with the flawed notes, but have identified three options: (a) destroy all 217.6 million redesigned notes and replace them; (b) inspect the 217.6 million notes and destroy and replace only those notes that are found to be flawed; or (c) circulate the 217.6 million notes after the higher quality new notes have been in circulation for a few years.

To better confront the military demands of a post-Cold War world, as well as to reduce costs of maintaining excess military infrastructure, Congress authorizes the Department of Defense (DOD) to realign or close military bases. Following an examination of its military forces and installations, the department compiles a list of recommended Base Realignment and Closing (BRAC) actions. This proposed list of base closures and realignments is presented to an independent BRAC Commission, which reviews the proposed actions and sends the list to the President with any recommended changes. After the President reviews and approves the list, it is sent to Congress. The recommended list is automatically enacted unless Congress passes a joint resolution disapproving the list as a whole and sustains it over a potential presidential veto. Following the actual base closings and realignments, the DOD carries out an environmental remediation plan to enable the conveyance of surplus federal land to other entities. Four separate BRAC rounds were initiated in 1988, 1991, 1993, and 1995. In total, 97 bases were closed or realigned under these rounds. By 2001, the DOD had implemented the recommendations from the previous rounds, although significant environmental remediation and asset transfers remain unfinished in many of the affected communities. Congress authorized a fifth round of military base realignments and closures for 2005 through the National Defense Authorization Act of 2002 ( P.L. 107 - 107 ). A primary objective of the 2005 BRAC round was "joint activity"—integration and realignment of cross-service functions in such areas as industrial, supply and storage facilities, technical, training, headquarters, and support activities. The list of recommended actions to achieve these objectives was presented to the BRAC Commission on May 13, 2005. The report became law on November 10, 2005. Small-area economic impact analysis can be a difficult and imprecise undertaking. Assumptions and supporting statistical reasoning can lead to predictions that are, in hindsight at least, inaccurate. For example, multiplier effects—measures of the rate at which a direct effect (e.g., base job losses) creates indirect effects—are central elements in estimating the socioeconomic impact of a base closing or realignment. If, for example, one assumes that a base job has a large indirect employment multiplier (e.g., 2.5-3.0), then for each direct job lost, employment indirectly related to the base job within some defined geographic area is also predicted to be lost. Similarly, an income multiplier allows one to estimate the total income generated by a military base and the resulting income loss or gain within a region. Assumptions about the extent to which base incomes are spent within a particular community can lead to very different assessments of the impacts from the loss of that income. A shift to a smaller employment multiplier will show a much reduced total employment loss from closure. Using data from military base closings between 1971 and 1994, one 2001 study estimated multipliers of less than one and concluded that employment impacts were mostly limited to the direct job loss associated with military transfers out of the region. On average, the study found that per capita income was little affected by the closures. Base closings in communities that have been declining economically for some time, however, may produce impacts different from (and possibly more severe than) those of base closings in communities where growth and economic diversification are more in evidence. The relative strength or weakness of the national or regional economy also can strongly influence the magnitude of community effects from base closure or realignment and the length of time for economic recovery. Evidence from earlier base closures suggests that the impacts can be less than expected because, unlike many other major employers, military bases may be relatively isolated economic entities, purchasing base needs outside the community and spending income at the base rather than in the local community. Local communities are also concerned about the fiscal impacts borne by local governments, especially rural governments. Revenue from property taxes, sales tax, licenses and permits, and state and federal aid is influenced by population gains and losses. With population loss, and related changes to local income, base closures can affect the ability of local governments to raise revenue and support existing services. Similarly, with significant population increases, a community may find greater demand for public services (e.g., transportation, schools, public safety, water and sewerage) without the necessary revenue to support the additional demand. Even where increased revenue can contribute to mitigating the impact of base expansion, the planning and adjustment costs impose other burdens on communities and residents. Local government expenditures and services can also be affected by closure and realignment, depending on the extent to which the military base is integrated into the community's fiscal planning. Here as well, statistical assumptions can lead to significant differences in estimated impact. For example, an economic development analyst estimated that the closure of Hanscom Air Force Base would mean the loss of about $200 million in defense contracts to Massachusetts's firms. Another analysis estimated the same losses at $3 billion. A review of impacts on local government revenue and expenditures, however, generally confirmed that these impacts were, like those impacts affecting the economy, not as severe as had been originally projected. The announcements of previous BRAC Commissions have been greeted in affected communities and elsewhere by significant concern over the potential consequences of closing or significantly realigning a military installation. Military bases in many rural areas, for example, provide an economic anchor to local communities. Even where the local and regional economy is more diversified, military bases provide a strong social and cultural identification that can be shaken by the announcement that a base is closing or being downsized. Not only can there be an immediate impact from the loss of military and civilian jobs, local tax revenues also can decline, leaving counties and communities less able to provide public services. School districts with a high proportion of children from military families can experience significant declines in enrollment. With these effects can come related reductions in state and/or federal funding. With the importance given to joint service activity in the 2005 BRAC round, some bases saw their functions moved to other bases. Other bases, however, are expanding and creating impacts on schools, housing, traffic, and local government services (e.g., Fort Belvoir, Virginia). DOD's Office of Economic Adjustment identified 20 locations where expected growth as a result of force realignments in FY2006-FY2012 would adversely affect surrounding communities. Communities have until September 15, 2011, to implement the changes specified in the BRAC Commission Report. While it is predictable that communities will react to news of a base's closing with concern and anxiety, evidence from past BRAC rounds shows that local economies are, in many cases, more resilient after an economic shock than they expected. Some worst-case scenarios predicted for communities did not occur, perhaps because they were based, in part, on assumptions about economic multipliers, the perceived versus actual role of a base in the local economy, and over-generalization from individual cases where there was significant economic dislocation. Many communities that developed a comprehensive and realistic plan for economic redevelopment were able to replace many of the lost jobs and restore lost income. The DOD programs for assisting communities with base redevelopment (e.g., the Office of Economic Adjustment) have also played a role in mitigating some of the effects of base closure and/or realignment. Some communities came to regard the closing as an opportunity for revitalizing and diversifying their economies. Other communities found they were in stronger economic shape after several years than they thought possible on first learning their bases were closing. Coping with the closure in the short term and revitalizing communities over the long haul can, nonetheless, be daunting tasks. Not all communities recover, and for those that do, the recovery can be uneven. The Government Accountability Office (GAO) found that many communities in 2005 were still recovering from prior closures. Rural areas in particular can find the loss of a base and the revitalization of their communities especially difficult challenges. The effects on individuals can also vary. For example, persons who lose jobs in a closure may not have the kinds of skills needed by the economic activity generated by the redevelopment. Individuals may relocate to other regions where the jobs they find may not match the wages of the jobs lost. Significant environmental cleanup costs from toxic elements at military installations can delay the transfer of the base to local authorities and limit the kinds of redevelopment options available to a community. In some respects, a closed military base shares similarities with other closed industrial facilities such as steel mills, oil refineries, or port facilities. Research and previous economic development experience suggest that converting a closed military base into a source of new competitive advantage is a major community effort. Some bases closed in earlier BRAC rounds have been successfully redeveloped into manufacturing facilities, airports, and research laboratories (e.g., Charleston, SC). Bases also may hold certain advantages for redevelopment that are not shared by other industrial sites. Pricing for the closed bases might be steeply discounted and liability for environmental protection indemnified. Federal grants and incentives also exist to aid community redevelopment efforts. Once a base is slated for closing, consideration of property transfer mechanisms, the extent of environmental cleanup necessary, and a realistic base reuse plan for the transferred property become central elements in organizing the economic development process. Establishing a Local Redevelopment Authority (LRA) with power to assume ownership of the transferred land is a necessary initial step in the economic redevelopment process. The LRA must be approved by the DOD before property can be transferred. The DOD's Office of Economic Adjustment (OEA) is a resource available to communities seeking assistance in managing the impact of a base closing or realignment. The OEA awards planning grants to communities and also provides technical and planning assistance to local redevelopment authorities. By 2002, a cumulative $1.9 billion in DOD and other federal funds had been expended to assist communities affected by base closures. Other sources of federal assistance may also be available to assist communities in recovering from a base closure. Given the variance in the economic conditions of the local area and the usable facilities left behind, there is no single template for redeveloping a closed military base. One generality that might be applied to almost all cases, however, is that the sooner economic redevelopment can begin after base closure, the better for local communities. Base closure can be economically difficult for a community, but closure with a long lag in which the closed base is essentially a hole in the local economy can be worse. While many factors can delay the economic redevelopment of a closed base, the most common may be the need for environmental cleanup of the closed property. Except for limited circumstances, property from a closed military base must be cleaned of environmental contamination before being transferred for redevelopment. The degree of cleanup and the timetable for completion, however, is left to DOD which operates under the appropriations authorized by Congress. Because of the extent of contamination and magnitude of costs involved once funds are allocated, the process of environmental cleanup can be lengthy. A complicating factor in the cleanup process can be the different levels of cleanup that might be completed. As of FY2009, 88% of sites from bases closed in prior BRAC rounds (so-called Legacy BRAC sites) that were not contaminated with munitions had been readied for transfer to local development authorities. Approximately 54% of the sites from the 2005 BRAC that were not contaminated with munitions have now been readied for transfer to local development authorities. For sites with munitions contamination, 68% of Legacy BRAC sites and 33% of 2005 BRAC sites had been readied for transfer at the end of FY2009. Land intended for use as housing or schools, for example, must be cleaned to a greater degree than land intended for industrial use. DOD, however, is not legally required to clean land past the point needed for industrial use. Sites that have been cleaned to DOD's satisfaction and readied for transfer to local authorities, may not have actually been transferred. When a community desires an ultimate land use that would require a greater level of cleanup than that done by DOD, this may result in a property being left vacant until either another use is found or until additional cleanup is done. In general, previous base closures suggest that communities face many specialized challenges, but there is little strong evidence that the closing of a base is the definitive cause of a general economic calamity in local economies. On the other hand, rural areas could experience substantially greater and longer-term economic dislocation from a base closing than urban and suburban areas. Rural areas with less diversified local economies may be more dependent on the base as a key economic asset than urban/suburban economies. Communities where bases are recommended for significant expansion can also find the effects of growth a major challenge. Over the five- to six-year phasing out of a base, however, environmental cleanup, successful property transfers to a local redevelopment authority, and widespread community commitment to a sound base reuse plan have been shown to be crucial elements in positioning communities for life without a military installation.

The most recent Base Realignment and Closure (BRAC) Commission submitted its final report to the Administration on September 8, 2005. Implementation of the BRAC round was officially completed on September 15, 2011. In the report, the commission rejected 13 of the initial Department of Defense recommendations, significantly modified the recommendations for 13 other installations, and approved 22 major closures. The loss of related jobs, and efforts to replace them and to implement a viable base reuse plan, can pose significant challenges for affected communities. However, while base closures and realignments often create socioeconomic distress in communities initially, research has shown that they generally have not had the dire effects that many communities expected. For rural areas, however, the impacts can be greater and the economic recovery slower. Early planning and decisive leadership from officials are important factors in addressing local socioeconomic impacts from base realignment and closing. Drawing from existing studies, this report assesses the potential community impacts and proposals for minimizing those impacts. For additional information on the BRAC process, see CRS Report RL32216, Military Base Closures: Implementing the 2005 Round, by [author name scrubbed]; and CRS Report RL33766, Military Base Closures and Realignment: Status of the 2005 Implementation Plan, by [author name scrubbed].

Turnover of membership in the House and Senate necessitates closing congressional offices. The most common reason for departure is the expiration of a Member's term of office, but a congressional office may also become vacant due to resignation, death, or other reasons. The closure of a congressional office requires an outgoing Member of Congress, or congressional officials, in the case of a deceased Member, to evaluate pertinent information regarding staff; the disposal of personal and official records; and final disposition of office accounts, facilities, and equipment. Table 1 summarizes the numbers of Members who have left or will be leaving the House and Senate after the 112 th Congress, and in the prior 10 Congresses. The House and Senate have developed extensive resources to assist Members in closing their offices. These services are typically used at the end of a Congress, when a Member's term of service ends, but most services are available to an office that becomes vacant for other reasons. This report provides an overview of issues that may arise in closing a congressional office, and provides a guide to resources available through the appropriate support offices of the House and Senate. House office closing activities are supported by the Chief Administrative Officer (CAO), Clerk of the House, and House Sergeant at Arms. Resources related to closing a congressional office are available to House offices through the 113 th Congress transition website on the House intranet. When it becomes known that a Senate office will be closing, the Sergeant at Arms contacts that office to initiate closing support services. The Senate Sergeant at Arms provides office closing services through an Office Support Services Customer Support Analyst (CSA) assigned to each Senate office. A CSA helps coordinate an initial closing office planning meeting between the office and all Senate support offices, and it facilitates the provision of the following: office equipment inventory reports assistance with archiving documents information on closing out financial obligations information on benefits and entitlements available to a Senator after leaving office Payroll for staff of Members who are leaving office at the conclusion of a Congress typically terminates automatically on January 2. The employing authority, a Member in the case of a personal office that is closing, determines whether outgoing staff are eligible to receive a lump sum payment for any accrued annual leave. Other potential benefits, including retirement plans, post-employment life or health insurance benefits, and student loan repayment programs, are administered through the House Office of Human Resources, according to statute and chamber regulation. The office will continue to interact with former House employees on a wide range of post-employment matters, including wage and earning statements, employee benefits, and any forms that must be completed by former employees. In addition to staff procedures to support the closing of a Representative's office, the House provides certain post-employment services to departing staff, including a résumé referral service to House staff who desire employment with Members-elect, provided by the CAO; individual outplacement and technical assistance, as well as job search strategies and transitional techniques to separating employees of the House, provided by the House Outplacement Services Resource Center; and help for affected employees focused on designing and developing a successful job search, provided by the Office of Employee Assistance. Staffs of Senators who will leave office when their term of office officially expires at noon on January 3 of the year in which such a term ends remain on the payroll until the close of business on January 2 of the year in which the Senator's term of office expires, unless terminated sooner. The Senate Disbursing Office addresses issues related to the termination of employment of departing staff and provides information on the available options to staff regarding post-employment insurance and retirement programs and other benefits. The Senate Placement Office provides application and referral service for professionals and support staff, and it can assist outgoing Senate employees who are seeking positions in new congressional offices. The departing staff who are interested in this service must complete an application form and be interviewed by a personnel specialist. Placement office personnel then review applications and send them to offices with matching available positions. According to the Clerk of the House, the files generated by a Member's congressional office and accumulated in the course of service in the House are the personal property of the Member. The House pays for point-to-point shipping of all official records and papers for departing Members of that chamber. Official papers are generally described as those materials that may be mailed under franking regulations. Other materials, including memorabilia, photographs, and documents that do not relate to official business, must be shipped or disposed of at the outgoing Member's expense. Guidance regarding records management is available from the Office of the Clerk. Shipping of records is carried out by the House CAO. The Senate Records Management Handbook notes that neither statute nor the standing rules of the Senate define which items constitute a Senator's papers. For management purposes, the Secretary of the Senate defines Senators' papers as "all records, regardless of physical form and characteristics, that are made or received in connection with an individual's career as a United States Senator." The manual notes that, by tradition and practice, any such records are the private property of the individual Senator. The principal exclusion from Senators' papers are committee records that are defined by statute and Senate standing rules to be records of the Senate. Senate office closing guidelines specify a detailed process for the handling of a Senator's records. The National Archives and Records Administration (NARA) provides courtesy storage facilities to Members of Congress for records created in Capitol Hill offices at the Washington National Records Center (WNRC) in Suitland, MD, and at regional storage facilities around the country for records generated in state or district offices. NARA courtesy storage expires at the conclusion of a Member's term of office. WNRC can be reached at 301-778-1650. Contact information for NARA regional facilities is available at http://www.archives.gov/locations/ . The House Office of Finance requests that contact information for each closing office be provided to expedite resolution of final payments to vendors. Closing offices must settle several accounts, with units of the Secretary of the Senate and the Sergeant at Arms, as well as other government agencies. The Senate Disbursing Office is authorized to withhold from Senators' pay, reimbursements, mileage, or expense money for delinquent indebtedness to the Senate. At the conclusion of a Congress, the Architect of the Capitol has in the past advised that departing Members must vacate their Washington, DC, offices not later than noon on December 1, of the second year of a Congress. A Departing Member Service Center has provided functional workspace for departing Members and staff once their office suites are vacated. The center is typically secured by the U.S. Capitol Police and has a central administrative facility that is staffed by CAO employees. Each departing Member office is assigned a single cubicle that can accommodate the Member and one other person at any given time. Each cubicle is equipped with a telephone, networked computer, and basic supplies. Senators may remain in their personal offices in Washington, DC, until their terms of office expire. Senators leasing federal office premises or commercial space in their home states must notify the General Services Administration (GSA) or private landlord in writing at least 30 days in advance of their intention to vacate the premises. The Sergeant at Arms requires that a copy of an intent to vacate letter be provided to his office at the same time it is provided to landlords. All office space must be vacated by the close of business on January 2 of the year in which the Senator's term expires. House Support Services (HSS) staff will begin scheduling final equipment inventories for the Capitol Hill offices of departing Members shortly after the November elections. GSA is responsible for performing the final inventory for the district office locations of departing Members. All furniture and equipment (including copiers, faxes, telecommunication systems, computers, personal digital assistants, and any other equipment used to support office operations), whether used in office settings, or in the residences of Members and staff, must be accounted for in those inventories. Representatives are allowed to purchase their chairs and desks only from the Washington, DC, inventory. In district offices, succeeding Members will receive all of the equipment and furniture items of the outgoing Member. If the succeeding Member chooses not to use office items of the departing Member, those items will then become available for purchase by the departing Member. Furnishings in a departing Senator's personal and Capitol offices remain in place. Keys for Capitol offices must be returned to Sergeant at Arms Capitol Facilities. The Asset Management Section of the Sergeant at Arms conducts an inventory of all office and information technology (IT) related equipment in closing offices. Telecommunications equipment must be returned to the Senate. Outgoing Senators may purchase select office equipment and non-historical furniture used in their Capitol Hill offices. Emergency equipment, including annunciators, escape hoods, emergency supply kits (go kits), and victim rescue units, will be inventoried by the Office of Security and Emergency Preparedness (OSEP). Outgoing Senators may purchase office furnishings from only one of their state offices at a price equal to the acquisition price less depreciation. A Member of Congress may leave office prior to the expiration of his or her term, due to resignation, death, or for other reasons. On the first business day after the death, resignation, or expulsion of a Member of the House, his or her office is renamed the Office of the ___ Congressional District of State/Territory. Pursuant to House Rule II, cl.2(i)(1), staff on payroll of the congressional office when the outgoing Member departs remain employed by the House, and carry out their duties under the supervision of the Clerk of the House until a successor is elected. Senate practice regarding the closing of the office of a Senator who leaves office prior to the expiration of his or her term of office varies according to the circumstances of the departure. In addition to the expiration of the regular term of office, the Senate Handbook notes that a Senate office might be closed due to the following categories: resignation termination of the service of a Senator who is appointed and who does not stand for election, or is defeated death of a Senator Employees in the personal office of a Senator who resigns are continued on the Senate payroll at their respective salaries for up to 60 days after the Senator leaves office, unless the Senator's term of office expires sooner. Employee duties are performed under the direction of the Secretary of the Senate. An amount equal to one-tenth of the official office expense account portion of the Senator's Official Personnel and Office Expense Account is available to the Secretary of the Senate to defray those expenses directly related to closing a Senator's office. Expenses are paid from the Contingent Fund of the Senate as Miscellaneous Items. Employees in the personal office of a Senator whose appointment is terminated are continued on the Senate payroll at their respective salaries for up to 30 days after the termination of the Senator's service, or until they have become otherwise gainfully employed, whichever is earlier. The office space in Washington, DC, and in the state of an appointed Senator must be vacated on the day preceding the swearing-in of the successor, if the Senate is in session. If the Senate has adjourned sine die, an appointed Senator who will not continue to serve in the Senate must vacate office facilities the day before a successor is certified, or 30 days after a successor has been elected, whichever is earlier. Employees in the personal office of a deceased sitting Senator are continued on the Senate payroll at their respective salaries for up to 60 days after the Senator's death, unless the Senator's term of office expires sooner. The Committee on Rules and Administration may extend this period in cases where it will take longer to close a deceased Senator's office. Employee duties are performed under the direction of the Secretary of the Senate. An amount equal to one-tenth of the official office expense account portion of the Senator's Official Personnel and Office Expense Account is available to the Secretary of the Senate to defray those expenses directly related to closing a Senator's office. Expenses are paid from the Contingent Fund of the Senate as Miscellaneous Items. The Senate Financial Clerk provides information concerning allowances for the operation of the deceased Senator's office during the 60-day period.

Turnover of membership in the House and Senate necessitates closing congressional offices. The closure of a congressional office requires an outgoing Member of Congress to evaluate pertinent information regarding his or her staff; the disposal of personal and official records; and final disposition of office accounts, facilities, and equipment. In the past several years, the House and Senate have developed extensive resources to assist Members in closing their offices. These services are most typically used at the end of a Congress, when a Member's term of service ends, but most of the services are available to an office that becomes vacant for other reasons. This report provides an overview of the issues that may arise in closing a congressional office, and provides a guide to resources available through the appropriate support offices of the House and Senate. This report, which will be updated as warranted, is designed to address questions that arise when a congressional office is closing. Another related report is CRS Report R41121, Selected Privileges and Courtesies Extended to Former Members of Congress , by [author name scrubbed].

The Department of Defense (DOD) has a long history of relying on contractors to support troops during wartime and expeditionary operations. Generally, from the Revolutionary War through the Vietnam War, contractors provided traditional logistical support such as medical care, transportation, and engineering to U.S. armed forces. Since the end of the Cold War there has been a significant increase in contractors supporting U.S. troops – in terms of the number and percentage of contractors, and the type of work being performed ( Figure 1 ). According to DOD, post-Cold War budget reductions resulted in significant cuts to military logistical and support personnel, requiring DOD to hire contractors to "fill the gap." The number of DOD contractors in Iraq is significant. According to DOD, as of July 1, 2008, there were 200,000 DOD contractors in Iraq and Afghanistan, compared to 180,000 uniformed military personnel. The Congressional Budget Office (CBO) estimates that from 2003 through 2007, DOD obligated $54 billion for contractors working in Iraq. These contractors not only provide traditional logistical support—such as delivering food and providing weapons maintenance—but also provide critical front-line combat support that puts them directly on the battlefield. Such front-line support includes interrogating prisoners, working as translators for combat units, providing security for convoys traveling through the battle space, and providing security for forward operating bases ( Figure 2 ). Projecting into the future, a senior DOD official said that civilian contractors may make up 50% of all DOD personnel deployed in future overseas operations. Unless a policy decision is made to expand the military, many analysts argue that the large-scale use of contractors will remain a fixture of the military's force structure for the foreseeable future. This raises questions about DOD's capacity to manage contractors in the field during such operations. DOD has an established acquisition workforce, consisting of military and civilian personnel who are responsible for acquiring goods and services for the military. However, while a number of contracting officers and other acquisition officials are in Iraq, most of DOD's acquisition workforce is generally not deployed or embedded with the military during expeditionary operations. As the number of contractors in the area of operations has increased, the operational force—the service men and women in the field—increasingly rely on, interact with, and are responsible for managing contractors. Yet, a number of military commanders and service members have indicated they did not get adequate information regarding the extent of contractor support in Iraq and did not receive enough pre-deployment training to prepare them to manage or work with contractors. One DOD official has pointed out that the military does not have an adequate infrastructure to effectively execute and manage contractors in Iraq. And last year, an Army commission produced the Gansler Report, which found that Contacting Officer Representatives (CORs) responsible for managing contractors are generally drawn from combat units and receive "little, if any, training" on how to work with contractors. This finding confirms what many analysts have argued: that deployed military personnel are not sufficiently trained or prepared to manage contractors in an area of operations. Given the critical role contractors are playing in supporting military operations and the billions of dollars DOD spends on contractors, the ability of the operational force to manage and oversee contractors has become increasingly important. Poor contract management can lead to troops not receiving needed support and the wasteful spending of billions of dollars. A lack of effective contractor management can even undermine the credibility and effectiveness of the U.S. military. For example, according to an Army investigative report, a lack of good contractor surveillance at Abu Ghraib prison contributed to fostering a permissive environment in which prisoner abuses took place. Many observers believe that the fallout from Abu Ghraib and other incidents, such as the shooting of Iraqi civilians by private security contractors hired by the United States government, have hurt the credibility of the U.S. military and undermined efforts in Iraq. A number of experts believe that the military needs to improve the operational force's management of and coordination with contractors in the area of operations. These experts have argued that increased training and education is necessary for non-acquisition personnel throughout the military. The Gansler Report stated that the Army needs to train operational commanders on the important role contracting plays, as well as on their responsibilities in the process. The report called for including courses in the curricula on contractors in expeditionary operations at command schools (e.g., the War College and Sergeant Majors Academy) and other officer educational programs. Echoing the Gansler Report, an official at the U.S. Army Materiel Command wrote that "Contractor logistics support must be integrated into doctrine and taught at every level of professional schooling in each component." The calls for more robust training are not new. For example, in 2003, GAO testified before the House Armed Services Committee, Subcommittee on Readiness, stating "[T]he lack of contract training for commanders, senior personnel, and some contracting officers' representatives can adversely affect the effectiveness of the use of contractors in deployed locations. Without training, many commanders, senior military personnel, and contracting officers' representatives are not aware of their roles and responsibilities in dealing with contractors." In early 2008, Congress amended the law (10 U.S.C. 2333, as amended) and mandated training for non-acquisition military personnel filling positions with contracting responsibilities during expeditionary operations. The statute was aimed to ensure that the military is prepared to deal with contracting responsibilities during contingency and other operations. The amendment also (1) mandated the incorporation of contractors and contract operations into mission readiness exercises; (2) directed the Secretary of Defense and the Secretary of the Army to evaluate all recommendations in the Gansler Report and submit a report to the congressional defense committees describing their plans for implementing applicable report recommendations; and (3) and required the GAO to submit to Congress a report analyzing the extent to which DOD is complying with this amended section (2333) of title X. In addition, Congress appropriated $2,500,000 for the Joint Contingency Contract Support Office and $2,000,000 for Military Non-Contracting Officer Training to implement this program. According to Title X of the United States Code, military services are generally responsible for training military forces. As such, some argue that it is the charge of the military services to implement training aimed at improving contractor coordination and management. Others argue that the use of contractors during expeditionary operations cuts across military branches and to be successful, training initiatives should be spearheaded by DOD and then propagated throughout the individual services. According to senior military officials, while there is not yet a unified strategy among the various DOD departments on how to train and educate non-acquisition personnel to work with and manage contractors, a number of initiatives are underway. Some of these initiatives are described below. In July 2008, DOD developed an Operational Contract Support Concept of Operations, intended to be a road map for integrating contract support and management during expeditionary operations. The concept calls for training officers in developing and executing key contracting documents such as statements of work, with the objective that "DOD as a whole must have the ability to ensure CORs are properly trained and certified." In addition, according to the Joint Staff, a "Joint Logistics" doctrine has been published that addresses contractor support integration and management. DOD is also developing classroom and on-line training for non-acquisition personnel and incorporating contracting scenarios into military exercises. DOD has developed an eight-hour course on Contingency Contract Management Training that is intended to pave the way for the military services to introduce such a course at the Staff Colleges. DOD also developed a similar eight-hour course geared to the Senior Staff Colleges. These courses are intended to prepare military leaders who lack extensive contracting experience to plan for contract support, integrate contractors into force plans, and manage contractors in the area of operation. DOD expects these courses to be offered in 2009. According to senior DOD officials, the long term plan is to offer similar courses throughout the military's educational system, including courses for noncommissioned officers. DOD is also planning to develop an on-line course targeting non-acquisition personnel that is designed along the lines of the classroom courses. The on-line training is intended to focus on pre-deployment training needs such as how to plan for, work with, and get the most out of contractors during military operations. Some observers believe that incorporating contractors and contract operations in military exercises can help educate and prepare military planners and operational commanders to better manage contractors. DOD established the Joint Contingency Acquisition Support Office (JCASO) to provide the joint force commander with the necessary assistance to plan, support, and oversee contingency contracting activities during the initial phases of a contingency operation. JCASO is intended to provide initial program management and contracting teams and will be responsible for coordinating and monitoring all contractors in a joint area of operations where JCASO is operating. In May 2008, DOD tested the JCASO concept by incorporating it into a U.S. European Command (USEUCOM) military exercise which took place in Germany over a span of nine days. According to DOD, the exercise validated the JCASO concept and structure, providing the joint force commander with "much-needed visibility regarding contracts and contractors". A post-exercise assessment found that military planners and commanders need to become better informed as to the role of JCASO and the capabilities it provides. DOD intends to have JCASO participate in other war games and exercises to ensure that contracting is integrated into mission planning and execution. Recognizing that acquisition and program management during expeditionary operations is a critical element in achieving operational success, the Army established the commission that issued the Gansler Report. In addition to DOD efforts, the Army has been developing and implementing a number of initiatives to improve how it works with and manages contractors on the battlefield and during expeditionary operations. Incorporating ideas from the Gansler Report, the Army is developing doctrine and taking a three-pronged approach to improve how the operations force works with contractors. The new approach would (1) familiarize the operational force with the importance of contracting support to mission execution, (2) educate and train selected individuals to better plan and coordinate the management of contractor support, and (3) collectively train units at the brigade level and above. According to Army officials, some educational classes and seminars are intended to familiarize the force with the importance of contracted support, while other classes and seminars are intended to provide concrete knowledge and skill sets. Officials stated that most efforts are focused on logisticians, who will be provided seminars or discussions on contracting throughout their careers, including at the Staff Sergeant, Captain, and Second Lieutenant levels. A number of educational opportunities will also be offered to non-logisticians. For example, all Majors will be required to attend a two hour class on contract support through the intermediate leader education courses. All attendees of the Army War College will be required to participate in a seminar on contractor support and operations logistics. Selected generals are to take a three hour Senior Leader Course on operational contract support. The army has also developed informational pamphlets and handbooks to help military personnel better understand the contracting process, to know their contracting responsibilities, and to work more effectively with contractors. In addition, the Army, with Air Force support, is developing a one to two week course on operational contract support that is intended to outline the contracting process (focusing on tactical unit commanders and staff roles and responsibilities in the acquisition process), teach relevant contracting skills (including how to create a complete requirements package), and teach how to integrate contractor personnel into military operations. The course is expected to be taught at the Army Logistics Management College's Huntsville, Alabama, campus at Ft. Levenworth, Kansas, to selected officer and NCO multi-functional logisticians, and is to be made available to all Army personnel. According to officials, the Army has incorporated operations contract support into most mission-readiness exercises over the last two years. In addition, the Army is working with the joint community to include contract support into other operations. For example, from August 11 - 22, 2008, the U.S. Southern Command sponsored PANAMAX 2008, a military exercise focused on ensuring the defense of the Panama Canal. The exercise included a Joint Contracting Command element provided by the Army, augmented by Air Force and Navy personnel. As a result of the contracting component of the exercise, the After Action Review of the effort included discussions on contracting. For example, noting the importance of contracting to mission success and the "little to no emphasis on contracting functions ... during the execution phase of the exercise," the After Action Review recommended "joint training agencies develop acquisition training programs that target operational commanders as the training audience." The report also recommended the establishment of policies and procedures for managing contractors. The National Defense Authorization Act of FY2008 ( H.R. 4986 / P.L. 110-181 ) required DOD, and especially the Army, to train military personnel who are outside the acquisition workforce but are expected to have acquisition responsibility , and to incorporate contractors and contract operations into mission exercises. As outlined above, DOD has initiated a number of steps to comply with P.L. 110-181 , including developing doctrine, developing a concept of operations, planning and introducing educational courses into the curricula of non-acquisition military personnel, and incorporating contractor support scenarios into mission-ready and other exercises. Congress may wish to consider requiring officer and/or enlisted performance evaluations to include commentary and/or grade evaluation of contractor management. On the one hand, including a contractor management narrative as part of a performance evaluation could help ensure attention is given to this issue. However, it should be recognized that contract support is not relevant for all military personnel, and elements of contract support could also fall under other evaluation factors, such as personnel, management. Alternatively, Congress could consider requiring performance evaluations for military personnel whose mission involves or substantially relies on contractor support. Another option would be to amend the performance evaluation guidelines to stipulate specifically that contractor management be part of the discussion of personnel management or other related factors. Such a requirement would be similar to section 527 of the FY2009 Duncan Hunter National Defense Authorization Act ( P.L. 110-417 ) which requires the Chairman of the Joint Chiefs of Staff to submit to Congress a report outlining the joint education courses available throughout the DOD. Such a report could help Congress execute its oversight function. Such a report could help accomplish two goals: it can (1) help Congress chart the military's progress in preparing the operational force to work with contractors during expeditionary operations and (2) help DOD maintain focus on this issue. DOD has stated as far back as 2004 that it would explore creating training courses on contracting for mid- and senior-level service schools. However, some analysts would argue that DOD failed to follow through adequately on creating additional training on contract support until Congress mandated training for appropriate non-acquisition military personnel. As described in this report, DOD has recently taken a number of concrete steps to improve how the operational force works with contractors and has incorporated contractors and contract operations into mission-readiness and other exercises. Analysts argue that only sustained congressional attention can help ensure that the desired results will be achieved.

The Department of Defense (DOD) is responsible for performing a wide range of expeditionary missions, including domestic emergency operations and military operations outside of the continental United States. DOD increasingly relies on contractors during expeditionary operations to perform a wide range of services. For example, more contractors are working for DOD in Iraq and Afghanistan than are U.S. military personnel. As a result, military personnel in the field are increasingly interacting with and responsible for managing contractors. Yet many observers argue that the military is not sufficiently prepared to manage contractors during expeditionary missions. The National Defense Authorization Act of FY2008 (H.R. 4986/P.L. 110-181) required DOD, and especially the Army, to train military personnel who are outside the acquisition workforce but are expected to have acquisition responsibility , and to incorporate contractors and contract operations into mission exercises. DOD, including the Army, are taking a number of steps to comply with Congressional legislation to better prepare the operational force—including servicemen and women conducting military operations on the battlefield—to work with contractors. These steps include developing doctrine for integrating contract support into expeditionary operations, introducing courses on contract support into the curriculum for non-acquisition personnel, and incorporating contract operations into mission readiness exercises. This report examines these steps being taken by DOD and options for Congress to monitor DOD's efforts to comply with P.L. 110-181. Options include requiring military departments to report on acquisition education courses available for operational personnel. This report will be updated as events warrant.

President Obama's budget outline for FY2010 includes several proposals to reduce federal spending by $16 billion over 10 years on the farm commodity and crop insurance programs. The issue was highlighted in the President's address to Congress on February 24, 2009, when he said, "In this budget, we will ... end direct payments to large agribusinesses that don't need them." Mr. Obama also highlighted the farm commodity programs when, as president-elect, he cited a GAO report on improper payments to farmers by remarking that, "There's a report today that, from 2003 to 2006, millionaire farmers received $49 million in crop subsidies even though they were earning more than the $2.5 million cutoff for such subsidies. Now, if this is true ... it is a prime example of the kind of waste that I intend to end as president." Criticism over parts of the farm subsidy program from an Administration is not new. Throughout the 2008 farm bill debate, the Bush Administration wanted tighter income eligibility limits on farm subsidies, and it vetoed the farm bill—albeit unsuccessfully—partly for such reasons. Reaction to the proposal has been generally negative from groups affiliated with or supportive of agriculture. The most vehement reaction has been to a proposal to eliminate direct payments to farms with more than $500,000 of sales. Several members of the House and Senate agriculture committees have spoken out against the proposal in part or in whole. Support, although not explicitly expressed, would likely originate from some groups or individuals who supported tighter payments limits in the 2008 farm bill and would want tighter payment limits in any form. The FY2010 budget proposal for the farm commodity and crop insurance programs is separate from the discretionary budget that funds USDA operations. The discretionary budget usually is the centerpiece of the Administration's annual proposal, but that element of the budget is delayed in the first year of a President's term, and is not expected until April. Pending that submission, the Administration has proposed a budget outline that, in the context of fiscal discipline, includes several proposals to reduce mandatory spending programs. The mandatory farm commodity programs are not subject to annual appropriations, but are part of the five-year 2008 farm bill ( P.L. 110-246 ). The FY2010 budget indicates that most of the proposed $16 billion in farm commodity reductions would be used to offset $9.9 billion of proposed increases in child nutrition, although the savings could be used in any number of ways throughout the federal government. Given the nature of the mandatory programs, it is important to note—relative to the Administration's proposal—that: any changes would require legislative action by Congress and would likely need to originate in the agriculture authorizing committees. They would not be part of the annual appropriations process. such action would be viewed as "reopening" the 2008 farm bill, which most in the agriculture community see as a five-year contract with farmers. The agriculture committees are neither obligated nor likely to take up the proposal (some committee members have spoken out against the proposal in part or in whole). if budget reconciliation is ordered by the budget committees, and the agriculture committees are tasked to find savings of a certain magnitude, then the President's farm proposals may draw more attention from Congress. Even then, the proposal likely would be modified or a different budget-saving approach chosen, given the reaction by farm groups and agriculture committee members. Specifically, the President's FY2010 budget proposes four reductions in the farm subsidies, including direct payments, payment limits, cotton storage payments, and crop insurance. The savings are estimated by the Administration to total $16 billion over 10 years ( Table 1 ). 1. Prohibit "direct payments" to farmers with sales exceeding $500,000 per year. 7 This would be a new and different type of "payment limit." About 76,500 farms in 2007 receiving government payments had sales over $500,000 (11% of farms receiving government payments, Table 4 ). Midwestern farms would be affected in the greatest number, but the proportion of cotton and rice farms affected would be greater than for corn, soybean, and wheat farms. The Administration estimates savings of $9.8 billion over 10 years. Relative to the $44 billion of direct payments that USDA expects to pay from FY2010-FY2019 in the baseline under the 2008 farm bill, the proposal would reduce total direct payments by 22% over 10 years ( Table 2 , Figure 1 ). 2. Tighten payment limits (maximum amount of subsidies paid) to $250,000 per person . The proposal is not detailed, but indications suggest it would re-impose limits on marketing loan benefits and tighten the limit on direct and counter-cyclical payments. This would be similar to prior-year proposals for the same amount (e.g., S.Amdt. 3695 , 110 th Congress). Current law has a per-person limit of $210,000 for direct and counter-cyclical payments, with no limit on marketing loan benefits. Prior law had a $360,000 limit that included marketing loans (although the limit could be avoided). The Administration estimates $126 million of savings over 10 years. 3. Eliminate storage payments for cotton. Only cotton has a payment program to pay storage costs for crops placed under government loan. The Administration estimates savings of $570 million over 10 years. 4. Reduce crop insurance subsidies. The proposal is not detailed, but savings could be achieved by reducing the subsidy on premiums that farmers pay, reducing underwriting gains received by the insurance companies that sell the policies, or reducing administrative and operating expense reimbursements to the insurance companies. The Administration estimates savings of $5.2 billion over 10 years. Relative to the $72 billion of crop insurance subsidies estimated from FY2010-FY2019 in the CBO baseline, the proposal would reduce the crop insurance baseline by 7.2% over 10 years ( Table 3 , Figure 2 ). The budget also mentions reductions in the Market Access Program (MAP) and elimination of the Resource Conservation and Development (RC&D) program, both of which are outside the scope of the farm commodity programs. Much of the attention given to the Administration's budget proposal has centered on the proposal to eliminate direct payments to farms with sales of more than $500,000. Several observations may be made about the effect of using a limit on sales, and on the number and types of farms that would be affected. A limit on sales would add a new type of "payment limit" for farm commodity support. Currently there is (1) a limit on amount of payments that a farmer can actually receive, and (2) an adjusted gross income (AGI) limit to determine eligibility. The proposal would add a third type of payment limit—an eligibility test of $500,000 of gross farm sales. A $500,000 limit on sales generally would be more restrictive than the existing AGI limit of $750,000 of "farm AGI" (after expenses) and $500,000 of "nonfarm AGI." The AGI measure is after expenses are subtracted from income; farms with $750,000 of farm AGI likely have sales exceeding $1-$2 million or more. The proposed limit on sales would be on a gross basis—that is, before expenses. Gross farm sales may be more variable than net farm sales ("farm AGI"). Net farm sales are less variable because higher expenses may offset higher sales. Thus, many opponents to the proposal have argued that farms exceeding a $500,000 sales limit may have very little profit or even a loss. The high magnitude of commodity price increases during 2007-2008 changed the share of farms with sales over $500,000 from the 3%-4% share of the previous nine years to 5.5% in 2007-2008. ( Figure 3 ). Although this share may decline in the future given the drop in commodity prices since the fall of 2008, it highlights that sales may be variable and more subject to "bracket creep" than net measures of income. Sales vary directly with prices and yields. Years with high prices or yields could push farms over the limit. In contrast, a net income measure may be more constant if higher production expenses occur or tax management tools are used. For example, expenses may vary in proportion to production (e.g., costs per acre, fertilizer-to-yield). Some expenses may be fixed regardless of production (e.g., land costs or sunk production costs). Other expenses may be manipulated to manage taxable income (e.g., purchasing equipment, and prepaying expenses), or delayed to reduce outlays in low-income years (e.g., postponing repairs or capital improvements, reducing withdrawals for family living expenses). USDA data show about 76,500 farms in 2007 receiving government payments and having sales over $500,000. They accounted for 11% of farms receiving government payments, and they received 47% of government payments ( Table 4 ). When estimating the number of farms affected, it is important to look both at farms receiving government payments and farms with sales greater than $500,000. About 116,000 farms (5.3% of all farms in 2007) had sales over $500,000, but only about 38% of all farms received government payments ( Figure 4 ). Many large fruit, vegetable, or livestock farms have sales over $500,000 but do not receive subsidies that accrue primarily to grains, oilseeds, and cotton. Large farms, although fewer in number, account for most of the production and government payments. The 116,000 farms with sales over $500,000 produced 74% of the value of production and received 47% of government payments. The effect on farms by region is visible in Table 4 . Overall, the states with the highest number of farms affected are Iowa (about 8,200 farms), Illinois (6,500 farms), Minnesota (5,300 farms), and Nebraska (5,100 farms). About one-third of the 76,500 affected farms in the nation are in these four states. About 13%-16% of farms in these states receive government payments and have sales over $500,000. The table also shows the importance of combining information about high sales and government payments, and the effect of producing non-subsidized commodities. For example, in California the effect of fruit and vegetable production on large farms is apparent with only 9% of farms receiving government payments. More California farms have sales over $500,000 (8,600 farms) than receive government payments (7,100 farms). Delaware has the highest ratio of farms (28%) with sales exceeding $500,000, likely an indicator of the state's concentrated poultry production on a relatively small amount of land (compare Figure 6 and Figure 7 ). By commodity, a limit on sales would affect a higher percentage of cotton and rice farms (in the southern tier of the United States) than corn, soybean, or wheat farms. Cotton and rice farms on average are larger than corn, soybean, or wheat farms, and their value of production per acre is much higher—making them more likely to exceed a sales threshold. Government payments to cotton and rice farms also are higher ( Figure 5 , Figure 7 ). This comparison is similar to arguments that have been made in the payment limits debate for many years. Specific to the Administration's proposal, about 17%-21% of farms selling corn, soybeans, or wheat have sales over $500,000. Their sales account for 51%-59% of the national production of corn, soybeans, and wheat ( Table 5 ). About 36% of farms selling cotton, and 43% of farms selling rice have sales over $500,000. Their sales account for 75% of the national production ( Table 5 ). But given the predominance of acreage devoted to corn, soybeans, and wheat compared with cotton and rice, the sheer number of corn, soybean, and wheat farms affected is larger than for cotton and rice. This is indicated by the number of farms with sales over $500,000 ( Table 5 ) and the rank of states like Iowa, Illinois, Minnesota, and Nebraska in Table 4 .

President Obama's budget outline for FY2010—in the context of fiscal discipline—includes several proposals to reduce federal spending by $16 billion over 10 years on the farm commodity and crop insurance programs. Reaction to the proposal has been generally negative from groups that are affiliated with or supportive of agriculture. The most vehement reaction has been to a proposal to eliminate direct payments to farms with more than $500,000 of sales. Any change would require legislative action by Congress; it would not be part of the annual appropriations process. Such action would be viewed as "reopening" the 2008 farm bill, which most in the agriculture community see as a five-year contract with farmers. The agriculture committees are neither obligated nor likely to take up the proposal. If budget reconciliation is ordered by the budget committees, and the agriculture committees are tasked to find savings, then the President's farm proposals may draw more attention—but even then, the proposal likely would be modified or a different budget-saving approach could be chosen. Specifically, the President's FY2010 budget proposes four reductions in the farm subsidies: Prohibit "direct payments" to farmers with sales exceeding $500,000 per year. This would add a new type of "payment limit." About 76,500 farms in 2007 receiving government payments had sales over $500,000 (11% of farms receiving government payments). They received 47% of government payments. Midwestern farms would be affected in the greatest number. Four states (Iowa, Illinois, Minnesota, and Nebraska) account for one-third of the number of farms affected nationally. But the proportion of cotton and rice farms affected would be greater than for corn, soybean, and wheat farms (36%-43% compared to 17%-21%, respectively). The Administration estimates savings of $9.8 billion over 10 years, a reduction of about 22% of expected direct payments. Tighten payment limits (the maximum amount of subsidies paid) to $250,000 per person. The proposal is not detailed, but indications suggest it would re-impose limits on the marketing loan program and tighten the limit on direct and counter-cyclical payments. The Administration estimates $126 million of savings over 10 years. Eliminate storage payments for cotton. Only cotton has a payment program to pay storage costs for crops placed under government loan. The Administration estimates savings of $570 million over 10 years. Reduce crop insurance subsidies. The proposal is not detailed, but savings could be achieved by reducing the subsidy on premiums that farmers pay, reducing underwriting gains to insurance companies that sell policies, or reducing administrative and operating expense reimbursements. The Administration estimates savings of $5.2 billion over 10 years, about 7.2% of expected outlays.

Historically, patient health information has been scattered across paper records kept by different caregivers in many different locations. Thus, the move toward collecting, storing, retrieving, and transferring these records electronically can significantly improve the quality and efficiency of care. This is especially true in the case of military personnel and veterans, because they tend to be highly mobile and may have health records at multiple facilities both within and outside the United States. Interoperability allows patients’ electronic health information to be available from provider to provider, regardless of where it originated. Achieving this depends on, among other things, the use of agreed-upon health data standards (e.g., standardized language for prescriptions and laboratory testing) and the ability of systems to use the information that is exchanged. Currently, both VA and DOD operate separate electronic systems to create and manage electronic health records. VA uses its Veterans Health Information Systems and Technology Architecture (VistA), a system that the department developed in-house and that consists of 104 separate computer applications; while DOD uses the Armed Forces Health Longitudinal Technology Application (AHLTA), which consists of multiple legacy medical information systems developed from customized commercial software applications. Since 1998, VA and DOD have undertaken a patchwork of initiatives intended to allow their health information systems to exchange information and increase interoperability. Among others, these have included initiatives to share viewable data in existing (legacy) systems, link and share computable data between the departments’ updated heath data repositories, and jointly develop a single integrated system. Table 1 below summarizes a number of the departments’ key efforts. In addition to the initiatives mentioned in table 1, the departments took a variety of actions to respond to provisions in the National Defense Authorization Act (NDAA) for Fiscal Year 2008, which required them to jointly develop and implement fully interoperable electronic health record systems or capabilities in 2009. The act also directed them to set up an interagency program office (referred to as the IPO) to serve as a single point of accountability for these efforts. Department officials stated that their previous initiatives, along with meeting six interoperability objectives established by their Interagency Clinical Informatics Board, had enabled them to meet the deadline for full interoperability established by the act. However, we previously identified a number of challenges that the departments faced in managing their efforts in response to the act and to address their common health IT needs. In particular, although these initiatives have helped to increase data-sharing in various ways, they have been plagued by persistent management challenges that have hampered progress toward fully interoperable electronic health record capabilities. In March 2011, the secretaries of the two departments announced that they would develop a new, joint integrated electronic health record system (referred to as iEHR). This was intended to replace the departments’ separate systems with a single common system, thus sidestepping many of the challenges they had previously encountered in trying to achieve interoperability. However, in February 2013, about 2 years after initiating iEHR, the secretaries announced that the departments were abandoning plans to develop a joint system, due to concerns about the program’s cost, schedule, and ability to meet deadlines. The IPO reported spending about $564 million on iEHR between October 2011 and June 2013. In place of the iEHR initiative, VA stated that it would modernize VistA, while DOD planned to buy a commercially available system to replace AHLTA. The departments stated that they would ensure interoperability between these updated systems, as well as with other public and private health care providers. In December 2013, the IPO was re-chartered and given responsibility for establishing technical and clinical standards and processes to ensure that health data between the two departments (and other providers) are integrated. We issued several prior reports regarding this approach, in which we noted that the departments did not substantiate their claims that it would be less expensive and faster than developing a single, joint system. We also noted that the departments’ plans to modernize their two separate systems were duplicative and stressed that their decisions should be justified by comparing the costs and schedules of alternate approaches. We therefore previously recommended that the departments develop cost and schedule estimates that would include all elements of their approach (i.e., modernizing both departments’ health information systems and establishing interoperability between them) and compare them with estimates of the cost and schedule for the single-system approach. If the planned approach was projected to cost more or take longer, we recommended that they provide a rationale for pursuing such an approach. VA and DOD agreed with our prior recommendations and stated that initial comparison indicated that the current approach would be more cost effective. However, as of October 2015, the departments have not provided us with a comparison of the estimated costs of their current and previous approaches. On the other hand, with respect to their assertions that separate systems could be achieved faster, both departments have developed schedules that indicate their separate modernizations are not expected to be completed until after the 2017 planned completion date for the previous single system approach. In light of the departments’ not having yet implemented a solution that allows for seamless electronic sharing of health care data, the National Defense Authorization Act (NDAA) for Fiscal Year 2014 included requirements pertaining to the implementation, design, and planning for interoperability between VA’s and DOD’s electronic health record systems. Among other actions, provisions in the act directed each department to (1) ensure that all health care data contained in their systems (VA’s VistA and DOD’s AHLTA) complied with national standards and were computable in real time by October 1, 2014, and (2) deploy modernized electronic health record software to support clinicians while ensuring full standards-based interoperability by December 31, 2016. Our August 2015 report noted that the departments have engaged in several near-term efforts focused on expanding interoperability between their existing electronic health record systems. For example, the departments analyzed data related to 25 “domains” identified by the Interagency Clinical Informatics Board and mapped health data in their existing systems to standards identified by the IPO. The departments also expanded the functionality of their Joint Legacy Viewer—a tool that allows clinicians to view certain health care data from both departments in a single interface. In addition, VA and DOD have both moved forward with plans to modernize their respective electronic health record systems. VA has developed a number of plans for its VistA modernization effort (known as VistA Evolution), including an interoperability plan and a road map describing functional capabilities to be deployed through fiscal year 2018. According to the road map, the first set of capabilities was to be delivered in September 2014, and was to include access to the Joint Legacy Viewer, among other things. For its part, DOD issued a request for proposals and developed a series of planning documents for its systems modernization effort (referred to as the Defense Healthcare Management System Modernization (DHMSM) program). Further, the department announced that the DHMSM contract was awarded on July 29, 2015, and that it plans for the new system to reach initial operating capability by December 2016. The IPO has also taken actions to facilitate departmental interoperability efforts. These included developing technical guidance that details how VA and DOD systems are to exchange information consistent with national and international standards. The office also developed a joint interoperability plan, which summarizes the departments’ actions in this area, and a health data interoperability management plan, which outlines a high-level approach and roles and responsibilities for achieving health data exchange and terminology standardization. While these are important steps toward greater interoperability, VA and DOD nonetheless did not, by the October 1, 2014, deadline established by the 2014 National Defense Authorization Act for compliance with national data standards, certify that all health care data in their systems complied with national standards and were computable in real time. Additionally, the departments acknowledged that they do not expect to complete a number of key activities related to their electronic health record system efforts until sometime after the December 31, 2016, statutory deadline for deploying modernized electronic health record software with interoperability. Specifically, deployment of VA’s modernized VistA system at all locations and for all users is not planned until 2018. Meanwhile, DOD has yet to define all the additional work that will be necessary beyond 2016 to fully deploy the DHMSM system, and full operational capability is not planned to occur until the end of fiscal year 2022. Thus, for the departments, establishing modernized and fully interoperable health record systems is still years away. A significant concern is that VA and DOD had not identified outcome- oriented goals and metrics that would more clearly define what they aim to achieve from their interoperability efforts and the value and benefits these efforts are intended to yield. As we have stressed in prior work and guidance, assessing the performance of a program should include measuring its outcomes in terms of the results of products or services. In this case, such outcomes could include improvements in the quality of health care or clinician satisfaction. Establishing outcome-oriented goals and metrics is essential to determining whether a program is delivering value. The IPO is responsible for monitoring and reporting on the departments’ progress in achieving interoperability and coordinating with VA and DOD to ensure that these efforts enhance health care services. Toward this end, the office issued guidance that identified a variety of process- oriented metrics to track, for example, the percentage of data domains that have been mapped to national standards. The guidance also identified metrics to be reported that relate to tracking the amount of certain types of data being exchanged between the departments’ existing initiatives, such as laboratory reports exchanged from DOD to VA through the Federal Health Information Exchange and patient queries submitted by providers through the Bidirectional Health Information Exchange. Nevertheless, as we reported in August 2015, the IPO had yet to specify outcome-oriented metrics and goals that would gauge the impact interoperable health record capabilities will have on the departments’ health care services. The acting director of the IPO stated that the office was working to identify metrics that would be more meaningful, such as metrics on the quality of a user’s experience or improvements in health outcomes. However, the IPO had not established a time-frame for completing such metrics and incorporating them into the office’s guidance. In our August 2015 report, we stressed that using an effective outcome- based approach could provide DOD and VA with a more accurate picture of their progress toward achieving interoperability and the value and benefits generated. Accordingly, we recommended that the departments, working with the IPO, establish a time frame for identifying outcome- oriented metrics, define related goals as a basis for determining the extent to which the departments’ modernized electronic health records systems are achieving interoperability, and update IPO guidance accordingly. Both departments concurred with our recommendations. In conclusion, VA and DOD are continuing to pursue their nearly 2 decades-long effort to establish interoperability between their electronic health records systems. Yet while the departments’ various initiatives over the years have increased the amount of patient health data exchanged by the departments and made accessible to providers, these efforts have been beset by persistent management challenges and uncertainty about the extent to which fully interoperable capabilities will be achieved and when. The 2013 decision to pursue separate modernizations, rather than a single, joint system, indicates that achieving interoperability will be an ongoing concern for years to come. Moreover, it has once again highlighted the criticality of these departments needing to define what they aim to accomplish through these efforts, and identify meaningful outcome-oriented goals and metrics that indicate not only the extent to which progress is being made toward achieving full interoperability, but also the measures to which they will be held accountable. As we stressed in our report, establishing measurable goals for improving the care that VA and DOD provide to the millions of service members, veterans, and their beneficiaries is essential to more effectively position the departments to do so. Chairmen Hurd and Coffman, Ranking Members Kelly and Kuster, and Members of the Subcommittees, this concludes my prepared statement. I would be pleased to respond to any questions that you may have. If you or your staffs have any questions about this statement, please contact Valerie C. Melvin at (202) 512-6304 or melvinv@gao.gov. Additional staff who made key contributions to this statement include Mark T. Bird (assistant director), Lee McCracken, Jacqueline Mai, Scott Pettis, and Jennifer Stavros-Turner. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

VA and DOD operate two of the nation's largest health care systems, serving millions of veterans and active duty members and their beneficiaries. For almost two decades the departments have undertaken various efforts to advance interoperability between their respective electronic health record systems. While the departments have made progress, these initiatives have also faced significant management challenges. Among their recent initiatives, the secretaries of the two departments committed to establishing interoperability between their separate electronic health record systems, which they are working to modernize. This statement summarizes GAO's August 2015 report (GAO-15-530) on VA and DOD's efforts to achieve interoperability between their health records systems. As GAO reported in August 2015, the Departments of Veterans Affairs (VA) and Defense (DOD), with guidance from the Interagency Program Office (IPO) tasked with facilitating the departments' efforts to share health information, have taken actions to increase interoperability between their existing electronic health record systems. These actions have included work on near-term objectives such as standardizing certain health data and making them viewable by clinicians in both departments in an integrated format. The departments also developed plans for their longer-term initiatives to modernize their respective electronic health record systems. In accordance with its responsibilities, the IPO issued guidance outlining the technical approach for achieving interoperability between the departments' systems. Having taken these actions, however, the departments did not, by the October 1, 2014, deadline established in the National Defense Authorization Act (NDAA) for Fiscal Year 2014 for compliance with national standards, certify that all health care data in their systems complied with national data standards and were computable in real time. Moreover, the departments do not plan to complete the modernization of their electronic health record systems until well after the December 2016 statutory deadline by which they are to deploy modernized electronic health record software while ensuring full interoperability. Specifically, VA plans to modernize its existing system, while DOD plans to acquire a new system; but their plans indicate that deployment of the new systems with interoperable capabilities will not be complete until after 2018. Consistent with its responsibilities, the IPO took steps to begin developing metrics to monitor progress related to the standardization of the departments' data and their exchange of health information. For example, it called for the development of tracking metrics to gauge the percentage of data domains within the departments' current systems that have been mapped to national standards. However, the office had not defined outcome-oriented metrics and related goals to measure the effectiveness of interoperability efforts in terms of improving health care services for patients served by both departments. IPO officials said that work was ongoing to develop more meaningful measures of progress, but the office had not established a time frame for completing this work or incorporating the outcome metrics and associated goals into its guidance. GAO concluded that without defining outcome-oriented metrics and related goals and incorporating them into their current approach, the departments and the IPO will not be in a position to effectively assess their progress toward further achieving interoperability and identifying the benefits that their efforts yield. In its August 2015 report, GAO recommended that VA and DOD, working with the IPO, establish a time frame for identifying outcome-oriented metrics, define goals to provide a basis for assessing and reporting on the status of interoperability, and update the IPO's guidance accordingly. The departments concurred with GAO's recommendations.

A court handling an interstate child custody dispute must consider whether it has jurisdiction to decide the custody case. Three laws provide the answer as to whether a particular court has jurisdiction: the Parental Kidnapping Prevention Act [PKPA], the Uniform Child Jurisdiction and Enforcement Act [UCJEA] and the Uniform Child Custody Jurisdiction Act [UCCJA], which has been enacted in some form in all fifty states and the District of Columbia. The PKPA gives priority to the child's home state (the state where the child lived with at least one parent for six months before the custody petition was filed). If one parent moves with the child to live in a new state, the original state continues to be the home state for an additional six months after the move. The child need not be physically present in the original state for the child custody proceeding to be initiated there by the parent who remained behind. Yes. In all states, custody orders can be modified by a court to further the best interests of the child. Usually, the parent requesting the modification must convince a judge that a substantial change in circumstances affecting the child's welfare has occurred since the original custody order was entered. Under the PKPA, the court that issued the initial custody decree has "continuing jurisdiction" over custody matters, provided that the first state meets three preconditions: (1) it entered its initial custody order in accordance with the Parental Kidnapping Prevention Act; (2) the child or one parent continues to live in the state; and (3) the state's own law allows continuing jurisdiction. If these conditions are met, a parent living in another state who wants to modify the initial custody arrangement must file the modification petition in the first state. The UCCJA provides that dismissal is mandatory where the noncustodial parent violates an existing custody order by refusing to return the child to the custodial parent at the end of the child's period of visitation and then asks the out-of-state court to modify custody. Neither the PKPA, UCJEA nor the UCCJA totally precludes the second state from ever modifying the initial custody order. The PKPA permits the second state to modify the initial custody provision if: (1) the second state has jurisdiction to make a child custody determination and (2) the first state no longer has jurisdiction or has declined to exercise jurisdiction. The remedies available under the UCJEA and UCCJA are unavailing if the left-behind parent is unable to find the abducting parent and the child. For this reason, the PKPA makes the federal Parent Locator Service available to assist local police in locating the abductor. The PKPA also provides that any state that treats parental kidnapping as a felony may enlist the F.B.I.'s assistance under the federal Fugitive Felon Act in locating the abducting parent, provided he or she has left the state. In many states, parental kidnapping (also known as interference with parental custody) is a felony, depending upon the circumstances. In others, it is a felony if the child is taken from the state. However, in most states, there can be no kidnapping unless there is an existing custody order that the parent has intentionally violated. Because many parental kidnappings take place before a final custody decree is entered, a few states have extended criminal sanctions to kidnappings that occur before the final custody decree. Several states also permit the court to assess expenses incurred in returning the child against any person convicted of violating the state's criminal custodial interference law. Parents, although they are subject to the PKPA, remain exempt from criminal sanctions under the general federal kidnapping statute. International parental kidnapping is a federal crime, punishable by a fine and/or imprisonment for up to three years. Once the child has been located, a possible solution to the abduction may be provided by the Hague Convention on the Civil Aspects of International Child Abduction. The Convention is in force in approximately 40 countries, including the United States, Mexico, Canada, and most of Europe. The countries that have signed the Hague Convention have agreed that a child who is habitually a resident in one country and who is removed to or retained in another country in breach of the left-behind parent's custody rights must be promptly returned to the country of the child's habitual residence. However, the Convention is inapplicable if the child has been abducted to a country that has not signed the Convention or the child is sixteen or older. Although there need not be a custody decree to invoke the Convention, the left-behind parent must be able to prove that he or she is exercising a "right of custody" at the time of abduction and that he or she had not given permission for the child to be removed or to be retained in the foreign country beyond a specified, agreed-upon time. In the absence of a formal custody order, custodial rights are determined by state law. It is important to remember that a Hague Convention proceeding is not a custody case. At a hearing under the Hague Convention, the judge's job is to determine only where the custody hearing should take place, not who is entitled to custody of the child. The goal of the Hague Convention is the child's swift return to his or her original country where the custody dispute can then be resolved, if necessary, in that country's courts. Parents are obliged to pay child support whether or not they were ever married. Parents also have an obligation to support all of their children, not just the children who reside with them. Thus, although the noncustodial parent is married to someone else or supporting other children, he or she has a continuing obligation to support the children of a previous marriage or relationship. Yes. As of January 1, 1994, the Family Support Act of 1988 requires that all new child support orders provide for automatically withholding child support payments from the obligated parent's paycheck, regardless of whether or not support payments are late. Federal law permits an exception to immediate withholding if the court finds good cause or if the parents both agree to another arrangement. However, a parent who falls at least one month behind in support payments is subject to withholding even in these cases. Withholding may be used to collect current support payments as well as arrearages. States have the option, under federal law, to apply withholding to income other than wages and to order withholding from bonuses, commissions, retirement benefits, rental or interest income, or unemployment compensation benefits. Yes. States permit a child support order to be modified upward or downward based on proof of a substantial change in the parents' financial circumstances or the child's needs. In addition, federal law requires that child support orders be reviewed every three years unless neither parent requests a review or, in temporary assistance for needy families [TANF] cases, if the review would not be in the child's best interest. However, child support orders may only be modified prospectively. The 1986 Bradley amendment to the federal child support laws effectively bars retroactive modification that would wipe out past-due support obligations. Yes. A parent who willfully refuses to comply with a lawful order of child support, though able to do so, may be held in contempt of court and jailed or fined for a fixed period of time as punishment or for an indefinite period until the child support is paid. As of October 1992, failure to pay child support in the interstate context has become a federal crime. An out-of-state parent who has willfully failed to pay court-ordered child support for at least one year or who is at least $5,000 in arrears may be criminally prosecuted by the local United States attorney. For a first offense, the penalties include a fine and/or a prison sentence of up to six months in prison; for a second offense, the punishment is a fine and/or up to two years in jail. A custodial parent who needs to obtain or enforce a child support order but who cannot find the noncustodial parent may enlist the assistance of a child support enforcement agency run by the state or local government, known as a IV-D agency. This assistance is available to all custodial parents, regardless of whether or not they receive public assistance.

Under the U.S. Constitution, Congress has little direct authority to legislate in the field of domestic relations. Generally, state policy guides these decisions. Despite the lack of direct authority to legislate domestic relations issues, Congress continues to enact federal laws that indirectly affect family law questions concerning child custody and support. This report answers questions frequently asked regarding the interplay between federal and state laws governing these areas.

In the three years since its creation, DHS realized some successes among its various acquisition organizations in opening communication through its strategic sourcing and small business programs. Both efforts have involved every principal organization in DHS, along with strong involvement from the CPO, and both have yielded positive results. DHS’ disparate acquisition organizations quickly collaborated on leveraging spending for various goods and services, without losing focus on small businesses. This use of strategic sourcing—formulating purchasing strategies to meet departmentwide requirements for specific commodities, such as office supplies, boats, energy, and weapons—helped DHS leverage its buying power, with savings expected to grow. At the time of our March 2005 review, DHS had reported approximately $14 million in savings across the department. We also found that the small business program, whose reach is felt across DHS, was off to a good start. In fiscal year 2004, DHS reported that 35 percent of its prime contract dollars went to small businesses, exceeding its goal of 23 percent. Representatives have been designated in each DHS procurement office to help ensure that small businesses have opportunities to compete for DHS’ contract dollars. However, some officials responsible for carrying out strategic sourcing initiatives have found it challenging to balance those duties with the demands and responsibilities of their full-time positions within DHS. Officials told us that strategic sourcing meetings and activities sometimes stall because participants must shift attention to their full-time positions. Our prior work on strategic sourcing shows that leading commercial companies often establish full-time commodity managers to more effectively manage commodities. Commodity managers help define requirements with internal clients, negotiate with potential vendors, and resolve performance or other issues arising after a contract is awarded and can help maintain consistency, stability, and a long-term strategic focus. DHS continues to faces challenges in creating a unified, accountable acquisition organization due to policies that create ambiguity as to accountability for acquisition decisions, inadequate staffing to conduct department-wide oversight, and heavy reliance on interagency contracting in the Office of Procurement Operations, which is responsible for a large portion of DHS’ contracting activity. Achieving a unified and integrated acquisition system is hampered because an October 2004 policy directive relies on a system of dual accountability between the CPO and the heads of the department’s principal organizations. Although the CPO has been delegated the responsibility to manage, administer, and oversee all acquisition activity across DHS, in practice, performance of these activities is spread throughout the department, reducing accountability for acquisition decisions. This system of dual accountability results in unclear working relationships between the CPO and heads of DHS’ principal organizations. For example, the policy leaves unclear how the CPO and the director of Immigration and Customs Enforcement are to share responsibility for recruiting and selecting key acquisition officials, preparing performance ratings for the top manager of the contracting office, and providing appropriate resources to support CPO initiatives. The policy also leaves unclear what enforcement authority the CPO has to ensure that initiatives are carried out because heads of principal organizations are only required to “consider” the allocation of resources to meet procurement staffing levels in accordance with the CPO’s analysis. Agreements had not been developed on how the resources to train, develop, and certify acquisition professionals in the principal organizations would be identified or funded. While the October 2004 policy directive emphasizes the need for a unified, integrated acquisition organization, achievement of this goal is further hampered because the directive does not apply to the U.S. Coast Guard and U.S. Secret Service. The Coast Guard is one of the largest organizations within DHS, with obligations accounting for about $2.2 billion in fiscal year 2005, nearly 18 percent of the department’s total. The directive maintains that these two organizations are exempted from the directive by statute. We disagreed with this conclusion, as we are not aware of any explicit statutory exemption that would prevent the application of the DHS acquisition directive to either organization. We raised the question of statutory exemption with the DHS General Counsel, who shared our assessment concerning the explicit statutory exemptions. He viewed the applicability of the management directive as a policy matter. DHS’ goal of achieving a unified, integrated acquisition organization is in part dependent on its ability to provide effective oversight of component activities. We reported in March 2005 that the CPO lacked sufficient staff to ensure compliance with DHS’ acquisition oversight regulations and policies. To a great extent, the various acquisition organizations within the department were still operating in a disparate manner, with oversight of acquisition activities left primarily up to each individual organization. In December 2005, DHS implemented a department wide management directive that establishes policies and procedures for acquisition oversight. The CPO has issued guidance providing a framework for the oversight program and, according to DHS officials, as of May 2006, five staff were assigned to oversight responsibilities. We have ongoing work in this area and will be reporting on the department’s progress in the near future. The challenge DHS faces overseeing its various components’ contracting activities is significant. For example, in May 2004 we reported that TSA had not developed an acquisition infrastructure, including organization, policies, people, and information that would facilitate successful management and execution of its acquisition activities. The development of those areas could help ensure that TSA acquires quality goods and services at reasonable prices, and makes informed decisions about acquisition strategy. To support the DHS organizations that lacked their own procurement support, the department created the Office of Procurement Operations. In 2005, we found that, because this office lacked sufficient contracting staff, it had turned extensively to interagency contracting to fulfill its responsibilities. At the time of our review, we found that this office had transferred almost 90 percent of its obligations to other federal agencies through interagency agreements in fiscal year 2004. For example, DHS had transferred $12 million to the Department of the Interior’s National Business Center to obtain contractor operations and maintenance services at the Plum Island Animal Disease Center. Interior charged DHS $62,000 for this assistance. We found that the Office of Procurement Operations lacked adequate internal controls to provide oversight of its interagency contracting activity. For example, it did not track the fees it was paying to other agencies for contracting assistance. Since our report was issued, the office has added staff and somewhat reduced its reliance on interagency contracting. Recently, DHS officials told us that the office has increased its staffing level from 42 to 120 employees, with plans to hire additional staff. As reported by DHS, the Office of Procurement Operations’ obligations transferred to other agencies had decreased to 72 percent in fiscal year 2005. To protect its major, complex investments, DHS has put in place a review process that adopts many acquisition best practices—proven methods, processes, techniques, and activities—to help the department reduce risk and increase the chances for successful investment outcomes in terms of cost, schedule, and performance. One best practice is a knowledge-based approach to developing new products and technologies pioneered by successful commercial companies, which emphasizes that program managers need to provide sufficient knowledge about important aspects of their programs at key points in the acquisition process, so senior leaders are able to make well-informed investment decisions before an acquisition moves forward. While DHS’ framework includes key tenets of this approach, in March 2005 we reported that it did not require two critical management reviews. The first would help ensure that resources match customer needs before any funds are invested. The second would help ensure that the design for the product performs as expected prior to moving into production. We also found that some critical information is not addressed in DHS’ investment review policy or the guidance provided to program managers. In other cases, it is made optional. For example, before a program is approved to start, DHS policy requires program managers to identify an acquisition’s key performance requirements and to have technical solutions in place. This information is then used to form cost and schedule estimates for the product’s development to ensure that a match exists between requirements and resources. However, DHS policy does not establish cost and schedule estimates for the acquisition based on knowledge from preliminary designs. Further, while DHS policy requires program managers to identify and resolve critical operational issues before proceeding to production, initial reviews—such as the system and subsystem review—are not mandatory. In addition, while the review process adopts other important acquisition management practices, such as requiring program managers to submit acquisition plans and project management plans, a key practice— contractor tracking and oversight—is not fully incorporated. We have cited the need for increased contractor tracking and oversight for several large DHS programs. While many of DHS’ major investments use commercial, off-the-shelf products that do not require the same level of review as a complex, developmental investment would, DHS is investing in a number of major, complex systems, such as TSA’s Secure Flight program and the Coast Guard’s Deepwater program, that incorporate new technology. Our work on these two systems highlights the need for improved oversight of contractors and greater adherence to a best practices approach to management review. Two examples follow. We reported in February 2006 that TSA, in developing and managing its Secure Flight program, had not conducted critical activities in accordance with best practices for large scale information technology programs. Program officials stated that they used a rapid development method that was intended to enable them to develop the program more quickly. However, as a result of this approach, the development process has been ad hoc, with project activities conducted out of sequence. TSA officials have acknowledged that they have not followed a disciplined life cycle approach in developing Secure Flight, and stated that they are currently rebaselining the program to follow their standard systems development life cycle process, including defining system requirements. TSA officials also told us they are taking steps to strengthen contractor oversight for the Secure Flight program. For example, the program is using one of TSA’s support contractors to help track contractors’ progress in the areas of cost, schedule, and performance and the number of TSA staff with oversight responsibilities for Secure Flight contracts has been increased. TSA reports it has identified contract management as a key risk factor associated with the development and implementation of Secure Flight. The Coast Guard’s ability to meet its responsibilities depends on the capability of its deepwater fleet, which consists of aircraft and vessels of various sizes and capabilities. In 2002, the Coast Guard began a major acquisition program to replace or modernize these assets, known as the Deepwater program. Deepwater is currently estimated to cost $24 billion. We have reported that the Coast Guard’s acquisition strategy of relying on a prime contractor (“system integrator”) to identify and deliver the assets needed carries substantial risks. We found that well into the contract’s second year, key components for managing the program and overseeing the system integrator’s performance had not been effectively implemented. As we recently observed, the Coast Guard has made progress in addressing our recommendations, but there are aspects of the Deepwater program that will require continued attention. The program continues to face a degree of underlying risk, in part because of the unique, system-of-systems approach with the contractor acting as overall integrator, and in part because it is so heavily tied to precise year-to year funding requirements over the next two decades. Further, a project of this magnitude will likely continue to experience other concerns and challenges beyond those that have emerged so far. It will be important for Coast Guard managers to carefully monitor contractor performance and to continue addressing program management concerns as they arise. In closing, I believe that DHS has taken strides toward putting in place an acquisition organization that contains many promising elements. However, the steps taken so far are not enough to ensure that the department is effectively managing the acquisition of the multitude of goods and services it needs to meet its mission. More needs to be done to fully integrate the department’s acquisition function, to pave the way for the CPO’s responsibilities to be effectively carried out in a modern-day acquisition organization, and to put in place the strong internal controls needed to manage interagency contracting activity and large, complex investments. DHS’ top leaders must continue to address these challenges to ensure that the department is not at risk of continuing to exist with a fragmented acquisition organization that provides stopgap, ad hoc solutions. DHS and its components, while operating in a challenging environment, must have in place sound acquisition plans and processes to make and communicate good business decisions, as well as a capable acquisition workforce to assure that the government receives good value for the money spent. Mr. Chairman, this concludes my statement. I would be happy to respond to any questions you or other Members of the Committee may have at this time. For further information regarding this testimony, please contact Michael Sullivan at (202) 512-4841 or sullivanm@gao.gov. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

The Department of Homeland Security (DHS) has some of the most extensive acquisition needs within the U.S. government. In fiscal year 2005, the department reported that it obligated almost $17.5 billion to acquire a wide range of goods and services. DHS's acquisition portfolio is broad and complex, including procurements for sophisticated screening equipment for air passenger security; technologies to secure the nation's borders; trailers to meet the housing needs of Hurricane Katrina victims; and the upgrading of the Coast Guard's offshore fleet of surface and air assets. This testimony summarizes GAO reports and testimonies, which have reported on various aspects of DHS acquisitions. It addresses (1) areas where DHS has been successful in promoting collaboration among its various organizations, and (2) challenges it still faces in integrating the acquisition function across the department; and (3) DHS' implementation of an effective review process for its major, complex investments. The information in this testimony is based on work that was completed in accordance with generally accepted government auditing standards. Since its establishment in March 2003, DHS has been faced with assembling 23 separate federal agencies and organizations with multiple missions and cultures into one department. This mammoth task involved a variety of transformational efforts, one of which is to design and implement the necessary management structure and processes for the acquisition of goods and services. We reported in March 2005 that DHS had opened communication among its acquisition organizations through its strategic sourcing and small business programs. With strategic sourcing, DHS' organizations quickly collaborated to leverage spending for various goods and services--such as office supplies, boats, energy, and weapons--without losing focus on small businesses, thus leveraging its buying power and increasing savings. Its small business program, whose reach is felt across DHS, is also off to a good start. Representatives have been designated in each DHS procurement office to ensure small businesses can compete effectively for the agency's contract dollars. We also reported that DHS' progress in creating a unified acquisition organization has been hampered by policy decisions that create ambiguity about who is accountable for acquisition decisions. To a great extent, we found that the various acquisition organizations within DHS were still operating in a disparate manner, with oversight of acquisition activities left primarily up to each individual organization. DHS continues to face challenges in integrating its acquisition organization. Specifically, dual accountability for acquisitions exists between the Chief Procurement Officer (CPO) and the heads of each DHS component; a policy decision has exempted the Coast Guard and Secret Service from the unified acquisition organization; the CPO has insufficient capacity for department-wide acquisition oversight; and staffing shortages have led the Office of Procurement Operations, which handles a large percentage of DHS's contracting activity, to rely extensively on outside agencies for contracting support--often for a fee. We found that this office lacked the internal controls to provide oversight of this interagency contracting activity. This last challenge has begun to be addressed with the hiring of additional contracting staff. Some of DHS's organizations have major, complex acquisition programs that are subject to a multi-tiered investment review process intended to help reduce risk and increase chances for successful outcomes in terms of cost, schedule, and performance. While the process includes many best practices, it does not include two critical management reviews, namely a review to help ensure that resources match customer needs and a review to determine whether a program's design performs as expected. Our prior reports on large DHS acquisition programs, such as the Transportation Security Administration's Secure Flight program and the Coast Guard's Deepwater program, highlight the need for improved oversight of contractors and adherence to a rigorous management review process.

The Air Force’s manpower requirements are determined by individual major commands, using a number of methodologies, including manpower standards, logistical models, and crew ratios. Once approved by Air Force leadership, the results serve as the basis for authorizing military, civilian, and contractor positions in the Air Force and are entered into the Air Force’s Manpower Data System. The Air Force’s Directorate of Manpower and Organization designed the Total Force Assessment (TFA) process to assess whether the various methodologies used by the Air Force to determine manpower requirements generated sufficient manpower to accomplish two purposes: (1) meet deployment commitments should it be called on to fight two major theater wars and (2) conduct multiple small-scale contingency operations in peacetime. To assess whether the authorized manpower was adequate for the wartime scenario, the Air Force compared the authorized forces in the Manpower Data System to the deployment commitments demanded by the two major theater wars. It then calculated the effect of deploying these forces on the manpower needed to continue operations at existing airbases (i.e., in-place support forces). Demands for the deployment commitments were identified using troop deployment listsgenerated from war plans for conducting wars in Southwest and Northeast Asia. The requirements for in-place support forces were calculated using a model that adjusts manpower requirements to account for changes in the personnel needed to support ongoing Air Force operations when forces are deployed. Plans for assessing the adequacy of forces in peacetime were never finalized. The Air Force conducted only the wartime component of the assessment, not the component assessing the adequacy of its manpower in conducting multiple contingency operations in peacetime. Moreover, the wartime component of the assessment was stopped before all discrepancies were resolved and, as a result, it was not conclusive. The incompleteness and irregular timing of this and similar past assessments indicate that they have not been a high priority for the Air Force. The Total Force Assessment was not entirely implemented as planned, and as a result the Air Force cannot objectively demonstrate that it has the manpower needed to carry out the operations envisioned by DOD. Begun in May 2000, this effort was conducted, in part, to provide the Air Force with an overarching analysis of its personnel requirements in preparation for the 2001 Quadrennial Defense Review. It was to be completed by January 2001. However, as of January 2002, the Air Force had essentially completed its assessment of wartime requirements, but it had not yet begun its assessment of whether Air Force authorized personnel were sufficient to support contingency operations in peacetime. The peacetime analysis was important because it would demonstrate whether particular career fields might be overburdened in peacetime even if sufficient forces were available to meet the two-theater-war scenario. The results of the wartime analysis were somewhat inconclusive because the Air Force stopped work on the study before some discrepancies in the assessment’s results were resolved. These discrepancies occurred because the process used for the study resulted in double counting some requirements, which in turn required the Air Force to manually review results for accuracy. Air Force officials told us they discontinued further work resolving discrepancies because Air Force leadership believed there was a strong likelihood that defense guidance would be changed from the two major theater war scenario to some other scenario. Such a change would have reduced the utility of any further efforts to produce more accurate results. At the time they stopped work, Air Force officials had concluded that results were about 90 percent accurate. According to Air Force officials, the leadership of the Air Force Directorate of Manpower and Organization believed that, at that point, the assessment results showed that forces were adequate to support the wartime scenario, and these results were subsequently briefed to the chief of staff of the Air Force. At the time of our review, Air Force officials still planned to conduct the peacetime analysis, but in view of the change in defense strategy they no longer plan to complete this portion of the current assessment. Instead, the Air Force plans to revamp the TFA process. Air Force officials advised us that in the future the TFA might be streamlined and shortened in duration since Air Force leadership believes that the current assessment is too time-consuming and manpower intensive. These officials said that they had proposed that the next TFA capitalize on the modeling that was used in the most recent Quadrennial Defense Review to test whether Air Force manpower is sufficient to meet a wide range of scenarios indicated by that review. Using this new approach, Air Force officials now anticipate completing a new iteration of TFA, covering the full spectrum of conflict, by December 2002. The incomplete implementation of the TFA reflects that, to some extent, the Air Force has not placed a high priority on achieving the goals of this type of assessment, as evidenced by the long interval experienced between assessments. A forerunner to Total Force Assessment, FORSIZE, was last completed in 1995—more than 6 years ago. No FORSIZE study was conducted in 1996 or 1997 because the analytical resources needed to conduct the assessment were devoted to the 1997 Quadrennial Defense Review instead. Planning for the most recent TFA began in 1999, but efforts were impeded by other changes the Air Force was undergoing, such as the recognition that the Air Force needed forces to conduct contingency operations as well as forces to meet the wartime scenarios, a need that then had to be incorporated in TFA’s design. While these changes certainly complicated the Air Force analysis, such uncertainty and change have almost become constants within DOD. Doing without a regular, institutionalized process— on the basis of inevitable complications—denies the Air Force’s Directorate of Manpower and Organization a way to determine objectively whether it has the forces needed to carry out the defense strategy. The Air Force did not use the results from the assessment for all of the purposes it had envisioned. On the positive side, Air Force officials told us that TFA results had been useful in helping some functional managers discuss the health of their career fields in briefings to the chief of staff of the Air Force. For example, the Total Force Assessment showed that the number of active forces fell somewhat short of the numbers demanded for the wartime scenario, while the number of reserve forces exceeded demands. In some situations, functional managers were asked to consider making greater use of reserve forces if active forces were deemed insufficient. On the other hand, the Air Force did not use TFA results as anticipated to support changes in budget submissions or to influence day- to-day management of manpower assets. Officials also noted that TFA results were not used to reallocate forces among various functional managers to make the best use of available forces, although they noted that TFA was not designed to do this. As a result, TFA has not lived up to its full potential for assisting Air Force leadership in making manpower decisions that can lead to a more effective force. We believe there are two possible reasons why the Air Force did not use TFA results to the full extent expected. First, because implementation of TFA was incomplete, the results themselves are incomplete and thus may have been viewed as of limited value for supporting changes to the budget or in making day to day management decisions. For example, officials told us that, with the changes to defense guidance and deployment schedules, TFA results are now viewed as one more data source on which to base decisions. Second, because TFA has not been institutionalized and does not occur on a regular basis, its results may have been viewed as insufficient or not timely for these purposes; for example, the Air Force might not have been able to link TFA results to very formalized and regularly occurring systems like the budget. Because the Air Force cannot objectively demonstrate that it has the forces necessary to carry out the full spectrum of military operations envisioned in defense guidance, its operational risk in both wartime and peacetime may not be fully understood. Both the secretary of defense and the Congress need this information to effectively discharge their respective oversight responsibilities. Without an institutionalized process for assessing risk, which occurs on a regular basis, the Air Force has no way of knowing what mitigating actions might be warranted. On the positive side, the Air Force has identified other aspects of force management that could benefit from the results of a Total Force Assessment. However, it has not been able to capitalize on this potential because the results to date have been incomplete and irregularly obtained. By not placing a high enough priority on conducting a regularly occurring assessment and by underutilizing assessment results, the Air Force may be shortchanging itself in terms of achieving an appropriate force size and mix and in terms of fully developing the related funding requirements. To enable the Air Force to objectively demonstrate it has the forces necessary to support the spectrum of military operations envisioned in the defense strategy and to enhance force management processes, we recommend that the secretary of defense direct the secretary of the Air Force to institutionalize a Total Force Assessment process to be conducted on a regular basis with clearly articulated uses for its results. In commenting on a draft of this report, DOD concurred with our recommendation that the Air Force institutionalize TFA but took issue with some of the findings and analysis in our assessment. DOD’s concerns center around whether the Air Force implemented TFA as planned and was able to establish its ability to carry out the full spectrum of missions envisioned by the defense strategy. Our assertion that the TFA was not implemented as planned is based on the fact that the chief of staff of the Air Force tasking letter that initiated TFA and the subsequent overarching guidance written by the Air Force specified an assessment of manpower requirements for both peacetime and wartime operations. At the time of our review, the Air Force had completed the wartime portion, but had not yet addressed peacetime operations. We understand, and noted in our report, that the Air Force now expects to complete a new iteration of TFA, covering the full spectrum of conflict, by December 2002. We endorse this effort and are hopeful that it reaches fruition. It does not alter the fact, however, that the fiscal year 1999 TFA was not fully implemented as planned, and that, lacking requirements for peacetime operations, it did not objectively establish the Air Force’s ability to fully execute the defense guidance. DOD’s comments also stress that the two major theater war portion of TFA was completed and briefed to the chief of staff of the Air Force and that the results showed that the Air Force had sufficient manpower to satisfy mission requirements. Our report acknowledges these facts. We noted, however, that the numbers resulting from the assessment were somewhat inconclusive and less useful than they might have been because work on the study was discontinued before all discrepancies were resolved. As stated in our report, Air Force officials estimated that final results were about 90 percent accurate. DOD’s comments further questioned our conclusion that TFA had not capitalized as anticipated on the assessment’s results, stating that the results of TFA were used widely for initiating taskings and making decisions. Our report does not indicate that TFA results were not used at all, only that its intended potential was not realized. We were unable to document the extent to which TFA was used for tasking and decision- making because the Air Force Directorate of Manpower and Organization did not produce a final report on TFA results, and it did not establish procedures for systematically tracking issues developed from TFA data and resulting actions to resolve them. Based on information provided by Air Force officials, we did acknowledge in our report that TFA results were used by functional managers to explore increasing the use of reserve forces to mitigate shortfalls in the active forces. However, during our review Air Force officials told us that TFA results would not be used for other purposes envisioned in the initial guidance written for TFA (e.g., supporting budget submissions and for day-to-day management of manpower assets). The department’s written comments are presented in their entirety in appendix I. To evaluate whether the Air Force’s Total Force Assessment demonstrated that forces are adequate to carry out the defense strategy, we reviewed Air Force policy, guidance, and documents used in planning and conducting the assessment from calendar year 1999 through 2001. We also reviewed the assessment’s results and discussed these results with officials responsible for this analysis. These included representatives of the Air Force’s Directorate of Manpower and Organization at the Pentagon; Air Force Manpower Readiness Flight at Fort Detrick, Maryland; and the Air Force Manpower and Innovation Agency in San Antonio, Texas. We also discussed the assessment’s methodology and past assessments with these officials. We did not independently verify the underlying manpower- requirements system information that serves as the starting point for the Total Force Assessment. To determine how the Air Force used the assessment’s results, we identified its anticipated uses and discussed with Air Force officials how these results were actually used. We conducted our review from July 2001 through January 2002, in accordance with generally accepted government audit standards. We obtained comments on a draft of this report from the Department of Defense and incorporated its comments where appropriate. We are sending copies of this report to the secretary of defense and the director, Office of Management and Budget. We will also make copies available to appropriate congressional committees and to other interested parties on request. If you or your staff has any questions about this report, please call me at (202) 512-3958. Major contributors to this report were Gwendolyn R. Jaffe, James K. Mahaffey, Norman L. Jessup, Jr., and Susan K. Woodward.

The Air Force began to test the force requirements in its manpower requirements-determination process in May 2000. The defense strategy envisions simultaneously fighting two major theater wars and conducting multiple contingency operations in peacetime. The Total Force Assessment was the Air Force's first evaluation of manpower adequacy in these contexts since 1995. Because the Total Force Assessment was not implemented as planned, the Air Force cannot demonstrate that it has the forces needed to carry out the full spectrum of military operations. Although intended to examine whether authorized Air Force personnel were sufficient to meet both the wartime and peacetime scenarios, the assessment only addressed the wartime scenario and did not address the adequacy of manpower for conducting multiple contingency operations in peacetime. Air Force officials concluded that manpower was adequate to support the wartime scenario but this assessment was inconclusive because the effort was discontinued before all discrepancies in the assessment's results were resolved. Although the Air Force spent considerable time and effort conducting at least a portion of its planned assessment, it has not used the results to the extent anticipated.

We reported that even though DCPS changed parts of its enrollment process in school year 1996-97 to address prior criticisms, the process remained flawed. Some of the changes, such as the use of an enrollment card to verify attendance, increased complexity and work effort but did little to improve the count’s credibility. Because DCPS counts enrollment by counting enrollment records—not actual students—accurate records are critical for an accurate count. Errors, including multiple enrollment records for a single student, remained in SIS, but DCPS had only limited mechanisms for correcting these errors. For example, although Management Information Services personnel maintained SIS, they had no authority to correct errors. In addition, DCPS’ enrollment procedures allowed multiple records to be entered into SIS for a single student, and its student transfer process may have allowed a single student to be enrolled in at least two schools simultaneously. Furthermore, DCPS’ practice of allowing principals to enroll unlimited out-of-boundary students increased the possibility of multiple enrollment records for one student. Nevertheless, DCPS did not routinely check for duplicate records. In addition, DCPS’ official enrollment count included categories of students usually excluded from enrollment counts in other districts when the counts are used for funding purposes. For example, DCPS included in its enrollment count students identified as tuition-paying nonresidents of the District of Columbia and students above and below the mandatory age for public education in the District of Columbia, including Head Start participants, prekindergarten students (age 4), preschool students (age 0 to 3), and some senior high and special education students aged 20 and older. In contrast, the three states that we visited reported that they exclude from enrollment counts used for funding purposes any student who is above or below mandatory school age or who is fully funded from other sources. Furthermore, even though the District of Columbia Auditor has suggested that students unable to document their residency be excluded from the official enrollment count, whether they pay tuition or not, DCPS included these students in its enrollment count for school year 1996-97. During school year 1996-97, District of Columbia schools had some attractive features. Elementary schools in the District had free all-day prekindergarten and kindergarten, and some elementary schools had before- and after-school programs at low cost. For example, one school we visited had before- and after-school care for $25 per week. This program extended the school day’s hours to accommodate working parents—the program began at 7 a.m. and ended at 6 p.m. In addition, several high schools had highly regarded academic and artistic programs; and some high schools had athletic programs that reportedly attracted scouts from highly rated colleges. Furthermore, students could participate in competitive athletic programs until age 19 in the District, compared with age 18 in some nearby jurisdictions. Problems persisted, however, in the critical area of residency verification. In school year 1996-97, schools did not always verify student residency as required by DCPS’ own procedures. Proofs of residency, when actually obtained, often fell short of DCPS’ standards. Moreover, central office staff did not consistently track failures to verify residency. Finally, school staff and parents rarely suffered sanctions for failure to comply with the residency verification requirements. In addition, the pupil accounting system failed to adequately track students. SIS allowed more than one school to count a single student when the student transferred from one school to another. Furthermore, schools did not always follow attendance rules, and SIS lacked the capability to track implementation of the rules. Finally, some attendance rules, if implemented, could have allowed counting of nonattending students. Other school districts report that they use several approaches to control errors, such as the ones we identified, and to improve the accuracy of their enrollment counts. These include using centralized enrollment and pupil accounting centers and a variety of automated SIS edits and procedures designed to prevent or disallow pupil accounting errors before they occur. the enrollment count. The Authority decided, however, that the inadequacies that led to the restructuring of the public school system would make auditing the school year 1996-97 count counterproductive. In short, the Reform Act’s audit requirement was not met. Because the enrollment count will become the basis for funding DCPS and is even now an important factor in developing DCPS’ budget and allocating its resources, we recommended in our report that the Congress consider directing DCPS to report separately in its annual reporting of the enrollment count those students fully funded from other sources, such as Head Start participants and tuition-paying nonresidents; above and below the mandatory age for compulsory public education, such as those in prekindergarten or those aged 20 and above; and for whom District residency cannot be confirmed. We also recommended that the DCPS Chief Executive Officer/ Superintendent do the following: Clarify, document, and enforce the responsibilities and sanctions for employees involved in the enrollment count process. Clarity, document, and enforce the residency verification requirements for students and their parents. Institute internal controls in the student information database, including database management practices and automatic procedures and edits to control database errors. Comply with the reporting requirement of the District of Columbia School Reform Act of 1995. We further recommended that the District of Columbia Financial Responsibility and Management Assistance Authority comply with the auditing requirements of the District of Columbia School Reform Act of 1995. checks and balances, no aggressive central monitoring, and few routine reports were in place. In addition, he said that virtually no administrative sanctions were applied, indicating that the submitted reports were hardly reviewed. The Authority shared DCPS’ view that many findings and recommendations in our report will help to correct what it characterized as a flawed student enrollment count process. Its comments did, however, express concerns about certain aspects of our report. The Authority was concerned that we did not discuss the effects of the Authority’s overhaul of DCPS in November 1996. It also commented that our report did not note that the flawed student count was one of the issues prompting the Authority to change the governance structure and management of DCPS. In the report, we explained that we did not review the Authority’s overhaul of DCPS or the events and concerns leading to the overhaul. DCPS has made some changes in response to our recommendations. For example, it dropped the enrollment card. DCPS now relies upon other, more readily collected information, such as a child’s grades or work, as proof that a child has been attending. DCPS has also strengthened some mechanisms for correcting SIS errors, such as multiple enrollment records for a single student. Staff reported that central office staff now conduct monthly duplicate record checks. These staff then work with the schools to resolve errors. In addition, central office staff now have the authority to correct SIS errors directly. Schools are also now required to prepare monthly enrollment reports, signed by the principal, throughout the school year. Central office staff review and track these reports. In addition, SIS can now track consecutive days of absence for students, which helps track the implementation of attendance rules. Finally, all principals are now required to enter into SIS the residency status of all continuing as well as new DCPS students. DCPS officials believe SIS’ residency verification status field also serves as a safeguard against including both duplicate records and inactive students in the enrollment count. who live outside school attendance boundaries. School data entry staff may still manually override SIS safeguards against creating multiple records. In addition, SIS still lacks adequate safeguards to ensure that it accurately tracks students when they transfer from one school to another. SIS’ new residency verification status field will not prevent the creation or maintenance of duplicate records. For example, a student might enroll in one school, filling out all necessary forms required by that school, including the residency verification form, and decide a few days later to switch to another school. Rather than officially transferring, the student might simply go to this second school and re-register, submitting another residency verification form as part of the routine registration paperwork. If the second school’s data entry staff choose to manually override SIS safeguards, duplicate records could be created. Even if a student did not submit a residency verification form at the second school, the data entry staff could simply code the SIS residency field to show that no form had been returned, creating duplicate records. Regarding the critical area of residency verification, all principals must now issue and collect from all students a completed and signed residency verification form (as well as enter residency verification status information into SIS as discussed). Principals are also encouraged to obtain proofs of residency and attach these to the forms. DCPS considers the form alone, however, the only required proof of residency for the 1997-98 count. The school district encouraged but not did not require such supporting proofs to accompany this form. A signed form without proofs of residency is insufficient to prove residency in our opinion. Such proofs are necessary to establish that residency requirements have been met. Until DCPS students are required to provide substantial proofs of residency, doubts about this issue will remain. of residency.) Furthermore, DCPS staff told us that the school district has not yet monitored and audited the schools’ residency records but plans to do so shortly. DCPS has proposed modifications to the Board of Education’s rules governing residency to strengthen these rules. The proposed modifications would strengthen the residency rules in several ways by stating that at least three proofs of residency “must” be submitted, rather than “may be” submitted, as current rules state; specifying and limiting documents acceptable as proofs; eliminating membership in a church or other local organization operating in the District of Columbia as an acceptable proof; and strengthening penalties for students who do not comply. DCPS staff told us that these proposed changes are now under consideration by the Authority. Regarding our recommendation that the Congress consider directing DCPS to report separately the enrollment counts of certain groups of students, the Congress has not yet required that DCPS do this. DCPS continues to include these groups in its enrollment count. For school year 1997-98, DCPS reports an official count of 77,111 students. This number includes 5,156 preschool and prekindergarten students who are below mandatory school age in the District of Columbia. Some of these students are Head Start participants and are paid for by Head Start; nevertheless, DCPS counts Head Start participants as part of its elementary school population. The count also includes 18 tuition-paying nonresident students attending DCPS. In addition, DCPS staff told us that although the count excludes adult education students, they did not know whether it includes other students above the mandatory school age. Finally, as noted earlier, the count includes students who have not completed residency verification. In addition to talking to DCPS staff, we talked to staff at the Authority about whether the Authority has provided for an independent audit of the 1997-98 enrollment count. Staff said that the Authority is in the process of providing for an audit but has not yet awarded a contract. Mr. Chairman, this concludes my prepared statement. I would be pleased to respond to any questions you or members of the Subcommittee may have. The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 37050 Washington, DC 20013 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.

Pursuant to a congressional request, GAO discussed its recent report on the enrollment count process that District of Columbia Public Schools (DCPS) used in school year 1996-97. GAO noted that: (1) in spite of some changes in DCPS' enrollment count process in response to criticisms, the 1996-97 count process remained flawed in several respects; (2) for example, the Student Information System (SIS) continued to have errors, such as multiple enrollment records for a single student and weaknesses in the system's ability to track students; (3) in addition, verification of student residency remained problematic; (4) although DCPS made some changes in its enrollment count process for the 1997-98 school year in response to GAO's recommendations and plans to make more, the larger systemic issues appear to remain mostly uncorrected; (5) consequently, fundamental weaknesses still remain in the enrollment count process, making it vulnerable to inaccuracy and weakening its credibility; (6) for example, DCPS staff report that although an important internal control--duplicate record checks--has been implemented for SIS, additional internal controls are still lacking; (7) several DCPS enrollment and pupil accounting procedures continue to increase the possibility of multiple enrollment records for a single student; (8) GAO is concerned that duplicate record checks alone may not be sufficient to protect the integrity of SIS, given the many possiblities for error; (9) furthermore, the enrollment count may still include nonresident students; (10) more than half of DCPS' students have either failed to provide the residency verification forms or have provided no proofs of residency to accompany their forms; (11) GAO questions the appropriateness of including students who have failed to prove residency in the official count, particularly students who have not even provided the basic form; (12) in addition, because DCPS has not yet monitored and audited residency verification at the school level, additional problems may exist that are not yet apparent; (13) proposed new rules governing residency will help DCPS deal with residency issues; (14) until these issues are fully addressed and resolved, however, the accuracy and credibility of the enrollment count will remain questionable; (15) in GAO's more recent discussions with DCPS officials, they acknowledge that more needs to be done to improve the enrollment count process, particularly in the areas of further strengthening DCPS' automated internal controls and addressing the nonresident issue; and (16) they have expressed concern, however, that GAO has failed to recognize fully the improvements DCPS made in the enrollment count process for school year 1997-98.

On June 4, 2015, the U.S. Office of Personnel Management (OPM) revealed that a cyber intrusion into its information technology systems and data "may have compromised the personal information of [approximately 4.2 million] current and former Federal employees." Later in June, OPM reported a separate cyber incident, which it said had compromised its databases housing background investigation records and resulted in the theft of sensitive information of 21.5 million individuals. The OPM breach, one of the largest reported on federal government systems, was detected partly through the use of the Department of Homeland Security's (DHS's) Einstein system—an intrusion detection system that "screens federal Internet traffic to identify potential cyber threats." Reportedly, the hackers used compromised security credentials—those assigned to a KeyPoint Government Solutions employee, a federal background check contractor working on OPM systems—to exploit OPM's systems and gain access. Officials do not believe that the intruders are still in the system. In the aftermath of the intrusions, Katherine Archuleta has stepped down as the director of OPM amid criticisms of how the agency managed its response to the intrusions and secured its information systems. Beth Cobert has taken on the role of acting director. In addition, OPM's Electronic Questionnaires for Investigations Processing (e-QIP) application, the "web-based automated system that was designed to facilitate the processing of standard investigative forms used when conducting background investigations," has been taken offline for "security enhancements." Notably, as is common with data breaches, a vailable information on the recent OPM breach developments remains incomplete. Assumptions about the nature, origins, extent, and implications of the data breach may change, and some media reporting may conflict with official statements. Policymakers have received official briefings on the breach developments, and Congress has held a number of hearings on the issue. This report provides an overview of the current understanding of the recent OPM breaches, as well as issues and questions raised about the source of the breaches, possible uses of the information exfiltrated, potential national security ramifications, and implications for the cybersecurity of federal information systems. Information released in June 2015 regarding the first OPM breach indicates that hackers gained access to personal information including "employees' Social Security numbers, job assignments, performance ratings and training information." The second reported breach involved the theft of data on 19.7 million current, former, and prospective employees and contractors who applied for a background investigation in 2000 or after using certain OPM forms. This second breach also impacted personal information of 1.8 million non-applicants; OPM notes that these non-applicants are primarily individuals married to or otherwise cohabitating with background investigation applicants. OPM confirmed that "the usernames and passwords that background investigation applicants used to fill out their background investigation forms were also stolen." About 1.1 million stolen records also include fingerprints. Notably, the two breaches revealed in June 2015 are not the first incidents targeting OPM databases containing such sensitive information. In a previous 2014 breach of OPM, hackers purportedly targeted "files on tens of thousands of employees who [had] applied for top-secret security clearances." Determining an actor (and actor's motivation) involved in a cyber incident can help guide how the United States responds. If a perpetrator is believed to be motivated by profit or economic advantage, the investigation and response may be led by law enforcement using the tools of the criminal justice system. If the perpetrator is deemed to be a state-sponsored actor with a different motivation, the United States may utilize diplomatic or military tools in its response. Speaking at an intelligence conference on June 24, 2015, Admiral Michael Rogers, director of the National Security Agency and head of U.S. Cyber Command, declined to discuss who might be responsible for the attacks, stating "I'm not [going to] get into the specifics of attribution.... That's a process that we're working through on the policy side. There's a wide range of people, groups and nation states out there aggressively attempting to gain access to that data." Speaking at the same conference a day later, however, Director of National Intelligence James Clapper identified China as the "leading suspect" in the attacks. Mr. Clapper expressed grudging admiration for the alleged hackers, noting "[y]ou have to kind of salute the Chinese for what they did.... You know, if we had an opportunity to do that, I don't think we'd hesitate for a moment." Without explicitly denying involvement, China has called speculation about its role in the OPM breaches neither "responsible nor scientific." In late June 2015, top officials from the United States and China met in Washington, DC, for the annual session of the U.S.-China Strategic & Economic Dialogue—the two countries' most high-level dialogue. The dialogue included discussion of cyber issues, but progress on these issues was not mentioned among the dialogue's official "outcomes." China said in early July that it was "imperative to stop groundless accusations, step up consultations to formulate an international code of conduct in cyberspace and jointly safeguard peace, security, openness and cooperation of the cyber space through enhanced dialogue and cooperation in the spirit of mutual respect." Of note, the United States in May 2014 filed criminal charges over a set of computer intrusions allegedly from China. The U.S. Department of Justice indicted   five members of China's People's Liberation Army (PLA) for commercial cyber espionage that allegedly targeted five U.S. firms and a labor union. It was the first, and so far only, time the United States has filed criminal charges against known state actors for cyber economic espionage. Criminal charges appear to be unlikely in the case of the OPM breach. As a matter of policy, the United States has sought to distinguish between cyber intrusions to collect data for national security purposes—to which the United States deems counterintelligence to be an appropriate response—and cyber intrusions to steal data for commercial purposes—to which the United States deems a criminal justice response to be appropriate. Describing discussions with Chinese officials at the July 2013 session of the annual U.S.-China Strategic & Economic Dialogue, a month after Edward Snowden made public documents related to U.S. signals intelligence, a senior Obama Administration stated, "[W]e were exceptionally clear, as the President has been, that there is a vast distinction between intelligence-gathering activities that all countries do and the theft of intellectual property for the benefit of businesses in the country, which we don't do and we don't think any country should do." The OPM breach so far appears to be seen in the category of intelligence-gathering, rather than commercial espionage. If the United States chooses to respond in other ways to intrusions from China, experts have suggested that China has multiple vulnerabilities that the United States could exploit. "China's uneven industrial development, fragmented cyber defenses, uneven cyber operator tradecraft, and the market dominance of Western information technology firms provide an environment conducive to Western CNE [computer network exploitation] against China," notes one scholar of Chinese cyber issues. It remains unclear how data from the OPM breaches might be used if they are indeed now in Chinese government hands. Experts in and out of government suspect that "China may be trying to build a giant database of federal employees" that could help identify U.S. officials and their roles. Writing in Wired magazine, Senator Ben Sasse observed, "China may now have the largest spy-recruiting database in history." There have been suggestions that information exposed in the breaches "could be useful in crafting 'spear-phishing' e-mails, which are designed to fool recipients into opening a link or an attachment so that the hacker can gain access to computer systems." In addition to being used by nation states, a trove of data from breaches such as those at OPM can provide a number of avenues for criminals to exploit. For instance, compromised Social Security numbers and other personally identifiable information (PII) may be used for identity theft and financially motivated cybercrime, such as credit card fraud. However, experts have been skeptical as to whether compromised information from the OPM breaches will even appear for sale in the online black market. When cybercriminals have tried in the underground markets to pass off other stolen data as that coming from the OPM breaches, this has been debunked, and the stolen data were shown to have come from other sources. The lack of stolen OPM data appearing in the criminal underworld has led some to speculate the breaches were more likely conducted for espionage rather than criminal purposes. Nonetheless, even if data were stolen for non-criminal purposes, they could still fall into criminal hands. While discussion about the stolen fingerprint information has been limited, analysts have begun to question how this data could be used. Some have speculated that if the fingerprints are of high enough quality, there may be "acutely negative long-term consequences for individuals affected and their future use of fingerprints to verify their identities." Depending on whose hands the fingerprints come into, they could be used for criminal or counterintelligence purposes. For instance, they could be trafficked on the black market for profit or used to reveal the true identities of undercover officials. Also a concern is that biometric data such as fingerprints cannot be reissued—unlike other identifying information such as Social Security numbers. This could make recovery from the breach more challenging for some. Reports have emerged indicating that OPM had attempted to take over the administration of Scattered Castles—the intelligence community's (IC's) database of sensitive clearance holders—and create a single clearance system for government employees. Although the IC refused out of concerns of increased vulnerability to hacking, news reports allege that some sharing of information between systems was underway by 2014. U.S. officials have denied that Scattered Castles was affected by the OPM hack, but they have neither confirmed nor denied that the databases were linked. If the IC's database were linked with OPM's, this could potentially help the hackers gain access to intelligence agency personnel and identify clandestine and covert officers. Even if data on intelligence agency personnel were not compromised, the hackers might be able to use the sensitive personnel information to "neutralize" U.S. officials by exploiting their personal weaknesses and/or targeting their relatives abroad. Access to the IC's database could also reveal the process and criteria for gaining clearances and special access, allowing foreign agents to more easily infiltrate the U.S. government. Some in the national security community have compared the potential damage of the OPM breaches to U.S. interests to that caused by Edward Snowden's leaks of classified information from the National Security Agency. Yet the potential exists for damage beyond mere theft of classified information, including data manipulation or misinformation. While there is no evidence to suggest that this has happened, hackers would have had the ability, some say, while in U.S. systems to alter personnel files and create fictitious ones that would have gone undetected as far back as 2012. Another concern is the possibility for data publication, as was done with the Snowden records. Dissemination of sensitive personnel files could damage the ability of clearance holders to operate with cover, and could open them up to potential exploitation from foreign intelligence agents. The cybersecurity of most federal information systems is governed by the Federal Information Security Management Act (FISMA, 44 U.S.C. §3551 et seq.), which was updated at the end of the 113 th Congress ( P.L. 113-283 ). The update gave explicit operational authority to DHS for implementation, including the authority to issue binding operational directives, and it set requirements for breach notification for federal agencies. In addition, 40 U.S.C. §11319, as added by P.L. 113-291 , provided agency chief information officers (CIOs) with additional budgeting and program authorities. A potential question for Congress is whether those and other provisions of law give agencies the legislative authority and resources they need to adequately address the risks of future intrusions. Among the specific questions Congress might consider are the following: Are the current authorities and requirements under FISMA sufficient, if fully implemented, to protect federal systems from future intrusions such as the most recent OPM intrusions? If not, what changes are needed to sufficiently reduce the level of risk? For example, should the priority level for cybersecurity be elevated with respect to other aspects of mission fulfillment; should the federal government adopt the explicit goal of being assessed by independent experts as having world-class cybersecurity? What are the barriers to improving federal cybersecurity to a level that would sufficiently reduce the risks of incidents such as the breaches at OPM, and what legislative actions are needed to remove them? For example, do agency heads, responsible for cybersecurity under FISMA, have sufficient understanding of cybersecurity to execute those responsibilities effectively—a broadly held concern with respect to private-sector chief executive officers that the National Institute of Standards and Technology (NIST) Cybersecurity Framework was designed in part to help address? Are the recent amendments to CIO authorities sufficient for them to implement their cybersecurity responsibilities under FISMA? Does DHS have sufficient authorities to protect federal civilian systems under its statutory responsibilities? For example, should it have greater legislative authority to deploy countermeasures on federal systems, as some legislative proposals would provide? Are the specific actions taken and proposed by the Obama Administration in the wake of the OPM breaches, such as the "cybersecurity sprint" and the proposed strategy and acquisition guidance initiatives, sufficient to provide the required improvements in cybersecurity at federal agencies? Congress is currently considering legislation to reduce perceived barriers to information sharing among private-sector entities and between them and federal agencies. An additional potential question for Congress is whether the protections outlined in the proposed bills against inadvertent disclosure by federal agencies will be sufficient in the wake of breaches such as those involving OPM.

On June 4, 2015, the U.S. Office of Personnel Management (OPM) revealed that a cyber intrusion had impacted its information technology systems and data, potentially compromising the personal information of about 4.2 million former and current federal employees. Later that month, OPM reported a separate cyber incident targeting OPM's databases housing background investigation records. This breach is estimated to have compromised sensitive information of 21.5 million individuals. Amid criticisms of how the agency managed its response to the intrusions and secured its information systems, Katherine Archuleta has stepped down as the director of OPM, and Beth Cobert has taken on the role of acting director. In addition, OPM's Electronic Questionnaires for Investigations Processing (e-QIP) application, the system designed to help process forms used in conducting background investigations, has been taken offline for security improvements. Officials are still investigating the actors behind the breaches and what the motivations might have been. Theft of personally identifiable information (PII) may be used for identity theft and financially motivated cybercrime, such as credit card fraud. Many have speculated that the OPM data were taken for espionage rather than for criminal purposes, however, and some have cited China as the source of the breaches. It remains unclear how the data from the OPM breaches might be used if they are indeed now in the hands of the Chinese government. Some suspect that the Chinese government may build a database of U.S. government employees that could help identify U.S. officials and their roles or that could help target individuals to gain access to additional systems or information. National security concerns include whether hackers could have obtained information that could help them identify clandestine and covert officers and operations. The cybersecurity of most federal information systems is governed by the Federal Information Security Management Act (FISMA, 44 U.S.C. §3551 et seq.). Questions for policymakers include whether existing provisions of law give agencies the legislative authority and resources they need to adequately address the risks of future intrusions. In addition, effective sharing of cybersecurity information has been considered an important tool for protecting information systems from unauthorized intrusions and exfiltration of data. The 114 th Congress is considering legislation to reduce perceived barriers to information sharing among private-sector entities and between them and federal agencies.

The major U.S. interests in the Southwest Pacific are preventing the rise of terrorist threats,working with and maintaining the region's U.S. territories, commonwealths, and military bases(American Samoa, Guam, the Northern Mariana Islands, and the Reagan Missile Test Site onKwajalein Atoll in the Marshall Islands), and enhancing U.S.-Australian cooperation in pursuingmutual political, economic, and strategic objectives in the area. (1) In a hearing before theSubcommittee on East Asia and the Pacific of the House Committee on International Relations (July23, 2002), several key issues were raised regarding U.S. interests in the Southwest Pacific. Theseinclude the vulnerability of small Pacific Island nations and "failed states" to transnational crime,including money laundering and drug trafficking; the threat of infiltration by terrorist groups orindividuals; and environmental problems. Many analysts have posited a link between politicalinstability and poverty in many Pacific Island nations and their attraction to organized crime andterrorists. (2) Since the end of World War II, the United States has commanded unimpeded military accessto the Southwest Pacific, although its involvement in the region, with the exception of its militarybases on Guam and Kwajalein Atoll (Marshall Islands), has been low key. The United Statesdiplomatic presence and foreign aid fell during the 1990s, except for its economic assistance to theFreely Associated States of the Marshall Islands, Micronesia, and Palau. The United States hasincreasingly relied upon Australia to promote shared strategic interests as well as political andeconomic stability in the region. Until recently, Australia was careful not to intervene directly indomestic political upheavals. (3) Instead, it pursued a strategy of greater cooperation and regionalassistance through participating in Pacific Island organizations such as the South Pacific Forum,extending bilateral assistance, and promoting public and private sector reforms. (4) The Australian government under Prime Minister John Howard has been a forceful advocateof a more interventionist strategy in a region where political and economic conditions havedeteriorated, especially after the Bali terrorist bombing of September 2002. As part of its effort topromote regional stability and prevent Pacific island nations from becoming havens for transnationalcrime and terrorism, Australia, along with New Zealand and other Pacific Island nations, hasdeployed troops in East Timor, Papua New Guinea, and the Solomon Islands. Other initiativesinclude heading the Pacific Islands Forum Secretariat through an Australian diplomat, Greg Urwin;financing a police training center in Fiji that would train officers from the Pacific Islands fordomestic and regional operations; (5) conditioning bilateral assistance on improved governance; andpromoting the creation of a federation of small Pacific Island nations that would pool nationalresources and share governmental responsibilities and services in order to make them viablestates. (6) For the most part, Pacific Island nations reportedly have accepted Australia's leadership asnecessary and agreed to the focus on security adopted by Australia and the United States. Themutual emphasis on security was reflected in the Nasonini Declaration on Regional Security adoptedby the Pacific Islands Forum in August 2002, in which members agreed that law enforcementcooperation should remain an important focus for the region. (7) In October 2003, leaders from13 Pacific Island nations and Hawaii gathered at the East-West Center in Honolulu to discussregional security issues and meet with President Bush. President Bush told regional leaders that theUnited States would share intelligence to help them meet their security needs. (8) In recent years, Australia has been reorienting its foreign and defense policies, reemphasizingthe importance of the United States to Australia. Australia's external orientation has shifted froman emphasis on Asian engagement, under the leadership of former Labor Prime Minister PaulKeating and his Foreign Minister Gareth Evans, to renewed emphasis on the United States allianceunder current Liberal Prime Minister John Howard who has been in office since 1996. PrimeMinster Howard has taken the position that Australia does not have to choose between its history andits geography, meaning that it can have close ties with Europe and America while also enjoyingproductive relationships with Asian states. This shift in relative emphasis came about for a numberof reasons, including the reluctance of the Australian people to see themselves as Asian; a reluctanceof Asian states, such as Malaysia, to think of Australia as part of Asia; diminished potential rewardsof Asian engagement in the wake of the Asian financial crisis of 1997; and renewed importance toAustralia of the strategic relationship with the United States as a result of the war against terror. The Howard Government's support of the United States in the war against terror has broughtthe United States and Australia closer together as Australia invoked the ANZUS alliance in the wakeof the 9/11 attacks to help the United States. Australia maintained its tradition of fighting alongsidethe United States, as it did in WWI, WWII, Korea, Vietnam and the first Gulf War, by committingtroops to recent United States operations in Afghanistan and Iraq. By doing so, in an internationalenvironment that was largely unwilling to supply combat troops in support of the United States inIraq, Australia, along with Britain, drew attention to itself as a loyal ally. This policy of support forthe United States was continued by the Howard Government despite significant opposition to the warin Australia. The Bush Administration recognized Australia's value to the United States and the AsiaPacific region in the following statement: Australia has long been a steadfast ally and partner, andrecent events have only magnified the value of our alliance with it. The key role that Australia'sbrave forces played in Iraq and Afghanistan, and its commitment to a leading role in regionalsecurity, only demonstrate Australia's growing importance. (9) To complement its strong political and strategic ties with the United States, Australia is seeking afree trade agreement (FTA) with the United States. (10) A fifth round of FTA negotiations were held in December of2003. While Australia has hosted joint early warning, communications and intelligence facilitiesfor decades, it may play an increasingly important strategic role as the United States seeks toredeploy its Asia-Pacific force structure. This would be part of the Department of Defense plansreportedly to effect "the greatest change in the U.S. overseas military posture in 50 years." (11) Positioning of Americanforces in Australia has been discussed in the past. In 1996, then Commandant of the United StatesMarine Corp, General Krulak advocated expanding joint training and the pre-positioning of militarysupplies in Australia. (12) More recently, Australia has been discussed as a potential site for an expanded American militarypresence to be better situated to fight the war on terror. (13) The Department of Defense is reportedly developing a new"overseas basing strategy to support current and future U.S. defense requirements." (14) Australian Prime MinisterHoward reportedly has stated that he would consider allowing an additional American militarypresence in Australia. In June 2003, Australian Defense Minister Hill stated that Australia was readyto expand joint exercises, allow the United States unilaterally to conduct training in Australia, andenhance facilities for United States naval crews to rotate through Australia. (15) The opposition LaborParty views these measures as unnecessary. (16) The United States and Australia conduct many joint military exercises and Australiapurchases much of its military equipment from the United States. U.S. Pacific Commander Adm.Fargo has pointed to the importance of maintaining interoperability with Australia across "the fullspectrum of contingency operations" while describing Australia as the "southern anchor of oursecurity architecture in the region." (17) The Australian government has also supported American plansto develop a missile defense system though this view is not necessarily shared by the Labor Partyopposition. (18) To meetits expanding military commitments, which are in part driven by alliance considerations, Australiaannounced in May 2003 that defense spending would increase over the next several years. Government officials projected defense spending to rise from AS$13.3 billion in 2001/2002 toAS$15 billion in 2003/2004. (19) Furthermore, the recent appreciation of the Australian dollarrelative to the United States dollar will increase the buying capacity of the government budget forprocurement. Australia took the lead in addressing the humanitarian crisis in East Timor that followed the1999 referendum for independence from Indonesia. After the referendum, local militias, whichfavored continued association with Indonesia, attacked pro-independence East Timorese. By leadingan international peacekeeping coalition to East Timor, Australia lessened pressure on the UnitedStates to become more extensively involved. Australia's subsequent involvement in East Timor has helped East Timor develop into an independent, viable state, though negotiations continue for a fullagreement on how to divide the oil and gas resources that lie beneath the Timor Sea. ConoccoPhillips, an American corporation, stated in June 2003 that it was moving forward with a $1.5 billionliquefied-natural-gas development in the Bayu-Undan area of the Timor Sea that separates EastTimor from Australia. (20) Australia, along with New Zealand, continues to play a constructive role in the cease fire andpeace process on Bougainville, where the two nations have helped restore order and improve theprospects for a lasting agreement between the people of Bougainville and Papua New Guinea. Australia became involved in the Peace Monitoring Group in 1997, that was intended to support theimplementation of the Burnham Peace process negotiated in New Zealand by the Bougainvilleindependence movement and the Papua New Guinea government. (21) Recent events in the Solomon Islands point to a renewed commitment by Australia topromote stability in its region that is inspired by the need to prevent failed states in the age ofterrorism. Inter-communal strife in the Solomon Islands reduced it to a virtual failed state by 2003. In response, Australia, along with New Zealand, Fiji, Papua New Guinea and Tonga, dispatched aforce of 2,300 troops to reinstate the rule of law and good governance as part of the RegionalAssistance Mission. This was done largely to reduce the prospect that the Solomons would becomean ungoverned area from which transnational crime, and potentially terrorists, could operate or drawsupport. (22) Australiahas also proposed the establishment of a region-wide police force to more effectively police theregion. Australia's renewed activism in the Pacific is not universally accepted. Some in Australiaand the region are concerned that it could mark a return to neo-colonial activity by Australia in thearea. (23) China has become increasingly active -- diplomatically and economically -- in the SouthwestPacific. Some analysts suggest that its current involvement could result in strategic benefits forChina in the long term. While the United States does not maintain an embassy in several PacificIsland countries, the People's Republic of China (PRC) has opened embassies in all countries withwhich it has diplomatic relations and has provided bilateral assistance and high-profile visits -- withlittle criticism of their internal policies. The PRC has provided funding, materials, labor, andtechnical assistance for infrastructure projects (roads, airports, sports stadiums, governmentcomplexes, hotels, mining operations) and financed the Pacific Trade Office in Beijing to promotetrade and investment between China and Pacific Island states. Over 3,000 Chinese state and privatecompanies reportedly have invested $800 million in the Southwest Pacific. (24) Although China is stillnot a major bilateral aid donor in the region, it has become the second largest aid donor to PapuaNew Guinea, the most populous Pacific Island nation. According to some foreign affairs analysts, China's aims have been two-fold. First, Chinahas attempted to thwart Taiwanese diplomatic efforts in the region. Taiwan has actively courted theregion, establishing diplomatic relations with four Pacific Island states at China's expense -- Palau,the Solomon Islands, Tuvalu, and the Marshall Islands. Taiwan has offered these and other PacificIsland countries economic and development assistance -- helping to build or provide hospitals,airports, copra processing equipment, ships, grants and loans. So eager are some states for assistancethat they often switch allegiances without warning or threaten to change sides. Nauru, for example,which recognized China over Taiwan in July 2002, reportedly threatened to renew ties with Taiwana year later -- until China agreed to extend more loans to the island nation. (25) In November 2003,Kiribati established ties with Taiwan, despite having diplomatic relations with China since 1980 andrenting land to the PRC for a space tracking station. (26) Second, some experts argue, China has hoped to raise its diplomatic and, ultimately, strategicinfluence in the region and its shipping lanes. The PRC reportedly has occasionally applieddiplomatic or economic pressure on Pacific Island countries to oppose actions of Taiwan or Australiain the region or to influence voting in the United Nations. According to one account, for example,the Vanuatu government publicly expressed reservations about the Australian-led peacekeepingmission in the Solomon Islands following a visit by its prime minister to Beijing. (27) Although China does notpossess a "blue water" navy capable of challenging the U.S. in the region, some experts assert thatit plans to develop one. China reportedly has provided "modest" military support -- training andnon-combat defense supplies rather than weapons -- to Pacific Island countries that possess militaryforces -- Fiji, Papua New Guinea, Vanuatu, and Tonga. Since 1997, China has operated a satellitespace-tracking station on Tarawa Atoll in the Republic of Kiribati. Some analysts argue that the basecould be used for monitoring U.S. missile defense tests at Kwajalein Atoll in the Marshall Islands. While not opposing the U.S. and Australian presence in the region, many Pacific Islandscountries have been attracted to China as an "anti-colonial" power, welcomed the aid and attentionfrom China and Taiwan, and appreciated China's relative support on some issues such as the globalwarming treaty (Kyoto Protocol) to reduce greenhouse emissions. Some regional analysts, Membersof Congress, and leaders of Australia have advocated stronger roles for the United States, Australia,and Japan in the Southwest Pacific as counterweights to growing Chinese influence. (28) Figure 1. Map of the Southwest Pacific

The major U.S. interests in the Southwest Pacific are preventing the rise of terrorist threats,working with and maintaining the region's U.S. territories, commonwealths, and military bases(American Samoa, Guam, the Northern Mariana Islands, and the Reagan Missile Test Site onKwajalein Atoll in the Marshall Islands), and enhancing U.S.-Australian cooperation in pursuingmutual political, economic, and strategic objectives in the area. The United States and Australiashare common interests in countering transnational crime and preventing the infiltration of terroristorganizations in the Southwest Pacific, hedging against the growing influence of China, andpromoting political stability and economic development. The United States has supported Australia'sincreasingly proactive stance and troop deployment in Pacific Island nations torn by political andcivil strife such as East Timor, Papua New Guinea, and the Solomon Islands. Australia may playa greater strategic role in the region as the United States seeks to redeploy its Asia-Pacific forcestructure. This report will be updated as needed.

The State Criminal Alien Assistance Program (SCAAP) was created by §20301 of the Violent Crime Control and Law Enforcement Act of 1994, and it is currently codified in §241(I) of the Immigration and Nationality Act (INA). The program is administered by the Bureau of Justice Assistance (BJA), which is part of the Department of Justice's (DOJ) Office of Justice Programs (OJP). The Department of Homeland Security (DHS) aids BJA in administering the program. SCAAP is designed to reimburse states and localities for correctional officers' salary costs incurred for incarcerating "undocumented criminal aliens." The INA defines the term "undocumented criminal alien" in the context of SCAAP to mean an alien who (3)(A) has been convicted of a felony or two or more misdemeanors; and (I) entered the United States without inspection or at any time or place other than as designated by the Attorney General; (ii) was the subject of exclusion or deportation proceedings at the time he or she was taken into custody by the State or a political subdivision of the State; or (iii) was admitted as a nonimmigrant and at the time he or she was taken into custody by the State or a political subdivision of the State has failed to maintain the nonimmigrant status in which the alien was admitted or to which it was changed under Section 248, or to comply with the conditions of any such status. Any state or locality that incurred costs for incarcerating "undocumented criminal aliens" is eligible to apply for SCAAP funding. Currently, this includes all 50 states, the District of Columbia, Guam, Puerto Rico, the U.S. Virgin Islands, and more than 3,000 counties and cities. For states and localities to qualify for SCAAP reimbursement, aliens under their jurisdiction must have at least one felony or two misdemeanor convictions under state or local law and be incarcerated for at least four consecutive days. Although the program is intended to compensate states and localities for correctional officers' salary costs, funds provided through SCAAP payments until recently have been unrestricted and could be used for any lawful purpose. In some instances, SCAAP funds were used for projects such as interoperable communications systems, inmate medical care, and construction. In many instances, funds were used for the jurisdiction's criminal justice system or jails. The criteria for the amount of SCAAP funds received have evolved over time. Prior to FY2003, the criteria were based on factors such as average cost per inmate multiplied by the number of eligible inmates and the total number of foreign-born inmates claimed. In many cases, this resulted in reimbursement for ineligible aliens such as naturalized citizens and legal permanent residents (LPRs). The formula is determined administratively by DOJ. In FY2007, the SCAAP reimbursement formula was determined through a multi-step process, as follows. DOJ determined a per diem rate per inmate, using a combination of correctional officers' annual salary costs and the total number of all inmate days. (The average inmate per diem for FY2007 was $30.30); Immigration and Customs Enforcement (ICE) in DHS analyzed applicant inmate records submitted by the applicants, and provided BJA with a report reflecting the number of eligible, ineligible, unknown, and invalid inmates; The number of inmate days and a percentage of unknown days were totaled, then multiplied by the applicant's per diem rate; The value of each applicant's correctional officers' salary costs associated with its eligible and credited unknown inmate days was totaled. (This value reflected the maximum allowable reimbursement); and The values were compared with the annual appropriation and a percentage factor was developed, and the percentage factor was applied uniformly to all jurisdictions. The reimbursement factor for FY2007 SCAAP awards was approximately 42%. Funding for SCAAP has been appropriated by Congress annually since 1995. Levels of funding for the program have fluctuated from $130 million in FY1995 to $565 million in FY2002 and have remained relatively consistent between $400 and $410 million for FY2006 through FY2009. The Administration's FY2010 budget did not request funding for this program. From FY2000 to FY2008, SCAAP reimbursements totaled approximately $4 billion. As Table 1 illustrates, California historically has received the largest annual awards, having received more than $1.7 billion since the program's inception. Florida, Illinois, New York, and Texas have consistently received larger awards as well, with smaller awards going to states such as West Virginia, Vermont, North Dakota, and the U.S. territories. In 2005, SCAAP was reauthorized through FY2011, and a provision was added that required SCAAP reimbursement funds be used for correctional purposes only. Legislation had been introduced in previous Congresses that would have modified the program to include covering costs for indigent defense, translators, criminal aliens charged with two misdemeanors or a felony, and limited reimbursement to border states and states with large numbers of unauthorized aliens. In the 111 th Congress, legislation has been introduced to reauthorize the program until FY2014 ( H.R. 2282 ), and to allow costs related to criminal aliens charged with specified crimes to be considered for SCAAP reimbursement ( S. 168 ). The Administration's FY2010 budget request did not include funding for SCAAP; however, funding for the program was included in the Commerce, Justice, Science and Related Agencies Appropriations Act of 2010 ( H.R. 2847 ). H.R. 2847 as passed by the House on June 18, 2009, would appropriate $300 million for SCAAP, and the Senate reported version would appropriate $228 million for the program.

The State Criminal Alien Assistance Program (SCAAP) is a formula grant program that provides financial assistance to states and localities for correctional officer salary costs incurred for incarcerating "undocumented criminal aliens." Currently, SCAAP funds do not cover all of the costs for incarcerating immigrants or foreign nationals. The program is administered by the Office of Justice Programs' Bureau of Justice Assistance, located in the U.S. Department of Justice, in conjunction with the U.S. Department of Homeland Security. Between FY1995 and FY2009, a total of more than $5 billion has been distributed to states in SCAAP funding. Recent changes to SCAAP include reauthorization through FY2011 and the requirement that SCAAP reimbursements be used for correctional purposes only. Legislation introduced in the 111th Congress includes provisions that would extend the program through FY2014 and authorize appropriations at $1 billion annually for FY2011-FY2014 (H.R. 2282); and would change SCAAP eligibility guidelines to reimburse states not only for criminal aliens convicted of two misdemeanors or a felony, but also for those charged with these crimes as well (S. 168). Funding for the program has also been included in the Commerce, Justice, Science and Related Agencies Appropriations Act of 2010 (H.R. 2847). H.R. 2847 as passed by the House on June 18, 2009, would appropriate $300 million for SCAAP, and the Senate reported version would appropriate $228 million for the program. This report will be updated as warranted by legislative, funding, or policy developments.

Congress enacted the Health Insurance Portability and Accountability Act of 1996 (HIPAA) to improve portability and continuity of health insurance coverage. The HIPAA Privacy Rule, issued by HHS to implement section 264 of HIPAA (42 U.S.C. § 1320d-2), regulates the use and disclosure of protected health information. On September 4, 2005, Health and Human Services Secretary Leavitt declared a federal public health emergency for Louisiana, Alabama, Mississippi, Florida, and Texas. To allow health care providers in affected areas to care for patients without violating requirements of HIPAA, Medicare, Medicaid, and the State Children's Health Insurance Program, the HHS Secretary waived certain provisions. Specifically with respect to the HIPAA Privacy Rule, the Secretary waived the imposition of sanctions and penalties arising from noncompliance with the following provisions: (1) requirements to obtain a patient's agreement to speak with family members or friends or to honor a patient's request to opt out of a facility directory (45 C.F.R.164.510); (2) the requirement to distribute a notice of privacy practices (45 C.F.R.164.520); and (3) the patient's right to request privacy restrictions or confidential communications (45 C.F.R.164.522). In the first Hurricane Katrina bulletin issued by HHS (HIPAA Privacy and Disclosures in Emergency Situations), the Department emphasized that the HIPAA Privacy Rule "allows patient information to be shared to assist in disaster relief efforts, and to assist patients in receiving the care they need." The bulletin states that under the rule, health care providers can share patient information to provide treatment and seek payment for health care services; to identify, locate, and notify family members, guardians, or anyone responsible for the individual's care of the individual's location, general condition, or death; with anyone as necessary to prevent or lessen a serious and imminent threat to the health and safety of a person or the public, consistent with applicable law and the provider's standards of ethical conduct. In addition, health care facilities maintaining a patient directory can tell people who call or ask about individuals whether the individual is at the facility, their location in the facility, and general condition. On September 9, HHS issued Hurricane Katrina Bulletin #2. Because the medical and prescription records of many evacuees were lost or inaccessible, and because health plans and health care providers were working with other industry segments to gather and provide this information, Bulletin #2 provides guidance on how the HIPAA Privacy Rule applies to these activities and describes the HHS Office for Civil Rights' enforcement approach in light of these emergency circumstances. Bulletin #2 discusses the use and disclosure of prescription and medical information by entities managing information on behalf of covered entities ("business associates"). In general, business associates are permitted to make disclosures "to the extent permitted by their business associate agreements with the covered entities, as provided in the Privacy Rule." The bulletin provides that covered entities or their business associates may provide health information on evacuees to another party for that party to manage the health information and share it as needed for providing health care to the evacuees. Where a covered entity provides protected health information to another for this purpose, the Privacy Rule requires the covered entity to enter into a business associate agreement with this party. If the business associate, rather than the covered entity itself, is providing this information to another party that is acting as its agent, the covered entity's business associate must enter into an agreement to protect health information with this party. Sample business associate agreement provisions are attached to the bulletin. On the subject of enforcement, HHS noted that Section 1176(b) of the Social Security Act provides the agency may not impose a civil money penalty where the failure to comply is based on reasonable cause and is not due to willful neglect, and the failure to comply is cured within a 30-day period. HHS noted its authority to extend the period within which a covered entity may cure the noncompliance "based on the nature and extent of the failure to comply." HHS, in determining whether reasonable cause exists for a covered entity's failure to meet requirements and in determining the period within which noncompliance must be cured, announced that it "will consider the emergency circumstances arising from Hurricane Katrina, along with good faith efforts by covered entities, its business associates and their agents, both to protect the privacy of health information and to appropriately execute the agreements required by the Privacy Rule as soon as practicable." Shortly after Hurricane Katrina, the federal government began a pilot test of KatrinaHealth.org , an electronic health record (EHR) online system, sharing prescription drug information for most of the hurricane evacuees with health care professionals. The launch of KatrinaHealth.org was possible in part because of plans already made and actions taken by the Administration, the Congress, foundations, and the private sector to implement electronic health records (EHRs) as part of the national health information infrastructure. President Bush and the Departments of Health and Human Services, Defense, and Veterans Affairs (HHS) have focused on the importance of transforming health care delivery through the improved use of health information technology (HIT). Philanthropies such as California Health Care Foundation, Robert Wood Johnson, the Markle Foundation, and others have provided funding, leadership, and expertise to this effort. In the private sector, the medical and nursing informatics, and the medical and nursing professional societies, have also been involved. Electronic health records are controversial among many privacy advocates and citizens who are concerned about information security and the potential for the exploitation of personal medical information by hackers, companies, or the government, and the sharing of health information without the patients' knowledge. Privacy advocates, in general, support the development of an interoperable national health information network built on the concepts of patient control, privacy, and participation. The Department of Health and Human Services has formed agreements with two organizations to plan and promote the widespread use of electronic health records in the Gulf Coast region as it rebuilds. The agreements supplement recently announced contracts to certify electronic health records, develop interoperability standards, evaluate variations among privacy and security requirements across the country, and create prototypes for a nationwide health information network. The Southern Governors Association will form the Gulf Coast Health Information Task Force, which will bring together local and national resources to help area health-care providers convert to electronic medical records. The Louisiana Department of Health and Hospitals will develop a prototype of health information sharing and electronic health record support that can be replicated in the region. The effort will not be connected with http://katrinahealth.org/ , which is not expected to be a long-term undertaking. On September 22, 2005, KatrinaHealth.org [ http://www.katrinahealth.org ], a secure online service, was launched to enable authorized healthcare providers to electronically access medication and dosage information for evacuees from Hurricane Katrina to renew prescriptions, prescribe new medications, and coordinate care. The website KatrinaHealth.org was available for a 90-day period. KatrinaHealth.org was a completely new, secure online service created in three weeks to help deliver quality care and avoid medical errors. The data contain records from 150 zip codes in areas hit by Katrina. At its launch, prescription drug records on over 800,000 people from the region could be searched by health care professionals. The information was compiled and made accessible by private companies, public agencies, and national organizations, including medical software companies; pharmacy benefit managers; chain pharmacies; local, state, and federal agencies; and a national foundation. The effort to create KatrinaHealth.org was facilitated by the Office of the National Coordinator for Health Information, Department of Health and Human Services. With the assistance of federal, state, and local governments, KatrinaHealth.org was operated by private organizations, such as the Markle Foundation. Under ordinary circumstances, HIPAA privacy rules would require formal, written "business associate agreements" among KatrinaHealth.org participants before they could exchange medical information. Reportedly, many of the participants had such agreements or were able to obtain them rapidly. In addition, HHS's second bulletin clarified that considering the emergency circumstances, organizations that did not comply with the business associate requirements would not be penalized as long as they showed good faith efforts to protect the privacy of health information and to appropriately execute the agreements required by the Privacy Rule as soon as practicable. The data or prescription information for KatrinaHealth.org was obtained from a variety of government and commercial sources. Sources include more than 150 private and public organizations' electronic databases from commercial pharmacies, government health insurance programs such as Medicaid, and private insurers such as Blue Cross and Blue Shield Association of America, and pharmacy benefits managers in the states affected by the storm. Key data and resources were contributed by the American Medical Association (AMA), Gold Standard, the Markle Foundation, RxHub and SureScripts. Data contributors also include the Medicaid programs of Louisiana and Mississippi; chain pharmacies (Albertsons, CVS, Kmart, Rite Aid, Target, Walgreens, Wal-Mart, Winn Dixie); and Pharmacy Benefit Managers (RxHub, Caremark, Express Scripts, Medco Health Solutions)). Federal agencies involved include the U.S. Departments of Commerce, Defense, Health and Human Services, Homeland Security, and Veterans Affairs. The information in KatrinaHealth.org did not exist in a central database, rather access was provided to a mix of data sets. Some of the information from chain pharmacies was aggregated while other available information was not. Licensed doctors and pharmacists, anywhere in the United States, treating evacuees from Louisiana, Mississippi, and Alabama, were eligible to use KatrinaHealth. Patients were not permitted access to the prescription information at the online site. Authorized clinicians and pharmacists using the system could view evacuees' prescription histories online, obtain available patient allergy information and other alerts, view drug interaction reports and alerts, see therapeutic duplication reports and alerts, and query clinical pharmacology drug information. The system was only accessible to authorized health care professionals and pharmacists, who provided treatment or supported the provision of treatment to evacuees. To ensure that only authorized physicians used KatrinaHealth.org, the AMA provided physician credentialing and authentication services. The AMA validated the identity of health care providers, a key step in ensuring patient confidentiality and security. The National Community Pharmacists Association (NCPA) authenticated and provided access for independent pharmacy owners. SureScripts provided these services for chain pharmacies on behalf of the National Association of Chain Drug Stores (NACDS). When treating an evacuee, an authorized user of KatrinaHealth.org was prompted to enter the evacuee's first name, last name, date of birth, pre-Katrina residence zip code and gender. If the evacuee's information was available in KatrinaHealth.org, the health provider would link to the following information: quantity and day supply; the pharmacy that filled the script (if available); the provider that wrote the script; and drug information, such as indication and dosage, administration and interactions. Tools to prevent unauthorized access, and audit logs of system access and records access were maintained and reviewed. The site provided "Read Only" access and information in the system could not be modified or other wise changed. The developers acknowledged that KatrinaHealth.org did not contain information on every Katrina evacuee from Louisiana, Mississippi, and Alabama; that the information on each evacuee's prescription history might be incomplete; and that the data might contain errors or omissions or duplication. Users of KatrinaHealth were encouraged to review the data with the patient. According to the developers, privacy and security concerns were central to the design of KatrinaHealth.org. Only authorized users could access the site. Highly sensitive personal information was filtered out to comply with state privacy laws. Medication information about certain sensitive health care conditions (HIV/AIDS, mental health issues, and substance abuse or chemical dependencies) was not available. Health privacy advocates argued that evacuees should have had the option to opt out of the site and that the site should not become permanent. In June 2006, The Markle Foundation released a report titled "Lessons From KatrinaHealth." The report provides recommendations to ensure that medical records can be accessed and prescriptions provided quickly in a future disaster. The recommendations include engaging in advance planning, taking advantage of existing resources, addressing system and electronic health record design issues, integrating emergency systems, creating systems that are simple to access, improving communication strategies, and overcoming policy barriers to working together.

Shortly after Hurricane Katrina, the federal government began a pilot test of KatrinaHealth.org, an online electronic health record (EHR) system that shared prescription drug information for hurricane evacuees with health care professionals. The website was available for a 90-day period. To allow health care providers in affected areas to care for patients without violating the Health Insurance Portability and Accountability Act (HIPAA), Health and Human Services (HHS) Secretary Leavitt waived certain provisions of the HIPAA Privacy Rule and issued guidance to clarify situations where the HIPAA privacy rule allows information sharing to assist in disaster relief efforts and with patient care. This report discusses HHS's waiver of certain provisions of the HIPAA privacy rule and guidance issued by HHS with respect to the use and disclosure of protected health information under the HIPAA Privacy Rule in response to Hurricane Katrina. It also briefly discusses the development of electronic health records (EHRs) and provides a brief overview of KatrinaHealth.org. This report will be updated.

ATP’s mission is to stimulate economic growth in the United States through technology development. The program seeks to accomplish that mission by sharing the cost of R&D projects with private industry. The projects selected by ATP for funding are characterized by the program as having “a potential broad-based economic impact but a relatively high technical risk and a long time horizon.” ATP’s program guidance has stated that if the technical risk associated with a project is very low, federal funding should not be necessary. In addition, when submitting a research proposal, applicants must sign a form stating that “this proposal is not requesting funding for existing or planned research programs that would be conducted in the same time period in the absence of financial assistance under the ATP.” This wording suggests that ATP should not fund projects that other sources would have funded or, when ATP does fund such projects, that ATP funds should enable applicants to complete their projects in a shorter time. Manufacturing extension programs offer manufacturers assistance in modernizing or upgrading their operations, often with state and federal funding. NIST manages federal funding of this type of program through its Manufacturing Extension Partnership Program, or MEP. In our prior reports, we used MEP to collectively refer to all state, federal, and university manufacturing extension programs. The primary mission of manufacturing extension programs is to give “hands-on” technical assistance to small- and medium-sized manufacturers trying to improve their operations through the use of appropriate technologies. These programs engage in a variety of activities to assist small- and medium-sized manufacturers, often in partnership with other business assistance providers, such as Small Business Development Centers, community colleges, and federal laboratories. The programs offer a wide range of business services, including helping companies (1) solve individual manufacturing problems, (2) obtain training for their workers, (3) create marketing plans, and (4) upgrade their equipment and computers. The assistance focuses on small- and medium-sized manufacturers because research by the National Research Council and others has indicated that these companies lack the resources necessary to improve their manufacturing performance. In our work on ATP, our objective was to examine, as one way to assess the program’s impact, whether research projects would have been funded by the private sector if they had not received funds from ATP. We also examined ATP’s impact in terms of other goals of the program, such as aiding the formation of joint ventures. We focused on two groups of ATP applicants, which we called “winners” and “near winners.” Both groups submitted proposals that were rated highest during ATP’s review, but the near winners did not ultimately receive ATP funding. We surveyed all applicants that qualified as winners or near winners during ATP’s first 4 years (1990-93). We achieved a 100-percent response rate from the 123 respondents that we included in our analysis (89 winners and 34 near winners). We found that ATP had funded research projects that would have been funded by the private sector as well as those that would not. The winners were nearly evenly divided when asked if they would have pursued their projects even if they had not received ATP funding. Half of the near winners continued their projects without relying on ATP funding, while the other half discontinued their projects for various reasons. Almost all the near winners that continued their projects did so on a modified schedule, meeting the projects’ milestones later than they had scheduled in their proposals to ATP. Of the 123 applicants we surveyed, 77, or 63 percent, did not look for funding from other sources before requesting it from ATP. Those applicants that did look for funding looked for a long time and made many attempts to find funding, on average. Seven applicants turned down offers from private sources because they could not reach an acceptable funding arrangement. We also found that ATP had other effects. More than three-fourths of the joint-venture applicants indicated that they had come together solely to pursue an ATP project, thus satisfying ATP’s goal of serving as a catalyst for the formation of joint ventures. Furthermore, of the 45 applicants that tried to find funding elsewhere before turning to ATP, about half were told by prospective funders that their projects were either too risky or precompetitive—characteristics that fulfill the aims of ATP funding. We surveyed 766 U.S. manufacturers that had completed at least 40 hours of manufacturing extension program assistance, including NIST’s MEP, and received 551 responses. We obtained respondents’ views on the impact of these services on their business performance and on the factors affecting the impact of these services. We did not verify either the positive or negative impacts reported by manufacturers, nor did we evaluate the operations or management of specific federal or state programs. We also obtained the views of other manufacturers that had little or no experience with these programs to determine why they made little or no use of them. Most manufacturers responding to our questionnaire—about 73 percent—reported that they believed the programs’ assistance had positively affected their overall business performance. About 15 percent of the respondents reported that they believed the assistance had not affected their overall business performance. Approximately 8 percent said that it was too early to determine the effect, and another 4 percent said they had had no basis to estimate the effect. In addition, most respondents reported that the assistance had positively affected their use of technology in the workplace (about 63 percent), the quality of their product (about 61 percent), and the productivity of their workers (about 56 percent). Between about 44 percent and 63 percent of the respondents reported that the programs’ assistance had positively affected certain specific indicators of their business performance, such as customer satisfaction, profits, and the ability to meet production schedules. Of those respondents not reporting a positive impact on specific indicators of their business performance, most said the programs’ assistance had not had any impact. Two percent or fewer of the respondents reported a negative impact on each specific performance indicator. Among the factors that manufacturers said had affected the impact of MEP services was their own companies’ input. The companies that had committed their own financial resources to implement the programs’ recommendations reported greater benefits from the assistance relative to other survey respondents. Of those 322 respondents who had made a financial investment, 86 percent said that the programs’ assistance had positively affected their business performance. However, 54 percent of those who had not made a financial investment also reported an overall positive impact. Other factors, according to the respondents, that influenced the effectiveness of the programs’ services were the expertise and experience of the programs’ staff and the affordability of the assistance. In our related telephone survey of 200 additional manufacturers who were not extensive users of the programs’ services, about 82 percent reported that they had not used the services because they were unaware of these programs. About 10 percent said that although they knew about these programs, they had not used them because they believed the assistance would not be necessary. The companies we interviewed said that other sources of modernization assistance besides these programs were their customers, vendors and/or suppliers, industry associations, and consultants. The report we are releasing today on performance measurement shows that there is no single indicator or evaluation method that adequately captures the results of R&D. However, indicators do provide helpful information for making decisions about R&D. Whether the focus is on basic research, applied research, or development, the amount of money spent in that area is taken as an indication of how much research is being performed. The major advantages of using expenditure data as an indicator are that they are easily understandable, readily available, and have been, in general, consistently gathered over time. In addition, spending on different projects in different research areas can be measured according to the same unit, dollars, making comparisons between projects straightforward. The amount of funding, however, does not provide a good indication of research results. Companies told us that they are switching their spending to more short-term R&D projects rather than long-term projects. However, the impacts of that change are unclear. The reduced funding levels for long-term projects may not reflect the fact that the R&D efforts can be performed with greater efficiency. For example, one way in which the federal government and the private sector have tried to use R&D resources more efficiently and effectively is through consortia with universities or other companies. By combining their research activities, companies attempt to avoid expensive duplication and learn from each other. We also found that because of the difficulties in identifying the impacts of research, quantitative and qualitative indicators have been developed as proxies to assess R&D results. The strengths and limitations are evident in both types of indicators. Quantitative indicators focus mainly on return on investment, patenting rates, and bibliometrics—the study of publication-based data. While implying a degree of precision, these indicators were not originally intended to measure long-term R&D results. Qualitative assessment such as peer review provides detailed information, but it relies on the judgments of experts and may be expensive. Because of these difficulties, the companies we interviewed stressed marketplace results rather than R&D output indicators. While varying in the types of indicators they collect, they emphasized the difficulties in measuring R&D’s specific contribution to a company’s overall performance. For example, one company stated that because so many people have been involved in a product’s evolution, it is difficult to separate the contribution of the research unit from that of other units. All of the companies interviewed have increased their expectation that R&D contribute directly to their profitability. However, instead of increasing their efforts at measuring R&D results, they have shifted the responsibility for making R&D decisions to the business units. For example, if the business units believe that a particular R&D project would increase their profits, the firm would budget for that R&D. Many of the R&D output measures tracked by the private sector do not apply directly to the federal government. In particular, while facing the same increasing cost pressures as the private sector, the federal government cannot rely on the profit motive to guide its decisions. This discussion of performance measures for R&D is particularly relevant because of the current emphasis on the Government Performance and Results Act (GPRA). In response to questions about the value and effectiveness of federal programs, GPRA seeks to shift federal agencies’ focus away from such traditional concerns as staffing, activity levels, and tasks completed toward a focus on program outcomes. GPRA incorporates performance measurement as one of its most important features. Under this act, executive branch agencies are required to develop annual performance plans that use performance measurement to reinforce the connection between the long-term strategic goals outlined in their strategic plans and the day-to-day activities of their managers and staff. However, the very nature of the innovative process makes measuring the performance of science-related projects difficult. For example, a wide range of factors determines if and when a particular R&D project will result in commercial or other benefits. It can also take many years for a research project to achieve results. Experiences from recent GPRA pilot efforts reinforce the fact that output measures are highly specific to the management and mission of each federal agency and that no single indicator exists to measure the results of research. The Army Research Laboratory, which was designated as a pilot project for performance measurement under the act, has developed a multifaceted approach using quantitative indicators, peer review, and customer feedback to evaluate the results of R&D. Although this is not the only approach that can be taken, this response to the challenges in measuring the impacts of research shows that some progress is being made in response to GPRA. Madame Chair, this concludes my prepared remarks. I would be happy to respond to any questions you may have. The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (301) 258-4066, or TDD (301) 413-0006. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.

GAO discussed its work related to the National Institute of Standards and Technology's Advanced Technology Program (ATP), Manufacturing Extension Partnership (MEP) Program, and research and development (R&D) performance measures. GAO noted: (1) ATP has funded research projects that would have been funded by the private sector as well as those that would not; (2) the award recipients were nearly evenly divided when asked if they would have pursued their projects if they had not received such funding; (3) GAO also found that in most cases, the participants in its survey did not look for funding from other sources, private or public, before trying to obtain funding from ATP; (4) about half of the 45 applicants that tried to find funding elsewhere before turning to ATP were told by prospective funders that their projects were either too risky or "precompetitive", characteristics that fulfill the aims of ATP; (5) manufacturers viewed the manufacturing extension programs' services positively, as was demonstrated in GAO's national survey of manufacturers who had received substantive services from the programs in 1993; (6) most manufacturers responding to GAO's questionnaire, about 73 percent, reported that they believed that the type of assistance they had received from these programs had positively affected their overall business performance; (7) about 15 percent of the respondents reported that they believed the programs' assistance had not affected their overall business performance; (8) the amount of money spent on R&D, the primary indicator of research investment, is useful as an input measure of how much research is being performed; (9) however, the level of spending is not a reliable indicator of research results; (10) GAO found that there is no primary indicator of R&D results; (11) the companies that GAO spoke with collect data on various output indicators, such as return on investment and patents granted, but in general make limited use of them in their investment decisions; (12) instead, they emphasized that R&D contributes directly to the bottom line; (13) because companies are profit oriented, many of the indicators tracked by the private sector cannot be directly applied to the federal government; (14) determining the specific outcomes resulting from federal R&D is a challenge that will not be easily resolved; and (15) however, in response to recent legislation requiring agencies to report on program results, some progress is being made in measuring the impacts of research.

In 2001, lighting accounted for 8.8 % (101 billion kilowatt hours) of U.S. household electricity use. Incandescent lamps, which are commonly found in households, are highly inefficient sources of light because about 90% of the energy they use is lost as heat. For that reason, lighting has been one focus of efforts to increase the efficiency of household electricity consumption. Lighting manufacturers are now producing products that are significantly more energy-efficient than incandescent bulbs. Such lighting includes fluorescent bulbs. Long considered a more economical choice for commercial and industrial lighting, compact fluorescent light bulbs are becoming more attractive to household consumers. The primary difference between a compact fluorescent light bulb (CFL) and a fluorescent tube is the size. Unlike tubes, CFLs are made to fit into products that can be plugged into standard household light sockets like table lamps and ceiling fixtures. Compared to incandescent bulbs that use a heated filament to produce light, CFLs contain a gas that produces invisible ultraviolet (UV) light when the gas is excited by electricity. UV light hits a white coating inside the fluorescent bulb, which alters the light into light visible to a human eye. Because fluorescent bulbs do not use heat to create light, they are far more energy-efficient than regular incandescent bulbs. In the past, complaints about the high cost, harsh light quality, and the inability to use with a dimmer made CFLs less attractive to some consumers. However, improvements in technology have resulted in less expensive CFLs that illuminate more softly, emitting light similar to light from an incandescent bulb, that are capable of dimming. CFL sales have increased significantly in the past two years. According to the U.S. Environmental Protection Agency (EPA), 290 million Energy Star-qualified CFLs were sold in 2007. That is nearly double the number sold in 2006 (the year that CFL market share increased from a steady 5% to 11%), and represents almost 20% of the U.S. light bulb market. The primary factors contributing to the rise in popularity of CFLs are their energy efficiency and longer life. According to the Department of Energy (DOE), CFLs use about 75% less energy than standard incandescent bulbs and last up to 10 times longer. Further, according to EPA, the increase in sales is due in part to increases in consumer education and promotion by Energy Star retail partners such as Wal-Mart, Lowe's, Home Depot, Costco, Ace Hardware, and Sam's Club. Another factor that may further increase the use of CFLs is the development of energy efficiency standards for lighting. Sections 321 and 322 of the Energy Independence and Security Act of 2007 ( P.L. 110-140 , enacted December 12, 2007; referred to hereafter as the Energy Act) established energy efficiency standards for certain types of incandescent lamps, incandescent reflector lamps, and fluorescent lamps. The standards specify the maximum wattage that can be used to power lights within a range of lumens (a measure of the perceived power of light). For example, a standard North American incandescent light bulb that emits approximately 1,700 lumens uses 100 watts of power. A CFL emitting comparable lumens uses approximately 23 watts. The new standard would require incandescent lamps emitting comparable lumens to use no more than 72 watts. The deadlines for meeting the new standard fall between January 1, 2012, to January 1, 2014, depending on the range of lumens emitted by various bulbs. CFLs already meet the Energy Act's energy standard. The Energy Act has been interpreted by some as a prohibition on the sale or production of incandescent bulbs, or as a mandatory requirement to use CFLs. Neither is true. The Energy Act only establishes standards that incandescent bulbs must meet—it does not prohibit their use, nor does it mandate the use of CFLs. Mercury is a highly volatile, naturally occurring element. It conducts electricity, is liquid at room temperature, combines easily with other metals, and expands and contracts evenly with temperature change. These properties make mercury useful in a variety of household, medical, and industrial products and processes. Mercury is also a potent neurotoxin that can, at certain exposure levels, cause brain, lung, and kidney damage. Mercury is an essential component of CFLs that allows a bulb to be an efficient light source. Fluorescent bulbs, unlike many other mercury-containing consumer products, are among the few products for which non-mercury substitutes do not exist. Still, over the past 20 years, the mercury content in fluorescent tubes and bulbs has declined steadily. A CFL generally contains 2 to 6 milligrams (mg) of mercury (an amount that poses virtually no risk of harm ). By comparison, mercury has been present for decades in the following household products: watch batteries (25 mg), dental amalgams (500 mg), thermometers (500 mg to 2 grams (g)), thermostats (3 g), electrical switches and relays (3.5 g), and standard fluorescent tubes (up to 40 mg; lighting manufacturers now produce low-mercury fluorescent tubes that generally contain less than 9 mg of mercury). Increased use of CFLs has generated concern among some over the potential danger the bulbs may pose if broken in the home during use or after disposal. The amount of mercury that may be released by a CFL depends on a variety of factors, including a bulb's age at the time of disposal. As the bulb ages, the mercury content becomes bound to the glass, where it is not readily available for release into the environment unless it is burned (i.e., disposed of in an incinerator). Therefore, it is possible to essentially eliminate potential mercury releases from CFLs if they are not broken, particularly when new, or incinerated. Mercury is not released from CFLs during normal use. Consumers would be exposed to mercury only if a bulb were to break. At room temperature, some of a bulb's metallic mercury will evaporate and form mercury vapors; however, the danger posed from exposure to the amount of mercury in an individual CFL is minimal. Although the potential risk of harm associated with CFL use is relatively low, certain precautions are recommended to avoid spreading of mercury vapor. Several federal and state agencies have published cleanup and disposal recommendations for CFLs. Guidance from the different agencies varies slightly, but generally recommends the following steps: open a window and leave the room for 15 minutes, and keep pregnant women, children, and pets away from the area until it is cleaned up; gather glass fragments and powder—on hard surfaces, use stiff paper or cardboard (do not vacuum), and on carpet, pick up large pieces wearing disposable gloves; use sticky tape, such as duct tape, to pick up any remaining small glass fragments and powder; wipe the area clean with damp paper towels or disposable wet wipes; and place all waste and cleaning materials in a glass jar with a metal lid or in a sealed plastic bag, and immediately place all materials outdoors and check with local or state government about disposal requirements. In guidance provided by the Energy Star program, it has been noted that the use of CFLs in place of incandescent bulbs could actually reduce the amount of mercury emissions to the environment. Coal-fired power plants currently account for 40% of mercury emissions in the United States. During a five-year span, by some estimates, a coal-fired power plant emits 9.3 mg of mercury in the course of producing the same amount of electricity needed to power an incandescent bulb, compared to 2.3 mg of mercury emissions from a CFL over the same period. The use of CFLs in place of incandescent bulbs could also lead to comparable decreases in carbon dioxide, sulfur dioxide, and nitrogen oxide emissions—all pollutants emitted from coal-fired power plants. Any additional mercury emissions associated with CFLs could be minimized if bulbs are kept out of the waste stream (i.e., recycled rather than discarded) when spent. Products containing mercury may meet the federal regulatory definition of hazardous waste. Pursuant to the Resource Conservation and Recovery Act (RCRA), EPA has established regulations regarding the transport, treatment, storage, and disposal of hazardous wastes. However, households are essentially exempt from RCRA. This means that household hazardous waste (e.g., paint, batteries, thermostats, certain cleaning fluids, and pesticides) may be disposed of in municipal solid waste landfills or incinerators. The mercury levels in CFLs would potentially cause them to be deemed household hazardous waste. As such, EPA suggests that the bulbs not be discarded in household garbage "if better disposal options exist." EPA recommends that household consumers contact their state or local environmental regulatory agency for information about proper disposal options. If household garbage disposal is the only option, EPA recommends that certain precautions be taken. Since CFLs discarded in the trash will likely break and release mercury, EPA recommends that bulbs be put in two plastic bags and sealed before placement in outdoor trash or a protected outdoor location. Since virtually all components of a fluorescent bulb can be recycled, EPA recommends recycling as the preferred method to manage spent CFLs. The scope of programs to recycle CFLs varies from state to state. For example, a recycling program operating in Minnesota allows residents to leave CFLs at any of hundreds of retail stores across the state. A program in Indiana accepts CFLs at certain Sears stores. Also, regional groups have formed to develop recycling options. For example, the Northwest Compact Fluorescent Lamp Recycling Project is in the process of designing a pilot project to recycle CFLs in Oregon and Washington. Another possibility is that more retailers will begin to accept CFLs for proper disposal—IKEA currently accepts spent CFLs, and Home Depot has begun to accept them at stores in Canada (but, not yet in the United States). Generally, recycling is not widely available for waste products that are not generated in sufficient amounts to make it economically feasible for recyclers. It is anticipated that, as more spent CFLs enter the waste stream, recycling opportunities will increase. Further, EPA is currently working with CFL manufacturers and U.S. retailers to expand disposal options. Finally, under § 321(h) of the Energy Act, EPA is directed to submit to Congress a report describing recommendations relating to the means by which the federal government may reduce or prevent the release of mercury during the manufacture, transport, storage, and disposal of light bulbs. A perceived danger posed by the use of CFLs has been fed, at least in part, by some media reports claiming hidden costs and dangers associated their use. These reports escalated after an incident involving a broken CFL in a home in Prospect, Maine, on March 14, 2007. After contacting various sources, the homeowner sought cleanup advice from the Maine Department of Environmental Protection (DEP). A DEP representative advised the homeowner to contact an environmental remediation company to remove any residual mercury from the home. The homeowner was given a $2,000 cleanup estimate. The Maine DEP later acknowledged that because CFLs were relatively new to the market, department personnel had been unfamiliar with proper cleanup and disposal requirements for the bulbs. The agency subsequently posted cleanup guidance on its website, along with an account titled the "History and facts on CFL breakage in Prospect, Maine." The initial incident was repeated by various media outlets, some of which exaggerated the potential danger and cost associated with CFL use and disposal. For example, one journal stated, in part, [T]here is no problem disposing of incandescents when their life is over. You can throw them in the trash can and they won't hurt the garbage collector. They won't leech deadly compounds into the air or water. They won't kill people working in the landfills. The same cannot be said about the mercury-containing CFLs. As noted previously, significantly higher levels of mercury have been present for decades in several other consumer products. There have been no reports of landfill worker fatalities related to mercury exposure. Additional elements of the incident in Maine have been widely repeated, particularly the claim that it will cost a consumer $2,000 to clean up a broken CFL at home. Even though many of the original details and claims have been refuted, the Maine incident is often cited in online news stories and Web logs, particularly when the potential dangers associated with CFLs are discussed.

Compact fluorescent light bulbs (CFLs), a smaller version of fluorescent tubes, are produced with technology that allows them to fit into standard lighting products such as lamps and ceiling fixtures. The bulbs use one-fifth to one-quarter the energy and can last 10 times longer than traditional incandescent light bulbs. These factors have led to a significant increase in the sales of CFLs. According to the U.S. Environmental Protection Agency (EPA), CFL sales doubled in 2007 and now represent 20% of the U.S. light bulb market. Sales may be expected to increase with the implementation of new energy efficiency standards for lighting specified in the Energy Independence and Security Act of 2007 (P.L. 110-140, enacted December 19, 2007). Those standards require certain light bulbs to use 25% to 30% less energy than today's products beginning in 2012. CFLs already meet the standards. The increased use of CFLs has led to concern among some groups over the presence in the bulbs of mercury, a potent neurotoxin. By way of example, EPA has likened the amount of mercury in individual bulbs to that which could fit on the tip of a ballpoint pen—ranging from 2 to 6 milligrams (mg). At these levels, mercury is virtually harmless to consumers. Still, EPA recommends that caution be taken in cleaning up broken CFLs to minimize potential mercury exposure. EPA also recommends that spent bulbs be recycled, instead of disposed of with household garbage, in areas where CFL recycling is available. (Federal regulations that apply to the disposal of mercury-containing products (e.g., lighting, switches, thermometers) do not apply to households.) Further, EPA has noted that increased CFL use may actually reduce overall mercury emissions to the environment by potentially reducing power use—coal-fired power plants are the greatest individual source of mercury emissions in the United States. This report discusses reasons why CFL sales have increased dramatically in the past two years, concerns that have arisen regarding their use and disposal, and some media reports that have exaggerated the potential danger associated with the mercury in CFLs.

VA policy specifies how VAMCs can purchase expendable medical supplies and RME. VAMCs can purchase expendable medical supplies and RME through their acquisition departments or through purchase card holders, who have been granted the authority to make such purchases. Purchase cards are issued to certain VAMC staff, including staff from clinical departments, to acquire a range of goods and services, including those used to provide care to veterans. According to VA, as of the third quarter of 2010, there were about 27,000 purchase cards in use across VA’s health care system. VA has two inventory management systems, which VAMCs use to track the type and quantity of supplies and equipment in the facilities. Each VAMC is responsible for maintaining its own systems and for entering information about certain expendable medical supplies and certain RME in the facilities into the appropriate system. Specifically, the Generic Inventory Package (GIP) is used to track information about expendable medical supplies that are ordered on a recurring basis. The Automated Engineering Management System/Medical Equipment Reporting System (AEMS/MERS) is used to track information about RME that is valued at $5,000 or more and has a useful life of 2 years or more. VAMC officials told us they use information about the items in their facilities for a variety of purposes, for example, to readily determine whether they have expendable medical supplies or RME that are the subject of a manufacturer or FDA recall or a patient safety alert. VA’s purchasing and tracking policies include the following three requirements for VAMCs: 1. A designated VAMC committee must review and approve proposed purchases of any expendable medical supplies or RME that have not been previously purchased by the VAMC. The committee, which typically includes administrative staff and clinicians from various departments, reviews the proposed purchases to evaluate the cost of the purchase as well as its likely impact on veterans’ care. For example, the committee that reviews and approves proposed RME purchases often includes a representative from the department responsible for reprocessing RME, in order to determine whether the VAMC has the capability to reprocess—clean and disinfect or sterilize—the item correctly and that staff are appropriately trained to do so. Proper reprocessing of RME is important to ensure that RME is safe to use and that veterans are not exposed to infectious diseases, such as Human Immunodeficiency Virus (HIV), during treatment. 2. All approvals for purchases of expendable medical supplies or RME must be signed by two officials, the official placing the order and the official responsible for approving the purchase. 3. VAMCs must enter information on all expendable medical supplies that are ordered on a recurring basis and all RME that is valued at $5,000 or more and has a useful life of 2 years or more into the appropriate inventory management system, either GIP or AEMS/MERS. VA does not require information about RME that is valued at less than $5,000 to be entered into AEMS/MERS. At the five VAMCs we visited, our preliminary work identified examples of inconsistent compliance with the three purchasing and tracking requirements we selected for our review. In some cases, noncompliance with these requirements created potential risks to veterans’ safety. We are continuing to conduct this work. VAMC committee review and approval. Officials at two of the five VAMCs we visited stated that VAMC committees reviewed and approved all of the expendable medical supplies the VAMCs purchased for the first time. However, at the remaining three VAMCs, officials told us that VAMC committees did not conduct these reviews in all cases. Officials from these three VAMCs told us that certain expendable medical supplies—for example, new specialty supplies—were purchased without VAMC committee review and approval. Specialty supplies, such as those used in conjunction with dialysis machines, are expendable medical supplies that are only used in a limited number of clinical departments. Without obtaining that review and approval, however, the VAMCs purchased these supplies without evaluating their cost effectiveness or likely impact on veterans’ care. At one VAMC we visited, officials told us that clinical department staff were permitted to purchase certain RME—surgical and dental instruments—using purchase cards and that these purchases were not reviewed and approved by a committee. Therefore, the VAMC had no assurance that RME purchased by clinical department staff using purchase cards had been reviewed and approved by a committee before it was purchased for the first time. As a result, these purchases may have been made without assurance that they were cost effective and safe for use on veterans and that the VAMC had the capability and trained staff to reprocess these items correctly. Signatures of purchasing and approving officials. At one of the five VAMCs we visited, VAMC officials discovered that one staff member working in a dialysis department purchased specialty supplies without obtaining the required signature of an appropriate approving official. That staff member was responsible for ordering an item for use in 17 dialysis machines that was impermeable to blood and would thus prevent blood from entering the dialysis machine. However, the staff member ordered an incorrect item, which was permeable to blood, allowing blood to pass into the machine. After the item was purchased, the incorrect item was used for 83 veterans, resulting in potential cross- contamination of these veterans’ blood, which may have exposed them to infectious diseases, such as HIV, Hepatitis B, and Hepatitis C. Entry of information about items into VA’s inventory management systems. At the time of our site visits, officials from one of the five VAMCs we visited told us that information about expendable medical supplies that were ordered on a recurring basis was entered into GIP, as required. In contrast, officials at the remaining four VAMCs told us that information about certain expendable supplies that were ordered on a recurring basis, such as specialty supplies, was not always entered into GIP. Since our visit, one of the four VAMCs has reported that it has begun to enter all expendable medical supplies that are ordered on a recurring basis, including specialty supplies, into GIP. By not following VA’s policy governing GIP, VAMCs have an incomplete record of the expendable medical supplies in use at their facilities. This lack of information can pose a potential risk to veterans’ safety. For example, VAMCs may have difficulty ensuring that expired supplies are removed from patient care areas. In addition, in the event of a manufacturer or FDA recall or patient safety alert related to a specialty supply, VAMCs may have difficulty determining whether they possess the targeted expendable medical supply. Officials at one VAMC we visited told us about an issue related to tracking RME in AEMS/MERS that contributed to a patient safety incident, even though the VAMC was not out of compliance with VA’s requirement for entering information on RME into AEMS/MERS. Specifically, because VA policy does not require RME valued under $5,000 to be entered into AEMS/MERS, an auxiliary water tube, a type of RME valued under $5,000 that is used with a colonoscope, was not listed in AEMS/MERS. According to VAMC officials and the VA Office of the Inspector General, in response to a patient safety alert that was issued on the auxiliary water tube in December 2008, officials from the VAMC checked their inventory management systems and concluded—incorrectly—that the tube was not used at the facility. However, in March 2009, the VAMC discovered that the tube was in use and was not being reprocessed correctly, potentially exposing 2,526 veterans to infectious diseases, such as HIV, Hepatitis B, and Hepatitis C. In addition, officials from VA headquarters told us that when information about certain RME is entered into AEMS/MERS, it is sometimes done inconsistently. The officials explained that this is because AEMS/MERS allows users to enter different names for the same type of RME. As a result, in the case of a manufacturer or FDA recall or patient safety alert related to a specific type of RME, VAMCs may have difficulty determining whether they have that specific type of RME. During our preliminary work, we discussed with VA headquarters officials examples of steps VA plans to take to improve its oversight of VAMCs’ purchasing and tracking of expendable medical supplies and RME. For example, VA plans to change its oversight of the use of purchase cards. Specifically, VA headquarters officials told us that designated VAMC staff are currently responsible for reviewing purchase card transactions to ensure that purchases are appropriate. However, one VA headquarters official stated that these reviews are currently conducted inconsistently, with some being more rigorous than others. VA headquarters officials stated that VA plans to shift greater responsibility for these reviews from the VAMCs to the VISNs, effective October 1, 2010. In addition, VA plans to standardize the reviews by, for example, adding a checklist for reviewers. Because this change has not yet been implemented across VA, we can not evaluate the extent to which it will address the appropriateness of purchases using purchase cards. Our preliminary work also shows that VA plans to create a new inventory management system. VA headquarters officials told us that they are developing a new inventory management system—Strategic Asset Management (SAM)—which will replace GIP and AEMS/MERS and will include standardized names for expendable medical supplies and RME. According to these officials, SAM will help address inconsistencies in how information about these items is entered into the inventory management systems. VA headquarters officials stated that SAM will help improve VA’s ability to monitor information about expendable medical supplies and RME across VAMCs. VA provided us with an implementation plan for SAM, which stated that this new system would be operational in March 2011. At this time, we have not done work to determine whether this date is realistic or what challenges VA will face in implementing it. Mr. Chairman, this concludes my statement. I would be pleased to respond to any questions you or other members of the committee may have. For further information about this statement, please contact Debra A. Draper at (202) 512-7114 or draperd@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony. Key contributors to this statement were Randall B. Williamson, Director; Mary Ann Curran, Assistant Director; David Barish; Alana Burke; Krister Friday; Melanie Krause; Lisa Motley; and Michael Zose. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

VA clinicians use expendable medical supplies--disposable items that are generally used one time--and reusable medical equipment (RME), which is designed to be reused for multiple patients. VA has policies that VA medical centers (VAMC) must follow when purchasing such supplies and equipment and tracking--that is, accounting for--these items at VAMCs. GAO was asked to evaluate VA's purchasing and tracking of expendable medical supplies and RME and their potential impact on veterans' safety. This testimony is based on GAO's ongoing work and provides preliminary observations on (1) the extent of compliance with VA's requirements for purchasing and tracking of expendable medical supplies and RME and (2) steps VA plans to take to improve its oversight of VAMCs' purchasing and tracking of expendable medical supplies and RME. GAO reviewed VA policies and selected three requirements that GAO determined to be relevant to patient safety. At each of the five VAMCs GAO visited, GAO reviewed documents used to identify issues related to the three requirements and interviewed officials to gather further information on these issues. The VAMCs GAO visited represent different surgical complexity groups, sizes of veteran populations served, and geographic regions. GAO also interviewed VA headquarters officials and obtained and reviewed documents regarding VA headquarters' oversight. GAO shared the information in this statement with VA officials. During its preliminary work at the five selected VAMCs, GAO found inconsistent compliance with the three VA purchasing and tracking requirements selected for review. Noncompliance with these requirements created potential risks to veterans' safety. (1) Requirement for VAMC committee review and approval. At two of the VAMCs, officials stated that the required designated committee review and approval occurred for all of the expendable medical supplies and RME that the VAMCs had not previously purchased. These reviews are designed to evaluate the cost of the purchase as well as its likely impact on veterans' care. However, at the remaining three VAMCs, officials stated that the required committee review and approval of the expendable medical supplies, such as those used in conjunction with dialysis machines, did not always occur. As a result, these purchases were made without evaluating the likely impact on veterans' care. (2) Requirement for signatures of purchasing and approving officials. At one of the VAMCs, VAMC officials discovered that a staff member in a dialysis department ordered an expendable medical supply item for use in dialysis machines, without obtaining the required signature of an approving official. That staff member ordered an incorrect item, the use of which presented a risk of exposing veterans to infectious diseases, such as Human Immunodeficiency Virus. (3) Requirement for entering information in VA's inventory management systems. Officials from one of the five VAMCs told GAO that information about expendable medical supplies that were ordered on a recurring basis was entered into the appropriate inventory management system, as required. At the remaining four VAMCs, officials told GAO that information about certain expendable medical supplies--those used in a limited number of clinical departments such as dialysis departments--was not always entered into the system. This lack of information can pose a potential risk to veterans' safety; in the event of a recall of these items, these VAMCs may have difficulty determining whether they possess the targeted item. VA reports that it plans to improve its oversight of VAMCs' purchasing and tracking of expendable medical supplies and RME. For example, VA headquarters officials stated that, effective October 1, 2010, VA plans to shift greater responsibility for reviews of purchase card transactions from the VAMCs to the Veterans Integrated Service Networks, which are responsible for overseeing VAMCs. VA headquarters officials also told GAO that VA is developing a new inventory management system, which it expects will help improve VA's ability to track information about expendable medical supplies and RME across VAMCs. VA expects this new system to be operational in March 2011.

Under the authority of the Ports and Waterways Safety Act of 1972, as amended, the Coast Guard operates VTS systems in eight ports. Operations and maintenance costs for these systems, which totaled about $19 million in fiscal year 1995, are borne by the Coast Guard and are not passed on to the ports or the shipping industry. Two other ports, Los Angeles/Long Beach and Philadelphia/Delaware Bay, have user-funded systems. Study of VTS systems was prompted by the Oil Pollution Act of 1990 (P.L. 101-380), passed after the 1989 Exxon Valdez oil spill and other accidents in various ports. The Act directed the Secretary of Transportation to prioritize U.S. ports and channels in need of new, expanded, or improved VTS systems. The resulting report, called the Port Needs Study, was submitted to the Congress in March 1992. This study laid much of the groundwork for the proposal for VTS 2000. Making funding decisions today about VTS 2000 is complicated by several as-yet-unanswered questions regarding the need for the system in certain ports, the system’s cost, and available alternatives to VTS 2000. Having more complete, up-to-date information on these questions is critical to deciding whether to move forward with the program. One uncertainty relates to which ports will receive VTS 2000 systems. Most of the 17 candidate ports were identified in the 1991 Port Needs Study, which quantified (in dollar terms) the benefits of building new VTS systems at port areas nationwide. The Coast Guard is not scheduled to make a final decision on which ports to include in the program until fiscal year 2000, but the information developed to date suggests that the number of ports ultimately selected could be much less than 17. The Port Needs Study and the follow-on studies completed so far show that a new system would produce little or no added benefit at about two-thirds of the ports being considered. Budget information the Coast Guard has provided to the Congress thus far has not fully reflected the limited benefits of installing VTS 2000 systems in many of the ports being considered. For example, the Coast Guard should provide to the Congress updated information on the added benefits, if any, that would be achieved by installing VTS 2000 at various ports, especially for those that already have VTS systems. In our view, this information, coupled with the Coast Guard’s current thinking on the high and low priority locations for VTS 2000, is critical to assist the Congress in deciding on whether a development effort for 17 ports is warranted. We realize that the Coast Guard is not in a position to make a final decision on all ports at this time, because it is still gathering information and conducting follow-on studies to reassess some ports on the list. However, having the most current and complete data will allow the Congress to better decide on funding levels for the VTS 2000 program and provide direction to the Coast Guard. A second major area of uncertainty is the cost to develop VTS 2000. This cost is considerable, regardless of whether it is installed at a few ports or all 17. The Coast Guard initially estimated that development costs alone (exclusive of installation costs at most sites) would total $69 million to $145 million, depending on the number of sites that receive VTS 2000 and the extent of software development. The estimated costs to install equipment and build facilities at each site ranged from $5 million to $30 million, bringing the program’s total costs to between $260 million and $310 million. The Coast Guard’s updated estimate of annual operating costs for a 17-site system is $42 million. At present, the Coast Guard plans to pay for all of these costs from its budget instead of passing them on to users. A few days ago, the Coast Guard awarded contracts for initial development of the VTS 2000 system. The bids from three vendors currently competing for the contract to design the system were substantially lower than earlier estimates. Further refinements to the Coast Guard cost estimates will be made in early 1997 when the Coast Guard plans to select a single contractor to build the VTS 2000 system. The system’s costs will also depend on the Coast Guard’s decision about how sophisticated the system should be. VTS 2000 can be developed in four phases; and additional capability can be added at each phase. For example, phase 1, originally estimated to cost $69 million, would create a system with operational capabilities that are about on a par with upgraded VTS systems currently being installed at some ports. The Coast Guard’s development plan allows for stopping after phase 1 (or any other phase) if cost or other considerations preclude further development. To date, the Coast Guard’s approach has not involved much consideration of whether feasible alternatives exist to VTS 2000 at individual ports under consideration. I want to emphasize that we did not attempt to assess whether other alternatives were preferable, but many would appear to merit consideration or study. Here are a few of these alternatives: Reliance on existing VTS systems. The systems in place at seven locations may be sufficient. For example, the port of Los Angeles/Long Beach, which is on the Coast Guard’s “short list” for the first round of VTS 2000 systems, now has a VTS system, which cost about $1 million to build and meets nearly all of VTS 2000’s operational requirements, according to a Coast Guard study. The Coast Guard is reconsidering its decision to keep the port on the “short list” but is still evaluating it for VTS 2000. Other VTS systems in Houston/Galveston, Puget Sound, Philadelphia/Delaware Bay, New York, San Francisco, and Valdez all have been recently upgraded or enhanced or are scheduled to be upgraded in the near future irrespective of VTS 2000. Therefore, these systems may provide protection similar to that of VTS 2000 now and into the future. VTS systems with smaller scope than proposed thus far under VTS 2000. The Port Needs Study and follow-on studies have proposed blanketing an entire port area with VTS coverage, but less comprehensive VTS coverage might be sufficient. For example, some key stakeholders at Port Arthur/Lake Charles, which has no radar-based VTS coverage, said such coverage was needed at only a few key locations, instead of portwide. A group is studying the feasibility of a more limited, privately-funded system. One vendor estimated that a system to cover key locations at Port Arthur/Lake Charles would cost $2 million to $3 million. Coast Guard officials told us that reduced coverage is an option they could consider when site-specific plans are established for VTS 2000. Non-VTS approaches. In some cases, improvements have been proposed that are not as extensive as installing a VTS system. For example, several years ago in Mobile/Pascagoula, the Coast Guard Captain of the Port proposed a means to enhance port safety at two locations where the deep ship channels (for ocean-going ships) intersect the Intracoastal Waterway (which mainly has barge traffic and small vessels). The proposal involved establishing “regulated navigation areas” that would require vessels from both directions to radio their approach and location to all other vessels in the vicinity. This proposal may merit further consideration before a decision is made on the need for a VTS in this port area. At the ports we visited, few stakeholders said they had been involved with the Coast Guard in discussing whether such alternatives are a viable alternative to VTS 2000 systems in their port. In discussions with us, Coast Guard officials agreed that greater communication with key stakeholders is an essential step in making decisions about VTS 2000. An additional study currently being conducted by the Marine Board of the National Research Council may provide additional information that will be useful in assessing VTS 2000. Among other things, this study will address the role of the public and private sectors in developing and operating VTS systems in the United States. An interim report is due to be completed in June 1996. Most of the stakeholders we interviewed did not support installing a VTS 2000 system at their port. Their opinions were predominantly negative at five ports, about evenly split at two, and uncertain at one. Many who opposed VTS 2000 perceived the proposed system as being more expensive than needed. Support for VTS 2000 was even less when we asked if stakeholders would be willing to pay for the system, perhaps through fees levied on vessels. A clear majority of the stakeholders was not willing to fund VTS 2000 at six of the ports; at the other two, support was mixed. The stakeholders interviewed at six ports generally supported some form of VTS system that they perceived to be less expensive than VTS 2000. However, at the four ports with VTS systems, this support did not reflect a belief that a new system was needed; most stakeholders said that existing systems were sufficient. The two locations without a VTS system (New Orleans and Tampa) supported an alternative VTS system. In contrast, at Mobile/Pascagoula, most stakeholders were opposed to a VTS system, saying that the low volume of ocean-going vessels did not warrant such a system. At Port Arthur/Lake Charles, views were evenly mixed as to whether a system was needed. In general, because stakeholders perceived that other alternative VTS systems could be less costly than VTS 2000, they were somewhat more disposed to consider paying for them. At two locations with existing private VTS systems, they are already doing so. At the remaining six ports, the stakeholders had the following views on paying for alternative VTS systems: stakeholders’ views were generally supportive at three, opposed at one, and mixed at the other two. In discussions with key stakeholders at each of the eight ports we visited, three main concerns emerged that could impede private-sector involvement in building and operating VTS systems. Obtaining funding for construction. At half of the six ports that do not have a privately funded VTS, the stakeholders were concerned that if local VTS systems are to be funded by the user community rather than through tax dollars, the lack of adequate funding for constructing such a system may pose a barrier. The cost of a VTS depends on its size and complexity; however, radar equipment, computer hardware and software, and a facility for monitoring vessel traffic alone could cost $1 million or more at each port. The privately funded systems at Los Angeles/Long Beach and Philadelphia/Delaware Bay initially faced similar financing concerns; both received federal or state assistance, either financial or in-kind. Obtaining liability protection. At each of the same six ports, most of the stakeholders were concerned that private VTS operators might be held liable for damages if they provided inaccurate information to vessel operators that contributed to an accident. At locations such as Tampa and San Francisco, where the possibility of privately funded systems has been discussed, the stakeholders believe that securing liability protection is a key issue that must be resolved before they would move forward to establish a VTS system. Currently, the two existing privately funded VTS systems receive liability protection under state laws, except in cases of intentional misconduct or gross negligence. However, these laws have yet to be tested in court. Defining the Coast Guard’s role. Federal law does not address what role, if any, the Coast Guard should play in privately funded systems. At seven of the ports, most of the stakeholders said the Coast Guard should have a role. In support of this position, they cited such things as the (1) need for the Coast Guard’s authority to require mandatory participation by potential VTS users and to ensure consistent VTS operations and (2) Coast Guard’s expertise in and experience with other VTS systems. In summary, difficult choices need to be made about how to improve marine safety in the nation’s ports. There is an acknowledged need to improve marine safety at a number of ports, but not much agreement about how it should be done. Decisions about whether VTS 2000 represents the best approach are made more difficult by the uncertainties surrounding the scope, cost, and appropriateness of VTS 2000 over other alternatives in a number of locations. While some unresolved questions cannot be immediately answered, we think it is vitally important for the Coast Guard to present a clearer picture to the Congress as soon as possible of what VTS 2000 is likely to entail. Complete, up-to-date information will put the Congress in a better position to make informed decisions about the development of VTS 2000. Mr. Chairman, this concludes our prepared statement. We would be happy to respond to any questions that you or the Members of the Subcommittee may have. The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (301) 258-4066, or TDD (301) 413-0006. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.

GAO discussed the Coast Guard's vessel traffic service (VTS) 2000 program. GAO noted that: (1) it is difficult to judge whether VTS 2000 is the best marine safety system because it is unknown how many ports need the system, how much it will cost, and whether other cost-effective alternatives are available; (2) most key stakeholders do not support VTS 2000 because they believe it will be too costly; (3) most key stakeholders oppose user fees or other funding methods that would shift the financial costs of VTS 2000 from the Coast Guard to users; (4) support for a VTS system of any kind varied among key stakeholders at different ports, but most favored the least expensive options available; and (5) issues affecting privately funded or privately operated VTS systems include the initial costs of a VTS system, the private sector's exposure to liability, and the Coast Guard's oversight role.

Radio frequency spectrum allocation policy within the United States is coordinated primarily through the Federal Communications Commission (FCC)—for private use, including state and local public safety wireless communications—and the National Telecommunications and Information Administration (NTIA)—for federal use. Spectrum management goals include balancing diverse concerns such as technical quality, economic benefit, fairness, access, security, and global competitiveness. Many economic models for providing the "highest and best use" for spectrum exist and have been tried, both in the United States and worldwide. Spectrum for what is widely described as "prime" frequencies (300 MHz - 3000 MHz) is judged by many to be the most commercially desirable and is widely sought after at auction. The Congressional Budget Office has estimated that auction proceeds for fiscal years 2007-2011 will total $28 billion. Current broadcast and wireless communications technology requires the assignment of specific frequencies to prevent interference among transmissions. Preventing interference while fostering spectrum policies that promote public benefits and economic growth have been key bulwarks of spectrum policy and management for the FCC since its creation. Using auctions as a market-driven approach to spectrum allocation is a fairly recent innovation. The Communications Act of 1934, as modified primarily by the Balanced Budget Act of 1997, governs spectrum allocation and auction requirements in the United States. It directs the FCC to hold auctions and to deposit the proceeds in the general fund of the Treasury. Spectrum policy that designates auction proceeds for specific uses is a departure from this requirement. Whenever spectrum reallocation is desirable or necessary because of changes in technology, spectrum value, or other factors, some mechanism—such as a trust fund—might be considered a component of spectrum management and policy in order to compensate organizations that cannot recover costs through pricing. On the assumption that spectrum reallocation is an integral part of spectrum management, and recognizing that relocation costs can climb to billions of dollars in some sectors, the need to create reimbursement programs could be considered part of spectrum policy. The purpose of the Spectrum Relocation Fund is to create a mechanism whereby federal agencies can recover the costs of moving from one spectrum band to another. The interest in relocating federal users—and accelerating the process by assuring reimbursement for the costs of moving—centers on valuable spectrum (relative to auction prices for comparable spectrum in the United States and other countries) now used by federal agencies, especially the Department of Defense. In particular, spectrum in bands within the 1710-1850 MHz range is sought by wireless telecommunications companies to facilitate the implementation of next-generation wireless technologies. including high-speed mobile services (3G). After much study, the NTIA and the FCC, aided by an Intra-Government 3G Planning Group, announced plans that would transfer spectrum in the 1710-1755 MHz range from federal agencies and make it available to the private sector through spectrum auctions conducted by the FCC. As part of the effort, the need was identified for new legislation that would permit affected federal agencies to recover costs directly from these auction proceeds. To meet this need, in mid-2002 the Department of Commerce proposed the creation of a Spectrum Relocation Fund. This fund could provide a means to make it possible for federal agencies to recover relocation costs directly from auction proceeds when they are required to vacate spectrum slated for commercial auction. In effect, successful commercial bidders cover the costs of relocation. To accomplish the NTIA and FCC goals required modification of the Communications Act of 1934, to permit the agencies direct access to auction funds. This was accomplished with the passage of the Commercial Spectrum Enhancement Act, Title II of P.L. 108-494 , in 2004. Among key provisions of the act were requirements that the auctions must recoup at least 110% of the projected costs, and that unused funds would revert to the Treasury after eight years. Specific frequencies mentioned included not only the 1710-1755 MHz band but also other federally used frequencies scheduled for reallocation and possible auction. The Communications Act of 1934 was therefore amended to create a Spectrum Relocation Fund within the Treasury to hold auction proceeds as designated. The fund is administered by the Office of Management and Budget. Following procedures required by the act, the FCC scheduled an auction for Advanced Wireless Services (AWS), designated Auction 66, which was completed on September 18, 2006. The AWS auction attracted nearly $13.9 billion in completed bids, substantially above the cost established by the NTIA of almost $936 million for the move. The FCC ruled that auction winners wishing to put acquired licenses to immediate use would in most cases be able to share with current federal users under guidance from the FCC. At a Washington, DC, conference in September 2007, John Kneuer, Director of the NTIA at the time, told the audience that there were some "issues" on relocating federal users to clear space for commercial license-holders. To facilitate the clearing of spectrum for revenue-generating auctions, the 109 th Congress included measures in a budget reconciliation bill to create a fund to hold the proceeds from Congressionally mandated auctions of licenses in the 700 MHz band. The fund and disbursements are administered by the NTIA, which is directed in the act to make specific disbursements. These are: $7,363 million from the auction of spectrum licenses at 700 MHz is slated go to reduce the budget deficit as specified in H.Con.Res. 95 up to $1,500 million on coupons for households toward the purchase of TV set top boxes that can convert digital broadcast signals for display on analog sets; a grant program of up to $1,000 million to improve communications capabilities for public safety agencies; payments of up to $30 million toward the cost of temporary digital transmission equipment for broadcasters serving the Metropolitan New York area; payments of up to $10 million to help low-power television stations purchase equipment that will convert full-power broadcast signals from digital to analog; a program funded up to $65 million to reimburse low-power television stations in rural areas for upgrading equipment from analog to digital technology; up to $106 million to implement a unified national alert system and $50 million for a tsunami warning and coastal vulnerability program; contributions totaling no more than $43.5 million for a national 911 improvement program established by the ENHANCE 911 Act of 2004; and up to $30 million in support of the Essential Air Service Program. The NTIA was authorized to finance some of the programs through loans from the Treasury, secured by the expected proceeds of the auction required by the law. Some of the funding provisions were later amended as regards timing of payments and use of funds but the amounts were not changed. Total legislated disbursements are slightly more than $10 billion, to stay within an estimate of auction revenue of approximately $12 billion, as originally provided by the Congressional Budget Office. There is no provision in the act for disbursing auction proceeds beyond that amount, although all the "proceeds (including deposits and upfront payments from successful bidders) from the use of a competitive bidding system under this subsection with respect to recovered analog spectrum" are to be deposited into the fund. Any additional disbursements from the fund would be treated as new costs by the Congressional Budget Office and would score as needing to be offset. Absent new legislation, the surplus in the fund will be deposited in the Treasury as general revenue. The fund, however, has no sunset date. The auction, Auction 73, concluded on March 18,2008; it grossed $19,592,420,000. The Public Safety Interoperability Implementation Act ( H.R. 3116 , Representative Stupak) would establish a separate fund within the Digital Television Transition and Public Safety Fund that would be used for public safety communications grants. This separate fund would receive the proceeds remaining from the auction required by the Deficit Reduction Act, after the payments required by the act had been made. It would also receive up to half of the net proceeds of future auctions, although this share could be reduced. In addition a total of $1.5 billion would be authorized for appropriations over three years, beginning with FY2008. The grant program would be administered by the NTIA with a board created for that purpose, with five members appointed by the Secretary of Commerce. Grants would go for communications critical to public safety, with a preference for programs providing broad-based interoperability. The bill was introduced July 19, 2007. The Reliable, Effective, and Sustained Procurement of New Devices for Emergency Responders (RESPONDER) Act of 2008 ( S. 3465 , Senator Wicker) would create a First Responders Interoperable Device Availability Trust Fund to provide grants to purchase interoperable radios for the new public safety network proposed for some of the channels being released in the transition to digital TV. The network plan is linked to the auction of a remaining block of analog spectrum, known as the D Block. The RESPONDER Act would place the entire net proceeds of the D Block Auction in the Trust. Additional funds would come from a percentage of future auctions. Auction authority for the Federal Communication Commission would be extended to assure the continuation of revenue-producing auctions. The bill was introduced September 10, 2008. The Spectrum Relocation Improvement Act of 2008 ( H.R. 7207 , Representative Inslee) would require that federal agencies covered by the Commercial Spectrum Enhancement Act provide detailed, publicly available information about the spectrum relocation plans and timelines covered under the act. In particular the availability of frequencies for shared use would be documented. To be eligible to receive payments from the Spectrum Relocation Fund, agencies would be required to complete the transition within a specified time period, to report on progress, and to comply with other requirements stated in the bill.

Congress has acted to create two special funds to hold the revenue of certain spectrum auctions for specific purposes. These funds represent a departure from existing practice, which requires that auction proceeds be credited directly to the Treasury as income. The Deficit Reduction Act of 2005 (P.L. 109-171, Title III) required the auctioning of licenses for spectrum currently used by TV broadcasters for analog transmissions. It established the Digital Television Transition and Public Safety Fund to receive this auction revenue and use some of the proceeds for the transition to digital television, public safety communications, and other programs. The Commercial Spectrum Enhancement Act (P.L. 108-494, Title II) established a Spectrum Relocation Fund to hold the proceeds of certain spectrum auctions for the specific purpose of reimbursing federal entities for the costs of moving to new frequency assignments. The spectrum being vacated by federal users has been sold for commercial use. Passage of the Spectrum Enhancement Act set a precedent in national policy for spectrum management by linking spectrum auction proceeds to specific funding programs. Among bills related to special funds that were introduced during the 110th Congress are: the Spectrum Relocation Improvement Act of 2008 (H.R. 7207, Inslee): the RESPONDER Act of 2008 (S. 3465, Wicker); and The Public Safety Interoperability Implementation Act (H.R. 3116, Stupak).

Section 319(a) of the Bipartisan Campaign Reform Act of 2002 (BCRA), also known as the McCain-Feingold law, establishes increased contribution limits for House candidates whose opponents significantly self-finance their campaigns. This provision, in tandem with Section 304, which applies a similar program to Senate candidates, is frequently referred to as the "Millionaire's Amendment." Generally, the complex statutory formula provides—using limits that were in effect at the time the case was considered—that if a candidate for the House of Representatives spends more than $350,000 of personal funds during an election cycle, individual contribution limits applicable to his or her opponent are increased from the usual current limit ($2,300 per election) to up to triple that amount (or $6,900 per election). Likewise for Senate candidates, a separate provision generally raises individual contribution limits for a candidate whose opponent exceeds a designated threshold level of personal campaign funding that is based on the number of eligible voters in the state. For both House and Senate candidates, the increased contribution limits are eliminated when parity in spending is reached between the two candidates. BCRA also requires self-financing candidates to file special disclosure reports regarding their campaign spending—as such expenditures are made—in addition to reporting in accordance with the regular periodic disclosure schedule. In 2004 and 2006, Jack Davis was a candidate for the House of Representatives from the 26 th Congressional District of New York. During the 2004 election cycle, he spent $1.2 million, which was principally from his own funds, and during the 2006 cycle, he spent $2.3 million, which (with the exception of $126,000) came from personal funds. In 2006, after the Federal Election Commission (FEC) informed Davis that it had reason to believe that he had violated BCRA's disclosure requirements for self-financing candidates by failing to report personal expenditures during the 2004 election cycle, Davis filed suit in the U.S. District Court for the District of Columbia seeking declaration that the Millionaire's Amendment was unconstitutional and an injunction preventing the FEC from enforcing the law during the 2006 cycle. A district court three-judge panel concluded sua sponte that Davis had standing to bring the suit, but rejected his claims on the merits and granted summary judgment to the FEC. Invoking BCRA's provision for direct appeal to the Supreme Court for actions brought on constitutional grounds, Davis appealed. Reversing the three-judge district court decision, in a 5-to-4 vote, the Supreme Court in FEC v. Davis invalidated the Millionaire's Amendment as lacking a compelling governmental interest in violation of the First Amendment. Justice Alito wrote the opinion for the majority and was joined by Chief Justice Roberts, and Justices Scalia, Kennedy, and Thomas. Justice Stevens wrote an opinion concurring in part and dissenting in part, and was joined, in part, by Justices Souter, Ginsburg, and Breyer. Justice Ginsburg also wrote an opinion, concurring in part and dissenting in part, which was joined by Justice Breyer. The Court remanded the case to the district court for proceedings consistent with its opinion. Citing prior decisions, the Court began its opinion by noting that it has long upheld the constitutionality of limits on individual contributions and coordinated party expenditures. While recognizing that contribution limits implicate First Amendment free speech interests, it has sustained such limits on the condition that they are "closely drawn" to serve a "sufficiently important interest" such as the prevention of corruption or the appearance of corruption. On the other hand, the Court observed that it has definitively rejected any limits on a candidate's expenditure of personal funds to finance campaign speech, finding that such limits impose a significant restraint on a candidate's right to advocate for his or her own election, which is not justified by the compelling governmental interest of preventing corruption. Instead of preventing corruption, use of personal funds lessens a candidate's reliance on outside contributions, thereby neutralizing the coercive pressures and risks of abuse that contribution limits seek to avoid. With regard to the Millionaire's Amendment, the Court observed that while it does not directly impose a limit on a candidate's expenditure of personal funds, it "imposes an unprecedented penalty on any candidate who robustly exercises that First Amendment right." Further, it requires a candidate to choose between the right of free political expression and being subjected to discriminatory contribution limits. If it simply increased the contribution limits for all candidates—both the self-financed candidate as well as the opponent—it would pass constitutional muster. Although many candidates who can afford significant personal expenditures in support of their own campaigns may choose to do so despite the Millionaire's Amendment, the Court determined that they would bear "a special and potentially significant burden if they make that choice." In fact, the Court concluded that if a candidate vigorously exercises the right to use personal funds, it creates a fundraising advantage for his or her opponents. In its 1976 landmark decision Buckley v. Valeo, the Supreme Court upheld a provision of the Federal Election Campaign Act (FECA) providing presidential candidates with the option to receive public funds on the condition that they comply with expenditure limits, even though it found overall expenditure limits to be unconstitutional. Distinguishing the Millionaire's Amendment from FECA's presidential public financing provision, the Davis Court observed that the choices presented by each of the statutes are "quite different." By forgoing public financing, a presidential candidate can still retain the unencumbered right to make unlimited personal expenditures. In contrast, the Millionaire's Amendment fails to provide any options for a candidate to exercise that right without limitation. Finding that the Millionaire's Amendment imposes a "substantial burden" on the First Amendment right to expend personal funds in support of one's own campaign, thereby triggering strict scrutiny, the Court announced that it is not sustainable unless it can be justified by a compelling governmental interest. As the Court held in Buckley, reliance on personal funds reduce s the threat of corruption, and therefore, the burden imposed by the Millionaire's Amendment cannot serve that governmental interest. Responding to the FEC's argument that the statute's "asymmetrical limits" are justified because they level the playing field for candidates of differing personal wealth, the Court pointed out that its jurisprudence offers no support for the proposition that this rationale constitutes a compelling governmental interest. According to the Court, preventing corruption or its appearance are the only legitimate compelling governmental interests—that have yet been identified—to justify restrictions on campaign financing. Moreover, "'the concept that government may restrict the speech of some elements of our society in order to enhance the relative voice of others is wholly foreign to the First Amendment.'" Specifically, the Court cautioned that restricting a candidate's speech in order to level opportunities for election among candidates presents "ominous implications" because it would permit Congress to "arrogate the voters' authority to evaluate the strengths of candidates competing for office." Voters are entrusted with the duty to judge candidates for public office and, according to the Court, Different candidates have different strengths. Some are wealthy; others have wealthy supporters who are willing to make large contributions. Some are celebrities; some have the benefit of a well-known family name. Leveling electoral opportunities means making and implementing judgments about which candidates should be permitted to contribute to the outcome of an election. The Constitution, however, confers upon voters, not Congress, the power to choose the Members of the House of Representatives, Article I, § 2, and it is dangerous business for Congress to use the election laws to influence the voters' choices. In considering the constitutionality of the disclosure requirements contained within the Millionaire's Amendment, the Court emphasized that it has repeatedly held that compelled disclosure significantly infringes on privacy of association and belief, as guaranteed under the First Amendment. Therefore, it has subjected such requirements to exacting scrutiny in order to ascertain whether there is a "relevant correlation" or "substantial relation" between the governmental interest and the information required to be disclosed. In view of its holding that the Millionaire's Amendment is unconstitutional, the Court likewise reasoned that the burden imposed by its disclosure requirements cannot be justified, and accordingly, struck them down. In a dissent, Justice Stevens—joined, in part, by Justices Souter, Ginsburg, and Breyer—argued that the Millionaire's Amendment represents Congress's judgment that candidates who spend over $350,000 of their own money in a campaign for a House or Senate seat have an advantage over other candidates who must raise contributions. The statute imposes no burden on self-financing candidates and "quiets no speech." Instead, the dissent found that it does no more than merely "assist the opponent of a self-funding candidate" to make his or her voice heard and that "this amplification in no way mutes the voice of the millionaire, who remains able to speak as loud and as long as he likes in support of his campaign." As a result of finding no direct restriction on the speech of the self-financed candidate, the dissent would subject the Millionaire's Amendment to a less rigorous standard of review. Indeed, the dissent specifically criticized the Court's landmark Buckley ruling, which struck down limits on expenditures, arguing that "a number of purposes, both legitimate and substantial," can justify the imposition of reasonable spending limits. Maintaining that combating corruption and the appearance of corruption are not the only governmental interests justifying congressional regulation of campaign financing, the dissent remarked that the Court has also recognized the governmental interests of reducing both the influence of wealth and the appearance of wealth on the outcomes of elections. While conceding that such prior decisions have focused on the aggregations of wealth that are accumulated in the corporate form, it reasoned that the logic of such decisions—particularly concerns about the "corrosive and distorting effects of wealth" on the political process—could be extended to the context of individual wealth as well. In a separate dissent, Justice Ginsburg—joined by Justice Breyer—concluded that sustaining the constitutionality of the Millionaire's Amendment would be consistent with the Court's earlier holding in Buckley v. Valeo . She resisted, however, joining Justice Stevens's dissent to the extent that it addresses the Court's ruling in Buckley invalidating expenditure limits. Noting that the Court had not been asked to overrule Buckley —and that this issue had not been briefed—Justice Ginsburg preferred to leave reconsideration of that case "for a later day." The Court's decidedly antiregulatory opinion in Davis appears to reaffirm its finding in the landmark 1976 decision, Buckley v. Valeo, that Congress has no compelling interest in attempting to level the playing field among candidates. In fact, the Davis Court determined that Congressional attempts to do so would supplant the choices of the voters. Notably, the decision also seems to be a departure from its 2003 decision in McConnell v. FEC —upholding key portions of BCRA—where the Court expressed deference to Congress's expertise in regulating the system under which its Members are elected. While Justice Stevens still appeared to subscribe to this view, the majority of the Davis Court seemed less deferential.

The "Millionaire's Amendment" is a shorthand description for a provision of the Bipartisan Campaign Reform Act of 2002 (BCRA), also known as the McCain-Feingold law, which established increased contribution limits for congressional candidates whose opponents significantly self-finance their campaigns. In 2008, in a 5-to-4 decision, Davis v. Federal Election Commission , the Supreme Court invalidated this provision. The Court found that the burden imposed on expenditures of personal funds is not justified by the compelling governmental interest of lessening corruption or the appearance of corruption and therefore, held that the law is unconstitutional in violation of the First Amendment.

Since FY1989, Congress has appropriated just under $271 billion (constant 2008 dollars) for disaster assistance in 34 appropriations measures, primarily supplemental appropriations acts, after significant catastrophes occurred in the United States. The median annual funding during the 20-year period FY1989 through the present was $2.7 billion; the mean annual funding was $12 billion ($241 billion/20)—both in current dollars. The mean funding in current dollars for all 34 enacted emergency supplemental bills was $7 billion ($241 billion/34). The median annual funding in constant dollars during the 20 year period FY1989 through the present was $3.8 billion; the mean annual funding in constant dollars was $13.6 billion. The mean funding in constant dollars for all 34 enacted emergency supplemental bills was $8 billion ($271 billion/34). Disasters during 2001 and 2005 were especially costly. In FY2001 and FY2002, supplemental appropriations for disaster assistance exceeded $26 billion, most of which went toward recovery following the terrorist attacks of September 11, 2001. In FY2005 and FY2006, after Hurricanes Katrina, Rita, and Wilma struck in 2005, supplemental appropriations for disaster assistance have reached an all-time high. From FY2005 through FY2008, Congress appropriated over $130 billion, almost 60% of the total appropriated since FY1989. Since the start of the 110 th Congress, the President has signed into law four measures ( P.L. 110-28 , P.L. 110-116 , P.L. 110-252 , and P.L. 110-329 ). These four statutes together provided roughly $41 billion in supplemental appropriations for disaster relief and recovery. P.L. 110-28 , signed on May 25, 2007, included an appropriation of $7.6 billion for disaster assistance, $3.4 billion of which was classified as "Hurricane Katrina Recovery." P.L. 110-116 , signed into law on November 13, 2007, provided a total of $6.355 billion for continued recovery efforts related to Hurricanes Katrina, Rita, and Wilma, and for other declared major disasters or emergencies. This total includes $500 million for firefighting expenses related to 2007 California wildfires. P.L. 110-252 , signed into law June 30, 2008, provided $7 billion in disaster assistance, most of which was directed at continuing recovering needs resulting from the 2005 hurricane season. P.L. 110-329 , signed into law on September 30, 2008, included an appropriation for emergency and disaster relief of $21.4 billion. Of this amount, roughly $2 billion is continued disaster relief for the 2005 hurricane season. The majority of the funding (just over $8.8 billion) in the law is for disasters occurring in 2008 which included Hurricanes Gustav and Ike, wildfires, and flooding. One of the largest components funding in P.L. 110-329 is for the Department of Housing and Urban Development's (HUD) Community Development Fund, which received $6.5 billion specifically for disaster relief, long-term recovery, and economic revitalization in areas affected by disasters that occurred in 2008. Other funding in the law includes $135 million for wildfire suppression, and a $100 million direct appropriation for the American Red Cross for reimbursement of disaster relief and recovery expenditures associated with emergencies and disasters that have also taken place in 2008. This report provides summary information on emergency supplemental appropriations legislation enacted since 1989 after significant catastrophes. It includes funds appropriated to the Disaster Relief Fund (DRF) administered by the Federal Emergency Management Agency (FEMA), as well as funds appropriated to other departments and agencies. This report uses a broad concept of what constitutes emergency disaster assistance. The funds cited in this report include appropriations for disaster relief, repair of federal facilities, and hazard mitigation activities directed at reducing the impact of future disasters. DRF appropriations are obligated for all major disasters and emergencies issued under the Stafford Act, not only those significant events that lead to supplemental appropriations. Counterterrorism, law enforcement, and national security appropriations are not included in this compilation. Unless otherwise noted, this report does not take into account rescissions approved by Congress after funds have been appropriated for disaster assistance. As reflected in Table 1 below, supplemental appropriations have been enacted as stand-alone legislation. However, in some instances, emergency disaster relief funding has been enacted as part of regular appropriations measures, continuing appropriations acts (continuing resolutions), or in omnibus appropriations legislation. Requested funding levels noted in the third column of Table 1 reflect House Appropriations Committee data on total requested funding for the entire enacted bill. Where possible, Office of Management and Budget (OMB) data taken from correspondence to Congress requesting emergency supplemental funding are used to identify dates of Administration requests for supplemental funding. In response to the widespread destruction caused by three catastrophic hurricanes at the end of the summer of 2005, the 109 th Congress enacted four emergency supplemental appropriations bills. Two of the statutes were enacted as FY2005 supplementals after Hurricane Katrina devastated parts of Florida and Alabama and resulted in presidential major disaster declarations for all jurisdictions in Louisiana and Mississippi. The two supplementals ( P.L. 109-61 and P.L. 109-62 ) together provided $62.3 billion for emergency response and recovery needs; most of the funding in these two bills was provided for the Disaster Relief Fund (DRF) administered by FEMA. After Hurricanes Rita and Wilma struck, the 109 th Congress enacted two other supplementals; the costs of both were offset by rescissions. The FY2006 appropriations legislation for the Department of Defense ( P.L. 109-148 ) rescinded roughly $34 billion in funds previously appropriated (almost 70% of which was taken from funds previously appropriated to the Department of Homeland Security) and appropriated $29 billion to other accounts primarily to pay for the restoration of federal facilities damaged by the hurricanes. Also in FY2006, Congress agreed to an Administration request for further funding—$19.3 billion was appropriated in supplemental legislation ( P.L. 109-234 ) for recovery assistance, with roughly $64 million rescinded from two accounts ($15 million from flood control, Corps of Engineers, and $49.5 million from Navy Reserve construction, Department of Defense). On May 25, 2007, the President signed into law P.L. 110-28 , which appropriated $120 billion in emergency supplemental funding for Iraq, Afghanistan, and other matters, including $6.9 billion for continued Gulf Coast relief. The measure was a successor to previous emergency supplemental legislation in the 110 th Congress, H.R. 1591 , vetoed by the President on May 1, 2007. This was the fifth supplemental measure enacted containing disaster assistance specifically provided in response to Hurricanes Katrina and Rita. The sixth supplemental measure enacted as part of P.L. 110-116 on November 13, 2007, provided an additional $5.9 billion for emergency assistance, most, but not all of which, can be attributed to the Gulf Coast recovery. The $3 billion appropriated for Department of Housing and Urban Development—Community Planning and Development Fund can only be used for the Louisiana Road Home program. However, the $2.9 billion appropriated for the Disaster Relief Fund can be used not only for the Gulf Coast but for other declared disasters as well. As a result, after enactment of P.L. 110-252 , the total amount appropriated by Congress in supplemental funding after the 2005 hurricanes surpassed the $130 billion mark. Table 2 provides information on the appropriations made in the six supplementals enacted after Hurricanes Katrina, Rita, and Wilma. Table 3 identifies the departments and agencies from which funds were rescinded in P.L. 109-148 . In addition to these rescissions and appropriations, Congress enacted other funding changes by transferring $712 million from FEMA to the Small Business Administration for disaster loans ( P.L. 109-174 ). On June 30, 2008, the 110 th Congress enacted the Supplemental Appropriations Act, 2008 ( P.L. 110-252 ). Some of the funding from P.L. 110-252 includes $100 million for the Economic Development Administration's economic development assistance programs, $73 million for the Department of Housing and Urban Development's (HUD) Road Home Program and $300 million for HUD's Community Development fund. The majority of disaster assistance funding (over $4 billion) in P.L. 110-252 is directed at the Corps of Engineers for projects aimed at repairing damages incurred from the 2005 hurricane season, as well as programs designed to mitigate against future hurricanes. Another supplemental, the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009 was passed three months later on September 30, 2008 ( P.L. 110-329 ). P.L. 110-329 includes ongoing disaster relief for destruction resulting from the 2005 hurricane season, including $85 million for the Disaster Housing Assistance program administered by the Department of Housing and Urban Development (HUD). The program enables families to settle in areas across the United States that were not affected by hurricane Katrina, Rita, or Wilma. The amount provided in the statute for disaster relief as a result of the 2005 hurricane season is roughly $1.3 billion. CRS Report RL33330, Community Development Block Grant Funds in Disaster Relief and Recovery , by [author name scrubbed] and [author name scrubbed]. CRS Report RL34711, Consolidated Appropriations Act for FY2009 (P.L. 110-329): An Overview , by [author name scrubbed]. CRS Report RL33999, Defense: FY2008 Authorization and Appropriations , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RL33053, Federal Stafford Act Disaster Assistance: Presidential Declarations, Eligible Activities, and Funding , by [author name scrubbed] (pdf). CRS Report RL33900, FY2007 Supplemental Appropriations for Defense, Foreign Affairs, and Other Purposes , coordinated by [author name scrubbed]. CRS Report RL34451, FY2008 Spring Supplemental Appropriations and FY2009 Bridge Appropriations for Military Operations, International Affairs, and Other Purposes (P.L. 110-252) , by [author name scrubbed] et al.

This report provides summary information on emergency supplemental appropriations enacted after major disasters since 1989. During the 20-year span from FY1989 through the present, Congress appropriated almost $271 billion in constant 2008 dollars. Most of the appropriations were preceded by a presidential request for supplemental funding. In 2008 a number of major natural disasters took place including Hurricanes Ike and Gustav, the California wildfires, and the Midwest floods. To date however, the most costly disasters occurred in the summer of 2005 when Hurricanes Katrina, Rita, and Wilma made landfall in Gulf Coast states. Since Hurricane Katrina struck in August of 2005, more than $151 billion has been appropriated for supplemental disaster funding, most of it needed for the recovery from the 2005 hurricanes. Portions of the appropriations were offset by rescinding more than $34 billion in previously appropriated funds, explained in the section titled "Hurricanes Katrina, Rita, and Wilma." Prior to FY2005 and the hurricanes, only the terrorist attacks of 2001 led to supplemental appropriations legislation that exceeded $20 billion. Congress appropriated a total of more than $26 billion for disaster assistance in response to the attacks. Other supplemental appropriations legislation enacted after catastrophic disasters (or several significant disasters that occurred in short time intervals) range from almost $366 million in FY2001 before the terrorist attacks (largely due to the Nisqually earthquake in the summer of 2001) to more than $12 billion for the Midwest floods of 1993 and the Northridge earthquake of 1994. At times, the supplementals enacted by Congress have included only disaster funding. The supplementals enacted after Hurricane Hugo and the Loma Prieta earthquake, in addition to the first two enacted after Hurricane Katrina, serve as examples. On other occasions, however, disaster funding has been part of larger pieces of legislation that appropriated funds for purposes other than disaster assistance. The most recent supplemental disaster assistance appropriation occurred on September 30, 2008 when the President signed into law H.R. 2638, the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009. The statute, P.L. 110-329, provides $21.3 billion in emergency supplemental appropriations for relief and recovery from hurricanes, floods, and other natural disasters. This report will be updated as events warrant.

Although more than 70 federal agencies have foreign language needs, some of the largest programs are concentrated in the Army, the State Department, the Central Intelligence Agency, and the Federal Bureau of Investigation. Office of Personnel Management (OPM) records indicate that the government employs just under a thousand translators and interpreters in the job series reserved for this group. The government also employs tens of thousands of individuals who use foreign language skills in positions such as FBI special agents and legal attachés, State Department Foreign Service officers, and Department of Commerce Foreign Commercial Service (FCS) officers. For the four agencies we reviewed, a total of nearly 20,000 staff are employed in positions that require some foreign language proficiency. Agency management of these resources takes place against the backdrop of an emerging federal issue—strategic human capital management. The foreign language staffing and proficiency shortfalls we discuss in our report can be seen as part of a broader pattern of human capital weaknesses and poor workforce planning that has impacted the operations of agencies across the federal government. In fact, GAO recently designated human capital management as a governmentwide high-risk area on the basis of specific problem areas identified in prior GAO reports.For example, GAO previously testified that the Department of Defense faces looming shortages of intelligence analysts, computer programmers, and pilots. In a subsequent report on trends in federal employee retirements, we found that relatively large numbers of individuals in key math and science fields will be eligible to retire by the end of fiscal year 2006: These include physics (47 percent); chemistry (42 percent); computer specialists (30 percent); and electronics and electrical engineering (27 percent and 28 percent, respectively). In response to these risks, the administration, the Office of Management and Budget (OMB), OPM, and GAO have issued guidance on how agencies can begin the process of strategically managing their staffing resources. For example, OPM has developed a five-step workforce planning model that outlines the basic tenets of effective workforce planning. The president and OMB’s guidance stresses that agencies should seek to address shortages of skills by conducting thorough workforce analyses, by using existing personnel flexibilities available to federal agencies, and by identifying additional authorities or flexibilities they might need to remove current obstacles and barriers to effective workforce management. GAO guidance emphasizes the use of a self-assessment checklist for better aligning human capital with strategic planning and core business practices. Officials in the four agencies we reviewed reported varied types and degrees of foreign language shortages depending on the agency, job position, language, and skill level. They noted shortages of translators and interpreters and people with skills in specific languages, as well as a shortfall in proficiency level among people who use foreign language skills in their jobs. The Army’s greatest foreign language needs were for translators and interpreters, cryptologic linguists, and human intelligence collectors. The State Department has not filled all of its positions requiring foreign language skills. And, although the Foreign Commercial Service has relatively few positions that require foreign language proficiency, it had significant shortfalls in personnel with skills in six critical languages. While the FBI does not have a set number of positions for its special agent linguists, these agents must have some level of foreign language proficiency that they can use in conducting investigations. (When identified by language, FBI staffing and proficiency data are classified and are discussed in the classified report mentioned earlier.) While our report provides detailed staffing and proficiency shortfall data for four agencies, I would like to use the data we obtained for the U.S. Army to illustrate the nature and extent of some of these shortfalls. The Army provided us data on translator and interpreter positions for six languages it considers critical: Arabic, Korean, Mandarin Chinese, Persian- Farsi, Russian, and Spanish (our analysis excluded Spanish because the Army has a surplus of Spanish language translators and interpreters). As shown in table 1, the Army had authorization for 329 translator and interpreter positions for these five languages in fiscal year 2001 but only filled 183 of them, leaving a shortfall of 146 (44 percent). In addition to its needs for translators and interpreters, the Army also has a need for staff with applied language skills. We obtained detailed information on two key job series involving military intelligence— cryptologic linguists and human intelligence collectors. As shown in table 2, the Army had a shortfall of cryptologic linguists in two of the six foreign languages it viewed as most critical—Korean and Mandarin Chinese. Overall, there were 142 unfilled positions, which amounted to a 25 percent shortfall in cryptologic linguists in these two languages. The Army also had a shortfall of human intelligence collectors in five of the six foreign languages it viewed as most critical in this area—Arabic, Russian, Spanish, Korean, and Mandarin Chinese.Overall, there were 108 unfilled positions, which amounted to a 13 percent shortfall in these five languages. The greatest number of unfilled human intelligence collector positions was in Arabic, but the largest percentage shortfall was in Mandarin Chinese. Table 3 provides data on these shortfalls, by language. The shortages that agencies reported can have a significant impact on agency operations. Although it is sometimes difficult to link foreign language skills to a specific outcome or event, foreign language shortages have influenced some agency activities. Here are a few examples: The Army has noted that a lack of linguists is affecting its ability to conduct current and anticipated human and signal intelligence missions. As a result, the Army said that it does not have the linguistic capacity to support two concurrent major theaters of war. The need for Spanish speakers has been an issue in pursuing Florida health care fraud cases. The assistant U.S. attorney in Miami in charge of health care fraud investigations recently advised the FBI that his office would decline to prosecute health care fraud cases unless timely translations of Spanish conversations were available. This situation has important implications, since the Miami region has the nation’s largest ongoing health care fraud investigation. The FBI estimates that Medicare and Medicaid losses in the region are in excess of $3 billion. The FBI’s Los Angeles office has also cited a critical need for Spanish language specialists and language monitors for cases involving violent gang members. According to the Bureau, being able to target these gang members will save lives in Los Angeles but is contingent on the availability of Spanish linguists to assist with these investigations. The need for foreign language speakers has hindered State Department operations. The deputy director of the State Department's National Foreign Affairs Training Center recently testified on this topic. She said that shortfalls in foreign language proficiency have contributed to a lack of diplomatic readiness. As a result, the representation and advocacy of U.S. interests abroad has been less effective; U.S. exports, investments, and jobs have been lost; and the fight against international terrorism and drug trafficking has been weakened. Finally, the lack of translators has thwarted efforts to combat terrorism. For instance, the FBI has raised concern over the thousands of hours of audio tapes and pages of written material that have not been reviewed or translated due to a lack of qualified linguists. Our second objective was to examine federal agencies’ strategies to address these foreign language shortages. The agencies we reviewed are pursuing three general strategies to meet their foreign language needs. First, agencies are focusing on staff development by training staff in foreign languages, providing pay incentives for individuals using those skills, and ensuring an attractive career path for linguists or language-proficient employees. Second, agencies are making use of external resources. This effort can include contracting staff as needed; recruiting native or U.S.-­ trained language speakers; or drawing on the expertise of other agency staff, reservists, or retirees. Third, several agencies have begun to use technology to leverage limited staff resources, including developing databases of contract linguists, employing language translation software, and performing machine screening of collected data. Figure 1 provides an overview of these categories and related strategies. While these assorted efforts have had some success, current agency strategies have not fully met the need for some foreign language skills, as evidenced by the continuing staffing and proficiency shortfalls that each agency we reviewed faces. Limited Progress Made Our third objective was to analyze federal agencies’ efforts to implement an on Workforce Planning overall strategic workforce plan to address current and projected foreign language shortages. To help fill existing skills shortages, some agencies have begun to adopt a strategic approach to human capital management and workforce planning. As I mentioned earlier, OPM has issued a workforce planning model that illustrates the basic tenets of strategic workforce planning. We used this model to assess the relative maturity of workforce planning at the four agencies we reviewed. As shown in figure 2, this model suggests that agencies follow a five-step process that includes setting a strategic direction, documenting the size and nature of skills gaps, developing an action plan to address these shortages, implementing the plan, and evaluating implementation progress on an ongoing basis. This is a model that could be used to guide workforce planning efforts as they relate to other skills needed in the federal government such as math, science, and information technology. We found that the FBI has made an effort to address each of the five steps in OPM’s model. For instance, the FBI has instituted an action plan that links its foreign language program to the Bureau's strategic objectives and program goals. This action plan defines strategies, performance measures, responsible parties, and resources needed to address current and projected language shortages. We found that the FBI’s work in the foreign language area was supported by detailed reports from field offices that documented the Bureau’s needs. The FBI reviewed these reports along with workload statistics from its regional offices. FBI officials noted that implementation progress is routinely tracked and adjustments to the action plan are made as needed. In contrast, the other three agencies have yet to pursue this type of comprehensive strategic planning and had only completed some of the steps outlined in OPM’s planning model. The Army has limited its efforts to developing a plan partially outlining a strategic direction and identifying its available supply and demand for staff with foreign language skills (addressing only steps 1 and 2 of the OPM model). The State Department has not yet set a strategic direction for its language program; however, the department has addressed step 2 in the workforce planning model through its annual survey of ambassadors regarding foreign language needs at their posts on a position-by-position basis. State has yet to develop an action plan and the related implementation and monitoring steps described in OPM’s model. Finally, the status of the Foreign Commercial Service’s language program closely mirrored the situation we found at the State Department. One difference, however, is that the agency surveys senior officers regarding a post’s foreign language needs every 3 years instead of annually. Another difference is that FCS officials indicated that they have begun a workforce planning initiative that is designed to address the key components outlined in the OPM model. In closing, I would like to note that foreign language shortages have developed over a number of years. It will take time, perhaps years, to overcome this problem. Effective human capital management and workforce planning, however, offer a reasonable approach to resolving such long-standing problems. Mr. Chairman and members of the Subcommittee, this concludes my prepared statement. I will be happy to answer any questions the Subcommittee members may have.

Federal agencies' foreign language needs have increased during the past decade because of increasing globalization and the changing security environment. At the same time, agencies have seen significant reductions-in-force and no-growth or limited-growth environments during the last decade. As a result, some agencies now confront an aging core of language-capable staff while recruiting and retaining qualified new staff in an increasingly competitive job market. The four agencies GAO reviewed reported shortages of translators and interpreters and other staff, such as diplomats and intelligence specialists, with foreign language skills. These shortfalls varied depending on the agency, job position, language, and skill level. The agencies reported using a range of strategies to address their staffing shortfalls, such as providing employees with language training and pay incentives, recruiting employees with foreign language skills, hiring contractors, or taking advantage of information technology. One of the four agencies has adopted a strategic approach to its workforce planning efforts. In contrast, the other three agencies have yet to pursue overall strategic planning in this area.

In September 2014, the Obama Administration announced a new Central American Minors (CAM) refugee program: We are establishing in-country refugee processing to provide a safe, legal and orderly alternative to the dangerous journey that children are currently undertaking to join relatives in the United States.... These programs will not be a pathway for children to join undocumented relatives in the United States . The "children" referenced are minors from El Salvador, Guatemala, and Honduras, who accounted for the surge in unaccompanied alien child arrivals in the United States between FY2012 and FY2014 that peaked in the summer of 2014. The establishment of in-country processing represents an effort by the Obama Administration to discourage children from attempting dangerous trips to the United States, by enabling at least some of them to be considered for refugee status at home. In-country refugee processing refers to the processing of prospective refugees by the U.S. government from within their countries of origin for admission to the United States. In addition to the new CAM program, several ongoing in-country refugee processing programs are operating in FY2015. The Immigration and Nationality Act (INA) defines a refugee, in part, as a foreign national who has experienced, or has a well-founded fear of, persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. Refugees are processed and admitted to the United States from abroad. They may legally live and work in the United States. After one year, they may apply to adjust to lawful permanent resident (LPR) status, subject to a set of requirements. Typically, a refugee being considered for resettlement in the United States is outside his or her country of origin (in a host county) and is referred to the U.S. program by the United Nations High Commissioner for Refugees (UNHCR). The first part of the INA definition of a refugee (INA §101(a)(42)(A)) states that the term means: any person who is outside any country of such person's nationality or, in the case of a person having no nationality, is outside any country in which such person last habitually resided, and who is unable or unwilling to return to, and is unable or unwilling to avail himself or herself of the protection of, that country because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. The INA also provides for the processing of refugees in their countries of origin for purposes of admission to the United States in some cases, as reflected in the second, alternate part of the definition of a refugee (INA §101(a)(42)(B)): in such circumstances as the President after appropriate consultation (as defined in section 207(e) of this Act) may specify, any person who is within the country of such person's nationality or, in the case of a person having no nationality, within the country in which such person is habitually residing, and who is persecuted or who has a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. Both the Department of State (DOS) and the Department of Homeland Security (DHS) have key roles in the U.S. refugee admissions process. DOS is responsible for overseas processing of refugees. Generally, it arranges for a nongovernmental organization (NGO), an international organization, or U.S. embassy contractors to manage a Resettlement Support Center (RSC) that assists in refugee processing. RSC staff members conduct pre-screening interviews of prospective refugees and prepare cases for submission to DHS's U.S. Citizenship and Immigration Services (USCIS), which is responsible for adjudicating refugee cases. These adjudications are handled by USCIS officers in the Refugee Corps, who make determinations about whether an individual qualifies for refugee status and is otherwise admissible to the United States. In order to be eligible for refugee status in the United States, an individual must satisfy the INA definition of a refugee, among other requirements (see " Refugee Admissions "). In accordance with this definition, a prospective refugee is required to establish a well-founded fear of persecution on one of the protected grounds (race, religion, nationality, membership in a particular social group, or political opinion), typically on an individual basis. Over the years, the United States has utilized in-country refugee processing to address particular refugee populations and situations. Decisions about establishing in-country processing programs involve a range of considerations; these include key considerations of foreign policy, diplomacy, and security, which are beyond the scope of this report. DOS has described in-country refugee processing as an "extraordinary" measure. For example, in 2002, in response to recommendations to establish in-country processing in Haiti, the department wrote: We do not believe that the extraordinary remedy of an in-country refugee processing program for Haitians is appropriate at this time. Given the level of economic desperation in Haiti, an in-country program is likely to attract many more ineligible than eligible applicants. We believe that existing protection options for Haitians who may be at risk of persecution or torture are sufficient. In annual presidential determinations on refugee admissions, Presidents have specified, in accordance with INA §101(a)(42)(B), persons in certain groups who, if otherwise qualified, may be considered for refugee admission to the United States within their countries of origin. A group commonly specified in presidential determinations issued in the 1980s, for example, was "present and former political prisoners and persons in imminent danger of loss of life, and their family members, in countries of Latin America and the Caribbean." Since the late 1980s, presidential determinations on refugee admissions have typically specified three or four groups as being eligible for in-country processing. These groups often included persons in Cuba, the (former) Soviet Union, and Vietnam. Since the presidential determination for FY2005, the in-country processing list has also included the following: "In exceptional circumstances, persons identified by a United States Embassy in any location." In-country processing programs for the following designated groups operated in FY2014 and continue to operate in FY2015: Persons in an independent state of the former Soviet Union or of Estonia, Latvia or Lithuania who are Jews or Evangelical Christians, or who participate in the religious activities of the Ukrainian Catholic Church or the Ukrainian Orthodox Church, and who have close family in the United States. Persons in Cuba who are "human rights activists, members of persecuted religious minorities, former political prisoners, forced-labor conscripts, and persons deprived of their professional credentials or subjected to other disproportionately harsh or discriminatory treatment resulting from their perceived or actual political or religious beliefs." Persons in Iraq who are or were employed in Iraq by the U.S. government, a U.S. media or nongovernmental organization, or a U.S. government-funded contractor or grantee, and specified family members; and persons who are beneficiaries of immigrant visa petitions filed by family members in the United States. (This group is sometimes referred to as "Iraqis associated with the United States.") In exceptional circumstances, persons identified by a U.S. Embassy in any location. For FY2015, the Obama Administration has established a new in-county processing program for the following persons: Minors in El Salvador, Guatemala, and Honduras with a parent who is lawfully present in the United States. Under this program, a parent who is lawfully present in the United States can request a refugee resettlement interview for an unmarried child in El Salvador, Guatemala, or Honduras. Establishing in-country processing in these countries is an effort to "reduce unlawful and dangerous migration to the United States." As described by DOS, "the program will provide certain vulnerable, at-risk children an opportunity to be reunited with parents lawfully resident in the United States." It is not known how many Central American minors will be considered for refugee admission under this program. In-country refugee processing is related to another feature of the U.S. refugee admissions system: processing priorities. As noted, DOS is responsible for overseas refugee processing, which is conducted through a system of three priorities for admission. The priorities provide access to U.S. resettlement consideration. Priority 2, the priority relevant to in-country processing, covers groups of special humanitarian concern to the United States. It includes specific groups that may be defined by their nationalities, clans, ethnicities, or other characteristics. Some Priority 2 groups are processed in their countries of origin (these are the in-country processing groups enumerated above), while other Priority 2 groups are processed outside their countries of origin. In-country refugee processing programs have come about in different ways, in some cases in connection with legislation. For example, the in-country processing program for Iraqis associated with the United States grew out of provisions in the 2008 Refugee Crisis in Iraq Act. This act both delineated a Priority 2 group for Iraqis associated with the United States and provided for the processing of group members in Iraq as well as in other countries for admission to the United States as refugees. Congress played a different role in the in-country processing group designation for persons in an independent state of the former Soviet Union or of Estonia, Latvia, or Lithuania who are Jews or Evangelical Christians, or who participate in the religious activities of the Ukrainian Catholic Church or the Ukrainian Orthodox Church. In 1989, it enacted a provision known as the Lautenberg Amendment as part of the FY1990 foreign operations appropriations act. The Lautenberg Amendment provided for the establishment of categories of Soviet nationals who would be subject to special rules about refugee determinations. The legislation was silent about where to process Lautenberg category cases; in-country processing of Soviet cases was an Administrative decision. Not all Lautenberg categories, however, are processed in-country. In 2004, the Lautenberg language was amended to add a new provision known as the "Specter Amendment," which required the designation of categories of Iranian nationals, specifically religious minorities, who would be subject to the Lautenberg rules on refugee determinations. These Iranian cases are processed in Austria and Turkey. For the most part, as noted, prospective refugees are required to establish a well-founded fear of persecution on one of the protected grounds on an individual basis (see " Adjudicatory Standard in Refugee Determinations "). This same general adjudicatory standard applies to refugee cases processed inside or outside countries of origin. Cases falling within a Lautenberg Amendment category (see " Designation of In-Country Processing Groups "), however, are an exception (whether processed inside or outside the refugee applicant's country of origin). Applicants under the Lautenberg standard are required to: establish that they are members of a protected category, assert a fear of persecution on one of the protected grounds, and assert a credible basis for concern about the possibility of such persecution. In asserting a credible basis for concern, applicants may assert, for example, actual past persecution or discriminatory actions taken against them personally, or acts of persecution taken against similarly situated individuals. In considering in-country refugee processing by the U.S. government, it is important to keep in mind how this mechanism fits into the larger scheme of the U.S. refugee admissions program. The INA definition of a refugee makes provision for in-country processing "in such circumstances as the President after appropriate consultation ... may specify." Over the years, Administrations—either on their own or prompted by Congress—have used this authority in limited cases. The 2002 remarks by the State Department about Haiti cited above suggest that some relevant considerations include likely effectiveness and the existence of sufficient alternatives. Relatedly, in-country processing programs are typically aimed at particular groups within a country and may require applicants to have some type of connection to the United States. For example, the new in-country processing program for certain minors from El Salvador, Guatemala, and Honduras requires the minors to have a lawfully present parent in the United States. Given such limitations, as important as in-country programs may be to prospective beneficiaries, out-of-country processing remains the norm.

The Obama Administration has established a new refugee program for certain minors in El Salvador, Guatemala, and Honduras with a parent who is lawfully present in the United States. Created in response to the FY2012-FY2014 surge in unaccompanied child arrivals to the United States from these countries, the Administration has described the new Central American Minors (CAM) program as providing an alternative to a dangerous journey to the United States. The CAM program is an in-country refugee processing program, which means that eligible minors will be processed by the U.S. government from within their countries of origin for possible admission to the United States as refugees. Under the program, a parent who is lawfully present in the United States can request a refugee resettlement interview for an unmarried child in El Salvador, Guatemala, or Honduras. The Immigration and Nationality Act (INA) defines a refugee, in part, as a foreign national who has experienced, or has a well-founded fear of, persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. Refugees are processed and admitted to the United States from abroad. Typically, a refugee being considered for resettlement in the United States is outside his or her country of origin (in a host country). The INA, however, also authorizes the President, after appropriate consultation with Congress, to specify groups for in-country refugee processing. Since the late 1980s, Presidents typically have specified three or four groups as being eligible for in-country processing in a fiscal year. In addition to the new CAM program, there are several ongoing in-country refugee processing programs operating in FY2015. These previously established programs are for designated groups in an independent state of the former Soviet Union or of Estonia, Latvia or Lithuania; in Cuba; and in Iraq, as well as, in exceptional circumstances, for persons identified by a U.S. embassy in any location. This report supplements CRS Report RL31269, Refugee Admissions and Resettlement Policy, which provides a broader look at the U.S. refugee program.

Regardless of a veteran’s employment status or level of earnings, VA’s disability compensation program pays monthly cash benefits to eligible veterans who have service-connected disabilities resulting from injuries or diseases incurred or aggravated while on active military duty. A veteran starts the disability claims process by submitting a claim to one of the 57 regional offices administered by the Veterans Benefits Administration (VBA). In the average compensation claim, the veteran claims about five disabilities for which the regional office must develop the evidence required by law and federal regulations, such as military records and medical evidence. To obtain the required medical evidence, VBA’s regional offices often arrange medical examinations for claimants. For example, in fiscal year 2004, VBA’s 57 regional offices asked the 157 medical centers administered by the Veterans Health Administration (VHA) to examine about 500,000 claimants and provide examination reports containing the medical information needed to decide the claim. On the basis of the evidence developed by the regional office, an adjudicator determines whether each disability claimed by the veteran is connected to the veteran’s military service. Then, by applying medical criteria contained in VA’s Rating Schedule, the adjudicator evaluates the degree of disability caused by each service-connected disability in order to determine the veteran’s overall degree of service-connected disability. The degree of disability is expressed as a percentage, in increments of 10 percentage points—for example, 10 percent, 20 percent, 30 percent, and so on, up to 100 percent disability. The higher the percentage of disability, the higher the benefit payment received by the veteran. If a veteran disagrees with the regional office adjudicator’s decision on whether a disability is service-connected or on the appropriate percentage of disability, the veteran may file a Notice of Disagreement. The regional office then provides a further written explanation of the decision, and if the veteran still disagrees, the veteran may appeal to VA’s Board of Veterans’ Appeals. Before appealing to the board, a veteran may ask for a review by a regional office Decision Review Officer, who is authorized to grant the contested benefits based on the same case record that the original adjudicator relied on to make the initial decision. After appealing to the board, if a veteran disagrees with the board’s decision, the veteran may appeal to the U.S. Court of Appeals for Veterans Claims, which has the authority to render decisions establishing criteria that are binding on future decisions made by VA’s regional offices as well the board. For example, in DeLuca v. Brown, 8 Vet. App. 202 (1995), the court held that when federal regulations define joint and spine impairment severity in terms of limits on range of motion, VA claims adjudicators must consider whether range of motion is further limited by factors such as pain and fatigue during “flare-ups” or following repetitive use of the impaired joint or spine. Previous to this decision, VA had not explicitly considered whether such additional limitations existed because VA contended that its Rating Schedule incorporated such considerations. Because adjudicators often must use judgment when deciding disability compensation claims, variations in decision making are an inherent possibility. While some claims are relatively straightforward, many require judgment, particularly when the adjudicator must evaluate (1) the credibility of different sources of evidence; (2) how much weight to assign different sources of evidence; or (3) disabilities, such as mental disorders, for which the disability standards are not entirely objective and require the use of professional judgment. Without measuring the effect of judgment on decisions, VA cannot provide reasonable assurance that consistency is acceptable. At the same time, it would be unreasonable to expect that no decision-making variations would occur. Consider, for example, a disability claim that has two conflicting medical opinions, one provided by a medical specialist who reviewed the claim file but did not examine the veteran, and a second opinion provided by a medical generalist who reviewed the file and examined the veteran. One adjudicator could assign more weight to the specialist’s opinion, while another could assign more weight to the opinion of the generalist who examined the veteran. Depending on which medical opinion is given more weight, one adjudicator could grant the claim and the other could deny it. Yet a third adjudicator might conclude that the competing evidence provided an approximate balance between the evidence for and the evidence against the veteran’s claim, which would require that the adjudicator apply VA’s “benefit-of-the-doubt” rule and decide in favor of the veteran. An example involving mental disorders also demonstrates how adjudicators sometimes must make judgments about the degree of severity of a disability. The disability criteria in VA’s Rating Schedule provide a formula for rating the severity of a veteran’s occupational and social impairment due to a variety of mental disorders. This formula is a nonquantitative, behaviorally oriented framework for guiding adjudicators in choosing which of the degrees of severity shown in table 1 best describes the claimant’s occupational and social impairment. Similarly, VA does not have objective criteria for rating the degree to which certain spinal impairments limit a claimant’s motion. Instead, the adjudicator must assess the evidence and decide whether the limitation of motion is “slight, moderate, or severe.” To assess the severity of incomplete paralysis, the adjudicator must decide whether the veteran’s paralysis is “mild, moderate, or severe.” The decision on which severity classification to assign to a claimant’s condition could vary in the minds of different adjudicators, depending on how they weigh the evidence and how they interpret the meaning of the different severity classifications. Despite the inherent variation, however, it is reasonable to expect the extent of variation to be confined within a range that knowledgeable professionals could agree is reasonable, recognizing that disability criteria are more objective for some disabilities than for others. For example, if two adjudicators were to review the same claim file for a veteran who has suffered the anatomical loss of both hands, VA’s disability criteria state unequivocally that the veteran is to be given a 100 percent disability rating. Therefore, no variation would be expected. However, if two adjudicators were to review the same claim file for a veteran with a mental disability, knowledgeable professionals might agree that it would not be out of the bounds of reasonableness for these adjudicators to diverge by 30 percentage points but that wider divergences would be outside the bounds of reasonableness. The fact that two adjudicators might make differing, but reasonable, judgments on the meaning of the same evidence is recognized in the design of the system that VBA uses to assess the accuracy of disability decisions made by regional office adjudicators. VBA instructs the staff who review the accuracy of decisions to refrain from charging the original adjudicator with an error merely because they would have made a different decision than the one made by the original adjudicator. VBA instructs the reviewers not to substitute their own judgment in place of the original adjudicator’s judgment as long as the original adjudicator’s decision is adequately supported and reasonable. Because of the inherent possibility that different adjudicators could make differing decisions based on the same information pertaining to a specific impairment, we recommended in November 2004 that the Secretary of Veterans Affairs develop a plan containing a detailed description of how VA would (1) use data from a newly implemented administrative information system—known as Rating Board Automation 2000—to identify indications of decision-making inconsistencies among the regional offices for specific impairments and (2) conduct systematic studies of the impairments for which the data reveal possible inconsistencies among regional offices. VA concurred with our recommendation but has not yet developed such a plan. At this point, VA has now collected 1 full year of data using the new administrative data system, which should be sufficient to begin identifying variations and then assessing whether such variations are within the bounds of reasonableness. Because the existing medical records of disability claimants often do not provide VBA regional offices with sufficient evidence to decide claims properly, the regional offices often ask VHA medical centers to examine the claimants and provide exam reports containing the medical information needed to make a decision. Exams for joint and spine impairments are among the exams that regional offices most frequently request. To comply with the DeLuca decision’s requirements for joint and spine disability exam reports, VHA instructs its medical center clinicians to make not only an initial measurement of the range of motion in the impaired joint or spine but also to measure range of motion after having the claimant flex the impaired joint or spine several times. This is done to determine the extent to which repeated motion may result in pain or fatigue that further degrades the functioning of the impaired joint or spine. In addition, the clinician also is instructed to determine if the claimant experiences flare-ups from time to time, and if so, how often such flare- ups occur and the extent to which they limit the functioning of the impaired joint or spine. However, in a baseline study conducted in 2002, VA found that 61 percent of the exam reports on joint and spine impairments did not provide sufficient information on the effects of repetitive movement or flare-ups to comply with the DeLuca criteria. We reported earlier this month on the progress VA had made since 2002 in ensuring that its medical centers consistently prepare joint and spine exam reports containing the information required by DeLuca. We found that, as of May 2005, the percentage of joint and spine exam reports not meeting the DeLuca criteria had declined substantially from 61 percent to 22 percent. Much of this progress appeared attributable to a performance measure for exam report quality established by VHA in fiscal year 2004 after both VHA and VBA had taken a number of steps to build a foundation for improvement. This included creating the Compensation and Pension Examination Project Office, a national office established in 2001 to improve the disability exam process, and providing extensive training to VHA and VBA personnel. While VA made substantial progress in ensuring that its medical centers’ exam reports adequately address the DeLuca criteria, a 22 percent deficiency rate indicated that many joint and spine exam reports still did not comply with DeLuca. Moreover, in relation to the issue of consistency, the percentage of exam reports satisfying the DeLuca criteria varied widely across the 21 health care networks that manage VHA’s 157 medical centers—from a low of 57 percent compliance to a high of 92 percent. It should be noted that the degree of variation is likely even greater than indicated by these percentages because, within any given health care network, an individual medical center’s performance in meeting the DeLuca criteria may be lower or higher than the combined average performance for all the medical centers in that specific network. Therefore, in the network that had 57 percent of its joint and spine exams meeting DeLuca criteria, an individual medical center within that network may have had less than 57 percent meeting the DeLuca criteria. Conversely, in the network that had 92 percent of the exams meeting the DeLuca criteria, an individual medical center within that network may have had more than 92 percent satisfying DeLuca. Unless medical centers across the nation consistently provide the information required by DeLuca, veterans claiming joint and spine impairments may not receive consistent disability decisions. Further, VA has found deficiencies in a substantial portion of the requests that VBA’s regional offices send to VHA’s medical centers, asking them to perform disability exams. For example, VA found in early 2005 that nearly one-third of the regional office requests for spine exams contained errors such as not identifying the pertinent medical condition or not requesting the appropriate exam. However, VBA had not yet established a performance measure for the quality of the exam requests that regional offices submit to medical centers. To help ensure continued progress in satisfying the DeLuca criteria, we recommended that the Secretary of Veterans Affairs direct the Under Secretary for Health to develop a strategy for improving consistency among VHA’s health care networks in meeting the DeLuca criteria. For example, if performance in satisfying the DeLuca criteria continues to vary widely among the networks during fiscal year 2006, VHA may want to consider establishing a new performance measure specifically for joint and spine exams or requiring that medical centers use automated templates developed for joint and spine exams, provided an in-progress study of the costs and benefits of the automated exam templates supports their use. We also recommended that the Secretary direct the Under Secretary for Benefits to develop a performance measure for the quality of exam requests that regional offices send to medical centers. As a national program, VA’s disability compensation program must ensure that veterans receive fair and equitable decisions on their disability claims no matter where they live across the nation. Given the inherent risk of variation in disability decisions, it is incumbent on VA to ensure program integrity by having a credible system for identifying indications of inconsistency among its regional offices and then remedying any inconsistencies found to be unreasonable. Until assessments of consistency become a routine part of VA’s oversight of decisions made by its regional offices, veterans may not consistently get the benefits they deserve for disabilities connected to their military service, and taxpayers may not trust the effectiveness and fairness of the disability compensation program. Mr. Chairman, this concludes my remarks. I would be happy to answer any questions you or the members of the subcommittee may have. For further information, please contact Cynthia A. Bascetta at (202) 512- 7101. Also contributing to this statement were Irene Chu and Ira Spears. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

The House Subcommittee on Disability Assistance and Memorial Affairs asked GAO to discuss its work on the consistency of disability compensation claims decisions of the Department of Veterans Affairs (VA). GAO has reported wide state-to-state variations in average compensation payments per disabled veteran, raising questions about decisional consistency. In 2003, GAO designated VA's disability programs, along with other federal disability programs, as high risk, in part because of concerns about decisional consistency. Illustrating this issue, GAO reported that inadequate information from VA medical centers on joint and spine impairments contributed to inconsistent regional office disability decisions. GAO's November 2004 report explained that adjudicators in the Department of Veterans Affairs often must use judgment in making disability compensation claims decisions. As a result, it is crucial for VA to have a system for routinely identifying the effect of judgment on decisional variations among its 57 regional offices to determine if the variations are reasonable and, if not, how to correct them. In 2002, GAO reported that state-to-state variations of as much as 63 percent in average compensation payments per disabled veteran indicated potential inconsistency. The nature of the criteria that adjudicators must apply in evaluating the degree of impairment due to mental disorders provides an example of the extent of judgment required. GAO's October 2005 report on decisions for joint and spine disabilities showed one important way to improve consistency. Specifically, regional offices often rely on VA's 157 medical centers to examine claimants and provide medical information needed to decide the claims. However, VA has found inconsistency among its medical centers in the adequacy of their joint and spine disability exam reports that regional offices need to decide these claims. As of May 2005, the percentage of exam reports containing the required information varied across the medical centers from a low of 57 percent to a high of 92 percent. This could adversely affect the consistency of disability claims decisions involving joint and spine impairments. Although VA has made substantial progress, more remains to be done to improve the level of consistency in the disability exam reports.

The Secretary of the Department of Homeland Security (DHS) is charged with preventing the entry of terrorists, securing the borders, and carrying out immigration enforcement functions. The Department of Defense's (DOD) role in the execution of this responsibility is to provide support to DHS and other federal, state and local (and in some cases foreign) law enforcement agencies, when requested. Since the 1980s, the DOD (and National Guard), as authorized by Congress, has conducted a wide variety of counterdrug support missions along the borders of the United States. After the attacks of September 11, 2001, military support was expanded to include counterterrorism activities. Although the DOD does not have the "assigned responsibility to stop terrorists from coming across our borders," its support role in counterdrug and counterterrorism efforts appears to have increased the Department's profile in border security. Some states, particularly those along the southern border that are experiencing reported escalations in crime and illegal immigration, are welcoming the increased military role and have taken steps to procure additional military resources. Governor Janet Napolitano of Arizona, for example, sent the DOD a request for federal funding to support the state's deployment of National Guard troops to the border after reportedly exhausting available state resources for combating illegal immigration and drug trafficking. Others view the increased presence of military support along the borders as undiplomatic, potentially dangerous, and a further strain on already overextended military resources. Nonetheless, the concerns over aliens and smugglers exploiting the porous southern border continue to grow, and some now argue that the military should play a much larger and more direct role in border security. On May 15, 2006, President Bush announced that up to 6,000 National Guard troops would be sent to the southern border to support the Border Patrol. According to the President, the Guard will assist the Border Patrol by operating surveillance systems, analyzing intelligence, installing fences and vehicle barriers, building roads, and providing training. Guard units will not be involved in direct law-enforcement activities and will be under the control of the Governors. The Administration has indicated that the vast majority of the force at the border would be drawn from Guardsmen performing their regularly scheduled, two- or three-week annual training, pursuant to Title 32 of the U.S. Code (see later discussion). Initial deployments of Guardsmen to the border began in June 2006 under the mission name, "Operation Jump Start." As of November 2006, approximately 5661 guardsmen were participating in the mission. In the 109 th Congress, Senate-passed S. 2611 and House-passed H.R. 5122 , as well as H.R. 1986 , H.R. 3938 , and H.R. 3333 , would have authorized, under certain parameters, the use of military forces or the National Guard along the border. The military does not appear to have a direct legislative mandate to protect or patrol the border or to engage in immigration enforcement. Indeed, direct military involvement in law enforcement activities without proper statutory authorization might run afoul of the Posse Comitatus Act. The military does have, however, general legislative authority that allows it to provide support to federal, state, and local law enforcement agencies (LEA) in counterdrug and counterterrorism efforts, which might indirectly provide border security and immigration control assistance. Military personnel for these operations are drawn from the active and reserve forces of the military and from the National Guard. The primary restriction on military participation in civilian law enforcement activities is the Posse Comitatus Act (PCA). The PCA prohibits the use of the Army and Air Force to execute the domestic laws of the United States except where expressly authorized by the Constitution or Congress. The PCA has been further applied to the Navy and Marine Corps by legislative and administrative supplements. For example, 10 U.S.C. §375, directs the Secretary of Defense to promulgate regulations forbidding the direct participation "by a member of the Army, Navy, Air Force, or Marines in a search, seizure, arrest, or other similar activity" during support activities to civilian law enforcement agencies. DOD issued Directive 5525.5, which outlines its policies and procedures for supporting federal, state, and local LEAs. According to the Directive, the following forms of direct assistance are prohibited: (1) interdiction of a vehicle, vessel, aircraft, or other similar activity; (2) a search or seizure; (3) an arrest, apprehension, stop and frisk, or similar activity; and (4) use of military personnel in the pursuit of individuals, or as undercover agents, informants, investigators, or interrogators. It is generally accepted that the PCA does not apply to the actions of the National Guard when not in federal service. As a matter of policy, however, National Guard regulations stipulate that its personnel are not , except for exigent circumstances or as otherwise authorized, to directly participate in the arrest or search of suspects or the general public. The PCA does not apply "in cases and under circumstances expressly authorized by the Constitution." Under the Constitution, Congress is empowered to call forth the militia to execute the laws of the Union. The Constitution, however, contains no provision expressly authorizing the President to use the military to execute the law. The question of whether the constitutional exception includes instances where the President is acting under implied or inherent constitutional powers is one the courts have yet to answer. DOD regulations, nonetheless, do assert two constitutionally based exceptions—sudden emergencies and protection of federal property. The PCA also does not apply where Congress has expressly authorized use of the military to execute the law. Congress has done so in three ways: by giving a branch of the armed forces civilian law enforcement authority (e.g., the Coast Guard), by addressing certain circumstances with more narrowly crafted legislation, and by establishing general rules for certain types of assistance. The military indirectly supports border security and immigration control efforts under general legislation that authorizes the armed forces to support federal, state, and local LEAs. Since the early 1980s, Congress has periodically authorized an expanded role for the military in providing support to LEAs. Basic authority for most DOD assistance was originally passed in 1981 and is contained in Chapter 18 of Title 10 of the U.S. Code—Military Support for Civilian Law Enforcement Agencies. Under Chapter 18 of Title 10, Congress authorizes DOD to share information (§371); loan equipment and facilities (§372); provide expert advice and training (§373); and maintain and operate equipment (§374). For federal LEAs, DOD personnel may be made available, under §374, to maintain and operate equipment in conjunction with counterterrorism operations (including the rendition of a suspected terrorist from a foreign country) or the enforcement of counterdrug laws, immigration laws, and customs requirements. For any civilian LEA, §374 allows DOD personnel to maintain and operate equipment for a variety of purposes, including aerial reconnaissance and the detection, monitoring, and communication of air and sea traffic, and of surface traffic outside the United States or within 25 miles of U.S. borders, if first detected outside the border. Congress placed several stipulations on Chapter 18 assistance, e.g., LEAs must reimburse DOD for the support it provides unless the support "is provided in the normal course of military training or operations" or if it "results in a benefit...substantially equivalent to that which would otherwise be obtained from military operations or training." Pursuant to §376, DOD can only provide such assistance if it does not adversely affect "the military preparedness of the United States." Congress incorporated posse comitatus restrictions into Chapter 18 activities in §375. In 1989, Congress began to expand the military's support role. For example, Congress directed DOD, to the maximum extent practicable, to conduct military training exercises in drug-interdiction areas, and made the DOD the lead federal agency for the detection and monitoring of aerial and maritime transit of illegal drugs into the United States. Congress later provided additional authorities for military support to LEAs specifically for counterdrug purposes in the National Defense Authorization Act for FY1991. Section 1004 authorized DOD to extend support in several areas to any federal, state, and local (and sometimes foreign) LEA requesting counterdrug assistance. This section has been extended regularly and is now in force through the end of FY2011. As amended, §1004 authorizes the military to: maintain, upgrade, and repair military equipment; transport federal, state, local, and foreign law enforcement personnel and equipment within or outside the U.S.; establish bases for operations or training; train law enforcement personnel in counterdrug activities; detect, monitor, and communicate movements of air, sea, and surface traffic outside the U.S., and within 25 miles of the border if the detection occurred outside the U.S.; construct roads, fences, and lighting along U.S. border; provide linguists and intelligence analysis services; conduct aerial and ground reconnaissance; and establish command, control, communication, and computer networks for improved integration of law enforcement, active military, and National Guard activities. Section 1004 incorporates the posse comitatus restrictions of Chapter 18. Unlike Chapter 18, however, this law does allow support which could affect military readiness in the short-term, provided the Secretary of Defense believes the support outweighs such short-term adverse effect. The National Guard is a military force that is shared by the states and the federal government and often assists in counterdrug and counterrrorism efforts. After September 11, for example, President Bush deployed roughly 1,600 National Guard troops for six-months under Title 10 authority to support federal border officials and provide a heightened security presence. Under "Title 10 duty status," National Guard personnel operate under the control of the President, receive federal pay and benefits, and are subject to the PCA. Typically, however, the National Guard operates under the control of state and territorial Governors. In "state active duty" National Guard personnel operate under the control of their Governor, are paid according to state law, can perform activities authorized by state law, and are not subject to the restrictions of the PCA. Because border security is primarily a federal concern, some states have looked to the federal government for funding to support some of their National Guard activities. Under Title 32 of the U.S. Code, National Guard personnel generally serve a federal purpose and receive federal pay and benefits, but command and control remains with the Governor. This type of service is commonly referred to as "Title 32 duty status," and examples are discussed below. According to the Administration, the deployment of the 6,000 Guardsmen derives its authority from 32 U.S.C. §502(a), which allows the Secretary of the Army and Air Force to prescribe regulations for National Guard drill and training and §502(f), described below. Federal funding may be provided to a state for the implementation of a drug interdiction program in accordance with 32 U.S.C. §112. Under this section, the Secretary of Defense may grant funding to the Governor of a state who submits a "drug interdiction and counterdrug activities plan" that satisfies certain statutory requirements. The Secretary of Defense is charged with examining the sufficiency of the drug interdiction plan and determining whether the distribution of funds would be proper. While the emphasis is certainly on counterdrug efforts, a state plan might include some related border security and immigration-related functions that overlap with drug interdiction activities. Arizona's drug interdiction plan, for example, recognizes related border issues created by human smuggling and terrain vulnerabilities with respect to the illegal entry of aliens into the United States. By approving the State of Arizona's drug interdiction plan, the Secretary of Defense has enabled the Arizona National Guard to engage in some border security measures. Section 502(f) of Title 32 has been used to expand the operational scope of the National Guard beyond its specified duties. This provision provides that "a member of the National Guard may ... without his consent, but with the pay and allowances provided by law ... be ordered to perform training or other duty " in addition to those he is already prescribed to perform (emphasis added). This is the provision of law that was used to provide federal pay and benefits to the National Guard personnel who provided security at many of the nation's airports after September 11 and who participated in Katrina and Rita-related disaster relief operations. States, such as Arizona, have argued that the "other duty" language should be liberally applied (like it was for Hurricane Katrina and Rita) to include activities associated with border security efforts. Some question, however, whether domestic operations, in general, are a proper use of this Title 32 authority. In 2004, Congress passed another law that could arguably provide federal funding for National Guard personnel conducting border security operations under Title 32. Chapter 9 of Title 32 of the U.S. Code authorizes the Secretary of Defense to provide federal funding at his discretion to a state, under the authority of the Governor of that state, for the use of their National Guard forces if there is a "necessary and appropriate" "homeland defense activity." A "homeland defense activity" is statutorily defined as "an activity undertaken for the military protection of the territory or domestic population of the United States ... from a threat or aggression against the United States." Although a deployment of National Guard troops for border security purposes could arguably be an activity "undertaken for the military protection" of a "domestic population," it is unclear whether the porous nature of the border or illegal entry of aliens is the type of "threat" or "aggression" that would be "necessary and appropriate" for National Guard troops. The State of Arizona requested federal funds for its National Guard under Chapter 9 for the performance of homeland defense-border security activities.

The military generally provides support to law enforcement and immigration authorities along the southern border. Reported escalations in criminal activity and illegal immigration, however, have prompted some lawmakers to reevaluate the extent and type of military support that occurs in the border region. On May 15, 2006, President Bush announced that up to 6,000 National Guard troops would be sent to the border to support the Border Patrol. Addressing domestic laws and activities with the military, however, might run afoul of the Posse Comitatus Act, which prohibits use of the armed forces to perform the tasks of civilian law enforcement unless explicitly authorized. There are alternative legal authorities for deploying the National Guard, and the precise scope of permitted activities and funds may vary with the authority exercised. This report will be updated as warranted.

JVA amended Title 38 of the U.S. Code, the legislation that governs the DVOP and LVER programs, and by doing so, introduced an array of reforms to the way employment, training, and placement services are provided to veterans under the DVOP and LVER programs. (See table 1.) The act also required increased veterans’ access to electronic services as well as to different types of Labor employment and training programs by requiring them to give veterans priority in receiving their services. In addition, it required federal contractors to advertise job openings at the appropriate employment service delivery system and report on their veteran hiring practices. Within Labor, VETS has primary responsibility for helping the nation’s veterans find employment. Among the programs that VETS administers are the DVOP and LVER programs, which were funded at about $162 million in fiscal year 2005. VETS administers the agency’s activities through representatives in each of Labor’s six regional offices and within each state. The state directors are the link between VETS and each state’s employment service system that is overseen by the ETA. The DVOP and LVER staff, whose positions are funded by VETS, are part of the state’s public employment service system. Employment services fall under the purview of ETA, which administers the Wagner-Peyser-funded Employment Services program within each state, providing a national system of public employment services to any individual seeking employment who is authorized to work in the United States. Like VETS, ETA carries out its employment service program through staff in Labor’s six regions and workforce agencies in each state. In fiscal year 2005, ETA requested about $700 million for the Wagner- Peyser program. The DVOP and LVER programs, along with the Employment Services program, are all mandatory partners in the one-stop center system created in 1998 by WIA and overseen by Labor, in which services provided by numerous employment and training programs are made available through a single network. Labor and states have taken action to implement most JVA provisions to reform veterans’ services since the law was enacted in November 2002, but challenges remain particularly in implementing reforms to improve accountability for the DVOP and LVER programs. Labor issued guidance clarifying the new roles and responsibilities for veterans’ staff and allocated funding to states for an incentive program. Labor has also established performance measures aligned with state workforce systems under WIA as required by JVA. However, Labor reports that states will not be held accountable to a common national standard for veterans’ employment until 2007. (See table 2.) States also report good progress in implementing provisions, but challenges remain in some local areas in terms of integrating veterans’ staff with other employment services staff in local workforce centers. Many states also have not implemented an incentive program as provided in JVA for recognizing quality services to veterans. VETS took several steps to prepare veterans’ staff for their new roles and responsibilities under the law, and while the majority of state workforce administrators reported that these staff had transitioned to a greater focus on intensive services for veterans and employer outreach as required by JVA, challenges remained in the areas of training and integrating staff in some one-stop offices. VETS began issuing guidance to transition staff to their new roles in 2002, and a training program soon followed in 2003. Both Labor’s formal written guidance and technical assistance was well- received, with almost three-quarters of the 50 state workforce officials reporting on our survey that the quality was good or excellent in facilitating implementation of new staff duties. VETS officials cited challenges, however, in meeting all training needs for veterans’ staff informing them of their new roles and responsibilities under the act. While Labor’s training institute continues to conduct and fund training, it estimated that the current funding would cover training for only about 16 percent of all veterans’ staff each year, while annual staff turnover was averaging about 18 percent. In terms of staff integration, Labor officials said that integrating staff into the one-stop offices has been a persistent challenge and the DVOP and LVER staff we interviewed cited a wide variation of integration in local areas. Reasons these staff cited for poor integration included a lack of support by the local office manager, the lack of education and training for other one-stop staff members on serving veterans, and only fair to poor quality of Labor’s guidance and technical assistance to states in how to integrate veterans’ staff into the local one- stop offices. VETS issued guidance in time to establish an incentive program in the first fiscal year after JVA, and 32 of the 50 state workforce administrators we surveyed reported implementing the program. State workforce officials in 17 states that did not implement the program cited various reasons. California, for example, cited that state law prohibited monetary or other gifts to employees for performing their duties. Idaho cited potential morale problems among one-stop staff that have limited opportunities to serve veterans. Four other states cited that the awards were incompatible with the states’ collective bargaining agreements. VETS officials said that some states had been more successful than others in designing their awards system and state opinions were mixed on the extent that the incentive programs resulted in improved services. Administrators in 16 states with award programs in place reported that their program had a positive effect on improving or modernizing veterans’ services. On the other hand, administrators in 15 other states either said that their incentive program had no effect (7 states) or that it was too early to say (8 states). Labor has taken action to establish a new accountability system as required by JVA, but reports that more time is needed under the new system before it can hold all states accountable to the same standard for veterans’ employment. As required by the act, Labor established some new performance measures for the DVOP and LVER grant programs in 2003 consistent with state performance measures under WIA. VETS officials told us they made additional modifications to the performance accountability system when they adopted the Office of Management and Budget’s new common performance measures in July 2005. As these new systems were put in place, VETS officials said they also changed the method they use to calculate the entered employment measure and collect source data. However, VETS anticipates it will need at least 3 years under these measures—until 2007—to collect comparable trend data needed to establish the national performance standard holding all states accountable to the same minimum goal for the rate veterans enter employment. While data are not available to link the JVA reforms to changes in veterans’ services and employment outcomes, most state workforce administrators we surveyed believed that the reforms have improved the quality of services to veterans, and have improved their employment outcomes. Overall, 33 of the 50 state workforce administrators reported that veterans’ employment services have improved in their respective states since the law’s enactment. Among six different services we asked about, administrators most often reported that DVOP staff were spending more time on case management since JVA, although somewhat fewer states reported that services to disabled veterans had similarly improved. (See fig. 1.) Workforce administrators in 33 states also reported improvement in veterans’ employment results. These respondents attributed the improvement both to the law’s reforms and to other factors. The reform cited most often as helping veterans obtain employment was the increased availability of case management or other intensive services through the DVOP program. Other than the reforms themselves, administrators said veterans’ employment was influenced by employer willingness or desire to hire veterans and by the strength of the local job market. (See fig. 2.) In terms of barriers to employment, state administrators reported that federal contractor failure to list job openings at the local one-stop centers was a factor under most likely to delay or prevent some employment. Other factors also presented obstacles to employment, the most frequent one being a poor local job market. This factor was cited nearly twice more often as other factors, such as non-transferability of skills or employer reluctance to hire veterans with National Guard or Reserve commitments. (See fig. 3.) Labor oversight and accountability for the DVOP and LVER programs has been affected by the lack of data available from local workforce offices in some states, as well as the lack of coordination among Labor agencies in monitoring and sharing information gathered on program performance. While state VETS directors responding to our survey most often reported that their monitoring role under JVA has had a positive effect on local accountability, 19 directors reported their monitoring role either had no effect or a negative effect. Our survey showed two main reasons for the lack of a stronger effect. Lack of Local Level Data. In our survey, state VETS directors reported that performance data from local offices are not available in many states, limiting federal oversight and weakening local level accountability. State VETS directors reported in our survey that among four different tools used to monitor local office performance, the most beneficial were analysis and use of data captured in states’ performance reports, along with on-site reviews of local offices. Under JVA, states took on greater responsibility for assessing their own performance, and VETS modified its monitoring practices in response by extending the time between site visits to local offices from 1 year to 5 years. VETS directors in 21 states, however, noted that data were not available to monitor performance of local offices, and in these states, federal oversight may be limited to the on-site monitoring visits by VETS directors required once every 5 years. Lack of Coordinated Oversight. While Labor agencies are jointly responsible for monitoring employment and training services, little or no effort has been made to coordinate oversight or use the monitoring results to target assistance to states and localities that are most in need. For example, while VETS is responsible for monitoring performance of the DVOP and LVER programs, ETA oversees other workforce programs that serve veterans as well as nonveterans, such as WIA and Wagner-Peyser Employment Services. However, the two agencies do not generally coordinate their monitoring activities or share the results. Only five state VETS directors reported that they met with ETA officials to share monitoring results and take joint action to address problems. Labor also lacks a strategy for using the monitoring information it gathers to improve performance across states and local areas. While Labor has authority under JVA to provide technical assistance to states that are deficient in performance or need help, VETS has yet to begin addressing the significant variation in performance levels among states, as reflected by their widely divergent performance goals. For example, in program years 2004 and 2005, states’ negotiated goals for the rate at which veterans entered employment ranged from 38 to 65 percent, while Labor’s national employment goal for veterans was 58 percent. Although more than half of the state goals fell short of Labor’s national target, VETS has not been proactive in determining why certain states are falling behind and in targeting them for assistance. Our report recommended that the Secretary of Labor provide clear guidance to integrate veterans’ staff into the one-stops and foster state use of incentives. We also recommended that Labor’s program offices coordinate their oversight of JVA provisions, and that Labor use monitoring results to develop program improvements. Labor agreed with our recommendations. Mr. Chairman, this completes my prepared statement. I would be happy to respond to any questions you or other Members of the Committee may have at this time. For further information regarding this testimony, please contact me at (202) 512-7215. Lacinda Ayers, Meeta Engle, and Stan Stenersen were key contributors to this testimony. Veterans’ Employment and Training Service: Labor Actions Needed to Improve Accountability and Help States Implement Reforms to Veterans’ Employment Services. GAO-06-176. Washington, D.C.: December 30, 2005. Unemployment Insurance: Better Data Needed to Assess Reemployment Services to Claimants. GAO-05-413. Washington, D.C.: June 24, 2005. Veterans’ Employment and Training Service: Preliminary Observations on Changes to Veterans’ Employment Programs. GAO-05-662T. Washington, D.C.: May 12, 2005. Workforce Investment Act: States and Local Areas Have Developed Strategies to Assess Performance, but Labor Could Do More to Help. GAO-04-657. Washington, D.C.: June 1, 2004. Veterans’ Employment and Training Service: Flexibility and Accountability Needed to Improve Service to Veterans. GAO-01-928. Washington, D.C.: September 12, 2001. Veterans’ Employment and Training Service: Proposed Performance Measurement System Improved, but Further Changes Needed. GAO-01-580. Washington, D.C.: May 15, 2001. Veterans’ Employment and Training Service: Strategic and Performance Plans Lack Vision and Clarity. GAO/T-HEHS-99-177. Washington, D.C.: July 29, 1999. Veterans’ Employment and Training Service: Assessment of the Fiscal Year 1999 Performance Plan. GAO/HEHS-98-240R. Washington, D.C.: September 30, 1998. Veterans’ Employment and Training: Services Provided by Labor Department Programs. GAO/HEHS-98-7. Washington, D.C.: October 17, 1997. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

The number of service members leaving active duty is likely to increase by 200,000 yearly, according to the Department of Labor. To improve employment and training services for veterans and to encourage employers to hire them, Congress passed the Jobs for Veterans Act in 2002, which reformed Labor's Disabled Veterans' Outreach Program (DVOP) and Local Veterans' Employment Representative (LVER) program. This testimony summarizes GAO's recent review of progress implementing the act, including the development of new staff roles and responsibilities, incentive awards, and performance accountability system. GAO examined (1) actions taken to improve performance and accountability since the law's enactment and any associated challenges, (2) whether available data indicate that such action has resulted in improved employment outcomes for veterans, and (3) factors affecting program oversight an accountability. Labor implemented most reforms under the Jobs for Veterans' Act (JVA) to improve the DVOP and LVER programs within the first 2 years of its enactment. However, it has not yet fully implemented measures to improve state accountability for these programs. Specifically, Labor reports that states will not be held accountable to the same standard for veterans' employment until 2007. States also report substantial progress implementing the law, but integrating veterans' staff with other one-stop staff remains challenging in some local areas. In addition, about one-third of the states did not establish incentive programs for their workforce personnel because state laws, policies, or agreements conflict with this JVA provision. Most state workforce administrators surveyed reported that the new legislation has improved both the quality of services to veterans and their employment outcomes. For example, they reported that services provided to disabled veterans have improved. They also credited the greater availability of case management and outreach to new employers for much of the improvement in employment outcomes under JVA. Aside from the law's influence, state administrators cited the willingness of employers to hire veterans and the strength of the local job market as significant factors affecting veterans' employment. About half of state directors of Veterans' Employment and Training reported their new monitoring role had strengthened local program accountability. However, just over a third reported that accountability had either lessened or not improved. Some partly attributed this to absence of local performance data and fewer annual visits to one-stop centers. GAO found, as well, that a lack of coordination among Labor's agencies responsible for certain JVA provisions has weakened accountability. Also, while Labor has developed a system to monitor program performance, it lacks a strategy for using the information it gathers to make improvements and to help states.

In an effort to protect the purchasing power of Social Security recipients, Congress in the early 1970s indexed benefit increases to the only consumer price index available at the time. The index to which Social Security benefits are linked became known as the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) after the U.S. Bureau of Labor Statistics (BLS) began publishing the Consumer Price Index for All Urban Consumers (CPI-U) in 1978. Concern has periodically been expressed that the CPI-W may not accurately reflect the inflation experience of the elderly, who make up the majority of Social Security beneficiaries. It has been argued that because annual cost-of-living adjustments (COLAs) in Social Security benefits have not kept pace with increases in the prices of goods and services more often purchased by the elderly (e.g., health care), some index other than the CPI-W might be more appropriate (e.g., an index for the elderly that Congress directed BLS to develop in 1987). This is not the context within which reconsidering the index upon which Social Security benefits are based has most recently been raised, however. Suggestions to change the index for inflation-adjusting Social Security among other programs and provisions in federal law most recently have arisen in connection with deficit reduction. Several plans to curb the growth in the U.S. budget deficit, which were put forth in 2010 and 2011, recommend that inflation-indexing be based on the Chained Consumer Price Index for All Urban Consumers (C-CPI-U) rather than on the CPI-W or CPI-U. Because the C-CPI-U has typically risen more slowly than the two indexes, this proposal raised concern at that time among those Social Security recipients who believe they already are being insufficiently compensated for increases in their cost of living. A bipartisan amendment in the nature of a substitute to the FY2013 budget resolution in the House, which was introduced but not approved in March 2012, suggests that interest remains in slowing the growth in the deficit by changing the price index on which Social Security COLAs are based. This report opens with an explanation of whom and what the CPI-W represents before examining how the spending pattern of the average elderly household differs from that of all households. It then focuses on BLS' experimental consumer price index (CPI-E) for the elderly and analyzes rates of change over time in the CPI-E, CPI-W, and C-CPI-U. The report closes with a brief discussion of policy considerations. The CPI-W is designed to measure changes in the price of a market basket of goods and services purchased by those who earn at least half of their income by having worked in clerical, blue-collar, or service occupations for at least 37 weeks in the previous year. In other words, the CPI-W only tracks the buying habits of the employed. This particular group of employed persons has accounted for a dwindling share of the U.S. population over time. Today, it reflects changes in the cost of living of about 32% of the population. Price changes may affect the average retiree's cost of living differently from that of the average CPI-W household to the extent that their purchasing patterns differ from one another. BLS collects data through the Consumer Expenditure Survey (CES) on how households spend their money in order to assign weights to each of the goods and services in the market basket. The weight reflects an item's relative importance in the market basket and determines how much a change in an item's price will affect the overall CPI. As shown in Table 1 , elderly households allocate their spending differently from the rest of the population across the major categories of goods and services in the CPI. The largest difference in spending patterns between the elderly and the general population is found in the shares of expenditures accounted for by health care. In 2010, the latest year for which data are available, those aged 65 and older spent twice as large a share of their total outlays on health care compared with the overall population. With respect to the population aged 75 and older, the share of their spending devoted to health care was two-and-one-third times the share of the total population. Health care costs have consistently risen more rapidly than the average price level. Because the elderly consume a greater than average share of a good whose price has generally risen faster than overall prices, the CPI-W may understate the inflation experience of the average elderly household. As noted above, the argument is often made that the CPI does not represent the average inflation experience of the elderly population. But, just as the inflation experience of the elderly population may differ from that of the population at large, so too are there differences within the elderly population itself. No summary inflation measure for a large population group will exactly account for the experience of each member of that group. Differences in spending patterns, in combination with different rates of price change for all of the various goods and services included in the CPI, mean that individual inflation rate experiences may range considerably above or below the measured average. If there is a great deal of variation in both the general population and within subgroups such as the elderly, a small difference in average inflation rates between groups may not be significant. Suppose the average inflation rate of the elderly population is slightly higher than the rate for the overall population, but that the distribution of individual inflation rates among the elderly is widely dispersed. In this case all of the elderly would be better off if their benefits were indexed to an inflation measure based on the average elderly household. Within the elderly population, however, there would be several different consequences. First, there would be some elderly whose inflation rates would be understated by the overall rate, but exaggerated by the elderly inflation measure. Second, there would be those elderly whose inflation rates were higher than either the overall measure or one based on elderly consumption patterns. Finally, there would be a number of elderly whose actual inflation rates would be lower than either the overall measure or one based on the elderly. One study of the distribution of inflation rates across the population found that differences in inflation rates among demographic groups were small in comparison with the variation within those groups. Further, it was found that differences among groups tended not to be stable over time. This study argued that no one group suffered disproportionately from inflation. If the variation in consumption patterns is great among the elderly and if the average inflation rate of the elderly is not dramatically different from the average rate of the overall population, then arguments for a separate index for the elderly population may be less compelling. In 1987, Congress amended the Older Americans Act of 1965 to direct BLS to develop an experimental price index to track inflation in the population aged 62 and older. BLS has calculated estimates of such an index, commonly called the CPI-E, dating back to December 1982. In all but 5 of the 29 years between December 1982 and December 2011, the experimental index rose as or more rapidly than the CPI-W and CPI-U. (See Table 2 .) In only three years was the increase in the CPI-E closer to that of the CPI-W than the CPI-U. The increase in the CPI-E has usually been closer to that of the CPI-U partly because a larger weight is given to health care outlays in the market basket of the CPI-U than the CPI-W. (Recall that unlike the CPI-W, the CPI-U covers persons not in the labor force including retirees.) The difference in the annual rates of change of the CPI-E compared with both the CPI-W and CPI-U has generally decreased since 1993, largely because the gap between health care inflation and overall inflation has narrowed as has the gap between shelter inflation and overall inflation. The 0.5-0.7 percentage point gap in the annual rates of change between the CPI-E compared with the CPI-W and CPI-U that often was the case from 1982 to 1993, shrank to 0.3 percentage points or less in most years thereafter. (See Table 2 .) Although the differences in the three indexes usually have been in the expected direction, the relationships between the three might not be the same if BLS developed an official rather than experimental index for the elderly. Optimally, when constructing a CPI for older Americans, a sample of geographic areas would be drawn for that specific population. In addition, surveys would be designed to collect expenditure weights for that specific population, a point-of-purchase survey designed for that population would be used to construct the outlet frame, and the distribution of items sampled would be representative of older Americans. Such an index would be costly to construct, however, and Congress has not appropriated the necessary funds to do so. For example, the number of households in the CES on which market baskets are based is much smaller for the CPI-E than for the CPI-W and CPI-U. The CPI-E therefore is subject to greater sampling error than the official indexes because of BLS' limited resources. The CPI-E also uses the CPI-U's sample of retail outlets to gather prices, but the outlets may not accurately reflect those at which the elderly shop and the prices may not be representative of those paid by the elderly. These methodological limitations may have contributed to the differences in the experimental compared with official measures of inflation and are the reasons for it being "classified as an experimental index." If the primary purpose of developing a separate index for the elderly is to inflation-adjust Social Security benefits, it should be kept in mind that not all Social Security recipients are elderly. Some receive benefits under the program because they have disabilities; others, because they are the spouse or young child of a deceased worker covered by the program. Thus, some would argue that the market basket of the elderly population is not the most appropriate one on which to base adjustments to Social Security benefits. Having a separate price index for the elderly may introduce complications in other areas. For example, the income thresholds that define tax brackets currently are adjusted annually by the CPI-U. If it is appropriate to base Social Security benefit adjustments on a price index for the elderly, should it also be used to adjust income tax brackets of elderly taxpayers? Finally, as stated at the outset, recent interest in the indexes used to inflation-adjust federal programs and individual income tax provisions has been prompted by the desire among policymakers to curb the growth rate of the budget deficit. Switching from the CPI-W or CPI-U to the Chained CPI-U may reduce government outlays and raise revenue in future years because the Chained CPI-U has risen more slowly than the two official indexes—and therefore, more slowly than the CPI-E. Leaving aside whether the Chained CPI-U is a more accurate measure of inflation than the CPI-W and CPI-U, it would not appear to achieve the purpose of those who have proposed changing to the Chained CPI-U to instead switch to the CPI-E for calculation of Social Security benefits as some have suggested. Were BLS to replace the experimental index with a newly developed index more representative of the elderly population, there also is no guarantee it would bear the same relationship to the CPI-W and Chained CPI-U as that of the CPI-E.

The federal government, in an effort to protect the purchasing power of Social Security beneficiaries, indexes benefits to increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Concern has periodically been expressed that the CPI-W may understate the impact of inflation on the elderly population and that it therefore may not be the most appropriate measure of inflation's impact on the elderly. At the behest of Congress, the U.S. Bureau of Labor Statistics (BLS) developed an experimental price index to track changes in the cost of living for the population aged 62 and older. In most years since 1982, the start of the experimental consumer price index (CPI-E) for the elderly, the annual rate of change in the CPI-E has exceeded that of the CPI-W and CPI-U. But, methodological limitations in the experimental index may have contributed to this pattern. Were BLS to construct an index that is more representative of the elderly population than the CPI-E, there is no guarantee that the relationship between the new index and the CPI-W would be the same. Interest in the CPI-E most recently emerged in response to deficit-reduction plans issued in 2010 and 2011 that recommend inflation-indexed provisions in federal law be based on the Chained Consumer Price Index for All Urban Consumers (C-CPI-U). Because the C-CPI-U has typically risen more slowly than the CPI-W, this proposal raised concern at the time among those Social Security recipients who already believe they have not been fully compensated for increases in their cost of living. Bills were then introduced to switch for purposes of Social Security indexation from the CPI-W to a CPI for those aged 62 and older (H.R. 456, H.R. 539, H.R. 776, H.R. 798, and S. 1876). As suggested by an amendment in the nature of a substitute to the FY2013 budget resolution in the House, interest has lingered into 2012 among some Members to switch to the C-CPI-U as a means of curbing the rate of growth in the budget deficit.

The Cable Communications Policy Act of 1984, 98 Stat. 2779, P.L. 98-549 , established for the first time a national regulatory policy concerning cable television communications. The act established a comprehensive cable regulatory scheme, delineating regulatory authority among the federal, state, and local levels. Increasing cable service rates and customer service complaints, however, prompted Congress to revisit the law as local authorities and consumer groups lobbied for new legislation. On October 5, 1992, Congress passed the Cable Television Consumer Protection and Competition Act of 1992, 106 Stat. 1460, P.L. 102-385 . This law addressed such issues as cable rates, must-carry rules, retransmission consent, program access, franchising authority, service standards, and more. Promulgation of regulations required by the 1992 act was done by the Federal Communications Commission (FCC). The regulations were completed in stages, according to dates set by the act. The FCC's first set of cable rate rules implementing this act went into effect September 1, 1993. The FCC expected, on average, a 10% reduction in overall cable bills. However, "on average" did not mean that all rates decreased 10%, or even that all rates decreased. One reason was that all cable systems did not charge rates that the FCC determined to be "unreasonable." Some rates increased, and Congress and the FCC decided to address the issue of rate hikes. After conducting a review of cable rates following issuance of its 1993 rate regulations, the FCC decided to revisit this issue. On March 30, 1994, the FCC issued rules for a second round of cable rate regulations. These new rules were intended to cut cable rates, on average, an additional 7%. No predictions were made estimating the number of cable subscribers who would see further reductions in their cable bills. The new rules took effect on May 15, 1994. The Telecommunications Act of 1996, 110 Stat. 115, P.L. 104-104 , was passed by the 104 th Congress in February 1996. This act eliminated most cable television rate regulations beyond the basic tier as of March 31, 1999 . In most cases, rates for a basic tier of services (defined as the tier that includes "over the air" broadcast stations) continues to be regulated either by local franchising authorities (LFAs) or state authorities. Most small cable operators (those serving less than 1% of all cable subscribers and having no affiliation with any company whose gross annual revenues exceed $250 million) were freed from rate regulation immediately. The FCC continues to monitor cable rate activity and issues an annual report on cable industry prices and one on competition in video markets. According to the 2005 FCC Annual Report on Cable Industry Prices , released in December 2006, the overall average monthly price for basic-plus-expanded basic cable service increased by 5.2% from $40.91 to $43.04 over the 12-month period ending January 1, 2005. Industry statistics on cable rates vary slightly from FCC statistics (see below), but cable companies in recent years have stated that sharply rising costs of obtaining sports and entertainment programming coupled with system upgrades caused them to increase rates for subscribers. Ongoing consumer concerns about rate increases for subscription television prompted Congress to mandate a General Accounting Office (GAO, now the Government Accountability Office) study of cable rates released in October 2003. In its report, Telecommunications: Issues Related to Competition and Subscriber Rates in the Cable Television Industry , GAO sought to examine the impact of competition on cable rates, assess the reliability of information contained in the annual FCC report on cable industry prices, and examine the causes of recent cable rate increases. In surveys of the industry conducted by GAO for its report, GAO concluded that the annual FCC report did not appear to provide a reliable source of information on the cost factors underlying rate increases or on the effects of competition, most notably costs associated with upgrading equipment and services. GAO recommended that FCC take steps to improve the reliability of data in its report. GAO also found that several key factors, including a 34% average increase in programming costs incurred by cable operators during the past three years—specifically a 59% average increase in sports programming costs—and cost increases from system upgrades have put upward pressure on operators to raise rates to their customers. The GAO report also discussed the option of converting cable system pricing to à la carte (per channel) pricing instead of the current tiered system. It noted that despite the customer benefit of greater choice, à la carte pricing could impose additional equipment costs on the customer and alter the current economics of the industry, especially how cable providers generate advertising revenues. According to the FCC's Twelfth Annual Report on Competition in Video Markets , released in March 2006, approximately 65.4 million homes in the United States, or 69.4% of all Multichannel Video Program Distributor (MVPD) television homes, subscribed to cable television as of June 2004. As defined by the FCC, an MVPD distributor is "an entity engaged in the business of making available for purchase, by subscribers or customers, multiple channels of video programming." Such entities include cable operators, direct broadcast satellite (DBS) services, and—in much smaller numbers—subscribers to five other technologies that deliver programming. Subscriptions to DBS in recent years have increased rapidly. As of June 2005, DBS subscribers numbered more than 26.1 million, or 27.7% of all MVPD subscribers. MVPD (cable and noncable) subscribers total approximately 94 million homes. The other five technologies (MMDS, HSD, PCO, BSP, and OVS) represent the approximately 2.9% of remaining MVPD subscribers. As a result of the Telecommunications Act of 1996, telephone companies can provide video services in direct competition with the local cable television company and in certain cases may merge with the local cable company. Cable television companies are also able to offer local phone service and broadband Internet services (including such services as "Voice Over Internet protocol" [VoIP]). Although individual consumers will presumably have more choices as a result of competition in the developing communications market, particularly from satellite services such as DBS, forecasts of what will happen in this new and complex environment are conflicting and uncertain. Many providers of cable television programming are owned by or affiliated with cable television operators. Concerns that such programmers may only provide their programming to their corporate affiliates prompted Congress to approve a provision in the Cable Act of 1992 addressing "program access" concerns. Program access provisions prevent the use of exclusive contracts between cable operators and their affiliated programmers for satellite delivered programming. The FCC was instructed in the statute to reexamine the continuing need for the prohibition after it had been in effect for 10 years. The prohibition was set to expire on October 5, 2002, but the FCC issued a Report and Order on June 13, 2002, extending for five years (until 2007) the statutory prohibition. The FCC found that the prohibition continues to be necessary to preserve and protect competition and diversity in the distribution of video programming. Broadband or high-speed Internet services can be offered through a series of technologies including cable, digital subscriber lines (DSL) provided by telephone carriers, satellite television, fixed wireless, and others. Cable television companies offer broadband services via a cable modem. Classifying broadband cable service as an "information service," a "telecommunications service," or as a combination of the two has important regulatory implications. Generally, classification as an information service would subject cable broadband services to minimal federal regulation and no requirement that they provide open access to their systems to competing Internet Service Providers (ISPs). Classification as a telecommunications service could subject cable broadband services to common carrier regulation and could require provision of open access to competing ISPs. Recently, the courts and the FCC have come to different conclusions regarding classification of these services. In a ruling on March 14, 2002, the FCC ruled that cable modem service is properly classified as an interstate information service. The ruling further determined that cable modem service is not a "cable service" and that cable modem service does not contain a separate "telecommunications service" and is not subject to common carrier regulation (the rules that govern telephone providers). However, in an opinion filed on October 6, 2003, the United States Court of Appeals for the Ninth Circuit came to a different conclusion regarding the classification of cable modem services. The court ruled in Brand X Internet Service v. FCC that cable modem services are legally in part a telecommunications service, which could lead to the requirement that cable operators open their lines to competing Internet service providers. This decision vacated in part the FCC March 2002 declaratory order , which classified cable modem service as exclusively an information service free from the rules of access governing telecommunications services. The FCC appealed the Ninth Circuit's decision, but the appeals court denied the FCC's petition for a full court review on March 31, 2004. The FCC and the Solicitor General of the United States then filed an appeal with the U.S. Supreme Court. On June 27, 2005, the high court overturned the Ninth Circuit's decision, ruling that cable companies do not have to open their lines to ISPs. In the 6-3 decision, the court basically supported the FCC's decision to classify cable modem service as an information service. U.S. Federal Communications Commission. "Regulation of Cable TV Rates." FCC Consumer Facts. September 2006. http://www.fcc.gov/cgb/consumerfacts/cablerates.html . This two-page fact sheet provides brief information on state and local franchising authorities' cable television responsibilities, including the regulation of rates for basic service tiers. ——. "Choosing Cable Channels." FCC Consumer Facts. December 2006. http://www.fcc.gov/cgb/consumerfacts/cablechannels.html . This two-page fact sheet explains how cable channels are packaged and distributed to consumers. It includes a brief description of tiers, "a la carte," and pay-per-view programming. ——. "General Information on Cable TV and Its Regulation." Fact Sheet. June 2000. http://www.fcc.gov/mb/facts/csgen.html . This extensive fact sheet presents background information on the history and evolution of the cable industry in the United States, including the evolution of parts of the Communications Act of 1934 that affect cable television, discussion of issues such as must-carry regulations, and information on the regulation of cable television by state and local authorities, including local franchising authority agreements and customer service guidelines. Additional fact sheets on specific cable TV topics are available at http://www.fcc.gov/mb/facts/#cable . ——. "FCC Role in Cable Rate Regulation Ends." Consumer Alert. March 1999. http://www.fcc.gov/Bureaus/Miscellaneous/Factsheets/cblrate.html . This two-page notice details the end of federal regulation of expanded basic cable rates as of March 31, 1999, which was mandated by the Telecommunications Act of 1996, P.L. 104-104 . CRS Report RL33542, Broadband Internet Regulation and Access: Background and Issues , by [author name scrubbed] and [author name scrubbed]. CRS Report RL32398, Cable and Satellite Television Network Tiering and " a la Carte " Options for Consumers: Issues for Congress , by [author name scrubbed]. CRS Report RL31260, Digital Television: An Overview , by [author name scrubbed]. CRS Report RS22217, The Digital TV Transition: A Brief Overview , by [author name scrubbed] and [author name scrubbed]. CRS Report RS21768, Satellite Television: Reauthorization of the Satellite Home Viewer Improvement Act (SHVIA) — Background and Key Issues , by [author name scrubbed]. CRS Report RL33338, The FCC ' s " a la Carte " Reports , by [author name scrubbed]. CRS Report RL32589, The Federal Communications Commission: Current Structure and Its Role in the Changing Telecommunications Landscape , by [author name scrubbed].

Cable television is one of the oldest and most popular distribution technologies used to deliver video programming to consumers. It uses fixed coaxial or fiber-optic cables to accomplish delivery. Of the various other methods used to deliver video, only direct broadcast satellite (DBS) successfully competes with cable. It uses communications satellites to deliver signals to individual consumers. In 2005, cable television was received by 65.4 million homes, or approximately 69% of all pay television subscribers. In comparison, DBS was received by 26.1 million homes, or approximately 27.7% of all television subscribers. This report presents information on the history of federal regulation of the cable television industry and background information on cable rates and other cable industry issues. The DBS industry, cable's main competitor, is not addressed extensively in this report. The Telecommunications Act of 1996, 110 Stat. 56, P.L. 104-104, eliminated most cable rate regulation beyond the basic tier of services as of March 31, 1999. Some small cable operators were freed from regulation upon the enactment of the law, but in most cases, rates for a basic tier of services continue to be regulated. The Telecommunications Act also opened up new areas of competition between telephone companies and cable companies. This report will be updated as legislation or news events warrant.

RS21664 -- The WTO Cancún Ministerial November 6, 2003 The new round of trade negotiations, the Doha Development Agenda (DDA), was launched at the 4th WTO Ministerial at Doha, Qatar in November 2001. It isknown as the Doha Development Agenda because of its emphasis on integrating developing countries into theworld trading system. Many developingcountries believed they have received little or no benefit from those trade negotiations over the years. The workprogram for DDA folded in continuing talks(the built-in agenda) on agriculture and services. Other negotiations were launched on the reduction or eliminationof non-agricultural (industrial) tariffs,clarification and improvement of disciplines for existing WTO agreements on antidumping and subsidies, and topicsrelating to special and differential (S&D)treatment for developing countries and assistance to developing countries with the implementation of existing WTOcommitments. Trade ministers at Dohaagreed to continue discussions on whether to launch negotiations "by explicit consensus" on the "Singapore issues"at the 5th Ministerial at Cancún. The DohaMinisterial declaration also directed negotiators to resolve a dispute related to the ability of least developed countriesto access generic medicines for HIV/AIDSand other epidemics. Trade ministers at Doha directed that the negotiations conclude not later than January 1, 2005with a mid-term review at the 5thMinisterial. Negotiations proceeded at a slow pace. Several deadlines for agreement on negotiating modalities (i.e., methodologies by which negotiations are conducted)were missed in the agriculture and industrial market access talks. Without agreement, negotiators looked towardthe Cancún Ministerial to resolve themodalities. In the weeks before Cancún, negotiating documents to achieve this resolution were criticizedby all sides, and expectations of the Ministerial werereduced to achieving an agreement on the framework for the modalities to be used in future negotiations. Access to Medicines. Negotiators did resolve the access to medicines dispute just prior to the beginning ofthe Ministerial. On August 30, 2003, the Trade Related Aspects of Intellectual Property Rights (TRIPS) Councilagreed on a mechanism to allow poordeveloping countries to issue a compulsory license to a third-country producer to manufacture generic drugs tocombat HIV/AIDS, malaria, tuberculosis, andother epidemics. While the agreement contained several restrictions to protect the patent rights of pharmaceuticalmanufacturers, the agreement was designedin part to reaffirm the importance of developing country issues to the WTO in time for Cancún. (1) At the Cancún Ministerial, negotiators became embroiled in disputes over agriculture and the Singapore issues. The negotiations were characterized by theemergence of the G-20+, an informal group of developing countries (2) which demanded substantial concessions from developed countries in the agriculturenegotiations. Some developing countries also refused to countenance the beginning of negotiations over theSingapore issues, which had been championed bythe European Union (EU). In the end, the Singapore issues broke up the talks before agriculture issues were evenformally discussed. Reaction. Subsequent to the collapse of the talks, U.S. and EU negotiators criticized both the substance andtactics of the G-20+ group. A U.S. negotiator claimed that developing country rhetoric was more suited to the UnitedNations, while others claimed that theG-20+ lacked a negotiating strategy other than making demands on developed countries. However, one G-20+ trademinister has suggested that the position ofthe G-20+ merely represented the paramount interest of its members in breaking down the agricultural barriers andsubsidies in the United States and the EU. U.S. reaction to the collapse of the talks has been to give increased emphasis to the negotiation of bilateral and regional free trade agreements (FTA). U.S. TradeRepresentative Robert Zoellick said that the United States would negotiate with what he called "can-do" countriesrather than "won't-do" countries. (3) Therewere also calls by some Members of Congress to oppose bilateral or regional negotiations with countries of theG-20+, leading some G-20+ participantsnegotiating FTAs with the United States, including Guatemala, Costa Rica, Peru, Colombia, and Thailand, todissociate themselves from their G-20+activities. (4) The European Union has undertaken a review of its policy towards the WTO and multilateral trade negotiations. One issue that may be discussed in this reviewis the future emphasis that the EU places on the Singapore issues. While EU negotiators agreed to drop demandsthat negotiations proceed on all but the tradefacilitation issue at Cancún, the lack of agreement on that agenda may result in renewed EU insistence onthe full Singapore agenda. The EU may also decide toplay the regional card by placing renewed emphasis on ongoing negotiations with Mercosur or with former coloniesin the African, Caribbean and PacificGroup. EU officials have also made public statements on the need to reform various aspects of the WTO'sdecision-making process. (5) Some participants from G-20+ countries returned from Cancún claiming the outcome was a victory for developing countries. To them, the lack of agreementwas evidence that they had successfully defended their national interests in demanding changes in the agriculturalpolicies of developed countries. However,many of these countries have subsequently expressed an interest in returning to WTO negotiations. Some G-20+members, possibly under pressure from theUnited States, have announced that they will no longer attend G-20+ meetings. These defections have called intoquestion the future of this group as anegotiating entity, as well as underlying differences between the trade policies of some of its members, most notablyBrazil and India. The Derbez Draft. During the course of the Cancún Ministerial, a draft declaration (6) was written by theMinisterial Chairman, Luis Ernesto Derbez, the Mexican Foreign Minister. Crafted as a framework for futurenegotiations to which all parties could agree, itwas criticized by most parties and was not adopted at the Ministerial. The Derbez text principally modified theagricultural language of a draft negotiating textcirculated, and widely criticized, prior to the negotiations. It did call for the start of negotiations on two of theSingapore issues, trade facilitation andgovernment procurement, while relegating the issues of investment and competition policy to further "clarification." In the aftermath of the Conference,however, the Derbez text has reemerged as a possible negotiation vehicle to restart the negotiations. It has beenendorsed by leaders of the Asia-PacificEconomic Cooperation (APEC) nations, including the United States, Canada and Japan. Brazil has also indicatedthat it could work from the text, although itdisagrees with certain language in the draft. The European Union has not taken a formal position on the Derbezdraft, although EU Trade Representative PascalLamy wondered in a recent speech in London, "what magic dust has been shaken over a text so roundly rejected inSeptember, to find it so roundly endorsed inNovember." (7) Only India has rejected the textoutright as a basis for negotiation. (8) While the Derbez draft provides the advantage of a ready-made template to restart the negotiations, this approach also has potential shortcomings. As acompromise text that essentially revised a previous compromise text, the language is highly general, and in manyrespects represents a lowest commondenominator of agreement. Many of the previous disagreements could reemerge if negotiations commence basedon this text. The Derbez text also reflects thejoint negotiating positions worked out between the United States and the EU in agriculture and industrial marketaccess. Post-Cancún, some U.S. commentatorshave suggested that these positions do not serve U.S. interests, and that the United States would be better servedby reverting to its previous, more ambitious,negotiating proposals. Agriculture. (9) Agriculture negotiations are part of the ongoing negotiations, a built-in agenda of talks thatwere incorporated into the launch of the Doha round. The negotiations involve the "three pillars" of agriculturesupport: market access (tariffs), exportsubsidies, and production subsidies. The emphasis of the U.S. negotiating position has been market access. Theinitial U.S. agriculture proposal includedsignificant tariff reduction based on a non-linear formula that would cap individual tariff lines at 25%. The proposalalso called for a complete elimination ofexport subsidies and a harmonization of trade-distorting domestic support to 5% of a country's total agriculturalproduct. The initial European Union proposal adopted a linear formula approach to tariff reductions and subsidies used in the Uruguay Round. The linear approachwould reduce tariffs and subsidies by a fixed percentage cut, thus leaving the relative subsidy and tariff ratesunchanged between trading partners. The EU alsosought to trade concessions on export subsidies, which it heavily utilizes, for concessions on export credit and foodaid programs, which are utilized by theUnited States. In June 2003, the EU announced a series of reforms to its Common Agricultural Policy (CAP)including the partial decoupling of mostproduction from subsidies by 2007. However, the EU did not revise its agriculture offer based on these reforms. In August 2003, the United States and the EU adopted a joint negotiating framework to spur negotiations in the lead-up to the Cancún Ministerial. Thecompromise text blended various aspects of the U.S. and EU proposals. It provides for a combination of harmonizedand linear tariff reduction formulas. Trade-distorting domestic support would be reduced by a percentage formula, and production-limited support wouldbe allowed up to 5% of the value of the country's total agricultural production. Export subsidies would be phased out for products of interest to developingcountries, and WTO disciplines would bedeveloped for state trading enterprises, export credits, and food aid programs. special and differential treatment(S&D) was recognized for developingcountries, but not necessarily for developing countries that are net food exporters. Some observers have criticizedthe United States for moving away from itsinitial trade liberalizing stance to compromise with the EU, claiming that the initial U.S. position had been morecompatible with certain developing countryproposals. (10) However, others contend that acoherent U.S.-EU position would help facilitate negotiations. In response to the U.S. - EU proposal, the G-20+ group advocated a proposal to cut U.S. and EU domestic subsidies more drastically than the U.S.-EU proposal,to eliminate export subsidies, and to provide S&D treatment for all developing countries in terms of tariffreduction and other market access. In addition, agroup of four African nations, Benin, Burkina Faso, Chad, and Mali proposed the elimination of trade-distortingdomestic support and export subsidies forcotton coupled with a transitional compensation mechanism for cotton exporters affected by the subsidies. Inresponse, the United States proposed a WTOsectoral initiative to examine trade distortions for cotton, man-made fibers, and textile and apparel with multilateralassistance to help these countries diversifytheir economies away from cotton. African countries refused to negotiate on this basis. The Derbez draft tried to reconcile these different positions by advocating deeper cuts in trade-distorting domestic subsidies, bringing under reviewnon-trade-distorting subsidies, and by negotiating a date for the elimination of export subsidies, positions that reflectprevious developing country negotiatingpositions. It followed the U.S.-EU tariff formula, which blended harmonized and linear tariffs, but alloweddeveloping countries to identify items for minimaltariff cuts. It also largely adopted the U.S. position paper on the cotton issue. Singapore Issues. The Singapore issues refer to four issues (investment, competition policy, tradefacilitation, and government procurement) that were offered for the negotiating agenda of the WTO by theEuropean Union at the 1st Ministerial, held inSingapore in 1996. The 2001 Doha Ministerial declaration called for a decision on negotiating the issues "by explicitconsensus" at the 5th Ministerial. The 5thMinisterial at Cancún did not provide explicit consensus to negotiate these items. According to reports, itwas an impasse over these issues that finally causedthe talks to collapse. The European Union, along with Japan, South Korea, and Taiwan, have been the principal proponents of the Singapore issues. Tactically, it is generallyaccepted that for them, negotiation of the Singapore issues would be a quid pro quo for substantive negotiation ontheir agriculture policies. The United Stateshas been ambivalent about the Singapore issues, recently supporting the inclusion of government procurement andtrade facilitation primarily to move thenegotiations along. Generally, the developing countries have been opposed to the negotiation of the Singapore issuesfor two reasons. First, they foresee theimplementation of multilateral rules on these issues as an infringement of their sovereignty. Second, manydeveloping countries claim not to have theinstitutional capacity or resources to undertake the negotiation of additional issues, whatever the merits. TheDerbez text proposed the inclusion of tradefacilitation and government procurement. In the final outcome, the EU was willing to drop all the issues save tradefacilitation, the consideration of which wasthen vetoed by Botswana backed by several other African states. Before the talks broke, however, South Koreaindicated that it would accept nothing less thannegotiations on all four issues. Industrial Market Access. The United States has favored an aggressive tariff-cutting negotiating strategy inthe industrial market access talks. In December 2002, the United States proposed the complete elimination of tariffsby 2015. This proposal would haveeliminated "nuisance" tariffs (tariffs below 5%) and certain industrial sector tariffs by 2010, and would haveremoved remaining tariffs in 5 equal increments by2015. The initial EU tariff reduction proposal relied on a "compression formula," one in which all tariffs arecompressed in four bands with the highest bandbeing 15%. Like the U.S. position, this proposal applied to all countries and did not contain S&D language. The United States generally has been opposed toweakening the concept of tariff reciprocity, maintaining that it is in the developing countries' own interest to lowertariffs, not least to promote trade betweendeveloping countries. A paper jointly proposed by the United States, Canada, and the European Union proposeda harmonization (i.e. non-linear) formula fortariff reduction. This joint paper did contain S&D language for developing countries in the form of creditsawarded for further liberalization activity. (11) Industrial market access did not receive the attention paid to agriculture or Singapore issues. Because there was no agreement on modalities prior to theMinisterial, the Derbez text only reaffirmed the use of an unspecified non-linear formula applied line-by-line thatprovides flexibilities for developingcountries. The text also supported the concept of sectoral tariff elimination as a complementary modality for tariffreduction on goods of particular exportinterest to developing countries, but it advanced no concrete proposal. Next Steps. Following the collapse of the Cancún talks, all negotiating group meetings were cancelled. TheWTO General Council chairman Perez del Castillo has entered into discussion with national trade ministers andtheir Geneva representatives to try to establisha consensus on the way forward in the negotiations. To date, the United States and the EU have declined to takea leadership role in these discussions. TheGeneral Council, the WTO's highest decision-making body, is scheduled to meet on December 15, 2003, to assessany progress resulting from these discussionand recommend further steps.

The Cancún Ministerial Conference of the World Trade Organization(WTO)broke up without reaching agreementon the course of future multilateral trade negotiations. Negotiations on the Doha Development Agenda haveproceeded at a slow pace since the launch of thenew round in November 2001. The immediate cause of the collapse of talks was disagreement over launchingnegotiations on the Singapore issues, butagriculture and industrial market access issues were also sources of contention. Reaction from the United States hasbeen to focus on regional and bilateraltalks, while the European Union has undertaken a policy review of its position towards the WTO. The talks werecharacterized by the emergence of the G-20+group of developing nations that sought deep cuts in developed country agricultural subsidies. This report will notbe updated.

In 1972, the Supreme Court ruled in Deepsouth Packing Co. v. Laitram Corp . that, under the Patent Act as it was written at that time, it was not an act of patent infringement to manufacture the components of a patented invention in the United States and then ship them abroad for assembly into an end product. In response to this loophole in the patent law that would have allowed potential infringers to avoid liability, Congress added subsection (f) to § 271 of the Patent Act. This statutory provision now states: (1) Whoever without authority supplies or causes to be supplied in or from the United States all or a substantial portion of the components of a patented invention, where such components are uncombined in whole or in part, in such manner as to actively induce the combination of such components outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer. (2) Whoever without authority supplies or causes to be supplied in or from the United States any component of a patented invention that is especially made or especially adapted for use in the invention and not a staple article or commodity of commerce suitable for substantial noninfringing use, where such component is uncombined in whole or in part, knowing that such component is so made or adapted and intending that such component will be combined outside of the United States in a manner that would infringe the patent if such combination occurred within the United States, shall be liable as an infringer. The patent at issue in Microsoft v. AT&T concerned AT&T's patent on a speech coder-decoder (a codec). A speech codec is a software program that is capable of converting spoken words into a compact code, or vice versa. AT&T brought suit against Microsoft in 2001, alleging that the speech codec included in Microsoft's Windows operating system infringes its patent. Microsoft filed a motion to exclude evidence of alleged liability arising from foreign sales of Windows, pursuant to § 271(f) of the Patent Act. Microsoft exports overseas a limited number of U.S.-made "golden master disks" containing the machine-readable software code of its Windows operating system; foreign computer manufacturers may use these disks to replicate the master disk in generating multiple copies of Windows for installation on foreign-assembled computers that are then sold to foreign customers. In support of its motion to limit liability and any damages award, Microsoft argued that: (1) software is intangible information such that it could not be a "component" of a patented invention within the meaning of § 271(f); and (2) even if the Windows software were a "component," no actual "components" had been "supplied" from the United States as required by § 271(f) because the copies of Windows installed on the foreign-assembled computers had all been made abroad. In considering Microsoft's motion, the U.S. District Court for the Southern District of New York first cited previous Federal Circuit decisions supporting the proposition that software is patentable. Furthermore, the court explained that § 271(f) does not limit "components" to only physical machines or tangible structures, but rather could include intangible information or data. Thus, the district court rejected Microsoft's argument that software could not be a "component" of a patented invention under § 271(f). As for the copies made abroad from the golden master disk sent from the United States, the district court held that such copies still came within the scope of § 271(f) in light of the legislative intent of the statute to prohibit the circumvention of infringement through exportation. After Microsoft appealed, a divided panel of the Federal Circuit affirmed the district court's decision. The appellate court relied on prior Federal Circuit case law that had held that "without question, software code alone qualifies as an invention eligible for patenting, and ... statutory language [does] not limit section 271(f) to patented 'machines' or patented 'physical structures,' such that software [can] very well be a 'component' of a patented invention for the purposes of § 271(f)." The Federal Circuit also ruled that, because "the act of copying is subsumed in the act of 'supplying,'" the exportation of the golden master disks, with the specific intent that they be replicated abroad, is an act that comes within the meaning of § 271(f)'s "supplied or caused to be supplied in or from the United States." In dissent, Federal Circuit Judge Randall R. Rader objected to the majority opinion's view that "supplies" within the meaning of § 271(f) includes the act of foreign "copying." Judge Rader expressed concerns that such an interpretation is, in effect, an impermissible "extraterritorial expansion" of U.S. patent law because it reaches "copying" activity overseas. In his view, AT&T's remedy lies not in U.S. law, but rather the law of the foreign country in which the infringement due to copying occurred. The Supreme Court accepted Microsoft's petition for a writ of certiorari in October 2006, in order to answer two questions: 1. Whether digital software code—an intangible sequence of "1's" and "0's"—may be considered a "component[] of a patented invention" within the meaning of Section 271(f)(1); and, if so, 2. Whether copies of such a "component[]" made in a foreign country are "supplie[d] ... from the United States." In a 7-1 decision issued in late April 2007, the Court reversed the Federal Circuit's judgment, holding that Microsoft was not liable for patent infringement under § 271(f), as the statute is currently written, when foreign-manufactured computers are loaded with Windows software that has been copied abroad from a master disk or an electronic transmission sent by Microsoft from the United States. In regard to the first question posed in the case, Associate Justice Ruth Bader Ginsburg, writing for the majority, explained that there are two ways to conceptualize software: One can speak of software in the abstract: the instructions themselves detached from any medium. (An analogy: The notes of Beethoven's Ninth Symphony.) One can alternatively envision a tangible "copy" of software, the instructions encoded on a medium such as a CD-ROM. (Sheet music for Beethoven's Ninth.) Abstract software code does not qualify as a component, for purposes of triggering liability under § 271(f), because it is an "idea" lacking physical embodiment and thus it cannot be a "usable, combinable part of a computer." Justice Ginsburg analogized software in the abstract to a detailed set of instructions, similar to that of a blueprint. But information sent abroad that instructs someone on how to build the components of a patented invention does not come within the scope of § 271(f); she observed that Congress, in enacting the statutory provision, did not include the export of design tools such as blueprints, schematics, templates, and prototypes. Thus, for the Windows software to be considered a "component" under § 271(f), the software code must be encoded or otherwise expressed in some sort of tangible medium—a computer-readable software "copy" such as a CD-ROM. The Court thus declined to adopt AT&T's characterization of software in the abstract as a combinable component that qualifies for § 271(f) liability. In reaching its answer to the second question, the Court largely agreed with Judge Rader's dissent from the Federal Circuit's opinion. The copies of Windows used for installation on the foreign computers had been made abroad; those copies were not "supplied" from the United States, even though the master disk from which they were duplicated had been exported. According to Justice Ginsburg, this distinction is legally relevant for liability purposes under § 271(f); further, such liability is not affected by the ease of copying software. Noting that keys or machine parts may also easily be copied from a master, she observed that § 271(f) "contains no instruction to gauge when duplication is easy and cheap enough to deem a copy in fact made abroad nevertheless 'supplie[d] ... from the United States.'" Furthermore, Justice Ginsburg argued that the traditional presumption against extraterritorial application of United States law, particularly in patent law, would help favor the Court construing § 271(f) in a manner that excludes intangible software code and copies of software made abroad. Echoing Judge Rader's advice, Justice Ginsburg observed that "[i]f AT & T desires to prevent copying abroad, its remedy lies in obtaining and enforcing foreign patents." At the end of the opinion, Justice Ginsburg conceded that the Court's decision effectively creates a "loophole" for software makers to avoid liability under § 271(f). However, she explained that the Court would resist using the "dynamic judicial interpretation" that would be needed to adjust the patent law "to account for the realities of software distribution." The majority opinion expressly invited Congress to consider whether this apparent loophole in favor of software companies, to the extent that it may exist, merits closing. Interestingly, the majority opinion of the Court excluded footnote number 14 , which was supported by only four justices (Justices Kennedy, Scalia, Souter, and Ginsburg). This footnote reads as follows: Microsoft suggests that even a disk shipped from the United States, and used to install Windows directly on a foreign computer, would not give rise to liability under § 271(f) if the disk were removed after installation. We need not and do not reach that issue here . Associate Justice Samuel Alito, in a concurrence joined by Justices Thomas and Breyer, would have decided that particular issue raised in footnote 14 in favor of Microsoft's assessment of liability under § 271(f). Justice Alito asserted that a "component" of an infringing physical device under § 271(f) "must be something physical"; thus, "[b]ecause no physical object originating in the United States was combined with these computers, there was no violation of § 271(f)." He further observed that "[n]o physical aspect of a Windows CD-ROM—original disk or copy—is ever incorporated into the computer itself" because the CD-ROM is removed from the computer after the installation process copies the Windows code to the computer's hard drive. Therefore: [I]t is irrelevant that the Windows software was not copied onto the foreign-made computers directly from the master disk or from an electronic transmission that originated in the United States. To be sure, if these computers could not run Windows without inserting and keeping a CD-ROM in the appropriate drive, then the CD-ROMs might be components of the computer. But that is not the case here. In lone dissent, Associate Justice John Paul Stevens explained that he would affirm the Federal Circuit's majority opinion in the case, because he deemed that judgment to be "more faithful to the intent of the Congress that enacted § 271(f)." In his view, abstract software code, whether embodied in a physical medium or detached from it, should be considered a "component" within the meaning of § 271(f) because it has no other intended use except for installation onto a computer's hard drive; therefore, it is a "component" used for assembly of an infringing machine, and Microsoft would be liable for exporting it. He also objected to the Court's comparison of abstract software to blueprints, because "unlike a blueprint that merely instructs a user how to do something, software actually causes infringing conduct to occur. It is more like a roller that causes a player piano to produce sound than sheet music that tells a pianist what to do." The outcome of the Microsoft decision is not unlike that of the Deepsouth Packing Co. v. Laitram Corp . opinion in 1972. In Deepsouth , the Supreme Court interpreted the Patent Act as it was then written to exclude from infringement liability the making in the United States of the unpatented parts of a patented shrimp deveining machine, and exporting such unassembled parts to foreign buyers for combination abroad. Congress then enacted § 271(f) as a specific response to Deepsouth , to expand the scope of patent infringement activity to include the supply of a patented invention's component from the United States for combination abroad. Now in Microsoft , the Supreme Court has expressly invited Congress to consider whether it is desirable to revise patent infringement liability under § 271(f) to include exporting software with the intent that such product be copied abroad for use on foreign computers.

Generally speaking, United States patent law does not have extraterritorial effect. The exception, however, is § 271(f) of the Patent Act, which makes it an act of patent infringement to manufacture within the United States the components of a patented invention and then export those disassembled parts for combination abroad into an end product. However, in Microsoft Corp. v. AT&T Corp . (550 U.S. ___ , No. 05-1056, decided April 30, 2007), the U.S. Supreme Court held that software companies are not liable for patent infringement under § 271(f) when they export software that has been embodied in machine-readable, physical form (a CD-ROM, for example), with the intent that such software be copied abroad for installation onto foreign-manufactured computers. In this case, AT&T holds a patent on a speech software program upon which Microsoft's Windows operating system infringes. Microsoft ships abroad a "master version" of Windows, either on a disk or via encrypted electronic transmission, which foreign computer manufacturers use to generate copies. Thus, the actual copies of the Windows software that are installed onto the foreign-made computers are made abroad. Consequently, according to the Supreme Court, liability for such unauthorized replication, if any, would have to arise under the patent laws of those foreign countries, not the U.S. Patent Act.

In the early 1970s, BIA began giving tribes more training, involvement, and influence in BIA’s budget process, in efforts that evolved into TPA. At that time, according to BIA officials, few tribes were experienced in budgeting or contracting, and most depended on BIA for services. Over the years, tribes have become more experienced and sophisticated in TPA budgeting, are more involved in directly contracting and managing their TPA activities, and have more flexibility in shifting funds between activities within TPA. Since 1991, through amendments to the Indian Self-Determination and Education Assistance Act, 206 tribes have entered into self-governance agreements with the federal government. Under the terms of these agreements, the tribes assume primary responsibility for planning, conducting, and administering programs and services—including those activities funded under TPA. Of the $757 million in TPA funds that the Congress appropriated in fiscal year 1998, about $507 million was for base funding, and about $250 million was for non-base funding. Base funding was distributed in three components: $468 million generally on the basis of historical funding levels, $16 million to supplement funding for “small and needy” tribes, and $23 million in a general funding increase. According to Interior officials, how TPA base funds for tribes were initially determined is not clearly documented, and adjustments may have been made over time in consideration of specific tribal circumstances. While most increases in the TPA budget prior to the 1990s resulted from congressional appropriations for specific tribes, subsequent increases have generally been distributed on a pro rata basis. The $468 million in base funds may be used by tribes for such activities as law enforcement, social services, and adult vocational training. Tribes may move these funds from one TPA activity to another. In 1998, the Congress appropriated TPA funds for BIA to supplement historical distribution levels for “small and needy” tribes; as a result, $16 million in additional base funds was distributed to 292 tribes. The designation “small and needy” was developed by the Joint Tribal/BIA/DOI Advisory Task Force on Bureau of Indian Affairs Reorganization in 1994.The task force recommended that tribes with service populations of less than 1,500 have available minimum levels of TPA base funds—$160,000 in the lower 48 states and $200,000 in Alaska—to allow them to develop basic self-government capacity. Because some small tribes were receiving less than $160,000, the Congress directed BIA to supplement TPA base funds with the 1998 distribution so that each of these tribes would receive $160,000. For fiscal year 1999, BIA has requested an additional $3 million to move the “small and needy” tribes in Alaska closer to the task force-recommended minimum funding level of $200,000. The $23 million general increase in base funds was evenly distributed among BIA’s 12 area offices, as recommended in January 1998 by a special task force assembled under the 1998 Interior Appropriation bill. Each equal portion was subsequently distributed to tribes and BIA offices according to various considerations. For example, the tribes in BIA’s Sacramento area each received an equal share of the area office’s $1.95 million allocation. The tribes in BIA’s Juneau area each received $4,000, and the remainder was distributed on the basis of population and TPA base funding levels. The remaining $250 million is non-base funds and is generally distributed according to specific formulas that consider tribal needs. In general, tribes may not shift these funds to other activities without special authorization. Road maintenance, housing improvement, welfare assistance, and contract support are all included in this category. For example, road maintenance funds are distributed to BIA’s area offices based on factors such as the number of miles and types of roads within each area. Housing improvement funds are distributed to area offices on the basis of an inventory of housing needs that includes such things as the number of units in substandard condition and the number of units needing renovation or replacement. As of March 1998, 95 percent of the $757 million in TPA funds had been distributed among the tribes and BIA offices. Our per capita analysis shows that the distributions ranged from a low of $121 per tribal member within BIA’s Muskogee area to a high of $1,020 within the Portland area. However, according to Interior officials, there are reasons for the differences in TPA distributions and the differences should not all be perceived as inequities. For example, BIA is required to fund law enforcement and detention in states that do not have jurisdiction over crimes occurring on Indian lands, so tribes located in those states may receive more TPA funds for these purposes than tribes located in other states. Similarly, BIA has a trust responsibility for natural resources on reservations, so tribes that have large land bases may receive more TPA funds for this purpose than tribes with small land bases. Furthermore, tribes with self-governance agreements may include funds in their TPA base amount that are not included for tribes without self-governance agreements. BIA officials also noted that they do not consider the service population figures, which are estimated by tribes, to be reliable—although they did not offer other figures that they believed to be more accurate. They also noted that TPA funds are distributed to tribes, rather than individuals, and that a lower per capita figure may reflect that tribes in one area have larger memberships but smaller land bases than tribes in another area. Appendix I presents the distributions and per capita analyses for BIA’s area offices. The remaining 5 percent of TPA funds not distributed to tribes includes $30 million, primarily for welfare assistance and contract support, that will be distributed later in the fiscal year on the basis of tribal need. While most of the contract support and welfare assistance funds are distributed on the basis of the prior year’s expenditures, between 15 and 25 percent is withheld until later in each fiscal year, when tribes’ actual needs are better known. An additional $9 million not distributed to tribes is for other uses, including education funding to non-tribal entities (such as states and public schools) and payments for employees displaced as a result of tribal contracting. Nonfederal entities—including tribes—meeting the federal assistance thresholds for reporting under the Single Audit Act (those receiving at least $100,000 in federal funds before 1997 and those expending at least $300,000 in 1997 or later) must submit an audited general-purpose financial statement and a statement of federal financial assistance. We examined all 326 financial statements on file with Interior that were most recently submitted by tribes; these statements generally covered fiscal years 1995 or 1996. The tribes’ financial statements varied in the type and amount of information reported. While some statements included only federal revenues, others also included revenues from state, local, and private sources; some included financial information only for tribal departments that expended federal funds, while others provided more complete reporting on their financial positions. In total, the statements reported that these tribes received more than $3.6 billion in revenues during the years covered by them. These revenues included such things as taxes and fees, lease and investment income, and funds received through governmental grants and contracts. About half of the financial statements we examined also included some information on tribal businesses. Tribal businesses include, for example, gaming operations, smokeshops or convenience stores, construction companies, and development of natural resources such as minerals or timber. The tribes that reported the results of their businesses had operating income totaling over $1.1 billion. Not all of these tribes reported a profit, however—about 40 percent reported operating losses totaling about $50 million. The reliability of the general-purpose financial statements we reviewed varied. Of the 326 we reviewed, 165—or about half—of the statements were certified by independent auditors as fairly presenting the financial position of the reporting entity and received “unqualified” auditors’ opinions. However, auditors noted that 38 of the “unqualified” statements were limited to certain funds and were not intended to represent the financial position of the tribe as a whole. The independent auditors’ opinions for the remaining financial statements indicated that the statements were deficient to varying degrees. Tribes with gaming operations are required under the Indian Gaming Regulatory Act to submit annual financial reports to the National Indian Gaming Commission. In 1997, we reported that 126 tribes with class II and class III gaming operations (which include bingo, pull-tabs, slot machines, and other casino games) reported a total of about $1.9 billion in net income from their gaming operations in 1995. About 90 percent of the gaming facilities included in that report generated net income, and about 10 percent generated net losses. Because the financial statements we examined covered different fiscal years and did not always include gaming revenues, we did not attempt to reconcile them to information reported to the Gaming Commission. In deciding whether to consider tribal revenues or business income in order to determine the amount of TPA funds tribes should receive, information that might be useful to the Congress could include (1) financial information for all tribes, including those tribes not submitting reports under the Single Audit Act; (2) more complete information on the financial resources available to tribes from tribal businesses, including gaming; and (3) more reliable data on tribes’ financial positions. However, there are several impediments to obtaining this information. For fiscal year 1997 and later, nonfederal entities (including tribes) expending less than $300,000 in federal funds are not covered by the Single Audit Act. Tribes reporting under the act do not have to report financial information for their tribal businesses if those businesses do not receive, manage, or expend federal funds. Interior officials also noted that under the terms of the Alaska Native Claims Settlement Act, Congress established for-profit native corporations as separate legal entities from the non-profit arms that receive federal financial assistance; for this reason, financial information on the for-profit arms would not be reported under the Single Audit Act. Further, financial information submitted by Alaskan villages that have formed an association or consortium or operate under self-governance agreements reflect only the operations of the umbrella organization and do not provide information regarding the separate tribal governments. Interior officials further noted that some tribes that meet the reporting threshold of the act have not submitted financial statements annually as required, or have not submitted them in a timely manner, and that BIA has few sanctions to encourage these tribes to improve their reporting. Finally, the financial statements we examined included a range of auditors’ opinions, and the reliability of the information in the statements varied. Mr. Chairman, this concludes my prepared statement. I will be pleased to respond to any questions that you or Members of the Subcommittee may have. We obtained information about (1) BIA’s bases for distributing 1998 TPA funds; (2) distributions of TPA funds in fiscal year 1998; (3) revenue and business income reported by tribes under the Single Audit Act; and (4) additional revenue and income information that might be useful to the Congress in deciding whether to distribute TPA funds considering total financial resources available to tribes. We contacted officials with the Department of the Interior’s Bureau of Indian Affairs, Office of Audit and Evaluation, and Office of Self-Governance in Washington, D.C., and its Office of Audit and Evaluation in Lakewood, Colorado. We analyzed distribution data provided by BIA and Office of Self-Governance officials to determine specific amounts distributed to area offices and tribes in fiscal year 1998. We did not independently verify the distribution or population data. At Interior’s Office of Audit and Evaluation in Washington, D.C. and Lakewood, Colorado, we examined all 326 of the most recent financial statements on file that were submitted under the Single Audit Act by tribes, tribal associations, and tribal enterprises. We excluded statements for some entities, such as tribal housing authorities and community colleges, because they are financially separate from the tribes. Of the 326 financial statements, 290 were for federally recognized tribes, 20 were for tribal businesses or components of tribes, 14 were for consortia or associations representing over 170 individual tribes, and 2 were for tribes not federally recognized. From each of the financial statements we examined, we obtained information about the independent auditor’s opinion, revenues for all fund types reported, and operating income for tribes that included tribal business information in their statements. We performed our review from November 1997 through April 1998 in accordance with generally accepted government auditing standards. The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 37050 Washington, DC 20013 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.

GAO discussed the preliminary results of its review of the Bureau of Indian Affairs' (BIA) distribution of Tribal Priority Allocation (TPA)--or TPA--funds, focusing on: (1) BIA's basis for distributing 1998 TPA funds; (2) total distributions of TPA funds in fiscal year (FY) 1998 and a per-capita analysis of those distributions; (3) revenue and business income information reported by tribes under the Single Audit Act; and (4) what additional revenue and income information may be useful to Congress in deciding whether to distribute TPA funds to tribes. GAO noted that: (1) two-thirds of the 1998 TPA funds were distributed primarily on the basis of historical levels, and tribes may shift these base funds among TPA activities according to their needs; (2) the remaining one-third, known as non-base funds, are used for such activities as road maintenance and housing improvement and were generally distributed on the basis of specific formulas; (3) in total, 95 percent of the TPA funds appropriated in FY 1998 have been distributed; (4) average TPA distributions varied widely among BIA's 12 area offices when analyzed and compared on a per-capita basis; (5) the per-capita averages ranged from $121 per tribal member with BIA's Muskogee area to $1,020 per tribal member within BIA's Portland area; (6) according to Interior officials, there are reasons for differences in TPA distributions, and they do not consider the population estimates to be reliable; (7) nonfederal entities--including tribes--meeting certain federal assistance thresholds must submit audited financial statements annually under the Single Audit Act; (8) GAO reviewed all 326 financial statements on file with the Department of the Interior that were most recently submitted by tribes; the statements generally covered fiscal years 1995 or 1996; (9) while some tribes reported only their federal revenues, others included revenues from state, local and private sources; (10) in total, the statements reported that these tribes received more than $3.6 billion in revenues during the years covered by them; (11) these revenues included such things as taxes and fees, lease and investment income, funds received through governmental grants and contracts; (12) some tribes also reported income from their businesses for the periods covered by the statements; (13) however, the quality of the information reported in the statements varied; only about half of the statements received unqualified opinions from auditors, while the others were deficient to varying degrees; (14) in deciding whether to consider tribal revenues or business income in distributing TPA funds, information that might be useful to Congress could include more complete and reliable financial information for all tribes; (15) however, there are several impediments to obtaining this information; and (16) for example, under the Single Audit Act, financial statements must be submitted by those nonfederal entities expending at least $300,000 of federal funds in a year and may not include income from tribes' businesses.

The IGs' four principal responsibilities are (1) conducting and supervising audits and investigations relating to the programs and operations of the agency; (2) providing leadership and coordination and recommending policies to promote the economy, efficiency, and effectiveness of these; (3) preventing and detecting waste, fraud, and abuse in these; and (4) keeping the agency head and Congress fully and currently informed about problems, deficiencies, and recommended corrective action. To carry out these purposes, IGs have been granted broad authority to: conduct audits and investigations; access directly all records and information of the agency; request assistance from other federal, state, and local government agencies; subpoena information and documents; administer oaths when taking testimony; hire staff and manage their own resources; and receive and respond to complaints from agency employees, whose confidentiality is to be protected. In addition, the Homeland Security Act of 2002 gave law enforcement powers to criminal investigators in offices headed by presidential appointees. IGs, moreover, implement the cash incentive award program in their agencies for employee disclosures of waste, fraud, and abuse (5 U.S.C. 4511). IGs have reporting obligations regarding their findings, conclusions, and recommendations. These include reporting: (1) suspected violations of federal criminal law directly and expeditiously to the Attorney General; (2) semiannually to the agency head, who must submit the IG report (along with his or her comments) to Congress within 30 days; and (3) "particularly serious or flagrant problems" immediately to the agency head, who must submit the IG report (with comments) to Congress within seven days. The Central Intelligence Agency (CIA) IG must also report to the Intelligence Committees if the Director or Acting Director is the focus of an investigation or audit. By means of these reports and "otherwise" (e.g., testimony at hearings), IGs are to keep the agency head and Congress fully and currently informed. In addition to having their own powers (e.g., to hire staff and issue subpoenas), IG independence is reinforced through protection of their budgets (in the larger establishments), qualifications for their appointment, prohibitions on interference with their activities and operations (with a few exceptions), and fixing the priorities and projects for their offices without outside direction. An exception to the IGs' rule occurs when a review is ordered in statute, although inspectors general, at their own discretion, may conduct reviews requested by the President, agency heads, other IGs, or congressional offices. Other provisions are designed to protect the IGs' independence and ensure their neutrality. For instance, IGs are specifically prohibited from taking corrective action themselves. Along with this, the Inspector General Act prohibits the transfer of "program operating responsibilities" to an IG. The rationale for both is that it would be difficult, if not impossible, for IGs to audit or investigate programs and operations impartially and objectively if they were directly involved in making changes in them or carrying them out. IGs serve under the "general supervision" of the agency head, reporting exclusively to the head or to the officer next in rank if such authority is delegated. With but a few specified exceptions, neither the agency head nor the officer next in line "shall prevent or prohibit the Inspector General from initiating, carrying out, or completing any audit or investigation, or from issuing any subpoena...." Under the IG Act, the heads of only six agencies—the Departments of Defense, Homeland Security, Justice, and the Treasury, plus the U.S. Postal Service (USPS) and Federal Reserve Board—may prevent the IG from initiating, carrying out, or completing an audit or investigation, or issuing a subpoena, and then only for specified reasons: to protect national security interests or ongoing criminal investigations, among others. When exercising this power, the head must explain such action within 30 days to the House Government Oversight and Reform Committee, the Senate Homeland Security and Governmental Affairs Committee, and other appropriate panels. The CIA IG Act similarly allows the director to prohibit or halt an investigation or audit; but he or she must notify the House and Senate intelligence panels of the reasons, within seven days. Presidentially appointed IGs in the establishments—but not in designated federal entities (DFEs)—are granted a separate appropriations account (a separate budget account in the case of the CIA) for their offices. This restricts agency administrators from transferring or reducing IG funding once it has been specified in law. Under the Inspector General Act, IGs in the larger establishments are appointed by the President, subject to Senate confirmation, and are to be selected without regard to political affiliation and solely on the basis of integrity and demonstrated ability in relevant fields. Two other IGs appointed by the President operate under similar but distinct requirements. The CIA IG is to be selected under these criteria as well as experience in the field of foreign intelligence. And the Special Inspector General for Afghanistan Reconstruction (SIGAR) is the only IG appointed by the President alone. Presidentially nominated and Senate-confirmed IGs can be removed only by the President; when so doing, he must notify Congress of the reasons. By comparison, IGs in the DFEs are appointed by and can be removed by the agency head, who must notify Congress in writing when exercising this power. The USPS IG is the only IG with removal "for cause" and then with the written concurrence of at least seven of the nine governors, who also appoint the officer. Terms of office are set for three IGs, but with the possibility of reappointment: in the Postal Service (seven years), AOC (five years), and U.S. Capitol Police (five years), with selection by the Capitol Police Board. Indirectly, the Peace Corps IG faces an effective term limit, because all positions there are restricted to five to 8½ years. With regard to Special Inspector General for Iraq Reconstruction (SIGIR) and SIGAR, each post is to end 180 days after its parent entity's reconstruction funds are less than $250 million. Several presidential orders govern coordination among the IGs and investigating charges of wrongdoing by high-echelon officers. Two councils, governed by E.O. 12805, issued in 1992, are the President's Council on Integrity and Efficiency (PCIE) and a parallel Executive Council on Integrity and Efficiency (ECIE). Chaired by the Deputy Director of the Office of Management and Budget (OMB), each is composed of the appropriate IGs plus officials from other agencies, such as the Federal Bureau of Investigation (FBI) and Special Counsel. Investigations of alleged wrongdoing by IGs or other top OIG officials (under the IG act) are governed by a special Integrity Committee, composed of PCIE and ECIE members and chaired by the FBI representative (E.O. 12993), with investigations referred to an appropriate executive agency or to an IG unit. Other coordinative devices have been created administratively. Statutory offices of inspector general have been authorized in 67 current federal establishments and entities, including all 15 cabinet departments; major executive branch agencies; independent regulatory commissions; various government corporations and boards; and five legislative branch agencies. All but nine of the OIGs are directly and explicitly under the 1978 Inspector General Act. Each office is headed by an inspector general, who is appointed in one of three ways: (1) 30 are nominated by the President and confirmed by the Senate in "establishments," including all departments and the larger agencies under the IG act, plus the CIA ( Table 1 ). (2) 36 are appointed by the head of the entity in 29 "designated federal entities"—usually smaller boards and commissions—and in seven other units, where the IGs operate under separate authority: SIGIR, ONDI, and five legislative agencies ( Table 2 ). (3) One (in SIGAR) is appointed by the President alone (Sec. 1229, P.L. 110-181 ). Initiatives in response to the 2005 Gulf Coast Hurricanes arose to increase OIG capacity and capabilities in overseeing the unprecedented recovery program. These include IGs or deputies from affected agencies on a Homeland Security Roundtable, chaired by the DHS IG; membership on a Hurricane Katrina Contract Fraud Task Force, headed by the Justice Department; an office in the DHS OIG to oversee disaster assistance activities nationwide; and additional funding for the OIG in Homeland Security. In the 110 th Congress, the IGs in DOD and in other relevant agencies have been charged with specific duties connected with combating waste, fraud, and abuse in wartime contracting ( P.L. 110-181 ). A new IG has been instituted in the AOC, in the GAO, and in the Afghanistan reconstruction effort, while other legislative action requires that full-agency websites link to the separate OIG "hotline" websites. Separate recommendations have arisen in the recent past, such as consolidating DFE OIGs under presidentially appointed IGs or under a related establishment office (GAO-02-575). Pending proposals in the 110 th Congress include the following: requiring IG annual reviews to report on program effectiveness and efficiency ( H.R. 6639 ); and establishing IGs for the Judicial Branch ( H.R. 785 and S. 461 ) and the Washington Metropolitan Area Transit Authority ( H.R. 401 ). The Intelligence Authorization Act for FY2009 ( H.R. 5959 and S. 2996 ) would create an inspector general for the entire Intelligence Community, a provision opposed by the Bush Administration; and would grant statutory recognition to specified OIGs in the Defense Department. Other bills— H.R. 928 and 2324 , whose earlier versions incurred objections from OMB—have been reconciled and await chamber action. These proposals are designed to increase the IGs' independence and powers. Different versions have called for providing specifics on initial OIG budget estimates to Congress; removing an IG only for "cause"; setting a term of office for IGs; establishing a Council of Inspectors General for Integrity and Efficiency in statute; revising the pay structure for IGs; allowing for IG subpoena power in any medium; and granting law enforcement powers to qualified IGs in DFEs.

Statutory offices of inspector general (OIG) consolidate responsibility for audits and investigations within a federal agency. Established by public law as permanent, nonpartisan, independent offices, they now exist in more than 60 establishments and entities, including all departments and largest agencies, along with numerous boards and commissions. Under two major enactments—the Inspector General Act of 1978 and its amendments of 1988—inspectors general are granted substantial independence and powers to carry out their mandate to combat waste, fraud, and abuse. Recent initiatives have added offices in the Architect of the Capitol Office (AOC), Government Accountability Office (GAO), and for Afghanistan Reconstruction; funding and assignments for specific operations; and mechanisms to oversee the Gulf Recovery Program. Other proposals in the 110th Congress are designed to strengthen the IGs' independence, add to their reports, and create new posts in the Intelligence Community. [Note: 5 U.S.C. Appendix covers all but nine of the statutory OIGs. See CRS Report RL34176, Statutory Inspectors General: Legislative Developments and Legal Issues, by [author name scrubbed] and [author name scrubbed]; U.S. President's Council on Integrity and Efficiency, A Strategic Framework, 2005-2010 http://www.ignet.gov; Frederick Kaiser, "The Watchers' Watchdog: The CIA Inspector General," International Journal of Intelligence (1989); Paul Light, Monitoring Government: Inspectors General and the Search for Accountability (1993); U.S. Government Accountability Office, Inspectors General: Office Consolidation and Related Issues, GAO-02-575, Highlights of the Comptroller General's Panel on Federal Oversight and the Inspectors General, GAO-06-931SP, and Inspectors General: Opportunities to Enhance Independence and Accountability, GAO-07-1089T; U.S. House Subcommittee on Government Management and Organization, Inspectors General: Independence and Accountability, hearing (2007); U.S. Senate Committee on Homeland Security and Governmental Affairs, Strengthening the Unique Role of the Nation's Inspectors General, hearing (2007); Project on Government Oversight, Inspectors General: Many Lack Essential Tools for Independence (2008).]

Federal debt represents, in large measure, the accumulated balance of federal borrowing of the U.S. government. The portion of gross federal debt held by the public consists primarily of investment in marketable U.S. Treasury securities. Investors in the United States and abroad include official institutions, such as the U.S. Federal Reserve; financial institutions, such as public banks; and private individual investors. Table 1 provides December 2015 data, available as of March 2016, on estimated ownership of U.S. Treasury securities by type of investment and the percentage of that investment attributable to foreign investors. The table shows that from December 2011 to December 2015, foreign holdings of debt increased by $1.1 trillion to approximately $6.1 trillion. During the same period, total publicly held debt increased by approximately $3.5 trillion to $15.1 trillion. Because the total debt has increased at about the same pace as the debt held by foreigners, the share of federal debt held by foreigners has been relatively steady. In December 2015, foreigners held 40% of the publicly held debt. Interest on the debt paid to foreigners in 2015 was $94.9 billion. Although 2015 was the first time in the past 10 years that foreign holdings declined, it is too soon to say whether this is a turning point in the heretofore upward trend. Data on major foreign holders of federal debt by country are provided in Table 2 . According to the data, the top three estimated foreign holders of federal debt by country, ranked in descending order as of December 2015, are China ($1,246.1 billion), Japan ($1,122.6 billion), and Caribbean Banking Centers ($351.7 billion). Based on these estimates, China holds approximately 20.3% of all foreign investment in U.S. privately held federal debt; Japan holds approximately 18.3%; and Caribbean Banking Centers holds approximately 5.7%. Foreign holdings as estimated by the Treasury Department can be divided into official (governmental investment) and private sources. Figure 1 provides data on the current breakdown of estimated foreign holdings in U.S. federal debt. As the figure shows, 66.6% ($4,094.6 billion) of foreign holdings in U.S. federal debt are held by governmental sources. Private investors hold the other 33.4% ($2,053.5 billion). After increasing for several years, overall foreign holdings have been relatively flat since 2013. From an economic perspective, foreign holdings of federal debt can be viewed in the broader context of U.S. savings, investment, and borrowing from abroad. For decades, the United States has saved less than it invests. Domestic saving is composed of saving by U.S. households, businesses, and governments; by accounting identity, when government runs budget deficits, it reduces domestic saving. By the same accounting identity, the shortfall between U.S. saving and physical investment is met by borrowing from abroad. When the deficit rises (i.e., public saving falls), U.S. investment must fall (referred to as the deficit "crowding out" investment) or borrowing from abroad must rise. If capital were fully mobile and unlimited, a larger deficit would be fully matched by greater borrowing from abroad, and there would be no crowding out of domestic investment. To be a net borrower from abroad, the United States must run a trade deficit (it must buy more imports from foreigners than it sells in exports to foreigners). Since 2000, U.S. borrowing from abroad and the trade deficit each have exceeded $300 billion each year. Borrowing from abroad peaked at $800 billion in 2006 and was $484 billion in 2015. Borrowing from abroad has occurred through foreign purchases of both U.S. government and U.S. private securities and other assets. As a result of foreign purchases of Treasury securities, the federal government must send U.S. income abroad to foreigners. If the overall economy is larger as a result of federal borrowing (because the borrowing stimulated economic recovery or was used to productively add to the U.S. capital stock, for example), then this outcome may leave the United States better off overall on net despite the transfer of income abroad. In other words, without foreign borrowing, U.S. income would be lower than it currently is net of foreign interest payments in this scenario. From 2008 to 2014, the output gap (the difference between actual gross domestic product [GDP] and potential GDP) was large, meaning the economy had significant idle capital and labor resources. In the presence of a large output gap, government budget deficits have a greater potential than usual to stimulate the economy and increase total income. As the economy gets closer to full employment, the scope for deficits to stimulate the economy diminishes. Because the federal government has run deficits almost every year since the 1960s, the mainstream economic view is that these budget deficits have not led to a larger economy on net over the long run for two reasons. First, the government has run deficits in many years when the economy was near or at full employment, precluding the role of deficit stimulus. Second, federal spending on capital is small relative to the overall budget. It can be argued that the underlying long-term economic problem is the budget deficit itself, and not that the deficit is financed in part by foreigners. This can be illustrated by the counterfactual—assume the same budget deficits and U.S. saving rates without the possibility of foreign borrowing. In this case, budget deficits would have had a much greater "crowding out" effect on U.S. private investment, because only domestic saving would have been available to finance both. The pressures the deficit has placed on domestic saving would have pushed up interest rates throughout the economy and caused fewer private investment projects to be profitably undertaken. With fewer private investment projects, overall GDP would have been lower over time relative to what it would have been. The ability to borrow from foreigners avoids the deleterious effects on U.S. interest rates, private investment, and GDP, to an extent, even if it means that the returns on some of this investment now flow to foreigners instead of Americans. In other words, all else equal, foreign purchases of Treasury securities reduce the federal government's borrowing costs and reduce the costs the deficit imposes on the broader economy. The burden of a foreign-financed deficit is borne by exporters and import-competing businesses, because borrowing from abroad necessitates a trade deficit. It is also borne by future generations, because future interest payments will require income transfers to foreigners. To the extent that the deficit crowds out private investment rather than is financed through foreign borrowing, its burden is also borne by future generations through an otherwise smaller GDP. Because interest rates are at historically low levels, this burden has not grown significantly given the increase in borrowing. Were rates to rise, however, the burden would rise with some lag as new borrowing was made at the new higher rates and old borrowing matured and "rolled over" into new debt instruments with higher rates. Thus far, this report has considered the impact of the government's budget deficit and the low U.S. saving rate on U.S. Treasury yields, but not investor demand. Since interest rates fell to historic lows at a time when the supply of Treasury securities rose to historic heights, it follows that Treasury rates have been driven mainly by increased investor demand in recent years. In the wake of the 2008 financial crisis, investor demand for Treasury securities increased as investors undertook a "flight to safety." Treasury securities are perceived as a "safe haven" compared with other assets because of low perceived default risk and greater liquidity (i.e., the ability to sell quickly and at low cost) than virtually any alternative asset. For foreign investors, their behavior also implies that they view the risk from exchange rate changes of holding dollar-denominated assets to be lower than alternative assets denominated in other currencies. The reasons for this flight to safety are varied. For example, investors who had previously held more risky assets may now be more averse to risk and are seeking to minimize their loss exposure; investors may not currently see profitable private investment opportunities and are holding their wealth in Treasury securities as a "store of value" until those opportunities arise; or investors may now need Treasury securities to post as collateral for certain types of transactions (such as repurchase agreements) where previously other types of collateral could be used (or used at low cost). Flight-to-safety considerations are likely to subside if economic conditions continue to normalize, reducing the incentive for foreigners to buy Treasuries and raising their yields, all else equal. More normal economic conditions would also be expected to increase domestic investment demand, which would either push up domestic interest rates or lead to more foreign borrowing. Recently, relatively stronger economic growth in the United States compared with other advanced economies has led U.S. interest rates to begin to rise relative to foreign rates. This relative movement in rates could attract additional foreign capital inflows. Finally, any discussion of foreign holdings of Treasuries would be incomplete without a discussion of the large holdings of foreign governments (referred to as "foreign official holdings" in Figure 1 ). Foreign official holdings are motivated primarily by a desire for a liquid and stable store of value for foreign reserves; relatively few assets besides U.S. Treasury securities fill this role well. Depending on the country, foreign reserves may be accumulated as a result of a country's exchange rate policy, the desire to reinvest export proceeds, or the desire to build a "war chest" to fend off speculation against the country's exchange rate and securities. If motivated by any of these factors, rate of return may be a lesser consideration for foreign governments than it is for a private investor. Although large, foreign official holdings have not been significantly increasing since 2013, after more than a decade of rapid growth before then. Since 1986, the United States has had a net foreign debt, and that debt grew to $7 trillion in 2014. The growth in net foreign debt is unsustainable in the long run, meaning that it cannot continuously grow faster than GDP, as it has generally done in recent decades. This net foreign debt has not imposed any burden on Americans thus far, however, because the United States has consistently earned more income on its foreign assets than it has paid on its foreign debt, even though foreigners owned more U.S. assets than Americans owned foreign assets. Although it is likely that the United States would begin to make net debt payments to foreigners at some point if the net foreign debt were to continue to grow, it has not been a cause for concern yet. To date, the primary drawback is the risk that its unsustainable growth poses, albeit slight in the short run. Unsustainable growth in the net foreign debt could lead to foreigners at some point reevaluating and reducing their U.S. asset holdings. If this happened suddenly, it could lead to financial instability and a sharp decline in the value of the dollar. Alternatively, were the growth in the debt to decline gradually, it is unlikely to be destabilizing. A related concern is whether the major role of foreigners in Treasury markets adds more risk to financial stability. In other words, would financial stability be less at risk if the United States borrowed the same amount from foreigners, but foreigners invested exclusively in private securities instead of U.S. Treasury securities? Empirical evidence does not shed much light on this question, although the fact that some foreign crisis countries, such as Ireland, had accumulated mainly private, not government, debt might suggest that avoiding foreign ownership of government debt is not a panacea. Although countries like Greece with large foreign holdings of government debt have experienced financing problems, a large share of Italy's large government debt was held domestically, and it has nevertheless faced financing problems. The major role of foreign governments as holders of U.S. Treasuries could reduce financial instability if foreign governments are less motivated by rate of return concerns because that implies they would be less likely to sell their holdings if prices started to fall. Finally, foreign official holdings of U.S. debt may have foreign policy (as opposed to economic) implications that are beyond the scope of this report. What policy options exist if policymakers decided foreign ownership of federal debt was undesirable? Absent strict capital controls, it is unlikely that foreigners could effectively be prevented from buying Treasury securities. After Treasury securities are initially auctioned by Treasury, they are traded on diffused and international secondary markets, and turnover is much higher on secondary markets than initial auctions. A foreign ban on secondary markets would be hard to enforce because secondary market activity could shift overseas, and even if it could be enforced, the U.S. saving-investment imbalance would likely shift foreign investment into other U.S. securities—perhaps even newly created financial products that allowed foreigners to indirectly invest in Treasury securities. Thus, a ban would not address the underlying economic factors driving foreign purchases. Economically, the only way government could reduce its reliance on foreign borrowing is by raising the U.S. saving rate, which could be done most directly by reducing budget deficits.

This report presents current data on estimated ownership of U.S. Treasury securities and major holders of federal debt by country. Federal debt represents the accumulated balance of borrowing by the federal government. To finance federal borrowing, U.S. Treasury securities are sold to investors. Treasury securities may be purchased directly from the Treasury or on the secondary market by individual private investors, financial institutions in the United States or overseas, and foreign, state, or local governments. Foreign investors have held slightly less than half of the publicly held federal debt in recent years, prompting questions on the location of the foreign holders and how much debt they hold. This report will be updated annually or as events warrant.

The source of federal copyright law originates with the Copyright and Patent Clause of the U.S. Constitution, which authorizes Congress "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." The Copyright Act offers legal protection to creators of original works of authorship that are fixed in a tangible medium of expression. Such original works must be captured in some form that is sufficiently permanent or stable for it to be perceived, reproduced, or otherwise communicated for a period beyond a transitory duration. The types of creative works that are potentially eligible for copyright protection fall into several categories, including literary works; musical works; dramatic works; pantomimes and choreographic works; pictorial, graphic, and sculptural works; motion pictures and other audiovisual works; sound recordings; and architectural works. In addition, copyright protects compilations and derivative works. However, copyright protection does not extend to any underlying abstract idea, procedure, process, system, method of operation, concept, principle, or discovery, but rather it only protects the manner in which those ideas are expressed. Works of the federal government are statutorily excluded from the scope of copyright protection. This includes the written opinions of federal courts, federal reports and documents, administrative regulations, and public laws. These materials are considered to be in the public domain. Works in the public domain are available for anyone to use without concern of infringement. The grant of copyright bestows several rights upon the creator of a work (or the individual having a legal interest in the work) that permit the copyright holder to control the use of the protected material. These statutory rights allow a copyright holder to do or to authorize the following: the reproduction of the copyrighted work; the preparation of derivative works based on the copyrighted work; the distribution of copies or phonorecords of the copyrighted work; the public performance of the copyrighted work; and the public display of the copyrighted work, including the individual images of a motion picture. The Copyright Act contains several statutory limitations on the copyright monopoly. These include the "first sale doctrine" that limits the copyright owner's exclusive control over distribution of the material objects in which a work is expressed. The "first sale doctrine" permits the owner of a particular copy of a copyrighted work to sell or dispose of that copy without the copyright owner's permission. Other limitations involve allowing certain reproductions by libraries and archives, limited performances and displays for educational purposes or in the course of services at a place of worship, and certain performances for non-profit, charitable causes. The doctrine of "fair use" in copyright law recognizes the right of the public to make reasonable use of copyrighted material, under particular circumstances, without the copyright holder's consent. For example, a teacher may be able to use reasonable excerpts of copyrighted works in preparing a scholarly lecture or commentary, without obtaining permission to do so. The Copyright Act mentions fair use "for purposes such as criticism, comment, news reporting, teaching, scholarship, or research." However, a determination of fair use by a court considers four factors: the purpose and character of the use including whether such use is of a commercial nature or is for nonprofit educational purposes, the nature of the copyrighted work, the amount and substantiality of the portion used in relation to the copyrighted work as a whole, and the effect of the use upon the potential market for or value of the copyrighted work. Because the language of the fair use statute is illustrative, determining what constitutes a fair use of a copyrighted work is often difficult to make in advance—according to the U.S. Supreme Court, such a determination requires a federal court to engage in "case-by-case" analysis. In 1998, Congress passed the Digital Millennium Copyright Act (DMCA). Section 1201(a)(1) of the DMCA prohibits any person from circumventing a technological measure that effectively controls access to a copyrighted work. This newly created right of "access" granted to copyright holders makes the act of gaining access to copyrighted material by circumventing digital rights management (DRM) security measures, itself, a violation of the Copyright Act. Prohibited conduct includes descrambling a scrambled work; decrypting an encrypted work; or avoiding, bypassing, removing, deactivating, or impairing a technological measure, without the authority of the copyright owner. In addition, the DMCA prohibits the selling of products or services that circumvent access-control measures, as well as trafficking in devices that circumvent "technological measures" protecting "a right" of the copyright owner. In contrast to copyright infringement, which concerns the unauthorized or unexcused use of copyrighted material, the DMCA's anti-circumvention provisions prohibit the act of DRM circumvention, as well as the design, manufacture, import, offer to the public, or trafficking in technology used to circumvent those copyright protection measures, regardless of the actual existence or absence of copyright infringement activity. The rights conferred on a copyright holder do not last forever. Copyrights are limited in the number of years a copyright holder may exercise his/her exclusive rights. In general, an author of a creative work may enjoy copyright protection for the work for a term lasting the entirety of his/her life plus 70 additional years. At the expiration of a term, the copyrighted work becomes part of the public domain. The unauthorized use of one of the exclusive rights of the copyright owner constitutes infringement. For example, unauthorized copying of a copyrighted work is an infringement of the copyright owner's exclusive right of reproduction. Anyone interested in doing anything with a copyrighted work that implicates one of the holder's exclusive rights must either (1) obtain the permission of the copyright holder, (2) comply with the terms of compulsory licenses established by law, or (3) assert that such use falls within the scope of certain statutory limitations on the exclusive rights such as the "fair use" doctrine. The Copyright Act has both criminal and civil provisions for infringement. Civil copyright infringement involves a violation of any of the exclusive rights of the copyright owner that are provided by 17 U.S.C. §§ 106-122, 602, including the right to control reproduction, distribution, public performance, and display of copyrighted works. Criminal copyright infringement includes the following offenses: copyright infringement for profit, 17 U.S.C. § 506(a)(1)(A), 18 U.S.C. § 2319(b); copyright infringement without a profit motive, 17 U.S.C. § 506(a)(1)(B), 18 U.S.C. § 2319(c); pre-release distribution of a copyrighted work over a publicly accessible computer network, 17 U.S.C. § 506(a)(1)(C), 18 U.S.C. § 2319(d); circumvention of copyright protection systems in violation of the Digital Millennium Copyright Act, 17 U.S.C. § 1204; bootleg recordings of live musical performances, 18 U.S.C. § 2319A; unauthorized recording of motion pictures in a movie theater (camcording), 18 U.S.C. § 2319B; and counterfeit or illicit labels and counterfeit documentation and packaging for copyrighted works, 18 U.S.C. § 2318. The direct infringer is not the only party potentially liable for infringement; the federal courts have recognized two forms of secondary copyright infringement liability: contributory and vicarious. The concept of contributory infringement has its roots in tort law and the notion that one should be held accountable for directly contributing to another's infringement. For contributory infringement liability to exist, a court must find that the secondary infringer "with knowledge of the infringing activity, induces, causes or materially contributes to the infringing conduct of another." Vicarious infringement liability is possible where a defendant "has the right and ability to supervise the infringing activity and also has a direct financial interest in such activities." The statute of limitations for initiating a civil action for copyright infringement is within three years after the claim accrued, while a criminal proceeding must be commenced within five years after the cause of action arose. Federal courts determine the civil remedies in an action for infringement brought by the copyright owner, among those statutorily authorized. If the federal government chooses to prosecute individuals for copyright violations, the imprisonment terms are set forth in the statutes describing the particular copyright crime (mostly in 18 U.S.C. § 2319), while the criminal fine amount is determined in conjunction with 18 U.S.C. § 3571 (specifies the amount of the fine under Title 18 of the U.S. Code). For a copyright owner who prevails in a copyright infringement lawsuit, the court may approve the following legal remedies: injunctions, 17 U.S.C. § 502; impounding, destruction, or other reasonable disposition of all copies made in violation of the copyright owner's rights, as well as all plates, molds, matrices, masters, tapes, film negatives, or other articles by means of which such copies may be reproduced, 17 U.S.C. § 503; actual damages suffered by the copyright owner due to the infringement, and any profits of the infringer attributable to the infringement, 17 U.S.C. § 504(b); statutory damages (at the copyright owner's election to recover in lieu of actual damages and profits), in the amount of not less than $750 or more than $30,000 as the court deems just, 17 U.S.C. § 504(c)(1). For willful infringement, a court may increase the statutory damages award to a sum of not more than $150,000, 17 U.S.C. § 504(c)(2); and costs and attorney's fees, 17 U.S.C. § 505. Willful infringement of copyright for purposes of commercial advantage or private financial gain is subject to criminal prosecution, and is punishable by up to 10 years in prison and a fine of up to $250,000. Another additional remedy for criminal copyright infringement is civil and criminal forfeiture of all infringing copies and all devices and equipment used in the manufacture of such infringing copies.

This report provides a general overview of copyright law and briefly summarizes the major provisions of the U.S. Copyright Act.

O n July 9, 2018, President Trump announced the nomination of Judge Brett M. Kavanaugh of the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) to succeed Supreme Court Justice Anthony M. Kennedy, who is scheduled to retire from active status on July 31, 2018. Judge Kavanaugh has served as an appellate judge for the D.C. Circuit since his appointment by President George W. Bush on May 30, 2006. He has also sat, by designation, on judicial panels for the U.S. Court of Appeals for the Eighth Circuit (Eighth Circuit), the U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit), and the U.S. District Court for the District of Columbia. During his tenure on the bench, Judge Kavanaugh has adjudicated more than 1,500 cases, almost all while a member of either a three-judge or en banc panel of the D.C. Circuit. The D.C. Circuit considers far fewer cases each year than other federal appellate courts. But in part because of the D.C. Circuit's location in the nation's capital and the number of statutes providing it with special or even exclusive jurisdiction to review certain agency actions, legal commentators generally agree that the D.C. Circuit's docket, relative to the dockets of other circuits, contains a greater percentage of nationally significant legal matters. Cases adjudicated by the D.C. Circuit are more likely to concern the review of federal agency action or civil suits involving the federal government than cases adjudicated in other circuits, while the D.C. Circuit docket has a lower percentage of cases involving criminal matters, prisoner petitions, or civil suits between private parties. Unlike the Supreme Court, which enjoys "almost complete discretion" in selecting its cases, the federal courts of appeals are required to adjudicate many cases as a matter of law and, as a result, tend to hear "many routine cases in which the legal rules are uncontroverted." Arguably indicative of the nature of federal appellate work, the vast majority of cases decided by three-judge panels of federal courts of appeals are issued without a dissenting opinion. However, while the vast majority of cases adjudicated by the D.C. Circuit are decided without a dissenting opinion, perhaps because of the nature of the D.C. Circuit's docket, a greater percentage of the court's decisions draw a dissenting opinion relative to its sister circuits. This report provides tabular listings of 306 cases in which Judge Kavanaugh authored a majority, concurring, or dissenting opinion. Arguably, these written opinions provide the greatest insight into Judge Kavanaugh's judicial approach, as a judge's vote or decision to join an opinion authored by a colleague may not necessarily represent full agreement with a colleague's views. Accordingly, this report does not include cases in which Judge Kavanaugh sat on a reviewing judicial panel, but is not credited as the author of an opinion. For example, instances where Judge Kavanaugh was part of a panel that issued a per curiam opinion, in which no particular judge was credited as an author, are omitted from this report. This report also does not attempt to identify the various rulings made by circuit panels on procedural issues in the midst of the appeal (e.g., granting a litigator's request for an extension of time to file a brief). Finally, the report does not address subsequent legal proceedings that may have occurred after a cited decision was issued, except to note where Westlaw or Lexis editors have indicated that a decision was subsequently abrogated, affirmed, reversed, or vacated by the Supreme Court or the D.C. Circuit. The opinions discussed in this report are categorized into three tables: Table 1 identifies 148 opinions authored by Judge Kavanaugh on behalf of a unanimous panel; Table 2 contains 47 controlling opinions authored by Judge Kavanaugh in which one or more panelists wrote a separate opinion; and Table 3 lists 111 cases where Judge Kavanaugh wrote a concurring or dissenting opinion, including cases where Judge Kavanaugh wrote both the majority opinion and a separate concurrence. A concurring opinion is identified as a "concurrence in the judgment"—that is, an opinion where the author agrees with the ultimate conclusion reached by the majority but not the manner in which it was reached—only when the concurrence is expressly labeled as such. Cases are listed in reverse chronological order based on where the case appears in the Federal Reporter . In each instance, the key ruling or rulings of the case are succinctly described. A glossary of common abbreviations for statutes, agencies, and Supreme Court cases referenced in the tables is attached as an Appendix . Judicial opinions discussed in this report are categorized using the following legal subject areas: Administrative Law (77 cases) Communications Law (14 cases) Antitrust Law (4 cases) Bankruptcy Law (1 case) Business & Corporate Law (6 cases) Civil Rights Law (24 cases) Contracts Law (7 cases) Criminal Law & Procedure (45 cases) Elections Law (7 cases) Energy & Utilities Law (17 cases) Environmental Law (33 cases) Federal Courts & Civil Procedure (covering matters such as standing, justiciability, civil procedure, legal ethics, and the admission of evidence in noncriminal proceedings) (53 cases) Indian Law (2 cases) Firearms Law (1 case) Freedom of Religion (4 cases) Freedom of Speech (including the right to petition) (13 cases) Food & Drug Law (including agriculture) (7 cases) Government Operations (concerning the structure and functions of executive and legislative branch entities) (18 cases) Healthcare Law (14 cases) Immigration Law (3 cases) Intellectual Property Law (4 cases) International Law (6 cases) Labor & Employment Law (38 cases) Military & Veterans Law (6 cases) National Security (17 cases) Pensions & Benefits Law (6 cases) Privacy & Records (15 cases) Securities Law (7 cases) Tax Law (8 cases) Torts (10 cases) Transportation Law (17 cases) Workers' Compensation & Social Security (5 cases) Where appropriate, up to three subject areas are identified as primarily relevant to a particular case. The goal of the subject matter listing is to provide those interested in particular issues concerning Judge Kavanaugh a means to identify key judicial opinions he authored in a given subject area. However, the list above is not an exhaustive accounting of all possible legal subjects addressed in Judge Kavanaugh's judicial writings. Moreover, categorization of a case under a particular legal subject area does not necessarily mean other categories are wholly inapplicable. For example, several listed cases that concern challenges by wartime detainees held at the U.S. Naval Station at Guantanamo Bay, Cuba, are solely categorized under the legal subject area of "National Security," though the cases may touch on other issues, such as "Federal Courts & Civil Procedure" (because detainee challenges concern judicial review of executive discretion in wartime matters) or "Administrative Law" (because the cases involve review of determinations made through an administrative process employed by the U.S. military to assess whether a person is properly detained). Accordingly, while the categories used in this report may prove helpful to readers seeking to locate judicial opinions by Judge Kavanaugh concerning certain legal topics, these categories do not necessarily capture the full range of legal issues those opinions address. While this report identifies and briefly describes opinions authored by Judge Kavanaugh during his tenure on the federal bench, it does not analyze the implications of those opinions or suggest how he might approach legal issues if appointed to the Supreme Court. Those matters will be discussed in a forthcoming CRS report. The cases included in this report were compiled by searching all federal cases in the LexisAdvance legal database for "writtenby(Kavanaugh)." A search was then conducted of all federal cases in the Westlaw legal database using "wb(Kavanaugh)" as a cross-check because editors of different legal databases may vary in how they identify cases. These search results were then compared to the listing of authored opinions submitted by Judge Kavanaugh to the Senate Committee on the Judiciary. These results were last compared on July 23, 2018. Not every identified result proved relevant. Moreover, in a handful of cases, an opinion authored by Judge Kavanaugh was subsequently republished with minimal, and sometimes only stylistic, changes. In cases where there are little, if any, substantive changes between two versions of a judicial opinion, only the most recent published version is listed. On the other hand, if there is a meaningful substantive difference between the two versions, both are included. Ultimately, this methodology was used to identify 306 cases in which Judge Kavanaugh is credited authoring an opinion: 301 cases decided by the D.C. Circuit and 5 cases decided on three-judge district court panels (Judge Kavanaugh is not credited as an author of any opinions issued by Eighth or Ninth Circuit panels on which he served). APA – Administrative Procedure Act AUMF – 2001 Authorization for Use of Military Force Chevron – Chevron, U.S.A, Inc. v. Nat'l Resources Def. Council 467 U.S. 837 (1984) CAA – Clean Air Act CFPB – Consumer Financial Protection Bureau CIA – Central Intelligence Agency DHS – Department of Homeland Security Dodd-Frank Act – Dodd-Frank Wall Street Reform and Consumer Protection Act DOT – Department of Transportation EPA – Environmental Protection Agency ERISA – Employee Retirement Income Security Act of 1974 FAA – Federal Aviation Administration FBI – Federal Bureau of Investigation FCC – Federal Communications Commission FERC – Federal Energy Regulatory Commission FOIA – Freedom of Information Act HHS – Department of Health and Human Services IRS – Internal Revenue Service NLRA – National Labor Relations Act NLRB – National Labor Relations Board Title VII – Title VII of the Civil Rights Act of 1964

On July 9, 2018, President Trump announced the nomination of Judge Brett M. Kavanaugh of the U.S. Court of Appeals for the District of Columbia Circuit (D.C. Circuit) to succeed Supreme Court Justice Anthony M. Kennedy, who is scheduled to retire from active status on July 31, 2018. Judge Kavanaugh has served as a judge on the D.C. Circuit since May 30, 2006. He has also sat, by designation, on judicial panels of the U.S. Court of Appeals for the Eighth Circuit and the U.S. Court of Appeals for the Ninth Circuit, and also served on three-judge panels of the U.S. District Court for the District of Columbia. During his tenure on the bench, Judge Kavanaugh has adjudicated more than 1,500 cases, almost all while a member of either a three-judge or en banc panel of the D.C. Circuit. In part because of the D.C. Circuit's location in the nation's capital and the number of statutes providing it with special or even exclusive jurisdiction to review certain agency actions, legal commentators generally agree that the D.C. Circuit's docket, relative to the dockets of other circuits, contains a greater percentage of nationally significant legal matters. Cases adjudicated by the D.C. Circuit are more likely to concern the review of federal agency action or civil suits involving the federal government than cases adjudicated in other circuits, while the D.C. Circuit docket has a lower percentage of cases involving criminal matters, prisoner petitions, or civil suits between private parties. Arguably, Judge Kavanaugh's authored opinions provide the greatest insight into the nominee's judicial approach, as a judge's vote or decision to join an opinion authored by a colleague may not necessarily represent full agreement with a colleague's views. This report provides a tabular listing of 306 cases in which Judge Kavanaugh authored a majority, concurring, or dissenting opinion. The opinions are categorized into three tables: Table 1 identifies 148 opinions authored by Judge Kavanaugh on behalf of a unanimous panel; Table 2 contains 47 controlling opinions authored by Judge Kavanaugh in which one or more panelists wrote a separate opinion; and Table 3 lists 111 cases where Judge Kavanaugh wrote a concurring or dissenting opinion (decisions where Judge Kavanaugh wrote both the controlling opinion and a separate concurrence are included in this final table). Opinions are identified and briefly discussed in each table in reverse chronological order based on where the case appears in the Federal Reporter. The opinions are also categorized by their primary legal subjects (e.g., administrative law, criminal law & procedure, environmental law, federal courts & civil procedure, labor & employment law, and national security). While this report identifies and briefly describes judicial opinions authored by Judge Kavanaugh during his time on the federal court, it does not analyze the implications of his judicial opinions or suggest how he might approach legal issues if appointed to the Supreme Court. Those matters will be discussed in a forthcoming CRS report. Key CRS products related to the Supreme Court vacancy and Judge Kavanaugh's nomination are collected in CRS Legal Sidebar LSB10160, Supreme Court Nomination: CRS Products, by [author name scrubbed].

RS21787 -- Foreign Trade Effects of an Alaskan Natural Gas Pipeline March 30, 2004 This report examines the policy implications for the U.S. current account balance of the construction of natural gas pipeline from Alaska to the lower 48 states. The 108th Congress hasincluded in H.R. 6 , the omnibus energy bill, provisions which provide incentives for the construction of anAlaska natural gas pipeline. A pipeline would link currentlyunavailable Alaskan gas supplies to the consuming market. This report analyzes the possible expansion orcontraction of natural gas imports as a result of constructing, or notconstructing, an Alaskan pipeline, within the framework of the National Energy Modeling System (NEMS). (1) NEMS is used by the EIA as a tool to forecast futureenergy trends asincluded in the AEO. (2) Recently, the EIA haspublished analyses of a variety of restricted natural gas supply scenarios including the non-availability of an Alaskanatural gas pipeline. (3) The AEO reference case forecast is the EIA's baseline estimate of the state of energy markets in the out years to 2025. (4) The reference case forecast projects naturalgas prices to be highenough after 2009 to begin construction of an Alaska natural gas pipeline. (5) In the forecast, natural gas deliveries come on stream from a pipeline in 2018with full capacity deliveriesbecoming available near the end of the forecast period, in 2024. If policy based incentives to construct a pipelinebecome available, it is possible that a pipeline might be constructedsooner than in the AEO reference case altering the results presented in this report. As a result of the constructionand delivery time line assumed in the reference case, the forecasts withand without the construction of a pipeline are virtually identical until 2018. This report will examine differencesin the forecasts for the years 2020 and 2025. (6) To focus on the international trade effects of the pipeline, likely variations in the current account balance in 2020 and 2025 will be calculated. The current account balance is a basicmeasure of a nation's foreign trade position and is defined as the nation's exports of goods and services minus thenation's imports of goods and services. When a nation's exportsexceed its imports, the country has a current account surplus. When a nation's imports exceed its exports, the nationhas a current account deficit. The EIA forecasts do not includeestimates of the cost of constructing the pipeline, or any trade effects that might come about as a result of sourcingdecisions for the steel and other goods and services used in theconstruction process. The current account balance effects described in this report are limited to the natural gas thata pipeline would deliver to the market. In the AEO reference case, an Alaska natural gas pipeline is expected to deliver approximately 2 trillion cubic feet (tcf), about 7% of yearly consumption, of gas per year by the time itreaches full capacity operation in 2024. Although deliveries are forecast to begin in 2018, they are expected to beginat approximately 0.8 tcf per year and grow to full capacity. By 2020 the reference case forecast projects a gap between total domestic production, 23.89 tcf, and total demand, 30.36 tcf, requiring imports of 6.47 tcf. The forecast projects that by2020 pipeline natural gas imports from Canada will be in decline compared to 2003 level. The U.S. imported 3.4tcf of natural gas from Canada in 2003, about 97% of importrequirements. By 2020 Canadian imports are expected to decline to 2.5 tcf, even though total U.S. importrequirement will have nearly doubled over 2003 levels. The reference forecastprojects that essentially all of the additional U.S. import requirements will come from liquefied natural gas (LNG). The values cited in the forecast are determined in conjunction withthe forecast wellhead price of natural gas in 2020 which is expected to reach $4.28 per thousand cubic feet in realterms, which would be over $8.00 per thousand cubic feet in nominalterms. (7) By 2025, the reference case projects total domestic production to reach 24.09 tcf and total demand to reach 31.33 tcf with a gap of 7.24 tcf to be filled by imports. In 2025, Canadianpipeline imports are projected to be 2.56 tcf with LNG again filling most of the remaining import gap. The referencecase forecast projects LNG demand growing from 2.16 tcf in 2010to 4.14 tcf in 2020 and 4.8 tcf in 2025. By 2025, the reference case projects a wellhead natural gas price of $4.40per thousand cubic feet in real terms, translating to a nominal price ofabout $8.40. (8) In contrast to the reference case forecast, the no pipeline case assumes that a natural gas pipeline from Alaska is not constructed. As a result, Alaskan natural gas production, whichtotaled about 0.51 tcf in 2003, is projected to rise to 0.72 tcf in 2020 and 0.51 tcf in 2025, less than the 2.29 tcf and2.71 tcf for the same years in the reference case. (9) Since imports areexpected to fill the gap between U.S. domestic production and total demand, a simple analysis might suggest thatthe no pipeline case would show an approximate 2 tcf increase inimports to compensate for no delivery of Alaskan gas. This is not the case, however. The unavailability of Alaskannatural gas through the pipeline leads to price increases in the naturalgas market. These price increases reduce the total demand for natural gas, as well as providing an incentive forproducers both in the U.S. and Canada to increase production. As aresult of these adjustments, the gas not available because of a lack of a pipeline from Alaska is not replaced byimports on a one to one basis in the EIA analysis. The increases in imports attributable to the lack of a natural gas pipeline from Alaska are 0.72 tcf in 2020, and 0.63 tcf in 2025 as projected in the EIA no pipeline case. To determinethe effect of these projected increases in natural gas imports, these quantities must be multiplied by appropriateprices. The EIA publishes import prices as part of the AEO referencecase, but not for the no pipeline case. As an approximation of the import price in the no pipeline case, CRS hascomputed prices based on the EIA reference case prices. (10) For 2020, theestimated import price is $4.81 per thousand cubic feet, and for 2025 it is $4.90 per thousand cubic feet. Based onthese values for price and quantity of imported natural gas, estimatedincreases in the value of natural gas imports as a result of lack of construction of a pipeline would be approximately$3.46 billion in 2020 and $3.09 billion in 2025. (11) To put theseprojected increases in imports in perspective, they are less than 1% of the current account deficit in 2002, the yearto which the price of natural gas is set in the EIA forecasts. Although these values represent potential increases in the current account deficits in 2020 and 2025 (or reductions in the surpluses), they might well be either increased or decreased byother related effects in the economy that might result from higher projected natural gas prices. For example,industrial demand for natural gas is projected to decrease. This could meanthat the U.S. production of chemicals, especially those that have natural gas as a large cost component, might bereduced. This might mean greater imports of fertilizers and otherchemicals bringing additional pressure on the current account balance. On the other hand, if the higher natural gasprices resulted in general reductions in income and employment in theUnited States, that might imply lower imports of consumer goods and services, improving the current accountbalance. The EIA analysis, which focuses on energy issues, does notprovide a detailed picture of all the secondary economic effects of higher natural gas prices as they alter relationshipsin the economy as a whole. An Alaska natural gas pipeline is projected to account for about 2 tcf of delivered gas in 2025 when operating at full capacity, but imports increase by only 0.63 tcf in that year as a resultof the lack of pipeline construction. In 2020, a pipeline is projected to deliver about 1.6 tcf, reflecting the build-upof delivered gas as operation begins in 2018, but imports increase byonly 0.72 tcf in the forecasts if no pipeline is constructed. It might appear that 1.37 tcf of gas in 2025, and almost1 tcf in 2020, has disappeared. The lost volumes can be accounted forby examining the effects of the higher projected prices of natural gas in 2025 and 2020 on aggregate demand andsupply. As a likely result of higher prices, projected natural gas demand is lower in the no pipeline case, both in 2025 and in 2020. Aggregate demand is 0.71 tcf lower in 2025 and 0.62 tcflower in 2020 compared to the reference case. In a 2025 comparison of demand patterns in the reference case andthe no Alaska pipeline case, all sectors reduce their consumption, butthe largest declines are in the industrial and electric generators at 0.11 tcf (1%) and 0.31 tcf (3.7%), respectively. In comparison, the residential and commercial sectors reduced theirconsumption by only 0.06 tcf (0.5%) in total. Fuel switching and reduced demand due to curtailed production arelikely explanations for the relatively larger reductions in the industrialand electric generator sectors. The pattern of reduced consumption is similar in 2020. Residential and commercial consumption each decline about 1%, while industrial demand declines by about 2% and demandfrom electric generators falls by 2.7%. On the production side of the market, because of the incentive of higher prices, domestic onshore and offshore production of natural gas in the lower 48 states increases, by 0.23 tcf in2020 and 0.67 tcf in 2025. For 2025, if the reduced demand of 0.71 tcf is added to the increased lower 48 statesproduction of 0.67 tcf the total is 1.38 tcf. If 1.38 tcf is added to theextra imports of 0.63 tcf the total is approximately equal to the 2 tcf that is not delivered through an Alaskanpipeline. For 2020, the reduction in demand is 0.72 tcf and the addedproduction projected from onshore and offshore production in the lower 48 states is 0.28 tcf which, when added,equals 1 tcf. Imports are projected to increase by 0.72 tcf in 2020 whichwhen added to the 1 tcf demand reduction and lower 48 state increased production equals 1.72 tcf which again isapproximately equal to the amount of gas not delivered as a result of noconstruction of an Alaska pipeline. (12) In the AEO reference case, an Alaska natural gas pipeline is projected to begin deliveries in 2018 and achieve full capacity delivery of about 2 tcf of gas per year to market when itachieves full capacity operation in 2025. This quantity of natural gas, subtracted from the market in the no pipelinecase, is sufficient to alter projected market prices. In the no pipelinecase, increases in the price of natural gas cause changes in consumption and production of gas, as well as thecomposition of gas sources. These price changes and resultant changessuggest that, in the forecast, energy markets compensate for the lack of Alaskan gas supplies in a variety of ways. As a result, the forecast increase in gas imports is not as great as theloss in deliveries from the pipeline if it is not constructed.

The Energy Information Administration (EIA), in the Annual Energy Outlook 2004(AEO), projects increased demand for imported naturalgas through 2025. The AEO reference case forecast assumes a natural gas pipeline will begin delivering Alaskannatural gas to the lower 48 state consuming markets in 2018. H.R. 6, the omnibus energy bill, contains provisions to enhance the future supply of natural gas throughconstruction of a pipeline. This report examines the effects of an Alaska natural gas pipeline on the U.S. current account balance. TheEIA finds that if the pipeline is not constructed, natural gas prices willincrease, markets will adjust, and imports of natural gas will increase. However, due to price induced marketadjustments, the increase in imports is projected to be less than the gasvolume lost from the lack of pipeline construction. As a result, if no pipeline is constructed, the effect on the currentaccount balance will be less than the value of the amount of gas thatwas projected to be delivered through a pipeline. This report will not be updated.

Since 1993, many states have enacted laws relating to breastfeeding. Currently, forty-three states and Puerto Rico have enacted some form of breastfeeding legislation, which most commonly addresses breastfeeding in the workplace and exempting nursing mothers from laws dealing with indecent exposure and/or criminal behavior. Additionally, some states have laws or rules that more directly bear on the obligation of breastfeeding mothers to serve on juries. This regulation of jury service generally has taken one of three approaches: Some states have enacted statutes that expressly excuse or defer jury service. States with this type of law include California, Idaho, Illinois, Iowa, Kansas, Minnesota, Mississippi, Nebraska, Oklahoma, Oregon, and Virginia. These laws are cited and summarized below. Additionally, Wyoming is considering legislation to defer or excuse jury duty. Another state legislative development is the enactment of "family friendly" jury duty legislation that permits parents who care for a young child on a full time basis, or who are caretakers of an elderly or disabled relative, to have jury service deferred or excused upon their request. Usually, breastfeeding mothers fall with the coverage of these statutes, although the statutes vary, and may not be applicable under every circumstance. Currently, twelve states—Alaska, Colorado, Florida, Georgia, Illinois, Massachusetts, New Jersey, South Carolina, Tennessee, Texas, Virginia, and Wyoming have some form of "family friendly jury duty legislation." (The laws of Colorado and Massachusetts probably are not applicable to the excuse or deferral of breastfeeding mothers from jury duty.) California has adopted a state-wide court rule which uniformly deals with breastfeeding and jury service. In addition, many individual courts—federal and state—have adopted rules to deal with this situation. Even if a state has neither a specific statute dealing with jury service and breastfeeding, a "family friendly" statute, nor a statewide court rule, it does not necessarily mean that a nursing mother will be required to perform jury duty. Individual court rules or custom, community practice, or other circumstances may permit an excuse or a deferral from jury service for a nursing mother. In the absence of a state law or court rule providing a specific exception for breastfeeding, the nursing mother may or may not be excused on the basis of a general "medical" needs exception. On the other hand, research has not found any court that permits a mother serving on a jury to have her child present in the court room or the jury room, or to breastfeed during court proceedings or jury deliberations. At the present time, eleven states have enacted laws which specifically allow a breastfeeding mother to either postpone or be excused from jury duty. The laws vary significantly in their language and scope. Certain states permit the mother to be excused from jury duty and other states permit the mother to postpone jury duty. The laws are cited to and are summarized below. Cal. Civ. Proc. Code § 210.5 (2006) requires that the "standardized jury summons shall include a specific reference to the rules for breast-feeding mothers." This rule, discussed below, permits the mother of a breastfed child to postpone jury duty for one year and eliminates the requirement for the mother to appear in court to request a postponement. Idaho Code § 2-212(3) (Michie 2006) provides that a nursing mother may have jury service postponed "upon a showing that the juror is a mother breastfeeding her child." 705 Ill. Comp. Stat. Ann. 305/10.3 (West 2006) provides that "any mother nursing her child shall, upon request, be excused from jury service." Iowa Code Ann. § 607A.5 (West 2006) permits a mother who is breastfeeding and who is responsible for the daily care of the child and is not regularly employed to be excused from serving on a jury. K.S.A. 43-158 (2006) provides that a mother's jury service shall be postponed until she is no longer breastfeeding the child. 2000 Minn. Laws Ch. 269 allows a nursing mother, upon request, to be excused from jury service if she is not employed outside of her home and if she is responsible for the daily care of the child. Miss. Code Ann. § 13-5-23(d) (2006) provides that a juror may be excused when "the potential juror is a breast-feeding mother." Neb. Rev. Stat. § 25-1601(1), (4) (2006) provides that a nursing mother shall be excused from jury service until she is no longer nursing her child by making such request to the court at the time the jury qualification form is filed with the jury commissioner and including with the request a physician's certificate in support of her request. The jury commissioner shall mail the mother's notification form to be completed and returned to the jury commissioner by the mother when she is no longer nursing the child. Okla. Stat. tit. 38, § 28(D) (2006) provides that breastfeeding mothers may request to be exempted from service as jurors. Or. Rev. Stat. §§ 10.050(4) (2006) permits a breastfeeding woman to be excused from acting as a juror, upon the approval of a written request. Va. Code Ann. § 8.01-341.1(8) (2006) provides an exemption for jury service, upon request, for "any mother who is breast-feeding a child." Some state statutes excuse or postpone jury duty for family caregivers. While they vary, some of these laws may apply to breastfeeding mothers. They are cited and summarized below. In addition to the laws which are discussed below, two other states—Colorado and Massachusetts—have "family friendly jury duty legislation" that do not appear to accommodate breastfeeding activities. Alaska Stat. § 09.20.030(a) (2007) exempts a person from service as a juror upon showing that the health or proper care of the person's family makes it necessary for the person to be excused. Fla. Stat. Ann. § 40.013(4) (2006) provides that an expectant mother or a parent who is not employed full time and who has custody of a child under six years of age may, upon request, be excused from jury service. In addition, the statute provides that a person may be excused from jury service upon a showing of hardship, extreme inconvenience, or public necessity. Ga. Code Ann. § 15-12-1(3) (2006) provides an exemption for jury duty to "any person who is the primary caregiver having active care and custody of a child under six years of age or younger...." 705 Ill. Comp. Stat. Ann. § 305/10.2(b) (2006) . A person may be excused from jury service upon showing that jury service would impose an undue hardship on account of the nature of the prospective juror's family situation. It is further provided that when an undue hardship caused by a family situation is due to the prospective juror being the primary caregiver of a child under age 12, the juror is to be excused if the jury commissioner finds that no reasonable alternative care is feasible which would not impose an undue hardship on the prospective juror. N.J. Rev. Stat. Ann. § 2B:20-10(c)(3) (2007) provides an excuse from jury service for a prospective juror having a personal obligation to care for another, including a minor child, who requires the prospective juror's personal care and attention, and no alternative care is available without severe financial hardship on the prospective juror or the person requiring care. S.C. Code Ann. § 14-07-860(B)(1) (2006) provides authority to a judge to excuse jurors for good cause if the person has legal custody and the duty of care for a child less than seven years of age. Tenn. Code Ann. § 22-1-104(b) (2006) provides an excuse from jury service upon a showing that service will constitute an undue hardship and upon making an oath that the person will, if excused, be caring for the person's child, children, grandchild or grandchildren, or ward. Tex. Code Crim. Proc. Code Ann. Art. 19.25.[356][407][395](2) (2006) provides that a person responsible for the care of a child younger than eighteen years may be excused from grand jury service. Tex. Gov ' t Code Ann. § 62.106(a)(2) (2006) provides that a person qualified to serve as a petit juror may establish an exemption from jury service if the person has legal custody of a child younger than ten years of age and the person's service on the jury requires leaving the child without adequate supervision. Va. Code Ann. § 8.01-341(8) (2006) provides for an excuse from jury duty for "a person who has legal custody of and is necessarily and personally responsible for a child or children 16 years of age or younger...." Wyo. Stat. Ann. § 1-11-10 4 (2006) provides that a person may be excused from jury duty when the care of that person's young children requires his absence. At the current time, one state's legislature is considering a bill which, if enacted, would impact breastfeeding mothers and their jury duty responsibilities. The bill is cited and summarized below. However, it should be considered, as it is early in the state legislative sessions, that additional bills may be subsequently introduced. Wy. H.B. 105 (2007) is a comprehensive legislative initiative dealing with various aspects of breastfeeding. One of the provisions would allow for breastfeeding mothers to be excused from jury duty. This section of the report deals only with state-wide court rules and federal district court rules for jury service relating to breastfeeding. It does not deal with local, county, or municipal court rules which may provide 1) a specific excuse for breastfeeding mothers; or 2) a general excuse under "family friendly" court rules. Cal. Rules of Court, Rule 859 (2006) provides for the deferral of jury service. A mother who is breastfeeding a child may request that jury service be deferred for up to one year, and may renew that request as long as she is breastfeeding. If the request is made in writing, under penalty of perjury, the jury commissioner must grant it without requiring the prospective juror to appear at court. Many of the federal district courts have made a provision in their jury plan to excuse or a defer jury duty for persons caring for a child or children under the age of ten. It appears that the rules vary among the federal district courts, including even among those located within the same state. For example, the U.S. District Court for the Central District of California has a rule concerning individual requests for excuse or deferment from jury duty. This rule provides an excuse for: Persons having active care and custody of a child or children under 14 years of age whose health and/or safety would be jeopardized by their absence for jury service; or a person who is essential to the care of an aged or infirm person. In contrast, the U.S. District Court for the Northern District of California provides an excuse upon the request of a sole caretaker of a preschool child or of an aged or disabled person, and not otherwise employed. In further contrast is the rule of the U.S. District Court for the Southern District of California, which provides an excuse for: 2) Any person having active care and custody of a child or children under 10 years of age whose health and/or safety would be jeopardized by absence of such person for jury service; or a person who is essential to the care of aged or infirm persons. These variations illustrate how different district courts in the same state handle the "family care" issue under different rules. While it appears that a breastfeeding mother might be excused from jury duty in these federal district courts, the term "breastfeeding" is not used, and the language of the rules is different. It is possible that the rules could be interpreted differently in various breastfeeding circumstances. The following chart compares the ways in which states currently deal with the issue of breastfeeding and jury duty. Some states have enacted legislation which provides a specific excuse or deferral from jury duty for a breastfeeding mother. Other states have enacted more general "family friendly" legislation that excuses a prospective juror from duty when faced with various family responsibilities. Depending upon the language of the statute and its implementation, such legislation may or may not excuse or defer breastfeeding mothers from jury duty. Legislation is currently pending in Wyoming to legislatively respond to the issue of breastfeeding and jury duty. California has a specific state-wide court rule which deals with the issue of breastfeeding mothers and jury duty. It is likely that local and state courts—where there is no uniform rule—may have varied, and not necessarily implemented consistent policies in dealing with breastfeeding mothers and jury duty responsibilities.

The increasing popularity of breastfeeding has focused attention on how the law facilitates or discourages the practice. One issue that has arisen involves breastfeeding mothers and jury duty, and whether a breastfeeding mother may receive an excuse or deferral from compulsory jury duty. At the present time there is no federal legislation on the subject, although Congress has considered and adopted other legislation concerning certain breastfeeding issues. By contrast, several states have enacted legislation to excuse or defer jury duty for breastfeeding mothers, either specifically or more generally under "family friendly" jury duty legislation. "Family friendly" jury legislation varies in scope, but it generally, though not always, is sufficiently expansive to cover breastfeeding mothers. Court rules concerning breastfeeding mothers and jury duty vary widely. California has adopted a uniform statewide rule. However, federal district courts have not adopted standard rules or practices. Likewise, state and local courts may have no specific rules, or very different rules on breastfeeding mothers and jury duty. The fact that a state, a court system, or a single court does not have a law, rule, or formally written procedure does not necessarily mean that a breastfeeding mother will be compelled to serve on a jury. It appears that a general "medical exception" from jury duty may be applicable to breastfeeding mothers in some instances, and local practice and custom may influence an excuse or deferral from jury duty. It appears that many of the decisions concerning a nursing mother's excuse or deferral from jury duty are handled on a case-by-case basis by the individual courts.

The United States has seen continued growth of electronic card payments (and a simultaneous decrease in check payments). From 2009 through 2012, debit card transactions have outpaced other payment forms. When a consumer uses a debit card in a transaction, the merchant pays a "swipe" fee, also known as the interchange fee. The interchange fee is paid to the consumer's bank that issued the debit card, covering the bank's costs to facilitate the transaction. Prior to 2010, the policy debate about interchange fees was motivated by concerns that the interchange fees received by banks were not being set by competitive market forces. A competitive market arguably would drive down swipe fees, which would benefit merchants and ultimately consumers. Alternatively, debit card issuers and networks had argued that a percentage of the interchange fees were being rebated to consumers in the form of consumer reward programs that were also beneficial to merchants. Section 1075 of the Consumer Financial Protection Act of 2010 (Title X of P.L. 111-203 , the Dodd-Frank Wall Street Reform and Consumer Protection Act), known as the Durbin Amendment, authorizes the Federal Reserve Board to mandate regulations to ensure that any interchange transaction fee received by a debit card issuer is reasonable and proportional to the cost incurred by the issuer. The Durbin Amendment allows the Federal Reserve to consider the authorization, clearance, and settlement costs of each transaction when setting the interchange fee. The Durbin Amendment allows the interchange fee to be adjusted for costs incurred by debit card issuers to prevent fraud. By statute, debit card issuers with less than $10 billion in assets are exempt from the regulation, which means that smaller financial institutions may receive a larger interchange fee than larger issuers. The Durbin Amendment also prohibits network providers (Visa, MasterCard, etc.) and debit card issuers from imposing restrictions that would override a merchant's choice of the network provider through which to route transactions. On June 29, 2011, the Federal Reserve issued a final rule implementing the Durbin Amendment by Regulation II, which includes a cap on the interchange fee for large issuers. The final rule went into effect on October 1, 2011. H.R. 10 , the Financial CHOICE Act of 2017, would repeal the Durbin Amendment. Specifically, Section 735 of the Financial CHOICE Act would repeal Section 1075 of the Consumer Financial Protection Act of 2010. On May 4, 2017, H.R. 10 was ordered to be reported by the House Financial Services Committee. This report begins with a description of the debit payments process and network pricing for the four-party system and the three-party system. It summarizes the requirements of Regulation II, which implements the Durbin Amendment. The report concludes with a discussion of some implications of Regulation II for merchants, consumers, and banks as well as with some recent observations. This section outlines the four-party and three-party network systems prior to implementation of the Durbin Amendment. The three-party system is explained for illustrative purposes, but implementation of the Durbin Amendment only applies to the four-party network where an interchange fee exists. Network providers, such as MasterCard and Visa, facilitate the interactions of four parties under a business model referred to as a "four-party system," consisting of the cardholder, the merchant, the acquirer, and the issuer. (See Figure 1 below, which illustrates the payment distribution. ) When a debit card is used in a transaction, the merchant pays a fee that is collected by the merchant's bank (the acquirer). For example, a debit cardholder makes a $100 purchase, the merchant retains $98.57 and pays $1.43 (merchant discount fee) to process the transaction. The $1.43 is distributed among the acquirer, the cardholder's bank (the issuer) that issued the debit card, and the network provider that links the acquirer and issuer. Prior to the Durbin Amendment, the network provider might retain 10 cents, the acquirer might receive 30 cents, and the issuer could be paid $1.03. The $1.03 paid to the issuer is known as the interchange reimbursement or "swipe" fee. This fee may cover some or all of the costs to process the debit card transaction (authorization, clearing, and settlement); fraud prevention and investigation; and other fees, such as customer service, billing and collections, compliance, network connectivity fees, and network servicing fees. Any fee compensation received by the network provider, the acquirer, or the issuers in excess of their respective total costs would be considered profit. Network providers enter into contractual arrangements with issuers and acquirers rather than deal directly with merchants and customers. Network providers can set the interchange fees to encourage issuers' greater issuance of payment cards, which in turn generates more transactions over their networks. Issuers may choose to rebate some of their interchange fee profits to cardholders in the form of reward points, which may entice greater debit card use. Consequently, some financial institutions may have greater ability to negotiate interchange fees with the network providers, especially if they have a large number of customers who frequently use debit cards. Merchants' billing, however, suggests that acquirers may also influence the merchant discount fees. Some merchants may be billed by their acquirers, and such invoices would include the fees payable to the both issuers and acquirers; network providers may send separate invoices for their fees. Hence, determining how much price-setting influence over merchant discount fees that is ascribed to the network provider relative to the acquirer is challenging and may vary. In addition to setting the interchange fees, merchants have historically had to abide by various association rules or contractual restraints; however, not all rules mentioned below necessarily appear in all merchant contracts. For example, no surcharge rules forbid merchants to levy surcharges when cardholders use debit cards, which prevents merchants from passing any of the merchant discount fees directly to cardholders. The honor-all-cards rules require merchants to take any cards that bear the network association's brand name, which means merchants cannot turn away credit or signature debit cards that may have higher merchant discount fees if the association's name appears on the card. Moreover, merchants are prohibited from offering discounts for the use of particular types of cards, which is known as the non-differentiation rule. Merchants are also required to accept these cards at all of their outlets, which is referred to as the all-outlets rule. Association rules prevent merchants from passing on to customers the costs to use cards, which arguably would discourage card use. The ability of merchants to pass such costs on indirectly to customers, however, may vary from product to product. There is no explicit interchange fee in the three-party system. For example, American Express model is a three-party system that consists of the cardholder, the merchant, and the network provider, which serves as both the acquirer and issuer; the three-party system is illustrated in Figure 2 below. American Express enters directly into contractual arrangements with merchants and customers; in this arrangement, American Express is the network provider, acquirer, and the issuer. American Express links directly to the merchant and the customer, meaning that there is no explicit interchange fee paid to a customer's bank. This feature limits regulators' ability to enforce the interchange fee restrictions on firms that operate under a three-party system business model. The Federal Reserve acknowledged that, for purposes of the final rule, three-party systems are not payment card networks. Hence, the Durbin Amendment does not apply to the three-party model. On June 29, 2011, the Federal Reserve issued Regulation II, a final rule, which capped the interchange fee received by large issuers (with $10 billion or more in assets) to 21 cents plus 0.05% of the transaction. The Federal Reserve also allowed for a 1 cent adjustment if the issuer implements fraud-prevention standards. Regulation II was implemented after the Federal Reserve conducted a survey in the form of public comments to obtain transaction cost information. Although some merchants argued that the Federal Reserve had set the interchange fee cap at a level higher than allowed by statue, the final rule was upheld. Regulation II does not regulate the merchant discount fee charged to the merchant by the network provider or acquirer ; it only limits the amount of the merchant discount fee that can be remitted in the form of interchange fee revenue t o covered institutions . Consequently, a two-tiered interchange fee system exists, meaning that institutions exempted from Regulation II may receive revenues consistent with interchange fees set above the cap. Some network providers did agree to implement a two-tiered interchange pricing system. The final rule also gives merchants the ability to route transactions to multiple network providers. Every issuer regardless of size is required to link with at least two unaffiliated network providers, thereby allowing merchants to choose the network provider with the lowest fees to process their debit card transactions. Mandatory compliance dates for network providers and issuers were October 1, 2011, and April 1, 2012, respectively. Economists have questioned the sustainability of a two-tiered interchange pricing system over time. The ability to charge different prices for the same service usually occurs when the supplier of a service can separate its customers into different market segments. By contrast, Regulation II separates the suppliers (issuers) of the same service into separate groups rather than the customers (merchants). Because merchants now have more choice over the processing of debit transactions, network providers may be more responsive to merchant pressures to lower merchant discount fees instead of pressures by smaller issuers to remit higher interchange fees. Consequently, the increased competition for merchant business could undermine the two-tiered interchange system over time, resulting in lower debit interchange revenues for exempt issuers. Furthermore, if interchange revenues for smaller issuers were to decline over time, the losses could be material, especially if their processing costs are higher relative to those of large issuers. Hence, declining profit margins from this line of business could possibly result in greater financial distress particularly for depository institutions that are increasingly sensitive to noninterest or fee income. Numerous pricing arrangements among thousands of exempt institutions under $10 billion and data limitations increase the difficulty to monitor whether this trend is emerging. Debit card issuers covered by Regulation II had expected to lose interchange fee income under the regulated cap, but the evidence has been uneven particularly for those institutions that process large volumes of debit card operations. Some covered institutions initially experienced declines in debit interchange revenues shortly after rule implementation, but they have since seen some gradual increase over time, which is consistent with the reported growth of debit card transactions since 2009. By contrast, some covered institutions saw an initial increase in interchange revenues but have since seen some gradual decline over time. Generally speaking, the amount of interchange revenue also reflects the amount of transactions, which depends upon economic activity. In other words, lower revenues that would have been anticipated in light of the interchange fee cap may have been offset by a rise in the quantity of debit transactions as the economy continued its recovery from the 2007-2009 recession. Hence, comparisons of the interchange revenues pre- and post-implementation of Regulation II are challenging because both the interchange fees and debit transactions likely changed simultaneously over the period. Many banks covered by the Durbin Amendment eliminated their debit card rewards programs after Regulation II's implementation; however, this response eliminates one mode for attracting (checking account) deposits to fund loans. Offering checking accounts with direct deposit, automated bill paying, and debit card services help depository institutions attract customers that are likely to use additional financial products, including loans. When customers use a variety of financial products and services, depository institutions may cross-subsidize their costs and financial risks more effectively. Hence, some financial institutions entered into partnerships with merchants sponsoring customer reward programs to help facilitate the attraction of deposits. Customers receive rewards for shopping with a particular merchant and paying for their purchases using electronic payment cards (i.e., credit, debit, or prepayment card) associated with participating banks. Merchants that were paying fees above the regu lated interchange fee had expected to benefit from the rule. Evidence from a 2015 study, however, suggests that the regulation has had a limited and unequal impact in terms of reducing merchants' costs. Because algorithms consisting of multiple factors were used to set individual merchant discount fees prior to implementation of the final rule, the magnitude of influence associated with the interchange fee cap is less likely to be uniform across the vast array of merchant discount fees. Furthermore, whether any change in consumer prices occurred as a result of merchants rebating any lower merchant discount fee savings back to their customers is likely to be indeterminate. Merchant pricing strategies are generally designed to cover production costs, achieve marketing objectives, and increase profitability. Hence, the correlation strengths among changes in interchange fees, merchant discount fees, and consumer prices are difficult to isolate and observe. Over the long run, other factors aside from the allocation of swipe fee revenues would be expected to influence the structure of the payments system. For example, technological developments over time may allow consumers to submit payments directly to other consumers or small businesses via alternative payment systems. Greater competition from nonbank institutions may result in fewer financial transactions being processed by U.S. banking institutions. Hence, interchange fee revenues generated for issuers belonging to four-party network systems are constantly susceptible to future financial market innovations.

The United States has seen continued growth of electronic card payments (and a simultaneous decrease in check payments). From 2009 through 2012, debit card transactions have outpaced other payment forms. When a consumer uses a debit card in a transaction, the merchant pays a "swipe" fee, which is also known as the interchange fee. The interchange fee is paid to the card-issuing bank (i.e., the consumer's bank that issued the debit card) as compensation for facilitating the transaction. Section 1075 of the Consumer Financial Protection Act of 2010 (or Title X of the Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111-203), also known as the Durbin Amendment, authorizes the Federal Reserve Board to prescribe regulations to ensure that the amount of any interchange transaction fee received by a debit card issuer is reasonable and proportional to the cost incurred by the issuer. The Federal Reserve may consider the authorization, clearance, and settlement costs of each transaction when it sets the interchange fee. The Durbin Amendment allows the interchange fee to be adjusted for costs incurred by debit card issuers to prevent fraud. Debit card issuers with less than $10 billion in assets are exempt by statute from the regulation, which means that smaller financial institutions may receive a larger interchange fee than larger issuers. The legislation also prohibits network providers (e.g., Visa and MasterCard) and debit card issuers from imposing restrictions that would override a merchant's choice of the network provider through which to route transactions. On June 29, 2011, the Federal Reserve issued a final rule implementing the Durbin Amendment by Regulation II, which includes a cap of 21 cents plus 0.05% of the transaction (and an additional 1 cent to account for fraud protection costs) on the interchange fee for large issuers. The rule went into effect on October 1, 2011. Merchants expected to benefit from the Durbin Amendment by having to pay a lower swipe fee. Large debit card issuers expected to lose revenue under the regulated cap. Many small debit card issuers that were exempt from the rule had also opposed the Durbin Amendment given concerns about the feasibility of a sustainable two-tiered interchange pricing system. Since implementation of the rule, merchants have seen a limited and unequal impact on the amount they pay in swipe fees. Likewise, the impact of Regulation II has been uneven for covered institutions. Institutions not covered by the Regulation II have reportedly observed minimal change in revenues generated by debit transactions. H.R. 10, the Financial CHOICE Act of 2017, would repeal the Durbin Amendment. Specifically, Section 735 of the Financial CHOICE Act would repeal Section 1075 of the Consumer Financial Protection Act of 2010. On May 4, 2017, H.R. 10 was ordered to be reported by the House Financial Services Committee.

The DRA continues the TANF block grant created in the 1996 welfare reform law through FY2010. In general, TANF funding levels, rules for use of funds, and program requirements continue unchanged through FY2010. With respect to funding, there are some exceptions: Supplemental grants paid to 17 states that have met criteria of low historic grants per poor person or high rates of population growth are continued at current levels only through FY2008. TANF bonuses totaling $300 million to states are repealed. The DRA established new project and demonstration grants for promoting healthy marriages ($100 million per year) and "responsible fatherhood" ($50 million per year). The DRA makes some significant changes to TANF work participation. These changes require most states to engage more of their caseloads in activities and/or reduce cash assistance caseloads from FY2005 levels. As originally enacted and also under DRA, TANF sets minimum work participation standards that a state must meet or be penalized by a reduction in its block grant. The standards are performance measures computed in the aggregate for each state, which require that a specified percentage of families with an adult or minor head of household receiving assistance be considered engaged in specified activities for a minimum number of hours. A state must meet two standards each year: 50% of all families with an adult recipient or minor head-of-household recipient must have a work participant; and (2) 90% of two-parent families must meet participation rules. However, the 1996 welfare reform law included a caseload reduction credit , which provided that the standards were reduced one percentage point for each 1% decline in the assistance caseload that had occurred since FY1995. States were not given credit for caseload declines that resulted from eligibility changes that had occurred since FY1995, the year before enactment of the federal welfare reform law ( P.L. 104-193 ). After the federal and state welfare reforms of the mid-1990s, many states had large declines in their cash assistance caseloads. Though the rate of caseload decline varied among the states, most states received fairly substantial caseload reduction credits which reduced their effective (after-credit) TANF work participation standards well below 50%. In FY2004, caseload reduction credits were large enough to reduce to 0% the effective (after-credit) work participation standard for 18 states. The DRA revises the caseload reduction credit, so that states will receive credit only for future caseload reductions. Effective in FY2007, states will only receive credit for caseload reductions that occur from FY2005 forward. The FY2007 credit will be based on caseload declines (if any) that occur from FY2005 to FY2006; the FY2008 credit will be based on caseload declines that occur from FY2005 to FY2007 and so on. As under prior law, states are not given credit for caseload declines that occur because of eligibility changes that occurred from the base year for measuring caseload changes; the base year will be FY2005 under the DRA. The TANF program was created in 1996 by consolidating three programs that provided matching grants to states, with the federal government funding approximately 55% of expenditures made in these predecessor programs. TANF requires states to meet a maintenance of effort (MOE) requirement, which is to spend, from their own funds, at least 75% of what they had spent in FY1994. State spending to meet the MOE need not be in the TANF program, but must be for needy families with children and for the same types of activities allowed under state TANF programs. Under the 1996 law, most TANF requirements, including the work participation standards, did not apply to families receiving assistance under separate state programs (SSPs): programs with expenditures countable toward the MOE but designated by the states as outside the TANF program. States used SSPs to, among other things, assist two-parent families, which freed them from the 90% standard applicable to that part of the caseload; operate "Parents as Scholars" programs for recipients attending college; and assist special populations such as families with a disabled member, permitting them to be exempted from work requirements without negatively affecting participation rates. The DRA requires that states count families in SSPs in determining their work participation rates. The major impact of this change is that states will have to meet a 90% standard for the two-parent portion of its caseload. This change will also subject special populations to the TANF work participation standards and, together with the HHS regulations defining TANF work activities, affect states' ability to allow recipients to attend college without negatively affecting work participation rates. Though the 1996 welfare reform law established TANF participation standards, minimum hours requirements, and a list of 12 categories of activities that count toward meeting the standards, much of the detail in operating and enforcing these standards was left to the states. The DRA required HHS to issue regulations to "ensure consistent measurement of work participation rates" by further defining TANF work activities beyond the current statutory list; requiring uniform methods for reporting hours of work; and determining the circumstances in which parents must be included in the work participation rate calculation. The HHS regulations were issued in interim, final form on June 29, 2006. Table 1 , at the end of this report, shows the specific work activities that may be included in each of the 12 federal statutory categories, as defined by HHS. These definitions prohibit states from counting participation in a four-year college degree program as vocational educational training. They also provide that activities such as substance abuse and mental health counseling may be counted as a "job readiness activity," countable together with job search for up to six weeks (12 weeks under some circumstances) in a fiscal year. Additionally, the HHS regulations also include requirements that activities be "supervised," many on a daily basis. The DRA requires states to have procedures to verify recipients' work participation, which identify who is subject to or excluded from work standards, how recipients' activities represent countable TANF work activities, and how reported hours of work are verified. HHS regulations require states to submit a description of these procedures in a state work verification plan. Preliminary work verification plans were due to HHS on September 30, 2006; final plans are due on September 30, 2007. Under the 1996 welfare reform law, all child-only TANF families (families where there are no adult recipients) were excluded from the work participation calculation. The DRA required that the HHS regulations specify the types of families with parent caretakers that should be included in or excluded from the participation rate. HHS regulations specifically exclude from the participation rate immigrant parents who are ineligible for assistance (with citizen children eligible for assistance). It allows states to make a case-by-case determination of whether to include in the participation rate a parent receiving Supplemental Security Income (SSI). Other nonrecipient parents must be included in the participation rate, particularly affecting parents removed from the assistance unit because of a time limit or sanction. These regulations do not affect the status of non-recipient, nonparent caretakers, such as grandparents, aunts, and uncles caring for children, who are exempt from the work participation standards. The regulations also allow states to exclude parents caring for a disabled family member from the participation rate calculation. From FY2002 through FY2005, mandatory child care funding for the Child Care and Development Block Grant has been set at $2.717 billion per year. The DRA increases mandatory child care funding to $2.917 billion per year for FY2006 through FY2010, an increase from current levels of $200 million per year or $1 billion over five years. The DRA establishes new categorical grants within TANF for healthy marriage promotion and responsible fatherhood initiatives. As originally enacted and continuing under DRA, TANF law allows states to use block grant and MOE funds for activities to further any TANF purpose, including promotion of the formation and maintenance of two-parent families. However, state expenditures in this category have generally been small. The healthy marriage promotion initiative is funded at approximately $100 million per year, to be spent through grants awarded by the Secretary of HHS to support research and demonstration projects by public or private entities; and technical assistance provided to states, Indian tribes and tribal organizations, and other entities. The activities supported by the healthy marriage promotion initiatives are programs to promote marriage to the general population, such as public advertising campaigns on the value of marriage and education in high schools on the value of marriage; education on "social skills" (e.g. marriage education, marriage skills, conflict resolution, and relationship skills) for engaged couples, those interested in marriage, or married couples; and programs that reduce the financial disincentive to marry, if combined with educational or other marriage promotion activities. The DRA requires applicants for marriage promotion grants to ensure that participation in such activities is voluntary and that domestic violence concerns be addressed, including through consultation with experts on domestic violence. Additionally, the DRA makes available up to $50 million per year for responsible fatherhood initiatives. These initiatives will be funded through competitive grants made by HHS to states, territories, Indian tribes and tribal organizations, and public and nonprofit community organizations (including religious organizations). Responsible fatherhood initiatives are defined as including activities to promote marriage; teach parenting skills through counseling, mentoring, mediation, and dissemination of information; support employment and job training services, and develop and promote media campaigns and a national clearinghouse focused on responsible fatherhood. (See CRS Report RL31025, Fatherhood Initiatives: Connecting Fathers to Their Children , by [author name scrubbed] for more on these initiatives.)

The Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ) includes a scaled-back version of welfare reauthorization. More extensive versions were considered during the preceding four-year debate. (See CRS Report RL33418, Welfare Reauthorization in the 109 th Congress: An Overview , by [author name scrubbed], [author name scrubbed], and [author name scrubbed] for details.) The DRA extends funding at current levels for basic state grants under the Temporary Assistance for Needy Families (TANF) block grant through Fiscal Year (FY) 2010. It requires most states to either raise participation in work activities among families receiving cash welfare from TANF or further reduce the cash assistance rolls. DRA also required the Department of Health and Human Services (HHS) to issue regulations to define activities countable toward work participation standards and set rules for state enforcement and verification of participation in activities. These regulation were published on June 29, 2006. The DRA also extends Child Care and Development Fund (CCDF) mandatory funding through FY2010, increasing mandatory child care funding by $200 million per year from previous levels (a total increase of $1 billion over five years). The DRA further establishes $100 million per year in TANF research and technical assistance funds for "healthy marriage promotion" initiatives and $50 million per year for "responsible fatherhood initiatives." This report will not be updated.

On April 6, 1789, James Mathers was elected as Senate Doorkeeper and became the chamber's first elected officer. On February 5, 1798, Mathers's duties were expanded when he was "invested with the authority of Sergeant-at-Arms, to hold said office during the pleasure of the Senate, whose duty it shall be to execute the commands of the Senate, from time to time, and all such process as shall be directed to him by the President of the Senate." Initially, the Senate met in closed-door sessions and it was the responsibility of the Doorkeeper to ensure that a quorum of Senators was present and that other interested parties were kept out of the chamber. This officer is hereafter referred to as Sergeant at Arms. Today, the Sergeant at Arms performs the original duties of the doorkeeper and is responsible for the protection of the Senate wing of the Capitol, the Senate office buildings, and the Senate chamber. In addition, the Sergeant at Arms serves as the Senate's chief protocol officer and has administrative responsibility for Senate offices and other Senate services, including the Senate beauty and barber shops, the Senate garage, the Senate post office, the Senate recording studio, and the Senate photographic studio. The Sergeant at Arms is elected by the Senate and serves "from Congress to Congress until a successor is chosen." The duties and responsibilities of the Sergeant at Arms and Doorkeeper have developed over time through several sources. These sources include statutes, Senate rules and orders, and customs and precedents. Statues, rules and orders, and other materials may be found in the United States Code , which is the codification, by subject matter, of the general and permanent laws of the United States; the United States Statutes at Large , which is the collection of all laws and concurrent resolutions enacted during each session of Congress, published in the order they were enacted into law; the Senate Manual , which contains the texts of the (1) Standing Rules of the Senate, (2) Standing Orders of the Senate, (3) rules for the Regulation of the Senate Wing of the United States Capitol, and (4) excerpts from law applicable to the Senate; and custom and precedent. Additionally, many of the duties of the Sergeant at Arms are defined by the Senate Committee on Appropriations and the Senate Committee on Rules and Administration. As a consequence of its jurisdiction over Senate administrative matters, the Senate Committee on Rules and Administration oversees operations of the Sergeant at Arms. The duties and responsibilities of Sergeant at Arms can be divided into three broad categories: law enforcement and security, protocol, and administration. Each category reflects the basic responsibility to ensure safe and effective operation of the Senate. As the Senate's chief law enforcement officer, the Sergeant at Arms is responsible for security in the Senate wing of the Capitol, the Senate office buildings, adjacent grounds, and for the security of Senators. At the request of a majority of Senators present on the floor, the Sergeant at Arms also has the authority to compel the attendance of absent Senators. The Sergeant at Arms enforces rules made by the Senate Committee on Rules and Administration and serves as a member of the Capitol Police Board, which is authorized by law to design, install, and maintain security systems for the Capitol and its grounds. Together with the Secretary of the Senate, the Sergeant at Arms develops and maintains a continuity-of-operations plan that enables the Senate to conduct business and access data at offsite locations, and oversees the office of security and emergency preparedness, which serves as the Senate's emergency planning and response team. As the chief of protocol of the Senate, the Sergeant at Arms performs ceremonial functions that exist through custom and precedent. In carrying out these duties, the Sergeant at Arms greets and escorts the U.S. President, heads of states, and other official Senate guests while attending functions in the Capitol; leads Senators from the Senate side of the Capitol to the House chamber for joint sessions of Congress, to their places on the inaugural platform, and to any other place the Senate travels as a body; and assists in arrangements for inaugurations and the planning of funerals of Senators who die while in office. By custom, the Sergeant at Arms is custodian of the Senate gavel. The Sergeant at Arms is responsible for protocol surrounding the death of a Senator. These responsibilities include the enforcement of a provision in the Standing Orders of the Senate which prohibits flowers in the Senate chamber unless an order is given waiving the prohibition for a display of flowers on the desk of a deceased Senator on the day of eulogies. The Sergeant at Arms also ascertains that the construction of a monument to a deceased Senator, who is to be buried in the Congressional Cemetery in Washington, D.C., conforms to specific construction materials and procedures. As an administrative officer of the Senate, the Sergeant at Arms is responsible for specified services to Senators' offices, including the following: acquiring home state office space, including mobile office space; purchasing office equipment and maintaining records of equipment use; operating computer support services; managing telecommunications services; establishing prices of items available for use in Senate offices; and administering orientation seminars for Senators, Senate officials, or members of the staffs of Senators or Senate officials and other similar meetings. The administrative duties of the Sergeant at Arms also include services to the Senate as a whole, including the following: Senate service department, which is responsible for production of newsletters and other Senate mailings, purchase and maintenance of equipment, storage of Senate publications, and micrographics services; Senate computer center, which oversees Senate computer operations; Senate post office, and recording and photographic studios; Senate barber and beauty shops; custodial services, office furnishings and equipment, and automobiles; Senate garage and other parking facilities; appointment desk to greet visitors on official business; Senate health promotion office; Senate placement office; Senate telecommunications, the Capitol telephone exchange, and the Senate telephone directory; Capitol Guide Service and other visitor services including assistance in Braille, sign language interpretation, and telecommunications devices for the deaf; Senate page program and assignment of duties to messengers; oversight of the doorkeepers; issuance of identification cards to Senate employees; disposal of surplus equipment; and education and training programs for Senate staff as needed. Since 1789, 38 men and women have been elected Sergeant at Arms of the Senate. Table A-1 lists those individuals, the Congress, when their term began, and when their term concluded.

The Sergeant at Arms of the Senate is an officer of the Senate with protection, security, decorum, protocol, and administrative responsibilities. The Sergeant at Arms is elected by the membership of the Senate. As the Senate's chief law enforcement officer, the Sergeant at Arms is responsible for security in the Senate wing of the Capitol, the Senate office buildings, and on adjacent grounds. As the chief of protocol of the Senate, the Sergeant at Arms performs ceremonial functions that fall within his jurisdiction through custom and precedent. In carrying out these duties, the Sergeant at Arms greets and escorts the U.S. President, heads of state, and other official Senate guests while attending functions in the Capitol; leads Senators from the Senate side of the Capitol to the House chamber for joint sessions of Congress, to their places on the inaugural platform, and to any other place the Senate goes as a body; and assists in arrangements for inaugurations and the planning of funerals of Senators who die while in office. By custom, the Sergeant at Arms is custodian of the Senate gavel. As an administrative official of the Senate, the Sergeant at Arms is responsible for specified services to Senators' offices. In the administration of Senators' offices the Sergeant at Arms is responsible for securing home state office space, including mobile home state office space; purchasing office equipment; managing telecommunications services; establishing prices of items available for use in Senate offices; reimbursing Senators for items purchased through their offices; maintaining records of equipment used in offices; and administering orientation seminars, among others.

Earlier federal law, the Jacob Wetterling Act, encouraged the states to establish and maintain a registration system. Each of them has done so. The Walsh Act preserves the basis structure of the earlier law, expands upon it, and makes more specific matters that were previously left to individual choice. For purposes of compliance by the states and other jurisdictions the prior law remains in effect until the later of three years after enactment or one year after the necessary software for the new uniform, online system has become available. For registrants, however, the new requirements became effective upon enactment. The class of offenders required to register has been expanded under the act. The group includes anyone found in the United States and previously convicted of a federal, state, local, tribal, military, or foreign qualifying offense, although strictly speaking violations of the laws of the District of Columbia or U.S. territories are not specifically mentioned as qualifying offenses. Offenders must register in each state or territory in which they live, work, or attend school. There are five classes of qualifying offenses: crimes identified as one of the specific offenses against a minor; crimes in which some sexual act or sexual conduct is an element; designated federal sex offenses; specified military offenses; and attempts or conspiracy to commit any offense in the other four classes of qualifying offenses. The inventory of qualifying offenses is subject to exception. Conviction for an otherwise qualifying foreign offense does not necessitate registration if it was not secured in a manner which satisfies minimal due process requirements under guidelines or regulations promulgated by the Attorney General. Nor does conviction of a consensual sex offense require registration if the victim is an adult not in the custody of the offender, or if the victim is 13 years of age or older and the offender no more than four years older. Finally, juvenile delinquency adjudications do not constitute qualifying convictions unless the offender is 14 years of age or older at the time of the misconduct and the misconduct adjudicated is comparable to, or more severe than, aggravated sexual assault or attempt or conspiracy to commit such an offense. There are no specific limitations on registration based on convictions that have been overturned, sealed or expunged under state or foreign law or on convictions for which the offender has been pardoned. There are no specific limitations on requirements that flow from past convictions regardless of their vintage. Instead, the Attorney General is authorized to promulgate rules of applicability. Those required to register must provide their name, social security number, the name and address of their employers, the name and address of places where they attend school, and the license plate numbers and descriptions of vehicles they own or operate. The jurisdiction of registration must also include a physical description and current photograph of the registrant and a copy of his driver's license or government issued identification card; a set of fingerprints, palm prints, and a DNA sample; the text of the law under which he was convicted; a criminal record that includes the dates of any arrests and convictions, any outstanding warrants, as well as parole, probation, supervisory release, and registration status; and any other information required by the Attorney General. The regularity with which registrants must appear for new photographs and to verify their registration information depends upon their status. It is at least every three months for Tier III offenders. Tier II offenders must reappear no less frequently than every six months. Tier I offenders must reappear for new photographs and verification at least once a year. Tier I offenders must maintain their registration for 15 years, which can be reduced to 10 years. Tier II offenders must maintain their registration for 25 years. Tier III offenders must maintain their registration for life, which can be reduced to 25 years. Jurisdictions that fail to comply after the act becomes fully effective run the risk of having their Byrne program funds reduced by 10%. The act makes failure to register a federal crime for offenders convicted of a federal qualifying offense, or who travel in interstate commerce, or who travel in Indian country, or who live in Indian country. Violations are punishable by imprisonment for not more than 10 years and by an addition penalty to be served consecutively of not less than five nor more than 30 years if the offender commits a crime of violence. Moreover, violation exposes an offenders to term of supervised release for any term of years not less than five years or for life. If the offender is a foreign national ("an alien"), he becomes deportable upon conviction. The Adam Walsh Child Protection and Safety Act is focused, as its name implies, upon child protection and safety. Its efforts involve the creation of new federal crimes, the enhancement of the penalties for preexisting federal crimes, and the amendment of federal criminal procedure, among other things. Many of these efforts are child-specific; some are more general. The new federal crimes include the following. Murder in the course of a wider range of federal sex offenses. Internet date rape drug trafficking. Kidnaping that involves the use of interstate facilities. Child abuse in Indian country. Production of obscene material. Obscenity or pornography in Internet source codes. Child exploitation enterprises. The amendments to federal criminal procedure are a bit more numerous and somewhat more likely to implicate crimes in addition to those committed against children. Among their number are: Random searches of sex offender registrants as a condition of probation or supervised release. Expanded DNA collection from those facing federal charges or convicted of any federal offense. Elimination of the statute of limitations for various sexual crimes or crimes committed against a child. Participation of state crime victims in federal habeas proceedings. Study of the elimination of marital privileges in abuse cases. Preventive detention in cases involving a minor victim or a firearm. Compensation for guardians ad litem. Government control of evidence in pornography cases. Forfeiture procedures in obscenity, exploitation and pornography cases. Murder during course of various sex offenses as a felony murder predicate. Civil commitment procedure for federal sex offenders. The act's penalty enhancements are the most extensive of its amendments to federal criminal law and procedure. It establishes new sentencing ranges for the federal crimes of murder, kidnaping, maiming, or aggravated assault when the victim is a child. In the case of murder, the penalty is imprisonment for any term of years not less than 30 years, imprisonment for life, or death; in the case of kidnaping or maiming, imprisonment for life or any term of years not less than 25 years; and in the case of aggravated assault, imprisonment for life or any term of years not less than 10 years. While the new minimums terms of imprisonment must yield to any otherwise applicable higher mandatory minimum, the new maximum penalties trump any otherwise applicable maximum. The provision has the effect of making capital offenses out of several federal murder statutes that heretofore were punishable only by a term of imprisonment when the victim is a child and when the misconduct involves the intentional killing of the victim or a reckless, fatal act of violence. The act increases penalties for several other child offenses including: The act establishes, reinforces, and revives several grant programs devoted to child and community safety, including the following. Big Brothers Big Sisters of America (authorizing appropriations totaling $58.5 million through FY2011). National Police Athletic League (authorizing appropriations totaling $64 million through FY2010). State, local and tribal governments in order to outfit sex offenders with electronic monitoring devices (authorizing appropriations totaling $15 million through FY2009). Public and private entities that assist in treatment of juvenile sex offenders or that assist the states in their enforcement of sex offender registration requirements (authorizing appropriations totaling $30 million through FY2009). Facilitating the prosecution of cases cleared as a consequence of the DNA backlog elimination (authorizing necessary appropriations through FY2011). Law enforcement agencies to combat sexual abuse of children (authorizing necessary appropriations through FY2009). A private nonprofit entity for a program of crime prevention media campaign (authorizing appropriations totaling $34 million through FY2010). State, local and tribal government programs for the voluntary fingerprinting of children (authorizing appropriations totaling $20 million through FY2011). The Rape, Abuse & Incest National Network (RAINN) to operate a sexual assault hotline, conduct media campaigns, and provide technical assistance for law enforcement (authorizing appropriations totaling $12 million through FY2010). To enable state, local and tribal entities to verify the addresses of registered sex offenders (authorizing necessary appropriations through FY2009). The act includes a wide assortment of other provisions designed to prevent, prosecute or punish the victimization of children. Among them are sections that broaden access to federal criminal records information systems, create a national child abuse registry, expand recordkeeping requirements for those in the business of producing sexually explicit material, immunize officials from civil liability for activities involving sexual offender registration, and authorize and direct the Department of Justice to establish and maintain a number of child protective activities.

The Adam Walsh Child Protection and Safety Act, P.L. 109-248 ( H.R. 4472 ), serves four purposes. It reformulates the federal standards for sex offender registration in state, territorial and tribal sexual offender registries, and does so in a manner designed to make the system more uniform, more inclusive, more informative and more readily available to the public online. It amends federal criminal law and procedure, featuring a federal procedure for the civil commitment of sex offenders, random search authority over sex offenders on probation or supervised release, a number of new federal crimes, and sentencing enhancements for existing federal offenses. It creates, amends, or revives several grant programs designed to reinforce private, state, local, tribal and territorial prevention; law enforcement; and treatment efforts in the case of crimes committed against children. It calls for a variety of administrative or regulatory initiatives in the interest of child safety, such as the creation of the National Child Abuse Registry. This is an abridged version of CRS Report RL33967, Adam Walsh Child Protection and Safety Act: A Legal Analysis , by [author name scrubbed], without the footnotes and citations to authority found in the longer report.

PPACA required the establishment of individual health insurance exchanges, as well as small business exchanges, within each state by 2014. PPACA does not require issuers to offer plans through these exchanges, but instead generally relies on market incentives to encourage issuer participation. Issuers seeking to offer a health plan in an individual exchange or small business exchange must first have that plan approved by the exchange in the state. We previously reported that most of the largest issuers holding the majority of the market in the 2012 individual and small-group markets participated in the 2014 exchanges, although most of the numerous smaller issuers in those markets did not. In addition, some issuers that participated in the 2014 individual or small business exchanges had not participated in that respective market in 2012. While some of these issuers had previously provided coverage in other markets in 2012, other issuers were newly established through the federally supported Consumer Oriented and Operated Plans (CO-OP) program. As I mentioned above, PPACA also changed, as of 2014, how insurers determine health insurance premiums and how consumers shop for health insurance plans. As part of this, PPACA required that health plans be marketed based on information that helps consumers compare the relative value of each plan. Specifically, plans must be marketed by specific categories—including four “metal” tiers of coverage (bronze, silver, gold, and platinum)—that reflect out-of-pocket costs that may be incurred by an enrollee. These changes occurred at the same time that PPACA required the establishment of health insurance exchanges for each state, through which consumers could compare and select from among QHPs. Finally, beginning January 1, 2014, premium tax credits and cost-sharing subsidies became available under PPACA for qualified individuals who purchased QHPs sold through an exchange. In 2016, we examined enrollment in private health-insurance plans in the years leading up to and through 2014, the first year of the exchanges established by PPACA, and found that in each year, markets were concentrated among a small number of issuers in most states. On average, in each state, 11 or more issuers participated in each of three types of markets—individual, small group, and large group—from 2011 through 2014. However, in most states, the 3 largest issuers in each market had at least an 80 percent share of the market during the period. (See fig. 1.) Not all issuers in the individual and small group markets participated in the exchanges in 2014, and several exchanges had fewer than 3 participating issuers. Enrollment through the exchanges was generally more concentrated among a few issuers than was true for the individual and small group markets overall in 2014. For our examination of issuer participation in the first year of the exchanges, we reported that fewer issuers participated in most state health insurance markets in 2014 compared to 2013, though exiting issuers generally had small market shares in that prior year. Specifically, we found that from 2013 to 2014, the number of issuers participating in individual markets decreased in 46 states, while fewer states’ small-group and large-group markets had decreased participation (28 and 22 states, respectively). (See fig. 2.) However, across the three types of markets, those issuers exiting each state market before 2014 generally had less than 1 percent of the market in the prior year. There were also issuers that newly entered state markets in 2014. Their market shares in 2014 varied across the three types of markets, with some newly entering issuers in the individual market capturing a market share of over 10 percent. Most newly entering issuers in 2014 participated in the exchanges and they generally had a larger share of the enrollment sold through the exchanges than through the overall markets. In addition, some newly entering issuers captured a majority of their exchange market, with CO-OPs having a higher proportion. Since 2014, there have been additional changes to the number of issuers entering and exiting the individual and small group markets. For example, most of the CO-OPs that offered coverage in the exchanges in 2014 have since discontinued offering coverage. In addition, in an analysis of data from exchanges in states that used the FFE and state-based exchanges, where available, HHS has since reported that the number of issuers offering health plans through the exchanges decreased from 2016 to 2017, reflecting multi-state withdrawals by a few large insurers. In 2015, we reported that individual market consumers generally had access to more health plans in 2015—a year after the initial implementation of key PPACA provisions—than in 2014. Consumers in most of the counties analyzed in the 28 states for which we had sufficiently reliable data for plans offered either on or off an exchange had six or more plans from which to choose in three of the four health plan metal tiers (bronze, silver, and gold) in both 2014 and 2015. The percentage of counties with six or more plans in those metal tiers increased from 2014 to 2015. Specifically, in 2014, six or more bronze-, silver-, and gold-tier plans were available to consumers in the individual market (either on or off an exchange) in at least 95 percent of the 1,886 counties and were available on an exchange in at least 59 percent of the 2,613 of the counties for which we had sufficiently reliable data for plans offered on an exchange. In 2015, the percentage of these same counties with six or more bronze-, silver-, and gold-tier plans available in the individual market increased to 100 percent, and at least 71 percent had six or more of these plans available on an exchange. (See table 1.) In our 2015 report, we also found that premiums varied among states and counties, the lowest cost plans were typically available on an exchange, and in most states premiums increased from 2014 to 2015. Specifically, we found that: The range of premiums available to consumers in 2014 and 2015 varied among the states and counties we analyzed. For example, in Arizona, the premium for the lowest-cost silver plan option for a 30- year-old in 2015 was $147 per month, but in Maine, the lowest-cost silver plan for a 30-year-old in 2015 was $237. We also found that the range of premiums—from the lowest to highest cost—differed considerably by state. For example, in Rhode Island, 2015 premiums for silver plans available to a 30-year-old either on or off an exchange ranged from a low of $217 per month to a high of $285 per month, a difference of 32 percent. By contrast, in Arizona, 2015 premiums for these plans ranged from a low of $147 per month to a high of $545 per month, a difference of 270 percent. The lowest cost plans were typically available on an exchange. Specifically, in both years, taking into account plans available through an exchange and those only available off an exchange, the lowest cost plans were available through an exchange in most of the 1,886 counties we analyzed in the 28 states. In most states, the costs for the minimum and median premiums for silver plans increased from 2014 to 2015. For example, in the 28 states included in our analysis, from 2014 to 2015 the minimum premiums for silver plans available to a 30-year-old increased in 18 states, decreased in 9 states, and remained unchanged in 1 state. At the county level, we found that premiums for the lowest cost silver option available for a 30-year-old increased by 5 percent or more in 51 percent of the counties in the 28 states. While our 2015 report examining the numbers of health plans and ranges of health plan premiums available to individuals in 2014 and 2015 was our most recent examination of these two issues, HHS has examined more recent data. For example, in 2016, HHS reported that despite a decline in the number of issuers participating in the FFE from 2016 to 2017, all consumers were able to choose among various plan options for 2017, although the options for about 21 percent of consumers were among choices of plans offered by a single insurer. HHS also conducted analyses focused on the premiums for the second-lowest cost silver plan in states that used the FFE and estimated that average premiums for these plans increased more between 2016 and 2017 (25 percent) than in previous years (2 percent between 2014 and 2015, and 7 percent between 2015 and 2016). In 2016, we reported that most enrollees who obtained their coverage through the health insurance exchanges were satisfied overall with their QHP during the first few years that exchanges operated, according to national surveys of QHP enrollees. For example, most QHP enrollees who obtained their coverage through the exchanges reported overall satisfaction with their plans in 2014 through 2016, according to three national surveys that asked this question. One survey found that most 2015 enrollees re-enrolled in 2016 with the same insurer, and often with the same plan offered by that insurer, and another survey reported that most re-enrollees expressed satisfaction with their QHP. The surveys reported that QHP enrollees' satisfaction with their plans was either somewhat lower than, or was similar to, that of those enrolled in employer-sponsored health insurance in 2015 and 2016. To varying degrees, QHP enrollees expressed satisfaction with specific aspects of their plan, including their coverage and choice of providers, and with plan affordability. We also interviewed stakeholders—including experts, state departments of insurance, and others—and reviewed literature for our 2016 report. These interviews and the literature revealed some concerns about QHP enrollee experiences that were similar to longstanding concerns in the private health insurance market. For example, according to these experts, some enrollees found it too expensive to pay for their out-of-pocket expenses before reaching their deductibles and have reported concerns about affording care or have been deterred from seeking care. Some enrollees have also faced difficulties understanding their QHP's coverage terminology and others have faced problems accessing care after enrollment, according to stakeholders and literature we reviewed. Chairman Jordan, Ranking Member Krishnamoorthi, and Members of the Subcommittee, this concludes my statement. I look forward to answering any questions that you may have. For questions about this statement, please contact John E. Dicken at (202) 512-7114 or dickenj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this statement include John E. Dicken, Director; Gerardine Brennan and William Hadley, Assistant Directors; and Kristen J. Anderson, LaKendra Beard, Sandra George, and Laurie Pachter. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

PPACA contained provisions, many of which took effect in 2014, that could affect how issuers determine health insurance coverage and premiums and how they market their plans. For example, PPACA prohibits issuers from denying coverage or varying premiums based on consumer health status or gender. PPACA also requires health plans to generally be marketed based on metal tiers (bronze, silver, gold, and platinum), which allows consumers to compare the relative value of each plan. It also required the establishment of health insurance exchanges in each state, through which consumers can compare and select from among participating health plans. This testimony describes (1) private health-insurance market concentration and issuer participation from 2011 through 2014, the year by which key PPACA provisions took effect, (2) health plans and premiums available to individuals in 2014 and 2015, and (3) the experience of enrollees that obtained coverage through the exchanges from 2014 through 2016. It is based on three GAO reports issued in 2015 and 2016. For these reports, GAO examined data from the Centers for Medicare & Medicaid Services (CMS); reviewed published research; and interviewed stakeholders, including experts and officials from CMS and five states—Colorado, Indiana, Montana, North Carolina, and Vermont—that varied in geography and whether the state or CMS offered the exchange. GAO issued three reports in 2015 and 2016 on the early impact of the Patient Protection and Affordable Care Act (PPACA) on private health insurance markets. Market Concentration In a 2016 report, GAO examined enrollment in private health-insurance plans in the years leading up to and through 2014, the first year of the exchanges established by PPACA, and found that in all years analyzed, markets were concentrated among a small number of issuers in most states. Beginning in 2014, enrollment in PPACA exchange plans was generally more concentrated among a few issuers than was true for the overall markets. Plan Availability and Premiums In a 2015 report, GAO examined the availability of health plans for individual market consumers and found that they generally had access to more health plans in 2015 than in 2014. In both years, most consumers in 28 states for which GAO had sufficiently reliable data had 6 or more plans from which to choose in three of the four health plan metal tiers (bronze, silver, and gold). The range of premiums available to consumers varied considerably by state, and in most states the costs for the minimum and median premiums for silver plans increased from 2014 to 2015. In both years, the lowest cost plans were typically available on an exchange. More recent analyses by the Department of Health and Human Services found that in 2017 all consumers continued to have multiple plan options, and that premiums for exchange plans increased more in 2017 compared to the annual increases for these plans since 2014. Enrollee Experiences In a 2016 report, GAO examined national survey data to examine satisfaction of exchange enrollees. GAO found that, from 2014 through 2016, most enrollees who obtained their coverage through an exchange reported being satisfied overall with their plans. In 2015 and 2016, the satisfaction that exchange enrollees reported with their plans was either somewhat lower than or similar to that of enrollees in employer-sponsored plans. Exchange enrollees reported varying degrees of satisfaction with specific aspects of their plans, including coverage and plan affordability. Stakeholders GAO interviewed and literature GAO reviewed revealed some concerns about exchange enrollee experiences that were generally consistent with longstanding concerns in the private health insurance market—including concerns about affordability of out-of-pocket expenses and difficulties understanding coverage terminology.

Companies holding licenses issued by the Federal Communications Commission (FCC or Commission) are in a unique position when they seek to combine. In the United States, when most corporations plan to merge, the proposal is reviewed by only one of two federal agencies, the Department of Justice (DOJ) or the Federal Trade Commission (FTC) (which agency reviews the merger proposal depends on the outcome of a process known as "clearance"). Companies holding FCC licenses, on the other hand, must obtain approval from two federal agencies in order to consummate a merger: the DOJ and the FCC. Though both agencies analyze the potential effects on competition a proposed merger may have, their processes differ, sometimes substantially. This report will focus on the FCC's authority to approve mergers and its process for reviewing these proposed transactions. The Commission has authority under Sections 7 and 11 of the Clayton Act to review the proposed mergers of common carriers. Specifically, the Commission may disapprove proposed mergers of "common carriers engaged in wire or radio communication or radio transmission of energy" where "in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such acquisition may be substantially to lessen competition, or to tend to create a monopoly." The Commission also finds authority to review mergers through its power to approve or deny the transfer of the licenses it issues under the Communications Act. Sections 214(a) and 310(d) of the Communications Act require the Commission to deny the transfer of licenses if the Commission determines that the transfer is not in "the present or future public convenience and necessity" under §214(a) or is not in the "public interest, convenience and necessity" under §310(d). This standard is widely referred to as the "public interest" standard. Although the Commission has explicit authority under the Clayton Act to review the proposed mergers of certain common carriers, it does not seem to have ever utilized that authority. The Commission most often proceeds solely pursuant to the Communications Act, because that authority "necessarily subsumes and extends beyond the traditional parameters of review under the antitrust laws." Indeed, courts have "insisted that the agencies [given licensing and regulatory authority over industry] consider antitrust policy as an important part of their public interest calculus," though they are not bound by the dictates of antitrust laws. Not only must the Commission consider competitive effects in its public interest calculus, but the threshold required for a transaction to be approved is higher under the public interest standard than under traditional antitrust laws. Proposed mergers that are reviewed under the Communications Act are held to a higher standard when examining their potential competitive effects than the same proposed transaction would be under the antitrust laws. Under the Clayton Act, if the reviewing agency decides not to approve a proposed merger, the agency must either reach a remedial agreement with the parties or file suit to block the merger in federal court where the agency will bear the burden of persuading the court that the proposed merger will have substantial anticompetitive effects. Not only must the government prove that the merger will decrease competition as compared to the current market, but the government must prove that the proposed merger will substantially decrease competition. This standard seems to indicate that proposed mergers that will be competitively neutral (preserve the current level of competition) would not violate the Clayton Act. In contrast, under the license transfer provisions of the Communications Act, the parties proposing to merge (as opposed to the reviewing agency) bear the burden of persuading the Commission that the merger would enhance (rather than merely preserve) competition. This standard that suggests a competitively neutral merger (which likely would be approved under the Clayton Act) could be denied by the Commission when acting under its Communications Act authority. The Commission reasons, therefore, that a review pursuant to the Communications Act's public interest standard renders the exercise of the Commission's Clayton Act authority unnecessary. When attempting to receive approval for the transfer of relevant licenses in the context of a merger, the merging companies must submit an application for the transfer of all relevant licenses and certifications to the Commission. The Commission, after receiving input from the public, then reviews the proposed transfer to determine whether it will serve the "public interest, convenience and necessity" as required by the Communications Act. The Commission is not required to complete this review in any set period of time, but has created an "informal timeline" of 180 days for consideration of license transfers. The amount of time required to analyze license transfers is dependent upon the complexity of the proposed transaction and the intricacy of the public interest analysis it may require, and the 180-day goal is not always met. The public interest standard of the Communications Act generally is considered to be an amorphous standard, and, as noted above, is broader in scope than traditional antitrust standards. The Supreme Court has stated that the public interest standard "no doubt leaves wide discretion and calls for imaginative interpretation." The Commission, therefore, has found that the public interest standard "necessarily encompasses the broad aims of the Communications Act." Factors considered to be in the public interest may include, among other things, "a deeply rooted preference for preserving and enhancing competition in relevant markets, accelerating private sector deployment of advanced services, promoting a diversity of license holdings, and generally managing the spectrum in the public interest." The Commission also may consider whether the proposed transaction will affect the quality of communications services or will result in the provision of new or additional services to consumers. Relevant to this analysis are technological and market changes, and the nature, complexity, and speed of change of the communications industry. For each proposed license transfer, the Commission's analysis of the potential harmful competitive effects of a proposed merger largely tracks the analysis presented in the DOJ and FTC Merger Guidelines. The Commission first defines the relevant product and geographic markets. After defining the markets, the participants must be defined. The Commission then analyzes the potential horizontal competitive effects within the markets, as well as the efficiencies that may be created by the proposed combination. The agency does the same for the vertical competitive effects and efficiencies. In this portion of the analysis, the Commission generally examines whether the merger will concentrate power in the hands of the merging parties in such a way that consumers could be harmed by, for example, increased prices, decreased services, or the exit of competitors from the marketplace. After evaluating potential competitive effects, the Commission examines claimed public interest benefits of a proposed transaction, such as the potential provision of new programming or services, lower prices for services, increased service coverage, etc. The public interest benefits must be transaction-specific, meaning that "the claimed benefit must be likely to be accomplished as a result of the transaction but be unlikely to be realized by other means that entail fewer anticompetitive effects." This standard does not mean that the claimed benefit must be nearly impossible absent a merger. Rather, the benefit must be unlikely to occur absent a merger. The claimed benefits must be supported by evidence and, in order to be in the public interest, the effects of the claimed benefits must flow through to consumers and not inure solely to the merging entities. The Commission weighs these benefits against the potential harms to the public interest using a "sliding scale approach." In this approach, where potential harms seem likely to occur, applicants must show that the claimed benefits are of a higher degree of magnitude and likelihood than when potential harms appear less likely. If the Commission's analysis suggests that the parties have shown that the merger, on balance, benefits the public interest, the Commission generally approves the transfer without condition. If the Commission determines that the proposed merger will harm competition or the public interest, the Commission may either designate the proposed transaction for hearing, or may negotiate with the parties to place voluntary conditions on the transaction to alleviate those harmful effects. In most instances, the Commission and the parties choose to negotiate. The Commission finds its authority to negotiate and enforce voluntary conditions on license transfers under §303(r) of the Communications Act, which grants the Commission the authority to "prescribe such restrictions and conditions, not inconsistent with the law, as may be necessary to carry out the provisions" of the act, and §214(c), which grants the Commission the power to place "such terms and conditions as in its judgment the public convenience and necessity may require" on the certificates the agency issues pursuant to its license transfer review authority. The parties and the Commission may agree to any condition upon the proposed transfer that is tailored to mitigate the specific harms anticipated by the Commission's review. For example, the Commission has approved license transfers to be in the public interest when conditioned upon such varied commitments as the divestiture of certain assets; the creation of new programming and a la carte options; maintenance of promised conditions to protect national security (including the citizenship status of certain key employees) where the merger involves a foreign owned corporation; temporary price freezes; compliance with increased reporting requirements; unbundling of certain services; and compliance with the Commission's "net neutrality" policy. In each of these cases, the Commission made clear that, absent these voluntary commitments, the proposed transactions would have resulted in significant public interest harms (such as monopoly power or potential to increase prices for extended periods) and the license transfer would not have been approved. Therefore, negotiation of acceptable conditions emerges as an important part of the license transfer process for many corporations seeking to combine.

With the proposed merger between Comcast and NBC/Universal announced recently, Congress has expressed an interest in the process of merger reviews at the Federal Communications Commission (FCC or Commission). This report will explain the merger review process at the FCC, as well as highlight some of the difference between the FCC's process and the more traditional antitrust merger review conducted by agencies such as the Department of Justice (DOJ) or the Federal Trade Commission (FTC). Whenever companies holding licenses issued by the FCC wish to merge, the merging entities must obtain approval from two federal agencies: the DOJ and the FCC. The Commission and the DOJ do not follow precisely the same process or reasoning when examining the potential effects of proposed mergers. Though both agencies have the authority to proceed under the antitrust laws (as the DOJ must), the Commission generally chooses to examine proposed mergers under its Communications Act authority to grant license transfers. The act permits the Commission to grant the transfer only if the agency determines that the transaction would be in the public interest. The public interest standard is generally broader than the competition analysis authorized by the antitrust laws and conducted by the DOJ. Therefore, the Commission possesses greater latitude to examine other potential effects of a proposed merger beyond its possible effect on competition in the relevant market, and greater latitude when placing conditions upon the proposed transfer of a license than the DOJ may have when placing conditions upon the proposed merger that necessitates the license transfer.

Though only about three times the size of Washington, DC, and with a population of 4.7 million, the city-state of Singapore punches far above its weight in both economic and diplomatic influence. Its stable government, strong economic performance, educated citizenry, and strategic position along key shipping lanes make it a major player in regional affairs. For the United States, Singapore is a crucial partner in trade and security cooperation as the Obama Administration executes its rebalance to Asia strategy. Singapore's value has only grown as the Administration has given special emphasis to the Association of Southeast Asian Nations (ASEAN) as a platform for multilateral engagement. Singapore's heavy dependence on international trade makes regional stability and the free flow of goods and services essential to its existence. As a result, the nation is a firm supporter of both U.S. trade policy and the U.S. security role in Asia, but also maintains close relations with China. The People's Action Party (PAP) has won every general election since the end of the colonial era in 1959, aided by a fragmented opposition, Singapore's economic success, and electoral procedures that strongly favor the ruling party. Some point to shifts in the political and social environment that may herald more political pluralism, including generational changes and an increasingly international outlook among Singaporeans. In May 2011, opposition parties claimed their most successful results in history, taking six of parliament's 87 elected seats, and garnering about 40% of the popular vote. Though this still left the PAP with an overwhelming majority in Parliament, the ruling party described the election as a watershed moment for Singapore and vowed to reform the party to respond to the public's concerns. Singapore's parliamentary-style government is headed by the prime minister and cabinet, who represent the majority party in Parliament. The president serves as a ceremonial head of state, a position currently held by Tony Tan Keng Yam. Lee Hsien Loong has served as prime minister since 2004. Lee is the son of former Prime Minister Lee Kuan Yew, who stepped down in 1990 after 31 years at the helm. The senior Lee, 89 and widely acknowledged as the architect of Singapore's success as a nation, resigned his post as "Minister Mentor" following the 2011 elections, citing a need to pass leadership to the next generation. In 2010, changes to the constitution guaranteed that more non-PAP members would be represented in the parliament. The electoral reforms were seen as an acknowledgement by the PAP that it must adjust to a more open and diverse Singapore. Singapore's leaders have acknowledged a "contract" with the Singaporean people, under which individual rights are curtailed in the interest of maintaining a stable, prosperous society. Supporters praise the pragmatism of Singapore, noting its sustained economic growth and high standards of living. Others criticize the approach as stunting creativity and entrepreneurship, and insist that Singapore's leaders must respond to an increasingly sophisticated public's demand for greater liberties for economic survival. Greater, and generally freer, use of the Internet may be threatening to some of the leadership; in the past the government attempted to tighten control over bloggers, who may not exercise the same restraint as the mainstream media in limiting criticism of the ruling party or touching on sensitive issues such as race, in Singapore's multi-ethnic environment. Although it has been elected by a comfortable majority in every election since Singapore's founding, the PAP "places formidable obstacles in the path of political opponents," according to the U.S. State Department's 2012 Country Report on Human Rights Practices. The report states that "the PAP maintained its political dominance in part by circumscribing political discourse and action." According to Amnesty International, defamation suits by PAP leaders to discourage opposition are widespread. The political careers of opposition politicians are marked by characteristic obstacles from the ruling party, including being forced to declare bankruptcy for failing to pay libel damages to prominent PAP members. Singapore's economy depends heavily on exports, particularly in consumer electronics, information technology products, pharmaceuticals, and financial services. The GDP per capita is $61,400 (2012 estimate). China, Malaysia, and the United States are Singapore's largest trading partners. The U.S.-Singapore Free Trade Agreement (FTA) went into effect in January 2004—the U.S.'s first bilateral FTA with an Asian country—and trade has burgeoned. In 2012, Singapore was the 17 th largest U.S. trading partner with $50 billion in total two-way goods trade, and a substantial destination for U.S. foreign direct investment. In 2012, U.S. exports to Singapore exceeded $30 billion, a historic high. Singapore was the largest U.S. trading partner in ASEAN in 2012, accounting for $31.4 billion in exports and $19.1 billion in imports. The U.S. trade surplus with Singapore is the fifth largest American surplus in the world. U.S. direct foreign investment in Singapore has increased more than 20%, exceeding $116 billion in cumulative investment in 2012. Singapore and the United States are among the 12 countries on both sides of the Pacific involved in the Trans-Pacific Partnership (TPP), which is the centerpiece of the Obama Administration's economic rebalance to Asia. With Japan's entry in the talks, the TPP participants represent a third of the world's trade. Singapore's record of championing rigorous trade pacts make it an important negotiating partner in pushing for a comprehensive agreement. Singapore has concluded at least 18 free trade agreements (FTAs) and is pursuing several more, including the Regional Comprehensive Economic Partnership (RCEP), a 16-nation group of Asian nations which is negotiating a free trade agreement at the same time some of its members are working on the TPP. Such agreements are relatively easy for Singapore to negotiate because, in addition to having a mature, globalized economy, it has virtually no agricultural sector and its manufacturing is limited to specialized sectors. The 2005 "Strategic Framework Agreement" formalizes the bilateral security and defense relationship. The agreement, the first of its kind with a non-ally since the Cold War, builds on the U.S. strategy of "places-not-bases" in the region, a concept that allows the U.S. military access to facilities on a rotational basis without bringing up sensitive sovereignty issues. The agreement allows the United States to operate resupply vessels from Singapore and to use a naval base, a ship repair facility, and an airfield on the island-state. The U.S. Navy also maintains a logistical command unit—Commander, Logistics Group Western Pacific—in Singapore that serves to coordinate warship deployment and logistics in the region. As part of the agreements, squadrons of U.S. fighter planes are rotated to Singapore for a month at a time, and naval vessels make regular port calls. Changi Naval Base is the only facility in Southeast Asia that can dock a U.S. aircraft carrier. Singapore forces also train regularly in the United States. Security cooperation has continued to grow under the Obama Administration: the two sides have increased bilateral exercises and training, including combined air combat exercises for fighter units for the countries' air forces, as well as enhanced joint urban training at Singapore's sophisticated Murai Urban Training Facility. An April 2012 agreement outlines bilateral initiatives to strengthen global cargo security procedures; in 2003, Singapore was the first Asian country to join the Container Security Initiative (CSI), a series of bilateral, reciprocal agreements that allow U.S. Customs and Border Patrol officials at selected foreign ports to pre-screen U.S.-bound containers. It was also a founding member of the Proliferation Security Initiative (PSI), a program that aims to interdict weapons of mass destruction-related shipments. In April 2013, the USS Freedom , a U.S. Navy littoral combat ship (LCS) arrived in Singapore to begin a 10-month deployment in Southeast Asia. The stationing of the LCS, the first of four ships, is emblematic of the role that Singapore can play in the U.S. "pivot" to the region. The vessel is the first U.S. Navy ship to be designed to fight close to shore in shallow waters, to carry a smaller crew, and to boast flexible capabilities that include anti-mine and anti-submarine missions. The smaller size also makes them more amenable to doing exercises with countries that have smaller-scale naval forces. Singapore's combination of sophisticated facilities and political standing in the region allows it to host such U.S. naval assets. Singapore has been a strong champion of ASEAN, which helps Southeast Asia's mostly small countries to influence regional diplomacy, particularly vis-à-vis China. Renewed U.S. engagement under the Obama Administration has pleased Singapore and may have allowed it more diplomatic space to stand up to Beijing on key issues. Singapore has praised the Administration's "rebalancing" effort toward Asia, yet has been careful to warn that anti-China rhetoric or efforts to "contain" China's rise will be counterproductive. During an April 2013 visit to Washington, Prime Minister Lee advised the United States to strengthen its economic ties to the region and develop more trust with Beijing. Maintaining strong relations with both China and the United States is a keystone of Singapore's foreign policy. Singapore often portrays itself as a useful balancer and intermediary between major powers in the region. In the South China Sea dispute, for example, in 2011 Singapore—a non-claimant—called on China to clarify its island claims, characterizing its stance on the issue as neutral, yet concerned because of the threat to maritime stability. At the same time, Singapore was hosting a port visit by a Chinese surveillance vessel, part of an ongoing exchange on technical cooperation on maritime safety with Beijing. China's economic power makes it a crucial component of trade policy for all countries in the region, but Singapore's ties with Beijing are multifaceted and extend to cultural, political, and educational exchanges as well. There are frequent high-level visits between Singapore and China. Singapore adheres to a one-China policy, but has an extensive relationship with Taiwan and has managed it carefully to avoid jeopardizing its strong relations with Beijing. Taiwan and Singapore have held large-scale military exercises annually for over 30 years and, in 2010, announced the launch of talks related to a free-trade pact under the framework of the World Trade Organization. Although it has been elected by a comfortable majority in every election since Singapore's founding, the PAP "places formidable obstacles in the path of political opponents," according to the U.S. State Department's 2012 Country Report on Human Rights Practices. The report states that "the PAP maintained its political dominance in part by intimidating organized political opposition and circumscribing political discourse and action." According to Amnesty International, defamation suits by PAP leaders to discourage opposition are widespread. The PAP ideology stresses the government's role in enforcing social discipline and harmony in society, even at the expense of individual liberties. The political careers of opposition politicians are marked by characteristic obstacles from the ruling party, including being forced to declare bankruptcy for failing to pay libel damages to prominent PAP members. International watchdog agencies criticize Singapore's control of the press as well. In 2013, Reporters Without Borders ranked Singapore 149 th out of 179 countries in terms of press freedom, its worst performance ever on the index. New media controls have been stepped up as well: in 2013 the government issued new regulations for online news sites that report on Singapore, prompting international internet companies with a presence in the city-state to criticize the move as backward-looking.

A former trading and military outpost of the British Empire, the tiny Republic of Singapore has transformed itself into a modern Asian nation and a major player in the global economy, though it still substantially restricts political freedoms in the name of maintaining social stability and economic growth. Singapore's heavy dependence on international trade makes regional stability and the free flow of goods and services essential to its existence. As a result, the island nation is a firm supporter of both U.S. international trade policy and the U.S. security role in Asia, but also maintains close relations with China. The Obama Administration's strategy of rebalancing U.S. foreign policy priorities to the Asia-Pacific enhances Singapore's role as a key U.S. partner in the region. Singapore and the United States are among the 12 countries on both sides of the Pacific involved in the Trans-Pacific Partnership (TPP), which is the centerpiece of the Obama Administration's economic rebalance to Asia. The People's Action Party (PAP) has won every general election since the end of the colonial era in 1959, aided by a fragmented opposition, Singapore's economic success, and electoral procedures that strongly favor the ruling party. Some point to changes in the political and social environment that may herald more political pluralism, including generational changes and an ever-increasingly international outlook among Singaporeans. In May 2011, opposition parties claimed their most successful results in history, taking six of parliament's 87 elected seats. Though this still left the PAP with an overwhelming majority in Parliament, the ruling party described the election as a watershed moment for Singapore and vowed to reform the party to respond to the public's concerns. In 2012, Singapore was the 17th largest U.S. trading partner with $50 billion in total two-way goods trade, and a substantial destination for U.S. foreign direct investment. The U.S.-Singapore Free Trade Agreement (FTA) went into effect in January 2004, and trade has burgeoned. In addition to trade, mutual security interests strengthen ties between Singapore and the United States. A formal strategic partnership agreement outlines access to military facilities and cooperation in counterterrorism, counter-proliferation of weapons of mass destruction, joint military exercises, policy dialogues, and shared defense technology.

Although the exact number of rogue Internet pharmacies is unknown, most operate from abroad. According to LegitScript, an online pharmacy verification service that applies NABP standards to assess the legitimacy of Internet pharmacies, there were over 36,000 active rogue Internet pharmacies as of February 2014. Federal officials and other stakeholders we interviewed consistently told us that most rogue Internet pharmacies operate from abroad, and many have shipped drugs into the United States that are not approved by FDA, including counterfeit drugs. In doing so, they violate Federal Food, Drug and Cosmetic Act (FDCA) provisions that require FDA approval prior to marketing prescription drugs to U.S. consumers, as well as customs laws that prohibit the unlawful importation of goods, including unapproved drugs. Many rogue Internet pharmacies sell counterfeit, misbranded, and adulterated drugs, in violation of FDCA provisions. Counterfeiting and trafficking or selling counterfeit drugs also violate laws that protect intellectual property rights. Many also illegally sell certain medications without a prescription that meets federal and state requirements. Indeed, nearly 10 years ago, we made sample purchases from a variety of rogue sites without a prescription and we subsequently received several drugs that were counterfeit or otherwise not comparable to the product we ordered. To sell drugs to their U.S. customers, foreign rogue Internet pharmacies use sophisticated methods to evade scrutiny by customs officials and smuggle their drugs into the country. For example, rogue Internet pharmacies have misdeclared the contents of packages, in violation of customs laws. Rogue Internet pharmacies have disguised or hidden their drugs in various types of packaging; for example, CBP has found drugs in bottles of lotion and in tubes of toothpaste. Some of the drugs we obtained when conducting work for our 2004 report were shipped in unconventional packaging, including in a plastic compact disc case and in a sealed aluminum can that was mislabeled as dye and stain remover In addition, rogue Internet pharmacies also often violate other wax.federal laws, including those related to fraud and money laundering. Rogue Internet pharmacies are often complex, global operations, and federal agencies face substantial challenges investigating and prosecuting those involved. According to federal agency officials, piecing together rogue Internet pharmacy operations can be difficult because they may be composed of thousands of related websites, and operators take steps to disguise their identities. The ease with which operators can set up and take down websites also makes it difficult for agencies to identify, track, and monitor rogue websites and their activities, as websites can be created, modified, and deleted in a matter of minutes. Officials also face challenges investigating and prosecuting operators because they are often located abroad, with components of the operations scattered in several countries. For example, as displayed in figure 1, one rogue Internet pharmacy registered its domain name in Russia, used website servers located in China and Brazil, processed payments through a bank in Azerbaijan, and shipped its prescription drugs from India. Even when federal agencies are able to identify rogue Internet pharmacy operators, agency officials told us that they face jurisdictional challenges investigating and prosecuting them. Agencies may need assistance from foreign regulators or law enforcement in order to obtain information and gather evidence. However, rogue Internet pharmacies often deliberately and strategically locate components of their operations in countries that are unable or unwilling to aid U.S. agencies. In addition, foreign law enforcement authorities that are willing to aid investigations can be slow in responding to requests for help, according to officials from several federal agencies. As a result of competing priorities and the complexity of rogue Internet pharmacies, federal prosecutors may not always prosecute these cases. Such cases are often resource intensive and often involve the application of specialized investigative techniques, such as Internet forensics and undercover work. Components of DOJ routinely prioritize cases for prosecution by applying minimum thresholds associated with illicit activities in order to focus their limited resources on the most serious crimes. Accordingly, agencies may not pursue cases if it appears that such cases do not meet relevant thresholds. In addition, basing a prosecution on violations of the FDCA can be challenging, which may contribute to prosecutors declining to pursue rogue Internet pharmacy cases. Though rogue Internet pharmacy activity clearly violates the FDCA, proving violations of the act’s misbranding and counterfeiting provisions can be difficult, according to a DOJ official. In addition, violations of these provisions of the FDCA are subject to relatively light criminal penalties, which may limit prosecutors’ interest. When federal prosecutors pursue charges against rogue Internet pharmacy operators, they often charge them for violating other laws, such as smuggling, mail fraud, wire fraud, or money laundering, since such violations can be less onerous to prove and carry stronger penalties. Despite these challenges, federal agencies and others have taken actions to combat rogue Internet pharmacies. Federal agencies have conducted investigations that have led to convictions, fines, and asset seizures from rogue Internet pharmacies as well as from companies that provide services to them. Agencies have investigated rogue Internet pharmacies independently and conducted collaborative investigations with other federal agencies through ICE’s National Intellectual Property Rights Coordination Center. Since our report was published in July 2013, DOJ has continued to pursue those that import and traffic in counterfeit drugs, as well as those that purchase from them. In addition, FDA formed a Cyber Crimes Investigation Unit in 2013, and in 2014, the agency announced its plans to expand its law enforcement presence overseas by placing its first permanent agent at Europol—the European Union’s law enforcement agency. Agencies have also collaborated with law enforcement agencies around the world to disrupt rogue Internet pharmacy operations. For example, FDA and other federal agencies have participated in Operation Pangea, an annual worldwide, week-long initiative in which regulatory and law enforcement agencies from around the world work together to combat rogue Internet pharmacies. In 2013, FDA took action against 1,677 rogue Internet pharmacy websites during Operation Pangea. FDA officials told us that the effect of such shutdowns is primarily disruptive since rogue Internet pharmacies often reopen after their websites get shut down; officials from federal agencies and stakeholders we spoke with likened shutting down websites to taking a “whack-a-mole” approach. One stakeholder noted that rogue Internet pharmacies own and keep websites in reserve so that they can redirect traffic and maintain operations if any of their websites get shut down. Federal agencies responsible for preventing illegal prescription drug imports have also interdicted rogue Internet pharmacy shipments. For example, from fiscal years 2010 through 2012, CBP reported seizing more than 14,000 illicit shipments of prescription drugs. However, FDA officials noted that the sheer volume of inbound international mail shipments makes it difficult to interdict all illicit prescription drug imports. FDA and others have taken steps to educate consumers about the dangers of buying prescription drugs from rogue Internet pharmacies. In September 2012, FDA launched a national campaign to raise public awareness about the risks of purchasing drugs online. The campaign provides information about the dangers of purchasing drugs from rogue Internet pharmacies, how to identify the signs of rogue Internet pharmacies, as well as how to find safe Internet pharmacies. Other federal agencies have also taken steps to educate consumers about the dangers of purchasing drugs online; for example, by posting information on their websites. NABP also posts information about its quarterly review of Internet pharmacies, which most recently showed that 97 percent of the over 10,000 Internet pharmacies that it reviewed were out of compliance with federal or state laws or industry standards. NABP also directs consumers to purchase medicines from legitimate Internet pharmacies that it has accredited. To assist consumers in more readily identifying legitimate online pharmacies, NABP is working to launch a new top-level domain name called .pharmacy. The association intends to grant this domain name to appropriately licensed, legitimate Internet pharmacies operating in compliance with regulatory standards—including pharmacy licensure, drug authenticity, and prescription requirements—in every jurisdiction that the pharmacy does business. LegitScript also helps consumers to differentiate between legitimate and rogue Internet pharmacies. It regularly scans the Internet and, using NABP’s standards, classifies Internet pharmacies into one of four categories: (1) legitimate, (2) not recommended, (3) rogue, or (4) pending review. When visiting its publicly available website, consumers can enter the website address of any Internet pharmacy and immediately find LegitScript’s classification. As of February 3, 2014, LegitScript had classified 213 Internet pharmacies as legitimate and therefore safe for U.S. consumers, on the basis of NABP standards. Despite these actions of agencies and stakeholders, consumer education efforts face many challenges. In particular, many rogue Internet pharmacies use sophisticated marketing methods to appear professional and legitimate, making it challenging for even well-informed consumers and health care professionals to differentiate between legitimate and rogue sites. For example, some Internet pharmacies may fraudulently display an NABP accreditation logo on their website, despite not having earned the accreditation, or may fraudulently display Visa, MasterCard, PayPal, or other logos on their website despite not holding active accounts with these companies or being able to process such payments. Figure 2 displays a screenshot of a rogue Internet pharmacy website that may appear to be legitimate to consumers, but whose operators pled guilty to multiple federal offenses, including smuggling counterfeit and misbranded drugs into the United States. Some rogue Internet pharmacies seek to assure consumers of the safety of their drugs by purporting to be “Canadian.” Canadian pharmacies have come to be perceived as a safe and economical alternative to pharmacies in the United States. Over the last 10 years, several local governments and consumer organizations have organized bus trips to Canada so that U.S. residents can purchase prescription drugs at Canadian brick-and- mortar pharmacies at prices lower than those in the United States. More recently, some state and local governments implemented programs that provided residents or employees and retirees with access to prescription drugs from Canadian Internet pharmacies. Despite FDA warnings to consumers that the agency could not ensure the safety of drugs not approved for sale in the United States that are purchased from other countries, the prevalence of such programs may have contributed to a perception among U.S. consumers that they can readily save money and obtain safe prescription drugs by purchasing them from Canada. Many rogue Internet pharmacies seek to take advantage of this perception by purporting to be located in Canada, or sell drugs manufactured or approved for sale in Canada, when they are actually located elsewhere or selling drugs sourced from other countries. Chairman Murphy, Ranking Member DeGette, and Members of the Subcommittee, this completes my prepared statement. I would be pleased to respond to any questions that you may have at this time. If you or your staff have any questions about this testimony, please contact me at (202) 512-7114 or crossem@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. GAO staff who made key contributions to this statement include Geri Redican-Bigott, Assistant Director; Michael Erhardt; Patricia Roy; and Lillian Shields. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

While some Internet pharmacies are legitimate businesses that offer consumers a safe and convenient way to purchase their prescription drugs, the FDA and NABP have reported that thousands are fraudulent enterprises. Among other things, these rogue Internet pharmacies often sell counterfeit or otherwise substandard drugs. Consumers have experienced health problems as a result of purchasing drugs from rogue Internet pharmacies, and the proliferation and patronage of such entities has rendered them a public health threat. A number of federal and state agencies share responsibility for administering and enforcing laws related to Internet pharmacies, including FDA, DOJ, CBP, and ICE, as well as state boards of pharmacy. This statement is based on GAO's July 2013 report, entitled Internet Pharmacies: Federal Agencies and States Face Challenges Combating Rogue Sites, Particularly Those Abroad ( GAO-13-560 ). In this report, GAO identified (1) how rogue sites violate federal and state laws, (2) challenges federal agencies face in investigating and prosecuting operators, (3) efforts to combat rogue Internet pharmacies, and (4) efforts to educate consumers about the risks of purchasing prescription drugs online. To conduct this work, GAO interviewed officials from federal agencies, reviewed federal laws and regulations, and examined agency data and documents. GAO also interviewed officials from stakeholders including NABP, drug manufacturers, and companies that provide services to Internet businesses. Although the exact number of rogue Internet pharmacies is unknown, one estimate suggests that there were over 36,000 in operation as of February 2014, and these rogue sites violate a variety of federal laws. Most operate from abroad, and many illegally ship prescription drugs into the United States that have not been approved by the Food and Drug Administration (FDA), including drugs that are counterfeit or are otherwise substandard. Many also illegally sell prescription drugs without a prescription that meets federal and state requirements. Foreign rogue Internet pharmacies use sophisticated methods to evade scrutiny by customs officials and smuggle drugs into the country. Their operators also often violate other laws, including those related to fraud and money laundering. Rogue Internet pharmacies are often complex, global operations, and federal agencies face substantial challenges investigating and prosecuting those involved. According to federal agency officials, piecing together rogue Internet pharmacy operations can be difficult because they may be composed of thousands of related websites, and operators take steps to disguise their identities. Officials also face challenges investigating and prosecuting operators because they are often located abroad in countries that are unable or unwilling to aid U.S. agencies. The Department of Justice (DOJ) may not prosecute such cases due to competing priorities, the complexity of these operations, and challenges related to bringing charges under some federal laws. Despite these challenges, federal agencies have conducted investigations that have led to convictions, fines, and asset seizures from rogue Internet pharmacies as well as from companies that provide services to them. FDA and other federal agencies have also collaborated with law enforcement agencies around the world to disrupt rogue Internet pharmacy operations. For example, FDA took action against 1,677 rogue Internet pharmacy websites in 2013 as part of a worldwide enforcement initiative. Other federal agencies such as U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement (ICE) have also taken actions—for example, by interdicting counterfeit drug shipments from rogue Internet pharmacies at the border. FDA and others have taken steps to educate consumers about the dangers of buying prescription drugs from rogue Internet pharmacies. FDA recently launched a national campaign to raise public awareness about the risks of purchasing drugs online, and the National Association of Boards of Pharmacy (NABP) posts information on its website about how to safely purchase drugs online. However, rogue Internet pharmacies use sophisticated marketing methods to appear legitimate, making it hard for consumers to differentiate between legitimate and rogue sites. NABP's recent analysis shows that 97 percent of the over 10,000 Internet pharmacies that it reviewed were out of compliance with laws or industry standards. Some rogue sites seek to assure consumers of the safety of their drugs by purporting to be “Canadian” despite being located elsewhere or selling drugs sourced from other countries.

The Federal Employee Dental and Vision Benefits Enhancement Act of 2004 was enacted on December 23, 2004, requiring the Office of Personnel Management (OPM) to establish arrangements under which supplemental dental and vision benefits are available to federal employees, Members of Congress, annuitants, and dependents. OPM established the Federal Employees Dental and Vision Insurance Program (FEDVIP), with coverage first available on December 31, 2006. Enrollees are responsible for 100% of the premiums, and OPM does not review disputed claims. Employees who are eligible to enroll in the Federal Employees Health Benefits (FEHB) program, whether or not they are actually enrolled, may enroll in FEDVIP. Annuitants, survivor annuitants, and compensationers (someone receiving monthly compensation from the Department of Labor's Office of Workers' Compensation program) may also enroll in FEDVIP. Eligible family members include a spouse, unmarried dependent children under age 22, and continued coverage for qualified disabled children 22 years or older. Former spouses receiving an apportionment of an annuity, deferred annuitants, and those in FEHB temporary continuation of coverage are not eligible to enroll in FEDVIP. There are four nationwide dental plans, and three additional dental plans that are only available regionally. The nationwide plans also provide coverage overseas. There are three vision plans, which all provide both nationwide and overseas coverage. Eligible individuals may enroll in a FEDVIP plan during the standard open season for FEHB plans (for 2008 coverage, open season is from November 12 through December 10, 2007). Individuals may change plans during open season each year, or following a qualifying life event. As with FEHB, new employees have 60 days to enroll. FEDVIP enrollment can be done through the Internet at http://www.BENEFEDS.com , or, for those without Internet access, by calling 1-877-888-FEDS. Individuals may choose a self-only, self +1, or a family plan. This set of options differs from the FEHB plans, which only allow for two choices: a self-only or a family plan. Individuals who choose to enroll in FEDVIP are not required to enroll in both a dental and a vision plan; they may choose only one type of coverage or both. Individuals are not required to enroll in the dental plan offered by their FEHB plan; for example, an individual whose health insurance is provided by GEHA may enroll in MetLife's dental plan and in Blue Cross Blue Shield's vision plan. However, any coverage for dental and/or vision services provided under the individual's FEHB plan is the primary source of coverage, and the FEDVIP supplemental dental and vision plans pay secondary. Additionally, active workers (not annuitants) may still contribute to a Flexible Spending Account (FSA) to cover any qualified unmet medical expenses, such as dental copayments or deductibles. Premiums vary by plan, by whether the enrollment includes other family members, and by residency (for dental plans only). Unlike nationwide FEHB plans, individuals enrolled in a FEDVIP dental plan pay different premiums depending on where they live in the country or overseas. Active employees pay FEDVIP premiums on a pre-tax basis (called premium conversion). However, unlike FEHB plans, employees may not opt out of premium conversion. Pre-tax premiums are not available to annuitants, survivor annuitants, or compensationers. While there are no preexisting condition exclusions for this coverage, there are waiting periods for orthodontia. Individuals must be in the same plan for the entire waiting period, and switching to a new plan may require beginning the waiting period over again. There are no waiting periods for vision services. While the statutes allow for more stringent waiting periods for individuals who do not enroll at their first enrollment opportunity, the brochures for 2008 do not indicate that plans have imposed additional restrictions. Enrollees will pay less out-of-pocket costs if they use in-network services. For 2008, the four nationwide dental plans are Aetna, GEHA, MetLife, and United Concordia. Both GEHA and MetLife have two options—a high and a standard option. There are also three regional plans: Triple-S (covering Puerto Rico), GHI (covering New York and parts of Pennsylvania, Connecticut, and New Jersey), and CompBenefits (covering 19 states, Washington, D.C., and parts of Maryland). Only the nationwide plans also provide coverage overseas. The benefits provided by these plans include, but are not limited to, the following: (1) Class A (Basic) services—oral examinations, prophylaxis, diagnostic evaluations, sealants, and X-rays; (2) Class B (Intermediate) services—restorative procedures such as fillings, prefabricated stainless steel crowns, periodontal scaling, tooth extractions, and denture adjustments; (3) Class C (Major) services—endodontic services such as root canals, periodontal services such as gingivectomy, major restorative services such as crowns, oral surgery, and bridges, and prosthodontic services such as complete dentures; and (4) Class D (Orthodontic) service. Premiums for these plans vary by geographic area. For example, an Aetna enrollee in Washington, D.C., will pay a monthly premium of $28.97 for self-only coverage. Monthly premiums for Aetna's plan range from $26.35 to $36.83, depending on where the enrollee resides. For all dental plans, self + 1 premiums are approximately twice the plan's self-only premium, and family premiums are about three times the plan's self-only premium. Thus, comparing plan premiums is slightly more complex than comparing nationwide FEHB plan premiums, for which everyone in the same self-only plan pays the same premium, regardless of where they live, and for which there is no self + 1 option. Similar to the FEHB program, premiums also vary by high or standard options. Table 1 , below, compares the national dental plans, including the monthly premiums for the Washington, D.C., area. Monthly self-only premiums range from $22.71 for MetLife's standard plan to $37.90 for GEHA's high option plan. Only Aetna had no premium increase over last year, with other plans increasing self-only premiums from about $1 per month (GEHA high option, with about a 2% increase) to $4.50 per month (United Concordia, with about a 15% increase) per month. The percentage of services covered by a plan varies by class of service, with only GEHA's standard plan requiring a copayment for preventive services. Enrollees who choose out-of-network services pay their coinsurance plus any amount over the plan's payment. The United Concordia plan pays only for emergency out-of-network services. All of the plans cover underserved areas, as well as those overseas. The plans also impose an annual benefit limit for total Class A through C services of $1,200 for all plans, except MetLife's high option plan with a $3,000 limit. There is a lifetime orthodontia limit, which is $1,500 for all plans, except MetLife's high option plan, which has a $3,000 limit. For 2008, the three vision plans are FEP BlueVision (Blue Cross and Blue Shield), Spectera, and Vision Service Plans (VSP). Each of these plans has both a high and a standard option, and also provides both nationwide and overseas coverage. Annual premiums for the three plans are similar; annual self-only coverage is $71.76 for Spectera, $99.36 for VSP, and $103.20 for FEP BlueVision's plan. The high-option plans cost about $20 to $40 more per year. Premiums for self + 1 plans are about double the costs of self-only plans, and premiums for family plans are about triple the costs. For 2008, Spectera had a very small premium increase (for self-only standard coverage, premiums increased by $0.20 per month, and high plan premiums increased by $0.39 per month, each about a 5% increase). The other vision plans' premiums remained the same. The more significant differences are found in benefits and network limitations. For example, under the FEP BlueVision plan, enrollees must stay in-network for covered services, with two exceptions: those who living in a limited access area or those who receive services overseas. Enrollees are responsible for any difference between the amount billed by the provider and the actual plan payment. Spectera and VSP both allow for reimbursement for visits to out-of-network providers. Generally, covered services are limited to eye exams, a choice between lenses for glasses or contacts, and extra discounts and savings on non-covered services, such as progressive lenses and additional glasses. The services are provided according to a schedule, such as eye exams every 12 months and new frames every 24 months. Additionally, plans cover low vision coverage on a limited basis. As shown in Table 2 , an individual enrolled in either of Spectera's plans could have an exam and new lenses and frames once during the course of a year. The copayment would be $10 for the exam and $10 for the lenses, or $25 for both lenses and frames, if new frames were purchased. Spectera's standard option includes scratch-resistant coating and polycarbonate lenses, and the high option also covers basic progressive lenses, tinted lenses, and UV coating. Plan brochures provide more detail on the differences between the standard and high options. The choice of covered frames is also limited. For those using services outside the network, the plans provide a schedule of payments. Enrollees may opt for contact lenses in lieu of glasses, subject to each plan's limits (i.e., generally a limit on disposable contacts, supplying only enough for part of the year). Several factors should be considered in deciding whether or not to enroll in FEDVIP, including (1) coverage of these services in a FEHB plan—more likely for those enrolled in a Health Maintenance Organization (HMO), (2) likelihood of using services covered by the plans, and (3) placing the same dollar amount that would be used toward dental and/or vision benefits premiums in an FSA (available to employees and not annuitants). Each prospective enrollee must weigh these considerations and others against his or her own level of risk aversion, as well as the fact that the individual pays 100% of the premium. Under the FEDVIP program, any coverage provided by an individual's FEHB health plan is primary, and the FEDVIP plans are the secondary payers. However, generally, the nationally available FEHB plans, have limited dental and vision coverage. This year, GEHA added limited vision coverage under its plans, offering an annual eye exam with a $25 copayment. GEHA, similar to some of the other national plans, has an arrangement with certain providers for discounted eyewear, but the enrollee would still be responsible for 100% of the discounted cost. In contrast, some of the FEHB HMO-type plans offer more comprehensive dental and vision benefits. Some high-deductible plans also provide some coverage. It is important to compare FEHB coverage to determine if also enrolling in FEDVIP is beneficial. While some enrollees know that they will use services, such an individual who wears glasses or a dependent who will need orthodontics, some services cannot be as easily predicted, such as an individual needing a root canal. Individuals must weigh their expected benefits against the premiums. For example, an individual who wears glasses, has a yearly eye exam, and uses a provider in-network may find that paying the premium will result in lower costs than paying for each of these services separately, even with pre-tax FSA funds for employees. On the other hand, an individual who does not wear glasses may not benefit from vision supplemental insurance. There is not, however, a one-to-one correlation between buying any insurance and the expectation of using the services. There is still a large share of unknown risk that any insurance protects against, so that some individuals may find themselves using services that they did not anticipate using. Both FEDVIP premiums and FSA contributions are pre-tax for employees, so that they may decide to enroll in one, none, or both. (Annuitants can not contribute to an FSA or pay premiums with pre-tax dollars.) Enrollees who choose both can use funds in the FSA for any copayments, coinsurance amounts, deductibles, amounts exceeding annual or lifetime maximums, or amounts above the plan's payment for out-of-network services. Some individuals may decide that they prefer to only contribute to an FSA and not enroll in either the dental or vision plan, and instead use their FSA funds to pay for any dental or vision expenditures. While using FSA funds provides the most flexibility, it may be that the dental and vision premiums cover more than the same dollars in the FSA. Individuals who are not sure they will use the services provided under FEDVIP can "wait and see," and if they do not use dental or vision services, they can use the FSA dollars for other qualified medical expenses. Others may choose to enroll only in FEDVIP and minimize their out-of-pocket expenditures by staying in-network. Decisions about FEDVIP and FSA can be revisited every year during open season.

The Federal Employee Dental and Vision Benefits Enhancement Act of 2004 was enacted on December 23, 2004 ( P.L. 108-496 ), directing the Office of Personnel Management (OPM) to establish a supplemental dental and vision benefits program. OPM created the Federal Employees Dental and Vision Insurance Program (FEDVIP), with coverage first available on December 31, 2006. Enrollees are responsible for 100% of premiums and may choose a self-only, self + 1, or family plan. Coverage for dental and/or vision services provided through Federal Employees Health Benefits (FEHB) plans is the primary source of coverage, and the supplemental dental and vision plan is secondary. Employees may still contribute to a Flexible Spending Account (FSA) to cover any qualified unmet medical expenses.

The Multilateral Debt Relief Initiative (MDRI) is the most recent effort by the International Monetary Fund (IMF), World Bank, and African Development Bank (AfDB) to provide poor country debt relief. Proposed by G8 finance ministers in June 2005, the MDRI provides 100% debt relief to select countries that are already participating in the joint-IMF/World Bank Heavily Indebted Poor Countries (HIPC) program. The goal of the MDRI program is to free up additional resources for the poorest countries in order to help them reach the United Nations' Millennium Development Goals (MDGs), which are focused, among other things, on reducing world poverty by half by 2015. There are several key features of the MDRI: All pre-existing IMF, World Bank, and AfDB debt will be cancelled for any country that completes the HIPC program. (The Asian Development Bank, Inter-American Development Bank, and other development banks are not participating in the Initiative.) The MDRI Agreement provides no additional net assistance. HIPC countries that receive debt reduction will have their total assistance flows from the agency canceling their debt reduced by the amount of debt forgiven. The IMF will internally fund its debt relief while the World Bank and AfDB will be compensated by G8 donors. IMF debt relief will be funded with the money obtained from the sale of some IMF gold in the late 1990s. The MDRI raises several questions for policy makers: What is the effect of debt on the poorest countries? What impact can the MDRI be expected to have on poverty reduction? What policies could make debt relief more effective? Looking at several studies of the effectiveness of the HIPC program from 1996-2006, it appears that although debt relief can slightly increase the amount of financial resources available to poor countries, the debt burden is not the main impediment to poverty reduction and economic growth in the poorest countries. Weak macroeconomic institutions and difficulty absorbing foreign assistance, as well as political challenges, appear more likely hurdles. Alleviating the debt burden in the absence of other strategic reforms is unlikely to substantially contribute to improved conditions in the poorest countries. If combined with other efforts, however, debt relief can have a complementary effect on domestic government finances and can help promote further reform. The MDRI builds on several bilateral and multilateral debt relief initiatives conducted over the past twenty years. In the 1980s and early 1990s, as the debts of the poorest countries increased rapidly compared to other low-income countries, the G7 and other creditor countries implemented several plans aimed at reducing the countries' debt payment burden. In 1988, in response to a G7 initiative, a group of major creditor nations, known as the Paris Club, agreed for the first time to cancel debts owed to them by up to one-third instead of refinancing them on easier terms as they had done previously. Over the next decade, the Paris Club gradually increased the amount of debt that it would be willing to write off by up to 90% in 1999. The United States did not participate in the initial debt forgiveness plans, but in 1991, at the initiative of Congress, independently forgave almost all of the debt owed to it by the poorest nations. Since 1991, the United States has forgiven $23.9 billion in foreign debt. The IMF and World Bank introduced debt relief in 1996 through the Heavily Indebted Poor Country (HIPC) Initiative. When conceived, the intention of the program was to reduce poor countries' debts to a so-called "sustainable" level. Sustainability was defined as multilateral debts not exceeding a maximum debt-to-exports ratio of 250%. In 1999, the program was redesigned in response to criticism that the debt-to-export ratio was too large, disqualifying many countries from debt relief. The target debt service-to-exports ratio was reduced to 150%, and the time period for eligibility was shortened. The HIPC program was also modified to require increased poverty reduction efforts. Any money freed up by debt relief must now be used explicitly on poverty reduction efforts. HIPC debt relief is provided in stages, based on each country's performance against a defined set of economic targets and requirements. HIPC-eligible countries must successfully implement IMF-proscribed reforms for three years before reaching the "decision point" and receiving intermediate debt relief. Following a further track record of good economic policy, a country reaches "completion point" where the remaining debt relief is granted. Table 1 shows the current status of countries in HIPC initiative. The eventual MDRI agreement was a compromise agreement between the United States and the Europeans. U.S. officials had reportedly argued that the cost of multilateral debt relief could be borne by the institutions and did not require donors' contributing any new assistance. Other creditors believed the institutions should be compensated for their debt forgiveness to avoid diverting potential resources that could be lent to the poorest countries. Any debt relief, they argued, should be additional to existing multilateral assistance. The compromise plan entailed the multilateral development banks receiving new money from creditor nations to offset their debt reductions while the IMF would absorb the cost of debt relief using internal resources. The IMF was the first of the participating institutions to implement its MDRI debt relief. Under MDRI, the IMF is cancelling all HIPC debt incurred by year-end 2004. In addition to the eligible HIPC countries, the IMF expanded MDRI to all IMF members with per capita incomes of $380 or less. Two non-HIPC countries—Cambodia and Tajikistan—have qualified for MDRI debt relief. To date, the IMF has provided MDRI debt relief to 21 countries, totaling $3.67 billion. The IMF expects that total MDRI debt relief will be around $5 billion if all eligible countries complete the program. Unlike the IMF, both the World Bank and the Asian Development Bank are only providing MDRI relief to HIPC completion point countries. Only debts accrued prior to year-end 2003 are eligible for World Bank/AfDB MDRI debt relief. If fully implemented, the World Bank will provide about $37 billion in debt relief. African Development Bank debt relief would be $8.5 billion. There are numerous reasons why policy-makers support poor country debt relief. Debt relief emerged as a foreign policy issue mainly through moral arguments against requiring the poorest countries to repay their debts. At a United Nations conference on Africa in 2004, Columbia University professor and United Nations advisor Jeffrey Sachs remarked: "No civilized nation should try to collect the debts of people who are dying of hunger and disease and poverty." Others, including the Bush Administration, presented what they viewed as a pragmatic argument for debt relief. They argued that debt was "locking these poorest countries into poverty and preventing them from using their own resources [for development]." By providing debt relief, they argued, resources that would have been allocated for debt repayments would now be redirected toward new investment and/or domestic social services. At a press release announcing the MDRI deal, former World Bank president Paul Wolfowitz announced that, "across Africa and around the world, leaders in 38 countries will no longer have to choose between spending to benefit their people and repaying impossible debts." Recent studies cast doubt, however, on debt relief's contribution to larger development and poverty reduction goals. These studies argue that poor underlying economic and political conditions are the main reason for the HIPCs' poor performance. In light of this research, Congress may wish to explore in more depth what effect debt has on poor countries' economies and under what conditions debt relief can help promote economic growth and poverty reduction. Historically, policymakers and academics viewed high levels of debt as a constraint on economic growth. It was argued that as long as investors expected a country's debt level to impair its ability to repay its loans—its "debt overhang"—investors would abstain from entering a country out of a concern that the government may resort to distortionary or inflationary measures, such as expanding the money supply or raising taxes on their profits, to finance debt payments. Even if the debt is not being serviced, the theory suggests that it is still an impediment to economic growth because of the effect the large debt stock has of dissuading private investors. In a debt overhang situation, the theory says, the appropriate policy response is to forgive the debt, either entirely or to some "sustainable" level so that investor confidence will be restored. Debt overhang theory was instrumental in driving the development of the HIPC program. Over time however, it became apparent that the theory was not especially well suited for the poorest countries, which relied on foreign assistance, rather than private investment, as their key source of foreign capital. According to the World Bank's 2006 evaluation of the HIPC program, debt relief alone is not sufficient for debt sustainability in the poorest countries. Under HIPC, 18 countries had their debt levels reduced to half their initial levels, cancelling $19 billion of external debt. However, in 11 out of the 13 countries (with data available), the debt situation has worsened. In 8 countries, debt levels once again exceed HIPC thresholds. Several reasons may explain this situation. First, the concepts of "sustainable debt" and "debt overhang" may be inappropriate for the HIPC countries. Earlier debt overhang models were designed with middle-income countries in mind, which were suffering under heavy non-concessional private debt. For example, when financial crises hit Latin American countries in the 1980s, their debts were resolved under the "Brady Plan" (negotiated by former Secretary of the Treasury Nicholas Brady). The forgiveness of debt amounted to $60 billion, after which, private capital surged into the Brady countries. These countries received $210 billion dollars in net capital flows in the five years following their debt write-off. In the case of the HIPC countries, investors were more likely to stay away for other reasons, such as political and economic instability, rather than any concerns about indebtedness per se. Moreover, unlike other debtor nations, bilateral and multilateral HIPC debt is highly concessional (i.e., inexpensive) compared to private sector debt. Foreign aid providers have not stopped their aid just because they are not being repaid 100% on their bilateral debt. Moreover, the inflow of foreign aid funds is typically more than sufficient to cover debt payments, so the cost of debt service is effectively borne by the donor countries rather than by the debtors. Secondly, there are additional factors, unique to the poorest countries, that may promote increased indebtedness. Since their debt is highly concessional, there may be a perverse incentive for countries not to grow in order to remain eligible for multilateral assistance. Preliminary evidence looking at 94 countries (33 of which are low income) over 1988-2000 found evidence of this effect. A significant number of countries appeared to stagnate around the income level that defined eligibility for concessional assistance. Above the cutoff level, countries would no longer be able to receive concessional aid. By diverting their assistance away from investment toward consumption they were able to hover just below the eligibility cutoff. The impact of MDRI debt relief will likely be modest at best. First, by definition, MDRI debt relief does not increase the overall resources available to poor countries. Any debt relief that a country receives results in a net decrease in future multilateral aid resources allocated. Second, the amount of debt relief provided by MDRI is small. In the case of the 15 African HIPCs, on average, they paid $19 million in debt service to the World Bank in 2004. That same year, they received $197 million in new World Bank aid and $946 million in total aid. Any debt relief, even if it were in addition to existing foreign aid, would provide only a minuscule increase in domestic resources. Thus it appears that debt relief can have its largest impact if it is situated as part of a broader package of reforms that include, among other things, increased debt management capacity, and targeted growth enhancing changes in national policy.

In June 2005, G8 finance ministers proposed the new Multilateral Debt Relief Initiative (MDRI). The MDRI proposes to cancel debts of some of the world's poorest countries owed to the International Monetary Fund, World Bank, and African Development Bank. This report discusses MDRI's implementation and raises some issues regarding debt relief's effectiveness as a form of foreign assistance for possible congressional consideration.

The Social Security Administration (SSA) administers two programs that provide cash benefits to persons with disabilities. The Social Security Disability Insurance (SSDI) program provides cash benefits based on previous earnings to persons with disabilities who have met the program's insurance requirements through work covered by the Social Security system. The Supplemental Security Income (SSI) program provides cash benefits to aged, blind, and disabled persons, including children with disabilities, who also meet federal income and asset limitations. The definition of disability, which is generally based on an inability to work, is the same for both programs. Determinations of disability for both programs are made by state Disability Determination Services (DDS) in accordance with federal laws, regulations, and policies. The state DDS play two roles in the SSDI and SSI programs. State DDS agencies make initial determinations of the disability status of program applicants and perform continuing disability reviews on program participants, including redeterminations of disability when children in the SSI program reach the age of 18. In FY2008, DDS agencies processed more than 3.6 million SSDI and SSI initial determinations and continuing disability reviews. Information on the number of cases processed by each state DDS is provided in Table A-1 in the Appendix . When a person applies for SSDI or SSI benefits, his or her application is first processed by the SSA to determine if he or she meets the non-disability requirements of the programs, such as the insurance requirements for SSDI or the income and asset requirements for SSI. The application is then forwarded to the claimant's home-state DDS. The DDS determines whether the applicant meets the program definition of disability and when the period of disability began. In making this determination, the DDS is authorized to purchase additional medical and vocational evidence such as consultative examinations and medical tests. If an applicant is denied SSDI or SSI benefits, he or she may, in most states, ask for a reconsideration of the initial disability decision. This reconsideration is made by the DDS. A case that is appealed to an SSA Administrative Law Judge (ALJ) may be subject to an informal remand in which the ALJ returns the case to the DDS for a review of its initial decision. SSDI beneficiaries and SSI recipients are subject to continuing disability reviews (CDRs) to determine if they still meet the disability program requirements. Most CDRs, including all CDRs for children in the SSI program, and all cases in which there has been a report of medical improvement, are performed by the DDS. Children who receive SSI benefits are subject to redeterminations of their eligibility when they turn 18 and are subject to the adult definition of disability. These redeterminations are performed by the DDS. Under the Social Security Act, states can choose whether to operate DDS themselves or to allow the SSA to administer DDS for them. This authority is found in the Social Security Act at Section 221(a)(1) for SSDI applicants and Section 1633(a) for SSI applicants. The statutory language specifies that "the determination of whether or not ... [an individual] is under a disability ... and of the day such disability began, and the determination of the day on which such disability ceases, shall be made by a State agency, notwithstanding any other provision of law, in any State that notifies the Commissioner of Social Security in writing that it wishes to make such disability determinations." Currently, all 50 states, the District of Columbia, and Puerto Rico administer their own DDS. The statute requires the Commissioner of Social Security to promulgate regulations that specify "performance standards and administrative requirements and procedures to be followed in performing the disability determination function in order to assure effective and uniform administration of the disability insurance program throughout the United States." Regulations issued pursuant to this authority set forth the state's administrative responsibilities and requirements, but the regulations emphasize that the "State will provide the organizational structure, qualified personnel, medical consultant services, and a quality assurance function sufficient to ensure that disability determinations are made accurately and promptly." As a result, each state's DDS is a state agency that is required to comply with all provisions in the Social Security Act, applicable federal regulations, and guidance from the SSA. Because each DDS is a state agency, all DDS employees are state, rather than federal, employees. Each state is generally free to implement its own policies regarding DDS personnel for salaries, benefits, and other administrative matters. For example, a 2006 study by the Social Security Advisory Board found wide variance in the salaries paid to DDS employees, with initial disability examiners in Connecticut earning more than twice as much as examiners in South Dakota. Although the states do operate their own DDS agencies, some federal requirements that apply to all state DDS agencies are found in the Social Security Act and regulations. For example, the federal regulations provide some guidance for equal employment opportunity requirements, hiring and compensation issues, allowable travel, and restrictions on state personnel actions. The Social Security Act and the regulations contain no provisions that specifically prohibit states from implementing such personnel actions as furloughs, hiring freezes, or limitations on overtime with regard to DDS employees. However, the regulations do state that, "[subject] to appropriate Federal funding, the State will, to the best of its ability, facilitate the processing of disability claims by avoiding personnel freezes, restrictions against overtime work, or curtailment of facilities or activities." Although this regulation clearly addresses some types of personnel actions, the language does not create a mandatory requirement for the states with regard to furloughs or other personnel actions. Therefore, as long as a state is acting within the scope of the applicable federal statutes, regulations, and SSA guidance, each state may administer its DDS as it wishes. This includes the ability to release DDS employees on furlough or to implement other personnel actions, such as hiring freezes or limitations on overtime. The SSA reimburses the DDS for 100% of all expenditures related to the processing of initial disability determinations and CDRs. This reimbursement includes itemized costs as well as non-itemized and administrative expenses. State governments do not contribute in any way to the cost of the DDS and see no financial savings if DDS operations are curtailed. In FY2008, DDS agencies were reimbursed for more than $1.8 billion in expenses. Information on DDS expenses for each state is provided in Table A-1 in the Appendix . Each state enters into an agreement with the Department of the Treasury for the reimbursement of its DDS expenses. These intergovernmental agreements are governed by the provisions of the Cash Management Improvement Act of 1990, applicable federal regulations, and Office of Management and Budget Circular A-87. The states receive funds from SSA, either in advance or by reimbursement, for the cost of their DDS expenditures, and they may not "incur or make expenditures for items of cost not approved by ... [SSA] or in excess of the amount ... [made] available" to them. As state employees, DDS disability examiners and other workers may be subject to several types of personnel actions generally intended to reduce costs. A state may furlough some or all of its employees by requiring them to take time off without pay, or may implement a reduction in force (RIF) in which certain employees are terminated or in which certain positions are eliminated. States may also subject their agencies to hiring freezes or other personnel actions such as pay and overtime reductions. States generally claim that it would be unfair to exempt one specific group of workers, such as DDS employees, from statewide furloughs or personnel actions. In addition, because some state positions are funded partially through external sources, identifying which employees should or should not be furloughed could present administrative difficulties and costs. States may also feel that they must include all employees in furloughs or personnel actions because they may be responsible, at least initially and until reimbursed by the federal government, for these employees' benefits and pension contributions. In some states, collective bargaining agreements and civil service rules require that DDS employees be subject to same personnel actions as other state workers. Table A-2 , in the Appendix , summarizes the personnel actions taken or planned by the states that apply to DDS agencies and employees. As of October 15, 2009, statewide furloughs had been implemented or announced by 13 states. Of these 13 states, three—Colorado, Illinois, and Maryland—exempt all DDS employees from the furloughs. In two states, Maine and Nevada, some DDS employees are subject to the furloughs, whereas others are exempt. In the remaining eight states—California, Connecticut, Hawaii, New Jersey, Ohio, Oregon, Virginia, and Wisconsin—all DDS employees are subject to the furloughs. Two states, California and Hawaii, have announced RIFs. However, DDS employees in California are exempt from the RIF and DDS employees in Hawaii are not among those scheduled to be laid off. However, under Hawaii's civil service rules, it may be possible for an employee subject to the RIF from another state agency to displace a DDS employee with limited seniority. State hiring freezes can have the effect of reducing overall DDS capacity if states are not able to replace DDS employees who retire or separate from service. Nationally in FY2008, the attrition rate for DDS disability examiners was 12.5%, and the SSA Office of the Inspector General (OIG) projected a disability examiner attrition rate of 9.8% for FY2009. As of October 15, 2009, 25 states had implemented or were planning to implement freezes on the hiring of new state employees. Of these 25 hiring freezes, 19 exempt DDS agencies whereas 6 do not. Table 1 lists states that have implemented or are planning to implement hiring freezes. In addition to furloughs, RIFs, and hiring freezes, a number of states have implemented or are planning to implement other personnel actions that, if applied to DDS agencies, could reduce the capacity of the DDS to process new SSDI and SSI applications and continuing disability reviews. The SSA Office of Disability Determination has indentified 20 states that have implemented or are planning to implement personnel actions such as limitations on hiring, overtime, and travel; pay freezes and reductions; and early retirement incentives. In nine of these states, DDS agencies and employees are exempt from these personnel actions. Table 2 provides information on the 11 states with personnel actions that could impact the DDS. Because all expenses associated with the DDS, including non-itemized and administrative expenses, are paid by the SSA, states will see no cost savings as a result of furloughs of DDS employees or other personnel actions such as hiring freezes or limitations on overtime. However, such furloughs and personnel actions would likely have a negative impact on the SSDI and SSI programs as well as on the states themselves. These potential negative impacts on the programs and the states were cited by Commissioner of Social Security Michael Astrue and Vice President Joseph Biden in letters sent in 2009 to Edward Rendell, governor of Pennsylvania and chair of the National Governors Association, urging him to ask state governors not to furlough DDS employees or take other personnel actions that might limit DDS capacity. DDS agencies process nearly all initial disability determinations and most CDRs. Any furloughs or other personnel actions that would limit the total number of cases that could be processed by the DDS would likely have a negative impact on the SSDI and SSI programs. This potential reduced capacity of the DDS to process initial disability applications comes at a time of significant growth in the number of SSDI and SSI applications. The SSA projects that 2.85 million SSDI and SSI applications will need to be processed in FY2010, an 8.1% increase from the number of applications processed in FY2009 and a 12.7% increase since FY2007. A reduced capacity to process initial disability determinations because of a furlough or other personnel action would increase the time claimants would have to wait for an initial decision on their benefit applications, and for applicants ultimately determined to be disabled, would result in benefits being delayed. Although benefits would ultimately be paid on a retroactive basis to the established date of program eligibility, SSI recipients could be forced to wait up to a year beyond the date of their eligibility decisions to receive all of their retroactive benefits. The SSA OIG estimates that a two-day furlough in California would result in 2,375 initial disability determinations and reconsiderations not being performed in the month of the furlough. As a result of these cases not being processed, the SSA OIG estimates that more than $648,000 in SSDI and SSI benefits to 776 approved claimants in California would be delayed because of a two-day furlough in any given month. A furlough or other personnel action affecting DDS employees would have a specific impact on SSDI and SSI applicants with the most severe illnesses and disabilities. Under the SSA's Compassionate Allowance program, SSDI and SSI applications are pre-screened and the applications of claimants with the most severe illnesses and disabilities are processed in an expedited manner to ensure that these claimants receive benefits as soon as possible. A reduced capacity to process initial determinations resulting from a furlough or other personnel action would delay the processing of these expedited cases and the payment of benefits to this population. The processing of CDRs by DDS employees would also be affected by a furlough or other personnel action. Increased processing times for CDRs would result in some SSDI beneficiaries and SSI recipients waiting longer for decisions on their active CDRs and others seeing delays in the commencement of their CDRs. In addition to adding to the current backlog of CDRs, these delays could result in the payment of benefits to SSDI beneficiaries and SSI recipients who no longer meet the statutory definition of disability. States will see no cost savings from implementing furloughs or other personnel actions on DDS employees. Rather, states with reduced processing of DDS workloads may lose portions of their federally funded non-itemized and administrative DDS expenses. Any delays in the payment of SSDI and SSI benefits because of a furlough or other personnel action will result in a state's economy losing the purchasing power of these monthly benefits. In addition, SSDI and SSI applicants waiting for benefit payments may rely on other social programs, such as Temporary Assistance for Needy Families (TANF), Supplemental Nutrition Assistance Program (SNAP), or Unemployment Insurance (UI) that are partially funded or administered by the states. Benefit delays could also result in an increased reliance on Medicaid by program applicants. DDS employees out of work because of a RIF would also likely file for UI benefits until they are able to find replacement work, and the states would lose the tax revenue from their salaries and the purchases they would make.

Initial and continuing determinations of eligibility for the Social Security Disability Insurance (SSDI) and Supplemental Security Income (SSI) programs are made by state Disability Determination Services (DDS). These DDS agencies are fully funded by the federal government. However, because DDS employees work for the states, rather than the federal government, they are subject to furloughs, hiring freezes, and other personnel actions taken by state governments. As of October 15, 2009, 10 states had either furloughed or plan to furlough DDS employees, and 6 states have either implemented or plan to implement hiring freezes that would affect DDS agencies. Eleven states had implemented or planned to implement other personnel actions, such as limitations on overtime or reductions in pay, that would apply to DDS agencies and employees. These furloughs, hiring freezes, and other personnel actions will reduce the capacity of the DDS to process initial SSDI and SSI applications as well as continuing disability reviews (CDRs). This reduced capacity may result in delays in moving people who qualify for SSDI or SSI onto the benefit rolls, which may also result in a greater reliance by these people on benefits funded or administered by the states.

Most federal and state programs of financial assistance to poor and low-income families either increase income or subsidize the purchase of goods and services to help them meet their basic, immediate consumption needs. The exceptions are education and training programs, that seek to build "human capital." More recently, Individual Development Accounts (IDAs) have been developed to help low-income families build financial capital. IDA programs are operated by community-based organizations (including faith-based organizations), as well as state and local governments in partnership with community-based organizations. From the participant's viewpoint, IDAs operate much like retirement 401(k) plans: the participant makes contributions, which are matched (at varying rates) by the program. Withdrawals from IDAs are restricted. Funds can be withdrawn to finance specific activities and purchases—generally, education, the purchase of a home, and to start a business. An individual's contributions may also be withdrawn for other purposes, but this leads to the loss of matching funds. In addition to providing matching funds for accounts, IDA programs also provide financial literacy education, case management, and supportive services to participants. This report describes IDA programs funded by two major federal grants: the Assets for Independence (AFI) Act of 1998 and the Temporary Assistance for Needy Families (TANF) program created in the 1996 welfare reform law. Other federal initiatives that provide for more targeted IDAs (e.g., for refugees and for families in assisted housing) are not discussed in this report. The Assets for Independence Act (AFI, P.L. 105-285 ) authorized up to $25 million per year for FY1999 to 2003 for competitively awarded IDA demonstration programs. Congress has continued the AFI program absent an authorization. The Department of Health and Human Service (HHS) administers the AFI program. Table 1 provides a funding history for IDAs under the AFI program. AFI is funded at $19 million for FY2014. AFI grantees must raise nonfederal funds to operate AFI IDAs. The AFI federal grant to an individual grantee cannot exceed the lesser of (1) the amount of nonfederal resources raised for the program, or (2) $1 million. The AFI Act authorizes competitive grants for IDA programs to nonprofit organizations; state, local, and tribal governments that apply with non-profits; credit unions; and organizations designated by the Secretary of the Treasury as community development financial institutions. Credit unions and community development financial institutions must demonstrate a collaborative relationship with local community-based organizations whose activities are designed to address poverty. Faith-based organizations may also operate IDA programs. Additionally, the AFI Act "grandfathers" in eligibility to operate an IDA program to state programs funded at $1 million or higher that were in operation on the date of enactment. "Grandfathered" state programs need not comply with AFI's rules. Under this provision, Pennsylvania and Indiana received AFI funds. Participation in AFI Act IDA programs is limited to persons who are eligible for TANF assistance; or live in a household with income below 200% of the poverty line or have and have a net worth of less than $10,000. The net worth test takes into account the market value of all assets except the household's primary residence and the value of one motor vehicle. IDAs may be established for the benefit of the participant, as well as his/her spouse and dependents. Since IDAs are targeted to low-income families who might qualify for government aid based on low income and assets, the AFI Act requires that IDA funds be ignored when determining eligibility for federal assistance programs. Participants are required to contribute to their IDA with cash or a check. Contributions from earnings are matched by a minimum $1 for each $1 in participant contributions. Matching amounts are funded from both federal and nonfederal sources, with a minimum 50% funded from nonfederal sources. Maximum matching amounts from federal funds are limited to $2,000 for any one individual and $4,000 for any one household. Participants may withdraw their contributions, match funds, and interest for specified purposes. These specified purposes are as follows: Post-secondary educational expenses. Payments are made directly from the IDA to an educational institution for tuition, fees, books, supplies, and equipment. The purchase of a home. Payments are made directly from the IDA to cover the acquisition costs (including the closing costs) of the home. The acquisition costs cannot exceed 120% of the average purchase price of similar residences in the area. Starting a business. The IDA may be used to finance expenditures under a business plan to acquire plant, equipment, working capital and finance inventory expenses. The business plan must be approved by a financial institution, micro enterprise development organization, or a nonprofit loan fund. The AFI Act allows participants to withdraw their contributions from the IDA to pay medical expenses for the participant and his/her spouse or dependents; payments to prevent the eviction of the participant from her home; and necessary living expenses following loss of employment. Match funds and interest earnings cannot be withdrawn for these emergency expenses. Under the AFI Act, IDA programs must use funds to provide financial literacy education (economic literacy, budgeting, credit, and credit counseling) to IDA participants. Of the federal and nonfederal funds used in the IDA program, up to 15% may be used for such financial literacy, administration, and assisting with an evaluation of the program. As a demonstration program, the AFI Act IDA program has an evaluation component. Organizations operating IDAs are required to submit annual progress reports to the Secretary of Health and Human Services (HHS) and HHS is required to submit periodic reports to Congress. Additionally, the AFI law required an evaluation, which was conducted by the Abt Research organization. Temporary Assistance for Needy Families (TANF) is a federal block grant that gives states broad flexibility in the use of its funds in aiding needy families with children. Generally, TANF funds (and required state monies spent under its "maintenance of effort" requirement) can be used to further any of its statutory goals. In addition, TANF provides specific authority and rules for states to operate IDA programs. States may use TANF and state maintenance of effort funds for IDAs either as an activity that furthers the statute's broad goals, in which case it must conform only to general TANF rules, or under TANF's specific authority to use funds for IDAs, in which case it must follow TANF's specific IDA rules. The TANF law provides explicit authority for states to use federal block grant funds for IDA programs and rules for their operation. Under this provision, IDA programs may be established for individuals eligible for TANF assistance who may make contributions from earned income to the account. Many of the rules for the TANF IDA are similar to the rules under the AFI Act: contributions are to be matched through a nonprofit organization or a state and local government (though there are no limits to matching rates or amounts); withdrawals may be made for educational expenses, purchase of a first home, or starting a business; and the IDA is not to be considered when determining the financial eligibility status of a recipient applying for or receiving federal aid. Eligibility to participate in TANF IDA programs is limited to those "eligible" for TANF assistance. There are no provisions for "emergency" withdrawals from TANF IDAs. As mentioned above, IDAs may also be established under TANF's authority to permit federal and state funds to be used to accomplish any TANF purpose. Except for general requirements regarding the use of TANF funds, states are free to design IDA programs without regard to federal limits and rules. For example, such IDAs may be established for purposes other than educational expenses, home purchase, or starting a business—such as purchasing a car. Boshara, Ray. Individual Development Accounts: Policies to Build Savings and Assets for the Poor. Brookings Institution Policy Brief, Welfare Reform and Beyond #32. March 2005. Sheridan, Michael. Assets and the Poor. M.E. Sharpe Inc., Armonk, New York. 1991.

Individual Development Accounts (IDAs) are savings accounts to help low-income families and persons save for specified purposes, usually education, purchase of a home, or to start a business. IDA programs match an individual's contributions, much like retirement 401(k) accounts. The Assets For Independence (AFI) Act, enacted by Congress in 1998, specifically authorizes IDA demonstration programs. Authorization for the AFI program expired at the end of FY2003, though Congress continued to appropriate money for the program. AFI is funded at $19.026 million for FY2014.

HHS’ ability to use the Special Reserve Fund for the procurement of countermeasures is predicated on a six-step process involving coordination with DHS and approval by the Director of the Office of Management and Budget (OMB). As provided in the BioShield Act, the process requires: 1. the DHS Secretary, in consultation with the HHS Secretary and the heads of other agencies as appropriate, to determine that a material threat exists and issue a “material threat determination;” 2. the HHS Secretary to determine countermeasures that are necessary to protect the public health; 3. the HHS Secretary to determine that a particular countermeasure is appropriate for procurement for the Strategic National Stockpile using the Special Reserve Fund and the quantities to be procured; 4. the DHS and HHS Secretaries to jointly recommend to the Director of OMB that the Special Reserve Fund should be used for the designated countermeasure acquisitions; 5. the director of OMB to approve the use of the Special Reserve Fund; 6. both Secretaries to notify designated congressional committees of the procurement. The BioShield Act also provides HHS the ability to use four new contracting authorities for the acquisition of countermeasures. In general, these authorities expanded upon existing provisions in the Federal Acquisition Regulation (FAR). The four authorities are: Simplified acquisition procedures which, in general, increased HHS contract threshold amounts from $100,000 to $25 million. However, the BioShield Act does not place a threshold limit on countermeasures that are procured using the Special Reserve Fund if the HHS Secretary determines there is a pressing need for the specific countermeasure. Procedures other than full and open competition can be used to award contracts when the requirement is only available from one responsible source or a limited number of responsible sources. In addition, in order to conduct procurements on a basis other than full and open competition using simplified acquisition procedures, the HHS Secretary must determine that the mission of the BioShield Program under the Act would be seriously impaired without such a limitation. Increased micropurchase threshold from $2,500 to $15,000. Personal services contracts may be used for experts or consultants who have scientific or other professional qualifications when the HHS Secretary determines such contracts are necessary to respond to pressing countermeasure research and development needs. In 2006, the Pandemic and All-Hazards Preparedness Act (PAHPA), among other things, established the Biomedical Advanced Research and Development Authority (BARDA), within HHS, to provide a coordinated, systematic approach to the development and purchases of countermeasures, including vaccines, drugs, therapies, and diagnostic tools. Later, in 2009, Congress transferred the following amounts from the Special Reserve Fund to HHS accounts: $275 million to be used for the advanced research and development of countermeasures and $137 million for influenza pandemic preparation. HHS has used its Special Reserve Fund (purchasing) authority and one of its contracting authorities to procure countermeasures for the Strategic National Stockpile. Since 2004, HHS awarded nine contracts using Special Reserve Fund monies to procure various countermeasures, such as anthrax and botulism antitoxins, vaccines for anthrax and smallpox, and post-exposure treatments for radiation poisoning in children and adults. Of the nine contracts awarded using monies from the Fund, HHS terminated one contract, in 2006, because the contractor was unable to meet a major contractual milestone. To date, the remaining eight contracts are valued at almost $2 billion. See table 1. In addition, HHS officials told us there are currently two requests for proposal solicitations for an anthrax vaccine and a smallpox therapeutic. Of the four contracting authorities provided under the BioShield Act, HHS has only used the simplified acquisition procedure authority. From 2004 through 2005, HHS’s National Institutes of Health (NIH) used this authority to award five other contracts, including ones for research to develop a botulism antitoxin and improved treatments for radiation poisoning. Awarded with NIH funding, these contracts have a total value of almost $30 million when options and other later modifications are included. See table 2. HHS officials told us that they have not used this authority since 2005. HHS officials also told us that no other BioShield contracting authorities have been used to date, although the officials noted that these authorities may be needed for use in the future. In response to BioShield requirements, HHS has established internal controls on its Special Reserve Fund (purchasing) and contracting authorities, but lacks adequate documentation of the risks of using the new contracting authorities. Language in the BioShield Act sets up a broad framework of controls over the procurement of countermeasures, including those with Special Reserve Funds, by requiring HHS to coordinate with DHS and obtain approval by OMB before the Fund may be used. In addition to the language in the Act, HHS officials told us that the internal controls for procuring countermeasures using the Fund are documented in a variety of internal policy and procedure documents and interagency agreements, which provide guidance on roles and responsibilities for how the controls are to be implemented. These documents include: an HHS policy document that establishes an enterprise governance board to oversee requirements and priority-setting regarding emergency medical countermeasures for the civilian population. The document also outlines the authorities, organizational structure, and guidelines for the board; an HHS budget execution document that delineates responsibilities and describes the processes for requesting contract actions, purchases, and interagency agreements; a BARDA standard operating procedure document that provides contracting and other BARDA officials with guidance on source selection procedures and outlines specific responsibilities in carrying out those procedures; a BARDA acquisition plan which details the pre- and post-award approval processes for procurements using the Fund; an interagency agreement between HHS and DHS dated September 25, 2006, that outlines the terms and conditions for when the Fund can be used; and an OMB Circular on transferring budget authority from one agency to another. HHS has also established internal controls for the contracting authorities that were specified in the BioShield Act. On October 18, 2005, HHS issued a memorandum that provided guidance on the use of the following contracting authorities: the increased simplified acquisition threshold and its use with the Special Reserve Fund, the increased micropurchase threshold, and the use of personal services contracts. HHS’s memo is structured around the five elements of internal control: the control environment, risk assessment, control activities, information and communications, and monitoring. Federal internal control standards state that management needs to comprehensively identify risks, analyze them for possible effect, and determine how risks should be managed. Federal internal control standards also state that controls need to be clearly documented, readily available for examination, and distributed in a form and time frame that permits people to perform their duties efficiently. Risk assessment statements we reviewed in the memo are generally not assessments of the risks involved in using particular authorities. Some of the risk statements identify some risks and one mentions possible negative consequences that could occur without proper controls in place, but the statements lack an analysis of those risks. For example, the risk assessment statement for using the increased micropurchase threshold states that “control procedures are necessary to prevent noncompliance with specific requirements of the Act, including exceeding statutory limitation on number of contracts and selections based on improper criteria.” And, the risk assessment statement on increased simplified acquisition procedures does not mention or assess risk. It simply states that “control procedures are necessary to prevent noncompliance with specific requirements of the Act.” In particular, the risk statement on simplified acquisition procedures in the memo does not discuss a key risk associated with using simplified acquisition procedures—namely, that an agency is prohibited from obtaining cost or pricing data for acquisitions at or below the simplified acquisition threshold. According to a senior BARDA procurement official, while using simplified acquisition procedures can expedite the procurement process, the agency will not have cost and pricing data, which may be needed to determine that the price of a contract—especially those valued in the tens of millions or hundreds of millions—is fair and reasonable. In a subsequent meeting, he stated that he is aware of these trade-offs based on his own experience and knowledge of the FAR. He also confirmed that an explanation assessing the trade-offs and risks involved when using the new contracting authorities is not contained in other HHS documents. Instead, this official acknowledged that HHS’s written guidance on the controls for the contracting authorities does not document known risks and trade-offs of using the authorities. As a result, implementation of these controls depends on the experience and knowledge of current personnel. Moreover, the consistent application of these controls is not likely to be sustained over time as employees leave their positions and new ones take their place. Not having adequately documented and appropriately communicated risk assessments, which institutionalize agency policies, may potentially result in future employees not knowing or understanding the risks or tradeoffs involved in using the various contracting authorities. Since the enactment of the BioShield Act in 2004, HHS has awarded almost $2 billion in contracts to either procure medical countermeasures or to facilitate their development. Although HHS has established internal controls for its new purchasing and contracting authorities, the risk assessment statements related to the agency’s internal controls for the contracting authorities are not sufficiently specific. In particular, the failure to mention and lack of analysis of specific risks in the risk statements associated with using the increased micropurchase threshold and increased simplified acquisition procedures is not consistent with requirements under federal internal control standards. With employee turnover, the lack of adequately documented risk assessment statements could create a situation in which employees do not know the risks or trade-offs involved in using the various authorities. The effectiveness of the internal controls now in place is dependent on the knowledge of individuals currently working at the agency. Without appropriately documented risk assessments that institutionalize agency policies, HHS will be unable to ensure that sound, informed, and consistent decisions will be made in the face of employee turnover. We recommend that the Secretary of Health and Human Services include comprehensive risk assessment statements in written guidance on the internal controls for the BioShield contracting authorities for which the agency was required to establish controls. HHS provided us with written comments on a draft of this report. The comments appear in appendix I. HHS agreed with our recommendation and said that it will revise its internal control guidance on risk assessments for using BioShield contracting authorities. We believe that this is a positive step toward helping ensure that sound, informed, and consistent risk assessments will be made in BioShield acquisitions. HHS also provided observations on the Special Reserve Fund and risk assessments, which appear in appendix I. We are sending copies of this report to the Secretary of Health and Human Services. The report is also available at no charge on the GAO Web site at http://www.gao.gov. If you or your staff have any questions about this report, please contact me at (202) 512-4841 or NeedhamJK1@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II. In addition to the contact named above, Carol Dawn Petersen, Assistant Director; Angela D. Thomas, Kelly Bradley, Robert S. Swierczek, Marie P. Ahearn, and Kenneth E. Patton made key contributions to this report.

The Project BioShield Act of 2004 (BioShield Act) increased the federal government's ability to procure needed countermeasures to address threats from chemical, biological, radiological, and nuclear agents. Under the BioShield Act, the Department of Health and Human Services (HHS) was provided with new contracting authorities (increased simplified acquisition and micropurchase thresholds, and expanded abilities to use procedures other than full and open competition and personal services contracts) and was authorized to use about $5.6 billion in a Special Reserve Fund to procure countermeasures. Based on the BioShield Act's mandate, GAO reviewed (1) how HHS has used its purchasing and contracting authorities, and (2) the extent to which HHS has internal controls in place to manage and help ensure the appropriate use of its new authorities. To do this work, GAO reviewed contract files and other HHS documents, including internal control guidance, which GAO compared with federal statutes and federal internal control standards. Since 2004, HHS has awarded nine contracts using its Special Reserve Fund (Fund) purchasing authority under the BioShield Act to procure countermeasures that address anthrax, botulism, smallpox, and radiation poisoning. HHS may procure countermeasures that are approved by the Food and Drug Administration and ones that are unapproved, but are within 8 years of approval. Of the nine contracts, one was terminated for convenience and the remaining eight are valued at almost $2 billion. HHS officials told GAO that additional contracts are likely to be awarded in the near future as the Fund provides funding through fiscal year 2013. In addition, HHS has used one of its new contracting authorities, simplified acquisition procedures, although it has not used this authority since 2005. HHS has established internal controls on its new purchasing and contracting authorities. In addition to the language in the BioShield Act, which sets up a broad framework of controls over the use of the Special Reserve Fund, the internal controls for this purchasing authority are documented in a variety of internal policy and procedure documents and interagency agreements, which provide guidance on roles and responsibilities for how the controls are to be implemented. In response to BioShield Act requirements, HHS also established internal controls for three of the contracting authorities: the increased simplified acquisition threshold and its use with Special Reserve Funds, the increased micropurchase threshold, and the use of personal services contracts. Federal internal control standards state that, among other things, management needs to comprehensively identify risks, analyze them for possible effect, and determine how risks should be managed. Although some of the risk statements in a memo HHS issued identify some risks and one mentions possible negative consequences that could occur without proper controls in place, the risk statements for using the increased micropurchase threshold and increased simplified acquisition procedures lack analysis of specific risks. In particular, the memo does not discuss a key risk associated with using simplified acquisition procedures--namely, that an agency is prohibited from obtaining cost or pricing data for acquisitions at or below the simplified acquisition threshold. Without this data, the agency may not be able to determine if the price of a contract is fair and reasonable. Moreover, not having adequately documented and appropriately communicated risk assessments potentially results in future employees not knowing or understanding the risks or trade-offs involved in using the authorities. With employee turnover, HHS' reliance on the knowledge of current personnel to appropriately implement key controls will not enable future employees to make sound, informed, and consistent decisions.

The Senate's emphasis on individual and minority rights, reflected in both its standing rules and chamber custom, can make it challenging for the chamber to achieve its various goals in a timely manner. For this reason, the Senate routinely chooses to set aside its standing rules by unanimous consent. This is done formally through UC agreements, which in many cases outline the terms under which specific legislation will be considered. Under recent practice, these UC agreements sometimes include a provision imposing a 60-vote requirement for approval of amendments or legislation, instead of the simple majority vote ordinarily required in the Senate. These amendments or measures are sometimes of a controversial nature with potential to be subjected to extended consideration or even a filibuster. By incorporating a 60-vote threshold, such UC agreements avoid the multiple requirements associated with Senate Rule XXII, both for invoking cloture and for consideration under cloture. Such UC agreements ensure that a measure will not be successful without the same level of super-majority support that would be required for cloture by stipulating that if the 60-vote threshold is not reached, the matter will be disposed of. As with all UC agreements, once agreed to, they can be altered only by the adoption of a further UC agreement. Several possible effects could result from the Senate choosing to impose a 60-vote threshold for the passage of legislation. First, for cases in which a large majority of Senators is in favor of or opposed to the question, the time that would ordinarily be required to invoke cloture can be avoided. Once a cloture petition has been submitted, it must lay over until the second calendar day that the Senate is in session before a vote on cloture occurs. For a cloture vote to be successful, in most cases three-fifths of all Senators must vote in the affirmative (i.e., 60 votes if there are no vacancies). If the cloture vote is successful, another 30 hours of consideration are in order before a vote on the underlying business must occur. Incorporating the 60-vote threshold into a UC agreement allows the Senate to bypass these time consuming requirements. Second, for cases in which a large majority either in favor of or against the question cannot be assumed, the 60-vote threshold accomplishes the same purpose as a filibuster by preventing or delaying passage, but without requiring the Senate to engage in extended debate. Thus, surrendering the right to filibuster may be more palatable if Senators are confident a measure will not pass without super-majority support. Another reason that a 60-vote threshold might be included in a UC agreement is that it presents Senators with an opportunity to vote directly on the underlying policy issue. Votes on cloture often fail and consequently a vote on the actual measure or amendment may never occur. The 60-vote threshold in a UC agreement has the effect of bypassing the procedural vote to grant Senators a direct vote on the policy issue at hand. Lastly, in many of these 60-vote threshold UC agreements, it is a pair (or group) of amendments or measures that are jointly held to the 60-vote requirement. Many of the pairs (or groups) are competing options for the same policy issue. This allows the Senate to debate and choose between contending alternatives in a timely and controlled manner. Although examples of UC agreements placing a similar 60-vote threshold provisions can be found dating from at least the early 1990s, the practice has increased in frequency over the last four years. Unanimous consent agreements that impose a 60-vote threshold may be agreed to at any time, either in advance, or during consideration. It is notable that unlike Senate rules requiring super majorities, which typically are framed in terms of a fraction either of the membership or those voting (e.g., two-thirds, three-fifths), these UC agreements explicitly state the number of votes required. Given that practices generally specify disposition for a question that achieves a majority vote, but not a super-majority vote imposed by unanimous consent, the language of these UC agreements typically provides for disposition of the amendment or measure if it fails to achieve the required 60 votes. Typically, the matter is withdrawn, but it could alternately be laid on the table or returned to the calendar For example, in one UC agreement, the Senate agreed that "... two amendments be subject to a 60 affirmative vote threshold, and that if neither achieves that threshold, then it be withdrawn." Unanimous consent agreements including a 60-vote threshold may be used not just to avoid the steps associated with invoking cloture, but also to avoid a separate vote on waiving a point of order raised under the Congressional Budget Act. In the Senate, most points of order under the Budget Act may be waived by a vote of at least three-fifths of all Senators duly chosen and sworn (60 votes if there are no vacancies). In one UC agreement, the Senate agreed to a 60-vote threshold for the passage of a conference report stipulating that a vote on the waiving of a Budget Act point of order also be treated as a simultaneous vote on adoption.

The Senate frequently enters into unanimous consent agreements (sometimes referred to as "UC agreements" or "time agreements") that establish procedures for the consideration of legislation that the Senate is considering or will soon consider. In recent practice, such unanimous consent agreements have sometimes included a provision that would require a 60-vote threshold to be met for amendments or legislation to be considered agreed to, rather than the simple majority ordinarily required. These amendments or measures may be of a controversial nature with the potential for causing a filibuster. By incorporating a 60-vote threshold, such UC agreements avoid the multiple requirements imposed by Senate Rule XXII for invoking cloture, while preserving the same requirement for super-majority support. This report will be updated each session of Congress.

Fiscal sustainability presents a national challenge shared by all levels of government. The federal government and state and local governments share in the responsibility of fulfilling important national goals, and these subnational governments rely on the federal government for a significant portion of their revenues. To provide Congress and the public with a broader perspective on our nation’s fiscal outlook, we developed a fiscal model of the state and local sector. This model enables us to simulate fiscal outcomes for the entire state and local government sector in the aggregate for several decades into the future. Our state and local fiscal model projects the level of receipts and expenditures for the sector in future years based on current and historical spending and revenue patterns. This model complements GAO’s long-term fiscal simulations of federal deficits and debt levels under varying policy assumptions. We have published long-term federal fiscal simulations since 1992. We first published the findings from our state and local fiscal model in 2007. Our model shows that the state and local government sector faces growing fiscal challenges. The model includes a measure of fiscal balance for the state and local government sector for each year until 2050. The operating balance net of funds for capital expenditures is a measure of the ability of the sector to cover its current expenditures out of current receipts. The operating balance measure has historically been positive most of the time, ranging from about zero to about 1 percent of gross domestic product (GDP). Thus, the sector usually has been able to cover its current expenses with incoming receipts. Our January 2008 report showed that this measure of fiscal balance was likely to remain within the historical range in the next few years, but would begin to decline thereafter and fall below the historical range within a decade. That is, the model suggested the state and local government sector would face increasing fiscal stress in just a few years. We recently updated the model to incorporate current data available as of August 2008. As shown in Figure 1, these more recent results show that the sector has begun to head out of balance. These results suggest that the sector is currently in an operating deficit. Our simulations show an operating balance measure well below the historical range and continuing to fall throughout the remainder of the simulation timeframe. Since most state and local governments are required to balance their operating budgets, the declining fiscal conditions shown in our simulations suggest the fiscal pressures the sector faces and are a foreshadowing of the extent to which these governments will need to make substantial policy changes to avoid growing fiscal imbalances. That is, absent policy changes, state and local governments would face an increasing gap between receipts and expenditures in the coming years. One way of measuring the long-term challenges faced by the state and local sector is through a measure known as the “fiscal gap.” The fiscal gap is an estimate of the action needed today and maintained for each and every year to achieve fiscal balance over a certain period. We measured the gap as the amount of spending reduction or tax increase needed to maintain debt as a share of GDP at or below today’s ratio. As shown in figure 2, we calculated that closing the fiscal gap would require action today equal to a 7.6 percent reduction in state and local government current expenditures. Closing the fiscal gap through revenue increases would require action of the same magnitude to increase state and local tax receipts. Growth in health-related costs serves as the primary driver of the fiscal challenges facing the state and local sector over the long term. Medicaid is a key component of their health-related costs. CBO’s projections show federal Medicaid grants to states per recipient rising substantially more than GDP per capita in the coming years. Since Medicaid is a federal and state program with federal Medicaid grants based on a matching formula, these estimates indicate that expenditures for Medicaid by state governments will rise quickly as well. We also estimated future expenditures for health insurance for state and local employees and retirees. Specifically, we assumed that the excess cost factor—the growth in these health care costs per capita above GDP per capita—will average 2.0 percentage points per year through 2035 and then begin to decline, reaching 1.0 percent by 2050. The result is a rapidly growing burden from health-related activities in state and local budgets. Our simulations show that other types of state and local government expenditures—such as wages and salaries of state and local workers, pension contributions, and investments in infrastructure—are expected to grow slightly less than GDP. At the same time, most revenue growth is expected to be approximately flat as a percentage of GDP. The projected rise in health- related costs is the root of the long-term fiscal difficulties these simulations suggest will occur. Figure 3 shows our simulations for expenditure growth for state and local government health-related and other expenditures. On the receipt side, our model suggests that most of these tax receipts will show modest growth in the future—and some are projected to experience a modest decline—relative to GDP. We found that state personal income taxes show a small rise relative to GDP in coming years. This likely reflects that some state governments have a small degree of progressivity in their income tax structures. Sales taxes of the sector are expected to experience a slight decline as a percentage of GDP in the coming years, reflecting trends in the sector’s tax base. While historical data indicate that property taxes—which are mostly levied by local governments—could rise slightly as a share of GDP in the future, recent events in the housing market suggest that the long-term outlook for property tax revenue could also shift downward. These differential tax growth projections indicate that any given jurisdiction’s tax revenue prospects are uniquely tied to the composition of taxes it imposes. The only source of revenue expected to grow rapidly under current policy is federal grants to state governments for Medicaid. That is, we assume that current policy remains in place and the shares of Medicaid expenditures borne by the federal government and the states remain unchanged. Since Medicaid is a matching formula grant program, the projected escalation in federal Medicaid grants simply reflects expected increased Medicaid expenditures that will be shared by state governments. These long-term simulations do not attempt to assume how recent actions to stabilize the financial system and economy will be incorporated into the federal budget estimates in January 2009. The outlook presented by our state and local model is exacerbated by current economic conditions. During economic downturns, states can experience difficulties financing programs such as Medicaid. Economic downturns result in rising unemployment, which can lead to increases in the number of individuals who are eligible for Medicaid coverage, and in declining tax revenues, which can lead to less available revenue with which to fund coverage of additional enrollees. For example, during the most recent period of economic downturn prior to 2008, Medicaid enrollment rose 8.6 percent between 2001 and 2002, which was largely attributed to states’ increases in unemployment. During this same time period, state tax revenues fell 7.5 percent. According to the Kaiser Commission on Medicaid and the Uninsured, in 2008, most states have made policy changes aimed at controlling Medicaid costs. Recognizing the complex combination of factors affecting states during economic downturns—increased unemployment, declining state revenues, and increased downturn-related Medicaid costs—this Committee and several others asked us to assist them as they considered a legislative response that would help states cope with Medicaid cost increases. In response to this request, our 2006 report on Medicaid and economic downturns explored the design considerations and possible effects of targeting supplemental assistance to states when they are most affected by a downturn. We constructed a simulation model that adjusts the amount of funding a state could receive on the basis of each state’s percentage increase in unemployment and per person spending on Medicaid services. Such a supplemental assistance strategy would leave the existing Medicaid formula unchanged and add a new, separate assistance formula that would operate only during times of economic downturn and use variables and a distribution mechanism that differ from those used for calculating matching rates. This concept is embodied in the health reform plan released by Chairman Baucus last week. Using data from the past three recessions, we simulated the provision of such targeted supplemental assistance to states. To determine the amount of supplemental federal assistance needed to help states address increased Medicaid expenditures during a downturn, we relied on research that estimated a relationship between changes in unemployment and changes in Medicaid spending. Our model incorporated a retrospective assessment which involved assessing the increase in each state’s unemployment rate for a particular quarter compared to the same quarter of the previous year. Our simulation included an economic trigger turned on when 23 or more states had an increase in the unemployment rate of 10 percent or more compared to the unemployment rate that existed for the same quarter 1 year earlier (such as a given state’s unemployment rate increasing from 5 percent to 5.5 percent). We chose these two threshold values—23 or more states and increased unemployment of 10 percent or more—to work in tandem to ensure that the national economy had entered a downturn and that the majority of states were not yet in recovery from the downturn. These parameters were based on our quantitative analysis of prior recessions. As shown in figure 4, for the 1990-1991 downturn, 6 quarters of assistance would have been provided beginning with the third quarter of 1991 and ending after the fourth quarter of 1992. Analysis of recent unemployment data indicate that such a strategy would already be triggered based on changes in unemployment for 2007 and 2008. In other words, current data confirm the economic pressures currently facing the states. Considerations involved in such a strategy include: Timing assistance so that it is delivered as soon as it is needed, Targeting assistance according to the extent of each state’s downturn, Temporarily increasing federal funding so that it turns off when states’ economic circumstances sufficiently improve, and Triggering so the starting and ending points of assistance respond to indicators of states’ economic distress. Any potential legislative response would need to be considered within the context of broader health care and fiscal challenges—including continually rising health care costs, a growing elderly population, and Medicare and Medicaid’s increasing share of the federal budget. Additional criteria could be established to accomplish other policy objectives, such as controlling federal spending by limiting the number of quarters of payments or stopping payments after predetermined spending caps are reached. The federal government depends on states and localities to provide critical services including health care for low-income populations. States and localities depend on the federal government to help fund these services. As the largest share of federal grant funding and a large and growing share of state budgets, Medicaid is a critical component of this intergovernmental partnership. The long-term structural fiscal challenges facing the state and local sector further complicate the provision of Medicaid services. These challenges are exacerbated during periods of economic downturn when increased unemployment leads to increased eligibility for the Medicaid program. The current economic downturn presents additional challenges as states struggle to meet the needs of eligible residents in the midst of a credit crisis. Our work on the long-term fiscal outlook for state and local governments and strategies for providing Medicaid-related fiscal assistance is intended to offer the Committee a useful starting point for considering strategic evidence-based approaches to addressing these daunting intergovernmental fiscal issues. For information about this statement for the record, please contact Stanley J. Czerwinski, Director, Strategic Issues, at (202) 512-6806 or czerwinskis@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Individuals making key contributions to this testimony and related products include: Kathryn G. Allen, Director, Quality and Continuous Improvement; Thomas J. McCool, Director, Center for Economics; Amy Abramowitz, Meghana Acharya, Romonda McKinney Bumpus, Robert Dinkelmeyer, Greg Dybalski, Nancy Fasciano, Jerry Fastrup, Carol Henn, Richard Krashevski, Summer Lingard, James McTigue, Donna Miller, Elizabeth T. Morrison, Michelle Sager, Michael Springer, Jeremy Schwartz, Melissa Wolf, and Carolyn L. Yocom. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

GAO was asked to provide its views on projected trends in health care costs and their effect on the long-term outlook for state and local governments in the context of the current economic environment. This statement addresses three key points: (1) the state and local government sector's long-term fiscal challenges; (2) rapidly rising health care costs which drive the sector's long-term fiscal difficulties, and (3) the considerations involved in targeting supplemental funds to states through the Medicaid program during economic downturns. To provide Congress and the public with a broader perspective on our nation's fiscal outlook, GAO previously developed a fiscal model of the state and local sector. This model enables GAO to simulate fiscal outcomes for the sector in the aggregate for several decades into the future. GAO first published the findings from the state and local fiscal model in 2007. This statement includes August 2008 data to update the simulations. This Committee and others also asked GAO to analyze strategies to help states address increased Medicaid expenditures during economic downturns. GAO simulated the provision of such supplemental assistance to states. As we previously reported, the simulation model adjusts the amount of funding states would receive based on changes in unemployment and spending on Medicaid services. Rapidly rising health care costs are not simply a federal budget problem. Growth in health-related spending also drives the fiscal challenges facing state and local governments. The magnitude of these challenges presents long-term sustainability challenges for all levels of government. The current financial sector turmoil and broader economic conditions add to fiscal and budgetary challenges for these governments as they attempt to remain in balance. States and localities are facing increased demand for services during a period of declining revenues and reduced access to capital. In the midst of these challenges, the federal government continues to rely on this sector for delivery of services such as Medicaid, the joint federal-state health care financing program for certain categories of low-income individuals. Our model shows that in the aggregate the state and local government sector faces growing fiscal challenges. Incorporation of August 2008 data shows that the position of the sector has worsened since our January 2008 report. The long-term outlook presented by our state and local model is exacerbated by current economic conditions. During economic downturns, states can experience difficulties financing programs such as Medicaid. Downturns result in rising unemployment, which can increase the number of individuals eligible for Medicaid, and declining tax revenues, which can decrease revenue available to fund coverage of additional enrollees. GAO's simulation model to help states respond to these circumstances is based on assumptions under which the existing Medicaid formula would remain unchanged and add a new, separate assistance formula that would operate only during times of economic downturn. Considerations involved in such a strategy could include: (1) timing assistance so that it is delivered as soon as it is needed, (2) targeting assistance according to the extent of each state's downturn, (3) temporarily increasing federal funding so that it turns off when states' economic circumstances sufficiently improve, and (4) triggering so the starting and ending points of assistance respond to indicators of economic distress.

RS20798 -- Taiwan: Findings of a Congressional Staff Research Trip, December 2000 January 31, 2001 Background. Elected in March 2000 with 39% of the popular vote, (1) Taiwan President Chen Shui-bian hassince faced an uncooperative legislature and has endeavored to establish a firm grip on his government. Chen'sDemocratic Progressive Party (DPP) currentlyholds only 67 seats in Taiwan's 225-member legislature, the Legislative Yuan. The Nationalist Party, orKuomintang (KMT), which lost the presidential election- the first time it has not ruled the Republic of China (ROC) - holds a plurality of 109 seats. Together, threeopposition parties - the KMT, the New Party, and thePeople First Party (PFP) - which tend to be economically and politically conservative compared to the DPP andmore inclined to consider eventual unificationwith China, have blocked, thwarted, and defied many of Chen Shui-bian's policies. Because the DPP lacksadministrative experience, many leadership postswithin the government remain filled by KMT members. Chen Shui-bian has faced several contentious issues during his first several months as President. These include: an economic downturn; labor demonstrations; Chen's anti-corruption campaign aimed at KMT vote-buying and gang-related politics ("black gold"); and PremierChang Chun-hsiung's announcement that workon Taiwan's fourth nuclear power plant, a project begun by the previous KMT government, would be halted. Opposition members have threatened to introducemotions of no confidence in Premier Chang and to recall President Chen. However, they have recently backeddown, partly in response to public demands toreduce political deadlock. Research Trip Findings. Taiwan's democracy is experiencing a period of rancor and instability as it undergoesa process of political maturation. Some Taiwanese government and party officials repeated the saying that "theDPP has not yet learned how to rule while theKMT has not yet learned how not to rule." The congressional staff delegation observed severalimportant features of Taiwan's "transition politics." One, thepolitical system lacks institutions for moderating partisanship and facilitating the transfer of power. For example,few formal and informal procedures andprecedents have been established for divided government. Two, Taiwanese political parties do not have experienceforming coalitions and creating stableparliamentary majorities. Three, voter identification tends to be unstable and unpredictable. A DPP representativeexplained that political personalities, ratherthan party ideologies, drive Taiwanese politics. An American observer stated that intra-party factionalism furtherdestabilizes Taiwanese politics. Four, the massmedia, though "free," lack traditions of objective reporting. A spokesperson for the Government Information Officestated that most mass media in Taiwan,including newspapers and television, are government- or party-affiliated and politically-biased. (2) There are no firm indications about how Taiwan's political parties will fare in the December 2001 legislative elections, although no party is expected to attain amajority in the Legislative Yuan. According to an American observer at the American Chamber of Commerce(AmCham) in Taipei, while the KMT continues towield economic clout and political influence, its popularity has continued to wane for several reasons: it has notdemocratized from within, expanded its partybase, created a compelling alternative vision for the country, or produced a charismatic leader. Background. President Chen faces some troubling economic indicators. At the end of 2000, Taiwan's stockmarket had fallen by more than 50% since Chen's election and unemployment had reached a 15-year high. (3) Taiwanese investment in the People's Republic ofChina (PRC) nearly doubled in 2000, which resulted in the transfer of many skilled and high tech jobs to themainland. According to some estimates,non-performing loans have reached 12-17 percent of all Taiwan bank loans. (4) Research Trip Findings. An expert at the American Institute in Taiwan (AIT), which conducts U.S.-ROCrelations, stated that the notion of a "troubled" Taiwanese economy is more a perception than a reality. Nonetheless,AIT officials envisioned several long-termtrends that would challenge the Taiwanese economy. These include declining exports to the United States,increasing imports from abroad if Taiwan joins theWTO, (5) greater economic competition from China,the loss of global competitive advantage of some Taiwanese export items, and falling consumer demand athome. Some American and Taiwanese economic analysts viewed China as the key to Taiwan's continueddevelopment. They told the delegation that the PRC'saccession to the WTO and direct trade, transportation, and communication between the mainland and Taiwan wouldfurther open China to Taiwanese investmentand exports. Because of a common language and culture, Taiwanese investors and traders on the mainland alreadyhave an edge over their American, Japanese,and European counterparts. However, ROC government officials stated that some restrictions on investment inmainland China were necessary in order to helppreserve Taiwanese technological superiority, economic autonomy, and political leverage. DPP Policy. The platform of the DPP has long advocated independence for Taiwan. (7) However, in hisinauguration speech of May 20, 2000, Chen Shui-bian promised that, as long as the PRC did not use military forceagainst Taiwan, he would not declareindependence. (8) Analysts have posited several factorsand considerations that may explain Chen's break from past positions and pro-independence members inhis party, including Chen's pragmatic nature, pressure from the PRC, Taiwanese public opinion, and U.S.-Chinarelations. Opposition Party Efforts. While President Chen and the PRC government have made little progress in breakingthe impasse on opening formal talks, many opposition lawmakers - up to one-third of the legislature - reportedlyhave gone to Beijing to engage in informaldiscussions on cross-strait issues. They and the PRC government have appeared eager both to resume the dialoguethat broke off in 1995 and to underminePresident Chen's role in the process. (9) Chen Shui-bianhas expressed a willingness to resume cross-strait talks, but without agreeing to the PRC's "one-Chinaprinciple" as a starting point. By contrast, opposition leaders have been more accepting of the "one-China" principleas a basis of negotiations. (10) Research Trip Findings. Taiwanese and American political experts told the delegation that following the March2000 presidential election, both the DPP and the KMT have taken more conciliatory stances toward the mainland. The KMT has downplayed former PresidentLee Teng-hui's suggested "state-to-state" framework for negotiations. The DPP has conveyed greater acceptanceof the idea that some political accommodationwith the PRC is inevitable, while the independence faction within the party has been marginalized. Severalgovernment officials privately suggested that VicePresident Annette Lu, an ardent member of the independence faction, does not enjoy widespread public support. An official at the ROC Mainland Affairs Council (MAC) stated that DPP and KMT positions on cross-straitissues have converged somewhat. Both partiessupport the "status quo" - a position of neither independence nor unification - for the time being. Both put forthdemocratization on the mainland as a conditionfor substantive moves toward greater political ties or unification. A DPP authority on international affairs cautioned,however, that the maintenance of Taiwan'ssovereignty is still a central goal of the party. He suggested that sovereignty could be achieved in two ways -through independence or a cross-strait politicalarrangement that is mandated by the Taiwanese electorate. Background. Despite the uncertain and often tense political atmosphere, cross-strait economic ties have grownconsiderably since the late 1980s. Bilateral trade was worth $25.8 billion in 1999, up 14.5 percent from 1998. Inthe first half of 2000, cross-strait trade increased29%. According to PRC data, Taiwan is China's largest source of imports. Taiwanese firms have invested anestimated $40 billion in more than 40,000enterprises on the mainland. Some analysts report that business interests on both sides of the strait are pursuinggreater economic cooperation in preparation forPRC and ROC accession to the WTO. (11) Research Trip Findings. Taiwanese leaders explained that growing economic ties with the mainland havecreated a dilemma for the new government. On the one hand, the mainland economy provides ample opportunitiesfor Taiwanese businesses. Economicinterdependence may also discourage the PRC from using force against Taiwan. On the other hand, Taiwaneseofficials worried, increased investment may causeTaiwan to lose jobs and technological know-how to the mainland. Furthermore, if the Taiwanese economy wereto become too intertwined with that of themainland, it may become vulnerable to economic shocks on the mainland or Taiwan may become beholden to PRCpolitical demands. Nonetheless, the DPP hascautiously encouraged greater trade and investment. President Chen has considered easing existing restrictions onTaiwanese businesses, which apply tolarge-scale investment, construction, and high tech manufacturing on the mainland. On January 2, 2001, the Chenadministration formally opened two ROCoffshore islands to trade and travel with the mainland as a precursor to broader direct links. (12) Research trip findings. (13) Officials of the ROC government and military establishment discussed military andpolitical solutions to the cross-strait tensions. Officials at the Ministry of National Defense raised several concerns. First, they articulated Taiwan's requirementsfor more sophisticated U.S. armaments in general. (14) Second, Taiwanese military leaders discussed their inability to fully utilize some U.S. hardwarebecause ofthe need for components, military training, and joint exercises. Third, they expected the PRC-Taiwan dialogue toresume within two years and help diffusetensions. Fourth, they expressed the desire not to unnecessarily aggravate strains in U.S.-PRC relations. ROC defense officials asserted that a mainland military attack was possible but not likely in the short-term. They stated, on the one hand, that the PRC still lackedthe capability to successfully invade the island. Furthermore, one official contended, although the PRC carried outmilitary exercises on a frequent basis, not all ofthem constituted preparation for an attack. An ROC general maintained that although the PRC White Paper ofFebruary 2000 added a condition for the PRC's useof force - Taiwan's "refusal" to enter into negotiations - it did not indicate greater imminence than before of amainland attack. On the other hand, Taiwanesedefense leaders argued that currently the mainland could pressure Taiwan through conducting missile tests, shootingdown Taiwanese fighters or sinking its ships,or taking over offshore islands. An American military specialist in Taipei concurred that although the ROC'sequipment and training were still superior to themainland's, a PRC missile attack could "wreak havoc" on the island and China's capabilities were expected toimprove substantially over the next five years. However, AIT officials suggested that the mainland's military buildup was not the only factor influencing the PRC's actions toward Taiwan. First, the PRCleadership is likely split between hardline and liberal factions. Second, the PRC leadership is torn betweenconflicting goals: the PRC government's antipathytoward foreign interference in China's "domestic affairs" and frequent exploitation of Chinese nationalism may fuelmilitaristic behavior; China's emphasis oneconomic development and aspirations for international prestige may discourage a military solution. Thus,considerations of coercive actions against Taiwan maybe checked by their perceived economic and political costs. AIT officials described the critical U.S. policyobjectives as encouraging liberal forces in PRCpolitics and raising the economic and political as well as military costs to the PRC of using force against Taiwan. Two trends have helped to stabilize PRC-Taiwan relations in the short term. First, the development of real political competition in Taiwan has encouraged themajor parties to appeal to the center of the political spectrum. Democratic politics has given strong voice sinceChen's election to the current majority view thatthe status quo in cross-strait relations should be maintained. Although Beijing, the DPP, and opposition parties maydisagree about means and objectives, thestatus quo at least allows for future talks on the issue. The timing of negotiations, however, may depend upon theoutcome of the December 2001 legislativeelections. Second, cross-strait economic ties, which have been bolstered by the prospect of WTO membership forboth sides, have raised the economic andpolitical costs of a military conflict for Beijing and Taipei. Other factors may add to tensions in the future. PRC foreign policy mishaps or social unrest stemming from economic reforms may trigger renewed governmentemphasis on Chinese nationalism. China's military modernization also bears watching.

This report summarizes findings from a congressional staff trip to Taiwan (Republicof China), December 10-17,2000, with supplemental material from other sources. The staff delegation met with Taiwan government andmilitary officials, political party representatives,leading private citizens, and United States officials and business persons in Taipei, the capital. The findings includemajor factors that have shaped relationsbetween Taiwan and the People's Republic of China (PRC) since Chen Shui-bian's election as President of Taiwanin March 2000. Taiwan's democratization andthe growth of cross-strait economic ties have, in some respects, helped to stabilize relations in the short run. Taiwan's legislative elections in December 2001 willlikely focus largely on domestic issues; its impact on cross-strait relations is uncertain. Chinese nationalism andmilitary modernization in the PRC will likelycontinue to contribute to tensions. This report will not be updated.

RS20837 -- Distribution of Child Support Collections Updated March 4, 2003 P.L. 104-193 , the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (enacted August 22, 1996), replaced theAid to Families with Dependent Children (AFDC) entitlement program with a Temporary Assistance for NeedyFamilies (TANF)block grant and made major changes to the Child Support Enforcement (CSE) program. The rules governing howchild supportcollections are distributed among families, the state, and the federal government have changed substantially. In part,CSE distributionrules were changed to acknowledge the fact that child support would be significant, if not critical, to helpingsingle-parent familiesexit welfare and maintain self-sufficiency. Since the CSE program's inception, the rules determining who actually gets the child support arrearage payments have been complex,but not nearly as complicated as they are currently. It is helpful to think of the rules in two categories. First, thereare rules in bothfederal and state law that stipulate who has a legal claim on the payments owed by the noncustodial parent. Theseare calledassignment rules. Second, there are rules that determine the order in which child support collections are paid inaccordance with theassignment rules. These are called distribution rules. When a family leaves TANF, (1) the order of distribution of any child support collection depends on (1) when the arrearages accrued(pre-assistance, during-assistance, or post-assistance); (2) when the child support was assigned to the state (beforeOctober 1997,between October 1997 and October 2000, or after October 2000); (3) how the child support arrearages werecollected (through thefederal income tax refund offset program or by some other means); (4) the amount of the unreimbursed welfarebalance; and (5) whenthe arrearages were collected (before October 1997, between October 1997 and October 2000, or after October2000). Some of thecomplexity of the distribution rules ceased on October 1, 2000 when the rules were completely phased-in, but theconfusion withregard to the six categories of arrearages (mentioned below) remains. As a condition of TANF eligibility, the custodial parent must assign to the state the right to collect both current child supportpayments and past-due child support obligations (i.e., arrearages) which accrue while the family is on the TANFrolls (these are calledpermanently-assigned arrearages (2) ). The assignmentrequirement for TANF applicants and recipients also includes arrearagepayments that accumulated before the family enrolled in TANF (these are called pre-assistancearrearages). Pre-assistance arrearagesare temporarily assigned to the state while the family is receiving TANF assistance, with the exception of thefollowing. Pre-assistance arrearages which were assigned to the state before October 1, 1997 are consideredpermanently-assigned arrearages. While the family receives TANF benefits, the state is permitted to retain any current support and any assignedarrearages it collects upto the cumulative amount of TANF benefits which has been paid to the family . Under old law (pre-1996) states were required to pass through the first $50 of current monthly child support payments collected onbehalf of an AFDC family and to disregard it as income to the family so that it did not affect the family's AFDCeligibility or benefitpayment. The remaining amount of current child support collected was divided between the state and federalgovernments accordingto the state's AFDC federal matching rate. (3) The 1996 welfare reform law repealed the required $50 pass through and gives states the choice to decide how much, if any, of thestate share (some, all, none) of child support collected on behalf of a TANF family to send the family. If a stateelects thepass-through option, it still must pay the federal share of the collection to the federal government, regardless of howmuch childsupport is passed through to the family. The state can then do what it wants with its share. It can give all, a portion,or none of itsshare to families. If a state passes through all of its share to families, it may count that as income to the family or it may disregard all or some of thechild support collection so that it does not decrease the TANF payment of the family, but instead enables that familyto increase itstotal income by the child support amount without it affecting the family's TANF eligibility status or benefit amount. Some statessend the family two checks, one reflecting the TANF benefit and another reflecting the child support paymentreceived from thenoncustodial parent. States also have the option to pass their share of arrearage collections to former TANFrecipients (if thearrearage occurred while the family was a cash welfare recipient). Under prior law, once a family went off AFDC, child support arrearage payments generally were divided between the state andfederal governments to reimburse them for AFDC; if any money remained, it was given to the family. In contrast,under P.L.104-193 , payments to families who leave TANF are more generous. Under P.L. 104-193 , arrearages are to be paidto the family first,unless they are collected through the federal income tax refund offset (in which case reimbursing the federal andstate governmentsare to be given first priority). For collections made before October 1, 1997. If a custodial parent assigned her orhis child support rights to the state before October 1, 1997, the parent had to assign all support rights for supportpayments (bothcurrent and past-due) that accrued to the family during the period of AFDC receipt, as well as payments that hadaccrued before theirapplication for AFDC benefits. Moreover, these families had to permanently assign their rights to pre-assistancearrearages to thestate. This means that once these families go off welfare, any pre-assistance arrearages that are collected on theirbehalf go to thestate (and the federal government) as reimbursement for AFDC aid paid to the family. (4) For collections made on or after October 1, 1997 and before October 1, 2000. If acustodial parent assigned her or his child support rights to the state on or after October 1, 1997 and before October1, 2000, the parenthad to assign all support rights for both current and past-due payments accrued while the family is receiving TANFbenefits. Unlikepre-1997 assignments, the TANF applicant or recipient only had to temporarily (rather than permanently) assignto the state all rightsto support that accrued to the family before it began receiving TANF benefits. This temporaryassignment lasts until October 1, 2000or the date on which the family stops receiving TANF benefits, whichever is later. These temporarily-assigned arrearages become conditionally-assigned arrearages when the family leaves the TANF rolls (or onOctober 1, 2000, whichever date is later). They are considered conditionally-assigned because if they are collectedvia the federalincome tax refund offset program they are to be paid to the state (and federal government) rather than the family. Ifconditionally-assigned arrearages are collected through a method other than the federal income tax refund offset,they belong to thefamily. Since October 1, 1997, states have been required to distribute to former TANF families current child support and child supportarrearages that accrue after the family leaves TANF (these arrearages are called never-assignedarrearages) before the state and thefederal government are reimbursed for TANF payments to families. (However, arrearages that accrued before thefamily beganreceiving TANF benefits did not have to be distributed to the family first if the pre-assistance arrearages werecollected by the CSEagency before October 1, 2000.) As mentioned above, an exception to the distribution requirement occurs when the child support is collected via the federal incometax refund offset program. In federal income tax refund offset cases, the child support arrearage payment (up to thecumulativeamount of TANF benefits which has been paid to the family) is retained by the state (and federal government) ifsuch arrearages wereassigned to the state either temporarily or conditionally. Thus, if child support arrearages are collected via thefederal income taxrefund offset program, the family does not have first claim on the arrearage payments. For collections made on or after October 1, 2000 (5). If a custodial parent assignsher or his child support rights to the state on or after October 1, 2000, the parent has to assign all support rights thataccrue while thefamily is receiving TANF benefits. In addition, the TANF applicant must temporarily assign to the state all rightsto support thataccrued to the family before it began receiving TANF benefits. This temporary assignment lasts until the familystops receivingTANF benefits. For child support collections made after October 1, 2000 (unless the sum is collected through the federal income tax offset program),the state is required to first distribute to the former welfare family the amount collected to satisfy the currentmonthly child supportobligation. If any money remains, it is to be paid to the family to satisfy never-assigned arrearages, which are childsupport arrearagesthat accrued after the family went off welfare or arrearages owed to families that never received welfare. If thereis money remaining,it is to be paid to the family to satisfy unassigned pre-assistance arrearages (i.e., all previously assignedarrearages which exceed thecumulative amount of unreimbursed assistance when the family leaves welfare and which accrued before the familybegan receivingwelfare) and conditionally-assigned arrearages (described earlier). If there is still money remaining, it is to be usedto reimburse thestate and federal government for TANF benefits paid to the family; the state shall retain its share of the amount andpay to the federalgovernment the federal share of the collection (to the extent necessary to reimburse amounts paid to the family ascash assistance (6) ). If any money remains, it is to be paid to the family. These distribution rules do not apply to child support collections obtained by intercepting federal income tax refunds. Child supportarrearages collected through the federal income tax offset program are to be paid to the state (and the state is to paythe federal shareof the collection to the federal government). The state may only retain arrearages that have been assigned to thestate and only up tothe amount necessary to reimburse amounts paid to the family as cash assistance. If the amount collected throughthe tax offset exceeds the amount retained, the state must distribute the excess to the family. To reiterate, effective October 1, 2000, the state must treat any support arrearages collected on behalf of a former welfare family,except for those collected through the federal income tax offset program, as accruing in the following order: (1)to the period after thefamily stopped receiving cash assistance, (2) to the period before the family received cash assistance, and (3) to theperiod while thefamily was receiving cash assistance. The result of these child support distribution changes is that states are nowrequired to pay ahigher fraction of child support collections on arrearages to families that have left welfare by making these paymentsto families first(before the state and federal government). (7) Custodial parents and noncustodial parents alike are dissatisfied with the current child support distribution system. Custodial parentsare frustrated because they view child support arrearages as belonging to them. They argue that they had to rely onfamily and friendsfor financial assistance during periods when the noncustodial parent failed to pay child support that occurred beforethey went onwelfare. They contend that they (and not the state) are entitled to any pre-welfare arrearage payments that arecollected on theirbehalf. Noncustodial parents are annoyed because once they start paying child support they want to see that theirmoney actuallyhelps their children; explanations that welfare benefits are in effect child support paid by taxpayers have not satisfiedthem. Moreover, advocates point out that while promising families priority in collecting arrearages owed to them as aninducement toencourage them to move off welfare as soon as possible, the states and the federal government keep for themselvescollections madevia the federal income tax refund offset program-the most lucrative form of arrearage collection. (In tax year 2001,$1.6 billion inoverdue support was collected via federal income tax refunds.) In contrast, some observers maintain that the seemingly dual mission of the CSE program, on the one hand to pay back the state forwelfare costs and on the other to keep families off welfare has contributed to the complexity of the distributionsystem which mostagree was complicated from the program's beginning in 1975. They note that the states' share of retained childsupport collectionsgenerally amount to only 10% of all states' expenditures on the TANF program, and argue that for families currentlyreceiving TANFpayments, the states should continue to retain this declining source of funding to help improve their CSE programs. (See CRS Report RL30488, Analysis of Federal State Financing of the Child Support Enforcement Program .) During the 107th Congress, many Members favored a child support distribution approach that simply paid former welfare families allthe arrearages collected on their behalf (including federal income tax refund offsets) before reimbursing the stateor federalgovernment for any owed arrearages. On May 16, 2002, the House passed H.R. 4737 (the welfarereauthorization bill),which would have provided incentives to states to distribute more child support collections to ex-welfare familiesand permitted statesto give a portion of child support collections to TANF families without having to repay the federal government itsshare of the money. In addition, H.R. 4737 would have simplified child support assignment and distribution rules, and made manyotherchanges. In the 108th Congress, H.R. 4 , a welfare reauthorization bill almost identical in substance to H.R. 4737 , wasintroduced on February 4, 2003. H.R. 4 was passed by the House on February 13, 2003. It includes childsupportassignment and distribution rules identical to those in H.R. 4737 as passed by the House in the107th Congress.

P.L. 104-193, the 1996 welfare reform law, substantively changed the rules governinghow child support collections are distributed among families, states, and the federal government. The general rulesin effect as ofOctober 1, 2000 are that child support collected during the time a family receives cash welfare belongs to the state;current childsupport and arrearages (past-due payments) that are owed to a family that is no longer receiving welfare belongsto the family; andchild support owed to a family that never received welfare belongs to the family. This is referred to as the "familiesfirst" childsupport distribution policy. (These "families first" distribution rules do not apply to child support collections madeby interceptingfederal income tax refunds.) Many policymakers contend that Congress should simplify the child supportdistribution system whichcurrently requires the tracking of six categories of arrearage payments to properly pay custodial parents. Legislationthat includedprovisions to simplify child support distribution procedures and provide more of the child support collected tocustodial parents(rather than the government) was passed by the House in the 106th and 107th Congresses, but not by the Senate. Similar legislation hasbeen reintroduced as part of the welfare reauthorization measure in the 108th Congress. This reportwill be updated as needed toreflect legislative activity.

Earmark disclosure rules in both the House and Senate were implemented with the stated intention of bringing more transparency to congressionally directed spending. The administrative responsibilities associated with these rules vary by chamber. This report outlines the major administrative responsibilities of Members and committees of the House of Representatives associated with the chamber's earmark disclosure rules. House Rule XXI, clause 9, generally requires that certain types of measures be accompanied by a list of congressional earmarks, limited tax benefits or limited tariff benefits that are included in the measure or its report, or a statement that the proposition contains no earmarks. Depending upon the type of measure, the list or statement is to be either included in the measure's accompanying report or printed in the Congressional Record . Rule XXI, clause 9, explicitly defines congressional earmark, limited tax benefit, and limited tariff benefit as follows: Congressional earmark - a provision or report language included primarily at the request of a Member, Delegate, Resident Commissioner, or Senator providing, authorizing or recommending a specific amount of discretionary budget authority, credit authority, or other spending authority for a contract, loan, loan guarantee, grant, loan authority, or other expenditure with or to an entity, or targeted to a specific State, locality or congressional district, other than through a statutory or administrative formula driven or competitive award process. Limited tax benefit - (1) any revenue-losing provision that (A) provides a federal tax deduction, credit, exclusion, or preference to 10 or fewer beneficiaries under the Internal Revenue Code of 1986, and (B) contains eligibility criteria that are not uniform in application with respect to potential beneficiaries of such provision; or (2) any federal tax provision which provides one beneficiary temporary or permanent transition relief from a change to the Internal Revenue Code of 1986. Limited tariff benefit - a provision modifying the Harmonized Tariff Schedule of the United States in a manner that benefits 10 or fewer entities. If either the list of earmarks or the letter stating that no earmark exists in the measure is absent, a point of order may lie against the measure's floor consideration. The point of order applies only in the absence of such a list or letter and does not speak to the completeness or the accuracy of either document. A point of order may lie against the consideration of any general appropriations conference report containing earmarks that are included in conference reports but not committed to conference by either House and not in a House or Senate committee report on the legislation. Such a point of order would be disposed of by a question of consideration, which is debatable for 20 minutes. House earmark disclosure rules apply to any congressional earmark included in either the text of the bill or the committee report accompanying the bill, as well as the conference report and joint explanatory statement. The disclosure requirements apply to items in authorizing legislation, appropriations legislation, and tax measures. Furthermore, they apply not only to measures reported by committees but also to unreported measures, "manager's amendments," Senate bills, and conference reports. These earmark disclosure requirements, however, do not apply to all legislation at all times. For example, when a measure is considered under the "suspension of the rules" procedure, House rules are laid aside, and therefore earmark disclosure rules do not apply. Also not subject to the rule are floor amendments (except a "manager's amendment"), amendments between the houses, or amendments considered as adopted under a self-executing special rule, including a committee amendment in the nature of a substitute made in order as original text. Under House Rule XXIII, clause 17(a), Members requesting a congressional earmark are required to provide a written statement to the chairman and ranking minority Member of the committee of jurisdiction that includes 1. the Member's name; 2. the name and address of the intended earmark recipient (if there is no specific recipient, the location of the intended activity should be included); 3. in the case of a limited tax or tariff benefit, identification of the individual or entities reasonably anticipated to benefit, to the extent known to the Member; 4. the purpose of the earmark; and 5. a certification that the Member or Member's spouse has no financial interest in such an earmark. When submitting earmark requests, it is important to note that individual committees and subcommittees often have their own additional administrative requirements beyond those required by House rules (e.g., prioritizing requests or submitting request forms online). The House Appropriations Committee, for example, has stated that it will require Members requesting earmarks to post information regarding their earmark requests on their personal websites. This information must be posted at the time of the request and must include the purpose of the earmark and why it is a valuable use of taxpayer funds. Additionally, the House Appropriations Committee has announced that it will no longer approve requests for earmarks that are directed to for-profit entities. Committees may also establish relevant policy requirements (e.g., requiring matching funds for earmark requests) or restrictions regarding earmark requests (e.g., not considering earmark requests for certain appropriations accounts or disallowing multi-year funding requests). In addition, committees and subcommittees often have deadlines, especially for earmark requests in appropriations legislation. For this reason, it is important to check with individual committees and subcommittees to learn of any supplemental earmark request requirements or restrictions. The committee of jurisdiction is responsible for identifying earmarks in both the legislative text and any accompanying reports. When it is not clear whether a Member request constitutes an earmark, the committee of jurisdiction may be able to provide guidance. When submitting an earmark request, it may be relevant whether the Member wants the earmark to be included in the text of the bill or the committee report accompanying the bill. Committees may make an administrative distinction between these two categories in terms of the submission of earmark requests, and there may be policy implications of an earmark's placement in either the bill text or the committee report. For example, under Executive Order 13457, issued in January 2008, executive agencies are directed not to commit, obligate, or expend funds that were the result of an earmark included in non-statutory language, such as a committee report. Under House rules, earmark disclosure responsibilities of House committees and conference committees fall into three major categories: (1) determining if a spending provision is an earmark; (2) compiling earmark requests for presentation to the full chamber; and (3) preserving the earmark requests. Individual committees may establish their own additional requirements. Committees of jurisdiction must use their discretion to decide what constitutes an earmark. Definitions in House rules, as well as past earmark designations during the 110 th Congress, may provide guidance in determining if a certain provision constitutes an earmark. House Rule XXIII, clause 17(b), states that in the case of any reported bill or conference report, a list of included earmarks and their sponsors (or a statement declaring the absence of earmarks) must be included in the corresponding committee report or joint explanatory statement. In the case of a measure not reported by a committee or a "manager's amendment," the committee of initial referral must cause a list of earmarks and their sponsors, or a letter stating the absence of earmarks, to be printed in the Congressional Record before floor consideration is in order. The House Appropriations Committee has stated that it will make earmark disclosure tables publicly available the same day that a subcommittee reports its bill. A conference report to accompany a regular appropriations bill must identify congressional earmarks in the conference report or joint explanatory statement that were not specified in the legislation or report as it initially passed either chamber. Each House committee and conference committee is responsible for "maintaining" all written requests for earmarks received, even those not ultimately included in the measure or the measure's report. Furthermore, those requests that were included in any measure reported by the committee must not only be "maintained" but also be "open for public inspection." Rule XXIII does not specify how the information shall be "maintained" and "open for public inspection."

Earmark disclosure rules in both the House and Senate establish certain administrative responsibilities that vary by chamber. Under House rules, a Member requesting that an earmark be included in legislation is responsible for providing specific written information, such as the purpose and recipient of the earmark, to the committee of jurisdiction. Further, House committees are responsible for compiling, presenting, and maintaining such requests in accord with House rules. In the House, disclosure rules apply to any congressional earmark, limited tax benefit, or limited tariff benefit included in either the text of a bill or any report accompanying the measure, including a conference report and joint explanatory statement. The disclosure requirements apply to earmarks in appropriations legislation, authorizing legislation, and tax measures. Furthermore, they apply not only to measures reported by committees but also to measures not reported by committees, "manager's amendments," and conference reports. This report will be updated as needed.

Among mandatory spending programs—and indeed tax expenditures—the health area is especially important because the long-term fiscal challenge is largely a health care challenge. Contrary to public perceptions, health care is the biggest driver of the long-term fiscal challenge. While Social Security is important because of its size, health care spending is both large and projected to grow much more rapidly. Our most recent simulation results illustrate the importance of health care in the long-term fiscal outlook as well as the imperative to take action. Simply put, our nation’s fiscal policy is on an imprudent and unsustainable course. These long-term budget simulations show, as do those published last December by the Congressional Budget Office (CBO), that over the long term we face a large and growing structural deficit due primarily to known demographic trends and rising health care costs and lower federal revenues as a percentage of the economy. Continuing on this unsustainable fiscal path will gradually erode, if not suddenly damage, our economy, our standard of living, and ultimately our national security. Our current path also will increasingly constrain our ability to address emerging and unexpected budgetary needs and increase the burdens that will be faced by future generations. Figures 3 and 4 present our long-term simulations under two different sets of assumptions. In figure 3, we start with CBO’s 10-year baseline— constructed according to the statutory requirements for that baseline. Consistent with these requirements, discretionary spending is assumed to grow with inflation for the first 10 years and tax cuts scheduled to expire are assumed to expire. After 2016, discretionary spending is assumed to grow with the economy, and revenue is held constant as a share of GDP at the 2016 level. In figure 4, two assumptions are changed: (1) discretionary spending is assumed to grow with the economy after 2006 rather than merely with inflation, and (2) all expiring tax provisions are extended. For both simulations, Social Security and Medicare spending is based on the 2005 Trustees’ intermediate projections, and we assume that benefits continue to be paid in full after the trust funds are exhausted. Medicaid spending is based on CBO’s December 2005 long-term projections under mid-range assumptions. As these simulations illustrate, absent significant policy changes on the spending and/or revenue side of the budget, the growth in mandatory spending on federal retirement and especially health entitlements will encumber an escalating share of the government’s resources. Indeed, when we assume that all the temporary tax reductions are made permanent and discretionary spending keeps pace with the economy, our long-term simulations suggest that by 2040 federal revenues may be adequate to pay only some Social Security benefits and interest on the federal debt. Neither slowing the growth in discretionary spending nor allowing the tax provisions to expire—nor both together—would eliminate the imbalance. Although revenues will be part of the debate about our fiscal future, assuming no changes to Social Security, Medicare, Medicaid, and other drivers of the long-term fiscal gap would require at least a doubling of taxes—and that seems highly implausible. Economic growth is essential, but we will not be able to simply grow our way out of the problem. The numbers speak loudly: our projected fiscal gap is simply too great. Closing the current long-term fiscal gap would require sustained economic growth far beyond that experienced in U.S. economic history since World War II. Tough choices are inevitable, and the sooner we act the better. Accordingly, substantive reform of the major health programs and Social Security is critical to recapturing our future fiscal flexibility. Ultimately, the nation will have to decide what level of federal benefits and spending it wants and how it will pay for these benefits. Our current fiscal path will increasingly constrain our ability to address emerging and unexpected budgetary needs and increase the burdens that will be faced by future generations. Continuing on this path will mean escalating and ultimately unsustainable federal deficits and debt that will serve to threaten our future national security as well as the standard of living for the American people. The aging population and rising health care spending will have significant implications not only for the budget, but also the economy as a whole. Figure 5 shows the total future draw on the economy represented by Social Security, Medicare, and Medicaid. Under the 2005 Trustees’ intermediate estimates and CBO’s 2005 long-term Medicaid estimates under mid-range assumptions, spending for these entitlement programs combined will grow to 15.7 percent of gross domestic product (GDP) in 2030 from today’s 8.4 percent. It is clear that, taken together, Social Security, Medicare, and Medicaid represent an unsustainable burden on future generations. Furthermore, most of the long-term growth is in health care. While Social Security in its current form will grow from 4.3 percent of GDP today to 6.4 percent in 2080, Medicare’s burden on the economy will quintuple—from 2.7 percent to 13.8 percent of the economy—and these projections assume a growth rate for Medicare spending that is below historical experience! As figure 5 shows, unlike Social Security which grows larger as a share of the economy and then levels off, within this projection period we do not see Medicare growth abating. Whether or not the President’s Budget proposals on Medicare are adopted, they should serve to raise public awareness of the importance of health care costs to both today’s budget and tomorrow’s. This could serve to jump start a discussion about appropriate ways to control the major driver of our long-term fiscal outlook—health care spending. As noted, unlike Social Security, Medicare spending growth rates reflect not only a burgeoning beneficiary population, but also the escalation of health care costs at rates well exceeding general rates of inflation. The growth of medical technology has contributed to increases in the number and quality of health care services. Moreover, the actual costs of health care consumption are not transparent. Consumers are largely insulated by third-party payers from the cost of health care decisions. The health care spending problem is particularly vexing for the federal budget, affecting not only Medicare and Medicaid but also other important federal health programs, such as for our military personnel and veterans. For example, Department of Defense health care spending rose from about $12 billion in 1990 to about $30.4 billion in 2004—in part, to meet additional demand resulting from program eligibility expansions for military retirees, reservists, and the dependents of those two groups and for the increased needs of active duty personnel involved in conflicts in Iraq, Bosnia, and Afghanistan. Expenditures by the Department of Veterans Affairs have also grown—from about $12 billion in 1990 to about $26.8 billion in 2004—as an increasing number of veterans look to federal programs to supply their health care needs. The challenge to rein in health care spending is not limited to public payers, however, as the phenomenon of rising health care costs associated with new technology exists system-wide. This means that addressing the unsustainability of health care costs is also a major competitiveness and societal challenge that calls for us as a nation to fundamentally rethink how we define, deliver, and finance health care in both the public and the private sectors. A major difficulty is that our current system does little to encourage informed discussions and decisions about the costs and value of various health care services. These decisions are very important when it comes to cutting-edge drugs and medical technologies, which can be incredibly expensive but only marginally better than other alternatives. As a nation, we are going to need to weigh unlimited individual wants against broader societal needs and decide how responsibility for financing health care should be divided among employers, individuals, and government. Ultimately, we may need to define a set of basic and essential health care services to which every American is ensured access. Individuals wanting additional services, and insurance coverage to pay for them, might be required to allocate their own resources. Clearly, such a dramatic change would require a long transition period—all the more reason to act sooner rather than later. In recent years, policy analysts have discussed a number of incremental reforms that take aim at moderating health care spending, in part by unmasking health care’s true costs. (See fig. 6 for a list of selected reforms.) Among these reforms is to devise additional cost-sharing provisions to make health care costs more transparent to patients. Currently, many insured individuals pay relatively little out of pocket for care at the point of delivery because of comprehensive health care coverage—precluding the opportunity to sensitize these patients to the cost of their care. Develop a set of national practice standards to help avoid unnecessary care, improve outcomes, and reduce litigation. Encourage case management approaches for people with expensive acute and chronic conditions to improve the quality and efficiency of care delivered and avoid inappropriate care. Foster the use of information technology to increase consistency, transparency, and accountability in health care. Emphasize prevention and wellness care, including nutrition. Leverage the government’s purchasing power to control costs for prescription drugs and other health care services. Revise certain federal tax preferences for health care to encourage the more efficient use of appropriate care. Create an insurance market that adequately pools risk and offers alternative levels of coverage. Develop a core set of basic and essential services with supplemental coverage being available as an option but at a cost. Use the Federal Employees Health Benefits Program (FEHBP) model as a possible means to experiment and see the way forward. Limit spending growth for government-sponsored health care programs (e.g., percentage of the budget and/or the economy). Other steps include reforming the policies that give tax preferences to insured individuals and their employers. These policies permit the value of employees’ health insurance premiums to be excluded from the calculation of their taxable earnings and exclude the value of the premium from the employers’ calculation of payroll taxes for both themselves and employees. Tax preferences also exist for health savings accounts and other consumer-directed plans. These tax exclusions represent a significant source of forgone federal revenue and work at cross-purposes to the goal of moderating health care spending. As figure 7 shows, in 2005 the tax expenditure responsible for the greatest revenue loss was that for the exclusion of employer contributions for employees’ insurance premiums and medical care. Another area conducive to incremental change involves provider payment reforms. These reforms are intended to induce physicians, hospitals, and other health care providers to improve on quality and efficiency. For example, studies of Medicare patients in different geographic areas have found that despite receiving a greater volume of care, patients in higher use areas did not have better health outcomes or experience greater satisfaction with care than those living in lower use areas. Public and private payers are experimenting with payment reforms designed to foster the delivery of care that is proven to be both clinically and cost effective. Ideally, identifying and rewarding efficient providers and encouraging inefficient providers to emulate best practices will result in better value for the dollars spent on care. The development of uniform standards of practice could lead to ensuring that people with chronic illnesses, a small but expensive population, received more and cost-effective and patient- centered care while reducing unwarranted medical malpractice litigation. The problem of escalating health care costs is complex because addressing federal programs such as Medicare and the federal-state Medicaid program will need to involve change in the health care system of which they are a part—not just within federal programs. This will be a major societal challenge that will affect all age groups. Because our health care system is complex, with multiple interrelated pieces, solutions to health care cost growth are likely to be incremental and require a number of extensive efforts over many years. In my view, taking steps to address the health care cost dilemma system-wide puts us on the right path for correcting the long-term fiscal problems posed by the nation’s health care entitlements. I have focused today on health care because it is a driver of our fiscal outlook. Indeed, health care is already putting a squeeze on the federal budget. Health care is the dominant but not the only driver of our long-term fiscal challenge. Today it is hard to think of our fiscal imbalances as a big problem: the economy is healthy and interest rates seem low. We, however, have an obligation to look beyond today. Budgets, deficits, and long-term fiscal and economic outlooks are not just about numbers: they are also about values. It is time for all of us to recognize our stewardship obligation for the future. We should act sooner rather than later. We all must make choices that may be difficult and unpleasant today to avoid passing an even greater burden on to future generations. Let us not be the generation who sent the bill for its consumption to its children and grandchildren. Thank you Mr. Chairman, Mr. Spratt, and members of the Committee for having me today. We at GAO, of course, stand ready to assist you and your colleagues as you tackle these important challenges. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

This testimony discusses entitlement and other mandatory spending programs in light of our nation's long-term fiscal outlook and the challenges it poses for the budget and oversight processes. In our report entitled 21st Century Challenges: Reexamining the Base of the Federal Government, we presented illustrative questions for policy makers to consider as they carry out their responsibilities. These questions look across major areas of the budget and federal operations including discretionary and mandatory spending, and tax policies and programs. We hope that this report, among other things, will be used by various congressional committees as they consider which areas of government need particular attention and reconsideration. Congress will also receive more specific proposals, some of them will be presented within comprehensive agendas. Our report provides examples of the kinds of difficult choices the nation faces with regard to discretionary spending; mandatory spending, including entitlements; as well as tax policies and compliance activities. Mandatory spending programs--like tax expenditures--are governed by eligibility rules and benefit formulas, which means that funds are spend as required to provide benefits to those who are eligible and wish to participate. Since Congress and the President must change substantive law to change the cost of these programs, they are relatively uncontrollable on an annual basis. Moreover, as we reported in a 1994 analysis, their cost cannot be controlled by the same "spending cap" mechanism used for discretionary spending. By their very nature mandatories limit budget flexibility. Mandatory spending has grown as a share of the total federal budget. Under both the Congressional Budget Office baseline estimates and the President's Budget, this spending would grow further. While the long-term fiscal outlook is driven by Medicare, Medicaid and Social Security, it does not mean that all other mandatory programs should be "given a pass." As we have noted elsewhere, reexamination of the "fit" between government programs and the needs and priorities of the nation should be an accepted practice. So in terms of budget flexibility--the freedom of each Congress and President to allocate public resources--we cannot ignore mandatory spending programs even if they do not drive the aggregate. While some might suggest that mandatory programs could be controlled by being converted to discretionary or annually appropriated programs, that seems unlikely to happen. If we look across the range of mandatories we see many programs have objectives and missions that contribute to the achievement of a range of broad-based and important public policy goals such as providing a floor of income security in retirement, fighting hunger, fostering higher education, and providing access to affordable health care. To these ends, these programs--and tax expenditures--were designed to provide benefits automatically to those who take the desired action or meet the specified eligibility criteria without subjecting them to an annual decision regarding spending or delay in the provision of benefits such a process might entail. Although mandatory spending is not amenable to "caps," that does not mean that mandatory programs should be permitted to be on autopilot and grow to an unlimited extent. Since the spending for any given entitlement or other mandatory program is a function of the interaction between the eligibility rules and the benefit formula--either or both of which may incorporate exogenous factors such as economic downturns--the way to change the path of spending for any of these programs is to change those rules or formulas. We recently issued a report on "triggers"--some measure which, when reached or exceeded, would prompt a response connected to that program. By identifying significant increases in the spending path of a mandatory program relatively early and acting to constrain it, Congress may avert much larger and potentially disruptive financial challenges and program changes in the future.

Over their lifetimes, men and women differ in many ways that have consequences for how much they will receive from Social Security and pensions. Women make up about 60 percent of the elderly population and less than half of the Social Security beneficiaries who are receiving retired worker benefits, but they account for 99 percent of those beneficiaries who receive spouse or survivor benefits. A little less than half of working women between the ages of 18 and 64 are covered by a pension plan, while slightly over half of working men are covered. The differences between men and women in pension coverage are magnified for those workers nearing retirement age—over 70 percent of men are covered compared with about 60 percent of women. Labor force participation rates differ for men and women, with men being more likely, at any point in time, to be employed or actively seeking employment than women. The gap in labor force participation rates, however, has been narrowing over time as more women enter the labor force, and the Bureau of Labor Statistics predicts it will narrow further. In 1948, for example, women’s labor force participation rate was about a third of that for men, but by 1996, it was almost four-fifths of that for men. The labor force participation rate for the cohort of women currently nearing retirement age (55 to 64 years of age) was 41 percent in 1967 when they were 25 to 34 years of age. The labor force participation rate for women who are 25 to 34 years of age today is 75 percent—an increase of over 30 percentage points. Earnings histories also affect retirement income, and women continue to earn lower wages than men. Some of this difference is due to differences in the number of hours worked, since women are more likely to work part-time and part-time workers earn lower wages. However, median earnings of women working year-round and full-time are still only about 70 percent of men’s. The lower labor force participation of women leads to fewer years with covered earnings on which Social Security benefits are based. In 1993, the median number of years with covered earnings for men reaching 62 was 36 but was only 25 for women. Almost 60 percent of men had 35 years with covered earnings, compared with less than 20 percent of women. Lower annual earnings and fewer years with covered earnings lead to women’s receiving lower monthly retired worker benefits from Social Security, since many years with low or zero earnings are used in the calculation of Social Security benefits. On average, the retired worker benefits received by women are about 75 percent of those received by men. In many cases, a woman’s retired worker benefits are lower than the benefits she is eligible to receive as the spouse or survivor of a retired worker. Women tend to live longer than men and thus may spend many of their later retirement years alone. A woman who is 65 years old can expect to live an additional 19 years (to 84 years of age), and a man of 65 can expect to live an additional 15 years (to 80 years of age). By 2070, the Social Security Administration projects that a 65-year-old woman will be able to expect to live another 22 years, and a 65-year-old-man, another 18 years. Additionally, husbands tend to be older than their wives and so are likely to die sooner. Differences in longevity do not currently affect the receipt of monthly Social Security benefits but can affect income from pensions if annuities are purchased individually. women. The authors estimated that, after 35 years of participation in the plan at historical yields and identical contributions, the difference in investment behavior between men and women can lead to men having a pension portfolio that is 16 percent larger. Social Security provisions and pension plan provisions differ in several ways (see app. I for a summary). Under Social Security, the basic benefit a worker receives who retires at the normal retirement age (NRA) is based on the 35 years with the highest covered earnings. The formula is progressive in that it guarantees that higher-income workers receive higher benefits, while the benefits of lower-income workers are a higher percentage of their preretirement earnings. The benefit is guaranteed for the life of the retired worker and increases annually with the cost of living. may elect, along with the spouse, to take a single life annuity or a lump-sum distribution if allowed under the plan. When workers retire, they are uncertain how long they will live and how quickly the purchasing power of a fixed payment will deteriorate. They run the risk of outliving their assets. Annuities provide insurance against outliving assets. Some annuities provide, though at a higher cost or reduced initial benefit, insurance against inflation risk, although annuity benefits often do not keep pace with inflation. Many pension plans are managed under a group annuity contract with an insurance company that can provide lifetime benefits. Individual annuities, however, tend to be costly. Under Social Security, the dependents of a retired worker may be eligible to receive benefits. For example, the spouse of a retired worker is eligible to receive up to 50 percent of the worker’s basic benefit amount, while a dependent surviving spouse is eligible to receive up to 100 percent of the deceased worker’s basic benefit. Furthermore, divorced spouses and survivors are eligible to receive benefits under a retired worker’s Social Security record provided they were married for at least 10 years. If the retired worker has a child under 18 years old, the child is eligible for Social Security benefits, as is the dependent nonelderly parent of the child. The retired worker’s Social Security benefit is not reduced to provide benefits to dependents and former spouses. Pensions, both public and private, generally do not offer the same protections to dependents as Social Security. Private and public pension benefits are based on a worker’s employment experience and not the size of the worker’s family. At retirement, a worker and spouse normally receive a joint and survivor annuity so that the surviving spouse will continue to receive a pension benefit after the retired worker’s death. A worker, with the written consent of the spouse, can elect to take retirement benefits in the form of a single life annuity so that benefits are guaranteed only for the lifetime of the retired worker. payment options. Under this act, a joint and survivor annuity became the normal payout option and written spousal consent is required to choose another option. This requirement was prompted partly by testimony before the Congress by widows who stated that they were financially unprepared at their husbands’ death because they were unaware of their husbands’ choice to not take a joint and survivor annuity. Through the spousal consent requirement, the Congress envisioned that, among other things, a greater percentage of married men would retain the joint and survivor annuity and give their spouses the opportunity to receive survivor benefits. The monthly benefits under a joint and survivor annuity, however, are lower than under a single life annuity. Moreover, pension plans do not generally contain provisions to increase benefits to the retired worker for a dependent spouse or for children. As under Social Security, divorced spouses can also receive part of the retired worker’s pension benefit if a qualified domestic relations order is in place. However, the retired worker’s pension benefit is reduced in order to pay the former spouse. The three alternative proposals of the Social Security Advisory Council would make changes of varying degrees to the structure of Social Security. The key features of the proposals are summarized in appendix II. The Maintain Benefits (MB) plan would make only minor changes to the structure of current Social Security benefits. The major change that would affect women’s benefits is the extension of the computation period for benefits from 35 years to 38 years of covered earnings. Currently, earnings are averaged over the 35 years with the highest earnings to compute a worker’s Social Security benefits. If the worker has worked less than 35 years, then some of the years of earnings used in the calculation are equal to zero. Extending the computation period for the lifetime average earnings to 38 years would have a greater impact on women than on men. Although women’s labor force participation is increasing, the Social Security Administration forecasts that fewer than 30 percent of the women retiring in 2020 will have 38 years of covered earnings, compared with almost 60 percent of men. The Individual Accounts (IA) plan would keep many features of the current Social Security system but add an individual account modeled after the 401(k) pension plan. Workers would be required to contribute an additional 1.6 percent of taxable earnings to their individual account, which would be held by the government. Workers would direct the investment of their account balances among a limited number of investment options. At retirement, the distribution from this individual account would be converted by the government into an indexed annuity. The IA plan, like the MB plan, would extend the computation period to 38 years; it would also change the basic benefit formula by lowering the conversion factors at the higher earnings level. This plan would also accelerate the legislated increase in the normal retirement age and then index it to future increases in longevity. As a consequence of these changes, basic Social Security benefits would be lower for all workers, but workers would also receive a monthly payment from the annuitized distribution from their individual account, which proponents claim would offset the reduction in the basic benefit. In addition to extending the computation period, elements of the IA plan that would disproportionately affect women are the changes in benefits received by spouses and survivors, since women are much more likely to receive spouse and survivor benefits. The spouse benefit would be reduced from 50 percent of the retired worker’s basic benefit amount to 33 percent. The survivor benefit would increase from 100 percent of the deceased worker’s basic benefit to 75 percent of the couple’s combined benefit if the latter was higher. These changes would probably result in increased lifetime benefits for many women. Additionally, at retirement a worker and spouse would receive a joint and survivor annuity for the distribution of their individual account unless the couple decided on a single life annuity. Security payroll tax into the account, which would not be held by the government. Proponents of the PSA plan claim that over a worker’s lifetime the tier I benefits plus the tier II distribution would be larger than the lifetime Social Security benefits currently received by retired workers. The worker would direct the investment of his or her account assets. At retirement, workers would not be required to annuitize the distribution from their personal security account but could elect to receive a lump-sum payment. This could potentially affect women disproportionately, since the worker is not required to consult with his or her spouse regarding the disposition of the personal account distribution. Under the PSA plan, the tier I benefit for spouses would be equal to the higher of their own tier I benefit or 50 percent of the full tier I benefit. Furthermore, spouses would receive their own tier II accumulations, if any. The tier I benefit for a survivor would be 75 percent of the benefit payable to the couple; in addition, the survivor could inherit the balance of the deceased spouse’s personal security account assets. Many of the proposed changes to Social Security would affect the benefits received by men and by women differently. The current Social Security system is comparable to a defined benefit plan’s paying a guaranteed lifetime benefit that is increased with the cost of living. Each of the Advisory Council proposals would potentially change the level of that benefit, and two of the proposals would create an additional defined contribution component. Not only would retired worker benefits be changed by these proposals, but the level of benefits for spouses and survivors would be affected. the account balances at retirement would depend on the contributions made to the worker’s account and investment returns or losses on the account assets. Since women tend to earn lower wages, they would be contributing less, on average, than men to their accounts. Furthermore, even if contributions were equal, women tend to be more conservative investors than men, which could lead to lower investment returns. Consequently, women would typically have smaller account balances at retirement and would receive lower benefits than men. The difference in investment strategy could lead to a situation in which men and women with exactly the same labor market experiences receive substantially different Social Security benefits. The extent to which investor education can close the gap in investment behavior between men and women is unknown. The two Advisory Council proposals with individual or personal accounts differ in the handling of the distribution of the account balances at retirement. The IA plan would require annuitization of the distribution at retirement, and choosing a single life annuity or a joint and survivor annuity would be left to the worker and spouse. If the single life annuity option for individual account balances was chosen, then the spouse would receive the survivor’s basic benefit after the death of the retired worker plus the annuitized benefit based on the work records of both individuals. The PSA plan would not require that the private account distribution be annuitized at retirement. A worker and spouse could take the distribution as a lump sum and attempt to manage their funds so that they did not outlive their assets. If the assets were exhausted, the couple would have only their basic tier I benefits, plus any other savings and pension benefits. Furthermore, even if personal account tier II assets were left after the death of the retired worker, the balance of the PSA account would not necessarily have to be left to the survivor. If a worker and spouse chose to purchase an annuity at retirement, then the couple would receive a lower monthly benefit than would be available from a group annuity. although the expected lifetime payments would be the same, the monthly payments to the woman would be lower, since women have longer life expectancies. Even though the current provisions of Social Security are gender neutral, differences during the working and retirement years may lead to different benefits for men and women. For example, differences in labor force attachment, earnings, and longevity lead to women’s being more likely than men to receive spouse or survivor benefits. Women who do receive retired worker benefits typically receive lower benefits than men. As a result of lower Social Security benefits and the lower likelihood of receiving pension benefits, among other causes, elderly single women experience much higher poverty rates than elderly married couples and elderly single men. Social Security is a large and complex program that protects most workers and their families from income loss because of a worker’s retirement. Public and private pension plans do not offer the social insurance protections that Social Security does. Pension benefits are neither increased for dependents nor generally indexed to the cost of living as are Social Security benefits. Typically, at retirement a couple will receive a joint and survivor annuity that initially pays monthly benefits that are 15 to 20 percent lower than if they had chosen to forgo the survivor benefits with a single life annuity. Furthermore, under a qualified domestic relations order, a divorced retired worker’s pension benefits may be reduced to pay benefits to a former spouse. While the three alternative proposals of the Social Security Advisory Council are intended to address the long-term financing problem, they would make changes that could affect the relative level of benefits received by men and women. Each of the proposals has the potential to exacerbate the current differences in benefits between men and women. Narrowing the gap in labor force attachment, earnings, and investment behavior may reduce the differences in benefits. But as long as these differences remain, men and women will continue to experience different outcomes with regard to Social Security benefits. This concludes my prepared statement. I would be happy to answer any questions you or other Members of the Subcommittee may have. For more information on this testimony, please call Jane Ross on (202) 512-7230; Frank Mulvey, Assistant Director, on (202) 512-3592; or Thomas Hungerford, Senior Economist, on (202) 512-7028.

GAO discussed the impacts of proposals to finance and restructure the Social Security system, specifically the impacts on the financial well-being of women. GAO noted that: (1) its work shows that, despite the provisions of the Social Security Act that do not differentiate between men and women, women tend to receive lower benefits than men; (2) this is due primarily to differences in lifetime earnings because women tend to have lower wages and fewer years in the workforce; (3) women's experience under pension plans also differs from men's not only because of earnings differences but also because of differences in investment behavior and longevity; (4) moreover, public and private pension plans do not offer the same social insurance protections that Social Security does; (5) furthermore, some of the provisions of the Social Security Advisory Council's three proposals may exacerbate the differences in men and women's benefits; (6) for example, proposals that call for individual retirement accounts will pay benefits that are affected by investment behavior and longevity; and (7) expected changes in women's labor force participation rates and increasing earnings will reduce but probably not eliminate these differences.

Between July 1985 and June 1999, we reviewed, reported, and testified on the SBIR program many times at the request of the Congress. While our work focused on many different aspects of the program, we generally found that SBIR is achieving its goals to enhance the role of small businesses in federal R&D, stimulate commercialization of research results, and support the participation of small businesses owned by women and/or disadvantaged persons. Participating agencies and companies that we surveyed during the course of our reviews generally rated the program highly. Specific examples of program success that we identified include the following: High-quality research. Throughout the life of the program, awards have been based on technical merit and are generally of good quality. For example, in 1989 we reported that according to agency officials, more than three-quarters of the research conducted with SBIR funding was as good as or better than other agency-funded research. Agency officials also rated the research as more likely than other research they oversaw to result in the invention and commercialization of new products. When we again looked at the quality of research proposals in 1995, we found that while it was too early to make a conclusive judgment about the long-term quality of the research, the quality of proposals remained good, according to agency officials. Widespread competition. The SBIR program successfully attracts many qualified companies, has had a high level of competition, and consistently has had a high number of first-time participants. Specifically, we reported that the number of proposals that agencies received each year had been increasing. In addition, as we reported in 1998, agencies rarely received only a single proposal in response to a solicitation, indicating a sustained level of competition for the awards. We also found that the agencies deemed many more proposals worthy of awards than they were able to fund. For example, the Air Force deemed 1,174 proposals worthy of awards in fiscal year 1993 but funded only 470. Moreover, from fiscal years 1993 through 1997, one third of the companies that received awards were first-time participants. This suggests that the program attracts hundreds of new companies annually. Effective outreach. SBIR agencies consistently reach out to foster participation by women-owned or socially and economically disadvantaged small businesses. For example, we found that DOD’s SBIR managers participated in a number of regional small business conferences and workshops that are specifically designed to foster increased participation by women-owned and socially and economically disadvantaged small businesses. Successful commercialization. SBIR successfully fosters commercialization of research results. At various points in the life of the program we have reported that SBIR has been successful in increasing private sector commercialization of innovations. For example, past GAO and DOD surveys of companies that received SBIR Phase II funding have determined that approximately 35 percent of the projects resulted in the sales of products or services, and approximately 45 percent of the projects received additional developmental funding. We have also reported that agencies were using various techniques to foster commercialization. For example, in an attempt to get those companies with the greatest potential for commercial success to the marketplace sooner, DOD instituted a Fast Track Program, whereby companies that are able to attract outside commitments/capital for their research during phase I are given higher priority in receiving a phase II award. Helping to serve mission needs. SBIR has helped serve agencies’ missions and R&D needs. Agencies differ in the emphasis they place on funding research to support their mission and to support more generalized research. Specifically, we found that DOD links its projects more closely to its mission. In comparison, other agencies emphasize research that will be commercialized by the private sector. Many of the projects DOD funded have specialized military applications while NIH projects have access to the biomedical market in the private sector. Moreover, we found that SBIR promotes research on the critical technologies identified in lists developed by DOD and/or the National Critical Technologies Panel. Generally agencies reviewed these listings of critical technologies to develop research topics or conducted research that fell within one of the two lists. We have also identified areas of weaknesses and made recommendations that, if addressed, could strengthen the program further. Many of our recommendations for program improvement have been either fully or partially addressed by the Congress in various reauthorizations of the program or by the agencies themselves. For example, Duplicate funding. In 1995, we identified duplicate funding for similar, or even identical, research projects by more than one agency. A few companies received funding for the same proposals two, three, and even five times before agencies became aware of the duplication. Contributing factors included the fraudulent evasion of disclosure by companies applying for awards, the lack of a consistent definition for key terms such as “similar research,” and the lack of interagency sharing of data on awards. In response to our recommendations, SBA strengthened the language agencies use in their application packages to clearly warn applicants about the illegality of entering into multiple agreements for essentially the same effort and developed Internet capabilities to access SBIR data for all of the agencies. In SBA’s view, the stronger language regarding the illegality of seeking funding for similar or identical projects addresses the need to develop consistent definitions to help agencies determine when projects are “similar.” Inconsistent interpretations of extramural research budgets. In 1998, we found that while agency officials adhered to SBIR’s program and statutory funding requirements, they used differing interpretations of how to calculate their “extramural research budgets.” As a result some agencies were inappropriately including or excluding some types of expenses. To address our recommendation that SBA provide additional guidance on how participating agencies were to calculate their extramural research budgets, the Congress in 2000 required that the agencies report annually to SBA on the methods used to calculate their extramural research budgets. Geographical concentration of awards. In 1999, in response to congressional concerns about the geographical concentration of SBIR awards, we reported that companies in a small number of states, especially California and Massachusetts, have submitted the most proposals and won the majority of awards. The distribution of awards generally followed the pattern of distribution of non-SBIR expenditures for R&D, venture capital investments, and academic research funds. We reported that some agencies had undertaken efforts to broaden the geographic distribution of awards and that the program implemented by the National Science Foundation had been particularly effective. Although we did not make any recommendations on how to improve the program’s outreach to states receiving fewer awards, in the 2000 reauthorization of the program, Congress established the Federal and State Technology Partnership Program to help strengthen the technological competitiveness of small businesses, especially in those states that receive fewer SBIR grants. Clarification on commercialization and other SBIR goals. Finally, in response to our continuing concern that clarification was needed on the relative emphasis that agencies should give to a company’s commercialization record and SBIR’s other goals when evaluating proposals, in 2000 the Congress required companies applying for a second phase award to include a commercialization plan with their SBIR proposals. This requirement partially addressed our concern. Moreover, in the spring of 2001, SBA initiated efforts to respond to our recommendation to develop standard criteria for measuring commercial and other outcomes of the SBIR program, such as uniform measures of sales and developmental funding, and incorporate these criteria into its Tech-Net database. Specifically, SBA began implementing a reporting system to measure the program’s commercialization success. In fiscal year 2002, SBA further enhanced the reporting system to include commercialization results that would help establish an initial baseline rate of commercialization. In addition, small business firms participating in the SBIR program are required to provide information annually on sales and investments associated with their SBIR projects. One issue that continues to remain somewhat unresolved after almost two decades of program implementation is how to assess the performance of the SBIR program. As the program has matured, the Congress has emphasized the potential for commercialization as an important criterion in awarding funds and the commercialization of a product as a measure of success for the program. However, in 1999, we reported that the program’s other goals also remain important to the agencies. By itself, according to some program managers, limited commercialization may not signal “failure” because a company may have achieved other goals, such as innovation or responsiveness to an agency’s research needs. We identified a variety of reasons why assessing the performance of the SBIR program has remained a challenge. First, because the authorizing legislation and SBA’s policy directives do not define the role of the company’s commercialization record in determining commercial potential and the relative importance of the program’s goals, different approaches have emerged in agencies’ evaluations of proposals. As a result, the relative weight that should be given to the program’s goals when evaluating proposals remains unclear. Innovation and responsiveness to an agency’s needs, for example, may compete with the achievement of commercialization. In the view of many program managers, innovation involves a willingness to undertake R&D with a higher element of risk and a greater chance that it may not lead to a commercial product; responsiveness to an agency’s needs involves R&D that may be aimed at special niches with limited commercial potential. Striking the right balance between achieving commercial sales and encouraging new, unproven technologies is, according to the program managers, one of the key ingredients in the program’s overall success. Second, we found that it has been difficult to find practical ways to define and measure the SBIR program’s goals in order to evaluate proposals. For example, the authorizing legislation lacks a clear definition of “commercialization,” and agencies sometimes differed on its meaning. This absence of a definition makes it more difficult to determine when a frequent winner is “failing” to achieve a sufficient level of commercialization and how to include this information in an agency’s review of the company’s proposal. Similarly, efforts to define and measure technological innovation, which was one of the program’s original goals, have posed a challenge. Although definitions vary, there is widespread agreement that technological innovation is a complex process, particularly in the development of sophisticated modern technologies. Finally, we reported that as the emphasis on commercialization had grown, so had concerns that noncommercial successes may not be adequately recognized. For example, program managers identified various projects that met special military or medical equipment needs but that had limited sales potential. These projects would be helpful in reducing the agency’s expenditures and meeting the mission of the agency but may not be appropriately captured in typical measurements of commercialization. In general, we found that program managers valued both noncommercial and commercial successes and feared that the former might be ignored in emphasizing the latter. To help evaluate the performance of the program, in the 2000 reauthorization of SBIR, Congress required SBA to develop a database that would help the agency collect and maintain in common format necessary program output and outcome information. The database is to include the following information on all phase II awards: (1) revenue from the sale of new products or services resulting from the SBIR funded research, (2) additional investment from any non-SBIR source for further research and development, and (3) any other description of outputs and outcomes of the awards. In addition, the database is to include general information for all applicants not receiving an award including an abstract of the project. In conclusion, Mr. Chairman, our work has shown that, overall, the SBIR program has been successful in meeting its goals and that the Congress and the agencies have implemented actions to strengthen the program over time. However, an assessment of the program’s results remains a challenge because of the lack of clarity on how much emphasis the program should place on commercialization versus other goals. For further information, please contact Anu Mittal at (202) 512-3841 or mittala@gao.gov. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

Since it was established in 1982, GAO has consistently reported on the success of the Small Business Innovation Research (SBIR) program in benefiting small, innovative companies, strengthening their role in federal research and development (R&D), and helping federal agencies achieve their R&D goals. However, through these reviews GAO has also identified areas where action by participating agencies or the Congress could build on the program's successes and improve its operations. This statement for the record summarizes the program's successes and improvements over time, as well as the continuing challenge of assessing the long term results of the program. Between July 1985 and June 1999, GAO reviewed, reported, and testified on the SBIR program many times at the request of the Congress. While GAO's work focused on many different aspects of the program, it generally found that SBIR is achieving its goals to enhance the role of small businesses in federal R&D, stimulate commercialization of research results, and support the participation of small businesses owned by women and/or disadvantaged persons. Participating agencies and companies that GAO surveyed during the course of its reviews generally rated the program highly. GAO also identified areas of weaknesses and made recommendations that, if addressed, could strengthen the program further. Some of these concerns related to (1) duplicate funding for similar, or even identical, research projects by more than one agency, (2) inconsistent interpretations of extramural research budgets by participating agencies, (3) geographical concentration of awards in a small number of states, and (4) lack of clarification on the emphasis that agencies should give to a company's commercialization record when assessing its proposals. Most of GAO's recommendations for program improvement have been either fully or partially addressed by the Congress in various reauthorizations of the program or by the agencies themselves. One issue that continues to remain somewhat unresolved after almost two decades of program implementation is how to assess the performance of the SBIR program. As the program has matured, the Congress has emphasized the potential for commercialization as an important criterion in awarding funds and the commercialization of a product as a measure of success for the program. However, in 1999, GAO reported that the program's other goals also remain important to the agencies. By itself, according to some program managers, limited commercialization may not signal "failure" because a company may have achieved other goals, such as innovation or responsiveness to an agency's research needs. GAO identified a variety of reasons why assessing the performance of the SBIR program has remained a challenge. First, because the authorizing legislation and the Small Business Administration's (SBA) policy directives do not define the role of the company's commercialization record in determining commercial potential and the relative importance of the program's goals, different approaches have emerged in agencies' evaluations of proposals. Second, GAO found that it has been difficult to find practical ways to define and measure the SBIR program's goals in order to evaluate proposals. For example, the authorizing legislation lacks a clear definition of "commercialization," and agencies sometimes differed on its meaning. Finally, GAO reported that as the emphasis on commercialization had grown, so had concerns that noncommercial successes may not be adequately recognized. For example, program managers identified various projects that met special military or medical equipment needs but that had limited sales potential.

The Water Resources Development Act of 2000 (Title VI, P.L. 106-541 ) authorized involvement of federal agencies in projects to restore the Everglades; these projects are coordinated under a planning framework—the Comprehensive Everglades Restoration Plan (CERP or the plan). The Everglades is the defining component of the South Florida ecosystem (see Figure 1 ), which incorporates 16 national wildlife refuges and four national park units. South Florida is also home to more than six million people and a large agricultural economy. There is wide agreement that major changes in water quantity, quality, timing, and distribution since the 1950s have significantly altered the region's ecology. During the dry season, the current water regime in South Florida is unable to sufficiently supply freshwater to meet both natural system needs and urban and agricultural demand. Water shortages, like those affecting Florida in 2007 because of lower than normal rainfall, are expected to become more frequent as demand by urban and agricultural consumers increases. The Everglades is a network of subtropical wetland landscapes that once stretched 220 miles from Orlando to Florida Bay. Several hundred lakes fed slow-moving creeks, called sloughs, that joined the Kissimmee River. Depending on rainfall, water flowed south down the river or topped the river's banks and flowed through 40,000 acres of marsh to Lake Okeechobee. During the summer rainy season, the lake would overflow its southern shore, spilling water into the Everglades. Due to flat topography, this water moved slowly south to Florida Bay through a shallow 40-mile wide, 100-mile long sawgrass marsh. These wetlands acted as natural filters and retention areas that recharged underlying aquifers. The Everglades' combination of abundant moisture, rich soils, and subtropical temperatures supported a vast array of species. However, by the mid-1800s, many in South Florida viewed the Everglades as an unproductive swamp. Flood control and reclamation efforts that manipulated the Everglades hydrology allowed development of the East Coast of Florida and permitted agriculture on reclaimed marshland. Principal among the human interventions affecting the Everglades is the Central and Southern Florida (C&SF) project of the Army Corps of Engineers (Corps), which was first authorized by Congress in 1948 for flood damage reduction and to satisfy other water management needs of South Florida. Water flows in South Florida are now directed by 1,000 miles of canals, 720 miles of levees, and almost 200 water control structures. Management and development activities have markedly changed the Everglades' water regime. Because of the C&SF project, water that once flowed from Lake Okeechobee across the Everglades in a slow-moving sheet is directed into canals and rivers discharging directly to the ocean. Experts now believe that the Everglades ecosystem has changed because it now receives less water during the dry season and more during the rainy season. The altered water regime combined with urban and agricultural development have reduced the Everglades to half its original size. Habitat loss has threatened or endangered numerous plant and animal species. The Everglades is also harmed by degraded water quality. Pollutants from urban areas and agricultural runoff, including excess nutrients (such as phosphorous and nitrogen), metals, and pesticides, have harmed plant and animal populations. Nutrients entering the Everglades have caused a decline in native vegetation and an overabundance of invasive exotic species. Changes in the quantity, quality, and timing of freshwater flows have also disrupted the equilibrium of coastal estuaries and reef systems. The federal government and the State of Florida have undertaken many restoration activities, such as acquiring lands and preparing a multi-species recovery plan, to address the health of the Everglades. The South Florida Ecosystem Restoration Task Force (Task Force), which was formalized by WRDA 1996 ( P.L. 104-303 ), coordinates the numerous restoration activities. The Task Force facilitates restoration using the following goals: (1) "get the water right," (2) restore, preserve, and protect natural habitats and species, and (3) foster compatibility of built and natural systems. Achieving these goals for South Florida is estimated at nearly $20 billion, of which $10.9 billion would be spent under CERP. The plan is the principal mechanism for "getting the water right" (i.e., restoring natural hydrologic functions and water quality, and providing water supplies). CERP focuses on water quantity, quality, timing, and distribution. The plan is designed to capture and store freshwater, which is currently discharged to the ocean, for use during the dry season. An estimated 80% of the captured water would be directed to the natural system, and the remaining 20% would be for agricultural and urban consumption. CERP calls for removing 240 miles of levees and canals, and building a network of reservoirs, underground storage wells, and pumping stations that would capture water and redistribute it to replicate natural flow. Title VI of WRDA 2000 approved CERP as contained in the Final Integrated Feasibility Report and Programmatic Environmental Impact Statement , as modified by the act. It also authorized $700 million in federal funds for an initial set of CERP projects. As other CERP projects are prepared, the Administration proposes them for authorization and inclusion in the next WRDA. WRDA 2007 ( P.L. 110-114 ) authorized a second set of activities, including the Indian River Lagoon (IRL) and Picayune Strand restoration projects; CERP activities in the legislation represented roughly $2.0 billion in authorizations (not counting $240 million in related deauthorizations also included in the legislation). Title VI of WRDA 2000 established that construction as well as operation and maintenance (O&M) costs of CERP projects would be equally shared by Floridian stakeholders and the federal government. CERP authorization was achieved after years of delicate negotiations among federal, state, local, and tribal stakeholders. Federal agencies responsible for components of CERP receive appropriations for these activities through their annual appropriations bills. Information on the status of appropriations for CERP activities performed by the Corps is available in CRS Report RL34009, Energy and Water Development: FY2008 Appropriations , by [author name scrubbed] et al. Appropriations status for CERP activities performed by Department of the Interior agencies is available in CRS Report RL34011, Interior, Environment, and Related Agencies: FY2008 Appropriations , by [author name scrubbed] et al. While support for CERP remains broad, reservations remain over its implementation. Recent concerns have included how projects are being prioritized, the pace of federal efforts and investments, and the pace of mitigation efforts for excess phosphorous. Other issues include effectiveness of restoration efforts and uncertainties in technologies. Since enactment of WRDA 2000 and though FY2007, $0.37 billion in federal funds and $1.63 billion in state funds have been put toward CERP projects. Much of the state's funds have gone toward projects that are part of the state's Acceler8 effort to accelerate the design, construction, and funding for eight priority CERP projects. Some stakeholders are concerned that the Acceler8 prioritization may increase effort on meeting water supply needs of agricultural and urban users, and decrease attention to investments for ecosystem restoration. This concern is raised by those wanting to maintain a focus on restoration and by those concerned with the Corps' mission being expanded into water supply projects for municipal and agricultural users. Proponents of Accerler8 argue that the priority projects have both water supply and restoration benefits and were agreed to as part of the CERP program; these proponents also perceive the pace of federal funding as being too slow. Federal water resources policies justify federal participation in ecosystem restoration projects, like CERP projects, based on the projects' environmental benefits for the nation. A concern of some stakeholders is that some specific Everglades restoration projects proposed for authorization or under development have primarily local benefits, rather than national benefits. Another concern has been that the CERP costs have increased, with increasing costs associated with land acquisition being one factor. Acceler8 proponents argue that these increasing costs are a reason to move more quickly. The increasing costs are of particular concern to stakeholders who worry that the commitment of federal funds to CERP might limit the funds available for other ecosystem restoration projects across the nation. The sponsors and beneficiaries of traditional Corps projects that provide navigation and flood control are concerned that not only Everglades restoration but also other large-scale restoration activities, such as wetlands restoration in coastal Louisiana, may divert funds away from their projects. No CERP projects have been completed since enactment, and all 15 CERP components scheduled for completion by 2007 have been delayed. There exists serious concern that delays may jeopardize the plan's feasibility. For example, delays in the Modified Waters Deliveries Project (Mod Waters), a pre-CERP project to restore flows to Everglades National Park, may result in insufficient water flows for the implementation of CERP components on the eastern side of the Everglades National Park. This interdependency of CERP and non-CERP projects for achieving ecosystem restoration goals was codified in WRDA 2000, which restricted appropriations for specific components of CERP until Mod Waters is complete. Another area of controversy that is related to potential delays in restoration stems from a May 2003 Florida state law (Chapter 2003-12) that authorizes a plan to mitigate phosphorus pollution reaching the Everglades. Some critics of the law argue that the plan extends previously established phosphorus mitigation deadlines and may compromise restoration efforts. The law's proponents argue that the plan represents a realistic strategy for curbing phosphorus. In the Interior and Related Agencies Appropriations Act, FY2006 ( P.L. 109-54 ), there were several provisions that conditioned funds for restoration on the achievement of water quality standards in federal properties. These provisions were also included in the FY2004 and FY2005 Interior appropriations. If water quality standards are not achieved, appropriations for restoration may be reduced according to provisions in these acts. The enacted language indicates congressional interest in overseeing the achievement of water quality standards for waters entering federal lands in Florida. Some environmental groups question the extent to which CERP contributes to Everglades restoration and whether so complicated and costly a plan is necessary. There also is concern that the plan does not include enough measures to improve water quality in the Everglades. Some groups and federal agencies have noted that CERP does not explicitly give natural systems precedence in water allocation, and that it is focused first on water supply rather than on ecological restoration. To address this point, the Corps revised the project implementation sequencing to include restoration activities in earlier phases. These changes have not satisfied some groups and scientists who continue to oppose CERP. Some environmental groups, which support CERP and Florida's financial participation in the effort, worry about the source of Florida's contribution. They argue against using funds designated for the purchase of land needed for restoration to finance other types of CERP projects. These groups contend that land acquisition is essential for successful Everglades restoration. A report by the National Research Council also suggests that acquiring needed land early in the restoration process is important for lowering the potential for irreversible damage due to development within the Greater Everglades. Others have raised questions regarding the management of Lake Okeechobee and other aspects of flood management for central Florida on the Caloosahatchee River's ecosystem and how these water management issues are being integrated into Everglades restoration efforts and planning. Others also have questioned the extent to which the impacts of sea level rise and climate change have been integrated into CERP, and their potential effects on the future of the Everglades ecosystem. Ecosystem restoration is a relatively young applied science, and, in many cases, the technologies and scientific data to support it are still being developed. To manage the resulting uncertainty, CERP is being implemented using adaptive management —a flexible learning-based approach that integrates new information into the restoration effort as it proceeds. Consequently, CERP is not as detailed as a typical Corps feasibility proposal. Another mechanism for coping with uncertainty of ecosystem restoration outcomes is the use of pilot projects. WRDA 2000 authorized four pilot projects, including projects to test aquifer storage and recovery (ASR), a water management strategy that has never been used on such a large scale as proposed under CERP. ASR uses aquifers as underground reservoirs to store surface water that will be withdrawn later during dry periods. These pilot projects have not been completed, and as a result, there are uncertainties in their effectiveness of early water storage projects.

The Everglades, a unique network of subtropical wetlands in Florida, is half its original size. Many factors contributed to its decline, including flood control projects and agricultural and urban development. Federal, state, tribal, and local agencies collaborated to develop a Comprehensive Everglades Restoration Plan (CERP, or the plan). CERP aims to increase storage of wet season waters to augment the supplies during the dry season for both the natural system and urban and agricultural users. The plan consists of more than 60 projects estimated to take more than 30 years and $10.9 billion to complete. The Water Resources Development Act (WRDA) of 2000 (P.L. 106-541) approved the CERP framework and authorized a first set of projects at $1.4 billion. WRDA 2000 established how CERP costs would be split; the federal government would pay half of construction and operation, and an array of state, tribal, and local agencies the other half. WRDA 2007 (P.L. 110-114) authorized a second set of CERP activities ($2.0 billion). CERP implementation issues include project priorities and funding; timeliness and effectiveness of restoration efforts (e.g., the impacts of delays in the Modified Water Deliveries project); mitigation of excess phosphorous; and technological uncertainties. This report summarizes CERP and its implementation.

RS21314 -- International Law and the Preemptive Use of Force Against Iraq Updated April 11, 2003 Until recent decades customary international law deemed the right to use force and even to go to war to be an essentialattribute of every state. As one scholar summarized: It always lies within the power of a State to endeavor to obtain redress for wrongs, or to gain political or other advantages over another, not merely by the employment of force, but also bydirectrecourse to war. (1) Within that framework customary international law also consistently recognized self-defense as a legitimate basis for theuse of force: An act of self-defense is that form of self-protection which is directed against an aggressor or contemplated aggressor. No act can be so described which is not occasioned by attack or fear ofattack. When acts of self-preservation on the part of a State are strictly acts of self-defense, they are permitted by the lawofnations, and are justified on principle, even though they may conflict with the ... rights of otherstates. (2) Moreover, the recognized right of a state to use force for purposes of self-defense traditionally included the preemptive useof force, i.e., the use of force in anticipation of an attack. Hugo Grotius, the father of international law,stated in theseventeenth century that "[i]t be lawful to kill him who is preparing to kill." (3) Emmerich de Vattel a century later similarlyasserted: The safest plan is to prevent evil, where that is possible. A Nation has the right to resist the injury another seeks to inflict upon it, and to use force ... against the aggressor. It may even anticipatetheother's design, being careful, however, not to act upon vague and doubtful suspicions, lest it should run the risk ofbecoming itself the aggressor. (4) The classic formulation of the right of preemptive attack was given by Secretary of State Daniel Webster in connection withthe famous Caroline incident. In 1837 British troops under the cover of night attacked and sank anAmerican ship, the Caroline , in U.S. waters because the ship was being used to provide supplies to insurrectionists againstBritish rule inCanada headquartered on an island on the Canadian side of the Niagara River. The U.S. immediately protested this"extraordinary outrage" and demanded an apology and reparations. The dispute dragged on for several years beforetheBritish conceded that they ought to have immediately offered "some explanation and apology." But in the courseof thediplomatic exchanges Secretary of State Daniel Webster articulated the two conditions essential to the legitimacyof thepreemptive use of force under customary international law. In one note he asserted that an intrusion into the territoryofanother state can be justified as an act of self-defense only in those "cases in which the necessity of that self-defenseisinstant, overwhelming, and leaving no choice of means and no moment for deliberation." (5) In another note he asserted thatthe force used in such circumstances has to be proportional to the threat: It will be for [Her Majesty's Government] to show, also, that the local authorities of Canada, even supposing the necessity of the moment authorized them to enter the territories of theUnitedStates at all, did nothing unreasonable or excessive; since the act, justified by the necessity of self-defence, mustbe limitedby that necessity, and kept clearly within it. (6) Both elements - necessity and proportionality - have been deemed essential to legitimate the preemptive use of force incustomary international law. (7) However, with the founding of the United Nations, the right of individual states to use force was purportedly curbed. TheCharter of the UN states in its Preamble that the UN was established "to save succeeding generations from thescourge ofwar"; and its substantive provisions obligate Member States of the UN to "settle their international disputes bypeacefulmeans" (Article 2(3)) and to "refrain in their international relations from the threat or use of force against theterritorialintegrity or political independence of any State, or in any manner inconsistent with the Purposes of the UnitedNations"(Article 2(4)). In place of the traditional right of states to use force, the Charter creates a system of collectivesecurity inwhich the Security Council is authorized to "determine the existence of any threat to the peace, breach of the peace,or actof aggression" and to "decide what measures shall be taken ... to maintain international peace and security" (Article39). Although nominally outlawing most uses of force in international relations by individual States, the UN Charter doesrecognize a right of nations to use force for the purpose of self-defense. Article 51 of the Charter provides: Nothing in the present Charter shall impair the inherent right of individual or collective self-defence if an armed attack occurs against a Member of the United Nations, until the Security Councilhastaken measures necessary to maintain international peace and security. (8) The exact scope of this right of self-defense, however, has been the subject of ongoing debate. Read literally, Article 51'sarticulation of the right seems to preclude the preemptive use of force by individual states or groupings of states andtoreserve such uses of force exclusively to the Security Council. Measures in self-defense, in this understanding, arelegitimate only after an armed attack has already occurred. (9) Others contend that Article 51 should not be construed so narrowly and that "it would be a travesty of thepurposes of theCharter to compel a defending state to allow its assailant to deliver the first, and perhaps fatal, blow ...." (11) To read Article51 literally, it is said, "is to protect the aggressor's right to the first strike." (12) Consequently, to avoid this result, someassert that Article 51 recognizes the "inherent right of individual or collective self-defence" as it developed incustomaryinternational law prior to adoption of the Charter and preserves it intact. The reference to that right not beingimpaired "ifan armed attack occurs against a Member of the United Nations," it is said, merely emphasizes one importantsituationwhere that right may be exercised but does not exclude or exhaust other possibilities. (13) In further support of this view, it is argued that the literal construction of Article 51 simply ignores the reality that the ColdWar and other political considerations have often paralyzed the Security Council and that, in practice, states havecontinuedto use force preemptively at times in the UN era and the international community has continued to evaluate thelegitimacyof those uses under Article 51 by the traditional constraints of necessity and proportionality. The followingexamplesillustrate several aspects of these contentions: In 1962 President Kennedy, in response to photographic evidence that the Soviet Union was installing medium range missiles in Cuba capable of hitting the United State, imposed a naval "quarantine" on Cuba in order"tointerdict ... the delivery of offensive weapons and associated material." (14) Although President Kennedy said that thepurpose of the quarantine was "to defend the security of the United States," the U.S. did not rely on the legal conceptofself-defense either as articulated in Article 51 or otherwise as a justification for its actions. Abram Chayes, theLegalAdviser to the State Department at that time, later explained the decision not to rely on that justification asfollows: In retrospect ... I think the central difficulty with the Article 51 argument was that it seemed to trivialize the whole effort at legal justification. No doubt the phrase "armed attack" must beconstruedbroadly enough to permit some anticipatory response. But it is a very different matter to expand it to includethreateningdeployments or demonstrations that do not have imminent attack as their purpose or probable outcome. To acceptthatreading is to make the occasion for forceful response essentially a question for unilateral national decision thatwould notonly be formally unreviewable, but not subject to intelligent criticism, either .... Whenever a nation believed thatinterests,which in the heat and pressure of a crisis it is prepared to characterize as vital, were threatened, its use of force inresponsewould become permissible .... In this sense, I believe that an Article 51 defence would have signalled that theUnited Statesdid not take the legal issues involved very seriously, that in its view the situation was to be governed by nationaldiscretion,not international law. (15) In 1967 Israel launched a preemptive attack on Egypt and other Arab states after President Nasser had moved his army across the Sinai toward Israel, forced the UN to withdraw its peacekeeping force from the Sinaiborder, andclosed the port of Aqaba to Israeli shipping, and after Syria, Iraq, Jordan, and Saudi Arabia all began moving troopsto theborders of Israel. In six days it routed Egypt and its Arab allies and had occupied the Sinai Peninsula, the WestBank, andthe Gaza Strip. Israel claimed its attack was defensive in nature and necessary to forestall an Arab invasion. BoththeSecurity Council and the General Assembly rejected proposals to condemn Israel for its "aggressive"actions. (16) On June 7, 1981, Israel bombed and destroyed a nuclear reactor under construction in Iraq. Assertingthat Iraq considered itself to be in a state of war with Israel, that it had participated in the three wars with Israel in1948,1967, and 1973, that it continued to deny that Israel has a right to exist, and that its nuclear program was for thepurpose ofdeveloping weapons capable of destroying Israel, Israel claimed that "in removing this terrible nuclear threat to itsexistence, Israel was only exercising its legitimate right of self-defense within the meaning of this term ininternational lawand as preserved also under the United Nations Charter." (17) Nonetheless, the Security Council unanimously "condemn[ed]the military attack by Israel in clear violation of the Charter of the United Nations and the norms of internationalconduct"and urged the payment of "appropriate redress." (18) Thus, in both theory and practice the preemptive use of force appears to have a home in current international law. Itsclearest legal foundation is in Chapter VII of the UN Charter. Under Article 39 the Security Council has theauthority todetermine the existence not only of breaches of the peace or acts of aggression that have already occurred but alsoof threatsto the peace; and under Article 42 it has the authority to "take such action by air, sea, or land forces as may benecessary tomaintain or restore international peace and security." These authorities clearly seem to encompass the possibilityof thepreemptive use of force. Less clear is whether international law currently allows the preemptive use of force by anation orgroup of nations without Security Council authorization. That would seem to be permissible only if Article 51 is read notliterally but as preserving the use of force in self-defense as traditionally allowed in customary international law. As noted,the construction of Article 51 remains a matter of debate. But so construed, Article 51 would not preclude thepreemptiveuse of force by the U.S. against Iraq or other sovereign nations. To be lawful, however, such uses of force wouldneed tomeet the traditional requirements of necessity and proportionality. As the examples listed above illustrate, the requirement of necessity is most easily met when an armed attack is clearlyimminent, as in the case of the Arab-Israeli War of 1967. But beyond such obvious situations, as Abram Chayesargued,the judgment of necessity becomes increasingly subjective; and there is at present no consensus either in theory orpracticeabout whether the possession or development of weapons of mass destruction (WMD) by a rogue state justifies thepreemptive use of force. Most analysts recognize that if overwhelmingly lethal weaponry is possessed by a nationwillingto use that weaponry directly or through surrogates (such as terrorists), some kind of anticipatory self-defense maybe amatter of national survival; and many - including the Bush Administration - contend that international law oughtto allow,if it does not already do so, for the preemptive use of force in that situation. (19) But many states and analysts are decidedlyreluctant to legitimate the preemptive use of force against threats that are only potential and not actual on thegrounds thejustification can easily be abused. Moreover, it remains a fact that the international community judged Israel'sdestructionof Iraq's nuclear reactor site in 1981 to be an aggressive act rather than an act of self-defense. Iraq has become an occasion to revisit the issue. Iraq had not attacked the U.S., nor did it appear to pose an imminent threatof attack in traditional military terms. As a consequence, it seems doubtful that the use of force against Iraq couldbedeemed to meet the traditional legal tests justifying preemptive attack. But Iraq may have possessed WMD, andit mayhave had ties to terrorist groups that seek to use such weapons against the U.S. If evidence is forthcoming on bothof thoseissues, then the situation necessarily raises the question that the Bush Administration articulated in its nationalsecuritystrategy, i.e. , whether the traditional law of preemption ought to be recast in light of the realities ofWMD, rogue states, andterrorism. Iraq likely will not resolve that question, but it is an occasion to crystallize the debate.

On March 19, 2003, the United States, aided by Great Britain and Australia,initiated a military invasion of Iraq. Both the U.S. and Great Britain contended that they had sufficient legalauthority touse force against Iraq pursuant to Security Council resolutions adopted in 1990 and 1991. But President Bush alsocontended that, given the "nature and type of threat posed by Iraq," the U.S. had a legal right to use force "in theexercise ofits inherent right of self defense, recognized in Article 51 of the UN Charter." Given that the U.S. had notpreviously beenattacked by Iraq, that contention raised questions about the permissible scope of the preemptive use of force underinternational law. This report examines that issue as it has developed in customary international law and under theUnitedNations Charter. It will be updated as events warrant. (For historical information on the preemptive use of forceby theU.S., see CRS Report RS21311, U.S. Use of Preemptive Military Force.)

Congress enacted Title VII of the Civil Rights Act of 1964 (CRA) to provide statutory protection for employees against religious discrimination by certain employers. Among other things, Title VII generally prohibits employers from discriminating against employees on the basis of their religious beliefs and requires employers to make reasonable accommodations for employees' religious practices. However, certain religious organizations may be exempt from some of the prohibitions of Title VII. Title VII is considered a model for other employment nondiscrimination legislation, and Congress may choose to incorporate protections offered by Title VII into new civil rights bills. This report analyzes the scope of Title VII's prohibition on religious discrimination, exemptions for religious organizations, and requirements for accommodations. The CRA established protections for civil rights across a wide spectrum, including, for example, education, federally funded programs, and employment. Title VII of the CRA prohibits discrimination in employment on the basis of race, color, religion, national origin, or sex. Title VII applies to employers with 15 or more employees, including the federal government and state and local governments. Individuals who believe they are victims of employment discrimination may file a complaint with the Equal Employment Opportunity Commission (EEOC), which is responsible for enforcing individual Title VII claims against private employers. The Department of Justice enforces Title VII against state and local governments but may do so only after the EEOC has conducted an initial investigation. Section 701 of Title VII defines religion to include all aspects of religious observance and practice, as well as belief, unless an employer demonstrates that he is unable to reasonably accommodate to [sic] an employee's or prospective employee's religious observance or practice without undue hardship on the conduct of the employer's business. This definition of religion forms the basis of requirements for employers under Title VII. Under the statutory definition, employers cannot use an employee's (or applicant's) religious observance or religious practice against the employee if the employer can reasonably accommodate the observance or practice without undue hardship on the business. If an employer discriminates based on a religious observance or practice that can be reasonably accommodated, the employer may be in violation of Title VII's prohibition on discrimination on the basis of religion. Sometimes whether a particular observance or practice is "religious" may be disputed. Religious practices and observances are generally considered "to include moral or ethical beliefs as to what is right and wrong which are sincerely held with the strength of traditional religious views." The belief does not need to be accepted by any religious group and does not need to be accepted by the religious group to which the individual belongs in order to qualify as religious under Title VII. Courts have upheld this understanding that a religious belief does not need to meet objective tests of reasonableness, but instead must be a sincerely held belief of the individual regardless of its broader acceptance. While Title VII and its regulations provide a broad prohibition on discrimination based on religion as it is defined alone, Section 703 of Title VII more specifically defines unlawful employment practices under the CRA. This section prohibits employers from using religion as a basis for hiring or discharging any individual. It further prohibits employers from discriminating "with respect to his compensation, terms, conditions, or privileges of employment" because of the individual's religion. It also prohibits employers from limiting or separating employees or applicants "in any way which would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his status as an employee...." Title VII generally prohibits employers from treating employees of one religion differently from the way they treat employees of another religion. Employers cannot consider religion when scoring results of employment-related tests; cannot use religion as a motivating factor for any action, even if other factors also motivated the action; cannot retaliate against any individual who opposed an employer's action that is unlawful under Title VII or participated in the investigation of the unlawful action; and cannot publish or advertise any preference based on religion, unless that preference is based on a bona fide occupational qualification. The discrimination prohibited by Title VII includes harassment that is "sufficiently severe or pervasive to alter the conditions of [the victim's] employment and create an abusive working environment." Furthermore, an employee cannot be required to participate in any religious activity as part of his or her employment. Title VII does not apply to all employers, particularly with respect to religious discrimination. In addition to exempting employers with fewer than 15 employees, Title VII includes exceptions that allow certain employers to consider religion in employment decisions. Specifically, Title VII's prohibition against religious discrimination does not apply to "a religious corporation, association, educational institution, or society with respect to the employment [i.e., hiring and retention] of individuals of a particular religion to perform work connected with the carrying on by such corporation, association, educational institution, or society of its activities." However, the statute does not define "religious corporation, association, educational institution, or society." There is no definitive judicial standard to determine whether an organization qualifies for the exemption. In an example of the varied understanding of the scope of the exemption, a three-judge panel from the U.S. Court of Appeals for the 9 th Circuit issued three opinions, each applying a different standard. The court later amended its decision and issued a majority opinion adopting four criteria that a religious organization must satisfy to qualify for the exemption. The court's standard requires that an entity is not subject to Title VII "if it is organized for a religious purpose, is engaged primarily in carrying out that religious purpose, holds itself out to the public as an entity for carrying out that religious purpose, and does not engage primarily or substantially in the exchange of goods or services for money beyond nominal amounts." The Supreme Court declined to review the case, leaving lower courts without a uniform standard to apply. However, lower court decisions generally have appeared to agree upon several factors relevant to deciding whether an organization qualifies for the exemption. Courts have considered (1) the purpose or mission of the organization; (2) the ownership, affiliation, or source of financial support of the organization; (3) requirements placed upon staff and members of the organization (faculty and students if the organization is a school); and (4) the extent of religious practices in or the religious nature of products and services offered by the organization. Title VII also provides two more specific exemptions. One separate, but similar, exemption applies specifically to religious educational institutions. That exemption allows such institutions "to hire and employ employees of a particular religion if [the institution] is, in whole or in substantial part, owned, supported, controlled, or managed by a particular religion or by a particular [organization], or if the curriculum of [the institution] is directed toward the propagation of a particular religion." The other exemption provided in Title VII allows employers to discriminate on the basis of religion, sex, or national origin if those factors are "a bona fide occupational qualification reasonably necessary to the normal operation of that particular business or enterprise." This exemption based on bona fide occupational qualifications has been construed narrowly. Accordingly, courts have deemed valid discriminatory qualifications to arise only in situations where religion plays an extremely significant part of the work environment, including, for example, jobs where employee safety is threatened because of the employee's religious affiliation. Exemptions for religious organizations in the context of Title VII are not absolute. Once an organization qualifies as an entity eligible for Title VII exemption, it is permitted to discriminate on the basis of religion in its employment decisions. However, the exemption does not allow qualifying organizations to discriminate on any other basis forbidden by Title VII. Thus, although a religious organization may consider an employee or applicant's religion without violating Title VII, the organization may still violate Title VII if it considers the individual's race, color, national origin, or sex. Furthermore, the exemptions in Title VII appear to apply only with respect to employment decisions regarding hiring and firing of employees based on religion. Once an organization makes a decision to employ an individual, the organization may not discriminate on the basis of religion regarding the terms and conditions of employment, including compensation, benefits, privileges, etc. In other words, religious organizations that decide to hire individuals with other religious beliefs cannot later choose to discriminate against those individuals with regard to wages or other benefits that the organization provides to employees. It is important to note one more exemption relevant to Title VII's prohibition on employment discrimination. The First Amendment of the U.S. Constitution protects religious organizations' right to choose spiritual leaders. Even before Title VII granted a statutory exemption to religious organizations' hiring decisions generally, the U.S. Supreme Court recognized that the "freedom to select the clergy" has "federal constitutional protection as part of the free exercise of religion against state interference." Title VII's nondiscrimination requirements (e.g., prohibitions on discrimination based on sex) may interfere with this constitutional freedom specific to clergy. This constitutional "ministerial exception" reconciles Title VII with the First Amendment by allowing religious organizations to select clergy without regard to any of Title VII's restrictions yet requiring that employment decisions made regarding other positions within the organization comply with Title VII's requirements or exemptions. Prior to the Supreme Court's recognition of the ministerial exception in 2012, each of the circuit courts also recognized the exception. However, the circuit courts differed on the scope of the exemption, particularly which employees qualified as ministerial employees. The Supreme Court declined to "adopt a rigid formula for deciding when an employee qualifies as a minister," deciding only the status of the employee in the case before it. Although the Court did not identify a definitive standard, it considered four factors that may be relevant to determining whether an employee is ministerial: (1) the formal title given to the employee by the religious institution; (2) the substantive actions reflected by the title (i.e., the qualifications required to be granted such a title); (3) the employee's understanding and use of the title; and (4) the important religious functions performed by employees holding that title. Under Title VII, employers are prohibited from acting on the basis of employees' observances and practices only if they can be reasonably accommodated without undue hardship on the employer's business. In other words, the employer may discriminate on the basis of observances and practices that cannot be reasonably accommodated without undue hardship. EEOC regulations provide guidelines for what constitutes reasonable accommodation and undue hardship. Once an employee requests religious accommodation, the employer must consider whether the requested accommodation is reasonable or what reasonable alternatives might be provided. If more than one accommodation is possible without causing undue hardship, the EEOC determines the reasonableness of the chosen accommodation by examining the alternatives considered by the employer and the alternatives actually offered to the employee. If more than one manner of accommodation would not cause undue hardship, "the employer ... must offer the alternative which least disadvantages the individual with respect to his or her employment opportunities." Employee requests for accommodation arise most often because religious practices conflict with work schedules. EEOC guidelines suggest three possible accommodation alternatives in such situations. First, the employer may permit a voluntary substitute policy under which employees can find substitutes to cover their tasks during the conflict. Second, employers may create a flexible work schedule, including flexible arrival and departure times, floating holidays, flexible breaks, use of lunch time for early departure, and staggered work hours. Third, the employer may consider a lateral transfer for individuals whose religious practices cannot be accommodated in their current position. Another common scenario in which employees request accommodations arises under a provision in collective bargaining agreements requiring employees to join a labor organization or pay an amount equivalent to dues to that organization. When an employee objects to this requirement on religious grounds, the EEOC recommends that the organization make an exception for that employee or allow the employee to donate the equivalent of the amount due to a charitable organization. Requests for accommodation may also arise when an employee's religious beliefs conflict with a work requirement, such as performing abortions, treating gay patients, or complying with dress codes. In order for these accommodations to be appropriate under Title VII, they must not cause undue hardship to the employer. Employers cannot claim undue hardship on "a mere assumption that many more people ... may also need accommodation." The regulations provide two general bases that may justify undue hardship: cost and seniority rights. An employer may refuse to accommodate an employee's religious practice if "the accommodation would require more than a de minimis cost." The EEOC determines whether an accommodation exceeds a de minimis cost by evaluating the cost incurred to the particular employer and the number of employees that will need the accommodation. Generally, administrative costs of rescheduling are considered de minimis costs. An employer may also refuse to accommodate because the accommodation would interfere with the preference guaranteed by a seniority system. Because seniority systems create "a neutral way of minimizing the number of occasions when an employee must work on a day that he would prefer to have off," Title VII does not require that seniority systems "must give way when necessary to accommodate religious observances."

Title VII of the Civil Rights Act of 1964 prohibits discrimination in employment on the basis of race, color, religion, national origin, or sex. It prohibits employers from discriminating against employees on the basis of their religious beliefs and requires employers to make reasonable accommodations for employees' religious practices. Title VII defines religion broadly and relies on an individual's subjective understanding of his or her beliefs, which may result in broad protections for employees with sincerely held beliefs. Congress has recognized that restrictions on employment decisions by religious employers may interfere with the employer's religious practice. As a result, Title VII includes exemptions for religious entities, allowing qualifying employers to consider religion in hiring decisions. Such an exemption allows the religious organization to hire individuals who share the same beliefs as the employer. However, Congress did not define which organizations would qualify for exemption from Title VII and courts have not established a definitive standard. If an organization does qualify for exemption and therefore is allowed to consider religion in employment decisions, it is not permitted to base employment decisions on other prohibited factors under Title VII. In addition to prohibiting discrimination in employment decisions, Title VII requires employers to make reasonable accommodations for current employees' religious practices. Reasonable accommodations may include scheduling adjustments or reassignment to other comparable positions that would not interfere with the employee's religious exercise. The employer is not required to make such an accommodation, however, if doing so would pose an undue hardship on the employer's business or operations. This report reviews the scope of Title VII's prohibition on religious discrimination and its exemptions for religious organizations. It analyzes which organizations may qualify for exemption and also explains the related constitutional protection known as the ministerial exception that often arises in the context of Title VII claims. Finally, the report examines Title VII's accommodations requirement, noting what accommodations may be required and which may be declined as an undue hardship to the employer.

Over the last 50 years, the composition of the American household has changed dramatically. During this period, the proportion of unmarried individuals in the population increased steadily as couples chose to marry at later ages and cohabit prior to marriage—and as divorce rates rose (see fig. 1). From 1960 to 2010, the percentage of single-parent families also rose. In fact, from 1970 through 2012, the estimated proportion of single-parent families more than doubled, increasing from 13 to 32 percent of all families. The decline in marriage and rise in single parenthood over this period were more pronounced among low-income, less-educated individuals, and some minorities. For example, from 1960 to 2010, the proportion of married, 45- to 54-year old men in the highest income quintile declined modestly while the proportion of married men in the lowest income quintile declined from an estimated 71 to 27 percent (see fig. 2). Similarly, the percentage of single parents among 45- to 54-year-old men and women in the highest income quintile remained flat, while there was a steep rise in the percentage of single parents in the lowest income quintile, according to our estimates. In terms of education, among individuals age 18 years and older, the rise in single parenthood was steeper for those without a high school diploma in comparison to their counterparts with 4 or more years of college. Over the same period, the labor force participation rate of married women increased (see fig. 3). In 1960, labor force participation rates among married men, single men, married women, and single women ranged from 89 percent for married men to 32 percent for married women, according to our estimates. Since then, the differences in labor force participation rates for these four groups have narrowed, with labor force participation among married and single women within 3 percentage points in 2010. As a result of married women’s increasing labor force participation, the proportion of married couples with two earners has risen—along with the wives’ contributions to household income. According to the Bureau of Labor Statistics, from 1970 through 2010, women’s median contribution to household income rose from 27 to 38 percent. Further, from 1987 through 2010, the percentage of households in which the wives’ earnings exceeded their husband’s rose from 24 to 38 percent. As marriage and workforce patterns have changed, the U.S. retirement system has undergone its own transition. Specifically, over the last two decades employers have increasingly shifted away from offering their employees traditional DB to DC plans, and roughly half of U.S. workers do not participate in any employer-sponsored pension plan. DB plans typically offer retirement benefits to a retiree in the form of an annuity that provides a monthly payment for life, including a lifetime annuity to the surviving spouse, unless the couple chooses otherwise. In contrast, under a DC plan, workers and employers may make contributions to individual accounts. Depending on the options available under the plan, at retirement DC participants may take a lump sum, roll their plan savings into an IRA, leave some or all of their money in the plan, or purchase an annuity offered through the plan. Further, many of the remaining DB plans now offer lump sums as one of the form-of-payment options under the plan. Participants who elect a lump sum forgo a lifetime annuity. Some DB plan sponsors have also begun offering special, one-time lump sum elections to participants who are already retired and receiving monthly pension benefits. Taken together, the trends in marriage and workforce participation have implications for the receipt of Social Security retirement benefits, especially for women. Specifically, the proportion of women who are not eligible to receive Social Security spousal benefits because they were either never married, or divorced after less than 10 years of marriage— the length of time required for eligibility for Social Security divorced spouse benefits—has increased over the last two decades. The decline in the proportion of women with marriages that qualify them for spousal benefits—coupled with the rise in the percentage of women receiving benefits based on their own work record—has resulted in fewer women today receiving Social Security spousal and survivor benefits than in the past.been more dramatic. In general, the trend away from women receiving spousal benefits is projected to continue, with the largest shift occurring among black women, according to SSA analyses. For many elderly, this shift is likely to be positive, reflecting their higher earnings and greater capacity to save for retirement. However, elderly women with low levels of lifetime earnings, who have no spouse or do not receive a spousal benefit—a group that is disproportionately represented by black women— For blacks, the rise in ineligibility for spousal or widow benefits has are expected to have correspondingly lower Social Security retirement benefits relative to those with higher incomes. These trends have also affected household savings behavior and the financial risks households face in retirement. Households with DC plans have greater responsibility to save and manage their retirement savings so that they have sufficient income throughout retirement. However, our analysis of SCF data shows that many households approaching retirement still have no or very limited retirement savings (see fig. 4). Married households—in which many women now make significant contributions to retirement savings—are more likely to have retirement savings, but their median savings are low. The majority of single-headed households have no retirement savings. Single parents, in particular, tend to have fewer resources available to save for retirement during their working years and are less likely to participate in DC plans. In addition to challenges with accumulating sufficient savings for retirement, individuals may also find it difficult to determine how to invest their savings during their working years and spend down their savings when they reach retirement. During their working years, DC plan participants typically must determine the size of their contributions and choose among various investment options offered by the plan. At retirement or separation from their employer, plan participants must decide what to do with their plan savings. Participants in DB plans also face similar decisions if the plan offers a lump sum option, including whether to take the annuity or lump sum, and if a lump sum is elected, how to manage those benefits. GAO has found that these decisions are difficult to navigate because the appropriate investment strategy depends on many different aspects of an individual’s circumstances, such as anticipated expenses, income level, health, and each household’s tolerance for risk. In addition, individuals with DC plans face challenges comparing their distribution options, in part due to a host of complicated factors that must be considered in choosing among such options. They may also lack objective information to inform these complicated decisions. In fact, while financial experts GAO has interviewed typically recommended that retirees convert a portion of their savings into an income annuity, or opt for the annuity provided by an employer-sponsored DB pension instead of a lump sum withdrawal, we found that most retirees pass up opportunities for additional lifetime retirement income. These choices coupled with increasing life expectancy may result in more retirees outliving their assets. Lastly, the transition from DB to DC plans has increased the vulnerability of some spouses due to differences in the federal requirements for spousal protections between these two types of retirement plans. For DB plans, spousal consent is required if the participant wishes to waive the survivor annuity for his or her spouse. In contrast, for DC plans, spousal consent is not required for the participant to withdraw funds from the account—either before or at retirement—and DC plans do not generally offer annuities at all, including those with a survivor benefit. While this may not be a concern among many couples, it is a concern for some, especially those who depend on their spouse for income. While the trends described above have the potential to affect many Americans, it is likely that they will impact the nation’s most vulnerable more severely. Despite the role Social Security has played in reducing poverty among seniors, poverty remains high among certain groups (see fig. 5). These groups include older women, especially those who are unmarried or over age 80, and nonwhites. Moreover, individuals nearing retirement who experience economic shocks, such as losing a job or spouse, are also vulnerable to economic insecurity. During the 2007-2009 recession, unemployment rates doubled for workers aged 55 and older. When older workers lose a job they are less likely to find other employment. In fact, the median duration of unemployment for older workers rose sharply from 2007 to 2010, more than tripling for workers 65 and older and increasing to 31 weeks from 11 weeks for workers age 55 to 64. Prior GAO work has shown that long- term unemployment can reduce an older worker’s future retirement income in numerous ways, including reducing the number of years the worker can accumulate savings, prompting workers to claim Social Security retirement benefits before they reach their full retirement age, Similarly, our and leading workers to draw down their retirement assets.past work has shown that divorce and widowhood in the years leading up to and during retirement have detrimental effects on an individual’s assets and income, and that these effects were more pronounced for women. As a result of the trends described above, these vulnerable populations may face increasing income insecurity in old age and be in greater need of assistance. For example, during the 2007-2009 recession, the demand for food assistance rose sharply among older adults. Specifically, from fiscal year 2006 to 2009, the average number of households with a member age 60 or older participating in the Supplemental Nutrition Assistance Program rose 25 percent, while the population in that age group rose by 9 percent. Pub. L. No. 89-73, 79 Stat. 218 (codified as amended at 42 U.S.C. §§ 3001-3058ff). past work, we noted that the national funding formula used to allocate funding to states does not include factors to target older adults in greatest need, such as low-income older adults, although states are required to consider such factors when developing the intrastate formulas they use to allocate funds among their local agencies. We found that certain formula changes to better target states with elderly adults with the greatest need would have disparate effects on states, depending on their characteristics. We have also found that lack of federal guidance and data make it difficult to know whether those with the greatest need are being served. Our findings underscore how retirement security can be affected by changing circumstances in the American household and the economy. As the composition of the American family continues to evolve and as our retirement system transitions to one that is primarily account-based, vulnerable populations in this country will face increasing risk of saving sufficiently and potentially outliving their assets. For those with little or no pension or other financial assets, ensuring income in retirement may involve difficult choices, including how long to wait before claiming Social Security benefits, how long to work, and how to adjust consumption and lifestyle to lower levels of income in retirement. Poor or imprudent decisions may mean the difference between a secure retirement and poverty. Planning for these needs will be crucial if we wish to avoid turning back the clock on the gains we have achieved over the past 50 years from Social Security in reducing poverty among seniors. Chairman Nelson, Ranking Member Collins, and Members of the Committee, this completes my statement. I would be happy to answer any questions you might have. In addition to the above, Charlie Jeszeck, Director; Michael Collins, Assistant Director; Jennifer Cook, Erin M. Godtland, Rhiannon Patterson, and Ryan Siegel made significant contributions to this testimony and the related report. In addition, James Bennett, David Chrisinger, Sarah Cornetto, Courtney LaFountain, Kathy Leslie, Amy Moran Lowe, Sheila McCoy, Susan Offutt, Marylynn Sergent, Frank Todisco, and Shana Wallace made valuable contributions. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

Over the past 50 years, poverty rates among older Americans have declined dramatically, in large part due to the availability and expansion of Social Security benefits. Social Security is now the most common type of income for retirees. Social Security retirement benefits are available not only to those who qualify based on their own work history, but also to spouses, widows/widowers, and in some cases former spouses of workers who qualify. However, in recent decades, marriage has become less common, women have entered the workforce in greater numbers, and many employers have shifted from offering DB to DC plans. In light of these trends, GAO is reporting on: (1) the trends in marriage and labor force participation in the American household and in the U.S. retirement system, (2) the effect of those trends on the receipt of retirement benefits and savings, and (3) the implications for vulnerable elderly populations and current challenges in assisting them. This statement draws from previously issued GAO work and a recently issued report, which was based on an analysis of nationally representative survey data including the Survey of Consumer Finances, the Survey of Income and Program Participation, and the Current Population Survey (CPS); and a broad literature review. GAO also interviewed agency officials and a range of experts in the area of retirement security. GAO is making no recommendations. The decline in marriage, rise in women's labor force participation, and transition away from defined benefit (DB) plans to defined contribution (DC) plans have resulted in changes in the types of retirement benefits households receive and increased vulnerabilities for some. Since the 1960s, the percentage of unmarried and single-parent families has risen dramatically, especially among low-income, less-educated individuals, and some minorities. At the same time, the percentage of married women entering the labor force has increased. The decline in marriage and rise in women's labor force participation have affected the types of Social Security benefits households receive, with fewer women receiving spousal benefits today than in the past. In addition, the shift away from DB to DC plans has increased financial vulnerabilities for some due to the fact that DC plans typically offer fewer spousal protections. DC plans also place greater responsibility on households to make decisions and manage their pension and financial assets so they have income throughout retirement. As shown in the figure below, despite Social Security's role in reducing poverty among seniors, poverty remains high among certain groups of seniors, such as minorities and unmarried women. These vulnerable populations are more likely to be adversely affected by these trends and may need assistance in old age. Note: The category “White” refers to people who are white only, non-Hispanic. “Black” refers to people who are black only, non-Hispanic. “Asian” refers to people who are either Asian only, Pacific Islander only or Asian and Pacific Islander, and are non-Hispanic. Hispanic people may be any race. Percentage estimates for poverty rates have margins of error ranging from 0.6 to 8.6 percentage points. See the hearing statement for more information on confidence levels and the data.

Head Start, a federal program that has provided comprehensive early childhood development services to low-income children since 1965, was last reauthorized in 1998 for fiscal years 1999-2003. The program has remained alive in subsequent years through the annual appropriations process. After unsuccessful efforts by the 108 th and 109 th Congresses to complete the reauthorization process, the 110 th Congress has undertaken the task. The House and Senate have each passed its own version of a reauthorization bill, the Senate version adopting the House bill's number ( H.R. 1429 ) and representing only a slightly modified version of the bill reported by the Senate Health, Education, Labor, and Pensions Committee ( S. 556 ). On November 9, 2007, House and Senate conferees filed a conference report ( H.Rept. 110-439 ). This report does not yet reflect the provisions contained in that agreement. The Improving Head Start Act of 2007 ( H.R. 1429 ) was introduced by Representative Kildee on March 9, 2007. The following week, the House Committee on Education and Labor debated, amended, and approved the bill (42-1), and the committee's written report accompanying the legislation ( H.Rept. 110-67 ) was filed on March 23, 2007. That bill was taken to the House floor on May 2, and was approved (with nine amendments) by a vote of 365-48. Twelve amendments in total were offered on the floor, in addition to a motion to recommit (which was rejected). The Head Start for School Readiness Act ( S. 556 ) was introduced by Senator Kennedy on February 12, 2007, and approved via voice vote by the Senate Committee on Health, Education, Labor, and Pensions (HELP) on February 14. The Chairman's amended version of the bill was subsequently reported on March 29, 2007; a written report ( S.Rept. 110-49 ) was filed April 10, 2007. On June 19, the Senate passed (by voice vote under a unanimous consent agreement) its bill, adopting the bill number of the reauthorization bill that passed the House ( H.R. 1429 ), but substituting its own committee-reported bill language of S. 556 (with a few technical changes). Both reauthorization bills propose to amend Head Start with the purpose of improving the program's ability to promote low-income children's school readiness by supporting their cognitive, social, emotional, and physical development. The means for doing so encompass a wide range of provisions, covering issues of program funding, administration, eligibility, accountability, quality, governance, and coordination. Below is an overview of broad areas addressed in the proposed legislation, followed by Table 1 , a detailed side-by-side comparison of each bill's provisions with current law (and, where relevant, current regulations). The areas listed below are not intended to encompass every provision included in each of the respective bills, but rather major areas addressed. The table does not reflect the provisions agreed to in conference. Despite the expiration of authorizing language, the Head Start program has continued to receive its funding through the annual appropriations process, most recently (FY2007) at a level of almost $6.9 billion. From FY1995-FY2003, the Head Start Act authorized funding Head Start at an unspecified dollar amount—"such sums as may be necessary." The reauthorization bills propose to increase funding for Head Start, with both bills designating a dollar amount ($7.350 billion) for FY2008. After FY2008, the House version of H.R. 1429 would authorize "such sums as may be necessary" for each of the remaining four years covered by the legislation, whereas the Senate version includes specific increases for FY2009 and FY2010, before once again mirroring the House bill with unspecified amounts for FY2011 and FY2012. Both bills propose changes with respect to the allocation of appropriated funds. Within the 13% currently reserved from the total appropriation for a variety of purposes, both bills introduce a greater level of specificity, assigning designated percentages (of the total appropriation) for allotments to Indian and Migrant Head Start programs. In the case of both bills, the percentages proposed reflect increases above the portion currently received (and not set in statute). The allocation formula for determining state allotments is changed in both bills to update the "hold harmless," or base amounts assured for the states. Appropriated funds available to states after allotting the hold harmless amounts would be distributed differently by the two bills. The House bill would continue to allot remaining funds based on states' relative shares of poor children under age 5, while the Senate bill introduces a new provision in which a portion of the remaining funds would be allocated based on the percentage of eligible children served by grantees within the state. Program quality is also addressed by the funding allocation provisions. The proposed legislation would maintain current law's practice of reserving a designated percentage of the aforementioned remainder funds for "quality improvement," with both bills proposing greater percentages for this purpose than under current law. Both bills elaborate on the uses of quality improvement funds. Both bills would increase the percentage of the total appropriation reserved for funding Early Head Start programs, with a caveat that these percentages may only be reached provided appropriation levels suffice. To compare the specifics of these and other funding-related provisions, see the portions of Table 1 that refer to Sections 639 and 640 of current law. Provisions designed to address issues of accountability take several forms. Both bills target accountability with respect to fiscal and program management, as well as accountability with respect to Head Start children's outcomes. Under both the House bill and Senate bill, agencies would be designated as a grantee for no more than five years at a time, after which recompetition may be required. (Under current law, grantees do not have to recompete for funds.) Only the House version would establish an application review system to be used during this process; however, both bills establish means for determining what constitutes a "high-performing" grantee, and those agencies not meeting the standard would be faced with recompetition. In order to be considered a high performing grantee under either bill, Head Start agencies would need to demonstrate competent financial management, as well as the ability to deliver a program high in quality, developmentally appropriate, and based on scientifically-based research and measures. Both bills add new language to current law, requiring programs' governing bodies to include individuals with expertise in fiscal matters. Both bills would introduce detailed definitions of "deficiency" into statute, along with provisions to help ensure that funding for any grantees or delegates unable or unwilling to correct deficiencies be suspended or terminated as necessary. As reflected in Table 1 , particularly within Sec. 641A, the two proposals often expand on current regulations with respect to corrective actions. Both bills emphasize the use of scientifically-based early childhood research as a basis for formulating educational measures for children and developing appropriate curricula that will lead to positive outcomes. Likewise, both would suspend use of the National Reporting System (NRS) in its current form, pending further review and recommendations from a National Academy of Sciences panel. The importance of effective and reliable screening and assessments in the Head Start program is stressed by both bills, accompanied by an emphasis on the value of ensuring that the tools used for screening and assessment be scientifically sound, based on the most up-to-date research in the field. Current law emphasizes shared governance and parent involvement within Head Start programs in general terms, leaving the details to regulation. Both versions of H.R. 1429 would introduce into statute more detailed provisions regarding program governance, clearly outlining the composition and responsibilities of both the governing bodies and the policy councils. The reports accompanying the legislation emphasize the committees' intent that a commitment be made to maintaining the structure of shared governance (between governing bodies and policy councils), with clear language that the governing bodies hold legal and fiscal accountability. The responsibilities of policy councils are stated in both bills, but using different language; both bills are more specific than current regulations. As in current regulations, both bills make reference to the need for an impasse policy or means for dealing with internal disputes, in the event that a governing body disagrees with recommendations from the policy council. As noted in Table 1 , within the two bills, the provisions related to program governance do not amend the same section of current law. Section 8 of the House version of H.R. 1429 includes the provisions stating the required composition, role and responsibilities of the governing bodies and councils as part of amendments to Sec. 642, whereas the Senate bill includes its program governance requirements (including composition, roles, and responsibilities) in Section 7, the portion of the bill that amends Sec. 641 of current law. Provisions that aim to improve the quality of Head Start programs (through a variety of means) permeate both reauthorization bills. Some of these provisions, already alluded to, relate to allocation of funds for quality and technical assistance and training, designating agencies, and developing standards and measures. In addition, both proposed bills would amend Sec. 648A of current law to increase staff qualifications for Head Start teachers (but with different requirements). Accompanying report language makes clear both committees' view that teacher quality is essential to early childhood program quality. Professional development is promoted in both bills, as are efforts to enhance services for children with limited English proficiency. Included in the Senate bill is a newly proposed section (641B) to the Head Start Act, which would provide for the establishment of a program under which the Secretary of Health and Human Services (HHS) would designate up to 200 exemplary Head Start agencies as "Centers of Excellence in Early Childhood." These agencies would receive (pending appropriation of funds) bonus grants of at least $200,000 per year. Like regularly designated grantees, the Centers of Excellence bonus grants would be designated for up to five years at a time. In addition to provisions aimed at improving the quality and accountability of Head Start programs, both bills would amend current law to foster even greater program coordination between Head Start and other early childhood programs, including state prekindergartens. Program coordination includes providing for alignment of Head Start goals and expectations with those schools into which Head Start children will later enroll. Coordination is also to be enhanced by bolstering state and local relationships with Head Start. The House version of H.R. 1429 proposes a new section, 642B, specifically outlining the partnerships that Head Start agencies are to enter into with local education agencies, including a description of the memorandum of understanding that each Head Start agency would negotiate with the local entities. Under both bills, collaboration grants are described in greater detail, and the state's role in collaboration is bolstered through involvement of an Early Learning Council (under the House bill) or a State Advisory Council (under the Senate bill). Under current law, all children from families with income under 100% of the poverty line are eligible for Head Start. Regulations state that at least 90% of children enrolled in each program must fit this criterion, allowing for 10% to be over-income. Both bills would allow for expansion of eligibility up to 130% of the poverty line, with the House version of H.R. 1429 specifying that no more than 20% of children served by a Head Start program be above the poverty line. In the case of both bills, the intent is that programs seek to serve children under 100% of poverty before serving those from families with higher incomes. Homeless children would also be deemed categorically eligible under both bills. Both bills address the issue of how to confront situations of under-enrollment in Head Start programs, recognizing that the cause of these situations may differ from program to program, sometimes reflecting a program weakness while in other cases demographic changes in the community. Another provision reflecting both committees' desire for greater flexibility with respect to participation and serving the needs of communities is one that allows for regular funds to be used for serving Early Head Start infants and toddlers. Doing so requires approval of a written application under both bills, but the possibility for this expansion of services would be written into law. Table 1 provides a detailed comparison of the House- and Senate-passed versions of H.R. 1429 , and current law. Where applicable, current regulations are included to show whether changes proposed in the reauthorization bills would reflect practical changes to the program. As stated earlier, the table does not include provisions agreed to in the conference report ( H.Rept. 110-439 ) filed on November 9, 2007. The table is structured in the order of current law's sections. In cases where bills address the same or similar provisions by amending different sections of current law, that has been noted in the table. The table also notes if a provision was added as an amendment during House floor debate.

Head Start, a federal program that has provided comprehensive early childhood development services to low-income children since 1965, was last reauthorized in 1998 for fiscal years 1999-2003. The program has remained funded in subsequent years through the annual appropriations process. After unsuccessful efforts by the past two Congresses to complete the reauthorization process, efforts to do so are underway in the 110th Congress. The House and Senate have each passed their own version of a reauthorization bill (H.R. 1429), and on November 9, 2007, conferees filed a conference report (H.Rept. 110-439). This report does not yet reflect the provisions included in the conference agreement. The Improving Head Start Act of 2007 (H.R. 1429) was introduced by Representative Kildee on March 9, 2007. The following week, the House Committee on Education and Labor debated, amended, and approved the bill (42-1), and the committee's written report accompanying the legislation (H.Rept. 110-67) was filed on March 23, 2007. That bill was taken to the House floor on May 2, and was approved (with nine amendments) by a vote of 365-48. The Head Start for School Readiness Act (S. 556) was introduced by Senator Kennedy on February 12, 2007, and approved via voice vote by the Senate Committee on Health, Education, Labor, and Pensions (HELP) on February 14. The Chairman's amended version of the bill was subsequently reported on March 29, 2007, with a written report (S.Rept. 110-49) filed April 10, 2007. On June 19, under unanimous consent, the full Senate passed the committee's bill, with a few technical changes, under the House bill number (H.R. 1429). Both reauthorization bills amend Head Start with the goal of improving the program's ability to promote low-income children's school readiness by supporting their cognitive, social, emotional, and physical development. The means for doing so encompass a wide range of provisions, covering issues of program funding, administration, eligibility, accountability, quality, governance, and coordination. Authorization levels for funding would be increased above current funding amounts by both bills, and eligibility would be expanded to allow for serving children up to 130% of the poverty line. Both bills include provisions that would increase competition for Head Start grants, by limiting the period for which a grantee may receive grant funds to five years, before recompetition may be required. Other similarities include increasing the percentage of the appropriation to be reserved for Early Head Start; emphasizing coordination and collaboration with other state and local early childhood programs; increasing staff qualifications; specifying requirements of shared governance principles in statute; and suspending use of the National Reporting System. Although the overall areas addressed by the two reauthorization bills are similar, a side-by-side comparison of provisions, alongside current law, reveals notable differences in detail. The table does not reflect the provisions agreed to in conference.

OPM and agencies are continuing to address the problems with the key parts of the hiring process we identified in our May 2003 report. Significant issues and actions being taken include the following. Reforming the classification system. In our May 2003 report on hiring, we noted that many regard the standards and process for defining a job and determining pay in the federal government as a key hiring problem because they are inflexible, outdated, and not applicable to the jobs of today. The process of job classification is important because it helps to categorize jobs or positions according to the kind of work done, the level of difficulty and responsibility, and the qualifications required for the position, and serves as a building block to determine the pay for the position. As you know, defining a job and setting pay in the federal government has generally been based on the standards in the Classification Act of 1949, which sets out the 15 grade levels of the General Schedule system. To aid agencies in dealing with the rigidity of the federal classification system, OPM has revised the classification standards of several job series to make them clearer and more relevant to current job duties and responsibilities. In addition, as part of the effort to create a new personnel system for the Department of Homeland Security (DHS), OPM is working with DHS to create broad pay bands for the department in place of the 15- grade job classification system that is required for much of the federal civil service. Still, OPM told us that its ability to more effectively reform the classification process is limited under current law and that legislation is needed to modify the current restrictive classification process for the majority of federal agencies. As we note in the report we are issuing today, 15 of the 22 CHCO Council members responding to our recent survey reported that either OPM (10 respondents) or Congress (5 respondents) should take the lead on reforming the classification process, rather than the agencies themselves. Improving job announcements and Web postings. We pointed out in our May 2003 report that the lack of clear and appealing content in federal job announcements could hamper or delay the hiring process. Our previous report provided information about how some federal job announcements were lengthy and difficult to read, contained jargon and acronyms, and appeared to be written for people already employed by the government. Clearly, making vacancy announcements more visually appealing, informative, and easy to access and navigate could make them more effective as recruiting tools. To give support to this effort, OPM has continued to move forward on its interagency project to modernize federal job vacancy announcements, including providing guidance to agencies to improve the announcements. OPM continues to collaborate with agencies in implementing Recruitment One-Stop, an electronic government initiative that includes the USAJOBS Web site (www.usajobs.opm.gov) to assist applicants in finding employment with the federal government. As we show in the report we are issuing today, all 22 of the CHCO Council members responding to our recent survey indicated that their agencies had made efforts to improve their job announcements and Web postings. In the narrative responses to our survey, a CHCO Council member representing a major department said, for example, that the USAJOBS Web site is an excellent source for posting vacancies and attracting candidates. Another Council member said that the Recruitment One-Stop initiative was very timely in developing a single automated application for job candidates. Automating hiring processes. Our May 2003 report also emphasized that manual processes for rating and ranking job candidates are time consuming and can delay the hiring process. As we mentioned in our previous report, the use of automation for agency hiring processes has various potential benefits, including eliminating the need for volumes of paper records, allowing fewer individuals to review and process job applications, and reducing the overall time-to-hire. In addition, automated systems typically create records of actions taken so that managers and human capital staff can easily document their decisions related to hiring. To help in these efforts, OPM provides to agencies on a contract or fee-for- service basis an automated hiring system, called USA Staffing, which is a Web-enabled software program that automates the steps of the hiring process. These automated steps would include efforts to recruit candidates, use of automated tools to assess candidates, automatic referral of high-quality candidates to selecting officials, and electronic notification of applicants on their status in the hiring process. According to OPM, over 40 federal organizations have contracted with OPM to use USA Staffing. OPM told us that it has developed and will soon implement a new Web- based version of USA Staffing that could further link and automate agency hiring processes. As we mention in the report we are issuing today, 21 of the 22 CHCO Council members responding to our recent survey reported that their agencies had made efforts to automate significant parts of their hiring processes. Improving candidate assessment tools. We concluded in our May 2003 report that key candidate assessment tools used in the federal hiring process can be ineffective. Our previous report noted that using the right assessment tool, or combination of tools, can assist the agency in predicting the relative success of each applicant on the job and selecting the relatively best person for the job. These candidate assessment tools can include written and performance tests, manual and automated techniques to review each applicant’s training and experience, as well as interviewing approaches and reference checks. In our previous report, we noted some of the challenges of assessment tools and special hiring programs used for occupations covered by the Luevano consent decree. Although OPM officials said they monitor the use of assessment tools related to positions covered under the Luevano consent decree, they have not reevaluated these assessment tools. OPM officials told us, however, that they have provided assessment tools or helped develop new assessment tools related to various occupations for several agencies on a fee-for-service basis. Although OPM officials acknowledged that candidate assessment tools in general need to be reviewed, they also told us that it is each agency’s responsibility to determine what tools it needs to assess job candidates. The OPM officials also said that if agencies do not want to develop their own assessment tools, then they could request that OPM help develop such tools under the reimbursable service program that OPM operates. As we state in the report we are issuing today, 21 of the 22 CHCO Council members responding to our recent survey indicated that their agencies had made efforts to improve their hiring assessment tools. Although we agree that OPM has provided assistance to agencies in improving their candidate assessment tools and has collected information on agencies’ use of special hiring authorities, we believe that major challenges remain in this area. OPM can take further action to address our prior recommendations related to assessment tools. OPM could, for example, actively work to link up agencies having similar occupations so that they could potentially form consortia to develop more reliable and valid tools to assess their job candidates. Despite agency officials’ past calls for hiring reform, agencies appear to be making limited use of category rating and direct-hire authority, two new hiring flexibilities created by Congress in November 2002 and implemented by OPM in June of last year. Data on the actual use of these two new flexibilities are not readily available, but most CHCO Council members responding to our recent survey indicated that their agencies are making little or no use of either flexibility (see fig. 1). OPM officials also confirmed with us that based on their contacts and communications with agencies, it appeared that the agencies were making limited use of the new hiring flexibilities. The limited use of category rating is somewhat unexpected given the views of human resources directors we interviewed 2 years ago. As noted in our May 2003 report, many agency human resources directors indicated that numerical rating and the rule of three were key obstacles in the hiring process. Category rating was authorized to address those concerns. The report we are issuing today also includes information about barriers that the CHCO Council members believed have prevented or hindered their agencies from using or making greater use of category rating and direct hire. Indeed, all but one of the 22 CHCO Council members responding to our recent survey identified at least one barrier to using the new hiring flexibilities. Frequently cited barriers included the lack of OPM guidance for using the flexibilities, the lack of agency policies and procedures for using the flexibilities, the lack of flexibility in OPM rules and regulations, and concern about possible inconsistencies in the implementation of the flexibilities within the department or agency. In a separate report we issued in May 2003 on the use of human capital flexibilities, we recommended that OPM work with and through the new CHCO Council to more thoroughly research, compile, and analyze information on the effective and innovative use of human capital flexibilities. We noted that sharing information about when, where, and how the broad range of personnel flexibilities is being used, and should be used, could help agencies meet their human capital management challenges. As we recently testified, OPM and agencies need to continue to work together to improve the hiring process, and the CHCO Council should be a key vehicle for this needed collaboration. To accomplish this effort, agencies need to provide OPM with timely and comprehensive information about their experiences in using various approaches and flexibilities to improve their hiring processes. OPM—working through the CHCO Council—can, in turn, help by serving as a facilitator in the collection and exchange of information about agencies’ effective practices and successful approaches to improved hiring. Such additional collaboration between OPM and agencies could go a long way to helping the government as a whole and individual agencies in improving the processes for quickly hiring highly qualified candidates to fill important federal jobs. In conclusion, the federal government is now facing one of the most transformational changes to the civil service in half a century, which is reflected in the new personnel systems for DHS and the Department of Defense and in new hiring flexibilities provided to all agencies. Today’s challenge is to define the appropriate roles and day-to-day working relationships for OPM and individual agencies as they collaborate on developing innovative and more effective hiring systems. Moreover, for this transformation to be successful and enduring, human capital expertise within the agencies must be up to the challenge. Madam Chairwoman and Mr. Davis, this completes my statement. I would be pleased to respond to any questions that you might have. For further information on this testimony, please contact J. Christopher Mihm, Managing Director, Strategic Issues, (202) 512-6806 or at mihmj@gao.gov. Individuals making key contributions to this testimony include K. Scott Derrick, Karin Fangman, Stephanie M. Herrold, Trina Lewis, John Ripper, Edward Stephenson, and Monica L. Wolford. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

The executive branch hired nearly 95,000 new employees during fiscal year 2003. Improving the federal hiring process is critical given the increasing number of new hires expected in the next few years. In May 2003, GAO issued a report highlighting several key problems in the federal hiring process. That report concluded that the process needed improvement and included several recommendations to address the problems. Today, GAO is releasing a followup report requested by the subcommittee that discusses (1) the status of recent efforts to help improve the federal hiring process and (2) the extent to which federal agencies are using two new hiring flexibilities--category rating and direct-hire authority. Category rating permits an agency manager to select any job candidate placed in a best-qualified category. Direct-hire authority allows an agency to appoint individuals to positions without adherence to certain competitive examination requirements when there is a severe shortage of qualified candidates or a critical hiring need. Congress, the Office of Personnel Management (OPM), and agencies have all taken steps to improve the federal hiring process. In particular, Congress has provided agencies with additional hiring flexibilities, OPM has taken significant steps to modernize job vacancy announcements and develop the government's recruiting Web site, and most agencies are continuing to automate parts of their hiring processes. Nonetheless, problems remain with a job classification process and standards that many view as antiquated, and there is a need for improved tools to assess the qualifications of job candidates. Specifically, the report being released today discusses significant issues and actions being taken to (1) reform the classification system, (2) improve job announcements and Web postings, (3) automate hiring processes, and (4) improve candidate assessment tools. In addition, agencies appear to be making limited use of the two new hiring flexibilities contained in the Homeland Security Act of 2002--category rating and direct-hire authority--that could help agencies in expediting and controlling their hiring processes. GAO surveyed members of the interagency Chief Human Capital Officers Council who reported several barriers to greater use of these new flexibilities. Frequently cited barriers included (1) the lack of OPM guidance for using the flexibilities, (2) the lack of agency policies and procedures for using the flexibilities, (3) the lack of flexibility in OPM rules and regulations, and (4) concern about possible inconsistencies in the implementation of the flexibilities within the department or agency. The federal government is now facing one of the most transformational changes to the civil service in half a century, which is reflected in the new personnel systems for Department of Homeland Security and the Department of Defense and in new hiring flexibilities provided to all agencies. Today's challenge is to define the appropriate roles and day-to-day working relationships for OPM and individual agencies as they collaborate on developing innovative and more effective hiring systems. Moreover, human capital expertise within the agencies must be up to the challenge for this transformation to be successful and enduring.

The September 11, 2001, terrorist attacks had a devastating effect on the U.S. financial markets with significant loss of life, extensive physical damage, and considerable disruption to the financial district in New York. Damage from the collapse of the World Trade Center buildings caused dust and debris to blanket a wide area of lower Manhattan, led to severe access restrictions to portions of lower Manhattan for days, and destroyed substantial portions of the telecommunications and power infrastructure that served the area. Telecommunications service in lower Manhattan was lost for many customers when debris from the collapse of one the World Trade Center buildings struck a major Verizon central switching office that served approximately 34,000 business and residences. The human impact was especially devastating because about 70 percent of the civilians killed in the attacks worked in the financial services industry, and physical access to the area was severely curtailed through September 13, 2001. Although most stock exchanges and clearing organizations escaped direct damage, the facilities and personnel of several key broker-dealers and other market participants were destroyed or displaced. Market participants and regulators acknowledged that the reopening of the stock and options markets could have been further delayed if any of the exchanges or clearing organizations had sustained serious damage. The stock and options exchanges remained closed as firms, that were displaced by the attacks attempted to reconstruct their operations and reestablish telecommunications with their key customers and other market participants. In the face of enormous obstacles, market participants, infrastructure providers, and the regulators made heroic efforts to restore operations in the markets. Broker-dealers that had their operations disrupted or displaced either relocated their operations to backup facilities or other alternative facilities. These facilities had to be outfitted to accommodate normal trading operations and to have sufficient telecommunications to connect with key customers, clearing and settlement organizations, and the exchanges and market centers. Some firms did not have existing backup facilities for their trading operations and had to create these facilities in the days following the crisis. For example, one broker-dealer leased a Manhattan hotel to reconstruct its operations. Firms were not only challenged with reconstructing connections to their key counterparties but, in some cases, they also had the additional challenge of connecting with the backup sites of counterparties that were also displaced by the attacks. The infrastructure providers also engaged in extraordinary efforts to restore operations. For example, telecommunications providers ran cables above ground rather than underground to speed up the restoration of service. By Friday September 14, 2001, exchange officials had concluded that only 60 percent of normal market trading liquidity had been restored and that it would not be prudent to trade in such an environment. In addition, because so many telecommunications circuits had been reestablished, market participants believed that it would be beneficial to test these telecommunications circuits prior to reopening the markets. Officials were concerned that without such testing, the markets could have experienced operational problems and possibly have to close again, which would have further shaken investor confidence. The stock and options markets reopened successfully on Monday, September 17, 2001 and achieved record trading volumes. Although the government securities markets reopened within 2 days, activity within those markets was severely curtailed, as there were serious clearance and settlement difficulties resulting from disruptions at some of the key participants and at one of the two banks that clear and settle government securities. Some banks had important operations in the vicinity of the attacks, but the impact of the attacks on the banking and payment systems was much less severe. Regulators also played a key role in restoring market operations. For example, the Federal Reserve provided over $323 billion in funding to banks between September 11 and September 14, 2001, to prevent organizations from defaulting on their obligations and creating a widespread solvency crisis. SEC also granted regulatory relief to market participants by extending reporting deadlines and relaxed the rules that restrict corporations from repurchasing their shares. The Department of the Treasury also helped to address settlement difficulties in the government securities markets by conducting a special issuance of 10-year Treasury notes. Although financial market participants, regulators, and infrastructure providers made heroic efforts to restore the functioning of the markets as quickly as they did, the attacks and our review of 15 key financial market organizations—including 7 critical ones—revealed that financial market participants needed to improve their business continuity planning capabilities and take other actions to better prepare themselves for potential disasters. At the time of the attacks, some market participants lacked backup facilities for key aspects of their operations such as trading, while others had backup facilities that were too close to their primary facilities and were thus either inaccessible or also affected by the infrastructure problems in the lower Manhattan area. Some organizations had backup sites that were too small or lacked critical equipment and software. In the midst of the crisis, some organizations also discovered that the arrangements they had made for backup telecommunications service were inadequate. In some cases, firms found that telecommunication lines that they had acquired from different providers had been routed through the same paths or switches and were similarly disabled by the attacks. The 15 stock exchanges, ECNs, clearing organizations, and payment systems we reviewed had implemented various physical and information security measures and business continuity capabilities both before and since the attacks. At the time of our work—February to June 2002—these organizations had taken such steps as installing physical barriers around their facilities to mitigate effects of physical attacks from vehicle-borne explosives and using passwords and firewalls to restrict access to their networks and prevent disruptions from electronic attacks. In addition, all 15 of the organizations had developed business continuity plans that had procedures for restoring operations following a disaster; and some organizations had established backup facilities that were located hundreds of miles from their primary operations. Although these organizations have taken steps to reduce the likelihood that their operations would be disrupted by physical or electronic attacks and had also developed plans to recover from such events, we found that some organizations continued to have some limitations that would increase the risk of their operations being impaired by future disasters. This issue is particularly challenging for both market participants and regulators, because addressing security concerns and business continuity capabilities require organizations to assess their overall risk profile and make business decisions based on the trade-offs they are willing to make in conducting their operations. For example, one organization may prefer to invest in excellent physical security, while another may choose to investment less in physical security and more in developing resilient business continuity plans and capabilities. Our review indicated that most of the 15 organizations faced greater risk of operational disruptions because their business continuity plans did not adequately address how they would recover if large portions of their critical staff were incapacitated. Most of the 15 organizations were also at a greater risk of operations disruption from wide-scale disasters, either because they lacked backup facilities or because these facilities were located within a few miles of their primary sites. Few of the organizations had tested their physical security measures, and only about half were testing their information security measures and business continuity plans. Securities and banking regulators have made efforts to examine operations risk measures in place at the financial market participants they oversee. SEC has conducted reviews of exchanges, clearing organizations, and ECNs that have generally addressed aspects of these organizations’ physical and information security and business continuity capabilities. However, reviews by SEC and the exchanges at broker-dealers generally did not address these areas, although SEC staff said that such risks would be the subject of future reviews. Banking regulators also reported that they review such issues in the examinations they conduct at banks. Regulators also have begun efforts to improve the resiliency of clearing and settlement functions for the financial markets. In August 2002, the Federal Reserve, Office of the Comptroller of the Currency, and SEC jointly issued a paper entitled the Draft Interagency White Paper on Sound Practices to Strengthen the Resilience of the U.S. Financial System. This paper sought industry comment on sound business practices to better ensure that clearance and settlement organizations would be able to resume operations promptly after a wide-scale regional disaster. The regulators indicated that the sound practices would apply to a limited number of organizations that perform important clearing functions, as well as to between 15 and 20 banks and broker-dealers that also perform clearing functions with sizeable market volumes. The regulators that developed the white paper appropriately focused on clearing functions to help ensure that settlement failures do not lead to a broader financial crisis. However, the paper did not similarly address restoring critical trading activities in the various financial markets. The regulators that developed the paper believed that clearing functions were mostly concentrated in single entities for most markets or in a very few entities for others and thus posed a greater potential for disruption. In theory, multiple stock exchanges and other organizations that conduct trading activities could substitute for each other in the event of a crisis. Nevertheless, trading on the markets for corporate securities, government securities, and money market instruments is also vitally important to the economy; and the United States deserves similar assurance that trading activities also would be able to resume when appropriate—smoothly and without excessive delay. The U.S. economy has demonstrated that it can withstand short periods during which markets are not trading. After some events occur, having markets closed for some limited time could be appropriate to allow emergency and medical relief activities, permit operations to recover, and reduce market overreaction. However, long delays in reopening the markets could be harmful to the economy. Without trading, investors lack the ability to accurately value their securities and cannot adjust their holdings. The September 11, attacks demonstrated that the ability of markets to recover could depend on the extent to which market participants have made sound investments in business continuity capabilities. Without clearly identifying strategies for recovery, determining the sound practices needed to implement these strategies, and identifying the organizations that could conduct trading under these strategies, the risk that markets may not be able to resume trading in a fair and orderly fashion and without excessive delays is increased. Goals and strategies for resuming trading activities could be based on likely disaster scenarios and could identify the organizations that are able to conduct trading in the event that other organizations could not recover within a reasonable time. Goals and strategies, along with guidance on business continuity planning practices, and more effective oversight would (1) provide market participants with the information they need to make better decisions about improving their operations, (2) help regulators develop sound criteria for oversight, and (3) assure investors that trading on U.S. markets could resume smoothly and in a timely manner. SEC has begun developing a strategy for resuming stock trading for some exchanges, but the plan is not yet complete. For example, SEC has asked the New York Stock Exchange (NYSE) and NASDAQ to take steps to ensure that their information systems can conduct transactions in the securities that the other organizations normally trade. However, under this strategy NYSE does not plan to trade all NASDAQ securities, and neither exchange has fully tested its own or its members’ abilities to trade the other exchanges’ securities. Given the increased threats demonstrated by the September 11 attacks and the need to assure that key financial market organizations are following sound practices, securities and banking regulators’ oversight programs are important mechanisms to assure that U.S. financial markets are resilient. SEC oversees the key clearing organizations and exchanges through its Automation Review Policy (ARP) program. The ARP program—which also may be used to oversee adherence to the white paper’s sound practices— currently faces several limitations. SEC did not implement this ARP program by rule but instead expected exchanges and clearing organizations to comply with various information technology and operations practices voluntarily. However, under a voluntary program, SEC lacks leverage to assure that market participants implement important recommended improvements. While the program has prompted numerous improvements in market participants’ operations, we have previously reported that some organizations did not establish backup facilities or improve their systems’ capacity when the SEC ARP staff had identified these weaknesses. Moreover, ARP staff continue to find significant operational weaknesses at the organizations they oversee. An ARP program that draws its authority from an issued rule could provide SEC additional assurance that exchanges and clearing organizations adhere to important ARP recommendations and any new guidance developed jointly with other regulators. To preserve the flexibility that SEC staff considers a strength of the current ARP program, the rule would not have to mandate specific actions but could instead require that the exchanges and clearing organizations engage in activities consistent with the ARP policy statements. This would provide SEC staff with the ability to adjust their expectations for the organizations subject to ARP, as technology and industry best practices evolve, and provide clear regulatory authority to require actions as necessary. SEC already requires ECNs to comply with ARP guidance; and extending the rule to the exchanges and clearing organizations would place them on similar legal footing. In an SEC report issued in January 2003, the Inspector General noted our concern over the voluntary nature of the program. Limited resources and challenges in retaining experienced ARP staff also have affected SEC’s ability to more effectively oversee an increasing number of organizations and more technically complex market operations. ARP staff must oversee various industrywide initiatives, such as Year 2000 or decimals pricing, and has also expanded to cover 32 organizations with more complex technology and communications networks. However, SEC has problems retaining qualified staff, and market participants have raised concerns about the experience and expertise of ARP staff. The SEC Inspector General also found that ARP staff could benefit from increased training on the operations and systems of the entities overseen by the ARP program. At current staff levels, SEC staff report being able to conduct examinations of only about 7 of the 32 organizations subject to the ARP program each year. In addition, the intervals between examinations were sometimes long. For example, the intervals between the most recent examinations for seven critical organizations averaged 39 months.

The September 11, 2001, terrorist attacks exposed the vulnerability of U.S. financial markets to wide-scale disasters. Because the markets are vital to the nation's economy, GAO's testimony discusses (1) how the financial markets were directly affected by the attacks and how market participants and infrastructure providers worked to restore trading; (2) the steps taken by 15 important financial market organizations to address physical security, electronic security, and business continuity planning since the attacks; and (3) the steps the financial regulators have taken to ensure that the markets are better prepared for future disasters. The September 11, 2001, terrorist attacks severely disrupted U.S. financial markets as the result of the loss of life, damage to buildings, loss of telecommunications and power, and restrictions on access to the affected area. However, financial market participants were able to recover relatively quickly from the terrorist attacks because of market participants' and infrastructure providers' heroic efforts and because the securities exchanges and clearing organizations largely escaped direct damage. The attacks revealed limitations in the business continuity capabilities of some key financial market participants that would need to be addressed to improve the ability of U.S. markets to withstand such events in the future. GAO's review of 15 stock exchanges, clearing organizations, electronic communication networks, and payments system providers between February and June 2002 showed that all were taking steps to implement physical and electronic security measures and had developed business continuity plans. However, some organizations still had limitations in one or more of these areas that increased the risk that their operations could be disrupted by future disasters. Although the financial regulators have begun efforts to improve the resiliency of clearance and settlement functions within the financial markets, they have not fully developed goals, strategies, or sound practices to improve the resiliency of trading activities. In addition, the Securities and Exchange Commission's (SEC) technology and operations risk oversight, which is increasingly important, has been hampered by program, staff, and resource issues. GAO's report made recommendations designed to better prepare the markets to deal with future disasters and to enhance SEC's technology and operations risk oversight capabilities.

Decentralization is the most distinctive characteristic of the congressional committee system. Because of the high volume and complexity of its work, Congress divides its legislative, oversight, and internal administrative tasks among committees and subcommittees. Within assigned subject areas, committees and subcommittees gather information; compare and evaluate legislative alternatives; identify policy problems and propose solutions to them; select, determine the text of, and report out measures for the full chambers to consider; monitor executive branch performance of duties (oversight); and look into allegations of wrongdoing (investigation). Although Congress has used committees since its first meetings in 1789, the 1946 Legislative Reorganization Act (60 Stat . 812) set the foundation of today's committee system. The House and Senate each have their own committees and related rules of procedure, which are similar but not identical. Within the guidelines of chamber rules, each committee adopts its own rules addressing organizational, structural, and procedural issues; thus, even within a chamber, there is considerable variation among panels. Within their respective areas of responsibility, committees generally operate rather independently of each other and of their parent chambers. The difficult tasks of aggregating committees' activities, and of integrating policy in areas where jurisdiction is shared, fall largely to the chambers' party leaderships. There are three types of committees—standing, select, and joint. Standing committees are permanent panels identified in chamber rules. The rules also list the jurisdiction of each committee. Because they have legislative jurisdiction, standing committees consider bills and issues and recommend measures for consideration by the respective chambers. They also have oversight responsibility to monitor agencies, programs, and activities within their jurisdictions, and in some cases in areas that cut across committee jurisdictions. Most standing committees recommend authorized levels of funds for government operations and for new and existing programs within their jurisdiction. Standing committees also have jurisdiction over appropriations (in the case of the Appropriations Committees), taxation (in the case of the House Ways and Means and Senate Finance Committees), various other revenues, and direct spending such as Social Security, veterans' pensions, and some farm support programs. Select committees usually are established by a separate resolution of the parent chamber, sometimes to conduct investigations and studies, sometimes to consider measures. A select committee is established because the existing standing committee system does not address an issue comprehensively, or because a particular event sparks interest in an investigation. A select committee may be permanent or temporary. Special committees tend to be similar in constitution and function and that distinction from select committees is generally thought to be only semantic. Joint committees are made up of Members of both chambers. Today, they usually are permanent panels that conduct studies or perform housekeeping tasks rather than consider measures. A conference committee is a temporary joint committee formed to resolve differences in Senate- and House-passed versions of a particular measure. Most committees form subcommittees with legislative jurisdiction to consider and report bills on particular issues within the purview of the full committee. Committees may assign their subcommittees such specific tasks as the initial hearings held on measures and oversight of laws and programs in their areas. Subcommittees are responsible to and work within guidelines established by their parent committees. Consequently, subcommittees' number, independence, and autonomy vary among committees. Party leaders generally determine the size of committees and the ratio of majority to minority members on each of them. Each party is primarily responsible for choosing its committee leaders and assigning its Members to committees, and, once assigned to a particular committee, a Member often makes a career there. Each committee distributes its members among its subcommittees, on which only members of the committee may serve. There are limits on the number and type of committees and subcommittees on which each Member may serve. Members, especially in the House, tend to specialize in the issues of their assigned committees. A committee's authority is centered in its chair. In practice, a chair's prerogatives usually include determining the committee's agenda, deciding when to take or delay action, presiding during meetings, and controlling most funds allocated by the chamber to the committee. Several rules allow others a share in controlling a committee's business, such as one allowing a majority of members of a committee to call a meeting. The ranking minority member, usually the minority party member of longest committee service, often participates in the chair's regulation of the committee, in addition to leading on matters affecting a committee's minority members. Also, each subcommittee has a chair and a ranking minority member who oversee the affairs of their panel. To distribute committee power, chamber and party caucus rules limit the number of full and subcommittee chair or ranking minority positions a single Member may hold. Only the Republicans have committee leadership term limits. No House Republican may serve as chair (or ranking minority member) of a committee or subcommittee for more than three consecutive terms, effective with the 104 th Congress, and no Senate Republican may serve more than six years as chair and six years as ranking member of any standing committee, effective with the 105 th Congress. Waivers can be granted. Approximately 2,000 aides provide professional, administrative, and clerical support to committees. Their main job is to assist with writing, analyzing, amending, and recommending measures to the full chamber, as well as overseeing the executive branch's implementation of laws and the operation of programs. Pursuant to funding resolutions and other mechanisms, committees receive varying levels of operating funds for their expenses, including the hiring of staff. From these funds, each hires its own staff, and committees employ varying numbers of aides ranging from a few to dozens. (Committees may also fire staff.) Most staff and resources are controlled by the chair of a committee, although in general a portion must be shared with minority-party members. Further, some committees assign staff directly to their subcommittees, and give subcommittee leaders considerable authority in hiring and supervising subcommittee staff. Each committee sets staff pay levels within limits contained in chamber salary policies. Committees conduct oversight to assure that the policy intentions of legislators are carried out by those administering programs, and to assess the adequacy of programs for changing conditions. Some committees, especially in the House, establish separate oversight subcommittees to oversee the implementation of all programs within their jurisdiction. Also, each chamber has assigned to specific committees oversight responsibility for certain issues and programs that cut across committee jurisdictions, and each has a committee responsible for overseeing comprehensively the efficiency and economy of government activities. Each committee has nearly exclusive right to consider measures within its jurisdiction. In general, committees are not required to act on any measure, and a measure cannot come to the floor for consideration unless through the action or at least concurrence of a committee. A procedure to discharge a committee from consideration is rarely successful. Any introduced measure generally gets referred immediately to a committee. Especially in the House, some measures are referred to two or more panels, usually because policy subjects are split among committees. When more than one House committee receives a referral, a primary committee is usually designated. Other panels receive a sequential referral. In the Senate, referral is determined by the predominant subject matter in the legislation. Singly referred measures have been more likely than multiply referred ones to pass their chamber and to be enacted into law, in part because of the difficulty in coordinating the work of multiple panels. Committees receive varying numbers of measures. Committees dispose of these measures as they please, selecting only a small percentage for action, for a number of reasons. For instance, a committee usually receives many proposals in each major policy area within its jurisdiction, but ultimately chooses one measure as its vehicle in each such area. While those measures not chosen usually receive no further congressional action, the idea, specific provisions, or entire text of some of these measures may be incorporated through the amendment process into others that the committees and chambers consider and that become law. Determining the fate of measures and, in effect, helping to set a chamber's agenda make committees very powerful. Committees often send their measures to subcommittees for initial consideration, but only a full committee can report a measure to the floor for consideration. When a committee or a subcommittee considers a measure, it usually takes the four actions described below. This sequence assumes the committee favors a measure; but, at any time, action on a measure may be discontinued. As a matter of practice and cooperation between the legislative and executive branches, a committee asks relevant executive agencies for written comments on measures it is studying. Committees frequently hold hearings to receive testimony from individuals not on the committee. Hearings may be for legislative, oversight, or investigative purposes. Legislative hearings are those addressing measures or policy issues before the committee, and they may address many measures on a given subject. Oversight hearings focus on the implementation and administration of programs created by law. Many committees perform oversight when preparing to reauthorize funds for a program, which may occur annually. Investigative hearings often address allegations of wrongdoing by public officials or private citizens, or seek the facts behind a major disaster or crisis. Oversight and investigative hearings may lead to the introduction of legislative proposals. At hearings, committees gather information and views, identify problems, gauge support for and opposition to measures and proposals, and build a record of action on committee proposals. Some common elements of hearings include the following: Most, but not all, hearings are held in Washington, DC. Hearings held outside of Washington, DC, are called field hearings. Committees invite experts (witnesses), including Members not on the committee, federal officials, representatives of interest groups, and private citizens to testify at hearings. Most witnesses testify willingly upon invitation by the chair or ranking minority member, and some request to testify. However, committees may summon individuals, as well as written materials, under a legal process (subpoena). Before testifying, witnesses generally are required to submit written statements, which they then summarize orally. Subsequently, committee members question witnesses. Committees generally must give at least one week public notice of the date, place, and subject of a hearing. The public usually may attend hearings and other committee meetings, and open hearings and meetings might be broadcast. Following legislative hearings, a committee decides whether to attempt to report a measure, in which case it chooses a specific measure to mark up and then modifies it through amendment to clean up problems, and sometimes, to attract broader committee support. A business meeting for this purpose is called a markup. Both chambers require a minimum quorum of one-third of a committee's members to hold a markup session, and some committees establish a higher quorum. The procedures of each chamber for amending measures on the floor apply generally to its committees. In practice, the amending process may be formal for controversial measures and informal for ones less contentious. In leading a markup, a chair in practice generally chooses the legislative vehicle, and presents it for consideration and amendment. This vehicle may be an introduced bill, or another version prepared by committee staff at the direction of the chair. Senate committees may permit absent members to vote by proxy, by submitting their vote in writing in advance of the actual vote; proxy voting is banned in the House. A majority of committee members voting, with a majority quorum present, is needed to approve a measure and report it to the parent chamber. A committee rarely reports a measure without changes. Committees sometimes report measures with a series of changes in various sections, or with one large amendment as an entirely new text (called an amendment in the nature of a substitute). A committee may also set aside its amended measure and report a new one reflecting the amended text. In the House the new bill is called a clean bill ; in the Senate, an original bill . Any committee amendments, and the entire measure, require a chamber's approval to be passed. A reported measure usually is accompanied by a written document, called a report, describing the measure's purposes and provisions and telling Members of a chamber why this version has been reported and why it should be passed. The report reflects the views of a majority of the committee, but also may contain minority, supplemental, or additional views of committee members. It usually includes estimates of the legislation's cost should it become law, various statements of its impact and application, a section-by-section analysis, and a comparison with existing law. Officials of the executive and judicial branches of government use these reports as an aid to understanding the legislative history of a law and Congress's intent in enacting it. Measures may reach the floor for consideration in ways other than by being formally reported. A measure may be called up and simultaneously extracted from a committee by unanimous consent, or, in the House, by suspension of the rules. These procedures, however, are seldom used without the consent of the committee of jurisdiction. By contrast, a measure may be extracted from a committee without its approval. For example, the House may agree to a motion to discharge a committee of consideration of a measure, and in general a Senator may offer the text of a measure before a committee as an amendment to a bill under consideration on the floor. The measure and its report are placed on a calendar of chamber business and scheduled for floor action by the majority-party leadership. In the House, the Committee on Rules works with the leadership to establish the terms and conditions for debating the more controversial or complex measures. These terms may include restrictions on offering and debating amendments. Other measures are considered under a few different procedures, where little or no debate and amendment is the norm. In the Senate, noncontroversial measures ordinarily are called up by unanimous consent, and disposed of with little or no debate and no amendment. More controversial or complex measures may be considered under the provisions of a time agreement (or other unanimous consent agreement), which may restrict Senators' freedom of debate and amendment in part by establishing time limits on actions related to the measure. Alternatively, such a measure may require a motion to proceed to its consideration, which generally is debatable and must be agreed to by majority vote. The influence of committees over measures extends to their consideration on the floor. The chair and ranking member of the committee or subcommittee that considered the measure (or their designees) normally manage floor debate for their respective parties. Managers guide measures through final disposition by the chamber, which includes planning parliamentary strategy, controlling time for debate, responding to questions from colleagues, warding off unwanted amendments, and building coalitions in favor of their positions. Especially in the House, committee members also have priority in recognition to offer floor amendments. Committees' responsibilities extend beyond a measure's initial passage by the chambers to its enactment into law. If the chambers agree to different versions of a measure, the leaders of the reporting committees may facilitate its transmittal between the chambers to obtain agreement on one version. If, however, the chambers decide to reconcile their differences at a conference committee, members of the reporting committees will comprise most of the negotiators. In practice, the chambers rely on the chair and ranking member of the reporting committee to choose which of their party colleagues on a committees will serve as conferees. Finally, the chair and ranking member often head their chamber's delegations in conference.

Because of the high volume and complexity of its work, Congress divides its tasks among committees and subcommittees. Both the House and Senate have their own committee systems, which are similar but not identical. Within chamber guidelines, however, each committee adopts its own rules; thus, there is considerable variation among panels. This report provides a brief overview of the organization and operations of House and Senate committees.

The Defense Energy Support Center (DESC), the primary agency responsible for procuring DOD's ground and air transportation fuels, buys bulk energy commodities and "resells" the fuel to various military customers—with a price markup to cover its cost of operation (e.g. storage, transportation, and maintenance). In order to deliver fuel as cost effectively as possible, the DESC will often provide its overseas customers with energy purchased from regional suppliers. However, the DESC generally charges all of its customers worldwide a uniform price. For example, a military unit in Iraq pays the same price for jet fuel (JP-8) as a military unit stationed in most other parts of the world. Fuels purchased by the DESC include jet, diesel, motor and aviation gasoline. The DESC also arranges contracts for direct purchase of fuels at commercial airports and contracts for supplying military posts, camps, and stations. The DESC's largest annual fuel procurement is JP-8 and JP-5 jet fuel, followed by diesel fuel. In FY2007, JP-8 represented ~50% of total DOD petroleum product purchases. Though JP-8 is used primarily by Air Force and Army aircraft, it is also used in Army tactical vehicles, for example in the Abrams M1A1/M1A2 Main Battle Tank. It also serves as a substitute for diesel fuel in other tactical vehicles. Motor gasoline is typically used by light non-tactical vehicles operated at post, camps, and stations. In Iraq, the breakdown of petroleum used by DOD in FY2007 was 81.5% jet fuel, 15.8% diesel, and 2.6% gasoline. In FY2007, the DOD's average cost for fuel ranged from $2.00 a gallon for diesel to $2.05 for JP-8 ( Table 1 and Figure 1 ). In comparison, commercial jet fuel (Jet A-1) averaged $2.17 per gallon and refiner crude oil $1.62 per gallon. As represented in Table 1 and Figure 1 , refiner crude oil is the average annual cost that a U.S. refiner would pay for a gallon of crude. The DESC reports buying fuel used in support of Central Command (CENTCOM) Area of Responsibility (AOR), which includes Operation Iraqi Freedom, primarily from five suppliers ( Table 2 ). The contracts for fuel contain price escalation provisions that increase or decrease the contract award prices based on fluctuations occurring in the regional commercial markets for the same or similar fuel products. As of December 31, 2007, fuel costs from these contracts ran from $1.96 to $2.88 per gallon, except for AVGAS, a specialized fuel, which ranges from $4.98 to $5.29 per gallon. The average fuel costs between FY2003 and FY2007 (during Operation Iraqi Freedom) are shown in Table 3 . Fuel prices rose dramatically in FY2008. As shown in Table 4 , gasoline costs now ranges from $3.39 to $4.52 a gallon and diesel from $4.08 to $5.21 a gallon. Of the five companies providing fuel to the DESC for use in Iraq, one (IOTC) is based in the United States, one (Kuwait Petroleum Corp.) is the state oil company of Kuwait, and three (Petrol Ofisi, Golteks, and Tefirom) are based in Turkey. Some of these companies, such as Kuwait Petroleum Corp., International Oil Trading, and Petrol Ofisi have been among the top 100 suppliers to the Defense Logistics Agency in recent years. According to the DLA, fuels purchased from Kuwait Petroleum Corp. are transported into Iraq by Jassim Transport and Stevedoring Company. Jassim is paid on a per-truck per-day basis. Prices range from $159 -$194 a day, depending on the size of the truck and the type of fuel being transported. Fuel purchased from IOTC is transported from Jordan. The cost of fuel charged by IOTC includes shipping into Iraq. The cost of gasoline, diesel, and aviation gasoline originating from Turkey also includes shipping costs. JP-8 originating from Turkey is supplied by truck under a separate tender agreement put in place by ICTB (Intratheater Commercial Transportation Branch, European Command). Deliveries to the DESC during 2007 include the following: From February -December of 2007, the DESC received 430 thousand gallons of AVGAS from Petrol Ofisi, 25 million gallons of diesel fuel from Golteks, and 3 million gallons of motor gasoline from Tefirom. From July-December 2007, the DESC received 190 million gallons of Jet A-1, 50 million gallons of diesel, and 8 million gallons of motor gasoline from Kuwait Petroleum Corp. In that same time period, the DESC also received 80 million gallons of JP-8 jet fuel, 4.5 million gallons of diesel fuel, 670 thousand gallons of motor gasoline. As previously mentioned, the price the DESC pays for fuel destined for Iraq does not directly impact how much military units and commands in Iraq are paying because DESC generally charges a set price to all of its customers worldwide. The price of fuel charged to U.S. military units by DESC was raised on July 1, 2008, to reflect the increased cost of crude oil. Table 5 illustrates the change: DESC reports that 81.8% of the fuel used in Iraq during FY2007 was jet fuel, 15.8% was diesel, and 2.6% was gasoline. The cost of gasoline in Iraq is heavily subsidized by the Iraqi government. As such, the price most Iraqis pay for fuel is not indicative of the true cost of fuel. As part of an agreement with the International Monetary Fund, fuel subsidies have been and may continue to be reduced (see Table 6 for current subsidized prices). According to one report, the Iraqi government reduced its subsidies from $6 billion in 2005 to approximately $2.5 billion in 2007. It is estimated that the official price for a gallon of regular gasoline in Iraq now stands at approximately $1.44. However, as this price is subsidized by the government, the black market price of gasoline can be almost three times the official price, reportedly hovering around $4.00 a gallon. The black market price of gasoline may be a closer reflection of the true cost of gasoline in Iraq than the subsidized government price. Comparing the cost of fuels delivered to the CENTCOM area of responsibility and the cost paid by Iraq's civilian population is difficult. A number of the fuels used by the U.S. military are generally not used by Iraqi civilians. Where comparable fuels such as gasoline and diesel are used, it is estimated that the military units pay higher prices than Iraqi civilians paying the official price for a number of reasons, including (1) the Iraqi government subsidizes the cost of gasoline and diesel in Iraq, (2) the military likely has higher transportation costs associated with bringing fuel into Iraq, and (3) the price charged by the DESC is the "level price" that it charges to all its military customers around the world, irrespective of the actual cost of fuel supplied to Iraq.

Since the invasion of Iraq in 2003, the average price of fuels purchased for military operations in Iraq has steadily increased. The disparity between the higher price of fuel supplied to the United States Central Command compared to Iraq's civilian population has been a point of contention. Several factors contribute to the disparity, including the different types of fuel used by the military compared to Iraqi civilians, the Iraqi government's price subsidies, and the level pricing that the DOD's Defense Logistics Agency charges for military customers around the world. The Iraqi government has been pressured to reduce its fuel subsidy and black market fuel prices remain higher than the official subsidized price.

The mental health of veterans—and particularly veterans of Operations Enduring Freedom and Iraqi Freedom (OEF/OIF) —has been a topic of ongoing concern to Members of Congress and their constituents, as evidenced by hearings and legislation. Knowing the number of veterans affected by various mental disorders and actions the Department of Veterans Affairs (VA) is taking to address mental disorders can help Congress determine where to focus attention and resources. Using data from the VA, this brief report addresses the number of veterans with (1) depression or bipolar disorder , (2) posttraumatic stress disorder (PTSD), and (3) substance use disorders; Appendix A discusses important data limitations. For each topic, this report also briefly describes what the VA is doing in terms of screening and treatment; Appendix B lists reports evaluating the VA's efforts. Veterans generally must enroll in the VA health care system to receive medical care; for information about enrollment, health benefits, and cost-sharing, see CRS Report R42747, Health Care for Veterans: Answers to Frequently Asked Questions , by [author name scrubbed] and [author name scrubbed]. From FY2002 through FY2012, 1.6 million OEF/OIF veterans (including members of the Reserve and National Guard) left active duty and became eligible for VA health care; by the end of FY2012, 56% of them had enrolled and obtained VA health care. The VA publishes the cumulative prevalence of selected mental disorders among OEF/OIF veterans using VA health care, based on information in the VA's electronic health records. Systematic information regarding veterans who do not use VA health care is not available. Data about OEF/OIF veterans using VA health care should not be extrapolated to the rest of the OEF/OIF veteran population, or to the broader veteran population. Limitations of the VA's data are discussed in Appendix A . Depression and bipolar disorder are both mood disorders; bipolar disorder includes episodes of both depressed mood (which characterizes depression) and mania (elevated mood or irritability) or hypomania (a milder form of mania). The VA does not present separate prevalence figures for depression and bipolar disorder, nor does it provide the prevalence of depression and bipolar disorder combined; instead, the VA presents the prevalence of affective psychoses , a range of diagnoses including major depressive disorder and bipolar disorder, among others (14%); and depressive disorder not elsewhere classified (NEC) , a diagnosis assigned when a patient reports depressive symptoms that do not meet criteria for other depressive disorders (e.g., major depressive disorder) (22%). The percentages are presented in Figure 1 and Figure 2 .Neither of these categories includes dysthymic disorder (a form of depression), which falls in a category of neurotic disorders (a broad category that also includes panic disorder and generalized anxiety disorder, among others). It is possible that a patient with a diagnosis of one mood disorder reflected in the electronic health record might also have a diagnosis of another mood disorder in the electronic health record; for this reason, the prevalence of affective psychoses (14%) and the prevalence of depressive disorder NEC (22%) should not be summed. These percentages are subject to other important data limitations discussed in Appendix A . Department policy requires an annual depression screening for veterans using VA health care . Depression and bipolar disorder may be treated with medication, psychosocial interventions, or both. The VA's suicide prevention efforts, which are relevant to patients with mood disorders (as well as other veterans), are described in CRS Report R42340, Suicide Prevention Efforts of the Veterans Health Administration , by [author name scrubbed]. All veterans, regardless of enrollment, may use the department's Veterans Crisis Line (1-800-273-8255, option 1), an online chat service ( www.VeteransCrisisLine.net/chat ), and an online suicide prevention resource center ( www.suicideoutreach.org ) maintained jointly with the Department of Defense (DOD). Several reports that have evaluated the department's mental health programs (including treatment for mood disorders and suicide prevention) and offered recommendations are listed in Appendix B . Posttraumatic stress disorder (PTSD)—one of the "signature injuries" of OEF/OIF —is a psychological response to a traumatic event; however, a history of trauma is not enough to establish a diagnosis of PTSD. The diagnosis requires a minimum number of symptoms in each of three categories: reexperiencing (e.g., recurring nightmares about the traumatic event); avoidance (e.g., avoiding conversations about the traumatic event); and arousal (e.g., difficulty sleeping). Symptoms must persist for at least one month and must result in clinically significant distress or impairment in functioning. As illustrated in Figure 3 , the VA reports the prevalence of PTSD among OEF/OIF veterans receiving VA health care in FY2002–FY2012 to be 29%. This percentage is subject to important data limitations discussed in Appendix A . Given the attention on PTSD, it is worth noting that prevalence estimates from other sources (generally not limited to users of VA health care) vary widely. A 2010 RAND analysis of 29 relevant studies found prevalence estimates for PTSD ranging from around 1% to 60% among OEF/OIF servicemembers; variation was attributed in part to the use of different samples and different methods of identifying PTSD. A 2012 report by the Institute of Medicine indicates that recent estimates of PTSD prevalence among OEF/OIF servicemembers and veterans range from 13% to 20%. Department policy requires that veterans new to VA health care receive a PTSD screening, which is repeated every year for the first five years and every five years thereafter, unless there is a clinical need to screen earlier. Department policy also requires that new patients requesting or referred for mental health services receive an initial assessment within 24 hours and a full evaluation within 14 days. Congressional testimony has raised questions about the extent to which these policies are implemented in practice. PTSD treatment provided by the VA includes both medication and cognitive-behavioral therapy (a category of talk therapy). Every VA Medical Center has specialists in PTSD treatment. Some facilities offer specialized PTSD treatment programs of varying intensity and duration, including (among others) PTSD day hospitals (four to eight hours per day, several days per week); evaluation and brief treatment PTSD units (14-28 days); specialized inpatient PTSD units (28-90 days); and PTSD residential rehabilitation programs (28-90 days living in a supportive environment while receiving treatment). Veterans may also receive PTSD treatment at VA community-based outpatient clinics (CBOCs) or at Vet Centers (which are subject to different policies than VA health care facilities). Several reports that have evaluated the VA's PTSD screening and treatment efforts and offered recommendations are listed in Appendix B . Substance use disorders include dependence on and abuse of drugs, alcohol, or other substances (e.g., nicotine). A diagnosis of dependence requires at least three symptoms (e.g., tolerance or withdrawal); substance use that does not meet criteria for dependence, but leads to clinically significant distress or impairment, is called abuse. Each diagnosis is specific to the substance, so an individual may have multiple diagnoses of abuse or dependence—one for each substance (e.g., marijuana dependence and cocaine abuse). Figure 4 and Figure 5 show the prevalence of drug dependence and abuse (respectively) among OEF/OIF veterans using VA health care during FY2002–FY2012. Alcohol dependence (6%) is more common than either drug dependence (3%) or abuse (5%); the prevalence of alcohol abuse was not provided. These percentages are subject to important data limitations discussed in Appendix A . Given the comparatively low rates of drug abuse and dependence (relative to other disorders presented in this report), VA policy does not require routine drug use screening. Department policy does require an annual alcohol screening, which is waived for veterans who drank no alcohol in the prior year. The VA offers medication and psychosocial interventions for substance use disorders, as well as acute detoxification care when necessary. Medication may be used to reduce cravings or to substitute for the drug of abuse (e.g., methadone for heroin users). Psychosocial interventions include (among others) brief counseling to enhance motivation to change; intensive outpatient treatment; residential care (i.e., living in a supportive environment while receiving treatment); long-term relapse prevention; and referral to outside programs such as Alcoholics Anonymous. Several reports that have evaluated the department's alcohol screening and substance use disorder treatment efforts and offered recommendations are listed in Appendix B . Appendix A. Data Limitations In order to understand the limitations of the data presented in this report, it is helpful to understand their sources. The VA identifies PTSD and substance use disorders by searching VA administrative data for diagnosis codes associated with specific conditions (e.g., 309.81 for PTSD). These codes are entered into veterans' electronic medical records by clinicians, in the normal course of evaluation and treatment. The data provided by the VA should be interpreted in light of at least three limitations, each of which is discussed below. First, some conditions may be overstated, because veterans with diagnosis codes for a condition might not have the condition, as a result of provisional diagnoses or noncurrent diagnoses. A provisional diagnosis code may be entered into a veteran's electronic medical record when further evaluation is required to confirm the diagnosis. A diagnosis may be noncurrent when a veteran who had a condition in the past no longer has it. In either case, the code remains in the veteran's electronic medical record. Second, some conditions may be understated, because veterans who have a condition might not be diagnosed (and therefore might not have the diagnosis code in their records), if they choose not to disclose their symptoms. Veterans might not want to disclose information that would lead to a diagnosis of mental illness. Veterans have reported not wanting to disclose trauma for fear that that they will not be believed, that others will think less of them, that they will be institutionalized or stigmatized, or that their careers will be jeopardized, among other reasons. Also, veterans using VA health care services may receive additional services outside the VA, without the knowledge of the department. Third, the numbers provided by the VA should not be extrapolated to all OEF/OIF veterans, or to the broader veteran population, because OEF/OIF veterans using VA health care are not representative of all OEF/OIF veterans or the broader veteran population. Veterans who use VA health care may differ from those who do not, in ways that are not known. Potential differences include (among other characteristics) disability status, employment status, and distance from a VA medical facility. Appendix B. Selected Evaluations of VA Services Table B-1 lists selected reports published since 2008 that evaluate the VA's efforts to address veterans' mental health:

The mental health of veterans—and particularly veterans of Operations Enduring Freedom and Iraqi Freedom (OEF/OIF)—has been a topic of ongoing concern to Members of Congress and their constituents, as evidenced by hearings and legislation. Knowing the number of veterans affected by various mental disorders and actions the Department of Veterans Affairs (VA) is taking to address mental disorders can help Congress determine where to focus attention and resources. Using data from the VA, this brief report addresses the number of veterans with (1) depression or bipolar disorder, (2) posttraumatic stress disorder (PTSD), and (3) substance use disorders. For each topic, this report also briefly describes what the VA is doing in terms of screening and treatment. From FY2002 through FY2012, 1.6 million OEF/OIF veterans (including members of the Reserve and National Guard) left active duty and became eligible for VA health care; by the end of FY2012, 56% of them had enrolled and obtained VA health care. The VA publishes the cumulative prevalence of selected mental disorders among OEF/OIF veterans using VA health care, based on information in the VA's electronic health records. Systematic information regarding veterans who do not use VA health care is not available. Data about OEF/OIF veterans using VA health care should not be extrapolated to the rest of the OEF/OIF veteran population, or to the broader veteran population. Limitations of the VA's data are discussed in Appendix A. Reports that have evaluated VA's efforts and offered recommendations are listed in Appendix B.

RS20572 -- Indonesian Separatist Movement in Aceh Updated February 26, 2004 Aceh Merdeka (Free Aceh or GAM) came into existence in the 1970s and issued a declaration of independence in 1976. GAM is waging an insurgency with amilitary force estimated at 5,000. GAM's political goals appear to have substantial public support, especially forthe proposal to hold a referendum onindependence vs. union with Indonesia. However, some of GAM's tactics -- forced "taxation," kidnapping,assassinations of pro-Indonesian Acehnese, andcriminal activities -- have drawn criticism from Acehnese. GAM has a political organization throughout Aceh. Indonesian commanders in Aceh haveacknowledged that community leaders, religious leaders, and local government officials do not support Indonesiansecurity forces against the GAM. (2) GAM professes the aim of establishing Aceh as an Islamic kingdom but not as a fundamentalist Islamic state. Most of its arms reportedly come fromSoutheast Asian sources through supply routes in southern Thailand. Its official leader, Hasan de Tiro, is exiled inSweden. He is U.S.-educated, at ColumbiaUniversity in New York and Plano University in Texas. He describes himself as pro-U.S. GAM condemned theSeptember 11 terrorist attack on the UnitedStates and voiced support for the U.S. campaign against terrorism. (3) However, GAM attacked the Arun natural gas facilities of the U.S. company,Exxon-Mobil, and drew a warning from the U.S. State Department. GAM claims that Exxon-Mobil collaborateswith the Indonesian military (TNI) and iscomplicit in the human rights abuses committed by the TNI. (4) The causes of separatism and alienation in Aceh are a combination of four factors: (1) Aceh has a distinct history as an independent kingdom from the 15th century until thebeginning of the 20th century. It maintained diplomatic and consularrelations with several states, including Great Britain. It exchanged diplomatic notes with the United States. (5) In 1873, the Dutch invaded Aceh and conqueredit after a war that lasted until 1904. Hasan de Tiro is a descendant of the last Sultan, who was killed fighting theDutch. (2) There has been a progressive alienation of the population in reaction to the policies of successive Indonesian governments since Indonesia wonindependence from the Netherlands in 1949. The Indonesian government abolished the province of Aceh in 1950,prompting the first revolt of the Acehnese inthe early 1950s. In 1959, the Indonesian government declared Aceh a special territory with autonomy in religiousand education affairs, but the governmentnever implemented this special status. From the 1960s, Aceh was subject to increased centralization of power inJakarta under President Suharto. Revolts,aiming at independence, occurred in the 1970s and late 1980s. (3) Extensive human rights abuses by the TNI have been documented. Military abuses of civilians reportedly became common from the 1970s to the present. Abusive tactics have included the murder, torture, and arbitrary arrests of politically active Acehnese (especiallythose who advocate a referendum), members ofnon-government organizations (NGOs), and human rights workers. Retaliation is a major source of abuses. Inresponse to GAM attacks and ambushes,military units often enter nearby villages and summarily execute residents, usually the male residents. Some of theseexecutions reportedly are unprovoked byGAM. (6) The TNI reportedly extorts money from localbusinesses as payment for "protection." (4) Aceh's wealth has gone to the central government. By the 1970s, discontent arose over the flow of wealth from Aceh's natural resources. Upwards of80-90% of this wealth has gone to Java, Indonesia's most populous island and the center of Indonesian politicalpower. (7) This prompted dissident Acehnese toclaim that Aceh was the object of Javanese colonialism, which had replaced Dutch colonialism. Indonesian policies toward Aceh have been influenced by three factors since the fall of the Suharto government in May 1998. One is the weaknesses in thegovernments that followed Suharto. They have been coalitions of individuals and groups with little or no priorgovernment experience or little experience intop decision-making levels. The same is true of the parliament elected in June 1999. Second, the Indonesian bodypolitic remains resentful over the loss ofEast Timor, blames the United Nations and foreign governments rather than Indonesian policies, and is determinedthat Aceh will not separate. The third is therelationship between the new governments and the military since Suharto's fall. Civilian leaders have tried to exertcontrol over the TNI with minimal success. The TNI retains authority over policy in Indonesia's outer islands and resists the central government's attempts toassert its authority in these places, includingAceh. The TNI leadership favors a policy of crushing the rebellion by military means, and it is suspicious ofnegotiations with GAM. It has pressed severaltimes since 1999 for the imposition of martial law in Aceh, which would give the TNI unquestioned authority overthe province. The government's political response includes an offer of autonomy to Aceh. In early 2001, the parliament passed a special autonomy law for Aceh. It providesthat Aceh will receive 70 percent of the revenue from the province's natural resources. It gives the provincialgovernment the right to impose Islamic sharia law(but sharia reportedly is not popular among many Acehnese). It provides for local elections. However, the specialautonomy law has not been implemented. The provincial government has not passed needed implementation legislation. According to a report by theInternational Crisis Group in July 2003, the centralgovernment controls all policies and programs in Aceh, and revenue from Aceh's resources goes to the TNI. Theprovincial government is considered to becorrupt; it is accused of siphoning off economic aid and humanitarian aid funds that pass through it. (8) The government also negotiated with GAM. The talks have been held under the auspices of the Henry Dunant Center, a Swiss organization. Negotiations since2000 produced several cease-fires, which quickly broke down. The talks made little progress on key political issues. The government holds that GAM mustaccept the special autonomy law. GAM contends that negotiations can take up special autonomy but must also takeup GAM's proposal of a referendum on thequestion of independence. GAM holds that there should be an international role in the settlement of the Acehquestion; the Indonesian government opposes arole by other governments or the United Nations. These issues were key to the breakdown of the cease-fire signed in December 2002. The truce provided for TNI and police units to withdraw from specifiedpositions. GAM would turn over its arms in specified locales under supervision of the Henry Dunant Center andThai and Filipino military monitors. GAMagreed to refrain from advocating independence. Political negotiations were to ensue. The cease-fire initiallyreduced violence. However, it began to breakdown after February 2004. Independent observers agreed with the TNI accusation that GAM used the cease-fireto rearm and reorganize. GAM cadrereportedly propagandized among villagers that independence would soon be achieved. GAM delayed turning overarms to the international monitors. The TNIrefused to withdraw from the specified forward positions. Offices and automobiles of the international observerswere arsoned; most observers accused the TNIof these acts. The Indonesian government, under apparent pressure from the TNI, took uncompromising positionsin negotiations. It demanded that GAMrenounce independence and accept special autonomy "within the framework of the unitary state of the Republic ofIndonesia." It refused to offer GAM a role asa political party. In May 2003, the TNI arrested five GAM negotiators who were preparing to fly to Tokyo, the siteof talks. (9) They were subsequentlysentenced to 12-15 years imprisonment. In the spring of 2003, the TNI held a meeting of over 48 commanders in Aceh. The apparent aim was to pressure the government to end the cease-fire and givethe TNI full authority, including authority over the police. On May 18, 2003, President Magawati declared martiallaw in Aceh for six months. The TNI andthe police deployed 45,000 troops into the province. Security forces gained control over major towns and the mainroads; security improved in these locales. GAM guerrillas reportedly dispersed into smaller units "all over Aceh," according to TNI Commander GeneralEndriartono Sutarto. (10) On December 31, 2003,the police commander in Aceh stated that since the imposition of martial law, 580 GAM members and 470 civilianshad been killed; 50 soldiers and 26policemen had been killed. The TNI earlier had claimed over 1,000 GAM members killed, apparently includingcivilians killed in the GAM figure. InNovember 2003, President Megawati extended martial law for another six months. The government also set forthpreconditions for negotiations, that GAMmust disband and accept "special autonomy." GAM called for a European government to mediate the conflict. With martial law, the TNI closed off Aceh from contact with outsiders with a few exceptions under TNI control. Foreign journalists were denied access to theprovince and were prohibited from contact with GAM. Cellular telephones were blocked. The TNI expelled foreignaid workers until December 2003 whenfive United Nations organizations were allowed access. Foreign human rights groups were denied access. The TNI also subjected Indonesian and Acehnese human rights groups to pressure and intimidation. This was part of a broad pattern of TNI and police humanrights abuses that were reported. The State Department's human rights report for 2003 stated regarding Indonesiathat "Human rights abuses were mostapparent in Aceh province." The report attributed to the TNI killings, beatings and torture, rapes, and arbitraryarrests of people for voicing pro-independenceviews. (11) Indonesian human rights groups,including the government's Human Rights Commission, made similar allegations, describing the forcible evacuationof 40,000 people, mass graves, and TNI orders for people to fly the Indonesian flag. The international organizations,Human Rights Watch and theInternational Crisis Group, issued similar reports. Former Indonesian President Abdurrahman Wahid declared thatthe "basic rights of the Acehnese have beenput aside" by the TNI. (12) GAM also was criticizedfor abuses, including the burning of schools, kidnappings, extortion, and killings of civilians. U.S. policy developed within the context of three broader policy objectives toward Indonesia that came out of East Timor's separation in 1999 and the fall ofthe Suharto government. The first was to support political evolution in Indonesia towards democracy. The secondwas to support Indonesia's territorialintegrity -- to reassure post-Suharto leaders that the United States would not repeat its East Timor policy of 1999towards other parts of Indonesia where therewere separatist movements. The third, advocated by the Pentagon and the U.S. Pacific Command, was to restorelinks between the U.S. and Indonesianmilitaries, which had been cut because of the East Timor situation. The U.S. war against terrorism added a policy priority of securing Indonesian cooperation against terrorism. This did not conflict with the three existing policygoals but reinforced them. The Bush Administration worked hard to restore links between the U.S. and Indonesianmilitaries and institute counter-terrorismtraining programs for the Indonesian police and the TNI. In August 2002, Secretary of State Colin Powell announceda $50 million package of such programs. The Clinton and Bush administrations have tried to influence the Aceh situation but in ways that would prevent Aceh from worsening U.S.-Indonesian relationsand reducing the possibilities of anti-terrorism cooperation. The United States urged GAM to accept specialautonomy within Indonesia. It supportedcease-fires; retired Major General Anthony Zinni reportedly played an important mediating role in the negotiationof the cease-fire of December 2002. TheUnited States tried to persuade the Indonesian government on several occasions against the imposition of martiallaw in Aceh and work instead for a politicalsolution; this diplomacy included the dispatch of National Security Council official, Karen Brooks, to Jakarta in July2003, a statement by Deputy Secretary ofDefense Paul Wolfowitz (former U.S. Ambassador to Indonesia) to Indonesia's Defense Minister in Singapore inMay 2003; and a tripartite statement withJapan and the European Union in November 2003. The Bush Administration has resisted Indonesian pressure todeclare GAM a terrorist organization underU.S. law. The State Department criticized TNI human rights abuses, including extensive criticisms in its 2003human rights report. However, high level BushAdministration officials refrained from public criticism. President Bush apparently did not raise Aceh during hisvisit to Indonesia in October 2003,concentrated exclusively on cooperation with Indonesia against terrorism and the case of Americans killed in Papuain August 2002. (13) The Administrationalso opposed a human rights lawsuit in U.S. courts filed by the International Labour Rights Foundation against theU.S. Exxon-Mobil Corporation forcomplicity in human rights abuses by TNI units guarding the company's natural gas installations in Aceh. (14) Congressional-imposed prohibitions on U.S. arms sales to Indonesia also affect the U.S. role in the Aceh situation. These restrictions, in the form of the "Leahyamendment" to foreign operations appropriations legislation, have existed since 2000 in reaction to TNI abuses inEast Timor. Foreign operations legislationfor FY2004 demands that the Indonesian government act against members of the TNI who abuses human rights. Aceh is not mentioned; but these provisionswould appear to apply to TNI abuses in Aceh. In addition to the U.S. priority to terrorism, another limitation on U.S. policy on Aceh is the low U.S. influence in Indonesia. Polls show a substantial majorityof Indonesians critical of the United States because of the U.S. invasion of Iraq and strongly supportive of themartial law policies in Aceh. The Indonesiangovernment and the TNI reportedly calculated that the U.S. war on terrorism and attack on Iraq would make theUnited States less critical of martial law inAceh. The government imposed martial law during the U.S. invasion. Anti-U.S. sentiment appears to be strongin the TNI. General Ryamizard Ryacudu, TNIChief of Staff, declared to TNI senior officers that future U.S. training of TNI personnel would be unnecessary andcounter-productive. (15)

Indonesia faces a major separatist insurgency in the province of Aceh in northernSumatra. The Indonesiangovernment has proposed autonomy for Aceh, but insurgents demand independence. Negotiations and cease-fireshave been unsuccessful. Indonesian civilianleaders have been unable to control the Indonesian military, whose aggressive actions in Aceh produce frequentreports of human rights abuses and alienation ofthe populace. The Bush Administration has urged Indonesia to seek a political settlement; but it has been hesitantto deal with the military's actions and seeksrenewed ties with the military in order to cooperate against terrorism.

Posing as private citizens, our undercover investigators purchased several sensitive excess military equipment items that were improperly sold to the public at DOD liquidation sales. These items included three ceramic body armor inserts identified as small arms protective inserts (SAPI), which are the ceramic inserts currently in demand by soldiers in Iraq and Afghanistan; a time selector unit used to ensure the accuracy of computer- based equipment, such as global positioning systems and system-level clocks; 12 digital microcircuits used in F-14 Tomcat fighter aircraft; guided missile radar test sets used to check the operation of the data link antenna on the Navy’s Walleye (AGM-62) air-to-ground guided missile; and numerous other electronic items. In instances where DOD required an EUC as a condition of sale, our undercover investigator was able to successfully defeat the screening process by submitting bogus documentation and providing plausible explanations for discrepancies in his documentation. In addition, we identified at least 79 buyers for 216 sales transactions involving 2,669 sensitive military items that DOD’s liquidation contractor sold to the public between November 2005 and June 2006. We are referring information on these sales to the appropriate federal law enforcement agencies for further investigation. Our investigators also posed as DOD contractor employees, entered DRMOs in two east coast states, and obtained several other items that are currently in use by the military services. DRMO personnel even helped us load the items into our van. These items included two launcher mounts for shoulder-fired guided missiles, an all-band antenna used to track aircraft, 16 body armor vests, body armor throat and groin protectors, six circuit card assemblies used in computerized Navy systems, and two Palm V personal data assistant (PDA) organizers. Using a fictitious identity as a private citizen, our undercover investigator applied for and received an account with DOD’s liquidation sales contractor. Our investigator was then able to purchase several sensitive excess military items noted above that were being improperly sold to the public. During our undercover purchases, our investigator engaged in numerous conversations with liquidation sales contractor staff during warehouse inspections of items advertised for sale and with DRMS and DLA’s Criminal Investigative Activity (DCIA) staff during the processing of our EUCs. On one occasion our undercover investigator was told by a DCIA official that information provided on his EUC application had no match to official data and that he had no credit history. Our investigator responded with a plausible story and submitted a bogus utility bill to confirm his mailing address. Following these screening procedures, the EUC was approved by DCIA and our undercover investigator was able to purchase our targeted excess military items. Once our initial EUC was approved, our subsequent EUC applications were approved based on the information on file. Although the sensitive military items that we purchased had a reported acquisition cost of $461,427, we paid a liquidation sales price of $914 for them—less than a penny on the dollar. We observed numerous sales of additional excess sensitive military items that were improperly advertised for sale or sold to the public, including fire control components for weapon systems, body armor, and weapon system components. The demilitarization codes for these items required either key point or total destruction rather than disposal through public sale. Although we placed bids to purchase some of these items, we lost to higher bidders. We identified at least 79 buyers for 216 public liquidation sales transactions involving 2,669 sensitive military items. On July 13, 2006, we briefed federal law enforcement and intelligence officials on the details of our investigation. We are referring public sales of sensitive military equipment items to the federal law enforcement agencies for further investigation and recovery of the sensitive military equipment. During our undercover operations, we also noted 13 advertised sales events, including 179 items that were subject to demilitarization controls, where the items were not sold. In 5 of these sales involving 113 sensitive military parts, it appears that DOD or its liquidation sales contractor caught the error in demilitarization codes and pulled the items from sale. One of these instances involved an F-14 fin panel assembly that we had targeted for an undercover purchase. During our undercover inspection of this item prior to sale, a contractor official told our investigator that the government was in the process of changing demilitarization codes on all F-14 parts and it was likely that the fin panel assembly would be removed from sale. Of the remaining 8 sales lots containing 66 sensitive military parts, we could not determine whether the items were not sold because DOD or its contractor caught the demilitarization coding errors or because minimum bids were not received during the respective sales events. Our investigators used publicly available information to develop fictitious identities as DOD contractor personnel and enter DRMO warehouses (referred to as DRMO A and DRMO B) in two east coast states on separate occasions in June 2006, to requisition excess sensitive military parts and equipment valued at about $1.1 million. Our investigators were able to search for and identify excess items without supervision. In addition, DRMO personnel assisted our investigators in locating other targeted items in the warehouse and loading these items into our van. At no point during either visit, did DRMO personnel attempt to verify with the actual contractor that our investigators were, in fact, contractor employees. During the undercover penetration at DRMO A, our investigators obtained numerous sensitive military items that were required to be destroyed when no longer needed by DOD to prevent them from falling into the wrong hands. These items included two guided missile launcher mounts for shoulder-fired missiles, six Kevlar body armor fragmentation vests, a digital signal converter used in naval electronic surveillance, and an all- band antenna used to track aircraft. Posing as employees for the same DOD contractor identity used during our June 2006 penetration at DRMO A, our investigators entered DRMO B a day later for the purpose of testing security controls at that location. DRMO officials appeared to be unaware of our security penetration at DRMO A the previous day. During the DRMO B undercover penetration, our investigators obtained 10 older technology body armor fragmentation vests, throat and groin protection armor, six circuit card assemblies used in Navy computerized systems, and two Palm V personal digital assistants (PDA) that were certified as having their hard drives removed. Because PDAs do not have hard drives, after successfully requisitioning them, we asked our Information Technology (IT) security expert to test them and our expert confirmed that all sensitive information had been properly removed. Shortly after leaving the second DRMO, our investigators received a call from a contractor official whose employees they had impersonated. The official had been monitoring his company’s requisitions of excess DOD property and noticed transactions that did not appear to represent activity by his company. He contacted personnel at DRMO A, obtained the phone number on our bogus excess property screening letter, and called us. Upon receiving the call from the contractor official, our lead investigative agent explained that he was with GAO, and we had performed a government test. Because significant numbers of new, unused A-condition excess items still being purchased or in use by the military services are being disposed of through liquidation sales, it was easy for our undercover investigator to pose as a liquidation sales customer and purchase several of these items for a fraction of what the military services are paying to obtain these same items from DLA supply depots. For example, we paid $1,146 for several wet-weather and cold-weather parkas, a portable field x-ray enclosure, high-security locks, a gasoline engine that can be used as part of a generator system or as a compressor, and a refrigerant recovery system used to service air conditioning systems on automobiles. The military services would have paid a total acquisition cost of $16,300 for these items if ordered from supply inventory, plus a charge for processing their order. Several of the items we purchased at liquidation sales events were being ordered from supply inventory by military units at or near the time of our purchase, and for one supply depot stocked item—the portable field x-ray enclosure—no items were in stock at the time we made our undercover purchase. At the time of our purchase, DOD’s liquidation contractor sold 40 of these x-ray enclosures with a total reported acquisition cost of $289,400 for a liquidation sales price of $2,914—about a penny on the dollar. We paid a liquidation sales price of $87 for the x-ray enclosure which had a reported acquisition cost of $7,235. In another example, we purchased a gasoline engine in March 2006 for $355. The Marine Corps ordered 4 of these gas engines from DLA supply inventory in June 2006 and paid $3,119 each for them. At the time of our undercover purchase, 20 identical gasoline engines with a reported acquisition cost of $62,380 were sold to the public for a total liquidation sales price of $6,221, also about a penny on the dollar. In response to recommendations in our May 2005 report, DOD has taken a number of actions to improve systems, processes, and controls over excess property. Most of these efforts have focused on improving the economy and efficiency of DOD’s excess property reutilization program. However, as demonstrated by our tests of security controls over sensitive excess military equipment, DOD does not yet have effective controls in place to prevent unauthorized parties from obtaining these items. For example, although DLA and DRMS have emphasized policies that prohibit batch lotting of sensitive military equipment items, we observed many of these items being sold in batch lots during our investigation and we were able to purchase several of them. In addition, DLA and DRMS have not ensured that DRMO personnel and DOD’s liquidation sales contractor are verifying demilitarization codes on excess property turn-in documentation to assure appropriate disposal actions for items requiring demilitarization. Further, although DLA and DRMS implemented several initiatives to improve the overall reutilization rate for excess A-condition items, our analysis of DRMS data found that the reported reutilization rate as of June 30, 2006, remained the same as we had previously reported—about 12 percent. This is primarily because DLA reutilization initiatives are limited to using available excess A-condition items to fill customer orders and to maintain established supply inventory retention levels. As a result, excess A-condition items that are not needed to fill existing orders or replenish supply inventory are disposed of outside of DOD through transfers, donations, and public sales, which made it easy for us to purchase excess new, unused DOD items. Despite the limited reutilization supply systems approach for reutilization of A-condition excess items, DLA and DRMS data show that overall system and process improvements since the Subcommittee’s June 2005 hearing have saved $38.1 million through June 2006. According to DLA data, interim supply system initiatives using the Automated Asset Recoupment Program, which is part of an old DOD legacy system, achieved reutilization savings of nearly $2.3 million since July 2005 and Business System Modernization supply system initiatives implemented in January 2006 as promised at the Subcommittee’s June 2005 hearing, have resulted in reutilization savings of nearly $1.1 million. In addition, DRMS reported that excess property marketing initiatives implemented in late March 2006 have resulted in reutilization savings of a little over $34.8 million through June 2006. These initiatives include marketing techniques using Web photographs of high-dollar items and e-mail notices to repeat customers about the availability of A-condition items that they had previously selected for reutilization. Our most recent work shows that sensitive military equipment items are still being improperly released by DOD and sold to the public, posing a significant national security risk. The sensitive nature of these items requires particularly stringent internal security controls. Our tests, which were performed over a short duration, were limited to our observations, meaning that the problem may likely be more significant than what we identified. Although we have referred the sales of items identified during our investigation to federal law enforcement agencies for follow-up, the solution to this problem is to enforce controls for preventing improper release of these items outside DOD. Further, liquidation sales of items that military units are continuing to purchase at full cost from supply inventory demonstrates continuing waste to the taxpayer and inefficiency in DOD’s excess property reutilization program. Mr. Chairman and Members of the Committee, this concludes my statement. I would be pleased to answer any questions that you or other members of the committee may have at this time. For further information about this testimony, please contact Gregory D. Kutz at (202) 512-7455 or kutzg@gao.gov. Major contributors to this testimony include Mario L. Artesiano, Donald L. Bumgardner, Matthew S. Brown, Paul R. Desaulniers, Stephen P. Donahue, Lauren S. Fassler, Gayle L. Fischer, Cinnimon Glozer, Jason Kelly, John Ledford, Barbara C. Lewis, Richard C. Newbold, John P. Ryan, Lori B. Ryza, Lisa M. Warde, and Emily C. Wold. Technical expertise was provided by Keith A. Rhodes, Chief Technologist, and Harold Lewis, Assistant Director, Information Technology Security, Applied Research and Methods. This is a work of the U.S. government and is not subject to copyright protection in the United States. It may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

In light of GAO's past three testimonies and two reports on problems with controls over excess DOD property, GAO was asked to perform follow-up investigations to determine if (1) unauthorized parties could obtain sensitive excess military equipment that requires demilitarization (destruction) when no longer needed by DOD and (2) system and process improvements are adequate to prevent sales of new, unused excess items that DOD continues to buy or that are in demand by the military services. GAO investigators posing as private citizens purchased several sensitive military equipment items from DOD's liquidation sales contractor, indicating that DOD has not enforced security controls for preventing sensitive excess military equipment from release to the public. GAO investigators at liquidation sales purchased ceramic body armor inserts currently used by deployed troops, a cesium technology timing unit with global positioning capabilities, a universal frequency counter, two guided missile radar test sets, 12 digital microcircuits used in F-14 fighter aircraft, and numerous other items. GAO was able to purchase these items because controls broke down at virtually every step in the excess property turn-in and disposal process. GAO determined that thousands of military items that should have been demilitarized (destroyed) were sold to the public. Further, in June 2006, GAO undercover investigators posing as DOD contractor employees entered two excess property warehouses and obtained about $1.1 million in sensitive military equipment items, including two launcher mounts for shoulder-fired guided missiles, several types of body armor, a digital signal converter used in naval surveillance, an all-band antenna used to track aircraft, and six circuit cards used in computerized Navy systems. At no point during GAO's warehouse security penetration were its investigators challenged on their identity and authority to obtain DOD military property. GAO investigators posing as private citizens also bought several new, unused items currently being purchased or in demand by the military services from DOD's excess property liquidation sales contractor. Although military units paid full price for these items when they ordered them from supply inventory, GAO paid a fraction of this cost to purchase the same items, demonstrating continuing waste and inefficiency.

On July 8, 2014, the Administration requested $4,346 million in FY2014 supplemental appropriations to address two issues: the federal costs of managing the surge of both unaccompanied alien children (UAC) and escorted alien children illegally crossing the southwest border, and a projected shortfall in federal funding to pay the costs of wildfires. The Senate Appropriations Committee conducted a hearing July 10, 2014, focusing on the border security and immigration aspects of the Administration's request. In addition, the following hearings on the issues involved in the supplemental request were held between the submission of the request and the introduction of the respective bills: Senate Committee on Homeland Security and Government Affairs, July 9 and 16, 2014, "Challenges at the Border: Examining the Causes, Consequences, and Responses to the Rise in Apprehensions at the Southern Border," and "Challenges at the Border: Examining and Addressing the Root Causes Behind the Rise in Apprehensions at the Southern Border"; Senate Committee on Energy and Natural Resources, July 15, 2014, "Wildfire Preparedness and Forest Service 2015 Fiscal Year Budget"; and Senate Committee on Foreign Relations, July 17, 2014, "Dangerous Passage: Central America in Crisis And the Exodus of Unaccompanied Minors." On July 23, 2014, the Senate introduced S. 2648 , which included $3,571 million in supplemental appropriations for those purposes as well as providing funding for defense assistance to Israel. The legislation would designate the appropriations as an emergency requirement, meaning the funding would not count against the discretionary budget caps for FY2014. On July 29, 2014, the House introduced H.R. 5230 , which included $659 million in supplemental appropriations to address the situation at the southwest border. The original legislation included $659 million in offsets. After consideration under the initial rule was postponed, a second rule was passed that increased the amount appropriated by $35 million, the offsets by $35 million, and altered the policy provisions included in the bill. This amended bill passed the House by a vote of 223-189 on August 1, 2014. Table 1 below outlines the Administration's request for supplemental funding for FY2014, and the proposed new budget authority provided in response to those requests. All figures are in millions of dollars of budget authority, and like all numbers in this report, are rounded to the nearest million. The figures in the table below are presented thematically between the issue areas: (1) the southwest border crisis, (2) wildfires, and (3) aid to Israel. Headers in bold italics note the theme. Under each theme, appropriations are listed by department and subtotaled. The left column notes the department or agency and the funded activity by appropriation. The Administration's request is in the next column, in millions of dollars of budget authority, followed by the appropriations that would be provided under the Senate bill and the House bill. The table only reflects new budget authority that would be provided in the legislation: transfers, rescissions, and redirection of appropriated funds are not included in the table. A brief narrative description of the request and each bill follows, which explores those issues, as well as the potential budgetary impact of each proposal. The Administration requested $4,346 million in supplemental appropriations to address two issues: the surge in unaccompanied and escorted children illegally crossing the southwest border, and a shortfall in federal funding to pay the costs of wildland fires. Of the request, $3,731 million was for the southwest border crisis to be distributed through appropriations that would fall under four appropriations subcommittees: Commerce, Justice, Science, and Related Agencies (2% of the border funding); Homeland Security (42%); Labor, Health, and Human Services, Education, and Related Agencies (49%); and State, Foreign Operations, and Related Programs (8%). The request included a general provision allowing up to $250 million of this amount to be transferred among applicable appropriations, which would give the Administration additional flexibility in how these funds may be used. The Administration also requested expanded transfer authority specifically for supplemental funds appropriated to DHS. The request included $615 million to cover wildland fire suppression and emergency rehabilitation activities. Similar to the Administration's request, the bill would also create a new adjustment to statutory spending limits to accommodate a portion of spending subsequently provided for "wildfire suppression operations," formulated with the intent of minimizing any additional spending beyond what is allowed under current law by tying it to the existing disaster relief cap adjustment. The Administration requested the supplemental funding be designated as an emergency under the budget laws. Funding with the designation would not count against the discretionary spending caps for FY2014, and an offset would not be needed to avoid violating those caps. S. 2648 has four titles, one each for border issues, wildfire, and aid to Israel, as well as a title of general provisions that apply broadly across the bill. It would provide $1 billion less than the Administration requested for managing the situation on the southwest border, and $225 million in funding for military assistance to Israel that the Administration had not formally requested. The bill would provide the requested wildfire funding, and includes an amendment sought by the Administration to make it easier to fund federal costs for fighting wildland fires. The Senate bill would provide almost double the supplemental funding requested for DOJ to speed the adjudications of those taken into custody along the border, appropriating $125 million. It would provide 28% less than requested for DHS—just over $1.1 billion—and would provide roughly two-thirds of the requested level of funding for HHS—$1.2 billion. The Senate bill would appropriate $300 million for the State Department and foreign operations work to address the flow of migrants, the same overall amount as requested by the Administration, but would reprioritize some of the funding. Title II of the bill would provide the requested $615 million for wildland fire costs, and the amendment sought by the Administration to create a new adjustment to discretionary spending limits for wildfire suppression operations and emergency restoration. Title III of S. 2648 would provide $225 million, through the Department of Defense, to the Government of Israel for the procurement of the Iron Dome defense system to counter short-range rocket threats. All funding in the bill would be designated as emergency funding, as the Administration requested. The Senate bill's southwest border title includes a number of provisions that would require a total of $3 million of the funding be transferred to various inspectors general to oversee the use of funds that would be provided in the bill. Under the appropriation for the Economic Support Fund, funds are also designated to be transferred to the Inter-American Foundation for youth training programs ($5 million) and DOJ efforts "to build investigative and prosecutorial capacity" in source countries ($10 million).   There are three provisions in the same title that would allow for transfer and reprogramming of funds. Funding for DHS in S. 2648 could be transferred between appropriations accounts or reprogrammed within them without limitation, and up to $250 million could be transferred between appropriations in other parts of the southwest border title with the approval of the Director of the Office of Management and Budget. Use of either authority would require advance notification to the appropriations committees—a common practice. The bill would also allow HHS to transfer funds for medical response expenses to the Public Health and Social Services Emergency Fund. The House bill has two divisions: the first is a five-title appropriations act; the second has three titles that would modify immigration laws, provide a framework for National Guard deployment to the southwest border, and provide exemptions from certain environmental laws for border security activities. The third title of the second division also includes a sense of Congress statement regarding the housing of undocumented minors on military installations. The analysis of this report only focuses on the first division of the House bill. Unlike the Senate bill, House-passed H.R. 5230 would provide funding only for the southwest border crisis—no supplemental funding is included for wildland fire management or aid to Israel. Its $694 million in new budget authority is $3.1 billion less than the request for the southwest border crisis, and over $2 billion less than the amount the Senate bill would provide for those activities. House-passed H.R. 5230 would provide $22 million for DOJ to speed the adjudications of those taken into custody along the border—$41 million less than the request. The House bill would provide $405 million (74% less than requested) for DHS, and $197 million (89% less) for HHS. The House bill would not provide any new budget authority for the State Department and foreign operations work to address the flow of migrants, but would allow $40 million of previously appropriated aid for Central America to be made available for "repatriation and reintegration activities." No transfers or additional transfer or reprogramming authority would be provided in the House bill. Unlike the Senate bill, which includes an emergency designation for the funding it would provide, the House bill is fully offset. H.R. 5230 as passed by the House would provide $694 million in new budget authority, which would be offset by the following permanent rescissions of $694 million: $405 million from the Federal Emergency Management Agency's Disaster Relief Fund; $70 million from Department of Defense-wide operations and maintenance; $22 million from the Department of Justice Assets Forfeiture Fund; and $197 million from international bilateral economic assistance through the Economic Support Fund.

On July 8, 2014, the Administration requested $4,346 million in FY2014 supplemental appropriations to address two issues: the surge in both unaccompanied and escorted children illegally crossing the southwest border, and a shortfall in federal funding to pay the costs of wildfires. The appropriations were requested to be designated as emergency funding, meaning the requested funds would not count against the discretionary budget caps for FY2014. On July 23, 2014, the Senate introduced S. 2648, which includes $3,571 million in supplemental appropriations for the Administration's requested purposes as well as for defense assistance to Israel. S. 2648 would designate the appropriations as an emergency, meaning they would not count against the discretionary budget caps for FY2014. On July 29, 2014, the House introduced H.R. 5230, which included $659 million in supplemental appropriations to address the situation at the southwest border. The legislation also included $659 million in rescissions that would offset the budgetary impact of the bill. An amended version of H.R. 5230, which includes an additional $35 million to defray the cost to states of National Guard deployments to the southern border, $35 million more in offsets, and a different set of policy provisions, passed the House 223-189 on August 1, 2014. The primary focus of this report is the Administration's request for supplemental appropriations, and the appropriations legislation considered in response to that request. Other policy-related provisions of the legislation will be analyzed in other CRS materials. This report will be updated as events warrant.

Under the provisions of Title XVI of the Social Security Act, disabled individuals and persons who are 65 or older are entitled to benefits from the Supplemental Security Income (SSI) program if they have income and assets that fall below program guidelines. SSI benefits are paid out of the general revenue of the United States and all participants receive the same basic monthly federal benefit. In most states, adults who collect SSI are automatically entitled to coverage under the Medicaid health insurance program. A participant in the SSI program receives the federal benefit rate (FBR), plus any state supplement, minus any countable income. At the end of June 2011, more than 8 million people received SSI benefits. In that month, these SSI beneficiaries each received an average cash benefit of $499.40 and the program paid out a total of nearly $4.3 billion in federally administered SSI benefits. The average monthly benefit is lower than the FBR because a person's final monthly benefit is based, in part, on his or her earnings and other income. Individuals and couples must have limited assets or resources to qualify for SSI benefits. Resources are defined by regulation as "cash or other liquid assets or any real or personal property that an individual (or spouse, if any) owns and could convert to cash to be used for his or her support and maintenance." The countable resource limit for SSI eligibility is $2,000 for individuals and $3,000 for couples. These limits are set by law, are not indexed for inflation, and have been at their current levels since 1989. Not all resources are counted for the purposes of determining SSI eligibility. The Social Security Act and federal regulations provide various types of resource exclusions that allow individuals or couples to own certain assets and not have them counted against their $2,000 or $3,000 resource limit. In addition, the laws governing several federal benefit programs, including the Food Stamp program, prohibit the Social Security Administration (SSA) from counting benefits paid under these programs as resources when determining SSI eligibility. The following section of this report will detail the four types of accounts that a person or couple may have money in and not have that money counted as a resource for the purposes of determining their SSI eligibility. Money set aside by an SSI recipient to pay for his or her burial expenses can be excluded from the SSI resource limits. Each person may set aside up to $1,500 for burial expenses and these expenses must be separately identifiable from other assets and money held. A burial plot owned by an individual or a couple is not considered a resource and its value is not counted against the $2,000 or $3,000 resource limit. There are two cases in which the amount of the burial expense exclusion may be reduced. First, the total amount permitted to be excluded is reduced by the face value of all life insurance policies held by the individual or his or her spouse. The face value of a policy is the amount the insurer agrees to pay the beneficiary upon the death of the insured. Second, the excluded amount of burial expenses is reduced by the total amount of money held in an irrevocable trust (commonly called an irrevocable burial trust) available to meet the burial expenses of the individual or his or her spouse. Under the provisions of the Foster Care Independence Act of 1999, P.L. 106 - 169 , the corpus , or total value, of any trust established by an individual is counted as a resource when determining SSI eligibility unless there is no circumstance under which a payment from the trust could ever be made for the benefit of the individual or the individual's spouse. Nearly all trusts, even irrevocable burial trusts, trusts deemed irrevocable under state law and trusts with specific exculpatory clauses exempting the trust from parts of the Social Security Act, are covered by this provision and the entire value of the corpora of these trusts is counted as a resource. While most irrevocable burial trusts are not excluded from the SSI resource rules, the value of the corpora of these trusts is still used to reduce the amount of the burial expense exclusion. A Plan for Achieving Self-Support (PASS) is an individual plan for employment designed by an SSI beneficiary. An SSI beneficiary designs his or her own PASS, usually with the assistance of a state Vocational Rehabilitation agency, disability service organization or Ticket to Work Employment Network. The plan must be submitted in writing to the SSA and must be approved by a special network of SSA employees called the PASS Cadre. A PASS must include a specific goal for employment, such as a specific job type desired or a plan for setting up a small business. In addition, a PASS must include a time line for achieving the employment goal. The PASS must also include a list of any goods, such as assistive devices or job-specific tools, or services, such as schooling, that will be needed by the beneficiary to achieve his or her goal and must include a time line for the use of these goods or services and their cost. Resources included in an approved PASS are not counted against the SSI resource limits. There is no limit to the amount of resources that can be excluded as part of a PASS and these resources can include money set aside to pay for elements of the PASS such as training or items purchased as part of the PASS such as assistive technology devices. If a beneficiary does not fulfill the terms of the PASS, then these resources can be counted and he or she may lose SSI eligibility and be required to reimburse the SSA for benefits paid after eligibility was lost. Individual Development Accounts (IDAs) are matched savings accounts that allow families and persons with low-incomes to set aside money for education, the purchase of a home, or the creation of a business. An individual may place money from his or her earnings into an IDA and have that amount of money matched by the state with funds from the state's Temporary Assistance for Needy Families (TANF) block grant. In addition, under the provisions of the Assets for Independence Act, P.L. 105 - 285 , nonprofit organizations, and state, local, or tribal governments may compete for grants to fund IDAs for low-income households. IDAs funded through this grant process are often referred to as Demonstration Project IDAs. Money saved in a TANF IDA or a Demonstration Project IDA, including the state contribution and any interest earned, is not counted as a resource for the purposes of determining SSI eligibility. There is no limit to the amount of money in an IDA that can be excluded from the SSI resource calculation. However, there are limits to the amounts states and other entities can contribute to IDAs. When a child SSI beneficiary is owed back SSI benefits of more than six months, his or her representative payee is required to place those benefits in a dedicated account at a financial institution. This dedicated account must be in the child's name and can not be invested in stocks, bonds, or other types of securities. Any money placed in the account and any interest earned on the account is the property of the child. The representative payee may use the money from the dedicated account for the medical care or education and training needs of the child. In addition, money from this account can be used for personal needs assistance, special equipment, housing modifications, or therapy for the child based on his or her disability or for other items and services for the child approved in advance by the SSA. Money from a dedicated account can not be used for the daily expenses, food, clothing, or shelter of the child. The representative payee is responsible for keeping records and receipts of all deposits and expenditures and is liable to the SSA for any misuse of money in a dedicated account. Money in a dedicated account for children is not counted as a resource for the purposes of determining the child's SSI eligibility or the SSI eligibility of the representative payee.

As a means tested program, Supplemental Security Income (SSI) places a limit on the assets or resources of its beneficiaries. However, there are four types of accounts that can be used by SSI beneficiaries for specific purposes without affecting their SSI eligibility. Money placed into burial accounts, money used as part of a Plan for Achieving Self-Support (PASS), money placed in Individual Development Accounts (IDAs), and money placed in dedicated accounts for children are not counted as resources for the purposes of determining SSI eligibility. These accounts can be used by SSI beneficiaries to build assets or plan for the future and represent an important part of the overall SSI program. This report provides an overview of these four types of accounts and outlines the cases when money placed into these accounts is exempt from the SSI resource limitations. This report will be updated to reflect any changes in this legislation or other relevant legislative activity.

H.R. 6 was introduced by the House Democratic Leadership to revise certain tax and royalty policies for oil and natural gas and use the resulting revenue to support a reserve for energy efficiency and renewable energy. The bill is one of several introduced on behalf of the Democratic Leadership in the House as part of its "100 hours" package of legislative initiatives conducted early in the 110 th Congress. Title I proposes to reduce certain oil and natural gas tax subsidies to create a revenue stream to support energy efficiency and renewable energy. Title II would modify certain aspects of royalty relief for offshore oil and natural gas development to create a second stream of revenue to support energy efficiency and renewable energy. Title III of H.R. 6 creates a budget procedure for the creation and use of a Strategic Energy Efficiency and Renewable Energy Reserve, under which additional spending for energy efficiency and renewable energy programs can be accommodated without violating enforcement procedures in the Congressional Budget Act of 1974, as amended. The stated purpose of the bill is to "reduce our nation's dependency on foreign oil" by investing in renewable energy and energy efficiency. Specifically, Section 301 (a) of the bill would make the revenue in the Reserve available to "offset the cost of subsequent legislation" that may be introduced "(1) to accelerate the use of domestic renewable energy resources and alternative fuels, (2) to promote the utilization of energy-efficient products and practices and conservation, and (3) to increase research, development, and deployment of clean renewable energy and efficiency technologies." The budget adjustment procedure for use of the Reserve is set out in Section 301 (b). The procedure is similar to reserve fund procedures included in annual budget resolutions. It would require the chairman of the House or Senate Budget Committee, as appropriate, to adjust certain spending levels in the budget resolution, and the committee spending allocations made thereunder, to accommodate a spending increase (beyond FY2007 levels) in a reported bill, an amendment thereto, or a conference report thereon that would address the three allowed uses of the Reserve noted above. The adjustments for increased spending for a fiscal year could not exceed the amount of increased receipts for that fiscal year, as estimated by the Congressional Budget Office, attributable to H.R. 6 . According to the Congressional Budget Office (CBO), the proposed repeal of selected tax incentives for oil and natural gas would make about $7.7 billion available over 10 years, 2008 through 2017. The proposed changes to the royalty system for oil and natural gas are estimated to generate an additional $6.3 billion. This would yield a combined total of $14 billion for the Reserve over a 10-year period. The CBO estimates show that the total annual revenue flow would vary annually over the 10-year period, ranging from a low of about $900 million to a high of about $1.8 billion per year. H.R. 6 came to the House floor for debate on January 18, 2007. In the floor debate, opponents argued that the reduction in oil and natural gas incentives would dampen production, cause job losses, and lead to higher prices for gasoline and other fuels. Opponents also complained that the proposal for the Reserve does not identify specific policies and programs that would receive funding. Proponents of the bill countered that record profits show that the oil and natural gas incentives were not needed. They also contended that the language that would create the Reserve would allow it to be used to support a variety of R&D, deployment, tax incentives, and other measures for renewables and energy efficiency, and that the specifics would evolve as legislative proposals come forth for to draw resources from the Reserve. The bill passed the House on January 18 by a vote of 264-163. In general, the budget resolution would revise the congressional budget for FY2007. It would also establish the budget for FY2008 and set budgetary levels for FY2009 through FY2012. In particular, the House resolution ( H.Con.Res. 99 ) would create a single deficit-neutral reserve fund for energy efficiency and renewable energy that is virtually identical to the reserve described in H.R. 6 . In contrast, the Senate resolution ( S.Con.Res. 21 ) would create three reserve funds, which identify more specific efficiency and renewables measures and would allow support for "responsible development" of oil and natural gas. On March 28, the House passed H.Con.Res. 99 by a vote of 216-210. For FY2007, it would allow for additional funding for energy (Function 270) above the President's request that "could be used for research, development, and deployment of renewable and alternative energy." Section 207 would create a deficit-neutral reserve fund that fulfills the purposes of H.R. 6 to "facilitate the development of conservation and energy efficiency technologies, clean domestic renewable energy resources, and alternative fuels that will reduce our reliance on foreign oil." On March 23, the Senate passed S.Con.Res. 21 , its version of the budget resolution. In parallel to the House resolution, Section 307 of S.Con.Res. 21 would create a deficit-neutral reserve fund that could be used for renewable energy, energy efficiency, and "responsible development" of oil and natural gas. In addition, Section 332 would create a deficit-neutral reserve fund for extension through 2015 of certain energy tax incentives, including the renewable energy electricity production tax credit (PTC), Clean Renewable Energy Bonds, and provisions for energy efficient buildings, products, and power plants. Further, Section 338 would create a deficit-neutral reserve fund for manufacturing initiatives that could include tax and research and development (R&D) measures that support alternative fuels, automotive and energy technologies, and the infrastructure to support those technologies.

H.R. 6 would use revenue from certain oil and natural gas policy revisions to create an Energy Efficiency and Renewables Reserve. The actual uses of the Reserve would be determined by ensuing legislation. A variety of tax, spending, or regulatory bills could draw funding from the Reserve to support liquid fuels or electricity policies. The House budget resolution (H.Con.Res. 99) would create a deficit-neutral reserve fund nearly identical to that proposed in H.R. 6. The Senate budget resolution (S.Con.Res. 21) would create three reserve funds with purposes related to those in H.R. 6. However, the Senate version has more specifics about efficiency and renewables measures, and it would allow reserve fund use for "responsible development" of oil and natural gas.

Individuals were first able to establish health savings accounts (HSAs) in 2004. These accounts allow people to pay for out-of-pocket medical expenses on a tax-advantaged basis. Individuals must have a qualifying high-deductible health plan (HDHP) to establish an HSA. After establishing an HSA, individuals (or employers) can contribute money to the account up to an annual maximum. Although commonly discussed in combination, HSAs should not be confused with Health Reimbursement Accounts (HRAs). Even though HRAs are also used to pay for unreimbursed medical expenses on a tax-advantaged basis, only employers may establish and contribute to an HRA. In addition, employees usually forfeit any remaining HRA funds at the termination of employment. Data covering enrollment and/or cost sharing during the first few years of HDHPs and their associated HSAs are now available from at least five separate sources. Only one source provides data on HSAs. Two sources provide data on HDHPs whose owners are eligible to open an HSA. The remaining two sources provide data that include individuals with HRAs. Before analysts can evaluate the effects of HSAs, they must decide which data source(s) to use. This primer provides basic guidance in that direction. The primer also provides the most recent data available from each source on enrollment, premiums, and deductible. Table 1 identifies the five data sources. The various data sources include two separate surveys of firms, a survey of individuals, data on all policies reported to an association, and a sample of IRS tax returns. The data sources are listed in alphabetical order. Which data source to use depends primarily on the question being asked. If the policy question truly requires information on HSAs—that is, the actual accounts rather than the associated HDHPs—then only the IRS data are suitable. The IRS data, which are broken down by tax reporting units, provide the total number of tax deductions taken and the aggregate value of the deductions. Two disadvantages of the IRS data are a total lack of information on the associated HDHPs and that the data are released well after the other data sources. Two sources combine data on HSA-eligible HDHPs and HRAs. These data can be used if separate analyses of HSAs or HRAs are not necessary. The Employee Benefit Research Institute (EBRI) provides enrollment estimates for privately insured individuals aged 21 to 64 with either an HRA or an HSA-eligible HDHP, while Mercer, a human resources consulting firm, provides enrollment estimates for account holders who are adults working in firms with at least 10 employees with either an HRA or an HSA-eligible HDHP. The EBRI data are based on a survey of individuals and contain information on the workers' ages, incomes, health status, and opinions of their health plan options. The Mercer survey is of firms and contains information on firm size. Choosing between these two data sources comes down to a choice between an individual-level analysis (EBRI) or a firm-level analysis (Mercer). Finally, two additional data sources provide information on HSA-qualified HDHPs. The data from America's Health Insurance Plans (AHIP) are obtained from insurance plans and measure all covered lives in the plans. Both individual and group plans are analyzed. The data form virtually a census of such policies among AHIP member companies. Thus, the AHIP data are based on a large number of enrollees in high-deductible health plans. Along with the average premiums and deductibles, information on enrollees' age and state of residence is also available. The Kaiser Family Foundation/Health Research and Education Trust (KFF/HRET) survey is of firms with at least three employees. Table 2 presents the most recent available data on enrollment. Four of the sources contain data on enrollment. The enrollment estimates differ greatly. These differences occur because each source measures a unique concept. AHIP reports that 10,009,000 individuals (including children) were covered by an HSA-eligible HDHP, and EBRI reports that 11,200,000 individuals between 21 and 64 were enrolled in either an HSA-eligible HDHP or an HRA in 2009. Mercer reports that 9% of all covered employees (in firms with at least 10 employees) have either an HSA-eligible HDHP or HRA, also in 2009. The IRS data do not measure enrollment but state that 810,729 tax returns claimed an HSA deduction in 2008. Although the various enrollment measures are not directly comparable to each other because they represent different concepts, the number of individuals who claim deductions for HSA contributions in 2008 is the smallest number. This is as expected for two reasons: (1) the number of HSAs has been growing over the 2008 to 2010 period, and (2) not all individuals contribute money to the HSA—and of those who do, not all claim an HSA deduction. AHIP provides the most complete information on premiums and deductibles; the average values are available for the small group and large group markets, and for three age groups in the individual market. No other data source provides breakdowns for more than one of these markets. In all cases, values for individual (and not family) insurance plans are reported in Table 2 . In general, individuals in small group markets are more costly to insure because the risk of major illness is spread across fewer individuals and because there are fewer economies of scale. Small group market deductibles should therefore be higher than large group market deductibles, assuming benefits and other policy characteristics are comparable across group size. The AHIP data display the expected pattern for HSA-eligible HDHPs, although the difference is not particularly large. The average deductible for small group policies is $2,329, and the average deducible for a large group policy is $2,203. HSAs have been available since 2004, and at least five data sources can be used to uncover some basic facts about the recent experience. Nevertheless, the data sources differ in the insurance markets analyzed; whether the information covers HSAs, HSA-eligible HDHPs, or HSA-eligible HDHPs and HRAs; and whether the information is provided by employers, insurance companies, or individuals. Great caution should be exercised in any attempt to combine data from these different sources. A more fruitful strategy would be to decide on a specific question and use only the source which best answers that question.

Individuals began establishing health savings accounts (HSAs) in 2004. These savings accounts are generally used to pay for unreimbursed medical expenses on a tax-advantaged basis. Any unspent money accrues to the individual. To open an HSA, the individual must enroll in a qualifying high-deductible health plan (HDHP). HSAs are tax-advantaged and provide some incentives for people to monitor, and perhaps reduce, their expenditures on health care. Data covering enrollment and/or cost sharing during the first few years of HDHPs and their associated HSAs are now available from at least five separate sources. This primer provides information on the data sources, together with the most recent data available from each source on enrollment, premiums and deductibles. Only one source, the Internal Revenue Service, provides data on HSAs. These data count the number of tax filing units that took a deduction for the HSA on their tax returns. Two sources provide data on HDHPs whose owners are eligible to open an HSA. One of these data sources, from the American Health Insurance Plans, is a census of virtually all lives covered by a HSA-eligible HDHP. The remaining two sources provide data that includes individuals with another type of health-related savings account (the Health Reimbursement Account). In addition to differing by the type of insurance plan covered, the data sources differ in the insurance markets analyzed, and whether the information is provided by employers, insurance companies, or individuals. Great caution should be exercised in any attempt to combine data from these different sources. A more fruitful strategy would be to decide on a specific question and use only the source which best answers that question.

A main goal of the bill is improving the management of service acquisitions. There is good reason for this. Over the past decade, federal agencies have substantially increased their purchases of services, particularly for information technology and professional, administrative, and management support. In fiscal year 2001 alone, the federal government acquired about $109 billion in services. This money, however, is not always well-spent. Our work, as well as the work of other oversight agencies, continues to find that millions of service contract dollars are at risk at defense and civilian agencies because acquisitions are poorly planned, not adequately competed, or poorly managed. In view of these problems, we examined how leading companies changed their approach to acquiring services. The companies we studied found themselves in a situation several years ago similar to the one that federal agencies are in today. They were spending a substantial amount of money on services—ranging from routine maintenance, to advertising, to information management—but did not have a good grasp of how much was being spent and where these dollars were going. Moreover, they were not effectively coordinating purchases, and they lacked tools to make sure that they were getting the best overall value. The companies we studied were able to turn this situation around by adopting a more strategic perspective to service spending; that is, each company focused more on what was good for the company as a whole rather than just individual business units, and each began making decisions based on enhanced knowledge about service spending. The specific activities they undertook ranged from developing a better picture of what they were spending on services, to taking an enterprisewide approach to acquiring services, to developing new ways of doing business. Figure 1 highlights key elements of the strategic approach. Specifically, the companies we visited analyzed their spending on services to answer basic questions about how much was being spent and where the dollars were going. In doing so, they realized that they were buying similar services from numerous providers, often at greatly varying prices. The companies used this data to rationalize their supplier base, or in other words, to determine the right number of suppliers that met their needs. Hasbro’s spend analysis, for example, revealed that it had 17 providers of temporary administrative, clerical, and light industrial personnel for 7 locations. The company also found that it had inconsistent policies and processes, multiple contact points, and limited performance measures. Information was not being shared across locations. The companies we studied changed how they acquired services in significant ways. Each elevated or expanded the role of the company’s procurement organization; designated “commodity” managers to oversee key services; and/or made extensive use of cross-functional teams to help identify their service needs, conduct market research, evaluate and select providers, and manage performance. These changes transformed the role of purchasing units from one focused on mission support to one that was strategically important to the company’s bottom line. For example, Dun & Bradstreet officials told us that, with the support of senior corporate management, their procurement function now exercises far more control and responsibility over their services and that it acts more in an advisory capacity to business units rather than just being relied on for negotiating expertise. Bringing about these new ways of doing business was challenging. For example, some companies spent months piecing together data from various financial management information systems and examining individual purchase orders just to get a rough idea of what they were spending on services. Other companies found that establishing new procurement processes met with resistance from individual business units reluctant to share decision-making responsibility and involved staff that traditionally did not communicate with each other. To overcome these particular challenges, the companies found they needed to have sustained commitment from their senior leadership—first, to provide the initial impetus to change and second, to keep up the momentum. Since service acquisitions were largely viewed as a mission support activity and peripheral to the bottom line, such commitment needed to be intense and accompanied by clear communication on the rationale, goals, and expected results from the reengineering efforts. Moreover, to help sustain management attention, the companies implemented performance measures to help them gauge whether reengineering efforts were really working. For example, ExxonMobil employed an extensive system to measure performance of its procurement function, which included metrics on the procurement organization’s progress in meeting financial, customer satisfaction, and business operation objectives; compliance with best practices; and more detailed metrics to assess the performance of local purchasing units. Why should these particular practices matter in looking how to reform service acquisition in the federal government? Taking a strategic approach clearly paid off. Companies were able to negotiate lower rates and better match their business managers’ needs with potential providers of services. One official estimated that his company saved more than $210 million over the past 5 years pursuing more strategic avenues to purchasing information technology services, while another estimates his company typically achieved savings of 15 percent or more on efforts that were undertaken using the new processes. The SARA bill touches on some aspects important to the approach followed by the leading companies. First, the proposed bill also encourages greater use of performance-based contracting. Performance- based service contracting is a process where the contracting agency specifies the outcome or result it desires and leaves it to the vendor to decide how best to achieve the desired outcome. Historically, the government has not widely used this strategy, but it is beginning to move in that direction in an effort to attract leading commercial companies to doing business with the government, gain greater access to technological innovations, and better ensure contractor performance. Second, the bill would create a chief acquisition officer within each agency. We support the concept of a chief acquisition officer. Our discussions with a number of officials from private sector companies about how they buy services indicate that a procurement executive or a chief acquisition officer plays a critical role in changing an organization’s culture and practices. The bill, however, differs from the approach taken by leading companies in terms of the scope and the decision-making authority of this position. Specifically, at the leading companies, these officials were corporate executives who had authority to influence decisions on acquisitions; implement needed structural, process, or role changes; and provide the necessary clout to obtain initial buy-in and acceptance of reengineering efforts. Under SARA, it is not clear that the chief acquisition officer would have comparable responsibility and authority. In addition to our work on best service acquisition practices, we are performing a number of evaluations related to specific proposals in the Services Acquisition Reform Act, including those on (1) acquisition workforce, (2) performance-based contracting, and (3) share-in-savings contracting. I would like to highlight what this work entails and how it can be of use to the subcommittee as it moves forward on the bill. The proposed bill contains several provisions to address the challenges being faced in the acquisition workforce. Procurement reforms and technological changes have placed unprecedented demands on the acquisition workforce. Contracting personnel are now expected to have a much greater knowledge of market conditions, industry trends, and technical details of the commodities and services they procure. We believe it is essential for agencies to define the future capabilities needed by the workforce and to contrast these needs with where the workforce is today. Doing so will provide a solid basis for evaluating whether different management tools are needed to meet the needs of the future workforce. Specifically, agencies could improve the capacity of the acquisition workforce by focusing on four key areas: Requirements—assessing the knowledge and skills needed to effectively perform operations to support agency mission and goals. Inventory—determining the knowledge and skills of current staff so that gaps in needed capabilities can be identified. Workforce strategies and plans—developing strategies and implementing plans for hiring, training, and professional development to fill the gap between requirements and current staffing. Progress evaluation—evaluating progress made in improving human capital capability and using the results of these evaluations to continuously improve the organization’s human capital strategies. In our current work for this and other committees, we are examining efforts to assess and address the needs of the future acquisition workforce. Specifically, we are looking at (1) the adequacy of agency training requirements for the acquisition workforce and agency practices for determining the level of funding needed for training, (2) selected federal agencies’ strategic planning efforts to manage and improve the capacity of the acquisition workforce, and (3) strategies being used to ensure that the acquisition workforce is prepared to meet the new challenges for acquiring services. As noted earlier, the proposed bill is promoting greater use of performance-based contracting. The work we are conducting now for this subcommittee should be particularly useful in determining the extent to which performance-based contracting is taking hold and whether there are governmentwide mechanisms that can be used to encourage greater use of it. Our work to date shows that for fiscal year 2001, about 23 percent of eligible service contracts were reported to be performance-based. This number is in line with a 20-percent goal set by the Office of Management and Budget. However, our work shows that there are inconsistencies in the interpretation of the definition of a performance-based contract. Moreover, demonstrating either monetary savings or efficiency gains will be challenging. We look forward to sharing the results of our review with the subcommittee by August of this year. The proposed bill focuses specifically on promoting greater use of one particular form of performance-based contract: share-in-savings. Basically, in share-in-savings contracting, a contractor funds a project up front in return for a percentage of the savings that are actually realized by an agency. Almost 6 years after the Clinger-Cohen Act called for the creation of pilot programs to test the share-in-savings concept in federal information technology contracts, the government has not identified many suitable candidates for use of this innovative technique. In large part, this is because use of this tool requires solid baseline data about the existing cost of an activity and a reliable method for measuring whether success has been achieved. Gathering reliable baseline data can be difficult. The work we are conducting in this area will identify examples of best practices using the share-in-savings contracting method found in the commercial sector and assess how these practices can be effectively applied in the federal government. We are specifically asking commercial companies why they chose this tool as a means to help achieve their business goals and what their experiences have been. One particular form of share-in-savings that has emerged in our discussions is gain sharing. Under this approach, a contractor does not assume all of the risk, rather it will reduce its normal fees in return for a percentage of increased earnings or savings that result from the contractor’s work. The idea is to develop a “win-win” arrangement, which jointly encourages the contractor and the client to achieve sustainable business results. I would like to share initial concerns we have with some particular provisions of SARA based on our previous work and experiences. First, section 221 of SARA would amend the Office of Federal Procurement Policy Act to increase the micropurchase threshold from $2,500 to $25,000. The governmentwide commercial purchase card is the preferred method for making micropurchases and is widely used. We have not comprehensively examined the use of purchase cards across the federal government. However, our reviews at selected agencies, including two Navy units, have found weak internal controls, which have left agencies vulnerable to a variety of improper purchases. We are concerned, therefore, that raising the micropurchase threshold may not be advisable until problems with controls and abuses are addressed and resolved. Second, section 223 of SARA would strengthen the process under which agencies decide challenges to their procurement decisions by imposing a statutory stay of contract award or performance pending resolution of any bid protest. The bill would require an agency to issue a decision on a bid protest within 10 business days. We support prompt resolution of protests and believe the proposed bill may help accomplish this. We are concerned, however, that the 10-day time limit would be too brief in many cases to permit meaningful consideration of a protester’s complaints, especially when the protest involves any degree of complexity. Third, section 211 of the proposed bill would authorize service contractors to submit invoices for payment more frequently—biweekly instead of monthly. Although this change would have a positive effect on service contractors’ cash flow, it could increase the cost of doing business for the government. Additionally, this change may increase the risk of erroneous payments—a significant problem across the government—as it could increase the volume of invoices and would provide agencies with less time to process and review them. As such, we believe further study is warranted on this provision. Lastly, the bill also makes a number of significant changes to commercial items, including one, section 404, that would designate as a commercial item any product or service sold by a commercial entity. Although we have not fully assessed the possible impact of the proposed change, we are concerned that the provision would allow for products or services that had never been sold or offered for sale in the commercial marketplace to be considered a commercial item. In such cases, the government may not be able to rely on the assurances of the marketplace in terms of the quality and pricing of the product or service.

The Service Acquisition Reform Act of 2002 seeks to strengthen the acquisition workforce by moving toward a performance-based contracting environment and improving service acquisitions management. During the past decade, federal agencies have substantially increased their purchases of services, particularly for information technology and professional, administrative, and management support. In fiscal year 2001 alone, the federal government acquired $109 billion in services. This money, however, is not always well-spent. GAO continues to find that defense and civilian acquisitions are poorly planned, not adequately completed, and poorly managed. Some leading companies have changed their approach to acquiring services after finding themselves spending a lot of money on services without knowing how much was being spent and where these dollars were going. GAO found that these companies were able to turn this situation around by adopting a more strategic perspective to service spending. Each company focused more on what was good for the company as a whole rather than just individual business units, and each began making decisions using enhanced knowledge about service spending. The companies analyzed their spending services to answer basic questions about how much was being spent and where the money was going. In doing so, they realized that they were buying similar services from many providers, often at different prices. The companies used this data to determine the right number of suppliers that met their needs.

Under the Patient Protection and Affordable Care Act ( P.L. 111-148 , ACA, as amended), a number of provisions directly affect access to health insurance coverage. Hereafter, "ACA" will refer to ACA, as amended. Most of the insurance reforms in ACA amend Title XXVII of the Public Health Service Act (PHSA, 42 U.S.C. 300gg et seq.). Title XXVII includes requirements on health insurance coverage for both the group and nongroup (individual) markets, enforcement applicable to such requirements, relevant definitions, and other provisions. This report provides a description of two of the provisions in ACA that are targeted toward younger individuals, for plan years beginning on or after s ix months from the date of enactment (i.e., the plan year beginning on or after September 23, 2010). ACA prohibits coverage exclusions for children with preexisting health conditions who are under age 19, and the law also requires plans to continue to make dependent coverage available to children under age 26. This report includes a description of the law and relevant information about the implementation of these two provisions. ACA prohibits coverage exclusions for children with preexisting health conditions who are under age 19, effective for plan years beginning on or after September 23, 2010. In other words, health plans may not exclude benefits based on health conditions for qualifying children. This provision applies to all grandfathered and new group plans (including self-insured plans ) and all new individual plans. A strict interpretation of the statutory language appears to separate the guarantee for the issuance of a health insurance policy from the prohibition against coverage exclusions for preexisting condition s once a policy has been issued. Such an interpretation would mean that children could be denied the offer of coverage altogether until 2014, but that if they are offered coverage, they would have access to all covered benefits to treat their health conditions for plan years beginning on or after September 23, 2010. However, the law gives the Secretary of Health and Human Services ("Secretary") wide latitude with respect to implementation of the insurance reforms and other provisions. In multiple instances, the law specifies that the Secretary will promulgate regulations to implement various provisions affecting private health coverage. In addition, the inclusion of the insurance reforms under Title XXVII of PHSA indicates the intent for the Secretary to exercise broad rulemaking and enforcement authority. On March 29, 2010, Secretary Sebelius stated in a letter to the President of America's Health Insurance Plans that she planned to issue regulations to confirm that beginning in September, 2010: •    Children with pre-existing conditions may not be denied access to their parents' health insurance plan; •    Insurance companies will no longer be allowed to insure a child, but exclude treatments for that child's pre-existing condition. On June 28, 2010, the Departments of Health and Human Services, Labor, and Treasury ("Departments") issued joint interim final rules in the Federal Register , which include rules for coverage for preexisting conditions. In the preamble of the regulation, the Departments state that this provision "protects individuals under age 19 with a preexisting condition from being denied coverage under a plan or health insurance coverage (through denial of enrollment or denial of specific benefits) based on the preexisting condition." The regulation defines preexisting conditions exclusion as "a limitation or exclusion of benefits (including a denial of coverage) based on the fact that the condition was present before the effective date of coverage (or if coverage is denied, the date of the denial)." In other words, the Departments have broadly defined preexisting condition exclusions to include the outright denial of coverage. On July 27, 2010, HHS posted Q&As to provide further clarification about implementation of this provision. HHS stated that "issuers in the individual market may restrict enrollment of children under 19, whether in family or individual coverage, to specific open enrollment periods if allowed under State law." Issuers have discretion regarding the number and duration of open enrollment periods, unless such conditions are specified under state law. If a state imposes open enrollment requirements on issuers in the individual market, such requirements are not preempted by federal statute or regulations. The interim final rules for coverage of preexisting health conditions include analysis of the potential impact of such rules on children with preexisting conditions. Using data from an existing health insurance survey, the Departments estimated that over 19 million children potentially had a preexisting condition in 2010. Most of these children had coverage through the private market (mainly provided through a parent's employer) or had public coverage. The Departments estimated that 540,000 children with preexisting health conditions were left uninsured. Assuming that a parent's insurance status would be a fundamental factor in the likelihood that an uninsured child with preexisting conditions would gain coverage as a result of the regulation, the Departments analyzed the number of such children (540,000) by the parents' insurance status: has employer-provided coverage, was offered employer-provided coverage, has coverage through the individual health insurance market, does not have private insurance, or there is no parent. Half of uninsured children with preexisting conditions (270,000) had a parent who did not have private coverage. Of the remaining half, most had a parent who was offered or had employer-provided coverage (see Table 1 ). The Departments researched the literature on take-up rates (i.e., the share of individuals with access to health insurance who end up obtaining coverage) to develop estimates on the number of children with preexisting conditions who could gain coverage under the regulation. In developing these estimates, the Departments acknowledged "substantial uncertainty," but, nonetheless, assumed that 50 percent of uninsured children whose parents have individual coverage will be newly insured, 15 percent of uninsured children whose parents are uninsured will be newly insured, and that very few children whose parents have ESI [employer-sponsored insurance], are offered ESI, or who do not live with a parent will become covered as a result of these interim final regulations. These take-up rates formed the mid-range estimates of the number of uninsured children with preexisting conditions who will gain coverage. As shown in Table 2 , of the 51,000 children who could gain coverage under the mid-range estimates, most would be enrolled in the individual health insurance market (45,000). Given the uncertainty regarding take-up rates, the Departments also developed high-end and low-end estimates. The requirement relating to coverage of children under age 26 will also take effect for the plan years beginning on or after September 23, 2010. The statute requires that if a plan provides for dependent coverage of children, the plan must make such coverage available for a child under age 26. Plans that offer dependent coverage must continue to make that offer available until the adult child turns 26 years of age. As an example, an adult child who is 26 years and 1 month old would no longer be required to be covered. Plans that offer dependent coverage must make it available for both married and unmarried children under age 26, but not for the children's children. The requirement affects individuals enrolled in group and individual health plans, including self-insured plans. With one exception, these provisions apply to grandfathered plans. Prior to 2014, grandfathered group health plans are not required to make dependent coverage available to adult children who can enroll in an eligible employer-sponsored health plan based on their own employment. (However, a plan may make dependent coverage available to such adult children if it wishes.) The statute does not require plans to offer dependent coverage in the first place, so that if a plan chooses not to provide such coverage, nothing in this statute would require them to do so. The age requirement affects only plans that choose to offer dependent coverage. On May 13, 2010, the Departments of Health and Human Services, Labor, and Treasury ("Departments") issued joint interim final rules in the Federal Register on dependent coverage under ACA. The rules clarify that "with respect to a child who has not attained age 26, a plan or issuer may not define dependent for purposes of eligibility for dependent coverage of children other than in terms of a relationship between a child and the participant". Thus, for example, a plan or issuer may not deny or restrict coverage for a child who has not attained age 26 based on the presence or absence of the child's financial dependency (upon the participant or any other person), residency with the participant or with any other person, student status, employment, or any combination of those factors." The federal requirements are a floor. That is, they provide a minimum requirement. States that already impose requirements beyond attaining age 26 may continue to do so. For example, New Jersey requires dependent coverage to be available up to the age of 31, as long as the adult child is unmarried and has no dependents. To the extent that the state law is more restrictive than the federal law (e.g., New Jersey's requires that the individual not be married), the federal statute would apply, therefore covering the married adult child under the age of 26. As part of the interim final rules for dependent coverage of children under age 26, the Departments of the Treasury, Labor, and Health and Human Services estimated the impact of the regulation on the health insurance coverage for this group. In order to estimate the number of individuals potentially affected, they examined several criteria including whether or not the parents of these adult children had existing employer-sponsored insurance (ESI) or individual insurance, and whether the adult children themselves were insured. Using this information, they estimated the take-up rates, that is, the number of individuals who are likely to accept coverage if offered it. The Departments estimated that in 2010 there were approximately 29.5 million individuals between the ages of 19 and 25. Of those, 9.3 million such individuals were estimated to have no access to dependent coverage, because their parents did not have ESI or non-group coverage. That left 20.2 million adult children whose parents were covered either by ESI or by non-group insurance. The 20.2 million are further broken down, as follows: 3.42 million were uninsured, 2.42 million were covered by their own non-group coverage, 5.55 million were covered by their own ESI, 5.73 million were already on their parent's or spouse's ESI, and 3.01 million had other coverage, such as Medicaid. The Departments assumed that the initial group of potential individuals for dependent coverage would only include those who were either uninsured or those who were covered by individual insurance (3.44 million + 2.42 million, for a total of 5.86 million). Of the 5.86 million, the Departments estimated that 3.49 million would choose not to enroll in their parent's plan, because (1) they are already allowed to enroll in their parent's plan under their state's existing laws, but have chosen not to do so; (2) they have their own offer of ESI and their parent's plan will not extend coverage to them; or (3) their parent's coverage in the nongroup market is underwritten (based on health status and other factors), so that there is no financial benefit for the adult child to enroll in the parent's plan. Subtracting out these 3.49 million individuals leaves a potential pool of 2.37 million. However, as they noted in the regulation, it is difficult to estimate how many of these 2.37 million individuals would likely take up the insurance. Recognizing the uncertainly in the estimates of take-up rates, the Departments produced a range of assumptions, shown in Table 3 . The most current national data on the uninsured from the Census Bureau showed a decline in the uninsured rate for young adults. For 19- to 25-year-olds, the rate of uninsurance declined from 31.4% in 2009 to 29.7% in 2010. Not only was this a statistically significant change from one year to the next, but young adults were the only adult age group that experienced a decline in their uninsured rate. All other adult age groups experienced slight increases in their uninsured rates. Another national data source also found a decrease in the uninsured rate for young adults, from 2010 to the first half of 2011. Some observers have attributed the uninsured rate decline to ACA's coverage provisions, specifically the dependent coverage requirements.

Under the Patient Protection and Affordable Care Act (P.L. 111-148, ACA, as amended), a number of provisions directly affect access to health insurance coverage. This report provides a description of two of the provisions in ACA that are targeted toward younger individuals, for plan years beginning on or after six months from the date of enactment (i.e., the plan year beginning on or after September 23, 2010). ACA prohibits coverage exclusions for children with preexisting health conditions who are under age 19, and the law also requires plans to continue to make dependent coverage available to children under age 26.

Title I-A of the Elementary and Secondary Education Act (ESEA) authorizes the largest grant program in the ESEA, funded at $14.9 billion in FY2016. It is designed to provide supplementary educational and related services to low-achieving and other students attending pre-kindergarten through grade 12 schools with relatively high concentrations of students from low-income families. The U.S. Department of Education (ED) determines Title I-A grants to local educational agencies (LEAs) based on four separate funding formulas: Basic Grants, Concentration Grants, Targeted Grants, and Education Finance Incentive Grants (EFIG). After calculating grants, ED provides each state with information on the grants calculated for LEAs in it. The state then makes specific adjustments to the grant amounts, including reserving funds for administration and school improvement and determining grants for charter schools that are their own LEAs. After making adjustments to the grant amounts calculated by ED, the state then provides funds to the LEAs. The LEAs, in turn, distribute funds to schools, often based on the percentage of children in each school eligible for free or reduced-price lunch. The ESEA was comprehensively reauthorized by the Every Student Succeeds Act (ESSA; P.L. 114-95 ) on December 10, 2015. The ESSA made few changes to the Title I-A formulas. Changes to the Title I-A formulas under the ESSA will take effect beginning in FY2017. This report provides a general overview of the key components of each of the four formulas used to allocate Title I-A funds and changes to these factors made by the ESSA. Table 1 provides a summary of these components or "factors." Under Title I-A, funds are allocated to LEAs via state educational agencies (SEAs) using four different allocation formulas specified in statute: Basic Grants, Concentration Grants, Targeted Grants, and Education Finance Incentive Grants (EFIG). Annual appropriations bills specify portions of each year's Title I-A appropriation to be allocated to LEAs and states under each of these formulas. In FY2016, about 43% of Title I-A appropriations will be allocated through the Basic Grants formula, 9% through the Concentration Grants formula, and 24% through each of the Targeted Grants and EFIG formulas. Once funds reach LEAs, the amounts allocated under the four formulas are combined and used jointly. For each formula, a maximum grant is calculated by multiplying a "formula child count," consisting primarily of estimated numbers of school-age children in poor families, by an "expenditure factor" based on state average per pupil expenditures for public K-12 education. In some formulas, additional factors are multiplied by the formula child count and expenditure factor. These maximum grants are then reduced to equal the level of available appropriations for each formula, taking into account a variety of state and LEA minimum grant and "hold harmless" provisions. In general, LEAs must have a minimum number of formula children and/or a minimum formula child rate to be eligible to receive a grant under a specific Title I-A formula. Some LEAs may qualify for a grant under only one formula, while other LEAs may be eligible to receive grants under multiple formulas. As discussed previously, under Title I-A funds are allocated to LEAs via SEAs under four different formulas. Under the Basic, Concentration, and Targeted Grant formulas, funds are initially calculated at the LEA level, and state total grants are the total of allocations for LEAs in the state, adjusted to apply state minimum grant provisions. Under the EFIG formula, allocations are first calculated for each state overall, with state totals subsequently suballocated to LEAs using a different formula. That is, under EFIG a state grant amount is affected by the formula child count within the state relative to the formula child count in other states. Subsequently, LEAs within each state compete with each other for grants, and these grants are determined, in part, based on how an LEA's formula child count compares to that of other LEAs in the same state. Under the other three Title I-A formulas, grants are initially determined at the LEA level, so each LEA competes for funding against all other LEAs nationwide. Although the allocation formulas have several distinctive elements, the primary factors used in all four are a formula child count and an expenditure factor. The formula child population used to determine Title I-A grants for the 50 states, the District of Columbia, and Puerto Rico consists of children ages 5 to 17 (1) in poor families, according to estimates for LEAs from the Census Bureau's Small Area Income and Poverty Estimates (SAIPE) program; (2) in institutions for neglected or delinquent children or in foster homes; and (3) in families receiving Temporary Assistance for Needy Families (TANF) payments above the poverty income level for a family of four (hereinafter referred to as TANF children). Children in poor families account for about 97% of the total formula child count. Each element of the formula child count is updated annually. The formula child rate is the percentage of children ages 5 to 17 residing in a given LEA who are formula children. It is calculated by dividing the number of formula children in an LEA by the number of children ages 5 to 17 who reside in the LEA. The latter child count is determined based on SAIPE data. The expenditure factor for all four Title I-A formulas is equal to state average per pupil expenditure (APPE) for public K-12 education, subject to a minimum and a maximum percentage of the national average, further multiplied by 0.40. State APPE is subject to a minimum of 80% and a maximum of 120% of the national APPE for Basic, Concentration, and Targeted Grants. That is, if a state's APPE is less than 80% of the national APPE, the state's APPE is automatically raised to 80% of the national APPE. If a state's APPE is more than 120% of the national APPE, the state's APPE is automatically reduced to 120% of the national APPE. For EFIG, the minimum and maximum thresholds for state APPE relative to national APPE are 85% and 115%, respectively. After adjustments, should they be needed, a state's APPE is multiplied by 0.40 as specified in statute. Both the Targeted Grant and EFIG formulas include weighting schemes to increase aid to LEAs with the highest concentrations of formula children. In general, children counted in the formulas are assigned weights on the basis of (1) each LEA's formula child rate (commonly referred to as percentage weighting) and (2) each LEA's number of formula children (commonly referred to as number weighting). Under both percentage weighting and number weighting, a weighted formula child count is produced and the higher of the two weighted counts is used to determine LEA grant amounts. As a result, the higher an LEA's formula child count or formula child rate is, the higher its grants per child counted in the formula will be. All four formulas contain hold harmless provisions to prevent large decreases in LEA grant amounts from year to year, assuming appropriations are sufficient to provide hold harmless amounts. Assuming appropriations are sufficient, a Title I-A hold harmless amount is the minimum percentage of an LEA's prior-year grant that the LEA will receive in the current year. Under all four formulas, LEAs with a relatively high percentage of formula children receive a higher hold harmless level. More specifically, the hold harmless rate under each formula is 85% of the previous-year grant if the LEA's percentage of formula children is less than 15%, 90% if the LEA's percentage of formula children is at or above 15% and less than 30%, and 95% if the LEA's percentage of formula children is at or above 30%. In order to benefit from the hold harmless provisions under each formula, an LEA must meet the eligibility requirements for the specific formula. The exception to this requirement is that LEAs that met the eligibility requirements to receive a Concentration Grant but fail to meet the requirements in a subsequent year will continue to receive a grant based on the hold harmless provisions for four additional years. All four formulas have state minimum grant provisions. Minimum grant amounts for each formula are calculated in part or wholly based on a percentage of the level of appropriations provided to each formula. This percentage is higher under the Targeted Grant and EFIG formulas than it is under the Basic and Concentration Grant formulas. The EFIG formula includes two factors used to determine state level grants that are not included in any of the other three formulas—the effort factor and the equity factor. The effort factor for each state is based on APPE for public K-12 education compared to personal income per capita (PCI) for each state compared to the nation as a whole. In general, the effort factor benefits states that have a relatively high level of spending on education relative to their PCI in their state. Similar to the expenditure factor, the effort factor is also bounded but with more narrow bounds of 0.95 and 1.05. These relatively narrow bounds minimize the influence of the effort factor in the determination of state grants. The effort factor is the same for all LEAs in a given state. The equity factor for each state is determined based on variations in APPE among the LEAs in the state. The application of the equity factor results in higher grants to states with less variation in APPE among their LEAs and lower grants to states with greater variation in APPE among their LEAs. That is, the equity factor favors states with more equitable APPE among their LEAs. In addition to determining state grant amounts, the equity factor is also used in the determination of LEA weighted student counts. Depending on a state's equity factor, one of three sets of weights is used in determining an LEA's weight formula child count. While the use of the equity factor in determining state grants rewards states where APPE among LEAs is more equitable, at the LEA level, higher weights are used in determining weighted student counts for LEAs in states where APPE among LEAs is less equitable. Within a state with more variation in APPE among its LEAs, this results in higher grants for LEAs with a relatively high number of formula children or a relatively high formula child rate relative to what would be provided if only a single set of weights was used. Conversely, the lower the variation in APPE among LEAs in a given state, the lower the weights used to determine weighted formula child counts. Thus, in a state with less variation in APPE among its LEAs, the use of the weights produces smaller differences in the weighted formula child counts of LEAs with a relatively high number of formula children or a relatively high formula child rate as compared with other LEAs in the state; thereby, lessening the differences in grant per formula child to each LEA in that state relative to grants that are provided to states in which APPE among LEAs is less equitable. Unlike other federal elementary and secondary education programs, most Title I-A funds are subsequently allocated to individual schools by formula, although LEAs retain substantial discretion to control the use of a significant share of Title I-A grants at a central district level. While there are several rules related to school selection, LEAs must generally rank their public schools by their percentages of students from low-income families, and serve them in rank order. All participating schools must generally have a percentage of children from low-income families that is higher than the LEA's average, or 35%, whichever of these two figures is lower, although LEAs have the option of setting school eligibility thresholds higher than the minimum in order to concentrate available funds on a smaller number of schools. The ESSA includes a requirement that all Title I-A appropriations not provided for the Basic Grants and Concentration Grant formulas be equally divided between the Targeted Grants and EFIG formulas. Appropriators have provided funding for the Title I-A formulas in this manner for the past several years at their discretion. Beginning in FY2017, the ESSA will increase the set asides made by ED for the Bureau of Indian Education (BIE) and the Outlying Areas and state set asides for school improvement. Before Title I-A grants are allocated to states and LEAs, ED sets aside funds for grants to the BIE and Outlying Areas. In FY2017, this set-aside will increase from 1.0% to 1.1% provided this does not reduce the total amount of funds available for state grants below the level of funding available in FY2016. As with the current allocation process ED will then allocate grants to states and provide each state with information on the grants calculated for LEAs in it. The state will then make specific adjustments to the grant amounts, including reserving funds for school improvement. Currently, there are two sources of ESEA funds for school improvement: (1) a reservation of 4% of the funds received by the state under Title I-A, and (2) the School Improvement Grants (SIG) program. While funded in FY2016, the ESSA eliminated the authorization for the SIG program. Beginning in FY2017, under the Title I-A program states will be required to reserve the greater of (1) 7% of their Title I-A funds or (2) the amount the state reserved under Title I-A for school improvement in FY2016 plus the amount the state received under the SIG program for school improvement. The ESSA also altered the grant allocation process for schools. As previously discussed, LEAs must generally rank their public schools by their percentages of students from low-income families, and serve them in rank order. This must be done without regard to grade span under current law for any eligible school attendance area in which the concentration of children from low-income families exceeds 75%. Below this point, an LEA can choose to serve schools in rank order at specific grade levels (e.g., only serve elementary schools in order of their percentages of children from low-income families). Beginning in FY2017, LEAs will have the option to serve elementary and middle schools with more than 75% of their children from low-income families and high schools with more than 50% of their children from low-income families before choosing to serve schools in rank order by specific grade levels.

The Elementary and Secondary Education Act (ESEA) was comprehensively reauthorized by the Every Student Succeeds Act (ESSA; P.L. 114-95) on December 10, 2015. The Title I-A program is the largest grant program authorized under the ESEA and is funded at $14.9 billion for FY2016. It is designed to provide supplementary educational and related services to low-achieving and other students attending pre-kindergarten through grade 12 schools with relatively high concentrations of students from low-income families. Under current law, the U.S. Department of Education (ED) determines Title I-A grants to local educational agencies (LEAs) based on four separate funding formulas: Basic Grants, Concentration Grants, Targeted Grants, and Education Finance Incentive Grants (EFIG). Annual appropriations bills specify portions of each year's Title I-A appropriation to be allocated to LEAs and states under each of these formulas. For each formula, a maximum grant is calculated by multiplying a "formula child count," consisting primarily of estimated numbers of school-age children in poor families, by an "expenditure factor" based on state average per pupil expenditures for public K-12 education. In some formulas, additional factors are multiplied by the formula child count and expenditure factor. These maximum grants are then reduced to equal the level of available appropriations for each formula, taking into account a variety of state and LEA minimum grant and "hold harmless" provisions. In general, LEAs must have a minimum number of formula children and/or a minimum formula child rate to be eligible to receive a grant under a specific Title I-A formula. Some LEAs may qualify for a grant under only one formula, while other LEAs may be eligible to receive grants under multiple formulas. This report provides a general overview of the key components of each of the formulas.

Section 706 of the Communications Act of 1934, as amended by 47 U.S.C. §606, authorizes the President, among other things, to address national security and emergency preparedness (NS/EP) telecommunications issues and assign federal department, agency, and entity NS/EP telecommunications responsibilities. On July 6, 2012, President Barack Obama issued an Executive Order 13618 to assign those NS/EP communications functions effective immediately. Generally, EO 13618 states that the federal government must have the ability to communicate at all times and under all circumstances. Specifically, the order outlines the federal government's need and responsibility to communicate during national security and emergency situations and crises and provides direction for such communications. The federal government uses numerous NS/EP communications systems and programs to effectively communicate during incidents and emergencies. Some of these systems and programs include the Government Emergency Telecommunications Service (GETS), Wireless Priority Service (WPS), and classified messaging related to the Continuity of Government Condition (COGCON). These systems and programs use both classified and nonclassified communications systems to assist the national leadership, and affected entities such as state and local governments, non-governmental organizations, the private sector, and the public, in communicating during emergencies and crises. These communications systems are both federally and privately owned and operated. The 2010 National Security Strategy , the primary federal government guidance on national security, reiterates the notion that reliable and secure telecommunication is necessary to effectively manage emergencies, and that the United States must prevent disruptions to critical communications. Following the enactment of the Communications Act of 1934, numerous Presidents have issued executive orders addressing NS/EP communications. For example, in 1962 President John F. Kennedy issued EO 10995 that assigned federal telecommunications management functions; in March 1978, President Jimmy Carter issued EO 12046 that transferred certain federal telecommunication functions; on September 13, 1982, President Ronald Reagan issued EO 12382 that established the National Security Telecommunications Advisory Committee; and President William Clinton issued EO 12919 on June 3, 1994, that addressed national security telecommunications related to national defense industry resources preparedness. EO 13618, however, changes federal NS/EP communications functions by dissolving the National Communications System (NCS), establishing an executive committee to oversee federal NS/EP communications functions, establishing a programs office within the Department of Homeland Security (DHS) to assist the executive committee, and assigning specific responsibilities to federal government entities. This report addresses EO 13618 salient provisions and provides a summary of EO 13618. Three sections of EO 13618 affect the federal government's NS/EP communications functions: Section 3 "NS/EP Communications Executive Committee," Section 4 "Executive Committee Joint Program Office," and Section 5 "Specific Department and Agency Responsibilities." These three sections direct federal department and agency actions. It appears as if DHS is assigned increased NS/EP communications functions. Specifically, EO 13618 affects DHS by dissolving NCS; creating a new committee, the NS/EP Communications Executive Committee and assigning DHS the responsibility of co-chairing that committee with DOD; establishing and supporting the Executive Committee Joint Program Office; and leading non-military federal department and agency NS/EP communications activities. These changes are described in the next section. EO 13618 changes the management of federal NS/EP communications functions and activities by dissolving NCS and placing NCS activities with the newly established NS/EP Communications Executive Committee. The NCS was responsible for coordinating the planning of NS/EP communications for the federal government under all circumstances, including crisis or emergency, attack, recovery and reconstitution. Arguably, the Committee replaces NCS's Committee of Principles (COP) and COP's Committee of Representatives, which were responsible for coordinating the federal government's NS/EP communications. It is possible, though not stated, that the Committee will participate in industry-government planning that NCS conducted with the National Security Telecommunications Advisory Committee because EO 13618 guidance (Section 3.3(g)) instructs the Committee to "enable industry input." Again, this executive order does not change existing NS/EP programs or their activities, however, it affects the management of these programs. The NS/EP Communications Executive Committee is the primary policy forum for addressing national NS/EP communications issues. It is composed of Assistant Secretary-level representatives. It is co-chaired by DHS and DOD and is responsible for advising the President on enhancing NS/EP communications survivability and resilience. The Committee is directed by EO 13618 to develop strategy which includes funding requirements and plans. The Committee is the primary federal entity responsible for NS/EP communications policy discussions. The Committee is similar to other interagency policy committees formulated and established under the National Security Council per PPD-1. DHS's National Communications System (NCS) was tasked with a similar mission as that which is assigned to the NS/EP Communications Executive Committee. In 1963, President John F. Kennedy established NCS following the Cuban Missile Crisis and the issues associated with the communications among the United States and the Soviet Union. In 1984, President Ronald Reagan broadened NCS NS/EP capabilities and responsibilities with the issuance of EO 12472. Following 9/11 and the enactment of the Homeland Security Act, NCS was transferred to DHS. On November 15, 2005, NCS was internally transferred to DHS's Directorate of Preparedness. EO 13618, however, dissolves NCS by revoking EO 12472. DHS states that Although many of the NCS programs will continue to support NS/EP communications, oversight of these programs now fall to the Department of Homeland Security's Office of Cybersecurity and Communications, part of the National Protection and Programs Directorate (NPPD). The activities and responsibilities of the Committee are supported by the Executive Committee Joint Program Office. EO 13618 requires DHS to establish an Executive Committee Joint Program Office (JPO). JPO is to support Committee activities. Even though DHS is to establish and administratively support JPO, the Committee, as a whole, is responsible for providing JPO personnel. DHS, however, is responsible for providing resources and funding to JPO. Arguably, JPO will assume some of the former NCS's day-to-day activities. JPO is specifically required to coordinate programs that support NS/EP missions, priorities, goals, and policy, which was the case for NCS. JPO is also required to support and convene governmental and non-governmental groups and meetings. Additionally, JPO is to coordinate activities and develop policies for senior (Committee) official review and approval. One might expect, though the executive order does not explicitly state, that the JPO would be managed, administered, and staffed in a similar manner as the Homeland Security Operations Center which is a different interagency entity that is managed, administered, and staffed by detailed personnel from participating federal departments and agencies. EO 13618 details federal department and agency responsibilities related to NS/EP communications functions. The executive order specifically identifies Departments of Defense (DOD), DHS, the Department of Commerce, the Administrator of General Services, the Director of National Intelligence, and the Federal Communications Commission responsibilities. DHS, however, is tasked with a significant portion of NS/EP communications responsibilities. DOD is tasked with a continuation of its responsibilities in oversight of the development, testing, implementation, and sustainment of NS/EP communications that directly affect the national security needs of the President, Vice President, and senior national leadership. In addition, DOD is now responsible for ensuring the security and survivability of this NS/EP communications. DOD is also newly tasked with providing the Committee technical support and provide, operate, and maintain communication services and facilities associated with the Intelligence Community consistent with EO 12333. DOD has always been responsible for these responsibilities, EO 13618 reiterates this assignment of responsibilities. DHS, like DOD, is tasked with overseeing the development, testing, implementation, and sustainment of NS/EP communications associated with non-DOD communications systems or responsibilities. This includes Continuity of Government (COG), and all levels of government emergency preparedness and response, non-DOD communications systems, and critical infrastructure protection networks. Similar to DOD, DHS is responsible for ensuring the security and survivability of NS/EP communications. DHS is to provide technical support to the Committee. As the lead federal agency, DHS is to receive, integrate, and disseminate NS/EP communications information to other federal, state, local, territorial, and tribal governments to establish a common operating picture and situational awareness. As stated earlier, DHS is to establish the JPO and serve as the lead federal agency for the prioritization restoration of NS/EP communications. Finally, within 60 days of the EO 13618 issuance, DHS is to submit a detailed plan to the President that describes DHS's organization and management structure for its NS/EP communications functions due to NCS's dissolution. The Commerce Secretary is responsible for providing advice and guidance to the Committee in identifying and using technical standards and metrics for enhancing NS/EP communications. Additionally, the Commerce Secretary is to develop and maintain radio frequencies as they relate to NS/EP communications. The GSA Administrator is to provide and maintain a common acquisition approach for federal NS/EP communications. The Director of National Intelligence (DNI) may issue policy directives and guidance deemed necessary to implement EO 13618. Finally, the Federal Communications Commission (FCC) is to continue its practice of licensing and regulating radio frequencies. Table 1 below provides more detailed information about the specific responsibilities. Generally, EO 13618 states that the federal government must have the ability to communicate at all times and under all circumstances. It assigns executive office responsibilities through Presidential Policy Directive 1 (PPD 1). It establishes the NS/EP Communications Executive Committee and the Executive Committee Joint Program Office. EO 13618 assigns specific and general federal department and agency responsibilities. Finally, it identifies previous executive orders that are amended and revoked. EO 13618 is a continuation of presidential authority assigned in the Communications Act of 1934, and modifies or revokes other executive orders related to federal NS/EP communications. As identified earlier in this report, EO 13618 changes federal national security and emergency preparedness communications functions by dissolving the National Communications System, establishing an executive committee to oversee federal national security and emergency preparedness communications functions, establishing a programs office within the Department of Homeland Security to assist the executive committee, and assigning specific responsibilities to federal government entities. Again, this executive order does not modify or end any NS/EP communications systems or programs, instead it assigns the management and administration of these systems and programs to specific federal departments, agencies, and entities.

In the event of a national security crisis or disaster, federal, state, local, and territorial government and private sector communications are important. National security and emergency preparedness communication systems include landline, wireless, broadcast and cable television, radio, public safety systems, satellite communications, and the Internet. For instance, federal national security and emergency preparedness communications programs include the Government Emergency Telecommunications Service, Wireless Priority Service, and classified messaging related to the Continuity of Government Condition. Reliable and secure telecommunications systems are necessary to effectively manage national security incidents and emergencies. On July 6, 2012, President Barrack Obama issued Executive Order (EO) 13618 which addresses the federal government's need and responsibility to communicate during national security and emergency situations and crises by assigning federal national security and emergency preparedness communications functions. EO 13618 is a continuation of older executive orders issued by other presidents and is related to the Communications Act of 1934 (47 U.S.C. §606). This executive order, however, changes federal national security and emergency preparedness communications functions by dissolving the National Communications System, establishing an executive committee to oversee federal national security and emergency preparedness communications functions, establishing a programs office within the Department of Homeland Security to assist the executive committee, and assigning specific responsibilities to federal government entities. This report provides a summary of EO 13618 provisions, and a brief discussion of its salient points.

The Coast Guard is a multimission, maritime military service within DHS. The Coast Guard’s responsibilities fall into two general categories—those related to homeland security missions, such as port security and vessel escorts, and those related to non-homeland security missions, such as search and rescue and polar ice operations. To carry out these responsibilities, the Coast Guard operates a number of vessels and aircraft and, through its Deepwater Program, is currently modernizing or replacing those assets. At the start of Deepwater in the late 1990s, the Coast Guard chose to use a system of systems acquisition strategy that was intended to replace the assets with a single, integrated package of aircraft, vessels, and communications systems. As the systems integrator, ICGS was responsible for designing, constructing, deploying, supporting, and integrating the assets. The decision to use a systems integrator for the Deepwater Program was driven in part because of the Coast Guard’s lack of expertise in managing and executing an acquisition of this magnitude. Under this approach, the Coast Guard provided the contractor with broad, overall performance specifications—such as the ability to interdict illegal immigrants—and ICGS determined the specifications for the Deepwater assets. According to Coast Guard officials, the ICGS proposal was submitted and priced as a package; that is, the Coast Guard bought the entire solution and could not reject any individual component. Deepwater assets are in various stages of the acquisition process. Some, such as the NSC and Maritime Patrol Aircraft, are in production. Others, such as the Fast Response Cutter, are in design, and still others, such as the Offshore Patrol Cutter, are in the early stages of requirements definition. Since the Commandant’s April 2007 announcement that the Coast Guard was taking over the lead role in systems integration from ICGS, the Coast Guard has undertaken several initiatives that have increased accountability for Deepwater outcomes within the Coast Guard and to DHS. The Coast Guard’s Blueprint for Acquisition Reform sets forth a number of objectives and specific tasks with the intent of improving acquisition processes and results. Its overarching goal is to enhance the Coast Guard’s mission execution through improved contracting and acquisition approaches. One key effort in this regard was the July 2007 consolidation of the Coast Guard’s acquisition responsibilities—including the Deepwater Program—into a single acquisition directorate. Previously, Deepwater assets were managed independently of other Coast Guard acquisitions within an insulated structure. The Coast Guard has also vested its government project managers with management and oversight responsibilities formerly held by ICGS. The Coast Guard is also now managing Deepwater under an asset-based approach, rather than as an overall system-of-systems as initially envisioned. This approach has resulted in increased government control and visibility. For example, cost and schedule information is now captured at the individual asset level, resulting in the ability to track and report cost breaches for assets. Under the prior structure, a cost breach was to be tracked at the overall Deepwater Program level, and the threshold was so high that a breach would have been triggered only by a catastrophic event. To manage Deepwater acquisitions at the asset level, the Coast Guard has begun to follow a disciplined project management process using the framework set forth in its Major Systems Acquisition Manual. This process requires documentation and approval of program activities at key points in a program’s life cycle. The process begins with identification of deficiencies in Coast Guard capabilities and then proceeds through a series of structured phases and decision points to identify requirements for performance, develop and select candidate systems that meet those requirements, demonstrate the feasibility of selected systems, and produce a functional capability. Previously, the Coast Guard authorized the Deepwater Program to deviate from the structured acquisition process, stating that the requirements of the process were not appropriate for the Deepwater system-of-systems approach. Instead, Deepwater Program reviews were required on a schedule-driven—as opposed to the current event-driven—basis. Further, leadership at DHS is now formally involved in reviewing and approving key acquisition decisions for Deepwater assets. We reported in June 2008 that DHS approval of Deepwater acquisition decisions as part of its investment review process was not required, as the department had deferred decisions on specific assets to the Coast Guard in 2003. We recommended that the Secretary of DHS direct the Under Secretary for Management to rescind the delegation of Deepwater acquisition decision authority. In September 2008, the Under Secretary took this step, so that Deepwater acquisitions are now subject to the department’s investment review process, which calls for executive decision making at key points in an investment’s life cycle. We also reported this past fall, however, that DHS had not effectively implemented or adhered to this investment review process; consequently, the department had not provided the oversight needed to identify and address cost, schedule, and performance problems in its major investments. Without the appropriate reviews, DHS loses the opportunity to identify and address cost, schedule, and performance problems and, thereby, minimize program risk. We reported that 14 of the department’s investments that lacked appropriate review experienced cost growth, schedule delays, and underperformance—some of which were substantial. Other programs within DHS have also experienced cost growth and schedule delays. For example, we reported in July 2008 that the Coast Guard’s Rescue 21 system was projected to experience cost increases of 184 percent and schedule delays of 5 years after rebaselining. DHS issued a new interim management directive on November 7, 2008, that addresses many of our findings and recommendations on the department’s major investments. If implemented as intended, the more disciplined acquisition and investment review process outlined in the directive will help ensure that the department’s largest acquisitions, including Deepwater, are effectively overseen and managed. While the decision to follow the Major Systems Acquisition Manual process for Deepwater assets is promising, the consequences of not following this acquisition approach in the past—when the contractor managed the overall acquisition—are now apparent for assets already in production, such as the NSC, and are likely to pose continued problems, such as increased costs. Because ICGS had determined the overall Deepwater solution, the Coast Guard had not ensured traceability from identification of mission needs to performance specifications for the Deepwater assets. In some cases it is already known that the ICGS solution does not meet Coast Guard needs, for example: The Coast Guard accepted the ICGS-proposed performance specifications for the long-range interceptor, a small boat intended to be launched from larger cutters such as the NSC, with no assurance that the boat it was buying was what was needed to accomplish its missions. Ultimately, after a number of design changes and a cost increase from $744,621 to almost $3 million, the Coast Guard began to define for itself the capabilities it needed and has decided not to buy any more of the ICGS boats. ICGS had initially proposed a fleet of 58 fast response cutters, subsequently termed the Fast Response Cutter-A (FRC-A), which were to be constructed of composite materials (as opposed to steel, for example). However, the Coast Guard suspended design work on the FRC-A in February 2006 to assess and mitigate technical risks. Ultimately, because of high risk and uncertain cost savings, the Coast Guard decided not to pursue the acquisition, a decision based largely on a third-party analysis that found the composite technology was unlikely to meet the Coast Guard’s desired 35-year service life. After obligating $35 million to ICGS for the FRC-A, the Coast Guard pursued a competitively awarded fast response cutter based on a modified commercially available patrol boat. That contract was awarded in September 2008. Although the shift to individual acquisitions is intended to provide the Coast Guard with more visibility and control, key aspects still require a system-level approach. These aspects include an integrated C4ISR system—needed to provide critical information to field commanders and facilitate interoperability with the Department of Defense and DHS—and decisions on production quantities of each Deepwater asset the Coast Guard requires to achieve its missions. The Coast Guard is not fully positioned to manage these aspects under its new acquisition approach but is engaged in efforts to do so. C4ISR is a key aspect of the Coast Guard’s ability to meet its missions. How the Coast Guard structures C4ISR is fundamental to the success of the Deepwater Program because C4ISR encompasses the connections among surface, aircraft, and shore-based assets and the means by which information is communicated through them. C4ISR is intended to provide operationally relevant information to Coast Guard field commanders to allow the efficient and effective execution of their missions. However, an acquisition strategy for C4ISR is still in development. Officials stated that the Coast Guard is revisiting the C4ISR incremental acquisition approach proposed by ICGS and analyzing that approach’s requirements and architecture. In the meantime, the Coast Guard is continuing to acquire C4ISR through ICGS. As the Coast Guard transitions from the ICGS-based system-of-systems acquisition strategy to an asset-based approach, it will need to maintain a strategic outlook to determine how many of the various Deepwater assets to procure to meet Coast Guard needs. When deciding how many of a specific vessel or aircraft to procure, it is important to consider not only the capabilities of that asset, but how it can complement or duplicate the capabilities of the other assets with which it is intended to operate. To that end, the Coast Guard is modeling the planned capabilities of Deepwater assets, as well as the capabilities and operations of existing assets, against the requirements for Coast Guard missions. The intent of this modeling is to test each planned asset to ensure that its capabilities fill stated deficiencies in the Coast Guard’s force structure and to inform how many of a particular asset are needed. However, the analysis based on the modeling is not expected to be completed until the summer of 2009. In the meantime, Coast Guard continues to plan for asset acquisitions in numbers very similar to those determined by ICGS, such as 8 NSCs. Like many federal agencies that acquire major systems, the Coast Guard faces challenges in recruiting and retaining a sufficient government acquisition workforce. In fact, one of the reasons the Coast Guard originally contracted with ICGS as a systems integrator was the recognition that the Coast Guard lacked the experience and depth in its workforce to manage the acquisition itself. The Coast Guard’s 2008 acquisition human capital strategic plan sets forth a number of workforce challenges that pose the greatest threats to acquisition success, including a shortage of civilian acquisition staff , its military personnel rotation policy, and the lack of an acquisition career path for its military personnel. The Coast Guard has taken a number of steps to hire more acquisition professionals, including the increased use of recruitment incentives and relocation bonuses, utilizing direct hire authority, and rehiring government annuitants. The Coast Guard also recognizes the impact of military personnel rotation on its ability to retain people in key positions. Its policy of 3-year rotations of military personnel among units, including to and from the acquisition directorate, limits continuity in key project roles and can have a serious impact on acquisition expertise. While the Coast Guard concedes that it does not have the personnel required to form a dedicated acquisition career field for military personnel, such as that found in the Navy, it is seeking to improve the base of acquisition knowledge throughout the Coast Guard by exposing more officers to acquisition as they follow their regular rotations. In the meantime, the lack of a sufficient government acquisition workforce means that the Coast Guard is relying on contractors to supplement government staff, often in key positions such as cost estimators, contract specialists, and program management support. While support contractors can provide a variety of essential services, when they are performing certain activities that closely support inherently governmental functions their use must be carefully overseen to ensure that they do not perform inherently governmental roles. Conflicts of interest, improper use of personal services contracts, and increased costs are also potential concerns of reliance on contractors. In response to significant problems in achieving its intended outcomes under the Deepwater Program, the Coast Guard leadership has made a major change in course in its management and oversight by re-organizing its acquisition directorate, moving away from the use of a contractor as the systems integrator, and putting in place a structured, more disciplined acquisition approach for Deepwater assets. While the initiatives the Coast Guard has underway have begun to have a positive impact, the extent and duration of this impact depend on positive decisions that continue to increase and improve government management and oversight. Mr. Chairman, this concludes my prepared statement. I will be pleased to answer any questions you or members of the subcommittee may have at this time. For further information about this testimony, please contact John P. Hutton, Director, at 202-512-4841 or huttonj@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this testimony. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

GAO has a large body of work examining government agencies' approaches to managing their large acquisition projects. GAO has noted that without sufficient knowledge about system requirements, technology, and design maturity, programs are subject to cost overruns, schedule delays, and performance that does not meet expectations. The Deepwater Program, intended to replace or modernize 15 major classes of Coast Guard assets, accounts for almost 60 percent of the Coast Guard's fiscal year 2009 appropriation for acquisition, construction and improvements. GAO has reported over the years on this program, which has experienced serious performance and management problems such as cost breaches, schedule slips, and assets designed and delivered with significant defects. To carry out the Deepwater acquisition, the Coast Guard contracted with Integrated Coast Guard Systems (ICGS) as a systems integrator. In April 2007, the Commandant acknowledged that the Coast Guard had relied too heavily on contractors to do the work of government and announced that the Coast Guard was taking over the lead role in systems integration from ICGS. This testimony reflects our most recent issued work on Deepwater, specifically our June 2008 report, Coast Guard: Change in Course Improves Deepwater Management and Oversight, but Outcome Still Uncertain, GAO-08-745 . Over the past two years, the Coast Guard has reoriented its acquisition function to position itself to execute systems integration and program management responsibilities formerly carried out by ICGS. The acquisition directorate has been consolidated to oversee all Coast Guard acquisitions, including the Deepwater Program, and Coast Guard project managers have been vested with management and oversight responsibilities formerly held by ICGS. Another key change has been to manage the procurement of Deepwater assets on a more disciplined, asset-by-asset approach rather than as an overall system of systems, where visibility into requirements and capabilities was limited. For example, cost and schedule information is now captured at the individual asset level, resulting in the ability to track and report breaches for assets. Further, to manage Deepwater acquisitions at the asset level, the Coast Guard has begun to follow a disciplined project management process that requires documentation and approval of program activities at key points in a program's life cycle. These process changes, coupled with strong leadership to help ensure the processes are followed in practice, have helped to improve Deepwater management and oversight. However, the Coast Guard still faces many hurdles going forward and the acquisition outcome remains uncertain. The consequences of not following a disciplined acquisition approach for Deepwater acquisitions and of relying on the contractor to define Coast Guard requirements are clear now that assets, such as the National Security Cutter, have been paid for and delivered without the Coast Guard's having determined whether the assets' planned capabilities would meet mission needs. While the asset-based approach is beneficial, certain cross-cutting aspects of Deepwater--such as command, control, communications, computers, intelligence, surveillance, and reconnaissance (C4ISR) and the overall numbers of each asset needed to meet requirements--still require a system-level approach. The Coast Guard is not fully positioned to manage these aspects. One of the reasons the Coast Guard originally contracted with ICGS as the systems integrator was the recognition that the Coast Guard lacked the experience and depth in workforce to manage the acquisition itself. The Coast Guard has faced challenges in building an adequate government acquisition workforce and, like many other federal agencies, is relying on support contractors--some in key positions such as cost estimating and contract support. GAO has pointed out the potential concerns of reliance on contractors who closely support inherently governmental functions.

In July 2012, we reported on changes Interior made to its oversight of offshore oil and gas activities in the Gulf of Mexico in the aftermath of the Deepwater Horizon incident. Specifically, we reported that On October 1, 2011, Interior officially established two new bureaus, separating offshore resource management oversight activities, such as reviewing oil and gas exploration and development plans, from safety and environmental oversight activities, such as reviewing drilling permits and inspecting drilling rigs. Because the responsibilities of these new bureaus are closely interconnected, and carrying them out will depend on effective coordination, Interior developed memoranda and standard operating procedures to define roles and responsibilities and facilitate and formalize coordination. New safety and environmental requirements and policy changes designed to mitigate the risk of a well blowout or spill initially required Interior to devote additional resources and time to reviewing certain oil and gas exploration and development plans and drilling permits for oil and gas activities in the Gulf of Mexico. Specifically, these policy changes affected Interior’s (1) environmental analyses, (2) reviews of oil and gas exploration and development plans, and (3) reviews of oil and gas drilling permits. Our analysis of drilling permit approval time frames found that approval times initially increased after the new requirements went into effect, but as both Interior staff and oil and gas companies became more familiar with these requirements, the review times decreased. Interior’s inspections of offshore Gulf of Mexico oil and gas drilling rigs and production platforms from January 1, 2000, through September 30, 2011, routinely identified violations. However, Interior’s database was missing data on when violations were identified, as well as when they were corrected for about half of the violations issued. As a result, Interior did not know on a real-time basis whether or when all violations were identified and corrected, potentially allowing unsafe conditions to continue for extended periods. During this same period, Interior issued approximately $18 million in civil penalty assessments. At the time of our report, Interior had begun implementing a number of policy changes to improve both its inspection and civil penalty programs—but had not assessed how these changes would affect its ability to conduct monthly drilling rig inspections. Interior continued to face challenges following its reorganization that may affect its ability to oversee oil and gas activities in the Gulf of Mexico. Specifically, Interior’s capacity to identify and evaluate risks associated with drilling remained limited, raising questions about the effectiveness with which it allocated its oversight resources. Interior also experienced difficulties in implementing effective information technology systems, such as those that aid its reviews of oil and gas companies’ exploration and development plans. It also continued to face workforce planning challenges, including hiring, retaining, and training staff. Moreover, Interior did not have current strategic plans to guide its information technology or workforce planning efforts. Our July 2012 report resulted in 11 recommendations for specific improvements to Interior’s oversight of offshore oil and gas activities, including those intended to improve its drilling inspection program and human capital planning. Interior generally agreed with our recommendations and has committed to implementing them. Federal oil and gas resources generate billions of dollars annually in revenues that are shared among federal, state, and tribal governments; however, in several reviews over the past 5 years we found Interior may not be properly assessing and collecting these revenues. In September 2008, we reported that Interior collected lower levels of revenues for oil and gas production in the deepwater of the U.S. Gulf of Mexico than all but 11 of 104 oil and gas resource owners in other countries, as well as in some states whose revenue collection systems were evaluated in a comprehensive industry study.significant changes in the oil and gas industry over the past several decades, we found that Interior had not systematically reexamined how the U.S. government is compensated for extraction of oil and gas in over 25 years. We recommended Interior conduct a comprehensive review of In addition, despite the federal oil and gas fiscal system using an independent panel. After Interior initially disagreed with our recommendations, we recommended that Congress consider directing the Secretary of the Interior to convene an independent panel to perform a comprehensive review of the federal oil and gas fiscal system and establish procedures to periodically evaluate the state of the fiscal system. In response to that recommendation, Interior commissioned a study that compared the U.S. government’s fiscal system with that of other resource owners. We are currently conducting work to assess how Interior plans to use the results of this study to inform decisions about its fiscal system. Furthermore, we reported, in July 2009, on numerous problems with Interior’s efforts to collect data on oil and gas produced on federal lands and waters, including missing data, errors in company-reported data on oil and gas production, and sales data that did not reflect prevailing market prices for oil and gas. As a result of its lack of consistent and reliable data on the production and sale of oil and gas from federal lands and waters, Interior could not provide reasonable assurance that it was assessing and collecting the appropriate amount of royalties on this production. We made a number of recommendations to Interior to improve controls on the accuracy and reliability of royalty data. Interior generally agreed with our recommendations and has implemented the majority of them. We also reported, in March 2010, that Interior was not taking the steps needed to ensure that oil and gas produced from federal lands and For example, we found that neither waters was accurately measured. BLM nor MMS had consistently met their agency goals for oil and gas production verification inspections, intended to examine, among other things, whether lessees were taking steps to ensure that the amount of oil and gas produced from federal lands and waters was being accurately measured. Without such verification, Interior cannot provide reasonable assurance that the public is collecting its share of revenue from oil and gas development. We also raised concerns over Interior’s efforts to develop software to allow inspection staff to remotely monitor gas production. Specifically, we found that BLM’s Remote Data Acquisition for Well Production program—a program designed to provide industry and government with common tools to validate production and to view production data in near real-time—had shown few results, despite 10 years of development and costs of over $1.5 million. Our March 2010 report identified 19 recommendations for specific improvements to oversight of production verification activities, including recommendations intended to strengthen BLM’s production inspection program and its ability to obtain near real-time gas production data. Interior generally agreed with our recommendations; it has already implemented many of them and continues to work on the remainder. Additionally, we reported, in October 2010, that Interior’s data likely understated the amount of natural gas produced on federal leases, because the data did not quantify the amount of gas released directly to the atmosphere (vented) or burned (flared) during the production process. This vented and flared gas represents lost royalties to the government and contributes to greenhouse gases. We recommended that Interior improve its data and address limitations in its regulations and guidance to reduce this lost gas. Interior generally agreed with our recommendations and is taking steps to implement them. In February 2011, we added Interior’s management of federal oil and gas resources to our list of federal programs and operations at high risk for waste, fraud, abuse, and mismanagement or needing broad-based transformation. We added Interior to the list because the department: (1) did not have reasonable assurance that it was collecting its share of revenue from oil and gas produced on federal lands; (2) continued to experience problems in hiring, training, and retaining sufficient staff to provide oversight and management of oil and gas operations on federal lands and waters; and (3) was engaged in a broad reorganization of both its offshore oil and gas management and revenue collection functions, leading to concerns about whether Interior could provide effective program oversight while undergoing such a broad reorganization. In the February 2013 update to our High Risk list,federal oil and gas management high-risk area to focus on revenue collection and human capital challenges because Interior had completed its reorganization. In order for GAO to remove the high-risk designation, Interior must successfully address the challenges we have identified, implement open recommendations, and meet its responsibilities to manage federal oil and gas resources in the public interest. While Interior recently began implementing a number of GAO recommendations, including those intended to improve the reliability of data necessary for determining royalties, the agency has yet to implement a number of other recommendations, including those intended to help the agency (1) provide reasonable assurance that oil and gas produced from federal leases is accurately measured and that the public is getting an appropriate share of oil and gas revenues and (2) address its long- standing human capital issues. We are currently engaged in two reviews examining the remaining two high-risk issues. First, we are conducting a follow up review of Interior’s collection of revenues from the production of oil and gas on federal lands and waters. As part of this review, we will examine Interior’s progress, if any, in (1) ensuring the government is getting a fair return for federal oil and gas resources, (2) meeting agency targets for conducting oil and gas production verification inspections, and (3) providing greater assurance that oil and gas production and royalty data are consistent and reliable. Second, we are reviewing the extent to which Interior continues to face problems hiring, training, and retaining staff, and how any remaining problems affect Interior’s ability to oversee oil and gas activities on federal lands and waters. As part of this effort, we will focus on the causes of Interior’s human capital challenges, actions taken, and Interior’s plans for measuring the effectiveness of corrective actions. In addition, while we have narrowed the focus of the high-risk area to revenue collection and human capital issues, we will, in the course of ongoing work on these issues, continue to consider Interior’s reorganization and its affect on the agency’s ability to oversee federal lands and waters. In conclusion, Interior’s management of federal oil and gas resources is in transition. Our past work has found a wide range of weaknesses in Interior’s oversight of federal oil and gas resources, ultimately resulting in its inclusion on our High Risk List in 2011. Since then, Interior has successfully implemented many recommendations and resolved one of the three concerns that led to its inclusion on the high risk list—the challenges associated with its reorganization. We remain hopeful that Interior will continue to implement the many remaining recommendations we have made, thereby providing greater assurance of effective oversight of federal oil and gas resources. Chairman Lankford, Ranking Member Speier and Members of the Subcommittee, this concludes my prepared statement. I would be pleased to answer any questions that you or other Members of the Subcommittee may have at this time. If you have any questions concerning this testimony, please contact me at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this statement. Other individuals who made key contributions include Jon Ludwigson, Assistant Director; Christine Kehr, Assistant Director; Janice Ceperich; Glenn Fischer; Cindy Gilbert; Alison O’Neill; and Barbara Timmerman. This is a work of the U.S. government and is not subject to copyright protection in the United States. The published product may be reproduced and distributed in its entirety without further permission from GAO. However, because this work may contain copyrighted images or other material, permission from the copyright holder may be necessary if you wish to reproduce this material separately.

Interior issues permits for the development of new oil and gas wells on federal lands and waters; inspects wells to ensure compliance with environmental, safety, and other regulations; and collects royalties from companies that sell the oil and gas produced from those wells. In recent years, onshore and offshore federal leases produced a substantial portion of the oil and gas produced in the United States. In fiscal year 2012, Interior collected almost $12 billion in mineral revenues including those from oil and gas development, making it one of the largest nontax sources of federal government funds. Previous GAO work has raised concerns about Interior's management and oversight of federal oil and gas resources. This testimony focuses on (1) Interior's oversight of offshore oil and gas resources, (2) Interior's collection of oil and gas revenues, and (3) Interior's progress to address concerns that resulted in its inclusion on GAO's High Risk List in 2011. This statement is based on prior GAO reports issued from September 2008 through February 2013. GAO is making no new recommendations. Interior continues to act on the recommendations that GAO has made to improve the management of oil and gas resources. GAO continues to monitor Interior's implementation of these recommendations. Interior's oversight of offshore resources . In July 2012, GAO reported on changes to the Department of the Interior's oversight of offshore oil and gas activities in the Gulf of Mexico following the Deepwater Horizon incident. Specifically, GAO reported that Interior had established two new bureaus, separating resource management oversight activities from safety and environmental oversight activities. GAO also reported that new requirements and policy changes designed to mitigate risk of a well blowout or spill had initially required additional resources and increased permit approval times, but that approval times decreased as Interior staff and oil and gas companies became more familiar with the new requirements. GAO also found that Interior's inspections of offshore Gulf of Mexico drilling rigs and production platforms routinely identified violations, but that Interior's database was missing data on when violations were identified and corrected. GAO made 11 recommendations aimed at improving Interior's oversight activities. Interior generally agreed with the recommendations and plans to implement them. Interior's collection of oil and gas revenues. In September 2008, GAO reported that Interior collected lower levels of revenues for oil and gas production in the deep water of the U.S. Gulf of Mexico than all but 11 of 104 oil and gas resource owners in other countries and some states. In July 2009, GAO reported on problems with Interior's efforts to collect data on oil and gas produced on federal lands, including missing and erroneous data. In March 2010, GAO reported that Interior was not taking needed steps to ensure that oil and gas produced from federal lands was accurately measured and was not consistently meeting its goals for oil and gas production verification inspections. GAO made numerous recommendations aimed at improving Interior's revenue collection policies, including oversight of production verification activities and controls on the accuracy and reliability of royalty data. Interior generally agreed with these recommendations and has implemented many of them. Interior's oil and gas management on GAO's high risk list . In February 2011, GAO added Interior's management of federal oil and gas resources to its list of federal programs and operations at high risk for waste, fraud, abuse, and mismanagement or needing broad-based transformation. GAO added this high risk area because Interior (1) did not have reasonable assurance that it was collecting its share of revenues; (2) continued to experience problems hiring, training, and retaining sufficient staff to provide oversight and management of oil and gas operations; and (3) was engaged in a broad agency reorganization that could adversely impact its ability to effectively manage oil and gas during the crisis following the Deepwater Horizon incident. In February 2013, after Interior completed its reorganization, GAO narrowed the oil and gas high-risk area to focus on revenue collection and human capital challenges and is currently examining these issues. While Interior has begun to implement many of GAO's recommendations, it has yet to fully implement a number of others, including recommendations intended to (1) provide reasonable assurance that oil and gas is accurately measured, and that the public is getting an appropriate share of revenues, and (2) address its long-standing human capital issues.

NRC’s implementation of a risk-informed, performance-based regulatory approach for commercial nuclear power plants is complex and will require many years to fully implement. It requires basic changes to the regulations and NRC’s processes to ensure the safe operation of these plants. NRC faces a number of challenges to develop and to implement this process. For example, because of the complexity of this change, the agency needs a strategy to guide its development and implementation. We recommended such a strategy in March 1999. We suggested that a clearly defined strategy would help guide the regulatory transformation if it described the regulatory activities NRC planned to change to a risk-informed approach, the actions needed to accomplish this transformation, and the schedule and resources needed to make these changes. NRC initially agreed that it needed a comprehensive strategy, but it has not developed one. As one NRC Commissioner said in March 2000, “we really are . . . inventing this as we go along given how much things are changing, it’s very hard to plan even 4 months from now, let alone years from now.” NRC did develop the Risk-Informed Regulation Implementation Plan, which includes guidelines to identify, set priorities for, and implement risk-informed changes to regulatory processes. The plan also identifies specific tasks and projected milestones. The Risk-Informed Regulation Implementation Plan is not as comprehensive as it needs to be, because it does not identify performance measures, the items that are critical to achieving its objectives, activities that cut across its major offices, resources, or the relationships among the more than 40 separate activities (25 of which pertain to nuclear plants). For example, risk-informing NRC’s regulations will be a formidable task because they are interrelated. Amending one regulation can potentially affect other regulations governing other aspects of nuclear plant operations. NRC found this to be the case when it identified over 20 regulations that would need to be made consistent as it developed a risk- informed approach for one regulation. NRC expects that its efforts to change its regulations applicable to nuclear power plants to focus more on relative risk will take 5 to 8 years. NRC has compounded the complexity of moving to a new regulatory approach by deciding that compliance with such an approach will be voluntary. As a result, NRC will be regulating with two different systems— one for those utilities that choose to comply with a risk-informed approach and another for those that choose to stay with the existing regulatory approach. It is not clear how this dual system will be implemented. One part of the new risk-informed approach that has been implemented is a new safety oversight process for nuclear power plants. It was implemented in April 2000; and since then, NRC’s challenge has been to demonstrate that the new approach meets its goal of maintaining the same level of safety as the old approach, while being more predictable and consistent. The nuclear industry, states, public interest groups, and NRC staff have raised questions about various aspects of the process. For example, the industry has expressed concern about some of the performance indicators selected. Some NRC staff are concerned that that the process does not track all inspections issues and NRC will not have the information available, should the public later demand accountability from the agency. Furthermore, it is very difficult under the new process to assess those activities that cut across all aspects of plant operations— problem identification and resolution, human performance, and safety conscious work environment. In June 2001, NRC staff expect to report to the Commission on the first year of implementation of the new process and recommend changes, where warranted. NRC is facing a number of difficulties inherent in applying a risk-informed regulatory approach for nuclear material licensees. The sheer number of licensees—almost 21,000—and the diversity of the activities they conduct—converting uranium, decommissioning nuclear plants, transporting radioactive materials, and using radioactive material for industrial, medical, or academic purposes—increase the complexity of developing a risk-informed approach that would adequately cover all types of licensees. For example, the diversity of licensees results in varying levels of analytical sophistication; different experience in using risk- informed methods, such as risk assessments and other methods; and uneven knowledge about the analytical methods that would be useful to them. Because material licensees will be using different risk-informed methods, NRC has grouped them by the type of material used and the regulatory requirements for that material. For example, licensees that manufacture casks to store spent reactor fuel could be required to use formal analytical methods, such as a risk assessment. Other licensees, such as those that use nuclear material in industrial and medical applications, would not be expected to conduct risk assessments. In these cases, NRC staff said that they would use other methods to determine those aspects of the licensees’ operations that have significant risk, using an approach that considers the hazards (type, form, and quantity of material) and the barriers or physical and administrative controls that prevent or reduce exposure to these hazards. Another challenge associated with applying a risk-informed approach to material licensees is how NRC will implement a new risk-informed safety and safeguards oversight process for fuel cycle facilities. Unlike commercial nuclear power plants, which have a number of design similarities, most of the 10 facilities that prepare fuel for nuclear reactors perform separate and unique functions. For example, one facility converts uranium to a gas for use in the enrichment process, two facilities enrich or increase the amount of uranium-235 in the gas, and five facilities fabricate the uranium into fuel for commercial nuclear power plants. These facilities possess large quantities of materials that are potentially hazardous (i.e., explosive, radioactive, toxic, and/or combustible) to workers. The facilities’ diverse activities makes it particularly challenging for NRC to design a “one size fits all” safety oversight process and to develop indicators and thresholds of performance. In its recently proposed new risk-informed safety oversight process for material licensees, NRC has yet to resolve such issues as the structure of the problem identification, resolution, and corrective action program; the mechanics of the risk- significance determination process; and the regulatory responses that NRC would take when changes in performance occur. NRC had planned to pilot test the new fuel cycle facility safety oversight process in fiscal year 2001, but staff told us that this schedule could slip. NRC also faces challenges in redefining its role in a changing regulatory environment. As the number of agreement states increases beyond the existing 32, NRC must continue to ensure the adequacy and consistency of the states’ programs as well as its own effectiveness and efficiency in overseeing licensees that are not regulated by the agreement states. NRC has been working with the Conference of Radiation Control Program Directors (primarily state officials) and the Organization of Agreement States to address these challenges. However, NRC has yet to address the following questions: (1) Would NRC continue to need staff in all four of its regional offices as the number of agreement states increases? (2) What are the appropriate number, type, and skills for headquarters staff? and (3) What should NRC’s role be in the future? Later this month, a NRC/state working group expects to provide the Commission with its recommended options for the materials program of the future. NRC wants to be in a position to plan for needed changes because in 2003, it anticipates that 35 states will have agreements with NRC and that the states will oversee more than 85 percent of all material licensees. Another challenge NRC faces is to demonstrate that it is meeting one of its performance goals under the Government Performance and Results Act— increasing public confidence in NRC as an effective regulator. There are three reasons why this will be difficult. First, to ensure its independence, NRC cannot promote nuclear power, and it must walk a fine line when communicating with the public. Second, NRC has not defined the “public” that it wants to target in achieving this goal. Third, NRC has not established a baseline to measure the “increase” in its performance goal. In March 2000, the Commission rejected a staff proposal to conduct a survey to establish a baseline. Instead, in October 2000, NRC began an 18-month pilot effort to use feedback forms at the conclusion of public meetings. Twice a year, NRC expects to evaluate the information received on the forms to enhance its public outreach efforts. The feedback forms that NRC currently plans to use will provide information on the extent to which the public was aware of the meeting and the clarity, completeness, and thoroughness of the information provided by NRC at the meetings. Over time, the information from the forms may show that the public better understands the issues of concern or interest for a particular plant. It is not clear, however, how this information will show that public confidence in NRC as a regulator has increased. This performance measure is particularly important to bolster public confidence as the industry decides whether to submit a license application for one or more new nuclear power plants. The public has a long history with the traditional regulatory approach and may not fully understand the reasons for implementing a risk-informed approach and the relationship of that approach to maintaining plant safety. In a highly technical and complex industry, NRC is facing the loss of a significant percentage of its senior managers and technical staff. For example, in fiscal year 2001, about 16 percent of NRC staff are eligible to retire, and by the end of fiscal year 2005, about 33 percent will be eligible. The problem is more acute at the individual office level. For example, within the Office of Nuclear Reactor Regulation, about 42 percent of the technical staff and 77 percent of senior executive service staff are eligible for retirement. During this period of potentially very high attrition, NRC will need to rely on that staff to address the nuclear industry’s increasing demands to extend the operating licenses of existing plants and transfer the ownership of others. Likewise, in the Office of Nuclear Regulatory Research, 49 percent of the staff are eligible to retire at the same time that the nuclear industry is considering building new plants. Since that Office plays a key role in reviewing any new plants, if that Office looses some of its highly-skilled, well-recognized research specialists to retirement, NRC will be challenged to make decisions about new plants in a timely way, particularly if the plant is an untested design. In its fiscal year 2000 performance plan, NRC identified the need to maintain core competencies and staff as an issue that could affect its ability to achieve its performance goals. NRC noted that maintaining the correct balance of knowledge, skills, and abilities is critical to accomplishing its mission and is affected by various factors. These factors include the tight labor market for experienced professionals, the workload as projected by the nuclear industry to transfer and extend the licenses of existing plants, and the declining university enrollment in nuclear engineering studies and other fields related to nuclear safety. In October 2000, NRC’s Chairman requested the staff to develop a plan to assess the scientific, engineering, and technical core competencies that NRC needs and propose specific strategies to ensure that the agency maintains that competency. The Chairman noted that maintaining technical competency may be the biggest challenge confronting NRC. In January 2001, NRC staff provided a suggested action plan for maintaining core competencies to the Commission. The staff proposed to begin the 5-year effort in February 2001 at an estimated cost of $2.4 million, including the costs to purchase software that will be used to identify the knowledge and skills needed by NRC. To assess how existing human capital approaches support an agency’s mission, goals, and other organizational needs, we developed a human capital framework, which identified a number of elements and underlying values that are common to high-performing organizations. NRC’s 5-year plan appears to generally include the human capital elements that we suggested. In this regard, NRC has taken the initiative and identified options to attract new employees with critical skills, developed training programs to meets its changing needs, and identified legislative options to help resolve its aging staff issue. The options include allowing NRC to rehire retired staff without jeopardizing their pension payments and to provide salaries comparable to those paid in the private sector. In addition, for nuclear reactor and nuclear material safety, NRC expects to implement an intern program in fiscal year 2002 to attract and retain individuals with scientific, engineering, and other technical competencies. It has established a tuition assistance program, relocation bonuses, and other inducements to encourage qualified individuals not only to accept but also to continue their employment with the agency. NRC staff say that the agency is doing the best that it can with the tools available to hire and retain staff. Continued oversight of NRC’s multiyear effort is needed to ensure that it is being properly implemented and is effective in achieving its goals. Mr. Chairman and Members of the Subcommittee, this concludes our statement. We would be pleased to respond to any questions you may have.

This testimony discusses the challenges facing the Nuclear Regulatory Commission (NRC) as it moves from its traditional regulatory approach to a risk-informed, performance-based approach. GAO found that NRC's implementation of a risk-informed approach for commercial nuclear power plants is a complex, multiyear undertaking that requires basic changes to the regulations and processes NRC uses to ensure the safe operation of these plants. NRC needs to overcome several inherent difficulties as it seeks to apply a risk-informed regulatory approach to the nuclear material licensees, particularly in light of the large number of licensees and the diversity of activities they conduct. NRC will have to demonstrate that it is meeting its mandate (under the Government Performance and Results Act) of increasing public confidence in NRC as an effective regulator. NRC also faces challenges in human capital management, such as replacing a large percentage of its technical staff and senior managers who are eligible to retire. NRC has developed a five-year plan to identify and maintain the core competencies it needs and has identified legislative options to help resolve its aging staff problem.

The Board of Governors of the U.S. Postal Service (hereinafter, the Board) was created by the Postal Reorganization Act in 1970 (PRA, 39 U.S. C. §202). The U.S. Postal Service (USPS) describes the Board as " comparable to a board of directors of a private corporation ." Guided by statute and its bylaws , the Board "directs the exercise of the powers of the Postal Service, reviews the practices and policies of the Postal Service, and directs and controls the expenditures of the Postal Service." The Board is composed of 11 members, including nine Governors who are appointed by the President with the advice and consent of the Senate. As noted in a USPS Office of Inspector General (USPSOIG) white paper , as an executive branch agency, the Postal Service is to be led by presidentially appointed and Senate-confirmed officers. The nine Governors serve this role. Additionally, the Board includes the Postmaster General, who is appointed, or may be removed, by the Governors, and the Deputy Postmaster General, who is appointed, or may be removed, by both the Governors and the Postmaster General. Under the PRA, Governors served nine-year terms, with the first nine appointees serving staggered terms of one to nine years. The Postal Accountability and Enhancement Act (PAEA, P.L. 109-435 ) reduced the Governors' staggered terms to seven years. Additionally, the PAEA requires that Governors represent the public interest and that at least four Governors be chosen based on their demonstrated ability to manage organizations with at least 50,000 employees. No more than five Governors may belong to the same political party. The President is required by law to consult with the Speaker of the House of Representatives, the minority leader of the House of Representatives, the majority leader of the Senate, and the minority leader of the Senate in selecting a nominee to the Board of Governors. While the statute stipulates that "not more than 5 of [the Governors] may be adherents of the same political party," it does not specify an order in which nominations are to be considered and confirmed to satisfy this requirement. Because USPS Governor nominations are advice and consent positions, Senate procedural considerations may affect the confirmation process. For example, a Governor nomination, like any other measure or matter available for Senate floor consideration, may be the subject of a Senate "hold." Senators place holds to accomplish a variety of purposes—to receive notification of upcoming legislative proceedings, for instance, or to express objections to a particular proposal or executive nomination—but ultimately the decision to honor a hold request, and for how long, rests with the majority leader. Typically, an executive agency head is appointed by the President, by and with the advice and consent of the Senate. In the case of USPS, however, the Postmaster General is only appointed, or may be removed, by the Governors. Similarly, the Deputy Postmaster General is only appointed, or may be removed by the Postmaster General and the Governors. No term limits exist for either the Postmaster General or Deputy Postmaster General. It is unclear whether the appointment or removal clauses of 39 U.S.C. §202 could operate as written, given the Board's current composition. As of the date of this report, the Board has no Governors. The term of the last Governor, Chairman James H. Bilbray, expired on December 8, 2016. The Board's membership as a whole includes the Postmaster General, Megan J. Brennan, and the Deputy Postmaster General, Ronald A. Stroman. Figure 1 shows the terms of Governors serving at the time the PAEA was enacted and Governors appointed or reappointed since the PAEA was enacted. President Barack Obama sent seven nominations to the position of Governor of the United States Postal Service to the Senate during the 114 th Congress. All seven nominations were returned to the President under the provisions of Senate Rule XXXI at the conclusion of the 114 th Congress on January 3, 2017. Of these seven nominations, one received a hearing. On April 21, 2016, the Senate Committee on Homeland Security and Governmental Affairs held a hearing to consider the nomination of Jeffrey A. Rosen. All seven nominations were subsequently reported favorably from the Senate Committee on Homeland Security and Governmental Affairs and all were placed on the Senate Executive Calendar. No votes were held on any of the nominations. In the 115 th Congress, President Trump sent four nominations for Governors of the USPS to the Senate on October 30, 2017. The three nominees are Robert M. Duncan of Kentucky (who is the subject of two nominations to two separate terms), Calvin R. Tucker of Pennsylvania, and David Williams of Illinois. Of the four nominations, three were placed on the Senate Executive Calendar on May 7, 2018. The fourth nomination, of Calvin R. Tucker, received a hearing on April 18, 2018. Table 1 provides details on each nomination. Although many authorities and responsibilities are given to the Board, certain matters are reserved for decision by the Governors alone. Table 2 lists selected matters that are reserved for decision by the Governors alone or by the full Board. It is unclear whether decisions that are reserved to the Governors alone (e.g., appointment and removal of the Postmaster General) could be made when no Governors remain on the Board. The Postal Service's day-to-day operations are largely the responsibility of USPS senior leadership and may not be affected by the absence of Governors. As shown in Table 2 , however, certain actions may only be authorized or approved by the Board or the Governors. However, under 39 U.S.C. § 205 , vacancies may not prevent the Board from conducting its business as long as there is a quorum of members. To have a quorum, generally at least six members of the Board must be present. For example, if the Postmaster General, Deputy Postmaster General, and four Governors are present, then the Board would have a quorum for the transaction of business. The quorum requirement applies to the business of the Board, but not to the conduct of business related to those matters that are reserved for decision by the Governors alone. The Board lost its quorum when the term of former Governor Mickey D. Barnett expired on December 8, 2014, and the Board's makeup dropped to five members. Just prior to the loss of its quorum, the Board adopted a resolution delegating its authority to a Temporary Emergency Committee (TEC) , in order to "provide for continuity of [postal] operations" in light of the loss of a Board quorum. While the Board has the authority (with certain restrictions) to create such a committee, it is unknown to what extent the TEC may act on matters that are explicitly reserved to the Board . Further, unlike the loss of quorum, the loss of the final Governor leaves the USPS without legal authority for several actions that must be authorized by the Governors. Select USPS appointment authority is provided to the Governors rather than to the Board. For example, the appointment of, removal of, and setting compensation for the Postmaster General requires an absolute majority of the Governors currently in office. In addition, the Inspector General is appointed by the Governors and may be removed only for cause "upon the written concurrence of at least 7 Governors." In the event the Postmaster General is incapacitated due to "an enemy attack or other national emergency," USPS guidance names the Deputy Postmaster General followed by the Vice President, Area Operations, Eastern Area, in the line of succession to perform the Postmaster's duties. The guidance does not specify whether a vacancy caused by lack of Governors would qualify as an emergency or trigger its emergency succession plan. The Governors have sole authority to (1) establish rates for Competitive Mail Products (e.g., Priority Mail®, Priority Mail Express®) and (2) adjust rates of Market Dominant Products (e.g., First-Class Mail, Advertising Mail). As noted by the USPSOIG , without at least one sitting Governor, the USPS cannot perform these actions—or any actions listed in the left column of Table 2 —without subjecting itself to potential legal challenge. While Governor Bilbray remained on the Board, he continued to act on those matters alone. Prior to his departure, Bilbray wrote Governors' Decision No. 16-8 allowing for an increase in rates for USPS competitive products "on or about January 21, 2018." On October 6, 2017, USPS filed with the Postal Regulatory Commission (PRC) a notice of its intent to increase prices for certain Market Dominant Products under this authority, and the PRC approved the request on November 9, 2017. As mentioned earlier, Governor Bilbray's term expired on December 8, 2016. Another issue for consideration is the authority, in absence of a quorum, of any newly appointed Governors to act on matters reserved to the Board. As discussed above, prior to the loss of its quorum, the Board established and delegated its authority to the TEC in order to "provide for continuity of [postal] operations" in light of the loss of a Board quorum. The Board will continue without a quorum until four or more Governors have been confirmed. In its resolution establishing the TEC, the Board affirmed that "the inability of the Board to constitute a quorum does not prevent the Governors then in office from exercising those powers vested solely in the Governors, as distinguished from the Board" (emphasis added). The resolution, however, did not specify whether newly appointed Governors are automatically members of the TEC.

Unlike other executive agencies, the United States Postal Service is governed not by a single presidentially appointed, Senate-confirmed agency head, but rather by an entity known as the Board of Governors. The Board of Governors of the U.S. Postal Service (hereinafter, the Board) was created by the Postal Reorganization Act in 1970 (PRA, 39 U.S.C. §202). The U.S. Postal Service (USPS) describes the Board as "comparable to a board of directors of a private corporation." As currently constructed under the Postal Accountability and Enhancement Act of 2006 (PAEA, P.L. 109-435), the Board consists of the Postmaster General, the Deputy Postmaster General, and nine Governors, appointed to staggered terms of seven years. The Governors appoint, or may remove, the Postmaster General; the Deputy Postmaster General is appointed, or may be removed, by both the Governors and the Postmaster General. Currently, there are no Senate-confirmed Governors and the only members on the Board are the Postmaster General and the Deputy Postmaster General. It is unclear whether the appointment or removal clauses of 39 U.S.C. §202 could operate as written, given the Board's current composition. President Trump sent four Governor nominations to the Senate on October 30, 2017; however, as of the date of this report, none of the nominations have been confirmed. Under 39 U.S.C. §205, vacancies may not prevent the Board from conducting its business as long as there is a quorum of members. Without any appointed Governors, the Board cannot have a quorum. Just prior to the loss of its quorum, the Board adopted a resolution delegating its authority to a Temporary Emergency Committee (TEC), in order to "provide for continuity of [postal] operations." The Board will continue without a quorum until four or more Governors have been confirmed. Although the Board, as a whole, has many authorities and responsibilities, certain matters are reserved for decision by the Governors alone. The lack of any appointed Governors leaves the USPS without legal authority for actions that must be authorized by the Governors, such as the establishment of rates and classes of competitive products; the adjustment of rates for market dominant products; and setting compensation for the Postmaster General and Deputy Postmaster General.

The Randolph-Sheppard Act, originally signed into law by Franklin D. Roosevelt in 1936, requires that blind individuals receive priority for the operation of vending facilities on federal property. The 1974 amendments to the act changed the term "vending stand" to "vending facility" and defined the term as meaning "automatic vending machines, cafeterias, snack bars, cart services, shelters, counters, and such other appropriate auxiliary equipment as the Secretary [of Education] may by regulation prescribe as being necessary for the sale of the articles or services described in section 107a(a)(5) of this title and which may be operated by blind licensees...." The regulations promulgated by the Department of Education define "cafeteria" as "a food dispensing facility capable of providing a broad variety of prepared foods and beverages (including hot meals) primarily through the use of a line where the customer serves himself from displayed selections. A cafeteria may be fully automated or some limited waiter or waitress service may be available and provided within a cafeteria and table or booth seating facilities are always provided." The act does not apply to "income from vending machines within retail sales outlets under the control of exchange or ships' stores systems[,] ... income from vending machines operated by the Veterans Canteen Service[,] ... or income from vending machines not in direct competition with a blind vending facility at individual locations" on the federal property. Two major circuit court cases have dealt with the issue of whether the term "cafeteria" in the Randolph-Sheppard Act applies to military troop dining facilities. Both the Fourth Circuit and the Tenth Circuit concluded that military troop dining facilities are "cafeterias" under the Randolph-Sheppard Act. In NISH v. Cohen , the court held that the Randolph-Sheppard Act applied to military troop dining facilities at Fort Lee in Virginia. NISH, a nonprofit agency designated "to represent other nonprofits employing the severely disabled in the production of items and services for government agencies under the Javits-Wagner-O'Day Act" (JWOD Act), had unsuccessfully sought to negotiate a contract for military troop dining facilities that was granted to a blind licensee. NISH filed suit seeking a declaratory judgment concerning the proper interpretation of the Randolph-Sheppard Act. In its appeal to the Fourth Circuit, NISH argued that military troop dining facilities are not "cafeterias" under the Randolph-Sheppard Act "because, in contrast to typical cafeterias (where meals are purchased by the general public from private funds), meals at military mess halls are provided to soldiers from appropriated funds." Using a two-part Chevron analysis , the court analyzed statutory and administrative interpretations and ruled that Fort Lee's contracting officer did not act unreasonably in applying the term "cafeteria" to the military troop dining facilities at Fort Lee. NISH also argued that the JWOD Act applied to the awarding of the military troop dining facilities contract at Fort Lee because the Competition in Contracting Act (CICA) "preclud[ed] application of the Randolph-Sheppard Act." CICA "requires that the military use 'full and open competition' when contracting for 'property or services' except 'in the case of procurement procedures otherwise expressly authorized by statute.'" The court ruled that the procurement provisions found in the Randolph-Sheppard Act met CICA's sweeping definition of procurement, which meant both the Randolph-Sheppard Act and the JWOD Act could apply to the situation. The court further held that, of the two statutes, the Randolph-Sheppard Act was more specific and therefore controlling. In NISH v. Rumsfeld , the court held that the Randolph-Sheppard Act applied to military troop dining facilities at Kirtland Air Force Base in New Mexico. NISH had a one-year contract for food services at the base with options for four additional years. Following the first year, the Air Force did not renew the contract with NISH and instead awarded it to the New Mexico Commission for the Blind (NMCB), citing compliance with the provisions of the Randolph-Sheppard Act. NISH filed suit seeking a declaratory judgment concerning the proper interpretation of the Randolph-Sheppard Act. In its appeal to the Tenth Circuit, NISH argued that Congress did not intend to include military troop dining facilities in the Randolph-Sheppard Act's definition of "vending facilities." The court rejected this argument by ruling that the plain language of the statute is unambiguous with respect to the inclusion of "cafeterias." NISH further argued that the Randolph-Sheppard Act did not grant authority to the Department of Education (ED) to regulate military mess halls, but the court ruled that Congress did grant this authority to the ED. Using a two-part Chevron analysis, the court held that the Air Force reasonably relied on the ED's determinations about the meaning of the Randolph-Sheppard Act as well as its own determination in awarding the contract to NMCB. As in NISH v. Cohen , NISH also argued that the JWOD Act applied because of CICA. The court here reached the same conclusion, holding that the Randolph-Sheppard Act met CICA's procurement definition and controlled over the JWOD Act. Small business concerns eligible to participate in a program or contract under Section 8(a) of the Small Business Act and HUBZone entities have also filed claims objecting to the application of the Randolph-Sheppard Act to the military troop dining facility contract process. In these cases the Comptroller General and the Court of Federal Claims both held that the blind vendor contracts within the competitive range of contracts had priority over the other groups' contracts. The application of the Randolph-Sheppard Act to military troop dining facility contracts is limited by the requirement found in 48 C.F.R. 15.306 that the contract fall within the competitive range. In Southfork Systems, Inc. v. United States , the Court of Appeals for the Federal Circuit held that a contract proposal from a blind vendor could fall within the competitive range of contracts as determined by the contracting officer. In this case Southfork lost its contract with the Air Force for military troop dining facility services to the Texas Commission for the Blind (the Commission) and contested the inclusion of the Commission's contract proposal in the competitive range. The lower court rejected Southfork's claims. The appellate court agreed with the lower court and specifically stated that it failed to see "how ... the Air Force could have concluded that the Commission did not have a 'reasonable chance of being selected for award'" without rejecting "out of hand the proposition that economic opportunities for the blind could be enlarged by having a blind individual" managing the cafeteria. The court recognized that the "contracting officer had broad discretion to consider each factor [in the contract process] as a part of a totality of the circumstances" in making the competitive range determination. The determination of the competitive range has also been part of several federal district court rulings. The application of the Randolph-Sheppard Act to military troop dining facility contracts also may be limited by the types of services provided by the blind individual. In one case, Washington State Department of Services for the Blind v. United States , the Court of Federal Claims held that dining facility attendant services contracts were not covered by the Randolph-Sheppard Act. In this case, the Washington State Department of Services for the Blind (WSDSB) challenged the Army's determination that the Randolph-Sheppard Act did not apply to contracts for dining facility attendant services at Fort Lewis. WSDSB argued that the Randolph-Sheppard Act's requirement that blind persons be given priority for " operation of a vending facility" on federal property included dining facility attendant services contracts, but the court held that the Army's interpretation that "operation" did not include dining facility attendant services was not arbitrary or capricious. However, in Mississippi Department of Rehabilitation Services v. United States , the Court of Federal Claims held that a contract for day-to-day services, as opposed to dining facility attendant services, fell under the Randolph-Sheppard Act even though the Navy retained control over menu selection and food supply purchasing. In this case, the Mississippi Department of Rehabilitation Services challenged the Navy's determination that the Randolph-Sheppard Act did not apply to a contractor for services at the Naval Air Station in Meredian, Mississippi, who was required to "manage the cafeteria, prepare the food, serve the food, provide cleanup and cashier services, implement quality control and training programs, provide certain supplies and equipment and hire the personnel, both managerial and support." The court concluded that the contractor was considered the facility's "operator" because of its daily responsibilities. The Javits-Wagner-O'Day and Randolph-Sheppard Modernization Act of 2008 was introduced by Senator Enzi on June 11, 2008. This legislation would, among other things, address several issues raised by the judicial decisions previously discussed. The bill would establish the Committee for the Advancement of Individuals with Disabilities that would jointly administer both the Randolph-Sheppard program and the AbilityOne program (which implements the JWOD Act). The bill also would require state licensing agencies to grant licenses for the operation of a vending facility to individuals with disabilities other than blindness starting three years after the bill's enactment. Additionally, with respect to military troop dining facilities, the bill would grant equal priority in the contract process to a state licensing agency bidding for a contract under the Randolph-Sheppard Act, a small business concern eligible to participate in a program or contract under Section 8(a) of the Small Business Act, a HUBZone entity, an Alaska Native Corporation, and other socially disadvantaged groups as defined by the Department of Defense. For military troop dining facility contract proposals from the AbilityOne program, the bill would prohibit new proposals and require that proposals be removed from the procurement list five years after the bill becomes law. Finally, the bill would specify that the term "cafeteria" in the Randolph-Sheppard Act, when used in reference to a military troop dining facility, would refer only to "services pertaining to a full food service military dining facility." This definition would not include "mess attendant, dining facility attendant, dining support" or other activities that supported the operation of the cafeteria. The bill was referred to the Senate Committee on Health, Education, Labor, and Pensions on June 11, 2008. No similar legislation has been introduced in the House.

The Randolph-Sheppard Act requires that blind individuals receive priority for the operation of vending facilities on federal property. "Vending facilities" include automatic vending machines, cafeterias, and snack bars. This report will discuss several significant court decisions and recent legislation related to the Randolph-Sheppard Act. Two federal court of appeals decisions, NISH v. Cohen and NISH v. Rumsfeld, held that military troop dining facilities are "cafeterias" under the Randolph-Sheppard Act and that the act controlled over the Javits-Wagner-O'Day Act, which provides employment opportunities for the severely disabled. Other cases have analyzed the scope of the Randolph-Sheppard Act's application to military troop dining facilities. S. 3112, which was introduced on June 11, 2008, would amend the Javits-Wagner-O'Day and Randolph-Sheppard Acts and address several issues raised by these judicial decisions.

The Food Stamp Program helps low-income individuals and families obtain a more nutritious diet by supplementing their income with food stamp benefits. The average monthly food stamp benefit was about $70 per person during fiscal year 1997. The program is a federal-state partnership in which the federal government pays the cost of the food stamp benefits and 50 percent of the states’ administrative costs. The U.S. Department of Agriculture’s Food and Nutrition Service (FNS) administers the program at the federal level. The states’ responsibilities include certifying eligible households and calculating and issuing benefits to those who qualify. The Food Stamp Employment and Training Program, which existed prior to the Welfare Reform Act, was established to ensure that all able-bodied recipients registered for employment services as a condition of food stamp eligibility. The program’s role is to provide food stamp recipients with opportunities that will lead to paid employment and decrease dependency on assistance programs. In fiscal year 1997, the states were granted $79 million in federal employment and training funding and spent $73.9 million, or 94 percent of the grant. In the Balanced Budget Act of 1997, the Congress increased grant funding for the Food Stamp Employment and Training Program to a total of $212 million for fiscal year 1998 and specified that 80 percent of the total had to be spent to help able-bodied adults without dependents meet the work requirements. For fiscal year 1999, the Congress provided $115 million in employment and training funding. These funds remain available until expended. Employment programs that the states choose to offer may involve the public and private sectors. For example, Workfare, which qualifies as an employment program under the Welfare Reform Act, requires individuals to work in a public service capacity in exchange for public benefits such as food stamps. Some states also allow participants to meet the work requirements by volunteering at nonprofit organizations. However, under the Welfare Reform Act, job search and job readiness training are specifically excluded as qualifying activities for meeting the act’s work requirements. During April, May, and June 1998, a monthly average of about 514,200 able-bodied adults without dependents received food stamp benefits, according to information from the 42 states providing sufficient data for analysis. These adults represented about 3 percent of the monthly average of 17.5 million food stamp participants in the 42 states during that period. Of the 514,200 individuals, about 58 percent, or 296,400 of the able-bodied adults without dependents were required to meet the work requirements; 40 percent, or 208,200, were exempted from these requirements because they lived in geographic areas that had received waivers; and 2 percent, or 9,600, had been exempted by the states from the work requirements. (See app. I for state-by-state information.) The number of able-bodied adults without dependents receiving food stamp benefits has apparently declined in recent years, as has their share of participation in the program. For example, in 1995, a monthly average of 1.2 million able-bodied adults without dependents in 42 states participated in the Food Stamp Program, compared with the 514,200 individuals who participated in the period we reviewed. In addition, in 1995, 5 percent of food stamp participants were estimated to be able-bodied adults without dependents, compared with the 3 percent we identified through our survey of the states. FNS and state officials accounted for these differences by pointing out that (1) food stamp participation has decreased overall—from about 27 million per month nationwide in 1995 to about 19.5 million in April, May, and June 1998; (2) some able-bodied adults without dependents may have obtained employment and no longer needed food stamps; and (3) others who were terminated from the program may not have realized that they could regain eligibility for food stamp benefits through participation in state-sponsored employment and training programs or Workfare. Also, the states vary in the criteria they use for identifying able-bodied adults subject to the work requirements. During April, May, and June 1998, a monthly average of 23,600 able-bodied adults without dependents filled employment and training and/or Workfare positions in the 24 states that provided sufficient data for analysis. Fifteen of these states offered Workfare positions, 20 offered employment and training positions, and 11 offered both Workfare and employment and training positions. The 23,600 individuals accounted for about half of the 47,000 able-bodied adults without dependents who were offered state-sponsored employment and training assistance and/or Workfare positions. More specifically: Able-bodied adults without dependents filled about 8,000 Workfare positions per month, or 34 percent of the 23,700 Workfare positions offered by the 15 states with Workfare positions; Able-bodied adults without dependents filled about 15,600 employment and training positions per month, or 67 percent of the 23,300 employment and training positions offered by the 20 states. (See app. I for state-by-state information.) These 23,600 individuals accounted for about 17 percent of the 137,200 able-bodied adults without dependents who were subject to the work requirements in those states. Of the remaining 113,600, some may have been within the 3-month time frame for receiving food stamp benefits while not working, others may have met these requirements by finding jobs or Workfare positions on their own, and some may not have met the work requirements, thereby forfeiting their food stamp benefits. FNS and state officials said they could not yet explain the limited participation in employment and training and Workfare programs, but FNS officials and some states are trying to develop information on the reasons for low participation. In addition, some suggested that able-bodied adults without dependents participated to a limited extent in employment and training programs and Workfare because they (1) participate sporadically in the Food Stamp Program, (2) prefer not to work, or (3) believe that the relatively low value of food stamp benefits is not enough of an incentive to meet the work requirements. With only 3 months remaining in fiscal year 1998, the states were spending at a rate that would result in the use of significantly less grant funds for food stamp employment and training recipients than authorized. For the first three quarters of the fiscal year, through June 30, 1998, the states spent only 28.4 percent, or $60.2 million, of the $212 million in grants, according to FNS data. The rate of spending varied widely by state, ranging from 75 percent, or about $230,000 of the $307,000 authorized for South Dakota, to less than 1 percent, or $109,000 of the $13.4 million authorized for Michigan. Twenty-five of the states spent less than 20 percent of their grant funds, 17 spent between 20 and 49 percent, and 9 spent 50 percent or more. Also, according to preliminary fourth-quarter financial data reported to FNS, 43 states spent about $72 million, or 41 percent of the grant funds available to them for fiscal year 1998. (See app. II.) To better understand why the states were spending less of their grant funds than authorized, we interviewed food stamp directors and employment and training officials in 10 geographically dispersed states.In general, according to these officials, grant spending has been significantly less than authorized because (1) some states had a limited number of able-bodied adults without dependents who were required to work, (2) some states needed time to refocus their programs on able-bodied adults without dependents, and (3) some states reported that it was difficult to serve clients in sparsely populated areas because of transportation problems or the lack of appropriate jobs. When asked whether spending would change in fiscal year 1999, state officials had differing expectations. Officials from 4 of the 10 states—Georgia, Iowa, Ohio, and West Virginia—said that they anticipate spending about the same or less, and Pennsylvania officials were unsure whether spending would change. In contrast, officials from five states—Illinois, Michigan, Rhode Island, Texas, and Washington—anticipate increases in spending, mostly because of the improvements they have made to their employment and training programs. In discussing the rate of grant spending, officials of five states—Georgia, Pennsylvania, Washington, Texas, and West Virginia—said that the requirement to spend 80 percent of funds on able-bodied adults without dependents had caused them to decrease employment and training services to other food stamp participants. For fiscal year 1998, a maximum of 20 percent of the available grant funds—$42 million—was available for employment and training activities for other food stamp recipients, while $79 million had been provided for employment and training activities for all food stamp recipients in fiscal year 1997. State officials explained that prior to fiscal year 1998, most employment and training funds had been spent for food stamp participants who were not able-bodied adults without dependents. With the shift in funds to able-bodied adults without dependents, less has remained for the other food stamp recipients, who typically had constituted the majority of the employment and training participants in the past. Nevertheless, some of those not served by Food Stamp Employment and Training Programs may be eligible to receive employment and training through other federal and state programs. We provided USDA’s Food and Nutrition Service with a copy of a draft of this report for review and comment. We met with Food and Nutrition Service officials, who provided comments from the Food and Nutrition Service’s Office of General Counsel and the Director, Program Analysis Division, Office of Food Stamp Programs. The Food and Nutrition Service generally agreed with the contents of the report and provided technical and clarifying comments that we incorporated into the report as appropriate. To obtain information on the numbers of able-bodied adults without dependents who are receiving food stamps benefits, are required to meet work requirements, are exempted from the work requirements, and are participating in qualifying employment and training and/or Workfare programs, we surveyed the states and the District of Columbia. The survey data covered the months of April, May, and June 1998. We used the participation data for these months to estimate average monthly participation in the program. All states and the District of Columbia responded to our faxed questionnaire, and we contacted state officials as needed to verify their responses. Eighty-eight percent of the responses provided by 41 states and the District of Columbia were based on estimates and the remaining on data in state records. According to the state officials who provided estimates, their information systems were in the process of being revised and they plan to have actual data for fiscal year 1999. To obtain information on state spending of federal grants for employment and training programs, we obtained FNS’ grant funding data reported by the states and the District of Columbia for the first three quarters of fiscal 1998, the latest data that were available as of November 1998. We subsequently obtained preliminary financial data for the fourth quarter of fiscal year 1998, which are subject to change after financial reconciliation. To supplement these data, we interviewed state food stamp directors or employment and training officials in 10 geographically dispersed states, including Georgia, Illinois, Iowa, Michigan, Ohio, Pennsylvania, Rhode Island, Texas, Washington, and West Virginia. We performed our work in accordance with generally accepted government auditing standards from July through November 1998. As agreed with your office, unless you publicly announce its contents earlier, we plan no further distribution of this report until 30 days from the date of this letter. At that time, we will send copies of this report to the appropriate Senate and House Committees; interested Members of Congress; the Secretary of Agriculture; the Administrator of FNS; the Director, Office of Management and Budget; and other interested parties. We will also make copies available to others upon request. Please call me at (202) 512-5138 if you or your staff have any questions about this report. Major contributors to this report are listed in appendix III. (continued) Average number of food stamp participants (by individual) in April, May, and June 1998 per Food and Nutrition Service’s (FNS) data. This option in the Food Stamp Program not exercised by the state. Data insufficient for analysis. Percent of fiscal year 1998 grant funds expended(continued) Numbers may not add due to rounding. Charles M. Adams, Assistant Director Patricia A. Yorkman, Project Leader Alice G. Feldesman Erin K. Barlow Nancy Bowser Carol Herrnstadt Shulman The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 37050 Washington, DC 20013 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (202) 512-6061, or TDD (202) 512-2537. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.

Pursuant to a congressional request, GAO provided information on: (1) the number of able-bodied adults without dependents who are receiving food stamp benefits, the number who are required to meet the work requirements, and the number who are exempted from the requirements; (2) the number of able-bodied adults without dependents participating in qualifying employment and training or Workfare programs; and (3) the amounts of federal grant funds that states spent through the first three quarters of fiscal year 1998 for employment and training or workfare programs for food stamp recipients. GAO noted that: (1) in the 42 states providing sufficient data for analysis, a monthly average of about 514,200 able-bodied adults without dependents received food stamp benefits during April, May, and June 1998; (2) about 58 percent of these individuals were required to meet the work requirements, another 40 percent were not required to work because they lived in areas that were considered to have high unemployment or an insufficient number of jobs, and 2 percent had been exempted by the states from the work requirements; (3) in the 24 states providing sufficient data for analysis, a monthly average of 23,600 able-bodied adults without dependents filled state-sponsored employment and training or workfare positions; (4) these participants represented about 17 percent of the able-bodied adults without dependents who were required to work in those states to receive food stamp benefits; (5) these individuals also accounted for nearly half of the able-bodied adults without dependents who were offered employment and training assistance or workfare positions by these states; (6) as of June 30, 1998, all the states had spent only about 28 percent, or $60.2 million, of the $212 million available for state employment and training programs for food stamp recipients; (7) according to preliminary fourth-quarter financial data, 43 states had spent about $72 million, or 41 percent of the grant funds available to them for fiscal year 1998; and (8) according to federal and state officials, the low percentage of spending for food stamp employment and training programs occurred primarily because: (a) fewer able-bodied adults without dependents were required to work than anticipated and fewer than anticipated accepted this assistance; and (b) some states needed more time to refocus their food stamp employment and training programs to target these individuals.

Peer review is well established as a mechanism for assuring the quality, credibility, and acceptability of individual and institutional work products. This assurance is accomplished by having the products undergo an objective, critical review by independent reviewers. Peer review has long been used by academia, professional organizations, industry, and government. Within EPA, peer review has taken many different forms, depending upon the nature of the work product, the relevant statutory requirements, and office-specific practices and needs. In keeping with scientific custom and/or congressional mandates, several offices within EPA have used peer review for many years to enhance the quality of science within the agency. In response to a panel of outside academicians’ recommendations in 1992, EPA issued a policy statement in 1993 calling for peer review of the major scientific and technical work products used to support the agency’s rulemaking and other decisions. However, the Congress, GAO, and others subsequently raised concerns that the policy was not being implemented consistently across the agency. In response to these concerns, in 1994 EPA reaffirmed the central role that peer review plays in ensuring that the agency’s decisions are based on sound science and credible data and revised its 1993 policy. The new policy, while retaining the essence of the prior one, was intended to expand and improve the use of peer review throughout EPA. The 1994 policy continued to stress that major products should normally be peer reviewed, but it also recognized that statutory and court-ordered deadlines, resource limitations, and other constraints might limit or even preclude the use of peer review. The policy applied to major work products that are primarily scientific or technical in nature and that may contribute to the basis for policy or regulatory decisions. In contrast, other products used in decision-making are not covered by the policy, nor are the ultimate decisions themselves. While peer review can take place at several different points along a product’s development, such as during the planning stage, it should be applied to a relatively well-developed product. The 1994 policy also clarified that peer review is not the same thing as the peer input, stakeholders’ involvement, or public comment—mechanisms used by EPA to develop products, to obtain the views of interested and affected parties, and/or to build consensus among the regulated community. While each of these mechanisms serves a useful purpose, the policy points out that they are not a substitute for peer review because they do not necessarily solicit the same unbiased, expert views that are obtained through peer review. EPA’s policy assigned responsibility to each Assistant and Regional Administrator to develop standard operating procedures and to ensure their use. To help facilitate consistent EPA-wide implementation, EPA’s Science Policy Council—chaired by EPA’s Deputy Administrator—was directed to help the offices and regions develop their procedures and identify products that should be peer reviewed. The Council was also given the responsibility for assessing agencywide progress and developing any needed changes to the policy. However, the ultimate responsibility for implementing the policy was placed with the Assistant and Regional Administrators. We found that—2 years after EPA established its peer review policy— implementation was still uneven. We concluded that EPA’s uneven implementation was primarily due to (1) inadequate accountability and oversight to ensure that all products are properly peer reviewed by program and regional offices and (2) confusion among agency staff and management about what peer review is, what its significance and benefits are, and when and how it should be conducted. According to the Executive Director of the Science Policy Council, the unevenness could be attributed to a number of factors. First, while some offices within EPA—such as the Office of Research and Development (ORD)—have historically used peer review for many years, other program offices and regions have had little prior experience. In addition, the Director and other EPA officials told us that statutory and court-ordered deadlines, budget constraints, and problems in finding and obtaining qualified, independent peer reviewers also contributed to the problem. EPA’s oversight primarily consisted of a two-part reporting scheme that called for each office and region to annually list (1) the candidate products nominated for peer review during the upcoming year and (2) the status of the products previously nominated. If a candidate product was no longer scheduled for peer review, the list had to note this and explain why peer review was no longer planned. Although we found this to be an adequate oversight tool for tracking the status of previously nominated products, we pointed out that it does not provide upper-level managers with sufficient information to ensure that all products warranting peer review have been identified. This fact, together with the misperceptions about what peer review is and the deadlines and budget constraints that project officers often operate under, has meant that the peer review program to date has largely been one of self-identification, allowing some important work products to go unlisted. According to the Science Policy Council, reviewing officials would be much better positioned to determine if the peer review policy and procedures are being properly and consistently implemented if, instead, EPA’s list contained all major products along with what peer review is planned and, if none, the reasons why not. We noted that the need for more comprehensive oversight is especially important given the policy’s wide latitude in allowing peer review to be forgone in cases facing time and/or resource constraints. As explained by the Executive Director of EPA’s Science Policy Council, because so much of the work that EPA performs is in response to either statutory or court-ordered mandates and the agency frequently faces budget uncertainties or limitations, an office under pressure might argue for nearly any given product that peer review is a luxury the office cannot afford in the circumstances. However, as the Executive Director of the Science Advisory Board (SAB)told us, not conducting peer review can sometimes be more costly to the agency in terms of time and resources. He told us of a recent Office of Solid Waste rulemaking concerning a new methodology for delisting hazardous wastes in which the Office’s failure to have the methodology appropriately peer reviewed resulted in important omissions, errors, and flawed approaches in the methodology; these problems will now take from 1 to 2 years to correct. The SAB also noted that further peer review of the individual elements of the proposed methodology is essential before the scientific basis for this rulemaking can be established. Although EPA’s policy and procedures provide substantial information about what peer review entails, we found that some EPA staff and managers had misperceptions about what peer review is, what its significance and benefits are, and when and how it should be conducted. Several cases we reviewed illustrate this lack of understanding about what peer review entails. Officials from EPA’s Office of Mobile Sources (OMS) told the House Commerce Committee in August 1995 that they had not had any version of the mobile model peer reviewed. Subsequently, in April 1996, OMS officials told us they recognize that external peer review is needed and that EPA planned to have the next iteration of the model so reviewed. We found similar misunderstandings in several other cases we reviewed. EPA regional officials who produced a technical product that assessed the environmental impacts of tributyl tin told us that the contractor-prepared product had been peer reviewed. While we found that the draft product did receive some internal review by EPA staff and external review by contributing authors, stakeholders, and the public, it was not reviewed by experts independent of the product itself or of its potential regulatory ramifications. When we pointed out that—according to EPA’s policy and the region’s own peer review procedures—these reviews are not a substitute for peer review, the project director said that she was not aware of these requirements. In two other cases we reviewed, there were misunderstandings about the components of a product that should be peer reviewed. For example, in the Great Waters study—an assessment of the impact of atmospheric pollutants in significant water bodies—the scientific data were subjected to external peer review, but the study’s conclusions that were based on these data were not. Similarly, in the reassessment of dioxin—an examination of the health risks posed by dioxin—the final chapter summarizing and characterizing dioxin’s risks was not as thoroughly peer reviewed. In both cases, the project officers did not have the conclusions peer reviewed because they believed that the development of conclusions is an inherently governmental function that should be performed exclusively by EPA staff. However, some EPA officials with expertise in conducting peer reviews disagreed, maintaining that it is important to have peer reviewers comment on whether or not EPA has properly interpreted the results of the underlying scientific and technical data. EPA’s quality assurance requirements also state that conclusions should be peer reviewed. During our review, we found that EPA had recently taken a number of steps to improve the peer review process. Although we believed that these steps should prove helpful, we concluded that they did not fully address the previously-discussed underlying problems and made some recommendations for improvement. EPA agreed with our findings and recommendations and has recently undertaken steps to implement them. While it is too early to gauge the effectiveness of these efforts, we are encouraged by the attention peer review is receiving by the agency’s upper-level management. Near the completion of our review, in June 1996, EPA’s Deputy Administrator directed the Science Policy Council’s Peer Review Advisory Group and ORD’s National Center for Environmental Research and Quality Assurance to develop an annual peer review self-assessment and verification process to be conducted by each office and region. The self-assessment was to include information on each peer review completed during the prior year as well as feedback on the effectiveness of the overall process. The verification would consist of the signature of headquarters, laboratory, or regional directors to certify that the peer reviews were conducted in accordance with the agency’s policy and procedures. If the peer review did not fully conform to the policy, the division director or the line manager must explain significant variances and actions needed to limit future significant departures from the policy. The self-assessments and verifications were to be submitted and reviewed by the Peer Review Advisory Group to aid in its oversight responsibilities. According to the Deputy Administrator, this expanded assessment and verification process would help build accountability and demonstrate EPA’s commitment to the independent review of the scientific analyses underlying the agency’s decisions to protect public health and the environment. During our review, we also found a number of efforts under way within individual offices and regions to improve their implementation of peer review. For example, the Office of Water drafted additional guidance to further clarify the need for, use of, and ways to conduct peer review. The Office of Solid Waste and Emergency Response formed a team to help strengthen the office’s implementation of peer review by identifying ways to facilitate good peer review and addressing barriers to its successful use. Additionally, EPA’s Region 10 formed a Peer Review Group with the responsibility for overseeing the region’s reviews. We concluded that the above efforts should help address the problems we found. However, we also concluded that the efforts aimed at improving the oversight of peer review fell short by not ensuring that all relevant products had been considered for peer review and did not require documenting the reasons why products were not selected. Similarly, we noted that the efforts aimed at better informing staff about the benefits and use of peer review would be more effective if they were done consistently throughout the agency. EPA agreed with our findings and conclusions and has recently undertaken a number of steps to implement our recommendations. On November 5, 1996, the Deputy Administrator asked ORD’s Assistant Administrator, in consultation with the other Assistant Administrators, to develop proposals to strengthen the peer review process. In response, ORD’s Assistant Administrator proposed a three-pronged approach consisting of (1) audits of a select number of work products to determine how well the peer review policy was followed; (2) a series of interviews with office and regional staff involved with peer review to determine the processes used to implement the policy; and (3) training to educate and provide help to individuals to improve the implementation of the peer review policy. Significantly, the Deputy Administrator has echoed our message that EPA needs to improve its oversight to ensure that all appropriate products are peer reviewed. In a January 14, 1997, memorandum to the Assistant and Regional Administrators, the Deputy stated, “I want you to ensure that your lists of candidates for peer review are complete.” To help accomplish this goal, each organization is directed to use, among other things, EPA’s regulatory agenda and budget planning documents to help identify potential candidates for peer review. While we agree that this should prove to be a useful tool, we continue to encourage EPA to expand its existing candidate list to include all major work products, along with explanations of why individual products are not nominated for peer review. An all-inclusive list such as this will be extremely useful to those overseeing the peer review process to determine whether or not all products have been appropriately considered for peer review. In summary, peer review is critical for improving the quality of scientific and technical products and for enhancing the credibility and acceptability of EPA’s decisions that are based on these products. We are encouraged by the renewed attention EPA is giving to improving the peer review process. Although it is too early for us to gauge the success of these efforts, the involvement of the agency’s upper-level management should go a long way to ensure that the problems we identified are resolved. Mr. Chairman, this concludes my prepared statement. I will be happy to respond to your questions or the questions of Subcommittee members. The first copy of each GAO report and testimony is free. Additional copies are $2 each. Orders should be sent to the following address, accompanied by a check or money order made out to the Superintendent of Documents, when necessary. VISA and MasterCard credit cards are accepted, also. Orders for 100 or more copies to be mailed to a single address are discounted 25 percent. U.S. General Accounting Office P.O. Box 6015 Gaithersburg, MD 20884-6015 Room 1100 700 4th St. NW (corner of 4th and G Sts. NW) U.S. General Accounting Office Washington, DC Orders may also be placed by calling (202) 512-6000 or by using fax number (301) 258-4066, or TDD (301) 413-0006. Each day, GAO issues a list of newly available reports and testimony. To receive facsimile copies of the daily list or any list from the past 30 days, please call (202) 512-6000 using a touchtone phone. A recorded menu will provide information on how to obtain these lists.

GAO discussed its recent report on the Environmental Protection Agency's (EPA) implementation of its peer review policy, focusing on EPA's: (1) progress in implementing its peer review policy; and (2) efforts to improve the peer review process. GAO noted that: (1) despite some recent progress, peer review continues to be implemented unevenly; (2) although GAO found some cases in which EPA's peer review policy was properly followed, it also found cases in which key aspects of the policy were not followed or in which peer review was not conducted at all; (3) GAO believes that two of the primary reasons for this uneven implementation are: (a) inadequate accountability and oversight to ensure that all relevant products are properly peer reviewed; and (b) confusion among EPA's staff and management about what peer review is, its importance and benefits, and how and when it should be conducted; (4) EPA officials readily acknowledge this uneven implementation and, during the course of GAO's work, had a number of efforts under way to improve the peer review process; (5) although GAO found these efforts to be steps in the right direction, it concluded that EPA was not addressing the underlying problems that GAO had identified; (6) accordingly, GAO recommended that EPA ensure that: (a) upper-level managers have the information they need to know whether or not all relevant products have been considered for peer review; and (b) staff and managers are educated about the need for and benefits of peer review and their specific responsibilities in implementing policy; (7) EPA agreed with GAO's recommendations and has several efforts under way to implement them; (8) for example, EPA plans to initiate a peer review training program for its managers and staff in June 1997; and (9) while it is still too early to be certain if these efforts will be fully successful, GAO is encouraged by the high-level attention being paid to this very important process.